On-Line Digital Solutions Ltd v Riddick

[2021] NZHC 3199

IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY

I TE KŌTI MATUA O AOTEAROA NGĀMOTU ROHE

CIV-2021-443-35

[2021] NZHC 3199

BETWEEN

ON-LINE DIGITAL SOLUTIONS LIMITED
Plaintiff

AND

DEANE JASON RIDDICK

Defendant

Hearing:

14 October 2021 (via AVL)

Appearances:

L McKeown for Plaintiff

P Dalkie and D Watson for Defendant

Judgment:

26 November 2021

JUDGMENT OF ISAC J

[Application for interim injunction]

Table of Contents

Para Nos

Introduction[1]

Background[8]
The restraint of trade[23]

Open2View Facebook page and cell phone number[32]

The relationship deteriorates[38]

Mr Riddick’s efforts to sell the Taranaki franchise and notice of termination[44]

Post-cancellation conduct and the status quo at the time of hearing[53]

Principles applicable to grant of interim injunctions involving restraints of trade

[58]

Is there a serious question to be tried?[61] The strength of the plaintiff’s claim of breach and the defendant’s counterclaim in estoppel[65]

The reasonableness of the restraint and the impact of s 83 of the CCLA[83] The impact of the holding-over provision on the reasonableness of the restraint [88] Mr Riddick’s alternative argument: the restraint was triggered in 2011[95] Overall conclusion on serious question to be tried[102] Balance of convenience[103]

Overall interests of justice[120]

Conclusion and result[122]

ON-LINE DIGITAL SOLUTIONS LIMITED v RIDDICK [2021] NZHC 3199 [26 November 2021]

Introduction

[1]                On-line Digital Solutions Ltd (On-Line) applies for an interim injunction restraining Mr Riddick from breaching a restraint of trade.

[2]                On-Line carries on business as the “Regional Franchisor” of the Open2View real estate photography business. On-Line has the right to grant area franchises throughout New Zealand,1 and to provide franchise services to those granted an area franchise.

[3]                In 2006 Mr Riddick entered into an area franchise agreement with On-Line for the Taranaki area. That agreement provided Mr Riddick with the right to carry on business under the Open2View banner within the relevant area, principally marketing and supplying clients with real estate digital photography.

[4]                On 5 August 2020, just short of 14 years after entering into the franchise relationship, On-Line terminated the agreement  on  one  month’s  notice.  Almost  11 months later, on 28 June 2021, it  commenced  these proceedings  alleging  that Mr Riddick has been operating in breach of a restraint of trade clause within the franchise agreement. It seeks an interim injunction preventing Mr Riddick from carrying out work as a real estate photographer pending trial.

[5]                On-Line argues that it had a clear right to terminate the franchise agreement on one-month’s written notice because Mr Riddick failed to give notice of renewal following the first five-year term of the contract. Thereafter, On-Line says a holding- over provision rendered the contract month-to-month. On-Line acknowledges that on its face the restraint of trade is unreasonable, it not being subject to any temporal or geographical constraints. But it says the Court can and should modify the restraint to make it reasonable, using the Court’s discretion under s 83(1)(b) of the Contract and Commercial Law Act 2017 (CCLA).

[6]                In response, Mr Riddick submits that On-Line represented the franchise agreement “automatically”…