Waterworld Limited v Taupo Wake Park Limited
[2023] NZHC 3859
•21 December 2023
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
I TE KŌTI MATUA O AOTEAROA
TE ROTORUA-NUI-A-KAHUMATAMOMOE ROHE
CIV-2023-463-95
[2023] NZHC 3859
BETWEEN WATERWORLD LIMITED
Applicant
AND
TAUPO WAKE PARK LIMITED
First Respondent
AND
JOHNATHAN ROBERT HINDLE
Second Respondent
AND
LAKE TAUPO AQUA PARK LIMITED
Third Respondent
AND
ODETTE ARTHURS
Fourth Respondent
Hearing: 18 and 19 December 2023 Appearances:
N K L Stone and D R Lang for applicant T R Mounsey for respondents
Judgment:
21 December 2023
JUDGMENT OF JOHNSTONE J
This judgment was delivered by me on 21 December 2023 at 3pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Smith and Partners, Auckland MMC Law Ltd, Taupō
WATERWORLD LIMITED v TAUPO WAKE PARK LIMITED [2023] NZHC 3859 [21 December 2023]
[1] In 2013, Johnathan Hindle and his partner Odette Arthurs commenced to operate a “wake park” on land in the Taupō region near the Waikato River. They did so through Mr Hindle’s company, Taupo Wake Park Limited. Taupo Wake Park had leased and excavated land beneath the water table adjacent to the Waikato River, creating an artificial lake. The wake park operates by using a cable to tow customers across the surface of the “lake”, riding wake boards.
[2] In recent years, Taupo Wake Park has sought to diversify. Amusements known as “water balls” have been used since the 2015/16 summer. Also in that summer, it operated two large inflatable slides and two large water trampolines upon its lake.
[3] During the 2022/23 summer, Taupo Wake Park entered an agreement with Waterworld Limited, a company incorporated by Kelvin Travers in 2018. The agreement related to Taupo Wake Park’s use of a set of waterborne inflatable structures to be provided by Waterworld. These types of structures are suitable for commercial use as amusement rides or devices. Mr Travers describes them as “waterparks”. Waterworld operates and licenses Waterworld-branded waterparks in various locations, mainly in the North Island.
[4] At the end of the 2022/23 summer, Waterworld retrieved its waterpark from the Taupo Wake Park. Since then, communication between Mr Hindle and Mr Travers has been sporadic.
[5] In November 2023, Mr Travers learned that Ms Arthurs had become the director of a newly incorporated company, Lake Taupo Aqua Park Limited, and that plans were in place to operate an alternate set of waterborne amusements at the Taupo Wake Park during the 2023/24 summer. Waterworld has commenced this proceeding alleging breach of a contract that it alleges prevents Taupo Wake Park from operating any waterborne inflatable structures other than a waterpark supplied by Waterworld. It seeks damages in the sum of $1,200,000 for that breach of contract, and in amounts to be calculated later in respect of additional causes of action based upon the torts of passing off, inducing breach of contract, and conspiracy.
[6] On 14 December 2023, Waterworld filed an application seeking an interim injunction, in broad terms prohibiting the respondents from engaging in any activity competing with Waterworld’s business.
[7] On 19 December 2023, at the conclusion of a hearing convened and conducted remotely in light of the matter’s urgency, I gave judgment dismissing Waterworld’s application, indicating I would give reasons and further directions in due course.
[8]Those reasons and directions follow.
Issues for determination
[9]In approaching Waterworld’s application, I was required to consider:
(a)whether there was a serious question to be tried, or put another way, whether Waterworld’s claim was vexatious or frivolous;
(b)the balance of convenience, requiring consideration of the impact on the parties of granting, and refusing, the application; and
(c)as a check, the overall justice of the position.1
Serious question to be tried
[10] In determining whether Waterworld established a serious question to be tried, I considered the parties’ claims on the facts and where they differ, the applicable law, and whether there is a tenable resolution of the facts and law on which Waterworld may succeed at trial.2
[11] In describing the view I reached, I start with the agreement between Waterworld, Taupo Wake Park and Mr Hindle.
1 NZ Tax Refunds Ltd v Brooks Homes Ltd [2013] NZCA 90, (2013) 13 TCLR 531 at [12].
2 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (CA) at 133.
Licence Agreement and Equipment Lease
[12] In January 2023, Waterworld, Taupo Wake Park and Mr Hindle appear to have executed a 27-page written agreement titled “Licence Agreement and Equipment Lease”. It is dated 10 January 2023, and signed by Mr Hindle on behalf of Taupo Wake Park as “the Licensee” and personally as “the Guarantor”.
[13]As its title suggests, the Licence and Lease purports to record, at clause 2:
(a)the grant by Waterworld of “an exclusive licence for the Taupo region to allow [Taupo Wake Park] to utilise … the Intellectual Property”; and
(b)Waterworld’s obligation to “deliver to, and lease, the Waterpark Equipment to [Taupo Wake Park] for the Term”.
[14]Clause 1 defines the “Intellectual Property” so licensed as:
… all of the Intellectual Property of Waterworld in the Business model involving the design, installation and operation of floating waterparks featuring the Waterpark Equipment which waterparks are used by customers paying entry fees to use and enjoy facilities of the waterpark under supervision of staff employed by [Taupo Wake Park] …
[15] Under clause 3, the “Term” during which Waterworld is to provide the waterpark is stated as an initial term of five years, plus renewals. Clause 3.2 provides for termination by either party upon “written notice of the termination” at least six months prior to renewal. Clause 12 provides for immediate termination in certain circumstances.
[16] The Licence and Lease contains important provisions at Clause 10 under the heading “Non-competition Obligations”:
10.1Meaning of “engage in”
In this Clause 10.1, the term "engage in" includes to participate in, assist or otherwise be directly or indirectly involved as a member, shareholder, unit holder, director, consultant, adviser, contractor, principal, agent, manager, employee, beneficiary, partner, associate, trustee or financier.
10.2Undertakings by the Licensee and Guarantors
In consideration of Waterworld entering into this Agreement,[Taupo Wake Park] (and each of its directors, officers, shareholders, servants and agents) and each Guarantor undertake to Waterworld that [Taupo Wake Park] (and each Guarantor shall not:
(a)during the Term of this Agreement in New Zealand or Australia; and
(b)for the following periods after termination of this Agreement:
(i)three (3) years;
(ii)two (2) years;
(iii)one (1) year;
Awithout the written consent of Waterworld, engage in any business or activity which directly or indirectly competes with Waterworld’s business, or in any matter whatsoever carry on any other business dealing directly or indirectly, in whole or in part, with the supply of floating waterpark services or any related waterpark equipment of a kind similar to the Waterpark Equipment supplied by Waterworld
Bsolicit, canvass, approach or accept any approach from any person who was at any time during the twelve (12) months prior to termination of this Agreement, a licensee of a or supplier to Waterworld with a view to obtaining the custom of that person in a business which is the same as, substantially similar to, or competitive with, or likely to compete with, Waterworld's business or otherwise prejudice the operation of Waterworld's business; or
Cinterfere with any relationship between Waterworld and the Licensees, employees or suppliers of Waterworld.
10.3Further Agreements and Acknowledgements of Licensee
(a)The Licensee shall procure separate written acknowledgements of the non-competition obligations set out in Clause 10.2 herein from each of its directors, secretary, any unit trust holders, officers and shareholders who are not a party to this Agreement and [Taupo Wake Park] (shall, within thirty (30) business days from the date of signing this Agreement, provide Waterworld with copies of such written acknowledgements.
(b)Clause 10.2 will have the effect as if it were several separate covenants each comprising each period of time set out in sub- clauses (a) and (b)(i) to (iii) inclusive combined with the areas of the territories of New Zealand and Australia set out in the first paragraph of this Clause 10.2.
10.4Existing Business at Licensed Premised Not Included
For the purpose of clarity, the covenants contained in Clause 10.2 herein do not extend to the continued running of [Taupo Wake Park’s] Existing Business if any.
10.5Effect of Invalid and Limitation of Provisions
(a)Each covenant set out in this Clause 10 herein shall operate as a separate and independent covenant. If any of the several separate and independent covenants in Clause 10.2 herein are, or become, invalid or unenforceable for any reason that invalidity or unenforceability will not affect the validity or enforceability of any of the other separate and independent covenants in Clause 10.2.
(b)If any of the prohibitions or restrictions contained in this Clause 10 are deemed by a Court of law to go beyond what is reasonable in the circumstances and necessary to protect the goodwill of Waterworld but would be deemed to be reasonable and necessary if any activity were deleted or the period or area were reduced, then the prohibitions or restrictions apply with that activity deleted or that period or area reduced by the minimum amount necessary.
[17] The First Schedule describes Taupo Wake Park’s existing business, apparently for the purpose of permitting its continued operation under clause 10.4, as:
Such business as the Licensee shall have carried on up to the date of commencement of this Agreement (if any) as first approved by Waterworld prior to entry into and execution of this Agreement.
[18] The words “Taupo Wake Park Ltd” are then added in handwriting to that last passage of text.
Operation of Waterworld waterpark 2022/23
[19] Waterworld’s waterpark was installed at Taupo Wave Park’s premises on around 16 and 17 January 2023. Operation of the waterpark commenced on 18 January 2023.
[20] That day, Mr Travers checked in with Mr Hindle by email. Amongst other things, he asked:
What’s your plan for on the park lifeguards/supervisors. I’m not too fussed to start however Worksafe regs and our ops manual requires at least one person on the part at all times.
[21] Mr Hindle responded by email dated 21 January 2023, writing “[i]n regards to all the health and safety, we have updated our ops manual to cover the aqua park.”
[22] By email on 27 February 2023, Mr Travers sought a report on progress, adding “[w]e would like you to start using the “Waterworld” brand rather than “Aqua Park” in all your marketing please. It’s an important part of the licence agreement and has a strong online presence”.
[23] By email on 7 March 2023, Mr Travers wrote again, under the heading “Plan for the Waterpark”. Amongst other things, he advised:
You can operate the equipment until the end of the next school holidays. 23 April 2023. Post this I would like to help get the equipment out of the water and back to our storage in Tauranga.
I know of no Waterparks that operate throughout the winter and cannot justify having the equipment exposed to the weather for a prolonged period, hence the deadline of end of April.
Moving forward I am more than happy to get the equipment back for setup at the end of November 2023 to operate throughout the summer.
I hope this gives you a solid plan to work to
End of season communications
[24] On 12 May 2023, Mr Travers sent Mr Hindle another email. He observed that Mr Hindle did not seem happy with the summer’s financial result, and queried “[d]id you want to operate a Waterworld waterpark again next summer? If so, can you come back to me with what you feel would be preferred opening dates and budgets for turnover.” Mr Travers went on to query also whether the wake park was still for sale. He mentioned the possibility of buying it “for the right price and/or taking over the management of the lease”.
[25] Mr Hindle responded by email dated 16 May 2023, observing that he planned to advertise the business for sale through the winter, and also that:
We have interested parties who have asked if there is anything in the licence that will be of conflict if Taupo Wake Park were to purchase their own Aqua Park? In regards to next summer, we would like to re-negotiate a licence in case it doesn’t sell, as the 50:50 is not enough for the business to run.
[26] Mr Travers’ reply by email dated 17 May 2023 was that “if you are advising purchasers about Waterworld Waterpark turnover and confidential information you would be in breach of the licence agreement.” Mr Travers’ email did not address Mr Hindle’s question about Taupo Wake Park buying its own aquapark (a term Mr Hindle uses as a description of the type of waterborne equipment leased by Waterworld). Nor did it address re-negotiation of “a licence”.
[27]On 3 August 2023, Mr Travers wrote to Mr Hindle as follows:
Hi John
Not sure if you are wanting to continue with the waterpark this summer. If you do we need to begin looking at the following logistics
• Budgets for the summer, as specified in the license agreement. Budgets are to be set after the first year's operation. Based on an average of our other parks, we would expect a turnover averaging $8000 per trading day.
• Naming the attraction Waterworld . This would be a non-negotiable term.
• Your insurance certificates.
• Proof of the PCBU and staff lifeguard qualifications to satisfy the Australian standards we are to operate to.
Kindly come back to me when you can.
[28] On 14 November 2023, Mr Travers wrote to Mr Hindle and Ms Arthurs under the heading “This summer”, as follows:
John and Odette,
It has come to my attention that you have purchased or will be operating another waterpark this summer.
Kindly get in contact with me ASAP to avoid pending legal action.
[29] There was no response to Mr Travers’ emails of 3 August and 14 November. On 22 November 2023, Waterworld’s solicitors wrote to Taupo Wake Park and Mr Hindle, providing three business days’ notice that Waterworld was terminating the Licence Agreement and Equipment Lease if certain breaches were not remedied.
[30] There being no response to that letter, Waterworld filed and served its application seeking an interim injunction for relief on 15 December 2023.
Waterworld’s position
[31] Mr Travers’ affidavit filed in support of Waterworld’s application outlines his work to establish Waterworld as Australasia’s largest waterpark company. It operates, or licences, waterparks in Mangawhai, Auckland, Pauanui, Whitianga, Hamilton, Karapiro, Tauranga, Palmerston North, Whanganui, New Plymouth, Wellington and Nelson. Mr Travers describes working with WorkSafe New Zealand to establish standards of operation for the waterborne inflatable industry, resulting in WorkSafe requiring waterparks to comply with an Australian standard. Mr Travers says that Waterworld’s equipment is customised because it is difficult to engineer waterpark equipment to meet these standards. Further, it has developed an operating system sufficient to obtain annual consents and permits that are necessary because Waterworld operates on council and regional council sites.
[32] Mr Travers says that Waterworld has established a licence system, providing licensees with standard-compliant equipment, life jackets, a “comprehensive operating system” including a digital booking system, and significant training and support including in respect of social media. I understand the digital booking system is the means by which Waterworld seeks to control revenue flow from its licensees. Customers’ payments made through the booking system are made to Waterworld, with Waterworld on-paying the negotiated proportion to the licensee in question.
[33] Mr Travers says that Waterworld staff trained Mr Hindle and Ms Arthurs on waterpark safety and operation during the installation process at the Taupo Wake Park, including by providing access to Waterworld’s operations manual. He says this manual contains “very valuable information that enables an operator to run a
waterpark”. Mr Travers says that Ms Arthurs was provided “comprehensive systems training” by Waterworld’s digital expert, Kathy Kendall.
[34] Mr Travers refers to learning of Taupo Wake Park’s alternative waterpark by observing social media and a website carrying the branding “Lake Taupo Aqua Park”, in November 2023. Mr Travers observed photographs of a Waterworld waterpark in the “gallery” section of the website. He described using the booking system available through the website, and finding it to be “exactly the same as Waterworld’s booking system with minor superficial changes”. He adds:
Waterworld operates the only waterparks in the world that uses Wix – an e- commerce platform that can be customised to meet industry standard and needs. Waterworld has spent significant money building the booking system and customising it to New Zealand waterpark needs – [Lake Taupo Aqua Park] has appropriated the system that Waterworld has meticulously built.
[35]Mr Travers asserts that Waterworld has suffered an approximate loss of
$1,200,000. He calculates this figure by reference to his own estimate of $600,000 revenue per season, over each of “the four remaining years” under the licence, applying the 50:50 split.
[36] On behalf of Waterworld, however, Mr Stone submitted that its solicitors’ letter of 22 November 2023 served to terminate the Licence Agreement and Equipment Lease, effective 27 November 2023. Mr Stone referred to the Clause 10 “non-competition obligations” set out above, and submits that at least for the time being the respondents are prohibited from engaging in the business of offering public waterborne inflatable amusements. Allowing for the possibility of termination at the end of the 2022/23 summer, and acknowledging that the three-year restraint of trade period is likely to be seen by the New Zealand courts as unreasonable and therefore unenforceable, Mr Stone said that the clause may provide an effective two-year restraint, and in any event does provide an effective one-year restraint, the effect of which is to prohibit the activities the respondents propose for this summer.
[37] Mr Stone submitted that the interim injunction was needed immediately so that Waterworld could proceed to operate a waterpark in the Taupō region during the summer season, free of competition from the respondents.
Respondents’ position
[38] In his affidavit filed in opposition to Waterworld’s application, Mr Hindle describes the establishment of Taupo Wake Park and its modest steps to diversify its activities since the 2015/16 summer, set out at the commencement of this judgment. He then asserts that, on behalf of Taupo Wake Park, he entered a “pretty casual arrangement” for equipment hire in line with discussions with Mr Travers. He says that Mr Travers wanted the Licence Agreement and Equipment Lease signed to record the leasing of equipment as it was the only contract he had. He says he did not pay it much attention.
[39] Mr Hindle indicates that he was surprised to receive various demands following the signing of the document; in particular, Mr Travers’ request to describe the leased equipment as “Waterworld” and to promote it as such: and Mr Travers’ request to adhere to Waterworld’s operations manual. Mr Hindle says that in fact Taupo Wake Park never used Waterworld’s operations manual. He refers for support to his email of 21 January 2023 advising Mr Travers that Taupo Wake Park had updated its own operations manual “to cover the aqua park”.
[40] Referring to Mr Travers’ email of 7 March 2023 advising that Waterworld intended to retrieve its equipment at the end of April, Mr Hindle says this was consistent with his understanding of having entered an equipment hire deal only. Mr Hindle refers to Mr Travers’ further queries during the winter of 2023, about whether Taupo Wake Park wished to operate a Waterworld waterpark again in the 2023/24 summer, as being consistent with his view that equipment hire during this next summer would require further agreement and re-negotiation.
[41] Mr Hindle says he communicated with Mr Travers over the prospect of Waterworld purchasing the Taupo Wake Park’s business. But those communications having stalled, the respondents decided to proceed with purchasing their own equipment, sourced from China. He says that he and Ms Arthurs incorporated the new company, Lake Taupo Aqua Park Limited, simply for the purpose of preventing others using that name. The company is dormant. Instead, Taupo Wake Park continues to
operate its diversified business, and intends to operate its newly purchased waterborne inflatable structures, which it describes as an “aqua park” this summer.
[42] Mr Hindle says that photographs of Waterworld’s equipment are not used on Taupo Wake Park’s new website. He accepts, and indicates he regrets, there were some photographs of Waterworld equipment on the old Wake Park Facebook page, posted by customers, which have now been deleted. He says that neither the website nor the Facebook page now associate in any way with Waterworld.
[43] Mr Hindle says that Taupo Wake Park has been using the same publicly available booking system for ten years. He has produced an invoice, dated 12 December 2016, for a three-year licence of software provided by wix.com at a price of USD 68.55. As I understand him, Mr Hindle says that Waterworld’s wix-based booking system was used during the 2022/23 summer in respect of waterpark bookings only, with bookings for the wake park and other aspects of Taupo Wake Park’s business continuing to be taken via its own version of wix. This was because Waterworld’s wix system was the means by which Waterworld was able to receive payment for use of its waterpark, subject to splitting the revenue by forwarding half of the takings to Taupo Wake Park. He says this was done simply for reasons of financial transparency.
[44] For the respondents, Mr Mounsey acknowledged an exchange of emails on 10 and 11 January 2023, which amongst others were produced in evidence by consent during the hearing on 19 December 2023, and following the filing of Mr Travers’ and Mr Hindle’s affidavits. The emails indicate that Mr Travers sent a first draft of the Licence Agreement and Equipment Lease to Taupo Wake Park on 10 January 2023 at
11.46 am. At 1.37 pm that day, Mr Hindle and Ms Arthurs replied, seeking clarification of whether the “licence fee” would be 40 per cent of takings as set out in that document, or 50 per cent as had been discussed, and whether they would have an “exclusive right of licence in Taupo”. At 4.58 pm, Mr Travers responded with a revised version showing a 50/50 revenue split, and providing for the “exclusive licence for the Taupo region” stated at [13] above. The emails indicate that the version signed by Mr Hindle on his own behalf and for Taupo Wake Park was returned to Mr Travers at 5.52 pm on 11 January 2023.
[45] Mr Mounsey therefore accepted that the Licence Agreement and Equipment Lease appears to have been much more than the afterthought described in Mr Hindle’s affidavit.
[46] Nevertheless, Mr Mounsey submitted that the parties’ conduct during the winter of 2023 indicates that they did not regard the Licence Agreement and Equipment Lease as binding upon them. For example, by retrieving its waterpark equipment from Taupo Wake Park, and by failing to engage adequately over its re-installation for the 2023/24 summer, Waterworld has demonstrated that it regarded the Licence Agreement and Equipment Lease as at an end. He submitted that the non-competition obligations set out at clause 10 are unenforceable against the respondents, including because inflatable amusements such as waterballs have been in use at the wake park since the 2015/16 summer, such that the “existing business” exclusion at clause 10.4 renders the clause redundant.
[47] Mr Mounsey submitted that the respondents are not using Waterworld’s intellectual property. Taupo Wake Park refused to use Waterworld’s operations manual. And, having finished using Waterworld’s booking system for the purpose of tracking finances, it has reverted to its own wix-based booking system, a business methodology in which Waterworld can claim no proprietary right, it being comprised of off-the-shelf software.
Assessment
[48] In assessing these accounts of the facts, and whether there is a tenable resolution of the facts and applicable law on which Waterworld may succeed at trial, I observed the starting point in respect of restraints of trade: that if there is nothing more they are contrary to public policy and therefore void. They may, however, be justified by the circumstances of particular cases if the restriction is reasonable, with regard to the interests of the parties and with regard to the interests of the public.3 It
3 Nordenfelt v Maxim Nordenfelt Guns and Ammunition Company [1894] AC 535 (HL), cited with approval by North P in Blackler v New Zealand Rugby Football League (Inc) [1968] NZLR 547 (CA) at 555.
is for the party seeking to enforce the restraint of trade to establish the restriction is reasonable.4
[49] As noted, Waterworld conceded that the full extent of the restraint of trade provided for by Clause 10 is so severe as to render at least parts of that provision unlawful. This concession was appropriately made. On its face, Clause 10 prohibits any form of competition with Waterworld, even “indirectly”, whether in New Zealand or Australia, for a period of three years.
[50] This meant that the divergence of views in the High Court as to the appropriateness in the course of an application for interim relief of exercising the power under s 83 of the Contracts and Commercial Law Act 2017 to give effect to only parts of a trade restraint provision, comes into focus.5 On this issue, I respectfully adopted the view of Isac J in On-line Digital Solutions Ltd v Riddick, that:6
The better view is to consider the likely need for modification as a factor in the overall assessment of the interests of justice. It may be that at an interlocutory stage the Court ought to restrain a defendant on terms which are more limited than the terms of the restraint sought. Doing so is not the result of a power under s 83. It is simply the result of the exercise of the Court’s equitable jurisdiction to grant injunctive relief, requiring the balancing of the risk of irreparable harm to both sides pending trial.
[51] That being the case, it is worth noting that, as with the ability of the plaintiff in On-line Digital Solutions, Waterworld’s ability to achieve relief in its substantive proceeding “will very much depend on its ability to persuade the trial Court that it should exercise its discretion to modify, rather than excise, the [restraint] provision.”7 In the present context, it will be for Waterworld later conclusively to establish that prohibiting Taupo Wake Park from offering waterborne inflatable amusements this summer, Waterworld having removed its waterpark at the end of last summer and to date having shown no real inclination to re-instal them, is a reasonable outcome of the commercial bargain reached in January 2023.
4 Skids Programme Management Ltd v McNeill [2012] NZCA 314, [2013] 1 NZLR 1 at [36].
5 See Grigg Auto Sales v ACP Media Ltd HC Wellington CIV-2003-485-932, 5 June 2003 at [32], contrast Deacon Holdings Ltd v Colenso Holdings Ltd HC Auckland CP 125-SW00, 12 April 2000 at [21] and Mike Pero (New Zealand) Ltd v Heath [2015] NZHC 2040 at [53].
6 On-line Digital Solutions Ltd v Riddick [2021] NZHC 3199 at [86].
7 At [87].
[52] I had considerable reservations as to whether Waterworld’s case in this regard is tenable.
[53] First, while Mr Travers asserts that access to Waterworld’s booking system and operations manual have provided considerable commercial advantage, Mr Hindle asserts that the booking system is little more than an off-the-shelf product, which his business had used for years previously, albeit in a different form. It appears likely that the new form was implemented for the primary purpose of protecting Waterworld’s revenue streams under the licensing, rather than simple lease, model it chose to implement for its own commercial purposes. And that Waterworld’s operations manual has simply been ignored.
[54] Second, on the prospect of a licence providing advantages in the sense of commercial goodwill deriving from Mr Travers’ insistence on using the Waterworld brand, there is very little evidence before me which might justify that view. I consider it unlikely that the branding of the particular waterborne inflatable structures upon which the public are to amuse themselves carries any real resonance in their minds, particularly where, as here, there are other aspects of branding such as location and the broader packages of activity offered by the Taupo Wake Park and/or Lake Taupo Aqua Park businesses in play. I note that no evidence has been offered that Waterworld has previously operated in the Taupō district, except to the extent its equipment was used for a season at the Taupo Wake Park.
[55] Third, and subject to compliance with health and safety standards which appear to have been publicised by WorkSafe New Zealand, there appears more broadly to be very few to barriers to entry into the market for inflatable waterborne amusements by enterprises other than the parties to this litigation. That being the case, the Court substantively determining this proceeding might consider it unreasonable in the context of the apparent breakdown in communications between the parties to restrain Taupo Wake Park from seeking to compete with any such newcomers.
[56] In sum, I found it difficult to accept Waterworld’s system provided such benefit to licensees that a restraint of trade of any real significance might be justified.
[57] These reservations notwithstanding, it does appear that Mr Hindle, and through him the other respondents, considered there to be at least a durational aspect to the agreement with Waterworld. I refer here to his correspondence with Mr Travers during the winter as to the consequences and constraints arising from the “licence”.
[58] On that basis, I did not reach the view that Waterworld’s claim was vexatious or frivolous. Put another way, there was, barely, a serious question to be tried. That said, the modest (in my view) apparent merit of Waterworld’s restraint of trade clause played a role in my overall assessment of the interests of justice.
Balance of convenience
[59] The purpose of an interim injunction is to protect the plaintiff from injury that cannot adequately be compensated in damages.8 The Court must be satisfied that the orders sought are reasonably necessary to preserve the position of the applicant.9 The Court may consider all the circumstances of the case, including the apparent strengths or weaknesses of the claim, the statutory framework, the public interest, and the private and public repercussions of granting relief.
Waterworld’s position
[60] The contractual position asserted for Waterworld being that, following termination of the Licence Agreement and Equipment Lease, Taupo Wake Park and Mr Hindle are prohibited for at least this summer from engaging in operating a waterpark, Mr Stone acknowledged that one measure of Waterworld’s loss, should the prohibition not be observed, would be calculated by reference to the Taupo Wake Park’s takings for its aquapark. Indeed, that is at least akin to the way in which Mr Travers calculated his own assessment of damages.
[61] However, Mr Stone said that damages would not adequately compensate Waterworld for its losses arising from the following likely events:
8 American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL).
9 Carlton & United Breweries Ltd v Minister of Customs [1986] 1 NZLR 423 (CA).
(a)dilution of Waterworld’s brand by means of competition which it had negotiated successfully to avoid; and
(b)dangerous and unsafe practices on the respondents’ part, which may compromise Waterworld’s business.
[62] Here, Mr Stone relied on further aspects of Mr Travers’ affidavit evidence. I summarise those aspects under Mr Stone’s two heads of argument as follows:
(a)Mr Travers says that Waterworld had plans to operate on Lake Taupō and had started applying for permits from the Tūwharetoa Māori Trust Board and the Taupō District Council. He says that Waterworld entered its agreement with Taupo Wake Park instead. He says that the Lake Taupo Aqua Park will dilute its brand in the Taupo district.
(b)Mr Travers asserts that Taupo Wake Park breached Waterworld’s operating system in a variety of ways during the 2022/23 summer, including relating to safety. And more recently, having assessed photographs of Taupo Wake Park’s new equipment shown on its website, Mr Travers believes it does not comply with the Australian standard adopted by WorkSafe. He is concerned that health and safety non-compliance on the respondents’ part may undermine Waterworld’s business, such as in the event of a serious mishap. He says such non-compliance may undermine the public’s appetite for waterpark amusements, or may lead WorkSafe to impose an industry-wide ban. Mr Travers notes, for the purpose of evidencing his concern, that on 14 November 2023 he wrote to WorkSafe, observing amongst other things that:
Lastly, we gave Taupo Wake Park a licence to operate one of our waterparks last summers and found very bad management and unsafe practices. They have now purchased their own waterpark for the summer. They are very dodgy operators. No qualifications, no lifeguards on the equipment, and at most times, zero supervision. Customers without life jackets. Zero water quality testing.
[63] And in support of the first head, Mr Stone submitted that Waterworld might be able to establish a competing waterpark in the Taupō district within a matter of weeks.
Assessment
[64] In my assessment, there is no significant prospect of either outcome being established upon the evidence before me.
[65]In respect of brand dilution, I observe that:
(a)The emails Mr Travers produced so as to substantiate his assertion that he had plans to operate on Lake Taupō are dated between 3 March and 25 May 2021. They suggest that during that period Mr Travers was contemplating seeking Taupō District Council permission to operate a Waterworld waterpark during the period 2 January 2022 to 8 February 2022 only. There being no ongoing correspondence, the notion appears to have foundered in late May 2021 at the point a mere six-day Council permit was under discussion.
(b)Instead, when Taupo Wake Park approached Waterworld in December 2022, it appears this presented a fresh opportunity for Waterworld to establish a presence in the Taupō District, arising at a time Waterworld was not actively seeking itself to do so.
(c)Following retrieval of its waterpark into winter storage in April 2023, there is no evidence of Waterworld taking any steps to maintain its Taupō presence by re-installing its equipment or, in the absence of such installation, by identifying alternate locations. I put aside here, Mr Stone’s unevidenced assertion that Waterworld might be able to do so now it is aware of Taupo Wake Park’s own intended aquapark.
(d)On the other hand, Taupo Wake Park has had an established business providing waterborne amusements since 2013. In my view there is little likelihood of the Taupo Wake Park intentionally seeking to derive custom by suggesting any ongoing involvement with the Waterworld
brand. The new Chinese waterborne inflatable structures appear to be clearly distinguishable by their appearance from those provided during the 2022/23 summer by Waterworld. I accept the explanation given relating to Facebook photographs of the Waterworld waterpark posted by customers, and that efforts will be made to ensure such photographs are not displayed again. Taupo Wake Park is commercially incentivised to display its own, newly imported aquapark, rather than the previous version leased from Waterworld.
[66] In respect of what Waterworld says are the respondent’s dangerous and unsafe practices, Mr Hindle has responded by asserting that he considers the new aquapark to be of a superior and safer design to that of Waterworld, and by relying on his prior experience of health and safety compliance.
[67] But in any event, I note that Mr Travers’ criticisms of the Taupo Wake Park in his 14 November 2023 letter to WorkSafe appear as the “final” set of various complaints about other operators and the industry at large. He refers in particular to operators in Northland and in Cromwell with “very lax safety procedures”. He advises WorkSafe that “there needs to be serious controls in place to ensure the industry is safe and professional. I am concerned now this is not happening”.
[68] It appears to me that the risk Mr Travers seeks to avoid, such as it may be, is not greatly affected by whether Taupo Wake Park does or does not operate its aquapark. Assuming Mr Travers’ concerns are genuine, rather than motivated for the purpose of avoiding competition, I consider they are likely to have resulted in WorkSafe being well aware that a distinction should be drawn between the variable health and safety features and practices of New Zealand’s separately owned and operated waterparks/aquaparks.
[69] Reliance can now be placed upon WorkSafe as the responsible regulator to ensure that appropriate standards are maintained, and in the event they are not, that unsafe businesses do not continue in operation. I consider the likely outcome of Mr Travers’ complaints to WorkSafe to be an inspection of the Taupo Wake Park early
in the 2023/24 season. If the aquapark’s operation is found at that stage to be unsafe, WorkSafe is appropriately equipped by law to address the issue.
[70] In summary, I took the view that there was no significant prospect of Waterworld suffering damage to its commercial position as a consequence of the respondents operating their aquapark during the 2023/24 summer, beyond which could readily be quantified by reference to its achieved sales.
[71] Although the above considerations were sufficient to dispose of the issue, I note also that Waterworld did not meet its obligation to provide information sufficient to enable the Court to assess the worth of its undertaking as to damages.10 Mr Travers’ affidavit describes Waterworld operating in numerous locations. But he says nothing at all about its financial position.
[72] Accordingly, Waterworld’s undertaking did not in substance provide assurance that Taupo Wake Park would be able to cover this summer’s lost revenue should it have been unsuccessful in avoiding an injunction yet successful at trial.
[73]For these reasons, the balance of convenience lay with the respondents.
Overall justice
[74] Standing back, I was not persuaded, given the apparent lack of effort on the part of Waterworld to re-instal its equipment at the Taupo Wake Park for the 2023/24 season, that Waterworld was intending to pursue any commercial activity in that area this summer. Instead, it appeared to me that Waterworld’s strategy was to choose not to operate, and in the event the Taupo Wake Park did so using alternate equipment, to seek to enforce its restraint of trade clause.
[75] I considered the overall justice of the case to be met by permitting Taupo Wake Park to operate as intended (subject to WorkSafe intervention, if any), with the live question of the efficacy of the restraint of trade clause being held over for determination in the course of the substantive hearing of this case. If the restraint is
10 Sanson v Energy Products Ltd HC Auckland CIV-2009-404-5464, 4 December 2009; Park Lane Builds Ltd v Shiva Eco Homes Ltd [2002] NZHC 1438 at [58].
held to be effective, Taupo Wake Park and Mr Hindle personally are likely to be required to account for an assessed proportion of their aquapark revenue. If not, they will at least have been permitted to continue trading in the meantime.
Result
[76]As indicated above, I declined Waterworld’s application.
[77] Having reflected on the position in respect of costs, and noting that the proceeding will require determination in future, I simply order that costs are reserved.
Johnstone J
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