Western Work Boats Ltd v Kelly - [2016] NZHC 2577

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

CIV-2016-470-000140 [2016] NZHC 2577

BETWEEN
WESTERN WORK BOATS LIMITED

First Plaintiff

SEAWORKS LIMITED Second Plaintiff

AND

SEAN TANE KELLY First Defendant

PACIFIC 7 LIMITED Second Defendant

Hearing:
17 October 2016

(Heard at Rotorua)

Appearances:

A M Stevens for Plaintiffs
M S King for Defendants

Judgment:

28 October 2016

JUDGMENT OF PALMER J

This judgment is delivered by me on 28 October 2016 at 11 am pursuant to r 11.5 of the High Court Rules.

..................................................... Registrar / Deputy Registrar

Solicitors:
Izard Weston Lawyers, Wellington
Sharp Tudhope Lawyers, Tauranga
Matt King, Barrister, Tauranga

WESTERN WORK BOATS LTD & ANOR v KELLY & ANOR [2016] NZHC 2577 [28 October 2016]

Summary

[1] The parties operate work-boat businesses in Tauranga and around New Zealand. They used to be in business together but have fallen out. Mr Sean Kelly sold his interest in Western Work Boats Ltd to Seaworks Ltd. Western Work Boats and Seaworks say Mr Kelly, and his new company Pacific 7 Ltd, breached a restraint of competition obligation. They seek an interim injunction restraining Mr Kelly and Pacific 7 from breaching the restraint of competition obligation and restraining disposition of Lot 4 in the Tauranga Marine Precinct. There is a serious question to be tried. I consider the balance of convenience and overall justice of the position does not favour granting an interim injunction regarding the restraint of trade obligation, which would add to the enforceability of the restraint which is currently disputed. However, I do grant an interim injunction restraining disposition of Lot 4, with leave to apply for its variation or removal if a change in circumstances materially alters the balance of convenience imposed by the injunction.

Facts

Western Work Boats

[2] In July 2000 Mr Kelly established Western Work Boats Ltd as a family business. With the global financial crisis came financial difficulties. In May 2010
Mr Kelly sold 50% of the shares to a competitor, Seaworks Ltd, who appointed a director. He remained as a shareholder and director. The shareholder agreement included clause 11.1:

11.1 Restraint on competition: No Shareholder shall, while it is a Shareholder or employee of the Company, or within 2 years after it ceases to be a Shareholder or employee of the Company, within New Zealand (Territory) directly or indirectly in any capacity:

(a) be directly or indirectly interested, engaged or concerned, or participate, whether on its own account or as a consultant to or partner, trustee, beneficiary under a trust, shareholder, director, agent, employee or in any other way whatever, in the conduct of any business, venture or other activity which competes or may compete with the Company’s or Seaworks’ business; or

(b) be interested in any other way in, or assist financially or in any other way, any such person, business, venture or other activity;

provided that this clause 11.1 shall not apply to any Shareholder’s involvement with Seaworks or an entity that is a Related Party of Seaworks.

Sale…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2016] NZHC 2577
Decision Date: 28 October 2016

CaseChat Overview and Summary

Western Work Boats Ltd and Seaworks Ltd brought an application for an interim injunction against Sean Tane Kelly and Pacific 7 Ltd, their former business partners, alleging that Kelly and Pacific 7 had breached a restraint of competition obligation and sought to dispose of property in the Tauranga Marine Precinct. Western Work Boats and Seaworks sought an interim injunction to restrain Kelly and Pacific 7 from breaching the restraint of competition, and to restrain Kelly and Pacific 7 from disposing of Lot 4 in the Tauranga Marine Precinct. Kelly and Pacific 7 opposed the injunctions. The court considered the application on the basis that there was a serious question to be tried on the substantive claims and the balance of convenience and overall justice of the position. The court declined to grant an interim injunction regarding the restraint of competition obligation as it would add to the enforceability of the restraint, which was currently disputed. The court granted an interim injunction restraining disposition of Lot 4, with leave to apply for its variation or removal if a change in circumstances materially alters the balance of convenience imposed by the injunction.
In summary, the court granted an interim injunction restraining Mr Kelly and Pacific 7 from taking any steps to sell, alienate or otherwise dissipate their respective interests in Lot 4, and requiring them to preserve their interests in Lot 4 in all respects pending a substantive outcome in the underlying proceedings or further order of the Court. Mr Kelly and Pacific 7 have leave to apply to the Court for variation or removal of the interim injunction if a change in circumstances materially alters the balance of convenience imposed by the injunction. Western Work Boats and Seaworks have succeeded in obtaining an interim injunction but only regarding part of what they sought. Mr Kelly and Pacific 7 have succeeded in responding to the application but only regarding part of what was sought. To recognise that both sides succeeded and failed I am inclined to let costs lie where they fall.

Orders