AAA One Industries Pty Ltd v Loane & Anor [1999] QSC 444

• • JUSTICE ----.:..- State Reporting Bureau TRANSCRIPT OF PROCEEDINGS Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau. SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION BYRNE J No 57287 of 1999 AAA ONE INDUSTRIES PTY LTD and ROSLYN LOANE and SHANE TONNA BRISBANE .. DATE 30/08/99 JUDGMENT ;11t Flnnr, Thc L:llv Courts, Cl'III'gC Strcet. Brish:IIIC, Q, ~()()() 1 REVISED COPfES ISSUED State Reporting Bureau Date' Plaintiff First Defendant Second Defendant Tclcpltlllll': (07) J2~7 ~J()() 1-":1'<: (07) J~~7 55.1; -- 1 of 7 -- 300899 Tl/PAF23 M/T 5375/99 (Byrne J) HIS HONOUR: This is an application for interlocutory injunctive relief, in part mandatory in nature. The applicant carries on a business as franchisor of a pest control system throughout Queensland under the name AAA One Pest Control. In November 1995 the plaintiff entered into a written franchise agreement with the first defendant, Ms Loane, who has since married the second defendant, Mr Tonna. The first defendant agreed to pay an initial franchise fee of $15,000 and some subsequent payments probably related to turnover. As it happens, it is unnecessary to form a view about the precise nature of the respective rights and obligations of the parties assumed with respect to payment of moneys. Other things are now in issue. In September 1997 the first defendant wrote to the plaintiff informing it that: "As from 1 October 1996 Shane Tonna will become a partner of AAA One Mackay. Hoping this is acceptable." There appears not to have been any response to the letter; nor it seems was there an attempt, either by franchisee or franchisor to bring into existence an agreement of the kind anticipated by clause 18 of the franchise agreement. This clause contains a covenant in restraint of trade and provides that, if the franchisee is a partnership, the franchisee will procure each of the partners to enter into 2 JUDGMENT 10 ( ( 50 60 -- 2 of 7 -- 300899 Tl/PAF23 M/T 5375/99 (Byrne J) a particular form of covenant with the franchisor of a type stated in annexure B to the agreement. Subsequent correspondence from the franchisor does not 10 appear to acknowledge that the second defendant became a party to the franchise agreement. Letters which were sent thereafter were directed to the first defendant, and no other explicit act of recognition of the second defendant which might have constituted a novation of the contract to add him as a party is established. Nonetheless, it must be a possibility that the plaintiff will succeed at the trial in demonstrating that the second defendant has become a party to the contract by a combination of his acquiescence, the letter sent by the first defendant, and the plaintiff's acquiescence in the notion that, thereafter, the partnership would conduct the franchise business. This is not the way in which the claim ?~'o is presently pleaded. However, in my view, the material 40 I discloses an arguable case that the second defendant has become a party to the franchise agreement with the consequences which that involves or else is estopped from denying that he also became a party to the agreement. 50 The material consequences for the defendants for present purposes are related to a telephone and the restraint which is imposed by the agreement in relation to businesses which the franchisees might, after termination of the franchise 60 agreement, conduct. 3 JUDGMENT -- 3 of 7 -- 300899 Tl/PAF23 M/T 5375/99 (Byrne J) It is common ground that the franchise agreement has been terminated, although the parties are at odds as to the date on which this occurred~ It is unnecessary for present purposes to form a view about it because, on either view, 10 the two-year restraint in carrying on a comparable business within the Mackay area, which is the subject of the franchise, has not elapsed. The questions which therefore present themselves are 20 C' whether interlocutory relief ought to be granted to restrain the second defendant from carrying on his pest control business pending trial of the proceedings, and whether an order ought to be made requiring the defendants to transfer the telephone number which the second defendant j8 is presently using. That telephone number was formerly used in connection with the conduct of the franchise business. 20 I have referred exclusively to rights deriving from the 40 franchise agreement rather than to the plaintiff's alternative contention that there has been misleading or deceptive conduct because there appears not to be any evidence to show that the conduct of either of the defendants involves some continuing contravention of the 50 relevant provisions of the Trade Practices Act, if any apply to these individuals, or of their analogues in the Fair Trading Act. 4 JUDGMENT :)0 60 ( I, ) ( )' -- 4 of 7 -- 300899 Tl/PAF23 M/T 5375/99 (Byrne J) 1 :,.,.,1 The second defendant is conducting his pest control business within the area and within the duration of the restraint accepted explicitly by the first defendant under the franchise agreement. The agreement appears to have 10 been concluded at arm's length. It is commercial in nature. There is no suggestion that either of the defendants was overborne in respect of their participation in the arrangement. There therefore seems a powerful case that the agreement is reasonable as between the parties. The question then arises whether it is shown to be unreasonable in the public interest. There is no evidence directed to that question. Wherever the onus of proof may lie - and I am inclined to think that it lies upon the :18 party asserting the invalidity of the restraint - it is not easy to see that there is a sound basis for challenging the restraint. No doubt by the time the case reaches trial, evidence will be directed towards that question, and it may '::c be yet possible for the plaintiff to demonstrate that the 40 restraint is contrary to the public interest. It suffices now to say that I am not satisfied that a challenge to the restraint will succeed. In these circumstances there appears to me to be an arguable case that the second defendant is bound both by the restraint provision and by the obligations expressly 5 JUDGMENT :iG 50 60 -- 5 of 7 -- 300899 T2/SE2S M/T 5375/99 (Byrne J) :.,": assumed by the first defendant under clause 13J, see page 25 of the Franchise Agreement, with respect to the telephone number, namely an obligation to discontinue the use of the number to the extent to which it was used in 10 connection with the franchisee's business previously. Therefore two questions remain. One is whether the applicant has demonstrated that damages will not be an adequate remedy; secondly, if the applicant has demonstrated that, where the balance of convenience lies. There is no evidence on either side directed to the losses ( that might be sustained by the applicant if the application fails, which the defendants will sustain if it succeeds. jB It is therefore very difficult to identify the damages which the plaintiff might succeed in obtaining if it succeeds at the trial in proving a breach of the restraint cclause or a failure, contrary to clause 13J, to transfer the telephone number. 40 ( There is, for example, no material before me to show that since the first defendant purported to terminate the agreement the plaintiff has sought another franchisee within the geographical area that is the subject of the 50 restraint; nor is there other material to suggest that the capacity of the plaintiff to obtain another franchisee is adversely affected in a way likely to sound in substantial damages by the second defendant's carrying on his business 4;~' 60 in the Mackay area. 6 JUDGMENT -- 6 of 7 -- 300899" T2/SE25 MIT 5375/99 (Byrne J) Much the same is true with respect of the telephone number. If the phone number is sterilised pending trial, the material does not show-that that is likely to prevent the applicant1s sustaining damage of any significance. So, little emerges to suggest that the damages could be substantial. It is not demonstrated that any damages which might be awarded, even if difficult to quantify, will not be an adequate remedy. For this reason it is unnecessary to turn to consider where the balance of convenience lies. The applicant should be left to such remedies as it can establish at the trial. The application for interlocutory injunctive relief will therefore be refused. The matter is plainly within the jurisdiction of a District Court, and the matter will be remitted to the District Court at Mackay. HIS HONOUR: I consider that the interests of justice will be sufficiently served if the costs of the application are the defendants I costs in the cause. 7 JUDGMENT 10 20 40 30 50 -- 7 of 7 --