A1 COMMERCIAL SERVICES 2012 LTD v FREEDOM TOURS AND TAXIS LTD [2018] NZHC 61

A1 COMMERCIAL SERVICES 2012 LTD v FREEDOM TOURS AND TAXIS LTD [2018] NZHC 61 [7February 2018]IN THE HIGH COURT OF NEW ZEALANDDUNEDIN REGISTRYCIV-2018-412-000010[2018] NZHC 61BETWEEN A1 COMMERCIAL SERVICES 2012LIMITEDPlaintiffAND FREEDOM TOURS AND TAXIS LIMITEDDefendantHearing: Determined on the papersReasons: 7 February 2018REASONS FOR DECISION OF GENDALL JIntroduction[1] On Friday last, 2 February 2018, at approximately 6 p.m., as a matter of someurgency, I granted the plaintiff's without notice interlocutory application for both aninterim injunction and a freezing order in this proceeding. Orders were made onlimited terms, simply to preserve the position of these parties in the meantime.[2] The specific orders made on 2 February 2018 were as follows:(a) On the plaintiff's interlocutory application without notice for theinterim injunction:Pending further order of this Court the plaintiff is granted an interiminjunction:(i) to restrain the defendant from entering into or purporting toenter into possession of the plaintiff's (now) business knownas City United Taxis on the basis of non-payment of the termloan/vendor finance arrangement; and(ii) to restrain the defendant from using in any way includingdisclosure and reproduction any confidential information thatwas sold to the plaintiff belonging now to the plaintiffincluding but not limited to telephone numbers, call centredetails, and bank accounts and accounting files; and(iii) to restrain the defendant from re-entering or purporting to re-enter the business premises of the plaintiff.[3] As to the plaintiff's application for a freezing order, this order was made asfollows:(a) A freezing order is made to restrain the defendant or the defendant'ssolicitor from removing any assets located in New Zealand, or fromdisposing of, dealing with or diminishing the value of those assets inthe meantime.[4] No order as to costs was made with respect to the applications. Costs werereserved.[5] I now give my brief reasons for those decisions.Background[6] In October 2017 the plaintiff as purchaser and the defendant as vendor enteredinto an agreement for the sale and purchase of a taxi business trading as City UnitedTaxis. Effectively this was a call centre, despatch system and taxi administrationbusiness operated from South Dunedin.[7] The purchase price for the business was $440,000. Settlement of the purchasetook place on about 16 November 2017.[8] Some $150,000 of the purchase price was left in following settlement by wayof vendor finance. This was secured by first ranking registered General SecurityAgreement (GSA) over the assets of the plaintiff's company. This loan was repayableover a period of about two years.[9] Standard warranties were included in the agreement for sale and purchase,including a turnover warranty.[10] Further, a retention fund of $65,000 was to be held back by the vendor'ssolicitor in his trust account from purchase funds for a period of three monthsfollowing settlement, with a proviso that this fund would be paid back to the plaintiffpurchaser if certain events involving taxi owners contracted to the business arose.[11] The plaintiff complains that a significant number of the vendor/defendant's taxicontractors' signed agreements, which were to be assigned to the plaintiff, were notprovided as the contract required and other breaches of the sale agreement occurredon the part of the defendant.[12] Further, as I understand the position, the plaintiff has a real concern that thedefendant, as the owner and landlord of the premises occupied by the taxi call centrewhich the plaintiff operates, has threatened to take steps to re-enter into possession ofthose premises under its GSA immediately on the basis of non-payment of the termloan/vendor finance arrangement. It is said that other threats relating to the plaintiff'sbusiness have been made by the defendant. The reasons for urgency in this matter areoutlined by the plaintiff in the material before the Court. The plaintiff says that anyundue delay would lead to the plaintiff losing access for its call centre and therebysignificant prejudice and irreparable injury.[13] The plaintiff contends that all payments it was required to make to date havebeen met. It complains also however that the defendant had not disclosed a statutorydemand it had received from the Inland Revenue Department around September orOctober 2017 and, further, that the defendant as vendor has outstanding debt owing tothe BNZ, which is in default. As I understand the position now, an application to placethe defendant into liquidation (which it is said is likely to be unopposed) is before theCourt to be heard on 9 February 2018.[14] So far as the $65,000 retained by the vendor's solicitors is concerned, theplaintiff contends that unless the freezing order sought is made, this amount will eitherbe paid to the vendor or to the liquidators of the vendor company and there would belittle, if any, chance of the plaintiff recovering these funds in terms of the defendant'sobligations under the sale contract if the order sought is not made.Decision[15] In the present case, the plaintiff has commenced proceedings against thedefendant seeking a permanent injunction. Rule 7.53 of the High Court Rules appliesand along with r 7.46 permits the present application for an interim injunction toproceed. I am satisfied that, in all the circumstances, and given the extreme urgency Iam told is required here and the undue delay that might otherwise arise, this mattercan properly be dealt with on a without notice basis, subject to the conditions I willimpose.[16] The general principles involved here are well settled. The test in AmericanCyanamid Co v Ethicon Limited1 applies and as McGechan on Procedure atHR 7.53.04 notes, it requires determination:(a) that there is a serious question to be tried in this proceeding; and1 American Cyanamid Co v Ethicon Limited [1975] AC 396.(b) that the balance of convenience lies in favour of granting the injunctionsought; and(c) the overall justice of the position is assessed and supports an injunctionbeing granted.[17] The ultimate question is always where that overall justice in the matter lies.This requires the Court to weigh the interests involved against each other. Questionsusually arise over the adequacy of damages should relief not be granted, and,obviously, a consideration of whether the status quo should be preserved.[18] Considerable urgency was involved in this matter, given that the applicationwas referred to me only by telephone and email communication late on Friday last, 2February 2017. Issues arose over whether the plaintiff's call centre business withoutfurther consideration would be brought to an end, with the defendant re-entering thebusiness premises as landlord and holder of a GSA, over the weekend.[19] As to whether there is a serious question to be tried in this proceeding, theplaintiff contends the defendant has committed serious breaches of the agreement forsale and purchase and that what is sought by way of injunction goes no wider than isreasonably necessary to protect the plaintiff's interests here.[20] Particular complaints are identified by the plaintiff to include the failure of thedefendant to notify the plaintiff that it was the subject of an impending liquidationapplication, its failure to provide all relevant information to the plaintiff (including theprovision of contracts for the taxi contractors which set up the relationship betweenthem and the plaintiff, these contracts providing a large portion of the source of incomeof the business) and the danger of the $65,000 retention being paid to the vendor or tothe liquidators of the vendor company prematurely with little chance of any fundsbeing recovered by the plaintiff.[21] On its face, I am satisfied to a degree as to the strength of the plaintiff's case.And, in all the circumstances outlined, the plaintiff's contention that damages wouldbe an inadequate remedy here and overall the status quo needs to be preserved, in myview, has merit.[22] The overall justice in this case and the balance of convenience, in my view,favour the granting of the injunction and the freezing order sought. Orders are madesimply on an interim basis to preserve the position.[23] Those orders outlined at para [2] above were made accordingly but on the basisthat this matter would come before the Court again on Monday, 5 February 2018(which occurred), to plan a way forward in resolving the dispute between these parties.In the meantime, counsel for the plaintiff was to make available all the material filedto counsel for the defendant. Interestingly, earlier discussions had taken placeregarding the matters the subject of this proceeding between those counsel. Matterswere to be discussed further between representatives of the parties and the Court on 5February 2018.[24] And, in the meantime, costs were reserved....................................................Gendall JSolicitors:Wilkinson Rodgers Lawyers, DunedinGuest Carter Law Limited, DunedinCopy to: G A Paine, Barrister, Dunedin