CHRISTENSEN v GORDON [2020] NZHC 1486

CHRISTENSEN v GORDON [2020] NZHC 1486 [29 June 2020]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2020-404-710[2020] NZHC 1486IN THE MATTERANDof an application for interlocutory injunctionIN THE MATTER of a claim for breach of contract and forassistance to breach of contractBETWEEN TONY CHRISTENSEN and ROSALINEMARY CHRISTENSEN as trustees of theCHRISTENSEN FAMILY TRUST TWOFirst PlaintiffsWOODY ROBERT PURDOM, LEANNEGILLIAN RUBY CLOUGH andPROFESSIONAL TRUSTEE SERVICES2019 LIMITED as trustees of the PURDOMFAMILY TRUSTSecond PlaintiffsAND TIMOTHY PAUL GORDONFirst DefendantALUMINATE SOLUTIONS LIMITEDSecond DefendantANGELA GORDONThird DefendantHearing: 17 June 2020Appearances: P Amaranathan for the PlaintiffsE St John and S P Maloney for the DefendantsJudgment: 29 June 2020JUDGMENT OF GAULT JThis judgment was delivered by me on 29 June 2020 at 4:00 pmpursuant to r 11.5 of the High Court Rules 2016.Registrar/Deputy Registrar: [1] The plaintiffs, trustees of the Christensen Family Trust Two and the PurdomFamily Trust, seek an interim injunction restraining the defendants from breachingrestraints of trade and disclosing confidential information. The plaintiffs are thecurrent shareholders of Trans-Space Industries Ltd (Trans-Space). The restraints oftrade and confidentiality obligations were included in agreements for sale andpurchase of shares in Trans-Space between the plaintiffs and the first defendant(Mr Gordon).Factual background[2] Trans-Space manufactures, imports and installs operable (movable) walls anddoors, including partitioning systems, aluminium doors, aluminium sliding doors,swing doors and other door systems, such as bi-fold doors. It has approximately 20employees, including 14 full-time, and turnover of around $4.5 million per year.[3] Mr Gordon was the majority shareholder, sole director and managing directorof Trans-Space from September 2012 until he sold his shares to the plaintiffs in late2019. He owned 100 per cent of the shares in Trans-Space until 2016 when he sold a20 per cent shareholding to the Purdom Family Trust.[4] The third defendant, Mrs Gordon, was employed by Trans-space as anestimator until 20 May 2020.[5] Mr Purdom has worked in the Trans-Space business for 17 years, focused oninstallation until 2019.[6] Mr Christensen joined Trans-Space in 2017, focused on manufacturing untilrecently.[7] By agreements for sale and purchase dated 27 November 2019:(a) the trustees of the Christensen Family Trust Two agreed to purchase625 ordinary shares, being 50 per cent of the shares in Trans-space,from Mr Gordon for $900,000 plus 50 per cent of Mr Gordon's$481,000 retained earnings in his shareholder current account; and(b) the trustees of the Purdom Family Trust agreed to purchase 375 shares,Mr Gordon's remaining 30 per cent shareholding, for $540,000 plus theother 50 per cent of Mr Gordon's shareholder current account.In aggregate, the purchase price for the 80 per cent shareholding was$1.44 million plus the $481,000 shareholder current account.[8] Both agreements included clause 7.3, which provided that Mr Gordon (and,in the case of the Purdom Family Trust agreement, Mrs Gordon) covenanted not to,and not to permit any associated party (as defined in the Income Tax Act 2007) to:(a) during the period of three years following the Completion Date andwithin New Zealand directly or indirectly carry on or be interested,engaged or concerned (whether on their own account or in partnershipwith or as manager, agent, director, shareholder, employee orbeneficiary under a trust or in any other capacity), in any businessventure or other activity that is the same as or substantially similar tothe Company's business, namely the manufacture, importation,distribution or installation of movable walls (operable wall systems),partitioning systems or door systems either in the domestic orcommercial markets within New Zealand including but not limited tothe Dormakaba Group of companies including Skyfold; or(b) during the period of three years following the Completion Date,whether on their own account or for any other person, solicit, enticeor endeavour to entice away any employee, officer or consultant ofthe Company, any customer of the Company or any employee, officerconsultant or Customer of a Related Party of the Company; or(c) at any time disclose or use confidential information or otherintellectual property rights of the Company or its Related Parties.[9] Completion of the sale and purchase agreements occurred on 6 December2019.[10] Mr Gordon agreed to be available to assist the business if required, until6 March 2020. Trans-Space paid him a salary based on remuneration of $50,000 perannum, paid fortnightly until late February/early March 2020.[11] On 27 February 2020, Mr Gordon telephoned Mr Purdom to advise that he wasconsidering purchasing AutexPSL, another business involved in the manufacture ofpartitions and doors. Mr Purdom emailed Mr Gordon the next day to confirm hisconcern with such a purchase due to the restraint of trade. Mr Gordon replied that hisdiscussion was premature, and it was unlikely anything would proceed.[12] During the COVID-19 lockdown, Mrs Gordon was the only Trans-spaceemployee with remote access to Trans-space's computer system. Unknown to theplaintiffs, Mr Gordon had retained administrator rights to Trans-space's computersystem. At some stage, Mr Gordon accessed his Trans-Space email account anddeleted his emails. They were recovered, and he deleted them a second time.They were recovered again.[13] On 8 April 2020 Mrs Gordon emailed to Mr Gordon at his private email addressa copy of an invitation to tender Trans-space had received for a Genesis Energy Ltdproject.[14] On 23 April 2020 Mrs Gordon emailed to Mr Gordon a copy of an invitationto tender Trans-space had received for a Sir Howard Morrison Performing Arts Centreproject.[15] On 29 April 2020 Mr Gordon told Mr Purdom that he had purchasedAutexPSL.[16] After correspondence between solicitors seeking undertakings, the plaintiffscommenced proceedings on 22 May 2020 and applied for interim relief. As againstMr and Mrs Gordon, the claim is for breach of contract relying on clause 7.3.As against the second defendant, the claim is pleaded as knowingly or unlawfullyassisting breaches of contract. Ms Amaranathan, for the plaintiffs, confirmed this isintended to refer to the tort of inducing breach of contract. At this stage, the statementof claim alleges assistance rather than inducement by the second defendant.[17] The second defendant, named as Partition Solutions Ltd, is a company ownedby Mr Gordon. It has had different names since it was incorporated in February 2020.On the same day as the proceedings were issued, it changed its name to AluminateSolutions Ltd. I direct the intituling be updated accordingly. Mr St John, for thedefendants, accepted the second defendant is Mr Gordon's vehicle for his proposedpurchase of the business of AutexPSL, being a going concern asset purchase, not ashare purchase.Relief sought[18] The interlocutory application seeks an interim injunction in the followingterms:(a) The first, second and third defendants be restrained from disclosing,holding or using confidential information belonging to Trans-Space.(b) The first and third defendants be restrained from directly or indirectlycarrying on or being interested, engaged or concerned (whether on theirown account or in partnership with or as manager, agent, director,shareholder, employee or beneficiary under a trust or in any othercapacity), in the second defendant's business or any other business,venture or activity that is the same as or substantially similar to thebusiness of Trans-Space either in the domestic or commercial marketswithin New Zealand, including but not limited to the Dormakaba Groupor companies including Skyfold.(c) The first and third defendants be restrained from directly or indirectlycarrying on or being interested, engaged or concerned (whether on theirown account or in partnership with or as manager, agent, director,shareholder, employee or beneficiary under a trust or in any othercapacity), in the second defendant's business or any other business,venture or activity that manufactures or imports or installs or distributesany of the following:(A) movable walls (operable wall systems);(B) partitioning systems; or(C) door systems;either in the domestic or commercial markets within New Zealand,including but not limited to the Dormakaba Group or companiesincluding Skyfold.(d) The second defendant (being a company directly or indirectlyestablished, owned or operated by the first defendant) be restrainedfrom manufacturing or importing or distributing or installing any of thefollowing:(A) movable walls (operable wall systems);(B) partitioning systems; or(C) door systems;either in the domestic or commercial markets within New Zealand,including but not limited to the Dormakaba Group or companiesincluding Skyfold.[19] Ms Amaranathan acknowledged that the plaintiffs would not need an order interms of (b). I agree that (c) addresses the issue in dispute more specifically.Approach to interim injunctions[20] It is well settled that on an application for an interim injunction the Courtaddresses:1(a) whether the plaintiff can show there is a serious question to be tried;(b) where the balance of convenience lies; and(c) where the overall justice lies.1 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (CA) at 142; andAmerican Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL).[21] As the House of Lords held in American Cyanamid Co v Ethicon Ltd:2It is no part of the Court's function at this stage of the litigation to try to resolveconflicts of evidence on affidavit as to facts on which the claims of either partymay ultimately depend nor to decide difficult questions of law which call fordetailed argument and mature considerations.Serious question to be triedRestraint of trade[22] The legal principles applicable to restraint of trade clauses are well established.Restraints of trade are prima facie invalid but will be enforced where they are no widerthan is reasonably necessary to protect the legitimate interests the restraint wasintended to protect.3 Reasonableness in the relevant sense relates to the legitimateinterest of the parties to the covenant and to the wider public interest.[23] At least at this stage, Mr St John accepted the restraint is enforceable. In termsof the serious question threshold, I proceed on that basis.[24] It is also not disputed that Mr Gordon has agreed to purchase the business ofAutexPSL. But Mr St John submits it does not compete with Trans-Space.The dispute focuses on the scope of the restraint. The relevant terms of the restraintare any activity that is the "same as or substantially similar" to Trans-Space's business,"namely the manufacture" or "distribution" of "partitioning systems or door systems".Mr Gordon said that Trans-Space has never advertised or sold "partitioning systems"and that Trans-Space amended its marketing materials to use that phrase only after henotified Mr Christensen and Mr Purdom of his intention to purchase AutexPSL.However, the term "partitioning systems" was included in the description in clause7.3. Ms Amaranathan submitted a plain reading indicates the list following the word"namely" describes the activities prohibited as well as Trans-Space's own activities.If it were referring only to Trans-Space's activities, the list would use the conjunction2 American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL) at 407. See also Villa Maria WinesLtd v Montana Wines Ltd [1984] NZLR 422 (CA) at 425; and Health Club Brands Ltd v ColvenBotany Ltd [2013] NZHC 428 at [9].3 Brown v Brown [1980] 1 NZLR 484 (CA) at 491, the leading New Zealand authority on theenforceability of a restraint of trade in connection with the sale and purchase of shares in abusiness. See also BYOF Holdings Pty Ltd v Bencho Ltd [2014] NZHC 1560 at [25]-[31]; andFeng v Liu [2017] NZHC 2479."and" rather than "or". I consider it is at least seriously arguable that the list following"namely" describes the activities agreed to be the "same or substantially similar" toTrans-Space's activities, and thus prohibited under the restraint for three years.[25] The primary issue relates to the phrase "partitioning systems or door systems".The defendants accept that AutexPSL purchases and on-sells raw aluminiumextrusions which can be used by its customers to construct fixed walls or "partitions".Mr Gordon says the phrase "partitioning systems" has a particular industry meaningdifferent from "partitions". He says "partitioning systems" means movable systemswhereas Mr Purdom says it includes movable and fixed. That is an issue for trial.As is whether AutexPSL in fact also supplies movable systems, such as sliding stackerdoors, or Alement products. There is some evidence that tends to support the plaintiffs'case. First, AutexPSL's own website refers to "partitioning systems". Mr Gordon saidthat what is advertised on the AutexPSL website is exaggerated and does not reflectwhat AutexPSL actually do – as its wholesale products are not photogenic, its websiteuses images of finished products, which they do not produce, in order to make theirwebsite more appealing to customers. That is said to be confirmed in a very briefaffidavit from Mr Croot of the Autex group. Secondly, back in February 2020,following concern raised by Mr Purdom, Mr Gordon asked Autex to remove anyinsinuation that a product had acoustic capability from their website. Thirdly,Mr Purdom's affidavit in reply exhibited recent tenders where Trans-Space andAutexPSL have competed. Those documents also refer to Alement products.Mr St John said those documents were not accepted. Ultimately, the issue for trialappears to be whether the activities of AutexPSL are substantially similar to those ofTrans-Space.[26] Both in relation to the restraint of trade and confidentiality claims, theplaintiffs' written submissions emphasised that the defendants' explanations were notcredible. As indicated, it is no part of the Court's function at this stage to try to resolveconflicts of evidence on affidavit. As Mr St John submitted, that indicates a trial isneeded. The question at this stage is whether the plaintiffs can show there is a seriousquestion to be tried.[27] Mr St John's submission cuts both ways. I consider the plaintiffs have shownthere is a serious question to be tried as to breach of the restraint of trade byMr Gordon. Whether or not there is a clear distinction between movable and fixedwalls and doors, there is evidence, including from AutexPSL's website, that itsactivities include designing and installing partitioning systems and sliding doorsystems, including Alement products.[28] In relation to the second defendant, I am not satisfied there is a serious questionto be tried on the current pleading. There is no pleaded allegation or evidence that ithas induced, rather than assisted, a breach of contract. Given the acknowledgementthat the second defendant is Mr Gordon's vehicle for his proposed purchase and he isits sole director, any such allegation would effectively involve Mr Gordon inducinghimself. In any event, any interim order against him in relation to the restraint of tradewould suffice. The terms of the restraint and the order sought capture direct or indirectinterests.[29] In relation to Mrs Gordon, there is no evidence that she is, or intends to be,involved in the purchase of the AutexPSL business. She signed the Purdom agreementas a separate covenantor which may give rise to an obligation not to permit Mr Gordon,as an associated party, to breach the restraint. To that extent only, there is a seriousquestion to be tried in relation to her compliance with the restraint.Confidential information[30] The plaintiffs allege two instances of breach of confidential information,namely Mrs Gordon's disclosure of the two invitations to tender to Mr Gordon byemail in April 2020. Mr Gordon is alleged to have knowingly assisted her.The defendants accept that Mrs Gordon forwarded the emails to Mr Gordon, and byway of explanation say she sent them to her husband to ask for his assistance withsolving issues in relation to the tenders during the lockdown. The plaintiffs do notaccept that explanation. Ms Amaranathan submitted that in the circumstances aninterim order is required.[31] Again, at this stage it is not for me to resolve conflicts of evidence on affidavit.I consider there is a serious question to be tried in relation to disclosure of confidentialinformation. Disclosure to Mr Gordon while he was Managing Director would ofcourse have been no issue, but by April 2020 he had sold and left the business andappears to have been arranging to purchase AutexPSL. The explanation for andconsequences of the disclosure to him are matters for trial – except insofar as hisconduct is relevant to the balance of convenience and overall justice.Balance of convenience[32] The balance of convenience involves balancing the risk of injustice to eachparty – deciding whether granting or refusing an injunction is the course which, aftersubstantive determination, would best allow the adjustment of the rights of the partiesin a way that accords with fairness and justice.4Adequacy of damages[33] A key consideration is the adequacy of damages. Ms Amaranathan firstreferred to the acknowledgement in the sale and purchase agreements that if arestrictive covenant is breached, monetary damages may not be sufficientcompensation. That acknowledgement is, of course, not determinative.[34] Ms Amaranathan submitted the harm to the Trans-space business could beirreparable and considerable – that damages may not be readily provable orquantifiable, particularly as projects involve confidential tenders. She submitted thatdamages would not be an adequate remedy to compensate for the unfair springboardgained by the defendants. Ms Amaranathan also referred to the effect onTrans-Space's innocent employees, which she acknowledged would only beconsequential on financial loss. It is also said there is no evidence the defendantswould be able to pay damages. In relation to adequacy of damages for the defendants,Ms Amaranathan submitted that there is insufficient detail of harm likely to be caused.[35] Mr St John submitted that the plaintiffs should have no issue demonstratingany loss whereas damages will be inadequate for the defendants if an injunction isgranted because the opportunity for Mr Gordon to purchase it will be lost.4 Congoleum Corporation v Poly-Flor Products (NZ) Ltd [1979] 2 NZLR 560 (CA) at 571; andMansfield v Bilkey [2016] NZHC 752 at [7].[36] I first consider whether damages would be an adequate remedy for theplaintiffs if an interim injunction is not granted but they succeed in establishing breachof the restraint of trade at trial. I accept that in a case involving breach of a restraintof trade by a person who joins an existing competitor – as the plaintiffs characteriseAutexPSL – it would often be difficult to quantify the loss caused by the breach, thatis caused by the covenantor's input into the business of an existing competitoras opposed to its ongoing legitimate competition without the covenantor's input.A before and after comparison might be a starting point for such an assessment butthat may be fraught with difficulty when extraneous economic factors may also affectthe businesses. The COVID-19 pandemic may be a particular and possibly acuteexample given the timing of this case.[37] However, this case has unusual features. The statement of claim seeks anaccount of profits. Given the structure of the proposed purchase,5 Mr St John acceptedthat, if the defendants are found in breach of the restraint at trial, any profits of thesecond defendant will be attributable to the breach. That makes quantificationrelatively simple. Further, although not currently pleaded, if the plaintiffs were to electdamages in the alternative, Mr St John also accepted that the profits of the seconddefendant would equate to the plaintiffs' loss. Given those concessions, I consider thatthe plaintiffs' loss will be relatively easy to quantify. Mr St John further offered rollingdiscovery of the second defendant's performance to monitor its activities.[38] On the other hand, even though the order sought does not expressly restrain thepurchase of the AutexPSL business, I accept an interim injunction may well have theeffect of causing Mr Gordon to lose his opportunity to purchase AutexPSL (eventhough Mr Gordon's evidence that AutexPSL "will not wait forever and I will lose thesale if I do not act soon" was somewhat vague). In the face of the order sought, itwould be very bold indeed to proceed on the basis that the AutexPSL business did notfall within the terms of the order. Quantifying that loss of opportunity would bedifficult. But I accept Ms Amaranathan's submission that there is little detail of theharm likely to be caused by that. The defendants have not disclosed the sale andpurchase agreement nor explained the terms of purchase, including the price, in order5 See [17] above.to indicate the extent of the capital investment. Although Mr Christensen understoodwhen the proceeding was commenced that the agreement went unconditional on27 April 2020 (two days before Mr Gordon told Mr Purdom he had purchasedAutexPSL), on 25 May 2020 Mr Gordon's lawyer "unequivocally confirmed" that hisclient had not entered into an unconditional agreement to purchase any business.Mr Gordon does not claim he is already committed to the purchase and his capitalinvestment is at risk. It is his loss of opportunity that is at risk. Also, Mr Gordon'sevidence on the harm if the purchase cannot proceed, that is the value of theopportunity that would be lost, is vague. He said "I will lose a very valuableopportunity that I will be unable to recover". But he also said that AutexPSL has lost$200,000 to $300,000 over the last two years. Therefore, while I accept quantificationof the defendants' lost opportunity would be difficult, the weight to be placed on thisfactor is somewhat reduced given the business's recent losses and the absence of morespecific evidence about its perceived value.[39] Balancing the adequacy of damages each way, I consider that given thedefendants' concessions it should be easier for the plaintiffs to quantify their loss if aninterim injunction is not granted than for the defendants to quantify the lostopportunity if an interim injunction is granted.[40] I do not draw an adverse inference from the defendants' lack of evidence as totheir ability to pay damages. The plaintiffs did not raise this issue in evidence, only insubmissions. They put forward no evidence about their own ability to pay damages iftheir undertaking is called upon, and I do not draw any adverse inference from thateither. This issue is neutral.[41] Mr St John also advised that the defendants would consent to, or even applyfor, a priority fixture. He indicated that a statement of defence could be filed andserved within days and discovery could be completed very quickly. He estimated athree day fixture would be sufficient. The issues would be confined and allowing forbriefs of evidence (even with the possibility of expert evidence as to industry terms)the proceeding could be ready for trial within three months. I have made enquiriesabout a priority fixture. If an application is made quickly and priority is granted, afixture may be available in November 2020. The next earliest date available would bein 2021.Employees[42] I accept the interests of innocent third parties can be important. Here, theposition of employees is relevant. I accept that damage to Trans-Space's business mayimpact employees and that even if damages following trial would be an adequateremedy for the plaintiffs, employees might lose jobs in the meantime. However, theconsequential impact of breach (as opposed to broader economic factors) onemployees is somewhat speculative. In the absence of more specific evidence, I amreluctant to give it too much weight. Equally, I am reluctant to place much weight onthe risk that, in the absence of Mr Gordon's investment, AutexPSL employees willalso suffer. Although it was suggested it needs investment to avoid liquidation, it wasalso suggested that AutexPSL has been trading for years and if an injunction is refusedall that will occur is it will continue to trade under new ownership.Status quo[43] Ms Amaranathan submitted that the status quo favours the plaintiffs becauseMr Gordon has not yet purchased the AutexPSL business. This assumes thatMr Gordon is not yet committed to the purchase – or at least was not committed whenthe proceedings were commenced – which as indicated appears to be a fair assumptionon the evidence provided. Preserving the status quo may be a relevant factor in favourof interim relief in the balance of convenience, particularly when other factors areevenly balanced. Ordinarily, the status quo means the position prevailing when thedefendant embarked upon the activity sought to be restrained. In that sense, the statusquo favours the plaintiffs.[44] On the other hand, Mr St John submitted this case is on all fours with WesternWork Boats Ltd v Kelly,6 where Palmer J considered that the balance of convenienceand overall justice did not favour granting an interim injunction in relation to arestraint of trade obligation. He considered that, if the defendants succeeded at trial,6 Western Work Boats Ltd v Kelly [2016] NZHC 2577.an interim injunction would have significantly altered the rights of the parties in theinterim, and that the balance of convenience did not favour such a change in position.7Leaving the defendants to assess their chances of success placed the appropriate set ofincentives on them – "to make their business decisions consistent with their bestassessment of their legal obligations".8 I note that Palmer J also considered that inthat case it would be easier to quantify the loss accruing to the plaintiffs from breachof the restraint than the defendants' lost business opportunities due to an interiminjunction.9[45] Ms Amaranathan submitted that Western Work Boats Ltd v Kelly isdistinguishable in terms of the status quo because here Mr Gordon has not yetcompleted purchase of AutexPSL. I accept that distinction and note that balance ofconvenience and overall justice are fact intensive enquiries so there is limited utilityin comparing the facts of other cases. But here too I have concluded that the adequacyof damages favours the defendants and the point about incentives also has someapplication.Injunction determinative[46] Mr St John submitted that this is a case where granting interim relief willeffectively determine the matter because it will preclude Mr Gordon from purchasingAutexPSL. The Court of Appeal has recognised that:10where the grant or refusal of an interlocutory injunction may well"determine the fate of the litigation the Court should take a more robustattitude than may be suggested by a reading of the decision of the House ofLords in American Cyanamid Co v Ethicon Ltd."[47] This is especially so where the facts appear to be clear and, to a certain extent,undisputed or at least indisputable.11 But this is not a case where the facts appear tobe clear, let alone undisputed. I am therefore cautious about the risk of effectivelydetermining the litigation in the plaintiffs' favour. The financial resources of the7 Western Work Boats Ltd v Kelly [2016] NZHC 2577 at [26]-[27].8 At [27].9 At [28].10 Wilfred v Gan [2013] NZCA 457 at [21], citing McKay Electrical (Whangarei) Ltd v Hinton[1996] 1 ERNZ 501 (CA) at 507.11 McKay Electrical (Whangarei) Ltd v Hinton [1996] 1 ERNZ 501 (CA) at 507.parties and the size of their investments together with the market prospects are factorsto be weighed in assessing whether the finality of an interim injunction is relevant.12Ms Amaranathan submitted that the plaintiffs have invested $1.9 million in Trans-Space whereas the level of Mr Gordon's investment in AutexPSL is unknown. That istrue but, as indicated, it is his loss of opportunity, rather than loss of investment, thatis at risk. Taking these matters into account, I consider the risk that an interiminjunction may effectively determine the litigation in the plaintiffs' favour is a factorweighing against the grant of an injunction, although not an overriding factor.Conduct[48] Ms Amaranathan submitted that the defendants' conduct is relevant to thebalance of convenience and overall justice. I accept that the conduct of the defendantscan be an important factor.13 This is sometimes described as acting with "eyes wideopen". It was a factor in Klissers.14 But, as Gilbert J said in Mansfield v Bilkey,15there is a distinction between a defendant seeking to avoid relief on the basis ofinconvenience when it has deliberately wronged and a defendant who has proceededin the face of opposition but genuinely believing it is acting within its rights.[49] Several aspects of the defendants' conduct are relied on. First, Mr Gordonappears to have proceeded with knowledge that the plaintiffs consider purchase ofAutexPSL would breach the restraint. Mr Purdom indicated his position on28 February 2020. Despite Mr Gordon claiming to have at all times been open andtransparent, following his statement to Mr Purdom on 28 February 2020 that it wasunlikely anything would proceed, he appears not to have updated the plaintiffs until29 April 2020 when he advised of the purchase.[50] Secondly, as indicated, the defendants have not disclosed the purchaseagreement nor explained the terms of purchase, which is unhelpful. Mr Christensensays he understands that Mr Gordon entered into an agreement to purchase theAutexPSL business on or about 18 March 2020. Mrs Gordon's lawyer advised the12 Plix Products Ltd v Frank M Winstone (Merchants) Ltd (1984) 3 IPR 373 (HC) at 388.13 See for example Mansfield v Bilkey [2016] NZHC 752 at [26].14 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (CA) at 141.15 Mansfield v Bilkey [2016] NZHC 752 at [29].agreement was signed on 17 March 2020. Although I have accepted the agreementwas not unconditional on 25 May 2020, an Autex website announcement indicates tocustomers that settlement was due to take place on 31 May 2020. That was apparentlydeferred following the defendants' undertakings pending this decision. Mr Gordonsaid his purchase is currently on hold.[51] Thirdly, Ms Amaranathan also refers to Mr Gordon's conduct accessing Trans-Space's systems and deleting information. Accessing his mailbox after his departureto delete emails (twice) without liaising with the purchasers was at the very leastunwise. His purpose for doing so and what was deleted are matters for trial. I am notat this stage in a position to draw an adverse inference in relation to that.[52] Fourthly, Ms Amaranathan also relies on Mrs Gordon's conduct in breach ofconfidence. As indicated, the explanation for the disclosure to Mr Gordon is largely amatter for trial. At this stage, I am not in a position to accept or reject Mrs Gordon'sexplanation.[53] Although the defendants' conduct lacks transparency in material respects, I amnot in a position to conclude on the affidavit evidence that Mr Gordon has deliberatelyacted in breach of clause 7.3. I do not consider the defendants' conduct is a significantfactor in favour of interim relief.Conclusion on balance of convenience[54] Weighing these various factors, I consider the balance of convenience is clearlyagainst the grant of an interim injunction restraining the defendants from proceedingwith the purchase of AutexPSL. The strongest factor is that damages should be anadequate remedy for the plaintiffs given the unusual features of the case.Overall justice[55] Stepping back, in relation to the restraint of trade issue, I consider that, giventhe defendants' concessions, damages should be an adequate remedy for the plaintiffsand overall justice weighs against an interim injunction that prevents the defendantsfrom proceeding with the purchase of AutexPSL. An early trial will reduce the periodof uncertainty for all parties.[56] Turning to confidential information, Mr St John offered undertakings inrelation to the two pleaded invitations to tender and advised that the defendants willgive further undertakings in relation to confidential information that is particularised.He proposed that an interim order in relation to confidential information could beconditional on the provision of undertakings.[57] The plaintiffs are entitled to expect Mr and Mrs Gordon to comply with theirobligations not to disclose or use confidential information. But the only alleged breachis that Mrs Gordon disclosed the two invitations to tender to Mr Gordon in breach ofher own covenant in the Purdom agreement, and Mr Gordon is alleged to haveknowingly assisted her. There is no evidence that Mr Gordon assisted, that is induced,her to disclose those documents to him or that he used that confidential information.The alleged breach is secondary in the dispute. The issue could have been addressedby the defendants providing undertakings earlier, but the order sought is in generalterms and indeed the plaintiffs' submissions belatedly sought a further order that thefirst and second (which I take to mean third) defendants render up and (which I taketo mean or) destroy all confidential information they hold belonging to Trans-Spaceand allow that to be independently verified. I do not consider such a mandatoryinterim order is necessary. In the circumstances, I consider the appropriate course isto make an interim restraining order in relation to confidential information butconditional in the sense that it takes effect unless more specific undertakings areprovided.Result[58] I make an interim order restraining the first and third defendants fromdisclosing or using confidential information of Trans-Space, to take effect fiveworking days after delivery of this judgment unless within that time the first and thirddefendants provide written undertakings to the plaintiffs' solicitors that they:(a) will not disclose or use confidential information of Trans-Space; and(b) will forthwith deliver up to the plaintiffs' solicitors all hard copies, anddelete permanently all electronic copies, of:(i) the invitations to tender dated 8 and 23 April 2020; and(ii) any other confidential information of Trans-Spaceparticularised by the plaintiffs' solicitors within three workingdays of delivery of this judgment.[59] The application for interim injunction is otherwise dismissed.[60] I also make timetable directions:(a) the parties are to file and serve a joint priority fixture application withinfive working days;(b) the defendants are to file and serve their statement of defence withinfive working days; and(c) the parties are to confer through their solicitors and file a memorandum(preferably joint) in relation to discovery and a pre-trial timetable forevidence within 10 working days. The defendants' discovery is toinclude rolling discovery of the second defendant's performance.[61] Given the result, it may be appropriate for costs to lie where they fall. If costscannot be agreed, I will receive brief memoranda (not exceeding three pages) within15 working days and determine costs on the papers.________________________________Gault JSolicitors / Counsel:Mr P Amaranathan, Rice Craig, PapakuraMr E St John and Mr S P Maloney, Barristers, AucklandMr K Mackie (defendants' instructing solicitor), Mackie & Co Ltd, Auckland