THREE HILLS GROUP LTD v NEW ZEALAND POST LTD [2023] NZHC 3156

THREE HILLS GROUP LTD v NEW ZEALAND POST LTD [2023] NZHC 3156 [9 November 2023]IN THE HIGH COURT OF NEW ZEALANDHAMILTON REGISTRYI TE KŌTI MATUA O AOTEAROAKIRIKIRIROA ROHECIV-2023-419-155[2023] NZHC 3156BETWEEN THREE HILLS GROUP LIMITEDPlaintiffAND NEW ZEALAND POST LIMITEDDefendantHearing: 2 October 2023Appearances: P A Depledge for the PlaintiffB McKinnon and B Marriner for the DefendantJudgment: 9 November 2023JUDGMENT OF GAULT JThis judgment was delivered by me on 9 November 2023 at 4:00 pmpursuant to r 11.5 of the High Court Rules 2016.Registrar/Deputy RegistrarSolicitors / Counsel:Mr P A Depledge, Barrister, HamiltonMr B Braatvedt (plaintiff's instructing solicitor), BCB Law Ltd, HamiltonMs B McKinnon and Ms B Marriner, Buddle Findlay, Wellington[1] The plaintiff (THG) applies for an interim injunction restraining the defendant(NZ Post) from taking steps to terminate a contract for delivery of rural mail and fromallocating mail and parcels to third party contractors in the contract delivery area.[2] At least for the purpose of interim relief, the dispute centres on whether thecontract is exclusive, that is whether NZ Post must exclusively use THG's services fordeliveries in the agreed area, and whether THG's notice of termination was lawful.Factual narrative[3] On 1 April 2019, THG purchased the Tamahere RD3 rural post run, a ruraldelivery route from Hamilton to Tamahere, by taking an assignment of a three yearcontract for delivery services dated 1 November 2018 between PJ and BM HaugheyPartnership and NZ Post.[4] The contract was renewed with effect from 1 November 2021 by way of aVariation to Contract for Delivery Services (with variations marked in a RestatedContract for Delivery Services that do not appear to be material to the issues indispute).[5] The contract provides that THG will provide the services as set out in theServices Schedule, which in essence are:(a) sorting and processing all mail and other items for delivery;(b) uplifting all mail and other items as required;(c) delivering all mail and other items to the appropriate destination inaccordance with the specified timetable and route description; and(d) delivering to the base office, nominated office or designated drop-point,immediately after completing each route, all mail and other itemsundelivered or uplifted for onward delivery.[6] The Services Schedule requires THG to comply with the manual whenperforming services or in accordance with the reasonable requirements of NZ Post atany time. The manual provides that every endeavour will be made by NZ Post to haveall product available to THG for sorting and assembling. Product includes mail and/orparcels.[7] The contract provides that NZ Post can vary the route description and THGmust alter its deliveries accordingly. NZ Post may also from time to time change thescope or details of the services, and the Services Schedule will be updated, but NZ Postmust provide seven days' notice for changes to delivery or round details.[8] THG says that the contract provides that all mail to be delivered within RD3 isto be allocated to THG. NZ Post disputes this and says that it does not requireexclusivity from contractors either.[9] The contract contains a dispute resolution clause requiring the parties tonegotiate first and then to mediate using the Resolution Institute rules and/or amediation from the Resolution Institute.[10] The contract also contains an entire agreement clause.[11] THG also says that it entered into the contract in reliance on representationsmade to it by NZ Post. THG says that, prior to purchase, it discussed its business planwith NZ Post. The business plan was a mandatory requirement prior to assignment.THG says the business plan indicates that it expected retention of all existingcustomers within the Hamilton-Tamahere rural delivery area, as well as all newsubdivisions and land development areas within this designated area. The businessplan referred also to commercial businesses, home based businesses, schools, privateclients, agents and new clients (builds and businesses) being established within thecontracted areas.[12] THG says that at two meetings, on 9 November 2018 and 19 February 2019,NZ Post management informed THG as to customers' high expectations andMs Kennedy from THG says that given THG was considering the purchase of RD3,the largest rural delivery run in the Hamilton/Waikato region, NZ Post's questionswere naturally focused on whether THG had the capacity to adjust to and growresources in order to meet the expectation of this large territory. Ms Kennedy saysthat THG successfully demonstrated that capability. THG was invoiced for NZ Post'smanagerial time approving and facilitating the business assignment.[13] Mr Searle from NZ Post, who attended the 19 February 2019 meeting, deniesany representation to the effect that THG would be provided with the exclusive rightto deliver all mail and parcels within the RD3 area. He says there was no meeting on9 November 2018.[14] Following commencement of the contract, as early as 19 August 2019 THGraised concerns with NZ Post that it had not received what it had bargained for andwhat had been represented. Ms Kennedy had observed a Courier Post driver in theRD3 area delivering RD3 freight. This was the third time she had raised the issue withNZ Post. NZ Post's response was that what had been happening was an historicprocess that was occurring prior to THG purchasing the run. As a general rule, if theaddress for delivery falls into THG's run area, then product for that address falls intothe RD3 run. However, NZ Post said there were exceptions to that and NZ Post parcelprocessing and further delivery to the end recipient is at the discretion of NZ Post andCourier Post.[15] THG says that at a meeting in September 2019, NZ Post also informed THGthat it would be removing all the freight for St Peter's School and the VelodromeComplex from THG in accordance with NZ Post's discretionary right. THG feltbetrayed.[16] On 11 December 2020, THG emailed NZ Post expressing concern that it haddiscovered that NZ Post had re-routed two big clients (Regal Haulage and TamahereModel Country School) to a Courier Post run. NZ Post responded that this was anhistoric process whereby these businesses were assigned to courier prior to THGtaking over the RD3 contract and this should have been clearly communicated by theexiting contractor. This is disputed by THG, and that other contractor. NZ Post'sresponse also said that for rural areas with large clusters of business, such as theHamilton Airport and surrounds, it is deemed necessary to operate a courier servicedue to the logistics providing an economic and sustainable offering in the area.[17] On 16 January 2021, NZ Post gave a new depot instruction sheet to sortingstaff, removing all freight for Regal Haulage and Tamahere Model Country Schoolaway from RD3.[18] THG sought legal advice and its lawyer wrote to NZ Post on 23 February 2021.It alleged breaches by NZ Post.[19] NZ Post's response of 31 March 2021 denied the removal of any RD3 freightor the use of other couriers.[20] The dispute continued. THG says its freight volume was down to three halfvans a day most days of the week. Its fourth van, which was required for freight onTuesdays and Wednesdays, was not needed as that freight had been removed fromTHG. THG also says that NZ Post was removing rural volume freight that can bepalletised and large sized freight items.[21] On 6 July 2022, THG raised a formal dispute with NZ Post.[22] On 5 August 2022, Buddle Findlay responded on behalf of NZ Post indicatingthat NZ Post was considering bringing the contract to an end and wanted to discusstermination.[23] A mediation took place in September or October 2022.[24] On 9 November 2022, THG asked for a comprehensive review of rates asprovided for in the contract.[25] On 22 November 2022, NZ Post responded offering a discussion around staffcosts and work arrangements to see how things might be improved but not a formalreview, and notified THG of NZ Post's intention to terminate.[26] On 20 December 2022, THG and five other Waikato RD contractors met withNZ Post. They raised concerns about couriers or third parties operating within theirruns. NZ Post denied this was happening. It agreed to undertake a comprehensivefreight data review of each contractor's run by the end of February 2023.[27] During this period NZ Post also provided a map which THG says indicates thata vital portion of the RD3 run was to be annexed and placed into a new multi-couriermodel. THG says the multi-courier model has been operating since December 2022in the RD3 territory. NZ Post says a multi-run business model pilot in Cambridgewould not have any impact on THG.[28] THG says that by February 2023 it had provided over 40 examples to NZ Postalleging redirection of freight away from RD3 to Courier Post or third parties.[29] THG says that further directives from NZ Post to depot sorting staff on 9 March2023 instructed them to remove more customers from THG's run.[30] On 29 March 2023, having made no progress with the freight data review or aresponse to the 20 December 2022 concerns, six contractors including THG informedNZ Post that they proposed suspending their contracts from 11 April 2023 (laterrevised to 14 April 2023). The email also raised a further notice of dispute under thecontract, claiming breaches in relation to allowing couriers to deliver mail and otherNZ Post items within the RD territories and that NZ Post rates were not reasonablegiven existing costs.[31] On 30 March 2023, Mr Searle of NZ Post responded proposing a meeting witheach contractor to discuss a route audit review.[32] On 31 March 2023, Buddle Findlay on behalf of NZ Post responded to the sixcontractors disputing the lawfulness of their proposed suspensions.[33] On 13 April 2023, Mr Searle wrote to THG. The letter was in four parts:(a) Proposal to terminate and review costs and arrangements –22 November 2022. This part of the letter referred to NZ Post's letterof 22 November 2022 and said that NZ Post had not received aresponse. It referred to a complaint from Tamahere Eventide HomeTrust (Tamahere Eventide), a Retirement Village and Care Home, andsaid this highlighted the need for the parties to bring the relationship toan end.(b) Further correspondence and meeting. This part referred to the eventssince 22 November 2022 and indicated that NZ Post had not had aresponse to its proposal to terminate, its offer to review THG costs andarrangements or to the other arrangements it proposed. NZ Post said"It is not clear to us where you stand, and [we] do not want simply tolet the matter drift".(c) Tamahere Eventide. This part addressed the complaint that NZ Posthad received from the CEO of Tamahere Eventide alleging that NZ Posthad not consulted with Tamahere Eventide or THG in relation to a"unilateral change" to the delivery of Tamahere Eventide's freight; thatfreight was being "held up" in order to be "palletised", which wascausing serious health and safety issues; and insisted that NZ Postreinstate its usual delivery agents. The letter explained that oninvestigation it transpired that Tamahere Eventide's concerns were withthe delivery of product that was not managed through the NZ Postnetwork. It said that THG had advised Tamahere Eventide that NZ Postwas responsible and was trying to take freight away from localcontractors, and expressed concerned about the way THG had handledthis matter.(d) Notice of termination. NZ Post stated that in its view THG's actions(in relation to the Tamahere Eventide complaint) were in breach ofclause 2.4(c) of the contract which requires that THG act in a mannerwhich does not detract from the reputation, business and brand of NZPost and immediately advise NZ Post of any issue which couldadversely affect such reputation, business and brand. The letter saidthat in NZ Post's view, THG's actions were sufficiently serious towarrant immediate termination. Notwithstanding that, the letter said,NZ Post did not propose to proceed with immediate termination.NZ Post went on, however, to say that THG's actions confirmed itsview that the relationship was no longer tenable. It also referred to theproposal to suspend services. Accordingly, the letter said, whileNZ Post was willing to allow THG some time to assign the contract,it confirmed NZ Post's proposal to terminate, pursuant to clauses 15.1and 15.3. It said the contract would terminate on 13 October 2023unless THG found an assignee in advance of that date, in which caseNZ Post would help to facilitate an earlier termination date if thatassisted. NZ Post also stated that, to address THG's concerns overbusiness being re-routed and to provide greater certainty, during thenotice period:(i) NZ Post would not take away any existing parcel customers inTHG's territory based on the sorting list, or allocate newbusiness to another contractor in the territory, unless it isinitiated by a customer or due to urbanisation, and in either casewould only do so following consultation with THG;(ii) Run 66 would continue to serve its existing list (noting that therecent changes regarding Regal Haulage and Tamahere ModelSchool would stay in place); and(iii) Express would continue to deliver in the territory in the usualway.[34] THG's contract suspension took effect on 14 April 2023. NZ Post alsosuspended the contract that day.[35] Following further correspondence and meetings in relation to the suspensionof services by THG and the other contractors (and by NZ Post), THG returned to workon 9 May 2023.[36] Other RD contractors have filed affidavits in support of THG also allegingbreach of exclusivity.[37] NZ Post's affidavits say that rural delivery runs as a single-cycle service,meaning delivery once a day. Sometimes items that miss the contractor's daily pickupneed to be delivered by another means such as a courier to meet the delivery target.Very large items which cannot be delivered by RD route are also allocated to couriers.In addition, some customers have specific requirements such as multiple pickups in aday. NZ Post acknowledges that mis-sorts also occur.[38] THG says that it can accommodate a multi cycle service and large items.[39] NZ Post says that scan data over the period from 28 November 2022 to20 February 2023 indicates there has not been a significant volume of items deliveredby other contractors on the RD3 route (1%). At a meeting to discuss this, thecontractors including THG disputed the accuracy of the data.[40] NZ Post also says THG's reduced volumes reflect trends nationwide. THGreplies that RD3 is in a high growth area.THG's claim and the interim relief sought[41] Two months after the notice to terminate, THG commenced this proceedingand applied for interim relief.[42] The initial statement of claim dated 9 June 2023 but filed on 13 June 2023pleaded four causes of action:(a) breach of contract – not making all mail and parcels in the RD3 routeavailable to the plaintiff for delivery/use of third party contactors in theplaintiff's territory;(b) breach of contract – failure to consult and exercising discretion underthe contract and services schedule arbitrarily, capriciously, orunreasonably (relating to method of payment);(c) breach of the Fair Trading Act 1986; and(d) misrepresentation.[43] THG's interim injunction application dated 12 June 2023 also filed on 13 June2023 sought:(a) an injunction restraining NZ Post from acting on the notice/proposal toterminate served on the plaintiff on 13 April 2023;(b) an injunction restraining NZ Post from terminating the contractotherwise than pursuant to the terms of the contract; and(c) an injunction restraining NZ Post from allocating mail and parcels tothird party contractors in the RD3 area.[44] There was further delay including because, following discussion betweencounsel, THG indicated that it would amend its claim.[45] On 12 July 2023, the Court allocated the 2 October 2023 hearing date for theinterim injunction application.[46] THG filed an amended application dated 17 July 2023 but seeking the samerelief as in the original interim injunction application.[47] The amended statement of claim dated 28 July 2023 added a breach of contractcause of action for unlawful termination. At least until this amendment, THG mayhave mistaken NZ Post's letter of 13 April 2023 as terminating for breach rather thanunder clause 15.[48] At least in part as a result of the lack of urgency since the termination noticeof 13 April 2023, the hearing took place only 11 days before the six months' notice oftermination was due to take effect. Given the lack of urgency, the extent to which thesubmissions focused on the substantive merits of the dispute given NZ Post's positionthat there is no serious question to be tried, with reference to the extensive affidavitevidence filed, and the Court's other commitments, I asked counsel about interimarrangements pending determination of the application. The Court expects parties tocooperate in reaching interim arrangements in any event, but that is particularly sowhere the parties have created a situation that puts unnecessary pressure on the Courtto prioritise determination of an interlocutory application.[49] By memorandum of counsel dated 4 October 2023, NZ Post advised that it hadextended the termination date until the earlier of two weeks following release ofjudgment or 10 November 2023, but it was not prepared to agree to a longer extensionproposed by THG.Principles governing grant of interim injunctions[50] The general principles governing applications for interim injunctions are wellestablished. They were summarised by the Court of Appeal in Commerce Commissionv Viagogo AG:1The principles that govern the grant of interim injunctions under r 7.53 andthe court's inherent jurisdiction are well settled. The court will usually adopta two-stage approach.2 The first inquiry is whether there is a serious questionto be tried. If that threshold is met, the court moves on to consider whetherthe balance of convenience favours granting or refusing relief. But as thisCourt observed in Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd,considerations are marshalled under these (non-exhaustive) heads as "an aidto determining, as regards the grant or refusal of an interim injunction, whereoverall justice lies. In every case the Judge has finally to stand back and askhimself that question."3[51] In relation to the threshold of a serious question to be tried, Ms McKinnon, forNZ Post, submitted that Courts conduct a reasonably close analysis of the legal andfactual basis of the plaintiff's claim and any defence that may be raised by thedefendant in order to determine whether there is a serious question to be tried, citingAndrew Barker KC's commentary in Sir Peter Blanchard (ed) Remedies – A to Z ofNew Zealand Law,4 which in turn refers to Henry Roach (Petroleum) Pty Ltd v Credit1 Commerce Commission v Viagogo AG [2019] NZCA 472, [2019] 3 NZLR 559 at [30].2 See American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL).3 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (CA) at 142.4 Sir Peter Blanchard (ed) Remedies – A to Z of New Zealand Law (online ed, Thomson Reuters at[51.6.2]).House (Vic) Pty Ltd.5 This indicates, as Eichelbaum J put it in Ansell v NZ InsuranceFinance Ltd,6 that the serious question step is not to be brushed over lightly and it isnot sufficient for the plaintiffs just to say that there is a tenable cause of action from alegal point of view, and a conflict of evidence on the facts. However, it is necessaryin this case to emphasise the point, dating at least from American Cyanamid Cov Ethicon Ltd and repeated recently in this Court in The Christian Church CommunityTrust v Bank of New Zealand, that:7At this stage of the proceeding, it is not the Court's function to attempt toresolve any conflicts of evidence on which the claims of the parties rely, noris it for the Court to determine any difficult questions of law which mayrequire more detailed consideration.8Serious question to be tried[52] Although the exclusivity issue arose first, I deal with the termination issue firstsince exclusivity is only relevant to interim relief if the contract remains in effect.Termination[53] THG says that NZ Post's decision to give notice to terminate was subject to agood faith clause and an implied duty of good faith designed to give effect to thereasonable expectations of the parties, and that the discretion to terminate could notbe exercised capriciously, arbitrarily or unreasonably.[54] In relation to NZ Post's decision to terminate, THG says the discretion wasexercised in bad faith and capriciously. Mr Depledge, for THG, submitted thatNZ Post had not considered that:(a) termination would eliminate all goodwill;(b) there is a genuine dispute yet to be addressed;5 Henry Roach (Petroleum) Pty Ltd v Credit House (Vic) Pty Ltd [1976] VR 309 at 311.6 Ansell v NZ Insurance Finance Ltd HC Wellington A434/83, 30 November 1983.7 The Christian Church Community Trust v Bank of New Zealand [2023] NZHC 2523 at [17].8 Mad Butcher Holdings Ltd v Standard 730 Ltd [2019] NZHC 589 at [15] following AmericanCyanamid Co v Ethicon Ltd [1975] AC 396 (HL) at 407; Villa Maria Wines Ltd v Montana WinesLtd [1984] NZLR 422 (CA) at 425; and Health Club Brands Ltd v Colven [2013] NZHC 428 at[9].(c) unilateral termination without the offer of adequate compensationwould be unconscionable; and(d) these types of contracts are traded for substantial goodwill value andNZ Post agrees to and charges a fee for the assignment of such contractsknowing this.[55] Mr Depledge submitted that THG raised a genuine dispute to be addressed andthat NZ Post's decision to terminate was to avoid that dispute. He submitted there isa serious question to be tried in relation to the lawfulness of NZ Post's notice toterminate.[56] NZ Post says the contract provides that either party can terminate without causeby giving at least 90 days' notice. It says its notice was lawful, in accordance with thecontract terms and reasonable. It says there is no express or implied obligation of goodfaith that applies to clause 15.1, and its termination was not arbitrary, capricious orunreasonable.[57] Clauses 15.1 and 15.3 of the contract provide:15.1 Either party may terminate any Services Schedule without cause bygiving the other party at least the period of notice specified in therelevant Services Schedule unless agreed otherwise by the parties.The Company may require the Contractor to cease providing theServices prior to the expiry of that period, with an agreedcompensation sum to be payable to reflect this (or as reasonablydetermined by the Company, if agreement on the sum cannot bereached within 10 days after the Company required the Contractor tocease providing Services under this clause). If the Contractorprovides less than the required period of notice, unless expresslyagreed with the Company in writing, the Contractor will be liable forthe full cost to the Company for replacement services for theoutstanding notice period.15.3 This Contract terminates when all Services Schedules under it haveterminated in accordance with their terms.[58] Clause 1.5 of the Rural Services Schedule states:1.5 A party must not exercise any discretion under the Contract or thisService Schedule arbitrarily, capriciously or unreasonably.[59] Mr Depledge also referred to clause 1.4(h) of the contract, which provides:1.4 The Company will:(h) use reasonable endeavours to assist the Contractor to increaseproductivity in performing the Services and decrease theContractor's costs in performing the Services, includingproviding general advice to assist the Contractor withpreparing an annual business plan if required and providingaccess to preferred supplier procurement rates;[60] THG's challenge to termination depends in part on qualifying what appears tobe a contractual right to terminate on notice without cause in clause 15.1 on the basisthat this is a relational contract and that deciding to give notice is a contractualdiscretion subject to reasonableness rather than an unfettered contractual right. TheCourts have accepted there is room for such a reasonableness qualification in somecontracts.[61] Mr Depledge referred to The Christian Church Community Trust v Bank ofNew Zealand,9 where Cull J considered it was reasonably arguable that the so-calleddefault rule or approach set out in Braganza v BP Shipping Ltd 10 may be applicableto the banking relationship in that case and to the exercise of the bank's discretion toterminate (close or suspend the customer's account etc) under a clause that said itcould do so for any reason.[62] As Cull J said:11The common law has developed a default rule controlling the exercise ofunilateral contractual powers or discretion. The rule is that a party, on whoma contract confers a discretionary power, must not exercise the discretionarbitrarily, capriciously or in bad faith, or unreasonably in the sense that noreasonable contracting party could have so acted.[63] In C & S Kelly Properties Ltd v Earthquake Commission, Mander Jexplained:129 The Christian Church Community Trust v Bank of New Zealand [2023] NZHC 2523 at [52].10 Braganza v BP Shipping Ltd [2015] UKSC 17, [2015] 1 WLR 1661.11 The Christian Church Community Trust v Bank of New Zealand [2023] NZHC 2523 at [38].12 C & S Kelly Properties Ltd v Earthquake Commission [2015] NZHC 1690 at [73].To summarise, Commonwealth Courts are willing to intervene in the exerciseof a prima facie unfettered discretion. Such intervention will ordinarily bepremised on an implied term to constrain the exercise of the discretion so asto give effect to the reasonable expectations of the parties. The exercise ofcontractual discretion will be open to challenge where it can be establishedthat it was not exercised honestly in good faith; or not exercised for thepurpose(s) for which it was conferred; or when exercised in a capricious orarbitrary manner; or otherwise falls into the category of what would beconsidered Wednesbury unreasonableness.[64] This passage was quoted in Woolley v Fonterra Co-operative Group Ltd,13where the Court of Appeal assumed (without expressly deciding) that the default ruleapplies in New Zealand. It did not consider that appeal was an appropriate vehicle foreither general endorsement or rejection of the Braganza approach. It noted it was notdealing with an employment case which, as the UK Supreme Court's judgmentsrecognise, involves a relational contract of a different character from an ordinarycommercial contract.14[65] In Bathurst Resources Ltd v L & M Coal Holdings Ltd,15 the majority of ourSupreme Court referred to Mid Essex Hospital Services NHS Trust v Compass GroupUK and Ireland Ltd (trading as Medirest),16 where Jackson LJ reviewed the authoritieson contractual discretions and contrasted contractual discretions with absolutecontractual rights and observed that the former involves "making an assessment orchoosing from a range of options, taking into account the interests of both parties".The majority in Bathurst Resources found the contractual rights under the relevantclause in that case (involving a choice to modify another clause as to whether delay inpaying the performance payments was an actionable breach) could not be classed ascontractual discretions that could be subject to review by a court on the basis that theywere exercised for an improper purpose.17[66] Mr Depledge submitted that the delivery contract here is akin to such arelational contract. He referred to Leota v Parcel Express,18 where the EmploymentCourt found that a courier driver was an employee rather than an independent13 Woolley v Fonterra Co-operative Group Ltd [2023] NZCA 266 at [96].14 At [112].15 Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696 at [278].16 Mid Essex Hospital Services NHS Trust v Compass Group UK and Ireland Ltd (trading asMedirest) [2013] EWCA Civ 200, [2013] BLR 265 at [83].17 Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696 at [279].18 Leota v Parcel Express [2020] NZEmpC 61, (2020) 17 NZELR 395.contractor (even though he signed an agreement stating he was engaged as anindependent contractor and not as an employee). Mr Depledge also submitted thecontract has a three year term and a right of renewal.[67] As Mr Depledge submitted, the Braganza approach applies Wednesburyreasonableness by analogy, recognising the difference between the decision-makingprocess and the outcome.19 He submitted it is seriously arguable that NZ Post'sdecision-making process (at least) was subject to Wednesbury reasonableness.[68] Ms McKinnon submitted that clause 15.1 provides both parties with anabsolute contractual right, namely a binary decision that requires no evaluation oradjudication to be undertaken before being entitled to take the decision,20 not acontractual discretion.[69] There is force in NZ Post's argument that clause 15.1, on its face, is an absolutecontractual right in a commercial contract the exercise of which is not subject toreasonableness constraints. It may be doubted whether the contract is a relationalcontract and whether clause 15.1 involves a contractual discretion to which the defaultrule applies. Contractual clauses providing a right to terminate without cause arecommon and extending Braganza to them would appear to be an unwarrantedinterference in the freedom of contract. For example, in Saturn Portfolio ManagementLtd v Chamberlain,21 Woolford J accepted on an interim injunction application that acontractual requirement of good faith did not apply to a clearly defined right toterminate without cause.[70] Here, however, there is a mixed question of fact and law. Clause 1.5 of theRural Services Schedule expressly provides that a party must not exercise anydiscretion under the contract or the service schedule arbitrarily, capriciously orunreasonably. While that clause refers to any "discretion", in the context of thisinterlocutory application I cannot deny there is a serious question whether the nature19 Braganza v BP Shipping Ltd [2015] UKSC 17, [2015] 1 WLR 1661 per Lady Hale, with whomLord Kerr agreed.20 Citing TAQA Bratani Ltd v Rockrose UKCSB LLC [2020] EWHC 58 (Comm), 188 ConLR 141 at[35] and [53].21 Saturn Portfolio Management Ltd v Chamberlain [2017] NZHC 1962 at [25]-[30].of the contract and the parties' expectations as to its term allow for the application ofclause 1.5 or the default rule to clause 15.1.22 Factual matrix and context may informthe assessment of the nature of the contractual relationship. Despite the detailedaffidavits, there is little evidence about the contract negotiations relevant to this issue.[71] Also, although NZ Post says the contract term is three years expiring inNovember 2024, the term and right of renewal are not clear from the unsigned versionof the Restated Contract for Delivery Services in evidence. Clause 15 recognises adistinction between termination of the contract and termination of individual serviceschedules. The 1 November 2018 contract stated that the contract commenced on thatdate and remained in force until terminated in accordance with the contract. It alsoprovided that each schedule specified a services schedule end date, and that theschedule would automatically renew for a further term of the same period unless eitherparty gave notice to terminate (at least three months before the end of the current term).In the 1 November 2018 contract, the relevant services schedule end date was31 October 2021. In respect of the renewed contract, while it is clear enough from theVariation to Contract for Delivery Services that the commencement date was1 November 2021 even though it is blank in the unsigned Restated Contract forDelivery Services in evidence, the services schedule end date is also blank.[72] Nor on the untested affidavit evidence can I deny there is a serious questionwhether NZ Post's decision to terminate was lawfully exercised if it was subject toreasonableness constraints.[73] For these reasons, I conclude that the lawfulness of NZ Post's notice toterminate is a serious question to be tried.Exclusivity[74] As a preliminary point, I note that at the commencement of the hearing,Mr Depledge addressed NZ Post's objection to the admissibility of a further affidavitof Ms Kennedy dated 29 September 2023 addressing exclusivity on the grounds it was22 I accept that if clause 1.5 does apply, there seems to be no need to imply the default rule.filed late and was not strictly reply evidence. I received it de been esse. In the event,it was not material.[75] THG claims that as a result of the pre-contractual representations and/or thecontract, NZ Post is obliged to make all mail and parcels in the RD3 route availableto THG for delivery, and that NZ Post is in breach. Mr Depledge submitted that THGwould never have taken the assignment if there was not exclusivity.[76] NZ Post disputes the exclusivity claim. It says there is no clause in the contractthat provides for exclusivity, and it should not be read in. It relies on the entireagreement clause.[77] There is also force in NZ Post's argument that the contract on its face does notprovide for exclusivity, at least as claimed by THG. THG has to contend with theentire agreement clause too. Although Ms McKinnon submitted there was not aserious question to be tried, her submissions acknowledged that whether NZ Post'suse of its own couriers in RD3 was a breach of contract is an issue appropriatelyresolved at trial. There is also a dispute as to pre-contractual representations relatingto exclusivity. On the affidavit evidence, I accept there is a serious question to betried.Balance of convenience[78] Mr Depledge submitted that if an injunction preventing termination is notgranted, THG will suffer irreparable loss and its directors will lose their family homeand livelihood. He submitted that the loss of income as a result of allocating mail andparcels to third parties is rapidly diminishing the value of THG's business and puttingits viability at risk, and that THG cannot sell the business with this uncertainty aboutexclusivity. He submitted this needs to be remedied before they can sell. He submittedthat damages are too difficult to calculate particularly as the contract could potentiallylast for many years. He submitted the status quo with the added restriction that thirdparties are not used is the fairest outcome. He characterised the added exclusivityrestriction as an attempt to mitigate THG's loss.[79] Mr Depledge submitted that, on the other hand, NZ Post will suffer no loss andtherefore the balance of convenience favours THG. At the very least, he sought topreserve the status quo, continuing the contract until it is terminated in a lawful way.[80] Ms Marriner, for NZ Post, addressed the balance of convenience and submittedthat damages are an adequate remedy for THG. She noted that the pleading only seeksdamages, to which Mr Depledge replied that the pleading will be amended to seekinjunctive relief. Ms Marriner submitted that the interim relief sought goes beyondmaintaining the status quo. She submitted NZ Post will be prejudiced if it is preventedfrom terminating. She also referred to THG's delay.[81] I consider the balance of convenience weighs against interim relief, for severalreasons. First, damages are more likely to be an adequate remedy for THG if itsucceeds than they would be for NZ Post if it succeeds. THG's damages for unlawfultermination and/or breach of exclusivity should be quantifiable based on THG's pastperformance and NZ Post's records of payments to its replacement contractor and itscouriers, which NZ Post is obliged to preserve. The evidence does not indicate thatTHG tried unsuccessfully to assign the contract before termination takes effect.THG's claim of irreparable harm to it or its directors is not supported by financialevidence. As Mr Depledge acknowledged, there is no evidence that THG cannot meetits obligations pending trial.[82] On the other hand, if exclusivity were conferred pending trial, NZ Post and itscustomers whose delivery needs are not met by THG in a single cycle would be undulyprejudiced and damages would likely not be an adequate remedy. THG's offer toaccommodate more deliveries has only arisen in evidence in the proceeding since thenotice to terminate.[83] Secondly, while it is not helpful to seek to characterise restraining NZ Postfrom allocating mail and parcels to third party contractors in the RD3 area asmandatory in this context, as the Court of Appeal said in Commerce Commission vViagogo,23 it is common ground that such interim relief goes beyond maintaining thestatus quo. Granting interim relief conferring the disputed exclusivity pending trial23 Commerce Commission v Viagogo AG [2019] NZCA 472, [2019] 3 NZLR 559 at [90].reflecting THG's substantive contention would not be appropriate, particularly giventhe practical implications of the order for the affected parties – NZ Post, customersand couriers. Given NZ Post's extensive delivery network, other rural deliverycontracts with the same terms may also be affected. In this context, I acceptMs Marriner's submission that I should not effectively decide the merits of thesubstantive issue on this application.[84] Thirdly, the exclusivity dispute dates back to 2019 and in some instancesrelates to what NZ Post says are historic arrangements that precede the contract.Granting interim relief requiring exclusivity only after the notice to terminate wouldnot be appropriate.[85] Fourthly, the order sought restraining NZ Post from terminating the contract"otherwise than pursuant to the terms of the contract" is vaguely worded and assumesthe current notice to terminate is invalid.[86] Fifthly, while there are serious questions to be tried, THG has not establisheda strong case.[87] Sixthly, even preserving the status quo in existence before the notice toterminate by restraining NZ Post from acting on it involves requiring both parties tocontinue to perform the contract despite their disputes, which may be problematic.In any event, I consider preserving the status quo is outweighed by the other factors inthis case.[88] Finally, while I accept that court proceedings were a last resort, THG's delayin challenging the notice to terminate is a secondary factor also counting againstinterim relief. After the notice to terminate dated 13 April 2023, proceedings werefiled on 13 June 2023 but termination was only squarely challenged in the amendedpleading in late July 2023.Overall justice[89] Stepping back, I consider that overall justice does not favour interim relief.THG has an arguable case but the balance of convenience factors weigh againstinterim relief especially in relation to the order sought restraining NZ Post fromallocating mail and parcels to third party contractors in the RD3 area. Given the extentof the dispute and the likelihood that damages will be an adequate remedy for THG ifit succeeds, I conclude that an interim injunction should not be granted either to stoptermination taking effect or in relation to exclusivity.Result[90] The interlocutory application for interim injunction is dismissed.Costs[91] Both parties signalled that they would seek costs (NZ Post said on an increasedbasis). My preliminary view is that costs should follow the event on a 2B basis.However, if costs cannot be agreed, memoranda (not exceeding three pages) may befiled within 20 working days, and I will determine costs on the papers.________________________________Gault J