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Craftworks Niugini Pty Ltd v Mott [1998] PNGLR 572 (27 June 1997)

[1998] PNGLR 572

PAPUA NEW GUINEA

[SUPREME COURT OF JUSTICE]

CRAFTWORKS NIUGINI PTY LTD

V

ALLAN MOTT

WAIGANI: AMET CJ, KAPI DCJ, LOS J.
20 February and 27 June 1997

Facts

The appellant company employed the respondent as General Manager in accordance with the terms of a contract of employment. The appellant carries on business in Papua New Guinea in the field of art, design, printing, publication and advertising. Clause 9 of the contract states that the respondent shall not without the prior consent of the appellant, engage in any form of employment with any person or company that carries on the business of art, design, printing or publication or any other businesses of a similar nature.

Held

1. The restrain of trade clause in the employment contract has run out for most part and only 7 weeks were remaining which will expire by the time decision in this matter is handed down. Under the circumstances it is proper not to grant the interim injunction, Employers Federation of Papua New Guinea v Papua New Guinea Waterside Workers and Seaman’s Union and Arbitration Tribunal, N393 (1982) followed, Gordon Sioni Pacific Advertising v Cahill, Unreported and Unnumbered (1982) and Taurama Pharmacy Pty Ltd v Sherwen [1990] PNGLR 127 applied.
   
2. The appellant needs to actually prove damages, if any.
   

Papua New Guinea cases cited

Employers Federation of Papua New Guinea v Papua New Guinea Waterside Workers and Seaman’s Union and Arbitration Tribunal, N393 (1982)

Gordon Sioni Pacific Advertising v Cahill, Unreported and Unnumbered (1982)

Taurama Pharmacy Pty Ltd v Sherwen [1990] PNGLR 127.

Counsels

P R Payne, for the appellant.
D Lightfoot, for the respondent.

27 June 1997

BY THE COURT. Craftworks Niugini Pty Ltd (hereinafter referred to as the Appellant) employed Mr Allan Mott (hereinafter referred to as the Respondent) as General Manager for a period of three years in accordance with the terms of an employment contract dated 1 June 1995. The appellant carries on business in Papua New Guinea in the field of art, design, printing, publication and advertising.

In part 9 of the contract, the respondent agreed with the appellant company that he shall not without the prior consent of the appellant first had and obtained that during the period of the 12 months after date of ceasing employment shall not engage in any form of employment with any person or company that carries on the business of art, design, printing or publication or any other business of a similar nature.

On 20 March 1996 the respondent gave notice of his intention to resign from his employment. The respondent is alleged to have secured employment with a company trading under the name Savi Advertising in Port Moresby in breach of the contract.

The appellant sued the respondent by writ of summons and claims: (1) an injunction to restrain the respondent until 15 April 1997 within Papua New Guinea being directly or indirectly engaged, concerned or interested with or in association with or as an employee, servant, agent, representative, director, member, shareholder, beneficiary, nominee or trustee of any person, firm, business, organisation, association or corporation which is engaged in or concerned in or carries on the business of art, design, printing or publication or any other business of a similar nature (2) Damages (3) Interest on damages (4) costs.

By a notice of motion the appellant applied for interim injunction pending the trial of the substantive proceedings. The matter came before Pitpit AJ. His Honour refused the orders and dismissed the application on 8 May 1996. Appellant has appealed against this decision.

The grounds of appeal may be summarised as follows: (1) That the trial judge fell into error in not applying the proper principles which are applicable in interim injunctions (2) The trial judge erred in concluding that the restraint of trade in this case was inconsistent with the freedom of employment pursuant to s 48 of the Constitution.

The trial judge in considering the interim injunction said:

"It appears that allegations of defendant enticing and securing clients of the Plaintiff were very remote. It appears also that defendant did not take nor remove any business documents or records nor acquire any specific knowledge that may provide immediate advantages to other competing company in the said business.

The defendant, I believe has a right to seek employment. There is no evidence to show that Part 8 has been breached. As for part 9 and the Restraining Covenant I do not think such Covenant is reasonable in view of the country’s policy in emphasising and encouraging involvement in an industry that is beginning to open its door by creating opportunities for employment and engagement of available resources."

The trial judge then made reference to several cases and then concluded:

"There is no evidence that clauses contained in Part 7, 8 and 9 of the contract between the plaintiff and defendant has been breached by the defendant. All in all the evidence does not support the application and I consider the restraint to be unconstitutional and contrary to the interests of the industry in Papua New Guinea and I therefore refused the application and the orders sought."

Counsel for the appellant submitted that the trial judge in the passages referred to above proceeded to deal with the merits of the substantive action and thereby fell into error.

The principles applicable in interim injunctions are well settled in our jurisdiction. These principles are set out in Employers Federation of Papua New Guinea v Papua New Guinea Waterside Workers and Seaman's Union and Arbitration Tribunal (Unreported judgment of Kapi DCJ, N393 dated 11 October 1982) at pages 3-4:

"However, the House of Lords had the opportunity to reconsider this principle in the case of American Cyanamid Company v Ethicon Limited [1975] UKHL 1; [1975] 1 All ER 504). The House of Lords laid down the following principles in this case.

1. Is the action not frivolous or vexatious?
   

Is there a serious question to be tried?

Is there a real prospect that the applicant will succeed in the claim for an injunction at the trial?

All these questions laid down the same test. See Smith v Inner London Education Authority [1978] 1 All ER 411 at 419.

2. The Court must then consider whether the balance of convenience lies in favour of granting or refusing interlocutory relief.
   
3. As to the balance of convenience the court should first consider whether if the applicant succeeds, he would be adequately compensated by damages for the loss sustained between the application and the trial, in which case no interlocutory injunction should normally be granted.
   
4. If damages would not provide an adequate remedy the Court should then consider whether if the applicant fails, the defendant would be adequately compensated under the applicant's undertaking in damages, in which case there would be no reasons on this ground to refuse an interlocutory injunction.
   
5. Then one goes on to consider all the matters relevant to the balance of convenience, an important factor in the balance should, other things been even, preserve the status quo; and
   
6. When all other things are equal it may be proper to take into account in tipping the balance the relative strength of each party's case as reviewed by the evidence before the Court hearing the interlocutory application."
   

It is clear from the passages set out above that the trial judge fell into error in proceeding to deal with the substantive issues in the action. These are issues, which should have been left to be determined at the trial of the substantive action.

The trial judge further held that the restraint of trade clause in this case is unconstitutional. His Honour did not discuss this at any great length. Counsel for the appellant submitted that this must have been a reference to s 48 of the Constitution, which deals with freedom of employment. It is clear from the terms of this provision that this right is qualified to the "extent that that freedom is regulated or restricted voluntarily". The question then arises whether the contract of employment in this case falls within this qualification. That of course is another triable issue, which may be determined at the trial of the substantive action. In proceeding to determine this issue conclusively, His Honour fell into error. He was only required to determine whether there was a serious question to be tried.

The next question to be considered in an application for interim injunction is whether the balance of convenience lies in favour of granting or refusing relief. Counsel for the appellant has submitted that the trial judge did not consider this issue. He submitted that the proper test to be applied in this regard is set out in Gordon Sioni Pacific Advertising v Cahill (Unreported judgment of Andrew J dated 2 August 1982) and Taurama Pharmacy Pty Ltd v Lisa Sherwen [1990] PNGLR 127. In the latter case Bredmeyer J applied the test in the following words:

"In this case although the plaintiff in the writ had sought damages as well as a permanent injunction, he would be hard pressed to prove damages. That is because it is hard for him to show that his business lost money directly related to Miss Serwen's employment. The complicating factor is that that arrival pharmacy run by Mr Patel has opened in Stop N' Shop which may well be the main cause for the lost of turnover in his Chapman Pharmacy. So damages are not realistic alternative for the plaintiff."

Counsel for the respondent has submitted that the appellant in its action claimed both permanent injunction as well as damages. He submitted that the appellant couldn’t have it both ways. It cannot claim specific performance of the contract through the claim for injunction and at the same time claim damages, which is based on termination, and breach of contract of employment.

It is not necessary to determine the merits of the submissions put to us by counsel. The events in this case have overtaken those considerations. This matter is partly raised by counsel for the appellant in paragraph 14 of his written submission:

"14. It is also submitted that due to the failure of the Trial Judge to grant the interim injunction the Appellant is entitled to have the matter remitted to the National Court to assess damages for the period 8 May 1996 to the grant of the interim injunction. Although the appellant's position is that the damages are an inadequate remedy given that the Trial Judge refused the interim injunction the appellant is now left with no other remedy."

This submission only relates to the period up to any interim injunction this Court may grant. However, at the time of the hearing of this matter counsel for the appellant informed us that the restraint of trade clause in the present contract has run for the most part and only seven (7) weeks were remaining. By the time this decision is handed down the remaining period will have expired. In those circumstances it would not be proper to grant the interim injunction. It would be more convenient for the plaintiff to actually prove any damages suffered during the total period.

Even though the trial judge erred in exercising his discretion in not granting the interim injunction, the circumstances are such that it would not be proper to grant the interim injunction now. In the result we would dismiss the appeal. We would remit this matter back to the National Court for the action to be tried and assessment of damages, if any.

Lawyers for the appellant: Blake Dawson Waldron.
Lawyers for the respondent: Carter Newell.