4th Dimension Transport Pty Ltd v Australian Couriers Pty Ltd

Federal Court of Australia|2022-11-28|Before: McEvoy J

THE COURT NOTES THAT: A. In these orders, the following terms have the following meanings: a. plaintiff means 4th Dimension Transport Pty Ltd, trading as Aramex Melbourne (ACN 152 947 503); b. defendant means Australian Couriers Pty Ltd, trading as Aramex (Australia) (ACN 057 389 769); c. Deed means the Regional Franchise Deed executed by the plaintiff and the defendant; d. Licensees means "all persons (other than the Regional Franchisee) licenced or otherwise entitled to use the System in Australia or elsewhere in the world" as set out in clause 1 of the Deed; and e. Franchise Period means "the period between the Effective Date and the termination of the Franchise in accordance with [the Deed]" as set out in clause 1 of the Deed. B. The plaintiff undertakes to submit to such order (if any) as the Court may consider to be just for the payment of compensation (to be assessed by the Court or as it may direct), to any person (whether or not that person is a party) affected by the operation of order 1 of these orders.

THE COURT ORDERS THAT:

There be an interlocutory injunction requiring the defendant, until the final determination of the proceeding or further order, to comply with the terms of the Deed, including, without limitation, clause 2.3 by procuring that all Licensees, including Link Logistics Pty Ltd, trading as Aramex Perth, promptly undertake delivery during the Franchise Period of packaged goods emanating from the plaintiff.

AND THE COURT ORDERS THAT: 3. The plaintiff have leave to file and serve an amended originating application within 7 days of the date of these orders. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

MCEVOY J: 1 The defendant, Australian Couriers Pty Ltd trading as Aramex Australia, and the plaintiff, 4th Dimension Transport Pty Ltd trading as Aramex Melbourne, are in a franchisor/franchisee relationship. Together with other franchisees they conduct the Aramex parcel delivery business, pursuant to a Regional Franchise Deed. 2 The Franchise Deed grants Aramex Melbourne the exclusive right to operate the Aramex business in a defined territory encompassing Melbourne and limited areas outside of metropolitan Melbourne (regional franchise territory or RFT). 3 It is said that a key plank of the bargain between the parties is that while Aramex Melbourne as franchisee is obligated promptly to pick up and deliver goods contracted by other franchisees for pick-up and delivery inside Aramex Melbourne's RFT, Aramex Australia, as franchisor, has covenanted to procure that all other franchisees undertake the delivery of goods contracted by Aramex Melbourne for delivery outside of Aramex Melbourne's RFT, within the limits of the Franchise Network (i.e. in other franchisees' regional franchise territories). 4 Linked Logistics Pty Ltd, trading as Aramex Perth, appears to be the regional franchisee with the exclusive right to operate the Aramex business in the Perth area. Aramex Perth is a wholly owned subsidiary of Aramex Australia with an identical board of directors. 5 It would seem that contrary to its covenant with Aramex Melbourne, Aramex Australia is refusing to procure that Aramex Perth deliver Aramex Melbourne's contracted goods in Perth. Aramex Australia seems to have taken steps to prevent Aramex Perth from delivering certain large format stock (specifically, 'flat-pack furniture') in Perth on behalf of Aramex Melbourne's largest customer, New Aim Pty Ltd. Aramex Melbourne contends that New Aim is extremely important to their continued survival, maintaining that Aramex Australia's 'ban' on delivering such items of stock thus threatens its survival. Aramex Melbourne seeks to enforce its rights against Aramex Australia under the Franchise Deed. 6 In this context Aramex Melbourne made an application for an urgent interlocutory injunction, requiring Aramex Australia to abide by the Franchise Deed in procuring the delivery by Aramex Perth of Aramex Melbourne customers' products, pending the final determination of the proceeding. Aramex Melbourne commenced the proceeding by way of originating process on 16 November 2022 against Aramex Australia, seeking final relief in the form of a permanent final injunction to ensure compliance with the Franchise Deed, as well as damages and costs. This claim for final relief has since been reformulated to seek specific performance of the Franchise Deed. 7 In support of its application for an interlocutory injunction, Aramex Melbourne relies upon the following material: (a) affidavit of Robert Chilov sworn on 16 November 2022; (b) affidavit of Nicholas Allen sworn on 20 November 2022; and (c) affidavit of Robert Chilov sworn on 24 November 2022. 8 In opposition to the application for the interlocutory injunction, Aramex Australia relies upon the following material: (a) affidavit of Rita Khodeir sworn on 20 November 2022; (b) affidavit of Christina Zaarour sworn on 20 November 2022; (c) affidavit of Adam Greer sworn on 24 November 2022; (d) affidavit of Christina Zaarour sworn on 24 November 2022; (e) affidavit of Samiul Islam sworn on 24 November 2022; (f) affidavit of Andrew van der Velde sworn on 24 November 2022; and (g) affidavit of Rubert Wolff sworn on 24 November 2022. 9 The parties have also filed detailed written submissions in support of their respective positions, the plaintiff on 18 November 2022 and the defendant, relevantly, on 27 November 2022.

RELEVANT PRINCIPLES 10 The legal principles applicable to an application for an interlocutory injunction are well known, and the Federal Court's power to make such orders are similarly uncontroversial: see for example Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 195 CLR 1 and s 19 and s 23 of the Federal Court of Australia Act 1976 (Cth). 11 The applicant for the interlocutory injunction must demonstrate to the Court's satisfaction that: (a) there is a prima facie case or serious issue to be tried; and (b) the balance of convenience favours the grant of the injunction. See Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 at 68 [19] (Gleeson CJ and Crennan J) and 82 [65] (Gummow and Hayne JJ) and Patrick Stevedores at 24 [21] (Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ). 12 To satisfy the requirement for a prima facie case it is not necessary for the applicant to establish that it is 'more likely than not' or 'probable' that it will succeed at trial, rather it must demonstrate sufficient prospects to show that the situation does not become irredeemable: O'Neill at 68 [19] and 82 [65]. 13 Insofar as the balance of convenience is concerned, it is for the Court to weigh up the competing implications of granting or not granting the injunction and to determine what is just in all the circumstances. That is, whether the applicant's inconvenience or injury which may arise from not granting the injunction outweigh the inconvenience or injury to the respondent if the injunction is granted: O'Neill at 68 [19] and 82 [65]. 14 Whether or not damages would be an adequate remedy is also to be considered, at least in the formulation of the balance of convenience: Samsung Electronics Co Ltd v Apple Inc (2011) 217 FCR 238 at 260 [63] (Dowsett, Foster and Yates JJ) and O'Neill at 68 [19] and 147 [250] (Heydon J). 15 It is uncontroversial that the requirements of a prima facie case and the balance of convenience are not considered in silos. An apparently strong claim may cause the court to grant an injunction if the balance of convenience is fairly even, and a potentially doubtful but prima facie claim may still result in an injunction if the balance of convenience tilts strongly in favour of the applicant: Bradto Pty Ltd v State of Victoria (2006) 15 VR 65 at 74 [39] (Maxwell P and Charles JA) and Samsung at 261 [67]. 16 Further, there is appellate authority that a court should consider the concept of which course of action - granting or denying the injunction - carries the lower risk of injustice if it should turn out to be 'wrong' at trial: Bradto at 73 [35].

IS THERE A PRIMA FACIE CASE? 17 Aramex Melbourne submits that there are at least four bases for the Court to be satisfied that it has a prima facie case to be resolved at trial, based on four separate causes of action: breach of contract; unconscionable conduct contrary to s 21 of the Australian Consumer Law (being Sch 2 of the Competition and Consumer Act 2010 (Cth)) (ACL); breach of the obligation to act in good faith contrary to cl 6 of the Franchising Code of Conduct (being Sch 1 of the Competition and Consumer (Industry Codes - Franchising) Regulation 2014 (Cth), established under s 51AE of the Competition and Consumer Act) and/or misleading and deceptive conduct contrary to s 18 of the ACL. Nonetheless, on the substantive hearing of the interlocutory injunction only the breach of contract claim was the subject of argument, the plaintiff's position being that this claim was compelling. 18 In this respect it is necessary to pay close consideration to the terms of the Franchisee Deed. The relevant clauses of the Franchisee Deed are as follows: 2.1 Grant The Franchisor [Aramex Australia] hereby grants to the Regional Franchisee [Aramex Melbourne] (to the exclusion of the Franchisor and others) a licence to establish and operate the Franchise during the Franchise Period in the Regional Franchise Territory subject to the terms of this document. 2.2 Exclusive Territory Subject to the terms of this document and the Regional Franchisees continued compliance with its obligations under this document the Franchisor shall not during the Franchise Period itself establish, or licence the establishment of, a business in the Regional Franchise Territory utilising the System, any Aramex Object or anything deceptively similar to them. 2.3 Pick Up and Delivery Obligations (a) The Regional Franchisee [Aramex Melbourne] covenants with the Franchisor to promptly pick up, deliver, or procure the pick up or delivery of, all packaged goods contracted by Licencees for pick up and delivery in the Regional Franchise Territory during the Franchise Period. (b) The Franchisor [Aramex Australia] covenants with the Regional Franchisee to procure all Licencees to promptly undertake delivery during the Franchise Period of packaged goods contracted by the Licencees in the Regional Franchise Territory for delivery in the area serviced by the Franchise Network from time to time outside the Regional Franchise Territory. (c) The Franchisor does not have authority to act as agent of any Licencee for the acceptance of offers to enter into contracts of carriage. 19 The parties appear to accept that the Franchise Deed is not well drafted. Aramex Melbourne submits that there is an error in the drafting of cl 2.3(b). 20 "Licensees" is defined in the Franchise Deed as "… all persons (other than the Regional Franchisee [Aramex Melbourne]) licenced or otherwise entitled to use the System in Australia or elsewhere in the world." It is submitted however, that while the exclusion of Aramex Melbourne from the definition of Licensees makes sense for the first use of that term in cl 2.3(b), it does not make sense for the second use of the term in that clause. Rather, the second use of the term should actually refer specifically to the Regional Franchisee, being Aramex Melbourne, as they are the only party that can do the thing contemplated by the clause, that is, contract within the RFT, pursuant to the other clauses of the Franchise Deed. 21 It is uncontroversial that a commercial contract should be construed by reference to the language used, the surrounding circumstances and the purposes and objects of the contract: Rinehart v Hancock Prospecting Pty Ltd (2019) 267 CLR 514 at 534 [44] (Kiefel CJ, Gageler, Nettle and Gordon JJ) and 548 [83] (Edelman J) and Electricity Generation Corporations v Woodside Energy Ltd (2014) 251 CLR 640 at 656-657 [35] (French CJ, Hayne, Crennan and Kiefel JJ). One should look to the parties' common intention, objectively ascertained from the words of the contract: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179 [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ). Additionally, a commercial contract is to be construed so as to avoid it making commercial nonsense or working commercial inconvenience: Woodside at 657 [35]. 22 Aramex Melbourne submits that to interpret cl 2.3(b) literally, so as to exclude Aramex Melbourne from those that may contract for packaged goods in Aramex Melbourne's RFT, would be entirely inconsistent with the grant of exclusivity in cl 2.1 and cl 2.2, which clauses underpin the very purpose of the Franchise Deed. It submits that a literal interpretation of cl 2.3(b) would make a commercial nonsense or work commercial inconvenience. 23 In this regard Aramex Melbourne submits that it is also accepted that a court may "construe a contract by adding, omitting as superfluous, restricting, transporting modifying or correcting particular parts if it is necessary to give effect to the meaning of the contract taken as a whole": Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633 at 661-662 [116]-[119] (Leeming JA) and National Australia Bank Ltd v Clowes [2013] NSWCA 179 at [34]-[38] (Leeming JA). Aramex Melbourne contends that either the second use of the term 'Licencees' in cl 2.3(b) should be replaced with the phrase 'Regional Franchisee', i.e. Aramex Melbourne, or alternatively the words 'by the Licencees' should simply be deleted. 24 If this interpretation of cl 2.3(b) is accepted, Aramex Melbourne contends that Aramex Australia's failure to procure its subsidiary (Aramex Perth) to deliver New Aim products in Perth, constitutes a plain breach of cl 2.3(b). 25 Aramex Australia did not appear to oppose this interpretation of the Franchise Deed or the purported error in the wording of cl 2.3(b). Rather, it concedes that the contractual obligation imposed upon it under cl 2.3 of the Franchise Deed is a serious issue to be tried, and it accepts that there is a "strong case against [it] as to a potential breach of contract." However, it submitted that the 'reason' for the potential breach must be examined in light of the context, which is relevant to its submissions on the balance of convenience. 26 Counsel for Aramex Australia also contended in oral submissions that the Franchise Deed only imposed an obligation on Aramex Australia to procure all licencees, rather than third parties, to undertake delivery of the goods. It was submitted that 'procure' does not mean 'pay' but rather 'organise', and reference was made to evidence the effect of which, it was submitted, was that this procurement had already been done by Aramex Australia. It was contended that there is no obligation on Aramex Australia under the Franchise Deed to pay third parties to do the 'end delivery'. 27 It is not apparent to me that, as presently formulated, the defendant's "procure" argument advances matters very far in its favour. In all the circumstances I accept that there is a compelling case in the plaintiff's favour that there is a serious question to be tried that the defendant has breached the Franchise Deed.

WHERE LIES THE BALANCE OF CONVENIENCE? 28 Aramex Melbourne submits that the balance of convenience is firmly in favour of the injunction being granted. It points to evidence of the commercial damage that it will suffer if it is not able to deliver to New Aim's end-customers in the Perth area. It contends that if the cessation of delivery in Perth were to continue, New Aim will likely look elsewhere for a delivery provider. New Aim apparently regards disruptions to its supply chain, particularly at this time of year, as untenable. 29 Mr Chilov describes New Aim as, in effect, Aramex Melbourne's flagship client which accounts for 15 per cent of Aramex Melbourne's revenue. Without New Aim, Aramex Melbourne says that it cannot justify its two physical depots in Port Melbourne and Dandenong, and would need to lay off some of its fifty staff and terminate the subcontracts of multiple drivers. It is submitted that this is an outcome the court should strive to avoid in determining the balance of convenience. 30 Aramex Australia, however, is critical of the quality of Aramex Melbourne's evidence concerning the potential harm it will suffer if the injunction were granted. It submits that there is no proper basis for the "significant insolvency risk" alleged by the plaintiff and notes that there is no accounting evidence adduced in support of this. Further it contends that there is also no proper basis for the assertion that New Aim will likely look elsewhere for a delivery provider if the cessation of delivery in Perth were to continue. Rather, it suggests that past events show New Aim to be co-operative in such circumstances. 31 Aramex Australia submits that the balance of convenience favours the injunction not being granted because of occupational health and safety (OHS) issues at play. It contends that an injunction would exacerbate the existing OHS issues, and that a high risk of physical injury to its staff outweigh the "speculative" prospect of future financial risk posed by the plaintiffs. Aramex Australia points to these OHS issues, caused by the volume of flat pack material, as the 'reason' for any possible breach of the Franchise Deed. 32 In furtherance of this, Aramex Australia says that such a risk to other franchisees and third parties is a serious consideration in determining the balance of convenience. It points to comments made by Jagot J about the relevance of third party interests in A & A (Sydney) v YUM! Restaurants Australia Pty Ltd [2014] FCA 678 at [31(2)] as well as to Samsung at 261 [68]. 33 Insofar as the evidence of any prejudice to Aramex Australia in granting the injunction is concerned, I consider that evidence to be underwhelming. Any OHS concerns that the defendant may have, can easily be ameliorated. A mandatory injunction requiring Aramex Australia to perform its contractual obligations under the Franchise Deed does not necessitate that it ignore such OHS concerns. 34 Aramex Australia also maintains that even if Aramex Melbourne was to prevail on the underlying contractual dispute, damages would be an adequate remedy. It submits that in this case any damages are clearly identifiable and therefore any loss can be easily quantified. Further, it says that if there is a breach of contract, in the ordinary course the loss will be borne by the plaintiff until trial. In a similar vein, Aramex Melbourne contends that even if it is wrong as to why it is entitled to relief under the Franchise Deed, any prejudice to Aramex Australia caused by the grant of the injunction can be easily quantified in damages, which Aramex Melbourne has undertaken to meet. 35 Finally, it is said by Aramex Melbourne that the proposed form of interlocutory injunction is 'until further order', and therefore that Aramex Australia can rely upon liberty to apply should matters change and there be a new basis to reformulate the terms of the injunction or to discharge it.

DISPOSITION 36 In the circumstances I consider that the injunction should be granted. Aramex Melbourne's case on the proper construction of the Franchise Deed is compelling, and no serious answer to it was advanced by Aramex Australia in argument. I am sufficiently satisfied on the evidence that a refusal to grant the injunction may cause more potentially irremediable damage to Aramex Melbourne than granting the injunction would cause to Aramex Australia. Further, I am not satisfied that damages would be an adequate remedy for Aramex Melbourne if the injunction was not granted, whereas the interests of Aramex Australia are adequately protected if the injunction is granted and it is subsequently shown that it should not have been. Aramex Australia will have the benefit of the undertakings as to damages given by Aramex Melbourne. 37 Aramex Australia will be ordered to pay the costs of and incidental to the interlocutory application. Aramex Melbourne will have leave to amend their originating application, reformulating the final relief to seek specific performance of the Franchise Deed. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McEvoy.

Competition and Consumer (Industry Codes - Franchising) Regulation 2014(Cth)

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