Belflora Pty Ltd v Vinflora Pty Ltd and Anor

Plaintiff submissions

1. The plaintiff submits that the objective circumstances, the parties' post contractual conduct, and admissions made by Mr Uppalapti prove the existence of a legally binding agreement as well as its terms, despite the fact the agreement was never signed (relying on Lawrence v Ciantar [2020] NSWCA 89 at [114] and the cases cited there as to the admissibility of post contractual conduct to prove the terms of an agreement that is partly oral; Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 as to the admissibility of Mr Uppalapti's admissions; and Brogden v Metropolitan Railway Company (1877) 2 App Cas 666 and Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1998) 14 NSWLR 523 at 528, 531 and 534-5 in support of the position that assent to the terms of a written document can be inferred despite the failure of a party to execute it).
2. In particular, the plaintiff points to the fact that Mr Belcastro and Mr Uppalapti were business partners splitting their business. It submits that their relationships with Mr Ehiya and other suppliers were commercial associations of considerable value to both Mr Uppalapti and Mr Belcastro, an objective factor which it is asserted supports the existence of consideration, an intention to enter legally enforceable obligations and the terms for exclusivity.
3. The plaintiff asserts in its closing submissions that the document at CB.984 reflects the parties' final agreement, which Mr Uppalapti took a photo of at the market on 1 June 2018. It submits that Mr Belcastro's evidence (see below) that Mr Uppalapti told him he was happy with the agreement is consistent with Mr Uppalapti's various admissions that they came to an "arrangement" or "understanding" that they would operate under "to start with". The plaintiff also submits that the existence of the agreement is supported by the fact Belflora and Vinflora commenced trading, that the stands were split, and the sharing of the warehouse, truck, Belflora Natives and employee, Anil. It submits that the fact Mr Belcastro and Mr Uppalapti refrained from selling Kenyan and South American flowers, respectively, for a period of 12 months supports the existence of the alleged restraint. However, the plaintiff submits the parties refrained from specifying any period of time for which the restraint should endure.
4. The plaintiff submits the defendants' repudiation defence must fail on the basis that acceptance of the repudiation was not pleaded nor the subject of evidence; before repudiation could have been accepted, Mr Uppalapti had to be willing and able to perform the agreement but denies the existence of the agreement; repudiation is not to be lightly inferred; Mr Belcastro's evidence is inconsistent with repudiation; and the parties were sharing the warehouse, truck, Belfora Native, Anil and even profits (see closing submissions [69]).
5. As to the enforceability of the restraint, the plaintiff submits it is not in restraint of trade in the relevant sense and in any event is reasonable. In their opening submissions, the plaintiff asserted that the purpose of the restraint was market differentiation not exclusion and Mr Uppalapti is free to sell South American flowers so long as they are obtained from Belfora. It was said to be reasonable in that each party obtained mutual benefit from the opportunity to concentrate on importing flowers from the growers with whom they had better connections, the connections with Kenyan and South American growers being assets ("goodwill") of the business being dissolved (see Commissioner of Taxation v Murray (1998) 193 CLR 605). In closing submissions, the plaintiff asserted that there is no restraint on existing trade, each party having commenced a new business and promised not to appropriate that part of the previous business taken by the other. The plaintiffs submit that Mr Uppalapti was capable of determining where his interests lay and negotiated on an equal footing with Mr Belcastro. The parties were the best judge of what was reasonable and Mr Uppalapti got what he wanted, which was at least, if not more, valuable than what Mr Belcastro took in return. The plaintiff further submits that the defendants' did not raise any issue concerning time nor the lessoning of competition in their defence and such issues have to be pleaded (Heydon on Contract at [19.30]).
6. The plaintiff also submits that the defendants have not relied upon s 4(3) of the Restraints of Trade Act 1976 (NSW).
7. The plaintiff asserts that the evidence is such that the defendants ought to concede they imported South American flowers in the period June 2018 to date and the plaintiff ought to be granted the relief sought.

Defendants' submissions

1. The defendants submit that the evidence, viewed objectively, does not establish that there was an agreement between the plaintiff and the second defendant in the form alleged. The plaintiff referred to several authorities concerning the objective theory of contract and the difficulties plaintiffs face in discharging their onus of proof in relation to contracts based on oral conversations, including John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 at [94] where Hammerschlag stated that the "seriousness of an allegation made, inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding" were relevant factors.
2. In summary, the defendants submit: 1. The evidence led by the plaintiff as to the creation of the written document propounded by the plaintiff as being the "written part" of the alleged agreement was confusing and contradictory; 2. It is common ground that Mr Belcastro and Mr Uppalapti ended their business relationship because Mr Belcastro made it clear he had lost faith and trust in Mr Uppalapti. Given the context of distrust, it is inherently unlikely that Mr Belcastro would not have insisted on a signed written agreement. The absence of Mr Uppalapti's signature is consistent with an assertion by Mr Uppalapti that he only ever considered the alleged agreement a proposal to which he never agreed. (Contrary to this, the plaintiff submits the reality is Mr Belcastro and Mr Uppalapti "remained good friends" and the terms of agreement required ongoing trust); 3. Mr Belcastro had a practice at the time of making and keeping notes of discussions he was going to have with Mr Uppalapti, yet there is no written record of any conversation between Mr Belcastro and Mr Uppalapti about the creation of the alleged agreement; 4. The consequences that would flow from a finding that Mr Uppalapti is bound by the alleged restraint forever are grave; 5. The conduct of the parties relied upon to support the repudiation and abandonment arguments (see below) is also relevant to the question of whether any contract existed.
3. The defendants submit that even if there was a legally binding agreement, it was either repudiated or mutually abandoned on the basis of the following asserted facts: 1. From about 2018, the plaintiff sold roses with the same packaging and pricing as Kenyan flowers; 2. From July 2018, the plaintiff purchased Kenyan roses from suppliers other than the defendants; 3. In October 2018, the plaintiff displayed and sold large quantities of Kenyan roses that were not purchased from the defendants; 4. In about June 2019, Mr Belcastro confirmed there was no agreement to the effect alleged; 5. In about August 2019, Mr Belcastro told Mr Uppalapti that he would be buying Kenyan roses from Kenyan importers; 6. The parties have never shared profits in relation to flowers purchased from each other; 7. Mr Uppalapti, by his conduct and express words, accepted the repudiation/abandonment, including during conservations with Mr Belcastro in October 2018 and June 2019 in which it was confirmed and agreed that there was no agreement in the form alleged.
4. The defendants submit that, if the alleged agreement remains in force, the alleged restraint operates as a restraint of trade in three ways, namely, by restricting the defendants' rights to engage with South American flower growers and exporters, by restricting the defendants' rights to display South American flowers, and by restricting the defendants' rights to sell South American flowers other than those purchased from the plaintiff.
5. The defendants assert the plaintiff has adopted a "shifting sands approach" to what the restraint is intended to protect. Nevertheless, the defendants submit there is no probative evidence that Mr Belcastro had any goodwill, in the form of connection to South American flower growers, to protect. They say there is no evidence as to how the asserted relationships were built up, how long it would take Mr Belcastro to cement those relationships before Mr Uppalapti could use them, or whether Mr Uppalapti ever used the suppliers used by the plaintiff. Even so, they submit that the plaintiff's reference to goodwill in relation to relationships and access to South American suppliers is not goodwill of the kind of associated restraints of trade (see Isaac v Dargan Financial Pty Ltd (2018) 98 NSWLR 343 at [66]; Allied Dunbar (Frank Weisinger) Ltd v Weisinger [1988] IRLR 60 at 65 (Millett J); GBAR (Australia) Pty Ltd & Ors v Brown & Anor [2020] QSC 14 at [82] (Bradley J). They say there is no evidence about how the restraint would operate to protect customer goodwill of the new businesses.
6. Further, the defendants submit that the alleged restraint is not a reasonable restraint in that: 1. It is for an indefinite period and cannot be redrafted to provide that the restraint will be for a definite period as that would not be a reading down of the restraint, but a new form of restraint (Kone Elevators Pty Ltd v McNay (1997) ATPR 41-564 (NSW Court of Appeal at 43,833; Woolworths v Olson [2004] NSWCA 372); 2. It is not, on terms geographically limited, although the relief sought by the plaintiffs limits the second and third elements of the restraint to stands 49, 50, 51 and 52 at Flemington Markets Sydney; 3. There is a gross disparity of obligation in that there is no corresponding obligation on the plaintiff to keep the defendants fully supplied or to supply at a competitive price or to a particular quality; 4. It is not limited to identifiable South American flower growers and exporters; 5. There is no evidence that the defendants' breach of the alleged restraint had any effect on the plaintiff's business; 6. There are multiple other operators in the Sydney Flower Markets selling South American flowers. In the premise, the restraint disadvantages the defendants but would not materially benefit the plaintiffs other than reducing by one the number of competitors in the market selling South American flowers; 7. In the premise, the restraint operates only to restrain competition.
7. Finally, the defendants submit that if the plaintiff was otherwise entitled to injunctive relief, such relief ought to be denied on discretionary grounds. They assert that, from the outset, the plaintiff sourced roses designed to look like Kenyan roses, which cuts across the stated reason for the agreement, and continued to purchase Kenyan roses from suppliers/wholesalers other than the defendant. The defendants also assert that the plaintiff's breach of the Court's confidentiality orders goes to the heart of what this case is about, namely two competing businesses at the Sydney Flower Market.

Further submissions on the term (or lack thereof) as to duration

1. The plaintiff pleads a contract under which Uppalapti would not sell flowers from South America and Belcastro would not sell flowers from Kenya (Statement of Claim [23], [40]) and a term that the "agreement would bind them so long as the parties operated side by side" (41). However, the plaintiff did not specifically plead that the term as to duration was written, oral or implied.
2. During the course of final submissions, I asked senior counsel for the plaintiff whether the agreement was intended to operate in perpetuity. Mr Coles QC informed me that "[n]o time was fixed for its expiry" (T174.42). I then asked whether it was an implied term that as long as each does business in the Sydney flower markets, the agreement is intended to operate. Mr Coles QC answered that there is no issue raised by the defendant that "he was entitled to terminate the agreement by giving some notice or that the Court would not enforce the agreement simply because it was unlimited as to time" (T174.47-40). Later, he said "[i]t is simply a covenant to which the parties themselves selected no particular termination time or expiry date" (T187.37-38).
3. However, upon reflection, I invited the parties back to discuss the issue and by email I sent out a request in substance asking whether the plaintiff relied on the term so far as duration is concerned having been implied and, if so, for some assistance from the parties as to the relevant authorities regarding the implication of terms where a contract is said to be partly oral and partly written.
4. Counsel for the plaintiff provided further written submissions dated 12 August 2020 in which they disavowed any implied term. They asserted "[t]here simply were no discussions concerning duration". Further, the plaintiff submits that no term should be applied as the criteria set out in Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 and BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 are not met. It submits that Crawford Fittings v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438 is authority for the proposition that an agreement which does not express a time period for its duration is indefinite, unless a term can be implied from the agreement and the surrounding temporal objective circumstances, to the contrary. However, it submits that this is by the by because the defendants did not advance the case that they performed the contract by exercising an implied term to terminate upon reasonable notice.
5. Mr Allen continued to disavow any implied term on 12 August when he and Mr Moses SC came before the Court. In response, Mr Moses SC raised four matters. First, he submitted that the plaintiff's pleaded case must fail because the parties do not in fact operate "side by side" (see the floor map for the Flemington Flower Markets at CB.83). Secondly, he submitted that if the plaintiff submits that the whole agreement could come to an end on reasonable notice, their case does not support the relief it now seeks. Thirdly, he submitted that the plaintiff's counsel had misunderstood Crawford Fittings, which he said relates to the termination of a commercial arrangement in relation to the provision of supplies and services and not restrictive covenants. Finally, he submitted that the defendants did not have an obligation to raise the case that the agreement could be terminated on reasonable notice.
6. On 13 August 2020, Mr Allen via email with the consent of the defendants drew my attention to paragraph [24.120] of Heydon on Contract, which he pointed out was referred to in footnote 36 of the plaintiff's opening submissions. That paragraph states: There is no general right to terminate a contract on giving reasonable notice, although it has been questioned whether there is any presumption against the capacity to give reasonable notice in the case of what would otherwise be a perpetual contract. (citing Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438 at 443 and Carnegie A R, "Terminability of Contracts of Unspecified Duration" (1969) 85 LQR 392).

Objective theory of contract

1. Whether an agreement exists is to be determined objectively and this exercise may involve recourse to events, circumstances and things which are external to the contract itself. In Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited (S99/2015; S102/2015) (2015) 256 CLR 104 ('Mount Bruce Mining') at [46]-[52], French CJ, Nettle and Gordon JJ explained the principles to be applied in determining the existence of a contract and its terms: [46] The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose. [47] In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract. [48] Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning. [49] However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals. [50] Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations. [51] Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption "that the parties ... intended to produce a commercial result". Put another way, a commercial contract should be construed so as to avoid it "making commercial nonsense or working commercial inconvenience". [52] These observations are not intended to state any departure from the law as set out in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales and Electricity Generation Corporation v Woodside Energy Ltd. We agree with the observations of Kiefel and Keane JJ with respect to Western Export Services Inc v Jireh International Pty Ltd. (citations omitted)
2. The comments of the High Court in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [35]-[36] and [40] are also relevant: [35] A striking feature of the evidence at trial, and of the reasoning of the learned primary judge, is the attention that was given to largely irrelevant information about the subjective understanding of the individual participants in the dealings between the parties. Written statements of witnesses, no doubt prepared by lawyers, were received as evidence in chief. Those statements contained a deal of inadmissible material that was received without objection. The uncritical reception of inadmissible evidence, often in written form and prepared in advance of the hearing is to be strongly discouraged. It tends to distract attention from the real issues, give rise to pointless cross-examination and cause problems on appeal where it may be difficult to know the extent to which the inadmissible material influenced the judgment at first instance. [36] In Codelfa Construction Pty Ltd v State Rail Authority of NSW (17), Mason J observed: ''We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.'' … [40] This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction. (citations omitted)

Informal contracts

1. The alleged agreement in this case is said to be partly oral and partly written. In Masterton Homes Pty Ltd v Palm Assets Pty Ltd (2009) 261 ALR 382 (at [90]), Campbell JA (with whom Allsop P and Basten JA relevantly agreed) set out principles that are applicable in deciding whether an agreement that parties have entered is one that is wholly in writing or partly written and partly oral: (1) When there is a document that on its face appears to be a complete contract, that provides an evidentiary basis for inferring that the document contains the whole of the express contractual terms that bind the parties... (2) It is open to a party to prove that, even though there is a document that on its face appears to be a complete contract, the parties have agreed orally on terms additional to those contained in the writing... Conversely, it is open to a party to prove that the parties have orally agreed that a document should contain the whole of the terms agreed between them.... (3) The parol evidence rule applies only to contracts that are wholly in writing, and thus has no scope to operate until it has first been ascertained that the contract is wholly in writing... (4) Where a contract is partly written and partly oral, the terms of the contract are to be ascertained from the whole of the circumstances as a matter of fact... (5) In determining what are the terms of a contract that is partly written and partly oral, surrounding circumstances may be used as an aid to finding what the terms of the contract are ... If it is possible to make a finding about what were the words the parties said to each other, the meaning of those words is ascertained in the light of the surrounding circumstances... If it is not possible to make a finding about the particular words that were used (as sometimes happens when a contract is partly written, partly oral and partly inferred from conduct) the surrounding circumstances can be looked at to find what in substance the parties agreed...
2. Specifically in relation to oral contracts, Spigelman CJ explained in County Securities Pty Ltd v Challenger Group Holdings Pty Lts [2008] NSWCA 193 at [7]: The subject matter and the concomitant terms of the [oral] contract must be inferred from a combination of surrounding circumstances including conversations, documents and conduct none of which provide a definitive form of words. The issue is not one of interpretation, because there are no words to interpret. The issue is one of fact: what did the parties agree?"
3. In Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 McHugh JA (Hope and Mahoney JJA agreeing) helpfully observed (at 11,117) that the question is "whether the conduct of the parties, viewed in the light of the surrounding circumstances, shows a tacit understanding or agreement" (quoted by Heydon JA in Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at [77]).
4. As I have explained in previous cases (see, e.g., Quijiao Liu & Anor v Yuqing Xiao & Ors [2020] NSWSC 289), there are other lines of authority relevant to the resolution of cases of this kind. One that is particularly relevant here relates to the difficulties plaintiffs face in discharging their onus of proof in relation to agreements said to be based on oral conversations or conduct that occurred years before proceedings are commenced. The reasons for the difficulty are to some extent obvious but were discussed by McClelland J with his customary precision and insightfulness in Watson v Foxman (1995) 49 NSWLR 315 as follows (at 319): Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
5. In similar vein, Hammerschlag J captured the difficulties associated with such an exercise in John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 (at [94]): Where a party seeks to rely upon spoken words as a foundation for a cause of action, including a cause of action based on a contract, the conversation must be proved to the reasonable satisfaction of the court which means that the court must feel an actual persuasion of its occurrence or its existence. Moreover, in the case of contract, the court must be persuaded that any consensus reached was capable of forming a binding contract and was intended by the parties to be legally binding. In the absence of some reliable contemporaneous record or other satisfactory corroboration, a party may face serious difficulties of proof. Such reasonable satisfaction is not a state of mind that is obtained or established independently of the nature and consequences of the fact or facts to be proved. The seriousness of an allegation made, inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question of whether the issue has been proved to the reasonable satisfaction of the court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony, or indirect inferences.
6. Further, as to the relevance of post contractual conduct, the usual position is that "post-contractual conduct is admissible on the question of whether a contract was formed… [but] not admissible on the question of what a contract means" (Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at [25]-[26] per Heydon JA (citations omitted)). However, as the Court of Appeal has recently stated in Lawrence v Ciantar [2020] NSWCA 89 (per Bathurst CJ, Meagher and Gleeson JJA agreeing at [114]): Although generally speaking, evidence of post-contractual conduct cannot be used in aid of construction (see Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57 at [35]), in the case of contracts not exclusively in writing, post-contractual material may be relevant in determining what the terms actually were: County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 at [7]-[27] and [45]; Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407 at [325]. (my emphasis)

Repudiation and abandonment

1. Whether there has or has not been a repudiation will depend on the facts in any particular case and it is not to be inferred lightly - it is a serious matter because the effect of it is to give the other party to the agreement the right to terminate it.
2. What can be said, however, is conduct must objectively be identified as amounting to conduct which is "substantially inconsistent" with the plaintiff's obligations. It must amount to a renunciation of the plaintiff's obligations, either of the agreement as a whole or a fundamental obligation under it (see Shevill v Builders Licensing Board (1982) 149 CLR 620, 625-627 (per Gibbs CJ, with whom Brennan J agreed); Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623, 647-648 (per Brennan J), 657-658 (per Deane and Dawson JJ); see also Keays v JP Morgan Administrative Services Ltd [2012] FCAFC 100).
3. The defendants point out that repudiation may be found in a combination of events, which, on their own would not entitle the aggrieved party to terminate the contract (Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17, 36-37, 40, 55; Carr v J A Berriman Pty Ltd (1953) 89 CLR 327). Further, an election to terminate a contract upon repudiation may be communicated by conduct or words, provided such words or conduct "make the election manifest to the relevant party" (Karacominakis v Big Country Developments Pty Ltd (2000) 10 BPR 18,235; [2001] ANZ ConvR 513; [2000] NSWCA 313 at [155]).
4. With respect to abandonment on the other hand, Dixon CJ and Fullagar J said in Fitzgerald v Masters (1956) 95 CLR 420 (at 423): There can be no doubt that, where what has been called an "inordinate" length of time has been allowed to elapse, during which neither party has attempted to perform, or called upon the other to perform, a contract made between them, it may be inferred that the contract has been abandoned…. What is really inferred in such a case is that the contract has been discharged by agreement, each party being entitled to assume from a long-continued ignoring of the contract on both sides that (in the words of Rowlatt J.) "the matter is off altogether". (citations omitted)
5. The relevant principles were reiterated by Kenneth Martin J in Porter v Sundance Resources Ltd (No 2) [2015] WASC 493 at [166] (cited with approval by the Full Federal Court of the Federal Court in Clifton (Liq) v Kerry J Investment Pty Ltd t/as Clenergy [2020] FCAFC 5 at [325]): (a) The conduct of parties may amount to a mutual abandonment of their contract. (b) A contract on foot may be discharged by the inferred later agreement of the parties, such later agreement being inferred from the parties' conduct. (c) Abandonment describes this situation of inferred later agreement. It should be noted that the discharge of a contract by abandonment in this sense is rare. (d) The abandonment inferred may be either of unperformed obligations, or both future performance and existing rights. (e) The key question is whether the parties have objectively manifested an implied intention to extinguish their first contract. (f) Abandonment requires that the inference is clear. The question may also be expressed as being whether a later inferred contract is substantially inconsistent with the first because, in such circumstances, the appropriate conclusion is the abandonment of the first contract. (g) The subjective intention of the parties is not relevant. (h) The implied intention may be manifested through silence and delay. (i) Parties may be estopped from denying that a contract has been abandoned. Silence and delay may be relevant in showing such an estoppel. (citations omitted).
6. Further, in Ryder v Frohlich [2004] NSWCA 472 at [135]-[137], McColl JA (with whom Hodgson and Ipp JJA agreed) observed: [135] Where it is plain from the conduct of parties to a contract that neither intends that the contract should be further performed the parties will be regarded as having so conducted themselves as to abandon or abrogate the contract: DTR Nominees Pty Limited v Mona Homes Pty Limited [1978] HCA 12; (1978) 138 CLR 423 at 434 (per Stephen, Mason and Jacobs JJ with whom Aickin J agreed); Summers v The Commonwealth [1918] HCA 33; (1918) 25 CLR 144 at 151 - 152 per Isaacs J. The inference of abandonment will be drawn where "an 'inordinate' length of time has been allowed to elapse, during which neither party has attempted to perform, or called upon the other to perform, a contract made between them … What is really inferred in such a case is that the contract has been discharged by agreement, each party being entitled to assume from a long-continued ignoring of the contract on both sides that … 'the matter is off altogether' ": Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420 at 432 per Dixon CJ and Fullagar J. [136] Whether there is abandonment or abrogation of a contract is a matter of fact to be inferred from an objective assessment of the conduct of the parties: see CIC Insurance Limited v Bankstown Football Club Limited (1995) 8 ANZ Ins Cas ¶61 - 232 per Kirby P; Wallera Pty Limited v CGM Investments Pty Limited [2003] FCAFC 279 at [2] per Ryan J, at [30] - [32] per Kiefel J; at [57] per Gyles J; Marminta Pty Limited v French [2003] QCA 541 at [22] per Jerrard JA, Williams JA and Philippides J agreeing. [137] The underlying premise of the abandonment cases is that a period of time elapses during which neither party to the contract manifests any intention to perform the contract, leading to the inference that the contract has been abandoned. It is clear that the question whether an "inordinate length of time has been allowed to elapse" is relative. In DTR Nominees Pty Limited v Mona Homes Pty Limited the High Court was prepared to infer abandonment after a period of less than five months had elapsed during which neither party took any steps to perform the contract. In Fitzgerald v Masters it was held that a contract for the sale of land had not been abandoned even though proceedings for its specific performance were not commenced until 26 years after its execution.

The Restraint of Trade Doctrine

1. The relevant principles were recently summarised by Gleeson JA (with whom Bathurst CJ and Beazley P agreed) in Isaac v Dargan Financial Pty Ltd (2018) 98 NSWLR 343 at [59]-[72]: [59] At common law a restraint of trade is contrary to public policy and void unless justified by the special circumstances of the particular case. A restraint may be enforced if the restraint is reasonably necessary for the protection of the parties concerned and reasonable in the interests of the public: Nordenfelt v The Maxim Nordenfelt Guns and Ammunition Company Ltd [1894] AC 535 at 565 (Lord Macnaghten); Lindner v Murdock's Garage (1950) 83 CLR 628 at 633 (Latham CJ); [1950] HCA 48; Buckley v Tutty (1971) 125 CLR 353 at 376, 379-380; [1971] HCA 71. [60] In New South Wales, it is necessary to have regard to the Restraints of Trade Act 1976 (NSW) … [61] The correct approach to the application of s 4(1) of the Restraints of Trade Act is well settled. In Orton v Melman [1981] 1 NSWLR 583 at 587 McLelland J (as his Honour then was) explained that first, the court determines whether the alleged breach (independently of public policy considerations) does or will infringe the terms of the restraint properly construed. Next, the court determines whether the restraint, so far as it applies to that breach, is contrary to public policy. If it is not, the restraint is valid, subject to any order which may be made under s 4(3)… [62] The effect of s 4(1) of the Restraints of Trade Act is to require, for the purpose of determining the validity of a restraint, that attention be focused on the actual or apprehended breach, rather than on imaginary or potential breaches: Cactus Imaging Pty Ltd v Peters (2006) 71 NSWLR 9; [2006] NSWSC 717 at [10] (Brereton J). [63] The validity of a covenant in restraint of trade is to be judged at the date of its creation: Lindner v Murdock's Garage at 653 (Kitto J); Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288 at 318 (Gibbs J); [1973] HCA 40; Geraghty v Minter (1979) 142 CLR 177 at 181 (Barwick CJ); [1979] HCA 42. Nonetheless, the court may take into account future events that could have been foreseen: Lindner v Murdock's Garage at 653. Hence, when exercising its discretion whether or not to grant relief, the court considers matters as at the date of the hearing: Sidameneo (No 456) Pty Ltd v Alexander [2011] NSWCA 418 at [70] (Young JA; Beazley and Basten JJA agreeing); Tullett Prebon (Australia) Pty Ltd v Purcell (2008) 175 IR 414 at 440; [2008] NSWSC 852 at [88] (Brereton J). [64] The nature of the interest meriting protection under a covenant in restraint of trade will differ according to the type of restraint under consideration. In Tullett Prebon (Australia) Pty Ltd v Purcell, a case involving restraints in an employment case, Brereton J said at [47]: "[47] … Whether a restraint is reasonable having regard to the interests of the parties depends on two, albeit related, considerations: first, whether the covenantee has a legitimate protectable interest, and secondly, whether the restraint is no more than reasonable for the legitimate protection of that interest. A covenantee is not entitled to be protected against mere competition; the legitimate interests which may be the subject of protection by covenant are in the nature of proprietary subject matter [Vandervell Products Ltd v McLeod [1957] RPC 185; Tank Lining Corp v Dunlop Industries Ltd (1982) 40 OR (2d) 219; 140 DLR (3d) 659 at 664], including trade secrets and confidential information, and goodwill including customer connection." [65] However as Young JA explained in Sidameneo (No 456) Pty Ltd v Alexander at [31]-[32], the word "proprietary" is used in a special sense and will include legitimate commercial interests. In this regard, his Honour referred to the view he had expressed in Twenty-First Australia Inc v Shade (Supreme Court (NSW), Young J, 31 July 1998, unrep) and Stokely-Van Camp Inc v New Generation Beverages Pty Ltd (1998) 44 NSWLR 607 at 612-613. [66] "Goodwill" has been described as a rather elusive concept: Sidameneo (No 456) Pty Ltd v Alexander at [54]. Goodwill has been referred to as the product of combining and using the tangible, intangible and human assets of a business for such purposes and in such ways that custom is drawn to it: Commissioner of Taxation of the Commonwealth of Australia v Murry (1998) 193 CLR 605; [1998] HCA 42 at [24]. It has been said that it is more accurate to refer to goodwill as having sources than being composed of elements, given that goodwill is to be seen as adding value to a business "by reason of" situation, name and reputation, and other matters, not because goodwill is composed of such elements: Commissioner of Taxation v Murry at [24], citing Commissioners of Inland Revenue v Muller & Co's Margarine Ltd [1901] AC 217 at 235 (Lord Lindley). It has also been recognised that many of the sources of goodwill are not themselves property, nor assets for accounting purposes: Commissioner of Taxation v Murry at [25]. [67] Generally, a stricter and less favourable view is taken of covenants in restraint of trade between employer and employee than in commercial agreements... [72] In Bridge v Deacons [1984] 1 AC 705, doubt was expressed as to whether the legitimate interests can be necessarily ascertained by placing the relevant agreement in a particular category and then trying to align that category with existing cases, such as employment cases or sale of business agreements. Bridge v Deacons involved a restraint clause in a partnership agreement. Lord Fraser, delivering judgment of the Privy Council on behalf of the other Lordships, observed at 714 that: "The agreement in the present case, being one between partners, does not conform exactly to either of the types to which reference has just been made, although it had some resemblance to both. Their Lordships are of the opinion that a decision on whether the restrictions in this agreement are enforceable or not cannot be reached by attempting to place the agreement in any particular category, or by seeking for the category to which it is most closely analogous. The proper approach is that adopted by Lord Reid in the Esso Petroleum case [1968] A.C. 269, where he said, at p. 301: 'I think it better to ascertain what were the legitimate interests of the appellants which they were entitled to protect and then to see whether these restraints were more than adequate for that purpose.' "
2. As Gleeson JA and the authorities his Honour cites make clear, covenants that restrain competition are invalid except to the extent that they are reasonably necessary to protect a party's legitimate interests. It is well established that covenantees are not entitled to protection from mere competition. In Vandervell Products v McLeod [1957] RPC 185, for example, Morris LJ said at 195-196 (having agreed with the judgment of Lord Evershed MR): It is entirely clear that the mere object of preventing competition does not give valid foundation for an enforceable covenant in restraint of trade. That is not in dispute between the parties to this litigation. I only propose to cite a sentence or two from one of the leading authorities. Morris Ld.v.Saxelby [1916] 1 A.C. 688. In his speech at p. 701, Lord Atkinson said: "In all cases such as this, one has to ask oneself what are the interests of the employer that are to be protected, and against what is he entitled to have the protected. He is undoubtedly entitled to have his interest in his trade secrets protected, such as secret processes of manufacture which may be of vast value. And that protection may be secured by restraining the employee from divulging these secrets or putting them to his own use. He is also entitled not to have his old customers by solicitation or such other means enticed away from him. But freedom from all competition per se apart from both these things, however lucrative it might be to him, he is not entitled to be protected against. (my emphasis)
3. The defendants asserted that the kind of goodwill the restraint of trade doctrine protects is that which is understood as "a measure of the expected propensity of existing customers to continue to use the services of the business and of new customers to do likewise on the recommendation of existing customers, notwithstanding the change of ownership" (GBAR (Australia) Pty Ltd & Ors v Brown & Anor [2020] QSC 14 at [82], quoting Allied Dunbar (Frank Weisinger) Ltd v Weisinger [1988] IRLR 60 at 65). However, Lord Eldon's definition of goodwill in Cruttwell v Lye (1810) 17 Ves 335 at 346; 34 ER 129 at 134, as "the probability that the old customers will resort to the old place", has been regarded as too narrow (see Trego v Hunt [1896] AC 7, 16-17, 23, 27; see also J D Heydon, The Restraint of Trade Doctrine at 207-8). In Trego v Hunt, Lord Macnaghten said (at 23-24): What "goodwill" means much depend on the character and nature of the business to which it is attached. Generally speaking, it means much more than what Lord Eldon took it to mean in the particular case actually before him in Cruttwell v Lye…Often it happens that the goodwill is the very sap and life of the business, without which the business would yield little or no fruit. It is the whole advantage, whatever it may be, of the reputation and connection of the firm, which may have been up by years of honest work or gained by lavish expenditure of money.
4. In In Inland Revenue Commissioners v Muller & Co's Margarine Ltd [1901] AC 217 at [17], his Lordship described goodwill as: the benefit and advantage of the good name, reputation, and connection of a business. It is the attractive force which brings in custom. It is the one thing which distinguishes an old established business from a new business at its first start.
5. Lord Lindley said (at 235): Goodwill regarded as property has no meaning except in connection with some trade, business, or calling. In that connection I understand the word to include whatever adds value to a business by reason of situation, name and reputation, connection, introduction to old customers, and agreed absence from competition, or any of these things, and there may be others which do not occur to me…
6. These definitions have been accepted by the High Court (see, e.g., Federal Commissioner of Taxation v Murray (1998) 193 CLR 605 at [17]; Box v Federal Commissioner of Taxation (1952) 86 CLR 387 at 396-397).
7. With respect to duration, indefinite restraints have been held valid (see J D Heydon, The Restraint of Trade Doctrine at 248). For example, in Foley v Classique Coaches Ltd [1934] 2 KB 1; [1934] All ER Rep 88 an agreement which required the purchasers of land to take their petrol supplies exclusively from the vendor was held valid. The agreement was not time limited but there was an implied term that the petrol supplied by the vendor should be of reasonable quality and sold at a reasonable price; to the extent that the purchasers were only required to purchase petrol from the vendor for the purpose of the business carried on by them on the piece of land purchased from the vendor, it was held there was no undue restraint of trade. In J Kitchen & Sons Pty Ltd v Stewart's Cash and Carry Stores (1942) 66 CLR 116, Latham CJ and McTiernan J upheld a price fixing agreement under which the defendant undertook not to sell the "Oxygen Washing Compound known as 'Persil'… at less than 6d. a packet" regardless of whether it was obtained from the plaintiff or any other source. However, their Honours held that the absence of a time limit and any power to withdraw were ordinary features of agreements of that type and for that reason did not justify the conclusion that the agreement was an undue restraint of trade. However, whether these cases would be decided the same way today has been doubted (see J D Heydon, The Restraint of Trade Doctrine at 248, 267).
8. Nevertheless, the question is again one of reasonableness. In Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd [1968] AC 269 ('Esso'), Lord Wilberforce noted (at 340): For what the court is endeavouring to ascertain is whether it is unreasonable for Esso in relation to Esso's interest in selling petrol on this location, to bind Harper's to it in the way that Harper's is bound for the period of the tie; or whether, in the public interest of preserving liberty of action to Harper's Ltd., they ought not to be held in the fetters which they have accepted. There appears to me to be enough in the evidence to show that, on Esso's side, to secure a tie for this period was a legitimate commercial objective; and that as regards Harper's, no public policy objection existed against holding them so long bound. (my emphasis)
9. Notably, the United Kingdom Supreme Court recently reconsidered the doctrine against restraint of trade and the Esso case in Peninsula Securities Ltd (Respondent) v Dunnes Stores (Bangor) Ltd (Appellant) (Northern Ireland) [2020] UKSC 36 ('Peninsula Securities'). The Court discarded the much-criticised "pre-existing freedom" test for the engagement of the doctrine, which was preferred by the majority Esso, and applied Lord Wilberforce's "trading society" test. The "pre-existing freedom test" has been rejected by the High Court (see Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126; Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 ('Maggbury') at [55]) and the applicability of the "trading society" test has seemingly been left open (Maggbury at 55-56; see also the discussion in Kosciuszko Thredbo Pty Ltd v ThredboNet Marketing Pty Limited [2013] FCA 563 at [224]-[229]). Its application was not raised by the parties. The United Kingdom Supreme Court's recent decision in Peninsula Securities did not alter what I will call the "reasonableness" test which is relevant once the doctrine is engaged.
10. In Hanna v OAMPS Insurance Brokers Ltd [2010] NSWCA 267, the appellant argued that that the primary judge erred in not adopting the test in Stacks Taree v Marshall [No 2] [2010] NSWSC 77, where McDougall J adopted Rath J's approach in IRAF Pty Ltd v Graham [1982] 1 NSWLR 419 "of considering the time taken to sever the covenantor's connection with the customers or clients in question rather than the time for the covenantee to build up (or rebuild) a connection". Allsop P (Hodgson JA and Handley AJA agreeing) rejected the argument, stating (at [43]) "[t]here is no legally required test in these circumstances. The use of one test or another depends on the facts and the evaluation of the approach that is reasonable."
11. The question of reasonableness is to be judged as at the date of the contract, and a restraint that is determined wholly unreasonable in relation to the convenantee's interest is void ab initio as offending public policy (see discussion in McHugh v Australian Jockey Club Ltd and Others (No 13) [2012] FCA 1441 (Robertson J) at [1529]-[1530]; Adamson v New South Wales Rugby League Ltd (1991) 31 FCR 242 at 285-286 (Gummow J)). Although, under s 4(1) of the Restraints of Trade Act 1976 (NSW), restraints of trade (that are not wholly unreasonable) are to be considered valid to the extent to which they are not contrary to public policy.
12. When it comes to the question of relief, the position at the date of trial is relevant and the usual factors apply in deciding whether an injunction should be granted (see, e.g., J D Heydon, The Restraint of Trade Doctrine at 335). In Tullet Prebon (Australia) Pty Ltd v Purcell (2008) 175 IR 414; [2008] NSWSC 852, Brereton J (a his Honour then was) said (at [88]): Even where a restraint is valid, equity retains a discretion as to whether and if so how far to enforce it. Mr Fernon SC does not dispute that the grant of an injunction, whether on an interlocutory or final basis, to enforce a negative contractual stipulation made for consideration is discretionary, although exceptional or compelling reasons will be required to persuade the court to decline injunctive relief in relation to the enforcement of such stipulations. The discretion to decline injunctive relief has been recognised in the context of applications to enforce restraints of trade. In exercising the discretion to grant or withhold injunctive relief, the court has regard to the circumstances as at the date of hearing. (citations omitted)
13. Brereton J had regard to whether the restraint no longer served to protect the legitimate interests of the plaintiff, whether the plaintiff should be left to a remedy in damages and whether "the jeopardy to the plaintiff from declining an injunction was slight, and the hardship occasioned by an injunction to the defendant was disproportionately great" ([104]), but did not in that case decline injunctive relief on any of those discretionary grounds ([107]).

Mr Belcastro

1. Mr John Belcastro made four affidavits, the first dated 28 November 2019, the second dated 11 February 2020, the third dated 9 June 2020, and the fourth dated 10 July 2020.
2. The first affidavit was in support of expedition but it makes reference to the allegations in the statement of claim and has annexed to it what is said to be the written part of the agreement. This document (CB.46) is a version of the first set of documents described above and is the one which does not bear any date.
3. The second affidavit states that the plaintiff was incorporated in May 2018 and has operated as a flower seller at the Flemington markets (at [2]).
4. Mr Belcastro says he first met Mr Uppalapti, who approached him to ask if he would sell Indian roses which he sourced from his father in law in India, in 2002. Mr Belcastro did so and the product did well ([3]-[5]).
5. Mr Uppalapti asked if he could work with Mr Belcastro. Although he was reluctant at first, Mr Belcastro eventually employed him. Soon after, Mr Belcastro went to India for Mr Uppalpti's wedding. The two became close "associates" ([6]-[9]).
6. In 2003, as Mr Belcastro was thinking of "winding down", he transferred 50% of the shares in Belflora Australia to Mr Uppalapti and his wife for no consideration and appointed Mr Uppalapti as a director ( [10]-[11]).
7. The business operated successfully over the years up to 2013 with Mr Belcastro keeping control over the administration, accounts and banking (see [12]).
8. At some point in 2013, Mr Belcastro decided to start a new business and offered Mr Uppalapti 30% of this business, again for no consideration. The new business was to be called Belflora International (see [13]). It had three shareholders, Belcastro Holdings, Uppalapti Holdings and Mr Ehiya. The new business had also negotiated arrangements with international flower sellers (see [13]).
9. In late 2016 or early 2017, Mr Belcastro's grandson, Luke Dominello, joined the business, first packing flowers and then approximately a year later in the administration of the company and in due course was involved in bio security issues and banking and the like (see [14]).
10. Mr Belcastro asserts that in 2017 he discovered that Mr Uppalapti had taken over control of banking and had redirected all mail to his personal address. From this point in time the relationship between the two men began to deteriorate and Mr Belcastro had a number of concerns as to how Mr Uppalapti was running the business ([15]-[19]).
11. From 2017, Mr Belcastro started writing notes of his concerns so as to assist him to recall matters he wanted to raise with Mr Uppalapti (see [22]).
12. In December 2017, the two had a meeting at Mr Belcastro's home in Dural. In that conversation, Mr Belscatro states Mr Uppalapti proposed a split of the business with each of them taking four stands. Mr Belcastro said he agreed and Mr Uppalapti also suggested the split occur from the end of the financial year and Mr Belcastro also agreed with that (see [24]). It was agreed that Mr Belcastro would keep stands 81, 82, 83, 84, 82A and 65. Mr Uppalapti would take stands 49, 50, 51 and 52 as depicted at CB.83. Mr Belcastro asserts he brought other grandchildren into the business ([25]-[26]).
13. On Valentine's Day 2018, Mr Belcastro asserts he and Mr Uppalapti had a conversation about exclusive lines they each should have. The discussions continued for a number of months. At some point, Mr Uppalapti suggested that Mr Belscatro sell Columbian flowers and Mr Belcastro suggested that Mr Uppalpti sell Kenyan flowers ([27]-[28]). Mr Uppalapti suggested that something be drawn up and within a few days Mr Belcastro "with my grandsons" drafted a document (see [30]). The document identified by Mr Belcastro is at CB.85.
14. Mr Belcastro says he had a conversation with Mr Uppalapti and gave him a copy of the document. Mr Uppalapti looked at the document "for some time" and he told Mr Belcastro he was happy with it. Mr Belcastro said he did not ask Mr Uppalapti to sign the document because he had had such a long standing relationship with him ([33]-[34]).
15. Mr Belcastro states he did not import any Kenyan or African roses. He asserts that Mr Uppalapti stocked South American flowers on his stand and he confronted him about the matter. Mr Uppalalpti responded that they were only for orders. Mr Belcasro states that he next saw South American flowers on Mr Uppalapti's stand in mid 2019 ([35]-[38]).
16. Mr Belcastro again complained to Mr Uppalapti in early June 2019. Mr Uppalapti said there should be no restrictions notwithstanding the agreement "we had" ([40]). Mr Belcastro got his grandson to send a letter complaining to a supplier of South American flowers about Mr Uppalapti's conduct ([41]). Mr Belcastro asserts that Mr Uppalapti only adhered to the agreement for approximately 12 months ([46]). He attempted to renegotiate the contract with Mr Uppalapti in August 2019, offering Mr Uppalapti the Columbian flowers and leaving himself with the flowers from Equador. He drafted another document with his grandson and he showed it to Mr Uppalapti but no agreement could be reached ([47]-[50]).
17. His third affidavit of 9 June is responsive to Mr Uppalapti's affidavit of 27 March 2020. He sets out his extensive career in selling flowers ([3]-[15]). He also deals with his plans to retire and he denies ever relinquishing control of Belflora Australia in favour of Mr Uppalalpti ([30]-[31]). He denies a number of the conversations asserted to have taken place by Mr Uppalapti and he agrees that after his grandson came to work for Belflora Australia he gave him more and more responsibility ([49]). He also became aware that Mr Uppalapti had changed certain established practices and the relationship deteriorated ([50]-[52]).
18. He denies that the document on the defendant's phone was a proposal. Mr Belcastro says the agreement had been discussed for the previous six months and agreed to prior to 1 June 2018 ([62]). Mr Belcastro states that his grandson at his direction typed the agreement and he did not involve lawyers because he trusted Mr Uppalapti to adhere to the agreement ([68]). He disputes numerous conversations asserted by Mr Uppalapti ([72]-[82]).
19. Mr Belcastro's final affidavit of 10 July is responsive to the affidavits of Messrs Parmar, Bains and Kashany.
20. In cross examination, Mr Belcastro agreed the Sydney Flower market was Australia's largest market for fresh cut flowers (T24.44). He also agreed that growers other than the plaintiff and the defendant sell roses especially from Kenya (T25.19). The agreement was to protect the goodwill particularly with South American growers (T25.37). But he agreed that it was also to protect the goodwill with African and Malaysian growers as well as Thailand and Singapore (T26.4-6).
21. He also alleged that "we had both signed that" (T26.49-50). He said the goodwill he was trying to protect was the relationship both he and Mr Uppalapti had built up with South American growers (T27.12-13). The relationship was with Belflora (T27.20-28). They agreed that he would speak to the South American growers and Mr Uppalapti would speak to the African growers (T28.12-16). He agreed that in 2002 he decided to hand over his business, John Belcastro Flowers, to his son-in-law, Mr Nati, and a former employee, a Mr Biscoe (T29.50-T30.1-3). From 2002, he and Mr Uppalapti became good friends (T30.23-25). He also agreed he went to Mr Uppalapti's wedding (T31.9-10). He accepted that Belflora Australia was set up with Mr Uppalalpti in January 2003 and both were directors (T31.45-40). In 2003, they had stands 33, 34 and a part of 35 and then they purchased 81, 82, 83 and 84 (T32.3-7).
22. Mr Belcastro asserted that he was in control and ran the whole business. He agreed that Mr Uppalapti dealt with customers, suppliers and quarantine agents. But everything was done under his instructions (T32.30-47).
23. In 2013, a number of different investors came into the business and a new company was established with Mr Ehiya and the Lee brothers from Singapore. The new company was Belflora International (T33.16-18). The new company bought stands 51, 52, 65 and 81A (T33.1-4). Mr Uppalapti was instrumental in bringing in the other investors (T34.12-15).
24. His relationship with Mr Uppalapti was like father and son (T34.27). He agreed that when his grandson came into the business the grandson had some friction with other members of staff (T35.9-10). He did trust Mr Uppalapti but he tried to correct things he was doing wrong and because the relationship was deteriorating he started making notes of discussions (T36.19-22). He saw discrepancies and things done without his authority. He agreed that by the end of 2017 the relationship had deteriorated quite substantially (T36.48). His notes were made with the assistance of his wife to remind him what to raise with Mr Uppalapti (T39.23).
25. The agreement with Mr Uppalapti took nearly six months to finalise. Mr Uppalapti had the most input and "I think he might have wrote it and gave me a copy" (T39.47-48).
26. He never wanted the business to be split but he agreed that he had lost trust in Mr Uppalapti by the end of 2017. He was "not really sure" whether the agreement at CB.85 was typed by his grandson but he thought that Mr Uppalapti might have given him a copy (T39.49-50). He had no recollection of sitting down with his grandsons, Luke and Jude, and Luke typing out the agreement (T40.5). He was unsure who wrote out the page (T40.21-22).
27. He believed that he and Mr Uppalapti discussed it over a period of six months (T40.25-26). He also thought a conversation took place between himself, Mr Uppalaplti and his grandsons at some point (T40.29-31). And it was Mr Uppalaplti who "designed it" (T40.39).
28. He agreed that it was after his grandson started working in the business that he noticed things were not right with the business (T43.4-7). He also denied coming up with the proposal (T43.20). He denied negotiations with Mr Uppalapti about the percentages particular flower varieties made up of the business (T43.27). He denied showing Mr Uppalapti the document at CB.85 during discussions (T44.6). He did not get Mr Uppalalpti to sign the document but he did not know why (T44.43-48).
29. He agreed that at CB.1003 there was a photograph of his hand attached to an email from his grandson requesting a supplier to pack ten stem roses in the same way that the Kenyan roses were; to have them packed for the future in a sleeve (T47.28-37). He denied from 2018 to 2020 his company was buying Kenyan roses from a number of suppliers T47.43. He agreed, however, that he bought roses in the market regardless of where they were from and they may have been from Kenya but he denied he bought Kenyan roses from suppliers (T48.5-8).
30. Once he discovered Mr Uppalapti was bringing roses in from South America in July 2019, he put another proposal to Mr Uppalapti but Mr Uppalapti rejected it (T49.8-11). Mr Belsastro said Mr Uppalalpti told him he did not want any restrictions (T49.45). He agreed that "unless there is a name on the sleeve, you do not really know where they come from" (T51.25-26). He would not agree that his company was either selling Kenyan roses or passing off roses as Kenyan roses (T52.2; T52.16-17).

Mr Dominello

1. Mr Luke Dominello made two affidavits, the first dated 28 February 2020, the second dated 17 July 2020.
2. In the first of those affidavits, Mr Dominello said he has been employed by the plaintiff since 2017. Mr Belcastro (his grandfather) told him that he had had a number of conversations with Mr Uppalapti about splitting the business ([4]), and, in May 2018, that he and Mr Uppalpti had agreed on the split ([5]). He then sat down with Mr Belcastro and his brother, Jude, and they "wrote out and then typed up the document" and he printed it out ([5]-[6]). The document he identified is at CB.291. That document is the one which bears "1st AGREEMENT JUNE 2018".
3. He states that his grandfather told him that "I've given the agreement to Vamsi, he's happy with it and from the 1st of July that's how we'll proceed" ([7]).
4. He then sets out the detail of the sale of various flowers and the records kept ([9]-[10]). He also asserted that he saw no South American flowers sold by the defendant until June 2019. He told his grandfather. Since that time he has observed the defendant's stands displaying Columbian and Ecuadorian flowers for sale ([12]14]).
5. His second affidavit is responsive to Mr Uppalapti's 27 March 2020 affidavit.
6. In cross examination, Mr Dominello agreed that prior to working for Belflora International he was a personal trainer (T60.30). He has no tertiary qualifications (T60.40). When he joined Belfora International, he was unaware how many shareholders there were but he did know the details by the end of 2017 or the start of 2018 (T61.1-12).
7. He knew that his grandfather and Mr Uppalapti were both directors but his grandfather took the lead in the company (T61.17). He did not know Belcastro Holdings and Uppalapti Holdings had equal shares but made that assumption (T62.19). He had no knowledge of Belflora Australia and the fact that both his grandfather and Mr Uppalapti set up the business in 2003 (T62.40). He had some awareness but thought his grandfather was taking the lead (T62.45-47).
8. He said that any friction between himself and any employee was "their doing" (T63.6-7). He denied having distrust for Mr Uppalapti (T63.32). He accepted that his grandfather and Mr Uppalapti had respect for each other but he did not resent the relationship (T64.2). He denied telling his grandfather what he thought was wrong with the business (T64.12).
9. He agreed that other flower sellers were selling both South American and Kenyan roses in the flower markets (T65.14).
10. He agreed that he and his grandfather and his brother Jude (who has a law degree) sat down (T65.34; T65.37). There was a handwritten note and there had been a discussion between his grandfather and Mr Uppalapti at the markets which he overheard (T65.50-T66.1).
11. He accepted that his grandfather had a note in his hand which he just typed up (T66.28). The note was "from what I recall" identical to the document he typed up (T67.3-11). He typed it because his grandfather's writing was illegible (T67.34-35). As far as he can recall, he typed the document and both his grandfather and his brother Jude were present (T68.25; T68.28; T68.34; T68.37; T68.40). As to the document at CB.291, he said "That's what my grandfather wanted him to agree to…" (T69.1).
12. He was present when his grandfather and Mr Uppalapti talked about the matters at CB.291. They did come to an agreement because it was "practised by all parties" (T71.42). He denied lying to the court about the matter (T72.9; T72.12). He asserted that his grandfather had given him a document which he had to write out (T73.11). He also said that his grandfather created the document in the presence of himself and his brother Jude (T74.41-44). After that had occurred, he took the document and typed it up (T.75.40).
13. He agreed that South American roses are usually packed in stems of ten or twenty five in cardboard (T77.5-11; T77.15; T77.50). He also agreed that Kenyan roses are sold in stems of ten with plastic wrapping (T77.3; T77.46). He denied that the photograph at CB.1005, together with an email of July 2018 at CB.1003-4, was support for the proposition that the particular roses looked like Kenyan roses, and that they wanted to sell them as Kenyan roses (T78.36). He was unable to explain the document at CB.984. He can recall typing the document at CB.984 but he cannot recall typing CB.291 on the same day (T81.24). The agreement his grandfather entered is at CB.984 (T83.5). But the document at CB.984 was typed prior to the document at CB.291 (T83.46). He denied he had fabricated his evidence (T84.30).
14. He asserted he told certain suppliers he could not take Kenyan roses (T89.30-33; T89.42-44; T90.27). He was then asked to explain his access to certain information prior to swearing his affidavit of 16 July (TT94-97).

Mr Uppalapti

1. The principal witness for the defendant filed only one affidavit of 27 March 2020. He was born in India in 1977 and is the sole director and secretary of the defendant ([1]-[3]).
2. He has been involved in the flower business since 2002. He asserts that the Sydney Flower Market accounts for approximately 75% of the wholesale cut flower trade in NSW. There are about 100 or more growers and wholesalers operating in the market, of whom 35 are wholesalers and the remainder are growers. He explained that, generally, a wholesaler buys flowers from the importer and sells at the market. An importer buys from the grower directly and sells to the wholesalers. Importers do not operate stands inside the market. Almost all wholesale operators sell roses imported from South America (predominately, Columbia and Ecuador) and Kenya. There are about two or three other operators who import directly from growers in Kenya and South America and wholesale into the Sydney markets in addition to the plaintiff and Vinflora ([11]-[15]).
3. Mr Uppalapti's wife's family operate large flower farms in India and they export to numerous countries around the world ([21]). He began to market these flowers from India into Australia in about 2002 ([22]-[23]).
4. He met Mr Belcastro in 2002 and asked whether he would be interested in selling roses from India. Eventually, he started working for Mr Belcastro who indicated he wanted to wind down. Mr Uppalapti offered to take over the business and run it for him ([30]-[36]).
5. In 2002, Mr Belcastro retired and handed over his then business to his son-in-law a Mr Nati ([38]). He and Mr Belcastro started a new business, Belflora Australia. Initially there was to be a 60/40 split in favour of Mr Uppalapti but they later settled on a 50/50 split. Mr Uppalapti said as he had a lot of respect for Mr Belcastro he was content with 50/50 ([41]-[47]).
6. In 2003, Belfora had only one stand, stand 33. It later acquired stand 34 and then in due course stands 81, 82, 83 and 84. Mr Uppalapti asserts he ran the operational activities and business management of Belfora ([54]). In due course he saw an opportunity to expand the African flower market and he invested in operations in Kenya and started importing flowers from Singapore, Malaysia, Thailand, Ecuador and Columbia ([61]-[65]).
7. In September 2012, Belflora purchased the additional stands referred to above at [115]. This gave the business more space for product and a cool room ([75]). Turnover increased as well. In 2013, Mr Ehiya expressed an interest in investing in Belflora. In July 2013, Belflora International was incorporated. Messrs Belcastro and Uppalapti through their corporates held 33 shares each. Mr Ehiya held 30 shares and the Lee brothers held three shares and the remaining share was held by all five shareholders ([79]-[81]). In addition, Belflora International purchased a warehouse and stands 52, 53, 65, 81A and 82A at the flower market ([82]).
8. After Mr Belcastro's grandson came to work with Belflora International in late "2016", the relationship between Mr Belcastro and Mr Uppalapti suffered. As a result, Mr Belcastro began questioning what Mr Uppalapti was doing and was growing increasingly hostile towards Mr Uppalapti ([87]-[92]).
9. Mr Uppalapti and Mr Belcastro had a conversation on Valentine's Day 2018 about the business and as a result Mr Uppalapti went to Mr Belcastro's home in Dural in February 2018. Both men agreed that the trust had gone. The two over the next few months decided that the business would be split and the fixed assets of Belflora International would be divided equally, including the flower stands and the warehouse. Mr Belcastro would keep the name Belfora, phone number, current trading spots and the goodwill. Belflora International would cease trading on 30 June 2018 and Mr Uppalapti would start a new business. Mr Belcastro would take stands 81, 82, 83, 65 and 81A and Mr Uppalapti's new company would take stands 49, 50,51 and 52 ([96]-[103]).
10. Mr Uppalapti asserts that on 1 June 2018, Mr Belcastro showed Mr Uppalapti what he calls a proposal which he took a copy of on his phone. Further discussion ensued and Mr Uppalapti asserts that Mr Belcastro proposed that they separate the product for the first year. They discussed roses, orchids, and chrysanthemums ([108]-[113]). Mr Uppalapti states that he did not want an agreement and that he did not respond to the proposal. He stated, however, that the defendant, Vinflora, did start trading as and from 1 July 2018 ([116]). On the same day, Mr Belcastro started trading as Belflora Pty Ltd ([117]-[118]). In October, Mr Uppalapti said he noticed Mr Belcastro selling Kenyan roses from his stands. Mr Uppalapti said he spoke to Mr Belcastro and told him he had no problem with that situation ([120]). He also stated that he saw Mr Belcastro wholesaling chrysanthemums and he did not raise any objections ([122]).
11. In June 2019, Mr Belcastro did assert there was an agreement which Mr Uppalalpti denied ([126]-[127]).
12. Mr Uppalapti secured additional warehouse space in 2019 but on 19 July he received a letter from Russo and Partners seeking to resolve the dispute ([129], [134]). In September 2019, Mr Belcastro approached Mr Uppalapti with a new proposal but Mr Uppalapti was not interested in it ([143]-[145]).
13. Mr Uppalapti then sets out the difficulties he would have in conducting business if the restraints insisted upon are enforced. For him to never be able to import South American roses would place him at a significant competitive disadvantage. Further, there has never been sharing of profits between the two entities ([152]-[153]).
14. In cross examination, Mr Uppalapti stated that Mr Ehiya became a supplier from about 2004 (T107.11). In 2006, Belflora invested in Mr Ehiya's expanding operations in Kenya. There were surplus funds in Belflora (T108.2). In due course, Mr Ehiya invested in Belflora International (T108.10-18).
15. The relationship between himself and Mr Belcastro "started going down" after Mr Dominello came into the business and he resented the intrusion in his aspects of the company's affairs (T109.30). He did not know the reason why Mr Belcastro was growing hostile towards him. He visited Mr Belcastro at home because he was concerned not to raise the issues about the disagreements he had been having at the market. It was decided they would split the stands: "I raised the proposal saying we spit the stands up and work separately (T112.37). He suggested that Mr Uppalapti take four stands and Mr Belcastro would take the rest. A number of discussions occurred over the next few months. And the split was to occur from 1 July 2018 (T113.23).
16. He agreed that he and Mr Belcastro discussed product lines but not exclusive business arrangements. He also agreed that they discussed selling South American and Kenyan flowers. He denied that Mr Belcastro would exclusively acquire Kenyan flowers from him (T115.48). Mr Belcastro did buy Kenyan flowers from him but not exclusively (T116.9-10). Mr Uppalapti did agree that it was agreed that the "basic deal" was that the assets of Belflora International would be divided up equally, including stands and warehouse (T116.28). He agreed that he told Mr Ehiya about the split (T118.1).
17. He was shown the document at CB.984 and he agreed that he saw it for the first time on 1 June 2018 because he took a picture on his iPhone as he did not at the time have time to look at it (T119.34-35). He still has it on his iPhone (T119.46; T119.49). He first saw the document at CB.291 when he received the letter from Russo and Partners. He agrees that he read the document at CB.984 before 1 July 2018 (T120.47). He continued to deny that he was going to exclude Mr Belcastro from importing Kenyan flowers. Again, he denied speaking about exclusivity (T122.14). They have been since 1 July 2018 sharing the truck (T123.43). The warehouse is shared "50%" each (T124.20). They also shared an employee named Anil for about four months (T125.25-31). He agreed that he and Mr Belcastro have continued to share the produce from Belflora natives (T126.33).
18. He said that after he had the document on his iPhone he did not speak to Mr Belcastro - he denied that he told Mr Belcastro he was happy with the agreement (T131.7). He agreed that he thought Mr Belcastro gave him the document "to understand the line of … understanding that we were going to have in future" (T131.26-27). He also said, "That's what we wanted to start with… And see how it goes" (T131.33).
19. It was also important "to start with" that he and Mr Belcastro not have identical stands (T132.1). He also agreed that for at least the next twelve months his company sold African flowers (T132.16). He did not in the beginning import Columbian flowers (T132.26). He did not display Columbian flowers until about June 2019 (T132.34). He agreed that Mr Belcastro confronted him about having an agreement and asserted that he should not be selling South American flowers. He said he told Mr Belcastro that they did not have an agreement (T133.39). He explained that for the first twelve months "we had an understanding that we would put a separate line of flowers on each stand so customers can go to both stands" (T134.3-4). He did not trust Mr Belcastro; that is why he did not respond, but there was an understanding that there would be one line different on his stand (T136.35-36). He agreed that the decision not to import flowers from South America "was related to [his] understanding … with Mr Belcastro" (T137.1-4). He wanted to give the market the impression he was not selling South American flowers (T137.32).
20. The defendant relied upon a further three witnesses, only one of whom was cross examined.

Mr Kashany

1. Mr Mirza Kashany filed one affidavit dated 29 June 2020. He is the manager of a company called Good Apples which sells imported flowers to wholesalers at the Sydney Flower Markets. They do not sell directly to customers who attend the markets. He stated Good Apples sold flowers to Belflora sourced from Kenya on various dates in August 2018, in September and October 2019, and in February 2020. He attached copies of the invoices.
2. In cross examination, Mr Kashany accepted that he imported flowers from other countries but his main source was Kenya (T153.45). He asserted that in the last ten years he would only have imported flowers from Ecuador and Columbia about six times (T154.3-4). He denied he was lying in that regard (T154.12). He agreed he had advertised flowers from Kenya, Columbia and Ecuador but he imported chrysanthemums from Colombia and Ecuador (T154.48-50). He also agreed that since 1 July 2019 has received a shipment from Columbia (T155.22) but they have not been successful (T155.13-18; T155.22). He asserted that he had had five or six shipments of roses from Ethiopia (T156.32).

Mr Parmar

1. Mr Jiteshkumar Parmar filed one affidavit dated 29 June 2020. He is a director of Roses in Australia. It sources roses from Kenya, Tanzania, Malaysia and China. It sells to wholesalers at the Sydney Flower markets. He believed that a number of flowers sourced from Kenya were supplied to Belflora on dates in 2018 and 2019. He was not cross examined.

Mr Bains

1. Mr Rajpal Bains filed one affidavit dated 29 June 2020. He is the sole director and secretary of Flower Flow. It sources flowers from Kenya and imports them into Australia to be sold to wholesalers and customers at the Sydney Flower market. He believed that Flower Flow sold flowers to Belflora that were grown in and sourced from Kenya on dates in August, September and October 2019. He was not cross examined.

Consideration

1. The first question to be considered is whether the parties intended to enter legally binding relations, or as the defendants would have it, the parties simply went their own ways without any binding obligations from one to the other.
2. Part of the reasoning of the defendants' case on this point is based upon the rather unsatisfactory way in which Mr Belcastro and Mr Dominello gave their evidence. Clearly, they gave conflicting and confusing evidence as to the genesis, and hence the drafting, of at least two potential candidates for the written part of the alleged agreement. There are important differences between Mr Belcastro's recollection on the matter and that of his grandson. Which of the documents at CB.291 and CB.984 came first, and from which source, is the subject of much very persuasive argument by the defendants in their final submissions. In the end, I do not consider much turns on the rather chaotic nature of the plaintiff's witnesses. There are several reasons for this.
3. First, it is uncontroversial that the parties had reached a point where they decided to go their separate ways. To what extent Mr Dominello was the catalyst is again not in my view really to the point. The simple fact is a prosperous partnership had come to an end and it was clearly important for the relevant persons to understand what was ahead in a commercial sense.
4. However, a cursory consideration of the two documentary contenders makes it tolerably clear that whatever Mr Belcastro, or for that matter Mr Dominello, thought was the case, the document at CB.984 clearly succeeded the document at CB.291, although it is possible that both could have been created on 1 June 2018. The obvious conclusion is that the document at CB.984 has had added to it additional matters suggesting it came after the document at CB.291.
5. The fact that the document is crude and drafted in an amateurish fashion is again not to the point, nor is the fact that it is not signed. Although it may be that Mr Uppalapti was not shown any earlier version of the document, the document at CB.984 was clearly shown to him and he accepts that he took a photograph of it on his iPhone, which as at the date of the trial he had retained.
6. What is so compelling in this case in my view is what the parties in fact did after 1 June. They did in fact physically part company, literally by dividing up their stands. The company, Belfora International, was in turn deregistered. Mr Belcastro started a new company using the Belflora name and Mr Uppalapti started Vinflora.
7. Consistent with the document, they did for a time employ a person named Anil as the driver of the truck they still share, along with the warehouse and the use of native flowers from Belflora Natives.
8. In other words, their subsequent conduct, to which I will return, amply demonstrates in my view that they intended to enter legally binding relations but they did not it seems to me make explicit all of the terms of their split.
9. But as a prelude to this analysis it is important to consider the words used in the relevant document to determine what the parties using or adopting those words against the background described should reasonably be understood to mean. In other words, objectively to determine what the terms and conditions of the agreement were.
10. The language used and/or adopted by them is the starting point. The document at CB.984 says, "The reason for these agreements is so that we do not have two identical stands". If this is the overarching purpose then it will potentially affect the way in which other "terms" will be viewed. The agreement states that a number of matters are to be "shared": profits, truck, Anil (the employee), the warehouse, Belflora Natives and "farms". Rather perhaps than this being an arrangement between persons who distrusted each other, it would appear more like a pragmatic arrangement between two persons anxious, co-operatively to separate but cause the least economic damage to each other. Indeed, I am satisfied that each principal was concerned to allow the other to operate their respective businesses without directly competing with each other, hence the intention not to have each business look alike.
11. Contrary to the submission of the plaintiff, in my view Mr Belcastro did far better out of the split than Mr Uppalapti. The principal reason why this is so is because Mr Belcastro was keeping the name Belflora in relation to which he was seemingly well known. That brand, I infer from the materials, was well known both to the market and the growers. On the other hand, Mr Uppalapti had to commence business afresh with a new company with it seems no prior corporate identity in the industry. I am of course prepared to infer that many market participants would of course know or know of Mr Uppalapti but nonetheless he had, as far as the brand Vinflora goes, to start as it were from scratch.
12. The plaintiff disavows any express or implied term as to duration. Absent either of those features, whilst it is clear the parties did not seemingly advert to the issue, it is asserted that the agreement should be construed as one of indefinite duration. Here, of course there was no sale of business in the traditional sense where the purchaser as part of the price buys exclusivity or some other restraint for a time. This was a mere split, with Mr Belcastro keeping the name Belflora. Each would only "speak" with the growers of the flowers they were exclusively to deal in.
13. There was to be on an ongoing basis a good deal of shared activities. The farms identified and profits were to be shared, although there is no evidence of those matters and how the sharing occurred. But the other matters already referred to (at [143]) are even at the date of trial the subject of shared activities. That is on one view consistent with the intended long term nature of the agreement and the post contractual conduct of the parties. On the other hand, the expressly stated commercial reason or purpose for the contract goes to appearance but also competition.
14. The parties clearly did not comprehensively detail the terms of their split; rather, the language and structure of the written part appears to be a somewhat clumsy and hasty attempt to wrap up their affairs before the end of the 2018 financial year. The document at CB.984 does not it seems to me give the appearance of a document of many months gestation. The concept of separation I am satisfied might have been on the table as it were for some time prior to 1 June 2018, but not in a document in the form of that at CB.984 or its earlier incarnation at CB.291.
15. However, I am satisfied that the parties did objectively intend to make a legally binding agreement to separate. There is abundance of relevant post contractual conduct supporting the notion they made such a contract. They divided up the stands, shared the warehouse, the truck, the truck driver for a time, and Belflora Natives, and the evidence would support they more or less kept to their "exclusive" bargain. I say more or less because Mr Uppalapti did import one shipment from South America, according to Belcastro, and the evidence suggests that Mr Belcastro did import numerous shipments believed to be Kenyan flowers, according to Messrs Kashany, Bains and Parmar.
16. The overriding purpose of this agreement was to create separate businesses as and from 1 July 2018 and to do so as cost effectively as possible. However, not only did the parties not expressly advert to the duration of the agreement, they did not address the mechanism of its termination. On its face it is an agreement of indefinite duration, arguably terminable on reasonable notice. However, this latter consideration does not arise in this case as it was not pleaded nor otherwise relied upon as having occurred.
17. The defendant submits that if an agreement did in fact come into existence there has been a repudiation and/or and abandonment of it. For the reasons that follow I do not consider either has occurred.
18. In short, I am not satisfied that the plaintiff has clearly indicated by words or conduct that it no longer wished to be bound by the agreement. It denied importing roses from Kenya, although there is some evidence it did. Asking suppliers to pack roses, not from Kenya, to look as if they were from Kenya may usurp the spirit of the contract but not its letter. In any event, I am not satisfied that is why that was done. Repudiation is not to be lightly inferred and it is a question of fact. In addition, there must be clear acceptance of the repudiation. Here, there is anything but. The parties continue to share a warehouse, a truck and a source of native flowers pursuant to the agreement they made. There seems to have been breaches on both sides. When Mr Belcastro challenged Mr Uppalapti about importing roses from South America he stopped for a time at least. I do not consider there is the clear and cogent evidence required to support repudiation. Indeed, the commencement of the proceedings provides support for the plaintiff seeking to affirm the agreement.
19. Likewise, I am not satisfied based on the evidence I have already referred to that there has been an abandonment of the agreement as opposed to a breach or breaches.
20. The last question that arises is whether the agreement is in restraint of trade. The mere fact the parties have made an agreement does not of itself create any immunity if it is in restraint of trade. Duration alone will not necessarily point towards such a conclusion either.
21. The plaintiff asserts that the agreement prevents the defendants from speaking to South American flower growers and exporters, from displaying South American flowers, and from selling South American flowers other than those supplied by the plaintiff. In addition, the agreement is asserted to prevent the defendant doing so from stands 49, 50, 51 and 52. It is further asserted that the term is binding "so long as the parties operated side by side" (Statement of Claim [41(d)]). It is not precisely clear in the pleading what the phrase "operated side by side" is meant to convey but the description is clearly not factually accurate. This emerges quite plainly from an inspection of the floor plan of the markets at CB.83.
22. It is further asserted that, apart from protecting and facilitating the new businesses of the parties, the restraints are a source of goodwill attaching to the respective businesses. In its pleadings, the plaintiff asserts the covenants were agreed to protect Mr Belcastro's contacts and good standing with South American flower growers and exporters and in recognition that Mr Uppalapti was in a better position to exploit and develop the Kenyan flower market (Statement of Claim [53(c)-(d)]). However, in its closing submissions the plaintiff submits the goodwill was built up by Belfora International, that is, Mr Belcastro and Mr Uppalapti together, and was the property of Belfora International. Mr Belcastro also gave evidence that he would have wanted to protect the goodwill he has built up with other growers, not just South American ones (see T26). However, there is at most only a modest amount of evidence regarding Mr Belcastro's (or Belfora International's) dealings with South American and other flower growers.
23. The restraint doctrine can apply obviously to any form of contractual arrangement (provided it concerns "trade") but it does not apply uniformly (see, e.g., Tank Lining Corp v Dunlop Industries Ltd (1982) 40 OR (2d) 219; 140 DLR (3d) 659 at [15], citing Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd [1968] AC 269 at 337 per Lord Wilberforce ("the classification must remain fluid and the categories can never be closed"); see also Nordenfelt v The Maxim Nordenfelt Guns and Ammunition Company Ltd [1894] AC 535 at 566 per Lord Macnaughten). There are clear public policy considerations that arise in each particular case as to how far, if at all, the court will interfere with the freedom to contract. Reasonableness at the time of the formation of the contract is the touchstone.
24. There is no doubt the restraint was intended to create, aspirationally, a basis for both former principals to launch each of their new business with what may have been seen as a commercial advantage of exclusive dealing. But in the markets where, according to the map of the stands, there are numerous vendors, the main effect of the clause relating to duration is that it would place both contracting parties indefinitely at a competitive disadvantage as against each other but also other participants in the market. Importantly, the greater impact would be placed on the defendants because of their need as it were to re-brand. I find the defendants' submission as summarised at [30] persuasive. Of particular note is the fact that there is no obligation on the plaintiff to keep the defendants fully supplied with South American flowers.
25. Whilst Mr Belcastro had a legitimate interest in protecting his or Belflora International's goodwill, he was not being paid any additional consideration for it nor was he paying anything. The so-called protection to enure indefinitely is by reason of its entirely unlimited operation in the circumstances of the flower market anti-competitive and against the interests of the parties, especially the defendants', and in my view, the public interest. It unreasonably restricts mere competition between the parties, and more importantly, the other vendors. This is a case where Mr Belcastro was already receiving a significant commercial advantage by maintaining the name and reputation of his brand, which he was at pains to explain in his evidence. The other difficulty is that the South American growers are unnamed in any schedule. None were the subject of specific agreement. There is no way of knowing whether in fact Mr Belcastro has dealt with any, or if so, for how long, although there is some evidence of his association with some South American growers. Nor is it clear that the restraint against the defendants only applied to growers Mr Belcastro had been (or, more relevantly, Belflora International) had been dealing with as at June 2018. Nor is there any explanation as far as I can tell why the particular farms specified in the document at CB.984 have been nominated but it appears from other evidence that they would seem to be suppliers of chrysanthemums and orchids (Belcastro affidavit 9 June 2020 [65]; Uppalapti affidavit 27 March 2020 [112]).
26. In my view, an indefinite restraint is, and was at the date the parties made their agreement, wholly unreasonable to protect whatever Mr Belcastro's goodwill is, especially where, although consideration is provided, no money as such has or was intended to change hands. As I have already noted, this is not a case concerning the sale of a business to a purchaser who has paid for a restraint against the vendor in order to protect the business's goodwill (see, e.g., Nordenfelt v The Maxim Nordenfelt Guns and Ammunition Company Ltd [1894] AC 535). Restraint limited to particular stands only makes the identification of a legitimate purpose even more elusive. As I have already said, the real, as well as the apparent effect of the agreement of indefinite duration is to stifle competition. So much is clear from the stated purpose of the agreement, namely to give the appearance of separate businesses, not so obviously competing one with the other.
27. As a result of my findings, the question of injunctive relief does not arise. However, even if I am wrong about the restraint question, I would have great difficulty in granting an injunction restraining the defendants from competing with the plaintiff in respect of the sale and display of Kenyan flowers on a permanent basis, partly due to the inability on the part of the Court, effectively to supervise the arrangements in futuro (see Doherty v Allman (1878) 3 App Cas 709 at 719-720 (Lord Cairns) and the criticism of Lord Cairns' decision in Dalgety Wine Estates Pty Ltd v Rizzon (1979) 141 CLR 552 at 573-574 (Mason J) (on the exercise of discretion); J C Williamson Ltd v Lukey (1931) 45 CLR 282 at 299-300 (Dixon J) (on the question of court supervision)). Therefore, I would not have exercised my discretion in granting the injunction sought by the plaintiff, even though the quantification of damages (if any) may have been a difficult exercise in this case. I was not asked to consider granting an injunction for a shorter period.
28. In conclusion, I am satisfied the parties intended objectively to enter legally binding arrangements. I am not satisfied there has been any repudiation or abandonment of their contract. However, I am satisfied that the restraint was unreasonable at the time they entered it and for the reasons stated is an unenforceable restraint of trade. It is plainly anti-competitive and the plaintiff has not established that it is reasonable to protect any of its own, let alone the defendants', legitimate interests. There may have been breaches on both sides, which the evidence neither permits me to determine with certainty or I suspect for anyone to quantify without further expenditure. However, in all the circumstances, it follows that the plaintiff has failed in its case and I would refuse any injunctive relief.
29. I invite the parties to bring in short minutes reflecting my reasons and would hear the parties further on the question of costs DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 September 2020