Judgment - EX TEMPORE
Revised from transcript and annotated; issued 25 October 2022
This is an application for an extension of the stay of orders I made on 10 October, following dismissal of the plaintiff's claim in these proceedings, for the discharge of earlier interlocutory orders which had been made in advance of the trial. I stayed the effect of the orders I made discharging those interlocutory orders until 6.00 pm today. [1]
The plaintiff now seeks a further stay until determination of an application which it has made to the Court of Appeal for an extension of the stay until the determination of the appeal [2] or for the grant of an interlocutory injunction pending the hearing of that appeal in similar terms.
The plaintiff's proposed notice of appeal is before me on this application. It was filed together with the application last Friday 21 October. The proposed appeal would challenge my conclusions in their entirety. The application for a stay, or for the continuation of the stay, is based on alleged prejudice which the plaintiff would suffer if the injunction is discharged at this point or the plaintiff's claim is ultimately upheld by the Court of Appeal.
The viability of the appeal has not been disputed. The prejudice which the plaintiff would suffer arises in the following way. The defendants are seeking to launch a business which will compete with the plaintiff's business. The plaintiff's business represents an amalgam of a business purchased by the plaintiff from the defendants in 2018 and an existing independent business which was previously operated by the plaintiff. The plaintiff has the benefit of restraint covenants given by the defendants at the time of the sale and which relevantly prevents the defendants from operating a business which is "competitive" with the business acquired by the plaintiff.
I found that the business being launched by the defendants was not relevantly "competitive with" the business sold, but those findings are challenged in the appeal. The existing injunction prevents the defendants from continuing to develop their business. If it is discharged, and if the plaintiff is ultimately successful, the plaintiff would have a claim in damages for loss suffered from the defendants' activities in the meantime, but its contention is that it would be difficult, if not impossible, to assess those damages.
There is, of course, a countervailing factor. For as long as the injunction lasts, the defendants will be prevented from developing the business in the manner in which they intend, and I have now found they are entitled, to do. Although no one questions the plaintiff's ability to meet an undertaking as to damages, it may be difficult to assess the damages which the defendants will suffer as a result of a delay in being able to develop the business.
The injunction in question was granted by Slattery J on 4 May following a judgment which his Honour delivered on 2 May: DXC Eclipse Pty Limited v Wildsmith [2022] NSWSC 512. In his judgment his Honour considered the balance of convenience. He considered that the balance favoured the plaintiff, in the sense that the difficulty the plaintiff would have in assessing damages in the absence of an injunction outweighed the difficulty the defendants would have in assessing damages if the injunction were granted.
At the time the proceedings were before Slattery J, his Honour expected that the hearing could take place by the end of June and that a judgment might be expected by August or early September. As events happened, the hearing did not take place until August but it has not been suggested that the delay was the responsibility of the defendants.
In the course of the hearing before me, counsel for the plaintiff suggested that the present application was one in which a stay was necessary to preserve the status quo pending the determination of the appeal. In some cases, a stay is granted on the ground that, without it, the appeal will be nugatory. The present appeal is not of that character. If I refuse this stay, I will not be depriving the plaintiff of its claim for damages against the defendants if it ultimately succeeds. The issue is, as I have stated, simply a matter of balance of convenience.
It seems to me, however, that, as a result of my decision in favour of the defendants, the balance of convenience must be struck differently. The decision is presumptively correct. In my view the prejudice to the defendants from being prevented from carrying out what I have found to be a lawful activity must carry greater weight than it did at the interlocutory hearing.
Another relevant factor in the application arises out of the circumstances in which it has come forward, and bears on the Court's discretion. As I stated in my judgment on 10 October, I granted a two week stay so as to allow the plaintiff an opportunity to obtain an extension of the stay from the Court of Appeal. This was because at the hearing on the previous Friday, 7 October, I had been advised that the plaintiff was contemplating an appeal.
I interpolate that my substantive judgment (DXC Eclipse Pty Limited v Wildsmith (No 2) [2002] NSWSC 1330) was delivered on 30 September. As a result, on 10 October, when I made final orders, the plaintiff had already had a week to consider the substance of my reasoning. [3] Two weeks would have been an adequate time to file an application for a stay and to have that application heard. Counsel for the plaintiff on this application candidly acknowledged that the plaintiff was "a week behind".
A solicitor's affidavit was filed in support of this application but all it revealed was that the plaintiff's solicitors had been seeking instructions from the plaintiff about an appeal from 10 October onwards. [4] The affidavit contained no explanation for why the application for a stay was not filed until last Friday, which was the business day before it was due to expire.
The plaintiff's application in the Court of Appeal has been given next Monday, 31 October, as its return date. But counsel for the defendants indicated that he will not be available for a hearing on that date. Recognising the possibility that the application will not be decided on 31 October, counsel for the plaintiff asks that I grant a stay until it is determined.
It is unfortunate to think that, whatever the result of my decision today, there will need to be further consideration of the question by a Judge of Appeal. That is a particular concern when the orders which I made on 10 October were designed to avoid that very thing.
I do not, of course, know how long the appeal will take and what available dates there would be for hearing it. I have been conscious in dealing with this application and the fact that the hearing date or dates which might be allocated by the Court of Appeal could be a relevant factor in deciding whether a stay should be granted pending the determination of the appeal.
It is tempting simply to grant the stay for a short period of time rather than to leave the matter in the lap of the Court of Appeal. But, on reflection, I do not think that would be the proper course. This application has been vigorously opposed by the defendants and, in my view, their position is supported both by the current balance of convenience following delivery of my judgment as well as discretionary considerations arising out of the delay in bringing an application for a stay before the Court of Appeal. Whatever may ultimately happen in the Court of Appeal, I consider that I have no alternative but to refuse this application.
The orders of the Court are:
1. Refuse the plaintiff's application for an extension of the stay granted by me on 10 October 2022.
2. Order that the plaintiff pay the defendants' costs of the application.
[2]
Endnotes
DXC Eclipse Pty Limited v Wildsmith (No 3) [2022] NSWSC 1361.
Strictly speaking, the plaintiff has filed an application for leave to appeal, but no doubt the plaintiff will be seeking a concurrent hearing of the leave application and the proposed appeal itself.
I had, however, invited the parties to identify any errors in the judgment and any points which I had missed. This invitation was taken up by the plaintiff and resulted in my delivering a revised and annotated version of my substantive judgment on 10 October.
Even though, as counsel for the defendants pointed out, the solicitors had had my substantive judgment in the preceding week.
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Decision last updated: 25 October 2022