Imac Security Services Pty Ltd v Tyco Australia Pty Ltd [2002] VSC 592

5. It appears that each of the plaintiffs invested significant funds to establish the infrastructure for the businesses which would enable them to meet their obligations under the franchise agreements. Although the evidence relating to the financial circumstances of each plaintiff is imprecise, it is evident that the plaintiffs, or some of their directors, have incurred significant liabilities in establishing their businesses to enable the plaintiffs to discharge their obligations under the franchise agreements with ADT. It also appears that those agreements were performed adequately until the middle of 2002.

8. By an asset acquisition agreement dated 24 September 2002G3 ADT sold its plant, equipment, the benefit of its customer contracts, the patrol services, and the benefit of the plant leases to the thirdnamed defendant, Group 4. In addition to the customer contracts with which the plaintiffs were concerned, the sale by ADT to Group 4 included its national manned service business which represented the manpower services of ADT throughout Australia. The franchise agreements between the plaintiffs and ADT permitted ADT to assign its interests under those agreements.

11. It was a condition precedent to the asset acquisition agreement that Group 4 would make an unconditional offer to each of the plaintiffs in the terms of the licence agreement annexed to the asset acquisition agreement. Paragraph 8.5 of the asset acquisition agreement provides:

"Franchises (a) The vendor will use its reasonable endeavours (which for the avoidance of doubt will not require the vendor to pay any money or breach any obligation on it) to procure the franchisees to agree to the termination of the franchises prior to completion. (b) If the vendor is unable to procure the franchisees to agree to the termination of the franchises prior to completion, then in relation to any franchise contract which requires the provision of patrol response services, escort services, patrol services, static guard services and temporary patrol services in any of the territories covered by the franchise (the franchise services) the purchaser will following completion:

(i) subcontract the vendor to provide the franchise services, it being the intention of the parties that the vendor will further subcontract the relevant franchisee to perform those franchise services;

(ii) pay to the vendor fees payable under that franchise contract in connection with the franchise services in accordance with 8.5(c);

(iii) not amend, vary, terminate, release, waive, extend or agree with or encourage any other person to amend, vary, terminate, release, waive or extend the contract without the written consent of the vendor; and

(iv) not engage in any conduct in relation to that contract which will cause the vendor to be in breach of any franchise or any law relevant to a franchise or which will prevent the vendor from complying with its obligations under the franchises."

It can be seen from these terms that the first and thirdnamed defendants were careful to ensure that their agreement concerning the franchises could not be construed as an inducement to interfere with, or an interference with, the contractual arrangements between the plaintiffs and ADT.

18. Both Group 4 and the secondnamed defendant, Zip Response Group Pty Ltd ("Zip"), are subsidiaries of Tempo Services Ltd, and provide security services in Victoria and other states in Australia. It was intended that upon the purchase of ADT's security service businesses by Group 4, Zip would manage that business.

21. At a meeting on 18 July 2002, a representative of ADT met with the representatives of the plaintiffs. According to the plaintiffs they were informed that ADT had sold its business to Zip whilst the firstnamed defendant contends that at that meeting the plaintiffs were only informed of ADT's intention to sell its security manned services. Nothing ultimately turns on this conflict of evidence. The plaintiffs were invited to meet with representatives of Zip to discuss the basis upon which they could work for Zip after the proposed sale of the business by ADT. The plaintiffs were provided with a copy of Zip's standard licensee agreement at some time after the meeting on 18 July 2002, but there appears to be some disagreement between the defendants as to precisely when and how such draft agreements were provided. Although the evidence is silent on the matter, I infer that ADT or Zip provided these licensee agreements in compliance with Group 4's obligation to make an unconditional offer in the form of the annexed licensee agreement to the asset acquisition agreement.

24. On 16 August 2002, ADT received a letter of demand sent by the plaintiffs' solicitors threatening to commence proceedings seeking an injunction to prevent the termination of the franchise agreements and alleging various breaches of those contracts. The plaintiffs, not unreasonably, had concluded from the preceding events that it was ADT's intention to terminate the franchise agreements. In that letter the plaintiffs sought an undertaking from ADT that, amongst other things, it would not proceed with the intended termination of the franchise agreements. On 23 August 2002, ADT's solicitors responded to the plaintiffs' solicitors stating in unequivocal terms that it was not ADT's intention to terminate the franchise agreements without the plaintiffs' consent. They noted, however, that the plaintiffs had indicated a willingness to consider a transfer of the franchise business to Zip, and suggested that it was premature to threaten the legal proceedings when Zip and the plaintiffs had indicated their willingness to continue to participate in good faith commercial negotiations. It appears that there were further communications and meetings between the parties throughout September 2002.

27. Following a meeting between the parties on 12 September 2002 a list of the plaintiffs' concerns regarding Zip's proposed licensee agreement was provided to the solicitors for ADT. Discussions took place between ADT and Zip for the purpose of seeking Zip's agreement to the amendment of the proposed licensee agreement to meet the plaintiffs' concerns. Zip agreed to some amendments to the proposed licensee agreement.

30. On 26 September 2002 ADT and Group 4 executed the asset acquisition agreement. The agreement provided for the sale and assignment to Group 4 of all customer contracts. Thus, on completion of the asset acquisition agreement, which it appears was in early October 2002, ADT had transferred to Group 4 all rights that it had to provide benefits to the plaintiffs under the franchise agreements. The consequence of the completion of the asset acquisition agreement is described in the affidavit of Kerin Forstmanis of 29 November 2002 filed on behalf of ADT in these proceedings. At paragraph 28 thereof Ms Forstmanis says:

"Group 4 then subcontracted Tyco for a short time to provide services that would then be available to the franchisees so as to allow time for Tyco's franchise agreements to be terminated. Following 29 November 2002 Tyco cannot provide benefits to the franchisees under the franchise agreements. Zip will have alternative service providers ready to service clients after 29 November 2002."

34. On 30 September 2002, the plaintiffs received advice from what they described in the affidavit of Ian McNamara dated 27 November 2002 as its "customers" that ADT had transferred its business to Group 4. As I have already observed, the customer contracts offering security services by ADT are in fact between ADT and its clients. The plaintiffs have no contractual relationship with them, nor do the plaintiffs have any rights under the franchise agreements to withhold consent to the termination or assignment of client service contracts. The plaintiffs are entitled under the franchise agreements to earn bonuses from any new customers which, through their promotion of the business, enter into agreements with ADT. The plaintiffs however are not parties to these contracts made between ADT and the new clients. Furthermore, the franchise agreements provide that all goodwill generated by the business at all times belongs to ADT, and that it may assign its rights and obligations under the franchise agreement without the consent of the plaintiffs.

37. On 30 September 2002, ADT wrote to each of the plaintiffs advising them of the sale of the business, notifying them of Zip's offer to appoint them as licensees in the same geographic area on no less favourable terms and offering an ex-gratia payment in recognition of the plaintiffs' residual concerns regarding the differences between each of the existing franchise agreements and the licensee arrangements proposed by Zip. The letter significantly also gave notice that ADT intended to terminate each of its franchise agreements with the plaintiffs at 12 midnight on 29 November 2002. This notice gave effect to the agreement between the defendants that apparently existed at the time of the completion of the asset acquisition agreement, and as described by Ms Forstmanis in her affidavit at paragraph 28, that Group 4 would subcontract to ADT for a short period of time until ADT terminated its franchise agreements with the plaintiffs. This arrangement between the defendants was both inconsistent with clause 8.5 of the asset acquisition agreement and was also inconsistent with the repeated assurances given to the plaintiffs by the solicitors for ADT that it was not its intention to terminate the franchise agreements without the plaintiffs' consent.

40. During the course of submissions I drew the paucity of material explaining the change in the position of the defendants concerning the termination of the plaintiffs' franchise agreements to the attention of counsel for the defendants. Despite the form of paragraph 8.5 of the asset acquisition agreement that the negotiations or agreements between the defendants not cause ADT to be in breach of its franchise agreements with plaintiffs, the notice to terminate provided by ADT on 30 September 2002, and the account provided in paragraph 8 of Ms Forstmanis' affidavit, supports the inference that by the date of the execution of the asset acquisition agreement the defendants were intent upon a course which would result in ADT terminating its franchise agreements with the plaintiffs on 29 November 2002. I observe that this view of the facts appears inconsistent with the facts deposed to in the affidavit filed on behalf of the second and thirdnamed defendants by Ronald Norman Hunt dated 4 September 2002. Mr Hunt deposes that it was not until mid-October 2002 that it came to his attention that when ADT had sent the draft licensee agreements to the plaintiffs it had advised the plaintiffs that Zip's offer would remain open for acceptance until 29 November 2002, and that ADT would terminate its franchise agreements with the plaintiffs at that time. Other evidence shows that the plaintiffs had been provided with Zip's draft licensing agreements in late July or early August, but there was no suggestion at that time of the plaintiffs' franchise agreements being terminated by ADT. The effect of the letter of 30 September 2002, as confirmed by the affidavit filed on behalf of ADT, was that Zip was subcontracting its work for ADT, and hence to the plaintiffs, for only a short time until the termination of the franchise agreements with the plaintiffs. It is not my function in these proceedings to resolve such conflicts in the evidence, but these facts have a direct bearing upon whether the plaintiffs can establish that there is a serious issue to be tried between the plaintiffs and the second and thirdnamed defendants.

43. On 8 October 2002, the plaintiffs were notified by letter that the sale of the business to Group 4 had been completed, that Zip had taken over management of the business, and that alarm response services would be referred to the plaintiffs by Zip. Thereafter the plaintiffs became aware that not all alarm response calls that were being received at the call centre were being referred to the plaintiffs as required by the franchise agreements.

46. It is unnecessary to refer in detail to the further discussions which took place between the parties between mid-October and mid-November 2002. During this period the plaintiffs rejected Zip's offer of a new licensee agreement and advised the defendants again that it would seek to obtain an injunction to prevent ADT or Zip from servicing the customer base that it said existed under the franchise agreements.

49. On or about 15 November 2002, Zip entered into licensing agreements with Knights Security to provide security services to part of the geographical area that had been serviced by the plaintiffs. On 22 November 2002, Zip appointed Statelink Security as a licensee to provide security services to the balance of the geographical area covered by the plaintiffs. In each case the licensees were appointed with effect from midnight on 29 November 2002. These arrangements were made to ensure that Zip would be in a position to service each of the geographical zones serviced by the plaintiffs following ADT's termination of the plaintiffs' franchise agreement on 29 November 2002.

52. Negotiations between the parties continued during November 2002 and, although much of the discussion was without prejudice, evidence has been placed before me which has not been the subject of objection, that the plaintiffs each sought advice from their accountants as to the amount of loss they were likely to suffer in the event that the franchise agreements were terminated. It was not until 8 November 2002 that the solicitors for the plaintiffs were able to provide ADT with a detailed letter seeking compensation in accordance with the plaintiffs' accountant's reports. It appears that further without prejudice discussions thereafter ensued. In a late affidavit filed on behalf of the plaintiffs, the plaintiffs solicitor, Mr James Keogh, deposed that it was not until after 19 November 2002 that it became apparent to the plaintiffs and their legal representatives that no compromise was likely to be reached, and that ADT was intent on terminating the agreements without the consent of the plaintiffs. It was not until 29 November 2002 that Mr Keogh wrote to the solicitors for ADT advising that the plaintiffs regarded the franchise agreement as valid and enforceable, notwithstanding ADT's intention to terminate them at midnight that evening. He expressed the plaintiffs' willingness to continue to carry out their duties under the franchise agreements. ADT would not agree to the plaintiffs continuing to provide their services beyond 30 November 2002 and advised the plaintiffs that they should not continue to patrol any customers' premises under threat of being charged with criminal trespass. In light of that advice the plaintiffs ceased to perform any services pursuant to the franchise agreements either late on 29 November or early on 30 November 2002.

55. In early December 2002, ADT commenced proceedings in the Supreme Court seeking the return by the plaintiffs of client keys, equipment and manuals. Those proceedings were returnable before the Practice Court on 6 December 2002. Those proceedings have subsequently been discontinued, that matter having been resolved to the satisfaction of the parties. On the same day the plaintiffs filed and served a writ seeking inter alia injunctions in similar terms to the summons presently before me. The plaintiffs seek interlocutory injunctions restraining ADT from terminating the franchise agreements, an injunction restraining ADT from closing, transferring or relinquishing control of its manned security services business or its alarm response call centre until the expiration of each of the franchise agreements, an injunction restraining ADT from offering any manned security work on customer contracts to any person other than the relevant plaintiff under the franchise agreement, an injunction restraining ADT from referring security alarm calls to any person other than the relevant franchisee under the franchise agreement, an injunction restraining Zip and Group 4 from providing any manned security services to customers of the plaintiff, and an injunction restraining Zip and Group 4 from interfering in the contractual relationship between the plaintiffs and ADT.

58. The plaintiffs seek interlocutory injunctions which are by their nature provisional and do not conclusively determine rights. Generally the purpose of injunctive relief is to preserve a position which is in dispute until the determination of the dispute or further orders. But in this case the plaintiffs seek to have their rights reinstated pending trial. The court is not required to anticipate how the dispute might ultimately be determined, but to provide an opinion as to whether or not there is a serious issue that requires determination, and whether it is appropriate in all of the circumstances for such rights to be preserved or reinstated which have been interfered with or threatened.

61. I am satisfied the plaintiffs have established at the very least that they had a legal right which was threatened or interfered with, namely, their interests under the franchise agreements. They seek to restrain ADT from terminating those agreements in breach of the agreement. They seek to restrain Group 4 and Zip from interfering in the contractual relations which exist between them and ADT, and they seek other injunctive relief which would preserve their rights under the franchise agreements. Clearly the terms of the injunctions, if granted, would have to be amended because ADT has now divested itself of its capacity to provide the benefits to the plaintiffs under the franchise agreements, and has terminated them.

64. Prior to giving judgment in this matter the plaintiffs filed and served an amended statement of claim which contains a number of significant amendments, including amendments to the relief sought. The plaintiff now seeks mandatory injunctions in the following terms:

"AB. An order that the secondnamed defendant (Zip) and thirdnamed defendant (Group 4) be restrained from interfering with the contractual rights existing between the plaintiffs and ADT and for that purpose there be orders in the nature of mandatory injunctions requiring -

(a) Zip and Group 4 to allow or engage ADT to be primarily responsible for the performance of all of the manned security services which are to be performed for the customers or former customers of ADT as listed in Schedule A to the statement of claim and in Exhibit DJV2 to the affidavit of Dennis John Viney sworn 4 December 2002 'the customers' for so long as the agreements have not expired or been terminated in accordance with Part 12 of the agreements, and for that purpose to refer any alarm response calls of customers to ADT or ADT's agents or assigns only; and

(b) ADT to specifically perform the agreements and in particular to allow the plaintiffs to perform the manned security services including all the patrolled services and alarm response services referred to in clause 10.4 of the agreements for the customers for so long as the agreements have not expired or been terminated in accordance with Part 12 of the agreements."

70. The second issue about which I must be satisfied before granting the injunction is that there is a serious question to be tried. The general rule was stated by the House of Lords in American Cyanamide Company v. Ethicon Ltd [1975] UKHL 1; [1975] AC 396, and it is now a well established principle in Australia. See Australian Coarse Grain Pool Pty Ltd v. Barley Marketing Board of Queensland (1982) 57 ALJR 425; 46 ALR 398; A v. Hayden (No. 1) (1984) 59 ALJR 1; 56 ALR. 73; Castlemaine Tooheys Ltd v. State of South Australia [1986] HCA 58; (1986) 161 CLR 148; 67 ALR. 553; Murphy v. Lush [1986] HCA 37; (1986) 60 ALJR 523; 65 ALR 651; and Re Minister for Immigration; Ex-parte Fejzullahu (2000) 74 ALJR 830; [2000] HCA 23. The plaintiffs' statement of claim seeks injunctions against ADT, but the only relief sought by the plaintiffs against ADT, other than the injunctions, is a claim for damages for breach of the franchise agreements.

73. A right to obtain an interlocutory injunction is not a cause of action and it cannot stand on its own. It is dependent upon there being a pre-existing cause of action arising out of an interference with or a threat to a legal or equitable right of the plaintiff. See The Siskina [1979] AC 210 at 256 per Lord Diplock.

76. The plaintiffs, in effect, seek specific performance of their franchise agreements and as much was conceded by counsel for the plaintiffs during the course of argument. That position is now reflected by the mandatory injunctions which the plaintiffs seek in their amended statement of claim to which I have just referred. The injunctions are sought in aid of the relief that they should have specific performance. Counsel for the plaintiffs have now complied with their undertaking to file an amended statement of claim which includes a claim for specific performance, although as I have noted, it is now in the form of a mandatory injunction. The burden which rests upon an applicant seeking a mandatory interlocutory injunction is significantly more onerous.

79. The plaintiffs claim that the franchise agreements between each of the plaintiffs and ADT constitutes the whole of the agreement between them. Each of those agreements makes a specific provision for the circumstances in which the franchise agreement can be terminated by ADT. Mr Cawthorn, who appeared on behalf of ADT, did not submit that the termination by ADT was in accordance with the franchise agreement. He submitted that there was an implied term of each of the franchise agreements that they could be terminated upon reasonable notice. Such a term, he submitted, was to be implied to give business efficacy to the franchise agreements. Alternatively he relied upon section 51AD of the Trade Practices Act (1974) which made the Trade Practices (Industries Codes - Franchising) Regulations (1998) applicable. Regulation 22 provides that before a franchise agreement can be terminated reasonable notice of the proposed termination must be given. There was evidence placed before me that the code was part of the disclosure documents provided to each of the plaintiffs with the franchise agreements and thus formed part of each franchise agreement. Thus, it was submitted, that ADT was entitled to give reasonable notice of its intention to terminate the agreement. Finally it was submitted that the plaintiffs by refusing to deal with the alarm responses between 5pm on 29 November 2002 and midnight on 29 November 2002, repudiated the franchise agreements, which repudiation ADT has accepted.

82. Mr Cawthorn quite properly conceded on behalf of ADT that for the purposes of this application there was a serious issue to be tried as to whether ADT had breached the franchising agreements by terminating them as it had. Although it is unnecessary for me to resolve this issue, there appears to be force in the plaintiffs' argument that the conduct of ADT constituted a flagrant breach of each of the franchise agreements. The plaintiffs claim that Group 4 has tortiously interfered in the contractual arrangements between ADT and the plaintiffs and that they ought not be allowed to benefit from the tort.

85. With respect to Zip and Group 4, Mr Martindale, who appeared on their behalf, submitted that there was no serious issue to be tried as the facts did not establish that Group 4 or Zip had interfered with any contractual relations concerning the plaintiffs. Due to the lateness of the hour that the court sat, Mr Martindale had little time, to develop his oral argument, and relied upon a carefully reasoned written outline of submissions. The plaintiffs seek an injunction to restrain Group 4 from servicing those customers which it had wrongfully taken, they say, from the plaintiffs. Reliance was placed upon Ansett Transport Industries Pty Ltd v. Australian Federation of Air Pilots [1991] VicRp 36; [1991] 1 VR 637 at pp.640 and 659 per Brooking J. That interference with contractual relations may constitute a tort is not in dispute. It was unclear, however, precisely what contractual relations the plaintiffs alleged had been interfered with and what facts supported such allegations. In the statement of claim and its summons the plaintiffs alleged that Group 4 and Zip had made offers of employment to the employees of the plaintiffs knowing that they were employees of the plaintiffs and with the intent to cause or induce those employees to terminate their contracts of employment with the plaintiffs, and to perform the same or similar work for Zip or Group 4. In argument before me the plaintiffs did not seek to rely upon this aspect of Zip's or Group 4's conduct as supporting the cause of action pleaded. If there was evidence which supported this allegation in the statement of claim it has not been drawn to my attention. Rather the plaintiffs relied upon that part of the statement of claim and summons which pleaded that Group 4 and Zip knew, or ought reasonably to have known, that by entering into negotiations, and subsequently an agreement with ADT, for the purchase from ADT of its security business, in circumstances where neither Zip nor Group 4 intended to take an assignment of ADT's rights and obligations under its agreements with the plaintiffs, that ADT would terminate the franchise agreements in breach of those agreements. The statement of claim alleges that Zip and Group 4 conspired with ADT to cause or encourage ADT to breach the franchise agreements.

88. Mr Hardy, who appeared on behalf of the plaintiffs, wisely pressed no argument based upon the pleading of conspiracy. Such an argument would probably be unsustainable. I doubt that a corporation in law can conspire with another to cause itself to break its contract with a third party. Further, such a concept does not it seems sit comfortably with the rule in Said v. Butt [1920] 3 KB 497. That principle has been considered in cases such as O'Brien v. Dawson [1942] HCA 8; (1942) 66 CLR 18 at p.32 per Starke J.; Rutherford v. Poole [1953] VicLawRp 23; [1953] VLR 130; Tsaprazis v. Gold Crest Properties Pty Ltd [2000] NSWSC 206; (2000) 18 ACLC. 285, and recently in Idoport Pty Ltd & Anor v. National Australia Bank [2001] NSWSC 328 per Einstein J; Australian Development Corporation Pty Ltd v. White Constructions Ltd [ 2001] NSWCA 9; and LMI Australasia Pty Ltd v. Baulderstone Hornibrook Pty Ltd [2001] NSWSC 886. These cases establish that directors of companies cannot commit the tort of inducing a breach of contract when acting as directors they cause their company to commit a breach of the company's contract with a third party.

91. It was submitted on behalf of the plaintiffs that the intention of the firstnamed defendant to terminate the franchise agreements on 29 November 2002 and the intention of Zip to arrange for third parties to service the customers' contract and alarm response calls evinced the clearest intention that contractual relations between ADT and the plaintiffs would be interfered with. As I understood the plaintiffs' argument, this was a primary form of the tort exemplified by the facts in Lumley v. Gye [1853] EngR 15; (1853) 2 El & Bl 216; (1853) 22 LJQB 463; (1853) 118 ER 749 where liability arises because the defendant enters into a contract with another party knowing that the contract is inconsistent with a prior contract which that other party has entered with another. See for example BMTA v. Salvadori [1949] Ch 556.

94. Mr Martindale emphasised that the franchise agreements between ADT and the plaintiffs could not be assigned because the use of ADT's trademarks had not been acquired by Group 4. He further submitted that the plaintiffs' cause of action against Group 4 and Zip was misconceived and that the facts did not support any intention by his clients to interfere with the franchise agreements between the plaintiffs and ADT. As to ADT, Group 4 and Zip's intentions, the asset acquisition agreement by its terms supports the inference that the defendants recognised that ADT did not have a unilateral right to terminate the franchise agreements, and while the franchise agreements remained on foot, Group 4 and Zip did not have a right to enter into a service agreement with ADT in which they performed the services which the plaintiffs were entitled to perform under their franchise agreements with ADT.

97. It was submitted on behalf of Zip and Group 4 that the contractual arrangements between ADT and Group 4 and Zip were not inconsistent with the franchise agreements and involved different parties, and the principle in Lumley v. Gye (as previously cited) had no application.

100. Mr Martindale submitted, largely in reliance upon the affidavit of Mr Hunt, there was no evidence which permitted the inference that his clients were aware at the time of the execution of the asset acquisition agreement, or on 30 September 2002 when ADT notified the plaintiffs of its intention to terminate the franchise agreements, that it was the intention of ADT to terminate those agreements. He submitted that until 8 October 2002 when Mr Hunt learned of ADT's intention to terminate those agreements, Group 4 and Zip had assumed that the franchise agreements would be validly terminated by agreement or otherwise that clause 8.5B would continue to apply. For the reasons that I have already expressed I have some difficulty in accepting the factual foundations for those submissions. In my view, there is a serious issue to be tried between the plaintiffs and the second and thirdnamed defendants.

103. There is a paucity of evidence as to the circumstances which led the defendants not to persevere with the arrangements contemplated in paragraph 8.5B of the asset acquisition agreement in the event that the plaintiffs would not agree to the new agreement proposed by Zip. As I said during the course of argument, I regard it as highly unlikely that there was no discussion between the defendants as to how customer contracts would be serviced and alarms responded to in the event that ADT without the plaintiffs' agreement terminated the franchise agreements. The plaintiffs may well establish at trial that the nature of the negotiations and agreements between the defendants, contrary to what was recorded in the asset acquisition agreement, contemplated that ADT would unilaterally terminate its franchise agreements with the plaintiffs and that Zip would make arrangements for all security services to be performed by third parties, thus interfering with the contractual arrangements made between the plaintiffs and ADT.

106. The third matter which I must address is the balance of convenience. The plaintiffs must establish the refusal of an injunction would cause them to suffer greater injury than the defendants would suffer if the injunctions were granted. In considering the question of the balance of convenience I recognise that if the court was of the view that the issue to be decided demonstrated a strong plaintiffs' case, then the strength of the case on the balance of convenience may tilt in favour of granting the relief sought. See Slater Walker Superannuation Pty Ltd v. Great Boulder Gold Mines Ltd [1979] VR107; and Magna Alloys Research Pty Ltd v. Coffey [1981] VicRp 3; [1981] VR 23. While the court is unable to resolve issues of fact or difficult questions of law on this particular application, it is necessary for me to make some attempt to form a view of the strength of the plaintiffs' case, although it would not be appropriate for the court to indulge in mere speculation. The court is not however precluded from considering the strength of a party's case on an application for interlocutory relief. It should not attempt to resolve difficult issues of fact or law and to express a view as to the strength of the respective cases unless it is apparent from the affidavit evidence and the exhibits that one party's case was much stronger than the other. See for example Waikato (Proprietary) Ltd v. Continental Holdings Pty Ltd [2002] VSC 310 per Gillard J, and Series 5 Software Ltd v. Clarke [1996] 1 All ER 853.

109. It is trite to observe that each case must depend upon its own circumstances and that the ultimate question for the court is whether it is just and convenient to grant the injunction. Mr Hardy conceded that the injunctions that were being sought were tantamount to seeking specific performance of a service agreement. As Warren J. noted in Axxess Australia Pty Ltd v. Primus Telecommunications (Aust) Pty Ltd [2000] VSC 64, it is a well recognised principle that courts are reluctant to grant injunctions in such circumstances. Furthermore, it is well established that courts are reluctant to interfere in commercial arrangements that parties have agreed to between themselves. See J C Williamson v. Luckey & Mulholland [1931] HCA 15; (1931) 45 CLR 282, and Spry on The Principles of Equitable Remedies (1997) 5th Ed. pp.538-540.

112. The defendants argue that the relief sought by the plaintiffs is tantamount to specific performance of an agreement for the provision of personal services. They point to the fact that fees are provided for all services which are rendered. If the court were required to make the orders sought, it would require the franchise businesses to continue. It would require ADT to make available again the services it had previously provided through the customer contracts, and would require ADT to pay the plaintiffs for patrol services and relay requests for alarm responses to the plaintiffs. The court, the defendants submit, would have to supervise how and when ADT would allocate alarm responses to the plaintiff. The defendants submit that the court would be involved in the supervision of the allocation of thousands of alarm response calls in the operation of a business which is based upon a high degree of trust and confidence because the plaintiffs have access to the premises of ADT's clients. It is true that the courts have declined to make orders compelling the carrying on of a business and the terms of the franchise agreements clearly fall into this category. See Co-operative Insurance Society Ltd v. Argyll Stores (Holdings) Ltd [1997] UKHL 17; [1998] AC 1, approved by the High Court of Australia in Patrick Stevedores Operations No.2 Pty Ltd v. Maritime Union of Australia [1998] HCA 30; (1998) 195 CLR 1 at 45. Indeed Mr Hardy on behalf of the plaintiffs recognised that it was these very considerations which had deterred the plaintiffs from seeking specific performance initially in their statement of claim. I think, however, the defendants' submission greatly exaggerates the present position. It was the intention of ADT to continue to franchise agreements with the plaintiffs by way of a subcontract from Group 4 and Zip in the event that the plaintiffs did not agree to a new contract with Zip. No evidence was placed before me as to how difficult such an arrangement would have been. Clearly orders likely to give rise to repeated applications for rulings on compliance should be discouraged. But I am not persuaded that the continuance or reinstatement of the franchise agreements between ADT and the plaintiffs would give rise to such complications as the defendants submit, certainly such as to make such a consideration decisive.

115. The injunctions that are sought to restrain ADT from referring any alarm call to any person other than the plaintiffs appear to be injunctions to restrain what is commonly described as a breach of a negative covenant as in Lumley v. Wagner (1852) 42 ER 687. Courts will in an appropriate case restrain the breach of a negative covenant even where the positive covenants are of such a nature as to be incapable of forming the subject of a decree for specific performance, Buckenara v. Hawthorn Football Club Ltd [1988] VicRp 5; [1988] VR 39 at 46 per Crockett J. The court is required to take into account all of the circumstances that may affect hardship that would be suffered by each of the parties. Where a contract of personal service contains negative covenants enforcement of which will amount to a decree of specific performance of the positive covenants of the contract, the court will not enforce those negative covenants; Hawthorn Football Club Ltd v. Harding [1988] VicRp 6; [1988] VR 49 at 58 per Tadgell J. Consistent with those principles it was submitted by ADT that the effect of enforcing the negative stipulations would be to compel ADT to engage the plaintiffs for alarm response services, otherwise ADT would be in breach of its contracts with its customers. This would in effect be to decree specific performance of positive obligations for the provision of personal services. For a similar case see Atlas Steels Australia Pty Ltd v. Atlas Steels Ltd (1948) 49 SR(NSW) 157 where Sugerman J. refused an injunction to restrain breaches of a negative stipulation because it amounted in substantial and practical effect to specific performance of the affirmative stipulations in the contract involving personal services.

118. This court, however, in more recent times has moved towards the view that there is no obstacle to an injunction being granted notwithstanding that it necessarily involves specific performance of a service agreement. This approach was carefully summarised by Warren J in Axxess Australia Pty Ltd v. Primus Telecommunications (Aust) Pty Ltd (as cited) at pages 18-19:

"Nevertheless, in more recent times this court has adopted the view that the balance of convenience will favour the granting of an injunction where it is otherwise just in all the circumstances to do so: State Transport Authority v. Apex Quarries Ltd [1988] VicRp 26; (1988) VR 187. In State Transport Authority v. Apex Quarries, Kaye J of this court observed (at 191) that there has been a movement away from the more strict position expressed by Dixon J in Williamson's case towards an approach where the court looks at the overall prevailing justice of the circumstances of the matter. Accordingly Kaye J considered that Thomas Borthwick & Son (Australasia) Ltd v. South Otago Freezing Co Ltd (1978) 1 NZLR 538 where the New Zealand Court of Appeal was of the view that the court may at its discretion grant an injunction to restrain an express negative covenant in a contract notwithstanding that the effect of the injunction would amount to ordering specific performance where equity would not do so. In State Transport Authority Kaye J considered also Sanderson Motors (Sales) Pty Ltd v. Yorkstar Motors Pty Ltd (1983) 1 NSWLR 513 where Yeldam J in considering an application to enjoin a defendant from terminating a motor car dealership agreement observed:

'The plaintiff has spent considerable sums of money in order to establish and maintain its position as a Mercedes-Benz dealer in the eastern suburbs of Sydney. Plainly it was entitled to expected that the agreement would be a self-renewing agreement and would not in normal circumstances be terminated. Future rights and obligations of the parties are controlled and determined by the dealership agreement, and do not require the supervision of the court. Hence I see no reason why an injunction should not be granted and every reason why it should be.'

In State Transport Authority v. Apex Quarries Kaye J. agreed with the observations of Yeldam J. in Sanderson Motors. Ultimately Kaye J held (at 192):

'In my respectful opinion, both Thomas Borthwick & Son (Australasia) Ltd v. South Otago Freezing Co Ltd and Sanderson Motors (Sales) Pty Ltd v Yorkstar Motors Ltd correctly state the principle that an injunction may lie to restrain a defendant from a breach of an express negative term or stipulation of a contract notwithstanding that the effect of the injunction might be to compel performance of a contract where equity would not decree specific performance.

The terms of the injunction sought in the present case do not require the form of supervision which in some type of contracts, such as contracts of service, the court will not undertake. That principle being applicable in the present case, I consider that there is a serious question to be tried, namely whether the defendant by its notice of 16 March 1987 was acting in default of the freight agreement and thereby repudiating it.'

The observation should be made that in Data Force Pty Ltd v. Brambles Holdings Ltd [1988] VicRp 73; (1988) VR 771 per Southwell J, this court declined to exercise the discretion to restrain by means of a mandatory injunction a contract which was yet to be performed. Southwell J followed the judgment of Gibbs CJ in the State of Queensland v. Australian Telecommunications [1985] HCA 25; (1985) 59 ALR 243 to the effect that where an interlocutory injunction is sought and is in substance a mandatory injunction, there must be a high degree of assurance that the plaintiff will necessarily succeed at trial. Kaye J in State Transport Authority v. Apex Quarries distinguished Data Force on the basis that the particular injunctions sought to restrain a contract that was yet to be in force. I would distinguish Data Force on the same basis from the present matter. However, I would make the further observation, with respect, that the approach adopted by Kaye J in State Transport Authority v. Apex Quarries is the correct approach. So much is borne out by the current state of the authorities (see Business World Computers Pty Ltd v. Australian Telecommunications Commission (1988) 82 ALR 499 per Gummow J at 501-503; McDermott & Anor v. BP Australia Ltd (1997) ATPR 41-547 per Drummond J."

127. The defendants point to other considerations which it is argued militate against the granting of these injunctions. They point to the fact that the injunctions, if granted, would now affect the rights of third parties in circumstances where there was inordinate and unjustifiable delay in the plaintiffs bringing on their application. As I have already said, a result of the agreement between the defendants is that ADT can no longer provide benefits to the plaintiffs under the franchise agreements because it has divested itself of its client contracts relating to franchise agreements with respect to all security services defined in the franchise agreements. The client contracts relating to those services have been transferred to Group 4, and in relation to the alarm response services, as defined in the franchise agreements, whilst ADT continues to have a contractual relationship with the clients in the electronic alarm monitoring services component of those agreements, the second and thirdnamed defendants have now contracted to provide the alarm response service components of those client contracts pursuant to the service agreement annexed to the asset acquisition agreement. I have already observed that Zip has now engaged Knight and Statelink to provide security services in discharge of those obligations. Those arrangements have now been in place for some weeks and the intention of the defendants has been known to the plaintiffs for some months. It was for that very reason that the plaintiffs' solicitors first threatened injunctive proceedings on 16 August 2002. Beyond further threatening an application for an injunction, no step was taken by the plaintiffs after they received formal notice on 30 September 2002of ADT's intention to terminate the franchise agreement on 29 November 2002.

130. An affidavit was filed on behalf of the plaintiffs during the course of the hearing which sought to further explain the delay by the plaintiffs in seeking injunctions. In substance it was said that the on-going negotiations between the parties, much of it without prejudice, had distracted or disinclined the plaintiffs from seeking such relief unless it was absolutely necessary. Much as one may understand the plaintiffs' motivation for refraining from commencing proceedings, it is a less than adequate explanation for the plaintiff to take no steps to enforce their rights in the face of the anticipatory breach by ADT of their franchise agreements.

133. Counsel for ADT submitted that ADT may have to take back its national manned service business which it sold to Group 4, a business with which the plaintiffs are not concerned, if these injunctions were granted. This it is said would be disruptive to ADT or Zip's customers who would become concerned about the security of their premises. No evidence was placed before me that such a likelihood would eventuate, and I do not therefore take it into account. On the other hand, the contracts between Zip and Knight Security and Zip and Statelink Security would have to be terminated with the prospect that ADT would be liable to Group 4 or Zip for compensation. I am conscious that those subcontractors are not privy to any of the conduct complained of by the plaintiffs.

136. Counsel for the defendants rely upon a very long established equitable principle relating to applications for urgent injunctive relief, that is that a person seeking such relief must seek it at the earliest opportunity. In this case the plaintiffs, well knowing of ADT's intention to terminate the franchise agreements, took no step to prevent ADT from giving effect to its intention or embarking upon new contractual arrangements which would involve third parties. See Spry (as cited) at page 417; and Dugul McDougall Motor Transport Pty Ltd v. Touring Car Entrance Group Australia Pty Ltd [2002] VSC 122 per Beach J.

139. There has been a substantial delay by the plaintiffs in bringing on this application, and that as a consequence of their inaction, of which they had knowledge, the defendants entered into contractual arrangements which required the secondnamed defendant to enter into contractual arrangements with third parties. Significantly this inaction by the plaintiffs gave rise to the loss of rights at law which the plaintiffs now seek to restore through injunctive relief. If the plaintiffs are right and ADT has wrongfully terminated its franchise agreements with plaintiffs, they will be entitled to damages.

142. Each of the defendants appears to be a company of substance. ADT is described in an affidavit filed on behalf of the plaintiffs as the world's largest security company. The evidence discloses that the plaintiffs were willing to negotiate terms with Zip but were not satisfied with the amount of compensation offered by ADT as at 30 September 2002, or later. A prominent hypothesis for the plaintiffs' delay in bringing these proceedings was their hope that they would receive an adequate offer of compensation from ADT following their accountant's examination of their financial position.

145. The fact that the applicants have delayed before seeking the remedy in question may have evidentiary weight in this case as tending to indicate that the material injury has caused them less hardship or inconvenience than might otherwise have been supposed, so that their claim to the exercise of the discretion of the court in their favour should be given correspondingly less weight. It has been established that in proceedings for interlocutory injunctions, the plaintiffs must establish a risk of imminent irreparable injury, such that in the circumstances the court should intercede at once on their behalf. Hence the delay of the plaintiff in seeking interlocutory injunctions may be calculated to throw considerable doubt upon the reality of the alleged injury, and it may be of importance in the balance of convenience being determined. See Spry (as cited) at pages 421-422. It may be that the plaintiffs relied on the statements of ADT that no breach of their rights would take place, but from 30 September 2002 there could be no doubt as to ADT's intentions to terminate each of their franchise agreements.

148. Delay on the part of the plaintiffs, as evidence of lack of hardship or prejudice to them, may often be of doubtful weight since it can do no more than give rise to an inference that is displaced by more direct evidence tending to establish a different position. That evidence is not in my view present in this case.

151. It has often been said that in order to establish a right to an interlocutory injunction the plaintiff must be able to show that it is threatened with irreparable injury. The better view now is that an apprehended injury is irreparable for present purposes only if, should it occur, and the plaintiffs be confined to such other remedies as damages, they would suffer substantial prejudice or hardship in a material respect. Irreparable injury is simply an injury of so serious a character that damages would not be an adequate compensation, and that on this ground a party should not be compelled to submit to it, even for a short period, and to take compensation in the shape of damages. See McCarthy v. Council of the North Sydney Municipality (1918) 18 SR(NSW) 210; King v. Macfarlane; ex-parte O'Flanagan and O'Kelly [1923] HCA 39; (1923) 32 CLR 518; and generally Spry (as cited) at page 457.

154. Each of the plaintiffs is a company. In the case of the thirdnamed plaintiff, Graywood Grange Pty Ltd, there is very little evidence of its financial circumstances, let alone evidence suggesting irreversible financial prejudice if its franchise agreement is not reinstated. Although there is some evidence that directors of the plaintiffs have incurred a level of indebtedness, no affidavit has been filed by anyone connected to the second or thirdnamed plaintiffs. The affidavit supporting the summons was sworn by a director of the firstnamed plaintiff who was authorised to speak on behalf of the second and thirdnamed plaintiffs. In that affidavit it was said that damages were an insufficient remedy, and that if the businesses of the plaintiffs were to close, in the time that it would take for a damages claim to conclude the plaintiffs would lose everything. The evidence relied upon in this regard is not particularly persuasive. It certainly does not persuade me that irreparable harm would be done to the plaintiffs. Acting upon the scant evidence provided in the affidavits filed on behalf of the plaintiffs, I also entertain a reservation about the plaintiffs' capacity to meet undertakings as to damage should I grant the injunctive relief sought. Two of the plaintiffs have a paid up capital of $12 and the other a paid up capital of only $2. No security for the undertakings as to damages has been offered. See for example Active Leisure Sports Pty Ltd v. Sportsman Australia Ltd [1991] 2 QdR 301; South Sydney District Rugby League Football Club Ltd v. News Limited [1999] FCA 1710; (1999) 169 ALR 120.

157. While I am not prepared to act upon the submission of counsel for ADT that the damages would be substantial, there being no evidence to support such a submission, I do nonetheless entertain reservations about the capacity of the plaintiffs to comply with any undertakings as to damages. Each of the defendants has submitted that it would support an application by the plaintiffs for a speedy hearing of the trial of this action. Furthermore, the firstnamed defendant has undertaken that until the trial of the proceedings, it will keep full records of call-outs and surveillance services for the territories previously the subject of the franchise agreements, and of the financial benefit that will accrue to it from the provision of those services. The second and thirdnamed defendants have undertaken to the court that until the trial of the proceedings or further order they will keep full records of the provisions of patrol services escort services, temporary patrol services, and alarm response services previously performed by the plaintiffs, in the same form as nearly as practicable as such records were formerly kept by the firstnamed defendant.

160. I have concluded that the delay by the plaintiffs in bringing these proceedings was unwarranted. During this period rights were, with full knowledge, lost whilst the defendants entered into contractual obligations with each other and with third parties. The plaintiffs regarded the prospect of compensation as a sufficient reason to remain inactive and in the absence of more compelling evidence, I am inclined to think that damages are an adequate remedy. For these and the other reasons that I have expressed, the plaintiffs' summons seeking injunctive relief will be dismissed.

163. The court will now hear from counsel as to the form of the orders, including such directions as should be given to facilitate a speedy hearing of the trial, and as to the question of costs.

I certify that this and preceeding 23 pages are a true copy of the reasons for judgment of Redlich J. of the Supreme Court of Victoria delivered on 19 December 2002.