BETWEEN : TOPSEAL CONCRETE SERVICES PTY LTD (ACN 081 000 777)

Equity - Injunctions - Interlocutory injunctions - Strength of applicant's case - Turns on own facts

Contracts - Construction and interpretation - Implied terms - Implied obligation of good faith in performance of contract - Turns on own facts

1 The plaintiff has brought an urgent application for interlocutory injunctions. At the commencement of the hearing, counsel for the plaintiff stated that the plaintiff sought the injunctions for a duration of one week only. The reasons for that need not now be canvassed.

2 For the reasons which follow I decline to grant the interlocutory injunctions sought. In summary, I so decide taking into account: my assessment of the strength of the case on the material now before the court; the extent to which it appears that damages would or would not be an adequate remedy; the balance of convenience; and some issues respecting the form and language of orders 2(a) - (c) of the orders sought.

3 I begin by outlining the principles relevant to the grant or refusal of an interlocutory injunction.

4 In Castlemaine Tooheys Ltd v The State of South Australia [1986] HCA 58; (1986) 161 CLR 148, 153, Mason ACJ summarised the principles governing the grant or refusal of an interlocutory injunction as follows:

In order to secure such an injunction the plaintiff must show (1) that there is a serious question to be tried or that the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief; (2) that he will suffer irreparable injury for which damages will not be an adequate compensation unless an injunction is granted; and (3) that the balance of convenience favours the granting of an injunction.

5 That summary was adopted by Gleeson CJ in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199, 217. These principles have been routinely applied in this and other courts in Australia.

6 These organising principles were further explained by Gummow and Hayne JJ in Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57, [65] - [71] (Gleeson CJ and Crennan J agreeing). Their Honours stated that the relevant principles are those explained in Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618, where the two main inquiries were said to be whether the plaintiff had made out a prima facie case and whether the balance of convenience favours the grant of the injunction. The phrase 'prima facie case' does not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed. It is sufficient that the plaintiff show a sufficient likelihood of success to justify, in the circumstances, the preservation of the status quo pending the trial. How strong the probability needs to be depends upon the nature of the rights the plaintiff asserts and the practical consequences likely to flow from the orders the plaintiff seeks: [65], [71].

7 The apparent statement by Lord Diplock in American Cyanamid Co v Ethicon Ltd [1975] UKHL 1; [1975] AC 396, 407 that, provided the court is satisfied that the plaintiff's claim is not frivolous or vexatious, then there will be a serious question to be tried, is not to be followed. The governing consideration is that the requisite strength of the probability of ultimate success depends upon the nature of the rights asserted and the practical consequences likely to flow from the interlocutory orders sought. These principles make it clear that the various considerations identified by Mason ACJ in Castlemaine Tooheys are to be considered together.

8 I turn to the evidence relied upon by the plaintiff in support of its application for interlocutory injunctions. I give some attention to the detail of that evidence because, for reasons I will explain, in my opinion the evidence of the plaintiff does not establish a case of sufficient strength to call for the injunctive relief now sought by the plaintiff.

9 The following summary is taken primarily from the affidavit of Mr Peter Davis sworn 2 April 2008.

10 The plaintiff (Topseal) operates various businesses which include acting as a selling agent for the defendant (Sika). In about August 2000 Topseal commenced distributing Sika concrete and mortar admixture products. In about August 2004 Mr Davis had a conversation with Mr Hugh McCook on behalf of Sika, in the course of which various statements were said to have been made by Mr McCook to Mr Davis (as set out in par 9 of the affidavit).

11 Subsequent to August 2004, Topseal sought customers in the Western Australian mining industry to whom it could distribute Sika products.

12 In February 2007 further discussions took place between Mr Davis and Mr McCook, leading to a written agreement between them. In the course of those discussions, Mr Davis' evidence (par 13) is that Mr McCook said words to the effect that: (a) Sika wished for Topseal to continue to promote Sika's products as much as possible; and (b) Sika wanted Topseal to continue to seek as many new customers as possible, and to promote and distribute Sika products to those customers.

13 On or about 1 March 2007, Topseal entered into a written agreement with Sika dated 1 March 2007 (the Agreement).

14 By cl 2.1 of the agreement Sika appointed Topseal as a selling agent of defined products to defined customers, as set out in sch 1. By that clause, Sika expressly reserved the right to make additions and deletions of products and customers to sch 1 at any time during the term of the Agreement, provided, in the case of customer additions and deletions, that reasonable notice is given to the agent.

15 Schedule 1 sets out a list of customers, products and commissions to which the Agreement referred. Four customers are listed, being Argyle Diamond Ltd, GBF Underground Mining Company, Jetcrete Australia Pty Ltd and Plutonic Operations Ltd. Various products are identified in respect of each customer. In the case of each product, a percentage commission payable to Topseal is stipulated.

16 Clause 3 provides that the Agreement will commence on 1 March 2007, and continue until the close of business on 28 February 2012, at which time an extension of the Agreement may be considered.

17 Clause 8.1 provides that title in the products shall remain in Sika up to the point of sale of the products by Topseal to a customer.

18 Clause 9 obliges Topseal to sell the products at the prices stated in such price lists as are provided by Sika to Topseal from time to time.

19 Clause 10.1 requires all sales of the products by Topseal to be for cash on delivery unless Sika's written consent to give credit to any customer is first obtained.

20 Clause 10.4 provides that nothing contained in the Agreement shall prevent Sika from directly selling and supplying the products in Western Australia. Clause 11 provides for the payment by Sika of commission of 15% subject to certain stipulated exceptions.

21 Clause 19.1 provides that each party shall be entitled to terminate the Agreement at any time, by written notice given by one party to the other, in the circumstances set out in subpars (1) to (5). These include, relevantly, subpar (1), which allows termination by Sika in the event of a material breach by Topseal of its obligations under the Agreement; provided that Sika first gives at least one month's notice of the breach on which it proposes to rely, and Topseal has not remedied or rectified that breach within that period.

22 Clause 22.1 provides that the document constituting the Agreement constitutes the complete agreement between the parties. This clause states that the parties acknowledge that, other than the Agreement, there are no agreements, warranties, promises or representations (either in writing or verbal) relating to the subject matter of the Agreement which are binding upon either party.

23 It should be noted that there is no provision in the Agreement that appoints Topseal as Sika's exclusive agent. The language of cl 2.1 is that Topseal is appointed as 'a selling agent'.

24 Although it was not mentioned in Mr Davis' affidavit, a written agreement in substantially similar terms to the Agreement had earlier been made between Topseal and Sika on 16 February 2004. A copy of that agreement is annexed to the affidavit of Mr Peter Scott sworn on 8 April 2008.

25 Mr Davis also gave evidence of conversations that he had with Mr McCook and Mr Beruzzo, the national sales and marketing manager of Sika, in which the Sika representatives said words to the effect that they wanted Topseal to promote Sika's products as much as possible, to seek as many new customers as possible, and to promote industry and distribute Sika products to those customers: par 16 of Mr Scott's affidavit.

26 Prior to entering into the Agreement, Topseal was distributing various Sika products to various mining industry customers: par 18 of Mr Davis' affidavit. The products and customers being provided to at this time were more extensive than that included in sch 1 of the Agreement.

27 Paragraph 23 of Mr Davis' affidavit sets out the combinations of products and customers which are not contained in sch 1, but which Topseal has supplied and for which Sika has paid commissions to Topseal since the parties entered into the Agreement.

28 In February 2008, Sika altered the procedure for ordering, supply and delivery of products. Prior to that time the customer placed the order via Topseal. After February 2008 the order would be placed directly with Sika.

29 On 14 February 2008 Topseal received a letter from Sika. Among other things, the letter gave one month's notice of the deletion of all customers and products from sch 1 of the Agreement after which time it was said that the Agreement would, in effect, be terminated.

30 After correspondence between the parties' solicitors, the notice given by Sika in its letter of 14 February 2008 was withdrawn.

31 On 14 March 2008 Sika wrote again to Topseal. The letter recorded that after reviewing the products and customers falling within the terms of the Agreement, it has 'become apparent' that Topseal is supplying product, including product not referred to in the schedule, to customers not referred to in the schedule.

32 By this letter, Sika gave notice that it required Topseal to strictly comply with the terms of the Agreement, stating that Topseal is not entitled to supply Sika product to customers not referred to in the Agreement. The letter stated that if Topseal continues to do so, Sika would 'view Topseal's conduct as a material breach of the Agreement giving rise to a right on the part of Sika to terminate'.

33 The letter also gave notice to Topseal pursuant to cl 2.1 of the Agreement, that certain products described as SIGUNIT L50AF and SIGUNIT L80AF were deleted from sch 1 with immediate effect. The letter also gave notice that the customer Plutonic Operations Ltd was deleted from sch 1, effective 30 days from the notice.

34 By the letter, Sika also gave notice that it intended to commence direct supply of its products to customers in Western Australia, including the customers listed in the Agreement, referring to its right to do so by reference to cl 10.4 of the Agreement.

35 It is the letter of 14 March 2008 which has given rise to this application for interlocutory injunctions.

The consequence of Sika acting in accordance with the letter of 14 March 2008

36 Mr Davis has given evidence in his affidavit of what he says are some of the consequences of Sika acting in accordance with its letter of 14 March 2008. He says that the product SIGUNIT L50AF and SIGUNIT L80AF accounted for approximately 80% of the commissions received by Topseal in the period from 1 July 2007 to 30 January 2008. Further, Topseal has distributed $13,650 of Sika products to Plutonic, for which Sika has paid to Topseal commission totalling $1,943. Since May 2007, Topseal has received from Sika $8,698 in commission for distribution to customers not named in the schedule.

37 Mr Davis says that Topseal has relied on the statements made to him by Mr McCook and Mr Beruzzo, being those statements I have already referred to, and the conduct of Sika in what is described as 'knowingly acquiescing in the supply by Topseal of products to customers not referred to in the schedule, and paying commission to Topseal in respect of the same'. Mr Davis says that these statements and conduct led Topseal to believe that sales in respect of mining sector customers not referred to in the Agreement would effectively be treated as coming within the terms of the Agreement for its entire term. That evidence is, it seems to me, the high-water mark of the plaintiff's case in relation to estoppel. I will return to that point.

38 Mr Davis says in par 36 of his affidavit that had Sika advised him that it considered itself entitled to elect not to pay commission in respect of such customers, he would not have performed any work in establishing and developing relationships with such customers, and Topseal would not have expended significant moneys to accommodate for the expansion of the business.

39 Finally, by way of summary of the evidence, Mr Davis says that if no injunctions are granted Topseal's business will be irreparably damaged in a way not capable of compensation by an award of damages in respects set out in subpars (a), (b) and (c) of par 37. I will return to that topic later in these reasons.

40 I turn to the orders which are sought by the plaintiff.

41 In substance, the plaintiff seeks four interlocutory injunctive orders. The first is an injunction restraining Sika from terminating or purporting to terminate the Agreement 'on the basis that' Topseal continues to supply various products listed in subpars 2(a)(i) and (ii).

42 The second and third orders originally were sought in terms of an injunction restraining Sika from 'removing or purporting to delete' from sch 1 the two products SIGUNIT L50AF and SIGUNIT L80AF, and deleting Plutonic Operations Ltd as a customer. The point was made in submissions for the defendant that those steps had, on the defendant's case, already occurred, by force of the letter of 14 March 2008. In light of that, counsel for the plaintiff moved to amend the initial orders to seek orders restraining the defendant from 'giving effect to the deletion or purported deletion' of the two products and one customer referred to. The application to amend was granted in the terms sought by counsel for the plaintiff.

43 The fourth order sought is that Sika be restrained from directly supplying any of the products listed in the earlier orders to any of the customers listed in sch 1 of the Agreement, or any of the customers referred to in the earlier orders.

44 There seem to me to be significant problems with the form of orders (a), (b) and (c).

45 Order (a) seeks an injunction restraining the defendant from terminating or purporting to terminate the Agreement. The injunction is sought for a duration of one week. In my opinion, there is no evidence which gives rise to any reasonable argument that there is any present threat of a termination or purported termination within one week. In my opinion, the only reasonable reading of the letter of 14 March 2008 is that it states an intention on the part of Sika to invoke the procedure in cl 19 of the Agreement. In so concluding, I note the language of the letter of 14 March, in particular its reference to 'material breach', which is the language of cl 19. The procedure in cl 19 involves giving notice and then, if the breach is not remedied after one month, terminating the Agreement.

46 The problem with the form of orders (b) and (c) is of a different character. It is fundamental that injunctive relief must be formulated with precision so that a party who is thereby at risk of a finding of contempt knows with clarity what conduct will and will not breach the order. I do not consider that the orders in the amended form of pars (b) and (c) are sufficiently certain to be an appropriate form of injunctive order.

47 The next difficulty with the orders sought by the plaintiff is that they appear to be difficult to reconcile with the express terms of the Agreement. Clause 2.1 of the Agreement expressly reserves the right of Sika to make additions and deletions of products and customers to sch 1. The reservation of Sika's right is conditioned in a specific way. The parties have expressly conditioned that reservation by the words following the word 'provided' in that clause. The proviso adds a requirement of reasonable notice in relation to customer additions and deletions, but not in relation to product additions and deletions.

48 The terms of cl 2.1 appear, at the least, to provide a significant hurdle to the grant of the first, second and third injunctions sought. The second and third injunctions would appear to be directly contrary to cl 2.1. Indeed, those injunctions seek in effect to restrain Sika from exercising its rights under cl 2.1, or, in the amended version of the injunction, to restrain Sika from giving effect to its exercise of rights under cl 2.1.

49 As to the first order sought, even if it be accepted that the parties treated additional customers and products as coming within the Agreement, cl 2.1 would then apply to those additional customers and products, they being within the Agreement. Therefore, cl 2.1 appears to be an obstacle for that argument as well.

50 The fourth injunction appears to be contrary to the terms of cl 10.4, which states that nothing in the Agreement shall prevent Sika from directly selling and supplying its products in Western Australia.

51 The observations regarding the terms of the Agreement seem to me to invite closer attention to the rights asserted by the plaintiff. What are the sources of the rights which the plaintiff claims to support the interlocutory injunctive relief now sought? The Agreement must, in my opinion, be at the least the starting point of any answer to that question: Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471 [32] - [36], [39] - [40].

52 The plaintiff has advanced arguments as to the proper construction of the Agreement and the imposition, upon the Agreement, of an obligation of good faith in the performance of the Agreement. I begin with the argument based on good faith.

53 It may be arguable that an obligation of good faith might be imposed on an exercise of power under cl 2.1. There have been many cases concerned with the imposition of implied obligations of good faith in the performance of a contract. Some of them are discussed in Seddon NC and Ellinghaus MP, Cheshire and Fifoot's Law of Contract (8th Aust ed, 2002) [10.43] - [10.46], and in Central Exchange Ltd v Anaconda Ltd [2002] WASCA 94; (2002) 26 WAR 33 [46] - [64]. Moreover, many of those cases relate to the exercise of a contractual power: see, for example, Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234; Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349; Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd [1999] FCA 903; Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187.

54 That leads immediately to the question of the content of the obligation of good faith in the context of this Agreement. How would such an obligation limit the exercise of power under cl 2.1?

55 An obligation of good faith in the exercise of a contractual power is not inconsistent with a legitimate pursuit by such party of its own commercial self-interest: Alcatel; Garry Rogers.

56 The oral submissions of the plaintiff as to the content of the good faith obligation in the context of cl 2.1 at times suggested that if an exercise of power has the effect of rendering the Agreement sterile it would thereby not be in good faith. At other points it appeared to be accepted that the question was to be addressed by reference to the intention or purpose with which the power was exercised. In any event, it seems to me that it must be the latter. In other words, any limit on the exercise of power derived from the imposition of an obligation of good faith in the context of cl 2.1 is one which would mean that an exercise of power with an intention to render the contract sterile, or otherwise in effect to terminate the contract, might be inconsistent with cl 2.1; it would not be enough if an exercise of power were, in the events that happened, to have such an effect.

57 In any case, on either approach, there does not seem to me to be sufficient evidence that the exercise of power under cl 2.1 by Sika was not one that was in good faith.

58 The onus of establishing that the exercise of power had such a character is, of course, upon the plaintiff: Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596, 609.

59 In my opinion there is no evidence capable of sustaining the conclusion that the exercise of power under cl 2.1 in this case was not done in good faith in the sense that I have explained. The only evidence pointed to by the plaintiff in support of its argument on this point was the letter of 14 February 2008. In my opinion, that letter is an inadequate foundation for the inference invited by the plaintiff.

60 I would have so concluded on the basis of the plaintiff's evidence alone. That conclusion is, it seems to me, reinforced when the evidence of Mr Scott is taken into account. Mr Scott sets out in his affidavit (pars 34 - 45) what he says were the reasons for Sika's decision to cease to produce L50AF, to change from the operations in respect of L80AF, and to delete Plutonic Operations Ltd from the list in the schedule.

61 I turn to good faith in the context of cl 10.4. In my opinion, there is no room for the imposition of an obligation of good faith in the context of cl 10.4. Clause 10.4 does not create a contractual power which is then to be exercised in a particular way. Rather, cl 10.4 makes clear what, in my opinion, would anyway have been the position: that the Agreement did not stop Sika from doing something. (I will explain that further later in these reasons.) In that context, in my opinion, no obligation of good faith arises. In any event, if I am wrong in that conclusion, there seems to me to be no evidence capable of sustaining an inference that the decision in respect of cl 10.4 was not made in good faith.

62 Although not the subject of written submissions, in oral argument there were some submissions advanced on behalf of the plaintiff relating to the construction of cl 2.1 and cl 10.4.

63 In respect of cl 2.1 it was argued that on a proper construction of the Agreement, the power under cl 2.1 could not be exercised so as to 'effect a de facto termination'.

64 In respect of cl 10.4 it was submitted by the plaintiff that that clause did not apply to customers who were listed in the schedule to the Agreement. That submission was also taken further to suggest that it was also applicable to customers who were not on the schedule, but were being treated as if they were on the schedule. However, I need not dwell on that latter point because I do not accept the plaintiff's submission in respect of the construction of cl 10.4.

65 I do not accept that it would render the Agreement sterile that the principal retains the right to sell its products, the subject of the agency agreement, to customers who are within the scope of the agency agreement.

66 I do not consider that the language of cl 10.4 supports the plaintiff's construction. It seems to me that the language of cl 10.4 is general and unqualified. The plaintiff's construction involves reading the clause as if there were inserted after it words to the effect 'to customers not being supplied by Topseal under this Agreement'.

67 It is also, I think, proper to have regard, as part of the background to the Agreement, to the legal position which would apply in the absence of this clause. It is permissible to have regard to matters of law as part of the background to construing a contract: Maggbury Pty Ltd v Hafaele Australia Pty Ltd [2001] HCA 70 [11]. I accept the submissions of the defendant that, absent this clause, the principal would retain its right to sell its own products: Dal Pont GE, Law of Agency (2001) [1.17].

68 For those reasons, I reject the plaintiff's argument on the construction of cl 10.4. That means that the argument on the construction of cl 2.1 also falls away. That is because it was accepted on behalf of the plaintiff that if its construction of cl 10.4 were not accepted, there would be no basis to conclude that the contractual power was exercised by Sika so as to effect a de facto termination.

69 For those reasons, the Agreement does not provide an arguable source of any of the rights sought to be protected by the interlocutory injunctive relief now sought.

70 The plaintiff also put its case on two other bases. First, the plaintiff relies upon a claim of unconscionable conduct under s 51AC of the Trade Practices Act 1974 (Cth). However, it was accepted by the plaintiff that its submission that the defendant's conduct was unconscionable in exercising its contractual powers relied upon the same material and invited the same conclusion as its submission that the powers had not been exercised in good faith. For the reasons I have given in relation to the good faith argument, the material relied upon by the plaintiff, namely the letter of 14 February 2008, does not give rise to a case of sufficient strength on unconscionable conduct to call for the grant of interlocutory injunctive relief that is now sought.

71 Secondly, the plaintiff relied upon an estoppel argument. The conduct of the parties referred to in Mr Davis' affidavit par 23 may provide a foundation for a claim that the parties acted under a shared assumption, or that Sika encouraged an assumption on the part of Topseal, that the additional customers and products referred to in par 23 came within the scope of the Agreement. That might give rise to an estoppel precluding Sika from denying the truth of such an assumption. However, an estoppel of that kind would not support the injunctions now sought. A stream cannot rise above its source. Here, it is the Agreement which is the source. If additional products and customers were brought within the scope of the Agreement, the parties' rights and obligations in relation to those products and customers would then be determined by the Agreement. Those terms include cl 2.1 and cl 10.4.

72 Mr Davis' affidavit also deposes to statements made by representatives of Sika encouraging Sika to promote and distribute Sika products, and to seek new customers to which Sika products would be provided. Statements to similar effect were made by representatives, according to Mr Davis' evidence, in August 2004 (par 9); February 2007, (par 13); and subsequent to the execution of the Agreement (par 16). The evidence of Mr Davis is that Topseal has relied upon those statements.

73 In my opinion, those statements are not capable of sustaining any cause of action for final relief which would call for the interlocutory injunctive relief now sought. The evidence as to the statements made on behalf of Sika does not establish a prima facie case, in the sense explained in Australian Broadcasting Corporation v O'Neill, of rights founded upon an estoppel which would preclude Sika from exercising its rights under cl 2.1 and cl 10.4 of the Agreement.

74 Counsel for the plaintiff identified that the foundation of the plaintiff's estoppel case is an assumption that the plaintiff was at liberty to procure clients and products in the mining industry without the risk of termination other than for breach. There is no evidence that any such assumption was made by Topseal.

75 Taken at its highest, Mr Davis' evidence is that he believed, because of the statements made by Sika, that the additional customers not in sch 1 of the Agreement would effectively be treated as within the Agreement: affidavit par 35. Mr Davis does not say that he understood the statements as meaning that Sika undertook not to exercise its rights under cl 2.1 and cl 10.4. Further, and in any event, the terms of the statements made on behalf of Sika, set out in Mr Davis' affidavit, do not involve a representation that Sika's rights under those clauses would not be exercised.

76 For those reasons I am not satisfied that the plaintiff has shown a sufficient likelihood of success to justify the preservation of the status quo pending the trial. That in itself would lead to the refusal of the injunction. There are, however, further considerations which reinforce the conclusion that the interlocutory injunctions should be refused.

77 I am not satisfied by the evidence of Mr Davis (affidavit par 34) that if no injunction is granted the plaintiff will suffer irreparable injury for which damages would not be an adequate compensation.

78 Subparagraph (a) of par 37 refers to damage said to be likely to occur to Topseal's business reputation in the mining industry. Mr Davis asserts that if Topseal is required to advise customers that they can no longer provide them with assistance in relation to their needs it is 'likely that that will cause those customers to form the view that Topseal is no longer a reliable supplier', which may have a flow-on effect to other areas of Topseal's business.

79 I do not give significant weight to that evidence. Why customers would form such a view is not explained. It is not clear to me why a customer would draw such a conclusion if Topseal were to advise the customer simply that it is no longer authorised by Sika to supply particular products to it or, in other cases, that it is no longer authorised by Sika to supply any products to it and that the customer must henceforth deal directly with Sika.

80 Subparagraph 37(b) of the affidavit refers to the risk of underestimating Topseal's future lost income. There are often uncertainties in the assessment of damages. I am not satisfied that the risk of underestimating any future lost income is any greater than the risk of overestimating.

81 Subparagraph 37(c) refers to what is said to be a requirement to terminate the employment of all employees associated with the distribution of Sika products. First, that evidence is premised on 'being no longer permitted to distribute Sika products'. The premise does not reflect the position 'threatened' by the letter of 14 March 2008. In any event there is no evidence as to how the termination of the employment of employees is irreparable damage to the plaintiff.

82 Finally, I turn to the balance of convenience. In taking into account my assessment of the strengths and weaknesses of the plaintiff's case, I also take into account the evidence of each party as to the consequences of the grant or refusal of the injunction (Mr Davis' affidavit par 37; Mr Scott's affidavit par 48).

83 In considering that evidence, it is also necessary, to take into account that the injunction ultimately sought was one for one week, whereas the evidence in the affidavits was directed toward the grant of an injunction of significantly greater duration.

84 The balance of convenience is against the grant of the injunction.

85 For all of these reasons I would decline to grant the injunctions sought.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : TOPSEAL CONCRETE SERVICES PTY LTD -v- SIKA AUSTRALIA PTY LTD [2008] WASC 57 (S)

BETWEEN : TOPSEAL CONCRETE SERVICES PTY LTD (ACN 081 000 777)

Costs - Application for interlocutory injunction is dismissed - Whether costs should be in the cause or paid by unsuccessful party - Turns on own facts

Plaintiff to pay defendant's costs of the application fixed at $9,300

1 BEECH J: On 10 April 2008 I heard an application by the plaintiff for interlocutory injunctions. On that day I dismissed the application. At the request of the parties I ordered that they file written submissions in relation to the question of costs.

2 The defendant seeks orders that the plaintiff should pay the defendant's costs of the application, payable forthwith, and that such costs should be taxed on an indemnity basis.

3 The plaintiff submits the appropriate order is that the costs of the application be costs in the cause.

4 In my opinion, for the reasons which follow, the appropriate costs order is that the plaintiff pay the defendant's costs of the application fixed at $9,300.

5 The plaintiff submits that a very common order on the grant or dismissal of an injunction is that the costs of the application be in the cause. I accept that that is so. However, in the circumstances of this case I consider that a different order is appropriate.

6 In determining the appropriate costs order upon the refusal of an interlocutory injunction, it is obviously necessary to have regard to the grounds for the refusal of the injunction application. For example, where an applicant for an injunction establishes a prima facie case (in the sense used in Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57), but where the injunction is declined on grounds of balance of convenience or other discretionary grounds, it will often, if not usually, be appropriate to order that costs be in the cause or be reserved to the trial judge.

7 However, in this case the plaintiff failed to put before the court material establishing a prima facie case in respect of any of the claims which, the plaintiff contended, provided a foundation for the interlocutory injunctions sought. Further, there were significant problems with the form of interlocutory injunctive orders sought by the plaintiffs. The plaintiff sought interlocutory injunctions for a period of one week, requiring full argument in respect of the application in circumstances where the utility of ordering the injunctions for one week only was not immediately apparent. In these circumstances, it seems to me to be appropriate to order that the plaintiff pay the defendant's costs of the application.

8 The defendant seeks an order that the plaintiff pay the defendant's costs on an indemnity basis.

9 An order for indemnity costs will be made only if there is some special or unusual feature in the case which justifies a departure from the ordinary practice of awarding costs on a party-party basis: Unioil International Pty Ltd v Deloitte Touche Tohmatsu (No 2) (1997) 18 WAR 190, 191; Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95 [8].

10 The categories of cases in which the discretion to award indemnity costs may be exercised are not closed: Colgate-Palmolive Company v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225, 233 - 234; Unioil (191). Most of the situations in which indemnity costs have been awarded have involved an element of improper or unreasonable conduct on the part of the parties or their advisors in the conduct of the case: Flotilla [9]; Colgate-Palmolive (233 - 234).

11 I am not satisfied that the matters referred to in the defendant's submissions, individually or when taken together, justify an order for indemnity costs in this matter. The strength (or otherwise) of the plaintiff's case and plaintiff's conduct in seeking interlocutory injunctions for a duration of only one week, and in seeking an urgent hearing, are matters I take into account in ordering that the plaintiff pay the costs of the application rather than following the common course of ordering costs in the cause. I am not satisfied that these circumstances call for an order for indemnity costs.

12 In accordance with the current practice of the court it seems to me to be appropriate to fix the amount of the costs and to order that the costs be payable forthwith.

13 In the event that costs were payable on a party-party basis the defendant sought that costs be fixed in the maximum amount allowed under the scale, namely $9,300. Taking into account the length of the hearing and the affidavits and submissions filed by the defendants, I am satisfied that it is appropriate to fix the costs in that sum.

14 Accordingly, I order that the plaintiff pay the defendant's costs of the application, fixed in the sum of $9,300 and payable forthwith.