Ubix Business Solutions Limited v Southern Image Solutions Limited [2012] NZHC 2595 (5 October 2012)

Last Updated: 17 October 2012

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

CIV 2012-412-000583 [2012] NZHC 2595

BETWEEN UBIX BUSINESS SOLUTIONS LIMITED Plaintiff

AND SOUTHERN IMAGE SOLUTIONS LIMITED

First Defendant

AND DARYN JARVIE Second Defendant

Hearing: 26 September 2012 (And on the Papers) Counsel: R M Harrison for Plaintiffs

D P Robinson for Defendants

Judgment: 5 October 2012

_{JUDGMENT OF WHATA J}

[1] Ubix Business Solutions Limited (“Ubix”) entered into a licence agreement with Mr Jarvie. The agreement provided exclusive rights to Mr Jarvie’s company, Southern Image Solutions Limited (“SIS”), to sell Ubix products in the Otago Region. Part of the arrangement involved income support in the start up phase and monthly payments of $12,000 were made to Mr Jarvie to a total of $48,000. Only one of the products was sold, and Mr Jarvie advised that he was not prepared to continue. Ubix proposed additional support, but that was not acceptable to Mr Jarvie. SIS then gave notice of cancellation of the licence agreement for misrepresentation. Ubix refused to accept that cancellation. Ubix now seeks an interim injunction preventing SIS and Mr Jarvie from supplying any competing

_{product or service for the contractual termination period of six months.}

UBIX BUSINESS SOLUTIONS LIMITED V SOUTHERN IMAGE SOLUTIONS LIMITED HC DUN CIV

2012-412-000583 [5 October 2012]

[2] I must resolve whether Ubix has a seriously arguable case based on breach of contract and if so whether the balance of inconvenience favours an interim injunction on the terms sought by Ubix.

Background

[3] Ubix and its sister company, Konica Minolta Business Solutions New Zealand Limited (“Konica Minolta”) are in the business of selling and servicing a range of copiers and printers known as multifunctional devices (“MFDs”). Ubix is leading an initiative to introduce a range of products into the New Zealand market, known as the Develop Brand, through local suppliers and backed by Konica Minolta service and support network.

[4] Daryn Henry Jarvie is the sole director of Southern Image Solutions Limited (“SIS”). Mr Jarvie is a married man with six children including two preschool and two school aged dependants. He also financially supports one of his older children who is soon to begin tertiary studies. Other than his wife who has a job for four hours per week, he is the sole income earner for his family. Until October 2007 he managed a division of a recruitment company before joining Konica Minolta. He enjoyed a career in sales with Konica Minolta and achieved a management position running the Invercargill Konica Minolta branch. He was in the process of exiting Konica Minolta in 2011 when he was approached by the CEO for Konica Minolta to participate in “Project D”. Project D related to the promotion and distribution of the “Develop” brand of MFDs. This was to coincide with the national relaunch of Ubix.

[5] Mr Jarvie says that he was presented with pricing information that indicated that the difference between the transfer price and the sale price to a client would represent a good margin and that such a margin would support a financial return. He says that after completing due diligence, including the involvement of his lawyers and accountants, he committed himself to Project D.

[6] This commitment was formalised in a licence agreement on 21 February

2012 between Ubix and SIS. Mr Jarvie was also a party to the agreement and

identified as the key person. The background to the agreement is recorded as follows:

BACKGROUND

A Ubix wishes to engage the Licensee to promote and maximise sales of Ubix’ products and services in the Territory.

B The Key Person is the person who will be primarily responsible for ensuring that the Licensee performs its obligations under this agreement. The Key Person has requested Ubix to enter into this agreement with the Licensee.

C The parties wish to record the terms of their agreement.

[7] Clause 2 of the agreement deals with the appointment of the licensee as an agent to market and sell Ubix products. More specifically, the agreement provides:

2.1 Sale of Products: Ubix appoints the agent as Licensee as its agent to market and sell the Products within the Territory during the Term, on the basis set out in this agreement.

2.2 Exclusivity: The Licensee’s appointment is exclusive within the Territory. However this exclusivity shall not prevent any person from selling Products within the Territory (in each case with the prior approval of Ubix):

(a) To an entity with a group decision-maker based outside the Territory and which has multiple sites, one or more of which is inside the Territory; or

(b) To an entity with which that person has a strong commercial relationship.

In those circumstances the Licensee will be entitled to fees for sales to sites within the Territory in accordance with paragraph 6 of Schedule 2.

...

2.4 Loss of exclusivity: Without limiting Ubix’ other rights under this agreement, if the Licensee breaches any of its obligations under this agreement (including any failure by the Licensee to achieve any sales target set by Ubix (in accordance with clause 4.2), Ubix may by written notice to the Licensee:

(a) Remove the Licensee’s right of exclusivity granted under

clause 2.2 with immediate effect; and/or

(b) Alter the Territory in such manner as Ubix determines.

2.5 Entitlement to perform other services: The Licensee will not during the term of this agreement supply to any person any product or service that competes with a product or service supplied by Ubix or LSL. The Licensee shall otherwise be entitled to supply products and services to any person, provided that the provision of such products or services does not detract from the performance of the Licensee’s obligation under this agreement.

[8] Clause 3 provides for the term of the agreement as follows:

3.1 This agreement commences on the Commencement Date and continues until terminated in accordance with clause 14.

[9] Clause 14 provides for termination on notice, termination by Ubix and termination on default. Under clause 14, Ubix may terminate the agreement at any time by giving three years’ written notice to the licensee provided that no such notice can expire within five years of the commencement date. The licensee may terminate the agreement at any time by giving six months’ written notice to Ubix. In terms of termination on default, clause 14.3 provides:

14.3 Termination on default: This agreement may be terminated immediately by either Ubix or the Licensee (“the first party”) giving notice in writing to the other of them (“the other party”):

(a) upon the other party committing any breach of this agreement that is incapable of being rectified;

(b) upon the other party committing any breach of this agreement that is not rectified within 30 days of written notice of the breach having been given to the other party;

(c) upon the other party becoming insolvent;

(d) upon a receiver or manager of any asset of the other party being appointed, or an order made or resolution passed for the liquidation of the other party.

[10] The agreement then provides for consequences of termination, including preservation of accrued rights as follows:

15.1 Accrued rights:

Termination of this Agreement will be without prejudice to any rights or obligations accrued as at the date of termination.

[11] There are also continuing obligations including under clauses 8, 9, 11, 13, 15 and 16. Relevant to this case clause 8 states:

8.1 The licensee must not within three months following termination directly or indirectly sell or offer to sell to any customer in the territory, any products or services which are similar to the Ubix products;

And clause 9 imposes an undertaking by the key person (Mr Jarvie):

(a) Not to take any action or make any omission which, if that action had been taken or omission had been made by the Licensee, would constitute a breach of this agreement by the Licensee; and

(b) Not to within three months following termination of this agreement either directly or indirectly sell or offer to sell to any customer in the territory any products or services which are similar to the products.

[12] The second Schedule dealing with fees provides a formula for payment to the licensee and contains provision for ongoing payment of fees following termination.

[13] Ubix claims that Mr Jarvie was offered an income support package in order to assist during the start up period. Mr Craig, general manager of Ubix, says that it was in effect an interest free loan but that it was a debt to be repayable by way of offset against future income. This is said to be recorded in a “term sheet” and sent to Mr Jarvie on 10 November 2011. That term sheet records:

The distributor will provide the licensee with a “start up” package which allows the reseller to invoice the distributor for a minimum income of $.... per month in the first six months of operation. The “start up” income is an advance against payments due from the distributor to the licensee, and will be offset against amounts to be paid to the licensee in future months.

[14] The income support package is said to have commenced in February 2012 for a six month term and comprised monthly payments of $12,000 plus GST. These monies were paid on invoice from SIS. The total amount of the support payments is said to be $48,000 plus GST, before they were discontinued in June 2012.

[15] It is common ground between the parties that the sales targets were not achieved. In a letter dated 16 May 2012 Mr Jarvie identified some of the measures he felt were necessary to gain initial and ongoing traction. This included ongoing financial support and specifically a request to reset the start up package and commence a new 12 month retained plan with monies paid to date being forgiven. He also sought a system upgrade, access to second hand devices, weekly telephone

conferences, an intermediary point of contact, access to marketing and web representation.

[16] In a letter dated 29 May 2012, Mr Craig wrote to Mr Jarvie setting out a revised financial support policy. That letter records in summary the key components of the policy as follows:

1. This offer supersedes any previous offer of financial support.

2. The financial support is in the form of a loan and, as such, is recoverable.

3. Your initial period of financial support is from February 2012 to July

2012.

4. For the balance of the initial period, your monthly guarantee amount will be $12,000 plus GST.

5. From July 2012, your support period may be extended by three months, subject to cumulative orders of $100,000 by that date, and

6. If necessary, at the end of the first extension, your support period may be extended by a further three months, provided $300,000 of cumulative orders is written before the start of the final extension period.

7. During the support period Ubix may partially recover any negative balances if actual commission earnings exceed $12,000 in any given commission month.

8. At the end of the support period, Ubix can recover any outstanding balances at a maximum rate of 25% of future commission earnings in any given commission period, unless the licensee agrees to a higher rate of recovery.

9. However in the event the licensee agreement is terminated, Ubix may immediately recover the entire outstanding balance, plus associated costs.

10. As per the previous arrangement, support payments will be made fortnightly but be limited to two payments per calendar month.

[17] Mr Jarvie responded in a letter dated 31 May 2012 recording that he was not comfortable continuing with a licence for Ubix in the Otago Region. More specifically Mr Jarvie stated:

I am not prepared to continue past the initial six month period hence my contact with you on Tuesday seeking a workable solution. As agreed every licensee is in the same position, we are all very experienced and well proven

successful sales people with a good sound knowledge of the industry and we are all facing the same revenue results. The revenue forecasts around which the opportunity was promoted and established have proven to be flawed.

[18] Mr Craig responded noting Mr Jarvie’s reluctance to make a commitment beyond the end of July and states further that Ubix believes that the enhanced offer of financial support fairly addresses the unforeseen circumstances of Ubix start up. He then says:

I am also obliged to inform you we immediately need to put a formal instrument in place, in order to continue support payments from now till the end of July. The most appropriate document to satisfy this requirement is the offer letter sent to you on 29 May last.

[19] Mr Jarvie considered that the revised package linked financial support to performance milestones that were unachievable. He therefore rejected the revised support package. Mr Craig then sent an email to Mr Jarvie on 11 June 2012 stating that:

As indicated in my memo dated 7 June, we need to put a support agreement in place, in the form of the offer emailed to you on 29 May.

Unless this happens by close of business today, my only option will be to exclude Southern Image Solutions from the payment schedule.

[20] Ubix was advised by letter dated 14 June 2012 that SIS was cancelling the licence agreement on the basis that SIS had been induced to enter into the licence agreement on grounds of misleading financial information supplied by Ubix.

[21] At the time Ubix suspected that Mr Jarvie had in fact taken employment with

Ricoh, a competitor of Ubix. That suspicion proved to be correct, and on 24 July

2012 they were notified that Mr Jarvie had accepted employment with Ricoh New

Zealand Limited.

The pleadings

[22] Ubix claims the following:

(a) SIS was not entitled to terminate the licence agreement without notice and as a result of termination the plaintiff has suffered loss, including the

investment made by the plaintiff by way of support to the defendants and there is no one in the Otago region promoting Ubix products.

(b) Mr Jarvie breached his obligations under the licence agreement including by ceasing to promote the Ubix products within the Otago region and through his employment with Ricoh. Claimed losses arise from the defendants’ failure to undertake promotional activities for Ubix products and the effect of employment with Ricoh on Ubix’s business and brand within the Otago region.

(c) Mr Jarvie has breached the income support agreement and has failed or refused to take steps to make repayment of advances in the sum of

$48,000.

Mr Jarvie’s response

[23] SIS and Mr Jarvie claim that the agreement was properly cancelled, given misrepresentations made by Ubix particularly in relation to the pricing structure, product differentiation, and the national launch and extensive marketing campaign that did not eventuate. Other representations are also identified that Mr Jarvie says

individually and collectively misled him into committing to Project D.[1]

Argument

[24] The plaintiff’s claims rest essentially on the confluence of clause 2.5 and

9.1(a) of the licence agreement. Under clause 2.5 the licensee must not provide similar product from competitors to the market. Under clause 9.1(a) the key person, Mr Jarvie, must not do anything that if undertaken by the licensee would breach the licence agreement.

[25] If the plaintiff is correct and the licence was not lawfully terminated under clause 14, then the combined effect of the clauses is that Mr Jarvie may not sell

competitors’ products. The plaintiff has fixed this requirement at six months to

reflect the minimum termination period set out at clause 14.

[26] The defendants do not dispute that if the licence agreement was not lawfully terminated, then the plaintiff’s claim is seriously arguable. However, the defendants say that the licence agreement was lawfully cancelled because the defendant was misled by the plaintiff in the following key respects:

38. The Plaintiff

(a) Misrepresented the transfer price of the MFDs;

(b) Represented that there would be an extensive marketing campaign with a national launch when there was no such planned campaign and launch;

(c) By representing that there would be extensive marketing campaigns and a national launch, represented that marketing plans were already in place;

(d) By providing forecast revenues, represented that market research had been undertaken to substantiate those forecasts, when there is no evidence of such market research having been undertaken;

(e) Represented that MFDs supplied to licensees were to be Develop brand MFD when in reality, they were rebranded Konica Minolta machines;

(f) By representing that the MFDs supplied were to be Develop brand MFDs, represented that supply arrangements were in place for Develop MFDs.

[27] The defendant says that:

(a) The plaintiff’s claim is not seriously arguable in light of these

misrepresentations; and

(b) The misrepresentations are relevant to the balance of convenience, in that the plaintiff does not come to the Court with clean hands.

Assessment

Seriously arguable?

[28] I am satisfied that the plaintiff has a seriously arguable case for the following key reasons:

(a) The right to terminate is clearly articulated and the licensee must give six months’ notice if the licensee wishes to terminate the agreement;

(b) The licensee did not give six months’ notice; and

(c) While the alleged misrepresentations are themselves arguable, I am not satisfied that the claims are so strong as to render the plaintiff’s claim not seriously arguable.

[29] Turning then to the claims of misrepresentation. The first key claim is that Ubix/Konica Minolta said that the price of the Ubix machines would be price competitive and they were not. In fact, the defendants say that the pricing was in reality no different to the Konica Minolta machines. The defendant relies on the following representations (among others):

(a) From Steven Spain (of CSG Print Services NZ Ltd, the owner of

Ubix) to Mr Jarvie on 14 September 2011:

It is based on the actual pricing and margins that we are seeing for Colour devices sold in Dunedin over the twelve months. The transfer price is set as per our discussion to allow a decent margin between the expected price and your “buy price”. The same applies to the Service component.

(b) The question and answer table sent by Steven Spain to Mr Jarvie on

18 September:

5. Is the Transfer price going to be 20% of the true landed cost and is there transparency over this?
   

The 20% is a guideline for how we will construct the price book. This will be above the cost of actually landing and

distributing the product into NZ. There will always be variations – depending on fluctuating exchange rates and variations between products. It is in the interests of both parties to ensure the pricing is competitive – and there will be opportunities for licensees to feedback market conditions

– and also to request special pricing for specific deals –

based on volume or market sector. The actual pricing details will have to remain confidential as KM/DEVELOP are not

permitted to disclose their buy-prices from KM Japan due to

their commercial sensitivities.

[30] There was also evidence from Mr Jarvie that he assessed the viability of the business based on the price competitiveness of the machines, but that the actual prices reflected Konica Minolta prices.

[31] Taken together, there is an arguable case of misrepresentation that induced Mr Jarvie to contract on a false premise. But the claim is not without its difficulties. It could be said that the representations were aspirational rather than providing a fixed guarantee of competitiveness. There is also evidence that Ubix adjusted the transfer price to make the price of the machines price competitive. All of this suggests a legitimate and seriously arguable contest is in play.

[32] The second key claim by the defendant is that there was going to be extensive marketing support associated with the brand launch that never eventuated. The evidence on this could be described as somewhat opaque, and the claim will largely depend on verbal exchanges and impressions left by, among others, Mr Spain. There is, however, contextual support, including the emphasis through the written discourse about the “re-launch” of the Ubix brand. There was also documented evidence that “marketing support will be provided centrally”. Again, while it could be said that there is an arguable case of misrepresentation, it is not so compelling as to prevent the basic claim by the plaintiff from crossing the seriously arguable threshold.

[33] The third essential claim by the defendant is that the forecasting was misleading. Mr Robinson emphasised that forecasting must have some factual basis. In reality, the rebranded Ubix machines failed miserably to achieve any sort of forecast target. However, whether or not the forecasting was misleading can only sensibly be resolved on hearing the evidence. That being so, this claim cannot render the plaintiff’s claim less than seriously arguable.

[34] The fourth key claim is that the MFDs (Ubix machines) were held out to be different from the Konica Minolta machines. Mr Jarvie avers as follows:

39. On or about 8th February I was advised that the “U-Bix” machines we were to sell were not in fact the “Develop” brand with “an inspired combination of German and Japanese technology” but were in fact, Konica Minolta MFD’s rebadged under the Ubix brand. The licensees had earlier been advised at an Auckland meeting that the devices were similar in look and design but the Develop devices had different European technologies. I was also aware the Develop devices had different consumables and these were not interchangeable with Konica Minolta devices.

[35] This is directly contradicted by Mr Craig:

7. Daryn Jarvie had already had discussions with Ubix prior to my commencing as General Manager in October 2011. I was aware that there had been a number of meetings with Mr Jarvie who had been flown to Auckland to discuss the territory licence programme. Mr Jarvie was considered a good candidate for the licensing programme in the Otago region and had a strong history with the copier industry and business, having worked for Konica Minolta in Dunedin and prior to entering the licence agreement, he was the branch manager for Konica Minolta based in Invercargill. Mr Jarvie was also enthusiastic about the opportunity to build a local business, and I am aware that he took time to assess the programme, including taking independent advice from a lawyer and his accountant.

[36] I cannot sensibly resolve this claim on the papers. Plainly, there is a seriously arguable claim by the defendant that will need to be resolved at trial. Again, however, it is not so obviously robust as to cause the plaintiff’s claim to fall below the seriously arguable threshold.

An additional matter

[37] At the hearing Mr Robinson raised a further defence to the plaintiff’s claim. He says that the plaintiff threatened to cease to make further support payments unless the defendant agreed to a revised agreement. This is then said to constitute a unilateral variation, ultimatum and repudiation of the licence agreement for the purposes of s 7(2) of the Contractual Remedies Act 1979.

[38] As this claim had not been raised earlier, I granted leave to the parties to file submissions on this aspect and they did so.

[39] The factual basis for the defendants’ claim appears to be sound. The plaintiff

wrote to the defendants stating:

As indicated in my memo dated 7 June, we need to put a support agreement in place, in the form of the offer emailed to you on 29 May.

Unless this happens by close of business today, my only option will be to exclude Southern Image Solutions from the payment schedule.

[40] The defendant then says that the support payments were essential to them and Mr Jarvie would not have entered into the licence agreement without them. There is also an evidential basis for this claim, with numerous references to the support payments in conjunction with discussions about the licence agreement.[2]

[41] The start up payments also coincide with the performance of the licence agreement until they were discontinued in June 2012. This evidence, in combination, supports the defendants’ claim that the plaintiff repudiated the agreement.

[42] In response, the plaintiff contends:

(a) There was no conduct on the part of the plaintiff which constituted a clear refusal by the plaintiff to perform its obligations and indeed there was conduct which clearly indicated the contrary;

(b) The plaintiff had no obligation to make the June and July monthly support payments in the overall circumstances, and therefore the

_{anticipated withholding of such payments by the plaintiff could not}

constitute repudiation;

(c) Any obligation that the plaintiff had to provide support payments to the first defendant in June or July 2012 could still have been met when due, so that at the time the first defendant purported to terminate the territory licence agreement, there was no breach by the plaintiff of any term, let alone an essential term;

(d) Any non payment was a breach which was capable of being remedied and in accordance with cl 14.3(b) of the agreement the first defendant could not terminate the territory licence agreement without first giving the plaintiff 30 days’ written notice under that clause.[3]

[43] There is then a rejoinder from the defendants filed with the Court on

2 October 2012, that the plaintiff’s conduct amounts to repudiation, not breach, so clause 14 has no application as it applies only to “breaches” of the licence.[4] It is also said that clause 14 does not apply to the collateral agreement to provide start up payments.

Assessment

[44] Of the various claims by the defendant, this claim has the most obvious merit. Applying the test set out in Betham v Margetts, there was:[5]

... an irrevocable indication that the party concerned would take no further steps to perform his or her obligations under the contract ... .

[45] There are nevertheless complexities associated with this claim. The defendants had already foreshadowed termination of the relationship.[6] The plaintiff’s actions must be seen in that light. The plaintiff could arguably be said to be looking to manage its exposure. Further the defendants’ contention that clause 14

_{does not apply to the collateral support agreement somewhat dilutes the argument}

that the threat to cease the start up payments was an irrevocable indication that Ubix would not perform the licence obligations. So while this claim by the defendant is seriously arguable, and intuitively has merit, I am again not satisfied that the plaintiff’s general claim is so inarguable that it ought to be precluded from seeking injunctive relief on that ground.

[46] I then turn to the balance of convenience issue.

Balance of convenience

[47] In summary the plaintiff highlighted the following factors of concern:

(a) Mr Jarvie had a central role in the relaunching of the Ubix brand in the Otago region and had, over a course of several months, identified a number of prospective opportunities for the sale of Ubix machines. The premature cessation of the licence agreement, and Mr Jarvie’s employment with a competitor, Ricoh, will in effect preclude Ubix from obtaining any benefit from the licence agreement and conversely will place a competitor at a serious commercial advantage.

(b) The loss to Ubix would be very difficult to quantify, there being no clear objective measure of the loss incurred by Ubix, and therefore the prospect of damages does not present itself as an obvious remedy in this particular context.

(c) The licence agreement subject to the proceedings is one of many licence agreements and the capacity of Ubix to enforce those agreements, including by way of injunctive relief, is critical to maintaining their integrity.

[48] The plaintiff also says that Mr Jarvie’s employment with Ricoh is not in jeopardy, given that Ricoh was on notice of the plaintiff’s claim at the time it retained Mr Jarvie.

[49] Ubix thus contends that, these factors taken together, implore injunctive relief for the remaining termination period as contemplated by the agreement.

[50] Against this, the defendants claim that an injunction in this context would be unfair. The defendant is effectively the sole breadwinner for his family. All of his training is directed to the sale of photocopying machines and similar devices and but for the misrepresentations by the plaintiff, he would be gainfully employed. The defendant also says that the market for the Ubix machines was very weak, as evidenced by the demonstrable failure to achieve any market penetration in the several months he was involved in the relaunch of the Ubix brand. But in any event, the quantification of any loss to Ubix is readily achievable based on available market information and assessment of likely penetration of the Ubix brand into the market and the losses resulting from the early termination of the agreement. In addition, in order to accommodate some of the concerns expressed by Ubix, Mr Jarvie has offered to extend the period of non-solicitation of prospects identified by him during his time with Ubix. This is said to significantly mitigate any exposure that Ubix might have had as a consequence of his early termination.

Resolution

[51] The effect of an injunction at this stage, if granted on terms sought by the plaintiff, is that Mr Jarvie will be precluded from sale of devices that could otherwise have been marketed on behalf of Ubix for a further period of three months. It does not preclude Mr Jarvie from sale of devices that do not fall into that description. Furthermore, I accept Mr Harrison’s contention that on its face, Ricoh having employed Mr Jarvie with knowledge of the claim by Ubix, cannot, reasonably in my view, terminate Mr Jarvie’s employment on that ground. Naturally, that would have to be a matter resolved in the proper context of an employment dispute, but I think it is a relevant factor bearing favourably on the plaintiff’s claim.

[52] All of this strongly supports an injunction of some kind, particularly given that the integrity and force of the licence agreement depends entirely on the ability of Ubix to take up the opportunities identified during the start up period. Indeed, in my view, licensees that prematurely terminate the licence agreement, and then take up

employment with competitors, seriously undermine the veracity of such agreements if they cannot be enforced speedily. I also accept that damages are unlikely to provide a suitable remedy in circumstances where the penetration of the Ubix brand into the market has been weak. There must be some conjecture about the loss to Ubix in financial terms given that background. The further problem for Ubix is that, in its crippled state, the prospect of it turning around such poor performance while still competing directly with Mr Jarvie (and Ricoh) must be small.

[53] Balanced against this, I am conscious that Mr Jarvie has made a significant commitment also to the Ubix brand on certain understandings which, at least in his mind, have proven to be false. Mr Jarvie also worked hard to give effect to the agreement. Furthermore, if he is correct, and there were misrepresentations as to price and as to product differentiation, then he could be said to be legitimately aggrieved. He has foregone a significant opportunity to work with competitors. This line of work is also his livelihood.

[54] In those circumstances, I think the proper outcome is injunctive relief, in the form of a prohibition on solicitation of all prospects identified by Mr Jarvie through and during his performance under the licence agreement. While this is not a complete “restraint of trade,” it maintains a key aspect of the integrity of the licence agreement, namely that customers and prospective customers identified during the start up phase remain directly accessible only to Ubix and not to Mr Jarvie. I do not think, however, that Mr Jarvie should otherwise be precluded from operating in his specialist market given the wider background and the arguable case he has in terms of misrepresentation and unilateral variation.

Result

[55] I propose to grant an injunction preventing Mr Jarvie from directly or indirectly selling or offering to sell to any person identified in Exhibits AC8, AC9, AC10 and AC11 in the Territory (as defined in the Licence Agreement) any products or services which are similar to the Products (as defined in the Licence Agreement). The period of the injunction will be limited to the remainder of the termination period.

[56] For the purpose of the final framing of the injunction, I invite counsel to, by

5 pm Wednesday, 10 October 2012:

(a) Provide a list of the affected persons;

(b) The last day for the injunction; and if possible

(c) Agree the precise terms of the proposed injunction contemplated.

[57] My expectation is that Mr Jarvie will abide by the general direction I have given until the exact terms of the injunction are concluded.

Costs

[58] I am mindful that the defendants offered up a non solicitation clause at the hearing. But the plaintiff has broadly succeeded in obtaining injunctive relief. Against that background, if the parties cannot agree, I invite submissions on costs.

Solicitors:

Harrison Stone, Auckland, for Plaintiffs

GCA Legal, Dunedin, for Defendants

---

[1] Refer [26] below.

[2] Excerpts recorded at paragraph 2 of supplementary submissions:

(a) “The company would loan you $10k per month to get you established for 6 months. This

would be offset against earnings in some way” (exh DHJ-3);

(b) “...as discussed earning scan be toped (sic) up to $10K each month for the first six months by way of advance or loan, and if all turned to custard after everyones (sic) best efforts we would find a role for you as a KM sales agent, account manager or branch manager. Hope that gives you the comfort you need to move forward with us” (exh DHJ-3);

(c) “This is not interest bearing – and is intended to provide you with a safety net while you get the business up and running. It is a “top up” to make sure you earn a minimum level of income in the start up phase – but will be paid back once your earnings start to exceed this amount – which should be very quickly. It is quite feasible that you won’t even need the top up if you need (sic) the ground running and build your sales volumes quickly” (exh DJH-4);

(d) Described as a “start up package” providing for “minimum income of $12,000 per month for the first six months of operation...” offset against income (subject to a threshold) (exh AC-2);

[3] _{Clause 14.3 is set out at [9] above.}
[4] _{Citing Bromley Industries Limited v Martin & Judith Fitzsimons Limited [2009] NZCA 382.}
[5] _{Betham v Margetts [1996] 2 NZLR 708, at 711.}
[6] Refer [17] above.