European Woodworks Limited v Habermann [2014] NZHC 2802 (12 November 2014)

Last Updated: 1 December 2014

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

CIV-2014-412-000147 [2014] NZHC 2802

BETWEEN	EUROPEAN WOODWORKS LIMITED Plaintiff
AND	SANDRA HABERMANN AND CHRISTIAN RAMPE First Defendants
AND	THERMADURA LIMITED Second Defendant

Hearing:	10 November 2014 (By way of telephone conference)
Appearances:	D M Lester for Plaintiff D R Tobin for Defendants
Judgment:	12 November 2014

_{COSTS DECISION OF DUNNINGHAM J}

Introduction

[1] The plaintiff issued these proceedings to enforce a restraint of trade given by the first defendants.

[2] The plaintiff operates a joinery business in Dunedin, which the plaintiff ’s sole shareholder and director, Mr Daken, acquired by purchasing shares from the first defendants. At the time he acquired the shares, he also sought and obtained a restraint of trade from the first defendants. It prevented them from carrying on, or being interested in a business which was “similar to the business” of the plaintiff, until 27 September 2015, although, it also contained an exception allowing the first defendants to build and supply windows and doors for conservatories from

_{27 September 2014.}

EUROPEAN WOODWORKS LIMITED v HABERMANN AND ANOR [2014] NZHC 2802 [12 November 2014]

[3] However, shortly before these proceedings issued, the plaintiff found that the first defendants, through a company they incorporated on 4 October 2013 and which is named as the second defendant, had won the tender to supply windows to a value of around $77,000 plus GST for a new home construction in Plynlimon Road, Christchurch. The plaintiff took the view that this action was in breach of the restraint of trade.

[4] The plaintiff wrote, via its solicitors, to the defendants, requiring them to provide an undertaking to “immediately desist from any production or business activity that includes the production or offering for sale of products that are similar to the type manufactured and sold by European Woodworks Limited and to remain out of that market for the duration of the restraint period”, failing which the plaintiff would take the necessary action to seek either damages or injunctive relief or both. No such undertaking was given in the time required.

[5] As a consequence, these proceedings were filed on 4 September 2014, and, on 17 September 2014, the defendants provided an undertaking to the Court on the following terms:

We Sandra Habermann and Christian Rampe hereby undertake to this Honourable Court that, save in relation to conservatories only, we will not directly or indirectly carry on or be interested, either alone or in partnership with or as manager, agent, director, shareholder, financier or employee of any person, in any business similar to the business of the plaintiff and in particular shall not sell or supply any doors and windows in competition with the business of the plaintiff.

Thermadura Limited hereby undertakes to this Honourable Court not to directly or indirectly sell or supply any doors and windows in competition with the business of the plaintiff, except in relation to conservatories.

[6] Both the undertakings were given for the period through to 27 September

2015.

[7] Once the undertakings had been provided, the defendants wrote to the plaintiff saying “I assume that these proceedings can be brought to an end by your client filing a notice of discontinuance”.

[8] The plaintiff’s lawyer responded saying “with the undertakings lasting for the duration of the restraint, the undertakings have in practical terms taken the place of the injunction order sought”. It also said that, as the second defendant has cancelled the job in Christchurch that led to the injunction, “there is no issue as to an account of profits”. The letter went on to propose that the proceeding be dealt with by the defendants:

(a) paying costs on a 2B basis, plus disbursements;

(b) confirming the advice regarding the cancellation of the Plynlimon

Road job by way of affidavit; and

(c) there be a Tomlin order staying the proceedings on the terms of the undertakings.

[9] The defendants responded by saying that the proposal in the letter was not accepted and that instead their solicitor had instructions to file a statement of defence and counterclaim testing the validity of the restraint of trade. The defendants wished to argue that the supply of wooden joinery for “passive house” construction,¹ was not encompassed by the restraint of trade, and that damages would be sought for the loss of the Plynlimon Road job which came within that category.

Has the undertaking resolved the plaintiff ’s claim?

[10] In the normal course, undertakings are given to avoid the need to hear an interim injunction application, but on the basis they apply until further order of the Court, and where the substantive proceeding is expected to proceed by both parties. However, in this case, the terms of the undertakings were not expressed to be interim but were co-extensive with the final relief sought by the plaintiff. Furthermore, both parties anticipated that the proceeding would terminate following the provision of the undertaking. That is clear from the defendants’ lawyer’s letter dated

23 September 2014, and is implicit in the directions made by Gendall J on

_{17 September 2014.}

1. A passive house being one that meets a rigorous voluntary standard for energy efficiency in a building.

[11] It seems however, that while the defendants accept that the undertaking given covers joinery of the type proposed for the Plynlimon Road house (that is, passive house joinery), they still wish to argue that the restraint itself does not cover such joinery and they have filed a statement of defence to that effect. Furthermore, they have raised two counterclaims seeking:

(a) a loss of profits on the Plynlimon Road contract; and

(b) damages under the Fair Trading Act 1986 for certain representations allegedly made by the plaintiff about whether the second defendant’s windows and doors should be certified as complying with the relevant New Zealand building standards.

[12] From the plaintiff’s perspective, the scope of the undertakings given address the plaintiff’s concerns entirely. It therefore considers the matter is at an end save for costs. The defendants however, argue that they should not be in a worse position by giving the undertakings than they would have been in if the application for interim injunction had been heard. Instead they suggest there may have been an “error in the undertaking”. That has been reiterated in a memorandum of counsel for the defendants filed subsequently, where they say “there is a misapprehension as to the reason the undertaking was given by the defendants. Counsel accepts full responsibility for that misunderstanding”. It appears that the defendants intended to offer an undertaking on an interim basis, but without prejudice to an argument that the type of joinery required for the Plynlimon Road house was not captured by the restraint.

[13] There can be no doubt that undertakings were clearly and unequivocally provided. More importantly, the undertakings addressed the fundamental dispute. The undertakings are almost identical in wording and scope to the restraint of trade clause. They were stated to apply until 27 September 2015 and, so long as the undertakings continue to operate, there is now no practical reason for further proceedings by the plaintiff.

[14] Instead, it appears that the defendants have committed an inexplicable “about face” in respect of the position set out in their lawyer’s letter of 23 September 2014, where they expressed the view that the plaintiff should now file a notice of discontinuance. It is unclear why, after receiving the plaintiff’s lawyers’ letter on 30

September 2014, the defendants therefore decided to pursue matters again.

[15] I note that the only circumstances in which the defendants could be released from their undertaking is where there has been “a change in circumstances that would render the enforcement of the undertaking unjust”.² It is difficult to see, in the present case, what change of circumstances there has been, which would justify this particularly when the issues the defendants wish to pursue were identified in their letter of 23 September 2014, but they said they did not intend to pursue them. However, the defendants may wish to seek such amendment and I note that, if they

wish to be released, the appropriate course is to apply to the Court for release, with an offer of undertakings on different terms.³

[16] As the undertakings remain operative until the expiration of the restraint of trade clause, the plaintiff has sought a Tomlin order staying its proceeding except for the purpose of enforcing the undertakings. At this stage, though I will not stay the proceedings as requested by the plaintiff, but will allow time for:

(a) the defendants to consider whether an application is to be made to amend the undertakings; and

(b) for the plaintiffs to file a defence to the counterclaims, which, in accordance with High Court Rule 5.59 could proceed in any event.

[17] However, I am satisfied that, at this juncture, the plaintiff is entitled to costs on the bringing of the application. The undertakings were not provided in response to the plaintiff’s solicitor’s letter sent on 20 August 2014 and it was only with the issue of proceedings that the undertakings were offered. The undertakings given

_{have been accepted and, unless an indulgence is extended to the defendants, those}

² _{Jones v Sky City Auckland Limited HC Auckland CP229/AS01, 31 August 2001.}

³ Neuronz Limited v Tran HC Auckland CP623/SW01, 14 May 2002 at [100].

undertakings resolve the plaintiff’s claim. Costs on a 2B basis, together with

disbursements fixed by the Registrar, are ordered in the plaintiff’s favour.

Solicitors:

Cameron & Co., Christchurch

Dean Tobin, Dunedin