Tyre Collection Services Limited v Le Roy [2016] NZHC 788 (22 April 2016)

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BETWEEN	TYRE COLLECTION SERVICES LIMITED Plaintiff
AND	MICHAEL BENNY LE ROY First Defendant
AND	JAMISON INVESTMENTS LIMITED Second Defendant
AND	TYRE RECYCLING SERVICES NEW ZEALAND LIMITED _{Third Defendant}

Hearing:	20 April 2016
Appearances:	G A Biggs for Plaintiff D J Ballantyne for the First, Second and Third Defendants
_Judgment:	_{22 April 2016}

[1] On 10 March 2016, I granted an interim injunction restraining the first and second defendants from being involved with tyre recycling or tyre collections until further order of the Court, and restraining the third defendant from assisting the first and second defendants in any way in such activities. The defendants have appealed that decision.

[2] The defendants now seek a stay of execution of the interim injunction orders while their appeal is pursued. The grounds for the stay are wide-ranging and

(a) if the stay is not granted the applicants’ appeal may be rendered nugatory because:

(i) the interim injunction prevents Tyre Recycling Services New Zealand Limited (TRSNZL) from normal trading in that it cannot continue to contract its sole contractor, Jamison Investments Limited (JIL), service its customer base, and meet its day to day expenses, including staff costs;

(ii) JIL cannot contract to TRSNZL and has been unable to find alternative uses for its tyre collection trucks;

(iii) Mr Le Roy has no source of income through JIL, and has provided guarantees in support of JIL’s borrowing to purchase its branded tyre collection trucks;

(b) the judgment is adversely affecting the interests of third parties including TRSNZL’s customers, employees and the market for tyre recycling/collection services;

(d) if the applicants’ appeal is unsuccessful, the respondent’s interests will be preserved by an enquiry into damages;

(e) the overall balance of convenience lies in staying execution of the judgment appealed against to maintain the status quo prior to the judgment.

19 April 2016, they received a minute from the Court of Appeal declining to do so. In making that decision the Court noted that Mr Le Roy and JIL have:

[4] The refusal to fast track the appeal means the practical effect of granting a stay is to reverse the grant of the interim injunction for at least three to six months until the appeal is heard. The issue before me is whether I should grant a stay in those circumstances, having regard to the further evidence before me at this time.

[5] The background to this application is more fully set out in my judgment granting the interim injunction.¹However, in summary, the plaintiff, TCSL, is a tyre collection company based in Rolleston, Canterbury which collects and processes “end of life” tyres, selling some to end users such as farmers but shipping the majority off shore for reprocessing.

[6] Mr Le Roy is the sole director and shareholder of JIL and, between April 2014 and January 2016, JIL was contracted by TCSL to collect end of life tyres on its behalf.

[7] TRSNZL was incorporated in November 2015. Its sole director and shareholder is Ms Melodie Clark, Mr Le Roy’s stepdaughter. TRSNZL is also in the business of collecting used tyres, though it operates a tyre shredding machine that allows it to recycle the tyres it collects domestically.

[8] In early 2014, TCSL advertised for an independent contractor to undertake tyre collection work for TCSL. As a consequence, Mr Le Roy met with Mr Daryl Shackleton, TCSL’s director, and discussed fulfilling this role. Mr Le Roy then set up his company JIL to undertake this work for TCSL and, on 14 April 2014, JIL entered into a short-term contract to collect tyres on behalf of TCSL, during which time JIL leased TCSL’s Mitsubishi truck. The contract envisaged that, at the conclusion of the short term contract, JIL would have the option of purchasing the

_{truck for $90,000 plus GST and entering a new three year contract with
TCSL. That}

[9] The July contract was drafted by Mr Shackleton and included the following restraint of trade:

After the three year term as long as both parties are happy the contract will be renewed.

If JIL wish to end their contract with TCS at any time, a 3 month written notice period must be worked out unless otherwise agreed by both parties in writing.

At this point, both JIL and Michael Benny Le Roy agree to a trade of restraint (sic) that they will not enter into anything to do with tyre recycling or tyre collections on their own behalf or on behalf of another party for the period of three years from termination date.

[10] There are various factual disputes about what else was said or agreed at the time the contract was entered into. Mr Le Roy asserts the contract was to be an exclusive contract, which TCSL denies. TCSL asserts that Mr Shackleton provided Mr Le Roy with various confidential company information at the time the contract was entered into, and subsequently, including TCSL’s pricing structure for customers, which Mr Le Roy denies. These are, of course, matters for resolution in the substantive proceedings.

[11] In February 2015, TCSL employed two members of staff to assist with undertaking its tyre collection work. Mr Le Roy and JIL argue this was in breach of representations made to them which formed terms of the July contract. Equally though, Mr Shackleton argues that JIL was in breach of its contractual obligations to TCSL in various ways. It appears that while attempts were made to iron out the differences during 2015, these were not successful.

on 21 January 2016, he was informed by one of TCSL’s other drivers, that he had

seen a business card for a company called Tyre Recycling Service NZ Limited on the counter of one of TCSL’s customers, Budget Tyres, in Christchurch. On it, it had the name Mike handwritten on it with a cell-phone number. Mr Shackleton recognised the handwriting and the phone number as belonging to Mr Le Roy.

[13] Mr Shackleton had not heard of a company of that name. When he checked the Companies Office website he found a company, Tyre Recycling Services New Zealand Limited, had been incorporated on 26 November 2015. The sole director and shareholder was Melodie Anne Merrie Clark, who was the daughter of Mr Le Roy’s wife. TRSNZL had also set up a website which Mr Shackleton says offered services which are “exactly the type of business that TCSL carries out and is directly in competition [with it]”. He rang the firm’s contact number and he recognised the voice on the answering machine as Mr Le Roy’s.

[14] Once Mr Shackleton had satisfied himself that Mr Le Roy was involved with TRSNZL, he took the view that Mr Le Roy and JIL were in breach of the July contract and he decided to terminate that agreement. On 26 January 2016 he prepared a letter informing JIL and Mr Le Roy of this. However, he first spoke to Mr Le Roy to see what he had to say about this business. He says Mr Le Roy denied any knowledge of the business or of knowing Melodie Clark, despite the fact she is Mr Le Roy’s stepdaughter. At this point, Mr Shackleton handed Mr Le Roy the letter terminating the July contract. This letter was followed up with a letter from TCSL’s lawyers to Mr Le Roy and JIL claiming that their actions in setting up the rival business were a significant breach of the July contract, justifying immediate termination, particularly given they were using TCSL’s confidential information to assist the new company, TRSNZL, to set up in business and to undercut TCSL.

[15] TCSL filed proceedings on 9 February 2016. In those proceedings it claimed that Mr Le Roy and JIL were:

[16] The defendants have denied all claims against them and make a similarly extensive range of counterclaims against the plaintiff, including claims that:

(a) the plaintiff has breached representations that the July contract would be an exclusive contract;

(c) if there is an enforceable restraint of trade, TCSL should be estopped from relying on a breach of the restraint of trade; and

(d) there has been misleading and deceptive conduct by the plaintiff under the Fair Trading Act 1986.

[17] There can be little doubt that the relationship between the plaintiff and the defendants is acrimonious, and every possible claim and counterclaim has been made by each side against the other in the ensuing legal battle.

[18] Since the defendants filed their appeal against the interim injunction decision, they have filed both this application for a stay and an application for summary judgment, by the second defendant, against the plaintiff, for the sum of $14,820.71 owed to it under the July contract. The plaintiff acknowledges this sum is owing, but says it has placed in a solicitor’s trust account pending resolution of its own claim against the second defendant, which it claims as a set-off and says will exceed the amount owed under the July contract.

[19] The plaintiff has, in turn, made an application for enforcement of the interlocutory orders I made on 10 March 2016, claiming the defendants have

repeatedly breached those orders, as Mr Le Roy and JIL have continued their involvement in providing tyre collection services for TRSNZL.

[20] The affidavit evidence filed by the parties in relation to the stay application needs to be set out in some detail given it is relied on to alter where the balance of convenience now lies since the interim injunction orders were made.

[21] For the defendants, Mr Ballantyne acknowledges that many of the same considerations arise in deciding an application for stay, as arose in the original interim injunction hearing. However, he says I should have regard to the evidence that the financial problems the defendants signalled would result in the interim injunction hearing, have now crystallised, and would likely render his clients’ appeal rights nugatory, if a stay is not granted.

[22] On the other hand, Ms Biggs, for the plaintiff, says that all the considerations which led to the interim injunction being granted in the first place, apply with equal force to the application for stay. Moreover, the defendants have not given a full or reliable picture in the subsequent affidavits as to what the financial consequences have, in fact, been. Instead, Mr Le Roy has been selective and inconsistent as to what information he has put before the Court about the financial impact on the defendants. Furthermore, he and his company have been in breach of the interim injunction. That evidence reinforces the appropriateness of the original decision and point against the stay being granted.

JIL has been unable to earn tyre collection contracting income since the interim injunction was granted from its contract with TRSNZL, and unable to find alternative sources of income for its branded tyre collection trucks.

TRSNZL lost its sole tyre collection contractor, JIL. Instead, it has had to lease trucks and contract drivers.

In February 2016, TRSNZL achieved income from tyre cartage of $43,900, gross profit of $36,614 and net profit of $32,824. Its projected income for the year end 31 March 2017 is in excess of $600,000.

By mid-March, after the interim injunction was granted, its income from tyre cartage reduced to $6,013 with a gross profit of $4,800 and a net profit of

Southern Finance Limited have security over JIL’s tyre collection trucks and will no doubt exercise its power under the loan agreements to repossess and sell the tyre collection trucks if JIL cannot secure a regular source of income to service these loans. I have personally guaranteed JIL’s borrowing from Southern Finance Limited.

I confirm that since the interim injunction was granted JIL has used every effort to find alternate contracting work for its branded tyre collection trucks. Its attempts have been unsuccessful. I have also been unsuccessful in obtaining alternate work.

[24] No details were provided by Mr Le Roy as to exactly what efforts he and JIL had made to get alternate cartage work, nor did he provide any evidence of the extent of JIL’s financial obligations, or of how the TRSNZL’s net profit was calculated.

[25] The evidence filed by the plaintiff in opposition to the application for stay, and in support of an application for enforcement of the interim restraining orders, claimed that Mr Le Roy and JIL had continued to work for TRSNZL by carrying out tyre collection services since 10 March 2016.

Scrap Tyre Movements, a competitor in the tyre collection business. He says that on

14 March 2016, he attended one of his customers premises, Economy Tyres, in Christchurch, where one of the mechanics told him that Mr Le Roy had called in earlier that day and offered to carry out tyre collections and left his business card for TRSNZL. The mechanic showed Mr Dick the business card left by Mr Le Roy. Mr Dick says he recognised the card and the name, as many of his other customers had told him that Mr Le Roy has offered to do their tyre collection and left them his cards.

[27] On 24 March 2016 he says he attended the premises of another customer, Jade Automotive Limited, which is also located in Christchurch. While there he saw a TRSNZL truck. There were two men in the truck and the truck was half to three quarters full of tyres. He subsequently had confirmation from the owner of Jade Automotive that that business is now using Mr Le Roy for its tyre collections.

14 April 2016 the owner confirmed that Mr Le Roy was now collecting its tyres and he showed Mr Dick invoices from TRSNZL.

[29] Another affidavit was from Mr Aaron Saddler, an employee of TCSL, who says he knows Mr Le Roy from when he was contracted to TCSL. His evidence is that on 14 March 2016 he saw a JIL truck carrying signage for TRSNZL, operating at Beaurepairs in Hornby. He then saw the same truck again on 21 March 2016 being operated by two men in high visibility overalls, and the container of the truck was full of tyres.

[30] Mr Brent White, a director of Classic Towing Limited, gives affidavit evidence that he knows both Mr Shackleton and Mr Le Roy. He says that on

23 March 2016 he saw Mr Le Roy pass him in the Mitsubishi Fuso truck marked in TCSL colours and, when he saw the truck pull up to a side road in Blenheim, he saw Mr Le Roy get out of the truck, drop its rear platform, collect tyres from a container and load them on to the truck. He took photographs of this which he attaches to his affidavit. He also telephoned Mr Le Roy’s mobile number and says that Mr Le Roy answered and he recognised his voice and confirmed his name to him. He says Mr Le Roy confirmed that he was “the only person who carried out tyre collections in the South Island and ... would be happy to collect tyres from me”.

5.15 pm close to Rolleston, and he says “the truck was full of tyres. They were pressing against the curtains and were visible”.

6 April 2016, when she was a passenger in a vehicle near Rolleston, she saw Mr Le Roy drive past them in the Mitsubishi Fuso truck that he used for tyre collections when collecting for TCSL. It was also towing a trailer which was full of tyres. She said Mr Le Roy was driving the truck and she had a clear view of his face as he drove past. She also says that they followed the truck, saw Mr Le Roy drive the truck into his driveway on Main South Road, Templeton, which is where he lives and stores this truck and another truck branded with the third defendant’s name, TRSNZL. She took a short video of the truck on her mobile as they followed it.

[33] Those affidavits prompted an affidavit of Mr Le Roy in reply. In response to Mr White’s evidence he says he has not heard of, or met, Brent White and does not believe that Mr White knows what he looks like. He says TCSL’s branding has been removed from the Mitsubishi Fuso truck since early February 2016 and he does not recall having a telephone discussion with Mr White on 23 March 2016. He also says that he no longer answers TRSNZL’s number, but does answer his personal mobile number. If he is contacted by customers of TRSNZL on that number he refers them to that company. He also says that he has reviewed his log book and he was not driving at the time Mr White alleges on 6 April 2016 and his log book is a reliable record.

[34] In response to Ms Harwood’s evidence he again reiterates that his log book does not show that he was driving at 5.00 pm on 6 April 2016 and he does not accept that the video footage is from that date as it is undated. He also cast doubt on her identification of him as a driver, saying “the truck’s windscreen is tinted and I have to wear tinted prescription sunglasses”. He also points to the absence of any video footage showing him driving.

[35] In response to Mr Dick’s evidence, he accepts that before the interim injunction was granted, he was able to obtain for TRSNZL a number of collection contracts from Mr Dick’s customers. He says “these continue to be serviced by TRSNZL and it leases JIL’s trucks to complete its collections. I am regularly contacted but refer these approaches to TRSNZL. I have made arrangements to lease JIL’s trucks to TRSNZL so that JIL is not in breach of the interim injunction”. He

[36] He says that he continues to drive for JIL “when its trucks are not being used to TRSNZL”. He also explains that, while JIL’s trucks are leased to TRSNZL, and are used by employed drivers or his stepdaughter to undertake the tyre collections for TRSNZL, the trucks “are stored at my house, and I do drive them, but I do not consider myself to have breached the interim injunction”.

[37] Finally, in terms of the defendant’s financial position, he now says that:

JIL has since had to borrow to fund these proceedings and will need to see if they can borrow even more to continue to fund the proceedings. Its income is reduced but that is as a direct result of TCSL’s actions. If needed, JIL can sell its trucks to meet any award of damages. These are currently worth around $120,000 combined. The Mitsubishi is worth around $65,000 plus GST, the Isuzu is worth around $55,000 plus GST. Its issue is that it needs cashflow to pursue the proceedings and service its borrowings.

[38] It is within the framework of this untested and, at points, contradictory affidavit evidence, that I have to consider the application for stay of the interim injunction orders.

[39] There are clear parallels between the considerations which apply to the grant of a stay of execution, and those that applied in determining whether to grant the interim injunction. They involve a balancing exercise between the injustices which would arise if the stay was granted, against the injustices which would arise if the

In applications of this kind it is necessary to weigh all of the factors in the balance between the right of a successful litigant to have the fruits of a judgment and the need to preserve the position in case the appeal is successful. Often it is possible to secure an intermediate position by conditions or undertakings and each case must be determined on its own circumstances.

[40] That weighing exercise has generally been undertaken with regard to the factors identified in Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd,³which are set out as follows:

The factors to which the Courts conventionally address themselves to find this balance include the following:

(ii) The bona fides of the applicants as to the prosecution of the appeal. (iii) Will the successful party be injuriously affected by this stay?

(v) The novelty and importance of the question involved. (vi) The public interest in the proceedings.

[41] The Court went on to say that those factors are not exhaustive and the individual factual circumstances of the particular case will need to be taken into account. Furthermore, the fact that no relief may ultimately be available as the result of a refusal of a stay application, is not fatal.⁴It will only be one factor to balance in deciding where the overall interests of justice lie.

[42] In the present case, I consider a relevant consideration is that the application seeks interim relief which would effectively reverse the interim relief granted on

10 March 2016 for a number of months. Given a decision has already been reached on how the competing interests of the parties should be addressed in the interim, I consider that a stay of that interim relief should only be granted where there is further information before the Court that alters where the balance of convenience lies, or otherwise affects the overall justice of the case.

_{[43] I now turn to consider those principles as they apply in the
present case.}

³Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd (1999) 13 PRNZ 48 (CA)

[44] The defendants say that if the stay is not granted, their appeal to the Court of Appeal may be rendered nugatory. They refer to the evidence as to the financial performance of TRSNZL and JIL since the interim injunction was granted which, the defendants say, amounts to lost net income to TRSNZL of around $29,000 per month and no income for Mr Le Roy and JIL. They therefore say that they would not have the financial capacity to pursue the appeal to the Court of Appeal or to recover financially from the effects of the interim injunction if it is quashed on appeal. Those concerns are compounded by the fact the Court of Appeal has declined to place the appeal on the fast track.

[45] However, in my view, the evidence that neither Mr Le Roy nor JIL have been able to earn income or find alternative sources of income for trucks since the interim injunction orders were made, is inconsistent with the contents of Mr Le Roy’s reply affidavit of 19 April 2016, and lack credibility. Contrary to the original assertion that JIL has not been able to earn income, the evidence in reply from Mr Le Roy is that JIL leases its truck to TRSNZL and is in receipt of rental income for this (although the details of that lease are not disclosed in the evidence).

[46] TRSNZL has also, on Mr Le Roy’s evidence, continued to trade and carry out tyre collections, through employing staff and leasing JIL’s trucks, so it is not clear why its income has dropped as claimed. Additionally, on Mr Le Roy’s evidence, he continues to drive for JIL when its trucks are not being used for TRSNZL’s business, although he has not indicated what business JIL undertakes which allows him to drive from that company nor what income he earns from this. Furthermore, if Mr Le Roy does lease his trucks to TRSNZL and if the plaintiff is correct that Mr Le Roy has continued to be involved in the tyre collection business then that would be the real reason both Mr Le Roy and JIL have not obtained alternate income sources.

[47] Having regard to these matters, I find Mr Le Roy’s evidence sufficiently incomplete and inconsistent that I cannot rely on it to support his assertion that the defendants will be so adversely affected by the interim injunction continuing, that

their appeal rights may be rendered nugatory by the lack of financial resources. Instead the evidence leaves me unsure as to what the current position is for the defendants. If, as Mr Le Roy deposes, TRSNZL is continuing to operate through taking on employees and leasing trucks, then it has an ongoing source of income. If that income is less than when Mr Le Roy is actively involved, then that would add weight to the plaintiff ’s assertion that it is Mr Le Roy’s knowledge of, and connection to, the tyre industry, which has given TRSNZL a springboard into the market. That in my view supports the restraining orders remaining on foot.

[48] Alternatively, and as the plaintiff suggests, if Mr Le Roy and JIL have simply ignored the restraining orders and continued to work for TRSNZL, then that undermines their claim to have made genuine attempts to find alternative income. That fortifies the plaintiff’s position and suggests that the restraining orders should remain in place and be rigorously enforced.

[49] It should be clear that I am not making any firm findings on whether there has been a breach, as the application for enforcement of the Court’s orders is yet to be heard, and it is inevitable that the contested evidence will need to be the subject of cross-examination. However, none of the scenarios that are possible on the affidavit evidence satisfy me that the defendants have, or will, suffer such a loss of income that their appeal rights would be rendered nugatory before the appeal can be heard, either by losing the business altogether or being unable to fund the appeal. The defendants can still pursue the appeal and counterclaims and, if successful, they would have a remedy in damages.

[50] In that regard, the plaintiff has provided an undertaking as to damages and financial information confirming its ability to meet that undertaking if necessary, whereas the financial position of the defendants has not been supported by any evidence. As the plaintiff says:

(a) Mr Le Roy has previously been adjudicated bankrupt; (b) He does not have any property in his own name;

(d) Mr Le Roy confirms in his affidavit the current poor financial position of the defendant companies;

(e) Another of Mr Le Roy’s companies, Always Bin Reliable Limited, was placed into liquidation.

[51] I note, too, that while JIL points to owning valuable assets in its trucks to suggest it could also meet a damages claim, it has said it has significant loans secured against those trucks. However, no information has been given as to the extent of those loans, or the likely net equity JIL has in those assets. The relative abilities of the parties to meet an award of damages, as disclosed on the evidence, favours the stay being declined.

[52] The plaintiff says that a further factor in support of declining the stay, notwithstanding that it may render the defendants’ appeal nugatory, is that the defendants took a “gamble” in setting up in opposition to the plaintiff during the course of the tyre collection contract, knowing of the risk in doing so, and so should have to wear the consequences of taking that risk.

[53] In support of this submission, the plaintiff relies on the Court of Appeal’s

judgment in Philip Morris (NZ) Limited v Liggett & Myers Tobacco Co (NZ) Ltd.⁵

In that case, Rothmans, the second appellant, sought a stay against interim injunction orders pending their appeal. Rothmans had embarked on marketing cigarettes under the trademark “Eve” when Philip Morris had an existing trademark for that name. Philip Morris sought, and was granted, an injunction stopping such competitive marketing. The Court of Appeal accepted that if “the stay of execution is refused, the result may be to cause a grave, perhaps fatal, interruption in the marketing of

_{knowledge of the existing trademark registration and therefore took a
commercial}

⁵_{Philip Morris (NZ) Limited v Liggett & Myers Tobacco
Co (NZ) Ltd [1977] 2 NZLR 41 (CA).}

risk, or gamble, when it used it. This was held to be a “most vital consideration” in

[54] Mr Ballantyne rejected this comparison, saying that the terms of the July contract did not contain any express restraint which applied during the term of the contract, so it was open to the first and second defendant to set up in competition while the contract was on foot, and this could not be considered comparable to the obvious risk arising when using another company’s registered trademark.

[55] While I accept that the circumstances are not entirely comparable, I nevertheless consider the defendants took a calculated risk that what they were doing may be unlawful. This conclusion is supported by the clandestine way in which TRSNZL was set up. There was no disclosure to the plaintiff of what Mr Le Roy and JIL were doing (as opposed to when JIL took on the TNL freight contract during the currency of the July contract where that was openly discussed and agreed with TCSL). In addition, the company was registered in the name of a relative of Mr Le Roy and not Mr Le Roy himself. Mr Shackleton’s evidence is that when Mr Le Roy was confronted with the evidence of setting up in competition, Mr Le Roy initially denied any knowledge of this. While Mr Le Roy rejects Mr Shackleton’s recollection of that exchange, I consider Mr Shackleton’s recollection is consistent with the other evidence that Mr Le Roy sought to hide the fact that he was behind the new competing company, until it was in a position to commence full time operation in competition with TCSL.

[56] In summary, the inconsistent and incomplete evidence of the defendants does not satisfy me that refusal of the stay would put the defendants out of business or otherwise render the appeal nugatory. In any event, this is only one factor to be considered in the overall balance and weighed against all other factors, which includes the fact the defendants took a conscious risk setting up their business in competition with the plaintiff in the first place.

[57] The plaintiff was the successful party in the interim injunction hearing. This was, in part because I held there was a risk of injury to the plaintiff if its claims were

upheld which could not be compensated by damages. This was because damages would be difficult to assess if the plaintiff succeeded in its substantive claims, and the defendants’ ability to meet an award of damages was doubtful. Nothing in the further evidence supplied has altered these conclusions. If the stay is granted those risks to the plaintiff are reinstated, and that is a factor pointing against the grant of a stay.

[58] I accept that the defendants have bona fide grounds of appeal. The appeal raises numerous challenges to the findings of this Court, including the findings on whether there was a serious question to be tried, and on the matters relied on to determine where the balance of convenience lay.

[59] While the plaintiff points to a delay in between filing the appeal, and then making the application for the stay, being on 22 March 2016 and 8 April 2016 respectively, I consider the reasons given by the defendants (including that there were some exchanges about possible settlement), are sufficient to explain that delay and do not undermine the bona fides of the defendants as to prosecution of the appeal. This factor does not point against a stay being granted.

[60] The defendants argue that the judgment appealed against is “adversely affecting the interests of third parties, including TRSNZL’s customers, employees and the market for tyre recycling/collection services”. However, that submission falters in light of the reply evidence of Mr Le Roy which suggests that TRSNZL has been able to continue business, by employing staff and leasing trucks. Even if JIL’s

trucks cannot be leased because of the broad terms of the injunction,⁷I see no reason

why other trucks could not be leased by TRSNZL if it has genuinely set up in competition without relying on any particular information or contacts which

⁷Which is a question I defer to the hearing of the application for enforcement of the Court’s

[61] On the other hand, the plaintiff says it is being adversely affected by loss of customers to the defendants, which it asserts are being obtained unfairly through the use of confidential information provided to Mr Le Roy during the course of the contract, or in breach of the agreed restraint of trade.

[63] There is no novelty or importance to the questions which will be determined on appeal. The law on interim injunctions is well settled and the appeal relates to the particular findings which were made on the facts in this case when applying the test. This factor does not support the application for stay.

[64] While the plaintiff suggests there is a public interest in upholding the “sanctity of contract” and in restraining the defendants from conduct which the plaintiff characterises as “deplorable” and “vindictive”, these are all matters to be addressed in subsequent stages of the proceedings.

[65] The defendants, in turn, suggest that the Court should be “most reluctant to prevent access to the open market in competition within the market”, saying that there is a real risk that customers of TRSNZL will be adversely affected and there will be “costs implications to the wider public”. I do not accept those arguments either. Mr Le Roy’s evidence is that TRSNZL is continuing in business and can do so through leasing trucks and employing staff. There is already competition in the tyre collection services market and so the effects on the wider public of being denied the additional competition for a period of time are insignificant. They do not trump my concerns that there are genuine questions as to whether the defendants have entered the market fairly, or whether they have done so by unlawfully using the advantage of knowledge of TCSL’s operation to springboard themselves into the position of a competitor.

[66] The defendants argue that the overall balance of convenience lies in staying execution of the judgment appealed against to “maintain the status quo prior to the judgment”.

[67] In determining where the overall balance of convenience lies, the defendants submit that TCSL’s conduct can also be criticised. They say that JIL’s counterclaim shows that TCSL’s current positive financial position has been generated at the expense of JIL. They also question the value of TCSL’s undertaking, given its evidence that its trading position has been eroded by the emergence of TRSNZL in the market.

[68] The defendants also argue that there is simply too much uncertainty around the validity of the interests being protected by the interim injunction. This is not a case where there are complex intellectual property rights at stake, and the defendants say that the real purpose of the proceedings is to protect TCSL’s market position against competition. In all those circumstances, and given the unlikelihood of the Court upholding anything more than a short term restraint of trade, even if one were found to exist, the stay should be granted, with the parties’ remedies being in damages, depending on which is successful.

[69] The plaintiff, on the other hand, relies on the same factors which led this Court to grant an interim injunction, but says, in addition, that all three defendants have breached the terms of the injunction and that is a relevant factor which favours the plaintiff’s position in deciding whether to grant a stay or not.

[70] As will be apparent from the above discussion, having considered the further evidence filed, and the range of considerations which are relevant to the grant of a stay, I am not satisfied that the adverse consequences of failing to grant a stay asserted by the defendants have a sufficient evidential foundation. The evidence belatedly supplied in Mr Le Roy’s second affidavit contradicts the assertion that TRSNZL cannot continue to service its customer base, as it has taken on staff and

leased trucks to do exactly that. Furthermore, Mr Le Roy’s further evidence has contradicted the assertion that he has no source of income through JIL, and that its tyre collection trucks have not been used.

[71] Because TRSNZL appears to have been able to continue trading, I also do not accept that there are adverse effects on third parties, including TRSNZL’s customers, employees and the market for tyre recycling/collection services.

[72] I am also troubled by the evidence which the plaintiff says demonstrates that Mr Le Roy and JIL have been in breach of the enforcement orders. My tentative view (subject to hearing from the parties in the application for enforcement of the Court’s orders) is that the use of JIL’s trucks to carry out TRSNZL’s operations offends the broad scope of the Court’s orders and, at the very least, clarification

should have been sought from the Court if such a lease was to be entered into.⁸

While I would have declined the stay even in the absence of this evidence, if the allegations of breach of the enforcement orders are accepted in the hearing to be held on that matter, that would, in my view, be a further reason for declining the stay.

[73] Accordingly, the application for stay of execution of judgment is declined. [74] The question of costs is reserved.

⁸Although, of course, the Court has no evidence of what lease arrangement exists and what amounts are paid to JIL other than Mr Le Roy’s bald assertion that JIL leases its trucks to TRSNZL.

High Court of New Zealand Decisions

Tyre Collection Services Limited v Le Roy [2016] NZHC 788 (22 April 2016)