Autoterminal New Zealand Limited v IBC Japan Limited [2018] NZHC 2986 (19 November 2018)

Last Updated: 26 November 2018

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2018-419-000294 [2018] NZHC 2986

BETWEEN	AUTOTERMINAL NEW ZEALAND LIMITED Applicant
AND	IBC JAPAN LIMITED Respondent

Hearing:	1 November 2018
Appearances:	M D Branch for the Applicant J A MacGillivray and M K Brady for the Respondent
Judgment:	19 November 2018

JUDGMENT OF WOOLFORD J

This judgment was delivered by me on Monday, 19 November 2018 at 12:30 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors: Harkness Henry, Hamilton

Tompkins Wake, Hamilton

AUTOTERMINAL NEW ZEALAND LIMITED v IBC JAPAN LIMITED [2018] NZHC 2986 [19 November 2018]

Introduction

[1] The plaintiff, Autoterminal New Zealand Limited (ATNZ), is a company incorporated in New Zealand. It imports and distributes used cars from Japan. The defendant, IBC Japan Ltd (IBC), is a company incorporated in Japan. It exports used cars to New Zealand. IBC supplies cars to ATNZ. This is done pursuant to a “Vehicle Supply Agreement” (VSA), dated 1 July 2014.

[2] The two companies are part of a wider partnership between Mr Robert Stone and Mr Hohua Hemi. They own or ultimately control both companies and all aspects of the business partnership. The relationship between them has broken down. Irretrievably so. They are engaged in litigation in several jurisdictions. At present, Mr Stone controls ATNZ and Mr Hemi controls IBC.

[3] IBC has just negotiated and signed an agreement to supply cars to ATNZ’s competitor in New Zealand – 2 Cheap Cars. ATNZ says in doing so, IBC has breached the VSA and two supplemental agreements. It now seeks an interim injunction against IBC to preserve what it says is its position as a preferred recipient of cars from IBC.

Background

[4] All the shares in ATNZ are owned by its sole director, Mr Michael Tyler. Mr Tyler holds these shares as a bare trustee for a Cayman Islands company, Autonet. Autonet is indirectly owned or controlled by Mr Stone and Mr Hemi, or their interests, on a 50/50 basis. Mr Tyler has firmly allied himself with Mr Stone in the dispute between Mr Stone and Mr Hemi.

[5] Autonet, the beneficial owner of ATNZ, is deadlocked to the extent its independent director has resigned because he cannot make any decisions in the absence of agreement between shareholders.

[6] NPLH Limited (a Hemi family trust company), as 50 per cent owner of Autonet, has instructed solicitors in the Cayman Islands to apply for the appointment of a liquidator over Autonet on just and equitable grounds.
[7] IBC is directly owned by Mr Stone and Mr Hemi. Each owns 50 per cent. IBC can continue to operate because under Japanese law a single representative director has wide ranging powers to make decisions and to enter contracts for the company.

[8] Until 31 May 2018, Mr Stone was the representative director and effectively controlled IBC. Mr Hemi became the representative director with effect from 31 May 2018. He and his wife now comprise a majority of IBC’s board of directors.

[9] Mr Stone has given notice that he intends to apply for the liquidation of IBC. His counsel submits that the liquidation of IBC seems a likely outcome given that Mr Stone holds 50 per cent of the shares and is a guarantor of the bank debt.

[10] Mr Hemi has been a director of IBC since its incorporation in 1991. He accepts IBC is a party to the VSA dated 1 July 2014. He does, however, take issue with the provenance and validity of the two supplemental agreements. He says he had not seen the supplemental agreements at any stage prior to the filing of the proceedings. They had also not been referred to in any of the correspondence leading up to the proceedings.

[11] Mr Tyler says each of the supplemental agreements were put together by himself and Mr Stone when he was the representative director of IBC following a year-end review session. He says the first supplemental agreement was signed by Mr Stone and himself when they were in Cebu, Philippines, sometime between 15 August 2016 and 27 August 2016. That is why there is no email trail for the exchange of the document. There was no need for correspondence as they were in the same place. He says he and Mr Stone worked through and edited the agreement together. He further says he saved a copy of the agreement on his laptop, which was later stolen.

[12] Mr Tyler says he signed the second supplemental agreement when he was in Cebu between 1 July 2017 and 4 August 2017. He then left it for Mr Stone to complete. Mr Stone was not in Cebu because he was late returning from an overseas trip. Mr Tyler says they subsequently worked on the document together through Google Docs. The final copy was stored on his laptop, which was stolen together with
his backup hard drive when he and his wife were on a European trip in November 2017. Mr Tyler says that he has carried out a full electronic search for copies of the agreement, but has not found anything.

[13] Mr Stone says he too has carried out electronic searches for the two supplemental agreements, but has found nothing. He says, however, that he found copies of both agreements in his hardcopy files.

[14] Mr Hemi remains suspicious. He points out Google Docs is a web-based word processor and forms part of the cloud-hosted office suite software offered by Google within its Google Drive service. As it is cloud-hosted, users are able to access their Google Drive account from different devices. Documents created on Google Docs are not exclusively stored on any specific device or server owned by the document creator. Rather, with the login details, these documents can be accessed from any computer, and many other devices, with an internet connection.

[15] Mr Hemi says there should, therefore, be an electronic record of Mr Tyler and Mr Stone making the second supplemental agreement dated 1 July 2017 in Google Drive. Mr Hemi has instructed IBC to search for the supplemental agreements, but they have not been able to be located. Furthermore, no correspondence regarding their creation, negotiation or execution has been able to be located.

Vehicle Supply Agreement

[16] ATNZ relies on two clauses in the VSA dated 1 July 2014:

5. Delivery

IBC shall use its best endeavour to deliver the vehicles ordered as soon as possible on the next available vessel. All deliveries shall be made Cost, Insurance and Freight (CIF) to Lytteton, [sic] Auckland or Wellington in New Zealand unless another port or destination is agreed upon by the parties subject to adjustment of freight costs, if any.

...

14. Relationship of Parties

The parties agree that they will work closely together to develop the market in New Zealand for both companies benefit. IBC grants ATNZ the exclusive right to represent IBC, act on IBC’s behalf and use the IBC name in New

Zealand for the purposes of marketing, promotion, customer’s service and sales.

[17] ATNZ says cl 5 of the VSA requires IBC not to enter into agreements with parties other than ATNZ where the effect of such sales would prevent cars ordered by ATNZ being delivered “as soon as possible on the next available vessel.”

[18] As to cl 14 of the VSA, ATNZ says that it creates an obligation such that IBC cannot operate in a way which:

(a) materially departs from the way parties have historically conducted themselves; and/or

(b) competes with, rather than being complementary to ATNZ’s business, including without limitation, attempting to sell directly to ATNZ’s existing customers and changing the priority rules.

[19] ATNZ also claims the wording of cl 14, the VSA as a whole, and the background set out by Mr Tyler, gives rise to a general obligation of good faith. The requirement of cooperation is said to be a strong factor in that regard.

Supplemental agreements

[20] ATNZ also relies on two supplemental agreements, which are said to have been effective from 1 July 2016 and 1 July 2017. As mentioned, the provenance and validity of the two supplemental agreements are challenged by IBC.

[21] ATNZ relies on three clauses in the first supplemental agreement dated 1 July 2016:

1. Term

The parties agree to extend the term of the VSA outlined in clause 2 for a further period of three years. The VSA will automatically renew at the expiry of each three year period for further rolling three years periods. The VSA can only be cancelled by mutual agreement of both parties or by one party giving the other party twelve (12) months written notice of termination before the end of the term or the subsequent renewal term. The termination of the agreement to take place at the end of the term or the subsequent renewal term.

2. Purchasing

Clause 3.2 of the VSA outlines the price IBC shall sell vehicles to ATNZ. The parties wish to update the pricing. IBC shall sell the vehicles to ATNZ at the lower of the following prices:

...

c) ATNZ and IBC shall mutually agree and set the terms for all customers in New Zealand so there is consistency in the marketplace. ATNZ shall have the right to set pricing terms and conditions for any customer to allow it to stay competitive in the market. No customer terms outside of established levels and below those offered to existing customers are permissible without the approval of ATNZ.

...

3. Credit Terms

All customers being offered credit terms in the NZ marketplace must have those credit terms approved by ATNZ, with ATNZ acting as the consignee, to enable ATNZ to responsibly fulfil its role as the manager of the credit facility. ATNZ will manage all such terms customers to ensure IBCs interests are protected including entering into contracts with those customers, collecting of deposits, lodging vehicle securities and managing the release of the MR2As.

[22] ATNZ says cl 2(c) of the first supplemental agreement means unless ATNZ agrees to the terms proposed, IBC cannot enter into agreements to sell cars to any other customer in New Zealand.

[23] It also says that cl 3 means that ATNZ has to agree to credit terms before they can be offered by IBC to any other customer in New Zealand.

[24] ATNZ relies on four clauses in the second supplemental agreement dated 1 July 2017:

Background

IBC and ATNZ have entered into a Vehicle Supply Agreement (“VSA”) dated July 1, 2014 which was amended via a supplementary agreement in July 2016. The parties agree to amend the existing VSA as follows:

1. Shipping Priority

ATNZ will receive priority for shipments if and when there are space or other restrictions, but will cooperate with IBC on sharing space when needed if the shortage of space or restrictions are a long-term

problem. In the event that alterative [sic] shipping services, including container shipments, are required, IBC will pay the extra costs.

...

3. Purchasing Priority

ATNZ will work with IBC on developing a priority policy for all vehicles purchased by IBC for the New Zealand market, any changes to this policy to be mutually agreed by both parties. The policy will be based on the following order of priority:

1. Customer attending the auction in person, as long as the customer selects, submits (via the website or auction staff) and bids on the vehicle.

2. Highest bid placed directly by the customer via the website, including bids made on behalf of customers by sales staff.

100. Highest bid placed by the customer via auction recommend or pricing with staff.

4. Auction or ISS staff attending the auction, as long as they select, submit and bid on the vehicle, with discretion that the staff do not monopolize too many of the vehicles bid on by other staff.

5. Highest bids submitted via website, if the highest bid is the same then the first bid placed with take priority.

4. Competitive Pricing and Terms

IBC will do everything in its power to keep ATNZ competitive in the NZ market, cooperating closely to recruit new customers and cultivate relationships to grow IBC’s market share. In pursuit of new business, and to retain the existing business, pricing and terms for some new and existing customers may be updated to levels lower than those already established. The new pricing and terms, once mutually agreed upon by IBC and ATNZ, will also be made available to ATNZ on at least equal terms to keep it competitive in the market. Once new terms are adjusted and confirmed, ATNZ’s pricing and terms will be updated immediately to reflect the changes. The pricing changes will affect all purchases, including those from IBC inventory, on-line auction system (iDirect), and buy trips. IBC will inform ATNZ prior to changing any customer pricing and terms below or outside of already approved parameters for approval, but also to confirm whether or not ATNZ wishes to avail itself of the updated pricing and terms.

5. Buy Trips

ATNZ will encourage all New Zealand customers to visit Japan to purchase vehicles on buy trips at auction. All buy trips must be notified to IBC in advance so that the schedule can be co-ordinated and bookings made. All buy trip costs including flights, accommodation, transport and meals will be covered by IBC for the

customer and any ATNZ staff who accompany customers on the buy trip on the following basis:

1. Flights will be economy or premium economy only, or NZD$2,000 toward a ticket the customer purchases themselves. Flights must be booked and arranged through ATNZ, for all buy trips including those customers that purchase direct from Japan, to keep the costs down and avoid peak dates and last-minute arrangements when tickets are much more expensive.

2. Hotel accommodations will be comfortable 3.5-4 star level as close and convenient to the auctions as possible.

100. Entertainment expense during buy trips should be limited to one- night out per trip, preferably before the smaller auctions, to allow IBC staff the rest they need and keep costs down.

4. IBC staff will only entertain customers until 10pm, after that they are to return home or to the hotel unless they choose to stay on their own. Driving to and from the auctions requires at least 8 hours after drinking alcohol to avoid violations of Japan’s drinking and driving laws.

5. Shinkansen (bullet train) seats will be assigned normal class, and not the green car.

6. IBC and ATNZ will endeavour to make the buy trips a pleasant experience for customers while being mindful of the costs and keeping expenses at a minimum.

7. Priority for choice of vehicles at auction is for customers on buy trips. If there are multiple customers at auction at the same time the customer who booked first shall have priority with the auction staff and account manager to make sure there is cooperation between them so conflicts are avoided.

[25] ATNZ says that cl 1 confirms that its shipping needs are to have priority, while cl 3 sets the priority that ATNZ’s customers must receive. ATNZ further says that cl 4 confirms the close working relationship of ATNZ and IBC and provides that ATNZ has to agree to pricing by IBC and, if agreed, those same terms have to be offered to ATNZ. Finally, ATNZ argues cl 5 provides ATNZ can book buying trips (and is required to encourage such trips) as long as the rules are complied with.

Orders sought

[26] In its amended application for an interim injunction, ATNZ seeks the following:

• (a) An order preventing the respondent from:

(i) selling vehicles to 2 Cheap Cars: and/or

(ii) marketing to customers of the applicant; and/or

(iii) offering preferential terms and/or priority to new customers in relation to vehicles purchased from IBC; and/or

(iv) offering credit terms to motor vehicle traders; and/or

(v) consigning any vehicle to a ship leaving Japan unless that vehicle was purchased prior to a vehicle purchased by the applicant; and/or

(vi) amending the priority rules from what are set out at pages 162 and 163 of the affidavit of Melinda Amy Findon sworn 3 October 2018 and, in particular, applying the rule that super priority goes to parties on buying trips and not to parties that have buyers permanently based in Japan; and/or

(vii) preventing or interfering with buying trips for ATNZ customers provided the terms set out in clause 5 of the Second Supplementary Agreement is adhered to;

without the prior written approval of the applicant or by further order of the Court.

(b) An order that:

(i) IBC must continue to supply vehicles ordered by ATNZ but with this order having a return date of 16 November 2018, at which time ATNZ will have reconciled, or at least will have attempted to reconcile, the amount owed and due (if any) by ATNZ to IBC; and/or

(ii) IBC must produce to ATNZ an unredacted copy of the VSA between it and 2 Cheap Cars.

The law

[27] The law relating to applications for interim injunctions is well settled. The Court of Appeal outlined the approach in NZ Tax Refunds Ltd v Brooks Homes Ltd:¹

The applicant must first establish that there is a serious question to be tried or, put another way, that the claim is not vexatious or frivolous. Next, the balance of convenience must be considered. This requires consideration of the impact on the parties of the granting of, and the refusal to grant, an order. Finally, an assessment of the overall justice of the position is required as a check.

¹ NZ Tax Refunds Ltd v Brooks Homes Ltd [2013] NZCA 90, (2013) 13 TCLR 531 at [12]–[13].

The grant of an interim injunction involves, of course, the exercise of a discretion. Such a decision is amenable to appeal, on the basis that the judge has erred in law, taken account of an irrelevant matter, failed to take account of a relevant matter or is plainly wrong. This is subject to the qualification, however, that whether there is a serious question to be tried is an issue which calls for judicial evaluation rather than the exercise of a discretion. Where an appellate court disagrees with a judge’s finding that there is no serious issue to be tried, the appellate court will have to carry out its own assessment of the balance of convenience and the overall justice of the case, although it may well derive assistance from the judge’s analysis of those aspects.

[28] First, the applicant must establish there is a serious question to be tried. The standard is easily satisfied. This part of the assessment is intended to dispose of cases that are “vexatious or frivolous”, or cases where the applicant has “no real prospect of success”.² As Lord Diplock said in American Cyanamid Co v Ethicon Ltd:³

It is no part of the court’s function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations. These are matters to be dealt with at the trial.

[29] Second, once the applicant has established a serious question to be tried, the Court considers whether the balance of convenience lies in favour of granting or refusing interim relief. This part entails consideration of whether, if the plaintiff were to succeed at trial, an award of damages would be adequate. As Lord Diplock said:⁴

If damages in the measure recoverable at common law would be adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff's claim appeared to be at that stage. If, on the other hand, damages would not provide an adequate remedy for the plaintiff in the event of his succeeding at the trial, the court should then consider whether, on the contrary hypothesis that the defendant were to succeed at the trial in establishing his right to do that which was sought to be enjoined, he would be adequately compensated under the plaintiff’s undertaking as to damages for the loss he would have sustained by being prevented from doing so between the time of the application and the time of the trial. If damages in the measure recoverable under such an undertaking would be an adequate remedy and the plaintiff would be in a financial position to pay them, there would be no reason upon this ground to refuse an interlocutory injunction.

² American Cyanamid Co v Ethicon Ltd [1975] UKHL 1; [1975] AC 396 (HL) at 407–408.

³ At 407.

⁴ At 408.

[30] Last, the Court will make a determination as to where overall justice lies. This part of the assessment serves as a check. The matters discussed and conclusions reached under the first two broad questions will assist.⁵

Serious question to be tried

[31] ATNZ submits there is a serious question to be tried because IBC has breached and intends to continue to breach the VSA and the two supplemental agreements by:

(a) Entering sale agreements which will substantially increase the number of cars it is required to export from Japan.

(b) Offering, or intending to offer, preferential bidding rights and other terms to 2 Cheap Cars and other motor vehicle traders without obtaining the prior approval of ATNZ.

(c) Offering, or intending to offer, credit terms to motor vehicle traders.

(d) Actively marketing to ATNZ’s customers.

(e) Directly competing with ATNZ with full knowledge that this competition will put ATNZ’s business at risk of failure.

[32] I am satisfied ATNZ has established a serious question to be tried. At least in respect of some of the clauses. I address each of its arguments in turn. In doing so, I put the concerns regarding the provenance of the supplemental agreements to one side. There is clearly a serious question to be tried in that regard.

[33] ATNZ submits by entering into sale agreements which will substantially increase the number of cars it is required to export from Japan, IBC is in breach of its best endeavour obligation as set out in cl 5 of the VSA. I am not convinced there is a serious question to be tried here. First, cl 5 is just a best endeavour clause: “IBC shall use its best endeavour to deliver the vehicles ordered as soon as possible on the next

⁵ Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] NZCA 70; [1985] 2 NZLR 129 (CA) at 142.

available vessel.” That clause does not prohibit IBC from entering into agreements such as that with 2 Cheap Cars. Second, I have not seen anything to indicate cl 5 has been breached. Although it appears there has been an increase in the average time between purchase and shipment from 10 – 15 days to 25 – 30 days, the Ministry of Primary Industries has imposed an additional requirement that all cars shipped to New Zealand now have to undergo a new heat treatment regime to meet the threat of stink bug infestations. This is a substantial contributor to the delays.

[34] As to the question of offering preferential pricing and terms to 2 Cheap Cars and others without obtaining the prior approval of ATNZ, it is not disputed that IBC has entered an agreement with 2 Cheap Cars without ATNZ’s approval. 2 Cheap Cars has also negotiated pricing that is in some respects superior to the pricing given to ATNZ. This is a prima facie breach of cl 2 of the first supplemental agreement and cl 4 of the second supplemental agreement. There is a serious question to be tried. But, as will be clear below, I am of the view the determinative issue is whether damages would be an adequate remedy.

[35] ATNZ further submits IBC has also offered credit terms to 2 Cheap Cars without ATNZ’s approval, which is another prima facie breach of cl 3 of the first supplemental agreement: “All customers being offered credit terms in the NZ marketplace must have those credit terms approved by ATNZ”. In reply, IBC say that 2 Cheap Cars has not been given credit terms in the NZ marketplace because it must pay for cars on delivery to New Zealand. ATNZ has then pointed to another agreement with Mr Motors, which does not include any fixed payment date such that it could be up to six months before some cars are paid for. Again, a serious question to be tried has been established. But I am of the view that the determinative issue is not so much whether there is a breach of cl 3, but whether ATNZ has suffered any damage.

[36] As to the question of marketing to ATNZ’s customers, ATNZ says this is a breach of cl 14 of the VSA, which requires the parties to work closely together to develop the market in New Zealand for both companies benefit and grants ATNZ the right to represent IBC, act on IBC’s behalf and use the IBC name in New Zealand. This is not a serious question to be tried. First, the clause is a general one requiring the parties to work closely together for both companies benefit. Second, IBC has
always made significant sales to other customers in New Zealand. From 21 March to 21 September 2018, cars supplied to ATNZ have accounted for less than half of IBC’s total sales revenue from New Zealand. There is no specific clause in the VSA or the supplemental agreements prohibiting IBC from selling cars direct to other customers in New Zealand.

[37] Finally, ATNZ further submits IBC is directly competing with ATNZ with full knowledge that this competition will put ATNZ’s business at risk of failure. I assume that ATNZ here again relies upon cl 14 of the VSA. This is not a serious question to be tried. First, the clause is a general one requiring the parties to work closely together for both companies benefit. It does not go as far as argued by ATNZ. Second, ATNZ has not provided an evidential basis for its claims that IBC is trying to put ATNZ out of business or that without the Court’s intervention ATNZ’s business will fail.

[38] ATNZ is not obliged to pay for cars supplied by IBC until they are sold to customers in New Zealand. The total contingent debt owing from ATNZ to IBC in respect of vehicles supplied by IBC to ATNZ is at least $40 million. There is a dispute as to how much of the total debt is currently due and owing (that is, about how much ATNZ has collected from its customers as against the amount that it has paid to IBC). IBC is taking steps to resolve the dispute with ATNZ about the exact level of debt, but has not suspended ATNZ’s right to purchase cars or given notice cancelling the VSA.

[39] Although not specified as a serious question to be tried in the amended application for an interim injunction, ATNZ also complains about what it says are changes to the priority rules for buying at car auctions in Japan. In reply, IBC says that 2 Cheap Cars has not been given enhanced priority. If more than one customer attends an auction, the highest bid always wins. IBC says that ATNZ is attempting to introduce a gloss on what it means to have a customer present at the auction. This is not a serious question to be tried as ATNZ relies on cl 3 of the second supplemental agreement, which requires nothing more than ATNZ to “work with IBC on developing a priority policy for all vehicles purchased by IBC for the New Zealand market.” Although cl 3 goes on to state that the policy will be based on a specified order of priority, the full and final policy is not contained in the agreement. Clause 3 merely sets out guidelines for the policy to be developed.
[40] Further, Mr Hemi says reasonable notice should be given per cl 5 of the second supplemental agreement:

All buy trips must be notified to IBC in advance so that the schedule can be co-ordinated and bookings made. All buy trip costs including flights, accommodation, transport and meals will be covered by IBC for the customer and any ATNZ staff who accompany customers on the buy trip on the following basis ...

[41] In any event, even if breached, damages should be an adequate remedy.

Balance of convenience

[42] In my view, damages would be an adequate remedy for ATNZ if IBC is found to be at fault at trial.

[43] At its highest, ATNZ has established prima facie breaches of cl 2 and cl 3 of the first supplemental agreement and cl 4 of the second supplemental agreement because IBC has entered sales agreements containing pricing and other terms with 2 Cheap Cars and Mr Motors without the prior approval of ATNZ. IBC has also appeared to offer credit terms without ATNZ’s approval. And I also include here the risk IBC might breach cl 5 of the second supplemental agreement in the future.

[44] The measure of damages would be the difference between the pricing and other terms offered to other customers and that offered to ATNZ. ATNZ would be able to identify where it has lost in auctions to 2 Cheap Cars. Clause 4 of the second supplemental agreement specifically provides that, in pursuit of new business, pricing and terms for some new and existing customers may be lowered. Once the lower rates had been agreed upon by IBC and ATNZ, the same pricing and terms would then be made available to ATNZ on at least equal terms to keep it competitive in the market. If it is established at trial that IBC is in breach of cl 4, then ATNZ can clearly quantify the extent to which ATNZ has suffered loss. The same reasoning applies in respect of cl 5.

[45] As far as offering credit is concerned, cl 3 of the first supplemental agreement gives ATNZ the right to approve credit terms offered to all customers by IBC, but it does not specifically provide that credit terms offered to ATNZ are to match credit
terms offered to other customers. It appears that ATNZ has, however, better credit terms than any other IBC customer because it only pays for cars supplied to it by IBC when they are sold. This is a real competitive advantage which ATNZ apparently retains. Even though ATNZ may have the rights to approve credit terms offered to other customers in the New Zealand marketplace, it is difficult to see what damage has been caused to ATNZ by a breach of cl 3. Nonetheless, if there is any damage, it should be able to be quantified in some way.

[46] There is also no difficulty in IBC meeting any damages which may be assessed at trial. Such damages can be offset against the more than $40 million owed by ATNZ to IBC.

Overall justice

[47] Standing back and looking at the situation overall as a matter of justice, I am convinced that the injunction ought not to be granted.

[48] First, ATNZ is seeking orders preventing IBC selling cars to competitors of ATNZ and/or offering preferential terms and/or priority to new customers in relation to vehicles purchased from IBC. In seeking such orders, ATNZ wants the Court to enforce the VSA and the two supplemental agreements.

[49] However, I have my doubts that the two supplemental agreements in particular are lawful. During the course of argument, I voiced my concern that the supplemental agreements may breach s 27 of the Commerce Act 1986 in that they appear to have the effect of substantially lessening competition. They effectively require ATNZ and IBC to collude and set IBC’s prices for all customers. Counsel for IBC agreed with my concern, but I did not hear any substantial argument on the issue. I would only be prepared to consider granting an injunction if I was satisfied that the supplemental agreements are lawful. At this stage, I am not so satisfied.

[50] Second, one of the orders sought is that IBC must continue to supply cars ordered by ATNZ. In effect, ATNZ seeks an enforcing mandatory injunction requiring IBC to do something it has already agreed to do by contract. Enforcing mandatory
injunctions are essentially particular orders for specific performance and are granted on the same principles that govern an order for specific performance.⁶

[51] The general rule is, however, that contracts for the sale of goods will not be specifically enforced by the Courts.⁷ This is because damages calculated on the market price of the goods are as complete a remedy to the purchaser as the delivery of the goods contracted for. In terms of its agreement with IBC, ATNZ is not obliged to pay for the cars it has ordered from IBC until it has sold them to customers in New Zealand. When ATNZ filed its application for an injunction it provided a balance sheet from its financial accounts for the year ended 31 July 2018, which showed that it had negative equity of NZ$12,008.177. In these circumstances, IBC also has concerns that if an enforcing mandatory injunction was granted in terms that required it to continue to supply cars ordered by ATNZ, it would not be paid for them.

[52] And as mentioned above, I am not convinced that there is a risk ATNZ’s business would fail if interim relief were declined. Rather, there is evidence that IBC is continuing to sell cars to ATNZ. Mr Hemi said that since 1 September 2018, ATNZ has purchased 1533 cars from IBC. The significant debt owed to IBC by ATNZ is also relevant.

[53] Third, this Court is reluctant to make orders that would fall to be performed and (if necessary) enforced in Japan in circumstances where IBC and the representative director of IBC is subject to Japanese law. One of the major issues in the proceeding is the priority given to particular buyers by IBC at car auctions in Japan. The priority rules apply to all of IBC’s customers and not just ATNZ. Any change in these would impact not on ATNZ, but also on all customers to whom IBC supplied cars.

6. Peter Blanchard (ed) Civil Remedies on New Zealand (2nd ed, Thomson Reuters, Wellington, 2011) at [5.2.1(2)].

⁷ At [8.7.1].

Result

[54] The application for an interim injunction is dismissed. Costs are payable by ATNZ to IBC on a 2B basis.









Woolford J