LIMITED DISTRIBUTION CATCHWORDS TRADE PRACTICES - consumer protection - interlocutory relief - whether conduct misleading and deceptive - balance of convenience - effect and construction of warranty in contracts - whether appropriate relief sought. Trade Practices Act 1974 (Cth): ss. 52, 53. GREGORY DENNIS TONKS v. BIOENGINEERING AUSTRALIA PTY. LIMITED G 515 of 1986 LOCKHART J. 1 DECEMBER 1986 SYDNEY IN THE FEDERAL COURT OF AUSTRALTA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION JUDGE MAKING ORDER: DATE OF ORDER: WHERE ORDER MADE: BETWEEN : MINUTES OF ORDER SYDNEY wee ww LOCKHART J. No. G 515 of 1986 GREGORY DENNIS TONKS THE COURT ORDERS THAT: 1. NOTE: Applicant BIOENGINEERING AUSTRALIA PTY. LIMITED Respondent 1 DECEMBER 1986 The application for interlocutory injuncitve relief be dismissed. The costs of this application be the respondent's costs in the proceeding. Settlement and entry of orders the Federal Court Rules. is dealt with in Order 36 of IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY No. G 515 of 1986 GENERAL DIVISION wee ww BETWEEN : GREGORY DENNIS TONKS Applicant AND: BIOENGINEERING AUSTRALIA Pry. LIMITED Respondent 1 December 1986 REASONS FOR JUDGMENT LOCKHART J. This is an application for interlocutory injunctive relief by Gregory Dennis Tonks. The case relates to a system called the Bio Treat system which converts household waste water to clear odourless water that may be automatically distributed round people's gardens. The Bio Treat system is manufactured by the respondent, Bioengineering Australia Pty. Limited, which has an application pending for a trademark, ("Bio Treat"), in respect of the goods constituted by the system but, as yet, no mark has been registered. No claim under the Trademarks Act 1955 arises in these proceedings. The applicant conducts the business of supplying, installing and maintaining the Bio Treat system. The contractual relations between the parties commenced in about March 1985 when the applicant and the principal of the respondent, a Mr. Rogan, had a discussion from which, it is asserted by the applicant, an agreement was reached upon terms that included the applicant being appointed by the respondent as its agent and distributor of the Bio Treat system in an area described in the evidence as the Central Coast area; the applicant had the exclusive right to enter into contracts with customers on behalf of the respondent and to supply, install, maintain and service the Bio Treat system for them; the applicant was to install the system for customers at his own expense; and the respondent was to pay the applicant a sum for each unit supplied and installed. Pursuant to that arrangement contracts were concluded with various customers. The applicant asserted that in August 1985 an oral variation to the agreement was made between the parties whereby the applicant would supply, install and maintain the systems sold to customers as principal; the respondent would supply the applicant with the systems and associated products on the basis that the applicant would pay to the respondent the agreed wholesale price. Pursuant to that varied oral agreement the applicant said that he entered into some twenty contracts. The applicant also said that the agreement between the parties was further varied in November 1985, whereby the applicant's area of operations was extended to include certain areas on the South Coast; otherwise in all material respects the terms of the original agreement, as varied in August, remained. The applicant opened an agency in the South Coast area and advertised the Bio Treat system manufactured by the respondent. He made representations concerning the system to various authorities including those in Local Government. However, apparently the respondent has since about April this year represented to potential customers of the applicant in the South Coast area , as it has since January this year in the Central Coast area, that it could supply and maintain the system. In about August this year the respondent approached customers of the applicant, including some with whom the applicant contracted as principal, and represented to them that the respondent was entitled to receive directly from them moneys owed to the applicant. These representations included representations that the customers should withhold money owed to the applicant. The applicant said that of the twenty contracts which he negotiated in his name, seven customers have either declined to retain his services for the purposes of maintenance and service or have made it clear that they will look elsewhere. In effect it is for the remaining thirteen of these customers that the applicant seeks interlocutory relief. The evidence consists of an affidavit of the applicant and an affidavit from Mr. Rogan, the General Manager of the respondent, who seems to be its principal. Neither deponent has been cross-examined. The applicant seeks to restrain the respondent from, in effect, further seeking to induce the remaining thirteen of the applicant's customers from continuing their contractual relations with him so that, pending the final hearing, the applicant will be free to continue to maintain and service the units that have already been installed. The applicant said that some of the representations that have been, and are being, made by the respondent to these people will unsettle them and may have an adverse effect upon his own goodwill and reputation in the areas in which he carries on his business. The respondent denied the case as put forward by the applicant. Each party has conducted this matter before me, although in part upon the question of whether there is a serious question to be tried, mainly on the issue of the balance of convenience. As this is an interlocutory hearing I make no final decisions on any of the issues. I am satisfied that there is a serious question to be tried and it is essentially the balance of convenience which determines the outcome of the present matter. In favour of the applicant it is true that the granting of interlocutory relief will maintain the status quo in that he will be able to continue to service the existing thirteen contracts without the customers being subjected to any pressure by the respondent. So far as any fresh contracts are concerned, the orders would not, of course, apply in relation to them and the applicant did not seek to make out a case in relation to this. The applicant has expended sums of money in building up his business and the goodwill which revolves around this product although he has, since the relations between the parties have soured, been providing a different product which performs a similar function. There are some features of the case which are troubling so far as interlocutory relief is concerned. The relevant contracts with customers are in writing and copies are in evidence. This form of contract is based on the earlier form of contract which the applicant used, being a contract printed on behalf of the respondent in which it appeared as "the company", and the applicant as "the distributor". The applicant took the same form of contract and inserted his name as distributor and the name of Greg Tonks Pty. Limited, as the company. I am informed by counsel for the applicant that he does not have a company Greg Tonks Pty Limited, and that it simply appears that way in the contract because "Pty Limited" has not been excised from the contract. Be that as it may, the applicant in effect appears as both "distributor" and "company"; I ignore for the moment the corporate name Greg Tonks Pty Limited. It does, I think, create difficulties to the conditions of the contract. I do not propose to construe them finally at this stage of the case, but it is necessary to examine them to some extent. A warranty appears in condition 2 and, by its terms, the "company" warrants that the Bio Treat system, including its mechanical and electrical components, is free from defects in manufacture and installation where such was carried out by the "company" or its authorised agents. The warranty is dependant upon the "company" being satisfied, amongst other things, that there has been no work carried out on, or any interference with, the Bio Treat system by anyone other than the "company" or its authorised agents. Such a warranty would make sense if the respondent were giving it as the "company" but, of course, in these latter contracts, it is the applicant who gives the warranty. He is not the manufacturer. He is the distributor. It is an odd warranty for a distributor to give, though perhaps not totally unknown commercially. The problem is that it may be, and it is certainly arguable, that the terms of the warranty are such as not to enable prospective purchasers to have recourse, in the event of breach, against the respondent. On a literal interpretation the applicant possibly would not be bound by the warranty because, although he gave it, it cannot be relied upon, according to the terms of condition 2, unless he is satisfied that there has been no work carried out on or interference with the system by any person other than himself or his authorised agents. This is a very strange provision as the system is made by the respondent. I mention that because it is one of a number of provisions in the form of contract that are relevant and troublesome at this interlocutory stage, and I think they could trouble and confuse the remaining thirteen members of the public who have contracts with Mr. Tonks. In the body of the agreements with the thirteen people it is provided that, as a condition of approval by relevant Health Authorities for the installation of a system, the householder - that is, the purchaser - must enter into a service agreement with the "company" or its authorised nominees. Such of the evidence as exists at the moment supports the conclusion that the Health Authorities would require the customers to contract with the manufacturer or distributor or his agent or other person authorised by Bioengineering Australia Pty. Limited. In other words, the evidence that I have at the moment suggests that the Health Authorities would require that it is the respondent, or its authorised nominee, who should enter into the relevant service agreement. I find that this condition of approval inserted in the body of the contract fits i11 with the assertion in the contract that the applicant is himself the "company". It may be true that letters which have been sent by the respondent to certain of the customers of the applicant (a copy of which is annexure "R" to the affidavit of Mr. Tonks sworn on 6 November 1986 and relied on in these proceedings) has been sent to other customers. The relevance of this point is that it may be that people other than those who have already said to the applicant that they do not propose to continue contractual relationships with him may have reached the same conclusion and are taking steps to terminate the contractual relations with him; in which case it would tend to militate against the granting of injunctive relief. If the Court granted injunctive relief, bearing in mind it would only be on a temporary footing as this is an interlocutory hearing, it would not be without considerable problems. The more one examines the appropriate orders to be made, the more the problem to which I have adverted becomes obvious. I have the uneasy feeling that if disputes between the parties were to proceed further, then they would fall to be determined in the light of a contempt application which would not be the appropriate vehicle for their rights to he determined. In essence this dispute is really one for damages between two people who have fallen out with each other. They chose to enter into a very general and oral contractual relationship. It is not, at this stage of the case, for me to determine the precise terms on which the contracts were made. It is obvious that the parties' relationship has severed. Indeed, the applicant himself has terminated the relationship between the parties on the basis of assumed repudiatory conduct by the respondent. It does not necessarily affect adversely his right to injunctive relief in the case of these thirteen customers. However, it shows that the arrangements between them have come to anend and we are now witnessing the sorting out of the winding up or termination of those arrangements. I think this matter is best left to the applicant, the respondent and the thirteen customers concerned to sort out themselves according to the behaviour of the marketplace and not by an interlocutory injunction from this Court. The claim is ultimately one for damages and it is in that field that the parties should adjust their respective rights and liabilities. Accordingly, I dismiss the claim for interlocutory injunctive relief. The costs of this application are to be the respondent's costs in the proceeding. { ce proce 4.19 Counsel and solicitor for Applicant Counsel and solicitor for Respondent Date of Hearing: Date of Judgment: ay tetins avd tie rence co a tes cory CF the Reacens fo" sutT7tt- Mr, Cusuce Lock' S 5 Dated: \ Decedas ad * (Ss) eas teren cf bis Honour fat D.L. Williams instructed by Alan Jessup. ; N.F. Francey instructed by Fiddes Pogson Mackay 1 December 1986 1 December 1986