NOT FOR GENERAL DISTRIBUTION _ JUDGMENT No. 6927/81... IN THE FEDERAL COURT OF AUSTRALIA ) } VICTORIA DISTRICT REGISTRY ) V. No. G 376 of 1986 ) ) GENERAL DIVISTON BETWEEN: BRAEMAR LIMITED and SOUTHERN HEATING HOLDINGS PTY. LTD. and BRAEMAR APPLIANCES PTY. LTD. and NATIONAL CONSOLIDATED LIMITED COURT: NORTHROP J. DATE 22 OCTOBER 1987 PLACE: MELBOURNE MINUTES OF ORDER THE COURT ORDERS THAT: - 1. The motion, notice of which is dated 3 September be refused. 2. The motion, notice of which is dated 7 October 1987, motion refused and the respondents' costs of the reserved, (Settlement and entry of Orders is dealt with Rules of Court.) Applicants Respondents 1987, ar dy wee ne a or ee en eer a ey IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V. No. G 376 of 1986 GENERAL DIVISION BETWEEN : BRAEMAR LIMITED and SOUTHERN HEATING HOLDINGS PTY. LTD. Applicants and BRAEMAR APPLIANCES PTY. LTD. and NATIONAL CONSOLIDATED LIMITED Respondents COURT: NORTHROP J. DA : 22 OCTOBER 1387 PLACE: MELBOURNE EX TEMPORE REASONS FOR JUDGMENT Before the Court are two motions. The first motion is one taken out by the respondents, notice of which is dated 3 September 1987. By that motion the respondents are seeking orders that until the hearing and determination of this proceeding the applicants be restrained from breaching clause 17 of the agreement in writing dated 17 May 1985 referred to in paragraph 13 of the applicants' amended statement of claim herein, and that the firstnamed applicant be ordered, until the hearing and determination of this proceeding, to comply with, or alternatively, specifically perform, the terms of clause 17 of the said agreement. The second motion is one Co aad taken out by the applicants, notice of which is dated 7 October 1987. By that motion the applicants are seeking an order that until the hearing and determination of this proceeding the respondents be ordered to perform the obligations and liabilities in respect of the Braemar warranty pursuant to clause 17(b) of the agreement in writing dated 17 May 1985 referred to in paragraph 13 of the applicants' amended statement of claim herein. During the course of the hearing of these motions, counsel for the applicants indicated that they did not intend to proceed with the motion, notice of which was dated 7 October 1987. Accordingly, I propose to deal with the remaining motion of which notice was given on 3 September 1987. This motion is taken out in proceedings which were commenced in October 1986. In those proceedings the applicants, as appears from their amended application, are seeking damages from the respondents under the Trade Practices Act 1974, and under contract, with respect to two agreements, one of which was entered into on 17 May 1986, which can be called the "hot water agreement." In addition to damages the applicants are seeking, under 5.87 of the Trade Practices Act, variations of some of the terms of that agreement, but on the face of it there 1s no reference to any variation being sought in relation to clause 17. The hot water agreement is an agreement entered into between Braemar Applicances Pty. Ltd., the vendor under the hot water agreement, and the firstnamed respondent, Southern Braemar Limited, which subsequently changed its name to Braemar yorsen wee eee Fe tee ene te ote cen ee on en ere ee "Fro, oe ae, ee ee Limited, the purchaser under the hot water agreement, and the first applicant, and the other two parties, namely Southern Heating Holdings Pty. Ltd. and National Consolidated Limited. By the hot water agreement, Braemar Appliances Pty. Ltd. sold to Braemar Limited the business theretofore being carried on by Braemar Applicances Pty. Ltd., its business of manufacturing and supplying Braemar hot water services and equipment. The agreement was to take effect as from 27 June 1985 and detailed provisions contained in that agreement related to what was to be taken over by Braemar Limited, the purchase price and how it was to be paid over a period of time, stock in trade and all other matters the subject of that agreement. In particular, Braemar Limited took over the goodwill of the business of Braemar Applicances Pty. Ltd. including the right to use the name Braemar. Prior to 27 June 1985, Braemar Appliances Pty. Ltd. had supplied or sold to consumers hot water appliances, both gas and electric. Under the contracts between Braemar Appliances Pty. Ltd. and the consumers there existed warranties whereby Braemar Appliances Pty. Btd. agreed to carry out repairs, if necessary, when they came within the terms of a warranty, in relation to the appliances supplied for various periods of time ranging from, in substance, five to seven years. Clause 17 of the hot water agreement deals with the question of these warranties. It is a long clause. eee mag eg Sy er em ye one meee ypreat It is headed "Braemar Warranty." In that clause the term means any warranty whether express or implied given by Braemar Appliances Pty. Ltd. in comnection with the sale by it prior to the sale date, that is 27 June 1985, of hot water units, room air conditioners and commercial air conditioners, but excluding certain types of equipment. In substance, under that clause, Braemar Limited agreed to meet the obligations and liabilities of Braemar Appliances Pty. Ltd. under the terms of the warranties given by Braemar Appliances Pty. Ltd., and in return Braemar Appliances Pty. Ltd. agreed to pay to Braemar Limited a total sum of $609,000 payable equally over three years by quarterly instalments. Reference is made specifically to sub-clause (g) of paragraph 17. Under that sub-clause, if Braemar Appliances Pty. Ltd. formed the opinion that Braemar Limited was not fulfilling its obligations under clause 17, it could give notice in writing to Braemar Limited indicating the reason it had formed that opinion, and requesting Braemar Limited to fulfil ats obligations under clause 17 failing which Braemar Appliances Pty. Ltd., without prejudice to any other rights it may have at law, have the right:- "(a) by notice in writing to terminate the provisions of this Clause; and (b) to claim damages against the Purchaser for breach of its obligations ..." TOT rn per _— Bom ersce mar -— re 6 mew eee ee ee ee ee ee under the agreement and in particular for all consequential costs and expenses which may be incurred by the vendor, that is Braemar Appliances Pty. Ltd., in re-establishing facilities to meet the Braemar warranty. The motion before the Court arises from actions taken by Braemar Limited under which 1t has indicated it will no longer perform its obligations under clause 17. This results in the position where Braemar Appliances Pty. Ltd. is obligated by contract to persons to whom it sold and supplied the hot water units, to perform any duties under the warranty at 1ts own expense. Apparently no notice has been given under sub-clause 17(g), and what the respondents are now seeking 1s an order that the applicants, and in particular Braemar Limited, perform its duties of performing the obligations of Braemar Appliances Pty. Ltd. under the guarantees given by Braemar Appliances Pty. Ltd. to persons who bought the hot water units from that company. There has been no cross-claim by the respondents raising a claim based on breach of clause 17. During the course of submissions, counsel for the respondents argued that the Court should anticipate and if need be make orders on conditions that the respondents would issue a cross-claim claiming specific performance by Braemar Limited of clause 17 of the hot water agreement. I will proceed on the assumption that such a cross-claim does exist. ety tear ore enap eee s mn pews wasp ee en prem Sn eee ee pee SFT OT ees ee ee «aren om me —r In the absence of any such cross-claim it 15 difficult to see how an interlocutory injunction or specific performance in the nature of an interlocutory injunction could be issued when there 15 no claim before the Court for such an order. Ié is noted also that the claim 1s based specifically on contract, it is not dependent at all on any claim under the Trade Practices Act. It is assumed that any such cross-claim would be before this Court as part of its accrued jurisdiction arising from a claim by the applicants based on s.52 of the Trade Practices Act. In addition to the facts already mentioned, I should also say that it seems clear, and any expressions of view I make on the facts are made on the basis that this is an interlocutory application and that no final view can be expressed on any of these matters, that subject to that qualification it seems fairly clear that Braemar Limited 1s suffering financial problems and claims ait is not in a@ position financially to carry out the obligations of Braemar Appliances Pty. Ltd. under the terms of clause 17. Braemar Appliances Pty. Ltd. suffers no such financial restrictions but says that 1f it is forced to carry out the warranty work itself, it will be forced to incur great expenses because 1t no longer does work of that kind, that in order to get people to do that work it may have to engage persons who are, in substance, under the control of Braemar Limited and there is danger that there may be cases of overcharging, or find other experienced persons who can perform the duties under the Various warranty clauses. a - 6S ape ee re pee ane Mart In law, the Court is reluctant to grant mandatory injunctions or even specific performance of contracts which have the effect of a mandatory injunction. This matter haz been discussed in a number of cases which are brought together and applied in the case of Australian National Airlines Commission v. Commonwealth of Australia (1986) 66 A.L.R. 545 at 552. I propose to apply those principles. In the present case it is quite clear, in my opinion, and again for the purposes of interlocutory proceedings, that Braemar Limited has quite deliberately announced it proposes to commit a breach of clause 17 of the agreement. For present purposes 1t is not relevant for me to express any views as to why it has taken that course. On that finding I am satisfied that the respondents have shown a strong case based on breach of contract against Braemar Limited. But at the same time it must be remembered that this is a claim made by Braemar Appliances Pty. Ltd. based upon contract, and there 15 a well established principle of equity that a court will not grant specific performance of a contract in cases where damages can supply ai sufficient remedy. This principle of law gains added weight from the fact that what is being sought here 15 an order directing Braemar Limited to perform a series of actions over possibly quite a long period of time. Even of more importance, in my opinion, is the fact that clause 17 itself has within it a provision as to what is to happen if Braemar Limited commits a breach of clause 17. That is sub-clause (g). It is said ne ee ote fet pee cece ere ee ce eer ee a ee ee -r ote ro nn ord oe s+ that that sub-clause confers an option upon Braemar Appliances Pty. Ltd. to either give that notice and act pursuant to sub-clause (g) or rely upon other rights. In my opinion it 1s a clear indication that Braemar Appliances Pty. Ltd., by clause 17, has the right to terminate the provisions of the clause thereby relieving itself of making any further payments and at the same time to go back and perform the warranty obligations itself and then claim by way of damages against Braemar Limited, the amount so incurred including any costs necessary in establishing the facilities to perform its obligations under 1ts warcanty with 1ts customers. It must Be noted also that since 27 June 1985, Braemar Limited has been supplying hot water units, and presumably under the contracts by which 1t supplied hot water units it is under an obligation of warranty to rectify defects which come within the terms of that warranty. Anything that I say has no bearing whatsoever on warranties of that kind. In all the circumstances of this case I see no reason at all why the Court should grant a mandatory aunterlocutory injunction against Braemar Limited. It is a case which, in my opinion, can be covered adequately by damages. In this regard, the fact that Braemar Limited might be in financial difficulties is immaterial. If an order were made and Braemar Limited did not have the funds necessary to provide the services, 1t may well make a mockery of the order, which 1s a further reason why the Court should not make the interlocutory orders sought. ee we ee eee ne rn i oe s---—- = a Accordingly, the orders sought by the motion of the respondents, notice of which is dated 3 September 1987, is 'refused. I make the further order that on the motion of the applicants, notice of which is dated 7 October 1387, the motion is refused and the respondents' costs of the motion are reserved. i 2 certily shat this and the ~g/tT Cs) 4 preceding pages aie a true copy of the | Beacon. for Judgment herein of the a Tenowable Mr. Sustiie 48 1 Nertarep? i Shana 2 Luau Associate 1 YR Getaber ASF 4 a eee en ee ye wee