IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE	
CIV-2019-412-000004
[2019] NZHC 504	

BETWEEN	GREENFIELDS INTERNET LIMITED
First Plaintiff	
AND	RURAL NETWORKS LIMITED
Second Plaintiff	
AND	RURAL NETWORKS SOUTH ISLAND LIMITED
First Defendant	
AND	CENTRAL LAKES INTERNET COMPANY LIMITED
Second Defendant	

Hearing:	8 March 2019	
Appearances:	J Moss for Plaintiffs
B Nevell and S Carter for Defendants	
Judgment:	20 March 2019	

JUDGMENT OF DUNNINGHAM J

Introduction

[1]	This is an application for an interim injunction by Greenfields Internet Ltd (GIL) and Rural Networks Ltd (RNL). GIL and RNL seek to restrain the defendants, Rural Network South Island Ltd (RNSIL) and Central Lakes Internet Company Ltd (CLICL) from:

GREENFIELDS INTERNET LIMITED v RURAL NETWORKS SOUTH ISLAND LIMITED [2019] NZHC 504 [20 March 2019]

(a)	terminating the internet connection which RNSIL provides to GIL until GIL has had a reasonable period to transition to alternate fixed wireless access (FWA) infrastructure; and

(b)	using confidential information and intellectual property belonging to, or supplied by, GIL and RNL, in particular by:

(i)	using GIL’s customer list to approach GIL’s customers; and

(ii)	using RNL’s intellectual property to build new infrastructure, including towers, to support customers of CLICL or customers which are not on the GIL network.

[2]	On 30 January 2019, I made orders on a without notice basis to retain the status quo until the issues could be argued, but on condition that payment of a disputed sum was made into a solicitor’s trust account and future payments from GIL to RNSIL were made in advance.

[3]	The application for interim injunction was duly served and RNSIL and CLICL filed documents opposing the above orders sought being made (noting that they have agreed to comply with other less contentious orders).

[4]	The existing interim orders were amended as a consequence of issues raised in telephone conferences held on 4 February 2019, but subject to the defendants’ right to challenge whether the orders were necessary at all.

[5]	Having heard the on notice application on 8 March, I gave a results judgment on 15 March 2019 declining to make the opposed orders. I advised that my reasons for the judgment would follow. This judgment sets out my reasons.

Issues

[6]	The issues for determination are:

(a)	Is GIL entitled to an interim injunction allowing enough time for it to transfer its clients off the RNSIL network before RNSIL’s notice of termination is effective?

(b)	Is GIL entitled to an interim injunction until the substantive proceedings restraining RNSIL and CLICL from approaching GIL clients?

(c)	Are RNL and GIL entitled to an interim injunction restraining RNSIL and CLICL from using RNL’s tower designs until the substantive proceeding?1

Background

[7]	GIL is a retail internet service provider (ISP) which was established in 2014, and operates in both the North and South Islands of New Zealand. Its sole director is Tony Reimann and its network manager is Warren Hurst.

[8]	RNL is a wholesale provider of FWA. It constructs and operates infrastructure, including towers to enable the provision of internet access by radio in more remote rural areas. It has the same director and shareholder as GIL.

[9]	RNSIL was established in late 2015 to provide FWA to GIL’s network to rural homes and businesses in the South Island. Its directors and shareholders are Brent and Janet Nicholson. RNSIL carries out a similar role to that which RNL provides GIL in the North Island and RNL claims it provided all of the network design, tower design, tower build, and core network build to RNSIL, and has assisted RNSIL with implementation and training. RNL says it did this “at cost or below cost” in order to help grow the respective businesses of RNSIL and GIL.

1	Noting that RNSIL and CLICL consent to an order restraining them from using RNL’s and GIL’s intellectual property related to the network configuration (if any), but resist such an interim order in relation to the tower design as they are using that design to build additional towers and have challenged RNL’s claim to own intellectual property in the design.

[10]	CILCL is, like GIL, a retail ISP. It was established on 16 November 2018 by the Nicholsons in order to compete against GIL in the areas where GIL was using RNSIL’s wholesale FWA infrastructure.

[11]	At the time RNSIL was established, Mr Nicholson and Mr Hurst were friends and the relationship with GIL and RNSIL, while not strictly a joint venture, was clearly symbiotic as RNSIL was established for the sole purpose of supporting GIL.

[12]	Given the connections between the individuals concerned, the parties never formalised their relationship in a written agreement. They did prepare what is described as an “operating framework”, which was drafted by RNSIL and amended and commented on by GIL. GIL’s comments included emphatic statements that RNSIL had no rights to the IP behind the design and implementation of network assets in the South Island, and that clients had to deal with GIL directly for payment for the services. However, it remained a draft document and there was no concluded written agreement between the parties on key issues including, in particular, the notice period which should apply in the event of termination of the relationship.

[13]	In general terms, GIL dealt with the customers and billed the customers directly for the provision of internet services, and RNSIL billed GIL for each customer which had access to its infrastructure. RNSIL also completed the installations of equipment on customer premises (CPE) needed to access the internet, which provided a source of additional revenue to RNSIL. RNL rendered accounts to RNSIL for the technical support and training it provided to RNSIL.

[14]	Unfortunately, however, difficulties arose with payment of the monthly invoices from RNSIL, and GIL fell behind in payment. GIL, in turn, objected to the fact that RNSIL was directly billing a small number of customers, which it said was a breach of the agreement that GIL was the ISP and owned the customer, whereas RNSIL was the wholesaler.

[15]	Those disputes were not resolved and there were exchanges between the parties during 2016 and 2017 regarding them. For example, in June 2017, Mr Hurst acknowledged that RNSIL “should have been paid” and he was working hard to do

that. He noted that RNSIL owed money to RNL for its support services and suggested doing some intercompany credits and debits. There was also discussion at that time of the Nicholsons lending $50,000 to GIL to help it get through the difficult cashflow position.

[16]	On  20  August  2017,  a  compromise  and   “temporary  arrangement”   to    1 February 2018 was proposed by RNSIL which acknowledged that the clients were owned by GIL and agreed on figures for certain payments to GIL. While one of these payments would be credited against the amounts GIL owed RNSIL, another of $1050 per month would only be paid after RNSIL received its monthly payment from GIL. However, GIL continued to be significantly in arrears with payments to RNSIL.

[17]	In August 2018, GIL proposed selling its residential wireless customer base. It had around 143 customers in the South Island and it offered those customers to RNSIL. Mr Hurst’s evidence is that GIL had received offers from third parties of $1,000 per residential customer and it offered to sell its residential customers to RNSIL for that sum on 3 September 2018. However, on 14 September 2018, CLICL (albeit that company was yet to be incorporated) made an offer, by way of a heads of agreement, to purchase GIL’s residential customers for $600 per person. That offer was rejected by GIL and negotiations ended.

[18]	In the following two months, tensions over unpaid accounts escalated, with RNSIL’s   lawyers   formally   demanding    the    payment    of    $24,897.92    by   26 September 2018.

[19]	GIL responded noting that there were invoices from RNL for the same period which had not been paid by RNSIL and if what was owed to GIL/RNL was set off against what was owed to RNSIL, it did not believe there would be “more than a couple of thousand dollars” owed to RNSIL.

[20]	RNSIL’s solicitors wrote back seeking confirmation that GIL was solvent and noting that “on average that our client had been paid 73 days after the due date”. It concluded by demanding the sum of $32,200 to be paid no later than Monday,           8 October 2018.

[21]	Further communication ensued about what RNSIL owed to RNL with Mr Hurst saying on 20 November 2018 that “while money may be owed to RNSI, there is a similar and correspondingly growing obligation back from RNSI to both GIL and RNL”.

[22]	On the same date, Mr Hurst sent Mr Nicholson a copy of the wholesale service agreement that GIL had with its North Island FWA provider, RNL, suggesting that it could be adapted to suit RNSIL in order to formalise the arrangements between GIL and RNSIL. The significance of this, according to RNSIL, is that the agreement envisaged the ability to terminate the agreement between the parties by giving 30 days’ notice in writing or, if one party materially breached the agreement, it could be terminated immediately. RNSIL and CLICL rely on the terms of this agreement to demonstrate what is normally considered a reasonable notice period, for the purpose of countering GIL’s suggestion that it should be a period of several months.

[23]	However, the proposal to conclude a wholesale service agreement between GIL and RNSIL was not progressed. Instead, on 30 November 2018, RNSIL, through its lawyers, advised it was terminating the relationship with two weeks’ notice because of the “recidivist nature of GIL defaults with RNSIL”.

[24]	GIL and RNL responded through their lawyers saying that given the “longstanding and ongoing service and supply arrangements between RNSI and GIL and RN respectively … [those arrangements] … can only be terminated by reasonable notice”, and a period of at least 60 business days’ notice was proposed. The letter sought that the termination notice be withdrawn and that RNSIL confirm that it would not terminate  or  interfere  with  the  services  provided,  without  giving  at  least  60 business days notice, failing which GIL would seek injunctive relief.

[25]	Further correspondence ensued over the Christmas period regarding the payment dispute and the termination period. RNSIL did not resile from the position that the relationship was terminating and it sought access to the passwords which RNL used on the RNSIL network in order to allow it to set up a second VLAN on its infrastructure to enable it to service other clients. That request was resisted by GIL because of concerns that the passwords were identical to those used on the RNL

network. GIL said they needed to be changed before they could be provided to protect the security of the RNL network. It offered to make those changes incrementally and to disclose 20 passwords a week to RNSIL. RNSIL’s view remained that it was essential to have the passwords in order to gain control over its own infrastructure assets, and that GIL’s reasons for withholding them was to “try and retain some power over the situation”.

[26]	In these exchanges, GIL advised that it was “prepared to reduce the termination period to end of January 2019 …[and]… to work towards a full settlement of all outstanding mutual claims within that timeframe”. On 14 December, RNSIL confirmed that, subject to agreement being reached on certain matters relating to the changeover,  it  would  accept  GIL’s  proposal  to   terminate   the   agreement   on 31 January 2019, rather than on an earlier date.

[27]	In a further email sent on 14 January 2019, GIL, through its lawyers, again said that it had “no illusions around the ending of the relationship between RNSI and RNL/GIL on the 31 January 2019. It is ending and [GIL] accepts that”. However, in that same email GIL was insistent that RNSIL not contact GIL’s clients, saying “it is clear your client is setting up to compete with GIL” and that RNSIL had no right to approach them directly as it “only had knowledge of GIL customers through acting as an agent for GIL”.

[28]	It appears that around 17 January 2018, RNSIL obtained access to the passwords used by RNL through an alternative source, and proceeded to take control of its infrastructure assets. RNSIL also repeated that it would only extend the proposed termination date to 31 January 2019 if payment of outstanding invoices was made. GIL responded by complaining that by “obtaining” the passwords, RNSIL had created a significant security risk to GIL, and GIL was now having to change its passwords so that it could again support its network.

[29]	In late January, GIL was satisfied it had seen RNSIL making contact with a GIL client, who shortly afterwards terminated his  internet  service  with  GIL.  On 30 January 2019, the without notice application was filed and interim orders to hold the status quo were made on the same date.

[30]	In light of that background I turn to the issues to be determined.

Principles relating to the grant of interim injunctions

[31]	The interim injunction orders sought by the plaintiffs are to provide them with temporary relief pending the substantive hearing on their claims that:

(a)	the first defendant has not provided a reasonable notice period (which in the pleadings is sought until 31 March 2019); and

(b)	the defendants have a duty to keep confidential all information and intellectual property belonging to or supplied by the plaintiffs, including their customer lists and the design of their infrastructure, including towers.

[32]	It is settled law that when considering an application for an interim injunction, this Court should have regard to:

(a)	whether the plaintiff can show there is a serious question to be tried;

(b)	where the balance of convenience lies as between the parties; and

(c)	the overall justice of the case.

[33]	In terms of showing  whether  there  is  a  serious  question  to  be  tried,  Lord Diplock in Amercian Cyanamid Co v Ethicon Ltd considered that a Court should “be satisfied that the claim was not frivolous or vexatious; in other words, that there was a serious question to be tried”.2 The defendants, however, suggest that, in some cases, the Court has applied a higher test of “strong prima facie case” and that should be applied here. However, as was the approach in the cases referred to by the defendants, I consider the strength of the parties’ cases is better taken into account at the stage of considering where the balance of convenience lies.3

2	Amercian Cyanamid Co v Ethicon Ltd 1975 1 All ER 504 at 510d.
3	See for example Theodurus Couwenburg and Son Ltd v Diesel Progress NZ Ltd (1987) 2 TCLR 512.

[34]	The question of where the balance of convenience lies is, as the plaintiff submitted, often described as the balance of the risk of doing an injustice.4 In determining where that issue lies, the Court regularly has regard to the following factors:

(a)	The adequacy of damages for both parties and whether or not there is irreparable harm if an interim injunction is not granted. If damages are not an adequate and proper remedy, an injunction will normally be granted.

(b)	The status quo. The Court may seek to preserve the status quo, that is, the state of affairs existing in the period immediately preceding the issue of proceedings seeking the permanent injunction, particularly where other matters are not determinative.

(c)	The relative circumstances of the case.

(d)	The relative strength of each party’s case. As already mentioned, where other matters are evenly balanced, it will usually be appropriate to have regard to the relative strengths of the parties’ cases.5

(e)	The effect on innocent third parties. Prejudice to innocent third parties may be a factor in favour of granting or not granting an interim injunction.

(f)	The conduct of the litigants. As the jurisdiction to grant an interlocutory injunction is governed by equitable principles, an injunction may be refused if the plaintiff has delayed taking action or where a party has come to the Court with “unclean hands”. Other aspects of a party’s conduct (where the plaintiff or defendant) may also have a bearing on whether injunctive relief is granted or not. For example, where a defendant has embarked on a course of conduct

4	ABC Developmental Learning Centres (NZ) Ltd v Artemis Early Learning Ltd HC Christchurch CIV-2010-409-1198, 7 October 2010 at 29.
5	Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (CA) at 137.

knowing the risks that it is running, the Court may ignore the inconvenience to that party in deciding whether to make an injunction or not.6

[35]	The third stage of the assessment is to consider the overall justice of the position. This is essentially a check on the position that has been reached through the first two stages of the assessment.

Is GIL entitled to an interim injunction allowing enough time for it to transfer its clients off the RNSIL network?

The plaintiffs’ position

[36]	GIL seeks to restrain RNSIL from turning off its wholesale network, on the grounds that there is no alternative wholesale network to transfer its customers to in this area (which is not the case in the North Island) and that means it would be inevitable that GIL would lose customers because they would be without an internet connection. In effect, CLICL or RNSIL could directly approach those same customers to provide a reconnection. It says as a result, CLICL (or RNSIL) would get most if not all of GIL’s customers at no cost, when only a few months ago it was prepared to offer $600.

[37]	GIL says that there is no agreed notice period because of the informal way in which the relationship between RNSIL and GIL commenced. It seeks an interim injunction for a “reasonable period” to allow it to set up a sufficient infrastructure (for example, it has already commissioned a temporary tower in Cromwell), to enable it to retain a reasonable number of its customers.

[38]	GIL does not specify what a reasonable period would be. It had sought until 31 March 2019 in its statement of claim. However, it now says that because of steps that RNSIL has taken (including obtaining the passwords without authorisation) it has not had a “clear run” at this and seeks a longer period.

6	See for example Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd, above n 5; NZ Farmers’ Co-op Association of Canterbury Ltd v Farmers Trading Co Ltd (No 1) (1979) 1 TCLR 18.

[39]	It acknowledges that the current FWA infrastructure took three years to establish and it cannot expect that length of time, but it should have “a reasonable opportunity to enter into alternative arrangements”, which it says should now go beyond 31 March 2019.

The defendants’ position

[40]	The defendants point out that at the beginning of November RNSIL had sent GIL a letter warning that they were reviewing their future with GIL because of the non-payment, and because the clients were receiving “inconsistent service”. They argue that the concept of “reasonable notice” does not mean sufficient notice “to make alternative arrangements of the sort similar to those which are being terminated”,7 but rather, as was cited with approval in Paper Reclaim Ltd v Aotearoa International Ltd, a reasonable notice period need be no more than what is required to provide:8
a reasonable opportunity to enter into alternative arrangements and to wind up matters which arise out of their relationship…[such as]…carrying out existing commitments, bringing current negotiations to fruition and, where appropriate, obtaining the fruits of any extraordinary expenditure or effort carried out within the scope of the agreement.

[41]	In this case, the defendants argue that GIL has no seriously arguable case for a notice period exceeding the three months they have already had. This is because:

(a)	the contractual notice period between GIL and their clients is one month so the time required to carry out existing commitments is just one month;

(b)	there are no current negotiations to be brought to fruition; and

(c)	there is no evidence of any extraordinary expenditure or effort carried out within the scope of the agreement which requires a longer notice period to account for.

7	Anchor Butter Co Ltd v Tui Foods Ltd [1997] 3 NZLR 107 at 124.
8	Paper Reclaim Ltd v Aotearoa International Ltd [2017] NZSC 26 at [10] citing Crawford Fitting Co v Sydney Valve & Fitting Pty Ltd (1988) 14 NSWLR 438 at 448.

[42]	The defendants also point out that GIL has no seriously arguable case for a notice period in excess of the 60 days because Mr Hurst himself has said that the industry norm is 60 days and the agreement GIL has with RNL allows for termination in shorter timeframes than this.

[43]	The defendants note that the only reason GIL seeks to have a longer notice period is because they have no alternative supplier of FWA infrastructure in the area that they can contract with and therefore it needs time to build its own infrastructure. However, as was said in Paper Reclaim Ltd, if GIL had wished to have a sufficient notice period to build a replacement set of infrastructure, that should have been expressly agreed at the outset. By not obtaining express contractual protection it took the risk of being disadvantaged if notice was given.9

[44]	Finally,  the defendants argue that GIL agreed to a final termination date of  31 January 2019, and although it was offered by RNSIL on conditions, those conditions were for RNSIL’s benefit and it waived them. There was no suggestion that GIL was reserving its position to argue for a longer termination date. It says GIL’s position that this date was agreed to under duress, and when GIL thought it was going to be a “seamless transition”. These claims do not withstand scrutiny. The duress being claimed here is simply commercial pressure to make an unpalatable decision which does not invalidate the binding nature of the agreement reached between the parties. In this regard, they rely on Mr Hurst’s own evidence where he says “we knew the end of January 2019 would allow us time to migrate a certain number of clients, but we felt powerless as to available options and so offered this concession (termination date of 31 January 2019)”.

[45]	RNSIL also point out that obtaining the passwords was not the equivalent, as the plaintiffs suggest, of “hacking RNL’s system”. It was no more than a necessary step enabling RNSIL to retake control over its own assets, including its CPE. There was no detriment to GIL or to internet customers in these steps being taken by RNSIL, and it was not a reason to delay the termination date.

9	At [8].

[46]	For these reasons, they say there is no serious question to be tried that the termination period should be longer than the current period they have enjoyed.

[47]	Turning to the balance of convenience, the defendants say that if the interim orders remain in place, GIL will effectively be gaining an unfair commercial advantage, allowing them time to build their own “last mile” infrastructure and transition clients without competition from RNSIL. During that time, RNSIL would be required to maintain all GIL clients on their system while GIL “cherry picks” the most valuable clients to transition. While GIL may complain that, without the interim orders, RNSIL would have a commercial advantage of being able to entice customers over to the CLICL network, that risk, of itself, does not justify the continuation of the interim orders. The Court should not be in the business of protecting a commercial enterprise from suffering a “legitimate disadvantage” as a result of the lawful termination of a commercial contract.

[48]	The defendants accept that potential disadvantage to third party customers may be influential but that RNSIL was “not going to cut any clients off from their internet connection without ensuring an alternative is in place for them”. For that reason, no third party customers would be affected adversely.

[49]	In terms of the status quo, the defendants submit that the existing position is that the parties had agreed to a termination date of 31 January 2019 and the Court should not override that agreement by extending it to RNSIL’s disadvantage.

[50]	Finally, the defendants argue that damages are a suitable remedy. In particular, it is clear that the loss of the residential clients can be readily valued given the parties were negotiating for their purchase shortly before termination at a figure somewhere between $600 and $1,000.

[51]	RNSIL also submits that there will be no damage to GIL’s goodwill, as RNSIL is motivated to ensure that clients will be transferred in an orderly and accommodating manner.

[52]	In looking at the overall justice of the case, the defendants say the Court should have regard to both:

(a)	the reason for termination, being the longstanding defaults in payment by GIL; and

(b)	GIL’s failure or refusal to release the passwords they had put onto RNSIL’s routers and CPE in order to leave GIL in full control of RNSIL’s infrastructure.

[53]	RNSIL on the other hand, has:

(a)	repeatedly requested payment of overdue invoices;

(b)	given notice of  its  intention  to  review  the  business  operations  on 5 November 2018;

(c)	given reasonable notice of its intention to terminate the contract rather than issue an immediate termination; and

(d)	continued to ensure the ultimate consumers have been protected at all times.

[54]	For all these reasons, they consider the overall justice of the case should mean there is no further extension of the notice period.

Discussion

[55]	In the absence of a written agreement as to what comprises a reasonable notice period, there was clearly a serious question to be tried as to whether the 14 day notice period initially given was adequate, even in the case of the repeated defaults in timely payment.

[56]	I do not accept that the terms of the agreement between GIL and RNL resolves what the appropriate terms should be in the circumstances of the relationship between

RNSIL and GIL. Not only did these parties not enter into such an agreement, but they were operating in a different environment where there is no alternative FWA provider for GIL to switch to.

[57]	However, in the absence of an agreement it was difficult to identify what GIL thought a reasonable notice period should be, and it has changed its position on this issue in the period since termination was due to take place. Initially it said 60 working days, but then it negotiated with RNSIL on the basis of a 31 January 2019 termination date, which was a shorter period. In its pleadings it sought a date of 31 March 2019. However, at the hearing, GIL sought a longer period than that because it had not had a “clear run” to set up alternative infrastructure. Mr Moss acknowledged that the existing infrastructure had taken three years to establish and that his clients did not expect an injunction of that duration but said GIL sought as long as possible in order to replicate as much of the FWA infrastructure as possible.

[58]	In my view, that position was untenable and the evidence supports GIL having agreed to a 31 January termination date. While there had been conditions put on that, they were for RNSIL’s benefit and they related to whether that date or an earlier date should apply. Indeed there was, on 14 January 2019, an unequivocal statement by GIL accepting that the relationship would terminate on 31 January 2019. I do not accept that the evidence supports that agreement being made under duress as that term is legally understood. These were commercial parties acting under legal advice, who well understood their options.

[59]	Even if I had residual doubts about that, I am satisfied that in considering where the balance of convenience lies, this is a case which can readily be resolved through damages. The practical effect of allowing the defendants to terminate their role as providers of FWA infrastructure to GIL is that GIL will lose many, if not all, of its small South Island customer base. It is clear that the loss of residential clients can readily be compensated for in damages, noting GIL was prepared to sell those clients for $1,000 prior to the arrangement being terminated. I have no reason to doubt that the value of the commercial clients can similarly be assessed based on their value as customers to GIL. GIL will continue in business as a North Island ISP and, as it has already erected some parallel infrastructure in the South Island, it may be able to

maintain some of its customers in the South Island and potentially grow that customer base.

[60]	To require the relationship to remain on foot given the acrimony which has arisen between the key personnel of the respective parties would, in my view, count against continuing the relationship in any event.

[61]	Looking at where the overall justice lies, I accept that both parties understandably consider that the other is using the situation for their commercial advantage. The plaintiffs say that RNSIL has only terminated in order to gain GIL’s clients for free. However, the defendants say that such an outcome has only occurred because GIL was continually behind in paying RNSIL notwithstanding that it was receiving payment from its customers. Any detriment to GIL was simply a consequence of RNSIL exercising its right to terminate the relationship for good cause. The defendants also consider that GIL and RNL acted inappropriately in withholding the passwords that RNSIL needed to take control over its own infrastructure, saying that GIL did so for commercial reasons rather than because there were legitimate security risks.

[62]	I accept that both parties have commercial motivations for their respective positions on this application. It is not a case where one party is clearly more deserving of the Court’s assistance than the other. Rather, this is a commercial relationship which has soured and where the merits of the respective parties’ positions are best determined at full hearing and, if the plaintiffs’ claims are established, damages are quantified in the usual way.

Is GIL entitled to an interim injunction until the substantive proceedings restraining RNSIL and CLICL from approaching GIL clients?

The plaintiffs’ position

[63]	The plaintiffs argue that GIL’s client list is confidential and any use of that outside the business relationship between GIL and RNSIL is an actionable breach of confidence. The defendants should not be allowed to use them to gain an advantage in establishing their new business.

The defendants’ position

[64]	The defendants submit there is no seriously arguable case, once the contract has terminated, to assert that the clients’ names and addresses are GIL’s confidential information. This is because RNSIL contracted directly with the clients in their own name for the provision of CPE (that is, equipment on the clients’ premises such as routers, dishes, and roof mounts) and the clients paid RNSIL for those services directly. That was acknowledged by Mr Hurst when he said that RNSIL also completed all installations on customers premises which was a good source of additional revenue for RNSIL. Thus, the knowledge of those clients names and addresses could never have been said to have been confidential to GIL.

[65]	In any event, even if the Court gets to the position where it considers there is a serious question to be tried, it is clear that this is an issue which could be remedied in damages.

Discussion

[66]	Many of the same considerations apply when considering this application for an injunction as applied in respect of the first application.

[67]	The issue of whether there is a serious question to be tried is made more difficult by the fact there was no written agreement identifying the exact nature of the relationship between RNSIL and GIL nor specifying which information was confidential to, or the property of, either party. If, in fact, RNSIL was acting as an agent for GIL, or in a joint venture, it is arguable that there was an obligation not to use information, such as a customer list, to “springboard” it into a competing business. However, again I consider the primary factor pointing against an interim injunction being required is that this issue, too, is remedial in damages for the same reason that the loss of clients through termination is.

[68]	Similarly, when looking at the overall justice of the case, there is no new factor which would warrant revisiting the view that this is an issue that is remediable in damages.

[69]	An interim injunction restraining the defendants from approaching GIL clients is therefore declined.

Are RNL and GIL entitled to an interim injunction restraining RNSIL and CLICL from using RNL’s tower designs until the substantive proceeding?

The plaintiffs’ position

[70]	The plaintiffs plead that RNSIL and CLICL owe a duty of confidence to keep confidential all information and intellectual property which belongs to or was supplied by GIL and RNL, and they say that RNSIL and CLICL have unlawfully breached that confidence by copying and using RNL’s intellectual property to build new towers to support customers of CLICL.

[71]	RNL points to the evidence from Mr  Hurst  that  GIL  commissioned Tokoroa Engineering to build the towers to Mr Hurst’s designs and under Mr Hurst’s instructions, and GIL therefore owns the intellectual property to that design. While GIL does not deny that RNSIL owns the physical towers that were built during the relationship, it does not have permission to use those designs to build new towers which are not servicing GIL clients.

[72]	The plaintiffs submit that damages, once again, are not a suitable remedy because they are difficult, if not impossible, to quantify. These are “bespoke wireless radio internet towers” and it is not possible to look at the value that other industry participants, such as Spark or Chorus, might place on those designs because the towers they use are very different and they do not operate in the distinctly rural areas that the plaintiffs operate in. The plaintiffs go on to say if RNSIL is not prevented from using RNL’s designs, it can promptly go out and build new towers without the delay that would be required if it had to design its own towers. The defendants may then be able to shut GIL out of the market because in some places, Council consent is required to build the towers, and there is no guarantee that the Council would allow a second tower to be built there where one already exists. If that turns out to be the case then RNSIL will effectively obtain a monopoly over not only the wholesale market, but also the retail market.

[73]	The plaintiffs go on to say that this is a case where the status quo should be maintained until the hearing. Furthermore, there would be no effect on innocent parties by retaining the status quo, noting that GIL and RNSIL were only able to acquire 143 customers over a three year time period, so there is no urgency for RNSIL to build new towers using RNL’s designs.

The defendants’ position

[74]	The defendants, quite properly, accept there is a serious question to be tried on whether the plaintiffs own the intellectual property to the tower design. However, again, they submit that damages is a suitable remedy. They point out that Mr Hurst in his reply affidavit says:

[H]ad [RNL] been selling the IP in full, it would have sought a levy on each further use of the IP (that is, if RNSIL went out and built new infrastructure for non GIL retail clients, it would have had to pay a levy to RNL).

[75]	RNSIL accepts it could go out and pay for another tower design but its position is that it has already paid for the design and construction of the towers and it should not be put to the cost of incurring that cost again on “a bare allegation by Mr Hurst that he contributed some intellectual property to that design”.

[76]	The question of where the balance of convenience lies on this issue is less clear cut. However, again I accept that the determining consideration is that damages is a suitable remedy. The evidence acknowledges that one way to remedy the unlawful use of the design to build further towers is to pay compensation to RNL for the use of its design if it is found to have ownership of it.

[77]	In respect of the plaintiffs’ concern that RNSIL may build towers where they later cannot replicate that service by building their own towers, that could equally occur (albeit with a small delay) if the defendants commission their own tower design. It seems, on the plaintiffs’ own evidence, that expansion of the FWA infrastructure is likely to be  slow,  noting  that  the  two  companies  were  only  able  to  acquire  143 customers over a three year time period and so this risk strikes me as being speculative at best. It does not so clearly flow from allowing the defendants to use the

design (as opposed to requiring them to come up with their own design), that it should warrant the grant of an interim injunction.

Outcome

[78]	For these reasons, as I advised in a results judgment on 15 March 2019, the interim injunctions orders which are opposed by the defendants are declined. However, I record that an interim order restraining the defendant from using any other intellectual property owned by RNL and GIL until disposition of the substantive proceedings is made by consent.

Costs

[79]	The issue of costs is reserved.

[80]	If costs can not be agreed, the party claiming costs is to file any memoranda within 15 working days, with any reply within a further 10 working days.

[81]	Costs will be determined on the papers unless I need to hear from the parties.

Solicitors:
Andrew Lewis Law, Auckland J Moss, Barrister, Christchurch
Guest Carter Law Limited, Dunedin