Precast NZ Ltd v Anystep Ltd

• Jurisdiction: New Zealand
• Judge: Thomas J
• Judgment Date: 08 March 2016
• Neutral Citation: [2016] NZHC 377
• Docket Number: CIV-2014-404-3171
• Court: High Court
• Date: 08 March 2016

Between

Precast NZ Limited

Plaintiff

and

Anystep Limited

First Defendant

and

P J Evans

Second Defendant

and

P T Cane

Third Party

[2016] NZHC 377

CIV-2014-404-3171

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

Application for an interim injunction restraining the defendant from terminating or purporting to terminate a licence Agreement and an interim mandatory injunction requiring the defendant to supply the licensed materials — the defendant manufactured moulds for making precast concrete stairs — it had the right to use the intellectual property rights to a system which enabled the cost effective installation of concrete stairs — pursuant to the licence, the defendant granted the plaintiff the exclusive rights to use and sell the system in New Zealand — the defendant claimed the plaintiff had breached the licence by sub-licensing the system by assigning its rights and the agreement without consent — it purported to terminate the agreement — the plaintiff alleged that there was a serious agreement that consent was not necessary and that the balance of convenience and overall justice favoured the granting of relief — whether the plaintiff's agreements were assignments granted without consent and were in breach of the licence — whether there was an explicit or implicit term of the licence that the components (which were patented and could not be obtained elsewhere) would be supplied — whether the plaintiff had delayed unreasonably in making the application..

Appearances:

M J Fisher and A T Burnet for the Plaintiff

B Gustafson and C M Hanafin for the Defendants

JUDGMENT OF Thomas J

Introduction

1 The plaintiff, Precast NZ Limited (Precast), applies for interim relief in respect of the purported termination of a Licence Agreement (the Licence) dated 22 December 2009 between Precast and the first defendant, Anystep Limited (Anystep).

2 Precast claims there is a serious question to be tried concerning the validity of Anystep's purported termination of the Licence, and the overall justice favours the granting of the interim relief sought. Precast also seeks interim mandatory orders requiring Anystep to supply Precast with rubber extrusions which Precast ordered from Anystep on 13 January 2006 pursuant to the Licence.

Background

3 Precast is the management company of the Stresscrete group of companies, which manufactures precast concrete components, and supplies them to the construction market. The Stresscrete Group is a joint venture between interests associated with Paul Cane and interests associated with Brett Russell. Mr Cane is the managing director of Precast and a third party in these proceedings.

4 Anystep manufactures moulds for making precast concrete stairs. It has the right to use the intellectual property rights to the Anystep Moulding System (System), which enables the cost effective installation of concrete stairs. The relevant intellectual property is owned by Anystep Technology Limited. Peter Evans is a director of Anystep.

5 Pursuant to the Licence, Anystep granted Precast the exclusive rights (with one exception in the Kerikeri area) to use and sell the System in New Zealand for a term of 25 years, with an option to renew for a further term of 25 years.

6 In August 2011, Precast acquired a 10 per cent shareholding in Anystep and in March 2012 Mr Cane was appointed a director of Anystep.

7 Unfortunately, the working relationship between Mr Cane and Mr Evans was problematic. In May 2013, the non-Precast shareholders voted to remove Mr Cane as a director. The reasons for his removal are in dispute. By late December 2013, however, Precast had relinquished its 10 per cent shareholding in Anystep.

8 In early 2014, a precast concrete manufacturer based in Ashburton, McIntosh Precast Ltd (McIntosh), contacted Mr Evans seeking to buy an Anystep Mould in order to manufacture and sell precast concrete stairs in Ashburton. Anystep was unable to make the sale due to its exclusive licence arrangements with Precast. Some time later, however, Ancon Building Products Pty Ltd (Ancon), an Australian based company which Anystep had agreed could sell the System in Australia, sold an Anystep Mould to McIntosh. The circumstances of that sale are not entirely clear (and will be an issue for trial).

9 Precast then commenced proceedings. It appears that Precast's key concern, given the breakdown in its relationship with Anystep, is that Anystep might sell its moulds to overseas entities (such as Ancon) in circumstances where Anystep knows, or ought to know, that those entities intend to on-sell the moulds in New Zealand. Precast says that any such conduct would be in breach of the Licence.

10 Precast sought an interim injunction to protect its position through to trial. In particular, it sought to restrain Anystep from assisting anyone to purchase the System where Anystep knew “or ought reasonably to know” that the System would be used in New Zealand. Precast's interim injunction application was ultimately resolved by Anystep providing appropriate undertakings.

11 Meanwhile, Anystep filed a counterclaim, alleging a breach of clause 10.2 of the Licence, which provides for Precast to support Anystep in respect of sales of the System to overseas parties. Anystep claimed to have lost potential sales and sought a declaration that the breach was repudiatory, entitling it to cancel the Licence.

12 Precast denied Anystep's counterclaim and sought summary judgment in respect of it, on the basis it was doomed to fail. In May 2015, I found that Anystep did not have an enforceable right to terminate the Licence, because a notice had not been given and, in any event, Anystep had affirmed the Licence. 1 Anystep's counterclaim based on clause 10.2 was permitted to continue to trial, albeit with the scope of any possible relief limited to damages.

13 Following the hearing, Anystep amended its pleading to include a further counterclaim, this time based on clause 8 of the Licence. Anystep says that this further counterclaim, unlike the one under clause 10, does give rise to a right on its part to terminate the Licence.

14 The Licence contains the following relevant clauses:

6. (Termination)

Either party may be written notice to the other, terminates this Agreement with immediate effect upon the happening of the following:

… 6.2.1 If the other party fails to perform or observe any provision of this Agreement and that failure to observe or perform is not remedied within 30 working days after written notice to the other party requiring it to be remedied.

Upon termination or expiry of this Agreement:

6.3.1 If termination was by the Licensor under clauses 6. 1 or 6.2, the Licensee will no longer be licensed under the Intellectual Property Rights to use or exploit in any the Anystep moulds;

Clause 8 (Assignment)

8.1 The Licensor shall not assign its interest under this Agreement to any party without having that party covenant with the Licensee in terms of this agreement.

8.2 The Licensee shall be entitled (subject to the prior written consent of the Licensor, which will not be unreasonably withheld or delayed) to assign its rights hereunder to any third party provided the Licensee remains liable for the payments due to the Licensor pursuant to clause 4.1 hereunder.

15 Anystep alleges that Precast breached clause 8 by, without seeking Anystep's consent:

• (a) granting an exclusive licence to Bradford Precast Limited (Bradford) to operate the System in Canterbury and Otago (Bradford Breach); and

• (b) granting a further licence to Balcrom Limited (Balcrom) to operate the System in Canterbury and Otago (Balcrom Breach).

16 Anystep relies on a letter it sent to Precast on 25 July 2015 as giving rise to a right to terminate the Licence for the alleged breaches of clause 8.2. It gave notice to Precast that it had 30 days to remedy the Bradford Breach and the Balcrom Breach (the Notice).

17 Precast has failed to “remedy” the Balcrom Breach and the Bradford Breach. Precast accepts it did not seek consent from Anystep to the granting of the Balcrom and Bradford sub-licences but disputes that a right to terminate has arisen, pursuant to the Notice or otherwise.

18 On 21 January 2016, Anystep's solicitors wrote to Precast's solicitors, and advised inter alia that:

• (a) the Licence was terminated; and

• (b) Anystep believed Precast's request for the rubber extrusions was so they could be on supplied to the allegedly unauthorised sub-licensee, Balcrom, and as such, Anystep would not supply them.

19 On 25 January 2016 Precast's lawyers wrote disputing the Licence was terminated. The letter did not dispute that Precast intended to on supply the rubber extrusions to Balcrom.

20 Anystep's lawyers replied by letter date 29 January 2016 advising that:

The letter of 25 July 2015 gave notice of the defaults, including the Balcrom breach and the Bradford Breach, and asked that they be remedied within 30 days. They were not. As a result the Licence was terminated from 25 August 2015.

For the avoidance of doubt, and out of an abundance of caution, this letter gives further notice pursuant to clause 6.2 that as a result of failing to remedy the Balcrom and Bradford Breaches as notified to you on 25 July 2015, the Licence is terminated with immediate effect.

In the unlikely event that a Court finds in the future that the Licence is not terminated by failure to comply with the notice delivered on 25 July 2015 this letter gives notice pursuant to clause 6.2.1 of the Licence of the Balcrom Breach and Bradford Breach (as set out in the amended statement of defence and counterclaim) and seeks that they be remedied within 30 days. A copy of this letter will be sent by registered post to your client's nominated...