Harry Jordaan, a senior member of our Litigation team and accredited specialist in Commercial Litigation, discusses the recent decision of the Supreme Court of Queensland in Tribal Health Pty Ltd v Flush Fitness Pty Ltd [2016] QSC 103.

This was an application for an injunction by a supplier against its distributor regarding the distribution of products. His Honour, Justice Bond, summed up the requirements for such relief as follows:

  1. Whether the applicant has shown that he has a prima facie case; and
  2. Whether the applicant has shown that the balance of convenience favours the granting of the relief claimed.

In considering the balance of convenience requirement, reference was made to the adequacy of an award of damages and the sufficiency of the undertaking provided. It was in those circumstances held that when the effect of an injunction would alter the status quo effectively and, in essence, finally determine a respondent’s legal rights in advance of the trial, the Court would demand a high degree of assurance from the applicant that it has a strong case.

Although His Honour ultimately found that the applicant had a strong case that the respondent should be held to the distribution agreement, he could not be certain that this conclusion would prevail at trial. What tipped the balance was that His Honour was not satisfied that if an injunction was provided, that the respondent would be able to be adequately protected for any loss suffered considering the undertakings provided on behalf of the applicant. This was notwithstanding the fact that the applicant produced evidence of a profitable enterprise and a reasonably large anticipated profit.

For this type of relief the Court would usually require an undertaking from the applicant that if the injunction is granted and at the trial it is found that it should not have been granted, the applicant has sufficient assets available to reimburse the respondent for damages suffered because of the injunction.

Litigants would therefore be well advised to provide persuasive evidence when applying for an injunction that the undertaking in relation to damages is valuable, and will be sufficient compensation in the event that the case ultimately goes against the applicant.

This is also further confirmation that parties to a distribution agreement should exercise care in choosing the proper candidates, so that unnecessary costs and effort are not later expended in having to approach the Court for enforcing the agreement. (Also see MCF Group Pty Ltd v Coleman & Ors [2015] QCA 268.)