Earthworks company, Done Rite 2017, wins High Court injunction
An earthworks contracting company in the Queenstown Lakes District has won a High Court injunction prohibiting former owners from competing with the business and enticing clients away.
Done Rite 2017 Limited, the earthworks contracting company, took four respondents to the High Court Invercargill registry this month, with the hearing via telephone conference.
The respondents were Rodney Bryan Wright and Toni Louise Chittock and companies they were directors of, Done-Rite Contracting 2007 and Rees River Supplies, a gravel quarry company.
Done Rite 2017, whose director was Luke Hunter, bought the business of Done-Rite 2007 for $873,310, the court ruling says.
The agreement for sale and purchase included a clause restraining Done-Rite 2007, Wright and Chittock from competing with Done Rite 2017 in the Queenstown Lakes District for two years following the settlement of purchase, which was in November, 2017.
However, in November 2018, Done Rite 2017 filed a statement of claim in the High Court, claiming Rees River Supplies, Wright and Chittock had continuously breached the restraint of trade clause. Done Rite 2017 sought an injunction requiring the respondents cease competing with the company. On November 28, Done Rite 2017 filed an interlocutory application for an interim injunction.
Hunter’s affidavit on behalf of Done Rite 2017 referred to instances in which he alleged the two-year restraint-of-trade clause had been breached.
These included a letter Done Rite 2017 solicitors sent to Wright and Chittock on June 11 complaining that Chittock was in breach of the restraint provisions in contacting Done Rite 2017 customers in an attempt to set up her own landscape and gardening business in the Glenorchy region.
Also, in October, Hunter emailed a letter to Wright that referred to Wright having met with a client to discuss potential work in September 2018, with Hunter’s letter alleging Wright’s conduct was in breach of the restraint-of-trade clause, which remained in place until November 30, next year.
In turn, solicitors for Done-Rite 2007 wrote to Done Rite 2017 solicitors on November 5 denying the allegation, but also saying they had agreed to the ‘‘extensive restraint-of-trade’’ only because during the negotiation, Done Rite 2017 had agreed to provide the respondents with either employment or contracting work for at least two years after settlement of the sale. The solicitors suggested the restraint clause be renegotiated.
In November, Done Rite 2017 solicitors obtained information from the Otago Regional Council about work carried out in the Wakatipu region by Rees River Supplies in September and October 2018.
Justice Nation’s December 6 decision says there is at least a prima facie case that Wright and Chittock had sought business on their own account in breach of the restraint provisions in the sale agreement and that they intended to continue doing so, claiming they were legally free to do so.
‘‘There is thus a serious question to be tried, the claim is not vexatious or frivolous,’’ Justice Nation says.
The respondents claimed they should not be bound by the restraint provisions because Done Rite 2017 was in breach of an oral agreement that Wright and Chittock would be employed in the business for two years after settlement. Justice Nation said there was a conflict in the evidence as to whether they ever received an assurance and there was no reference to such an agreement in the sale and purchase agreement.
Justice Nation was satisfied Done Rite 2017 was entitled to the injunction it sought.
Wright and Chittock were prohibited from being involved with any business or enterprise competing with Done Rite 2017 in the Queenstown Lakes District and they were prohibited from enticing away any client or employee of Done Rite 2017 in the district.