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AGK Pacific (NG) Ltd v Anderson [2000] PGNC 87; N2062 (4 December 2000)

N2062

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

W.S. NO. 1489 of 1999

BETWEEN:

A.G.K. PACIFIC (N.G.) LTD
-Plaintiff-

AND:

WILLIAM BRAD ANDERSON
-First Defendant-

AND:

KARSON CONSTRUCTION (PNG) LTD
-Second Defendant-

AND:

DOWNER CONSTRUCTION (PNG) LTD
-Third Defendant-

LAE: INJIA, J.
2000: November 17

December 4

CIVIL – Interim Injunctions – Contract of Employment – Preservation of negative covenants.

Cases cited:
Employer’s Federation of PNG v. PNG Waterside Workers Union & Others N392 (1982)
Doherty v. Allman [1978] 3 A.C. 709

Counsel:
K. Gamoga for Plaintiffs
T. Pryke for the Defendants

4th December 1999

INJIA, J.: The plaintiff (AGK) is seeking, by motion on notice, various interim injunctions against the defendants, in particular against the First Defendant ("Anderson"). AGK says the interim injunctions are necessary to preserve the status quo of the parties pending determination of its substantive claim. AGK’s substantive claims are for inter alia, a declaration that the sub-contract between the Third Defendant ("Downer") and Second Defendant ("Karson") dated 27/3/00, be amended to delete Karson’s name and to be substituted with AGK’s name. In the statement of claim, AGK raises allegations of acts of misrepresentation and conspiracy to defraud and fraud committed by Anderson in collusion with Karson to undermine his employment contract with AGK, in tendering for a road drainage sub-contract project with Downer on behalf of Karson, a company recently incorporated by Anderson and his wife and solely owned by his wife. It claims Anderson whilst in the employ of AGK breached the terms of his employment contract in that he secretly negotiated and signed the sub-contract for Karson instead of for AGK, and he is now in the process of leaving AGK’s employment to join Karson and he is inducing some 36 employees of AGK who previously worked under Anderson’s supervision for AGK, to leave AGK and work for Karson.

As an interim measure, AGK is seeking interim injunctions to, inter alia;

Affidavit evidence is produced by AGK’s manager to support the allegations in the statement of claim and it’s claim for interim injunctions.

AGK;s allegations are sought to be refuted in two affidavits sworn by Anderson and one sworn by Mr. Richard Gough of Downer.

The grant of injunctive relief, interim or permanent, mandatory or otherwise, is an equitable remedy and it is discretionary. The principles governing the Court’s grant of interim injunctions are set out in various cases, some of which have been cited to me by Mr. Pryke of counsel for the defendants, but I consider the principles of equity developed by the English equity Courts in various cases and restated by Kapi, DCJ in Employer’s Federation of PNG v. PNG Waterside Workers Union & Others N392 (1982) to be a comprehensive statement of the law. In essence, an applicant for interim injunction must satisfy two basic requirements:-

There are many relevant considerations to be taken into account and these are set out by Kapi DCJ in that case but the application of those principles will vary from case to case. In some category of cases, the seriousness of the issues to be tried and the strength of the plaintiff’s case discerned from a preponderance of the evidence produced by the applicant and the defendant alone, without regard to the balance of convenience arguments or the question of damages, may militate in favour of the grant of an interim injunction. For instance, in an action for specific performance of a negative covenant in a contract of employment, an interim injunction may be issued in order to prevent a party from abdicating its contractual obligation to the detriment of the other. The principles are well-settled. A classic statement of the principle is found in the House of Lord’s decision in Doherty v. Allman [1978] 3 A.C. 709 at 719, per Lord Cairns:

"My Lords, if there had been a negative covenant, I apprehend, according to the well-settled practice, a Court of Equity would have had no discretion to exercise. If parties, for valuable consideration, with their eyes open, contract that a particular thing shall not be done, all that Court of Equity has to do is to say, by way of injunction, that which the parties have already said by way of covenant, that the thing shall be done; and in such case the injunction does nothing more than give the sanction of the process of the Court to that which already is the contract between the parties. It is nto then a question of the balance of convenience or inconvenience, or of the amount of damage or of injury – it is the specific performance, by the Court, of that negative bargain which the parties have made, with their eyes open between themselves."

As I understand the arguments to be, made by both counsels, in particular Mr. Pryke, there is no real dispute as to the seriousness of the questions raised in AGK’s substantive claims to be determined. Much of the arguments made by both counsels relate to the balance of convenience requirement but these arguments are not relevant to the case before me. AGK is seeking interim injunctions to enforce negative covenants in its contract of employment with Anderson as well as the 36 employees whom Anderson may induce to leave AGK. Anderson’s contract with AGK is still current so as his work permit which expires on 8/6/2001. It was a term of the contract that Anderson would not enter into any service of or be employed by any other person or company during the currency of the contract.

I accept Mr. Pryke’s submission that the plaintiff’s allegations of fraud and misrepresentation in inducing the sub-contract for Karson and interference in AGK’s employment contract with its 36 employees are strongly refuted by the affidavit evidence produce by the defendants. However, this is not the time to determine the merits of the case for the respective parties. Suffice it is to say at this stage that the questions raised by AGK in its pleadings and the affidavit evidence are serious and they remain to be determined by the Court. The uncontested fact that Anderson is an expatriate engineer who was brought into this country by AGK under a work permit sponsored by AGK and issued by the State under the Employment of Non-Citizens Act (Ch. No. 374), which required Anderson to work only for AGK during the currency of the work permit, adds a significant dimension to the seriousness of the issues to be determined.

Then there are other aspects which reflect on the strength of the plaintiff’s case. First, AGK is an established company and a going concern, notwithstanding its current receivership status, and engaged in this kind of sub-contract work. Karson on the other hand is a new company whose corporate reputation and capacity to perform such sub-contract in the area of road construction is unknown or non-existent. Karson proposes to perform the sub-contract through Anderson and the other 36 employees of AGK, and in that sense, to the detriment of AGK. The economic loss occasioned to AGK would be far greater than those caused to Karson, if any. Secondly, Anderson’s relationships with Karson is unclear. Anderson is neither a shareholder nor a director of Karson. There is no evidence of any work permit obtained by Karson to employ Anderson. I do not know in what capacity he signed the sub-contract agreement on 27/3/2000. It is clear that at the time of the signing of the sub-contract, Anderson was still effectively employed by AGK and his work permit with AGK which was still current. Thirdly, Downer’s concerns over the quality of work performed by AGK without Anderson’s involvement is not a legitimate concern because whether Anderson works for Karson or AGK is of little or no consequence because Downer’s expectations will be met by Anderson regardless of which employer he works for. And AGK unlike Karson has a legitimate expectation it will benefit from Anderson’s service in the performance of the sub-contract.

For these reasons, it is in the interest of equity that AGK’s relationship with Anderson and its 36 employees be maintained and the sub-contract be performed by AGK as agreed in May 2000 between AGK and Anderson. Any losses suffered by Karson, if any, as a result of the interim injunctions which I intend to issue should be
recoverable in damages through an undertaking as to damages which AGK should file, as undertaken by Mr. Gamoga in Court. However, in order to secure any monetary benefits which might accrue to Karson, I consider that all income derived from the performance of the sub-contract be kept in a trust account operated by Downer subject to payment of monies for necessary expenses associated with the performance of the sub-contract, which payments are to be jointly authorised by Anderson, AGK and Downer.

The orders of the Court are:-

_____________________________________________________________________
Lawyer for the Defendant : Warner Shand
Lawyer for the Plaintiff