In the recent Federal Court case of Gardena (Australia) Pty Ltd
v Nylex Corporation Pty Ltd  FCA 1846 two iconic companies in
the Australian garden and irrigation products market became
embroiled in a turf war resulting in an interlocutory injunction
being granted by the Federal Court.
For many years Nylex was the exclusive distributor of Gardena
products in Australia. In November 2007 Gardena gave notice
terminating the agreement to take effect in December 2008.
The Federal Court said the termination was in accordance with
Gardena's contractual entitlements to bring the arrangement to
an end. The Court noted that it was done for rational and
explicable commercial reasons.
Nylex had agreed in the distribution agreement not to
manufacture, distribute, promote or sell any products which
competed with specified Gardena products in Australia. There were
also other best endeavour obligations.
In breach of the distribution agreement Nylex had taken steps to
supply products in competition with the Gardena products.
Gardena sought an interim injunction to protect its contractual
rights. There were only a few weeks until the expiry of the
The Federal Court said Nylex's breaches were wilful,
numerous and systematic. They were carried out to advance the
financial position of Nylex at the expense of Gardena.
The decision in the Nylex case is a useful reminder of the legal
principles considered by a Court when exercising its discretion to
grant an interlocutory injunction to protect contract rights. Some
of the key principles include:
The legal rights and the relief that would be finally sought at
a trial must be identified.
There must be a "serious question to be tried" or if
the evidence remains as it is there is the probability that at the
trial of the action the applicant would be entitled to the relief
Whether the applicant would suffer irreparable harm for which
damages will not be adequate compensation unless an injunction is
Whether the balance of convenience favours the granting of an
In exercising its discretion the Court is required to assess
and compare the prejudice and hardship likely to be suffered by the
defendant, third persons and the public generally if an injunction
is granted, with that which is likely to be suffered by the
claimant if no injunction is granted.
Hardship caused to third parties or the public generally by the
interlocutory injunction being granted will rarely be decisive in
exercising the Court's discretion.
The grant or refusal of any interlocutory injunction depends
upon the particular circumstances of the case.
In applying the legal principles the Federal Court carefully
considered the evidence presented by the parties, particularly in
relation to the issues of prejudice and the balancing of the
competing interests. The quality of the evidence was particularly
The Federal Court noted that the breaches by Nylex were serious
In resisting the application, Nylex argued that an injunction
would cause serious damage to Nylex. Described as a "very bold
submission indeed" the Federal Court said that the
consequences flow directly from Nylex's own premeditated breach
Nylex also sought to resist the injunction on the basis that the
injunction would seriously harm innocent third parties. The Judge
observed that the evidence put forward by Nylex was vague and
general in form, being unsubstantiated and uncorroborated by any
primary or reliable third person. For example there was no direct
evidence from any third party retailer who was said to be affected
by the grant of an injunction.
On the facts, damages were not an adequate remedy for Gardena.
The Judge observed that it was almost always difficult to measure
the full impact of the breach of non-compete obligations.
Protecting contract rights
The Nylex decision is instructive when considering the
protection of contract rights.
The non-compete and best endeavour obligations in the agreement
were the basis for Gardena's application for the interlocutory
injunction. The importance of having appropriate evidence, whether
to seek or resist an interlocutory injunction cannot be over
emphasised. Tellingly, even though there were only a few weeks
until the expiry of the distribution agreement, the interlocutory
injunction was still granted.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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This was an interlocutory decision about the appointment of a tutor for the child appellant, to carry on his proceedings.
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