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Supreme Court of Fiji |
IN THE SUPREME COURT OF FIJI
AT SUVA
CIVIL PETITION NO: CBV 0004 of 2015
[Court of Appeal No: ABU 0021 of 2014]
BETWEEN
DIGICEL (FIJI) LIMITED
Petitioner
AND
FIJI RUGBY UNION
First Respondent
AND
VODAFONE FIJI LIMITED
Second Respondent
Coram: The Hon. Justice Saleem Marsoof, Judge of the Supreme Court
The Hon. Justice Brian Keith, Judge of the Supreme Court
The Hon. Justice Buwaneka Aluwihare, Judge of the Supreme Court
Counsel: Mr. M. M. Varitimos Q.C, with Mr. M. Turner and Ms. M. Muir
for the Petitioner
Mr. N. Lajendra for the 1st Respondent
Mr. S. P. Sharma with Mr. E. Narayan for the 2nd Respondent
Date of Hearing: 11thApril 2016
Date of Judgment: 26th August 2016
J U D G M E N T
01. “My Lords, if there had been a negative covenant, I apprehend, according to 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 a 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 not 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.” These words, uttered more than a century and three decades ago, by Lord Cairns L.C. in Doherty v Allman (1878) 3 AC 709 at 719 - 720, have often been adverted to by judges in dealing with applications for interlocutory injunctions to restrain violations of contractual negative covenants.
02. What is even more significant is the statement of principle that Lord Cairns went on to enunciate in the following words –
“It is not 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”
03. The Petitioner, Digicel Fiji Limited (hereinafter referred to as “Digicel”),has filed this application for leave to appeal against the decision of the Court of Appeal of Fiji (Calanchini P, Chandra JA and Guneratne JA) dated 12thJune 2015, by which the Court of Appeal affirmed the Ruling of the High Court of Fiji at Suva (Kumar J) dated 13thMarch 2014refusing Digicel certain injunctive orders against the 1st Respondent Fiji Rugby Union (hereinafter referred to as “the FRU”) and the 2nd Respondent, Vodafone Fiji Limited (hereinafter referred to as “Vodafone”). During the hearing of this application for leave to appeal, learned Counsel for Digicel relied heavily on the above quoted dicta of Lord Cairns L.C. in Doherty v Allman, supra, in support of his contention that where an interlocutory injunction is sought to enforce a negative covenant in a contract in the context of a case that raises one or more serious question for determination after trial, the court will grant the interlocutory injunction as a matter of course and does not have to consider factors that are usually taken into consideration in exercising the discretion of court, such as the balance of convenience or whether the award of damages would be sufficient redress.
04. Digicel had sought these injunctive orders to enforce its purported “option to match”, which it claims it had exercised in due time as contemplated by the relevant provisions of the agreements it had entered into with the FRU with the view to renewing for a further term its contractual rights as the exclusive sponsor of the Fiji National Rugby Sevens Team (hereinafter referred to as the “Fiji 7’s team”) and the prestigious Fijian provincial rugby tournament for the Digicel Cup.
05. As would appear from Digicel’s amended notice of motion dated 7thFebruary 2014 filed in the High Court, the objective of the first injunctive order prayed for by Digicel was to restrain the FRU or its directors, servants and agents from performing, implementing, announcing, displaying, advertising, amending, varying and or further concluding sponsorship agreements with Vodafone including the “Vodafone Consortium” or any third party, for the sponsorship of the Fiji 7's team and/or the Digicel Cup tournament, until the final determination of the proceedings in the High Court.
06. The purpose of the second injunctive order prayed for by Digicel was to similarly restrain the FRU or its directors, servants and agents from outfitting the Fiji 7's team with jerseys or any other gear or articles of clothing displaying the logos and or names, including trade names or shortened names, of the members of the Vodafone Consortium or any other third party.
07. The significance of the sponsorship of the Fiji 7’s team and the Fijian provincial rugby tournament for FRU, Digicel, Vodafone, and the sports loving public of Fiji can be gathered from the fact that rugby is the most popular sport in Fiji, and the Fiji 7’s team, which was for the last two years ranked world’s No. 1 for sevens rugby, won the Gold Medal for men’s sevens rugby at the recently concluded 2016 Olympic Games at Rio de Janeiro. Needless to say, this application for leave to appeal was contested before this court with the same intensity and fury associated with the Fijian brand of rugby, and indeed, the case raises some very interesting questions of fact and law relating to the criteria to be adopted by courts in the grant of interlocutory injunctions in the context of an alleged contractual negative covenant.
Factual Matrix
08. First things first. In order to better appreciate the questions of fact and law that arise for determination in the context of this application for leave to appeal, it is considered necessary to set out below in brief, the factual background in the context of which they arise.
09. It is significant to note that Digicel had sought relief from the High Court of Suva in connection with two sponsorship agreements it had entered into with the FRU. The first of these agreements was the “Digicel Sevens Agreement” dated 14thAugust 2009 whereby the FRU appointed Digicel as its sole and exclusive sponsor of the Fiji 7’s team for the period of 4 years commencing on 1st November 2009 and expiring at midnight (Fiji local time) on 1stNovember 2013. Clauses 4 and 13 of the said Agreement were varied by the Deed of Variation dated 17thSeptember 2009. The second of these agreements was the “Digicel Cup agreement” dated 6thNovember 2009, whereby the FRU appointed Digicel as its sole and exclusive sponsor of the major provincial rugby competition known as the Digicel Cup Tournament for a period of approximately 4 years and 2 months commencing 3rdNovember 2009 and expiring at midnight (Fiji local time) on 31stDecember 2013.
Proceedings in the High Court
(c) to be restrained from offering, contracting or concluding sponsorship agreements with any third party, including Vodafone, Fiji Airways, CJ Patel and or Fijian Holdings Limited, for the sponsorship of the Fiji National Rugby Sevens Team and/or the Digicel Cup Tournament until the final determination of the matter.
(i) whether there is a serious question to be tried;
(ii) whether damages would be adequate remedy; and
(iii) whether balance of convenience favour granting or refusing Interlocutory Injunction.
(b) Learned Counsel for Vodafone had submitted that the proper test to be applied was that applicable to mandatory injunctions, which is far more stringent than the test in American Cyanamid.
(c) On a careful analysis of the relief sought by Digicel, it is clear that the relief sought in the amended notice of motion is prohibitory and as such, the principles applicable are that stated in American Cyanamid.
(d) It is well established that the jurisdiction to either grant or refuse interlocutory injunction is discretionary.
(e) In considering whether there is a “serious question” to be tried, it is noteworthy that although paragraphs 68 to 75 of the original Statement of Claim filed by Digicel did not disclose a cause of action, paragraphs 62 to 65 thereof did allege breaches of the Digicel Sevens and Digicel Cup Agreements by the FRU, which are clearly causes of action.
(f) On an examination of the evidence provided to Court by way of affidavits, there are serious questions to be tried, namely –
- (i) Did Fiji Rugby Union breach the provisions in the Agreement relating to option granted to Digicel to match any proposed sponsorship? and
- (ii) If so, can the breach be remedied by an order for Specific Performance of those provisions?
(g) Additionally, an issue that needs to be tried, even though it was not raised by Counsel for the FRU, is whether the condition in Digicel's letter dated 29thJanuary 2014 that “the FRU exclude any sponsor that operates in the telecommunication brand sector” from sponsoring Fiji International Seven Tournament and Deans Trophy makes the offer conditional. If so, than it may be argued that Digicel has not matched Vodafone Consortium's offer.
(h) A further concern is whether the provision dealing with exclusive negotiation and option to match any proposed sponsorship in Digicel, may have offend provisions of Part 6 in particular section 60 of Commerce Commission Decree 2010 as it may seem to hinder competition.
(i) Learned Counsel for the FRU had, after examining the Vodafone Agreement in Court, conceded that withdrawn its submission that it was a contract and not an agreement to enter into a contract.
(j) It is apparent from the affidavit of Robert Smith, which is not very different from those of Padraig Power and Chris Barnumfiled in the proceedings, that tangible and intangible benefits are derived from a sponsorship agreement, and whilst tangible benefits can be readily assessed, there can be uncertainty as to assessment of intangible benefits.
(k) However, Fijian courts and courts in other jurisdictions have been called upon to assess damages for breach of contract in relation to rights of intellectual property and similar intangible rights, and it is not doubted that the Courts in Fiji have the ability to assess damages that may arise from the alleged breach of the Digicel Sevens and Digicel Cup Agreements.
(l) Even though Digicel had submitted that it will suffer irreparable harm, huge loss and loss of reputation in the event that the interlocutory injunctions sought by it are not granted, it has not claimed damages in its Statement of Claim, and is only interested in equitable relief in form of specific performance and permanent orders by way of injunction.
(m) In any event, even if Digicel chooses to claim damages for the alleged breach of contract, the award of damages will be an adequate remedy.
(n) The Vodafone Agreement has been performed by the FRU and Vodafone Consortium since its execution, in particular during the Wellington Sevens series which took place on 7th and 8thFebruary 2014.
(o) In regard to the balance of convenience, in particular, the submission of Digicel that it will suffer irreparable harm if performance of the Vodafone Agreement is not restrained, and the contrary submission of the FRU and Vodafone that if any restraining orders are granted, that would cause them substantial loss and irreparable harm, and taking into consideration the factors set out in paragraph 3.73 sub-paragraphs (i) to (xiv) of the High Court Ruling and applicable principles of law, the learned High Court Judge stated in his said Ruling that-
“I am of the view that balance of convenience and overall justice of the case require status quo at the time of hearing be maintained until final determination of this matter.”
Appeal to the Court of Appeal
(ii) If the Court was to regard the relevant negotiations between the FRU and Digicel as a renewal of that initial contract, then there had to be clear evidence that, Digicel had “matched” the Vodafone or any other competing offer.
(c) The resulting position is that, further evidence would be required to be led to resolve that issue, which can be done only at the trial.
(d) In any event, the proposition that negative covenants contained in an agreement are usually enforceable by injunction, is subject to several exceptions which are discernible from the authorities cited on behalf of the parties, some of which are implied in dicta in Doherty v Allman, supra, and A.G. v Barker [1990] 3 All ER 257.
(e) Even assuming that the covenant in question will attract the purported rule in Doherty v Allman, supra, the aforesaid exceptions to the rule will be applicable to the facts and circumstances of the case.
(f) Irrespective of whether Vodafone was aware of any subsisting contract between Digicel or the FRU at the time it entered into the Vodafone Agreement, there was nothing in equity or law that prevented Vodafone from entering into the contractual relationship with the FRU since the former was in the shoes of a third party outside the contractual relationship between Digicel and the FRU, and as was held in Pacific Transport Company Ltd v. Latchan Express Services Ltd [1997] FJHC 264, “....a contract cannot confer rights or impose obligations on strangers to it, that is, persons who are not parties to it....”
(g) Consequently, even assuming that the covenants in the Digicel Sevens Agreement and the Digicel Cup Agreement constitute negative covenants, the rule in Doherty v Allman, supra, cannot find application in the context of the present case.
“[53] Should this Court grant the reliefs sought in appeal, nevertheless the ongoing agreement between the 1st and 2nd Respondents [the FRU and Vodafone] would still remain. The Appellant did not seek to have that agreement struck out in the High Court.
[54] Accordingly, to grant the said reliefs, in any event, would not serve the cause of the Appellant [Digicel].”
“[61] As has been observed by Lord Diplock in Hadmor Productions Ltd & Others v Hamilton and Others [1982] 1 All ER 1042, the function of an Appellate Court against the grant or refusal of an interlocutory injunction is a limited one, which is initially to review the lower Court's decision only and not to exercise an independent discretion of its own unless the lower Court's decision is so aberrant.”
Application for Leave to appeal to the Supreme Court
“save where the case is of gravity involving a matter of public interest, or some important question of law, or affecting property of considerable amount, or where the case is otherwise of some public importance or of a very substantial character.”
“I am surprised that leave was given by the Court of Appeal in this case which at all times has been barely arguable. I do not think the Court would have given special leave on a petition. That is because of the little chance of success, where the Courts below had fully and correctly expounded the applicable principles.”
“Upon an appeal from the judge's grant or refusal of an interlocutory injunction the function of an appellate court, whether it be the Court of Appeal or your Lordships’ House, is not to exercise an independent discretion of its own. It must defer to the judge's exercise of his discretion and must not interfere with it merely upon the ground that the members of the appellate court would have exercised the discretion differently. The function of the appellate court is initially one of review only. It may set aside the judge's exercise of his discretion on the ground that it was based upon a misunderstanding of the law or of the evidence before him or upon an inference that particular facts existed or did not exist, which, although it was one that might legitimately have been drawn upon the evidence that was before the judge, can be demonstrated to be wrong by further evidence that has become available by the time of the appeal; or upon the ground that there has been a change of circumstances after the judge made his order that would have justified his acceding to an application to vary it. ” (Emphasis added)
The Covenants in Clause 13 of the Digicel Sevens & Digicel Cup Agreements
The Digicel Sevens Agreement
“Any person or operator whose principal business includes the provision of wireless technology transmission and related services (including the operation of a mobile telecommunications network or universal mobile telecommunications system for the provision of mobile telecommunications services, as well as the provision of fixed wireless and the provision of internet access services and internet content services related thereto), mobile telecommunications hardware (including telecommunications infrastructure and mobile wireless handsets) and/or mobile telecommunications services or equivalent and whether to, or for the benefit of, end users, suppliers, re-sellers or otherwise; and/or such other telecommunications operators.” (Emphasis added)
Clause 13.2: Between 1stNovember 2009 and 31st July 2013: Subject to the other provisions of clause 13 including clause 13.7, the parties agree that the FRU cannot negotiate and or conclude any memorandum of understanding, arrangement, agreement, or otherwise with any Third Party, including a Competitor, in relation to the grant of Rights either individually or collectively, or any similar rights prior to 31stJuly 2013, unless Digicel notifies the FRU in writing of its intention not to pursue the renewal of the Sponsorship Agreement;
Clause 13.3: Between 1stJune 2013 and 31stJuly 2013: Subject to the other provisions of clause 13 including clause 13.7, the parties agree that they will enter into exclusive negotiations with each other and to the exclusion of any other Third Party including a Competitor, in relation to the renewal of the Sponsorship Agreement;
Clause 13.4: Between 1st August 2013 and 31stOctober 2013: Subject to the other provisions of clause 13 including clause 13.7, the parties agree that the FRU may negotiate and or conclude any memorandum of understanding, arrangement, agreement, or otherwise with any Third Party, but excluding a Competitor, in relation to the grant of Rights either individually or collectively, or any similar rights, but only where such arrangement, agreement, or otherwise commence from 1stNovember 2013;
Clause 13.5: Between 1stNovember 2013 and 31stJanuary 2014: Subject to the other provisions of clause 13 including clause 13.7, the parties agree that the FRU may negotiate and or conclude any memorandum of understanding, arrangement, agreement, or otherwise with any Third Party, including a Competitor, in relation to the grant of Rights either individually or collectively, or any similar rights, though the 30day period in clause 13.7.2 will be reduced to 15 days in this instance;
Clause 13:6: After 1stFebruary 2014: For the avoidance of doubt, the Parties agree that from the date of 1stFebruary 2014, and without any obligation to Digicel, the FRU may negotiate and or conclude any memorandum of understanding, arrangement, agreement, or otherwise with any Third Party including a Competitor, in relation to the grant of rights either individually or collectively, or any similar rights.
“13.7 Notwithstanding any other clause of this Deed of Variation and or the Sponsorship Agreement the Parties agree that if at any time prior to 1stFebruary 2014, the FRU proposes to enter into any memorandum of understanding, arrangement, agreement or otherwise with any Third Party, including a Competitor, in relation to the grant of Rights, either individually or collective, or any similar rights the following terms apply:
13.7.1 Right of Notification
The FRU shall notify Digicel, in accordance with the notification procedure in clause 20 of the Sponsorship Agreement, of the terms of any proposed memorandum of understanding, arrangement, agreement or otherwise with a Third Party, which terms shall include but shall not be limited to, rights to be granted to and by the FRU (“the Proposed Sponsorship Terms”). Such notice must contain full disclosure of the Proposed Sponsorship Terms and include any change made in the Proposed Sponsorship Terms during the option period in clause 13.7.2.
13.7.2 Option to Match
The FRU shall grant Digicel an option to enter into a memorandum of understanding, arrangement, agreement or otherwise with the FRU on terms equivalent to or better than the proposed sponsorship terms, such option to be valid for 30 days from the time the notice to Digicel of the oroposed sponsorship terms is left at Digicel's address in accordance with clause 20 of the Sponsorship Agreement.
13.7.3 Deemed Matching
It is agreed that Digicel shall be deemed to have matched the Proposed Sponsorship Terms if the financial and other material terms of the deal proposed by Digicel are the same as or better than the proposed sponsorship terms.
13.7.4 Digicel has the right to match subsequent proposed sponsorship terms
If Digicel is offered and does not take up the option to match under clauses 13.7.2 and 13.7.3 above, the FRU must not proceed at any time with memorandum of understanding, arrangement, agreement or otherwise containing Proposed Sponsorship Terms that are less favourable than the Proposed Sponsorship Terms contained in the original proposed agreement without providing Digicel with notice, an offer to match and the right with respect to deemed matching contained in clauses 13.7.1 - 13.7.3 above.”
The Digicel Cup Agreement
The Interpretation of Clause 13 of the Digicel Sevens & Cup Agreements
“A case might very well arise where affirmative words involve a negative. I think myself the true construction of saying I will maintain a storehouse involves the negative—I will not pull it down.”
“......the courts are slow to imply a term. In many cases, what the parties have actually agreed upon represents the totality of their willingness to agree; each may be prepared to take his chance in relation to an eventuality for which no provision is made. The more detailed and comprehensive the contract, the less ground there is for supposing that the parties have failed to address their minds to the question at issue. And then there is the difficulty of identifying with any degree of certainty the term which the parties would have settled upon had they considered the question.”(Emphasis added)
“The court's function is to interpret and apply the contract which the parties have made for themselves. If the express terms are perfectly clear and free from ambiguity, there is no choice to be made between different possible meanings: the clear terms must be applied even if the court thinks some other terms would have been more suitable. An unexpressed term can be implied if and only if the court finds that the parties must have intended that term to form part of their contract: it is not enough for the court to find that such a term would have been adopted by the parties as reasonable men if it had been suggested to them: it must have been a term that went without saying, a term necessary to give business efficacy to the contract, a term which, though tacit, formed part of the contract which the parties made for themselves.”(Emphasis added)
“If at any time in the three (3) calendar months before the expiration of the Term, or in the six (6) calendar months immediately after the termination of this Agreement by effluxion of time, the FRU proposes to enter into any agreements with a third party in relation to some or all of the Rights, the following terms apply”. (Emphasis added)
“the Parties agree that from the date of 1stFebruary 2014, and without any obligation to Digicel, the FRU may negotiate and or conclude any memorandum of understanding, arrangement, agreement, or otherwise with any Third Party including a Competitor, in relation to the grant of rights either individually or collectively, or any similar rights.”(Emphasis added)
“The purpose of interpretation is to identify what the parties have agreed, not what the court thinks that they should have agreed. Experience shows that it is by no means unknown for people to enter into arrangements which are ill-advised, even ignoring the benefit of wisdom of hindsight, and it is not the function of a court when interpreting an agreement to relieve a party from the consequences of his imprudence or poor advice. Accordingly, when interpreting a contract a judge should avoid re-writing it in an attempt to assist an unwise party or to penalise an astute party.”(Emphasis added)
The Rule in Doherty v Allman
“The use of such expressions as “a probability,” “a prima facie case,” or “a strong prima facie case” in the context of the exercise of a discretionary power to grant an interlocutory injunction leads to confusion as to the object sought to be achieved by this form of temporary relief. The court no doubt must be satisfied that the claim is not frivolous or vexatious; in other words, that there is a serious question to be tried.It is no part of the court's function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations. These are matters to be dealt with at the trial.”(Emphasis added)
“As to that, the governing principle is that the court should first consider whether, if the plaintiff were to succeed at the trial in establishing his right to a permanent injunction, he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendant's continuing to do what was sought to be enjoined between the time of the application and the time of the trial. If damages in the measure recoverable at common law would be adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff's claim appeared to be at that stage. If, on the other hand, damages would not provide an adequate remedy for the plaintiff in the event of his succeeding at the trial, the court should then consider whether, on the contrary hypothesis that the defendant were to succeed at the trial in establishing his right to do that which was sought to be enjoined, he would be adequately compensated under the plaintiff's undertaking as to damages for the loss he would have sustained by being prevented from doing so between the time of the application and the time of the trial. If damages in the measure recoverable under such an undertaking would be an adequate remedy and the plaintiff would be in a financial position to pay them, there would be no reason upon this ground to refuse an interlocutory injunction. It is where there is doubt as to the adequacy of the respective remedies in damages available to either party or to both, that the question of balance of convenience arises. It would be unwise to attempt even to list all the various matters which may need to be taken into consideration in F deciding where the balance lies, let alone to suggest the relative weight to be attached to them. These will vary from case to case.” (Emphasis added)
“16. Lord Cairns L.C. in Doherty v. Allman (1878) 3 App Cas 709 said that a court of equity has no discretion to exercise when an injunction is sought to enforce a negative covenant in a contract. His Lordship drew a distinction between "a negative covenant" and a covenant which is affirmative only. The distinction so drawn was, I think, not one deriving from the language or form in which a covenant happened to be expressed, but one arising from the substance of the obligation imposed by the covenant (see, e.g., Wolverhampton and Walsall Railway Co. v. London and North-Western Railway Co. [1873] UKLawRpEq 85; (1873) 16 Eq 433 per Lord Selborne L.C.)
17. There has been general agreement that Lord Cairns' statement that a court of equity has no discretion to refuse an injunction restraining a breach of a negative covenant is not accurate. In Doherty v. Allman (1878) 3 App Cas itself Lord Blackburn, who, like Lord Selborne L.C. in the Wolverhampton Case, was inclined to repudiate the notion that a distinction should be made between negative and affirmative words, considered that there were cases in which a court of equity would refuse to enforce a negative covenant on discretionary grounds.” (Emphasis added)
“Thirdly, there is Doherty v. Allman. I accept, of course, that Lord Cairns' words were uttered in a case where what was in issue was a perpetual injunction and not an interlocutory injunction. Indeed, the words seem to be obiter, for no negative covenant was present in that case. But these considerations do not preclude the words from having any weight or cogency in relation to an interlocutory injunction. Where there is a plain and uncontested breach of a clear covenant not to do a particular thing, and the covenant or promptly begins to do what he has promised not to do, then in the absence of special circumstances it seems to me that the sooner he is compelled to keep his promise the better.”(Emphasis added)
“If, of course, as here, the validity of the covenant is in dispute on an interlocutory application, it might well be that the judgment at the trial, after full discovery and evidence, will not be in accord with the interlocutory conclusion on a prima facie case and probability of success; ........and the application of the Doherty v. Allman rule to applications for interlocutory injunctions would make the injunction automatic on the probability of success at the trial being established, irrespective of the degree of such probability and every matter which, in accordance with the general rule, it is right for the court to take into consideration. The result would be that a probability of success barely established, without the advantage of full evidence and opportunity for full consideration, would result in an injunction in circumstances in which, until trial, the absence of injunction would be no disadvantage of any substance to the applicant and injunction would cause most serious harm to his opponent. It is not difficult to conceive of such a situation......So my conclusion is that the principle of Doherty v Allman, does not apply to interlocutory injunctions.”(Emphasis added).
“51 The decision in Texaco was before the decision in American Cyanamid. However, no later case has cast any doubt on this passage in Texaco. Indeed, now that the threshold for an application for an interim injunction has been lowered from good arguable case to a serious issue to be tried, the reasoning in Texaco becomes more rather than less cogent.
52 Having at long last directed myself in relation to these matters of principle, I will now seek to apply those principles to the present application. I will, in particular, as suggested by the claimant, seek to apply the principles in Cyanamid.”(Emphasis added)
Conclusions
Hon. Brian Keith, J.
Introduction
The Proper Approach
“ ... the governing principle is that the court should first consider whether if the plaintiff were to succeed at the trial in establishing his right to a permanent injunction he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendant’s continuing to do what was sought to be enjoined between the time of the application and the time of the trial. If damages in the measure recoverable at common law would be adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff’s claim appeared to be at that stage. If, on the other hand, damages would not provide an adequate remedy for the plaintiff in the event of his succeeding at the trial, the court should then consider whether, on the contrary hypothesis that the defendant were to succeed at the trial in establishing his right to do that which was sought to be enjoined, he would be adequately compensated under the plaintiff’s undertaking as to damages for the loss he would have sustained by being prevented from doing so between the time of the application and the time of the trial. If damages in the measure recoverable under such an undertaking would be an adequate remedy and the plaintiff would be in a financial position to pay them, there would be no reason upon this ground to refuse an interlocutory injunction.”
124. Lord Diplock went on to say that it is where there is doubt about the adequacy of either of the parties’ remedies in damages that what is called the “balance of convenience” arises. He thought that it would be unwise to attempt to list the various matters which may need to be considered in deciding where the balance of convenience lies, let alone to suggest the relative weight to be attached to them, but he did say this:
“Where other factors appear to be evenly balanced it is a counsel of prudence to take such measures as are calculated to preserve the status quo. If the defendant is enjoined temporarily from doing something that he has not done before, the only effect of the interlocutory injunction in the event of his succeeding at the trial is to postpone the date at which he is able to embark upon a course of action which he has not previously found it necessary to undertake; whereas to interrupt him in the conduct of an established enterprise would cause much greater inconvenience to him since he would have to start again to establish it in the event of his succeeding at the trial.”
125. To what extent can the court consider the relative strength of the parties’ cases in deciding where the balance of convenience lies? That was the last topic which Lord Diplock addressed. He said:
“Save in the simplest cases, the decision to grant or to refuse an interlocutory injunction will cause to whichever party is unsuccessful on the application some disadvantages which his ultimate success at the trial may show he ought to have been spared and the disadvantages may be such that the recovery of damages to which he would then be entitled either in the action or on the plaintiff’s undertaking would not be sufficient to compensate him fully for all of them. The extent to which the disadvantages to each party would be incapable of being compensated in damages in the event of his succeeding at the trial is always a significant factor in assessing where the balance of convenience lies; and if the extent of the uncompensatable disadvantage to each party would not differ widely, it may not be improper to take into account in tipping the balance the relative strength of each party’s case as revealed by the affidavit evidence adduced on the hearing of the application. This, however, should be done only where it is apparent upon the facts disclosed by evidence as to which there is no credible dispute that the strength of one party’s case is disproportionate to that of the other party. The court is not justified in embarking upon anything resembling a trial of the action upon conflicting affidavits in order to evaluate the strength of either party’s case.”
126. Against that background, I turn to how the last of these principles has to be modified in a case such as the present one where there is no certainty at all that that there will be a trial of the action. That was one of the issues which Lord Diplock considered in NWL Ltd v Woods [1979] 3 All ER 614 where he returned to the extent to which the relative strength of each party’s case can be taken into account. Woods was, said Lord Diplock at p 625d, “a case in which the grant or refusal of an injunction at [the interlocutory] stage would, in effect, dispose of the action finally in favour of whichever party was successful in the application, because there would be nothing left on which it was in the unsuccessful party’s interest to proceed to trial”. Lord Diplock said that there was nothing in American Cyanamid to suggest that “practical realities” of that kind should not be given full weight to. This is how he described at p 625f-626b the position to be:
“Cases of this kind ... bring into the balance of convenience an important additional element. In assessing whether what is compendiously called the balance of convenience lies in granting or refusing interlocutory injunctions in actions between parties of undoubted solvency the judge is engaged in weighing the respective risks that injustice may result from his deciding one way rather than the other at a stage when the evidence is incomplete. On the one hand there is the risk that if the interlocutory injunction is refused but the plaintiff succeeds in establishing at the trial his legal right for the protection of which the injunction had been sought he may in the meantime have suffered harm and inconvenience for which an award of money can provide no adequate recompense. On the other hand there is the risk that if the interlocutory injunction is granted but the plaintiff fails at the trial the defendant may in the meantime have suffered harm and inconvenience which is similarly irrecompensable. The nature and degree of harm and inconvenience that are likely to be sustained in these two events by the defendant and the plaintiff respectively in consequence of the grant or refusal of the injunction are generally sufficiently disproportionate to bring down, by themselves, the balance on one side or the other; and that is what I understand to be the thrust of the decision ... in American Cyanamid Co v Ethicon Ltd. Where, however, the grant or refusal of the interlocutory injunction will have the practical effect of putting an end to the action because the harm that will already have been caused to the losing party by its grant or refusal is complete and of a kind for which money cannot constitute any worthwhile recompense, the degree of likelihood that the plaintiff would have succeeded in establishing his right to an injunction if the action had gone to trial is a factor to be brought into the balance by the judge in weighing the risks that injustice may result from his deciding the application one way rather than the other.” (Emphasis supplied)
The inescapable fact is that if the current action is not going to proceed to trial for a long time, if at all, then the grant or refusal of the application for interlocutory injunctions will have the practical effect of bringing the action to an end. Accordingly, if one gets to the balance of convenience and if Woods is to be followed, the relative strength of Digicel’s and Vodafone’s cases is a factor to be taken into account.
127. I have not overlooked the apparent endorsement by the Supreme Court in Wakaya Ltd v Chambers [2012] FJSC 9 of the passage in Ba Town Council v Fiji Broadcasting Commission (1976) 22 FLR 91 that it is not the practice of the court to grant an interlocutory injunction which will have the practical effect of granting the sole relief claimed. I do not suppose that these words were meant to be taken literally. Interlocutory injunctions invariably prohibit the defendant from doing something when a permanent injunction to prohibit him from doing that is the principal, indeed the sole, relief sought. The crucial point is that an interlocutory injunction will prohibit the defendant temporarily from doing that which he might otherwise have done, and I see no basis whatever for refusing an interlocutory injunction on the basis that it temporarily prohibits him from doing that which the action seeks to prohibit him from doing permanently. So I assume that what was really being said was that it was not appropriate to grant an interlocutory injunction if the practical effect of granting it was to dispose of the action finally in favour of the plaintiff.
128. I do not doubt that this is a relevant consideration. There are unquestionably cases in which, to adopt the words used in Cayne v Global Natural Resources Ltd [1984] 1 All ER 225, “to decide in favour of the plaintiffs would mean giving them judgment in the case against [the defendant] without permitting [the defendant] the right to trial”. But that does not mean that in every such case the application for the interlocutory injunction should be refused. It is simply one factor – admittedly an important factor – to be taken into account in deciding which course involves the least injustice.
The Relevant Contractual Terms
129. Having set out the conventional approach to applications for interlocutory injunctions, it is important to remember that Digicel’s core point is that these principles do not apply to this case. That is because of the nature of the two contractual terms which Digicel is seeking to enforce in these proceedings. They are to be found in clause 13.7.2 of the agreement relating to the Fiji National Rugby Sevens Team (“the Sevens Agreement”) and clause 13.5.2 of the agreement relating to the provincial rugby competition known as the Digicel Cup (“the Digicel Cup Agreement”). In short, in those provisions the FRU agreed to grant Digicel options to enter into new sponsorship agreements with the FRU under which Digicel would be the sponsor of the Fiji National Rugby Sevens Team (“the Sevens Team”) and of the Digicel Cup, on condition that Digicel was prepared to match the terms offered to the FRU by a third party.
130. Neither of the options expressly said that under such new sponsorship agreements Digicel would be the sole and exclusive sponsor of the Sevens Team or the Digicel Cup, but Digicel had been the sole and exclusive sponsor under the existing sponsorship agreements. In any event, if the sponsorship terms offered to the FRU by Vodafone provided for Vodafone to be the sole and exclusive sponsor of the Sevens Team and the Digicel Cup, the effect of the two provisions was to oblige the FRU to grant Digicel options to enter into new sponsorship agreements with the FRU under which Digicel would be the sole and exclusive sponsor of the Sevens Team and the Digicel Cup, provided, of course, that Digicel’s offer matched Vodafone’s. The FRU did not disclose to Digicel the precise terms of Vodafone’s offer. For all we know, that is what Digicel’s application for discovery and further and better particulars may have related to. But it would have made little commercial sense for Vodafone to offer the FRU a non-exclusive sponsorship deal, and the only sensible assumption to make is that Vodafone’s offer was an offer under which Vodafone would be the sole and exclusive sponsor of the Sevens Team and the Digicel Cup (as well as other teams and competitions). Indeed, that is borne out by Vodafone’s letter of 18 November 2013 expressing its interest in sponsoring rugby in Fiji. That letter was not shown to Digicel at the time, and Digicel’s officers would only have seen it when it was exhibited to the affidavit of Dr Berlin Kafoa, the FRU’s Acting Chief Executive Officer, sworn on 11 February 2014. Although the letter did not expressly seek exclusive sponsorship rights, Vodafone’s offer was made on the basis that it would be entitled to the “naming rights” to the teams and tournaments which it was offering to sponsor, to the “branding rights to attire and merchandise worn” by the teams it was offering to sponsor, and to the “branding and signage rights” at the venues of the tournaments it was offering to sponsor. It would be absurd to suppose that Vodafone’s bid did not contemplate the exclusive grant of these rights.
131. I make two preliminary comments about the two contractual promises on which Digicel relies – in the interests of completeness rather than because they are important to the outcome of the case. First, although the FRU agreed to grant these options to Digicel, it does not look as if they were actually ever granted. The agreements did not say either that the FRU was hereby granting such options to Digicel, nor did they provide that the notification to Digicel of any terms offered to the FRU by a third party would amount to the grant of an option to Digicel to enter a new sponsorship agreement on terms at least as favourable to the FRU as the terms offered by the third party. Indeed, clause 13.7.2 of the Sevens Agreement (and clause 13.5.2 of the Digicel Cup Agreement) provided that the FRU “shall” grant such options to Digicel. So when Digicel wrote to the FRU purporting to exercise the options, there had in fact been no options granted to Digicel which it was capable of exercising.
132. Secondly, even if it could be said that the options had been granted to Digicel and that it had purported to exercise them, that did not mean that the sponsorship agreements were deemed to have been renewed. I mention that only because that was what Digicel’s counsel argued in para 12 of their written submissions in support of the appeal. They relied on clauses 13.7.2 and 13.7.3 of the Sevens Agreement and clauses 13.5.2 and 13.5.3 of the Digicel Cup Agreement. But those clauses do not support this contention. Clause 13.7.2 of the Sevens Agreement and clause 13.5.2 of the Digicel Cup Agreement are the clauses which required the FRU to grant the options to Digicel, and clause 13.7.3 of the Sevens Agreement and clause 13.5.3 of the Digicel Cup Agreement merely identified a particular situation in which Digicel would be deemed to have matched the terms offered by a third party.
133. Having made those observations, I return to the two contractual promises which Digicel is seeking to enforce in these proceedings – clause 13.7.2 of the Sevens Agreement and clause 13.5.2 of the Digicel Cup Agreement. Digicel contends that these contractual promises did not just amount to positive obligations to grant the options to Digicel if Digicel matched any competing bids. It is said that they were negative obligations as well since they amounted to promises on the part of the FRU not to enter into sponsorship agreements for the Sevens Team and the Digicel Cup with anyone other than Digicel if to do so would put the FRU in breach of its obligation to grant options to Digicel to enter into new sponsorship agreements for the Sevens Team and the Digicel Cup with the FRU.
134. The relevance of that is this. Digicel’s case has always been that it is only seeking to enforce the negative elements of these contractual promises. The only injunctions it sought were injunctions prohibiting the FRU from implementing the sponsorship agreement it had reached with Vodafone. Digicel never sought injunctions requiring the FRU to enter into a new sponsorship agreement with it. The judge at first instance understood that, though I fear that the Court of Appeal did not. Of course, if the FRU had been prohibited from implementing its sponsorship agreement with Vodafone, the FRU may then have wanted to enter into a new sponsorship agreement with Digicel because otherwise it would be without a sponsorship agreement with either of them. That, no doubt, was why Digicel subsequently undertook to match the terms of the sponsorship agreement which the FRU had by then entered into with Vodafone.
135. The fact that Digicel has only been seeking to enforce what it claims to be the negative elements of the FRU’s contractual promises lies at the heart of what is now its case. That is because, where there is a clear and “uncontested” breach of a negative obligation in a contract, it is unnecessary to consider where the balance of convenience lies. Subject to two reservations to which I shall come in a moment, a plaintiff is entitled to an interlocutory injunction to prevent a defendant from doing that which he promised not to do. That is what Lord Cairns said in Doherty v Allman (1878) 3 App Cas 709 at p 720:
“If parties, for valuable consideration, with their eyes open, contract that a particular thing shall not be done, all that a 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 not be done; and in such a 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 not then a question of the balance of convenience, 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 wide open, between themselves.”
136. The first reservation to this statement of principle relates to what Lord Cairns said about the balance of convenience and the quantum of loss. Some commentators have thought that the effect of what Lord Cairns was saying was that once a breach of a negative obligation in a contract has been established, the court has to grant an interlocutory injunction: the court has no discretion in the matter. If that was the effect of what Lord Cairns was saying, that would not have been right. An injunction is an equitable remedy, and as such its grant is always subject to the ultimate discretion of the court. That is not to say that the issues which the court might address when it comes to the exercise of that discretion will be the same whether or not the court is considering the enforcement of a positive or a negative obligation in a contract, and I explain below in para 140, by reference to what Elias LJ said in the recent case of Araci v Fallon [2011] EWCA 668 (Civ) in England, what issues may, and what may not, be taken into account when the court is considering whether to enforce a negative obligation in a contract.
137. The second reservation to Lord Cairns’ statement of principle in Doherty v Allman is that it was said by the Court of Appeal in the present case at [23] to be subject to a number of exceptions which have been identified in subsequent cases. These were said to include, for example, “[t]he effect which enforcement will have on the relationship of the parties”, and “[t]he character of the order required to enforce the stipulation”. I have borne that in mind when dealing in paras [175]-[179] below with the exercise of the court’s discretion in this particular case
138. Doherty v Allman was a case in which the application was for a permanent injunction, not an interlocutory one. Indeed, what Lord Cairns said was obiter since there was no negative obligation in that case. But as Megarry J said in Hampstead & Suburban Properties Ltd v Diomedous [1969] 1 Ch 248 at p 259A-D:
“ ... these considerations do not preclude the words from having any weight or cogency in relation to an interlocutory injunction. Where there is a plain and uncontested breach of a clear covenant not to do a particular thing, and the covenantor promptly begins to do what he has promised not to do, then in the absence of special circumstances it seems to me that the sooner he is compelled to keep his promise the better. In such a case I do not think that the enforceability of the defendant’s obligation falls into two stages, so that between the issue of the writ and the trial the defendant will be enjoined only if that is dictated by the balance of convenience and so on, and not until the trial will Lord Cairns’ statement come into its own. Lord Cairns’ express reference to ‘the balance of convenience or inconvenience’ suggests that he had not forgotten interlocutory injunctions. I see no reason for allowing a covenantor who stands in clear breach of an express prohibition to have a holiday from the enforcement of his obligations until the trial. It may be that there is no direct authority on this point; certainly none has been cited. If so, it is high time that there was such authority; and now there is.”
139. I have not overlooked the conclusion of Ungoed-Thomas J in Texaco Ltd v Mulberry Filling Station Ltd [1972] 1 WLR 814 at p 831 that Lord Cairns’ statement of principle in Doherty v Allman does not apply to interlocutory injunctions. But (a) on one view that merely reflected the obvious fact that what Lord Cairns had said about interlocutory injunctions had been obiter, and (b) Ungoed-Thomas J did not doubt the correctness of what Megarry J had said in Diomedous. Ultimately, I read Ungoed-Thomas J as having distinguished Diomedous from the case he was dealing with on the basis that the validity of the covenant in Texaco was not “plain and uncontested”. His view of the proper outcome of the case would, I think, have been different if the validity of the covenant had been obvious to everyone. Indeed, the Court of Appeal in Araci v Fallon had no difficulty in applying the statements of principle of Lord Cairns and Megarry J to an application for interlocutory injunctions. For these reasons, there is, in my opinion, no reason why Lord Cairns’ statement of principle in Doherty v Allman, as explained by Megarry J in Diomedous, should not be adopted in Fiji with the reservations I have mentioned.
140. Megarry J talked of a plain and uncontested breach of the negative obligation to make it unnecessary for the balance of convenience to be considered. I do not think that he meant that if the breach was contested, the court would still have to consider the balance of convenience. If that were so, an unscrupulous defendant could simply deny the breach to render what Lord Cairns and Megarry J were saying of no practical effect. Indeed, in Araci v Fallon, the Court of Appeal applied the statements of principle of Lord Cairns and Megarry J in a case in which the breach was contested but where the defence was so fanciful that there was little chance of it succeeding at trial. So when Megarry J talked of the breach having to be uncontested, he must have meant not reasonably contestable. The effect of all this is that if the elements of the two contractual promises which Digicel is seeking to enforce amount to negative obligations, Digicel was, and still is, entitled to the interlocutory injunctions sought, provided that the breach of the two clauses is plain and not reasonably contestable, and the court in its discretion thinks that the interlocutory injunctions should be granted. The fact that the court’s discretion is engaged does not open up all the questions which would have had to be addressed when deciding where the balance of convenience lies. That is because, as Elias LJ pointed out in Araci v Fallon, the discretion has to be exercised in accordance with established legal principles relating to the grant of an injunction following a trial of the action. That, of course, includes considering whether damages are an adequate remedy, and any other factors which would militate for and against the grant or refusal of a permanent injunction.
141. This was not the way in which the case was originally argued. Digicel’s case in the High Court was that on the conventional approach to applications for interlocutory injunctions set out in American Cyanamid as explained in Woods, it was entitled to the interlocutory injunctions it sought. It was only in the Court of Appeal that the point was made on its behalf (a) that the relevant contractual terms contained both positive and negative obligations, (b) that Digicel was only seeking to enforce the negative elements of those obligations, (c) that the breach of those negative elements was clear and not reasonably contestable, and (d) that in those circumstances there was no need for the court to address the balance of convenience. The Court of Appeal rejected the argument at (a), concluding that “there was no subsisting negative covenant that could have been enforced by way of an interim injunction”.
142. Was that correct? I have already identified those contractual promises which Digicel accepts were positive obligations, namely the promises in clause 13.7.2 of the Sevens Agreement and clause 13.5.2 of the Digicel Cup Agreement to grant Digicel options to enter into new sponsorship agreements if Digicel matched any offer made by a third party. The critical question is whether those promises amounted to negative obligations by which the FRU agreed not to enter into sponsorship agreements for the Sevens Team and the Digicel Cup with anyone other than Digicel if to do so would put Digicel in breach of its obligation to grant options to Digicel to enter into new sponsorship agreements for the Sevens Team and the Digicel Cup with the FRU. The Court of Appeal did not address that issue. Indeed, it did not refer to the issue at all, and the impression one gets from its Judgment is that it was not alive to the contention that the positive obligations in the material clauses included negative obligations as well.
143. There is no doubt that an agreement can contain both positive and negative obligations relating to the same subject matter. Araci v Fallon is a good example of that. The defendant was a jockey who had been retained by the owner of a racehorse to ride the horse as and when requested. The agreement contained the positive obligation to ride the horse in races whenever it was possible to do so or as requested by the owner. It also contained the negative obligation not to ride any other horse in any race in which the jockey had been retained to ride the horse in question. It is true that in that case the negative obligation was an express one, whereas in the present case it is not, but that is a distinction without a difference if it can truly be said that the positive obligation on the part of the FRU to grant the options to Digicel amounted to a promise not to enter into sponsorship agreements for the Sevens Team and the Digicel Cup with anyone else if to do so would amount to a breach of its agreements with Digicel. Indeed, the courts have always recognised that a positive obligation in a contract can amount to a negative obligation as well. As Lord Blackburn said in Doherty v Allman itself at p 731:
“A case might very well arise where affirmative words involve a negative. I think myself the true construction of saying I will maintain a storehouse involves the negative – I will not pull it down.”
And in Manchester Ship Canal Co v Manchester Racecourse Co [1901] UKLawRpCh 78; [1901] 2 Ch 37, the Court of Appeal in England held at p 51 that where a provision in a contract gave the plaintiff the right of “first refusal” if the defendant decided to sell his land, and where the defendant threatened to sell the land to a third party in breach of that provision, the positive obligation on the defendant to give the plaintiff first refusal to buy the land “involve[d] a negative contract not to part with the land to any other company or person without giving that first refusal”.
144. The FRU does not seek to challenge Digicel’s contention that there were the negative obligations in both the Sevens Agreement and the Digicel Cup Agreement for which Digicel contend: its case is that there was not a clear breach of those negative obligations as there were good grounds for saying that Digicel had not matched Vodafone’s offer. That is Vodafone’s case as well, though in addition Vodafone did challenge the existence of such negative obligations. Vodafone’s counsel did not advance any submissions for that, save to say this (in para 33 of his written submissions):
“Given the circumstances, FRU can only accept offers which are more favourable than Digicel’s offers. The obligation on FRU under ... clause [13], is to notify Digicel with sufficient particulars, acknowledge Digicel’s matching offers and accept either Digicel’s matching offer or an offer that Digicel has not matched.”
I do not think that this is an entirely accurate summary of clause 13 of each of the two agreements, but the important point is that a summary of the provisions of clause 13 of each of the two agreements does not address the question whether the FRU’s promise to grant the options also meant that it had agreed not to come to a sponsorship agreement for the Sevens Team and the Digicel Cup with anyone else if Digicel matched their competing offer.
145. The key to answering that question relates to the exclusivity of Digicel’s sponsorship. For the reasons given in para 130 above, if Digicel’s sponsorship had been renewed, we have to proceed on the assumption that it would have been getting the sole and exclusive right to sponsor the Sevens Team and the Digicel Cup. The entitlement of company A under a sponsorship agreement with company B to be the sole and exclusive sponsor of a team or a competition necessarily carries with it a corresponding obligation on company B not to enter into a sponsorship agreement with anyone else as that would amount to a breach of the exclusive nature of its sponsorship agreement with company A. It follows that clause 13.7.2 of the Sevens Agreement and clause 13.5.2 of the Digicel Cup Agreement each amounted to a promise that the FRU would not enter into sponsorship agreements for the Sevens Team and the Digicel Cup with anyone other than Digicel if to do so would put the FRU in breach of its obligation to grant options to Digicel to enter into new sponsorship agreements for the Sevens Team and the Digicel Cup with Digicel. Such promises amounted to negative obligations, and because Digicel are seeking interlocutory injunctions to prohibit the FRU from continuing to implement its agreement with Vodafone rather than requiring it to enter into new sponsorship agreements with Digicel, Digicel can properly be said to be seeking to enforce negative obligations only.
146. I should add one thing. I do not think that the negative obligations for which Digicel contends arise by implying those obligations into the two agreements. There are, as Marsoof J has persuasively pointed out, only very limited circumstances in which a term can be implied into a contract. It may be that these negative obligations might be implied to give the agreements business efficacy – in other words to make them work commercially. But the exclusive nature of Digicel’s sponsorship agreements with the FRU meant that the FRU could not enter into sponsorship agreements with anyone else if Digicel matched any competing bid. In other words, the negative obligations in the agreements were the automatic effect of the exclusivity of the agreements: they were terms of the agreements as a matter of construction rather than by implication.
147. It follows that questions relating to the balance of convenience do not arise, provided, of course, that the FRU’s breach of those negative obligations is plain and not reasonably contestable. That is the issue to which I now turn.
The Breach of the Negative Obligations
148. Did Digicel’s offer match Vodafone’s offer? The principal point taken on behalf of both the FRU and Vodafone is that the terms of the new sponsorship agreement which Digicel offered did not match the terms of the sponsorship agreement which Vodafone had offered. The argument is that unlike Vodafone Digicel was not prepared to sponsor the Fiji International Sevens Tournament and the Fiji Secondary Schools Competition (also known as the Deans Trophy), so that unlike Vodafone’s offer of $8m a year, Digicel deducted the sponsorship value attributable to those tournaments from its offer of $8m a year. This contention has to be put into its proper context, and that makes it necessary to look at the course which the negotiations between Digicel and the FRU took. I trust that I will be forgiven for going into that in some detail. Moreover, clause 13.7.1 of the Sevens Agreement and clause 13.5.1 of the Digicel Cup Agreement had required the FRU to notify Digicel of the full terms of Vodafone’s offer, and the correspondence shows that the FRU never did that. The contention that Digicel did not match Vodafone’s offer has therefore to be seen in that light.
149. Before looking at the correspondence, it is necessary to refer to the negotiations which the Sevens Agreement and the Digicel Cup Agreement provided for. The Sevens Agreement expired on 1 November 2013, and the Digicel Cup Agreement expired on 31 December 2013. Both agreements addressed what should happen as and when the agreements came to an end. The Sevens Agreement required both Digicel and the FRU to enter into exclusive negotiations with each other during June and July 2013 for the renewal of the agreement. If no such agreement was reached, the FRU could during the months of August, September and October 2013 enter into negotiations and conclude an agreement with a third party for the sponsorship of the Sevens Team, provided that the third party was not a business competitor of Digicel. If no such agreement was reached, the FRU could enter into negotiations from 1 November 2013 and conclude an agreement with any third party, including a business competitor of Digicel, for the sponsorship of the Sevens Team. Similar but not identical provisions were included in the Digicel Cup Agreement. Both Digicel and the FRU agreed to enter into negotiations with each other for the sponsorship of the Digicel Cup by 30 June 2013, those negotiations to be carried out in good faith. The FRU also agreed that until 30 September 2013 it would not enter into any negotiations with any third party for the sponsorship of the Digicel Cup. However, if terms could not be agreed between Digicel and the FRU by 30 September 2013, the FRU was entitled to enter into negotiations and conclude an agreement with a third party for the sponsorship of the Digicel Cup, provided that the third party was not a business competitor of Digicel.
150. The correspondence reveals what actually happened. Negotiations between Digicel and the FRU’s agents over a future sponsorship agreement initially took place in the latter half of 2012. Digicel’s proposals covered the sponsorship not just of the Sevens Team and the Digicel Cup but other teams and tournaments as well. A five year agreement was proposed, and although the FRU could under this proposal appoint other sponsors who were not business competitors of Digicel, Digicel would have the “naming rights” which, of course, is the key component of any sponsorship agreement. Digicel was prepared to pay $8.8m for these rights. Digicel was notified on 21 December 2012 that the FRU agreed to these proposals in principle, though on 12 February 2013 Digicel was informed that the FRU’s agents had been instructed no longer to negotiate with Digicel, and that the FRU did not accept that an agreement in principle had been reached. Over the next few months, Digicel sought to re-open negotiations with the FRU, but by the end of September 2013 the FRU was still not prepared to negotiate with it. The FRU has not sought to dispute these facts, and for present purposes I proceed on the basis that they are correct. It means that the FRU was in breach of the clauses in the two agreements which provided for negotiations to take place.
151. On 12 October 2013, the FRU placed an advertisement in the Fiji Times inviting expressions of interest from individuals or companies to sponsor one or more of Fiji’s rugby teams and tournaments. Seven teams (including the Sevens Team) and nine tournaments (including the Digicel Cup, the Fiji International Sevens Tournament and the Deans Trophy) were specified. Digicel was concerned about that in view of the FRU’s unwillingness in breach of the Sevens Agreement and the Digicel Cup Agreement to negotiate with it alone over the renewal of the agreements. So on 16 October 2013 Digicel sought the FRU’s assurance that the FRU would honour its promises in clause 13.7.2 of the Sevens Agreement and clause 13.5.2 of the Digicel Cup Agreement to grant Digicel options to match any offer for sponsorship made by any third party. It agreed to waive its right to exclusive negotiations on condition that the FRU gave it that assurance. The FRU did not do so. On the contrary: by an undated e-mail (but first sent on 18 October 2013) it informed Digicel that Digicel would have to submit an expression of interest despite those provisions. The judge at first instance thought that Digicel had thereby waived its right to exclusive negotiations, ignoring (if I may respectfully say so) that Digicel’s offer to waive that right had been subject to the condition it had sought which had not been fulfilled.
152. By a letter of 11 December 2013, the FRU eventually gave Digicel the assurance Digicel had sought. The material parts of the letter (which had been drafted by Digicel) read:
“(a) The FRU acknowledges that pursuant to Digicel’s Option to Match under the Sponsorship Agreements:
(i) Digicel is entitled to match any third party sponsorship proposal that the FRU intends to accept (Proposed Sponsorship Terms); and
(ii) The FRU will give Digicel full disclosure of the Proposed Sponsorship Terms;
(b) The FRU will not accept any third party Proposed Sponsorship Terms until Digicel has had a reasonable opportunity to match that proposal, which in any case includes a period of at least 5 working days from the time full disclosure of the Proposed Sponsorship Terms is provided to Digicel;
(c) If Digicel matches the Proposed Sponsorship Terms, the FRU is obliged to, and fully intends to, accept Digicel’s offer to match.”
The only change which the FRU made to Digicel’s draft before the FRU’s chairman signed the letter was to change the number of days in para (b) from 15 to 5, even though clause 13.5 of the Sevens Agreement had stipulated a period of 15 days for Digicel to match a competing offer (and clause 13.5.2 of the Digicel Cup Agreement had stipulated a period of 30 days).
153. It was on 14 January 2014 that Digicel was informed that a bid had been made by Vodafone. What Digicel was told about that bid was set out in a spreadsheet attached to a letter dated 13 January 2014 from the FRU to Digicel. The spreadsheet revealed that Vodafone was offering a five year sponsorship deal consisting of cash of $3.6m a year, and benefits in kind of $4.4m a year, amounting to $8m a year in all for seven teams (including the Sevens Team) and seven tournaments (but not including the Digicel Cup – unless the Digicel Cup went by another name which we were not told about). There was a breakdown for each team and tournament for each of the five years from 2014 to 2018 inclusive. However, it did not set out the terms of the bid.
154. Digicel responded to this information in a letter dated 15 January 2013. The letter is marked “without prejudice”, but no-one objected to the Court considering it. It first made the point that Vodafone’s bid was for five years whereas the FRU had informed Digicel in the letter of 13 January 2013 that it was looking for sponsorship only for three years. But leaving that aside, the real point the letter made was that the terms of Vodafone’s bid had not been disclosed to it. In addition, the letter said that there were some specific things which Digicel needed to know – for example, whether Vodafone’s bid included a performance element, and if so what that was, and what the benefits in kind were, including things like handsets, credit, data roaming and promotional support. The letter concluded by saying that Digicel’s preference was to make an offer which matched that of Vodafone for all the teams and tournaments which the FRU wanted sponsorship for, though it was also prepared to match any offer which was limited to the Sevens Team and the Digicel Cup. It therefore asked for information about Vodafone’s offer relating to the sponsorship of the Sevens Team and the Digicel Cup. As I have said, I read the spreadsheet as having given that information relating to the Sevens Team but not that relating to the Digicel Cup. The FRU replied on 17 January 2014. It merely set out figures for some of the benefits in kind without allocating them to any particular year or to any particular team or tournament. It said nothing else. In particular, it did not disclose the terms of Vodafone’s offer.
155. In the belief that the FRU was about to accept Vodafone’s bid, and fearful that it might already have purported to do so, Digicel agreed to match Vodafone’s offer. It did so by its letter of 20 January 2014. That letter, and a subsequent one dated 22 January 2014, are two of the critical documents for present purposes. It offered the FRU what it described as a sponsorship package (which I take to mean a package covering all the teams and tournaments to which Vodafone’s offer related) made up of cash of $3.6m a year and benefits in kind of $4.4m a year. It said that it was also willing to match other material terms of the sponsorship package offered by Vodafone, to the extent that the FRU had notified Digicel of them. Having noted that Vodafone’s bid was for five years, Digicel offered to match that as well. In his affidavit, Dr Kafoa accepted that by this letter Digicel had matched Vodafone’s offer. Digicel sent the FRU a more detailed letter dated 22 January 2014 repeating the offer against the background of the FRU’s obligations under clause 13.7.2 of the Sevens Agreement and clause 13.5.2 of the Digicel Cup Agreement. Indeed, it went further and said that in the memorandum of agreement which would be drawn up “formally committing the parties to negotiating in good faith a sponsorship agreement on terms acceptable to both parties”, Digicel would be committed “to giving the FRU a sponsorship package that at least matches the sponsorship package proposed by Vodafone”, which was not conditional on the FRU notifying Digicel of it. Finally on 28 January 2014 it sent the FRU a draft memorandum of agreement incorporating its offer under which both Digicel and the FRU would be committed to negotiate in good faith a binding sponsorship agreement giving effect to the terms of the offer.
156. That is the context in which the argument that Digicel modified its offer so that it did not match that of Vodafone has to be seen. The correspondence relevant to that issue began on 24 January 2014. On that day, the FRU wrote to both Digicel and Vodafone. Digicel claim not to have received the letter until 29 January 2014. Digicel and Vodafone were both told the following:
“Since there are existing valid contracts for the sponsorship of the Fiji International Sevens Tournament and the Secondary School’s Deans Trophy Tournament, the FRU Board and Marketing Sub-Committee wish to offer to [ ] as a Tier-Two Sponsor for the mentioned products the same amounts being proposed previously. We will meet and discuss with the existing contract owners to ensure that this arrangement is done.”
The word in the square brackets was “Digicel” in the letter to Digicel and “Vodafone” in the letter to Vodafone. How that would have left the FRU if both Digicel and Vodafone had accepted this offer is not something I need to address.
157. We were not told what a Tier-Two Sponsor was. I assume that it was a lesser form of sponsorship than the sponsorship already in existence. But this letter is unclear – in particular the words “the same amounts being proposed recently”. Was it inviting Digicel and Vodafone to say what their offer would be if the Fiji International Sevens Tournament and the Deans Trophy were removed from the sponsorship package, and to bid separately, if they chose to, for those two tournaments in the same amounts as two-tier sponsorship of those tournaments had previously cost? Or was the FRU inviting Digicel and Vodafone to confirm that they were prepared to maintain their offers of sponsorship for $8m a year, even if they had to accept a lesser form of sponsorship for the Fiji International Sevens Tournament and the Deans Trophy? Or did it mean something else altogether? And what did the last sentence mean? Did it mean that the offer was subject to the existing sponsor’s consent? Or did it mean that the offer was subject to the existing sponsor’s confirmation that such an arrangement was feasible? I am not alone in being uncertain about the meaning of this letter. Someone had added to this passage in the letter to Digicel: “Billy not sure what this means.” Billy was Baljeet (Billy) Singh, the Chairman of the FRU’s Marketing Sub-Committee, and so someone within the FRU who was checking Mr Singh’s letter had had their own concerns about what the letter meant. The FRU must have inadvertently failed to remove that comment on the letter which went to Digicel!
158. I come, then, to the two other critical documents for present purposes. They are Digicel’s response to that letter. That response was by both e-mail and letter. Both are dated 29 January 2014. The e-mail said:
“Digicel is happy to accede to the FRU’s preference to ... exclude the International 7’s tournament and Deans Trophy tournament from the sponsorship package and reduce the sponsorship value by the amounts attributed to those assets in the Vodafone sponsorship package.”
The letter said:
“With regards to your comments on the Fiji International 7’s Tournament and the Deans Trophy Tournament, Digicel is happy to exclude these assets from the sponsorship package that Vodafone had included and match the Vodafone sponsorship proposal with regards to the remaining assets. We ask that the FRU exclude any sponsor that operates in the telecommunications brand sector from sponsoring these assets.”
The spreadsheet attached to the FRU’s letter of 13 January 2014 showed that Vodafone was offering to sponsor the Fiji International Sevens Tournament in the sum of $258,065 a year (consisting of $100,000 in cash and $158,065 in benefits in kind) and to sponsor the Deans Trophy in the sum of £516,129 a year (consisting of $200,000 in cash and $316,129 in benefits in kind). These sums totalled $674,194, but instead of reducing its offer from $8m a year by that amount, Digicel reduced its offer only by $516,130, $1 more than Vodafone’s proposed sponsorship of the Deans Trophy. In other words, it did not reduce its offer to reflect the fact that the Fiji International Sevens Tournament was no longer included in the package.
159. This is the basis on which the FRU and Vodafone claim that Digicel was not prepared to match Vodafone’s offer of sponsorship of $8m a year. The judge at first instance merely had to decide whether there was a serious issue to be tried, and he accepted Digicel’s case that there was. That was also what the Court of Appeal had to address in the light of its conclusion that “there was no subsisting covenant that could have been enforced by way of an interim injunction.” But the Court of Appeal took an unusual line when it came to consider this topic. It referred to an irrevocable undertaking which Digicel had given to the High Court, although it mistakenly thought that this undertaking had been given in an affidavit sworn by Digicel’s Chief Executive Officer. Digicel undertook that it would “match the financial terms (both in cash and in kind)” of Vodafone’s offer. The Court of Appeal thought that this showed that even then there was uncertainty about whether Digicel had matched Vodafone’s offer, and that the issue could only be resolved by evidence at trial.
160. There are at least three reasons why this approach was wrong. First, the Court of Appeal appears to have thought that because the issue could not be definitively determined until the trial of the action, no injunction should be granted. That could not have been correct. The issue for the Court of Appeal was whether there was a serious issue to be tried. It did not consider that. Secondly, the Court of Appeal did not appreciate why Digicel had given this undertaking. It was because Digicel had never seen the full terms of the agreement which had been reached between the FRU and Vodafone. Digicel needed to see it. It gave this undertaking on condition that it was disclosed – and in case it contained terms which Digicel could not reasonably have anticipated. Thirdly, the fact that it gave this undertaking did not mean that there was uncertainty about whether Digicel had matched Vodafone’s offer. As we have seen, by its letter of 22 January 2014, it had agreed to match whatever Vodafone’s offer had been.
161. I return, then, to the effect of Digicel’s response of 29 January 2014 to the FRU’s request to take the Fiji International Sevens Tournament and the Deans Trophy out of the equation. It is plain that Digicel reduced the annual sum which it was prepared to offer only because (a) it knew from the spreadsheet attached to the FRU’s letter of 13 January 2014 that Vodafone had included sponsoring those two tournaments in its offer, (b) it read the letter of 24 January 2014 as inviting Digicel to vary its offer to reflect the fact that the two tournaments would not be included in the sponsorship package and to bid separately (if it chose to) for two-tier sponsorship of them in the same amounts as such sponsorship had previously cost, and (c) it assumed that Vodafone would reduce its offer to reflect the FRU’s request to remove those two tournaments from the package. It must (or at the very least should) have been apparent to the FRU that this was the assumption which Digicel was making, and that if the assumption was not correct, Digicel may well want to maintain its original offer, even without the sponsorship of the Fiji International Sevens Tournament and the Deans Trophy or with a lesser form of sponsorship of those two tournaments – especially as by its letter of 22 January 2014 Digicel had offered to match whatever Vodafone’s offer had been.
162. If Digicel’s assumption was correct, and Vodafone’s offer had been reduced to reflect the removal of these two tournaments from the package, Digicel’s revised offer would presumably have matched the Vodafone’s offer. We cannot say that definitively because that offer has not been disclosed in its entirety, but if it did not, we would unquestionably have been told that. We therefore have to proceed on the assumption that the assumption which Digicel made was not correct – in other words, that Vodafone’s offer remained at $8m a year despite either the removal of the two tournaments from the package or a lesser form of sponsorship for them. That would have been a change in Vodafone’s “proposed sponsorship terms” (to use the language of the Sevens Agreement and the Digicel Cup Agreement) because the $8m a year would on that assumption have been offered either for less tournaments than before or for a lesser form of sponsorship for two of those tournaments. On that basis, clause 13.7.1 of the Sevens Agreement and clause 13.5.1 of the Digicel Cup Agreement required the FRU to notify Digicel of the change in the offer so that Digicel would have the opportunity to match it. It is true that this obligation only lasted “during the option period”, but that period would only have begun when Digicel was notified of that change. It never was. The fact is, therefore, that Digicel was not given what it was entitled to – the opportunity to match what we have to assume was the change in Vodafone’s offer.
163. But all that is beside the point. The fact is that even if Vodafone’s offer remained at $8m a year despite the removal of the Fiji International Sevens Tournament and the Deans Trophy from the package, Digicel must be treated as having continued to match whatever Vodafone may then have been offering, despite its response to the FRU’s letter of 24 January 2014. That is because in its letter of 22 January 2014 it had offered to match whatever Vodafone’s bid may have been. So if Vodafone’s bid had remained at $8m a year despite the removal of the two tournaments from the package, Digicel’s offer had to be treated as matching that revised offer. There is no way in which Digicel’s response to the FRU’s letter of 24 January 2014 could be construed as Digicel going back on its offer to match whatever Vodafone’s offer was or would be. That is the answer to the FRU’s contention that its letter of 24 January 2014 shows that it had made no decision at that stage about who the sponsorship should be awarded to, and if an offer was thereafter received from Vodafone which was better than Digicel’s offer, it was not under any obligation to accept Digicel’s offer. The fallacy in that argument is that Digicel had forestalled whatever offer Vodafone was to make by offering to match it whatever it was.
164. My conclusion on this topic has not depended on evidence which is in dispute. There is no question of the affidavits giving conflicting accounts of these events. My view has been based on the documents which speak for themselves. The Court is now in as good a position as the judge would be at trial to decide whether Digicel’s response to the letter of 24 January 2014 meant that it was no longer offering to match Vodafone’s offer. I have concluded that it should be treated as having continued to match Digicel’s offer. In my opinion, that conclusion is plain and is not reasonably contestable. It follows that the FRU was plainly and not reasonably contestably in breach of the negative stipulation in the agreements that it would not enter into sponsorship agreements for the Sevens Team and the Digicel Cup with anyone if to do so would put it in breach of its agreements with Digicel.
165. In reaching this conclusion, I am, of course, mindful of the importance which Marsoof J attaches to clause 13.6 of the Sevens Agreement, and the absence of an equivalent clause in the Digicel Cup Agreement. I do not share his view on this topic, and I note that it was not relied on either by the FRU or Vodafone. In my opinion, clause 13.6 of the Sevens Agreement merely supplemented clauses 13.2-13.5 about (a) the negotiations which the FRU had to conduct with Digicel over the renewal of the Sevens Agreement and the limited circumstances in which it could conduct negotiations with a third party about a new sponsorship agreement for the Sevens Team, and (b) the agreements which it could conclude following such negotiations. Its effect was simply to permit the FRU to conduct negotiations with a new sponsor, and to conclude an agreement with a new sponsor following such negotiations, from 1 February 2014 if, and only if, its negotiations with Digicel had not resulted in the renewal of the Sevens Agreement otherwise than by virtue of the FRU’s own breach of the Sevens Agreement.
166. I say that because Digicel’s right in clause 13.7 to be granted the option to enter into a new sponsorship agreement with the FRU for the Sevens Team if it matched any competing bid was expressed to be “[n]otwithstanding any other clause of the Deed of Variation and or the Sponsorship Agreement”. Indeed, if clause 13.6 was to be regarded as trumping clause 13.7, all that the FRU had to do if it wanted to avoid its obligations under clause 13.7 was to refuse to negotiate with Digicel, or to negotiate with Digicel in such a way that agreement would not have been reached by 31 January 2014, or to refuse to grant Digicel an option to match any competing bid. That cannot have been what the Sevens Agreement contemplated as any of those things would have amounted to a breach by the FRU of its obligations under clause 13 of the Sevens Agreement, and however the Sevens Agreement was to be construed, it would not be right to construe it in such a way that the FRU could avoid its obligations under one clause of the agreement by not performing its obligations under another clause of the agreement. Moreover, clause 13.6 would not have been prefaced with the words “For the avoidance of doubt” if it trumped clause 13.7. “For the avoidance of doubt” clauses are included in contracts, not to create new rights, but to explain existing rights in the event of possible ambiguities.
167. The effect of the Commerce Commission Decree: Some restrictive trade practices have been rendered unenforceable in Fiji by Part 6 of the Commerce Commission Decree 2010 (“the Decree”). The judge at first instance was concerned that clause 13 of each of the Sevens Agreement and the Digicel Cup Agreement might be unenforceable for that reason. He said that the provisions in the two agreements which conferred on Digicel the exclusive right to negotiate with the FRU on new sponsorship agreements and the right to be granted an option to match any competing bid “may have offend[ed] provisions of Part 6 in particular section 60 of the Decree as it may seem to hinder competition”. The judge did not analyse the issue at all, but he took the possibility that the provisions may be unenforceable into account when deciding where the balance of convenience lay. This was not a topic which had been raised by either the FRU or Vodafone in the hearing in the High Court. Indeed, the judge did not mention the issue in the course of the hearing, and Digicel’s legal team were not therefore afforded an opportunity to deal with it.
168. The topic was picked up by both the FRU and Vodafone in the Court of Appeal. As I read the written submissions filed on their behalf, they were contending that the relevant contractual provisions were unenforceable, and that this was a complete defence to Digicel’s claim since Digicel’s causes of action depended on their enforceability. The topic was not addressed by the Court of Appeal, no doubt because it was dismissing the appeal on other grounds. Since the FRU and Vodafone still maintain that the relevant contractual provisions are unenforceable, it is necessary for us to deal with the point.
169. Section 60(1) of the Decree provides:
“If a provision of a contract-
(a) is an exclusionary provision; or
(b) has the purpose, or has or is likely to have the effect, of substantially lessening competition,
that provision is unenforceable in so far as it confers rights or benefits or imposes duties or obligations on a person.”
The provisions in clause 13 of each of the two agreements were not exclusionary provisions since section 4(10)(i) of the Decree provides that a provision in a contract “shall be taken as an exclusionary provision if ... the contract ... was made ... between person[s] any two or more of whom are competitive with each other”. The agreements were between Digicel and the FRU, and they were not in competition with each other. Accordingly, the provisions will only have been unenforceable if their purpose was to lessen competition substantially, or if they had, or were likely to have, that effect.
170. I accept, of course, that during the few months when only Digicel had the right to negotiate with the FRU, other companies did not have the opportunity to compete for the sponsorship. To that extent, the provisions had the effect of lessening competition temporarily in the sense that it deferred the time when other companies could compete with Digicel for the sponsorship. But no new agreement could take effect until the agreements with Digicel had expired, and the period during which Digicel had exclusive negotiating rights came to an end long before then. Moreover, the FRU was not bound to renew its agreements with Digicel come what may. It had to negotiate with Digicel in good faith, but if it thought that Digicel was offering too little for the rights it was seeking to retain, the FRU could look for sponsorship elsewhere. So the fact that the provisions had the effect of lessening competition temporarily did not have the effect of preventing the FRU from entering into a sponsorship agreement with a new company by the time the agreements with Digicel expired. It cannot therefore be said that Digicel’s exclusive negotiating rights substantially lessened completion.
171. I turn to the FRU’s obligation to renew the agreements if Digicel made an offer which matched all other competing bids. I do not think that this had the effect of lessening competition at all, let alone substantially. If anything, it stimulated competition. Digicel knew that it would have to make a really competitive offer if it was to retain the sponsorship. And it was not as if the FRU was tied into having Digicel as the sponsor whatever the circumstances. It could seek expressions of interest from potential new sponsors anywhere in the world, any of whom were free to bid for the sponsorship, and Digicel knew that if it was to retain the sponsorship, it would have to match the very best of those competitive bids. Competition for the sponsorship was no less open than it would have been without Digicel’s right to match the best of the bids, and Digicel’s only competitive edge was that if the two best bids were those of Digicel and another company, the FRU was obliged to accept Digicel’s offer.
172. Again, my conclusion on this issue is not dependent on evidence which is in dispute. It has been based on the contractual provisions themselves. The Court is in as good a position as the judge would be at trial to decide whether these provisions were rendered unenforceable by section 60 of the Decree. I have concluded that they were not. In my opinion, that conclusion is plain and not reasonably contestable.
Would a Permanent Injunction have been granted at Trial?
173. The first issue here is whether damages at trial would have been an adequate remedy for Digicel for the FRU’s breach of its negative obligations. It is important to remember what that means. As Jackson LJ pointed out in Araci v Fallon at [42], the real question is whether it would have been just in all the circumstances for Digicel to have been confined to its remedy in damages. The judge at first instance found that damages would be an adequate remedy for Digicel, but he was considering Digicel’s loss only for a few months until the trial of the action could take place. In any event, he relied – in part at least – on the fact that Digicel had not sought damages in its Statement of Claim as if that was relevant to the adequacy of damages as a remedy, which it was not. He did not reject Digicel’s claim that the FRU had limited funds of its own, but he thought that the FRU would be able to pay any damages which may be awarded against it from the sponsorship funds it would be getting – presumably from Vodafone. He acknowledged that the loss of the intangible benefits from the sponsorship agreements would be difficult to quantify, but he said that the courts of Fiji had the ability to do so. The Court of Appeal did not address the issue – no doubt for the reasons which I shall come to shortly.
174. I agree with the judge on one thing. I do not think that the courts in Fiji are less equipped than courts elsewhere to assess damages, even in cases in which the damages may be difficult to quantify. Where I find myself in respectful but profound disagreement with the judge is whether any court could properly quantify Digicel’s loss in this case. The tangible benefits from sponsorship may not difficult to assess, but the purpose of long-term sponsorship is to increase awareness of one’s brand and to benefit from the prestige which sponsorship brings, and things like sales figures and other financial data can hardly be said to be reliable guides to increased brand awareness and prestige as it is impossible to say with any degree of certainty whether greater turnover is attributable to increased brand awareness and prestige or to other factors. There is no guarantee whatsoever that any damages which the court might have awarded would meet Digicel’s true losses. Moreover, I am far less convinced than the judge was that the FRU would be in a position to pay damages. It is all very well saying that it can call on sponsorship funds, but that assumes that those funds would not have already been used to support rugby in Fiji by the time the action would have come on for trial. In the circumstances, I do not see why Digicel should at that stage have been confined to its imperfect remedy in damages, nor do I see why it should now be confined to so imperfect a remedy.
175. I turn finally to whether there are any discretionary reasons why a permanent injunction would not have been granted at trial. I can only think of two, the preservation of the current status quo being only relevant when the balance of convenience is to be considered. One of these reasons was the one which the Court of Appeal had in mind, and was, no doubt, why it did not consider whether damages would be an adequate remedy. That was that the FRU had already concluded an agreement with Vodafone. “How can the FRU”, the court asked at [39], “implement two contracts which are at variance with one another with two different contracting parties?” And it added at [55] that should the court grant the injunctions sought, the agreement between the FRU and Vodafone “would still remain”.
176. I fear that in voicing these concerns the Court of Appeal overlooked the nature of the injunctions which Digicel was asking for. There was no question of the FRU having to “implement two contracts”. Digicel was not asking the court to order the FRU to enter into a new sponsorship agreement with it. It was only asking the court to order the FRU not to implement its agreement with Vodafone. Nor would the agreement between the FRU and Vodafone “still remain” if that was what the court prohibited the FRU from doing. Indeed, the effect of the orders sought by Digicel would have been that there would be no sponsorship agreements in place for the Sevens Team and the Digicel Cup – not one with Digicel because the FRU has not granted it the option to enter into new sponsorship agreements for them, and not with Vodafone either, because the orders sought would have prevented the FRU from implementing its agreement with Vodafone. So the Court of Appeal’s concern about two different agreements remaining in force at the same time, and the agreement with Vodafone still remaining in force, was groundless.
177. There is an allied point here. Granting the injunctions sought will result in the FRU no longer being able to comply with its obligations under its agreement with Vodafone. Should the court make an order in favour of a plaintiff when the effect of the order would be to prevent a defendant from meeting its contractual obligations to a third party? That is an important consideration, but Digicel contends that it is not one which should deter the court. That is because a contract may become frustrated when one of the parties to it is prevented from complying with it by an order of the court: see Codelfa Construction Proprietary Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337. It all depends on whether the performance of the contract had become radically different from what had originally been contemplated. I cannot go along with this argument. For a contract to be frustrated, the inability of the contract to be performed in the way the parties had contemplated had to arise without any fault on the part of either of the contracting parties. That was not the case here. The FRU entered into the agreement with Vodafone knowing of the terms of its agreements with Digicel, and it knew (or at least should have known) that to do so when Digicel had matched Vodafone’s offer would put it in breach of its agreements with Digicel.
178. So should the fact that the injunctions sought by Digicel would result in the FRU being unable to comply with its obligations under its agreement with Vodafone prevent Digicel from getting the injunctions? I do not think so. As Elias LJ said in Araci v Fallon at [74]:
“The adverse effect of the injunction on [the] owners [of the other racehorse] is unfortunate, but innocent third parties are often prejudiced when injunctions are granted to enforce lawful covenants ...”
It is not Digicel’s fault that the FRU finds itself in this position. Digicel made its position clear throughout – a position which has been vindicated by this Judgment. If proceedings for breach of contract are brought against the FRU by Vodafone as a result of the injunctions which I would order, the FRU has only itself to blame. Of course, its liability to Vodafone might well depend on whether Vodafone was aware of the terms of Digicel’s contract when it concluded its agreement with the FRU, because if it was, the FRU may be able to avoid liability to Vodafone on the basis either that Vodafone was itself a party to the FRU’s breach of its agreements with Digicel or on the basis that Vodafone had procured that breach. Indeed, the correspondence shows that on 31 January 2014 – and therefore before 2 February 2014 when Vodafone concluded its sponsorship agreement with the FRU – Digicel’s chairman had informed the Chief Executive Officer of Vodafone Group Plc (which I assume was the holding company of the group) about the terms of Digicel’s agreements with the FRU, including its right to be offered the option to match any competing bid. But whatever the position, Digicel should not be denied the only effective remedy for the FRU’s breach of contract by fear of what Vodafone might do if the FRU is prohibited from continuing to implement its agreement with Vodafone.
179. The other reason why a permanent injunction might not have been granted at trial is that granting it would leave the FRU without a sponsor for rugby in Fiji. That is what the FRU claim. But that would be putting the case far too high. Any injunctions in favour of Digicel could only relate to the Sevens Team and the Digicel Cup since Digicel had the right to be granted options to enter new agreements for the sponsorship of them only. Digicel is prepared to continue to sponsor them, and the FRU cannot be heard to say that it would be dissatisfied with that as it had agreed for Digicel to remain sponsors of them if Digicel matched any competing bid.
An Alternative Approach
180. In the interests of completeness. I have considered what the outcome of this appeal should have been if the conventional principles set out in American Cyanamid as explained in Woods had had to be applied. There were obviously serious questions to be tried, as it could not be said that that Digicel was acting vexatiously or frivolously when it contended that it had matched Vodafone’s offer and that the relevant contractual provisions were not rendered unenforceable by section 60 of the Decree. For the reasons I have given, I do not believe that Digicel should have been confined to its remedy of damages. On the other hand, at the time when Judgment was handed down in the High Court, I think that damages would have been an adequate remedy for the FRU on the cross-undertaking as to damages which Digicel had been prepared to give, because (a) Digicel was undoubtedly good for the money and (b) the FRU would only have been deprived of Vodafone’s sponsorship of the Sevens Team and the Digicel Cup for the few months until the trial of the action, and it would have been able to get Digicel to sponsor rugby in Fiji for those few months in the light of Digicel’s undertaking. On that basis, the judge was wrong to refuse the injunction, especially as the preservation of the status quo would strongly have pointed to the sponsorship remaining with Digicel for the time being. I recognise, as I said at the beginning of this Judgment, that things have changed and we are now where we are. But preserving the current status quo is inappropriate when I have formed the view that Digicel’s chances of obtaining a permanent injunction had the action proceeded to trial are as strong as they are. Indeed, that is why I would have had no qualms about granting injunctions in this case even though the practical effect of granting them would have been to dispose of the action finally in favour of Digicel. So even on the American Cyanamid test as explained in Woods, this was, and still is, a case for appropriate injunctive relief.
Conclusion
181. In the light of all this, I turn to whether special leave to appeal should be granted. With rugby having the following it does in Fiji, one might be forgiven for thinking that the case raises “a matter of great general or public importance” (the words of section 7(3)(b) of the Supreme Court Act 1998). I do not think that it does. There is a difference between what is of great interest to the public and what is a matter of great public importance. This case is an example of the former, not the latter. However, the case raises “a far-reaching question of law” (the words of section 7(3)(a) of the Supreme Court Act 1998) – indeed, more than one – namely whether a sole and exclusive sponsorship agreement containing an obligation to grant an option to the sponsor to renew the agreement if it matches any competing bid gives rise to a negative stipulation not to offer the sponsorship to a third party, and whether in Fiji a negative obligation in a contract can be enforced on an application for an interlocutory injunction without the court having to consider where the balance of convenience lies. On that basis, I would give Digicel special leave to appeal.
182. For the reasons I have endeavoured to give, I would have allowed Digicel’s appeal, I would have set aside the orders of the High Court and the Court of Appeal, and I would have restrained the FRU from continuing to implement its agreement with Vodafone. But I repeat what I said earlier about the need for that to be qualified. Digicel only had the right to be granted options to enter into new agreements for the sponsorship of the Sevens Team and the Digicel Cup. It had no right to be granted options to sponsor any other rugby teams or tournaments. The injunction which I would have granted would therefore have had to be limited to prohibiting the FRU from continuing to implement its agreement with Vodafone for the sponsorship of the Sevens Team and the Digicel Cup. To the extent that the FRU’s agreement with Vodafone provides for the sponsorship of other teams and tournaments, there is, of course, no reason why the FRU should not continue to implement it. However, since Marsoof J and Aluwihare J take a different view about the appropriate outcome of this appeal, the orders of the court must be the ones which they propose.
Hon. Buwaneka Aluwihare J.
183. I have given careful consideration to the Judgments proposed by Marsoof J and Keith J, both of which I have perused in draft.
184. I am in respectful agreement with Marsoof J and Keith J that leave to appeal may be granted to the Petitioner Digicel (Fiji) Limited (hereinafter referred to as “Digicel”) against the decision of the Court of Appeal dated 12th June 2015. However, in regard to the questions on which leave ought to be granted, I feel constrained by the limited ambit of appellate review in a case such as this where it is sought to impugn a Judgment of the Court of Appeal which affirmed a Ruling of the High Court refusing the interlocutory injunctive relief sought by Digicel at first instance.
185. The role of an appellate court in the context of the grant or refusal of interlocutory injunctive relief was explained by Lord Diplock in Hadmor Productions Ltd. v. Hamilton [1983 ] 1 A.C. 191 at page 210, in the following manner:
“The function of the appellate court is initially one of review only. It may set aside the judge’s exercise of his discretion on the ground that it was based upon a misunderstanding of the law or of the evidence before him or upon an inference that particular facts existed or did not exist, which, although it was one that might legitimately have been drawn upon the evidence that was before the judge, can be demonstrated to be wrong by further evidence that has become available by the time of the appeal; or upon the ground that there has been a change of circumstances after the judge made his order that would have justified his acceding to an application to vary it.”
186. In this case, there has not been any application by Digicel before the Court of Appeal or this Court to introduce fresh evidence that might have had a bearing on the exercise of discretion by the High Court in refusing the grant of interlocutory injunction sought by Digicel, nor was any change of circumstances alleged in the petition of appeal filed in the Court of Appeal or in this Court, to justify any variation or adjustment of the Ruling of the High Court affirmed by the Court of Appeal. In the light of the above quoted remarks of Lord Diplock, the only question therefore is whether the High Court had based its decision on a misunderstanding of the law.
187. It has been submitted on behalf of Digicel that leave to appeal ought to be granted and its appeal allowed on the basis that the lower courts failed to consider and apply the rule in Doherty v. Allman (1878) 3 A C 709. Learned Counsel for the Fiji Rugby Union (FRU) and Vodafone Fiji Limited (Vodafone) have submitted that there is no basis for the grant of leave to appeal, but I am in respectful agreement with Marsoof J. and Keith J. that leave to appeal ought to be granted to Digicel.
188. In my considered opinion, the only far reaching question of law that justifies the grant of leave to appeal in this case is that identified by Marsoof J. in paragraph 55 (b) of his Judgment, which raises the question whether the alleged exercise by Digicel of the contractual option in terms of clause 13 of the two agreements entered into by Digicel with FRU brought into play the rule in Doherty v Allman, supra, under which an interlocutory injunction ought to have been granted as a matter of course to restrain breaches of negative covenant, unless any of the exceptions to the said rule became applicable. I would therefore grant leave to appeal to Digicel only on the said question, and proceed to examine the same.
189. The principles applicable to the exercise of discretion by any court in considering whether or not to grant relief to any party by way of interlocutory injunction were carefully explained by Lord Diplock in his oft quoted judgment in American Cyanamid Co v Ethicon Ltd [1975] UKHL 1; [1975] AC 396. In my opinion, the rule in Doherty vs. Allman, supra, was not intended in any case involving the enforcement of a negative covenant, to deprive the court of first instance of its discretion to grant or refuse relief in the light of all the material facts and circumstances of the case.
190. I am fortified in my opinion by the observation of Mason J. in paragraph 17 of his judgment in Dalgety Wine Estates (Pvt.) Ltd, vs. Razzon (1979) HCA 41; 141 CLR 552 that Lord Blackburn, in Doherty vs Allman, supra, was inclined to repudiate the notion that a distinction should be made between negative and covenants, and considered that there were cases in which a court of equity would refuse to enforce a negative covenant on discretionary grounds. Taking a common sense view, Lord Blackburn had stated as follows at page 730 of his judgment in Doherty vs. Allman, supra-
“Even where there have been negative words, circumstances may change, so that though the covenant still remains it would not be reasonable that it should be enforced. I think the case of The Duke of Bedford vs. The Trustees of the British Museum 2 My. & K. 55, illustrates very well what I mean. There a covenant not to raise a garden wall above a certain height was made between the Duke of Bedford and Lord Montagu when they were occupying two large houses with gardens adjoining each other, and the covenant remained after Montagu House had been turned into the British Museum, and after the Duke of Bedford's garden had been turned into Bedford Square, and it was then sought to enforce it in Equity against the British Museum; the Duke of Bedford acting no doubt for the benefit of the tenants of his houses in the square. What Lord Eldon said was, if he has a right to enforce the contract he may enforce it, but circumstances have been so changed by time that it is unjust and unreasonable to enforce in Equity this contract against the British Museum in favour of Bedford Square, though he would enforce it without much hesitation in favour of the Duke of Bedford against Lord Montagu, if they had been both occupying their gardens at the time. That strikes me at once as the common sense view of the matter.”
191. I have no doubt that a court of equity may refuse enforcement of a negative covenant on discretionary grounds even in case involving a negative covenant. Recent decisions of courts in England, Australia and other common law jurisdictions cited in the course of argument involving the grant or refusal of interlocutory relief for alleged violations of negative covenants show that courts do exercise discretion in granting or refusing interlocutory relief.
192. No submissions have been made before this court that the High Court had erred in the exercise of its discretion in the course of its Ruling dated 13thMarch 2014, which was affirmed by the Court of Appeal. I also have no reason to differ from the Court of Appeal in its decision that the rule in Doherty v Allman, supra, did not become applicable in the circumstances of this case.
193. For these reasons I am of the opinion that the question on which I was inclined to grant leave to appeal highlighted in paragraph 188 of this Judgment, should be answered in the negative, and the appeal should be dismissed with costs fixed at F$5000 each payable by Digicel severally to FRU and Vodafone. I would affirm the Judgment of the Court of Appeal dated 12thJune 2015, which affirmed the Ruling of the High Court dated 13thMarch 2014.
194. I am also concerned about the delay in the progress of this case to trial and in this regard, I am in agreement with the orders proposed by Marsoof J. at paragraph 116 of his Judgment.
Orders of Court
In the result, the Court makes the followings orders:-
(1) The application for leave to appeal is allowed;
(2) The appeal is dismissed with costs fixed at F$5000 payable severally by the Petitioner to each of the Respondents. The total costs of appeal to this Court payable by the Petitioner is F$10,000. The Judgment of the Court of Appeal dated 12th June 2015, which affirmed the Ruling of the High Court dated 13th March 2014, is affirmed (Hon. Justice Brian Keith dissenting);
(3) The High Court holden in Suva is directed to have High Court of Fiji Civil Action bearing No. HBC 30 of 2014 called within three weeks of the pronouncement of this Judgment, for making all appropriate orders for expediting the trial of this case or for otherwise having this case expeditiously disposed of.
.............................................
Hon. Justice Saleem Marsoof
Judge of the Supreme Court
............................................
Hon. Justice Brian Keith
Judge of the Supreme Court
.............................................
Hon. Justice Buwaneka Aluwihare
Judge of the Supreme Court
Solicitors:
Siwatibau & Sloan for the Petitioner
Lajendra Law for the 1st Respondent
Patel Sharma Lawyers for the 2nd Respondent
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