Belflora Pty Ltd v Vinflora Pty Ltd and Anor

This case concerns the question whether the plaintiff (Belfora Pty Ltd) and the defendants (Vinflora Pty Ltd and Mr Uppalapti) entered a legally binding agreement in 2018 by which Mr Belcastro and Mr Uppalapti, formerly business partners, agreed to split their business on particular terms.

The plaintiff asserts that the agreement contained terms for the differentiation of the businesses created by the split, including a term to the effect that the defendants would not display flowers imported from South America, nor sell flowers imported from South America other than those supplied by the plaintiff. The plaintiff asserts that the terms it relies upon are in a document which was agreed orally to express part of their agreement. It is also asserted there are further oral terms dealing with the division of the stands at Flemington Markets Sydney from which flowers were to be sold and that the agreement would bind the parties “so long as they operated side by side”.

The plaintiff seeks, permanently to restrain the defendants from displaying flowers imported from South America at stands 49, 50, 51 and 52 at Flemington Markets Sydney, and selling flowers imported from South America at those stands, other than flowers supplied by the plaintiff. The plaintiff operates from stands 81, 82, 83, 84, 82A and 65 and it is asserted is subject to similar restraints but with respect to Kenyan as opposed to South American flowers (the physical location of the stands can be seen on the floor map at CB.83, a matter to which I will return).

The defendants deny that such an agreement was entered into and that the document relied upon was no more than a proposal which if it did create legally binding relations was only entered into for a year, alternatively was repudiated by the plaintiff and that repudiation was accepted by the defendants, or alternatively that it was abandoned by the parties. The defendants also allege the terms of the agreement are contrary to public policy by reason of it being in restraint of trade and assert the plaintiff should not obtain the injunctive relief sought.

The two principals of the plaintiff and first defendant respectively, Mr John Belcastro and Mr Vamsi Uppalapti (the second defendant), first met in 2002. Shortly thereafter, Mr Uppalapti began supplying Mr Belcastro with roses sourced from India and commenced working for him.

In January 2003, Mr Belcastro transferred 50% of the shares in Belflora Australia Pty Ltd to Mr Uppalapti and Mr Uppalapti was thereafter appointed a director.

In about 2004, seeking to identify other sources of roses, Mr Uppalpti identified what he thought was an opportunity to expand into the developing Kenyan roses market through a contact with Mr Mohamed Ehiya Mohamed Gani (Ehiya) who he had been introduced to by some contacts. In about 2005, Mr Uppalapti started buying roses from Kenya and Mr Ehiya started buying Indian roses from Mr Uppalapti’s family. Mr Uppalpti asserts he introduced Mr Belcastro to Mr Ehiya in 2005 when they visited Kenya together. By 2006, Mr Uppalapti had invested in Mr Ehiya’s business.

In 2008, Mr Uppalpti asserts Belflora Australia started importing Columbian roses and Ecuadorian roses from South America.

In 2011, Belflora Australia invested Euro 200,000 in a start-up Kenyan flower grower, Golden Tulip Farms Ltd (an entity associated with Mr Ehiya).

In July 2013, Belflora International Pty Ltd commenced business. The three directors were Mr Belcastro, Mr Uppapapti and Mr Ehiya. Two eponymous corporations, Belcastro Holdings and Uppalapti Holdings, held 33 shares each. Mr Ehiya personally held 30 shares.

In late 2016, Mr Luke Dominello, Mr Belcastro’s grandson, commenced to work for Belflora International.

It is asserted that differences emerged between Mr Belcastro and Mr Uppalpti such that in late 2017, Mr Uppalpti proposed the business be split. It is also suggested that this was because of Mr Dominello having joined the business.

The plaintiff asserts that Mr Uppalpti in February 2018 visited Mr Belcastro’s home so as to work through the details of how to split the business.

The plaintiff asserts that in March 2018, an oral agreement is reached by which Mr Belcastro (through a new company, Belfora) would have the exclusive right to import South American flowers and Mr Uppalalpti (through a new company, Vinflora) would have the exclusive right to import Kenyan flowers.

A document is drawn up by it is alleged Mr Luke Dominello and described as “1st AGREEMENT JUNE 2018” (CB.85 and 291). At the bottom of each of these documents appears the sentence, “The reason for this agreement is so that we do not have two identical stands”. The documents also state that the parties can purchase Kenyan and South American flowers from each other respectively “for orders only. They cannot be put on the floor for sale” and that “profit is to be shared”. Another version of that document exists but without the date at the bottom (CB.46). And yet another document exists with some additional items on it (CB.984). There are several differences between this document and the first set. First, it does not bear a date. Secondly, the type font is different to the first set of documents and a number of the sentences are in bold. There are additional words under the heading “Other things to share”. There are four bullet points against which are the items, “Truck”, “Warehouse”, “Anil” and “Belflora Natives”. Thirdly, this document speaks of “The reason for these agreements”. And there exists yet another brief document in quite different terms entitled “VINFLORA/BELFLORA NEW AGREEMENT” (CB.1014) with provision made for signatures but which is unsigned. This document refers to it having attached a copy of what is described as the “first agreement” and contains the sentence, “Vinflora is to purchase roses from South America in 25 stem bundles”.

There are numerous factual disputes about who precisely saw which document and when and what each of the principals said to each other at various points in time.

It is asserted that Belflora and Vinflora commenced their respective business on 1 July 2018.

It is also asserted that in July 2019, Vinflora commenced to import South American flowers.

The plaintiff submits that the objective circumstances, the parties’ post contractual conduct, and admissions made by Mr Uppalapti prove the existence of a legally binding agreement as well as its terms, despite the fact the agreement was never signed (relying on Lawrence v Ciantar [2020] NSWCA 89 at [114] and the cases cited there as to the admissibility of post contractual conduct to prove the terms of an agreement that is partly oral; Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 as to the admissibility of Mr Uppalapti’s admissions; and Brogden v Metropolitan Railway Company (1877) 2 App Cas 666 and Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1998) 14 NSWLR 523 at 528, 531 and 534-5 in support of the position that assent to the terms of a written document can be inferred despite the failure of a party to execute it).

In particular, the plaintiff points to the fact that Mr Belcastro and Mr Uppalapti were business partners splitting their business. It submits that their relationships with Mr Ehiya and other suppliers were commercial associations of considerable value to both Mr Uppalapti and Mr Belcastro, an objective factor which it is asserted supports the existence of consideration, an intention to enter legally enforceable obligations and the terms for exclusivity.

The plaintiff asserts in its closing submissions that the document at CB.984 reflects the parties’ final agreement, which Mr Uppalapti took a photo of at the market on 1 June 2018. It submits that Mr Belcastro’s evidence (see below) that Mr Uppalapti told him he was happy with the agreement is consistent with Mr Uppalapti’s various admissions that they came to an “arrangement” or “understanding” that they would operate under “to start with”. The plaintiff also submits that the existence of the agreement is supported by the fact Belflora and Vinflora commenced trading, that the stands were split, and the sharing of the warehouse, truck, Belflora Natives and employee, Anil. It submits that the fact Mr Belcastro and Mr Uppalapti refrained from selling Kenyan and South American flowers, respectively, for a period of 12 months supports the existence of the alleged restraint. However, the plaintiff submits the parties refrained from specifying any period of time for which the restraint should endure.

The plaintiff submits the defendants’ repudiation defence must fail on the basis that acceptance of the repudiation was not pleaded nor the subject of evidence; before repudiation could have been accepted, Mr Uppalapti had to be willing and able to perform the agreement but denies the existence of the agreement; repudiation is not to be lightly inferred; Mr Belcastro’s evidence is inconsistent with repudiation; and the parties were sharing the warehouse, truck, Belfora Native, Anil and even profits (see closing submissions [69]).

As to the enforceability of the restraint, the plaintiff submits it is not in restraint of trade in the relevant sense and in any event is reasonable. In their opening submissions, the plaintiff asserted that the purpose of the restraint was market differentiation not exclusion and Mr Uppalapti is free to sell South American flowers so long as they are obtained from Belfora. It was said to be reasonable in that each party obtained mutual benefit from the opportunity to concentrate on importing flowers from the growers with whom they had better connections, the connections with Kenyan and South American growers being assets (“goodwill”) of the business being dissolved (see Commissioner of Taxation v Murray (1998) 193 CLR 605). In closing submissions, the plaintiff asserted that there is no restraint on existing trade, each party having commenced a new business and promised not to appropriate that part of the previous business taken by the other. The plaintiffs submit that Mr Uppalapti was capable of determining where his interests lay and negotiated on an equal footing with Mr Belcastro. The parties were the best judge of what was reasonable and Mr Uppalapti got what he wanted, which was at least, if not more, valuable than what Mr Belcastro took in return. The plaintiff further submits that the defendants’ did not raise any issue concerning time nor the lessoning of competition in their defence and such issues have to be pleaded (Heydon on Contract at [19.30]).

The plaintiff also submits that the defendants have not relied upon s 4(3) of the Restraints of Trade Act 1976 (NSW).

The plaintiff asserts that the evidence is such that the defendants ought to concede they imported South American flowers in the period June 2018 to date and the plaintiff ought to be granted the relief sought.

The defendants submit that the evidence, viewed objectively, does not establish that there was an agreement between the plaintiff and the second defendant in the form alleged. The plaintiff referred to several authorities concerning the objective theory of contract and the difficulties plaintiffs face in discharging their onus of proof in relation to contracts based on oral conversations, including John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 at [94] where Hammerschlag stated that the “seriousness of an allegation made, inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding” were relevant factors.

In summary, the defendants submit:

The defendants submit that even if there was a legally binding agreement, it was either repudiated or mutually abandoned on the basis of the following asserted facts:

The defendants submit that, if the alleged agreement remains in force, the alleged restraint operates as a restraint of trade in three ways, namely, by restricting the defendants’ rights to engage with South American flower growers and exporters, by restricting the defendants’ rights to display South American flowers, and by restricting the defendants’ rights to sell South American flowers other than those purchased from the plaintiff.

The defendants assert the plaintiff has adopted a “shifting sands approach” to what the restraint is intended to protect. Nevertheless, the defendants submit there is no probative evidence that Mr Belcastro had any goodwill, in the form of connection to South American flower growers, to protect. They say there is no evidence as to how the asserted relationships were built up, how long it would take Mr Belcastro to cement those relationships before Mr Uppalapti could use them, or whether Mr Uppalapti ever used the suppliers used by the plaintiff. Even so, they submit that the plaintiff’s reference to goodwill in relation to relationships and access to South American suppliers is not goodwill of the kind of associated restraints of trade (see Isaac v Dargan Financial Pty Ltd (2018) 98 NSWLR 343 at [66]; Allied Dunbar (Frank Weisinger) Ltd v Weisinger [1988] IRLR 60 at 65 (Millett J); GBAR (Australia) Pty Ltd & Ors v Brown & Anor [2020] QSC 14 at [82] (Bradley J). They say there is no evidence about how the restraint would operate to protect customer goodwill of the new businesses.

Further, the defendants submit that the alleged restraint is not a reasonable restraint in that:

Finally, the defendants submit that if the plaintiff was otherwise entitled to injunctive relief, such relief ought to be denied on discretionary grounds. They assert that, from the outset, the plaintiff sourced roses designed to look like Kenyan roses, which cuts across the stated reason for the agreement, and continued to purchase Kenyan roses from suppliers/wholesalers other than the defendant. The defendants also assert that the plaintiff’s breach of the Court’s confidentiality orders goes to the heart of what this case is about, namely two competing businesses at the Sydney Flower Market.

The plaintiff pleads a contract under which Uppalapti would not sell flowers from South America and Belcastro would not sell flowers from Kenya (Statement of Claim [23], [40]) and a term that the “agreement would bind them so long as the parties operated side by side” ([41](d)). However, the plaintiff did not specifically plead that the term as to duration was written, oral or implied.

During the course of final submissions, I asked senior counsel for the plaintiff whether the agreement was intended to operate in perpetuity. Mr Coles QC informed me that “[n]o time was fixed for its expiry” (T174.42). I then asked whether it was an implied term that as long as each does business in the Sydney flower markets, the agreement is intended to operate. Mr Coles QC answered that there is no issue raised by the defendant that “he was entitled to terminate the agreement by giving some notice or that the Court would not enforce the agreement simply because it was unlimited as to time” (T174.47-40). Later, he said “[i]t is simply a covenant to which the parties themselves selected no particular termination time or expiry date” (T187.37-38).

However, upon reflection, I invited the parties back to discuss the issue and by email I sent out a request in substance asking whether the plaintiff relied on the term so far as duration is concerned having been implied and, if so, for some assistance from the parties as to the relevant authorities regarding the implication of terms where a contract is said to be partly oral and partly written.

Counsel for the plaintiff provided further written submissions dated 12 August 2020 in which they disavowed any implied term. They asserted “[t]here simply were no discussions concerning duration”. Further, the plaintiff submits that no term should be applied as the criteria set out in Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 and BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 are not met. It submits that Crawford Fittings v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438 is authority for the proposition that an agreement which does not express a time period for its duration is indefinite, unless a term can be implied from the agreement and the surrounding temporal objective circumstances, to the contrary. However, it submits that this is by the by because the defendants did not advance the case that they performed the contract by exercising an implied term to terminate upon reasonable notice.

Mr Allen continued to disavow any implied term on 12 August when he and Mr Moses SC came before the Court. In response, Mr Moses SC raised four matters. First, he submitted that the plaintiff’s pleaded case must fail because the parties do not in fact operate “side by side” (see the floor map for the Flemington Flower Markets at CB.83). Secondly, he submitted that if the plaintiff submits that the whole agreement could come to an end on reasonable notice, their case does not support the relief it now seeks. Thirdly, he submitted that the plaintiff’s counsel had misunderstood Crawford Fittings, which he said relates to the termination of a commercial arrangement in relation to the provision of supplies and services and not restrictive covenants. Finally, he submitted that the defendants did not have an obligation to raise the case that the agreement could be terminated on reasonable notice.

On 13 August 2020, Mr Allen via email with the consent of the defendants drew my attention to paragraph [24.120] of Heydon on Contract, which he pointed out was referred to in footnote 36 of the plaintiff’s opening submissions. That paragraph states:

Whether an agreement exists is to be determined objectively and this exercise may involve recourse to events, circumstances and things which are external to the contract itself. In Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited (S99/2015; S102/2015) (2015) 256 CLR 104 (‘Mount Bruce Mining’) at [46]-[52], French CJ, Nettle and Gordon JJ explained the principles to be applied in determining the existence of a contract and its terms:

The comments of the High Court in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [35]-[36] and [40] are also relevant:

The alleged agreement in this case is said to be partly oral and partly written. In Masterton Homes Pty Ltd v Palm Assets Pty Ltd (2009) 261 ALR 382 (at [90]), Campbell JA (with whom Allsop P and Basten JA relevantly agreed) set out principles that are applicable in deciding whether an agreement that parties have entered is one that is wholly in writing or partly written and partly oral:

Specifically in relation to oral contracts, Spigelman CJ explained in County Securities Pty Ltd v Challenger Group Holdings Pty Lts [2008] NSWCA 193 at [7]:

In Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 McHugh JA (Hope and Mahoney JJA agreeing) helpfully observed (at 11,117) that the question is “whether the conduct of the parties, viewed in the light of the surrounding circumstances, shows a tacit understanding or agreement” (quoted by Heydon JA in Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at [77]).

As I have explained in previous cases (see, e.g., Quijiao Liu & Anor v Yuqing Xiao & Ors [2020] NSWSC 289), there are other lines of authority relevant to the resolution of cases of this kind. One that is particularly relevant here relates to the difficulties plaintiffs face in discharging their onus of proof in relation to agreements said to be based on oral conversations or conduct that occurred years before proceedings are commenced. The reasons for the difficulty are to some extent obvious but were discussed by McClelland J with his customary precision and insightfulness in Watson v Foxman (1995) 49 NSWLR 315 as follows (at 319):

In similar vein, Hammerschlag J captured the difficulties associated with such an exercise in John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 (at [94]):

Further, as to the relevance of post contractual conduct, the usual position is that “post-contractual conduct is admissible on the question of whether a contract was formed… [but] not admissible on the question of what a contract means” (Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at [25]-[26] per Heydon JA (citations omitted)). However, as the Court of Appeal has recently stated in Lawrence v Ciantar [2020] NSWCA 89 (per Bathurst CJ, Meagher and Gleeson JJA agreeing at [114]):

Whether there has or has not been a repudiation will depend on the facts in any particular case and it is not to be inferred lightly – it is a serious matter because the effect of it is to give the other party to the agreement the right to terminate it.

What can be said, however, is conduct must objectively be identified as amounting to conduct which is “substantially inconsistent” with the plaintiff’s obligations. It must amount to a renunciation of the plaintiff’s obligations, either of the agreement as a whole or a fundamental obligation under it (see Shevill v Builders Licensing Board (1982) 149 CLR 620, 625-627 (per Gibbs CJ, with whom Brennan J agreed); Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623, 647-648 (per Brennan J), 657-658 (per Deane and Dawson JJ); see also Keays v JP Morgan Administrative Services Ltd [2012] FCAFC 100).

The defendants point out that repudiation may be found in a combination of events, which, on their own would not entitle the aggrieved party to terminate the contract (Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17, 36-37, 40, 55; Carr v J A Berriman Pty Ltd (1953) 89 CLR 327). Further, an election to terminate a contract upon repudiation may be communicated by conduct or words, provided such words or conduct “make the election manifest to the relevant party” (Karacominakis v Big Country Developments Pty Ltd (2000) 10 BPR 18,235; [2001] ANZ ConvR 513; [2000] NSWCA 313 at [155]).

With respect to abandonment on the other hand, Dixon CJ and Fullagar J said in Fitzgerald v Masters (1956) 95 CLR 420 (at 423):

The relevant principles were reiterated by Kenneth Martin J in Porter v Sundance Resources Ltd (No 2) [2015] WASC 493 at [166] (cited with approval by the Full Federal Court of the Federal Court in Clifton (Liq) v Kerry J Investment Pty Ltd t/as Clenergy [2020] FCAFC 5 at [325]):

Further, in Ryder v Frohlich [2004] NSWCA 472 at [135]-[137], McColl JA (with whom Hodgson and Ipp JJA agreed) observed:

The relevant principles were recently summarised by Gleeson JA (with whom Bathurst CJ and Beazley P agreed) in Isaac v Dargan Financial Pty Ltd (2018) 98 NSWLR 343 at [59]-[72]:

As Gleeson JA and the authorities his Honour cites make clear, covenants that restrain competition are invalid except to the extent that they are reasonably necessary to protect a party’s legitimate interests. It is well established that covenantees are not entitled to protection from mere competition. In Vandervell Products v McLeod [1957] RPC 185, for example, Morris LJ said at 195-196 (having agreed with the judgment of Lord Evershed MR):

The defendants asserted that the kind of goodwill the restraint of trade doctrine protects is that which is understood as “a measure of the expected propensity of existing customers to continue to use the services of the business and of new customers to do likewise on the recommendation of existing customers, notwithstanding the change of ownership” (GBAR (Australia) Pty Ltd & Ors v Brown & Anor [2020] QSC 14 at [82], quoting Allied Dunbar (Frank Weisinger) Ltd v Weisinger [1988] IRLR 60 at 65). However, Lord Eldon’s definition of goodwill in Cruttwell v Lye (1810) 17 Ves 335 at 346; 34 ER 129 at 134, as “the probability that the old customers will resort to the old place”, has been regarded as too narrow (see Trego v Hunt [1896] AC 7, 16-17, 23, 27; see also J D Heydon, The Restraint of Trade Doctrine at 207-8). In Trego v Hunt, Lord Macnaghten said (at 23-24):

In In Inland Revenue Commissioners v Muller & Co's Margarine Ltd [1901] AC 217 at [17], his Lordship described goodwill as:

Lord Lindley said (at 235):

These definitions have been accepted by the High Court (see, e.g., Federal Commissioner of Taxation v Murray (1998) 193 CLR 605 at [17]; Box v Federal Commissioner of Taxation (1952) 86 CLR 387 at 396-397).

With respect to duration, indefinite restraints have been held valid (see J D Heydon, The Restraint of Trade Doctrine at 248). For example, in Foley v Classique Coaches Ltd [1934] 2 KB 1; [1934] All ER Rep 88 an agreement which required the purchasers of land to take their petrol supplies exclusively from the vendor was held valid. The agreement was not time limited but there was an implied term that the petrol supplied by the vendor should be of reasonable quality and sold at a reasonable price; to the extent that the purchasers were only required to purchase petrol from the vendor for the purpose of the business carried on by them on the piece of land purchased from the vendor, it was held there was no undue restraint of trade. In J Kitchen & Sons Pty Ltd v Stewart’s Cash and Carry Stores (1942) 66 CLR 116, Latham CJ and McTiernan J upheld a price fixing agreement under which the defendant undertook not to sell the “Oxygen Washing Compound known as ‘Persil’… at less than 6d. a packet” regardless of whether it was obtained from the plaintiff or any other source. However, their Honours held that the absence of a time limit and any power to withdraw were ordinary features of agreements of that type and for that reason did not justify the conclusion that the agreement was an undue restraint of trade. However, whether these cases would be decided the same way today has been doubted (see J D Heydon, The Restraint of Trade Doctrine at 248, 267).

Nevertheless, the question is again one of reasonableness. In Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269 (‘Esso’), Lord Wilberforce noted (at 340):

Notably, the United Kingdom Supreme Court recently reconsidered the doctrine against restraint of trade and the Esso case in Peninsula Securities Ltd (Respondent) v Dunnes Stores (Bangor) Ltd (Appellant) (Northern Ireland) [2020] UKSC 36 (‘Peninsula Securities’). The Court discarded the much-criticised “pre-existing freedom” test for the engagement of the doctrine, which was preferred by the majority Esso, and applied Lord Wilberforce’s “trading society” test. The “pre-existing freedom test” has been rejected by the High Court (see Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126; Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 (‘Maggbury’) at [55]) and the applicability of the “trading society” test has seemingly been left open (Maggbury at 55-56; see also the discussion in Kosciuszko Thredbo Pty Ltd v ThredboNet Marketing Pty Limited [2013] FCA 563 at [224]-[229]). Its application was not raised by the parties. The United Kingdom Supreme Court’s recent decision in Peninsula Securities did not alter what I will call the “reasonableness” test which is relevant once the doctrine is engaged.

In Hanna v OAMPS Insurance Brokers Ltd [2010] NSWCA 267, the appellant argued that that the primary judge erred in not adopting the test in Stacks Taree v Marshall [No 2] [2010] NSWSC 77, where McDougall J adopted Rath J’s approach in IRAF Pty Ltd v Graham [1982] 1 NSWLR 419 “of considering the time taken to sever the covenantor’s connection with the customers or clients in question rather than the time for the covenantee to build up (or rebuild) a connection”. Allsop P (Hodgson JA and Handley AJA agreeing) rejected the argument, stating (at [43]) “[t]here is no legally required test in these circumstances. The use of one test or another depends on the facts and the evaluation of the approach that is reasonable.”

The question of reasonableness is to be judged as at the date of the contract, and a restraint that is determined wholly unreasonable in relation to the convenantee’s interest is void ab initio as offending public policy (see discussion in McHugh v Australian Jockey Club Ltd and Others (No 13) [2012] FCA 1441 (Robertson J) at [1529]-[1530]; Adamson v New South Wales Rugby League Ltd (1991) 31 FCR 242 at 285-286 (Gummow J)). Although, under s 4(1) of the Restraints of Trade Act 1976 (NSW), restraints of trade (that are not wholly unreasonable) are to be considered valid to the extent to which they are not contrary to public policy.

When it comes to the question of relief, the position at the date of trial is relevant and the usual factors apply in deciding whether an injunction should be granted (see, e.g., J D Heydon, The Restraint of Trade Doctrine at 335). In Tullet Prebon (Australia) Pty Ltd v Purcell (2008) 175 IR 414; [2008] NSWSC 852, Brereton J (a his Honour then was) said (at [88]):

Brereton J had regard to whether the restraint no longer served to protect the legitimate interests of the plaintiff, whether the plaintiff should be left to a remedy in damages and whether “the jeopardy to the plaintiff from declining an injunction was slight, and the hardship occasioned by an injunction to the defendant was disproportionately great” ([104]), but did not in that case decline injunctive relief on any of those discretionary grounds ([107]).

Mr John Belcastro made four affidavits, the first dated 28 November 2019, the second dated 11 February 2020, the third dated 9 June 2020, and the fourth dated 10 July 2020.

The first affidavit was in support of expedition but it makes reference to the allegations in the statement of claim and has annexed to it what is said to be the written part of the agreement. This document (CB.46) is a version of the first set of documents described above and is the one which does not bear any date.

The second affidavit states that the plaintiff was incorporated in May 2018 and has operated as a flower seller at the Flemington markets (at [2]).

Mr Belcastro says he first met Mr Uppalapti, who approached him to ask if he would sell Indian roses which he sourced from his father in law in India, in 2002. Mr Belcastro did so and the product did well ([3]-[5]).

Mr Uppalapti asked if he could work with Mr Belcastro. Although he was reluctant at first, Mr Belcastro eventually employed him. Soon after, Mr Belcastro went to India for Mr Uppalpti’s wedding. The two became close “associates” ([6]-[9]).

In 2003, as Mr Belcastro was thinking of “winding down”, he transferred 50% of the shares in Belflora Australia to Mr Uppalapti and his wife for no consideration and appointed Mr Uppalapti as a director ( [10]-[11]).

The business operated successfully over the years up to 2013 with Mr Belcastro keeping control over the administration, accounts and banking (see [12]).

At some point in 2013, Mr Belcastro decided to start a new business and offered Mr Uppalapti 30% of this business, again for no consideration. The new business was to be called Belflora International (see [13]). It had three shareholders, Belcastro Holdings, Uppalapti Holdings and Mr Ehiya. The new business had also negotiated arrangements with international flower sellers (see [13]).

In late 2016 or early 2017, Mr Belcastro’s grandson, Luke Dominello, joined the business, first packing flowers and then approximately a year later in the administration of the company and in due course was involved in bio security issues and banking and the like (see [14]).

Mr Belcastro asserts that in 2017 he discovered that Mr Uppalapti had taken over control of banking and had redirected all mail to his personal address. From this point in time the relationship between the two men began to deteriorate and Mr Belcastro had a number of concerns as to how Mr Uppalapti was running the business ([15]-[19]).

From 2017, Mr Belcastro started writing notes of his concerns so as to assist him to recall matters he wanted to raise with Mr Uppalapti (see [22]).

In December 2017, the two had a meeting at Mr Belcastro’s home in Dural. In that conversation, Mr Belscatro states Mr Uppalapti proposed a split of the business with each of them taking four stands. Mr Belcastro said he agreed and Mr Uppalapti also suggested the split occur from the end of the financial year and Mr Belcastro also agreed with that (see [24]). It was agreed that Mr Belcastro would keep stands 81, 82, 83, 84, 82A and 65. Mr Uppalapti would take stands 49, 50, 51 and 52 as depicted at CB.83. Mr Belcastro asserts he brought other grandchildren into the business ([25]-[26]).

On Valentine’s Day 2018, Mr Belcastro asserts he and Mr Uppalapti had a conversation about exclusive lines they each should have. The discussions continued for a number of months. At some point, Mr Uppalapti suggested that Mr Belscatro sell Columbian flowers and Mr Belcastro suggested that Mr Uppalpti sell Kenyan flowers ([27]-[28]). Mr Uppalapti suggested that something be drawn up and within a few days Mr Belcastro “with my grandsons” drafted a document (see [30]). The document identified by Mr Belcastro is at CB.85.

Mr Belcastro says he had a conversation with Mr Uppalapti and gave him a copy of the document. Mr Uppalapti looked at the document “for some time” and he told Mr Belcastro he was happy with it. Mr Belcastro said he did not ask Mr Uppalapti to sign the document because he had had such a long standing relationship with him ([33]-[34]).

Mr Belcastro states he did not import any Kenyan or African roses. He asserts that Mr Uppalapti stocked South American flowers on his stand and he confronted him about the matter. Mr Uppalalpti responded that they were only for orders. Mr Belcasro states that he next saw South American flowers on Mr Uppalapti’s stand in mid 2019 ([35]-[38]).

Mr Belcastro again complained to Mr Uppalapti in early June 2019. Mr Uppalapti said there should be no restrictions notwithstanding the agreement “we had” ([40]). Mr Belcastro got his grandson to send a letter complaining to a supplier of South American flowers about Mr Uppalapti’s conduct ([41]). Mr Belcastro asserts that Mr Uppalapti only adhered to the agreement for approximately 12 months ([46]). He attempted to renegotiate the contract with Mr Uppalapti in August 2019, offering Mr Uppalapti the Columbian flowers and leaving himself with the flowers from Equador. He drafted another document with his grandson and he showed it to Mr Uppalapti but no agreement could be reached ([47]-[50]).

His third affidavit of 9 June is responsive to Mr Uppalapti’s affidavit of 27 March 2020. He sets out his extensive career in selling flowers ([3]-[15]). He also deals with his plans to retire and he denies ever relinquishing control of Belflora Australia in favour of Mr Uppalalpti ([30]-[31]). He denies a number of the conversations asserted to have taken place by Mr Uppalapti and he agrees that after his grandson came to work for Belflora Australia he gave him more and more responsibility ([49]). He also became aware that Mr Uppalapti had changed certain established practices and the relationship deteriorated ([50]-[52]).

He denies that the document on the defendant’s phone was a proposal. Mr Belcastro says the agreement had been discussed for the previous six months and agreed to prior to 1 June 2018 ([62]). Mr Belcastro states that his grandson at his direction typed the agreement and he did not involve lawyers because he trusted Mr Uppalapti to adhere to the agreement ([68]). He disputes numerous conversations asserted by Mr Uppalapti ([72]-[82]).

Mr Belcastro’s final affidavit of 10 July is responsive to the affidavits of Messrs Parmar, Bains and Kashany.

In cross examination, Mr Belcastro agreed the Sydney Flower market was Australia’s largest market for fresh cut flowers (T24.44). He also agreed that growers other than the plaintiff and the defendant sell roses especially from Kenya (T25.19). The agreement was to protect the goodwill particularly with South American growers (T25.37). But he agreed that it was also to protect the goodwill with African and Malaysian growers as well as Thailand and Singapore (T26.4-6).

He also alleged that “we had both signed that” (T26.49-50). He said the goodwill he was trying to protect was the relationship both he and Mr Uppalapti had built up with South American growers (T27.12-13). The relationship was with Belflora (T27.20-28). They agreed that he would speak to the South American growers and Mr Uppalapti would speak to the African growers (T28.12-16). He agreed that in 2002 he decided to hand over his business, John Belcastro Flowers, to his son-in-law, Mr Nati, and a former employee, a Mr Biscoe (T29.50-T30.1-3). From 2002, he and Mr Uppalapti became good friends (T30.23-25). He also agreed he went to Mr Uppalapti’s wedding (T31.9-10). He accepted that Belflora Australia was set up with Mr Uppalalpti in January 2003 and both were directors (T31.45-40). In 2003, they had stands 33, 34 and a part of 35 and then they purchased 81, 82, 83 and 84 (T32.3-7).

Mr Belcastro asserted that he was in control and ran the whole business. He agreed that Mr Uppalapti dealt with customers, suppliers and quarantine agents. But everything was done under his instructions (T32.30-47).

In 2013, a number of different investors came into the business and a new company was established with Mr Ehiya and the Lee brothers from Singapore. The new company was Belflora International (T33.16-18). The new company bought stands 51, 52, 65 and 81A (T33.1-4). Mr Uppalapti was instrumental in bringing in the other investors (T34.12-15).

His relationship with Mr Uppalapti was like father and son (T34.27). He agreed that when his grandson came into the business the grandson had some friction with other members of staff (T35.9-10). He did trust Mr Uppalapti but he tried to correct things he was doing wrong and because the relationship was deteriorating he started making notes of discussions (T36.19-22). He saw discrepancies and things done without his authority. He agreed that by the end of 2017 the relationship had deteriorated quite substantially (T36.48). His notes were made with the assistance of his wife to remind him what to raise with Mr Uppalapti (T39.23).

The agreement with Mr Uppalapti took nearly six months to finalise. Mr Uppalapti had the most input and “I think he might have wrote it and gave me a copy” (T39.47-48).

He never wanted the business to be split but he agreed that he had lost trust in Mr Uppalapti by the end of 2017. He was “not really sure” whether the agreement at CB.85 was typed by his grandson but he thought that Mr Uppalapti might have given him a copy (T39.49-50). He had no recollection of sitting down with his grandsons, Luke and Jude, and Luke typing out the agreement (T40.5). He was unsure who wrote out the page (T40.21-22).

He believed that he and Mr Uppalapti discussed it over a period of six months (T40.25-26). He also thought a conversation took place between himself, Mr Uppalaplti and his grandsons at some point (T40.29-31). And it was Mr Uppalaplti who “designed it” (T40.39).

He agreed that it was after his grandson started working in the business that he noticed things were not right with the business (T43.4-7). He also denied coming up with the proposal (T43.20). He denied negotiations with Mr Uppalapti about the percentages particular flower varieties made up of the business (T43.27). He denied showing Mr Uppalapti the document at CB.85 during discussions (T44.6). He did not get Mr Uppalalpti to sign the document but he did not know why (T44.43-48).

He agreed that at CB.1003 there was a photograph of his hand attached to an email from his grandson requesting a supplier to pack ten stem roses in the same way that the Kenyan roses were; to have them packed for the future in a sleeve (T47.28-37). He denied from 2018 to 2020 his company was buying Kenyan roses from a number of suppliers T47.43. He agreed, however, that he bought roses in the market regardless of where they were from and they may have been from Kenya but he denied he bought Kenyan roses from suppliers (T48.5-8).

Once he discovered Mr Uppalapti was bringing roses in from South America in July 2019, he put another proposal to Mr Uppalapti but Mr Uppalapti rejected it (T49.8-11). Mr Belsastro said Mr Uppalalpti told him he did not want any restrictions (T49.45). He agreed that “unless there is a name on the sleeve, you do not really know where they come from” (T51.25-26). He would not agree that his company was either selling Kenyan roses or passing off roses as Kenyan roses (T52.2; T52.16-17).

Mr Luke Dominello made two affidavits, the first dated 28 February 2020, the second dated 17 July 2020.

In the first of those affidavits, Mr Dominello said he has been employed by the plaintiff since 2017. Mr Belcastro (his grandfather) told him that he had had a number of conversations with Mr Uppalapti about splitting the business ([4]), and, in May 2018, that he and Mr Uppalpti had agreed on the split ([5]). He then sat down with Mr Belcastro and his brother, Jude, and they “wrote out and then typed up the document” and he printed it out ([5]-[6]). The document he identified is at CB.291. That document is the one which bears “1st AGREEMENT JUNE 2018”.

He states that his grandfather told him that “I’ve given the agreement to Vamsi, he’s happy with it and from the 1st of July that’s how we’ll proceed” ([7]).

He then sets out the detail of the sale of various flowers and the records kept ([9]-[10]). He also asserted that he saw no South American flowers sold by the defendant until June 2019. He told his grandfather. Since that time he has observed the defendant’s stands displaying Columbian and Ecuadorian flowers for sale ([12]14]).

His second affidavit is responsive to Mr Uppalapti’s 27 March 2020 affidavit.

In cross examination, Mr Dominello agreed that prior to working for Belflora International he was a personal trainer (T60.30). He has no tertiary qualifications (T60.40). When he joined Belfora International, he was unaware how many shareholders there were but he did know the details by the end of 2017 or the start of 2018 (T61.1-12).

He knew that his grandfather and Mr Uppalapti were both directors but his grandfather took the lead in the company (T61.17). He did not know Belcastro Holdings and Uppalapti Holdings had equal shares but made that assumption (T62.19). He had no knowledge of Belflora Australia and the fact that both his grandfather and Mr Uppalapti set up the business in 2003 (T62.40). He had some awareness but thought his grandfather was taking the lead (T62.45-47).

He said that any friction between himself and any employee was “their doing” (T63.6-7). He denied having distrust for Mr Uppalapti (T63.32). He accepted that his grandfather and Mr Uppalapti had respect for each other but he did not resent the relationship (T64.2). He denied telling his grandfather what he thought was wrong with the business (T64.12).

He agreed that other flower sellers were selling both South American and Kenyan roses in the flower markets (T65.14).

He agreed that he and his grandfather and his brother Jude (who has a law degree) sat down (T65.34; T65.37). There was a handwritten note and there had been a discussion between his grandfather and Mr Uppalapti at the markets which he overheard (T65.50-T66.1).

He accepted that his grandfather had a note in his hand which he just typed up (T66.28). The note was “from what I recall” identical to the document he typed up (T67.3-11). He typed it because his grandfather’s writing was illegible (T67.34-35). As far as he can recall, he typed the document and both his grandfather and his brother Jude were present (T68.25; T68.28; T68.34; T68.37; T68.40). As to the document at CB.291, he said “That’s what my grandfather wanted him to agree to…” (T69.1).

He was present when his grandfather and Mr Uppalapti talked about the matters at CB.291. They did come to an agreement because it was “practised by all parties” (T71.42). He denied lying to the court about the matter (T72.9; T72.12). He asserted that his grandfather had given him a document which he had to write out (T73.11). He also said that his grandfather created the document in the presence of himself and his brother Jude (T74.41-44). After that had occurred, he took the document and typed it up (T.75.40).

He agreed that South American roses are usually packed in stems of ten or twenty five in cardboard (T77.5-11; T77.15; T77.50). He also agreed that Kenyan roses are sold in stems of ten with plastic wrapping (T77.3; T77.46). He denied that the photograph at CB.1005, together with an email of July 2018 at CB.1003-4, was support for the proposition that the particular roses looked like Kenyan roses, and that they wanted to sell them as Kenyan roses (T78.36). He was unable to explain the document at CB.984. He can recall typing the document at CB.984 but he cannot recall typing CB.291 on the same day (T81.24). The agreement his grandfather entered is at CB.984 (T83.5). But the document at CB.984 was typed prior to the document at CB.291 (T83.46). He denied he had fabricated his evidence (T84.30).

He asserted he told certain suppliers he could not take Kenyan roses (T89.30-33; T89.42-44; T90.27). He was then asked to explain his access to certain information prior to swearing his affidavit of 16 July (TT94-97).

The principal witness for the defendant filed only one affidavit of 27 March 2020. He was born in India in 1977 and is the sole director and secretary of the defendant ([1]-[3]).

He has been involved in the flower business since 2002. He asserts that the Sydney Flower Market accounts for approximately 75% of the wholesale cut flower trade in NSW. There are about 100 or more growers and wholesalers operating in the market, of whom 35 are wholesalers and the remainder are growers. He explained that, generally, a wholesaler buys flowers from the importer and sells at the market. An importer buys from the grower directly and sells to the wholesalers. Importers do not operate stands inside the market. Almost all wholesale operators sell roses imported from South America (predominately, Columbia and Ecuador) and Kenya. There are about two or three other operators who import directly from growers in Kenya and South America and wholesale into the Sydney markets in addition to the plaintiff and Vinflora ([11]-[15]).

Mr Uppalapti’s wife’s family operate large flower farms in India and they export to numerous countries around the world ([21]). He began to market these flowers from India into Australia in about 2002 ([22]-[23]).

He met Mr Belcastro in 2002 and asked whether he would be interested in selling roses from India. Eventually, he started working for Mr Belcastro who indicated he wanted to wind down. Mr Uppalapti offered to take over the business and run it for him ([30]-[36]).

In 2002, Mr Belcastro retired and handed over his then business to his son-in-law a Mr Nati ([38]). He and Mr Belcastro started a new business, Belflora Australia. Initially there was to be a 60/40 split in favour of Mr Uppalapti but they later settled on a 50/50 split. Mr Uppalapti said as he had a lot of respect for Mr Belcastro he was content with 50/50 ([41]-[47]).

In 2003, Belfora had only one stand, stand 33. It later acquired stand 34 and then in due course stands 81, 82, 83 and 84. Mr Uppalapti asserts he ran the operational activities and business management of Belfora ([54]). In due course he saw an opportunity to expand the African flower market and he invested in operations in Kenya and started importing flowers from Singapore, Malaysia, Thailand, Ecuador and Columbia ([61]-[65]).

In September 2012, Belflora purchased the additional stands referred to above at [115]. This gave the business more space for product and a cool room ([75]). Turnover increased as well. In 2013, Mr Ehiya expressed an interest in investing in Belflora. In July 2013, Belflora International was incorporated. Messrs Belcastro and Uppalapti through their corporates held 33 shares each. Mr Ehiya held 30 shares and the Lee brothers held three shares and the remaining share was held by all five shareholders ([79]-[81]). In addition, Belflora International purchased a warehouse and stands 52, 53, 65, 81A and 82A at the flower market ([82]).

After Mr Belcastro’s grandson came to work with Belflora International in late “2016”, the relationship between Mr Belcastro and Mr Uppalapti suffered. As a result, Mr Belcastro began questioning what Mr Uppalapti was doing and was growing increasingly hostile towards Mr Uppalapti ([87]-[92]).

Mr Uppalapti and Mr Belcastro had a conversation on Valentine’s Day 2018 about the business and as a result Mr Uppalapti went to Mr Belcastro’s home in Dural in February 2018. Both men agreed that the trust had gone. The two over the next few months decided that the business would be split and the fixed assets of Belflora International would be divided equally, including the flower stands and the warehouse. Mr Belcastro would keep the name Belfora, phone number, current trading spots and the goodwill. Belflora International would cease trading on 30 June 2018 and Mr Uppalapti would start a new business. Mr Belcastro would take stands 81, 82, 83, 65 and 81A and Mr Uppalapti’s new company would take stands 49, 50,51 and 52 ([96]-[103]).

Mr Uppalapti asserts that on 1 June 2018, Mr Belcastro showed Mr Uppalapti what he calls a proposal which he took a copy of on his phone. Further discussion ensued and Mr Uppalapti asserts that Mr Belcastro proposed that they separate the product for the first year. They discussed roses, orchids, and chrysanthemums ([108]-[113]). Mr Uppalapti states that he did not want an agreement and that he did not respond to the proposal. He stated, however, that the defendant, Vinflora, did start trading as and from 1 July 2018 ([116]). On the same day, Mr Belcastro started trading as Belflora Pty Ltd ([117]-[118]). In October, Mr Uppalapti said he noticed Mr Belcastro selling Kenyan roses from his stands. Mr Uppalapti said he spoke to Mr Belcastro and told him he had no problem with that situation ([120]). He also stated that he saw Mr Belcastro wholesaling chrysanthemums and he did not raise any objections ([122]).

In June 2019, Mr Belcastro did assert there was an agreement which Mr Uppalalpti denied ([126]-[127]).

Mr Uppalapti secured additional warehouse space in 2019 but on 19 July he received a letter from Russo and Partners seeking to resolve the dispute ([129], [134]). In September 2019, Mr Belcastro approached Mr Uppalapti with a new proposal but Mr Uppalapti was not interested in it ([143]-[145]).

Mr Uppalapti then sets out the difficulties he would have in conducting business if the restraints insisted upon are enforced. For him to never be able to import South American roses would place him at a significant competitive disadvantage. Further, there has never been sharing of profits between the two entities ([152]-[153]).

In cross examination, Mr Uppalapti stated that Mr Ehiya became a supplier from about 2004 (T107.11). In 2006, Belflora invested in Mr Ehiya’s expanding operations in Kenya. There were surplus funds in Belflora (T108.2). In due course, Mr Ehiya invested in Belflora International (T108.10-18).

The relationship between himself and Mr Belcastro “started going down” after Mr Dominello came into the business and he resented the intrusion in his aspects of the company’s affairs (T109.30). He did not know the reason why Mr Belcastro was growing hostile towards him. He visited Mr Belcastro at home because he was concerned not to raise the issues about the disagreements he had been having at the market. It was decided they would split the stands: “I raised the proposal saying we spit the stands up and work separately (T112.37). He suggested that Mr Uppalapti take four stands and Mr Belcastro would take the rest. A number of discussions occurred over the next few months. And the split was to occur from 1 July 2018 (T113.23).

He agreed that he and Mr Belcastro discussed product lines but not exclusive business arrangements. He also agreed that they discussed selling South American and Kenyan flowers. He denied that Mr Belcastro would exclusively acquire Kenyan flowers from him (T115.48). Mr Belcastro did buy Kenyan flowers from him but not exclusively (T116.9-10). Mr Uppalapti did agree that it was agreed that the “basic deal” was that the assets of Belflora International would be divided up equally, including stands and warehouse (T116.28). He agreed that he told Mr Ehiya about the split (T118.1).

He was shown the document at CB.984 and he agreed that he saw it for the first time on 1 June 2018 because he took a picture on his iPhone as he did not at the time have time to look at it (T119.34-35). He still has it on his iPhone (T119.46; T119.49). He first saw the document at CB.291 when he received the letter from Russo and Partners. He agrees that he read the document at CB.984 before 1 July 2018 (T120.47). He continued to deny that he was going to exclude Mr Belcastro from importing Kenyan flowers. Again, he denied speaking about exclusivity (T122.14). They have been since 1 July 2018 sharing the truck (T123.43). The warehouse is shared “50%” each (T124.20). They also shared an employee named Anil for about four months (T125.25-31). He agreed that he and Mr Belcastro have continued to share the produce from Belflora natives (T126.33).

He said that after he had the document on his iPhone he did not speak to Mr Belcastro – he denied that he told Mr Belcastro he was happy with the agreement (T131.7). He agreed that he thought Mr Belcastro gave him the document “to understand the line of … understanding that we were going to have in future” (T131.26-27). He also said, “That’s what we wanted to start with… And see how it goes” (T131.33).

It was also important “to start with” that he and Mr Belcastro not have identical stands (T132.1). He also agreed that for at least the next twelve months his company sold African flowers (T132.16). He did not in the beginning import Columbian flowers (T132.26). He did not display Columbian flowers until about June 2019 (T132.34). He agreed that Mr Belcastro confronted him about having an agreement and asserted that he should not be selling South American flowers. He said he told Mr Belcastro that they did not have an agreement (T133.39). He explained that for the first twelve months “we had an understanding that we would put a separate line of flowers on each stand so customers can go to both stands” (T134.3-4). He did not trust Mr Belcastro; that is why he did not respond, but there was an understanding that there would be one line different on his stand (T136.35-36). He agreed that the decision not to import flowers from South America “was related to [his] understanding … with Mr Belcastro” (T137.1-4). He wanted to give the market the impression he was not selling South American flowers (T137.32).

The defendant relied upon a further three witnesses, only one of whom was cross examined.

Mr Mirza Kashany filed one affidavit dated 29 June 2020. He is the manager of a company called Good Apples which sells imported flowers to wholesalers at the Sydney Flower Markets. They do not sell directly to customers who attend the markets. He stated Good Apples sold flowers to Belflora sourced from Kenya on various dates in August 2018, in September and October 2019, and in February 2020. He attached copies of the invoices.

In cross examination, Mr Kashany accepted that he imported flowers from other countries but his main source was Kenya (T153.45). He asserted that in the last ten years he would only have imported flowers from Ecuador and Columbia about six times (T154.3-4). He denied he was lying in that regard (T154.12). He agreed he had advertised flowers from Kenya, Columbia and Ecuador but he imported chrysanthemums from Colombia and Ecuador (T154.48-50). He also agreed that since 1 July 2019 has received a shipment from Columbia (T155.22) but they have not been successful (T155.13-18; T155.22). He asserted that he had had five or six shipments of roses from Ethiopia (T156.32).

Mr Jiteshkumar Parmar filed one affidavit dated 29 June 2020. He is a director of Roses in Australia. It sources roses from Kenya, Tanzania, Malaysia and China. It sells to wholesalers at the Sydney Flower markets. He believed that a number of flowers sourced from Kenya were supplied to Belflora on dates in 2018 and 2019. He was not cross examined.

Mr Rajpal Bains filed one affidavit dated 29 June 2020. He is the sole director and secretary of Flower Flow. It sources flowers from Kenya and imports them into Australia to be sold to wholesalers and customers at the Sydney Flower market. He believed that Flower Flow sold flowers to Belflora that were grown in and sourced from Kenya on dates in August, September and October 2019. He was not cross examined.

The first question to be considered is whether the parties intended to enter legally binding relations, or as the defendants would have it, the parties simply went their own ways without any binding obligations from one to the other.

Part of the reasoning of the defendants’ case on this point is based upon the rather unsatisfactory way in which Mr Belcastro and Mr Dominello gave their evidence. Clearly, they gave conflicting and confusing evidence as to the genesis, and hence the drafting, of at least two potential candidates for the written part of the alleged agreement. There are important differences between Mr Belcastro’s recollection on the matter and that of his grandson. Which of the documents at CB.291 and CB.984 came first, and from which source, is the subject of much very persuasive argument by the defendants in their final submissions. In the end, I do not consider much turns on the rather chaotic nature of the plaintiff’s witnesses. There are several reasons for this.

First, it is uncontroversial that the parties had reached a point where they decided to go their separate ways. To what extent Mr Dominello was the catalyst is again not in my view really to the point. The simple fact is a prosperous partnership had come to an end and it was clearly important for the relevant persons to understand what was ahead in a commercial sense.

However, a cursory consideration of the two documentary contenders makes it tolerably clear that whatever Mr Belcastro, or for that matter Mr Dominello, thought was the case, the document at CB.984 clearly succeeded the document at CB.291, although it is possible that both could have been created on 1 June 2018. The obvious conclusion is that the document at CB.984 has had added to it additional matters suggesting it came after the document at CB.291.

The fact that the document is crude and drafted in an amateurish fashion is again not to the point, nor is the fact that it is not signed. Although it may be that Mr Uppalapti was not shown any earlier version of the document, the document at CB.984 was clearly shown to him and he accepts that he took a photograph of it on his iPhone, which as at the date of the trial he had retained.

What is so compelling in this case in my view is what the parties in fact did after 1 June. They did in fact physically part company, literally by dividing up their stands. The company, Belfora International, was in turn deregistered. Mr Belcastro started a new company using the Belflora name and Mr Uppalapti started Vinflora.

Consistent with the document, they did for a time employ a person named Anil as the driver of the truck they still share, along with the warehouse and the use of native flowers from Belflora Natives.

In other words, their subsequent conduct, to which I will return, amply demonstrates in my view that they intended to enter legally binding relations but they did not it seems to me make explicit all of the terms of their split.

But as a prelude to this analysis it is important to consider the words used in the relevant document to determine what the parties using or adopting those words against the background described should reasonably be understood to mean. In other words, objectively to determine what the terms and conditions of the agreement were.

The language used and/or adopted by them is the starting point. The document at CB.984 says, “The reason for these agreements is so that we do not have two identical stands”. If this is the overarching purpose then it will potentially affect the way in which other “terms” will be viewed. The agreement states that a number of matters are to be “shared”: profits, truck, Anil (the employee), the warehouse, Belflora Natives and “farms”. Rather perhaps than this being an arrangement between persons who distrusted each other, it would appear more like a pragmatic arrangement between two persons anxious, co-operatively to separate but cause the least economic damage to each other. Indeed, I am satisfied that each principal was concerned to allow the other to operate their respective businesses without directly competing with each other, hence the intention not to have each business look alike.

Contrary to the submission of the plaintiff, in my view Mr Belcastro did far better out of the split than Mr Uppalapti. The principal reason why this is so is because Mr Belcastro was keeping the name Belflora in relation to which he was seemingly well known. That brand, I infer from the materials, was well known both to the market and the growers. On the other hand, Mr Uppalapti had to commence business afresh with a new company with it seems no prior corporate identity in the industry. I am of course prepared to infer that many market participants would of course know or know of Mr Uppalapti but nonetheless he had, as far as the brand Vinflora goes, to start as it were from scratch.

The plaintiff disavows any express or implied term as to duration. Absent either of those features, whilst it is clear the parties did not seemingly advert to the issue, it is asserted that the agreement should be construed as one of indefinite duration. Here, of course there was no sale of business in the traditional sense where the purchaser as part of the price buys exclusivity or some other restraint for a time. This was a mere split, with Mr Belcastro keeping the name Belflora. Each would only “speak” with the growers of the flowers they were exclusively to deal in.

There was to be on an ongoing basis a good deal of shared activities. The farms identified and profits were to be shared, although there is no evidence of those matters and how the sharing occurred. But the other matters already referred to (at [143]) are even at the date of trial the subject of shared activities. That is on one view consistent with the intended long term nature of the agreement and the post contractual conduct of the parties. On the other hand, the expressly stated commercial reason or purpose for the contract goes to appearance but also competition.

The parties clearly did not comprehensively detail the terms of their split; rather, the language and structure of the written part appears to be a somewhat clumsy and hasty attempt to wrap up their affairs before the end of the 2018 financial year. The document at CB.984 does not it seems to me give the appearance of a document of many months gestation. The concept of separation I am satisfied might have been on the table as it were for some time prior to 1 June 2018, but not in a document in the form of that at CB.984 or its earlier incarnation at CB.291.

However, I am satisfied that the parties did objectively intend to make a legally binding agreement to separate. There is abundance of relevant post contractual conduct supporting the notion they made such a contract. They divided up the stands, shared the warehouse, the truck, the truck driver for a time, and Belflora Natives, and the evidence would support they more or less kept to their “exclusive” bargain. I say more or less because Mr Uppalapti did import one shipment from South America, according to Belcastro, and the evidence suggests that Mr Belcastro did import numerous shipments believed to be Kenyan flowers, according to Messrs Kashany, Bains and Parmar.

The overriding purpose of this agreement was to create separate businesses as and from 1 July 2018 and to do so as cost effectively as possible. However, not only did the parties not expressly advert to the duration of the agreement, they did not address the mechanism of its termination. On its face it is an agreement of indefinite duration, arguably terminable on reasonable notice. However, this latter consideration does not arise in this case as it was not pleaded nor otherwise relied upon as having occurred.

The defendant submits that if an agreement did in fact come into existence there has been a repudiation and/or and abandonment of it. For the reasons that follow I do not consider either has occurred.

In short, I am not satisfied that the plaintiff has clearly indicated by words or conduct that it no longer wished to be bound by the agreement. It denied importing roses from Kenya, although there is some evidence it did. Asking suppliers to pack roses, not from Kenya, to look as if they were from Kenya may usurp the spirit of the contract but not its letter. In any event, I am not satisfied that is why that was done. Repudiation is not to be lightly inferred and it is a question of fact. In addition, there must be clear acceptance of the repudiation. Here, there is anything but. The parties continue to share a warehouse, a truck and a source of native flowers pursuant to the agreement they made. There seems to have been breaches on both sides. When Mr Belcastro challenged Mr Uppalapti about importing roses from South America he stopped for a time at least. I do not consider there is the clear and cogent evidence required to support repudiation. Indeed, the commencement of the proceedings provides support for the plaintiff seeking to affirm the agreement.

Likewise, I am not satisfied based on the evidence I have already referred to that there has been an abandonment of the agreement as opposed to a breach or breaches.

The last question that arises is whether the agreement is in restraint of trade. The mere fact the parties have made an agreement does not of itself create any immunity if it is in restraint of trade. Duration alone will not necessarily point towards such a conclusion either.

The plaintiff asserts that the agreement prevents the defendants from speaking to South American flower growers and exporters, from displaying South American flowers, and from selling South American flowers other than those supplied by the plaintiff. In addition, the agreement is asserted to prevent the defendant doing so from stands 49, 50, 51 and 52. It is further asserted that the term is binding “so long as the parties operated side by side” (Statement of Claim [41(d)]). It is not precisely clear in the pleading what the phrase “operated side by side” is meant to convey but the description is clearly not factually accurate. This emerges quite plainly from an inspection of the floor plan of the markets at CB.83.

It is further asserted that, apart from protecting and facilitating the new businesses of the parties, the restraints are a source of goodwill attaching to the respective businesses. In its pleadings, the plaintiff asserts the covenants were agreed to protect Mr Belcastro’s contacts and good standing with South American flower growers and exporters and in recognition that Mr Uppalapti was in a better position to exploit and develop the Kenyan flower market (Statement of Claim [53(c)-(d)]). However, in its closing submissions the plaintiff submits the goodwill was built up by Belfora International, that is, Mr Belcastro and Mr Uppalapti together, and was the property of Belfora International. Mr Belcastro also gave evidence that he would have wanted to protect the goodwill he has built up with other growers, not just South American ones (see T26). However, there is at most only a modest amount of evidence regarding Mr Belcastro’s (or Belfora International’s) dealings with South American and other flower growers.

The restraint doctrine can apply obviously to any form of contractual arrangement (provided it concerns “trade”) but it does not apply uniformly (see, e.g., Tank Lining Corp v Dunlop Industries Ltd (1982) 40 OR (2d) 219; 140 DLR (3d) 659 at [15], citing Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd [1968] AC 269 at 337 per Lord Wilberforce (“the classification must remain fluid and the categories can never be closed”); see also Nordenfelt v The Maxim Nordenfelt Guns and Ammunition Company Ltd [1894] AC 535 at 566 per Lord Macnaughten). There are clear public policy considerations that arise in each particular case as to how far, if at all, the court will interfere with the freedom to contract. Reasonableness at the time of the formation of the contract is the touchstone.

There is no doubt the restraint was intended to create, aspirationally, a basis for both former principals to launch each of their new business with what may have been seen as a commercial advantage of exclusive dealing. But in the markets where, according to the map of the stands, there are numerous vendors, the main effect of the clause relating to duration is that it would place both contracting parties indefinitely at a competitive disadvantage as against each other but also other participants in the market. Importantly, the greater impact would be placed on the defendants because of their need as it were to re-brand. I find the defendants’ submission as summarised at [30] persuasive. Of particular note is the fact that there is no obligation on the plaintiff to keep the defendants fully supplied with South American flowers.

Whilst Mr Belcastro had a legitimate interest in protecting his or Belflora International’s goodwill, he was not being paid any additional consideration for it nor was he paying anything. The so-called protection to enure indefinitely is by reason of its entirely unlimited operation in the circumstances of the flower market anti-competitive and against the interests of the parties, especially the defendants’, and in my view, the public interest. It unreasonably restricts mere competition between the parties, and more importantly, the other vendors. This is a case where Mr Belcastro was already receiving a significant commercial advantage by maintaining the name and reputation of his brand, which he was at pains to explain in his evidence. The other difficulty is that the South American growers are unnamed in any schedule. None were the subject of specific agreement. There is no way of knowing whether in fact Mr Belcastro has dealt with any, or if so, for how long, although there is some evidence of his association with some South American growers. Nor is it clear that the restraint against the defendants only applied to growers Mr Belcastro had been (or, more relevantly, Belflora International) had been dealing with as at June 2018. Nor is there any explanation as far as I can tell why the particular farms specified in the document at CB.984 have been nominated but it appears from other evidence that they would seem to be suppliers of chrysanthemums and orchids (Belcastro affidavit 9 June 2020 [65]; Uppalapti affidavit 27 March 2020 [112]).

In my view, an indefinite restraint is, and was at the date the parties made their agreement, wholly unreasonable to protect whatever Mr Belcastro’s goodwill is, especially where, although consideration is provided, no money as such has or was intended to change hands. As I have already noted, this is not a case concerning the sale of a business to a purchaser who has paid for a restraint against the vendor in order to protect the business’s goodwill (see, e.g., Nordenfelt v The Maxim Nordenfelt Guns and Ammunition Company Ltd [1894] AC 535). Restraint limited to particular stands only makes the identification of a legitimate purpose even more elusive. As I have already said, the real, as well as the apparent effect of the agreement of indefinite duration is to stifle competition. So much is clear from the stated purpose of the agreement, namely to give the appearance of separate businesses, not so obviously competing one with the other.

As a result of my findings, the question of injunctive relief does not arise. However, even if I am wrong about the restraint question, I would have great difficulty in granting an injunction restraining the defendants from competing with the plaintiff in respect of the sale and display of Kenyan flowers on a permanent basis, partly due to the inability on the part of the Court, effectively to supervise the arrangements in futuro (see Doherty v Allman (1878) 3 App Cas 709 at 719-720 (Lord Cairns) and the criticism of Lord Cairns’ decision in Dalgety Wine Estates Pty Ltd v Rizzon (1979) 141 CLR 552 at 573-574 (Mason J) (on the exercise of discretion); J C Williamson Ltd v Lukey (1931) 45 CLR 282 at 299-300 (Dixon J) (on the question of court supervision)). Therefore, I would not have exercised my discretion in granting the injunction sought by the plaintiff, even though the quantification of damages (if any) may have been a difficult exercise in this case. I was not asked to consider granting an injunction for a shorter period.

In conclusion, I am satisfied the parties intended objectively to enter legally binding arrangements. I am not satisfied there has been any repudiation or abandonment of their contract. However, I am satisfied that the restraint was unreasonable at the time they entered it and for the reasons stated is an unenforceable restraint of trade. It is plainly anti-competitive and the plaintiff has not established that it is reasonable to protect any of its own, let alone the defendants’, legitimate interests. There may have been breaches on both sides, which the evidence neither permits me to determine with certainty or I suspect for anyone to quantify without further expenditure. However, in all the circumstances, it follows that the plaintiff has failed in its case and I would refuse any injunctive relief.

I invite the parties to bring in short minutes reflecting my reasons and would hear the parties further on the question of costs