FEDERAL COURT OF AUSTRALIA DB Marketing Solutions Pty Ltd (formerly known as Auto Xtreme Electronics Pty Ltd) v Cause (No 2) [2014] FCA 1429 Citation: DB Marketing Solutions Pty Ltd (formerly known as Auto Xtreme Electronics Pty Ltd) v Cause (No 2) [2014] FCA 1429 Parties: DB MARKETING SOLUTIONS PTY LTD (FORMERLY KNOWN AS AUTO XTREME ELECTRONICS PTY LTD) (ACN 105 423 014), WORLDMARK GROUP HOLDINGS PTY LTD (ACN 144 505 199) and MOTOR ONE GROUP PTY LTD ACN 097 188 219 v TRENT DAVID CAUSE, ASHLEY GRANT CAUSE and ON HIGHWAY ELECTRONICS (A PARTNERSHIP) (ABN 67 918 445 405) File number: QUD 508 of 2014 Judge: LOGAN J Date of judgment: 9 December 2014 Catchwords: CORPORATIONS – interlocutory application – whether there is a cause for dissolution or variation of injunctive orders – whether evidence not previously before the Court before primary judgment warrants dissolution or variation of interlocutory injunction Legislation: Corporations Act 2001 (Cth) ss 182, 183 Cases cited: Austen & Butta Ltd v Shell Australia Ltd (1992) 10 ACSR 556 cited P Dawson Nominees Pty Ltd v Australian Securities and Investments Commission (No 2) (2009) 255 ALR 466 followed Date of hearing: 9 December 2014 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 32 Counsel for the Applicants: Mr NM Cooke Solicitor for the Applicants: Hunt & Hunt Lawyers Solicitor for the Respondents: Snowton Saje Lawyers IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 508 of 2014 BETWEEN: DB MARKETING SOLUTIONS PTY LTD (FORMERLY KNOWN AS AUTO XTREME ELECTRONICS PTY LTD) (ACN 105 423 014) First Applicant WORLDMARK GROUP HOLDINGS PTY LTD (ACN 144 505 199) Second Applicant MOTOR ONE GROUP PTY LTD ACN 097 188 219 Third Applicant AND: TRENT DAVID CAUSE First Respondent ASHLEY GRANT CAUSE Second Respondent ON HIGHWAY ELECTRONICS (A PARTNERSHIP) (ABN 67 918 445 405) Third Respondent JUDGE: LOGAN J DATE OF ORDER: 9 DECEMBER 2014 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The orders made by the Court on 22 September 2014 are varied such that the restraints specified in paragraph 1 to 3 inclusive thereof expire on 19 January 2015. 2. Costs be costs in the cause. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 508 of 2014 BETWEEN: DB MARKETING SOLUTIONS PTY LTD (FORMERLY KNOWN AS AUTO XTREME ELECTRONICS PTY LTD) (ACN 105 423 014) First Applicant WORLDMARK GROUP HOLDINGS PTY LTD (ACN 144 505 199) Second Applicant MOTOR ONE GROUP PTY LTD ACN 097 188 219 Third Applicant AND: TRENT DAVID CAUSE First Respondent ASHLEY GRANT CAUSE Second Respondent ON HIGHWAY ELECTRONICS (A PARTNERSHIP) (ABN 67 918 445 405) Third Respondent JUDGE: LOGAN J DATE: 9 DECEMBER 2014 PLACE: BRISBANE REASONS FOR JUDGMENT 1 Upon an interlocutory application filed on 11 September 2014 and heard on 16 September 2014, the Court (Collier J) on 22 September 2014 made orders at the behest of the then applicants, DB Marketing Solutions Pty Ltd (DB Marketing) as first applicant and Worldmark Group Holdings Pty Ltd (Worldmark Group) as second applicant against the first-named respondent Mr Trent David Cause in these terms: SUBJECT TO THE USUAL UNDERTAKINGS AS TO DAMAGES THE COURT ORDERS THAT PENDING FURTHER ORDER OF THIS COURT, MR TRENT CAUSE BE RESTRAINED FROM: 1. Any activity involving or related to the selling, installation, servicing and the maintaining of electronic equipment in trucks and vehicles within Australia. 2. Directly or indirectly conducting any business which is similar to or competes with the applicants' business or any part of the applicants' business within Australia. 3. Any activities involving or related to the advertising of or the selling, installation, servicing and the maintaining of electronic equipment in trucks and vehicles within Australia. 2 In making those orders the Court refused an application which had been made on behalf of the respondents, namely, Mr Trent Cause, Mr Ashley Grant Cause (the second respondent) and a firm in which Mr Trent Cause and Mr Ashley Cause were partners, On Highway Electronics (the third respondent) for an adjournment of the hearing of the application for interlocutory injunctive relief. The Court file discloses that a notice of solicitors acting for the respondents was filed on 15 September 2014. 3 At the time, the bases of the then applicants' claim against the respondents were as follows: alleged contraventions of their employment contracts with the applicants; alleged contraventions of a shareholder agreement and related deed of adherence and variation; alleged contraventions of s 182 (1) and s 183(2) of the Corporations Act 2001 (Cth) (Corporations Act); and alleged contraventions by Messrs Trent and Ashley Cause respectively of their fiduciary duties to the applicants. The relief sought by way of final relief was permanent injunctions, an account of profits or, alternatively, damages for breach of contract, breach of the aforementioned provisions of the Corporations Act and, further or alternatively, breach of alleged fiduciary duties. 4 The background circumstances as then disclosed on the evidence are described at paragraph 5 of the reasons for judgment published on 22 September 2014. I not repeat what is there stated. 5 Mr Trent Cause has applied for the dissolution of the interlocutory injunction or, as became apparent in the course of submissions today, at least its variation. It was only as against Mr Trent Cause that interlocutory injunction relief went. 6 It might be noted that it is a feature of the terms of the order as made that the order does not run as so often an interlocutory injunction does by formal prescription, until the hearing and determination of the proceeding or further earlier order. Rather, the form of the relief granted runs until further order of the Court. At least on its face, that order has the potential to run even after the determination of the proceeding. One might expect, of course, that there would be attention given to the form of any continuance of the order beyond the determination of the proceeding at some stage before the determination of the proceeding. 7 There was also originally for today an application on the part of the present applicants for an order that they have judgment in default of the filing of a defence. That application was not pressed, only the further part of the application that directions be given for the further conduct of the proceeding. 8 It is not necessary to dwell upon the abandonment of that part of the applicants' application for judgment in default of the filing of a defence, only to indicate that, having regard to the course of proceedings before the docket judge on 19 November 2014, I can well see why, upon reflection, judgment in default was not pressed and, with respect, sensibly not pressed. 9 The substantive question then for today is whether or not there should be either dissolution or at least some variation of the interlocutory injunction granted on 22 September 2014? 10 As to that, there are some well-settled principles which are relevant. Dissolution or variation is a matter for discretion but that discretion requires cause. It is not by any means an opportunity just to revisit, on the material before the judge who granted the interlocutory injunction, whether or not that interlocutory injunction should have been ordered. In other words, it would be quite wrong to view today's proceeding as in the nature of an appeal or a rehearing of any sort. It is not. In fairness, neither party approached the question of whether there should be dissolution or variation on that basis. 11 The following considerations derived from the judgment of Goldberg J in P Dawson Nominees Pty Ltd v Australian Securities and Investments Commission (No 2) (2009) 255 ALR 466 at [49] are relevant: (a) there is new material or new evidence which was not available, or at least not reasonably available to seeking dissolution or variation at the time when the orders were made; (b) has there been some material change of circumstances since the time the interlocutory orders were made; (c) are there, in any event, exceptional circumstances which warrant re-consideration of the matter; and (d) does the justice of the matter require that there be a revisiting of the interlocutory order. 12 In another case, Austen & Butta Ltd v Shell Australia Ltd (1992) 10 ACSR 556, Brownie J put the question in relation to whether an interlocutory injunction might be varied in a like way by stating that there ought to be some significant change of circumstances or new facts shown which rendered the enforcement of the order earlier made unjust. 13 As will be apparent, the bases upon which an interlocutory injunction might be dissolved or varied are not closed but none of those bases entail simply revisiting the material which was before the court at the time the interlocutory order was made. It is no part of a judge's role to order variation or dissolution merely on the basis that that particular judge might have come to a different view to the judge who granted the interlocutory injunction. 14 Approaching the matter in this way, what, if anything, is new? 15 Mr Trent Cause points to a number of developments. He highlights that, since the interlocutory injunction was granted, there has been a joinder of another applicant party, namely, the third applicant, Motor One Group Pty Ltd (Motor One). Further, Mr Trent Cause highlights that, having regard to the terms of the statement of claim which was filed on 6 November 2014 and to the application for amendment, it is apparent that Motor One always ought to have been an applicant. 16 Mr Trent Cause does not, though, rest his claim for dissolution or variation wholly upon the addition of Motor One as an applicant party. He also relies upon evidence which he has given in an affidavit filed on 19 November 2014 concerning his shareholding and a related cessation of employment by him in November 2013. In theory, the description which Mr Trent Cause gives at para 54 through to and including para 78 of that affidavit was evidence which might have been placed before the Court on 16 September 2014. That is because the events related there occurred before that date. Nonetheless, the time for the respondents to meet the application for interlocutory injunctive relief was very compressed indeed. I am satisfied that it was not reasonably possible for the degree of detail found in Mr Trent Cause's affidavit filed on 19 November 2014 to have been placed before the Court on 16 September 2014. 17 To put in context the relevance and importance, for present purposes, of the evidence which Mr Trent Cause gives in relation to his shareholding, it is necessary to give further detail in relation to one of the contractual bases for the cause of action of the applicants. That is found in clause 17 of a shareholder agreement made in June 2010. That clause is directed to the subject of, materially, non-competition, with provision in clause 17.1 for restrictions which run "prior and for the period ending 12 months after the reference date". The reference date is defined in the shareholder agreement, clause 1.1, to be, in respect of another shareholder or a manager, the later of that other shareholder or manager ceasing to: (a) hold an interest in any share, (b) be a party to a service agreement; and (c) be an employee of any group entity. 18 The restraint found in clause 17.1 runs in respect of competition soliciting, accepting business from a customer or client and inducing or attempting to induce any employee or consultant to terminate his or her employment or consultancy with any member of the company group. 19 Mr Trent Cause was not a party to that shareholder agreement. He was, though, a party to a deed of adherence and variation which was made on 31 December 2010 with the parties to the shareholder agreement to which I have referred. Mr Trent Cause is described in the deed of adherence and variation as a management shareholder. The recital in that deed of adherence and variation (recital B) records that he has subscribed for ordinary shares in the capital of the company, the company being Worldmark Group Holdings Proprietary Limited. Materially, then, by clause 2 of the deed of adherence and variation, it is provided that each of the parties to the deed agree that: Upon the issue of ordinary shares to the management shareholder the management shareholder will immediately become a party to and agree to observe, perform and be bound by all the terms of the shareholders agreement as if the management shareholder was a party in the shareholders agreement as a shareholder and only as a shareholder. 20 Those two agreements were in evidence before the court on 16 September 2014. Also in evidence was an extract from Worldmark Group Holdings share register as at 18 June 2014. That extract disclosed that Mr Trent Cause had received an allotment of 32,265 A class fully paid shares in the company on 1 August 2011 and that he remained the holder of shares of that class. It also disclosed that he had received, by allotment or transfer, a number of fully paid ordinary shares in Worldmark Group Holdings, but that the entirety of his holding of ordinary shares in that company had ceased on 20 January 2014. 21 Against that background Mr Trent Cause's description of events on and from mid-2013 in respect of his shareholding, both ordinary and A class, in that company becomes material. He was at the time undergoing property settlement proceedings with his then wife. He had also formed a relationship with another employee of the applicants' group of companies, a Ms Vanessa David. The long and the short of it is that though he had, at mid-2013, a desire to retain at least some shareholding in that company, property settlement pressures dictated otherwise. He spoke with Mr Stuart Davies of the company on that subject. These discussions occurred both in the middle of the year and then continued thereafter, up to and including mid-November 2013. 22 One proposal which came to pass as to 50,000 ordinary shares entailed Ms David's funding of a transfer in of 50,000 ordinary shares on 22 August 2013. As I have noted, all of those ordinary shares have since been acquired either by the company or a related party. What Mr Trent Cause further states at paragraph 68 is this: Around mid-November, prior to my departure Mr Davies called me and said he owed me a huge apology as he had just met with the party referred to as MCo in the shareholder agreement [MCo is LVS Holdings SDN BHD, a company incorporate in Malaysia] who stated that I was not permitted to hold any shares if I was no longer an employee within the Applicants' group of companies. I understood this to be a notice from MCo under clause 11.1 of the shareholder agreement. Mr Davies said to me that the second applicant would buy the ordinary shares in my name from me at $2.25 and pay me out my allocated amount class A shares when he completes the calculation before Christmas 2013. 23 The acquisition of all of the ordinary shares occurred, but for some reason which remains unknown there has not yet been an acquisition of the class A shares nor has there been an affidavit filed on behalf of the applicants to address what is said in paragraph 68 of Mr Trent Cause's affidavit. 24 On one view of the matter, it is a convenience, to use a neutral term, for the applicants to have Mr Trent Cause still recorded at least as an A class shareholder, having regard to the terms of clause 17. There is, as disclosed in this new material, at least an interrogative note as to whether had there been performance of the agreement to which Mr Trent Cause refers in paragraph 68, there would be anything on and from 20 January 2015 by reference to which a restraint might be grounded in the shareholder agreement, read with the deed of adherence and variation. 25 Apart from the Corporations Act cause of action, there was also a cause of action grounded on an employment agreement. Assuming for the moment, as it would seem the judge did on 22 September, that that agreement in some way became binding or remained binding upon Mr Trent Cause upon a transfer of the business in 2013, it, too, by way of restraint, assuming the restraint is valid, could have no longer reach than one year after cessation. That time has now expired. That would leave in place only the Corporations Act based cause of action and the cause of action based on fiduciary duty as the ongoing foundation to support interlocutory injunctive relief. They have no particular temporal limitation to them. 26 The present applicants have caused various inquiries and investigations to be undertaken in relation to what they apprehended was an ongoing operation of the partnership business conducted by Mr Trent Cause and Mr Ashley Cause under the name On Highway Electronics. It emerged in evidence today that, last month, Mr Trent Cause and Mr Ashley Cause had taken steps to dissolve that partnership. That, too, is a fact which was not before the court on 16 December 2014. There is, though, evidence which discloses that Mr Ashley Cause has been actively undertaking work in the nature of the servicing and maintaining of electronic equipment in vehicles. That evidence does not disclose that, following the dissolution of the partnership, Mr Trent Cause has been undertaking such activity. Mr Ashley Cause is not bound by the terms of the interlocutory injunction. 27 Had the court had the benefit of the greater detail concerning the apparent arrangement for the disposal of all of Mr Trent Cause's shares in the company, a very real question would have emerged as to whether there was a serious question to be tried in respect of any operative effect after, at the latest, 20 January 2015 in respect of the clause 17 restraint. There is, of course, no defence as yet to the statement of claim so there is a degree of conjecture entailed as to the basis of defence but there is, nonetheless, disclosed in paragraphs 68 in particular, occasion for thinking that there may be a basis upon which Mr Trent Cause might assert that a company was not entitled to rely upon the restraint at least after 20 January 2015. 28 Taking the new material into account, my view is that occasion has not been shown for the dissolution of the interlocutory injunction but there is occasion shown for its variation such that it expire on 19 January 2015 or further earlier order. 29 I have considered, also, varying the interlocutory injunction so as to make explicit that it would, alternatively, run until the hearing and determination of the proceeding. However, given that the present time of year and that there is no defence as yet filed, and, further, that there may well be a need for pre-trial discovery, at least in a limited way and, yet further, that 19 January falls within what this court terms the "summer non-sitting period", it is, in a practical sense, unnecessary to add the usual alternative qualification of "until the hearing and determination of this matter". That is because there is no chance whatsoever of the case being heard and determined before 19 January 2015. 30 Mr Trent Cause and, for that matter, the other respondents, chose not, on 16 September 2014, or today, to proffer any particular undertakings that might go to address the balance of convenience. I take into account the absence of such undertakings but nonetheless am satisfied, having regard to the new material to which I have referred, that there is occasion in terms of the principles in the cases to which I have referred to vary the interlocutory injunctions granted on 22 September. 31 It might be thought that the territorial reach of the interlocutory injunction was large, but it was no part of submissions today that it should be narrowed. Further, there is no new material which would provide occasion for such a variation, nor do I apprehend that any particular injustice would be rendered by retaining that until 19 January 2015 which is, after all, only a relatively short time in advance. 32 For these reasons, then, the interlocutory injunction order made on 22 September 2014 is varied such that the restraints specified in paragraphs 1, 2 and 3 expire on 19 January 2015. In my view, damages or an account would provide a sufficient and adequate remedy in respect of any claim that the applicants might have in respect of any loss which might occur after that date. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan. Associate: Dated: 23 December 2014