DXC Eclipse Pty Ltd v Wildsmith (No 5) [2022] NSWSC 1710

Supreme Court New South Wales

Medium Neutral Citation: DXC Eclipse Pty Ltd v Wildsmith (No 5) [2022] NSWSC 1710 Hearing dates: On the papers; submissions ending 18 November 2022 Date of orders: 16 December 2022 Decision date: 16 December 2022 Jurisdiction: Equity - Expedition List Before: Parker J Decision: See [33] Catchwords: COSTS – indemnity costs – restraint of trade dispute – offer of compromise by defendants before commencement of proceedings – plaintiff's claim dismissed – whether failure to accept offer unreasonable – claims failed on evidence at the hearing – undertakings given prior to the hearing – order for indemnity costs refused Cases Cited: DXC Eclipse Pty Ltd v Wildsmith [2022] NSWSC 512 DXC Eclipse Pty Ltd v Wildsmith (No 2) [2022] NSWSC 1330 Category: Costs Parties: DXC Eclipse Pty Limited (Plaintiff) Martin Wildsmith (First Defendant) On-Key Consulting Pty Limited (Second Defendant) Representation: Counsel: A Spies (Plaintiff) D Mahendra (Defendants)

Solicitors: Bird & Bird (Plaintiff) Maurice Blackburn Lawyers (Defendants) File Number(s): 2022/91079 Publication restriction: Nil

Judgment 1. These proceedings were the subject of an expedited hearing before me in August. On 30 September, I delivered my judgment: DXC Eclipse Pty Ltd v Wildsmith (No 2) [2022] NSWSC 1330. On 10 October, I made orders disposing of the plaintiff's claims. 2. This judgment deals with the costs of the proceedings. It assumes familiarity with my September judgment, paragraphs of which are referred to in this judgment as "J2" (the September judgment was the second published judgment in the proceedings; there was an earlier interlocutory judgment by Slattery J in May: DXC Eclipse Pty Ltd v Wildsmith [2022] NSWSC 512). 3. The background to the proceedings is set out at J2 [2]-[21]. For present purposes, it may be summarised as follows. 4. The plaintiff in the proceedings is DXC Eclipse Pty Limited ("DXC Eclipse"). DXC Eclipse is a software reseller. Its business involves the supply and installation of "software solutions" for business customers. DXC Eclipse is part of a multi-national group of companies ("DXC Group") and is a subsidiary of DXC Technology Australia Holdings Pty Limited ("DXC Holdings"). 5. The proceedings arose out of the acquisition by DXC Eclipse of another software solutions business in April 2018. That business was conducted through a unit trust structure by a corporate trustee under the name "Sable37". DXC Eclipse acquired the business by purchasing the shares in the corporate trustee and the units in the unit trust under an agreement referred to as the "Securities Purchase Agreement". 6. The defendants are Mr Martin Wildsmith, the first defendant, and On-Key Consulting Pty Limited ("OKC"), the second defendant. They were two of the vendors under the Securities Purchase Agreement. Mr Wildsmith is the owner and sole controller of OKC. As in my September judgment, I will, for simplicity, refer to Mr Wildsmith as if he were the sole defendant and will only refer to OKC where it is necessary to do so. 7. The Securities Purchase Agreement contained restraint covenants given by the vendors lasting for seven years (that is, until April 2025). The restraints were expressed to be given in order to protect the business of Sable37 in DXC Eclipse's hands, which was defined as "the Business". Relevantly, there were restraints against: 1. carrying on or being interested in a "Competing Business", defined as a business "competitive with" the Business (cl 16.1(c); J2 [110]); 2. soliciting customers or former customers, or suppliers or former suppliers, of the Business (cl 16.3(b)(a) and (b); J2 [176]); and 3. soliciting employees of "any Related Body Corporate" of DXC Holdings (cl 16.3(b)(d); J2 [184]). 1. Prior to the acquisition, Sable37's business involved the supply and installation of software solutions based on business software products of Microsoft Corporation called "Finance and Operations" ("F&O") and "Customer Engagement" ("CE"). DXC Eclipse supplied and installed software solutions based on another Microsoft business software product called "NAV". Following the acquisition, DXC Eclipse has continued both businesses. Before the acquisition, Microsoft had announced plans for both products to develop into "cloud-based solutions" (see J2 [48]-[53]). The new version of NAV is known as "Business Central" ("BC"). 2. One of the terms of the Securities Purchase Agreement was that Mr Wildsmith was to accept employment with DXC Eclipse to manage the two businesses. He did so, served for the period required in the Agreement, and later left. 3. In December last year, Mr Wildsmith let it be known that he wanted to get back into the software solutions industry. He incorporated a new company called Will Thirty Three Pty Limited ("Will Thirty Three") for this purpose. Mr Wildsmith's plan was that Will Thirty Three would sell software solutions based on BC. In February this year, it was announced that Mr Wildsmith would be appointed to the board of another software solutions business, Sentient Dynamics Pty Limited ("Sentient"). That company specialises in the supply of solutions based on yet another Microsoft product called "Power Platform". 4. DXC Eclipse commenced the proceedings in late March this year. In April, prior to the hearing, Mr Wildsmith gave undertakings to DXC Eclipse. Some were unconditional undertakings, accepted by DXC Eclipse, that would apply regardless of the outcome of the proceedings, not to solicit, before April 2025, any customers or employees of Sable37 as at the date of the purchase (J2 [22]). Mr Wildsmith also gave other interlocutory undertakings to DXC Eclipse. 5. The main debate between the parties at the trial concerned the operation of the non-competition covenant. It was contended for DXC Eclipse that the restraint covenant covered Mr Wildsmith's involvement in both Will Thirty Three and Sentient. DXC Eclipse sought an injunction, lasting until April 2025, accordingly. Mr Wildsmith disputed that the covenant applied to his involvement with Will Thirty Three or Sentient. He also disputed the reasonableness of the restraint, if the covenant did apply. 6. There were two further claims for relief made by DXC Eclipse at the trial. First, DXC Eclipse sought an injunction based on the non-solicitation covenant, in its application to suppliers, against Mr Wildsmith being involved in dealings between Will Thirty Three and Microsoft (J2 [24]). Mr Wildsmith disputed the reasonableness of the restraint. Second, DXC Eclipse sought an injunction based on the employee solicitation covenant against Mr Wildsmith soliciting any current employees of Sable37, and any employees of its parent company and that parent's related companies (J2 [25], [186]). The application for this injunction arose from a post on Mr Wildsmith's LinkedIn account (J2 [187]). Mr Wildsmith disputed the reasonableness of the restraint. 7. I concluded that the non-competition restraint did not apply to Mr Wildsmith's involvement in Will Thirty Three or Sentient, and the restraint was in any event unreasonable. The injunction sought by DXC Eclipse against Mr Wildsmith from being involved in dealings with Microsoft was unreasonable (J2 [183]). The employee solicitation injunction sought by DXC Eclipse was also unreasonable (J2 [189]). 8. DXC Eclipse's application for injunctions (which has been the subject of the expedited hearing) was dismissed. Strictly speaking, my findings were confined to the future enforcement of the restraints (see J2 [20]). But DXC Eclipse did not pursue any claim for damages for breach of the restraints in the period prior to judgment. Accordingly, its claim was dismissed.