Supreme Court New South Wales Medium Neutral Citation: Hanshaw v Stampin' Up! Australia Pty Ltd [2012] NSWSC 396 Hearing dates: Thursday, 19 April 2012 Decision date: 19 April 2012 Jurisdiction: Equity Division - Duty List Before: White J Decision: Refer to para [39] of judgment. Catchwords: PRACTICE AND PROCEDURE - interlocutory issues - injunctions - application to restrain defendant from acting on purported termination of agreement - no serious question to be tried that defendant not entitled to give notice of termination under agreement between parties - interlocutory injunction to restrain plaintiff from holding out she has a current agreement with defendant and using defendant's intellectual property Legislation Cited: Bankruptcy Act 1966 (Cth) Category: Interlocutory applications Parties: Tracey May Hanshaw (Plaintiff) Stampin' Up! Australia Pty Ltd (Defendant) Representation: Counsel: Plaintiff in person S B Docker (Defendant) Solicitors: N/a (Plaintiff) Thomsons Lawyers (Defendant) File Number(s): 2012/96838 Judgment 1HIS HONOUR: I am dealing with two applications for interlocutory injunctions. Both applications arise from the appointment of the plaintiff, Ms Tracey Hanshaw, as a "demonstrator" of the defendant. The defendant is a member of a group of companies which designs and manufactures what have been described as an exclusive line of decorative rubber stamp sets. It also offers home décor, craft projects, greeting cards and scrapbooks. These products are known as Stampin' Up products. They are sold through a network of independent sellers called demonstrators. 2Ms Hanshaw entered into a Demonstrator Agreement with the defendant in 2009. According to the defendant's evidence, the agreement is dated 1 October 2009. The agreement is unsigned, but it is common ground that the agreement was entered into. The defendant says that terms were accepted by Ms Hanshaw online. 3In the agreement, the defendant was called "the Company". The plaintiff was referred to as "I" or "me". The agreement contained clauses including the following: "10. Use of company Intellectual Property. I understand that the Company's trademarks, service marks, trade names, trade dress, patents, trade secrets, and copyrighted materials (collectively the 'Intellectual Property') belong solely to the Company, and any use of the Intellectual Property must be in strict compliance with the Company's policies, which may be amended by the Company from time to time. 11. Other Proprietary Rights. I agree that the Company has the exclusive proprietary interest in information developed by or for the Company, such as, but not limited to, Demonstrator lists, downline and upline lists, Company-generated customer lists, customer profile data, credit data, manufacturing procedures, Product development information, Product purchase information, consultant and advisor lists, all operating, financial, and planned marketing materials, and all other information not provided by the Company to the public, and that such information is confidential (the 'Confidential Information'). I agree not to use or disclose such Confidential Information to any third party except in strict accordance with this Agreement. I further agree that any Confidential Information given to me is based on my role as a Demonstrator and must be used solely in my business relationship with the Company. During the term of this Agreement and thereafter, I will not sell or use Confidential Information to sell products or services other than the Company's Products and services, or in connection with any other business, or for any other reason except in compliance with this Agreement. Upon termination or nonrenewal of this Agreement, I will immediately cease all use of the Company's Intellectual Property and Confidential Information, and upon request by the Company, I will return all such materials in my possession or control to the Company. ... 18. Term. This Agreement shall be in effect until the forthcoming March 31. It shall renew annually thereafter so long as: (a) I am in compliance with this Agreement; (b) this Agreement has not been terminated under Article 19; (c) I have not informed the Company and the Company has not informed me of intent not to renew; (d) the Company has not notified me that I must execute a new contract. 19. Termination. Subject to my rights to a hearing and appeal when termination is made for disciplinary purposes, either I or the Company may terminate this Agreement: (a) at any time without cause, by giving the other party 30 days' written notice of such termination; or (b) at any time, upon written notice for a breach of or failure to comply with any provision in this Agreement, the Demonstrator Manual, or amendments thereto. Upon termination, or upon a failure to renew this Agreement, all rights to receive payments, promotions, prizes, incentives, bonuses, and other advantages previously earned or available to me as a Demonstrator shall terminate. Stampin' Up! will, within 30 days from the date the termination becomes effective, issue commissions and overrides earned while I was active." 4On 23 February 2012, the defendant purportedly gave notice pursuant to clause 19 that the agreement was to terminate on 31 March 2012. 5On 27 March 2012, Ms Hanshaw instituted these proceedings. The only final relief sought in the statement of claim is a sum of $5 million, apparently as damages for breach of the Demonstrator Agreement. However, she also seeks an injunction, including an interim injunction, to restrain the defendant from acting on the purported termination of the agreement. 6The relief Ms Hanshaw seeks today is an order, that until further order, and pending the determination by the Australian Competition and Consumer Commission, or the Consumer, Trader and Tenancy Tribunal, as to whether the defendant is engaged in multilevel pyramid selling, the defendant permit her to: "... CONTINUE IN MY FULL CAPACITY and ALL ASPECTS AS AN INDEPENDENT DEMONSTRATOR INCLUDING BUT LIMITED TO; Selling, Ordering, New demonstrator agreements, earning and receiving: Commissions, Performance Bonuses, Incentives, Awards, Recognition, Promotions, Attending Convention and Regional events, All training and Management Events, access to the Demonstrator Website, DBWS, Stampin Connection and all training Webinars." 7In her statement of claim, Ms Hanshaw pleads the giving of the notice of termination. She also pleads that at no time had the defendant indicated to her over the preceding three years that this could or would occur, that when she signed the agreement there was no expiration date, that she has invested over $50,000 in building the business to date, that she signed with the view of a long-term business opportunity and was strongly encouraged by the defendant to do so, and that the defendant, over the past two years, has severely hampered her ability to build upon the business and has altered or manipulated figures and earning of commission, bonuses and awards resulting in her exclusion from such commissions, awards and incentives. 8Ms Hanshaw also pleads that she and the defendant entered into a deed of settlement, the effect of which is, so she contends, that the Demonstrator Agreement can only be terminated for breach of the Demonstrator Manual. She also alleges that the defendant has not terminated any of the 6,000 other Australian demonstrator's independent agreements and has acted illegally and in a discriminative manner against her. 9The defendant seeks the following relief: "6. Upon the cross claimant giving the usual undertaking as to damages, an order restraining the cross defendant by herself, her servants and agents until further order from: a) representing herself to be a demonstrator, manager or otherwise associated with the cross-claimant's business to any person or the public; b) using the cross-claimant's trademarks, service marks, trade names, trade dress, patents, trade secrets and copyrighted materials; and c) using the cross-claimant's demonstrator lists, downline and upline lists, customer lists generated by the defendant, credit data, manufacturing procedures, product development information, product purchase information, consultant and adviser lists and marketing materials." 10The first question is, whether there is a serious question to be tried that Ms Hanshaw is entitled to a final injunction to restrain the defendant from giving effect to the purported termination of the Demonstrator Agreement. If there is such a serious question then the question is, whether the balance of convenience favours the grant of an interlocutory injunction pending the final determination of these proceedings. Relevant to that question is whether the plaintiff can provide a worthwhile undertaking as to damages. 11Three matters are raised by the defendant on the question whether there is a serious question to be tried. The first is, that Ms Hanshaw is an undischarged bankrupt. She was made bankrupt on 17 May 2010. Section 58(1) of the Bankruptcy Act 1966 (Cth) provides: "58 Vesting of property upon bankruptcy-general rule (1) Subject to this Act, where a debtor becomes a bankrupt: (a) the property of the bankrupt, not being after acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee; and (b) after acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee." 12The expression "property" includes personal property of every description. It includes a chose in action arising under a contract. The defendant contends that the cause of action the plaintiff seeks to propound is vested in her trustee in bankruptcy and she has no standing to the relief sought. 13The second matter raised by the defendant is that there is no serious question to be tried that it was not entitled to give notice of termination under clause 19(a) of the Demonstrator Agreement. 14An agreement was made in May 2011 between the parties that settled a dispute then pending in the Consumer, Trader and Tenancy Tribunal in relation to Ms Hanshaw's compliance with the Demonstrator Manual and the defendant's recognition, or failure to recognise, her entitlement to certain awards, incentives, recognitions or other entitlements. Clause 2.2 of the settlement agreement provides: "2.2 TH [Ms Hanshaw] acknowledges that any breach by TH of any of the policies contained in the Demonstrator Manual may result, in SU's [the defendant's] absolute discretion, in the immediate termination of: (a) TH's role as a Demonstrator; and (b) the Independent Demonstrator Agreement between SU and TH dated 1 October 2009 upon giving TH 30 days['] written notice." 15The defendant contends that clause 2.2 does not preclude it from giving 30 days' written notice of termination of the Demonstrator Agreement without cause pursuant to clause 19(a) of that agreement. 16The third issue raised on the question whether there is a serious question to be tried is, that on 30 March 2012 the defendant gave notice, pursuant to clause 18(c), of its intention not to renew the Demonstrator Agreement, and that accordingly the agreement was to expire on and no longer be in effect from 31 March 2012. 17In correspondence in reply to that notice Ms Hanshaw said that it was ineffective because 30 days' notice was required. She also says that the giving of the notice was in breach of an undertaking given to the Court by the defendant on 29 March 2012. 18It is convenient to deal with the second and third matters first. Clause 2.2 of the settlement agreement of May 2011 does not expressly state that the defendant could only give 30 days' written notice of termination of the Demonstrator Agreement if Ms Hanshaw was in breach of any of the policies contained in the Demonstrator Manual. 19Ms Hanshaw argues that that is to be implied from the words used, and that was the intention of the parties when the settlement agreement was entered into. The parties' subjective intentions as to what they expected to be achieved by the settlement agreement are irrelevant to its proper construction. The defendant's evidence is that it was not its intention that, by entering into the settlement agreement, the defendant would be altering its right to terminate or not to renew the Demonstrator Agreement. 20There is nothing in the recitals to that agreement that supports the construction of clause 2.2 for which Ms Hanshaw contends. I agree with the submission of Mr Docker, counsel for the defendant, that Ms Hanshaw's acknowledgement that a breach of the Demonstrator Manual "may result in SU's [the defendant's] absolute discretion, in the immediate termination " of the agreement on giving 30 days' written notice, is not a restriction on any other way in which the defendant might terminate the agreement. 21The clause is an acknowledgement on the part of Ms Hanshaw, not a promise by the defendant, nor a limitation on the defendant's rights. 22It is not objectively probable that the defendant should have limited its right to terminate the Demonstrator Agreement to a case of breach by Ms Hanshaw of any of the policies contained in the Demonstrator Manual. If that were the only circumstance in which the defendant was entitled to terminate the Demonstrator Agreement, it would mean that the defendant could not do so in the case of a breach of the Demonstrator Agreement, unless that were also a breach of a policy contained in the Demonstrator Manual. Moreover, it would mean that notwithstanding the seriousness of any breach of the Demonstrator Agreement, the defendant could not terminate, except on 30 days' notice. 23There is nothing in the settlement agreement that would explain why the defendant might give up such rights. I do not think there is a serious question to be tried that the settlement agreement prevented the defendant from giving 30 days' notice of termination pursuant to clause 19(a) of the Demonstrator Agreement. 24Under clause 19 that notice could be given without cause. It is therefore irrelevant that the plaintiff is not said to be in breach of the agreement. It is also irrelevant that the defendant has not terminated the agreements of other demonstrators. No evidence is given that would support a claim that the defendant was estopped from exercising its right under clause 19(a). 25Nor is there any serious ground for challenging the defendant's notice of 30 March 2012 as being ineffective to bring the Demonstrator Agreement to an end on 31 March in accordance with clause 18(c). 26Contrary to the assertion made by Ms Hanshaw in correspondence, there is no requirement in clause 18(c) that notice of intention not to renew must be of a period of at least 30 days. Nor was the giving of the notice contrary to the undertaking given on 29 March 2012. The undertaking was that the defendant would not take any steps to terminate the Demonstrator Agreement between the plaintiff and it based on the defendant's notice dated 23 February 2012. 27The notice given on 30 March 2012 was not based on the notice of 23 February 2012. The expiry of the agreement pursuant to clause 18(c) arises independently of the defendant's notice dated 23 February 2012. 28Having reached these conclusions, it is unnecessary to decide whether the plaintiff's claim for injunctive relief, that is to say, her claim to seek to enforce the Demonstrator Agreement, is property that is vested her trustee in bankruptcy. Whether the rights of the plaintiff to perform the Demonstrator Agreement are purely personal rights not capable of vesting the trustee in bankruptcy is not entirely clear. If this were the only objection to the plaintiff's claim a question would, in any event, arise as to whether her trustee in bankruptcy should be given the opportunity to consider whether he should be joined as a co-plaintiff so as to seek to enforce the rights she asserts. In the light of the conclusion to which I have come on the other questions, it is unnecessary to pursue this issue. 29Had I come to the view that there was a serious question to be tried that the Demonstrator Agreement was still on foot, the balance of convenience would nonetheless not have favoured the grant of an interlocutory injunction against the defendant. That is so for a number of reasons. The first is that being a bankrupt, the plaintiff cannot proffer a worthwhile undertaking as to damages. The second is that the defendant would, in any event, be entitled to terminate the Demonstrator Agreement by reason of the plaintiff's being in breach of it. Even if the defendant's only right to terminate was for breach of the policies contained in the Demonstrator Manual, the plaintiff is in breach of those policies. The policies include that a demonstrator not represent another retail or wholesale business that sells products in the rubber stamping or scrapbook industries. 30The policies state that the demonstrator must choose between a Stampin' Up! demonstratorship and representation of the business that sells competing products. Since at least earlier this month, Ms Hanshaw has been promoting products of what appears to be a soon-to-be-launched competing business known as "Create and Play Club". Although she now denies it, she stated in an email dated 3 April 2012 that she had signed with the company called "Create and Play" on that day as its first consultant. She stated on the internet on 6 April 2012 that she had already signed five other consultants for that business. She recommended that business' products. 31I understand the plaintiff to say that she is not in breach of the policies referred to in the Demonstrator Manual because the new business has not yet commenced to sell products. However, as I understood her, Ms Hanshaw said that the company is due to start its business at the beginning of May. At least from that time, the defendant would be entitled to give notice of termination, even if its only right to terminate the Demonstrator Agreement was that contained in the settlement deed. 32Ms Hanshaw referred to sections of the Demonstrator Manual that provide for a formal resolution process, including a process of internal appeal, in the defendant's organisation. Two things may be said about that. The first is, as Mr Docker submitted, that Ms Hanshaw has herself eschewed those processes. The processes state that neither party can start Court proceedings, except proceedings seeking interlocutory relief, in respect of a dispute, unless it has first complied with the clause. Ms Hanshaw's proceedings include a claim for $5 million, which is not interlocutory relief. Secondly, the Demonstrator Manual states that nothing in the clause dealing with the appeal processes affects a party's right to terminate the Demonstrator Agreement. 33The Court would not grant an interlocutory injunction where the defendant would in any event be entitled to terminate the agreement in a short time. 34Further, the evidence of the breaches of the Demonstrator Agreement by Ms Hanshaw would be a powerful reason for refusing a final injunction on the grounds that she does not come to equity with clean hands. That is a further reason as to why there is not a serious question to be tried. 35For these reasons, the plaintiff's notice of motion will be dismissed. 36Ms Hanshaw admittedly has in her possession copyright materials of the defendant and other property containing its intellectual property. The circumstances of her arranging to become a consultant of the competing business show that there is a threat, unless restrained, that she may breach clauses 10 or 11 of the Demonstrator Agreement by using the defendant's intellectual property or its confidential information. 37The interlocutory injunction sought by the defendant against Ms Hanshaw would enforce by Court order only that to which she has agreed. 38Mr Docker also applied orally for summary dismissal of the statement of claim on the basis of Ms Hanshaw's bankruptcy. It is possible that the trustee in bankruptcy might wish to intervene as a co-plaintiff. As Ms Hanshaw had not had notice of that application, I declined to deal with that application at today's hearing. If it is to be proceeded with, it will have to be raised by way of notice of motion. 39For these reasons, I make the following orders: 1. Order that the claims for relief in the plaintiff's notice of motion filed on 27 March 2012 be dismissed. 2. Upon the cross-claimant giving the usual undertaking as to damages, order that until further order the cross-defendant by herself, her servants and agents be restrained from: (a) representing herself to be a demonstrator, manager or otherwise associated with the cross-claimant's business to any person or the public; (b) using the cross-claimant's trademarks, service marks, trade names, trade dress, patents, trade secrets and copyright materials; and (c) using the cross-claimant's demonstrator lists, downline and upline lists, customer lists generated by the defendant, credit data, manufacturing procedures, product development information, product purchase information, consultant and adviser lists and marketing materials. 3. Order that the plaintiff pay the defendant's costs of her notice of motion filed on 27 March 2012. 4. Order that the costs of the cross-claimant's application for interlocutory relief be the cross-claimant's costs in the proceedings. 5. Stand the matter over to the Registrar's list on 10 May 2012. 6. The exhibits for today's application may be returned, but are to be retained by the parties and otherwise dealt with in accordance with the practice note. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 26 April 2012