Catalano v Managing Australian Destinations Pty Limited

Federal Court of Australia|2012-06-14|Before: Yates J

The first plaintiff be granted leave pursuant to s 237(2) of the Corporations Act 2001 (Cth) to bring this proceeding on behalf of the third plaintiff. THE COURT NOTES THAT:
The first plaintiff and the third plaintiff each give the usual undertaking as to damages in relation to the interlocutory orders made below. THE COURT ORDERS THAT, SUBJECT TO ANY FURTHER OR OTHER ORDER:
The second, third and fourth defendants, whether by themselves, their servants or agents, deliver up to the third plaintiff at the premises known as 6A Dunlop Road, Hoppers Crossing, Victoria 3029 the shumai machine and associated bag sealing equipment presently located at those premises within 48 hours of written notice to that effect being given by the third plaintiff acting through the first plaintiff, and that the said defendants grant access to the third plaintiff to the said premises to enable it to decommission, dismantle and carry out such other work as may reasonably be necessary to remove the said shumai machine and associated bag sealing equipment from the said premises for relocation to the premises in Victoria of Rethink Group Pty Limited trading as Rethink Party Food.
The third and fourth defendants, whether by themselves, their servants or agents, each be restrained from representing by any means to any person that the third defendant is employed by or that the third or fourth defendants are now associated with or act on behalf of the third plaintiff or in relation to the third plaintiff's products supplied under the brand "Crazy Dragon".
The third and fourth defendants, whether by themselves, their servants or agents, each be restrained from trading, operating, advertising or otherwise promoting any business concerning the production or supply of Asian food products under the name "The New Crazy Dragon" or any name including the words "Crazy Dragon".
The third defendant transfer the mobile telephone number 0405 746 423 to the third plaintiff.
In accordance with the resolution of the directors of the third plaintiff signed on 30 September 2011, the second defendant execute all cheques drawn on the bank account of the third plaintiff that are required for payment of the day-to-day running expenses of the third plaintiff incurred in the normal operation of its business, including for the payment of supplies and wages, within 24 hours of the first plaintiff providing lists of cheques and/or payments required, subject to the second defendant reasonably satisfying himself that such expenses are due and payable by the third plaintiff.

SAM, MAUREEN & NATHAN CATALANO AS TRUSTEES OF THE EQUICAP PTY LIMITED PROVIDENT FUND (ABN 70 739 750 546)

FINE FOOD SOLUTIONZ PTY LIMITED (ABN 83 134 923 005)

AND: MANAGING AUSTRALIAN DESTINATIONS PTY LIMITED (ABN 58 070 373 689)

THE GOURMET DIM SIM COMPANY PTY LIMITED (ACN 156 541 712)

JUDGE: YATES J DATE: 14 JUNE 2012 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 The first plaintiff seeks leave to bring proceedings on behalf of the third plaintiff (the company) in which urgent interlocutory relief is also claimed. If granted, that interlocutory relief would have the effect, until further order, of: (a) preserving equipment for use in the company's business; (b) restraining each of the third and fourth defendants from carrying on activities under the name "The New Crazy Dragon" in competition with the company and from representing that they are associated with the company and its products; (c) requiring the second defendant to sign, as a co-signatory, cheques drawn on the company's bank account in order to pay the day-to-day expenses of the company incurred in the ordinary operation of its business in accordance with a directors' resolution made on 30 September 2011; and (d) facilitating access by the company to its website, which is hosted by the fifth defendant. 2 The company operates a business under the name "Crazy Dragon Gourmet Foods". It supplies restaurants, cafes and hotels, and supermarkets with frozen finger food products. The products include spring rolls, dim sims, shumai, dumplings and gyozas. The products are promoted and supplied under the brand "Crazy Dragon". Woolworths is a major customer of the company. Coles has recently placed a trial order for the company's products and is, potentially, a major customer of the company. 3 The first plaintiff is a director and secretary of the company. He is also the company's general manager. The evidence shows that he has been entrusted with, and undertakes, the day-to-day management of the company's business, which is based in Sydney. The second defendant is also a director and secretary of the company. He resides at Port Douglas in Queensland. The first plaintiff and second defendant are the only directors of the company under arrangements put in place by Heads of Agreement dated 23 November 2010 (the Heads of Agreement). 4 The third defendant was an employee of the company, based in Victoria. Until 30 April 2012 he was employed as the company's Business Development Manager for Victoria, South Australia and Western Australia. On 30 April 2012 his employment with the company was terminated by the first plaintiff in circumstances to which I will refer. He is the second defendant's stepson. 5 The second-named plaintiffs are the first plaintiff, Sam Catalano and Maureen Catalano. They are said to be the trustees of the Equicap Pty Limited Provident Fund who hold 50% (500) of the company's issued shares. However, Sam Catalano is an undischarged bankrupt. It would seem that property in the shares he purports to hold as trustee vested in his trustee in bankruptcy by operation of s 58(1) of the Bankruptcy Act 1966 (Cth). For this reason the second-named plaintiffs, in their capacity as trustees, have refrained from pursuing or joining in any claim for relief in the present application for interlocutory relief. However, the roles that Sam Catalano and Maureen Catalano have played in the conduct of the company's business remain relevant to the events that have given rise to the present application for interlocutory relief. 6 The remaining 50% of the issued shares in the company are held by Kurth Management Pty Limited (as to 300 shares) and the third defendant (as to 200 shares). 7 It is convenient to refer to the first plaintiff, Sam Catalano and Maureen Catalano as the "Catalano interests" and to the first to fourth defendants as the "Kurth/Hepner interests". It is also convenient to refer to the first plaintiff and the company, collectively, as "the plaintiffs".

Background 8 There has been a history of disputes between the Catalano interests and the Kurth/Hepner interests in relation to the direction of the company's business and its management. More recently, from about March 2012, disputes have arisen between them about the following matters, as well as other matters: (a) The incorporation on 28 March 2012 of the fourth defendant by the third defendant, with the third defendant as its sole director, secretary and shareholder, apparently at the instigation, or at least the urgings, of the second defendant. (b) The registration on 29 March 2012 of the business name "The New Crazy Dragon". A Victorian Business Name Extract records the third and fourth defendants as the owners of an extant business operating under that name. The nature of the business is recorded as "Asian food production". (c) The refusal by the third defendant on about 29 March 2012 to permit the relocation of a shumai machine and associated bag sealing equipment from premises at 6A Dunlop Road, Hoppers Crossing, Victoria to the Victorian premises of Rethink Holdings Pty Limited (Rethink), the company's intended and preferred contract manufacturer of "Crazy Dragon" brand shumai products. (d) The negotiation of a lease on or about 29 March 2012 by the third defendant of the Hoppers Crossing premises, where the shumai machine and associated bag sealing equipment are currently located. (e) The use by the third and fourth defendants of the shumai machine and associated bag sealing equipment at the Hoppers Crossing premises to produce orders for shumai products placed with the company by one of its customers (Alpha Flight Services), without accounting to the company for the proceeds of that supply. (f) The fact that the third defendant and the fourth defendant appear to be using, or at least threaten to use, the shumai machine and associated bag sealing equipment to compete directly with the company under the name "The New Crazy Dragon" in relation to the production and supply of shumai products. 9 The first plaintiff's evidence is that, because of the involvement of the third defendant in the conduct summarised above, he terminated the third defendant's employment with the company on 30 April 2012. The second defendant does not accept that the first plaintiff had authority to terminate the third defendant's employment. 10 It is necessary to say something more about the shumai machine and associated bag sealing equipment. This equipment, together with other equipment employed in the company's business (collectively, the Equipment), is said to be leased by the second defendant and his wife (the third defendant's mother) from the Bank of Queensland (BOQ). The Equipment is also the subject of a chattel mortgage in favour of the BOQ. The mortgagors are the first and third defendants. The second defendant and his wife are guarantors under the chattel mortgage. Under the Heads of Agreement, the second defendant and his wife agreed to assign the lease to the company. This has not been formalised. Nevertheless, it would seem that the company has been making regular and timely payments in respect of the lease to the BOQ. The financial records of the company show the Equipment to be assets of the company and there seems to be little doubt on the present state of the evidence that the Equipment has been used for the production of products supplied by the company under its business name, and the brand "Crazy Dragon". 11 The shumai machine and associated bag sealing equipment at the Hoppers Crossing premises were operated by a company called Wonsum Pty Limited (Wonsum). It acted as a contract manufacturer of shumai products for the company. The first plaintiff's evidence is that, because of a variety of problems with Wonsum, he had arranged for the shumai machine and associated bag sealing equipment to be moved from the Hoppers Crossing premises to Rethink's premises at Ascot Vale in Victoria, so that it could take over the manufacture of shumai products for the company, at least in the short term. The question of whether the shumai machine and associated bag sealing equipment should be relocated has been a significant bone of contention between the Catalano interests and the Kurth/Hepner interests. It was the principal matter in dispute between the parties at the hearing for interlocutory relief. Wonsum no longer carries on business. 12 In the period 8 to 10 May 2012 the parties unsuccessfully attempted to mediate a number of disputes between them in relation to the conduct of the company's business. In the course of that mediation, on 9 May 2012, the second defendant, under the letterhead of the first defendant, gave notice to the company and its directors (of which he was plainly one) that, because of an alleged breach of clause 12 of the Heads of Agreement, the right of the company to use the Equipment was revoked and that the Equipment would be placed "on the open market", presumably for sale to a third party. The legal basis for this purported revocation is not apparent. Clause 12 of the Heads of Agreement appears to be irrelevant. It deals with the circumstances in which a particular power to purchase shares in the company from existing shareholders can be exercised. 13 Apparently in order to provide continuity of supply of the company's shumai products, particularly to its largest customer Woolworths, temporary arrangements were entered into between the Catalano interests and the Kurth/Hepner interests under which the Kurth/Hepner interests would manufacture the shumai products for the company from the Hoopers Crossing premises using the shumai machine and associated equipment. Those arrangements have themselves run into difficulties, with the company complaining, amongst other things, about the rate of production and tardy delivery of shumai products required for the company's business. I will say more about this later. 14 It is convenient at this stage to say something about access in relation to the company's website. As I have noted, this website is hosted by the fifth defendant who is said to be a close personal friend of the third defendant. Immediately prior to the mediation to which I have referred, the company's access to the website had been blocked. Following the mediation, arrangements were made by the second defendant with the fifth defendant to permit access to the website by the Catalano interests. After that access was given, the first plaintiff removed the third defendant as a sales contact shown on the website. The first plaintiff says that he did this because the third defendant's employment with the company had been terminated. A short time later, the third defendant's contact details were reinstated on the website, but not by the Catalano interests. Since then the company, and the Catalano interests, have again been "locked out" of the website. The company has requested the fifth defendant to grant it administrator access to the website, as well as the necessary information to move the hosting of the website to another party. This request has been refused by the fifth defendant, acting on instructions from the second defendant. 15 There is also evidence that, after termination of his employment, the third defendant failed to return the company's mobile phone that he was using, despite requests that he do so. The presently uncontested evidence is that the third defendant successfully procured Telstra to transfer the number of the mobile phone to himself with a new service provider under a new account. He did so by misrepresenting himself to be the first plaintiff. The number of the mobile phone is important to the company because it has been advertised as a point of contact for "Foodservice sales", which refers to the company's supply to restaurants, cafes and hotels. This category represents approximately 30% of the company's revenue. 16 There have also been difficulties with the second defendant refusing to authorise payment of monthly wages to the first plaintiff and payment of monthly fees to MRS Holdings Pty Limited through which Sam Catalano provides bookkeeping services to the company, as well as authorising payment in a timely manner of other expenses incurred by the company. On 30 September 2011 the first plaintiff and second defendant, as directors of the company, signed a resolution pursuant to s 248A of the Corporations Act 2001 (Cth) (the Act) which provided a protocol for actioning payment of the company's expenses. The plaintiffs claim that, effectively, this protocol is not being adhered to by the second defendant. 17 Although the plaintiffs have not as yet filed a statement of claim, in substance they allege, amongst other things, that: (a) The third and fourth defendants' conduct, taken as a whole, constitutes misleading or deceptive conduct, passing off, the making of false or misleading representations, and an unlawful interference with the company's contractual relations. They also contend that the third defendant's conduct was "a breach of his duty of good faith and confidentiality under his then employment contract" with the company. (b) The first and second defendants' conduct in purporting to revoke the company's right to use the Equipment, and to sell it, was without any proper legal basis and was a breach of the Heads of Agreement (specifically of the term to assign the lease to the company) as well as a breach by the second defendant of his duties as a director of the company. They also contend that the first and second defendants' conduct constitutes an unlawful interference with the company's contractual relations. (c) The second defendant's conduct in refusing to authorise payment of the company's expenses in a timely manner is a breach of the resolution made on 30 September 2011 and a breach of the second defendant's duties as a director of the company. (d) The conduct of the fifth defendant in denying access to the company's website is an "interference with contractual relations".

Application under s 237 of the Corporations Act 18 The first plaintiff submits, and I accept, that this is an appropriate case for granting leave to the first plaintiff under s 237 of the Act to bring proceedings on behalf of the company in relation to the relief claimed in the originating process. 19 The first plaintiff is an officer of the company: see s 236(1). As the relief sought is in respect of the company's claims against, principally, the Kurth/Hepner interests, which can be seen to own 50% of the company's issued shares and to have equal representation on the company's board of directors, I am satisfied that it is probable that the company will not itself bring the proceedings or, alternatively, properly take responsibility for them or for the steps in them: see s 237(2)(a). Indeed, the second defendant has made clear his position that he does not give permission for the present proceedings to be brought against the Kurth/Hepner interests. 20 On the evidence presently before me, I am satisfied that the first plaintiff is acting in good faith and that it is in the best interests of the company that he be granted the leave that he seeks: see s 237(2)(b) and (c). For the reasons I will give, I am also satisfied that the first plaintiff has established that there is a serious question to be tried in relation to the relief that is presently claimed: see s 237(2)(d). 21 The first plaintiff has not given prior written notice of his application to seek leave: see s 237(2)(e)(i). Nevertheless, I am satisfied that it is appropriate that leave should be granted: see s 237(2)(e)(ii).

Claim for interlocutory relief - serious question to be tried 22 I am satisfied that the plaintiffs have established that there is a serious question to be tried that the third and fourth defendants have contravened, or at least threaten to contravene, s 18 of the Australian Consumer Law by either carrying on or threatening to carry on a business producing and supplying Asian food products under the name "The New Crazy Dragon" and by falsely representing that the third defendant is employed by, or that the third and fourth defendants are now associated with or act on behalf of, the company in relation to its supply of "Crazy Dragon" products. I am also satisfied that the same conduct gives rise to a serious question to be tried that the third and fourth defendants have engaged in passing off or threaten to do so. 23 In this connection, although the registered business name adopted by the third and fourth defendants is not identical to the company's business name, it is, nevertheless, arguably deceptively similar to that name when applied to the production and supply of Asian food, because of the word elements "Crazy Dragon" that are common to those respective names. Indeed "Crazy Dragon" is the brand actually used by the company in relation to its products. The likely deceptive similarity between the two business names, and between the third and fourth defendants' business name and the company's brand, could be no mistake given the third defendant's role within the company's business at the time the third and fourth defendants' business name was registered. 24 I also take into account the seemingly dishonest way in which the third defendant obtained the transfer into his own name of the telephone number associated with the company's mobile phone that was used by him during his employment with the company. The third defendant has not sought to dispute the fact that he procured the transfer of the telephone number to himself by falsely representing that he was the first plaintiff; nor has he proffered any justification for this conduct. The telephone number has been promoted by the company as one associated with its business. That promotion has included use of the telephone number on the company's website. Despite the third defendant's contact details being initially removed from the company's website following the termination of his employment on 30 April 2012, it is clear that, in circumstances which have not been explained by the defendants, the third defendant's name, in association with the mobile telephone number, were reinstated on the website. On the present evidence, it is likely this could only have been done at the behest of the second or third defendant. The company was then "locked out" of the website by the fifth defendant acting, at least, on the request of the second defendant. The result is that the third defendant is now falsely identified on the company's website as a continuing point of contact (namely, as sales manager) for the sale of "Crazy Dragon" food products using the mobile telephone number he has procured to be transferred into his name. 25 I also take into account the control that the third and fourth defendants, and it seems also the second defendant, have sought to exert over the shumai machine and associated bag sealing equipment that have been used at the Hoppers Crossing premises to manufacture the company's shumai products. The third and fourth defendants have exerted this control by the third defendant taking a lease over the Hoppers Crossing premises following the demise of the Wonsum business previously conducted there. It seems that the third defendant is prepared to permit that equipment to be used at the Hoppers Crossing premises to manufacture shumai products for the company, but only on his own terms. At the present time there is nothing to stop the third and fourth defendants from using that equipment to also manufacture shumai products to be sold in competition with, or in substitution for, the company's products. The fact that they have registered a name for the business of producing Asian food indicates their preparedness to engage in that conduct. 26 It is of significance that the third defendant has not given evidence in this application. The second defendant has given evidence by way of affidavit. He has purported to do so on behalf of all defendants, other than the fifth defendant. The affidavit is in somewhat unsatisfactory form. It appears to be an amalgam of statements sought to be made by the second defendant and the third defendant, but sworn by the second defendant. To the extent that the second defendant has sought to explain the third and fourth defendants' conduct, he has done so substantially on a hearsay basis. For example, the second defendant gave evidence that the third defendant informed him that "he" (the third defendant) was not trading as "The New Crazy Dragon". I place very little weight on this evidence, given the form in which it is expressed and given also the objective evidence before me of the third and fourth defendants' conduct that I have recorded. 27 I should add that the second defendant has given evidence that, in about April 2012, he asked the third defendant to "make the necessary arrangements to ensure manufacturing could continue from the Hoppers Crossing premises with the shumai machine". He also gave evidence that "in order to maintain the status quo, I told [the third defendant] to incorporate an entity at arms length [sic] to me, and to continue to supply from the Hoppers Crossing premises". This evidence was apparently tendered to provide justification for the third and fourth defendants' conduct. However, far from justifying that conduct, the evidence implicates the second defendant in it and, specifically, in what seems to be an attempt to isolate the shumai machine and associated bag sealing equipment from use by the company except on terms that are acceptable to the third and fourth defendants and, presumably, the second defendant. 28 In this latter regard there is other evidence before me, in the form of email correspondence in May 2012, in which, in relation to concerns expressed by the Catalano interests about the rate at which the shumai products were being supplied from the Hoppers Crossing premises under the temporary arrangements to which I have referred, the second defendant said that "[the third defendant] is the one you have to talk to it is his factory". In that correspondence he also said that the "conflict" in relation to those arrangements was one between the first plaintiff and the third defendant. At the very least this evidence suggests that, when it has suited him to do so in his commercial dealings with the Catalano interests, the second defendant has sought to downplay his own involvement in the affairs of the third and fourth defendants and to attribute control over the Hoppers Crossing premises, and the use of the equipment in those premises, principally to the third defendant. 29 My conclusion on the existence of a serious question to be tried, in this regard, is sufficient to justify the particular interlocutory relief that is sought against the third and fourth defendants, subject to consideration of the balance of convenience. It is not necessary, therefore, for me to consider the other bases on which the plaintiffs claim that relief. 30 I am also satisfied that the plaintiffs have established that there is a serious question to be tried that the second defendant has acted in breach of his duty as a director of the company. Arguably, this has been manifested in four respects: first, by his purported revocation, without apparent lawful cause, of the company's right to, or right to use, the Equipment, coupled with a threat to sell the Equipment, presumably with the objective of denying its availability for use by the company in carrying on its business; secondly, by apparently procuring the third defendant to isolate the shumai machine and associated bag sealing equipment from use by the company except on terms that are acceptable to the third and fourth defendants, and presumably himself; thirdly, by failing to sign, or in procrastinating in signing, cheques drawn on the company's bank account; and fourthly, by taking the steps that eventuated in the company being effectively "locked out" of its website. 31 On the present evidence, there is a serious question to be tried that, despite his denials, this conduct was deliberately undertaken by the second defendant to impede or disrupt the orderly conduct of the company's business as a form of retaliation against the Catalano interests, substantially because of the differing personal views that have developed as to how the company's business should be conducted. Such conduct, if established at a final hearing, may well constitute, for example, a breach of the second defendant's duty to exercise his powers and discharge his duties in good faith in the best interests of the company and for a proper purpose. It may also constitute, for example, a breach of his duty not to improperly use his position to gain advantage for himself or for others (such as the third and fourth defendants) or to cause detriment to the company. 32 My conclusion on the existence of a serious question to be tried, in this regard, is sufficient to justify the particular interlocutory relief that is sought against the second defendant, subject to consideration of the balance of convenience. It is not necessary, therefore, for me to consider the other bases on which the plaintiffs claim that relief.

Interlocutory relief - balance of convenience 33 In my view the balance of convenience lies in favour of granting interlocutory relief substantially in the terms sought by the plaintiffs. 34 The plaintiffs have submitted, and I accept, that the conduct of which they complain threatens the company's core business and its relationship with customers and suppliers. Regrettably, the constructive business relationship between the Catalano interests and the Kurth/Hepner interests that was contemplated by the Heads of Agreement has failed. The defendants' counsel referred to the present relationship as "toxic". The Catalano interests have purported to put in train the compulsory acquisition provisions of the Heads of Agreement that would lead to their acquisition of the 50% shareholding of the Kurth/Hepner interests. Despite this state of affairs, the business of the company remains viable. Indeed, the second defendant has expressed the view that the business is "sound", especially with ongoing contracts such as those with Woolworths, which now appears to be the company's major customer. 35 I should at this juncture say something more about the production of shumai products for the company from the Hoppers Crossing premises. 36 The first plaintiff has given evidence that the temporary arrangements for the supply of the shumai products from those premises by the third and fourth defendants have substantially failed. There are disputes between the Catalano interests and the Kurth/Hepner interests about the timeliness with which the shumai products are being produced; the quantities in which the products are being produced to meet existing and anticipated orders, particularly with the company's major customers such as Woolworths and, at least potentially, Coles; the terms of payment for those products; and the quality of the products. 37 There is evidence before me that several orders, particularly in relation to Woolworths, are late and that, based on present performance, future orders will not be met. For example, the third and fourth defendants are only prepared to produce five pallets of product at a time, on condition that the company make payment for that product within seven days. Any additional pallets of product are required to be paid for in advance. These conditions are not acceptable to the company. They effectively limit its supply to no more than five pallets of shumai products per week. Production at this rate cannot possibly satisfy the company's supply commitments to Woolworths and Coles. 38 The second, third and fourth defendants have sought to justify production at this rate, and on these terms, on the basis that the third and fourth defendants should not be at risk in respect of payment for their manufacture of these products. This justification sits oddly with the second defendant's claim that the third and fourth defendants are effectively acting as a vertically integrated arm of a single business, namely the company's business, and that they are engaging in their conduct for the company's benefit and in its interests. In my view the evidence is more consistent with the third and fourth defendants acting purely in their own interests without sufficient financial resources to engage in the production activity that is required by the company. 39 As a result of these circumstances, the company has had to reschedule a number of delivery time-slots with Woolworths. The first plaintiff has expressed concern about the consequences this will have on the company's "service level rating" from Woolworths. The first plaintiff sees supply to Woolworths as crucial to the company's success. I also note that the first plaintiff has adduced evidence that Coles has stressed the need for timely delivery. It has said that if its trial orders are not delivered on 26 June 2012, the company's products will be removed from its layout. 40 Perhaps to compound the company's present problems with supply, the third defendant is currently holidaying overseas. This has increased the first plaintiff's concerns that orders will not be filled in a timely manner. 41 There is also evidence that, over the last three weeks, the company has received three complaints from customers relating to shumai products supplied to Woolworths from the Hoppers Crossing premises. Two complaints relate to the presence of human hair in the product. One complaint relates to the use of plastic in the product. Whilst I take this evidence into account, I am unable to draw from it any inference that the third and fourth defendants are not, generally speaking, manufacturing products of an acceptable standard. Assuming the complaints to be justified (there is no evidence either way), these complaints could simply be isolated events of no particular significance in relation to the overall volume of products manufactured at the Hoppers Crossing premises. 42 The first plaintiff has given evidence that he has received assurances from Rethink that, if the shumai machine and associated bag sealing equipment are relocated to its Victorian premises, it will be able to meet all of the company's deadlines by undertaking double shifts and working weekends. It is not in dispute that the shumai machine is capable of producing five to six pallets per day on a standard shift. This equates to 25 to 30 pallets per week. It seems clear on the evidence, therefore, that the strategy proposed by Rethink, using double shifts and working over the weekends, will result in the company being about to meet its anticipated commitments to supply shumai products, particularly to its present major customer Woolworths. 43 The second defendant has expressed a number of concerns about relocation of the shumai machine and associated bag sealing equipment to Rethink's Victorian premises. These concerns are articulated, principally, in [36] of his affidavit sworn on 13 June 2012. In substance, the second defendant says that the third and fourth defendants have the ability to produce the required shumai products to an acceptable standard. He has, however, raised concerns about the competence and ability of Rethink to manufacture the shumai products in the quantities required in a timely fashion. He has raised concerns about Rethink's experience as a manufacturer of food products generally. He has also expressed concerns about the wisdom of the company committing to supply its shumai products to Woolworths in the quantities that are currently sought. 44 The concerns raised by the second defendant have been articulated in very general terms. On the other hand Rethink has given assurances that it is able to produce 30 pallets of the company's shumai products per week and that, due to capital improvements made at its manufacturing facility, that quantity can be increased dramatically upon request. Rethink has stated that the only limiting factor for production will be the capacity of the shumai machine itself. It has stated that it can commence manufacturing within 48 hours of the shumai machine being delivered to its facility. It has also stated that its manufacturing facility is up-to-date with all relevant food permits and that it adheres to the most stringent health procedures. 45 In this connection I note that the company has been in discussions with Rethink since November 2011 about its ability and capacity to satisfactorily manufacture the company's shumai products. The company has inspected the Rethink facility. Overall, the evidence gives me no real reason to doubt the first plaintiff's assessment about the suitability and capacity of Rethink to competently manufacture the company's shumai products to the required standard and in a timely manner so as to meet the company's commitments in the near future. 46 On the other hand, in light of the evidence to which I have referred, I am in no doubt that timely manufacture cannot be obtained satisfactorily from the third and fourth defendants operating the same equipment at the Hoppers Crossing premises upon terms which they deem to be commercially acceptable. In particular, I am satisfied that the payment terms required by the third and fourth defendants for the required production of the shumai products are not commercially realistic and should not be effectively imposed on the company when other commercially acceptable terms are on offer. In my view, therefore, the interests of the company are best served by facilitating the production of its shumai products by an independent manufacturer who, on the present evidence, appears to have the ability and willingness to produce those products on terms which are commercially acceptable to the company. 47 For these reasons, the balance of convenience favours the granting of interlocutory relief that will preserve the shumai machine and associated bag sealing equipment for the company's use by a manufacturer at premises of the company's choosing. I propose, therefore, to grant the interlocutory relief sought by the plaintiffs which requires delivery up of the shumai machine and associated bag sealing equipment to the company for relocation to Rethink's Victorian premises. 48 As to the remainder of the interlocutory relief that is sought by the plaintiffs, I am satisfied that the balance of convenience favours the granting of relief against the second defendant with respect to the signing of cheques by him in accordance with the resolution of 30 September 2011. The granting of this relief was not really contested by the second defendant whose concern, as explained at the hearing, was that any order to that effect should be conditioned on him being able to satisfy himself that the cheques were for sums properly due. The interlocutory relief to be granted should contain that qualification, with a further qualification that the second defendant must act reasonably in that regard. 49 The balance of convenience also favours the granting of relief against the third and fourth defendants substantially in terms sought by the plaintiff. No arguments were advanced as to why this relief should not be granted, particularly in light of the evidence to which I have referred. 50 Finally, the balance of convenience also favours the granting of relief that will enable the company to have access to its website. Once again, this relief was not really contested. In particular, it was made clear at the hearing that the fifth defendant did not contest the granting of that relief and would abide any order that the Court saw fit to make in that regard.

Disposition 51 Orders will be made substantially as sought by the plaintiffs. I certify that the preceding fifty-one (51) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.

Corporations Act 2001(Cth)ss 236, 237

At a glance

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Judgment (12 paragraphs)

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Legislation Cited (2)

Cited By (1)