DB Marketing Solutions Pty Ltd (formerly known as Auto Xtreme Electronics... [2014] FCA 1026 | Case summary

Federal Court of Australia|2014-09-22|Before: Gummow J, Collier J

The applicant is likely to suffer injury for which damages will not be an adequate remedy 28 In relation to the interlocutory relief sought by the applicants concerning Mr Trent Cause, I am satisfied at this interlocutory stage that Mr Trent Cause would not be in a position to adequately compensate the applicants pursuant to an order for damages should the applicants be successful in the substantive proceedings. 29 First, although there is evidence before the Court (in the affidavit of Ms Nemeth filed 11 September 2014) to support a finding that the applicants paid the vendors of the Auto Xtreme business (including Mr Trent Cause) the sum of $2 million, and further that Mr Trent Cause has sold shares allotted to him in relation to the sale of that business, nonetheless there is also evidence that Mr Trent Cause is in need of funds and that it is for this reason that he has commenced the On Highway Electronics business. 30 Second, while there is evidence before the Court that Mr Trent Cause is the owner of a rural property at Bunjurgen in Queensland, Ms Nemeth deposes that this property, which is of unknown value, is subject to a mortgage of an unknown amount to the Commonwealth Bank of Australia. 31 Certainly no submissions were put to me at the recent hearing from which I could infer that Mr Trent Cause could satisfy any damages award should the applicants be successful in the substantive proceeding. 32 In circumstances where there is a real question as to whether a respondent is in a financial position to satisfy a potential damages award, the Court is entitled to infer that injunctive relief is justified: Sempra Metals & Concentrates Corporation v Tritton Resources Ltd [2006] NSWSC 1209; cf Lord Diplock in American Cyanamid Co v Ethicon Ltd [1975] AC 396 at 408.

Balance of convenience 33 In this case there is evidence to support a finding at an interlocutory stage that the business of the applicants is significantly suffering from the activities of Mr Trent Cause, because of his intimate knowledge and experience of the industry in which the applicants operate and his previous position with the applicants. Further, there is evidence that Mr Trent Cause was previously paid substantial amounts in respect of the acquisition of the applicants' business in both cash and shares, but is now conducting a business in competition with that of the applicants contrary to contractual obligations he has previously incurred and which remain ongoing. 34 In addition to these considerations, I note that, prima facie, the contractual restraints preventing Mr Trent Cause from competing with the applicants will cease to operate on or about 20 January 2015. A refusal by the Court at this stage to grant an interlocutory injunction would practically mean that those restraints cease to have any effect from this point, save as to any remedy the applicants can pursue in damages. 35 While it may be that Mr Trent Cause would suffer financially if he is restrained at this interlocutory stage from continuing to operate a business in competition with that of the applicants, in my view the balance of convenience favours a restraint of his conduct pending determination of substantive matters claimed by the applicants. 36 However, I note that the applicants are also seeking an interlocutory injunction to restrain Mr Trent Cause from having an interest in any business which is similar to or competes with the applicants' business. I am not satisfied that such a restraint is necessary to maintain the status quo pending resolution of final issues concerning Mr Trent Cause. In my view an order restraining Mr Trent Cause from directly or indirectly conducting any competing business or being involved in competing activities is adequate to address the possible contraventions by Mr Trent Cause of his contractual obligations and ongoing injury to the applicants' business interests.

CONCLUSION 37 In my view the Court should order limited interlocutory injunctive relief against Mr Trent Cause. It is also appropriate that the legal representatives of the parties should produce draft directions for consideration by the Court to take the matter forward to final hearing. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier.

Corporations Act 2001(Cth)ss 182, 182(1), 183, 183(2)

(2012) 205 FCR 187 Sempra Metals & Concentrates Corporation v Tritton Resources Ltd [2006] NSWSC 1209 Trivett v Zoccoli [2002] WASCA 138 United Motor Search Pty Ltd v Hanson Construction Materials Pty Ltd (No 2) [2014] FCA 277

Adjournment 8 Whether it is appropriate to order an adjournment in particular circumstances is an issue of discretion for the Court: Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at [5]; Jago v District Court of NSW (1989) 168 CLR 23 at 47; Goldberg v Morrow [2004] FCA 1490 at [36]; Trivett v Zoccoli [2002] WASCA 138. In this case the respondents submit that the Court ought grant an adjournment because, in summary: There is a serious question whether the restraints allegedly imposed on the respondents by agreements with the applicants, and in particular on Mr Trent Cause, are contrary to principles espoused in such well-known cases as Nordenfelt v The Maxim Nordenfelt Guns & Ammunition Co Ltd [1894] AC 535. The adjournment being sought by the respondents is not long, merely sufficient time to enable them to time to prepare a proper case to answer the applicants' claim. 9 While these submissions have force, in the circumstances I am not prepared to accede to the respondents' application for adjournment. I have formed this view because: While the application was brought on at relatively short notice, this is not uncommon in respect of interlocutory injunction applications, nor unreasonable where an applicant seeks restraint of conduct which is causing significant injury to its business interests. The respondents were represented both by solicitor and Counsel, and to that extent had had an opportunity to provide instructions to their legal representatives to meet the applicants' claim at this interlocutory stage, including preparation of affidavit material. It was not in dispute that there had been extensive discussions between the applicants and the respondents over a period of approximately six to eight weeks in relation to the applicants' complaints concerning the respondents' conduct. To that extent it would appear that the respondents had been provided with some notice of the applicants' grievances, and potential claims in this Court. It is difficult at this stage to infer that the respondents would have been taken by surprise by the interlocutory application filed on 12 September 2014. Extensive material was provided by the applicants in support of their interlocutory application, including relevant agreements. No indication was given at the hearing by Counsel for the respondents as to the type of material which the respondents proposed to file to answer this material, such that I could assess the benefits of an adjournment as sought. Indeed, it is possible that no further material of substance could be filed by the respondents. Counsel for the respondents was able to meet the respondents' interlocutory claim to the extent of referring to relevant case law including Nordenfelt. Further, it is clear that Counsel was able to make submissions at the hearing concerning the question whether the Court should, at this stage, order interlocutory relief. Indeed the majority of the hearing constituted submissions by the parties in relation to this question. 10 It follows that the respondents' application for adjournment should be dismissed. I will now turn to consideration of whether the applicants have substantiated their application for interlocutory relief.

Interlocutory injunctive relief 11 The evidence upon which the applicants rely in this proceeding is, to a considerable degree, hearsay evidence. Matters are the subject of deposition by the solicitor and corporate counsel of the applicants, relating information given to them by officers of the applicants. In my view however there is evidence sufficient to support this application at an interlocutory level. I have formed this view in light of the fact that this is an interlocutory hearing, for which evidence has been produced urgently and to a less rigorous standard than that required in a substantive hearing (cf observations in United Motor Search Pty Ltd v Hanson Construction Materials Pty Ltd (No 2) [2014] FCA 277 at [63]; Palm Springs Ltd v Darling [2002] FCA 277 at [20]; Pampered Paws Connection Pty Ltd v Pets Paradise Franchising (QLD) Pty Ltd (No 2) [2008] FCA 1716 at [17]; Australian Securities Commission v Macleod (unreported, Gummow J, 3 August 1992) at [2]; Australian Competition & Consumer Commission v Pauls Ltd [1999] FCA 1750; (2000) ATPR 41-747 at [52]; ICAP Australia Pty Limited v BGC Partners (Australia) Pty Limited [2007] FCA 467 at [6]). 12 As the applicants have correctly identified, the key questions requiring determination by the Court in relation to an application for interlocutory injunctive relief are whether: 1. There is a serious question to be tried as to the applicant's entitlement to relief; and 2. The applicant is likely to suffer injury for which damages will not be an adequate remedy; and 3. The balance of convenience favours the granting of an interlocutory injunction. (Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 at [19] per Gleeson CJ and Crennan J). 13 In this case the applicants have partially substantiated their case.

The partnership 23 In relation to the third respondent the claim of the applicants perforce relies upon the fact that it is a firm, the partners of which are Mr Trent Cause and Mr Ashley Cause. Evidence before the Court indicates that they are partners, having registered the business name "On Highway Electronics" on 30 April 2014. 24 At the hearing Mr Cooke for the applicants directed my attention to s 9 of the Partnership Act 1891 (Qld) ("Partnership Act"). Relevantly s 9(1) provides: 9 Partners bound by acts on behalf of firm (1) An act or instrument relating to the business of a firm, other than an incorporated limited partnership, and done or executed in the firm-name, or in any other manner showing an intention to bind the firm, by any person authorised to bind the firm, whether a partner or not, is binding on the firm and all the partners. 25 Further, I note s 8 of the Partnership Act which materially provides: 8 Power of partner to bind the firm (1) Every partner in a partnership, other than a firm that is a limited partnership or incorporated limited partnership, is an agent of the firm and his or her other partners for the purpose of the business of the partnership, and the acts of every partner who does any act for carrying on in the usual way of business of the kind carried on by the firm of which the partner is a member bind the firm and his or her partners, unless - (a) the partner so acting has in fact no authority to act for the firm in the particular matter; and (b) the person with whom the partner is dealing either knows that the partner has no authority, or does not know or believe the partner to be a partner. 26 While a business name has been registered in the name of a partnership, there is no indication that the third respondent is a legal entity separate from Mr Trent Cause and Mr Ashley Cause, such as to be capable of being sued in its own right as is the case with an incorporated limited partnership under s 72 of the Partnership Act (cf BFI Optilas v Blyth [2002] EWHC 2693 (QB) where the Court considered - but rejected - an application for interim injunctive relief brought by a company against two former employees and the limited liability partnership of which they were members). The fact that a business name has been registered does not mean that the partnership can be sued, or restrained, except insofar as proceedings can be commenced against the individual partners to that firm. In any event in circumstances where I am not satisfied that there is a serious question to be tried concerning Mr Ashley Cause in his capacity as an individual, there is no serious question to be tried concerning Mr Ashley Cause in his capacity as a partner of a firm, notwithstanding that the other partner to this firm is Mr Trent Cause. Further, it is difficult to identify the relevance of s 8 or s 9 of the Partnership Act where any contractual restraint of Mr Trent Cause's apparently predated the partnership with Mr Ashley Cause. 27 I am not prepared to order interim injunctive relief against the third respondent as named on the pleadings.

DB Marketing Solutions Pty Ltd (formerly known as Auto Xtreme Electronics Pty Ltd) v Cause

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