DXC Eclipse Pty Ltd v Wildsmith

DXC Eclipse Pty Ltd v Wildsmith - [2022] NSWCA 224 - NSWCA 2022 case summary — Zoe

JUDGMENT

This is an application by DXC Eclipse Pty Limited ("DXC Eclipse") an applicant for leave to appeal, for injunctive relief to preserve the status quo pending determination of its proposed appeal from a decision of Parker J sitting in the Equity Division of 30 September 2022 (DXC Eclipse Pty Ltd v Wildsmith (No. 2) [2022] NSWSC 1330). In case the Court considers that it in fact has a right of appeal, DXC Eclipse proposes also to file a notice of appeal. The application for leave to appeal and the appeal are to be heard concurrently by this Court in February 2023.
The proceedings in the Equity Division related to DXC Eclipse's acquisition of ownership of a business and its attempt to enforce restraint covenants in the purchase contract against two of the vendors, who are the present respondents. The business involves the supply and installation of business software solutions using software produced by Microsoft. On 4 May 2022, Slattery J granted interlocutory relief to preserve the status quo pending the final hearing in the Equity Division ([2022] NSWSC 512). That hearing took place in August 2022 and resulted in Parker J's decision of 30 September 2022 rejecting DXC Eclipse's claim ([2022] NSWSC 1330).
By a further judgment of 24 October 2022, Parker J declined to make an order having the effect of extending the interlocutory relief pending DXC Eclipse's appeal to this Court ([2022] NSWSC 1452).
In that judgment, Parker J described the prejudice that DXC Eclipse claimed it would suffer as follows: "4 The viability of the appeal has not been disputed. The prejudice which the plaintiff would suffer arises in the following way. The defendants are seeking to launch a business which will compete with the plaintiff's business. The plaintiff's business represents an amalgam of a business purchased by the plaintiff from the defendants in 2018 and an existing independent business which was previously operated by the plaintiff. The plaintiff has the benefit of restraint covenants given by the defendants at the time of the sale and which relevantly prevents the defendants from operating a business which is 'competitive' with the business acquired by the plaintiff. 5 I found that the business being launched by the defendants was not relevantly 'competitive with' the business sold, but those findings are challenged in the appeal. The existing injunction prevents the defendants from continuing to develop their business. If it is discharged, and if the plaintiff is ultimately successful, the plaintiff would have a claim in damages for loss suffered from the defendants' activities in the meantime, but its contention is that it would be difficult, if not impossible, to assess those damages."
Parker J then referred to the prejudice that the vendors claimed that they would suffer if interim relief were granted pending the appeal. He said at [6] that the vendors argued that they would "be prevented from developing the business in the manner in which they intend, and I have now found they are entitled, to do" and noted that it "may be difficult to assess the damages which the defendants will suffer as a result of a delay in being able to develop the business".
His Honour then noted that Slattery J had granted interlocutory relief prior to the hearing at first instance but concluded that his own subsequent final determination of the proceedings in favour of the vendors necessitated a different approach in considering DXC Eclipse's application for relief pending the appeal. His Honour found in effect that the final judgment in the vendors' favour was enough to tip the balance against the grant of interlocutory relief. Although the question which I have to decide is not whether Parker J was right or wrong in this conclusion, but whether I should grant interim relief, I have concluded that Parker J's approach was sound and should be adopted by me.
As it is accepted that the appeal is reasonably arguable, it is necessary to turn first to the balance of convenience.
On the one hand it is clear that there is potential for DXC Eclipse to suffer loss if no interim relief is granted and the appeal is subsequently allowed. On this basis, the vendors will have had the opportunity in the months before the appeal is heard, and whilst judgment is reserved, to operate a competitive business to the potential detriment of DXC Eclipse's business. Moreover, damages to which DXC Eclipse would be entitled would be difficult to assess.
On the other hand, the business which the vendors are in the process of establishing ("Will Thirty Three") is in an early stage of development. In the application before me both sides emphasised the importance of the past and potential role of the first respondent, Mr Wildsmith, in relation to Will Thirty Three. Mr Gavin Marshall, the sole director of the new business, referred in evidence to Mr Wildsmith as the only person who has the requisite sales skill, knowledge and background to save the business from collapsing. On the other hand, DXC Eclipse submitted that such activity by Mr Wildsmith on behalf of Will Thirty Three, pending the appeal, would impact adversely on its business. It said that the parties were in agreement that Mr Wildsmith "is a highly effective salesperson".
DXC Eclipse was highly critical in argument of the lack of specificity in the respondents' evidence concerning the prospective prejudice to it and, in particular, concerning the risk that it might collapse in the next few months if interim relief were granted to DXC Eclipse. There is force in what was put but ultimately I have concluded that there was sufficient evidence led by the respondents to establish that that result is at least a realistic possibility. The evidence in question was certainly lacking in detail but it was admitted without objection and was not the subject of cross-examination. In these circumstances, the evidence had some, although limited, weight and the issues before me are to be determined on the basis of the evidence in fact led, not what might ideally have been put before the Court (see Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345; [2012] HCA 17 at [165]).
As with the loss which DXC Eclipse might suffer if interim relief were not granted, possible loss to the respondents as a result of the grant of relief would be difficult to identify and quantum. Although Slattery J considered that a comparison of the business' revenue before and after the period of restraint would facilitate quantification, for my part I emphasise the difficulty there would be of charting the course that a start-up business would have taken if it had not been subject to a court restraint for a period of perhaps six months or more. Inevitably there would be arguments about the impact of the loss of a substantial period of trading in the early stages of its development.
The result is that there is potential prejudice to both sides and the balance of convenience is not clearly in favour of either one. Each faces potential prejudice depending whether or not the interlocutory relief sought is granted. My view is that in these circumstances the deadlock needs to be broken by recourse to the respondents' entitlement to enjoy the fruits of their victory at first instance. It is a significant factor that in a carefully considered final judgment Parker J found in favour of the respondents and against DXC Eclipse. Although I accept that the appeal is arguable, it is necessary for me to assume, at least on a prima facie basis, that the judgment below is correct. As a result I decline to grant interim relief and order that DXC Eclipse's amended notice of motion be dismissed with costs.

At a glance

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Judgment (4 paragraphs)

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Cases Cited (5)

Cited By (1)