Enertek AU Pty Ltd v 8StarEnergy Pty Ltd [2022] VSC 544

2 The relevant agreements are both dated 24 April 2020. The first is a manufacturing and supply agreement between the first plaintiff and the defendant (the MSA). Under the MSA the first plaintiff is the exclusive supplier and manufacturer of Licensed Products to the defendant. The second agreement is a distribution agreement between the second plaintiff and the defendant (the DA). Under the DA the second plaintiff has the exclusive right to distribute Licensed Products in Australia and New Zealand (the Territory). Further, the second plaintiff has a non-exclusive right to distribute the Licensed Products anywhere else in the world in which the defendant had or acquired the right to market and sell Licensed Products (the Non-Exclusive Territory).

3 In summary, by notice dated 2 August 2022, the defendant has purported to exercise its rights under the DA to terminate the DA by reason of the failure of the second plaintiff to meet the minimum order amounts (MOA) under the DA for 2020 and 2021 (the termination notice). Further, by two notices dated 4 August 2022, the defendant has purported to give the first plaintiff a right of first refusal under the MSA in respect of hybrid batteries not currently manufactured by the first plaintiff (the first refusal notices). For convenience, I will refer to the termination notice and the first refusal notices collectively as the notices.

4 Prior to the service of the notices, the defendant sourced hybrid batteries for supply in Europe from a third party called Fox and entered into purchase orders to supply approximately 50,000 hybrid batteries under the Energizer label to customers in Europe (the European hybrid battery purchase orders).

5 The plaintiffs contend that there has been no breach of the MOA for 2020 or 2021 because the defendant waived, elected not to rely upon, or is estopped from relying upon, the MOA in those years and, as a result, the defendant was not able to issue the termination notice or the first refusal notices_._

(1) sourcing the hybrid batteries from Fox and entering into the European hybrid battery purchase orders; and

(2) serving the notices, in particular the first refusal notices (containing unachievable timeframes which were impossible to comply with and/or agree to and in breach of other provisions of the MSA),

the defendant has engaged in a course of conduct in breach of express and implied terms of the MSA and the DA, including the obligations of cooperation and good faith.

7 First, the defendant denies any waiver, election or estoppel in relation to the MOA for 2020, 2021, or at all, and denies that it was not entitled to issue the notices.

8 Second, the defendant accepts that it has engaged, in substance, in the course of conduct alleged but refers to other conduct, both of the plaintiffs and the defendant, which puts that course of conduct in context. It denies that that conduct relied upon alone, or in context, is in breach of express and/or implied terms of the MSA and the DA.

9 The plaintiffs submit that, unless the injunctions restraining the defendant from acting on the notices are granted (the injunctions sought), it is likely that the plaintiffs will cease to trade and it will result in a loss of reputation and goodwill. This is in light of the fact that:

(1) the plaintiffs' business model is reliant upon the Energizer license and manufacturing products under the Energizer brand;

(2) the first plaintiff must supply Licensed Products to the defendant and cannot supply the Licensed Products to any other persons including the second plaintiff; and

(3) the first plaintiff is unable to manufacture a Competing Product without first offering the Product to the defendant.

10 By contrast, the defendant submits that, unless the injunctions sought are refused, the defendant will suffer significant loss. The defendant relied upon two primary kinds of harm. First, the inability to complete the European hybrid battery purchase orders. Second, the inability to exploit the hybrid battery market in the Non-Exclusive Territory (particularly in Europe, but also North America). This is in circumstances where demand for hybrid products is growing in these regions, where the defendant is now ready, willing and able to source and sell hybrid batteries and where the first plaintiff has no such products ready for sale.

11 Further, the defendant contends that, given the poor financial position of the plaintiffs, the sufficiency of their undertaking as to damages was reason itself to refuse the injunctions sought.

12 For the reasons that follow I have concluded that:

(1) there is a serious question to be tried at least as to whether there has been an estoppel in respect of the application of the MOA for 2020 and 2021 which would invalidate the basis of each of the termination notice and the first refusal notices;

(2) second and independently, there is a serious question to be tried as to whether there has been a course of conduct on the part of the defendant, in particular in relation to the terms of the first refusal notices, which would invalidate the first refusal notices, or make it unconscionable for the defendant to rely upon them; and

(3) subject to an appropriate form of security being provided, in light of the offer by the plaintiffs or their directors and officers to provide security in the sum of $1 million, the balance of convenience favours granting the injunctions sought until the hearing and determination of this proceeding, or further order.

13 As to the material, the plaintiffs rely upon the affidavits of Mr Aganesov affirmed 26 August 2022, 1 September 2022 and 5 September 2022 (the first Aganesov affidavit, the second Aganesov affidavit and the third Aganesov affidavit respectively).

14 The defendant relies upon the affidavits of Vincenzo Marciano sworn 4 September 2022 and of Edwin McKeon affirmed 4 September 2022.

15 The relevant principles to grant an interlocutory injunction are clear. The plaintiffs need to establish the following matters:

(1) there is a serious question to be tried, that is, the plaintiff has made out a prima facie case in the sense that there is a sufficient likelihood of success at trial to justify, in the circumstances, the preservation of the status quo;

(2) the plaintiff will suffer irreparable injury for which damages will not be adequate compensation unless the injunction is granted; and

(3) the balance of convenience, or justice, favours the granting of the injunction.[1]

16 These organising principles referred to by the High Court in O'Neill are not entirely separate and must be examined together. For example, if a case seems particularly strong, this may affect the balance of convenience.[2] The converse is also true: if the case seems a weak prima facie case, that may affect the balance of convenience.

17 It is important always to bear in mind that the purpose of an interlocutory injunction is to maintain the status quo pending the determination of the parties' rights. The issue is whether the injury or inconvenience which the applicant would be likely to suffer if an injunction were refused outweighs, or is to be outweighed by, the injury or inconvenience which the defendant would suffer if the injunction were granted. It is a question of which course would entail the lesser risk of injustice should it turn out that the injunction should not have been granted.[3]

18 In this context, one must consider the adequacy of the damages undertaking and any other discretionary considerations. As to the sufficiency of the undertaking, there is no inflexible rule that the plaintiff should be denied interlocutory relief unless it can give a meaningful undertaking.[4] Nevertheless, I consider that in cases involving the protection of commercial interests, the adequacy of the undertaking is of relevance and a factor to be taken into account in the balance of convenience.[5]

19 The plaintiff submitted that the MSA and the DA constituted a package or suite of documents and should be considered together in light of their terms, the parties, and the fact that they were executed on the same day. There is much force in this argument. Nevertheless they are separate contracts and I will deal with them separately.

20 I will first deal with the DA. The Term of the DA commences on 24 April 2020 and ends on the termination of the MSA. As noted above, pursuant to the DA, the defendant agreed that the second plaintiff would have:

(1) the exclusive right to distribute Licensed Products in the Territory [cl 3.1(a)]; and

(2) a non-exclusive right to distribute the Licensed Products anywhere in the Non-Exclusive Territory [cl 3.2].

21 In support of the exclusive right conferred by cl 3.1(a) of the DA, the defendant also agreed that it:

(1) must not during the Term in the Territory supply, sell, or distribute to any person other than the second plaintiff, the Licensed Products or any Competing Products except with the defendant's prior written consent [cl 3.1(b)]; and

(2) must promptly refer any customers or potential customers of the Licensed Products in the Territory to the second plaintiff [cl 3.1(d)].

22 It was not in dispute in this application that the hybrid battery of the kind to be supplied under the European hybrid battery purchase orders or the subject of the first refusal notices was a Competing Product for the purpose of the DA and the MSA.

23 Clause 5.2 of the DA contains the MOA, namely, the minimum order amounts to be placed by the second plaintiff. Clause 5.2(a) provided for an initial order amount of 1000 units on the execution of the DA. This requirement was deleted by a variation to the DA dated 21 July 2020. Clause 5.2(b) provided the MOA for each calendar year of the Term (or part of that calendar year where appropriate). Relevantly, the MOA under cl 5.2(b) was 1377 units in 2020, and 2000 units in 2021 (and for each full calendar year of the DA thereafter).

24 Further, cl 7.1 provides that the defendant must act in good faith at all times towards the second plaintiff and provide such assistance and co-operation as practicable upon reasonable request by the second plaintiff in order for the second plaintiff to perform its obligations under the DA.

25 Finally, cl 13 of the DA provides the circumstances in which the second plaintiff or the defendant was entitled to terminate the DA, including upon a material breach which was not capable of being remedied.

26 I now turn to the MSA. The Term of the MSA commences on 24 April 2020 until 31 December 2021 with three automatic renewals, each of one year. However, cl 4.3 provides that the MSA terminates automatically if the defendant's License Agreement with Energizer expires or terminates for any reason.

27 Pursuant to the MSA, the parties agreed that the first plaintiff would be the exclusive supplier and manufacturer of the Licensed Products to the defendant [cl 2.2]. In support of this exclusive right the defendant also agreed that:

(1) the defendant must not itself, nor permit another person to, purchase from any person other than the first plaintiff the Licensed Products or any Competing Products except with the prior written consent of the first plaintiff [cl 2.2(b)];

(2) the defendant must not itself, nor permit any other person to, develop and manufacture the Licensed Products [cl 2.2(a)]; and

(3) the defendant must not purchase from, or authorise to be sold by, any person other than the first plaintiff, or itself develop, supply or recommend and/or distribute, any software to be used with the Licensed Products, except with the first plaintiff's prior written consent [cl 2.2(c)].

28 In turn, the first plaintiff agreed that it must supply the Licensed Products exclusively to the defendant, and that the second plaintiff must not supply the Licensed Products to any other person [cl 2.3(a)]. Further, the plaintiffs agreed that while the MSA remained on foot, they would not sell Products to any person other than the first defendant and that they would not develop and manufacture any Competing Products except with the defendant's prior written consent [cl 2.3(b)(i)].

29 Clause 10 of the MSA relates to product development and innovation. Clause 10.2(a) provides, in summary, that the first plaintiff must continuously undertake research and development in relation to the Licensed Products and seek to identify improvements to enhance their quality, energy efficiency and effectiveness (the Improvements).

30 Clause 10.2(b) relates to offering the defendant a right of first refusal in respect of any Improvements. In summary, it provides:

(1) if the first plaintiff identifies Improvements or develops new products which would constitute Competing Products (New Products), the first plaintiff must immediately give the defendant a notice setting out the details of the New Products, including the price of the New Products (New Products first refusal notice) and offer to supply the New Products exclusively to the defendant under the MSA or otherwise on the terms set out in the notice [cl 10.2(b)];

(2) the defendant within 15 business days after receiving the New Products first refusal notice is required to indicate whether it is willing to purchase the New Products from the plaintiff on the same terms as set out in the New Products first refusal notice [cl 10.2(c)]; and

(3) if the defendant rejects the New Products first refusal notice, the plaintiff is entitled to offer to any third party the opportunity to purchase the New Products on terms not less favourable than contained in that notice and to supply the New Products to that third party, notwithstanding the other terms of the MSA [cl 10.2(f)].

31 Clause 10.3 relates to the first plaintiff's obligation to apply for certification of any Product for sale by the relevant regulatory bodies. In summary it provides that:

(1) as soon as practicable after the date of the MSA, the first plaintiff, to the extent that it did not already have regulatory approval to sell the relevant Product in the Territory, must apply for all necessary certifications required to sell the Product in the Territory [cl 10.3(a)]; and

(2) as soon as practicable after the defendant places a Purchase Order in respect of the Products to be supplied within the Non-Exclusive Territory, and no more than 90 days after the date of such a Purchase Order, the first plaintiff, to the extent that it did not already have regulatory approval to sell the relevant Product in the Non-Exclusive Territory, must apply for all necessary certifications required to sell the Product in the Non-Exclusive Territory [cl 10.3(b)].

32 Clause 10.4 relates to the defendant's right of first refusal. Clause 10.4(a) provides:

If, during the Term, [the second plaintiff] has not ordered the Minimum Order Amount during the Order Period under the Distribution Agreement, then the [defendant] may source, develop or obtain the right to sell Competing Products (ROFR Products), in which case the [defendant] must:

(i) give the [first plaintiff] a notice setting out the details of the ROFR Products including the price of the ROFR Products (Right of First Refusal Notice); and

(ii) offer the [first plaintiff] the opportunity to manufacture and supply the ROFR Products under this agreement and otherwise on the terms set out in the Right of First Refusal Notice.

(1) the first plaintiff within 15 business days was required to indicate whether it was willing to manufacture and sell the ROFR Products to the defendant on the same terms set out in the Right of First Refusal Notice [cl 10.4(b)];

(2) if the first plaintiff rejected the offer in the Right of First Refusal Notice, the defendant was entitled to offer to any third party the opportunity to manufacture and supply the ROFR Products on terms not less favourable to the defendant than those contained in the Right of First Refusal Notice [cl 10.4(e)]; and

(3) if the first plaintiff accepted the Right of First Refusal, items 1 and 2 of the schedule (which defined the Products for the purpose of the MSA) will be taken to be updated to include the ROFR Products [cl 10.4(c)].

34 The MSA contains the terms imposing obligations of confidentiality in cl 20 and providing for service of a termination notice in cl 22.2. It also contains terms purporting to limit the liability of a party to another party:

(1) for losses or damages of any kind caused by or resulting from any wrongful, wilful or negligent act or omission of the other party [cl 18.1(a)]; and

(2) for any indirect, special or consequential damages, loss of profits, loss of goodwill, loss of opportunity but not so as to limit that parties' right to recover Loss (as defined in the MSA) where that Loss arises naturally in accordance with the usual course of things from the relevant breach [cl 18.1(b)].

35 As noted above, under the DA, the MOA for 2020 was 1377 units and the MOA for 2021 was 2000 units. In fact in 2020, the second plaintiff ordered 70 units and in 2021 the second plaintiff ordered 1038 units. I note that in 2022, the second plaintiff has ordered 200 units from the defendant. Thus, the second plaintiff did not meet the MOA for 2020 and 2021. However the plaintiffs submitted that the defendant has waived its right to rely, elected not to rely, or is estopped from relying, upon the MOA for 2020 and 2021.

36 In summary, the plaintiffs contended that the MOA requirement could not be achieved in 2020 and 2021 in light of certain disabling events beyond the control of the plaintiffs, namely:

(1) the original certification required for the Licensed Products in 2020 from the Clean Energy Council (CEC) and the approval required from Energizer under its License Agreement with the defendant (both not obtained until December 2020);

(2) COVID-19 supply chain issues; and

(3) the need to seek recertification by late 2021 from the CEC in light of the amended Australian standards released in October 2020 (with recertification not obtained until 2 May 2022).[6]

37 The plaintiffs contended that the defendant expressly or implied waived the requirement to meet the MOA, elected not to rely upon that requirement, or should be estopped from relying upon it in circumstances where:

(1) the defendant was informed by the plaintiffs of the disabling events which impacted the second plaintiff's ability to market and distribute Products and that meant the second plaintiff could not meet the MOA for 2020 and 2021;

(2) the defendant informed the plaintiffs in a meeting in March or April 2021 that it did not require the MOA for 2020 and 2021 to be met and understood the MOA could not be met;

(3) the plaintiffs continued to deal with the defendant on the basis that the MOA would no longer apply, including in negotiations in February and March 2021 and September and October 2021;

(4) the plaintiffs continued to manufacture the Products under the MSA and to place orders for Products under the DA;

(5) the first occasion upon which the defendant raised the failure to comply with the MOA for 2020 and 2021 was on 24 June 2022 in the course of negotiations between the plaintiffs and the defendant: this is notwithstanding that the right arose for the 2020 year on 1 January 2021 and for the 2021 year on 1 January 2022 respectively; and

(6) the defendant first exercised any rights in respect of the failure to comply with the MOA for 2020 and 2021 by the termination notice on 2 August 2022.[7]

38 As to the evidence, in [97] of the first Aganesov affidavit, Mr Aganesov deposed that at all material times he regularly advised representatives of the defendant that COVID-19 and the changes implemented by the CEC, including the recertification, meant that the manufacturing and supply of Products by the first plaintiff could not be undertaken, that the second plaintiff's ability to market and distribute Products was being impacted, and that as a result customer orders were not being made by the second plaintiff and therefore the MOA would likely not be met. In [98] of the first Aganesov affidavit Mr Aganesov deposed that:

For example, during a meeting in or about March or April 2021, I advised [Mr McKeon] that unless the state of emergency improved globally the 2021 MOA will most likely not be met. [Mr McKeon] was very understanding and said words to the effect 'it is not a problem, the world is going through a difficult time'.

39 Mr Aganesov also deposed in his second affidavit at [11] that, in addition to the conversation referred to in [98] of his first affidavit, at a meeting in or about March 2021, Mr McKeon said words, in the context of negotiations for the second plaintiff to forgo its distribution rights in Europe, to the effect that the 'MOAs will no longer apply for [the second plaintiff] as we are taking on the exclusive distribution in Europe'. This statement was made in a different context to the disabling events. I will deal with any agreement for exclusive rights in Europe further below.

40 The plaintiffs allege that, as a result, the defendant represented to the plaintiffs, or alternatively induced the plaintiffs to assume, or alternatively the plaintiffs adopted the common assumption (common assumption) that:

(1) the second plaintiff was not required to meet the MOA for the 2020 Period or the 2021 Period; and

(2) the second plaintiff was not required to comply with cl 5.2 of the DA and therefore was no longer required to comply with the MOA requirement specified in the DA.

41 The plaintiffs allege that in reliance upon these matters, the plaintiffs:

(a) agreed to forgo the exclusivity rights in the Territory in accordance with the requests made by the defendant;

(b) agreed to withdraw entirely from the Non-Exclusive Territory in accordance with the requests made by the defendant;

(c) diverted time and resources to assisting with European accreditation as required by the defendant and to assisting the defendant with the development of alternative products; and

(d) refrained from taking steps, including pre-emptive steps, to protect the second plaintiff's rights under the DA.

42 As to [41](a), (b) and (c), the plaintiffs alleged that:

(1) in February and March 2021, the second plaintiff agreed to the defendant's request to distribute the Licensed Products exclusively in Europe (via Voltalia), notwithstanding that the defendant failed to provide a Right of First Refusal Notice as required under the DA, on the basis that the defendant would pay an increased price per unit for the Licensed Products supplied by the first plaintiff and that the MOA for 2021 would not be enforced; and

(2) in September and October 2021 respectively, the second plaintiff agreed to the defendant's request to sell the Licensed Products to MM Electrical and the Sunova Group for on-sale of those Products in the Territory, on the basis that the defendant would pay an increased price per unit for the Licensed Products to be sold to MM Electrical and Sunova and that the MOA for 2021 would not be enforced.

43 The Aganesov affidavits generally supported these allegations. However, and significantly, in the course of oral argument, counsel for the plaintiffs informed the Court that his instructions were that no concluded agreement had been reached on the terms of the agreement in respect of the defendant exclusively supplying Licensed Products in Europe.

44 In oral argument, the plaintiffs relied in particular upon the principles relating to common assumption or estoppel by convention, namely:

(1) an assumed state of affairs based upon a course of dealing or some other acts or declarations as to a matter of fact or a matter of legal effect;

(2) where it would be unjust to allow either party to insist upon strict reliance on the terms of the original contract in light of that assumed state of affairs; and

(3) departure from the assumed state of affairs will occasion detriment to the plaintiff.[8]

45 In all these circumstances the plaintiffs contended that there is a serious question to be tried as to whether the defendant waived its right to rely, elected not to rely, or is estopped from relying, upon the MOA.

46 In summary, the defendant submitted there was no serious question to be tried given:

(1) that the defendant disputed the factual basis of the plaintiffs' claims in respect of the MOA, including the making of any representation that the MOA would not apply; and

(2) the alleged inconsistencies between the allegations in the IOW and the Aganesov affidavits.

47 The defendant submitted that, even if the plaintiffs established there was a serious question to be tried in respect of the MOA, any such claim was weak.

48 First, based on the McKeon affidavit, the defendant submitted that:

(1) the defendant entered into the MSA and the DA because the plaintiffs represented that their 'Tomorrow' product had obtained certification and could be sold under the Energizer label all within a short period of time; and

(2) after the MSA and the DA were entered into, the plaintiffs continued to make optimistic predictions and forecasts of sales and production.

49 The defendant submitted that this cast doubt upon the veracity of Mr Aganesov. I note that in the third Aganesov affidavit, Mr Aganesov denied that the defendant was not aware prior to entering the MSA and the DA of the need to recertify the 'Tomorrow' product after the Energizer re-branding. Further, he deposed that while he did not dispute that forecasts were provided by the plaintiffs, they were optimistic, including because he did not then know of the disabling events or their impacts. In any event, the defendant intended to issue a counterclaim based upon this representation.

50 Second, based on the Marciano affidavit, the defendant:

(1) disputed that there were delays in obtaining Energizer approval in 2020; and

(2) contended that any delays in obtaining certification in 2020 or, as a result of the new 2020 standard, were due to the plaintiffs.

51 The substance of these matters were also disputed in the third Aganesov affidavit.

52 Third, the defendant noted that the parties entered into a variation deed to remove the initial order amount under cl 5.2(a) of the DA. However, there has been no variation to the MOA in the DA at any time.

53 Fourth, as to the MOA, the defendant submitted that it was only in the second Aganesov affidavit that Mr Aganesov suggested for the first time that the MOA would no longer apply. The defendant relied upon Mr McKeon's denial that there were any discussions in meetings with the plaintiffs on 12, 19 or 30 March 2021 in relation to the reduction of the MOA. It submitted that the minutes of these meetings did not refer to any discussion of the reduction of the MOA.

54 Further, as to discussions concerning Voltalia, MM Electrical and the Sunova Group, Mr McKeon deposed that at no stage during these discussions did the plaintiffs mention reducing the MOA or seek that the MOA not be enforced, and that Mr McKeon did not say anything to that effect. Mr McKeon deposed that there was never any agreement to vary the MOA.

55 Fifth, the defendant relied upon the fact that there was no reference in the contemporaneous documents that the MOA no longer applied and that some documents were inconsistent with such a suggestion.[9]

(1) there were no unequivocal acts of the defendant relied upon by the plaintiffs which could found any waiver or election;

(2) the evidence did not support any claim based on a representation that the MOA would not apply; and

(3) the detriment relied upon was not true detriment given that the allegations in the IOW and the Aganesov affidavits referred to detriment suffered by each of the first and second plaintiffs which could not in fact be suffered by them.

57 In all these circumstances the defendant submitted that even if the plaintiffs establish there was a serious question to be tried in respect of the MOA, any such claim was weak. The defendant contended that even if there was a relevant waiver, election or estoppel in respect of the MOA under the DA, there was no such relevant waiver, election or estoppel in respect of the MOA under cl 10.4(a) of the MSA.

58 In summary, I have formed the view that there is a serious question to be tried as to whether the defendant is estopped from relying upon the MOA requirements, at least for 2020 and 2021, for all purposes under the DA and the MSA. I consider it unnecessary to make any finding beyond that period in light of the fact that the injunctions sought only relate to notices relying upon the MOA applying for those years.

59 My conclusion in [58] is based upon the evidence before me to the effect that:

(1) the fact of the disabling events (outside the control of the plaintiffs) and which caused issues both with the manufacture and sale of Products in 2020 and 2021;

(2) these matters were known to and discussed with the defendant;

(3) the evidence in [97], and the statement in [98] of the first Aganesov affidavit which was made by Mr McKeon in the express context of COVID-19 (which affected the 2020 year and the 2021 year);

(4) the time to exercise any right in respect of the 2020 and 2021 MOA arose on 1 January 2021 and 1 January 2022 respectively;

(5) the second plaintiff under the DA and the defendant under the MSA placed orders for Products including on 1 August 2022 and negotiated some changes to these agreements; and

(6) the defendant failed to rely upon the MOA for 2020 and 2021 until the service of the termination notice in the course of negotiations to revise or vary the terms of the DA and the MSA.

60 Of course, if the defendant is correct and an agreement was reached to give the defendant exclusive rights in Europe, then the evidence of Mr Aganesov set out in [11] of his second affidavit assumes more significance.

61 I am conscious that some of these factual issues are disputed by the defendant. Most relevantly, Mr McKeon deposed that there was no discussion during meetings on 12 March, 19 March and 30 March 2021 of a reduction in the MOA. However, disputed matters of fact are not to be determined or addressed in interlocutory applications such as this.

62 Further, in my opinion, the plaintiffs have a reasonably strong case based upon common assumption or conventional estoppel consistent with the principles set out at [44] above. In my view, any common assumption or conventional estoppel between the parties in relation to the MOA applied not only to the DA, but also to the MSA, particularly given the interrelationship between these agreements.

63 As noted above, the defendant contended that the plaintiffs' case is weak, including because it was very unlikely that the defendant would agree not to enforce the MOA without the matter being referred to expressly in correspondence. I am unable to accept that submission at this stage of the proceeding, notwithstanding the extensive correspondence exhibited to the affidavits in this application. Rather, my experience as a lawyer and as a judge, and my reading of the correspondence disclosing the conduct of the parties to this proceeding, leads me to conclude that the conduct of the parties was not always undertaken through the prism of, or having regard to, binding contractual terms.

64 As to the defendant's submission that there is no relevant reliance for a claim of equitable estoppel, as noted in [44] above, the doctrine of conventional estoppel looks not to past detriment but the detriment that would occur in the event that the common assumption is resiled from.

65 In any event, I am satisfied that there is a serious question to be tried as to whether the plaintiff acted to its detriment in light of the matters set out in [41] and as deposed to in [119] of the first Aganesov affidavit. This is notwithstanding that [119] of the first Aganesov affidavit has been inelegantly or perhaps even incorrectly expressed. As is made plain in the first Aganesov affidavit at [147], the plaintiffs' entire business model is reliant upon the Energizer license held by the defendant. Further, I am satisfied that the plaintiffs have ordered their affairs under each of the MSA and the DA in conjunction with each other and as part of a package of agreements.

66 The plaintiffs also submitted there was a serious question to be tried as to whether the course of conduct undertaken by the defendant was in breach of express or implied obligations under the MSA and the DA, including the duty to cooperate and the obligation of good faith.

67 I wish to point out that the plaintiffs' allegations changed from the time that this proceeding was issued until the hearing of the interlocutory injunctions. This was not the fault of the plaintiffs or their legal advisors. Rather, the changes came about because of the affidavit material filed by the defendant which disclosed that, prior to the service of the notices, the defendant had engaged in a course of conduct to source hybrid batteries from Fox and to enter into the European hybrid battery purchase orders.

(1) from at least late 2021 the parties were in discussions concerning the development of a potential hybrid battery to distribute in Europe in 2022;

(2) by email dated 3 March 2022, the plaintiffs advised that they had a hybrid battery which would meet the defendant's specification subject to some changes, that the first plaintiff would develop a prototype for the Intersolar conference in Germany in May 2022 and that the plaintiffs would aim to have the hybrid battery certified by October 2022;

(3) in April 2022, the plaintiffs presented their specifications for their hybrid battery and had prepared a functional prototype and requested that the defendant sign a non-disclosure agreement in relation to their hybrid battery (the NDA) because Mr Aganesov suspected that the defendant was negotiating with a third party for the supply of hybrid batteries. The defendant refused to sign a non-disclosure agreement;

(4) on 6 May 2022, the defendant informed the plaintiffs that the defendant had not obtained the necessary approval from Energizer to display the prototype hybrid battery at the Intersolar conference. However, at about this time, Mr Marciano informed Mr Aganesov in the context of discussing hybrid batteries that the defendant had 'gone with Fox';

(5) while the defendant did not display the plaintiffs' prototype hybrid battery at the defendant's booth at the Intersolar conference, the defendant did display a Fox hybrid battery painted with the Energizer label;

(6) at about this time, representatives of the defendant said words to the effect that the defendant painted the Fox hybrid because it didn't expect the plaintiffs to get the prototype hybrid battery ready in time;

(7) on 16 May 2022, a representative of the defendant said that it was a pity that the defendant could not get approval from Energizer for the Fox hybrid battery or the plaintiffs' prototype hybrid battery in time for the Intersolar conference;

(8) by reason of the matters set out in (4), (5), (6) and (7) above, and (9) below, prior to the service of the notices, the defendant had taken steps to procure the sourcing of the supply and development of, and the right to sell, hybrid batteries from Fox for supply in Europe;

(9) prior to the service of the notices, the defendant had taken steps to procure the sale of hybrid batteries from Fox in Europe, namely the European hybrid battery purchase orders, save for the last purchase order dated 8 August 2022;

(10) in early August 2022, while negotiations were on foot as to the revision of the DA and the MSA, the defendant served the notices; and

(11) the terms of the first refusal notices were, to the knowledge of the defendant, impossible for the first plaintiff to comply with and/or agree to.

69 There are two first refusal notices. For convenience, in these reasons, I will refer to the details of the notice relating to the All In One hybrid battery (the Hybrid first refusal notice), which the plaintiffs acknowledge was similar to the hybrid battery it had developed but with additional specifications and commercial terms. That notice contained the following terms:

(1) all specifications and certification documents for Germany, Italy, Poland, the United Kingdom, and the Netherlands (the Priority Countries) must be provided to the defendant with any ROFR acceptance notice (i.e. within 15 days of the first refusal notice) in response to the first refusal notice (term 4);

(2) in addition to the documents listed in (1) above, proof of submission for testing for Spain and France (the Secondary Priority Countries) must be provided to the defendant by no later than 31 August 2022 (term 5);

(3) in addition to the documents listed in (1), proof of submission for testing or near readiness for submission for testing in Portugal and Greece (the Low Priority Countries) must be provided to the defendant by no later than 31 October 2022 (term 6); and

(4) if the first plaintiff provides a ROFR acceptance notice, the first plaintiff is deemed to warrant that it is capable of complying with any purchase orders for the ROFR Products received from the defendant:

(a) within 15 business days of the date of each purchase order for the Priority Countries;

(b) within 15 business days of the date of each purchase order received after 31 August 2022 for the Secondary Priority Countries; and

(c) within 15 business days of the date of each purchase order received after 31 October 2022 for the Low Priority Countries (term 7).

70 Further, term 9 of the Schedule to the Hybrid first refusal notice provided:

Proof of all certifications detailed at paragraph 8 of this Schedule above must be supplied to [the defendant] with any ROFR Acceptance Notice provided in response to this Right of First Refusal Notice. If proof of the relevant certifications are not provided, the provisions of clause 10.4 (d) of the [MSA] will be deemed to apply such that [the first plaintiff] will be taken to have rejected the offer contained in this Right of First Refusal Notice...[10]

71 The plaintiffs contended that this course of conduct was in breach of express or implied obligations of cooperation, of good faith and/or to act reasonably in the DA and/or the MSA and was unconscionable.

72 As to the terms of the first refusal notices, Mr Aganesov deposed that these terms imposed a completely unachievable timeframe. This was because, among other things, as the defendant was aware from the certification of Products undertaken in 2020, it would take at least six months to obtain certification in the Priority, Secondary Priority and Low Priority Countries. Thus the first plaintiff could not give the warranty in term 9. Nor could it reasonably comply with terms 4 to 7. Thus the prospects of the first plaintiff complying with or agreeing to these terms was, to the knowledge of the defendant, illusory. Indeed, the plaintiffs submitted that by deliberately including these terms in the first refusal notices the defendant was seeking to secure for themselves the right to sell hybrid batteries in the Non-Exclusive Territory and also in the Territory.

73 Further, the plaintiffs submitted that term 9 was inconsistent with cl 10.3 of the MSA which contained obligations on the first plaintiff to apply for certifications of Products where certification had not yet been obtained. They relied upon cl 10.4(c) of the MSA to submit that, if the first refusal notices were accepted, the ROFR Products would be taken to be a Product for the purpose of the MSA. As a result, under cl 10.3, the only obligation on the first plaintiff in respect of the Non-Exclusive Territory was to apply for all necessary authorisations as soon as reasonably practicable after the defendant placed a purchase order, and in any event, no more than 90 days after the date of any such order.

74 The second first refusal notice related to the 'AC battery charger + Stackable Storage configuration, Hybrid inverter + Stackable Storage solution' (the AC first refusal notice). For the most part, the AC first refusal notice was the same as the Hybrid first refusal notice but there were some differences, relevantly, in the definition of the Priority Countries (Germany, Italy and France), the Secondary Priority Countries (the UK, Poland, Spain and the Netherlands) and the Low Priority Countries (Portugal, Greece, the USA, Canada and Mexico).

75 The plaintiffs alleged that the AC first refusal notice was also in breach of express and implied obligations of the DA and/or the MSA for reasons in addition to those relating to the Hybrid first refusal notice. This was because the first plaintiff had not yet developed a product of the kind specified in the AC first refusal notice and had not been aware, prior to receipt of that notice, that the defendant wished to develop such a product.

76 The defendant's evidence was to the effect that:

(1) since at least April 2021, the plaintiffs had been on notice of the defendant's desire to sell hybrid batteries of the type described in the first refusal notices which were of increasing popularity in Europe;

(2) the defendant had been asking from at least June 2021 for the plaintiffs to develop a hybrid battery including by asking for a 'hybrid roadmap' i.e. information about the specification of the first plaintiff's hybrid product, including what products would be available for delivery and when. No roadmap had been provided despite promises to do so;

(3) in March 2021, after being informed of the defendant's specifications for a hybrid battery (including pricing) and the desire for delivery 120 days after 1 March 2022, the plaintiffs responded that they wanted to formulate a new agreement and would share details of work done on their hybrid battery after a MOU [memorandum of understanding] was executed; and

(4) the plaintiffs refused to provide the defendant with the details of their hybrid battery unless the defendant signed the NDA which the defendant refused to do given: (1) the confidentiality provisions in the MSA; and (2) the terms of the NDA were more onerous than, and inconsistent with, the MSA.

77 As a result of these matters and the apparent failure of the first plaintiff to develop a New Product in breach of cl 10.2 of the MSA the defendant:

(1) had sourced from a company called Fox two hybrid batteries for anticipated sale in the Non-Exclusive Territory, namely Europe and North America, to be manufactured under the Energizer label:

(a) the All In One hybrid battery which is certified for, and has been available for sale in Europe since 2020; and

(b) the Energy Cube which was certified for sale in Europe on 1 April 2022; and

(2) had entered into the European hybrid battery purchase orders.

78 Further, the defendant's evidence was to the effect that it intends to bring the All In One hybrid battery into Australia but not before mid-2023. This is in circumstances where the All In One hybrid battery is not yet approved by the CEC for sale in Australia.

79 The defendant submitted that in these circumstances the second plaintiff's performance as distributor has been extremely poor and that the defendant now wishes to engage other distributors and make sales through other channels. The defendant submitted that it is precisely for this eventuality that the MOA requirement was imposed, namely, to allow the defendant to end its relationship with its underperforming distributor and, in those circumstances, have New Products manufactured elsewhere subject only to a right of first refusal to the existing supplier.

80 In these circumstances the defendant submitted that there had been no breach of express or implied terms of the MSA or the DA, in particular cl 10.4(a) of the MSA, before issuing the notices, either:

(1) by sourcing from Fox hybrid batteries for anticipated sale in the Non-Exclusive Territory under the Energizer label and by displaying the Fox All In One hybrid battery and the Energy Cube with an Energizer label;[11] or

(2) by entering into the European hybrid battery purchase orders.

81 Further, the defendant submitted that there was no breach of the express or implied terms of the MSA by reason of the terms of the first refusal notices. In oral argument the defendant submitted that it could impose 'any terms' and then 'any commercial' terms it liked. In addition, the defendant submitted that cl 10.3 of the MSA was not relevant as it only referred to Products and a ROFR Product was not a Product for the purpose of that clause.

82 The defendant submitted that no general obligation of good faith or cooperation should be implied into the MSA. This is in circumstances where an express obligation of good faith was included in the DA, but no such express term was included in the MSA, notwithstanding the inter-relation between these agreements and the parties to them.

83 In response, Mr Aganesov deposed that the first plaintiff has been developing its own hybrid battery. He deposed that:

(1) he provided regular updates on its development to the defendant;

(2) instructions were given to progress its certification for Poland on 17 January 2022 and for Italy, the United Kingdom, Spain, Portugal, France and Greece on 1 April 2022; and

(3) as at 5 September 2022, it is 'on track' for certification by 30 October 2022.

84 Further, the plaintiffs submitted that it was open to the Court to infer that the inclusion of the terms in the first refusal notices was a deliberate one in order to prevent the first plaintiff from having a reasonable opportunity to consider and meet those terms. It was submitted that the terms were constructed to make sure that the first refusal notices had no prospect of ever possibly being accepted.

85 In summary, I have formed the view that there is a serious question to be tried as to whether:

(1) the terms of the first refusal notices at the very least were in breach of the implied obligation of cooperation under cl 10.4 of the MSA; and

(2) by the course of conduct referred to at [86] the defendant was in breach of the implied obligation of cooperation, or of good faith and/or reasonableness, or cl 10.4 of the MSA as properly construed.

86 The relevant course of conduct leading to the notices which I have considered is as follows:

(1) from at least late 2021 the parties were in discussions concerning the development of a potential hybrid battery to distribute in Europe in 2022 in light of the defendant's desire to sell hybrid batteries in Europe;

(2) by email dated 3 March 2022, the plaintiffs advised that they had a hybrid battery which would meet the defendant's specifications subject to some changes, that the first plaintiff would develop a prototype for the Intersolar conference and that the plaintiffs would aim to have the hybrid battery certified by October 2022;

(3) in April 2022, the plaintiffs presented their specifications for their hybrid battery, had prepared a functional prototype hybrid battery and requested that the defendant sign a non-disclosure agreement in relation to their battery because Mr Aganesov suspected that the defendant was negotiating with a third party for the supply of hybrid batteries. The defendant refused to sign a non-disclosure agreement;

(4) while the defendant did not display the plaintiffs' prototype hybrid battery at the defendant's booth at the Intersolar conference, the defendant did display a Fox hybrid battery under the Energizer label;

(5) prior to the service of the notices, the defendant had taken steps to procure at the very least the sourcing of the supply from Fox of hybrid batteries for supply in Europe;

(6) prior to the service of the notices, the defendant had taken steps to procure the sale of hybrid batteries (most likely from Fox) in Europe namely the European hybrid battery purchase orders, save for the last purchase order dated 8 August 2022;

(7) in early August, while negotiations were on foot as to the revision of the DA and the MSA, the defendant served the termination notice and the first refusal notices; and

(8) the terms of the first refusal notices were, to the knowledge of the defendant, impossible for the first plaintiff to comply with and thus agree to.

87 As to the terms of the first refusal notices, I do not accept the submission of the defendant that it was at liberty to impose 'any terms' or 'any commercial terms' it liked. In my view, at the very least, any such submission was inconsistent with the implied term that each party will do all things necessary to enable the other party to have the benefit of the contract.[12] To the contrary, in my view, the defendant could not impose a term or terms which would have the effect of depriving the first plaintiff of a reasonable opportunity to meet all the terms in the refusal notices. This is particularly so in light of the objective intention of cl 10.4(a) (i.e. to give the first plaintiff an opportunity to consider whether it could or should manufacture the ROFR Product) and in light of the consequences of a failure to accept a first refusal notice in cl 10.4(e).

88 As to the particular terms in the first refusal notices, I refer, in particular, to terms 4, 7, 8 and 9 of the Hybrid first refusal notice. I note that similar terms were also contained in the AC first refusal notice at terms 5, 8, 9 and 10 respectively, subject to the differences set out in [74] above. I also refer to the evidence of Mr Aganesov, in particular in relation to certification.

89 Terms 8 and 9 of the Hybrid first refusal notice relating to certifications are of particular concern in light of this evidence. As noted above, terms 8 and 9 require proof of the relevant certifications within 15 days of the date of the first refusal notice for the Priority Countries. In my view, to the likely knowledge of the defendant in the circumstances of this case, these terms would at the very least deprive the first plaintiff of any real opportunity to meet or agree to them.

90 The same comments apply in respect of similar terms (terms 9 and 10) in the AC first refusal notice. Further, it is important to recall that in the case of the AC first refusal notice, the first plaintiff has not yet developed such a product and was not aware that the defendant wished to develop such a product before the service of that notice.

91 Further, term 7 of the Hybrid first refusal notice (term 8 of the AC first refusal notice) imposes a warranty that the first plaintiff is capable of complying with any purchase orders for the ROFR Products within 15 days of the date of each purchase order for the Priority Countries, and within 15 days of the date of each purchase order received after 31 August 2022 for the Secondary Priority Countries. In my view, there is a serious question to be tried that such a warranty could not be met or achieved by the first plaintiff. This is in circumstances where the first refusal notices are dated 4 August 2022 and in the context of the course of events leading up to these first refusal notices. I also refer to my comments in [90] in respect of the AC first refusal notice.

92 For completeness, I also consider that there is a real issue as to whether these terms are inconsistent with the provisions of cl 10.3 of the MSA. This is because it is clearly arguable that on its proper construction, cl 10.3 would include ROFR Products, at least if the first refusal notice was accepted.

93 In all these circumstances I consider that there is a serious question to be tried as to whether, by including these terms in the first refusal notices, the defendant was, at the very least, in breach of the implied obligation of cooperation under cl 10.4 of the MSA that the defendant would do all things necessary to enable the first plaintiff to have the benefit of the right of first refusal, namely a reasonable opportunity to agree to those terms.

94 Further, I am satisfied that there is a serious question to be tried as to whether the conduct of the defendant in [86](1) to (6) leading up to the first refusal notices (in particular in sourcing products from Fox and entering into the European hybrid battery purchase orders before issuing the notices) is in breach of an implied obligation of cooperation, of good faith and/or to act reasonably or a breach of the terms of cl 10.4(a) as properly construed.

95 As to the duty to cooperate I refer to my comments in [87] above. As to the duty of good faith and/or to act reasonably, I consider that the absence of an express term in the MSA (compared to the DA) is not in my view fatal to its implication into a clause such as cl 10.4. I refer to my comments relating to the objective intention of that clause in [87] above. I note that the content of the obligation of good faith and to act reasonably appear to ov[13]lap, at least in part.13 As to the terms of cl 10.4, I am conscious that cl 10.4(a) does not in its terms allow the defendant to enter into a supply agreement. Any final view on the construction of the clause must await trial in light of the context of the MSA and the other relevant contractual terms. So too must the exploration of the factual circumstances giving rise to the European hybrid battery purchase orders in the context of other aspects of the course of conduct, including the notices. I am conscious that counsel for the defendant informed me no contract or agreement to supply with Fox had been entered into by the defendant, notwithstanding their dealings and those purchase orders: however there was no evidence to that effect.

96 Relatedly, in the course of oral argument, the defendant submitted in effect that, in light of the failure of the first plaintiff to develop a hybrid battery, notwithstanding the requests of the defendant and the failure of the second plaintiff to promote the Products, the defendant was left with no choice but to source hybrid batteries from Fox, to enter into the European hybrid battery purchase orders and to issue the first refusal notices in the terms in which it did. I do not accept this argument. It was not explained to me why it was not open to the defendant to issue a notice of breach under the MSA in respect of any perceived failure to develop New Products or pursue certifications.

97 As to the strength of the second serious question to be tried, I consider that, on the evidence before me, there is a reasonably strong claim in relation to the terms of the first refusal notices. As to the course of conduct, I consider that the circumstances in which the defendant sourced the hybrid batteries from Fox, entered into the European hybrid battery purchase orders and drafted and served the notices raise serious questions about the conduct of the defendant and its officers.

98 Further, I wish to record my view that, on the evidence before me, there is a basis to conclude that the defendant deliberately engaged in a course of conduct to deprive the first plaintiff of the opportunity to meet all the terms in the first refusal notices and thus to agree to them. This seems particularly so in light of other aspects of the course of conduct. I make these comments conscious that the evidence before me may be very different to the evidence called at the trial.

99 In summary, the plaintiff submitted, based on the Aganesov affidavit, that:

(1) the termination of the DA will likely result in the plaintiffs having to cease trading;

(2) the termination of the DA will likely result in loss of reputation and goodwill by the plaintiffs; and

(3) neither of these kinds of harm are compensable by merely an award of damages.

100 As to the sufficiency of damages, Mr Aganesov deposed that it would be difficult, if not impossible, to assess and/or quantify the damages that flow from the defendant's termination of the DA and issuance of the first refusal notices given a lack of reliable data and information due to COVID-19 related issues.

101 As to potential harm, Mr Aganesov deposed that as the plaintiffs' entire business model is reliant upon the Energizer license held by the defendant, if the termination notice and the first refusal notices are not withdrawn or set aside, both businesses will be unable to continue trading. This is because under the MSA:

(1) the first plaintiff must supply Products to the defendant but cannot supply them to any third person [cl 2.3(a)];

(2) the first plaintiff is unable to manufacture a Competing Product without first offering it to the defendant; and

(3) there is no mandatory MOA on the defendant i.e. the defendant could order no Products yet the first plaintiff will still be bound by the terms of the MSA.

102 As to paragraph [101](2), I note that:

(1) cl 2.3(b) provides that the plaintiffs must not sell to any person other than the defendant, or itself develop or manufacture any Competing Products except with the defendant's prior written consent; and

(2) cl 10.2 provides that the first plaintiff cannot develop new products that would constitute Competing Products without first offering such a product to the defendant.

103 Further, Mr Aganesov deposed that, in the event that the defendant consented to the first plaintiff manufacturing and supplying Products or Competing Products to third parties, the products would need to be rebranded and recertified and that it was uncertain whether the plaintiffs have the resources to undertake the rebranding and recertification processes if the injunctions were not granted.

104 Mr Aganesov deposed that the plaintiffs have 7 full-time employees and 20 contract employees who work on a full-time basis and, if the plaintiffs are unable to generate revenue, they will be unable to retain their employees or continue engaging contractors.

105 Mr Aganesov also deposed that the second plaintiff has existing agreements to supply Licensed Products within the Territory and that, if the DA is terminated, the second plaintiff will be unable to supply those Products. However, in the course of oral argument, counsel for the defendant indicated that the defendant was willing to allow the second plaintiff to meet these orders.

106 In the course of oral argument, I asked counsel for the plaintiffs whether damages would be an adequate remedy if there was no injunction granted in respect of the first refusal notices. In summary, counsel for the plaintiffs replied that the MSA and the DA were part of a suite or package of agreements and that it was difficult to determine whether damages were adequate in respect of each injunction. Nevertheless, he submitted that there would be at the very least reputational damage to the first plaintiff, which is now associated with the Energizer label, and in respect of which damages would be an inadequate remedy.

107 In summary, as noted above, the defendant submits that, unless the injunctions are refused, the defendant will suffer significant loss, in particular, the inability to pursue the hybrid batteries in the Non-Exclusive Territory. Of course, this argument is premised on the basis that:

(1) the defendant is ready to distribute and sell hybrid batteries in Europe;

(2) the first plaintiff cannot supply these products, at least not prior to 30 October 2022; and

(3) it is important that the defendant move into the market as quickly as possible.

108 In summary, the defendant submitted that it would lose critical business opportunities relating to hybrid batteries and suffer significant financial losses if the injunctions were granted. It was unclear in the defendant's submissions and affidavit material whether the phrase 'if the injunction is granted' referred to an injunction preventing the termination of the DA or an injunction preventing the operation of the first refusal notices.

109 This is in a context where the defendant submitted that:

(1) the first plaintiff had not pursued the defendant's request to develop a new hybrid battery, or had failed to develop New Products like hybrid batteries which would constitute Competing Products; and

(2) the second plaintiff's performance as distributor has been extremely poor and that the defendant now wishes to engage other distributors and make sales through other channels.

110 Mr McKeon deposed as to the harm which would be caused to the defendant if the injunctions were granted.

111 First, Mr McKeon deposed as to the defendant's inability to complete the European hybrid battery purchase orders. Mr McKeon deposed that the defendant has received purchase orders for hybrid batteries to be supplied in Europe which will be unable to be supplied if injunctive relief were granted. The relevant orders are:

(1) an order for 36,500 units dated 22 June 2022 totalling approximately €44 million;

(2) an order for 8000 units dated 27 June 2022 totalling approximately €688,000;

(3) an order for 7500 units dated 29 July 2022 totalling approximately €8.2 million; and

(4) an order for 1500 units dated 8 August 2022 totalling approximately €2.2 million.

112 As previously noted, except for the order dated 8 August 2022, those orders were placed before the first refusal notices were sent to the plaintiffs. While the orders were for the most part in German, there was no apparent delivery date.

113 Second, there is the inability from the time the injunctions are granted to exploit the hybrid battery market in the Non-Exclusive Territory (relevantly, Europe and North America). This is in circumstances where Mr McKeon deposed that demand for hybrid products is growing in the Non-Exclusive Territory and the defendant is now ready, willing and able to source and sell hybrid batteries while the first plaintiffs is yet to have a hybrid battery ready for sale.

114 The defendant relied upon the apparent agreement with the second plaintiff for the defendant to have exclusive distribution rights in Europe. Further, Mr McKeon deposed that one of the options that the defendant would like to explore is granting exclusive distribution rights to a North American based distributor, subject to meeting minimum order amounts. He deposed that:

(1) the defendant is more likely to be able to enter into a distribution agreement with a large US distributor if the arrangement is exclusive; and

(2) the defendant would not be able to enter into any distribution arrangement with the US distributor, even on a non-exclusive basis, if the defendant was prevented from sourcing hybrid batteries from Fox or other manufacturers besides the first plaintiff.

115 Mr McKeon then deposed as to the likely loss of revenue from these international markets. The estimated likely loss was based upon information he had received from the Chief Financial Officer (CFO) of the defendant. Mr McKeon deposed that:

(1) for the year ended 30 June 2023, there would be projected revenue from these international markets of approximately $100 million and projected earnings before interest, taxes, depreciation and amortization (EBITDA) of $8.67 million; and

(2) for the year ended 30 June 2024, there would be projected revenue of approximately $360 million and projected EBITDA of approximately $54.5 million.

116 Further he deposed that, if the injunctions sought were granted, it would have the effect of preventing the defendant from making sales to the European and United States markets as a result of which the defendant would lose:

(1) for the year ended 30 June 2023, revenue of approximately $53 million, resulting in EBITDA of - $2 million; and

(2) for the year ended 30 June 2024, revenue of approximately $150 million, resulting in a reduction of EBITDA by $40 million.

117 These estimated losses are, on their face, very large.

118 Third, Mr McKeon deposed that, if the injunctions sought were granted, it would affect the defendant's forecast sales in the Territory. Relevantly, he deposed that if the injunctions were granted and the defendant could only make sales to the second plaintiff, MM Electrical and the Sunova Group in the Territory:

(1) for the year ended 30 June 2023, the defendant's projected sales revenue would be reduced by at least $5 million and the projected EBITDA would be -$3.7 million; and

(2) for the year ended 30 June 2024, the defendant's projected sales revenue would be reduced by at least $7.5 million and the projected EBITDA would be -$2.25 million.

119 Fourth, Mr McKeon deposed that, if the injunctions sought were granted, he did not believe that the defendant has any prospect of obtaining finance to pay the minimum guaranteed royalty payment to Energizer of USD2.85 million by 30 September 2022 and that he believed that the defendant 'will likely not be able to pay the September Royalty Payment'.

120 Fifth, the defendant submitted that the suggested harm to the plaintiffs, if no injunctions sought were granted, is overstated. This is because the first plaintiff can continue to manufacture Products and sell to the defendant its existing Licensed Products. As to the second plaintiff, the defendant submitted that it can continue to sell the Licensed Products in the Territory. Further, the second plaintiff has already shown a willingness to agree to other distributors being appointed by the defendant to sell Products in the Territory (namely MM Electrical and the Sunova Group) which are the only countries in which the plaintiffs operate.

121 The defendant submitted that the demand for those Products in the Territory will not in the short-term be affected by hybrid batteries given that the defendant has no applicable immediate plans to sell hybrid batteries in the Territory.

122 Sixth and significantly, the defendant relied upon the sufficiency and the adequacy of the undertaking as to damages. The defendant relied upon Mr Aganesov's affidavit to the effect that it is very unlikely that the plaintiffs will have liquidity to rebrand and recertify products. It also relied upon the balance sheet of each of the first and second plaintiff as at 30 June 2022. I have had regard to the balance sheet of each plaintiff for the purpose of reaching my decision in this application, however will not refer to them as they are contained in a confidential exhibit.

123 As a result, the defendant submitted that the plaintiffs will be unable to meet an award of damages for the very significant losses that will be suffered by the defendant if the injunctions are wrongly granted.

124 As is evident, the defendant vigorously opposed the making of the injunctions sought. The defendant was keen to highlight the conduct of the plaintiffs in relation to the agreements, which it submitted was far from reasonable or appropriate. As I indicated in the course of argument, the conduct of the parties was far from exemplary when viewed through the prism of the agreements between the parties.

125 Nevertheless, the defendant proposed that if the Court was minded to make the injunctions it should carve out certain matters which would have the effect of limiting the harm caused by the injunctions on the defendant. The defendant submitted that these carve-outs should be made by the Court in the exercise of its discretion and in the context of the balance of convenience, and to adopt a course which would entail a lesser risk to justice. In this context, the defendant submitted that the carve-outs were a 'fair commercial' outcome of balance.

126 Relevantly, the defendant proposed that the carve-outs from any injunctions would allow the defendant:

(1) to enter into, or continue any non-exclusive arrangements in the Territory in respect of products set out in item 2 of the schedule to the DA i.e. the Products;

(2) to have exclusive distribution arrangements with a third party in Europe or North America (i.e. the USA, Canada, Mexico); and

(3) to purchase hybrid solar battery products the subject of the first refusal notices from a manufacturer outside the Territory for distribution and sale outside the Territory.

(1) the paragraph (1) carve-out mirrored the agreements entered into between the defendant and the plaintiffs in respect of MM Electrical and Sunova Group; and

(2) the paragraph (2) carve-out was consistent with the agreement which the defendant alleged was reached with the plaintiffs in March 2021 for Europe (concerning Voltalia).

128 Further, as noted above, the defendant indicated it would be willing to offer the second plaintiff to meet existing orders placed for the supply of Licensed Products within the Territory.

129 In reply, significantly, counsel for the plaintiffs informed the Court that the plaintiff and/or its officers or directors would be prepared to offer security in an appropriate form in the sum of $1 million to secure the undertaking as to damages.

130 Counsel for the plaintiffs also addressed the harm that would allegedly be suffered by the defendant if the injunctions were granted.

131 First, the plaintiffs contended that any loss that might arise in respect of the European hybrid battery purchase orders was part of the course of conduct by the defendant relied upon by the plaintiffs to found the second serious question to be tried. As a result, it was not the kind of harm that the Court could have regard to in an interlocutory injunction.

132 The plaintiffs made a similar argument in respect of the defendant's inability to exploit the hybrid battery market in the Non-Exclusive Territory (relevantly, Europe and North America) in the event the injunctions sought are granted. Further, the plaintiffs submitted that the estimates deposed to by Mr McKeon and provided by the defendant's CFO were not supported by any objective evidence, including, forecasts, budgets or internal working papers from the defendant.

133 As to the potential lost sales in the Territory, the plaintiffs contended that this is not a relevant prejudice, namely that the defendant will perform worse if it adheres to its contractual obligations than if it is free to source and sell Products within the Territory. Further, the plaintiffs also submitted that the estimates deposed to by Mr McKeon and provided by the defendant's CFO were not supported by any objective evidence, including, forecasts, budgets or internal working papers from the defendant.

134 As to the Energizer license fee, the plaintiffs submitted that the defendant has known of this obligation from the outset of the license agreement.

135 As to the European hybrid battery purchase orders, the plaintiffs submitted that this is not relevant prejudice. This is because, pursuant to the MSA, the defendant is required to only purchase Products, including New Products, from the first plaintiff [cl 2.2 and 10.2]. However, before even issuing the first refusal notices, it would appear that the defendant has purchased Competing Products from Fox. The plaintiffs allege that the defendant cannot weaponise its breaches of the MSA against the first plaintiff and then rely upon them for prejudice.

136 As to the defendant's proposed order and the carve-outs, the plaintiffs submitted that the carve-outs had the effect of undermining the injunctions. In summary, the plaintiffs submitted that the carve-outs were not an attempt to balance the interests of the plaintiffs and the defendant, but rather to secure for the defendant an outcome which it sought in commercial negotiations. Further, the plaintiffs disputed that any concluded agreement had been reached for the defendant to be the exclusive distributor of any Licensed Products in Europe. There was no suggestion that any such agreement had been reached in respect of North America.

137 In the course of argument, I raised with counsel for the parties the possibility that the balance of convenience might favour the grant of an injunction restraining the defendant acting upon the termination notice, but not granting an injunction restraining the defendant acting on the first refusal notices. This is in light of issues relating to the adequacy of damages in respect of the first refusal notices if no injunction were granted and the failure of the plaintiffs to offer any security in respect of the undertaking as to damages, or for those persons behind the plaintiffs to provide any undertaking as to damages.

138 However, in the course of argument, the interrelationship between the MSA and the DA and between any injunction in respect of the termination notice and the first refusal notices became more apparent to me. This was particularly due to the matters raised by the plaintiffs in respect of the course of conduct by the defendant leading to the drafting and service of the termination notice and the first refusal notices.

139 Further, as is clear from the evidence set out above, the evidence of the plaintiffs and the defendant was premised on the basis that both the injunctions were granted, or not granted. In addition, the plaintiffs offered security in respect of the damages undertaking.

140 As to the adequacy of damages, I am satisfied that damages would not be an adequate remedy in respect of the termination of the DA and/or the first refusal notices.

141 I am conscious that the inadequacy of damages is less clear in respect of the first refusal notices. However, as noted above, the plaintiffs' entire business model is reliant upon the Energizer license held by the defendant. This is in a context where the plaintiffs (understandably) treat the MSA and the DA as part of a package of agreements. I have formed the view that, in a real sense, they are 'back-to-back' agreements, particularly in light of the MOA under the DA, which leads to the defendant making minimum purchase orders under the MSA.

142 I am also conscious of the lack of reliable historical data in relation to the manufacture, supply and distribution of Licensed Products in the Territory or Non-Exclusive Territory by reason of the disabling events, in particular, COVID-19 related issues.

143 Further, I am satisfied that it is likely there would be a loss of reputation to the plaintiffs if no injunction were granted in respect of the first refusal notices. This is due in part to the fact that the entire business model of the plaintiffs is reliant on the Energizer license and that the inability of the first plaintiff to manufacture and supply, and the second plaintiff to market and distribute their hybrid battery under the Energizer label is likely to impact upon the plaintiffs' reputations.

144 As to the nature and strength of the serious questions to be tried (considered in the context of the balance of convenience), I refer to my conclusions in [58], [62], [93], [94] and [97] above. I have also had some regard to my comments in [98] above.

145 As to the harm which the defendant contends will result if the injunctions sought are granted there are a number of points to make.

146 First, as to the defendant's evidence in respect of projected revenues in the Territory and in particular the Non-Exclusive Territory, I am not satisfied on the basis of the evidence of Mr McKeon that the defendant is likely to suffer harm of such magnitude. There is no objective evidence or documents that would support these estimates such as budgets, forecasts or working papers.

147 However, I accept that if the injunctions sought are granted, the defendant will be unable to exploit, at least for a period of time, the opportunity to sell hybrid batteries (which are not currently manufactured by the first plaintiff). That qualifier 'at least for a period of time' is important. Mr Aganesov has deposed that applications for certification of the hybrid battery developed by the first plaintiff have been made in Europe and that the hybrid battery is 'on track' for certification by 30 October 2022.

148 Thus, it is open to the defendant to substantially minimise its loss should it choose to take up its right of first refusal in respect of this New Product under cl 10.2(b) of the MSA. It is for this reason that I accept that the effect of the injunctions sought, particularly in relation to the first refusal notices, will be that the defendant will be unable to exploit, for some period of time, the opportunity to sell hybrid batteries, particularly in Europe.

149 In this context there are three matters to note. The first is that cl 10.3(b) of the MSA requires the first plaintiff to apply for all necessary authorisations to sell Products in a Non-Exclusive Territory as soon as reasonably practicable after the defendant places a purchase order for them, and in any event, not more than 90 days after the date of any such order. Thus some delay is envisaged under the contractual bargain evidenced by the MSA, at least in respect of Products to be supplied in a Non-Exclusive Territory. As set out above, I acknowledge that the defendant contends that this clause does not apply in the case of a ROFR Product. I refer to my comments at [92] above.

150 The second relates to the submission of the defendant that the delay in the development of hybrid batteries which may be marketed under the Energizer label all lies at the feet of the plaintiffs and has the result that the defendant will be locked out of the market for hybrid batteries, particularly in Europe. In short, I am unable to accept that this is so. Rather, as set out above, it was not explained to me why it was not open to the defendant to issue a notice of breach at an earlier time under the MSA in respect of any perceived failure to develop New Products such as hybrid batteries or pursue certifications for them.

151 The third is that I am conscious that the defendant submitted that neither the defendant nor the Court should have any confidence in the plaintiffs' obtaining certification by 30 October 2022 in light of their conduct to date. Nevertheless, on the evidence before me, there is a proper basis for me to conclude that the risk of the defendant suffering loss from being locked out from the hybrid battery market is not as great as the defendant contends. Of course, if certification of the first plaintiff's hybrid batteries is not obtained by 30 October 2022, the defendant is at liberty to take what steps it thinks appropriate.

152 Second, as to the harm resulting from the defendant entering into the European hybrid battery purchase orders, the plaintiffs submitted that it is not harm of the kind which I should consider in the context of these interlocutory injunctions. I am unable to accept that this is so given that the European hybrid battery purchase orders form part of the cause of action alleged in support of the injunctions sought.

153 In any event, I note that there is no date on the European hybrid battery purchase orders. It is thus difficult for me to determine whether and/or when any such harm may be suffered by the defendant. As a result, for the purpose of this decision, I am prepared to accept that the defendant may suffer some loss. However, the extent of any loss that might be suffered in relation to the European hybrid battery purchase orders may be affected by the matters referred to in [146] and [151] above.

154 As to the suggested inability to obtain finance for or pay the guaranteed license fee due on 30 September 2022, the evidence does not make plain why this inability arises if the injunctions sought were to be made. Based on the evidence before me, that seems a present issue for the defendant. In any event, the suggested inability was in the nature of an assertion (albeit on oath) and unsupported by objective evidence in relation to the financial position of the defendant.

155 As to the harm which the plaintiffs contend would be suffered if the injunctions sought were not granted, I accept the evidence to the effect that:

(1) the plaintiffs (i.e. both businesses) will be unable to continue trading substantially for the reasons set out in [101] above;

(2) this will result in the loss of seven full-time employees and 20 contract employees who work on a full-time basis for the plaintiffs;

(3) the plaintiffs will suffer a loss of reputation and goodwill as set out in [143] above; and

(4) in the event that the defendant were to consent to the first plaintiff manufacturing and supplying Products or Competing Products to third parties, those products would need to be rebranded and recertified and it is uncertain whether the plaintiff would have sufficient resources to undertake these steps if the injunctions sought were not granted.

156 This is in the context of the restrictions on the plaintiffs set out in cl 2.3 of the MSA set out in [28] above. It is also in a context where the balance sheets of the plaintiffs for the year ended 30 June 2022 indicate that their current financial situation is far from strong.

157 For completeness, I wish to record that the plaintiffs contended that one kind of the harm they will suffer if the injunctions sought are not granted is that there is no mandatory MOA requirement on the defendant under the MSA. That argument seems at odds with the plaintiffs' allegation that the MOA requirement in the DA does not apply for the balance of the term of the DA in light of the waiver, election or estoppels.

158 Finally, there is the undertaking as to damages. The defendant relied upon the plaintiffs' balance sheets for the year ended 30 June 2022. The defendant also relied upon statements of Mr Aganesov to the effect that the plaintiffs may not have sufficient funds to rebrand and recertify any products under a new label. However I am satisfied that that evidence was given only in the context that the injunctions sought were refused.

159 It is significant that, albeit belatedly, the plaintiff has offered that it or its directors and/or officers will arrange security in an appropriate form to be lodged in support of the undertaking as to damages in the sum of $1 million. That sum is considerable. Nevertheless, the defendant submitted that it was not sufficient to meet the kind of harm which the defendant contended would arise if the injunctions were granted.

160 However, in light of my conclusions in relation to the kind and extent of relevant harm which the defendant is likely to suffer if the injunctions sought were (wrongly) granted, I consider that the security together with the undertaking is likely to be an adequate undertaking as to damages. However, the extent of the relevant harm may also depend on other matters. I will address this further below.

161 In this regard, it is important that I emphasise that, in determining the balance of convenience, I have taken into account my conclusions in relation to the two serious questions to be tried (including the strength and nature of those claims) referred to above.

162 In all these circumstances, I have concluded that the injury which the plaintiffs would be likely to suffer if the injunctions sought were refused outweighs the injury which the defendant would be likely to suffer if the injunctions sought were granted. That is to say, I consider that the granting of the injunctions on the terms set out below entails the lesser risk of injustice should it turn out that the injunctions should not have been granted. However the terms of the injunctions I propose to grant are not in the terms sought by the plaintiffs.

163 The injunctions I propose to grant will be conditional upon the plaintiffs providing security of $1 million in an appropriate form. Further, in light of:

(1) the fact that the factors that have influenced my decision may change;

(2) uncertainty about the extent of time in which the defendant may be unable to exploit the hybrid battery market by reason of the injunctions; and

(3) as a consequence of (2), concerns about the adequacy of the undertaking as to damages,

I will grant these injunctions until the hearing and determination of this proceeding or further order.

164 I have considered whether, in lieu of granting the injunctions sought, I should grant the injunctions with the carve-outs proposed by the defendant. In my view, it would not be appropriate to do so. In summary, and consistent with the submissions of the plaintiffs, this is because I consider that the carve-outs would have the effect of seriously undermining the injunctions and, consistent with my views set out above, are not required to achieve the lesser risk of injustice should it turn out that the injunction should not have been granted.

165 Further, the carve-outs appear to be based upon:

(1) concluded agreements reached with the plaintiffs in respect of the Territory and certain areas in the Non-Exclusive Territory (i.e. Europe concerning Voltalia); and

(2) the apparent commercial appropriateness of the Court imposing orders to give effect to similar agreements in the Territory and other areas in the Non-Exclusive Territory (i.e. North America).

166 Further, and in any event, while I am conscious that a court of equity will fashion relief for the justice of each case and achieve the least injustice, as a matter of principal, I do not consider that it is appropriate for a court of equity to make such carve-out orders even by way of interlocutory relief. This is particularly so given that the plaintiffs now appear to dispute any concluded agreement has been reached in respect of exclusive distribution in Europe and there is no suggestion that any such agreement had been concluded in respect of North America.

167 I will hear from the parties as to the form of the injunctions, on the costs of this application and on the directions to be made in the proceeding. However, I wish to inform the parties that in my preliminary view the costs of this application should be reserved.

[1] ABC V O'Neill [2006] HCA 46; (2006) 227 CLR 57 ('O'Neill').

[2] See, eg, Optus Networks Pty Ltd v City of Boroondara [1997] 2 VR 318.

[3] Bradto Pty Ltd v State of Victoria [2006] VSCA 89; (2006) 15 VR 65, 73 [35].

[4] Caravelle Investments Ltd v Martaban Ltd [1999] FCA 1505; (1999) 95 FCR 85, 92 [25].

[5] See for example the comments in Organic Marketing Australia Pty Ltd v Woolworths Limited [2011] FCA 279, [69] (Katzman J).

[6] These allegations are contained in [22] of the Indorsement on the Writ (IOW) and deposed to in [40]-[48], [49]-[50], [83]-[89] and [90]-[96] of the first Aganesov affidavit.

[7] The substance of these matters is alleged in the IOW and in the first Aganesov affidavit.

[8] F.J. & P.N. & Curran Pty Ltd v Almond Investors Land Pty Ltd [2019] VSCA 236, [214].

[9] Minutes of a meeting on 2 February 2021, a letter dated 31 May 2022 from the plaintiffs' lawyers and the provision of forecasts of orders and sales above the MOA.

[10] It would appear that the certifications detailed in paragraph 8 (term 8) relate to at least the Priority Countries.

[11] However the defendant acknowledged that entering into a contract to purchase the hybrid batteries before issuing the first refusal notices would be a breach.

[12] Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596 (Mason J, Gibbs, Stephen and Aickin JJ agreeing).

[13] See, eg, Primary Flooring Pty Ltd v Australian Comfort Group Pty Ltd [2019] VSC 104, [41].