Serious issue to be tried and balance of convenience
32 The principles to be applied in circumstances where an applicant seeks interlocutory relief by way of injunction are well-established: see, for example, Edelman J's summary in Ocean Dynamics Charter Pty Ltd v Hamilton Island Enterprises Limited [2015] FCA 460 at [26]-[34]. It is not necessary to state them further for the purpose of this application, but I have had regard to them in considering whether any interim relief should be granted.
33 Mr Karis relies for the purpose of this application on the category of case, referred to by Bromwich J in the extract from Herold v Seally reproduced above, in which an injunction may be granted when foreign proceedings are, according to principles of equity, vexatious or oppressive. The words 'vexatious or oppressive' have a special meaning in this context, as is apparent from Herold v Seally, in particular citing CSR v Cigna at 389-394. The limits of the power to grant such an injunction are determined by the dictates of equity and good conscience. The authorities refer to 'oppressive' as meaning 'seriously and unfairly burdensome, prejudicial or damaging' and to 'vexatious' as meaning 'productive of serious and unjustified trouble and harassment': Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538 at 555-556.
34 Mr Karis submits that the following matters support the grant of the relief sought.
35 First, it is said that the relief sought by Digital CC Management in the US proceeding is available from the Federal Court of Australia. In Ace Insurance Ltd v Moose Enterprise Pty Ltd [2009] NSWSC 724 at [76], Brereton J concluded that having regard to the choice of law clause, the Californian court would be obliged to apply Australian law and so there would be no advantage in suing in California. An anti-suit injunction was granted. Mr Karis submitted that the position in the present case is analogous. In accordance with the choice of law clauses, the law of Western Australia will be applied in the US proceeding, and so there is nothing which can be gained by Digital CC Management from the US proceeding over and above what can be gained in this proceeding.
36 Second, Mr Karis submitted that while the US proceeding was commenced shortly before this proceeding, this is not determinative. The order of the commencement of proceedings was held by Brennan CJ in CSR v Cigna to be 'of little relevance either to the question whether the Supreme Court is a clearly inappropriate forum or to the question whether an interlocutory anti-suit injunction should issue' (at 379-380, in dissent but this point was not otherwise addressed). Accordingly Mr Karis submitted that the commencement of the US proceeding prior to this proceeding creates no preference.
37 Third, Mr Karis submitted that the US proceeding and this proceeding are in relation to the same controversy. The claims raised in the US proceeding are not as broad as those raised in this proceeding, but the essential controversy is the dispute between the parties in relation to Mr Karis' obligations and entitlements arising from his role in establishing and being employed by the Digital CC Group. He submitted that it is artificial, and likely to lead to error, to attempt to resolve part of this dispute without regard to the full context. It was submitted that the intertwined nature of the claims in the US proceeding and this proceeding can be understood from the following:
(a) Mr Karis' conduct in entering into the Purported Agreement can only be understood in the context of his investment in the success of the Digital CC Group, including the equity he received and his employment by Digital CC Holdings;
(b) Recital C of the Purported Agreement states to the effect that the Karis bitcoin trading accounts were acquired by Mr Karis with moneys provided for such purpose by Digital CC Management;
(c) in the US proceeding, Digital CC Management does not allege that Mr Karis was paid for the Karis bitcoin trading accounts and, contrary to the representation that he would be paid, Mr Karis does not recall ever receiving payment from Digital CC Management for the Karis bitcoin trading accounts;
(d) in the US proceeding, Digital CC Management alleges (in effect) that Mr Karis ultimately received a 23.88% share of Digital X (via Digital Man LLC) in exchange for transferring ownership of the (disputed) Karis bitcoin trading accounts; and
(e) in contrast, Mr Karis alleges in his affidavit that the equity he received was in exchange for being a founder and a director of that company, or companies, assisting with the capital raising by way of the roadshows in March 2014 and for money he had loaned to Digital CC Holdings (his former employer).
38 Fourth, Mr Karis points to the risk (see [28] above) that even though the law of Western Australia ought to be applied in the US proceeding, Mr Karis' claims pursuant to the ACL may not be available. These are an important part of his case and he may be prejudiced if he cannot pursue them.
39 Fifth, Mr Karis contends that the US proceeding only covers part of the dispute between the parties. He submitted that it is not able to determine fully the issues which ought to be considered due to the operation of the exclusive jurisdiction clause in the Executive Employment Agreement. The context in which each of the representations were made cannot be understood in isolation. He submitted that it was 'the promise of the whole, of what being involved in the Business would mean and the incentives he was given to ensure that the Business was successful, that is integral to the different elements to which Mr Karis agreed'. This includes his employment by Digital CC Holdings. He submitted that the US proceeding seeks 'impermissibly and artificially to separate out the Purported Agreement from its context and to claim against Mr Karis on that basis, while he is denied, by operation of the exclusive jurisdiction clause in the Executive Employment Agreement, the opportunity to have the court consider and determine the full circumstances and to bring all counterclaims which may otherwise be available to him'.
40 I accept that there is sufficient relevance, substance and weight in these submissions to justify the grant of interim relief. Whilst I acknowledge that the interaction of the various claims will require close assessment in due course, the ACL claims are (on their face) of considerable relevance to the overarching relief, particularly as Mr Karis seeks an order under s 237 of the ACL that the Purported Agreement is void.
41 In all of those circumstances, it is sufficiently arguable that the US proceeding is vexatious and oppressive as those terms are to be understood in this context.
42 There is therefore a serious question to be tried as to whether Digital CC Management is to be restrained from continuing the US proceeding.
43 That question should not be considered in isolation from the balance of convenience.
44 I acknowledge that a concern has arisen as to whether Mr Karis might receive a distribution of assets from the Trustee at some point. It seems to me that such risk is relatively remote at this point, although it might become heightened as time goes on. At present, I am concerned only with an interim interlocutory injunction, and this risk can be re-visited once the interlocutory application is listed for further hearing. Mr Karis has indicated (and his senior counsel has confirmed in Court today) that he would be willing to undertake that any relevant funds received by him from the Trustee would be paid to his Australian solicitors and held on trust pending further orders.
45 I also acknowledge (based on Mr Mingace's affidavit) that the solicitors for Digital CC Management in the US proceeding told Mr Mingace that the Trustee had requested that there be an order from a United States Federal Court declaring Digital CC Management's ownership of the disputed Karis bitcoin trading accounts. Mr Mingace was not aware of whether an order from the Federal Court of Australia would be sufficient for the Trustee's purposes. This matter might well require further attention from the parties so that the requirements of the Trustee might be properly understood and tested.
46 The proposed orders will undoubtedly affect the hearing in the District Court of Massachusetts scheduled for 15 June 2022 and I acknowledge there may be some inconvenience to that Court. This is regrettable. However, I do not expect that the order sought by the Trustee would be made at the forthcoming hearing, were it to proceed. Therefore, I do not consider that the Trustee's interests are prejudiced in the short term (if at all) by the proposed orders. There will be delay, at least in the interim, in Digital CC Management pursuing its claim in the District Court. On balance, I do not consider these matters shift the balance of convenience in favour of Digital CC Management at this interim stage when one has regard to the potential risk to Mr Karis that part of his claim may be prejudiced, particularly if an anti anti-suit injunction were sought in the US proceeding. Further, any prejudice has to be viewed in the context that this injunction is to be granted on an interim basis only, pending a full hearing of the injunction application in due course.
47 Finally, I note that Mr Karis has proffered the usual undertaking as to damages (this Court's practice note GPN-UNDR). Senior counsel for Mr Karis informed me during the hearing that Mr Karis is a citizen of the United States and resides in Massachusetts. It was disclosed that Mr Karis has no assets in Australia. That is a fact that may well require further discussion in due course.
48 However, having regard to all of those matters, I am persuaded that it is appropriate to grant the relief sought by way of an interim injunction. Once the relevant papers are served on Digital CC Management, the injunction application will be programmed to a hearing.