Plaintiff v Defendants

3 Daiwa Can contends that it is appropriate to restrain the Japanese Proceeding and the commencement of any other proceedings relating to alleged intellectual property infringement by an anti-suit injunction as:

(a) this Court is not a clearly inappropriate forum (ie it is a clearly appropriate forum);

(b) it is necessary to protect this Court's processes and/or to restrain the unconscientious exercise of legal rights;

(c) there is a serious question to be tried in this proceeding; and

(d) the balance of convenience favours the grant of an injunction.

5 Barokes is an Australian-incorporated company based in Melbourne.[3] The shares in Barokes are held as follows:

(b) the Second Defendant (Knights Quest), which is controlled by Mr Stokes, holds 26.7% of the shares; and

(c) the Third Defendant (SMS Management), which is controlled by Steven Barics (Mr Barics), holds 13.3% of the shares.

6 Daiwa Can acquired its 60% shareholding in Barokes in 2012 for nearly $18 million, pursuant to the Share Purchase Agreement dated 27 August 2012.[4]

7 At the time of Daiwa Can's acquisition of its shares in Barokes, a Shareholders Deed dated 27 August 2012 was entered into between Barokes, Daiwa Can, Knights Quest and SMS Management.[5] It is governed by Victorian law,[6] and contains a submission to Victorian jurisdiction.[7]

8 Under clause 3.2 of the Shareholders Deed, each of Daiwa Can and Knights Quest was entitled to appoint 2 directors to the board of Barokes. Since then, the board of Barokes has comprised 4 directors:

(b) Tetsuo Yamashita, as an appointee of Daiwa Can;

(c) Mr Stokes, as an appointee of Knights Quest; and

9 Clause 5 of the Shareholders Deed refers to a managing director. Mr Stokes was appointed as the managing director under the Stokes Executive Services Agreement dated 27 August 2012.[8]

10 The Stokes Executive Services Agreement is also governed by Victorian law,[9] and contains a submission to Victorian jurisdiction.[10]

11 Clause 3.2 of the Stokes Executive Services Agreement states:

The Employment will commence on the Commencement Date (or a later date as agreed in writing between the Executive and the Company) and will continue for a fixed-term of 3 years where the Employment will end on the expiry of the fixed-term, unless terminated earlier in accordance with this Agreement (Initial Term).

12 Clause 4.8 of the Executive Services Agreement states:

The Executive acknowledges that the Executive has no authority to bind the Company except as set out in the Shareholders Deed or otherwise authorised by the Board. The Executive will not make any unauthorised representations to any third party in relation to such authority.

13 Mr Stokes' employment as managing director commenced on 13 September 2012. The expiry of the fixed term was 11:59pm on 12 September 2015.[11]

14 Schedule 3 of the Shareholders Deed sets out a list of matters that require a Special Majority (75%) of the Shareholders of Barokes. Item 1.18 states:

Instigate or settle any litigation, arbitration or other proceedings involving a Group Company when the aggregate amount claimed is in excess of $1 million (except the instigation of claims against debtors in the ordinary course of business).

15 Schedule 4 of the Shareholders Deed sets out a list of matters in relation to which the managing director has authority. Item 1.8 states:

Instigate or settle any litigation, arbitration or other proceedings involving a Group Company when the aggregate amount claimed is less than $1 million.

16 A number of shareholder disputes have arisen between the shareholders of Barokes. They are the subject of 3 proceedings in this Court:

(a) proceeding S CI 2015 01529 commenced on 8 April 2015, in which Knights Quest seeks leave to commence a derivative proceeding in the name of Barokes against Daiwa Can, for allegedly failing to honour representations about additional funding. The application for leave was heard by the Honourable Associate Justice Efthim on 18 June 2015 and judgment has been reserved;

(b) proceeding S ECI 2015 307 commenced on 24 August 2015, in which Daiwa Can seeks to wind up Barokes on the just and equitable ground, to remove Mr Stokes as a managing director at the expiry of his term of office, and to invalidate a default notice served by Knights Quest and SMS Management on Daiwa Can for alleged defaults under the Shareholders Deed; and

(c) proceeding S ECI 2015 309 commenced on 26 August 2015, in which Knights Quest and SMS Management allege that they are oppressed by Daiwa Can and seek to buy Daiwa Can's shares in Barokes, and also seek orders allowing Mr Stokes to commence and continue with litigation in the name of Barokes, including the Chinese Proceeding and the Japanese Proceeding referred to below.

17 Proceedings S ECI 2015 307 and S ECI 2015 309 (the Victorian Proceedings) are being case managed together, and are listed for trial before the Honourable Justice Judd on 27 January 2016.

Mr Stokes' desire to commence patent infringement proceedings

18 At a board meeting of Barokes held on 28 January 2015, Mr Stokes said that he wanted Barokes to sue a number of companies including a Japanese company, Monde Shuzo Co., Ltd (Monde), for patent infringement. Mr Ikeda and Mr Yamashita, both appointees of Daiwa Can on the board of Barokes,[12] disagreed with Mr Stokes' proposed strategy because they wished the company to focus on increasing sales rather than spending funds on patent protection.[13] The meeting ended prematurely. On 10 March 2015, the meeting was resumed. Mr Stokes put forward several resolutions authorising himself to cause Barokes to commence litigation:[14]

(a) against such persons as Mr Stokes determines in relation to an alleged agreement to fund working capital;

(b) against such persons as Mr Stokes determines in relation to an alleged failure to supply slim bottle cans;

(c) against such persons as Mr Stokes determines in relation to an alleged breach of confidential information and intellectual property to assist Monde Wines to breach Barokes patent in markets including China;

(d) against such persons as Mr Stokes determines in relation to an alleged breach of the Shareholders Deed by proposing to manufacture cans in breach of Barokes' patent; and

(e) against such persons as Mr Stokes determines for alleged breaches of directors' duties.

19 The resolutions were defeated, with Mr Stokes and Mr Barics voting in favour of the resolutions, and Mr Ikeda and Mr Yamashita voting against the resolutions.[15]

20 On 7 July 2015, Mr Stokes caused Barokes to commence a patent infringement proceeding in Chengdu, China against certain parties engaged in the distribution of beverages in China, including Seven-Eleven (Chengdu) Co. Ltd (Seven Eleven Chengdu), a subsidiary of the Seven&i group.[16] That proceeding seeks to restrain Seven Eleven Chengdu, and those other parties, from selling Monde products in China as they allegedly breach one of Barokes' patents (Chinese Proceeding). The claim document states that Barokes requests the court to place an order on the defendants to stop selling products that infringe Barokes' patent, and to mediate in the compensation of all losses that the defendants have caused for Barokes.

21 Although Daiwa Can is not a defendant in the Chinese Proceeding, it contends that it is adversely affected, and Barokes is also adversely affected, by that proceeding, as the proceeding is harmful to the trading relationship between Daiwa Can and the Seven&i group.[17]

22 Daiwa Can does not press for interlocutory relief in relation to the Chinese Proceeding; however at the hearing of the trial in the Victorian Proceedings, Daiwa Can has indicated that it will seek an anti-suit injunction to restrain Barokes and Mr Stokes from taking any further steps in the Chinese Proceeding.

23 On 3 August 2015, and notwithstanding the defeated resolution, Mr Stokes caused Barokes to commence a patent infringement proceeding in the Tokyo District Court, Japan, against Daiwa Can, Monde, Itochu-Shokuhin Co. Ltd., and Seven-Eleven Japan Co. Ltd[18] (Japanese Proceeding). The court documents in that proceeding were served on Daiwa Can only on 26 August 2015.[19]

24 The Japanese Proceeding alleges that Daiwa Can and Monde have breached Barokes' patents. Page 2 of the document sets out the amount of damages that Barokes claims, being an amount of JPY ¥201,718,156. This equates to approximately AUD $2.4 million.

25 In the Japanese Proceeding, Barokes makes a number of allegations against Daiwa Can and the other defendants, including that:

(a) since 2011, Daiwa Can has manufactured and sold products which infringe Barokes' patent;

(b) since 2011, Monde, by using the bottle cans, has manufactured products which infringe Barokes' patent;

(c) since 2011, Monde has sold the infringing products to Itochu Shokuhin and Seven-Eleven Japan;

(d) since 2011, Itochu Shokuhin has purchased the infringing products from Monde, and has sold them to Seven-Eleven Japan;

(e) since 2011, Seven-Eleven Japan has sold the infringing products to consumers; and

(f) the activities alleged above by the defendants constitute a joint tort by all of them.

26 In an email sent on 29 July 2015, Mr Stokes alleged that there have been patent infringements by 'Daiwa, Monde, Mann, Yomeishu, Yamata, Malus, Takahata, and all those involved in the supply chain that enabled this infringement eg. Seven-Eleven, Circle K/ Sunkus, Itochu, etc'.[20] In that email, Mr Stokes stated that he intended 'to take such steps as are necessary to ensure that Barokes pursues its rights and recovers the losses suffered by reason of this wrongful conduct'.

27 Given the entire controversy between the parties, Daiwa Can submitted, in effect, that this Court is not a clearly inappropriate forum.[21]

28 The defendants submitted that this Court could not deal with the subject matter of the Japanese Proceeding.

29 For reasons that follow, it is not necessary to decide the forum issue. Clearly, this Court can deal with all shareholder disputes, including whether the Japanese Proceeding and other proceedings have been authorised and should continue or be commenced. By the same token, it may well be the case that such proceedings may only be undertaken outside Australia. In other words, Japan may well be the correct forum. However, for reasons that follow, this is not to the point given the nature and context of the Victorian Proceedings.

Restraint of Japanese Proceeding and commencement of other infringement proceedings

30 Daiwa Can submitted that it is appropriate to restrain the Japanese Proceeding, and the commencement of any other intellectual property infringement proceedings, by the grant of an anti-suit injunction, in the exercise of this Court's inherent and/or equitable jurisdiction.

31 It was submitted that the Court has an equitable jurisdiction to grant an anti-suit injunction in restraint of unconscionable conduct, or the unconscientious exercise of legal rights.[22] The bringing of the Japanese Proceeding invokes this jurisdiction, it was submitted, because:

(a) As managing director, under the Shareholders Deed, Mr Stokes was unauthorised to commence the Japanese Proceeding on behalf of Barokes, given that it exceeded the $1 million monetary cap. That proceeding, which seeks more than $1 million, contravenes the Shareholders Deed, and was commenced and is being conducted beyond power. Mr Stokes is not authorised to cause Barokes to take any further step in it;

(b) Following the expiry of his term as managing director on 12 September 2015, Mr Stokes will be unauthorised from commencing any further proceedings on behalf of Barokes. Any proceedings would be in breach of contract and beyond power. It would be improper for Mr Stokes to commence any further proceedings at all, irrespective of value, between now and 12 September 2015, or thereafter given the shareholder disputes;

(c) In causing the commencement of the Japanese Proceeding, Mr Stokes has exploited his incumbency as the managing director prior to expiry of his term of office;

(d) Resolutions in relation to the commencement of proceedings were defeated at a board meeting of Barokes, but nonetheless Mr Stokes commenced the Chinese Proceeding and the Japanese Proceeding; this smacks of an air of a lack of transparency, akin to that which formed the basis for the recent grant of an anti-suit injunction by the Federal Court;[23]

(e) Mr Stokes has expressly sought to reserve for himself the power to continue with existing proceedings and to commence fresh proceedings;

(f) There is a real basis to fear that unless restrained, Mr Stokes will cause Barokes to take further steps in the Japanese Proceeding, and will cause Barokes to commence fresh proceedings for infringement of intellectual property; in this regard, an anti-suit injunction may be granted on a quia timet basis.[24]

32 Moreover, by issuing proceeding S ECI 2015 309, which seeks orders (retrospectively) about the commencement of proceedings on behalf of Barokes (including Japanese Proceeding and the Chinese Proceeding), it was submitted that Mr Stokes has implicitly conceded that the foreign proceedings were commenced without authority. Daiwa Can referred to the statutory procedure for commencement of proceedings on behalf of a company - namely the procedure in Part 2F.1A of the Corporations Act. That procedure is a code: s 236(3). There are five criteria which an applicant for leave must satisfy. The Japanese Proceeding could not and would not, it was submitted, satisfy the criteria because, relevantly, Mr Stokes could not demonstrate that the proceeding was 'in the best interests of the company': s 237(2)(c). In fact, the evidence, it was submitted, is to the contrary. There is evidence that the Japanese Proceeding is causing harm to Barokes, both in terms of reputation damage and the incurring of legal costs.[25] In addition, it is not, it was submitted, in the interests of Barokes for the Japanese Proceeding to continue in circumstances where the Victorian Proceedings have been fixed for hearing on 27 January 2016.

33 Further or alternatively, it was submitted that the Court has an inherent jurisdiction to grant an anti-suit injunction in order to prevent its processes being interfered with.[26] The Japanese Proceeding interferes with, or has a tendency to interfere with, the proceedings in this Court.

34 In the Victorian Proceedings, the Court will consider and determine, among other things, whether Mr Stokes had authority to commence and continue the Chinese Proceeding and the Japanese Proceeding on behalf of Barokes, and whether he has authority to commence and continue any other proceedings on behalf of Barokes. This Court will also consider and determine the value of the shares in Barokes, in the context of claims for infringement of the intellectual property owned by Barokes.[27] It is necessary to consider to what extent the issues relating to infringement, and any issues relating to the validity of the patents, can be determined properly and efficiently in the context of the oppression claim made against Daiwa Can. There is at least the potential, it was submitted, for the Japanese Proceeding to interfere with the proceedings in this Court, and for the subject-matter of the Japanese Proceeding to overlap with the subject-matter of the proceedings in this Court, such that the continuation of the Japanese Proceeding may result in steps being taken which are inconsistent with this Court's determination of all the issues in dispute.

35 In this regard, Daiwa Can referred to two relevant statutory directives on the exercise of powers by this Court:

(a) to secure that, as far as possible, all matters in dispute between the parties are completely and finally determined, and all multiplicity of proceedings is avoided;[28] and

(b) to give effect to the overarching purpose, namely to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.[29]

36 The Victorian Proceedings relate to a dispute between the shareholders of Barokes.

37 On the one hand, there is Daiwa Can, the majority shareholder which hitherto has left the management of the company to Mr Stokes. Daiwa Can seeks the winding up of Barokes on the just and equitable ground, and the removal of Mr Stokes as the managing director at the expiry of his term of office.

38 On the other hand, there is Mr Stokes and his allies, Knights Quest and SMS Management, which allege that Barokes' intellectual property rights are being infringed by Daiwa Can and others, and consequently seek to prosecute infringement proceedings as well as a compulsory buy-out of Daiwa Can's shares in Barokes on the ground of oppression.

39 In this context, Daiwa Can submitted that there is a serious question to be tried as to whether Mr Stokes had and has the authority and power to commence and prosecute the Japanese Proceeding and other infringement proceedings, given the express limitations on the power of the managing director in the Shareholders Deed, the expiry of the term of office under the Stokes Executive Services Agreement, and the overall shareholder dispute between the parties.

40 Daiwa Can submitted that granting the interlocutory injunction carries the lower risk of injustice to the parties.[30]

41 If the Japanese Proceeding is not restrained, a number of adverse consequences are, it was submitted, likely to flow. The matters referred to below were referred to. Much of the evidence was objected to. For reasons discussed later, it will not be necessary to rule on these objections.

42 The reputation of Daiwa Can will be adversely affected. The commencement of the Japanese Proceeding by Barokes against Daiwa Can, Monde, Itochu-Shokuhin Co. Ltd., and Seven-Eleven Japan Co. Ltd, has already, it was submitted, created friction between Daiwa Can and those other defendants. As such, there is a high possibility that the Seven&i Group may remove Monde and Barokes products from its retail stores. If this were to occur, this would adversely impact Daiwa Can's business. For Monde (of which Daiwa Can is the majority shareholder), the removal of its products from Seven Eleven retail stores may cause insolvency, as most of its sales are made through Seven Eleven retail shops. As further steps are taken in the Japanese Proceeding, and there is the likelihood of the Japanese Proceeding gaining publicity, the standing of Daiwa Can in the eyes of its suppliers and customers is likely to be further harmed.

43 It was submitted that within the Japanese business community, litigation is considered an option only if its instigator does not want to continue its business relationship with the defendants. The act of litigating in itself sends a message to the broader business community that the company cannot manage its business relationships or resolve disputes in a respectful manner. Although Daiwa Can did not instigate the Japanese Proceedings, other parties expect that Daiwa Can, as the majority shareholder, will control the actions of its subsidiary Barokes, and therefore Barokes actions are attributed to Daiwa Can. For example, in the 27 years that Mr Ikeda has worked for Daiwa Can, the company has never instigated litigation involving customers or business partners other than these proceedings. As the litigation carries on Daiwa Can's reputation in the eyes of its suppliers and customers will suffer.

44 Itochu-Shokuhin Co. Ltd. and Seven-Eleven Japan Co. Ltd are major distributors and retailers in Japan and they sell many of the Daiwa Can Group's products, including products of Monde. Retailers may no longer want to stock Monde's products because they may be concerned that Barokes might sue them. Until the commencement of the Japanese Proceeding, Daiwa Can had an excellent relationship with Itochu-Shokuhin Co. Ltd. and Seven-Eleven Japan Co. Ltd., but those relationships have been put under severe pressure by Mr Stokes' unauthorised action to sue those parties. Since the Japanese Proceeding has commenced, Mr Ikeda has had to dedicate significant time trying to repair Daiwa Can's business relationships and its reputation with its suppliers and customers. He has attended many meetings with Daiwa Can's business partners to express embarrassment at Barokes' action and apologise for the disruption it has caused. Mr Ikeda's normal work duties as the Director in charge of Sales Control Department of Daiwa Can are being severely disrupted because of the need to manage the consequences of the Japanese Proceeding.

45 There is a risk that the Japanese Proceeding will significantly harm Barokes' reputation in its primary market. In the period between July 2014 and February 2015, Japan accounted for approximately 90% of Barokes' sales world-wide.[31] Many Japanese distributors and retailers are unlikely to wish to be associated with Barokes after it has brought legal proceedings against such high profile companies as Itochu-Shokuhin Co. Ltd. and Seven-Eleven Japan Co. Ltd.

46 If the Japanese Proceeding is not restrained, Daiwa Can will, it was submitted, be required to take interlocutory steps in the Japanese Proceeding. Daiwa Can will incur significant legal fees in doing so. The procedural steps, it was submitted, involve:[32]

(a) Daiwa Can submitting a reply and supporting documentary evidence prior to the first hearing (scheduled for 9 October 2015);

(b) the exchange of pleadings and arguments in written brief format and presentation of additional supporting documentary evidence;

(c) a scheduling conference after pleadings have been completed; and

(d) a trial, and then submission of a final brief in which the parties present their cases. Although the prospects of Daiwa Can successfully defending the Japanese Proceeding are high, under Japanese law, a party to a lawsuit must pay its own legal fees (attorney fees) even if it is successful.[33] In addition, Barokes will incur significant legal fees, which will further deplete the value of its assets to the detriment of its shareholders (of which Daiwa Can is the majority shareholder), and creditors (of which Daiwa Can is the major creditor).

47 After the filing of the Chinese Proceeding and the Japanese Proceeding, the amount of time Mr Ikeda has had to dedicate to the disputes between the shareholders of Barokes has greatly increased. He has invested a lot of time in the preparation of his previous affidavits and for meeting with the lawyers for Daiwa Can. As he does not speak or read fluent English, meetings are conducted with an interpreter and any English documents must first be translated into Japanese. The fact that some of Daiwa Can's customers (and its subsidiaries customers) have been included as defendants to the Chinese Proceeding and the Japanese Proceeding has required him to spend time managing those relationships. There is a risk, it was submitted, that he will need to further divide his time between the Australian proceedings and the Japanese Proceeding, and that by doing so, he will be unable to give either proceeding sufficient attention.

48 On the other hand, Mr Stokes has not, it was submitted, identified any urgency in progressing the Japanese Proceeding before the determination of the proceedings in this Court. If the patent infringement claims are made out, Barokes would be adequately compensated by a monetary award by the Japanese court.

49 The defendants submitted that there was no basis for the granting of interlocutory injunctive relief. The Japanese Proceeding was, it was submitted, properly instituted with authority and was necessary to protect the interests of Barokes, particularly in circumstances where Daiwa Can was a defendant, and had a substantial stake in another defendant.

50 The defendants submitted by reference to authority (and correctly conceded by Daiwa Can) that the Japanese Proceeding could only be conducted in Japan and that there was no reason to put that proceeding on hold. It was submitted that the Victorian Proceedings could continue, that the Japanese Proceeding had no impact or effect on such proceedings, and that the ultimate course of the Japanese Proceeding could be determined after the hearing and determination of the Victorian Proceedings.

51 It was submitted further that there was no serious issue to be tried and that the balance of convenience favoured the defendants.

52 It was submitted further that the mere co-existence of proceedings in different countries does not constitute vexation or oppression.[34] The fact that there may be an overlap in issues or that the issues arise from a common substratum of fact is not, it was contended, a basis for contending that the Japanese Proceedings are oppressive or vexatious.[35]

53 Reference was made to CSR where the majority held that:

neither principle nor authority supports the view that [existing] foreign proceedings become vexatious or oppressive...in the event that the party against whom they are brought later commences proceedings with respect to the same subject-matter in this country. (at 345)

...

foreign proceedings are to be viewed as vexatious or oppressive only if there is nothing which can be gained by them over and above what may be gained in local proceedings. (at 393).

54 Reference was also made to the decision of the Full Federal Court in TS Production where the majority accepted that both proceedings arose 'out of a common substratum of facts' but held that, as the subject matter was not identical, there was no prima facie vexation or oppression.[36]

55 In my opinion, Daiwa Can is entitled to limited interlocutory relief. The Japanese Proceeding should be put on hold and no other proceedings should be commenced in the name of Barokes until the trial of the Victorian Proceedings.

56 It is unnecessary to engage in the interesting and sometimes complex area of anti-suit injunctions with its primary focus on the appropriate forum. Rather, the application should succeed on a far simpler basis. It is clearly neither desirable nor appropriate for the Japanese Proceeding to continue in circumstances where there is a deadlock between the shareholders and directors of Barokes, the party making the claim, and such deadlock, which may impact on the future of the Japanese Proceeding, is due to be heard within a reasonably short period of time. The Japanese Proceeding is an unnecessary distraction and should be put on hold, notwithstanding the fact that it may well be the only appropriate forum to litigate Japanese patent infringements. However, this is not to the point as emerged during argument.

57 I would grant the injunction on ordinary principles. There are clearly serious issues to be tried, and the balance of convenience favours Daiwa Can.

58 Each of the matters referred to in paragraph 31 is a serious issue to be tried. The critical, serious issue relates to the authority of Barokes to commence the Japanese Proceeding where the directors (and shareholders) have not authorised it to do so, a resolution to such effect having been defeated. A related critical, serious issue is the authority of the managing director to authorise the commencement of the Japanese Proceedings, in August 2015, particularly in circumstances where, first, there was and remains a serious issue as to whether the tenure of Mr Stokes as managing director expired on 12 September 2015 under the Stokes Executive Services Agreement, and secondly, there is a serious issue as to whether he exceeded his authority.[37]

59 Given the limited nature of the injunction, in my view, the balance of convenience favours Daiwa Can. Why should it be compelled to defend a proceeding that may not have been authorised and that it did not agree to in circumstances where the deadlock and acrimonious relationship between the parties (which includes the unilateral decision to proceed in the face of a resolution to the contrary) is in the process of resolution, and which may have an impact on the future of that very proceeding.

60 Of course, ultimately, the Japanese Proceeding may continue, and Barokes' rights should be protected. For this reason, I will only grant the injunction until 15 February 2016. I will also provide for liberty to apply and make the orders subject to any further order. This Court is clearly the appropriate forum to deal, at the very least, with the critical, serious issues referred to in paragraph 58 and all of the issues referred to in paragraph 31 above. These issues touch and concern the Japanese Proceedings to a sufficient extent so as to put those proceedings on hold pending the hearing of the Victorian Proceedings. In my opinion, and in this regard, there is substance in paragraph 34 of the submissions made by Daiwa Can.

61 There is no real prejudice to Barokes. The lowest risk of injustice clearly favours the grant of the injunction.

62 There are two further reasons why the Japanese Proceeding should be put on hold for a short period. Faced with a situation where the majority shareholder and two directors (thereby creating a deadlock) did not agree and with questionable and disputed authority, and being aware of the contention that his tenure as managing director was about to expire, the appropriate course for such a director and minority shareholder to take (and perhaps still to take) would have been to make application for leave to sue in the name of Barokes under s 236 of the Corporations Act 2001 (Cth). It has done this in respect of other proposed causes of action that Barokes seeks to commence and has recognised that this is the appropriate way to proceed.

63 The further related point is that although Barokes may have a good case so far as the Japanese Proceeding is concerned, and is entitled, and indeed perhaps obliged, to prosecute such a claim, the corporate forum and structure, and attendant rights and duties that flow, must be respected. Directors cannot go out on a frolic of their own. A company cannot commence a proceeding unless it is authorised to do so. If authority is not granted for whatever reason - usually deadlock or self-interest - other procedures are available including an application under s 236 as noted above. Further, directors that did not agree, but should have agreed to commence a proceeding, may be in breach of statutory and fiduciary duties.

64 Finally, in my opinion, it is not in the interests of justice to permit the Japanese Proceeding to continue. It is, whatever its merits, and in the context of the wider dispute, unnecessary, and in my view, unauthorised, although it is sufficient that there is a serious issue in this regard. It also means that there is a case for urgency in relation to the Victorian Proceedings. The sooner these proceedings are resolved, the better, with the consequence that the Japanese Proceedings will then be reconsidered.

65 For these reasons, I granted the injunction on 11 September 2015 and made orders accordingly.

66 There are two further issues that require brief consideration. The first relates to evidence. The defendants objected to much of the evidence of Daiwa Can. It is not necessary to resolve those objections.[38] Even excluding the evidence objected to, I would have granted the injunction. The critical basis of the injunction, as set out above, are facts either agreed or not in dispute. The fact that there are serious issues is clear, whatever the resolution of the evidentiary objections. The nature, context, and extent of the Victorian Proceedings is common ground and form part of the balance of convenience argument. Further, it is clear and obvious, and hardly requires detailed evidence, that a party to litigation, particularly a defendant facing a serious claim, may face reputational damage. It is also obvious that defending a case requires not insubstantial time and cost.

67 The final matter relates to the undertaking as to damages proffered, as required, by Daiwa Can. In announcing my decision in Court on 11 September 2015, the day after the hearing, the defendants submitted that they should be given an opportunity to make application for a secured undertaking. I declined to accede to the request and indicated that I would not consider a secured undertaking in the circumstances of this case. These matters are usually raised as part of the hearing of the injunction. Although briefly referred to, there was no evidence to support such a requirement. Further, on one view (which is documented), Barokes is indebted to Daiwa Can in an amount exceeding $11m. The other view relies on representations and conduct and is the subject of the leave to proceed application heard by Efthim AsJ. In the exercise of my discretion, I would not order that the undertaking be secured.

[1] The defendants objected to the entire affidavit on the basis of the manner in which it was sworn and in the alternative to paragraphs 25, 29, 31, 32, 35, 36, 37-40 on a variety of grounds.

[2] The defendants objected to paragraph 9 on the basis that it was conclusionary and prejudicial.

[3] Exhibit GS-1 is a company search of Barokes. Exhibit YI-2 is the Memorandum and Articles of Association of Barokes.

[11] Despite clause 3.2 of the Stokes Executive Services Agreement, Mr Stokes disputes that his term as managing director expired on 12/9/2015.

[12] Mr Ikeda is also a director of Monde.

[13] Ikeda affidavit dated 3 September 2015, paragraph 22.

[14] Ikeda affidavit dated 3 September 2015, paragraph 23.

[15] A copy of the minutes for the board meeting held on 10 March 2015 are at page 23 to Exhibit YI-15.

[16] The English translation is at page 198 to Exhibit YI-15.

[17] Ikeda affidavit dated 3 September 2015, paragraph 25. (This paragraph is objected to).

[18] Legal proceedings filed in the Tokyo District Court 2015 (WA) No. 21684 (Patent Infringement Injunction Claim Case) between Barokes Pty Ltd (as plaintiff) and Monde Shuzo Co Ltd, Daiwa Can Company, Itochu-Shokuhin Co Ltd and Seven-Eleven Japan Co Ltd (as defendants).

[19] A partial English translation is Exhibit YI-16. A full English translation was provided to the Court at the hearing.

[20] That email is at page 148 of Exhibit YI-15.

[21] CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345 (CSR); TS Production LLC v Drew Pictures Pty Ltd [2008] FCAFC 194 (TS Production); Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd [2013] VSCA 237.

[22] CSR at 392. See also Davies, Bell & Brereton, Nygh's Conflict of Laws in Australia, (9th ed. 2014), [9.26]-[9.32].

[23] Whirlpool (Australia) Pty Ltd v Castel Electronics Pty Ltd [2015] FCA 906.

[24] Davies, Bell & Brereton, Nygh's Conflict of Laws in Australia, (9th ed. 2014), [9.6].

[25] Ikeda affidavit dated 3 September 2015, paragraph 38. (This paragraph is objected to).

[26] CSR at 391-2. See also Davies, Bell & Brereton, Nygh's Conflict of Laws in Australia, (9th ed, 2014), [9.14]-[9.18].

[27] Discussion during directions hearing on 27 August 2015 in the Victorian Proceedings before the Honourable Justice Judd. Transcript is Exhibit YI-17.

[28] Section 29(2) of the Supreme Court Act 1986 (Vic).

[29] Sections 7 and 8 of the Civil Procedure Act 2010 (Vic).

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

[31] At page 93 of Exhibit YI-15 is an analysis of sales volumes per country.

[32] Sakai affidavit dated 3 September 2015, paragraph 10. The conduct of the Japanese Proceeding may be delayed if there is an application to the Japanese Patents Office to challenge the validity of the Barokes patent: Sakai affidavit dated 3 September 2015, paragraph 12.

[33] Sakai affidavit dated 3 September 2015, paragraph 9. (This paragraph was objected to).

[34] TS Production LLC v Drew Pictures Pty Ltd [2008] FCAFC 194 at [55]; Treadtel International Pty Ltd [2014] NSWSC 1406 at [19]; CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345, 393.

[36] TS Production LLC v Drew Pictures Pty Ltd [2008] FCAFC 194 at [55].

[37] The decision to restrict the amount claimed in the Japanese Proceeding to under AUD$1m, to fall within the authority of the managing director, smacks of opportunism, tactics and expediency. This itself is a serious issue in a number of respects. First, is such a reduction in the claim in the best interests of Barokes? Secondly, does the authority to commence proceedings for under AUD$1m apply where there is a specific board resolution to the contrary?