Rectron Australia BV v Lu

Judgment 1These proceedings concern questions, of substantive law and procedure, about the proper construction and enforcement of provisions granting a release of rights in a deed pursuant to which an earlier set of proceedings (commenced in the Supreme Court of NSW but transferred to, and concluded in, the Supreme Court of Victoria) were settled. 2The questions for determination in the current proceedings arise because the releasee (the first plaintiff) contends that, contrary to the tenor of the release granted in the Deed of Settlement, the releasor (the defendant) has continued to maintain proceedings, in Taiwan, against employees of its (the releasee's) group of companies (namely, the second and third plaintiffs) who are, it says, entitled, with it, to the benefit of the release. 3The parties agree that nothing turns on the facts that: (a) having been commenced in the Supreme Court of NSW, the earlier Australian proceedings (for convenience, described hereafter as "the Victorian proceedings") the subject of the Deed of Settlement were transferred to, and determined in, the Supreme Court of Victoria; and (b) these current proceedings, instituted to enforce the Deed of Settlement, have been commenced and maintained in the Supreme Court of NSW. 4The earlier "Victorian proceedings" were transferred to the Victorian Supreme Court by an order made by this Court, the NSW Supreme Court, pursuant to the Jurisdiction of Courts (Cross Vesting) Act 1987 NSW. Under the equivalent Victorian legislation this Court, the NSW Supreme Court, can exercise whatever jurisdiction the Victorian Supreme Court could have exercised had the current proceedings been commenced in Victoria rather than in New South Wales. The law to be applied is the same whether it is to be applied by the Supreme Court of NSW or that of Victoria. There is but one "Common Law" (in the sense of general, non-statutory law) operative throughout Australia: Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 562-563. To the extent that reference may be made to company law questions that arose in the Victorian proceedings, those questions arose under the Corporations Act 2001 Cth, legislation of the Australian Parliament operative throughout Australia. 5An urgent determination of the current proceedings is necessary because the Taiwanese proceedings (in which the present defendant is suing the present second and third plaintiffs, in civil proceedings, for damages for an alleged breach of privacy under Taiwanese law and slander) are listed for final hearing in the Taipei Magistrates Court on Monday 6 October 2014, three days hence. 6The Deed of Settlement was made, on 28 July 2014, between four parties named as parties in the Victorian proceedings. Only two of those parties are named as parties in the present proceedings: the first plaintiff and the defendant. 7No party to the present proceedings has suggested that enforcement of the release granted by the defendant to the first plaintiff in the Deed of Settlement requires joinder in these proceedings of the other two parties to the Deed. That is notwithstanding that one of those parties (Rectron Electrics Pty Limited, known as "REPL") is named in the release clause (with the first plaintiff) as a releasee. 8The second and third plaintiffs were not named as parties in the Deed of Settlement, although the second plaintiff signed the Deed as the authorised representative of each of the first plaintiff and REPL. 9The first plaintiff is not named as a party in the Taiwanese proceedings. The only parties named in those proceedings are the present defendant (the applicant in the Taiwanese proceedings), the present second plaintiff (the first respondent in the Taiwanese proceedings) and the present third plaintiff (the second respondent in the Taiwanese proceedings). 10The Taiwanese proceedings were pending at the time the Deed of Settlement was executed. They appear to have been commenced on 9 October 2013. At the time of their commencement, and at the time the Deed of Settlement was executed, the second plaintiff was the only respondent to the Taiwanese proceedings. The third plaintiff was not joined as a respondent until after the Deed of Settlement was executed, although counsel for the defendant says (and I accept) that an application for the joinder of the third plaintiff as a respondent to the Taiwanese proceedings had been made prior to execution of the Deed of Settlement. 11In the Taiwanese proceedings the defendant (as applicant) claims damages of $2 million New Taiwan Dollars. 12The parties to the present proceedings agree that that amount of Taiwanese currency is roughly the equivalent of $A70,000. 13In the present proceedings the first plaintiff, with the support of the second and third plaintiffs, applies for relief to the following effect: (a)a declaration that the claims for relief made by the defendant (as applicant) in the Taiwanese proceedings are claims in respect of which, upon the proper construction of the Deed of Settlement, the defendant has granted the first plaintiff a release (clause 21); (b)a declaration that, upon the proper construction of the Deed of Settlement, the second and third plaintiffs are entitled, as is the first plaintiff, to the benefit of the release formally granted by the defendant to the first plaintiff; (c)an order, by way of injunction, that the defendant by himself, his servants and agents, be permanently restrained from maintaining the Taiwanese proceedings; and (d)an order, by way of a mandatory injunction, that the defendant take such steps as may be necessary to discontinue the Taiwanese proceedings forthwith. 14The plaintiffs contend that the first plaintiff has an entitlement to this relief without any need for joinder of either the second plaintiff or the third plaintiff in the proceedings. The second and third plaintiffs were joined, during the course of the final hearing of the proceedings, for more abundant caution. Their joinder has met prospective arguments of the defendant that the constitution of the proceedings would be defective (and that it would not be open to the Court to grant injunctive relief, in effect, for the benefit of the second and third plaintiffs) without their joinder. 15Joinder of the second and third plaintiffs has narrowed the questions for determination. 16In essence, there are two questions proferred by the parties for the Court's determination: (a)First, the plaintiffs contend (and the defendant denies) that, upon the proper construction of the Deed of Settlement, the release granted by the defendant to the first plaintiff extends to the claims made by the defendant against the second and third plaintiffs in the Taiwanese proceedings. (b)Secondly, the defendant contends (and the plaintiffs dispute) that, even if the Taiwanese proceedings do fall within the terms of the release, the Court should, upon an exercise of discretion, decline to grant injunctive relief. 17Although these are the central questions, I have not overlooked the contention of the defendant that the Court should, in its discretion, dismiss the plaintiffs' claims for relief at the outset because (the defendant contends and the plaintiffs deny) the Supreme Court of NSW is (according to the principles enunciated by the High Court of Australia in Voth v Manildra Flour Mills Pty Limited (1990) 171 CLR 538) an inappropriate forum within which to determine whether (as the defendant puts the question) the release granted by the defendant in the Deed of Settlement operates as a bar to the Taiwanese proceedings. 18Without objection on the part of the plaintiffs, the defendant's forum non-conveniens argument proceeded as if (which is not the case) the defendant had filed a notice of motion for an order that the plaintiffs' claims for relief be stayed, either permanently or for a time sufficient for the Taiwanese Court to consider whether, upon the proper construction of the Deed of Settlement, the defendant's grant of a release, by the Deed, operates as a bar, or some other form of impediment, to the Taiwanese proceedings. 19Putting aside the absence of a motion, the defendant's contention must be dismissed. This Court is not an inappropriate forum for determination of the plaintiffs' claims for relief. Those claims are for declaratory and injunctive relief designed to enforce a contract (the Deed of Settlement) made in Australia, affecting parties present in Australia, for the resolution of litigation conducted in Australia about the ownership, control and management of an Australian company (REPL). The focus for attention is not on an exercise, or potential exercise, of jurisdiction of the Taiwanese Court but on whether, how, and to what extent, an Australian contract can, and should, be enforced in Australia. 20The parties agree that the principles to be applied by the Court in the current proceedings are those discussed or, at least, to be drawn from judgments: (a)by the High Court of Australia in CSR Limited v Signa Insurance Australia Limited (1997) 189 CLR 345 (dealing with the topic of "anti-suit injunctions" in private international law), Toll (FGCT) Pty Limited v Alpha Pharm Pty Limited (2004) 219 CLR 165 (dealing with the need for contracts to be construed objectively), Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112 at 129-130 (dealing with the proper construction of release clauses) and McDermott v Black (1938) 63 CLR 161 at 187-0189 (dealing with the availability of injunctive relief); and (b)by White J, a judge of this (NSW) Court, in MRT Performance Pty Limited v Mastro Motors Inc [2005] NSWSC 316 (dealing with anti-suit injunctions). 21Reference has also been made to a paper by Andrew Bell and Justin Gleeson, entitled "The Anti-Suit Injunction", published at (1997) 71 Australian Law Journal 955. 22The principal provisions of the Deed of Settlement to which specific reference has been made in argument are the recitals, clause 21 and clause 26. 23With editorial adaptation, the critical provisions are the following: "Recital E E. The parties to this deed have agreed to resolve the issues between them in respect of the proceeding [agreed by the parties to the present proceedings to be the Victorian proceedings], and also all issues between them in respect of [the current defendant's] actions as the managing director and as a director of REPL, without admissions of liability. Clause 21 21. Save only for this Deed [the current defendant] hereby unconditionally and irrevocably releases each of [the first plaintiff] and REPL, their respective former and current officers, agents, employees, related companies (and each of the related companies' respective former and current officers, agents, employees, contractors and assigns), contractors assigns and parent entities (and each of the parent entities' respective former and current officers, agents, employees, related companies, contractors and assigns) from all claims, causes of action, demands, debts, complaints, suits, proceedings, decrees, or judgments, arising out of, relating to, connected with or touching upon the matters the subject of the proceeding [agreed by the parties to the present proceedings to be a reference to the Victorian proceedings] or his [the defendant's] involvement in any capacity or role with REPL and/or [the first plaintiff]. Clause 26 26. This Deed may be pleaded as a full and complete defence by any party to this Deed to any action, suit, or proceedings commenced, continued or taken by any other party to this Deed for or on its behalf in relation to any of the matters referred to in this Deed." 24The release granted in clause 21 was matched by a reciprocal provision in clause 22 of the Deed of Settlement, but, apart from noticing it, no party has dwelt on its particular terms as especially material to the questions for determination by the Court in a current proceedings. 25The nature and terms of the Deed of Settlement are entirely consistent with consideration having moved from the first plaintiff to the defendant in support of the defendant's grant of a release to the first plaintiff. The defendant has not contended that the release is unsupported by consideration. 26It is common ground that each of the second and third plaintiffs falls within the description of an "employee" (and, in the case of the second plaintiff, a "current officer") of a company within the first plaintiff's group of companies (to use a compendious description of the corporate entities identified by description in clause 21). 27That being so, clause 21 may be read, in substance and with emphasis, as follows: "21. Save only for this Deed [the current defendant] hereby unconditionally and irrevocably releases each of [the first plaintiff] and REPL [and the second and third plaintiffs] from all claims, causes of action, demands, debts, complaints, suits, proceedings, decrees, or judgments arising out of, relating to, connected with or touching upon the matters the subject of [the Victorian proceedings], or [the current defendant's] involvement in any capacity or role with REPL [of which he was formerly managing director] and/or [the first plaintiff]". 28An appreciation of the parties' respective contentions as to the proper construction of clause 21 (informed by such reference to Recital E as may be appropriate) depends on an understanding of the nature, and course, of the Victorian proceedings vis-á-vis the Taiwanese proceedings. Both sides of the record have referred to recital E as an aid to construction of clause 21. Neither side has contended that such reference is inappropriate. 29The Victorian proceedings appear to have arisen out of a breakdown in the personal, and business, relationships of the second plaintiff and the defendant. 30The first plaintiff (a Dutch entity) and the defendant each held 50% of the shares in REPL, an Australian trading company engaged in a business of dealing with electronic equipment. 31The defendant had been managing director of REPL for several years before the relationship breakdown that appears to have surfaced, relevantly, in or about March 2013. 32The second plaintiff is and was at all material times a director, and the Chief Executive Officer, of Mustek Limited (a South African entity), the ultimate holding company of the first plaintiff. At all material times the first plaintiff and the second plaintiff appear thus, essentially, to have had a common commercial interest. 33The third plaintiff is and was at all material times, incidentally, an employee of a company (Mercer Technology Limited, a Taiwanese entity) in the group of companies of which Mustek Limited is the ultimate parent. She is alleged by the defendant to have acted, to his detriment, at the direction of, or in combination with, the second plaintiff. 34The relationship between the first plaintiff and the defendant as shareholders in REPL was, until the Deed of Settlement was executed on or about 28 July 2014, governed by a "Shareholders Agreement" dated 25 June 2003: to which the first plaintiff, the defendant, REPL and the first plaintiff's immediate parent company (Rectron International Holdings BV, a Dutch entity) were party. 35Rightly or wrongly, the commercial interests associated with the first plaintiff formed the view (in or about March 2013) that the defendant, as managing director of REPL, had, at the first plaintiff's expense, received from a third party (New Venture International Limited) money to which he was not entitled. 36Acting upon a conviction that that was the case, the first plaintiff and interests associated with it took steps to remove the defendant as managing director of REPL. 37An outline of the saga can be found in a judgment published by Judd J in the Victorian proceedings on 30 July 2013: Rectron Australia BV v Lu; Re Rectron Electronics Pty Limited [2013] VSC 384 at [14] et seq. 38The Victorian proceedings were commenced by the first plaintiff, against the defendant and others, seeking declaratory and other relief designed: (a) to confirm the validity of contested resolutions of directors of REPL pursuant to which the defendant was displaced as managing director of the company; and (b) to enforce the Shareholders Agreement. 39The defendant responded to the first plaintiff's Originating Process, inter alia, by filing an application (styled Interlocutory Process) for REPL to be wound up pursuant to provisions (ss 232, 233, 461(1)(g) and 461(1)(k)) of the Corporations Act 2001 Cth enabling a winding up order to be made in circumstances in which the affairs of a company have been conducted oppressively or it is otherwise just and equitable that a winding up order be made. 40In his outline description of the Victorian proceedings, Judd J recorded, as "a fair summary" of the defendant's case for a winding up order, a contention that the first plaintiff was acting under the direction of the second plaintiff, whose object and purpose were, inter alia, to close down the business of REPL: [2013] VSC 384 at [24]. 41It is not necessary here to detail the full course of the Victorian proceedings beyond noting that: (a) at no stage in the proceedings were the respective cases of the first plaintiff and the defendant set out in formal pleadings, with the consequence that the nature and scope of the litigation are to be inferred from documents of record, such as the parties' competing applications, affidavits filed in the proceedings, expert reports prepared as evidence and the parties' written submissions; (b) Judd J's judgment was published at an early stage of the proceedings, bringing to an end a preliminary skirmish in which the defendant unsuccessfully challenged the validity of the Shareholders Agreement; (c) during the course of the proceedings the defendant filed and served affidavits, and written submissions, in which he complained that any relationship of trust and confidence between him and the first plaintiff had been destroyed because of the first plaintiff's allegation, and slanderous statements, to the effect that he had misused company funds of REPL for his own benefit in dealings with New Venture International Limited; (d) the defendant's complaints of false allegations being made against him by the first plaintiff were accompanied by an allegation that the evidence of his alleged misappropriations was acquired by the second plaintiff, and the third plaintiff acting in association with him, obtaining, through illegal means, bank statements recording payments made to the defendant by New Venture International Limited; (e) the Victorian proceedings were listed for final hearing commencing on 28 July 2014; and (f) the proceedings were settled during the first day appointed for that final hearing. 42Given the breadth of issues that can be canvassed in the conduct of an oppression suit, it cannot be said that the first plaintiff's allegation of misappropriation against the defendant was the only, or even the most central, of the allegations to be litigated in the Victorian proceedings. However, it was an allegation of the first order of importance in that it went to the heart of the parties' respective cases about whether the affairs of REPL had been, and could be, fairly and properly managed on the basis of a continuing relationship between the first plaintiff and the defendant. 43The allegation of misappropriation made by the first plaintiff, and the defendant's counter allegation that the allegation of misappropriation was grounded upon illegally obtained evidence, fall squarely within the expression "the matters the subject of the [Victorian] proceeding" in clause 21 of the Deed of Settlement. 44I do not accept the defendant's submission to the contrary. 45Even if the parties' respective allegations were not characterised as part of "the matters the subject of the [Victorian] proceeding", the defendant's attempt (in the Taiwanese proceedings) to assert a cause of action based upon his allegation of a breach of privacy arising from the second and third plaintiffs' alleged illegal acquisition of bank statements, or upon his allegation of slander, falls within the words "arising out of, relating to, connected with, or touching upon" which define the scope of the clause 21 release. Those words are words of broad meaning. 46I reject the defendant's submissions to the contrary. 47The defendant's submissions are based upon a fundamental contention that, in the Victorian proceedings, the defendant's allegation of illegally obtained evidence, in particular, was no more than an inconsequential, second order allegation. It was, in fact, an allegation of first order importance, upon which he based his contention that the foundational relationship of trust and confidence between him and the first plaintiff had irretrievably broken down. 48My characterisation of the defendant's allegation of illegally obtained evidence (and his associated complaint of having been slandered by the plaintiffs or interests associated with them) as falling within the scope of the release granted by clause 21 of the Deed of Settlement carries with it a determination that the defendant's maintenance of the Taiwanese proceedings is inconsistent with (and a breach of contract associated with) his grant of a release. 49The overlap between the Victorian and the Taiwanese proceedings is evident in paragraphs 2 and 4, under the heading "Facts and Reasons", set out in the originating process filed in the Taiwanese proceedings (an Application for Civil Procedure) on or about 9 October 2013. 50In English translation, and with adaptation of the description of the parties to conform to their description in the current proceedings, those paragraphs read as follows: "2. Checking reveals that the personal account details of [the defendant] in Taiwan are the personal information of [the defendant]. Also, [the defendant] and New Venture International Limited did not authorise [the second plaintiff] to obtain the account details without obtaining consent. Therefore, if [the second plaintiff] did not use illegal means to collect, [the second plaintiff] was absolutely not able to obtain [information set out in an email dated 16 March 2013 recording deposits into a personal account of the Defendant by New International Venture Limited in 2007 and 2009] that includes the exposed details of [the defendant's] previous personal account. Hence, [the second plaintiff] has used illegal means, without any proper reason and also, without consent given by [the defendant] to collect the personal information of [the defendant]. It has therefore seriously encroached the privacy rights and personal information of [the defendant]. ... 4. In addition, due to the tortious act by [the second plaintiff], falsely accused that [the defendant] and New Venture International Limited had improper money transaction(s), this has caused damage to his [the defendant's] reputation. In addition to that, during the litigation process in overseas [agreed by counsel to be a reference to the Victorian proceedings], the disclosure and improper accusations have obviously damaged the reputation of [the defendant] very hugely and heavily]...." 51Upon the proper construction of clause 21 of the Deed of Settlement and characterisation of the case sought to be made by the defendant in the Taiwanese proceedings, such rights as the defendant seeks to assert in the Taiwanese proceedings must be taken as falling within the release granted by the defendant to the first plaintiff in clause 21, with the consequence, inter alia, that the Deed of Settlement could be pleaded by the first plaintiff as a defence to the Taiwanese proceedings (as contemplated by clause 26) if it were a party to the Taiwanese proceedings. 52In any event, the defendant's deliberate maintenance of the Taiwanese proceedings (including his joinder of the third plaintiff as a second respondent in those proceedings) after his execution of the Deed of Settlement is a breach of his contractual obligations, embodied in the Deed, arising from his grant of a release in the terms of clause 21 of the Deed. 53The defendant accepts that the words "[the defendant] hereby unconditionally and irrevocably releases [the first plaintiff and associated persons]" in clause 21 constitute a grant, in favour of the releasees, of a release of such, if any, rights he might otherwise have. 54That grant carries with it an implied contractual obligation on the part of the defendant, as releasor, in the nature of an obligation not to derogate from his grant of an entitlement to a release (to use the language of property law) or (to use the language of contract law) not to do anything to hinder or prevent the fulfilment of the purpose of the release or to destroy the efficacy of the bargain he made with the first plaintiff: O'Keefe v Williams (1910) 11 CLR 171 at 191; Shepherd v Felt & Textiles of Australia Limited (1931) 45 CLR 359; Service Station Association v Berg Bennett (1993) 45 FCR 84 at 92-94. 55It may not be correct, generally, to describe a grant of a release of rights as carrying with it, in every case, an implied obligation analogous to an implied "covenant (by the releasor) not to sue (a releasee)" but, on the proper construction of the Deed of Settlement as a whole, it is in this case an implied, negative contractual stipulation substantially to the same effect. 56Viewed objectively, the contractual intent of the parties to the Deed of Settlement (including both the first plaintiff and the defendant) was that all proceedings between them (within the scope of the mutual, reciprocal releases contained in clauses 21 and 22 of the Deed of Settlement) would be "unconditionally and irrevocably" brought to an end so that they could, respectively, enjoy the benefits of a commercial settlement in which interests associated with the first plaintiff could buy-out the defendant's shares in REPL. 57An injunction lies, within the discretion of the Court, to restrain a breach of an implied negative stipulation of the character of that found in this case: McDermott v Black (1940) 63 CLR 161 at 187-189; CSR Limited v Signa Insurance Australia Limited (1997) 189 CLR 345 at 392; MRT Performance Pty Limited v Mastro Motors Inc [2005] NSWSC 316 at [17]-[25]; RP Meagher, JD Heydon and MJ Leeming (eds), Meagher, Gummow and Lehane's Equity: Doctrines and Remedies (4th ed, 2002), paragraph [21-205]. 58The defendant contends that the Court should, in its discretion, decline to grant any injunctive relief. However, to do so, would be to facilitate his breach of contract in circumstances, moreover, in which an impediment to enforcement of the clause 21 release in the Taiwanese proceedings is that the first plaintiff is not a party to those proceedings. In my opinion, there is no good reason not to grant the injunctive relief sought by the plaintiffs, and there are good reasons for granting it. 59The defendant should be held to his bargain with the first plaintiff. The first plaintiff should not be left (as the defendant contends it should be) to such entitlements it may have to an award of compensation in the event that the Taiwanese proceedings were to end with a judgment in favour of the defendant and against the second and third plaintiffs. The first plaintiff is entitled, in these proceedings, to support its staff against an action maintained by the defendant in breach of his contractual obligation to bring to an end litigation associated with the Victorian proceedings. 60In the circumstances of this case, the injunctive relief to be granted to the plaintiffs should include, as well as a negative form of injunction, a mandatory injunction designed to direct the defendant to discontinue the Taiwanese proceedings. That is necessary, as a consequential order, to reinforce the effectiveness of the primary injunction to be granted. 61With the benefit of submissions, on both sides of the record, as to the form of declaratory relief appropriate to give effect to this determination, I have, for the reasons recorded in these Reasons, made orders as follows: (1)DECLARE that, in accordance with the laws of Australia, the Deed of Settlement made in Melbourne, Australia, dated 28 July 2014 between Rectron Australia BV and Chien-Min Lu (hereafter "Mr Lu") and others ("the Deed"), on its proper construction, has the following meaning in regard to clause 21 of the Deed; namely: (a)Chi-Hsing Kan (hereafter "Mr Kan") and Yi-Chen Yeh (hereafter "Ms Yeh") are persons to whom the release contained in clause 21 applies; and (b)the proceedings in the Taipei District Court in Taiwan brought by Mr Lu against Mr Kan and Ms Yeh, being Court Reference S.Z. No. 4536 of 2013 ("the Taiwan proceeding") is a proceeding within the terms of clause 21 of the Deed. (2)DECLARE that, consequently, Mr Lu's continued prosecution after 28 July 2014 of the Taiwan proceeding is, in accordance with the law of Australia and the proper construction of the Deed, a breach of clause 21 of the Deed. (3)ORDER that the Defendant by himself, his servants and agents be permanently restrained from taking any step or permitting any step to be taken having the effect of prosecuting or continuing the Taiwan proceeding. (4)ORDER that the Defendant, no later than 7.00pm (Australian Eastern Time) today (3 October 2014) take all steps necessary to have his claim in the Taiwan proceeding dismissed or otherwise appropriately terminated. (5)ORDER that the reference to Annexure "A" in the "Amended Commercial List Summons" filed by the Plaintiffs on 3 October 2014 be taken to be the document described as Annexure "A" to the Commercial List Summons filed on 28 August 2014. (6)ORDER that the Defendant pay the Plaintiffs' costs of these proceedings. (7)RESERVE to the parties' liberty to apply on three hours' notice for orders in aid of implementation, or enforcement, of these Orders. (8)ORDER that Exhibits and subpoenaed material may be returned forthwith; any exhibits returned must be retained intact by the party or person that produced the material until the expiry of the time to file an appeal, or until any appeal has been determined. (9)ORDER that these Orders be entered forthwith.