Targus Group (UK) v Targus Australia

Judgment

1. HIS HONOUR: The first defendant/applicant (Targus Australia) seeks interlocutory injunctive relief directed at preventing what it says is unconscionable conduct, for the purposes of s 234 of the Australian Consumer Law [1] or equivalent legislation, on the part of the respondents. As between Targus Australia and the first respondent/plaintiff (Targus UK), Targus Australia says that the conduct alleged also constitutes breaches of contractual obligations, including of good faith and fidelity.

Background

1. On 18 December 1991, Targus Group PLC (Targus PLC), Targus Australia (then known as Windate Pty Limited), Heathmere Pty Ltd and Mrs Alenka Tindale made a Participation Agreement. It is common ground that, by whatever means it may have come about, Targus UK is in effect the successor to Targus PLC.
2. Heathmere is a company controlled by Mrs Tindale. It provided and provides her services as CEO to Targus Australia. Mrs Tindale owns 49% of the issued shares in Targus Australia. Targus UK owns the remaining 51%.
3. By the Participation Agreement, Targus PLC appointed Targus Australia to distribute Targus products in Australia, New Zealand and nearby regions. Those products include computer accessories and peripherals including, of present relevance, devices known as "docking stations".
4. The Participation Agreement was amended, in a way that is not contentious, on 8 April 1992.
5. Targus Australia says that the Participation Agreement was further amended on 16 August 1996. Targus UK says that the document of 16 August 1996 had and has no legal effect. If that document (which for convenience but without prejudgment I shall call "the 1996 agreement") had contractual validity, its effect was to convert the Participation Agreement from one for successive terms of five years, terminable on at least one year's prior notice before the expiry of the then current term, to one terminable only by mutual agreement.
6. The Targus Group operates around the globe. Its structure has undergone many changes, and is now both opaque and exceedingly complex. In essence, there is an ultimate holding company (CI Holdco) in the Cayman Islands. That company in turn is controlled by private equity investors.
7. The global operations of the Targus Group appear to be directed by the second respondent, Targus International LLC (Targus International), although, for the most part, it is not possible (at least, on the evidence to date) to work out on whose behalf, or in whose interest, various actions have been undertaken. It is equally difficult to work out, in respect of actions of and documents emanating from various individuals, the company for whom that individual was purporting to act or write.
8. The third respondent (Mr Mikel Williams) is said to be the global CEO of the Targus Group. He is a director of Targus Australia.
9. The fourth respondent (Mr Michael Dussinger) is associated with the private equity owners of CI Holdco. Since 2 March 2018, Mr Dussinger has been a director of Targus Australia. He succeeded Mr Bill Oppenlander in that role. Mr Oppenlander is said to be the global CFO of the Targus Group.
10. Messrs Williams and Dussinger are nominees (and before the latter, Mr Oppenlander was a nominee) of Targus UK on the board of Targus Australia. Mrs Tindale and her accountant, Ms Helen Argiris, are also directors. Recently, and over the protest of Mrs Tindale, Targus UK used its 51% shareholding to cause two other directors, said to be independent (and there is no evidence to suggest that they are not), to be appointed.
11. On the evidence, Targus Australia is the only company in the Targus group that is not, ultimately, a wholly owned subsidiary of CI Holdco.

Events leading up to the commencement of the proceedings

1. In the second half of 2017, the Targus Group experienced serious quality issues with docking stations. Targus Australia was affected. There was a product safety recall. There was a problem with duplicated serial numbers. There were problems with malfunctions of the docks in the premises of those who had bought them. By late 2017, there was also a shortage in stocks of the various models of docking stations. That was caused, at least in part, by a shortage of crucial components.
2. The supply arrangements are almost as opaque as the structure of the Targus Group overall. Goods are manufactured by third-party contractors, pursuant to contracts with Targus International. The distribution of goods is organised by various companies within the Targus Group. For Australia, that distribution is now organised either by Targus UK or by some shadowy operating division (whether of Targus UK or of another Targus company is not clear) known as Targus EMEA. The initials denote "Europe, the Middle East and Africa". It is not at all clear why a functional division responsible for those geographic locations should have responsibility for the supply of goods to a company in Australia, but that is one of the lesser curiosities in this case.
3. Prior to December 2017, and for some years at least, the way that Targus Australia ordered and paid for products was as follows: 1. Targus Australia would place orders directly with the factories; 2. the factories would invoice Targus UK but deliver direct to Targus Australia; 3. Targus Australia would pay Targus UK the latter's cost price: the FOB price charged by the factory to Targus UK; and 4. Targus UK allowed Targus Australia 60 day terms to pay.
4. In December 2017, Targus International took, or caused to be taken, two significant steps. The first was to impose on Targus Australia a 10% surcharge on the invoice value of goods ordered by it. The second was to direct Targus Australia to cease ordering goods direct from the factories where they were made.
5. The 10% surcharge on invoice cost was said to be justified by the cost incurred by Targus UK in supplying, or arranging for the supply of, goods to Targus Australia. It is scarcely necessary to observe that if the previous practice had continued, Targus UK would not have incurred that administrative cost. The change to the ordering practice was said to be necessary for the efficient operation of the Targus Group, and to promote efficiency and regularity of supply of goods to all Targus distributors.
6. Not surprisingly, Targus Australia protested at these changes. It took its protests to the length, in respect of the surcharge, of refusing to pay it. In respect of the changed ordering arrangements, Targus Australia complained in effect that the process has become more complicated, and the lead time for delivery of goods has blown out.
7. The relationship between Targus Australia and Targus UK/Targus International did not improve into 2018. Targus Australia complained that it was not getting goods as quickly as, and in the quantities that, it needed them to enable it to bid for contracts, and to supply customers where its bids were successful. It says that, under the Participation Agreement, it is entitled to be supplied quickly, and indeed, on its construction of the relevant clauses, in preference to other Targus distributors around the globe.
8. In early July 2018, Targus UK required that Targus Australia accept extensions of delivery times for goods "to the Targus UK standard lead times, subject to potential delay by the factories". Targus Australia was unhappy about this, and made its position clear. Targus UK enforced its will by declining to place purchase orders with factories for goods ordered by Targus Australia until Targus Australia accepted that condition.
9. On 9 July 2018, Targus UK notified Targus Australia that it was to pay for goods on a COD basis. It is obvious that the sudden imposition of COD terms would have an impact on Targus Australia's cash flow, because it would create (at least for some months) a mismatch between the terms on which Targus Australia was required to pay and the terms on which it had required its customers to pay it.
10. As the disputes between the parties developed, lawyers became involved. Much correspondence was exchanged, both between the parties themselves and between their lawyers. The high-handed and peremptory nature of the actions taken by Targus UK was picked up in the correspondence emanating from its lawyers, Corrs Chambers Westgarth (Corrs). There were a number of letters written by Corrs, the tone of which could at best be described as bullying (more accurately, as threatening). Much of what was written had no apparent purpose other than to cow Targus Australia into complying with the wishes of Targus UK and Targus International.

Issues in the proceedings

1. Targus UK has commenced proceedings. It seeks: 1. a declaration to the effect that the 1996 agreement had no legal effect; and 2. recovery of the 10% surcharge, to the extent that Targus Australia has not paid it.
2. Targus Australia has responded with a cross-claim. That document is of such length and complexity (in its present form, it comprises 74 pages and 159 paragraphs, and requires a table of contents to enable one to navigate through it) that any attempt to summarise it is bound to be inadequate. In essence, Targus Australia says that the various actions of which it complains were, as between it and Targus UK, taken in breach of the terms of the Participation Agreement. More generally, Targus Australia says that in all the circumstances, the conduct of Targus UK, Targus International, and the actions of Messrs Williams and Dussinger are unconscionable. It claims appropriate declaratory and injunctive relief.

The interlocutory application

1. These reasons deal only with the substantive disputes between the parties. They deal with a notice of motion filed by Targus Australia on 31 July 2018, in which it seeks wide-ranging relief, on an interlocutory basis, against Targus UK, Targus International and Messrs Williams and Dussinger. I set out the prayers for relief in that notice of motion: 1. Pursuant to the equitable jurisdiction of the Court and/or s 234 of the Australian Consumer Law, an order that, pending the determination of the proceedings or further order of the Court, Targus Group (UK) Limited: 1.1 be restrained from imposing cash on delivery payment terms instead of 60 days after delivery payment terms in respect of purchase orders submitted by Targus Australia Pty Ltd (Targus Australia) for the supply of Targus goods to Targus Australia; 1.2 be restrained from requiring Targus Australia, in connection with the placement of Targus Australia purchase orders and the supply of Targus goods to Targus Australia, "to accept the extension of the delivery time to the Targus UK standard lead times, subject to potential delay by the factories" or any such similar requirement; 1.3 be restrained from requiring Targus Australia, in connection with the placement of Targus Australia purchase orders and the supply of Targus goods to Targus Australia, to "acknowledge and agree that orders for stock with restricted or short supply will only be accepted by Targus UK on the basis that Targus Australia agrees to an extended delivery period and such other terms as Targus UK may require" or any such similar requirement; 1.4 deal promptly with production orders submitted by Targus Australia and within 8 weeks of the order being submitted by Targus Australia to Targus Group (UK) Limited or its representative; 1.5 require its suppliers to sequence its production and fulfilment of purchase orders so that in respect of Targus goods destined for Targus Australia, the production will be shipped by the ninth week after the production order has been accepted and confirmed by Targus Group (UK) Limited or its representative and if not so shipped, Targus Group (UK) Limited arrange to pay for the airfreight costs less the shipping costs that would have been incurred to mitigate against delay; 1.6 withdraw the instructions issued to suppliers in or about December 2017 (and any subsequent instructions to similar effect) directing them not to accept purchase orders submitted by Targus Australia directly or communicate with Targus Australia directly; 1.7 be restrained from issuing any further instruction to suppliers to the effect that they not accept purchase orders submitted by Targus Australia directly or not communicate with Targus Australia directly in respect of such purchase orders; 1.8 be restrained from taking any discriminatory or punitive action against Targus Australia in respect of its refusal to assign intellectual property rights in the Power Management Device or to pay the 10% mark-up demanded of it or to pay any other additional amounts to Targus Group (UK) Limited or Targus International LLC (or any other entity within the Targus global group). 2. Pursuant to s 234 of the Australian Consumer Law, an order that, pending the determination of the proceedings or further order of the Court, Targus International LLC: 2.1 withdraw the instructions issued to suppliers in or about December 2017 (and any subsequent instructions to similar effect) directing them not to accept purchase orders submitted by Targus Australia directly or communicate with Targus Australia directly; 2.2 be restrained from issuing any further instruction to suppliers to the effect that they not accept purchase orders submitted by Targus Australia directly or not communicate with Targus Australia directly in respect of such purchase orders; 2.3 reinstate Targus Australia's access rights and privileges in respect of the IT systems ordinarily used by it in its operations processes immediately prior to 6 December 2017 and in connection with the ordering and supply of Targus goods to Targus Australia, including access to information on global demand consolidation and purchase order consolidation; 2.4 be restrained from excluding Targus Australia from demand planning and operational meetings; 2.5 be restrained from taking any discriminatory or punitive action against Targus Australia in respect of its refusal to assign intellectual property rights in the Power Management Device or to pay the 10% mark-up demanded of it or to pay any other additional amounts to Targus Group (UK) Limited or Targus International LLC (or any other entity within the Targus global group). 3. Pursuant to the equitable jurisdiction of the Court and/or s 1324 of the Corporations Act 2001 (Cth), an order that pending the determination of the proceedings or further order of the Court, each of Mikel Howard Williams (Williams) and Michael Dussinger (Dussinger) be restrained from preventing or impeding Targus Australia obtaining external legal advice and representation in respect of the issues the subject of these proceedings, and the authorisation and expenditure of Targus Australia funds in respect of same. 4. Pursuant to s 1324 of the Corporations Act 2001 (Cth), an order that, pending the determination of the proceedings or further order of the Court, Targus Group (UK) Limited and Targus International LLC be restrained from directing or attempting to aid, abet, counsel, or procure a director of Targus Australia to exercise his or her powers with respect to the funding, conduct or resolution of the proceedings brought by Targus Group (UK) Limited against Targus Australia, and in the enforcement and protection of Targus Australia's legal rights against Targus Group (UK) Limited and/or Targus International LLC and any person connected with the present dispute, for the purposes of furthering the interests of Targus Group (UK) Limited and/or Targus International LLC. 5. Such further or other orders as the Court thinks fit. 6. Costs.
2. The notice of motion was heard over 4 days, between 13 and 21 August 2018. It is to be noted that on 20 July 2018 an order was made fixing the substantive proceedings for hearing for 2 days on 10 and 11 October 2018. In the course of hearing the interlocutory application, it became clear that 2 days would be woefully inadequate. I offered the parties an 8-day hearing to commence on 17 September 2018, on the basis that the interlocutory hearing proceed no further and that the parties focus their efforts on getting ready for the final hearing. The respondents were content to accept that proposal. Targus Australia was not. Its stated reason was that the delay between 14 August 2018 (when the offer was made) and the likely date when judgment would be given on the proposed final hearing would be financially ruinous if there were not some interlocutory regime in place to protect its position.
3. In consequence of Targus Australia's decision, the probability is that there will be no final hearing until April 2019.

The parties' submissions

1. Ms Roughley of Counsel, who appeared for Targus Australia, put her client's application on the basis that it was inappropriate to separate out the various individual items of conduct, or to approach the prayers for relief in the notice of motion individually. She submitted that there had been a campaign of orchestrated and escalating conduct from December 2017 to July 2018, aimed at putting Targus Australia out of business and enabling Targus International to assume sole control of Australian distribution. On Ms Roughley's submissions, that campaign involved the following steps [2] : 1. imposing the 10% surcharge, and the significant change to the existing process of ordering goods, that occurred in December 2017 (see at [15], [16] above); 2. objecting to Targus Australia's retaining "a law firm to represent 'Targus Australia's interests' without Board approval and consent" [3] , in circumstances where "the nature of the economic arrangement in question is really between [Mrs Tindale] as a 49% owner of Targus Australia and Targus UK's interest as a 51% owner" [4] ; 3. further objecting to Targus Australia's retaining a law firm or obtaining external legal advice in relation to the existing dispute (concerning the 10% surcharge and the change to the ordering system); 4. between November 2017 and March 2018, refusing to approve the budget that Targus Australia had prepared (in accordance with the Participation Agreement) unless it reflected the 10% surcharge; that refusal was said to have "implications for employee commission entitlements and consequent staff morale" [5] ; 5. purporting to backdate the 10% surcharge to 1 October 2001, and invoicing Targus Australia for that backdated surcharge, an amount in excess of $7.7 million; 6. threatening to end the exclusive distributorship of Targus Australia by asserting that the 1996 agreement was ineffective; 7. excluding Targus Australia from global group activities and "strategic interactions" including product information; 8. engaging lawyers to demand that Targus Australia assign to Targus International, for no consideration, its intellectual property rights in a "Power Management Device" apparently developed by employees of Targus Australia in their capacity as employees; 9. "[t]aking steps to engineer the situation where factory capacity has the appearance of been [sic] "locked up" and constrained with consequent extended lead times but the circumstances are that other international Targus subsidiaries have been encouraged and directed to submit bulk orders for quantities of key stocks that well exceed their immediate supply needs and which have the effect of artificially blowing out the lead times being given in respect of Targus Australia's purchase orders for key stock" [6] ; 10. commencing these proceedings on 31 May 2018; 11. imposing what Targus Australia said were new supply terms in early July 2018 (see at [20]) above; 12. within 18 hours of first receiving Targus Australia's cross-claim and cross-claim list statement, and the notice of motion and supporting affidavits, threatening to seek indemnity costs orders not merely against Targus Australia but against the lawyers involved in the preparation of that process and the prosecution of the cross-claim and the notice of motion; and 13. repeating those threats in subsequent correspondence.
2. I referred at [22] above to the character of some of the correspondence. The correspondence referred to in the last two subparagraphs is a clear example. It may well be that the purpose of that correspondence was to seek to drive a wedge between Targus Australia and its lawyers, by making the latter fear for their own interests and thus become subject to, or perceive that they might become subject to, a clash of duty and interest. If that were not the purpose, it would nonetheless be a foreseeable consequence.
3. Mr Elliott of Senior Counsel, who appeared with Ms Gall of Counsel for Targus UK (but not for any of the other respondents) submitted in effect that since it was the Participation Agreement that lay at the heart of the dispute, the prayers for relief should be analysed primarily by reference to that document. He submitted that, given the Participation Agreement contained a detailed "good faith" clause, the cause of Targus Australia could not be advanced by seeking to characterise the conduct of which it complained as against Targus UK as involving unconscionable conduct. Thus, Mr Elliott submitted, it was appropriate to analyse the application for interlocutory relief by reference to the individual prayers for relief, tied back to their contractual setting.
4. For the most part, Mr Elliott accepted that there were serious questions to be tried. There were some few exceptions to this, but since, in the main, they have no bearing on the outcome of Targus Australia's application, it is unnecessary to go into too much detail.
5. Ms Roughley's submissions were extensive and, to an extent, repetitive. They focused on the conduct of which Targus Australia complained, with a view to making good the case that it involved not only breaches of contract (on the part of Targus UK) but, more widely, unconscionable conduct on the part of all respondents. It is difficult to understand why the submissions engaged in so much detail with the alleged unconscionability, given Mr Elliott's concession. I think the rationale was that by demonstrating, as Ms Roughley put it, a very strong case that the conduct was unconscionable, the interaction between the "serious question to be tried" and "balance of convenience" considerations would tip more favourable towards her client.
6. Because the application took an excessively long time to hear (due in no small part to the way in which the case for Targus Australia was put), and because of the consequent loss of otherwise available time to prepare reasons, I do not propose to set out in detail, or even to summarise more than briefly, the competing submissions for the parties. To do so would delay the delivery of these reasons, in circumstances where (as will be seen) I have concluded that Targus Australia should have relief in respect of one of the prayers in the notice of motion.
7. Further, given Mr Elliott's concession and for the reason just stated, I do not propose in general to go in any detail to the evidence on which Ms Roughley relied to support the proposition that there had been a carefully orchestrated campaign of escalating unconscionable conduct. It is enough to say that I am satisfied, to the extent that one can be on an interlocutory hearing, that save for one element of that conduct (see at [125] to [153] below) there is material that, if accepted at a final hearing and uncontroverted by other evidence, could well sustain that conclusion.
8. Without wishing to disregard Ms Roughley's submissions as to the way in which one should approach the application - by considering the conduct as a whole, and then by moving to consider what (if any) relief should be granted, I propose to approach the question of relief by reference to the topics the subject of the individual prayers. That is the only way, so far as I can see, to give some structure and coherence to these reasons.
9. Before I turn to the prayers for relief, there are two further matters that should be stated. The first is that Targus International, Mr Williams and Mr Dussinger did not appear on the interlocutory hearing. Nor did they give any evidence directly. I say "directly" because the solicitor for Targus UK, Mr Michael Catchpoole of Corrs, swore an affidavit which set out, on information and belief [7] , instructions obtained from those two men.
10. When the notice of motion first came before me on 1 August 2018 for directions, I gave directions for informal service on each of Targus International, Mr Williams and Mr Dussinger. I am satisfied (including by the fact that the latter two gave instructions to Mr Catchpoole) that they became aware of the proceedings and that they had sufficient time to appear and be represented had they wished to do so. In those circumstances, I am satisfied that it is appropriate to make orders pursuant to UCPR r 10.14(3). It is implicit in that conclusion, and I should formally record that I am satisfied, that in the case of each of those respondents, service outside Australia without leave was justified pursuant to UCPR r 11.4 and Schedule 6.
11. I add that when the matter came before me on 1 August 2018, Mr Tyson of Counsel announced his appearance for the first and second respondents (Targus UK and Targus International). It is clear, both from what was said in the course of that directions hearing and from the draft orders propounded by Mr Tyson, that the transcript was not in error in recording him as having so appeared. Nor, for that matter, is my memory.
12. It must follow from Mr Tyson's appearance for Targus International that it was aware of Targus Australia's claims for interlocutory relief. It follows from the orders propounded by him that, at least as at 1 August 2018, Targus International was considering whether to defend them. Those matters reinforce my view that there is no injustice in proceeding in the absence of Targus International. Targus International was aware of the claims. It had the opportunity to defend them. It chose not to do so.
13. The second matter is that Mr Elliott submitted that the prayers for interlocutory relief did not reflect any prayers for final relief. He submitted that the purpose of an interlocutory injunction, whether negative or "mandatory", was to preserve the status quo pending a final hearing at which the rights claimed by the plaintiff (or in this case, cross-claimant) could be decided. He accepted, I think, that it was not necessary for the interlocutory relief to mirror exactly the final relief claimed. However, he said, no assessment could be made of the need for interlocutory relief unless the rights that were sought to be preserved pending a final hearing were defined. In this case, he submitted, the lack of specificity as to the relief sought meant that this could not be done.
14. Ms Roughley submitted that there was no fixed rule that the interlocutory relief claimed should mirror or presage the final relief. In any event, she submitted, the cross-summons did include specific prayers for final relief, including declaratory relief.
15. Of the nine prayers for final relief (one of which included three sub-prayers, so that in reality there were 11), only two were in anyway specific. I set out those nine prayers: 7. A declaration that Targus Group (UK) Limited is precluded from denying the validity and application of cl 19 of the Participation Agreement to purchase orders submitted by Targus Australia to Targus Group (UK) Limited or its nominated representative for the receipt and processing of purchase orders. 8. Final injunctions pursuant to s 232 of the Australian Consumer Law directed to Targus Group (UK) Limited and Targus International LLC. 9. Damages. 10. Compensation pursuant to s 236 of the Australian Consumer Law. 11. Orders pursuant to s 237 of the Australian Consumer Law: 11.1 refusing to enforce cl 20(b) of the Participation Agreement insofar as it may have otherwise permitted the imposition of the 10% mark-up on and from 1 October 2001; and 11.2 varying cl 20(b) of the Participation Agreement; and/or 11.3 declaring cl 20(b) to be void on and after 1 October 2001. 12. Compensation pursuant to s 1317H of the Corporations Act 2001. 13. Final injunctive relief pursuant to s 1324(6) and/or (7) of the Corporations Act 2001. 14. Damages pursuant to s 1324(10) of the Corporations Act 2001. 15. Costs.
16. It is unnecessary to say more than that, in the absence of any clear indication of the precise rights sought to be vindicated by the final relief claimed, it becomes more difficult to assess the need to preserve, by way of interlocutory relief, the status quo. More precisely, it is difficult to assess the need for particular elements of the prayers for interlocutory relief, in circumstances where it is not clear how (and if so, to what extent) the prayers for final relief seek to ensure that the status quo continues.
17. With those observations out of the way, I turn to the Participation Agreement. I shall then go to the prayers for relief in the notice of motion. Although I said that they should be considered individually, they do in fact fall into logical groups, and to the extent that they do, I shall aggregate them.

Relevant terms of the Participation Agreement

1. By cl 2 of the Participation Agreement, Targus PLC (which was referred to simply as "Targus") appointed Targus Australia (which was referred to by its previous name "Windate") to be the sole and exclusive distributor of Targus products in the defined territory. It provided for automatic renewal of the term. That part of cl 2 has been purportedly amended by the 1996 agreement.
2. By cl 4, Targus was required to prepare its accounts according to relevant Australian Accounting Standards and, subject to that, "to the requirements of Targus [UK]".
3. There were clauses relating to intellectual property. They need not be set out.
4. Within 15 days of the conclusion of each month, Targus International was required to "provide in a form agreed by the parties monthly financial statements of sales and expenses" to Targus UK.
5. Clause 7 dealt with commission and profits. Since there was some reference made to this in submissions, I set it out: a. There will be paid to Mrs Tindale and such other employees of Windate as she determines a commission of 2.5% of nett sales, such commission to be calculated one month after the close of the month's trading and such commission to be paid at the discretion of Mrs Tindale as to the timing of paying and recipients of such commission provided that no such commission be payable unless 90% of budgeted nett sales and 90% of budgeted pre-tax profit has been achieved in such month. b. For the purposes only of distribution of net profits to the Shareholders dividends shall (subject to Clause 23) be paid as follows: i. Targus shall be entitled to 50% of such nett profits; ii. Mrs Tindale shall be entitled to 50% of such nett profits.
6. Clause 10 required Targus Australia, Heathmere and Mrs Tindale to enter into a service agreement in the form annexed. Presumably, that was done.
7. Clause 14 dealt with budgets. I set it out: 14. Budgets will be prepared by Mrs Tindale as Chief Executive Officer of Windate and will be subject to the approval of Targus. Such budget shall be prepared no later than 31st August in each year. In addition to such annual budget there shall be prepared on a monthly basis a cash flow statement as to actual recipients and expenditures during the preceding month and estimates of receipts and expenditure for the following month. Such monthly statements shall be prepared within twenty-one days of the conclusion of each month and a copy of the same shall be forwarded by airmail or facsimile to Targus.
8. By clause 15, the financial year for Targus Australia was to be 1 October to 30 September, provided that if the accounting year of Targus UK changed, the accounting year of Targus Australia would change correspondingly.
9. Clauses 16, 18, 19, 20 and 21 lay at the heart of the parties' disputes. I set them out (in cl 19(b), I have included without comment the effect of the uncontroversial amending agreement made on 8 April 1992): 16. If Windate wishes by means of sub-contractors to produce Targus products locally or otherwise, Windate will by facsimile to Targus provide all relevant details of the proposed production by facsimile within seven days thereafter approval will be deemed to have been given by Targus. It is not intended that Windate produce as manufacturer any such products. Any production pursuant to this clause shall be of a design and quality consistent with the design and quality of Targus products generally. … 18. Targus and Windate jointly and severally covenant that they will deal with each other on proper commercial bases and with all fidelity and good faith at all times to ensure the commercial viability and success of the distribution of Targus products in Australia, New Zealand, Indonesia and Papua New Guinea. The success of Windate as a distributor depends upon:- a. proper design, manufacturer and finishing of products; b. maintenance of quality of products; c. acceptance of products by international customers; d. proper competitive pricing structure; e. prompt supply of samples and thereafter prompt supply of selected promotion items; f. sharing of all relevant marketing and productive information between the parties; And Targus will use its best endeavours to deal competently and promptly with the matters enumerated in this clause. 19. Targus further specifically guarantees to Windate that: a. sample requests submitted by Windate will be dealt with promptly as they are received and without permitting other subsequent requests priority and further it will use its best endeavours to maintain a "sample turn around" of three weeks from date of receipt of facsimile specification sheet to dispatch of sample. b. production orders submitted by Windate will be dealt with promptly (wherever possible within 8 weeks of the order being received by Targus Orient). The only time that this procedure will be changed is if Targus Orient advise Windate by facsimile, within 7 days of receiving the original purchasing order, of the production completion dates of that order and the reasons for the extension beyond 8 weeks (if this is the case) and such reasons are accepted by Windate by facsimile. c. production will be shipped by the ninth week after the production order has been accepted and confirmed by Targus Orient and if not so shipped as between Windate and Targus, Targus shall arrange and pay for the airfreight costs less the shipping costs that would have been incurred to mitigate against delay. In the event that Windate demonstrates a loss of order by reason of failure on the part of Targus to maintain any or all of the above schedules the amount of profit payable to Targus at year end will be adjusted in favour of Mrs Tindale in her own right to reflect such loss of order and the parties further agree that the above sample and production schedule will extend not only to future orders but also to past unfulfilled orders. 20. Prices charged by Targus to Windate shall be at a level which will enable Targus to market and distribute Targus products competitively within the Australian, New Zealand, Indonesia and Papua New Guinea market places and in particular, but without restricting he generality of the foregoing: a. Targus will not be quoted for items or sold items at a higher price (having regard to the cost of freight if applicable) than that available to any other Targus distributor (not being a wholly owned subsidiary of Targus) b. Notwithstanding the generality of (a) hereof Targus will not charge Windate more than the Targus Orient F.O.B. costs plus 10% thereof and will at all times make available to Windate particulars of current F.O.B. costs. And in the event of dispute the parties will use their best endeavours to establish a mechanism for the prompt and inexpensive resolution of such dispute and further, Windate shall be at liberty at its expense to appoint a properly qualified chartered accountant reasonably acceptable to Targus to carry out any reasonable investigation of the Targus operations to ensure that the terms this clause [sic] are complied with. 21. a. The parties acknowledge that it is intended that Windate shall not have any bank borrowings AND to assist Windate, Targus agrees that it shall extend credit facilities to Windate as and when reasonably required by Mrs Tindale as Chief Executive Officer of Windate having regard to cash flow forecasts prepared and submitted to Targus. b. The parties further acknowledge that profit shall only be distributed between the parties in accordance with paragraph 7(b) hereof when a majority of the directors agree that said distribution will not be detrimental to the cash flow development of the business of Windate.

Prayer 1.1

1. Before I turn to deal with this prayer for relief, I should restate that although I am considering the prayers for relief individually (or, where they are linked, in groups), I am mindful of Ms Roughley's submission that each element of conduct to which each prayer is directed forms part of a series of orchestrated and escalating steps. I accept that it is necessary to consider each element of the alleged conduct in its context. I have sought to do so.
2. Prayer 1.1 relates to the imposition of COD terms. That was done, peremptorily and without prior consultation, by email dated 9 July 2018. That email is the penultimate element of conduct referred to in Ms Roughley's submissions (see at [28] above). It is to be considered against the background of the preceding conduct to which Ms Roughley referred.
3. Targus UK was perfectly open about the rationale for imposition of the COD terms. The email in question, from Ms Anna Murphy, who appears to be the Senior Financial Controller for Targus EMEA (this is one of the few emails emanating from the respondents' side that actually identifies the entity for which the human sender works) was addressed to Mr Matthew Field, the CFO and COO of Targus Australia. It said (omitting greetings and salutations): Given the ongoing litigation between Targus Group UK Limited and Targus Australia PTY Ltd. and the continued non-payment of the 10% upcharge, with immediate effect for all new POs raised as of today going forward we are going to change payment terms to Cash on Delivery (COD) - i.e., the 60 day payment terms for invoices associated with all new POs will no longer apply.
4. Whatever Mr Field's state of health may have been immediately prior to receipt of this email, the substance of the email was unlikely to have brought about any improvement.
5. The rationale stated in the email was repeated in Mr Oppenlander's affidavit [8] at [19]: 19. The decision by Targus UK to impose COD Payment Terms was primarily driven by the ongoing litigation between Targus UK and Targus Australia and the issues in dispute between the parties in the proceedings.
6. In the same affidavit, Mr Oppenlander also said: 21. I am informed by Ms Murphy, and verily believe that, no response was provided by Targus Australia in response to this notification of an intention to change the payment terms. 22. Further, I understand that, at no point prior to the 31 July Motion being filed, did any representation of Targus Australia contact Targus UK in relation to the 9 July COD Email, the COD Payment Terms or the procedure available to Targus Australia under clause 21(a) of the Participation Agreement by which to request credit.
7. Those last two paragraphs, considered in isolation, did not give a true picture of what had happened. However, since it may be that Mr Oppenlander had been misinformed by Ms Murphy, I say no more than that. I should however record that Targus Australia did protest. Mr Darren Kingham, who is the Operations Manager for Targus Australia, said, among other things, in an email of 19 July 2018 to Ms Hutton, copied to Ms Murphy: We have been separately informed by Anna Murphy that Targus UK intends to change the long-standing agreed payment terms for invoices associated with these purchase orders from 60 days to cash on delivery. We have been informed that this change in position has been made because of the litigation commenced by Targus UK and the non-payment of the '10% upcharge'. Targus Australia does not agree that the change is appropriate (for the reasons stated or otherwise) and if implemented it will have a very significant impact on the commercial viability and success of Targus Australia. This is particularly so in circumstances where Targus Australia is making provision for the '10% upcharge' on a without prejudice basis. For those reasons, we do not accept the change to the payment terms to cash on delivery and will apply the 60 day payment terms as previously agreed.
8. It does not appear that there was any further correspondence on the topic of the COD terms, although since the documentary evidence is contained in the exhibits to the individual affidavits, and not compiled chronologically in a court book (and I should make it clear that I intend no criticism by saying this), I may be wrong.
9. It is correct to say, as Mr Oppenlander noted at [22] of his affidavit, that Targus Australia had not initiated the cl 21 (of the Participation Agreement) process relating to credit facilities. However, it is reasonable to ask why it should have done so, in a situation where there were already, and for many years had been, credit facilities in place, in the form of 60 day terms, that were satisfactory to Targus Australia. The more appropriate question is: why was it reasonable for Targus UK to withdraw the 60 day terms peremptorily, without consultation, and without making any attempt itself to engage the cl 21 process? There is no obvious answer to this question.
10. In my view, it is well arguable that the actions of Targus UK, in withdrawing the 60 day terms in the manner that I have described and without engaging the cl 21 process, were undertaken in breach of its obligations of fidelity and good faith (cl 18 of the Participation Agreement). Alternatively, it is well arguable that those actions, considered in the context of the antecedent conduct, are capable of demonstrating unconscionable conduct for the purposes of the Australian Consumer Law. Mr Elliott did not submit that those matters were not, or were only weakly, arguable.
11. That conclusion directs attention to the related questions of the adequacy of damages as a remedy, and where the balance of convenience lies.
12. I suppose that it might be possible to calculate the time value of all the money paid by Targus Australia on delivery rather than at 60 day terms (that is to say, the monetary value to Targus Australia of the 60 day terms) and to construct a case for damages based around that. However, that is not of itself the most significant aspect of the detriment to which Targus Australia pointed. The real detriment lies in the mismatch, created by imposition of the COD terms, between the terms on which Targus Australia is required to pay and the terms on which its customers are required to pay it. It is the impact of that mismatch on the viability of the business of Targus Australia, rather than the mere monetary quantification of the value of the 60 day credit terms, that lies at the heart of this aspect of the case for Targus Australia.
13. Mr Field sought to address this issue. He swore three affidavits: on 27 July, 2 August and 15 August 2018. The last of those was sworn and served in the break between the first two days of hearing (13, 14 August 2018) and the latter two days (20, 21 August 2018). It was sworn because, as Ms Roughley ultimately accepted in submissions [9] , Mr Field's first analysis for the period up to August 2018 was less accurate than a competing analysis undertaken by Mr Oppenlander, and was not persuasive for the future because Mr Field had not done the work that would be required to make it accurate.
14. Understandably, Mr Elliott objected to Targus Australia's being given the opportunity to put on further evidence on this point. However, as he properly acknowledged, the hearing would have to be adjourned for some further dates after the two days initially allocated, so that he would have at least some opportunity to consider the fresh material. It is unsatisfactory that the evidence on this issue developed as it did.
15. Mr Field's third affidavit annexed, among other things, a cashflow analysis covering the months July to December 2018. That analysis sought to take account of both orders actually placed and orders that, according to Targus Australia's operational staff (including, no doubt, Mr Kingham), were expected to be placed over those months. It sought to take into account the dates when the goods the subject of those orders would be received, which (by virtue of the COD terms) would be the dates Targus Australia was required to pay. It sought to take account of the dates when Targus Australia could expect to be paid, having regard to the terms it imposed on its customers. It combined all those and no doubt other matters to project, on a monthly basis, the closing cash balance (Targus Australia reported its closing cash balances weekly, but the forecast to which I am referring aggregated them). For the months July to December 2018, the projected cash balances were $6.98 million, $4.81 million, $2.57 million, $128,000, $1.10 million, and $849,000.
16. The very sharp drop in the closing cash balances shown in October 2018 appears to reflect a substantial spike in purchases in September 2018. Mr Elliott criticised the analysis on the basis that there was no detail given of the orders that were the effective cause of that spike. Thus, he submitted, it was not possible for Targus UK to analyse the accuracy of the forecast, because without details of the orders, it could not estimate delivery times and, hence, the impact (in terms of payment) of the COD requirement.
17. There is some force in Mr Elliott's submission. However, the application was dealt with urgently and on an interlocutory basis. Mr Field prepared his analysis in reliance upon business records provided by, among others, those of Targus Australia's staff who were responsible for ordering goods. There was a regular process for assessing and approving forward orders. Although the forecast does not of itself prove the assumptions on which it was based (including, specifically, the assumption as to the timing of the payment obligations for forward orders), the business records on which it was based, if analysed, may well be capable of proving that.
18. Ms Roughley sought to tender a USB stick on which, she said, those business records were contained in electronic form. I declined to permit that, on the basis that any attempt on my part to investigate it would not be fruitful unless I had the benefit of submissions, and that to permit it to be considered and made the subject of submissions would lead to yet further delay and expense.
19. The starting point is obvious. The mismatch between payment terms will have an impact on cashflow. The next point is that the precise impact will depend on a precise identification of the various goods that are ordered, the times (or estimated times) for delivery, and the values of those orders. The evidence suggests that some goods (in particular, docking stations) are subject to very long lead times while others (perhaps, although it does not matter, items such as laptop bags) can be delivered much more quickly.
20. The forecast is no more than a forecast. However, on an interlocutory application, there is not much that can be gained by more detailed analysis.
21. Targus UK responded to the third Field affidavit with an affidavit of Mr Michael Locke. He gave his occupation as Manager, Financial Planning & Analysis for Targus International. His qualifications include that he is a certified public accountant for the State of California. He would appear to report, directly or indirectly, to Mr Oppenlander.
22. Mr Locke identified what he said were errors in Mr Field's revised cashflow. The first was that Mr Field had incorrectly aggregated weeks into months, because he had ignored the way in which Targus reported. The effect was to bring forward, to some extent, the cashflow discrepancy (between payments made by and payments made to Targus Australia).
23. Mr Locke also identified what he said was a significant error relating to the purchases for September 2018. Mr Field's cashflow projected those at $3.436 million. Mr Locke queried the absence of data to support that projection. Further, Mr Locke said, the projection was inconsistent with another business record produced by Targus Australia, in conjunction with or by commentary on a business record produced by Targus UK, called the 15 August PO Tracker. That record projected that there would be a total of (in round terms - the precise amount is a little less) $2 million payable by Targus Australia in September 2018, not the amount of $3.436 million projected in Mr Field's forecast. Mr Locke said that this error appears to have arisen because Mr Field had assumed that a number of invoices would fall due for payment in the month, whereas, because they were labelled "Supplier ETD" (referring to the supplier's estimated time of delivery), there was no basis for assuming that they would be payable within that month.
24. It may be that the basis for Mr Field's allocation is contained somewhere within the USB stick of business records that Ms Roughley invited me to receive and consider. For the reasons I have given, that proposal was unattractive.
25. Even taken at face value, Mr Field's forecast does not suggest that Targus Australia's cash balances will be entirely depleted over the term of the forecast. However, it is clearly unsatisfactory for a company whose purchases amount to many millions of dollars annually to exist on wafer-thin positive cash balances. The parties recognised that, at least in a commercial sense, by cl 21 of the Participation Agreement.
26. Another significant matter of context relates to the draft budget that Targus Australia prepared and submitted to Targus UK, consistent with its obligation to do so under cl 14 of the Participation Agreement.
27. One of the complaints made by Targus Australia is that Targus UK has refused to consider, or approve, that draft budget. Indeed, it would appear, Targus UK has offered no substantive comment upon it. The budget is of some significance because, Ms Roughley submitted [10] , it showed that Targus Australia should maintain a cash reserve of about $3 million to support its operations. (I say "Ms Roughley submitted" because if the budget were in evidence, I was not taken to it. However, Mr Elliott did not suggest that Ms Roughley's submission was factually incorrect.)
28. Ms Roughley submitted, with some justification, that if that were management's pre-dispute view of the desirable cash balance, the cash balances projected by Mr Field or balances remotely near them would be perilously thin. Ms Roughley submitted, and I am inclined to agree, that it is likely that the budget was prepared in good faith and represented views genuinely held by management, since at the time of its preparation it does not appear that the relationship between Targus Australia and Targus UK was showing any significant sign of strain.
29. There is no evidence from Targus UK to suggest that the COD terms that it seeks to impose on Targus Australia are required for its own protection. That is to say, there is no evidence from Targus UK that it is required to pay its suppliers on shorter terms. There is no evidence that Targus UK was subject to some sort of mismatch in payment terms, of the kind to which Targus Australia is now subject. Thus, on balance of convenience, there is no consideration tending the way of Targus UK.
30. Mr Elliott relied upon a letter written by Corrs on 16 August 2018. That letter recounted, in the customary self-serving way, what were said to be various flaws in Targus Australia's case. It pointed to the failure (as it was put) of Targus Australia to engage the cl 21 process. It then said that Targus UK, although not required to do so, was prepared, without admission and without prejudice, to offer a revolving credit facility of up to AUD500,000 to Targus Australia. The offer was to hold the facility open until the resolution of what might be called the 60 day/COD controversy.
31. Mr Elliott submitted (and I am prepared to accept, although the formula is in some respects a little difficult to follow) that the effect of acceptance of the offer would be that Targus Australia's cash balance would never fall below $500,000 whilst the facility remained in place. The letter invited Targus Australia to accept, or if it were unacceptable to seek to negotiate upon, the terms of the proposed facility.
32. I do not put much store in that offer. It was produced after the first two days of hearing had expired without resolution, and on the Thursday before resumption (on Monday, 20 August 2018). It could be thought that, as is often the case with offers made immediately prior to the hearing or resumed hearing of a dispute, it was designed at least in part to distract the addressee from the task of preparation (or continued preparation) of its case. But even if that were not the design, it is in my view inevitable that detailed consideration and response would have had that effect.
33. As I have said already, it is open to view the long-standing practice of affording 60 day terms as being a practical, and obviously informal, credit facility put in place for the purposes of cl 21. On that analysis, if Targus UK wished to vary the terms of the facility, it should have notified Targus Australia of its desire to do so, and perhaps the reasons for doing so, and engaged in negotiations for an alternative facility. Fidelity and good faith would have required no less. Instead, Targus UK has acted peremptorily. It refused to countenance any withdrawal from its position until it made the offer of 16 August 2018. In all the circumstances, I do not regard that offer as going anywhere near what should have been done in performance of the obligation of fidelity and good faith.
34. My overall view is that this aspect of Targus Australia's case has both factual and legal merit. Indeed, its factual merit may be said to be strong. For the reasons I have given, damages are unlikely to afford an adequate remedy. Considerations of balance of convenience strongly favour Targus Australia (and will do so even if Mr Field's analysis were significantly discounted to allow for the concerns raised by Mr Locke), particularly because there is no evidence of detriment to Targus UK if it is, for the present, restrained from enforcing the COD requirement.
35. The belated offer made by Targus UK on 16 August 2018 does not really ameliorate the detriment to Targus Australia. It is by no means clear that it would work as Mr Elliott submitted it would. It does not address what will happen if purchases exceed the facility limit. In my view, the facility that has been offered goes nowhere close to addressing the problems that will follow from the abrupt imposition of COD terms on 9 July 2018.
36. It follows, in my view, that Targus Australia has made good its case to interlocutory relief in respect of the COD term.
37. However, I stress that this conclusion is based on an analysis of the facts known at the date these reasons are delivered. I accept that there may be changes in circumstances between now and the final hearing (or the delivery of judgment following a final hearing) that could justify, if not the imposition of COD terms, at least payment terms other than the current 60 day payment terms.
38. The order that I propose to make is framed to operate up until the final hearing and resolution of the dispute or up until the further order of the court. I intend this to accommodate the possibility that there may be a change in circumstances, not foreseen or foreseeable as at August 2018, which justifies reopening the issue. I should make it quite clear that if either Targus UK or Targus Australia comes to the view that circumstances have changed, so as to require reconsideration of the 60 day payment terms, then it (or they) should engage the mechanism of cl 21 of the Participation Agreement, and should do so in good faith, before coming back to court.

Prayers 1.2, 1.3

1. These prayers relate to Targus UK's purported imposition, as a condition of accepting purchase orders from Targus Australia, that Targus Australia accept extended delivery times. It is convenient to consider the prayers together but in reverse order.
2. Prayer 1.3 is based on an email dated 3 July 2018 from Ms Carla Hutton who gives her occupation as "Head of Demand & Supply Planning" for Targus EMEA, to Mr Kingham of Targus Australia. That email stated: For all future PO's raised by Australia, please amend the wording at the footer to the following: Targus Australia hereby acknowledges and agrees that orders for stock with restricted or short supply will only be accepted by Targus UK on the express basis that Targus Australia agrees to an extended delivery period and such other terms as Targus UK may require. Please remove all other text currently in place. Additionally, going forward, can you please ensure that the team specifically acknowledge the Supplier ETD is accepted in the Australia PO tracker each time there is a new PO or any amendment to ETD. This should be within the current column Q "Australia comments" and contain wording similar to "28/05: Thanks, ETD 26 Jun accepted" as per THZ66203AU-52 on PO 630993 on the May tab in the Tracker. Please confirm these updates will take effect from tomorrow.
3. Targus UK accepted, both before the hearing and in the course of submissions, that even on its construction of cl 19 of the Participation Agreement, it was not open to Targus UK to impose a blanket requirement, on all purchase orders to be submitted at any time in the future, that Targus Australia accept extended delivery times. In those circumstances, and despite Ms Roughley's strenuous submissions as to the inadequacy of Targus UK's recognition of the lack of justification for its actions, I see no utility in granting relief in terms of prayer 1.3. Put simply, there is no evidence of any likelihood of repetition of the particular conduct sought to be restrained, and the more targeted prayer for relief 1.2 addresses what it is that, unrestrained, Targus UK apparently proposes to do.
4. Prayer 1.2 is based on an email from Ms Hutton to, among others, Mr Kingham dated 6 July 2018. That email stated: Pursuant to Clause 19b of the Participation Agreement, Targus Group (UK) Ltd. ("Targus UK") advises that the items the subject of the purchase orders 631055 are not currently in stock. Based on currently available information, the order is subject to Targus UK standard lead times, subject to potential delay at the factories. Please confirm that Targus Australia Pty Ltd ("Targus AU") accepts the extension of the delivery time to the Targus UK standard lead times, subject to potential delay by the factories. Failing that confirmation, Targus UK will be unable to accept your order under Clause 19(c) of the Participation Agreement. If Targus AU agrees to the foregoing, please confirm by replying with "Accepted by Targus AU" to Carla Hutton at Targus UK via email to xxx@targus.com in order for Targus UK to raise the Purchase Order with the factories. (emphasis in original)
5. Targus UK accepted that this email, if it were to be a valid notification for the purposes of cl 19(b) of the Participation Agreement, must be read in conjunction with an email sent some five days later in which Ms Hutton notified specific factory lead times for each class of goods the subject of the relevant purchase order, PO #631055. After setting out those lead times, Ms Hutton said: We will request ship dates as per the PO's received and work with the suppliers to achieve the best possible dates, however please confirm you accept these standard lead-times, subject to potential delay by the factories. Failing that confirmation, Targus UK will be unable to accept your order under Clause 19(c) of the Participation Agreement.
6. Ms Roughley submitted that, properly construed, cl 19 of the Participation Agreement (as amended on 8 April 1992) did not give Targus any absolute right to extend the times for delivery beyond the eight weeks referred to in para (b). She submitted that it was a matter for Targus Australia to decide whether to accept the reasons for delay. If it did not, she submitted, Targus UK was bound to deliver in eight weeks. If it could not do so, it was to arrange and pay for the extra cost of air freight, as contemplated by para (c).
7. Mr Elliott submitted that this construction of cl 19 was so weak as to be untenable. In this case, he submitted, there was no serious question to be tried as to Targus Australia's contractual right, and thus as to its claim for interlocutory injunctive relief to keep that right alive pending a final hearing.
8. More fundamentally, Mr Elliott submitted, the evidence showed clearly that the 8 week delivery time was, and for some years prior to 2018 had been, unachievable. He noted that from time to time in the course of email correspondence, Targus Australia had accepted this was so, and indeed had thanked Targus UK for doing what it could to speed up delivery. I note that in her affidavit affirmed 25 July 2018, Ms Claire French, who gives her occupation as Targus Australia's General Manager, said at [41.1] that when she informed customers of problems with dock supplies, she said: Ordinarily we would be able to supply within 16 weeks… That does not suggest that delivery within 8 weeks is crucial for Targus Australia's business.
9. The evidence certainly showed that for particular classes of product, including specifically docking stations, lead times for delivery were significantly longer than eight weeks. Ms Roughley submitted that this was because Targus UK or Targus International had encouraged other Targus distributors to over-order and thus to deplete the supply of stock available to be ordered by Targus Australia (that contention lies at the heart of the issues arising under prayers 1.4 and 1.5). That submission does not find a great deal of support in the evidence to date. In referring to "evidence to date", I mean to include not only the affidavits upon which Targus UK relied, but also the business records exhibited to those and other affidavits. Those business records make repeated references to difficulties and delay in the supply of, in particular, docking stations.
10. Although this is an interlocutory application, it is clear that a question of construction may be resolved, if the relevant factual matrix has been exposed in the evidence and the court has sufficient time to do so. See Kolback Securities Ltd v Epoch Mining NL [11] at 535. Although McClelland J referred to "a contested question of law", it seems to me that this may include a question of the proper construction of a contract, particularly where that contract is in writing and there is no factual dispute as to its terms.
11. Clause 19 deals first with sample requests (para (a)) and then with production orders (paras (b), (c)). Sample orders can be put to one side.
12. The contractual scheme for production orders is divided into two parts. The first (para (b)) has the following elements: 1. it requires Targus UK to deal with production orders "promptly"; 2. it qualifies this otherwise vague obligation by the parenthesised words "(wherever possible within 8 weeks of the order being received by Targus Orient)"; and 3. it then provides an exception to the obligation to deal with production orders within 8 weeks of receipt.
13. The exception to the 8 week obligation clearly reflects the contingent nature of that requirement - it applies "wherever possible". To put it another way, the exception to the 8 week obligation is intended to deal with situations where, at least in the view of Targus UK, it is not possible to deliver within 8 weeks. That exception has two elements: 1. if Targus UK thinks it cannot meet the 8 week obligation, it is required, within 7 days of receipt of the purchase order, to advise Targus Australia of the extended completion date and the reasons why that extension is necessary; and 2. Targus Australia is given the right to accept (and by implication, not to accept) those reasons.
14. So far, the scheme would appear to be that Targus UK must deal with production orders within 8 weeks, unless it invokes the extension of time procedure. Further, if Targus Australia accepts the extended time (or the reasons for it), Targus UK must deliver within that extended time.
15. The case for Targus Australia is that if it does not accept the extended time, then Targus UK is bound to deliver within the 8 week time specified earlier in the paragraph. In other words, on the construction for which Targus Australia contends: 1. Targus UK, acting with all fidelity and good faith, may consider on reasonable grounds supported by evidence available to it that it cannot meet the 8 week delivery obligation; 2. Targus Australia may refuse to accept any extension, or the reasons given by Targus UK; so that 3. Targus UK is thereupon required to meet the 8 week target, notwithstanding that, on the evidence available to it, it thinks reasonably that it cannot do so.
16. If I may say so, that is a strange construction. It would require a party to do that which, acting with fidelity and good faith, it believes it cannot do.
17. In my view, the solution to the problem is found in para (c). That paragraph requires Targus UK to ship "by the ninth week after the production order has been accepted and confirmed" by Targus UK. The reference to acceptance and confirmation does not appear earlier in cl 19. In my view, it is referable to what might be called the extension of time provisions in para (b). If Targus Australia accepts the extension or the reasons for it, then Targus UK is obliged to accept and confirm the order, and then the provisions of para (c) operate. However, if Targus Australia does not accept the extension and the reasons for it, Targus UK is not bound to accept or confirm the order.
18. Although the clause as a whole is not happily drafted (for example, because para (c) refers to shipping "by the ninth week" after acceptance and confirmation, even though that may include acceptance and confirmation pursuant to an agreed extension of time), nonetheless it seems to me that the words "accepted and confirmed" must be given some work to do. They suggest that in some circumstances at least, Targus UK is not bound to accept a purchase order from Targus UK. They indicate, first, that Targus UK has accepted the production order subject to agreement on an extension of time for delivery and, secondly, that where the parties have agreed to an extension, Targus UK has confirmed the order accordingly.
19. In short, in my view, cl 19(b), (c) read together, contemplate that if Targus UK seeks an extension of time and Targus Australia does not agree, Targus UK may refuse to accept and to confirm the production order, and, having done so, is not obliged to perform it.
20. There is a question as to whether Targus Australia must act with fidelity and good faith in considering the request for extension of time. It could well be that Targus Australia agrees with the reasons, or sees no reason to disbelieve them, but nonetheless cannot accept the extended delivery dates because, for example, they are too late to enable it to meet the requirements of an existing or potential customer. In those circumstances, one would think, Targus Australia would be justified in rejecting the extension request. A fortiori, if that were the reason for rejecting it, there could be no basis for requiring Targus UK to meet a date that, objectively, it believed to be impossible to achieve.
21. I should note that in this analysis I have assumed that "Targus Orient", the expression that appears in cl 19, should be read as "Targus UK". The expression "Targus Orient" is not defined in the Participation Agreement. Nor, so far as I can tell, does it appear anywhere else in that agreement. There is no evidence as to the identity of "Targus Orient". It may have been some operating division of Targus PLC, perhaps functionally similar to Targus EMEA vis a vis Targus UK. It is however unnecessary to pursue that speculation, because if the position of Targus UK cannot be assimilated to that of "Targus Orient", then the case for Targus Australia, based on its contractual rights (or on the failure to observe fidelity and good faith in respect of them, or in relation to unconscionable disregard of them) becomes weaker.
22. I return to the particular emails: those of 6 and 11 July 2018 (see at [95], [96] above). In my view, in those emails, Targus UK was doing what cl 19(b) permitted it to do. It referred to the specific purchase order. It said that the goods are not currently in stock. It said, initially, that based on currently available information, they would be subject to standard lead times unless there were further delay at the factories. It required Targus Australia to accept that extended lead time, and said that if it did not do so, Targus UK would not accept the order. It invoked specifically cl 19(c).
23. The second email specified what were the current factory lead times for the goods the subject of the order. Thus, it supplemented the possible defect in the earlier email, in that it did not advise the extended completion date. Further, it advised the estimated delivery date (presumably, delivery on ship) based on those lead times.
24. In my view, read together, the emails were sufficient to invoke the extension of time mechanism contained in cl 19(b). It was a matter for Targus Australia to decide whether to accept the extended delivery dates. If it were not prepared to do so, then in my view Targus UK did have the right, which the emails pointed out, to refuse to accept the purchase order.
25. It follows that I see no threat of breach of contract in those emails.
26. Is it, nonetheless, possible that they may be elements of a campaign of unconscionable conduct? To find that would require me to find that there is a seriously arguable case that the pretended reason for seeking the extension of time - delays at the factory - was incorrect, or that, even if correct, it was not the real reason why Targus UK sought consent to the extended delivery dates. Taking all the evidence into account, and accepting (at the risk of repetition) that I must assess this particular aspect of the conduct of Targus UK in the overall context of conduct to which Ms Roughley pointed, I do not consider that there is a serious question to be tried as to this. At present at least, there is no shred of evidence to suggest that the reason given for the extended time was wrong, or that (if correct), it were nonetheless not the real reason for the invocation of cl 19(b).
27. I decline to grant injunctive relief pursuant to prayer 1.2.
28. I add that although I have reached the conclusion just set out in relation to prayer 1.2 on the basis of what in my view is the correct construction of cl 19, I would have declined to grant the relief sought even if I thought that the construction for which Targus Australia contended were arguable. That is because there is no evidence to suggest that the particular emails of 6 and 11 July reflect anything other than the facts as known to Targus UK. And as I have said, there is no evidence to suggest that even if those facts are correct, nonetheless the real reason for imposing the condition is something ulterior, beyond what might be permitted by considerations of fidelity and good faith.
29. That being so, a refusal to allow Targus UK to take advantage of the extension of time mechanism in cl 19(b) would deprive it of a contractual protection contained in a long-term commercial contract negotiated between parties of equal bargaining strength. The nature of the right is such that its exercise will be beneficial to one party and, perhaps, disadvantageous to the other. But that is an inherent part of the contractual bargain that the parties created. The court ought to be slow, particularly on an interlocutory application where not all the facts are known (and that is clearly the case here) to deprive a party of a contractual right clearly intended to protect its position in circumstances such as those which, on the evidence, have arisen.
30. I should note that Ms Roughley submitted that on its proper construction, cl 19 required Targus UK to give priority to Targus Australia in arranging for the fulfilment of purchase orders. She submitted, alternatively, that the same result could be reached by a process of implication (by which she meant, as I understand it, implication ad hoc, or in fact).
31. Ms Roughley submitted that at the time the Participation Agreement was made, Targus Australia was the only international distributor of Targus UK's (strictly speaking, Targus PLC's) products. That was relevant, she submitted, either as part of the factual matrix available to be considered for the purposes of construction or as a circumstance that could assist in grounding the suggested implication. There is no evidence that in fact Targus Australia was, back in 1992, the only such distributor, so to the extent that the submission depends on that matter of fact, there is no proof.
32. Looking at the matter as a question of construction, I do not see how the suggested obligation (on Targus UK) or right (to Targus Australia) arises. On the contrary, the clause contains a sequenced series of steps that are to be followed in dealing with production orders, and provides for the consequences if those steps are not taken or miscarry. Although Ms Roughley sought to support her preferred construction by reference to other provisions of the Participation Agreement (including the contractual relationship between the parties, their shareholdings, their entitlements to share in profit, and the like), I do not think that these have the effect for which Ms Roughley contended.
33. Looking at the matter as one of implication, I see no basis for implying the term. It is not necessary to give business efficacy to the contract. It is not so obvious that it goes without saying. It is, at least arguably, inconsistent with the express terms of the contract. The contract can work perfectly well without it, and it may be noted, did so for the best part of 20 years.

The "risk buy" process

1. It is necessary to deal in a little detail with that part of Targus Australia's case referred to at [28(9)] above: the proposition that Targus UK and Targus International sought "to engineer the situation where factory capacity has the appearance of been [sic] "locked up" and constrained with consequent extended lead times…". The paragraph of Ms Roughley's submissions from which I have taken that quotation cross-refers to paras 80 to 91 of the cross-claim list statement. Those paragraphs (I shall not set them out) refer in turn to an occasion, said to be "in or about early 2018", when Targus UK or Targus International encouraged other Targus subsidiaries to submit bulk orders, in particular for docking stations.
2. Mr Kingham dealt with this in his first affidavit [12] at [58] to [61] under the heading "Stockpiling of Docks by Targus US and Targus EMEA…". He caused information to be extracted from a computer system known as "Baan" which, he said (and the documents exhibited to his affidavit appear to confirm) showed that Targus EMEA had ordered, in round figures, 115,000 docking stations in June 2018 and Targus US had ordered, again in round figures, 77,300 docking stations in May 2018. Mr Kingham said that he did not know why "such large stock orders" had been placed.
3. Targus UK responded to that evidence through the first affidavit of Ms Carla Hutton [13] . Targus EMEA appears to be an operating division of Targus Europe Limited, which is a subsidiary of Targus UK.
4. Ms Hutton said that there had been a global shortage of components used in the manufacture of docking stations and that this had led to long lead times for their supply. The problem was recognised by December 2017.
5. On 15 December 2017, Mr Ron DeCamp, whose occupation is said to be Vice President, Global Product Management and Development for unidentified Targus entities, sent an email to a number of people in the Targus group including Mr Kingham. As I understand it, Mr DeCamp's role puts him at, or somewhere near, the top of global supply management (conducted through the Global Supply Group, or "GSG") for Targus entities worldwide.
6. In the email, Mr DeCamp referred to the component shortage issue "and intense factory rework effort". He said that "many of you are now concerned with longer-term supply gaps… and have requested approval to start issuing new POs".
7. The email then stated: To that end, we are now at a point of reconsidering executing the global dock risk buy on DOCK120/177/180 [different docking station products manufactured for and distributed by Targus companies] and I need each of you to review the attached and update the "blue" fields, taking into consideration your current demand reality. Note: I've added "comments" on Columns A/B that will give you further context as to what I am looking for.
8. The attachment referred to the various geographic areas across which Targus products were sold: the Americas, EMEA, Australia and New Zealand, and "AP" (which I understand to refer to the Asia Pacific region). The blue column indicated the normal demand for the various products, and then a "Risk Buy Qty". There were columns stating other information and then, as Mr DeCamp had said, a column for comments. The comments referred to the suggested risk buy quantities.
9. It is self-evident that Mr DeCamp wanted the various regions, including Australia and New Zealand, to indicate the extent to which they wished to order more than their "Normal Demand" - that is to say, the extent to which they wished to participate in the "Risk Buy". In context, the various regions were asked in effect to consider whether they should over-order so as to enable them to have a reserve of docking stations to meet new or unexpected business opportunities.
10. Mr Kingham's affidavit was silent as to what it was that Targus Australia did in response to Mr DeCamp's email. The documentary evidence contains no more than an email from Mr Kingham to various people including Ms Hutton sent on 9 January 2018 that "attached our updated PO spreadsheet" and noted "that the risk buy orders are included in this week PO's". Ms Hutton said that she understood the attached purchase order "to be for Targus Australia's forward purchase". Although Mr Kingham swore a further affidavit [14] in which he responded, among other things, to Ms Hutton's affidavit, he did not comment on that aspect of her evidence.
11. On 10 May 2018, Ms Hutton sent an email to Mr Kingham in which she raised again, in effect, the prospect of Targus Australia's making a risk buy order. That email, so far as it is relevant, said: In speaking to Janice yesterday she has advised that she does not trust Action Star to source the materials required to supply the quantities we indicated in our earlier volumes submission. She has "forced their hand" by placing PO's for supply through to next March and had Mikel Williams sign-off on this. Her suggestion is that we should do the same. I will be putting a proposal together for the CLT here to review/sign-off tomorrow, so wanted to let you know Janice's view and what we will be doing, so you can review your position. Let me know how you wish to proceed.
12. It is not clear whether Mr Kingham, or for that matter anyone else from Targus Australia, replied. Mr Kingham does not mention this email in his affidavits.
13. Ms Hutton said at [94] of her affidavit that she understood "that Targus Australia elected not to make forward purchases in January 2018 to the same extent as other global regions, and that has contributed to them being unable to secure sufficient stock of docking stations". Mr Kingham did not respond to this evidence. Nor did anyone else.
14. Targus Australia relied on the evidence of Ms French. That evidence covered a number of topics, including loss of business opportunities caused by lack of supply of docking stations. She referred to two particular opportunities, and in other evidence there is reference to a third. For convenience and to preserve such confidentiality as may be significant, I shall refer to the opportunities as relating to Company 1, Company 2 and Company 3. Each of those companies is a very large entity, whose business, one might think, any supplier of products would be keen to win or retain.
15. Company 1 had sought supply of a large number of docking stations. Ms French said that she instructed another employee of Targus Australia to inform the relevant officer of Company 1 "that at this time it would be highly unlikely we would be able to meet their timelines…". Ms French said that thereafter she placed a call to that officer and left a voicemail message reiterating the comment. Perhaps unsurprisingly, she has not heard back from Company 1. Ms French gave no evidence of any further attempts to contact Company 1, or to see if its requirements for delivery times could be extended. Mr Elliott characterised as this as a half-hearted attempt to win the business. I am inclined to agree.
16. As to Company 2, Ms French suggested that the opportunity had been won in principle, but that the customer did not proceed because of concerns over delivery times. However, Ms French's affidavit evidence omits (whether conveniently or by true oversight) that potential customer's requirement not merely for units to be supplied by specified dates but also for Targus Australia to "align pricing to be more competitive" with that of another specified product. Ms French says nothing at all about that potential customer's requirement for Targus Australia to, as it were, sharpen its pencil.
17. Whilst I do not find the evidence of Ms French to be particularly compelling, I can accept (because it is self-evident) that a company in the position of Targus Australia would have difficulty in seeking to win business for the supply of large quantities of docking stations if it could not be assured that the docking stations would be available when required.
18. The story with Company 2 does not end there. Ms French sent an email to Ms Tindale and Mr Kingham dated 22 June 2018. The email was copied to people who as I understand it are part of the Global Supply Group. That email (which discloses the requirement for repricing) referred to the total number of docking stations needed to meet the opportunity and the timeframe in which they would be required.
19. Mr Kingham would appear to have become involved before that email was sent. On 21 June 2018, he wrote to Ms Hutton and Ms Janice Hansen, someone else as I understand it involved in the Global Supply Group, referring to the business transacted with Company 3 (I have yet to come to this) and then dealing with the Company 2 deal. So far as the email concerned Company 2, Mr Kingham said: … [I]t looks like Claire has managed to save the Company 2 global deal for XXXXX [redacted for confidentiality] units… that we believed had been lost… However there is one big proviso with this deal and that is that we have to be able to confirm to Company 2 next Monday 25th June that Targus will be able to supply XXXX units of DOCK190AUZ in August this year. We know this is asking a lot but is there any way that we could meet this requirement? Australia has already diverted XXXXX units of our initial DOCK 190AUZ purchase order to cover the increased Company 3 roll out, we have no more stock until January 2019. I have included [Mr Williams]… and [Mr DeCamp] on the e-mail as this will require global agreement on realigning supply to make it happen. Sorry to add to your stress.
20. Ms Hansen replied, not unreasonably, that it might take a little longer than four days to see what could be done. Mr Kingham said that he would see if he could buy more time. On 26 June 2018, Ms Hansen replied: Unfortunately we are still working on this. One of the challenges in swapping is that you don't have any POs to swap until January… . It looks like you did not place any buys in the Global roll up we did in early January although I'm not sure why. … [W]e are all pretty constrained up front. … [T]here are definitely long term challenges when you are swapping an August arrival for a January arrival.
21. In early July 2018, Mr Kingham asked for an update. Ms Hansen replied, saying that there were no supplies of the relevant dock "available to pull in from other regions by end of August to support you". She added that it might be possible to do some things to help and then said: If you'd been more aggressive in January you would have DOCK180 POs of your own to swap and be in better shape.
22. Mr Kingham responded the same day, thanking Ms Hansen for the update. Then, on 12 July 2018, Ms French (who had been apprised by Mr Kingham of what had happened) thanked him for chasing the matter up, stated that the Company 2 deal "is still very much alive" and raised whether there were other ways in which the deal could be saved. There is no evidence that, since 12 July 2018, the Company 2 deal has been lost (nor, if it has, why).
23. Mr Kingham did not say anything in his affidavits about Ms Hansen's comments (which, clearly, were related to the risk buy process). Nor did Ms French in hers.
24. The obvious inference is that Targus Australia took a conservative approach to Mr DeCamp's suggestion that the various global regions reconsider their risk buy orders. I am not being critical in saying this. I can understand that there is a significant cost to any business in having stock on hand that is not required to fulfil actual orders. In effect, Targus Australia had to weigh up the prospect that it might be able to obtain further business and use those docks (or be able to swap them with other regions) against the risk that the docks would sit around, unused and unwanted, and incurring holding or loss of opportunity costs for the money required to buy them.
25. Nonetheless, the fact is that Targus Australia had an opportunity in January 2018 to increase its risk buy allocation. It did not do so. Its evidence does not explain why it did not do so. Nor does its evidence seek to controvert the points made by Ms Hutton in her affidavit and by Ms Hansen in her emails.
26. The story with the Company 3 deal is not so complicated. It seems that Targus Australia won the business and, one way or another, was able to supply docking stations as required by Company 3. However, as noted, this meant that Targus Australia had no reserve stock to enable it to meet the delivery requirements of Company 2 (assuming that Targus Australia had been able to make its pricing more competitive).
27. When one surveys the whole of the evidence to date on this topic, there is no support for the proposition that Targus UK and Targus International have sought, in effect, to engineer a shortage of docks, let alone that they have done so for the purpose of putting pressure on Targus Australia. As the evidence stands, the shortage of docks was predicted; the Global Supply Group suggested that the various regional distributors order more stock in an attempt to increase their reserves of docks (and Ms Hutton renewed this suggestion in May 2018); and Targus Australia did not respond as aggressively as other operating divisions had done. None of that is any evidence of a conspiracy of the kind alleged, although not by that name.
28. Ms Roughley referred to evidence that showed that whilst the other regions in which Targus products were sold had enjoyed substantially increased sales of docking stations, Targus Australia had sustained a 15% decrease. She submitted that this was the result of the shortage of docking stations. The submission is correct, so far as it goes. What it does not acknowledge is that the other regions had increased their risk buy allocations, and Targus Australia had not. That is why Ms Hansen said to Mr Kingham twice, on 26 June and 6 July 2018, in effect that Targus Australia was the author of its own problems because it had not participated more aggressively in the global risk buy process. As I have said, Targus Australia did not respond, either in emails or in its affidavit evidence, to this proposition. Nor did it reply to Ms Hutton's evidence to the same effect.
29. The evidence falls along way short of showing a serious question to be tried as to this particular element of Targus Australia's case, as reflected in the submission referred to at [28(9)] above.

Prayer 1.4

1. I turn to prayer 1.4. An order made in the terms sought would require Targus UK to deal promptly with production orders that Targus Australia submits, and to do so within 8 weeks of submission. That approach abridges the contractual requirements, which are to deal "promptly" and "wherever possible within 8 weeks" of receipt. Further, it ignores what I have called the extension of time provisions contained within cl 19(b).
2. Again, the absence of any evidence to show that the assigned reason for delay is factually incorrect (and known to be so) or is not, even if correct, the true reason for Targus UK's acting as it did is of some importance.
3. So, too, is the consideration that if mandatory injunctions are to be granted to enforce particular provisions of a contract, they should not be granted to enforce only part of those provisions.
4. I accept that there is a conceptual distinction between specific performance of a contract (which, necessarily, means specific performance of the whole of the contract) and an injunction requiring performance of a particular contractual term. I accept that the court has power, including on an interlocutory application, to order that a party perform a specified term of a contract. But it does not follow that the party should be ordered to perform part only of that term, or that the order should be so framed (as is prayer 1.4) to deprive the party of the benefit of a protective element of that term.
5. For that reason, in addition to what I have said as to the proper construction of cl 19 and, in the alternative, as to the discretionary reasons for refusing relief if the construction for which Targus Australia contended were reasonably arguable, I decline to grant relief in terms of prayer 1.4.

Prayer 1.5

1. This prayer seeks an order that Targus UK in effect direct its suppliers to arrange their production schedules so that orders for Targus Australia can be produced and shipped by the 9th week after their acceptance and confirmation (by Targus UK); alternatively, that Targus UK arrange and pay for the extra cost of airfreight.
2. As with prayer 1.4, prayer 1.5 abstracts from the contract a particular obligation, and seeks an order directing its extra-contextual performance. It thus ignores the overall scheme of cl 19, including the protection that is given to Targus UK. For that reason alone, it ought not be granted.
3. Further, the prayer assumes that Targus Australia has an absolute right to have goods shipped and delivered in those terms, or to require Targus UK to arrange and pay for the extra cost of airfreight. Again, that misses the point that the obligation only arises after acceptance and confirmation.
4. There is a further problem. Where an order has been accepted and confirmed on the basis that the delivery date on ship will be longer than 8 weeks (as was the case for the goods specified in the email of 11 July 2018, for which the estimated production time was 12 weeks), there can be no basis for ordering Targus UK to deliver at some earlier time.

Prayers 1.6, 1.7

1. These prayers relate to instructions given by Targus International to suppliers, requiring them not to accept orders direct from Targus Australia, and, where orders are destined for Targus Australia, to accept them only from Targus UK. Prayer 1.5 seeks that the instruction be withdrawn, and prayer 1.6 seeks that no further such instructions be given.
2. The story starts on 6 December 2017, when Mr Williams, writing on behalf of Targus UK (another of the relatively rare occasions when the particular corporate entity for whom something is done or written is identified), notified Targus Australia that Targus UK would henceforth charge for goods supplied at cost plus 10%. Mr Williams referred specifically to cl 20 of the Participation Agreement as justifying that charge. He said that it was imposed because of the costs incurred by Targus (seemingly, Targus Group or Targus International) "to run the business, including the sourcing operations".
3. Mr Williams added: To further that objective, Targus hereby instructs Targus Australia to immediately discontinue its practice of ordering products directly from factories under Targus' contractual relationship with then. Going forward, Targus requires that Targus Australia place orders through, and remit payments to, Targus in accordance with the Agreement. Targus will hereafter make orders to the factories in accordance with its contractual arrangements with the factories on Targus Australia's behalf and will apply a 10% mark-up on the goods distributed to Targus Australia under the Agreement. For the period from October 1, 2017 to the present, Targus will present an invoice reflecting the mark-up directly to Targus Australia for such payment. I am eager to discuss this with you, but I have been directed by the Targus board of directors to send this letter and have no choice.
4. Mrs Tindale replied to Mr Williams on 7 December 2017. She said: As you can understand the communication suggests a significant change to the Targus Australia business, and consequently I need to give this issue some more thought, so would appreciate if we could chat next week.
5. Mr Williams replied the same day, acknowledging receipt, and setting out his availability to talk "tomorrow" after "4pm Eastern" or "anytime over the weekend" or "anytime I am not on a plane".
6. It appears from other documents that there were discussions between Mrs Tindale and Mr Williams, but since neither has sworn an affidavit (at least, one that was read in the proceedings), I do not know what, if anything, was discussed or what, if anything, was agreed.
7. On 19 December 2017, Mr Stan Mortensen, identified as "SVP, General Counsel & Secretary", wrote to Mrs Tindale "by way of follow-up" to Mr Williams' letter. Mr Mortensen said: This email and the attached documents are by way of follow-up to Mikel's letter of December 6 on behalf of Targus Group (UK) Limited ("Targus UK"). In that letter, Targus UK instructed Targus Australia to immediately discontinue its practice of ordering products directly from the factories under Targus UK's contractual agreements with them. Going forward, Targus UK is requiring that Targus Australia place orders through, and remit payments to, Targus UK. Upon receipt of orders from Targus Australia, Targus UK will thereafter make orders to the factories in accordance with its contractual arrangements with the factories on Targus Australia's behalf and will apply a 10% mark-up on the goods distributed to Targus Australia under the Agreement. In the attached letters, we have instructed the factories with whom Targus Group (UK) Limited and Targus International LLC have contractual agreements to accept orders under those agreements that are destined for Targus Australia solely when they receive such orders directly from Targus Group (UK) Limited. I have attached five such instruction letters to this email for your reference and will forward the remainder in a series of emails to follow.
8. As Mr Mortensen's email suggested, he did indeed attach copies of letters to a number of suppliers, containing the instruction of which Targus Australia now complains.
9. It is obvious that the 10% surcharge issue was clearly linked to the issue of stopping factories from accepting direct orders from Targus Australia. Mr Williams and Mr Mortensen had made this clear. Mr Williams repeated the connection in an email that he sent to Mrs Tindale on 17 January 2018. There is no need to set out the terms of that email.
10. Thereafter, Targus Australia protested. It retained solicitors, DibbsBarker (later known as Dentons Australia). Ms Emma Hodgman, a partner in DibbsBarker, wrote a number of letters on behalf of Targus Australia, seeking, among other things, information as to the costs charged to Targus UK.
11. Targus UK (or Targus International) decided to escalate the dispute. Corrs became involved. On 27 March 2018, Corrs wrote to DibbsBarker alleging breach of the participation agreement, on the ground that: Targus Australia is required to purchase Targus products only from [Targus UK] in accordance with the pricing formula set out in Clause 20 of the Participation Agreement.
12. The letter asserted that, "contrary to the [unspecified] obligations contained in the Participation Agreement", Targus Australia had placed orders direct with manufacturers, and had thereby substantially deprived Targus UK of the benefit of the Participation Agreement. The letter claimed that some $7.7 million was owing on this account. It enclosed an invoice for the amount of the claim. It demanded that Targus Australia provide, within a few days, a proposal for payment of that amount.
13. The tone of the letter was high-handed and inflammatory. It appeared to proceed upon a misapprehension (to put it both politely and neutrally) of the effect of the relevant terms of the Participation Agreement. It failed to consider how it could possibly be the case that Targus Australia, having paid, for the most part within terms, every invoice ever issued by Targus UK, could nonetheless now still owe it some $7.7 million.
14. There is little point in continuing with the recitation of facts. The most salient fact is that the "new" ordering processes had been in place for over 7 months at the time the notice of motion was filed. There was some evidence that, initially, they had resulted in delays to orders. However, those difficulties were resolved. The evidence shows that where supplies are available, the introduction of the new system has caused very little delay in delivery. And where supplies are not available, or where the lead times are extended beyond 8 weeks for reasons beyond the control of Targus UK, such delay as the new system may have introduced becomes irrelevant.
15. Further, as I have said, the evidence shows the since the introduction of the new system, Targus Australia and Targus UK have worked cooperatively to attempt to resolve stock shortage or stock supply problems, and Targus Australia has from time to time expressed its appreciation of the efforts of Targus UK's staff in that behalf.
16. In short, there is no evidence that restoration of the old system would achieve any benefit for Targus Australia. There is every reason to think (in particular, based on the evidence of Ms Hutton) that to require an interlocutory reversion to it would cause considerable disruption to the business of Targus International and Targus UK, and to their relationships with their suppliers.
17. I accept that it may be shown that the motive for introducing the new system was to compel, in a practical sense at least, Targus Australia to pay Targus UK the 10% markup on cost price. I accept, further, that it may be shown that these steps were part of the wider campaign of conduct to which Ms Roughley referred, and, considered in that context, were part of the unconscionable conduct of which Targus Australia confirms.
18. Nonetheless, in the absence of any evidence of prejudice to Targus Australia specifically referable to this step (as opposed to problems in the supply chain that would apply even if the old system were reintroduced), I am not prepared to grant the relief sought.

Prayer 1.8

1. It is better to set out this prayer again, rather than to attempt to summarise it: 1 Pursuant to the equitable jurisdiction of the Court and/or s 234 of the Australian Consumer Law, an order that, pending the determination of the proceedings or further order of the Court, Targus Group (UK) Limited: … 1.8 be restrained from taking any discriminatory or punitive action against Targus Australia in respect of its refusal to assign intellectual property rights in the Power Management Device or to pay the 10% mark-up demanded of it or to pay any other additional amounts to Targus Group (UK) Limited or Targus International LLC (or any other entity within the Targus global group).
2. The immediate problem, and one which in my view dictates that the relief sought ought not be granted, is that the enforcement of an order in terms of prayer 1.8 would involve value judgments as to what is "discriminatory or punitive", and as to whether any action so characterised is taken "in respect of" the subjects that are thereafter identified. An interlocutory injunction granted in those terms would be productive of further dispute.
3. Where the court restrains a party from acting in a particular way, that party must know with clarity and certainty what it can and cannot do. It should not be left to guess. It should not be exposed to the risk that its assessment of the proper characterisation of its actions, even if made in good faith and on reasonable grounds, might differ from the assessment of others: not only the party obtaining the relief, but also the court asked to enforce, by way of punishment for contempt, the orders made.
4. It is inevitable that if relief were granted in the terms sought, the court would be plagued with endless disputes as to whether any particular action taken by Targus UK were in breach. That is not a situation that I propose to engender, in circumstances where: 1. Targus Australia has already occupied four days of hearing time to argue an interlocutory application that should have been completed in, at the most, two days; and 2. at the same time, Targus Australia has refused to accept an early final hearing offered in the circumstances set out at [26] above.

Prayer 2

1. Prayers 2.1, 2.2 and 2.5 effectively seek, as against Targus International, relief in the terms of that sought against Targus UK in terms of prayers 1.6, 1.7 and 1.8. For the reasons given, making all appropriate changes, Targus Australia has not made good its claim to that relief.
2. Prayers 2.3 and 2.4 seek to regain for Targus Australia what might be called its seat at the table in respect of access to IT systems, operational meetings and the like. Ms Roughley submitted that the steps taken by Targus International had deprived Targus Australia of "visibility" of the ordering and production processes, and had made those processes not "transparent". That (whatever it means) may be so; but it is difficult to see how the situation could be improved if those privileges, whatever they may be, were restored.
3. I am prepared to accept, here as elsewhere, that the steps taken may be shown to have been part of a concerted campaign of unconscionable conduct: that is to say, as steps of themselves tainted by that overall (hypothetical) unconscionability. It does not follow, in the absence of evidence suggesting any immediate problem, that they ought be reversed on an interlocutory basis.

Prayer 3

1. This prayer seeks to prevent Messrs Williams and Dussinger from preventing or impeding Targus Australia from obtaining external legal advice and representation. The simple answer appears to be that there is no evidence that they propose to do so.
2. Mr Williams has protested from time to time at Targus Australia's actions in obtaining legal advice. He has suggested that in substance, Mrs Tindale is using the company and its money to prosecute her private shareholder's dispute with Targus UK. That assertion seems to me to overlook that the action is being taken by Targus Australia. If it succeeds, it will succeed for the benefit of the company as a whole. And if it succeeds, the expense of funds to obtain legal advice may be shown to have been justified.
3. However, there is no evidence to suggest that Messrs Williams and Dussinger propose to do anything more than protest. In this context, I note that in Mr Catchpoole's affidavit referred to earlier, he gives evidence of being informed by Messrs Williams and Dussinger of certain things. Those instructions are set out at [8] (in respect of Mr Dussinger) and [10] (in respect of Mr Williams). It is not necessary to set out the whole of those paragraphs.
4. Each of those men says that he accepts that it would be improper for him to instruct lawyers to compromise the proceedings and has not sought to do so; and that he has recused himself from deliberations on the dispute between Targus Australia and Targus UK. Each of them says, further, that to the extent that he had objected to the appointment of external lawyers, it is on the basis that I have referred to earlier: namely, that Mrs Tindale is in effect using company money to fund her private, shareholder's, dispute with Targus UK.
5. I accept that those are the instructions given to Mr Catchpoole. There is no reason to think that they were given otherwise than in good faith. It follows that not only is there no evidence of a threat to behave in the way sought to be enjoined, there is evidence that the respondents in question do not propose to engage in that behaviour.
6. I do not propose to grant relief in terms of prayer 3.

Prayer 4

1. Prayer 4 seeks orders retraining Targus UK and Targus International from directing, aiding, abetting etc. Messrs Williams and Dussinger from acting in the way sought to be restrained by Prayer 3 (the drafting of prayer 4 goes somewhat further, but there is no need to set it out again). Since there is no evidence that Messrs Williams and Dussinger propose to behave in the way referred to in prayer 4, and on the contrary, evidence that they do not, there is no basis for granting that relief so far as those companies are concerned.
2. As I noted earlier, two apparently independent directors have been appointed. There is no evidence to suggest that Targus UK or Targus International would seek to procure them to act in the way described in prayer 4. Nor is there the slightest reason for thinking that those directors would succumb to any approach or invitation to do so.
3. I suppose that at some stage Targus UK may revoke its appointment of Messrs Williams and Dussinger, and appoint other persons as its nominee directors. If that happens, and if there is some reason to think that this has been done to engineer a vote of the kind described in prayer 4, an application could be made. But at present, the relief claimed is directed at a situation which, on the evidence, has not arisen and is not likely to arise.

Undertaking as to damages

1. Targus Australia provided the usual undertaking as to damages. Mr Elliott did not attack the company's ability to meet the undertaking if called upon to do so. What he did submit was that, in circumstances where Targus Australia is owned 51% by Targus UK, and Targus UK is entitled to share equally in Targus Australia's profits, the undertaking should be given by Mrs Tindale personally.
2. Ms Roughley responded that the application was one brought by Targus Australia for the benefit of itself and, thus, all its members. She submitted that if it succeeded, the benefit would accrue to Targus UK as well as to Mrs Tindale. In those circumstances, she submitted, it was appropriate that those who would enjoy the fruits of success should bear the burden necessarily incurred in obtaining that success.
3. Targus UK, and Messrs Williams and Mortensen, have sought to portray the dispute only as one between shareholders. That analysis has been reflected in some of the correspondence emanating from Corrs. In a practical sense, the analysis may be correct. In a legal sense, however, the cross-claim is one undertaken by Targus Australia in its own right. If it succeeds, the success will endure for the benefit of the company as a whole.
4. That legal analysis is a little artificial, given that any success enjoyed may very well be at the expense of one of those members: Targus UK.
5. Regardless of the legal and practical analysis, the real point seems to me to be as follows. The undertaking as to damages is required to secure the position of the party against whom interlocutory relief is sought, in the event that the relief is granted and, on a final hearing, it becomes apparent that it should not have been granted. It would be wholly inconsistent with that purpose to require the party entitled to the benefit of the undertaking to pay half the cost of meeting it. In a practical sense, the undertaking is only of significance where, interlocutory relief having being granted, the court later concludes that the successful applicant should not have obtained it. Thus, as Mr Elliott submitted, it is the event of failure, rather than the event of success, that ought determine analysis and its outcome.
6. When one views the matter in that way, it seems to me to be plain that, as a matter of justice, the limited relief that I propose to grant, in terms of prayer 1.1, ought be granted only on terms that Mrs Tindale rather than Targus Australia give the undertaking as to damages. I had considered whether it ought be given by them both, jointly and severally, but that would not really answer the question. If Targus UK became entitled to enforce the undertaking, and chose to do so only against Mrs Tindale, she would be entitled to be exonerated, as to one-half of any amount paid by her, by Targus Australia. That exoneration in turn would be borne as to half by Targus UK. That is the very situation that ought not arise.

Conclusion and orders

1. Targus Australia has made good its claim for interlocutory relief in the terms sought by prayer 1.1 of the notice of motion, read in conjunction with the "chapeau". However, that relief will only be granted on terms that Mrs Tindale give the undertaking as to damages.
2. The balance of the claim fails and ought be dismissed.
3. There will no doubt be arguments as to costs.
4. I will stand the matter over for a period of time to enable the parties to consider these reasons. If Mrs Tindale is prepared to give the undertaking as to damages, I will make an order in the terms described, and the notice of motion will otherwise be dismissed. If Mrs Tindale is not prepared to give the undertaking, the notice of motion will be dismissed entirely.
5. There will need to be a regime for submissions as to costs.
6. The parties are to formulate orders (including pursuant to UCPR r 10.14(3) in relation to service on the 2nd, 3rd and 4th respondents - see at [37] above) to give effect to these reasons once they have had the opportunity of considering what I have said. I stand the matter over to 9:30am on 31 August 2018 before me for the making of orders. For the moment, I reserve all questions of costs.

Endnotes

1. Schedule 2, Competition and Consumer Act 2010 (Cth).
2. Written outline of submissions dated 10 August 2018, [7], [9], [10].
3. The quotation comes from an email dated 21 December 2017 sent by Mr Williams to Mrs Tindale.
4. Ibid.
5. Written submissions [10(b)].
6. Written submissions [10(g)].
7. Admissible by virtue of s 75 of the Evidence Act 1995 (NSW).
8. Affirmed 8 August 2018.
9. See generally T107 and following, culminating at T112.1-.6.
10. See, eg, T160.40-161.4.
11. (1987) 8 NSWLR 533.
12. Sworn 1 August 2018.
13. Sworn 8 August 2018, [86]-[94].
14. Sworn 12 August 2018. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 29 August 2018