Brusa v Brusa - [2020] WASC 362

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   BRUSA -v- BRUSA [2020] WASC 362
CORAM:   HILL J
HEARD:   14 AUGUST 2020
DELIVERED          :   12 OCTOBER 2020
FILE NO/S:   COR 80 of 2020
BETWEEN:   PAUL BASSO BRUSA
Plaintiff
AND
CARL BASSO BRUSA
First Defendant
MARK BASSO BRUSA
Second Defendant
BRUSA PTY LTD
Third Defendant
MARIA ANITA BASSO BRUSA
Fourth Defendant
KRISTA BASSO BRUSA
Fifth Defendant

Catchwords:

Corporations law - Interlocutory injunction - Whether equitable principles apply to statutory injunction under s 1324 of Corporations Act (Cth) - Broad interlocutory relief sought by plaintiff - Whether damages are an adequate remedy

Legislation:

Corporations Act 2001 (Cth), s 1324

Result:

Application to discharge interlocutory injunction allowed

Category: B

Representation:

Counsel:

Plaintiff	:	Mr M Holler & Mr G Carter
First Defendant	:	Mr D J Pratt & Mr L Palmos
Second Defendant	:	Mr D J Pratt & Mr L Palmos
Third Defendant	:	Mr D J Pratt & Mr L Palmos
Fourth Defendant	:	Mr D J Pratt & Mr L Palmos
Fifth Defendant	:	Mr D J Pratt & Mr L Palmos

Solicitors:

Plaintiff	:	My Law Firm Pty Ltd
First Defendant	:	Palmos Legal
Second Defendant	:	Palmos Legal
Third Defendant	:	Palmos Legal
Fourth Defendant	:	Palmos Legal
Fifth Defendant	:	Palmos Legal

Case(s) referred to in decision(s):

Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1
Australian Securities and Investments Commission v Mauer-Swisse Securities Ltd [2002] NSWSC 741; (2002) 42 ACSR 605
Australian Securities and Investments Commission v Parkes [2001] NSWSC 377; (2001) 38 ACSR 355
Australian Securities and Investments Commission v Pegasus Leverage Options Group Pty Ltd [2002] NSWSC 310; (2002) 41 ACSR 561
Australian Securities and Investments Commission v Sweeney [2001] NSWSC 114
Black Uhlans Inc v New South Wales Crime Commission [2002] NSWSC 1060; (2002) 12 BPR 22
Broken Hill Pty Co Ltd v Bell Resources Ltd (1984) 2 ACLC 157
Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd [2009] FCAFC 147; (2009) 180 FCR 11
CME Properties (Australia) Pty Ltd v Prime Capital Securities Pty Ltd [2016] WASC 231
Emeco International Pty Ltd v O'Shea [2012] WASC 282
Fayad v Bellpac Pty Ltd [2004] NSWSC 755
Gore v Australian Securities and Investments Commission [2017] FCAFC 13; (2017) 249 FCR 167
Leawell Pty Ltd as Trustee for the Garton Smith Trust v Watershed Premium Wines Ltd [2009] FCA 26
Mesenberg v Cord Industrial Recruiters (1996) 39 NSWLR 128
Morara Pty Ltd v Kingslane Property Investments Pty Ltd [2019] WASC 136
Pizzale v Gumina Enterprises Pty Ltd (1994) 13 WAR 88
Re Ikon Group Ltd [2015] NSWSC 980; (2015) 107 ACSR 146
Sino Iron Pty Ltd v Mineralogy Pty Ltd (No 2) [2017] WASCA 76; (2017) 55 WAR 36

HILL J:

On 30 June 2020, the plaintiff, Paul Basso Brusa, commenced these proceedings against his two brothers Carl and Mark, their wives, Maria and Krista, and Brusa Pty Ltd (Brusa), a company recently established by Carl and Mark. Because the parties share a common surname, I will refer to the parties by their first names. I intend no disrespect in doing so.
On the same date, Paul filed an interlocutory process seeking interlocutory relief against the defendants until trial pursuant to s 1324 of the Corporations Act 2001 (Cth) (Act). The interlocutory process was listed on an urgent basis before his Honour Justice Tottle on 30 June 2020. The defendants did not seek to substantively argue the application on that date, nor did they oppose an injunction being granted. The defendants sought orders programming the application through to a contested hearing. Tottle J programmed the substantive hearing of the application before a judge of this court, and, in the interim, granted the orders sought by the plaintiff.
In support of its application, Paul relied on five affidavits: his affidavit filed 30 June 2020, an affidavit of his solicitor, Maurizio Antonio Oteri filed 30 June 2020, Paul's responsive affidavits filed 28 July 2020 and 12 August 2020, and an affidavit of his wife, Natalie Simone Basso Brusa filed 12 August 2020.
In opposition to the applications, the defendants filed eight affidavits: an affidavit of Mark filed 21 July 2020, two affidavits of Carl filed 21 July 2020 and 3 August 2020, an affidavit of Mohamed Shabir Sass filed 21 July 2020, two affidavits of Tracy Joughin filed 21 July 2020 and 22 July 2020, an affidavit of Michael John Gangemi filed 21 July 2020, and an affidavit of Dannielle Louise Mangan filed 21 July 2020.
The plaintiff's interlocutory process was listed before me for hearing on 14 August 2020. At the hearing, the defendants sought orders for the interlocutory injunction to be discharged in its entirety, while the plaintiff contended the orders should continue until trial.
For the reasons which follow, I consider that the orders of Tottle J made on 30 June 2020 should be discharged.

Factual Background

Despite the lengthy affidavit evidence filed by the parties, much of the factual background which is relevant to this application was not in dispute between the parties. Prior to the hearing, the parties filed notices of objections to various portions of the affidavits that had been filed, which I ruled upon at the hearing. For the purposes of the determination of this application, I have set out below the matters that are not in contest between the parties.
Paul, Carl and Mark have been in business together operating various companies in the building industry since the early 1990s.[1] They became involved in the building industry through their now deceased father, Bruno Basso Brusa.[2]
[1] Affidavit of Mark Basso Brusa filed 21 July 2020 [7].
[2] Affidavit of Mark Basso Brusa filed 21 July 2020 [8].
Paul, Carl and Mark are equal shareholders and directors of Materon Investments WA Pty Ltd (Materon) which was incorporated in 2012.[3] Materon currently carries on two businesses: WA Building Company and New Home Centre WA.[4] In addition to Materon, they are equal shareholders in a number of companies which are referred to in the affidavits as the Delstrat Group.[5] The Delstrat Group includes companies trading under the business names Seacrest Homes, Broadway Homes, Ideal Homes and Affordable Living Homes.[6] Each of these companies targets and operates in different market segments of the residential housing market.[7]
[3] Affidavit of Paul Basso Brusa filed 30 June 2020 PB1.
[4] Affidavit of Paul Basso Brusa filed 30 June 2020 [4], [17], PB2.
[5] Affidavit of Mark Basso Brusa filed 21 July 2020 [6]; Affidavit of Tracy Joughin filed 21 July 2020 [3].
[6] Affidavit of Paul Basso Brusa filed 30 June 2020 [18].
[7] Affidavit of Paul Basso Brusa filed 30 June 2020 [19].
WA Building Company has carried on business since 2014 and currently employs 25 full time staff as well as a number of contractors.[8] On the evidence before me, it is a successful and profitable business.
[8] Affidavit of Paul Basso Brusa filed 30 June 2020 [6], [10].
In or about 2017 or 2018, relations between the brothers broke down and Paul stopped attending the monthly directors' meetings of Materon.[9] From 11 October 2017 until June 2020, Paul did not attend any directors' meetings.[10]
[9] Affidavit of Mark Basso Brusa filed 21 July 2020 [45].
[10]Affidavit of Tracy Joughin filed 21 July 2020 TJ02.
On 13 December 2018, The New Home Company Pty Ltd (New Home Company) was incorporated.[11] The directors of New Home Company are Paul's wife, Natalie, and their son, Dylan. Natalie owns 60,090 of the 60,100 shares on issue. Dylan owns the remaining 10 shares. Of the shares owned by Natalie, 60,000 are owned by her in her capacity as the trustee of the DCJ Trust.[12] Both Natalie and Paul deny that Paul has any involvement in this business.[13]
[11] Affidavit of Natalie Simone Basso Brusa filed 12 August 2020 NBB1.
[12] Affidavit of Natalie Simone Basso Brusa filed 12 August 2020 [2] ‑ [4], NBB2.
[13] Affidavit of Natalie Simone Basso Brusa filed 12 August 2020 [6] ‑ [8]; Affidavit of Paul Basso Brusa filed 12 August 2020 [2], [3], [5], [6].
On 23 October 2019, Carl and Mark incorporated Brusa Pty Ltd. They are equal shareholders in Brusa and were originally directors of this company.[14]
[14] Affidavit of Paul Basso Brusa filed 30 June 2020 PB5.
On 21 May 2020, the business name of 'WA Building Company' was transferred from Materon to Brusa.[15] On the same date, 'WA Building Company1' was registered in the name of Materon.[16] Paul's evidence is that he had no knowledge of either of these matters and did not consent to them.[17]
[15] Affidavit of Paul Basso Brusa filed 30 June 2020 PB4.1.
[16] Affidavit of Paul Basso Brusa filed 30 June 2020 PB4.2.
[17] Affidavit of Paul Basso Brusa filed 30 June 2020 [12].
In early June 2020, Paul became aware that Mark and Carl had set up Brusa. Paul's evidence is that Mark told him that he and Carl had set up Brusa and that as of 1 July 2020, they would not be selling any homes through Materon but would sell them through Brusa.[18] Mark does not respond to this evidence although he admits that he and Carl decided that Materon would complete any existing jobs and that future work would 'be run through Brusa'.[19] The defendants contend that they did this in response to various actions of Paul and his family.[20] Paul has not responded to this evidence, on the basis that he was advised these matters were not relevant to issues before the court on this application.[21]
[18] Affidavit of Paul Basso Brusa filed 30 June 2020 [20].
[19] Affidavit of Mark Basso Brusa filed 21 July 2020 [60].
[20] Defendants' outline of submissions [15].
[21] Affidavit of Paul Basso Brusa filed 28 July 2020 [2].
On 12 June 2020, Paul's solicitors wrote to Carl and Mark demanding that the business name of 'WA Building Company' be transferred back to Materon and asked that they provide a written undertaking not to solicit any staff or clients of Materon.[22]
[22] Affidavit of Paul Basso Brusa filed 30 June 2020 PB6.
On 15 June 2020, the business name of 'WA Building Company' was re-registered in the name of Materon.[23] Shortly afterwards, on 19 June 2020, Mark replied to the letter of demand contending that the matter had been resolved on 15 June 2020[24] without providing any particulars as to the basis of this contention.
[23] Affidavit of Paul Basso Brusa filed 30 June 2020 PB4.3.
[24] Affidavit of Paul Basso Brusa filed 30 June 2020 PB8.
On 23 June 2020, Paul's solicitors wrote again to Mark and Carl disputing that Paul's concerns had been resolved and seeking fresh undertakings from them.[25] Carl and Mark have declined to give the undertakings sought.[26]
[25] Affidavit of Paul Basso Brusa filed 30 June 2020 PB9.
[26] Affidavit of Paul Basso Brusa filed 30 June 2020 PB10.
On 24 June 2020, Mark told Paul that the Sales Manager for WA Building Company would be working for both Brusa and Materon and that all new home sales would go through Brusa.[27]
[27] Affidavit of Paul Basso Brusa filed 30 June 2020 [28].
On 25 June 2020, Mark and Carl resigned as directors and appointed their wives, Maria and Krista, as directors of Brusa.[28] Mark and Carl continue to be equal shareholders in Brusa. Mark informed Paul's solicitors that Brusa will 'start from scratch' and operate under the trading name 'Supreme Living'.
[28] Affidavit of Mark Basso Brusa filed 21 July 2020 MBB9.
There was no evidence before the court at the hearing as to whether Brusa is currently trading under this name or the financial position of Materon since 1 July 2020.

Summary of Proceedings

The originating process filed by the plaintiff is brought under s 181, s 182, s 232, s 233 and s 1324 of the Act. The grounds for the application are that Carl and Mark's conduct is contrary to the interests of the members of Materon as a whole and is oppressive to, unfairly prejudicial to, or unfairly discriminatory against Paul and in breach of their directors' duties. The specific matters relied upon by Paul are:
(a)the conduct of the affairs of Materon by Carl and Mark;
(b)actual and proposed acts of Carl and Mark to compete with Materon or divert the business of Materon to Brusa;
(c)the acts or omissions by Carl and Mark on behalf of Materon by failing to prevent Brusa from competing with Materon.
Paul seeks, as final relief, a series of injunctions against the defendants restraining them from diverting the business of Materon to Brusa or otherwise competing with Materon.
The interlocutory process filed by the plaintiff on 30 June 2020 was in substantially similar terms. The interlocutory process was listed on an urgent basis on the same date before Tottle J. His Honour heard briefly from the parties. Counsel for the defendant indicated that the orders were agreed save for order 1(h) which the defendants neither consented to nor opposed. On this basis, Tottle J made the following orders:
Until the trial and determination of this proceeding or further order of the court:
(a)the Third Respondent be restrained from using the business name 'WA Building Corp', or any similar name;
(b)the Third Respondent be restrained from acting as a building services contractor under the Building Services Registration Act 2011 (WA), in relation to any business diverted from or presently conducted or carried on by Materon, and in relation to any business which competes with any business presently conducted or carried on by Materon;
(c)the First Respondent be restrained from acting as the nominated supervisor of the Third Respondent under the Building Services Registration Act 2011 (WA);
(d)the Respondents or any of them by their servants or agents or otherwise be restrained from directly or indirectly diverting in any way all or any part of the business of Materon to the Third Respondent or any other person;
(e)the Respondents or any of them, their servants or agents or otherwise directly or indirectly, be restrained from conducting or carrying on in any way any business diverted from Materon;
(f)the Third Respondent directly or indirectly, be restrained from conducting or carrying on in any way any business (including under the name Supreme Living) which competes with Materon;
(g)the Respondents or any of them from themselves, their servants or agents or otherwise be restrained from directly or indirectly, in any way soliciting or engaging staff or contractors of whatever description of Materon;
(h)the Respondents or any of them by their servants, agents or otherwise be restrained from directly or indirectly, in any way soliciting, or entering into contracts with, clients of Materon; and
(i)the Respondents or any of them by their servants, agents or otherwise be restrained from directly or indirectly, in any way soliciting, or entering into contracts with persons who have contracted Materon, other than for the benefit of Materon.
Orders were also made for the filing of affidavits and submissions in response to the application.
On 3 August 2020, the defendants filed an interlocutory process in which final relief is sought against the plaintiff. This application is also made under s 181, s 182, s 232 and s 233 of the Act and claims that Paul has breached his duties as a director of Materon, improperly used his position to gain an advantage for himself or New Home Company Pty Ltd (New Home) and has conducted the affairs of Materon as a director of Materon contrary to the interests of the members of Materon as a whole. Carl and Mark seek orders that either Paul sell his shares in Materon to Carl and Mark or that Paul purchase Carl and Mark's shares in Materon.

Legal principles

Paul's application for an interlocutory injunction until trial is made pursuant to s 1324 of the Act. This section relevantly provides that:
(1)Where a person has engaged in, is engaging or is proposing to engage in conduct that constituted, constitutes or would constitute:
(a)a contravention of this Act; or
(b)attempting to contravene this Act; or
(c)aiding, abetting, counselling or procuring a person to contravene this Act; or
(d)inducing or attempting to induce, whether by threats, promises or otherwise, a person to contravene this Act; or
(e)being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of this Act; or
(f)conspiring with others to contravene this Act;
the Court may, on the application of ASIC, or of a person whose interests have been, are or would be affected by the conduct, grant an injunction on such terms as the Court thinks appropriate, restraining the first-mentioned person from engaging in the conduct and, if in the opinion of the Court it is desirable to do so, requiring that person to do any act or thing.
…
(4)Where in the opinion of the Court it is desirable to do so, the Court may grant an interim injunction pending determination of an application under subsection (1).
Pursuant to s 1324(5) of the Act, the court may discharge or vary an injunction previously granted under s 1324(1), (2) or (4) of the Act.
The legal principles governing the court's power to grant injunctions under s 1324 of the Act were summarised by Palmer J in Australian Securities and Investments Commission v Mauer-Swisse Securities Ltd[29] as follows.
[29] Australian Securities and Investments Commission v Mauer-Swisse Securities Ltd [2002] NSWSC 741; (2002) 42 ACSR 605 [36].
First, the jurisdiction which the court exercises under s 1324 of the Act is a statutory jurisdiction, not the court's traditional equity jurisdiction. Second, Parliament has made it increasingly clear by successive statutory enactments that the court, in exercising its statutory jurisdiction, is not to be confined by the considerations which would be applicable if it was exercising its traditional equity jurisdiction.
Third, among the considerations which the court must take into account in an application for an injunction under s 1324 of the Act are the wider issues referred to by Austin J in Australian Securities and Investments Commission v Sweeney and Australian Securities and Investments Commission v Parkes[30] and Davies AJ in Australian Securities and Investments Commission v Pegasus Leveraged Options Group Pty Ltd;[31] they may be gathered under the broad question as to whether the injunction would have some utility or would serve some purpose within the contemplation of the Act.
[30] Australian Securities and Investments Commission v Sweeney [2001] NSWSC 114; Australian Securities and Investments Commission v Parkes [2001] NSWSC 377; (2001) 38 ACSR 355.
[31] Australian Securities and Investments Commission v Pegasus Leverage Options Group Pty Ltd [2002] NSWSC 310; (2002) 41 ACSR 561.
Fourth, these considerations are to be taken into account regardless of whether the application is for a permanent injunction under s 1324(1) or for an interim injunction under s 1324(5).
Fifth, when an application under s 1324(4) is made by ASIC rather than a private litigant, the court is more likely to give greater weight to the broader question as to whether the injunction would serve a purpose within the contemplation of the Act.
Sixth, where there is an appreciable, that is, not fanciful, risk of particular future contraventions of the Act by a defendant, it would serve a purpose within the contemplation of the Act that the court grant not only a permanent injunction but, in an appropriate case, an interim injunction restraining such conduct.
Seventh, although the questions whether there is a serious question to be tried and where the balance of convenience lies will not circumscribe the court's consideration in an application for an interim injunction under s 1324(4), the interests of justice will always require that those questions be examined carefully when restrictions are sought to be imposed before the case has properly been examined by the court, even where the protection of the public is said to be involved.

Eighth, the balance of convenience will be viewed differently according to whether the applicant under s 1324(4) is ASIC or a private litigant. Where ASIC is acting to protect the public interest, the absence of an undertaking as to damages which is exempted by s 1324(8) will usually be of little consequence. However, where the proceedings are brought to advance the plaintiff's private interests then, if such an undertaking is not proffered even though it may likewise be exempted by s 1324(8), the court may take that circumstance into account as a matter of practicality, common sense and fairness in determining where the interests of justice lie and whether it is desirable to grant the injunction.
There is a debate in the authorities as to whether, in respect of the grant of an interim injunction, Palmer J's summary is an accurate summary of the applicable principles. In CME Properties (Australia) Pty Ltd v Prime Capital Securities Pty Ltd, Le Miere J referred to the competing views and concluded:[32]
Although traditional equitable principles do not circumscribe the court's consideration of an application for an interim injunction under s 1324(4) of the Corporations Act, the court will always examine carefully whether there is a serious question to be tried and where the balance of convenience lies and will not grant an injunction where it would not have done so if it were exercising its traditional equity jurisdiction unless there are matters relating to the statutory obligation sought to be enforced or the public interest which require the grant of the injunction.
[32] CME Properties (Australia) Pty Ltd v Prime Capital Securities Pty Ltd [2016] WASC 231 [13]; see also Morara Pty Ltd v Kingslane Property Investments Pty Ltd [2019] WASC 136 [51] - [52].
In this case, Paul is a private litigant. There is no public interest involved other than the general public interest in the law being complied with and enforced.
For that reason, I will apply the general principles that govern the grant of an interlocutory application, namely whether there is a serious question to be tried and where the balance of convenience lies. In doing so, I note that on an application for an interlocutory injunction, the court is not undertaking a preliminary trial or giving relief on a forecast of the ultimate result. However, it is necessary for the court to assess the strength of the plaintiffs' probability of ultimate success. This is a critical factor in the determination of the application.
In doing so, it is important to emphasise that the court considers these traditional factors in the exercise of its statutory discretion. The remedy under s 1324(4) is a statutory remedy and general equitable principles do not apply. The statutory intention of this section is to provide the court with power to enforce the Act on the application of either the regulator or a person with sufficient standing.[33]
[33] Leawell Pty Ltd as Trustee for the Garton Smith Trust v Watershed Premium Wines Ltd [2009] FCA 26 [15].
The question of adequacy of damages is an aspect of the balance of convenience. This requires consideration of whether the matter of which the plaintiff complains can be properly compensated in damages, an order for an account of profits or some other remedy, and whether it is just in all the circumstances that the plaintiff be confined to a remedy in damages.[34]
[34] Sino Iron Pty Ltd v Mineralogy Pty Ltd (No 2) [2017] WASCA 76; (2017) 55 WAR 36 [131].

Serious question to be tried

The plaintiff asserts that the first and second defendants' conduct is a breach of their directors' duties under s 180 and s 181 of the Act, and is also oppressive contrary to s 232 and s 233 of the Act.
Counsel for the defendant conceded, in my view appropriately, that on the evidence before the court, the plaintiff has established there was a serious question to be tried in respect of the oppression claim.[35]
[35] ts 12.
On the basis of this concession, I only deal with the question as to whether there is a prima facie case of breach of directors' duties and, if so, whether the plaintiff has standing to seek an injunction under s 1324 of the Act to restrain Carl and Mark from breaching their duties to Materon.
It is trite that directors' duties are owed to the company and not to shareholders. I note that Paul does not seek leave to bring a derivative action in the name of the company in either the originating process or interlocutory process. While the evidence of each of the parties is that the brothers had run their business as, in effect, a partnership, in doing so, they have used the structure of a company. As such, as a matter of law, any duties owed by the first and second defendants are owed to the company and not to plaintiff individually.
The question as to whether a shareholder or creditor has standing to seek an injunction under s 1324 of the Act for a breach of directors' duties has not been finally determined. In Re Ikon Group Ltd, Brereton J accepted that a shareholder of a holding company was a person whose interests may be affected by breaches of directors' duties and had the requisite standing to seek relief under s 1324(1) of the Act.[36] In Fayad v Bellpac Pty Ltd, White J did not specifically address the question of standing but indicated he was only prepared to grant an injunction on an undertaking being given to the court to bring an application for leave under s 237 of the Act, and to pursue that application with expedition.[37]
[36] Re Ikon Group Ltd [2015] NSWSC 980; (2015) 107 ACSR 146 [21].
[37] Fayad v Bellpac Pty Ltd [2004] NSWSC 755.
In Mesenberg v Cord Industrial Recruiters,[38] in the context of considering whether there were any sections which impliedly excluded s 1324 of the Corporations Law (which is in identical terms to the current provision), Young J expressed doubt as to whether the legislature intended that any shareholder or creditor could commence action for a minor breach of the Act because they had a stronger interest than an ordinary member of the public. He stated that:[39]
I doubt very much, however, whether the legislature intended to abrogate the rule in Foss v Harbottle for internal disputes where sections of the Law repeat in a statutory form (sometimes making them criminal offences as well) what were the general law obligations of officers of a company.
[38] Mesenberg v Cord Industrial Recruiters (1996) 39 NSWLR 128, 134 ‑ 135.
[39] Mesenberg v Cord Industrial Recruiters, 135.
On the question of standing under s 1324 of the Act, Young J concluded that:[40]
The approach that has been taken by judges administering the [Act] has been to give wide standing, but to be particularly severe in deciding whether or not to grant an injunction in cases where what is really happening is that shareholders or creditors are usurping the role of the board of directors. At least this is so where the directors have made a proper attempt to fulfil the functions committed to them by the [Act] and by the constitution of the company. Although this approach has problems (as do all other approaches), it seems to me that in administering legislation common throughout Australia, it behoves me to take the same approach.
Accordingly, provided that there is some breach of statutory duty, the case is one where the plaintiff should be considered to have standing under s 1324 of the [Act].
[40] Mesenberg v Cord Industrial Recruiters, 135.
Ultimately, the question of standing is a matter of statutory construction of s 1324 of the Act. I accept that the interests referred to in s 1324 of the Act are the interests of any person that goes beyond the mere interests of a member of the public.[41] I consider that the better view is that on a plain reading of s 1324 of the Act, a director, shareholder or creditor has standing to seek injunctive relief against directors for a breach of directors' duties and that it is a matter of discretion as to whether, in the circumstances of a particular case, the court will grant the relief sought.
[41] Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd [2009] FCAFC 147; (2009) 180 FCR 11 [110] (Sundberg & Dowsett JJ) citing with approval Broken Hill Pty Co Ltd v Bell Resources Ltd (1984) 2 ACLC 157, 162 (Hampel J).
In any event, as the authors of Ford, Austin and Ramsay's Principles of Corporations Law note at [10.310.24], under pt 2F.1 of the Act, breaches of directors' duties can constitute oppression and a remedy available to an oppressed shareholder is an injunction.[42] For this reason, even if I am wrong on the question of standing and Paul does not have standing to seek orders under s 1324 of the Act for a breach of directors' duties, he has standing to seek an order under s 1324 of the Act to restrain conduct which may constitute oppression until these issues can be finally determined at trial.
[42] Austin RP and Ramsay IM, Ford, Austin and Ramsay's Principles of Corporations Law (17^th ed, 2018) 787.
I turn then to consider whether there is a serious question to be tried as to a breach of directors' duties. As directors of Materon, Carl and Mark owed duties to Materon:
(a)to exercise their powers and discharge their duties in good faith in the best interests of Materon;[43]
(b)not to use their position to gain an advantage for themselves or for someone else;[44]
(c)not to cause detriment to Materon.[45]
[43] Corporations Act 2001 (Cth) s 181(1)(a).
[44] Corporations Act s 182(1)(a).
[45] Corporations Act s 182(1)(b).
In this case, on the evidence before me, I consider there is a serious question to be tried as to whether Carl and Mark have breached each of these duties to Materon in causing the business name of WA Building Corp to be transferred from Materon to Brusa and in proposing that the business opportunities of Materon would be directed to Brusa after 1 July 2020.
As presently framed, the injunction extends to Brusa, Maria and Krista. None of them are directors or shareholders of Materon or owe any duties to the plaintiff. For that reason, orders could only be made if there was a serious question to be tried that these parties or any of them were:
(a)aiding, abetting, counselling or procuring a contravention of the Act (s 1324(c));
(b)inducing or attempting to induce Carl and Mark to contravene the Act (s 1324(d));
(c)directly or indirectly, knowingly concerned in, or party to, the contravention by Carl and Mark of the Act (s 1324(e)); or
(d)conspiring with Carl and Mark to contravene the Act (s 1324(f)).
It is not clear as to the precise basis upon which the plaintiff sought orders against these parties. This is because the plaintiff's submissions focussed on the actions of Carl and Mark.
In considering whether Brusa, Maria or Krista were knowingly concerned in a contravention of the Act, as was noted by the Full Court of the Federal Court in Gore v Australian Securities and Investments Commission:[46]
There is, in our view, a distinction between being concerned in, or party to a contravention and being knowingly concerned in, or party to that contravention. Neither participation in the alleged contravention, nor knowledge of the elements of the contravention is sufficient in itself to attract accessorial liability under s 1324(1)(e). …
In Yorke v Lucas (1985) 158 CLR 661 Mason ACJ and Wilson, Deane and Dawson JJ held that in order to establish, in civil proceedings, that a person is liable as an accessory to a statutory contravention, all of the elements of that contravention must be proven, as must be the alleged accessory's knowledge of the essential facts constituting the contravention. At 661, their Honours said, concerning a legislative provision similar to s 79 and paras (c) to (f) of s 1324(1):
'In our view, the proper construction of par (c) requires a party to a contravention to be an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention.'
Brennan J (as his Honour then was) published separate reasons to the same effect. At 676, his Honour adopted a passage from the joint reasons of Wilson, Deane and Dawson JJ in Giorgianni v R (1985) 156 CLR 473 in which their Honours held that for the purposes of the criminal law, an accessory's participation, 'must be intentionally aimed at the commission of the acts which constitute it'.
[46] Gore v Australian Securities and Investments Commission [2017] FCAFC 13; (2017) 249 FCR 167 [6] ‑ [8] (Dowsett & Gleeson JJ).
Rares J, who delivered the primary judgment of the court in that case, stated:[47]
The person cannot be an accessory under s 79(c) or s 1324(1)(e) or their analogues if he or she does not know the essential facts that constitute the principal's offence or contravention. The person does not need to know that those facts amount to an offence or contravention. Rather, the person must know that the facts themselves exist. What is essential to accessorial liability, is that the accessory actually knows that he or she is participating in (or is all knowingly concerned in) the principal doing, or omitting, each of the essential facts that constitute the offence or contravention.
An accessory must have the intention to participate (or be knowingly concerned) in the principal's acts or omissions that are essential facts for the principal to commit the offence or contravention. Legislation can provide that the principal can commit some offences or contraventions, even if he or she or it does not intend or have mens rea to do an act or make an omission that is an essential fact to establish criminal liability. Offences of strict liability provide instances where a person will be criminally liable simply because something happened even though the person was unaware of an essential fact that constituted the offence. But, if a person is to be found to be an accessory to such an offence, he, she or it must intend to participate in what the principal is doing, whatever the principal's state of mind or ignorance, in doing or omitting what will constitute the essential facts of the principal's offence.
[47] Gore v Australian Securities and Investments Commission [165] - [166].
The plaintiff has not adduced any direct evidence that Maria or Krista were actively involved in or induced the conduct of Carl and Mark that is complained of by the plaintiff. In relation to Brusa, it is trite that a company can only act through its directors. Accordingly, the acts of Carl and Mark, while they were directors of Brusa, are the acts of Brusa.
While there is no direct evidence in respect of the third to fifth defendants, in my view, an inference can be drawn that each of Brusa, Maria and Krista knew that Carl and Mark are directors of Materon, that they proposed to transfer the business name of WA Building Company to Brusa and to use information and opportunities of Materon to solicit business away from Materon to the benefit of Brusa. On this basis, I consider there is a prima face case that each of Brusa, Maria or Krista is knowingly concerned in the conduct of Carl and Mark and accordingly can be the subject of orders under s 1324 of the Act.
I turn then to consider the balance of convenience.

Balance of convenience

In his written submissions, the plaintiff noted that the defendants did not file any evidence as to the balance of convenience.[48] Counsel for the plaintiff contends that damages will not be an adequate remedy as they will be difficult to establish and quantify.[49] Specifically, the plaintiff contends that Materon has spent time and money building up goodwill in the business of Materon which will be eroded if Brusa is entitled to trade under the deceptively similar name of WA Building Corp. The plaintiff emphasises that the final relief he seeks is a permanent injunction and not damages.[50]
[48] Plaintiff's reply submissions [1(b)].
[49] Plaintiffs outline of submissions [34(c) - (e)].
[50] Plaintiff's reply submissions [14(a)].
In support of the submission that damages would not be an adequate remedy, the plaintiff relied on the decision of Edelman J in Emeco International Pty Ltd v O'Shea.[51] In that case, which concerned an application for an injunction to enforce a contractual restraint of trade, Edelman J stated that:[52]
It has often been said, in the context of injunctive relief for apprehended breach of a restrictive covenant that 'where what is involved is the enforcement by injunction of a contractual negative stipulation, it is a rare case in which relief will be declined on the basis that damages are a sufficient remedy'.
The reasons why damages are often inadequate in these cases includes (i) the difficulty of detection of breaches of the obligations; (ii) the difficulty of establishing causation between any loss of business with customers and any actions of the ex-employee; and (iii) the difficulty of the calculation of the quantum of any damage arising from loss of business. (citations omitted)
[51] Emeco International Pty Ltd v O'Shea [2012] WASC 282.
[52] Emeco International Pty Ltd v O'Shea [20] - [21].
It is important to emphasise that the plaintiff's claims in these proceedings do not concern a breach of restrictive covenant. The claims concern alleged breaches of directors' duties and oppression. The principles that govern the assessment and quantification of liability for a breach of fiduciary duty were outlined by the High Court in Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia FriendlySociety Ltd.[53] In that case, Kiefel CJ, Keane and Edelman JJ summarised the quantification of liability in the following terms:[54]
Once it has been determined that a benefit or advantage has been caused by the acts of knowing assistance, there remains the question of quantification of the benefit to be disgorged. While it is true that equity will not require an errant fiduciary or a participant in a breach of fiduciary duty to account for an advantage which the breach of fiduciary duty has not caused or to which it has not sufficiently contributed, where causation is sufficiently established the onus is upon the errant fiduciary or participant to show that he or she should not account for the full value of the advantage. That onus is not discharged by mere conjecture or supposition giving the benefit of the doubt to a proven wrongdoer. The requirement of proof conforms with the obligation of a party charged with a breach of fiduciary duty to show why the full value of an advantage obtained in a situation of conflict of duty should not be disgorged.
[53] Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia FriendlySociety Ltd [2018] HCA 43; (2018) 265 CLR 1.
[54] Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [13].
That is, if the plaintiff succeeds in its claim, the onus will be on the defendants to show that it would be inequitable to require them to account to the plaintiff for the whole of the advantage acquired by them.[55] If the defendants are unable to do this, the defendants are likely to be required to account to the plaintiff for the entirety of the business of the third defendant.
[55] Ancient Order of the Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [17] (Kiefel CJ, Keane & Edelman JJ), [91] (Gageler J).
The defendants submit that the balance of convenience does not favour the continuation of the injunction as this 'would be to effectively force Carl and Mark to … continue to work to preserve the value of Paul's shareholding in Materon for him…'.[56] I do not accept this submission. The orders sought by Paul are to restrain Carl and Mark from effectively transferring the property and business of Materon to their own benefit for no value. The orders do not require Carl and Mark to continue to work in the business of Materon if they choose not to.
[56] Defendants' outline of submissions [17(a)].

In addition, counsel for the defendant contended that, given the business name of WA Building Company had been transferred back to Materon, it was not necessary for any orders to be made in terms of order 1(a) restraining the defendants from using the name 'WA Building Corp' or any similar name.
On the evidence before me, I accept that Paul has a strong case that Carl and Mark have acted in breach of their directors' duties and in a manner which is commercially unfair, which is the hallmark of oppressive conduct. I also accept that there is a prima facie case that each of Maria, Krista and Brusa are knowingly concerned in the breach of directors' duties.
On this basis, I consider that Paul may be entitled to an injunction to prevent a continuing breach of directors' duties by Carl and Mark. However, the orders sought by Paul go significantly further than this. The orders are not limited to serving a purpose within the contemplation of the Act, namely to prevent further breaches of the Act, but seek to protect Materon from competition, to prevent Brusa from operating and prevent Carl and Mark from working with Brusa. These orders, in my view, effectively seek to enforce a restraint of trade in circumstances where neither Carl nor Mark are subject to such a restraint. It is my view that damages or another form of equitable relief, such as an account of profits, would be an adequate remedy.
While I accept that the final relief sought by the plaintiff is a series of permanent injunctions under s 1324 of the Act, I do not consider that this means the consideration of whether damages is an adequate remedy is not relevant or that, on establishing there is a serious question to be tried, he is entitled to an interlocutory injunction. The court may, under s 1324(10) of the Act, make an order for damages in addition to or in substitution for the grant of an injunction.

Application of 'Clean Hands' maxim to injunction under s 1324 of Act

Given the conclusion I have reached, it is not necessary for me to address in detail the argument by the defendants that the plaintiff was not entitled to injunctive relief because of the 'clean hands' maxim.
It is sufficient for me to note that, as has been summarised above, in the exercise of the statutory jurisdiction under s 1324 of the Act, equitable considerations do not apply. The focus of this section is on preventing continuing breaches of the Act. For this reason, I do not consider that the 'clean hands' maxim applies.
Even if I am wrong in this regard, I do not consider that this maxim would be of assistance to the defendants.
This maxim focusses on the conduct of the party seeking equity and requires that there be an 'immediate and necessary relation' between the party's conduct and the relief sought.[57] In this case, the plaintiff is seeking relief in respect of Carl and Mark's breaches of directors' duties. While these breaches may be a reaction to certain conduct of Paul (on which I make no finding), that is not sufficient. On the evidence before me, I do not accept that Paul's conduct was the immediate and direct cause of their conduct[58] or that Paul is taking advantage of his own alleged wrong in seeking to enforce statutory rights under s 1324 of the Act.
[57] Black Uhlans Inc v New South Wales Crime Commission [2002] NSWSC 1060; (2002) 12 BPR 22,421 [157] - [185].
[58] Pizzale v Gumina Enterprises Pty Ltd (1994) 13 WAR 88, 121 ‑ 122 (Ipp J), 90 and 94 (Kennedy J agreeing).

Conclusion

For these reasons, it is my view that the orders made by Tottle J on 30 June 2020 should be discharged.
I will hear from the parties as to the appropriate orders, including costs, of the application.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
ME
Associate to the Honourable Justice Hill
12 OCTOBER 2020