Climate Change Technologies P/L v Glynn - [2017] SASC 60

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
CLIMATE CHANGE TECHNOLOGIES P/L v GLYNN & ORS
[2017] SASC 60
Judgment of The Honourable Justice Nicholson
1 May 2017
EQUITY - EQUITABLE REMEDIES - INJUNCTIONS - INTERLOCUTORY INJUNCTIONS - SERIOUS QUESTION TO BE TRIED
EQUITY - EQUITABLE REMEDIES - INJUNCTIONS - INTERLOCUTORY INJUNCTIONS - RELEVANT CONSIDERATIONS - BALANCE OF CONVENIENCE GENERALLY
The plaintiff is a research and development company and over a number of years has taken steps to design and develop and commercially exploit what it understands to be a unique thermal energy storage system or thermal energy device (TED) together with its application in other associated technologies such as waste heat recovery, concentrated solar collection and heliostat reflected heat (Associated Technology).
The first defendant is in his late 60s and is a highly qualified, highly experienced and, by all accounts, successful research scientist in these and related fields. From 2011 until October 2016, the first defendant provided consulting services for and was for a time employed by the plaintiff. He was its Principal Research Officer. The first defendant was employed by the plaintiff in the role of Chief Executive Officer from 1 February 2016 until about 4 July 2016. The first defendant resigned his employment and severed his involvement with the plaintiff with effect from 14 October 2016. During the period of his involvement with the plaintiff, the first defendant was also a director of the plaintiff and he resigned from this position as a result of giving notice of resignation on 22 October 2016.
The plaintiff contends, in brief, that the first defendant (together with the second and third defendants) after severing his relationship with the plaintiff retained intellectual property and confidential information in relation to the TED and Associated Technology belonging to the plaintiff. It is also contended that the defendants have already commenced, and intend to continue, to exploit, further develop and commercialise the plaintiff’s intellectual property and confidential information for themselves. It is the plaintiff’s case that the second defendant has been incorporated as the research and development vehicle with the third defendant to be an “umbrella” company for the purposes of attracting investment funds.
In addition, it is contended that the defendants have been dealing and negotiating with third parties being persons or entities with whom the first defendant initially dealt when he was representing the plaintiff. It is alleged that the defendants intend, in effect, improperly to divert material business opportunities acquired by the plaintiff during the period that the first defendant was a director of the plaintiff.
The plaintiff seeks interlocutory injunctive relief.
Held:
1. Subject to paragraph (2), the plaintiff is entitled to an interlocutory injunction in the terms identified in the reasons which differ from those propounded by the plaintiff.
2. The granting of an interlocutory injunction is subject to hearing further submissions from the parties about and resolving the question of the adequacy of the plaintiff’s undertaking as to damages as presently offered.
Australian Broadcasting Corporation v O’Neill [2006] HCA…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2017] SASC 60
Decision Date: 1 May 2017

CaseChat Overview and Summary

The Federal Court of Australia was presented with a case, Climate Change Technologies P/L v Glynn, where the plaintiff, a research and development company, sought an interlocutory injunction against the defendants to prevent them from misusing and disseminating the plaintiff's intellectual property and confidential information, as well as exploiting business opportunities that arose while the first defendant was a director and representative of the plaintiff. The defendants, who had previously been involved with the plaintiff, argued against the injunction. The court had to decide whether the plaintiff had established a prima facie case for injunctive relief and if the balance of convenience favoured the granting of the injunction.

In assessing whether the plaintiff had a prima facie case for injunctive relief, the court considered the evidence presented and concluded that the plaintiff had indeed established such a case. This conclusion was based on the significant investment made by the plaintiff in its research and development efforts, the potential value of the intellectual property and confidential information, and the advanced stage of commercialisation the plaintiff had reached. The court found that the plaintiff's business would be at serious risk of failure without protection of its intellectual property and confidential information.

The court also examined the balance of convenience to determine whether interlocutory injunctive relief should be granted. The plaintiff argued that the balance of convenience favoured the injunction, given the fundamental importance of the intellectual property and confidential information to its business, the substantial investment made, and the advanced stage of commercialisation. The court found the evidence supported these contentions, indicating that the plaintiff's business would suffer significant harm if the injunction were not granted. The court considered the potential harm to the plaintiff's business, the potential benefit to the defendants of continuing their activities, and the public interest in the matter.

Ultimately, the court granted the interlocutory injunction, finding that the plaintiff had established a prima facie case and that the balance of convenience favoured the injunction. The court's decision was based on the evidence presented, which demonstrated the significant risk to the plaintiff's business and the potential for serious harm if the injunction were not granted. The court's ruling aimed to protect the plaintiff's intellectual property and confidential information while allowing the defendants to continue their activities in other respects, subject to the terms of the injunction.

Orders

Orders of the court

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Background

Background to the litigation

As at 13 April I also had in the order of four formal interlocutory applications before me in addition to the plaintiff’s application for an interlocutory injunction. Two of the applications, one by the defendants for security for costs and one by the plaintiff seeking disclosure by the defendants of an identified class of documents on oath, I stood over for later consideration. On the basis of the other applications, I made a series of procedural orders all, but one, by consent,[1] in order to assist with the further conduct of the litigation. At the conclusion of the hearing on 13 April, I reserved my decision on the interlocutory injunction.[1] The one contested order concerned which party was to pay, in the first instance, the costs of an independent solicitor engaged to hold and preserve certain property on behalf of the parties. I exercised the wisdom of Solomon. Ultimately, these costs as between the parties were reserved.Background to the dispute Some matters by way of general background to the dispute are briefly canvassed in my ruling for interim relief provided to the parties on 14 March 2017. Further background to the dispute is as follows. The plaintiff is a research and development company and over a number of years has taken steps to design, develop and commercially exploit what it understands to be a unique thermal energy storage system or thermal energy device (TED), together with its application in other associated technologies such as waste heat recovery, concentrated solar collection and heliostat reflected heat (Associated Technology). The first defendant is in his late 60s and is a highly qualified, highly experienced and, by all accounts, successful research scientist in these and related fields. From 2011 until October 2016, the first defendant provided consulting services for and was for a time employed by the plaintiff. He was its Principal Research Officer. The first defendant was employed by the plaintiff in the role of Chief Executive Officer from 1 February 2016 until about 4 July 2016. The first defendant resigned his employment and severed his involvement with the plaintiff with effect from 14 October 2016. During the period of his involvement with the plaintiff, the first defendant was also a director of the plaintiff and he resigned from this position as a result of giving notice of resignation on 22 October 2016. The first defendant, at or about the time of severing his involvement with the plaintiff, caused the second defendant to be incorporated as a research and development vehicle through which the first defendant could continue to exploit his own research and development expertise. The first defendant is a director, secretary and majority shareholder of the second defendant. The other director of the second defendant is Mr John Thomas, who is also the sole director and secretary of the third defendant. Another company (Toddstead Pty Ltd) of which Mr Thomas is a director and majority shareholder, holds the remaining shares in the second defendant.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

NICHOLSON J

It is also open to be discerned from the Gmail correspondence that the defendants have been engaged and propose to engage in the future in dealings concerning the commercialisation of thermal energy storage devices and related technology with certain third parties with whom the first defendant had earlier dealt on behalf of and as a director of the plaintiff. Conclusion as to a prima facie case I am satisfied that on the evidence as presently available, the plaintiff has established a prima facie case for final injunctive relief, as that notion is to be understood following Australian Broadcasting Corporation v O’Neill,[6] on the basis of one or more of the causes of action respectively asserted against the first defendant, the second defendant and the third defendant as identified earlier. This is subject to the qualification I later express concerning the claim relating to the wrongful diversion of a business opportunity.[6] [2006] HCA 46; (2006) 227 CLR 57.Balance of convenience What follows is, in summary form, a number of contentions pressed by the plaintiff in support of its submission that the balance of convenience favours the granting of interlocutory injunctive relief. I am satisfied that the evidence available to this point lends support to each of these contentions.(i)The plaintiff is a research and development company and the intellectual property and confidential information which it claims to protect is fundamental to its business. The success of its business depends on the future commercial exploitation of the technology such that without protection the business would be at serious risk of failure.(ii)The plaintiff has spent approximately $5 million over the last six years or so on research and development into its TED and Associated Technology. It has built prototypes and liaised with potential investors and partners with a view to commercialisation.(iii)The intellectual property and confidential information to which the plaintiff remains entitled is potentially valuable. Whilst the first defendant has deposed to matters in his affidavit evidence which tend to challenge this, his evidence in this respect is conflicting. The first defendant has asserted that the value of his 20 per cent shareholding in the plaintiff is approximately $2.4 million. If correct, this would suggest an enterprise value of $12 million or so. Of course, any research and development enterprise, as at the early stage of its development, is difficult if not impossible to value with any precision. It may all come to nothing or it may have extraordinary success. What is important at the moment is that a number of persons have been prepared to invest $5 million or so and to expend labour and expertise for six years or so into a research and development exercise that would appear to be at the forefront of a significant technological environment with substantial commercial exploitation possibilities. (iv)The plaintiff is at a relatively advanced stage in respect of commercialisation of its research and development work. It has produced pre-production TED units understood to be suitable for demonstration use in potential customer installations. The pre-production models will be used to establish proof of technology which, if successful, should assist to attract further investment. (v)The plaintiff has been developing contacts and negotiating in a number of markets including in India and Malaysia. (vi)The plaintiff seeks only to prevent any misuse and dissemination of its intellectual property and confidential information; to have its intellectual property and confidential information returned to it; and to prevent the defendants from seeking to exploit business opportunities that arose in favour of the plaintiff at a time when the first defendant was a director and representative of the plaintiff. Save in these respects, the plaintiff does not seek to prevent the first defendant from working in his chosen field or exploiting his own expertise.

Ratio Decidendi

Legal Principle Established

Established by: NICHOLSON J

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