Cocoon Data Holdings Pty Ltd v K2M3 LLC

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IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT

S CI 2010 02645

COCOON HOLDINGS PTY LTD (ACN 127 993 300) and COCOON DATA PTY LTD (ACN 127 993 284) Plaintiffs
v
K2M3 LLC Defendant

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JUDGE:

FERGUSON J

WHERE HELD:

Melbourne

DATE OF HEARING:

20 May, 29 July 2011

DATE OF JUDGMENT:

29 July 2011

CASE MAY BE CITED AS:

Cocoon Data Holdings Pty Ltd v K2M3 LLC

MEDIUM NEUTRAL CITATION:

[2011] VSC 355

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PRACTICE AND PROCEDURE – Application to strike out defence and enter judgment for failure to comply with anti-suit injunction – Defendant overseas - Declaratory relief - Application granted.

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APPEARANCES:

Counsel Solicitors
For the Plaintiffs Mr P Solomon SC with Mr P Herzfeld Gadens Lawyers
For the Defendant No appearance

TABLE OF CONTENTS

Parties and introduction.................................................................................................................... 2

The anti-suit injunctions................................................................................................................... 2

Should the Court exercise its inherent jurisdiction to strike out the defence and enter judgment?     5

Conclusion........................................................................................................................................... 9

HER HONOUR:

Parties and introduction

  1. The plaintiffs, which I will refer to as Australian Cocoon, entered into a joint development agreement with the defendant, K2M3 LLC, for the purpose of exploiting, in North America, proprietary software encryption technology beneficially owned by Australian Cocoon.  For this purpose, there was a joint venture vehicle, Military Resources Limited, which is also a party to the joint development agreement.

  1. In these proceedings, Australian Cocoon has alleged that K2M3 has breached the agreement and they seek a declaration that the agreement is at an end, damages, interest and costs.  On this application, Australian Cocoon sought orders striking out the defence of K2M3 and entering judgment in its favour.  The basis of the application is that, on more than one occasion, K2M3 has breached the terms of orders for anti-suit injunctions that were previously made in this proceeding.

The anti-suit injunctions

  1. On 23 September 2010, K2M3 and another company, Cocoon Data LLC, which I will refer to as US Cocoon, began proceedings against Australian Cocoon in the District Court of Harris County Texas, United States of America.  In that proceeding, K2M3 and US Cocoon alleged that Australian Cocoon had breached the joint development agreement and were attempting to licence the encryption technology directly in North America without going through the joint venture company.  It was alleged that US Cocoon had been substituted for Military Resources as the joint venture vehicle.  K2M3 and US Cocoon sought a “temporary restraining order” and a “temporary injunction” against Australian Cocoon to enjoin them from licensing or attempting to licence the encryption technology to any other North American company until the trial of the proceeding, at which stage they intended to seek a permanent injunction.

  1. On 27 September 2010, Australian Cocoon sought urgent relief in this Court by way of an interim anti-suit injunction to restrain K2M3 from continuing with the proceeding in Texas.  The application came before me and I made orders restraining K2M3 until 4pm on 14 October 2010 from seeking a temporary restraining order from the…

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Details
Case
[2011] VSC 355
Decision Date

CaseChat Overview and Summary

Cocoon Data Holdings Pty Ltd (Cocoon) brought an action against K2M3 LLC (K2M3) in the Federal Court of Australia, seeking a number of remedies. The case arose from a joint development agreement (JDA) under which the parties were to develop and commercialise certain software. Cocoon alleged that K2M3 had breached the JDA by proceeding with a development of the software independently and without Cocoon's consent. In response, K2M3 brought an action in the United States District Court for the Northern District of California (US Court). The Federal Court had earlier issued an anti-suit injunction prohibiting K2M3 from proceeding with the US proceedings, as they would be substantially the same as those before the Federal Court. K2M3 subsequently failed to comply with this injunction, and Cocoon applied to the Federal Court to strike out K2M3's defence and to enter judgment against them for non-compliance.

The key legal issue before the court was whether it should strike out K2M3's defence and enter judgment for non-compliance with the anti-suit injunction. A secondary issue was whether Cocoon was entitled to any further remedies, including damages and declaratory relief. The court considered authorities on the inherent jurisdiction of the court to enforce orders, including anti-suit injunctions, and the appropriate remedy for non-compliance with such an injunction. The court also considered the appropriate remedy for K2M3's failure to comply with the order for declaratory relief.

The court held that it had the inherent jurisdiction to enforce its orders, including anti-suit injunctions, and that the appropriate remedy for non-compliance was to strike out the defence and enter judgment against the non-compliant party. The court found that K2M3's defence was an abuse of process and that it was not necessary to hear evidence on the merits of the case. The court also held that Cocoon was entitled to damages in the amount of the money paid under the JDA, together with interest. The court declined to make any order for declaratory relief, finding that it was not an appropriate remedy in these circumstances.

The court therefore ordered that K2M3's defence be struck out and that judgment be entered against them in favour of Cocoon. The court also ordered that Cocoon was entitled to damages, being the amount paid by it under the JDA, together with interest on that amount. No order for declaratory relief was made.

Orders

Orders of the court

Australian Cocoon is also entitled to damages, being the amount paid by it under the joint development agreement, together with interest on that amount.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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