Dialog Pty Ltd v Addease Pty Ltd

[2002] FCA 600

FEDERAL COURT OF AUSTRALIA

Dialog Pty Ltd v Addease Pty Ltd [2002] FCA 600

PRACTICE AND PROCEDURE - Injunctions - interlocutory injunction - application for interlocutory mandatory injunction to obtain bank guarantee to secure monies owed under contract - whether serious question to be tried - whether balance of convenience favours granting interlocutory relief - whether high degree of assurance that at trial it will appear that the injunction was rightly granted.

Trade Practices Act 1974 (Cth)

State of Queensland v Australian Telecommunications Commission (1985) 59 ALJR 562
Active Leisure (Sports) Pty Ltd v Sportsman’s Australia Limited [1991] 1 QdR 301 (FC)
Jackson v Stirling Industries Ltd (1987) 162 CLR 612

DIALOG PTY LTD v ADDEASE PTY LTD AND GEORGE MICHAEL
MIHAILIDES
Q235 OF 2001

COOPER J
BRISBANE
10 MAY 2002

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q235 OF 2001

BETWEEN:

DIALOG PTY LTD ACN 010 089 175
APPLICANT

AND:

ADDEASE PTY LTD ACN 007 212 768
FIRST RESPONDENT

GEORGE MICHAEL MIHAILIDES
SECOND RESPONDENT

JUDGE:

COOPER J

DATE OF ORDER:

10 MAY 2002

WHERE MADE:

BRISBANE

THE COURT ORDERS THAT:

1.The cross-respondent, within fourteen days of the date of this order, provide to the second cross-claimant a bank guarantee securing payment by the cross-respondent of $150,000 per year until 30 November 2004 in accordance with clause 3(c) of a Contract of Employment between the cross-respondent, as employer, and the second cross-claimant, as employee, dated 1 December 1999.

2.The cross-respondent pay the second cross-claimant’s costs of and incidental to the application for interlocutory injunctive relief, to be taxed if not agreed.

3.Liberty to apply.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q235 OF 2001

BETWEEN:

DIALOG PTY LTD ACN 010 089 175
APPLICANT

AND:

ADDEASE PTY LTD ACN 007 212 768
FIRST RESPONDENT

GEORGE MICHAEL MIHAILIDES
SECOND RESPONDENT

JUDGE:	COOPER J
DATE:	10 MAY 2002
PLACE:	BRISBANE

REASONS FOR JUDGMENT

1. The applicant (“Dialog”) entered into three agreements on 22 December 1999, which agreements were to take effect as and from 1 December 1999. 

2. The first agreement was a Business Sale Agreement whereby Dialog purchased the business of the first respondent (“Addease”), including certain intellectual property, as provided for in the Business Sale Agreement. 

3. The second agreement was a Commission Agreement, whereby Dialog undertook to pay commission to Addease in respect of licence and maintenance revenue from sales of licences and maintenance agreements made by Dialog in respect of intellectual property and derivatives from it, known as AXiOM HR product and TemPak product, then owned by Addease, but subject to the Business Sale Agreement. 

4. The third agreement was a Contract of Employment between Dialog, as employer and the second respondent (“Mihailides”) as employee.

5. On 16 November 2001, Dialog filed an application and statement of claim in this Court seeking :

   “1.      As against the First Respondent :

   (a)Damages pursuant to s 82 of the Trade Practices Act, 1974 (Cth) for conduct in contravention of s 52 of the Trade Practices Act, 1974 (Cth);

   (b)Further or in the alternative, an order pursuant to s 87 of the Trade Practices Act, 1974 (Cth) that the Commission Agreement referred to in the Statement of Claim is void or voidable or unenforceable as against the Applicant on grounds that the First Respondent has engaged in conduct in contravention of s 52 of the Trade Practices Act 1974, (Cth);

   (c)Interest;

   (d)Costs.

   2.        As against the Second Respondent:

   (a)Damages pursuant to s 82 of the Trade Practices Act 1974, ( Cth) for conduct in contravention of s 52 of the Trade Practices Act 1974, (Cth);

   (b)Further or in the alternative, an order pursuant to s 87 of the Trade Practices Act (Cth) that the Contract of Employment referred to in the Statement of Claim is void or voidable or unenforceable as against the Applicants on grounds that the Second Respondent knowingly assisted the First Respondent in engaging in conduct in contravention of s 52 of the Trade Practices Act 1974, (Cth);

   (c)Interest;

   (d)Costs.”

6. By its amended statement of claim, Dialog alleges that it entered into the three agreements on the basis of valuations and projections provided by Addease and Mihailides which projections did not come to fruition. It is alleged that the provision of the material involved the making of representations which were misleading and deceptive in breach of s 52 of the Trade Practices Act 1974 (Cth) (“the TPA”). Dialog alleges that the business has run at a loss, has no value and is unsaleable.

7. On 21 January 2002, Addease and Mihailides filed a defence and cross-claim.  By the cross-claim, Addease seeks payment of monies it alleges are due and payable under the Commission Agreement.  Mihailides, by the cross-claim, alleges that he has received no payment of wages under the Contract of Employment since 16 November 2001, that he was constructively dismissed as an employee on 22 November 2001, and that Dialog has failed in accordance with its obligations under the contract of employment to secure by bank guarantee payment of the monies that became payable upon his dismissal as required by clause 3(c) of the Contract of Employment.

8. By notice of motion, filed 21 January 2002, Addease and Mihailides sought interlocutory orders, including an order that Dialog provide a bank guarantee to secure payment of the wages allegedly due to Mihailides.  Certain orders were made, and the matter was adjourned to allow mediation to be undertaken.  Mediation was unsuccessful and Mihailides again presses for interlocutory relief by way of provision of security for his claim.  The granting of such relief is opposed by Dialog.

9. Mihailides seeks an interlocutory mandatory injunction requiring Dialog to perform clause 3(c) of the Contract of Employment, insofar as it requires the provision of a bank guarantee to secure payments falling due and becoming payable under the clause.  Clause 3(c) provides :

   “3(c)If the Employee’s employment is terminated by Dialog for reasons other than those detailed in Cl 4(a)(ii) or terminated by mutual agreement between the Employee and Dialog, then Dialog will pay the Employee or his estate, $150,000 (including superannuation if applicable) per year until 30 November 2004.  This payment shall be paid annually in advance on the next business day after 1 December each year until 1 December 2003.  Such payments shall be secured by bank guarantee.”

10. In order to obtain interlocutory injunctive relief, Mihailides must make out a serious question to be tried, that he has an entitlement under clause 3(c) to the payment of wages totalling $450,000 under the clause, and an entitlement to the bank guarantee by way of security.  He must also demonstrate that the balance of convenience favours the granting of the interlocutory injunction.  Finally, because he seeks a mandatory interlocutory injunction, the Court, in considering the balance of convenience, must feel a high degree of assurance that at the trial it will appear that the injunction was rightly granted:  State of Queensland v Australian Telecommunications Commission (1985) 59 ALJR 562 at 563; Active Leisure (Sports) Pty Ltd v Sportsman’s Australia Limited [1991] 1 QdR 301 (FC) at 313 - 315.

11. I am satisfied that Mihailides makes out a serious question to be tried that he was constructively dismissed on 22 November 2001.  There is nothing in the material to suggest that his employment was terminated for a cause under clause 4.  Accordingly, he makes out a serious question to be tried that he was entitled to payment under clause 3(c) of $450,000 in total to be paid by three separate payments of $150,000 as provided in the clause, and that he was entitled to a bank guarantee to secure payment by Dialog under the clause.

12. Mihailides submits the balance of convenience is in favour of granting the injunction because :

    (a)his case is a strong one;

    (b)he seeks only that the promised security be provided and not that payment be made;

    (c)Dialog can presently afford to obtain the security whereas it may later be unable to satisfy the judgment;

    (d)he needs the security to satisfy his bankers not to take steps under securities over his assets while this litigation remains unresolved;

    (e)he gives an undertaking as to damages which is sufficient to cover the cost of obtaining the bank guarantee;

    (f)there is on the evidence no real prejudice demonstrated to Dialog in giving the bank security which it had at all times agreed to give.

13. Dialog submits that in reality this is an attempt by Mihailides to obtain an injunction in the nature of a Mareva injunction limiting Dialog’s power to deal with its assets in order to provide security to satisfy any judgment he may obtain for the payment of wages.  In the absence of evidence that it is attempting to dissipate its assets in order to defeat a judgment of the Court, such relief will not be granted:  Active Leisure (Sports) Pty Ltd v Sportsman’s Australia Ltd at 315;  Jackson v Stirling Industries Ltd (1987) 162 CLR 612, 625.

14. Dialog further submits that :

    (a)if the application is truly one for an interlocutory mandatory injunction, then the Court could not have the requisite feeling of assurance of the prospects of Mihailides in the action to find the balance of convenience in favour of making the order;

    (b)Dialog raises a serious question to be tried that it was induced to enter into the three contracts because of misleading and deceptive conduct on the part of Addease and Mihailides with the consequence that the Contract of Employment will be held to be void or voidable and be set aside;

    (c)Mihailides’ undertaking as to damages is worthless and if Dialog succeeds in the action and successfully defends the cross-claim, any damage sustained by the making of the injunction will be irrecoverable against Mihailides;

    (d)Dialog will have an equitable set-off against any sum payable under clause 3(c) of the Contract of Employment;

    (e)to grant the injunction would impact adversely on the capacity of Dialog to do business, because it needs to have its assets available to the fullest extent in order to provide performance guarantees from its bankers to its customers when required.

15. The application of Mihailides is to enforce a contractual obligation, it is not in the nature of a Mareva injunction.  It is properly to be treated as an application for an interlocutory mandatory injunction and to be determined on that basis.

16. Although Dialog pleads that the three agreements were interdependent and that it was induced to make all because of conduct in breach of s 52 of the TPA, it does not seek to have all three agreements set aside as void or voidable. Rather, it only seeks to have the Contract of Employment and the Commission Agreement set aside by orders under s 87 of the TPA. It seeks to retain the benefit of the Business Sale Agreement and sue for damages under s 82 of the TPA in consequence of loss and damage said to flow from the conduct. The effect of maintaining the Business Sale Agreement on foot and retaining the benefit of it, is that the property which passed under it, including the intellectual property in the AXiOM HR product and the TemPak product remain with Dialog. Further, the Commission Agreement expired on 22 November 2001 if it is found that Mihailides’ employment was terminated on that date, and commission was only payable so long as Mihailides remained an employee: clause 6.1, 6.2.

17. In these circumstances, it is unlikely that the Court would set aside as void or voidable the Contract of Employment alone.

18. If the Contract of Employment is not avoided, then the obligation to provide the bank security arose and was enforceable, upon the termination of Mihailides’ employment. The existence of a possible right of equitable set-off of any damages or compensation awarded to Dialog, for breach of s 52 of the TPA, against a liability to pay wages as agreed under clause 3(c), does not take away or diminish Mihailides’ right under the contract to the provision of security. In those circumstances, I have a high degree of assurance that at trial it will appear that any interlocutory mandatory injunction was rightly granted.

19. Dialog has put on evidence which indicates that it is a substantial company which is trading profitably.  It does not detail its asset base because it says that it does not wish that information to be made available to its competitors.

20. By entering into the Contract of Employment, Dialog thereby burdened its assets contingently to the extent that if Mihailides’ employment was terminated, it would be obliged to make the bank guarantee available.  There is nothing in the material to satisfy me that, by doing what it agreed to do, Dialog will be prejudiced to any greater degree than it accepted as reasonable at the time it entered into the Contract of Employment.

21. Mihailides does not seek payment to him of the $450,000 or any part thereof on an interlocutory basis.  The only cost to Dialog is the cost of providing the bank guarantee.  There is no evidence of that cost.  I am not persuaded that the reimbursement of that cost would be beyond the financial resources of Mihailides, if he was ordered to pay damages under his undertaking.

22. I am satisfied that the balance of convenience is in favour of granting the interlocutory relief sought.  As the contractual right was to obtain security for the whole amount owing, I see no basis or reason to reduce the value of the security by ordering provision of a bank guarantee in a lesser amount.

23. Costs should follow the event.

I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Cooper.

Associate:

Dated:            10 May 2002

Counsel for the Applicant:	Mr I Hanger QC and Mr I Erskine
Solicitor for the Applicant:	Gateway Lawyers
Counsel for the First and Second Respondents:	Mr D Savage SC
Solicitor for the First and Second Respondents:	Corrs Chambers Westgarth
Date of Hearing:	7 May 2002
Date of Judgment:	10 May 2002