Groeneveld Australia Pty Ltd v Nolten
[2009] VSC 478
•29 October 2009
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
LIST B
No. 7564 of 2009
| GROENEVELD AUSTRALIA PTY LTD & ORS | Plaintiffs |
| v | |
| NOLTEN & ORS | Defendants |
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JUDGE: | Judd J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 22 October 2009 | |
DATE OF JUDGMENT: | 29 October 2009 | |
CASE MAY BE CITED AS: | Groeneveld Australia Pty Ltd and Ors v Nolten and Ors | |
MEDIUM NEUTRAL CITATION: | [2009] VSC 478 | |
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Practice And Procedure – Anti-suit Injunction – Contempt – Implied undertaking.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr G. Griffith QC Mr A. Strahan | DLA Phillips Fox |
| For the First Defendant | Mr P. Ehrlich | Willocks Lawyers |
HIS HONOUR:
This is an application by the first defendant, Woulter Nolten, for an injunction restraining the third plaintiff, Groeneveld Transport Efficiency BV, from prosecuting a proceeding against him commenced in the Netherlands on 18 September 2009. The foreign proceeding seeks to enforce covenants contained in Article 7 of a Contract of Employment, dated 24 April 1995, between the third plaintiff and Mr Nolten. The contract was made at Gorinchem in the Netherlands. The covenants prohibit Mr Nolten working in the same industry as his employer for a period of two years after the termination of his employment. The restraint is worldwide. At the time he entered into the contract, Mr Nolten resided in the Netherlands.
The third plaintiff, incorporated in the Netherlands, is a member of the Groeneveld Group which carries on a business of providing automotive greasing and lubrication systems to the transport industry. The Groenveld Group operates in Europe, the United States, Canada, South Africa, Singapore, Australia, New Zealand and elsewhere in the world.
By a Secondment Agreement, dated 30 August 1995, Mr Nolten was appointed by the third plaintiff as director of the first plaintiff, Groeneveld Australia Pty Ltd, a subsidiary of the second plaintiff. Mr Nolten was to take up residence in Australia, although he would continue to report directly to his employer, the third plaintiff, in the Netherlands.
The Secondment Agreement expressly provided that it was governed by the laws of the Netherlands and any dispute arising from or connected with the agreement would be submitted to a competent court in Gorinchem. It also expressly provided that the Contract of Employment dated 24 April 1995 was to remain in force.
On 6 July 2009 the first and second plaintiffs made application, ex parte, for search orders under r 37B of the Rules of Court to authorise the search, seizure and preservation of material they claimed would evidence serious breaches by Mr Nolten of his Contract of Employment and duties as a director of the first plaintiff. The evidence at that time indicated a plan by Mr Nolten, in an advanced stage of being implemented, to establish a competing business in Australia and Singapore. The evidence also revealed attempts to induce employees of the first plaintiff to work for his new business. A search order was executed on Mr Nolten’s home on 10 July 2009.
During the search of Mr Nolten’s home material was discovered which the plaintiffs’ solicitors contend disclosed serious breaches of duty by Mr Nolten in addition to those which formed the basis of the application for the search orders. As a consequence, the plaintiffs’ solicitors sought to be released from an undertaking not to disclose that information to their client. Mr Nolten, through his solicitor, gave his consent and on 20 July 2009 an order was made, reflecting Mr Nolten’s consent, giving leave to the plaintiff’s solicitors to discuss with their clients the information obtained during the execution of the search orders.
Mr Nolten submitted that, since the lifting of the undertaking, information derived from the coercive process had been directly and indirectly used by the plaintiffs to enable the third plaintiff, without leave of the court, to commence the foreign proceedings. The direct use was said to be evidenced by an email dated 22 July 2009 from David Leggatt, of the plaintiffs’ solicitors, to Francisca Boel, attorney for the third plaintiff in the Netherlands and Tom Mulder, the plaintiffs’ corporate counsel.
Mr Nolten also alleged indirect use by the plaintiffs, through the use of the product of enquiries and investigations which he submitted were initiated as a result of the plaintiffs’ knowledge of the search information. The indirect use allegation was not developed after Mr Nolten identified the “smoking gun” which was the email of 22 July 2009. He submitted that the use of the information was a breach of an implied undertaking not to use such material for a purpose other than for this proceeding and a contempt of court. Mr Nolten did not make an application under r 75 of the Rules of Court, nor did he seek to restrain the future use of the search material and information.
The plaintiffs maintained that they did not misuse any material or information from the search and foreshadowed an application for leave to use the material and information in the foreign proceeding.
It was common ground that an anti-suit injunction may be granted by a court to protect the integrity of its processes or to restrain unconscionable conduct or the unconscientious exercise of legal rights.[1] Mr Nolten’s application initially involved elaborate arguments designed to invoke broad discretionary considerations aimed at a permanent injunction to restrain the prosecution of the foreign proceeding. The alleged contempt was only one of a number of grounds. He also submitted that the foreign proceeding was vexatious because it sought identical relief to that sought and available in this proceeding. He argued that the restraint contained in the Employment Contract would not be enforceable in Australia but, if it was found to be enforceable, a judgment would be binding on him, thus providing the plaintiffs with all necessary protection.[2]
[1]CSR Ltd v Signa Insurance Australia Ltd (1997) 189 CLR 345, 372, 389-94.
[2]National Australia Bank Ltd v Deso [1998] VR 521, 522.
As the hearing progressed it became increasingly obvious that Mr Nolten did not seek to prevent the third plaintiff from prosecuting the foreign proceeding, but sought to avoid the prejudice of defending two proceedings at once. The foreign proceeding is to be heard on 10 November 2009 with a decision expected within two weeks. At the same time, interlocutory steps are proposed in this proceeding with a view to a trial early next year.
Thus, stripped of its initial complexity, Mr Nolten’s application for an anti-suit injunction relied only upon the alleged contempt. He argued that this court should enjoin the prosecution of the foreign proceeding to protect the integrity of its own processes. He argued that the third plaintiff should not be able to benefit from the misuse of the search information and foreshadowed his opposition to any application for leave to use such material.
Not surprisingly, the plaintiffs made an open proposal that they would yield to directions, if necessary, suspending further steps in this proceeding until the hearing and determination of the foreign proceeding. Mr Nolten rejected that proposal, pressing for his anti-suit injunction, although repeating his concession that it was not intended that the third plaintiff would be permanently deprived of the opportunity to prosecute the foreign proceeding. By that concession, I take Mr Nolten to mean – only if the foreign proceeding has not been stayed by reason of the alleged contempt and, if not, then only for so long as it is prosecuted without any direct or indirect assistance from the search material.
The expression by Mr Nolten of his real concern (the prejudice of two concurrent proceedings), coupled with his concession that he did not seek an injunction to permanently preclude the third plaintiff from prosecuting the foreign proceeding, gave rise to some confusion. In the end it became apparent that there were qualifications. First, it was clear that the application for an anti-suit injunction, based on the alleged contempt, was not abandoned; second, Mr Nolten would oppose any application for leave to use the search material in the foreign proceeding;[3] and, third, insofar as the foreign proceeding might be permitted to proceed, it should be stayed while this proceeding is fully litigated.
[3]The basis for opposition was not fully articulated although included reliance upon the alleged contempt.
Having regard to the unsatisfactory and at times confusing case advanced by Mr Nolten, it seems clear that I am unable to resolve this dispute by merely deciding which of the proceedings should go first. I accept that it would be unfair and unjust to Mr Nolten if he were required to defend the foreign proceeding while attending to interlocutory steps in this proceeding. The plaintiffs also appear to concede as much. Nevertheless, before I am in a position to decide whether the foreign proceeding should advance first and whether leave should be granted to the plaintiffs to use and rely upon the search information, I am required to decide whether the contempt allegation is made out and, if so, whether the foreign proceeding should be stayed.
Contempt
Mr Nolten’s contempt case was confined to an allegation that information or material obtained in the course of the searches had been directly or indirectly employed in the preparation of the initiating document in the foreign proceeding. In the end, indirect use was only faintly argued. There was no allegation of any threatened future misuse of the search information other than the general allegation that the third plaintiff intended to prosecute the foreign proceeding.
Mr Nolten invited the court to infer direct use and contempt from letters written by the plaintiffs’ solicitors, an email dated 22 July 2009 from Mr Leggatt to Ms Boel and Mr Mulder, the affidavits sworn by Mr Boel and Matthew Tozer and a translation of the initiating document in the foreign proceeding, which is in the nature of a statement of claim.
In paragraph 10 of the initiating document the third plaintiff alleges:
On 10 July and the period thereafter GTE and GA investigated the matter further by, among other things, obtaining a court order from a court in Australia. This investigation showed that Mr Nolten:
·lied during the meeting on 10 July with GTE/GA about allegedly not being involved with the establishment of Lubecore;
·was clearly involved with the establishment, etc of Lubecore;
·tried to sway employees from GTE to resign from their positions with GTE and start employment at Lubecore;
·as manager made decisions that did not accord with the interests and policy of GTE and GA;
·at the cost of Groeneveld Group and/or GA travelled on business that benefited Lubecore and/or would benefit [competition] activities;
·was guilty of conflict of interests, etc by not keeping GTE/GA abreast of his financial interest in companies that provide services to Groeneveld Groep and/or GTE and/or GA.[4]
[4]Emphasis added.
Mr Nolten relied in particular upon the opening paragraph and the last three dot points highlighted above and the content of the email from Mr Leggatt in which he wrote:
Dear Tom and Francisca
Please see the attached letter from Woulter that sets out his position.
You will see that he intends to resign and that he also considers that his position had been terminated already.
What he has not done in his letter is explain his conduct in relation to Lubecore other than to assert that he has not done anything wrong, which is plainly wrong.
What we know he has done wrong is:
-made extensive arrangements to establish a competitor business called Lubecore in Australia
-this included approaching key employees to set up the competitor business
-make business decisions that were in the best interests of the competitor business and not Groeneveld
-use travel arrangements paid for by Groeneveld to advance the competitor business and not Groeneveld
-lie to Henk and Jan at a meeting on 10 July when asked to explain whether or not he was involved in establishing Lubecore in Australia
He has also deliberately concealed from Groeneveld his financial interest in a number of businesses that supply services to Groeneveld such as a C&CT.
Francisca can you please draft a letter that deals with Wouter’s entitlements and I will settle it to best tactical effect in this case.
Over to you. If you need anything further please let me know.
Kind Regards
David.[5]
[5]Emphasis added.
The email was sent two days after an order was made releasing the plaintiffs’ solicitors from their undertaking not to communicate the product of the search to their clients. Paragraph 10 made explicit mention of the search order and thus appeared to identify the search as a possible source of the information set out in the dot points. Mr Nolten conceded, however, that prior to the search the plaintiffs already had the information set out in the first three dot points. He submitted that the timing of the email, the correlation between the content of the email and the last three dot points and the reference to the search order, compelled an inference that the source of the information in the last three dot points was the search material.
In her affidavit, Ms Boel said that she was responsible for initiating the foreign proceeding. She said that at the time of preparing the particulars she was aware of the fact that the plaintiffs’ lawyers in Australia were under an obligation not to use, in other proceedings, information obtained pursuant to the coercive powers, without the leave of the court. She deposed, “I did not use any information obtained from those proceedings in preparing the originating process in the Netherlands proceeding”. In relation to the particular allegations in paragraph 10 of the initiating document, Ms Boel said that the source of her instructions was not material obtained by the coercive powers of the Supreme Court of Victoria, but her client.
Mr Nolten criticised the affidavit as much for what was said as for what was not said. He submitted that Ms Boel said nothing of the source of the instructions from her client. It is possible, of course, that she was unaware of the status of material provided to her. She may have been provided with search information without appreciating its provenance. In paragraph 35 of her affidavit, however, Ms Boel positively deposed,
I have not used information obtained through coercive powers of the Supreme Court of Victoria to commence or advance the Netherlands proceeding. As I understand my instructions, each of the allegations made in the Netherlands proceeding resulted from information obtained through my client’s investigations, separate to the proceedings in the Supreme Court of Victoria, and statements made by Nolten’s own lawyers.[6]
[6]Emphasis added.
The significance of what Ms Boel said is, to some extent, clarified in the affidavit of Mr Tozer. Mr Tozer was the plaintiffs’ officer responsible for investigating Mr Nolten’s conduct. He said that he kept Mr Mulder up-to-date with his investigations and that his investigations resulted in the amendments made to the statement of claim in this proceeding which enlarge the case against Mr Nolten.
Mr Tozer deposed to investigations made by him prior to the date on which the search orders were made or executed. The topics of investigation fell generally within the dot points in paragraph 10 of the initiating document. Mr Tozer said that after Mr Nolten was suspended from his employment, on 10 July 2009, he made enquiries in New Zealand in relation to travel payments. At that time the search material was unavailable to the plaintiffs. He said that he knew from his enquiries that Mr Nolten had engaged in a number of activities that he considered to be in breach of the fiduciary duties as a director of the first plaintiff. He undertook further investigations in July and August 2009 in New Zealand, Queensland, Western Australia and of computer documents at the plaintiffs’ premises at Sunbury. He deposed,
I deny completely that I have used any information obtained as a result of execution of the search orders in conducting these enquiries.
Mr Tozer gave details of the results of his enquiries which have found their way into the plaintiff’s amended statement of claim in this proceeding.
Ms Boel and Mr Tozer were not required to attend for cross-examination. Their evidence was not contradicted. The significance of Mr Tozer’s evidence is that he was the person responsible for conducting the investigation and providing the results to the plaintiffs’ corporate counsel. He drew a distinction between the product of his own investigations and the information obtained as a result of the execution of the search orders. While it would have been helpful if Ms Boel had identified Mr Tozer or Mr Mulder as the source of the information available to her, it seems probable that they were the source of “client” information.
Mr Nolten submitted that the email from Mr Leggatt was the source of the relevant information. That email was not, however, from the “client”, but was from its solicitors in Australia. Furthermore, the email was concerned with the preparation of a letter to Mr Nolten. It does not mention the commencement of any proceeding and is dated two months before the foreign proceeding was commenced. By that time, Mr Tozer’s investigations were well advanced.
The allegation of contempt made by Mr Nolten is a very serious allegation. He does not suggest that the misuse was innocent, or the result of a misunderstanding by Mr Leggatt of the use which may be made of search material or by Ms Boel, of the status of the information provided to her by Mr Leggatt. Mr Leggatt and Ms Boel were both aware of the obligations in relation to the search material.
Mr Nolten’s case called upon the court to infer that the last three dot points in paragraph 10 of the initiating document were the product of disclosure of search material by Mr Leggett. It is by no means clear that Mr Leggatt drew on the search material when preparing the email. He did not give evidence. Mr Tozer was, at that time, pursuing his line of enquiries which had begun prior to the search.
The inference upon which Mr Nolten’s case depends may only be drawn if facts are proved which form a reasonable basis for a definite conclusion, affirmatively drawn, of the truth of which the tribunal of fact may reasonably be satisfied.[7] Mr Nolten bears the onus to prove his serious allegation of contempt. I am not persuaded that such facts as have been established by Mr Nolten form a reasonable basis for a definite conclusion that Mr Leggatt provided search material to Ms Boel or that she used such material in the preparation of the initiating document. The overwhelming probability is that both lawyers were astute to their ethical and legal obligations. The fact that the plaintiffs did not call Mr Leggatt to explain his email does not, as Mr Nolten submitted, shift the evidentiary onus. The evidence of Ms Boel, the person to whom the communication was made and who prepared the document, was unchallenged. So was the evidence of Mr Tozer.
[7]Jones v Dunkel (1959) 101 CLR 298, 304-305.
Mr Nolten has failed to make out his allegation of contempt. Accordingly, there is no basis upon which an anti-suit injunction might be granted to protect the integrity of this court from abuse through the misuse of the search material.
Vexatious or oppressive
The second substantive ground upon which Mr Nolten relied to support his anti-suit injunction was the broad discretion to prevent an injustice where there is unconscionable conduct or the unconscientious exercise of legal rights. He argued that this proceeding offered the plaintiffs a complete remedy – that the foreign proceeding was vexatious and oppressive because there was nothing that could be gained by the third plaintiff over and above what was to be gained in this proceeding. Mr Nolten argued that this proceeding sought or was capable of delivering whatever relief the plaintiffs were entitled to and that any restraint enforced in this proceeding would be binding upon him.
The plaintiffs submitted that there were clear differences in the enforceability of any orders obtained in the two proceedings. They pointed to the primary relief in the foreign proceeding as being designed to protect “trade secrets and competition conditions” which, if granted, would be enforceable throughout the European Union and more widely throughout the world under international treaties. They submitted that it could be enforced more widely and effectively than a judgment of this court. They argued that the plaintiff’s business was a global business and that it had a very real interest in a global remedy more readily available in the Netherlands.
There appear to be material differences in the scope and efficacy of the relief available in each proceeding, even though common relief is sought in relation to the restraint of trade. I need not, however, decide whether the scope and efficacy of each remedy is such that the plaintiffs may achieve in this proceeding as much as they are entitled to in the foreign proceeding. This is because, absent the contempt ground, Mr Nolten did not challenge the plaintiffs’ right to bring and maintain the proceeding. His complaint distilled, in the end, to a contention that he should not be required to defend two proceedings at the same time. The plaintiffs proposed that the foreign proceeding go first. Mr Nolten submitted that this proceeding should go first. Thus, the question arises which proceeding should yield.
Which Proceeding should be Stayed
This proceeding is not confined to a remedy to enforce the restraint of trade. The allegations made by the plaintiffs against Mr Nolten and the other defendants are extremely serious. In addition to allegations of a breach of contract and serious breaches of his duty as a director, he is accused of criminal conduct. Mr Nolten has not yet filed a defence, nor has he filed any material in which he denies the allegations or seeks to explain his conduct. That is not to suggest that he was under any obligation to do so.
By letter dated 28 August 2009 Mr Nolten informed the plaintiffs that he proposed to adopt the position that he was not bound by the non-compete clause as a matter of the law of Australia and that he intended, after a period of seven days from the date of his solicitor’s letter, “to involve himself in activities which would be inconsistent with the final relief sought by your clients in D” in the statement of claim. Paragraph D sought an order restraining Mr Nolten from establishing or being engaged in a business supplying automotive greasing systems or lubricants to the trucking and transport industry in Australia. The restraint imposed under his employment agreement is worldwide. There is evidence that Mr Nolten is proposing to compete with the Groeneveld Group inside and outside of Australia.
The applicable law under the Secondment Agreement is the law of the Netherlands. In my view both agreements should be read together so that the applicable law of the Employment Agreement is also the Netherlands. That was the place where the agreement was made. Mr Nolten continued to be employed by the third plaintiff even when working in Australia. The third plaintiff proposes to seek to enforce the restraint in the place where the agreement was made, according to the law of that place and in the designated court. In my opinion the third plaintiff should be permitted to proceed, provided that Mr Nolten is not exposed to the prejudice of defending two proceedings at once. The foreign proceeding is less complicated and will be resolved more quickly than this proceeding. The relief sought is more limited.
If this proceeding is put on hold until the foreign proceeding is heard and determined, the prejudice to Mr Nolten of defending two proceedings at once is addressed. The plaintiffs have indicated that they are willing to adopt such a course. I propose to make orders, if necessary, suspending interlocutory steps in this proceeding until the foreign proceeding is finalised.
Supplementary Submission
Since preparing draft reasons for judgment it has come to my attention that Mr Nolten filed with the court and now seeks to rely upon a further submission in support of his contention that the foreign proceeding is infected by a further contempt of court and should be enjoined for that reason.
While I am not obliged to consider further submissions, received after a hearing has concluded and an issue has been reserved for judgment, I will receive and consider the submission in this case because of the gravity of the allegation and because the plaintiffs have availed themselves of the opportunity to respond in writing.[8]
[8]Stockdale v Alesios (1999) 3 VR 169.
The new contempt upon which Mr Nolten relied was, according to his submission, disclosed in emails which were before the Court at the conclusion of argument on the last occasion. In an email dated 2 September 2009 from Mr Mulder to Ms Boel, he enclosed or attached, amongst other affidavits and documents, an affidavit of Barry Joseph Woods. Mr Woods, a solicitor, was a respondent to a search order, although the proceeding against him was discontinued shortly after attempted execution. The order was apparently directed to a wrong premises. I was told that Mr Woods provided some material voluntarily, although I am not aware of the precise nature of that material. In the events that occurred Mr Woods filed an affidavit sworn 16 July 2009. Counsel who appeared for Mr Woods at the time the affidavit was filed now appears as counsel for Mr Nolten. He does not suggest that the affidavit was filed under or by reason of any rule, order or direction of the court.
Mr Nolten argued that the contents of the affidavit remained confidential and did not form part of the evidence. He relied upon Hearne v Street, a recent decision of the High Court,[9] to support the proposition that the use of that material in preparation of the foreign proceeding was a serious contempt of this Court. Mr Nolten submitted that it was difficult to conceive of a more serious contempt and that this conduct was a powerful reason why the foreign proceeding should be enjoined and leave refused upon any application by the plaintiffs to use the affidavit in the foreign proceeding.
[9](2008) 235 CLR 125.
The affidavit of Mr Woods was not filed pursuant to any order or direction of the court. The plaintiffs submitted that it was volunteered and by its nature was not subject to any implied undertaking that it not be used in some other proceeding. Having regard to its contents, it seems likely that the affidavit was prepared and filed in order to induce the plaintiffs to agree not to proceed further against him. Mr Nolten did not seek to explain its provenance. The facts, therefore, may distinguish this case from the principles enunciated in Hearne v Street,[10] which appear to be confined to the disclosure of material provided under coercion or as a consequence of an order or direction of the Court.
[10](2008) 235 CLR 125 at [96].
In any event, the email upon which Mr Nolten relied as evidence of the misuse of the content of the affidavit does not establish that its contents were used by Ms Boel in the preparation of the foreign proceeding. Ms Boel was never asked about the affidavit and has deposed that the information she employed came from her client. It is true that Mr Mulder falls within the category of the “client” for this purpose, but it is he who framed the email, not Ms Boel. He wrote:
Dear Francisca,
I enclose the documents I think you need for preparing the procedure in The Netherlands. Referring to our call this morning I assume David will send us copies of the signed documents (including the termination letters) in the course of tomorrow.
I am unable to infer that Ms Boel used the content of the affidavit in the preparation of the foreign proceeding. Having regard to the particular paragraphs in the affidavit, upon which Mr Nolten relied as containing admissions by Mr Woods of his role, there is nothing contained therein to compel the inference that it must have been employed in the preparation of the initiating document in the foreign proceeding.
I am not satisfied that the additional material, upon which Mr Nolten relied to establish a further contempt, alone or in conjunction with the other material, achieves his objective.
I dismiss the application for an anti-suit injunction.
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