Kayak Direct International Limited v Dong
[2001] WASC 168
•28 JUNE 2001
| JURISDICTION | : | SUPREME COURT OF WESTERN AUSTRALIA IN CHAMBERS |
| CITATION | : | KAYAK DIRECT INTERNATIONAL LIMITED -v- DONG & ORS [2001] WASC 168 |
| CORAM | : SCOTT J | ||
| HEARD | : 8 JUNE 2001 | ||
| DELIVERED | : 8 JUNE 2001 | ||
| PUBLISHED | : 28 JUNE 2001 | ||
| FILE NO/S |
| ||
| BETWEEN | : KAYAK DIRECT INTERNATIONAL LIMITED |
Plaintiff
AND
VICTOR DONG
First Defendant
MARK JAMES PALLISTER
Second Defendant
BOATSPLUS PTY LTD (ACN 092 489 097)
Third Defendant
Catchwords:
Injunction - Franchise agreement - First defendant purchaser sold business to second and third defendants - Dispute as to ownership of machinery - Plaintiff seeking to restrain use of intellectual property and machinery
Legislation:
Nil
[2001] WASC 168
Result:
Application dismissed
Representation:
Counsel:
| Plaintiff | : | Mr G D Cobby |
| First Defendant | : | Mr D A Lenhoff |
| Second Defendant | : | In person |
| Third Defendant | : | Mr L A Tsaknis |
Solicitors:
| Plaintiff | : | Tottle Christensen |
| First Defendant | : | Lenhoff & Co |
| Second Defendant | : | In person |
| Third Defendant | : | Gary Massey & Associates |
Case(s) referred to in judgment(s):
American Cyanamid Ethicon Ltd [1975] AC 396
Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148
Case(s) also cited:
Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (177) 180 CLR 266
Carr Boyd Minerals v Ashton Mining Ltd (1989) 15 ACLR 599
Evans v Bartlam [1937] 2 All ER 646
London & Blackwall Railway Co v Cross (1886) 31 Ch D 354
Mott v Mount Edon Gold Mines (1994) 12 ACLC 319
Scammel & Nephew Ltd v Ouston [1941] AC 251
The Council of the Upper Hunter County District v Australian Chilling &
Freezing Co Ltd (1968) 118 CLR 429
Wallis Son & Wells v Pratt & Haynes [1911] AC 394
Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317
[2001] WASC 168
SCOTT J
SCOTT J: On 8 June 2001 I dismissed an application by the plaintiff for an interim injunction against the second and third defendants on conditions which will be discussed later in these reasons.
The application against the first defendant was not pursued after the first defendant gave an undertaking by counsel that he would not, until further order, disclose or divulge any confidential information to any person in relation to the manufacture of plastic moulded kayaks from information provided by the plaintiff and/or by Michael Hebden Bennett (the plaintiff’s managing director).
When dismissing the application for injunctions against the second and third defendants I indicated that detailed reasons would later be published. These are those reasons.
The plaintiff's application arises out of a contract entered into between the plaintiff and the first defendant. The contract is in writing and entitled "Franchise Licence Agreement". The front page of the agreement indicates that it was prepared by solicitors in New Zealand. The contract is dated 9 August 1999.
The agreement recites that the plaintiff had developed the design machinery and system to produce polythene rotational moulded kayaks. The agreement amongst other things purports to grant to the first defendant a licence to use and operate the system devised by the plaintiff for the production of kayaks.
In consideration of the use of the plaintiff's intellectual property, the first defendant was obliged to pay $1000 as a licence fee and royalty fees of $A10 per product sold. In addition the first defendant was to pay the plaintiff the sum of $NZ48,000 for what the contract refers to as a "machinery fee". That fee was payable on delivery on certain items of machinery which included aluminium moulds and other items used in production of the kayaks.
It is common ground that the plaintiff provided the machinery to the first defendant together with the moulds and the technology necessary for the kayaks to be produced. The first defendant paid the machinery fee to the plaintiff.
It is also common ground that the first defendant decided to sell the kayak moulding business to the second and third defendants. The first defendant's case is that the business was sold to the third defendant. The second defendant also maintains that the business was sold to the third
[2001] WASC 168
SCOTT J
defendant but the plaintiff may contend that the business was sold by the
first defendant to either or both the second and third defendants.
The central matter in dispute between the parties is whether the plaintiff by the franchise licence agreement sold to the first defendant the machinery required to produce the kayaks. Counsel for the plaintiff maintains that the contract indicates that the plaintiff did not sell the machinery to the first defendant so that the machinery at all times remained the property of the plaintiffs. That fact is contested by all defendants.
In supporting his submission counsel for the plaintiff points to cl 11.2 of the agreement which provides:
"11.2 Upon termination of this licence the licensee shall
forthwith:
(a) return to the licensor all articles documents and machinery relating to the licensee's business the systems and the products other than those articles and documents which are required to be retained for statutory purposes."
There are other provisions in cl 11.2 including:
"Return to the licensor and/or destroy all copies in the hands or control of the licensee of all information (whatever format) relating to the licensee's business in the intellectual property."
The defendants on the other hand maintain that the first defendant purchased the machinery so that when he sold his business to the third defendant the title to that machinery passed on the sale.
Annexed to the affidavit of Michael Hebden Bennett sworn 7 May 2001 is a course of correspondence between the plaintiff and the first defendant. Amongst that correspondence is a letter from the manager of the plaintiff faxed on 14 March 2000 which says in part:
"The current price for the machine and mould and the one that has just sold in Sydney is $A68,000 that converts to $NZ80,000."
| 14 | In addition there is other correspondence which supports the view that the first defendant acquired title to the machinery when he purchased it from the plaintiff. In particular when the second defendant was |
[2001] WASC 168
SCOTT J
negotiating with the plaintiff to take over the first defendant's business a
fax from the plaintiff to the first defendant provided:"Victor's business is not typical of what is now the kayak direct franchise. Our practice is to start with the small mould and machine and move to a lease situation on our other five models when the purchaser is familiar with the running of the system."
That fax signed by "Michael" the managing director of the plaintiff, gives a clear indication that the machinery purchased by the first defendant became the first defendant's property on payment of the machinery fee.
In further correspondence between the second defendant and the plaintiff the second defendant sought to have the plaintiff modify the terms of the franchise agreement. In particular in an email of 27 December 2000 the second defendant said:
"2.2 deleted as the machinery is Victor's, and as such this clause is not required. 3.1(a) amended as no machinery fee is payable in the first instance as I'm buying it off Victor."
There is no correspondence from the plaintiff in response to those emails from the second defendant to dispute the claim to ownership of the machinery.
By a further email of 4 January 2001 the managing director of the plaintiff sent to the second defendant the following message:
"While I sense you are impatient to proceed with the sale and purchase of Victor's machine and mould that is a very small part of what we are doing and where we are going. The agreement as drafted to you was for obvious reasons, to cover the sale of the pacer. Already there is the pacer XS upgrade and they are all covered in separate agreements. That is just the way we do it."
Again that is a clear indication in correspondence emanating from the plaintiff that the machinery in relation to the pacer was sold by the plaintiff to the first defendant.
| 20 | The plaintiff's application for an injunction was to prevent the second and third defendants from utilising either the machinery, the moulds, or any confidential information supplied by the first defendant in relation to |
[2001] WASC 168
SCOTT J
the manufacture of the kayaks. In addition the plaintiffs sought information concerning the number of kayaks already produced and an order so that the royalty fee could be properly protected.
As I have already indicated in these reasons upon dismissing the application I made orders to protect the plaintiff with respect to royalty fees. I did so by making appropriate orders for the payment into Court of the royalties already due and provision of sufficient records to enable the plaintiff to ascertain any royalties which may become due.
In considering an application for an interlocutory injunction it is important to bear in mind the three primary considerations that govern the granting of interlocutory injunctions referred to by Mason ACJ in Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 at 153:
"The principles governing the grant or refusal of interlocutory injunctions in private law litigation have been applied in public law cases, including constitutional cases, but notwithstanding that different factors arise for consideration. In order to secure such an injunction the plaintiff must show (1) that there is a serious question to be tried or that the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief; (2) that he will suffer irreparable injury for which damages will not be an adequate compensation unless an injunction is granted; and (3) that the balance of convenience favours the granting of an injunction."
In that case the Court favoured the test as being that there is "a serious question to be tried" rather than that there be a prima facie case as referred to in American Cyanamid Ethicon Ltd [1975] AC 396 at 407.
In the way in which this application was presented it is difficult to see how the plaintiff could succeed on the argument that the machinery was not sold by it to the first defendant when the contract was entered in to. However even if that hurdle can be overcome in my view the plaintiff could properly be compensated by an award of damages. Whether that award of damages would be made against the first defendant, the second defendant or the third defendant or jointly and severally against each of them is a matter of no consequence in determining this application. Suffice it to say that in my view, an award of damages will constitute an adequate remedy for the plaintiff if the plaintiff succeeds. In reaching that conclusion I have taken into account the contention on behalf of the
[2001] WASC 168
SCOTT J
plaintiff that the second defendant is a bankrupt. I have also considered the attack upon the financial integrity of the third defendant. The third defendant however has a paid up capital of $180,000 and there is no evidence to suggest that it is other than a substantial company. In addition the third defendant gave an undertaking that it would pay into court the $10 royalty fee for each of the kayaks produced giving some indication of its integrity in that regard.
For these reasons in my view this was not an appropriate case for an interlocutory injunction and the application was dismissed.
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