MFX Research Pty Ltd v Coleman

[1999] NSWSC 692

CITATION:	MFX Research Pty Ltd v Coleman & Anor [1999] NSWSC 692
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	2902/99
HEARING DATE(S):	1/7/99
JUDGMENT DATE:	2 July 1999
PARTIES :	MFX Research Pty Limited [Plaintiff} Leigh Coleman (1st Defendant) Samir Ghattas (2nd Defendant)
JUDGMENT OF:	Bergin J

COUNSEL :	Mr S White (Plaintiff) Mr D Pritchard (Defendant)
SOLICITORS:	Freidmann Reeves (Plaintiff) Kemp Strang (Defendants)
CATCHWORDS:	Application to dissolve and/or discharge injunction for material non-disclosure
CASES CITED:	TQM Cargo Logistics Pty Ltd & Ors v Drake (unreported Santow J 2 September 1998); Gillfillen v Gillfillen (1973) 6 SASR 330; Text: Kerr on Injunctions
DECISION:	Non-disclosure serious but not material; Injunction continued.

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BERGIN J

FRIDAY 2 JULY 1999

2902/99 - MFX RESEARCH PTY LTD v LEIGH COLEMAN & ANOR

JUDGMENT
EX TEMPORE - DUTY JUDGE

1    This matter came before me on 26 June 1999 when I made orders in favour of the plaintiff, MFX Research Pty Ltd, which I will refer to as MFX, against the defendants, Leigh Coleman and Samir Ghattas.

2    That was an ex parte application and the orders I made were that up to and including 28 June 1999 the defendants themselves, their servants and agents are restrained from representing the defendant or Coleman Technologies Inc as being associated with or in a relationship with the plaintiff as distributor or otherwise, or words to similar effect and that they be restrained from representing that they were entitled to the sale or otherwise making available the technology known as MFX 2000 software technology which is in compact disc form.

3    I also made an order that the defendants, their servants or agents, forthwith deliver up into the possession of the solicitor for the plaintiff, Mr Freidman, all copies or arrangements of the technology, which I will refer to as MFX 2000.

4    I made a further order, that up to and including 28 June 1999 the defendants were restrained from removing from the jurisdiction, or otherwise parting with the possession of any copies or originals of the technology MFX 2000.

5    Another order I made was, without fettering the defendants' entitlement to claim any relevant privilege, they were to deliver up by 12 noon on 28 June 1999 an affidavit stating the names and addresses of those persons or entities with whom they or Coleman Industries Inc, their servants or agents, had entered into any contract, arrangement or understanding with representatives for the supply, sale or otherwise of MFX 2000.

6    Thereafter I granted leave to the plaintiff to serve a copy of the orders by 10am the following day, 27 June and directed the proceedings to come back before me at 10am on Monday, 28 June.

7    The plaintiff was also directed to file in Court its affidavits in support of the orders that I made on 26 June by 28 June 1999 and I directed the plaintiff to file the summons in Court on 28 June 1999.

8    It is apparent that those orders were served on the defendants in the lobby of the Menzies All Seasons Premier Hotel at 14 Carrington Street, Sydney at 11pm on 26 June. Immediately following the service of the orders by Mr Freidman, solicitor for the plaintiff, Mr Freidman read the orders to the defendants and at approximately 11.30pm on 26 June the first defendant, Mr Leigh Coleman, delivered up into Mr Freidman's possession three compact discs.

9    The matter then came back before me on 28 June 1999 when Mr Alex David Linden, solicitor, appeared for the defendants. Mr Linden indicated to me that he was not in a position to oppose or indeed consent to any continuation of the orders as he was in some difficulty in respect of obtaining instructions from the defendants. He did, however, undertake to file a notice of appearance and that notice of appearance was filed on 28 June 1999, such notice indicating that he acted for the first and second defendants.

10    On 28 June when the matter was before me I continued the orders up to and including 1 July 1999 and the defendants were to file their affidavits by 10am on 1 July and to deliver the original master copies of MFX 2000 to Mr Freidman by 5pm today. I should say that in each order there was an exclusion to the restraining of the defendants and that exclusion was a contract allegedly between the plaintiff and Taiyuan Juhua Industrial Development Co Ltd of China, to which I will refer in due course.

11    On 1 July the matter was again returnable before me when Mr Pritchard of counsel appeared for the defendants and moved on a notice of motion seeking orders that the orders I made on 26 June 1998 and continued on 28 June be dissolved, alternatively that orders 3 and 4 on 26 June be dissolved, alternatively that time for compliance with orders 3 and 4, which are of course the delivery up and the affidavits, be extended up to and including 13 July. Order 4 in the notice of motion is that access to the technology referred to in order 3 and the affidavit referred to in order 4 be limited to and kept confidential by the counsel and solicitor for the plaintiff until further order.

12    Mr White of counsel appears for the plaintiff. I should say that he appeared on 26 June and on 28 June as well as yesterday and today. He is instructed by Mr Freidman, solicitor of Freidman Reeves and it is noted on 26 June 1999 when evidence was called Mr Freidman in fact asked the witness the questions and took the witness through the evidence that was led, Mr White indicating at that time that he had not had the opportunity to see the documents and so he effectively was counsel making the submissions but Mr Freidman was permitted to lead the evidence from the witness.

13    The history of this matter is that MFX was incorporated for the purpose of the development and commercial exploitation of software technology MFX 2000. The technology is to deal with the Y2K problem. The technology is said to comprise a set of detect and modify algorithms capable of analysing and modifying executable object codes on computer systems.

14    It is said that by using this technology MFX has developed a suite of software diagnosis and correction tools which detect and correct short date formats in operating systems, applications programmes and user data files. The MFX 2000 technology is claimed by the plaintiff to have significant advantages over all competing products in the market place because it is said it operates at computer object code level. It is claimed by the plaintiff that no other product is capable of providing remediation capabilities across a computer operating environment.

15    In early February 1999 the Managing Director of the plaintiff, Michael William Carr, whom I will refer to as Dr Carr, was advised by Mr Hearn of Y2K Corporation Pty Ltd, a company in Perth, that his company was represented by the first defendant in the United States of America. That company, which I will refer to as Y2K, is a company involved in the sale and supply of computer hardware fix for the year 2,000 problem.

16    Upon the recommendation of Mr Hearn, Dr Carr decided to make contact with the first defendant in the United States and had various discussions with Mr Hearn about the nature of his dealings with Mr Coleman. It is apparent from the evidence that Mr Coleman was contacted by Dr Carr both by telephone, and by letter and by e-mail.

17    In early February 1999 Mr Coleman wrote to Dr Carr and suggested a regime whereby Mr Coleman could assist the plaintiff in distributing its product in the United States of America. Mr Coleman set out his background in short form and informed Dr Carr that his company, Coleman Industries, had a means to manufacture and package in southern California the materials assisting in the set up and manufacturing capacity of Y2K, the company in Perth.

18    It is to be noted that the parties to these proceedings and indeed Mr Hearn in Perth have been doing things in what might be described and was described by Mr Coleman, as a "bit of a rush". The need for that, of course, is the impending 1 January 2000, the time at which the Y2K problem is said to arise.

19    When Mr Coleman wrote to Dr Carr he said:

"Michael, as we don't have a lot of time to roll this product out, can we get an agreement in principle that this is a good fit and we will move immediately? We actually have already included MFX in our presentation today to some degree."

Mr Coleman then went on to say:

"I would like to add that to the sales efforts of Y2K in the US as far as possible."

It is apparent that Mr Coleman was in fact moving throughout the United States of America in his effort to sell Y2K's products.

20    Mr Coleman set out a list of issues that he saw as necessary for attention. They were as follows:

"1.Terms of licence.
2. Price.
3. Method of payment.
4. Control of intellectual property.
5. Technical support from Australia.
6. Marketing protection procedures.
7. Warranty issues.
8. Product liability issues.
9. Suggested retail price and pricing in the marketing channel."

Mr Coleman concluded that he wanted to work with MFX:
"...closely as a partner, with mutual support on all issues to achieve an optimum result for both parties. We have this arrangement with Y2K. We feel and sense we can achieve this with your organisation too."

He then concluded by asking Dr Carr:
"I would appreciate if we could come to some agreement in principle as soon as possible so we can use the current negotiations to best effect.

21    The parties then negotiated further and there were communications, to which I will refer a little later but by 3 March Coleman Industries Inc wrote again to Dr Carr in which Mr Coleman put forward a proposal with the following:

"1. We provide market support and distributor coordination to your existing and future distributors for your product. We would actively seek out and appoint and manage new distributors consistent with a sensible distribution strategy.
2. We provide point of contact on your behalf for the market in general for promotional and technical reasons. PR for example.
3. We promote the MFX products in conjunction with the distributors to the various vertical markets for the product.
4. We, under policies laid out by you, manage the distribution and marketing channels so as to optimise the sales of the product.
5. We attend promotional events, trade shows, et cetera to ensure representation for your product in the US markets. We would work with the distributors and be a central resource to provide promotional materials, sales aids, et cetera to project an appropriate image and professionalism.
6. We provide a US base of operation for MFX.
7. We provide market intelligence, competitor analysis and trends.
8. We could provide logistics, customer service support to distributors and technical support where necessary."

22    These proposals were put forward by Mr Coleman that Coleman Industries Inc, "act as a master distributor for the USA on a non-exclusive basis". Mr Coleman suggested that in turn Coleman Industries would need support from the plaintiff in the form of, "technical training, marketing collateral and any direct out of pocket costs". He then suggested "a proposal, strategy and budget including corporative advertising" for the plaintiff's approval. He suggested that a certain amount be allocated in the pricing as Coleman Industries would certainly be asked to provide that to large customers. He suggested that Coleman Industries would implement the strategy for the plaintiff. He then said:

"Again acting as, if you like, a product manager organising a product large and ongoing sales strategy, we would be accountable for sales performance and if you were not happy with us, as we are non-exclusive you could appoint others as well. We would work hard to ensure that you would not feel this was necessary."

23    Mr Coleman then suggested to Dr Carr that as Coleman Industries were developing markets in Asia, the Middle East and South America:

"We would take both Y2K and MFX products for these markets together. Mike, these are my thoughts so far, I hope I convey our enthusiasm to represent two Australian companies with world class products to the largest market in the world."

24    Between 3 March 1999 and 26 June 1999 further negotiations took place between the plaintiff and Mr Coleman and in about April 1999 it is apparent that Dr Carr made the master copies of MFX 2000 technology in CD format available to Mr Coleman. This was done at a time when negotiations were continuing as claimed by the plaintiff and it is apparent, although not crystal clear, that the technology was made available for the purposes of some testing that was done in the laboratory in China.

25    The testing was completed by that laboratory, known as Chinese Software Testing Centre, also known as CSTC. That laboratory completed the testing of that technology, MFX 2000 and produced a report. There is some controversy about the reference to the plaintiff and to Coleman Technologies because it is claimed by the plaintiff that at no stage was there any input and there is no evidence that there was any input of a company known as Coleman Technologies in the creation of the technology.

26    The plaintiff and Mr Coleman entered into further negotiations in respect of Mr Coleman's capacity to put himself forward as the plaintiff's agent in China and it is apparent that in March a letter was sent to him whereby he was authorised to claim that he was in part representing the plaintiff for certain contractual negotiations in China. Although that letter does not have an apparent limitation on its face the circumstances of its delivery, according to Dr Carr, are that it was for the purposes of securing some confidence in Mr Coleman whilst he was negotiating in China.

27    Those negotiations have apparently been fruitful and a contract for 300,000 units of the technology has been secured. That contract, however, is also controversial because the plaintiff alleges that the contract has been entered into without any reference to the name of the plaintiff. That contract is in evidence and the only way the plaintiff was able to find out the nature of its terms was through Mr Hearn from Y2K in Perth.

28    The negotiations, as I say, continued between April and 26 June and it is apparent that Dr Carr had some concerns with the conduct of Mr Coleman because he could not obtain a response to some of the questions that he posed or alternatively he was concerned with what was happening in the United States of America.

29    These concerns led him to make a trip to the United States during the second week of June this year. Whilst in San Diego, where Mr Coleman's companies are based, Dr Carr met with Mr Coleman and other representatives of Coleman Industries and or Coleman Technologies. Whilst travelling on the plane he prepared himself for those meetings and during the course of the meetings it became apparent that Mr Coleman had to leave the United States of America to go to China earlier than expected. Dr Carr anticipated that the discussions about the problems that the plaintiff was experiencing could continue to approximately 7pm but Mr Coleman, on the plaintiff's version of events, left precipitously at about 3pm on the Sunday.

30    As a result of the failure to reach some form of what Dr Carr says was a final agreement, Dr Carr wrote a letter on 10 June to Mr Coleman's wife, who is apparently a lawyer. That letter is in evidence before me and puts forward a proposition and indeed a willingness of the plaintiff to enter into and sign a distribution agreement with Mr Coleman's interests on various conditions.

31    That letter is dated 10 June and the conditions include the destruction of MFX stationery and business cards, an acknowledgment that Leigh Coleman was appointed as a non-exclusive agent to act on behalf of MFX in China and various other acknowledgments and a warranty that Leigh Coleman and Veronica Whitaker (apparently Mr Coleman's wife) and any companies of which they are directors or shareholders would not institute any legal proceedings against MFX, its directors or staff.

32    The plaintiff said if these conditions were satisfied then a distribution agreement could be put in place and signed and dated Sunday, 6 June 1999. That, of course, is a reference to a date four days earlier than the letter sent to Ms Whitaker.

33    It is apparent that this letter was not signed or returned to Dr Carr and it is also apparent that the plaintiff (through Dr Carr) and Mr Coleman had a series of e-mails which, on the one hand, the plaintiff alleged that the defendants were not entitled to hold themselves out as the plaintiff's agent, on the other hand, the defendant through Mr Coleman alleging that he was astonished that Dr Carr would be making these claims upon him at this stage of the negotiations.

34    Notwithstanding all of that, further communication was sought and Dr Carr eventually convinced Mr Coleman and Mr Ghattas to come to Sydney on their way to China for further discussions. That occurred and both defendants were in Sydney on Thursday 24 and Friday, 25 June 1999. Meetings were held. The contents of those discussions at those meetings were on a without prejudice basis and of course have not been referred to in content or detail before me.

35    However, it is apparent that the discussions did not lead to a settling of the differences that had developed between the plaintiff and Mr Coleman. At this stage, that is on 25 June and on 26 June, the defendants still held or still had possession of the plaintiff's copies and it is claimed the original master copies of MFX 2000.

36    Dr Carr understood that the defendants were departing Australia on Saturday 26 but on enquiry of the Menzies Hotel understood that the two defendants would remain in the jurisdiction for another 12 to 24 hours, although he wasn't sure of the timing of their departure. Accordingly, he then instructed Mr Freidman to make an application that precipitated my orders of 26 June 1999.

37    It is what happened at that application that has been the basis upon which the defendants move to have the injunction discharged. The basis of the notice of motion is for a material non-disclosure by the plaintiff.

38    It is important therefore to indicate what was before me, or more objectively, the Judge, on Saturday 26 June 1999. The application was made at 7pm in Court 9B. As there was no Court Reporting staff available I taped the evidence of Dr Carr. The transcript of that tape is exhibit K before me in this application. The evidence was led by Mr Freidman, to which I have already made reference and during the course of that evidence exhibits A to J were tendered (there being no exhibit I). Upon the evidence led and the exhibits before me I made the orders to which I have referred.

39    Mr Pritchard for the defendants has submitted a bundle of documents consistent with the annexures to Dr Carr's affidavit and an affidavit that he read of Lisa Berton, the solicitor for the defendants. He points to a number of documents within that bundle as being documents that were not disclosed and not produced to me in the application and relies upon those documents as forming the basis upon which he says I will be satisfied that the Judge was mislead on 26 June 1999 and that there was a material non-disclosure.

40    Mr Pritchard has helpfully referred me to Santow J's decision in TQM Cargo Logistics Pty Ltd & Ors v Drake, 2 September 1998, wherein his Honour referred to Spry’s Equitable Remedies 5th Ed (LBC. 1997) at 495 referring to the duty of candour in disclosure by an ex parte applicant for injunctive relief:

"Where application is made ex parte the obligation of the plaintiff is not merely not to mislead the Court by expressly or impliedly making representations that are untrue as is otherwise ordinarily the case in an interparties proceedings but in addition he is under the duty of disclosing to the Court all matters which are within his knowledge or would have been discovered by proper enquiries and which are material to the proceedings at hand and tend in favour of an absent party. A matter is regarded as material for these purposes either if it is relevant to the existence of a power to grant an injunction or if it is one of those circumstances that the Court takes into account in exercising its discretion."

41    I was also referred to a line of the authority by Mr White in respect of the materiality of non-disclosures. In particular Kerr on Injunctions at page 660 says:

"If on the motion to dissolve an ex parte injunction it appeared that the plaintiff has misstated his case either by misrepresentation or by the suppression of material facts so that an injunction has been obtained which would not have been obtained if a more accurate statement of the case had been made, the injunction will be dissolved on that ground alone."
.

42    A material non-disclosure in my view is one that has to be significant and influential upon the outcome of the application.

43    Mr White also referred me to a line of authorities referred to in Ritchie and in particular Gillfillen v Gillfillen (1973) 6 SASR 330. In Gillfillen Sangster J said:

"Returning to the question of whether I should dissolve the injunction made by Walters J, the law is clear it is the duty of the party asking for an interlocutory injunction in any jurisdiction if that application be made ex parte to bring to the Court all facts material to the determination of that party's right to that injunction and any omission to bring any material facts before the court is a ground for dissolving the injunction so obtained. I need only refer to the case of Thomas A Eddison v Bullock (1912) 15 CLR 679, a decision of Isaacs J and I refer to his Honour's reasoning at page 681 to 683 and to the English Supreme Court Practice 1973 29/1/25 where the learned authors cited Boyes v Gill (1981) 64 LT 824. The omitted material must of course be such as might have influenced the learned judge upon hearing the party's application (O'Brien v Australian Temperance and General Mutual Life Insurance Society Ltd (1991) 24 SALR 129)"

44    So, it seems to me that non-disclosure, as I say, must be significant and influential to the determination of the ex parte application.

45    Mr Pritchard submits that the correspondence to which I was not referred falls into such a category. I should therefore deal with each of the matters upon which he has relied.
46    The first is an e-mail dated 18 February which he submits is obviously in response to Mr Coleman's letter of 16 February 1999. That e-mail says:

"Leigh, thanks for the comprehensive comments. I agree and we simply need to agree on detail. Sorry, I read that 8 hours ago and forgot to reply. I will be in touch."

47    Dr Carr was cross-examined about this e-mail and did not agree with the proposition put to him that it was in fact an e-mail in which he agreed with Mr Coleman to an agreement in principle. Indeed, Dr Carr suggested at one stage that this e-mail may well have been a response to a telephone call. Without any need to decide that matter for the moment, if it is a response to the letter of 16 February then it is important to know, on one view of it, what it was that he was agreeing to. Was he agreeing that the issues that needed to be dealt with were, as I have said earlier, the terms of licence, the price, method of payment, control of intellectual property, technical support, et cetera? Was he agreeing to Mr Coleman's suggestions that he had made that there was not a lot of time to roll the product out and he wanted an agreement in principle and that what he proposed was a good fit and he should move immediately? Or was he agreeing to the proposal that each of them should work together in mutual support?

48    So far as the e-mail is concerned it is quite clear that it was not before me on 26 June 1999, nor on 28 June 1999. The plaintiff says that this is not any evidence of any agreement, indeed the other correspondence indicates that this was simply a statement that there was some need to agree to various matters in detail and negotiations were continuing. However, the defendant says that the words "I agree and we simply need to agree on detail" is a most material matter to which the Court should have been taken at the time of the ex parte application.

49    Dr Carr said he looked at this e-mail and decided that this was not relevant to the application before me. He said that he was not of the opinion that it turned upon any issue of relevance to the ex parte application and that the e-mail was identified as originating from Coleman Industries and not Coleman Technologies. I am not sure of why that qualification is made but it is apparent that the e-mail of 18 February is clearly one that has emanated from Coleman Industries.

50    Certainly if, as the defendant claims, the plaintiff was agreeing that there be an agreement in principle and the detail be nutted out, that is a matter that may have been a most important aspect of this case. Because of other matters, to which I will refer, I will come back to this e-mail in due course.

51    The next item on Mr Pritchard's list is 24 February 1999, an e-mail from Dr Carr to Mr Coleman wherein Dr Carr told Mr Coleman that he will produce an NDA distribution agreement to Mr Coleman so that "we can progress ASAP". That item was not before me on 26 June, nor on 28 June. The evidence given by Dr Carr on this topic was that that was a confidentiality agreement and that this happens regularly and that he was of the view that this did not seem to him to be a matter of any relevance at all, a submission which Mr White made in terms of the exercise of my discretion on Saturday, 26 June. That matter seems to me to be of little importance in the scheme of things and so I will move to 18 April which is an e-mail from Dr Carr appointing Mr Coleman, it is claimed, as agent in Canada.

52    That e-mail of 18 April says in part:

"Hi Leigh. I have observed how broad your shoulders are. Are you happy to manage Canada as well as the USA in North America?"

53    The term "Are you happy to manage Canada as well as the USA in North America?" is relied upon by the defendants in suggesting that the distribution agreement was agreed in principle and that not only was it agreed in principle but that Dr Carr was asking Mr Coleman whether he was happy to manage the USA together with Canada in the North American distribution of the plaintiff's product. That was not disclosed to me on 26 June, nor on 28 June. The defendants say that that is a matter material and should have been disclosed because of its importance, that the plaintiff was asking the defendant to manage the USA. The plaintiff, on the other hand, says that is just another step in the negotiations, if at all and really if it is a non-disclosure, it is not a material one.

54    The situation is that seems to me to be right in terms of that statement but I will return to this e-mail together with the e-mail of 18 February in due course.

55    There was then a submission by Mr Pritchard that the software licence agreement prepared by Messrs Freehill Hollingdale & Page was a material non-disclosure. On the evidence before me I don't need to go into a good deal of detail on this particular matter because it seems to me that it is abundantly clear that this matter was one in which the defendant was authorised to act for the plaintiff in a different vein, that is he was authorised to sign an agreement with the particular third party as agent for the plaintiff. This is something quite different from what is being agitated here, that is the distribution agreement between the plaintiff and the defendant and or Coleman Industries for the purposes of distributing MFX 2000. It was not disclosed. If it is to be considered as a non-disclosure I am of the view that it was not material.

56    There is then a letter of 22 April on which Mr Pritchard relies from Dr Carr to Mr Coleman. That letter is headed "Real Time Marketing Solution". That in fact is caught up with the software licence agreement to which I have just referred and is to be encompassed in the view that I expressed that if it is a non-disclosure it is not material to this particular matter. It deals specifically with the signing of that agreement.

57    The last document is a letter of 4 June 1999 from Dr Carr to Mr Coleman. This is a letter that Mr White submitted that Dr Carr produced on the way to America from Sydney in the first and second week of June, to which I have referred earlier, when the concerns had arisen between the plaintiff and the defendant and Dr Carr and another colleague travelled to the States to thrash out the issues. The letter was not before me on Saturday 26 nor Monday, 28 June. Mr Pritchard relies upon this letter to submit that it is a non-disclosure and a material non-disclosure which entitles his clients to the discharge of the injunctions. The letter in part says:

"Dear Leigh, as you are aware I am subject to the scrutiny of the Board and as we have previously discussed I have been instructed to resolve apparent issues in the running of MFX Research in the USA."

58    Dr Carr then for the first time, it is said, in writing refers to Mr Coleman's letter on Coleman Industries letterhead of 3 March 1999, to which I have referred earlier. He then comments on eight points raised on page 1 of that letter by posing various questions and making various comments about the matters raised in that letter. He says, for instance, where Mr Coleman had suggested that Mr Coleman would attend promotional events in the United States of America, "provision of a report of such activities". Where Mr Coleman referred to US operations base for MFX, Dr Carr said "needs confirmation" and where Mr Coleman suggests that Coleman Industries might provide marketing intelligence Dr Carr said "we have not seen a report". He then said:

"On page 2 of your document you mention that you would have certain requirements and we feel that we have provided technical training, marketing collateral and economic support. You suggested that you would provide us promotional strategy and budget but we have not received a marketing plan. All of the above has to be seen in the context of a high margin ranging from 7.5 per cent to 10 per cent of total territory turnover based upon a mutually agreed goal. It is the aim of Alex and myself to resolve any issues in a positive fashion and it is on this basis that we are visiting you in the USA to remove any misunderstandings."

59    That letter, it seems to me, is an important letter. It deals with a number of issues that have been raised in the proposal placed before the plaintiff by Coleman Industries for the distributorship of MFX 2000 in the United States of America. It formed part of the thought processes of Dr Carr as to what he viewed as the appropriate response to the proposal put forward by the defendant for its distributorship agreement.

60    As to why it was not disclosed to me, Dr Carr swore an affidavit in the following terms:

"On or about 4 June 1999 Alex Lopez and myself travelled to California to meet with Mr Coleman on 6 June 1999 for the purpose of resolving the issues in dispute between us. In that regard I refer to paragraph 12 of my affidavit sworn 28 June 1999. Annexure M (which is in fact the letter of 4 June) was handed to Mr Coleman when we met him on 6 June 1999. It represented an agenda for the meeting with Mr Coleman of the document. Annexure M (that is the 4 June letter) is evidence of negotiations that were continuing between the parties as at that point in time. The document does not represent an agreement in terms or otherwise and I did not think it is relevant to the issues to be determined by her Honour on the ex parte application."

61    The reference to paragraph 12 of the affidavit of 28 June encompasses material to which Dr Carr had deposed about his concerns that Mr Coleman or his companies would not have the capacity to represent the plaintiff in the United States of America. He claimed in paragraph 12 in his 28 June 1999 affidavit:

"Mr Coleman assured me on a number of occasions his companies had the capacity to set up an MFX office in San Diego and that there were resources available to properly represent the interests of MFXR."

62    After referring to the trip by himself and Mr Lopez to the United States of America Dr Carr went on to say:

"Coleman Industries Inc appeared to operate out of offices occupied by Avery Bennett Inc, which I understand to be an employment and recruiting agency run by Mr Coleman's wife. I was not introduced to any person having a technical or computer related background. Further, at about this time, I became aware of the proposed involvement of another company associated with Mr Coleman, Coleman Technologies Inc. I am not aware of the relationship between Coleman Industries Inc and Coleman Technologies Inc, if any. As a consequence of my trip to San Diego I formed the view that Mr Coleman and his companies were incapable of adequately representing the interests of MFXR in the United States as agent. I was however prepared to appoint Coleman Technologies or Coleman Industries as a distributor of MFX 2000 technology subject to the terms set out in the facsimile dated 10 June."

I have already made reference to the letter of 10 June.

63    So, it can be seen that Dr Carr at the time of the ex parte application apparently had reference to the letter of 4 June but took the view that it did not represent an agreement in terms and he did not think this was relevant to the issues to be determined by me on an ex parte application.

64    He also told me that he had in fact taken advice from his solicitor, Mr Freidman. It is to be noted that Mr Freidman is a director of the plaintiff. That fact was not disclosed to me, albeit that that fact is not relied upon by Mr Pritchard. He gently put a submission that Mr Freidman was a director and therefore should have been aware of the material to which I am referring now and inferentially the submission is Mr Freidman, being both the solicitor leading the evidence from Dr Carr in the ex parte application and a director, should have known about and should have disclosed the document to the Court.

65    Just testing the question of whether this is in fact a matter that would obviously fall outside a category that Dr Carr would not put before me through his lawyers, it is the case that he did in fact put before me material that was evidence of negotiations, so the fact that it was merely negotiations and not agreement could not be a basis for not disclosing it. The whole of his documents he says were evidence of negotiation and only negotiation, and not of any agreement having been reached.

66    But if one reads the letter of 4 June in a particular way it becomes, on one view of the evidence, clear that Dr Carr had claimed that he had already provided technical training, marketing collateral and economic support consistent with Mr Coleman's suggestion in his letter of 3 March. Nowhere else does it appear in the evidence, indeed I was not told on 26 June that such technical training, marketing collateral and economic support had been provided to the defendants. That seems to me to be a very important matter and although this letter is suggested to be a mere agenda for the meeting, the statements within this letter do not sit happily with such a description.

67    The opening lines of the letter "as you are aware I am subject to the scrutiny of the Board and as we have previously discussed I have been instructed to resolve apparent issues in the running of MFX research in the USA", suggest that there were previous discussions and he had to sort out those things that had in fact occurred in relation to the "running of MFX research in the USA". If that means the running of MFX Research in the future once we get an agreement, that is one thing. If it means the running of MFX Research as it currently stands, that is another and very important aspect.

68    I simply can not understand how this document could be thought to be not relevant and a conscious decision was made by Dr Carr not to produce it, he having told Mr Pritchard that much in the witness box.

69    It is therefore important to decide whether this non-disclosure was material within the meaning of the authorities to which I have already referred.

70    Is it a matter which would have been influential for the determination of the application on 26 June 1999, as has been stated by Mr Pritchard? I am at the disadvantage of being both the Judge who granted the ex parte application and the Judge who has to decide this issue, there being absolutely no application to have it heard before another judge.

71    It is a difficult situation because what was disclosed thereafter seems to me to be in support of the defendant far more than the letter of 4 June. If I can transport myself to an objective situation and look back at the judge on the Saturday night and assess whether that judge, myself, would have granted the ex parte application or would not in the circumstances of the disclosure of 4 June, it is important to rely upon the e-mail of 8 June from the defendant to the plaintiff to analyse the situation. The defendant wrote to the plaintiff in astonishment at an e-mail which had been sent to the defendant on 8 June. The defendant said:

"I am astonished at the receipt of this e-mail given the discussion that took place at our meeting. You undertook to immediately forward a signed distribution contract for Coleman Technologies Inc the next day. You did this in my presence and Veronica's. Is it that you don't want us to sell MFX?"

Mr Coleman then requires or asks the plaintiff to confirm:
"You will honour your agreements with (a), my distribution agreement and as agreed at our meeting resolve the issue of MFX representation later. Mike, remember I wanted you to get here Saturday. You chose not to meet till the next day, you knew I was leaving. It is not my fault I am running hard for your company. It concerns me however that we have come to an agreement and I trusted you to follow through. We know too much about each others activities et cetera and all you are raising are issues of phone answering and reporting. Given that, I have been most patient waiting for you to sign my formal agreement because I was signing the contract for Coleman Technologies you even agreed to back date to cover me."

That of course is a reference to the back dating of the 10 June promised distribution agreement to 6 June.

72    So, the application came before the judge on 26 June with the disclosure that the defendant had made these allegations, that there had been an agreement and that it was agreed to back date it. The letter of 10 June indicates a willingness to agree and to back date it. There has been no response.

73    So did the disclosure of the 8 June e-mail dissipate any materiality of the non-disclosure of the 4 June letter? Would a judge seeing the 4 June letter have been influenced not to grant the ex parte orders that were granted on 26 June 1999? It is important to note that it is not submitted that the orders should not have been granted on any other basis than non-disclosure.

74    It does seem to me that the 8 June 1999 letter sets out the defendants' position most clearly in terms of what Mr Dr Carr had agreed to do.

75    On balance, doing the best I can in this somewhat difficult circumstance, I am of the view that it was a serious non-disclosure, that is that it should have been disclosed.

76    On balance I am not satisfied that it was material to the point to have a significant or influential effect on the determination of the matter by the judge on 26 June 1999. Accordingly the e-mails of 18 February and 18 April, they being although relevant are less important than the 4 June letter and I form the same view in respect of those two documents.

77    Accordingly, the defendant fails to have orders 1 and 2 made in the notice of motion on the basis of material non-disclosure.

78    Last evening when the application was not completed until after the expiration of the orders made on 28 June, the orders were continued to 5pm today. Mr Pritchard submits that there is a serious question to be tried. It seems to me that that is correct. The balance of convenience, it is submitted, is in the defendants' favour because of a number of contracts having been entered into and there being the possibility that the defendants may suffer a very large amount of damage. The defendants have not complied with my order of 28 June to supply the affidavit evidence and have not in fact produced the original master copies, albeit that they have to be produced by 5pm tonight.

79    In requesting Mr Pritchard to obtain instructions overnight as to where the original MFX 2000 technology was Mr Pritchard candidly indicated that he was having some difficulty contacting his client who left the jurisdiction on Sunday morning.

80    The difficulty for the plaintiff is that it too is experiencing exactly the same problems that Mr Pritchard has been experiencing. Mr Coleman will not tell the plaintiff with whom it is that he entered into the contracts. There has been one contract produced, dated 24 June 1999, a day upon which the two gentlemen were in Sydney. That contract was not sighted by Dr Carr until it was produced to the Court on Thursday, 1 July.

81    In all the circumstances it seems to me that some communication should have occurred between the defendants and their solicitors to at least provide the material required by the Court and should be provided.

82    The balance of convenience is in favour of the plaintiff in my view. It has produced this technology for the purposes of marketing world wide and the urgency of that marketing is because it deals with the Y2K problem. The suggested regime that Mr Pritchard very sensibly suggested in paragraph (g) on page 7 of his outline of submissions for a proper interim reporting regime would be a sensible regime if one could speak to the defendants, one would have thought but it is abundantly clear that these defendants are, to give them the benefit of the doubt, so terribly busy or in a rush, as they have stated, to roll out the product that they have no time to even instruct their attorneys in these proceedings.

83    I am satisfied that the balance of convenience is with the plaintiff so that it can in fact pursue the contracts it wishes to pursue both nationally and internationally for the purposes of completing its business plan.

84    The important aspects of the defendants' case in this regard have been brought to my attention through the evidence of Lisa Berton in paragraphs 6 to 12. Ms Berton sets out the instructions that she has received from Mr Coleman over the telephone whilst he travels the word. The highest it has been put in Ms Berton's affidavit is that if Coleman Technologies Inc, that is a company different from Coleman Industries Inc:

"is unable to meet its distribution arrangements with third parties...it may be liable to those third parties for damage."

85    I emphasise the word "may". There is also a paragraph which deals with instructions from Mr Coleman and Mr Ghattas in terms that they will need "at least ten days to comply with the orders made last Saturday night." Those orders require, without fettering the defendants’ proper claims for privilege, the production of the affidavit to indicate to the plaintiff with whom contracts have been entered for the purported distribution of the plaintiff's product and the delivery up to the plaintiff of its original master copies of MFX 2000. Those orders, in my view, must be complied with.

86    In all the circumstances I am of the view then that the balance of convenience in the plaintiff's favour requires the continuation of the orders and I do make those orders.

87    The defendants raise an issue about the genuineness or effectiveness of the undertaking given by the plaintiff in respect of these restraining orders. The documentary material relied upon by the defendant to suggest that the Court would have some concern about this undertaking in my opinion does not defeat the genuineness of the undertaking given by the plaintiff, however, if there is to be an application by the defendants in respect of any security for costs, that is a different and separate matter.

(The matter was stood down for the purpose of short minutes to be prepared.)

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