Moodle Pty Ltd v Lambda Solutions Inc - [2021] WASC 166

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   MOODLE PTY LTD -v- LAMBDA SOLUTIONS INC [2021] WASC 166
CORAM:   MASTER SANDERSON
HEARD:   27 APRIL 2021
DELIVERED          :   2 JUNE 2021
PUBLISHED           :   2 JUNE 2021
FILE NO/S:   CIV 2157 of 2020
BETWEEN:   MOODLE PTY LTD
Plaintiff

AND

LAMBDA SOLUTIONS INC
Defendant

Catchwords:

Practice and procedure - Application to set aside the issue of a writ - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA)

Result:

Temporary stay of plaintiff's action granted

Category: B

Representation:

Counsel:

Plaintiff	:	V Ghosh
Defendant	:	T O'Leary

Solicitors:

Plaintiff	:	Corrs Chambers Westgarth
Defendant	:	Gilbert + Tobin

Case(s) referred to in decision(s):

Nil

MASTER SANDERSON:

On 18 November 2020, the plaintiff obtained an order granting leave to issue a writ of summons against the defendant and to serve the writ in the Canadian province of British Columbia. The writ in this action was duly issued and served. A conditional appearance was filed on 30 December 2020, and on 28 January 2021 the defendant filed an application to set aside the issue of the writ. The application was supported by an affidavit of Jamie Matthew Ammendolea sworn 28 January 2021, and supplemented by a further affidavit of Mr Ammendolea sworn 12 February 2021. The defendant relied on two further affidavits being an affidavit of Peter Lawrence Rubin affirmed 11 February 2021, and an affidavit of Bat-Sheva Levy sworn 11 February 2021.
The relevant background facts are set out with admirable clarity in the defendant's written submissions. Nothing in this recitation of the facts is controversial, although a number of points require further elucidation. But as an overview, I can do no better than the defendant's written submissions.[1]
The parties
5. Lambda is a learning intelligence company, specialising in the customisation of open source learning management software (LMS) and e-learning products and services, including development, design, analytics, training and support.
…
26.A number of procedural steps have been taken by Lambda and Moodle in the Current British Columbia Dispute. However, a summary trial is not expected to take place until at least September or October 2021.
[1] Defendant's submissions dated 19 March 2021, [5], [26].
In this case leave to serve out of the jurisdiction was granted under O 10 r 2 of the Rules of the Supreme Court 1971 (WA). That rule reads as follows:
2. Service out of jurisdiction of writ etc. as to contract
Where it appears to the Court that a contract contains a term to the effect that the Supreme Court shall have jurisdiction to hear and determine any action in respect of the contract, the Court may grant leave to serve a person outside Australia with a writ, or notice of a writ, that begins such an action.
It is worth noting in passing that this rule deals specifically with a situation where this Court is said to have jurisdiction. That is the case with respect to the Moodle Partner Certification Agreement (the Partner Agreement). Clause 19 of the Partner Agreement reads as follows:[2]
19. Applicable Law
This Agreement will be governed and interpreted under the laws of the State of Western Australia without regard to its conflict of laws principles. Any and all disputes arising out of or in connection with this Agreement will be subject to the exclusive jurisdiction of the courts of the State of Western Australia and may only be brought within a court of competent jurisdiction within the State of Western Australia.
[2] Affidavit of Bat-Sheva Levy, sworn 11 February 2021, Annexure SL-31.
It is not entirely clear why there is a specific rule covering contract with a jurisdiction clause as well as r 1, which covers a wider and more general range of matters. Both rules embody a discretion, and insofar as full and frank disclosure is required before leave is granted, there would appear to be no difference between the two rules. In any event, it was accepted by the defendant in this case it was open to the Court to make the order for service out of the jurisdiction - that is to say, there was no question as to whether or not the plaintiff fitted in one of the 'pigeon holes' found in r 1. The defendant said there were two separate grounds upon which the writ ought be set aside. First, the plaintiff's alleged failure to make full and frank disclosure on the leave application. Second, it was said Western Australia was a clearly inappropriate forum. In the alternative it was said there ought be a temporary stay pending the resolution of the proceedings in British Columbia. In my view, the defendant has made good on the final point. There should be a temporary stay. Before explaining why I have come to that conclusion, I should deal first with the other two issues raised by the defendant.
It is a well established rule of practice that on an ex parte application, a party must make full and frank disclosure of all matters relevant to the question under consideration. If such disclosure is not made, then any order will almost invariably be set aside on the motion of a party affected by that order. The rule applies not only for applications for leave to serve out of the jurisdiction but any ex parte application − ex parte injunctions being a particular example. Two issues arise. First, was there a failure to disclose relevant information? Second, in the exercise of discretion is it appropriate to set the order aside? There was no disagreement between the parties as to the principles involved.
The application for leave to serve out of the jurisdiction was supported by two affidavits of David Larcombe Yates, the first sworn 16 November 2020, the second sworn 17 November 2020. Paragraphs 8 and 9 of Mr Yates' first affidavit are in the following terms:
8.On 18 April 2018, Moodle commenced an action in the Supreme Court of British Colombia where it sought orders to compel Lambda to submit to an audit in accordance with the Partner Agreement due to alleged unpaid license fees. Attached and marked 'DLY-3' is a copy of the Notice of Civil Claim filed by Moodle on 3 April 2020.
9.The Court found in favour of Moodle in the above proceedings, granting the order that Lambda submit to a further audit. Attached and marked 'DLY-4' is a copy of the Orders made by the Supreme Court of British Colombia dated 18 September 2019.
It was the defendant's position this statement in relation to the proceedings in the Supreme Court of British Columbia was misleading. It was said the court did not find in favour of the plaintiff. Rather, there was a consent order. Insofar as it goes, that submission is correct. There was no final determination of the issues between the parties in British Columbia. But the plaintiff had sued seeking an 'audit'. The defendant had conceded an audit ought be ordered. In other words, the plaintiff got what it wanted. To describe the outcome as the court finding in favour of the plaintiff is not misleading - ultimately the order giving the plaintiff what it wanted was made by the Court. Perhaps more precise wording could have been used by Mr Yates but really it is a matter of semantics. There was nothing misleading about Mr Yates' affidavit.
Nor in my view was there any other aspect of the evidence the order for service out of the jurisdiction was misleading. This was a very straightforward application. There was an exclusive jurisdiction clause and the plaintiff was seeking to exercise its rights under that clause. At the time it was not aware the defendant would bring further proceedings in British Columbia. There is no basis for suggesting a lack of disclosure, and accordingly no basis upon which the writ could be set aside.
Nor am I satisfied Western Australia is a clearly inappropriate forum. Again, there was no difference between the parties as to the applicable principles. They have been set out clearly by the High Court. What is of importance in this case is the parties agreed the Supreme Court of Western Australia ought have jurisdiction in this matter. As counsel for the plaintiff said in his submissions, the parties had agreed on an apportionment of risk in this regard. While I accept it would be open to the court to decline to give effect to this contractual arrangement, there would need to be some compelling reason to reach that conclusion. In this case, there is no such compelling reason.
Having said that, I am mindful that the plaintiff conducts its business worldwide while the defendant's business is localised in Canada. I also accept that witnesses who may need to give evidence would be based in Canada. But taking those factors into account does not displace the plaintiff's contractual right to have the dispute litigated in Western Australia. In short, there is no compelling reason to depart from what the parties agreed.
That then leads to the question of whether there should be a temporary stay of these proceedings. The starting point of this enquiry is the document entitled 'Notice of Civil Claim' lodged by the defendant in the Supreme Court of British Columbia on 11 August 2020. It appears as annexure PLR‑8 to Mr Rubin's affidavit. It appears to be the equivalent of our writ of summons. It contains what is said to be 'Claim of the Plaintiff' which equates to our statement of claim, although it appears not to be constrained by the same rules of pleading. The crux of the defendant's claim is found in [19] of the Statement of Facts. It reads as follows:
19.Upon the termination of the Licence Agreement, in reliance on Moodle's conduct and representations, Lambda reasonably expected that Moodle would continue to allow Lambda to create plugins, including one for Zoola, and publish those plugins to the Moodle Directory. Accordingly, Lambda continued to invest time, energy and capital into the development of its technology, including Zoola.
Paragraph 24 then reads as follows:
24. The Plugins were developed by Lambda with the understanding and expectation based on, among other matters, Lambda's previous dealings with Moodle, Moodle's dealings with other third parties, and the content of Moodle's website that, provided they met the Guidelines, the Plugins would be published to the Moodle Directory and Lambda would have access to the benefits associated with such publication, as touted by Moodle.
Under the heading 'Legal Basis' the defendant sets out why it says the plaintiff is liable to the defendant. These paragraphs read as follows:
Part 3: LEGAL BASIS
Equitable Estoppel
31.Moodle's actions, conduct, statements and information posted on its website, are intended to induce third parties to develop plugins on the understanding that, if they meet the Guidelines, those plugins will be published to the Moodle Directory.
32.Further, Moodle's communications with Lambda represented that the Plugins would be approved and published to the Moodle Directory.
33.As a result of Moodle's actions, conduct, communications and representations, Lambda proceeded to develop the Plugins and has continued to act on the understanding that the Plugins would be published to the Moodle Directory, providing Lambda with the associated benefits.
34.Lambda has invested significant time and resources into the development of the Plugins and its subsequent efforts to have the Plugins published to the Moodle Directory.
Breach of Contract
35.Through its actions, conduct, communications and the content of its website, Moodle offers to contract with third parties who wish to publish plugins to the Moodle Directory.
36.By submitting the Plugins to Moodle, Lambda accepted Moodle's offer to contract.
37.Consideration flowed from Lambda to Moodle in the form of the Plugins which were provided to Moodle for publication and which provide value to Moodle.
38.The contract between Lambda and Moodle contained an express, or in the alternative an implied, term that the Plugins would be approved and published to the Moodle Directory within a reasonable time, provided they met the Guidelines.
39.Moodle has breached its contract with Lambda by failing to publish the Plugins despite their compliance with the Guidelines and Lambda has suffered damages as a result of Moodle's breach of contract.
Misrepresentation
40.Moodle is liable for the tort of negligent misrepresentation, in that:
(a)Moodle represented to Lambda that the Plugins would be approved and published to the Moodle Directory provided they met the Guidelines and failed to disclose that Moodle may arbitrarily refuse to publish plugins to the Moodle Directory;
(b)Moodle knew, or ought to have known, that Lambda would rely upon Moodle's representations;
(c)it was reasonable for Lambda to rely upon Moodle's representations; and
(d)Lambda did rely upon Moodle's representations to its detriment.
Although it is not entirely clear, it would appear that the formulation of the defendant's claim stood independent of the Partner Agreement. The Partner Agreement was without doubt necessary as a background; but the defendant was not engaging the Partner Agreement. It was not alleging a breach of the Partner Agreement or attempting to imply a term. On that basis, there appears to be no reason why the exclusive jurisdiction provision of the Partner Agreement was relevant.
On 17 November 2020, the defendant lodged an 'Amended Notice of Civil Claim'. That document appears as annexure PLR‑10 to Mr Rubin's affidavit. The defendant made significant changes to its claim. Of particular relevance are [16] - [22]. These paragraphs (including the marking up) read as follows:
16.One of the significant pieces of e-learning technology which Lambda developed under the Partnership Agreement, from and after 2014, is Zoola Analytics ('Zoola'). Zoola is a reporting and analytics solution for Moodle's LMS and Totara Learn (an open source distribution of Moodle designed for corporate learning) which allows clients to get insight into and control over learning and business data. Zoola can also retrieve, analyze and report on data such as financial, sales and accounting information.
17.Throughout Lambda's term as a Moodle Certified Partner, Moodle received significant revenue in the form of royalty payments from Lambda, in accordance with the terms of the Partnership Agreement. A significant portion of that revenue was derived specifically from the marketing and sale of Zoola.
18.Lambda's research and development of Zoola was undertaken with Moodle's knowledge and consent. Moodle encouraged and induced Lambda to pursue its research and development of Zoola through its representations and its contractual relationship with Lambda, as such development was to the financial benefit of Moodle. Lambda's expectation, as informed by Moodle's actions, conduct, website, and the Plugin Representations, was that Moodle would have a continuing obligation, even after the termination of the Partnership Agreement, to:
(a)review and publish plugins relating to Zoola which comply with the Guidelines to the Moodle Directory within a reasonable time;
(b)not refuse such review and publication unreasonably, in bad faith, or for extraneous reasons or considerations; and
(c)not treat the review and publication of plugins relating to Zoola on a lesser footing than others in the industry.
(collectively, the 'Zoola Plugin Provisions')
19.In 2017, Lambda decided that it no longer wished to be a part of the Moodle Certified Partner program and terminated the Partnership Agreement in accordance with its terms, effective July 31, 2017.
20.The Zoola Plugin Provisions were implied terms of the Partnership Agreement which survived the termination of the Partnership Agreement.
21.All disputes related to the rights and obligations which are the subject matter of these proceedings are properly governed in accordance with the laws of the State of Western Australia.
22.Upon the termination of the Partnership Agreement, in reliance on the Zoola Plugin Provisions, the Plugin Representations, and the express and implied terms of the Partnership Agreement, Lambda continued to invest time, energy and capital into the research and development of its technology, including Zoola.
It seems then that the defendant's claim has been amended so that it seeks to imply terms into the Partner Agreement. This is confirmed by amendments made to the 'Legal Basis' section of the statement. I will not repeat these, but it is clear that the amended pleading engages the Partner Agreement and by its terms seems to anticipate exclusive jurisdiction in the Supreme Court of Western Australia.
All of that means if the action were to proceed in the Supreme Court of British Columbia and in the Supreme Court of Western Australia, there is the possibility of inconsistent outcomes. Moreover, it would appear on the face of it the plaintiff could seek a stay of the proceedings in British Columbia based upon the exclusive jurisdiction provisions. Neither party really grappled with this issue. There is nothing in the evidence which would allow me to reach a conclusion that if the plaintiff were to seek a stay of the British Columbia proceedings it would be successful. But equally there is nothing to suggest the contrary. It would seem the proceedings in British Columbia are still at a relatively early stage. We in this jurisdiction would probably say the pleadings are closed with the next step being discovery. There does not appear to have been any judicial intervention to date. But if the plaintiff wishes to rely upon the exclusive jurisdiction clause and issue proceedings in this jurisdiction, it ought to take some steps to halt the proceedings in British Columbia. If it does not do so, it would appear to be consenting to the matter proceeding in British Columbia and it would be unreasonable to allow proceedings to continue in this jurisdiction.
For these reasons, I am satisfied there ought be a temporary stay of the proceedings in this Court. Depending upon the way matters develop in British Columbia, this action might proceed. For instance, if the plaintiff was to apply for and obtain a stay of the British Columbia proceedings based upon the exclusive jurisdiction clause, then there could be no objection to this action proceeding. But while proceedings are on foot in another jurisdiction, it would be inappropriate to allow these proceedings to continue.
On publication of these reasons the parties ought to confer as to the appropriate form of orders. Short submissions should be provided as to costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CB
Associate to Master Sanderson
2 JUNE 2021