Need Pty Ltd v Need Essentials U.S.A LLC

[2023] VSC 184

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST

S ECI 2022 05222

NEED PTY LTD (ACN 601 065 105)	Plaintiff
v
NEED ESSENTIALS U.S.A LLC	Defendant

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JUDGE:	M Osborne J
WHERE HELD:	Melbourne
DATE OF HEARING:	6 March 2023
DATE OF JUDGMENT:	14 April 2023
CASE MAY BE CITED AS:	Need Pty Ltd v Need Essentials U.S.A LLC
MEDIUM NEUTRAL CITATION:	[2023] VSC 184

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INJUNCTIONS – Application for an anti-suit injunction to restrain foreign proceeding – Cross application for permanent or temporary stay of Australian proceeding – Contractual dispute between US and Australian companies – Related subject matter proceedings in two jurisdictions – Victorian choice of law and jurisdiction clause in contract – Contractual construction – Whether clause an exclusive jurisdiction clause – Whether Victorian jurisdiction clearly inappropriate forum – CSR Ltd v Cigna Insurance Australia Limited (1997) 189 CLR 345 – Whether proceedings vexatious or oppressive according to equity – Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538 – Whether commencement date, state and subject of proceedings are relevant – Whether dispute can be wholly resolved in Victoria – Comity considerations – Sterling Pharmaceuticals Pty Ltd v The Boots Company (Australia) Pty Ltd (1992) 34 FCR 287 criteria applied to temporary stay application.

INTELLECTUAL PROPERTY – Trademarks – Application for interlocutory prohibitory injunction to restrain use of trademark by counterparty to disputed contract – Whether use of trademarks is in breach of agreement – Whether damages alone an adequate remedy – Samsung Electronics Company Ltd v Apple Inc (2011) 217 FCR 238 – Whether prima facie case of infringement and where balance of convenience lies – Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	G Dalton KC with P Annabell of counsel	Arnold Bloch Leibler
For the Defendant	R Kornhauser of counsel	Madgwicks

HIS HONOUR:

Introduction

1. The plaintiff, Need Pty Ltd (‘Need Australia’), is a producer[1] and seller of wetsuits and other surf-related products whose principal place of business is in Torquay, Victoria.  In 2016, Need Australia entered into a distribution agreement with Colby Exon LLC dated 1 July 2016, which provided for Colby Exon LLC to act as Need Australia’s distributor in the US (the ‘Distribution Agreement’).

   [1]The Distribution Agreement (as defined in paragraph 1 of these reasons) describes Need Pty Ltd as a manufacturer, seller and distributor of the products set out in the schedule to the Distribution Agreement.  The products listed in the schedule are wetsuits, boardshorts, surf apparel, surf accessories, leg ropes and tail pads.  Notwithstanding the description in the Distribution Agreement, the evidence adduced on the application established that at least some of the products ordered by Need Essentials U.S.A LLC were manufactured on behalf of Need Pty Ltd by third parties and Need Pty Ltd’s founder and director Ryan Scanlon refers to his establishment of Need Pty Ltd in 2013 so as to ethically produce and supply the best possible wetsuits and surfing products.

1. Since around 2016, the rights and obligations of Colby Exon LLC as distributor under the Distribution Agreement were novated to the defendant, Need Essentials U.S.A LLC (‘Need USA’), a limited liability company of the State of Delaware in the US, whose principal place of business is in Santa Barbara, California. 

1. The Distribution Agreement was for a term of three years commencing on 1 July 2016 and automatically renewed for subsequent periods of three years until terminated.  Relevantly, the terms of the Distribution Agreement include clause 7.3, which provides that following termination, the distributor would cease using all intellectual property of Need Australia, including the Need trademarks, and clause 12.2, headed ‘Governing Law’, which provides:

This Agreement is governed by the laws of Victoria, Australia and each party hereby submits and consents to the jurisdiction and venue in the proper federal, state or district courts located in Victoria, Australia.

1. Pursuant to clause 12.14 of the Distribution Agreement, which mandated a mediation procedure before any party resorted to litigation, arbitration or other forms of alternative dispute resolution, on 14 December 2021, Need Australia issued Need USA with a notice of dispute.  Thereafter, on 2 May 2022, Need Australia and Need USA participated in a mediation before a member of the Victorian Bar.  The mediation was conducted virtually.  The dispute did not resolve at mediation. 

1. On 19 July 2022, Need Australia purported to terminate the Distribution Agreement by notice, with such termination to take effect from 18 October 2022.

1. Need Australia and Need USA are in dispute following the termination of the Distribution Agreement.

1. It is not in dispute that notwithstanding the purported termination of the Distribution Agreement, Need USA has continued to use the Need trademarks in the US, including continuing to sell goods by reference to those trademarks on its website,

1. On 12 November 2022, and without prior notice to Need Australia, Need USA commenced proceedings against Need Australia, Needessentials IP Pty Ltd (‘Need Essentials IP’), Ryan Scanlon, the founder and director of Need Australia and ‘Does 1-10’ (being unidentified individuals) in the Superior Court of the State of California (the ‘California Proceeding’).  In the California Proceeding, Need USA alleges, inter alia, breaches and repudiation of the Distribution Agreement, promissory estoppel, negligent misrepresentation, contravention of the Californian Unfair Business Practices, Business and Professions Code, § 17200 (the ‘Code’) and an entitlement to damages for unjust enrichment against all defendants to the California Proceeding. 

1. Shortly after being issued, a copy of the California Proceeding was provided to the solicitors for Need Australia, but not served on any of the defendants.

1. On 19 December 2022, Need Australia commenced proceedings in this Court  in which it alleges, inter alia, breaches and repudiation of the Distribution Agreement by Need USA and seeks declarations that the Distribution Agreement had been terminated.

1. In addition, the writ specifies final relief in the form of an injunction, prohibiting Need USA from using the Need trademarks in the US and an injunction restraining Need USA from taking any further step in the California Proceeding, other than discontinuance.

1. By its summons dated 19 December 2022, Need Australia seeks:

(a)   an interlocutory injunction prohibiting Need USA from taking any further step in the California Proceeding, other than discontinuance (the ‘Anti-Suit Injunction’); and

(b)  an interlocutory injunction prohibiting Need USA from using the trademarks (the ‘Prohibitory Injunction’).

1. On 22 December 2022, I granted an ex parte injunction, inter alia, restraining Need USA from seeking or applying for any order in the Superior Court of the State of California that would have the effect of preventing Need Australia from pursuing its claim for an anti-suit injunction.  This ‘anti anti-suit injunction’ was thereafter continued on an inter partes basis and various timetabling orders were made for the hearing and disposition of the Anti-Suit Injunction and the Prohibitory Injunction. 

1. On 14 February 2023, following service of this proceeding on Need USA, Need USA filed a conditional appearance, and by summons dated 14 February 2023, sought orders that this proceeding be permanently or temporarily stayed.  Need USA’s application is advanced primarily on the basis that Need USA had already commenced the California Proceeding against Need Australia and others, prior to the commencement of the local proceeding, and that the California Proceeding raises substantially similar (but also additional) issues to those raised in the local proceeding and is the only forum in which the whole of the disputes between the parties to the Distribution Agreement and connected parties, can be effectively resolved.

1. On 20 February 2023, Need Australia sought removal of the California Proceeding to the District Court for the Central District of California, a Federal Court (the ‘District Court’).  It is not in dispute that if the California Proceeding continues that it will be heard in Federal Court.  Need USA did not submit that Need Australia’s removal of the California Proceeding to Federal Court constituted a submission to its jurisdiction.

1. Need Australia’s application for an Anti-Suit Injunction is brought on two bases; first, that clause 12.12 of the Distribution Agreement constitutes an exclusive jurisdiction clause which prohibits the commencement of proceedings in courts other than those in Victoria; secondly that even if that were not so, the California  Proceeding should be enjoined, on the grounds that its continuation is vexatious and oppressive.

1. The issues before the Court therefore constitute the following:

(a)   Should the Court grant a permanent stay of this proceeding or a temporary stay, pending the hearing and determination of the California Proceeding?

(b)  Should the Court grant the Anti-Suit Injunction?

(c)   Should the Court grant the Prohibitory Injunction?

Is the local Court a clearly inappropriate forum?

1. In CSR Ltd v Cigna Insurance Australia Limited (‘CSR v Cigna’),[2] the High Court by majority allowed an appeal against the decision of the Supreme Court of New South Wales (Court of Appeal), dismissing an appeal against an interlocutory anti-suit injunction granted by the primary judge which restrained CSR Ltd, an Australian incorporated company, and its US subsidiary, CSR America, from continuing proceedings instituted by them in the US against their insurers and Cigna Corporation, a US incorporated company, seeking declarations that they were entitled to indemnity with respect to asbestos-related claims made against them in the US. 

   [2](1997) 189 CLR 345 (‘CSR v Cigna’).

1. After the issue of the US proceeding, Cigna Corporation and its Australian subsidiary, Cigna Australia, subsequently commenced proceedings against CSR Ltd, CSR America and others in the Supreme Court of New South Wales.  Interlocutory anti-suit injunctions were granted by the primary judge, restraining CSR Ltd and CSR America from taking any further step in the US proceeding. The primary judge also dismissed a stay application in respect of the Australian proceedings brought by CSR Ltd and CSR America.  The Court of Appeal dismissed applications for leave to appeal against both those decisions. 

1. The High Court observed that a court’s power to grant an anti-suit injunction arises in part from its inherent power to prevent its processes being abused by protecting the integrity of court processes once set in motion and that the power is to be exercised when the administration of justice demands or when otherwise necessary for the protection of the court’s own proceedings or processes.[3]  Apart from the inherent power of a court to protect its own processes, a court exercising equitable jurisdiction also has power to make orders in restraint of unconscionable conduct or the unconscientious exercise of legal rights.  In some cases, the equitable jurisdiction to restrain unconscionable conduct can be exercised in aid of legal rights which include the obtaining of an injunction to restrain proceedings brought in breach of a contract not to sue.[4]  Otherwise, the High Court noted that an injunction may be granted in aid of a promise not to sue in a foreign jurisdiction constituted by an agreement to submit to the exclusive jurisdiction of the courts of the forum.[5]  Other established categories of cases in which an injunction may be granted in the exercise of the court’s equitable jurisdiction are cases involving proceedings in another court which are, according to the principles of equity, vexatious or oppressive.[6] 

   [3]Ibid 392.

   [4]Ibid.

   [5]Ibid.

   [6]Ibid 393.

1. Where an anti-suit injunction is sought on equitable grounds, the preclusive nature of such relief along with considerations of comity are such that the local court should first consider whether it is appropriate, in the sense that it is not clearly inappropriate, for it to determine the matter in issue before granting an anti-suit injunction.[7]  If the court concludes that it is a clearly inappropriate forum, then there will be no occasion for the court to consider whether to grant an anti-suit injunction.  If, however it considers that it is not a clearly inappropriate forum, the court must then determine whether it may be nevertheless expedient to require the applicant for the anti-suit injunction to first seek a stay or dismissal of the foreign proceedings.[8]

   [7]Ibid 397.

   [8]Ibid 398.

1. Although CSRv Cigna was not a case which involved an application for an interlocutory anti-suit injunction based on an exclusive jurisdiction clause, the court’s judgment in CSR v Cigna did not confine the question of first considering whether the court is a clearly inappropriate forum to applications based on equitable grounds in circumstances other than those involving an exclusive jurisdiction clause.

1. In any event, the applicant here, Need Australia, accepted that the first matter to be considered was whether the Supreme Court of Victoria is a clearly inappropriate forum for the resolution of the dispute. 

1. In that respect therefore, the first matter for consideration on the question of an anti-suit injunction, namely whether the Supreme Court of Victoria is a clearly inappropriate forum for the resolution of the dispute, mirrors Need USA’s application for a permanent stay of this proceeding. 

1. In Voth v Manildra Flour Mills Pty Ltd (‘Voth’),[9] the High Court approved the following principles stated by Deane J in Oceanic Sun Line Special Shipping Co Inc v Fay (‘Oceanic Sun Line’), where his Honour stated:[10]

That power [to order that proceedings which have been regularly instituted within jurisdiction should be dismissed or stayed on inappropriate forum grounds] is a discretionary one in the sense that its exercise involves a subjective balancing process in which the relevant factors will vary and in which both the question of the comparative weight to be given to particular factors in the circumstances of a particular case and the decision whether the power should be exercised are matters for individual judgment and, to a significant extent, matters of impression. The power should only be exercised in a clear case and the onus lies upon the defendant to satisfy the local court in which the particular proceedings have been instituted that it is so inappropriate a forum for their determination that their continuation would be oppressive and vexatious to him. Ordinarily, a defendant will be unable to discharge that onus unless he can identify some appropriate foreign tribunal to whose jurisdiction the defendant is amenable and which would entertain the particular proceedings at the suit of the plaintiff. Otherwise, that onus will ordinarily be discharged by a defendant who applies promptly for a stay or dismissal if he persuades the local court that, having regard to the circumstances of the particular case and the availability of the foreign tribunal, it is a clearly inappropriate forum for the determination of the dispute between the parties.

[9](1990) 171 CLR 538, 564 (‘Voth’). 

[10](1988) 165 CLR 197, 247-8.

1. It is convenient then, first to consider whether Need USA can establish that this Court is a clearly inappropriate forum.  If it can do so, then it will be entitled to a stay of this proceeding and no occasion will arise for consideration of Need Australia’s application for the Anti-Suit Injunction.

1. Need USA relies principally on the fact that proceedings are pending between the same parties in California on the same subject matter (lis alibi pendens).  Need USA emphasises that the California Proceeding was commenced first in time, which it submits is a matter which weighs very heavily in favour of a stay of the local proceeding.  Relatedly, Need USA submits that only the California Proceeding can offer a complete resolution of all matters in dispute between the contracting parties, Need Australia and Need USA, as well as those between Need USA and the other defendants to the California Proceeding, being Need Essentials IP, Mr Scanlon and the Does 1-10 (who, for convenience, shall be referred to as the ‘Connected Parties’).

1. Need Australia relies on the presence of clause 12.12 of the Distribution Agreement, by which the contracting parties agreed that the Distribution Agreement was to be governed by the laws of Victoria, Australia (the ‘Choice of Law Component’) and, secondly, by that same clause that ‘each party submitted and consented to the jurisdiction and venue in the proper federal, state or district courts located in Victoria, Australia’ (the ‘Jurisdiction Component’), arguing that in such circumstances, it cannot be said that this Court is a clearly inappropriate forum for what, at its core, is a contractual dispute between those parties.  It otherwise submits that this Court has jurisdiction to resolve all claims made in the California Proceeding, both between the contracting parties in the dispute before me and between Need USA and the Connected Parties, further noting that the contractual disputes between the contracting parties will involve the application of Victorian law.  Secondly, Need Australia points to its presence in Victoria and the fact that Mr Scanlon and its employees, who will likely be the witnesses in this proceeding and will likely constitute the identity of Does 1-10, are all based in Victoria.  As such, it submits that the Supreme Court of Victoria is not a clearly inappropriate forum

1. As Deane J observed in Oceanic Sun Line, the power to order that proceedings which had been regularly instituted within the local jurisdiction should only be exercised in a ‘clear case’ and the onus lies on the defendant, here Need USA, to satisfy the local court that the continuation of the proceedings in this Court will amount to their continuation in a forum ‘so inappropriate … for their determination that their continuation would be oppressive and vexatious [to Need USA].’

1. Whilst the question of whether clause 12.12 constitutes an exclusive jurisdiction clause is a matter of controversy, it is not controversial that at the very least, by that clause Need USA submitted and consented to the jurisdiction of this Court.  Moreover, it agreed that the ‘agreement is governed by the laws of Victoria, Australia’, which agreement likely at the very least governs the relevant law to be applied to the resolution of the contractual disputes between the contracting parties.  In those circumstances, Need Australia submits that establishing this Court as a ‘clearly inappropriate forum’ presents as a high bar. 

1. Need USA seeks to jump that high bar by emphasising that the California Proceeding was issued first in time and, by submitting that only the California Proceeding can offer a complete resolution of the matters involved in the controversy at large which extends beyond the contracting parties to the dispute between Need USA and the Connected Parties and encompasses non contractual claims, which Need USA submits cannot be resolved in this Court.

1. In respect of the prior commencement of the California Proceeding, Need USA relies on the reasoning of the High Court in Henry v Henry (‘Henry’), where the court explained:[11]

Parallel proceedings in another country with respect to the same issue may be compared with multiple proceedings with respect to the same subject matter in different courts in Australia. In Union Steamship Co of New Zealand Ltd v The Caradale, Dixon J observed of that latter situation that ‘[t]he inconvenience and embarrassment of allowing two independent actions involving the same question of liability to proceed contemporaneously in different courts needs no elaboration.’ From the parties’ point of view, there is no less - perhaps, considerably more - inconvenience and embarrassment if the same issue is to be fought in the courts of different countries according to different regimes, very likely permitting of entirely different outcomes.

It is prima facie vexatious and oppressive, in the strict sense of those terms, to commence a second or subsequent action in the courts of this country if an action is already pending with respect to the matter in issue. And although there are cases in which it has been held that it is not prima facie vexatious, in the strict sense of that word, to bring proceedings in different countries, the problems which arise if the identical issue or the same controversy is to be litigated in different countries which have jurisdiction with respect to the matter are such, in our view, that, prima facie, the continuation of one or the other should be seen as vexatious or oppressive within the Voth sense of those words.

It does not follow that, because one or other of the proceedings is prima facie vexatious or oppressive within the Voth sense of those words, the local proceedings should be stayed. However, it does follow that the fact that there are or, even, that there may be simultaneous proceedings in different countries with respect to the same controversy is highly relevant to the question whether the local proceedings are oppressive in the sense of ‘seriously and unfairly burdensome, prejudicial or damaging’, or, vexatious, in the sense of ‘productive of serious and unjustified trouble and harassment’. And it also follows that courts should strive, to the extent that Voth permits, to avoid that situation.

[11](1996) 185 CLR 571, 590-1 (citations omitted) (‘Henry’). 

1. Need USA places particular emphasis on the first sentence of the second paragraph of the extract above, to the effect that it is prima facie vexatious and oppressive to commence a second or subsequent action in the local forum if an action is already pending with respect to the matter in issue and the second-last sentence of the third paragraph, where the court observes that the existence of simultaneous proceedings in different countries with respect to the same controversy is highly relevant to question of whether the local proceedings are oppressive.

1. Overall, Need USA submits that where the California Proceeding was already on foot, the commencement of a second or subsequent action in this Court which arises from the same controversy should properly be seen as oppressive, in the sense of being ‘seriously and unfairly burdensome, prejudicial or damaging’ or vexatious, in the sense of ‘productive of serious and unjustified trouble and harassment’.[12]

   [12]Henry (n 11) 579.

1. It is important to consider the context in which the High Court made its observations in Henry.  Henry involved matrimonial proceedings between a husband and wife who had married in Germany and lived principally in Monaco thereafter.  Later, the husband and the wife commenced separate divorce proceedings in Monaco.  The husband’s proceedings were later struck out, but the wife’s continued.  Subsequently, the husband left Monaco and returned to Australia before commencing proceedings for the dissolution of the marriage in the Family Court of Australia on the basis that he was then domiciled in Australia.  The husband had bank accounts and business interests in several countries, but few assets in Australia.  The wife applied to have the Australian proceedings stayed on the grounds of lack of domicile and forum non conveniens.  The issue of forum non conveniens was raised in the appeal to the High Court.  The High Court set aside the decision of the Full Court of the Family Court of Australia, which had dismissed the wife’s appeal from the dismissal of her application for a stay, and remitted the proceeding to the Full Court on the basis, among other things, that the Full Court had not taken into account a number of relevant matters including, relevantly, the order in which the proceedings were instituted, the stage which they had reached, the costs that had been incurred and the connection of the parties and their marriage with the various jurisdictions and to issues which might affect the relief to which each might be entitled in those jurisdictions.

1. In my view, there is nothing in Henry which supports the proposition that the mere fact that a proceeding in a foreign jurisdiction had been commenced first in time is a factor of any special significance.  That is particularly so in the present case where in fact, no steps beyond the commencement of the proceeding had occurred prior to the commencement of the local proceeding.[13]  Further, no process had been served on any of the defendants to the California Proceeding at the time of the commencement of this proceeding and, even at the hearing of this application, although a copy had been provided to the solicitors for Need Australia.  Moreover, by the time of the hearing of this application, only Need Australia and Need Essentials IP had been served, with service yet to be affected on Mr Scanlon and, for obvious reasons, Does 1-10.  Of course, if the proceeding issued first in time was well advanced, the position is very different.

   [13]Aside from the removal of the proceeding to the District Court for the Central District of California and the initiation of a dismissal application.

1. The case referenced in the relevant footnote in the High Court’s judgment in Henry as supporting the proposition that it is prima facie vexatious and oppressive in the strict sense of those terms to commence a second or subsequent action in the courts of this country if an action is already pending with respect to the matter in issue is Moore v Inglis.[14]  That case in fact involved a proceeding where the vexation and oppression arose from the plaintiff’s commencement of a second or subsequent action in one court where the plaintiff had already commenced a proceeding in another court as a plaintiff with respect to the matter in issue.

   [14](1976) 9 ALR 509.

1. Insofar then as Need USA’s submission rests on the proposition that the continuation of the proceeding in this Court constitutes its continuation in a clearly inappropriate forum because of the prior commencement of the California Proceeding, it is rejected.  The mere fact of the existence of an earlier commenced proceeding in another jurisdiction is only one factor to which regard is had in determining whether the local forum is clearly inappropriate: Sterling Pharmaceuticals Pty Ltd v The Boots Company (Australia) Pty Ltd (‘Sterling’).[15]  In the present case, the weight given is minimal because it was commenced only shortly prior to the commencement of this proceeding and neither Need Australia, or the other defendants to the California Proceeding have taken any steps of significance in that proceeding, beyond the removal to the District Court and a challenge to the continuation of the proceeding.  No defendant to the California Proceeding actively participated in that proceeding prior to issuing this application to restrain the California Proceeding.[16]

   [15]Sterling Pharmaceuticals Pty Ltd v The Boots Company (Australia) Pty Ltd (1992) 34 FCR 287, 290-1 (‘Sterling’), cited with approval by the High Court in both Henry (n 11) 590 and CSR v Cigna (n 2) 390. 

   [16]Cf M Davies et al, Nygh’s Conflict of Laws in Australia, (LexisNexis Butterworths, 10^th ed, 2020) 219 [8.47] (‘Nygh’s’).

1. Turning to the second critical feature relied upon, Need USA submits that only the California Proceeding can resolve all matters of controversy between the contracting parties and the Connected Parties.  This submission proceeds upon two accepted premises.  The first is that a US court can entertain the claims made by Need Australia in this proceeding, given that the claims involve straightforward contractual claims.  Need USA submits that there is no reason to think that a US court could not adjudicate upon those claims, applying Victorian and Australian law if needed.  The second is that there is significant overlap between the issues in this proceeding and those in the California Proceeding.[17]

   [17]Affidavit of Charles Stuart Exon II, sworn 14 February 2023, [178]-[179].

1. There are two aspects to the submission that only the California Proceeding can resolve Need USA’s claims; first, the claims made in the California Proceeding include claims made by Need USA against Need Australia for relief under US statute and a claim based on promissory estoppel, which Need USA submits is not available in the Victorian proceeding.  Secondly, but relatedly, Need USA submits that if the Court was to grant the Anti-Suit Injunction on the basis of clause 12.12 of the Distribution Agreement by reason of that clause constituting an exclusive jurisdiction clause, such an injunction can only lie to restrain the proceedings between Need Australia and Need USA.  The limited nature of the injunction so ordered would leave the balance of the claims in the California Proceeding against the Connected Parties continuing in the California Proceeding, and therefore result in the undesirable multiplicity of proceedings which should be avoided, by reason of the grant of a stay on the grounds that the proceeding before me is in a clearly inappropriate forum. 

1. The claims made by Need USA in the US proceeding are set out in the complaint filed in the Superior Court of the State of California.

1. Under the subheading ‘Defendants’ Breaches of the Distribution Agreement’ in paragraphs 62 to 100, Need USA alleges, in summary, that following the automatic renewal of the Distribution Agreement which occurred in 2019, in Spring 2020,[18] the defendants (Need Australia, Need Essentials IP, Ryan Scanlon and Does 1-10) repudiated the renewed Distribution Agreement by:

   [18]Assuming this intends March to May 2020, as it is in the US.

(a)   seeking to introduce new terms to that agreement, which included terms originally proposed by the defendants and rejected by Need USA before the agreement was entered into on 1 July 2016;

(b)  notifying Need USA of a royalty rate increase in breach of the Distribution Agreement;

(c)   demanding that Need USA supply a bank guaranteed irrevocable letter of credit to the defendants, covering all purchase orders placed by the defendants on Need USA’s behalf to the defendants’ manufacturer, noting that Need USA also alleges that such a demand was in breach of the Distribution Agreement; and

(d)  issuing a notice of breach of the Distribution Agreement to the plaintiff with respect to amounts alleged to be owed and overdue for payment in circumstances where in fact all amounts and payments owed had been paid in a timely basis to the defendants.

Additionally, Need USA alleges that the demands made by the defendants of the nature set out above were made by the defendants in bad faith.

1. Under the subheadings ‘First Cause of Action’ (for breach of contract), ‘Second Cause of Action’ (for breach of the covenant of good faith and fair dealing) and ‘Third Cause of Action’ (for repudiation of contract), Need USA relies upon the matters alleged in paragraphs 62 to 100 as supporting the first three causes of action which variously give rise to an entitlement to damages of not less than $5 million, and associated declarations.

1. Under the subheadings ‘Fourth Cause of Action’ (for promissory estoppel) and ‘Fifth Cause of Action’ (for negligent misrepresentation), Need USA relies upon ‘clear and unambiguous promises to the plaintiff that the defendants’ would fulfil purchase orders given by Need USA by serving as the ‘middle man’ between Need USA and the defendants’ global manufacturer, that those promises were intended to induce Need USA to build interest and demand in the trademark goods in the US with the plan and intent to later force Need USA to ‘surrender its valuable rights’ under the Distribution Agreement so that the defendants could ‘reap all the benefits’; that the defendants had ‘no intention of fully performing’ and allowing Need USA to perform and continue to perform on a long term basis as the exclusive distributor which caused damage to Need USA in an amount of not less than $5 million.

1. Under the subheading ‘Sixth Cause of Action’, Need USA pleads that the defendants engaged in ‘unfair’ business practices in violation the Code, by ‘consummating an unlawful, unfair and/or fraudulent business practice designed to deprive’ Need USA of its rights under the Distribution Agreement by reason of the defendants’ misleading and deceptive practices and false representations made to Need USA in order to induce Need USA to enter into the Distribution Agreement and build a ‘loyal United States customer base’ on the defendant’s behalf.  Separately, and in what appears to be in an additional incidence of the Code, Need USA relies upon an alleged prohibition by the defendants on Need USA or anyone else from communicating directly with the defendants’ manufacturers, which has the effect that those manufacturers ‘are stuck with a product pricing and terms that [the defendants choose to] develop’.  Need USA alleges that those matters caused it to suffer damage:

[I]ncluding but not limited to, its significant capital and human resources in building a loyal consumer base from the ground up in the United States, and the harm to [Need USA’s] name and reputation. 

1. Under the subheading ‘Seventh Cause of Action’ (for unjust enrichment), Need USA alleges an entitlement to an order that the defendants pay Need USA all amounts by which the defendants have been unjustly enriched, which unjust enrichment is said to arise ‘[a]s a result of the breaches by and wrongful acts of [the defendants]’.

1. Under the subheading ‘Eighth Cause of Action’ (for declaratory relief), Need USA complains of the defendants’ refusal to allow Need USA to sell off its inventory of the defendants products and asserts an entitlement to a declaration which would permit Need USA ‘to orderly sell off [the] defendants’ branded inventory in the US without interference or disruption by defendants, or as a result of the wrongful repudiation and termination of the Distribution Agreement, which declaration would salvage the damage the defendants were alleged to have caused to Need USA’s name and reputation.

1. In the accompanying prayer for relief, Need USA seeks relief as follows:

1For damages in an amount to be proven at trial, but not less than $5 million;

2For an order or a declaration that the defendants, jointly or severally, abide and comply with the express terms of the Distribution Agreement;

3For an order or declaration enjoining [the] defendants from engaging in unfair competition;

4For an order or declaration enjoining [the] defendants from prohibiting the plaintiff to mitigate its damages;

5        For restitutionary disgorgement in an amount to be proven at trial;

6        For attorneys’ fees as [authorised] by contract or law;

7        For cost of suit incurred; and

8        For such other and further relief as the Court may deem just and proper.

1. Need USA submits that the position is relevantly analogous to that which arose in CSR v Cigna, where the court’s refusal to grant an anti-suit injunction and its concomitant order for a stay of the local proceedings on the ground that the local forum was a clearly inappropriate forum was based in substantial part on the fact that in the earlier issued US proceeding, CSR Ltd and CSR America sought an order that Cigna Corporation was liable for statutory damages in violation of the Sherman Act,[19] which relief was accepted to not be available in the New South Wales proceeding.

   [19]Being a version of 15 USC §§ 1-7 (2018) at the relevant time.

1. The inability to obtain such relief in New South Wales proceedings was conceded by both parties in CSR v Cigna.  The majority considered that Cigna Australia’s dominant purpose in instituting the subsequent New South Wales proceeding was to prevent CSR Ltd and CSR America from pursuing remedies in the US proceedings which were not available in the New South Wales proceedings.[20]  It was that reasoning which was critical to the conclusion that the New South Wales proceeding was oppressive ‘in the Voth sense’ and should be stayed.

   [20]CSR v Cigna (n 2) 402. 

1. Here, the local proceeding was clearly issued, at least in part, for the purposes of facilitating an application for the Anti-Suit Injunction. So much is obvious from the statement of claim and prayer for relief.  However, that matter alone is of no real consequence.  It is not vexatious or oppressive in a Voth sense for a proceeding to be commenced in Australia with the motive of persuading the other party not to commence litigation on the same claim in another country.[21]  It can hardly be vexatious or oppressive to institute proceedings in Australia for the purpose of enforcing a clause in a contract (being clause 12.12 of the Distribution Agreement). 

   [21]Conagra International Fertiliser Co v Lief Investments Pty Ltd (1997) 141 FLR 124.

1. Unlike in CSR v Cigna, Need Australia does not accept that the relief sought by Need USA in the US proceeding is not available in this Court, and nor is there any basis on the evidence to conclude that Need Australia commenced this proceeding with the motive of denying Need USA relief to which it was entitled in the California Proceeding but not in this Court.  No doubt it is more convenient for Need Australia to litigate in this Court and not in the US, but the initiation of proceedings in this Court to facilitate the making of an application for the Anti-Suit Injunction based on a claimed exclusive jurisdiction clause which encompasses a Choice of Law Component and a submission to Jurisdiction Component by Need USA, cannot be categorised as vexatious and oppressive merely because success on the Anti-Suit Injunction carries with it the incidental benefit for Need Australia of it not being required to litigate in the US.  These considerations were not present in CSR v Cigna.

1. Both parties adduced expert evidence as to whether a US court hearing of the California Proceeding would apply Victorian law to the determination of the claims made in the complaint.

1. Daniel Herling, a member of the law firm Mintz, Levin, Cohn, Ferris, Glovsky and Popeo P.C., considered that a US court would apply Victorian law to the determination of claims made in the complaint and that a US court would likely construe such a clause as applying to all claims arising out of the parties’ agreement, including tort claims that concerned the parties’ business relationship.  Adam Clermont, a partner of the law firm Payne Clermont Velasco, agreed that a US court would apply Victorian law in determining the breach of contract claim raised in the California Proceeding but considered that a US court may apply Californian law or Federal US law in adjudicating the non-contractual claim.

1. Mr Herling considered that Mr Clermont significantly overstated the likelihood that a US court would not apply Victorian law to all causes of action asserted by Need USA, and considered that, as long as Victorian law did not deprive Need USA of important rights protected by Californian law, the US court would apply Victoria law.

1. Whilst the debate between Mr Hurling and Mr Clermont as to the likelihood of a US court applying US law to the non-contractual claims in light of the choice of law provision contained in clause 12.12 of the Distribution Agreement is not uninteresting, it is not something that can be resolved on this application.

1. Nor is it particularly relevant, at least to this stage of the enquiry. The relevant question is whether there is sufficient basis to conclude that this Court cannot grant Need USA a form of relief that it seeks in the California Proceeding, this in itself is sufficient to enable Need USA to discharge its onus of establishing that this Court is a clearly inappropriate forum.

1. I do not accept that it has discharged such onus.  Even if I assume in favour of Need USA that the lex causae of the non-contractual claims is Californian law, I am not persuaded that this Court cannot grant Need USA the relief that would arise if it succeeded in such claims.

1. First, the mere fact that foreign law is applicable does not mean that this Court is a clearly inappropriate forum.[22]

   [22]Regie Nationale des Usines Renault SA v Zhang (2002) 210 CLR 491, 521 [81] (‘Renault v Zhang’).

1. Secondly, the critical concession made in CSR v Cigna arose because the-then Australian choice of law rule for tort required double actionability, and particularly that the ‘foreign’ cause of action be actionable in Australia.  Violation of the Sherman Act[23] is characterised, for conflict of law purposes, as a tort.  In Regie Nationale des Usines Renault SA v Zhang (‘Renault v Zhang’),[24] the choice-of-law rule was altered to provide for application of the law in the place of the wrong. As the authors of Nygh’s Conflict of Laws in Australia (‘Nygh’s’) observe, in light of this development, the concession in CSRv Cigna need not have been made and the number of cases where the foreign forum will offer a remedy not able to be litigated in Australia will cease.[25]  To the extent then that the Code applies, I am not satisfied that this Court cannot apply it.  On the contrary, the High Court in Renault v Zhang did not see any impediment to interpreting the provisions of the French Civil Code that were applicable in New Caledonia.[26]

   [23]See above n 19.

   [24]Ibid.

   [25]Nygh’s (n 16) 243 [9.27].

   [26]In Nygh’s, the authors observe that there is no reason why Australian courts should be diffident about their ability to apply foreign statutes: 216-7 [8.42].

1. For similar reasons, I am not satisfied that relief sought by Need USA in promissory estoppel or other equitable claims cannot be obtained in this Court.  Need USA submitted that this Court, as a Court applying principles of equity, is required to act in accordance with principles of equity administered by this Court and that the nature of promissory estoppel is different in the US than in this jurisdiction.  As to the first part of the submission, Holland J in National Commercial Bank v Wimborne held in that case that the Court acting in personam as a court of conscience has jurisdiction to apply principles of equity administered by that court where it is has jurisdiction over the defendant.[27]  As I read his Honour’s reasons, they do not in terms deny the applicability of foreign law if that forum’s choice of law rules dictate that foreign law is to be applied.[28]  Further and in any event, whilst his Honour’s approach may represent the generally accepted principle, the question has not been decisively determined.[29]

   [27](1978) 5 BPR 11,958.

   [28]In fact, in New Zealand Pelt Export Co Ltd v Trade Indemnity New Zealand Ltd [2002] VSC 570, Warren J drew an analogy to the law of tort and applied the law of the place of the commission to a claim involving promissory estoppel.

   [29]In United States Surgical Corporation v Hospital Products International Pty Ltd [1982] 2 NSWLR 766, 796-9, McLelland J considered whether he should apply New South Wales law as the law of the forum to a fiduciary relationship arising out of a contact governed by the law of ‘New York/Connecticut’ but reached no conclusion as it made no difference to the result.

1. The basis of the second part of this submission was limited to reference to the reasons of Mason CJ and Wilson J in Waltons Stores (Interstate) Ltd v Maher,[30] at the different pace at which promissory estoppel had developed in the US compared to Australia.  I am not satisfied that this reference within a case decided in 1988 is sufficient for me to conclude that the relief available in the California Proceeding is sufficiently different to that available here as to compel the conclusion that this Court is clearly inappropriate, particularly in circumstances when Need USA adduced evidence on Californian law which did not examine this question.  No evidence was led as to the other equitable claims which would enable a conclusion to be drawn that they give rise to relief available in California which is not available here.

   [30](1988) 164 CLR 387, 401.

1. Thirdly, unlike in CSR v Cigna, in this case there is a Choice of Law Component which provides that Victorian law is to ‘govern’ the Distribution Agreement.  Even on a narrow interpretation of its ambit, Victorian law will apply to a very substantial component of the matters of controversy.  Given that the Australian counterparty to the Distribution Agreement is Need Australia and not Need Essentials IP, Mr Scanlon or Does 1-10, and that Victorian law is to govern ‘the Agreement’, it seems unlikely to say the least that the contractual claims advanced in the California Proceeding against ‘the defendants’ collectively will not in reality be confined to claims by Need USA against Need Australia.  In circumstances where the claim issued in this Court by Need Australia against Need USA and is confined to contractual claims,  it would be a curious outcome if this Court would be considered a clearly inappropriate forum for the resolution of a dispute at large between the contracting parties and Connected Parties in circumstances where the critical matters in dispute, both in this Court and in the California Proceeding, require the application of Victorian law.

1. Fourthly, the above analysis proceeds on the assumption that Need USA has established that the lex causae for the non-contractual claims is California law.  In fact, I am not satisfied that any conclusion can be drawn to that effect based on the evidence to date.  Mr Exon has made two affidavits which condescend to some detail and which refer to a dispute which has arisen between the parties from about 2020 to 2022, which unsurprisingly is evidenced in emails sent to and from Victoria and California and associated telephone conversations.  Neither the evidence led, or the submissions made are sufficient to establish that foreign law applies.  For an application to stay a proceeding to succeed, it must be clear that foreign law applies.  A mere likelihood that foreign law might apply is not enough.[31]

   [31]Puttick v Tenon Ltd (2008) 238 CLR 265, 277-9, 282-3.

1. There remains the further submission by Need USA which is to the effect that if any anti-suit injunction is granted, it can only restrain Need USA from prosecuting its claims in the US proceeding against Need Australia and as such the only way in which a multiplicity of proceedings could be avoided is for the Victorian proceeding to be stayed.   

1. This argument is dealt with below in the consideration of Need Australia’s application for an Anti-Suit Injunction.  However for present purposes, it is important to note that there is no reason to doubt that this Court can entertain the claims made by Need USA against Need Essentials IP and Mr Scanlon.  Thus, any multiplicity of proceedings is avoided if Need USA chooses to prosecute its claims against Need Essentials IP and Mr Scanlon in the same case and same forum in which it is defending the claims made by Need Australia and prosecuting any counterclaim against Need Australia.  Whilst the rules of this Court do not permit the commencement of proceedings against Does 1-10,[32] given the presence of joinder rules, I am not satisfied that this difference is material in any way.

   [32]Supreme Court (General Civil Procedure) Rules 2015 (Vic).

1. The analysis above has focussed on the critical matters raised by Need USA in support of its contention that this Court is a clearly inappropriate forum such that the local proceeding should be stayed.  The prior commencement of the California Proceeding and the ability of this Court to grant Need USA the relief it seeks in the California Proceeding and the Choice of Law Component and submission to Jurisdiction Component are the critical features in the necessary Voth analysis.  

1. Additional factors customarily considered, such as the subject matter of the action and the location of the parties, their respective places of business and availability of witnesses are otherwise evenly balanced; Need Australia’s connection with Victoria and the locale of its likely witnesses in Victoria is broadly matched by the connection of Need USA and its likely witnesses within California or the US. 

1. The fact that the Distribution Agreement was signed in California is not significant given the Choice of Law Component and the Jurisdiction Component of clause 12.2; the breaches relied upon by Need Australia in the form of Need USA’s failure to make payments due occurred in Australia where the payments were required to be paid or in the US in relation to the requirement to meet sales targets.  To the extent to which the affidavit material identifies the conduct of Need Australia relied upon by Need USA as evidencing breaches of good faith terms or other actionable conduct, it seems that for the most part, such conduct occurred by communications occurring by telephone or emails sent back and forth, although the harm allegedly suffered by Need USA as a result of that conduct no doubt occurred in the USA.

1. Against the backdrop of these neutral considerations, the parties were right to focus their arguments on the prior commencement of the California Proceeding, the Choice of Law Component and Jurisdiction Component of clause 12.12 of the Distribution Agreement and the capacity of the local forum to resolve the disputes at large, including between Need USA and the Connected Parties.

1. Given that the California Proceeding was only commenced shortly prior to this proceeding and no significant steps have taken place in it, the fact that this Court can resolve all matters in dispute between both the contracting parties and the Connected Parties, the Choice of Law Component and Jurisdiction Component of clause 12.12 of the Distribution Agreement assume great significance,[33] particularly where the contractual claims are at the core of both this proceeding and those advanced in the California Proceeding. 

   [33]Voth (n 9) 558, 565.

1. On that basis, and given that this Court can resolve claims made in this proceeding and those made in the California Proceeding, this Court is the natural forum for the resolution of the disputes at large.

1. For the purposes of the application for the permanent stay however, Need USA must establish that this forum is a clearly inappropriate one.  It has not done so.  Need Australia has a prima facie right to have this Court exercise the jurisdiction which it has regularly invoked and to which Need USA agreed to submit. 

Application for a temporary stay by Need USA

1. In the alternative, Need USA seeks a temporary stay, pending determination of the California Proceeding.  It is common ground that the Voth test is not applicable in relation to an application for a temporary stay. In those circumstances, the Court has regard to the criteria identified in Sterling:[34]

   [34]Sterling (n 15) 294.

1. The Sterling criteria comprises matters such as:[35]

   [35]Ibid 291.

(a)   which proceeding was commenced first;

(b)  whether the termination of one proceeding is likely to have a material effect on the other;

(c)   the public interest;

(d)  the undesirability of two courts competing to see which of them determines common facts first;

(e)   consideration of circumstances relating to witnesses;

(f)    whether work done on pleadings, particulars, discovery, interrogatories and preparation might be wasted;

(g)  the undesirability of substantial waste of time and effort if it becomes a common practice to bring actions in two courts involving substantially the same issues;

(h)  how far advanced the proceedings are in each court;

(i)     the law should strive against permitting multiplicity of proceedings in relation to similar issues; and

(j)     generally balancing the advantages and disadvantages to each party.

1. Here, unlike Sterling, there have been no steps of any significance taken in the California Proceeding.  There will be no wastage of money and resources which will not be met by the correlative resources expended in this proceeding.  Given those circumstances, there is no principled basis for staying this proceeding pending the determination of the California Proceeding or staying it pending completion of any interlocutory proceeding, such as a motion to dismiss in the California Proceeding.  Acceding to such an application would be to allow through the back door what Need USA is not able to obtain by entering through the front door and would undermine the application of the Voth test.  It would in effect amount to this Court declining to exercise jurisdiction which has been regularly invoked, notwithstanding the conclusion above that this Court is the more natural forum and, in any event and more pertinently, is not a clearly inappropriate forum. 

The Anti-Suit Injunction

The respective arguments in summary

1. Given that this Court is not a ‘clearly inappropriate forum’ for the resolution of all disputes between the contracting parties and between Need USA and the Connected Parties, Need Australia has jumped the first hurdle adverted to in CSR v Cigna.[36]

   [36]CSR v Cigna (n 2) 397.

1. Need Australia’s application for an Anti-Suit Injunction is based in the first instance on the proposition that clause 12.12 of the Distribution Agreement is an exclusive jurisdiction clause, which includes an implied promise not to sue in any other jurisdiction in respect of any disputes concerning the Distribution Agreement.[37]  Thus Need Australia invokes the Court’s equitable jurisdiction to restrain a breach of contract in circumstances where damages are an inadequate remedy and there are no discretionary reasons tending against the grant of equitable relief.

   [37]Ibid 391-2. 

1. Need Australia points to several feature of clause 12.12 of the Distribution Agreement.  First, whilst the clause does not use the word ‘exclusive’, the absence of the word is not determinative.[38]  Secondly, as clause 12.12 of the Distribution Agreement is unchanged from the original draft of the agreement,[39] it cannot be said that there has been a ‘deliberate’ omission of the word ‘exclusive’ such as to convey an intent to adopt a non-exclusive clause.  Thirdly, it relies upon the fact that the Distribution Agreement includes a Victorian law governing clause, which it submits supports a construction of clause 12.12 as conferring exclusive jurisdiction on Victorian courts.  It argues that in circumstances where the Distribution Agreement is governed by Victorian law, the Victorian jurisdiction clause is otiose unless it confers exclusive jurisdiction, as Victorian courts would have jurisdiction in any event.[40]  Fourthly, it notes that in a commercial agreement, it is presumed that the parties intended some certainty about where their disputes would be litigated and in that context, it is difficult to see why the parties would not intend for all their disputes to be resolved in Victoria.[41] 

   [38]Ace Insurance Ltd v Moose Enterprise Pty Ltd [2009] NSWSC 724, [33] (‘Ace Insurance’). 

   [39]Affidavit of Charles Stuart Exon II, sworn 14 February 2023, [50], cf Faxtech Pty Ltd v ITL Optronics Ltd [2011] FCA 1320, [10]-[11] (‘Faxtech’). 

   [40]Ace Insurance (n 38) [33], [37].  See also Lord Collins et al (eds), Dicey, Morris and Collins on The Conflict of Laws (Thomson Reuters, 16^th ed, 2022) 12-07. 

   [41]Armacel Pty Ltd v Smurfit Stone Container Corp (2008) 248 ALR 573, [88] (‘Armacel’). 

1. In contrast, Need USA submits that on its proper construction, clause 12.12 of the Distribution Agreement is properly construed as a non-exclusive jurisdiction clause and identifies four particular features which support that construction.  First, it argues that the words of the Distribution Agreement and their ordinary meaning indicate no more than each party has agreed to submit and consent to Victorian jurisdiction. 

1. It points to the analysis of Hobhouse J in Pathe Screen Entertainment Ltd v Handmade Films (Distributors) Ltd (‘Pathe’) of a relevantly indistinguishable clause:[42] 

   [42](Queen’s Bench Division, Hobhouse J, 11 July 1989).

This agreement shall be construed and interpreted pursuant to laws of England and the parties hereby consent and submit to the jurisdiction of the Courts of England in connection with any dispute arising hereunder.

and submits the below analysis of his Honour is apposite:[43]

[The clause] uses words which are words of submission not reference:  ‘the parties hereby submit to the jurisdiction’.  In the output agreement the equivalent phrase is ‘the parties hereby consent and submit to the jurisdiction’.  The addition of the word ‘consent’ reinforces the same conclusion.  The phrase in the Austrian Lloyd case was IR agree to submit ’but in that case it was construed in a transitive sense as an agreement to submit disputes to a particular court in the same way as one can agree to submit disputes to the decision of an arbitrator.  The clauses which I have to construe do not lend themselves to a transitive construction; the sense is that the parties submit themselves to the jurisdiction of the court, not that the parties submit disputes.  In the Austrian Lloyd case, it was open to the court to construe the words as if they read to agree to submit all such disputes’.  I do not consider that it would be appropriate to make such an inferential assertion in these clauses.  Words are an accurate tool and relatively small differences in wording will produce different contractual effects.  In these clauses the parties have used neither the word ‘exclusive’ nor a sentence construction which is transitive.  They have used words which are apt to demonstrate an intention to agree to submit to the jurisdiction of English Courts and not that there should be a contractual obligation not to have any recourse to any other court.  This is the natural meaning of the words used.  It is consistent with the surrounding circumstances and the general matrix of the contracts and in accord with the general context in which these clauses appear in the contracts. 

[43]Ibid (citations omitted).

1. Secondly, and relatedly, it points to the complete absence of any words suggesting, or even consistent with, clause 12.12 being of an exclusive nature, such as the words ‘exclusive’, ‘must’, ‘shall’, ‘all disputes’ or ‘any action’.[44]  It submits that the absence of words suggesting that clause 12.12 is of an exclusive nature is not merely a neutral factor but tends against the clause being an exclusive jurisdiction clause on the basis that if such an obligation was intended ‘it could easily have been so stated in clear words’.[45]

   [44]Ace Insurance (n 38) [33], cf, for example, British Aerospace Plc v Dee Howard Co [1993] 1 Lloyd’s Rep 368, 375 (‘British Aerospace’).

   [45]Berisford Plc v New Hampshire Insurance Co [1990] 2 QB 631, 637; Ace Insurance (n 38) [33]. 

1. Thirdly, Need USA submits that the clause should be construed contra proferentem on the basis that Need Australia drafted the Distribution Agreement and proposed the words for its conclusion.  It submits that if Need Australia desired an exclusive jurisdiction clause, it was up to Need Australia to make that intention objectively clear and it should not benefit from any alleged lack of clarity which itself has brought about.[46]

   [46]Ace Insurance (n 38) [33]; Lord Collins et al (eds), Dicey, Morris and Collins on The Conflict of Laws (Thomson Reuters, 16^th ed, 2022) 12-074. 

1. Fourthly, Need USA submits that the objective context of the Distribution Agreement and its commercial purpose suggest an intention for non-exclusivity.  It notes that clause 12.12 was included in an agreement which was entered into in the US and was to be performed almost wholly in the US; that one party was based only in the US and had no connection to Victoria, and that the principal of the US party was an experienced, US-admitted lawyer familiar with the jurisdiction.  Need USA submits that when the matter is considered commercially, Need Australia had a natural interest in requiring its overseas distributor to submit to the jurisdiction of the courts in its state, should Need Australia ever sue the distributor, but that the distributor had an equally natural interest in preserving its ability to have recourse to the courts of its own state (being the US).  Accordingly, it submits that the objective purpose of the clause is no more than to require the distributor to submit to being sued in Victoria, subject to a forum non conveniens analysis. 

1. Further, whilst both parties accept that this Court is not bound by previous decisions concerning the construction of similarly worded (or even identically worded) contracts, those decisions are nevertheless illustrative of the laws of construction which apply to interpreting such provisions and reflect the legal background against which the Distribution Agreement was made.

Principles to be applied

1. Need Australia submits that it is appropriate to resolve the application by reference to orthodox principles applied in relation to interlocutory injunctions.  The applicant must establish:

(a)   it has a prima facie case for the relief it seeks; and

(b)  the balance of convenience favours the grant of an injunction.[47]

[47]Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57, 81-2 [65] (Gummow and Hayne JJ) (‘ABC v O’Neill); SiemensGamesa Renewable Energy Pty Ltd v Bulgana Wind Farm Pty Ltd [2019] VSCA 318, [106]-[107].

1. The principles are interdependent.  The strength of the parties’ substantive cases may be relevant to the evaluation of the balance of convenience.[48]  Similarly, the issue as to whether damages as an adequate remedy may be considered as part of the assessment of the balance of convenience.[49]

   [48]Tymbook Pty Ltd v Victoria (2006) 15 VR 65, [39] (‘Tymbook’).

   [49]Samsung Electronics Company Ltd v Apple Inc (2011) 217 FCR 238, [61]-[62] (‘Samsung v Apple’). 

1. The first principle requires the applicant to make out a prima facie case, in the sense of a sufficient likelihood of success to justify in the circumstances the preservation of the status quo until the trial.[50] 

   [50]ABC v O’Neill (n 47) 81-2 [65] (Gummow and Hayne JJ). 

1. Need USA does not dispute that those principles apply to interlocutory injunctions generally and relies upon them in relation to the Prohibitory Injunction but otherwise submits that because the question of whether clause 12.12 is an exclusive jurisdiction clause involves a question of the proper construction of the clause, the Court can and should form a concluded view as to its meaning.

1. In the result, I doubt that much turns on whether a concluded view is reached or only a view as to whether a prima facie case is established. It is well recognised that interlocutory relief in the form of an anti-suit injunction will frequently be final in its effect,[51] and as such the Court is required to scrutinise the basis of the claim more fully than would otherwise be the case on a standard application for interlocutory relief.[52]  Because of its final effect, the customary weighing up of the balance of convenience rarely has a significant role to play.  So much was accepted by Need Australia.

   [51]See generally CSRv Cigna (n 2).

   [52]Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533.

Guidance from similar cases

1. In the context of determining the key issue as to whether clause 12.12 of the Distribution Agreement is an exclusive jurisdiction clause, both parties relied on various cases which they submitted provided guidance.

1. In Ace Insurance Ltd v Moose Enterprise Pty Ltd (‘Ace Insurance’),[53] Brereton J held that the following clause was an exclusive jurisdiction clause:

Should any dispute arise concerning this policy, the dispute will be determined in accordance with the law of Australia and the States and Territory thereof.  In relation to any such dispute the parties agree to submit to the jurisdiction of any competent court in a State or Territory of Australia.

I do not think that much assistance can be gained from the analysis of this clause.  First, the clause references in the same clause the determination of ‘any dispute … concerning this policy’; moreover, it was fundamental to Brereton J’s reasoning that both Moose and Ace were Australian corporations and that the contract of insurance was made in Australia.  In those circumstances, Australia was clearly the natural forum and it could not conceivably be suggested that an Australian jurisdiction was clearly inappropriate.  Given the connection of each of the parties to Australia, the fact that the policy was made in Australia and was governed by Australian law and that Australia was in any event the natural forum for disputes under the policy, the jurisdiction clause must have been intended to do something more than provide for non-exclusive jurisdiction, because such jurisdiction would have clearly existed in any event. 

[53]Ace Insurance (n 38) [11].

1. Here though, aside from the jurisdiction component, the question of the natural forum when considered at the inception of the agreement is less clear cut.  Whilst the choice of law component provides some assistance, and in the events which have occurred, is a critical factor, it is confined to ‘the Agreement’.  The absence of any connection between the resolution of disputes and the courts to which the parties agreed to submit to jurisdiction means that the analysis in Ace Insurance is of limited application.  Additionally, it is not the case here that both parties are Australian corporations and as such the features in Ace Insurance which enabled the primary judge to conclude that the only purpose could be served by the clause was if it was to be construed as providing for exclusive jurisdiction are not present here. 

1. In Armacel Pty Ltd v Smurfit Stone Container Corp,[54] Jacobson J stated that he would have found the following clause to be an exclusive jurisdiction clause (save that the parties were bound by a prior issue estoppel):[55]

This Agreement must be read and construed according to the laws of the state of New South Wales, Australia and the parties submit to the jurisdiction of that State …

[54]Armacel (n 41).

[55]Ibid [29], [90]. 

1. Jacobson J considered the parties’ recognition of the primacy of New South Wales law supported the proposition that they intended that the clause would constitute an exclusive jurisdiction clause.  Two other features of the clause were present and were apparently influential in the analysis. First, the clause extracted above continued by providing that if a dispute arose the parties would mediate in Sydney and secondly, another subclause expressly recognised the potential for conflict between the law of the place where the equipment the subject of the agreement was located (Pennsylvania) and expressed the primacy of New South Wales law.  The fact that the parties chose to agree upon the primacy of the application of New South Wales law supported the inference that the parties wanted to avoid the difficulties of applying Pennsylvanian law to a court sitting in New South Wales, which recognised that the courts of New South Wales would have exclusive jurisdiction.  Need USA submits that his Honour’s observations otherwise were plainly obiter and, in any event, were, no doubt in those circumstances, not the subject of detailed analysis and, in any event, based upon distinguishable contextual analysis.  I agree that the analysis was affected by contextual considerations not present here.

1. Need Australia also relied upon Austrian Lloyd Steamship Co v Gresham Life Assurance Society Ltd (‘Austrian Lloyd’), where the Court of Appeal held the following clause to confer exclusive jurisdiction:[56]

For all disputes which may arise out of the contract of insurance, all the parties interested expressly agree to submit to the jurisdiction of the Courts of Budapest having jurisdiction in such matters.

The clause in Austrian Lloyd is distinguishable.  A natural reading of the clause links the submission to the courts in Budapest of all disputes in a manner which permits the construction of the clause in a transitive sense (to use the words of Justice Hobhouse in Pathe) and in a manner which implies the negative stipulation not to sue other than in Budapest.[57]  The linkage of ‘all disputes’ with the submission to jurisdiction ‘permits’ the clause to be construed as if it read ‘all the parties interested expressly agree to submit all disputes to the jurisdiction of the courts of Budapest having jurisdiction in such matters’.  No such linkage is present here in the case of clause 12.12. 

[56][1903] 1 KB 249, 251-2.

[57]British Aerospace (n 44) 373.

1. Need Australia also points to British Aerospace Plc v Dee Howard Co (‘British Aerospace’),[58] where Waller J held that the following clause was exclusive:

This agreement shall be governed by and construed and take effect according to English law and the parties hereto agree that the courts of law in England shall have jurisdiction to entertain any action in respect thereof and that in the event of such proceedings being commenced each party shall forthwith notify to the other an address in England for the service of documents.

[58]Ibid 368. 

1. In British Aerospace, Waller J distinguished the wording of the clause in Pathe in three ways, each of which relevantly distinguish the clause under consideration in British Aerospace to clause 12.12 of the Distribution Agreement; first, the language in the clause permits a transitive construction, in the sense of submitting disputes to the English court because of the reference in the same clause to the courts having jurisdiction ‘to entertain any action in respect’ of the agreement.  Secondly, unlike the present case, there is a provision for the parties to provide an address for service in England, which provision did not appear in the Pathe case or in clause 12.12 in this case.  Less persuasively, Waller J also noted that there was no real purpose in submitting disputes to the jurisdiction of an English court as well as choosing English law, unless the intention is to make England the exclusive jurisdiction.  Relevant also was the use of the word ‘shall’, which was apposite to create the language of obligation whilst the reference to any action in context, clearly meant all actions.  I agree that these are relevantly distinguishing features from clause 12.12 of the Distribution Agreement.

1. Need Australia also relied upon Sohio Supply Co v Gatoil (USA) Inc (‘Sohio’),[59] where the Court of Appeal held that a clause which provided that ‘this agreement shall be governed by the Laws of England’ coupled with the addition of the further words ‘under the jurisdiction of the English courts without recourse to arbitration’ could be construed as an exclusive jurisdiction clause.  This case too can be distinguished.  Both buyers and sellers were companies registered in Delaware, carrying on business in Texas and Ohio respectively.  In circumstances where neither party had any obvious connection to the jurisdiction, the combination of the specification of their agreement being governed by English law and the reference to their contract being ‘under the jurisdiction of English courts’ indicated objectively that the parties intended that the English court would have exclusive jurisdiction.  Otherwise, there could be no discernible reason as to why the parties, themselves non-resident, would specify that English courts should have jurisdiction if by doing so they were doing nothing more than indicating that the jurisdiction was be non-exclusive.  Again, in my view, the surrounding circumstances which informed the construction of the clause as providing for exclusive jurisdiction are not present here.

   [59][1989] 1 Lloyd’s Rep 588.

1. In contrast, there are a number of decisions which have adopted the same approach as followed by Hobhouse J in Pathe.  Thus, Travers J in the Supreme Court of South Australia in Contractors Ltd v MTE Control Gear Ltd held the following clause as not giving rise to an implied prohibition on commencing a proceeding in any other court:[60]

This agreement shall be construed according to the laws of England for the time being in force and shall be deemed to constitute a submission to the High Court of Justice therein for the determination of any dispute or difference arising thereunder or in connection therewith.

[60](1964) SASR 47.

1. Similarly, in Sabah Shipyard (Pakistan) Ltd v The Islamic Republic of Pakistan,[61] the Court of Appeal in the United Kingdom considered that the following clause did not lend itself to a transitive construction:

Each [p]arty hereby consents to the jurisdiction of the Courts of England for any action filed by the other [p]arty under this [a]greement to resolve any dispute between the [p]arties and may be enforced in England except with respect to the [p]rotected [a]ssets as defined in the [i]mplementation [a]greement of the [g]uarantor. 

[61][2008] 1 Lloyd’s Rep 210.

1. Similarly, in Land Operations Pty Ltd v M & W Equipment Pty Ltd,[62] Justice Blue of the Supreme Court of South Australia reached a similar conclusion with respect to a clause which read:

These terms are governed by and will be construed in accordance with the laws of New South Wales.  The parties agree to submit to the jurisdiction of the courts of that State.

[62][2016] SASC 2.

1. Justice Langley sitting in the Queen’s Bench Division in Sea Trade Maritime Corp v Hellenic Mutual War Risks Association (Bermuda) Ltd (No 2) reached an identical conclusion with respect to a clause which read:[63]

The association and each owner hereby submits to the jurisdiction of the High Court of Justice of England in respect of any dispute or difference between the owner and the association arising out of or in connection with these rules or out of or in connection with any contract between the owner and the association.

[63][2007] 1 All ER (Comm) 183.

1. Likewise, Middleton J of the Federal Court of Australia considered that the following clause was a non-exclusive jurisdiction clause in Faxtech Pty Ltd v ITL Optronics Ltd:[64]

[T]he agreement shall be interpreted, construed and enforced in accordance with the laws of England and the parties submit to the jurisdiction of the competent courts of England (London). 

[64]Faxtech (n 39).

Analysis

1. The question of whether a jurisdiction clause is an exclusive jurisdiction clause is a question of the construction of the particular contract with such regard to the circumstances surrounding the entry into of the contract as is permissible in the case of any other commercial contract. 

1. In the present case, both Need Australia and Need USA sought to rely on evidence of surrounding circumstances which was in part objected to by the other.  I received that evidence subject to objection and indicated I would rule on it if necessary, in the judgment.  I have not hard regard to and would not accept as admissible evidence of the surrounding circumstances paragraphs 9 and 140 of Mr Scanlon’s affidavit made 16 December 2022.  Plainly, paragraphs 9 and 140 record Mr Scanlon’s subjective intention, which is not relevant to the issue of construction posed by clause 12.12.  Further, insofar as paragraph 40 records Mr Scanlon’s belief that the litigation should be conducted in a Victorian court, the opinion constitutes inadmissible opinion evidence and is otherwise irrelevant.  For similar reasons, I have not had regard to paragraphs 51 to 54, 56 to 61 and 63-64 of Mr Exon’s affidavit made on 14 February 2023. 

1. I also have not had regard and would not admit paragraph 55 of Mr Exon’s affidavit of 14 February 2023, save to the extent that I accept that it was a mutually known fact that Need USA was to be a US-based distributor which was to conduct all its business in the US and that product would be shipped directly from the manufacturers in Asia to Need USA and that marketing events would be carried out in California.  So much is explicit or, if not explicit, implicit in the terms of the Distribution Agreement.  I would also not admit paragraph 62 of Mr Exon’s affidavit of 14 February 2023, save to the extent that I accept that it was a mutually known fact that Need USA’s business and employees would be based in the US and that its performance of the obligations imposed upon it under the Distribution Agreement would, for the most part, be carried out in the US.  Once again, such matters are explicit or, if not explicit, implicit in the Distribution Agreement.

1. In construing clause 12, the only relevant surrounding circumstances are that the contract was entered into by two commercial parties, one based in Australia, the other based in the US, where the obligations required to be performed by one of the parties, specifically Need USA, were, for the most part, likely to be carried out in the US.  These features are largely apparent from the contract itself.  Aside from the fact that the constructive task can be approached on the assumption that the parties intended to produce a commercial result, I do not find the surrounding circumstances as assisting much in the relevant analysis. 

1. Specifically, and unlike Ace Insurance where the connection of each of the parties with Australia, the fact that the contract was made in Australia and that it was governed by Australian law, and that Australia was in any event the natural forum, meant that the jurisdiction clause was superfluous unless it conferred exclusive jurisdiction, no such conclusion can be drawn here, where Need USA was based in the US.  Further, the surrounding circumstance in Sohio, namely that neither party had any particular connection with England, but the parties nevertheless referenced the jurisdiction of the English courts and that this indicated that the parties intended those courts to be the exclusive repository for the resolution of their disputes, is not a factor of assistance here. 

1. Nor do I obtain any assistance from the alleged circumstance that the contract was first proffered by Need Australia for consideration by Need USA.  The strength of the presumption is debatable and, in any event, in circumstances where I am determining the question on an interlocutory basis, I cannot be satisfied I have necessarily been provided with all relevant communications between the parties.  As such, it is unsafe to draw any conclusion adverse to Need Australia based upon the fact that it allegedly proffered the form of the Distribution Agreement which contained clause 12.12 in the form subsequently executed.

1. Further, in such circumstances, the absence of the word ‘exclusive’ is neutral; its  absence might be significant where the word ‘exclusive’ appeared in an earlier version of the contract, or it may be significant where it may be presumed that both contracting parties were aware of the significance of the use of the word ‘exclusive’,  such that its absence assumes significance.  Otherwise, I do not see any principled basis for considering the absence of the word as speaking to any presumptive effect, unless it could be said that both contracting parties were aware of the significance of the use of the word ‘exclusive’.  Here, there is no evidence that Need Australia, for one, was aware of the significance which might attach to the use of the word ‘exclusive’. 

1. In the result, the process of construction is one which must be carried out essentially by reference to the words alone. 

1. Whilst I am not prepared to construe the clause on a final basis, and accept that Need Australia’s construction is arguable and in that sense it has established a prima facie case, I consider that the significantly better view is that the words do not permit a construction which carries with it an implied prohibition on Need USA commencing any proceeding in courts other than the federal, state or district courts located in Victoria, Australia. 

1. The language of the clause is consistent with words of submission, not reference.  By clause 12.12 of the Distribution Agreement, the parties submitted themselves to the jurisdiction of the Court, but no more.  It is very difficult to construe the words used as giving rise to an agreement to refer all disputes to the jurisdiction of Victorian courts and nowhere else.  The contextual considerations present in cases such as Sohio or Ace Insurance are not present here.  Nor can any assistance be obtained from a conscious deletion of ‘exclusive’ or a presumed known significance as to the use of the word ‘exclusive’ such that accepted processes of construction permit the clause to be interpreted in a way which gives it exclusive effect.

1. Whilst their absence may perhaps be regarded as a matter of form rather than substance, it exposes the somewhat unclear basis upon which the injunction could be granted, given that neither of Need Essentials IP or Mr Scanlon have a contractual right to restrain foreign proceedings or the existence of subsisting proceedings in this Court in respect of which there is completely overlapping relief as factors would point to the prosecution of concurrent proceedings in the US as vexatious or oppressive. 

1. Need Australia relies upon Global Partners Fund Ltd v Babcock & Brown Ltd (in liq) (‘Global Partners’),[88] where the Court of Appeal in New South Wales dismissed an appeal against orders granting a stay of local proceedings until related litigation was concluded in England on the basis of an exclusive jurisdiction clause in a contract to which only one of the respondents to the local proceedings was a party.

   [88](2010) 79 ACSR 383 (‘Global Partners’). 

1. In delivering the judgment of the Court of Appeal, Spigelman CJ (with whom Giles and Tobias JJA agreed), observed that there are ‘non parties and non parties’.[89]

   [89]Ibid 401 [74].

1. After noting that there are judgments which have interpreted an exclusive jurisdiction clause in a way which binds a party to that clause with respect to proceedings against a non-party,[90] but other cases where an exclusive jurisdiction clause has been interpreted as applying only to agreements between the parties,[91] the Chief Justice noted that the question of whether the exclusive jurisdiction clause could be interpreted such as to bind a party with respect to a proceeding against a non-party required the interpretation of the particular contract in context. 

   [90]Eg, Donohue v Armco Inc [2002] 1 Lloyd’s Rep 425; Winnetka Trading Corp v Julius Baer International Ltd [2009] 2 All ER (Comm) 735.

   [91]Credit Suisse First Boston (Europe) Ltd v MLC (Bermuda) Ltd [1999] 1 Lloyd’s Rep 767, 777-8; Morgan Stanley & Co International plc v China Haisheng Juice Holdings Co Ltd [2010] 1 Lloyd’s Rep 265, [21]-[30].

1. In concluding that the exclusive jurisdiction clause in that case enabled the contracting party to rely upon it so as to prohibit the commencement of proceedings against non-parties to the agreement, as contrary to the exclusive jurisdiction clause, the Chief Justice noted that the provisions of the agreement in that case conferred rights on identified non-parties and that in such a case the choice of law and exclusive jurisdiction clauses should be construed as binding the parties with respect to proceedings in which those non-parties may seek to enforce those contractual rights. 

1. In my view, that approach cannot be applied here; first, I have determined that the better view is that the clause is not an exclusive jurisdiction clause, and for that reason alone the analysis has limited application; secondly, unlike in Global Partners, there is no basis to suggest that any of the Connected Parties could seek to enforce rights given under the Distribution Agreement.  There was a hint in submissions that those persons may wish to rely upon the indemnity contained in clause 5.1 of the Distribution Agreement which requires Need USA to:

indemnify and hold harmless Need Australia (and its affiliates) from and against any and all claims, losses, liabilities and damages of any kind (including reasonable attorneys’ fees) resulting from solely from any negligent and/or wilful acts of distributor and/or any breach of this agreement by the distributor. 

1. Even if I were to assume in favour of Need Essentials IP and Mr Scanlon (and the Does) that they are affiliates of Need Australia, the claims made against them do not fall within the scope of clause 5.1.  As such, the indemnity provision pointed to in the Distribution Agreement is of a quite different nature to that relevant in Global Partners. 

1. Need USA also relies upon the judgment of the Court of Appeal in New South Wales in Australian Health & Nutrition Association Ltd v Hive Marketing Group Pty Ltd (‘Sanitarium’).[92]  The Court of Appeal dismissed an appeal from a decision by the primary judge granting a stay of proceedings commenced by Australian Health and Nutrition Association Ltd (‘Sanitarium’) and Rebel Sport Limited against Hive Marketing Group Pty Ltd and Emirat Ltd, in which the primary judge granted a stay of the proceedings commenced against Emirat on the basis that Emirat and Sanitarium were parties to an agreement which contained an exclusive jurisdiction clause which provided for disputes to be determined in English courts.  The effect of giving effect to that clause led to the stay of the proceedings against Emirat and in turn had the effect of fragmenting the proceedings.  The case is relied upon by Need USA in support of a submission that if clause 12.12 is construed as an exclusive jurisdiction clause in respect of which it conceded ‘strong reason’ was required to justify its non-enforcement,[93] the risk of parallel proceedings involving different parties and different causes of action was nevertheless a ‘strong reason’ why such a clause ought not be enforced.  Need USA drew particular attention to the complexity occasioned by the enforcement of exclusive jurisdiction clauses in a context where not all parties to the litigation are parties to the relevant exclusive jurisdiction clause.[94] 

   [92](2019) 99 NSWLR 419 (‘Sanitarium’). 

   [93]Akai Pty Ltd v The People’s Insurance Co Ltd (1996) 188 CLR 418, 445.

   [94]Sanitarium (n 92) 439, [80], citing Global Partners (n 88); Incitec Ltd v Alkimos Shipping Corporation (2004) 138 FCR 496; Royal Bank of Scotland plc v Babcock & Brown DIF III Global Co-Investment Fund LP [2017] VSCA 138.

1. As the Court of Appeal observed:[95]

In such cases, two very powerful policy considerations may be in play and, depending on the facts, in tension. They are, on the one hand, the desire to and importance of holding commercial parties to their bargain, and, on the other hand, trying to ensure that all aspects of a dispute between all parties (including, relevantly, non-contracting parties) be resolved in one place at the one time, the rationale for this being not only judicial tidiness and ‘efficiency’ but, perhaps more profoundly, the high desirability of minimising the possibility or prospect of different courts reaching different decisions (whether as to the facts or the law or both) in relation to the same dispute, a consequence apt to undermine confidence in the rule of law were it to materialise.

[95]Sanitarium (n 92) 438 [81].

1. The Court continued:[96]

These competing policy considerations loomed large in the decision of Allsop J in Incitec. The second of the policy concerns I have identified above was characterised by his Honour, in the context of a review of a number English decisions, as the deep and strong antipathy of courts for the promotion of circumstances allowing for inconsistent curial approaches to the same dispute. His Honour also referred to the then recent decision of the House of Lords in Donohue v Armco. That case concerned the propriety of the grant of an anti-suit injunction to give effect to an English exclusive jurisdiction clause in circumstances where the consequence of that injunction being granted, in the context of a multi-party dispute, would have been to generate litigation both in England and New York, New York proceedings having been commenced first and involving defendants who were not party to the English exclusive jurisdiction clause the enforcement of which was sought to be achieved through the mechanism of an anti-suit injunction.

[96]Ibid 438-9 [82] (citations omitted).

1. Understandably in that context, Need USA argued that if clause 12.12 is not an exclusive jurisdiction clause as it submitted, or if it was, the Connected Parties as non parties to the Distribution Agreement cannot rely on it and the contracting parties cannot enforce it in such a way as to bind Need USA in any proceeding against the Connected Parties, no injunction can be granted to restrain Need USA’s prosecution of the California Proceeding against the Connected Parties.  As a consequence, Need USA submits that the only way in which the fragmentation of proceedings can be avoided is if the whole dispute is determined by a single court, and the only court in which that could occur was a US court, and on that basis an Anti-Suit Injunction should not be granted. The fragmentation of proceedings constitutes ‘strong reason’ why an Anti-Suit Injunction should not be granted if clause 12.12 is construed as an exclusive jurisdiction clause or if it is not, it means that the California Proceeding is not vexatious or oppressive as it will continue in any event or alternatively, it is a powerful discretionary factor against the grant of injunctive relief.  This is the ‘flip side’ of Need USA’s submission; that these circumstances mean that this Court constitutes a ‘clearly inappropriate forum’.  Necessarily, the submission has even greater force where the clause is construed as a non-exclusive jurisdiction clause, which in my view is the better construction.

1. I accept that it is not appropriate, on the application of Need Australia, for proceedings by Need USA to be restrained against the Connected Parties.  They are not parties to the Distribution Agreement which means that the Choice of Law Component has no direct application, and relatedly, no significance can be attached to the Jurisdiction Component of the clause.  They are not parties to the proceeding in this Court and as such the continuation of the proceeding in this Court along with a proceeding brought against them in the US court will not vex them in the same way in which it is vexatious and oppressive to Need Australia.  They are separate legal persons to Need Australia.  In those circumstances, I cannot see how any equity lies with Need Australia to restrain the prosecution of foreign proceedings against other parties where the other parties are not parties to the local proceeding.  This is a circumstance which involves mere concurrent proceedings with related but not the same subject matter. 

1. However, I do not accept that this means that I should not grant an Anti-Suit Injunction restraining the California Proceeding by Need USA against Need Australia, in circumstances where I consider that this Court is not a clearly inappropriate forum for the resolution of the dispute between those parties, nor for that matter, between Need USA and the Connected Parties.  As stated above, this Court is the natural forum for the dispute, certainly between Need Australia and Need USA, and Need Australia has regularly invoked the jurisdiction of this Court against Need USA which agreed to submit to it and lastly, the central disputes between them concern the Distribution Agreement, which is governed by Victorian law.

1. To decline injunctive relief in such circumstances would allow Need USA to obtain effectively a permanent stay otherwise than by establishing that this Court is a clearly inappropriate forum by reference to Voth principles or vex Need Australia with concurrent proceedings involving exactly the same issues.  A party in the position of Need USA could seek to avoid the consequences of its bargain by commencing a proceeding in a foreign jurisdiction including claims against additional parties who were not parties to the Distribution Agreement.  Whilst clause 12.12 may not be an exclusive jurisdiction clause, it nevertheless provides for the applicable law between the contracting parties and, by its terms, Need USA bargained away any objection to the jurisdiction of the courts in Victoria.  The significance of that promise is weakened substantially if a court accedes too readily to the proposition that fragmentation alone is a reason for not otherwise granting relief, which would have the effect of the proceeding being determined in a jurisdiction assented to by the parties (whether exclusively or not).  Secondly, such a course would encourage the incorporation of additional claims against non-parties for the principal purpose of enabling a party to avoid the consequences which might follow from the reliance on the jurisdiction clause (exclusive or non-exclusive).  Although there was no evidence before me as to the sustainability under US law of the claims made by Need USA in the US proceedings, Mr Exon, Need USA’s co-managing member,[97] swore two affidavits in this proceeding, the first of which set out in some detail the negotiations which preceded the entry into of the Distribution Agreement, the structure of the Distribution Agreement, Need USA’s performance under that agreement, the attempts by Need Australia to negotiate a new distribution agreement and its alleged subsequent repudiation and refusal to perform under that agreement.  Both Mr Exon’s affidavit and the relevant documentary chain exhibited is bereft of reference to Need Essentials IP and, as noted above, it is otherwise not at all clear how Need USA could contend that the defendants to the California Proceeding collectively (including the 10 Does, as well as Mr Scanlon and Need Essentials IP) could be liable for breaches of the Distribution Agreement in circumstances where they are not named as parties to that agreement.  I note that both of Mr Exon’s affidavits and the complaint record that Mr Exon is a retired General Counsel of Quiksilver and, as such, a person who has legal training.  In that respect therefore, and on the assumption that the claims against the Connected Parties as defendants in the California Proceeding, are maintainable, it is probable that those claims only lie against those entities for the non-contractual claims.  This is in contrast to the proceedings in this Court and the dispute between Need Australia and Need USA, where the contractual claims are central.

   [97]Mr Exon describes that role as being broadly analogous to that of a shareholder and director in an Australian company.

1. Whilst this does not eliminate the general inconvenience associated with proceedings going ahead in both the local forum and the US, it minimises the more acute inconvenience and the vexation and oppression which is associated with simultaneous proceedings in different countries with regard to the same controversy between the same parties.  That consequence is avoided if the proceeding brought by Need USA against Need Australia in the US are enjoined.

1. Of course, the only reason why the California Proceeding will continue against the Connected Parties, apart from any dismissal or stay being granted by the US District Court, is if Need USA wishes to pursue them in lieu of adding the Connected Parties as additional defendants to any counterclaim brought against Need Australia.  It is open to it to take steps to avoid that outcome.

Conclusion – Stay Application and Anti-Suit Injunction

1. In the result therefore, I am not satisfied that this Court is a clearly inappropriate forum and accordingly I am not prepared to stay the proceeding. I do not consider that there is any basis to temporarily stay the proceeding.  I shall grant an interlocutory injunction restraining Need USA from proceeding with the California Proceeding against Need Australia.

1. It is necessary then to turn to the Prohibitory Injunction.

The Prohibitory Injunction

1. As noted above, the principles to be applied are not in dispute.  Need Australia must establish a prima facie case that Need USA’s conduct in continuing to sell wetsuits and surf wear in the US using trademarks of Need Australia after the termination of the Distribution Agreement is in breach of the Distribution Agreement, and that the balance of convenience favours the grant of interlocutory injunctive relief. 

1. The principles are interdependent.  The strength of the parties’ substantive cases may be relevant to the evaluation of the balance of convenience.[98]  Similarly, the issue as to whether damages as an adequate remedy may be considered as part of the assessment of the balance of convenience.[99]

   [98]Tymbook (n 48) [39]. 

   [99]Samsung v Apple (n 49) [61]-[62].  

1. The first principle requires the applicant to make out a prima facie case, in the sense of a sufficient likelihood of success to justify in the circumstances the preservation of the status quo until the trial.[100]  How strong that probability of relief needs to be depends on the nature of the rights the applicant asserts and the practical consequences likely to flow from the orders it seeks.[101] 

   [100]ABC v O’Neill (n 47) 81-2 [65] (Gummow and Hayne JJ). 

   [101]Ibid. 

1. Need USA accepts that the Distribution Agreement has been terminated and that it is continuing to sell product in the US using the trademarks.  It says that the proper interpretation of the Distribution Agreement entitles it to do so and otherwise Need Australia’s termination of the Distribution Agreement was wrongful and repudiatory of the agreement, such that Need Australia is not entitled to enforce its provisions. 

1. In its application for a Prohibitory Injunction, Need Australia seeks an injunction in aid of its contractual right.  Where the applicant seeks an injunction restraining the breach of a negative stipulation, then the applicant will ordinarily be entitled to an injunction restraining such breach.[102]

   [102]JC Williamson Ltd v Lukey (1931) 45 CLR 282, 299; Dalgety Wine Estates Pty Ltd v Rizzon (1979) 141 CLR 552, 560 (Gibbs J); 576 (Mason J) (‘Dalgety’). 

1. Need Australia relies upon clauses 7.3 and 9.1 of the Distribution Agreement.  Clause 7.3 relevant provides that:

… upon termination of this Agreement for any reason, the Distributor will cease using all intellectual property of [Need Australia]. 

1. Further, clause 9.1 headed ‘Intellectual Property Rights’, provides:

9.1      The Distributor:

(a)acknowledges that all Intellectual Property Rights in and to the Need trademarks and the Products are the sole and absolute property of [Need Australia] and that nothing contained in or implied by this Agreement or the performance of its terms by the Distributor shall be construed as granting or giving rise to any proprietary interest in favour of the Distributor;

…

(c)shall not use any Intellectual Property Rights other than as expressly permitted in this Agreement in connection with the sale of the Product.

1. Need Australia purported to terminate the Distribution Agreement by notice given 19 July 2022, which it submits was effective to terminate the agreement from 18 October 2022. 

1. Clause 7.1 permits Need Australia to terminate the agreement on three months’ notice in writing to the distributor upon the happening of the events set out which include:

(a)   if any sum payable to Need Australia is in arrears and the distributor fails to pay the same within 30 days of notice from Need Australia requiring the distributor to pay the same;

(b)  the distributor ceases to carry on business or ceases to distribute the product;

(c)   the distributor is in material breach of the agreement and such breach has not been cured within three months’ notice in writing to the distributor; and

(d)  the distributor fails to meet in any year the minimum freight on board (‘FOB’) purchases through Need Australia which are set out for the first three years, between 1 July and 30 June, as follows:

(i)     first year – USD150,000 FOB;

(ii)  second year – USD300,000 FOB; and

(iii)             third year – USD600,000 FOB.

1. Subclause I continues by providing that from 1 July 2020 and for each subsequent three automatic renewal period set forth in clause 6, Need Australia and the distributor shall agree on the minimum FOB purchases through Need Australia based on the then current market conditions. 

1. In addition, Need Australia asserts that Need USA evinced an intention to no longer be bound by the Distribution Agreement and thereby repudiated it, which repudiation was accepted by Need Australia upon the filing of and service of the writ in this proceeding.

1. In further support of its claim that it has terminated the agreement pursuant to the contractual entitlement to do so embodied in clause 7 of the Distribution Agreement, Need Australia relies upon the failure on the part of Need USA to pay sums due on:

(a)   7 April 2022, in the sum of USD17,067.07;

(b)  11 June 2022, in the sum of USD8,067.76;

(c)   7 July 2022, in the sum of USD2,266.92;

(d)  11 June 2022, in the sum of USD126,229.28;

(e)   7 July 2022, in the sum of USD32,691.31;

(f)    13 July 2022, in the sum of USD192,125.08;

(g)  7 October 2022, in the sum of USD49,403.59, and

associated notices requiring payment between April 2022 and June 2022. 

In Mr Exon’s first affidavit, prepared in response to Mr Scanlon’s 16 December 2022 affidavit, Mr Exon makes no reference to and does not take issue with those parts of Mr Scanlon’s affidavit in which, among other things, Mr Scanlon deposes to the fact that ‘[a]s at the date of issuing the termination notice, Need USA was in default of payments to Need Essentials in the amount of USD427,851.01.  Those defaults have still not been remedied’[103] and ‘[f]rom April 2022, Need USA stopped paying Need Essentials at all’.[104]  Rather, Mr Exon appears to accept that Need USA ceased placing purchase orders with Need Australia after 5 October 2021.  The burden of Mr Exon’s evidence is that Need USA was unable to place purchase orders because of Need Australia’s wrongful demand that Need USA provide an irrevocable letter of credit (‘ILOC’) before placing such purchase orders.  Otherwise, and insofar as Need Australia purported to terminate the Distribution Agreement in accordance with its contractual right to do so, Mr Exon explains that Need Australia was not entitled to do so because it had already wrongfully repudiated the Distribution Agreement by demonstrating a sustained unwillingness or inability to perform the Distribution Agreement according to its terms, in circumstances more fully described in the complaint of the California Proceeding.  The gist of Need USA’s response is that Need Australia’s conduct in seeking to renegotiate the terms of the Distribution Agreement and requesting the provision of an ILOC constituted a breach of the Distribution Agreement including the implied terms of good faith, was repudiatory of the Distribution Agreement, which repudiation it has accepted.  Relatedly, it argues that the reference in clause 7.3 to ‘termination for any reason’ only applies where there has been a lawful termination in accordance with the agreement and otherwise that its acceptance of Need Australia’s wrongful termination of the Distribution Agreement, means that Need Australia is not entitled to the benefit of clauses 7.3 and 9.1.

[103]Paragraph [21].

[104]Paragraph [69].

1. Need USA does not dispute that it is continuing to use the Need Australia trademark in the US, notwithstanding Need Australia’s purported termination of the Distribution Agreement. 

1. Need USA also contends that on the proper construction of clauses 7.3 and 9.1, even in the event of a lawful termination of the Distribution Agreement, Need USA is still permitted to sell down its remaining unsold stock (with reference to the trademarks) so as to facilitate the ending of the parties’ relationship in an orderly manner.  Secondly, Need USA submits that the Distribution Agreement came to an end in circumstances where Need Australia itself repudiated the Distribution Agreement, including by reason of its wrongful termination where it was itself in breach of that agreement and that, as a consequence of the agreement coming to an end in those circumstances, Need Australia is not entitled to the benefit of clauses 7.3 and 9.1. 

1. For the purposes of this application, all that it is necessary for Need Australia to establish is that it has made out a prima facie case that it has lawfully terminated the Distribution Agreement in accordance with clause 7.1.  In circumstances where there is an admitted failure to pay outstanding invoices and where no dispute is taken with respect to the service of the necessary notices, Need Australia has established such a prima facie case. 

1. Further, whilst I am prepared to assume in favour of Need USA that Need Australia’s request for the obtaining of an ILOC before it accepted any orders placed by Need USA may not have been permitted under the terms of the Distribution Agreement, the question of whether such a request gives rise to a breach of an implied term of good faith (even assuming that such a term was implied into the parties’ agreement, which itself is controversial) or much less constituted repudiatory conduct, is a much higher hurdle for Need USA to jump. 

1. Further, even if such conduct on the part of Need Australia constituted conduct repudiatory of the Distribution Agreement, then the conduct is of no consequence, save to the extent to which Need USA accepted the repudiation and terminated the Distribution Agreement itself as a consequence.  It is only in that event that it may be able to argue that Need Australia is not entitled to rely upon the post-termination restriction on the use of the trademark contained in clause 7.3.  The evidence as to the acceptance of the repudiation by Need USA is scant; in Mr Colby’s email to Need Australia’s solicitors dated 3 November 2022, sent in response to Need Australia’s letter dated 21 October 2022 asserting that termination of the Distribution Agreement had been effected on 18 October 2022, Mr Colby replied by saying that ‘the Distribution Agreement will be terminated only when we have had a reasonable time to mitigate the damages we have suffered (due to the wilful breaches of the agreement by Need Pty Ltd) by selling off our existing Need Essentials inventory’.

1. Such conduct is not of the unequivocal nature necessary to amount to an election to terminate the Distribution Agreement by the antecedent repudiatory conduct of Need Australia.  Nor is the content of Need USA’s California Proceeding consistent with such a characterisation including, as it does, a prayer for relief which seeks orders that the defendants abide by and comply with the express terms of the Distribution Agreement.

1. Conversely, if Need USA did accept the repudiation of the Distribution Agreement, then the agreement has been lawfully terminated.  In those circumstances, the Distribution Agreement has been terminated for a lawful reason and it is difficult to see how clause 7.3 does not take effect according to its terms.

1. Further, regardless of the lawfulness of the termination by Need Australia, it is not in dispute that the marketing and sales activity of Need USA is being conducted with the aid of intellectual property rights otherwise ‘than as expressly permitted in this Agreement’.  On the face of it therefore, this is in breach of clause 9.1(c).  Whilst the acceptance by an innocent party of the wrongful repudiation of a contract by a counterparty will bring the contract to an end and may discharge the innocent party from any obligations which tenure beyond the term of the contract, such as post contractual employment restraints or similar, here Need USA seeks to rely on similar arguments to deny Need Australia the ability to enforce rights given under clause 9.3.  A termination brought about by the acceptance of a wrongful repudiation will discharge obligations of future performance but will not affect accrued rights.  Need Australia has established a prima facie case that clause 9.3 is an accrued right.

1. Nor can Need USA point to any lawful entitlement to use the trademarks other than those which arise under or as an incident of the Distribution Agreement.  Thus, it is also necessary for it to establish as a matter of the proper construction of clauses 7.3 and 9.1, that it was entitled to sell down its remaining unsold stock using the trademarks, notwithstanding the lawful termination of the Distribution Agreement where Need Australia did not avail itself of the option to purchase the unsold stock at cost, pursuant to clause 7.3. I do not accept that the Distribution Agreement can be construed in this way; it is directly contrary to clause 7.3 and 9.1.

1. Overall then, on the basis of the material before me, the prima facie case made out by Need Australia with respect to its lawful termination of the Distribution Agreement based on the service of notices sent as a consequence of non-contested payment defaults and its consequential entitlement to enforce clauses 7.3 and 9.1 appears significantly stronger than Need USA’s case to the effect that it entitled to continue to use the marks.

1. Turning to the balance of convenience, evaluation of the balance of convenience must take place in the context of my conclusion as to the strength of Need Australia’s prima facie case and in light of the fact that Need Australia is seeking an injunction to restrain the breach of a negative stipulation which constitutes a ‘strong foundation for relief by way of injunction, at least in cases where the court is concerned only with private rights’.[105] To similar effect in Maggbury Pty Ltd v Hafele Australia Pty Ltd,[106] Callinan J stated that the correct approach is to grant the injunction unless there are good reasons to the contrary. 

   [105]Dalgety (n 102) 576.

   [106](2001) 210 CLR 181, 219-20 [102].

1. Even if the evaluation of the balance of convenience is considered otherwise than by reference to such matters, the balance of convenience strongly favours the grant of interlocutory injunctive relief.  First, the only prejudice occasioned to Need USA is that it will be deprived of the loss of the opportunity of selling stock which it owns by use of marketing methodologies which deploy the Need Australia trademarks.  Even if that means that the goods are unsaleable, then Need USA will be able to claim damages for the loss of the sales from Need Australia and raise same in this proceeding by way of setoff or otherwise include the amounts as part of any damages claim advanced by it in a counterclaim.  Such loss is otherwise dealt with by the undertaking as to damages.  The loss of sales is limited in value and readily quantifiable. 

1. Contrastingly, I accept that unless Need USA is restrained, Need Australia will effectively be locked out of the US market and be unable to sell its products in the US under Need trademarks, at the very least without causing confusion.  Effectively, Need Australia will be delayed in entering the US market which is the largest market for wetsuits and surf wear in the world.  The harm to Need Australia arising from any delayed entry into the market is difficult to quantify but includes its inability to sell branded products currently held by Need Australia for products ordered and not paid for by Need USA in respect of which Need Australia is incurring ongoing interest and leasing costs.  The potential harm to Need Australia is exacerbated in the circumstances where damages cannot be regarded as an appropriate alternative remedy in circumstances of Need USA’s history of repeated payment defaults and where, despite request, Need USA has not provided any documents that would give comfort to Need Australia with respect to Need USA’s financial position. 

1. Overall, therefore, Need Australia has a strong case for interlocutory injunctive relief to restrain a breach by Need USA of a negative stipulation and in respect of which damages will not be an adequate remedy.  Conversely, any detriment to Need USA occasioned by the grant of interlocutory injunctive relief will be easily quantifiable and Need USA will have the benefit of an undertaking as to damages provided by Need Australia should that be necessary. 

Conclusion

1. In conclusion, I dismiss Need USA’s application for a temporary or permanent stay of this proceeding.  On the basis of Need Australia’s undertaking as to damages, I would grant an interlocutory injunction in favour of Need Australia to restrain the prosecution of the California Proceeding by Need USA against Need Australia (the Anti-Suit Injunction), but not in the broader form sought by Need Australia which would restrain the proceedings against Need Essentials IP, Mr Scanlon or Does 1-10, being the Connected Parties.  I would also grant an interlocutory injunction restraining Need USA from using the Need trademarks (the Prohibitory Injunction).

1. I will hear counsel as to the form of orders and as to costs. 

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