Safer Storage Systems v Dexion (Australia) - [2019] FCA 1784

FEDERAL COURT OF AUSTRALIA
Safer Storage Systems v Dexion (Australia) [2019] FCA 1784

File number: VID 188 of 2019

Judge: O'BRYAN J

Date of judgment: 1 November 2019

Catchwords:
PRACTICE AND PROCEDURE – application for interlocutory injunction – restraint of trade – where interlocutory injunction sought to restrain conduct alleged to be in contravention restrictive covenants in supply agreement – serious question to be tried – whether cross-respondents’ business activities contravened restrictive covenants – whether restrictive covenants in supply agreement are enforceable – whether cross-claimant established prima facie case of trade mark infringement – where balance of convenience favours refusal of application – application refused

CONTRACT – restraint of trade – where supplier and distributor entered into supply agreement – whether supplier entitled to interlocutory injunction to restrain conduct of distributor’s business after termination of supply agreement – possible contravention of the Competition and Consumer Act 2010 (Cth)

INTELLECTUAL PROPERTY – trade mark infringement – whether cross-respondent used a mark belonging to the cross-claimant

Legislation:
Australian Consumer Law (Schedule 2 of the Competition and Consumer Act 2010 (Cth)) s 18

Competition and Consumer Act 2010 (Cth) ss 4F, 4L, 45AD

Evidence Act 1995 (Cth) ss 55, 59, 135

Trade Marks Act 1995 (Cth) s 120(1)

Cases cited:
Australian Broadcasting Tribunal v O’Neill (2006) 227 CLR 57

Bacchus Marsh Concentrated Milk Co Limited (In Liquidation) v Joseph Nathan and Co Limited (1919) 26 CLR 410

Carlton & United Breweries (NSW) Pty Ltd v Bond Brewing NSW Ltd (1987) 76 ALR 633

Coca Cola Co v All-Fect Distributors Ltd (1999) 96 FCR 107

E & J Gallo Winery v Lion Nathan Australia Pty Ltd (2010) 241 CLR 144

Esso Petroleum Co Limited v Harper’s Garage (Stourport) Limited [1968] AC 269

Herbert Morris Ltd v Saxelby [1916] 1 AC 688

McHugh v Australian Jockey Club Limited (2014) 314 ALR 20

Moorgate Tobacco Co Limited v Philip Morris Limited (No. 2) (1984) 156 CLR 414

Nordenfelt v Maxim Nordenfelt Guns and Ammunition Company Limited [1894] AC 535

Peters (WA) Limited v Petersville Limited (2001) 205 CLR 126

Scandinavian Tobacco Group Eersel BV v Trojan Trading Company Pty Ltd (2016) 243 FCR 152

Shell Company of Australia Limited v Esso Standard Oil (Australia) Limited (1963) 109 CLR 407

SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516

Date of hearing: 1 October 2019

Registry: Victoria

Division: General Division

National Practice Area: Commercial and Corporations

Sub-area: Commercial Contracts, Banking, Finance and Insurance

Category: Catchwords

Number of paragraphs: 130

Counsel for the Applicant and Cross-Respondents: Mr T J North QC with Mr B J Murphy

Solicitor for the Applicant and Cross-Respondents: Mansour Lawyers

Counsel for the Respondent and Cross-Claimant: Mr P D Corbett QC with Mr H Forrester and Mr C P Thompson

Solicitor for the Respondent and Cross-Claimant: Patane Lawyers

ORDERS

VID 188 of 2019

BETWEEN:
SAFER STORAGE SYSTEMS PTY LTD ACN 118 950 431

Applicant and First Cross-Respondent

MATTHEW BELL

Second Cross-Respondent

MORRIS BELL

Third Cross-Respondent

AND:
DEXION (AUSTRALIA) PTY LTD ACN 000 083 956

Respondent and Cross-Claimant

JUDGE:

O'BRYAN J

DATE OF ORDER:

1 NOVEMBER 2019

THE COURT ORDERS THAT:
1.The interlocutory application filed on 8 August 2019 by the cross-claimant be dismissed.
2.Within 7 days, the parties are to file and serve submissions of no more than 2 pages addressing the costs of the interlocutory application filed on 8 August 2019.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT
O’BRYAN J:
Introduction

By interlocutory application filed on 8 August 2019, the cross-claimant, Dexion (Australia) Pty Ltd (Dexion Au), seeks interlocutory relief against the cross-respondents, Safer Storage Systems Pty Ltd (SSS) and its directors Messrs Matthew and Morris Bell (the Bells).
The primary orders sought by Dexion Au are interlocutory injunctions, until the hearing and determination of its cross-claim or further order:
(a)restraining SSS and the Bells from engaging in conduct in contravention of restrictive covenants contained in a supply agreement with Dexion Au;
(b)restraining SSS from using the name “Dexion” as a trade mark in marketing or promoting its goods to customers in Australia;
(c)restraining SSS from further participating in any tender for the supply of products, or from supplying any products in pursuance of any successful tender, in which SSS used confidential information belonging to Dexion Au.
Dexion Au also sought an order for the preservation and inspection of certain products supplied by Dexion Au to SSS which SSS has alleged are defective.
In the course of the interlocutory hearing, Dexion Au informed the Court that it did not press its application for an interlocutory injunction relating to the alleged use of its confidential information. Accordingly, the application for interlocutory injunctions was confined to allegations concerning the restrictive covenants and the trade mark. The parties also agreed to consult further in relation to Dexion Au’s application for a preservation and inspection order. On that basis, the hearing of that part of the interlocutory application was adjourned.
The principles applicable to the grant of an interlocutory injunction are well known and are described in Australian Broadcasting Tribunal v O’Neill (2006) 227 CLR 57 at [19] and [65]‑[72]. There are two primary enquiries: is there a serious question to be tried and where does the balance of convenience lie? In relation to the first enquiry, the applicant must demonstrate a sufficient likelihood of success to justify, in the circumstances, the preservation of the status quo pending the trial. In relation to the second enquiry, the Court must assess and compare the prejudice likely to be suffered if an injunction were granted with that which is likely to be suffered if one were not granted. As an additional requirement, or as part of the second enquiry, the applicant for the injunction must usually show that damages will not be an adequate remedy for the injury that will be suffered in the interim if an injunction is not granted. There is a relationship between the first and second enquiries. The requisite strength of the probability of ultimate success in the proceeding depends upon the nature of the rights asserted and the practical consequences likely to flow from the interlocutory orders sought. Delay by an applicant in seeking the injunction is an important discretionary consideration, as is the likely practical adequacy of any undertaking as to damages which the applicant may give: Carlton & United Breweries (NSW) Pty Ltd v Bond Brewing NSW Ltd (1987) 76 ALR 633 at 638‑639.
Evidence on the application was given by way of affidavit. The parties read a number of affidavits, which are referred to below. None of the deponents was cross-examined and accordingly none of the evidence has been tested. SSS filed lengthy objections to the affidavits filed on behalf of Dexion Au. The primary grounds of objection were relevance (s 55 of the Evidence Act 1995 (Cth) (Evidence Act)), hearsay (s 59) and unfair prejudice (s 135). As the hearing concerned an interlocutory application, I informed the parties that I would not make specific rulings on the evidentiary objections but would treat them as submissions. With respect to objections based on relevance, I have disregarded irrelevant material. With respect to objections based on hearsay, I have allowed the evidence in so far as a source of the evidence has been identified, consistently with s 75 of the Evidence Act. With respect to objections based on unfair prejudice, I do not consider that any of the evidence has given rise to unfair prejudice to the cross-respondents in the context of the application for an interlocutory injunction.
The factual findings made below are based on the affidavit evidence that was read at the interlocutory hearing. As noted, the evidence is untested and contains material that would be inadmissible at trial. It is also incomplete. For that reason, findings of fact made after a trial may differ from those made on this interlocutory hearing.
For the reasons that follow, I will not grant the interlocutory injunctions sought by Dexion Au. In relation to the injunction to restrain conduct alleged to be in breach of the restrictive covenants, I consider that there is a serious question to be tried as to the enforceability of the covenants and contravention, but I consider that the balance of convenience favours the refusal of the application. In relation to the injunction to restrain the use of the name “Dexion” as a trade mark, Dexion Au has failed to satisfy me that there is a prima facie case that SSS has infringed Dexion Au’s trade mark in the past or is likely to do so in the future.
Overview of the dispute
This proceeding was commenced by SSS on 1 March 2019. The dispute between the parties arises out of a supply agreement, titled “Tier 1 Supply Agreement”, entered into between Dexion Au (as the supplier) and SSS (as the acquirer) on or about 19 October 2017. Under that agreement, Dexion Au agreed to supply to SSS, for the purposes of resupply in Australia, Dexion branded storage products and systems, including products such as shelving and pallet racking and the provision of associated services. Storage products of that kind are supplied to many businesses in Australia for use within their businesses in order for those businesses to efficiently store their stock of products.
By its concise statement, SSS alleges that, prior to entering into the Tier 1 Supply Agreement, Dexion Au made representations as to the pricing of the goods to be supplied to SSS under the agreement, which representations were false, misleading or deceptive. By letter dated 31 January 2018, SSS (by its solicitors) notified Dexion Au of the alleged misrepresentations. Despite that letter, SSS did not terminate the agreement but continued to acquire goods under the agreement. By letter dated 7 February 2019, SSS (by its solicitors) purported to terminate the agreement. Dexion Au says that the purported termination was not effective. On 22 February 2019, Dexion Au gave written notice to SSS that SSS was in default of its payment obligations to Dexion Au under the agreement and, on or about 15 March 2019, Dexion Au gave notice to SSS terminating the agreement.
SSS claims damages from Dexion Au for the amount it paid to acquire goods under the Tier 1 Supply Agreement which it claims was in excess of the prices that Dexion Au represented would be payable for the goods prior to the agreement being entered into. The claim made by SSS is brought under s 18 of the Australian Consumer Law (ACL).
By its concise response, Dexion Au says that the alleged representations were never made. Further, Dexion Au says that it published a price list and the Tier 1 Supply Agreement contemplated that goods would be supplied under the agreement pursuant to Dexion Au’s prices as notified from time to time.
Dexion Au filed a cross-claim against SSS and the Bells on 18 April 2019, which was amended on 21 August 2019. By its amended concise statement of cross-claim, Dexion Au alleges four causes of action against SSS:
(a)First, Dexion Au alleges that between about 24 October 2018 and 6 February 2019, it supplied various goods to SSS pursuant to the Tier 1 Supply Agreement, issued invoices for the supply of those goods but has not been paid. It alleges that the total amount outstanding is $3,715,803.10.
(b)Second, Dexion Au alleges that the business activities that have been conducted by SSS since the termination of the agreement have been in breach of the restrictive covenants in the agreement. Dexion Au seeks a permanent injunction against SSS restraining it from engaging in conduct alleged to contravene the restrictive covenants and also seeks an account of profits or alternatively damages in respect of past contraventions.
(c)Third, Dexion Au alleges that SSS has infringed Dexion Au’s registered trade marks in the name “Dexion”. It seeks a permanent injunction against further use of the Dexion mark and damages or an account of profits in respect of past infringements.
(d)Fourth, Dexion Au alleges that, in participating in certain tenders for the supply of goods, SSS has misused Dexion Au’s confidential information. Dexion Au seeks an injunction restraining SSS from participating in any tender for the supply of goods in which it has used Dexion’s confidential information, or from supplying goods in such circumstances, and also seeks an account of profits in respect of past uses of the confidential information.
By its amended concise statement of cross-claim, Dexion Au also alleges two principal causes of action against the Bells. The causes of action are based in contract and assume that the Bells are parties to the Tier 1 Supply Agreement. In that agreement, the Bells are identified as guarantors of the obligations of SSS, and Mr Matthew Bell is also referred to as the “Authorised Person”. The Bells executed the agreement on behalf of SSS in their capacity as directors of SSS, but did not otherwise execute the agreement in their personal capacity. Accordingly, an issue arises in the proceeding whether the Bells are parties to the agreement. The two principal causes of action alleged against the Bells are:
(a)First, Dexion Au claims the amounts owing by SSS from the Bells as guarantors of the obligations of SSS.
(b)Second, Dexion Au also seeks to enforce the restrictive covenants against the Bells (as the terms of the covenants provide that they are given by SSS, each guarantor and the Authorised Person).
SSS is yet to file a concise response to Dexion Au’s cross-claim. The written submissions filed on behalf of SSS on the application for interlocutory relief indicate that SSS will not deny that amounts are owing by it to Dexion Au for goods supplied from late October 2018 until the termination of the Tier 1 Supply Agreement. However, SSS proposes to claim the amounts alleged to be owing in respect of its primary claim as a set off against Dexion Au’s claim. The written submissions also indicate that SSS will defend the other allegations made by Dexion Au on the following bases:
(a)as to the alleged breach of the restrictive covenants, SSS says that its trading activities do not infringe the covenants, but in the alternative says that the covenants are unenforceable as an unreasonable restraint of trade;
(b)as to the alleged trade mark infringement, SSS denies that it has used the Dexion name as a trade mark in Australia since the termination of the Tier 1 Supply Agreement; and
(c)as to the alleged misuse of confidential information, SSS denies that it has used Dexion’s confidential information since the termination of the Tier 1 Supply Agreement.
Dexion Au did not file its application for interlocutory relief until 8 August 2019. As mentioned earlier, by that application Dexion Au seeks interlocutory injunctive relief in respect of alleged contraventions of the restrictive covenants, infringement of the Dexion trade mark and misuse of confidential information. However, Dexion Au only presses its application in respect of the restrictive covenants and the Dexion trade mark.
Evidence of Dexion Au
Evidence by way of affidavit was given on behalf of Dexion Au by the following individuals:
(a)David Maycock, who is the Business Unit Manager for Industrial Products and Shared Services of Dexion Au;
(b)Anthony Barbara, who is the Senior Product Manager for Dexion Au;
(c)Damir Pletikosa, who is the National Marketing Manager for Dexion Au;
(d)Rodger Ryan, who is the Company Secretary of Dexion Au;
(e)Kenneth Ward, who is a Director of Citiport Holdings Pty Ltd (Citiport) which is a party to a “Tier 1 Supply Agreement” with Dexion Au pursuant to which Citiport Holdings operates a “Dexion Supply Centre” under the names “Dexion Citiport”, “Dexion Dandenong” and “Dexion Storage Systems” from premises located in Dandenong, Victoria;
(f)Brett Cater, who is an Area Sales Manager employed by Citiport;
(g)Jye Sampson, who is an Area Sales Manager employed by Citiport;
(h)Philip Skinner, who is employed by QRack Systems Pty Ltd (QRack) as a Major Accounts Executive in the “Dexion Acacia Ridge” business conducted by QRack pursuant to a “Tier 1 Supply Agreement between Dexion Au and QRack from premises located at Acacia Ridge, Queensland; and
(i)Susan Bohan, who is a principal of the firm Patane Lawyers, the solicitors for Dexion Au.
History of Dexion internationally
Mr Maycock gave evidence that Dexion Limited was established in London in 1937. That company developed shelving and storage products and over time established various subsidiary trading companies throughout Europe and the Asia-Pacific region, including the establishment of Dexion Au in Australia. In 1999, a Norwegian company called Constructor Group AS (Constructor) acquired the Dexion group of companies, including Dexion Au. In 2003, Constructor divested its shareholding in Dexion Au and other Dexion group companies established in the Asia-Pacific region. Those companies were first acquired by GUD Holdings Limited in 2010 and subsequently by Tech-Link Storage Engineering (Australia) Pty Ltd (Tech-Link) in 2017. Constructor was acquired by another Norwegian company called Gonvarri Material Handling AS (Gonvarri) in about 2017.
Since its establishment in 1950, Dexion Au has carried on business in Australia for the supply of “Dexion” branded storage products and systems, including products such as shelving and pallet racking, and the provision of associated services.
Dexion Au’s business model changed following its acquisition by Tech-Link in 2017. Prior to the acquisition, Dexion Au supplied its products directly to business customers and also through a franchise network. From about mid-2017, Dexion Au has operated under a business model whereby it enters into supply agreements with distributors for the operation of “Dexion Supply Centres”. With some limited exceptions, Dexion Au now only supplies its products and services to the Dexion Supply Centres, and the Dexion products are then on-sold by the Dexion Supply Centres to business customers. Products sold by Dexion Au in Australia are typically manufactured by, and sourced from, one of the Dexion group of companies within the Asia‑Pacific region. Australian customers of Dexion Au and Dexion Supply Centres currently include IKEA, Bunnings Group Limited, Toyota, Linfox Logistics, Iron Mountain Australia Group Pty Ltd, Arnotts, Unilever Australia, Kimberly Clark, Sistema, A-Mart, Sony DADC Australia, MainFreight Logistics, Reece, Reckitt Benckiser, Westpac Banking Corporation, Bunzi, and Grace Information and Records Management (Australia) Pty Ltd.
Dexion Au’s products fall into three general categories: integrated systems, commercial products and industrial products. Integrated systems comprise software and automation systems such as conveyors, automated storage and retrieval systems, robotics and warehouse management systems. Commercial products comprise light industrial and commercial office shelving and specialist storage products. Industrial products comprise the structural components required for heavy duty racking and shelving, such as steel uprights, beams and braces.
For many years, Dexion Au’s industrial products have included racking and shelving products sold under the brand names “Keylock” and “Speedlock”. A majority of the industrial products sold by Dexion Au, by value, are Speedlock products.

The primary brand name used by Dexion Limited and the worldwide group of companies it subsequently established (including Dexion Au) for its industrial and commercial products is “Dexion”. Dexion Au is, and at all material times has been, the registered owner under the Trade Marks Act 1995 (Cth) of the “Dexion” mark and the “Speedlock” mark in respect of various goods associated with racking and storage. Mr Maycock deposed that Dexion is one of Australia’s leading brands of industrial racking and shelving products. The Dexion brand has been used for decades to represent Dexion Au and Dexion products supplied in Australia in national advertising and promotional campaigns. Market survey evidence adduced by Mr Maycock suggests that the Dexion name is well known in Australia.
Mr Maycock deposed that Constructor retained ownership of the Dexion and Speedlock marks for use in Western Europe and South America (amongst other places).
Mr Maycock also deposed that Dexion Au and Constructor have traded independently in the Northern and Southern Hemispheres since about 2003 and source their products independently. Since about 2014, Dexion Au has typically manufactured its industrial racking products, such as Speedlock, in Asia, whereas Constructor predominantly sources its products from Europe. Constructor sells industrial racking and storage products in Europe under the Dexion and Speedlock brands. Further, there are certain design similarities between the industrial racking products sold by Dexion Au in Australia and the industrial racking products sold by Constructor in Europe under the Dexion and Speedlock brands.
In March 2018, following Gonvarri’s acquisition of Constructor, Gonvarri announced that it had entered into a collaboration with a Malaysian based steel company, Eonmetall Group Berhad (Eonmetall), for the manufacture of Constructor racking products in the Asia-Pacific. A corporate brochure published by Gonvarri states that it is a world leading provider of industrial storage systems and it operates under the brands Dexion, Constructor and Kasten. A map within the brochure shows that Gonvarri either supplies, or is willing to supply, its products to Australia.
New business model of Dexion Au
Under its new business model since mid-2017, Dexion Au has established two categories of Dexion Supply Centres, called “Tier 1” and “Tier 2”. Tier 1 Supply Centres are established pursuant to an agreement titled “Tier 1 Supply Agreement” entered into between Dexion Au as supplier and a distributor referred to in the agreement as the “Supply Centre”. The recital to the agreement records that:
Dexion supplies the Authorised Goods and Authorised Services. Dexion has agreed to supply the Authorised Goods and Authorised Services to the Supply Centre and the Supply Centre has agreed to purchase the Authorised Goods and Authorised Services from Dexion on the terms set out in this Agreement. The Supply Centre will on-sell the Authorised Goods and Authorised Services to their customers and their appointed Tier 2 Supply Centres and their appointed Authorised Resellers.
Under the Tier 1 Supply Agreement, Dexion Au agrees to supply defined “Authorised Goods” and “Authorised Services” pursuant to supply terms that may be amended by Dexion Au from time to time. The Supply Centre is required to obtain all of its requirements for the Authorised Goods or any similar goods from either Dexion Au or an authorised supplier stipulated under the agreement. The Supply Centre is only permitted to sell the Authorised Goods and Authorised Services in the “Business”, which is defined as the business owned and operated by the Supply Centre for the retail sale of the Authorised Goods and Authorised Services from the “Premises” (which are the business premises of the Supply Centre as stipulated in the agreement) under the “Business Name” (which is the business name adopted by the Supply Centre as stipulated in the agreement). Dexion Au grants the Supply Centre a non-exclusive right to use its intellectual property to promote, offer for sale and sell the Authorised Goods and Authorised Services in the Business during the term of the agreement. However, Dexion Au does not confer any exclusive territorial rights on the Supply Centre and reserves the right to enter into similar agreements and license others to conduct competing businesses.
The prices at which Dexion Au supplies its products to a Supply Centre under the Tier 1 Supply Agreement are not set out in the agreement itself. Instead, clause 2 of the agreement provides that the products will be supplied on the terms of the agreement and the “Supply Terms” which will include matters such as pricing (including a rise and fall formula), the ordering process and delivery. In the agreement, the expression “Supply Terms” is defined as the terms and conditions entered into by the parties for the supply of the Authorised Goods and Authorised Services to the Supply Centre, executed on or about the date of the agreement.
Clause 15 of the Tier 1 Supply Agreement contains a number of restrictive covenants. The restrictive covenants are central to Dexion Au’s cross-claim and the present application. The clause is considered in detail below, but in general terms it restricts the Supply Centre from conducting a business that is competitive with the Supply Centre both during the term of the agreement and for a period of up to two years after termination.
Mr Maycock deposed that, in addition to supplying Dexion products to Tier 1 Supply Centres, Dexion Au also supplied various resources and technical support. The resources and technical support included:
(a)access to and use of an online intranet service that communicated libraries of confidential design, technical, operational, sales and marketing information;
(b)price lists detailing the purchase price of Dexion products;
(c)access to and use of an “in-house” computer program known as the Dexion Design Program which generates design drawings for racking solutions using Dexion products that comply with applicable Australian standards and that assist in optimising space and material usage;
(d)various manuals containing design and specification information for Dexion products;
(e)training of Tier 1 Supply Centre staff on the use of various design tools;
(f)technical and engineering support services;
(g)sales and marketing support;
(h)an enquiry and referral service;
(i)Dexion rack inspection kits; and
(j)product brochures and the promotion of Dexion products and the Dexion brand via social media sites, trade magazines and trade shows.
Dexion Au does not charge a licence fee or any other fees to Tier 1 Supply Centres. Its revenue is generated solely from the supply of Dexion products to Tier 1 Supply Centres.
Tier 2 Supply Centres are typically smaller in size and scope than a Tier 1 Supply Centre. A Tier 2 Supply Centre typically contracts directly with a Tier 1 Supply Centre to obtain products, although each Tier 2 Supply Centre is required to execute a deed poll in favour of Dexion Au for the use and exploitation of certain of Dexion Au’s intellectual property for the purpose of carrying on the Tier 2 Supply Centre. The operator of a Tier 2 Supply Centre is permitted to market and sell a range of Dexion branded products. However, in contrast to a Tier 1 Supply Centre, Tier 2 Supply Centres are also permitted to sell a range of products other than Dexion products.
By about December 2017, Dexion Au had established eight Tier 1 Supply Centres and six Tier 2 Supply Centres. The Tier 1 Supply Centres included SSS (trading as “Dexion Solutions”), Dexion Citiport and Dexion Acacia Ridge. Although a number of the Dexion Tier 1 Supply Centres adopted a trading name referencing the location of their principal place of business (such as Dexion Acacia Ridge), Mr Maycock deposed that it is typical for a Tier 1 Supply Centre to be national in scope and not limited to any particular geographical area or region of Australia.
Prior to establishing its new business model, Dexion Au supplied its products to various large corporate customers. From about mid-2017, Dexion Au gradually stopped the direct sale of Dexion products to customers and instead began referring both its new and existing customers to Tier 1 Supply Centres. Supply arrangements with existing customers, and new enquiries about products and services received by Dexion Au, were allocated to particular Tier 1 Supply Centres on a case-by-case basis.
Dexion products installed on an industrial racking project require ongoing inspection and maintenance for safety reasons and to ensure compliance with relevant Australian standards. Inspection and maintenance services are typically provided on an annual basis by the original supplier.
Tier 1 Supply Agreement with SSS
Mr Maycock gave evidence that, on or about 19 October 2017, Dexion Au and SSS entered into a written agreement for the operation of a Tier 1 Supply Centre by SSS which was comprised of:
(a)an undated document titled “Dexion Tier 1 Supply Agreement 2017” executed by Dexion Au and SSS;
(b)an undated document titled “Tier 1 Supply Centre Manual 2017”; and
(c)Authorised Purchase Orders (within the meaning of that term in clause 1 of the Tier 1 Supply Agreement) made from time to time.
A number of questions arise in relation to those documents. It is unnecessary to resolve those questions on this interlocutory application, but various of the questions are relevant to the assessment of Dexion Au’s prima facie case and the issues in dispute between the parties. The following two matters are noted:
(a)First, Dexion Au alleges that the Bells are parties to the Tier 1 Supply Agreement and are bound by the restrictive covenants. On this application, Dexion Au seeks an interlocutory injunction against the Bells individually. However, it is not clear that the Bells are parties to the Tier 1 Supply Agreement. The agreement defines the Bells as guarantors and the guarantors agree to give the restrictive covenants in clause 15 of the agreement. Although the Bells signed the agreement in their capacity as directors of SSS (thereby executing the agreement on behalf of SSS), there is no separate execution of the agreement by them in their individual capacities. Accordingly, a question for trial will be whether the Bells are parties to the agreement.
(b)Second, clause 2 of the Tier 1 Supply Agreement stipulates that the terms of supply of the Dexion products, including pricing, ordering and delivery, will be specified in a document called “Supply Terms”. The expression “Supply Terms” is defined as the terms and conditions entered into by the parties for the supply of the Authorised Goods and Authorised Services to the Supply Centre, executed on or about the date of the agreement. As the evidence presently stands, it is not clear whether such a document was executed by the parties on or about the date of the agreement. Schedule 4 to the Manual contains a document described as “Credit Terms and Conditions” and bears an effective date of 1 December 2017. The document has been signed by the Bells, presumably on behalf of SSS. The version of the document in evidence has very small print and is close to illegible. A question for trial will be whether that document is the “Supply Terms” for the purposes of the agreement.
Mr Maycock deposed, and it appears to be common ground, that SSS operated a Tier 1 Supply Centre pursuant to the Tier 1 Supply Agreement from about 1 December 2017 to early February 2019 inclusive. It also appears to be common ground that, as the operator of a Tier 1 Supply Centre, SSS had access to the resources and materials provided by Dexion Au under the agreement.
Mr Maycock adduced in evidence an article entitled “Safer Storage Systems partners with Dexion” published on or about 23 November 2017 in an online trade publication known as “Logistics & Materials and Handling”. The article appears to have been printed from a joint press release issued by Dexion Au and SSS. The article states in part:
Pallet racking and shelving provider Safer Storage Systems has partnered with storage solutions provider Dexion Australia and signed on to become a Dexion Supplier Centre.
…
“This new partnership sees two power houses in the industry join forces to deliver the very best product and service for customers” said Matt Bell, Managing Director, Safer Storage Systems. “Dexion has world-class engineering capabilities and we are excited to be able to add the quality product range to our robust business offering.”
With a growing Key Account team, to manage on-going requirements for customers, such as Reece and Bunnings, as well as experienced installation crews and project managers, Safer Storage Systems is equipped to offer comprehensive storage solutions for the industrial and commercial industries, Dexion said in a statement.
Mr Maycock also adduced in evidence a document purportedly available on SSS’s website in mid-2018 which promoted the business then being conducted by SSS as “Dexion Solutions”. The document stated:
Dexion Solutions is more than just a Dexion distributor. We are a complete storage solutions provider with over 400 years of combined industry expertise, specialist teams and multiple locations across Australia and beyond.
Becoming part of the Dexion network was a strategic decision to continue the growth of Safer Storage Systems. While we are now known as Dexion Solutions, we still have the same great team and are continuing our mission to create the safest, most efficient and comprehensive storage solutions for every business.
Mr Maycock deposed that Dexion Au referred a number of customers to SSS during the term of the Tier 1 Supply Agreement including Reece, Bunnings, MainFreight, Visa Global Logistics, Silk Contract Logistics and DHL.
Mr Maycock also deposed that, in the course of operating its Tier 1 Supply Centre, SSS had access to, and typically placed purchase orders with Dexion Au by reference to, Dexion Au’s published price lists. Dexion Au maintained a credit account for SSS. During the period of the Tier 1 Supply Agreement, Dexion Au sold Dexion products to SSS on credit on the account. The price of products in the price lists were in the currency of the place where a product was to be manufactured. For example, the price of products manufactured in China was recorded in the relevant price list in Chinese Yuan (and not in Australian dollars). The procedure adopted by Dexion Au and SSS was for SSS to submit a purchase order to Dexion Au referable to a particular price list and Dexion Au invoiced SSS for products in the currency shown on the price list and purchase orders. The tax invoices rendered by Dexion Au were in turn paid by SSS to Dexion Au in the currency stated on the invoice.
Mr Maycock deposed that, as at the date of his affidavit, amounts invoiced by Dexion Au for products supplied by it to SSS under the Tier 1 Supply Agreement, but not paid for by SSS, are as follows:
(a)AUD$59,009.08 in respect of goods supplied during the period between about 24 October 2018 and 8 January 2019;
(b)¥14,770,558.65 in respect of goods supplied during the period between about 11 September 2018 and 14 January 2019;
(c)€59,727.71 in respect of goods supplied during the period between about 1 November 2018 and 22 November 2018;
(d)3,586,815.50 kr in respect of goods supplied on or about 6 February 2019; and
(e)US$58,162.90 in respect of goods supplied during the period between about 8 October 2018 and 9 January 2019.
A statement of account issued by Dexion Au to SSS as at 8 February 2019 recorded the balance outstanding, expressed in Australian dollars, as $3,715,803.10. It is common ground that that amount has not been paid by SSS.
Termination of the Tier 1 Supply Agreement with SSS
On or about 7 February 2019, SSS purported to terminate the Tier 1 Supply Agreement with immediate effect and ceased operating a Tier 1 Supply Centre under the name of “Dexion Solutions”. On or about 20 February 2019, Dexion Au gave written notice to SSS that it was in default of its payment obligations. The default was not remedied and, on or about 15 March 2019, Dexion Au gave written notice to SSS terminating the supply agreement with immediate effect.
Again, it appears to be common ground that, since the termination of the Tier 1 Supply Agreement, SSS has continued to conduct business supplying storage products and systems to customers in Victoria and elsewhere in Australia. Mr Maycock adduced in evidence extracts from SSS’s LinkedIn page and website by which SSS promotes its ongoing business. A post on the LinkedIn page in February 2019 from SSS’s National Major Accounts Manager stated that “It’s business as usual” and that “Safer Storage Systems… are returning to our roots” and that while the “branding and trading name have now changed, all other business details will remain the same”. SSS’s website contains statements that “Safer Storage Systems has been supplying pallet racking and storage systems across Australia for over 12 years” and that “We have recently returned home to where it all began and are now back to trading as Safer Storage Systems”.
Mr Pletikosa is the National Marketing Manager for Dexion Au. On 16 September 2019, Mr Pletikosa conducted a number of searches of the SSS website and websites that were able to be accessed from the SSS website. Mr Pletikosa then exhibited copies of the website pages that he searched. There is some difficulty with Mr Pletikosa’s evidence in that it is difficult to get an impression of how the webpages exhibited to his affidavit would have appeared on the computer screen. Nevertheless, his evidence is to the following effect.
First, a page on the SSS website contains the following statements:
Gonvarri Material Handling is a leading global provider of industrial storage systems, from racking and shelving to complete warehouse solutions.
Safer Storage Systems is now the exclusive Australian Supplier of the Gonvarri range of European manufactured storage systems.
European Manufacturing
Gonvarri Material Handling comprises of (sic) world-renowned brands, including Constructor, Kasten and Dexion. The product range incorporates cutting-edge steel pallet racking and shelving systems, as well as storage machines and automatic systems.
With first-class manufacturing facilities strategically located in key markets of Russia, Romania, Germany and Finland, Gonvarri Material Handling is one of Europe’s leading forces in engineering and manufacturing of storage solutions having helped some of the world’s major brands and pioneering SMEs since 1856.
…
Having access to the Gonvarri range of brands allows Safer Storage Systems to engineer high quality and highly customised picking and packing solutions – offering value that can be tracked through to profits for our customers.
Mr Pletikosa deposed that the webpage contained a blue box with the words “see the product range”. Clicking on the words takes the viewer to a webpage where there were three more boxes labelled “pallet racking”, “shelving systems” and “storage machines”, each of which was hyperlinked. Clicking on the box labelled “pallet racking” took the viewer to a website under the domain name “constructor-storage.com”. There is no evidence as to the ownership of that website. However, from various references to Sweden, Denmark and Finland on the website, together with the use of a Swedish phone number, it appears to be a Swedish or European website. The screenshots adduced in evidence are in the English language. Displayed on the website was a product described as “Pallet Racking P90 Standard”. A PDF document describing that product could be downloaded from the website. Each page of that document contains the “constructor-storage.com” domain name and a Swedish phone number. The document is written in the English language. Within the PDF document, the following sentence appears: “The Speedlock P90 pallet racking system is designed according to standardised pallet dimensions to ensure optimum usage of available space”. That appears to be the only use of the name “Speedlock” in that document. It is unclear whether the name “Speedlock” is used to refer to a particular type or category of the P90 pallet racking system. On the “constructor-storage.com” website there is also a single reference to “Speedlock P90 Push Back racking”. It is unclear whether the use of the name “Speedlock” refers to a particular type or category of P90 Push Back racking.
Competition between Dexion Supply Centres and SSS since termination

Mr Maycock gave evidence concerning his investigation of tenders in which SSS has participated since the termination of the Tier 1 Supply Agreement and in which either Dexion Au or another Dexion Supply Centre also participated as tenderers. Those tenders are as follows:
(a)In or about December 2018, Arlec Australia Pty Ltd invited tenders with the first stage bids closing in February 2019. Each of SSS and Dexion Citiport submitted tenders. A post published on the SSS LinkedIn page in June 2019 indicates that the Arlec project was awarded to SSS.
(b)In or about December 2018, Secon Freight Logistics Pty Ltd invited tenders for two projects in Victoria. Tender submissions for the projects closed on or about 25 March 2019. SSS and Dexion Citiport submitted tenders. Posts published on the SSS LinkedIn page in June 2019 indicate that the projects were awarded to SSS.
(c)In or about March 2019, Iron Mountain Australia Group Pty Ltd issued a tender for the supply and installation of storage products in Western Australia. Tender submissions for the project closed in or about April 2019. SSS and Dexion Au submitted tenders. The project was awarded to another supplier, Stow Storage Systems Australia Pty Ltd, on or about 21 May 2019.
(d)In or about mid-February 2019, DuluxGroup (Australia) Pty Ltd (Dulux) invited tenders for a project at a warehouse facility in Western Australia. Each of SSS, Dexion Citiport and Dexion Balcatta submitted tenders for the project. Mr Maycock said that he had been informed by Mr Ward of Dexion Citiport that the project was awarded to SSS and that racking installation on the project was due to commence in or about January 2020.
(e)In or about May 2019, Silk Contract Logistics invited tenders for the supply and installation of storage products at a new warehouse facility in Western Australia. Tenders were submitted by SSS and Dexion Balcatta, amongst others.
(f)In or about October 2018, Pinnacle Diversity Pty Ltd invited bids for the supply and installation of racking products and storage systems for a facility in Queensland. Bids for the project were submitted by SSS, Dexion Acacia Ridge and Schaefer Systems International Pty Ltd (SSI Schaefer). The project was awarded to SSS in or about March 2019.
Mr Ward is a director of Citiport which, since about mid to late 2017, has been a Dexion Tier 1 Supply Centre and has traded under the names of Dexion Dandenong, Dexion Citiport and Dexion Storage Systems from its premises in Dandenong, Victoria. Mr Cater has been an Area Sales Manager for Citiport for about 9 years. Mr Ward and Mr Cater gave the following evidence about three tenders in which Citiport competed against SSS:
(a)Mr Ward deposed that Secon Freight Logistics Pty Ltd has been a customer of Citiport. In December 2018, it invited tender submissions for the supply and installation of storage products at two warehouse sites in Victoria. Citiport submitted a tender, as did Stow Storage Systems Australia Pty Ltd and SSS. The tender submissions closed on 25 March 2019. SSS was awarded the tender in around late May 2019.
(b)Mr Ward deposed that he became aware in about late 2018 that Arlec was developing new warehouse space and would require storage products and systems. In January 2019, Citiport approached Arlec and was invited to submit a quotation. Tender submissions were required by mid-late February 2019. In addition to Citiport, Mr Ward believes that tender responses for the project were submitted by SSS, Stow Storage Systems Australia Pty Ltd, SSI Schaefer, Absolute Storage Systems Pty Limited and Premier Pallet Racking. In about mid-April 2019, SSS and Citiport were shortlisted as preferred tenderers. In about late April 2019, SSS was awarded the Arlec project. Mr Cater deposed that he spoke with a representative of Arlec in January and February of 2019 in which the representative referred to SSS as Dexion (consistently with SSS still being a Tier 1 Supply Centre at that time).
(c)Mr Ward deposed that Citiport submitted a tender in response to an invitation from Dulux in about mid-February 2019. In addition to Citiport, Mr Ward believed that tender responses were also submitted by Dexion Balcatta and SSS. On or about 11 June 2019, Mr Ward attended a meeting with a representative of Dulux, Mr Rogerson, together with Mr Jye Sampson for Citiport. In the course of the meeting, Mr Rogerson said words to the effect that, if SSS was awarded the Dulux project, SSS intended to supply Dulux with “Dexion from Romania and Germany”, which Mr Ward took to mean “Dexion” branded racking products and that an example of the kind of racking products SSS intended to supply to Dulux were being held at the “Mainfreight site” in New South Wales. Mr Ward deposed that he was aware that Mainfreight Australia has previously used “Dexion” branded storage products in its warehouse and distribution facilities. Mr Ward also deposed that on or about 8 July 2019 he attended a further meeting with Mr Rogerson. In the course of that meeting, Mr Rogerson said words to the effect that the ownership of SSS was a Dexion supplier in the UK.
Mr Skinner holds the position as Major Accounts Executive in the business Dexion Acacia Ridge conducted by QRack. Dexion Acacia Ridge has operated as a Dexion Tier 1 Supply Centre since about December 2017 from premises in Bradman Street, Acacia Ridge, Queensland. Mr Skinner deposed that, prior to becoming a Dexion Tier 1 Supply Centre in or about late 2017, SSS traded from premises that were also located in Bradman Street, Acacia Ridge. After SSS became a Dexion Tier 1 Supply Centre, SSS traded from those premises under the name Dexion Solutions. In about early 2018, SSS moved to premises located at Parkinson in Queensland, which is about 10 kilometres away from Acacia Ridge. Mr Skinner gave the following evidence about two tenders in which QRack competed against SSS:
(a)Mr Skinner deposed that a sales manager for Dexion Acacia Ridge, Mr Goodall, approached a representative of Silk Contract Logistics, Mr Cavallin, in about September 2018 in relation to a project for Silk Contract Logistics in the Port of Brisbane in Queensland. Mr Goodall followed up that approach on or about 14 January 2019. Mr Cavallin said words to the effect that he was surprised to receive a call from Mr Goodall because “Dexion had already won the project and it was being handled by Dexion Solutions”. Mr Goodall said words to the effect that Dexion Acacia Ridge was separate from the business being operated by Dexion Solutions. Mr Cavallin said words to the effect that he thought he was dealing with “Dexion” on the project and that having a number of businesses called “Dexion”, but being independent of each other, was confusing. On or about 27 February 2019, Mr Goodall and Mr Skinner telephoned Mr Cavallin. In the course of that conversation, Mr Goodall asked Mr Cavallin if he was aware that Silk Contract Logistics was no longer being supplied with Dexion branded products. Mr Cavallin said words to the effect that he was aware of that. Mr Goodall asked Mr Cavallin what type of products SSS was supplying on the project. Mr Cavallin did not answer Mr Goodall’s question directly, but said words to the effect that he was satisfied with the products being supplied by SSS.
(b)Mr Skinner also deposed that, on or about 25 September 2018, Mr Goodall sent an introductory email to Mr Cheng of Pinnacle Hardware in relation to a project located in Berrinba in Queensland. On or about 16 October 2018, Mr Cheng sent an email to Mr Goodall stating that Dexion Solutions was preparing a proposal for Pinnacle Hardware and asking whether Dexion Solutions and Dexion Acacia Ridge were related or independent companies. Mr Goodall replied that the two businesses were independent but both supplied the same brand of products. Mr Cheng then invited Mr Goodall to submit a tender for the project which Dexion Acacia Ridge did on or about 13 February 2019. Mr Skinner understands that SSS and SSI Schaefer tendered for the project and there may have been other tenderers of which Mr Skinner was unaware. Mr Cheng informed Mr Goodall on or about 18 March 2019 that Pinnacle Hardware had awarded the tender to SSS.
Financial harm caused by competition from SSS
Mr Maycock deposed that if SSS, having ceased to be a Dexion Supply Centre, is allowed to continue to compete with Dexion Au and Dexion Supply Centres in breach of the restrictive covenants in the Tier 1 Supply Agreement, this has the potential to cause irreparable harm to the business of Dexion Au in that:
(a)there is an immediate potential loss of sales and profits to Tier 1 Supply Centres due to SSS successfully tendering for projects in direct competition with Tier 1 Supply Centres who might otherwise reasonably have expected to win those tenders;
(b)any such loss of sales suffered by Tier 1 Supply Centres also results in a loss of sales and profits to Dexion Au because Dexion Au derives its revenues and profits from the supply of products to Tier 1 Supply Centres; and
(c)in so far as Dexion Au would have tendered for the project, there is also a direct loss of sales and profits to Dexion Au from the competition with SSS.
Mr Maycock deposed that it would be difficult to calculate the value of lost sales and profits because any such calculation would need to be based on a counter-factual of whether, in the absence of competition from SSS, Dexion Au or a Tier 1 Supply Centre would have won the tender rather than a third party competitor. Mr Maycock also deposed that competition from SSS on price potentially means that, even where a Tier 1 Supply Centre successfully wins a tender against SSS, the resulting prices and profit margins are lower than if SSS were not competing against it. Mr Maycock further deposed that competition from SSS has the potential to undermine the financial viability of Tier 1 Supply Centres, on whose success Dexion Au ultimately depends.
Financial position of Dexion Au
Mr Ryan, the Company Secretary of Dexion Au, gave evidence concerning the Dexion Au group of companies and their financial position. He deposed that Dexion Au is the sole shareholder of two Australian companies, Dexion Integrated Systems Pty Ltd and Dexion Commercial (Australia) Pty Ltd, and five other foreign subsidiaries, one incorporated in each of New Zealand, Malaysia and Hong Kong and two incorporated in Singapore. Dexion Au employs approximately 38 people and its turnover for 2019 will be approximately $5 million. Mr Ryan also prepared what he called a balance sheet for the Dexion Au group of companies as at 30 August 2019. The document is not in the usual form of a balance sheet in that it discloses only a limited number of assets and liabilities. Nevertheless, Mr Ryan deposed that Dexion Au has net assets of approximately $4.35 million plus approximately $1.429 million cash at bank and on hand, and that the Dexion Au subsidiaries have a total of approximately $11.4 million cash at bank and on hand. Mr Ryan further deposed that the cash at bank and on hand position of the subsidiaries is typically stable and he did not expect that the cash resources of the subsidiaries, as shown in the balance sheet, would materially change.
Affidavit evidence on behalf of SSS
Evidence by way of affidavit was given on behalf of SSS by the following individuals:
(a)Matthew Bell, who is a director of SSS and indirectly owns 44% of its issued shares;
(b)Morris Joseph Anthony Bell (known as Tony Bell), who is the brother of Matthew Bell and is also a director of SSS and indirectly owns 44% of its issued shares;
(c)Shailesh Anand, who is the Administration Manager of SSS and has day to day management of the IT system of SSS;
(d)Stuart McNab, who was, until about November 2017, the Regional General Manager of Dexion Au with operational management of all business matters for the Dexion group in Australia and Hong Kong; and
(e)Brendan Boyd, who is one of two directors and the Managing Director of Silk Contract Logistics.
Formation of the SSS business
Mr Matthew Bell deposed that he started working for Dexion Au in about 1993 as a sub‑contractor. In 2000, he started working for Citiport as a rack inspector. At that time, Citiport was part of the Dexion Au franchise network.
SSS was incorporated on 23 March 2006 for the initial purpose of selling second hand pallet racking products in Australia. SSS was set up by Mr Bell’s brother, Tony, and others. In about 2011, Mr Matthew Bell left the Dexion Au franchise network and became the Managing Director of SSS. The shares in SSS are currently owned (indirectly) by the Bells (as to 44% each) and by Mr James Hardy (as to 12%).
Between 2006 and 2013, SSS primarily sold second hand pallet racking in Australia. The second hand pallet racking was purchased from various customers including Dexion Au Supply Centres and sometimes from Dexion Au itself.
In 2014, SSS launched a new pallet racking product that was manufactured, designed and supplied by an entity called Zheijiang Shanghong Shelf Co Limited (Shanghong) in China (SSS Racking). The engineering and testing of SSS Racking was conducted by SSS in Australia. Mr Matthew Bell deposed that SSS’s business significantly grew after the introduction of SSS Racking. In 2013, SSS had an annual turnover of approximately $3.7 million and in 2014, largely due to SSS Racking, its annual turnover had grown to approximately $8.7 million. In about 2014, SSS moved to larger premises located at 21 Capital Drive, Dandenong South in Victoria, which is where SSS currently operates its business.
Formation of supply arrangements between SSS, Tech-Link and Dexion Au
Mr Matthew Bell deposed that, in 2015, Mr Khurshed Mirza, in his then role as Chief Executive Officer of Tech-Link, approached him to ask whether SSS would be interested in distributing Dexion Au pallet racking in Australia. SSS started sourcing additional racking products from Tech-Link and, in 2015, Tech-Link was SSS’s second largest supplier behind Shanghong.
Mr Matthew Bell deposed that, in about February or March 2017, Mr Mirza told him that Tech-Link was looking at purchasing Dexion Au. Mr Mirza said that Tech‑Link was interested in bringing SSS into its Supply Centre network as a Tier 1 Supply Centre. Between February and October 2017, Mr Matthew Bell and his brother Tony negotiated the Tier 1 Supply Agreement with Mr Mirza and Mr Stuart McNab on behalf of Dexion Au. The negotiations were conducted both by email and in face to face meetings. Mr Matthew Bell deposed that there were eight meetings in that period. At the first meeting on 30 May 2017, Mr Bell said to Mr Mirza words to the effect that SSS required pricing of low to mid 80 cents per kilogram ex-works. Pricing and terms of the agreement were discussed in each of the meetings.
Mr Stuart McNab gave evidence of his involvement, while Regional General Manager of Dexion Au, in the negotiations between Dexion Au and SSS to enter into the Tier 1 Supply Agreement. At that time, Mr McNab reported directly to Mr Mirza who was the Chief Executive Officer of the Dexion Au group at that time. Mr McNab deposed that Dexion Au wanted to secure SSS as a Tier 1 supplier of Dexion Au because SSS had approximately 50% of Bunnings’ market share, it had a business which could easily transition into a Tier 1 supplier and Dexion Au was no longer directly servicing clients and wanted SSS to take on Dexion Au’s portion of Bunnings.
Mr McNab deposed that pricing was central to the negotiations between Dexion Au and SSS. To the best of his recollection, the following verbal representations were made by Mr Mirza on behalf of Dexion Au at meetings with representatives of SSS:
(a)that the price for Bunnings’ goods would be $1.09 per kilogram;
(b)that all prices for other customers of SSS would be based on the $1.09 per kilogram formula as used for Bunnings;
(c)that SSS would receive a substantial rebate of 4.2% or 4.5% of total sales if SSS achieved the required sales targets;
(d)that SSS would be given status, seniority and priority above the other Supply Centres; and
(e)that a lead time of six weeks from Malaysia to Melbourne would be achievable.
Mr McNab deposed that, during the negotiations with SSS, Mr Mirza said to him words to the effect that “we have SSS on the hook and need to supply them at $1.09”. Mr McNab said that, based on his internal calculations, he became aware during the period of negotiations that the price of $1.09 was not achievable and he informed Mr Mirza of this. Mr Mirza said to Mr McNab that he would work with the owner of Dexion Au, Mr Hock Seng Tan, to achieve the price.
Mr Matthew Bell deposed that SSS entered into a Tier 1 Supply Agreement with Dexion Au on or about 19 October 2017.
Termination of the Tier 1 Supply Agreement
Mr Matthew Bell deposed that, after signing the Tier 1 Supply Agreement, he, his brother Tony, and Mr Hardy made numerous complaints to Mr Mirza and Mr McNab in relation to, amongst other things, price, delivery lead times, the rebate structure and stock levels held in China. On or about 31 January 2018, the solicitors for SSS sent a letter to Dexion Au alleging that Dexion Au had misrepresented, amongst other things, the price of storage components to be supplied by Dexion Au to SSS pursuant to the agreement. SSS purported to terminate the Tier 1 Supply Agreement on 7 February 2019 and Mr Matthew Bell deposed that SSS stopped purchasing Authorised Goods and using Authorised Services on that date.
Mr Matthew Bell admits in his affidavit that there are invoices that have been issued by Dexion Au to SSS that have not been paid. He states that, to the extent that SSS is indebted to Dexion Au in respect of any of those invoices, SSS will seek to set off such debt against the loss and damage that it claims in the proceeding.
Mr Matthew Bell deposed that, in or about February 2019, a company called Safer Storage Systems Procurement Pty Ltd (SSSP) started ordering the following products from Gonvarri: a shelving system called HI280; a semi-automated storage machine known as the Kasten vertical lift module; and P90 pallet racking. Also in or about February 2019, Gonvarri provided SSS with access to its structural design program known as RackStar which allows SSS to structurally design and produce parts lists prior to tendering. Pursuant to an internal arrangement between SSSP and SSS, SSS sells Gonvarri products to customers in Australia. On or about 27 June 2019, SSSP entered into a distributor agreement, manufacturing licence agreement and brand licence agreement with Gonvarri.
Competition between SSS and Dexion Supply Centres
Mr Matthew Bell deposed that all SSS tender materials issued after 7 February 2019 made no reference to Dexion Au. In relation to the project for Pinnacle Hardware (referred to earlier), Mr Bell says that the project was completed by SSS before the Tier 1 Supply Agreement was terminated.
Mr Matthew Bell deposed that, prior to entering into the Tier 1 Supply Agreement with Dexion Au, SSS sold goods and services to Bunnings Group Limited, Reece and Mainfreight Logistics. Bunnings Group Limited has been a customer of SSS dating back to 2013. Reece has been a customer of SSS dating back to 2012. Mainfreight Logistics has been a customer of SSS dating back to 2014. Mr Bell deposed that Visa Global Logistics was referred to SSS by Mr Cameron McNaughton, the National Major Projects Manager of SSS, in or about March 2018 and Silk Contract Logistics was a customer of SSS well before 2017. DHL has never been a customer of SSS.
Mr Brendan Boyd, the Managing Director of Silk Contract Logistics, deposed that, since February 2014, Silk Contract Logistics has not been a client of, engaged by or been a “key account customer” of Dexion Au and Silk Contract Logistics was never referred as a client to SSS by Dexion Au. Rather, Silk Contract Logistics has engaged multiple industrial racking suppliers over the years.
Harm if SSS were prevented from conducting its business

SSS currently employs 47 people including the Bells. Its monthly payroll is approximately $400,000. SSS carries between $8 million and $12 million of work in progress at any given time. Mr Matthew Bell deposed that if an injunction were granted which prevented SSS from conducting its business, the damage to SSS would include third party obligations, lease obligations, employee redundancies, penalties for work in progress that is unable to be completed, financial obligations and contractual obligations to third parties. Mr Bell provided an estimate of SSS’s total loss and damage which would exceed $30 million. No calculations were provided to support that figure. While I do not accept that figure as a reasonable estimate, I accept that the loss to SSS from the grant of an injunction would run to many millions of dollars. It would result in its employees losing their jobs and, in all likelihood, SSS’s business would not recover.
Restrictive Covenant
By its interlocutory application, Dexion Au seeks an interlocutory injunction restraining SSS and the Bells from engaging in conduct that is alleged to contravene the restrictive covenants in the Tier 1 Supply Agreement. The order sought is that, until determination of the cross-claims in the proceeding or earlier order of the Court, each of SSS and the Bells be restrained in Australia from:
(a)participating in, being interested in, assisting with, or otherwise being directly or indirectly involved, engaged, concerned or interested in a business, activity or operation that is the same as, substantially similar to, or competitive with the “Business” as defined in the Tier 1 Supply Agreement or any material part of it (Restrained Business);
(b)soliciting, canvassing, dealing with, approaching or accepting an approach from any person who was, as at 15 March 2019, or was at any time during the six month period ending on 15 March 2019, a customer or supplier of the “Business” as defined in the Tier 1 Supply Agreement with any purpose of, or having the effect of, obtaining the custom or services of that person in the Restrained Business;
(c)representing themselves as being in any way connected with, interested in or associated with the “Business” as defined in the Tier 1 Supply Agreement (except as its proprietor before 14 March 2019 or former proprietor after 14 March 2019) or any business conducted by the cross-claimant unless agreed otherwise by the cross-claimant in writing;
(d)interfering with the business of the cross-claimant or divulging to any person any information concerning the business of the cross-claimant or any of their respective dealings, transactions or affairs; and
(e)interfering with the relationship between the cross-claimant and any of its clients, customers, employees, suppliers or “Supply Centres” within the meaning of the Tier 1 Supply Agreement to the detriment of the cross-claimant.
The form of interlocutory order sought generally reflects the terms of the restrictive covenant in clause 15 of the Tier 1 Supply Agreement. It is necessary to have regard to the full terms of clause 15, including the applicable definitions. The clause is as follows:
15. Restrictive Covenant
(a)Restrictions – The Supply Centre, each Guarantor and the Authorised Person must not, in any capacity including on its own account or as a member, shareholder, unitholder, director, partner, joint venturer, employee, trustee, beneficiary, principal, agent, adviser, contractor, consultant, manager, associate, representative or financier or in any other way or by any other means:
(i)during the period specified in clause 15(c) (Restraint Period) and in the area specified in clause 16(c)(iii) (sic) (Restraint Area) participate in, be interested in, assist with or otherwise be directly or indirectly involved, engaged, concerned or interested in a business, activity or operation that is the same as, substantially similar to, or competitive with, the Business or any material part of it (Restrained Business);
(ii)during the Restraint Period, solicit, canvas, deal with, approach or accept an approach from any person who is at the day on which this Agreement expires or is terminated (End Date), or was at any time during the sixth month period ending on the End Date, a customer or supplier of the Business with any purpose of, or having the effect of, obtaining the custom or services of that person in a Restrained Business;
(iii)at all times, represent itself as being in any way connected with, interested in or associated with the Business (except as its proprietor before the End Date or former proprietor after the End Date) or any Business conducted by Dexion unless agreed otherwise by Dexion in writing;
(iv)during the Restraint Period, solicit, canvass, encourage, approach or accept an approach from, induce, or endeavour to do so, any person (who is at the End Date, or was at any time during the sixth month period ending on the End Date, a director, employee, agent, associate, contractor or advisor of the Supply Centre, Guarantor or the Authorised Person) to leave the office, employment or agency of, or association with, the Business or the Supply Centre;
(v)during the Restraint Period, interfere with the business of Dexion or divulge to any person any information concerning the business of Dexion or any of their respective dealings, transactions or affairs; or
(vi)during the Restraint Period, interfere with the relationship between Dexion and its clients, customers, employees, suppliers or Supply Centres to the detriment of Dexion.
(b)Affiliates – The Supply Centre, each Guarantor and the Authorised Person must ensure that:
(i)where the Supply Centre and/or Guarantor is a body corporate, no officer or Related Body Corporate (as that term is defined in the Corporations Act 2001 (Cth)) of the Supply Centre and/or Guarantor;
(ii)where the Supply Centre and/or Guarantor and/or Authorised Person is a natural person, no spouse, domestic partner, relative by blood or adoption of the Supply Centre and/or Guarantor and/or Authorised Person or spouse of such a relative,
(each an Affiliate) does any of the things that the Supply Centre and/or Guarantor and/or Authorised Person cannot do under clause 15(a).
(c)Restraint Period – The period referred to in clause 15(a) is each of the following periods separately:
(i)during the Term and two years from the End Date;
(ii)during the Term and one year from the End Date; and
(iii)during the Term and six months from the End Date.
(d)Restraint Area – The area referred to in clause 16(a) (sic) is each of the following areas separately:
(i)Australia;
(ii)the State or Territory in which the Premises are located;
(iii)within 50 kilometres from each of the Premises;
(iv)within 25 kilometres from each of the Premises; and
(v)within 10 kilometres from each of the Premises.
(e)Permitted Involvement – Nothing in this clause 15 prevents the Supply Centre and each Guarantor and the Authorised Person or any of their Affiliates holding an aggregate less than 5% of the issued shares of a body corporate, or interests in a registered management investment scheme, included on the official list of a financial market (as defined in the Corporations Act 2001 (Cth)).
(f)Independence of Restrictions – Each:
(i)covenant in the paragraphs of clauses 15(a) and (b);
(ii)paragraph of the Restraint Period definition in clause 15(c); and
(iii)paragraph of the Restraint Area definition in clause 15(c)(iii) (sic),
is a separate and independent covenant of the Supply Centre and each Guarantor and the Authorised Person. They can be combined and each combination is a separate covenant and restriction.
(g)Severability – For the avoidance of any doubt, if any of the separate and independent covenants or restrictions set out in this clause 15 is or becomes invalid or unenforceable for any reason:
(i)clause 35(l) of this Agreement applies; and
(ii)without limiting the operation of that clause, if the covenant or restriction in question would be valid or enforceable if any activity was deleted or the area of time was produced, then the clause must be read down by deleting that activity, or reducing that period or area, to the minimum extent necessary to achieve that result.
(h)Reasonableness of Restraint – The Supply Centre and each Guarantor and the Authorised Person each acknowledge that each of the restrictions imposed by this clause 15:
(i)is reasonable in its extent (as to duration, geographical area and restrained conduct) having regard to the interests of each party to this Agreement; and
(ii)extends no further, in any respect, than is reasonable and necessary and is solely for the protection of Dexion in respect of the goodwill of Dexion.
(i)Legal Advice – The Supply Centre and each Guarantor and the Authorised Person acknowledge that in relation to this Agreement and in particular this clause 15, the Supply Centre and each Guarantor and the Authorised Person have received legal advice or have had the opportunity to obtain legal advice.
(j)Injunction – The Supply Centre and each Guarantor and the Authorised Person acknowledge and agree that monetary damages alone may not be adequate compensation to Dexion for a breach by a Supply Centre and for any breach by a Guarantor or the Authorised Person of this clause 15. Dexion is entitled to seek injunctive relief from a court of competent jurisdiction if:
(i)the Supply Centre and a Guarantor or the Authorised Person fails to comply with any obligation under this clause 15 or threatens to do so; or
(ii)Dexion has reason to believe the Supply Centre and a Guarantor or the Authorised Person will not comply with any obligation under this clause 15.
Clause 35(l) of the Tier 1 Supply Agreement provides that:
Any provision of this Agreement which is invalid in any jurisdiction must, in relation to that jurisdiction:
(i)be read down to the minimum extent necessary to achieve its validity, if applicable; and
(ii) be severed from this Agreement in any other case,
without invalidating or affecting the remaining provisions of the Agreement or the validity of that provision in any other jurisdiction.
The following capitalised terms used in clause 15 have the following definitions in the Tier 1 Supply Agreement:
(a)Supply Centre means SSS;
(b)Guarantor means each of Morris Bell and Matthew Bell;
(c)Authorised Person means Matthew Bell;
(d)Premises means 21 Capital Drive, Dandenong South, Victoria;
(e)Business Name means Dexion Solutions;
(f)Term means 1 December 2017 to 30 November 2020;
(g)Business means the business owned and operated by the Supply Centre for the retail sale of the Authorised Goods and Authorised Services from the Premises under the Business Name using the Intellectual Property;
(h)Authorised Goods means the Goods (as that term is defined in the Supply Terms) to be supplied by Dexion to the Supply Centre under the agreement and any additional goods that the parties agree in writing will be supplied under the agreement as are authorised by Dexion from time to time;
(i)Authorised Services means Construction Work (as that term is defined in the Supply Terms) and such other services as are authorised by Dexion from time to time;
(j)Intellectual Property means all present and future intellectual and industrial property rights conferred by statute, at common law or in equity and wherever existing, including:
(i)patents, inventions, designs, copyright, trade marks, brand names, names of the Authorised Goods and Authorised Services, domain names, know how, trade secrets and any other rights subsisting in the results of intellectual effort in any field, whether or not registered or capable of registration;
(ii)any application or right to apply for registration of any of those rights;
(iii)any registration of any of those rights or any registration of any application referred to in paragraph (ii); and
(iv)all renewals, divisions and extensions of those rights, which rights may, but may not be, available for use at any given time; and
(k)Supply Terms means the terms and conditions entered into by the parties for the supply of the Authorised Goods and Authorised Services to the Supply Centre, executed on or about the date of this Agreement.
Clause 31(h) of the Tier 1 Supply Agreement provides that, despite any other provision of the agreement, clause 15 (amongst others) survives the expiry or termination of the agreement.
Prima facie case
Dexion Au submitted that there is a strong prima facie case that the business activities of SSS since March 2019 contravene the restrictive covenants in clause 15 of the Tier 1 Supply Agreement. Dexion Au relies principally on the covenant in clause 15(a)(i) and submitted that there is a strong prima facie case that, by offering to supply and by supplying storage products, including steel racking, in competition with Dexion Au and its Tier 1 Supply Centres, SSS is carrying on a business in Australia that is similar to or competitive with the Business as defined for the purposes of clause 15.
Dexion Au acknowledged that a covenant in restraint of trade is unenforceable unless the restraint is, at the time it is agreed, reasonable by reference to the interests of the parties to the covenant and is not injurious to the public. Dexion Au submitted that the restrictive covenants are reasonable because they are intended to protect Dexion Au from having a former competitor and Tier 1 affiliate leverage its advantageous position to the disadvantage of Dexion Au and other Tier 1 Supply Centres after leaving Dexion Au’s network. Dexion Au submitted that SSS derived various advantages from being a Tier 1 Supply Centre including:
(a)using and benefiting from Dexion Au’s valuable brand and reputation;
(b)having access to Dexion Au’s valuable confidential information including computer programs, manuals, technical support and confidential price lists; and
(c)having access to Dexion Au’s marketing support including the referral of Dexion Au customers and leads.
Dexion Au also relies on the express terms of clause 15 by which SSS and the Bells acknowledge:
(a)that each of the restrictive covenants is reasonable (clause 15(h));
(b)that SSS and the Bells received legal advice, or had the opportunity to obtain legal advice, in respect of the restrictive covenants (clause 15(i)); and
(c)that monetary damages alone may not be adequate compensation to Dexion Au for a breach of the restrictive covenants and Dexion Au is entitled to seek injunctive relief (clause 15(j)).
SSS submitted that Dexion Au has not established a prima facie case that Dexion Au is entitled to relief against SSS for contraventions of the restrictive covenants. SSS advanced three principal arguments in support of that submission.
First, SSS submitted that the evidence shows that SSS was induced into entering the Tier 1 Supply Agreement based on misrepresentations by Dexion Au and SSS is entitled to an order declaring the whole of the agreement to be void (under s 243 of the ACL). In those circumstances, the restrictive covenants are also void and therefore unenforceable.
Second, SSS submitted that the restrictive covenants are prima facie void unless they are reasonable in all the circumstances. SSS submitted that the restrictive covenants are not reasonable, particularly in circumstances where SSS carried on business involving the supply of storage and racking products prior to entering into the Tier 1 Supply Agreement.
Third, SSS submitted that, on the proper construction of the restrictive covenants, particularly the covenant in clause 15(a)(i), SSS’s business activities do not breach the covenants. In that respect, SSS argues that the restrictive covenant in clause 15(a)(i) seeks to restrain a Supply Centre from engaging in retail sales of Authorised Goods and Authorised Services from the Premises using the Intellectual Property. SSS says that the covenant does not and cannot operate to restrain SSS or any related entity or associated person from selling (retail or otherwise) other goods and services to its customers or to third parties from the Premises or otherwise. SSS says that the evidence shows that, since February 2019, SSS has been selling products supplied by Gonvarri and has not been selling products supplied by Dexion Au. SSS further submitted that it has conducted business to business sales and not retail sales within the meaning of the restrictive covenants.
In my view, Dexion Au has established that there is a serious question to be tried whether the current business activities of SSS contravene the restrictive covenant in clause 15(a)(i) of the Tier 1 Supply Agreement. However, the strength of Dexion Au’s case is affected, to varying degrees, by SSS’s defences.
It is convenient to start with SSS’s argument that, on the proper construction of clause 15(a)(i), SSS’s current business activities do not contravene the restrictive covenant in that clause. Ultimately, the proper construction of clause 15(a)(i) will be a matter for trial. Nevertheless, for the purposes of determining this interlocutory application, I consider that there are a number of difficulties with SSS’s construction of the clause.
On its terms, the restrictive covenant in clause 15(a)(i) binds the “Supply Centre” (and the Guarantors and the Authorised Person). The “Supply Centre” is defined as SSS. Given that the covenant operates during the term of the agreement and beyond, it is clear, in my view, that the covenant binds SSS as a corporate entity, whether or not it is operating as a Dexion Supply Centre.
Clause 15(a)(i) prevents SSS from being involved in a business that is the same as, substantially similar to, or competitive with, the Business. As noted earlier, the “Business” is defined as the business owned and operated by the Supply Centre for the retail sale of the Authorised Goods and Authorised Services from the Premises (which is SSS’s premises in Dandenong in Victoria) under the Business Name (which is Dexion Solutions) using the Intellectual Property. It is apparent that the definition of “Business” refers to the business carried on by SSS pursuant to the Tier 1 Supply Agreement. The effect of the covenant is to prevent SSS from conducting any business that is similar to or competitive with the business conducted under the Tier 1 Supply Agreement both during the term of the agreement and for a period up to two years after its termination. Thus, the covenant requires a degree of exclusivity from SSS in respect of business activities that are similar to or competitive with conducting a Dexion Tier 1 Supply Centre. Within that field of business activity and during the term of the agreement, SSS is required to operate the Tier 1 Supply Centre exclusively (in other words, not operate a competing business). For a period up to two years after termination of the agreement, the covenant requires SSS not to conduct business in that field of business activity at all.
The evidence establishes a prima facie case that SSS is presently conducting a business that is similar to or competitive with the business it previously conducted as a Tier 1 Supply Centre, which would involve a contravention of clause 15(a)(i). The evidence records a number of tenders which have occurred since the termination of the Tier 1 Supply Agreement in which SSS has competed directly against other Dexion Supply Centres.
The alternative construction of clause 15(a)(i) advanced by SSS has numerous difficulties. SSS submitted that the covenant only applies to the conduct of a business which involves the retail sale of Dexion goods under the Dexion name. SSS says that it is not conducting such a business. However, that construction ignores that aspect of the restraint which prevents SSS from conducting a business that is similar to or competitive with the Business as defined in the Tier 1 Supply Agreement. The plain words of that covenant extend beyond conducting a business selling Dexion goods under the Dexion name. SSS also submitted that it is not involved in the retail sale of storage products. In my view, the use of the words “retail sale” in the definition of “Business” indicates that retail sale is intended to mean the sale of storage products to business customers who will use those products for the conduct of their business and not for the purposes of re-sale. That is the business currently being conducted by SSS.

While the proper construction of the restrictive covenants will be a matter for full argument at trial, I do not presently give much weight to SSS’s defence based on the construction of clause 15(a)(i).
SSS’s primary claim in the proceeding is that it was induced to enter into the Tier 1 Supply Agreement by misrepresentations by Dexion Au, which involved contraventions of s 18 of the ACL. If the contravention of s 18 is established, SSS will seek an order under s 243 of the ACL declaring the agreement to be void. On the current state of the evidence, it is not possible to form any view as to the likelihood of SSS succeeding in its primary claim, or the likelihood that the Court would declare the Tier 1 Supply Agreement to be void. The affidavit evidence of Mr McNab provides a basis for the claim. However, Mr McNab’s evidence is at a high level of generality and in a conclusory form. He does not attempt to give evidence about specific oral communications between the parties which contained the alleged misrepresentations. Further, even if SSS were successful on its primary claim of contravention of s 18 of the ACL, it is not possible to assess, at this time, whether the Court would be likely to declare the agreement to be void. The appropriate remedy may simply be an award of damages with the agreement being otherwise unaffected by the Court’s orders.
SSS also argues that the covenants in clause 15(a) are unenforceable, either in their entirety or for any period beyond six months (which period has already expired), by reason of the doctrine of restraint of trade. In my view, there is a serious question to be tried whether the covenants in clause 15(a) are unenforceable in whole or in part.
The legal principles concerning the doctrine of restraint of trade were summarised by the Full Court of the Federal Court in McHugh v Australian Jockey Club Limited (2014) 314 ALR 20 at [4] as follows:
It was not in dispute before this Court or at trial that:
(a)at common law all interferences with individual liberty of action in trading and all restraints of trade themselves, if there is nothing more, are contrary to public policy and therefore void: Nordenfelt v Maxim Nordenfelt Guns and Ammunition Company Limited [1894] AC 535 at 565 per Lord Macnaghten;
(b)such a restraint will nevertheless be valid if:
(i)it affords no more protection than is reasonably necessary to protect the interests of the party in whose favour it is imposed: Nordenfelt at 565; Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd [1973] 133 CLR 288 at 315-316 per Gibbs J;
(ii)it is reasonable having regard to the interests of the public: Nordenfelt at 565; Amoco at 315;
(c)reasonableness in those contexts is to be judged at the date the restraint was first imposed: Adamson v New South Wales Rugby League Limited (1991) 31 FCR 242 at 285-286 per Gummow J; Sheppard J agreeing at 245;
(d)the onus of showing that the restraint is no more than reasonably necessary to protect the interests of the party having the benefit of the restraint is on that party: Esso Petroleum Co Limited v Harper’s Garage (Stourport) Ltd [1968] AC 269 at 319 per Lord Hodson; Herbert Morris Pty Ltd v Saxelby [1916] 1 AC 688 at 700, 707-708 per Lord Atkinson and Lord Parker. There are judgments of individual Justices of the High Court to similar effect: see Lindner v Murdock’s Garage (1950) 83 CLR 628 at 646 per McTiernan J and 653 per Kitto J; Amoco at 317 per Gibbs J;
(e)the onus of showing that a contract in restraint of trade is injurious to the public lies on the party making that allegation: Herbert Morris at 700, 707-708; Esso Petroleum at 319;
(f)what is to be proved in both cases are facts, but the question of whether those facts make good the proposition that the restraint is reasonable is a question of law: Esso Petroleum at 319, Amoco at 317;
(g)in assessing what is reasonable the Court may take into account future probabilities that could have been foreseen: Adamson at 285-286; and
(h)in assessing what is reasonable, facts occurring after the restraint’s inception may, but need not, throw light on circumstances existing at the relevant date: Amoco at 318.
Two common forms of restrictive covenants are those imposed on employees, both during the term of employment and after termination, and those imposed in connection with the sale of a business. In the case of employee restraints, an employer may seek to protect its trade secrets, other confidential information and customer relationships, by restricting a former employee from engaging in employment or business activities that compete with the employer for a period following the termination of employment. In the case of business sales, the purchaser may seek to protect the value of the goodwill of the business purchased by restricting the seller from competing with the business sold for a period following the sale. Restraints of these kinds have commonly been considered by the courts. The restraints will be regarded as reasonable in so far as the scope of the restraint, including the duration, is such as to protect the legitimate interests of the employer or purchaser, as the case may be. Those interests typically relate to the goodwill of the business concerned, usually manifested in customer relationships, as well as trade secrets and confidential information.
A third category of restraint that has often been considered by the courts is what is often referred to as a vertical restraint, which is a restraint in connection with the supply or acquisition of goods or services. Typical vertical restraints include exclusive supply restrictions by which a supplier agrees to supply one or more purchasers exclusively, and exclusive purchase restrictions by which a purchaser agrees to acquire certain goods or services from one or more suppliers exclusively. Restraints of that kind usually operate during the term of the relevant supply or purchase agreement. They are also subject to the restraint of trade doctrine and will be void if they are unreasonable: see for example Esso Petroleum Co Limited v Harper’s Garage (Stourport) Limited [1968] AC 269.
The restrictive covenants in the present case, and particularly clause 15(a)(i), do not fall neatly in the foregoing categories. The relationship between the parties is not one of employment; there has been no sale of business between the parties; and the restraint does not involve a typical vertical restraint associated with the supply or purchase of goods or services. Rather, the relationship between the parties is one of supplier and distributor and the covenant in clause 15(a)(i) restrains SSS (as distributor) from conducting a business in competition with the business of a Tier 1 Supply Centre both during the term of the agreement and for a period after termination. It is unnecessary to consider the rationale for, and validity of, such a covenant during the term of the Tier 1 Supply Agreement. The present dispute will require an assessment of the rationale for, and validity of, the covenant after the termination of the Tier 1 Supply Agreement.
Dexion Au is, of course, entitled to restrain SSS from infringing its trade marks following the termination of the Tier 1 Supply Agreement. That is a separate question which is considered below. It may also be accepted that Dexion Au is also entitled to enforce a contractual restraint that prevents SSS from using Dexion Au’s trade secrets and confidential information following the termination of the Tier 1 Supply Agreement. However, such rights are not relied upon by Dexion Au in the present interlocutory application. The question for determination is whether Dexion Au is entitled to restrain SSS from conducting a competing business after the termination of the Tier 1 Supply Agreement.
Dexion Au argues that the restraint in clause 15(a)(i) is necessary to protect its goodwill. In my view, there are significant doubts about that contention. Goodwill ordinarily manifests in trade names, trade secrets and customer relationships. The covenant in clause 15(a)(i) is not targeted to the protection of those interests in a reasonable manner. It simply prevents SSS from conducting a competing business. Furthermore, it does so in circumstances where SSS conducted a competing business before it became a Tier 1 Supply Centre, and that was the only business it conducted. The effect of the covenant, which can be taken to be known to Dexion Au, would be to cause SSS to cease business altogether. The evidence adduced on behalf of Dexion Au shows that Dexion Au believes that the enforcement of the covenant is commercially advantageous to Dexion Au because it would remove a competitor from the market. Dexion Au considers that the removal of SSS as a competitor would increase its profits. It may be open to infer that the purpose of the restraint is simply to achieve that result: the removal of a competitor from the market. The covenant has the appearance of being a restraint of trade where “there is nothing more”: see Nordenfelt v Maxim Nordenfelt Guns and Ammunition Company Limited [1894] AC 535 at 565; Herbert Morris Ltd v Saxelby [1916] 1 AC 688 at 706; Bacchus Marsh Concentrated Milk Co Limited (In Liquidation) v Joseph Nathan and Co Limited (1919) 26 CLR 410 at 440; Peters (WA) Limited v Petersville Limited (2001) 205 CLR 126 at [43]-[44].
For those reasons, I consider that there is a serious question to be tried whether the covenants in clause 15(a), and particularly the covenant in clause 15(a)(i), are unenforceable. Overall, it is neither possible nor appropriate to assess the likelihood of success of Dexion Au or SSS in respect of the claim based on the restrictive covenants. It is sufficient to note that the question of the enforceability of the restrictive covenants significantly reduces the strength of Dexion Au’s prima facie case.
There is a further question that arises concerning the legality and enforceability of the restrictive covenant in clause 15(a)(i) that was not addressed by the parties. I refer to it because it is a matter of some importance and will need to be considered by the parties in the conduct of this proceeding. However, as the matter was not addressed by the parties, I make no findings about it. The question is whether the covenant in clause 15(a)(i) is a cartel provision within the meaning of s 45AD of the Competition and Consumer Act 2010 (Cth) (CCA). Relevantly, s 45AD defines a provision of a contract as a cartel provision if the following two conditions are satisfied:
(a)the provision has the purpose of directly or indirectly preventing, restricting or limiting the supply, or likely supply, of goods or services to persons or classes of persons by any or all of the parties to the contract; and
(b)at least two of the parties to the contract are or are likely to be, or but for the contract, would be or would be likely to be, in competition with each other in relation to the supply, or likely supply, of goods or services the subject of the provision.
Section 4F of the CCA provides that a provision of a contract shall be deemed to have had, or to have, a particular purpose if the provision was included in the contract for that purpose or for purposes that included that purpose and that purpose was or is a substantial purpose.
A cartel provision is unenforceable: see s 4L of the CCA and SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516 at [52]. It should also be noted that making a contract that contains a cartel provision and giving effect to the cartel provision involves both criminal offences and a civil contravention of the CCA: see ss 45AF, 45AG, 45AJ and 45AK.
In summary, in my view there is a serious question to be tried whether SSS’s current business activities contravene the restrictive covenant in clause 15(a)(i) of the Tier 1 Supply Agreement; and there is a serious question to be tried whether that restrictive covenant is enforceable or void by reason of the common law doctrine of restraint of trade. Other questions will also arise at trial: whether SSS can establish that its entry into the Tier 1 Supply Agreement was induced by conduct of Dexion Au in contravention of s 18 of the ACL, and whether the Court will declare the Tier 1 Supply Agreement to be void as a consequence. I expect the issues to be strongly contested. It is neither possible, nor desirable, to assess the respective strengths of the parties’ cases beyond what has already been said. However, the fact that the issues to be determined at trial are contestable bears upon the assessment of the balance of convenience and the decision whether to grant interlocutory relief.
Balance of convenience
Dexion Au submitted that the balance of convenience weighs in its favour. This is because competition from SSS has the potential to harm Dexion Au’s business by:
(a)diminishing the sales and profits of competing Tier 1 Supply Centres, which in turn will reduce Dexion Au’s profits (which are primarily derived from selling products to its Tier 1 Supply Centres); and
(b)diminishing the sales and profits of Dexion Au in so far as Dexion Au continues to supply storage products and systems directly to customers.
Dexion Au submitted that it will also suffer financially by reason of competition from SSS because:
(a)competition from SSS on price potentially means that, even where Dexion Au or a Tier 1 Supply Centre successfully wins a tender against SSS, the resulting prices and profit margins may be lower than if SSS was not competing against it;
(b)to the extent that SSS wins a tender, SSS will have the opportunity to build a closer relationship with the customer and thereby be in an advantageous position to win ongoing business, even after the restraint period expires;
(c)competition has the potential to harm the relationship between Dexion Au and other Tier 1 Supply Centres (which are subject to similar restraints to those agreed with SSS); and
(d)competition has the potential to undermine the strength of the Dexion brand and Dexion Au’s accrued goodwill in that brand in Australia.
Dexion submitted that the damage to its business is immeasurable and, in the circumstances, likely to be irreparable.
Conversely, Dexion Au submitted that any prejudice to SSS from the grant of the injunction is measurable in damages and any damage can be met by the undertaking as to damages. Dexion Au submitted that the evidence establishes that it has the financial capacity to satisfy the undertaking as to damages if called upon.
SSS advanced four arguments on the balance of convenience:
(a)First, if an injunction were granted, it would cause the demise of SSS and would amount to final relief. If SSS were restrained from carrying on its business, it would jeopardise the employment of 47 people and ongoing contractual obligations to third party customers.
(b)Second, if Dexion Au were successful at trial in showing that SSS has acted in breach of the restrictive covenant, damages would be an adequate remedy.
(c)Third, there has been unsatisfactory delay in Dexion Au seeking interlocutory relief. SSS gave notice of termination of the Tier 1 Supply Agreement on 7 February 2019 and yet Dexion Au waited almost seven months before seeking to restrain SSS and the Bells from operating their business.
(d)Fourth, the evidence before the Court does not establish that Dexion Au has sufficient assets in the jurisdiction to meet an undertaking as to damages.
I am persuaded that the balance of convenience favours the refusal of the application for an interlocutory injunction. That is for the following reasons.
First and foremost, the effect of the interlocutory injunction would be to restrain SSS from conducting its current business. That would be likely to result in the loss of employment of some 47 people. It would also disrupt the provision of products and services to SSS’s current customers. In that respect, I regard it as particularly significant that SSS has been conducting a business of supplying storage products since 2006. Until 2017, it conducted its business independently of Dexion Au. It is not clear from the evidence before the Court whether supply arrangements between Dexion Au and SSS were more strongly desired by Dexion Au or by SSS; perhaps the arrangement was seen to be mutually desirable at the time. Whatever the case, the evidence establishes that it would be highly prejudicial to SSS, its employees and customers to restrain it from conducting a business which it has been conducting since 2006. Damages would not be an adequate remedy for the prejudice that would be caused to SSS. For that reason, it is not necessary for me to determine whether Dexion Au has sufficient assets to meet an undertaking as to damages if it failed at trial.
Conversely, I consider that any harm which may be suffered by Dexion Au as a result of SSS continuing to compete against it can be adequately compensated by damages. I accept that the estimation of damages would involve some complexities. However, it is not a task that the Court is unfamiliar with.
While the evidence shows that SSS has competed against Dexion Au and its Tier 1 Supply Centres in a number of customer tenders and that SSS has been successful on a number of those tenders, the evidence falls a long way short of showing that competition from SSS will do irreparable damage to the business of Dexion Au and its Tier 1 Supply Centres. First, the evidence concerns only five tenders that have occurred since the termination of the agreement, four of which appear to have been won by SSS. There is no direct evidence of the value of the total market for racking and storage products in Australia, nor of the market share held by Dexion Au, its Tier 1 Supply Centres and SSS. Dexion Au adduced evidence of its total sales revenue between 2015 and 2019. The figures were said to be confidential and it is unnecessary to refer to them. However, the revenue constituted by the particular customer tenders referred to in the evidence represents a relatively small proportion of Dexion Au’s total annual revenue.
A further factor that weighs against the grant of an interlocutory injunction is the delay by Dexion Au in seeking interlocutory relief. It is significant that there is no evidence that, immediately following the termination of the Tier 1 Supply Agreement, Dexion Au took any steps to secure compliance with the restrictive covenants by SSS. The evidence shows that, on 11 April 2019, the lawyers for Dexion Au wrote to SSS and the Bells seeking to recover amounts invoiced but unpaid. The letter did not refer to the restrictive covenants. The notice of cross-claim filed by Dexion Au on 18 April 2019 sought a declaration that the restrictive covenants are binding and enforceable, but it did not seek any relief in respect of any breach of the restrictive covenants. It was only on 5 August 2019 that the lawyers for Dexion Au advised the lawyers for SSS that Dexion Au intended to seek the leave of the Court to file an amended notice of cross-claim and an amended concise statement of cross-claim alleging that SSS and the Bells have acted in breach of the restrictive covenants. While Dexion Au submitted that the delay in taking action on the restrictive covenants was caused by the fact that Dexion Au was not aware of the extent of SSS’s competitive activities, the evidence that has been filed on this application shows that the competitive activities commenced immediately after termination of the Tier 1 Supply Agreement and that various Tier 1 Supply Centres were aware of SSS competing against them on customer tenders. Mr Maycock of Dexion Au did not give direct evidence of when he became aware of SSS’s competitive activities, and as such there is no direct evidence supporting Dexion Au’s submission that it was not aware of those activities until August 2019.
Conclusion on the restrictive covenant

In conclusion, although there is a serious question to be tried whether the business activities of SSS are in breach of the restrictive covenants in clause 15(a) of the Tier 1 Supply Agreement, in my view the balance of convenience strongly favours the refusal of the application for an interlocutory injunction.
Trade mark infringement
By its interlocutory application, Dexion Au also seeks an order that, until the determination of its cross-claims in the proceeding or earlier order of the Court, SSS be restrained, whether by itself, its employees, agents or howsoever from any use of “Dexion” as a trade mark in marketing or promoting its goods to customers in Australia.
For the reasons that follow, I do not consider that Dexion Au has established a prima facie case of trade mark infringement and I therefore decline to make the order it seeks.
Section 120(1) of the Trade Marks Act 1995 (Cth) (Trade Marks Act) provides that a person infringes a registered trade mark if the person uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the trade mark in relation to goods or services in respect of which the trade mark is registered.
In E & J Gallo Winery v Lion Nathan Australia Pty Ltd (2010) 241 CLR 144, French CJ, Gummow, Crennan and Bell JJ approved (at [43]) the statement by the Full Court of the Federal Court in Coca Cola Co v All-Fect Distributors Ltd (1999) 96 FCR 107 at [19] that:
Use “as a trade mark” is use of the mark as a “badge of origin” in the sense that it indicates a connection in the course of trade between goods and the person who applies the mark to the goods … That is the concept embodied in the definition of “trade mark” in s 17 – a sign used to distinguish goods dealt with in the course of trade by a person from goods so dealt with by someone else.
As observed by their Honours (at [42]), the essential characteristics of a trade mark are distinguishing goods of a registered owner from the goods of others and indicating a connection in the course of trade between the goods and the registered owner.
A use of a mark in an advertisement for goods is a use in the course of trade and is a use in relation to the goods advertised: Shell Company of Australia Limited v Esso Standard Oil (Australia) Limited (1963) 109 CLR 407 at 422 per Kitto J; Moorgate Tobacco Co Limited v Philip Morris Limited (No. 2) (1984) 156 CLR 414 at 433-434 per Deane J (Gibbs CJ, Mason, Wilson and Dawson JJ agreeing).
In Scandinavian Tobacco Group Eersel BV v Trojan Trading Company Pty Ltd (2016) 243 FCR 152, the Full Court of the Federal Court observed (at [63]):
… a registered trade mark may be used in many different ways which do not involve physically applying the mark to goods. Trade mark use can also occur in relation to goods in print and electronic advertising, invoices, bills of lading and other commercial documents, or even in conversations between a salesperson and a customer…
The evidence establishes that Dexion Au is the owner of two registered trade marks under the Trade Marks Act which include the word “Dexion” as their sole or predominant element and which cover the racking products in issue in this proceeding. However, the evidence before the Court on this application does not establish a prima facie case that SSS has used or, more significantly, is threatening to use on an ongoing basis, the Dexion mark as a trade mark. Indeed, the evidence relied on by Dexion Au as to trade mark infringement is very sparse.
The evidence before me on this application shows that the Dexion brand was first created in London in 1937. The Dexion business expanded throughout Europe and the Asia-Pacific region and the international Dexion group of companies was acquired in 1999 by a Norwegian company known as Constructor. Subsequently, Constructor divested its ownership of the Dexion business in Australia and the Asia-Pacific region and ultimately that business was acquired by Tech-Link. The European side of the business was ultimately acquired by Gonvarri. It appears that Dexion Au has trade mark rights in respect of the Dexion brand in Australia and possibly throughout the Asia-Pacific, whereas Gonvarri has rights to that brand in Europe. There is no evidence of any licensing or other contractual arrangements between Dexion Au and Gonvarri in relation to the use of the Dexion brand in Australia. Accordingly, on the basis of the evidence currently before me, the importation of Gonvarri products bearing the Dexion brand into Australia would be likely to infringe Dexion Au’s trade marks.
In support of its claim that SSS has infringed Dexion Au’s trade marks, Dexion Au placed primary reliance upon a single conversation that occurred between Mr Ward of Dexion Citiport and Mr Rogerson of Dulux on or about 11 June 2019 in which Mr Rogerson said words to the effect that, if SSS was awarded the Dulux project as the successful tenderer, SSS intended to supply Dulux with “Dexion from Romania and Germany”. The evidence does not establish that SSS made that statement to Mr Rogerson in the course of offering goods for supply. While that is one possibility, it is equally possible that SSS identified Gonvarri as the source of products to be supplied by SSS, and Mr Rogerson saw the reference to Dexion on the Gonvarri website. If that occurred, there would not be any use by SSS of Dexion Au’s trade mark.
The other evidence relied on by Dexion Au on this application consists of copies of a page from SSS’s website that refers to the fact that SSS is now the exclusive Australian supplier of the Gonvarri range of European manufactured storage systems and, under a heading “European Manufacturing”, describes Gonvarri as a supplier of steel pallet racking and shelving systems under the brands Constructor, Kasten and Dexion. In my view, the evidence on its own does not establish a prima facie case of use of the Dexion brand by SSS in Australia. It is not apparent from the copies of the webpages adduced in evidence that SSS is seeking to offer Dexion branded products in Australia. Rather, the reference to the Dexion name is in the context of describing the business of Gonvarri as a European manufacturer. More is needed to show that SSS is using the Dexion mark as a badge of origin for the products being supplied by SSS.
In those circumstances, it is not necessary to consider the balance of convenience. There is simply insufficient evidence before me of trade mark infringement, or threatened trade mark infringement, to justify the grant of an interlocutory injunction.
Conclusion
In conclusion, I will dismiss the application for an interlocutory injunction. I will hear the parties on the question of costs.

I certify that the preceding one hundred and thirty (130) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Bryan.
Associate:
Dated: 1 November 2019

File number:	VID 188 of 2019
Judge:	O'BRYAN J
Date of judgment:	1 November 2019
Catchwords:	PRACTICE AND PROCEDURE – application for interlocutory injunction – restraint of trade – where interlocutory injunction sought to restrain conduct alleged to be in contravention restrictive covenants in supply agreement – serious question to be tried – whether cross-respondents’ business activities contravened restrictive covenants – whether restrictive covenants in supply agreement are enforceable – whether cross-claimant established prima facie case of trade mark infringement – where balance of convenience favours refusal of application – application refused CONTRACT – restraint of trade – where supplier and distributor entered into supply agreement – whether supplier entitled to interlocutory injunction to restrain conduct of distributor’s business after termination of supply agreement – possible contravention of the Competition and Consumer Act 2010 (Cth) INTELLECTUAL PROPERTY – trade mark infringement – whether cross-respondent used a mark belonging to the cross-claimant
Legislation:	Australian Consumer Law (Schedule 2 of the Competition and Consumer Act 2010 (Cth)) s 18 Competition and Consumer Act 2010 (Cth) ss 4F, 4L, 45AD Evidence Act 1995 (Cth) ss 55, 59, 135 Trade Marks Act 1995 (Cth) s 120(1)
Cases cited:	Australian Broadcasting Tribunal v O’Neill (2006) 227 CLR 57 Bacchus Marsh Concentrated Milk Co Limited (In Liquidation) v Joseph Nathan and Co Limited (1919) 26 CLR 410 Carlton & United Breweries (NSW) Pty Ltd v Bond Brewing NSW Ltd (1987) 76 ALR 633 Coca Cola Co v All-Fect Distributors Ltd (1999) 96 FCR 107 E & J Gallo Winery v Lion Nathan Australia Pty Ltd (2010) 241 CLR 144 Esso Petroleum Co Limited v Harper’s Garage (Stourport) Limited [1968] AC 269 Herbert Morris Ltd v Saxelby [1916] 1 AC 688 McHugh v Australian Jockey Club Limited (2014) 314 ALR 20 Moorgate Tobacco Co Limited v Philip Morris Limited (No. 2) (1984) 156 CLR 414 Nordenfelt v Maxim Nordenfelt Guns and Ammunition Company Limited [1894] AC 535 Peters (WA) Limited v Petersville Limited (2001) 205 CLR 126 Scandinavian Tobacco Group Eersel BV v Trojan Trading Company Pty Ltd (2016) 243 FCR 152 Shell Company of Australia Limited v Esso Standard Oil (Australia) Limited (1963) 109 CLR 407 SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516
Date of hearing:	1 October 2019
Registry:	Victoria
Division:	General Division
National Practice Area:	Commercial and Corporations
Sub-area:	Commercial Contracts, Banking, Finance and Insurance
Category:	Catchwords
Number of paragraphs:	130
Counsel for the Applicant and Cross-Respondents:	Mr T J North QC with Mr B J Murphy
Solicitor for the Applicant and Cross-Respondents:	Mansour Lawyers
Counsel for the Respondent and Cross-Claimant:	Mr P D Corbett QC with Mr H Forrester and Mr C P Thompson
Solicitor for the Respondent and Cross-Claimant:	Patane Lawyers

JUDGE:	O'BRYAN J
DATE OF ORDER:	1 NOVEMBER 2019