Smart EV Solutions Pty Ltd v Guy

Case [2023] FCA 1580

FEDERAL COURT OF AUSTRALIA

Smart EV Solutions Pty Ltd v Guy [2023] FCA 1580

File number: QUD 261 of 2023
Judgment of: DERRINGTON J
Date of judgment: 6 October 2023
Date of publication of reasons: 12 December 2023
Catchwords:

EQUITY – injunctions – confidential information – director / employee leaving companies in a corporate group and starting a new business in the same industry – evidence that some information taken – injunction granted

CORPORATIONS – director and employee duties – misuse of confidential information in competing business – breach of duties under Corporations Act 2001 (Cth) ss 181, 182 and 183 – injunction granted to restrain use of confidential information

Legislation:

Corporations Act 2001 (Cth)

Federal Court of Australia Act 1976 (Cth)
Cases cited:

AG Australia Holdings Ltd v Burton (2002) 58 NSWLR 464

Apotex Pty Ltd v Cipla Ltd [2017] FCA 1627

Armstrong World Industries (Australia) Pty Ltd v Parma (2014) 101 ACSR 150

Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57

Australian Securities and Investments Commission v Mauer-Swisse Securities Ltd (2002) 42 ACSR 605

Australian Securities and Investments Commission v Somerville (2009) 77 NSWLR 110

Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618

Blackmagic Design Pty Ltd v Overliese (2010) 84 IPR 505

Boardman v Phipps [1967] 2 AC 46

Commissioner for Corporate Affairs v Green [1978] VR 505

Commonwealth v John Fairfax & Sons Ltd (1980) 147 CLR 39

Dais Studio Pty Ltd v Bullet Creative Pty Ltd (2007) 165 FCR 92

Del Casale v Artedomus (Aust) Pty Ltd (2007) 73 IPR 326

DHL Supply Chain (Australia) Pty Limited v United Workers’ Union [2021] FCA 707

Digital Cinema Network Pty Ltd v Omnilab Media Pty Ltd (No 2) [2011] FCA 509

Digital Products Group Pty Ltd v Opferkuch [2008] NSWSC 575

Emeco International Pty Ltd v O’Shea [2012] WASC 282

Forkserve Pty Ltd v Jack (2001) 19 ACLC 299

Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd (2008) 81 IPR 1

GDP Group Pty Ltd v Saye [2022] FCA 688

HiTech Group Australia Ltd v Riachi [2021] NSWSC 1212

Huang v Wang [2015] NSWSC 510

Just Group Ltd v Peck (2016) 344 ALR 162

Krueger Transport Equipment Pty Ltd v Glen Cameron Storage & Distribution Pty Ltd (2008) 78 IPR 262

Liberty Financial Pty Ltd v Jugovic [2021] FCA 607

Links Golf Tasmania Pty Ltd v Sattler (2012) 213 FCR 1

Luvalot Clothing Pty Ltd v Dong [2022] FCA 1411

McNamara v Flavel (1988) 13 ACLR 619

New Aim Pty Ltd v Leung (2023) 410 ALR 190

New Aim Pty Ltd v Leung [2022] FCA 722

NP Generations Pty Ltd v Feneley (2001) 80 SASR 151

Plus One International Pty Ltd v Ching (No 3) [2020] NSWSC 1598

Prestige Lifting Services Pty Ltd v Williams (2015) 333 ALR 674

R v Byrnes (1995) 183 CLR 501

Rosetex Company Pty Ltd v Licata (1994) 12 ACSR 779

Samsung Electronics Co Ltd v Apple Inc (2011) 217 FCR 238

SBA Music Pty Ltd v…

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Details
AGLC
Smart EV Solutions Pty Ltd v Guy [2023] FCA 1580
Case
[2023] FCA 1580
Decision Date

CaseChat Overview and Summary

In this case, Smart EV Solutions Pty Ltd and Smart Grid Investments Pty Ltd, referred to as the applicants, sought an injunction against Mr Guy and Charge Hub, referred to as the respondents. The applicants alleged that Mr Guy, a former director and employee of the applicants, misappropriated confidential information in establishing and operating Charge Hub, a competing business within the same industry. The Federal Court was tasked with determining whether Mr Guy breached his duties under the Corporations Act 2001 (Cth) and whether an injunction should be granted to restrain the use of the applicants' confidential information.

The court considered whether Mr Guy breached his fiduciary duties under sections 181, 182, and 183 of the Corporations Act 2001 (Cth) by misusing confidential information in his competing business. The applicants argued that Mr Guy took some of their confidential information when he left their companies to start Charge Hub. The court found that there was sufficient evidence to support the applicants' claims, and that Mr Guy had indeed breached his duties. The court also found that the applicants had demonstrated a serious issue to be tried and that an injunction was necessary to protect their confidential information. The court thus granted the injunction to restrain the respondents from using, copying, forwarding, publishing, distributing, disclosing, impairing, deposing of, exploiting, or dealing with the applicants' confidential information.

The court further ordered that each respondent file an affidavit by a specified date, setting out which of the applicants' property listed in Annexure B it had or has had in its possession or control since 22 November 2022, and, if it no longer has that property in its possession or control, the circumstances in which that property is no longer in its possession or control. The court made no order as to costs.

The court's decision provides a clear framework for protecting confidential information in the context of corporate disputes. The court found that the applicants had demonstrated a serious issue to be tried and that an injunction was necessary to protect their confidential information. The court's decision also highlights the importance of complying with fiduciary duties under the Corporations Act 2001 (Cth) and the potential consequences of breaching those duties. The court's order requiring the respondents to file an affidavit regarding the applicants' property further demonstrates the court's commitment to ensuring that justice is served in this matter.

Orders

Orders of the court

1. From the date of this Order until judgment, or the earlier determination of this proceeding, each of the respondents be restrained from using, copying, forwarding, publishing, distributing, disclosing, impairing, deposing of, exploiting, or dealing with the applicants’ confidential information listed in Annexure A.

2. By 4:00 pm AEST on 13 October 2023, each respondent file an affidavit setting out:

(a) which of the applicants’ property, listed in Annexure B, it had or has had in its possession or control since 22 November 2022, and, if it no longer has that property in its possession or control, the circumstances in which that property is no longer in its possession or control; and

(b) details of who received the applicants’ property, listed in Annexure B, with sufficient detail to enable the first applicant to identify the person who gained possession.

3. There be no order as to costs.

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

Annexure A – Confidential Information

SEVS means Smart EV Solutions Pty Ltd ACN 650 654 916

SGI means Smart Grid Investments ACN 640 994 190

Confidential Information means:

(a) all documents, whether in hard or electronic form;

(b) that are not lawfully in the public domain;

(c) which contain or show SEVS’ or SGI’s;

i. supplier database details;

ii. customer lists, sales data, relationship contacts and similar information;

iii. client database detail;

iv. potential client lists;

v. sales history;

vi. financial information;

vii. marketing plans, operations and similar information;

viii. business operations and similar information;

ix. patent information (including provisional patent application 2020904801);

x. company records (including original agreements, resolutions, minutes);

(d) which were created by, at the instruction of, or for SEVS or SGI; and

(e) includes all emails sent to, or received by the email addresses:

i. support@smart-charge.com.au;

ii. paul.guy@smartevsolutions.com.au; and

iii. sales@ev-hub.com.au.

Annexure B – SEVS’ assets sold by the Respondents yet to be invoiced #

#

Item

Code

Quantity

1.

EDS - Business Line CombiPole for Double

EDSCombiPoleDBL

4

2.

Elvi Mounting Box (Ver 3)

EDSElviMountBox

11

3.

EVBox - BL 1Ph 32A 7.4kW, Sckt, Hub SGL, Shr, RCBO

EVB1321-E1802

1

4.

EVBox - BL Cover MAKROLON

RAL7043 (Traffic Grey B)

EVB707043-M

8

5.

EVBox - BusinessLine, Double, NO Shutter, Hub, 3P-

EVBB3322-E1801

4

6.

EVBox - Elvi V2 Wi-Fi/kWh/UMTS, 11 kW (3P-16A), Wh

EVBE3160-A15062- 11.2

7

7.

EVBox - Elvi V2 Wi-Fi, 11 kW (3P-16A),

White, T2,

EVBE3160-A45062- 11.2

1

8.

Teltonika RUTX10 Ethernet Router

TARUTX10000400

4

9.

NHP 40A 3 Pole 500V AC IP66 Lg N-

Line Ind Isolator

TZ11836

1

10.

Hager 32 Amp MCB/RCD RCBO C Curve 4 Pole 6kA 30mA

TZ75726

2

11.

Smappee - CT T16/100A 150CM Lead

VPTACCT100A

1

12.

Smappee - CT T24/200A 150CM Black

VPTACCT200A

1

13.

Smappee - CT T10/50A 150CM Lead

VPTACCT50A

1

14.

Wattwatchers Auditor 6W (WiFi) (Combo)

WWA6W

2

15.

Wattwatchers 120A CT (set of 3) for Auditor

WWCT-120

4

Background

Background to the litigation

In general terms, the parties have fallen into dispute as to whether Mr Guy, in establishing and operating the business of Charge Hub, is misusing confidential information that he has improperly obtained from the applicant companies with which he was formerly associated. Background An inordinate volume of material was filed for the purposes of this application. Much of it proved to be of little relevance, notwithstanding the seriousness of the allegations levelled against Mr Guy. At the outset of the proceedings, it was difficult to perceive through the quantity of filed material the limits of the case actually brought by the applicants. However, those limits have become clearer as the matter has progressed. What follows is an identification of the more salient facts.The formation of the SG Group In early 2020, Mr Guy and Mr Dale Cook (who presently remains a director of each of the applicant companies) had discussions about the prospect of going into business together. At that time, Mr Guy operated a business called “Smart Grid Solutions” as a sole trader. According to Mr Cook’s affidavit evidence in this proceeding, he initially offered advice to assist Mr Guy to “get his business off the ground” — including in relation to the setting up of a corporate structure. Some months later, he indicated to Mr Guy that he was interested in investing in the business. In May 2020, SGI was incorporated. Its sole director and secretary at the time of its incorporation was Mr Guy. On 1 June 2020, Mr Guy sent to Mr Cook an investor proposal. The two then engaged in further discussions. Mr Cook deposed that, in the course of those discussions, it was agreed that Mr Guy would transfer the business names, domain names, contracts, related intellectual property and other assets from his Smart Grid Solutions business to a new corporate entity within what would then be a nascent corporate group. In apparent accordance with this agreement, Smart Grid Solutions Pty Ltd (SGS) was incorporated on 6 July 2020. Its sole director and secretary at the time of its incorporation was Mr Guy, though his partner later replaced him as secretary. At some time between July and August 2020, Mr Cook and his wife decided to invest in SGI by purchasing shares in it. Mr Cook and Mr Guy then agreed the details of the investment and the structure of the business that would follow. Mr Cook became a director of both SGI and SGS on 13 August 2020. Regrettably, the details of the corporate structure that was subsequently erected remained somewhat elusive to both the Court and to Counsel for the applicants as at the time of the hearing of this application. However, it is sufficiently clear that SGS was wholly owned by SGI, and that the shareholders of SGI included:(a)Guy O’Sullivan Pty Ltd (GO Pty Ltd), which represented the interests of Mr Guy and his partner; and(b)DBSME Future Fund Pty Ltd (DBSME), which represented the interests of Mr Cook and certain other members of his family.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

In those circumstances, it is appropriate to make an order in the form proposed by the applicants, requiring the respondents to file an affidavit identifying, amongst other things, which items of the applicants’ property listed in the relevant annexure to the proposed orders has been in their possession or control since 22 November 2022. Conclusion In accordance with the foregoing reasons, the applicants should be granted relief generally in the nature of their proposed orders 1(a) and 3.Costs As to the question of costs, Mr de Waard sought the applicants’ costs of the application on a standard basis while Mr Jordaan submitted that they should be reserved. Although costs are to be awarded entirely in the discretion of the Court, the usual course in relation to interlocutory applications is that they be reserved. That is, essentially, because of the lower threshold that an applicant often needs to satisfy in such a context, which might allow it to achieve an initial success in the matter that it is later unable to maintain when the merits are assessed comprehensively at trial. There is, perhaps, good reason to reserve the costs here on precisely this basis. A difficulty with that, however, is that, if the question of costs is dealt with at a later time after a full hearing on the merits, then the acute circumstances of this application may have been forgotten. Mr Jordaan quite appropriately referred, in this connection, to the scattergun approach initially adopted by the applicants and the shambolic nature of the affidavit material and submissions first received in connection with this application. Maybe for that reason, the applicants might never deserve their costs of the application. On the other hand, the respondents’ approach also did not seem to coincide perfectly with their obligations under ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth). In particular, the respondents were reticent to explain the true circumstances surrounding Mr Guy’s forwarding of the emails from his SEVS email address to his personal email address. One might expect that the application could have been brought on more efficiently if those circumstances had been clarified earlier. Even if the question of costs was to be dealt with sometime later in the course of these proceedings, it could not justifiably be ordered that either side pay the other’s costs of this application. In those circumstances, it should be ordered that, in relation to this interlocutory application, there be no order as to costs.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.