Tracplus Global Limited v V2Track (2022) Limited

[2022] NZHC 1556

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV 2022-419-143

[2022] NZHC 1556

BETWEEN

TRACPLUS GLOBAL LIMITED

First Plaintiff

TRACPLUS AUSTRALIA PTY LIMITED
Second Plaintiff

TRACPLUS USA, INC.
Third Plaintiff

AND

V2TRACK (2022) LIMITED

First Defendant

BEVAN DIPROSE
Second Defendant

KYLAN DIPROSE

Third Defendant

Hearing:

28 June 2022

Appearances:

P J Napier and A Ryder for the plaintiffs

O C Gascoigne and L Walker for the defendants

Judgment:

1 July 2022

JUDGMENT OF CAMPBELL J

This judgment was delivered by me on 1 July 2022 at 2.00 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

TRACPLUS GLOBAL LIMITED v V2TRACK (2022) LIMITED [2022] NZHC 1556 [1 July 2022]

[1]                 The plaintiffs apply for interim injunctions against the defendants, requiring the defendants to deactivate communication connections provided to Queensland Parks and Wildlife Services (QPWS), a customer of the second plaintiff. The plaintiffs say the defendants are unlawfully retaining those connections, thereby preventing the second plaintiff from being able to provide communication and tracking services that the second plaintiff is contracted to supply to QPWS.

Background

[2]                 The first plaintiff, TracPlus Global Ltd (TracPlus), provides software for tracking and communication using satellites. It has over 700 customers in over 44 countries. Its software is primarily used by aviation first responder organisations.

[3]                 TracPlus has two subsidiary companies: the second plaintiff, TracPlus Australia Pty Ltd (TracPlus Australia), and the second plaintiff, TracPlus USA, Inc. As the names suggest, those companies are incorporated in Australia and the United States of America respectively. Both subsidiaries are entirely controlled by TracPlus. It will be unnecessary for me to refer to TracPlus USA, Inc further.

[4]                 TracPlus primarily provides software, though it also provides tracking hardware through partnerships with third party manufacturers.

[5]                 In simple terms, each aircraft or vehicle that is tracked contains a hardware device that communicates via the Iridium satellite constellation (Iridium). Iridium remits data to and from the TracPlus servers. Each hardware device is referred to as aligning with a “connection”.

[6]                 According to the affidavit evidence filed by the plaintiffs, the connections to Iridium are critical to TracPlus’s operations. TracPlus’s customers mostly operate in remote or challenging locations outside cellular coverage. Data is sent from an aircraft or vehicle via its device connection to an Iridium satellite. From there it is relayed to an earth station, to TracPlus via the Internet, then back the other way.

[7]                 In May 2020, TracPlus agreed to acquire the business of V2 Track Ltd, a company based in Cambridge, New Zealand, that manufactured tracking hardware.

V2 Track Ltd also provided tracking software known as the V2 platform. V2 Track Ltd had about 600 Iridium connections, which TracPlus acquired under the agreement. V2 Track Ltd’s directors were Bevan and Kylan Diprose, who are the second and third defendants.

[8]                 The acquisition of V2 Track Ltd’s business did not work out as well as TracPlus had hoped. In late December 2021, TracPlus agreed to sell the V2 business to a new company set up by Kylan and Bevan Diprose, v2track (2022) Ltd (v2track), the first defendant. On 21 December 2021, an Asset Transfer and Software Licence Agreement (ATSLA) was entered into by TracPlus, v2track and Kylan and Bevan.

[9]                 As part of the ATSLA, TracPlus assigned to v2track all rights of TracPlus under contracts with customers specified in sch 1 to the ATSLA. Schedule 1 specified that QPWS was one of TracPlus’s customers whose contracts were assigned to v2track. Schedule 1 stated that there were 109 connections in respect of QPWS.

[10]             The completion date under the ATSLA was 31 December 2021. From that date, or not long after, it appears that v2track was entitled (as between itself and TracPlus) to provide tracking services to the customers whose contracts had been assigned to it under the ATSLA. I say “appears” because there is a dispute as to whether those assignments, or at least the assignment of TracPlus’s contract with QPWS, was effective without one or other of the parties obtaining the consent of the third party (such as QPWS) to effect the assignment. I do not have to resolve that dispute here. I proceed on the assumption that there was an effective assignment of TracPlus’s contract with QPWS to v2track.

[11]             In early February 2022, in order to provide tracking services to the assigned customers, v2track transferred to itself the Iridium connections for the assigned customers, including QPWS. It did so by deactivating those connections from TracPlus’s account with Iridium.

[12]             TracPlus was concerned about the manner in which v2track deactivated the connections. Its view was, and remains, that v2track had no authority to deactivate connections from TracPlus’s account with Iridium. It believes that v2track became

able to deactivate the connections only by Bevan representing himself to Iridium as an employee of TracPlus, when he was not. TracPlus says, further, that v2track then deactivated the connections covertly over a long weekend.

[13]             Bevan and v2track firmly reject those accusations. They say that they were authorised to deactivate the connections and that their actions were overt.

[14]             I do not have to resolve this dispute, as it is not relevant to determining the interim injunction application. As will become apparent, the application turns not on the legitimacy of v2track’s deactivation of the Iridium connections from TracPlus’s account, but on the legitimacy of v2track retaining certain of those connections — namely, the connections for QPWS that v2track holds.

QPWS ends the (assigned) contract with v2track, and enters into a new contract with TracPlus

[15]             QPWS is a business division of the Department of Environment and Science within the Government of Queensland. QPWS manages and maintains protected areas within Queensland, such as national parks and state forests.

[16]             From 2020, QPWS engaged TracPlus Australia to provide a redundant communication system for communication with, and tracking of, staff in remote areas. The system is remote in the sense it is the failsafe when mobile phone or radio are unavailable. That is usually in extreme or remote areas.

[17]             Gregory Carter, a senior ranger (assets) with QPWS, has made an affidavit in support of TracPlus’s application. Mr Carter says that prior to adoption of the TracPlus system, there were a number of fatalities over the past decades where not having a failsafe system had led to serious injury or death.

[18]             Mr Carter says the most recent contract (before 2022) that QPWS entered into with TracPlus Australia was on 3 June 2021 (the 2021 contract). The 2021 contract documents are a “short form” containing details specific to that contract and “basic purchasing conditions” that appear to be standard conditions used by the Queensland Government for its contracts.

[19]             Mr Carter says there is no specific end date in the 2021 contract, but that the short form refers to the provision of certain hardware (which presumably has been delivered) and to the provision of communication and tracking services from “June 2021 to May 2022”. Mr Carter says QPWS therefore considered the 2021 contract to end on 31 May 2022.

[20]             Mr Carter says that, although he is unsure whether QPWS received a formal notice of assignment of the 2021 contract to v2track, QPWS became aware earlier this year that v2track had taken over responsibility for providing the services previously provided by TracPlus Australia.1

[21]             Mr Carter says that QPWS experienced a noticeable drop in quality once v2track started providing the services. He says rangers have been losing connections for varying amounts of time. Mr Carters says he is not overstating matters by saying that if the system is down, the results could, in the wrong circumstances, be fatal.

[22]             For that and other reasons, QPWS was keen to reinstate its relationship with Tracplus Australia when the 2021 contract expired. In early April 2022, QPWS entered into a contract with TracPlus Australia for the provision of services from     1 June 2022 (the 2022 contract).

[23]             For TracPlus Australia to be able to provide the services to QPWS under the 2022 contract, QPWS’s connections to Iridium had to be moved from v2track to TracPlus Australia. On 27 April 2022, TracPlus advised v2track of the 2022 contract and asked for v2track’s cooperation in the transfer of the connections. A reply came from v2track the next day. v2track raised a number of issues with TracPlus’s alleged non-compliance with obligations under the ATSLA. But its reply did not engage with TracPlus’s request for cooperation in the transfer of the connections.

1      Before me, the parties did not raise any issue about the 2021 contract being with TracPlus Australia rather than TracPlus. TracPlus Australia is not a party to the ATSLA. I have not reviewed the ATSLA to see whether its effect was to assign to v2track contracts to which TracPlus Australia was a party. I proceed on the assumption it did. If it did not do so, the case for an injunction would be stronger.

[24]             On 13 May 2022, QPWS emailed v2track informing them of the 2022 contract with TracPlus Australia and asking v2track to deactivate all connections on the morning of 1 June 2022. v2track did not respond until 2 June 2022. It said that it had been “unable to action your request as of yet”. It then said that TracPlus had sold to v2track a number of customers, including QPWS, and that TracPlus had been in the process of transferring those customers to v2track. It said that it had requested information from TracPlus “so that we can determine the appropriate steps to take”.

[25]             By 13 June 2022, v2track had still not deactivated the connections. That day, QPWS emailed v2track again. It said that if the 2021 contract had not come to an end on 31 May 2022, then QPWS’s email of 13 May 2022 had been notice of cancellation of the 2021 contract. For the avoidance of doubt, the email continued, if the 2021 contract had not already expired or been cancelled, “we hereby cancel it”. QPWS again asked v2track to immediately deactivate the connections to Iridium that v2track holds for QPWS. (I pause to observe that the 2021 contract allows QPWS to terminate the contract by written notice, without cause: cl 12.3 of the basic purchasing conditions.)

[26]             v2track responded on 14 June 2022. It said it was unable to action QPWS’s request as it was awaiting some key information from TracPlus. It said this information was needed to “confirm the scope of the [2021] contract”.

[27]             Meanwhile, QPWS has reminded TracPlus Australia that QPWS is entitled to cancel the 2022 contract on notice. I infer that QPWS would prefer not to do this and would rather see TracPlus Australia be in a position to provide its services. But I also infer that QPWS would not be prepared to wait a significant time for that to happen.

[28]             A few days later, on 17 June 2022, the plaintiffs commenced this proceeding and applied for an interim injunction requiring the defendants to deactivate the Iridium connections for QPWS that it holds. (The plaintiffs also sought an interim injunction in relation to another aspect of its business, but that part of its application was overtaken by events.)

The plaintiffs’ substantive claim

[29]             The plaintiffs’ claims in respect of QPWS are currently pleaded at a fairly high level. Mr Gascoigne, counsel for the defendants, said that the claim could be viewed either as a claim for the tort of inducing breach of contract or as a claim for the tort of causing loss by unlawful means. I agree with that observation. Some of the language used in the statement of claim is more apt to the former tort. But the factual allegations (and the pleaded facts are what matters) could be viewed as fitting either tort.

[30]I return to the elements of those torts below.

Principles governing applications for interim injunctions

[31]These principles were not in dispute. I have to consider:

(a)Have the plaintiffs established a serious question to be tried?

(b)Where does the balance of convenience lie?

(c)What is the overall justice of the case?

[32]             A relevant consideration is that the plaintiffs are seeking an interim mandatory injunction.

Have the plaintiffs established a serious question to be tried?

[33]             As noted, the plaintiffs’ claimed could be viewed as pleading either of two torts.

Inducing breach of contract

[34]Mr Napier, counsel for the plaintiffs, submitted that for this tort there must be:

(a)A  legally enforceable contract.   The plaintiffs say this is the 2022 contract between TracPlus Australia and QPWS.

(b)The defendants must have engaged in conduct which induced a breach of contract. The plaintiffs say v2track’s refusal to deactivate the connections is conduct that has induced TracPlus Australia to breach its 2022 contract with QPWS. This is because, without that deactivation, TracPlus Australia cannot provide the contracted services under that contract.

(c)The defendants must have known that their conduct would induce the breach. The plaintiffs say this knowledge is evident from QPWS and TracPlus informing v2track of the 2022 contract and repeatedly requesting the deactivations.

(d)The defendants’ conduct inducing the breach must have caused loss or damage to the plaintiff. The plaintiffs say that if the connections are not deactivated, TracPlus Australia will suffer loss or damage by being exposed to a liability to QPWS for breach of contract and by losing profits from ongoing contracts with QPWS.

(e)The defendants’ conduct must have been without lawful justification. The plaintiffs say that v2track has no lawful justification for refusing to deactivate the connections.

[35]             The defendants dispute many of these elements. But Mr Gascoigne, counsel for the defendants, submitted there was a more fundamental problem. He submitted that this tort was one of secondary liability. An essential element of the tort was that the plaintiff’s counterparty (here, QPWS) was primarily liable for breach of contract, with the plaintiff seeking to make the defendant liable as an accessory to the liability of the contracting party.

[36]             In response, Mr Napier accepted it was unusual for this tort to be pursued by the party who was in breach of the underlying contract. But he reminded me that the plaintiffs only had to show a reasonably arguable case on this application.

[37]             I accept Mr Gascoigne’s submission. I am not aware of any authority where the party in breach of the underlying contract has been successful against (or even sued) a third party in tort for inducing the plaintiff’s breach. This, presumably, is because the tort has always been conceived of and expressed as one of accessory (or secondary) liability. The tort presumes that the counterparty to the underlying contract (rather than the plaintiff) is the one in breach. This is how the tort is described and explained by Lord Hoffmann in OBG Ltd v Allan.2 Lord Hoffmann does this several times. Two examples will suffice:

[T]he important point to bear in mind about Lumley v Gye [which established liability for inducing breach of contract] is that the person procuring the breach of contract was held liable as accessory to the liability of the contracting party.³

Under Lumley v Gye … the breach of contract is of the essence. If there is no primary liability, there can be no accessory liability.⁴

[38]             The point is one of substance, not mere description. In OBG, Lord Hoffmann distinguished the tort of inducing breach of contract from the tort of causing loss by unlawful means. The latter tort, he said:5

… requires the use of means which are unlawful under some other rule (“independently unlawful”) whereas liability under Lumley v Gye … requires only the degree of participation in the breach of contract which satisfies the general requirements of accessory liability for the wrongful act of another person … .

[39]             In short, TracPlus needs to show that v2track’s refusal to deactivate the connections is independently unlawful. If the plaintiffs’ claim were to be considered under the tort of inducing breach of contract, they would be avoiding that requirement.

[40]             In my view, this point is so clear that the plaintiffs’ claim under this tort is not arguable.

2      OBG Ltd v Allan [2007] UKHL 21, [2008] 1 AC 1.

3 At [5].

4 At [8].

5 At [8].

Causing loss by unlawful means

[41]             The essence of this tort is (a) a wrongful interference with the actions of a third party in which the plaintiff has an economic interest and (b) an intention thereby to cause loss to the plaintiff.6 The relevant elements are that:

(a)The defendant has deliberately used unlawful means to interfere with the actions of a third party.

(b)The defendant has done so with the intent to cause loss to the plaintiff.

[42]             On this application, therefore, the plaintiffs have to establish that it is reasonably arguable that:

(a)v2track’s retention of the Iridium connections for QPWS is unlawful; and

(b)v2track has retained those connections with the intent to cause loss to the plaintiffs.

[43]             As to the first element, Mr Gascoigne submits that v2track’s retention of the connections is not unlawful. He says there has been no “valid request” for those connections to be deactivated because v2track has consistently informed both TracPlus and QPWS that “it was not able to carry out the deactivation without basic information regarding the contracts which v2track acquired under the ATSLA”.

[44]             I agree that v2track has consistently informed TracPlus and QPWS that that is v2track’s position. But I consider it reasonably arguable (at the least) that its refusal to deactivate the connections is unlawful. This is because:

(a)It is well arguable that the 2021 contract, which was assigned to v2track, has come to an end either by expiry or by termination on notice.

6 At [47].

(b)v2track says it is not clear that the 2021 contract was the only contract between QPWS and TracPlus Australia. v2track therefore says there may be other QPWS contracts that were assigned to it and that remain extant. It is sufficient at this point to say it is reasonably arguable that the 2021 contract was the only contract. That is clearly the view of the contracting parties, TracPlus Australia and QPWS. One would expect them to know.

(c)If there is no longer any contractual relationship between v2track and QPWS, there is no longer any reason for v2track to retain the connections. The 2021 contract has no express provision obliging the service provider to deactivate the connections when the contract comes to an end. But, given the context, it is well arguable that such an obligation is implied. Otherwise, v2track could retain the connections indefinitely.

(d)It is therefore reasonably arguable that, as between v2track and QPWS, v2track’s refusal to deactivate the connections is a breach of contract and therefore unlawful.

(e)v2track’s refusal to deactivate the connections relies on complaints it makes as to TracPlus’s compliance with its obligations under the ATSLA. It is not necessary for me to address whether TracPlus is in breach of the ATSLA in those respects, as any such breach would merely be a matter between v2track and TracPlus. It would not justify v2track’s (arguable) breach of the contract with QPWS.

[45]             As to the second element, I find it reasonably arguable that v2track has been retaining the connections with the intent to cause loss to TracPlus and TracPlus Australia. In its correspondence, v2track told QPWS that it was “unable” to deactivate the connections because of a lack of information from TracPlus. But it appears from the correspondence, including an open offer made by v2track after the application was made, that v2track is able to deactivate all the connections that it currently holds for QPWS. It appears the issue is not one of inability, but of wanting TracPlus to provide

it with more information that v2track considers TracPlus is obliged to provide under the ATSLA. I find it is reasonably arguable, therefore, that by refusing to deactivate the connections v2track intends to cause loss to TracPlus and TracPlus Australia in order to pressure those parties to provide that information. That v2track arguably has this intent to cause loss suffices. That it pursues this intent with another ultimate goal in mind is irrelevant.

Where does the balance of convenience lie?

[46]             The potential losses that would be suffered by TracPlus Australia if it incurred liability to QPWS for breach of the 2022 contract would be relatively easy to calculate and would be an adequate remedy for TracPlus Australia. But that would not be the limit of the loss. There is every chance QPWS would decline to engage TracPlus Australia for the foreseeable future. There might be damage to the commercial reputation of both TracPlus Australia and TracPlus. Damages for those losses would not be easy to calculate. There is therefore a serious risk that damages would not be an adequate remedy for the plaintiffs.

[47]             I also have to consider whether, if I granted an interim injunction and v2track ultimately succeeded at trial, v2track would be adequately compensated under the plaintiffs’ undertaking as to damages for any loss sustained in the meantime. v2track says the consequences of deactivation are unknown “without knowing the relevant contractual arrangements between TracPlus and QPWS”. But it says that it may have to give away valuable assets or contractual rights, or be exposed to unknown liabilities, if required to deactivate the connections. It says, for instance, that there may be connections that are not covered by the 2022 contract and in respect of which v2track remains entitled to provide a service. But in my view none of these matters, even if currently unknown, is not adequately calculable and compensable in damages.

[48]               Also relevant is the apparent strength of the case. As should be apparent from my analysis above, I regard the plaintiffs’ case as a strong one.

[49]             The mandatory nature of the interim injunction sought by the plaintiffs is relevant. But, as the Court of Appeal has said, what matters is not the label of the

injunction but the practical implications of the order for the affected parties.7 On the material before me, I do not regard the implications for v2track as significant. I regard the implications for TracPlus and TracPlus Australia as more significant, and for QPWS as very significant indeed.

[50]             In interim injunction applications, it is often said the prudent course is to preserve the status quo. However, v2track acknowledges the status quo is arguable. I regard this point as neutral.

[51]             v2track says that an important factor against a grant of interim relief is that TracPlus Australia could, even without the injunctions, provide the relevant service to QPWS by providing new hardware. There is evidence this would cost in the order of

$250,000. I am not persuaded by this point. It is a reasonable inference that this hardware could not be supplied expeditiously. Quite apart from supply chain issues that are affecting commerce everywhere, there are over 100 connections on devices contained in aircraft and vehicles throughout Queensland, presumably some of them currently in remote locations.

[52]             Considering all of these matters, in my view the balance of convenience favours the grant of the interim injunctions.

What is the overall justice of the case?

[53]             An unusual aspect of this application is that QPWS, a third party, has expressed serious concerns about the safety of its staff if v2track does not deactivate the connections.

[54]             v2track does not accept that the service it has provided to QPWS has been in any way deficient. v2track says that QPWS did not raise these issues prior to purporting to bring the 2021 contract to an end.

[55]             At this point I cannot make any findings as to the quality of v2track’s services. It is not necessary for me to do so.  QPWS’s concerns appear to be genuinely held.

7      Commerce Commission v Viagogo AG [2019] NZCA 472, [2019] 3 NZLR 559 at [90].

They are concerns held by a governmental body. I give them weight in considering where the overall justice lies.

[56]             QPWS’s concerns favour the grant of the interim relief sought by the plaintiffs. Together with the matters I have referred to when considering the balance of convenience, I consider that overall justice favours relief being granted.

Result

[57]I order that:

(a)The first defendant deactivate the Iridium connections for QPWS that it holds.

(b)The second and third defendants cause the first defendant to deactivate the Iridium connections for QPWS that the first defendant holds.

[58]             My provisional view is the plaintiffs are entitled to costs on the application. I have not considered whether that entitlement may be affected by part of the application having been overtaken by events. If costs cannot be agreed, brief memoranda (no longer than two pages each, excluding any relevant schedule or annexure) may be filed.

Campbell J