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Federal Court of Australia |
Last Updated: 28 January 2009
FEDERAL COURT OF AUSTRALIA
Tennant Ltd v Uhlen [2009] FCA 29
EQUITY – application to extend
interim injunction – respondent said to have breached fiduciary duty to
former employer by using
confidential information to acquire business
opportunity – serious question to be tried – balance of convenience
favours
grant of injunction – terms of order refined – injunction
granted
Canadian Aero Service Ltd v
O’Malley 40 DLR (3d) 371 referred to
Consul Developments Pty Ltd
v DPC Estates Pty Ltd [1975] HCA 8; (1975) 132 CLR 373 referred to
Pilmer v Duke
Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165 referred to
Ridgeway
International Ltd v McCullum (unreported, Supreme Court of New South Wales
(Equity Division), Bryson J, 9 April 1998) referred to
Meagher R, Heydon D & Leeming M,
Equity Doctrines & Remedies (4th ed, Butterworths
LexisNexis, 2002)
TENNANT
LTD and NONOX AUSTRALIA PTY LTD v STIG UHLEN, DENOX PTY LTD, LAUNCHPAD NOMINEES
PTY LTD, PETER O'MEARA and ROSS JOHN GRAHAM
NSD 1932 of
2008
JACOBSON J
16 JANUARY
2009
SYDNEY
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AND:
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THE COURT:
1. ORDERS that until further order, the First Respondent is restrained by himself, his servants or agents or otherwise, from:
(a) being knowingly involved in the business of the Second Respondent or any other business involving the distribution or supply of AdBlue&tm; that uses money or finance offered, procured or made available by or with the assistance or co-operation of Launchpad Nominees Pty Limited trading as "Carbon Alliance" or any associate of Launchpad Nominees Pty Limited;(b) disclosing or using any of the confidential information referred to in paragraphs 26, 28, 36, 45 and 60 of the affidavit of Stephen Becher Wolfe sworn 12 December 2008, paragraph 8 of the affidavit of Benjamin Lau sworn on 13 December 2008, and paragraph 9 of the affidavit of Stewart Anthony Robinson sworn on 12 December 2008.
For the purposes of this order, "associate" means:
(a) a director or secretary or shareholder of Launchpad Nominees Pty Limited,
(b) a related body corporate of Launchpad Nominees Pty Limited,
(c) a director or secretary or shareholder of the related body corporate of Launchpad Nominees Pty Limited; and
(d) an agent of or partner of the director or secretary or shareholder of Launchpad Nominees Pty Limited or a related body corporate of Launchpad Nominees Pty Limited, or any person in concert with whom the director, secretary or shareholder of Launchpad Nominees Pty Limited or a related body corporate of Launchpad Nominees Pty Limited is acting or proposes to act.
2. ORDERS that until further order, each of the Second, Third, Fourth and Fifth Respondents is restrained from directly or indirectly, disclosing or using any of the confidential information referred to in paragraphs 26, 28, 36, 45 and 60 of the affidavit of Stephen Becher Wolfe sworn 12 December 2008, paragraph 8 of the affidavit of Benjamin Lau sworn on 13 December 2008, and paragraph 9 of the affidavit of Stewart Anthony Robinson sworn on 12 December 2008.
3. ORDERS that the costs of the interlocutory application:
(a) as between the Applicants and the First and Second Respondents be costs in the cause; and(b) as between the Applicants and the Third, Fourth, and Fifth respondents be reserved.
4. ORDERS that each party have liberty to apply on 2 days’ notice or on such shorter notice as a Judge might allow.
5. ORDERS that the proceedings stand over to 9.30 am, 11 February 2009 for directions.
6. ORDERS, pursuant to s 50 of the Federal Court of Australia Act
1976 (Cth), that the contents of Confidential Exhibit SBW, Confidential
Exhibit BJ and Confidential Exhibit A not be disclosed to anyone
other than the
legal representatives of the
parties.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal
Court Rules.
The text of entered orders can be located using eSearch on the
Court’s website.
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BETWEEN:
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TENNANT LTD
First Applicant NONOX AUSTRALIA PTY LTD Second Applicant |
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AND:
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STIG UHLEN
First Respondent DENOX PTY LTD Second Respondent LAUNCHPAD NOMINEES PTY LTD Third Respondent PETER O'MEARA Fourth Respondent ROSS JOHN GRAHAM Fifth Respondent |
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JUDGE:
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JACOBSON J
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DATE:
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16 JANUARY 2009
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PLACE:
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SYDNEY
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REASONS FOR JUDGMENT
1 The applicants apply to continue, until further order, three orders, which I made on 18 December 2008. Those orders are Orders 3(a), 3(b) and 4. The continuation of Orders 3(b) and 4 is not opposed. The only question, therefore, is whether I ought to continue Order 3(a), which is in the following terms:
3. [The Court] Orders that up to 19 January 2009 or further order, the First Respondent is restrained by himself, his servants or agents or otherwise, from:(a)_being knowingly involved in the business of the Second Respondent or any other business involving the distribution or supply of AdBlueTM that uses money or finance offered, procured or made available by or with the assistance or co-operation of any member or participant in the venture known as "Carbon Alliance" or any associate of any such member or participant;...
For the purposes of this order, "associate" means:
A. where the member of or participant in the venture known as Carbon Alliance is a body corporate:
(i) a director or secretary or shareholder of the body corporate, and(ii) a related body corporate,
(iii) a director or secretary or shareholder of the related body corporate; and
(iv) an agent of or partner of the director or secretary or shareholder of the body corporate or related body corporate, or any person in concert with whom the director, secretary or shareholder of the body corporate or related body corporate is acting or proposes to act;
B. where the member or participant of Carbon Alliance is a natural person, a partner or agent of the member or any person in concert with whom the member is acting or proposes to act.
2 The grounds upon which the relief is sought are as set out in the written submissions filed by the applicants in support of continuation of the interlocutory injunction. I will mark the submissions MFI 1, and they can remain with the Court papers.
3 The essential grounds upon which the applicants rely are as follows. While employed by Tennant, and by misusing confidential information belonging to the applicants, Mr Uhlen misappropriated for his own benefit and for the benefit of Denox, a business opportunity which he had been engaged by the applicants to pursue on behalf of Nonox. Mr Uhlen attempted to and, unless restrained, may continue to exploit that business opportunity for his benefit and that of Denox, and the venture described in the evidence as Carbon Alliance. Mr Uhlen may do so by further misusing confidential information belonging to the applicants.
4 The facts which have been established at this stage of the proceeding, are set out in the applicants’ written submissions. For convenience I will set out the relevant paragraphs of those submissions in my reasons for judgment:
7. Mr Uhlen commenced his employment with Tennant in or about March 2002 as a senior trader and product manager. 8. In 2004, Tennant commenced a business under the name of "Nonox AdBlue" (AdBlue business) which consisted in the marketing and distribution of:9. In or about the second half of 2005 Mr Uhlen’s duties expanded to include work in Tennant’s AdBlue business. 10. In or about August 2007, Tennant’s managing director, Mr Wolfe, informed Mr Uhlen that Tennant’s AdBlue business had the potential to become a global business, but that, if that were to occur, Tennant needed to bring in outside investors to fund an accelerated "rollout of our infrastructure". Mr Uhlen was then directed that his sole focus as employee of Tennant would be on the Nonox AdBlue business. 11. During the period from late 2007 to around August 2008, Mr Wolfe unsuccessfully sought joint venture partners as a means to obtain capital to fund the roll out. In or about August 2008, Mr Wolfe engaged Maxiem Pty Limited to seek out venture capital. 12. Shortly before 1 September 2008, Mr Wolfe instructed Mr Uhlen to update a financial model that Mr Uhlen helped to prepare in connection with Mr Wolfe’s discussions with one potential joint venture party, and to prepare an information pack for prospective investors. Mr Wolfe also informed Mr Uhlen that Mr Uhlen and Tennant’s chief financial officer, Mr Farmer would have the carriage of discussions with potential investors. 13. In early September 2008, Mr Uhlen informed Mr Wolfe that Mr Uhlen had been referred a group of investors known as "Carbon Alliance". On 16 September 2008, Mr Wolfe and Mr Uhlen met with the fourth respondent, Mr O’Meara, and a Mr Collins. During the meeting, Mr O’Meara introduced Carbon Alliance to Mr Wolfe, and Mr Uhlen gave a presentation. The substance of what Mr Uhlen presented is recorded in a confidential document that Mr Uhlen prepared. That document set out background to the SCR technology and the Nonox AdBlue business, distribution channels for AdBlue, projected financial results for the period 2008-2013 (revenue, EBITDA, net cash flow, cumulative cash flow), assumptions underlying the financial projections, and the proposed strategy for achieving the projected financial results. 14. After Mr Uhlen’s presentation, Mr O’Meara said that "we would be potentially interested in an investment in Nonox" and, after Mr Wolfe said that Nonox was looking "to sell 25% to 30% of the equity in Nonox for an investment of $10 million", Mr O’Meara said that that sounded reasonable. 15. A further meeting took place on 20 September 2008 but without Mr Wolfe. Before that meeting, Mr Wolfe informed Mr O’Meara that he was going on leave, but that Mr Uhlen and Mr Farmer would have carriage of the project, and be in a position to give Mr O’Meara more in depth information. Mr Wolfe confirmed this by an email sent on 17 September 2008. 16. On 7 October 2008, Mr Uhlen informed Mr Wolfe that "this Carbon Alliance thing is going to happen" and that "they want decision makers at the meeting booked for Thursday". A meeting took place on 9 October 2008 during which Mr O’Meara reiterated Carbon Alliance’s interest in investing in Nonox. Mr O’Meara stated, however, that he needed a "firm proposal from you", a list of the key assumptions behind Nonox’s financial model, forecast financials, the detailed cashflow for the next two years, the rollout plan for infrastructure, and the proposed application of funds. 17. By email sent on 17 October 2008, Mr Wolfe provided to Mr O’Meara a draft terms sheet and a document headed "forecast assumptions". The "forecast assumptions" contained forecast SCR vehicle sales, market share, market growth rates, AdBlue consumption as a percentage of diesel consumption, fuel consumption per 100 kilometres, market segmentation of demand for Truck Stops and home depots, forecast bulk tank roll out, asset utilisation, capital costs of tanks, consolidated forecast profit and loss for 2009 to 2013, the net present value of forecast profit, and a two year cashflow. 18. According to Mr Wolfe, on 28 October 2008 Mr O’Meara informed Mr Wolfe that things looked positive. However, the next day, Mr O’Meara informed Mr Wolfe that one of Carbon Alliance’s investors would not be receiving money he expected to receive and, for that reason, Carbon Alliance needed to put everything "on hold". Mr Wolfe said that Nonox would still look for investors, but also said that he would welcome the participation of Carbon Alliance should money become available to them. 19. After Mr O’Meara informed Mr Wolfe on 29 October 2008 that Carbon Alliance needed to put everything "on hold", the following occurred:(a) a solution known as "AdBlue" which is used in vehicles which have included in them a pollution control technology called Selective Catalytic Reduction (SCR);
(b) equipment to store AdBlue and dispense AdBlue into vehicles; and
(c) business intelligence and payment systems used in connection with the storage and dispensing of AdBlue.
20. Additionally, by no later than 13 November 2008, Mr Uhlen prepared a business plan and strategy for the establishment of a new entity "to become a supplier of the reducing agent AdBlueTM required for the operation of the SCR systems fitted to these new generation diesel engines in Australia". The document was clearly prepared for the purpose of being provided to and considered by Carbon Alliance: the "new entity" referred to in the business plan was identified as "Carbon Alliance AdBlue". 21. On 18 November 2008, Mr Uhlen tendered his resignation, giving four weeks’ notice, as he was required to do under his contract of employment. On that day, Mr Uhlen incorporated Denox and executed a discretionary trust deed on behalf of Heimdall Investments Pty Limited as trustee. Heimdall was the shareholder of Denox. On 21 November 2008, Mr Uhlen was appointed director of Denox. 22. During December 2008, Mr Uhlen, acting on behalf of Denox and Carbon Alliance, and persons apparently associated with Carbon Alliance, approached actual and potential customers of Tennant and Nonox.(a) On 5 November 2008, Mr Uhlen informed the operations manager of Tennant, Mr Robinson that he was thinking of leaving the company and doing something himself similar to the AdBlue business, and asked Mr Robinson whether he wanted him to do the same work for him.
(b) In early November 2008, Mr Uhlen asked Mr Lau, another employee of Tennant who worked full time in the Nonox AdBlue business, whether Mr Lau would go with Mr Uhlen if Mr Uhlen were to go "to a company with much more funds and support".
(c) In the same conversation as that referred to in (b), Mr Uhlen asked Mr Lau questions about contact and other details of customers for which Mr Lau was responsible.
(d) On 12 November 2008, Mr Uhlen requested Mr Robinson to provide him with a copy of a training manual that Tennant had prepared for use by the New South Wales State Transit Authority.
(e) On 17 November 2008, Mr Uhlen sent a draft offer of employment to Mr Lau with a new company, the second respondent Denox. In a conversation that Uhlen had with Lau about the offer, Mr Uhlen said that "we will have lots of funds to buy stock".
(f) Sometime in the week commencing [24] November 2008, Mr Uhlen informed Mr Lau that Carbon Alliance was the "big boss", thus implying that Carbon Alliance was the source of funds for Denox.
23. Mr Uhlen signed a deed of employment with Denox dated 18 December 2008 under which Mr Uhlen is to be paid a base salary of $165,000 per annum together with 5% of the issued capital of Denox and a performance bonus of $100,000. Payment of the bonus depended on, among other things, fulfilment of the "annual sales equivalent to that described in the Annual sales plan agreed by the CEO and Board and the employee". The deed provided for the allotment to Mr Uhlen of a further 2.5% of the issued shares in Denox, again upon fulfilment of agreed business plans for the years 2010 and 2011. 24. In December 2008, Denox prepared a twelve month business plan which is predicated on a substantial capital expenditure, clearly on equipment for storing and dispensing AdBlue. [Footnotes and in text references deleted].(a) On 1 December 2008, Mr Uhlen sent an email to a Mr Ng, an officer of TCIM Singapore, a potential customer of Nonox, stating that he had started a new company for supplying AdBlue to Australia and Asian markets.
(b) On 3 December 2008, a person by the name of Rob Dylan sent an email to Mr Ng introducing himself and a John Owens, and stating that "John and I work with Stig as part of the Carbon Alliance group of companies".
(c) On 11 December 2008, Mr Wolfe was informed by a customer that a "John Owen from Denox" and then Mr Uhlen had contacted Sunbus, a customer of Tennant.
5 I am satisfied that there is a serious question to be tried that Mr Uhlen breached his fiduciary duty, in his capacity as manager of the Nonox AdBlue business, not to pursue for his own benefit a business opportunity which he had been engaged in by the applicants to pursue on behalf of Nonox.
6 The principles upon which the applicants rely are not in dispute. They are established in two authorities of the High Court and by a Canadian authority. The High Court authorities are Pilmer v Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165 at [78] and Consul Developments Pty Ltd v DPC Estates Pty Ltd [1975] HCA 8; (1975) 132 CLR 373 at 393. The Canadian authority is the decision in Canadian Aero Service Ltd v O’Malley 40 DLR (3d) 371 (‘Canaero’). The statements of principle in the Canaero decision were set out in the judgment of Laskin J at 382, as follows:
In my opinion, this ethic disqualifies a director or senior officer from usurping for himself or diverting to another person or company with whom or with which he is associated a maturing business opportunity which his company is actively pursuing; he is also precluded from so acting even after his resignation where the resignation may fairly be said to have been prompted or influenced by a wish to acquire for himself the opportunity sought by the company, or where it was his position with the company rather than a fresh initiative that lead him to the opportunity which he later acquired.7 Canaero has been referred to in Australia with approval in the decision of Bryson J in Ridgeway International Ltd v McCullum (unreported, Supreme Court of New South Wales (Equity Division), 9 April 1998); see also Meagher R, Heydon D & Leeming M, Equity Doctrines & Remedies (4th ed, Butterworths LexisNexis, 2002) at [5-100].
8 No evidence was filed by the respondents to suggest that Mr Uhlen, or the other respondents, would suffer any hardship or inconvenience or any practical difficulties as a result of the continuation of Order 3(a). However, three matters were raised by Mr Greenwood SC who appeared for Mr Uhlen, and I will address Mr Greenwood’s points.
9 First Mr Greenwood cross-examined Mr Wolfe, the Managing Director of Tennant, to suggest that the applicants would not be able to meet their undertakings as to damages. Mr Wolfe’s evidence on this issue was not entirely satisfactory. It is true that he was given no advance warning, but I would have expected him to have a better knowledge of the financial position of the company than he revealed this morning. Nevertheless, I am satisfied on the basis of Mr Wolfe’s evidence that the applicants are in a position to meet the undertaking.
10 Second, Mr Greenwood submitted that neither of the applicants has a licence to use the trade mark ‘AdBlue’. Again, I did not consider Mr Wolfe’s evidence to be totally satisfactory, but I am satisfied on the basis of what he told me this morning, that it is arguable that Tennant had, and that Nonox has, an implied licence to use the mark.
11 Third and most significantly, Mr Greenwood submitted that the terms of Order 3(a) are so imprecise that Mr Uhlen would not be able to understand properly what he is prevented from doing. In my opinion, the substantial attack that was made on the terms of the injunction is essentially met by the qualification expressed in the opening words of the order. What is proscribed is, in each case, qualified by the use of the word "knowingly" as Mr Nicholas SC conceded. The injunction is not concerned with inadvertent breaches. Any question of breach is conditioned by the requirement that Mr Uhlen be knowingly involved.
12 Mr Greenwood also pointed, in my opinion correctly, to the looseness of the description of the venture known as "Carbon Alliance." The injunction should be limited to the involvement of Launchpad Nominees Pty Ltd, trading as Carbon Alliance, and the terms of Order 3(a) will be amended accordingly, effective from today’s date.
13 It follows, therefore, that I am satisfied that the balance of
convenience favours the continuation of Order 3(a) amended
in the terms set
out above. In coming to this view I have taken into account the need for
expedition of the final hearing. I will
make directions with a view to securing
a final hearing of these proceedings at the earliest possible date. The orders
therefore
will be that Order 3(a) made on 18 December 2008, amended as
stated above, be continued until further order. Orders 3(b)
and 4 will
also be continued until further order.
Associate:
Dated: 27
January 2009
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Solicitor for the Applicants:
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Commercial Corporate & Property Lawyers
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Counsel for the First and Second Respondents:
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P Greenwood SC with N Polin
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Solicitor for the First and Second Respondents:
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Gillis Delaney Lawyers
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Counsel for the Third, Fourth and Fifth Respondents:
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M Holmes QC
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Solicitor for the Third, Fourth and Fifth Respondents:
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Jarman McKenna Lawyers
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URL: http://www.austlii.edu.au/au/cases/cth/FCA/2009/29.html