Ohio Art Co v Hunter Leisure Pty Ltd [1998] FCA 1349 (2 September 1998)

Last Updated: 28 October 1998

FEDERAL COURT OF AUSTRALIA

Injunctions - sub-licence agreement - clause preventing sub-licensee from using or transferring "technology or tooling" without consent of sub-licensor - whether clause extended to moulds made by sub-licensee from samples provided by sub-licensor - whether injunctive relief inappropriate as primary focus of commercial dealing was to secure access to use of name "Michael Jordan" - whether sub-licensor estopped from asserting clause - whether to exercise discretion to grant injunction.

THE OHIO ART COMPANY v HUNTER LEISURE PTY LIMITED

NG 463 OF 1998

JUDGE: BEAUMONT J.

PLACE: SYDNEY

DATE: 2 SEPTEMBER 1998

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 463 of 1998

BETWEEN:	THE OHIO ART COMPANY Applicant
AND:	HUNTER LEISURE PTY LIMITED Respondent
JUDGE:	BEAUMONT J.
DATE OF ORDER:	2 SEPTEMBER 1998
WHERE MADE:	SYDNEY

ORDERS:

1. The question of damages, if any, suffered by the applicant by reason of any breach of the agreement be determined as a separate question.

2. Otherwise, claims made by the applicant dismissed.

3. Upon the applicant filing and serving an undertaking to the Court to pay to the respondent such amount as may be fixed by agreement between the parties or, in default of agreement, as may be fixed by the Court by way of reasonable compensation for the detriment suffered by the respondent by reason of the restraint imposed by the following injunction -

Order that the respondent, by itself, its servants and agents, be restrained from using or transferring any of the moulds made by it from any of the samples supplied by the applicant except with the prior written approval of the applicant.

4. Cross-claim dismissed.

5. Registrar of the Court directed to mediate between the parties on:

(a) the amount of compensation to be the subject of the undertaking to the Court, if such undertaking is to be given by the applicant; and

(b) the question of any claim for damages by the applicant.

6. Parties to attend before Registrar Hedge at 12.00 p.m. on 3 September 1998 for the purpose of a preliminary mediation conference.

7. Costs reserved.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 463 of 1998

BETWEEN:	THE OHIO ART COMPANY Applicant
AND:	HUNTER LEISURE PTY LIMITED Respondent

JUDGE:	BEAUMONT J.
DATE:	2 SEPTEMBER 1998
PLACE:	SYDNEY

REASONS FOR JUDGMENT

BEAUMONT J.

The background to these proceedings appears, to an extent, in the reasons for ruling given on 12 June 1998. The matter has now progressed to the point where I have heard the evidence and the submissions on the remaining issues, other than the question of any entitlement that the applicant may have to damages.

The primary claim, made on behalf of the applicant, that is now outstanding, is a claim for injunctive relief, which is sought on a permanent basis, by which the Court is asked to restrain the respondent from transferring or using the technology or tooling referred to in cl 7.01 of the agreement between the parties. The terms of that provision are set out at page 3 of one of my reasons for ruling given on 12 June. As I have indicated in the course of argument, whilst there may be some room for argument as to the meaning of the words "Technology or tooling" where used in that clause, if the ordinary dictionary meanings of the terms are applied in the present case they may readily be seen, I think, to apply to the moulds made by the respondent from samples supplied by the applicant. In particular, I am of the view that the word "Technology" is apposite to describe those moulds. It was submitted on behalf of the respondent that neither of the expressions used in cl 7.01 could apply here because, so far as concerns the word "Technology" in particular, there should be imported into this expression a notion of novelty or some ingredient which suggested or indicated the application of a particular technical skill of a high order.

I cannot accept the submission. It seems to me, as a matter of the ordinary use of language, "Technology" is appropriate to describe any work or thing that requires the input of some technical skill, even technical skills of a relatively low order. It was also submitted on behalf of the respondent that there should be imported into the notions or concepts of "Technology or tooling", where used in cl 7.01, an ingredient of confidentiality or something in the nature of a trade secret and that this had not been demonstrated here. I accept, of course, that often the creation of something that can be described as "Technology" does involve confidentiality or a trade secret. Nevertheless, in my view, it is not a necessary ingredient and there is no reason, as I see it, for making such an implication in the language of cl 7.01. It follows, therefore, that as a matter of interpretation I would construe cl 7.01 as extending to moulds made by the respondent from samples provided by the applicant.

It was next submitted on behalf of the respondent that cl 7.01 should not be used as a platform or as a springboard for the grant of injunctive relief in the present circumstances because, the argument ran, if regard is had to the whole context of the commercial dealings between the parties, their primary focus in the course of their negotiations and the real object, so far as the respondent was concerned, in conducting those negotiations was to obtain access to the use of the name of an international celebrity of the extraordinary fame of Michael Jordan.

Again, whilst I can accept the importance of this, as obviously it was important in driving or motivating the course of the negotiations, when one has regard to the language used in the agreement, the provisions of cl 7.01 are quite specific and quite clear on the present point. It is simply no answer, in my view, to a claim to enforce the restrictions on use embodied in the plain and clear language of cl 7.01, to contend that the objective of the respondent was to obtain access to the right to use the name of Michael Jordan. It is, to my mind, an irrelevant consideration for present purposes. It was of course relevant for other purposes and I have, in my other reasons dated 12 June, already rejected a claim made by the applicant to restrain an alleged passing off in which the matters I have mentioned are more easily seen as relevant.

Subject to one matter of discretion to which I will return, I have come to the conclusion that the applicant has established a prima facie entitlement to an injunction to enforce the restriction embodied in cl 7.01.

Before going to that matter of discretion however, I should mention some other matters that were raised by way of defence and by way of cross-claim in answer to the claim for the present injunction. They may be grouped into two classes. First, it is said on behalf of the respondent that the applicant is in effect estopped from seeking to enforce the restrictions contained in cl 7.01 by reason, in substance, of the fact that the respondent, with the knowledge and acquiescence of the applicant, in the course of negotiations between the respondent and Croner-Tyco Toys Pty Ltd ("Croner-Tyco"), agreed to a sub-licensing arrangement for a period of three years commencing on 1 October 1996.

The evidence certainly shows that the applicant through its own executive officers in the United States and through its Australian-based consultant, Mr Chapman, was aware of the course of the negotiations between the respondent and Croner-Tyco in the early stages of 1996. However, the platform upon which the respondent seeks to erect an answer to the present claim collapses when it is acknowledged, as the respondent must acknowledge, that by deed dated 30 June 1997, the respondent and Croner-Tyco terminated their arrangement as from that date. I say no more of that issue except to mention that it was thought to be submitted on behalf of the respondent that consequential upon that termination, the respondent re-entered the field on its own behalf taking over the production activities from Croner-Tyco. As a matter of fact, that may itself be accepted, but again it is of no ultimate assistance to the respondent. The arrangements between the applicant and the respondent, as is common ground, were extended from time to time and did not expire until December 1997 when the applicant gave the respondent notice of termination by letter dated 8 December 1997 and at the same time offered to purchase the tools used to manufacture the product. As a matter of timing then, the position is that the arrangement between the respondent and Croner-Tyco having been dissolved in June 1997, the relationship between the applicant and the respondent is then terminated six months later. In the upshot it does not seem to me that the inter-position of Croner-Tyco into the relationship between the parties has any ultimate legal significance in the present proceedings at all.

I should also merely note that other claims were made in the cross-claim. For the sake of completeness and as already indicated in the course of argument, I see no basis whatever for any of the claims made in para 49 of the cross-claim. They consist of a claim for an indemnity against any claim by Michael Jordan, as to which there is no suggestion of any prospect of such a claim in the evidence. There is also a claim made in para 49 for an indemnity against any claim that may be made by Croner-Tyco in the present connection. Again there is no basis for any such claim.

There is a further claim in para 49 for an entitlement to be repaid in the sum of $413,963.01 as money had and received by the applicant to the use of the respondent. In my view there is no foundation for this claim either. The simple position is that the relationship between the applicant and the respondent remained on foot until December 1997 when it was terminated in accordance with the legal rights and obligations of the parties. Up to that point their relationship subsisted and was given effect to as the agreement required.

I return then to the question of discretion. It seems to me that although the respondent has, since the commencement of these proceedings, returned the technical data and other written material in connection with the technology and tooling referred to in cl 7.01, there is such special value to be attributed to the moulds made by the respondent from the samples provided by the applicant that a Court of Equity should protect the applicant's proprietary interest in such a thing. I am, therefore, as I have already noted, of the view that prima facie an injunction should run to restrain the use or transfer of the technology in accordance with the restriction imposed by cl 7.01. However, as I have further indicated in the course of argument, it seems to me that this is a situation where equity should require that a party seeking equitable relief should itself do equity. I think that the appropriate mechanism to achieve a fair and equitable outcome of the grant of the injunction is that I order that the applicant should, as a price of obtaining the injunction, undertake to the Court to pay to the respondent a reasonable amount by way of compensation for the restriction on use or transfer to be imposed by the injunction.

I therefore propose to make the following orders -

1. The question of damages, if any, suffered by the applicant by reason of any breach of the agreement be determined as a separate question.

2. Otherwise, claims made by the applicant dismissed.

3. Upon the applicant filing and serving an undertaking to the Court to pay to the respondent such amount as may be fixed by agreement between the parties or, in default of agreement, as may be fixed by the Court by way of reasonable compensation for the detriment suffered by the respondent by reason of the restraint imposed by the following injunction -

Order that the respondent, by itself, its servants and agents, be restrained from using or transferring any of the moulds made by it from any of the samples supplied by the applicant except with the prior written approval of the applicant.

4. Cross-claim dismissed.

5. Registrar of the Court directed to mediate between the parties on:

(a) the amount of compensation to be the subject of the undertaking to the Court, if such undertaking is to be given by the applicant; and

(b) the question of any claim for damages by the applicant.

6. Parties to attend before Registrar Hedge at 12.00 p.m. on 3 September 1998 for the purpose of a preliminary mediation conference.

7. Costs reserved.

I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Beaumont

Associate:

Dated: 2 September 1998

Counsel for the Applicant:	Mr D Ryan
Solicitor for the Applicant:	Deacons Graham & James
Counsel for the Respondent:	Mr Bingham
Solicitor for the Respondent:	Kennedy Guy
Date of Hearing:	2 September 1998
Date of Judgment:	2 September 1998