FEDERAL COURT OF AUSTRALIA

Thomas International Limited v Humantech Pty Ltd [2015] FCA 541

THE COURT NOTES THE FOLLOWING UNDERTAKINGS GIVEN BY THE APPLICANT TO THE COURT:

A.    The applicant will:

    (a)    submit to such order (if any) as the Court may consider to be just for the payment of compensation, to be assessed by the Court or as it may direct, to any person, whether or not a party, adversely affected by the operation of any of the interlocutory orders and undertakings referred to herein;

    (b)    pay the compensation referred to in (a) to the person there referred to;

    (c)    re-transfer the domain name www.thomasinternational.com.au to the third respondent if the Court so orders; and

    (d)    re-transfer the domain name www.thomas.co.za to the second respondent if the Court so orders;

B.    The applicant will within 7 days of the date of these orders:

    (a)    provide security for the undertakings referred to in paragraph A above in the amount of $200,000 by way of unconditional bank guarantee issued by a major Australian trading bank in a form to be agreed between the solicitors for the applicant and the first, third, fourth, fifth and sixth respondents or, in default of agreement, as determined by the Registrar;

    (b)    provide security for the first, third, fourth and fifth respondents’ costs in the amount of $10,000 in a form to be agreed between their solicitor and the solicitor for the applicant or, in default of agreement, as determined by the Registrar; and

    (c)    provide security for the sixth respondent’s costs in the amount of $25,000 in a form to be agreed between his solicitor and the solicitor for the applicant or, in default of agreement, as determined by the Registrar.

C.    The applicant will within 7 days of the date of these orders file and serve its amended originating application and amended statement of claim.

THE COURT ORDERS THAT:

1.    By 4pm on 3 June 2015, the third respondent is to take all such steps and do all things as are reasonably required to transfer the domain name www.thomasinternational.com.au to the applicant including:

(a)    providing the applicant with the Domain Authorisation Key (otherwise known as the Domain Password, Auth Key, Domain Secret, Registry Key and/or the UDAI key);

(b)    signing by an authorised signatory where indicated on the declaration in Annexure A to these orders; and

(c)    to give confirmation of the request for transfer from the current registrant contact when requested to do by .au Domain Administration Limited, Net Registry and/or any other domain administrator.

2.    By 4pm on 3 June 2015, the second respondent is to take all such steps and do all things as are reasonably required to transfer the domain name www.thomas.co.za to the applicant.

3.    The applicant have leave to proceed against each of the first, third, fourth and fifth respondents pursuant to s 440D of the Corporations Act 2001 (Cth) up to and including 27 May 2015.

4.    The applicant file and serve any amended originating application and any amended statement of claim by 4pm, 3 June 2015.

5.    A copy of these orders be served on the second respondent by delivering a copy thereof to the offices of John Morrissey, the solicitor for the sixth respondent, marked for the attention of the sixth respondent in his capacity as director of the second respondent by 4pm today.

6.    A copy of the applicant’s amended originating application and amended statement of claim be served on the second respondent by delivering a copy thereof to the offices of John Morrissey, the solicitor for the sixth respondent, marked for the attention of the sixth respondent in his capacity as director of the second respondent by 4pm, 3 June 2015.

7.    The costs of the interlocutory application be reserved.

8.    Each party have liberty to apply on 2 days’ notice.

9.    The proceeding be stood over for directions to 9.30am on 18 June 2015.

AND THE COURT FURTHER NOTES:

“Mr Antony Anne de Vries and Mr David Solomons (the Administrators) in their capacity as joint and several administrators of the first, third, fourth and fifth respondents (the respondents) undertake to the Court that, subject to any further order or direction, they will use their best endeavours to keep safe and preserve all documents and records (including, without limiting the foregoing, all accounting, banking and financial records) in the possession, custody or control of the Administrators or any one or more of the respondents which relate to any business or former business of the respondents or any one or more of them.”

Annexure A

Declaration by the Transferor, being the Current Registrant of the domain name thomasinternational.com.au (Domain Name) (being Thomas International (Australia) Pty Ltd A.C.N. 103 702 978).

I/We declare and warrant to the Registrar and to .au Domain Administration Ltd that:

    I am authorised to submit this form for or on behalf of the current registrant of the Domain Name; and

    the current registrant of the Domain Name is entitled to transfer the domain name licence to the proposed new registrant; and

    all information contained in this transfer form are true, complete and correct, and not misleading.

The current registrant hereby transfers the Domain Name licence to the proposed new registrant, subject to the terms and conditions on which the current registrant held the Domain Name licence at the time of transfer.

……………………………………………………………..

Signed for and on behalf of the Transferor

(Thomas International (Australia) Pty Ltd (A.C.N. 103 702 978))

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

REASONS FOR JUDGMENT

Background

1    On 27 May 2015, I made interlocutory orders in this proceeding requiring the second respondent and the third respondent to transfer the domain names “www.thomas.co.za” and “www.thomasinternational.com.au” to the applicant (“TIL”) subject to TIL providing various undertakings to the Court including the usual undertaking as to damages together with additional undertakings providing for the re-transfer of the domain names to the second and third respondents should the Court so order. These are my reasons for making such orders.

2    The sixth respondent, Mr Schutte, is:

    the sole director of the first respondent (“Humantech”);

    a director of the second respondent (“JCS”);

    the sole director of the third respondent (“TIA”);

    the sole director of the fourth respondent (“ACT”); and

    the sole director of the fifth respondent (“JCSA”).

3    The evidence indicates that Humantech and ACT are wholly owned by JCSA, that JCSA is wholly owned by Mr Schutte, and that TIA is also wholly owned by Mr Schutte. As to JCS, the evidence is not so clear. On the evidence before me, and in the absence of any evidence to the contrary from Mr Schutte, I will proceed on the basis that if JCS is not wholly owned by Mr Schutte, he at least holds a controlling shareholding in JCS.

4    This proceeding was commenced on 14 May 2015. As I will further explain, on 18 May 2015, Messrs Antony Anne De Vries and Mr David Solomons were appointed as joint and several administrators of Humantech pursuant to a resolution made in accordance with s 436A of the Corporations Act 2001 (Cth). On 20 May 2015 they were also appointed as joint and several administrators of each of TIA, ACT and JCSA. On the same day TIA changed its name to Assignments on Contract Int Pty Ltd.

5    Mr Spencer of Counsel appeared for Humantech, TIA, ACT and JCSA on the instructions of the administrators. Mr McKeand SC appeared for Mr Schutte. There was no appearance at the hearing before me for JCS though the evidence establishes that on 17 May 2015 its solicitor for a time (Mr Morrissey) filed a Notice of Address for Service on its behalf.

The Applicable Principles

6    There are two inquiries relevant to the question whether an applicant should be granted an interlocutory injunction. The first relates to the strength of the applicant’s claim to final relief. The second relates to the balance of convenience or, as it is sometimes expressed, the balance of the risk of doing an injustice by either granting or withholding the interlocutory relief sought. The relevant principles were considered by the High Court in Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57, including by Gummow and Hayne JJ at [65]-[72]. Their Honours stated at [65]:

The relevant principles in Australia are those explained in Beecham Group Ltd v Bristol Laboratories Pty Ltd [(1968) 118 CLR 618]. This Court (Kitto, Taylor, Menzies and Owen JJ) said that on such applications the court addresses itself to two main inquiries and continued [(1968) 118 CLR 618 at 622-623]:

“The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief ... The second inquiry is ... whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted.”

By using the phrase “prima facie case”, their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial. That this was the sense in which the Court was referring to the notion of a prima facie case is apparent from an observation to that effect made by Kitto J in the course of argument [(1968) 118 CLR 618 at 620]. With reference to the first inquiry, the Court continued, in a statement of central importance for this appeal [(1968) 118 CLR 618 at 622]:

“How strong the probability needs to be depends, no doubt, upon the nature of the rights [the plaintiff] asserts and the practical consequences likely to flow from the order he seeks.”

7    In Samsung Electronics Co Ltd v Apple Inc (2011) 217 FCR 238 (Samsung) at [44]-[74] the Full Court referred to the purpose of interlocutory injunctive relief and the principles governing the Court’s discretion to grant or withhold it. The Full Court said at [66]:

In exercising that discretion, the Court is required to assess and compare the prejudice and hardship likely to be suffered by the defendant, third persons and the public generally if an injunction is granted, with that which is likely to be suffered by the plaintiff if no injunction is granted. In determining this question, the Court must make an assessment of the likelihood that the final relief (if granted) will adequately compensate the plaintiff for the continuing breaches which will have occurred between the date of the interlocutory hearing and the date when final relief might be expected to be granted.

8    The Full Court accepted (at [61]-[63]) that it is not always necessary for an applicant for an interlocutory injunction to establish that he or she will suffer irreparable harm if the injunction sought is not granted. However, whether or not the applicant will suffer irreparable harm is one of a number of matters that must ordinarily be addressed when considering the balance of convenience.

9    The Full Court also observed that it is necessary for the applicant for an interlocutory injunction to identify the legal or equitable rights which are to be determined at trial and in respect of which final relief is sought: Samsung citing, in particular, Gleeson CJ in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at [15].

10    Whether an applicant for an interlocutory injunction has made out a prima facie case and whether the balance of convenience favours the grant of such relief are related questions. It will often be necessary to give close attention to the strength of a party’s case when assessing the risk of doing an injustice to either party by the granting or withholding of interlocutory relief especially if the outcome of the interlocutory application is likely to have the practical effect of determining the substance of the matter in issue or if other remedies, including an award of damages, or an award of compensation pursuant to the usual undertaking, are likely to be inadequate.

11    With respect to the granting or withholding of interlocutory mandatory injunctions, the same general approach will usually apply. In either case it is necessary to evaluate the balance of the risk of doing an injustice by either the granting or withholding of the relief. The question whether the granting or withholding of the relief will in a practical sense determine the substance of the matter in issue will often be a highly significant consideration in cases involving mandatory relief.

Factual Background

12    TIL is an English company that has for many years conducted business providing psychological testing and psychometric assessments, and competency and skills-based assessments. Much of the business is carried on using the internet. TIL operates a centralised online “hub” in the United Kingdom (“the Thomas Hub”) consisting of a sophisticated computer system that can be accessed online by TIL’s distributors and customers by logging into TIL’s website at www.thomasinternational.net.

13    There is evidence before me from Mr Martin Reed, the Chairman and Chief Executive Officer of TIL, concerning the scope of the TIL business. Mr Reed says that in addition to providing customers with psychometric tools, TIL also provides training and consultancy services in relation to the use and administration of those tools enabling customers to use them and to generate reports from them. This allows other people in a client’s organisation to use TIL’s core products and services themselves without supervision from TIL. Mr Reed says the training and consultancy services provided by TIL are a critical part of TIL’s “one stop shop” assessment business and that TIL has been committed for the last 25 years to developing and expanding the training and consultancy side of its business.

14    TIL is the registered owner of various trade marks registered in relation to an extensive range of services in Class 35. These trade marks are registered in many places including in Australia and South Africa. The most important of these is a composite mark consisting of the name Thomas with a device resembling a jigsaw piece (“the Thomas composite mark”). The goods and services in relation to which the trade marks are registered are as follows:

Appraisals, enquiries, investigations, management consulting, organisation consulting, research and efficiency expert services; commercial and industrial management assistance; consultancy and advice services, all performed in relation to personnel; employment agencies; recruitment agency services; consultancy services relating to recruitment agency services; personnel management; consultancy services relating to personnel management; services in introducing potential candidates for employment to potential employers; applicant tracking services; provision of the aforesaid services via the Internet; psychological testing and assessment services; personality, intelligence, aptitude, capability, performance and character assessment; testing of individuals to determine training and employment skills; provision of the aforesaid services via the Internet

It is clear that the scope of this registration is extremely broad, encompassing a wide range of consulting and advisory services relating to personnel, management and recruitment services.

15    In January 2007 TIL and Humantech entered into a written agreement described as the Master Licence Agreement (“the MLA”) pursuant to which Humantech was granted exclusive rights to appoint distributors throughout the territory to market, sell and distribute TIL’s products throughout the territory, and to collect royalties from such distributors in respect of such sales. The territories relevantly include Australia and South Africa.

16    The MLA contains recitals that refer to the previous arrangements made between TIL, Humantech and JCS (referred to in the MLA as “Human Dynamics”). Clause 2.6 provides:

2.6    Humantech and TI, accordingly enter into this agreement to:

2.6.1    regulate the establishment of a new company in Australia to assume the licence and rights conferred to Humantech in terms of this agreement, and

2.6.2    enter into a comprehensive agreement in which the future relationship pertaining to the rights and the business, as from the commencement date, will be regulated.

17    Clause 4.4 provides:

Should a new agreement be entered into between Humantech and a distributor, such agreement shall contain all of the applicable obligations of Humantech in terms of this agreement including a provision to the effect that, should this Master Licence Agreement between TI and Humantech be terminated by Humantech for whatever reason, that distribution agreement will similarly come to an end and with it all rights the Distributor may have in relation to the Thomas Systems, and any renewals or extensions of existing agreement shall be amended where necessary to include all these obligations. A breach by a distributor of any of the terms and provisions of the distribution agreement, shall under no circumstances constitute a ground for TI to cancel this agreement. Humantech nevertheless hereby undertakes to take all steps reasonably necessary to enforce compliance by a distributor with its contractual obligations in terms of the distribution agreement and to take such legal or other steps necessary to, in the event of breach by a distributor, enforce specific compliance with the provisions of the said agreement, alternatively, to cancel such distribution agreement.

18    Clause 5.9 provides:

Humantech shall be entitled to register the name and company Thomas International Management Systems and trade in South Africa and Australia under this banner, linking it to any Humantech Group company in all its literature. However on termination of this agreement, and pursuant to clause 16.1 below, the right to use this company name shall cease and Humantech or any Group company will change this company name (if in use) to another name not including the words “Thomas/Thomas International”.

19    Clauses 7.1 to 7.3 provide:

7.1    TI has interests in the Trade Marks and Trade Name and Humantech undertakes that it will not in any way infringe, harm or contest the right and interests of TI to such Trade Marks or Trade Name.

7.2    Humantech recognises that the use by it of the Trade Marks or Trade Name and of any other marks or names which incorporate the said Trade Marks or Trade Name exist for the benefit of TI and that any goodwill arising from such use by Humantech shall automatically vest in TI any event.

7.3    Humantech warrants that it will not use the Trade Marks or Trade Name except in conjunction with the Business and shall not use any marks or names similar to or capable of being confused with the Trade Marks or Trade Name or any other trade marks or trade names of TI.

20    Curiously, the MLA does not identify the “Trade Marks and Trade Name” referred to in cll 7.1 – 7.3 but there is no reason to think that the trade marks referred to do not include the Thomas composite mark.

21    Pursuant to cl 12 of the MLA, Humantech undertook that it would use its best endeavours to promote, market and distribute the Thomas Products in the territory. Clause 12.9 provides that Humantech would not sell, market or distribute any products which may in any way compete with the Thomas Products.

22    The MLA contains a number of provisions relating to termination. Clauses 15 and 16 relevantly provide:

15.    Notwithstanding the provisions of clause 4 above, either party shall have the right to summarily terminate this agreement, by notice in writing to the other party (“the guilty party”) in the following circumstances:

15.1    If the “guilty party” shall be in material breach of this agreement and the other party shall have notified the “guilty party” in writing of any such breach and the “guilty party” shall not have rectified such breach within 28 (twenty eight) days of date of such a written notice.

15.2    In the event of any wilful and repeated material breach of any of the “guilty party’s” obligations under this agreement. For the purposes of this sub-clause a wilful and repeated breach shall be in excess of 3 (three) breaches of its obligations during the term of this agreement.

…

16.    Immediately upon termination of this agreement for any reason, or in the case of non-renewal at the end of the period of notice, all Humantech’s rights as licensee shall terminate. TI shall assume all the rights of Humantech in respect of the Distributors and Humantech shall:

16.1    cease forthwith to trade under the name TI and the business shall change its name to one that does not bear the words: Thomas International;

16.2    not hold itself out as a vendor of the Thomas Products and cease to sell or offer for sale any of the Thomas Products;

16.3    cease to use by advertising or otherwise the Trade Name or Trade Marks or any imitation or approximation thereof on any sign, stationery, invoice, service mark and any other trademarks, trade names, systems slogans, symbols and copyright used in connection with the business;

…

23    Mr Reed says that he first became aware of the existence of ACT in about May 2014, but that he did not have an understanding of its business activities until later that year. He says that ACT is a company that sells ACT’s products and services as well as TIL’s products and services. In support of this statement he refers to the following statement appearing on ACT’s website (www.actechnologies.com.au) as at 11 May 2015:

ACT is the consulting leg of the group and offers need-specific and assessment centre services delivered by in-house psychologists, professional facilitators and psychometrists. Assessment Centres are widely applied in recruitment, development, promotion and change management to improve individual and group performance. ACT uses its own instruments as well as tools from the Thomas product range.

24    Mr Reed also refers to what he describes as a dramatic decline in Humantech’s sales figures for the years ending 30 December 2013 and 30 December 2014. Mr Reed says that the sales revenue for the year ending 30 December 2014 was the lowest since 2009 and had followed strong financial performances in 2011 and 2012, with sales revenue between 2013 and 2014 declining by about 25%.

25    There is also evidence from Ms Suchi Pathak, TIL’s Head of Psychology. She says that a number of ACT’s products are substantially similar to various TIL products from a functionality perspective. She gave evidence of a comparison she undertook of an assessment called the Personal Values Profile (PVP) offered by ACT to its customers and a TIL product known as the Trait Emotional Intelligence Questionnaire (TEIQue).

26    There is also evidence from a former employee of TIA, Ms Laura Paraschiv, that in or about June 2013 she and other employees were advised by Mr Schutte that there was to be a shift in the focus of the business towards the ACT side of the business, but one that would still include the TIA products. She says that staff were advised during the meeting that this meant changing their emphasis and focus from not only promoting and selling the TIA products, but also promoting and selling the ACT products. It is necessary to emphasise that, according to Ms Paraschiv’s evidence, she was only ever employed by TIA. Her evidence suggests that the TIA business and the ACT business were highly integrated and may have even operated as a single business unit.

27    According to Ms Paraschiv, in August 2014 she was the employee most experienced in TIA’s product. She says that her role drastically changed about this time in that she ceased acting as the Branch Manager for NSW and Victoria responsible for sales of both TIA and ACT products to becoming Sales Manager for ACT products only. She also says that the product known as Thomas360 was re-developed and enhanced by TIA and renamed Bespoke360. According to Ms Parachiv, this product was invoiced as an ACT product and treated as revenue of ACT.

28    In his affidavit evidence, Mr Schutte says that Ms Paraschiv’s employment by TIA was terminated on 24 November 2014 due to non-performance, that she is now holding herself out to TIL’s clients as acting for “Thomas International Australia”.

29    As I have mentioned, this proceeding was commenced on 14 May 2015. In the statement of claim filed on that date TIL alleged that Humantech had, since a date unknown to TIL, committed multiple and continuous material breaches of the MLA amounting to a fundamental breach of the MLA entitling TIL to terminate the MLA. It is also asserted that TIL would by notice terminate the MLA pursuant to cl 15.2 and/or for fundamental breach. On the same date by letter from Sparke Helmore (TIL’s solicitors) to Humantech and JCS, TIL purported to terminate the MLA.

30    On 17 May 2015, Mr Schutte, Mr Jacques Schutte, Mr Don Stander, Mr Cristiaan Jonker and Mr John Morrissey (representing the various respondents) met with Mr Qureshi and Ms Platt (representing TIL). Mr Qureshi is the Chief Operating Officer of TIL, and Ms Platt (a partner of Sparke Helmore) is TIL’s solicitor. The evidence indicates that Mr Morrissey is a solicitor who was advising Mr Schutte and the other respondents.

31    The negotiations that took place at the 17 May 2015 meeting culminated in a document being signed by (inter alios) Mr Schutte entitled “Undertakings from Schutte Group Companies to TIL 17 May 2015” (“the Undertaking”). The Undertaking is lengthy and I need not set it out in full. The Undertaking includes various recitals and thereafter provides:

EACH OF THE SCHUTTE GROUP COMPANIES (INCLUDING THEIR SUCCESSORS AND ASSIGNS) JOINTLY AND SEVERALLY UNDERTAKE TO TIL (INCLUDING ITS SUCCESSORS AND ASSIGNS) IN THE FOLLOWING TERMS (WHICH ADOPT THE DEFINITIONS IN THE NOTICE) WHICH, SAVE FOR PARAGRAPH 6 WHICH IS EFFECTIVE IMMEDIATELY, ARE NOT EFFECTIVE UNTIL TIL AND THE SCHUTTE GROUP COMPANIES ACTING IN GOOD FAITH TO RESOLVE THE DISPUTE IN THE PROCEEDINGS HAVE EXHAUSTED SUCH DISCUSSIONS OR 25 MAY 2015, WHICHEVER OCCURS FIRST:

Undertaking

1.    Cease to Trade Under the name Thomas International

1.1    each of the Schutte Group Companies will immediately and permanently cease making the Representations, or any one of them;

1.2    each of the Schutte Group Companies will immediately and permanently cease to trade under the TIL name and cease using the name Thomas, or “Thomas International” in Your business or trading name or in the course of your business;

1.3    each of the Schutte Group Companies will immediately procure that TIA will change its name to one that does not use or incorporate the words “Thomas International” or anything substantially identical or deceptively similar thereto (see Clauses 5.9 and 16.1 of the MLA).

2.    Cease to Represent Association in Trade or Commerce

2.1    each of the Schutte Group Companies will immediately and permanently:

2.1.1    cease to trade under and use the name Thomas International (see Clause 16.1 MLA);

2.1.2    cease to hold Yourself out as a vendor of the Thomas Products and cease to sell them (see Clause 16.2 MLA);

2.1.3    notify TIL of all persons inquiring about Thomas Products (see Clause 16.4 MLA);

2.1.4    pay over all monies due to TIL (see Clause 16.5 MLA); and

2.1.5    return to TIL all Thomas Products and Stationery (see Clause 16.6 MLA).

3.    Cease to Use Trade Marks

3.1    each of the Schutte Group Companies will immediately and permanently cease to use (or authorise other to use) each of the TIL Trade Marks and Trade Names listed in Schedule 3, or any mark substantially identical or deceptively similar.

3.2    each of the Schutte Group Companies immediately remove TIL’s Trade Marks and Trade Names from the ACT Websites and the websites and products listed in Schedule 3.

4.    Transfer of Domain Name

4.1    each of the Schutte Group Companies will immediately take all steps and do all things necessary to transfer the domain names thomasinternational.com.au and Thomas.co.za to TIL.

5.    Payment of Outstanding Royalty

5.1    each of the Schutte Companies will immediately pay to TIL all outstanding Royalties due to TIL as at today, 17 May 2015 without any deduction whatsoever (see Clause 8.5 of the MLA).

32    The following account of the negotiations leading up to execution of the Undertaking is based upon Mr Schutte’s account of what occurred. TIL initially raised an objection to Mr Schutte’s evidence on this topic but the objection was not pressed after it became clear that the respondents will seek to contest the enforceability of the Undertaking.

33    The negotiations commenced on the evening of 17 May 2015. According to Mr Schutte, there was discussion about the grant of a new licence agreement. Mr Schutte says that Mr Qureshi said that unless various documents (including the Undertaking) were signed he would not negotiate with Mr Schutte for a new licence agreement.

34    According to Mr Schutte, Mr Morrissey questioned Mr Qureshi and Ms Platt as to why they should sign. Mr Schutte says that Mr Qureshi stated that by signing them Mr Schutte would demonstrate that he was acting in good faith. Mr Schutte says that in response to further questioning by Mr Stander, Mr Qureshi said that no proposal would be put on the table until the Undertaking was signed.

35    Mr Schutte and his colleagues, including his solicitor, Mr Morrissey, then met in private and reviewed the Undertaking. It was then signed by them and provided to Ms Platt. Mr Schutte says that he wanted to get on with the negotiations (it was about 8.00pm at this stage) but that Mr Qureshi insisted that the group reconvene the following day to discuss the terms of a new agreement.

36    Mr Schutte and his colleagues returned to Ms Platt’s offices the next day at around 10.00am. Mr Schutte says that Ms Platt was provided with some financial statements (apparently in accordance with cl 6.2 of the Undertaking) when Mr Schutte and his colleagues arrived, but they were then kept waiting until about 12 noon. Mr Schutte says that Mr Qureshi then provided details of the terms of the proposed new licence agreement. Mr Schutte says that he told Mr Qureshi that what was proposed would cause “financial ruin”. Mr Qureshi is said to have replied:

You will need to figure out how to accommodate the proposal as I think it would be a little harder, tougher, but better for all parties in the long haul.

37    According to Mr Schutte, after some deliberation, he and Mr Stander then left. He says that Mr Jonker and Mr Jacques Schutte stayed to inform Mr Qureshi and Ms Platt of their response to Mr Qureshi’s proposal. Mr Schutte’s affidavit does not disclose whether or not they did so or why Mr Schutte did not do so himself.

38    Mr Schutte says in his affidavit that accepting the terms proposed by TIL would have meant certain financial ruin, and that he saw no alternative but to have Humantech, TIA and ACT placed into administration. He does not appear to have told Mr Qureshi that this is what he intended to do. As is apparent from the documents annexed to Mr de Vries’ affidavit, Mr Schutte signed a resolution appointing the administrators to Humantech at 4.20pm on the same day, namely, 18 May 2015.

39    On 19 May 2015 Sparke Helmore wrote to Mr Morrissey’s firm referring to a number of matters. The first of these was the resolution to place Humantech into voluntary administration. The second matter, which is disputed by Mr Schutte, relates to an alleged divestiture of assets by Humantech which is said to have occurred not long before the resolution was passed. Sparke Helmore’s letter states that in light of those matters, the discussions were exhausted and the Undertaking was now binding upon the respondents.

40    Mr Qureshi’s evidence indicates that he became aware on 19 May 2015 that various websites, including the TIA website and the JCS website, had been taken down. According to Mr Qureshi, taking down the TLA had the effect of preventing customers using TIL’s products and services in Australia from gaining access to the Thomas Hub through the TIA website. As a temporary measure, according to Mr Qureshi, TIL established a new portal (via a directory in the thomasinternational.net domain) through which customers can access the Thomas Hub, however, his evidence also indicates that TIL is having difficulty contacting customers in order to inform them of this new point of entry.

Strength of Applicant’s Case

41    Clause 4.1 of the Undertaking provides that the corporate respondents will immediately take all steps necessary to transfer the domain names thomasinternational.com.au and thomas.co.za. to TIL. TIL relied on cl 4.1 of the Undertaking in support of its application for the mandatory interlocutory relief it sought.

42    The respondents relied upon Mr Schutte’s evidence in support of their contention that the Undertaking is unenforceable and liable to be set aside on the basis that TIL did not (and never intended to) engage in a good faith negotiation with the respondents.

43    The capitalised words appearing in the Undertaking (see para 31 above) make clear that the relevant provisions, in particular cl 4.1, do not commence to operate until the parties acting in good faith have either exhausted their discussions directed to the resolution of the dispute the subject of the proceeding or 25 May 2015, whichever first occurs. For present purposes I shall assume that all parties to the discussions were contractually bound to negotiate in good faith.

44    It seems clear from Mr Schutte’s account of events that he considered the discussions to have been exhausted by late afternoon on 18 May 2015 when administrators were appointed to Humantech. TIL appears to have been of the same opinion at least by the time Sparke Helmore wrote to Mr Morrissey on 19 May 2015.

45    The strength of TIL’s case for final relief based upon cl 4.1 very much depends upon the strength of the respondents’ contention that TIL breached its obligation to negotiate with the respondents in good faith.

46    In support of the contention that TIL breached that obligation, Mr McKeand SC placed considerable emphasis upon the terms of the proposed settlement offered by Mr Qureshi. However, while the terms proposed by Mr Qureshi may have appeared harsh to Mr Schutte, it does not necessarily follow that TIL was not seeking to negotiate a resolution of the dispute in good faith. A party does not fail to engage in a good faith negotiation merely because it drives a hard bargain.

47    The respondents’ submissions did not address the content of the obligation to negotiate in good faith in any detail beyond contending that TIL was required to act honestly. Recent authority indicates that an obligation to act in good faith may go further, requiring a party to act reasonably, and to engage in fair dealing having regard to the provisions, aims and purposes of the contract objectively ascertained: see Paciocco v Australia and New Zealand Banking Group Limited [2015] FCAFC 50 at [288] per Allsop CJ. With respect to the scope of the obligation of good faith the Chief Justice added (at [289]) that “[n]one of these obligations requires the interests of a contracting party to be subordinated to those of the other.”

48    The respondents’ submissions invite the Court to infer, at a prima facie level, that the offer made by Mr Qureshi was not bona fide in the sense that TIL was not interested in achieving any negotiated settlement of the proceeding and that, on the contrary, the offer made by him on behalf of TIL was intended to ensure that the negotiation did not result in any such settlement.

49    Mr Schutte may well have regarded the terms that were offered by TIL as unreasonable and harsh. However, in this case I do not think his views as to the reasonableness of the offer provide a solid foundation for inferring, even if only at the prima facie level, that TIL breached its obligation to negotiate in good faith.

50    The respondents also drew attention to TIL’s failure to raise any complaint with Mr Schutte in relation to Humantech’s performance or its relationship with ACT and Mr Reed’s knowledge of the presence of a link to the ACT website on TIA’s website throughout most of 2014. They also relied on Mr Schutte’s evidence concerning his dealings with the former Chairman of TIL, Mr Ray Reed, in early 2005, which they say clearly indicates that Mr Ray Reed knew of the existence of Assessment Centre Technology (Pty) Ltd (a South African company) which Mr Schutte told Mr Ray Reed would act as a professional consultancy.

51    TIL’s evidence indicates that from about May 2014 TIL engaged in investigations using the services of private investigators and forensic accountants in an attempt to gain a better understanding of the business or businesses that were being carried on by Mr Schutte’s companies. Mr Reed’s evidence, if correct, indicates that he knew very little about ACT until these investigations commenced. That is not as implausible as the respondents would suggest in circumstances where the correspondence between Mr Schutte and Mr Ray Reed does not appear to reach any end point and where that correspondence was, in any event, overtaken by the signing of the MLA in early 2007.

52    In the result, and while accepting that the respondents’ allegations against TIL raise issues that cannot be finally resolved before trial, I am satisfied that TIL has a strong prima facie case for final relief based upon TIA’s and JCS’s failure to comply with the requirements of cl 4.1 of the Undertaking. I am also satisfied that TIA’s and JCS’s obligations under cl 4.1 are of a kind that it is open to the Court to enforce by way of final relief in the form of a mandatory injunction on the basis that damages would not provide TIL with an adequate remedy.

Balance of Convenience

53    It was submitted by Mr Spencer on behalf of the administrators that the interlocutory orders sought by TIL would, if made, have “a catastrophic effect” on the business of ACT passing through TIA’s website. This submission does not sit comfortably with the fact that the website has been shut down by TIA (presumably acting through or at the direction of either Mr Schutte or the administrators) and that customers previously accessing the Thomas Hub by that route may no longer do so.

54    It was also submitted on behalf of the administrators that customers of ACT who use the TIA website, will be unable to do so if the interlocutory orders sought are granted, and that ACT will also suffer loss and damage as a consequence. Again, this submission is difficult to accept in circumstances where the TIA website has already been disabled, and customers of TIL who are entitled to use the facilities available at the Thomas Hub, can no longer do so now that the website has been shut down.

55    TIL submitted that the present state of affairs may cause TIL significant reputational damage as a result of customers who have purchased units entitling them to make use of facilities provided by TIL at the Thomas Hub being prevented from gaining access to it through the TIA website. I accept this submission. I also consider that any such damage may be irreparable and that damages will most likely not provide an adequate remedy. The financial statements of TIA for the financial year ending 30 June 2014 show that the company has net assets of just under $145,000.

56    The administrators drew my attention to a proposal which they advanced whereby the TIA website would be reactivated and include a landing page which would include links to the TIL website (allowing access to the Thomas Hub) and the ACT website. This proposal was rejected by TIL during the course of the hearing on the basis that it would imply that TIL had endorsed or approved (even if only in the past) ACT’s business, and may involve an infringement of one or more of TIL’s trade marks. There is force in these submissions. The administrator’s proposal is not one that I would impose upon TIL. Nor is it a matter that I am prepared to give much weight when deciding whether or not to grant the interlocutory relief sought by TIL.

DISPOSITION

57    At the time of making the orders of 27 May 2015, I was satisfied that TIL has a strong prima facie case for a final mandatory injunction requiring TIA to transfer the thomasinternational.com.au domain name to TIL and a final mandatory injunction requiring JCS to transfer the thomas.co.za domain name to TIL. I was also satisfied that the balance of convenience favours the grant of the interlocutory injunctive relief granted by me subject to the provision of the undertakings that TIL gave to the Court. It was on this basis that I made orders 1 and 2.

LEAVE TO PROCEED

58    The administrators opposed TIL being granted leave to proceed against Humantech, TIA, ACT or JCS pursuant to s 440D of the Corporations Act 2001 (Cth). The authorities relevant to the exercise of the Court’s discretion on an application for leave to proceed under that section were considered by me in Hopkins v AECOM Australia Pty Ltd (2012) 91 ACSR 391. In this case I have given consideration to the matters referred to at [20] of my reasons in Hopkins and concluded that it was appropriate to grant the leave sought up to and including 27 May 2015. The most significant matter bearing on my decision to grant leave in this case was the harm that might be suffered by TIL in the event that it did not secure the interlocutory relief it sought, especially when weighed against the protection afforded to the administrators and the corporate respondents by the undertakings that TIL was required to give to the Court.

Associate:

Dated:    2 June 2015