Ireland v Brown [2004] VSC 57 (23 February 2004)

Last Updated: 3 March 2004

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

PRACTICE COURT

No. 9389 of 2003

STEVEN EDWARD IRELAND and Anor.	Plaintiff
v.
JULIE ANN BROWN and Ors.	Defendant

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JUDGE:	MANDIE J
WHERE HELD:	Melbourne
DATE OF HEARING:	23 February 2004
DATE OF JUDGMENT:	23 February 2004
CASE MAY BE CITED AS:	Ireland & anor v Brown & ors
MEDIUM NEUTRAL CITATION:	[2004] VSC 57

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PRACTICE AND PROCEDURE - Application for interlocutory injunction - Claim that plaintiff granted licence agreement under duress - Whether serious question to be tried - Whether balance of convenience favoured granting of injunction

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr L. Watts and Mr J. Williams	O'Neill Behan & Associates
For the Defendants	Mr A.K. Panna	Stephens Lawyers & Consultants

HIS HONOUR:

1. I have come to the conclusion that an interlocutory injunction should be granted in this matter. In my opinion there are serious questions to be tried. The evidence shows, at least on one view, and one view is sufficient, that the first plaintiff developed an idea for an Easy Reader bookmark, and whether or not there was some contribution from others is irrelevant to the present proceeding. He has made a patent application and he has become involved with the first defendant, and with others, in a proposed business venture for the marketing of that Easy Reader bookmark. The company formed as vehicle for the marketing of the bookmark is the second plaintiff, and it is not possible on this interlocutory hearing to determine exactly what status that company now has. It may still be the company entitled to market the bookmark, or it may be that its rights have been determined, but, if they have, there arise real questions as to the rights of the shareholders in relation to what subsequently happened, because moneys have been invested in that company, the second plaintiff.
2. What is uncontradicted is that Mr Ireland, the first plaintiff, later came up with an idea, for reasons that need not be elucidated at this stage, that the vehicle for the marketing should not be the second plaintiff but should be a company to be formed, Easy Reader Pty Ltd. At the same time as conveying his idea in that respect to the first and second defendants, he mentioned that he also wished to acquire a domain name with the same title, Easy Reader. He then set about instructing his advisers to incorporate that company and to acquire that domain name.
3. The defendants, or some of them, complain that he misled them and said that the company had been in fact incorporated when it had not, but, as I read the material, that was arguably anticipatory only. He was clearly going about doing it, but what the defendants other than the company, or some of the defendants at any rate, did was step in and, because the first plaintiff had not completed through his agents his incorporation of the company and his acquisition of the domain name, they stepped in, in particular the first defendant, incorporated the company, made herself sole director and shareholder to the exclusion of the other parties to this business arrangement, and then presented the first plaintiff with a fait accompli. According to the first plaintiff, he felt that he had no alternative in those circumstances, the company having been incorporated and the domain name acquired by the first defendant in particular, but to agree to the proposal that was put to him to sign a licence agreement.
4. There are other versions of this. The first defendant has another version, and counsel for the defendants says that if you look at the documents you can see that there are inconsistencies, and no doubt there are and the facts will have to be determined at trial. But if one takes the evidence of Mr Ireland on its face, and I think it is a credible version in the circumstances, he says that he was told by the first defendant that he would be left with no customers, he would lose all his customers, if he did not sign the licence agreement. They put terms to him, and he says that he was induced to sign the licence agreement as a result of that pressure. It can only be determined at trial whether that is correct or not, but in my opinion the material raises a serious question to be tried as to whether, by illegitimate pressure, the first plaintiff was induced to enter the licensing agreement. If he was, then the agreement is voidable and would be declared by the court, in all probability, to be void and set aside. The pressure is arguably illegitimate, because at least it is seriously arguable on the material that the taking of the company name and the acquisition of the domain name was a misuse of confidential information supplied by the first plaintiff to the first defendant and others, and a breach of fiduciary duty by the first defendant and others. That fiduciary duty may arise as a result of the first defendant being connected with the second plaintiff, although I think it is more likely to arise as a result of a quasi-partnership or joint venture between Ireland, Brown and Humble. It seems to me that in equity, whatever particular analysis is likely to be ultimately adopted, it can at least be said at this stage that there is a serious question to be tried as to whether the acquisition of this company and the domain name, to the exclusion of the first plaintiff, was improper and illegitimate conduct and hence, when used to induce the licensing agreement, if that is what occurred, constituted illegitimate pressure which one might credibly believe would cause the first plaintiff in the circumstances to enter such an agreement. Whether that ultimately turns out to be the version accepted is another matter, but I think, for the purposes of an interlocutory injunction, serious questions arise.
5. On the balance of convenience, I think the right to interlocutory injunction is also established. If the licensing agreement may be set aside for duress, then it is hardly appropriate to permit the agreement to proceed pending trial. A limited amount of work has been done under it prior to the service of the writ, but to permit it to continue pending trial will raise all kinds of difficulties. It will raise difficulties about keeping records, it will raise difficulties about the status quo when trial is reached, and it will also be likely to be productive of further disputation in relation to such matters as the royalty and in relation to such matters as, if it be an implied obligation to use reasonable endeavours under the licence agreement to market the product, whether those reasonable endeavours have been put into effect and whether appropriate marketing methods have been adopted. Given that the parties are at the moment in hot dispute, one can envisage that to permit this agreement to be performed pending trial, when there is an argument about duress, will be productive of further disputation and probably legal costs as well. I think the sensible thing to do, although it concededly has some disadvantages as well, is to freeze the situation pending trial in so far as that can be done by granting the relief sought. In relation to the plaintiff's usual undertaking as to damages, if one assumes that the plaintiff would have no means to satisfy the undertaking should he lose the case, I note that the amount payable to him under the licence agreement and not yet paid would serve as adequate security for the first and second defendants.
6. I think the defendants should be restrained until after the determination of this proceeding from promoting, distributing, marketing and selling the product known as the Easy Reader, the indicating bookmark, and restrained for the same time from trading under or by reference to or using in any manner the company name of Easy Reader Pty Ltd and the domain name www.EasyReader.com.au, including but not limited to using the company name or domain name on any signage, advertisement, stationery, promotional material or telephone listing.
7. The other relief sought in the summons is no longer sought. Costs should be reserved.

Are any other directions sought?

(Discussion ensued.)

HIS HONOUR: I will direct that the proceeding be referred to mediation by a mediator to be agreed, or in default to be nominated by the court, such mediation to be completed within a period of 14 days. I will grant liberty to apply in case there is some disagreement about the details of the mediation or the mediator.