BSO Network Inc & Anor v EMClarity Pty Ltd [2021] QSC 192

SUPREME COURT OF QUEENSLAND CITATION: BSO Network Inc & Anor v EMClarity Pty Ltd [2021] QSC 192 PARTIES: BSO NETWORK INC (first plaintiff) & APSARA NETWORKS INC (second plaintiff) v EMCLARITY PTY LTD ACN 88 139 128 180 (defendant) FILE NO: BS12112 of 2019 DIVISION: Trial Division PROCEEDING: Originating Application, continued as if commenced by way of Claim ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 9 April 2021 DELIVERED AT: Brisbane HEARING DATES: 20 – 23 July 2020, 19 August 2020; 21 and 22 October 2020 (further written submissions) JUDGE: Ryan J ORDERS: The parties are directed to confer about the next steps in this litigation and to contact my associate by no later than 23 April 2021 with agreed draft directions or orders; or a request for a date for a review of the matter. Until further order, I will restrict publication of these reasons to the parties and to their solicitors and counsel (subject, in the case of the defendant, to the orders made -- 1 of 6 -- 2 by Brown J on 27 November 2019, and varied by me on 4 August 2020). CATCHWORDS: CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – PARTICULAR PARTIES – PRINCIPAL AND AGENT – CREATION OF RELATIONSHIP OF AGENCY – FORMATION AND PROOF OF AGENCY – where alleged principal wholly owned subsidiary of alleged agent – where alleged principal undisclosed to other contracting party – whether holding company negotiating “on behalf of” subsidiary created agency relationship CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – IMPLIED TERMS – whether contract an unconditional contract for supply of goods or a development contract, with supply to follow only if development successful – where, if an unconditional contract for supply, the contract was silent as to when the goods were to be delivered – whether a term requiring delivery within a reasonable time ought to be implied – determination of period of reasonable time – whether there had been failure to supply the goods within a reasonable time CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – REPUDIATION AND NON- PERFORMANCE – REPUDIATION – DELAY AND PROVISIONS AS TO TIME – where defendant agreed to supply goods to second plaintiff – where defendant then unilaterally implemented a “Quality Review” of all its products and a pause on shipping until the review was complete – where defendant informed plaintiffs about Quality Review and pause on shipments but would provide no information to plaintiffs about when the review might be completed – where defendant cancelled orders for components for second plaintiff’s product –– whether conduct of defendant repudiatory CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – where contract between first plaintiff and defendant contained obligation of confidence – -- 2 of 6 -- 3 where plaintiffs’ competitor acquired defendant – where, prior to acquisition, during due diligence, defendant provided redacted versions of plaintiffs’ confidential information to plaintiffs’ competitor – where, after acquisition, defendant provided un-redacted copies of plaintiffs’ confidential information to plaintiff’s competitor – whether confidential information provided in breach of contractual obligation of confidence – whether contractual exceptions to obligation of confidence applied EQUITY – GENERAL PRINCIPLES – equitable obligation of confidence – whether equitable obligation of confidence co-exists with contractual obligation of confidence – whether, if co-existing, equitable obligation broader in scope than contractual obligation EQUITY – GENERAL PRINCIPLES – equitable obligation of confidence – where competitor of plaintiffs acquired defendant – where, during due diligence, prior to acquisition, defendant provided redacted versions of the plaintiffs’ confidential information to the plaintiffs’ competitor – where, after acquisition, defendant provided un-redacted copies of the plaintiff’s confidential information to the plaintiff’s competitor – whether confidential information provided in breach of equitable obligation of confidence CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – contractual obligation of confidence – contractual exclusivity terms – whether defendant likely to breach contractual obligation of confidence or exclusivity terms of the contract EQUITY – GENERAL PRINCIPLES – equitable obligation of confidence – whether defendant likely to breach equitable obligation of confidence Apotex Pty Ltd v Les Laboratoires Servier (No 2) [2012] FCA 748 Astea (UK) v Time Group [2003] EWHC 725 Bell Group Ltd (in liq) v Westpac Banking Corp (No 9) (2008) 39 WAR 1 -- 3 of 6 -- 4 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 Branwhite v Worcester Works Finance Ltd [1969] 1 AC 552 Bridlington Relay Ltd v Yorkshire Electricity Board [1965] Ch 436 Byrne v Australian Airlines Ltd (1995) 185 CLR 410 Coco v AN Clarke (Engineers) Ltd [1969] RPC 41 Coghlan v Pyoanee Pty Ltd [2003] QCA 146 [2003] 2 Qd R 636 Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Cooperative Assurance Co of Australia Ltd (1931) 46 CLR 41 Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520 Commonwealth Bank of Australia v Barker (2014) 253 CLR 169 Corporate Farming Pty Ltd v Eden Bay Pty Ltd (Unreported, Supreme Court of Western Australia, Murray J 28 January 1992). Curwen & Ors v Vanbeck Pty Ltd [2009] VSCA 284 Dan v Barclays (1983) 46 ALR 437 Del Casale v Artedomus (Aust) Pty Ltd [2007] NSWCA 172 Faccenda Chicken Ltd v Fowler [1985] 1 All ER 724 Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 Gold Coast Oil Co Pty Ltd v Lee Properties Pty Ltd [1984] QSCFC 85 [1985] 1 Qd R 416 Gold & Copper Resources Pty Ltd v Newcrest Operations Ltd [2013] NSWSC 281 Global Advanced Metals Pty Ltd v Metallurg Inc [2017] WASCA 188 GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd [(1986) 40 NSWLR 631 Hart v MacDonald (1910) 10 CLR 417 Hick v Raymond & Reid [1893] AC 22 Kazakstan Wool Processors (Europe) Ltd v Nederlandsche Credietverzekering Maatschappij NV [2000] CLC 822 King Tide Company Pty Ltd v Arawak Holdings Pty Ltd [2017] QCA 251 Koompahtoo Local Aboriginal Council v Sanpine Pty Ltd (2007) 233 CLR 115 -- 4 of 6 -- 5 Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 Links Golf Tasmania Pty Ltd v Sattler (2012) 213 FCR 1 Maynard v Goode (1926) 37 CLR 529 Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) (1984) 156 CLR 414 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286 Optus Networks Pty Ltd v Telstra Corporation Ltd (2010) 265 ALR 281 Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 Questband P/L v Macquarie Bank Limited [2009] QCA 266 Rossiter v Miller (1878) 3 App Cas 1124 Sequel Drill & Blast P/L v Whitsunday Crushers P/L [2009] QCA 218 Saltmann Engineering Co Ltd v Campbell Engineering Co Ltd [1963] 3 All ER 413 Shawton Engineering v DGP International [2006] BLR 1 Streeter v Western Areas Exploration Pty Ltd (No 2) 92011) 278 ALR 291 Streetscape Projects (Aust) Pty Ltd v City of Sydney (2013) 85 NSWLR 196 Tate v Freecorns Pty Ltd [1972] WAR 204 Telina Developments Pty Ltd v Stay Enterprises Pty Ltd [1984] QSCFC 43 [1984] 2 Qd R 585 Weemah Park Pty Ltd v Glenlaton Investments Pty Ltd [2011] QCA 150 [2011] 2 Qd R 582 COUNSEL: D O’Brien QC with F Lubett and L Wick for the plaintiffs G Beacham QC with G Coveney for the defendant SOLICITORS: Johnson Winter & Slattery for the plaintiffs Ashurst Australia for the defendant Overview [1] In broad terms: the plaintiffs claim that the defendant failed to perform its contractual obligations, under four contracts, to supply certain products to Apsara Networks within a reasonable time, or alternatively, repudiated the contracts. The defendant contends that the contracts are contracts for development and supply. Supply is conditional upon successful development. There has not yet been successful development. Therefore, the contractual obligation to supply products has not yet arisen and the contracts have not been breached. -- 5 of 6 -- 6 [2] Nineteen issues were presented for my determination. My conclusions as to each are stated briefly in the table below. [3] Critically, I have concluded that the second plaintiff and the defendant entered into contracts in pursuance of which the defendant agreed unconditionally to supply products to the second plaintiff; which the defendant has repudiated by manifesting an intention to perform the contracts only “if and when” it suited the defendant to do so. Whether the second plaintiff has or will terminate the contracts was not an issue for me. [4] … [5] My conclusions do not resolve matters between the parties, but they will inform the next steps of this litigation. [6] The parties are directed to confer about the next steps and to contact my associate, by no later than 23 April 2021, with agreed draft directions or orders; or a request for a review of the matter. [7] At this stage, I will restrict publication of these reasons to the parties and to their solicitors and counsel (subject, in the case of the defendant, to the orders made by Brown J on 27 November 2019, and varied by me on 4 August 2020). [8] Restricted reasons follow. -- 6 of 6 --