Mincom Ltd v Oniqua Pty Ltd[2006] QSC 155

SUPREME COURT OF QUEENSLAND 

1. The applicant, Mincom Ltd (“Mincom”), sought an injunction restraining the respondent, Oniqua Pty Ltd (“Oniqua”), from providing certain products and services to an identified list of companies except in accordance with the contract said to exist between Mincom and Oniqua. As I indicated on the day of hearing, I was inclined to refuse the application and I gave directions to ensure that the substantive matter could be heard and determined as soon as possible. These are my reasons for refusing to grant the injunction sought.

2. The products or services were identified as “any products or services … in connection with, or in respect of the computer software described as the ‘Oniqua or Mincom Inventory Optimiser (formerly Advent Optimiser)’ [the “Inventory Optimiser”] and ‘Oniqua or Mincom Procurement Strategiser (formerly Advent Trader)’ [the “Procurement Strategiser”].”

3. The specified group of people with whom Oniqua would be restrained from dealing are described in the application as customers of Mincom and identified in Annexure A to the application as Burlington Northern and Santa Fe Railway Company (“BNSFRC”); Carbones Del Cerrejon LLC (“Carbones”); City of Cleveland – Division of Water (“Cleveland Water”); City of Gainesville d.b.a. Gainesville Regional Utilities (“Gainesville Utilities”); Energex; Ergon; Goro Nickel SA (“Goro Nickel”); Hawaiian Electric Company (“Hawaiian Electric”); INCO Limited (“INCO”); Intergral Energy; Kahama Mining Corporation Limited (also Barrick Gold) (“Barrick Gold”); Minera Cerro Verde SAA (an Affiliate of Phelps Dodge) (“Minera CV”); Nashville Electric Service (“Nashville Electric”); Newmont USA Limited, d/b/a Newmont Mining Corporation (“Newmont Mining”); Newmont USA – through its affiliate Minera YANACOCHA S.R.L (“Minera”); Oklahoma Gas and Electric; Orange County Transportation Authority; Phelps Dodge Corporation (“Phelps Dodge”); Phelps Dodge Mining Services Inc (“Phelps Dodge Mining”); Rio Tinto Services, Inc (“Rio Tinto Services”); Transgrid; Western Power Electricity Corporation (trading as WP); and Xcel Energy (collectively referred to as the “customers”).

4. The contract identified in the application is said to be the “Reseller Addendum executed by the respondent on 14 August 2003” (“Addendum 2”).

5. On the hearing of the application, counsel for Mincom submitted that there were two alleged breaches of contract which the applicant sought to restrain. The first was a breach of Clause 11 of Addendum 2 and the second was a breach of Clause 14 of what is referred to as the Master Reseller Agreement (“MRA”).

6. An injunction may be granted to protect a legal or equitable right of an applicant^[1] such as to restrain breach of an express or implied negative stipulation in a contract^[2] or to restrain a breach of confidence.  In order to determine whether or not an injunction should issue, it is necessary to determine whether or not there is a serious question to be tried and whether, if so, the balance of convenience favours the grant of injunctive relief.^[3]

7. Mincom’s affidavit material reveals that it supplies computer services and technical support within Australia and internationally to government, business and industry. The provision of those services is founded, in part, upon the resupply by Mincom of software and support services associated with software originated from third party suppliers. The contractual arrangements for such resupply are generally set out in a standard MRA.

8. Oniqua is a retailer of software which allows asset-intensive industries, such as mining companies, to manage their maintenance, inventory and procurement requirements.

9. Mincom entered into an MRA with Mantech Software Pty Ltd (“Mantech Software”), a company which was a related entity to Oniqua^[4], on 26 September 2000.  The MRA governed the licensing of software from Oniqua to Mincom and the provision of support and consulting services by Oniqua to Mincom.  The licensing of the software was found in Clause 3 of the MRA^[5].  Clause 3.1 provided:

“3.1 Production Software

If the parties have executed an Addendum for Software, the Supplier grants to Reseller a non-exclusive (except as provided in any special conditions in the Reseller Contract), non-transferable (subject to Clause 16.4) license to market and grant sub-licenses under End User Contracts in respect of the Software in the Territory for the Software Fees specified in the Reseller Contract.”

Additionally Clause 6 of the MRA provided that Mincom was to provide what is referred to as level 1 help desk services and Oniqua, level 2 and level 3 help desk services to customers. 

10. The MRA was supplemented by a document described as the Reseller Addendum to the MRA (“Addendum 1”). It explicitly incorporated the terms and conditions of the MRA and was entered into on the same date. Together the MRA and Addendum 1 became the Reseller Contract which governed relations between the parties. Clause 1.11 of the MRA defined the “Reseller Contract” to mean “the contract governed by execution of an Addendum incorporating the terms and conditions of the MRA in accordance with Clause 2 of this MRA.”

11. Clause 15 of the MRA dealt with its term and how it might be terminated. Clause 15.1 provided that the term of the contract commenced on 26 September 2000 and continued for the term set out in the Reseller Contract unless terminated pursuant to Clause 15.2 of the MRA. Clause 15.2 set out two methods for termination of the contract during its term: either party could terminate at any time by giving 180 days written notice; or if one party was in breach, the other party was entitled to give written notice to remedy the breach and terminate if the breach was not remedied within 30 days. Neither method of termination had been used.

12. The term of the Reseller Contract was set out in the Addendum as follows:

“The term of this Addendum, shall be 2 years commencing on 26 September 2000.

Following expiration of the original term this Addendum may be renewed for such number of further twelve month periods as are mutually agreed between the parties.

The extension by a further 12 months of this Addendum will only be taken to have occurred if:-

1. either party gives to the other party not less than one (1) and not more than three (3) months notice on writing to that effect prior to the expiration of the previous term; and

2. the other party gives written notice of the acceptance of such extension of the term prior to the expiration of the previous term, failing which they will be deemed to have refused the acceptance of such extension.”

13. The effects of the end of the Reseller Contract were set out in subclauses 15.3 and 15.4 of the MRA:

“15.3 Effects of Termination.Upon termination or expiration of a Reseller Contract for any reason:-

(a)all Software Fees relating to Software that has been delivered to the Reseller and all Service Fees relating to any Support Services or Consulting Services performed prior to termination, or in respect of Support Fees applying to the current invoicing period shall become immediately due and payable;

(b)the non-exclusive, non-transferable license to market the Software shall be at an end; and

(c)all rights of the Reseller under that Reseller Contract to grant any further sub-licenses to End Users in accordance with clause 3 hereof, shall be terminated.

15.4 Survival. Clauses 1 (Definitions), 5 (Restrictions on Use), 12 (Limitation of Liability), 14 (Confidentiality), 15.3 (Effects of Termination), and 16 (General) will survive expiration or termination of the MRA or any Reseller Contract for any reason.”

14. On 15 August 2003 the parties executed a second Reseller Addendum to the MRA (Addendum 2). Addendum 2 provided that a new Reseller Contract was formed by its execution, in the following terms:

“The parties acknowledge and agree that by executing this Reseller Addendum a new binding and enforceable Reseller Contract is formed, the terms of which incorporate as fully set out in this Reseller Addendum and the terms and conditions in the Master Reseller Agreement 1 entered into between the parties on 26 September 2000.”

15. The term of Addendum 2 was said to be two years commencing on 1 July 2003. Upon its expiration there were similar provisions in Addendum 2 as were found in Addendum 1 for renewal and for what would happen on termination or expiration of the contract. It was common ground between the parties that the Addendum had not been renewed. Although there had been negotiations^[6] the parties had not been successful in reaching any agreement to extend the Reseller Contract by entering into a new Addendum agreement.  The respondent argued that the dealings between the parties were no longer governed by a Reseller Contract because it had expired with effluxion of time in accordance with its terms.

16. Mincom argued, however, that the parties continued to perform their obligations as if the contract remained on foot after the expiration of Addendum 2 while they negotiated a further extension of the Reseller Contract. Mr Poppenbeck of Mincom has deposed that Mr Roveda, the CEO of Oniqua, asserted at a meeting in January 2006 that “the terms of the existing Addendum Agreement continued to apply to any new deals, as well as in respect of maintenance being provided under existing deals, until such time as suitable new terms could be agreed.” Mr Roveda conceded that he could have said something to that effect.

17. Those negotiations broke down in March 2006 over a dispute about separate arrangements that had been made between the parties regarding the provision of software to Rio Tinto. There had been other difficulties during the negotiations. The parties could not agree about a number of matters including the percentage return provided to Oniqua. On 16 March 2006, Mr Roveda sent an email to Mincom saying that Oniqua wished to renew the MRA but that the parties needed to set a timetable in which to make it happen. On 27 March 2006, an apparently increasingly impatient Mr Roveda sent an email to Mincom pointing out that the parties had been negotiating for more than a year and that the Reseller contract had expired almost a year previously and stating “In the absence of any correspondence by 31 March 2006, we will assume Mincom has no desire to review the MRA.” Mincom informed Oniqua on 27 March 2006 that until the Rio Tinto issue was satisfactorily resolved, Mincom’s CEO would instruct Mincom’s sales force to immediately suspend Oniqua and its products from all of Mincom’s proposals “globally” and would instruct Mincom’s legal team to suspend work on finalising a new Reseller Agreement with Oniqua. On 3 April 2006, the Chairman of Oniqua replied noting the formal termination of the “already expired MRA, effective 31 March 2006.”

18. At that point, both Mincom and Oniqua wrote to the customers who used the Inventory Optimiser and the Procurement Strategiser pursuant to contracts with Mincom offering to provide the customers with the goods and the services previously provided by both. Oniqua said it would provide those services immediately but would not invoice them for those services until after their contracts with Mincom had expired.

19. Mincom argued that for Oniqua to do so was in breach of Clause 11 of Addendum 2 by which Oniqua acknowledged that one of the principal reasons it was entering into the Reseller Agreement was to take advantage of the existing customer base of Mincom. Oniqua agreed that Mincom would be the primary point of contact for all sales efforts into Mincom’s existing customer base. Oniqua agreed to direct its distributors to engage the local Mincom office in their region as their point of contact for all sales to existing customers of Mincom and that Mincom would be responsible for such sales, unless Mincom expressly agreed otherwise or declined to actively pursue the sale. It is arguable that Oniqua’s behaviour in writing to Mincom’s customers itself would have been in breach of Clause 11 of Addendum 2 but if the contract between the parties had expired, according to its terms, then the obligation to comply with Clause 11 had also expired.

20. Mincom’s argument as to the continuation of a contractual relationship between the parties was that the parties had agreed, while negotiating, to continue to be bound by Addendum 2 and had in fact acted in accordance with that. Mincom had continued to pay maintenance and support fees to Oniqua. The last payment noted was 7 February 2006. The fees were for service contracts, two of which were not due to expire until December 2006. Software licence fees had continued to be invoiced by Mincom to its customers in respect of Oniqua products, the last one being on 17 February 2006. Additionally, Mincom passed on to Oniqua a request for support from a customer on 25 July 2005 which was dealt with by Oniqua. The applicant argued that the parties have, by this conduct and by agreement, accepted that Addendum 2 remained on foot; and that therefore the parties continued to be bound by the MRA; and might only terminate the contract in accordance with Clause 15.1 of the MRA, by giving 180 days notice. No such notice had been given.

21. One difficulty with the applicant’s argument is that it is contrary to the express terms of the Reseller Contract and the express terms of Addendum 2 as to how the contract between the parties could be renewed or extended. If each party were, however, prepared to act on the basis of the commercial terms of the Reseller Contract while they considered its renewal then arguably the contract continued until it expired or was terminated. The contractual period could not, however, continue once those negotiations had broken down. What the agreement between the parties to continue to act in accordance with the contract during negotiations did was to extend the expiration date of the contract. If suitable terms for a formal extension of the contract between the parties could be agreed, then a new contract would be entered into. If not, then the informal or ad hoc extension of the Reseller Contract beyond its two year term would simply expire. Once the contract had expired, it was not necessary to terminate it. In fact it is not possible to terminate a contract which has expired as the contractual obligations (with the exception of any obligations explicitly surviving) have been discharged. The applicant has not therefore raised a serious question to be tried that the respondent is in breach of the termination requirements under Clause 11 of the MRA.

Estoppel

22. The applicant argued that had 180 days notice been provided, Mincom would have commenced making arrangements in respect of other suppliers during the run down period provided for by the Addendum agreement. Mincom submitted that it acted in reliance upon Oniqua’s conduct in not taking any steps to make other supply arrangements for its customers and that by reason of Oniqua’s failure to provide notice in terms of Clause 15.2, Mincom had been denied that opportunity. That argument stands or falls with the argument that Oniqua was obliged to give 120 days notice and need not therefore be further considered.

Confidential Information

23. The applicant also argued that Oniqua should be restrained from providing products and services to the customers as to do so would be in breach of confidence. The duty of confidence was, it was said, founded both in contract and equity. In this case it would appear that the alleged breach of confidence sought to be restrained is one that arises pursuant to the contract between the parties.

24. The provisions of the Reseller Contract which are relevant to this argument are Clauses, 1.2, 14 and 15.4 of the MRA. Clause 1.2 provides that “confidential information” means “all information (in whatever format) designated as such by either party, together with such information which relates to the business, affairs, customers, products, developments, trade secrets, know-how and personnel with either party and what may reasonably be regarded as the confidential information of the disclosing party and expressly includes the terms of this MRA and any Reseller Contracts.”

25. Clause 14 of the MRA deals with confidentiality. It should be noted that pursuant to Clause 15.4 the confidentiality provisions survive the expiration or termination of the MRA or any Reseller Contract for any reason. Clause 14 provides as follows:

“14.1Subject to Clause 14.2, each Party shall

(a)only use Confidential Information for the purposes of the relevant Reseller Contract;

(b)only disclose Confidential Information to a third party with prior written consent of the other Party; and

(c)ensure that any third party to whom Confidential Information is disclosed is under similar obligations of confidentiality.

14.2The provisions of Clause 14.1 shall not apply to any Confidential Information whichever

(a)is in or comes into the public domain other than by breach of this Clause 14;

(b)is or has been independently generated by the recipient Party; or

(c)is properly disclosed pursuant to a statutory obligation, the order of a court of competent jurisdiction or that of a competent regulatory body.”

26. Mincom argued that the terms of the MRA concerning confidentiality are reinforced by Clause 11 of Addendum 2 which has previously been referred to. What is alleged to be the confidential information was set out in the affidavit of Ricky Lee Rogers, the President of Mincom Inc, a United States corporation which is a wholly owned subsidiary of Mincom. He swears that the confidential information includes information generated prior to the sale of the product and services including direct marketing campaigns, client history, and intelligence on client requirements and feedback; information relevant to Mincom’s pricing of its software products; information about the customers’ decision-making processes including the customers’ internal budgetary constraints, the identity of key decision makers and who were the staff members of the customer who supported the Mincom product guiding it through the sales process; information such as targeted marketing campaigns, prospect lists, client inclinations and idiosyncrasies, desires, dislikes and other valuable sales information. The applicant’s argument was that if Oniqua deals with any of the customers then it will inevitably use the confidential information in doing so.

27. Oniqua submitted that much, if not all, of that information was in the public domain, had been published by Mincom in its application and affidavit material or on its website, or was independently known to Oniqua and could not therefore be regarded as confidential.^[7] 

28. The issue of alleged misuse of confidential information does appear to give rise to serious questions, both of fact^[8] and of law, to be tried although it is not possible at this preliminary stage to determine precisely what confidential information the defendant has which it would be prevented from using by the terms of the contract.

Balance of convenience

29. Having determined that there is a serious question to be tried it remains to consider where the balance of convenience lies. A relevant consideration to the balance of convenience is whether damages would be an adequate remedy.^[9]  Indeed in Castlemaine Tooheys Ltd v South Australia^[10] Mason ACJ, sitting alone to determine whether or not to grant an interlocutory injunction, held that the applicant for such an injunction, in addition to the demonstrating that there was a serious question to be tried and that the balance of convenience favoured the grant of an injunction, was also required to show that he or she would suffer irreparable injury for which damages would not be an adequate compensation unless an injunction were granted.^[11]  In the present case, it would appear that any loss to Mincom by Oniqua using its confidential information to compete against it with the customers listed in Annexure A is capable of being readily quantified particularly if Oniqua is obliged to keep records of all such sales and an account of profits made from them.^[12] 

30. It could be argued that if the alleged breach of confidence is founded in equity rather than in the surviving contractual obligation, then Mincom would have the right to an injunction no matter what the balance of convenience as damages would not be awarded for breach of the equitable duty.^[13]  However the remedy here is in reality sought for breach of the contractual obligation by which the parties have articulated the extent of the duty of confidentiality between them^[14] and in such a case damages may be awarded and the adequacy of damages as a remedy is relevant to the balance of convenience.^[15]

31. Also relevant to the balance of convenience is the width of the injunction sought. It appears that the precise detail of the confidential information varied from customer to customer. Mr Rogers referred to the particular relationship between the parties to this litigation and four of the listed customers. However, the applicant made no other attempt to detail what was said to be the “Confidential Information” with regard to each of the 23 listed customers. This is relevant as the injunction sought is in the widest possible terms. It appears from the affidavits of Mr Rogers and of Andrew Hill filed by leave on 19 May 2006, that Oniqua had different levels of involvement with different customers. A party against whom an injunction is granted is entitled to know precisely what it may or may not do since a breach of injunction gives to penal sanctions.^[16]  One that is in such wide terms should give rise to great difficulties in knowing precisely what behaviour was prohibited with regard to each of the customers. 

32. The effect of the injunction sought would be to enjoin the defendant from dealing with each of the 23 customers even though the confidential information said to have been imparted with regard to each customer is said to be different and in many cases, is described only in broad and imprecise terms. This gives rise to the twin problems identified by Johnson J in Rapid Metal Developments (Australia) Pty Ltd v Anderson Formrite Pty Ltd^[17] for a party seeking an interlocutory injunction to restrain breach of confidence:

“In O'Brien v Komesaroff^[18] Mason J treated the failure to define with any precision or detail the alleged confidential information as fatal to any attempt to treat it as something that could be protected against use by those to whom it had allegedly been imparted. Further, the inability of a plaintiff to define with sufficient precision what he seeks to call confidential information will call into play the cardinal principle that a defendant should only be enjoined in terms which indicate that which is forbidden on pain of contempt: Lawrence David Ltd v Ashton [1991] 1 All ER 385 at 393; see also American Cyanamid Co v Alcoa of Australia Ltd (1993) 27 IPR 16 at 20.”

33. Also relevant to the balance of convenience is the potential effect on third parties who are not parties to the litigation but whose interests will certainly be affected^[19].  If Oniqua is prevented at this interlocutory stage from supplying goods and services to the customers who currently use those products, their business will be affected.  It is no answer to say that Oniqua may under the terms of the proposed injunction provide the goods and services to the customers in accordance with the contract said to exist between Mincom and Oniqua because in my view no such contract exists.  The injunction would therefore effectively prevent Oniqua from dealing with the customers who apparently use Oniqua’s goods and services in their businesses.  There can be doubt that any such injunction would have an adverse effect on those customers.

Conclusion

34. I therefore refuse the injunction sought but direct Oniqua to keep a list of all commercial dealings it has with the customers set out in Annexure A to the application. I shall hear submissions as to the precise form of the order.