Fighting on two fronts: when are anti-suit injunctions suitable?

Having a dispute looming is bad enough – but what if you have two or more? That is a distinct possibility when you are dealing with a matter that involves another jurisdiction abroad. Successfully managing multiple disputes over the same issue can be done, but it requires planning your response before the writ is filed, and understanding the tactics available to you.

A recent case in the Federal Court showcases the importance of understanding anti-suit injunctions.

In Gensco Laboratories, LLC v Care A2 Plus Pty Ltd (receiver appointed) [2023] FCA 1024, Care A2 Plus was seeking to restrain Gensco from carrying out its threat to file a multi-million dollar claim in the Eleventh Judicial Circuit of Florida, but instead was left with an order to pay costs after Justice Halley dismissed its application.

The $200 million plus claim in Australia vs the $3.3 million plus claim in the US

Pharmaceutical company Gensco entered into an exclusive licence agreement with Care A2 Plus, giving Gensco permission to take advantage of the intellectual property in Care A2 Plus' baby formula during a supply shortage in the US.

In mid-2023, Gensco commenced proceedings in Australia alleging that it suffered losses exceeding $200 million by Care A2 Plus breaching the agreement and engaging in misleading or deceptive conduct. One of the directors was also sued.

About a week before the Australian proceedings commenced, Gensco's US lawyers also demanded payment of USD $3.36 million plus punitive damages from a director, Ms Hyland, the Founder, the Chairman, and the CEO of Care A2 Plus, on the basis that all four of them were liable under Florida law as co-conspirators for making misrepresentations and engaging in fraudulent conduct.

Care A2 Plus and Ms Hyland urgently applied for an anti-suit injunction in the Federal Court to prevent Gensco from carrying out its threat to institute proceedings in Florida.

Refresher on anti-suit injunctions

There are two bases for granting an anti-suit injunction. First, the court has inherent power to protect the integrity of its processes. This is the counterpart of the court's power to stay proceedings to prevent an abuse of process, and is exercised when the administration of justice demands.

Secondly, the court may exercise its equitable jurisdiction and grant an anti-suit injunction in aid of legal rights or to restrain unconscionable conduct or the unconscientious exercise of legal rights. For example, an anti-suit injunction may be ordered against a party threatening legal action abroad if that party signed a contract not to sue or to submit to the exclusive jurisdiction of an Australian court, or if the foreign proceedings would be vexatious or oppressive.

When hearing an application for an anti-suit injunction pursuant to equitable jurisdiction, the court will need to decide that it is not a clearly inappropriate forum to determine the parties' dispute. If so, the court may require the applicant to seek a stay or dismissal of proceedings by the foreign court. If it is not desirable to do that, or if the applicant is unsuccessful in the foreign court, then the local court will need to apply the usual principles relating to granting interlocutory relief, which will include deciding whether there is a serious question to be tried and whether the balance of convenience supports the grant of the anti-suit injunction.

Gensco was free to litigate in Florida

Justice Halley ultimately dismissed the bid by Care A2 Plus for the anti-suit injunction.

The misrepresentation and fraudulent conduct causes of action in the US proceedings were different to the breach of contract and misleading or deceptive conduct claims in the Australian proceedings, with both sets of proceedings having different defendants.

The only possible common defendant would be Ms Hyland, but Gensco gave an undertaking to not commence proceedings against her in the US while the Australian proceedings were on foot.

Further, given that Gensco is domiciled in Florida and had extensively set out its allegations in its demand, his Honour did not find that the purpose behind the US proceedings is to harass the officers of Care A2 Plus with inconvenience and legal costs associated with defending legal action in two countries. There was also no intention for the US proceedings to interfere with the Australian proceedings.

Gensco was seeking punitive damages under Florida law, which went above and beyond what the Australian proceedings could provide as those damages had the potential to be up to four times the actual damages. Accordingly, complete relief could not be provided in the Australian proceedings alone, meaning that any proceedings in Florida would not be vexatious or oppressive.

Importantly, Gensco warned before it commenced the Australian proceedings that it would commence proceedings in Florida, with the consequence that Care A2 Plus was unable to rely on an estoppel to the effect that Gensco had elected to commence proceedings in Australia only.