21st Century Promotions Australia Pty Ltd v Telstra Corporation Ltd - [2005] SASC 115

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
21ST CENTURY PROMOTIONS AUSTRALIA PTY LTD v TELSTRA CORPORATION LTD
Judgment of The Honourable Justice Bleby
30 March 2005
EQUITY - EQUITABLE REMEDIES - INJUNCTIONS - INTERLOCUTORY INJUNCTIONS - UNDERTAKING AS TO DAMAGES
SECURITY FOR UNDERTAKING AS TO DAMAGES - ENTITLEMENT TO SECURITY
Action for damages for breach of contract – Defendant files counterclaim – Interim injunction restraining defendant from disconnecting telecommunication services – Plaintiff ordered to pay into suitors’ fund security for possible liability pursuant to undertaking – Action by plaintiff dismissed – Counterclaim by defendant partly successful – Application by defendant for payment out of court of money held in suitors’ fund – Plaintiff company deregistered – Nature of trust attaching to moneys paid into Court – Whether defendant entitled to payment – Whether entitled to full amount held – Whether losses sustained as result of injunction exceeded amount in suitors’ fund – Application granted.
Corporations Act 2001 (Cth) s 601AB, s 601AD and s 601AE; Enforcement of Judgments Act 1991 (SA) s 8, referred to.
Remm Construction (SA) Pty Ltd v Allco Newsteel Pty Ltd (1991) 56 SASR 515; Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249, applied.

21ST CENTURY PROMOTIONS AUSTRALIA PTY LTD v TELSTRA CORPORATION LTD
[2005] SASC 115

BLEBY J: The present applicant and defendant in the proceedings, Telstra Corporation Ltd (“Telstra”) is a telecommunications service provider that contracted to supply services to a company known as Network Digital Australia Pty Ltd (“NDA”), an internet service provider. The original plaintiff, 21^st Century Promotions Australia Pty Ltd (“Century”) was a related corporate entity of NDA and had taken over some of the business activities of NDA. It claimed also to have taken over a number of telecommunication facilities provided by Telstra. It brought an action for damages against Telstra consequent upon the disconnection of telecommunication services. NDA was not a party to the action.
On 8 July 1998, Century filed an application seeking an injunction against Telstra. On 9 July 1998 a Judge of this court granted an interim injunction restraining Telstra from terminating telephone and telecommunication services provided to Century and ordering Telstra to restore certain telephone and telecommunication services which it had already disconnected. Some of those were in the name of NDA. The plaintiff gave the usual undertaking as to damages.
On 28 July 1998 the court ordered Century to pay into court the sum of $10,000. A further similar order was made on 17 September 1998. Both orders were complied with. On 19 March 1999 the court ordered that Century pay into court a further sum of $10,000 within seven days. Century failed to pay the additional $10,000 into court. As a consequence, the injunction was dissolved on 15 April 1999.
The trial of Century’s claim against Telstra took place before a Judge. It involved various claims by Century said to arise from the disconnection of telecommunication services by Telstra. Telstra filed a counterclaim for unpaid charges incurred in providing telecommunication services to Century. The counterclaim was filed on 25 September 1998. It was subsequently amended to give some further particulars, but the nature and amount remained the same throughout.
The counterclaim was in two parts. The first part alleged an amount of $10,633.67 outstanding on the following accounts:
216 7085 000    (This appears to be a mistaken reference to account
No.216 7065 000)
381 1542 600
376 8909 400
262 7611 763
377 4387 400
660 1499 300    (This appears to be a mistaken reference to account
No.860 1499 300)
Part 2 was in respect of Prime OnRamp Connections allegedly provided on two other accounts, that part of the claim amounting to $11,812.73.
On 27 October 2000 the Judge dismissed Century’s action against Telstra. Judgment was entered for Telstra on the counterclaim in an amount of $9,930.06 plus $1,620 interest, but only in respect of the first part of the counterclaim. Telstra did not succeed on the second part. Century was ordered to pay Telstra’s costs of the action and of the counterclaim. See 21^st Century Promotions Australia Pty Ltd v Telstra Corporation Ltd (2000) 211 LSJS 55; [2000] SASC 353.
Century appealed to the Full Court against the judgment. The Full Court delivered judgment on 29 August 2001 dismissing the appeal. Century was ordered to pay Telstra’s costs of the appeal. See 21^st Century Promotions Australia Pty Ltd v Telstra Corporation Ltd (2001) 163 FLR 258; [2001] SASC 299.
By an application for directions dated 18 March 2002 Telstra sought payment out of court to it of the money held in the suitors’ fund, together with accrued interest thereon. The justification was said to be in satisfaction of the judgment on the counterclaim ($11,550.06) plus post-judgment interest and in part satisfaction of Telstra’s costs. The costs had not been taxed but the balance, it was said, would only be enough to cover fees paid or payable for senior counsel for the defendant for the first five days of the trial.
Following correspondence with the Australian Securities and Investment Commission (“ASIC”), the reason for which will become apparent, Telstra filed an amended application for directions on 14 November 2002. Again, the claim was for the whole of the amount paid into court plus accrued interest. This was now said to be in part satisfaction of outstanding charges due to Telstra for telecommunication services provided to the plaintiff as a result of the restoration and continued connection of the telecommunication services in accordance with the interim injunction. The amount said to be due exceeded the then balance, with accrued interest, in the suitors’ fund. In argument, the amount of the claim was justified by reference to the amount of the judgment (including interest) on the counterclaim plus an amount unpaid which had been the subject of the unsuccessful part of Telstra’s counterclaim. Accordingly, Telstra no longer sought to justify release of the money on the basis that it should be applied in settlement of its claim for costs. This was no doubt in recognition of the difficulty posed by the fund being held for a limited and specific purpose. The money was not paid into court by way of security for costs.
There appears to be no doubt that the payments into court were ordered for the purpose of securing Century’s possible liability pursuant to its undertaking as to damages. In his recital of the facts the trial Judge noted that the payments were “to ensure that moneys would be available to meet the defendant’s charges in respect of the lines affected by the injunction”.
The application raises questions both as to the entitlement of Telstra to the fund and, if it is so entitled, as to the amount to which it is entitled.
ASIC deregistered Century on 18 February 2002 pursuant to s 601AB of the Corporations Act 2001. By virtue of s 601AD of the Corporations Act Century then ceased to exist, and all its property vested in ASIC. Section 601AD(3) provides:
“(3)Under subsection (2), ASIC takes only the same property rights that the company itself held. If the company held particular property subject to a security or other interest or claim, ASIC takes the property subject to that interest or claim.
Note:See also subsection 601AE(3) – which deals with liabilities that a law imposes on the property (particularly liabilities such as rates, taxes and other charges).”
It is apparent from s 601AE that ASIC holds any such property as trustee. Section 601AE(3) and (4) provide:
“(3)The property remains subject to all liabilities imposed on the property under a law and does not have the benefit of any exemption that the property might otherwise have because it is vested in ASIC. These liabilities include a liability that:
(a) is a charge or claim on the property; and
(b) arises under a law that imposes rates, taxes or other charges.
(4)ASIC’s obligation under subsection (3) is limited to satisfying the liabilities out of the company’s property to the extent that the property is properly available to satisfy those liabilities.”
Telstra argues that it has a prior charge over the moneys held in the suitors’ fund for the purpose of s 601AE of the Corporations Act, and that consequently the property of Century vested in ASIC subject to that prior charge in favour of Telstra.
ASIC did not seek to be joined to the proceedings or to make any submissions. Telstra has not sought to make ASIC a party. I am satisfied, however, that ASIC has had full notice of Telstra’s claim and has chosen not to seek representation.
As I have said, it would seem that there is little doubt that the money was paid into court by order of the court in order to secure the possible liability of Century pursuant to its undertaking as to damages. Telstra had been ordered to continue telecommunication services to Century in respect of which Telstra alleged that it had not been paid and had been ordered to restore certain other disconnected services. It had expressed concern about the likelihood of being paid for the services it was directed to provide. When the further condition of payment into court was not met the injunction was dissolved. For the period of the injunction Telstra complied with its terms by continuing to provide the telecommunication services directed. I agree with Telstra’s submission that a charge in equity arose in favour of Telstra in respect of the money in court to the extent of any loss suffered by Telstra as a result of complying with the injunction.
Telstra made an alternative submission as to an entitlement, as a judgment creditor, to a charging order over the property of Century as a judgment debtor under s 8 of the Enforcement of Judgments Act 1991. In the circumstances, it is not necessary to address that argument, as the security created by the court’s order is sufficient, in my opinion, to act as a security or liability attaching to the fund to which any interest that ASIC might now have in the fund is subject. In any event, if a separate charging order were to be made, it seems unlikely that it could go further than to charge the fund to the extent of any outstanding liability for the judgment on the counterclaim, the particulars of which might not necessarily be the same as the particulars of Telstra’s loss as a result of complying with the injunction.
It follows that, in my opinion, Telstra is entitled to an order for payment out of such of the moneys held in court as are required to satisfy any loss that Telstra has sustained by reason of the obligation imposed by the Court to maintain the supply of telecommunication services in accordance with the injunction and for so long as the injunction remained in force.
In Remm Construction (SA) Pty Ltd v Allco Newsteel Pty Ltd (1991) 56 SASR 515, Mullighan J said, at 519-520:
“It is necessary to consider principles which relate to injunctive relief of the nature here granted at the interlocutory stage, upon the basis of an undertaking in damages. As was observed by Kaye J in Bond Brewing Holdings Ltd v National Australia Bank Ltd (No.2) (1990) 8 ACLC 403 at 406:
‘… the requirement of an undertaking as to damages from a plaintiff seeking interlocutory intervention is for the purpose of safeguarding the defendant from being without remedy for damage suffered as a result of an interlocutory order which subsequently might be held ought not to have been made.’
The party who gives the undertaking puts himself under the power of the court, not merely in the suit but absolutely: see Newby v Harrison (1861) De GF & J 287 at 290-291; 45 ER 889 at 890, per Turner LJ. As Turner LJ there acknowledges, that power over such a party continues even if the proceedings have come to an end. The object of requiring an undertaking in damages was discussed in Air Express Ltd. The only damages to which the party enjoined is entitled are those sustained by the injunction: see per Gibbs J (at 312). Stephen J observed (at 318) that the undertaking is made to the court, and not to the other party, and the court acquires powers to do justice between the parties which it would not otherwise possess. The undertaking is given as ‘the price’ of obtaining an injunction: see Attorney-General v Albany Hotel Co [1896] 2 Ch 696 at 699, per North J; Air Express Ltd; Southern Tableland Insurance Brokers Pty Ltd (In Liq) v Schomberg (1986) 11 ACLR 337 and Bond Brewing Holdings (supra).
The damages to which the enjoined party is entitled must be sustained by reason of the injunction and not for any other reason: see Air Express Ltd. In that case Stephen J expressed that principle in this way (at 320):
‘From this it can be seen that it will only be if damage is suffered because of the grant of the injunction, and would not have been suffered but for it, that the court should compensate a defendant who claims damages under the undertaking. Its grant must be shown to be the cause sine qua non of the damages complained of before the defendant can be entitled to be compensated for what turns out to be the erroneous grant by the court of the injunction against it. Only then will the defendant have suffered, from the grant of the injunction, such “real harm” as Cussen J spoke of in Victorian Onion and Potato Growers’ Association v Finnigan (No.2) [1922] VLR 819; what North J,in Attorney-General v Albany Hotel Co (supra), described as “the damages which were really sustained”.’
Lastly, I mention that an inquiry as to damages will not be ordered and damages will not be assessed until either the party giving the undertaking has failed on the merits at the trial or it has been established before trial that the injunction should not have been granted in the first instance: see Ushers Brewery Ltd v P S King & Co (Finance) Ltd [1972] Ch 148 at 154, per Plowman J.”
I do not overlook the relevant principles on which damages will be awarded as discussed, for example, by Aickin J in Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249 at 259-268. The application of those principles governing Telstra’s entitlement is relatively simple. It was expressed by Doyle CJ in the decision on appeal in this case at [84]:
“It is not disputed that, in obedience to the injunctions, Telstra continued to supply services to Century. On the discharge of the injunctions, Telstra was entitled either to payment under a contract with Century or pursuant to the undertaking as to damages given by it when the injunction was granted. There is no reason why payment pursuant to the undertaking should not be claimed and allowed at the ordinary rate at which Telstra would have charged for the relevant services. This is particularly so when the injunction was granted on the basis that Century was alleging that it had contractual rights to the continuation of services.
In my opinion, whatever the basis of the award, Telstra was entitled to payment at its usual rates.”
Perry J and I agreed.
The difficulty in this case is to ascertain the precise amount of the unpaid liability to Telstra for services provided during the period of the injunction. The injunction was in place from 8 July 1998 to 15 April 1999. In assessing the amount of the defendant’s counterclaim (Part 1) the trial Judge allowed a claim for services provided by Telstra to Century up to the date of the filing of the counterclaim, 25 September 1998. That is a period which includes part of the period covered by the injunction. It is not apparent from the trial Judge’s reasons whether that claim extended to services provided before the granting of the injunction. Without further analysis it is therefore possible that Telstra may have no security over the money held in court in respect of at least part of judgment on the counterclaim. There may also be questions as to the ability to apply the fund to the payment of interest.
Telstra has merely asserted in its application that at that time the total indebtedness of Century for telecommunication services provided by Telstra was $26,619.50, which includes the judgment sum (including interest) and post-judgment interest accrued. On the face of the claim, it may not all be secured by the money in court.
At the trial, Telstra led evidence of the total indebtedness of Century for services provided by Telstra. This substantially exceeded the amount of the counterclaim for which judgment was obtained because the services were continuing until shortly before the injunction was dissolved. For reasons which he gave, the trial Judge only allowed, on Part 1 of the counterclaim, amounts for services provided up to the date of filing of the counterclaim. There is nothing in the judgment that would preclude Telstra from successfully claiming other amounts for services provided after that date. These amounts are therefore not included in the judgment and they did not form part of the unsuccessful Part 2 of the counterclaim.
A convenient starting point is the affidavit of Eric John Spencer sworn on 8 March 1999 in which he deposed that the balance of charges due to Telstra by the plaintiff, excluding charges claimed in Part 2 of the counterclaim (which was dismissed by the trial Judge), was $26,728.09. He identified the accounts in respect of which those moneys were said to be due. They included all the accounts the subject of Part 1 of the counterclaim plus one additional account not included in the counterclaim. The amount outstanding on that account was only $57.15 and included charges to 16 February 1999. They appear to be charges incurred during the period of the injunction. All the other accounts were the subject of findings by the trial Judge on the counterclaim in respect of which he awarded judgment in the sum of $9,930.06, being for liabilities on the various invoices up to the date of filing of the counterclaim. I have checked each of the invoices for those accounts which the trial Judge included in the calculation of the counterclaim. All of them are in respect of services provided after the commencement of the injunction. None of them cover any earlier period. Those amounts are included in the $26,728.09 claimed as outstanding in Mr Spencer’s affidavit. The balance of the amount identified in Mr Spencer’s affidavit is in respect of services provided after the filing of the counterclaim and therefore within the period of the injunction. Thus, the suitors’ fund balance will be security for the whole of the amount deposed to by Mr Spencer as outstanding on the various accounts to which I have referred, all such liabilities to Telstra having been incurred during the period of the injunction and as an apparent result of it. However, this amount is less than the current balance in the suitors’ fund.
In a supplementary written submission supplied by Telstra, it is claimed that the charges for use of service number 03 9731 0571 from 8 July 1998 to 3 February 1999 can also be claimed against the security of the money held in court. This is because the injunction directed Telstra to restore telephone and telecommunication services “including the services to No.03 9731 0571”. The charges for that service are comprised in Telstra account No.479 1064 300. That account was the subject of specific findings by the trial Judge, at [134]:
“The counterclaim also includes a claim for charges in respect of services provided through the OnRamp situated at Werribee. Charges in respect of that service are included in account number 479 1064 300 rendered to NDA. The OnRamp in question was never transferred to the plaintiff and the account for services provided by it remained at all times with NDA.”

That part of Telstra’s counterclaim was dismissed by the trial Judge, and therefore Telstra can have no claim in contract against Century for that amount. Nevertheless, the telephone line in question was reconnected, as it happens, to NDA, pursuant to the order contained in the injunction. It appears that NDA did not pay the accounts subsequently incurred during the period of the injunction as a result of the reconnection. The injunction was nevertheless obtained on the application of Century and pursuant to its undertaking. The reconnection of the service pursuant to the injunction has resulted in a loss to Telstra by way of unpaid charges amounting to $11,633.60. I consider that the amount standing to the credit of the suitors’ fund is also available as security for the amount of that loss incurred by Telstra. It would therefore appear that the losses incurred by Telstra as a result of complying with the injunction and which it could now recover from Century, if it existed, pursuant to the latter’s undertaking, comprise:
Unpaid accounts in respect of the period of the
injunction in the name of Century, including the
amount of the judgment on the counterclaim
(but not including pre-trial or post-judgment interest) $26,728.09
Loss in relation to reconnection of service
No.03 9731 0571 $11,835.30
$38,563.39
As at 31 December 2004 the amount standing to the credit of the relevant suitors’ account was $27,043.25, including interest to that date. That falls well short of the amount to which Telstra is entitled. I am therefore relieved of the need to consider whether the amount paid into court could also be considered as security for pre-judgment interest awarded by the trial Judge and for interest on the judgment. The figures set out above do not include any such interest. I am also relieved of the need to make any final assessment of the full amount of damages to which Telstra may be entitled. It is sufficient, for present purposes, that I am satisfied, as I am, that that amount exceeds the amount presently held in the suitors’ fund.
Accordingly, there will be an order that the amount standing to the credit in the account in the name of this action, together with all accrued interest to the date of payment out be paid to Telstra.