Angelatos, A v National Australia Bank
[1994] FCA 522
•01 AUGUST 1994
ANDREAS ANGELATOS AND ORS. v. NATIONAL AUSTRALIA BANK
No. VG195 of 1994
FED No. 522/94
Number of pages - 7
Interlocutory Injunction
(1994) ATPR 41-333
COURT
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
BRANSON J
CATCHWORDS
Interlocutory Injunction - application to vary an interlocutory order due to lack of consensus as to what claims were before the Court - serious question to be tried - balance of convenience - forward exchange contracts
Federal Court Rules O35 r7
HEARING
ADELAIDE/MELBOURNE VIDEO LINK, 29 July 1994
#DATE 1:8:1994
Counsel for the Applicants: Mr A Chernov QC with Mr J Tsalanidis
Solicitors for the Applicants: Minter Ellison Morris Fletcher
Counsel for the Respondent: Mr J Karkar QC with Mr P Almond
Solicitors for the Respondents: Mallesons Stephen Jaques
JUDGE1
BRANSON J On 27 July 1994 I delivered reasons for judgment with respect to a claim by the applicants for interlocutory relief argued on 21 July 1994. These reasons should be read with the earlier reasons. As the earlier reasons reveal I regarded the claim made on that day as being a claim for interlocutory relief in the terms of paragraph 2 of the Application. That is, in effect, for an injunction restraining the respondent until the hearing and determination of this matter from:-
(a) taking any steps to require the applicants to repay the foreign currency borrowings referred to in paragraph 7 of the Statement of Claim; and
(b) from enforcing the securities referred to in paragraph 7 of the Statement of Claim.
It may be noted that the Statement of Claim filed on 16 June 1994 makes no mention of forward exchange contracts between the parties. It follows that it makes no complaint of any allegedly misleading or deceptive conduct in respect thereof. The Application filed on the same day does not claim interlocutory relief related to forward exchange contracts between the parties. No further claim or application for interlocutory relief had been filed as at 27 July 1994.
The affidavit of Mr Angelatos filed in support of the claim for interlocutory relief argued on 21 July 1994 does refer to forward exchange contracts between the parties. See in particular paragraph 60 - 69 thereof. Mr Angelatos deposes in this affidavit to having been told by an officer of the respondent before he entered into the first of a series of forward exchange contracts that the Angelatos Group would be entitled to close-out any forward exchange contract prior to its settlement date. He states in the affidavit that it was on this basis that the applicants entered into the first and subsequent forward exchange contracts with the respondent. He states further that from time to time forward exchange contracts were closed-out with the consent of the respondent, but that, not long after the foreign exchange contracts with a maturity date of 29 July 1994 were entered into, the respondent refused to consent to such contracts being closed-out prior to their maturity date.
It is noteworthy that in this affidavit Mr Angelatos does not depose to the applicants having wished or sought to close-out such forward exchange contracts before their maturity date or having suffered loss as a result of the respondent's refusal of consent to such a close-out. The affidavit does not include any express information as to whether, as at the date that the affidavit was sworn, it appeared likely that the applicants would make a profit or a loss on such forward exchange contracts upon their maturity. The affidavit does, however, include the following statements:-
"I am advised by the solicitors for the Angelatos Group and verily believe that the position taken by NAB is that unless payments allegedly due under the foreign exchange facility and the forward exchange contracts are made on 31 July 1994 and 29 July 1994 respectively, the NAB may exercise its rights and powers under the said securities ........ . This will cause irreparable harm to these companies and the Angelatos Group as a whole ........ . For these reasons I request that this Honourable Court restrain the NAB until the hearing and determination of these proceedings from exercising any rights it may have under the securities on the grounds of alleged failure by the Exposed Companies to make payments under the foreign currency facility agreements or the forward exchange contracts."
No other affidavits filed on behalf of the applicants took the matter of forward exchange contacts any further. The affidavits filed on behalf of the respondent added little on this topic although the affidavit of Timothy Robert Piper sworn on 21 July 1994 referred to earlier disputes between the parties concerning shortfalls experienced by the applicants on hedging activities.
I do not have available to me in Adelaide the transcript of submissions made to me in Melbourne on 21 July 1994 when the claim for interlocutory relief was argued. It is not appropriate to delay dealing with this urgent matter until such transcript can be obtained. My notes reveal that Mr. Chernov QC, senior counsel for the applicants, referred in his submissions to the applicants being compelled by reason of there being no ZCB in place to hedge the foreign exchange borrowings by entering into forward exchange contracts with the respondent. He further stated that the current forward exchange contracts would expire on 29 July 1994 and that failure to pay under these would trigger default under the securities.
Mr Chernov went on to say on 21 July 1994 that what was required to be paid on 29 July 1994 was AUD 7.7M and that the applicants were not able to raise AUD 7.7M in the time frame upon which the respondent insisted. I note that AUD 7.7M is the Australian dollar equivalent of the foreign currency borrowings.
My notes further record that on two occasions Mr Chernov identified the "serious question to be tried" on the claim for interlocutory relief as being whether the respondent was obliged to roll over the foreign currency borrowings. I do not recall, and my notes do not record his having submitted that there was a serious question to be tried with respect to whether the respondent had breached an agreement to allow the applicants to close-out on a date prior to their maturity date certain forward exchange contracts.
In the circumstances it was not, in my view, surprising that Mr Karkar QC, senior counsel for the respondent, did not on 21 July 1994 address me with respect to the forward exchange contracts. His submissions were directed to the foreign currency borrowings.
My reasons for judgment of 27 July 1994 record my findings and conclusions on the submissions put to me on 21 July 1994 as I understood them. I did not understand that there was a claim before me by the applicants for interlocutory injunctive relief with respect to the forward exchange contracts which had a maturity date of 29 July 1994. For this reason I gave no consideration at the time to whether or not such an injunction ought to be granted. I note that had I given consideration at that time to that issue I would have had very limited relevant factual material before me.
After I published my reasons for judgment on 27 July 1994 I was advised by Mr Chernov that his understanding was that an application had been made on behalf of the applicants on 21 July 1994 for interlocutory relief with respect to the forward exchange contracts. He opposed the inclusion in any order of the Court of the second condition which my reasons for judgment indicated would be part of the injunction which I proposed to make.
As I did not consider that any application for injunctive relief with respect to the forward exchange contracts had been made or adjudicated upon I considered it appropriate to make the orders foreshadowed on pages 19 and 20 of my reasons for judgment. Mr Karkar for the respondent supported the making of such orders. However in view of the misunderstanding which had occurred, it was my view that the applicants should have an opportunity to make an application for interlocutory relief with respect to the forward exchange contracts. I therefore gave the applicants liberty to apply on short notice. The intent of this order was to allow Mr Chernov to make an urgent application on behalf of the applicants for injunctive relief in respect of the forward exchange contracts should he be so instructed. It was plain that if such an application were successfully made it would be likely to involve a variation of the interlocutory orders made by me on 27 July 1994.
Such an application has been made on behalf of the applicants. Further an Amended Application and an Amended Statement of Claim have been filed on behalf of the applicants. Paragraph 2 of the Amended Application reads:-
"2. An injunction restraining the respondent whether by itself, its servants or agents or howsoever otherwise until the hearing and determination of this proceedings from:
(a) taking any steps to require the applicants to repay the borrowings referred to in paragraph 7 of the said Statement of Claim or any part thereof on 31 July 1994 or at any time prior to the redemption date of the said Leno Couper Bonds;
(aa) taking any steps to require the third to sixth applicants to pay the monies referred to in paragraph 30 of the said Statement of Claim
(b) enforcing the said security referred to in paragraph 7 of the said Statement of Claim." (underlining as per the original)
Paragraphs 21 - 30 of the Amended Statement of Claim now plead in effect:-
(a) that the forward exchange contracts were entered into for the purpose of mitigating any loss or damage that the applicants may suffer by reason of the respondent's failures with respect to the ZCB;
(b) an agreement between the parties that the applicants were to be permitted at their option to close-out such forward exchange contracts prior to their maturity date;
(c) the entering into by the applicants of forward exchange contracts and the closing-out of such contracts prior to their maturity date;
(d) the wrongful refusal of the respondent to allow the closing-out of the forward exchange contracts which had maturity dates of 29 July 1994;
(e) further or in the alternative that the applicants were induced to enter into the forward exchange contracts by representations and warranties that the respondent would allow such contracts to be closed-out before their respective maturity date;
(f) that the respondent has acted in breach of contract, and in contravention of section 52 of the Trade Practices Act;
(g) that as a consequence of the above the applicants have suffered and will continue to suffer loss and damage;
(h) that the respondent threatens wrongfully to require the applicants to pay the monies otherwise payable under the forward exchange contracts on their maturity date and to enforce the securities in the event that the monies are not paid.
I heard argument on the applicants' claim for interlocutory relief with respect to the forward exchange contracts on Friday 29 July 1994 by video link between Melbourne and Adelaide.
It was argued on behalf of the respondent that:-
"The purpose and effect of the applicants' further application to the Court are to re-open and vary the Court's order made on 27 July 1994. This is impermissible unless the applicants can show by evidence that there has been a significant change of circumstances since the making of the order or that they have become aware of facts which they could not reasonably have known, or found out, in time for the first hearing."
It is true, at least in part, that the purpose of the applicants' claim is to re-open and vary the Court's order made on 27 July 1994. In my view it is permissible for the applicants to seek so to do in view of the peculiar circumstances of this matter which are outlined above. Order 35 rule 7 of the Federal Court Rules provides that the Court may if it thinks fit vary or set aside an interlocutory order after it has been entered.
I consider that circumstances in which a hearing has been conducted without a common understanding between the Court and the respective parties as to precisely what claims were before the Court amply justify the invoking, if necessary, of Order 35 rule 7.
I have been troubled by whether in the circumstances it is appropriate for the applicants to rely on the matters of fact set out in the affidavit of Mr Angelatos sworn on 29 July 1994 filed in support of the fresh claim for interlocutory relief. As Mr Karkar has pointed out, this affidavit contains no material which it was not open to Mr Angelatos to include in his earlier affidavit sworn on 14 July 1994. Yet crucial parts of the factual material which it is now asserted establishes "a serious question to be tried" with respect to the forward exchange contracts is to be found in the later affidavit, as is important material as to the balance of convenience. I am referring first to the evidence of a request to close-out the forward exchange contracts made, and refused, in November 1993. Secondly I am referring to evidence that the amount which the applicants will be required to pay to the respondent on the maturity date of the forward exchange contracts is an amount of approximately AUD 1M and that the applicants will be unable to make such payment.
Ultimately I have decided to take the material contained in the affidavit of Mr Angelatos sworn on 29 July 1994 and the material contained in the affidavit of Mr Piper also sworn on 29 July 1994 into account on the present claim for interlocutory relief. I do so because I regard the claim as a fresh claim brought on for argument pursuant to the liberty to apply granted on 27 July 1994. It is a claim based on the Amended Application and Amended Statement of Claim which were not brought into existence until later than 27 July 1994.
I record, however, that had the present claim been made on the basis only of the material before me on 21 July 1994 I would not have exercised my discretion in favour of granting the applicants' the interlocutory relief now sought.
On the material now before me I find that there is a serious question to be tried as to whether the respondent, in breach of an agreement with the applicants or contrary to an understanding induced by its conduct, refused, as Mr Angelatos alleges, to allow the applicants to close-out forward exchange contracts in November 1993 thus causing the applicants loss.
In his affidavit sworn on 29 July 1994 Mr Angelatos deposes to a conversation with an officer of the respondent on or about the day on which the Angelatos Group took the initial steps towards entering into forward exchange contracts with the respondent. He states:-
"In that conversation I asked Mr Ray Crowe whether the NAB would allow me to close-out, or cancel the forward exchange contracts at my option. Ray Crowe said that I could do this."
Mr Angelatos' exhibits to this affidavit a copy of a facsimile transmission sent by him to Mr Ray Crowe on 23 December 1991 in which he confirms his understanding that the Angelatos Group was to have the option to extend or cancel its forward exchange contracts. He further exhibits a facsimile transmission to him from Mr Crowe dated 24 December 1993 which seeks to illustrate the effect of closing-out a forward exchange contract prior to its maturity date.
Mr Angelatos goes on to depose to the fact that the applicants entered into forward exchange contracts with the respondent in reliance on the statement of Mr Crowe, and have closed-out all such contracts, other than those with a maturity date of 29 July 1994, prior to their respective maturity dates. Mr Angelatos states that on 16 November 1993 he telephoned Mr Crowe and said that he wanted to close-out the current forward exchange contracts (i.e. those with a maturity date of 29 July 1994). He deposes to Mr Crowe saying that the forward exchange contracts could not be closed-out. Mr Angelatos further deposes to the exchange rate having moved since December 1993 to such an extent that the required payment on the maturity date will be approximately AUD 1M.
The respondent does not deny the entitlement of the applicants to close-out forward exchange contracts prior to their respective maturity dates. I note, however, that included as part of the exhibit marked "TRP7" to the affidavit of Timothy Robert Piper sworn on 29 July 1994 is a copy letter from the respondent's solicitors to the applicants' solicitors which, in my view, is capable of being understood as asserting that the forward exchange contracts were to run for their full term.
In his affidavit sworn on 29 July 1994 Mr Piper, a senior officer of the respondent denies that any request was ever made on behalf of the applicants to terminate prematurely the forward exchange contracts. This dispute on the affidavits, in my view, gives rise to a serious issue to be tried between the parties.
For the reasons set out in my reasons for judgment of 27 July 1994 I am satisfied that in the circumstances of the applicants' inability to meet the financial demands of the respondent as at 29 July 1994 it would not be just to confine the applicants to a remedy in damages should they succeed at the final hearing of this matter. They would be likely, I consider, to suffer irreparable harm prior to the hearing and determination of these proceedings should the respondent commence to enforce its securities before that time.
Further I am satisfied that the balance of convenience favours the granting of the injunction claimed - although on the conditions offered by the applicants. I have no evidence before me as to the present value of the securities held by the respondent. The fact, however, that it holds securities to protect its position with respect to its commercial dealings with the applicants reduces its vulnerability to injury should it be successful at the hearing of this matter. The applicants, by contrast, are vulnerable to significant injury should the securities be realised prior to the hearing. Important aspects of such injury would not be ameliorated by a judgment in their favour.
Upon the applicants and each of them giving the usual undertaking as to damages and on the conditions set out below I propose to order:-
(1) that my order of 27 July 1994 be set aside;
(2) that the respondent be restrained, whether by itself, its servants or agents or otherwise, until the hearing and determination of this matter from:-
(a) taking any steps to require the applicants to repay the borrowings referred to in paragraph 7 of the Amended Statement of Claim in this matter;
(b) taking any steps to require the third to sixth applicants to pay the monies referred to in paragraph 30 of the Amended Statement of Claim;
(c) enforcing the security referred to in paragraphs 7 and 30 of the Amended Statement of Claim.
The order will be conditional upon the applicants:-
(1) continuing to meet all interest obligations with respect to such borrowings;
(2) within seven days placing upon deposit with the respondent the sum of $250,000 by way of part security for the payment of moneys allegedly due by the applicants to the respondent on 29 July 1994 pursuant to forward exchange contracts copies of which are exhibited to the affidavit of Andreas Angelatos sworn on 14 July 1994 and marked "AA-17";
(3) agreeing to allow and accepting the entitlement of the respondent to treat at its option the sum of $750,000 currently held by the respondent to the account of the applicants as security for the payment of such monies;
(4) placing upon deposit with the respondent a further sum of $120,000 by way of security for the payment of interest that may fall due with respect to the borrowings referred to in paragraph 7 of the Amended Statement of Claim.
All parties are to have liberty to apply on five days' notice.
I will hear counsel on the question of costs.
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