Balout v Bella Ikea Cronulla Pty Ltd - [2024] NSWSC 775

Supreme Court

New South Wales

Medium Neutral Citation: Balout v Bella Ikea Cronulla Pty Ltd [2024] NSWSC 775
Hearing dates: 13 June 2024
Date of orders: 28 June 2024
Decision date: 28 June 2024
Jurisdiction: Equity - Expedition List
Before: Rees J
Decision:
Order return of security paid into Court. Dismiss application for compensation under the usual undertaking as to damages.

Catchwords:
USUAL UNDERTAKING AS TO DAMAGES – shareholder dispute resolved by consent orders, including sale of apartment building ‘in one line’ to maximise sale price – director alleged to have circumvented consent orders by arrangement with another developer and mortgagee – interlocutory injunction to restrain mortgagee sale of 3 apartments only – plaintiffs pay $2M into court as security under Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 – apartment building sold ‘in one line’ for higher price – mortgagee paid out – director seeks compensation of $980,000 for mortgagee’s higher payout figure.
COMPENSATION – whether to enforce undertaking where no final determination of the merits –defendants concede injunction properly granted – principles and case law review at [61]-[78] – mere discharge of interlocutory injunction before trial does not establish that it ought not to have been ordered – defendants fail to establish circumstances warranting exercise of court’s discretion to enforce undertaking.

Legislation Cited:
Uniform Civil Procedure Rules 2005 (NSW), r 25.8

Cases Cited:
Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1979) 146 CLR 249
Cheltenham and Gloucester Building Society v Ricketts [1993] 1 WLR 1545
Cirillo & Anor v Citicorp Australia Ltd & Ors [2004] SASC 293
Computer Accounting & Tax Pty Ltd v Professional Services of Australia Pty Ltd (No 5) [2012] WASC 382
European Bank Ltd v Evans (2010) 240 CLR 432
Fourie v le Roux [2007] UKHL 1
Graham v Campbell (1878) 7 Ch D 490
Griffith v Blake (1884) 27 Ch D 474
Hortico (Australia) Pty Ltd v Energy Equipment Co (Australia) Pty Ltd (1985) 1 NSWLR 545
IceTV v Ross [2008] NSWSC 898
Indoor Holdings Pty Ltd v Bennett (No 2) [2010] WASC 307
Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161
Metropolitan Properties Pty Ltd v Caltex Petroleum Pty Ltd [1999] WASC 153
Mohamed t/as Billan Family Day Care v Secretary, Department of Education, Skills and Employment (No 3) [2021] FCA 1537
National Australia Bank Ltd v Garrett [2016] FCA 714
Rail Corporation New South Wales v Leduva Pty Limited [2007] NSWSC 571
Russell v Farley (1881) 105 US 433
Tucker v State of Victoria [2023] VSCA 126
Ushers Brewery Ltd v PS King and Co (Finance) Ltd [1972] 1 Ch 148

Texts Cited:
Peter Biscoe, Freezing and Search Orders: Mareva and Anton Piller Orders (2nd ed, 2008, LexisNexis)

Category: Procedural rulings
Parties: Alan Balout (First Plaintiff)
Wisefox Holdings Pty Ltd (Second Plaintiff)
Bella Ikea Cronulla Pty Ltd (First Defendant)
Bella & SEB Holdings (Second Defendant)
Joseph Touma (Third Defendant)
Representation:
Counsel:
P Afshar (First and Second Plaintiffs)
C P O’Neill / A…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2024] NSWSC 775
Decision Date: 28 June 2024

CaseChat Overview and Summary

In Balout v Bella Ikea Cronulla Pty Ltd, the plaintiffs sought an interlocutory injunction to restrain the mortgagee from selling three apartments separately, which would have circumvented the terms of consent orders that required the sale of the apartment building in one line to maximize the sale price. The defendant director alleged to have circumvented these orders through an arrangement with another developer and the mortgagee. The court was tasked with determining whether the plaintiffs were entitled to compensation for the higher payout figure resulting from the sale of the apartment building in one line and whether the defendants were to be held to their undertaking as to damages.

The court examined whether the defendants should be compelled to honour their undertaking where there had been no final determination of the merits. The defendants conceded that the injunction was properly granted, but argued that the court should exercise its discretion to enforce the undertaking. The court reviewed the principles and relevant case law, ultimately concluding that the mere discharge of the interlocutory injunction before trial did not establish that it ought not to have been ordered. The defendants failed to demonstrate circumstances warranting the exercise of the court’s discretion to enforce the undertaking.

The court dismissed the director’s claim for compensation of $980,000. The plaintiffs were ordered to pay $2 million into court as security under Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161, which was paid out to the mortgagee. The court held that the defendants were not required to compensate the director for the mortgagee’s higher payout figure.

Orders