Bell Group NV (in liq) v Insurance Commission of Western Australia - [2017] WASCA 229

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: BELL GROUP NV (in liq) -v- INSURANCE COMMISSION OF WESTERN AUSTRALIA [2017] WASCA 229

CORAM: MAZZA JA
LE MIERE J
ALLANSON J

HEARD: 27 & 28 JULY 2017

DELIVERED : 22 DECEMBER 2017

FILE NO/S: CACV 50 of 2017

BETWEEN: BELL GROUP NV (in liq)
Appellant
AND
INSURANCE COMMISSION OF WESTERN AUSTRALIA
First Respondent
ANTONY LESLIE JOHN WOODINGS AS LIQUIDATOR OF THE BELL GROUP LTD (in liq)
Second Respondent
THE BELL GROUP LTD (in liq)
Third Respondent
ANTONY LESLIE JOHN WOODINGS AS LIQUIDATOR OF BELL GROUP FINANCE PTY LTD (in liq)
Fourth Respondent
BELL GROUP FINANCE PTY LTD (in liq)
Fifth Respondent
ANTONY LESLIE JOHN WOODINGS AS LIQUIDATOR OF BELL BROS PTY LTD (in liq)
Sixth Respondent
BELL BROS PTY LTD (in liq)
Seventh Respondent
ANTONY LESLIE JOHN WOODINGS AS PROVISIONAL LIQUIDATOR OF WESTERN INTERSTATE PTY LTD (in provisional liquidation)
Eighth Respondent
WESTERN INTERSTATE PTY LTD (in provisional liquidation)
Ninth Respondent
GARRY JOHN TREVOR AS LIQUIDATOR OF BELL GROUP NV (in liq)
Tenth Respondent
LAW DEBENTURE TRUST CORPORATION PLC
Eleventh Respondent
COMMONWEALTH OF AUSTRALIA
Twelfth Respondent
WA GLENDINNING & ASSOCIATES
Thirteenth Respondent

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :PRITCHARD J
Citation  :INSURANCE COMMISSION OF WESTERN AUSTRALLIA -v- ANTONY LESLIE JOHN WOODINGS AS LIQUIDATOR OF THE BELL GROUP LTD (IN LIQ) [2017] WASC 122
File No  :CIV 2666 of 2016

Catchwords:

Injunction - Practice and procedure - Appeals - Appeals against grant of interlocutory anti-suit injunction - Where parties entered agreements as Indemnifying Creditors to indemnify liquidators of companies in the Bell Group - Where parties wished to make arrangements to secure a benefit to the body of the Indemnifiers - Where further agreements for the assignment of shares and for distribution of funds returned among Indemnifying Creditors - Where appellant brought proceedings in Federal Court which if successful would affect the funds available for distribution - Whether implied covenant not to destroy fruit of agreement or challenge assumption underlying agreements - Whether injunction lies to restrain appellant from prosecuting or progressing claims in the Federal Court - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA), O 20 r 2(2), O 52 r 1(3)

Result:

Appeal allowed

Category: B

Representation:

Counsel:

Appellant:     Mr N J O'Bryan SC & Mr A D'Arcy
First Respondent          :     Mr G Rich SC & Mr I Ahmed
Second Respondent      :     No appearance
Third Respondent        :     No appearance
Fourth Respondent      :     No appearance
Fifth Respondent         :     No appearance
Sixth Respondent         :     No appearance
Seventh Respondent     :     No appearance
Eighth Respondent       :     No appearance
Ninth Respondent        :     No appearance
Tenth Respondent        :     No appearance
Eleventh Respondent    :     No appearance
Twelfth Respondent     :     No appearance
Thirteenth Respondent :     No appearance

Solicitors:

Appellant:     Lipman Karas
First Respondent          :     Quinn Emanuel Urquhart & Sullivan
Second Respondent      :     No appearance
Third Respondent        :     No appearance
Fourth Respondent      :     No appearance
Fifth Respondent         :     No appearance
Sixth Respondent         :     No appearance
Seventh Respondent     :     No appearance
Eighth Respondent       :     No appearance
Ninth Respondent        :     No appearance
Tenth Respondent        :     No appearance
Eleventh Respondent    :     No appearance
Twelfth Respondent     :     No appearance
Thirteenth Respondent :     No appearance

Case(s) referred to in judgment(s):

Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA 63; (2001) 208 CLR 199
Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104
Caratti v Mammoth Investments Pty Ltd [2016] WASCA 84; (2016) 50 WAR 84
Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 253 CLR 169
CSR Ltd v Cigna Insurance Australia Ltd [1997] HCA 33; (1997) 189 CLR 345
EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78; (2010) 41 WAR 23
Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268
Marmax Investments Pty Ltd v RPR Maintenance Pty Ltd [2015] FCAFC 127
Peters (WA) Ltd v Petersville Ltd [2001] HCA 45; (2001) 205 CLR 126
Rectron Australia BV v Lu [2014] NSWSC 1367
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359
Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76
Stirling v Maitland & Boyd (1864) 122 ER 1043
The Bell Group (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 39 WAR 1

JUDGMENT OF THE COURT: In 1995, the Insurance Commission of Western Australia (ICWA), the Law Debenture Trust Corporation, Bell Group NV and the Commonwealth (collectively, the Indemnifying Creditors) agreed to provide funding to the liquidators of some of the Bell Group companies to commence proceedings against banks which had security over assets of Bell Group companies (the Bell Proceedings). The Indemnifying Creditors and the liquidators entered into agreements for that purpose. They also made agreements to pool and distribute the monies recovered in the Bell Proceedings in agreed ratios.
The parties to the Bell Proceedings included Western Interstate Pty Ltd, a subsidiary of The Bell Group Ltd. The present appeal relates to three related agreements: the Western Interstate Inter‑Creditor Agreement; the Western Interstate Assignment Agreement; and the Western Interstate Indemnity Agreement (collectively, the Western Interstate Agreements).
On 16 May 2016, BGNV commenced proceedings in the Federal Court of Australia against Bell Group Finance and others, including Western Interstate and its provisional liquidator.
On 13 April 2017, the primary judge issued an interlocutory injunction restraining BGNV from continuing to prosecute its claim in the Federal Court. Bell Group NV appealed on multiple grounds. The critical question on appeal is whether her Honour erred in finding an implied term in agreements between BGNV and other creditors of the Bell Group of companies that BGNV breached by its claim in the Federal Court.
ICWA was formerly known as the State Government Insurance Commission, and made agreements in that name. We will refer to it, throughout these reasons, as ICWA. Bell Group NV is conveniently abbreviated to BGNV.

The Federal Court proceedings (WAD 191 of 2016)

In the Federal Court proceedings, BGNV seeks orders including:
7.A declaration that [Western Interstate] is not a creditor of [Bell Group Finance] in the sum of $758,386,538 or at all.
8.A declaration that [Western Interstate] has no debt or claim admissible to prove against [Bell Group Finance] under section 553(1) of the Corporations Act.
9.An order directing [Western Interstate] to withdraw its proof of debt in the winding up of [Bell Group Finance] pursuant to regulation 5.6.56 of the Corporations Regulations and an order directing [the liquidator of Bell Group Finance] to consent to that withdrawal.
10.In the alternative to paragraph 9, an order directing [the liquidator of Bell Group Finance] to reject the proof of debt lodged by [Western Interstate] with [Bell Group Finance].
ICWA is not a party to the Federal Court action.

The Supreme Court proceedings (CIV 2666 of 2016)

ICWA commenced this action by writ filed in the High Court of Australia on 9 June 2016. BGNV is one of thirteen defendants. On 2 September 2016, French CJ ordered that the proceedings be remitted to the Supreme Court of Western Australia. Two of the defendants, including BGNV, had sought removal to the Federal Court of Australia.
The writ filed is generally endorsed. ICWA has subsequently filed a Statement of Facts, Issues and Contentions.
ICWA seeks declarations in respect of the construction and operation of certain agreements, including the Western Interstate Agreements, to which one or more of the defendants are party, and other relief.
Relevantly to the present matter, ICWA alleges, in par 7(e), (f) and (g) of the writ, the making of:
(a)the Western Interstate Assignment Agreement, dated 13 March 1996 and amended in July 1997, between parties including the Indemnifying Creditors, and the liquidators of Bell Group Finance and the provisional liquidator of Western Interstate;
(b)the Western Interstate Indemnity Agreement, dated 6 March 1996 and amended in July 1997, between the Indemnifying Creditors, and the provisional liquidator of Western Interstate; and
(c)the Western Interstate Inter-Creditor Agreement, dated 6 February 1996, between the Indemnifying Creditors.
The writ alleges that disputes have arisen regarding the distribution of the fund received by the liquidator of certain Bell Group companies. Justiciable controversies have arisen as to matters including the construction and operation of s 564 of the Corporations Act 2001 (Cth); the construction and operation of, and the parties' obligations under The Bell Group Ltd Trust Deed and the Bell Group Finance Trust Deed; and the construction and operation of, and the parties' obligations under, various of the other agreements (pars 10 and 11). ICWA also makes other claims, including claims against BGNV under the Trade Practices Act 1974 (Cth) and the Australian Securities and Investment Commission Act 2001 (Cth).
The relief sought by ICWA includes declarations (pars 23 -29) that:
(a) BGNV became a Terminating Indemnifier for the purposes of the Western Interstate Assignment Agreement and the Western Interstate Inter-Creditor Agreement in about March 1999, and ceased to have any interest or claim in or with respect to 57,000 fully paid ordinary shares in Western Interstate, the subject of the Western Interstate Assignment Agreement.
(b)Bell Bros (a company in the Bell Group) is obliged to transfer 57,000 fully paid ordinary shares in Western Interstate, the subject of the Western Interstate Assignment Agreement, to the liquidator of Bell Group Finance and the liquidator is obliged to accept the transfer.
(c)Upon receipt of the shares, the liquidator of Bell Group Finance holds them on trust for ICWA and the Commonwealth as the sole beneficial owners of the shares.
By a proposed amendment to the writ, dated 14 February 2017, ICWA seeks an order permanently restraining BGNV from taking any further steps to prosecute or progress specified claims in proceedings it commenced in the Federal Court of Australia in May 2016 (WAD 191 of 2016) or any claims for relief for the same or substantially the same relief (par 30). In the alternative, or in addition, ICWA claims damages for breach of contract.
In proposed amendments to its Statement of Facts, Issues and Contentions, ICWA contends that the sole source of monies which might be distributed by Western Interstate to its shareholders is a debt claimed by Western Interstate from Bell Group Finance (par 1148). As a result, the benefits contemplated to be received by ICWA, BGNV and the Commonwealth by their entry into the Western Interstate Agreements could only be achieved if Western Interstate is a creditor of Bell Group Finance in the winding up of Bell Group Finance for $758,386,538 (or some other substantial amount) (par 1149).
ICWA contends that the Western Interstate Inter-Creditor Agreement contains the following implied terms:
(a)a term obliging the parties to co-operate to secure a benefit for which the agreement provides (duty of co-operation); and
(b)a term requiring the parties to refrain from acting so as to destroy the fruits of the agreement (duty of good faith) (par 1150).
ICWA contends that the conduct of BGNV in commencing and progressing a claim in the Federal Court of Australia is a breach of one or more of the terms it contends should be implied in the Western Interstate Inter‑Creditor Agreement, and that BGNV ought to be permanently restrained from advancing the claim, the effect of which would be to deprive the Indemnifying Creditors (including ICWA) of the benefits promised to them by that agreement (par 1151, 1152).

The application for an interlocutory anti-suit injunction

On 9 December 2016, ICWA filed an application for an order that, until further order, BGNV be restrained from taking any further steps to prosecute or progress its claims for declaratory relief and other orders in the Federal Court proceedings, and an order for leave to file an amended writ of summons. The application was supported by an affidavit of Angela Hamersley, affirmed on 9 December 2016. At the hearing of the application, the evidence included a further affidavit of Ms Hamersley, affirmed 10 February 2017, and an affidavit of Scott Bruce Foreman, sworn 14 March 2017, filed on behalf of BGNV.
The application was heard over two days on 31 March and 6 April 2017. The primary judge delivered her reasons orally on 13 April 2017.

Factual background

The primary judge set out the following factual background, taken from the affidavits filed in the proceedings. While BGNV has challenged some particular findings of fact, the challenge does not extend to the following matters:
Western Interstate Pty Ltd (in liquidation) (WI) claims to be a creditor of Bell Group Finance (in liquidation) (BGF). It has lodged a proof of debt in the winding up of BGF for more than $750 million. It appears that that figure represents a loan of $434 million to BGF, plus interest on that amount. WI's claim is that it loaned BGF that sum in December 1988 and January 1989. The funds for that loan came from the issue of 43,405 redeemable preference shares in WI to BGUK. …
BGNV is a creditor of BGF. It is a substantial creditor, having been admitted to proof in the winding up for the sum of approximately $394 million. The other substantial creditor of BGF is WI. If BGNV can establish that WI is not a creditor of BGF, then that will be to BGNV's considerable financial advantage in the distribution of funds in the liquidation of BGF.
… The Federal Court proceedings were commenced by BGNV against BGF. The liquidator of WI, Mr Woodings, is also a party to those proceedings. (Mr Woodings is the liquidator of both BGF and WI.) ICWA was not joined as a party to the Federal Court proceedings. It has since applied to be joined. That application, which is opposed by BGNV, is listed for hearing at the end of April 2017 [9] ‑ [11].
ICWA's application to be joined as a party to the Federal Court action did not proceed, following the grant of the injunction.

The Western Interstate Agreements

The background to the agreements was described in the affidavit of Ms Hamersley. It is unnecessary to set it out in any detail, but it is relevant to note the following.
The liquidators of various Bell Group companies required funding to undertake investigations. In March 1995, the Indemnifying Creditors entered into an agreement ‑ The Bell Group Ltd Inter‑Creditor Agreement ‑ and in April 1995, the Indemnifying Creditors made agreements for indemnification with the liquidators of The Bell Group Ltd and Bell Group Finance (par 153).
By reason of unpaid tax claims of companies in the Bell Group, setting aside particular transactions would benefit the Australian Taxation Office but not other creditors. The liquidators and the Indemnifying Creditors entered into the Western Interstate agreements. Although dated on different days, the agreements were negotiated and final versions produced on 2 February 1996, and were executed by ICWA on that day (par 157).

The Western Interstate Assignment Agreement

The parties to the Western Interstate Assignment Agreement are Mr Totterdell (the Liquidator), as the liquidator of Bell Bros and two other companies in the Bell Group; Mr Woodings, as the liquidator of Bell Group Finance and provisional liquidator of Western Interstate; and the Indemnifying Creditors.
The Western Interstate Assignment Agreement recites that the Liquidator had undertaken an investigation in respect of transactions which do or may give rise to claims against third parties for damages, compensation, or debts. The Liquidator is without funds in the liquidation and unable to pursue those claims. Subject to the terms and conditions of the agreement, the Indemnifying Creditors agree to indemnify him for the purposes and in the manner stated in the agreement.
It further recites that the indemnifiers wish to enter into agreements with the liquidators of other companies in the Bell Group in similar terms, and it is the intention of the parties that, to the extent permitted by law, the Liquidator cooperate with the liquidators of other companies in the Bell Group and any subsidiaries who enter into a similar agreement: Recital F.
By Recitals G, H, I and J the parties state:
If the claims of Bell Bros are successful the sole or primary beneficiary of that action would be the Commonwealth by reason of the receipt of dividends from Bell Bros.
In the circumstances, the current Indemnifiers have informed the Liquidator that they are only willing to fund the Liquidator to undertake the Examination and Proceedings provided arrangements are made to secure a benefit to the body of the Indemnifiers from such funding.
The parties have reached agreement for arrangements whereby the Indemnifiers will provide funding to the Liquidator to enable Examination and Proceedings to be undertaken on the terms set out in this Agreement.
At all material times prior to 1 February 1990 the property of Bell Bros included 95,000 shares in [Western Interstate] being all the issued ordinary shares in [Western Interstate]. Pursuant to the terms of a share mortgage dated 1 February 1990 between Bell Bros and Westpac Banking Corporation (Westpac), Bell Bros mortgaged its interest in the shares in [Western Interstate] to Westpac and Westpac now holds the shares in [Western Interstate] in its capacity as mortgagee for Bell Bros. The equity of redemption (if any) of Bell Bros in the shares in [Western Interstate] is hereinafter referred to as the 'Shares'.
Clause 3 of the agreement deals with the obligations of the Indemnifiers to indemnify the Liquidator, in an agreed ratio, under the terms of the Agreement.
Clause 3.2 provides for the obligations of an indemnifier to be terminated by giving notice, or by failing to meet a request or give security as required under the Agreement. By cl 3.4, a Terminating Indemnifier:
shall have no continuing rights, entitlements or obligations under this Agreement other than any obligation which arose Prior to the Termination Date as well as its obligations under clause 12.1 but shall for all other purposes of this Agreement (but for no other purpose) cease to be an Indemnifier.
Clause 3A provides for the assignment to Bell Group Finance, and the acceptance by the liquidator of Bell Group Finance, of all Bell Bros' right, title and interest in 57,000 of the Shares. Clause 3B contains a declaration by the Liquidator of Bell Group Finance that Bell Group Finance holds the right, title and interest in the 57,000 shares transferred to it on trust for BGNV, ICWA, and the Commonwealth in accordance with the ratios 110:75:15.
By cl 3C, the Commonwealth consents to the assignment and agreed that at any meeting of creditors of Bell Bros it would exercise its vote as a creditor to support or to ratify that assignment.
The Indemnifiers agree that the assignment of the Shares has been undertaken by the Liquidator 'for and on behalf of Bell Bros at the request of the Indemnifiers' and the Indemnifiers agree to hold the Liquidator harmless against any claim against him by reason of or in consequence of the assignment: cl 3D1. The Indemnifiers agree that their funding will remain on foot 'in the event that the assignment … is void or unlawful or ineffective for any reason': cl 3D2.

The Indemnifiers agree to indemnify the Commonwealth and hold it harmless against any action, claim or demand that may be made against it: cl 3E.
Clauses 4 and 5 provide for the Indemnifiers to indemnify the Liquidator in respect of his reasonable costs and expenses of examinations conducted under s 596A or s 596B of the Corporations Act, and, subject to certain conditions, his reasonable costs and expenses of proceedings:
which litigation will, if successful, result both in the Company's property being recovered, protected or preserved or the assets of the Company generally available for the satisfaction of the claims of its creditors being increased and in expenses incurred by the Liquidator pursuant to or under this Agreement being recovered.
The Agreement does not, itself, provide for the application of dividends.
By cl 12.1, the Indemnifiers indemnify the Liquidator against personal liability. The proviso to that clause continues, proportionately, the liability of a Terminating Indemnifier.
The parties submit to the non-exclusive jurisdiction of the courts of Western Australia: cl 17.2.
The Agreement constitutes the entire agreement between the parties and supersedes all prior agreements, arrangements, undertakings, understandings and negotiations: cl 18.1.

The Western Interstate Indemnity Agreement

The Western Interstate Indemnity Agreement is made between the Indemnifying Creditors and Mr Woodings, as the provisional liquidator of Western Interstate (the Liquidator). It recites that the Indemnifiers wish to enter into agreements with the liquidators of other companies in the Bell Group in similar terms, and that it is their intention, to the extent permitted by law, that the Liquidator cooperate with the liquidators of other companies in the Bell Group.
Clause 2 of the agreement provides for the collective obligations of the Indemnifiers to be borne according to the participating ratio of 15:75:110 (the Commonwealth, ICWA and BGNV respectively), as in the Western Interstate Inter-Creditor Agreement.
To the extent that the Agreement imposes a continuing obligation on any Indemnifier to indemnify the Liquidator, that obligation is borne according to the participating ratio: cl 3.1.
Clauses 3.2 to 3.4 provide, similarly to the Western Interstate Assignment Agreement, in relation to a Terminating Indemnifier.
The Indemnifiers are to indemnify the Liquidator in respect to his reasonable costs and expenses of an examination conducted under s 596A or s 596B of the Corporations Act: cl 4. And, if certain conditions are met, they are to indemnify the Liquidator also as to his reasonable costs and expenses of conducting proceedings for avoiding and for recovering the benefits of specified transactions: cl 5.
There is no provision for application of dividends.
Clause 12.1 provides for the Indemnifiers to indemnify the Liquidator against personal liability, and contains a similar proviso regarding the obligations of a Terminating Indemnifier as in the Western Interstate Assignment Agreement.
By cl 17, the Agreement is governed by the law of Western Australia, and the parties submit to the non-exclusive jurisdiction of the courts of this State.
The agreement 'constitutes the entire agreement between the parties and supersedes all prior agreements, arrangements, undertakings, understandings and negotiations': cl 18.

The Western Interstate Inter-Creditor Agreement

The Indemnifying Creditors are also parties to the Western Interstate Inter-Creditor Agreement.
This agreement begins with four recitals:
A.The parties have entered into agreements with the liquidators of Bell Bros Pty Ltd … (in liquidation), Wanstead Pty Ltd … (in liquidation) and Wigmores Tractors Pty Ltd … (in liquidation) on the one hand, and Western Interstate Pty Ltd … (in liquidation) on the other hand (all being certain members of the Bell Group) ('Indemnity Agreements') for the purpose of funding an examination of the Transactions and subject to the terms of that agreement to fund the Proceedings.
B.The parties have agreed to enter into the arrangements set out in this Agreement for the purpose of regulating their arrangements with regard to the allocation of any recovery made pursuant to the Proceedings.
C.The parties acknowledge and believe that they have a commercial interest in undertaking the arrangements in this Agreement and at the time of reaching this Agreement it has not been possible for the parties to determine which member or members of the Bell Group will be the entity or entities through which recovery in respect of the Proceedings may be effected and accordingly the parties have agreed to enter the pooling arrangements referred to in this Agreement.
D.The parties have a genuine and substantial commercial interest in entering into this Agreement.
Part 1 contains important definitions, including:
Pooled Funds means:
(a)any monies in the nature of return of capital in respect of the shares in Western Interstate … held in trust by [Bell Group Finance] for the Commonwealth, [ICWA] and BGNV; and
(b)any Settlement Funds.
Settlement Funds means any monies or valuable consideration payable to any of the parties or their Associates in consideration of or as an inducement to their discontinuing any indemnity under the Indemnity Agreements whether those monies are paid as dividends in the liquidation of any company or otherwise.
The Western Interstate Inter-Creditor Agreement also defines Examination, Proceedings, and Terminating Indemnifier by reference to the Indemnity Agreements described in Recital A.
By cl 2, in the event that an offer or compromise is made in relation to any Proceedings, any approval of the offer or compromise, or recommendation to the Liquidators shall be by unanimous decision of the parties.
Clause 4 is headed 'Obligations under the Indemnity Agreements'. Clause 4.1 provides:
The collective obligations of the parties to this agreement under the Indemnity Agreements shall be borne according to the ratio of 15:75:110 for:
(a)the Commonwealth as to 15:
(b)[ICWA and Law Debenture Trust Corporation] as to 75; and
(c)BGNV as to 110.
Clause 4.2 provides for the giving of security for the performance of the parties' obligations.
By cl 5.1.1, the parties 'shall ensure' that the Pooled Funds are distributed in the same ratio in which the parties bear obligations under the agreement. By cl 5.2, the parties 'shall ensure' that their Associates make payment of Pooled Funds as required by cl 5. Each indemnifier authorises the distribution of the money 'held pursuant to cl 8.1 of the Indemnity Agreements' to each Indemnifier in those proportions (the Western Interstate Indemnity Agreement has no cl 8).
Clause 6 provides for termination. If a party elects to become a Terminating Indemnifier, that party's rights and obligations under the Agreement are to be assumed by the remaining parties in the ratios set out in cl 4 and cl 5. The election to become a Terminating Indemnifier 'shall not affect any liability which accrues to that Terminating Indemnifier prior to it becoming a Terminating Indemnifier'.
Clause 8 deals with representations and warranties, including that each party represents and warrants to each other party that the Agreement 'constitutes its legally binding obligations, enforceable against it in accordance with its terms': cl 8.1(c).
By cl 10, a party loses and forfeits its benefits under the Agreement if it fails to indemnify the liquidators pursuant to the Indemnity Agreements or cl 4:
If a party ceases to have any benefits under this Agreement pursuant to this clause it shall not relieve it from the obligations under the Agreement other than those relating to any continuing obligation:
(a)to contribute to costs under the Indemnity Agreements and this Agreement; and
(b)provide or maintain security pursuant to clause 4.2 in respect of any costs which arise after it became a Terminating Indemnifier.
Clause 13 contains general clauses including:
13.4This Agreement constitutes the sole and entire agreement between the parties and a warranty, representation, guarantee or other term or condition of any nature not contained or recorded in this Agreement is of no force or effect.
13.7This Agreement is governed by, and is to be construed in accordance with, the law of the state of Western Australia and the parties submit to the non-exclusive jurisdiction of the courts of that State and any court hearing the appeal is from those courts.
By cl 15, the parties will do all acts and things to give effect to the Agreement.

The decision of the primary judge

The primary judge first noted that, while the application was for an anti‑suit injunction, the dispute was not as to whether the Federal Court has jurisdiction to deal with the proceedings commenced by BGNV, or whether those proceedings should have been commenced in the Supreme Court. If a permanent injunction is ultimately granted, it will be on the basis that BGNV is not permitted by contract to pursue, in any court, the relief it seeks in the Federal Court. The effect of the order is to interfere with the proceedings in the other court, but the case does not involve a question as to whether the Federal Court or the Supreme Court is the more appropriate forum.
Her Honour then referred to two other matters. First, ICWA is not a party to the Federal Court proceedings, BGNV having opposed ICWA's application to be joined 'other than on a very limited basis'. Second, the injunction application had been brought in existing proceedings in the Supreme Court which raised for determination numerous issues concerning the distribution of funds in the liquidation of The Bell Group Ltd and Bell Group Finance [18].
Her Honour continued:
Because of the flow of funds through companies (themselves in liquidation) within the Bell Group, the distribution of funds in the liquidation of TBGL will encompass funds flowing from Western Interstate. If the Relief which BGNV seeks in the Federal Court proceedings were to be granted, those funds would not flow, and thus would not be available for distribution in the liquidation. That point is at the heart of the Application.
The primary judge then turned to the principles applicable to the grant of an interlocutory injunction: whether ICWA had made out a prima facie case; and whether the balance of convenience favours the grant of the injunction, including whether damages would be an adequate remedy for any injury suffered.
Her Honour concluded that ICWA had established a serious question to be tried as to the existence of the implied duties for which it contended, and that, if those duties applied to BGNV, it had breached them by commencing and continuing to pursue the Federal Court proceedings [61]. Her Honour described ICWA's prospects of success, at best, as 'only fair' [77]. She found, however, that the grant of an interlocutory injunction was necessary to preserve the status quo [82], and that the balance of convenience favoured the grant of the injunction.
Her Honour also considered submissions on behalf of BGNV regarding the discretionary considerations relevant to whether the court should grant relief: delay by ICWA in instituting or prosecuting the claim [99]; acquiescence [100]; and whether ICWA came to the court with clean hands [101].
Finally, her Honour rejected an argument that the implied term for which ICWA contended was contrary to public policy [102].
The primary judge concluded with an 'overall evaluation' of whether ICWA had made out its claim [104] ‑ [105]:
Although my preliminary view for the purposes of the Application at this stage is that ICWA has only fair prospects of success in establishing that the commencement and prosecution of the claims for Relief in the Federal Court proceedings constitute a breach of the Implied Duty, the balance of convenience weighs strongly, in my view, in favour of the grant of an interlocutory injunction. That is particularly so in circumstances where the question of final injunctive relief is ripe for consideration as a separate issue, in advance of the trial of the remaining issues in CIV 2666 of 2016.
Taking into account the overall balance of convenience, I am satisfied that an interlocutory injunction should issue and that the discretionary factors raised by BGNV do not warrant the Court refusing the grant of interlocutory injunctive relief.

The grounds of appeal

The appellant relies on six grounds of appeal, although the 'particulars' of some of the grounds raise distinct issues.

Ground 1

The first ground is that the primary judge erred in law in the approach her Honour took to the grant of an anti-suit injunction.
There are two particulars to the ground.
(a)The power to grant an anti-suit injunction should be exercised with caution. Her Honour wrongly held that caution was only required where the issue was which court is the appropriate forum for the litigation and that as this case did not involve that question, considerations of the kind the subject of CSR Ltd v CIGNA Insurance Australia Ltd (1997) 189 CLR 345, did not arise and judicial comity did not require the Court to withhold its hand.
(b)Her Honour failed to give any or any adequate consideration to the central question that needed to be answered, namely whether the Supreme Court or the Federal Court should hear and determine ICWA's application for the injunction.
The argument on appeal, both in written and oral submissions, went some way outside these particulars.
Ground 1 is directed to the reasoning in [16] and [17] of the reasons, where the primary judge said:
I turn next to the principles applicable to the Application. As I have already noted, this is an application for an anti-suit injunction. It is appropriate to observe, however, that the genesis for the Application is not a dispute as to whether the Federal Court has jurisdiction to deal with the Federal Court proceedings, or whether those proceedings should have been commenced in this Court instead. In that respect, the application is not one which raises the kinds of considerations which were the subject of the discussion in CSR Ltd v Cigna Insurance Australia Ltd. The outcome of the Application, if a permanent injunction is ultimately granted, will not be that this Court will determine whether to grant the Relief now sought by BGNV in the Federal Court proceedings. Rather, the outcome would simply be that BGNV will not be permitted to continue to pursue the Relief in the Federal Court proceedings at all.
As I have already observed, the basis for the Application is that ICWA claims that by seeking the Relief in the Federal Court proceedings, BGNV is acting in breach of its contractual obligations, and that it should be restrained from doing so. There is no doubt that this Court has an inherent jurisdiction to restrain a party from bringing proceedings in breach of a contract, wherever those proceedings may be brought. Although an anti-suit injunction operates in personam, the effect of such an order is to interfere with the proceedings in the other court, because a litigant will be restrained from pursuing those proceedings. The authorities emphasise that in cases where the issue is which court is the appropriate forum for the litigation, principles of judicial comity warrant caution in the exercise of the jurisdiction to grant injunctive relief. (That is why the view has sometimes been taken that it is not appropriate or desirable to grant an anti-suit injunction unless the applicant for the injunction has first sought a stay or dismissal of the other proceedings.) However, as I have said, the present case does not involve a question as to whether the Federal Court or this Court is the more appropriate forum for determining BGNV's claims to the Relief. Where no question of the proper forum arises, where the Court in which the injunction is sought clearly has jurisdiction, and where the basis for the application is to enforce a contractual right, I agree with the observation of McDougall J in Great Southern Loans v Locator Group [Great Southern Loans v Locator Group [2005] NSWSC 438 [52]] that considerations of judicial comity do not require the Court to 'withhold its hand'.
The primary judge proceeded, correctly, on the basis that the application was for an injunction on equitable grounds, to restrain a breach of contract. In CSR Ltd v Cigna Insurance Australia Ltd [1997] HCA 33; (1997) 189 CLR 345 the majority said:
As already indicated, the considerations to which reference has been made, namely, comity and the preclusive effect of an interlocutory anti-suit injunction, require that an injunction not be granted by an Australian court in the exercise of equitable jurisdiction if it is a clearly inappropriate forum. If it is not a clearly inappropriate forum, it may be expedient to require the applicant to seek a stay or dismissal of the foreign proceedings. However, if that step is not considered expedient or desirable or if it is taken without success, the court must proceed in accordance with the practice which ordinarily applies with respect to interlocutory relief. In other words, it must then determine whether there is a serious issue to be tried and, if so, whether the balance of convenience favours the grant of an interlocutory injunction (398).
The matters referred to in this passage are not to be applied in some mechanical fashion, without regard to the issues actually before the court. Her Honour's approach was, in our opinion, correct.
First, the Supreme Court is not a clearly inappropriate forum to determine the contractual question. The subject matter is a contract governed by the laws of Western Australia, and the parties submitted to the non-exclusive jurisdiction of the courts of this State: cl 13.7. Both ICWA and BGNV were parties to the proceedings in the Supreme Court, and those proceedings raised for determination numerous issues concerning the distribution of funds in the liquidation of The Bell Group Ltd and Bell Group Finance - matters that are related to the subject matter of ICWA's claim of an implied contractual term, and that would be affected by the relief sought by BGNV in the Federal Court.
Second, the judge was considering an application for interim restraint only, until the hearing of the anti-suit injunction could be heard. Her Honour had regard to the possibility of the final hearing and determination of the application for an injunction as a discrete issue, with a relatively confined further hearing well in advance of the balance of the issues in the Supreme Court action [83].
Third, ICWA was not a party to the proceedings in the Federal Court, and, as her Honour noted, its application to be joined as a party had been opposed by BGNV, other than on a limited basis.
Fourth, her Honour clearly recognised the need for caution in the exercise of her jurisdiction. Her conclusion that the court was not required to 'withhold its hand' is no denial of the proper approach. We agree with the submission made by ICWA that, having regard to the contractual source of the rights and the relief sought, considerations of comity did not require her Honour to refuse relief.
On the issues that arose before her, there was no error in principle in proceedings to determine whether there was a serious issue to be tried, and whether the balance of convenience favoured the grant of an interim injunction.
Finally, we note that, on 2 December 2016, BGNV obtained an ex parte injunction in the Federal Court to restrain ICWA from applying for the anti-suit injunction. On 8 December 2016, McKerracher J dissolved or vacated the injunction granted ex parte.

Proposed amendment

BGNV applied in the appeal to amend ground 1 to add a further particular:
ICWA's writ of summons in CIV 2666 contained no claim for breach of the Western Interstate Inter-Creditor Agreement and made no claim for interlocutory or final injunctive relief. It was therefore not open to her Honour to grant ICWA an interlocutory injunction, this being a remedy that went beyond the scope of the claims made and the relief sought by ICWA in the indorsement to its writ.

The writ as initially filed did not include a claim for interlocutory relief, or a claim for breach of the implied terms on which that application is based. BGNV submits that the indorsement on the writ marks out the metes and bounds within which the statement of claim must be framed. The statement of claim must not contain any allegation or claim in respect of a cause of action not mentioned in the writ, or arising from facts that are the same as or include or form part of the facts giving rise to a cause of action so mentioned: Rules of the Supreme Court 1971 (WA) O 20 r 2(2).
BGNV submits that, in any application for an interlocutory injunction, it is necessary to identify the legal or equitable rights which are to be determined at trial and in respect of which final relief is sought. The power to grant interlocutory relief must be exercised by reference to the rights claimed by the applicant in the proceedings: see Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 [130]; Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA 63; (2001) 208 CLR 199 [8]. BGNV submits that the trial judge had no power to issue the injunction until the writ was amended, and that is fatal to ICWA's case.
The point was not argued before the primary judge. In the affidavit in support of the application to amend, Mr Foreman, solicitor for BGNV, says that the junior counsel for the appellant only became aware of the additional argument in preparing for the hearing of the appeal.
In our opinion, leave to amend should be refused. First, the power of the court does not depend on that relief then being sought in the writ: the court has power to grant an injunction even before a writ is issued: see O 52 r 1(3). Second, ICWA was not seeking an injunction divorced from the legal or equitable rights to be determined at trial; in the same interlocutory process it applied for leave to amend its writ to include the claim for breach of contract and injunctive relief. Third, had BGNV taken the point before the primary judge, the case could have been managed to ensure the application to amend the writ was not deferred until after the determination of the injunction application. BGNV is bound by the way in which it conducted its case below: Caratti v Mammoth Investments Pty Ltd [2016] WASCA 84; (2016) 50 WAR 84 [202] ‑ [210].

Application to adduce further evidence

BGNV also applied to adduce additional evidence relating to the primary judge's estimate that the court could accommodate a hearing of the injunction application, as a discrete issue, well in advance of the balance of the issues. Because of our conclusion on ground 2, it is unnecessary to resolve that application. Our preliminary view is that it is not a point to be argued on appeal. If the appeal had been otherwise unsuccessful, so that the interim injunction remained, an application could have been made to the primary judge to vary or remove the injunction should her Honour's understanding about when this matter could be resolved prove to be mistaken. Ground 1 has not been made out.

Ground 2

The body of the ground simply alleges:
The primary judge erred in law in finding that ICWA had established that there was a serious issue to be tried.
The ground contains one 'particular', which raises six distinct contentions:
•The implied duties are not known to the law.
•The implied duties were contrary to public policy.
•The implied duties were void for uncertainty.
•There could be no serious question to be tried as to whether they had been breached.
•There was no scope for those duties to operate the circumstances of the case.
•There was no scope for those duties to be breached in the circumstances of the case.
In its application for interlocutory relief, ICWA contended for the implication of two terms into the Western Interstate Inter-Creditor Agreement: a term obliging the parties to co‑operate to secure a benefit for which the agreement provides (duty of co‑operation); and a term requiring the parties to refrain from acting so as to destroy the fruits of the agreement (duty of good faith) [37]. The two duties substantially mirror and complement each other [40].
The duty to co‑operate is not controversial. The primary judge referred to the well-recognised duty to co-operate, implied into contracts generally as a matter of law: see Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596, where Mason J said:
But it is common ground that the contract imposed an implied obligation on each party to do all that was reasonably necessary to secure performance of the contract. As Lord Blackburn said in Mackay v Dick (1881) 6 App Cas 251, at p 263:
'as a general rule … where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.'
It is not to be thought that this rule of construction is confined to the imposition of an obligation on one contracting party to co-operate in doing all that is necessary to be done for the performance by the other party of his obligations under the contract. As Griffith CJ said in Butt v M'Donald (1896) 7 QLJ 68, at pp 70-71:
'It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract.'
It is easy to imply a duty to co-operate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract. It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but are not essential to the performance of that party's obligations and are not fundamental to the contract. Then the question arises whether the contract imposes a duty to co-operate on the first party or whether it leaves him at liberty to decide for himself whether the acts shall be done, even if the consequence of his decision is to disentitle the other party to a benefit. In such a case, the correct interpretation of the contract depends, as it seems to me, not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself (607 ‑ 608).
See also Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 253 CLR 169, where the plurality said:
The duty to cooperate … applies to contracts generally. That duty is directly related to contractual performance, which explains to some degree why it can arguably be characterised as a rule of construction [37].
There is also ample support in the authorities for 'a negative covenant not to hinder or prevent the fulfilment of the purpose of the express promises made in [the contract]': Peters (WA) Ltd v Petersville Ltd [2001] HCA 45; (2001) 205 CLR 126, 142 [36] (Gleeson CJ, Gummow, Kirby & Hayne JJ). The primary judge referred to several cases in which the negative covenant had been recognised.
In Peters (WA), the court was concerned with an agreement to grant, or procure the grant, to Peters WA of the exclusive right and licence to use certain trade marks in Western Australia (Art 5). At [36], the plurality said:
The law also implies a negative covenant not to hinder or prevent the fulfilment of the purpose of the express promises made in Art 5.
In Stirling v Maitland & Boyd (1864) 122 ER 1043, Cockburn CJ said at 1047:
If a party enters into an arrangement which can only take effect by the continuance of a certain existing state of circumstances, there is an implied engagement on his part that he shall do nothing of his own motion to put an end to that state of circumstances, under which alone the arrangement can be operative.
In Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359, Dixon J said of a contract under which the appellant was employed by the respondent as its representative in Sydney and suburbs for the sale of its products on a commission basis:
In considering whether the appellant's conduct amounted to a breach of the conditions of his contract of agency, it must first be ascertained what material conditions the contract contained. The express promise of the appellant to use his best endeavours to obtain orders for the respondent and to influence business on its behalf necessarily includes an obligation not to hinder or prevent the fulfilment of its purpose. Moreover, the contract established a relation between the parties intended to subsist for a period, and it involved some degree of mutual confidence and required a continual co-operation. Its object was the increase of the sale of the respondent's manufactures, and to that end the extension of the respondent's business connection. Such an agreement inevitably imported a tacit condition that the appellant should perform the services faithfully which he contracted to give the respondent, and should not endeavour to impede or defeat the respondent in the sale of its manufactures at the prices it might think proper to ask (378).
In Rectron Australia BV v Lu [2014] NSWSC 1367, Lindsay J said of a clause by which the defendant granted the plaintiff a release from all claims arising out of, relating to, connected with or touching upon the matters the subject of specified proceedings:
That grant carries with it an implied contractual obligation on the part of the defendant, as releasor, in the nature of an obligation not to derogate from his grant of an entitlement to a release (to use the language of property law) or (to use the language of contract law) not to do anything to hinder or prevent the fulfilment of the purpose of the release or to destroy the efficacy of the bargain he made with the first plaintiff [54].
The primary judge considered the implication of a duty of co‑operation where the co-operation of the parties is not necessary to achieve the express terms of the contract. The duty would have to be implied, in fact, in the particular case and will depend on the parties' intention as manifested in the contract [47]. The primary judge recognised the difficulties in such a course:
As the authorities demonstrate, it is not easy for a litigant to establish a positive duty to do something which, in a merely general sense, will enable the benefit of the contract to be enjoyed. Such a case would face the problem that a duty to co‑operate is not a general duty to ensure that another party obtains an anticipated benefit from the contract [48].
The primary judge did not immediately resolve whether such a general duty should be implied in this contract. At [49], her Honour said that there is room for argument that the same conclusion (that there is no general duty to ensure that another party obtains an anticipated benefit from the contract) does not follow in relation to the implication of a negative covenant. Her Honour said that it is at least arguable that there may be implied a general duty not to do something which will undermine the substance of the bargain itself or which would prevent the benefit of the contract from being secured.
Later, her Honour said at [56]:
The question for the Court in any particular case will be to identify what it is that the contract requires in terms of obligations to be performed, and what objective the contract is intended to achieve. A party will be under an implied duty not to hamper or hinder the other's performance of a contractual obligation, and not to hamper or hinder the fulfilment of the purpose of the contract. (emphasis added)
The primary judge then found that ICWA had established a serious question to be tried about an implied contractual duty which was a composite of the two strands - 'a duty on the parties to co‑operate in securing the benefit of the agreement and not to act so as to hinder or prevent that benefit from being secured or so as to destroy the fruits of the agreement' [60].
In my view, ICWA has made out a serious question to be tried on the existence of the Implied Duty here, founded on the express clauses of the WIICA to which I have referred, but drawing on all of the WI Agreements as encompassing the entirety of the arrangement between the Indemnifying Creditors and the liquidators [61].
Her Honour further said that one of the manifestations of the duty of good faith is an obligation not to act to undermine the bargain entered or the substance of the contractual benefit bargained for [59].
Her Honour cited, as an example of the obligation of good faith, the decision in Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268 [12] (Allsop P). We do not believe that decision assists; the parties in that case had expressly agreed that 'utmost good faith' was to be the standard of mutual behaviour expected in how the parties acted towards each other:
(a)in the performance of their respective duties;
(b)in the exercise of their respective powers; and
(c)in their respective dealings with each other.
The contract was to continue for many years. Allsop P said:
These clauses should not be read narrowly. By the encompassing reference to 'in their respective dealings' in contracts preliminary to or concerned with dealings over an anticipated century of a commercial relationship, the parties can be seen to have been laying down a high standard of contractual fair dealing that they expected of each other [7].
The primary judge referred to five points that support the conclusion that ICWA had established a serious question to be tried for the existence of that composite 'Implied Duty' in the Western Interstate Inter-Creditor Agreement:
(1) The obligation in cl 15 to do all things necessary to give effect to the agreement is arguably an express obligation to do what is necessary to bring the terms of the agreement to fruition [63].
(2)The object of the definition of 'Pooled Funds' arguably embodied the parties' assumption that there would be a flow of capital from the manner in which the redeemable preference shares would be dealt with [64].
(3)From the obligation in cl 5.1 to 'ensure' that Pooled Funds were distributed in the prescribed ratio, it is arguable that BGNV is obliged to not do something which would destroy or undermine the existence of the Pooled Funds [65].
(4)From the obligation to 'ensure' that Pooled Funds were distributed in the prescribed ratios, it is arguable that a party may not take action which would have the result that the distribution of the Pooled Funds in the manner contemplated could not be 'ensured' [66] - [67].
(5)The Implied Duty exists to exclude the one risk that each of the parties could control, namely, that one of their own number might challenge the assumption underlying the agreement [68].
Her Honour had also, earlier, referred to the close relationship of the Indemnifying Creditors and of the parties to the Western Interstate Agreements, as a factual circumstance where a duty of good faith may be more readily implied [58].
The primary judge concluded:
[There] is a serious question to be tried that if the Implied Duty exists, BGNV's conduct … is a breach of that implied obligation. If the relief is granted, so that [Western Interstate] is not a creditor of [Bell Group Finance], then it will not receive the anticipated distribution which can be passed onto the shareholders by way of a return of capital (as it has virtually no other creditors). The ordinary shares in [Western Interstate] which are held on trust for the Indemnifying Creditors will therefore be worth little, and the Indemnifying Creditors will not receive the very benefit which it was the purpose of the [Western Interstate Inter-Creditor Agreement], in conjunction with the [Western Interstate Indemnity Agreement] and the [Western Interstate Assignment Agreement], to achieve [69].
Her Honour stated that the case advanced by ICWA was not an easy one, and ICWA faced a 'difficult path' in relying on implied terms [73]. Her Honour found, however, that ICWA had 'fair prospects of success', sufficient to justify the maintenance of the status quo on an interim basis [77].

What is the content of the implied duty

The negative covenant and the composite implied duty are expressed in various ways in the course of the reasons:
•a duty not to do something which will undermine the substance of the bargain itself or which would prevent the benefit of the contract from being secured [49];
•a duty not to hamper or hinder the fulfilment of the purpose of the contract [56];
•an obligation not to act to undermine the bargain entered or the substance of the contractual benefit bargained for [59];
•the implied duties 'to co‑operate in securing the benefit of the agreement and not to act so as to hinder or prevent that benefit from being secured or so as to destroy the fruits of the agreement' [60];
•a duty not to take action which would have the result that the distribution of the Pooled Funds in the manner contemplated could not be 'ensured' [67]; and
•a duty not to seek to challenge the assumption underlying the arrangement [68].
In none of those formulations is the content of the implied duty related to any express obligation imposed on or assumed by BGNV under the Western Interstate Inter-Creditor Agreement, other than the implied duty to cooperate.

Consideration of ground 2

In Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 253 CLR 169 French CJ, Bell and Keane JJ discussed different paths by which terms may be implied. Speaking first of implication to give business efficacy to a particular contract, their Honours said:
Implication of a term in fact in a contract, by reference to what is necessary to give it business efficacy, was described in Codelfa Construction Pty Ltd v State Rail Authority of NSW as raising issues 'as to the meaning and effect of the contract'. Implication is not 'an orthodox exercise in the interpretation of the language of a contract, that is, assigning a meaning to a particular provision.' It is nevertheless an 'exercise in interpretation, though not an orthodox instance' [22].
Later, their Honours turned to terms implied by law, such as the duty of cooperation. The implication of a term in law is based on more general considerations, but is not at large. Like the implication of a term in fact, it is limited by the criterion of necessity: Commonwealth Bank v Barker [28]. Their Honours in Barker, continued:
[The] 'necessity' which will support an implied term in law is demonstrated where, absent the implication, 'the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined' or the contract would be 'deprived of its substance, seriously undermined or drastically devalued'… It is a necessary condition that [implied conditions] are justified functionally by reference to the effective performance of the class of contract to which they apply, or of contracts generally in cases of universal implications, such as the duty to cooperate [29].
A duty to co-operate, whether expressed positively or as a negative covenant, is similarly limited by the criterion of necessity and must relate to bringing about something which the contract requires to happen. In Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104, the Court (Mason P, Beazley and Stein JJA) said:
[The] conduct relied upon must, in Lord Atkin's words from Southern Foundries, bring about 'the impossibility of performance'. Performance of what? The answer must surely be: The obligations of a party under the contract. These obligations depend on the application of rules of enforceability and construction concerning written instruments. The 'implication' of a term implied in law depends upon the demonstration of 'necessity'… It follows that, leaving aside fiduciary obligations (which are not involved here), there cannot be a duty to co-operate in bringing about something which the contract does not require to happen….
In his alternative way of approaching the matter, the learned trial judge referred to implied obligations:
'… not voluntarily to do anything to cause or permit the enjoyment by the plaintiffs of the benefits contemplated in the above quoted parts of clause 3, 5.1, 5.4, 8.1, 8.2 and 9.6 of the agreement to be rendered nugatory or worthless or seriously undermined.'
… We are of the view that his Honour erred in taking this alternative approach, first because it is not supported by the authorities cited, and secondly because it lacks the necessity required before a term may be implied. Many terms now said to be implied by law in various categories of contract reflect the concern of the courts that, unless such a term be implied, the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined. It would be, however, fallacious to elide the purpose of implying such terms with the terms themselves. To do so would replace necessity with desirability. The passages cited from Nullagine Investments Pty Lid v WA Club Inc (1993) 177 CLR 635 at 647-648, 659, Byrne and Breen, show the High Court as drawing a clear distinction between the term implied and its rationale. A contract may contemplate many benefits for the respective parties, but each can only call on the other to provide, or co-operate in the providing of, benefits promised by that party (124 ‑ 125). (emphasis in original)

The approach in Australis Media Holdings has been repeatedly followed: see, for example, Marmax Investments Pty Ltd v RPR Maintenance Pty Ltd [2015] FCAFC 127 [132] ‑ [138]. In EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78; (2010) 41 WAR 23 [109], Buss JA (Owen and Newnes JJA agreeing) said:
The duty to cooperate does not, however, rise above the promises made by the parties to the contract.
This was the substance of the primary argument advanced by BGNV on the hearing of the appeal. BGNV submitted that it had promised no benefit by way of a return of capital to ICWA. Its obligation was to ensure that the Pooled Funds were distributed in the agreed ratio. Further, the definition of Pooled Funds recognised the possibility that there may be no such funds to be distributed, either because there was no return of capital or because there was no receipt of settlement funds. The obligations imposed on BGNV were conditional, to be discharged in the future if and only if Pooled Funds were received. Clause 5.1.1 conferred no obligation on BGNV and no corresponding benefit on the other contracting parties.
BGNV submitted that it did not promise that Western Interstate was a creditor of Bell Group Finance, or promise that it would support Western Interstate's claim to be a creditor. Its only promise was that if Pooled Funds were received, it would ensure those funds were distributed in the agreed ratio.
ICWA submitted that the argument on appeal by BGNV raised no question of principle but rather disputed the primary judge's interlocutory conclusions. It further submitted that the conduct of BGNV in commencing the Federal Court proceedings is aimed at ensuring that the group can never obtain the principal, perhaps only, benefit that the parties to the Western Interstate Inter-Creditor Agreement contemplated.
With respect to the argument advanced by ICWA, it did not identify any promise by BGNV to which the negative covenant attaches, the performance of which would be hindered or prevented. ICWA relied on 'conduct that puts an end to the state of affairs under which the express covenants in the agreement would operate'. That, on our understanding of the authorities, is not enough. The effect of the argument, focusing on the underlying 'state of affairs', is to deflect enquiry away from what are the express or implied obligations of BGNV under the contract, and in what manner it would hinder or prevent the performance of its contractual obligations.
In our opinion, the negative covenant sought to be implied goes beyond the principles which govern the implication of terms. The test on the present application is whether ICWA has demonstrated a sufficient likelihood or probability of success to justify the restraint which it seeks to have the court impose. In our opinion, it has not. Her Honour erred in finding to the contrary. Ground 2 has been made out.

Ground 3

In holding that the balance of convenience strongly supported the grant of an interlocutory injunction, the primary judge erred:
3.1in law in concluding that ICWA would suffer harm if the injunction was not granted;
3.2in fact and law in deciding that an interlocutory injunction was necessary to preserve the status quo;
3.3in fact and law in not finding that the practical impact of the grant of an interlocutory injunction would result in serious prejudice to BGNV.

In particulars, BGNV asserts that ICWA could suffer no harm from the commencement or successful prosecution of the Federal Court proceedings; that her Honour incorrectly identified the status quo and should have found that it was the position immediately before the issue of the application for an interlocutory injunction; and that the primary judge erred in not placing much weight on BGNV's submissions concerning delay and in assuming that the application for an injunction could be determined by the end of 2017.
The primary judge made the following findings:
(1)ICWA would suffer some harm if the injunction is granted. Her Honour referred to ICWA not being a party to the Federal Court proceedings in which it is exposed to the risk that the basis on which the Western Interstate agreements were founded would be eliminated [79].
(2)The current proceedings are for the vindication of a contractual right, and it is often difficult to quantify the value of rights of that kind. Her Honour noted that BGNV is in liquidation, and there was no evidence before her about whether it would be in a position to meet a claim for damages of that kind. Her Honour was not satisfied damages were an adequate alternative remedy [80] - [81].
(3)Until BGNV commenced the Federal Court proceedings, the Indemnifying Creditors had all conducted themselves on the basis that the anticipated return of capital, arising from the position with respect to the redeemable preference shares, would be maintained [82].
(4) In relation to prejudice from delay, there may be scope to determine the question whether an injunction should be granted on a final basis well in advance of the balance of the issues, and the court could accommodate that hearing before the end of the year [83].
(5)BGNV's concerns regarding further delay must be viewed in the context of a proof of debt which is many years old, and where the issues that BGNV now wishes to agitate in the Federal Court proceedings have been known for many years, and in circumstances where it appears BGNV contemplated bringing proceedings in the Federal Court for about two years prior to when it in fact commenced those proceedings. Furthermore, this is not a case where it was suggested that evidence would be destroyed or would deteriorate, or that there would be a similar kind of prejudice arising from a delay in the resolution of the Federal Court proceedings [84] - [85].
(6)The Federal Court proceedings are not at such an advanced stage to alter the consideration of the balance of convenience for present purposes [86] ‑ [87].
(7)The prejudice incurred by BGNV in the costs it had expended to date in the Federal Court proceedings, compared with the implication of a judgment in those proceedings, did not strongly militate against the grant of relief [88].
The primary judge also considered the possibility of prejudice to BGUK, which was a defendant in the Federal Court proceedings, and found that it did not militate against the relief sought [89] - [92].
By reason of our decision on ground 2, it is unnecessary to decide ground 3. However, had we reached a different view on ground 2, we would have held that the injunction should be granted to preserve the position of the parties until the question of contractual breach could be heard and decided. The relevant status quo, in our opinion, is the position of the parties before the contract is breached. We agree with the findings and reasons of the primary judge which we have set out above.

Ground 4 - delay, acquiescence, and unclean hands

The primary judge erred in fact and law in failing to refuse relief on the grounds of ICWA's delay, acquiescence and unclean hands.
Particulars
(a) ICWA's delay was inordinate, deliberate and unexplained. This delay was sufficient of itself, to deny relief to ICWA.
(b)Her Honour misunderstood BGNV's case on acquiescence and failed to consider properly BGNV's case on unclean hands

Before the primary judge, and on appeal, BGNV submitted that the delay should be taken as running from 2014, when BGNV first confirmed its intention to seek the relief sought in the Federal Court proceedings.
BGNV also submitted that, while ICWA had expressed concern about the proposed claim, it did so on the basis of abuse of process and estoppel. Only in December 2016 did ICWA assert that the prosecution of the claim in the Federal Court was a violation of its contractual rights. That, BGNV submitted, was acquiescence by ICWA to BGNV proceeding in that way.
The primary judge dealt with delay at [95] ‑ [99]. Her Honour recognised that delay in instituting or prosecuting a claim for an injunction may be a ground for refusing relief, describing delay as an important discretionary consideration [95]. Her Honour made the following comment on the delay:
It is clear from that correspondence [annexed to affidavits before the Court] that ICWA has sought to express its concerns to BGNV since it first became aware that BGNV was contemplating taking action of the kind it has pursued in the Federal Court proceedings.
If there was, in truth, any delay here, it was short-lived. ICWA clearly expressed its concerns to BGNV about its intention to pursue the Federal Court proceedings in advance of those proceedings being commenced. I see no room for criticism of its decision to wait and see if BGNV actually commenced the Federal Court proceedings. If those proceedings had been commenced and ICWA had been named as a defendant, then that would no doubt have had a bearing on the question of whether ICWA's application for injunctive relief should be made in the Federal Court or this Court. Further, to bring an application for an injunction in advance of the Federal Court proceedings being commenced, when there was a prospect that BGNV might not commence those proceedings in view of ICWA's concerns, would be to risk wasting the time and resources of the Court and the litigants. ICWA's delay in bringing the Application is not a consideration warranting refusal of the grant of relief [98] ‑ [99].

The period of delay

BGNV, in oral submissions, said that ICWA had been on notice of issues regarding the validity of transactions relating to shares in Western Interstate for a long time. Counsel referred to passages in the judgment of Owen J in The Bell Group (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 39 WAR 1, where his Honour discussed the flow of funds in Western Interstate, including the issue of 43,405 redeemable preference shares in Western Interstate to BGUK. At [2104], Owen J referred to a proposed amendment by the plaintiffs in the Bell Proceedings which, his Honour said, 'opened up an argument that the preference share issue to BGUK was invalid', and which he did not allow. Owen J said, at [2105]:
As I understand it, the validity of the Western Interstate preference share issue may still be a live issue between the parties. But it will not be decided in these proceedings.
BGNV foreshadowed the claim it eventually brought in December 2014.
On 15 January 2015, ICWA advised BGNV that it considered that the common objective of the Western Interstate Assignment Agreement was to secure to the Indemnifying Creditors the benefit of the debt owed by Bell Group Finance to Western Interstate, and to mitigate the diversion of the proceeds of that debt to the Commonwealth. ICWA wrote that it and the other parties to the Agreement had acted in reliance upon the common assumption, including in making payments pursuant to the Western Interstate Assignment Agreement. A large part of the letter is directed to the argument then apparently put forward by BGNV that the relevant transactions were a sham.
On 12 February 2015, the solicitors for ICWA wrote again, repeating that the execution of the Western Interstate Assignment Agreement was predicated on there being a liability owed by Bell Group Finance to Western Interstate, and referring to the conduct of BGNV in proceedings in the Supreme Court from 1996 until 2013. The letter continued:
As a consequence of its past statements and conduct, BGNV may well be estopped from asserting [Western Interstate] is not a creditor of [Bell Group Finance], although we do not express a view on that point. Furthermore, parties who have relied upon BGNV's previously adopted position to their detriment may have a cause of action against it.
On 13 April 2015, the solicitors for BGNV wrote of their intention to issue proceedings seeking a declaration that Western Interstate is not a creditor of Bell Group Finance. They advised that they had refrained from issuing proceedings 'pending the outcome of the mediation', and that if the mediation were successful there would be no need to proceed with the proposed proceeding.
On this occasion, BGNV attached a draft statement of claim for potential proceedings in the Supreme Court of Western Australia.
In May 2015, the Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Act 2015 (WA) was introduced into Parliament. BGNV did not commence proceedings until immediately following the decision by the High Court that the Act was invalid. The originating process was issued in the Federal Court in June 2016. ICWA was not named as a defendant to the Federal Court proceedings. BGNV has opposed ICWA being joined to those proceedings other than in a limited capacity.
On 1 December 2016, ICWA gave BGNV notice of its claim that the Federal Court proceedings were in breach of contract and invited conferral. On 2 December 2016, BGNV obtained an ex parte injunction in the Federal Court to restrain ICWA from applying for an anti-suit injunction. BGNV's injunction was dissolved by McKerracher J on 8 December 2016. ICWA filed its application the following day.
BGNV relied upon alternative cases: either the delay of two years from 2014, or the seven month delay from the issue of proceedings in the Federal Court. Her Honour regarded the relevant delay as that between June 2016 and December 2016. On the basis of the chronology, BGNV has not demonstrated any error by the primary judge in her assessment of what was the relevant period of delay. Further, we fully agree with her Honour's comment that bringing the application when there was a prospect that BGNV might not commence the foreshadowed proceedings would be to risk the time and resources of the court and the litigants.
After BGNV issued its proceedings, ICWA did not immediately seek an anti-suit injunction. On 7 June 2016, the solicitors for ICWA wrote to the solicitors for BGNV enquiring if it would join ICWA as a party to the proceedings. On 8 June, the solicitors wrote again, confirming ICWA's intention to seek to participate, with the means of participation depending in part upon the actions of the provisional liquidator of Western Interstate. ICWA pursued other courses of action, including an appearance in the proceedings in the Federal Court to oppose the relief sought by BGNV, none of which could be characterised as sitting on its rights.
The effect of that delay was a matter for the exercise of the discretion of the primary judge, and BGNV has shown no error of principle in her Honour's decision.
The primary judge dealt summarily with BGNV's submission regarding acquiescence. BGNV submitted, on appeal, that her Honour misunderstood and failed to address their case.
Acquiescence may be used in different senses. BGNV submitted that its claim of acquiescence was directed to ICWA's delay in raising its argument that the prosecution of the Federal Court proceedings was a breach of contract. It is not clear whether BGNV relied on acquiescence in the sense of ICWA abstaining from interference while the violation of its rights was in progress (referred to in Meagher, Gummow & Lehane's Equity: Doctrines and Remedies (4th ed, 2002) [36-090] as the primary meaning of acquiescence); or whether it relied on action by ICWA over a long period of time, with full knowledge of its rights, refraining from exercising its rights in circumstances where it can properly be inferred that it has abandoned them.
But, in whatever sense of acquiescence it relies upon, BGNV has not established the factual basis for its claim of acquiescence. ICWA forcefully protested against what BGNV said it was going to do. In not articulating breach of contract as a basis for restraining BGNV, ICWA did not acquiesce in the threatened violation.
The primary judge also dealt summarily with an allegation of unclean hands. BGNV did not press that argument on appeal other than as an argument in favour of acquiescence. The contention that her Honour erred in relation to unclean hands fails with the claim of acquiescence. Ground 4 has not been made out.

Ground 5

The primary judge erred in law in failing to give adequate reasons.

Particulars of the grounds allege that the judgment did not address all of the appellant's submissions and did not expose her Honour's reasons for rejecting the appellant's submissions on unclean hands and that the implied terms were contrary to public policy and void for uncertainty.
The application before the primary judge was for interim restraint, pending the hearing of the application for an anti-suit injunction. BGNV filed submissions of 64 pages, an 'aide memoir' of 39 pages, and an affidavit with an annexure of over 2,000 pages. The primary judge heard the matter over two days, and delivered reasons orally the following week. Her Honour said:
I have decided to deliver these reasons for decision orally today, rather than to adopt the more usual approach, after reserving judgment, of publishing reasons for decision in writing. That is because my other commitments are such that it will not be possible to publish a written judgment in the immediate future, and it is desirable that the parties know the outcome of the present application as soon as possible, given that there is a significant hearing listed in the Federal Court later this month.
The reasons for decision are comprehensive and carefully considered. The critical matters for determination - in particular the basis for implication of the negative covenant - are addressed in detail. Not everything is dealt with in detail. Some of the claims made by BGNV were summarily dismissed.
This was an interlocutory application on a matter of practice and procedure. The circumstances of the proceedings in the Federal Court required a decision relatively quickly. There is no doubt that a judge must give adequate reasons for decision. The primary judge, in our opinion, did so. And, we agree with the written submission made by ICWA:
The administration of justice could not cope if first instance judges, confronted with volumes of material and swarms of arguments, in the course of dealing with a matter of practice and procedure, were obliged to give reasons for accepting or rejecting all of the points made or matters relied upon [54].
Ground 5 has not been made out.

Ground 6

The primary judge erred in law in granting an injunction terms that went beyond what was necessary to do justice between the parties.

In particulars, the appellant contends that, if it were appropriate for interlocutory injunctive relief, the injunction should be limited to restrain the appellant from entering final orders in its favour in the Federal Court proceedings.
Because of the view we have taken on grounds 2 and 3, that an injunction should not have issued restraining BGNV, it is not necessary to determine this ground. Were it necessary, we would dismiss this ground.
ICWA's case is that the institution and continuation of the proceedings is a breach of contract. The appropriate relief, in such a case, is to enjoin the conduct which is in breach. To continue an action up to entering final orders would be to permit what is, arguably, an ongoing breach of contract; and it would be an unjustifiable use of the resources of the court and the parties.

Conclusion

We would allow the appeal on Ground 2. The parties should be heard as to consequential orders.