Bordex Wineracks Pty Ltd v Bordex Manufacturing Pty Ltd

[2014] SASC 48

Supreme Court of South Australia

(Civil: Application)

BORDEX WINERACKS PTY LTD v BORDEX MANUFACTURING PTY LTD & ORS

[2014] SASC 48

Judgment of The Honourable Justice Stanley (ex tempore)

28 March 2014

EQUITY - EQUITABLE REMEDIES - INJUNCTIONS - INTERLOCUTORY INJUNCTIONS - GENERALLY

EQUITY - EQUITABLE REMEDIES - INJUNCTIONS - INTERLOCUTORY INJUNCTIONS - INJUNCTIONS TO PRESERVE STATUS QUO AND PROPERTY PENDING DETERMINATION OF RIGHTS - MAREVA INJUNCTIONS

PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - PARTIES - JOINDER OF PARTIES

Interlocutory application.

The plaintiff brings an application seeking three orders from the Court. First, it seeks the joinder of Wine ACC Supplies Pty Ltd as a defendant to this action. Second, it seeks the continuation of an ex parte freezing order previously made by a judge of this Court in this matter. Third, it seeks an interlocutory injunction, restraining Wine ACC Supplies Pty Ltd, its employees and its agents from manufacturing and/or selling wine racks.

Whether the respondent ought to be joined as a defendant to this matter.  Whether an injunction should lie on an interlocutory basis.  Whether there is a proper basis for the freezing order to continue in the terms in which it was made.

Held (allowing the application):

1. In all the circumstances, it is proper to join Wine ACC Supplies Pty Ltd as a defendant to the proceedings. The broad power conferred by 6SCR 74 should properly be invoked if for no other reason than to enable a remedy to be enforced in this matter (at [3]).

2.  An injunction should lie on an interlocutory basis.  A prima facie case has been established that damages would not be an adequate remedy in the circumstances and that the balance of convenience favours the grant of the interlocutory application (at [4]).

3.  The freezing order made ex parte should continue in the terms in which it was made. Having regard to the history of the matter, there is a risk that if the freezing order is not continued, Wine ACC Supplies might dissipate its assets (at [5]).

Supreme Court Act 1935 (SA) s 50; Supreme Court Rules 2006 (SA) r 74, referred to.
Emeco International v O’Shea [2012] WASC 282, discussed.
Positive Endeavour Pty Ltd v Madigan (2009) 105 SASR 109; Gilford Motor Co Ltd v Horne [1933] Ch 935, considered.

WORDS AND PHRASES CONSIDERED/DEFINED

"prima facie case” and “good arguable case"

BORDEX WINERACKS PTY LTD v BORDEX MANUFACTURING PTY LTD & ORS
[2014] SASC 48

STANLEY J:

Introduction

1. The plaintiff brings an application seeking three orders from the Court. It seeks the joinder of Wine ACC Supplies Pty Ltd as a defendant to the within proceedings. It seeks the continuation of an ex parte freezing order previously made by me in this matter. It seeks an interlocutory injunction, restraining Wine ACC Supplies Pty Ltd its employees and agents, from manufacturing and/or selling wine racks.

2. In considering these applications, I have had regard to all the evidence before me, and to the helpful submissions of both Mr Ower for the plaintiff and Mr Robertson SC, for Wine ACC Supplies Pty Ltd. At the outset I should indicate that I am prepared to grant the orders sought by the plaintiff. I do so on the following basis.

3. In all the circumstances I am satisfied it is proper to join Wine ACC Supplies Pty Ltd as a defendant to the proceedings. I do so on the basis that I am satisfied that the broad power conferred upon me by 6SCR 74 should properly be invoked if for no other reason than to enable a remedy to be enforced in this matter.

4. I am satisfied that an injunction should lie on an interlocutory basis.  I am satisfied that a prima facie case has been established on the material before me, that damages would not be an adequate remedy in the circumstances and that the balance of convenience favours the grant of the interlocutory application.

5. I am also satisfied that the freezing order made ex parte should continue in the terms in which it was made. I am satisfied that there is a good arguable case.  I am satisfied of that on the same basis I am satisfied there is a prima facie case.  I accept that the good arguable case test is a less onerous test than the prima facie case test. I am also satisfied that there is a risk that if the freezing order is not continued, Wine ACC Supplies might dissipate its assets.

6. I come to these views against the background of this matter. The plaintiff entered into an agreement for the sale and purchase of a business with the first defendant.  The business was the manufacturing and selling of wine racks. The second and third defendants were the directors of the first defendant. The terms of the sale and purchase agreement included a restraint of trade clause. Ancillary to that, the second and third defendants entered into a further restraint pursuant to a deed of covenant. 

7. There is sufficient evidence before me that satisfies me that there is a prima facie case that the fourth defendant was controlled by the third defendant, which set up in competition with the plaintiff in breach of the restraint. The fourth defendant was joined to the action later.  I am satisfied that there is at least a prima facie case that subsequently Wine ACC Supplies was incorporated, and that it later set up in competition with the plaintiff.

8. I am satisfied that there is a prima facie case that Wine ACC Supplies was under the control of the third defendant, notwithstanding the affidavit of Mr Loc Bui, who is the director of that company, to the contrary.

9. I am satisfied on the basis of the approach indicated by Gray J in Positive Endeavour Pty Ltd v Madigan, that equity will enable relief to be obtained against Wine ACC Supplies if the prima facie case that I have found to exist is proved at trial. If that is so, it will become plain that the third defendant, as the controlling mind of Wine ACC Supplies utilised Wine ACC Supplies to avoid the obligation that he was under, pursuant to the restraints entered into by the first defendant and by him and his brother pursuant to the deed, in the same way as was attempted through the fourth defendant. To that extent I am satisfied there is a prima facie case that Wine ACC Supplies acted as the alter ego of the third defendant.

10. I accept that the cases relied upon by Mr Ower, as acknowledged by him, are a step removed factually from Positive Endeavour or Gilford. Nonetheless, the factual differences between this case and those cases does not detract from the applicability of the relevant legal principle for which those cases stand.

11. It is true that the third defendant, and for that matter the second defendant, are not directors or shareholders of Wine ACC Supplies. That is a factor that I have considered in the context of weighing whether or not there is a good arguable case and whether or not there is a prima facie case. I am satisfied, particularly having regard to the matters referred to by Mr Ower, which set out the circumstantial case his client will run at trial, that there is a sufficient basis for being satisfied, for the purposes of these applications, that the third defendant exercised effective control over Wine ACC Supplies.

12. Having regard to the history of this matter, I am satisfied that if the Court does not make the orders sought by way of injunction and by way of a freezing order, that Wine ACC Supplies would continue to trade in the manufacture and sale of wine racks.  I am further satisfied it would do so in a way that would harm the commercial interests of the plaintiff and that there is a real risk that history would repeat itself and at some point in the future, the business of manufacturing and selling wine racks might be transferred to some other entity so as to avoid the legal obligations assumed by the first and third defendants, and for that matter, the second defendant.  In that way the risk that it might dissipate its assets would be realised. 

13. Mr Robertson submits that even if I am satisfied that a prima facie case had been established on the material before me, I could not be satisfied that damages would not be an adequate remedy. I reject that submission. I do so, with respect, for the same reasons that were found persuasive by Edelman J in Emeco International v O'Shea, particularly at paragraphs 18 through to 22 of his Honour's reasons which are reported in [2012] WASC 282. Mr Robertson further submitted that even if I was satisfied that a prima facie case had been established on the material before me, I should not be persuaded that the balance of convenience favoured the grant of an interlocutory injunction. I reject that submission. In my view, in the absence of an interlocutory injunction, the respondent would continue to trade by way of the manufacture and sale of wine racks and that could do irreparable harm to the plaintiff’s commercial interests in the particular market in which it operates. I note in that context the provision of an undertaking as to damages by the plaintiff and although there has been some criticism levelled by Mr Robertson at the company's capacity to satisfy that undertaking in the event that the plaintiff fails in the action, I am not dissuaded that that is a sufficient basis to find that the balance of convenience does not favour the granting of the interlocutory injunction sought, particularly where I am prepared to accommodate the parties with an early trial.

14. For all those reasons, I would make the following orders:

    1.Wine ACC Supplies Pty Ltd is to be joined as a defendant to the action.

    2.On the condition the plaintiff provides the usual undertaking as to damages, there be an injunction that pending the trial of the action, Wine ACC Supplies Pty Ltd, its employees and its agents be restrained from manufacturing and/or selling wine racks.

    3.The freezing order restraining Wine ACC Supplies Pty Ltd from disposing of, dealing with or diminishing the value of its assets located in Australia, made by me on an ex parte basis on 3 March 2014, will continue until the hearing of the trial of this matter.

    4.To the extent that it is required, the respondent has permission to appeal order No.3.

    5.The costs of this application are to be reserved.

    6.A further directions hearing is set for Friday, 11 April 2014 at 9.30 a.m.