Churnin v Pilot Developments Pty Ltd

[2008] NSWSC 831

CITATION:	Churnin v Pilot Developments Pty Ltd [2008] NSWSC 831
HEARING DATE(S):	19/02/08 [then written submissions until August]
JUDGMENT DATE :	15 August 2008
JURISDICTION:	Equity Division
JUDGMENT OF:	Young CJ in Eq
DECISION:	The motion for damages dismissed with no order as to costs. Similar orders made in the five associated matters.
CATCHWORDS:	EQUITY [343]- Equitable remedies- Injunctions- Interlocutory injunctions- Undertaking as to damages- Calculation of damages- Court to offset gains against losses resultant from injunction- It is seldom just and equitable that a plaintiff bear the burden of damages not foreseeable from circumstances known at the time injunction was granted.
CASES CITED:	Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249 Cheltenham & Gloucester Building Society v Ricketts [1993] 1 WLR 1545 Victorian Onion and Potato Growers' Association v Finnigan [1922] VLR 819
PARTIES:	Brian Churnin (P1) Janet Churnin (P2) Pilot Developments Pty Ltd (D1) Beacon Development Corporation Pty Ltd (D2)
FILE NUMBER(S):	SC 2031/01
COUNSEL:	C Harris SC (P) S Robson (Plaintiffs in associated matters) R A Parsons (D1 and D2)
SOLICITORS:	Picone & Co (P) Verekers Lawyers (D1 and D2)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

YOUNG CJ in EQ

Friday 15 August 2008

2031/01 – CHURNIN v PILOT DEVELOPMENTS PTY LTD

SUPPLEMENTARY JUDGMENT

1 HIS HONOUR: On 14 December 2007 I gave reasons for judgment on a dispute between the parties as to what was owing under an undertaking as to damages in a case where the plaintiffs’ claim was ultimately unsuccessful; see [2007] NSWSC 1459.

2 There were two claimants in the end, Pilot Developments Pty Ltd (Pilot) and Beacon Development Corporation Pty Ltd (Beacon).

3 I assessed the claims, and when I say claims, I mean not only the claims involved in the present proceedings, but also in five other sets of proceedings which were heard concurrently. I found that the total amount of the Pilot claim was $380,838 and the total amount of the Beacon claim $270,209. The claims were concurrent; accordingly the Pilot claim should be allowed but not the Beacon claim. I stood the matter over to enable short minutes of order to be brought in.

4 On 19 February 2008, when the short minutes were to be brought in, I was told by Mr C Harris SC who appeared for the plaintiffs, that he was concerned that I had apparently not dealt with the issues raised in paras 10 and 13 of Dr Churnin’s points of defence.

5 Paragraph 10 was that any damages which the plaintiffs were otherwise liable to pay must be offset by the increased purchase price obtained by the first defendant on resale.

6 After discussion, it was agreed that the outstanding matters including questions of interest and costs would be dealt with by way of written submissions. Unfortunately, as a result of illness and other causes, these submissions came in gradually, the final submissions being received in early August 2008.

7 I should note that I never became functus. I published reasons and stood the matter over for orders to be made. At that time, I was asked to re-examine an aspect of the case and agreed to do so. This reconsideration is not strictly speaking under the “slip rule” but is an extended part of the original hearing where before the orders are made, a party makes a proper request for the judge to consider an aspect of the case that appears to have been overlooked.

8 I need to consider the supplementary matters under the following heads:

(1) Miscalculations and para 10 of the points of defence;

(2) The effect of the result on Beacon’s claim;

(3) Paragraph 13 of the points of defence;

(4) Interest;

(5) Costs; and

(6) Adjusted result.

9 (1) This raises two sub-issues: (a) whether the judgment contained miscalculations; and (b) the contention that I overlooked the price which the units would have realized had they been resold in the normal course without an injunction and the increased value that they did in fact raise when they were resold mostly in 2004 (para 10 of the points of defence).

10 As to (a) it is clear that there was a miscalculation in para 96 of my previous judgment in that the interest for 10 months on the relevant principal is $337,761.60 and not the higher figure used in the judgment. This is regrettable, but this sort of error is not uncommon and is usually cured at the short minutes stage. Actually the calculation should be for 303 days, not 10 months, so that the proper figure for interest is $336,466.07.

11 As to (b), during the exchange of written submissions, counsel agreed the true figures with respect to each relevant unit.

12 The calculations for each unit (the name of the first purchaser/plaintiff, being in brackets) are as follows:

Unit 6 (Blackman) Interest $45,313.03 plus outgoings $2,683.84 = $47,996.87
Unit 8 (Blackman) Interest $49,704.92 plus outgoings $2,943.05 = $52,647.97
Unit 12 (Cheetham) Interest $52,284.58 plus outgoings of say $2,800 = $55,084.58
Unit 14 (Glover) Interest $60,597 plus outgoings $4,120 = $64,717.15

Unit 15 (Mason) as Unit 14, $64,717.15

Unit 27 (Churnin) Interest $67,969.54 plus outgoings $4,616 = $72,585.54

13 The defendants do not seek any order against Cheetham re Unit 12. However, the loss on the Cheetham Unit must be taken into consideration. That loss was not agreed and I have calculated it as best as I could.

14 The total loss on this basis is $357,749.

15 However, Mr Harris and also Mr Robson who appeared for plaintiffs in associated matters, say that this leaves out of account the fact that when the monies were received in March 2004 an extra $391,512 was received. This must be set off against the $357,749 (or some lesser figure) and the result is that Pilot suffered no damage.

16 There is little authority on the point as to whether the court should offset gains made by the defendant because of the injunction against the loss suffered by the injunction. There is every reason why one should do so as the aim is to find the just and equitable loss that the defendant has really suffered by the injunction. Furthermore, the only reported case to deal with the point to which I have been referred, Victorian Onion and Potato Growers’ Association v Finnigan [1922] VLR 819 at 822 fully supports the proposition.

17 Accordingly, on balance, Pilot suffered no loss by the injunction and thus Pilot’s claim for damages must be dismissed.

18 Mr Parsons for the claimants/defendants, says that the ratio of the Victorian Onion case is, after taking into account offsetting gains, has there been actual loss? To calculate this one uses the actual interest paid, not interest at some notional rate.

19 I do not consider that this is correct. As is noted in [31]-[32] below and as submitted by Mr Robson, the court considers losses of which the plaintiff should be aware, not the actual payments made by the defendant because of its particular circumstances.

20 I should note that, although there were six separate suits, the motion was approached on all sides as one where the total of the injunctions in all six matters caused the whole loss. It is thus unnecessary to examine the figures to see if, in any one Unit, there was a slight excess of loss over profit.

21 (2) My previous reasons indicated that Beacon may have a claim and that such claim would be for interest forgone on what it would have received after 30 July 2003.

22 There seems to be an error in the calculation of that amount. The suggested figure was the loss of interest on $4,503,488 for eight months. However, as there would still be $863,167 owing to superior creditors, the maximum amount that would flow through to Beacon on 30 July 2003 was the $1,524,523 received from sales in July 2003 less the $863,167 paid over to superior creditors, leaving a balance of $661,356.

23 Beacon’s loss was thus 9% on $661,356 for 272 days which is $44,356. This may need to be reduced by 10% to $39,920 for the reasons given in the previous judgment.

24 In the former judgment I did not need to consider the defences to the claim as I held that the Pilot claim was the primary claim and was of greater worth. However, if the Pilot claim fails, this claim must be reconsidered.

25 (3) Paragraph 13 of the points of defence put, in summary:

(i) Beacon became a shareholder of and lender to Pilot subsequent to the injunctions being ordered and in the knowledge that the injunctions were in place and Beacon suffered no damages as a result of the injunctions or, alternatively, waived any right to damages to which it might have been entitled by the injunctions at the time it became a shareholder of, and lender to, Pilot;

(ii) The financial position of Pilot was such that, even if the injunctions had not been in place and Pilot had been able to sell the relevant unit by 30 June 2003, the proceeds of sale would have been required for reduction of debt and no part of the proceeds of sale would have become available for distribution to the shareholders of Pilot;

(iii) Any damages recoverable by Beacon cannot exceed the amount of any damages suffered by Pilot; and

(iv) Any damages recoverable by Beacon must be reduced by the amount of any damages recoverable by Pilot.

26 As to (ii), I found that money would have flowed through to Beacon by 30 July 2003 and I cannot see why I should revise that. Points (iii) and (iv) do not arise. That only leaves point (i).

27 As Mr Harris acknowledges, except in so far as it might affect the costs question, the matter is academic if the result in the previous judgment stands because Beacon’s claim in the ultimate failed on the reasons I have already given. Doubtless that was the reason why I did not particularly consider these matters, though I have no particular recollection one way or the other.

28 The facts appear to be clear that Beacon first became involved with Pilot on 24 January 2002. The injunctions were made on 29 October 2001.

29 Although I do not need to go into all the details, it is clear that Beacon came into the project with its eyes open because it needed to buy out a previous owner of Pilot which had been involved in litigation with its partner.

30 It must follow that it knew about the injunctions and the affected units.

31 The mere fact that Beacon knew about the injunctions when it acquired its interest would not seem to me to be sufficient to deny it a claim. However, the rule is, as laid down by Aickin J in Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249 at 267 and adopted in England in Cheltenham & Gloucester Building Society v Ricketts [1993] 1 WLR 1545 at 1552, that it will be seldom just and equitable that a plaintiff should bear the burden of damages which were not foreseeable from circumstances known to him at the time.

32 It would seem to me that on the facts, that if Beacon otherwise had a claim, there is insufficient material on which to base a finding that any of the plaintiffs were likely to be aware of its claim at the time when the undertaking was given so that it would be unlikely that I would have enforced Beacon’s claim.

33 There is the further factor that Beacon would have probably have received some benefit from the increased prices ultimately received.

34 Thus, applying the principles in the Air Express case, in my view it would not be appropriate to award any damages to Beacon.

35 (4) In my previous reasons, I noted that no interest was claimed. Mr Parsons now seeks interest. This is opposed. As the claims fail, there is no need to consider the matter.

36 (5) As to costs, the submissions that were made were made on the basis that one of the claimants succeeded. That scenario is no longer on the screen. I should allow the parties to make further submissions on the matter within 21 days at their own risk as to costs. Failing submissions, my present view is that each party should pay its own costs.

37 The principal factors which lead to my present view are, the plaintiffs won as against Pilot on a narrow point which took little hearing time, Beacon largely lost on discretionary grounds. The plaintiffs succeeded, but they were in the wrong in obtaining the injunction. The case took longer than it should partly because of factors not in the control of the parties.

38 The fact that Beacon was specially revived from being delisted to mount this case on behalf of its creditors is also a relevant factor.

39 (6) The result is that the motion for damages must be dismissed with no order as to costs. However, this order is not to be entered for 21 days and, within that period, any party may make submissions as to costs and opposing parties have 14 days from receipt of those submissions to reply. If this proviso is activated, I will give a further adjudication dealing with costs.

40 Similar orders must be made in the five associated matters.

*******************************