Churnin v Pilot Developments Pty Ltd

[2007] NSWSC 1459

CITATION:	Churnin v Pilot Developments Pty Ltd; Mason v Pilot Developments Pty Ltd; Cheetham v Pilot Developments Pty Ltd; Blackman v Pilot Developments Pty Ltd; Blackman v Pilot Developments Pty Ltd; Glover v Pilot Developments Pty Ltd [2007] NSWSC 1459
HEARING DATE(S):	4, 5 and 6 September 2007
JUDGMENT DATE :	14 December 2007
JURISDICTION:	Equity Division
JUDGMENT OF:	Young CJ in Eq
DECISION:	The plaintiffs in 2031/01 to pay the first defendant $76,931 as compensation resulting from an undertaking to the court as to damages: pro rata orders in other matters.
CATCHWORDS:	EQUITY [343] Equitable remedies- Injunctions- Interlocutory injunctions- Undertaking as to damages- How damages ought to be calculated when sales of units frustrated by injunction.
LEGISLATION CITED:	Supreme Court Rules 1970, Pt 28 r7(2) (repealed) Uniform Civil Procedure Rules 2005, r 25.8
CASES CITED:	Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1979) 146 CLR 249 Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 Cheltenham & Gloucester Building Society v Ricketts [1993] 1 WLR 1545 Evans & Associates v Citibank Ltd [2007] NSWSC 1004 F Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry [1975] AC 295 National Provincial Bank Ltd v Ainsworth [1965] AC 1175 Prosser v Hughes (1835) 1 Y & C Ex 481; 160 ER 196 Smith v Day (1882) 21 Ch D 421 Victorian Onion & Potato Growers' Association v Finnigan [1922] VLR 819
PARTIES:	2031/01: Brian Churnin (P1) Janet Churnin (P2) Pilot Developments Pty Ltd (D1) Beacon Development Corporation Pty Ltd (D2) Parterre Glebe Pty Ltd (D3) 3386/01: Brendan Linnell Mason (P1) Juliet Anne Evelyn London (P2) Pilot Developments Pty Ltd (D1) Beacon Development Corporation Pty Ltd (D2) Parterre Glebe Pty Ltd (D3) 3298/01: David Mark Blackman (P1) Brigitte Rose Blackman (P2) Pilot Developments Pty Ltd (D1) Beacon Development Corporation Pty Ltd (D2) Parterre Glebe Pty Ltd (D3) 3300/01: David Mark Blackman (P1) Brigitte Rose Blackman (P2) Jeffrey Edward Blackman (P3) Pilot Developments Pty Ltd (D1) Beacon Development Corporation Pty Ltd (D2) Parterre Glebe Pty Ltd (D3) 2444/01: Richard Ronald Glover (P) Pilot Developments Pty Ltd (D1) Beacon Development Corporation Pty Ltd (D2) Parterre Glebe Pty Ltd (D3)
FILE NUMBER(S):	SC 2031/01; 3386/01; 3298/01; 3300/01; 2444/01
COUNSEL:	C Harris SC (Plaintiffs in 2031/01; 3386/01; 2444/01) S Robson (Plaintiffs in 3298/01; 3300/01) R A Parsons (D1 and D2) P Carlisle (Solicitor) (D3)
SOLICITORS:	Picone & Co (Plaintiffs in 2031/01; 3386/01; 2444/01) Verekers Lawyers (D1 and D2) Carlisle Attorneys (D3)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

YOUNG CJ in EQ

Friday 14 December 2007

2031/01 – CHURNIN v PILOT DEVELOPMENTS PTY LTD
3386/01 – MASON v PILOT DEVELOPMENTS PTY LTD
4025/01 – CHEETHAM v PILOT DEVELOPMENTS PTY LTD
3298/01 – BLACKMAN v PILOT DEVELOPMENTS PTY LTD
3300/01 – BLACKMAN v PILOT DEVELOPMENTS PTY LTD
2444/01 - GLOVER v PILOT DEVELOPMENTS PTY LTD

JUDGMENT

1 HIS HONOUR: These reasons deal with questions relating to an undertaking as to damages given by the plaintiffs in suits for specific performance in which they were ultimately unsuccessful.

2 The six matters were heard together. However, in 4025/2001, involving the Cheethams, the plaintiffs are now bankrupts and no order is sought against them.

3 The hearing of these matters took place before me on 4, 5 and 6 September 2007 followed by further written submissions, the last of which was received on 10 September 2007.

4 At the oral hearing, Mr C Harris SC appeared for the plaintiffs in the first, second and sixth matters, Mr S Robson of counsel appeared for the plaintiffs in the Blackman matters, Mr R A Parsons of counsel appeared for the first two defendants and Mr P Carlisle, solicitor, appeared for the third defendant.

5 The present matters arise out of the fact that in March and April 1999, the defendant (“Pilot”) entered into a series of contracts to sell units at Clovelly “off the plan” to people including all the plaintiffs. The plaintiffs sought specific performance of those contracts. Each of those proceedings were dismissed by Windeyer J: see Churnin v Pilot Developments Pty Ltd [2003] NSWSC 592.

6 On 29 October 2001, all of the plaintiffs obtained injunctions preventing Pilot from reselling the relevant units pending the final hearing of the proceedings. The injunctions were given subject to the usual undertaking as to damages being given to the court.

7 Those injunctions were in place from 29 October 2001 until 22 December 2003. However, on 2 September 2002, I ordered on Pilot’s application and in the face of opposition by the plaintiffs that the injunctions be modified so as to permit Pilot to enter into contracts for the sale of some lots provided that the new contract was made subject to the relevant plaintiff’s rights. That order was conditional to take effect from 23 September 2002. However, it would appear that the conditions were not complied with and the order did not take effect except in relation to Lots 6 and 15.

8 Although the matters were heard together, it is important to realize that this dispute concerns 6 different contracts with respect to 6 different units.

9 The parties, proceedings and units are as follows:

PARTY UNIT NO PROCEEDING NO
Blackman 6 3298/01
Blackman 8 3300/01
Cheetham 12 4025/01
Glover 14 2444/01
Mason 15 3386/01
Churnin 27 2031/01

10 The proceedings were heard in 2003 and, on 2 July 2003, Windeyer J dismissed them with costs.

11 The case was described by Windeyer J as an unfortunate one for all parties. The contract provided for a right of rescission on a certain event, that event occurred and the vendor was able to rely on it to rescind. The purchasers’ argument that the vendor had brought about the event was not accepted.

12 There was an appeal to the Court of Appeal which was dismissed and the injunctions were dissolved on 22 December 2003.

13 Up until 2004, there had only been one defendant to the proceedings, Pilot. However, other defendants were subsequently added. Of these additional defendants, some were later dismissed from the proceedings.

14 The matter of the assessment of damages came on before McLaughlin AsJ in 2005. However, the trial was aborted. This occurred again on other occasions and the matters were at last heard before me last September.

15 When I heard the matters, there were three defendants, Pilot, Beacon Development Corporation Pty Ltd (“Beacon”) and Parterre Glebe Pty Ltd (“Parterre”). Each made claims for damages pursuant to the undertaking as to damages.

16 However, on the first day of hearing, Mr Carlisle for Parterre sought to withdraw the claim, though hinting that it might later be renewed. I gave leave to withdraw and ordered costs against Parterre. The hearing continued as to the other two defendants.

17 Part 28 rule (7)(2) of the Supreme Court Rules 1970 (which is identical to rule 25.8 of the Uniform Civil Procedure Rules 2005) provides that an undertaking to the court as to damages:

“is an undertaking to the Court to submit to such order (if any) as the Court may consider to be just for the payment of compensation, to be assessed by the Court or as it may direct, to any person, whether or not a party, affected by the operation of the interlocutory order … .”

18 The parties were ordered to file points of claim and points of defence to assist the court in assessing the damages.

19 Pilot and Beacon had a number of attempts at a set of points of claim, the final version being that filed on the third day of hearing “Second Further Amended Points of Claim” to which I will refer merely as the “points of claim”.

20 In their points of claim, the defendants made it clear that the Beacon claim included the Pilot claim so that if Beacon entirely succeeded in its claim, Pilot’s claim could be disregarded.

21 Before dealing with the matters raised in the points of claim and the defences, I must set out some matters of fact which seem to be clearly established.

22 The Clovelly development was of strata units which required registration of a strata plan before they could be transferred. The strata plan was registered on 19 November 2002.

23 A conditional contract was entered into for the sale of Lot 15 to a Dr Roller on 20 January 2003.

24 Pilot was a company established solely for the purpose of acquiring, developing and selling the units in the Clovelly development. Beacon was a shareholder in Pilot and was also a lender of funds to Pilot.

25 Beacon, in turn, borrowed funds from other companies, including companies in the Reed Group.

26 Both Pilot and Beacon were paying substantial interest on their borrowings to finance the strata building.

27 There is, however, no material to show that any of the plaintiffs had any knowledge of the borrowing commitments of either Beacon or Pilot.

28 Ian Paul Widdup was at all material times the controlling force in Pilot and Beacon until they went into receivership or liquidation.

29 The relevant dates in consideration with respect to the various units are as follows:

Unit	Exchanged	Price	Resale	Price	Completion
6	19/4/1999	$380,000	12/3/2004	$655,000	16/4/2004
8	19/4/1999	$565,000	4/3/2004	$730,000	19/4/2004
12	23/4/1999	$525,000	12/3/2004	$820,000	23/4/2004
14	12/3/1999	$575,000	5/5/2004	$820,000
15	19/3/1999	$575,000	20/1/2003	$875,000*	28/4/04
27	16/3/1999	$580,500	24/6/2004	$995,000

* There are doubts about this price which are considered later .

30 I should make some comments about this table before moving on. First, it is important to note that the original contract price is really irrelevant. Once the original contract was validly rescinded, the vendor was at liberty to sell the unit for whatever price it could get.

31 Secondly, the price achieved on resale is a good guide as to the value of the unit at the date of resale, but not necessarily a conclusive fixing of the value of the relevant unit.

32 Further, as the defendants point out, for most purposes it is the net receipts from the eventual resale of the affected units which is the vital figure rather than the gross contract price. Mr Finney, the chartered accountant called by the defendants, says that the net realisations were: Unit 6 $606,500; Unit 8 $665,284; Unit 12 $699,808; Unit 14 $811,073; Unit 15 $811,073; Unit 27 $965,497.50. However, the figures in various documents are not always consistent.

33 Another fact that must be taken into the mix is that Mr Widdup, who was virtually controlling Beacon and Pilot at the relevant time, rejected an offer in April 2003 for Unit 27 of $1,020,000. He acknowledges that, in hindsight, that was a mistake as the unit was ultimately sold for $995,000.

34 Various “experts” gave evidence, Mr Finney for the defendants and Mr Dundas and Mr Humphreys for the plaintiffs.

35 Mr Finney’s report, PX51, assumes figures and then calculates the effect of them.

36 Mr Finney noted that each unit was the mirror of another unit. He took the price paid for the mirror unit and assumed that the corresponding affected unit had the same value.

37 Mr Dundas was a valuer. He put a value on the affected units at various dates. I am a little reserved about accepting his evidence as his approach to the valuation exercise appeared to be rather gung-ho. However, that is of little consequence as the central matter is to work out what funds would have been generated for Pilot had the injunction not been in place.

38 As to this, I believe that Mr Finney’s approach is reasonable, except perhaps with respect to Units 14 and 15 which were mirrors of each other but were both affected units. Mr Dundas values Unit 14 as having a value of about $20,000 more than Unit 15 and I believe I should accept that differentiation.

39 I had, for a while, a little difficulty with accepting that mirror units necessarily have the same value. This is because the fact that units have the same area and facilities does not necessarily take into account factors such as view and aspect. However, I consider that with the present building, it is legitimate to accept that mirror units have equivalent value.

40 Mr Humphreys is also a chartered accountant. He challenges a number of Mr Finney’s assumptions, including his thinking that the six affected units would have been sold by 28 February 2003.

41 Beacon says, in essence, that had there been no injunctions, it would have realized all the capital value of the six units affected by the injunctions by 28 February 2003 (the February alternate) or 30 June 2003 (the June alternate) and, had that happened, it would not have had to pay interest, holding charges, rates and taxes on the affected units for a considerable period of time.

42 The plaintiffs acknowledge that Pilot, at least, would have had to pay some holding charges, but they say that it is inappropriate to take the high rate of interest that the defendants were in fact paying and, in any event, that fact is counterbalanced by the fact that the ultimate sale price of the units had markedly increased during the delay produced by the grant of the injunctions.

43 The present state of the defendants is that Pilot is in liquidation and a Receiver and Manager has been appointed. There is a subsidiary issue before me as to whether the claim is property which passes to the receiver or whether the liquidator takes it.

44 I will deal with the issues that arise in the case under the following headings:

1. General conspectus as to undertakings as to damages ;

2. Beacon’s claim ;

3. Pilot’s claim;

4. Ancillary matters and the result .

45 1. It is abundantly clear that when dealing with a claim for compensation resulting from an undertaking to the court as to damages, the court is giving equitable relief. The undertaking is given to the court, not to the defendant and a defendant or third party has no right to compensation unless the court, in its discretion, considers it conscionable that there should be compensation: Cheltenham & Gloucester Building Society v Ricketts [1993] 1 WLR 1545.

46 In the present case, no point was raised that compensation should not be ordered if the defendants’ claim was just.

47 However, when the court is making an assessment of damages pursuant to an undertaking, it usually applies the same principles applicable to the assessment of damages for breach of contract: FHoffmann-La Roche & Co AG v Secretary of State for Trade and Industry [1975] AC 295, 361.

48 There is some doubt about this proposition in the light of what Cussen J said in Victorian Onion & Potato Growers’ Association v Finnigan [1922] VLR 819, 822, as discussed by some of the judgments in Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1979) 146 CLR 249 and by Gzell J in Evans & Associates v Citibank Ltd [2007] NSWSC 1004, but, the differences of view are not significant in the instant case.

49 As Aitken J put it in Air Express at 267, after referring to earlier English authority, the court assesses the loss which is the natural consequence of the injunction under the circumstances of which the party obtaining the injunction has notice.

50 Thus, I will basically apply the contract measure of damages, but will test the result on what is fair just and equitable on the overall view of the case.

51 As to remoteness, I was referred to the judgment of McHugh JA in the Court of Appeal in Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310, 365 where his Honour analyses the authorities and concludes that the enquiry is to see what the parties would have thoughtfully contemplated would be a serious possibility of the loss or damage that might flow. However, in this, they need not contemplate the degree or extent of the loss or damages suffered, nor the precise details of the events giving rise to the loss so long as they contemplate the kind or type of loss or damage suffered.

52 2. It is appropriate to deal with Beacon’s claim first as the answer to it may make otiose the consideration of Pilot’s claim.

53 Essentially, Mr Parsons put that Beacon was a secured creditor of Pilot ranking behind three other creditors. Had the injunction not been granted, Pilot would have received $4,503,488 which was sufficient money to pay out the prior ranking secured creditors. There would have been a flow through to Beacon of about $1,200,000 (I will deal with the exact figures later) whereas, in fact, Beacon received nothing. Therefore the loss suffered by Beacon is that amount.

54 Mr Robson put that the position was nowhere as simple as Mr Parsons put. There were a complex set of transactions under which Pilot and Beacon acquired the Clovelly property and paid out former partners etc. There was no conceivable way that any of the plaintiffs could have been aware of these arrangements.

55 Mr Robson acknowledges that under the accepted learning his client in obtaining the injunction stopping sale would be liable with respect to the normal incidents of the development whether the precise terms of them were known or not (cf Smith v Day (1882) 21 Ch D 421, 428), however, he says that the complicated financial arrangements in the present case went far beyond this.

56 Moreover, under the Clovelly Development Agreement, Beacon warranted that it would not require Pilot to pay the debt owing to it until after all lots in the Clovelly Development had been sold. This did not occur even in respect of lots that were not affected by the injunctions until 26 May 2004, five months after the injunctions had been dissolved and after the proceeds of sale of all the affected lots (except 27) had been received.

57 Even putting these matters aside, the strata plan was not registered until 19 November 2002. Tab 41 to Mr Widdup’s affidavit shows that only one-third of the unaffected lots had been sold by 28 February 2003. This tends to show that the alternate date claimed by the defendants of 30 June 2003 is the appropriate date to select rather than 28 February. I agree with this last submission.

58 Mr Parsons says that parties in this day and age would contemplate that developers build on borrowed money and that, accordingly, the type of loss of longer payment of holding charges was a matter within their reasonable contemplation. It matters not that this particular developer was (if it be the case) borrowing at a higher rate than average nor that much more had been borrowed than an “ordinary developer” might have borrowed.

59 I consider that that submission is correct up to a point. However, if money is commonly available in the community at 8%, one might say that even 12% was merely a difference in extent, but if the rate claimed was 25%, one would take a different view. Likewise with the amount borrowed.

60 Mr Parsons says that there is no room for any view that money might have been syphoned off from sales and not paid to the secured creditors because they would have had partially to release their security in order for the sale to proceed and so would be monitoring the situation.

61 However, that does not completely square with Mr Humphrey’s evidence that about 4% was skimmed off.

62 I also accept Mr Humphrey’s evidence that Mr Finney’s figures should be adjusted meriting an adjustment of $305,046.25 and that there should be a further adjustment for GST of $290,379.

63 Mr Finney looks at the figures, sees that the secured creditors would have been paid out by 30 June 2003 and says that it would be reasonable to assume that, were it not for the injunctions, all the affected units would have been sold and the proceeds received and, thus, Beacon has been without its money from that date.

64 The figures in Mr Finney’s report and which are substantiated by the evidence are that, as at 28 February 2003, Pilot was indebted to outside secured creditors having priority over Beacon for $12,893,997.

65 By 30 June 2003, the debt to the first ranking creditor, ING, had been reduced to $560,307.23 because of deposits of the proceeds of sales of units. The debt to Grenfell, the second ranking creditor, was $3,345,970.67 as at 30 June 2003. It had reduced to $1,982,210.89 by December 2003 when it was purchased, at a discount, by the third ranking creditor.

66 The third creditor, before it took assignments of the prior secured debts, was owed $1,460,376.98 as at 30 June 2003.

67 Thus, on 30 June 2003, Pilot owed $5,366,654.88 to prior secured creditors ahead of Beacon.

68 It must be stressed that the assumption has been made in this that all this money was borrowed for development costs, an assumption which must be false.

69 Thus, if one takes the assumption on which the defendants rely that had the injunction not been granted, Pilot would have received $4,503,488, there would still have been $863,167 owing to superior creditors on 30 June 2003 and Beacon would not have received any repayment of capital.

70 However, on the Grenfell figures in DX62/160, a further net $1,524,523 was received from sales up to 30 July, so that, had Pilot received $4,503,488, even on Mr Humphrey’s adjustments, monies would have commenced to flow to Beacon after 30 July 2003.

71 However, not much was received after 30 July 2003. Apart from the completion of the sale to a former “insider” (Hansen) on 24 May 2004, no proceeds were received from sales of units other than the affected units. Even after their proceeds were received, Beacon and Pilot still owed money to secured creditors.

72 Thus, even without considering questions of mitigation of damages, Beacon’s claim is for the interest foregone for the period 31 July 2003 to 28 April 2004 (by which time the proceeds of resale of all the affected units had been received).

73 Messrs Harris and Robson say that the period of 28 April is too long. The defendants had to mitigate their damage. Instead, they went about their sales campaign in an improper manner and tried to be too greedy (as instanced in the refusal of the $1.02 million offer for Lot 27).

74 The onus of establishing a failure to mitigate is on the present plaintiffs. Evidence was called by the defendants from a salesman, Mr Barda, who attempted to say that the marketing of the affected units was carried out with all due expedition. However, in cross-examination he said that the focus during 2004 was on the available apartments rather than the affected units. Further, he conceded there was little activity during the January 2004 period.

75 I consider that it would have been reasonable to expect a bit more activity in the marketing field and that a downward adjustment of 10% is warranted.

76 As to values, the resale prices of units 14, 15 and 27 were, respectively $820,000, $820,000 and $995,000 (though some documents show slightly different figures). Mr Dundas’ valuation as at the end of 2002, indicates that these prices were probably fair market prices.

77 The transactions that were entered into by Mr Widdup with respect to Beacon and Pilot and the adjustment of the Hansen interests, the relationships with the builders, the financing and refinancing and the assignment of debts all make unravelling the figures very complicated. However, doing the best I can and considering Mr Finney’s advice and the raw data, I find that no funds would have flowed through to Beacon until after 30 July 2003.

78 Because few sales were completed up to the cut off date, the exercise for Beacon is to establish what its losses were by not having the $4,503,488.

79 Mr Parsons says that if this exercise is to be performed, it is on the actual rate of interest that Beacon was paying including extra fees such as the 20% service fee it was paying the builder who was, or was associated with, the third ranking creditor.

80 Mr Harris says that the proper measure is the rate that would have been received by Beacon had it invested the money, he suggests 4%.

81 I consider that Mr Parsons is correct insofar as he says that the probabilities based on knowledge available to all members of the community would be that developers would be borrowing money to complete developments and that they would be paying a higher rate than that received by investors in safe financial institutions.

82 The court rate at the relevant time was 9% per year. Whilst I recognise that the court rate has built into it a factor to encourage debtors to pay their judgments debts ahead of other debts, I believe that it is as sound a rate to use as any other. The interest at 9% for 8 months on $4,503,488, on my calculations, is $270,209.

83 Reducing this by 10% as indicated earlier, this produces a figure of $243,188. If this is the final figure, it must be split amongst the various plaintiffs in proportion found by applying the fraction whose numerator is the net amount of the sale price of the unit with which they were concerned and whose denominator is 4,503,488.

84 Considering the matter in this way, I do not need to enter into consideration of other matters raised by Mr Harris and Mr Robson.

85 One major matter is whether it is appropriate, in view of the paucity of information about Beacon’s financial status, to allow it to claim when the primary claimant is Pilot. The rhetorical question was posed: can I be sure that monies would have flowed to Beacon from Pilot rather than go to some other creditor? After all, Pilot is both in liquidation and receivership.

86 However, on the material that is before me, the balance of probabilities favour a finding of fact that surplus monies would have flowed to Beacon. But again, it is unusual for courts to take the step in faith and cut corners by awarding monies to a claimant down the line instead of a primary claimant as persons who might need to be heard were not heard.

87 However, in the circumstances, this problem need not be faced.

88 Secondly, there was the question as to whether the evidence established that the debts which were being serviced were raised to finance the Clovelly development or whether a considerable amount was to payout former partners or to settle other disputes involving Beacon and Pilot. This again does not arise.

89 3. I believe that, in view of the above, I must now analyse Pilot’s claim.

90 Mr Parsons says that the claim is simple. In the points of claim it is put that all relevant contracts for the sale of units off the plan required completion 14 days after the registration of the strata plan. Therefore, it is reasonable to assume that any replacement contract would have had the same condition.

91 With respect, I cannot make such an assumption. The above table shows that replacement contracts for the affected units took at least six weeks to complete and there are other contracts in evidence with 84 days (12 weeks) for completion.

92 The six affected units sold for $4,503,488. Had the sales taken place without the injunction that money would have been received at least prior to 30 June 2003.

93 Accordingly, Pilot has suffered loss of its money between 1 July 2003 and 28 April 2004.

94 In addition, Pilot had to pay council rates of $789, strata levies of $3,269.65 and 2003 land tax of $1,479.26, a total of $5537.91.

95 I can see no answer to each of those claims, other than those already discussed with respect to the Beacon claim which is covered by a 10% discount.

96 Accordingly, the total amount that must be paid pursuant to the undertaking as to damages is $380,828.56, being $375,290.65 + $5,537.91.

97 It was not suggested that I should consider any question of interest on that amount.

98 Thus, in 2031 of 2001, the plaintiffs must pay Pilot in dollars 909,750 divided by 4,503,488 multiplied by 380,828 namely $76,931. I will leave it to counsel to produce the appropriate figures in the other cases.

99 4. As to ancillary matters, it clearly follows from the above that the claim that Pilot can establish is slightly more than the Beacon claim. It is acknowledged that they overlap. Accordingly, the Pilot claim must be allowed, but not the Beacon claim.

100 This result absolves me from working out whether, in any event, I should permit the Beacon claim to proceed.

101 I must now briefly consider Mr Robson’s proposition that the receiver of Pilot had no authority to commence these proceedings.

102 The first argument appears to be that there is no evidence that the relevant instrument of charge empowers the receiver to conduct litigation in Pilot’s name.

103 Consequential matters are, if the receiver was so empowered: (a) whether Pilot’s equity forms part of Pilot’s “property; and (b) if so, whether that property may be the subject of an assignment to a receiver.

104 Mr Robson puts that the equity to enforce an undertaking as to damages is a personal equity and thus not “property”, he cites Prosser v Hughes (1835) 1 Y & C Ex 481; 160 ER 196 and National Provincial Bank Ltd v Ainsworth [1965] AC 1175, but neither case goes so far as actually support the proposition.

105 The first argument really should only be considered on a motion to challenge Pilot’s solicitor’s retainer.

106 Argument 2(a) needs proper consideration – my initial reaction is to reject it but I would like full argument by two opposing counsel before making a final ruling.

107 However, it is clear that either the receiver or the liquidator is entitled to use Pilot’s name to make the claim. The fact that Pilot is a party is sufficient for present purposes.

108 Thus, I do not consider a need to resolve this point in the present proceedings.

109 Costs will need to be debated. I do not know whether there was any payment into court or offer of compromise. If there was not, I would think that the defendants are entitled to some, but nowhere near all of their costs of the hearing, but I will await submissions.

110 Accordingly, I will simply publish these reasons and stand the proceedings over until 31 January 2008 for the purpose of considering the short minutes of order.

111 On 31 January, if it is likely that these matters will take more than 15 minutes, it may be necessary to consider the matters that arise on a later day. Counsel should contact my Associate if that seems likely.

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