Cran Camerons Pty Ltd v Sundarjee
[2000] VSC 199
•11 May 2000
| SUPREME COURT OF VICTORIA | |
| PRACTICE COURT | Not Restricted |
No. 5145 of 2000
| CRAN CAMERONS PTY. LTD. | Plaintiff |
| v. | |
| MANISH SUNDARJEE AND OTHERS | Defendants |
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JUDGE: | BEACH, J. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 8 MAY 2000 | |
DATE OF JUDGMENT: | 11 MAY 2000 | |
CASE MAY BE CITED AS: | CRAN CAMERONS PTY. LTD. v. SUNDARJEE & ORS. | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 199 | |
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CATCHWORDS: Interlocutory mandatory injunction – Serious issue to be tried – Balance of convenience favouring plaintiff.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr. S.K. Wilson Q.C. and Ms. A. Ryan | Herbert Geer & Rundle |
| For the Defendants | Mr. S.R. Horgan | Best Hooper |
HIS HONOUR:
This is an application by the plaintiff, Cran Camerons Pty Ltd, for an interlocutory injunction requiring the defendants, three of whom are former members of the plaintiff, to return to the plaintiff a number of client files presently in their possession which are the property of the plaintiff. The plaintiff is a company whose members practise as accountants.
The first three defendants, Manish Sundarjee, Anthony Clements and Paul Kerss, were originally members of the company.
Earlier this year those three defendants left the plaintiff and established their own accounting practice. The company they incorporated for that purpose is the fourth defendant, Kidmans (Melbourne) Pty Ltd.
At the time the first three defendants left the plaintiff they entered into agreements with it relating to the files of clients for whom they had been acting.
In the case of Kerss, the effect of the agreement he made with the plaintiff was that Kerss would take with him the files of clients for whom he had been acting and would pay to the plaintiff the sum of $100,000 in respect of them. The agreement was subject to the plaintiff obtaining releases for Kerss in respect of guarantees he had given to (inter alia) the Bank of Melbourne to secure repayment to the bank of the finance facility it had made available to the plaintiff. At the present moment the plaintiff is indebted to the bank for approximately $900,000.
In the case of Sundarjee and Clements, they were to take the files of their clients subject to the payment of money calculated in accordance with the formula contained in the agreement those defendants and the plaintiff had signed on 10 January 2000. It was proposed that the appropriate payments be made on 3 March 2000, that being the date for the payout of the plaintiff's major commercial bill facility with the bank.
As one would expect, the bank holds a registered debenture over the assets and goodwill of the plaintiff. The assets include all the client files of the plaintiff including those the subject of the agreements between the plaintiff and the first three defendants.
The heads of agreement signed by the plaintiff and the defendants Sundarjee and Clements acknowledge that the files of their clients were subject to the bank's charge and acknowledge that until the whole amount of the consideration has been paid by them to the plaintiff the files remain the property of the plaintiff.
Having regard to the circumstances surrounding the departure of the defendant Kerss, I consider that it is strongly arguable that similar acknowledgments were given by him to the plaintiff at the time he took his clients' files.
The first three defendants removed their files from the premises of the plaintiff on 12 January and since that time have been using them in their new practice under the name of Kidmans. To date they have made no payment to the plaintiff in respect of the files. Their failure to do so is causing the plaintiff severe embarrassment so far as its relationship with the Bank of Melbourne is concerned.
The reason why the defendant Kerss has made no payment to the plaintiff is that as yet the plaintiff has not obtained Kerss's release from the guarantee he gave to the Bank of Melbourne to secure repayment to the bank of the moneys advanced by it to the plaintiff. Kerss does not otherwise challenge his indebtedness to the plaintiff, although the exact amount of it is subject to some further calculation.
The reason the plaintiff has been unable to obtain such a release from the bank is that until such time as the first three defendants pay the moneys they are obliged to, to the plaintiff, the plaintiff cannot pay out the moneys it owes to the bank and thereby obtain appropriate releases.
The defendants Sundarjee and Clements have refused to make any payment to the plaintiff in respect of their files because they now contend that the formula set out in the agreement of 10 January, and pursuant to which their indebtedness is to be calculated, is totally inappropriate. Whereas the plaintiff maintains that the sum they are obliged to pay to it in respect of their files is of the order of $590,000, the first and second defendants contend that the amount should be significantly less.
The Bank of Melbourne has indicated to the plaintiff that it will re-negotiate the finance of the plaintiff and simultaneously release the first, second and third defendants from the guarantees they have given to it when they pay to the bank via the plaintiff the amount of the value of the files physically taken by them.
If that does not occur in the immediate future the plaintiff has justifiable fears that the bank will foreclose.
With a view to arriving at a practical solution to the problem, on 12 April the plaintiff's solicitors wrote to the defendants' solicitors with a proposal which would both satisfy the bank and secure the release of the first three defendants from their guarantees. The letter reads:
"We refer to our previous correspondence and note that notwithstanding the appointment of an investigating accountant by Bank of Melbourne Ltd ("BOM"), this matter remains unresolved.
We note your clients' assertion that they have the ability to currently pay a sum in excess of $450,000.00. Our clients have obtained finance for the sum of $350,000.00.
In light of the above, so as to avoid the commercial disaster that would arise if the Bank appointed an Administrator, we recommend the following take place.
1. Your clients provide the sum of $450,000.00 to BOM.
2. Our clients provide the sum of $350,000.00 to BOM.
3.BOM create an unsecured facility payable by the six partners jointly and severally for the remaining $100,000.00. Alternatively, BOM may wish to have a second charge over both your clients' business and our clients' business.
4.BOM provide a release of the existing debenture charge and guarantees.
5.The parties submit to an appropriate dispute resolution process to resolve who owes what amounts.
The advantages of this process are as follows:
1. The fees of the investigating accountant are reduced.
2.The risk of the appointment of an Administrator, who would seek all of your clients' files, can be avoided.
3.Your client can reduce liability for interest on monies owing. In this regard, as your clients will be aware, they presently have possession of files from which they can earn income, but our clients have debt upon which they are required to pay interest. This must be adjusted. We estimate the cost to your client to be in the vicinity of $1,000.00 per week.
Assuming your clients really do have capacity to provide the $450,000.00 then we can see no commercial justification whatsoever for the above process not being followed by all parties.
Kindly provide us with a response by midday 12 April 2000."
The proposal was not accepted by the defendants.
And so the plaintiff is, as it were, placed in a Catch 22 situation. It cannot obtain payment of the moneys due to it by the defendant Kerss until such time as the bank releases Kerss from his guarantee. It cannot obtain a release in respect of Kerss until the first three defendants pay the moneys owing by them to the plaintiff, thereby enabling the plaintiff to repay the bank facility; and at the present time the defendants Sundarjee and Clements will not make any payment to the plaintiff because they disagree with the plaintiff's calculations as to the amount of their indebtedness.
Yet, at the same time, the defendants have the files which are the property of the plaintiff but subject to the bank's charge, and are earning income by means of such files.
In his affidavit of 8 May 2000 the defendant Sundarjee, who has been authorised to handle the matter on behalf of all defendants, has said:
"4.It appears that the heads of agreement is unable to be performed and that the termination arrangements between the first and second defendants and the remaining partners of Cran Cameron would need to be renegotiated."
On any view of the matter there are serious issues to be tried in the proceeding. I hasten to add that my recital of the facts in relation to the dispute is incomplete and does no more than paint a general picture of the more salient aspects of it. For a complete picture of what is involved it would be necessary for the reader of these reasons for judgment to read the affidavits which have been filed in the court by the parties and the exhibits to those affidavits.
Where then does the balance of convenience lie?
In my opinion the balance of convenience in this case is heavily in favour of the plaintiff.
The files in question are the plaintiff's files and remain so until such time as payment for them has been made by the first three defendants; further, the files are the subject of the debenture given by the plaintiff to the Bank of Melbourne and given by it at a time when the first three defendants were members of the plaintiff.
It is clear that the defendants Sundarjee and Clements have no intention at the present time of paying to the plaintiff the amount calculated according to the formula contained in the agreement of 10 January and that the defendant Kerss will not pay to the plaintiff the amount he owes to it until such time as he receives a release from the bank. Yet, as I pointed out a moment ago, the defendants are making use of the files to produce income.
The plaintiff has given an undertaking to the court that, if the injunctive relief it seeks is granted pending the trial and determination of this proceeding, it will give to the defendants and their staff free and unfettered access to the files in question at its premises, save that it will be the plaintiff which will bill the clients to whom the files relate for any work done, not the defendants. In this way any difficulty caused to clients by the return of the files to the plaintiff should be minimised.
The inconvenience which might be caused to clients if the files were returned to the plaintiff was, of course, a matter strongly relied upon by counsel for the defendants in opposition to the plaintiff's application.
But in the circumstances of this case I do not consider that that should be an over-riding consideration.
One might ask rhetorically, what of the inconvenience to the Bank of Melbourne if it forecloses and the files over which it has its charge are not in the possession of the plaintiff?
Having considered all aspects of the matter, it is my opinion that the appropriate course for the court to adopt is to order that the files of the plaintiff now in the possession of the defendants be returned to the plaintiff.
Mr Wilson, do you give the usual undertaking as to damages?
MR WILSON: I am instructed to give both the usual undertaking as to damages and the undertaking as Your Honour recited it in Your Honour's reasons.
HIS HONOUR: I order that by noon on Monday 15 May 2000 the defendants deliver to the plaintiff the files relating to the clients listed in the schedules marked A, B and C annexed to the statement of claim in this proceeding, or such of those files as are presently in their possession.
Because I consider that this proceeding should come to trial as speedily as practicable, I make the following interlocutory orders in the proceeding:
1.I order that the defendants deliver their defences and counter claims (if any) on or before 16 May 2000.
2.I order that the plaintiff deliver its replies and defences to counter claims (if any) on or before 30 May.
3.Subject to any order of the trial judge to the contrary, I order that the trial of this proceeding be by affidavit.
4.I order that any further affidavits to be relied upon by the plaintiff be filed and served on or before 16 June.
5.I order that any further affidavits upon which the defendants intend to rely be filed and served by 30 June.
6.I refer the proceeding to the Listing Master to enable a date to be fixed for the trial of the proceeding after 30 June and I request the Listing Master to give the proceeding such priority as she considers appropriate.
7.I direct that this order be prepared by the solicitors for the plaintiff and brought to me for authentication by 4 p.m. on 15 May.
8.I direct that a copy of this order be served on the associate to the Listing Master within seven days of its authentication.
9.I reserve the costs of the application.
10.I order that the parties give discovery of any further documentation not already exhibited to their affidavits or not exhibited to the affidavits they may file hereafter by 30 June 2000.
(Discussion ensued.)
HIS HONOUR: The application for a stay is refused.
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