Cunard Technologies Pty Ltd v Harris
[1999] WASC 194
CUNARD TECHNOLOGIES PTY LTD -v- HARRIS & ORS [1999] WASC 194
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [1999] WASC 194 | |
| Case No: | CIV:1755/1999 | 7 SEPTEMBER 1999 | |
| Coram: | McKECHNIE J | 7/09/99 | |
| 8 | Judgment Part: | 1 of 1 | |
| Result: | Injunction discharged | ||
| PDF Version |
| Parties: | CUNARD TECHNOLOGIES PTY LTD (ACN 009 241 016) MARK DRYSDALE HARRIS NAUTRONIX LTD (ACN 009 109 603) INTRINSIC ASIA PACIFIC PTY LTD (ACN 084 989 211) |
Catchwords: | Interlocutory injunction Seeking to restrain third parties Mareva orders Principles to be applied |
Legislation: | Nil |
Case References: | Cardile v LED Builder Pty Ltd [1999] 8 HCA 18; (1999) 162 ALR 294 Frigo v Culhaci, unreported; SCt of NSW; CA 40414/98 17 July 1998 Patrick Stevedores v Maritime Union of Australia (1998) 153 ALR 643 American Cyanamid Co v Ethicon Ltd (1975) AC 396 Auto Securities Ltd v Standard Telephones & Cables Ltd (1965) RPC 92 Canadian Aero Services Ltd v O'Malley (1973) 40 DLR (3d) 371 Castlemaine Tooheys Limited v South Australia (1986) 161 CLR 148 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1 Halaga Developments Pty Ltd v Grime (1986) 5 NSWLR 740 Hubbard v Vosper (1972) 2 QB 84 Industrial Development Consultants v Cooley [1972] 2 All ER 162 Joseph & Co Pty Ltd v Robertson, unreported; SCt of NSW (Windeyer J); 18 August 1997 McKenzie v McDonald [1927] VLR 134 Miller v Jackson [1977] QB 966 Mott v Mount Edon Gold Mines (Aust) Ltd (1994) 12 ACLC 319 Nocton v Lord Ashburton [1914] AC 932 Perrey v Mordiesel Co Pty Ltd [1976] VR 569 Potters-Ballotini v Weston-Baker (1977) RPC 202 R v Macfarlane; Ex parte O'Flanagan (1923) 32 CLR 518 State Transport Authority v Apex Quarries Ltd [1988] VR 187 Thomas A Edison Ltd v Bullock (1912) 15 CLR 679 US Surgical Corporation v Hospital Products Ltd [1983] 2 NSWLR Williams v Marac Australia Limited (1985) 5 NSWLR 529 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
MARK DRYSDALE HARRIS
First Defendant
NAUTRONIX LTD (ACN 009 109 603)
Second Defendant
INTRINSIC ASIA PACIFIC PTY LTD (ACN 084 989 211)
Third Defendant
Catchwords:
Interlocutory injunction - Seeking to restrain third parties - Mareva orders - Principles to be applied
Legislation:
Nil
(Page 2)
Result:
Injunction discharged
Representation:
Counsel:
Plaintiff : Ms A L Westwood
First Defendant : Mr M H Zilko
Second Defendant : No appearance
Third Defendant : Mr M H Zilko
Solicitors:
Plaintiff : Minter Ellison
First Defendant : Jackson McDonald
Second Defendant : No appearance
Third Defendant : Jackson McDonald
Case(s) referred to in judgment(s):
Cardile v LED Builder Pty Ltd [1999] 8 HCA 18; (1999) 162 ALR 294
Frigo v Culhaci, unreported; SCt of NSW; CA 40414/98 17 July 1998
Patrick Stevedores v Maritime Union of Australia (1998) 153 ALR 643
Case(s) also cited:
American Cyanamid Co v Ethicon Ltd (1975) AC 396
Auto Securities Ltd v Standard Telephones & Cables Ltd (1965) RPC 92
Canadian Aero Services Ltd v O'Malley (1973) 40 DLR (3d) 371
Castlemaine Tooheys Limited v South Australia (1986) 161 CLR 148
Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373
Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1
Halaga Developments Pty Ltd v Grime (1986) 5 NSWLR 740
Hubbard v Vosper (1972) 2 QB 84
Industrial Development Consultants v Cooley [1972] 2 All ER 162
Joseph & Co Pty Ltd v Robertson, unreported; SCt of NSW (Windeyer J); 18 August 1997
(Page 3)
McKenzie v McDonald [1927] VLR 134
Miller v Jackson [1977] QB 966
Mott v Mount Edon Gold Mines (Aust) Ltd (1994) 12 ACLC 319
Nocton v Lord Ashburton [1914] AC 932
Perrey v Mordiesel Co Pty Ltd [1976] VR 569
Potters-Ballotini v Weston-Baker (1977) RPC 202
R v Macfarlane; Ex parte O'Flanagan (1923) 32 CLR 518
State Transport Authority v Apex Quarries Ltd [1988] VR 187
Thomas A Edison Ltd v Bullock (1912) 15 CLR 679
US Surgical Corporation v Hospital Products Ltd [1983] 2 NSWLR
Williams v Marac Australia Limited (1985) 5 NSWLR 529
(Page 4)
1 McKECHNIE J : By an endorsement on an amended writ of summons the plaintiff sues the first defendant for equitable compensation, alternatively for an account of the profits or alternatively damages for breach of fiduciary duty and fidelity and good faith. The third defendant is a company whose principal shareholders are the first defendant, Mr Harris, and one Mr Whyte.
2 In essence the claim relates to a period when Mr Harris was employed by the plaintiff as general manager. At the time the plaintiff was the agent in Australia for a series of companies, which I will refer to as Hydro, which manufactured subsea electrical connections, electrical systems and cables. Mr Whyte is a major shareholder in, and CEO of, Hydro. The agency was created by contract in 1997. In February 1998 the second defendant Nautronix contacted the plaintiff seeking a bid to supply a product for an Australian Government project for an underwater sound range to be installed off South Australia for trials of the Collins Class submarines. Nautronix is now the project manager.
3 In summary, it is alleged that Mr Harris did much work on behalf of Cunard as Hydro's agent to win a contract from Nautronix to the extent that Mr Harris advised one of the directors of Cunard that the contract was "in the bag". On 23 November 1998 Mr Harris resigned from Cunard. Shortly prior to that date Mr Harris and Mr Whyte were appointed directors of the third defendant Intrinsic. On 19 November 1998 Mr Whyte, on behalf of Hydro, terminated Cunard's agency with effect from 18 December 1998. On 23 November 1998 Hydro appointed Intrinsic as its sales representative in Australia. Thereafter it is alleged Mr Harris continued to deal with Nautronix and in due course in early 1999 Intrinsic won the contract to supply cable and connectors in place, it is alleged, of Cunard.
4 Nautronix is named in the writ. There is no cause of action pleaded against it and no allegation of wrongdoing on its part. On 9 July 1999 Miller J granted an interlocutory injunction restraining Nautronix from paying more than 80 per cent of its contractual obligations to Intrinsic. That was subsequently varied. The injunction will expire today and this is an application by the plaintiff to extend that injunction indefinitely.
5 Nautronix has not appeared, leaving the decision to the Court. The first and third defendants appear through counsel and oppose the application.
(Page 5)
A serious question to be tried
6 The defendants concede that the plaintiff has established a serious question to be tried. Such a concession is appropriate and indeed inevitable. The application for an interlocutory injunction is no time to try the action, especially when there are disputed questions of fact. Nevertheless some assessment of the plaintiff's case is appropriate in considering whether the interests of justice lie in granting an injunction.
7 Disregarding disputed matters, my preliminary assessment is that the timing of various key actions, coupled with the interrelationship between Mr Harris, Mr Whyte, Intrinsic and Hydro, the documentation produced after discovery from Nautronix and other documents in Cunard's possession, all suggest the plaintiff's ultimate case against Mr Harris and Intrinsic for breach of fiduciary duty and being knowingly concerned in such breach is strong. This is a factor to be weighed.
An injunction to restrain third parties
8 The Court has jurisdiction, in appropriate cases, to restrain a third party whether or not they are named as a party and whether or not the plaintiff pleads or establishes the cause of action. Nevertheless the Court will be slow to restrain a third party unless there is a very clear case of injustice.
9 Although plaintiff's counsel was loath to accept the appellation, the present proceedings are in the nature of a Mareva order. If not precisely identical there are many similarities. In my opinion the Court should approach the present injunction in the same way as if it were making a Mareva order against an innocent third party. That being so the Court is bound by Cardile v LED Builder Pty Ltd [1999] 8 HCA 18; (1999) 162 ALR 294.
10 In that case the majority cited with approval the unreported NSW Court of Appeal decision of Frigo v Culhaci, unreported; SCt of NSW; CA 40414/98 17 July 1998 to the effect:
"The function of the order is not to provide a plaintiff with security in advance for a judgment that he hopes to obtain and that he fears might not be satisfied. …"
11 The major judgment in Cardilewent on at par 54 as follows:
(Page 6)
- "We have indicated our acceptance of a negative proposition put by the appellants. However, we consider that the general proposition for which the appellants contend - that the grant of Mareva relief against the third party should be limited to cases in which the third party holds or is about to hold or dissipate or further dissipate property beneficially owned by the defendant in the substantive proceedings - is too narrowly expressed. Nevertheless, it will be a rare case in which Mareva relief will be granted if such a situation does not exist."
12 The Judges in the majority - and I should say that Kirby J reached the same result by a different process of reasoning - set out a principle of law which is to be applied. That principle is set out at par 57:
"What then is the principle to guide the Courts in determining whether to grant Mareva relief in a case such as the present where the activities of third parties are the object sought to be restrained? In our opinion such an order may, and we emphasise the word 'may', be appropriate, assuming the existence of other relevant criteria and discretionary factors, in circumstances in which:
(i) the third party holds, is using, or has exercised or is exercising a power of disposition over, or is otherwise in possession of, assets, including 'claims and expectancies' (Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 625), of the judgment debtor or potential judgment debtor; or
(ii) some process, ultimately enforceable by the courts, is or may be available to the judgment creditor as a consequence of a judgment against that actual or potential judgment debtor, pursuant to which, whether by appointment of a liquidator, trustee in bankruptcy, receiver or otherwise, the third party may be obliged to disgorge property or otherwise contribute to the funds or property of the judgment debtor to help satisfy the judgment against the judgment debtor."
- Paragraph 58:
"It is that principle which we would apply to this case. Its application is a matter of law although discretionary elements are involved."
(Page 7)
13 In the present case I am not sure that Nautronix comes within the principle of law espoused by the High Court. It has a contract with Intrinsic which requires it to pay Intrinsic under that contract for goods sold and delivered. There is no suggestion that as between Nautronix and Intrinsic the contract is a sham or device for concealing the assets of Intrinsic. It seems to me at present that to describe Nautronix as being in possession of the assets, including the claims and expectancies of Intrinsic, is, in the circumstance, an incorrect description of the contractual relationship for the sale of goods.
14 If this be right then the plaintiff's claim fails at this point because, as a matter of law, an order will not extend to an injunction against Nautronix. However, as I have not heard detailed argument on the point I will deal with the discretionary considerations which together are often combined under the heading "Balance of Convenience". The plaintiff points to the likelihood that if no order is made the fruits of any judgment may be dissipated.
15 Intrinsic is a $2 WA company. Its two directors are in Scotland. The bank account into which funds have been paid at present is in Scotland. The money paid to Intrinsic by Nautronix will probably therefore be transmitted overseas. Some of or all of the money will be paid to Hydro. This is a relevant consideration. However, any judgment obtained in Western Australia could be registered and enforced in the United Kingdom, albeit at extra cost and inconvenience to the plaintiff.
16 I am not sure whether it can be said that in circumstances where there is a contract the execution of that contract necessarily means the dissipation of assets but I am prepared to assume that there is an element of dissipation in the ultimate profit of Intrinsic if that profit indeed is transferred beyond Intrinsic's bank account. However, the evidence before me is silent as to whether Mr Harris, the first defendant, has any assets within the jurisdiction. He is the person against whom the principal claim is made.
17 The plaintiff points to hardship: par 51 to par 55 of Mr Hall's affidavit of 8 July 1999. On analysis these paragraphs do not disclose particular hardship. They are more in the nature of particulars of some of the damage suffered if the claim is ultimately successful.
18 The defendants point to the prospect that Intrinsic will cease business if the injunction continues. Hydro will not supply it unless paid. It will be therefore unable to supply Nautronix, leading to a breach of contract
(Page 8)
- with adverse effect on Nautronix and the Australian Government for whom the sound range is being built.
19 Such dire predictions can be discounted somewhat. Mr Whyte appears, from the correspondence and his affidavit, to be the controlling mind of both Hydro and Intrinsic. As a matter of practical reality he can choose whether to allow Intrinsic to cease trading or to reach an accommodation between it, Hydro and Nautronix, especially bearing in mind the proposed injunction is not restraining payment of all of the money but only 12-1/2 per cent of it.
20 Nevertheless, an injunction has the risk of bringing about a breach of contract. Even if the risk is not as great as the defendants would urge, nevertheless it is an appreciable risk. If Intrinsic breaches its contract and the position is not remedied by Mr Whyte then Nautronix will be affected.
21 The approach to be taken when an injunction will affect third parties is set out in Patrick Stevedores v Maritime Union of Australia (1998) 153 ALR 643 par 65 and par 66. The weight to be given to this factor varies with the circumstances. In the present case the proposed order is unusual. It is not the same as an injunction directly affecting the defendants' property. Unlike a bank which may hold funds on a contractual basis for a defendant but is otherwise passive, here the contract between Nautronix and Intrinsic is not to hold funds on terms but for the supply of goods in payment therefor. The proposed injunction interferes directly with that contractual relationship. I therefore ascribe significant weight to the appreciable risk of adverse consequences to third parties that the proposed injunction may have.
Conclusion
22 The proposed injunction is one which is in the nature of a Mareva order. Settled principle is that such injunctions are only granted as a matter of discretion. It is a drastic remedy not be granted lightly. The plaintiff has at this stage established a strong case that it will succeed at trial. At the very least there is a serious issue to be tried. However, the plaintiff has not established to the necessary degree any particular hardship over and above the risk all litigants face in executing a judgment. Specifically, it has not established hardship which will be alleviated by the granting of the injunction. There is an appreciable risk of adverse consequences to innocent third parties if the proposed injunction is granted. The balance of convenience does not favour an injunction. Therefore the plaintiff's claim fails.
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