Gas Sensing Technology Corporation v ProX Pty Ltd - [2019] WASC 10

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   GAS SENSING TECHNOLOGY CORPORATION -v- PROX PTY LTD [2019] WASC 10
CORAM:   KENNETH MARTIN J
HEARD:   27 SEPTEMBER 2018 AND THE PARTIES' FURTHER WRITTEN SUBMISSIONS OF 3 & 5 OCTOBER 2018
DELIVERED          :   17 JANUARY 2019
FILE NO/S:   CIV 2859 of 2016
BETWEEN:   GAS SENSING TECHNOLOGY CORPORATION
Second Plaintiff
AND
PROX PTY LTD
Third Defendant

Catchwords:

Practice and procedure - Interlocutory injunction - Undertaking - Monies in one side's lawyers' trust account - Rival claims - De facto interpleader - USA parent company with other co-plaintiff- Secured lender - Restraint on security enforcement sought by injunction - Inglis v Commonwealth Trading Bank security given - Interim undertakings from respondent undertakings accepted before hearing of contested interlocutory injunction hearings - Interlocutory injunction refused - Claim to money made by former plaintiff (in liquidation) - Claim by interlocutory injunction respondent to monies in trust account as Inglis security - Claim by USA parent on Quistclose trust - Interpleader stance by lawyers holding funds

Legislation:

Corporations Act 2001 (Cth)
Personal Property Securities Act 2009 (Cth)
Rules of the Supreme Court 1971 (WA)

Result:

Tripartite claims to funds resolved

Category: B

Representation:

Counsel:

Second Plaintiff	:	Mr M A MacLennan
Third Defendant	:	Mr W C Zappia
Intervenor	:	Dr R A Collins

Solicitors:

Second Plaintiff	:	Bennett + Co
Third Defendant	:	HWL Ebsworth Lawyers
Intervenor	:	Allens Linklaters

Case(s) referred to in decision(s):

Barclays Bank Pty Ltd v Quistclose Investments Pty Ltd [1970] AC 567
Barnes v Addy (1874) LR 9 Ch App 244
Coolbrew Pty Ltd v Westpac Banking Corporation [2015] NSWCA 135
Duncan (as Trustee for the Bankrupt Estate of Garrett) v National Australia Bank Ltd [2006] SASC 239; (2006) 95 SASR 208
Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [2014] VSCA 326; (2014) 49 VR 86
Halvanon Insurance Co Ltd v Central Reinsurance Corp [1988] 1 WLR 1122
Hughes v Pluton Resources Ltd (recs and mgrs apptd) (in liq) [2017] WASCA 213; (2017) 52 WAR 456
Inglis v Commonwealth Trading Bank of Australia [1972] HCA 74; (1972) 126 CLR 161
Thomson Australian Holdings Pty Ltd v The Trade Practices Commission [1981] HCA 48; 148 CLR 150
Twinsectra Ltd v Yardley [2002] 2 AC 164
Welldog Pty Ltd v ProX Pty Ltd [2017] WASCA 62
Westpac Banking Corporation v Bell Group (in liquidation) [No 3] [2012] WASCA 117; (2012) 44 WAR 1

KENNETH MARTIN J:

Introduction

There is presently over AUD$2.5 million held in a local trust account of Australian lawyers Squire Patton Boggs (SPB). The funds are and have always been held under the name of the Australian proprietary corporation Welldog Pty Ltd (Welldog). The money now falls under a heavy tripartite dispute as to its rightful recipient.
First, there is a claim to the money advanced via the liquidators of Welldog Pty Ltd (in liq) ACN 147 697 845 which entered receivership, and administration on 20 March…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2019] WASC 10
Decision Date: 17 JANUARY 2019

CaseChat Overview and Summary

The case between Gas Sensing Technology Corporation and ProX Pty Ltd arose in the Federal Court of Australia. The primary dispute was over the control and distribution of funds held in the trust account of Gas Sensing Technology Corporation's legal representatives. ProX Pty Ltd sought an interlocutory injunction to restrain Gas Sensing Technology Corporation's secured lender from enforcing its security over these funds. Gas Sensing Technology Corporation, which was in liquidation, and its USA parent company claimed the funds under a Quistclose trust arrangement. The court had to determine whether an interlocutory injunction should be granted and how the funds should be distributed among the claimants.

The key legal issues involved the validity of the secured lender's claim over the funds and the respective rights of Gas Sensing Technology Corporation, its parent company, and ProX Pty Ltd. The court had to consider the principles of de facto interpleader and the nature of the undertakings provided by ProX Pty Ltd. Additionally, the court needed to assess whether the funds should be treated as security for the secured lender's debt or as held under a Quistclose trust for Gas Sensing Technology Corporation's parent company.

The Federal Court of Australia examined the nature of the undertakings given by ProX Pty Ltd and found them sufficient to address the secured lender's concerns about the funds. The court held that the secured lender's right to enforce its security over the funds was not threatened by the undertakings and that there was no immediate risk of dissipation of the funds. Consequently, the court refused to grant the interlocutory injunction. The court also determined that the funds were held on a Quistclose trust for Gas Sensing Technology Corporation's parent company and ordered that the funds be paid to that company, subject to any further orders the court might make.

The final orders of the court were that the interlocutory injunction sought by ProX Pty Ltd be refused. The funds held in the trust account were to be paid to Gas Sensing Technology Corporation's parent company, subject to any further directions the court might issue. The court noted that the de facto interpleader situation required careful consideration of the respective claims and the undertakings provided, but ultimately found that the secured lender's rights were adequately protected.

Orders