GB Radio (Australia) Pty Ltd v Marchant
[2005] VSC 458
•7 November 2005
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 4408 of 2000
| GB RADIO (AUSTRALIA) PTY LTD & ORS (According to schedule attached) | Plaintiffs |
| V | |
| PIETER CECIL MARIA MARCHANT | Defendant |
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JUDGE: | HARGRAVE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 7 November 2005 | |
DATE OF JUDGMENT: | 7 November 2005 | |
CASE MAY BE CITED AS: | GB Radio (Australia) Pty Ltd & Ors v Marchant | |
MEDIUM NEUTRAL CITATION: | [2005] VSC 458 | |
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Interlocutory Injunctions - Interim undertaking until further order to preserve proceeds in dispute on trust until hearing and determination – Application for release from undertaking to use funds to discharge debt to the Australian Taxation Office – Whether serious question to be tried – Whether balance of convenience favoured preserving the status quo – Whether interim undertaking in place for two years and relied on by both parties amounted to interlocutory undertaking – Whether defendant’s undertaking as to damages of any worth.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr A Sandbach with Mr R Harris | Lennon Settle Mazzeo |
| For the Defendant | Mr M Strang | Aitken Walker & Strachan |
HIS HONOUR:
I have before me an application by the defendant by summons dated as long ago as 4 December 2003 for orders that approximately $160,000 presently held in trust by Gadens Sydney remain in trust pending the hearing and determination of the proceeding or further order.
I do not intend to rehearse all of the background facts, they appear in my previous judgment delivered on 27 June 2005 and reported at [2005] VSC 222. Furthermore, I refer to the factual history of the proceeding as set out in the two judgments delivered in this proceeding by Justice Beach and reported at [2000] VSC 213 and [2001] VSC 98.
What is not clear from my earlier judgment is that the sum of $660,000, being the net proceeds of the sale of the Melbourne and Sydney licences of the first plaintiff (“GB Radio”) is held on two trusts. First, the sum of $500,000 is held in respect of the sale of the Melbourne licence. That amount is held by a previous firm of solicitors who acted for the plaintiffs. That trust is not relevant to the application before me. Second, a separate amount of $160,000 is held on trust by the firm Gadens Sydney pursuant to undertakings given by Gadens Melbourne to the Chief Justice on 5 December 2003 when the defendant’s summons dated 4 December 2003 first came on for hearing.
By the summons the defendant sought to restrain GB Radio from dealing with the net proceeds, after deduction of legal costs, of the sale of the Sydney licence to World Audio Communications Pty Ltd (“World Audio”). This is the sum of $160,000 in dispute in the applications before me.
When the summons came before the Chief Justice on 5 December 2003 certain undertakings were given. First the defendant, by his counsel, undertook to abide by any order which the court may make as to damages in the event that damages were suffered by the plaintiffs by reason of certain undertakings given by Gadens Melbourne on behalf of the plaintiffs. Second, the plaintiffs’ then solicitors Gadens Melbourne undertook on an interim basis that until further order of this court or consent in writing of both parties, Gadens Sydney would hold in its trust account all such moneys as it received pursuant to paragraph 11(b) of the Order of the Honourable Justice McDougall made on 14 November 2003 in Proceeding No.50056 of 2003 in the Supreme Court of New South Wales. On this basis the defendant’s summons was adjourned. Since that time the defendant’s summons has been further adjourned and the undertakings have been maintained. The $160,000 remains in the trust account of Gadens Sydney.
In the meantime, a period of nearly two years, the parties have continued to prosecute their respective claims in the proceeding and incurred a great amount in costs. The matter has reached the stage where it is almost ready to be set down for trial. The Order of Master Kings made on 29 August 2005, if complied with, would have had the effect that the matter would be before the Master today and be fixed for trial. Notwithstanding that there has been some slippage in the time table, the fact remains that the matter is almost ready to be set down for trial and there is no reason why the parties cannot complete the remaining interlocutory steps promptly.
By notice of assessment dated 12 August 2005 the Australian Taxation Office assessed GB Radio with Goods and Services Tax (“GST”) on the sale of the Sydney Radio licence. The assessment is in the amount of $45,044.00 after taking some GST credits into account. This event caused the plaintiffs’ solicitors to ask the defendant’s solicitors to consent to the release of the funds currently held in the trust account of Gadens Sydney “in order that this and any other taxation liabilities in respect of the sales of the licences can be met from the proceeds of those sales.” I note that the request was not limited to the assessment of $45,044.00, it was a much broader request seeking consent to the use of moneys held in trust for the payment of tax liabilities in respect of the sales of the licences on any account.
The solicitors for the defendant, on instructions, refused the request. Accordingly, presumably pursuant to liberty to apply, the plaintiff arranged for the defendant’s summons of 4 December 2003 to be re-listed for hearing and determination. The matter came before Justice Morris in the Practice Court on 18 October 2005.
His Honour did not have time to deal with the matter and referred the matter to the Listing Master for fixing for hearing before me on a convenient date. The summons was adjourned on that basis and undertakings were given to Justice Morris by the defendant as to damages in the usual form. Undertakings were also given to Justice Morris by the plaintiffs’ solicitors on an interim basis, to retain in its trust account all moneys received from Gadens Sydney pursuant to Paragraph 3 of His Honour’s Order.
His Honour ordered, in paragraph 3 of his Order made on 18 October 2005, that the plaintiffs’ former solicitors, Gadens Melbourne, be released from their undertakings given on 5 December 2003 to the Chief Justice upon payment by Gadens Sydney of all such moneys to the plaintiffs’ present solicitors, Lennon Settle Mazzeo. However, things did not go as contemplated. Gadens refused to pay all of the moneys held by it on trust to Lennon Settle Mazzeo. There is apparently a dispute between the plaintiffs and its former solicitors Gadens. Gadens are claiming a lien over both the documents and the moneys held in trust.
I was informed from the Bar table that the $160,000 which is held by Gadens is sufficient to both cater for the payment of the $45,044 tax liability and to pay the outstanding legal costs claimed by Gaden’s. However, there is no evidence to that effect.
The result is that Gadens remain bound by the undertakings, having refused to pay the moneys to Lennon Settle Mazzeo as contemplated by paragraph 3 of the Order made by Justice Morris.
Mr Sandbach, who appeared with Mr Harris for the plaintiff, submitted in summary that I should ignore the previous undertaking by Gadens given on instructions from the plaintiffs because it was expressly stated to be an interim undertaking only, and not interlocutory until the hearing and determination of the proceeding. He submitted that there was no serious question to be tried and that, in any event, the injunction sought by the defendant should be refused because the defendants’ undertaking as to damages is and was of no real worth. Alternatively, it was submitted that at the very least, the status quo should be disturbed to enable payment of the tax assessment from the trust moneys.
Mr Strang, who appeared for the defendants, submitted that there was a serious question to be tried and that the balance of convenience favoured the maintenance of the status quo which has existed for a period of approximately two years. As to the frailty of the defendant’s undertaking as to damages, he submitted that this has been well-known for some time, and in any event was not conclusive on the power of the court to grant or withhold injunctive relief. In this regard it was submitted that, even if the defendant is unsuccessful at trial, he will still be the owner of 47 per cent of the shares in GB Radio’s United Kingdom parent company and these will have some value.
I note that the damages, which may be hereafter suffered by GB Radio by reason of the trust continuing, are unlikely to be substantial between now and the hearing and determination of the proceeding. The Listing Master has informed me that if the parties act promptly, the matter can be heard in June next year. The damages from this time would appear to be the income which GB Radio could earn on the money which is held in trust and the exposure to tax penalties, if it be the case that GB Radio is otherwise unable to pay the tax liability. I note that there was no evidence as to whether the $160,000 was accruing interest in the Gadens’ Trust Account.
In my view at this late stage of the interlocutory process, with the matter nearly ready to be fixed for trial and having regard to the fact that the sum of $160,000 has been in trust for nearly two years, I should not say anything about the merits of the proceeding except that there appears to me to be a serious question to be tried. It is not possible to make findings on the contentious affidavits filed and I do not intend to simply adopt factual findings or comments made by other judges of this and other courts at other times in respect of different applications.
As to the strength of the undertakings offered by the defendant and the balance of convenience, I am of the view that justice requires that the status quo be maintained subject to one exception concerning the taxation assessment. I am of that view for the following reasons.
In my view there has been de facto interlocutory relief in place since 5 December 2003, notwithstanding that the undertakings given by Gadens Melbourne were expressly stated to be interim in nature. The parties have both proceeded on the basis that the undertakings were interlocutory in nature and have expended money on costs.
The plaintiff has delayed for two years since the undertakings were given in bringing this application. In my view the plaintiff has known all or at least most of the facts which it now relies upon for that time. In particular the plaintiff has known of the impecuniosity of the defendant. The only new fact is the assessment from the Australian Taxation Office.
The plaintiff has relied upon the existence of the undertaking in another interlocutory application heard by me on appeal from Master Kings to set aside the order for security for costs which had previously been consented to. The first plaintiff relied heavily upon the existence of the moneys in trust as a factor which I should take into account in the exercise of my discretion. I did so. I was not informed that at the time there were already in train discussions with the Australian Taxation Office concerning the possible liability of the first plaintiff for tax.
The proceeding is virtually ready for trial. There are only minor pleading and discovery issues which remain to be determined and as I have said the parties ought be able to deal with these promptly so that the matter can attain an early trial date.
The application at this late stage smacks of a tactical one made on the eve of a trial to embarrass the defendant. I note that no evidence was led on behalf of the first plaintiff as to its ability or otherwise to pay the tax liability which has been assessed. Further, I note that only sparse information was given to me as to the taxation position in general. It was only when a subpoena to the plaintiff’s taxation lawyers was called upon that the full position emerged.
The funds which are held in trust by Gadens are the net proceeds of the sale of the Sydney licence. Whatever else this proceeding is about, it concerns the rights and entitlements of the parties to those funds.
I accept that the undertaking of the defendant to damages may be of little worth if he loses the proceeding. But as I have said, this has been known by the plaintiff for many years and no point was taken when the undertaking was given or at any time thereafter. In the meantime, the defendant has incurred substantial costs in this proceeding. Now is not the occasion to determine whether those costs were reasonably or necessarily incurred.
The first plaintiff’s liability to the tax office is in my view a special category and does require a limited change to the status quo which has existed since the undertakings were given to the Chief Justice in December 2003. I note in this regard that the defendant relies upon his shareholding in the parent company of the first plaintiff to support his undertaking as to damages. On the other hand, the defendant seeks to stifle the ability of the first plaintiff to pay its tax obligations, thus exposing it to penalties. I note that the tax liability in issue relates directly to the receipt of the $160,000 held in trust. In my view, the balance of convenience favours making orders to enable the tax to be paid and accordingly I propose to make orders as follows:
Upon the defendant by his counsel undertaking to abide by any order of the court as to damages in case the court should hereafter be of the opinion that the plaintiffs shall have sustained any by reason of the orders made this day.
1.Subject to paragraph 2, the plaintiffs’ former solicitors Gadens Melbourne be released from their undertakings given on 5 December 2003, that Gadens Sydney will hold in its trust account all moneys it receives pursuant to paragraph 11(b) of the Order of the Honourable Justice McDougall made on 14 November 2003 in Proceeding No. 50056 of 2003 in the Supreme Court of New South Wales (“the undertakings”).
2.The release of the undertakings is limited to such part of the money held by Gadens Sydney as it may be directed by the first plaintiff to pay to the Australian Taxation Office, such payments not to exceed $45,044.00 and to be paid by Gadens Sydney directly to the Australian Taxation Office in respect of the liability of the first plaintiff for that amount specified in the notice of assessment from the Australian Taxation Office dated 12 August 2005.
3.The plaintiffs and each of them shall take all steps reasonably necessary to ensure that:
(a)the first plaintiff lodges a notice of objection with the Australian Taxation Office in respect of the said notice of assessment as soon as reasonably practicable; and
(b)the said notice of objection is prosecuted with all reasonable efficiency and expedition.
4.In the event that a refund is received by the first plaintiff as a result or in respect of the notice of objection, the first plaintiff forthwith pay the amount of such refund to its solicitors Lennon Settle Mazzeo.
5.If Lennon Settle Mazzeo receive any moneys from the first plaintiff or from the Australian Taxation Office as a result or in respect of the notice of objection, such moneys be held by Lennon Settle Mazzeo in its trust account and not be dealt with without the consent in writing of both the first plaintiff and the defendant or in accordance with an order of this court.
6. The witness costs of Kerry Grills & Associates Pty Ltd are fixed at $800.
7. The witness costs of Hall & Wilcox Lawyers are fixed at $990.
8.By 4 p.m. on 2 December 2005 the plaintiffs file and serve any reply and defence to the defendant’s further amended defence and counterclaim.
9.The proceeding be referred to the Listing Master for directions and fixing for trial and I direct that the Listing Master give the trial of the proceeding such expedition as she can afford it.
10. The costs of this application be costs in the cause.
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SCHEDULE OF PARTIES
GB Radio (Australia) Pty Ltd
First Plaintiff
Roger Thomas
Second Plaintiff
Alan Thomas
Third Plaintiff
Kerry Philip Grills
Fourth Plaintiff
and
Peter Cecil Maria Marchant
Defendant
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