Hannah Louis Group Pty Ltd v Maxum Taxi Trucks Pty Ltd

[2008] NSWSC 1400

CITATION:	Hannah Louis Group Pty Ltd v Maxum Taxi Trucks Pty Ltd [2008] NSWSC 1400
HEARING DATE(S):	16 December 2008
JUDGMENT DATE :	16 December 2008
JURISDICTION:	Equity Division
JUDGMENT OF:	Palmer J
EX TEMPORE JUDGMENT DATE:	16 December 2008
DECISION:	Application refused.
CATCHWORDS:	ASSET PRESERVATION ORDER – Whether some but not all interim orders for preservation of goodwill of business should be vacated.
LEGISLATION CITED:	Uniform Civil Procedure Rules 2005 (NSW) - s 25(3)
CATEGORY:	Consequential orders
PARTIES:	Hannah Louis Group Pty Ltd t/as Maxum Transport (First Plaintiff/Second Cross Defendant) Michael Saba (Second Plaintiff/First Cross Defendant) Maxum Taxi Trucks Pty Ltd (First Defendant) CDM Transport Pty Ltd (Second Defendant) Dominic Savo (Third Defendant/First Cross Claimant) Sandra Savo (Fourth Defendant/Second Cross Claimant) Christina Savo (Fifth Defendant/Third Cross Claimant) Savo Holdings Pty Ltd (Sixth Defendant) Total Transport Services (NSW) Pty Ltd (Seventh Defendant) Lindsay Lerau (Eighth Defendant) Michael Walker (Ninth Defendant)
FILE NUMBER(S):	SC 5691/07
COUNSEL:	M. Saba (in person) (Plaintiffs/Cross Defendants) A.P. Cheshire (1st to 3rd, 5th to 7th Defendants/1st & 3rd Cross Claimants) P. Cook (4th Defendant/2nd Cross Claimant)
SOLICITORS:	Kelvin Solari (Plaintiffs/Cross Defendants) Cropper Parkhill (1st to 3rd, 5th to 7th Defendants/1st & 3rd Cross Claimants) K.P. Lawyers (4th Defendant/2nd Cross Claimant)

5691/07 Hannah Louis Group Pty Ltd & Anor v Maxum Taxi-trucks Pty Ltd & Ors

JUDGMENT – Ex tempore

16 December, 2008

1    The First to Third and Fifth to Seventh Defendants in these proceedings make application by way of Notice of Motion filed on 12 December 2008 in respect of orders made by Barrett J on 15 August 2008. The Notice of Motion seeks that two of the several orders made by his Honour made on that date be vacated and further orders to ensure that these proceedings progress according to a timetable. One of the orders sought seeks that the Plaintiffs be "debarred from bringing any Notice of Motion for contempt against the Defendants in respect of any contempt alleged to have occurred prior to the date of these orders" . 2 The background to the proceedings is as follows. 3 The Second Plaintiff/First Cross Defendant, Mr Saba, claims that he made an agreement with Mr Savo, the Third Defendant/First Cross Claimant, in about 2006 whereby a taxi truck business would be owned by Mr Saba or the First Plaintiff and Mr Savo would manage that business. That claim is disputed. Mr Savo and the other Defendants say that the business would, in reality, be owned by Mr Savo or his interests. 4 In August this year, the Plaintiffs filed a Notice of Motion seeking various orders relating to the continued management of the taxi truck business. The business was then under the control of the Defendants. 5 The Plaintiffs said that the Defendants were threatening to close down the business on because it was not trading profitably. The Plaintiffs were apprehensive that the business was being run down by the Defendants and that the subject matter of the proceedings was being dissipated or destroyed. 6 The Plaintiffs sought unusual interim relief. They sought that Mr Saba be placed in control of the subject business pending final hearing. His Honour, after hearing the motion, made orders to that effect and made various other orders ancillary to the principal interim relief sought. Although his Honour does not refer in his judgment to the basis upon which such an order was made, I gather that the order must have been made pursuant to r 25.3 Uniform Civil Procedure Rules 2005 (NSW), that is, pursuant to the power of the Court, which is not only conferred by the Civil Procedure Rules but is an inherent power, to preserve an asset from wastage or dissipation pending the hearing. 7    The usual form of asset preservation order is either a freezing order or the appointment of a receiver to the asset, pending final determination. His Honour expressly considered whether a receiver should be appointed to the business but, having regard to the damage to the goodwill of the business that the appointment of a receiver would probably occasion, he decided that that was not the appropriate course. Rather, his Honour decided that it was better in the interest of preserving the subject matter of the dispute, that is, the goodwill of the business, that Mr Saba himself be placed in a position to control it and manage it. That is the order, in essence, which his Honour made and his Honour, by way of ancillary order, made orders restraining the Defendants from utilising any confidential information of the subject business pending final hearing. 8    Clearly, his Honour was of the view that it would be of no great utility for Mr Saba to be placed in charge of the business previously run by the Defendants if the Defendants could retain the information which they had accumulated as to the customers of the business and use that information for their own benefit. 9    The First to Third and Fifth to Seventh Defendants (“the Savo Interests”), now seek to have vacated the orders by which his Honour sought to preserve the confidentiality of information relating to the goodwill of the subject business. Those orders are in paragraphs 10 and 11 of the orders made his Honour on 15 August 2008. 10    The application is founded upon the assertion, contained in a letter dated 2 December 2008 from Mr Saba’s then solicitor, that the subject business is not profitable and that Mr Saba intends to cease trading that business forthwith. 11    Mr Cheshire of Counsel, who appears for the Savo Interests, says that if the subject business is to be closed down then there is no purpose or utility in continuing to restrain the Defendants from using information confidential to that business in competition with that business. He says that there will be no business to compete with and that, as matters will then stand, his clients will be purposelessly restricted from carrying on their own business or using that information as they wish. 12    Mr Saba has appeared today in person with the assistance of his wife. Mr Saba says that in fact he is seeking to continue to trade the business. He says that, had information been given to him in accordance with the orders of Barrett J on 15 August 2008, he would have been able to run the business more profitably. 13    Mr Saba has provided me with a letter from Mr Bruckner of Counsel which indicates that Mr Saba is in the course of seeking Legal Aid or other pro bono legal assistance, and that Mr Bruckner has been giving active consideration to the way in which Mr Saba should prosecute his case in the future. 14    Mr Saba says that, although he opposes the application today, he is not able to deal with the matter properly until he obtains legal advice some time in the New Year. Mr Cheshire says that the position is so clear as to the non-utility of the confidentiality orders that those orders should be made now without delay. 15    As I have said, the orders made by his Honour on 15 August 2008 are in the nature of orders for the preservation of assets pending final determination of the issues at trial. I do not think it is appropriate to dissolve part of those orders or to deal with those orders piecemeal. As long as it is not shown that there is no utility in an asset preservation order generally then the regime which his Honour put into effect should be maintained. 16    I note further that the evidence in support of this application relied upon by the Savo Interests is that of their solicitor, Mr Campion. That affidavit largely contains evidence on information and belief given to him by one of the Defendants as to the difficulties of continuing to run their business without being able to use certain information. 17    I do not think that that kind of evidence is satisfactory in an application to discharge a major part of the regime which his Honour put in place for the preservation of this asset. I can see that even if the subject business is placed in receivership, or the First Plaintiff, which conducts that business, is put into liquidation, there may be some continuing goodwill in the business which a liquidator could realise for the benefit of creditors. Simply because a partnership which carries on a business is terminated, or a company which carries on a business is wound up, does not mean that the former partners or the former directors of the company can, without further ado, appropriate for themselves the surviving goodwill of the business previously owned by the partnership or the company. 18    Accordingly, I do not propose to vacate orders 10 and 11 made by his Honour on 15 August 2008. 19    The Savo Interests complain that the Plaintiffs have been dilatory in the conduct of these proceedings and that they are disadvantaged and indeed hamstrung in the conduct of their own affairs by reason of the Plaintiffs' inactivity. That may be so. I gather that the Plaintiffs have been hampered in the conduct of the proceeds by lack of funds, but the remedy for the Defendants is not to dismantle piecemeal asset preservation orders but to take other action to bring to an end, perhaps in summary fashion, the prosecution of these proceedings by the Plaintiffs if they fail to comply with the Court's direction in a timely manner. 20    In particular, the Defendants seek an order barring the Plaintiffs from bringing any contempt proceedings against them for alleged breach of the orders made by Barrett J on 15 August 2008. I do not think it is appropriate to make such an order. As I understand the matter, Hammerschlag J gave leave to file a contempt motion by a certain date, but did not direct that if it were not filed by that date the Plaintiffs should be thereafter forever barred in prosecuting a contempt claim. 21    It is not only a matter for a party to litigation but also a matter of concern to the Court if the Court's orders have been disobeyed. I am not making any finding in this regard. I am simply saying that at this stage it is inappropriate to shut the Plaintiffs out of contempt proceedings. That is not to say that if a contempt proceeding is later filed, the Defendants may not move to strike it out for a variety of good reasons. I make no comment about that. All I wish to say is that I do not think it is now appropriate to make an order denying the Plaintiffs from filing a contempt proceeding. 22    It seems to me that this matter has become somewhat of a procedural tangle. The tangle is not assisted by attempting to extricate various parts of the orders so far made from the rest of the tangle. The whole of the tangle needs to be addressed properly and this motion is not the way to go about it.
– oOo –