Health and Life Care Ltd v Central Management Services Pty Ltd

Re: HEALTH & LIFE CARE LIMITED; ADELA PTY LTD; MOTAKI PTY LTD and JAMES WALTER
KELLIE
And: CENTRAL MANAGEMENT SERVICES PTY LTD; TASMAN COVE PTY LTD; ARTED PTY LTD;
VIEPLUM PTY LTD; KYMHILL PTY LTD; HUTT STREET PRIVATE HOSPITAL PTY LTD;
PARKWYND PRIVATE HOSPITAL PTY LTD; TWENTY SECOND CAROLINA PTY LTD; NLANTO
PRIVATE HOSPITAL PTY LTD; AUDIENCIAS PTY LTD; OAKSHIRE ASSOCIATES PTY LTD;
KYMKIM PTY LTD; OAKLANDS PRIVATE HOSPITAL PTY LTD; SEBEN PTY LTD; THIRTY
SECOND APTEX PTY LTD; REVENSON PTY LTD; LASOONE PTY LTD; AYAGUALCO NOMINEES
PTY LTD; MALVERN PRIVATE HOSPITAL PTY LTD; FYNWIN PTY LTD; WYKUS PTY LTD; IAN
ANDREW McGOLDRICK; PETER SHANE McGOLDRICK; EDWARD JOHN McGOLDRICK; BRYAN
MICHAEL McGOLDRICK; CLAIRE DOROTHY McGOLDRICK and PARTNERSHIP PACIFIC LIMITED
No. G45 of 1988
Interlocutory Injunction

COURT

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Forster J.(1)

CATCHWORDS

Interlocutory injunction - serious question to be tried - balance of convenience

Trade Practices Act 1974

HEARING

ADELAIDE

#DATE 28:6:1988

Counsel for Health & Life Care & Ors: Mr T.A. Gray, Q.C. with Mr S. Lipman

Solicitor for Health & Life Care & Ors: Thomson Simmons & Co.

Counsel for Partnership Pacific Limited: Mr A.J. Myers, Q.C. with Mr J.G. Santamaria

Solicitor for Partnership Pacific Limited: Baker McEwin

ORDER

The application to dissolve interlocutory injunction dated 23 May 1988 be dismissed.

Partnership Pacific Limited by itself its servants and agents be restrained and an injunction is hereby granted restraining it until further order from disposing of any ordinary shares in the capital of Health & Life Care Limited over which it claims any powers or rights pursuant to any obligations by any of the other respondents or the applicants or any of them.

Partnership Pacific Limited be at liberty to apply on twenty-four hours notice to vary or discharge this order.

The question of costs be reserved.

Note: Settlement and entry of orders is dealt with in Order 36 of

the Federal Court Rules.

JUDGE1

This is an application by Partnership Pacific Limited ("PPL") to set aside an injunction granted ex parte against it and the other respondents precluding them from exercising or purporting to exercise any powers or rights, or any of them, which they or any of them claim against the applicants pursuant to the agreement made between the applicants and the respondents dated 23 March 1987, (as amended) ("the agreement") in respect to or arising out of the payment of any money or the performance of any obligation by the applicants. There is also a notice of motion by the applicants seeking a further injunction against PPL.

Health and Life Care Limited ("HLC"), the first applicant, agreed to purchase from the respondents other than PPL, (hereinafter called "CHC") the businesses of private hospitals run by various members of the CHC group. The agreement and the transaction were very complicated. For present purposes it is unnecessary to go into the detail of the transaction. According to the original agreement dated 23 March 1987, no money was to pass immediately from HLC to CHC but the consideration was to be given in shares in HLC. Many of the assets both real and personal were either mortgaged by CHC or leased. CHC agreed to give a clear title to these assets. In order to do this it would be necessary for CHC to have money available and it was contemplated by the parties that CHC would mortgage shares in HLC which would be issued pursuant to the original agreement for sale.
Settlement did not take place on the due date. HLC then instituted proceedings in the Supreme Court of South Australia for specific performance. Some interlocutory relief was granted by the Supreme Court and discussions between the parties took place. As a result of these discussions two further agreements were entered into and a partial settlement took place. Put briefly, PPL advanced moneys to CHC on the security of some of the shares in HLC to enable the real estate and the businesses of the hospitals to be transferred unencumbered to HLC. Settlement was only partial because CHC was unable to give an unencumbered title to chattels and other personalty.
HLC went into all the hospitals purchased and started running them. It is said that it became apparent that the hospitals were not as profitable as had been represented by CHC. The present proceedings were instituted against the members of the CHC group and some of the individuals in control of the affairs of the companies in the group upon the footing that the respondents had been guilty of misleading and deceptive conduct and also of fraud. Damages are sought and also a re-writing of the agreement between the parties pursuant to s.87 of the Trade Practices Act 1974 and also other relief.
PPL is also a respondent to the application. A statement of claim had not yet been filed or delivered when argument upon the two present applications took place, but it now has.
PPL became involved in the transaction at or about the time of partial settlement. The applicants complain that they were induced by the representations of the respondents, other than PPL, to enter into an agreement dated 18 June 1987 with all the respondents including PPL. The applicants also complain that in the course of the negotiations leading to the partial settlement PPL said that it did not intend to seek security for any more than a loan of $15,000,000 to Wykus Pty Ltd ("Wykus") a member of the CHC group on the security of a mortgage over HLC's shares transferred to Wykus as part of the partial settlement. It is also said that PPL represented that it did not intend to take a mortgage over 8,750,000 shares in HLC which it was planned should be used by Wykus as security for a further loan to enable CHC to pay off the existing encumbrances with respect to chattels and other personalty to enable settlement to be completed.
It is also said that PPL represented that it did not intend to hold any shares in HLC for any advance exceeding $15,000,000 and charges thereon. In addition it is said that PPL agreed with the applicants to limit the circumstances in which it could and would sell any HLC shares and would release such shares as had to be sold gradually on to the market.
It is said that in breach of these representations and undertakings PPL granted an unlimited credit facility to Wykus and that PPL obtained from Wykus its agreement that the security given by Wykus over HLC shares should be security for all moneys at any time due by Wykus to PPL. It is also said that PPL obtained from Wykus security by way of share mortgage over the parcel of 8,750,000 shares contrary to its agreement with the applicants. It is also complained that PPL obtained from Wykus a right to call up any advance on demand and that upon becoming entitled to realise its security, PPL could immediately sell HLC shares without restriction, contrary to its agreement with the applicant.
It is also argued that PPL is an assignee of the shares from Wykus, which is the fact, and that it therefore has no better rights than Wykus to the shares, that is to say Wykus's rights to HLC shares are affected by the applicant's claim against Wykus and the CHC group generally and that as a consequence, PPL has no entitlement to exercise any rights with respect to the HLC shares.
It is claimed that PPL was guilty of false and misleading conduct contrary to the Trade Practices Act of misrepresentation of fraud and of negligence. Damages are claimed and also orders pursuant to s.87 of the Trade Practices Act and an order restraining it from exercising any of its alleged rights under any agreement or security for money.
I have examined the various documents and affidavits with some care and have reached the conclusion that there is prima facie evidence of the facts alleged in the statement of claim and that so far as matters of law are concerned the applicants have an arguable case. There is therefore in my view a serious question to be tried with respect to the claims of the applicant against PPL set out briefly above. Since the matter may be tried before me or some other judge in due course, I do not consider it desirable to say any more at this stage about the facts.
The ex parte interlocutory injunction which I made on 23 May 1988 as well as orders affecting the other respondents enjoined PPL against exercising any power or rights against the applicants pursuant to the agreement of 23 March 1987 in respect of or arising out of the payment of any money or the performance of any obligation by the applicants. The further injunction now sought against PPL is that it be restrained until further order from disposing of any ordinary shares in the capital of HLC over which it claims any powers or rights pursuant to any obligations by any of the other respondents to these proceedings or the applicants or any of them.
I have said that it is my opinion that there is a serious question to be tried between the applicants and PPL and therefore the remaining question is that of the balance of convenience. It seems to me that this is clearly weighted on the side of the applicants. If very many of the shares are sold, Kellie, the principal person behind the corporate applicants will, or may, lose control of HLC. If the applicants are successful in the principal action and are found to be entitled to a re-writing of their agreements with CHC and PPL or either of them, this will be impossible if many shares have been sold by PPL. It is also argued that although PPL as an assignee may be in no better position vis-a-vis the applicants than Wykus, a purchaser from PPL without notice may well have a clear title to the shares unembarrassed by the claims of the applicants which clear title it would be impossible to attack. Damages, it is said, will not be adequate compensation for loss of control of HLC by Kellie. I do not think that I accept this last argument but whether I do or not the potential loss to PPL is of money only and I am satisfied that the undertaking to be extracted from the applicants is of sufficient value to stand any award of damages likely to be made to PPL if the injunction which I propose to make should not have been made.
I order that PPL's application to dissolve the injunction be dismissed.
Subject to the usual undertakings being given I make an injunction in the terms asked for and order that the costs of these applications and orders be reserved to await judgment in the principal proceedings.

[1988] FCA 346

28 JUNE 1988