Huntingdale Village Pty Ltd (Receivers and Managers Appointed) v Korda

[2017] WASC 346

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   HUNTINGDALE VILLAGE PTY LTD (RECEIVERS AND MANAGERS APPOINTED) -v- KORDA [2017] WASC 346

CORAM:   LE MIERE J

HEARD:   22 FEBRUARY 2017

DELIVERED          :   4 DECEMBER 2017

FILE NO/S:   COR 192 of 2010

MATTER                :Huntingdale Village Pty Ltd (Receivers and Managers Appointed), Silkchime Pty Ltd (Receivers and Managers Appointed), Vannin Pty Ltd (Receivers and Managers Appointed), Warwick Entertainment Centre Pty Ltd (Receivers and Managers Appointed), Paragon Apartments Ltd (Receivers and Managers Appointed), Westpoint Corporation Pty Ltd (Receivers and Managers Appointed) (In Liq), Bayview Port Melbourne Ltd (Receivers and Managers Appointed (In Liq) and Westpoint Ltd (Receivers and Managers Appointed ) (In Liq)

BETWEEN:   HUNTINGDALE VILLAGE PTY LTD (RECEIVERS AND MANAGERS APPOINTED)

SILKCHIME PTY LTD (RECEIVERS AND MANAGERS APPOINTED)
VANNIN PTY LTD (RECEIVERS AND MANAGERS APPOINTED)
WARWICK ENTERTAINMENT CENTRE PTY LTD (RECEIVERS AND MANAGERS APPOINTED)
PARAGON APARTMENTS LTD (RECEIVERS AND MANAGERS APPOINTED)
Plaintiffs

AND

MARK ANTHONY KORDA
DAVID JOHN WINTERBOTTOM
OREN ZOHAR
First Defendants

PERPETUAL NOMINEES LTD
Second Defendant

Catchwords:

Practice and procedure - Injunction - Application for an injunction to preserve disputed monies until the outcome of related action - Turns on own facts

Corporations Act 2001 (Cth) - Receivers - Application for inquiry under s 423 - Where there is insufficient ground for ordering an inquiry - Turns on own facts

Legislation:

Corporations Act 2001 (Cth), s 423(1), s 424
Legal Professional Conduct Rules 2010 (WA), r 34(2)

Result:

Applications dismissed

Category:    B

Representation:

Counsel:

Plaintiffs:     Mr S Penglis

First Defendants            :     Mr J A Thomson SC & Mr S D Wilson

Second Defendant         :     No appearance

Solicitors:

Plaintiffs:     Coulson Legal

First Defendants            :     Corrs Chambers Westgarth

Second Defendant         :     No appearance

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

Duro Felguera Australia Pty Ltd v Samsung C&T Corporation [2016] WASC 119

GE Capital Australia v Davis (2002) 180 FLR 250

Korda v Silkchime Pty Ltd [2010] WASC 155

Osborne v Landpower Developments Pty Ltd [2003] WASCA 117

Oswal v Carson (2013) 300 ALR 149

Re Quality Blended Liquor Pty Ltd [2015] 2 Qd R 381

Re S & D International Pty Ltd (in liq) (Recs and Mgrs) [2009] VSC 225

Sugar Australia Pty Ltd v Landlease Services Pty Ltd [2015] VSCA 98

LE MIERE J: 

Summary

1. This is one of a number of related proceedings arising out of the appointment by Perpetual Nominees Ltd as custodian of the ING Mortgage Pool for ING Funds Management Ltd as the Responsible Entity of the ING Mortgage Pool (ING) of the defendants as receivers and managers to companies in the Westpoint Group of companies.  I will refer to the defendants as the Receivers.

2. In September 2009 the plaintiffs commenced proceedings against ING and the Receivers alleging misconduct by the Receivers.  Those proceedings are now COR 223 of 2009.

3. In 2010 in COR 173 of 2009 the Receivers applied under s 424 of the Corporations Act 2001 (Cth) (the Act) for, amongst others, directions that they were not obliged to retire as receivers and managers and they were entitled to realise the remaining assets of the plaintiffs to create a fund available to satisfy the future liability of the plaintiffs to ING. I delivered judgment on 25 June 2010: Korda v Silkchime Pty Ltd [2010] WASC 155 (Korda v Silkchime).  Paragraph 2 of the orders (Order 2) to give effect to the judgment is:

   The Court directs that, subject to any findings or orders in COR 223 of 2009, the Receivers are justified in not retiring and in realising the assets of [the plaintiffs] to create a fund available to satisfy the future liabilities of [the plaintiffs] to ING as a result of COR 223 of 2009 and any other threatened litigation.

4. The Receivers realised the assets of the plaintiffs, so far as they could.  The Receivers did not pay the proceeds of the realisation of the assets into a separate fund; they paid the proceeds into their statutory account.  The Receivers have drawn on those funds to pay their remuneration as receivers and to meet legal costs and disbursements in defending litigation, including COR 223 of 2009.  COR 223 of 2009 has not yet proceeded to trial.

5. On 5 November 2010 the plaintiffs commenced this proceeding seeking an order under s 423 of the Act that the court in relation to the fund referred to in Order 2 (the Retention Fund) and the Receivers be required to account for their expenditure out of and payments to the Retention Fund since 24 June 2006.  This proceeding lay dormant for six years until the plaintiffs took steps to bring their application for an inquiry to a hearing.  At the hearing of the application counsel for the plaintiffs said that the crux of the matter is the plaintiffs' contention that the use by the Receivers of funds which they have obtained by realising assets of the plaintiffs for the purpose of securing the Receivers' costs and disbursements in litigation is a matter that ought be inquired into because it is, prima facie, in breach of the Receivers' duties because they have no lawful entitlement to do so.

6. In October 2016 the plaintiffs gave notice of an application for an interlocutory injunction to restrain the Receivers from dealing with the Retention Fund.  The plaintiffs' applications for an inquiry and an interlocutory injunction were heard together.  The plaintiffs' applications will be dismissed for the following reasons.

The Westpoint Group

1. I will begin by identifying the plaintiff companies' relationship with each other.  Norman Carey is the founder of the Westpoint Group of companies which include each of the plaintiffs and Westpoint Corporation Pty Ltd.  Mr Carey is a director of each of the plaintiff companies.

2. In September 2005 ING as lender (Lender) and Westpoint Corporation and the plaintiffs, other than Paragon, as borrower (Borrower) entered into a loan agreement (Loan Agreement).  At the same time, ING as Lender and Mr Carey and companies in the Westpoint Group as Guarantor entered into a guarantee and indemnity (Guarantee) by which the Guarantor guaranteed to the Lender the payment to it by the Borrower under the Loan Agreement of the Guaranteed Money (that is, all the money and damages which the Borrower is liable to pay to the Lender).  By way of materially identical instruments of fixed and floating charge (Charges) each of the Borrowers and each of the corporate guarantors (together the Chargors) granted a fixed and floating charge in favour of ING over the whole of their assets and undertaking or, in the case of Silkchime, specific assets, to secure the borrowings under the Loan Agreement.

3. Each of the plaintiffs committed an act of default and on 24 January 2006, acting pursuant to the Charges, ING appointed the Receivers as receivers and managers of the Chargors, including each of the plaintiffs.  ING and the Receivers entered a Deed of Indemnity.  Since January 2006, acting pursuant to the Charges, the Receivers have realised assets and caused the Chargors to repay amounts to ING.

COR 223 of 2009

1. On 4 September 2009 the plaintiffs commenced proceedings in the Federal Court against ING, the Receivers and Westpoint Corporation (in liquidation) in respect of the conduct of the receiverships by the Receivers.  The originating process in the Federal Court stated that the application is principally a complaint about receivers made under s 423, s 434, s 1317H and s 1324 of the Act and s 12GD and s 12GF of the Australian Securities and Investments Commission Act 2001 (Cth). Subsequently the Federal Court ordered that the proceeding be transferred to this court where it became action COR 223 of 2009. I have case managed that proceeding since it was transferred to this court.

2. In essence the plaintiffs allege that the Receivers realised assets of the plaintiffs and as from 23 January 2008 the Secured Money has been completely paid.  The Secured Money is the amount in which the plaintiffs as Borrowers and Guarantors are liable to ING at the appointment of the Receivers.  The plaintiffs say that since at least 23 January 2008, wrongfully and in breach of the relevant Charge, ING has failed and refused to discharge the relevant security interest and remove the Receivers.  The plaintiffs say that the Receivers conduct in continuing the receiverships after the Secured Money had been repaid is a trespass to the property of the plaintiffs and the Receivers and ING have forfeited all rights of indemnity from the plaintiffs, in respect of the receiverships from at least 24 January 2008.  The plaintiffs make other wide ranging challenges to the Receivers' remuneration and expenses and to fees paid by the Receivers to Corrs Chambers Westgarth, the solicitors engaged by the Receivers to carry out legal services in relation to a range of matters concerning the receiverships.

Legal principles

1. Section 423 of (1) of the Act provides relevantly that if:

   (a)it appears to the Court … that a controller of property of a corporation has not faithfully performed, or is not faithfully performing, the controller's functions or has not observed, or is not observing, a requirement of:

   (i)in the case of a receiver ‑ … the instrument under which the receiver was appointed; or

   …

   (iii)in any case ‑ the Court; or

   (iv)in any case ‑ this Act, the regulations or the rules; or

   (b)a person complains to the Court … about an act or omission of a controller in connection with performing or exercising any of the controller's functions and powers;

   the Court … may inquire into the matter and, where the Court … so enquires, the Court may take such action as it thinks fit.

2. The exercise of the power to enquire into a controller's failure to perform duties has been considered in a number of cases, including relevantly, GE Capital Australia v Davis (2002) 180 FLR 250; Re S & D International Pty Ltd (in liq) (Recs and Mgrs) [2009] VSC 225; Oswal v Carson (2013) 300 ALR 149; and Re Quality Blended Liquor Pty Ltd [2015] 2 Qd R 381. Those cases establish the following principles:

   1.The process of determining whether to inquire into the performance of a controller's functions or duties involved two stages.  First, whether the complainant has established a prima facie case that there is something which requires enquiry.  Secondly, if the complainant does establish a prima facie case as a first step, then whether the court should, in its discretion, order an inquiry.

   2.Section 423(1)(a) requires that the sufficient basis for making the order must relate to the matters concerning faithful performance of duties or observance of the requirements stated in the paragraph. On the other hand, s 423(1)(b) is wide enough to cover complaints about incompetence or lack of diligence as well as complaints about failure to perform duties faithfully.

   3.An inquiry would be inappropriate unless some breach of the controller's powers or functions can be established simply, is not open to substantial dispute and the grounds of any remedies to be awarded in respect of the impugned conduct are not legally or factually complex.

   4.Matters should not be subject to an inquiry when they are already the subject matter of proceedings in this or another superior court because that would give rise to duplication and waste of resources for no discernible benefit and the risk of inconsistent findings being made in different proceedings.

   5.Other matters relevant to the exercise of the discretion include the strength and nature of the allegations, any answers offered by the controller, other available remedies, the stage to which the controller has progressed, the likely amounts of money involved, the availability of funds to pay for any inquiry, the likely benefit to be derived from it and the legitimate interest of the applicant in the outcome.

Korda v Silkchime

1. In Korda v Silkchime I considered aspects of the proper construction of the relevant financial instruments, that is the Loan Agreement, the Guarantees, the Charges and the Deed of Indemnity.  I found that:

   … the material effect of the provisions of the instruments referred to, and in particular the relevant provisions of the Deed of Indemnity, is that ING is liable to indemnify the Receivers for their costs in defending any proceedings against them in respect of the receiverships except that the Receivers will not be entitled to indemnity in respect of any costs of or arising out of any negligent act or omission, any act or omission done or omitted by them otherwise than in the bona fide performance of their powers as agents, any act or omission in contravention of s 180 - s 183 of the Act, or any act or omission in respect of which the indemnity would be void by reason of s 199A of the Act [117].

   I also held at [118] that the Borrowers and Guarantors, which includes the plaintiffs, are liable to indemnify ING against its liabilities to the Receivers.  I said:

   In this case whether or not whether the Borrowers and the Guarantors are liable to indemnify ING against any liability to indemnify the Receivers for their costs in defending COR 223 of 2009 and any other proceedings arising out of the receiverships may depend upon facts and circumstances that cannot be resolved in these proceedings. Whether or not the Borrowers and the Guarantors are liable to indemnify ING against any legal fees and other costs and expenses which it incurs in relation to COR 223 of 2009, including indemnifying the Receivers against the costs incurred by them in defending those proceedings, depends upon the findings that might be made in the course of COR 223 of 2009 and the consequential orders made by the court in those proceedings [119].

2. It is necessary to put those statements in context.  The Receivers sought, and obtained, a direction that they are justified in realising the assets of the Chargors in anticipation of satisfying the future liabilities of the Chargors to ING as a result of COR 223 of 2009 and other threatened litigation and they did not have to wait until they had incurred those expenses or liabilities before realising the assets of the Chargors to satisfy those liabilities.  I made a statement to the effect that whether or not the plaintiffs are liable to indemnify ING against any costs and expenses which it incurs in relation to COR 223 of 2009, including indemnifying the Receivers against the costs incurred by them in defending those proceedings, depends upon the findings that might be made in COR 223 of 2009.  I made that statement to make it clear that my findings and orders in Korda v Silkchime did not preclude the plaintiffs from pursuing their claims in COR 223 of 2009.  It was not necessary to consider whether or not the Receivers were entitled to pay their remuneration or the costs and expenses incurred by them in defending COR 223 of 2009 out of the proceeds of the realised assets of the plaintiffs before the resolution of COR 223 of 2009 and I did not consider or decide that issue.

The plaintiffs' submissions concerning Order 2

1. In their outline of submissions in support of their application for an inquiry which are dated 26 October 2016 the plaintiffs said that the matter arises from my judgment in Korda v Silkchime and turns upon the construction of Order 2.  The plaintiffs stated that the issue is whether on the proper construction of Order 2 the Receivers are authorised to apply the monies standing to the credit of the Retention Fund.  The plaintiffs submitted that on its proper construction Order 2 empowers a Receiver to retain monies to the credit of the Retention Fund but it does not empower the Receivers to apply those monies without further order of the Court.  The plaintiffs submitted that the expenditure of monies from, or that were intended to be deposited in, the Retention Fund is an unauthorised use of such money not authorised by Order 2 or otherwise.  The plaintiffs submitted that the Receivers were not and are not authorised or entitled to expend any money from the Retention Fund (or any proceeds of the sale of any assets for the purpose of establishing such fund) to satisfy any legal fees or other costs and expenses which they have incurred in relation to COR 223 of 2009, and that an inquiry ought be held into such conduct to determine whether and if so what orders ought to be made in respect of it.

The Receivers' submissions concerning Order 2

1. In their outline of submissions dated 9 February 2017 the Receivers said that the Court should decline to order an inquiry for the following reasons.  The Receivers right to realise assets of the plaintiffs and to pay remuneration, expenses and costs from those proceeds does not arise from Order 2.  The right to do so is contractual and arises from the Deed of Indemnity and the Charges.  Order 2 directs that the Receivers are justified in realising the assets of the plaintiffs and they did not need to wait until they incurred expenses or other liabilities before they realised assets of the plaintiffs to satisfy those liabilities, which became liabilities of the plaintiffs to ING through the operation of the relevant Charge.  There was no need for the court to make a further order that the Receivers were justified in applying the proceeds of the assets realised.  Order 2 did not give the Receivers additional powers they did not always have or impose any additional obligations and duties on the Receivers they do not already owe.  The Receivers are entitled to exercise their right of indemnity in respect of their costs and expenses incurred in performing their functions and duties as receivers which includes the costs and expenses in defending COR 223 of 2009 and in realising assets.  The Receivers have realised assets and paid their fees and expenses from the proceeds of the realisation in accordance with the terms of the relevant contractual documents and the Act.

Order 2 does not preclude Receivers from using proceeds of realised assets

1. I accept the submissions of the Receivers concerning the interpretation and effect of Order 2.  Order 2 was not an order that the Receivers create the Retention Fund.  It did not require the Receivers to retain the proceeds from the realisation of assets of the plaintiffs in a separate segregated fund.  Order 2 neither authorises nor prevents the Receivers applying the proceeds of the realisation of assets of the plaintiffs to paying their remuneration, costs and expenses.  That is a matter which is to be determined having regard to the relevant contractual instruments and the general law.

2. The plaintiffs' submissions to the effect that the expenditure of monies by the Receivers from, or that were intended to be deposited in, the Retention Fund is an unauthorised use of such money because it is not authorised by Order 2 does not disclose a prima facie case that the Receivers have failed to perform their functions or duties.  The plaintiffs' submission does not make out a prima facie case or sufficient basis for making an order for an inquiry.

Receivers' right to indemnity

1. The Receivers submit, correctly, that they are entitled to draw on the indemnity in respect of their costs and expenses incurred in performing their powers and duties as receivers.  This extends to their costs and expenses in defending proceeding COR 223 of 2009 as well as their costs and expenses in realising assets of the Chargors to obtain funds to satisfy the future liabilities of the Chargors to ING as a result of COR 223 of 2009 and any other threatened litigation.  Each of the Charges provides that the Chargor is liable to ING for costs and expenses incurred in relation to the conduct of the receivership.  The effect of cl 11.10(d) and 12.2(a)(ii) is that a receiver may, on behalf of the Chargors, commence, defend, prosecute, settle, discontinue and compromise litigation in relation to the secured property.  The effect of cl 17.2(b)(i) is that each chargor must pay, and if paid by ING, reimburse ING for ING's costs and expenses in relation to, among other things, the exercise or attempted exercise or the preservation of any rights of ING under the transaction documents which includes the Loan Agreement, the Charges and the Guarantees.  Costs and expenses include legal costs and expenses on a full indemnity basis:  cl 17.1.  ING and the Receivers must be remunerated by the Chargor for any services rendered by them in relation to the exercise of any right under the Charge:  cl 17.3.  The Chargor must indemnify ING on demand against any liability, loss, cost or expenses caused or contributed to by the exercise or attempted exercise of any right by ING or the Receivers:  cl 18.1(c).  Each Chargor must indemnify the Receivers against any liability, cost and expense caused or contributed to by anything ING is indemnified against:  cl 18.2.

1. Clause 14.1 of the Charges specifies the manner and priority in which the Receivers must apply any monies obtained from the realisation of assets of the Chargors.  The first two priorities are:

   (a)first, towards the payment or reimbursement of the costs and expenses incurred in or incidental to the exercise or enforcement or attempted exercise or enforcement of its rights under the Charge;

   (b)secondly, towards the remuneration of the Receivers and any money owing by the Chargor to any representative of ING or the Receivers;

2. The plaintiffs submitted that the Receivers are not a party to the Charges and there is no contractual relationship between the plaintiffs and the Receivers.  That is not an answer.  The Charges expressly in their terms purport to confer a benefit directly on the Receivers and is therefore enforceable by them.  In any event, the Charges create a right of the Receivers which may be enforced by ING.  The Receivers are entitled to apply the proceeds from the sale of assets of the plaintiffs toward their remuneration and the payment or reimbursement of the costs and expenses incurred in or incidental to the exercise or enforcement or attempted exercise or enforcement of ING's rights under their Charges.

Plaintiffs' submissions concerning Receivers contractual rights

1. In the plaintiffs' written submissions in reply dated 20 February 2017 and in counsel's oral submissions the plaintiffs submit that the Receivers, without any direction from the Court, have paid themselves and their solicitors from monies which the plaintiffs assert the Receivers hold unlawfully, rather than out of their or ING's own pockets, in full knowledge that their entitlement to do so is disputed and subject to, amongst other things, the outcome in COR 223 of 2009 which has not yet been heard and determined.  The plaintiffs say that such conduct is prima facie improper and there ought to be an enquiry into such conduct.

2. Counsel for the plaintiffs, Mr Penglis, accepted that if the indemnity given by the plaintiffs to ING is enforceable then the Receivers are entitled to apply the proceeds from the realisation of the plaintiffs' assets to paying their remuneration, costs and expenses.  Mr Penglis accepts that 'there is a lawful entitlement prima facie' for the Receivers to spend the realised funds on the costs of the receiverships and litigation (ts 55) and that 'the prima facie position is there is an indemnity between the receivers and [ING] and [ING] and [the plaintiffs] and if that indemnity is enforceable then [the Receivers] can do what they've done' (ts 59).  However, Mr Penglis says, the indemnity is in dispute and it is improper for the Receivers to pay their remuneration, costs and expenses out of those proceeds in the knowledge that the right of indemnity is in dispute.  The dispute about the Receivers' right of indemnity is the plaintiffs' claims in COR 223 of 2009 and the Receivers' answer to those claims.

No inquiry will be ordered

1. The plaintiffs say that it is 'improper' for the Receivers to pay remuneration, costs and expenses from the proceeds of the realisation of assets of the plaintiffs when the plaintiffs contend that they are not entitled to do so.  That is not a sufficient ground for ordering an inquiry.

2. The Receivers are prima facie entitled by the terms of the Charges to pay their remuneration, and costs and expenses incurred in or incidental to the exercise or enforcement of ING's rights out of the proceeds of the realisation of the plaintiffs' assets.  Furthermore, the terms of the Deed of Indemnity provide that ING is liable to indemnify the Receivers for their costs in respect of the conduct of the receiverships.  The plaintiffs do not dispute those matters.  The plaintiffs say that those provisions do not apply because ING was obliged to terminate the receiverships and in any event because of other conduct of the Receivers and their solicitors in carrying out the work which gives rise to the remuneration, costs and expenses.  The Receivers are not prima facie in breach of their duties and it is not prima facie unlawful for the Receivers to use the realised funds merely because the plaintiffs allege they are not entitled to do so or because the plaintiffs have commenced COR 223 of 2009 in which they allege the Receivers are not entitled to do so.

3. The Receivers are only not entitled to use the funds, and in breach of their duties or faithful performance of their functions, if the plaintiffs' allegations in COR 223 of 2009 are correct.  Those matters are the subject matter of COR 223 of 2009.  In substance, the failures to perform functions and duties which the plaintiffs complain of in this proceeding are the same as those they complain of in COR 223 of 2009.  It is inappropriate to inquire into those matters in a separate inquiry when they remain the subject of COR 223 of 2009.  To do so would give rise to duplication and waste of resources and the risk of inconsistent findings being made in different proceedings.

4. In any event, it would be pointless to order an inquiry into whether the Receivers have not faithfully performed their functions by paying remuneration and costs and expenses out of the realised assets of the plaintiff.  In COR 223 of 2009 the plaintiffs have applied for an inquiry whether or not the plaintiffs are entitled to the relevant remuneration and payment of costs and expenses.  If the court finds that the Receivers are entitled to the remuneration, costs and expenses then they are entitled to pay that remuneration, costs and expenses from the realised assets of the plaintiffs.  If in COR 223 of 2009 the court finds that the Receivers are not entitled to all or any part of the remuneration, costs and expenses then the inquiry sought in this application would be redundant.

5. Furthermore, it is inappropriate to order an inquiry having regard to the nature of the matters the plaintiffs say should be inquired into, the available remedies, the likely amounts of money involved and the likely benefit to be derived from it.  The plaintiffs' allegations that ING and the Receivers are not entitled to indemnity involve complex factual and legal matters.  They will be resolved in COR 223 of 2009.  The primary remedies of benefit to the plaintiffs is the ending of the receiverships and the repayment of proceeds of the plaintiffs' assets applied to the Receivers' remuneration and costs and expenses incurred in the receiverships and litigation.  Those are remedies being pursued in COR 223 of 2009.

6. Order 2 was made on 25 June 2010.  Mr Carey has sworn that between 23 January 2008 and 23 July 2015 the Receivers raised $5,866,110 from realising the assets of the plaintiffs, Westpoint Corporation, Westpoint Management Ltd and Bayview Port Melbourne Ltd.  Mr Carey says that the Receivers paid this money out as and when it was received by them mainly for their fees and their legal costs.  As a consequence the receiverships have only a small amount of cash left.  Mr Morgan has sworn that as at 31 January 2017 the total funds on hand were $596,023.  In short, the plaintiffs have failed to progress their application whilst the Receivers have, to the knowledge of the plaintiffs, realised the plaintiffs' assets and used the funds to pay the Receivers' remuneration and legal costs.  The explanation for the delay appears to be that the plaintiffs' previous solicitors failed to progress the application.  That is not an adequate explanation.

No injunction will issue

1. The plaintiffs submit that the balance of the disputed monies ought be preserved by an injunction in the nature of an asset preservation order until the outcome of COR 223 of 2009.  They submit that if an injunction is not granted, the disputed assets will continue to be dissipated and if ultimately the plaintiffs establish that ING is not entitled to enforce its indemnity, then the plaintiffs will have lost their property and be exposed to the prospect of having to recover against the Receivers as unsecured creditors.

2. The plaintiffs have not truly put forward a prima facie case that the Receivers are not entitled to use the proceeds from the realisation of the plaintiffs' assets to meet their remuneration and legal costs.  In essence, the plaintiffs point to their allegations in COR 223 of 2009 and submit that there is a dispute about the Receivers' entitlement and that gives rise to the prima facie case for relief.

3. Whether or not the plaintiffs have made out a prima facie case that by continuing the receiverships after the Secured Money had been repaid, the Receivers and ING have forfeited all rights of indemnity from the plaintiffs in respect of the receiverships from at least 24 January 2008 and the Receivers are otherwise disentitled to remuneration and expenses, the balance of convenience is against the grant of an injunction and an injunction should be refused on discretionary grounds.

4. An injunction would cause prejudice to the Receivers or ING.  In order to continue the receiverships and meet their legal expenses incurred in defending COR 223 of 2009 they would have to do so out of their own funds.  Where contractual documents specify which party should bear the financial risk pending the final determination of the matter, the court should take that allocation of risk into account.  In the context of performance bonds, where the bond is intended to operate as a device for allocating the risk of being out of pocket pending the final determination of the dispute, that intention informs the court's task of resolving whether or not to grant an injunction restraining the beneficiary of the bond from converting the bond to money:  Sugar Australia Pty Ltd v Landlease Services Pty Ltd [2015] VSCA 98. In Duro Felguera Australia Pty Ltd v Samsung C&T Corporation [2016] WASC 119 [24] I said that a contractual provision which allocates risk pending determination of the dispute alters the context in which the court must exercise its discretion, by changing the complexion of the status quo and raising the prospect of substantial injustice if the purpose of the provision is defeated.

5. In this case, the contractual documents provide how the funds from the realisation of the plaintiffs' assets are to be distributed.  That is the status quo.  The plaintiffs have not shown sufficient reason for making an order that will change that status quo.

6. Furthermore, I am not satisfied that the undertaking offered by the plaintiffs and Mr Carey have been shown to be sufficient.  The sufficiency of the undertaking offered by the plaintiffs and Mr Carey is relevant to the balance of convenience.  An undertaking by the insolvent plaintiffs is worthless.  The evidence offered by Mr Carey of his ability to pay damages if ordered is inadequate.  The absence of any sufficient evidence of Mr Carey's ability to pay and the insolvency of the plaintiffs weigh against the injunction being granted.

7. Delay may be a sufficient reason for declining to grant an interlocutory injunction.  The plaintiffs' failure, without reasonable excuse, to progress this application for an inquiry to a hearing and their unexplained delay in waiting six years before seeking an injunction are sufficient to deny their application.

8. The plaintiffs' application for an injunction will be dismissed.

Receivers' application to re‑open

1. On 18 September 2017, after I had completed a draft of these reasons but before I had delivered a copy to the parties, the Receivers made an application:

   (a)to supplement their submissions to the Court by written submissions dated 18 September 2017; and

   (b)to adduce further evidence by tendering a Fee Agreement which was executed by one of the Receivers, Mr Korda, and a representative of One Part Funds Management Ltd (formerly ING Funds Management Ltd) on or about 23 June 2014.

   The Receivers' submissions of 18 September 2017 stated that the Fee Agreement is irrelevant to the applications made by the plaintiffs for an inquiry and an injunction.  The Receivers said that they made the application to adduce further evidence and submissions to qualify a submission by senior counsel at the hearing of the plaintiffs' application.  On the hearing of the plaintiffs' applications senior counsel for the Receivers made submissions upon the basis that the only relevant documents governing the rights as between the Receivers and Perpetual in respect of the payment of the Receivers' fees, remuneration and costs were the Loan Agreement, Charge, Instruments and the Deed of Indemnity.  The Receivers sought to adduce evidence of the Fee Agreement to ensure that the court was fully informed.

2. The plaintiffs filed submissions dated 16 October 2017.  The plaintiffs stated that they had no objection to the application to correct submissions previously made but stated there were difficulties with respect to the application to adduce evidence after trial.  The plaintiffs stated that they agreed that the Fee Agreement is irrelevant 'but on the basis that, as has previously been submitted, the [Receivers'] rights of indemnity are irrelevant to the determination of both applications'.  The plaintiffs went on to say that if the Court considers such matters to be relevant then the Fee Agreement impacts upon those entitlements and the plaintiffs would seek to make further submissions.  The plaintiffs submitted that:

   (a)there should be a direction from the Court requiring the Receivers to file an affidavit fully explaining what has occurred; and

   (b)the Court inform the parties whether it would be assisted by receiving additional submissions based on the Fee Agreement.

3. On 6 November 2017 I informed the parties as follows.  First, the Court would not make a direction requiring the Receivers to file an affidavit explaining what has occurred.  Secondly, it is a matter for the plaintiffs whether they put on evidence or make submissions in support of or in opposition to the Receivers' application to adduce further evidence; the Court would not give a preliminary ruling on whether the evidence adduced by the Receivers is complete or sufficient or whether the Fee Agreement is relevant to the relief sought by the plaintiffs.  Thirdly, to ensure that the plaintiffs had every opportunity to put on evidence and submissions in relation to the Receivers' application to adduce further evidence, the plaintiffs would have leave to file and serve any affidavit and/or submissions in support of or in opposition to the Receivers' application to adduce further evidence.

4. On 17 November 2017 the plaintiffs filed further submissions.  The plaintiffs submitted that the Receivers' application to adduce further evidence should be dismissed for two reasons.  First, there is no explanation to how it is that the Fee Agreement was unknown to the Receivers' counsel at the hearing of the applications.  Secondly, the evidence is not relevant.

5. The Court has a discretion to allow a party to adduce further evidence after the hearing of an application even when it should have been adduced at the hearing.  The primary consideration for the court is whether the interests of justice are better served by allowing or rejecting the application to adduce further evidence:  Osborne v Landpower Developments Pty Ltd [2003] WASCA 117 [12] ‑ [14] (McLure J).

6. I will give leave to the Receivers to file their submissions of 18 September 2017 but refuse their application to adduce further evidence by tendering the Fee Agreement.  The submissions were made in performance of the duty of candour owed by the Receivers' legal representatives to the court:  see Legal Professional Conduct Rules 2010 (WA) r 34(2).  However, leave to adduce the Fee Agreement in evidence is refused because it is irrelevant to the issues in the plaintiffs' applications and both parties submit that it is irrelevant.

7. The plaintiffs should have the costs of the Receivers' application to adduce further evidence.  Costs should follow the event.  However, the plaintiffs' costs should not include the costs of the plaintiffs' submissions dated 16 October 2017.  Those submissions sought directions from the court which I declined to make.