Imaginex Corporation Pty Ltd v Imaginex Holdings Pty Ltd - [2001] WASC 247

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: IMAGINEX CORPORATION PTY LTD & ANOR -v- IMAGINEX HOLDINGS PTY LTD & ORS [2001] WASC 247

CORAM: HASLUCK J

HEARD: 24 AUGUST 2001

DELIVERED : 24 AUGUST 2001

FILE NO/S: CIV 2126 of 2001

BETWEEN: IMAGINEX CORPORATION PTY LTD (ACN 090 744 782)
First Plaintiff
PAUL GIANATTI
Second Plaintiff
AND
IMAGINEX HOLDINGS PTY LTD (ACN 097 575 810)
First Defendant
ROLAND SCHEFFLER
Second Defendant
HANS HENDRIK HENDRIKSEN
Third Defendant

Catchwords:

Partnership - Rights and obligations of parties following dissolution of partnership - Application for discharge of injunction to restrain use of name - Injunction obtained on ex parte basis - Alleged failure to disclose material facts - Application allowed in part - Turns on own facts

Legislation:

Partnership Act 1895 (WA), s 49

Result:

Application allowed in part

Category: B

Representation:

Counsel:

First Plaintiff                :     Mr S Owen-Conway QC
Second Plaintiff            :     Mr S Owen-Conway QC
First Defendant             :     Mr R H B Pringle QC
Second Defendant         :     Mr R H B Pringle QC
Third Defendant           :     Mr R H B Pringle QC

Solicitors:

First Plaintiff                :     Godfrey Virtue & Co
Second Plaintiff            :     Godfrey Virtue & Co
First Defendant             :     Murfett & Co
Second Defendant         :     Murfett & Co
Third Defendant           :     Murfett & Co

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

McCorkill Holdings Pty Ltd v Fraser, unreported; SCt of WA; Library No 920621; 26 November 1992
Thomas A Edison Ltd v Bullock (1912) 15 CLR 679
Westwind Air Charter Pty Ltd v Hawker De Havilland (1990) 3 WAR 71

Case(s) also cited:

American Cyanamid Co v Ethicon Ltd [1975] AC 396
Barlow v Neville Jeffress Advertising (1994) 4 TASR 391
Cardile v LED Builders Pty Ltd (1999) 198 CLR 380
Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148
Cayne v Global National Resources Plc [1984] 1 All ER 225
CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345
Higgins v Potter (1949) 50 SR (NSW) 77
Hooper v Rogers [1975] Ch 43
Jackson v Sterling Industries Ltd (1987) 162 CLR 612
Mareva Compania Naviera SA v International Bulk Carriers SA (1975) 2 Lloyds Rep 509
McEacharn v Colton [1902] AC 104
Meyers v Casey (1913) 17 CLR 90
Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 195 CLR 1
Rosetex Co Pty Ltd v Licata (1994) 12 ACSR 779
Thornhill v Weeks [1913] 1 Ch 438
Town & Country Sports Resorts (Holdings) Pty Ltd v Partnership Pacific (1988) 30 FCR 540

HASLUCK J: This is an application brought by the defendants seeking the discharge or partial discharge of an injunction previously granted upon an ex parte basis.
It will be useful to set the matter in context by going first to the background to the dispute. In doing so I take account of various evidentiary materials, some of which have come before me at short notice. The relevant materials include a statement of claim forming part of a writ of summons issued on 9 August 2001.
On the plaintiffs' side I must take account of the affidavit of Paul John Gianatti sworn 8 August 2000. It was that affidavit which was principally relied upon when the ex parte application for an injunction was brought before Miller J. Subsequently, in the context of this application for a discharge of the order, a further affidavit has been adduced, being the supplementary affidavit of Mr Gianatti sworn 24 August 2001.
On the defendants' side I note that there is the affidavit of Hans Henrik Henriksen sworn 22 August 2001, and his further affidavits sworn 23 and 24 August 2001. There is also the affidavit of Nicholas James Murfett sworn 23 August 2001. I note that Mr Murfett is the solicitor for the defendants.
When one looks at the position in overview, drawing upon these various materials, I will accept for the sake of an orderly discussion (but without necessarily making a finding to that effect) that the role of the first plaintiff was to act as the trustee of four trusts which were engaged in a partnership business of importing and reselling laminated timber flooring products.
I will accept the plea set out in the statement of claim that the second plaintiff is a director of the first plaintiff company; the first defendant is a company incorporated pursuant to the Corporations Law; the second and third defendants are directors of the first plaintiff and of the first defendant.
Without purporting to make any finding about such matters, I proceed from the premise that there was a falling-out between the individuals behind the various entities. More particularly, on 9 July 2001, the partnership was dissolved by a notice issued by the Gianatti Number 2 Trust.
It seems that as a consequence of the notice of dissolution various exchanges began to take place between the parties. The defendants were represented by Mr Murfett. An accountant named Renting was involved. These exchanges were directed to the question of whether there was any prospect of the defendants, or interests associated with Mr Scheffler and Mr Henriksen, acquiring the interests associated with the individuals behind two of the other companies in the former partnership, namely, Mr Goh and Mr Gianatti.
The various exchanges were inconclusive. It seems that no agreement could be reached as to what should be regarded as the proper valuation of a one‑third share of the partnership. Certainly, it was recognised that the role of the plaintiff, as the party essentially conducting the trading operation, was ambiguous in that the partnership was now dissolved pursuant to the notice I mentioned a moment ago.
Against the background of these inconclusive exchanges and, it would seem, with some degree of disputation as to what the responsibilities of the parties were, given that the partnership was now dissolved, the application for an injunction was made by the plaintiffs on an ex parte basis.
It is material to note that in the affidavit of Mr Gianatti sworn 8 August 2000, being the affidavit I referred to earlier, various matters were put up in support of the application for an injunction. It is significant, to my mind, that par 6 of what I will call the first Gianatti affidavit has this to say:
"Upon dissolution there was a view expressed by Henriksen and Scheffler that upon dissolution there was no longer any business or goodwill of the partnership to sell."
That passage signified a difference of opinion as to what should now happen concerning the affairs of the first plaintiff and of the former partnership.
The stance of the plaintiff as expressed by counsel at the hearing before me was unequivocal, namely, pursuant to s 49 of the Partnership Act, the responsibility of those associated with the former partnership, and thus the responsibility of the directors of the plaintiff company, in particular, was to ensure that the business was wound up with all proceeds of the business being directed to the plaintiff company.
It follows from the stance adopted by the plaintiff that if there are any products to be distributed to third parties, then that must clearly be a sale being effected by the plaintiff company, with the result that the proceeds of such a sale must be directed to the plaintiff company. On the plaintiffs' case, anything less could be regarded as a conversion.
Nonetheless, it is apparent from some of the earlier exchanges between the parties, and there is a hint of it in par 6 of the first Gianatti affidavit, that there was some degree of argument between the parties as to whether the plaintiffs' view was the correct way of regarding the matter. It is by no means certain that a dispute of the kind just mentioned has been finally resolved.
It was against that background that the matter came before Miller J on 10 August 2001. The materials before him, as I say, were essentially plaintiffs' statement of claim and the affidavit of Gianatti, sworn 8 August 2001. I will not traverse the full detail of that affidavit but, in essence, it was being put to the Court that there were circumstances of some urgency. There were indications, if not positive evidence, that attempts were being made in the names or pursuant to the agency of the defendants to sell products, or otherwise deliver products, which, on the plaintiff's case, should properly be regarded as the property of the plaintiff.
In other words, the assertion before the Court was that unless restrained, the defendants would act in a manner which would have the effect of conveying funds properly due to the plaintiff to the control of the defendants. In addition, the defendants would utilise the name of goodwill of the plaintiff company, through the agency of the first defendant, being a company constituted for that purpose under the name of Imaginex Holdings, in order to subvert the goodwill of the plaintiff company.
That was the position described to the Court by the first affidavit of Gianatti. What was not placed squarely before the Court, however, apart from the passage in par 6 that I have mentioned, is that a considerable body of exchanges had been taking place between the parties which bore upon the question as to whether the dispute could be easily and quickly resolved by the fixing of a value to the third share under discussion, with the result that the Gianatti and Goh interests would cease to be interested in the business of Imaginex.
The restraining order was granted. The ex parte order in question, without going to the full particularity of it, provides for the defendants to be restrained from utilising the name Imaginex and from continuing business under the name Imaginex Holdings or from carrying on business under that style.
The defendants are also enjoined to disclose details of orders placed for the supply and sale of products to Imaginex Holdings, enjoined to account for the dealing of all stock on hand and they are enjoined from dissipating or otherwise dealing with any income received by Imaginex Holdings.
Importantly, the order made by his Honour included provision for the defendants to have liberty to apply on 48 hours' notice to the plaintiffs to dissolve or vary the injunction.
Some time went by after the granting of the injunction. The explanation for the passage of time is provided to me in the affidavit of Mr Murfett. He refers to the circumstances in which counsel was briefed and the way in which materials were assembled in order to support an application to discharge the injunction. I have no reason to doubt that the matters adverted to did indeed take place. Thus, the matter now comes back to the Court in the form of an application to dissolve the injunction pursuant to the liberty to apply.
The basis for the application, as argued by counsel for the defendants, is threefold: that there was no full and sufficient disclosure of material facts at the time the injunction was initially obtained on an ex parte basis; secondly, that the presence of a serious issue to be tried (being a requirement in the case of an injunction of this kind) has not been sufficiently demonstrated; and thirdly, that in this case, in any event, when one has regard to the balance of convenience, the general rule that an injunction is usually only granted where damages would be an inadequate remedy does not apply. Where damages are an adequate remedy, counsel contended, this is a basis upon which the injunction should be set aside.
In the course of his submissions, counsel for the defendants pointed to some forthcoming events, namely, that an application is to take place on Wednesday of next week for the appointment of a receiver. Counsel for the defendants drew my attention also to a matter of urgency concerning his clients, namely, the need to fulfil certain orders for delivery. Thus, in par 6 of his written submissions, it is recognised that the existing injunction could be moulded or shaped in a varied form which would allow for its continuation until the appointment of a receiver is argued out.
According to counsel for the defendants, the principal bone of contention is the use of the style or name of Imaginex. He submitted that there should be some amelioration of the terms of the injunction in regard to the delivery of products and the utilisation of proceeds. I take account of that aspect of the defendants' submissions as I review the appropriate response to the application before me.
When I turn to the first of the matters raised with me, I observe that it is well‑known that there is an obligation in the case of an ex parte injunction to make a full disclosure. I see no need to review the authorities at length. The basic principles are set out in Seaman at pars 52.1.13 to 52.1.15. They are succinctly expressed in the case upon which counsel for the defendants relied, namely Thomas A Edison Ltd v Bullock(1912) 15 CLR 679.
In that case the High Court held that it is the duty of a party asking for an interlocutory injunction ex parte to bring before the Court all facts material to the determination of his right to that injunction and omission to bring any material facts before the Court is a ground for dissolving an injunction so obtained.
Nonetheless, one has to take account of a further aspect of the matter which bears upon such an issue, being a consideration mentioned in Seaman. On the authority of the case of Westwind Air Charter Pty Ltd v Hawker De Havilland (1990) 3 WAR 71 at 88 it is said that where there has been no deliberate lack of candour and the matter which is not disclosed is not of a major character overall and was omitted in circumstances in which extensive instructions have necessarily been taken in haste, an injunction will not necessarily be set aside.
Seaman goes on to recognise that an injunction dissolved for non‑disclosure does not prevent the Court in the proper case from regranting the injunction forthwith on notice and on the merits. This aspect of the matter should be considered in conjunction with the controversy concerning the serious issue. The presence of a serious issue to be tried needs to be demonstrated by the plaintiff.
In that regard Mr Owen‑Conway for the plaintiff places reliance upon principles of law bearing upon fiduciary obligations and the obligations of directors. He makes particular reference to s 180 to s 183 of the Corporations Law. Reference is also made to the case handed up in the Court of argument, namely McCorkill Holdings Pty Ltd v Fraser, unreported; SCt of WA; Library No 920621; 26 November 1992.
The reasoning in the latter case certainly recognises that in circumstances where a plaintiff is conducting an ongoing business, and its existing employees or directors, act in a manner which reveals a conflict of interest and a failure to observe their fiduciary obligations, or act in a manner which subverts and is contrary to the interests of the plaintiff, then that may provide a basis for restraining the defendants by injunction.
I have to say, however, as I said to counsel in the course of argument, I see those principles as being somewhat clouded in the circumstances of this case, bearing in mind that the plaintiff is not in the position of a company conducting an ongoing business. It appears to be common ground before me that the plaintiff was conducting the business on behalf of a partnership which is now dissolved. The future is unclear as to what is now to happen.
It is true that even though there has been a dissolution of the partnership, there are, no doubt, continuing obligations upon those associated with the partnership to get in the assets of the partnership, including any unpaid amounts due to it and so forth. However, the presence of a somewhat confusing central fact at the core of the present controversy, namely, the dissolution of the former partnership, does bear upon the exercise of the discretion to grant an injunction and upon the disclosure issue. In that somewhat confused situation, it seems to me that there is an explanation for what has happened which might not be solely referable to fault or incorrigible misconduct on the part of the defendants of the kind alleged by the plaintiff.
Thus, with that thought in mind, it seems to me also that the presence of exchanges between the parties arising out of the dissolution of the partnership was a material factor which ought to have been presented as a matter of disclosure when the application for an injunction on an ex parte basis was made. As I say, there is some passing reference to it in par 6 of the first Gianatti affidavit but to my mind that was nowhere near sufficient to convey to the Court the full complexity of what was taking place. The dissolution of the partnership and the related negotiations were an important part of a situation that was still unfolding.
I therefore consider that pursuant to principles of the kind reflected in the decision of the High Court in the Thomas A Edison case, there is certainly here a basis for seeking to vary or dissolve the injunction upon the basis that a full disclosure has not been made.
This brings me then to the question of the demonstration of the serious issue to be tried and to the balance of convenience. Again, I recognise that there is certainly a forceful case to be argued on behalf of the plaintiff of the kind that has been espoused, but there are complexities in the situation which do not make it a conclusive case or one that is incontrovertible.
I must also have regard to two other matters that bear upon the grant of an injunction. I refer to the balance of convenience and the question of whether damages would be an adequate remedy.
When I turn to the balance of convenience, it seems to me that if the injunction is reshaped in the way that counsel for the defendant has contended for, then that goes some way to adjusting the balance of convenience and establishing that there is sufficient protection for the plaintiff's position.
I turn finally to the question of whether damages would be an adequate remedy in the circumstances of the present case. Counsel for the plaintiff urges upon me most strongly that this principle should not be brought into play in circumstances where there is a failure by directors, on his case, to honour their responsibilities. He refers to an alleged breach of fiduciary relationship. He says that the public interest requires that the Court intervene to impose restraining orders that will make a party observe their proper obligations.
Again, I see force in that argument if the applicable reasoning was of the straightforward kind described in the McCorkill Holdings case that I mentioned a moment ago. However, for all the reasons that I enunciated when translating the approach reflected in that case to the present circumstances, I consider that this is a more complex situation. There is here, arguably, an explanation as to why a party might have thought it was at liberty to proceed in a certain manner. It seems to me that such an explanation is sufficient to negate the consideration of public interest that was touched on by counsel for the plaintiff.
More importantly, I take account of the fact that the sums of money involved in this case are comparatively modest. The amounts involved concerning the goods to be delivered are not large. If, indeed, upon a fuller inquiry into the evidence it emerges that there has been a conversion, it does seem to me that the plaintiff or a receiver appointed to the plaintiff would have the prospect of obtaining relief by way of damages as compensation for any such conversion.
In my view, considerations of this kind bear upon the setting aside of the injunction and upon the further implicit issue as to whether, notwithstanding what might have happened before, the injunction should be regranted in any event.
Thus, in summary, to draw this together, I consider that there has been a failure to disclose of the kind required to support an application for ex parte injunction. Some of this may be referable to haste of the kind referred to in the Westwind Charters case, but I am not persuaded that a degree of haste is sufficient to justify a disregarding of the usual rule.

When I take account of that failure to disclose in the context of the other matters I have pointed to concerning the serious issue to be tried, some doubts about the strength of the plaintiffs' case, matters bearing upon the balance of convenience and the adequacy of damages as a remedy, then, as I weigh up those factors, I do consider, for all these reasons, that the injunction should be varied and upon the basis proposed by counsel for the defendants.
Against the background of that ruling, I will hear from the parties with a view to modifying the order previously made, but upon the basis that the restraint upon use of the name or style of Imaginex will remain. I will also make provision for an extension of such of the injunction as remains to Wednesday next or some other specific date in the near future.