Industry Uniserve Pty Ltd v Morley Electrical Engineering Co Ltd
[1998] FCA 883
•24 JUNE 1998
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 241 of 1998
BETWEEN:
INDUSTRY UNISERVE PTY LTD
(ACN 001 217 107)
APPLICANTAND:
THE MORLEY ELECTRICAL ENGINEERING COMPANY LIMITED
FIRST RESPONDENTJOHN MILLER
SECOND RESPONDENTCALAMATT HOLDINGS PTY LTD (ACN 075 244 816)
THIRD RESPONDENTMORLEY ELECTRIC MOTORS AUSTRALIA PTY LTD
(ACN 075 244 727)
FOURTH RESPONDENTGRAHAM JOHN MILLER
FIFTH RESPONDENT
JUDGE:
EMMETT J
DATE:
24 JUNE 1998
PLACE:
SYDNEY
THE COURT ORDERS THAT:
Until the final hearing of these proceedings or further order the fourth respondent be restrained from any dealing with or disposition of the fourth respondent’s assets otherwise than in the ordinary course of its business.
The costs of the applicant’s application for interlocutory relief be costs of the parties in the proceedings.
The applicant pay the costs of the respondents’ notices of motion filed on 5 and 6 May 1998 insofar as those costs are additional to the costs of the application for interlocutory relief.
Leave be granted to the applicant to amend its statement of claim by 26 June 1998 in accordance with the proposed amendments served on 22 June 1998.
The respondents file and serve their defences on or before 10 July 1998.
The applicant file and serve its reply, if any, on or before 17 July 1998.
The evidence in chief of all witnesses at the final hearing be given by way of affidavit.
Any further affidavit evidence in chief of the applicant be filed and served on or before 17 July 1998.
The respondents file and serve their affidavit evidence on or before 10 August 1998.
10. The applicant file and serve any affidavit evidence in reply on or before 17 August 1998.
11. The matter be stood over for further directions on 21 August 1998.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 241 of 1998
BETWEEN:
INDUSTRY UNISERVE PTY LTD
(ACN 001 217 107)
APPLICANTAND:
THE MORLEY ELECTRICAL ENGINEERING COMPANY LIMITED
FIRST RESPONDENTJOHN MILLER
SECOND RESPONDENTCALAMATT HOLDINGS PTY LTD (ACN 075 244 816)
THIRD RESPONDENTMORLEY ELECTRIC MOTORS AUSTRALIA PTY LTD
(ACN 075 244 727)
FOURTH RESPONDENTGRAHAM JOHN MILLER
FIFTH RESPONDENT
JUDGE:
EMMETT J
DATE:
24 JUNE 1998
PLACE:
SYDNEY
REASONS FOR JUDGMENT
HIS HONOUR: I have had before me several motions brought by all parties in the proceedings. In the first instance the Applicant sought interlocutory relief pending the final disposition of the proceedings. The First Respondent sought an order striking out the statement of claim or in the alternative summary dismissal of the proceeding. The second to Fifth Respondents also sought that the statement of claim be struck out or, alternatively, summary dismissal.
The Applicant's claim arises out of a business relationship which existed between the Applicant and the First Respondent whereby the Applicant was a distributor in Australia of equipment manufactured by the First Respondent. The Second Respondent was employed as a manager of the Applicant. As such he owed certain duties to the Applicant both of a purely contractual character and of a fiduciary nature. In the course of his duties the Second Respondent was acquainted with the First Respondent.
In general, the allegation is that the Second Respondent participated with his brother, the Fifth Respondent, in making arrangements whereby the Fourth Respondent was incorporated and entered into arrangements with the First Respondent for the distribution in Australia of equipment manufactured by the First Respondent. The allegation is that those dealings constituted a breach of contract and a breach of fiduciary duty by the Second Respondent in which the other respondents participated. The allegations made by the Applicant are denied by all respondents. The Applicant claims damages or equitable compensation and a declaration that all of the assets of the Fourth Respondent are held on trust for the Applicant.
I have had the benefit of affidavit evidence filed on behalf of the Applicant and on behalf of the Second and Fifth Respondents. The Applicant's case is, in a sense, a circumstantial one, in that it relies upon inferences said to be able to be drawn from objective facts over the course of several years. The attack on the statement of claim was based on alleged failure by the pleader to articulate all of the circumstances from which it is alleged inferences should be drawn.
I have had several short hearings dealing with successive versions of the statement of claim, each of which was the subject of attack until a final proposed amendment was formulated earlier this week. I am satisfied from the evidence which is before me that it supports the claims made in the statement of claim as finally intended to be amended. I am also satisfied that that evidence indicates that there is a serious question to be tried as to whether or not the respondents have participated in breaches of duty and breaches of contract as alleged by the Applicant. If the Applicant succeeds in its claims of breach of fiduciary duty by the Second Respondent and participation by the other parties then there is a fair prospect that the Applicant would succeed in obtaining an order that the business of the Fourth Respondent is held on trust for the Applicant.
At present the only assets of the Fourth Respondent comprise the assets of that business and the evidence indicates that there is a reasonable prospect that the Applicant will succeed in establishing that the Fourth Respondent was formed solely for the purposes of acquiring that business and conducting the business. There is no suggestion at the moment that the Fourth Respondent would be prejudiced by an injunction restraining it from disposing of or dealing with its assets otherwise than in the ordinary course. Accordingly, it seems to me that the balance of convenience presently favours maintaining the status quo in relation to the Fourth Respondent's business, certainly insofar as it consists of its arrangement with the First Respondent.
In the circumstances, I consider that it is appropriate to restrain the Fourth Respondent from dealing with or disposing of its assets otherwise than in the ordinary course of business. However, it would be appropriate that if any business dealing was proposed by the Fourth Respondent otherwise than in the ordinary course of its business, it should have liberty to apply to vary the terms of any injunction. Accordingly, I propose to order that the Fourth Respondent, until the final hearing of the proceedings or further order, be restrained from any dealing with or disposition of its assets otherwise than in the ordinary course of its business.
The costs of the application for interlocutory relief should be the costs of the parties in the proceedings. However, the respondents have been successful insofar as they persuaded me in the course of argument to a provisional view that the statement of claim was deficient. In the circumstances it seems to me that they are entitled to their costs of the motions relating to the pleadings. The First Respondent has asked for those costs on special basis and for an order that they have leave to tax the costs and for payment forthwith.
I do not consider that any basis has been established for any special order for costs or that the ordinary practice as contemplated by the rules should be departed from. Accordingly, I propose to order that the Applicant pay the respondents' costs of the motions of 6 May 1998 and 30 April 1998. However, I regard the fact that the Applicants have incurred the costs in endeavouring to force their claim as being something which may be relevant in the question of final relief. Accordingly, I do not consider it appropriate that the respondents have leave to tax their costs at this stage.
Accordingly, I make orders in accordance with the short minutes of order as amended by me which I have initialled and dated with today's date. I order that the costs of the Applicant's application for interlocutory relief be the costs of the parties in the proceedings. I order that the Applicant pay the costs of the respondents of the notices of motion filed on 5 and 6 May 1998 insofar as those costs are additional to the costs of the application for interlocutory relief.
I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of Honourable Justice Emmett
Associate:
Dated: 24 June 1998
Counsel for the Applicant S.D. Epstein
Solicitor for the Applicant Stewart Levitt & Company
Counsel for the First Respondent J.W.J. Stevenson
Solicitor for the First Respondent Abbott Tout
Solicitor for the Second to Fifth Respondents Deacons Graham & James
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