Information Solution Works Pty Ltd v Plastic Wrap Australia Pty Ltd
[2004] VSC 310
•9 August 2004
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
PRACTICE COURT
No. 7081 of 2004
| INFORMATION SOLUTION WORKS PTY LTD (RECEIVER AND MANAGER APPOINTED) (IN LIQUIDATION) (ACN 074 036 810) | Plaintiff |
| v | |
| PLASTIC WRAP AUSTRALIA PTY LTD (ACN 074 514 426) | Defendant |
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JUDGE: | HABERSBERGER, J. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 9 AUGUST 2004 | |
DATE OF JUDGMENT: | 9 AUGUST 2004 | |
CASE MAY BE CITED AS: | INFORMATION SOLUTION WORKS v PLASTIC WRAP AUSTRALIA | |
MEDIUM NEUTRAL CITATION: | [2004] VSC 310 | |
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Practice and Procedure – Interlocutory injunction – Whether proposed issue of units in Unit Trust was in accordance with agreement between the parties – Balance of convenience.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P.G. Nash QC | Comlaw |
| For the Defendant | Mr R.D. Strong | Riordans Lawyers |
HIS HONOUR:
The application in the first proceeding before me today is for an interlocutory injunction restraining the defendant from issuing units pursuant to a notice dated 30 June 2004.
The plaintiff, which is now in receivership and liquidation, sold a business to the defendant for the sum of $844,000. The agreement provided that the payment of that purchase price could be satisfied by the issue to the plaintiff of units in the Plastic Wrap Unit Trust, of which the purchaser was the trustee, and it was agreed that the number of units to be issued to the plaintiff would be such that it would hold 20% of the total units in that trust. The agreement further provided that the units would be issued to the vendor in accordance with the unit trust by application by the vendor to the trustee. The units were to be issued no sooner than three years and no later than six years after the completion date. Either party could give notice to the trustee requiring the trustee to issue units to the vendor in accordance with the agreement and the unit trust deed. The units were to be issued at the expiration of 28 days from the date of service of that notice. Pending the issuing of the units, the defendant was to pay interest to the plaintiff on the purchase sum, such interest being fixed for the first three years and increasing in each year by 10%, and thereafter the interest was to increase by an amount of 10% every year.
By a letter dated 30 June 2004 a solicitor acting for the defendant wrote to Mr A. Zion of Nelson Jay Pty Ltd, who appears to be acting as agent for the plaintiff, advising that the defendant had decided to exercise its rights to issue units to the plaintiff and enclosing a copy of the notice to trustee to issue units, which had been served on the trustee of the trust, which of course was the defendant, requiring the trustee to issue 25 ordinary $1 units in the Plastic Wrap Unit Trust to the plaintiff within the 28-day period. The evidence was that the defendant in its capacity as trustee had resolved to treat the contractual documents as the written application by the plaintiff for units.
The plaintiff's submissions were that in three different ways the issue or purported issuing of the units to the plaintiff would not be in accordance with the contractual documents. The first point was that the plaintiff had not applied in writing for the issuing of those units; secondly, that the plaintiff had not consented to the issuing of those units; thirdly, that the units which were being issued were not unencumbered, as it was said, was required by the contractual documents.
Mr Nash, Q.C., who appeared on behalf of the plaintiff, developed those points in argument before me in support of the submission that a serious question to be tried had been raised on the material such as would justify the grant of an interlocutory injunction.
Mr Strong of counsel, who appeared for the defendant, submitted that the issues raised by the plaintiff were not strong, and indeed in several cases he argued that they were clearly not correct.
In an effort to try and bring the matter to some finality, notwithstanding that there were proceedings on foot with a summons in support of the interlocutory injunction, the defendant in the first proceeding issued an originating motion seeking construction of the relevant contractual documents and that matter came on at the same time as the interlocutory application.
Were it not for the fact that Mr Nash on behalf of the plaintiff in the first proceeding indicated that there were factual matters that the plaintiff wished to investigate and possibly put before the court, the issues between the parties may well have been able to be dealt with on the originating motion in this court. However, Mr Strong fairly conceded that the plaintiff was entitled to investigate and, if so desired, put further factual material before the court, which could only be done in the first proceeding.
I have certain views on the likely outcome of the construction arguments about these issues that have been raised by the plaintiff. However, I do not think it is of assistance to expand on those views in this judgment.
Notwithstanding Mr Strong's argument that the appropriate test is that there should be a strong possibility that the serious issues to be tried could be decided in favour of the party seeking interlocutory relief and his submission that these issues do not go anywhere near that level of seriousness, I am of the view that there are serious questions to be tried which do warrant further investigation and that they do have sufficient strength to justify, if otherwise appropriate, an interlocutory injunction.
The matter that has exercised my mind most today has been the question of the balance of convenience. Mr Nash submitted that if I refused to grant the interlocutory injunction then the units would be issued and the plaintiff would be converted from a creditor to a unit-holder. In response, Mr Strong pointed out that the relevant provision was such that unless the units were issued in accordance with Clause 5 of the sale agreement they did not constitute full and complete satisfaction of the debt, so that if at trial the defendant failed to establish that the units had been issued in accordance with Clause 5, then the debt would still be fully in existence and the defendant might ask for the units back, and therefore, he submitted, the plaintiff would not be prejudiced.
Mr Nash then submitted that it would be unnecessarily complicating matters to have the plaintiff in a position of limbo, as it were, not knowing whether it was indeed a unit-holder or was still a creditor. What rights could it exercise pending the final outcome of this proceeding as a unit-holder, which on one view it was then? For example, if it exercised any rights at all as a unit-holder, would there be then an argument raised against it that it was estopped from denying that the units had been properly issued to it?
Before dealing finally with that point, I should also mention that the parties were in agreement that, whatever the outcome of the interlocutory application, because of the position of the plaintiff being in receivership and liquidation, any interest payable by the defendant should be paid into a separate account which could earn interest and then await the outcome of the hearing.
Mr Strong also advanced arguments that in essence were based on the fact that it would be easier in terms of pleadings to raise certain of these issues if the units had been issued and the factual position had proceeded to that extent, rather than pleading some of these issues in the situation where the process had been started but had been stopped by the interlocutory injunction. Whilst there is some merit in that point, it seems to me, weighing that pleading question in the balance, it is fairly insignificant in terms of the other issues.
I was also concerned to be satisfied that the usual undertaking as to damages would be such as to protect the defendants if an interlocutory injunction were granted in respect of any loss that it might suffer from the making of the order, over and above the fact that it has had to pay interest into the interest-bearing account which, of course, if it is successful eventually, will be returned to it together with any accrued interest on the sums paid into that account.
Taking all of those matters into account, I am satisfied that the balance of convenience does favour the making of an interlocutory injunction. I think it would be quite messy and unnecessarily complicating matters to allow the issue of the units to proceed, when there are these matters that have to be fully argued and determined by the court. On that basis, and on the basis that the plaintiff has in effect undertaken to proceed expeditiously, I think I would also require as an undertaking and not just as part of a proposed time-table that the plaintiff comply with the directions and not unnecessarily delay this matter being ready for trial. I believe that there should be an interlocutory injunction, although I notice that in actual fact the order proposed by Mr Nash is that the defendant continue the undertaking which it previously gave not to act on the notice until the matter came before me. I do not know whether Mr Strong has any instructions in respect of that, or any preference that it be done by way of undertaking rather than injunction. Before I get an answer to that, I will deal with the question of the originating motion.
It seems to me, as I said to counsel during argument, that as the originating motion was not able to be dealt with as hoped for by the defendant in the main proceeding, Plastic Wrap, on this occasion, it really now serves no useful purpose and probably the simplest thing is that it be dismissed. All of the issues that it raised can now be raised in the counter-claim.
The argument then proceeded on the question of costs. Mr Nash made the point that initially the originating motion was issued against a company in liquidation without leave, there was a subsequent summons seeking that leave now for then; Information Solution issued a summons supported by an affidavit seeking to strike out the originating motion as an abuse of process; so that there has been some costs incurred on that originating motion. Nevertheless, I am not prepared to classify that second proceeding as an abuse of process, and in my view the appropriate order in respect of both sides' costs of that proceeding is that they abide the result of the first proceeding, so that whoever is successful in the first proceeding will obtain its costs of the originating motion.
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