Kevin French Pty Ltd v Caravan Parts & Accessories Pty Ltd

[1989] FCA 753

IN THE FEDERAL COURT OF AUSTRALIA )

)

SOUTH AUSTRALIA DISTRICT REGISTRY ) NO. G100 of 1989

)

GENERAL DIVISION	)
B E T W E E N :
KEVIN FRENCH PTY LTD and KEVIN STANLEY FRENCH

Applicants

- and -

CARAVAN PARTS & ACCESSORIES PTY
LTD, KEITH ODGERS TRAVEL PTY
LTD, NEIL ODGERS and MICHAEL

HUGHES

Respondents

EX TEMPORE REASONS FOR JUDGMENT

CORAM: VON DOUSSA J.

31 AUGUST 1989

I propose to be fairly brief as I am already three quarters of an hour late for the next case. This is a difficult

matter which is very much on the borderline, in my view.

The applicants come to court seeking an interlocutory injunction. It is required, according to the authorities, to establish that there is a serious question to be tried and that the balance of convenience is in favour of granting the injunction sought. In this instance the serious question must be one that arises as between the applicants and the second respondent, Keith Odgers Travel Pty Limited, being the company against which the interlocutory relief is sought.

That raises two questions. The first is whether there

is a serious question to be tried as between the applicants and the first respondent, Caravan Parts and Accessories Pty Llmited, as to the misleading and deceptive conduct that is pleaded in the statement of claim.

Involved within that, in turn, are questions whether there are issues to be tried as to the making of representations of the kind alleged and, secondly, whether those representations caused loss.

Assuming those hurdles are overcome by the applicants, the second question then arises: they have to show that there is, by reason of that conduct on the part of the first applicant, created an equity or imperfection in the title which Caravan Parts and Accessories Pty Limited had in the debenture which, in turn, has been passed over to Keith Odgers Travel Pty Limited as an incident of the assignment. In other words, has Keith Odgers Travel Pty Limited taken only an equitable assignment of the debenture subject to equities or has it taken a legal title? There are difficulties at every point in those issues.

There is some evidence on the applicants' affidavits, unanswered by the first respondent, as to the fact of there being conduct that could be said to be misleading and deceptive. There is information on the affidavits, again unanswered, which could support a finding of causation. It is simply not possible to pass a judgment one way or the other on those matters of fact, but it follows, as there is some evidence, that one would have to say - and I do say - that there is a serious question to be tried on those issues as between the applicants and Caravan Parts and Accessories Pty Limited.

As to the second issue, it seems to me there is a serious question to be tried as to whether the title which was gained by the second respondent was a legal title or an equitable title. Without passing any concluded view on the issues that have been discussed, it seems to me that s.206 of the Companies (S.A.) Code is probably irrelevant to the inquiry. I suspect also that clause 20 of the debenture document may turn out to be irrelevant to the inquiry, but there is, I think, an issue to the contrary to be tried there. Looking at it from the applicants' point of view, there is an issue to be tried as to the effect of clause 20. More importantly, it seems to me that it is arguable that there was no proper notice given by virtue of s.15 of the Law of Property Act 1936 (S.A.), i.e. whilst there was a deed of assignment, which one must assume at this stage was regular, there was no notice of that assignment given by Keith Odgers Travel Pty Limited to the applicants. I emphasise I am passing no concluded views on those matters, but it seems to me there is enough before the court for it to be said that there are serious

questions to be tried that could, if answered in the applicants'	favour, lead to a result in their favour.
I should say that I have also accepted in the applicants' favour that there is a serious question to be trled as to whether rights whlch may exist under s.87 of the Trade Practices Act 1974 to set aside the debenture as between the first applicant and the first respondent amounts to an equity or

infirmity whlch would have clogged the title of Keith Odgers Travel Pty Limited if that company took only an equitable assignment, even for good consideration.

So, it seems to me the applicants have overcome the first hurdle that they face on the serious question issue.	It
becomes necessary to consider the balance of convenience.	This

too is a difficult question. From the applicantsr point of view if an injunction is not made it appears that their business is likely to collapse spectacularly, an event which should not happen if it is possible to avoid it happening whilst there are serious issues to be tried involving the first respondent and the third and fourth respondents, in particular.

On the other hand, taking the documents at their face value, it seems that Keith Odgers Travel Pty Limited is now the holder of a debenture over a company that cannot be said to be rolling in assets and the second respondent is entitled to express concern about the value of that security and the risk that it may cease to be a valuable security if it is effectively frozen by some order of the court over an extended period of

time.

I propose to take a short term and intermediate step first. Rather than decide where those risks are to fall until trial, I propose to stand the matter over for a period of a fortnight or thereabouts - at the convenience to the parties - and to extend the injunction in the meantime. I propose that the applicants be required to produce to the court profit and loss accounts certified by their accountants for the period ending 30 June 1989, and some Independent information - whlch I suppose could even be forthcoming from the accountants but I will hear the parties on that - as to the extent of the stock, the

value of it and so on. Then we will have another look at this.

Mr Bampton, I should say to you that I think that somehow or other the positlon of the second respondent, if you want the injunction to continue, has to be strengthened. In other words, the security has to be tightened up and some degree of assurance given that the security is good.

This case stands on quite a different footing to the

case of Graham & Ors. v. Commonwealth Bank of Australia (1988)

ATPR 40-908 and to the various decisions that are referred to in

that judgment. In those cases, the secured creditor was prevented from enforcing the security but the security was over real estate and there was no reason to doubt that, given more time, the security would still be a valuable one. I do not see this case in that light.

So what I propose to do is to stand the matter over for a fortnight, continue the injunction in the meantime, require you, Mr Bampton, or your clients to produce the profit and loss accounts for the first applicant on oath, and to produce some independent evidence as to the extent of the stock.

Dr Baxter, do you want any other information? your

client might think there is something else they need to know.
DR BAXTER: If your Honour would excuse me?
HIS HONOUR: Yes, certainly.
DR BAXTER: The only other thing I can see is not really related
to that information. I would submlt strongly that some sort of

undertaking of continuation of trading be required. After all,

it is the assets of a business. I mean, we need - in order to strengthen the security, on the assumption there is $30,000 worth of assets there that it will ...

HIS HONOUR: Yes. Mr Bampton your client is in court. Do we have an undertaking that he is proposing to trade at least for the fortnight?

MR BAMPTON: Yes, your Honour.
HIS HONOUR: Is there another interest payment due in the

fortnight? Mr Bampton, your client had better keep on with the

current interest payments whenever they fall due. We are not

going to have argument whether there are some arrears due.

I will stand the matter over to 9.15 a.m. Thursday, 21 September. I reserve the question of costs. The injunctions on the same undertaking as before are extended to 5.00 p.m. on Thursday, 21 September 1989.

I certlfy that this and

the 5 preceding pages are

a true copy of the Reasons for Judgment of Mr Justice von Doussa.

Assoclate:
Dated: