Manning v NUW Trading - [2008] SADC 58

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
MANNING v NUW TRADING & ANOR
[2008] SADC 58
Reasons of His Honour Judge Tilmouth
12 May 2008
EQUITY - EQUITABLE REMEDIES - INJUNCTIONS - MANDATORY INJUNCTIONS
Application in the nature of a mandatory injunction requiring the respondents to execute a charge in registerable form refused, as effectively amounting to final judgment in favour of the applicant.
District Court Act 1991 SA s30; District Court Rules 2006 s24b, referred to.
Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at 535–536; Corporate Affairs Commission v Engelbrecht (1989) 15 ACLR 13; Cardile v Led Builders Pty Ltd (1999) 198 CLR 380 at 395–396; Australian Broadcasting Corp v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 216, 231–232, 241, applied.
Business World Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499 at 501 L20 and 503 L31-46; Zafripoulos v Registrar-General (1980) 24 SASR 133; Karaggianis v Malltown Pty Ltd (1979) 21 SASR 381; Tymbook Pty Ltd v Victoria; Bradto Pty Ltd v Victoria (2006) 15 VR 65; State of Queensland v Australian Telecommunications Commission (1985) 59 ALR 243 at 245; Bingham v 7-Eleven Stores Pty Ltd [2003] QCA 402 at [41] and [106-107], considered.

MANNING v NUW TRADING & ANOR
[2008] SADC 58

The plaintiff in this matter seeks orders by interlocutory application in the nature of a mandatory injunction pursuant to Section 30 of the District Court Act (1991) SA.
The underlying subject matter relates to an investment by the applicant in the Wakefield Hotel in the city. It is clear enough that he invested $550,000 in about November 2005. On any view of the facts, he is still owed at least $495,000 by way of unpaid principal and interest. The hotel has proved unprofitable and a decision has been made to sell it at the price of $430,000. Settlement is due to take place at 12pm today (12 May 2008).
The long and the short of the case for the applicant is that the investment was organised through his accountant, of whom the second defendant was also a client. On the applicant’s understanding, this money was advanced by way of loan, “secured by way of a fixed and floating charge over the assets of the hotel”. No written agreement was executed to this effect. There appears to be some contention about whether the monies were truly advanced by way of loan or were some kind of investment in the hotel and from what source they came, but those matters may be put aside for present purposes. The problem is that if the hotel is sold, as is proposed, and the debt is not secured, he may not recover anywhere near the full amount of his investment.
The high point of the case for the plaintiff resides in a letter sent by solicitors engaged by the accountants to organise the transfer of the hotel licence. That letter signed by Mr Manning the applicant and Mr Connelly the second respondent, read as follows:
Dear Sir
Financing Arrangements
Wakefield Hotel – 50105559
Lent $550,000 at an interest rate of 13% per annum or 11% per annum when paid on the last day of each calendar month. The term of the loan is 5 years.
Security is an unregistered fixed and floating charge over the assets of the business excluding the gaming machines.
This is contemporaneous document prima facie entitled “to be given … proper legal effect …”: Lenzoot Haulage Pty Ltd v Sinclair (1984) 42 SASR 506 at 513. Evidentially speaking, it contains admissions by both parties, to the effect that the advance was not only raised by way of loan, but with the mutual intention of “security … [by way of] … unregistered fixed and floating charge over the assets” of the Wakefield Hotel, excluding the gaming machines: Pitcher v Langford (1991) 23 NSWLR 142 at 146 and 160 B-G.
The precise order sought by the applicant is that both defendants execute “the deed of a charge in the form exhibited” to an affidavit of the applicant. That may well be in a standard form used in commercial practice these days. It is, however, a comprehensive deed of charge comprising some thirty two pages and thirty main clauses, and many subclauses. There is no evidence the parties intended to execute a charge in such detailed terms. Moreover, the charge is not qualified in the way referred to in the letter. The evident purpose of an order in these terms, is to bring it within PART 2K.2 of the Corporations Act 2001 (Cth), thus enabling the charge to be lodged with the Australian Securities and Investments Commission.
Section 30 of the District Court Act provides:-
Part 6—Special provisions as to the Court's civil jurisdiction
Division 1—General
30—Interim injunctions etc
The Court may, on such terms as appear just, grant an injunction or make any other order that may be necessary to preserve the subject-matter of an action intact until the questions arising in the action have been finally determined.
There can be no doubting the power to make orders in the nature of those sought here in order to preserve the status quo until the matters in issue can be determined: Zafripoulos v Registrar-General (1980) 24 SASR 133. In any case Rule 246 of the District Court Rules 2006 provides:-
[6DCR 246] Court's power to grant injunction [District Court only]
(1) The Court may, on application by a party to an action, grant an injunction before, at or after the hearing and determination of proceedings in the Court.
Ordinarily an applicant must establish a serious issue to be tried, that the inconvenience or injury likely to suffered by the applicant should an injunction be refused, outweighs the injury the respondent would suffer if an injunction was granted and that damages are not an adequate remedy: Australian Broadcasting Corp v O'Neill (2006) 227 CLR 57 at [71] per Gummow and Hayne JJ (with whom Gleeson CJ and Crennan J agreed).
Equally, no doubt the court has the jurisdiction to make orders in the nature of mandatory injunctions: Karaggianis v Malltown Pty Ltd (1979) 21 SASR 381, but the threshold may have been somewhat different. However, the balance of authority in Australia favours the view that the remedy should be available whenever required by justice: Tymbook Pty Ltd v Victoria; Bradto Pty Ltd v Victoria (2006) 15 VR 65 at [33-34], Bingham v 7-Eleven Stores Pty Ltd [2003] QCA 402 at [41] and [106-107]. Unlike the more familiar prohibitory injunction restraining the person to whom it is addressed from doing something, a mandatory injunction directly orders the person to whom it is addressed to do something: Meagher Gummow & Lehane, “Equity Doctrines & Remedies”, (4th ed., 2002) at 21–460.
Irrespective of whether it remains necessary in an application of this kind, for the court to be satisfied according to a “high degree of assurance” of the underlying facts, a test followed by Gibbs J in State of Queensland v Australian Telecommunications Commission (1985) 59 ALR 243 at 245, or as the balance of authority suggests “as a matter for judicial discretion, in each several case”: Business World Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499 at 501 L20 and 503 L31-46, there is no doubting these days the power of the courts to make orders in the nature of mandatory injunctions, “whenever it is satisfied that refusing the relief would carry a greater risk of injustice than granting it”: Di Napoli v New Beach Apartments Pty Ltd (2004) 11BPR 21, 493; (2004) ATR 81-728 at [27]. The court is satisfied this is such a case.
The plain fact of the matter is that the practical consequence of making the claimed order, would dispose of the action finally in favour of the applicant, a consideration counting against the making of the order: Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at 535–536, Corporate Affairs Commission v Engelbrecht (1989) 15 ACLR 13 and Sofronoff, "Interlocutory Injunctions Having Final Effect", (1987) 61 ALJ 341. An order in the nature of an injunction cannot be made unless the applicant points to a legal or an equitable right capable of protection by the injunction: Cardile v Led Builders Pty Ltd (1999) 198 CLR 380 at 395–396; Australian Broadcasting Corp v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 216, 231–232, 241. There is no present legal or equitable right entitling the applicant to an order compelling the respondents to execute a charge in terms going beyond those in the letter quoted above. Doing so would be effectively making a final order in the nature of rectification in his favour.
It follows that this application must fail. This is because an order in the terms sought involves making findings outside the underlying facts, and because it would have the effect of a binding final declaration of right. It should be noted the applicant has a measure of protection in the interim order negotiated between the parties.