May v Smith - [2000] WASC 313

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: MAY -v- VINCENT SMITH AS ADMINISTRATOR FOR COLE ENGINEERING PTY LTD (UNDER ADMINISTRATION) & ANOR [2000] WASC 313

CORAM: ROBERTS-SMITH J

HEARD: 29 NOVEMBER 2000

DELIVERED : 30 NOVEMBER 2000

FILE NO/S: CIV 2589 of 2000

BETWEEN: KENNETH GEORGE MAY
Plaintiff
AND
VINCENT SMITH AS ADMINISTRATOR FOR COLE ENGINEERING PTY LTD (UNDER ADMINISTRATION)
First Defendant
COLE ENGINEERING PTY LTD (UNDER ADMINISTRATION) (ACN 008 825 689)
Second Defendant

Catchwords:

Corporations Law - Interim injunction - Prevention of meeting of creditors - Application to discharge interim injunction

Practice and procedure - Application to strike out writ of summons and indorsement of claim - Whether application open after entry of unconditional appearance - Whether indorsement sufficient - Principles

Practice and procedure - Claims under Corporations Law and otherwise - Whether proceedings should have been brought under O 81G Supreme Court Rules - Effect of non-compliance

Practice and procedure - Affidavit - Sworn before member of defendant's firm of solicitors who was a commissioner for affidavits - Whether affidavit should be received

Legislation:

Corporations Law, s 449B, s 449E

Supreme Court Rules, O 2, O 2 r 19, O 37 r 15, O 81G

Result:

First defendant's application to strike out indorsement of claim and writ of summons dismissed
Interim injunction discharged

Representation:

Counsel:

Plaintiff:     Mr T Mijatovic
First Defendant             :     Ms A J Robertson
Second Defendant         :     Ms A J Robertson

Solicitors:

Plaintiff:     TRM Legal Services
First Defendant             :     Phillips Fox
Second Defendant         :     Phillips Fox

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

Bentley v Nelson, FCt SCt of WA, (1963) WAR 89
Cambridge Credit Corporation Ltd v Surfers Paradise Forests Ltd (1977) Qd R 261
Carlton and United Breweries (NSW) Pty Ltd v Bond Brewing (NSW) & Ors, (1987) 76 ALR 633
Daglish v Jarvie 2 Mac & G, 231
Hill v Borough of Luton (1951) 2KB 387
Hubbard v Vosper (1972) 2 QB 84
Kimberley Downs Pty Ltd v State of Western Australia, unreported; Library No 6414; 25 August 1986
Mott v Mount Edon Goldmines (1994) 12 ACLC 319
Network Exchange Pty Ltd v MIG International Communications Pty Ltd (1994) 12 ACLC 594
Petrochemical Industries Ltd (in liq) v Dempster Nominees Pty Ltd (administrator appointed) & Anor 15 ACSR 468
Pontin v Wood (1962) 1 QB 594
Thomas A. Edison Ltd v Bullock (1912) 15 CLR 679
Trustek Australia Pty Ltd v Burke and Ors, SCt of WA; Library No 980121; 16 March 1998
Wilson v Dunn's Gazette Ltd (1912) VLR 342

Case(s) also cited:

Ali v Fahd Shobhoksi Group Ltd v Moneim [1989] 2 All ER 404
Australian Transport Insurance Pty Limited v Graham Phillips Road Transport Insurance Pty Ltd (1986) 71 ALR 287
Bass Shire Council v King, unreported; SCt of VIC; BC 9604973; 15 August 1994
Caboolture Park Shopping Centre Pty Ltd (in liq) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224
Dallinger v Halcha Holdings Pty Ltd (1996) 14 ACLC 263
Evans Marshall & Co…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2000] WASC 313
Decision Date: 30 NOVEMBER 2000

CaseChat Overview and Summary

The case of May v Smith involved an interim injunction application brought under the Corporations Law, specifically aimed at preventing a meeting of creditors. The plaintiff, May, sought to discharge the injunction, while the defendant, Smith, opposed the application. The court had to decide whether the injunction should be discharged, whether the application to strike out the writ of summons and indorsement of claim was valid after an unconditional appearance, and whether the proceedings should have been brought under a specific rule. Additionally, the court examined the sufficiency of an affidavit sworn before a solicitor from the defendant's firm, who was also a commissioner for affidavits.

The court noted the importance of the undertaking as to damages when considering interlocutory relief, referencing Cambridge Credit Corporation Ltd v Surfers Paradise Forests Ltd and Carlton and United Breweries (NSW) Pty Ltd v Bond Brewing. It examined the financial circumstances of the parties, with May claiming assets of approximately $132,000 against a potential loss to Smith of $129,000. The court also considered May's support from the Rural Action Movement and an agreement with Mr Cole. However, the court expressed reservations about the adequacy of May's undertaking as it was not directly to the court and would be difficult to enforce.

After weighing the evidence and arguments, the court decided to maintain the injunction. The court found the undertaking as to damages barely adequate and lacking in detailed verification. Despite these concerns, the court decided not to discharge the injunction at that stage, given the present circumstances. This decision highlights the importance of a solid undertaking as to damages and the need for detailed verification when seeking interlocutory relief.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

I turn now to the question of the undertaking as to damages. The undertaking is a very important condition of the granting of interlocutory relief of this kind. In Cambridge Credit Corporation Ltd v Surfers Paradise Forests Ltd (1977) Qd R 261, Dunn J remarked that the worthlessness of the undertaking is a potent factor to take into account when deciding whether to grant the injunction. The same of course must apply when deciding whether or not to continue or discharge an injunction. What is necessary is an examination of the facts of each particular case to decide whether or not the undertaking sufficiently protects the defendant. It is also relevant to consider whether or not there would be a difficulty in establishing a causal connection between the grant of the injunction and the consequence or loss which would flow from it. If the difficulty of doing that would be too great the Court may well refuse to grant the injunction for that reason; see Carlton and United Breweries (NSW) Pty Ltd v Bond Brewing (NSW) & Ors, (1987) 76 ALR 633. I have already mentioned that there has been an undertaking filed by the plaintiff and it is in the usual form. I refer again to the affidavit of Mr May sworn 21 November 2000 and filed the following day. In par 36 he says he is the joint registered proprietor of a property at Lesmurdie which has a mortgage liability of $45,000 and a market value of $230,000. He says he is also the owner of chattels and motor vehicles totalling another $40,000. Of course, as Ms Robertson points out, that reflects a half interest in the property and the end result is, on my arithmetic, a claim that he has assets of some $132,000. As against that the potential losses identified by Mr Smith in his affidavit filed 28 November, par 124 to par 128, and the attached summary or analysis indicates a loss to the first and second defendant, specifically the second defendant, of some $129,000. In addition to what Mr May claims to be his own income and asset situation, he refers to the fact that he is the coordinator of the Rural Action Movement whose executive supports him in this action. He deposes that he has been given an indemnity from that association for acting in the interests of the rural community and has specifically been given an undertaking that they are supporting the present action and that they have assets of some $1.1 million. He also deposes that he has entered into an agreement with Mr Cole in regard to the conduct of the action and that all costs and expenses that he will incur under the undertaking will be covered by that. It is annexed as KM14. I think the short point that may be said about those two arrangements is that they certainly are not undertakings to the Court and, secondly, would no doubt provide little relief and great difficulty of enforcement should the defendants need to seek to have them enforced to enable them to recover from Mr May on the basis of his undertaking. Again I have serious reservations about the undertaking given by the plaintiff. It is simply as a matter of arithmetic barely adequate as things presently stand particularly when it is unsupported by more detailed and cogent verification of the plaintiff's financial circumstances. Nonetheless and not without some hesitation I would not at this stage again and in the present circumstances discharge the injunction for that reason.