MN'M Transport Pty Ltd v LJF Partners Pty Ltd
[2004] FMCA 141
•16 March 2004
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MN'M TRANSPORT PTY LTD v LJF PARTNERS PTY LTD | [2004] FMCA 141 |
| TRADE PRACTICES – PRACTICE & PROCEDURE – INTERLOCUTORY INJUNCTION – Balance of convenience – whether serious issue to be tried – whether injunction relating to a ‘charge’ is analogous to mortgage. |
Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148
Australian Coarse Grain Pty Ltd v Barley Marketing Board of Queensland (1982) 46 ALR 398
CBS Records Australia Ltd v Telmak Telly Products (Aust) Pty Ltd (1987)
8 IPR 473
| Applicant: | MN'M TRANSPORT PTY LTD (ACN 104 371 468) |
| Respondent: | LJF PARTNERS PTY LTD (ACN 098 459 048) |
| File No: | MZ 133 of 2004 |
| Delivered on: | 16 March 2004 |
| Delivered at: | Melbourne |
| Hearing Date: | 10 March 2004 |
| Judgment of: | McInnis FM |
REPRESENTATION
| Counsel for the Applicant: | Mr J Lewis |
| Solicitors for the Applicant: | Henderson & Ball |
| Counsel for the Respondent: | Mr D Clarke |
| Solicitors for the Respondent: | Newbury Bell (Melb) Pty Ltd |
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MZ 133 of 2004
| MN'M TRANSPORT PTY LTD (ACN 104 371 468) |
Applicant
and
| LJF PARTNERS PTY LTD (CAN 098 459 048) |
Respondent
REASONS FOR JUDGMENT
The applicant by an application filed on 10 February 2004 seeks an interlocutory injunction restraining the respondent from exercising or purporting to exercise any rights under a registered charge number 959286 (the charge).
In support of the application for an interlocutory injunction the applicant has relied upon an affidavit sworn by Lynda Mulhall, a director of the applicant, sworn 9 February 2004 and an affidavit of Andrew Thomson Burgess sworn 10 February 2004. The application for an injunction is opposed by the respondent who in a response filed 5 March 2004 seeks an order that the application for the injunction be dismissed with costs. The respondent relies upon an affidavit of Lorenzo Fernandez, the sole director of the respondent, sworn 5 March 2004.
Relevant law
In considering whether to grant an interlocutory injunction the court is required to determine whether there is a serious issue to be tried and whether the balance of convenience favours the granting of the injunction (see Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 at 153; Australian Coarse Grain Pty Ltd v Barley Marketing Board of Queensland (1982) 46 ALR 398).
In determining whether there is a serious question to be tried the court must consider not only the issues of fact between the parties but also questions of law (see CBS Records Australia Ltd v Telmak Telly Products (Aust) Pty Ltd (1987) 8 IPR 473 at 487 per Bowen CJ).
Background
The applicant's claim is for damages for breach of contract, misleading and deceptive conduct and unconscionable conduct in trade and commerce which the applicant claims arises from negotiations leading to and entering into a contract between the parties for the purchase by the applicant from the respondent of a business called, "Avilla Bin Hire".
Ms Mulhall, a director of the applicant, had worked for the respondent from early 2003. At that time the respondent’s name was "Avilla Bin Hire Pty Ltd" which, amongst other things, conducted the business of hiring out rubbish skips. Mr Fernandez at all times has been a director of the respondent company and the director of another company called "Labink Pty Ltd" (Labink). Labink conducted a demolition business and was the main customer of the then respondent's rubbish skip hire business.
It is claimed that around May 2003 Mr Fernandez told Ms Mulhall that he wanted to sell the Avilla Bin Hire business and following negotiations the parties entered into a contract of sale dated 27 June 2003. The sale price on the contract was $300,000 payable by way of a deposit of $150,000 to be paid by way of $100,000 on 17 June 2003 and a further $50,000 on or before 18 July 2003. There is no dispute that a total amount of $150,000 has been paid. The balance of the purchase price of $150,000 was subject to special condition 3 of the contract and was payable over a two-year period commencing 30 September 2003. Special Condition 3 provides as follows:
“3.The Purchaser will pay the reside (sic) of $150,000.00 by way of twenty-four (24) equal monthly instalments, the first of such instalments due on 30 September, 2003 and monthly thereafter in the sum of $6,250.00.”
As security for payment of the balance Ms Mulhall executed a personal guarantee and the applicant provided a fixed and floating charge over its assets in favour of the respondent. It is that charge which is the subject of the interlocutory injunction application.
There is no dispute that the payment of the instalments pursuant to special condition 3 has not occurred and it would appear that there have not been any monthly payments of $6250 made since September 2003. As a consequence of that alleged breach the respondent has made it clear that it intends, unless restrained from doing so, to exercise the rights it has in relation to the charge.
It is also common ground that difficulties were encountered between the parties from about early September 2003. In context, those difficulties arose where the applicant, on the one hand, alleges that business from Labink had not been sustained, whilst on the other hand, the respondent claims that due to circumstances beyond its control it was unable to maintain the orders for skip bins and otherwise recites various complaints concerning the standard of service provided by the applicant.
It is relevant to refer to the following special condition:
“6.The vendor agrees with the purchaser that the vendor has provided contractual services of the vendor to Labink Pty Ltd (ABN 31 080 255 347) relating to bin hire at the following rates (including GST):
6m $170 8m $206
12m $260 15m $292
20m $385
("the contractual services") and that the vendor will facilitate ongoing contractual services as between Labink Pty Ltd and the purchaser for a minimum of two (2) years from date of this contract always subject to the purchaser providing the existing standard of priority services as presently given to Labink Pty Ltd.”
Both parties have relied upon this special condition to the extent that the applicant claims that contractual services have not been facilitated with Labink, whilst the respondent claims that the applicant has not provided what is described as the "existing standard of priority services".
The applicant's claim in simple terms would appear to be an allegation that Mr Fernandez having sold the business on behalf of the respondent to the applicant had sought "to create (artificially or otherwise) grounds for complaint against the applicant". It is alleged that the intention was to dispense with the applicant's services after the sale of the business. Those claims are disputed.
It is not necessary to otherwise consider in detail the other issues or documentation in this matter for the purpose of this application for interlocutory injunction.
Whether there is a serious issue to be tried
By reference to the background in my view there is a serious issue to be tried. Whilst the respondent has asserted in relying upon the affidavit of Mr Fernandez that a number of breaches have occurred in relation to the provision of the appropriate standard of service, it is clear that his complaint, along with other matters, is very much in issue between the parties.
A core issue would appear to be the lack of provision of further services to enable trading to occur by the applicant at a level similar to the level of trading enjoyed by the respondent with Labink. Whether the decline in level of business can be justified or otherwise will no doubt be a matter for trial. At this stage I am satisfied that the matters referred to earlier in this judgment clearly provide what could properly be described as serious triable issues.
At present neither party has provided any pleadings and it is clear that proper pleadings are appropriate in a matter of this kind so that the parties may either proceed to mediation and/or trial with all issues clearly identified. On the affidavit material I am satisfied that there is a serious issue to be tried.
Balance of convenience
It has been submitted on behalf of the applicant that if the respondent is permitted to take further action in relation to the charge, then the financial consequences may be significant and the applicant may well be denied the fruits of any future judgment if the applicant were to succeed. The balance of convenience it is submitted favours the applicant in avoiding what might potentially be the appointment of a receiver and perhaps abandonment of these proceedings.
The respondent has argued that having regard to the affidavit material it is entitled to payment and that the simple solution available to the applicant is to maintain the instalments in accordance with the contract and avoid any action on the charge. It is further argued that the court should not be necessarily satisfied that the balance of convenience favours the applicant in relation to the potential of a receiver being appointed and proceedings abandoned.
It should also be noted in passing that the respondent would appear to have significant difficulties in the further conduct of business due to alleged industrial action.
It is clear to the court that there are significant competing claims in this matter in relation to the balance of convenience. On my assessment, however, of the issues currently before the court I am satisfied that the balance of convenience favours the applicant and the granting of an injunction. The reason I am satisfied that the balance of convenience favours the applicant is that I accept that there is a serious issue to be tried and that upon the hearing of the matter in the event that the applicant succeeds, there may be an order which requires payment by the respondent to the applicant rather than further payments by the applicant to the respondent under the contract.
If the applicant is required to continue to advance moneys in circumstances where there is a dramatic decline in the business, which was not anticipated to arise from the purchase of the business, then that would provide significant prejudice to the applicant. I am further satisfied that there is at least a significant potential that if the respondent is permitted to pursue the rights that it has under the charge, then that may well lead to the appointment of a receiver of the applicant and prevent the applicant from pursuing this litigation.
It is further relevant, in my view, to note that not only does the charge continue to exist, but there is also before the court evidence that Ms Mulhall has executed a personal guarantee. There is no evidence to suggest that the guarantee is worthless or that there has been any claim made by the respondent against the guarantor. Potentially at least the respondent has the opportunity to pursue the guarantor at a later time, which one presumes would not occur until after a current claim has been heard and determined. Nevertheless, it remains part of the security.
It had been argued that the court should draw an analogy between those cases which deal with injunctions against mortgagees seeking to enforce a mortgage security and the rights of the respondent seeking to pursue rights under the charge. In my view, given the nature of the security given in the present case and the business arrangement, I do not accept that the analogy applies. In this case there is a clear connection between delivery of services, the quality of services and payment. There is at least a serious issue to be tried, as indicated earlier, which may well involve payment by the respondent to the applicant rather than continuation of the payments under the sale of business agreement by the applicant to the respondent. In those circumstances it is not appropriate to apply the somewhat higher standard which may be applied in the granting of an interlocutory injunction against a mortgagee to the facts and circumstances of the present case.
Having noted the submissions in writing by the applicant in relation to a suggestion that there may be a payment into Court as a condition of granting injunctive relief, I am satisfied in the present circumstances that it is inappropriate to make the order conditional upon such a payment. As referred to earlier in this judgment I accept that the present application should not be seen an analogous to injunctive relief being sought against a mortgagee holding by way of security a mortgage over an applicant’s property. The undertaking in relation to damages however should also include a further undertaking not to deal with or dispose of the applicant’s assets other than in the ordinary course of business until further order.
Conclusion
It follows, therefore, that it is appropriate that an order be made granting an interlocutory injunction as sought by the applicant and for the court to make further directions. I am satisfied that it is appropriate to seek the usual undertakings as to damages from the applicant. There is no evidence before me to suggest that that undertaking is worthless or of no value.
I certify that the preceding twenty-six (26) paragraphs are a true copy of the reasons for judgment of McInnis FM
Associate:
Date: 16 March 2004
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