Monty Financial Services Ltd v Cash Resources
[2001] VSC 84
•30 March 2001
| SUPREME COURT OF VICTORIA AT MELBOURNE | |
| COMMERCIAL AND EQUITY DIVISION | Not Restricted |
No. 6027 of 1993
| MONTY FINANCIAL SERVICES LTD (formerly known as INSCORP HOLDINGS LTD) and ANOR (according to the schedule herein) | Plaintiffs |
| v | |
| CASH RESOURCES AND ORS (according to the schedule herein) | Defendants |
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JUDGE: | McDonald J | |
WHERE HELD: | Melbourne | |
DATES OF HEARING: | 29, 30, 31 January 2001 and 1, 2, 5 February 2001 | |
DATE OF JUDGMENT: | 30 March 2001 | |
CASE MAY BE CITED AS: | Monty Financial Services Ltd and Anor v Cash Resources and Ors | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 84 | |
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Injunction – interim ex parte injunction – undertaking as to damages – claim for damages for loss suffered by reason of injunction.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiffs | Mr P.T. Nugent | Egon Fice |
| For the fourth Defendant | Mr G. Watkins | Mulcahy Mendleson & Round |
HIS HONOUR:
On 4 May 1993 proceedings were commenced in this Court by the plaintiffs, Inscorp Holdings Ltd (“Inscorp”) and Michael Wansley, against the five defendants named in the writ, including the fourth defendant, Robert K. Brown & Co (Boronia) Pty Ltd and the fifth defendant Burwood Discounts (Australia) Pty Ltd (“Burwood Discounts”).
By the plaintiffs’ statement of claim endorsed on the writ the plaintiffs’ alleged that –
§ until about April 1991 Robert Kingsley Brown (“Robert Brown”) conducted an accountancy practice at 170 Boronia Road, Boronia;
§ by an agreement made on 17 March 1988 between Inscorp and Robert Brown, Inscorp agreed to advance by way of loan $190,000 to Robert Brown upon the terms and conditions of the relevant loan agreement;
§ on 17 March 1988 to better secure the moneys owing under the loan agreement Robert Brown assigned and set over to Inscorp chattels, set out in the schedule to the agreement, the goodwill, every trade and business carried on by Robert Brown from the above address, all books of account, promissory notes, bills of exchange and other negotiable instruments representing or evidencing debts due or which might become due to Robert Brown in connection with any business and the goodwill thereof and assigned the same to Inscorp.
§ as at 17 March 1988 Inscorp was entitled as owner of the chattels, goodwill and book debts of the business of Robert Brown as security for the obligations of Robert Brown pursuant to the loan agreement;
§ Robert Brown without the written consent of Inscorp had no power to sell, hire, dispose or part with possession of or encumber the property the subject of the agreement and that the security would become enforceable in the event of Robert Brown being in default of moneys payable pursuant to the loan agreement;
§ by notice dated 23 November 1990 Inscorp notified Robert Brown that he was in breach of the terms and conditions of the loan agreement in that he had failed to pay interest due and the principal sum lent which defaults were required to be remedied but that he had failed or refused to remedy such defaults and that the money owing under the agreement remained outstanding;
§ on 24 April 1991 Inscorp appointed Wansley as receiver of the property pursuant to the provisions of the mortgage;
§ on or about 27 September 1989 the first defendant, Cash Resources Australia Pty Ltd (“Cash Resources”), entered into a factoring agreement with Robert Brown which contained a provision enabling that defendant to execute on his behalf as his duly authorised attorney a mortgage over the property and that Cash Resources had purported to execute a mortgage over the property on behalf of Robert Brown as his authorised attorney, which mortgage purported to assign assume and set over to Cash Resources the property and that on 14 November 1990 the defendant, Cash Resources, purported to appoint the second defendant, Ven Milner & Co Pty Ltd (“Ven Milner”), as its agent to take possession of the property of Robert Brown purportedly pursuant to the provisions of that mortgage;
§ on or about 24 April 1991 Wansley attempted to take possession of the property pursuant to the provisions of the mortgage held by Inscorp over the property of Robert Brown but the defendants, Cash Resources and Ven Milner, prevented Wansley from taking possession of the property since or about 24 April 1991 thereby causing the plaintiff, Inscorp, to suffer loss and damage;
§ since 14 November 1990 Cash Resources or its agent, Ven Milner, had received the proceeds of the realisation of part of the property which property was vested in Inscorp and that Cash Resources and Ven Milner had received moneys thereby causing Inscorp to suffer loss and damage.
It was further alleged by the statement of claim that from or about 4 April 1991 Robert K. Brown & Co Pty Ltd was incorporated and that in or about the month of April 1991 Robert Brown purported to transfer and assign to Robert K. Brown & Co Pty Ltd the property of his business for no consideration at a time when Robert Brown held such property on behalf of and for the benefit of Inscorp as was known by Robert K. Brown & Co Pty Ltd and, accordingly, that company held the property on behalf of and for the benefit of the plaintiff, Inscorp.
It was further alleged by the plaintiffs that on or about 8 May 1991 Robert K. Brown & Co Pty Ltd purported to charge all its right, title and interest in the property of the business to Cash Resources it being alleged that at that time Robert K. Brown & Co Pty Ltd held no right, title or interest in that property and that after 8 May 1991 Cash Resources received from Robert K. Brown & Co Pty Ltd the realisation of book debts forming part of the property of Robert K. Brown & Co Pty Ltd.
Further, it was alleged that on or about 22 June 1992 the fifth defendant, Burwood Discounts, entered into a factoring agreement with Robert K. Brown & Co Pty Ltd whereby the latter purported to charge its right, title and interest in the property to Burwood Discounts it being alleged that at the time that Robert K. Brown & Co Pty Ltd purported to create the charge it held no right, title or interest in the property.
Further, it was alleged that since 22 June 1992 Burwood Discounts had received moneys being the proceeds of book debts and being part of the property alleged to be that of the plaintiff, Inscorp, thereby causing that latter company to suffer loss and damage.
It was further alleged that on or about 17 February 1993 Robert K. Brown & Co Pty Ltd was wound up by order of this Court and that on the following day, 18 February 1993, the fourth defendant, Robert K. Brown & Co (Boronia) Pty Ltd, was incorporated and that on or after 18 February 1993 Robert K. Brown & Co Pty Ltd purported to transfer and assign to Robert K. Brown & Co (Boronia) Pty Ltd the property for no consideration.
It was alleged that Robert K. Brown & Co (Boronia) Pty Ltd held the property so assigned and transferred to it on behalf of and for the benefit of the plaintiff, Inscorp.
Further, it was alleged that on or about 26 February 1993 Robert K. Brown & Co (Boronia) Pty Ltd purported to charge its right, title and interest in the property to the fifth defendant, Burwood Discounts, pursuant to the provisions of a mortgage debenture it being alleged that at that time Robert K. Brown & Co (Boronia) Pty Ltd had no right, title or interest in that property.
Further, it was alleged that subsequent to 26 February 1993 Burwood Discounts had received moneys to the use of the plaintiff, Inscorp, and had taken possession of the property thereby causing Inscorp to suffer loss and damage.
It was further alleged by the plaintiffs that unless restrained by the court Burwood Discounts threatened to transfer, assign and dispose of, encumber or otherwise deal with the property of the plaintiff, Inscorp, that being the goodwill and book debts of Robert Brown.
On 5 May 1995 the day following the issue of the writ the plaintiffs caused to be issued a summons directed to the fifth defendant, Burwood Discounts, seeking an injunction pending the hearing and determination of the proceedings, restraining Burwood Discounts from transferring, disposing, assigning, encumbering or otherwise dealing with any of the goodwill, book debts or client files of the accountancy practice formally known as Robert Brown, then Robert K. Brown & Co Pty Ltd and then again Robert K. Brown & Co (Boronia) Pty Ltd, and being the client files annexed to the summons and marked “A” together with the goodwill and book debts associated therewith.
On 7 May 1993 on the return of the summons the plaintiffs and fifth defendant, Burwood Discounts, appeared before the court by counsel. On that day and upon undertaking as to damages being given by the plaintiffs by their counsel it was ordered that the third defendant, Lindsay Philip Maxsted, the fourth defendant, Robert K. Brown & Co (Boronia) Pty Ltd and the fifth defendant, Burwood Discounts, be restrained until 4.15 pm on 13 May 1993 from “transferring, disposing, assigning, encumbering or otherwise dealing with any of the client files and the goodwill and book debts associated therewith of the accountancy practice of “Robert K. Brown & Co and/or Robert Kingsley Brown and or Robert K. Brown & Co Pty Ltd (in liquidation) and or Robert K. Brown & Co (Boronia) Pty Ltd and being the client files annexed hereto marked ‘A’”. It was further ordered that leave “be granted to add third party purchasers of the accounting practice of Robert K. Brown & Co (Boronia) Pty Ltd, Devendra Kantilal Desai and Deerhan Jammadus Naran as defendants to the proceedings”. Further it was ordered that as soon as practicable a copy of the order, the summons of 5 May 1993 and the supporting documentation and documents filed be served on the first defendant Cash Resources, the second defendant Ven Milner, the third defendant Lindsay Philip Maxsted and the fourth defendant Robert K. Brown & Co (Boronia) Pty Ltd. The further hearing of the summons was adjourned until 13 May 1993.
On 13 May 1993 and on the further hearing of the summons filed 5 May 1993 it was ordered that the summons be dismissed and further that “the applicant pay the taxed costs of the third, fourth and fifthnamed defendants including reserved costs”.
On 28 May 1993 the plaintiffs filed a Notice of Discontinuance of the proceedings against the fourthnamed defendant, Robert K. Brown & Co (Boronia) Pty Ltd.
On 9 March 1994 there was filed on behalf of the fourth defendant, Robert K. Brown & Co (Boronia) Pty Ltd, a summons directed to the plaintiffs seeking an order that “interlocutory judgment be entered in favour of the fourth defendant against the plaintiffs for damages to be assessed in accordance with Rule 51 by a Master of this Court pursuant to the undertaking as to damages given by the plaintiffs on 7 May 1993”.
On the return of that summons and on 29 March 1994 it was ordered by consent that the fourth defendant, Robert K. Brown & Co (Boronia) Pty Ltd, file and serve its statement of claim on or before 19 April 1994, that the plaintiffs file and serve their defence on or before 17 May 1994, that each of the parties file and serve affidavits of discovery on or before 14 June 1994, that otherwise the summons be referred to the Listing Master and that the costs be reserved.
At the time that the order was made on 29 March 1994 the plaintiff, Inscorp, had changed its name to Monty Financial Services Ltd (“Monty Financial Services”) and the fourth defendant, Robert K. Brown & Co (Boronia) Pty Ltd, changed its name to On The Spot Tax Refunds Pty Ltd. For convenience, I shall hereafter refer to the first plaintiff as “Monty Financial Services” and I shall refer to the fourth defendant, On the Spot Tax Refunds Pty Ltd, as “the fourth defendant”.
On 20 April 1994 there was filed with the court, pursuant to the order made on 29 March 1994 a “statement of claim in an enquiry as to damages pursuant to an undertaking in damages” wherein the fourth defendant was named as the plaintiff in those proceedings and Monty Financial Services Pty Ltd and Michael Irvine Wansley were named as defendants to the proceedings. By its statement of claim the plaintiff to the proceeding, the fourth defendant, claimed that by virtue of the order made by the court on 7 May 1993, it had suffered loss and damage in the amount of $108,369.35. The fourth defendant claimed an order for payment of that amount by Monty Financial Services and Wansley as were found due upon the enquiry. It also claimed interest pursuant to the Supreme Court Act. The defendants to the claim, Monty Financial Services and Wansley, by their defence, denied that the making of the order by the court on 7 May 1993 caused the fourth defendant to suffer loss and damage.
In particularising its claim for damages the fourth defendant alleged that it suffered the following damages in consequence of the order made by the courts on 7 May 1993:
A.“Interest”; being interest costs to Burwood Discounts through being unable to bank receipts - $48.00;
B.“Loss of productivity”; for the period 7 May 1993 to 13 May 1993 in consequence of the effect of the restraining order causing a loss of confidence by its staff - $4,214.00;
C.“Damage to reputation and confidence”; it was alleged that the staff could not be paid for the week due to the injunction, that one accountant sought other employment after three years service making it necessary to make up for the loss of such staff member and that the cost of her replacement and training was claimed to be in the sum of - $15,250.00. Further, under this head it was alleged that the weekly rent due by the fourth defendant was not paid which resulted in meetings being held with the landlord, estate agent and solicitors for the landlord which allegedly caused a loss of time by a director in attending such various meetings causing a loss of $1,5050. Further, again under this head, it was alleged that Burwood Discounts reduced the limit available to the fourth defendant pursuant to a factoring agreement from $100,000 to $65,000 causing an increased workload in the cash management of the business resulting in a further loss of $6,120.00;
D.“Directors time at court”; it was alleged that the fourth defendant further suffered a loss in consequence of director’s time at court being $787.00;
E.“Legal Expenses”; it was alleged that the fourth defendant incurred legal expenses in the sum of $11,313.35.
F.“Loss of Goodwill”; it was alleged that by virtue of the order the fourth defendant suffered $50,750 loss of its goodwill;
G.“Loss in respect of aborted sale”; the sum of $16,225.00 was claimed under this head;
H.“Interest cost on funds expended”; the sum of $2,500.12 was claimed under this head.
On the trial and after evidence had closed counsel for the fourth defendant informed the court that he did not intend to submit that the evidence before the court established the claims made in paragraphs F and H of its statement of claim. Accordingly, at that stage of the trial the claim of the fourth defendant was, that by virtue of the order made on 7 May 1993 it had suffered damage in the sum of $55,107.35 which it maintained the court should determine were the damages suffered by it in consequence of the restraining order on 7 May 1993 and that pursuant to the undertaking given by Monty Financial Services and Wansley as to damages the court should order such parties to pay such sum to it.
No question arises in the present proceedings as to whether the court should embark upon an enquiry as to damages alleged to have been suffered by the fourth defendant in consequence of the interim ex parte restraining order made by the court against it on 7 May 1993. The order referred to and made on 29 March 1994 was made by consent of the parties, Monty Financial Services and Wansley on the one side and the fourth defendant on the other side. Further, no matter is specifically raised by Monty Financial Services and/or Wansley in their defence as to why in the circumstances of this case the court should not enquire and determine the matter as raised by the statement of claim of the fourth defendant.
In Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd[1] Aitken J addressed the question as to the principles to be applied by a court when determining whether an award for damages should be made in circumstances where a plaintiff in an action having given an undertaking as to damages on the granting of an interlocutory injunction in the action, fails in the action.
[1](1979) 146 CLR 249.
At p. 266-267 of his judgment Aitken J said:
“In a proceeding of an equitable nature it is generally proper to adopt a view which is just and equitable, or fair and reasonable, in all the circumstances rather than to apply a rigid rule. However the view that damages should be those which flow directly from the injunction and which could have been foreseen when the injunction was granted is one which will be just and equitable in the circumstances of most cases……….… However, it will in my opinion be seldom that it will be just and equitable that the unsuccessful plaintiff should bear the burden of damages which were not foreseeable from circumstances known to him at the time.”
His Honour further said at p. 268:
“It is important in all cases… to bear in mind the distinction adverted to in many cases… between damages flowing from the injunction and damages flowing from the litigation itself. There may not in every case be any difference between the two but where there is a difference, it is essential that damages flowing from the litigation should not be confused with damages flowing from the interlocutory injunction. This is necessarily required by the form of the undertaking itself.” (Citations omitted.)
In the order made by the court on 7 May 1993 it is recited that the orders were made, “upon the usual undertakings as to damages”. It was not in issue that such undertaking was given on behalf of the plaintiffs. In its full terms such an undertaking was an undertaking given to the court on behalf of the plaintiffs that they would abide any order that the court may make as to damages if the court should thereafter be of the opinion that the defendants (who were restrained by the order) or one or other of them should have sustained any damage by reason of the order, which the plaintiffs ought to pay.
On appeal in Air Express Ltd[2] the decision of Aitken J was upheld. At p. 310 Barwick CJ said:
“I treat the relevant law as finally settled in the sense expressed by my brother Aitken. But the adoption of that view makes it more imperative to maintain the distinction between results which are caused by the grant of an injunction and those which flow from the fact of litigation itself.”
[2](1981), 146 CLR 309.
In his judgment Gibbs J at p. 312 said:
“…it is perfectly clear and it appears from the words of the undertaking themselves, that the only damages to which a defendant is entitled are those which he has sustained by reason of the grant of the injunction. The generally accepted view is that damages must be confined to the loss which is the natural consequence of the injunction under the circumstances of which the party obtained the injunction has notice.”
His Honour at p. 312-3 further said:
“In a number of authorities the court has distinguished between loss which was caused by the injunction and loss which arose from the litigation………… There is no reason to doubt that it is correct in principle to draw such a distinction if the facts warrant it. If the pendency of the litigation, rather than the making of the order, was the cause of the plaintiff’s loss, the terms of the undertaking have no application, since the plaintiff has not sustained loss by reason of the order.”
………… In the end however the question becomes a question of fact: did the making of the order cause the loss. The onus of proof must, in accordance with general principles lie on the defendant who asserts that he sustained damage by reason of the order. (Citation omitted.)
In his judgment Stephen J at p. 320 said:
“… it will only be if damage is suffered because of the grant of the injunction, and would not have been suffered but for it, that the court should compensate a defendant who claims damages under the undertaking. Its grant must be shown to be the causa sine qua non of the damage complained of before the defendant can be entitled to be compensated for what turns out to be the erroneous grant by the court of the injunction against it.”
The principles enunciated by the court in Air Express Ltd which were with reference to an interlocutory injunction have equal application to the grant of the interim ex parte injunction in the present case. The present injunction existed for a period of five working days. The question that must be addressed in these proceedings is whether it has been established by the fourth defendant that the order made by the court on 7 May 1993 and directed to it caused it to suffer any and, if so, what damage which the court should order Monty Financial Services and Wansley to pay to the fourth defendant by reason of the undertaking given to the court at the time that the orders were made on 7 May 1993.
The history of events occurring before and relevant to the incorporation of the fourth defendant is to be obtained from the evidence of Darren Kingsley Brown which in part was contained in the affidavit sworn by him on 29 March 2000 and relied on by the fourth defendant in these proceedings. From this evidence it appears that for some time before December 1990 Robert Brown the father of Darren Kingsley Brown, carried on a public accountancy business under the name of Robert K Brown & Co. The practice carried on by Robert Brown was predominantly a “tax return” type practice with a number of more substantial corporate clients. In or about December 1990 Robert Brown surrendered his tax agents registration with the effect that he was unable to carry on business as a tax agent. In consequence of this and by March 1991 the practice of Robert Brown had little work in progress. In May 1991 Robert Brown was declared bankrupt. During the period from early January 1991 until 4 April 1991 Darren Brown had been employed by his father in the business conducted by him. On 4 April 1991 the company, Robert K Brown & Co Pty Ltd, was incorporated and commenced to carry on an accountancy business at 170 Boronia Road, Boronia. The business of Robert K Brown & Co Pty Ltd was conducted at the direction of Darren Brown. His father, Robert K Brown, became an employee of the company. On the incorporation of Robert K Brown & Co Pty Ltd it obtained the files of the clients of Robert Brown. They were on the premises from which the company commenced its business. At this time Darren Brown having obtained the degree of a Master of Business Administration sought to expand the business previously conducted by Robert Brown and sought to develop an aspect of the business that which was the giving of corporate advice. The business of Robert K Brown & Co Pty Ltd was financed pursuant to a factoring agreement entered into by it with Cash Resources . On 17 February 1993 it was ordered by this Court that Robert K Brown & Co Pty Ltd be wound up. That order was made on the petition of the Deputy Commissioner of Taxation. During the period from incorporation until being ordered to be wound up and while it conducted its business under the direction of Darren Brown the company, Robert K Brown & Co Pty Ltd, had failed to pay group tax.
On 18 February 1993, the day after it was ordered that Robert K Brown & Co Pty Ltd be wound up, the fourth defendant, Robert K Brown & Co (Boronia) Pty Ltd was incorporated. That company commenced trading from the same premises as that occupied previously by Robert K Brown & Co Pty Ltd and before that time by Robert Brown. It was the actions of Darren Brown that caused the fourth defendant to be incorporated. The fourth defendant took over the seven members of staff previously employed by Robert K. Brown & Co Pty Ltd as its staff. The client list of the fourth defendant was to a large extent that which was the client list of Robert K. Brown & Co Pty Ltd. Darren Brown was a director of the fourth defendant from its date of incorporation until 4 March 1996.
On 26 February 1993 the fourth defendant entered into a factoring agreement with the fifth defendant, Burwood Discounts. The factoring agreement was in existence for some nine weeks before the order was made by this Court on 7 May 1993. In the conduct of its business the months of April and May 1993 were poor billing months for the business.
Pursuant to the factoring agreement entered into between the fourth defendant and Burwood Discounts, on the former company preparing a bill or invoice for work done for a client the bill or invoice would be sent to the client and a copy of the same would be provided to Burwood Discounts to whom the debt owing to the fourth defendant would be assigned. Pursuant to the factoring agreement and on the assignment by the fourth defendant of a debt due to it, to Burwood Discounts the latter made a payment to the former of 70 percent of the face value of the debt so assigned.
It was the evidence of Darren Brown that before 7 May 1993 it was anticipated that on 7 May 1993 the fourth defendant would assign debts to Burwood Discounts which would result in it being paid approximately $10,000 pursuant to the factoring agreement. It was the evidence of Darren Brown that in consequence of the injunction being granted on 7 May 1993 the fourth defendant was unable, on that day, to assign debts owing to it to Burwood Discounts resulting in it not receiving from that company the expected sum of $10,000. No documentary evidence was produced during the trial to support this evidence that the fourth defendant expected to received from Burwood Discounts on 7 May 1993 approximately $10,000.
It was the evidence of Darren Brown that in consequence of the order being made on 7 May 1993 and the fourth defendant not receiving from Burwood Discounts the approximate sum of $10,000 on 7 May 1993 the company was unable to make payment of the weekly rent in the sum of $1,100.00 due on the premises occupied by it, that the company was unable to make payment of wages to its employees for work performed by those employees for the week ended 30 April 1993, that the company was prevented from making payment to the Deputy Commissioner of Taxation on 7 May 1993 for group tax in the sum of approximately $2,500 and, further, that the company was prevented from making the payment of telephone, light and power accounts due by the company for payment on 7 May 1993. Again, no documentary evidence was produced to support the evidence of Darren Brown that such payments were due on 7 May 1993.
Darren Brown gave evidence that he believed that the injunction granted on 7 May 1993 relative to the fourth defendant effectively froze its business for the week and that staff could not work on files or write fees for clients whose names appeared on the list being the annexure marked “A” to the order made on 7 May 1993. Darren Brown gave evidence that he thought that during the course of that week the company wrote about half of the fees that would have been written had the order not been made. In cross-examination Darren Brown said that the fourth defendant remained in the premises occupied by it in May 1993 for a period of approximately 12 months and that the rent not paid on 7 May 1993 remained owing. He further said that the wages due to be paid to staff on 7 May 1993 were made up to the staff within a week or so after the order that was made on 13 May. He said, however, that although staff were paid, they may have remained a week behind in wages due to them. He produced no document relating to the payment of wages to staff. No overdraft statement or bank statement relating to the financial position of the fourth defendant was produced by that company relative to the month of May 1993.
In cross-examination Darren Brown said that the injunction prevented the fourth defendant from receiving moneys from Burwood Discounts in respect of debts which had been previously assigned to Burwood Discounts. However, later he said that at the date of the granting of the injunction the fourth defendant was not expecting to receive moneys from Burwood Discounts in respect of debts previously assigned to it. However, he maintained that the staff of the fourth defendant, in consequence of the injunctive order, were not able to work on client files which were the subject of the injunction while the same remained on foot.
The terms of the injunction, inter alia, prevented the fourth defendant from assigning to Burwood Discounts book debts of the clients who were identified and set out by name in Annexure “A” to the order, during the period that the injunction remained in force.
It was the evidence of Darren Brown that as a result of the fourth defendant not receiving the sum of approximately $10,000 from Burwood Discounts on 7 May 1993 it had consequences which resulted in the fourth defendant suffering damage.
Before addressing the question as to whether the fourth defendant did suffer any damage, as alleged, it is first necessary to address the question whether the injunction caused the fourth defendant not to receive approximately $10,000 from Burwood Discounts on 7 May 1993 which it would have received had the order not been made that day. When Darren Brown was asked as to what was the source of his contention that the company had anticipated receiving a sum of approximately $10,000 from Burwood Discounts on 7 May 1993. He said that the figure was derived from invoices which would have been provided to Burwood Discounts that day but for the imposition of the injunction. He agreed in cross-examination that he had no documentary evidence to support the figure of $10,000. When cross-examined and asked whether he was an accountant Darren Brown said that he had a lot of “accountant’s resources” and that he dealt with documents but that it would not be correct to call himself an accountant. He said that probably it would not be correct to describe him as a careful man when it came to maintaining records. Darren Brown was unable to explain where the invoices referred to were now. He said that he was sure that they had them and that he did not know why they had not been put in evidence. As to the contention that the fourth defendant was unable to pay its rent due on 7 May 1993, he accepted in cross-examination that, notwithstanding that fact, the company stayed in its premises for some 12 months after the injunction had been granted. No document such as a lease or the like was produced evidencing that rent was due to be paid by the fourth defendant on 7 May 1993. As to the claim made that the fourth defendant was unable to pay wages to staff for work performed for the week ending 30 April 1993, when asked whether that was true, Darren Brown said that he was saying that he did not make payment on 7 May 1993.
In paragraph 8(c) of the fourth defendant’s Statement of Claim it was alleged that as of the date of the Statement of Claim, 20 April 1994, the staff were still behind in wages due to the injunction. When queried as to this allegation during the course of cross-examination Darren Brown said, “That rings a bell”. He said that the staff may still have been a week behind in their wages. No document was discovered or produced supporting this allegation. No person who was a member of staff was called to support this allegation. When further cross-examined and when asked whether the failure to pay wages for staff on 7 May 1993 caused financial cost to the company, he said it did in terms of staff morale but otherwise not in dollars.
When cross-examined as to the allegation that the fourth defendant was unable to pay group tax due on 7 May 1993, in consequence of the order made that day, Darren Brown agreed that no tax records for the company had been discovered, no records were discovered which showed the amount of the company’s group tax liability or when it was due, and that no document was discovered to show when, if ever, payment was made. No evidence was called to support this contention made by Darren Brown. Again, as to the allegation that the company was unable to pay the telephone and light accounts due to be paid on 7 May 1993, in consequence of the injunctive order made that day, Darren Brown conceded that no telephone bill was discovered which related to the matter, and no light bill relating to the allegation was discovered. He agreed in further cross-examination that there was no direct detriment suffered by the company with respect to these matters but said that there was a detriment to the business in not paying such bills as there was a need to shuffle creditors around.
The events which gave rise to these proceedings occurred in 1993. Brown accepted that in 1993 he would have been aware that if the fourth defendant was to claim damages allegedly caused by the order made on 7 May 1993 that there would be a need to produce evidence to support the claim. He was aware he said that he needed evidence to prove the case of the fourth defendant. However, with respect to claims now made very few documents were produced or made available by the fourth defendant in discovery substantiating or supporting the claims now pursued for damages by the fourth defendant at trial. Darren Brown accepted that he was a person who was not good at details. In the manner in which Darren Brown addressed questions put to him during the course of giving evidence, he impressed me as being glib in the manner in which he gave evidence. He presented as a person, to my mind, who was not particularly concerned as to correctness of the evidence being given by him and whether claims made by the fourth defendant could in fact be substantiated or not. From my observations of Brown while he gave his evidence I was caused to have very considerable reservations as to whether his evidence, as given during the trial, should be accepted. The failure to produce evidence particularly in the form of documents which it is to be expected must have existed if the particular claims now made were of substance, appeared in greater detail when the particular claims for damages were tested and analysed in cross-examination.
I turn to the various claims made as to damages allegedly suffered by the fourth defendant in consequence of the order made on 7 May 1993 and its continuance until 13 May 1993, as pursued finally at trial.
The first claim was for “interest” in the sum of $48. In his affidavit sworn on 29 March 2000 Darren Brown deposed – “The fourth defendant claims interest costs at $48 incurred to Burwood Discounts Australia Pty Ltd as a result of not being able to pay monies into Burwood Discount’s account on 7 May 1993”. In the affidavit of Alan Muir sworn on 19 April 2000 which was relied on by the fourth defendant in the proceedings, Muir identified a claim for interest totalling $2,560 and being costs of $48 and $2,512. The latter sum was claimed in the fourth defendant’s statement of claim as “interest costs on funds expended”. It was in respect of that amount that counsel for the fourth defendant informed the court that he did not intend to submit that the evidence established the claim made for that sum. The claim for interest in the sum of $2,560 although forming part of the claim made pursuant to the fourth defendant’s statement of claim there was no reference to the same in the affidavit of Darren Brown. In cross-examination Darren Brown said he did not know why Muir had said that there was a claim for $2,560. He said that he could not “shed light on” how that claim was made. In re-examination and after being shown the fourth defendant’s statement of claim he gave some explanation as to where the sum of $2,512 claimed may have come from. It was apparent to me that he was doing no more than speculating as to the source of this claim. As to the further claim for $48, he gave an explanation as to the basis of the claim being made which, in my view, really amounted to no more than an explanation of how such claim may have arisen. No document was discovered or produced in evidence which evidenced the incurring of an interest debt of $48 to Burwood Discounts. On the evidence presented to the court I am not satisfied that it has been establish that this debt was incurred by the fourth defendant to Burwood Discounts.
The next claim made was for “loss of productivity”. The allegation was that as a result of the injunction a general disturbance and loss of confidence pervaded the practice of the fourth defendant due to the injunction causing the fourth defendant to suffer a loss of production in the sum of $4,214. In his affidavit Darren Brown deposed that the injunction adversely affected the productivity of the practice, over the following weeks without identifying the period of time which he was in fact referring to. Darren Brown did not identify any amount claimed by the fourth defendant to have been suffered by way of loss consequent upon the practice of the fourth defendant being so affected. Rather Darren Brown referred to an opinion expressed as to the loss of productivity as deposed to by the witness Muir. In addition Darren Brown, in his affidavit sworn on 19 April 2000, deposed to the amounts of “fees earned” for the periods of time being the year ended 30 June 1993, the year to 6 May 1993, the year ended 30 June 1992 and the period to 6 May 1992. In evidence Darren Brown said that the figures appearing in paragraph 25 of his affidavit relating to the periods of time referred to were taken from a computer printout. When asked where such document was at present Brown said that he was not sure but, “we have them”. It was those figures which Muir relied on in expressing an opinion as to whether, it could be demonstrated that there was a loss in the production of the fourth defendant during the period from 7 May 1993 to 28 May 1993. Muir expressed the opinion that the reduction in production during that period was equivalent to $691.36 per day and further that the reduction in productivity for the period 7 May 1993 to 28 May 1993 was a total of $11,062. He further expressed the opinion that the “firm’s production” in 1993 decreased and that that amount appeared to be in the range of $2,080 to $11,062. The second figure referred to, on the basis that there was to be ascertained a reduction of $691.36 per day, would be equivalent to a period of 16 days whereas the reduction in production of $2,080 at $691.36 per day would be a loss in production amounting to three days loss of production. It was not identified whether the “loss of production” was a gross loss of production or an amount being the net loss to the fourth defendant in consequence of the productivity of staff being diminished in consequence of the injunctive order being made on 7 May 1993. The evidence of Muir as contained in his affidavit sworn on 19 April 2000 was that the opinions formed and expressed by him were based on production reports provided to him by the fourth defendant. Muir further deposed to the fact that such reports had been misplaced since he conducted his examination. These reports, forming the basis of the opinion expressed by Muir were not produced in evidence nor discovered by the fourth defendant. Muir said that the document exhibited to his affidavit and marked “AJM2”, which he said set out a detailed comparison of production during the months of May and June 1992 and May and June 1993 was a table extracted by former solicitors of the fourth defendant from his report rather than being a table compiled by him. Again, the documentary material for this table was not produced or discovered. It is to be observed, however, that insofar as that table is said to be a detailed comparison of production during the weeks identified, those relevant to 1992 would relate to R K Brown & Co Pty Ltd and those relevant to 1993 relate to the fourth defendant.
For the opinion of an expert, with respect to matters of fact, to have any value, the facts on which the opinion is based must be proved by admissible evidence – Romsey v Watson[3]; Paric v John Holland (Constructions) Pty Ltd[4]. It may be said that the evidence of Muir, relevant to the head of damages, was not strictly evidence amounting to “opinion evidence”, but rather, Muir, as a chartered accountant, gave evidence which explained matters which were to be found in the production reports examined by him. Where books of account and records are tendered in evidence it is permissible for an accountant to give evidence of the results of his examination: Potts v Miler[5].
[3](1961) 108 CLR 642.
[4](1985) 62 ALR 85, at p. 87.
[5](1940) 64 CLR 283, at 303.
In my view no weight can be given to the evidence of Muir relevant to this head of damages as the documents on which his evidence was based have not been proved in evidence. Further, with respect to this claim no endeavour was made to identify any net loss which may have been suffered by the fourth defendant consequent upon loss of confidence of staff alleged to have been suffered as a result of the order made on 7 May 1993. Under this head of damages claimed, on the evidence presented to the court I cannot be satisfied as whether to any and if so what loss was suffered by the fourth defendant in consequence of a loss of confidence by members of the staff alleged to have been brought about by the order being made on 7 May 1993.
The next claim made by the fourth defendant was for loss and damage allegedly suffered by it and, being costs incurred in replacing a staff member, an accountant, who allegedly left the employment of the fourth defendant as a consequence of the injunctive order being made on 7 May 1997. The claim of the fourth defendant under this head and as identified in paragraph 8(C)(i) of the statement of claim is for $15,250.
In his affidavit sworn on 29 March 2000 Darren Brown deposed, as relevant to this head of damages, that an employee accountant, Ms Nicole Sedawie, gave notice on or about 21 May 1993 of her resignation and that she left the employment of the fourth defendant at the end of August 1993. Darren Brown deposed that the fourth defendant engaged a procurement bureau to find a replacement for Ms Sedawie which resulted in one Donegon being employed. Darren Brown deposed that the employment bureau charged a fee of $5,250 for its services which fee was reduced to $3,000 and which was paid by the fourth defendant. He also deposed that he estimated the cost incurred in training the new staff member, Donegon, including introduction to clients was $10,000 and being the cost of two months’ wages for Donegon. At the outset of his evidence Darren Brown said that the estimate of costs incurred in training Donegon being two months’ wages was not how the estimate was made. Darren Brown later gave evidence that the estimate of loss as to $10,000 was correct but that the calculation based on the wages of Donegon was incorrect. No wage documents that related to Donegon were discovered. Darren Brown, in his evidence, said that that was because such wages were not a relevant part of the calculation. Darren Brown agreed that the figure of $10,000 was substantially more than Donegon was paid for two months. Darren Brown said that he knew that Donegon was not paid $10,000 for two months and that was an error in his affidavit that he missed. When asked when Donegon was first employed he said that he was not sure but he thought it was early in the next year after Ms Sedawie had resigned. His attention was drawn to the invoice of Dapiran Knight Australia, Personnel and Management Consultants, being the consultants engaged to recruit Donegon which stated that the commencement date for the appointee, Donegon, was 21 February 1994. On his attention being drawn to this document he said that it was right that Donegon’s employment commenced on 21 February 1994. He agreed that no document had been discovered relating to any chargeable work performed by Donegon for any period of time during his employment with the fourth defendant. Darren Brown agreed that from the date that Donegon commenced his employment with the fourth defendant he was doing some chargeable work. He agreed that there was no documentary evidence nor had any document been discovered which enabled it to be ascertained what chargeable work Donegon generated.
Under this head of the claim it was alleged that Ms Sedawie resigned in consequence of the injunctive order made on 7 May 1993. As to this aspect of the fourth defendant’s claim in, the affidavit sworn by Allan Muir, and relied upon by the fourth defendant in these proceedings Muir deposed that a measure of the cost of staff replacement, where staff are experienced or qualified accountants, would be based on the wages cost. He deposed that his estimate would be the cost of wages for one to two months which he believed would be a reasonable estimate for the cost of training and client introduction. He further deposed that based on a salary of $35,000 per annum the cost would be $4,500. When Darren Brown was cross-examined and he was referred to that part of the affidavit sworn by Muir where he based his estimate of the cost of training and client introduction of a new staff member on a salary of $35,000 per annum Darren Brown said that that was “more like it”. Other than that reference there was no evidence establishing the wages paid to Donegon as an employee accountant nor was there produced any documentary evidence demonstrating what chargeable work had been generated by Donegon from the time of the commencement of his employment.
In the affidavit of Muir and relevant to this head of damages, Muir deposed that he had sighted the invoice for $3,000. Taking that figure as the relevant cost paid to an employment agent for the recruiting of Donegon, together with his estimate that the reasonable cost of training and client introduction based on a salary of $35,000, the loss, if any, suffered by the fourth defendant would be $7,500 not $15,250. However, central to this claim for damages is the allegation that it became necessary to employ Donegon to replace Ms Sedawie as she had resigned her employment in consequence of the order made on 7 May 1993. A letter alleged to be the letter of resignation of Ms Sedawie and dated on or about 21 May 1993 was not produced on the trial. Further, Ms Sedawie was not called as a witness. The question central to this claim is whether the resignation of Ms Sedawie was causally related to the injunctive order made on 7 May 1993. On behalf of the fourth defendant it was submitted that having regard to the date on which Ms Sedawie tendered her resignation, being 21 May 1993, and the evidence that the injunction caused a disruption in the accounting practice conducted by the fourth defendant, that it should be concluded that the order made on 7 May 1993 which remained in existence until 13 May 1993 was the cause of Ms Sedawie resigning from her employment. In my view it is not open to me to draw that inference on the evidence before the court and I do not do so. In such circumstances it is not necessary to have regard to the principles enunciated in Jones v Dunkel[6] and O’Donnell v Reichard[7].
[6](1959) 101 CLR 298.
[7][1975] VR 916 at 929, per Newton and Norris JJ.
Having regard to these matters I am not satisfied that it has been established that in consequence of the injunctive order and disruptive effect that it had on the accounting practice conducted by the fourth defendant at the time that such were a cause of the resignation of Ms Sedawie resulting in the fourth defendant incurring expenses in order to replace her by the employment of Donegon. No damages should be awarded under this head of claim.
The next claim made on behalf of the fourth defendant was for the sum of $1,837.50. In his affidavit sworn between 9 March 2000 Darren Brown deposed that he spent some 17.5 hours attending estate agents, solicitors and court between 7 May and 13 May 1993, that his normal charge-out rate was $105 per hour at the time and that the amount lost by so attending on such matters at such charge-out rate was $1,837.50. In cross-examination Darren Brown said that there had not been discovered any time-sheet by himself relevant to him attending on estate agents, on solicitors or the times that he spent at court. He further said that he had no documentary evidence supporting his assertion that the time spent on attending estate agents, solicitors and at court was 17.5 hours. He said there was no document that he could rely on that he had spent a day at court. He said that he attended on the estate agents as it “took some smoothing over” as the rent had not been paid. He said that he went to the office of the estate agents and he had a distinct memory of that. Darren Brown gave evidence that because the fourth defendant was in arrears with rent under the terms of the lease the landlord had required the rent to be paid weekly. He said that this was convenient to do as each week the fourth defendant factored its invoices. The lease was not produced. Brown, in his evidence, further said that he did not keep time-sheets for the administrative work that he engaged in and that the period claimed of 17.5 hours was an under-estimate of the time that he spent on the activities referred to.
In his affidavit sworn 19 April 2000 the accountant, Muir, deposed that he had confirmed that Brown’s charge-out rate was $105 per hour. He further expressed the opinion that such a charge-out rate was a fair and reasonable charge. Exhibited to the affidavit of Muir were copies of printouts from back-up tapes showing, amongst other things, that Darren Brown’s charge out rate, was of $105 per hours. In my view it would be unlikely that Darren Brown would keep time-sheets relevant to attending to the matters the subject of this claim. I accept that it would be likely that it would be necessary for Darren Brown to attend to administrative matters, as a result of the order made on 7 May 1993 and the consequences of the same which included the proceedings being again before the court on 13 May 1993. The attendances at court, in my view, were directly related to and caused by the plaintiff’s application for injunctive relief on 7 May on which day the ex parte interim order was made against the fourth defendant and also the hearing of the proceedings insofar as it related to the fourth defendant on 13 May. One would expect that, at best, a person such as Darren Brown attending to these matters would make an estimate of the time spent. In my view the estimate of the time spent does not appear to be excessive. I am satisfied that under this head the fourth defendant suffered damages in the sum of $1,837.
The next claim of the fourth defendant to be considered, is a claim for $6,120, it being alleged that in consequence of the injunctive order made on 7 May 1993 Burwood Discounts reduced the limit of debt able to be factored by the fourth defendant with it from $100,000 to $65,000, which in turn caused staff to be engaged in additional administrative work in order to manage the fourth defendant's cash flow.
In his affidavit sworn 29 March 2000 Darren Brown exhibited a letter from Burwood Discounts to the fourth defendant dated 15 July 1993. That was marked for the attention of Darren Brown and signed by one Kadane on behalf of Burwood Discounts. In that letter Kadane referred to a letter previously sent to the fourth defendant. The writer stated that he wished "to restate the instructions given to me by the directors of my company limiting your future factoring to $65,000." Kadane further stated – "this is due mainly to unresolved problem between yourself and Inscorp Pty Ltd. You will understand that under these circumstances the action of limiting your factoring balances became necessary." In his affidavit Darren Brown deposed that such reduction increased the workload and cash flow management of the fourth defendant dramatically. He deposed that two employees Natalie Ingall and Anne-Maree McCombe had to spend approximately three hours per week for 24 weeks engaged in "balancing" the fourth defendant's "cash flow management". The claim of the fourth defendant as relative to this matter is a claim that these persons were engaged for a total period of three hours per week for 24 hours on administrative work which was not chargeable and that thereby the fourth defendant suffered loss.
Kadane was called as a witness on behalf of the fourth defendant. In an affidavit sworn by him on 19 April 2000, he deposed that the fourth defendant was one of approximately 12 clients of Burwood Discounts and that the fourth defendant was the second biggest client of Burwood Discounts. He further deposed that Burwood Discounts purchased book debts of the fourth defendant on a basis once or twice a week which debts were current debts. Kadane further deposed that in May 1993 he personally became aware of the proceedings by the first plaintiff and instructed solicitors to oppose the injunction sought by the first plaintiff against Burwood Discounts which was named as one of the defendants in the proceedings.
The summons of the plaintiff's issued on 5 May 1993 seeking interlocutory relief was directed to Burwood Discounts alone. On the return of that summons on 7 May 1993 Burwood Discounts were represented. It was on the return of that summons that orders were made against the third, fourth and fifth defendants. Kadane exhibited to his affidavit the letter dated 15 July 1993 signed by him and previously referred to. In his affidavit Kadane deposed that the reason for Burwood Resources reducing the limit on the factoring balance from $100,000 to $65,000 was, "that the injunction caused me and Burwood Discounts grave concern as to the future viability of the fourth defendant." He also deposed that, "the interlocutory injunction was lifted prior to 14 July 1993, the proceedings remained on foot in which injunctive and other relief was sought".
In evidence Kadane said that the effect of the injunction was that for a week or thereabouts Burwood Discounts could not use any cheques that were paid for invoices that had been factored. He said that Darren Brown could not deposit them and they kept them until the result of the injunction became known. In evidence Kadane said that he would have known that the injunction was lifted on 13 May 1993. He was asked how the injunction affected the relationship of the fourth defendant with Burwood Discounts in relation to the facility that had been granted to the fourth defendant. He replied, "We didn't exactly jump for joy when it happened. We sent a letter to Brown and in view of what had happened demanded that the accounts factored be reduced drastically down to $60,000, the outstanding account from $100,000 which was previously the case." He identified the letter that was sent and being that exhibited to his affidavit and dated 15 July 1993. Kadane was referred to this letter and that part relating to Burwood Discounts limiting the future factoring to $65,000 and it being said that that was, "due mainly to unresolved problems between yourself and Inscorp Pty Ltd". He was asked what was meant by that. He replied that the directors of the company felt that in view of the injunction and in view of the problems that Inscorp seemed to have lodged against the company that Burwood Discounts should play it safe and that it was a commercial decision of the directors of Burwood Discounts.
There was also produced the letter of 14 July 1993 from Burwood Discounts to the fourth defendant, marked to the attention of Darren Brown, was also signed by Kadane. This was the letter which was referred to in the letter of 15 July 1993 as the “letter of yesterday”. In that letter Kadane stated that he had been advised by Robert K. Brown that on 30 June 1993 the company, "Robert K. Brown & Co (Boronia) Pty Ltd ACN 058 578 466 with which we have factoring arrangement has changed its name to On the Spot Tax Refunds Pty Ltd ACN 058 578 466". In the letter Kadane said, "We understand that the reason for the above change is that On the Spot Tax Refunds P/L is the holder of tax agents licence whereas the previous company was not". He further stated that he understood that, "as from the date of change all invoices will be issued in the name of Robert Brown & Co a business name of On the Spot Tax Refunds Pty Ltd ACN 058 578 466". Further Kadane stated in the letter that, "The directors of Burwood Discounts are rather concerned that any future changes in your company structure are cleared with us prior to putting them into effect". Further Kadane stated in his letter that he had been advised that on 30 June 1993 "a company On the Spot Tax Refunds Pty Ltd ACN 006 830 351 of which we were not previously aware, has changed its name to Robert K. Brown & Co (Boronia) Pty Ltd ACN 006 830 351." Kadane requested that they be advised in writing the reason for making the second change and that it appeared that the company On the Spot Tax Refunds Pty Ltd ACN 006 830 351 had created a new entity of Robert K. Brown & Co (Boronia) Pty Ltd ACN 006 830 351 which had no relationship with the company of the same name incorporated on 18 February 1993 with which they had an existing factoring arrangement. Further by that letter Kadane advised the fourth defendant that the directors of Burwood Discounts were concerned about the slow collection of outstanding accounts of Robert K. Brown & Co Pty Ltd (in liquidation) which amount outstanding as at 14 July 1993 was $41,176.70 whereas the balance outstanding for the fourth defendant was then $65,649.29.
The letter of 14 July 1993 further advised that the directors of Burwood Discounts had consented to the continuation of the factoring arrangements with the company under the changed name of On the Spot Tax Refunds Pty Ltd subject to their solicitor's approval and the recovery of the outstanding old accounts of the company in liquidation. The letter stated, "Until such time they have decided to limit the factoring balance of the present (Boronia) company to $65,000 when a new limit will be considered". In that letter there was no reference to the proceedings as issued by the plaintiffs against, inter alia, the fourth defendant and Burwood Discounts nor was there any reference to the order made in the proceedings on 7 May 1993. In cross-examination Kadane said that it was correct that he was concerned when he found out there had been a switch of names on 30 June and that he wasn't sure which company his company was dealing with. He agreed that he was sufficiently concerned that he requested Darren Brown to advise in writing as to the reason for the switch of names. Kadane agreed that the directors of Burwood Discounts were concerned by the name switch from one entity to another. He further agreed that for some time prior to 14 July 1993 the directors of Burwood Discounts were concerned about the slow rate of recovery of the outstanding accounts of the company Robert K. Brown & Co Pty Ltd. In cross-examination Kadane said that a reason but not the sole reason why the amount that the company could factor its debts was $65,000 was that one of the entities in that known as the "Brown account" had some $41,000 in outstanding accounts. Kadane further agreed that taking the sum of $41,000 outstanding on the account of Robert K. Brown & Co Pty Ltd (in liquidation) and the balance outstanding on the fourth defendant’s account, being $65,000, which totalled a little over “$100,000”, that was the maximum that he wished that the "Brown Group" would factor through his organisation. Kadane agreed that shortly prior to 14 July 1993 the wish that he had in respect of the account, "the Brown account" which was conducted through a number of entities was that the account of Brown factor no more than $100,000. He agreed that they had reached that limit by 14 July 1993. He agreed that $41,000 odd of that money was owed by a company in liquidation and that $65,000 odd was owed by the entity which commenced some time around February 1993. He agreed that he had concerns that he may not be able to recover all the moneys owed by the company in liquidation. He agreed further that he had concerns that there had been a name change in respect of the company which he knew nothing about. He agree that he required that Burwood Discounts be notified of any further changes in the company structure. He agreed that the amount by which he reduced the facility to factor debts, that is with respect to the fourth defendant, was approximately the same amount that was then owed to Robert K. Brown & Co Pty Ltd (in liquidation). Kadane was asked, "And the reason why you sought to factor, reduce the amount that the companies as a group could factor because you had those concerns you wouldn't in fact recover all of the moneys owed by Robert K. Brown & Co Pty Ltd (in liquidation)?" He replied, "I would say yes".
In re-examination Kadane was taken to the matters which he said were of concern to Burwood Discounts, and which he had referred to in giving his evidence in cross-examination and then he was asked, "Did anything concern you and cause you to reduce the limit to $65,000?" He replied, "Well, the injunction matter started the alarm bells ringing".
The first question to be addressed with respect to this claim is whether it has been established by the fourth defendant that the order made on 7 May 1993 enjoining the fourth defendant as provided by its terms, caused Burwood Discounts to reduce the limit of the factoring facility available to the fourth defendant from $100,000 to $65,000. Kadane was aware that the injunction was discharged on 13 May 1993. The letter written by him on 14 July 1993 made no reference to the imposition of the injunction as a reason as to why the directors of Burwood Discounts had decided to limit the factoring balance available to the fourth defendant. Rather in that letter Kadane advised that the directors of Burwood Discounts had consented to the continuation of the factoring arrangements with the fourth defendant under the changed named of On the Spot Tax Refunds Pty Ltd subject to the solicitors for Burwood Discounts approval and the recovery of the outstanding old accounts of Robert K. Brown & Co Pty Ltd (in liquidation). Specifically Kadane informed the fourth defendant that until such time that it obtained the approval of its solicitors and the recovery of the outstanding old accounts of Robert K. Brown & Co Pty Ltd (in liquidation) the directors had decided to limit the factoring balance available to $65,000. Further in the letter of 15 July 1993 Kadane stated that the limit of the factoring facility to $65,000 was due "mainly to unresolved problem [sic] between yourself and Inscorp Pty Ltd" In neither of those letters did Kadane state that the injunction caused him and Burwood Discounts grave concern as to the future viability of the fourth defendant. I am unable to be satisfied that the imposition of the injunction on 7 May 1993 as its effected the fourth defendant, caused Burwood Discounts to reduce the discount facility available to the fourth defendant. Accordingly under this head of damages the fourth defendant fails.
The next claim of the fourth defendant to be considered is that particularised in its statement of claim as “legal expenses” - $11,313.35.
In his affidavit sworn 29 March 2000 Darren Brown has deposed that he had sighted invoices and related documentation from solicitors, Peter J. Howse and Mulcahy Mendelson & Round supporting a total claim of $12, 031.03. The documents alleged to support this claim were those exhibited to the affidavit of Darren Brown and marked “DKB13”. Those documents comprise a bill of account from Peter J. Howse, solicitor, addressed to Mr R.K. Brown, dated 7 March 1994 and a bill of account from Mulcahy Mendelson & Round, solicitors, addressed to Burwood Discounts dated 28 September 1993. The solicitor, Peter J. Howse, was the solicitor acting on behalf of the fourth defendant in the proceedings. Mulcahy Mendelson & Round, solicitors, acted on behalf of Burwood Discounts in the proceedings. It is alleged that the fees of Mulcahy Mendelson & Round were payable by the fourth defendant pursuant to cl. 17 of the Factoring Agreement.
That agreement was exhibited to the affidavit, of Muir. By cl. 17 of the agreement it was provided that:
“17.The Vendor [the fourth defendant] further covenants with the Purchaser [Burwood Discounts] that the Vendor will from time to time upon demand indemnify the Purchaser against and pay to the Purchaser: -
(a)all costs, fees, charges, expenses and legal costs, charges and fees including fees on a solicitor and client basis incurred or paid by the Purchaser of and incidental to this Deed, and any Security for the obligations of the Vendor hereunder and the preparation, execution and completion thereof or any discharge thereof (in whole or in part) or any matter arising out of or incidental to this Agreement or the performance or failure to perform of the Vendor or any party to this Deed or Guarantor of the covenants and obligations on their part herein contained or contained in any security or Guarantee as aforesaid;”
The claim made by the fourth defendant under this head of alleged damages was the difference between the costs of the fourth defendant’s solicitors as rendered to the fourth defendant, ($18,678.23) less the amount recovered from the plaintiffs on taxation ($10,082.80) being $8,596.43 together with the amount that the fourth defendant paid to Burwood Discounts being its cost of the proceedings not recovered on taxation. Accordingly, the claim of the fourth defendants in respect of each incident as to costs is the difference between solicitor client costs and party party costs.
As to such costs of Burwood Discounts as paid by the fourth defendant, I am of the opinion that the costs incurred by Burwood Discounts in the proceedings did “arise out of” and were “incidental” to the factoring agreement existing between the fourth defendant and Burwood Discounts.
However, that which must be addressed is whether at the time that the plaintiffs gave their undertaking as to damages with respect to the orders made restraining the fourth defendant and Burwood Discounts from “transferring, disposing, assigning, encumbering, or otherwise dealing with any of the client files and the good will and book debts” identified in the order, was it reasonably foreseeable by the plaintiffs or did they have notice that if they were unsuccessful in their claim for interlocutory injunctive relief against the fourth defendant in its relationship with Burwood Discounts, by virtue of a clause in the factoring agreement the fourth defendant would be obliged to pay to Burwood Discounts, the difference between the costs ordered by the court to be paid by the plaintiffs to Burwood Discounts and the solicitor client costs of Burwood Discounts. Although it may be concluded that as evidenced by their statement of claim, the plaintiffs were aware of “a mortgage debenture “given by the fourth defendant to Boronia Discounts the conclusion I have reached is that it has not been established that the plaintiffs ought to have foreseen or that they had notice of the obligations of the fourth defendant to Burwood Discounts pursuant to cl. 17(a) of the factoring agreement.
As to the claim that the fourth defendant has suffered damage in consequence of the order made on 7 May 1993 which was discharged by order of the court on 13 May 1993 and being the difference between the costs that it paid to its solicitors as against that recovered on taxation and paid by the plaintiffs, the conclusion that I have reached is the amount claimed is not recoverable by the fourth defendant in the proceedings. The order made on 13 May 1993 on it being ordered that the plaintiff’s summons be dismissed, was that the applicant (the plaintiffs) pay the defendants taxed costs including reserved costs. The order made as to costs was not that the plaintiffs pay the fourth defendant’s costs to be taxed on a solicitor client basis or an indemnity basis. The claim now made as to damages under this head, in effect seeks to go behind the order made and in effect the fourth defendant claims that it should have been ordered that the plaintiffs pay the fourth defendant’s costs on a solicitor client basis. The trial judge determined that the fourth defendant should have its costs against the plaintiffs on a party/party basis. That was the limit of the plaintiffs’ liability to the fourth defendant as to costs. That being the case, in my view, there is no room now for the fourth defendant to recover against the plaintiffs in these proceedings, and, by way of damages, the additional amount now claimed. Under this head the fourth defendant is not successful against the plaintiffs.
As the fourth defendant did not pursue its claim for damages, being that identified as loss of goodwill, I turn next to the claim for damages for the loss of a sale by the fourth defendant of its business. The amount claimed is $16,225, it being alleged that that was the total amount of moneys paid by the fourth defendant to accountants, solicitors and personnel and management consultants relevant to the sale of the business which the fourth defendant alleges that it lost in consequence of the order made against the fourth defendant on 7 May 1993. In his affidavit sworn on 29 March 2000 Darren Brown deposed that the fourth defendant had been negotiating a sale of its practice to Devendra Desai and Deerhan Naran which agreement had been executed by all but one party as at March 1993. A copy of the agreement produced, identified the fourth defendant, Silverleaves Holdings Pty Ltd, D.C.M. Brown Investments Pty Ltd and Darren Kingsley Brown as “the vendor”. Burwood Discounts were identified as “the debenture holder” and Devendra Desai and Deerhan Naran were identified as “the purchaser”. Cherry Hill Way Pty Ltd was identified as “the guarantor”. The sale price as stated in the contract was $410,000. Part of that sale price, $46,155, was identified as chattels owned by Silverleaves Holdings Pty Ltd. By the recitals to the contract of sale it is stated in part that the “vendor” owns an accounting practice conducted under the name of “Robert K. Brown” and that such name was a business named registered under the name of “Robert K. Brown & Co (Boronia) Pty Ltd”. By cl. 2 of the agreement it was provided in part that Burwood Discounts, the debenture holder, in consideration of receiving all payments due in respect of the debenture “shall assign to the liquidator of Robert K. Brown & Co Pty Ltd (in liquidation) the balance of any debts uncollected and transfer to the purchaser the goodwill (if any) in the business Robert K. Brown & Co Pty Ltd (in liquidation)”. Darren Brown deposed in his affidavit that from the sale of the business the fourth defendant had to pay the liquidator of Robert K. Brown & Co Pty Ltd, L.P. Maxsted of K.P.M.G. Peat Marwick, the sum of $95,000.
In a letter from Maxsted to Darren Brown dated 4 May 1993 and exhibited to the affidavit of Darren Brown, Maxsted made to him a “counter offer”, which in part was that the consideration for the assets of Robert K. Brown & Co Pty Ltd (in liquidation) was to be set at $95,000.
That counter offer was stated to be subject to the confirmation, by the staff of Maxsted, that the debtors of Robert K. Brown & Co Pty Ltd were not substantially different to that stated in a facsimile of Darren Brown dated 22 April 1993 “and also that no substantial developments occur in regards to Inscorp Holdings Limited”. Maxsted required the Sale of Business Agreement to be redrafted to include matters referred to in his letter. Darren Brown in his affidavit further deposed that after the issue of the injunction the purchasers required extra security, which was incorporated in a new agreement. Darren Brown further deposed that at the same time “Maxsted withdrew the offer of $95,000 by reason of the legal proceedings (including the injunction) issued by the plaintiff”. Darren Brown deposed “as a result the sale of the practice was aborted. The fourth defendant could not perform its obligations under the new agreement if no agreement could be reached with the liquidator”. In a letter by Maxsted to Darren Brown dated 17 May 1993, Maxsted withdrew the offer made in his letter of 4 May. In that letter Maxsted after referring to his letter to Darren Brown of 4 May 1993 and referring to that part in which he expressed that his offer was subject to there being no substantial developments occurring in regards to Inscorp Holdings Limited, he further stated:
“You will be aware that there has subsequently been a substantial development with regard to the position of Inscorp Holdings Limited (‘Inscorp’) inasmuch as that company has issued Supreme Court writ No. 1993 No. 6072 naming, inter alia, myself as a defendant. The writ was filed on 4 May 1993 and on 13 May Inscorp unsuccessfully applied to the Supreme Court of Victoria for injunctive relief. In view of this substantial development the counter-offer contained in my letter of 4 May 1993 is withdrawn.”
In his letter Maxsted further stated
“…. I am satisfied that Boronia [Robert K. Brown & Co (Boronia) Pty Ltd] has no legal title in the business and that ownership of the business is subject to competing claims between Burwood Discounts (Australia) Pty Ltd… and Inscorp which are still to be resolved. In view of these competing claims I am not in a position to take part in the sale of the business.”
In an affidavit sworn by Devendra Desai on 1 June 2000 and relied on by the plaintiffs in the proceedings she deposed that all negotiations with the fourth defendant for the sale of the business were conducted through the broker of the fourth defendant and in particular Richard Osborne.
She further deposed that at a time which she could not precisely recall, but she believed it to be in early 1993, Osborne contacted her and told her that the fourth defendant would not be proceeding with the agreement. She deposed that no reason was given to her as to why the vendor was not proceeding with the sale. Further she deposed that at no time was she “informed that Inscorp had obtained an injunction in relation to the assets of the fourth defendant nor was she aware of any litigation involving that company”.
I am satisfied that the order made in the proceedings on 7 May 1993 against the fourth defendant and the effect that it may have had on the fourth defendant did not cause the fourth defendant to be unable to proceed with the sale of the business. I am satisfied that the reason why the fourth defendant was unable to proceed with the sale was that Maxsted, the liquidator of Robert K. Brown & Co Pty Ltd, was not prepared to take part or participate in the sale of the business for the reasons stated in his letter, including that by 17 May 1993 he was satisfied that the fourth defendant had no legal title to the business. On behalf of the plaintiffs it was further submitted that even if it was determined that the order made against the fourth defendant on 7 May 1993 and the effect that such order had on the fourth defendant was the cause of the fourth defendant losing its sale of its business, the sums claimed as damages under this head of claim ought not to be allowed. It is not necessary that I address these matters as I am satisfied that the fourth defendant has not established any entitlement to damages under this head of claim.
As referred to earlier, the fourth defendant ultimately did not seek to pursue its claim for damages under the heading “interest cost on funds expended”. Accordingly for the reasons expressed I conclude that in these proceedings before the court the fourth defendant is entitled to recover $1,837 in damages against the plaintiffs.
It is ordered that in the proceedings by the fourth defendant for damages against the plaintiffs pursuant to the undertaking as to damages given to the court by the plaintiffs on 7 May 1993, there be judgment for the fourth defendant against the plaintiffs in the sum of $1,837 and that the plaintiffs pay to the fourth defendant the sum of $1,837.
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SCHEDULE OF PARTIES
| Inscorp Holdings Limited | First Plaintiff |
| Michael Irvine Wansley | Second Plaintiff |
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| Cash Resources Australia Pty Ltd | First Defendant |
| Venn Milner & Co Pty Ltd | Second Defendant |
| Lindsay Philip Maxstead | Third Defendant |
| Robert K Brown & Co (Boronia) Pty Ltd | Fourth Defendant |
| Burwood Discounts (Australia Pty Ltd | Fifth Defendant |
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