Muffingrove Pty Ltd v Melridge Mining and Exploration Pty Ltd

[1991] FCA 620

JUDGMENT No. ........ .	G%,	LLI	l
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IN THE FEDERAL COURT OF AUSTRALIA )

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QUEENSLAND DISTRICT REGISTRY	)	No G109 of 1991
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GENERAL DIVISION	)

BETWEEN:	MUFFINGROVE PTY LTD
First Applicant
JAMES WALTON BARKER AND MARY JANE ISABELLA BARKER
Second Applicants

AND :	MELRIDGE MINING AND EXPLORATION PTY
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LTD First Respondent JOHN WATSON OUINN Second Respondent JACK ABBOT BARKER Third Respondent DAVID MURRAY HOADLEY Fourth Respondent

CORAM: HILL J
PLACE: BRISBANE

DATED: 11 OCTOBER 1991

EX TEMPORE REASONS FOR JUDGMENT

evidence was read which, so far as the contract is concerned,	indicated that it was likely that the contract would proceed but
that it was made conditional upon the outcome of the present proceedings.
Further evidence was adduced, however, which led to new issues between the parties emerging. In affidavit evidence from Mr Quinn, there were set out details of assets and liabilities of Melridge, together with figures indicating the value of these respective assets and liabilities. On the basis of the figures produced by Mr Quinn, if the values were ultimately derived, Melridge would have a surplus of assets over liabilities of $935,000.
The second matter was that proceedings had been commenced by Farrow Mortgage Services Pty Ltd which company has a mortgage security over the motel property to secure the sum of approximately $900,000 against a number of named persons, including Mr Barker, Mr Quinn, and Mr Hoadley, but also including a Mr Reddrop and a Mr Orconnor. There was no evidence before me
a director and one would assume that Mr Reddrop was closely as to who Mr Reddrop is, although it appears that Mr O'Connor is
associated with the company in some way, otherwise it is unlikely that he would have entered into a guarantee of indebtedness.
Be that as it may, proceedings have been commenced seeking $905,000, the amount allegedly owing by Melridge to Farrow, together with interest. The proceedings are by way of specially endorsed writ and a possible outcome of them is that summary judgment may be entered against the defendants. This raised, for the first time, the question of the significance that should be attached in determining the balance of convenience in this matter to the fact that two individuals, not in any way apparently involved in the contravention alleged by the applicants of s.52 Trade Practices Act 1974 (Cth) may be prejudiced if the ability to sell or deal with the motel in dispute is affected.
This evidence being read, counsel for the applicants indicated that he proposed to seek leave to call further evidence and desired also to cross-examine M r Quinn. Accordingly, the matter was adjourned until today to enable further evidence to be adduced and to permit such cross-examination as may be required. On 2 October, I made orders in the form discussed at that time, in effect continuing the orders of Mr Justice Pincus, albeit in a slightly different form.
In addition to the undertaking as to damages, I made those orders on undertakings effectively that the applicants would pay in the interim, until final hearing, rent on the basis of one-third of gross receipts, less telephone revenue and further, would bring up to date arrears of rent to the extent, at least, that the rent was calculated on the same basis of one- third of gross receipts, less telephone revenue.
It now appears that the applicants were financially unable to comply with that undertaking. Mr Barker, who gave evidence, said, and there is no reason to doubt it, that at the time he gave the undertaking he believed the amount of the arrears to be less than it turned out to be. I should say that there is, in any event, a dispute between the parties as to the quantum of arrears, which dispute depends largely upon whether amounts paid in the past were for interest or rent. Mr Barker proposes to the court, in effect, that an amount of approximately $8,000 be paid forthwith, I understand that has been at least tendered today, and that the balance be brought up to date in the early new year.

On 26 September 1991, I delivered interim reasons for judgment in this matter. I did so, as I then indicated, because the proceedings had been adjourned until 2 October, by which time it was thought it would be possible to determine whether the contract which had been entered into by Melridge would proceed. When the hearing resumed on 2 October 1991, further affidavit

Mr Quinn was cross-examined, effectively, as to two

matters. Firstly, an attempt was made to suggest that the valuations in part contained in Mr Quinn's affidavit relating to the assets of Melridge were inflated. Mr Quinn admitted that there were other liabilities not declared to the extent of approximately $70,000 and also that an attempt to sell the

offers ranging from $1.3 to $1.7 million, where the figures	combined property in Gladstone had not produced a sale but only	showed Mr Quinn's affidavit as to the combined value of the Gladstone properties was in excess of $2 million.
The other subjectmatter of cross-examinationconcerned the third party purchase of the motel property. It now appears that the arrangement is somewhat more complicated than Mr Quinn previously deposed to in that the sale is not an outright sale for cash, but rather the purchaser of the motel is, in fact, selling to the vendor another property and the two contracts are interdependent in the sense that completion of one cannot occur before completion of the other. The end result, apparently, is that the sale will produce only a cash amount of $500,000 which, of itself, would not be sufficient to pay off Farrow and to enable that sale to take place, having regard to security arrangements which were the subject of some evidence, it would be necessary for additional finance to be arranged by way of a first mortgage of some $500,000 on the new property to be acquired, and by way of a second mortgage, which would have to be ultimately arranged with another finance company.
Apparently, there have been some discussions with that finance company, but those discussions could not proceed far without the obtaining of a valuation, which has not yet taken place. I should say that the failure to disclose the interdependency of the two contracts does not put Mr Quinn in the
most favourable of lights, particularly as he is a solicitor and should be fully aware of the need to disclose all relevant
matters to the court.
It is obvious from a perusal of the matters set out in the interim reasons for judgment that, when considering the balance of convenience and on the facts as they then appeared to be, the most significant matter requiring consideration was the situation of the third party purchase. To some extent, it seems to me that the position of that third party purchaser has ceased to be of great materiality, in that the contract has been made effectively conditional upon the outcome of the litigation. Such a condition, which does not appear in the original version of the contract, was said to have been always part of the agreement between the parties.
One would certainly hope that that was so, otherwise, the contract in the form entered into could well have led the respondents into breach of their undertakings to the court. However, as I also indicated, obviouslythe question of hardship or potential hardship to third parties will be a factor to consider.
The matter is not without difficulty in weighing up where the balance of convenience lies. It is clear enough that the applicants are without means to the extent that they are unable, at least without great difficulty, to meet the agree
payments of a third of gross revenue less telephone revenue, and that difficultywill no doubt be compounded by their undertaking,
if it be accepted, to make up arrears. The asset position no doubt of the respondents appears strong, but is not supported by any evidence of a valuation, and I am left in some doubt as to the figures that may, at the end of the day, be realised.
A lot has been said of the ability of Farrow in the proceedings in the Supreme Court of Queensland to obtain summary judgment, and the consequences that might flow from that summary judgment. In evidence today, M r Quinn indicated that his belief was that there was a substantial defence, at least as to amounts payable for interest, although no defence clearly available in respect of payments of capital.
A bona fide defence, raising a triable issue as to the whole claim would ordinarily be a matter that would avoid summary judgment being entered, or would permit the entry of summary judgment to be set aside. If some part of the claim were admitted, the judgment might be entered into at lease in respect of such part of the claim as was admitted. However, at this stage there is insufficient evidence to form a view as to the ultimate outcome of these proceedings. Suffice it to say that there is some risk of judgment being entered into in whole or in part against, inter alia, the third parties who, on the face of things, appear innocent of any misrepresentation.

I do not pretend that the matter is an easy one. On

the one hand the applicants, if the injunctive relief is not continued, stand to lose a business and a home. Their rights would then, in practical terms, be limited to a claim for damages. The fear of the applicants, at least, is that there may, at the end of the day, be no money available to meet that claim. The position of the respondents is that they, on the face of the documents, are entitled to rent being paid and interest being paid, and it is clear that even the minimum amount of rent, as to which there was some prior agreement, cannot be paid by the applicant nor can arrears of it be brought up to date without great difficulty. There is also the position of the third parties which favours the respondents.

With some hesitation, I have reached the conclusion that the position of the respondents should be preferred. I do so with some regret, but it does seem to me that having regard to the various matters to which I have referred, the balance of convenience probably, but only marginally, favours the respondents. On the whole, there could be greater prejudice to the respondents if the situation stays as it is than, on the balance of probabilities, there would seem to be to the applicants if the injunction be dissolved. The applicants have a claim for damages if they are successful in the proceedings and that claim is brought not only against Melridge but also against individuals, as to whom nothing has been said. No attempt has been made to ascertain whether they have, or do not have, assets

the individuals would have assets with which to satisfy the	available. On the whole, however, it is likely that Melridge and	judgment.
In these circumstances I propose to dissolve the injunctions previously made and then make further directions for the final disposition of the proceedings.

I vary the orders made by me on the previous occasion

in the following terms:

(1) Orders 1 and 2 will cease to have effect, subject to the stay hereafter mentioned.

(2) Order 4 will be varied by deleting "11 October" and substituting "16 October".

(3) I would stay that part of the orders made today relating to paragraphs 1 and 2 of the orders made by me on 2 October until 4pm on Tuesday to permit the applicants, if they so desire, to seek either a further stay or leave to appeal, or both.

(4) The costs of 2 October, the costs occasioned directly in respect of the contractual matter, be borne by the respondents; the remaining costs be costs in the cause.

I certify that this and the

preceding eight (8) pages

are a true copy of the Reasons

for Judgment here'n of

Justice "Onour

Associate:

Date: 11 #itob$ 1991

Counsel and Solicitors	M.W.D. White Q.C and
for Applicant:	P.  J. Baston instructed by
Primrose Couper Cronin Redkin
Counsel and Solicitors	P.H. Morrison Q.C. and D. Savage
for Respondent:	instructed by Phillips Fox
Dates of Hearing:	11 October 1991
Date Judgment Delivered:	11 October 1991