Narain Holdings Pty Ltd v Questco Pty Ltd
[2018] VSC 220
•26 April 2018 (Ex tempore) (Reasons revised 4 May 2018)
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2018 01525
| NARAIN HOLDINGS PTY LTD (ACN 120 783 726) (and others according to the attached Schedule) | Plaintiffs |
| v | |
| QUESTCO PTY LTD (ACN 005 991 499) | Defendant |
JUDGE: | Connock J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 26 April 2018 |
DATE OF RULING: | 26 April 2018 (Ex tempore) (Reasons revised 4 May 2018) |
CASE MAY BE CITED AS: | Narain Holdings Pty Ltd & Ors v Questco Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2018] VSC 220 |
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PRACTICE AND PROCEDURE – Interlocutory injunction – Recovery of chattels from land – Impact on purchaser – Mandatory injunction – Third party interest – Breach of deed of settlement – Serious question to be tried – Balance of convenience – Damages an adequate remedy – Limited relief.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr L Magowan | J+K Law |
| For the Defendant | Mr K Naish | Neylon Legal |
HIS HONOUR:
Introduction
By summons filed today, 26 April 2018, the plaintiffs seek urgent relief in the form of interlocutory injunctions restraining the defendant from settling the sale of properties known as 4, 6 and 8 Rodney Road, North Geelong (Rodney Road Properties). They also seek interlocutory relief compelling the defendant to provide access to the Rodney Road Properties, including keys, to the plaintiffs and their agents for a period of not less than 12 days to enable the plaintiffs to remove certain chattels (Chattels), being chattels referred to in a deed of settlement and release between the parties executed on 17 April 2018 (Deed).
In addition, the plaintiffs seek a declaration that the defendant is not entitled to enforce clause 3.2 of the Deed until the period during which access is sought to the Rodney Road Properties has expired.
The plaintiffs rely on an affidavit of the third plaintiff, Mr Narain, affirmed 24 April 2018 (Narain Affidavit). The defendant relies on an affidavit of its solicitor, Mr Neylon, sworn today, 26 April 2018 (Neylon Affidavit).
Counsel for the plaintiffs has confirmed that he is instructed by each of the six plaintiffs to give the usual undertaking as to damages by each of them.
The relief sought in the summons in the form that it is sought is refused. Having heard further from the parties, a more limited form of relief is to be granted restraining the defendant from selling, transferring or otherwise dealing with the Chattels except for the purpose of removing and storing the Chattels pending further order or trial of this proceeding.
Background
The plaintiffs and the defendant are parties to the Deed. The Deed records the terms on which the parties agreed to resolve earlier disputes between them regarding, among other things: loans made to some of the plaintiffs; securities obtained in respect of the loans; a lease between the second plaintiff (GDM) and the first plaintiff of the Rodney Road Properties; the sale of the Rodney Road Properties to a third party purchaser by the defendant as mortgagee in possession; chattels said to be owned by GDM and located at the Rodney Road Properties; the settlement of the sale to the third party purchaser; and the proposed sale of the Chattels by the defendant.
Details of the background to the earlier disputes are set out in recitals A to Z of the Deed, which are referred to in paragraph 10 of the statement of claim. Additional background is set out in the Narain Affidavit and the Neylon Affidavit. Recitals A to Z of the Deed are in the following terms:
A.Questco is a financier of venture capital activities and a niche lender to commercial borrowers.
B.Narain Holdings, GDM, Ravi Narain, Amrit Narain, Edwina Narain and Christopher Latham are known in this Deed as the “Narain Parties”.
C.Narain Holdings:
(a)is the registered proprietor of the land contained in certificates of title volume 10795 Folio 098, volume 10795 folio 099 and volume 9110 folio 042 being the land respectively known as 4, 6 and 8 Rodney Road, Geelong North in the State of Victoria (“Rodney Road Properties”); and
(b)the majority shareholder of GDM.
D.Edwina Narain
(a)was the registered proprietor of the land contained in certificate of title volume 6412 folio 227 being the land known as 352 to 390 Founds Road, Drysdale in the State of Victoria (“Founds Road Property”);
(b)is the former wife of Ravi Narain; and
(c)was formerly a director of GDM.
E.Ravi Narain:
(a)was formerly a director of Narain Holdings;
(b)is the Authorised Officer of GDM;
(c)is the sole shareholder of Narain Holdings.
F.Amrit Narain is a director of GDM.
G.Christopher Latham is a director of Narain Holdings and GDM.
H.By letters of offer dated 25 October 2005, 20 June 2006 and 23 January 2007 (“Letters of Offer”), Questco offered to make loans to Edwina Narain and Narain Holdings on the terms set out in the Letters of Offer.
I.Pursuant to the Letters of Offer, Questco made loans to Edwina Narain and Narain Holdings (“Loans”) and obtained various securities (“Securities”) in its favour for the Loans including, but not limited to:
(a)real property mortgages over the Rodney Road Properties dated 14 March 2007 and registered as numbers AF002160C and AF002161A (“Rodney Road Mortgages”);
(b)real property mortgages over the Founds Road Property dated 21 November 2005 and 31 October 2007 and registered respectively as numbers AE075476 and AF458943W (“Founds Road Mortgages”);
(a)Guarantees dated 14 March 2007 given by Edwina Narain (“Edwina Guarantees”);
(b)Guarantees dated 21 November 2005, 14 March 2007 and 31 October 2007 given by Ravi Narain (“Ravi Guarantees”); and
(c)Deed of Charge given by Narain Holdings over its assets which charge is registered on the Personal Property Securities Register as number 201112160185135 (“Narain Holdings Charge”).
J.On 6 November 2007 GDM executed a Deed of Charge over its assets in favour of Questco which is registered on the Personal Property Securities Register as number 201112170790132 (“GDM Charge”).
K.Edwina Narain and Narain Holdings first defaulted under the loans on 1 November 2007.
L.By an agreement between Questco and some or all of the Narain parties, Questco and GDM executed a lease dated 15 June 2010 in relation to the Rodney Road Properties whereby Questco was the lessor and GDM was the lessee (“Questco Lease”). In consideration of entering into the Questco Lease, Questco agreed not to take immediate action under the Securities in relation to the Loan defaults.
M.Narain Holdings and GDM executed a lease dated 29 September 2015 (“Narain Holdings Lease”) in relation to the Rodney Road Properties whereby Narain Holdings was the lessor and GDM was the lessee. Questco claims that it consented to the Narain Holdings Lease on the condition that Narain Holdings would put the Rodney Road Properties to public auction.
N.GDM made payments of rent to Questco between 1 June 2010 and 21 March 2017.
O.On or about 23 May 2017 Questco served a default notice dated 23 May 2017 on Narain Holdings under the Narain Holdings Mortgage.
P.On 22 June 2017 Questco issued Supreme Court proceeding number SCI 2017 02381 against Narain Holdings seeking possession of the Rodney Road Properties. Questco obtained judgment for possession of the Rodney Road Properties on 7 August 2017 and obtained possession of those properties on 24 November 2017 pursuant to the execution by the Sheriff of a Warrant of Possession.
Q.Questco claims that it is owed the amount of $6,424,169.08 under the Loans (“Debts”).
R.Questco sold the Founds Road Property as mortgagee with settlement occurring on or about 6 March 2018. The net sale proceeds obtained at settlement were paid in reduction of the Debts.
S.On or about 7 February 2018 GDM issued VCAT Proceeding number BP148/2018 (“VCAT Proceeding”) against Questco seeking injunctive and other relief in relation to the Rodney Road Properties and the chattels contained therein (“Chattels”).
T.On 26 February 2018 VCAT dismissed GDM’s application in the VCAT Proceeding for injunctive relief and made directions in relation to GDM’s damages claim in the VCAT Proceeding.
U.On or about 21 February 2018 Questco sold the Rodney Road Properties as mortgagee (“Rodney Road Sale”). Settlement of the Rodney Road Sale is scheduled to take place on 20 April 2018.
V.By a notice dated 7 March 2018 Questco gave notice to GDM that its tenancy of the Rodney Road Properties under the Questco Lease would terminate on 13 April 2018.
W.Questco claims that GDM is indebted to it in the amount of $95,536.26 (“GDM Debt”).
X.By notice dated 28 March 2018, Questco gave notice under the Personal Property Security Act to GDM and Narain Holdings that it intends to sell the Chattels by public auction to be held on 16 April 2018 (“Chattels Auction”).
Y.On 3 April 2018 GDM issued a second application (“Second Application”) for an injunction in the VCAT Proceeding. The Second Application was heard by VCAT on 6 April 2018 and orders were made on 10 April 2018 which, inter alia:
(a)dismissed the application to prevent the Rodney Road Sale from settling; and
(b)prevented the Chattels’ Auction taking place until further order.
Z.The parties have agreed to resolve all matters referred to in these Recitals in accordance with the terms and conditions set out in this Deed.
As recorded in the Deed and the Narain and Neylon affidavits, the earlier disputes were the subject of VCAT proceeding BP148/2018 (VCAT Proceeding) commenced by GDM which, pursuant to the terms of the Deed, were dismissed by consent earlier in April 2018. One aspect of the earlier disputes related to GDM’s desire to remove the Chattels from the Rodney Road Properties.
GDM contends that the Chattels have special value to it in connection with its business, being a business involving the manufacture of a range of certified organic and natural products for cleansing and sanitising.
Prior to the time the parties resolved their disputes by entering into the Deed, GDM had sought and obtained from VCAT an interlocutory injunction restraining the defendant until further order from selling or offering to sell by public auction or otherwise the ‘goods’ — which I infer included or comprised the Chattels — unless by agreement between the parties. That order and other orders were vacated as part of the resolution of the disputes pursuant to the terms of the Deed.
Clauses 2 and 3 of the Deed set out the terms upon which the parties agreed the Chattels would be dealt with. They provide as follows:
2.THE PAYMENTS
2.1The Narain Parties will pay to Questco the sum of $50,000.00 (“Settlement Sum”) no later than 5.00 pm on 14 April 2018.
2.2The Settlement Sum will be paid to by way of clear funds into the trust account of Questco’s solicitors, Neylon Legal, the details of which are as follows:
Bank: National Australia Bank Ltd
Account name: Neylon Legal Trust Account
BSB: 083 028Account number: 42 001 7052
2.3Once the Settlement Sum is paid in accordance with this clause it will become the absolute property of Questco and will not be refundable to the Narain Parties under any circumstances.
3.REMOVAL OF CHATTELS
3.1On Questco receiving confirmation that the full amount of Settlement Sum has been received into the trust account of Neylon Legal, the Narain Parties will remove all of the chattels (but not any of the fixtures) from the Rodney Road Property and they agree as follows:
(a)All of the Chattels at the Rodney Road Properties, both inside the buildings and outside the buildings, will be removed to the reasonable satisfaction of Questco. For the avoidance of doubt, the Narain Parties will not leave any Chattels at the Rodney Road Properties when the removal of the Chattels has concluded in accordance with this Deed;
(b)The Chattels will be removed with care and without causing any damage to the buildings at or the grounds of the Rodney Road Properties. Should the Narain Parties cause any damage to the Rodney Road Properties, they will be liable to Questco for such damage;
(c)The Narain Parties will arrange for the services including but not limited to electricity, gas and water to be cut and sealed by qualified tradesmen to the reasonable satisfaction of Questco;
(d)The Narain Parties will remove all of the Chattels no later than 5:00 pm on 26 April 2018; and
(e)The Narain Parties will be liable for all of the costs of the removal of the Chattels in accordance with this clause.
3.2Should the Narain Parties fail to remove the Chattels by 26 April 2018 in accordance with clause 3.1, Questco will be entitled to sell the Chattels and pay the proceeds of sale in the following order of priority:
(a)First in payment of the costs of the sale;
(b)Secondly in payment of any unpaid storage costs relating to the Chattels;
(c)Thirdly in payment of any costs incurred by Questco due to the failure of the Narain Parties to comply with clause 3.1 including, but not limited to, the costs incurred by Questco due to the delay in settling the Rodney Road Sale;
(d)Fourthly in payment of any amount owing to Questco in relation to the GDM Debt;
(e)Fifthly the balance will be paid to GDM.
Recital U of the Deed records that the defendant sold the Rodney Road Properties as mortgagee and that settlement of the sale is scheduled to take place on 20 April 2018.
Mr Narain has referred to the sale in paragraph 31 of the Narain Affidavit and stated that he believes that settlement of the sale is due to occur tomorrow, 27 April 2018.
Counsel for the defendant confirmed from the Bar table that the settlement date remains 20 April 2018 and informed the court that although settlement has not occurred the defendant has not yet received a notice of rescission.
As mentioned, at the time the Deed was entered into by the parties, there was an extant proceeding in VCAT and GDM had the benefit of an interlocutory injunction granted by VCAT in respect of the Chattels. The VCAT Proceeding was resolved pursuant to the Deed executed on 17 April 2018. At that time it was known by the parties that: (a) the Rodney Road Properties had been sold; (b) settlement of the sale was due to occur on 20 April 2018; (c) the terms of the Deed contemplated that the VCAT injunction and other orders would be vacated and the VCAT Proceeding would be dismissed; and (d) the parties had agreed to a considered regime regarding the recovery and sale of the Chattels including, in particular, specific dates by which the Chattels had to be removed by the plaintiffs.
The right of the plaintiffs to remove all of the Chattels (but not fixtures) was subject to the defendant receiving confirmation that the full amount of the $50,000 Settlement Sum (Settlement Sum) had been received into the trust account of its solicitors.
The Deed also provided that the plaintiffs were to remove all of the Chattels ‘no later’ than 5.00 pm on 26 April 2018.
Pursuant to the Deed, if all of the Chattels were not removed by 5.00 pm on 26 April 2018, then clause 3.2 of the Deed was engaged and provided for the defendant to deal with and sell the Chattels in the manner set out in that clause.
With respect to the events subsequent to entry into the Deed, the evidence reveals that GDM arranged for the Settlement Sum to be deposited in its own solicitor’s trust account on 13 April 2018 but that due to an error in processing the money was not transferred to the defendant’s solicitor’s trust account until 18 April 2018, being the day after the Deed was executed.
On Wednesday 18 April 2018, after providing to the defendant’s solicitor evidence of the transfer of the Settlement Sum, the plaintiffs’ solicitors requested access to the Rodney Road Properties.
Thereafter, written and verbal communications passed between the parties’ solicitors regarding the request for access, removal of the Chattels, insurance, trade qualifications, and other matters. The plaintiffs and the defendant characterise this conduct differently and have differences of view as to the nature and flow of communications referred to in the Narain and Neylon affidavits.
It is neither possible nor appropriate at this stage to draw firm conclusions regarding the correct characterisation of these communications or this conduct, each being matters that may ultimately fall for determination at trial.
Whatever be the correct characterisation, it is not in dispute that the plaintiffs were not given access to the Rodney Road Properties to enable them to remove the Chattels or that, to date, the plaintiffs have not been given access or had an opportunity to remove any of the Chattels.
Consequently, the plaintiffs allege in the writ and statement of claim filed today that the defendant breached the Deed by refusing to grant access to the Rodney Road Properties to allow removal of the Chattels, and by insisting that the Chattels be removed by a licensed builder with details of the builder to be provided to the defendant in advance of access being provided. These allegations of breach are made in paragraph 15 of the statement of claim.
In paragraphs 66 to 83 of the Narain Affidavit, Mr Narain deposes to what he says is the effect of not having access to what is there described as the ‘plant and equipment’. He also deposes as to why it is said that the equipment is specialised and has special value to GDM and GDM’s business.
Mr Narain makes reference to the equipment having been acquired over a 20-year period; that it was purchased specifically for the purpose of manufacturing GDM’s products; that it was specialised equipment that cannot be easily replaced; that the cost of buying all the equipment at one time would be exorbitant; that it is impossible to manufacture GDM’s products without the plant and equipment; that if GDM cannot manufacture its products the business will fail; that being denied access will substantially affect income and customers of the business; and that the Chattels are worth more to GDM than any other potential purchaser.
Mr Narain’s evidence is that it will take approximately two weeks to remove the Chattels and that at the time the Deed was ‘submitted’ (which I infer means executed) on 17 April 2018, he, Mr Narain, considered that the equipment could be removed by 26 April 2018.
If what Mr Narain has said is correct, it follows that even if access had been given on 18 April 2018 not all of the Chattels could have been removed by 26 April 2018; although as counsel for the defendant properly acknowledged, it is open to infer that some of the Chattels could have been removed in that time.
The relevant principles
The relevant principles are not in dispute. Granting interlocutory relief is a discretionary matter. In the exercise of the court’s discretion the court must be satisfied that there is a serious question to be tried, in the sense that it must be shown that there is a sufficient likelihood of success to justify the preservation of the status quo pending trial, and that the balance of convenience favours the granting of the injunction.[1]
[1]See generally Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57, 68 [19] (Gleeson CJ and Crennan J) and Bradto Pty Ltd v State of Victoria (2006) 15 VR 65, 74 [39], 82 [84] (Maxwell P and Charles JA).
The requirements of a serious question to be tried and balance of convenience are to be examined together. The court also bears in mind that it should take whichever course appears to carry the lower risk of injustice if it should turn out to have been wrong, in the sense of granting an injunction to a party who fails to establish their rights at trial, or in failing to grant an injunction to a party who succeeds at trial.
Further, an injunction will not generally lie where damages would be an adequate remedy. As the relief sought is discretionary, the court may consider other factors relevant to the discretion, including delay.
As observed in the outline of submissions of the plaintiffs, the Court of Appeal concluded in Bradto that a single test is to be applied and that there is no special test in the case of mandatory injunctions.[2]
[2]Bradto Pty Ltd v State of Victoria (2006) 15 VR 65, 73 [33]–[35] (Maxwell P and Charles JA).
Serious question to be tried
In its written submissions the defendant contended that there was no serious question to be tried regarding the alleged breach of the Deed. During the course of the hearing when addressing this issue the defendant confirmed that it no longer pressed that contention.
There is a serious question to be tried and the defendant’s concession was properly made. Given the common ground regarding the existence of a serious question to be tried it is not necessary to set out detailed reasoning for that conclusion. However, because the strength or otherwise of the plaintiffs’ case is relevant to the exercise of the court’s discretion, attention is briefly drawn to the following.
On the evidence it is not in dispute between the parties to the Deed that it records the terms upon which the earlier disputes were resolved. In this proceeding it is claimed by the plaintiffs that the parties owed obligations of good faith, that the parties owed each other obligations of cooperation, and that there was a further implied term that following payment of the Settlement Sum the plaintiffs were given an unrestricted licence by the defendant to enter the Rodney Road Properties so that they could remove the Chattels. It may also be observed that clause 11.4 of the Deed provided that each party must perform any action necessary to give full effect to the terms of the Deed.
It is also not in dispute that:
(a) clauses 3.1 and 3.2 of the Deed are in the terms referred to previously;
(b) that the object of clause 3.1 of the Deed is to facilitate access to enable the Chattels to be removed;
(c) clause 3.1(b) is not, in terms, qualified by restrictions regarding the qualifications or insurance status of those to be involved in the removal process;
(d) in contrast to clause 3.1(b), clause 3.1(c) of the Deed contains a specific requirement for ‘qualified tradesmen’ to be involved when dealing with the ‘services’, including electricity, gas and water;
(e) the plaintiff sought access on 18 April 2018, although access had been sought a few days earlier but at that time the Deed had not been executed and the Settlement Sum had not been paid;
(f) the defendant has not yet permitted the plaintiffs to access the Rodney Road Properties;
(g) to date there has been no opportunity for the plaintiffs to remove any of the Chattels pursuant to the terms of the Deed; and
(h) as provided in the Deed, the specific time by which all of the Chattels were to be removed by the plaintiffs was 5.00 pm on 26 April 2018, that is by 5.00 pm today.
These briefly stated reasons reveal why there is a serious question to be tried as to whether the defendant is in breach of the Deed by not yet providing the plaintiffs with access to the Rodney Road Properties for the purpose of facilitating the removal of the Chattels.
Damages not an adequate remedy
The plaintiffs contend that damages are not an adequate remedy. Having regard to the evidence of Mr Narain in paragraphs 38 to 40 and paragraphs 66 to 83 of the Narain Affidavit regarding the special value of the Chattels and the impact of not recovering them, I am satisfied that damages may not be an adequate remedy. A similar conclusion was reached by Senior Member Riegler in a related context in his reasons for decision dated 10 April 2018 in the VCAT Proceeding.[3]
[3]GDM Technologies Pty Ltd v Questco Pty Ltd [2018] VCAT 544, 8 at [32].
The reasons deposed to by Mr Narain regarding the special value of the Chattels include the following:
·the Chattels have been selectively and strategically built up over many years;
·recovery of the Chattels will enable the business to be continued;
·GDM needs the equipment to manufacture its products;
·the Chattels were acquired over a 20-year period;
·some of the Chattels were modified to GDM’s specifications to comply with accreditation requirements;
·the Chattels include specialised equipment that cannot be easily replaced, and the cost of doing so at one time would be exorbitant;
·if the defendant sells the Chattels, GDM’s business will be destroyed;
·the Chattels are worth more to GDM than any other purchaser and would cost more than $1 million to replace, but may be worth little if sold;
·the GDM business that has been built up over 20 years will be lost if access to the Chattels cannot be gained; and
·it would take years to rebuild the GDM business from scratch.
This evidence establishes that damages may not be an adequate remedy.
Balance of convenience
The balance of convenience favours refusal of injunctions in the terms sought.
At the time the plaintiffs entered into the Deed they had the benefit of an injunction from VCAT relating to the Chattels but exercised a choice to give up that benefit and replace it with an agreement of the kind reflected in the Deed. The agreed regime contemplated a limited time for removal of the Chattels by the plaintiffs by reference to agreed dates. Even if access had been given to the plaintiffs immediately, or the day after the relevant request, being 18 or 19 April 2018, on the evidence such access would not have allowed sufficient time for the plaintiffs to remove all of the Chattels and, absent further agreement, clause 3.2 of the Deed would have been engaged.
At the time the Deed was entered into, the Rodney Road Properties had been sold to a third party purchaser and settlement was set for 20 April 2018. This was a fact known to the parties and referred to in the Deed. The evidence raised some doubt as to whether settlement had been extended until 27 April 2018 because Mr Narain deposed that he believed it had been extended to that date. However, counsel for the defendant informed the court that the agreed date for settlement remains 20 April 2018. In any event, even if settlement had been extended to 27 April 2018, that is tomorrow.
Further, and importantly, the orders sought impact directly and materially on the rights of a third party purchaser who not only has an equitable interest in the Rodney Road Properties but is not a party to the proceeding and, it can be inferred, is an effective stranger to the dispute. In this regard, I refer to what has been said in paragraphs 24 to 26 of VCAT’s reasons in the VCAT Proceeding[4] and referenced in paragraphs 34 to 35 of the defendant’s submissions. As was observed by VCAT in that related context (excluding footnotes):
[4]Ibid, 6.
24.Further, the interests of the third-party Purchaser is of serious concern. In Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3), Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ commented in reference to the rights of third parties:
In applications to grant interlocutory injunctions, the court is concerned to examine and in appropriate cases to protect, pending the trial, the moving party’s right to relief against that party’s opponent. But the rights of the plaintiff and defendant are not the only rights considered in determining where the balance of convenience lies.
25.The following statement by Cumming-Bruce LJ in Miller v Jackson was approved:
Courts of Equity will not ordinarily and without special necessity interfere by injunction where the injunction will have the effect of very materially injuring the rights of a third persons not before the court.
26.In Bridge Property Investments Pty Ltd v Garland Lot 3 Pty Ltd, Barrett JA, stated further:
[54] When the matter was before the primary judge, Ruby Street [the innocent purchaser] was a stranger to the suit. In deciding whether to grant an injunction, his Honour was bound to consider the injury that the injunction might inflict on such strangers and third parties generally: Maythorn v Palmer (1864) 11 LT 261. His Honour did not do so, as regards Ruby Street. Had he considered the matter, he would have found that Ruby Street, as purchaser under the extant but uncompleted contract of sale, had an equitable interest in the land and that any restraint at all upon the Garland companies in relation to their performance of the contract was, of its very nature, a matter in which Ruby Street had a clear and distinct expectation of being heard. On that basis alone, his Honour should have regarded the balance of convenience as favouring refusal of the interlocutory order.
[55] Ruby Street became a party to the proceedings at the start of the hearing in this court. While its non-party status was thereby resolved, it remained a third party as regards Bridge, the Garland companies and their contract; and the competition, if one may call it that, was between Bridge’s contractual right against the Garland companies, whatever its precise content may be, and Ruby Street’s proprietary right as purchaser under the uncompleted contract with the Garland Companies. Ruby Street’s right is “superior” to that of Bridge, in the sense discussed in Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 530.
27.In my view, a similar situation arises in the present case. Here, an unknown third-party Purchaser has an equitable right. As highlighted in Bridge Property Investments, its equitable right is superior to the mere equity held by the Applicant.
Further, as was submitted by the defendant, the access period sought by the proposed injunctions is greater than that which would have been obtained if access had been given to the plaintiffs immediately on 18 April 2018. Absent some further agreement, at 5.00 pm on 26 April 2018 clause 3.2 of the Deed would have been engaged, at least in respect of the Chattels that remained at the Rodney Road Properties at that time. That date of 26 April 2018 is about half-way through the approximate 14-day period said by Mr Narain to be needed to remove the Chattels.
I do not accept that the plaintiffs have been dilatory. They requested access on 18 April 2018 when the Settlement Sum was paid and then sought to comply with some information requests made by the defendant. I am not in a position to determine, at this stage, the accuracy or otherwise of the information provided by the plaintiffs, but for present purposes that is not material.
Understandably, the main factor relied upon by the plaintiffs is the impact of the loss of the Chattels and the consequences for the business. However, this does not outweigh the other balance of convenience considerations referred to, particularly when regard is had to the rights of the third party purchaser, and the terms of the Deed, the latter of which embodied an agreed regime by reference to specific dates and also involved GDM agreeing to give up the benefit of the VCAT injunction it had previously obtained in respect of the sale of the Chattels by the defendant.
It was submitted by the plaintiffs that the fact that damages may be difficult to quantify is a factor that materially favours the grant of the injunction. Even if it were to be assumed that damages might be difficult to quantify (which at this stage does not need to be decided), courts frequently deal with difficult damages assessment issues and this factor is of little weight in the present context. Further, the interlocutory orders sought by the plaintiffs are seeking to address the circumstances pending the trial of the primary issues in dispute. Accordingly, the submission that the litigation will continue if the relief is not granted is also of little (if any) weight.
Each plaintiff is willing to give the usual undertaking as to damages. I reject the defendant’s implicit submission that I ought not to accept the undertakings or that, on the evidence, the financial position referred to ought not lead to the grant of more limited relief of the kind referred to earlier in these reasons.
The evidence relied upon by the defendant regarding the value of the usual undertakings was a reference in paragraph 28 of the Neylon Affidavit that it is believed that two of the plaintiffs have previously been made bankrupt. Counsel for the defendant properly confirmed that the defendant does not contend that those individuals are now bankrupt, and there is no evidence before me to suggest that they are. Further, no submissions were made or material put forward in connection with the four other plaintiffs who have given the usual undertaking as to damages, two of whom are individuals.
Conclusion
Although relief in the form sought in the summons is not to be granted, having heard further submissions from the parties, it is appropriate to grant more limited interlocutory relief that has the effect of restraining the defendant from transferring, selling or otherwise dealing with the Chattels except for the purpose of removing and storing them pending trial or further order.
The existence of a serious question to be tried has been addressed above.
With respect to the grant of more limited relief and the balance of convenience, not all of that which has been said on the topic remains applicable. With respect to the additional matters raised in this context by the parties, and particularly the defendant who resisted the granting of more limited relief, the balance of convenience favours the granting of an injunction in this more limited form for a number of reasons.
First, it does not impact on the third party purchaser’s rights in the way the orders as originally sought would have.
Secondly, I have accepted that the Chattels have special value and that damages may not be an adequate remedy.
Thirdly, the Deed contemplated an agreed regime that would have seen removal and sale of the Chattels by the defendant if not all of the Chattels had been removed by the plaintiffs by 5.00 pm today, 26 April 2018. As counsel for the defendant understandably submitted, this was a ‘backstop’ for the defendant in the Deed if the Chattels were not removed by the plaintiffs by the agreed time and date.
Fourthly, it has been properly conceded that there is a serious question to be tried as to whether the defendant has breached the Deed by not allowing access. I accept that one can, and in this case should, consider the serious question to be tried issue at the same time as considering matters going to the balance of convenience.
Fifthly, if the plaintiffs are right in their contention that the actions of the defendant have wrongfully deprived them of any opportunity to commence the removal of the Chattels, then even if not all of the Chattels could have been removed before the 26 April 2018 date, the plaintiffs have been deprived of an opportunity to remove whatever Chattels they could have removed by the agreed time and date.
Sixthly, the regime in the Deed contemplated that from 5.00 pm on 26 April 2018 removal of the Chattels would be carried out by the defendant at its expense in the first instance, but subject to the distribution of the proceeds of sale as referred to in clause 3.2 of the Deed.
Seventhly, the usual undertaking as to damages has been provided by the plaintiffs.
Finally, given that it is difficult in the abstract to determine which parts of, or how many of, the Chattels would have been able to have been removed in the relevant period if access had been granted when the plaintiffs contend that it ought to have been granted, if the plaintiffs are right in their contention regarding their allegations of breach, then the effect of the interlocutory injunction will be to preserve the Chattels the subject of the dispute until trial or further order.
With respect to the defendant’s submission that the consequence of the more limited order will be to increase the period of storage and therefore increase the storage costs, this consideration does not outweigh the other matters referred to above, and the balance of convenience remains in favour of the grant of an injunction of the character referred to. It may be observed in this regard that the settlement of the sale will produce a settlement sum, and also that the usual undertakings as to damages have been proffered. Further, the regime contemplated under the Deed is consistent with the defendant rather than the plaintiffs removing such of the Chattels as remain at the Rodney Road Properties after the agreed date and time of 5.00 pm on 26 April 2018.
It is also open to the defendant to seek expedition in relation to the hearing of this matter with a view to minimising the risk of additional storage time.
The declaratory relief sought in the summons amounts to final relief and is a matter for trial.
The precise form of orders will be addressed with the parties.
SCHEDULE OF PARTIES
| S CI 2018 01525 |
BETWEEN
| NARAIN HOLDINGS PTY LTD (ACN 120 783 726) | First Plaintiff |
| GDM TECHNOLOGIES PTY LTD (ACN 091 263 704) | Second Plaintiff |
| RAVI AMRIT NARAIN | Third Plaintiff |
| AMRIT RAVI NARAIN | Fourth Plaintiff |
| EDWINA KATE NARAIN | Fifth Plaintiff |
| CHRISTOPHER JOHN LATHAM | Sixth Plaintiff |
| - and - | |
| QUESTCO PTY LTD (ACN 005 991 499) | Defendant |
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