Newrab Pty Ltd v Fogarty
[2018] WASC 239
•30 JULY 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: NEWRAB PTY LTD -v- FOGARTY [2018] WASC 239
CORAM: SMITH J
HEARD: 30 JULY 2018
DELIVERED : 30 JULY 2018
FILE NO/S: CIV 2400 of 2016
BETWEEN: NEWRAB PTY LTD
Plaintiff
AND
MARC FOGARTY
Defendant
Catchwords:
Interlocutory injunction - Defendant seeks an order restraining the plaintiff completing the sale of real property - Whether a pre-existing cause of action - Whether defendant has a legal or equitable right in the property - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 237
Rules of the Supreme Court 1971 (WA), O 4 r 3(2)
Result:
Defendant's application for an interlocutory injunction dismissed
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr C McIntosh |
| Defendant | : | In person |
Solicitors:
| Plaintiff | : | Muries Lawyers |
| Defendant | : | In person |
Case(s) referred to in decision(s):
Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199
HPM Pty Ltd v Fear [2002] WASCA 249
Siskina (Owners of the Cargo Lately Laden on Board) v Distos Compania Naviera SA [1979] AC 210
SMITH J:
(This judgment was delivered extemporaneously on 30 July 2018 and has been edited from the transcript.)
The result
After hearing from the parties to this action, I made an order that the defendant's application for an interlocutory injunction be dismissed. The reason why I made this order is that the defendant was unable to show that he has a legal or equitable right or interest in the property the subject of the application.
The application
By a chamber summons filed on 26 July 2018, the defendant makes an application for an interlocutory injunction to restrain the plaintiff from proceeding with the completion of the sale of real property, namely lot 1502 Anderson Road, Karratha on plan 213939, being the whole of the land in certificate of title, volume 1927 folio 140.
Completion of the sale has been arranged by the plaintiff, a third party (purchaser) and the plaintiff's mortgagee to take place at 3.15 pm on 31 July 2018 by the exchange of funds and executed documents, including a transfer of land for registration by the titles office.
The right to apply for injunctive relief is dependent upon there being a pre‑existing cause of action against the party sought to be restrained out of an invasion, actual or threatened, of legal or equitable right of the applicant for enforcement of which the other party is amenable to the jurisdiction of the court.[1]
[1] Siskina (Owners of the Cargo Lately Laden on Board) v Distos Compania Naviera SA [1979] AC 210, 256.
It is clear that interlocutory relief will not lie where there is no right to final relief. Whether there is a prima facie case turns on the governing consideration that the requisite strength of the probability of ultimate success depends upon the nature of the rights asserted and the practical consequences likely to flow from the interlocutory orders sought.
An applicant for an interim injunction must be able to show a sufficient colour of a right to final aid of which he or she seeks an interlocutory injunction.[2] The purpose of an interlocutory injunction is to preserve the status quo until the hearing of the main action. That is, the status quo of the state of affairs during the period immediately before the making of the application.
[2] Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199.
The question that requires determination in this application is what is the status quo and can the defendant demonstrate a prima facie case of the existence of an underlying cause of action which would entitle him to an interest in the land in question.
In support of the application, the defendant, in an affidavit sworn by him on 24 July 2018, stated that the property is an asset in dispute in this action and in other actions that are yet to be instituted against the plaintiff by him and possibly by another company in respect of which he is a director.
Interests pleaded by the defendant in CIV 2400 of 2016
CIV 2400 of 2016 commenced by the plaintiff filing a writ of summons endorsed with a statement of claim filed on 17 August 2016.
The plaintiff is and was the proprietor of the land in question. The defendant is a director of Aspect Inspection Services Pty Ltd in liquidation (Aspect).
The plaintiff and Aspect entered into a lease of the land for a term of 60 months commencing on 7 November 2013. It is common ground that the defendant guaranteed Aspect's obligations pursuant to the terms of the lease.
The defendant claims in his defence and counterclaim filed on 28 March 2017 that there was not only an agreement to lease the land, but an agreement to purchase part of the land known as lot 2.
A dispute subsequently arose between the parties about the lease and about non‑payment of rent and expenses.
A liquidator to Aspect was appointed on or about 17 November 2015.
At the time the writ was filed, the defendant was in possession of the land.
The plaintiff claims, in the statement of claim, non-payment of rent, expenses, outgoings and management fees and seeks orders that:
(a)the defendant give to the plaintiff possession of the land, an order that the defendant pay the plaintiff the sum of $153,088.77 and rent and outgoings from 18 April 2016 to the date that the defendant gives up possession or judgment, whichever is the sooner; and
(b)in the alternative, an order that the defendant pay mesne profits to the date that the defendant gives up possession or judgment, whichever is the sooner.
After the writ was filed, the defendant conceded possession of the land on 1 November 2016, and vacated the premises by at least 16 January 2017.
An affidavit of a director of the plaintiff, Neil Wayne Gillett, sworn on 2 December 2016, deposes that as at 21 November 2016, the plaintiff's claim for rent, outgoings and management fees on the outgoings was $233,803.20.
The defendant raises in his defence and counterclaim a claim of misrepresentation. The claim of misrepresentation is made in fact, which is pleaded as a misrepresentation induced by the plaintiff, which caused Aspect to enter into the agreement to lease, and the defendant to enter into the guarantee agreement. In effect, the defendant pleads that he is entitled to rescission of the guarantee.
The defendant in his counterclaim claims damages against the plaintiff on grounds that he and Aspect expended in excess of $200,000 on the development of the property in reliance of promises that:
(a)firstly, if Aspect incurred any costs associated with the subdivision of the land, the costs would either be reimbursed by the plaintiff or offset against future rent payments; and
(b)secondly, the plaintiff would subdivide the property to facilitate the completion of the sale of lot 2 of the property to Aspect.
The subdivision of the property did not and, at the time this application was made, has not occurred.
It is notable that it was a term of the lease that:
(a)the cost of the fitout of the premises was to be paid by Aspect and was to cost $58,600 inclusive of GST;
(b)the amount claimed from the plaintiff by the rent would be reduced to $2,866.66 per month plus GST over an 18 month period; and
(c)the defendant was to construct a car park and complete landscaping, the cost of which was to be added to the amount of $58,600 and apportioned over an 18 month repayment period.
The defendant makes two claims for damages in the counterclaim:
(a)The first is damages for loss and damage he suffered as a result of Aspect's loss of business opportunities.
(b)The second is damages pursuant to the terms of the lease whereby the plaintiff is obligated to reimburse him for expenses which were the responsibility of the plaintiff to pay.
The defendant, in an affidavit affirmed on 29 November 2016, deposes that because the subdivision of the property did not proceed, Aspect was not able to put in place its plans for the premises, including providing adequate warehousing and distribution facilities, and other facilities, which caused the termination of an exclusive distribution contract for protective paint coatings, and other business opportunities, to fail. As a result, it is stated by the defendant in his 29 November 2016 affidavit that Aspect suffered financial stress and went into liquidation.
Importantly for this application, the defendant in the defence and counterclaim in CIV 2400 of 2016 does not claim an interest in the land. The defendant's counterclaim is solely a claim for damages. Nor is there a claim made in the defendant's counterclaim of a claim of specific performance of an agreement for sale or a plea of any claim to possession of the land.
Also of importance, the defendant does not plead in the defence and counterclaim or set out in either of his affidavits the quantum of funds he personally claims he expended on improvements to the land. The defendant simply pleads a global sum which is referred to as an amount expended by Aspect and him.
Actions currently being contemplated by the defendant
During the hearing of this application, the defendant made a submission that he has recently acquired the right to institute fresh proceedings against the plaintiff which would entitle him to an interest in the land. In particular, he contends that it is open to him to make a claim for specific performance of a contract of the sale of the whole or part of the land.
The difficulty with such a claim is that:
(a)the terms of the lease of the land contemplated sale of part of the land following subdivision and a first right of refusal to Aspect to purchase the whole of the land in the event that the subdivision is not permitted by some local or other government authorities or some legal reason; and
(b)the circumstances by which it is pleaded by the parties in the statement of claim and defence and counterclaim in CIV 2400 of 2016 is that the subdivision did not proceed for reasons other than the non-approval of local or other government authorities, nor is there any other matter pleaded upon which a claim could be made that the subdivision did not proceed for legal reasons.
The defendant made a submission that it may be open to him to bring an action for specific performance of contract for sale of the whole or part of the land as a partner of Aspect. However, the defendant has put no evidence before the court which raises an arguable case that he was personally, at any material time, in partnership with Aspect.
The defendant also made a submission that he is entitled to institute proceedings for Aspect's right to specific performance of a contract for sale of the whole or part of the land as Aspect's right to do so has been personally assigned to him by the liquidator of Aspect.
The defendant stated in an affidavit sworn by him on 24 July 2018, that when Aspect went into liquidation and ceased to trade he and the other director of Aspect formed a new company, Active Distributors Proprietary Limited (Active). He also stated that as a result of negotiations with the liquidator of Aspect, the liquidator entered into two deeds of arrangement. The first was for Active to purchase all assets and interests of Aspect. The second was a deed of assignment to assign outstanding legal actions and rights of Aspect to Active.
The defendant, however, cannot act on behalf of Aspect or Active in bringing this application for the reasons outlined by the Full Court in HPM Pty Limited v Fear.[3] Order 4 r 3(2) of the Rules of the Supreme Court 1971 (WA) is to the effect that, except as expressly provided by or under any Act, a body corporate may not begin or carry on any proceeding in the Supreme Court otherwise than by a solicitor.[4]
[3] HPM Pty Ltd v Fear [2002] WASCA 249.
[4] HPM Pty Ltd v Fear [2002] WASCA 249 [22].
HPM Pty Ltd v Fear also considered the well‑known point that s 237 of the Corporations Act 2001 (Cth) requires the leave of the court to be given to bring any proceedings in the name of Aspect as it is in liquidation.[5] Although this point may not be material to this application as no proceedings have yet been instituted, after the points in HPM Pty Ltd v Fear were raised with the defendant in an email from counsel on behalf of the plaintiff on 27 July 2018, the defendant informed the court from the bar table that the deed of assignment had yet to be executed and that the deed, once executed, will assign all outstanding legal actions and rights of Aspect to him personally, and not to Active.
[5] HPM Pty Ltd v Fear [2002] WASCA 249 [18] ‑ [19].
The difficulty with this submission is that, firstly, this submission is contrary to the statement made by the defendant in his affidavit, sworn on 24 July 2018, that the deed of assignment was to assign Aspect's legal actions and rights to Active. Secondly, if this submission (that is contrary to the contents of his sworn affidavit) is accepted, the deed of assignment has yet to be executed. Thirdly, there is no direct evidence of the contents of the proposed deed before the court.
In these circumstances, the only underlying cause of action that could be the subject of proper consideration in determining this application is the cause of action pleaded by the defendant in his counterclaim which is solely a claim for damages.
For these reasons, I am not satisfied that there is a serious question to be tried, or a prima facie case in the sense that if the evidence remains as it is there will be a probability that at the trial of the action the defendant would be entitled to relief that arises out of an interest in the land.
It follows, therefore, the question of whether the balance of convenience favours the granting of an injunction does not arise.
However, even if the defendant was able to make out a prima facie case that there was a serious question to be tried that he has an interest in the land, I am not satisfied that the balance of convenience favours the grant of an interlocutory injunction. The defendant, on his own admission, is unable to give an undertaking as to damages.
If an interlocutory injunction was to issue to prohibit the completion of the sale of the land, the plaintiff and the third-party purchaser would be prejudiced. The plaintiff would incur penalty interest and an interlocutory injunction could result in rescission of the contract of sale to the third party.
Rescission could arise if an interlocutory injunction were to issue because the defendant's claims, if properly made, are not capable of speedy resolution. Thus, an interlocutory injunction would necessarily have to remain in place for some time, which would clearly result in prejudice to the plaintiff and the third party.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
VV
ASSOCIATE TO THE HONOURABLE JUSTICE SMITH10 AUGUST 2018
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