Olex Focas Proprietary Limited & Anor v Skodaexport Company Ltd
[1996] HCATrans 287
TRANSCRIPT
OF PROCEEDINGS
AUSCRIPT
Victoria
Level 7
451 Little Bourke St
Melbourne VIC 3000
GPO Box 1114J
Melbourne VIC 3001
Phone (03) 672 5608
Fax (03) 670 8883
O/N 3992
IN THE HIGH COURT OF AUSTRALIA
MELBOURNE OFFICE OF THE REGISTRY
No M66 of 1996
BETWEENOLEX FOCAS PROPRIETARY LIMITED and OLEX PROPRIETARY LIMITED
Applicants
- and -
SKODAEXPORT COMPANY LIMITED and
HONGKONGBANK OF AUSTRALIA LIMITED
Respondents
DAWSON J (in Chambers)
AT MELBOURNE, WEDNESDAY, 18 SEPTEMBER 1996
MR G. GARDE: I appear with my learned friend, MR M. GARNER, for the applicants (instructed by Freehill, Hollingdale and Page).
MR M. CONNOCK: I appear on behalf of the first respondent (instructed by Maddock, Lonie and Chisholm).
HIS HONOUR: Yes, Mr Connock. There is no appearance for the second respondent?
MR GARDE: There is no appearance for the second respondent, your Honour. The position has been now for some time that the second respondent simply has abided by the outcome of the applications that have been made in this matter.
HIS HONOUR: It is in the middle.
MR GARDE: Yes. Yes, your Honour. Yes, and it - the second respondent has made in essence, no submissions at any stage as to the matter, other than to indicate that it will abide by the outcome.
HIS HONOUR: Mr Garde, I have literally just glanced at some of the papers, so really I think that perhaps you might be just best employed in describing as quickly as possible.
MR GARDE: Yes, I will do that, your Honour.
HIS HONOUR: What the proceedings are and what stage they have reached.
MR GARDE: Yes, if the Court pleases. Your Honour, there is an affidavit which we have put together with some haste in view of the expiration at 4.15 this afternoon of the stay which was granted this morning by the Court of Appeal, and the net effect, your Honour, is that at this stage after 4.15 this afternoon, the outstanding demand made by the first respondent on the performance bond guarantees which are described in the material, will be effective and what that will mean is that upon the HongKongBank taking steps to make payment on those demands, an amount, at this stage in the vicinity of $A6 million will pass in ‑ ‑ ‑
HIS HONOUR: Now, perhaps if I tell you where I have got to and you can fill in the gaps.
MR GARDE: Sorry.
HIS HONOUR: The HongKongBank has guaranteed the payment of the performance bonds and something called mobilisation advances ‑ ‑ ‑
MR GARDE: And procurement of advanced guarantees.
HIS HONOUR: Yes.
MR GARDE: What I would suggest ‑ ‑ ‑
HIS HONOUR: So, there are two parts to the guarantee. Does anything turn on that?
MR GARDE: To some extent, your Honour.
HIS HONOUR: Except in terms of date.
MR GARDE: Yes.
HIS HONOUR: Yes. Now, it has been said that the first respondent has wrongly demanded payment under those guarantees, or under some of them, or under one of them.
MR GARDE: Yes.
HIS HONOUR: And the bank really is in a position of not being able to do anything other than meet the demand.
MR GARDE: Yes.
HIS HONOUR: But it is said that the first respondent is not entitled to the monies.
MR GARDE: Yes.
HIS HONOUR: And therefore not entitled to make the demand, but unless either the first respondent is restrained from making a demand or presumably the bank is restrained from paying out, the payment will be made in accordance with the demand.
MR GARDE: Yes.
HIS HONOUR: And you have mentioned the first performance bond, is the one which involves $6 million, is it?
MR GARDE: Yes.
HIS HONOUR: And, so an action was commenced in the Supreme Court of Victoria.
MR GARDE: Yes, it was.
HIS HONOUR: Claiming interlocutory and permanent injunctions.
MR GARDE: Yes.
HIS HONOUR: Against the making of the demands - demand or demands, and the payment by the second respondent.
MR GARDE: Yes, it was, your Honour.
HIS HONOUR: And Batt J, granted interim - or at least Hampel J granted interim injunctions and Batt J then granted interlocutory injunctions.
MR GARDE: Yes.
HIS HONOUR: For some reason, for which I do not understand, you were not satisfied with that interlocutory order, and you appealed to the Court of Appeal.
MR GARDE: Yes.
HIS HONOUR: The Court of Appeal continued those orders?
MR GARDE: What transpired ‑ ‑ ‑
HIS HONOUR: At least made some order, pending the making a determination of an application for special leave to appeal to this Court against its order.
MR GARDE: Yes.
HIS HONOUR: Yes, all right. Well, that is where my knowledge runs outs.
MR GARDE: Yes. Would it be convenient, your Honour, to look at the injunctions that were granted by Batt J, and just to explain to your Honour why were not satisfied with them.
HIS HONOUR: Where do they appear?
MR GARDE: They appear ‑ ‑ ‑
HIS HONOUR: In Mr Davies' affidavit?
MR GARDE: Yes, they do, your Honour, and it may be a convenient place to start in paragraph 5 of Mr Davies' affidavit. Your Honour will see that by a writ which was dated 12 July 1996 there were proceedings commenced in the Supreme Court of Victoria against the two respondents. You will see, your Honour ‑ ‑ ‑
HIS HONOUR: I have not located paragraph 5 yet. It is on page ‑ ‑ ‑
MR GARDE: Yes, that is page 11 paragraph 5, your Honour.
HIS HONOUR: Thank you.
MR GARDE: And the following page your Honour will see that the purpose of these proceedings was to obtain injunctions which restrained the first defendant which had threatened to call up the bank guarantees at that stage but had not actually done so from making demand upon the bank for payment of the amounts which were guaranteed under the nine guarantees, six of which relate to the mobilisation and procurement advances and three of which, your Honour, relate to performance bonds. At the same time injunctions were sought restraining the second defendant, namely the bank, from making those payments if and when demanded by the first respondent. Declaratory relief in similar terms was also sought.
HIS HONOUR: Yes.
MR GARDE: And application was then made to his Hampel J of the Supreme Court of Victoria on 12 July 1996.
HIS HONOUR: And he in effect made orders in accordance with the first two claims?
MR GARDE: Yes, he did.
HIS HONOUR: Yes.
MR GARDE: And those ‑ ‑ ‑
HIS HONOUR: And ordered a summons seeking interlocutory relief be issued. Well, that was issued and the matter came before Batt J?
MR GARDE: Yes. That transpired. There were various extensions which were granted by several of their Honours before the interlocutory injunction applications were ready to proceed. Yes, and paragraph 8 sets out what transpired there. Now what then happened, your Honour, is this that ‑ ‑ ‑
HIS HONOUR: Just interpolating, I cannot pronounce it but why is this bank - I see, it is the agent of the first respondent?
MR GARDE: Yes, your Honour.
HIS HONOUR: Yes.
MR GARDE: It is the Czech bank which was nominated by the first respondent and is its agent. And your Honour will then see that on 22 July 1996 the orders and other material as directed was served upon the Czech company, the first respondent in Prague and on the following day, the 23 July despite service of those orders the Czech bank saw fit to make demand on the second respondent upon all of the bank guarantees in the entirety of the sums that they secured, your Honour. So that was after the restraining order and it has been always the substance of our case, an important aspect of our case that the demand was in contravention of the orders of the Supreme Court of Victoria which had been served in accordance with the convention on the first respondent.
The first respondent is a foreign corporation. It has its head office in Prague in the Czech Republic. None of the material suggests that it has any assets or presence in Australia, your Honour. And your Honour will see from the statement of claim which was filed with the Court and subsequently amended that the substance of the claims which are made on behalf of the applicants arise from meetings which took place on 3 and 4 July 1996 and what is alleged is this, that in the course of some negotiations which occurred between the two parties on those days in the course of which as Batt J held upon the affidavit material and I think was common to both sides in the course of which admissions were made by the first respondent, by its senior officers, to two officers of the applicant companies that moneys were owed upon outstanding invoices by the first respondent to the applicants so that for - the facts show, your Honour, that for a number of months the invoices of the applicants in relation to this project had not been paid. Meetings then occurred on 3rd and 4th ‑ ‑ ‑
HIS HONOUR: And the first respondent wanted a 25 per cent discount.
MR GARDE: Yes.
HIS HONOUR: I see.
MR GARDE: And what occurred, your Honour, was this that the first respondent acknowledged its responsibility to pay the outstanding invoices less a 25 per cent deduction on two invoices and another 25 per cent deduction on two other invoices that had been previously paid but subject to those aspects, your Honour, acknowledged its responsibility to pay and in the terms of some of the paragraphs of Mr Campbell's affidavit - he was present at that meeting, he is the senior officer of the applicant companies - there was an ultimatum delivered. The substance of that ultimatum was that unless you agree to this proposal and unless you agree to what we say we will call up the bank guarantees.
So that was the position and as a consequence of that instructions were given to make the application which was subsequently made to Hampel J resulting in the orders being made. And the amended statement of claim was drawn on the basis that no demand had in fact been made but that a demand was threatened to be made.
HIS HONOUR: But in fact a demand was made.
MR GARDE: And a demand was made as Mr Hubicic's affidavit which was sworn and filed on behalf of the first respondent is different in some respects from Mr Campbell's affidavit. He deposed to the fact that no ultimatum as such was made so there is a contest which Batt J held to be a serious issue to be tried on that matter, but it is common ground between the parties that a few days later a demand was made in the full amount of the bank guarantees and of course relating to all of the bank guarantees so that that particular difference in the affidavit material as to whether it was an ultimatum or not an ultimatum does not seem to ultimately matter too much.
In addition there was a dispute, your Honour, between the parties which Batt J understandably on the material available at that time was unable to resolve one way or the other, but we were making claims for additional sums for a number of reasons including the provision of late instructions and multiply varied instructions for the construction of software called the Scada equipment in some of the material. This was being undertaken, this work was being undertaken by an Italian sub-contractor, Nuovo Pignone, in Italy and the last set of instructions as to what the software which was to run the telesupervisory and telecommunications system and the control stations along the pipeline was to consist of the last set of instructions were in April or May of this year in accordance with details set out in the material.
The position is that at this meeting on 4 July the first respondent's representatives inquired whether the Scada equipment would be ready by a date later in July. Mr Campbell said he would obtain information from - about that and respond. But they were the circumstances but before any response could be made by Mr Campbell to that request what transpired was that all of the bank guarantees and so on were called up.
HIS HONOUR: And is that the occurrence on which it is alleged that there was a right to payment under the performance bond?
MR GARDE: Yes. No, I think it is fair to say, your Honour, that no particular reason has ever been advanced because ‑ ‑ ‑
HIS HONOUR: Well, then, what is the relevance of that last set of facts you gave to me?
MR GARDE: Well, the only relevance is this, your Honour, that there was a dispute between the parties. We were claiming extras in relation to the delay and some other matters. The first respondent seems to have been saying that it is your fault that this equipment is late, so there was a ‑ ‑ ‑
HIS HONOUR: And therefore we are entitled to be paid under the bond?
MR GARDE: That has not been suggested, your Honour, because the bonds as to six of them related to matters of mobilisation and procurement. Three of them related only to performance.
HIS HONOUR: Yes.
[2.57pm]
MR GARDE: The purpose of the mobilisation and procurement advance bank guarantees was to provide security for the payment of some 15 per cent of the contract price by the first respondent as head contractor to the applicants as subcontractor in order to ensure that mobilisation occurred. 7½ per cent was payable before mobilisation into the locality by the applicant companies, another 7½ per cent upon completion of mobilisation and the procurement side relates to supplies which the - and equipment, of course, which the applicant companies had to procure for the purposes of the contract.
So six of the bank guarantees called up related to that matter, and the contract had an in-built mechanism for repayment of the mobilisation and procurement advance sums and this was accomplished by the deduction of 15 per cent of the value of each and every invoice when progressively rendered by the applicant companies to the first respondent as the head contractor. So as time was going alone and works were being done and moneys were being paid, so those 15 per cents were progressively being deducted.
As a consequence of the advance date of the works with some 95 per cent of all of the necessary supplies and equipment having been installed and something like 70 - in excess of 70 per cent of all of the labour necessary to complete the job having been completed, the mobilisation and procurement advance guarantees were, as to a very significant proportion, already repaid before the calling up of the moneys secured on the mobilisation and procurement advance guarantees and the three performance bonds.
HIS HONOUR: So that the demand on the guarantee was for the full amount of the advance?
MR GARDE: Yes.
HIS HONOUR: Notwithstanding that you say a large proportion had been repaid in any event.
MR GARDE: Yes, it was.
HIS HONOUR: I see.
MR GARDE: And his Honour, Batt J, held that the calling up of the mobilisation and procurement advances in that way was unconscionable and accordingly his Honour found that there was a serious issue to be tried as to that matter.
HIS HONOUR: Yes.
MR GARDE: His Honour also held that the balance of convenience favoured that course of action and our concern which led to the appeal was this, your Honour, that there had only ever been the one ‑ ‑ ‑
HIS HONOUR: Well, now what orders did Batt J make?
MR GARDE: His Honour granted interlocutory injunctions and they are set out ‑ ‑ ‑
HIS HONOUR: On page 19.
MR GARDE: Yes.
HIS HONOUR: Well, you are dissatisfied with those orders?
MR GARDE: Yes.
HIS HONOUR: Or were dissatisfied anyway.
MR GARDE: Yes, we were, your Honour. What I ‑ ‑ ‑
HIS HONOUR: Why?
MR GARDE: Yes. What they order - if I take your Honour to paragraph 1, it says that the first defendant forthwith countermand or cause to be countermanded the demand for payment of the moneys secured by the bank guarantees and there are six of them listed there, issued by the second defendant in favour of the first defendant. That order that the demand be countermanded in those six instances relates, your Honour, to the mobilisation and procurement advance bank guarantee. So his Honour ordered that the demand in those six out of nine cases be counter demanded. His Honour then ordered in paragraph 2 that:
The first defendant be restrained until trial or further order from demanding or receiving a payment of any moneys under the bank guarantees referred to -
that is the mobilisation and procurement advance bank ‑ ‑ ‑
HIS HONOUR: That is the whole - the total of them?
MR GARDE: Yes. Yes, your Honour:
... in excess of the aggregate amount truly outstanding on mobilisation and procurement advances made by the first defendant.
So that was the substance of what his Honour ordered. So that the demand as to the six had to be countermanded and no future demand could be made in excess of the amount truly outstanding on those bank guarantees.
HIS HONOUR: Yes.
MR GARDE: No restraining order was made by his Honour in relation to the demand insofar as it related to the demand made on the performance bonds. So that our concerns, your Honour, were twofold. They related to the performance bonds which had been demanded in circumstances ‑ ‑ ‑
HIS HONOUR: Now, let me get this straight. The guarantees mentioned in paragraph 1 are six out of nine cases, you say?
MR GARDE: Yes.
HIS HONOUR: And they are mobilisation advances?
MR GARDE: Yes, they are.
HIS HONOUR: Yes, and not performance bonds?
MR GARDE: That is so.
HIS HONOUR: Yes.
MR GARDE: Then in round terms, your Honour, what this means as follows that the moneys secured by the performance bond guarantees amount to round about six to six and a half million dollars.
HIS HONOUR: Yes.
MR GARDE: And the amount which had already been repaid upon the mobilisation and procurement advance bonds amount to about four and a half million dollars and the amount which had not been repaid upon the mobilisation and procurement advances amount to about one and a half million dollars.
HIS HONOUR: Yes.
MR GARDE: Now, we say, your Honour, that had the invoices which had been rendered been paid of course further amounts would have been paid in reduction of the outstanding one and a half million dollars or thereabouts concerning the mobilisation and procurement advances. And we say also in relation to the performance bonds that as his Honour, Batt J, found it was admitted by the first respondent that it was in fact indebted to the applicant companies upon the invoices which had been rendered.
HIS HONOUR: Yes.
MR GARDE: And in the proceedings which were brought before his Honour, Batt J, it was claimed in those circumstances under the general law and under section 51AA of the Trade Practices Act 1974 that the restraining orders and declaratory relief sought in the proceedings were well founded.
HIS HONOUR: Now, one can see the difference of opinion by comparing the relief claimed in the statement of claim and the relief actually granted which appears on page 19, is that correct?
MR GARDE: Yes, your Honour. Yes.
HIS HONOUR: Very well.
MR GARDE: The whole purpose of the proceeding was to seek restraining orders from the court in relation to the demands which were made both under the general law and under the Trade Practices Act as it applies to international trade and commerce. Now I will come back to those matters, your Honour, but upon his Honour Batt Js orders being made a notice of appeal was prepared and filed last Friday against the whole of the decision and orders of Batt J which had bene made on 28 August 1996 except as to paragraphs 1, 3 and 8 and they were really, your Honour, those injunctions of course that had in fact been granted but it was sought to, by the notice of appeal, to appeal from his Honour's decision except insofar as it relates to those orders.
A summons was also issued dated 13 September 1996 seeking to preserve the position of the applicant's companies pending the expeditious hearing of the appeal and the orders which were sought in that summons which was dated 13 September 1996 are set out on page 20 of Mr Davies' affidavit and the substance of paragraph 1, your Honour, as it is set out in paragraph 19 is to, in substance, extend the interim injunctions granted by Hampel J on 12 July 1996 until the ‑ ‑ ‑
HIS HONOUR: Now the injunction, the interim injunction, precluded demands being made on any of the guarantees, in respect of any of the guarantees, and payments being made in respect of any of the guarantees?
MR GARDE: It did, your Honour.
HIS HONOUR: Batt J restricted the relief to those ones in which - well, to, in fact, the - and that is where I am not quite clear. What is the difference?
MR GARDE: The missing, the difference between the interim injunctions as granted by Hampel J and the interlocutory injunctions as granted by Batt J relates to the three performance bonds, your Honour. The interim injunctions restrained ‑ ‑ ‑
HIS HONOUR: They relate only to the mobilisation and procurement?
MR GARDE: That is so and to that extent of say four and a half million dollars leaving the potential for the balance of one and a half million dollars ‑ ‑ ‑
HIS HONOUR: Now no demand has so far been made in relation to the performance bonds?
MR GARDE: The demand made in relation to the performance bonds, there has been one demand made, your Honour, and that was the demand made on 23 July calling up everything.
HIS HONOUR: I see, on all the bonds?
MR GARDE: On everything - all the amounts secured, your Honour, on all nine bonds.
HIS HONOUR: That was after the interim order was made by Mr Justice ‑ ‑ ‑
MR GARDE: Yes, it was. The ‑ ‑ ‑
HIS HONOUR: But since his order covered everything it was in breach of that order, you say?
MR GARDE: Yes, it was.
HIS HONOUR: Yes.
MR GARDE: So that regardless of that order and the service of that order everything that could conceivably be called up, your Honour, was called up in substance.
HIS HONOUR: Yes.
MR GARDE: Now it is important also to draw your Honour's attention to the sixth order which Batt J made as set out on page 19 of Mr Davies' affidavit and paragraphs 1 and 2 of course were the interlocutory - 1, 2 and 3 related to interlocutory relief and his Honour granted interim injunctions in the form of paragraph 6, that notwithstanding paragraph 4 of this order that paragraph ‑ ‑ ‑
HIS HONOUR: Well, I have read that.
MR GARDE: Yes.
HIS HONOUR: He in fact extended Hampel Js injunction to the date fixed or ‑ ‑ ‑
MR GARDE: Yes, he did.
HIS HONOUR: ‑ ‑ ‑ was fixed for the hearing of the appeal.
MR GARDE: Yes. Yes, he did, your Honour. So that - the effect of that was in fact to grant interim injunctions and there was a further extension granted by his Honour which is in the same form until 20 September which is next Friday. So that were it not ‑ ‑ ‑
HIS HONOUR: No, it is not, it is Thursday.
MR GARDE: I am sorry, 20th - it was in any event till this forthcoming Friday, your Honour, and the purpose of that was to permit application to be paid to the ‑ ‑ ‑
HIS HONOUR: I am sorry, you are right. No, it is the Friday.
MR GARDE: To the Court of Appeal. There has been a lot happening today, your Honour. We have come here very quickly and ‑ ‑ ‑
HIS HONOUR: Yes.
MR GARDE: So that was the position. Now the notice of appeal was filed and served on the 13th. A summons seeking preservation of the position was issued also and in substance, as your Honour will see from paragraph 1 within paragraph 19, in substance those interim orders were sought to be extended until the hearing and determination of the appeal. So ‑ ‑ ‑
HIS HONOUR: And did the court of appeal make that order? Yes.
MR GARDE: Your Honour, no, the Court of Appeal saw fit to dismiss those applications so giving rise to the immediate problem that we presently face, namely that the bank guarantees except to the extent to which a demand on them was restrained by Batt J can be called as from 4.15 this afternoon in their entirety. A principal concern which we have about that state of affairs is that that defeats the whole object of the notice of appeal and the relief sought to be procured by way of appeal to the Court of Appeal. So that the appeals against his Honour Batt Js order which we say although his Honour held actual unconscionability and granted us interlocutory injunctions that, we say that the orders his Honour granted were too narrow in their scope and so we have appealed and we will take your Honour to the grounds for that in due course but the effect of the dismissal of the summons is that the appeal is rendered nugatory.
We continue to hold the interlocutory injunctive orders granted by his Honour but in all other respects the demand can now, and indeed the bank is called on to meet the performance bond guarantees in their full sum and the mobilisation and procurement advance if and when demanded in the amount of about $1.5 million. So that is the situation that will ‑ ‑ ‑
HIS HONOUR: Well, now, it is a curious situation, is it not, because you are really asking for an extension of Hampel Js interim orders ‑ ‑ ‑
MR GARDE: Yes.
HIS HONOUR: ‑ ‑ ‑ until what?
MR GARDE: Until our application for special leave could be heard and determined.
HIS HONOUR: But what if, in the mean time, the Court of Appeal hears the appeal and dismisses it?
MR GARDE: Well, in those circumstances, your Honour, we ‑ ‑ ‑
HIS HONOUR: Or grants it for that matter. I do not know what it is going to do.
[3.15pm]
MR GARDE: Yes. It appears that at present the listing of the appeal is not likely in the immediate future, despite our entreaties to that effect, but nonetheless ‑ ‑ ‑
HIS HONOUR: What I am putting to you, Mr Garde, is that what you are really asking, more than protecting your rights on an application for special leave to appeal, you are really asking to protect your rights in the Court of Appeal.
MR GARDE: Yes, we are. Yes, your Honour, and the application we made to the Court of Appeal was an application based on the Erinford property principle and like authority, namely that orders should be made by the Court which would prevent the appeal, if successful, from being rendered nugatory and the situation that now obtains, your Honour, is that the moneys concerned will be out of Australia within a short space of time. We are still entitled to prosecute our notice of appeal and appeal to the Court of Appeal.
The whole object of that appeal is to procure the injunctions which have been the purpose of the proceeding from its outset, but once the moneys are gone into a prior bank account, your Honour, it is really quite pointless to continue to prosecute an appeal to seek restraining orders.
HIS HONOUR: Well, there are some difficulties in the way of the application. Maybe they are not insuperable, but there are some. May I put them to you? One I have already put to you in effect.
MR GARDE: Yes.
HIS HONOUR: That for all I know that before the application for special leave to appeal is heard and determined, the Court of Appeal may have delivered judgment in the matter, in which case the interlocutory orders which were made, to which you object as being too little, will have been overtaken or may have been overtaken. Really what you are seeking to do is to preserve the position not so much until the hearing and determination of the application for special leave to appeal but until the hearing and determination of the appeal in the Court of Appeal. That is the first thing.
[3.18pm]
The second thing is that of course you have to show a prospect - a reasonable prospect of success. I do not know if it is put as high as likelihood but you have to show a reasonable prospect of success in your application for special leave to appeal. Now, that would mean that some point of principle must be involved.
MR GARDE: Yes.
HIS HONOUR: Rather than merely the exercise of a discretion in a particular way by the Court of Appeal. And so far no point of principle has emerged over much, you may say, on the facts. You were entitled to the relief which you sought. Well, those are the two things that immediately occurred to me.
MR GARDE: Can I turn to those matters, your Honour. It may be convenient to complete the scenario that has most recently eventuated and then go to those matters if that is convenient to your Honour. And of course we accept that we need to satisfy your Honour as to the matters required by the authorities ranging from Paringa Mining through to more recent decisions by single judges of this court. Simply there are the full requirements, your Honour which we are called on to address.
We must show reasonable or substantial or whatever word is used there, prospects of success. We must show that - of course we have made the necessary application to the, in this case, court of appeal which we have done. We must show of course material which would permit your Honour to be satisfied as to any loss that might be transpired or administered to the first respondent and there is none in this case for reasons that will emerge not only have the usual undertakings been given by a large organisation, a large company, but also as a result of undertakings given this morning to the court of appeal.
The position is that the moneys have to be held in a cheque bank account in Prague or alternatively if the parties agree invested in Victoria.
HIS HONOUR: Why would you say the moneys, what moneys?
MR GARDE: The moneys received upon the payment by the Hong Kong bank on demands made by the first respondent. So that effectively six million dollars as at present in relation to the performance bond and further one and a half million dollars upon the mobilisation and procurement advance bank guarantees are called on to be held in accordance with undertakings that have been given to the Court of Appeal.
HIS HONOUR: And the first respondent has given those undertakings.
MR GARDE: The first respondent has given those undertakings so that ‑ ‑ ‑
HIS HONOUR: And why do you need an injunction?
MR GARDE: Because, your Honour, the effect of those undertakings is that the money is gone.
HIS HONOUR: Into a bank account.
MR GARDE: Into a bank account of the first respondent, in Prague.
HIS HONOUR: Yes.
MR GARDE: So that again there - once the demands are triggered, once the call on the bank guarantees has occurred the appeal which we seek to bring to the court of appeal is nugatory. We can hardly get restraining orders which we seek as the principal relief in the proceedings in these circumstances. So that the action and the appeal is, your Honour, defeated.
HIS HONOUR: While you say well, it is all very well for the moneys to be paid into a cheque bank account but that means they are effectively irrecoverable by us.
MR GARDE: Yes.
HIS HONOUR: And the order of the court in any event is, to say the least, difficult to enforce.
MR GARDE: Yes, it is, your Honour.
HIS HONOUR: Well, you say that, do you?
MR GARDE: We do. There is no - we say there is no real prospect of enforcement of the undertakings that have been given but the enforcement of those undertakings in relation to a foreign company out of the jurisdiction is to say the least most difficult. But on the matter of balance of convenience, your Honour, the difference between the two situations really is that if injunctions are given of the sort which are requested, the moneys of course are securely kept in Australia as against the situation that will now occur namely, that the six million dollars and the additional one and a half million dollars will pass out of Australia into the bank account with the cheque, Commercial Bank of the first respondent in Prague.
What the situation with that account may be, whether it is only an overdraft or whether it is not in overdraft, we simply do not know. I mean for example, if there were a significant overdraft in relation to that account and the moneys go into the account the bank itself may well have rights over those moneys. So we face the very real prospect, your Honour, that once the moneys are gone they are gone and the appeals to the Court of Appeal are so defeated.
HIS HONOUR: And no doubt these arguments were put to the Court of Appeal?
MR GARDE: Yes.
HIS HONOUR: And rejected.
MR GARDE: Yes, your Honour. They were put to the Court of Appeal and they were rejected in favour of the course of requiring the undertakings to be given.
HIS HONOUR: Where is the point of principle which would justify special leave being granted in an interlocutory matter such as this.
MR GARDE: Yes. Your Honour we have prepared and I have to say this was done before we had the benefit of the revised reasons of the Court of Appeal but we have prepared a draft notice of appeal. This document, your Honour, may well need further revision since we now have the reasons for decision and the grounds of the notice of appeal are set out in paragraph two and we submit that the Court of Appeal erred in law when it permitted the bank guarantees to be called and the proceeds transmitted from Australia prior to the hearing and determination of the appeal that the ‑ ‑ ‑
HIS HONOUR: Well what was the basis on which the Court of Appeal refused to make the orders which you sought?
MR GARDE: Reasons were handed down, your Honour. Has your Honour been provided ‑ ‑ ‑
HIS HONOUR: Yes, I glanced at them but they did not mean very much to me at the time because ‑ ‑ ‑
MR GARDE: Your Honour, to some extent the reasons are non-speaking if I can use that term. And it is not all that easy to interpolate as to what the position is. His Honour, Brooking J, at page one refers to the applications to the special arrangements that have been made to constitute a court, Monday after the appeal had been filed. His Honour said, at about the mid stage:
It is undesirable to say anything in disposing of the present application which might embarrass the hearing of the appeal or the trial.
And his Honour then said that he was not persuaded that the appellant should have any wider or further injunctions pending the determination of the appeal in those granted by His Honour, Batt J. That I think was the substance of what his Honour said. At page two his Honour, Tadgell J, said:
I agree. I would add for myself that as presently advised I do not see this case as one in which it can legitimately be said, as the appellants contended, that it is sought to preserve the status quo. Rather, it seems to me it is a case in which an attempt is made to disturb the status quo with respect to the ability of the first named ‑ ‑ ‑
HIS HONOUR: Well, I have read that ‑ ‑ ‑
MR GARDE: So that is what his Honour said in addition.
HIS HONOUR: Well Charles J says well it is a very unusual thing to prevent a demand being made and payment being made under a guarantee of the sort that is involved here. The bank is not usually in a position to judge the legitimacy of the demand and must pay. Maybe section 52AA, is it, of the ‑ ‑ ‑
MR GARDE: 51AA, your Honour.
HIS HONOUR: 51AA of the Trade Practice Act makes an inroad on the Common Law but in all the circumstances he thinks that the orders made by Batt J are adequate.
MR GARDE: Yes.
HIS HONOUR: Well now, where is the principle of law which would require the attention of this Court?
MR GARDE: The principle of law, your Honour, is that - it is the duty of the Court of Appeal, in circumstances such as this, to make orders which will ensure that appeals brought to the Court, if successful, are not nugatory in their nature and it is, we submit, the requirement of law for the Court of Appeal to make orders which preserve the utility of an appeal which was, as of right, to the Court of Appeal. And the appellate process, your Honour, depends on the making of orders of that type. Not only at the Court of Appeal level but also in this Court. And what we submit that by simply permitting, as it were, the process to be defeated in that way there was error of law on the part of the Court of Appeal.
Those principles, your Honour, the errant for properties, the requirement of errant for properties, the requirement of Wilson v Church and other cases are not addressed by their Honours.
HIS HONOUR: But really you are conflating two situations here are you not? The situation where you attempt to stay, as it were, a judgment. I know that is not what you are doing. That is where it is said that if an appeal is - would be rendered nugatory, without a stay of the judgment which is appealed from, then the stay should be granted. That is one thing. But what you are trying to do here is to preserve the status quo and have an interlocutory injunction for that purpose. Now the principle on interlocutory injunctions are granted for that purpose, are subject, as you recognise, to at least two conditions, one that there be a serious question to be tried. Well no one is disputing that here as I understand it. And the second is that the balance of the convenience. And it is a matter of discretion whether the relief is granted or not is it not?
MR GARDE: It is, your Honour. The grounds in the ‑ ‑ ‑
HIS HONOUR: And it must be, surely, a rare case where the status quo is preserved merely by leaving money lie where it happens to be. Because the payment of money is not something that is irreversible. And the fact that you have difficulty because you are dealing with an international company does not alter those principles.
MR GARDE: Your Honour, if the moneys are paid as demanded, not only is the appeal defeated but so for that matter is the action defeated.
HIS HONOUR: Why? If ultimately you succeed. I mean we are only talking about the interlocutory stage. But if ultimately you succeed in the action before - or the one which has been before Batt J, then you will establish your entitlement or not to the moneys which are in question. Perhaps that is putting it simply. You establish your entitlement to recover the moneys if they have been paid or your entitlement to have the moneys not paid. That is what is in issue in the action is it not?
MR GARDE: Your Honour, in terms of our ultimate right, as it were, to seek damages in the proceeding, which is, I think, the substance of what your Honour is putting to me, it is most important and indeed this is an exceptional case in this respect, that the first respondent is a foreign company. It has no assets in the jurisdiction at all. It has no office in ‑ ‑ ‑
HIS HONOUR: Well then what you are doing is attempting to have something that smacks of a Mareva Injunction, which is to prevent the other side - first respondent - from taking, one way or another, moneys out of the country, in order that, if the judgment is eventually given in your favour, the moneys will be there to satisfy it.
MR GARDE: What we are seeking to do, your Honour, is to preserve the prospect that the action, if successful, could result in favourable orders. And in circumstances ‑ ‑ ‑
HIS HONOUR: Yes. Well that is exactly that. You are trying to use the interlocutory injunction you are seeking to secure the payment of anything that is found due to you at the end.
MR GARDE: What we are ‑ ‑ ‑
HIS HONOUR: I think that is a very odd way to use an interlocutory injunction.
MR GARDE: What, your Honour, we are seeking to do is to preserve the possibility that the appeal, if successful, could perhaps ‑ ‑ ‑
HIS HONOUR: In one sense it is to preserve the status quo pending the determination of the appeal.
MR GARDE: Yes.
HIS HONOUR: But the appeal relates to money and unless you have some authority, which I am not aware of, I do not know of any case which preserves the status quo by making money lie where it happens to be. Because the situation with money is not irreversible as it is with other states of affairs in which interlocutory injunctions are granted.
MR GARDE: Your Honour, the matter does go beyond the question of money in that the - as the evidence shows, that is evidence from Mr Campbell - the financial reputation of the applicant companies is also on the line in these circumstances.
HIS HONOUR: Well that is not the subject matter of the action.
MR GARDE: The position is also that the application is made in circumstances where His Honour, Batt J, held that the first respondent had acted unconscionably. So that it is not a situation ‑ ‑ ‑
HIS HONOUR: Well he held there was a question to be tried and no doubt there is.
MR GARDE: Yes. His Honour, in fact, went beyond that but certainly did hold there was a serious issue to be tried. His Honour held there was, on the material that he had from both sides, there was actual unconscionability in terms of the demand that had been made on the ‑ ‑ ‑
MR CONNOCK: Your Honour, I hesitate to rise but I have heard my learned friend put a number of times that his Honour held that certain matters were unconscionable and it is put on the basis that that was held in general terms. What his Honour held was that it seemed to him there was a strong argument that there was unconscionability with respect to that part of the mobilisation advances that had already been repaid, if I can put it in those terms. But he expressly stated, with respect, to the performance guarantees and with respect to the balance that had not been repaid, that he did not see there was a serious issue to be tried as to unconscionability or to fraud and expressly stated that had a demand been made only in respect of the outstanding balances of the mobilisation advances, then there would have been no issue of unconscionability at all.
HIS HONOUR: Yes.
MR GARDE: Your Honour, his Honour held that the demand that had been made, in the circumstances in which it was made, was unconscionable to the extent that it related to the mobilisation procurement advances which had been repaid. His Honour certainly held that there was no serious issue to be tried other than that. And one of the bases on which we have sought to appeal to the Court of Appeal is this: That the demand - there was only ever the one demand. The demand was held by his Honour to relate to sums of money which the first respondent knew that it had no entitlement to and we certainly would seek, in the course of our appeal to the Court of Appeal, to seek orders from their Honours and rulings from their Honours that the unconscionability extended to and included the whole of the demand in those circumstances.
HIS HONOUR: Well, that is not an issue which would worry me at this stage, one way or the other. What I am putting to you is that you have probably gone a long way in getting the relief that you did get in the Court of Appeal pending the determination of the appeal in that Court in that it is an interlocutory - we do have interlocutory injunctions relating to the payment of money on the basis that at least to that extent the status quo should be preserved. Well now ‑ ‑ ‑
MR GARDE: I need to clarify one thing, your Honour, that I have not perhaps put it quite as fully to your Honour as I should. The undertakings given to the Court of Appeal were undertakings to secure the position until the special leave application could be made to this Court. They were not undertakings to secure the position until ‑ ‑ ‑
HIS HONOUR: Yes, you are right.
MR GARDE: ‑ ‑ ‑ the Court of Appeal could hear the appeal which the applicants have brought. So in relation to the appeal to the Court of Appeal, no relief was granted by their Honours and there are no undertakings nor ‑ ‑ ‑
HIS HONOUR: Well that is right, except that - and I was speaking in elliptical terms because you do have your orders from Batt J that that ‑ ‑ ‑
MR GARDE: Yes, we do, your Honour. The Court of Appeal saw fit to discharge the interim injunctions which his Honour had granted additional to and in a sense overriding the other orders which his Honour had made. So the effect of that was that in terms of the appeal to the Court of Appeal there is no protection available to the applicants. And that is the situation if I ‑ ‑ ‑
HIS HONOUR: Batt J extended the interim order until?
MR GARDE: Until next Friday.
HIS HONOUR: Yes, just until next - until an application could be made to the Court of Appeal, yes.
MR GARDE: That is so. In fact what transpired, your Honour, is that the Court of Appeal hearing occurred on - from Monday of this week and as a consequence the expectation of his Honour that the application to the Court of Appeal would be on Friday was overtaken by the earlier date, the day after the notice of appeal. That is the working day after the notice of appeal was filed, the application was heard.
HIS HONOUR: So that the extension of the interim injunction went further than was necessary in the view of the Court of Appeal and they terminated that earlier than Friday?
MR GARDE: They did, your Honour. That occurred this morning. However, the Court of Appeal saw fit to grant a stay on the order of the Court of Appeal until 4.15 this afternoon so that the discharge of the interim injunctions granted by Batt J is operative as at 4.15 this afternoon when, of course, that stay comes to an end. So that is where things stand at this time.
HIS HONOUR: It is obvious I will have to continue that until I give a decision.
MR GARDE: Yes, we would so apply, your Honour.
HIS HONOUR: Well, I just might hear Mr Connock on that. I had in mind until some time tomorrow. You would have no objection to that?
MR CONNOCK: I could not put any sensible opposition to that, your Honour.
HIS HONOUR: Yes. And the undertaking as to damages?
MR GARDE: It is, your Honour.
HIS HONOUR: Is continued?
MR GARDE: Yes. We are instructed ‑ ‑ ‑
HIS HONOUR: Very well. I will make an order that the interim injunction made by Hampel J continue until 4.15 tomorrow.
MR CONNOCK: Your Honour, would it be perhaps more appropriate that the stay ordered by the Court continue until 4.15 tomorrow rather than the interim injunction, which in fact has been discharged?
HIS HONOUR: I see, yes. What do you say as to that, Mr ‑ ‑ ‑
MR GARDE: That is to the same effect, your Honour, and we would agree with the stay order.
HIS HONOUR: Very well. The order which I make will be that the stay granted in relation to its order, that is the Court of Appeal's order, be continued until 4.15 tomorrow. Very well, we can continue now without any undue sense of urgency.
MR GARDE: I was apprehensive, your Honour, that unless I could procure an order in the next 20 minutes there might be difficulties.
[3.40pm]
HIS HONOUR: That is not an invitation to extend your argument.
MR GARDE: No, your Honour. No. If your Honour ‑ ‑ ‑
HIS HONOUR: Now, you were going to take me to some authorities.
MR GARDE: Yes, your Honour. We have had prepared, your Honour, some books of cases which we trust will be of assistance to your Honour, and we will hand those up. We hand up, your Honour - there is one book that relates to the relevant principles that relate to applications of this type. We would take your Honour through those, but we suspect your Honour is more than familiar with them. And the second book is an index to the cases which are relevant to the application made to the Court of Appeal, and it may be most convenient if I initially take you to the cases which I will briefly highlight, your Honour - not go through every one.
HIS HONOUR: Yes.
MR GARDE: But to take your Honour to the relevant cases.
HIS HONOUR: This is the first book you are going to now?
MR GARDE: Yes, is the - book number 1 case is Wilson v Church number 2, if your Honour has that.
HIS HONOUR: Yes, that is the second book you handed up?
MR GARDE: Yes, it is, your Honour. And this case, that is Wilson v Church, which is reported 1879 12 Chancery Division 454 is one of the leading cases that sets out the relevant principle, we would submit. A case which has subsequently been followed.
HIS HONOUR: But that is the case involving the stay of the judgment in Court below.
MR GARDE: Yes.
HIS HONOUR: In circumstances where the appeal would be nugatory because any money would have disappeared. But this is not that sort of case, is it?
[3.43pm]
MR GARDE: This ‑ ‑ ‑
HIS HONOUR: In the first place the appeal is against an interlocutory order.
MR GARDE: Yes, and it is made in circumstances, your Honour, where the appeal would be nugatory unless the relief sought is granted and is at all fours in that respect, we would submit, with Wilson v Church and subsequent authority. If I start by briefly referring to the head note. It says:
Where an unsuccessful party is exercising an unrestricted right of appeal -
and that is us -
it is the duty of the Court in ordinary cases to make such order for staying proceedings under the ...(reads)... but the Court will not interfere if the appeal appears not to be bona fide -
that has not been suggested -
or there are other sufficient exceptional circumstances.
Well, that also as far as we can see, your Honour, is not suggested. The relevant page is 458. Your Honour will see that the problem in that case was the potential distribution of money to bond holders in accordance with an order of the Court. There was an appeal which had been made in relation to orders which resulted in that outcome, and the principle was there set out. We submit this is a clear case where the appeal would be nugatory. If we won the appeal the money would have gone and nothing could usefully be done about that.
HIS HONOUR: Yes, but you have not yet established your entitlement to the money, and you would not have established it at the conclusion of the appeal.
MR GARDE: Your Honour, in Wilson v Church nor had the appellants. They were unsuccessful ‑ ‑ ‑
HIS HONOUR: But if they won the appeal they would establish their entitlement, and that is why it is important - to the money. That is why it is important to recognise these proceedings are interlocutory.
MR GARDE: Yes, but with respect, your Honour, if we won the appeal we would have established our entitlement to interlocutory restraining orders that would relate to the performance bond money and the balance of the mobilisation and procurement advance money, so that whilst it is true that it could be a final situation, or it could be an interlocutory situation, the reality is that if the ‑ ‑ ‑
HIS HONOUR: What you are attempting to do is to secure a judgment in your favour when you have not yet got to the stage of even arguing that question, the initial action not yet having been tried.
MR GARDE: Yes. Your Honour, what we would submit that the Court of Appeal could, and indeed should have done, is to grant us interim orders - extend the interim orders until the appeal was heard. The appeal could have been promptly listed. It was open to the Court to determine upon that outcome, but the effect of saying we will grant you no relief, no undertakings and no injunctive orders, is that the appeal, whilst we are entitled to prosecute it, it is an appeal about the making of restraining orders upon demands which have already been met so it is defeated, we would submit.
HIS HONOUR: Well, that is right, but it is only an interlocutory appeal. You still have your action in order to establish your rights if you can. It has not been heard yet.
MR GARDE: We do have the action, your Honour, but an award of damages is no substitute in this type of situation for the making of injunctive orders.
HIS HONOUR: I have no doubt it is not, but what I am putting to you, and I am repeating myself, is that a party does not have an entitlement to an injunction which is intended to have the effect and has the effect of securing the payment of any judgment which may be given in his favour in the action.
MR GARDE: Well, we do not suggest that there is such an entitlement.
HIS HONOUR: But that is what I suggest the effect of the orders which you are seeking are, and you may have got more from Batt J than perhaps you were entitled to.
MR GARDE: All we got from his Honour was to hold the situation in a limited way until the trial.
HIS HONOUR: Is there any authority where only questions of amounts of money are involved where an interlocutory injunction has been granted to preserve the status quo?
MR GARDE: The answer is yes, your Honour. I will seek to locate - there is a New South Wales decision. It will just take me a moment to find it, your Honour.
HIS HONOUR: What I have in mind is the comment that was made in relation to Mareva injunctions, that they are an exceptional type of relief because the insolvency or otherwise of a defendant in an action is left to the insolvency laws for remedies.
MR GARDE: I can take your Honour to case number 15 in the other volume. This is the decision of Rolf J in Barclay Mowlin Construction v Simon Engineering (Australia) Proprietary Limited (1991) 23 NSWLR 451. This was another bond case situation, your Honour. It involved a building contract where a performance bond had been provided for the purpose of providing security. It was held by his Honour that an interlocutory injunction should be made restraining the defendant from calling upon the bond. In one sense, of course, had no such order been made, damages could have been recovered at a later stage in the proceedings. It was a building contract situation in 1991. A fact that was certainly significant to his Honour.
HIS HONOUR: Well, what his Honour says at page 461-462 is, and I gather that is the basis of your reference a few moments ago, that:
Damages would have been an inadequate remedy because the company's reputation would be affected.
MR GARDE: Yes, it ‑ ‑ ‑
HIS HONOUR: Well, I find that difficult to understand that being a reason when it is not a question - the action was not concerned with reputation, presumably. However ‑ ‑ ‑
MR GARDE: His Honour certainly finds that:
In the commercial world, once performance bonds of this type are called up, questions may be raised and all sorts of untoward consequences to business people occur.
There is material from Mr Campbell in one of his affidavits to that effect. His Honour held that:
Damages were not an adequate remedy, and in these circumstances that the plaintiff was entitled to succeed.
HIS HONOUR: Well, as I say I - with respect to his Honour, I find that curious reasoning because damages would have been an adequate remedy for what damages were claimed for. In other words, damages were not claimed for loss of reputation.
MR GARDE: His Honour is looking at the overall position, one does not doubt, your Honour, of the applicant that whilst it may be so that damages could have been procured, the adverse impacts on the plaintiff were far wider in their nature than could be recompensed by damages. What we ‑ ‑ ‑
HIS HONOUR: I suppose it might go to balance of convenience, but that would seem to be the limit.
MR GARDE: In this type of situation, your Honour, where we have a foreign defendant, it is quite apparent as a matter of practicality, we would submit, that an award of damages is in no sense a substitute for a restraint on the call of large sums of money and their removal into the first respondent's bank account. That in circumstances where ‑ ‑ ‑
HIS HONOUR: Well, I think you have made that point.
MR GARDE: Yes, and we can add to that that there is no evidence that has ever been provided. Indeed, Batt J found on the affidavit material that his Honour had that there was no evidence of any immediate need for the moneys on the part of the first respondent, so he was not saying we need these moneys to do something in relation to the contract or something of that sort. They were simply being called in circumstances of the discussions of 3 and 4 July and the wish of the first respondent to get its hands on - that is his Honour's term, the moneys in question.
HIS HONOUR: Yes, I follow that. Yes, but you were going ‑ ‑ ‑
MR GARDE: They are some of the reasons, your Honour, why damages would be in no sense a suitable remedy in this type of situation. The case, your Honour, really does involve some significant issues. The position is that since the last decision in this case, which was in the Woodhall case in 1979 which related to performance bonds, there has been no subsequent case that addresses section 51AA of the Trade Practices Act, and the context of the statutory ‑ ‑ ‑
HIS HONOUR: Well, you would not really be addressing that in any appeal to this Court, which would be an appeal against the refusal of the interlocutory order which you sought before the Court of Appeal. I mean, in those circumstances, the Court is not going to be involved in an examination of section 51AA.
MR GARDE: Except, your Honour, to the extent that the prospects of success made irrelevant it would be ‑ ‑ ‑
HIS HONOUR: But you see where is the matter of principle involved in all of that? You say that you had sufficient prospects of success to justify the order being made. The Court for one reason or another did not accept that, or did not accept that as a sufficient reason, but where - what you are really concerned with is a point of principle, if a point of principle does arise here, is whether the Court of Appeal in some way misconceived the basis on which interlocutory relief of this sort is refused or granted. That would be the point of principle, but no such point of principle arises, does it?
MR GARDE: Your Honour, that is the ‑ ‑ ‑
HIS HONOUR: Where did it misconceive the applicable principles, if it did?
MR GARDE: Your Honour, it misconceived the principles stated in Wilson v Church because it granted no relief whatever to preserve the right of appeal which the appellant had to the Court of Appeal. In looking at the reasons for decision in Wilson v Church, there are exceptions to that rule, which are highlighted. For instance, if the appeal was not bona fide, that is an exception. In the - that is set out on page 458 of the reasons of their Lordships in the Erinford Properties case, which is case number 2 in the Wilson v Church volume of cases. McGowrie J considers the jurisdiction to grant injunctive relief preserving the status quo pending an appeal, and if I take your Honour to page 268, his Honour, at about line six or so onwards:
A Judge who feels no doubt in dismissing a claim to an interlocutory injunction made perfectly consistently ...(reads)... granting any injunction at all.
Then in the next three lines there are some exceptions to this principle that his Lordship draws attention to:
There will, of course, be many cases where it would be wrong to grant an injunction pending appeal as where any appeal would be frivolous -
it is not suggested that is so here, your Honour -
or to grant the injunction would inflict greater hardship than it would avoid -
and so on. That is not suggested here, your Honour, but subject to that the principle is to be founding in the leading judgment in Wilson v Church from the - where, speaking of an appeal from the Court of Appeal to the House of Lords, he said:
When a party is appealing, exercising is undoubted ‑ ‑ ‑
HIS HONOUR: Well, you need not read that.
MR GARDE: Yes.
HIS HONOUR: I mean, undoubtedly the principle is that a stay may be granted with respect of a judgment if - pending an appeal, if the appeal, without the stay, may be rendered nugatory. We can take that as established. But here we do not have an appeal from a judgment, we have an appeal from - a prospective appeal from an interlocutory order.
MR GARDE: Yes.
HIS HONOUR: The interlocutory order, in turn, is concerned with the preservation of the status quo pending the hearing of an action which is, I suggest to you, the distinction, but we have been over that ground.
MR GARDE: Your Honour, it is submitted in looking at the cases that there is no distinction in terms of this principle as between the interlocutory injunction situation and on the other hand between a situation that might arise as a consequence of trial. In the interlocutory injunction situation there are certain requirements that we have to meet: we have to meet the requirement of satisfying the Court of Appeal in the manner which is set out in House v Queen, and we certainly are called on to do that, and we stand ready to do that. I have not taken your Honour yet to the grounds of appeal, but it is, we suggest, important for the Court of Appeal to preserve its own jurisdiction in those circumstances.
Effectively, unless that is done, it means that you can have an appeal that is right, but it is not worthwhile because the damage which is thought to be curtained has happened before the jurisdiction to appeal can be exercised. So, the duty which is described in this line of authority is more extensive, we submit, than simply being confined to the final trial situation if - unless a principle such as this applies in relation to appeals generally to a Court of Appeal, then the appeals which are made in other circumstances can be totally defeated, particularly in circumstances such as these before the appeal is heard and determined. Parliament has seen fit to give a right to appeal as such ‑ ‑ ‑
HIS HONOUR: What is the right of appeal from Batt Js orders ‑ ‑ ‑
MR GARDE: It is granted by the Supreme Court Act, your Honour. It is section 17A(4)(b)(ii), which is tab number 6. Under 17(4)(b)(ii) there is an appeal as of right in cases of granting or refusing an injunction. It matters not whether it is a permanent or interlocutory injunction. It is the ‑ ‑ ‑
HIS HONOUR: I might have the wrong ‑ ‑ ‑
MR GARDE: It is the second page ‑ ‑ ‑
HIS HONOUR:
An appeal does not lie from the Court of Appeal ‑ ‑ ‑
MR GARDE: Yes. Your Honour will see it says:
An appeal does not lie to the Court of Appeal (b) without the leave of the Judge constituting the trial ...(reads)... (ii) Cases of granting or refusing an injunction.
So, the effect of that, your Honour, is that we have a right of appeal without leave.
HIS HONOUR: Yes, I see.
MR GARDE: The cases do draw the distinction between the situation where the appeal is as of right, and the situation where the appeal is subject to the grant of leave. In the line of authority that we have been referring to the appeal is as of right in cases such as Peringer Mining, for example, your Honour, the appeal may be subject to leave, but in those circumstances the requirements may be somewhat stricter than to operate where the appeal is as of right. But that is the distinction which is to be found in the cases, rather than the distinction between the interlocutory situation on the one hand, and the trial situation on the other.
We have, your Honour, in the bundle of cases, enclosed the decision of Bercove v Hermes and Others. This is under tab 3. It is a decision of Toohey J, 51 ALR 105 and shows the application in Australia of this well accepted principle as set out in Wilson v Church and Erinford Properties Limited. His Honour applies those principles ‑ ‑ ‑
HIS HONOUR: That is merely applying Wilson v Church. There is no point in going through all of these cases which apply the principles established in Wilson v Church. I think that - as I said, we can take that as read.
MR GARDE: Yes. Well, what we submit, your Honour, is that the Court of Appeal erred in law when it failed to apply this established principle. If it be that it did so, and it does not emerge from the reasons for decision, but if it be that it did so because it held that this was an application of an interlocutory nature, then we submit that that is not a correct principle of law, and that the correct principle of law is the distinction between the as of right situation and the application as of leave. So, it is our contention, your Honour - we certainly would wish to take this matter up as is set out in the grounds, and the notice of appeal, as being an error of principle on the part of the Court of Appeal in this respect.
HIS HONOUR: Well, that is your case, and you encapsulate it by saying unless we have the orders that are in the form of the interim orders made by Hampel J we will be deprived of moneys to which we say we are entitled, and that was the bone of contention before the Court of Appeal and will be the bone of contention before the High Court if special leave to appeal is granted.
MR GARDE: Yes, it would, your Honour.
HIS HONOUR: Unless that situation is preserved, that is that the moneys are not paid out, they will be dissipated by the payee in a way that will prevent them from being recovered, and in that sense any appeal to the High Court would be rendered nugatory.
MR GARDE: Yes, it would.
HIS HONOUR: In failing to recognise that in relation to its own appeal, the Court of Appeal erred.
MR GARDE: Yes.
HIS HONOUR: Well, that is what you say, is it not?
MR GARDE: Yes ‑ ‑ ‑
HIS HONOUR: Well, I understand that, and you say its error was such as to make the prospect of success in any appeal if special leave was granted - well, make the prospect of special leave being granted and success in any appeal obvious, that is what you say?
MR GARDE: Yes. Yes, we do, your Honour. We certainly rely on all of those matters, and we put those submissions in the broader context of section 51AA of the Trade Practices Act. We have a situation here where since 1992 a new provision has been operative in relation to the standard of conduct of commercial organisations in overseas trade and commence and otherwise, under section 51AA which renders unconscionable conduct, now, of course, actionable within the terms of that legislation, and it is of fundamental importance if one has the statutory right under section 80 to obtain injunctions of that particular type, in the context now of section 51AA, to have the ability to reserve one's position in order to attract that jurisdiction.
So, there has been, your Honour, a quite significant change as Charles J recognises with his observation as to the substantial inroads into the general law, and Batt J recognised that that was so also, but that is an important situation which bears directly upon this type of circumstance where, in the course of negotiations between commercial corporations as to outstanding sums of money owed to the present applicants by the first respondent, the pressure is applied of saying well, unless you agree with me, I will do this in relation to bank guarantees. That is the situation that is presently faced, and it is important for interlocutory relief to be available.
It is important for the applicant's rights in this type of situation to be protected, otherwise the public interest objectives of section 51AA will themselves be defeated. In other words, once that money goes, there is not much point. You can prosecute your rights under section 51AA and section 80, particularly subsection 1, but that will not be to any significant avail.
[4.10pm]
HIS HONOUR: I think you have made that point, Mr Garde.
MR GARDE: Yes.
HIS HONOUR: Now, is there any additional point you wish me to take into consideration?
MR GARDE: We have - we have, your Honour, set out in our outline of - set out in our outline of argument, which is exhibit DJD7, and that was, your Honour, our outline of argument to the Court of Appeal, and the - in paragraph 2, the authorities which I have canvassed with your Honour are referred to, and in paragraph 7, by way of contrast, the authority is relevant where the appeal is not as a right are there set out, and in the second class of situation, as emerges from the authorities referred to, the position is that the jurisdiction to grant positive injunctive relief to the unsuccessful party to maintain the status quo is one which is exercised in exceptional circumstances.
So in the other type of situation, your Honour, that is the significantly more burdensome requirement that in the situation which we face, and that distinction stands on the authorities we submit was not applied here. Would your Honour pardon me a moment? I have not taken your Honour to the matters which we have sought to raise in the notice of appeal to the Court of Appeal so as to give your Honour an overview of those ‑ ‑ ‑
[4.13pm]
HIS HONOUR: Well, I have the draft notice of appeal; that is to this Court, of course, yes.
MR GARDE: It is proper that we should do so and I will do so in the form of an overview of the matters which we seek to raise. I refer your Honour to exhibit DJD2 and if I take your Honour to grounds 1 and 2 which are set out on page 3 of that notice, your Honour will see that we appeal to the Court of Appeal first of all on the ground that the learned Judge, that is Batt J, was in error in holding that there was no serious question to be tried, that the conduct in making or procuring the demand for payment of the full amount of all the guarantees was unconscionable under section 51AA and is difficult, your Honour, to see how, when there is a continuing course of conduct on the part of the first respondent involving the negotiations and leading up to the making of a demand on 23 July preceded by the service of the court order on the 22nd, that it can be said that the conduct is unconscionable in respect of six of the nine guarantees, but not unconscionable in relation to the other three guarantees. Either the conduct is, we submit, unconscionable or it was not. Your Honour ‑ ‑ ‑
HIS HONOUR: But these are matters that were for the Court of Appeal. What you have got to address here is where the Court of Appeal went wrong, and not only where it went wrong, but where its going wrong involved some serious error of principle which would justify the granting of special leave.
MR GARDE: Yes. We have, your Honour, highlighted the principle which ought to be operative in relation to interlocutory applications. When we look at what their Honours, in fact, decided, there is in the reasons for decision of Brooking J no reference to the relevant principles other than in saying in the last paragraph on page 1 that:
I am not persuaded that the appellant should have any wider or further injunctions pending the determination of the appeal.
His Honour did not indicate why that was so, whether it was thought for some reason that the principle of Wilson v Church or Erinsford Properties were not apposite or that we fell within some exception or that there is some other concern. All that his Honour did was to simply state that that was all that in his Honour's opinion should be extant, but his Honour does not seem to have addressed the fundamentals of the application that were made to the Court for the application of the Wilson v Church and Erinsford Properties and like principles as set out in the outline of argument which I took your Honour to a moment ago in the very first paragraph.
HIS HONOUR: Well, I think you have made that point, Mr Garde.
MR GARDE: Tadgell J took the view that ‑ ‑ ‑
HIS HONOUR: He said it was not a matter ‑ ‑ ‑
MR GARDE: Yes.
HIS HONOUR: ‑ ‑ ‑ preserving the status quo; rather it was ‑ ‑ ‑
MR GARDE: To upset the status quo, in substance, and ‑ ‑ ‑
HIS HONOUR: Exactly, and that - well, that is what he says, yes.
MR GARDE: Yes. That we ‑ ‑ ‑
HIS HONOUR: And you dispute that.
MR GARDE: We would respectfully submit that the status quo reflects the existing situation, the existing position, and what we were seeking to do was to preserve the existing position rather than to see the existing situation substantially altered for the worse from our point of view. To the extent that that is an additional matter, your Honour, which his Honour has relied on, we would submit that that view of the matter is not well-founded in law, that the application was in truth an application to preserve the status quo, not to disturb the status quo as his Honour held it was. And his Honour ‑ ‑ ‑
HIS HONOUR: Look, we are just going over the same ground, are we not? I have asked you to point to those principles which you say would warrant the attention of the Court; you have done that.
MR GARDE: Yes.
HIS HONOUR: But it does not add to your argument to recite what the Judges in the Court of Appeal said, merely to say that it was wrong.
MR GARDE: Yes, well ‑ ‑ ‑
HIS HONOUR: Are there any additional points you want to put to me?
MR GARDE: Those, your Honour, are the major points which we would seek to rely on in terms of a notice of appeal on the grounds that - and the focus is on the duty of the Appeal Court in relation to the preservation of the opportunity of success in relation to an appeal.
HIS HONOUR: I follow that.
MR GARDE: Would your Honour pardon me for a moment? Well, that, your Honour, is the thrust of the matter. I stand ready to expand on the details, the facts or other issues in any manner that might be of assistance to your Honour, but that is the thrust of the application which we make.
HIS HONOUR: Thank you, Mr Garde. Mr Connock.
MR CONNOCK: Thank you, your Honour. At the outset I could say something - with respect to the matters of fact that were put to your Honour, I do not see them as being particularly relevant to this application. I simply wish to say that we take issue with a number of statements made, but I did not propose to take your Honour to all those matters unless your Honour required me to.
HIS HONOUR: No, I do not.
MR CONNOCK: With respect to what occurred before the Court of Appeal, there were two applications ultimately made to the Court of Appeal, your Honour. Firstly, an application for an injunction pending the hearing of the appeal. That was rejected by the Court of Appeal; in fact, rejected without calling upon the first respondent, and then an oral application was made at that time, quite properly so, we say with respect, for an interim injunction pending special leave to appeal. That approach taking it to the Court of Appeal was consistent with what the High Court has said as to the proper forum for that application.
That application was also rejected, your Honour, and as we understand it now, all that is sought is an interim injunction pending special leave to appeal. We say that should be rejected because we submit that there is no prospect of success with respect to the application for leave to appeal. There are no exceptional or extraordinary circumstances warranting the injunction pending appeal, and really what it amounts to is an attempt to use the procedure to get in another way what in fact they have been refused by Batt J and the Court of Appeal.
With respect to the relevant principles, your Honour, it is our submission that it is an extraordinary jurisdiction to grant an interim injunction pending special leave to appeal, and that what the applicant is required to show is that there are substantial prospects of success with respect to the special leave application and also the ultimate appeal, and secondly, that there are exceptional circumstances. I have some decisions I can take your Honour to, but ‑ ‑ ‑
HIS HONOUR: Well, I know those decisions and that is what they say.
MR CONNOCK: Yes, your Honour. I should raise one factual matter which is that the demand made under the guarantee stated on its face that it was made on the basis of breaches of the contract by the applicants. As to the relevant matters as to why we say there is no prospect of success, we make these points, your Honour. It was an exercise of discretion by the Court of Appeal. On any view it does not satisfy the criteria for the granting of special leave, and in that regard I note my learned friend characterised the substance of the case as being that the - their submission that the Court of Appeal erred in law in failing to apply the established principle. If it is the failure to apply an established principle, that is not a question of principle itself. There is no question of the principle.
We also submit, your Honour, that on the basis of the judgment as it stands, there is no basis for saying that any question of principle arises at all. The Court of Appeal also considered the evidence and Justice of Appeal Charles made the further point at page 3, your Honour, that:
Even if it be accepted that a breach of the Trade Practices Act by virtue of section 51AAA may suffice to entitle the plaintiffs ...(reads)... evidentiary basis, in my view, for any further injunctions beyond those granted by the primary Judge.
So that both Batt J and his Honour - the Court of Appeal have considered over a period of three days and have reserved decision in the case of Batt J, and one-and-a-half days in the case of the Court of Appeal both the evidence and the matters raised. The importance of bank guarantees is also relied upon, your Honour, as to the importance to commerce generally. Perhaps the easiest way I can deal with the remainder of the relevant matters is to provide to your Honour a copy of the outline of submissions prepared for the purposes of the appeal which, as I understand it, was not provided to the Court of Appeal because the first respondent was not ultimately called upon.
If your Honour turns to page 5 of that document there are a number of matters there raised, some more relevant to the Court of Appeal itself. First of all, we submit that his Honour did not err at the outset. Careful consideration has been given to these matters, that the importance of bank guarantees and the importance of that to the lifeblood of commerce referred to in subparagraph (4), your Honour. The terms of the guarantees itself, which your Honour will see from the documents provided to you, indicate that they are indeed that, on demand guarantees. The conclusions reached by his Honour at first instance with respect to the discretionary matters and the factual matters. The conclusion that the balance of convenience favoured the refusal of the interlocutory injunctions.
With respect to the suggestion that there is a risk of dissipation, his Honour expressly found that the first respondent - that is, my client - was a very substantial corporation operating internationally and his Honour also concluded that it was acknowledged that there was no evidence of likely dissipation. That is referred to in his Honour's reasons on page 54. That, of course, was prior to the undertaking being given which was given to the Court of Appeal earlier today.
In summary, your Honour, what in our submission it amounts to is an attempt by Pacific Dunlop, or rather its subsidiary Olex, to obtain what is in practical terms the injunction which they have been refused at all levels so far, and it is an attempt to use the procedure to their advantage. It should be borne in mind that it arose in the context where an order was granted on 12 July, made ex parte and without notice of which there was no opportunity for our client at that time to present any argument, and then the delay in the time until now has been as a result of the procedure in just getting before the Court. So it is another factor where our client has been restrained from exercising its lawful rights until this time.
Yes, your Honour, the other matter I mention is that damages are actually sought in the statement of claim and that in itself is an indication in our submission that they consider that it is a remedy that they wish to seek and wish to use and it is an adequate remedy.
The final matter, your Honour, is with respect to this allegation of being in breach of the Court order by making the demand. There are a number of matters we wish to say about that, but again we see that as not being relevant to the current issue before your Honour. If your Honour pleases.
HIS HONOUR: Thank you, Mr Connock. Do you wish to say anything in reply, Mr Garde?
MR GARDE: Your Honour, there are many matters there that we disagree with, but I do not propose to go into those matters. Our learned friend has not addressed the reasons for decision of their Honours other than perhaps but briefly, and we would submit, your Honour, that the fundamental concerns with the approach that their Honours have seen fit to take remain, in particular that the judgments do not address the fundamental principle of Wilson v Church and so forth, nor do they seek to say why that principle does not apply, if that is their view. The reasons for decision of Charles J do go as to the importance of bank guarantees generally, no one would disagree with that; no one would disagree with the need to identify the appropriate jurisdictions or remedies that may lie in the Court, but, your Honour, those reasons and the other reasons do not address why the fundamental principles that relate to applications of this type were not applied.
What we submit is that that is the basis of the application for special leave and the response that has been made a moment or two ago does not deal with those issues. If the Court pleases.
HIS HONOUR: Thank you, Mr Garde. I will endeavour to give my decision tomorrow and the parties will be notified if and when it is possible for me to do that. Very well.
MR GARDE: If your Honour pleases.
AT 4.32 PM THE MATTER WAS ADJOURNED
INDEFINITELY
0
1
0