Oswal v Australia and New Zealand Banking Group Limited
[2011] VSC 664
•16 December 2011
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
List D
No. 4653 of 2011
| RADHIKA PANKAJ OSWAL | Plaintiff |
| v | |
| AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522) & Ors (according to the Schedule attached) | Defendants |
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JUDGE: | Davies J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 14 and 16 December 2011 | |
DATE OF JUDGMENT: | 16 December 2011 | |
CASE MAY BE CITED AS: | Oswal v Australia and New Zealand Banking Group Limited & Ors | |
MEDIUM NEUTRAL CITATION: | [2011] VSC 664 | |
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PRACTICE AND PROCEDURE – Interim injunction – No serious question to be tried – Balance of convenience against party seeking injunction – Where damages will be an adequate remedy — Where delay effects other parties – Where inadequate undertaking as to damages – No jurisdiction to grant injunction against non-party
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms K J Williams | Jones Day |
| For the First to Fourth Defendants | Mr A C Archibald QC with Mr M N Connock SC and Mr M D Rush | Freehills |
| For the Fifth Defendant | No appearance for or on behalf of the Fifth Defendant | |
| For the Non-Parties | Mr D J O’Callaghan SC | Middletons |
| For the Deputy Commissioner of Taxation | Mr V Tavalaro | Solicitor for the Deputy Commissioner of Taxation |
| For Yara Australia Pty Ltd | Mr R W Douglas | Clayton Utz |
HER HONOUR:
Introduction
This is an application by the plaintiff (“Mrs Oswal”) seeking injunctions directed at preventing the sale of her shares in Burrup Holdings Limited (“BHL”) pending the hearing and determination of the proceeding. Mrs Oswal is the owner of 35% of the issued shares in BHL. The other shareholders are Mr Oswal, as to 30% and Yara Australia Pty Ltd (“Yara”), as to 35%. The first defendant (“ANZ”) holds a mortgage over 7.5% of Mrs Oswal’s shares in BHL under a share mortgage dated 23 December 2009. The mortgaged shares as well as Mrs Oswal’s remaining 27.5% shareholding in BHL are held in escrow by the fifth defendant, JP Morgan Chase Bank NA, as escrow agent on the terms of an escrow agreement made and entered into as at 1 February 2010 by ANZ and Mrs Oswal. An Escrow Process Deed dated 1 February 2010 contains the rights and obligations as between Mrs Oswal and the ANZ in relation to the circumstances in, and terms on, which ANZ may cause the Escrow Shares to be sold (“permitted sale”) and the application of the proceeds of a permitted sale.
On or about 16 December 2010, ANZ appointed the second, third and fourth defendants (“the receivers”) as receivers and managers of the mortgaged shares. In May 2011, the receivers, or the receivers and ANZ together, sought expressions of interest from persons wishing to buy (up to) 65% of the shares in BHL, being the 65% registered in the names of Mr and Mrs Oswal. The receivers and ANZ intend to sell Mrs Oswal’s shares in BHL, exercising rights under the share mortgage, the escrow process deed, and the escrow agreement, and to apply the proceeds in accordance with the terms of those documents and a guarantee given by Mrs Oswal in favour of ANZ.
On 28 November 2011, ANZ and the receivers entered into a Share Sale Deed for the sale of Mrs Oswal’s shares in BHL to a third party. Clause 2.1(d) of the Share Sale Deed contains a condition precedent to completion of the sale that:
(a)either Yara does not exercise a pre-emptive right to purchase the shares pursuant to a Shareholders’ Deed dated 24 March 2008 between Yara, Mr Oswal, BHL and BHL’s subsidiary, Burrup Fertilisers Pty Limited (“BFPL”); or
(b)that clause 10 of the Shareholders’ Deed (being the principal clause that sets out BHL shareholders’ pre-emptive rights) ceases to apply to the proposed transfer of the shares under the Share Sale Deed.
On 29 November 2011, a Transfer Notice pursuant to clause 10 of the Shareholders’ Deed was given to Yara in respect of Mrs Oswal’s shares. The Transfer Notice was signed for and on behalf of Mrs Oswal;
(a)as to the mortgage shares – by the second defendant, as Mrs Oswal’s attorney appointed under clause 9 of the share mortgage; and
(b)as to the escrow shares – by an officer of ANZ, under a power of attorney.
The Transfer Notice was stated to constitute an unconditional offer to sell Mrs Oswal’s shares to Yara on specified terms and to be open until 4.00pm on 30 January 2012.
The application
On 14 December 2011, a summons was filed on behalf of Mrs Oswal and made returnable that afternoon for orders restraining ANZ and the receivers:
(a) from taking any steps to complete a sale of Mrs Oswal’s shares in BHL on the terms of the Share Sale Deed dated 28 November 2011;
(b) from taking any steps to complete a sale of Mrs Oswal’s shares in BHL to Yara in the event that Yara accepts the offer made by the Transfer Notice; and
(c) from taking any steps to sell, transfer or otherwise dispose of Mrs Oswal’s shares in BHL to any person or entity.[1]
[1]Plaintiff’s Summons (filed 14 December 2011), [2].
The summons is supported by an affidavit affirmed by Philip Jacob Hoser (“Mr Hoser”) on 13 December 2011. Mr Hoser is a partner of the firm of solicitors acting for Mrs Oswal in these proceedings.
The apparent need for urgency in the hearing of the application is the possibility that Yara will accept the offer made by the Transfer Notice. Counsel for Mrs Oswal sought interim restraining orders in the terms above to protect Mrs Oswal’s position until the Court can hear the full interlocutory injunction application, which the Court indicated that it could do on 19 January 2012. Counsel for Mrs Oswal also advised the Court that she would be seeking an interim order against Yara on an alternative basis restraining Yara until 21 January 2012 from:
(a) accepting the offer constituted by the Transfer Notice; and
(b) declining to exercise, waiving or otherwise foregoing any right to exercise the rights it has, or may have to accept the offer;
and for an order that Mrs Oswal have leave to join Yara as the sixth defendant to this proceeding.
Yara had been given notice of the orders sought in the summons but not of the proposed interim order against it, nor of the application to join it as a defendant to the proceeding.
The Court heard the application on 14 December 2011 and reserved its decision. Yara was not in attendance at the hearing on 14 December 2011 but was informed by Mr Hoser after the hearing of the orders sought against it. Yara requested that it be given an opportunity to be heard on the alternative relief that is sought against it. In view of that request, the application was re-listed for further hearing for that purpose on 16 December 2011. Between the hearing on 14 December 2011 and the resumed hearing on 16 December 2011, the solicitors for Mrs Oswal served Yara with a summons seeking leave to join Yara as a defendant to the proceeding and to file and serve a proposed Amended Statement of Claim.
For the reasons that follow, I have concluded that the application for an interim injunction in the terms of the relief sought in the summons and the orders sought against Yara on the alternate basis should be refused.
Applicable principles
The applicable principles for the grant of an interim injunction are the same as the principles relevant to the grant of an interlocutory injunction.[2] They were identified by the High Court in Australian Broadcasting Corporation v O’Neill[3] and can be summarised as follows:
(a)the plaintiff must demonstrate a prima facie case, in the sense of showing that there is a serious question to be tried as to the plaintiff’s entitlement to relief, not whether it is more probable than not that the plaintiff will succeed at trial;
(b)the plaintiff must also satisfy the Court that the balance of convenience favours granting the injunction. This requires consideration of the consequences to the defendants of the grant of an injunction where the plaintiff may not ultimately be successful in obtaining the final relief that it seeks, as well as the consequences to the plaintiff of the refusal of an injunction, where the plaintiff may ultimately be entitled to final relief. The Court of Appeal in Bradto Pty Ltd v State of Victoria[4] stated that the Court must, in determining whether to grant an injunction, “take whichever course appears to carry the lower risk of injustice if it should turn out to have been “wrong”, in the sense of granting an injunction to a party who fails to establish his right at the trial, or in failing to grant an injunction to a party who succeeds at trial”.[5] The adequacy of damages as a remedy is a relevant factor in weighing up the competing disadvantages and consequences;
(c)the Court may also have regard to factors such as the strength of the grounds of defence of the defendants and whether there has been any delay on the part of the plaintiff in seeking the injunction; and
(d)the Court may refuse to grant the injunction in the absence of an undertaking as to damages given by the party seeking the undertaking or if the worth of the undertaking would be inadequate because of the lack of financial resources of the party proffering the undertaking.
[2]R.P. Meagher, D. Heydon and M. Leeming (eds), Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (4th ed, 2002) 794 [21-420].
[3](2006) 227 CLR 57.
[4](2006) 15 VR 65.
[5]Ibid 73 [35].
Is there a serious question to be tried?
In this proceeding, Mrs Oswal has challenged the validity of the share mortgage, the escrow agreement, the escrow process deed, the guarantee and power of attorney under which she appointed ANZ as her attorney to execute any “Permitted Sale Agreement” within the meaning of the Escrow Process Deed and to do other things necessary for or desirable in connection with a “Permitted Sale” (collectively “the documents”). Mrs Oswal claims that each document is:
(a)void and not enforceable against her or her property on the grounds that they are contrary to public policy; or
(b)alternatively liable to be set aside as against her or is unenforceable as having been entered into by her under duress or as a result of having been procured by the undue influence or unconscionable conduct of the ANZ.
The facts on which those claims are based are pleaded in paragraphs 27-36 of the Statement of Claim. Essentially the claims are founded on the allegation that during the course of meetings between ANZ, Mr and Mrs Oswal, and their respective solicitors between 19 and 23 December 2009, there were negotiations as to matters concerning what are termed the “European Guarantees” in the Statement of Claim, being guarantees that were executed in connection with loans made by ANZ to certain entities. It is alleged that in the course of those negotiations ANZ asserted that the European Guarantees had been forged and that Mr Oswal had admitted to bank officers that he had forged them, that the forgeries constituted events of default under the ANZ facilities and that as a result ANZ was entitled to exercise certain rights and powers including the right to appoint controllers or receivers to the assets and undertaking of BFPL and /or BHL’s shares in BFPL. It is also alleged that ANZ asserted that if Mr and Mrs Oswal did not execute the guarantees and mortgages, ANZ would issue notices of default under the ANZ facilities and appoint receivers. Further, that Mr Oswal could go to prison for his role in the forgeries if the forgeries were reported to the relevant authorities or became public knowledge as a result of steps taken by ANZ, that if ANZ issued notices of default it would report the forgeries to the relevant authorities and that:
[ANZ] was wanting to “help” [Mr and Mrs Oswal], and [ANZ] didn’t want the alleged forgeries to become public, but they had to execute the documents required by [ANZ].[6]
[6]Statement of Claim (filed 2 September 2011), 15 [28(b)(viii)].
It is further alleged that Mrs Oswal believed that if the forgeries were reported or became known to the relevant authorities, her husband could go to gaol and that if ANZ issued notices of default, ANZ would report the forgeries to the relevant authorities and that ANZ was aware of her belief.[7]
[7]Ibid, 16 [28(c)-(f)].
On the claim as pleaded, ANZ induced Mrs Oswal to execute the documents because, amongst other matters, ANZ intended that Mrs Oswal should believe, and Mrs Oswal did believe, that if she executed the documents, the ANZ would refrain from reporting alleged forgeries by her husband to the relevant authorities, and would refrain from taking any step which might result in the alleged forgeries becoming public knowledge and refrain from exercising, or taking steps to exercise, its rights and powers to appoint controllers or receivers to the assets and undertaking of BFPL and/or BHL’s shares in BFPL.[8]
[8]Ibid, 16-21 [29-36].
The only evidence supporting the factual claims made in the Statement of Claim is the evidence of Mr Hoser that Mrs Oswal had confirmed to him, and that he believed, that the matters of fact alleged in the Statement of Claim are true. That evidence is not sufficient to discharge the onus of proof on Mrs Oswal of demonstrating a serious question to be tried. Having regard to the nature of the allegations made against the defendants which rely on allegations of representations made to Mrs Oswal and beliefs that she formed in order to establish the legal claims, the mere assertion that the facts as pleaded are correct does not constitute probative evidence upon which the Court may rely to form the view that there is a serious question to be tried. The failure to support the application by evidence of the events and matters constituting the basis of the material allegations in the Statement of Claim is a sufficient basis on which to dismiss the application, without the need for further consideration.
Mrs Oswal’s claims, in any event, are contradicted by documents put into evidence by ANZ in opposition to the grant of the injunction. The documents include declarations made by Mrs Oswal that she received independent legal advice regarding the documents and that she freely and voluntarily signed the documents after receiving that advice. In the face of that evidence, unexplained by Mrs Oswal despite the fact that ANZ relies on those declarations in the defence filed 20 October 2011, I could not conclude that there is any serious question to be tried.
Balance of Convenience
I turn now to the question of the balance of convenience.
It was submitted for Mrs Oswal that the balance of convenience favours the grant of the injunction. It was argued that ANZ and the receivers will not be deprived of the benefit of the Share Sale Deed if the injunction is granted and Mrs Oswal’s claims are dismissed following a final hearing, as the injunction would not result in the termination of the Share Sale Deed unless the injunction remained in effect beyond 31 October 2012.[9] It was further argued that by contrast, if the Court upholds Mrs Oswal’s claims but her shares have been sold to Yara or some other third party purchaser before the final determination of the proceedings, the orders sought against ANZ and the receivers for delivery up of her shares and transfer forms would be nugatory and moreover that she may be unable to recover her shares from the purchaser.
[9]Share Sale Deed (dated 28 November 2011), Cl 2.6 (Exhibit PJH16 to the First Affidavit of Philip Jacob Hoser affirmed 13 December 2011).
I do not consider that the balance of convenience favours Mrs Oswal on the material before the Court.
First, there is no imminent sale. A share sale agreement has been entered into but it is conditional upon Yara not exercising its pre-emptive rights of acquisition of Mrs Oswal’s shares or clause 10 of the Shareholders’ Deed ceasing to apply. Yara has until 30 January 2012 in which to accept the offer.
Secondly, there is an absence of evidence that real prejudice would be suffered by Mrs Oswal, if Yara did exercise its rights. The fact that her shares may be sold does not in itself establish any real prejudice. On the other hand, the injunction would interfere with the legal rights of third parties which cannot be ignored by the Court.
Thirdly, I am not persuaded that this is a case where, on the face of it, damages would not be an adequate remedy. It was submitted that damages would be an inadequate remedy because Mrs Oswal will forever have lost the opportunity to continue to be a stakeholder in BHL and its business and lost the opportunity to sell her shares at a time of her choosing and on terms negotiated by her. These submissions assume that the lost opportunity would have value which was not compensable. That is not shown on the evidence.
Fourthly, in considering this issue, it is permissible to have regard to the strength of Mrs Oswal’s case. Even had I found that the assertion of truthfulness of the facts alleged in the Statement of Claim was sufficient to show a serious question to be tried, it is not a strong claim on the state of the evidence before the Court having regard to the declarations put into evidence by the defendants.
Other factors
Next, Mrs Oswal has been on notice since at least September 2011 that ANZ and the receivers intended to sell her shares and were taking steps for that purpose. The terms of the injunction sought in the summons did not justify Mrs Oswal delaying seeking an injunction, if her intention was to prevent any sale. If there was merit in the injunction application to prevent any sale, the application should have been made as soon as Mrs Oswal became aware that the shares would be sold. Instead, the consequence of delaying the application means that third parties will have their rights affected by the injunction, if granted, and her delay has caused a material alteration to the position of the defendants by reason that they have now entered into a contract for the sale of the shares. This is a significant factor in my view militating against the grant of the injunction.
Next, it was submitted that it is at least arguable that the proposed sale of Mrs Oswal’s shares to a third party would put Mrs Oswal in breach of the freezing orders referred to in paragraphs 29-30 of Mr Hoser’s affidavit.[10] Mrs Oswal has sought to ascertain the attitude of the Deputy Commissioner of Taxation to the proposed sale, but this is not yet known. Nor have ANZ and the receivers or the potential third party purchaser indicated whether they consider that the freezing orders are orders preventing the consummation of the transaction contemplated by the Share Sale Deed. It was submitted that in those circumstances and given that Mrs Oswal is expressed to be the selling party under the Share Sale Deed, that there is some risk that she may be alleged to have breached the freezing order if the sale proceeds. If it is the case that there is the potential that Mrs Oswal may be in breach of the freezing orders, the remedy lies in seeking a variation of those freezing orders, not in the proposed injunctions.
[10]First Affidavit of Philip Jacob Hoser (affirmed 13 December 2011), 8-9 [29-30].
Next it was submitted that even assuming that the documents are valid, it appears that the proposed sale of the escrow shares to the third party purchaser is in breach of clauses 4.1 and 4.2 of the Escrow Process Deed. The submissions then proceed to set out why that may be so. There is no material from which it may be deduced that Mrs Oswal could suffer irreparable detriment which could not be subsequently addressed by relief in her favour if the sale (which in any event at present is conditional) was effected in a way that was in breach of the Escrow Sale Process.
Undertaking as to damages
Next, I am of the view that the undertaking as to damages is inadequate. It is acknowledged for Mrs Oswal that she has no substantial unencumbered assets to which the defendants could have recourse to recover any damages that she may be ordered to pay pursuant to the undertaking in the event that the Court dismisses her claims for final relief. However, it was submitted on her behalf that it is important to note that the undertaking would not be inadequate but for the Share Mortgage, the Escrow Agreement and the Escrow Process Deed, the validity and enforceability of which are in dispute in these proceedings. The object however of requiring an undertaking as to damages is to ensure that the defendants will receive compensation for any loss by reason of the grant of the injunction if it appears that Mrs Oswal was not entitled to it. I see no reason in the circumstances of this case why the defendants should be deprived of that protection, particularly given that if the defendants are successful in defending the claims, the purpose of obtaining the undertaking will have been circumvented by the Court upholding the validity of the documents.
Significantly, Mrs Oswal lives in Dubai and has no material assets in Australia. Counsel for Mrs Oswal properly disclosed to the Court that on the research undertaken by her instructing solicitors, there is no mutual recognition treaty with the United Arab Emirates so that there is likely to be difficulty in enforcing a judgment in Australia over there. In my view that is a compelling reason for not granting the injunctive relief.
Yara
The application for an injunction against Yara carried its own specific problems in addition to the matters above.
First, Yara is not a party to the proceeding, although it has now been foreshadowed that an application will be made to join Yara. A consideration of the proposed Amended Statement of Claim indicates that no ultimate relief will be sought against Yara and that no wrong has been alleged against Yara which Mrs Oswal is entitled to prevent or redress. Rather, joinder was said to be necessary because Yara is the recipient of the Transfer Notice which Mrs Oswal seeks to impugn by the alleged conduct of ANZ. In the circumstances, I accept the submission for Yara that there is no jurisdiction to grant an injunction against it.
Next, assuming that there is jurisdiction, the Court should not lightly make orders that may interfere with Yara’s legal rights. For the reasons above, the balance of convenience does not favour Mrs Oswal.
One further compelling reason against finding the balance of convenience in favour of Mrs Oswal is that the Supreme Court of Western Australia has held that she is bound by the Shareholders Agreement. In other words, she is obliged to give Yara the pre-emptive right to acquire her shares if they are sold. The fact that this decision is on appeal by her does not assist Mrs Oswal to shift the balance of convenience in her favour.
Finally, the argument advanced on behalf of Mrs Oswal as to why the undertaking as to damages should be accepted as adequate cannot apply to Yara. Nothing about Yara’s conduct has caused Mrs Oswal’s impecuniosity.
Accordingly the application for interim relief is refused.
SCHEDULE OF PARTIES
| S CI 2011 4653 | |
| RADHIKA PANKAJ OSWAL | Plaintiff |
| - and - | |
| AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522) | Firstnamed Defendant |
| IAN MENZIES CARSON | Secondnamed Defendant |
| DAVID LAURENCE McEVOY | Thirdnamed Defendant |
| SIMON GUY THEOBALD | Fourthnamed Defendant |
| J P MORGAN CHASE BANK NA (ABN 074 112 011) | Fifthnamed Defendant |
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