Pendulum Properties Pty Ltd v Greenbase Nominees Pty Ltd - [2006] WASC 316

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: PENDULUM PROPERTIES PTY LTD -v- GREENBASE NOMINEES PTY LTD & ANOR [2006] WASC 316

CORAM: MARTIN CJ

HEARD: 21 & 22 DECEMBER 2006

DELIVERED : 22 DECEMBER 2006

FILE NO/S: CIV 2294 of 2006

BETWEEN: PENDULUM PROPERTIES PTY LTD (ACN 115 727 609)
Plaintiff
AND
GREENBASE NOMINEES PTY LTD (ACN 119 662 690)
First Defendant
STAN MICHAEL PALASSIS
Second Defendant

Catchwords:

Practice and procedure - Injunctions - Interlocutory injunction - Application for injunctive relief to restrain the first defendant from disposing of assets - Where plaintiff asserts entitlement to shareholding in the first defendant company under option agreement - Whether the entitlement to relief probable - Whether balance of convenience justifies the relief sought - Turns on own facts

Legislation:

Nil

Result:

Application dismissed

Category: B

Representation:

Counsel:

Plaintiff:     Mr G R Donaldson SC and Mr K J de Kerloy
First Defendant             :     Mr D H Solomon and Mr C S Williams
Second Defendant         :     Mr D H Solomon and Mr C S Williams

Solicitors:

Plaintiff:     Freehills
First Defendant             :     Solomon Brothers
Second Defendant         :     Solomon Brothers

Case(s) referred to in judgment(s):

Australian Broadcasting Corporation v O'Neill (2006) 80 ALJR 1672
Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618

MARTIN CJ: This is an application for injunctive relief at the suit of the plaintiff, Pendulum Properties Pty Ltd ("Pendulum"). The nature of the relief sought has changed since the initial application and I will explain briefly how that has occurred.
The first defendant, Greenbase Nominees Pty Ltd ("Greenbase"), is a company which has an interest, somewhat arcane and therefore not necessarily needing to now be detailed, in the proceeds of the sale of land at Baldivis. The sale is to settle on 28 December 2006. Its interest in the proceeds of the sale of that land is approximately $9.5 million.
At the time the application for injunction was initiated, Pendulum appeared to apprehend that there would be a net balance of proceeds available to Greenbase, although it was then aware that of the amount of $9.5 million, some $3 million was to go to a company called SPM Project Marketing Pty Ltd ("SPM"). SPM has appeared today. Further, pursuant to an undertaking given on behalf of Greenbase in related proceedings in the Federal Court, some $3.5 million of the proceeds of sale was to be retained pursuant to that undertaking.
There is also some evidence that on 18 December 2006, Pendulum became aware of an obligation owed by Greenbase to a Mr and Mrs Foulds of between $3 million and $4 million. As it transpires, the evidence establishes that that obligation is an amount of $4.6 million, although it is not clear that that information was made available to Pendulum on 18 December. At all events, it is now clear that there is a secured charged held by Mr and Mrs Foulds over all the property of Greenbase, including the proceeds of sale to secure a debt of $4.6 million owed by Greenbase to Mr and Mrs Foulds payable on 28 December 2006.
Simple mathematics reveals therefore that the proceeds of sale of some $9.5 million is approximately $1.6 million less than the amount required to satisfy the existing obligations of Greenbase. In the affidavit of the second defendant, Mr Palassis, sworn 21 December 2006, Mr Palassis states that, in effect, he will be providing the additional sum of $1.6 million required to meet those obligations at settlement. Therefore, the apprehension that there would be a net surplus from the settlement due on 28 December 2006 has proven to be erroneous.
The relief that is now sought in light of the detailed revelation of those matters is relief which would permit payment of the various amounts to which I have referred. This totals in excess of the amounts to be received. Nevertheless, Pendulum seeks to restrain Greenbase from disposing of any of its assets save for individual payments of properly incurred expenses of no more than $1000 per week.
The basis of Pendulum's claim against Greenbase is an option agreement that was entered into earlier this year as part of a loan arrangement between Pendulum and Greenbase. Under the option agreement, Pendulum had the opportunity to either acquire 60 per cent of the equity of Greenbase, that is to say, the issued shares in Greenbase or to require Greenbase to enter into a management agreement under which Pendulum would receive 60 per cent of the profits from the sale of the Baldivis land.
In the event, Pendulum purported to exercise the option by notice dated 30 August 2006 and, in particular, purported to exercise the option to acquire 60 per cent of the issued shares in Greenbase. The validity of the exercise of that option is disputed, primarily on the ground that it was exercised too late. The reason for this is that, although the original option agreement was somewhat obscure as to the time by which the option had to be exercised, by an addendum to that agreement entered into during August 2006, it was agreed between the parties that the time for exercise of the option would be extended until 24 August 2006. Previously, it was apparently taken to be 21 August 2006.
Therefore, Greenbase says that because the option was not exercised within the time required, there was a failure to comply with the requirements for the exercise of the option with the result that it was not validly exercised. Pendulum answers that contention by asserting that representations were made orally by Mr Palassis to Mr Fogarty, a director of Pendulum, upon which Mr Fogarty relied. The nature of the representations alleged is to the effect that Greenbase would not insist upon the provisions of the addendum to the option agreement requiring that the option be exercised by 24 August 2006.
When application is made for an interlocutory injunction there are essentially two questions which arise. The recent decision of the High Court in the case of Australian Broadcasting Corporation v O'Neill (2006) 80 ALJR 1672, has made it clear that the principles to be applied in Australia are those previously set out by the High Court in its decision in Beecham Group Ltd v Bristol Laboratories Pty Ltd(1968) 118 CLR 618.
Two questions were identified in that case as being central. The first is whether the plaintiff had made out a prima facie case in the sense that if the evidence remains as it is there is a probability that at the trial of the action, the plaintiff will be held entitled to relief. The second inquiry is whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs, or is outweighed by, the injury which the defendant would be likely to suffer if an injunction were granted.
In the case of Australian Broadcasting Corporation v O'Neill (supra), their Honours went on to explain that the reference to the probability of success in that passage is not to be construed as a probability in the sense that it is more likely than not that relief will be obtained, that is it say, that the prospects of the plaintiff's success are 51 per cent or more.
Rather, their Honours pointed out that "probability" when used in that expression is used in the sense which has been traditionally recognised both in the High Court and in decisions in this court; that is, in the sense of identifying a sufficient likelihood of success to justify the preservation of the status quo pending the trial.
As their Honours point in Australian Broadcasting Corporation v O'Neill (supra), the nature of the intervention sought by the court will affect the nature or the extent of the likelihood of success that requires to be established; so that where the intervention sought is of a modest kind, less will be required from the plaintiff in terms of satisfying the likelihood of success than in a circumstance in which the intervention is of a dramatic kind.
In the present case, Pendulum has, on the evidence, established that there is an arguable issue. It is not one of those cases in which it could be said that there is a strong probability of success, because the nature of the issue that I have identified makes clear that the case will turn largely upon the oral evidence to be given to the two parties to the discussions to which I have referred; namely, the oral evidence of each of Mr Fogarty and Mr Palassis.
It would be bold, perhaps foolhardy, to attempt at this stage of the proceedings to predict which of those witnesses is more likely to be believed than the other. When I ask myself the first question of whether there is a probability that the plaintiff will be held entitled to relief, I conclude that, in this case, Pendulum has made out an arguable case. The strength of Pendulum's case is difficult to assess at this stage because of the nature of the issue which will fall to be determined, that issue depending critically upon the oral evidence to be given at trial.
The second question is whether the balance of convenience justifies the relief sought. The relief sought would effectively confine Greenbase and prevent it from dealing with any assets or indeed undertaking any significant business other than by making payments of less than $1000 per week.
An affidavit has been provided from Mr Mark Alan Richard Blundell in which he deposes that on the basis of a conversation that he had earlier this morning with Mr Palassis, he believes that Greenbase owns no assets other than its interest in the Baldivis land. On the face of it, that is a curious assertion given the evidence which establishes that Greenbase received $3.6 million on 9 November 2006.
There is no evidence before me as to what happened to that $3.6 million, but it seems inherently likely that whatever has happened to that $3.6 million has given rise to some form of an asset or receivable that would be held by Greenbase. I therefore have some difficulty accepting the bald assertion made on the basis of hearsay that Greenbase owns no assets other than its interest in the Baldivis land. Mr Blundell has explained to me, and I accept, that when he took instructions for the purpose of his affidavit, he inadvertently overlooked seeking instructions in relation to the receipt of $3.6 million.
But one thing is clear and that is that the particular urgency which generated these proceedings; being the receipt of $9.5 million on 28 December 2006, no longer justifies the urgent timetable that had been fixed for the resolution of these issues. It is clear that the entire proceeds of sale are committed and will be disbursed to the entities I have identified pursuant to securities already given and the undertakings already given to the Federal Court.
On the evidence before me, all I know about the assets of Greenbase is that on 9 November 2006, $3.6 million was received and on 28 December 2006, $4.6 million has to be paid. It is, I think, somewhat unsatisfactory that Greenbase has proffered no evidence as to what has happened to that $3.6 million. However, Mr Solomon points out that Greenbase is a single shareholder company with a single director and that the single shareholder in Greenbase is another company which is under the complete control of Mr Palassis.
He further points out that in the Federal Court proceedings, Pendulum referred to Greenbase as the alter ego of Mr Palassis. On the material before me, it seems possible that Mr Palassis has been treating Greenbase as his alter ego. It may well be that the $3.6 million has given rise to some form of a chose of action against either Mr Palassis or some other entity with which he is associated. However, that is complete speculation on my part because I have no evidence whatsoever as to whether Greenbase does in fact have any assets or any assets of value beyond the receivable in the form of the sale proceeds from the Baldivis land.
The basis upon which Pendulum seeks the relief presently sought, is to restrain apprehended dissipation of value in Greenbase because of its asserted 60 per cent interest as a shareholder in Greenbase. Put another way, because Pendulum asserts an entitlement to 60 per cent of the issued shares in Greenbase, it claims to be entitled to protect the value of that interest by restraining Greenbase from dissipating assets until such time as these proceedings can be resolved and it can acquire its interest. Pendulum could then exercise the rights that would go with 60 per cent of the shares in order to presumably take control of the board and, through control of the board, preserve Pendulum's assets and the value of its shares.
The difficulty I have with the interim relief sought is that it seems to be based upon the entirely speculative proposition that there are some assets which are threatened and which the court should intervene to protect. It appears that at the moment there is simply insufficient evidence for me to arrive at a conclusion that there are any assets in Greenbase which it would be appropriate for the court to intervene and protect.
It would be sheer speculation to assume that there are assets of value and assets that are under threat of dissipation. No doubt, Mr Palassis will be aware of his obligations as a director of Greenbase. One would hope that he will be aware of the consequences of dissipating further the assets of a company against whom claims are made, other than in the ordinary course of business. Those consequences would obviously be serious and could give rise to penal proceedings.
In summary, although Pendulum has satisfied me that there is a prima facie case in the sense described in the authorities, on the evidence before me, I am not presently satisfied that there is sufficient evidence to enable me to conclude that there either is an asset of value or that there is an imminent threat to any asset of value so as to justify the grant of the relief sought.
I will therefore dismiss this application. This will not preclude Pendulum from reapplying if and when a point is reached at which there might be sufficient evidence to establish a threat to the assets of Greenbase and therefore a threat to the value which Pendulum seeks to derive from these proceedings.