Rudnicki v Adventura One Pty Ltd
[2017] ACTSC 89
•21 April 2017
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Rudnicki v Adventura One Pty Ltd |
Citation: | [2017] ACTSC 89 |
Hearing Date: | 21 April 2017 |
DecisionDate: | 21 April 2017 |
Before: | Robinson AJ |
Decision: | Injunctions Refused |
Catchwords: | PRACTICE AND PROCEDURE – EX PARTE INJUNCTIONS |
Cases Cited: | Bond Brewing v National Bank (1990) 1 ACSR 445 International Finance Trust Co Ltd v New South Wales Crime Commission [2009] HCA 49; 240 CLR 319 Thomas A Edison Ltd v Bullock (1912) 15 CLR 679 |
Texts Cited: | Spry, Equitable Remedies, (Thomson Reuters, Australia, 9th ed, 2013) |
Parties: | Edward Rudnicki (Plaintiff) Marian Rudnicki (Plaintiff) Danuta Rudnicki (Plaintiff) Adventura One Pty Ltd (First Defendant) Andrew Rudnicki (Second Defendant) |
Representation: | Counsel Mr D Hassall (Plaintiffs) |
| Solicitors Dwyer Lawyers (Plaintiffs) | |
File Number: | SC 125 of 2017 |
ROBINSON AJ:
On the day upon which the proceedings were filed in the Registry, at the request of the Plaintiffs, the matter was listed before me for hearing of an interlocutory application for urgent relief sought by the plaintiffs on an ex parte basis.
At the conclusion of that interlocutory application, I declined ex parte relief and stated I would publish reasons later. These are my reasons.
Outline
For present purposes, it is not necessary to outline the facts in much detail. The proceedings concern the administration of a family trust, the Rudnicki Trust No.2. The undated trust deed is not elaborate nor is the business of the trust complicated. The trust appears to have come into existence in about 2013.
Without intending any disrespect, I will use the first names of the family members in describing the parts played by them.
The three plaintiffs, Marian, Danuta and Edward are husband, wife and son respectively.
The second defendant, Andrew, is another son.
The first defendant, Adventura One Pty Ltd is the trustee of the trust. Significantly, the trustee has one shareholder and one director and that is Andrew.
Rudnicki Trust No.2
Some aspects of this trust must be noted. First, although the four non-corporate parties to the proceeding are named beneficiaries, the term beneficiary under the deed also encompasses their respective spouses, children, relatives, companies, charities and other persons and entities. Thinking that all beneficiaries had been joined, this matter may have escaped the consideration of those who brought the proceedings. Second, there is an appointor and that is Andrew. Third, the trustee and the appointor can together, exercise a power of variation. Fourth, the trustee and the appointor can together, remove any beneficiary. Fifth, the appointor can change the trustee.
The business of the trust seems relatively straightforward. It purchased a property at [redacted for legal purposes], for, I am told, about $2.8M. Marian and Danuta contributed an initial $200,000 to this purchase and the ANZ bank appears to have provided the balance or a substantial amount of the remaining necessary financial accommodation. In order for the bank to advance this amount upon this ratio, it has taken substantial further security from the parties as well as guarantees from them. The property has been rented out.
Claims for Final Relief
The prayers for final relief claim the removal of the trustee, that the three plaintiffs be appointed both as new trustees and also as appointers replacing Adventura One P/L and Andrew respectively. No accounts were sought.
Claims for Interlocutory Relief
In substance, the plaintiffs sought, until further order, that-
1.The trustee be restrained from dealing with the trust property other than paying creditors in the ordinary course of business.
2.A mandatory order that Adventura One P/L and Andrew give the plaintiffs access to the books and records of the trust, cause the plaintiffs to be able to sign cheques on the trust’s bank account and be able to pay creditors in the ordinary course of business.
3.That Adventura One P/L and Andrew be restrained from using their powers as trustee and appointor to affect variations to the trust deed, change in beneficiaries or trustee.
Evidence on the application
Each of the three plaintiff’s affidavits was read on the application.
I accept that there is evidence which could make out a case where the trustee would have to account to the beneficiaries of the trust and possibly where the trustee would have to account on a wilful default basis.
I accept that there is some evidence that the ANZ is concerned about the state of its customer’s indebtedness. However, this evidence is not clear. By its letter dated 10 April 2017, the bank calls upon the trustee to remedy a failure to provide financial reporting under four headings (appearing to be a non-monetary default) and threatens to exercise its rights as to an Event of Default. At the same time, the bank makes reference to a letter of offer dated 1 February 2017. This is an offer in respect of which there is no evidence that it was accepted and is operative.
I accept also that there is evidence that the trustee has not supplied timely information as to the business of the trust on straightforward matters. I accept that there is evidence that the affairs of the trust are not being dealt with and attended to in a proper and timely way.
I accept that there are grounds established which could make out the removal of the trustee.
That being so, the defendants have had no chance to answer the evidence.
I will refer to disclosure on an ex parte application later. However, disclosure by the plaintiff of what the defendant would say or might say has obvious difficulties. Not the least of these is that the plaintiff might not know the facts that the defendant would be able to advance in opposition to an order. The plaintiff’s obligation of disclosure is not a substitute for the presence of the defendant.
Notice to Defendants
The plaintiffs deliberately refrained from giving notice of the commencement of these proceedings and the application for interlocutory relief. I was told from the bar table that they feared that the service of Court process would cause the defendants to exercise their powers to bring about changes to the trust deed, beneficiaries or the identity of the trustee itself. Each of the three plaintiffs concluded their affidavits in identical terms:
I fear and apprehend that if the relief sought in the accompanying applications is not granted by this Honourable Court, the beneficiaries, including ourselves, will suffer further and irremediable loss by reason of the failure of the Trustee to act properly and in accordance with its fiduciary duties in managing and administrating the Trust’s affairs in the best interests of the beneficiaries.
For the purposes of the interlocutory relief being sought, without notice to the defendants, I need to make additional findings on the existing state of the evidence.
No undertakings have been sought from the defendants, along the usual lines, concerning the subject of the interlocutory relief.
The defendant, Andrew, and hence the trustee, could have been served or given effective informal notice of the application for interlocutory relief. As it happens, he resides in the adjoining premises to that in which the plaintiffs, Marian and Danuta reside.
The defendants have not threatened in the past to exercise powers, contrary to the fears embedded in the interlocutory relief sought.
The conduct which is complained of and concerning the improper or non-administration of the affairs of the trust, has been the subject of complaint by the plaintiffs for at least two years.
The recent step taken by the bank requires investigation and possibly prompt action by guarantors but it does not require the interlocutory relief sought and, in any event, would not preclude notice being given to the defendants of some suitable quia timet tailored relief.
I am not satisfied that “the beneficiaries will suffer an irremediable loss” if notice of the application for interlocutory orders was given to the defendants. If the appointor or trustee combined to accomplish a variation to the trust deed, a deletion of a beneficiary or a change in trustee to the detriment of the beneficiaries between the giving of notice and the interlocutory hearing, such a manoeuvre would most probably fail. It would be characterised as a failure to exercise fairly and honestly the powers for the purposes for which they were given but rather to accomplish an ulterior purpose. Additional interlocutory orders reversing that altered position and restoring the status quo would follow to enable an orderly hearing to be held.
Ex Parte Injunctions
The jurisprudence which has grown up around the seminal Australian case of Thomas A Edison Ltd v Bullock (1912) 15 CLR 679 concerning both the requirement and ambit of disclosure is well known. It should be remembered that that jurisprudence proceeds out from a fundamental platform set out in that case at page 681:
There is a primary precept governing the administration of justice, that no man is to be condemned unheard; and therefore, as a general rule, no order should be made to the prejudice of a party unless he has the opportunity of being heard in defence. But instances occur where justice could not be done unless the subject matter of the suit were preserved, and, if that is in danger of destruction by one party, or if irremediable or serious damage be imminent, the other may come to the court, and ask for its interposition even in the absence of his opponent, on the ground that delay would involve greater prejudice than instant action.
In International Finance Trust Co Ltd v New South Wales Crime Commission [2009] HCA 49; 240 CLR 319, Heydon J had occasion to consider interlocutory injunctions in equity and the sensitivity of the law towards the interests of parties who may be affected by ex parte substantive orders. He said at [150]:
Another instructive aspect of equitable practice is afforded in relation to the question of whether an ex parte injunction should be granted at all. It was summarised thus by Lord Hoffmann, delivering the opinion of the Privy Council in National Commercial Bank Jamaica Ltd v Olint Corpn Ltd [2009] 1 WLR 1405:
"Although the matter is in the end one for the discretion of the judge, audi [alteram] partem is a salutary and important principle. Their Lordships therefore consider that a judge should not entertain an application of which no notice has been given unless either giving notice would enable the defendant to take steps to defeat the purpose of the injunction (as in the case of a Mareva or Anton Piller order) or there has been literally no time to give notice before the injunction is required to prevent the threatened wrongful act. ... Their Lordships would expect cases in the latter category to be rare, because even in cases in which there was no time to give the period of notice required by the rules, there will usually be no reason why the applicant should not have given shorter notice or even made a telephone call. Any notice is better than none." (emphasis in original)
It is also necessary to keep in mind the decision in Bond Brewing v National Bank (1990) 1 ACSR 445 where the Full Court commented adversely upon the lack of effective notice given in an ex parte application to appoint a receiver. In the course of that decision (at [458]) the Full Court also made observations on the question of delay, which is relevant here:
Where an injunction or similar relief is sought against a person without notice to him the court should always bear in mind the words of Lord Langdale MR in Earl of Mexborough v Bower (1843) 7 Beav 127 at 131 ; 49 ER 1011 :
… nothing can be more true than this, if parties come and ask for an injunction ex parte, the court looks minutely to the time in which they have permitted the matter complained of to proceed, and will not allow them to obtain an injunction in the absence of the other party, when they have themselves, for some time, acquiesced. It is quite reasonable that that should be so, because the granting of an injunction ex parte is the exercise of a very extraordinary jurisdiction, the effect of which, in every case in which it is asked, is most alarming; therefore the time at which the plaintiff first had notice of the existence of the subject of complaint, is looked to with the greatest care and jealousy, in order to prevent an improper order being made against a party in his absence ….
In Equitable Remedies, Ninth Edition at pages 530-1, Spry states the test on an ex parte application as:
Therefore when an ex parte application is made the question to be decided by the court is, as in all other cases where an interim or interlocutory injunction is sought, whether in view of prospective injury to the plaintiff and such other remedies as he may have, either in damages or otherwise, the balance of justice favours the grant of the particular relief in question. The main considerations that the court takes into account, when it is thus asked to depart from the more desirable course of hearing both parties, are the extent and nature of the risk that will be undergone by the plaintiff if there is an adjournment, the degree of probability with which he has established his rights, the extent of the hardship or prejudice to the defendant that the grant of an injunction will involve, any difficulties that may be encountered in effecting service on or giving notice of the material application to him and the extent to which the grant or refusal of relief may affect third persons.
In the circumstances I was not satisfied that there was sufficient risk of irremediable damage or detriment to the rights of the plaintiffs so as to justify the making of the ex parte interlocutory orders sought. Those circumstances include, importantly, the length of the delay and the fact that no actual threat has been made to affect variations to the trust deed or a change in either beneficiaries or trustee.
I did make orders for service of the application and fixed the return date of the application as 28 April 2017. I regarded the matter as justifying shortened service of the initiating process.
| I certify that the preceding thirty-two [32] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Acting Justice Robinson. Associate: Date: |
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