Rural Finance Pty Ltd v Hennessy

[1993] QCA 40

IN THE COURT OF APPEAL	[1993] QCA 040
SUPREME COURT OF QUEENSLAND

Appeal No. 240 of 1992

Brisbane

[Rural Finance Pty. Ltd. v. Equus Financial Services Ltd.]

BETWEEN

RURAL FINANCE PTY. LIMITED

(First Plaintiff) First Appellant

- and -

ASHWARE LIMITED, FARMER JOHNSON ACQUACULTURE LIMITED

FARMER JOHNSON RESTAURANTS PTY. LIMITED, DAZMAC PTY. LTD. MOBARI PTY. LIMITED, FARMER JOHNSON BAKERIES PTY. LIMITED

FARMER JOHNSON LIMITED, WOODS AND JOHNSON DEVELOPMENTS PTY.

LIMITED, SAVELLA PTY. LIMITED, SIGRID PTY. LTD., JOHNSON

BULLDOZER CONTRACTING PTY. LIMITED, SIGRID PTY. LTD.
JOHNSON BULLDOZER CONTRACTING PTY. LIMITED, JFM SYSTEMS
PTY. LIMITED, JFM CONSTRUCTION PTY. LIMITED, KATHLEEN
DRIVE STONEFRUIT GROWERS SYNDICATE NO.1 PTY.
LIMITED, MOGARE PTY. LIMITED, JOHNSON FARM MANAGEMENT

PTY. LIMITED, AUSTRALIAN BLUEBERRY COMPANY PTY. LIMITED, CORINDI BLUEBERRY GROWERS PTY. LIMITED FARMER JOHNSON DISTRIBUTORS PTY. LIMITED, FARMER

JOHNSON CITRUS LIMITED, JFM INVESTMENTS PTY.

LIMITED, WINHOLM PTY. LIMITED, JOBHILL PTY. LIMITED in its own capacity and as trustee for the JOBHILL TRUST,

GREGORY MORRIS JOHNSON, FRANCIS EDWARD JOHNSON and
ANTHONY JAMES JOHNSON

Second

(Second Plaintiffs)

Appellants

- and -

PHILLIP ARTHUR HENNESSY

(First Defendant)

- and -

MICHAEL JOSEPH DWYER

(Second Defendant)

- and -

EQUUS FINANCIAL SERVICES LIMITED

(Third Defendant) Respondent

The President
Mr Justice Davies

Mr Justice Derrington

Judgment delivered 04/03/93
Judgment of the Court.

APPEAL ALLOWED TO THE EXTENT THAT (i) THE WORDS "UNLESS THE DETERMINATION IS SET ASIDE OR REMITTED UNDER RSC 0.97 r.1" ARE ADDED TO THE END OF PARAGRAPH (C) OF THE ORDER 13 OF LEE J. AND (ii) THE RESPONDENT MUST GIVE AN UNDERTAKING AS TO DAMAGES IN THE USUAL TERMS IN RELATION TO ORDER 13 AND THE MATERIAL PARTS OF ORDERS 10 AND 12 OF LEE J. OTHERWISE THE APPEAL IS DISMISSED. APPELLANTS TO PAY THREE-QUARTERS OF THE TAXED COSTS OF AND INCIDENTAL TO THE APPEAL.

CATCHWORDS:	EQUITY - Equitable remedies - Injunctions - Interlocutory - whether undertaking as to damages required.
Counsel:	D.J.S. Jackson Q.C., with him A. Crowe, for the appellants P.A. Keane Q.C., with him S.W. Couper, for the respondent
Solicitors:	Messrs. Clayton Utz for the appellants Messrs. Gadens Ridgeway for the respondent
Hearing Date(s):	1st March, 1993

THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 240 of 1992

Before The President
Mr Justice Davies
Mr Justice Derrington

[Rural Finance Pty. Limited v. Equus Financial Services

Limited]

BETWEEN

RURAL FINANCE PTY. LIMITED

(First Plaintiff) First Appellant

- and -

ASHWARE LIMITED, FARMER JOHNSON ACQUACULTURE LIMITED

FARMER JOHNSON RESTAURANTS PTY. LIMITED, DAZMAC PTY. LTD. MOBARI PTY. LIMITED, FARMER JOHNSON BAKERIES PTY. LIMITED

FARMER JOHNSON LIMITED, WOODS AND JOHNSON DEVELOPMENTS PTY.

LIMITED, SAVELLA PTY. LIMITED, SIGRID PTY. LTD., JOHNSON

BULLDOZER CONTRACTING PTY. LIMITED, SIGRID PTY. LTD.
JOHNSON BULLDOZER CONTRACTING PTY. LIMITED, JFM SYSTEMS
PTY. LIMITED, JFM CONSTRUCTION PTY. LIMITED, KATHLEEN
DRIVE STONEFRUIT GROWERS SYNDICATE NO.1 PTY.
LIMITED, MOGARE PTY. LIMITED, JOHNSON FARM MANAGEMENT

PTY. LIMITED, AUSTRALIAN BLUEBERRY COMPANY PTY. LIMITED, CORINDI BLUEBERRY GROWERS PTY. LIMITED FARMER JOHNSON DISTRIBUTORS PTY. LIMITED, FARMER

JOHNSON CITRUS LIMITED, JFM INVESTMENTS PTY.

LIMITED, WINHOLM PTY. LIMITED, JOBHILL PTY. LIMITED in its own capacity and as trustee for the JOBHILL TRUST,

GREGORY MORRIS JOHNSON, FRANCIS EDWARD JOHNSON and
ANTHONY JAMES JOHNSON

Second

(Second Plaintiffs)

Appellants

- and -

PHILLIP ARTHUR HENNESSY

(First Defendant)

- and -

MICHAEL JOSEPH DWYER

(Second Defendant)

- and -

EQUUS FINANCIAL SERVICES LIMITED

(Third Defendant) Respondent

REASONS FOR JUDGMENT - THE COURT

This is an appeal from interlocutory orders made in the Trial Division on 19 November, 1992. The writ was issued on 23rd August, 1991 and, on 5th September, 1991, the action was certified for speedy trial by Ryan J. At that time and subsequently, there have been interlocutory disputes and the action is not yet ready for hearing.

The appellants are the plaintiffs in the action and Frank Johnson Pty. Ltd. ("FJ"), a company associated with at least some of the plaintiffs. The respondent is one of the defendants in the action (and a plaintiff, by counterclaim), and FJ is one of the defendants to the respondent's counterclaim. Apart from incidental claims such as interest and costs, the claims made in the action against the respondent are for "an order pursuant to Section 87 of the Trade Practices Act 1974 declaring void a certain Loan Agreement and Guarantee, and a certain Deed of Charge, both dated on or about 7 January 1991, and entered into between" the appellants (other than FJ) and the respondent, "damages pursuant to Section 82 of the Trade Practices Act 1974", "damages, for breach of contract", and "all necessary accounts, directions and enquiries." By its counter-claim, the respondent seeks to enforce the securities which the plaintiffs in the action wish to have set aside and to recover monies to which it claims to be entitled.
On 5 September, 1991, upon the appellants' undertaking as to damages, the respondent was restrained on an interlocutory basis from exercising its power of sale under the security documents.

For a period up to early 1992, the respondent permitted money raised from the sale of blueberries to be paid to one of the appellants, Corindi Blueberry Growers Pty. Limited ("CBG"), by another company, Blueberry Farms of Australia (Corindi) Pty. Limited ("BFA"), to enable the continued operation of blueberry farms at Corindi in New South Wales with which the appellants are associated. BFA owns a neighbouring farm and until March, 1992, was engaged in a joint venture with some of the appellants pursuant to which BFA carried out harvesting and marketing of the blueberries and remitted the material proceeds of sale after deduction of expenses.

On 9 April, 1992, the respondent was ordered by White J. to direct BFA, until further notified by the respondent, to pay to the solicitors for the appellants, as trustee for CBG, in lieu of payment to the respondent "all monies owing or to become owing to the joint venture between BFA and CBG" on account of expenses of the said joint venture payable for services provided to the joint venture by CBG or Johnson Farm Management Pty. Limited ("JFM") and "distribution of that part of the surplus of the income of the said joint venture over the expenses of the said joint venture which is attributable to the harvest of blueberries" to which CBG is entitled. Further, the respondent was restrained on an interlocutory basis from giving any further notification to BFA.

Those orders were made on the basis of a number of undertakings by the appellants other than FJ; namely:

(a)  To pay to the Defendants any damages which the Defendants may sustain by reason of the injunction, and which this Court or a Judge thereof may think they ought to pay;

(b)  To cause all money paid or to be paid to them in respect of the growing of, the sale of, or the provision of services in connection with the growing and sale of, blueberries and macadamia nuts grown at or around Corindi in the State of New South Wales ("the blueberry activities") to be banked in an account with the Bank of New Zealand in the name of Messrs. Clayton Utz as trustee for Corindi Blueberry Growers Pty. Limited;

(c)  That the only payments to be made from such account, to which shall also be paid the moneys which the Third Defendant shall in compliance with this Order direct Blueberry Farms of Australia (Corindi) Limited to pay, shall be the following payments, which shall be paid to either or both of Corindi Blueberry Growers Pty. Limited and Johnson Farm Management Pty. Limited as may be appropriate:

(i) the sum of $82,408.00 on or after the date hereof;

(ii) the sum of $63,090.00 on or after the date

hereof;

(iii) the sum of $51,190.00 on or after 1 May,

1992;

(iv) the sum of $71,590.00 on or after 1 June,

1992;

(v)  the sum of $78,090.00 on or after 1 July, 1992;

(vi) the sum of $75,090.00 on or after 1 August,

1992;

(vii) the sum of $46,590.00 on or after 1

September, 1992;

(viii) the sum of $56,090.00 on or after 1 October,

1992;

(d)  That the monies so paid to either of both of Corindi Blueberry Growers Pty. Limited and Johnson Farm Management Pty. Limited shall be expended by them solely in connection with the blueberry activities and substantially in accordance with the budget which is exhibit "AJJ1" to the affidavit of Anthony James Johnson filed herein on 7 April 1992;

(e)  That monthly accounts of such expenditure shall be prepared by the Plaintiffs and forwarded to the Third Defendant by the 15th day of the following month ;

(f)  That they shall permit the Third Defendant at any time during normal business hours to examine and audit such expenditure and the records relating thereto.

On 22 May, 1992, White J., who had made the orders of 9 April, 1992, declined to permit any of the money received by the trustee to be used to pay the appellants' legal costs. Her Honour considered that, while there would be sufficient to maintain the farm until trial according to the appellant's budgetary projections, the budget was "fairly tight" and "very stringent" and "the diversion of funds away from the farming project would defeat the very purpose" for which the injunctive relief had earlier been granted.

White J. was aware on 9 April, 1992, that a contract had been entered into between JF and FJM, but it was described in an affidavit read on behalf of the appellants as an agreement whereby JFM had subcontracted its management responsibilities to FJ and no copy of the document was placed before her Honour. In fact, in lieu of the joint venture with BFA, a contract dated 9 March, 1992, had been entered into between JFM, CBG, Kathleen Drive Stonefruit Growers Syndicate No.114 Limited ("KDSF"), another appellant, and FJ by which the other companies sold to FJ all fruit in which they had an interest and gave FJ the right to receive all proceeds of sale of the first. Under
the agreement, JFM, CBG, and KDSF were entitled to receive from the proceeds of sale paid to FJ only the balance after deduction of all farm costs as determined by FJ and a further sum, being 10% of the costs or $4,000.00 per month, whichever was the greater. Further, an additional $2,400.00 per fortnight, not provided for in the budget approved by White J., had been paid to Frank Johnson and expended on living expenses.
In November, 1992, cross-applications came before Lee J., and on 19 November, his Honour ordered that undertakings (b), (c), (d) (e) and (f) in the order of 9 April, 1992, "be discharged", and made orders including the following:

3.   that pending the trial of this action or further earlier order, the Plaintiffs and Frank Johnson Pty. Limited will not without the prior written consent of the applicant enter into a contractual or other arrangement with Frank Johnson Pty. Limited or any other party with respect to the management and maintenance of blueberry activities or the sale of fruit derived from the project, other than as provided for by the agreement of 9 March 1992 and that Frank Johnson Pty. Limited will not without the prior written content of the applicant, subcontract, or assign any of its interests or obligations under that Agreement, whether pursuant to clause 6.2 thereof or otherwise.

4.    that Frank Johnson Pty. Limited and the plaintiffs permit the first plaintiff by counterclaim, at any time during normal business hours on reasonable notice to examine and audit all items of expenditure incurred and revenue earned, at any time, by Frank Johnson Pty. Limited and/or the plaintiffs in relation to the blueberry activities and all of their records, primary documents and any other thing or matter in the custody or control of Frank Johnson Pty. Limited and/or the plaintiffs with respect to the blueberry activities.

5.   that such audits be conducted by Steven Benjamin metter at the cost of the applicant, such costs to be deemed to be the applicant's costs in the cause.

6.   that a copy of each audit be forthwith furnished to the solicitors for the plaintiffs and Frank Johnson Pty. Limited.

7.    that the plaintiffs and Frank Johnson Pty. Limited cause all moneys and other consideration presently held by the plaintiffs and Frank Johnson Pty. Limited and other than monies necessary to meet the payroll of Frank Johnson Pty. Limited due for the week ending 20 November 1992, and all monies paid or payable after the date of this order to them (except for sums payable by the trustees to Frank Johnson Pty. Limited and the plaintiffs) in respect of the blueberry activities to be banked without deduction in an account with the Westpac Banking Corporation Group Limited in the name of Messrs. Clayton Utz as trustee for the parties pending the trial of this action or further earlier order.

8.   that within 28 days of the date of this order, Frank Johnson Pty. Limited pay to the trustee the sum of $43,347.61 and immediately upon receipt thereof of any further amounts received by way of management fees pursuant to the agreement of 9 March 1992, to be held by the trustee for the parties pending the trial of this action or further earlier order; reserving the question of payments to the date thereof to Frank Johnson as well as payment to date for vehicle hire and office expenses to be determined at the trial.

9.    that the plaintiffs and Frank Johnson Pty Limited:

(a)	within seven (7) days of the date of his order provide a detailed budget in respect of revenue and expenses of the blueberry activities for the month of December 1992 to the applicant and to the trustees.
(b)	within fourteen (14) days of the date of his order provide a detailed budget in respect of revenue and expenses of the blueberry activities for the period of 1 December 1992 to 30 June 1993 to the applicant and to the trustee.
(c)	on or before fourteen (14) days prior to the commencement of each month, provide an updated detailed budget in respect of revenue and expenses of the blueberry activities for that month to the applicant and to the trustees, to commence with respect to the month of January 1993 and thereafter monthly.

10.

that the trustees make payment from the trust
account to Frank Johnson Pty. Limited only in
respect of expenses incurred in the blueberry
activities for the purposes of maintenance,
growing, harvesting and sale of produce with
respect to the month of December 1992 and
following, substantially in accordance with the
budgets referred to in paragraphs 7(a) and (c) of
his order, provided that if there is any dispute
between the parties with respect to any items in
budget, payment shall be made in accordance with
any variation to any budget as may be agreed upon
in writing between the parties or in default of
agreement, in accordance with any rulings which
may be given by the arbitrator appointed pursuant
to paragraph 13 of this order.

11.  that the trustees make payment from the trust account of expenses incurred in the blueberry activities for the purposes of maintenance, growing, harvesting and sale of produce, with respect to expenses incurred in those activities.

12.  that the plaintiffs and Frank Johnson Pty. Limited expend any moneys paid to them by the trustees solely in connection with the blueberry activities, and substantially in accordance with the terms of the budgets furnished from time to time in accordance with the paragraphs 9(a) and (c) of this order or as varied in writing between the parties or as varied by any ruling of the arbitrator appointed pursuant to paragraph 13 hereof.

13.  that:-

(a)	within three (3) days of his order, the parties shall approach the President of the Institute of Arbitrators Australia (Queensland Division) and request the appointment of a suitable qualified person to arbitrate any disputes or questions between the parties with respect of the extent of the expenditure necessary for the blueberry activities and any contracts the plaintiffs or Frank Johnson Pty. Limited wish to enter pursuant to paragraph 3 of this order;
(b)	any party may refer any such dispute or question to the arbitrator;
(c)	the arbitrator shall act as an expert and the parties shall be bound by the arbitrator's determination in respect of any question or dispute arising between the parties and referred to him as provided by this order.

14.  that the plaintiffs and Frank Johnson Pty. Limited:

(a) maintain a full and accurate account from and commencing 1st November 1992 of all fruit harvested from blueberry trees at the Corindi property, and of all sales of fruit from that

property, including the date and quantity harvested on each day during harvest, the date of each sale, the name and address of each buyer, the quantity sold to each buyer, the price agreed to be paid to each buyer, the terms as to payment, the date and place of delivery, and all documentation which comes into the hands of the plaintiffs and Frank Johnson Pty. Limited in respect of each sale;

(b)  maintain from 1st November 1982 a full and accurate account of the application and disposition of the moneys and other consideration received from the sale of fruit from the Corindi property and from the trustees, including in respect of each expenditure made by the plaintiffs and Frank Johnson Pty. Limited details of the date and amount of the expenditure, to whom the moneys were paid, the reason or consideration for the payment, and all documentation which comes into the hands of the plaintiffs and Frank Johnson Pty. Limited in respect of each instance of application or dispositions of the said moneys.

15. that the plaintiffs and Frank Johnson Pty.
Limited, by the fifteenth day of each month
provide to the applicant detailed reports,
prepared on a full accrual basis and in the same
format as the budgets, of the items of revenue
earned by them and expenditure made or incurred by
them on the blueberry activities for the preceding
month, such reports to include the month
commencing 1st November 1992 and thereafter
monthly.

16.  that the trustees prepare and forward a statement to the solicitor for the applicant and to the solicitors for the plaintiffs and Frank Johnson Pty. Limited on the fifteenth day of the following month giving the amount of moneys received into and paid out of the trust account in the preceding month, each statements to include the month commencing 1st November 1992 and thereafter monthly.

The first ground of appeal is that Lee J. erred in granting the orders made on 19 November, 1992, without an undertaking as to damages from the respondent. According to the appellants, there is a mandatory requirement for such an undertaking under R.S.C.0.58 r.12. The answer sought to be made, shortly stated, is that the "orders ... were appropriate, in the events which had happened, as conditions for the maintenance of the restraint upon the exercise ... of its rights" by the respondent.

Subject to a specific matter to which we will refer, that seems to us plainly correct. Indeed, subject to some qualifications, the appellants did not dispute that they could properly have been asked - and would have given - undertakings substantially in terms of the orders made by Lee J. insofar as they impose restraints or obligations upon the appellants.

The first qualification involved an attempt by the appellants to place new material before this Court pursuant to R.S.C. O.70 r.10. However, this course was not proceeded in when it was objected to by the respondent, which had been given very late notice of the application and also wished the opportunity to place additional material before the Court. It was accepted that, in the circumstances, the appellants should seek to have the interlocutory orders varied in the Trial Division on the basis of the further evidence which they wished to adduce and that this appeal should be confined to the material before Lee J.

The second qualification concerned Lee J's order number 8. The appellants said that an undertaking would not be given in those terms due to the financial position of FJ.
Further, it was submitted for the appellants that an undertaking as to damages should have been required from the respondent in relation to this order.
We do not agree. Paragraph 8 merely aims to restore the position ordered by White J. in April, 1992. It does no more than require FJ to refund payments made to it to which it was not entitled in accordance with White J's orders.
The final qualification to which reference is presently necessary concerned Lee J's order number 13 (and the associated parts of orders numbers 10 and 12).

Both parties accepted in the course of argument that R.S.C. R.97 r.1 empowered an order in terms of order 13 subject to the addition of the words "unless the determination is set aside or remitted under R.S.C. O.97 r.1" to the end of paragraph (c) of the order. However, the appellants submitted that Order 13, which was applied for by the respondent, ought not have been made or an undertaking as to damages should have been required of the respondent.

This is the only aspect of the appeal which has caused any difficulty. However, we are satisfied that Order 13 is properly to be considered as more than a requirement to which the appellants have properly been subjected as a condition of the restraints imposed upon the respondent, and is an additional substantive provision which may operate, if wrong determinations are made, to cause the appellants significant loss.

It was indicated for the respondent that an undertaking as to damages was available from it if the Court should be of this view and, accordingly, the Court requires such an undertaking as the basis of Order 13 and the material parts of orders 10 and 12.

Otherwise, the appeal is dismissed. The appellants have failed except in one limited respect and, in the circumstances, should pay three quarters of the taxed costs of and incidental to the appeal.