Rydges Hotels P/L v Cebor P/L

[1993] FCA 571

57 1 9 3

JUOGiVlENT No. ........ ... ,..... / ..-......

IN TFE FEDERAL COURT OF AUSTRALIA )

GENERAL DIVISION	NG 456 of 1992
STATE OF NEW SOUTEI WALES

BETWEEN: RYDGES HOTELS PTY LTD

ACN 050 035 268

AND: CEBOR PTY LTD

ACN 002 137 859

First Respondent

TRUSIDE PTY LIMITED
ACN 003 772 165

Second Respondent

RECEIVED

2 3 AUG 1993	ROBERT EDWARDS CHAMBERS
FEDERAL COURT OF	Third Respondent

AUSTRAUA PRINCIPAL

REDISTRY

EX TEMPORE JUDGMENT

EINPELD J SYDNEY 21 JULY 1993

The applicant on 2 July filed a motion for an order that the applicant pay into court, pending the hearing of this case the rental under its lease with the second respondent. The clear purpose of this motion, as is conceded in the affidavit filed in its support, is to constitute an advance fund for the payment to the applicant by the respondents of all or part of the damages which the applicant is seeking in the proceedings. The basis upon which the applicant seeks the order is that the respondents, particularlythe corporate respondents, have no assets or funds.

respondent, undertook to do a deal of building construction work are that the respondents, I think particularly the second

The facts of the case, which are not disputed in this respect,

for the purpose of constructing a hotel and restaurant in a Sydney suburb which the applicant was to lease. It has in fact been leasing the premises and conducting them for some time. In order to do its construction work, the respondents, or one or other of them, took out a loan from Custom Credit, a finance organisation of a substantial kind, and it or they have, of course, undertaken the obligations to repay that loan. The respondents' solicitor filed an affidavit yesterday in the motion, pointing out a number of these matters and some others, all of which the applicant was or must have been aware of, or could easily have made itself aware of, at the time when the lease was entered into.

No precedent was cited, and I know of none, for the application contained in the motion, which would have the effect of requiring the Court to vary the lease by ordering that the rental payments be directed elsewhere than the lease itself requires. This would effectively be an interim variation of the lease under section

87 of the Act, making the assumption that the relevant

of deceptive and misleading conduct -- had been or were so	prerequisite of section 87 orders -- namely, the establishment
strongly likely to be established as to make almost inevitable some sort of final order under section 87.
I have said in other cases, and I repeat here, that whilst in the very strictest sense of the word, the Court might have jurisdiction to make such orders -- and I am by no means persuaded yet that it does, it is difficult to conceive of a

situation in which the Court would exercise the jurisdiction, for it would effectively have the result of predetermining the major issues to be fought in the proceedings. Nothing, for example, has been evidenced on this motion to establish either that there was misleading or deceptive conduct, or that whatever misleading and deceptive conduct had taken place would inevitably result in an order under section 87. The applicant, in fact, puts its claim in the alternative, because it seeks also damages under section 82, so that even the applicant is not yet decided as to whether the facts of the case must give rise to an order under section 87, or whether there is adequate relief available elsewhere in the statute.

However, perhaps the more important matter for this case is that all the matters set out in the affidavit filed by the solicitor for the respondent must or ought to have been known to the applicant before this motion was filed. The most important facts of which it should have been aware were that the respondent companies were nominee bodies with few or no assets and that they

were using the rent paid by the applicant to fund their	obligations to Custom Credit. The effect therefore of diverting
these rental payments, as requested in the motion, would mean that the respondents would cease to be able to carry out their obligations under the mortgage to Custom Credit with the usual types of consequences from that type of conduct and perhaps special consequences that might be applicable to this particular case. The result would be disaster all round, including to the applicant itself.

I must say that when I first read the papers in this matter I

could not see how the motion could conceivably succeed. No doubt that is why the applicant is itself seeking to have it dismissed, so that when the respondents apply, as they do today by counsel, for an order for indemnity costs, the question that has to be considered, both under the court's statutory charter and also under the common law principles that apply on indemnity costs, is whether this motion should ever have been filed, because it never had any chance of success.

No basis has been suggested on which this motion could have succeeded, not only on the evidence which was filed in support of it but on any other evidence that might have been advanced. It seems to me that it was misconceived from the outset. Attempts by applicants to obtain security from the respondents for the damages that the respondents might ultimately be called upon to pay are in my experience without precedent and without justification. Parties, especially corporate parties, who enter into agreements with nominee and ostensibly impecunious companies

take the risk that those companies will not be able to meet their	obligations. I cannot imagine that they can in some way come
along later and complain that the companies may not be able to pay damages. This is not a basis for involving the court in orders of the Mareva type to protect a company from the consequences of its own acts and to facilitate its recovery of any proceeds of the case when it decided in advance that it did not need to take any steps to protect itself.

For those reasons 1 am clearly of the view that the motion ought never to have been filed, that it did not have the slightest chance of success, and that the respondents should not be out of pocket for the costs which they have incurred in defending it.

I therefore order that the motion be dismissed and that the

applicant pay the respondents' costs on an indemnity or solicitor

and client basis.

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