Seniors Provident Pty Limited v Allco Finance Group Limited

[2008] NSWSC 844

CITATION:	Seniors Provident Pty Limited v Allco Finance Group Limited [2008] NSWSC 844
HEARING DATE(S):	17 July 2008
JUDGMENT OF:	McDougall J at 1
EX TEMPORE JUDGMENT DATE:	18 July 2008
DECISION:	See paras [91] to [93] of the judgment.
CATCHWORDS:	INJUNCTIONS – Serious question to be tried – whether valid termination of joint venture agreement – whether assets form part of business or joint venture – whether relief should be granted compelling continuance of deteriorated personal relationship – whether damages adequate remedy.
CASES CITED:	Butt v M’Donald (1896) 7 QLJ 68 Mackay v Dick (1881) 6 App Cas 251 Renard Constructions (ME) Pty Limited v Minister for Public Works (1992) 26 NSWLR 234
PARTIES:	Seniors Provident Pty Limited (ACN 097 928 286) (First Plaintiff) Phillip Crossman (Second Plaintiff) Allco Finance Group Limited (ACN 077 721 129) (First Defendant) Capital Markets Finance Limited (ACN 008 648 459) (Second Defendant) Allco Management Limited (ACN 003 101 731) (Third Defendant)
FILE NUMBER(S):	SC 3721/08
COUNSEL:	P R Whitford SC / J A Arnott (Plaintiffs) T F Bathurst QC / M J Darke (Defendants)
SOLICITORS:	DLA Phillips Fox (Plaintiffs) Allens Arthur Robinson (Defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

McDOUGALL J

18 July 2008 ex tempore (revised – 1 August 2008)

3721/08 SENIORS PROVIDENT PTY LIMITED v ALLCO FINANCE GROUP LIMITED

JUDGMENT

1 HIS HONOUR: The first plaintiff (Seniors Provident) and the second defendant (Capital Markets) are, or were, participants in a joint venture known as the Principal Finance Joint Venture (the joint venture). The third defendant (Management) was a party to the agreement whereby the joint venture was set up. The second plaintiff (Mr Crossman), although not a party to the joint venture agreement, is or was “director” of the joint venture. Briefly described, the joint venture business comprised the earning of fee and other income through packaging and “securitisation“ of various kinds of receivables.

2 On 3 July 2008, Capital Markets terminated, or purported to terminate, the joint venture and Mr Crossman’s appointment as director. The plaintiffs say that the termination was ineffective. They seek, among other things, interlocutory relief preventing the defendants from selling or procuring the sale of what the plaintiffs say are the assets and business of the joint venture.

The issues

3 In what follows I seek to state the essential issues that were argued. The statement follows the plaintiffs’ reformulation, away from the terms of relevant prayers for relief in the summons, of their claims for interlocutory relief.

4 The first issue is whether there is a serious question to be tried as to the validity of what, for convenience but without prejudgment, I shall call the termination.

5 The second issue is whether the assets that are the subject of the plaintiffs’ application are assets, or part of the business, of the joint venture. There is a related issue, namely whether on the proper construction of the relevant contractual provisions, the threatened sales are being undertaken “on behalf of” the joint venture so as to attract, as the plaintiffs submit, the operation of the relevant provision of the joint venture agreement.

6 The third issue is whether any interlocutory relief should be granted against the first defendant (Allco) which is not a party to the joint venture agreement or, so far as the evidence and submissions disclose, any other relevant agreement.

7 The fourth issue is whether interlocutory relief should be granted which might:

(1) compel the continuance of a personal relationship that has broken down; or
(2) hinder, deter or prevent non-party trustees from performing their duties as trustee.

8 The fifth issue is whether damages are an adequate remedy for any loss that the plaintiffs might sustain from the alleged wrongs of which they complain if those alleged wrongs are not restrained.

9 The sixth issue is whether other considerations of balance of convenience support the grant, or the refusal, of interlocutory relief.

Background

10 Mr Crossman, who has extensive experience in the operation of debt capital markets and the securitisation of debt, introduced the idea or concept that became the joint venture business to what I will for convenience call the Allco Group. (I interpose that the history of the Allco Group is somewhat convoluted, and the company now known as Allco Finance Group Limited is not the company known by that name in mid 2003, when the joint venture was negotiated and set up.)

11 It took the parties the best part of 12 months to negotiate the terms of the joint venture agreement. There is not, even now, a signed joint venture agreement. The parties accepted for the purposes of the interlocutory application that the terms of the joint venture agreement were set out initially in an unsigned draft sent to Mr Crossman on 25 August 2004 (there were subsequent amendments). That draft provided, among other things, that the joint venture had commenced on 1 August 2003, and that it would continue until at least 30 June 2006.

12 The joint venture agreement was amended at least twice. In about January 2005, the profit share payable to Seniors Provident was varied. In about June 2006, the joint venture agreement was amended, among other things, by extending its minimum term by three years to 30 June 2009.

13 The joint venture parties sought units in a trust known as the Principal Finance Unit Trust (PFUT). Management was the settlor of the initial trust fund. Another company with in the Allco Group, Allco Management Investment Limited, was the trustee. Seniors Provident held 3,000 of the 10,000 issued shares, Capital Markets held 3,500 and the balance was held by entities associated, one way or another, with the Allco Group.

14 The unit holdings were adjusted as part of the amendments agreed in January 2005. Seniors Provident’s holding was increased to 4,000 units. As I understand it, the other holdings were decreased proportionately.

15 Another change introduced in January 2005 was that in certain circumstances Seniors Provident might get more than 40 percent of the net profits distributed by PFUT. That contingent entitlement was not reflected in, or reflective of, any further change in the unit holdings.

16 The joint venture business has been profitable. The net profits of PFUT from 30 June 2005 to 31 December 2007 (apparently, the latest date for which figures are available) were:

Year ended 30 June 2005: $1,258,061.
Year ended 30 June 2006: $3,891,131
Year ended 30 June 2007: $5,501,890.
6 months ended 31 December 2007: $2,230,127.

17 From that net income Seniors Provident received:

Year ended 30 June 2005: $603,225.
Year ended 30 June 2006: $1,621,991.
Year ended 30 June 2007: $2,775,850.

6 months ended 31 December 2007: $1,042,051.

18 The share of income that Seniors Provident has derived from PFUT over the period in question constitute in substance the earnings of Mr Crossman, and the means of support for him and his family.

The joint venture business

19 Clause 1.4 of the joint venture agreement described the business as follows:

The primary business of the Venture shall be the gaining of fee and other income from the origination, arranging and distribution of securitisation programs and related funding activities, as detailed in the business plan approved by the Participants and annexed as Attachment 1, and, as opportunities arise and as agreed in writing by the Participants, other structured finance transactions.

20 In essence, receivables were packaged and sold to trustees of trusts, which trusts were special purpose vehicles set up to hold those assets. In each case, the trustee’s purchase was funded by debt. In some cases, that debt was provided by external lenders such as banks. In other cases, I think involving more risky asset classes, it was provided from within the Allco Group.

21 The trusts were set up pursuant to a master trust deed made on 26 November 2003. As parcels of debt were packaged, a trust was set up in which the package was held. At least as a matter of form, and I think as a matter of substance also, Management arranged the packaging and funding. I note however, that Mr Crossman says that his duties as director of the joint venture included the identification of business opportunities for it.

22 One feature of the joint venture business model is that there is a mismatch between the average term of maturity of the receivables in any given package, and the term of the debt undertaken to fund the acquisition of that package. Thus, it has been (and remains) necessary to roll over, or refinance, that debt. That process has become increasingly difficult. Nonetheless, it must be done.

23 Mr Crossman said that all the “senior notes“ issued to the banks that provided finance for the transaction and now due for payment are being re-negotiated. It is probably self evident that if the renegotiations fail, the joint venture business will collapse, with obvious detrimental consequences to the joint venture parties and their associates.

24 The business model assumes that the income from the packaging and receivables would be sufficient to pay operating expenses, interest on all debts, and fees, and to leave some “residual income”. The complex structure through which the joint venture operated to ensure that all fee and a proportion (I think, but it does not really matter, 50 percent) of all residual income went to PFUT.

25 Another feature of the business model is that the underlying assets - the receivables - are not owned by the joint venture parties (either directly or through a joint venture vehicle), but are owned by the trustees of the various trusts into which the assets have been sold. Management is a trustee of two only (out of the 34 or so) trusts involved. Thus, as to the great bulk of the assets in respect of which interlocutory relief is sought, the owners (trustees) are parties neither to the joint venture agreement nor the proceedings.

Events leading up to termination

26 As is now well known Allco, a listed public company, has experienced very severe financial difficulties over the last six months or so. It has been seeking to divest itself of “non-core” or “financial” assets, of which the interest in the joint venture is an example.

27 Mr Crossman said that from about February onwards he had a number of meetings with representatives, including the Chief Executive Officer, of Allco. He said that, in those meetings, Allco made it plain that it wanted to get out of the joint venture as quickly as possible, and to sell the underlying assets of the joint venture. Mr Crossman said that he responded, when the question was raised, that the joint venture could not be terminated except by giving notice on or after 30 June 2009.

28 Mr Crossman said that he offered to assist Allco by trying to find someone who would buy out Allco’s interest in the joint venture. However, he said, he pointed out that the only assets that Allco could sell were its interest in the “partnership” (presumably, the joint venture), its interest in PFUT and its interest as a note-holder in various trusts. In these conversations, Mr Crossman said, representatives of Allco repeated their proposal to sell the underlying assets of the joint venture, and Mr Crossman repeated that he would not allow that.

29 From about March 2008, Mr Crossman sought to interest Challenger Management Services Limited (Challenger) in acquiring Allco’s interest in the joint venture. He conducted negotiations with Challenger which resulted in the making of a non-binding offer on 16 May 2008 and a higher non-binding offer on 19 May 2008. The joint venture parties were prepared to accept the latter offer, and signified as much to Challenger. However, the transaction did not proceed because Challenger decided to withdraw.

30 Mr Crossman said that he had further conversations with representatives of Allco, including Mr James Hope Murray. Mr Crossman became aware that Challenger had sought to sell some of the underlying interest in some of the trusts, from which the joint venture derived income. Mr Crossman reiterated his opposition to that course.

31 On 3 July 2008, Mr Crossman was summoned to a meeting with representatives of Allco. He was given letters, bearing date 3 July 2008. One of those letters, addressed to him, terminated (or purported to terminate) his appointment as director of the joint venture. The other, addressed to Seniors Provident, terminated (or purported to terminate) the joint venture. In each case, the termination was said to be based on default on the part of Seniors Provident and Mr Crossman in the performance of their respective obligations under the joint venture agreement.

First issue: validity of the terminations

32 Clause 7.1(a) of the joint venture agreement, as amended in about June 2006, provided, subject to clauses 7.2 and 7.9 (the latter of which is irrelevant) that the joint venture should not be terminated before 30 June 2009. However, the joint venture might be terminated “subject to clause 7.1(a)” by giving six months’ notice. It is unnecessary to consider when, at the earliest, such a notice might be given.

33 Clause 7.2(a) provides for termination “forthwith” in the event of wilful or negligent failure to perform, or wilfully incorrect or negligent performance of, obligations under the joint venture agreement.

34 Mr T F Bathurst of Queens Counsel, who appeared with Mr M J Darke of counsel for the defendant, conceded, for the purposes of the interlocutory application, that there was a serious question to be tried as to the validity of the terminations.

35 Mr P R Whitford of Senior Counsel, who appeared with Mr J A Arnott for counsel for the plaintiffs, submitted that the plaintiffs’ case, as to invalidity of terminations, was a very strong one. This, he said, was a factor to be taken into account, particularly in assessing discretionary considerations and the balance of convenience.

36 In support of the submission that the plaintiffs’ case on termination was strong, Mr Whitford relied on other matters. They included what he said was Allco’s desperate financial position at the time; the absence of any prior complaint or warning; the timing of the termination (in particular, having regard to the collapse of the sale to Challenger and the plaintiffs’ repeated opposition to the sale of individual assets); and what he said was the vague, general and unparticularised allegations of breach in the letters of 3 June 2008.

37 There is, in my view, much to be said for those submissions. However, given that this is an interlocutory application, I do not think it desirable to say more.

38 It follows that the first issue should be answered in favour of the plaintiffs.

Second issue: are the assets in question the assets or part of the business of the joint venture.

39 There are two prefactory points to be made. The first is that the plaintiffs relied on what they said was the proper construction of the relevant clause, cl 5.4, of the joint venture agreement. They did not put a case based on implied terms of the kind discussed in cases such as Mackay v Dick (1881) 6 App Cas 251, Butt v M’Donald (1896) 7 QLJ 68 and Renard Constructions (ME) Pty Limited v Minister for Public Works (1992) 26 NSWLR 234.

40 The second point is that Allco was not a party to the joint venture agreement, and thus not bound by its terms.

41 By clause 5.1 of the joint venture agreement, Management was appointed as the "manager" of the joint venture agreement. Its duties were to conduct and manage the administration of the joint venture.

42 Clause 5.4 provided, so as far as is relevant, that without the agreement of the joint venturers neither they nor Management could "on behalf of" the joint venture alter the nature of the business of the joint venture or sell all or any material part of its assets or business. The relevant provisions read:

5.4 Unless the Participants otherwise agree, neither they, nor the Manager shall on behalf of the Venture:
….


(c) alter the nature of the business of the Venture;

….
(h) sell all or any material part of the assets or business of the Venture.

43 There is no doubt that the Allco Group wishes to sell assets of at least some (and probably all) of the trusts from which PFUT derives fee and other income. Although the debts are said to have an aggregate value of more than three billion dollars, it is said that the rights that sought to be sold have a value of about $160 million. There is no doubt that if those sales are effected, the proceeds will be used to alleviate the Allco Group’s burden of debt.

44 The relevant questions are whether any such sales would constitute sales of the assets of business of joint venture, or would alter the nature of that business. Mr Bathurst submitted that the assets in question were neither assets nor the business of the joint venture. He pointed out that with but two (out of the 30 or more instances) exceptions, the owners of the assets were trustees who were party neither to the joint venture agreement nor to these proceedings. Although, in the two exceptional cases, Management is a trustee, and therefore an owner, Mr Bathurst submitted that any sale by Management would be a sale in its capacity as trustee, not "on behalf of" the joint venture.

45 Mr Whitford submitted that it was necessary to look to the substance of the joint venture relationship. He submitted that, as a matter of substance, the securitised receivables were the assets on which the joint venture depended for its income, and were therefore either assets of the joint venture or part of its business.

46 Mr Whitford did not submit that the incidents of the legal relationship between the joint venture parties were to be deduced from sources other than the constituent documents and other relevant agreements (including, of course, such terms as the law might impose or imply). Nor did he submit that the agreements, into which the joint venture parties had entered, or on the basis of which they had conducted their joint business, were shams. In those circumstances, I do not think that the Court can go behind the documents (construed properly and in context) to define and give effect to some "substance" other than the rights and obligations that those documents give and impose.

47 In this case, commercially sophisticated parties chose to set up a complex and detailed scheme for the conduct of their business. As part of that scheme they chose to house the underlying assets, from which the business would derive income, in trust vehicles in which the parties had no direct beneficial interest. I do not think that the Court is justified in disregarding - more accurately, dismembering - what the parties have done.

48 Thus I do not accept that the assets - the securitized receivables - are assets of the joint venture.

49 The parties’ submissions did not dwell at any length on the distinction drawn in clause 5.4 (h) of the joint venture agreement between "assets" of the joint venture and its "business". That business, according to clause 1.4, is primarily "the gaining of fee and other income from the origination, arranging and distribution of securitisation programs". The business is the means - the intellectual and physical capital - by which income is garnered from the exploitation of receivables. It seems to me that the business is something separate from the receivables, even though they provide its revenues.

50 In any event, even if the receivables are part of “the business" of the joint venture for the purposes of clause 5.4 (h), there is no threat of any sale "on behalf of" the joint venture. What is proposed is a sale by those who have the prima facie right to do so: the trustees who own the receivables. To the extent that Management, as a trustee, proposes to sell, any sale by it would be in its capacity as trustee, not in its capacity as manager of the joint venture. I think that the words "on behalf of" the joint venture in the introductory words of clause 5.1 were intended to emphasise this dichotomy.

51 Thus, I do not think that what is proposed is (or would be) prohibited by clause 5.4 (h).

52 Does it however fall foul of clause 5.4 (c)? As a matter of the literal application of the words of paragraph (c), the answer would appear to be "no". The extent of the business application may change if sales are effected. Its nature, one would think, would not.

53 Mr Whitford submitted that, given the obvious purpose of the proposed sales - to raise money - it was likely that the better performing assets of the trusts would be sold first. I think that this is a reasonable inference. Thus, one might think, the sale of "good" assets might leave a pool of impaired assets, less attractive to either a purchaser or a potential new "partner" with Seniors Provident in the business.

54 The evidence suggests that the securitized packages of receivables vary in quality. Thus there is some basis for thinking that as sales progress, those that remain will be of lower quality and lesser appeal to third parties.

55 On this analysis, it could be said that the "nature" of the business might change, from one deriving income from a mix of assets both good and bad to one deriving income (if at all) predominantly from assets of poor quality.

56 However, the parties did not put before me any break-up which might show, in a quantitative way, the effect of assets sales on the remaining asset mix. Indeed, so as far as I understand it, the evidence would not permit any such analysis.

57 I am reluctant to conclude that the proposed sale would have some quantitative effect on the asset mix, or on the resultant value of the business. In saying this, I acknowledge that as assets are sold and the income of the business diminishes the value of the business will necessarily diminish also.

58 Further, in saying this, I assume, although I do not decide, that any change in the asset value or resulting value of the business would be a change to the "nature" of that business as well.

59 In any event, as I understand the defendants’ position, this is a hypothetical topic, because the defendants’ intention, unless restrained, is to sell all, or as much as possible, of the packages of receivables. In this context I reiterate that the plaintiff did not put a case based on the implied terms of the kind to which I referred earlier.

60 Thus, I conclude, the second issue should be answered adversely to the plaintiffs. In case I am wrong in that I will deal with the remaining issues.

Third issue: relief against Allco

61 I do not understand the basis on which the plaintiffs claim to be entitled to interlocutory relief against Allco. As I have said, it is not party to the joint venture agreement. Nor is it a trustee. No case was put that Allco was guilty of any wrong remediable at the instance of the plaintiffs: for example, inducing breach of contract.

Fourth issue: personal relationships; the position of trustees.

62 Mr Bathurst submitted that no injunction should be granted if it would have the effect of compelling the maintenance of the relationship between the parties when it was clear that the relationship had broken down.

63 Mr Whitford accepted the principle. He did not, I think, accept that the relationship had broken down. Nor did he accept that the effect of the orders sought would be to compel maintenance of the relationship.

64 The evidence of Mr Hope Murray, who is an Executive Director of Allco, suggests that the relationship has broken down. I suspect that if it has, that is because Allco wishes to sell the packages of receivables and Seniors Provident opposes this. However, I do not think that the orders sought would if granted have the effect of compelling the maintenance of the relationship. It is clear that Mr Crossman would like to resume performance of his duties as Director of the joint venture. But the plaintiff did not seek his reinstatement to that position on an interlocutory basis. The orders that are sought could if granted be obeyed with at most minimal interaction between the parties.

65 As to the impact on third party trustees: the orders sought, if made, would not bind them. The orders sought, if made, would prevent the defendants from soliciting or procuring asset sales. They would not prevent the trustees independently from doing so, if in the proper performance of their duties as trustee they come to the conclusion that it was necessary.

66 There is a twist that can be dealt with relatively briefly. Management is both the manager of the joint venture and the manager of the various trusts. In its latter capacity it is required to manage the business of the trusts. The potential for conflict was recognised.

67 Clause 2.2 (a) and (c) of the Master Trust Deed provides as follows:

2.2 Trustee to act in interests of Unit Holder and Noteholders of a Trust
(a) The Trustee shall, in respect of each Trust that issues Notes, act in the interests of the Unit Holder and (subject to paragraph (c) below) Noteholders and other Creditors in relation to that Trust on, and subject to, the terms and conditions of this Deed. In the event of any conflict of interests, the interests of the Creditors (including where applicable the Noteholders) will prevail over the interests of the Unit Holders and as between the Creditors (including where applicable the Noteholders of each Class of Notes) the interests of one over another shall prevail in the order set out in the application of proceeds clause in the relevant Security Trust Deed in the event of any conflict of interest.
….
(c) For the avoidance of doubt:
(i) the obligation of the Trustee to act in the interests of the Noteholders or Creditors is contractual, not a fiduciary, obligation; and
(ii) (in the case of Noteholders):

(A) the obligation of the Trustee arises out of the contractual relationship existing between the Trustee and the Noteholders under the Notes; and
(B) the Noteholders in respect of a Trust are not beneficiaries of that Trust.

68 Paragraph (d) is factually irrelevant; and I shall not set it out.

69 Clause 14.4 of the Master Trust Deed provides as follows:

14.4 Manager to act in interests of Unit Holder and Noteholders
(a) The Manager shall, in respect of each Trust that issues Notes, act in the interests of the Unit Holder and Noteholders in relation to that Trust on, and subject to, the terms and conditions of this Deed. In the event of any conflict of interests, the interests of the Creditors (including where applicable the Noteholders) will prevail over the interests of the Unit Holders and as between the Creditors (including where applicable the Noteholders of each Class of Notes) the interests of one over another shall prevail in the order set out in the application of proceeds clause in the relevant Security Trust Deed in the event of any conflict of interest.
(b) The Trustee shall, in respect of each Trust that does not issue Notes, act in the interests of the Unit Holder and Creditors in relation to that Trust on, and subject to, the terms and conditions of this Deed. In the event of any conflict of interests, the interests of the Origination Facility Provider will prevail over the interests of the other Creditors and Unit Holders.

70 So far as is relevant, those provisions give the interests of the Allco Group (as creditors or note-holders) priority over the interest of Seniors Provident as an ultimate beneficiary through PFUT of the intermediate trusts that hold residual capital or residual income units in the underlying trusts. Thus, to the extent that the grant of relief might have some impact on Management’s performance of its duties as manager of the trusts, any conflict that would arise is to be resolved in favour of the Allco Group. If relief were to be granted, it would have at least the potential to prevent other members of the Allco Group from enjoying the primacy, as creditor or note holders to which the relevant terms of the Master Trust Deed entitled them.

Fifth issue: adequacy of damages.

71 If the plaintiffs are correct, they have wrongly lost the benefit of a little under a year's income from the joint venture. It may be, as Mr Whitford I think suggested, that one needs to add six months. I do not need to resolve the point.

72 Seniors Provident's rights to remuneration under the joint venture agreement are clear. It gets what is in effect a fixed retainer or "salary", guaranteed by Management, of (since June 2006) $300,000 per annum. It gets 40 per cent of any profit “thereafter” up to $4 million per annum, and 45 per cent of any profit over $4 million per annum.

73 It would be a relatively straightforward exercise to calculate the profit share that Seniors Provident would have derived over the balance of the joint venture had the agreement continued to be performed, and had the relevant assets been retained.

74 Thus, prima facie, one might think that damages are an adequate remedy.

75 Mr Whitford however submitted that:

(1) Allco's financial position was such that it might not meet any damages that were awarded; and
(2) there were in any event other kinds of loss that could not be properly remedied by the payment of damages.

76 As to the first point: It is clear that the financial position of the Allco Group has been perilous. However, the Allco Group in principle has renegotiated its senior debt facilities, and is reducing its debt levels. It is undertaking a restructure of its business. There is nothing in the evidence to suggest that the defendants would be unable to pay damages of the order of those that might be thought to be recoverable. In this context, I note that the best year for Seniors Provident was that ended 30 June 2007, from which its profit share was a little under $2.8 million. The loss of, at most, 18 months of profit share is unlikely to exceed $4 million bearing in mind the turmoil in the world and local financial markets over recent months and the likely impact of that on the profitability of the joint venture.

77 The evidence does not justify the conclusion that the defendants are unlikely to be good for $4 million or thereabouts in damages.

78 As to the second point, Mr Crossman gave evidence of a number of concerns. He noted that if the termination were given effect, Seniors Provident would be unable to participate in the joint venture business for the remainder of the agreed term, and would not be able to identify and procure new business opportunities. He referred also to the likelihood of sale of assets unless interlocutory relief were granted, and noted that the income to be derived would cease.

79 As to the first concern, the principal answer is that, as Mr Hope Murray has made clear, Allco has no intent of seeking or supporting new business for the remaining term (if any) of the joint venture. Furthermore, Mr Hope Murray said, if the joint venture has not already been terminated, Allco will terminate it as soon as it may lawfully do so. Allco or its subsidiaries are the major lenders to the trusts in which assets are held. If Allco does not provide finance - and Mr Hope-Murray's evidence is clear that it will not do so - there will be no new business. In essence the joint venture will be in runoff.

80 Thus, it seems, the significance of the loss of the opportunity to source new business is not likely to have any impact.

81 As to the loss of income: I acknowledge that this is a concern. If however the loss is wrongful it will be compensated in damages. If it is not, it is not something that can be or on the question of the adequacy of damages.

82 Mr Whitford submitted that Mr Crossman, and Seniors Provident, would lose the business that they had built up. But, even if they are right as to the invalidity of the termination, this will happen next year in any event. Where they can be compensated for the truncation of the term (if it be ineffective), what might happen after lawful termination is neutral.

83 I accept that this may be personally distressing to Mr Crossman, but personal distress is not of itself something that bears heavily on the decision to grant or withhold interlocutory injunctive relief.

84 There was some suggestion in Mr Crossman's evidence that the business of the joint venture would suffer if he were not to act as its Director. However, Mr Hope Murray said that Allco had employed highly experienced consultants, with relevant industry experience, to manage the business under his supervision. Since that in effect will involve the run off of the book of business, I do not think that the loss of Mr Crossman’s contribution is a point of great significance.

85 In any event, as I have already noted, the interlocutory relief now sought does not in terms extend to the reinstatement of Mr Crossman as Director of the joint venture.

86 Had this issue arisen for consideration, I would have answered it adversely to the plaintiffs.

Sixth issue: other factors bearing on the balance of convenience

87 Mr Bathurst pointed to the amount at stake from Allco's perspective - about $160 million. He compared this with the amount at stake from Seniors Provident perspective - about $4 million. Mr Bathurst pointed also to Mr Hope Murray's evidence as to the consequences of the grant of relief. Mr Hope Murray said, as I have noted, that Allco did not intend to provide further funding for securitization programmes, other than such funding (if any) as might be needed to enable the business to run until the end of its term. He said that if the assets of some of the trusts could not be sold then, without external funding, there was a likelihood that some of the trusts may become insolvent, with obvious adverse consequences for their trustees. That, he said would have an adverse impact on the value of the underlying assets.

88 Thus, Mr Hope Murray said, if Allco could not proceed with the sale of the relevant assets, then the trusts and their beneficiaries would suffer loss and this would be so regardless of the question of obtaining new business.

89 To some extent, the modified claims for interlocutory relief accommodate some of the concerns pressed by Mr Hope Murray. However, on balance, I think that the balance of convenience would tilt against the grant of relief. To my mind, the consequences of granting even the modified relief sought are likely to be far more damaging to Allco, its creditors and shareholders than the consequences of the refusal of relief are likely to be for Seniors Provident.

90 To the extent that the plaintiffs, in relation to the balance of convenience, relied on the exclusion of Mr Crossman from performing his role as Director of the joint venture, I refer to what I have said on that topic in relation to the adequacy of damages as a remedy.

Conclusion

91 The application for interlocutory relief is dismissed. The draft short minutes of order propounding the relief actually sought by the plaintiffs will be marked for identification A and will remain with the papers. The exhibits on the application will remain with the papers for 28 days, and be dealt with thereafter in accordance with the rules.

92 I order the plaintiffs to pay the defendants’ costs of the interlocutory application.

93 I release the defendants from any further obligation to comply with the notices to produce that are evidenced by exhibit PX3.

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