Singh v Friedman
[2012] WASC 141
•24 APRIL 2012
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: SINGH -v- FRIEDMAN [2012] WASC 141
CORAM: McKECHNIE J
HEARD: 18 APRIL 2012
DELIVERED : 24 APRIL 2012
FILE NO/S: CIV 1476 of 2012
BETWEEN: SUKHWANT SINGH
Plaintiff
AND
NEVILLE FRIEDMAN
First DefendantJEFFREY SOMAH LURIE
Second Defendant
Catchwords:
Practice and procedure - Interlocutory injunction - Breach of contract - Estoppel - Whether serious question - Balance of convenience - Whether damages an adequate remedy - No new principles
Legislation:
Nil
Result:
Interlocutory injunction granted
Category: B
Representation:
Counsel:
Plaintiff: Mr M L Bennett
First Defendant : Mr S Penglis
Second Defendant : Mr S Penglis
Solicitors:
Plaintiff: Bennett & Co
First Defendant : Freehills
Second Defendant : Freehills
Case(s) referred to in judgment(s):
Twinside Pty Ltd v Venetian Pty Ltd [2008] WASC 110
McKECHNIE J:
How this matter comes to court
The plaintiff and defendants are solicitors formerly in practice together as Friedman Lurie Singh & D'Angelo.
On 29 March 2010, Mr Singh advised that he wished to leave the partnership and it was agreed that he would do so on 30 June 2010. Disputes have arisen between the former partners as to whether there was an agreement as to the valuation of his share or whether the partnership should be wound up. Mr Singh has taken action to enforce what he says was a binding agreement and there are counterclaims lodged (the 'substantive proceedings'). However, all agree that one way or another Mr Singh has rights which will probably involve the eventual payment of money to him.
Mr Singh says that the defendants agreed that until his rights to return of capital were determined, they would pay him $25,000 a month. The defendants have in fact made 19 payments of $25,000. Indeed, in October 2010 when they paid only $10,000, Mr Singh complained and the defendants soon topped up the monthly payment back to $25,000. Payments continued without incident until 2 March 2012 when the defendants' solicitors wrote somewhat peremptorily to Mr Singh's solicitors, advising:
Having regard to your client's decision to escalate the dispute, the matters alleged, what we are instructed to be the true facts of the matter, the additional costs that will now be incurred and the additional delay that will now be involved in resolving the proceedings, our clients no longer intend to pay to your client more than their contractual obligation.
Accordingly, as from yesterday, the monthly payments to your client will be $10,000.
The defendants acknowledge an agreement to pay Mr Singh monthly payments of $10,000. They deny any agreement to pay more.
And so Mr Singh comes to this court for injunctive relief to have the payments resumed. The amount in issue is $15,000 a month.
What type of injunction is sought?
Whether this is an injunction which prohibits the defendants from reducing the payment or an injunction which mandates that they pay the amount may be a nice matter of debate. Mandatory injunctions for reasons explained in the cases are much less readily granted. I take this into consideration.
One usual reason for an injunction is to preserve the present position between the parties until trial or, when lawyers pretentiously spoke Latin, to preserve the status quo ante. In this case the relief sought is to continue that which has occurred for more than a year, a monthly payment of $25,000. The relief sought, while having imperative consequences, is far more akin to an injunction to preserve the parties' present position until trial.
Moreover, the defendants have indicated if there is any doubt as to their ability to pay damages in due course, they would pay $15,000 per month into a trust account held by the respective solicitors to abide the trial. That proffer of an undertaking itself obviates some of the difficulties that may arise in a mandatory injunction. An injunction will not compel the defendants to act; for example, to continue on business.
Although framed as interlocutory relief, in reality relief will be final. Mr Singh's claim for the payment of $25,000 is not in perpetuity but until determination of the substantive proceedings. Little will remain after those have been decided. So I approach this case on the basis that effectively my decision is a final decision.
The issues that arise
The legal principles governing the judicial approach to an injunction are long settled and not in dispute in the present proceedings. They are summarised conveniently by Beech J in Twinside Pty Ltd v Venetian Pty Ltd [2008] WASC 110 [7] ‑ [13] and I apply them to the issues.
1.Has the plaintiff established that:
(i)there is a serious issue to be tried that the parties entered into agreement to pay $25,000 a month; or
Yes
(ii)there is a serious issue to be tried that the defendants are estopped from denying such an agreement.
Not that would separately justify an injunction.
2.Are damages an adequate remedy?
No.
3.Is it just and convenient to order an injunction?
Yes.
The 'third' agreement is decisive
The plaintiff pleads that the parties entered into a number of agreements. However, I focus on what is referred to as the 'third agreement'. My task is to determine if there is a serious question to be tried that the parties entered into the third agreement. Although it is unnecessary for me to go further, as this may be final relief, I have done so.
The defendants object to various paragraphs of the plaintiff's two affidavits of 21 March 2012 and 12 April 2012. I have not found it necessary to resolve each and every objection. In some cases the evidence is admissible but, in the absence of supporting material, of little or no weight. Evidence of motive, feelings and the like, I have ignored.
When matters of fact are in significant contest, I cannot resolve them on affidavits and annexures. This is so with respect to aspects of all the agreements pleaded by the plaintiff except for the third agreement.
For the third agreement I have concentrated in the main on Mr Friedman's affidavit, the email and documentary exchanges, and the conduct of the defendants. I have drawn inferences from generally uncontroversial circumstances reflected in the documents particularly as to what was the consideration for the third agreement.
The pleadings
This action was commenced by an endorsed writ of summons on 21 March 2012. The endorsement of claim by par 1.4 and par 1.5 pleads an agreement in or about October 2010, by par 1.5 the endorsement pleads an agreement between March and April 2011.
In the statement of claim the third agreement is pleaded by par 16 and particularised as being partly in writing and partly by conduct, evidenced by emails of 4 March and 19 April 2011.
The third agreement is not in the indorsement of claim which normally sets the boundaries of the dispute. However, it is referred to in the statement of claim.
After the hearing, the plaintiff amended both the writ of summons and the statement of claim, leave not being required: O 21. The amendments do no more than regularise what had been argued.
The third agreement is now pleaded in pars 12 to 16. I am conscious that the defendants have not had time to plead to the allegations in the amended statement of claim. In the original statement of claim there is no reference to an email interchange in December 2010. Consequently, Mr Penglis was at a disadvantage in responding but was alive to the essential issue. Mr Friedman dealt with the interchange in his affidavit of 10 April 2012 at [29].
The essence of Mr Singh's case is that at some point the defendants agreed to pay him $25,000 a month until his entitlement to a share in the partnership was resolved.
The evidence as to an agreement to pay $25,000 a month
The plaintiff's affidavit 21 March 2012
By way of background, the plaintiff asserts that he resigned from the partnership on about 29 March 2010. At a meeting on that day it was agreed that he would not dissolve the partnership, that the defendants would take over the firm and its assets while his share was valued and he would continue to be paid $32,816.66 per month until 30 June 2010. These payments were made.
In May 2010, during continuing discussions about the NAB facility, he was asked to consider reduced drawings. He was asked 'What is the minimum monthly payment you can survive on?' and calculated that at about $25,000 per month. During the meeting in about July or August 2010 he asserts that the agreement was varied. He would receive a payment of $25,000 per month from 1 July onwards until the price and payment of his one‑third share of the partnership had been determined. If the bank did not rollover its facility, the payment of $25,000 per month would be made for three months, and thereafter $10,000 per month, but otherwise payments were to be maintained at $25,000 per month. The overdraft facilities were rolled over.
October 2010 payment
Payments of $25,000 per month continued until October 2010. On 25 October 2010 the plaintiff received an email and a bank printout showing the sum of $10,000 had been deposited. There followed email exchanges about that and other matters. Mr Friedman to Mr Singh, 27 October 2010, 1.48 pm:
In the meantime we have agreed, on a without prejudice basis, to continue the level of prior payments to you until 31.12.10. I will arrange this with Colleen when she gets back Monday.
Mr Singh to Mr Friedman, 1 November 2010, 8.33 am:
5.Can you confirm payment of the balance of the last instalment (another $15,000) today?
Later that day, at 9.46 am Ms Radich emailed Mr Singh:
I will also transfer the extra $15k today to make the payment for October up to $25k as agreed with Neville and Jeff.
The balance of the payment was subsequently confirmed.
Relations between the parties seem to have steadily deteriorated.
Mr Singh to Ms Radich (for on‑forwarding), 17 November 2010, 12.22 pm:
5.As to our respective monthly payments (in your case your drawings), I have a right to these payments. To help you both in you perceived problems with cashflow, I offered to receive less than your drawings. However, you seek to limit the payments to end December 2010. I do not accept that. The payments are not at your discretion. I reserve my right to payments in sums equivalent to your monthly and total drawings post my notice of resignation.
...
11.I request your specific response to the following by 2pm Wednesday 24 Nov 2010 (I note that you are away from this Thursday):
...
(d)That the monthly payments to me will continue until I either require payments to me equal to your drawings or the requested written agreement is signed and issues resolved;
Mr Singh to Ms Radich (to be on‑forwarded), 29 November 2010, 4.05 pm::
In the absence of a signed agreement between us and FLSD entities, various matters remain uncertain or unresolved, for example:
(a)my right to agreed interim payments, such as payments to continue on a monthly basis and until finalisation (you wish to limit it to 31 December 2010);
Mr Singh to Mr Friedman, 2 December 2010, 9.43 am mentioning, amongst other things:
(c)You seek to limit my monthly payments to end Dec 2010;
That evoked a response:
Your email does not say what you want. What is it that you want?
Mr Singh to Mr Friedman, 3 December 2010, 9.07 am:
5.From your said email, I require also confirmation of the following:
5.1that my current monthly payment will continue until resolution of issues;
In response to this Mr Friedman wrote 'Yes' so the return email Mr Friedman to Mr Singh:
5.1that my current monthly payment will continue until resolution of issues; yes.
Mr Friedman to Mr Singh, 19 April 2011, 10.45 am:
In the meantime you are not prejudiced as you continue to receive regular payments in reduction of the amount which might ultimately be due to you. This regime will continue until you have been paid the amount due to you for your interest in the practice, whatever it is.
The first defendant's affidavit, sworn 10 April 2012
Mr Friedman denies having a conversation with the plaintiff about payment to him in July or August 2010. He gives evidence about the 3 December 2010 email:
I refer to the email from the plaintiff dated 3 December 2010 which I inserted comment in and returned to him, a true copy of which forms part of attachment 'SS12' to the plaintiff's affidavit. The word 'yes' was inserted by me in paragraph 5.1. I agreed to extend the payments to the plaintiff of $25,000 beyond 31 December because I understood the plaintiff might commence legal proceedings against us if we did not do so and because the second defendant appeared to me to be highly distressed at the time as a result of the prospect of the plaintiff commencing proceedings against us.
Mr Friedman's motives are irrelevant, but this passage indicates an unequivocal agreement to continue payments of $25,000 beyond 31 December 2010.
It was sent in response to the email from Mr Singh dated 2 December 2010, wherein Mr Singh had detailed various matters he had done or refrained from doing. I have regard to Mr Friedman's evidence, the contemporaneous emails and the conduct in continuing the payments beyond December 2010 through the whole of 2011 until 2 March 2012.
I also take into account the defendants' concession that Mr Singh is likely to be entitled to something as return of capital.
Mr Friedman confirmed that he sent an email to Mr Singh from Ms Radich's computer on 4 March 2011 which states:
We now formerly make an offer to you for your interest in the practice and all its related entities in the sum of $900,000.00, less deductions.
As you are aware, a portion of this has already been paid to you at the rate of $25,000.00 per month since July 2010.
Any balance due to you will be paid to you at the rate of $25,000.00 per month until the agreed sum has been paid in full.
This offer is open for acceptance by not later than close of business Friday 18 March 2011 after which, if not accepted, it will have lapsed.
This offer was not accepted and does not form part of a contract or agreement between the parties. Nevertheless, coupled with the fact of the payments which continued until March 2012, it is significant evidence that there was an existing agreement to pay Mr Singh $25,000 per month, recognising that in due course, by whatever means, he would be entitled to a share in the partnership.
In deciding whether there is a serious question to be tried, I also take note of the fact that the defendants have conspicuously declined to offer an explanation for the payments either on oath or through their experienced counsel. Specifically they have not explained the continuation of payments after legal proceedings were commenced.
I am conscious that this is in reality an application for final relief or at least something close to it. The evidential burden for an interlocutory injunction is to establish a serious question to be tried.
I have also assessed the evidence to a civil standard of proof on the balance of probabilities. I am satisfied that it is more probable than not that Mr Singh and the defendants entered into an agreement whereby the defendants would continue to pay Mr Singh $25,000 per month until his claims had been resolved. While the nature of the consideration for the agreement is more equivocal, I am satisfied there was some consideration for that agreement.
Some submissions made by Mr Penglis as to the existence of any consideration for the third agreement have substance.
The consideration is pleaded in the amended statement of claim: par 11. If the consideration was that Mr Singh would not immediately withdraw his role as guarantor and refrain from exercising his rights to wind up the partnership, as pleaded in pars 11 and 16, then the fact that his guarantee is later withdrawn does not effect the essential nature of the agreement or necessarily bring to end the payment of $25,000. Mr Penglis submits that if the consideration was to refrain from commencing legal proceedings, any agreement has ended because the plaintiff has commenced them. However, the defendants continued to make regular payments for months after a writ was issued.
I am satisfied that the agreement to pay Mr Singh $25,000 was supported by consideration.
Estoppel - insufficient serious issue
The plaintiff claims that the defendants were estopped from denying the agreements, particularly the third agreement. The evidence of an estoppel, absent the third agreement, is much less clear.
Any financial detriment that Mr Singh may have experienced over the last two years has been principally brought about by his decision to retire from what seems to have been a profitable partnership. He was not entitled to drawings after June 2010. I am inclined to agree with the defendants that the evidence deposed to by Mr Singh, in respect of both his reliance and the prejudice he suffers, falls significantly short of establishing an estoppel that would entitle him to a remedy compelling the defendants to make monthly payments of $25,000. The reliance and prejudice detailed by Mr Singh in his affidavit at pars 51 to 54 are not sufficient to found a claim in estoppel strong enough to justify an interlocutory injunction.
Damages are an inadequate remedy
The defendants argue that this is an ordinary breach of contract action which does not normally attract injunctive relief and that, if the plaintiff is successful at trial, damages will be an adequate remedy. The damages are effectively the cost of money and, in one sense, the question is: Who bears the cost of the money of $15,000 until trial? - the plaintiff or the defendants.
It is more probable than not there is a third agreement of the type pleaded by Mr Singh. For reasons given in Mr Singh's responsive affidavit dated 12 April 2012 at par 19, I accept that Mr Singh continues to need a monthly payment of $25,000 and would have difficulty making payments on a loan to cover the shortfall. I accept this as evidence as to the adequacy of damages as a remedy even though it falls short of establishing a sufficient case of reliance for estoppel.
Adequacy of damages as a remedy does not completely determine whether or not an interlocutory injunction will issue although it is generally a very powerful factor against an injunction. But not all cases are alike and I am required to fashion an order when it appears just or convenient.
The plaintiff is seeking vindication of his legal rights in the substantive proceedings. The reduction in monthly payments is a considerable obstacle in his path. It is more probable than not that the solicitor's letter of 2 March 2012 constitutes a breach of contract. To confine Mr Singh to a relatively small amount of damages should he ultimately be successful does not measure the scope of actual harm.
It is just and convenient that an interlocutory injunction should issue requiring resumption of what had been in place.
Postscript
There is a Scottish proverb 'A wise lawyer never goes to law himself'. Mr Singh, Mr Friedman and Mr Lurie should know better than most, the cost and perils of litigation. Stripped of its legal intricacies and possibilities for relief, the substantive action is simply about a sum of money. The parties would be wise to negotiate a solution which will leave all of them free to resume concentration on their practice and their clients.
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