Tambakis v Ferluga - [2009] SADC 122

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
TAMBAKIS v FERLUGA & ORS
[2009] SADC 122
Judgment of His Honour Judge Brebner
13 November 2009
EQUITY - EQUITABLE REMEDIES - INJUNCTIONS
Application for confirmation of interim injunction - contract for sale and purchase of land - deposit secured by way of bank guarantee - dispute about whether the contract is enforceable - plaintiff seeks injunction restraining the defendant from calling in the guarantee pending the determination of the action - relevant principles - whether damages are an adequate remedy - where the balance of convenience falls - interim injunction discharged.
Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57; Kilpatrick Green Pty Ltd v State Supply Board (1991) 56 SASR 591; Prior and Anor v Kuji Pty Ltd (1992) QConvR 54-423, considered.

TAMBAKIS v FERLUGA & ORS
[2009] SADC 122

The plaintiff signed a contract to purchase an apartment from the second to sixth defendants (the defendants).
The schedule to the contract provided for a deposit in the amount of $100,000. The plaintiff satisfied this obligation by providing a bank guarantee (the guarantee) which he obtained from the seventh defendant (the bank). The defendants accepted the guarantee as the deposit. The schedule to the contract stipulated that the deposit was to be paid to a named third party who would hold it, but not as a stakeholder. The guarantee is currently held by the third party.
A dispute arose. The plaintiff asserts that he is entitled to repudiate the contract and that he has done so by notifying the land agent acting on behalf of the defendants in writing that he had cancelled the agreement. The defendants have given notice to settle and settlement falls due on 16^th November 2009.
On 8^th October 2009 the plaintiff commenced an action against the defendants seeking a number of remedies. In essence the plaintiff sought a declaration that the defendants had engaged in false and misleading conduct, a declaration that the plaintiff had lawfully repudiated the contract or, in the alternative, an order that the contract be set aside and damages for false and misleading conduct and, finally, an injunction restraining the defendants from negotiating or dealing with the guarantee in anyway whatsoever. It is not necessary to identify the remedies sought with any greater degree of specificity.
On 8^th October 2009, and on the plaintiff giving appropriate undertakings, a judge of the Court granted an ex parte injunction restraining the defendants and the bank from “… negotiating or in any way dealing with …” the guarantee. On 14^th October 2009 there was a further hearing before the same judge. The plaintiff and the defendants were represented by counsel at this hearing but there was no appearance for the bank. The judge extended the injunction until further order and made consequential orders in anticipation of a full confirmation hearing.
The confirmation hearing was conducted on 29^th October 2009. Again the plaintiff and the defendants were represented but again there was no appearance for the bank.
Ordinarily injunctions will not be granted unless the plaintiff demonstrates that there is a serious question to be tried, in the sense that his prospects of success in the action which he has brought are sufficient to justify the preservation of the status quo pending the determination of the action that damages will not be an adequate remedy and that the balance of convenience falls in favour of granting the injunction in the sense that the injury or inconvenience which the plaintiff is likely to suffer if the injunction is refused is greater than the injury that the defendant would suffer if it is granted[1]. Some cases have incorporated the question of whether damages are an adequate remedy into the question of where the balance of convenience lies[2].
[1] Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 at [19], [65]-[72]
[2] e.g. Kilpatrick Green Pty Ltd v State Supply Board (1991) 56 SASR 591
The guarantee is unconditional. If it is enforced then presumably the bank would take steps to obtain the amount of the guarantee from the plaintiff.
Counsel for the defendant concedes that there is a serious question to be tried.
Assuming that the guarantee had not been enforced by the time then action was determined and if the plaintiff succeeds in obtaining a declaration that he was entitled to repudiate the contract or an order setting it aside, then the defendants would have no right to enforce the guarantee. However, and again assuming that the guarantee had not been enforced, if the plaintiff fails then the defendants would be entitled to enforce the guarantee. In essence what the plaintiff seeks to achieve by the continuation of the injunction is the preservation of the status quo pending the determination of the action.
The defendants oppose the continuation of the injunction. In an affidavit filed on behalf of the defendants the first defendant asserts that it would be unreasonable for the defendants not to have the benefit of the deposit and he undertakes on behalf of himself and the other defendants that they will not present the guarantee until they are entitled to do so under the contract. I take it from all this that it is the intention of the defendants to present the guarantee as soon as they are able to do so unless restrained or unless the action is determined in the plaintiffs favour before the time when they would otherwise be entitled to enforce the guarantee and call in the money.
Damages
Counsel for the plaintiff submits that damages will not be an adequate remedy because if the plaintiff succeeds in obtaining a declaration that he was entitled to repudiate the contract, or an order setting it aside, then the question of damages will not arise. Obviously this would only be so if the defendants had not enforced the guarantee by the time any declaration or order was made.
If the defendants enforce the guarantee and if the plaintiff later succeeds in obtaining a declaration that he has lawfully repudiated the contract, or an order setting it aside, and assuming that he had paid or was liable to pay the guaranteed amount to the bank then plainly he would be entitled to recover that amount from the defendant. It follows accordingly that if the injunction were to be discharged thus permitting the defendants to take steps to call in the guarantee before the action is determined then damages would be an adequate remedy if the plaintiff succeeds in his action thus demonstrating retrospectively that the defendants were not entitled to call in the guarantee in the first place. The plaintiff falls at the first hurdle.
Balance of convenience
In submitting that the balance of convenience favoured the confirmation of the injunction, counsel for the plaintiff relied heavily on the case of Prior and Anor v Kuji Pty Ltd[3]. Prior was a case where the plaintiffs had agreed to purchase a property from the defendant. A bank guarantee was granted in favour of the defendants in part satisfaction of the deposit stipulated in the contract. A dispute arose, the plaintiffs did not settle on the contract and the defendant sought to enforce its rights under the guarantee. The plaintiff sought an injunction restraining the defendants from exercising its rights under the guarantee pending the outcome of a claim by the plaintiffs that they had been entitled to decline to complete the contract.
[3] (1992) Q ConvR 54-423
A judge of the Supreme Court of Queensland granted the injunction on the basis that the defendant would be no worse off if the injunction were to be granted than he would have been if the deposit had been paid in cash and then held by a third party pending the outcome of the action and that the guarantee should not be used for any purpose other than securing any legal obligations which might ultimately be found to have arisen under the contract.
As I understand him, counsel for the plaintiff submitted that Prior is authority for the proposition that, and I quote from his outline of submissions “It is generally understood that an injunction is an appropriate remedy to prevent a vendor from calling in a bond given as a deposit”. As I read the reasons in Prior, the judge was doing no more than applying what he perceived to be the guiding principles to the facts of the case and that he was not purporting to lay down any absolute proposition of the kind contended for. Also, his Honour did not consider the question of whether damages would be an adequate remedy either, separately or within the ambit of the balance of convenience and, with all due respect, his failure to do so must call the correctness of his ultimate conclusion into doubt. Accordingly, Prior’s case cannot assist the plaintiff.
Counsel for the plaintiff also submits that the trial of the action would be quite short, that it could be heard in the near future and therefore the injunction would be unlikely to remain in effect for any inordinate length of time if it were to be confirmed. I am prepared to proceed on the assumption that all this is so. Counsel for the plaintiff cannot point to anything that suggests that the defendants would act as errant vendors in the meantime and nor can he point to anything which suggests that the defendants would be unable or unlikely to satisfy any order for damages which might ultimately be made in favour of the plaintiffs and, if the action is heard and determined quickly, the plaintiff will not be out of his money for any great length of time if he succeeds. Counsel for the defendants concedes that the only prejudice the defendants would suffer if an injunction is granted would be the loss of the use of the guaranteed money from the moment they were legally entitled to call on the guarantee until the day of judgment.
The balance of convenience is thus even or so little in favour of the plaintiff so as to have no bearing on the outcome of the ultimate question of whether an injunction should be granted or not. If the question of damages and the question of balance of convenience are considered together under the head of balance of convenience the result is the same for the reason that the plaintiff cannot point to anything which suggests that the defendants would be unable to repay the money represented by the guarantee if the action was ultimately determined in favour of the plaintiff.
Conclusion
In the light of these findings it is unnecessary to consider the other submissions of counsel for the plaintiff. The application for an injunction must be dismissed.