Thermarite Danmark A/S v Carlyle, P.J
[1992] FCA 1029
•19 Nov 1992
l
b/OT FDi': 53-77,7,~?07/ofl/ 1 , , , , .
- !
i o a q ~ q a :
IUDGMENT No. ..., ........ ...... ..., ........ I.)
I -
IN THE FEDERAL COURT OF AUSTRALIA 1 . I OUEENSLAND DISTRICT REGISTRY 1 No. QG 150 of 1992 GENERAL DIVISION 1 I
BETWEEN: THERMARITE DANMARK A/S
Applicant
AND: PHILIP JAMES CARLYLE
First Respondent
AND: T H E W RITE PTY LTD Second Respondent
-
AND: DONJAN NO. 2 PTY LTD and SANDHURST DALE PTY LTD Third Respondents
AND: RALPH COTTRILL
Fourth Respondent
MINUTES OF ORDER 1 .
JUDGE MAKING ORDER: Spender J. DATE OF ORDER: 19 November 1992 WHERE MADE:
Brisbane I
.
THE COURT ORDERS THAT: i
1. The application for interlocutory relief is refused. t , 2. Costs of the respondents to the interlocutory I application their costs in the principal proceedings. l ..
0. 36 of the Federal Court Rules.
Settlement and entry of orders is dealt . with in
IN THE FEDERAL COURT OF AUSTRALIA 1 QUEENSLAND DISTRICT REGISTRY
1 No. QG 150 of 1992 GENERAL DIVISION 1
BETWEEN: THERMARITE DANMARK A/S
Applicant
AND: PHILIP JAMES CARLYLE
First Respondent
AND: THERMA RITE PTY LTD
Second Respondent
AND: DONJAN NO. 2 PTY LTD and SANDHURST DALE PTY LTD Third Respondents
AND: RALPH COTTRILL
Fourth Respondent
CORAM: SPENDER J. PLACE : BRISBANE m: 19 November 1992
EX TEMPORE REASONS FOR JUDGMENT
This is an application for an interlocutory injunction by Thermarite Danmark A/S ('Thermarite Danmark'), the applicant in proceedings number G150 of 1992. By way of interlocutory relief, the applicant seeks an order that until trial or earlier
order Therma Rite Pty Ltd ( 'Therma Rite'), the second respondent,
be restrained and an injunction issued restraining it from forfeiting, purport to forfeit, selling, attempting to sell or otherwise without the consent of the applicant dealing howsoever with the 1000 ordinary shares in Therma Rite held by Thermarite
5 Danmark and the subject of a contract referred to in paragraph
X three, of the application.
The application was filed on 19 October 1992, and I will say more about that application and paragraph three shortly. Because of other pressing demands on the court's time, the application for interlocutory relief was heard somewhat episodically, but I have had the benefit of very careful and extensive submissions of counsel and have been referred to much authority. I want to say that I am grateful to all counsel for their valuable assistance in this matter, but notwithstandingthe extent of that assistance, I am able to be relatively terse in these reasons.
I have concluded that I should not grant interlocutory
relief.
The basic principles are not in dispute. In American
Cvanamid Co. v. Ethicon Ltd [l9751 A.C. 396 in the speech of Lord Diplock, the history of the differing approaches to the exercise of the discretion concerning interlocutory relief was canvassed and at the end, at 407, his Lordship said:
" The u s e o f such e x p r e s s i o n s a s ' a
p r o b a b i l i t y ' , ' a prima f a c i e c a s e " , or ' a
s t r o n g prima f a c i e case' i n the context of the exercise of a d i s c r e t i o n a r y power t o gran t an i n t e r l o c u t o r y i n j u n c t i o n l e a d s t o c o n f u s i o n a s t o the o b j e c t sough t t o be ach i eved by th is
form o f temporary re l i e f . The c o u r t n o doub t
mus t be s a t i s f i e d t h a t the c l a i m i s not
f r i v o l o u s o r v e x a t i o u s ; i n o t h e r words, t h a t there i s a s e r i o u s q u e s t i o n t o be t r i e d . "
That approach has been accepted by the High Court in Australian Coarse Grain Pool Ptv Ltd v. Barlev Marketinq Board of Oueensland (1982) 46 ALR 398, 57 A.L.J.R. 425; Castlemaine Toohevs Limited v. The State of South Australia (1986) 161 CLR 148 at 153; Tableland Peanut Ptv Ltd v. Peanut Marketina Board (1984) 52 ALR 651 at 653; _A v. Havden (1984) 59 ALJR 1 at 3-5; and it has been consistently followed in this court, in particular by the Full Court of the Federal Court in Eoitoma Pty m v. Australasian Meat Industrv Em~lovees ' Union f No. 2 (1984) 54 ALR 730.
In that case, the court, consisting of Sheppard, Morling and Beaumont JJ, said at 734:
" In an application for an interlocutory injunction, the court must inquire first whether there is a serious question to be tried. "
If there is, then the court considers the balance of
convenience.
However, a question in relation to the application of
those principles does arise in this case. It is submitted that
when the totality of the material is looked at, notwithstanding what is sworn to be the case for the applicant, the contemporaneous material, including correspondence, is such that one should conclude that a serious question pursuant to S. 5 2 of the Trade Practices Act 1974 ('the Act') is not made out.
In Snell on Eauitable Remedies 29th ed. 1990 at 663,
this appears :
" The court should not embark on anything resembling a trial of the action on
conflicting affidavits . However, sometimes on undisputed facts (or facts as to which there is no credible dispute) the strength of one party's case is disproportionate to that of the other, and this maybe taken into account in tipping the balance. "
The circumstances in which the relative strength of one party's case might be considered is said to be where the facts are undisputed or there is no credible dispute.
Here there are a number of serious factual and legal questions, and it seems to me that it is not possible, consistent with the authorities to which I have referred, to have regard to or even attempt an assessment of the relative strength of the cases.
In Pacific Hotels Ptv Ltd v. Asian Pacific International Ltd (1986) ATPR 40-730 I had occasion to consider the extent to which the principles of American Cvanamid (supra) as adopted in Epitoma (supra) admit of any exceptions. At 47,964
I said:
" The extent to which these principles admit of exceptions is a controversial issue. (See C. Gray, 'Interlocutory In junctions since Cyanamid', 40 C.L.J. 307, especially at pp. 316-325.) One suggested exception is where the facts of a case are clear, and where 'the prospect of success is a matter within the competence of the judge who hears the interlocutory application' (Fellowes & Son v Fisher [l9761 1 Q.B. 122 at p. 141 per Sir
John Pennycuick) . "
It is not appropriate therefore, having regard to the
purpose of interlocutory relief, to attempt to give a definitive
resolution of the numerous questions that have been thrown up by
this application.
In E~itoma (supra) the Full Court said at 735-6:
v .
" Once it i s conceded t h a t it was, a t the very l e a s t , arguable t h a t a l i t e r a l c o n s t r u c t i o n
should p r e v a i l i t i n e v i t a b l y f o l l o w s t h a t
there i s a s e r i o u s q u e s t i o n to be t r i e d on
th is i s s u e . To borrow the language o f Lord
Diplock i n Dimblebv & Sons L t d v. Nat iona l
Union of J o u r n a l i s t s [l9841 1 W.L.R. 427, it
i s ' n o par t o f the c o u r t ' s f u n c t i o n on an
a p p l i c a t i o n for an i n t e r l o c u t o r y i n j u n c t i o n t o
d e c i d e d i f f i c u l t q u e s t i o n s o f l a w which c a l l
for d e t a i l e d argument and m a t u r e . .
cons ide ra t i on ' ( a t p 436). "
I have had quite detailed argument in respect of a number of important legal questions, but it seems to me inappropriate as being not necessary, or even desirable, to
'
decide at this stage questions such as whether the purported 1. , . : ' 8 forfeiture was valid or not. I ?
I am satisfied that there are serious questions to be 1
8 ,
tried, but in my opinion the balance of convenience is against ; the grant of the injunction sought.
A short summary of the facts is as follows:
i
Therma Rite has 2000 shares issued of its authorised , . . ! I
capital of 100,000 $1 shares; the shareholders of Therma Rite, ! prior to the question of the disputed forfeiture, are as follows: I Thermarite Danmark, 1000 shares, 50 per cent; Philip James .I I Carlyle, 510 shares, 25.5 per cent; Donjan No 2 Pty Ltd, 340 I
ordinary shares, 17 per cent; Sandhurst Dale Pty Ltd, 120 shares,
6 per cent; Trentway Pty Ltd, 30 shares, 1.5 per cent.
In about June 1991, the force behind the applicant, Peter Thiess Holm, of Sonderborg, Denmark, had discussions with Philip James Carlyle, who has a significant connection with the second respondent. As a result of discussions between M r Carlyle and Mr Holm, Mr Holm agreed to subscribe $2 million in Therma Rite. Mr Holm and the various corporate entities through which he operated were to receive a 50 per cent shareholding in Therma Rite, the sole right to distribute Therma Rite products in northern Europe, and the sole right to distribute Therma Rite products in Australia and New Zealand.
Thermarite Danmarkmadethreewrittenagreements, being an agreement for the allotment of shares first dated 27 August / 1991, a deed of variation dated 28 October 1991, and the second deed of variation, dated 8 November 1991. Pursuant to those agreements, Thermarite Danmark paid to Therma Rite the sum of 1.2
million on or about 1 August 1991, and a further sum of
$300,000.00 on or about 10 November 1991.
It is said by the applicant that it was induced to make each of the allotment agreements by the conduct of Therma Rite through Carlyle, and it made each of those allotment agreements in reliance on the conduct of Mr Carlyle. Under the allotment agreements, Thermarite Danmark was to have paid Therma Rite on 31 July 1992 $500,000.00 by way of a final instalment of the total sum owing under the allotment agreements. Mr Holm
swears in paragraph 15 of an affidavit filed on the interlocutory
application:
v . . .For the r e a s o n s appear ing i n the
a p p l i c a n t ' s s t a t emen t o f c l a i m , the a p p l i c a n t h a s d e c l i n e d t o p a y the f i n a l i n s t a l m e n t . In
s h o r t the a p p l i c a n t ' s s h a r e s i n Thenna R i t e p t y L t d a r e n o t , and never were, wor th the
purchase p r i c e agreed f o r them. Such a p r i c e
was o n l y commensurate w i t h Therma R i t e P t y
L t d , h a v i n g been i n the s t a t e and w i t h the
p r o s p e c t s r e p r e s e n t e d by M l - C a r l y l e a s set o u t
i n the s ta t emen t o f c l a i m . I t i s n o t and was
n o t o f such s t a t e and p r o s p e c t s .
In paragraph 18 of that affidavit, Mr Holm baldly swears:
" The f a c t s s e t - o u t ( s ic ) i n the a p p l i c a n t ' s
s t a t e m e n t o f c l a i m a r e t r u e . "
Objection is taken as to the evidentiary basis of the applicant's claim and, in particular, the swearing in paragraph 18. Objection canvalidlybemade of that approach, particularly since paragraph 22 in the statement of claim is in these terms:
. . . a t a l l m a t e r i a l times the first re sponden t [ b e i n g C a r l y l e ] was a person i n v o l v e d i n t h e second responden t ' s c o n t r a v e n t i o n o f the Act
a f o r e s a i d a s one who:-
( a ) a ided , a b e t t e d , c o u n s e l l e d or procured
the c o n t r a v e n t i o n ;
(b 1 induced the c o n t r a v e n t i o n ; ( c ) was d i r e c t l y or i n d i r e c t l y knowing1 y
concerned i n or p a r t y t o the con t raven t i on .
PARTICULARS
The first responden t was the p r o g e n i t o r o f and
t h e person who made each o f the ve rba l r e p r e s e n t a t i o n s , t h e w r i t t e n r e p r e s e n t a t i o n and the v a r i a t i o n r e p r e s e n t a t i o n s . ''
The purpose of pleading is to allege facts rather than evidence. Simply to swear CO the issues defined by a statement of claim is hardly providing a satisfactory evidentiary basis for interlocutory relief.
However, having regard to the other material, including paragraph 15 of Mr Holm's affidavit, I am satisfied that a factual basis alleging contraventions of S. 52 of the Trade Practices Act is sworn to.
That is not to say, and I want to make it plain, that there are not very real difficulties facing the applicant. Without going to the material in any detail there is much to be said for the submission of Mr Sofronoff QC, the senior counsel for, inter alia, Therma Rite, that the assertions of Mr Holm sit very uncomfortably with the contemporaneous correspondence and one might genuinely entertain difficulty in respect of what the ultimate position might be.
Further, as Mr Couper, counsel for Donjan No 2 Pty Ltd, one of the third respondents, submitted, there are also difficulties for the applicant in relation to S. 5 of the Trade Practices Act. Section 5 ( 4 ) provides:
" A person other than the Minister or the Commission is not entitled to make an application to the Court for an order under sub-section 8 7 ( 1 ) or (1A) in a proceeding in respect: of conduct to which a provision of this Act extends by virtue of sub-section (1) or (2) of this section except with the consent in writing of the Minister. "
Section 5(1) is in these terms:
" Par t s I V and V extend t o the engaging i n conduct o u t s i d e Aus t ra l ia by b o d i e s corporate
incorporated o r carry ing on b u s i n e s s w i t h i n
A u s t r a l i a o r by Aus t ra l ian c i t i z e n s or persons
o r d i n a r i l y r e s i d e n t w i t h i n A u s t r a l i a . "
The statement of claim in paragraph 5 says that the negotiations between Mr Carlyle and Mr Holm were engaged in to attract investment by Mr Holm or an entity associated with
Mr Holm by the purchase of shares in Therma Rite, and the
particulars of that paragraph are:
" Discussions between the app l i can t by Holm and
the first respondent : -
(i a t 37 Mayfield S t r e e t , Ascot on o r
about 18 June 1991;
(ii) a t Sonderborg i n Denmark v a r i o u s l y on
and between 20-26 J u l y 1991. "
There is no further particularity as to which of the
various representations later set out in the statement of claim
were made at which of those two addresses. It was submitted by
Mr Couper that except for the representations in paragraph 7 of the statement of claim with respect to profit forecasts, it is not possible to determine the place at which any particular representation was made. I accept the correctness of that submission. It was then further said, however, that it is not possible to conclude that any representations were made in Australia and, the onus being on the applicant to show that the application is properly bought, it was submitted that the application must fail.
Having regard to the totality of the material it seems to me that it is possible to infer that some of the representations, although the identification of which particular ones is not possible at present, were made in Australia. Since it is asserted that each of the representations was causative in the investment decision by the applicant it seems to me that whatever be the difficulties posed by S. 5 and, in particular, S. 5 ( 4 ) of the Act for the applicant, it is not possible to say
that there is no case under S. 52 on which the applicant might
rely.
I note also paragraph 22 of M r Holm's affidavit in
which he swears:
" Should it be necessary to enable this Honourable Court to grant the applicant the interlocutory injunction it seeks, I am authorised by the applicant to proffer the
following undertaking: - the applicant undertakes to pay to any party adversely affected by the interlocutory injunction such compensation (if any) as this Honourable Court thinks just, in such manner as this Honourable Court directs. "
A point having been taken as to the adequacy of the undertaking having regard to the identity of the applicant further material was placed before the court to indicate that security to the extent of $150,000.00 of a satisfactory kind to support the undertaking would be able to be offered. It seems to me that it is not possible in those circumstances to conclude that the undertaking offered by the applicant is worthless.
I turn now t o paragraph 10 o f the a p p l i c a t i o n . B y
paragraph 10 the a p p l i c a n t c l a i m s :
" Fur ther , or a l t e r n a t i v e l y , a d e c l a r a t i o n t h a t
a n y purpor ted f o r f e i t u r e by the second
responden t o f 1000 o r d i n a r y share s i n i t , h e l d
by the a p p l i c a n t , by reason o f the a p p l i c a n t
n o t pay ing a f u r t h e r sum o f $500,000.00
pursuant t o the i n s t r u m e n t s r e f e r r e d t o i n the
s ta t emen t o f c l a i m , i s :-
f a ) un law fu l and o f n o e f f e c t a s n o t
a u t h o r i s e d by, o r i n compliance w i t h
the second r e sponden t ' s a r t i c l e s o f a s s o c i a t i o n or o t h e r w i s e a u t h o r i s e d a t law;
fb) ( a l t e r n a t i v e l y ) i n v a l i d and o f no
e f f ec t a s c o n s t i t u t i n g an un lawfu l
p e n a l t y or f o r f e i t u r e and c o n t r a r y t o
p u b l i c p o l i c y . "
Tha t c l a i m f o r re l ie f has t o be s e e n i n the c o n t e x t o f ,
f i r s t , a l e t t e r o f 31 July 1 9 9 2 from Messrs Morris Fletcher &
Cross ( a s t h e y then w e r e ) t o the D i r e c t o r s o f Therma R i t e , wh i ch
i s i n t h e s e t e r m s :
" W e a c t for Thermar i t e Danmark A/S .
W e a r e i n s t r u c t e d t h a t pursuant t o an
Agreement f o r the A l l o t m e n t o f Shares da t ed 27 August 1991 ( ' the Agreement ' ) , o u r client was t o d a y t o p a y t o you $500,000.00. Our
client w i l l n o t be d o i n g so.
Our client h a s i n s t r u c t e d u s t o commence
proceed ings i n the Federal Cour t o f A u s t r a l i a
a g a i n s t Thenna R i t e P t y L t d and ELr C a r l y l e for damages f o r m i s l e a d i n g and d e c e p t i v e conduc t , damages for breach o f the Agreement and an i n j u n c t i o n r e s t r a i n i n g you from s e l l i n g o u r
client's s h a r e s .
To avo id the necessity o f a p p l y i n g f o r an
i n t e r l o c u t o r y i n j u n c t i o n , we r e q u e s t t h a t you
under take t o u s i n w r i t i n g by 5:OOpm on
Monday, 3 August 1992, t h a t you w i l l n o t seek
t o d i s p o s e o f the s h a r e s u n t i l the t r i a l or
o t h e r r e s o l u t i o n o f the foreshadowed
proceeding. "
On 4 August 1992, Rapp Hickey Morgan Power, s o l i c i t o r s
o n b e h a l f o f Therma R i t e , w r o t e s a y i n g , inter a l i a :
" As you c o r r e c t l y p o i n t o u t , pursuan t t o the
Share A l l o t m e n t Agreement da t ed 27 August 1991, a s v a r i e d by the subsequen t Deeds o f V a r i a t i o n , your client was t o p a y t o o u r client the sum o f
$500,000.00 o n 31 J u l y 1992.
W e n o t e t h a t , i n b reach o f t h e Agreement, your client d i d n o t make s u c h payment.
W e n o t e t h a t you have i n s t r u c t i o n s t o commence
proceed ings a g a i n s t o u r cl ient and h2 C a r l y l e
i n the Federal Cour t o f A u s t r a l i a . Your letter
makes the b a l d a s s e r t i o n t h a t o u r c l i e n t h a s
been g u i l t y o f m i s l e a d i n g and d e c e p t i v e
conduc t , and h a s breached the Share A l l o t m e n t
Agreement. No p a r t i c u l a r s whatsoever a r e g i ven
i n suppor t o f t h o s e a l l e g a t i o n s . Would you
p l e a s e s p e c i f y the f o l l o w i n g :
1. The conduc t o f o u r c l i e n t which i s
a l l e g e d t o be m i s l e a d i n g and d e c e p t i v e .
2. The a l l e g e d b r e a c h e s by o u r client o f
the Share A1 l otmen t Agreement .
W e note your i n t e n t i o n t o a p p l y f o r an
i n j u n c t i o n r e s t r a i n i n g o u r client from s e l l i n g
y o u r client's s h a r e s . I t i s premature for your
client t o be a p p l y i n g for the i n j u A c t i o n
foreshadowed i n y o u r correspondence . Our
client h a s n o t under taken a n y o f the procedures
n e c e s s a r y t o b r i n g abou t the s a l e o f your
client's share s .
In a n y e v e n t , there i s no doubt t h a t your
client h a s d e f a u l t e d i n making the f i n a l
i n s t a l m e n t payment for the s h a r e s a l l o t t e d to
y o u r client, and it i s i m p o s s i b l e f o r your
c l i e n t t o succeed i n o b t a i n i n g a n i n j u n c t i o n
a g a i n s t o u r client i n the t e r m s t h a t you have
ment ioned , m e r e l y on the b a s i s o f a damages
c l a i m a g a i n s t o u r c l ient . Tha t i s a s e p a r a t e m a t t e r , and a n y damages c l a i m t h a t y o u r client
may c a r e t o r a i s e a g a i n s t o u r client i s no
j u s t i f i c a t i o n for y o u r client's d e f a u l t i n
payment o f the f i n a l i n s t a l m e n t for the s h a r e s . " Other matters are referred t o i n that l e t t e r which are
unnecessary t o set out here.
The memorandum o f ar t ic les o f Therma Rite provide i n
clauses 109 t o 116 for the for fe i ture o f shares i n these terms:
' 109. I f a member f a i l s t o pay any call or instalment o f a cal l on the day appointed for payment thereof, the Directors may a t any time thereafter during such time a s any part o f such call or instalment remains unpaid serve a notice on him requiring payment o f so much o f the call or instalment as i s unpaid together with any in teres t which may have accrued and a l l expenses that may have been incurred by the Company b y reason o f such non- payment . 110. The notice shall name a further day (not earlier than the expiration o f fourteen days from the date o f the notice) on or before which and the place a t which the payment required by the notice i s t o be made and shall s tate that i n the event o f non-payment a t or before the time and a t the place appointed, the share i n respect o f which the call was
made w i l l be l iab le t o be forfei ted. 111. I f the requirements o f any such notice a s aforesaid are not complied with any share i n respect o f which the notice has been given may a t any time thereafter before the payment required by the notice has been made be
forfeited by a resolution o f the Directors t o that e f f e c t . Such forfei ture shall include a l l dividends declared i n respect o f forfeited shares and not actually paid before the
forfeiture .112. A forfei ted share m a y be sold or otherwise disposed o f on such terms and i n such manner as the Directors shall think fit and a t any time before a sale or disposition the forfei ture m a y be cancelled on such terms as the Directors think fit. 113. The Directors may accept the surrender o f any paid up shares by way o f compromise o f any question as t o the holder being properly registered i n respect thereof. Any share so surrendered may be disposed o f i n the same manner as a forfei ted share. 114. A person whose s h a r e s have been f o r f e i t e d
s h a l l c e a s e t o be a member i n r e s p e c t o f the f o r f e i t e d s h a r e s b u t s h a l l n o t w i t h s t a n d i n g remain l i a b l e t o p a y t o the Company a l l moneys which a t the d a t e o f f o r f e i t u r e were payable by him t o the Company i n r e s p e c t o f the s h a r e s .
115. A s t a t u t o r y d e c l a r a t i o n i n w r i t i n g t h a t
the d e c l a r a n t i s a D i r e c t o r o f the Company and
t h a t a share o f the Company h a s been d u l y
f o r f e i t e d on a d a t e s t a t e d i n the d e c l a r a t i o n
s h a l l be c o n c l u s i v e e v i d e n c e o f the f a c t s
therein s t a t e d a s a g a i n s t a l l pe r sons c l a i m i n g t o be e n t i t l e d t o the share . The Companymay
receive the c o n s i d e r a t i o n , i f any , g i ven f o r the share on a n y s a l e o r d i s p o s i t i o n t h e r e o f
and may e x e c u t e a t r a n s f e r o f the share i n
favour o f the person t o whom the share i s s o l d
o r d i sposed o f and he s h a l l thereupon be
r e g i s t e r e d a s the h o l d e r o f the share and
s h a l l n o t be bound t o see t o the a p p l i c a t i o n
o f the purchase money, i f any , n o r s h a l l h is t i t l e t o the s h a r e be a f f e c t e d by an i r r e g u l a r i t y or i n v a l i d i t y i n the proceedings i n r e f e r e n c e t o the f o r f e i t u r e , s a l e o r
d i s p o s a l o f the s h a r e . 116. The p r o v i s i o n s o f these Articles a s t o
f o r f e i t u r e s h a l l a p p l y i n the c a s e o f non-
payment o f a n y sum which by terns o f i s s u e o f a share become payab le a t a f i x e d time whether on account o f the amount o f the share o r by way o f premium a s i f the same had been payable
by v i r t u e o f a c a l l d u l y made and n o t i f i e d .
"
O n 7 August 1 9 9 2 Therma R i t e wro t e t o Thermar i t e
Danmark, and s i n c e t h i s let ter i s r e l e v a n t t o the arguments based
o n the q u e s t i o n o f whe ther t h i s n o t i c e was i n v a l i d , o r whether
the f o r f e i t u r e a s a consequence was i n v a l i d , o r was pena l , it i s n e c e s s a r y t o s e t the le t ter o u t i n f u l l .
" The company notes t h a t y o u r company i s the h o l d e r o f 1,000 o r d i n a r y s h a r e s i n the
company. Those s h a r e s were a l l o t t e d t o your
company pursuant t o a Share A l l o t t m e n t ( s i c )
Agreement da t ed the 2 7 t h d a y o f Augus t , 1991.
The 1,000 s h a r e s a r e p a r t l y pa id up t o t h e
v a l u e o f $0.75 p e r s h a r e . The s h a r e s were t o
become f u l l y paid upon payment by your company o f t h e f ina l ins ta lment o f $500,000 due pursuant t o t h e Share A l l o t m e n t ( s ic )
Agreement, a s var ied , on 31s t Ju ly , 1992.
Your company d e f a u l t e d i n payment o f the f i n a l
in s ta lmen t o f $500,000.00 on t h e 31s t d a y o f
J u l y , 1992.
The companyhereby g ives you n o t i c e , pursuant
t o c l a u s e s 109 and l 1 0 o f t h e Articles o f
Assoc ia t ion o f t h e company, that it r e q u i r e s
you t o do t h e fol lowing:
1 . Pay t h e f i n a l in s ta lmen t i n respec t o f your
shares , namely t h e sum o f $500,000.00 on or before Monday t h e 24th day o f August, 1992. 2. Make such payment by forwarding a bank
cheque t o t h e company a t 12 Energy
Crescent , Ernes t Junct ion, or by
t e l e g r a p h i c a l l y t r a n s f e r r i n g t h e funds t o
t h e company's bank account, t h e d e t a i l s o f which a r e a s follows: NATIONAL AUSTRALIA BANK
PACIFIC FAIR BRANCHHOOKER BOULEVARD
BROADBEACH QLD 4218 AUSTRALIA
BSB NO: 084 569 ACCOUNT NO: 51646 1983
3 . A t the same time, and i n l ike manner, pay
t o t h e company i n t e r e s t on t h e sum o f
$500,000.00 a t t h e r a t e o f 11% per annum
ca lcu la ted from t h e 1 s t day o f May 1992
u n t i l 24th day o f August, 1992 i n the
amount o f $1 7,4 79.45.
I n t h e event o f non-payment by your company o f
t h e amounts r e f e r r e d t o here in , on o r before t h e time and a t t h e place s p e c i f i e d above,
your shares h e l d by your company w i l l be
l i a b l e t o be f o r f e i t e d i f t h e Directors so resolve .
Dated t h i s 7 t h d a y o f August, 1992.
On t h e a p p l i c a t i o n f o r i n t e r l o c u t o r y r e l i e f , it i s
accepted t h a t t h e c la im i n r e s p e c t o f interest i s o v e r s t a t e d , b u t
it was submitted on beha l f o f the respondents t h a t , i n f a c t , the
notice relies on two breaches by Thermarite Danmark, as is made plain by the way in which the letter is couched. There is a claim for Thermarite Danmark to pay the final instalment in respect of the shares, and there also is a claim "At t h e same
time, and i n l ike manner, p a y t o t h e company i n t e r e s t . . . " It was
submitted that the notice was a valid notice.
The question of whether the notice is bad because it overstates the interest which must be paid to avoid a forfeiture, is one on which, on the authorities provided to me in the course of submissions, conflicting arguments may be made.
The applicant relies on the three judgments of the Court of Appeal in Johnson v. Lvttle's Iron Aaencv (1877) 5 Ch. D. 687, all which may be summarised in the pithy comment of James L.J. at 694 that:
" A very l i t t l e i n a c c u r a c y i s a s f a t a l a s t h e
g r e a t e s t . "
For the respondents it was argued that contrary to what was said in Johnson's Case (supra) the principles relating to forfeiture are common to all forms of forfeiture, whether by virtue of articles of association (as here), pursuant to a mortgage, or under any other form of contract. It was submitted
that the statement "A very l i t t l e i n a c c u r a c y i s a s f a t a l a s t h e g r e a t e s t " no longer represents good law, and reliance was placed
on what appears in Meagher Gummow and Lehane, Eauitv Doctrines
and Remedies, 3rd ed. at paragraph 1805.
In particular reliance is placed on the judgment of Thomas J. in Clarke v Japan Machines (Australia) Ptv Ltd [l9841 1 Qd. R. 404. That was a case dealing with a mortgage. In addition there are cases, including Pannell v. Citv of London Brewerv Com~anv [l9001 1 Ch. 496, which address the question of whether, where there are multiple bases relied on, it is sufficient to support a valid notice that one of the claims is good.
It is clear that the procedure provided by the articles relating to forfeiture of shares must be strictly followed. In Ghabrial v Romollv Ptv Ltd (1991) 5 ACSR 611 at 614, the procedure required two notices, a notice of levy and a notice of default. A combined notice was held to be clearly non compliance with the procedure required by the articles, and consequently the forfeiture was invalid.
As I indicated earlier, it is a serious and important
question on which, on the authorities, arguments can be put each
way. It seems to me neither necessary nor desirable that that
question be answered in any determinate way on interlocutory proceedings. It is sufficient that serious and non-trivial arguments can be made in respect of that issue. The same applies in respect of the question of whether the forfeiture articles are unenforceable as being penal. It is true that forfeiture provisions enforcing an obligation to pay amounts due on shares have always been regarded as valid, and such provisions have statutoryrecognition, in particular regulation 26 of the Table A
regulations under the Cor~orations Law.
Nonetheless, without the benefit of any directly relevant authority, M r Bain, counsel for the applicant, submits that where, as here, a substantial part of the price of the shares has been paid, to require the shares to be forfeited constitutes a penalty. That submission seems to me to be at least arguable.
Again, it is unnecessary for me to decide that matter. These issues raise real questions, and as I indicated, in my view, they are not properly to be resolved on an application for an interlocutory injunction.
As I indicated at the outset, the reason I have decided not to grant the interlocutory injunction sought is because, in my view, the balance of convenience is against it. Quite simply, this is a damages case, and I am fortified in my view by what is, it seems to me, a fair and concise representation of what the applicant's case is which appears in paragraph 15 of Mr Holm's affidavit.
He says, in short, that the applicant's shares in Therma Rite are not, and never were, worth the purchase price agreed for them. Mr ~ o l m swears that such a price is only commensurate with Therma Rite having been in the state and with the prospects represented by M r Carlyle as set out in the statement of claim and that it is not, and was not, of such state and prospects. If all of that is true, the applicant is entitled to damages, and there is nothing, it seems to me, to suggest that damages would not be an adequate remedy.
In Polaroid Cor~oration v Eastman Kodak Comoany (1977)
R.P.C. 379 at 395, Buckley LJ said:
... if the plaintiff can be compensated in
damages for anything he may wrongfully suffer between the date of the application and the trial, the defendant should not be restrained, save in exceptional circumstances. There seems to me to be no exceptional circumstances in the present case. "
In the factual circumstances of this case, I see no
exceptional circumstances. There are other factors which were
referred to. The first is the question of delay. The notice concerning forfeiture is dated 7 August 1992, and this application was not brought until 16 October 1992. However, in relation to that, it was submitted on behalf of the applicant that to disentitle relief, delay must be attended by irremediable prejudice, and there is none here.
The question of delay on an interlocutory application
is not simply a question of prejudice, although that is the
central basis for its consideration. Were it simply the
question of delay, I would not decline to grant interlocutory relief where it would, in all other respects, be appropriate to grant such relief. It seems to me, however, that there are real questions affecting the rights of third parties, and I refer again to the application and, in particular, paragraph 3.
What is sought in the principal proceedings by paragraph 3 is an order varying a contract or arrangement between the parties constituted by the three allotment agreements that I have earlier referred to, so as to eliminate any existing obligation of the applicant to pay money for or in respect of the allotment and issue to it of 1000 ordinary shares in the second respondent held by the applicant, in particular, the sum of
$500,000.00 referred to in paragraph 2 of the deed of variation made on 8 November 1991. By paragraph 4 of the application, the applicant seeks an order varying the contract or arrangement referred to in paragraph 3 so that the said 1000 shares in the second respondent held by the applicant and referred to in that contract or arrangement shall be deemed to have been fully paid.
By paragraph 5, the applicant seeks an order declaring the contract or arrangement referred to in paragraph 3 as varied by the court's orders to have had effect as so varied ab i n i t i o or, alternatively, on and after such date before the date of
orders as the court may specify. In those paragraphs, the applicant is relying on the provisions of S. 87(1) and (1A) of the Trade Practices Act, but there are difficulties in that regard as well.
Section 87(1) states:
"
Without l i m i t i n g t h e g e n e r a l i t y of s e c t i o n 80,
where, i n a proceed ing i n s t i t u t e d under, or for an offence against, t h i s P a r t , the Court finds that a person who i s a party t o the proceeding has suffered, or i s l i k e l y t o su f f e r , loss or damage by conduct o f another person that was engaged i n (whether before or a f t e r the commencement o f t h i s sub-section) i n contravention o f a provision o f P a r t IV or V, the Court may, whether or not it grants an injunction under section 80 or makes an order under section 80A or 82, make such order or orders as it thinks appropriate against the person who engaged i n the conduct or a person who was involved i n the contravention (including a l l or any o f the orders mentioned
Court considers that the order or orders i n sub-section ( 2 ) o f t h i s section) i f the concerned w i l l compensate the first-mentioned person i n whole or i n part for the loss or damage or w i l l prevent or reduce the loss or damage . "
The important matters for present purposes to be noted are first, the commencing words "Without l imit ing the generality
o f section 80", because S . 80(1) provides:
" Subject t o sub-sections (1A) and ( I B ) , where, on the application o f the Minister, the Commission or any other person, the Court i s sat is f ied that a person has engaged, or i s proposing t o engage, i n conduct that constitutes or would constitute -
( a ) a contravention o f a provision o f Part
IV or V;
(b) attempting t o contravene such a provision;
( c ) aiding, abetting, counselling or procuring a person t o contravene such a provision; ( d ) inducing, or attempting t o induce, whether by threats, promises or otherwise, a person t o contravene such
a provision;
( e )
being i n any way, d irect ly or indirect ly , knowingly concerned i n , or party to , the contravention b y a person o f such a provision; or
( f )
conspiring with others t o contravene such a provision,
the Court may grant an i n j u n c t i o n i n such
terms a s the Court determines t o be
appropr ia te . "
Secondly, however, S. 87(1) gives power to the court, whether or not it grants the injunction under S. 80 or makes an order under S. 80A or S. 82, to make such order or orders as it thinks appropriate:
' . . .agains t the person who engaged i n the conduct or a person who was invo lved i n the con t raven t ion ( i n c l u d i n g a l l o r a n y o f the
orders mentioned i n sub-sect ion ( 2 ) o f th is
section) i f the Court cons iders t h a t the order or o r d e r s concerned w i l l compensate the first- mentioned person i n whole o r i n par t f o r the loss or damage o r w i l l prevent o r reduce the loss or damage. "
Similarly, subsection (1A) gives power to the court to make such order or orders as the court thinks appropriate:
' . . .agains t t h e person who engaged i n t h e conduct or a person who was invo lved i n the con t raven t ion ( i n c l u d i n g a l l o r a n y o f the
o r d e r s mentioned i n sub-sect ion ( 2 ) ) . "
There is a question whether, consistent with that statutory power, it is possible for the court to rewrite an agreement which involves parties other than persons against whom it is alleged there was conduct which constituted a contravention of the relevant parts of the Act. Even if it is within power, and it is not presently necessary to reach a conclusion, the fact that third party interests are involved is an aspect which confirms my view that the balance of convenience favours the refusal to grant interlocutory relief.
As I indicated earlier, if there is contravention of
S. 52, it seems to me that the nature of the case on which the
applicant relies is essentially a straightforward S. 52 claim and that, prima facie, it is entitled, as the measure of its loss or damage under S. 82, to the difference between the value of what was contracted to be purchased and its real value at the time of entering into such obligation, consistent with the approach of the High Court in Gould v Vaaaelas (1985) 157 C.L.R. 215; 60 A.L.J.R. 49; 62 A.L.R. 527 and in many other cases under the Trade Practices Act.
Therefore, for these reasons, I refuse the application for interlocutory relief. The costs of the respondents to the interlocutory application are to be their costs in the principal proceedings.
I certify t h a t t h i s and the preceding
twenty-two (22) pages a re a t r u e c o p y
o f t h e reasons f o r judgment here in o f t h e Honourable J u s t i c e J . E . J . ~ ~ e n d z - .
Counsel f o r the a p p l i c a n t : Mr R. Ba in
i n s t r u c t e d by: Minter E l l i s o n Morris Fletcher Counsel f o r the f irst , second
and f o u r t h r e s p o n d e n t s : Mr W. S o f r a n o f f P.C. w i t h
Mr G. C . Newton
i n s t r u c t e d by: S l y & W e i g a l l , Cannan & Pe te r son
Counsel f o r the first t h i r d
responden t : Mr S . Couper
i n s t r u c t e d by: Thynne & Macartney a s Town Agent
for Primrose Couper Cronin
Rudkin
Counsel f o r the second t h i r d
responden t : Mr D. A. Savage
i n s t r u c t e d by: P h i l l i p s Fox Dates o f Hearing: 9 , 10 , 13 and 16 November 1992
0
6
0