Venture Marketing Group Pty Limited v Eastern Suburbs District Rugby League Football Club Limited

[1992] FCA 1053

Re: VENTURE MARKETING GROUP PTY LIMITED
And: EASTERN SUBURBS DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED; K.R. STEEL;
B.J. HEALEY; B.A. SAMPHIER; B.T. NEILAN; D.C. FRY; M.J. CONN; M.H. McGAHAN and
R.C. SEABROOK
No. NG693 of 1992
FED No. 1053
Number of pages - 6
Injunction

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lee J(1)

CATCHWORDS

Injunction - application for mareva injunction - principles to be applied.

Jackson v Sterling Industries Ltd (1987) 162 CLR 612

Paterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319

Perth Mint v Mickelberg (No. 2) (1985) WAR 117

Riley McKay Pty Ltd v McKay (1982) 1 NSWLR 264

HEARING

SYDNEY, 28 September 1992

#DATE 28:9:1992

Counsel for the Applicant: N.F. Francey

Solicitors for the Applicant: Blessington Judd Freeman Lazarus

Counsel for the Respondents: B.W. Walker

Solicitors for the Respondents: Phillips Fox

ORDER

THE COURT ORDERS THAT:

1. The application for interlocutory relief be dismissed.

2. The applicant is to pay the first respondent's costs of the

interlocutory application in any event.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

LEE J This is an application for an interlocutory injunction to restrain Eastern Suburbs District Rugby League Football Club Limited ("Easts") from distributing or otherwise disposing of such money as it presently holds or may receive in the future that would result in East's cash funds being reduced to a sum below $300,000.00.

1. On 18 September 1992 an interim injunction in like terms was granted until 28 September 1992 to allow argument to be heard on that date on whether the injunction should be extended until the date of trial of the substantive issue in the matter. The applicant Venture Marketing Group Pty Limited ("VMG") is a company incorporated in New South Wales. Its principal business is the provision of marketing and promotional services to sporting bodies and corporations. Easts is a corporation which participates in the professional sport of rugby league. The second to eighth respondents are members of the Board of Directors of Easts and the ninth respondent is the Chief Executive Officer.

2. VMG's claim relates to an agreement made between Easts and VMG dated 16 April 1992 ("the marketing agreement") whereby VMG agreed to "act on behalf of Easts as its exclusive sponsorship marketing consultancy" (sic) and Easts agreed to pay VMG, inter alia, "25% commission on all net sponsorship revenue secured". The term of the agreement was 2 years.

3. Pursuant to the marketing agreement VMG canvassed potential sponsors for Easts. In late April 1992 VMG commenced negotiations with Mitsubishi Electric AWA Pty Limited ("Mitsubishi") for Mitsubishi to agree with Easts to provide sponsorship for Easts.

4. In its claim for interlocutory relief VMG asserted that Mitsubishi and Easts reached an agreement at a meeting on 21 July 1992, attended by Mr Winter the director of VMG, the second respondent and representatives of Mitsubishi whereby Mitsubishi agreed to make sponsorship payments in a sum of $1,000,000.00 over two years. Further it was said that at the same meeting VMG agreed with Easts to reduce its commission to 20% in respect of the sponsorship payments to be made by Mitsubishi. It was said that the terms of the agreement between Easts and Mitsubishi were set out in an unexecuted agreement prepared on 23 July 1992. The Board of Easts did not resolve to enter an agreement with Mitsubishi or ratify any agreement purportedly made on its behalf. VMG has not pleaded that the second respondent had the authority to bind Easts in the discussions with Mitsubishi.

5. On 5 August 1992 Easts advised VMG that it wished to terminate the marketing agreement pursuant to clause 11 thereof which provided that:
   

"11. It is an express term of this agreement that Easts shall at any time be entitled to terminate this agreement on seven (7) days notice to VMG in the event that Easts are of the opinion that the performance of VMG is unsatisfactory. In determining the performance of VMG, Easts shall, inter alia, take into account profitability, marketing, new business created and public perception."

1. VMG's claim for interlocutory orders was based upon the claim that it had earned a sum of $200,000.00 under the marketing agreement before the agreement was terminated or, alternatively, upon a claim for damages for the loss of the opportunity to earn commission pursuant to the marketing agreement by virtue of the breach of an implied term that Easts would not act to prejudice the formation of a sponsorship agreement with a sponsor.

2. Each of those issues is yet to be pleaded appropriately.

3. Whilst no defence has yet been filed, counsel for the respondents indicated that the respondents vigorously contested the allegations pleaded.

4. The injunction sought is aimed at preventing Easts from making payments to players and non-playing staff. Easts employs and retains on contracts 64 players and 27 non-playing staff. Payments to the players are contracted to be made twice yearly. The first payment was made in July 1992 and the second payment is due in October 1992. The total payments due to players on 30 October 1992 is $789,372.00. Payments to be made to non-playing staff total $137,000.00.

5. The major source of income for Easts is a grant from Eastern Suburbs League Club Limited ("the League Club") which carries on business as a licensed club and has common directors with Easts. Additional funds are obtained from the New South Wales Rugby League, gate receipts and sponsorship.

6. VMG fears that if Easts are not restrained from applying funds towards the payment of the outstanding salaries of players and non-playing staff then no funds will be available to meet a judgment in its favour.

7. The appropriate approach to the issue of a mareva injunction has been set forth by the High Court in Jackson v. Sterling Industries Ltd (1987) 162 CLR 612. In that case Deane J (with whom Mason CJ agreed) stated at page 623:
   

"As a general proposition, it should now be accepted in this country that "a mareva injunction can be granted...if the circumstances are such that there is a danger of (the defendants) absconding, or a danger of the assets being removed out of the jurisdiction or disposed of within the jurisdiction or otherwise dealt with so that there is a danger that the plaintiff, if he gets judgment, will not be able to get it satisfied": per Lord Denning MR Rahman (Prince Abdul) v. Abu-Taha (1980) 1 WLR 1268 at p 1273 quoted with approval by Street CJ in Ballabil Holdings (1985) 1 NSWLR. 155 at p 160."

1. His Honour further noted at page (623) that the mareva type injunction should "now be accepted as an established part of the armoury of a court of law and equity to prevent the abuse and frustration of its process in relation to matters coming within its jurisdiction".

2. Similarly Wilson and Dawson JJ, in their joint judgment (at 617), noted that the purpose of the mareva injunction is to prevent the abuse of the process of the court by the frustration of its remedies. Their Honours stated at pages 617-618:
   

"Its use must be necessary to prevent the abuse of the process of the Court. As Ackner LJ pointed out in A.J. Bekhor and Co. Ltd. v. Bilton

(1981) QB 923, at p 941-942 the mareva injunction represents a limited exception to the general rule that a plaintiff must obtain his judgment and then enforce it. He cannot beforehand prevent the defendant from disposing of his assets merely because he fears that there will be nothing against which to enforce his judgment nor can he be given a secure position against other creditors. The remedy is not to be used to circumvent the insolvency laws."

1. It has been held that, in addition to any other considerations that may be relevant in the circumstances of a particular case, as a general rule an applicant will need to establish, first, a prima facie cause of action against the defendant and secondly that there is some intentional purpose on the part of a respondent to so organise its assets or finances that the end result of any proceeding against it is likely to be one in which a successful applicant will be left lamenting thereby bringing the proceedings of the Court and the process of litigation generally into disrepute. (See Paterson v. BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319).

2. In making a determination the Court will assess the balance of convenience to assist it in making an appropriate exercise of its discretion. (See Riley McKay Pty Ltd v. McKay (1982) 1 NSWLR 264 at 276).

3. There is nothing made out in the present case that would indicate there is any purpose or intention on the part of Easts to put the fruitful execution of a judgment beyond the reach of VMG. The highest it can be put is that there is some apprehension on the part of VMG that if it succeeded in its claim Easts would be unable to meet any judgment entered against it due to the disbursement of its funds on salary payments to players and non-playing staff and the Leagues Club not being disposed to grant funds to Easts in order that the judgment debt be satisfied.

4. There is nothing set out in the material before the Court to support such an apprehension and certainly nothing that meets the standard required to show that there is a prospect that Easts has embarked upon a course of frustration or abuse of the Court's process. I consider it is also necessary to look at the nature and strength of VMG's claim to see whether that may disclose a purpose in the respondents' action that might otherwise remain latent.

5. The essence of this reasoning is contained in the following passage by Burt CJ in Perth Mint v. Mickelberg (No. 2) (1985) WAR 117 at 119 where his Honour said:
   

"if some basis in fact is made for the prognosis that unless restrained the defendant will, prior to judgment, dissipate his assets so as to leave and with the intention of leaving nothing to satisfy the judgment, if obtained, the Court must then form a judgment as to the strength of the plaintiffs case. That obviously cannot be anything in the nature of a final judgment. It can only be an informed prognosis based on the material brought before the judge. Some of the cases speak of the necessity for the plaintiff to satisfy the judge that he has a "prima facie" case, others speak of a "good arguable case" and others that are "sufficiently strong case to justify the grant of the interlocutory remedy" be made out. That was the way in which the requirement was expressed by the court in Riley McKay Pty Ltd v. McKay ((1982) 1 NSWLR 264 at 277) and it is in my respectful opinion the most helpful way in which to express it because, as I have said, it seems to me that the sufficiency of the strength of the plaintiffs case will always fall to be judged in the context of the risk that the defendant will dissipate his assets with the intention of placing them beyond the reach of the plaintiff. As has been said, those two considerations must be judged in combination."

1. In other words, if an applicant has a strong case that may motivate a respondent to order its affairs to frustrate the applicant's expectations. Similarly, if a prima facie case made out against a respondent is one involving dishonesty, a Court may infer more readily that the respondent is engaged in conduct aimed at dissipating its assets.

2. In this matter I see nothing in the nature of the case sought to be made that indicates that it is of such strength that Easts may intend to act in a way that is not yet disclosed in the material before the Court. At this time the claims in contract lack supporting material to show prima facie either that Easts and Mitsubishi had become bound to a sponsorship agreement or that the conduct of Easts was likely to be in breach in any implied term of the marketing agreement.

3. In any event, had the applicant been able to satisfy the foregoing requirements, the balance of convenience overwhelmingly dictated that there be no order in the terms sought. Such an interference with the affairs of Easts would have been quite disproportionate to the real risk faced by VMG.

4. The appropriate order is that the application for interlocutory relief be dismissed and that VMG pay Easts' costs in any event.