Wireline Wholesale v Jordan Infinity Group Pty Ltd

[2017] VCC 846

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION
GENERAL LIST

Revised
Not Restricted
Suitable for Publication

Case No. CI-17-01775

ACN 155 975 063 Pty Ltd t/as Wireline Wholesale	Plaintiff
v
Jodan Infinity Group Pty Ltd t/as Infinity Broadband	Defendant

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JUDGE:	His Honour Judge Woodward
WHERE HELD:	Melbourne
DATE OF HEARING:	26 June 2017
DATE OF RULING:	26 June 2017
CASE MAY BE CITED AS:	Wireline Wholesale v Jordan Infinity Group Pty Ltd
MEDIUM NEUTRAL CITATION:	[2017] VCC 846

REASONS FOR RULING
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Subject:  PRACTICE AND PROCEDURE – Freezing order
Legislation Cited:     County Court Civil Procedure Rules 2008 (Vic)
Cases Cited:            KQ International Trading Pty Ltd v Yang [2012] VSC 415

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J Leung	Brixton Legal
For the Defendant	Mr P Caillard	Mornington Legal

HIS HONOUR:

1. The plaintiff (“Wireline”) is a wholesale supplier of telecommunication services. The defendant (“Infinity”) purchases telecommunication services from wholesale suppliers and on-sells those services (both data and voice services) to retail customers. By this proceeding, Wireline claims sums alleged to be owing by Infinity pursuant to a Master Supply Agreement executed by the parties on 24 November 2014 (“MSA”), which is exhibit LBW-2 the affidavit of Mr Widdowson referred to below. In its defence, Infinity alleges numerous breaches of the MSA by Wireline and seeks to set off losses alleged to have been caused by those breaches against Wireline’s claim.
2. By a summons dated 21 May 2017, Wireline has applied for a freezing order pursuant to rule 37A.02 of the County Court Civil Procedure Rules 2008 against Infinity. Wireline’s application is supported by an affidavit of its director Mr Widdowson dated 19 May 2017. The application is opposed by Infinity. Infinity relies on the affidavit of its manager Mr Harris, sworn on 22 June 2017. It is clear from the affidavit material filed on behalf of both parties that the claims in the proceeding are substantially in dispute. In particular, there are allegations and counter allegations concerning the extent of compliance by each party with the terms of the MSA.
3. It is very difficult on the material filed to date to form even a tentative view about either party’s prospects in the proceeding. More relevantly for present purposes, while I accept the submission by counsel on behalf of Wireline that it appears that Wireline has a good arguable case for at least that part of its claim in respect of the allegedly unpaid invoices, I am not able to reach a satisfactory conclusion as to the total value of that claim, after taking into account the effect of the set-offs and other claims by Infinity. Counsel for Wireline submitted that the net amount claimed by Wireline for unpaid invoices after taking into account reductions claimed by Infinity is approximately $34,000. However, I am not satisfied that this analysis adequately accounts for all the offsetting claims that Infinity maintains.
4. On the other hand, it does not appear to be in dispute that, as part of the MSA, Infinity agreed to grant to Wireline security over “the end-user customer contracts for all services that You purchase from Us” (page 16 of the MSA).  The only evidence of the number of end user customer contracts for services purchased by Infinity from Wireline still in existence appears at paragraph 78 of Mr Harris’s affidavit on behalf of Infinity. Mr Harris there deposes, in effect, that there are a total of 71 contracts currently operated by Infinity which had formerly been wholesaled by Wireline.  Based on Mr Widdowson’s evidence that, in his (Mr Widdowson’s) experience, each retail contract is worth $100, Mr Harris has deposed that the total value of the 71 contracts would be $7100 (paragraph 83 of Mr Harris’s affidavit).
5. As the Court’s practice note PNCI 1-2007 and the numerous authorities on which it is based make clear, a freezing order is an extraordinary interim remedy which should not be granted lightly. Moreover it is not a means of providing security for a plaintiff’s claim.  On the other hand, the jurisdiction to grant an order is invoked where there is a risk that a defendant will so deal with his assets that he will stultify and render ineffective any judgment given by the court in the plaintiff’s proceeding, and thus impair the jurisdiction of the court and render it impotent to properly and effectively administer justice.
6. In KQ International Trading Pty Ltd v Yang [2012] VSC 415 [5], Kaye J stated as follows:

The principles governing the grant of a freezing order are well established, and need only be referred to briefly. In order to be entitled to a freezing order, the plaintiff must, first, demonstrate that it has a realistic prospect of success, or a good arguable case, at trial. Secondly, the plaintiff must establish that the refusal of the injunction would involve a real risk that any judgment or award of damages in favour of it would remain unsatisfied. Thirdly, the plaintiff must establish that the balance of convenience lies in favour of the grant of such an injunction. 

7. In this case, Mr Harris on behalf of Infinity has frankly admitted in his affidavit that, at the time this proceeding was commenced, Infinity was preparing to sell its business and, while any sale process is in its very early stages, that remains its intention (Harris Affidavit at [80] to [81]). It is also apparent from Mr Harris’s affidavit that Infinity’s only asset of any substance is its business. Thus, if Infinity were to achieve a sale of its business while the trial and judgment in the proceeding were pending, there is a real risk that Infinity’s only asset of substance will be converted to cash which (absent an order of this Court) could thereafter be dissipated and effectively untraceable.
8. In those circumstances, I am satisfied that the Court’s jurisdiction to make a freezing order has been properly invoked and that I should make an order that balances the need to provide limited protection to Wireline, while ensuring that Infinity’s capacity to carry on its business and to continue negotiations for the sale of that business, is not unduly constrained. In my view, that balance is best struck by making a freezing order that, for the time being, is limited in amount to the value of the contracts over which it claims a security interest (namely, $7,100) and ensures that it has reasonable notice of any impending sale by Infinity of its business, so that it can make any further application in respect of the proceeds of any such sale as it may be advised.
9. I also repeat the observation made by me to counsel for the parties in the course of the hearing, that the amounts now in dispute in this proceeding appear relatively modest and it is likely that they will soon be significantly exceeded by the costs incurred in completing the interlocutory stages of the proceeding. Accordingly, and despite the fact that the parties have already made some attempt at a resolution of the proceeding, I would encourage the parties to propose orders for the remaining steps in the proceeding that will facilitate a further mediation at the earliest opportunity.  I will pronounce orders in relation to the freezing order application and then hear counsel on what pre-trial interlocutory orders should be made.

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Certificate

I certify that these 4 pages are a true copy of the reasons for decision of His Honour Judge Woodward delivered on 26 June 2017.

Dated:       26 June 2017

Simone Karmis

Associate to His Honour Judge Woodward