Legler v Formannoij
[2022] NZHC 660
•1 April 2022
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE
CIV-2020-488-32
[2022] NZHC 660
IN THE MATTER of the Kaahu Trust UNDER
Part 18 of the High Court Rules 2016
BETWEEN
LI KARI LEGLER, LAILA SUN LEGLER KLAUI and KEN LEGLER
Plaintiffs
AND
MARIA GUILLAUMINA CORNELIA JOHANNA FORMANNOIJ
First Defendant
KAAHU TRUSTEE LIMITED
Second Defendant
Hearing: 14 February 2022 Appearances:
J D McBride and R C Wood for the applicants/defendants
D R Bigio QC and J W H Little for the respondents/plaintiffs
Judgment:
1 April 2022
JUDGMENT OF HARLAND J
(Application by defendants for enforcement of an interlocutory order under r 7.48)
This judgment was delivered by me on 1 April 2022, at 1:00 pm Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar Date……………………………..
Counsel/Solicitors:
TGT Legal, Auckland Martelli McKegg, Auckland D R Bigio QC, Auckland
J D McBride, Auckland J W H Little, Auckland R C Woods, Auckland
LEGLER v FORMANNOIJ [2022] NZHC 660 [1 April 2022]
Introduction
[1] The importance of an undertaking as to damages when an interlocutory injunction is granted is recognised by the requirement in r 7.54, High Court Rules 2016 (HCR). This case exemplifies why this is so. I am asked to determine whether such an undertaking can be implied from the time the interlocutory application in this case was granted, or whether it only applies from the time the trial Judge ordered it in the context of an application for a stay of his substantive judgment, pending an appeal. That substantive judgment dismissed the claim by the party who had benefitted from the injunction.
[2] The application, notice of opposition and subtleties of the arguments made in respect of them before me are best understood against their background. For this reason, I set out the details of the application and opposition after the factual background, which I now address.
Background
The parties and their relationships1
[3] Ricco Legler and Maria Formannoij met and began their relationship in 1989. They moved to New Zealand in 1991 and married in 2009.
[4] In 2017, Ricco Legler died unexpectedly. He was survived by Ms Formannoij and his three adult children from an earlier marriage, Li, Laila and Ken Legler (collectively referred to as “the children”).
[5] Ricco Legler’s father was a successful Italian businessman. He died in 2002, leaving Ricco a significant inheritance. This led to the creation of two family trusts: the Horowai Family Trust and the Kaahu Trust.
1 Most of the following has been taken from the judgment of Downs J of 2 June 2021, Legler v Formannoij [2021] NZHC 1271, (2021) 5 NZTR 31-006 at [2] – [12].
[6] The Horowai Trust was established on 2 March 2007. Its sole trustee is Horowai Trustee Co Ltd (Horowai Trustee). The directors of Horowai Trustee were formerly Ricco and Li, but now are Li and Laila Legler.
[7] The Kaahu Trust was established on 9 June 2008. Its trustees were Ricco, Ms Formannoij, and BOI Taxation Trustee Co No.2 Ltd (BOI). The Kaahu Trust’s sole trustee is now Kaahu Trustee Ltd (KTL). As Downs J noted, the appointment of KTL is the heart of this case.
[8] The discretionary beneficiaries of each trust were the same: Ricco, Ms Formannoij, the children, and any trust which included them as a beneficiary. Ricco and his children were the final beneficiaries of the Horowai Trust; Ricco and Ms Formannoij were the final beneficiaries of the Kaahu Trust.
[9] On 30 May 2014, the Horowai Trust’s trustee removed Ricco (and by proxy, Ms Formannoij) as a final beneficiary. In his judgment, Downs J noted that Ricco told Ms Formannoij he wanted Kaahu Trust to primarily benefit them, and Horowai Trust to primarily benefit the children.2
[10] A series of transactions ending in 2016 endowed each trust with substantial assets. The Horowai Trust’s assets include a 214-hectare block of forested land (with a house) at Purerua Road, Kerikeri, an adjacent 21-hectare block of farmland, and a fund of at least $3 million. The Kaahu Trust’s assets include “Mokomoko”, a home in Russell built by Ricco and Ms Formannoij, worth several million dollars and a fund of approximately $5 million.
[11] On 16 November 2017, Ricco died in a gliding accident. Ricco left his shares in Horowai Trustee to Li, and the balance of his estate to the Kaahu Trust. This included “Jimmy”, a large catamaran built by Ricco for more than $1 million.
2 At [10].
The substantive proceedings
[12] Ricco’s death left Ms Formannoij and BOI as trustees of the Kaahu Trust, which I will refer to from now on as “the Trust”. However, in November 2019, when the independent trustee resigned, Ms Formannoij found herself as sole trustee of the Trust. As sole trustee of the Trust, she could not exercise any powers other than the power to appoint more trustees. After receiving legal advice, Ms Formannoij incorporated KTL as an additional trustee and then resigned as a trustee of the Trust. That left KTL, in which she is the sole director, as corporate trustee. KTL was able to exercise all the powers contained in the Trust. At some point, all beneficiaries, apart from Ms Formannoij, were removed as beneficiaries of the Trust by KTL and the Trust’s property was transferred to Ms Formannoij.
[13] On 11 June 2020, the children issued proceedings claiming that Ms Formannoij’s appointment of KTL was a fraud on a power and void. They sought the appointment of an independent trustee. I refer to “the children” as “the plaintiffs” from now on in this judgment.
[14] The following chronology of events is summarised in the joint chronology prepared by counsel after the hearing before me.3
Brewer J’s 8 July 2020 injunction
[15] On 7 July 2020, the plaintiffs applied for an interlocutory injunction against the defendants preventing them from selling Mokomoko or otherwise disposing of the Trust’s property. The application was made without notice and served on a Pickwick basis with the application and documents being forwarded to the defendants’ then solicitors, who later that day filed a memorandum opposing the relief sought.
[16] Despite the mandatory requirements of r 7.54 HCR, the plaintiffs did not provide an undertaking as to damages, neither did they alert the Court to the fact that there was no such undertaking. This was a serious error because r 7.54 HCR provides:
7.54 Undertaking as to damages
3 Joint chronology dated 23 February 2022.
(1)An applicant for an interlocutory injunction under rule 7.53 must file a signed undertaking that the applicant will comply with any order for the payment of damages to compensate the other party for any damage sustained through the injunction.
(2)The undertaking must be referred to in the order granting the interlocutory injunction and is part of it.
[17] The seriousness of the error was compounded by the fact that the without notice application was certified.4
[18] The application for interlocutory injunction came before Brewer J. He granted it on 8 July 2020 on the papers, his Minute of the same date recording the basis for his decision. He accepted that the plaintiffs had established a prima facie basis for the relief they sought. He said:
[12] The Court is always concerned, when malfeasance in relation to a Trust such as fraud on a power is alleged, to secure the assets of the Trust pending resolution of the allegation.
[13] The Court is also concerned not to unnecessarily stifle the proper operation of a Trust, and in this case it is said that the first defendant depends on her income from the Trust.
[14] I have decided to grant the without notice application for interim relief subject to stipulations which will enable the defendant to argue for the extinguishment or modification of the interim relief in a timely way.
[15] I make an order directing the first defendant and the second defendant not to exercise any dispositive powers or otherwise dispose of property of the Kaahu Trust pending further order of the Court.
[16] I direct the registry to list the matter for call at 9:00 am on 16 July 2020. The purpose of the call will be to identify any challenge to the continuation of the interim order, or any modification to the interim order, which might be necessary in the interests of the defendants, and to timetable the resolution of any such challenge or application for modifications.
[17] I give a preliminary indication that I would likely modify the interim order to provide for the continuation of reasonable support for the first defendant from the assets of the Trust. Agreement of counsel given his indication would be helpful.
[19] Directions were made for counsel to file a memorandum prior to the listing of the matter back in Court on 16 July 2020. I refer to this injunction in my judgment as
4 High Court Rules 2016, rr 7.19 and 7.23; and Form G 32
“the Brewer J injunction” even though it was subsequently varied by consent by other Judges.
[20] By a joint memorandum, dated 15 July 2020, counsel asked for the first call mention date to be vacated, appearances excused, and the following directions by consent:
(a) The terms of the interim injunction be varied to allow for $50,000 quarterly drawings to continue for the first defendant’s maintenance and support (per Mr Bigio’s memorandum).
(b) The time for filing statements of defence for the defendants is extended to 5.00 pm Friday 17 July.
(c) Leave is open for the defendants to apply to discharge or vary the terms of the injunction order.
(d)Normal case management to proceed after 17 July.
[21] The joint memorandum came before Woolford J, who made the orders and directions sought by consent.
[22] On 3 December 2020, the defendants asked the plaintiffs to agree to vary the injunction to allow the Mokomoko property to be sold to enable Ms Formannoij to buy a property elsewhere. It was proposed that this would be on the condition that the assets be retained within the Trust. There was no reply to this letter and the request was repeated in a further letter from the defendants’ solicitors to the plaintiffs’ solicitors on 18 February 2021.
[23] On 23 February 2021, the plaintiffs indicated via their solicitors that they did not consent to a variation that would permit the sale of Mokomoko, noting that it was designed and built by their father and funded from a legacy of the Legler family assets. As such, their view was that it should be retained in the Trust for future generations. They expressed the view that provision could be made from the Trust’s other resources to achieve the outcome Ms Formannoij sought, however, they indicated that they would like to discuss the trust assets at a mediation which had been proposed to occur in the near future.
[24] On 3 March 2021, the defendants applied to the Court to vary the terms of the Brewer J injunction to permit the sale of Mokomoko to enable Ms Formannoij to purchase a property at Waiheke.
[25] On 23 March 2021, a mediation was held but it did not resolve the issues outstanding between the parties.5 However, on 9 April 2021, a memorandum seeking orders by consent to vary the Brewer J injunction was filed in Court.
[26] On 13 April 2021, Campbell J granted the orders sought in the joint memorandum of 9 April 2021. The orders repeat verbatim what was sought in the memorandum, as follows:6
1.1The property at 92 Pukematu Lane, Russell, Record of Title 500738 (Mokomoko), owned by the second defendant for the benefit of the first defendant, may be marketed by a real estate agent, following consultation with the plaintiffs by the defendants, and sold by the second defendant, with the proceeds of sale used to purchase a residential property on Waiheke Island, such property to be owned by the second defendant as trustee of the Kaahu Trust for the benefit of the first defendant who may live in that property as her primary residence until agreement of the parties to proceeding CIV 2020-488- 0032 or further order of the Court, provided that the sale of Mokomoko and the purchase of the Waiheke property are supported by valuations prepared by registered valuers confirming that the applicable sale and purchase prices are at fair market value.
1.2The net proceeds of sale of Mokomoko shall be applied to the purchase of the property on Waiheke Island, with any surplus arising from the proceeds of the sale of Mokomoko and the purchase of the new property on Waiheke (less marketing, legal, and conveyancing costs and other costs of sale) to be held in the trust account of the defendants' solicitors, Martelli McKegg on trust for the second defendant as trustee of the Kaahu Trust until agreement of parties to proceeding CIV 2020-488-0032 or further order of the Court.
[27] Thus, although Ms Formannoij had requested a variation of the Brewer J injunction to sell Mokomoko in December 2020, it was not agreed that this could occur until 9 April 2021. However, the parties had agreed in July 2020 that the defendants should be granted leave to apply to the Court to discharge or vary the Brewer J injunction and they did not do so until March 2021.
5 Affidavit of Gregory Ambler at [3].
6 Consent memorandum seeking orders varying interim injunction dated 9 April 2021, at 1.1 and 1.2.
[28] The substantive proceeding was heard by Downs J on 17 to 20 May 2021. In his judgment of 2 June 2021, Downs J dismissed the plaintiffs’ claim, and the Brewer J injunction was discharged.7 The flavour of the litigation was revealed however in paragraph [68] of the judgment where Downs J said:
[68] This leaves two points. Mr Bigio accused Maria of improper litigation tactics by filing a statement of defence that wrongly said the children were still beneficiaries of Kaahu. Mr McBride accused the children of improper litigation tactics by obtaining without notice interim relief on a less than candid basis, and by adducing inaccurate evidence when seeking such relief. These contentions are peripheral. I say no more about them for this reason.
Post-judgment orders
[29] The plaintiffs appealed Downs J’s judgment to the Court of Appeal. Curiously they applied without notice for interim relief pending their appeal under r 12(3)(b) of the Court of Appeal (Civil) Rules 2005 (the CA Civil Rules) for:8
… orders restraining the defendants from exercising any dispositive powers or otherwise disposing of the Kaahu Trust’s property (including by implementing deeds executed in March 2020), subject to the modifications made to the equivalent orders during the High Court proceeding identified in Schedule A, until the final determination of the applicants’ intended appeal to the Court of Appeal …
[30] On 18 June 2021, unsurprisingly Downs J declined to grant without notice relief, but noted that the plaintiffs could seek it on-notice.
[31] The plaintiffs then applied on notice for the same interim relief pending their appeal again relying on r 12(3)(b) of the CA Civil Rules and the defendants filed a notice of opposition to the application on 28 June 2021.
[32]Rule 12(3)(b) and sub-r (4), which is also relevant, provide:
12 Stay of proceedings and execution
…
(3)Pending the determination of an application for leave to appeal or an appeal, the court appealed from or the Court may, on an interlocutory application,—
7 Legler v Formannoij [2021] NZHC 1271 at [69].
8 Plaintiffs’ application for interim relief (ex parte) dated 18 June 2021 at 1(a) and (b).
(a)order a stay of the proceeding in which the decision was given or a stay of the execution of the decision; or
(b)grant any interim relief.
(4)An order or a grant under subclause (3) may—
(a)relate to execution of the whole or part of the decision or to a particular form of execution:
(b)be subject to any conditions that the court appealed from or the Court thinks fit, including conditions relating to security for costs.
…
[33] The relief sought was effectively injunctive relief, which given the wide power to grant any interim relief under r 12(3)(b), is permissible. The rule does not, however, require an undertaking as to damages to be filed but as subs (4) provides, the Court can make any order subject to “any conditions, … it thinks fit.” This would include the power to make an order requiring an undertaking as to damages.
[34] The plaintiffs’ application for interim relief pending appeal and the defendants’ opposition to it came before Downs J on 2 July 2021. He found in favour of the plaintiffs as follows:9
[4] … I am persuaded the balance of convenience favours protection of the children’s position pending appeal, provided (a) Maria may continue to sell MokoMoko; (b) purchase a home on Waiheke Island with the proceeds of sale of MokoMoko; and (c) continue to receive an income from the trust sufficient to meet her needs. In other words, I envisage a return to the position identified in the consent memorandum of 9 April 2021.
[35]Downs J also noted:
[6] This leaves one matter. Maria also opposes relief on the basis without notice, pre-trial relief was obtained by “seriously misleading evidence” on the part of the children. While there is no small measure of hyperbole in this submission, I do harbour reservations about the way in which that relief was obtained. It is not clear it was really brought home to the Judge there are two trusts, one of which is primarily for Maria’s benefit.10 Nor is it clear the children faithfully represented their connection to the property in the Kaahu Trust. These concerns, however, do not vitiate the need for relief pending appeal.
9 Legler v Formannoij HC Whangārei CIV-2020-488-32, 2 July 2021.
10 I [Downs J] do not overlook that relevant correspondence was given to the Judge.
[36] By this time, the property at Mokomoko, although it had been placed on the market for sale by tender, had not sold. Property prices in Waiheke were increasing. At some point, the defendants turned their minds to what they thought had been provided by the plaintiffs by way of an undertaking as to damages when they sought their interlocutory injunction before Brewer J. It became apparent that an undertaking as to damages had not been provided.
[37] On 9 July 2021, the defendants via their solicitor asserted that they had suffered a significant loss arising from the lost opportunity to buy in the Auckland property market in July 2020. They contended that this was because of the Brewer J injunction of 8 July 2020. Despite an undertaking as to damages not having been provided, the defendants expressed the view that such an undertaking was implied. It was also noted:11
…
(f)Kaahu Trustee Limited now intends to call on the cross-undertaking, once it has finalised evidence from valuers as to the extent to which the Auckland property market has appreciated over the last 12 months, and confirmed the losses that have been suffered as a consequence of your clients’ actions. …
[38] On 4 August 2021, the defendants filed an interlocutory application for orders dealing with what they termed “the plaintiffs’ refusal to provide undertakings as to damages”. The orders sought were as follows:
(a)the plaintiffs must comply with any order for the payment of damages to compensate the defendants for any damage sustained through the interim injunction granted by Brewer J on 8 July 2020; and
(b)the plaintiffs must comply with any order for the payment of damages to compensate the defendants for any damage sustained through the interim injunction granted by Downs J on 2 July 2021; and
(c)as to costs.
[39] The application was made in reliance of rr 1.5, 7.54 and 11.11(2)(b) HCR and the inherent jurisdiction of the Court.
11 Martelli McKegg Lawyers letter to TGT Legal dated 9 July 2021.
[40] As can be seen, orders were sought in relation to both Brewer J’s and Downs J’s injunctions.
[41]The plaintiffs opposed the application.
[42] The application came before Downs J on 13 October 2021. On 18 October 2021, he issued his judgment.12 In relation to what was now very evident, namely, that no undertaking to pay damages had been provided at the time the Brewer J injunction was made, Downs J said the following:
[6] The children did not provide an undertaking to pay damages, nor inform Brewer J they were not doing so. It is unlikely these omissions were sinister, for, the children served the papers on a Pickwick basis (making them readily discoverable). But, the omissions were serious. To compound matters, the children certified the application contained “all relevant information” when, plainly, it did not. Again, the children did not inform Brewer J they were not providing an undertaking. Nor did the children seek exemption from r 7.54 of the High Court Rules 2016.13 This rule makes an undertaking mandatory when someone seeks an interim injunction.
[43] After the hearing, counsel for the plaintiffs filed a memorandum which was referred to in Downs J’s judgment at paragraph [15]. It offered a form of undertaking, as follows:
“We will comply with any order for the payment of damages to compensate the trustee of the Kaahu Trust (either the first or second defendant, as the case may be), in its or her capacity as such, for any damage sustained to the trust property from the date of this undertaking through the order granted by the Court on 2 July 2021.”
[44] In relation to this proposed undertaking, Downs J held that it was not sufficiently broad. He said:
[16] I am not persuaded the proposed undertaking is sufficiently broad. Courts cannot foresee all ends, hence the breadth of the language in r 7.54, namely that the applicant “will comply with any order for the payment of damages to compensate the other party for any damage sustained through the injunction”. There is no reason why the undertaking should not use this language and good reason why it should. After all, the children are now doing only what they ought to have done before Brewer J in the middle of last year.
12 Legler v Formannoij [2021] NZHC 2759.
13 [Downs J noted] Caselaw is divided on whether an exemption is possible; see A C Beck and others
McGechan on Procedure (looseleaf ed. Thomson Reuters, Wellington) at [HR7.54.01].
[17] For completeness, Mr Bigio expressed concern at the hearing an undertaking could be “weaponised” given intra-familial acrimony. The answer to this submission is twofold. First, an undertaking to pay damages is the orthodox, presumptive “price” of an interim injunction. Second, Kaahu now exists primarily for Maria’s benefit. The interim injunction prevents the trust disposing of property to benefit her.14 An undertaking to pay damages is, therefore, proper.
Result
[18] I recall the stay and interim relief orders I made 2 July 2021. I re-issue them conditional on the children providing an undertaking to pay damages in accordance with r 7.54 on or before 5 pm, Thursday 21 October 2021.
(bold emphasis added)
[45] On 21 October 2021, the plaintiffs filed an undertaking which, they submit, “uses the language” of r 7.54 and complies with Downs J’s orders in paragraph [18] above:
“[The plaintiffs] will comply with any order for the payment of damages to compensate the other parties for any damage sustained through the injunction
granted by the Honourable Justice Downs on 18 October 2021”.
[46] This undertaking has resulted in the application now before the Court which I must now determine.15
The application and notice of opposition
[47] The defendants apply under rr 7.48, 7.52, 7.53, 7.54 HCR and on the inherent jurisdiction of the Court for the following orders:16
(a)the plaintiffs must comply with the orders made in this proceeding by Downs J on 18 October 2021 and provide a written undertaking as to damages in accordance with r 7.54, being an undertaking to compensate the defendants for any damage sustained through the injunction granted by the Honourable Justice Brewer on 8 July 2020, within 3 working days; or
(b)alternatively, the plaintiffs must comply with any order for the payment of damages to compensate the defendants for any damage sustained through the interim injunction granted by Brewer J on 8 July 2020;
(c)as to costs on an indemnity basis, and
14 I [Downs J] do not overlook Maria may sell the home “Mokomoko” by dint of an agreed variation.
15 Legler v Formannoij HC Whangārei CIV-2020-488-32, 3 December 2021.
16 Amended interlocutory application by the defendants dated 4 February 2022.
(d)otherwise as to such relief as the Court thinks just.
[48] Mr McBride submitted that the application has been amended to make it plain that the defendants seek either:
(a)an undertaking must be provided in the form required by Downs J, being a r 7.54 undertaking to compensate the defendants for any damage sustained through the injunction, namely, to be clear, the injunction granted by Brewer J on 8 June 2020 and “restored” by Downs J on 18 October, with no provisos or qualifications; or
(b)if the plaintiffs maintain their refusal to this course, and the Court agrees that they can do so, the defendants repeat their 4 August application and seek orders under 1(a) (of that application) (which was never resolved) that the plaintiffs must comply with any order for the payment of damages to compensate the defendants for any damage sustained through the interim injunctions granted by Brewer J on 8 July 2020. This is the argument that an undertaking as to damages can be implied into the Brewer J injunction.
[49] The plaintiffs oppose the application. Although the grounds for the plaintiffs’ opposition are set out fully in the notice of opposition, essentially, they boil down to two points, the specifics of which will be traversed in this judgment. The plaintiffs say that:
(a)They have complied with the Court’s judgments as properly interpreted;
(b)The defendants’ application is a second application for the same relief which is prevented by r 7.52 HCR because leave has not or should not be granted;
(c)If leave is granted, the Court has no jurisdiction to modify a previous interim order, which the defendants impliedly consented to and which is now spent; and
(d)In substance, the order was not an ordinary interim injunction but a direction to a trustee not to exercise its powers over trust property while its appointment was in question.
Did the plaintiffs provide an undertaking as ordered by Downs J on 18 October 2021?
[50] The dispute centres on the meaning of paragraph [18] of Downs J’s judgment and the words “in accordance with r 7.54”.
[51] The defendants submit that by referring to r 7.54, Downs J must have been referring to the Brewer J injunction because the only application for an interlocutory injunction under r 7.53 to which r 7.54 could relate was the application before Brewer J. They submit that Downs J “restored” this injunction on 18 October 2021. The defendants further submit that the two injunctions, the Brewer J and Downs J injunctions, are plainly linked and Downs J’s observations in paragraphs [16] and [17] of his judgment support this view.
[52] The plaintiffs submit that there is only one injunction to which the undertaking can refer, namely, Downs J’s judgment of 18 October 2021 because it would be “extraordinary” and “unprecedented” if an applicant for one injunction could provide an undertaking to pay damages sustained as a result of a different injunction. In response to the argument that the reference to r 7.54 can only relate to the application before Brewer J, the plaintiffs submit that the reference to r 7.54 was to the “language” in r 7.54. Mr Bigio submitted that this is clear from paragraph [16] of the judgment where Downs J refers to the “breadth of the language in r 7.54” being more appropriate than the narrower language proposed by the plaintiffs.
[53] The starting point must be the judgment of Downs J of 2 June 2021. After finding for the defendants, Downs J discharged “the interim relief order”, which can only have been a referral to the Brewer J injunction. There is nothing extraordinary about this. The application before Brewer J was for an interlocutory injunction pending the outcome of the substantive proceeding. The substantive proceeding having been determined by Downs J, Brewer J’s “interim orders” were therefore discharged. They were no longer in existence.
[54] The plaintiffs then applied for relief to restrain the defendants from disposing of the Trust’s property pending their appeal to the Court of Appeal. Although the CA Civil Rules do not require an undertaking as to damages to be provided, there is no suggestion that anyone (including counsel) was aware (at this point) that an undertaking as to damages had not been provided at the time the plaintiffs sought an interlocutory injunction from Brewer J.
[55] The Minute of Downs J on 2 July 2021 recording his decision to grant interim injunctive relief pending the appeal effectively adopted a continuation of the approach taken in the Brewer J injunction. He referenced this by saying “… I envisage a return to the position identified in the consent memorandum of 9 April 2021.” But importantly, this was a new order made following a new application under different rules.
[56] Following discovery of the fact that an undertaking as to damages had not been provided, and following the defendants applying to the Court for that to occur, Downs J, on 18 October 2021, recalled “the stay and interim relief orders” he made on 2 July 2021, but reissued “them conditional on the children providing an undertaking to pay damages in accordance with r 7.54 on or before 5 pm, Thursday, 21 October 2021.”17
[57] Significantly, in my view, there is no suggestion anywhere that Downs J was recalling the order he made in his judgment of 2 June 2021 discharging the Brewer J injunction. Further, Downs J’s Minute of 2 July 2021 was dealing with the plaintiffs’ application for interim relief, which had been filed relying on the CA Civil Rules. The recall of his judgment of 2 July 2021 on 18 October 2021 was within this context, although it appears from Downs J’s judgment that the offer for the undertaking which followed from the plaintiffs was in response to an indication that he was inclined to recall the orders he made on 2 July 2021 and require an undertaking.18 Addressing the draft form of the undertaking provided (outlined in paragraph [43] above), which was limited to “from the date of this undertaking through the order granted by the Court on 2 July 2021”, his Honour determined that the only issue for him to adjudicate was
17 At [18].
18 At [13].
how the undertaking should be framed. In this regard it must be remembered that as the CA Civil Rules do not require an undertaking as to damages, there is no text to support how such an undertaking should be framed.
[58] In determining that the proposed undertaking was not sufficiently broad, Downs J then referred to the breadth of the language in r 7.54 effectively quoting the provisions of sub-r (1). The difference between the undertaking proposed and r 7.54(1) as quoted related to “any damage sustained through the injunction” (the wording in r 7.54) and “any damages sustained to the Trust property from the date of this undertaking through the order granted by the Court on 2 July 2021” (that proposed by the plaintiffs). As can be seen, the undertaking subsequently provided referred exactly to the wording in r 7.54 but added “granted by the Honourable Justice Downs on 18 October 2021”.
[59] I conclude that the undertaking provided by the plaintiffs did comply with Downs J’s judgment as the injunction by Brewer J was a different and discharged injunction.
[60]There is, however, a matter that I need to address quite firmly.
[61] The plaintiffs’ position is that everybody had overlooked the presence of the undertaking as to the damages at the time the interlocutory injunction was made by Brewer J. Despite claiming that the error was an innocent one from the plaintiffs’ perspective, Mr Bigio submitted that the error did not cause any prejudice to the defendants given that their lawyers must have known that no undertaking had been filed (because they were served with everything), and with that knowledge, elected not to challenge the continuation of the order on the basis that no undertaking had been given. Further, Mr Bigio submitted that had the defendants contended that the injunction should not continue without an undertaking, the plaintiffs would have argued that no undertaking was appropriate, which is what they did in respect of the application before Downs J on 18 October 2021.19
19 The plaintiffs’ synopsis dated 7 October 2021 at [11] – [15], Common Bundle pages 135 – 136.
[62] These submissions are double-edged and are made with the benefit of hindsight. On the one hand, the plaintiffs contend that everyone had overlooked the undertaking, but on the other hand, seek to attribute responsibility to the defendants for failing to identify or do anything about the lack of it. These submissions are at odds with the inarguable requirement that it is the responsibility of an applicant for an interlocutory injunction to comply with r 7.54 and if a departure from an undertaking as to damages is sought, then it is the applicant’s responsibility (not the respondent’s) to raise this with the judge, particularly if an application is made without notice (even if it has been served on a Pickwick basis) with certification that it complies with the rules.
[63] I have mentioned these matters because they have been raised in argument, but because of my conclusion, they do not form part of the substantive reasons for finding in favour of the plaintiffs’ interpretation of the undertaking required. They are, however, in my view important matters to address to lay to rest any suggestion that the plaintiffs have the moral or legal high ground in respect of the failure to provide an undertaking as to damages to support their application for an interlocutory injunction when it was heard before Brewer J.
Should the Court make order (b) as sought by the defendants?
[64] The defendants seek, in the alternative, an order requiring the plaintiffs to comply with any order for the payment of damages to compensate the defendants for any damages sustained through the interim injunction granted by Brewer J on 8 July 2020 as per their original application of 4 August 2021. The basis for this argument is that an undertaking can be implied into Brewer J’s injunction. The defendants argue that Downs J’s judgment did not specifically address this matter and I am therefore invited to address it now.
[65] The plaintiffs submit that Downs J implicitly dismissed the application by not granting it. They submit that if the defendants were dissatisfied with that result, their recourse was to seek leave to appeal it, rather than to ask the Court to now determine it effectively as a new or second application. Mr Bigio submitted that leave is required to do so under r 7.52 and this has not and should not be granted.
[66] Even though there is ability for leave to be granted to bring a second interlocutory application, the jurisdictional threshold for that is that the party seeking it has failed in respect of its first application.20 In this case, the defendants do not rely on the application “failing”, they contend Downs J did not determine this part of their application. It does not appear that this argument was addressed by Downs J – at least it is not clear from his judgment. I therefore conclude that r 7.52 does not apply because this part of the application did not fail. If the argument is that the Court before whom the argument was presented did not deal with it, then in my view, the appropriate procedure is for an application for recall under r 11.9 HCR to be made or for the judgment to be appealed.
[67] But there is a further reason why, in my view, it is not appropriate to engage with this part of the defendants’ application at this time. Effectively, what is being sought is for the Court to determine retrospectively an undertaking as to damages by implying one into the Brewer J injunction. In my view, this is an argument that will only be necessary if it becomes clear that the defendants have in fact suffered any particular loss as a result of the grant of Brewer J injunction and bring proceedings to recover that loss. In my view, this argument is best dealt with in a context of any subsequent proceedings dealing with that issue where the basis upon which the loss can be recovered from the plaintiffs can be properly argued.
Result
[68]The application by the defendants is dismissed.
[69] If costs cannot be agreed, the plaintiffs are to file and serve a memorandum (not exceeding three pages) in relation to costs within 14 days of the date of receipt of this judgment. The defendants are to file any memorandum in reply (not exceeding three pages) no later than 14 days thereafter. Costs will be dealt with on the papers
20 High Court Rules, r 7.52(1).
unless the Court considers upon reading the memoranda that a further hearing is required.
Harland J
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