Injunctions - Interlocutory injunctions - Application for injunction to restrain defendant from dismantling and dealing with a boat - Plaintiffs claim an equitable interest in the boat - Turns on own facts

Shipping Registration Act 1981 (Cth)

Advertising Department Pty Ltd v Ship MV Port Phillip [2004] FCA 1762; (2004) 141 FCR 251

Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57

General Credits (Finance) Pty Ltd v Registrar of Ships (1982) 61 FLR 329

Hancock Family Memorial Foundation Ltd v Porteous [1999] WASC 55; (1999) 151 FLR 191

Holroyd v Marshall [1862] EngR 963; (1862) 10 HL Cas 191

Kalls Enterprises Pty Ltd (in liq) v Baloglow [2007] NSWCA 191

Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; (2003) 217 CLR 315

The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239

Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110

1 The plaintiffs apply for an interlocutory injunction restraining the defendant from dismantling or dealing with a boat registered in the name of the defendant. The plaintiffs claim that the second plaintiff has an equitable interest in the boat under a contract of sale.

2 For the reasons that follow I would decline to grant the interlocutory injunction sought. In summary, that is because of the apparent weakness of the plaintiffs' claim to an equitable interest, and because of the plaintiffs' considerable delay in taking steps to pursue any claim to ownership of the boat.

4 The plaintiffs rely upon four affidavits sworn by the first plaintiff, Mr Barry Horsman. They also rely upon an affidavit of Mr Charles Warner and two affidavits of Mr Darren Zusman.

5 The defendants rely on affidavits of Mr Anthony Ellis sworn 22 May 2009, Mr Terrence Hewitt sworn 22 May 2009 and Mr Christopher Dunnell sworn 25 May 2009 and 29 May 2009. The following summarises much of what emerges from the affidavits. Naturally, it does not involve any final findings of fact.

6 As will appear, the evidence ultimately given by Mr Horsman in his second and subsequent affidavits differs from what was said in his first affidavit.

7 Mr Horsman is the sole shareholder and director of the second plaintiff, Westmont International Ltd, a corporation incorporated in the Bahamas on 4 October 2004. The date of incorporation is material because at least one of the relevant contracts of sale was entered into before October 2004.

8 Westmont Corporation Pty Ltd was deregistered on 15 January 2006. Prior to its deregistration, Mr Horsman was the sole shareholder and director of that company.

9 At the beginning of 2004, Barontrend Pty Ltd was the owner of a 37 metre fishing boat called The Comet (the Vessel). The Vessel has been berthed at the defendant's shipyard since about May 2001. It remains there.

10 Barontrend was registered as the owner of the Vessel on the Australian Register of Ships maintained under the Shipping Registration Act 1981 (Cth). The directors of Barontrend were Mr Charles Warner and Mr Alexander Palatnikov. Mr Palatnikov was the sole shareholder.

11 On 5 April 2004 Mr Horsman signed an offer to purchase the Vessel from Barontrend for $300,000. The purchaser, on whose behalf Mr Horsman signed, was 'Westmont Corporation Int'l'. At that stage, Westmont International Ltd did not exist. Westmont Corporation Pty Ltd was in existence. There was no entity known as 'Westmont Corporation Int'l' associated with Mr Horsman at that time.

12 The offer to purchase dated 5 April 2004 provided that the terms of purchase were by payment of a deposit of $30,000 within seven days of acceptance; payment of the sum of $135,000 within 12 months from the date of acceptance; and payment of a further $135,000 within two years from the date of acceptance.

13 The offer provided that Barontrend acknowledged receipt of the deposit and thereby provided Westmont Corporation Int'l with a general authority to take charge of the Vessel giving immediate and practical effect to the acceptance of the offer. Notwithstanding that provision, no payments were made pursuant to the offer to purchase dated 5 April 2004. In particular, the deposit was not paid.

14 There is a further sale document which bears the date 21 May 2004. The date is typed on the document and also handwritten in the place where Mr Horsman signed it. In Mr Horsman's first affidavit (sworn 18 May 2009) he said that he signed this document on or about 21 May 2004 and that around the same day he also signed a letter that was a loan agreement for $300,000 which had to be paid to Mr Palatnikov.

15 In his second affidavit, sworn 21 May 2009, Mr Horsman says that he believes that the agreement dated 21 May 2004 is incorrectly dated and that the agreement was actually signed in May 2005.

16 I will say more about the evidence respecting the agreement that is dated 21 May 2004 after recounting the events between May 2004 and May 2005.

17 During 2004 and 2005 the Vessel continued to be kept in the pen at the defendant's shipyard. On 31 December 2004 the defendant invoiced 'Westmont Int'l Corporation' the sum of $7,580 in respect of six months' pen fees.

18 On 16 January 2005 Mr Warner and Mr Palatnikov agreed in writing with Mr Horsman to pay outstanding berthage charges in relation to the Vessel in the sum of $8,250. That amount was said to represent 10 months' worth of berthing fees. The agreement also provided that Mr Horsman agreed to guarantee to reimburse to Mr Warner and Mr Palatnikov the amount of $8,250 within six months of the date of the agreement.

19 It may be inferred from this agreement that in substance the parties agree that Mr Horsman was ultimately liable for the then outstanding 10 months' berthing fees, but that Messrs Warner and Palatnikov would pay those fees in the first instance. Nothing is said as to the reason for that, but lack of available funds on the part of Mr Horsman is one possible reason.

20 In January 2005 Mr Horsman signed an offer dated 18 January 2005, on behalf of Westmont International Ltd, to purchase the Vessel from Barontrend. Mr Warner signed the offer on behalf of Barontrend. The terms of the offer included the following:

(a) a deposit of $30,000 was payable within 60 days of acceptance;

(b) a sum of $135,000 was payable within one year of the date of acceptance;

(c) a further sum of $135,000 was payable within two years of the date of acceptance;

(d) Westmont International Ltd had full access as regards to restoration and refurbishment of the Vessel within the boundaries of Western Australian territorial waters; and

(e) the costs of restoration, refurbishments, modifications and pen fees that are carried out or due on the Vessel would be the responsibility of Westmont International Ltd.

21 The agreement provided that the date of possession of the Vessel was the date on which the deposit was paid. The agreement also provided that the date of settlement was the date on which a formal agreement between Barontrend and Westmont International Ltd was signed, and on which date Barontrend would produce documents of transfer duly signed and handed to Westmont International Ltd, and Westmont International Ltd shall have paid to Barontrend all moneys due under the agreement.

22 Thus this agreement contemplated the transfer of title to the Vessel upon payment of the whole of the purchase price.

23 On 3 February 2005 Mr Warner sent an email addressed 'To Whom It May Concern'. The email stated that Barontrend had entered into a sale agreement in April 2004 to sell the Vessel, and that while the formal sale did not settle until 2005, possession and management control over the Vessel was granted as of the date of the original agreement.

24 There is no evidence as to the recipient of the email. In particular, there is no evidence that the email was sent to the defendant. Mr Anthony Ellis, corporate counsel for the defendant, says that as far as he is aware the defendant did not receive the email.

25 Mr Horsman says in his second affidavit that in May 2005 he entered into the agreement that is dated 21 May 2004. He says he is confident that the document was signed in May 2005, not May 2004. That is because he says he has a clear recollection that the final contractual arrangements in relation to the Vessel were that it was purchased for $1 with a side agreement to pay the balance of the consideration directly to Mr Palatnikov.

26 Paragraph 14 of Mr Horsman's second affidavit is in the following terms.

I remember that I signed the side agreement with Mr Palatnikov on the same day that I signed the Second Agreement to buy the boat for $1, which I have now located. I haven't yet located a copy of the side agreement - which may well have the same date error. I remember that Mr Warner brought both of these documents to a meeting that we had at a coffee shop in May 2005. The documents were prepared by Mr Warner (or at least he had them prepared) and I signed them both at that meeting, and handed over the $1.

27 On 20 May 2009 Mr Horsman swore an affidavit in substantially similar terms to the affidavit of 21 May 2009. This affidavit has not been filed, however Mr Horsman deposes to its contents in his further affidavit sworn 25 May 2009 at par 5. Paragraph 14 of the affidavit sworn 20 May 2009 was in the following terms.

Attached hereto and marked BSH1 is the agreement that I remember signing with Mr Palatnikov on the same day that I signed the Second Agreement to buy the boat for $1 which I have now located. This agreement is also dated 21 May 2004. I believe that the same mistake as was made in relation to the date was made in relation to the Second Agreement. I remember that Mr Warner brought both of those documents to a meeting that we had at a coffee shop in May 2005. The documents were prepared by Mr Warner (or at least he had them prepared) and I signed them both at that meeting, and handed over the $1.

28 In his fourth affidavit Mr Horsman says that when he gave instructions to his solicitors in relation to the preparation of his 20 May 2009 affidavit, he thought that Mr Warner had a copy of the $300,000 side agreement and that he did not notice its absence, and the reference to it, in par 14.

29 The side agreement has not been produced to the court or put in evidence by any party.

30 Mr Warner says, in his affidavit sworn 21 May 2009, that he believes that the agreement dated 21 May 2004 was executed after the January 2005 agreement. He says that his email of 3 June 2005 supports his belief that the document dated 21 May 2004 was executed on 21 May 2005.

31 Mr Horsman says that he paid the $1 under the agreement dated 21 May 2004 on 21 May 2005 when that agreement and the side agreement were signed.

32 Neither Mr Horsman nor Westmont International Ltd has paid any part of the sum of $300,000 to Mr Palatnikov. Mr Horsman says in par 45.1 of his first affidavit as regards to Mr Palatnikov that:

[He] and I have agreed that I don't have to start making the payments until I get the Vessel.

33 The defendant objects to that evidence on the ground that it is an assertion of a conclusion rather than evidence of any material fact. I uphold that objection. The affidavit does not purport to state the substance of who said what or on what occasion.

34 No steps were taken to transfer the registration of the Vessel from Barontrend to Westmont International Ltd. Mr Horsman does not give any direct evidence as to why that was so. He states that it was his understanding that it was not necessary to update the Register under the Shipping Registration Act because the Vessel was an Australian fishing vessel and was not being used on overseas voyages. Mr Warner says that there were two reasons for not updating the register. One of them reflects the point just made by Mr Horsman in his first affidavit. The other reason is that the agreement dated 21 May 2005 is said by Mr Warner to be part of the further agreement entered into between Mr Horsman and Mr Palatnikov for the sum of $300,000, and the registration of Barontrend's interest in the Vessel was to remain on the Australian Register of Ships as security for outstanding amounts that the first plaintiff owed to Barontrend.

35 The evidence deals with issues which apparently emerged between Mr Horsman and the defendant as regards access to the Vessel and the performance of repair work on it. Although those issues were relevant to the application for an interlocutory injunction in its original form, as I will explain, the plaintiffs confined their application in the course of the initial hearing. For the purposes of the application ultimately made by the plaintiffs it is not necessary to detail the evidence pertaining to the access and repair issues during 2005.

36 On 3 June 2005 Mr Warner sent an email to Mr Eric Sutton, an employee of the defendant. The email was said to 'confirm that the ownership of the [Vessel] was fully transferred to Westmount International on 16 May 2005 and [the Vessel] is fully owned by Westmount International'.

37 On 7 June 2005 Mr Warner advised, in response to a request from Mr Sutton, that the transfer of the Vessel was to Westmont International rather than Westmount International.

38 On 27 July 2005 the defendant issued a notice to Westmont Corporation Pty Ltd under the Disposal of Uncollected Goods Act 1970 (WA). The notice stated that:

(a) the Vessel was ready for redelivery to Westmont Corporation Pty Ltd;

(b) an amount of just over $5,000 was due for berthage fees;

(c) storage was being charged at a rate of $915 per week until the Vessel was collected; and

(d) unless Westmont Corporation Pty Ltd took redelivery of the goods, gave directions for redelivery, or gave notice in writing of a dispute, the goods would be sold or otherwise disposed of.

39 On 2 October 2005 Mr Horsman wrote on behalf of Westmont International Ltd in response to the notice of 27 July 2005. The letter stated that Westmont International Ltd:

(a) had been the owner of the vessel since April 2004;

(b) had been prevented from removing the Vessel, which it still requested to do; and

(c) denied liability for outstanding pen fees, claiming that it was entitled to damages from the defendant.

40 On 2 February 2006 the defendant, by its solicitor, issued a notice to Westmont Corporation Pty Ltd under Part V of the Disposal of Uncollected Goods Act to treat a dispute as determined. The notice stated that:

(a) by the facsimile of 2 October 2005 Westmont Corporation Pty Ltd had disputed the weekly berthage charges;

(c) unless within one month Westmont Corporation Pty Ltd took redelivery, gave directions for the redelivery, or gave notice that it objected to the dispute being treated as determined, the goods would be sold or otherwise disposed of in accordance with the Act.

41 On 3 March 2006 the plaintiffs' solicitors wrote to the defendant's solicitors in relation to the notice of 2 February 2006 addressed to Westmont Corporation Pty Ltd. The letter stated that on their instructions Westmont Corporation Pty Ltd was not the owner of the Vessel and that consequently the notice was invalid.

(a) stated that the plaintiffs were unable to move the Vessel until certain works were carried out;

(b) stated that Mr Sutton of the defendant had refused to allow access to the Vessel to complete the works and that this was continuing;

(d) stated that the plaintiffs objected to the dispute being treated as set out in the notice; and

(e) stated that the plaintiffs were willing to move the Vessel but must be allowed access to complete the work on the Vessel to enable it to be moved.

43 On a date that is not clear, but which was before June 2006, the defendant commenced proceedings in the Magistrates Court under the Disposal of Uncollected Goods Act seeking an order for the disposal of the Vessel.

44 On 6 June 2006 the defendant and the plaintiffs agreed by exchange of solicitors' letters to settle the Magistrates Court proceeding on the basis that:

(a) the plaintiffs pay the defendant the sum of $15,757.50 for outstanding berthage fees and further berthage fees to 14 July 2006;

(b) that sum was to be paid to the defendant and cleared before any work was to be done on the Vessel;

(c) the Vessel would be removed by the plaintiffs by no later than 14 July 2006, failing which berthage would accrue thereafter at the rate of $915 per week (exclusive of GST).

45 The plaintiffs have not made any payments under the June 2006 agreement.

47 On 24 April 2007 Mr Horsman caused the Vessel to be renamed and registered it with the Department for Planning and Infrastructure with Westmont International Ltd as the owner.

48 In March 2007 Mr Warner contacted Mr Sutton and told him that Barontrend was still the owner of the Vessel because the contract for sale with Westmont had not been finalised.

49 On 21 March 2007 Mr Dunnell, a solicitor acting for the defendant, spoke with Mr Warner by telephone. Mr Warner told Mr Dunnell that the sale of the Vessel was subject to payment of various amounts of money which had not been made and that Westmont owed Barontrend about $320,000 under the contract.

50 On 26 March 2007 Mr Warner sent an email to Mr Sutton of the defendant. The email was in the following terms:

Hi Eric [Mr Sutton],

As discussed please find the agreement that we signed with Barry [Mr Horsman].

We currently are owed $310,000 odd thousand dollars from Barry. We can confirm that the contract of sale has not been fulfilled, we have not transferred the boat into Barry's company, or any other person.

We only gave permission to make modifications and use the Comet under the condition that he paid all [fees] and charges relating to the Comet, this has not happened.

As owners of the Comet we are prepared to sign a release document indemnifying MG [Kailis] from any actions which Barry might want to take against MG [Kailis] relating to moving or us selling the Comet.

Eric the reality here is that Barry has not fulfilled his contract with [us], he has not got any money what so ever and owes to both of us combined over $400,000. We currently have a buyer for $50,000 who wants to move quickly I really don't want to miss out on this opportunity.

Charles [Mr Warner]

51 Attached to the email was the offer to purchase of 5 April 2004, the offer to purchase dated 21 January 2005 and the agreement of 16 January 2005. The agreement dated 21 May 2004 was not attached.

52 In his affidavit sworn 21 May 2009 Mr Warner said that he sent the email of 26 May 2007 because:

(a) the defendant was proposing to scrap the Vessel or have it destroyed;

(b) he wanted to protect the interests of Westmont International Ltd in the Vessel; and

(c) he was dependent on the Vessel being operative and available for use by Westmont International Ltd so that it could fulfil its side agreement with Mr Palatnikov for the loan of $300,000, which amount was ultimately to go to Barontrend.

53 Mr Warner says in his affidavit that at no time did he truly believe that ownership of the Vessel had not passed to Westmont International Ltd.

54 I will say more about this evidence later in these reasons.

55 On 30 October 2007 Mr Ellis, corporate counsel of the defendant, sent an email to Mr Warner. The email stated that the defendant was contemplating organising a salvage operator to salvage the Vessel or to require Barontrend to remove the Vessel to another site.

56 Mr Warner responded to this email on the same day, stating that he could not approve any action in relation to the Vessel for two reasons. The first reason was that ownership of The Comet was now in dispute between Westmont International Ltd and Barontrend. The second reason was that the pending possible settlement conference between the defendant and Westmont International Ltd should occur before any steps were taken. Mr Warner's email concluded that he had been given an assurance that providing a settlement can be reached between the defendant and Westmont International Ltd, the Vessel could well be removed a short time thereafter.

57 On 31 October 2007 Mr Ellis sent a further email to Mr Warner, stating that the defendant was withdrawing its action against Westmont International Ltd under the Disposal of Uncollected Goods Act. The email stated that the defendant was aware that ownership was in dispute and this was one of the reasons for discontinuing the action, because any dispute over ownership would probably need to be resolved first. The letter proposed that either Barontrend's representatives or Westmont International Ltd's representatives remove the Vessel within 28 days.

58 The Magistrates Court proceedings under the Disposal of Uncollected Goods Act were discontinued on or about 13 November 2007.

59 On 9 November 2007 Mr Ellis of the defendant sent an email to the plaintiffs' solicitors. The email noted the absence of any response to the request for confirmation whether the plaintiffs were genuine in their intention to remove the Vessel. The email said that the defendant had had an independent valuation on the Vessel stating that it has no value and that, in fact, it had a negative value in that the fees for removing and scrapping the Vessel would exceed the value derived from the process of scrapping it.

60 The email stated that it was the defendant's understanding that a portion, if not all, of the purchase price owed to Barontrend under the sale agreement between Westmont International Ltd and Barontrend had not been paid and that the agreement had lapsed. Consequently, given Barontrend's deregistration, property in the Vessel transferred to ASIC. The email foreshadowed the defendants' intention to apply to ASIC to acquire the Vessel.

61 There is no evidence of any response to that email.

62 On 6 March 2008 solicitors for the defendant wrote to ASIC applying under s 601AE of the Corporations Act 2001 (Cth) to purchase the Vessel for the nominal price of $1. The letter stated that the Vessel was in a state of disrepair and the defendant had a valuation demonstrating the Vessel would cost more to salvage than would be obtained by selling the salvaged parts. The letter also stated that the Vessel was taking up space, delaying the redevelopment of the boatyard, and was posing an environmental risk to the harbour.

63 On 14 March 2008 the defendant's solicitors wrote to the plaintiffs' solicitors. The letter advised that the defendant had made an application pursuant to s 601AE(2). The letter stated that ASIC had requested that Westmont International Ltd provide written confirmation that the contract of sale between it and Barontrend was not completed, and that it had no objection to the defendant's application to purchase the Vessel.

64 The only evidence of any response by the plaintiffs' solicitors to that letter is a reference to a telephone conversation of 14 May 2008 in the email of 29 May 2008, to which I will refer shortly.

65 The copy of the defendant's letter dated 14 March 2008 attached to Mr Horsman's first affidavit has in handwriting a telephone number for ASIC and the date 28 April 2009. However, Mr Horsman says in his first affidavit that he telephoned ASIC on 28 April 2008, not 28 April 2009. Whether that evidence is to be accepted will be a matter for trial, not for determination on this application. At trial, it will be relevant to notice that on 28 April 2009 Mr Horsman wrote to ASIC in relation to the Vessel.

66 On 31 March 2008 an officer of ASIC advised the defendant that its application would be unsuccessful as Westmont International Ltd was disputing ownership. The ASIC officer sought confirmation that the defendant wished to withdraw its application.

67 On 29 May 2008 Mr Ellis for the defendant sent an email to the plaintiffs' solicitors. The email was in the following terms:

I refer to our telephone conversation of 14 May 2008 and confirm that ASIC has informed us that it is not able to make an administrative order with respect to the Comet as there is a dispute over its ownership and that any order must be made by the courts.

We have been advised that the sale of the Comet by Barontrend to your client was not completed and that the time for completion has passed. Consequently, your client is not the owner of the vessel.

It is [the defendant's] intention to commence proceedings under section 601AH of the Corporations Act to have Barontrend Pty Ltd reinstated and Barontrend ordered to transfer the Comet to us so that we can remove it from our premises. We intend to commence proceedings on or about 16 June 2008. However, we are prepared, prior to that date, to permit your client access to the Comet for the purposes of towing the vessel to another location. We are advised that the vessel is capable, in its current state of repair, of being towed, even as far as Asia.

If the vessel has not been removed from our premises prior to 16 June 2008, then we will commence court proceedings as indicated and our advice is that your client will have no further claim to the vessel.

Please let us know at you earliest opportunity whether your client intends to remove the vessel during the period specified.

68 There is no evidence of any response by the plaintiffs to Mr Ellis' email of 29 May 2008.

69 On 12 June 2008 Mr Horsman reregistered the Vessel with the Department of Planning and Infrastructure in the name of another company which he controlled, Sea Spirit Pty Ltd.

70 On 6 November 2008 the defendant commenced proceedings, as foreshadowed in the email of 29 May 2008, in this court for the reinstatement of Barontrend (COR 165 of 2008).

71 Mr Ellis' affidavit in support of the application for reinstatement was sworn on 5 November 2008. The affidavit annexed the emails to the defendant from Mr Warner in June 2005 and March 2007, and referred to Mr Warner's conversation with Mr Dunnell in March 2007 which I have summarised.

72 The affidavit also included, as an annexure, an email dated 18 December 2007 to the defendant's solicitors from Mr Kent Stewart, a senior valuer at Maritime Engineers Pty Ltd. The email was to the effect that the cost of recovering the Vessel as scrap would exceed the sale value of the scrapmetal thus recovered. Mr Ellis also says in his affidavit sworn 5 November 2008 that the Vessel was badly corroded, at risk of sinking, and created a significant risk of a spill in the harbour.

73 On 17 March 2009 Master Sanderson made orders for the reinstatement and winding up of Barontrend. Paragraph 5 of the orders provided that the liquidator transfer the vessel previously vested in ASIC under s 601AD(2) to the defendant.

74 On 30 March 2009 ASIC reinstated Barontrend to the register.

75 On 25 March 2009 the liquidator of Barontrend wrote to Mr Horsman advising Mr Horsman of his appointment and advising that the Vessel would be transferred to the defendant pursuant to the orders of the Supreme Court.

76 The liquidator wrote again on 28 April 2009. The liquidator's letter of 28 April 2009 advised that the liquidator had executed a bill of sale transferring ownership of the Vessel to the defendant and that the liquidator had provided the defendant with the registration certificate for the Vessel. The letter stated that any issues relating to ownership of the Vessel should be directed to the defendant.

77 As was stated in the letter, on 28 April 2009 the liquidator of Barontrend executed a bill of sale under the Shipping Registration Act effecting the transfer of ownership of the Vessel.

78 Mr Horsman evidently spoke to a person at the liquidator's office on 28 April 2009. He wrote a letter on that day to the liquidator enclosing an unidentified letter of ASIC.

79 By letter of 5 May 2009 the defendant sent the bill of sale to the Australian Maritime Safety Authority for registration under the Shipping Registration Act. Due to an administrative error at the office of the defendant the letter was inadvertently couriered to Broome. It was resent on 11 May 2009. In my view, the fact that, by 11 May 2009, the defendant had received the letter of 6 May 2009 to which I will shortly refer, does not affect the consequences of registration of the transfer which had been effected by the bill of sale executed on 28 April 2009. On 27 May 209 the defendant was registered as the owner of the Vessel.

80 On 6 May 2009 solicitors for Mr Horsman wrote to Mr Ellis of the defendant. The letter contended that:

(a) in 2004 Westmont Corporation Pty Ltd had entered into an agreement with Barontrend to acquire the Vessel;

(b) equitable ownership of the Vessel vested in Westmont Corporation Pty Ltd;

(c) the defendant was aware of the interests of Westmont Corporation Pty Ltd;

(d) the defendant holds the Vessel as constructive trustee for Westmont Corporation Pty Ltd once Barontrend is reinstated;

81 and sought an undertaking from the defendant that it would not deal with the Vessel in any way without giving prior written notice.

82 Solicitors for the defendant responded by letter of 14 May 2009. The letter rejected the contentions summarised above. The letter stated that there was nothing to suggest the purchase price had ever been paid and that even if it had been paid it would be Westmont International Ltd not Westmont Corporation Pty Ltd which would hold the interest.

83 The letter of 14 May 2009 offered to transfer ownership of the Vessel on conditions including:

(b) upon receipt of that sum the defendant would grant access for a period no more than 30 days to perform work necessary to be done before the Vessel could be towed, whereupon it would be immediately removed; and

(c) Mr Horsman and his companies waive any claims it may have against the defendant in any way related to the Vessel.

84 The letter stated that if the offer were not accepted, the defendant reserved its right to deal with the Vessel at any time in any manner without further notice to the plaintiffs.

85 On 18 May 2009 the plaintiffs commenced this action.

86 Also on 18 May 2009 the plaintiffs applied by chamber summons for an interlocutory injunction restraining the defendant from dismantling, moving or dealing with the Vessel in any way.

87 Prior to the first return date of the application the plaintiff filed a minute of orders which sought additional injunctions to those in the chamber summons. The additional injunctions were to restrain the defendants from preventing the plaintiffs from having access to the Vessel to effect repairs and from removing the Vessel from its current location.

88 The application for interlocutory injunctions came before me for hearing on 25 May 2009. At an early stage of the hearing, counsel for both parties requested that the application be adjourned to enable the parties to confer in respect of possible interim resolutions that would accommodate the parties' interests in a satisfactory way, and to negotiate generally.

89 Ultimately, the hearing of the application was adjourned to 4 June 2009 and an interim injunction granted. Before that occurred, the plaintiffs refined the interlocutory relief they sought in a significant way. The terms of the injunctions now sought by the plaintiffs are, relevantly, as follows:

(a) the defendant be restrained from dismantling, moving or otherwise dealing with the Vessel;

(b) for the duration of any interlocutory injunction the plaintiffs pay berthage fees to the defendant in the amount of $915 per week;

(c) within 14 days of the date of any injunction the plaintiff pay the sum of $162,000 into their solicitor's trust account on terms that the funds are to be held in trust until further order of the court; and

(d) unless the order in par (c) is complied with then the injunction will lapse.

90 For convenience, I repeat the outline of the principles relevant to the grant of an interlocutory injunction I gave in Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110 [7] - [11]:

In Castlemaine Tooheys Ltd v The State of South Australia [1986] HCA 58; (1986) 161 CLR 148, 153, Mason ACJ summarised the principles governing the grant or refusal of an interlocutory injunction as follows:

In order to secure such an injunction the plaintiff must show (1) that there is a serious question to be tried or that the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief; (2) that he will suffer irreparable injury for which damages will not be an adequate compensation unless an injunction is granted; and (3) that the balance of convenience favours the granting of an injunction.

That summary was adopted by Gleeson CJ in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA 63; (2001) 208 CLR 199, 217. These principles have been routinely applied in this and other courts in Australia.

These principles were further explained by Gummow and Hayne JJ in Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57, [65] - [71] (Gleeson CJ and Crennan J agreeing). Their Honours stated that the relevant principles are those stated in Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618, where the two main inquiries were said to be whether the plaintiff had made out a prima facie case and whether the balance of convenience favours the grant of the injunction. The phrase 'prima facie case' does not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed. It is sufficient that the plaintiff show a sufficient likelihood of success to justify, in the circumstances, the preservation of the status quo pending the trial. How strong the probability needs to be depends upon the nature of the rights the plaintiff asserts and the practical consequences likely to flow from the orders the plaintiff seeks: [65], [71].

The apparent statement by Lord Diplock in American Cyanamid Co v Ethicon Ltd [1975] UKHL 1; [1975] AC 396, 407 that, provided the court is satisfied that the plaintiff's claim is not frivolous or vexatious, there will be a serious question to be tried, is not to be followed. The governing consideration is that the requisite strength of the probability of ultimate success depends upon the nature of the rights asserted and the practical consequences likely to flow from the interlocutory orders sought. These principles make it clear that the various considerations identified by Mason ACJ in Castlemaine Tooheys are to be considered together.

As the apparent strength of the applicant's case diminishes, the balance of convenience moves against the making of an order: Glenwood Management Group Pty Ltd v Mayo [1991] VicRp 45; [1991] 2 VR 49, 54-55; Todd v Novotny [2001] WASC 171. The grant of an injunction involves balancing the injustice which might be suffered by the defendant if the injunction is granted and the plaintiff later fails at trial, against the injustice which might be suffered by the plaintiff if the injunction is not granted and the plaintiff later succeeds at trial: Films Rover International Ltd v Cannon Film Sales Ltd [1987] 1 WLR 670; Madaffari v Labenai Nominees Pty Ltd [2002] WASC 67 [14].

91 Delay by the plaintiff may be a discretionary factor in favour of refusing an interlocutory injunction.

92 These principles make it clear that whether there is a serious question to be tried and whether the balance of convenience favours the grant of an injunction are not two separate inquiries. Rather, the degree of strength of the plaintiffs' case that is required before the plaintiff has established a serious question to be tried is influenced by the practical consequences likely to flow from the interlocutory orders sought by the plaintiff. Nonetheless, for ease of exposition it is convenient to begin with the question of the apparent merits of the plaintiffs' claim.

The apparent merits of the plaintiffs' claim: is there a serious question to be tried?

93 The plaintiffs have foreshadowed a claim for damages for the allegedly wrongful prevention by the defendant of access to the Vessel, and for alleged removal of equipment from the Vessel. It is not necessary to give those claims any detailed attention for the purposes of this application. That is because such damages claims could not support the claim for an interlocutory injunction in respect of the Vessel.

94 The plaintiffs claim that there is a serious question to be tried that the defendant holds its title to the Vessel on constructive trust for Westmont International Ltd, and subject to Westmont International Ltd's equitable interest in the Vessel arising from the contract of sale dated 21 May 2004 but made on 21 May 2005.

95 The plaintiffs do not rely on the agreement of 21 January 2005. That is not surprising, given that its terms mean that title in the Vessel was not intended to pass until the purchase price was paid.

96 Further, the plaintiffs do not rely on the agreement dated 21 May 2004 if it was made in May 2004. The evidence of Mr Horsman or Mr Warner is that it was made in May 2005, not May 2004. Moreover, Westmont International Ltd did not exist in May 2004. It is, at the least, doubtful that s 131 of the Corporations Act applies to a foreign company, because that section applies only to a company that is registered under the Corporations Act.

97 In order to succeed at trial in its claim to an equitable interest in the Vessel, Westmont International Ltd would need to establish the following matters:

(a) the contract dated 21 May 2004 was in fact made in May 2005, not May 2004;

(b) as at April 2009 the contract remained in force against Barontrend, notwithstanding the non-payment of the sum of $300,000 contemplated by the side agreement;

(d) as a matter of general law the contract remained specifically enforceable notwithstanding that Barontrend transferred the Vessel to the defendant, that is, the defendant took its title to the Vessel subject to Westmont International Ltd's equitable interest; and

(e) any claim is not defeated by the registration of the defendant as owner of the Vessel under the Shipping Registration Act.

99 The evidence of Mr Horsman and Mr Warner is, ultimately, to the effect that the agreement was made in May 2005 notwithstanding that it is dated 21 May 2004. It is apparent that at any trial of this action that evidence will be under serious challenge. The document is dated May 2004 in two places, one of which is in Mr Horsman's handwriting. It may be suggested that while making an error in stating the date as being the preceding year is not unusual in January, it may be thought to be uncommon in May. Moreover, it appears that the same error as to date is thought to have been made in relation to the side agreement which has apparently not been located. However, these are matters to be pursued at any trial. They cannot be resolved unfavourably to the plaintiffs in an application of this nature. Nevertheless, the existence of these issues bears upon the apparent strength of the plaintiffs' claim.

100 The same may be said in relation to any questions arising as to why the parties might have substituted a purchase price of $1, with a side agreement for a loan of $300,000, in place of an agreement for a purchase price of $300,000.

102 On the plaintiffs' case, the agreement was made in May 2005; the purchase price of $1 was paid when the agreement was made; and the $300,000 the subject of the loan agreement has not been paid. It will be for the plaintiffs to establish that in these circumstances the agreement remained on foot as at April 2009. The evidence before me includes statements and an email from Mr Warner stating that the purchase price remained outstanding as at March 2007 and that Barontrend did not consider the agreement to be enforceable. Mr Warner has said in his affidavit sworn 21 May 2009 that he did not genuinely mean what he said in this regard. Again, whether that evidence is accepted is a matter for trial. However, an assessment of the apparent strength of the plaintiffs' claim must take into account the need for Mr Warner to explain statements that he made and the email that he wrote on 26 March 2007.

103 Further, there is no evidence of any demand by the plaintiffs for the transfer of the title to the Vessel. That is consistent with one of the reasons advanced in Mr Warner's affidavit for title not being registered in the name of any Westmont entity. That reason is that registration was intended to remain in Barontrend's name as security for all the monies to be paid by the plaintiffs.

104 The plaintiffs submit that a purchaser acquires an equitable interest in the property the subject of the purchase, referring to Holroyd v Marshall [1862] EngR 963; (1862) 10 HL Cas 191. A purchaser acquires an interest in the property only if and to the extent that a court would decree specific performance or protect the purchaser's rights by injunction: Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; (2003) 217 CLR 315 [53]. Thus Westmont International Ltd has an equitable interest in the Vessel only if and to the extent that the contract to purchase the Vessel is specifically enforceable.

105 Whether a contract for sale of a boat is specifically enforceable is a fact sensitive judgment turning on whether, in all the circumstances, damages will be an adequate remedy. If an appropriate substitute is available in the market damages will be adequate. In some cases, contracts for sale of boats may be specifically enforceable: see Meagher, Gummow & Lehane, Equity: Doctrines and Remedies (4th ed, 2002) [20-040] and cases there cited.

106 In this application the plaintiffs have not led any evidence as to the availability of possible substitutes or to establish that the Vessel is unique. Rather, Mr Horsman has said, in a summary way, that he could not afford to purchase an alternative boat in the market.

107 Counsel for the plaintiffs referred to what is said about the Vessel in a business plan annexed to Mr Zusman's affidavit of 28 May 2009. In my opinion, that is of no real assistance. The annexure is a draft business plan as at 2005. It refers to characteristics of the Vessel, but nothing which would seem to make the Vessel unique in the relevant sense. In any event, the annexure is not admissible evidence of the truth of its contents.

108 The only admissible evidence led by the plaintiff about the value of the Vessel is a valuation in 1999. The defendant's evidence is that the Vessel has no value, and that it will cost more to remove than will be realised when the Vessel is sold for scrap.

109 Because the question of adequacy of damages depends upon all the circumstances, I would not determine it adversely to the plaintiffs at this stage. But, in my opinion, on the material before me, it represents a further significant hurdle for the plaintiffs' claim to an equitable interest in the Vessel.

110 That brings me to the fourth hurdle for the plaintiffs' case.

111 Assuming that the contract were specifically enforceable against Barontrend, the next question would be whether the plaintiffs' interest in the Vessel remains enforceable notwithstanding the transfer of the Vessel to the defendant. I will address this question first as a matter of general law, and then with reference to the effect of registration under the Shipping Registration Act.

112 The defendant would hold the Vessel subject to the interest of Westmont International Ltd only if it received the property with sufficient notice of Westmont International Ltd's interest. There will be sufficient notice if there is actual knowledge; a wilful shutting of one's eyes to the obvious; a wilful and reckless failure to make such inquiries as an honest and reasonable person would make; or knowledge of circumstances which would indicate the facts to an honest and reasonable person: Hancock Family Memorial Foundation Ltd v Porteous [1999] WASC 55; (1999) 151 FLR 191 [79]; Kalls Enterprises Pty Ltd (in liq) v Baloglow [2007] NSWCA 191; The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239 [4744] - [4748].

113 The plaintiffs point to communications from 2004 to 2006 as establishing that the defendant knew of the claim of the plaintiffs or Westmont Corporation Pty Ltd to be the owner of the Vessel. I accept that during that period, the defendant knew of the claim.

114 However, the question is what the defendant knew and believed in 2009, when it became the owner of the Vessel.

115 On the evidence currently available, it is readily arguable that when the defendant became the owner of the Vessel it believed that the purchaser under any contracts of purchase entered into in 2004 and 2005 had failed to pay the purchase price and that any such contracts were no longer enforceable. That is what the defendant had been told by Mr Warner in March 2007. Moreover, the defendant gave notice of its intentions, and its understanding that the Barontrend contract was at an end by reason of non-payment of the purchase price, to the then solicitors for the plaintiffs (see the emails of 9 November 2007, 14 March 2008 and 29 May 2008). There is no evidence of any response, much less any action on the part of solicitors for the plaintiffs, in relation to this correspondence.

116 In these circumstances, the defendant submits, it was entitled to act on the basis that the plaintiffs accepted the position set out in the emails of 9 November 2007, 14 March 2008 and 29 May 2008. There is considerable force in this submission. It is, I think, difficult to see, on the current state of the evidence, any basis for a different conclusion.

117 For these reasons, there seems to me, on the material now available, to be very significant difficulties for the plaintiffs' case.

118 There is an additional hurdle arising from the registration of the defendant under the Shipping Registration Act.

119 There is longstanding authority that registration under the Shipping Registration Act and its predecessors in Australia and England gives a registered owner or mortgagee of a ship a priority or power which displaces the rules of common law and equity which would otherwise apply: General Credits (Finance) Pty Ltd v Registrar of Ships (1982) 61 FLR 329, 334.

120 In Advertising Department Pty Ltd v Ship MV Port Phillip [2004] FCA 1762; (2004) 141 FCR 251 [25], after a review of the authorities, Finkelstein J held that:

(b) if a person in good faith acquires an interest in a ship from the registered owner he will obtain an indefeasible title that will defeat any prior unregistered right or interest, regardless of whether the prior right or interest is legal or equitable;

(c) it makes no difference that the owner obtained his registration by fraud, provided the person who acquired the interest was not party to, or did not know of, the fraud.

121 Given that the defendant has become registered as the owner of the Vessel, if the approach of Finklestein J is adopted, the hurdles for the plaintiffs' case become even higher.

122 For all these reasons and in all these respects there are, in my opinion, very serious difficulties for the plaintiffs' claim to an equitable interest in the Vessel enforceable against the defendant.

123 The defendant emphasised in its written submissions that an applicant for an interlocutory injunction must demonstrate that, absent an injunction, it will suffer irreparable injury for which damages will not be an adequate compensation. I accept that proposition.

124 However, in this case, that requirement is tied up with the plaintiffs' primary claim to an equitable interest in the Vessel arising from the claim for specific performance of the contract. If and to the extent that Westmont International Ltd has an arguable claim to specific performance of the contract with Barontrend then, by hypothesis, the loss of a right to specific performance of that contract will be a prejudice for which damages are not an adequate remedy. That is because the right to specific performance will exist only if damages are not an adequate remedy for the breach of the Barontrend contract.

125 Ultimately, in the course of argument, counsel for the defendant accepted this position. Thus the inadequacy of damages requirement for an interlocutory injunction invites attention to the merits of the claim for specific enforcement of the Barontrend contract.

126 I turn to the question of balance of convenience and the disposition of the application.

The balance of convenience and the merits of the application

127 The balance of convenience involves balancing the injustice which might be suffered by the defendant if the injunction is granted and the plaintiff later fails at trial, against the injustice which might be suffered by the plaintiff if the injunction is not granted and the plaintiff later succeeds at trial.

128 The potential injustice to the plaintiff if the injunction is not granted is that its claim for an equitable interest in the Vessel arising from the contract will be defeated. That is because if no injunction is granted the defendant intends to dismantle the Vessel.

129 The consequence of the refusal of the injunction would be to restrict any claim on the part of Westmont International Ltd to a claim for damages. That proposition in turn invites attention to the merits of the claim to an equitable interest. The stronger the claim appears to be, the greater the risk of injustice if an injunction is refused.

130 The defendant accepts that access to the Vessel should be allowed so as to enable reasonable assessment by an expert as to the value of the Vessel. To that end, the defendant proffered an undertaking not to dismantle, move or otherwise deal with the Vessel for a period of three weeks. I accept that, on the evidence before me, the period of three weeks is sufficient to provide the plaintiffs with a reasonable opportunity to obtain expert evidence. Had no such concession been made by the defendant, I would have so ordered. That is because, in the absence of an opportunity for an expert to assess the value of the Vessel, the claim for damages by Westmont International Ltd would be rendered worthless.

131 For a long time, the defendant's primary complaint has been that it wishes to be rid of the Vessel from its shipyard and that the Vessel has been there for many years without the defendant receiving pen fees. The grant of the injunction now sought by the plaintiffs would not involve prejudice of that kind. That is because the plaintiffs propose, as a term of any injunction, that they be required to pay pen fees for the duration of the injunction.

132 The only other prejudice to the defendant identified by its counsel lay in the evidence as to the environmental hazard said to be created by the Vessel. In this regard, the defendant relies upon the evidence of Mr Ellis in his affidavit of 5 November 2008 in support of the application for reinstatement of Barontrend. I have set out the relevant contents of that affidavit earlier in these reasons. I accept the plaintiffs' submission that this evidence is not worthy of any substantial weight in the present proceedings. The evidence is in very general terms. It was given in 2008. More importantly, the evidence came from Mr Ellis, a person not evidently qualified to assess questions of the hazards of sinking. The defendant has filed an affidavit of Mr Terrence Hewitt, an experienced engineer, in opposition to the plaintiffs' application for an interlocutory injunction. Nothing is said in Mr Hewitt's affidavit to support a conclusion that the Vessel poses any risk of sinking with consequent environmental hazards.

133 In summary, therefore, the grant of the injunction would not cause any substantial prejudice to the defendant. Notwithstanding that finding, I am not persuaded that justice requires the grant of the injunction. In essence, there are two matters that, taken together, lead me to decline to grant the injunction. The first is the weakness of the plaintiffs' case. The second is the plaintiffs' delay in asserting and actively pursuing its rights under the Barontrend contract.

134 I refer to the observations I have already made as to the merits of the plaintiffs' claim to an equitable interest in the Vessel. I have identified five essential elements of plaintiffs' claim: [97]. As I have explained, I consider that Westmont International Ltd faces substantial hurdles in relation to each element. To my mind, the fourth and fifth appear to provide the greatest obstacles to success on the part of the plaintiffs. I am left in doubt as to whether Westmont International Ltd has established a serious issue to be tried, in the sense explained in Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57 [65] - [71]. But if that hurdle is overcome, I would refuse to grant the injunction on account of the plaintiffs' delay.

135 There is no evidence that at any time before April 2009 the plaintiffs ever demanded that the Vessel be transferred to one of them.

136 The plaintiff was aware from 2005 that the defendant wished to have the Vessel removed from its pen. The plaintiffs, by their solicitors, received notice from the defendant in November 2007, March 2008 and May 2008. The effect of the notices were that the defendant understood that the contract with Barontrend was no longer enforceable and that the defendant intended to take steps to become the owner of the Vessel by having Barontrend's title transferred to it.

137 The plaintiffs took no steps to prevent this occurring. Indeed, the plaintiffs did not respond in any way to these emails.

138 Following that, the defendant commenced and prosecuted the proceedings in this court for the reinstatement of Barontrend, the appointment of a liquidator to that company and the transfer by the liquidator of the Vessel to the defendant.

139 In the event that the plaintiffs are entitled to an equitable interest in the Vessel, those proceedings would have been a waste of time and money.

140 Consequently, in my opinion, the defendant has been substantially prejudiced by the delay on the part of the plaintiffs in asserting their right to the Vessel.

142 In my opinion, the plaintiffs' delay is a powerful discretionary factor against the grant of an interlocutory injunction. It is also relevant to the merits of the plaintiffs' claim at trial to an equitable interest: see Meagher, Gummow & Lehane [36-020].

143 For these reasons, I would refuse to grant the interlocutory injunctions sought by the plaintiffs.