Aquamore Credit Equity Pty Ltd v Pamada Pty Ltd

The plaintiffs' interim injunction application

1. By notice of motion filed on 28 May 2021, the plaintiffs sought an interim injunction restraining Upper Hunter and Mr Sydney from negotiating for, making offers in relation to, entering into, performing or giving effect to any agreement to sell, transfer, dispose of or grant any interest in "the Project Assets".
2. During the hearing of the motion on 20 August 2021, the terms of the proposed injunction were revised to, inter alia, narrow the assets to the intellectual property in respect of the Project. The revised terms of the injunction sought by the plaintiffs were as follows: "1. Upon the first plaintiff by its counsel giving the usual undertaking as to damages, an order that: a. the second defendant, by itself its servants and agents, be restrained from engaging in the Restrained Conduct (as defined in this notice of motion) except with the prior written consent of the Plaintiffs, until further order of the Court; b. within 7 days of this order the second defendant inform the plaintiff in writing of all people or entities who the second defendant knows to be a Relevant Third Party (as defined in this notice of motion) and serve on the applicant an affidavit setting out that information; c. the fifth defendant, by itself its servants and agents, be restrained from engaging in Restrained Conduct (as defined in this notice of motion) until further order of the Court; and d. within 7 days of this order the fifth defendant inform the plaintiff in writing of all people or entities who the fifth defendant knows to be a Relevant Third Party (as defined in this notice of motion) and serve on the applicant an affidavit setting out that information. 2. The second defendant and the fifth defendant serve a copy of any orders made pursuant to prayer 1 or prayer 2 on any Relevant Third Party. 3. The second defendant and fifth defendant pay the plaintiffs' costs of the motion. In this notice of motion: ACLS means the Amended Commercial List Statement filed 7 September 2020. Intellectual Property has the meaning given to it by paragraph 31(b)(ii) and paragraph 32 of the ACLS. Project Assets means any Intellectual Property. Relevant Period means the period commencing 28 April 2020 to date. Relevant Third Party means any person (other than a party to the Proceedings) who has been a party to the Restrained Conduct during the Relevant Period. Restrained Conduct means negotiating, making offers in relation to, entering into, performing, or giving effect to any agreement to sell, transfer, dispose of, or grant any interest in the Project Assets (including any part of the Project Assets) to any person."
3. Upper Hunter and Mr Sydney opposed the plaintiffs' application. Each of them offered an undertaking to the Court to give 14 days' notice to the plaintiffs of any intention on their part to enter into any binding contract to sell, transfer or grant any interest in respect of the Project.
4. Consistently with its position referred to at [40] above, Pamada did not wish to be heard in relation to the interim injunction application.

Applicable principles

1. The principles governing the grant of interim injunctions are well established: see Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199, especially at [8]-[13], [18] (Gleeson CJ), [91] (Gummow and Hayne JJ, Gaudron JJ agreeing); and see also Papas v Grave [2013] NSWCA 308 at [83] (Emmett JA, Sackville AJA agreeing).
2. The purpose of an interim injunction is to preserve the status quo until the rights of the parties can be determined at a final hearing of the proceeding or, to adopt the language of Gleeson CJ in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (supra) at [12], to "prevent the practical destruction" of the right in respect of which the plaintiff claims final relief "before there has been an opportunity to have its existence finally determined".
3. A plaintiff must establish that: 1. Its claim for final relief raises a serious question to be tried 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 entitled to relief; 2. if the interim injunction is not granted, it will suffer irreparable harm for which damages will not be an adequate remedy; and 3. the balance of convenience favours the grant of the interim injunction.
4. The inadequacy of a remedy in damages is often stated as a separate factor to be considered, but it is more accurately assessed as one aspect of the balance of convenience. The Court must determine whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted: Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622-623.
5. If a serious question to be tried is identified, the strength of the plaintiff's case for final relief will also be relevant to the Court's assessment of the balance of convenience. However, the extent to which it is necessary to examine the strength of the plaintiff's case will depend on all the circumstances of the case.

Consideration and determination

1. In my opinion, the presently unchallenged evidence referred to at [7] and [20]-[32] above establishes that the plaintiffs' claim for specific performance of the alleged December 2018 contract raises a serious question to be tried in the sense described in the authorities referred to above. Indeed, it was not submitted on behalf of Upper Hunter and Mr Sydney that there was no serious question to be tried. Rather, their submissions were directed to whether the strength of the plaintiffs' case was sufficient to warrant an interim injunction in the terms sought.
2. In the absence of any evidence adduced by the defendants on this application, and in the absence of any cross-examination of Mr Hsu, I consider that the plaintiffs have demonstrated a reasonably strong case for the purpose of this application.
3. For present purposes, I do not regard Upper Hunter's Barnes v Addy cross-claim as diminishing the strength of the plaintiffs' claim for the purpose of this application. The evidence referred to at [7] above and other documentary evidence adduced by the plaintiffs indicates that the Project has been propounded by Mr Sydney through several corporate entities, all of which are ultimately beneficially owned by him or by members of his family. Upper Hunter adduced no evidence in relation to its cross-claim at the hearing of the interim injunction application.
4. Of course, it will ultimately be a matter for the trial judge to assess the merits of the plaintiffs' case, together with the merits of the defences and Upper Hunter's cross-claim, after hearing all of the evidence adduced by all parties.
5. The plaintiffs adduced documentary evidence of many instances of Mr Sydney, through various corporate entities, negotiating with potential purchasers of the Project and soliciting investment in the Project, including investment in the form of debt to be secured against the assets of the Project. The assets of the Project include the intellectual property in relation to the Project, which is very broadly defined in the Amended Commercial List Statement in terms that reflect the intellectual property transferred by Pamada to Upper Hunter in December 2016 as set out in a schedule to the deed pursuant to which that transfer occurred. Indeed, it is tolerably clear that the intellectual property comprises substantially the whole of the Project assets. The evidence before the Court on this application did not reveal any other Project assets, save for a licence and option in respect of the land on which the Project is proposed to be developed. Much of the documentary evidence to which I have referred post-dates the commencement of these proceedings and came to the knowledge of the plaintiffs only relatively recently through the discovery process in the proceedings.
6. Neither Upper Hunter nor Mr Sydney denied these efforts to sell or deal with the Project intellectual property. On the contrary, they maintain that they are entitled to deal with those assets.
7. On the basis of that evidence, I am satisfied that there is a danger that the plaintiffs will suffer irreparable harm for which damages would not be an adequate remedy if an interim injunction is not granted restraining the sale, transfer, disposal of or granting of an interest in the intellectual property in respect of the Project.
8. As the plaintiffs submitted, the danger is that Upper Hunter and/or Mr Sydney will sell, transfer, or dispose of, or grant an interest to a third party in, the very intellectual property that the plaintiffs claim that Upper Hunter and Pamada agreed to licence to UHEP. If that were to occur, it is likely that the plaintiffs' claim for specific performance would be defeated by the third party's interest in the intellectual property and/or by a third party purchaser or investor's right to assume or participate in the carriage and control of the Project. As the plaintiffs submitted, that danger arises from any sale, transfer, disposal or granting of an interest to a third party, even if such a transaction is for fair value.
9. Upper Hunter and Mr Sydney emphasised that the plaintiffs have an alternative claim for damages. However, that does not reduce the likelihood of the plaintiffs suffering irreparable harm if their claim for specific performance is effectively defeated before it has been determined on its merits. There is unchallenged evidence of Mr Sydney's statements to Mr Hsu in December 2018 about his financial position and the judgment debt entered against him almost one year ago in respect of moneys owing to Aquamore remains unsatisfied. According to Upper Hunter's financial statements for the year ended 30 June 2020, it has a net asset deficiency of approximately $772,000. I infer from the lack of progress in relation to the Project since 2018 and from the evidence of Mr Sydney's activities referred to at [55] above that Mr Sydney and his related entities, including Upper Hunter, lack the funds to progress the Project and that their available options are to sell the Project or to attract a substantial investment to finance the Project. Senior counsel for Upper Hunter accepted that this inference was open, and Mr Sydney (who appeared in person) did not demur. Accordingly, any damages award would most likely prove to be a hollow victory for the plaintiffs in this case.
10. Upper Hunter and Mr Sydney submitted that any sale or dealing with the Project intellectual property was likely to "further the realisation of the monies owed" to Aquamore and this would in fact be in the interests of the plaintiffs. However, the submissions fell short of positively asserting that Mr Sydney and his associated entities intend to apply any proceeds of dealing with the Project intellectual property in repayment of monies owing to Aquamore under those loans. Moreover, there was no evidence of any realistic prospect of a third party investing funds in the Project on the basis that an amount in excess of $2.5 million would be applied to repay existing debt. Those submissions therefore do not detract from the danger referred to at [58] above, particularly when viewed in light of Mr Hsu's presently unchallenged evidence that Mr Sydney said to him in October 2019 that "[t]he security you have is illusory" and suggested that he would arrange for repayment of the principal only if Aquamore would waive its right to payment of interest in respect of the loans.
11. However, I accept the submissions made on behalf of Upper Hunter and Mr Sydney that the terms of any injunctive relief should not extend to preventing them from negotiating for the sale, transfer or disposal of the Project intellectual property or negotiating the grant of an interest in that intellectual property to a third party. Such negotiations will not prejudice the plaintiffs if they do not result in any agreement, and the terms of the injunction will restrain Upper Hunter and Mr Sydney from entering into an agreement or from making an offer, the acceptance of which by a third party may give rise to a binding agreement. By eliminating negotiations from the scope of the conduct to be restrained by the injunction, Upper Hunter and Mr Sydney will not suffer the prejudice of having their hands completely tied in relation to the Project. It was submitted on their behalf that they wish to be negotiating with third parties to get themselves into a position whereby, if these proceedings are determined in favour of the defendants, they will be able to sell or grant an interest in the Project to a third party promptly thereafter.
12. It was also submitted on behalf of Upper Hunter and Mr Sydney that they should not be restrained from giving effect to any binding agreement already entered into as this would put them in breach of contractual obligations to third parties. In circumstances where they did not submit that any such agreement had entered into, much less adduce evidence of any such agreement, I reject that submission.
13. Provided that the terms of the injunction are limited in the manner referred at [61] above, I am satisfied that the danger of the plaintiffs' claim for specific performance being effectively defeated before it has been determined on its merits if the interim injunction is refused outweighs any prejudice to Upper Hunter and Mr Sydney if the injunction is granted. Neither Mr Sydney nor Upper Hunter adduced any evidence of prejudice. They submitted that the prejudice is self-evident, in that they will be unable to put themselves in a position of being able to negotiate a sale of, or significant investment in, the Project or the Project intellectual property that they can then complete if they succeed in defending the plaintiffs' claims in these proceedings. However, that prejudice does not arise given that the interim injunction is to be limited in the manner I have indicated.
14. I do not regard the undertaking offered by Upper Hunter and Mr Sydney to give the plaintiffs 14 days' prior notice of any intention to enter into a contract as tipping the balance against granting an interim injunction. The plaintiffs have established after a contested hearing that an interim injunction is appropriate. The prospect of the Court having to hear and determine that debate in relation to specific transactions on potentially multiple occasions whenever Mr Sydney has a proposed deal in sight is singularly unattractive and inconsistent with the overriding purpose. [1]
15. I decline to make the disclosure orders sought by the plaintiffs. The plaintiffs failed to demonstrate any legitimate interest in knowing the identity of the various parties with whom Mr Sydney has conducted negotiations in the previous 18 months without concluding any agreement. In addition, as Upper Hunter submitted, the proposed disclosure orders would be onerous in that they would require it to trawl back through extensive documents already discovered in these proceedings in order to provide a subset of the information therein to the plaintiffs in affidavit form.
16. No issue was raised about the adequacy of the undertaking as to damages offered by the plaintiffs.
17. The plaintiffs sought an order that the second and fifth defendants pay the plaintiffs' costs of the interim injunction application. I see no reason why costs should not follow the event.

Conclusion and orders

1. For the reasons above, I make the following orders: 1. Upon first plaintiff by its counsel giving the usual undertaking as to damages, order that: 1. the second defendant, by itself, its servants and agents, be restrained from engaging in the Restrained Conduct (as defined in these orders) except with the prior written consent of the plaintiffs, until further order of the Court; and 2. the fifth defendant, by himself, his servants and agents, be restrained from engaging in the Restrained Conduct (as defined in these orders) except with the prior written consent of the plaintiffs, until further order of the Court. 1. Order that the second and fifth defendants pay the plaintiffs' costs of the plaintiffs' notice of motion filed on 28 May 2021, as agreed or assessed. In these orders: Restrained Conduct means making offers in relation to, entering into, performing, or giving effect to any agreement to sell, transfer, dispose of, or grant any interest in the Project Assets (including any part of the Project Assets) to any person. Project Assets means any intellectual property owned by Upper Hunter in respect of the Project, including (without limitation) the development approval for the Project, consultant reports in connection with the development approval, wind data and reports, solar data and reports, planning reports, designs for the Project infrastructure and equipment, plans for the layout of the Project, the application made on or about 7 November 2018 to Ausgrid for a right to connect to the Ausgrid 66/33/11kV zone substation at Scone, New South Wales to supply energy generated by the Project to the transmission network as a registered participant for a generating plant and documentation that is ancillary to that connection application. Project means the project that is the subject of project approval (file number S06/01144) given by the Minister for Planning dated 31 January 2010 pursuant to the former Part 3A of the Environmental Planning and Assessment Act 1979 (NSW) for the construction and operation of a renewable energy generation facility and associated infrastructure and two sites in the Upper Hunter local government area in New South Wales.

Endnote

1. Civil Procedure Act 2005 (NSW) s 56 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 August 2021