Supreme Court of SA|1996-11-14|Before: Perry J

EXECUTOR TRUSTEE LTD v DELOITTE HASKINS and SELLS and TUCKER TP No. SCGRG 93/1807 Judgment No. 5874 Number of pages - 14 Corporations [1996] SASC 5874 (14 November 1996)

COURT IN THE SUPREME COURT OF SOUTH AUSTRALIA PERRY, J

CWDS Corporations - companies code - contravention - damages in lieu of injunction - the plaintiff, a trustee for the holders of debenture stock, sued a former director of a "borrowing corporation" for damages alleging breaches of the duty to furnish to the plaintiff true and accurate reports of the financial position of the corporation pursuant to s158 of the Companies (South Australia) Code ("the Code") (s1324 of the Corporations Law) - the plaintiff did not seek an injunction, but relied on s574(8) of the Code, which creates a jurisdiction where there is power to grant an injunction "either in addition to or in substitution for the grant of the injunction" to order a person to pay damages to any other person - held by analogy with Lord Cairns Act that the words "in addition to or in substitution for the grant of the injunction" identified a situation where an injunction was sought, and if no injunction was sought, there was no power to order damages pursuant to the section - furthermore, held that the subsection did not create a right to damages where such a right did not otherwise exist. Companies (South Australia) Code ss158 and 574; Corporations Law s1324; Supreme Court Act 1935s30; Equity Act (NSW) 1880 ; Supreme Court Act (NSW) 1970 s68, referred to. Permanent Trustee Australia Ltd and Anor v Perpetual Trustee Co Ltd , not followed. Spry, Equitable Remedies 4th ed 616; Dixson v Tange and Anor ; Horsler and Anor v Zorro ; Johnson and Anor v Agnew ; Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd ; ; Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (Reg) ; ; State Transport Authority v Apex Quarries Ltd ; , considered.

Counsel for applicant David John Tucker: Mr H Abbott

Solicitors for applicant David John Tucker: Rowell Forest and Co.

Counsel for respondents: Mr R D G Gleeson

Solicitors for respondents: Phillips Fox

JUDGE1 PERRY J

This is an application by the third party David John Tucker (�Mr�Tucker�) to strike out part of the third party notice and statement of claim.

The plaintiff Executor Trustee Australia Ltd (�ETA�) was appointed trustee for the holders of debenture stock issued by Pegasus Securities Ltd (In Liquidation) (Receiver Appointed) (�Pegasus�) pursuant to a trust deed dated 27�May 1983 (�the trust deed�). Between the financial years ending 30�June 1984 and 30�June 1990, the defendant Deloitte Haskins and Sells (Reg�d) and its successor, the defendant Deloitte Ross Tohmatsu (Reg�d) were auditors of Pegasus. I will hereafter refer to both entities simply as �Deloittes�. Mr�Tucker was at the relevant time a director of Pegasus and of a number of related companies.

Pursuant to s158 of the Companies (South Australia) Code (�the Code�), Pegasus, being a �borrowing corporation� within the meaning of the section, owed a duty to furnish periodic reports to ETA to be signed by not less than two of its directors.

In the third party statement of claim, Deloittes assert that Mr�Tucker breached duties owed to ETA pursuant to s158 of the Code and pursuant to the terms of the trust deed. More particularly, Deloittes allege that Mr�Tucker owed a duty to take reasonable care in and about the provision of the s158 reports, and also as to the preparation of certain other reports and certificates required under various clauses of the trust deed.

The alleged breaches include the assertion that Mr�Tucker failed properly to assess the recoverability of and the adequacy of the provision for certain bad and doubtful debts due to Pegasus, to assess the adequacy and appropriateness of the valuation of shares held by Pegasus in certain subsidiary and related companies, and generally to cause Pegasus or its directors to inform ETA accurately of its financial position.

In consequence of the alleged breaches of the duties which it asserts Mr�Tucker owed to ETA under the Code, Deloittes assert that pursuant to s574 Mr�Tucker is liable to ETA in damages.

S574 of the Code is as follows: �(1) Where a person has engaged, is engaging or is proposing to engage in any conduct that constituted, constitutes or would constitute a contravention of this Code, the Court may, on the application of- (a) the Commission; or (b) any person whose interests have been, are or would be affected by the conduct,grant an injunction restraining the first-mentioned person from engaging in the conduct and, if in the opinion of the Court it is desirable to do so, requiring that person to do any act or thing.

(2) Where a person has refused or failed, is refusing or failing, or is proposing to refuse or fail, to do an act or thing that he is required by this Code to do, the Court may, on the application of- (a) the Commission; or (b) any person whose interests have been, are or would be affected by the refusal or failure to do that act or thing,grant an injunction requiring the first-mentioned person to do that act or thing.

(3) Where an application is made to the Court for an injunction under sub-section (1), the Court may, if in the opinion of the Court it is desirable to do so, before considering the application, grant an interim injunction restraining a person from engaging in conduct of the kind referred to in sub-section (1) pending the determination of the application.

(4) The Court may rescind or vary an injunction granted under sub-section (1), (2) or (3).

(5) Where an application is made to the Court for the grant of an injunction restraining a person from engaging in conduct of a particular kind, the power of the Court to grant the injunction may be exercised- (a) if the Court is satisfied that the person has engaged in conduct of that kind - whether or not it appears to the Court that the person intends to engage again, or to continue to engage, in conduct of that kind; or (b) if it appears to the Court that, in the event that an injunction is not granted, it is likely the person will engage in conduct of that kind - whether or not the person has previously engaged in conduct of that kind and whether or not there is an imminent danger of substantial damage to any person if the first- mentioned person engages in conduct of that kind.

(6) Where an application is made to the Court for the grant of an injunction requiring a person to do a particular act or thing, the power of the Court to grant the injunction may be exercised- (a) if the Court is satisfied that the person has refused or failed to do that act or thing - whether or not it appears to the Court that the person intends to refuse or fail again, or to continue to refuse or fail, to do that act or thing; or (b) if it appears to the Court that, in the event that an injunction is not granted, it is likely the person will refuse or fail to do that act or thing - whether or not the person has previously refused or failed to do that act or thing and whether or not there is an imminent danger of substantial damage to any person if the first-mentioned person refuses or fails to do that act or

(7) Where the Commission makes an application to the Court for the grant of an injunction under this section, the Court shall not require the Commission or any other person, as a condition of granting an interim injunction, to give any undertakings as to damages.(8) Where the Court has power under this section to grant an injunction restraining a person from engaging in particular conduct, or requiring a person to do a particular act or thing, the Court may, either in addition to or in substitution for the grant of the injunction, order that person to pay damages to any other person.�

It will be seen that s574(8) enables the Court in the circumstances there postulated to order a person with respect to whom the Court has power to grant an injunction �to pay damages to any other person�. It is pursuant to that sub- section that Deloittes claims to be entitled to an order against Mr�Tucker that he pay damages to ETA. Its standing to make such a claim is said to arise by reference to subs(1), in that Deloittes is said to be a person �whose interests have been � affected� by the conduct of Mr�Tucker.

The relevant order sought in the prayer for relief in the third party statement of claim is: �(B) Further, or alternatively, an order pursuant to s574 of the Code, or s1324 of the Corporations Law, that Mr�Tucker pay damages to ETA, or ETA as trustee for the debenture holders of Pegasus, in respect of the amount of the loss and damage suffered by ETA, or the debenture holders of Pegasus, the subject of the claim by ETA in the proceedings herein.�

The strike-out application targets that plea in the prayer for relief, together with paragraphs 24 to 27 (inclusive) of the third party statement of claim, being the paragraphs which contain the allegations relevant to the claim under the Code.

The prayer for relief also refers to s1324 of the Corporations Law. That is in substantially similar terms to s574 of the Code, such differences as there are between the two provisions being irrelevant for present purposes. It is doubtful if the Corporations Law applies at all. It is likely that the matter is governed by the Code provisions. It is unnecessary for the purposes of dealing with the present application further to address that aspect of the matter. For simplicity, I will continue to refer only to the Code provisions.

Put shortly, Mr�Tucker�s argument in support of the application is that the Court has no jurisdiction to entertain a claim for damages under s574(8) of the Code, disengaged from any application for an injunction. Mr�Tucker contends that the jurisdiction under s574 may only be invoked by an application for an injunction. Absent such an application, the Court has no �power under this section to grant an injunction� within the meaning of those words in s574(8).

S574(1) and (2) both deal expressly with injunctions. Subs(3) deals with interim injunctions, and subs(4) confers a power to rescind or vary an injunction granted under the section. Subs(5) and (6) amplify the power to grant an injunction by making it clear that it may be granted whether or not similar conduct of the kind sought to be restrained has been engaged in before the application is brought, and whether or not it appears likely that the person concerned intends to engage in conduct of that kind in the future. Subs(7) extinguishes the common law power to require, as a condition of granting an interim injunction, an undertaking as to damages in circumstances where the Commission makes the application.

Pausing there, from the observations which I have so far made, it is clear that all of the subsections of s574 down to subs(8) have to do with applications for an injunction, the circumstances in which such an application may be granted, and the terms of an order granting an injunction. While subs(7) refers to damages, it does so only in the context of an undertaking to pay damages if any should be occasioned by the grant of the injunction.

On the other hand, the reference in subs(8) to damages must be taken to relate to damages shown to have resulted from the conduct sought to be restrained.

Against that background there are strong arguments that the words �in addition to or in substitution for the grant of the injunction� in subs(8) identify a situation where an injunction is sought, but the Court exercises the discretion to make an order for payment of damages at the same time as granting the injunction or in lieu of doing so. Given the statutory context, it is difficult to accept the argument advanced by Deloittes that the power to award damages under subs(8) exists independently of any application for an injunction, or if such a power did in some abstract sense exist, that it could be invoked absent an application for an injunction.

True it is that the words �where the Court has power under this section to grant an injunction� could possibly identify a situation where the power, in the sense of jurisdiction, exists to grant an injunction, but there has not necessarily been an attempt to invoke it. In my opinion, however, that would be a strained interpretation of the section, and would not sit comfortably with the words �in addition to or in substitution for the grant of the injunction�.

A different view of the section was taken by Cohen�J sitting in the Supreme Court of New South Wales (Equity Division) in Permanent Trustee Australia Ltd and Anor v Perpetual Trustee Co Ltd (1994) 15 ACSR 722.

In that case, the ASC sought an order that Permanent Trustee, which was the trustee of a unit trust, and another company, which was the manager of the funds invested by the trust, pay damages for losses alleged to have been sustained by investors in certain units in the trust. The claim was made under s574(8). It was met with similar arguments to those which have been presented to me on the present application.

In the course of his decision, Cohen�J said (at 727): �The question arises whether the Commission is entitled to claim damages on behalf of unit holders without seeking any injunctive relief. It was submitted on behalf of Perpetual Trustee that s574(8) does not give a general power to claim damages but that it can only be used in the same way as the provisions of Lord Cairns Act now set out in s68 of the Supreme Court Act.�

I interpolate that the provisions of Lord Cairns Act, which have been reproduced in a form substantially similar to those appearing in the s68 of Supreme Court Act (NSW), appear in this State in the Supreme Court Act 1935, s30. The New South Wales provision is in the following terms: �S68 Where the Court has power- (a) to grant an injunction against the breach of any covenant, contract or agreement, or against the commission or continuance of any wrongful act; or (b) to order the specific performance of any covenant, contract or agreement, the Court may award damages to the party injured either in addition to or in substitution for the injunction or specific performance.�

After the passage in his judgment in Permanent Trustee which I have just cited, Cohen�J continues (at 727): �In effect, it is said that an injunction must be sought and it is only where in particular circumstances it is refused that damages may be awarded. For the ASC it was submitted that the power to award damages is independent of any claim for injunction and that there is a distinction between the wording of subs(8) and s68. It was further submitted that if this were not so it would have been unnecessary to insert subs(8). In any case, so it is submitted, there was power in the court to grant an injunction because of the wide provisions contained in s475(5) and (6). (Sic, 574(5) and (6).) When one looks at the wording of s68 and that of s574(8), there is not a great deal of textual difference, certainly not of

any significance. Nevertheless, the circumstances of the creation of the two sections are quite different. Section 68 is a clear successor, through the lineage of s32 of the Equity Act 1880 and s9 of the Equity Act 1901, to s2 of Lord Cairns Act which was passed in 1858. That Act was intended to overcome the lack of power, or uncertainty as to power, of the Court of Chancery to award damages where injunctions or specific performance were sought. It has continued as a particular aspect of rights in equity. On the other hand s574, notwithstanding the similar wording in subs(8), was intended to widen the scope of persons who could seek relief from contraventions of the Companies Code. Those breaches have little to do with the situation which existed in the middle of the 19th century where the Chancery Court had no jurisdiction to grant damages even similar to, let alone identical with, the power given to the Queen�s Bench. Lord Cairns Act gave that power, which has been interpreted as having a somewhat limited scope. In my opinion the Code stands alone, unaffected by the principles which have been applied to the powers to grant damages under Lord Cairns Act and its successors.�

I must say with great respect to Cohen�J that I have some difficulty with the proposition that s584(8) should not be construed in the manner in which Lord Cairns Act has been construed.

Be that as it may, in the Permanent Trustee case, Cohen� did not in fact have to make an order for payment of damages, as the claims against Permanent Trustee had been settled on the basis of an agreed payment of $4.5 million. The issue for Cohen�J was to determine whether those monies should be paid to the ASC for distribution to the unit holders, being the unit holders as at the date upon which a transaction was entered into which occasioned the loss the subject of the claim for damages, or whether the monies should be paid to Perpetual Trustee for the benefit of the fund administered by it on behalf of the unit holders generally as at the date of payment to Permanent Trustee. In those circumstances it is at least arguable that the observations made by Cohen�J with respect to s574(8) were strictly obiter, given that his task was to determine the application of an agreed amount of damages.

But even if obiter, Cohen�J�s observations, if accepted, would, on the face of it, sustain the validity of the claim the subject of the application before me.

It is unquestionably desirable, where possible, to maintain comity between Judges in different jurisdictions in Australia, particularly when dealing with similar sections in the Corporations Law. It is, therefore, with a deal of diffidence and with great respect to the judgment of Cohen�J that I feel obliged to take another view.

In doing so, I acknowledge that the view which I have expressed, namely that the power under s574(8) to order the payment of damages may only be exercised in a case where there is an application before the court for an injunction, despite the observations made by Cohen�J, has not been accorded universal acceptance in the context of the analogous provisions in Lord Cairns Act itself. See Spry, Equitable Remedies (4th edition) at 616 where the learned author, in discussing the effect of Lord Cairns Act, observes:��.. if there is in fact jurisdiction to award an injunction or specific performance, it is probably unnecessary that an injunction or specific performance should have been claimed by the plaintiff, it being sufficient under these circumstances that the plaintiff merely should claim equitable damages.�

The learned author goes on to cite Dixson v Tange and Anor (1891) 12 LR(NSW) Eq 204 and Horsler and Anor v Zorro (1975) Ch 302.

In Dixson v Tange and Anor the plaintiff, a builder, sued the defendant, the building owner, for damages for refusing to pay for the erection of a building which the defendant claimed was not in accordance with the specifications. The defendant raised by way of a demurrer the argument that the statement of claim raised no equity, and the remedy of the plaintiff was, if anything, at law.

Owen�J, after referring to s32 of the Equity Act (NSW) 1880, which was at that time the analogue in New South Wales of Lord Cairns Act, went on to say (at 206- 207): �The point then is this - has the Court in this suit jurisdiction to grant an injunction or to make a decree for specific performance? It appears to me that the plaintiff has, in his statement of claim, set out a wrongful act, in respect of which he might have claimed an injunction, and had he done so the Court would have had jurisdiction to grant the injunction and also damages. According to the statement of claim, the suit arose out of a contract which the plaintiff, a builder, was carrying out for the defendant Tange and his architect, Blacket, and by which the architect had power to vary the specifications. According to the original specifications the foundations of the building, which was the subject matter of the contract, were �to be composed of one cask of Portland cement and about two parts of clean sharp sand to one cubic yard of clean broken metal, such as Nepean,� but the defendant Blacket afterwards, in pursuance of the powers mentioned, substituted �quarry rubbish� for �clean broken metal, such as Nepean.� Then it is alleged that the plaintiff laid the foundations in pursuance of the specifications as varied and built some 20,000 bricks upon them, that Blacket then told him that the work ought to have been carried out according to the original specifications, and when the

plaintiff expostulated with him, said that Tange had condemned the work, and that therefore he must do so also - ie, that the architect condemned the work not on his own judgment, but because it had been condemned by his employer. It is also alleged that both the defendants were aware while the work was going on that it was being done according to the specifications as varied by Blacket, and that the objection was not taken till the work was completed. The allegations I must take to be true on demurrer, and, therefore, I could grant an injunction restraining the defendants from continuing these wrongful acts, or a mandatory injunction ordering them to allow the plaintiff to complete his contract, and therefore, under s32 - which provides not that the Court shall grant an injunction, but merely that it shall have jurisdiction to entertain an application for an injunction - I have power to grant damages. The demurrer is, therefore, overruled.�

In Horsler and Anor v Zorro (supra), the plaintiff originally sued for specific performance of a contract pursuant to which the defendant agreed to sell a house to the plaintiffs. Before the action came on for hearing, the claim for specific performance was dropped. The plaintiff thereafter claimed only for rescission and damages as a separate head. The matter came before Megarry�J on a summons to discharge an order made by a master, which, after reciting that it appeared that the contract was rescinded, directed an inquiry �by way of damages for the non-performance by the defendant of the said contract�.

In the course of his judgment Megarry�J observed (ibid 307): �The damages had been awarded on the basis of Wroth v Tyler (1974) Ch 30 being the difference between the contract price and the value of the property at the date not of the breach but of the order. Yet such an award is based on the jurisdiction conferred by Lord Cairns� Act 1858 (Chancery Amendment Act 1858), which arises when damages are awarded in substitution for specific performance; and in this case the claim for specific performance had disappeared when the amendment was made on May 16, before the order for rescission and damages was made. There are obvious difficulties in awarding damages as a substitute for what is not even claimed.�

It is important to note the precise point being made by Megarry�J. That is, that whatever may have been the position as to an entitlement to an award of damages on ordinary common law principles, damages assessed as at the date of the order could only be so assessed pursuant to Lord Cairns� Act. It is as to that aspect of the matter, and not as to the strict construction of Lord Cairns� Act, that in Johnson and Anor v Agnew (1980) AC 367 that the House of Lords subsequently expressed disagreement with the view taken by Megarry�J.

In Johnson and Anor v Agnew (supra) a decree of specific performance was ordered but not complied with. It was held that the plaintiff might in those circumstances apply to the court to �put an end� to the contract, and that if he did so, he was entitled to damages for the breach of contract.

The decision highlights the distinction between the election which a vendor must make if the purchaser fails to complete, that election (which must be made before the action is brought) being either to accept the repudiation and sue for damages, or to seek an order for specific performance, together with such damages as might arise from the delay in performance, and the situation which arises where an order for specific performance is sought and made but not complied with. In the latter case, the vendor may either apply to the court for enforcement of the order, or may apply to the court to dissolve the order, put an end to the contract, and award damages for breach ( See ibid per Lord Wilberforce at 394).

Putting it another way, the decision of the House of Lords in that case stands for the proposition that a decree of specific performance does not do away with the right to damages for breach of contract if the decree is not performed. The party who is entitled to the benefit of the decree may in those circumstances seek to pursue the alternative remedy in damages for breach of contract, which may then be assessed as at the date of the order.

Properly understood, the decision in Johnson and Anor v Agnew cannot be regarded as determinative of the relevant question of construction of Lord Cairn�s Act, and, by analogy, of the question raised by the application before me.

In any event, my task is to construe s574 of the Code. While the analogy with Lord Cairns� Act may plainly be perceived, decisions under that Act cannot be determinative of the construction of the Code.

A feature of the immediate context in which subs(8) of s574 appears is that every other subsection of s574 expressly deals, in one way or another, with applications for an injunction. In subs(8) we then see the words �in addition to or in substitution for the grant of the injunction ��. In my opinion, the words �the injunction� refer to an injunction sought pursuant to the preceding subsections.

That view of the section is sufficient to justify the making of the order sought in the application. If, however, I was to be wrong in the view which I have so far expressed, it appears to me that the application must succeed for a different and rather more fundamental reason.

In Johnson and Anor v Agnew (supra) it was made clear that with certain limited exceptions, Lord Cairns� Act did not create a right to damages which did not previously in law exist, as opposed to creating a jurisdiction in equity to award damages at common law. See the speech of Lord Wilberforce (ibid at 400. Contrary to what Megarry�J had said in Horsler and Anor v Zorro, the House of Lords held that in those circumstances, the common law rule that damages are ordinarily to be assessed as at the date of the breach is not an absolute rule. See per Lord Wilberforce, with whom the other members agreed, at 400-401) �Since the decision of this House, by majority, in Leeds Industrial Co-operative Society Ltd v Slack (1924) AC 851 it is clear that the jurisdiction to award damages in accordance with section 2 of Lord Cairns� Act (accepted by the House as surviving the repeal of the Act) may arise in some cases in which damages could not be recovered at common law: examples of this would be damages in lieu of a quia timet injunction and damages for breach of a restrictive covenant to which the plaintiff was not a party. To this extent the Act created a power to award damages which did not exist before at common law. But apart from these, and similar cases where damages could not be claimed at all at common law, there is sound authority for the proposition that the Act does not provide for the assessment of damages on any new basis. The wording of section 2

�may be assessed in such manner as the court shall direct� does not so suggest, but clearly refers only to procedure.In Ferguson v Wilson (1866) LR 2 Ch 77, 88 Turner�LJ sitting in a court which included Sir Hugh Cairns himself expressed the clear opinion that the purpose of the Act was to enable a court of equity to grant those damages which another court might give; a similar opinion was strongly expressed by Kay�J in Rock Portland Cement Co Ltd v Wilson (1882) 52 LJ Ch 214 and Fry on Specific Performance 6th ed. Page 602 is of the same opinion. In Wroth v Tyler (1974) Ch 30, however, Meggary�J, relying on the words �in lieu of specific performance� reached the view that damages under the Act should be assessed as on the date when specific performance could have been ordered, in that case as at the date of the judgment of the court. This case was followed in Grant v Dawkins (1973) 1 WLR 1406. If this establishes a different basis from that applicable at common law, I could not agree with it, but in Horsler v Zorro (1975) Ch 302, 316 Megarry�J went so far as to indicate his view that there is no inflexible rule that common law damages must be assessed as at the date of the breach. Furthermore, in Malhotra v Choudhury (1980) Ch 52 the Court of Appeal expressly decided that, in a case where damages are given in substitution for an order for specific performance, both equity and the common law would award damages on the same basis - in that case as on the date of judgment. On the balance of these authorities and also on principle, I find in the Act no warrant for the court awarding damages differently from

common law damages, but the question is left open on what date such damages, however awarded, out to be assessed.�

To recognise that limitation is not to deny the greater flexibility which might govern an award of equitable damages in those cases where there is found to be an entitlement to damages on that footing (see Spry, Equitable Remedies, 4th ed. Pages 631-634). The passage to which I have just referred in Lord Wilberforce�s speech in Johnson and Anor v Agnew (supra) has been approved in the course of the decision of the High Court of Australia in Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd [1981] HCA 75; (1981) 146 CLR 249 per Aickin J at 267.

In the case of s574 of the Code, there are additional reasons why the word �damages� in subs(8) could hardly be taken to identify damages other than with respect to a legal obligation created by some other provision of the statute or possibly by some other statute or at common law.

There are a number of provisions in the Code, and for that matter in the Corporations Law, pursuant to which there is an express entitlement to recover damages, or compensation for loss. For example, an officer of a corporation (which includes a director) may be exposed to a liability to repay as a debt any profit made by the officer or another person, or any loss to a corporation incurred, as a result of a contravention of any of the duties imposed under s229.

Is it to be suggested that the power to award damages under s 574(8) is in some way to run in parallel with s229 (and similar provisions) so as to create alternative remedies to compensate for losses which are the product of a contravention of the Code, in the one case (under s229) as a �debt�, in the other (under s 574(8)) as �damages� (presumably at large)?

Is it to be suggested that absent any specific power to award compensation in the context of other provisions of the Code where there is spelt out a duty of one kind or another, some general power to award damages in the event of a contravention of such a provision is to be erected out of s574(8)?

It would be a strange result if, as though by some kind of side wind, some general power to award damages with respect to contraventions of the Code could be regarded as having been created by s574(8) other than in circumstances in which a liability to pay damages is expressly provided for in the other substantive provisions of the Code, or possibly by the general law. This is particularly so, given that s574 is, for the reasons which I have indicated, a section which must be regarded as focussing upon the manner in which the jurisdiction to grant injunctions is created and falls to be exercised.

Such a result is even more difficult to accept when regard is had to the fact that on the construction which Deloittes suggest in their argument before me, the right to claim damages with respect to contraventions (other than in circumstances where a particular section specifying the contravention includes a remedy in damages or otherwise for loss) can only be activated if the claimant goes through the empty exercise of demonstrating that at some stage there would have been a power under s574 to issue an injunction. But the argument assumes that the claimant does not seek an injunction! There would seem to be no sense in limiting what is suggested as a general power to award damages to situations where the court had power at some stage to grant an injunction, but no injunction is sought.

If there was to be created in the Code a general power to award damages for contraventions of the Act, one would expect to see it disengaged from a section dealing with the jurisdiction to make an injunction. Putting it another way, it would be odd to think that the legislature intended to create an ability to award damages not otherwise recoverable, only where there was power to order an injunction.

Earlier in these reasons, after referring to the fact that the prayer for relief in the third party notice also invokes s1324 of the Corporations Law, I indicated that I would deal with the matter only by reference to the provisions of the Code.

For completeness, I should say that I am well aware that s1324 of the Corporations Law is, at least in the early part of the section, cast in a somewhat different way from that which appears in s574 of the Code. Unlike s574, s1324(1) is in general terms purporting to render the section applicable to any situation where a person �has engaged, is engaging or is proposing to engage� in conduct constituting a contravention, or is in some other way associated with a contravention or attempt to contravene the Corporations Law. However, the generality of subs(1) of s1324 does not deflect me from applying the same process of reasoning as that which I have brought to bear with respect to s574 of the Code to s1324(10), which is in precisely the same terms as s574(8).

Furthermore, under the Law, a further dimension is created with respect to the observations which I have made as to the difficulties which would be posed if a general right to damages of the kind suggested by Deloittes was to be read into s574(8) or s1324(10) of the law. I draw attention to s1325 which sets out a detailed code as to certain relief, including a right to orders for the reimbursement of loss for damage suffered as a result of certain specific contraventions, namely, contraventions of Part 7.11 (conduct in relation to securities) and 7.12 (offering securities for subscription or purchase).

Before leaving the matter I deal with one other argument put by Mr Gleeson of counsel for Mr Tucker.

He submitted that on the construction of s574(8), which in the result I have adopted, the subsection would have no real work to do. With respect, that is not so. The construction which I have found to apply makes it plain that damages might be awarded even if not expressly claimed in the proceedings pursuant to which the injunction is sought. Furthermore, the section operates in aid of the principle that an injunction will not usually be granted where damages would be an adequate remedy (see, for example, State Transport Authority v Apex Quarries Ltd [1988] VicRp 26; (1988) VR 187). True it is that the word �damages� may not be apt to describe, for example, the debt which is recoverable under s229. But I think it is a case of the wording of the Act falling short of the intention of the legislature. No doubt the shortfall can be made up by a flexible application of the common law principle. Consistently with that principle, there is no reason why in the exercise of the discretion as to the issue of an injunction it should not be refused if any other remedy, whether sounding in damages or not, would be an adequate remedy.

It was urged upon me by Mr�Gleeson that unless I was clearly of the view that the relevant parts of the statement of claim were properly sustainable as pleadings, I should allow the question to be determined at the trial. However, I am of the view that I should dispose of the point now.

It is true that it has been observed:�� the R�46.18 procedure is a summary procedure and should be reserved for a plain case. It is not apt for the resolution of difficult questions of law� (Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (Reg) [1994] SASC 4402; (1994) 61 SASR 424 per King�CJ, with whom Millhouse�J agreed).

But after making that observation, King�CJ went on to say:�Perhaps the demurrer type procedure envisaged by r�75.02(c) would have been more appropriate. I think, however, that having reached the conclusion which I have reached after full argument and consideration, it would be artificial to dismiss the appeal on the ground that the r�75.02 procedure might have been preferable. A conclusion does not necessarily cease to be plain because it has taken argument and consideration to arrive at it. I have reached a clear conclusion that the statement of claim does not disclose a cause of action in negligence and I think that the Court should give effect to that view by allowing the appeal.�

Having come to a clear view about this matter, it is better that it be expressed now. If a ruling can conveniently be made at this stage of the proceedings, it should be made in the interest of Mr�Tucker being made aware of the case which he faces at the trial.

For these reasons, I would allow the application and strike out the prayer for relief in the third party statement of claim being paragraph (B), together with paragraphs 24 to 27 of the third party statement of claim, together with the words in the third party notice �or pursuant to s574 of the Companies (South Australia) Code or s1324 of the Corporations Law that you pay damages to the plaintiff ��.

Supreme Court Act 1935

Lord Cairns� Act 1858

(Chancery Amendment Act 1858

Supreme Court Act 1935

Lord Cairns� Act 1858

(Chancery Amendment Act 1858

EXECUTOR TRUSTEE LTD v DELOITTE HASKINS and SELLS and TUCKER TP No. SCGRG 93/1807 Judgment No. 5874 Number of pages - 14 Corporations [1996] SASC 5874

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Source

Judgment (76 paragraphs)

EXECUTOR TRUSTEE LTD v DELOITTE HASKINS and SELLS and TUCKER TP No. SCGRG 93/1807 Judgment No. 5874 Number of pages - 14 Corporations [1996] SASC 5874 (14 November 1996)

Parties

Legislation Cited (10)

Cases Cited (2)