Balance of Convenience and Ultimate Decision on the Motion
326 JMG has proved that it has a serious and not a speculative case, which has a real possibility of ultimate success and that it has contractual interests, which may well be presently being substantially eroded by the conduct of NMG and the Bank. It has shown a serious and far from speculative case in support of the proposition that NMG has breached and continues to breach its contractual obligations provided for in the Consultancy Agreement. JMG has established serious grounds for concern as to the Bank's conduct, and as to whether JMG's clear interests in the proper commercialisation of the AUSMAQ service, and in the activities of NMG and Systems, are presently being vitally affected by the failure to hold management committee meetings, by JMG's effective exclusion from its right to be represented at management committee meetings and from the effective failure to permit the holding of the clause 4.1(a) meetings between JMG and a management committee. JMG has shown a serious and not a speculative case to the effect that it has been effectively excluded from participating, as was intended by the Consultancy Agreement, in the preparation of proposed Business Plans. JMG has shown that it has a serious case in relation to whether or not the Bank is presently, by the subject Services, utilising or about to utilise the "System IP rights" as defined by the Consulting Agreement, without having brought itself or those entities, such as NAFM, which apparently are to run the new services, under the rubric of the Consultancy Agreement by accession. [See Schedule 3 and clause 20.2]
327 There are notwithstanding that JMG has shown a serious case on the interlocutory motion to the above effect, very clear difficulties in the Court presently granting the interlocutory relief sought. At the end of the day, however, the simple fact is that JMG has no proprietary interest in the undertakings of NMG or AUSMAQ Systems. It has contractual entitlements of value and undoubtedly, if its causes of action are made out at the final hearing, a very substantial claim to unliquidated damages against the Bank.
328 To my mind it is appropriate, together with the other discretionary considerations referred to below, to bear in mind the central structure of JMG's transaction with the Bank at inception. That transaction retained for JMG only contractual rights. JMG has no proprietary interest in the AUSMAQ Service or in the System I.P. Rights.
329 In essence, the claims to interlocutory relief resolve into four compartments. The first is the claim for appointment of receivers. The second is the claim for sundry injunctions seeking to bring within NMG, the Bank's proposed services already referred to. The third is comprised of injunctions seeking to force the Bank to permit NMG to presently operate by Management Committee Meetings, and to permit the holding of the clause 4.1(a) meeting or meetings between the management committee and JMG. The fourth is comprised of those orders seeking various types of accounting on an interim basis.
330 The receivership applications have already been dealt with. The receivership orders are not orders which in this case and on these facts are appropriate to be made on an interlocutory basis. The very fabric of the underlying businesses and the environment in which they operate must mean that the receivership applications fail. Further, the possibility of repeated applications for rulings on the mode by which the receiver sought to act as an umpire in relation to conflicting claims which may be anticipated from both parties as to:
(a) the proper construction of the Consultancy Agreement;
(b) how the AUSMAQ service should be operated;
(c) how business opportunities for that service in Australia and overseas should be furthered,
is a strong factor suggesting that this form of relief is inappropriate. [Cf Patrick Stevedores (supra) - and in particular the emphasised section of the extract from the joint judgment].
331 Insofar as injunctions are sought by way of orders calculated to bring the subject operations of the Bank relating to The Gateway, Margin Lending, FX Auto Dealing and Maple Leaf Services within the umbrella of NMG, there are very real difficulties which stand in the plaintiff's path. JMG simply has no proprietary interest in, nor any right to control the assets of NMG or of AUSMAQ Systems. Mandatory interlocutory injunctions carry a higher risk of injustice than prohibitory injunctions as they go further than the preservation of the status quo by requiring a party [in this case the defendants] to take some new positive step or to undo what has been done in the past. Hence, requiring a party to take positive steps usually causes more waste of time and money if it turns out to have been wrongly granted than an order which merely causes delay by restraining the party from doing something which he was otherwise entitled to do. It is also particularly difficult to formulate with sufficient precision the terms of the mandatory interlocutory injunctions; see the judgment of Hoffman J as he then was in Films Rover International Ltd v Cannon Film Sales Ltd [1986] 3 All ER 772 at 781; see CS Phillips Pty Limited & Anor v Baulderstone Hornibrook Pty Limited (Unreported, Supreme Court of New South Wales, 26 October 1994, Giles J).
332 Relevant to all of the claims to interlocutory relief, and particularly to the claims in respect of the receivership orders and the orders seeking to bring NMG's and AUSMAQ System's operations under the rubric of NMG, is the inadequacy of the applicant's undertaking as to damages. Also relevant is the delay in pursuing the proceedings.
333 As to the undertaking as to damages, the tax return for Idoport for the year ending 30 June 1998 (DX1 at 395 - 398) relevantly provides that the company received income of $895,361 during the course of that year. Expenses for the year totalled $888,006, with $473,619 attributed to "contractor, subcontractor and commission expenses". The 1998 balance sheet, (DX1 at 399 - 400) part of the last published accounts (T 16.40) records total assets of $229,808 and total liabilities of $219,511. The tax return for Market Holdings Pty Limited (DX1 at 403 - 406) is also for the year ending 30 June 1998. It relevantly provides that the company received no income during the course of the year and incurred expenses of $1,910. The 1998 balance sheet, of that company, also the last published, records total assets of $12,850 and total liabilities of $135,779, giving negative shareholder funds of $120,979.79 (T 16.30 - .35).
334 Where the court is balancing monetary disadvantages as between a plaintiff and defendant, the inability to give a valuable undertaking as to damages is a factor which can be taken into account in assessing the balance of convenience, and may be decisive: Wentworth v Wentworth (Unreported, Supreme Court of New South Wales, 12 June 1997, Hodgson J.)
335 As to the bank guarantee earlier referred to in the judgment, the proposition that the guarantee leaves the plaintiffs at risk as the Bank's shareholders' funds are substantially less than the plaintiffs' claim fails to recognise that it is one thing to claim damages of up to $US 21 billion and altogether another matter to substantiate such a claim at a final hearing. Clearly enough an unlimited guarantee given by the Bank is a matter of substantial value of the highest order.
336 The matter of delay has already been referred to. This is a case in which, in late June 1998, Mr Garnsey QC forwarded to the general counsel of the Bank the draft statement of claim foreshadowing a claim to the appointment of receivers, or receivers and managers, to the assets, business and undertaking of NMG, Systems, and other companies of the NMG Group including the AUSMAQ Service and the AUSMAQ IP, and to such parts of the assets, business and undertakings of the Bank and NAFM in which the AUSMAQ IP and the AUSMAQ Service had been employed. Later on 19 August 1998, JMG, by Mr Maconochie, forwarded to NMG, attention Mr Meikle, a detailed letter enclosing an expanded form of draft statement of claim. On this occasion the draft form of statement of claim [exhibit DX 1 page 241] foreshadowed interlocutory orders and injunctions in very similar form to those presently sought almost precisely one year later. By letter dated 24 September 1998 from Freehill Hollingdale & Page, solicitors for the defendants, to Withnell Hetherington, solicitors for the plaintiffs, it was confirmed that Mr Hetherington had confirmed to Mr Healey that the plaintiffs "would not be seeking interlocutory orders against our clients".
337 Later on 24 September 1998 Withnell Hetherington wrote to Freehill Hollingdale & Page advising:
'you enquired as to our clients' intentions in relation to the interlocutory orders sought in the summons. We will be writing to you well before the return date of the proceedings seeking undertakings from your clients to be given to the Court. Our clients' intentions concerning the interlocutory orders will depend on your response.
[Exhibit DX page 248]
338 By letter dated 30 September 1998 Freehill Hollingdale & Page wrote to Withnelll Hetherington advising:
'Your clients have foreshadowed [in the summons] that they will seek various interlocutory orders against our clients on 16 October 1998. In particular, your clients apparently intend to seek the appointment of a receiver to:
* the businesses of NMG and AUSMAQ Systems
* certain parts of NAB and NAFM
It is a most serious matter to seek orders of the kind your client seeks . It is for this reason that we wrote to you on 24 September 1998 seeking your client's immediate clarification of their position. Your letter of the same day provided no such clarification. Instead of responding to our request for information, you said that at some stage "well before the return date" you will be seeking unspecified undertakings from our clients and that your clients' attitude to seeking interlocutory relief will depend upon our clients' response'.
[DX 249] [emphasis added]
339 The correspondence continued to pass between the two firms of solicitors. Freehill Hollingdale and Page wrote on 8 October 1998 complaining that despite numerous undertakings to the contrary, the plaintiffs had still not made their position clear as to interlocutory relief.
340 By letter of 8 October 1998 Withnell Hetherington wrote to Freehill Hollingdale & Page enclosing draft undertakings and advising that in the absence of the undertakings being given "the plaintiffs will seek appropriate directions on the return date for the hearing of an application for interlocutory relief in the form of the draft short minutes".
341 The proposed undertakings were congruent generally with the orders sought in the notice of motion before me in mid 1999.
342 The plaintiffs declined to give those undertakings - see letter from Freehill Hollingdale & Page of 15 October 1998 [DX 278].
343 Thereafter the plaintiffs, at the directions hearing of 16 October 1998, did not seek interlocutory orders and the position which ultimately obtained was that the plaintiffs did not pursue the notice of motion for interlocutory relief until well into 1999. In early June the amended notice of motion upon which the plaintiffs moved was filed.
344 These are extraordinary delays in proceeding with the applications now made. I do not accept the plaintiffs' explanation that it was not appropriate to seek interlocutory relief until the Bank had further formalised its particular plans with respect to the known services. And whilst I do certainly accept that substantial difficulties would always have been perceived in the plaintiffs' camp, in terms of progressing an interlocutory application of the type here pursued by way of having to produce the necessary evidence, the plaintiffs always took the risk that the Court, in the exercise of its discretion, would take into account as an important matter, the plaintiffs' delay. That risk is now realised. A significant ground for the Court's refusal to grant the bulk of the relief here sought is by reason of the plaintiffs' delay.
345 I turn next to the claimed injunctive relief which would require NMG to proceed to hold management committee meetings, thereby permitting JMG in being entitled to meet with the management committee [clause 4.1(a)], that which is asserted to be its proper role in relation to preparation of draft Business Plans. I have given close consideration to the question of whether these are orders which ought now to be made at an interlocutory level. The plaintiffs submit that no particular prejudice is discernible from the defendants' perspective, in permitting, as it contracted to permit, JMG by two nominated representatives to attend at Management Committee Meetings. The plaintiffs argue that the suggestion that there are now irreconcilable difficulties which must render such Management Committee Meetings abortive should be rejected.
346 One of the considerations which it may be thought should be treated as relevant in aid of the plaintiffs' argument that past personality difficulties ought not render management committee meetings abortive, is the very fact that if the plaintiffs' submissions were accepted, the terms of the judgment would presumably lead to the Bank and NMG taking special care to cause management committee meetings to be held and to afford to JMG its contractual right to be heard at those meetings, and, particularly through the clause 4.1(a) procedure, to afford to JMG its contractual right to be involved in the preparation of Business Plans in accordance with the Consultancy Agreement.
347 Another factor which suggests that the balance of convenience may be in favour of an order for the holding of management committee meetings is that there has been a very serious case established that those meetings were always intended as a vehicle through which JMG would receive such information as it was entitled to receive in relation to the ongoing concern and business activities of NMG and the AUSMAQ service.
348 Ultimately, however, I have reached the view that the balance of convenience is against this form of injunctive relief being granted at this stage in these proceedings. To my mind as the litigation progresses through the next several months into a final hearing, the very high likelihood is that a management committee regime to be put in place by interlocutory injunctive orders would simply become a forum in which the respective parties would be, with an eye to the final hearing, making statements and dealing with one another in the most artificial of environments. Such meetings imposed by court order are capable clearly of becoming a major focus for the evidence ultimately adduced during the final hearing. It is one thing for the parties to comply with their contractual obligation outside of an interlocutory injunctive regime, and altogether another matter for the holding of management committee meetings to be compelled by court order.
349 This then highlights as it seems to me the significance of the litigation as a factor to be taken into account in the balance of convenience exercise. Take for example the curious fact that the Consultancy Agreement expressly denies to the JMG representatives entitled to attend at management committee meetings, any right to receive minutes of those meetings. Whatever may have been the original thinking which led to the inclusion of this provision, the fact is that by dint of the continuing discovery obligations of both parties in the proceedings, JMG, certainly by its legal representatives and probably by itself, becomes entitled to discovery of all minutes of management committee meetings. Hence a court-imposed injunctive regime requiring the holding of management committee meetings, if this is to be enforced as a continuing contractual obligation, would presumably have to specify that the JMG representatives were not to be entitled to receive minutes of those meetings. Yet at the very same time, the discovery process would permit JMG to receive those minutes as part of the litigious process. These are real concerns and simply highlight the difficulties faced by the court in imposing the management committee injunctive regime now sought by the plaintiffs.
350 It goes without saying that the court's refusal to grant that form of injunctive relief says nothing whatever to the continued obligations in contract of the parties to hold management committee meetings. But that is a matter which will continue simply as contractual obligations without the aid of a court order, and all that such an order would entail.
351 It is further quite clearly the case that JMG's complaints with respect to the management committee matter have been in existence and being aired for at least two years now.
352 In the result to my mind the appropriate exercise of the court's discretion is to reject the claims to this class of injunctive relief.
353 In relation to the sections of the notice of motion as seek an order that the Bank and NMG keep separate accounts and records, to my mind the balance of convenience is heavily in favour of the making of such an order provided that an order can be framed with sufficient specificity to permit of its enforcement. Possibly an order generally in the form of that sought in paragraph 9 of the notice of motion as originally filed on 4 June 1999, but confined to the services which are still pursued, namely Gateway, Margin Lending, FX Auto Dealing and Maple Leaf would have the necessary precision. Understandably relatively little attention was addressed to this issue during the hearing of the motion. In consequence, I would be disposed to entertain further submissions on the matter. Plainly, a clear question will arise as to the suggested inclusion for example of the last two and a half lines of paragraph 9, namely the words following the words, "… or any other Service within …".