Application for interlocutory injunction to restrain plaintiff from selling trust property - Prima facie case established - Balance of convenience against grant - Court should order not order injunction where no evidence that directors made judgment in bad faith or for improper purpose.

1 LE MIERE J: The defendants have applied to dissolve injunctions which I made by consent on 7 August 2013 or alternatively to restrain the plaintiff from selling, or causing to be sold, certain real property. Before considering the grounds of that application it is necessary to outline the circumstances giving rise to it.

2 Slondia Nominees Pty Ltd (Slondia) is the trustee of the M Mercanti Family Trust (MMFT) and Mike's Multi-Service Retail Trust (MMSRT). MMFT owns four real estate properties. MMSRT operates the retail arm of the multiservice shoe repair business founded by the plaintiff, who I will refer to as Michael. Citycourt Pty Ltd (Citycourt) is the trustee of Footwear Wholesale Trust (FWT) which operates the wholesale arm of the business. Before these proceedings commenced Michael and his wife, Sybil Yvonne Mercanti (Yvonne) were shareholders and directors of Slondia and Citycourt. The first defendant, who I will refer to as Tyrone, is the son of Michael and Yvonne and was the managing director of Slondia and Citycourt. Michael was the appointor of MMFT and FWT.

3 On 20 October 2004 the third and fourth defendants (Slondia and Citycourt) each executed deeds of variation to vary the trust deeds to make Tyrone appointor of each trust in place of Michael. Michael signed each deed as director of Slondia and Citycourt respectively. Michael says he does not recall signing the deeds of variation or receiving any legal or other advice about them and would not have executed them if he had understood their effect.

4 On 18 February 2013 Michael commenced CIV 1262 of 2012. Michael claimed a declaration that the terms of the MMFT trust deed did not empower Slondia to vary the trust deed in the manner of the MMFT variation deed, and a declaration that the MMFT variation deed was not validly executed by Slondia because there was no resolution of the directors authorising it to enter the variation deed or affix the common seal, and because the directors of Slondia who witnessed the affixing of the common seal to the variation deed did not know of or agree to the terms of the variation deed. Michael also sought a declaration that the variation effected by the variation deed was made by Slondia in breach of trust because it was not an exercise of power in good faith and because Tyrone was a knowing participant in the breach or knowingly took the benefit of the breach. Michael sought other relief including an order setting aside the variation deed. Michael sought similar relief in relation to the FWT variation deed.

5 On 18 February 2013 Michael also caused to be issued a chamber summons which sought orders that Tyrone be restrained from exercising or purporting to exercise any powers as appointor of the MMFT or FWT until judgment or further order. On 20 February orders were made by consent restraining Tyrone from exercising or purporting to exercise his powers as appointor until the chamber summons was determined. On 7 March orders were made by consent and upon mutual undertakings discharging the orders made on 20 February. Tyrone undertook not to exercise any powers as appointor of the MMFT or FWT or to cause Slondia or Citycourt to dispose of, acquire or encumber any property except in the ordinary course of business. Michael and Yvonne undertook not to exercise powers as directors of Slondia and Citycourt to remove Tyrone or his wife Vanessa as directors of the company without giving notice.

6 On 29 July Michael caused a chamber summons to be issued seeking orders that Tyrone be restrained from exercising or purporting to exercise any powers as appointor of the MMFT or FWT. Tyrone's solicitors were informed of the chamber summons at 12:14 pm on 29 July. The chamber summons came on for hearing at 10.00 am on 31 July. Meanwhile at some time before 9:38 am that day Tyrone had executed notices of removal and appointment removing Slondia and Citycourt as trustees of MMFT and FWT and appointing the second defendant (Parradele) in their place. Parradele is a company controlled by Tyrone. I will refer to Tyrone and Parradele together as the defendants. In view of that development the plaintiff asked for the matter to be adjourned to the afternoon so that he might issue fresh proceedings.

7 Michael then commenced this action in which he claimed a declaration that the notices of removal and appointment are invalid and of no legal force or effect or alternatively a declaration that the purported removal of Slondia and Citycourt as trustee of MMFT and FWT respectively was in breach of the duties of Slondia and Citycourt as trustees and an order setting aside the appointments. Michael also sought injunctions.

8 Michael says that the notices appointing Tyrone appointor of the trusts are invalid and of no legal force or effect by reason of the matters alleged in CIV 1262 of 2013. Alternatively, Michael says that by effecting the notices of appointment Tyrone breached his fiduciary duty or duty of care to exercise the appointment power bone fide for the purpose for which it was conferred. Michael says that Parradele had knowledge of those matters and has become trustee of the MMFT and FWT through its knowing involvement, alternatively knowing receipt of the benefit of, Tyrone's breaches of duty.

9 Michael also caused to be issued a chamber summons seeking injunctions restraining Parradele from acting as trustee of the trusts or dealing with their assets. The chamber summons came on for hearing after lunch on 31 July. Counsel who had appeared for Tyrone in CIV 1262 of 2013 did not have instructions to act for the defendants in this action. I dealt with the application as an application for an interim injunction until the matter could be heard on an inter partes basis. I determined that Michael had made out a prima facie case of the requisite strength for the purposes of the interim injunction sought and that the balance of convenience favoured the grant of the interim relief. I said that the injunction sought was essentially for the purpose of maintaining the status quo until the parties' rights were determined at the further interlocutory hearing of the application for an injunction. I said that the relevant status quo was that which prevailed before Tyrone executed the notices of appointment which gave rise to the application. I made orders that Parradele be restrained from acting as trustee of the trusts or dealing with their assets until the hearing of Michael's application for interlocutory injunctions on 7 August.

10 On 7 August I made orders by consent that Parradele be restrained from acting as trustee of the trusts or dealing with their assets until judgment or further order. It is those orders which the defendants now seek to discharge.

11 A number of steps have been taken by Slondia and Citycourt. On 30 July Michael's solicitors wrote to the defendants' solicitors informing them that pursuant to shareholders resolutions passed on 30 July, Michael and Yvonne had removed Tyrone as a director of Slondia and Citycourt and that Tyrone was no longer authorised to manage the businesses. Michael's solicitors further stated that their clients would consider whether to continue Tyrone's employment after they had had an opportunity to properly consider the company records. On 2 August Michael, as managing director of Slondia and Citycourt, wrote to Tyrone informing him that he was not to attend the business premises or otherwise interfere with the business. On 17 October, Michael as managing director of Slondia and Citycourt, summarily terminated Tyrone's employment. Also on 17 October the solicitors for Slondia and MMFT gave Tyrone notice to vacate the property at 5 Brodrick Street, Karrinyup. The property is owned by Slondia. Tyrone and his family have lived there rent free since 1996. Yvonne offered to let Tyrone and his family occupy rent free premises owned by her in Cape Street, Yokine with his right to use the property being revokable at any time.

12 On 12 November Tyrone applied for orders dissolving the interlocutory injunction made on 7 August, or alternatively for an interlocutory injunction against Michael and Slondia restraining them from selling any trust assets or alternatively orders preventing the sale of 5 Brodrick Street and permitting Tyrone and his family to remain living there. The application was brought on the basis that the injunction should be dissolved because of changed circumstances. On 26 November Michael made an offer that Slondia would retain, and Tyrone may continue to occupy, 5 Brodrick Street pending the outcome of the trial of the action and Slondia would instead sell the property at 33 Gladstone Street, East Perth.

13 The first and second defendants' application to dissolve the injunctions and to restrain the sale of 5 Brodrick Street came on for hearing on 12 December. The defendants were not then able to proceed with their application to dissolve the injunction because they had recently been served by the plaintiff with affidavit evidence concerning the financial health of the trusts and they wished to put on expert evidence in response. I ordered that Michael and Slondia be restrained from exercising or purporting to exercise any powers as trustee to dispose of, transfer, sell, mortgage or otherwise encumber any real property owned by Slondia as trustee for MMFT until further order. The matter was then adjourned with directions made for putting on further evidence.

14 On 21 February 2014 Michael filed an undertaking that until trial or further order he will not as a director of Slondia or Citycourt or otherwise exercise or purport to exercise any power to transfer, mortgage, sell or encumber any real property other than the property known as 1 Granadilla Street, Duncraig without first providing 21 days' notice in writing to the solicitors for Tyrone and Parradele.

15 Slondia is the registered proprietor of a warehouse located at 33 Gladstone Street and three residential properties situated at 5 Brodrick Street, 1 Granadilla Street and 34/6A Valley Road, Halls Head. As I have said 5 Brodrick Street is occupied by Tyrone and his family. 1 Granadilla Street is currently rented to a tenant. 34/6A Valley Road is a residential property which is used by the plaintiff and his family from time to time as holiday accommodation.

16 Michael says, and Tyrone denies, that it is necessary for Slondia to sell assets. Both the plaintiff and the defendants have adduced affidavit evidence concerning the financial state of the retail and wholesale businesses. The plaintiff has adduced evidence from Damon Harris and the defendants have adduced evidence from Christopher Watts.

17 Mr Harris is an accountant and director of the accounting firm William Buck (WA) Pty Ltd. Since about January 2013 William Buck has been engaged by Michael to investigate the financial affairs of Slondia and Citycourt. Since about 30 July 2013 Mr Harris has been providing assistance to Michael in his capacity as director and subsequently managing director of Slondia and Citycourt to manage the business. Mr Harris spends part of his day at the head office of the business to observe the operation of the business and advise Michael in relation to the business. On 9 February 2013 Yvonne appointed Mr Harris as her alternate director of Slondia. There is evidence that there is a longstanding close personal relationship between Mr Harris and Michael and Yvonne and their other sons, particularly Jason. Mr Harris conducted without prejudice discussions with Tyrone on behalf of Michael in relation to the matters in dispute in these actions. Mr Harris is involved in the operation of the businesses at the instigation of Michael and has a personal relationship with Michael. Mr Harris has given factual evidence and expert evidence by way of affidavit. Mr Harris is not an independent expert. That is relevant when considering Mr Harris' evidence. However, this is an interlocutory application and I must have regard to all of the evidence before the court unless it is clearly wrong on grounds which do not depend merely on credibility. The evidence of Mr Harris is not inconsistent with facts established by the evidence, or improbable. Mr Harris' evidence is directed to the financial status of the businesses and not to the matters in dispute between the plaintiff and the defendants concerning the validity or effect of the deeds of variation and notices of appointment. In those circumstances I take into account Mr Harris' evidence mindful of his relationship with the plaintiff and the circumstance that it has not been the subject of crossexamination.

18 In November 2013 Mr Harris caused Ms Hegarty to prepare a consolidated cash flow budget for the trusts for the period 1 December 2013 to 30 January 2014. Ms Hegarty is an inhouse accountant for Slondia and Citycourt. She has experience in the shoe repair industry and detailed knowledge of the trusts' business. The budget shows a net cash outflow of $430,229 and a closing bank balance of -$473,643. The companies, in effect, have an overdraft of $200,000. If the companies' cash inflows and outflows between 1 December 2013 and 30 June 2014 turn out to be as forecast in the cash flow budget then to meet the debts Slondia will have to sell assets or obtain further finance facilities. On a number of occasions before 17 October Mr Harris informed the plaintiff as follows. First, the trusts would struggle to continue to satisfy their liabilities simply from the businesses cash flow and they could not simply trade out of this position. Secondly, the trust would need to sell assets to reduce the number of overdue creditors, make the loan repayments on the Westpac ATO facility and provide operating capital for the business. Thirdly, unless the trusts sell assets, Mr Harris holds grave concerns that Slondia and Citycourt may become insolvent before CIV 1262 of 2013 and this action are determined. Fourthly, the trust should consider selling 5 Brodrick Street.

19 Christopher Watts is a chartered accountant retained by the defendants to provide a responsive report to the affidavits of Mr Harris sworn 2 and 10 December 2013. Mr Watts has prepared a report of 7 February 2014. Mr Watts states that his summary of findings includes the following. He does not agree with the findings of Mr Harris at [56] of Mr Harris' affidavit sworn 2 December 2013 that the trusts would struggle to continue to satisfy their liabilities from cash flow and could not trade out of the position, and that unless the trusts sell assets there are grave concerns that Slondia and Citycourt may become insolvent. Mr Watts believes there are significant questions and doubt surrounding the transactions within the November budget. Mr Watts questions a number of results referred to by Mr Harris. Mr Watts says that based on his investigations and the discrepancies he has identified in Mr Harris' affidavit he is of the opinion that significant doubt must surround Mr Harris' statement in the 2 December 2013 affidavit [53] and [54] that the November budget is correct and that the trust will have a consolidated closing bank balance of approximately $-473,643 as at 30 June 2014. Mr Watts says that in his opinion to get a true picture of the trusts financial position and then to determine solvency and whether any assets need to be sold he believes that an audit be conducted under Australian Auditing Standards as at 31 December 2013. On the information currently provided to him Mr Watts is unable to recommend the sale of any trust assets pending an audit as he has referred to.

20 Mr Harris swore an affidavit on 21 February 2014 responding to the questions raised by Mr Watts about the November budget and Mr Harris' opinions expressed in his 2 December 2013 affidavit. Mr Harris raised with Ms Hegarty the questions raised by Mr Watts concerning the November budget and obtained answers and explanations from her. Mr Harris says that Ms Hegarty has informed him as follows. First, as at 31 December 2013 the trusts' cash at bank position was $163,372. Secondly, as at 31 January 2014 the trusts' cash at bank position was $107,634. Thirdly, the improvement in the trusts cash at bank position between 31 December 2013 and 31 January 2014 was largely attributable to a oneoff payment in relation to the financing of the Tea Tree Kiosk which was received in January 2014. Fourthly, based on current forecasts adjusted for actual cash inflows and outflows for the months of December 2013 and January 2014, assuming all employees and creditors are paid, the trusts' closing cash at bank position as at 30 June 2014 will be around $522,084. Mr Harris states his opinion that the trusts will need to sell an asset or assets to reduce the number of trade creditors, make the loan repayments to the Westpac ATO facility, provide operating capital for the business and repay the Mercanti Loan. The Mercanti loan is a reference to $100,000 loaned by Michael and Yvonne to Slondia. It arose in the following circumstances. In about February 2014 Michael was informed by Ms Hegarty and Mr Vecchio, the general manager of the businesses, that the trust had an immediate cash shortfall of around $100,000. To temporarily alleviate the cash shortfall Michael and Yvonne loaned $100,000 to Slondia.

21 I accept the evidence of Mr Harris that if the trusts do not sell any assets their cash at bank position as at 30 June 2014 is likely to be in the order of $500,000. That is based on the November budget as updated by the information referred to by Mr Harris in his affidavit of 21 February 2014. The November budget was prepared by Ms Hegarty. Mr Watts has raised a number of questions concerning that budget. Mr Harris has referred those questions to Ms Hegarty and obtained plausible answers to them. The estimate of the bank position as at 30 June 2014 is only a projection. Nevertheless, I accept that if no assets are sold the trusts are likely to have a bank position similar to that as at 30 June 2014. The trusts are not likely to be able to meet their debts unless capital is injected into the businesses, further finance facilities are obtained or assets are sold. Against that background I turn to consider the defendants application to dissolve the injunctions made on 7 August 2013.

Legal principles concerning varying or discharging orders

22 Ultimately the court should do whatever the interests of justice require in the particular circumstances of the case, but as a general rule an application to discharge an interlocutory injunction must be founded on a material change of circumstances since the original application was heard, or the discovery of new material which could not reasonably have been put before the court on the hearing of the original application and the effect of which is to demonstrate that the situation is materially different from when the order was made so that it would be unjust to continue the injunction: see Clairs Keeley (a Firm) v Treacy [2004] WASCA 277; (2004) 29 WAR 479.

23 The order which the defendants seek to discharge was made by consent. The courts recognise two types of consent orders. The first type of consent order arises in circumstances where there is a real contract between the parties. The second type of consent order arises in circumstances where one party does not object to an order being made. The order in this case falls into the first category. The order was not concerned only with procedural matters, it affected the rights of the parties to remove and appoint the trustees and, through the trustees, ultimately to control the businesses and the assets of the trusts. The person who has the power to appoint and remove the trustee of a trust may be thought of as the person in whom the ultimate control resides in the sense that the appointor may appoint a trustee who he controls or who is prepared to act in accordance with his directions or wishes although he cannot, in any legal sense, direct the trustee how to act. From the commencement of CIV 1262 of 2013 it has been common ground that the person who has the power to appoint and remove the trustees of MMFT and FWT controls those trusts, their assets and businesses. The consent orders were made in contemplation of, and to avoid, a contested hearing to determine whether the injunctions should be continued and hence who would control the trusts and the businesses.

24 The court has jurisdiction to vary or discharge interlocutory consent orders based on the overriding interests of justice. However, when exercising discretion to set aside a consent order based on an underlying agreement the court will take into account the fact that the parties have reached an agreement on the issue. This will make it less likely that a consent order will be set aside because to do so would effectively alter the agreement made by the parties. In this case the consent orders were made until after judgment or until further order. Although the consent orders apply only until further order, the agreement underlying the consent orders had the effect that Michael, Slondia and Citycourt would have control of the trusts and the businesses. In those circumstances the onus on the defendants to establish sufficient reason to discharge the orders is greater than if the orders had not been made by consent.

25 The defendants have put forward evidence concerning the merits of the action which was not before the court on 31 July 2013. The object of that evidence is to demonstrate that the defendants have a very strong case on the merits. It is not appropriate to reconsider whether or not the plaintiff has made out a prima facie case on an application to vary or discharge an interlocutory injunction. Such an application is not in the nature of an appeal or rehearing, each of which is founded on the contention that the order appealed from ought not to have been made. An application to vary or discharge the order starts with the assumption that that order was rightly made. There is therefore no question of reversing or varying or rehearing the original decision or order. An application that is based upon the assumption that the order, the operation of which is sought to be discharged or varied, was wrongly made must fail. The only question is whether the defendants are entitled under the altered circumstances to be relieved from the operation of the order. The following illustration was given by McClelland J in Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44 and repeated by Barrett J in Metropolitan Petar v Mitreski [2003] NSWSC 1007 at [13]:

The defendants are seeking a rehearing on evidence which, or much of which, so far as one can tell, they could have adduced on the earlier occasion if they had sought an adequate adjournment, which they would probably have obtained. Even in interlocutory matters a party cannot fight over again a battle which has already been fought unless there has been some significant change of circumstances, or the party has become aware of facts which he could not reasonably have known, or found out, in time for the first encounter. The fact that he capitulated at the first encounter cannot improve a party's position.

26 The evidence on which the defendants now rely is evidence which they could have adduced on the earlier occasion if they had sought an adequate adjournment, which they would probably have obtained. It is not appropriate now to reconsider whether or not the plaintiff's case on the merits is sufficiently strong to continue the injunction. That is all the more so when, as here, the interlocutory injunction was made by consent. The defendants, by consenting to the interlocutory injunctions, conceded that the plaintiff has a prima facie case for final relief. The defendants cannot now reargue that matter on the basis of evidence which they could have adduced before.

27 The time from which any material change of circumstances should be considered is 7 August 2013, the date on which the orders were made by consent. The changes in circumstances relied upon by the defendants are as follows. First, Tyrone has been summarily terminated from his employment. Secondly, Michael, Slondia and Citycourt intend to sell 1 Granadilla Street unless restrained by this court. Thirdly, Michael has caused Slondia to mismanage the businesses and in particular has failed to renew the lease on premises from which shoe repair kiosks are operated and has substantially increased the cost of wages and subcontractors. Fourthly, Michael has made threats to Tyrone. Fifthly, Michael has caused Slondia to fail to provide Tyrone with information to which he is entitled as a beneficiary of the trust.

28 Those changes of circumstances individually or collectively are not sufficient to cause the court to discharge the injunctions. The termination of Tyrone's employment on 17 October must be considered in light of the agreement made by the parties and effected by the consent orders and the circumstances on 7 August. Tyrone knew that the effect of the consent orders would be that Michael and Slondia would have control of the trusts and their businesses and would have the right and duty to make decisions about how the businesses were to be carried on including hiring and firing employees and buying and selling assets. By 7 August Tyrone had been removed from management of the businesses, he had been directed not to attend the business premises, he and his wife had been removed as directors and Michael's solicitors had informed Tyrone that Slondia would consider whether to continue Tyrone's employment once it had an opportunity to properly consider the company records. Termination of Tyrone's employment and Tyrone ceasing to receive income from that employment was foreseeable when the consent orders were made and is not a sufficient reason to discharge the consent orders.

29 The proposed sale of 1 Granadilla Street is not a sufficient reason to discharge the injunction. The defendants knew when they consented to the injunctions that the consent orders would have the effect of giving Michael control of the trust's assets. The proposed sale is for business reasons although the necessity for the sale is disputed by the defendants. Tyrone says that Slondia's notice to Tyrone to vacate 5 Brodrick Street and its intention to sell the property was actuated by malice. Michael has given an undertaking not to cause Slondia to sell 5 Brodrick Street. Tyrone alleges that it is not necessary for Slondia to sell 1 Granadilla Street but does not allege that it proposes to sell 1 Granadilla Street for any improper purpose.

30 I am not satisfied that Slondia, under the control of Michael, has so mismanaged the business that the injunctions should be discharged. There is evidence that Slondia has decided not to renew three leases for premises on which shoe repair kiosks were operated. There is no evidence about the history of Slondia's lease of premises. There is no evidence, for example, that it is not in the ordinary course of Slondia's business to take out leases for new premises and allow leases for old premises to expire. There is no evidence from which it can be inferred that Slondia's decision not to renew the leases is not in the best interests of the company and the trusts. Counsel for the defendants tried to persuade the court that between June 2013 and November 2013 there has been a substantial, unexplained and inappropriate increase in the costs of wages and subcontractors. The evidence does not establish that.

31 Tyrone has put forward evidence of threats made to him by Michael. The evidence discloses strong animosity between Michael and Tyrone. The conflict and animosity between Michael and Tyrone existed on 7 August. That it may have manifested itself in threats made by Michael to Tyrone does not of itself constitute a reason for discharging the orders made by consent on 7 August 2013.

32 The final matter relied upon by the defendants is that Tyrone has requested Slondia to provide information and Slondia has failed to do so. Counsel for Tyrone referred to the statement in Halsburys Laws of Australia at [4304210] that a 'necessary incident of the control of the trust property by the trustee is the trustee's obligation to keep proper accounts, allow inspection of them by the beneficiaries and, on demand, give a beneficiary information and explanations as to the dealings with the trust property'. Tyrone says that Michael and Slondia, or their solicitors, have refused to provide information requested by Tyrone or his solicitor. Tyrone's solicitor requested from Michael and Slondia copies of all financial documentation that supported the necessity for the sale of 5 Brodrick Street and the sale of no other trust asset.

33 The duty of a trustee to provide information to a beneficiary was considered by Hammerschlag J in Silkman v Shakespeare Haney Securities Ltd [2011] NSWSC 148. Hammerschlag J referred to two lines of authority. One line of authority commencing with In re Londonderry's Settlement; Peat v Walsh [1965] Ch 918 attributes a beneficiary's right to inspect 'trust documents' held by the trustee to an equitable proprietary interest of the beneficiary in them. On the Londonderry approach, Tyrone need do no more than establish that Slondia is his trustee and that the documents sought are so called trust documents. Relief is as of right and does not require the exercise of any judicial discretion in favour of the beneficiary. The other line of authority is headed by Schmidt v Rosewood Trust Ltd [2003] UKPC 26; [2003] 2 AC 709 where the Privy Council declined to follow Londonderry. Taking what Lord Walker described as 'a more principled and correct approach' it held that a trustee has no equitable proprietary interest in documents so as to give rise to a right of production and inspection but that, as one aspect of the court's inherent jurisdiction to intervene in the administration of trusts, an order for inspection and production of documents by a trustee may be made at the instance of the beneficiary. In Silkman v Shakespeare Haney Securities Ltd Hammerschlag J followed the Schmidt approach. Hammerschlag J identified a number of jurisprudential difficulties with the Londonderry approach including ascribing a workable and principled definition of the term 'trust documents'. Hammerschlag J also observed that on the Londonderry approach a discretionary beneficiary has an interest in the due administration of the trust but has no proprietary interest in the assets and should logically be denied disclosure.

34 It may be that Tyrone is not as of right entitled to inspect trust documents and that Slondia is under no duty to provide to him information requested by him. There are at least three reasons for that. First, Tyrone is a discretionary beneficiary and has no proprietary interest in the trust documents or trust assets. Secondly, on the Schmidt approach a beneficiary has no interest in trust documents so as to give rise to a right of production and inspection but, as one aspect of the court's inherent jurisdiction to intervene in the administration of trusts, an order for inspection and production of documents by a trustee may be made at the instance of the beneficiary in the exercise of the court's discretion. Thirdly, a trustee is under no duty to disclose reasons for its exercise of a discretionary power or the information which may bear upon or affect those reasons: Curwen v Vanbreck Pty Ltd [2009] VSCA 284; [2009] 26 VR 335 [25].

35 In any event, whether or not Slondia is under a duty to provide to Tyrone the requested information and has failed to do so is not a sufficient reason for discharging the consent orders. Whether Tyrone has a legal right to the information, or may apply to the court for an order that the information be provided, is a matter that should be determined in separate proceedings if Tyrone wishes to pursue the claim. In this action Michael has adduced evidence of Slondia's reasons for deciding to sell 1 Granadilla Street. That Slondia declines to produce all of the documents, or explanations requested by Tyrone in circumstances where the parties are engaged in litigation does not constitute a sufficient change of circumstances.

36 I will now consider whether or not the plaintiff should be restrained from causing Slondia to sell any real property. The defendants seek alternatively an interlocutory injunction preventing Michael from causing Slondia to sell any trust property. The defendants must establish that they have a prima facie case in the sense that they are likely to be successful at trial. The defendants urge upon the court that they have very strong cases. The strength of a party's case is a matter which may be taken into account in considering the balance of convenience. I am satisfied that the defendants have established a prima facie case that they will be successful in the actions and in effect Tyrone will regain practical control of the trusts and the businesses. I decline to determine the respective strengths of the parties' cases other than to find that there is a real, and not merely theoretical, probability that the defendants will be successful at trial.

37 The outcome of this action and CIV 1262 of 2013 will determine whether Michael and Slondia on the one hand or Tyrone and Parradele on the other hand will have control of the trusts, their real property and the businesses. In considering the balance of convenience I must consider the injustice which Tyrone might suffer if Michael causes Slondia to sell one of the properties other than 5 Brodrick Street and it is found at trial that Tyrone is the lawful appointor of the trusts, the notices of appointment are valid and Tyrone is able to exercise practical control over the businesses and the trusts on the one hand and the injustice which Michael will suffer if he is not able to cause Slondia to sell any of the trust property and it is found at trial that he is the lawful appointor of the trusts and able to exercise practical control over the businesses and the trusts on the other hand. I must also have regard to the interests of the trusts and their beneficiaries.

38 There is evidence before me that if the trusts do not sell any assets their cash at bank position as at 30 June 2014 is likely to be around $500,000 and the continued viability of the trusts and their businesses is at risk if the trustee does not sell trust assets to raise funds to reduce the number of overdue creditors, make the loan repayments on the Westpac ATO facility and provide operating capital for the business. The evidence adduced by the defendants raises questions about the details put forward by Mr Harris concerning the trusts' financial positions but does not go as far as providing evidence that if no trust assets are sold the trust bank position as at 30 June 2014 will be materially better than projected by Ms Hegarty and accepted by Mr Harris. In those circumstances the balance of convenience is against the court interfering to prevent those managing Slondia and Citycourt selling 1 Granadilla Street.

39 The consent orders and the agreement between the parties giving rise to them had the effect of giving Michael, Slondia and Citycourt control of the trusts, the businesses and the trust assets. The directors of Slondia have duties to act in the best interests of the company, to exercise care skill and diligence and to prevent insolvent trading. The court should not interfere with business judgments made by officers of the company where there is evidence that the judgment is a rational one and there is no evidence establishing, or from which it can be properly inferred, that the judgment is made in bad faith or for an improper purpose. The court is not in a position to step into the shoes of the directors and decide whether an asset should or should not be sold in the financial circumstances of the trusts and their businesses.

40 The parties should proceed to trial as expeditiously as possible so that the rights of the parties may be determined. In the meantime I decline to discharge the consent orders made 7 August 2013 or prevent Michael causing Slondia to sell 1 Granadilla Street. The defendants' application will be dismissed.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : MERCANTI -v- MERCANTI [2014] WASC 64 (S)

HEARD : 12 DECEMBER 2013, 24, 26, 28 FEBRUARY 2014

Costs - Just apportionment of costs - No special order for costs - Fixed costs

Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012

Legal Profession Act 2008 (WA), s 280(2)

First and second defendants pay the plaintiff's costs of the defendants' application fixed in the sum of $5,500

1 LE MIERE J: On 12 November 2013 the first and second defendants, who I will refer to as the defendants, applied by letter for orders dissolving the interlocutory injunction made on 7 August 2013 or alternatively for an interlocutory injunction against the plaintiff restraining him from selling or causing the third defendant (Slondia) to sell any trust assets or alternatively orders preventing the sale of 5 Brodrick Street and permitting the first defendant (Tyrone) and his family to remain living there. On 28 February 2014 I dismissed the defendants' application: Mercanti v Mercanti [2014] WASC 64. I reserved the question of costs. The parties have now made written applications for costs orders, supported by written submissions.

1. The first and second defendants pay the plaintiff's costs of the application including the hearings on 12 December 2013, 24 February 2014 and 26 February 2014, to be taxed and paid forthwith.
2. Pursuant to Legal Profession Act 2008 (WA) s 280(2), the taxation of the plaintiff's costs pursuant to order 1 above shall be on the basis that the limit imposed in item 10(a) of Table B of the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012 is increased to $23,000.

1. first and second defendants be awarded their costs, with reference to the Scale, fixed in the sum of $8,000 and particularised as follows:

(a) Application by letter sent to Associate dated 12 November 2013 including: Minute of Proposed Orders seeking injunction preventing sale of 5 Brodrick Street and also extension of Caveat; Affidavits in support from Tyrone Mercanti x2 (140 pages including annexures and 20 including annexures), Peter Nettleton and Anthony Torre; and memos of conferral and undertaking as to damages;

(b) Costs thrown away of hearing on 12 December 2013;

(c) Costs of hearings on 24, 26 and 28th of February

1. the court may choose to award fixed costs on the basis of the Schedule at CPD 4.7.1 in which case the maximum costs to be awarded, to either party, would total no more than:

Preparation; attendance; some submission; reporting. SP ~ 1.0 1.5

Includes 1.41.6 above, preparation, appearance and reporting.

$1,892 plus $583 per extra hour of hearing and $500 for urgent (if applicable)'

4 The plaintiff submitted that he was successful because the defendants' application was dismissed and there is no reason why the usual rule that costs should follow the event ought not apply in this case. The plaintiff seeks a special order for costs on the basis that the scale item is inadequate having regard to the number and nature of the affidavits filed in the course of the hearing, and in addition the affidavit evidence of Christopher Hicks sworn 27 February 2014 concerning the number of hours worked by the plaintiff's solicitor and counsel and the costs incurred by the plaintiff in opposing the application. The plaintiff says that the inadequacy arises because of the complexity of the matter as well as the importance of the matter.

5 The first defendant submits that his application was partially successful and that he should be awarded his costs of the application and also his costs thrown away for the hearing on 12 December 2013. As at 12 December 2013 the defendants sought orders that the injunctions in CIV 2186 of 2013 and in CIV 1262 of 2013 should be dissolved or alternatively injunctions should be made preventing the sale of 5 Brodrick Street or the removal of the first defendant from 5 Brodrick Street until a judgment or further order and preventing sale of any other trust property, except in the ordinary course of business and the giving of 14 days' notice to the defendants with liberty to apply. The plaintiff's offers to extend the caveat and give the written undertaking with respect to 5 Brodrick Street were not made by the plaintiff until the date of the hearing on 12 December 2013. Thus, it is said the defendants were partially successful in the application. In any event, the defendants say the adjournment of the hearing on 12 December was necessitated by the late filing of the plaintiff's affidavits in response to the application.

6 The defendants say they should also be awarded the costs of the hearings on 24, 26 and 28 February. The defendants made an offer on 27 November 2013. Some of the terms of the offer were in effect conceded by the plaintiff by the giving of undertakings and consent orders for the extension of the caveat on 12 December 2013. Further, if the plaintiff had accepted the offer the application to dissolve the injunctions would have been discontinued on 28 November 2013 and there would have been no restraint on the plaintiff or third defendant selling any trust property. Whatever the court's discretion with respect to the award of costs, the defendants submit there was nothing with respect to the application that would warrant the imposition of a special costs order. The defendants say that they should be awarded their costs fixed in the sum of $8,000 in accordance with the Practice Direction Scale referred to earlier in these reasons.

7 The costs of interlocutory proceedings are in the discretion of the court. The usual rule is that costs follow the event. Generally speaking, a successful respondent to an interlocutory application is entitled to receive his costs from the unsuccessful applicant. This is ordinarily a just outcome because an applicant who turns out to have unjustifiably brought a respondent before the court should be required to bear the costs of the application. However, the court may refuse costs to a successful respondent who has, by some act or omission, led the applicant to bring the application where, aside from the respondents inducing conduct, the application would not in all likelihood have been brought. Furthermore, a respondent who is generally successful may not recover some or all of his costs if he is unsuccessful in raising or resisting discrete issues or obtained relief no more substantial than already offered by the unsuccessful applicant to settle the dispute. On the other hand, a cost order may be made against an applicant who makes or continues an unsuccessful application that should not have been made or persisted with.

8 The application resulted from the conduct of the plaintiff who, on 17 October 2013, threatened to evict Tyrone from 5 Brodrick Street where he had lived with his family since 1996. That was a substantial departure from the status quo when the consent orders were made on 7 August 2013. It was not in the ordinary course of the business of the trusts to sell the real property owned by Slondia. It ought not to have been in the reasonable expectation or anticipation of Tyrone when he consented to the 7 August 2013 orders that the plaintiff would decide to cause Slondia to sell that property and evict Tyrone and his family. In those circumstances the defendants acted reasonably in bringing the application.

9 On 26 November 2013 the plaintiff offered not to sell 5 Brodrick Street. However, that was not an unqualified offer. It was made on condition that the plaintiff cause Slondia to sell 33 Gladstone Street instead and that the defendants' application be discontinued with no order as to costs. The plaintiff said that if those conditions were not met then the plaintiff would proceed with removing Tyrone and his family from 5 Brodrick Street. The plaintiff persisted with the intention of selling, or causing to be sold, 33 Gladstone Street until 19 February 2014 when the solicitors for the plaintiff and Slondia stated that they no longer intended to sell 33 Gladstone Street and would instead sell 1 Grandilla Street. That was the position of the plaintiff when the court heard and determined the defendants' application on 24 and 26 February 2014 and it was on that basis that the court dismissed the defendants' application.

10 In my view the defendants were entitled to their costs of bringing the application and their costs at least until 12 December 2013 when the plaintiff gave an unconditional undertaking that he would not sell or cause to be sold 5 Brodrick Street or interfere with the first defendant's quiet enjoyment of that property. The plaintiff is entitled to his costs at least from 19 February 2014 when he informed the defendants that he no longer intended to sell 33 Gladstone Street and would instead sell 1 Grandilla Street.

11 For the reasons I have given there should be an apportionment of costs in relation to the defendants' application. The judgment as to the apportionment is in the end an evaluative one and the exercise of discretion is based largely on impression as to the costs reasonably incurred by each of the parties in relation to the issues, or parts of the application, in relation to which they should have their costs. In the exercise of my discretion I consider that a just apportionment of costs to reflect the conduct of the parties in bringing and resisting the application and the outcome of the application is that the defendants should pay 50% of the plaintiff's costs.

12 I am not satisfied that there should be a special order for costs. That is so for two reasons. The first is that the plaintiff should not have the whole of his costs for the reasons I have stated. The second is that I am not satisfied that the amount of costs allowable in respect of the application is inadequate because of the unusual difficulty, complexity or importance of the matter. Item 10 of the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012 allows an amount of $11,011 for interlocutory proceedings in chambers. I am not satisfied that the amount of work that was reasonably necessary to be done in resisting the defendants' application is such that $11,000 is an inadequate amount. The application and resisting it involved legal and factual issues that are no more complex than in most contested applications for an interlocutory injunction or to discharge an interlocutory injunction in this court. I am not satisfied that the matter was important so as to justify an order under Legal Profession Act 2008 (WA) s 280(2). In one sense most applications for an interlocutory injunction, or to discharge an interlocutory injunction, in this court are important to the parties. But this application did not carry with it such great or serious consequences as to justify a special costs order.

13 The plaintiff seeks an order that the costs be paid at once rather than in any event. Practice Direction 4.7.1 provides that as a general rule where an order for costs is to be made against a party in interlocutory proceedings, the costs will be fixed and ordered to be paid forthwith or by a particular date. There is no good reason why the general rule should not be followed in this case.

14 As I have said item 10 of the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012 allows an amount of approximately $11,000 for interlocutory proceedings in chambers. That is an appropriate amount to allow for costs in relation to this application. The first and second defendants should pay to the plaintiff 50% of that amount, that is, an amount of $5,500.

15 In conclusion, the appropriate order for costs is that the first and second defendants pay the plaintiff's costs of the defendants' application by letter of 12 November 2013 fixed in the sum of $5,500.