Plaintiff v Defendants

2 Under the trading arrangements between the plaintiff and McArthur Express, nominated customers of the plaintiff arranged for the collection and delivery of the goods by McArthur Express, which would be invoiced to the plaintiff. At the times which are relevant to these proceedings, there were four nominated customers of the plaintiff, including Chi Chi Cosmetics.

3 Following the appointment of the defendants as the receivers of McArthur Express, the plaintiff experienced difficulty in obtaining release of goods owned by its customers. The solicitor for the plaintiff, Mr Timothy Davies, contacted Mr Alan Hunt, the debt recovery consultant employed by the defendants. As a consequence of those discussions, Mr Hunt, on behalf of the defendants, sent to Mr Davies a letter dated 27 September 2007 which was to be signed by Mr Davies on behalf of the plaintiff. Having received instructions from his client, Mr Davies signed that document for and on behalf of the plaintiff.

4 In these proceedings, the plaintiff claims that the terms of that document constituted a binding agreement between the plaintiff and the defendants entitling the plaintiff to access its customers' goods, which were held by the defendants. In this application, the plaintiff seeks an injunction requiring the defendants to make available, for collection by the plaintiff, the goods of the nominated customers held at the depots of McArthur Express. On behalf of the defendants it has been contended that the document does not constitute a binding agreement between the parties. Further, the defendants maintain that the document was entered into by mistake, in circumstances entitling them to an order by the Court setting it aside.

5 The letter dated 27 September 2007 was entitled "Customer Contract with Freight Logistic Solutions". It commenced by reciting the appointment of the defendants as receivers and managers of Bon McArthur Pty Ltd, and by referring to the customer contract and trading terms with the plaintiff. The letter then stated as follows:

"The Receivers are prepared to consent to Freight Logistics Solutions collecting the goods which are the subject of the Contract, but have not been delivered from the places where those goods are located on the condition that Freight Logistics Solutions acknowledges that it will pay the outstanding debt that is owed to Bon McArthur in the sum of approximately $40,000 in accordance with the usual trading terms (ie by 31 October 2007), without any deduction, counterclaim or setoff.

The Customer also acknowledges that if there are any outstanding invoices that were not processed at the date of appointment, they will be paid on the presentation of the appropriate documentation.

Please acknowledge Freight Logistics Solution's agreement to this arrangement by signing and dating this letter and faxing it to me immediately on (telephone number provided).

By entering into this arrangement the receivers are not, and should not be taken to have, adopted the terms of the Contract."

Immediately underneath those words the document was signed by the first defendant on behalf of Bon McArthur Transport Pty Ltd (Receivers and Managers appointed).

6 In early October, it came to the notice of the plaintiff that representatives of the defendants were refusing to provide information as to the whereabouts of goods of customers of the plaintiff, and were refusing to release all of those goods. There then ensued a series of correspondence between the solicitors for the plaintiff and the solicitors for the defendant, and a series of telephone calls, in which it was maintained, on behalf of the defendant, that the letter dated 27 September contained a mistake in respect of the amount of the debt specified in it.

7 The affidavits filed on behalf of the plaintiff and the defendants set out different versions as to the discussions which occurred between the parties before the execution of the document of 27 September. Mr Davies, in his first affidavit, has stated that he initially contacted Mr Roscoe, an employee of the defendant, on 26 September. He told Mr Roscoe that goods were held for customers of the plaintiff, including Chi Chi Cosmetics, and that it was necessary that those goods be released urgently. Subsequently Mr Hunt telephoned Mr Davies. According to Mr Davies, Mr Hunt asked him how much he thought the plaintiff owed McArthur Express, and Mr Davies responded that he did not know, but that he was aware that the plaintiff had some issues with McArthur Express relating to overcharges. Subsequently, on 27 September 2007, Mr Davies had a further discussion with Mr Hunt. Mr Davies offered on behalf of the plaintiff to pay $20,000 to secure the release of the Chi Chi Cosmetics goods, on the understanding that they would continue their discussions to resolve the release of the other goods. Mr Hunt said that he would consider the offer and respond in writing. It was subsequent to that conversation that Mr Hunt sent to Mr Davies the letter, which I have set out above. That letter constituted a counter offer to that which had been put by Mr Davies in the conversation on 27 September. Having obtained instructions from his client, Mr Davies signed it on behalf of the plaintiff and returned it to the defendants by facsimile.

8 On the other hand, in his affidavit Mr Hunt states that, in the first conversation with Mr Davies on 27 September, he asked Mr Davies how much his client currently owed Bon McArthur, to which Mr Davies said that he did not know. Mr Hunt states that he told Mr Davies that, according to the records and books of Bon McArthur, the plaintiff appeared to owe approximately $116,000, of which the August account was approximately $87,000. Mr Davies said he would seek instructions. Mr Davies told him the number of the consignment notes relating to Chi Chi. Mr Hunt stated that he would allow the Chi Chi freight to be released on the basis that the plaintiff pay the August 2007 account in the amount of approximately $87,076.88, and that the plaintiff execute a document agreeing to clear the remainder of its account when it fell due. Mr Davies responded that he would seek his client's instructions.

9 Pausing there, Mr Davies takes issue with that version of the first conversation. Mr Hunt did ask him how much he thought was the amount of the debt by the plaintiff to the defendant, to which Mr Davies responded he did not know. Mr Hunt said that according to the "records" the plaintiff owed about $80,000. However, Mr Hunt did not know whether that debt included amounts which had not been invoiced, or whether it included amounts for goods currently held but not delivered.

10 According to Mr Hunt, in a second conversation on 27 September, Mr Davies offered to pay $20,000 immediately to secure the release of the Chi Chi freight. Mr Hunt responded that he accepted that offer on the basis that the plaintiff pay $20,000 immediately, and execute a consent agreement whereby the receivers would release all the plaintiff's freight and the plaintiff would pay its remaining debt when it falls due.

11 Mr Davies takes issue with Mr Hunt's version of that conversation. He agrees that he offered on behalf of his client $20,000 for the release of the Chi Chi Cosmetics goods, but denies that Mr Hunt told him that he accepted the offer.

12 In his affidavit Mr Hunt states that there was an error contained in the letter of 27 September. The relevant section of his affidavit is as follows:

"15. On 1 October 2007 I discovered that an error had been made in the consent agreement which recorded the amount to be paid by FLS in respect of its total outstanding debt to Bon McArthur as $40,000. According to the books and records of Bon McArthur, this figure was incorrect and should have been approximately $116,000, which figure included the sum of $20,000 which FLS had agreed to pay, but which was not received at any time by Bon McArthur.

16. The incorrect figure of $40,000 was inserted by genuine mistake. At this time, my team was negotiating with numerous parties and sifting through large amounts of information. It seems that the figure of '$40,000' had not been changed from an earlier letter to a separate debtor which had been used as a precedent."

13 Mr Hunt further states that, on realising his mistake, he telephoned Mr Davies and said that there was a mistake in the consent agreement "the correct figure should be $122,007.13 and not $40,000". Mr Davies responded that his client would stand by the consent agreement.

14 The plaintiff seeks an interlocutory injunction, by which it seeks to enforce the agreement constituted by the letter of 27 September 2007. In his affidavit, Mr Davies recites his instructions from his client that the plaintiff is suffering irreparable harm by the actions of the defendants in not releasing the plaintiff's customers' goods. The plaintiff has been threatened with legal action by its customers. The plaintiff is in jeopardy of losing its customers' accounts, which provide a substantial part of the revenues of the plaintiff. Further, if the plaintiff's customers are not able to access their goods readily, the plaintiff may not be able to recover its fees from its customers because they are likely to refuse payment. In addition, the plaintiff's reputation as a freight forwarder will be harmed. The freight forwarding business is a competitive market, which is sensitive to the perceived reputation of the participants.

15 In order to be entitled to an interlocutory injunction, the plaintiff must establish that there is a serious issue to be tried, and that the balance of convenience is in favour of the grant of the injunction. The relief sought is by way of mandatory injunction and, if the relief is granted, the plaintiff will have been successful in obtaining the principal relief which it seeks in the proceeding.

16 Until recently, it was considered that, where a plaintiff seeks a mandatory interlocutory injunction, the plaintiff must show a "high degree of assurance" that it will succeed at trial.[1] However, in Tymbook Pty Ltd v State of Victoria,[2] Maxwell P and Charles JA, constituting the Court of Appeal, held that there was no special test which must be applied in such a case. Rather, their Honours endorsed the approach of Hoffman J in Films Rover International Limited v Cannon Film Sales Limited,[3] and held that the approach which should be taken was that which involved the "lower risk of injustice" should the decision of the Court, at the interlocutory stage, turn out to be "wrong". Thus, in Tymbook, their Honours stated:

"... whether the relief sought is prohibitory or mandatory, the Court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been 'wrong', in the sense of granting an injunction to a party who fails to establish his right at the trial, or in failing to grant an injunction to a party who succeeds at trial."[4]

17 Nevertheless, I am conscious that, if the plaintiff succeeds before me, it will gain access, on behalf of the its clients, to goods held by the defendants, without paying for those goods, thus depriving the defendants of the benefit of the lien which is expressed in the terms of trading between the plaintiff and Bon McArthur Pty Ltd. In view of that circumstance, in my view, a higher onus of persuasion falls on the plaintiff to justify the grant to it, at this preliminary stage, of the relief sought in this application.

18 Mr Ahern, who appeared on behalf of the defendants, submitted that the defendants have two principal responses to the claim of the plaintiff to enforce the letter of 27 September as a binding agreement between the parties. First, he submitted, the letter does not constitute a binding agreement between the parties. Secondly, he submitted that, in any event, the defendants would be entitled, in equity, to set aside the agreement contained in the letter, on the basis of mistake.

19 Mr Ahern submitted that the error as to the amount, set out in the letter, was so fundamental that it had the result that the parties did not reach a concluded agreement in the letter of 27 September. In support of that proposition he relied on the decision of Hartog v Colin & Shields.[5] In my view, that submission on behalf of the defendant is barely tenable. I do not consider, on a proper reading of it, that the decision of Singleton J in Hartog's case supports the proposition put forward by Mr Ahern. It is trite law that, in determining whether the parties have reached a binding agreement, the law looks to the objectively ascertained intentions of the parties, and does not take into account their subjective views or intentions. In this case, the plaintiff's solicitor and the defendants' representative discussed an arrangement which would result in the release of the plaintiff's customers' goods. A letter, to be signed by the plaintiff's solicitor, was sent to him by the defendants' representative. It was duly signed and returned. Objectively, the circumstances bespeak eloquently of an intention by the parties to enter into a binding agreement.

20 The second submission on behalf of the defendants is based on the doctrine of unilateral mistake. Essentially it was submitted that, if the letter of 27 September constituted a binding agreement between the parties, the defendants would be entitled, in equity, to have the agreement set aside on the basis of unilateral mistake. The circumstances in which an agreement may, in equity, be set aside on the basis of a mistake made by one of the parties to the agreement, has been the subject of a number of authorities to which I was referred in the course of submissions, including the decision of the High Court in Taylor & Ors v Johnson.[6] See also Deputy Commissioner of Taxation (NSW) v Chamberlain;[7] Tlais v Tlais.[8] For the purposes of this application, the parties accepted as applicable the following statement of principle by Kenny JA in Leibler & Ors v Air New Zealand Limited & Anor (Nos 2):[9]

"The principles which govern an application for rectification of a contract on the ground of unilateral mistake can be briefly stated. If (1) one party, A, makes an agreement under a misapprehension that the agreement contains a particular provision which the agreement does not in fact contain; and (2) the other party, B, knows of the omission and that it is due to a mistake on A's part; and (3) lets A remain under the misapprehension and concludes the agreement on the mistaken basis in circumstances where equity would require B to take some step or steps, depending on those circumstances, to bring the mistake to A's attention; then (4) B will be precluded from relying on A's execution of the agreement to resist A's claim for rectification to give effect to A's intention ... ."

21 In the present case, it was put on behalf of the defendants that, if the Court were to accept the version of Mr Hunt as to his first conversation with Mr Davies on 27 September 2007, the plaintiff, by its solicitor, was well aware that the defendants maintained that the plaintiff owed to McArthur Express an amount which was significantly greater than that recorded in the document, which was sent by the defendants to the plaintiff on the same date, and which purported to contain the agreement between the parties. It was therefore submitted that the mistake which was made by the defendant, as to the amount recorded in that letter, was a mistake of which the plaintiff was either aware, or ought to have been aware. In those circumstances it was submitted that it would be unconscionable for the plaintiff to rely upon the error so made by the defendant in the document.

22 In response, Mr Davies accepted, for the purpose of this application, that the defendant would have an "arguable defence" to a claim made on the letter of 27 September, based on the doctrine of unilateral mistake. However Mr Davies, who appeared for the plaintiff, submitted that such a defence would be weak, both as a matter of fact, and as a matter of law. On the factual question, Mr Davies submitted that the file note of Mr Hunt as to that conversation, and which is an exhibit to Mr Hunt's affidavit, does not support Mr Hunt's version of the conversation. Further, the defendants' solicitors wrote to Mr Davies a letter dated 3 October 2007, but that letter did not refer to the terms of the conversation alleged by Mr Hunt.

23 At this stage, without the benefit of cross-examination, it is not appropriate for me to express a view as to the credibility or otherwise of the account given by Mr Hunt in his affidavit. Nonetheless, there is merit in the proposition advanced by Mr Davies that, at trial, Mr Hunt's version will be open to cross-examination on the bases to which I have just referred. Further, I agree with the argument by Mr Davies that, in the circumstances deposed to by the defendants, it is questionable whether the defendants will be able to rely on the doctrine of unilateral mistake, even if the version of events given by Mr Hunt were accepted. There was no conduct on behalf of the plaintiff which contributed to the error made by the defendant. In his affidavit Mr Davies states that he told Mr Hunt that there were issues between the plaintiff and Bon McArthur relating to invoicing and offsetting claims. The letter which was sent to Mr Davies for execution required an acknowledgement of debt of $40,000. It is not suggested that, by seeking that acknowledgement, the defendants conceded that the debt owed to it by the plaintiff was no more than $40,000.

24 The circumstances of this case are by no means as strong as the circumstances in Chamberlain and in Tlais, to which I have referred, and in which the Court held that there had been unilateral mistake of the type entitling the mistaken party to avoid reliance on the contract. In Chamberlain's case, there was a clear and unequivocal error between the amount originally claimed by the Deputy Commissioner of Taxation from the taxpayer, and that which was contained in the consent judgment entered into by the parties. Similarly in Tlais, the defendant, who had made a claim for damages for personal injury, received an offer which was clearly so high that it could not possibly have been offered other than through a mistake.[10] In each of those circumstances it was unconscionable for the beneficiary of the error, well knowing of the error, to have "snapped up" the offer.

25 As I have stated, Mr Davies has conceded, correctly, that the defendants have, nevertheless, shown that they have an arguable defence to the claim of the plaintiff based on unilateral mistake as to the amount of the debt which was to be the subject of the acknowledgement contained in the letter of 27 September. In the course of submissions, Mr Ahern sought to broaden the scope of the mistake upon which his clients relied. At one stage he submitted that the mistake was not only as to the amount of the debt, but also as to the terms of the agreement which was to be contained in the letter sent to the plaintiffs. Mr Ahern relied upon Mr Hunt's version of the two conversations which he had with Mr Davies on 27 September, and submitted that, in the course of those discussions, it was agreed that the plaintiffs would pay $20,000 for the release of the Chi Chi freight, and would pay its remaining indebtedness as and when it fell due. He submitted that, by mistake, that agreement was not encapsulated in the document of 27 September.

26 In my view, that argument is not supported by the evidence put forward on behalf of the defendants. In paragraphs 15 and 16 of Mr Hunt's affidavit, which I have already quoted, Mr Hunt stated that the error which was contained in the letter was the recording of the amount of the debt of the plaintiff as $40,000, rather than $116,000. Mr Hunt does not maintain that the letter contained any other error as to its terms and conditions. Thus, in his affidavit, he stated that when he telephoned Mr Davies on 1 October, he said that the mistake in the agreement was that the correct figure should have been $122,007.13 and not $40,000. The defendants' solicitor's letter to Mr Davies dated 3 October 2007 contains the same allegation. It does not suggest that the letter of 27 September contained any error as to the terms and conditions agreed between the plaintiff and the defendants.

27 Thus, I am satisfied that the plaintiffs have established that there is a serious issue to be tried. Indeed, the defendants did not contend to the contrary. For the reasons which I have already expressed, I also accept that the defendants do have an arguable defence to the claim for the plaintiffs based on the letter of 27 September, but I also agree with Mr Davies that, on the materials before me, and for the purpose of this application, that defence is not strong. The question, then, is whether the balance of convenience favours the grant of the injunction sought by the plaintiff. In particular, in the terms stated by the Court of Appeal in Tymbook Pty Ltd v State of Victoria, is there a lower risk of injustice if I grant the injunction in circumstances which turn out to be "wrong", or if I do not grant the injunction in circumstances in which the plaintiff is entitled to succeed at trial.

28 In my view the balance of convenience, stated in those terms, strongly favours the grant of an injunction. If the plaintiff is not able to obtain access to its customers' goods, the plaintiff will suffer substantial harm which may not be able to be met by an appropriate order for damages. As I have stated, Mr Davies has recited his instructions from his client, stating that the plaintiff may become liable to legal action against it by its customers, it may lose its customers' accounts, it may not be able to recover fees owing to it by its customers, and its reputation as a freight forwarder will be harmed. While it might be possible for the plaintiff to be able to identify, and claim damages for, some of those matters, nonetheless it would have some difficulty in establishing the value of the loss of its reputation, and in identifying precisely what customers it has lost as a result of the problems which it is experiencing with obtaining the release of its customers' goods from the control of the defendants.

29 On the other hand, it was submitted on behalf of the defendants that, if I grant the injunction claimed by the plaintiff, the defendants would be deprived of the right to rely on the lien to which it is entitled according to the terms of trading with the plaintiff. There are, however, a number of answers to that proposition. First, there is no evidence that the plaintiff will be unable to pay the account of the debt claimed to be due by it to the defendants. There is no suggestion that the plaintiff has, hitherto, been delinquent in its account with Bon McArthur Pty Ltd, or that the plaintiff does not have the financial resources to pay that account to the defendants. Further, it must be borne in mind that, according to the terms of the agreement contained in the letter of 27 September, it was only contemplated that the plaintiff acknowledge the debt which was said to be owing to Bon McArthur. The letter itself did not require the payment of the debt before the goods were collected; rather, it required the acknowledgement of that debt in order to secure release of the goods. As I have already stated, Mr Hunt does not depose that the terms of the letter itself contain any error; he has only sworn that the amount which is set out in the letter was mistaken.

30 Further, in their letter to the plaintiff's solicitors, dated 3 October 2007, the defendants' solicitor stated that his clients "have no difficulty with releasing the goods". The defendants' solicitor, in that letter, only required that the plaintiff acknowledge that the amount of debt owed to Bon McArthur was approximately $122,007.13. Thus, again, the defendants were prepared to release the goods of the plaintiff's customer, upon receiving acknowledgement, but not necessarily payment, of the amount owed to McArthur Express by the plaintiff. In those circumstances, it is clear that, at relevant times, the defendants were prepared to release the plaintiff's customers' goods, while the plaintiff was indebted to McArthur Express in a sum which, according to the defendants, exceeded $100,000. That circumstance significantly undermines the proposition that, if I were to grant the injunction sought by the plaintiff, the defendants would thereby suffer the loss of McArthur Express' rights under the lien which they were otherwise entitled to assert over the plaintiff's customers' goods.

31 For those reasons, I conclude that the balance of convenience strongly favours the grant of the mandatory injunction sought by the plaintiff. In the circumstances which I have described I do not consider that I should require, as a condition of granting that relief, that the plaintiff should be required to pay the Court the amount of the debt asserted by the defendants, as submitted by Mr Ahern.

32 However, as discussed in submissions with counsel, I do consider that, in order to be entitled to injunctive relief, the plaintiff should give to the Court the undertaking which was discussed in the course of argument, namely, that in any proceedings between itself and the defendants in relation to the debt owed by the plaintiff to the defendants, the plaintiff will not maintain that the terms of the letter dated 27 September 2007 preclude the defendants from claiming from the plaintiffs a debt greater than that stated in the letter, namely $40,000. Mr Davies acknowledged in the course of argument that the plaintiff would not seek to maintain that the letter, on its proper construction, constituted an agreement that the debt between the parties was no more than $40,000, or that it would give rise to an estoppel preventing the defendants from asserting that the debt owed by the plaintiff to McArthur Express was greater than $40,000.

33 Accordingly, for the reasons I have set out above, upon the plaintiff by its solicitor giving the undertaking to which I have just referred, and giving the usual undertakings to damages, I shall grant the plaintiff the injunctions sought in paragraphs 1 and 2 of its summons. I shall hear counsel on the question of the precise wording of those orders.

[1] See Shepherd Homes Limited v Sandham [1971] 1 Ch 340, 351.

[2] [2006] VSCA 89.

[3] [1987] 1 WLR 670, 680 - 681.

[4] [2006] VSCA 89, [35].

[5] [1939] 1 All ER 566.

[6] [1983] HCA 5; (1983) 151 CLR 422, especially at 432 (per Mason ACJ, Murphy and Deane JJ).

[7] (1990) 93 ALR 729, 740.

[8] [2003] NSW SC 1143.

[9] [1999] 1 VR 1, 14 [36].

[10] [2003] NSW SC 1143, [4].