Varley v Varley [2006] NSWSC 1025 | Case summary

4946/04 JOHN ANTHONY VARLEY v ALEXANDRIA MARGARET VARLEY JUDGMENT - Ex Tempore; (revised and expanded 28 September 2006) 1 HIS HONOUR: The plaintiff and the defendant were in a de facto relationship for about eight years until September 2000. While the relationship was on foot a company called Blue Water Fishex Pty Ltd was incorporated. They each became a director of and shareholder in that company. It acquired a fishing vessel known as "Sharpshooter" which was intended to be operated as a commercial fishing vessel. 2 In November of 2000 the plaintiff and the defendant consented to some orders in the Local Court for an adjustment of property under the Property (Relationships) Act 1984. Nature of the Proceedings 3 The present proceedings were ones begun by the plaintiff in 2004. The plaintiff was the man in the relationship. He alleged, in very broad terms, that the November 2000 orders were obtained by a misrepresentation of the defendant and should be set aside. He alleged that the defendant had, unbeknown to him, transferred the registration of "Sharpshooter" into her own name and arranged for it to be managed by a professional fishing company. In consequence the plaintiff said that he had been deprived of an income stream from Blue Water Fishex which he had been relying on to meet child support payments. 4 The defendant, for her part, said that all the income which was derived from the vessel was accounted for to Blue Water Fishex during the time of the management contract which she had arranged. She alleged that in about 2002 the plaintiff had entered into a further management contract relating to the vessel and it caused the income derived under that contract to be paid not to Blue Water Fishex but to another company which the plaintiff controlled, Ensign Ordnance Pty Ltd. She sought the winding up of Blue Water Fishex. February 2006 Consent Orders 5 The 2004 proceedings were settled in February 2006 by consent orders. The winding-up proceedings were dismissed. The orders then went on to make orders which varied the property adjustment orders which had been made in November 2000. Those February 2006 orders identified four topics upon which the parties were in dispute, namely: "1. The correct classification for the purpose of the correct completion of the books of Blue Water Fishex of moneys paid to or by the plaintiff, defendant or Ensign Ordnance Pty Ltd or any other person to or by Blue Water Fishex, whether to such parties loan accounts or whatever expense account was appropriate in the circumstances 2. The correct classification of payments by Blue Water Fishex by way of expenses of the business or otherwise. 3. The moneys due to or payable by the plaintiff, defendant and Ensign Ordnance Pty Ltd by or to Blue Water Fishex, and 4. Any amount due other than to any of the persons or entities referred to in (3) to any other creditor of Blue Water Fishex." 6 In the consent orders the parties agreed to a regime under which they would confer about these four topics, assisted by their accountants, and try to reach agreement and if they did not reach agreement, the four topics would be referred to a referee for inquiry and report. The plaintiff and the defendant agreed that they would join in an application to the Court to adopt the report and would consent to its adoption. They also agreed that "Sharpshooter" would be placed under the management of a nominated person who would prepare it for sale and would operate it in the meantime. They agreed on a procedure for the sale of the vessel and they also agreed: "12.2 that upon the sale of the vessel the proceeds thereof shall be retained by [Blue Water Fishex] which shall cause such amounts to be paid as shall have been determined by the referee pursuant to order 2.1.3 above. 13. That the plaintiff and defendant are each hereby restrained until completion of the sale of the vessel and the taking of accounts by the Court Appointed Referee from receiving any moneys whatever on any account whatever from [Blue Water Fishex] unless otherwise agreed." 7 They also agreed to reinstate a bank account of Blue Water Fishex, on the basis that both the plaintiff and the defendant shall be required to sign all cheques. Present State of Implementation of the February 2006 Orders 8 The working through of those orders has been slow. Only recently have the parties exhausted their attempts to reach agreement on the four topics. They have now agreed upon the identity of the referee but the referee has not yet entered upon the reference. 9 "Sharpshooter" was sold at auction on 25 July 2006. Following that sale the net proceeds, $379,500, have been deposited into the bank account of Blue Water Fishex. The Application Now Being Decided 10 The application before me is one which the plaintiff brings on a notice of motion. It seeks mandatory orders that the defendant sign cheques drawn on the bank account of Blue Water Fishex to pay certain expenses. The plaintiff has sent to the defendant an invoice relating to each of those expenses, and a cheque drawn on the account of Blue Water Fishex which the plaintiff has signed in payment of each of those invoices. He has requested her to sign the cheques and send them to the payees, but she has not done so. 11 To understand the expenses in question, one needs to know a little more about the way in which "Sharpshooter" was operated. In January of 2004 the operator of "Sharpshooter" informed the plaintiff that the vessel needed repairs, that the operator did not have sufficient funds in hand to pay for the repairs, and that if those repairs were not carried out the operator would not be prepared to take the vessel to sea, and indeed, would not want to have it under his management any more. The plaintiff says: "I then decided that rather than leave the vessel to deteriorate on the unguarded wharf, I would try to have the repairs carried out and get it operational. I decided, after receiving the advice of my accountants, to do that using Ensign Ordnance Pty Ltd, which by then was inactive...." 12 From February 2004 the plaintiff operated the boat through Ensign Ordnance Pty Ltd. The plaintiff made at least one payment of money from his own funds into the bank account of Ensign Ordnance to enable some expenses to be paid, and may have made more than one payment. Income earned by the vessel, and expenses connected with the vessel, all passed through the bank account of Ensign Ordnance Pty Ltd. The plaintiff prepared monthly accounts showing the cash flow concerning the vessel, and sent them to the defendant's solicitors. 13 After the consent orders were made in February 2006, the person who had been nominated as intended manager of "Sharpshooter" took over her operations, and for some months that manager paid the income earned by the vessel into the bank account of Blue Water Fishex. The defendant consented to running expenses of the vessel that were incurred after the consent orders, and also certain expenses which had been incurred prior to the consent orders, being paid from the Blue Water Fishex account. 14 However, payments of income derived from the operation of the vessel ceased to be made to the bank account of Blue Water Fishex on 29 May 2006. When the defendant inquired of the manager why this had happened he told her, "We have now been directed by Mr Varley to pay the income to Ensign Ordnance." That situation continued until the sale of the vessel on 25 July 2006. 15 All of the invoices which the plaintiff seeks to have paid are ones which are addressed to Ensign Ordnance. All of them except one relate to the period prior to the consent orders of February 2006. The one that does not relate to the period prior to the consent orders of February 2006 is an invoice that was sent to Ensign Ordnance relating to expenses incurred in June and July of 2006. Jurisdictional Basis for the Orders 16 The plaintiff submits that the orders he seeks are ones which the Court can make under section 38(1)(h)(i) and (k) of the Property (Relationships) Act 1984. Those provisions provide: "38(1) Without derogating from any other power of a court under this or any other law, a court, in exercising its powers under this Part, may do any one or more of the following: (h) make an order or grant an injunction: (i) for the protection of or otherwise relating to the property or financial resources of the parties to an application or either of them … (k) make any other order or grant any other injunction (whether or not of the same nature as those mentioned in the preceding paragraphs) which it thinks it is necessary to make to do justice." 17 The plaintiff accepts that the orders which he seeks are interlocutory orders, to cover the situation until the final referee's report is received and adopted. Plaintiff's Submission 18 The plaintiff submits that if the accounts are not paid the likelihood is that the various creditors will bring litigation against Ensign Ordnance. Those creditors might also join Blue Water Fishex as a defendant, or, if they do not, Ensign Ordnance itself will join Blue Water Fishex as a third party. Having this sort of litigation would, he submits, be very wasteful, when Blue Water Fishex has enough money sitting in its bank account to be able to pay the bills. Further, he submits, all of the liabilities are ones which were clearly incurred by Ensign Ordnance in the course of operating "Sharpshooter". All of the income of Ensign Ordnance, from the period in which it operated "Sharpshooter", will be brought to account in the accounting exercise that the referee will conduct, and likewise any payment of expenses which Ensign Ordnance made will be brought into account. Thus, even if Ensign Ordnance were to pay the expenses itself now, they would need to be brought into account, and would ultimately be borne by Blue Water Fishex. In those circumstances, he submits, the balance of convenience favours Blue Water Fishex paying them now. No Irreparable Injury? 19 The defendant submits, correctly, that there is authority that, to obtain a mandatory interlocutory injunction under the general law, an applicant needs to show that there is a serious question to be tried, that he will suffer irreparable injury for which damages will not be an adequate compensation unless an injunction is granted, and that the balance of convenience favours the granting of the injunction: Castlemaine Tooheys Ltd v the State of South Australia (1986) 161 CLR 148 at 153 per Mason A-CJ (sitting as a single judge); Silktone Pty Ltd v Devreal Capital Pty Ltd (1990) 21 NSWLR 317 at 321 per Kirby P. 20 In the present case, the defendant submits, the plaintiff has not endeavoured to show he would suffer irreparable injury if the injunction is not granted. 21 The plaintiff points out that the injunction which he seeks is one arising under a statute. In those circumstances, he submits, the tests which the general law requires to apply, when an interlocutory injunction is granted in the exercise of the general law jurisdiction of the Court, do not necessarily apply. 22 There is some truth in that submission of the plaintiff. When there is a statutory power to grant an injunction, the tests that the Court ought apply depend upon construction of the statute. It is for the Court to decide, whether, taking into account the nature and purpose of the statutory provisions, an adequate case has been made out. However, even when the power to grant an interlocutory injunction arises under a statute, many of the same factors need to be taken into account as need to be taken into account when an interlocutory injunction is sought under the general law. Thus, the tests of requiring a serious question to be tried, and the balance of convenience favouring an injunction, have been applied to the exercise of statutory jurisdiction to grant an injunction under the Family Law Act 1975 (Blue Seas Investments Pty Ltd v Victor Mitchell (1999) 25 Fam LR 65 at [56]) and the Trade Practices Act 1974 (Epitoma Pty Ltd v Australasian Meat Industry Employees' Union (1984) 3 FCR 55 at 58). 23 In the present case, the injunction that the plaintiff seeks is in aid of the Court's power to make orders for adjustment of property rights under section 20 Property (Relationships) Act 1984, and to make orders varying or setting aside, under section 41 of that Act, orders that have earlier been made under section 20. The present is not a case like the case where a plaintiff seeks an interlocutory injunction to restrain commission of a tort or breach of contract, where the plaintiff will have a right to damages under the general law if the injunction is not granted. In such a case it is not only relevant, but necessary, to ask whether, if the injunction were to be refused, the plaintiff would suffer injury for which damages would not be an adequate remedy. It is necessary to ask the question because such an injunction is one granted in equity's auxiliary jurisdiction, and equity only grants an injunction in its auxiliary jurisdiction when damages are not an adequate remedy. 24 By contrast, when an interlocutory injunction is sought to restrain breach of an obligation arising in equity's exclusive jurisdiction there is no need to provide evidence to show that the plaintiff would suffer irreparable injury for which damages would not be an adequate compensation, because in that situation the plaintiff would have no right to damages at all if the injunction were to be refused: Heavener v Loomes (1924) 34 CLR 306 at 326. 25 That it is only sometimes that proof of irreparable injury is a precondition to the grant of an interlocutory injunction has led to the test under the general law for the grant of an interlocutory injunction being stated in a way which is applicable in both the auxiliary and the exclusive jurisdiction of equity, and also concerning other types of injunctions. Under that way of stating the test, the questions are whether there is a serious question to be tried, and whether the balance of convenience favours the grant of the injunction: Murphy v Lush (1986) 60 ALJR 523, at 524 per Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ; American Cyanamid Co v Ethicon Ltd [1975] AC 396 at 407; Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 at 24, [21] per Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ. If the test is stated that way, and the interlocutory injunction is one which is sought to hold the status quo until the court can decide whether to issue an injunction in equity's auxiliary jurisdiction, then the question of whether damages are an adequate remedy is part of whether there is a serious question to be tried. For all types of injunction, the type of damage which the applicant will suffer if the injunction is not granted is a relevant matter to take into account on the balance of convenience. 26 In the present case, if the injunction were to be refused I can see no basis on which the plaintiff would have any right to damages at all, arising from the failure of the defendant to agree to pay the invoices from the proceeds of sale of the vessel. Thus, I do not regard the fact that the plaintiff has not endeavoured to show that he would suffer irreparable injury as necessarily a knock-out point concerning the plaintiff's application. Rather, it is one factor to take into account on the balance of convenience. Inevitable that Blue Water Fishex will Pay these Invoices? 27 The defendant submits that it should not be assumed that the invoices which are now in dispute will ultimately be paid by Blue Water Fishex. I mentioned earlier that the defendant had drawn up accounts, on the basis of information which the plaintiff supplied to her. Those accounts show, on a prima facie basis, that the plaintiff received of the order of $400,000 more than the defendant received from the operation of the vessel prior to the making of the February 2006 orders. That difference is one which would need to be taken into account in the reference, in deciding how much money is owed by whom and to whom. 28 It is a possibility, the defendant submits, that the outcome of the accounting will be that, even after allowing the invoices that today's litigation is about as an item in Ensign Ordnance's favour, then Ensign Ordnance will still owe money to Blue Water Fishex. It is a possibility, she submits, that particularly in light of the plaintiff having received greater payment from the operation of the vessel than the defendant received, the outcome of the reference may be that the whole of the amount held in the bank account of Blue Water Fishex is payable to the defendant. 29 In my view, that submission is right. My acceptance of that submission does not involve expressing any views about the probabilities of those possible outcomes arising. That is because the evidence before me does not examine, even on a prima facie basis, all of the items which would need to be considered in having a full accounting of the dealings between the plaintiff and the defendant, Ensign Ordnance and Blue Water Fishex. It does establish, however, that there is a realistic possibility that the making of the orders could cause significant prejudice to the defendant. 30 As well, the defendant submits that it cannot be assumed that, even in the taking of the accounts, Ensign Ordnance will be entitled to be indemnified by Blue Water Fishex for all, or even part, of these accounts. They were, the defendant submits, incurred during a period when the plaintiff had caused Ensign Ordnance to in effect usurp the role of operator of the vessel. In those circumstances, the defendant submits, Ensign Ordnance was not a conventional agent, entitled to the indemnity from its principal to which a conventional agent is entitled. I record this submission, but prefer to decide the case without expressing any view about it. Serious Enough Risk to Justify Mandatory Order? 31 The defendant also submits that there is no evidence of a sufficiently serious risk to justify the making of a mandatory interlocutory order. There is no evidence of a solicitor's letter of demand to Ensign Ordnance, and no evidence of service of a statutory demand. That submission is also right. Even bearing in mind that the injunction in question is an injunction, the power to grant which is conferred by statute, it is still necessary to show evidence of a risk which calls for the making of an injunction. This Application Contrary to Orders of February 2006? 32 The defendant submits, also, that it is not possible for the plaintiff to bring the present application, in light of the orders which were made in February 2006. What the application seeks to do is to circumvent the procedure which the parties themselves have agreed, and the Court has ordered, by which the amounts owing between them will be first ascertained, and then paid. The defendant puts this, not as a jurisdictional bar, but as a discretionary matter going to whether an injunction should be granted. 33 In my view, when the parties have agreed, in Clause 12.2 of the consent orders (para [6] above) that the proceeds of the vessel "shall be retained" by Blue Water Fishex, and paid in accordance with the referee's decision, strong reasons would need to be shown why the parties should not keep their agreement. In putting it that way, I deliberately keep my remark at the level of discretion, and leave undecided whether there is any more powerful point that could be made arising from the terms of Clause 12.2. 34 Apart from Clause 12.2, there is a principle whereby a declaration will not be granted concerning whether some but not all of the items involved in an accounting are due, on the basis that a litigant cannot have little bits of an account: Colin D Young Pty Ltd v Commercial and General Acceptance Ltd (1982) NSW ConvR 55-097 at 56,575; Adams v Bank of NSW [1984] 1 NSWLR 285 at 296. An analogous principle applies here, in my view, and would make a court reluctant to make a mandatory interlocutory order that presupposes the result of one part of an accounting that the Court has ordered to occur. No Undertaking as to Damages 35 Finally, the defendant points to the fact that the plaintiff does not proffer an undertaking as to damages. 36 The plaintiff completed a financial statement in December 2005, for the purpose of some proceedings in the Family Court. That shows him as having an average weekly income of $727 and personal expenditure of $1,474. It shows his net assets as being around $677,000. In arriving at that figure, it values his interest in Blue Water Fishex at $200,000. The basis for that calculation is that he took the value of the vessel to be $400,000, and took the view that the value of his interest in the company was half of that $400,000. The boat, when sold, realised less than $400,000, and it will not be known until the accounting is completed whether there are any liabilities of Blue Water Fishex that need to be taken into consideration in valuing the plaintiff's interest in the company. Thus that particular asset cannot be taken at its face value. 37 Another significant asset is what he says is a 50 percent equitable interest in a home which he owns with his wife. However, his wife is the sole registered proprietor of the home. Counsel for the defendant rightly points out that in those circumstances there may be difficulties in the defendant actually obtaining the value of the plaintiff's equity in the house, if the result of the present proceedings was that that needed to be done. 38 The plaintiff also included as an asset a loan account for nearly $360,000 with Blue Water Fishex. Whether he is really owed that sum will depend upon the outcome of the accounting. Further, whether whatever sum it is that he is owed by Blue Water Fishex, if any, is actually recoverable by him will depend upon the outcome of that accounting. 39 He also includes an asset of nearly $55,000, which is a loan owed to him by Ensign Ordnance. Again, whether that loan is recoverable will depend upon the outcome of the accounting. 40 The financial statement values his interest in Ensign Ordnance at nil. 41 The defendant draws two different conclusions from this. First, she submits that it is a possibility, on the evidence, that Ensign Ordnance is insolvent. If that is so, then it might not be able to repay any amount which the accounting finds is due from it. That is an extra factor, the defendant says, which should be taken into account in concluding that the defendant would be at real risk if the injunction were to be granted, and it were to eventuate, that the whole, or a substantial part, of the funds in the bank account at the time was due to the defendant. I accept that submission. 42 Second, the defendant points out that the plaintiff does not proffer the undertaking as to damages, and his financial circumstances are such that, even if he were required to give one as a condition of relief, he might not be able to satisfy it. 43 The plaintiff's counsel's response to this was not to deny that the plaintiff is presently financially pressed. Rather, he submitted that, in a case like the present, an undertaking as to damages ought not be required. He submits that it is another consequence of the jurisdiction invoked being a statutory one that the requirement of the general law for an undertaking as to damages to usually be given will not be imported into it. 44 He referred me to the decision of the Full Court of the Family Court in Blue Seas Investments Pty Ltd v Victor Mitchell (1999) 25 Fam LR 65 (Nicholson CJ, Lindenmayer and O'Ryan JJ). That case arose from an appeal against the granting of an interlocutory injunction. The wife in the marriage in question, who had applied for the injunction, had proffered an undertaking as to damages, which was accepted when the trial Judge made an injunction which restrained the husband from dealing with certain of his properties, and borrowing further money. The husband appealed against the granting of the interlocutory injunction, and lost. 45 One of the points taken on the appeal was that the discretion of the trial judge had miscarried, because the wife's undertaking as to damages would be likely to be worthless. The Court said, at [51] and following: "Dr Dickie [Counsel for the appellant] conceded that there is no requirement for an undertaking as to damages if the party seeking an injunction is impecunious or has limited means: see Allen v Jambo Holdings [1981] 1 WLR 1252; [1980] 2 All ER 502; see also Dein v Bealey [1960] NSWR 385, Szentessy v Woo Ran (Australia) Pty Ltd (1985) 64 ACTR 98. He submitted, however, that the inability of the applicant to give such an undertaking is a relevant factor in considering whether to grant the injunction at all. 52. We note that the learned authors of Meagher Gummow & Lehane's Equity Doctrine and Remedies (4th Edition) p 603, in a note which refers to the above cited Australian cases, say: 'It would be a pity if these cases were followed with any enthusiasm, as it would mean that the res puplica would be held to ransom by paupers, whereas poverty is a practical misfortune not a legal privilege.' 53. Against this, however, is a well-known principle that poverty or straitened circumstances should not bar a litigant's access to justice - see Re Will of F B Gilbert (deceased) (1946) 46 SR(NSW) 318 at 323, cited in Adam P Brown Male Fashions Pty Ltd v Phillip Morris Inc (1981) 148 CLR 107 at 177; 35 ALR 625. 54. It should be noted that these principles in relation to undertakings as to damages are principles of equity derived from civil litigation. There is, we think, an additional highly relevant matter that distinguishes litigation under the Family Law Act from ordinary civil litigation: that is the fact that very often the wealth of the parties is controlled by one rather than both of them. This in turn means that it is not uncommon for one of the parties to have no means of meeting any liability that may be incurred pursuant to an undertaking as to damages. 55. In the present matter, the wife's case is that the husband, Ms Jan McGillivray and his son Kristen, have combined together to place the assets of the marriage outside her reach. Accordingly, it may well be that she does not have the capacity to meet any damages awarded against her pursuant to her undertaking. While this was not the subject of any specific finding by her Honour, if her case has substance, it would be extraordinary if this fact should stand in the path of the grant of an injunction. 56. There is no doubt that in proceedings for interlocutory injunctions the court, before making an order, is required to find that there is a serious issue to be tried and that the balance of convenience supports the making of an order: see American Cyanamid v Ethicon Ltd [1975] AC 396; [1975] 1 All ER 504 and the other cases cited by the Full Court of this court in Yunghanns v Yunghanns (1999) 24 Fam LR 400 at 433; FLC 92-386 at 85,723. 57. No doubt in ordinary civil litigation the impecuniosity of a party is a matter that may be relevant to the issue of balance of convenience. For the reasons already stated however, we consider that family law cases must be looked at in a different light. In our view it would be unconscionable to accept a broad principle that the impecuniosity of a party in family law proceedings would be given such weight as to prevent an injunction being granted where all the other requirements for the grant of such an injunction are present. Indeed, it may even be doubtful whether the impecuniosity of one of the parties to family law proceedings would usually be a factor militating against a grant of interim or interlocutory injunctions if the other tests for the grant of the same were otherwise satisfied. This is not to say that such a factor would never be relevant but in the present circumstances at least, where the injunction may have the effect of preserving the only piece of property to which the wife might have recourse, it would be unreasonable in the extreme for her impecuniosity to operate to prevent an injunction being granted." 46 I note that there was a concession by counsel for the appellant in Mitchell. There is no such concession in the present case. Thus it is necessary to look at the cases referred to in para [51] of Mitchell, to see whether they bear out the proposition that "there is no requirement for an undertaking as to damages if the party seeking an injunction is impecunious or has limited means". 47 Allen v Jambo Holdings Ltd (the correct citation of which is [1980] 1 WLR 1252; [1980] 2 All ER 502) was an interlocutory appeal. It concerned a situation where a man had been killed in England when he was struck by the propeller of an aeroplane. The aeroplane was the only asset which the owner of the aeroplane had in England. It was about to leave the country. The owner was a Nigerian company. The widow began a claim under the Fatal Accidents Act 1976. She had legal aid. She was granted a Mareva injunction (as it was then called), requiring that the aircraft not be removed from England. An application to discharge the Mareva injunction was made by solicitors acting for insurers, at a time when there was no evidence before the Court that the insurers had accepted liability under the policy, and when they had made no offer to provide any alternative security. The trial juge discharged the Mareva order, but the Court of Appeal restored it. 48 Lord Denning MR, at 1256-7 in WLR, 505 in All ER said: "It is said whenever a Mareva injunction is granted the plaintiff has to give the cross undertaking in damages. Suppose the widow should lose this case altogether. She is legally aided. Her undertaking is worth nothing. I would not assent to that argument. As Shaw LJ said in the course of the argument, a legally aided plaintiff is by our statute not to be in any worse position by reason of being legally aided than any other plaintiff would be. I do not see why a poor plaintiff should be denied a Mareva injunction just because he is poor, whereas a rich plaintiff would get it. One has to look at these matters broadly. As a matter of convenience, balancing one side against the other, it seems to me that an injunction should go to restrain the removal of this aircraft." 49 Shaw LJ agreed, saying at 1257, "Questions of financial stability ought not to affect the position in regard to what is the essential justice of the case as between the parties." 50 Templeman LJ at 1258 of WLR, 506 of All ER, said nothing more than: "In this case one factor which counsel for the first and second defendants very properly urged on us (but it is only a factor which we must bear in mind) is the cross-undertaking in damages which must inevitably be limited to the assets of the executors which I understand are no more than the present inflated value of a house. Nevertheless, it seems to me that to deny an injunction in these circumstances would be to deny a measure of assurance to the widow which she is entitled to have." 51 It is of some interest that that decision was given in June of 1979, and the previous month, May 1979, a bench of which Lord Denning MR was a member in Third Chandris Shipping Corp v Unimarine SA [1979] QB 645 at 669 gave a detailed reserved judgment, which included guidelines for the granting of a Mareva injunction, which included, at 669: "The plaintiff must, of course, give an undertaking in damages - in case he failed in his claim, or the injunction turns out to be unjustified. In a suitable case this should be supported by a bond or security: and the injunction only granted on it being given, or undertaken to be given." 52 It would be very surprising if in Allen v Jambo Holdings Lord Denning had intended to depart from one of his own decisions given a month previously, without mentioning that he was doing so, or why. I infer, from the passages from Lord Denning and Templeman LJ which I have quoted, that in Allen v Jambo the plaintiff proffered an undertaking as to damages, and the point taken against her was that her undertaking was not worth very much money. It appears, from Templeman LJ's remarks about it being limited to the value of a house, that it had some value, however. Thus, Allen v Jambo Holdings is not authority for the proposition that a poor applicant need not proffer an undertaking as to damages. Indeed, Mitchell was also a case where there was an undertaking as to damages, and the argument concerned its value. 53 Szentessy v Woo Ran (Australia) Pty Ltd (1985) 64 ACTR 98 is a decision of Kelly J in the Supreme Court of the Australian Capital Territory, which also concerned the grant of a Mareva injunction to a poor plaintiff. His Honour, at 104, purported to apply Allen v Jambo Holdings, by dispensing with an undertaking as to damages altogether. That involves, in my respectful view, a misreading of Allen v Jambo Holdings. 54 As well, there are difficulties in giving any general application to the process of reasoning in Szentessy. At 101, Kelly J had said: " The applicant also deposed to a lack of means such that he could not properly undertake to be responsible for any damages which the defendants might suffer if an injunction were granted. I saw no reason to doubt the truth of that evidence. I take the opportunity to point out, however, that I formed no conclusion as to the truth of the matters deposed to by the applicant, being content to decide whether his claim was either frivolous or vexatious." 55 Yet at 104 His Honour said: "I was satisfied, as I have earlier indicated, that he had no means and that he was legally aided." 56 A minor difficulty with the reasoning is that the two passages I have quoted do not seem to sit together very well. A more significant difficulty, in my view, is that using a conclusion that the plaintiff had no means as a reason for not requiring an undertaking as to damages involved making a finding of fact, on a final basis, in the course of an interlocutory hearing. Of course sometimes, in the course of an interlocutory hearing, there are some facts which are common ground, and some (such as whether or not a particular litigant has legal aid) which, when proved by documents, do not admit of any real doubt. However, it would be most unusual for the fact that a plaintiff had no means at all which could be called upon to satisfy an undertaking as to damages to be a fact of that kind. The usual way a court proceeds on an application for an interlocutory injunction, is to take account of any risk that an undertaking as to damages might be inadequate, as one factor entering into the balance of convenience. 57 Dein v Bealey [1960] NSWR 385 does not, in my respectful view, provide support for the proposition for which the Full Court cited it in Mitchell. It arose from an application for an injunction to restrain the defendant from subdividing land. The plaintiffs did not wish to give an undertaking as to damages, and so the case proceeded as an application for a final injunction. Jacobs J said at 386. "I do take a view of the construction of the Local Government Act 1919 in its application to the circumstances of this case which is not in favour of the plaintiffs. If I took a different view, however, I would not think that the evidence is sufficient upon the question of the plaintiffs' special damage to entitle them to an injunction at this stage. However, I would in that event have given the plaintiffs the opportunity to obtain that further evidence, and I would in the meantime have granted interlocutory relief for a short period, and I think I would have exercised my discretion to dispense with an undertaking as to damages - provided the period was a very short one. However, as I say, these matters do not arise...." 58 Judicial musings like those, even from as eminent a judge as Jacobs J, are not authority for anything beyond the incontestable fact that the terms on which an interlocutory injunction is granted are a matter of discretion. As well, there is no statement in the judgment in Dein v Bealey that the plaintiffs were impecunious or had limited means. Indeed, from p 385 it appears that the standing of the plaintiffs to seek the injunction arose from being a neighbouring landholder, and that on the plaintiffs' land was erected a two-storey block of flats. 59 In my respectful view, the legal proposition in the first sentence of para [51] of Mitchell is not borne out by the authorities it relies on. 60 Nor, in my respectful view, does the reference to Re Will of Gilbert (1946) 46 SR(NSW) 318, in Mitchell at [53], support the principle which the Full Court drew from it. Re Will of Gilbert concerned an appeal from a final order under the Testators Family Maintenance Act. The relevant principle at 323, which was cited in Adam P Brown Male Fashions Pty Ltd v Phillip Morris Inc (1981) 148 CLR 170, concerned the circumstances in which an Appellate Court will alter a discretionary decision of a trial judge. It says nothing at all about poverty or strained circumstances barring access to justice. 61 I also mention that the reference in para [52] of Mitchell to the 4th edition of Meagher Gummow & Lehane is a mistake, as the 4th edition was not published until 2002. It should be a reference to the 3rd edition. The passage quoted is repeated in the 4th edition at [21-410], p.792. 62 The decision in Allen v Jambo has been followed by Ipp J in the Supreme Court of Western Australia in Custom Credit Corporation Limited v Whitehall Holdings Pty Ltd, unreported, 7 April 1992. The relevant portion of his Honour's judgment can most readily be found quoted in the decision of Davies AJ in Circaz Pty Ltd v Manolidis [2003] 45 ACSR 542, at 546-7 [12]. Ipp J said at 23-25: "The fact that an undertaking as to damages has little or no value is not conclusive as to the result of an application for an interlocutory injunction.It is only a factor which must be borne in mind: Allen v Jambo Limited [1981] WLR 1252 at 1258 per Templeman LJ." 63 Ipp J then set out the passages from the judgments of Lord Denning MR and Shaw LJ that I have earlier set out, and continued: "It is of course desirable for an applicant for an interlocutory injunction to provide undertakings as to damages which are of value. Nevertheless, where there is a serious issue to be tried, and when those who stand behind the applicant company have offered undertakings so that the applicant has done the best it can to provide appropriate undertakings, justice may well require the grant of an injunction even though the undertakings are of little or no value.In my view the paramount consideration is embodied in the remarks of Bowen LJ in Cowell v Taylor (1885) 31 Ch 34, where he said at 38: "The general rule is that poverty is no bar to a litigant. That, from time immemorial, has been the rule at common law and also, I believe, in equity." In Cayne v Global Natural Resources Plc [1984] 1 All ER 225, Eveleigh LJ said at 233: "It seems to me that with the risk that this decision will produce an injustice on one side or the other it would be wrong to run the risk of causing an injustice to a defendant who is being denied the right to trial where the defence put forward has been substantiated by affidavits and a number of exhibits in this case. The injustice in such a case is caused by the denial of the trial. So also it seems to me that with the risk that this decision will produce an injustice on one side or the other it would be wrong to run the risk of causing an injustice to the Whitehall companies, who have demonstrated that there are serious issues to be tried, both of law and of fact, substantiated by affidavit, and who will be denied the right to trial by reason of their financial inability to fund the litigation when that situation would be alleviated by the grant of an injunction. In Cayne v Global Natural Resources , May LJ said at 338: "Where a plaintiff brings an action for an injunction I think that it is, in general, an injustice to grant one at an interlocutory stage if this effectively precludes a defendant from the opportunity of having his rights determined in a full trial." So also, in my view, where a plaintiff brings an action for an injunction, it is in general an injustice to refuse one at an interlocutory stage if this effectively precludes the plaintiff from the opportunity of having his rights determined in a full trial. This is particularly the case where the plaintiff has established that there are serious issues to be tried."

Varley v Varley

At a glance

Court

Decision date

Before

Source

Judgment (13 paragraphs)

Parties

Cases Cited (10)

Cited By (20)