P. Howard on instructions from S. Matawalu & Associate for Plaintiffs
R. Naidu for First-named First Defendants and three others.
P. Knight for NBF Asset Management Bank Fifth Defendant.
Dates of Hearing: 26th, 28th November 1997
Date of Interlocutory Judgment: 28th November 1997
INTERLOCUTORY JUDGMENT
The Statement of Claim annexed to the Writ herein which is dated the 16th of October 1997 contains 127 paragraphs and occupies 47
pages. Because this is an ex tempore judgment I do not intend to refer to the Statement of Claim in any great detail, such as would
be required in a final judgment disposing of the case, but intend merely to refer to those parts of it which bear on the Notice of
Motion dated 11th November 1997 which is presently before me. Likewise I do not intend to refer at any length if at all to the only
Defence so far filed in the action, that of the First Defendants which was delivered on the 14th of November 1997. It will however
be necessary to refer to some of the affidavits which have been sworn and filed in support of and in opposition to the Notice of
Motion.
My judgment is being delivered ex tempore because I was informed from the Bar Table by counsel for the First Defendant, and I am prepared
to believe truthfully, that there is some urgency in giving a decision on the Motion, namely that for reasons beyond their control
as a result of an unfortunate and unavoidable delay by Pain J. in giving a decision in related proceedings in Action No. HBC500 of
1996, the First Defendants allege that a sale of the business involved in both these actions was lost and that it is likely that
another sale will also be lost unless the Court gives its decision quickly. I hope to cover all the relevant issues as adequately
as possible having read the various affidavits and written submissions of the parties and heard oral argument by counsel for First
and Fifth Defendants in support of those submissions.
The First Plaintiffs to whom I shall refer henceforth as "the Plaintiffs" were at all material times Directors and Shareholders
of Donald Pickering & Sons Enterprises Ltd. (DPSE) trading as United Engineers (Receiver and Manager Appointed) which I shall
hereafter call "the Company".
At all material times the First Plaintiffs were:
(a) Directors and Shareholders of the Second and Third Plaintiffs;
(b) Guarantors jointly and severally (unlimited) in respect of the indebtedness of the Company to the National Bank of Fiji (the Second
Defendant);
(c) Guarantors jointly and severally (unlimited) in respect of the indebtedness of the Second and Third Plaintiffs to the Second Defendants.
The persons named collectively as the First Defendant at all material times comprised the partnership of the persons so named who
traded as KPMG Peat Marwick Chartered Accountants.
On 21st September, 1993 the Company submitted a tender for the construction of five multipurpose plain vessels on the invitation of
a Company based in Tahiti called Establishment pour La Valorisation Des Activities Aquardes et Maritimes (EVAAM).
It was a term of the tender contract that a bank guarantee for 2% of the amount tendered be provided in the form of a bank guarantee
in the event that the successful tenderer defaulted by failing to sign the contract after its acceptance as the successful tenderer.
The Second Defendant on 21st September 1993 at the request of the Company provided a guarantee for percentage of tender in the sum
so requested.
On 14th October 1993 the Second Defendant confirmed the approval of the additional tender guarantee to the Company in the sum $225,000.00.
The Plaintiffs then allege that on 14th November 1993 the Second Defendant made various representations concerning the Company and
the First-named First Plaintiff to EVAAM, the nature of which is immaterial for present purposes. The Plaintiffs' Company DPSE was
the successful tenderer and was awarded a contract to build five longline fishing vessels for a Company known as L'Armement Cooperatif
Polynesian ACP of Tahiti (ACP).
The Statement of Claim alleges that the total contract value was F$10,889,661.00 with a 14% profit margin.
Funding would require a deposit of 20% of the contract price, the balance to be paid on presentation of certified completion certificates.
The First-named First Plaintiff informed the Second Defendant that the bank guarantee was required to draw upon the initial 20% deposit
in Central Pacific Francs in favour of ACP. The Second Defendant hereinafter called NBF issued a Form of Performance Guarantee in
favour of ACP under seal dated 16th January 1995.
In a letter dated 25th January 1995 from NBF to the Company, NBF advised its approval of a further additional facility under normal
banking conditions of the Company as follows:
(i) establishment of a performance bond of XPF 38, 113, 815 (F$544,483) being 5% of the contract value of XPF 762,276,300; and
(ii) establishment of a payment guarantee of XPF 150,000,000 (F$2,177,933) being 20% of contract value.
That citation of relevant paragraphs of the Statement of Claim is sufficient to provide an outline of the background of this case.
Paragraph 58 is relevant to the present Motion and I quote from it the beginning and paragraphs (a), (c), (d), (e) and (f). Paragraph
(b) is of no relevance in the present circumstances.
"The Plaintiffs charge and the fact is that the intervention of Brian Murphy was causative of the rejection of the application for
refinance by FDB.
PARTICULARS
(a) At a meeting held 26th April, 1996 at NBF's Head Office between Donald Pickering, Ross McDonald and Escudier he expressed the
view the contract was not profitable and should be sold. He then proffered the services of KPMG Peat Marwick's so that he Brian Murphy
could carry out an investigative report.
(c) The First Defendants confirmed that NBF had requested the undertaking of a review of the present and projected financial position
of the company with regard to the viability of the fishing vessel contract.
(d) On 10th May, 1996 Escudier advises the company Murphy will undertake a Special Investigation and prepare a report for NBF and
the Company at the Bank's expense.
(e) Murphy's Draft report prepared as at 23rd May, 1996 and given to the Company's officers at a meeting held at its premises on 24th
May, 1996. Present were the First Plaintiffs, Sefton Bale, Ross McDonald and Murphy who recommended the company go into receivership.
(f) On 26th July, 1996 Donald Pickering learnt that the FDB had rejected the application for refinance in a telephone call to L. Qarase
the then General Manager who told him that the KPMG Peat Marwick report of Murphy had convinced him to decline which it formally
did on 30th July, 1996."
The Notice of Motion seeks the following Orders:
"(1) An Order restraining the Second and Fifth Defendants from instructing and/or authorising the First Defendant to continue
with the receivership of Donald Pickering and Sons Limited Enterprises Limited (trading as United Engineering (Receivers and Managers
appointed) ("the Company"), pursuant to section 125 of the Fair Trading Decree (the Decree).
(2) An Interlocutory Order pursuant to section 125 being an interim injunction pending final determination restraining the First Defendant,
his servants and/or agents from continuing with the sale of the assets of the Company pursuant to his powers as receiver and manager
of the Company until further Order.
(3) An Interim Order pending determination of these proceedings restraining the Defendants from continuing the contravention of Decree
as pleaded in the Statement of Claim filed herein.
(4) An Order that an undertaking as to damages be dispensed with."
When the parties came before me this morning Mr. Peter Howard stated that he was appearing on instructions from Mr. Sam Matawalu and
handed over written submissions by Mr. Matawalu on behalf of the Plaintiffs. He stated that owing to Mr. Matawalu's departure from
the country today Mr. Howard was not in a position to make any other submissions of his own in answer to those of the Defendants.
Counsel for the First Defendant then handed up supplementary submissions to those which he had already filed on the 26th of November
together with copies of judgments in various Courts and from text books on which he proposed to rely.
Shortly after the hearing began I mentioned for the benefit of counsel that I had yesterday read the file in the present action and
the decision of Mr. Justice Pain in Action No. HBC500 of 1996 and that having done so I thought it only fair to inform counsel that
I would need great persuasion by the Plaintiffs to convince me otherwise that in my view any remedy they might have against the Defendants
lay in the realm of damages and not an injunction against the Defendants. I then adjourned the proceedings at 10.30 a.m. to allow
counsel to read the various written submissions and the hearing resumed about 40 minutes later.
In beginning his submissions for the First Defendants Mr. Naidu reminded me that on the previous hearing on the 26th of November Mr.
Matawalu had stated that for the purposes of this Motion the Plaintiffs were really relying on Section 125 of the Fair Trading Decree
Sub-sections (1) and (2) and which are in the following terms:
"(1) An injunction under this section may be granted by the Court -
(a) against a person in the course of proceedings against that person for an offence against this Decree; or
(b) at any other time.
(2) If the Court is satisfied, on the application of the Minister, the Director or any other person that a person has engaged, or is proposing
to engage, in conduct that constitutes or would constitute -
(a) a contravention of a provision of this Decree;
(b) attempting to contravene such a provision;
(c) aiding, abetting, counselling or procuring a person to contravene such a provision;
(d) inducing or attempting to induce, whether by threats, promises or otherwise, a person to contravene such a provision;
(e) being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision;
(f) conspiring with others to contravene such a provision,
the Court may grant an injunction to such terms as the Court determines to be appropriate.
I consider Sub-sections (3) to (8) inclusive are irrelevant here but Sub-Sections (9) and (10) in my view bear directly on the present
Motion. They read:
"(9) Where the Minister or the Director applies for an injunction under this section, no undertaking as to damages or costs will
be required.
(10) The Minister or the Director may give an undertaking as to damages or costs on behalf of some other applicant and, on that event,
no further undertaking will be required."
I shall discuss these Sub-sections and various authorities which have been cited to me relating to them in a moment but before doing
so I must state at this point with due respect to the efforts of counsel for the Plaintiffs that having considered all the submissions
so far made to me I remain of the view that if the Plaintiffs have any remedy against the Defendants it lies in damages only.
It will be seen from the Sub-sections of Section 125 I have just quoted that the class of conduct to which the Section is addressed
is very restrictive, indeed far more so than the type of conduct for which common law injunctions may be obtained.
As Mr. Naidu put it, and I accept, it is not intended to be a panacea for all ills but, as I understand its purpose, to restrain misleading
and deceptive conduct pending the determination of an action but not as in the instant case to block a Receiver's sale merely because
the Writ in the action as here alleges various contraventions of the Fair Trading Decree 1992.
In my judgment it is clear that a pre-condition of the granting of an injunction under Section 125 is that the Court must be satisfied
that a person is contravening the Decree or attempting to do so. Nothing in the affidavit of Donald Thomas Pickering sworn on the
7th of November 1997 persuades me at this stage that there has been any such contravention. Nothing in the affidavit of Donald Thomas
Pickering sworn on the 24th of November persuades me that at least at this stage there has been any such contravention.
In Mr. Pickering's first affidavit the Plaintiffs seek to be relieved from the obligation of giving an undertaking as to damages as
a pre-condition of them being granted an injunction and to support that request they rely through their counsel on the remark of
Bowen C.J. in World Series Cricket Pty Ltd. v. Parish [1977] 16 ALR 181-186 when dealing with Section 80 of the Australian Fair Trading Act which is the equivalent of Section 125 of our Fair Trading Decree
that:
"Under s 80, a private person has statutory authority to bring the proceeding and this appears to absolve him from the necessity
of obtaining the fiat of the Attorney-General. Whether this should assimilate his position to that of the Attorney-General suing
to enforce the public interest or to a private individual suing by relation is not entirely clear. The approach of the court I think
should be that it will inquire from a private person seeking an interim injunction whether he is willing to give an undertaking as
to damages. The court should then take into account on the balance of convenience the presence or absence of such an undertaking
as one of the factors to be considered in exercising its discretion."
When that case went to the High Court of Australia Brennan J. assumed that the plaintiff's undertaking as to damages had been properly
demanded by St. John J.
In Trade Practices Law by J.D. Heydon The Law Book Company Limited 1989 the learned author says at pp. 9156 to 9157:
"That approach, rather than that suggested by Bowen C.J., conforms to a better reading of s 80 so far as private persons are
concerned. The exemption of one class of persons from giving undertakings, far from exempting others, suggests that the latter are
not exempted. Hence in practice litigants other than the Commission and the Minister offer the undertaking, and have it accepted,
as a matter of course (subject to the financial capacity of the person offering it to meet it). It follows from s80(6)-(7), and from
what Bowen C.J. said, that the words in s80(6) "the court shall not require ... as a condition" extend to the court being
prohibited from indicating that it will not grant an injunction unless an undertaking is given and probably also to the court being
prohibited from taking into account the absence of an undertaking on the balance of convenience."
In my judgment those comments apply equally well to Section 125 (9) and (10) of the Decree so that the only persons exempted by the
Section from giving an undertaking in damages are the Minister or Director for Fair Trading. I can see no reason why the Plaintiffs
should be absolved from giving such an undertaking in this case.
I am reinforced in this view by one of the cases relied on by Mr. Matawalu in his submissions Thomson Australian Holdings Proprietary Limited v. The Trade Practices Commission and Others [1980-81] 148 CLR 150 in which the High Court of Australia held that Section 80 of the Trade Practices Act was a complete and comprehensive statement of
the circumstances in which injunctions might be granted in respect of relief sought under the Act. As I have already stated I do
not consider Section 125 is designed to prevent sale of a business by a Receiver as in the present case.
In Hanbury and Maudsley Modern Equity 13th Edition the author states at page 730 under the heading Conditions and Undertaking:
"One reason for the practice of undertakings is that it aids the court in achieving its object of abstaining from expressing
any opinion on the merits until the hearing. While an undertaking by the plaintiff is exacted for the benefit of the defendant, it
is not a contract with the defendant. The undertaking is given to the court, so that non-performance is a contempt of court and not
a breach of contract."
Generally speaking the law in my view is clear that it is only in most exceptional circumstances that a Plaintiff seeking an interlocutory
injunction should not be required to give an appropriate undertaking - see Spry, Equitable Remedies 3rd Edition (1984) page 465.
In my judgment there are no exceptional circumstances in this case.
I can understand the desire of the Plaintiffs to prevent their business being sold. In the closing paragraph of his submissions Mr.
Matawalu states that to hold that the Plaintiffs' remedies if anything sound only in damages regrettably takes no account of the
fact that the business the Receiver now seeks to dispose of grew from a very small family operation. He says damages alone will not
adequately compensate the Plaintiffs' loss. I can understand the Plaintiffs' feeling in this regard - just like the small seed which
grows into a large mustard tree so they now see the business which they gradually built up into the size it now is running the risk
of being sold off because it is unable to pay its debts. Unfortunately it is a fact of life that the world of business is a hard
and unforgiving one where sentiment is so often lacking.
It appears to me that the Plaintiffs are attempting to lay the blame for this on Mr. Brian Murphy and the Fifth Defendant but in Action
No. HBC500 of 1996 Pain J. was in no doubt as to the real reason for the financial problems of the Company. At page 5 of his decision
he said this:
"It is important to consider the financial situation of United Engineers. During 1996 it was experiencing serious financial troubles.
Debts, such as outstanding premiums of $49,107.63 due to Dominion Insurance, were not being paid. The company was failing to make
payments to NBF in accordance with its loan agreements. The Tahitian Contract was behind schedule with substantial contingent penalties
accruing. The situation is encapsulated in the financial report prepared by Brian Murphy. The validity of this report has not been
challenged by the plaintiffs or United Engineers. A balance sheet prepared as at 4 May 1996 showed total assets of $3,775,000 and
total liabilities of $5,719,000. Moreover the company had a "cash flow/liquidity crisis", which really made it unable to
continue its operations. Its viability depended on successful completion of the Tahitian contract. However that needed an injection
of cash funds to enable the company to continue the project, to meet other operational costs, to pay creditors and to meet N.B.F.
commitments. This expenditure could not be met from progress payments under the contract. The truth of the matter was that United
Engineers was already over committed to N.B.F. It had no prospect of obtaining a fresh injection of cash funds and the endeavours
of all concerned could not achieve this."
He continued on page 6:
"The allegation that Brian Murphy did not use his best endeavours to sell the Tahitian Contract is unsubstantiated. I accept
his evidence in paragraphs 19, 20 and 21 of his affidavit that there was little value in thecontract. It was behind schedule and
did not have the financial resources to finish the building of the ships. It was in a weak bargaining position. Shipbuilders of Fiji,
the only firm available to complete this work, was not a willing and enthusiastic purchaser. It could afford to do nothing, in the
likely expectation that United Engineers would default under the contract and Shipbuilders of Fiji would then be engaged to complete
the work. That situation seems to have been accepted by United Engineers and Donald Pickering in their letter to KPMG dated 15th
August 1996 (Exhibit 10 to affidavit of Brian Murphy)."
He concluded at the bottom of that page:
"The evidence shows that a major problem for United Engineers was its inability to service its substantial exposure to N.B.F.
The Bank was putting pressure on the company."
On the material before me I see no reason to differ from my learned brother's assessment of the situation.
In his brief submission Mr. Knight for the Fifth Defendant said, and I accept, that the law is that only in the most exceptional cases
will a Receiver be restrained from exercising his power of sale. I also agree with his statement that the whole thrust of the Fair
Trading Decree is to protect the public and not a private contractual arrangement between a bank and one of its customers.
In my judgment on the evidence before me I consider that the balance of convenience is to allow the sale of the business to proceed
which I consider will be in the interests of the Company and that any further delays are likely to reduce the value of the business.
I therefore refuse the application for injunction and order the Plaintiffs to pay the costs of the First and Fifth Defendants which
I fix at $350.00 each by the 29th of December 1997.
JOHN E. BYRNE
JUDGE
Legislation, authorities and cases referred to in judgment:
Fair Trading Decree 1992, Decree No. 25 of 1992.
Hanbury and Maudsley Modern Equity 13th Edition.
Trade Practices Act (Australia).
Trade Practices Law by J.D. Heydon The Law Book Company Limited 1989.
Civil Action No. HBC500 of 1996 - Donald Thomas Pickering and Another v. Brian Murphy and Others - unreported decision of Pain J. dated 28th May 1997.
Thomson Australian Holdings Proprietary Limited v. The Trade Practices Commission and Others [1980-81] 148 CLR 150.
World Series Cricket Pty Ltd. v. Parish [1977] 16 ALR 181.
The following additional cases were referred to in argument:
Australian Course Grains Pool Pty Limited v. Burley Marketing Board of Queensland [1950] ArgusLawRp 45; [1983] 57 ALR 425.
Commercial Bank of Australia v. Amadio [1983] 153 CLR 447.
Levett v. Barclays Bank Plc. [1995] 1 WLR 1260.
R. v. Judges of Federal Court of Australia; Ex-parte: Pilkington ACI (Operations) Pty Limited [1978] HCA 60; [1978] 142 CLR 113.
Rosling & Company v. Law Guarantee & Trust Company [1903] 47 S.J. 225.
Brown v. Jam Factory Pty. Ltd. [1981] 53 FLR 348.
Equity, Doctrines and Remedies - Meagher, Gummow, Lehane - Butterworths 1992.
Hbc0447d.97s
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