ATCHWORDS Trade Practices - misleading and deceptive conduct - Federal and State claims - interlocutory relief staying execution of regular judgment in State Supreme Court. Trade Practices Act 1974 PETRUS FREDERICUS INDRISIE, WILHELMINA JULIANA INDRISIE, INDRISIE INVESTMENTS PTY. LTD. and COMBINE NOMINEES PTY. LTD. Vv. GENERAL CREDITS LIMITED and KEVIN BRYANT V. No. G 259 of 1984 Northrop J. Melbourne 26 October 1984 IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V. No. G 259 of 1984 ewww GENERAL DIVISION PETRUS FREDERICUS INDRISIE, WILHELMINA JULIANA INDRISIE, INDRISIE INVESTMENTS PTY. LTD. and COMBINE NOMINEES PTY. LTD. Applicants and GENERAL CREDITS LIMITED and KEVIN BRYANT Respondents CORAM: Northrop J. DATE: 26 October 1984 PLACE: Melbourne EX TEMPORE JUDGMENT In May 1977, arrangements were entered into between the applicants and General Credits Limited to enable Indrisie Investments Pty. Ltd. ("the Company") to finance its business activities relating to amusement machines. For present purposes it is sufficient to say that the Company manufactured the machines and sold them to General Credits which thereafter leased them back to the Company. The arrangements were of a continuing nature and provided the total amount advanced did not exceed stated amounts, there was no limit on the number of lease agreements that could be entered into between the Company and General Credits. The upper limit of advances to be made was increased from time to time. Under the lease agreements, the Company was required to pay the rental amounts and other charges. The leasing arrangements were contained in a master lease agreement. As part of the general arrangements, Mr and Mrs Indrisie, who controlled the Company, and Combine Nominees Pty. Ltd., also controlled by Mr and Mrs Indrisie, guaranteed the payment of monies owing by the Company to General Credits. At the same time Mr and Mrs Indrisie gave a mortgage over their home at Kew in favour of General Credits, and Combine Nominees gave a mortgage over land owned by it in Victoria Street, Richmond, in favour of General Credits. The Victoria Street premises included the buildings in which the amusement machines were assembled. During the year 1982, the Company got into financial difficulties, ain circumstances which will be outlined later in these reasons. General Credits gave the necessary notices demanding that Mr and Mrs Indrisie and Combine Nominees pay. The demands were not met and on 20 September 1982, General Credits issued two writs out of the Supreme Court of Victoria, seeking orders for possession of the Kew land and the Victoria Street land respectively. The orders were sought on the ground that the mortgagors had defaulted in the performance of their obligations under their respective mortgages. On 6 December 1982, a Master of the Supreme Court granted General Credits leave to enter judgment for possession of the land in each of the Supreme Court proceedings. The Supreme Court, constituted by King J. dismissed appeals from the orders of the Master. On 22 February 1984, a Full Court of the Supreme Court dismissed appeals from the orders made by King J. In giving reasons for the dismissal of the appeal, the Full Court, comprising the Chief Justice, Sir John Young, and Crockett and Nicholson JJ., expressed views which I propose to quote, but for convenience I shall adapt the terminology to correspond with that used in these reasons. At p.3, the Full Court said: "Mr Indrisie in an account deposed to by him by affidavit, and which, for present purposes, must be taken as true or as possibly being established as correct, has averred that General Credits in February 1982 breached its agreement with the Company. It was said that 1t was always agreed that General Credits would lend to the Company up to $1,000,000. However, 1t was alleged that in late 1981 the agreement was varied 50 as to allow the Company to borrow up to §1,500,000. The additional borrowing was to be used principally in replacing parts i1n machines and permitting a change-over to a more modern type of machine. General Credits then defaulted in its agreement to lend the additional $500,000. This default resulted in the Company's inability satisfactorily to compete for business and to service its requirements. The consequent decline in profitability led to loss by the Company and in turn to its inability to pay to General Credits the sums falling due under the master lease. In reliance on the alleged breach by General Credits of its agreement with it, the Company by a writ issued 19th August, 1982, sought to restrain General Credits from taking steps to repossess amusement machines. Then, in another writ issued 26th October, 1982, the Company has sought the recovery from General Credits of damages for breach of contract. In these circumstances Mr and Mrs Indrisie maintained that General Credits should not have had granted to it leave to enter final judgment. The two principal arguments relied on - and which are alone those that require consideration for the determination of this appeal - were that Mr and Mrs Indrisie were entitled in the action to rely upon an equitable set-off ..." I indicate that the second contention was then set out but need not be repeated. I now continue the quote: "In support of the first contention it was argued that Mr and Mrs Indrisie could take the benefit in the proceedings against them of any equity which the Company had by virtue of the right of action accruing to it from General Credits contractual default. Were it otherwise, so it was said, the guarantor would be placed in a worse position than the principal debtor. In particular it was said that, asp the liability of the Mortgagors arose only because the principal's G@efault was ain turn caused by General Credits' misconduct, that default could not be relied upon by the mortgagee to support a right of recourse by it to the mortgage security." The Full Court rejected that contention. On 21 September 1984 the High Court refused special leave to appeal from the orders of the Full Court of the Supreme Court of Victoria. On 4 October 1984 the applicants commenced these proceedings in the Federal Court of Australia. Each applicant is seeking damages under section 82 of the Trade Practices Act 1974 ("the Act") arising from conduct alleged to have been engaged in by General Credits which was misleading or deceptive or was likely to mislead or deceive contrary to section 52 of the Act. The applicants are Claiming also injunctions, both interlocutory and permanent, restraining General Credits from taking any steps to execute the judgments obtained by it in the Supreme Court actions and from taking any steps to enforce the guarantees given by Mr and Mrs Indrisie and by Combine Nominees and from taking any steps to enter into possession of or to take any steps to sell or otherwise dispose of any interest in the Kew land or the Victoria Street land. The Federal Court has heard the motions for interlocutory injunctions. A number of affidavits have been filed in support of and in opposition to the claim for the anterlocutory injunctions. It is not necessary for me to consider the contents of those affidavits in any detail, nor is it necessary to make any final findings of fact. It is sufficient to say that from the material contained in those affidavits it appears that there are facts which could forma basis for a claim by the Company against General Credits based upon section 52 of the Act. The conduct was engaged in by Kevin Bryant who, at all material times, was a servant or agent of General Credits. The facts constituting the conduct essentially were those summarized in the judgment from the Full Court of Victoria, which I have already quoted. I am Batisfied that on this matter there 15 a serious question to be tried between the Company and General Credits. The claim, however, is limited to damages. The position 15 not 50 clear with respect to the claims by Mr and Mrs' Indrisie and by Combine Nominees. Any claim those applicants would have would be limited to damages. For the purpose of the motion for interlocutory injunctions, I am prepared to assume that there are serious questions to be tried between them and General Credits. It if necessary, therefore, to consider whether interlocutory injunctions should be granted. On this aspect of the motion it is noted that the applicants, in addition to relying upon conduct by General Credits in contravention of section 52 of the Act, rely upon claims based upon the accrued jurisdiction of the Federal Court, including claims based upon breach of agreement, being the same agreement and breach as alleged in one of the Supreme Court proceedings brought by the Company against General Credits and which is still pending in the Supreme Court. Counsel for the applicants has said that if the interlocutory injunctions are granted the Company would discontinue those proceedings. In addition, the applicants are claiming relief based upon negligence, deceit, and equitable estoppel. The claims based upon the accrued jurisdiction may be open to the Company but without deciding whether similar claims are available to Mr and Mrs Indrisie and to Combine Nominees I will assume, for the purposes of these reasons, that the claims are available. At this stage 1t is necessary to note certain other facts. The judgments of the Supreme Court are not being challenged in these proceedings. The mortgages and the other agreements on which those judgements are based are not being challenged in these proceedings. General Credits is not pursuing any claim in proceedings in the Supreme Court which form the basis of the claims based upon the accrued jurisdiction of the Federal Court. This is not a case where injunctions are being sought restraining a plaintiff from proceeding further with Supreme Court proceedings s0 as to enable all claims arising between parties to be determined in the Federal Court proceedings. Implicit in these statements is the fact that none of the agreements entered into in 1977 are being challenged and, more particularly, no relief based upon section 87 and, in particular, sub-section 87(1A) of the Act, are being sought by the applicants. The essential basis for the claim for interlocutory relief is that under sub-section 82(1) of the Act Mr and Mrs Indrisie and Combine Nominees have suffered loss or damage by conduct of General Credits which was done in contravention of sub-section 52(1) and thus are entitled to recover the amount of the loss or damage from General Credits. The loss or damage so suffered, it is contended, includes the amount which General Credits Claim under the guarantees and mortgages. Reference 1s made to the wide discretion conferred upon the Court by section 80 of the Act. Counsel contends that General Credits, having engaged in conduct that contravenes section 52 of the Act, the Court's power to grant injunctions is not limited to restraining General Credits from engaging in conduct that constitutes, or would constitute, a contravention of the Act but 15 unlimited except by considerations of what 15 appropriate - which is the word used in the Act, or, in other words, what is fair and equitable between the parties. Counsel referred to the wide nature of the powers conferred upon the Court hy section B7 of the Act. Counsel then contended that having regard to all those matters in determining what was fair and equitable between the parties, the Court should restrain General Credits from obtaining the benefits resulting from its wrongful actions until the applicant's claims could be heard and determined. Presumably, if the applicants succeed in obtaining judgments for damages against General Credits, those damages could be set off against the amounts owed to General Credits, or, at least be used to pay those amounts, thereby rendering unnecessary the enforcement of the rights conferred upon General Credits by the mortgages. In 1ts reasons for the judgment, the Full Court of the Supreme Court of Victoria rejected a similar argument to that put by counsel. That argument was summarised in the passage already referred to in these reasons. The different factor there present was that the Company was not a party to the Supreme Court proceedings. Nevertheless, the Full Court said, at p.5, and again I use the terminology appropriate to these reasons: "In our opinion the Company could not set up its claim for unliquidated damage as a set-off. It i5 not suggested that the claim amounts to a Statutory or common law set-off. But it was contended for Mr and Mrs Indrisie that it did constitute an equitable set-off. However reference to cases such as Edward Ward & Co. v. McDougall C1972] V.R. 433; British Anzani (Felixstowe Ltd. v. International Marine Management (U.K.) Ltd. C1980] 1 Q.B. 137; Eagle Star Nominees Ltd. v. Merril £19823 V.R. 557 shows that, in order to rely upon a cross-claim as an equitable set-off, there must be such a nexus between the claim and cross-claim that the cross-claim can be said to impeach the plaintiff's claim. In the present case the claim for unliquidated damages is founded, not upon the transaction in respect of which the principal debtor is said to be liable, but upon a collateral contract entirely independent of that for which General Credits has the benefit of a security for due performance. Mr and Mrs Indrisie's claim clearly does not meet the test to be applied, namely, can the cross-claim be said to impeach the title to General Credits legal demand? Then, what is a no less formidable obstacle for Mr and Mrs Indrisie, is the fact that any right to an equitable set-off would vest, of course, in the Company. But it is not the company that seeks to rely on it but Mr and Mrs Indrisie. They are strangers to the contract breach of which the Company 15 asserting has conferred on it a claim for unliquidated damages. There 1s no authority to which the Court was referred in which there was acknowledged the right to any such transference of an alien claim to meet an obligation by way of equitable set-off. Nor, in our opinion, should the Court as a matter of principle now take the step hitherto not taken of extending toa stranger to the cross-claim any right that properly should be that of the cross-claimant alone. In any event for such a step to be taken the Company would have to be before the Court as a party. See Wilson v. Mitchell £1939] 2 K.B. 869." The Company is now a party to the proceedings before the Federal Court but the relevant rights of General Credits under the mortgages have merged in the judgment obtained in the Supreme Court. Those rights cannot be relitigated between the parties to those judgments; see Blair v. Curran (1939) 62 C.L.R. 464, especially per Dixon J. at pages 5310-2 and Port of Melbourne Authority v. Anshun Pty. Limited (1981) 147 C.L.R. 589 per the Chief Justice Sir Harry Gibbs and Mason and Aitkin JJ. at page 597 and the following pages. In reality, the applicants are attempting to defeat a judgment properly obtained in the Supreme Court. The correct position is clearly illustrated by a reference to Stack v. Coast Securities(No 9) Pty Ltd (1983) 49 A.L.R. 193 per the Chief Justice at page 207: "It is then necessary to decide whether the pending litigation should be continued in the Supreme Court or in the Federal Court. Clearly the two actions in which judgment has already been given (Nos 180 and 182) should remain on foot in the Supreme Court. Indeed, since the Supreme Court had jurisdiction in those matters, the judgments, while they stand, render the matters which they decided res judicata." - 10 - At pages 215 to 216 Mason, Brennan and Deane Jd. said: "It is for the Federal Court to determine how the discretion should be exercised in the present causes. In exercising this discretion it will have regard to the considerations mentioned in Fencott v. Muller. In ordinary circumstances the Federal Court would also have regard to the fact that 1t is the one court with jurisdiction to resolve the whole of the controversy of which the federal issues are an element: see Philip Morris (ALR at 475; ALJR at 125) per Barwick CJ. Here the significance of this factor is substantially diminished, if not eliminated, by the summary judgments already delivered in two of the Supreme Court actions. Obviously there is no point in the Federal Court exercising a discretion to determine non-federal issues which have already been determined by the Supreme Court, subject to the pending appeals. The Supreme Court proceedings have resulted in judgments which, unless upset on appeal, constitute determinations of the non-federal aissues which are binding on the parties." The Federal Court should not do indirectly what it cannot do directly. Here, no relevant claim based upon the accrued jurisdiction is the same as any claim pending in the Supreme Court. What is sought is a stay of a judgment validly obtained after due process. Having obtained that judgment, it would not be appropriate to restrain General Credits from giving effect to that judgment; in fact, it would be unfair and inequitable to restrain General Credits from giving effect to the judgments regularly obtained. I can see no equity which would support the contentions made. If the applicants have suffered loss or damage by the conduct of General Credits in contravention of sub-section 52(1) of the Act, they will be entitled to recover the amount of that loss or damage. Difficult - ll - questions might arise in determining the amount of that loss or damage, but that does not justify the making of the order sought. In any event, in cases of this kind, there is a well established principle referred to, for instance in inglis v. Commonwealth Trading Bank of Australia (1972) 126 C.L.R. 161. The statement 15 set out in the headnote of that report: "As a general rule an injunction will not be granted restraining a mortgagee from exercising powers conferred by a mortgage and, in particular, a power of sale unless the amount of the mortgage debt, 1f this is not in dispute, is paid or unless, af the amount is disputed, the amount claimed by the mortgagee 15 paid anto court; and this rule will not be departed from merely because the mortgagor claims to be entitled to set off the amount of damages claimed against the mortgagee." Here the applicants, Mr and Mrs Indrisie and Combine Nominees Pty Ltd, are mortgagors and are seeking orders that the mortgagee, General Credits Limited, should be restrained from exercising its rights under the mortgage pending the hearing and determination of the action in the Federal Court. The applicants are seeking damages and I have already alluded to this aspect of the matter. Applying the principles illustrated by Inglis' case this is not a case where an injunction of an interlocutory nature should be granted restraining General Credits from exercising its rights under those mortgages. The motions are refused. The interim injunctions granted on 4 October 1984 are discharged. I certify that this and the ten preceding pages are a true copy of the Reasons for Judgment herein of the Honourable Mr. Justice Northrop. e . | [6 Novewher 484 CAsrociade )