CATCHWORDS Practice and procedure - Appeal from interlocutory orders - Federal Court jurisdiction - Trade Practices Act s.86 - Claim of equitable set-off under s.52 - Whether exclusively federal - Whether parties should be restrained from proceeding in Supreme Court - Principles applicable to choice of appropriate court to determine matter - Whether Federal Court claims genuine - Whether a serious question to be tried - Balance of convenience. Federal Court of Australia Act 1976, s.23 Trade Practices Act, ss.45, 52, 82, 86, 87 Judicature Act 1878 (Qld), s.4(5) Property Law Act 1974 (Qld), s.95 WESTPAC BANKING CORPORATION & ORS. -V- ELTRAN PTY LIMITED & ORS. OLD G. 162 OF 1986 ELTRAN PTY LIMITED & ORS. -V- WESTPAC BANKING CORPORATION & ORS. QLD G. 141 OF 1986 ABLSIOAY} "WHINE VITWHESOW dO tenes TrHuadks "eesiatk= = E Ganigozy £& Y -f \' Fox, Northrop & Burchett JJ. Sydney 26 June 1987 — eed Up re oo ee : av a ty 7 naar nenaieaiaaalinad — eerie ayo csr es: IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY No. G.162 of 1986 eee GENERAL DIVISION ON APPEAL FROM THE HONOURABLE MR. JUSTICE SPENDER BETWEEN: WESTPAC BANKING CORPORATION & ORS. Appellants AND: ELTRAN PTY LIMITED & ORS. Respondents G.141 of 1986 BETWEEN: ELTRAN PTY LIMITED & ORS. Appellants AND: WESTPAC BANKING CORPORATION & ORS. Respondents CORAM: Fox, Northrop and Burchett JJ. PLACE: Sydney DATE: 26 June 1987 REASONS FOR JUDGMENT FOX & BURCHETT JJ. On 9 and 10 April 1987 the Court heard an appeal by Westpac Banking Corporation and others ("the Bank") as well as an application for leave to appeal. The application for leave and the appeal for which leave was sought were heard together. The mgt cept pr sy par cee or eee ogee anu, en een ee ee ee A 2. Court announced its decisions at the time, and said that reasons would be delivered later. The matters raised are interlocutory in nature and an important consideration which influenced us in the course we took was the desirability of facilitating the speedy progress of the proceeding to a final hearing. The orders made included directions designed to achieve that aim. During the period 20 July 1984 to 30 October 1984, the Bank advanced to Eltran Pty Limited ("Eltran") the sum of $8,000,000.00. The loan was drawn down in Swiss francs and Japanese yen as follows: CHF 14,552,725.78 and JPY 167,672,000.00. The moneys were advanced pursuant to the terms of facility letters dated 11 July 1984, 18 July 1984 and 10 October 1984. The period of the loan was five years from the date of draw down. Provision was made that, periodically, Eltran could give notice to the Bank that it wished the whole or part (being the equivalent of a minimum of $A1,000,000.00 and a whole multiple of $A500,000.00) of the loan to be denominated, for the ensuing interest period of the loan, in a different currency (falling within a defined group of currencies) from the existing currency of the advance, but so that the loan would not be denominated at any one time in more than three different currencies. Provision was also made, by clause 13.01 of the letter of 11 July 1984, as follows: "Tf at any time, or from time to time, the Bank in its absolute discretion determines that the Australian Dollar equivalent of the ee oe Me ' . cS " . Ve ee ng eee pony ' of ua ao ce eee ee ee a te te 3. Loan at that time (converted at the Bank's spot rate of exchange on the relevant date) exceeds seventy per centum (70%) of the Value of the Security (such excess being hereinafter called the ''Shortfall') then, without prejudice to any other rights which the Bank may have hereunder, the Bank may, at its option, give notice to the Borrower requiring the Borrower within five (5) Banking Days to do either of the following: {a) provide the Bank with additional Security over assets acceptable to the Bank with a value (in the opinion of the Bank) at least equal to the Shortfall, such Security to be in form and substance satisfactory to the Bank; or (b) deposit with the Bank to such account and in such currency as the Bank shall specify cash deposits in immediately available funds equal to the Shortfall and to provide the Bank with = such Security over such deposits as the Bank shall require." It is relevant to note, in reading this clause, and provision for acceleration which w11il be referred to, word the due date of the loan in the event of default. ways "Loan" is defined in clause 15 as follows: "the aggregate of all moneys advanced by the Bank pursuant to this letter which are from time to time owing to the Bank." also the that the By clause 12.01 provision was made for acceleration of in which default could occur were specified, particular it was provided: "The Loan together with interest accrued thereon and any other amounts payable hereunder shall, at the option of the Bank and notwithstanding any delay or previous waiver of the right to exercise such option, become immediately due and payable and the facility shall be at an end without necessity for demand in the event that: and A number of in A ne ee ee ee ee ee ST TT a ee wre Pas o (a) the Borrower shall fail to make any payment at or before the due time on the due date, in the currency and in the manner specified in this letter; or (b) the Borrower defaults in duly performing any of the agreements or obligations on its part herein contained or contained in any mortgage, charge or other security executed by the Borrower in favour of the Bank or contained in any other agreement or arrangement between the Borrower and the Bank; or ...." Eltran claims that the Bank, prior to the making of the agreement set out in the facility letters, made to it certain misleading or deceptive representations. In particular, it claims that officers of the Bank, a Mr. Cherry and a Mr. Look, represented to its director Mr. Trevor King and foreign exchange adviser Mr. Karl Hippmann that the Bank had a very competent foreign currency department in Sydney, and a dealing section in Brisbane, and that the Bank would agree to enter into forward exchange contracts as requested; that "every assistance to hedge when needed to safeguard the loan" would be provided; that the Bank would make hedging facilities and advice in relation thereto avallable to Eltran for the purpose of protecting its exposure to foreign currency fluctuation in relation to the loan; and that any decision as to taking out or reversing of hedging contracts would be made by Eltran and acted upon by the Bank. Both Mr. King and Mr. Hippmann have sworn affidavits in which they assert that Mr. Hippmann said to Mr. Cherry and Mr. Look: "Let's clearly understand that the ultimate decision is always with Trevor King in relation to hedging because he also takes the ultimate risk," aot ete see and that both Mr. Cherry and Mr. Look agreed that that was the case. Eltran alleges that these representations were misleading or deceptive, in that the officers of the Bank did not intend to act upon the instructions of Eltran except where so advised or directed by the Bank. Eltran also alleges that the Bank was in the business of giving foreign currency advice to customers, upon which customers relied, as the Bank knew; that the Bank represented itself to Eltran as skilled in foreign currency trading; and that this conduct and representation were misleading and deceptive in that the officers of the Bank responsible for Eltran's account were not skilled in the management of foreign currency accounts. Disputes developed between the Bank and Eltran in relation to various matters concerned with hedging arrangements and otherwise in respect of the loan, and the Australian dollar equivalent of the amount of the loan escalated greatly. By notice dated 2 September 1986 the Bank, relying on clause 13.01 of the loan facility agreement, required Eltran to deposit and secure within five banking days the sum of $A7,723,212.00. The deposit demanded not being forthcoming, on 18 September 1986 the Bank made demand, on the basis of default, for payment of CHF 14,937,463.47 and JPY 172,433,186.00. On 19 September 1986, the Bank also made demand on the second to seventh applicants inclusive under the security documents executed by them to secure cere . " - 1 Site telah eehcieeeeend ee re rit . a aon er eee ne Ot ont rneecinn eren p= =——r ee me or 6. the loan. In addition to taking these steps, the Bank appointed receivers, who are the second and third appellants. The Bank also served, pursuant to s.84 of the Property Law Act 1974 - 1985 of the State of Queensland, notice of exercise of power of sale under the securities relating to the loan. On 23 and 26 September 1986 writs were 1ussued by the Bank out of the Supreme Court of Queensland, claiming the full amount advanced in Swiss francs and Japanese yen plus interest, or alternatively the equivalent of these amounts in Australian dollars, by the one writ, and a declaration and injunction in aid of the appointment of receivers, by the other. On 3 October 1986 proceedings were commenced in this Court by Eltran, the other companies which had given securities in respect of the loan to Eltran, and Mr. King, against the Bank and the receivers appointed by it. In the Statement of Claim in this Court, claims were made relying upon s.52 of the Trade Practices Act, and also in contract and negligence. By reason of the matters pleaded, and particularly the claims under s.52 of the Trade Practices Act, Eltran claimed to be entitled to set off in equity against the amount of the advance a total of $A9,944,027.00, with the result that its indebtedness as at 2 September 1986 was a sum equivalent to $A6,472,171.00. Alternatively, it was alleged that Eltran had suffered, and was entitled to set off, loss in an amount equivalent to the difference between $8,000,000.00, being the Australian dollar equivalent of the advance as at the date of the advance, and the present Australian dollar equivalent of the sum of CHF sepe ey ee y Sre es --oe momen meme eres yt sma yore wees we 7. 14,552,725.78 and JPY 167,672,000.00. (The Australian dollar equivalent at 2 September 1986 of these two amounts in Swiss francs and Japanese yen was $A16,416,198.) It was further alleged that the Bank held in an account in the name of Eltran the sum of $520,000.00, forming part of the Bank's security for the advances to Eltran. It was alleged that accordingly there was, aS at 2 September 1986, no amount owing by Eltran to the Bank, and no amount had subsequently become owing. Entitlement to issue the notice of 2 September 1986, to make the demand of 18 September 1986, to give the notice of 19 September 1986 and to appoint receivers were each denied. Also on 3 October 1986, an application was made by Eltran (and its associated companies which had entered into securities) for interlocutory relief, supported by an affidavit sworn by Mr. King. On 8 October 1986, a further affidavit was sworn by Mr. Karl Hippmann, and filed and served. The relief sought included interlocutory injunctions restraining the Bank, until the trial or earlier order, from taking any further proceedings in the actions in the Supreme Court of Queensland. On 16 October 1986, Spender J. granted interlocutory relief restraining the Bank from proceeding further in the two actions. He also made an order confirming the position of the receivers, but restraining them from taking any steps to advertise for sale, or sell, the properties of which they had been appointed receivers, without prior written notice to Eltran's solicitors. cree a rr a - . a i eal eat helene ar heen; may toe fy ange RTO Gn ET > 8. The appellants (the Bank and the receivers) appealed by leave from that part of the judgment of Spender J. by which the Bank was restrained from taking further proceedings in the actions in the Supreme Court of Queensland. The Bank also alleged in correspondence with Eltran's solicitors that further breaches of the loan facility agreement had occurred subsequently to the institution of proceedings, or at any rate apart from what had previously been alleged. The Bank filed no statement of defence and raised no cross-claim, nor in the application for interlocutory relief did it file any affidavit of Mr. Look or Mr. Cherry denying the specific allegations made by Mr. King and Mr. Hippmann, which related to alleged statements by Mr. Look and Mr. Cherry. Nor did the Bank file any affidavit disputing by expert evidence the assertions of Mr. Hippmann (who on the face of his affidavit was both independent and well qualified to make the assertions of expert opinion which he made) suggesting that the Bank's officers responsible for the foreign currency dealings associated with Eltran's loan had been guilty of lack of competence or of neglect. So far as the failure to file a statement of defence was concerned, appropriate directions had been given, but the Bank claimed that it was under the impression that an amended statement of claim would be filed and served dealing with the further defaults which it alleged, and that for that reason it had delayed filing a statement of defence. This explanation is unconvincing. Eltran's solicitor was entirely justified in taking the attitude, which he evidenced by affidavit, that it was not for Eltran and the other respondents to the appeal to raise v YF ray we ayo! . TE oe aa) ? si nara ar heel tere amend iy Be een ae oe rs mene ae' ' RTT RS I I gg ee om ", . . way alee es a a) 9. issues which had not been pleaded by the Bank, and that they should deal with these matters when they were alleged by a statement of defence or by way of cross-claim. However, no statement of defence having been filed, on 9 March 1987 the appellants took out a Notice of Motion seeking leave to bring further proceedings in the Supreme Court of Queensland upon the basis of the alleged further defaults, with a view to endeavouring to obtain summary judgment, but offering to issue execution in respect of any judgment to a limited extent only, that is to say on a basis allowing for the amount of Eltran's alleged set off or counter claim. On 24 March 1987, Spender J. made an order (inter alia) in the following form: "That ... (l)eave be given to the First Respondent (i.e. the Bank) to issue proceedings in the Supreme Court of Queensland against the First to Ninth Applicants herein claiming the sum of CHF 15,054,794.91 and JPY 173,885,173 in respect of debt and interest thereon from 31st October 1986 to the date of judgment at the rate claimed in the Writ, on the undertaking of the First Respondent that until trial or further earlier order, to:- (a) proceed with a summary judgment application in the Supreme Court of Queensland against the First to Ninth Applicants for the said sums and to execute on any judgment obtained on such application to the extent only of the sum being the difference at the date of judgment between the amount claimed by the First Respondent in the Supreme Court proceedings and the amount sought to be set off by the First to Ninth Applicants in these proceedings; and (b) apply to the Supreme Court of Queensland for a Mareva injunction against the assets of the Ninth Applicant herein." ey ' shniuas tieioe aanenatar eee ae 10. It is from this order that Eltran and its co-applicants sought leave to appeal. On the same day that the order was made, fresh proceedings were commenced by the Bank in the Supreme Court claiming CHF 15,054,794.91 together with JPY 173,885,173 plus unterest or the equivalent in Australian dollars as at the date of judgment. On 1 April 1987, a summons was issued on behalf of the Bank seeking summary judgment in the Supreme Court. On 7 April 1987, Eltran and its co-applicants sought a stay of the operation of the order of Spender J. made 24 March 1987 until the hearing of their application for leave to appeal on 9 April 1987. That stay was granted by Fox J. until the conclusion of the application for leave to appeal, but counsel for the Bank pointed out that the injunction did not in terms restrain the Bank from taking steps in the fresh proceedings, but only in the two proceedings which had been on foot at the time the injunction was granted. On 8 April 1987, the Bank sought to pursue its application for summary judgment in the Supreme Court before Weld M. Eltran and its co-applicants sought a stay from Weld M., pending the application for leave to appeal to be presented in this Court on the following day. That stay was refused, but a stay was granted upon Eltran appealing from Weld M. to a Judge of the Supreme Court, and accordingly the summary judgment application has not yet been considered in that Court. aot y yok eee a tlty z we The . as atte wwe 1s bead me ey ee ee ' - ot + Ie COI fey 1 ebdee cheer tiiteerearadiie d ns ACO ah : yy ll. In the proceedings in this Court directions were given on 20 October 1986 pursuant to which the applicants on 24 October 1986 filed and served their amended statement of claim. The evidence does not show the date fixed for the Bank's statement of defence, but its counsel at the hearing conceded that a date was fixed. The evidence does show that on 26 November 1986 the Bank's solicitors wrote to Eltran's solicitors asking whether they intended to re-plead to take into account "the further notices of default and the appointment of further receivers based thereon." It was suggested that if not, the validity of the latter appointment would be conceded and "proceeding with the action in respect of the earlier default is quite pointless ina commercial sense." It is difficult to avoid the impression that the Bank had no intention of filing a statement of defence in accordance with the direction of the Court, unless Eltran first submitted to the Bank's demand that it further amend its statement of claim. On what basis the Bank considered it was entitled to take this stand does not appear. In order to consider the Bank's appeal against the interlocutory orders made by Spender J. on 16 October 1986, it is necessary to examine in a little detail the reasons his Honour gave for those orders. Spender J. referred to at least two bases on which, he said, Eltran asserted that the Bank was not entitled to make the particular demand to deposit A$7,723,212.00 which it made on 2 September 1986. The first ground was the claimed set-off of approximately $9.9 million said to arise under s. 52 of the Trade Practices Act. His Honour said: "Tt is said that this right to set off impeaches My 12. the bank's right to require the topping up as referred to in clause 13. I must confess that I have some difficulty with this aspect of the argument, because of the terms contained in clause 13 of the facility letter." Spender J. referred to the terms of the clause and continued: "Now, that condition 1s expressed to _ be dependent on the ratio between the Australian dollar equivalent of the loan and the value of the security. It does not refer in any way to what might be the indebtedness between the bank and Eltran." Senior counsel for the Bank supported this comment, and argued that, under the terms of the facility letters, the Bank was entitled to make the demand for a deposit which it made simply upon the basis of a comparison between the Australian dollar equivalent of the principal sum originally lent and the amount being 70% of the value of the security. However, with great respect, the proposition fails to give sufficient weight to the definition of the word "loan" to which reference has already been made. By virtue of that definition, the word does not refer to the amount of the principal originally advanced but to the aggregate of all monies advanced which are from time to time owing to the Bank. At this interlocutory stage, it is sufficient to say that the definition makes it plain that there is a serious question to be tried whether the set-off alleged does impeach the right of the Bank, to make the demand of 2 September 1986, by reducing the amount owing to the Bank at that time below 70% of the value of the security. For the Bank, reliance was placed on Clyne v. Deputy Commissioner of Taxation (1981) 150 C.L.R. 1. It was said that oe Rep nn eis ee er rn 13. the High Court had distinguished between the meaning of "owing" and "due and payable" in a way which enabled the Bank to contend that the reference in the definition to moneys from time to time owing to the Bank pointed to principal borrowed and not repaid, without regard to whether it was at the relevant time payable. But in the application of the definition to clause 13 of the facility letter, "owing" cannot in any case mean "payable" since the clause refers to a loan for a period of five years. In Clyne's Case at p. 8 Gibbs C.J. said: "The word 'due' is ambiguous; it can mean owing, although not payable until some future date, or it can mean presently payable. The meaning of the word must be determined by the context." Juxtaposed to a reference to "the aggregate of all moneys advanced", there is at least a serious argument that' the additional words "which are from time to time owing to the Bank" are intended to select so much only of the original advances as represents moneys still due and that, for this purpose, an equitable set-off reducing the amount due to the Bank must be taken into account. The set-off must be taken into account, not under the contract, but upon the principles of equity. Although Spender J. expressed the difficulty to which reference has been made, he accepted that the claim in the Federal Court of an equitable set-off was genuinely put forward. (On that issue, the view of a judge hearing an interlocutory application is entitled to particular weight.) He referred to the following passage from the 3rd ed. of Spry, The Principles of Equitable Remedies p. 175: cestleteenten pehemeateeiadaar menaadeecieaanedian taken wa cle et . 14 . H oe sae a me cee ee errr siene sins yagne Sar cp crm iene Sm se me mere oni ee ee pe 5 = rd - wee ye . t ee me 14. "What generally must be established is a relationship between the respective claims of the parties which is such that the claim of the defendant has been brought about by, or has been contributed to by, or is otherwise closely bound up with, the rights that are relied on by the plaintiff and which is such that it would be unconscionable that he should proceed without permitting a set-off. Thus if conduct of the plaintiff is such as to induce the defendant to incur an obligation in favour of the plaintiff, and the conduct itself is fraudulent, negligent or otherwise wrongful so as to give a cause of action to the defendant, the plaintiff is not ordinarily permitted to proceed until he has made good the material claims of the defendant." Spry goes on to say on the same page: "In other cases also it will, where appropriate, be held that an equitable set-off lies, provided that it appears that the claim of the defendant does in truth impeach that of the plaintiff, for the application of the principles that are here in question should not be = arbitrarily restricted." In the circumstances of this case, the alleged breaches of s. 52, and indeed the alleged breaches of contract and acts of negligence, went directly to the hedging arrangements taken and not taken and thus to the very great exchange losses by reason of which the Bank claimed that clause 13 was triggered. In British Anzani (Felixstowe) Ltd. v. International Marine Management (U.K.) Ltd. [1980] 1 Q.B. 137 at 152 it was stated of the doctrine of equitable set-off: "The important qualification is that the equity must impeach the title to the legal demand, or in other words go to the very foundation of the ... claim." But it was held that the cross-claim need not arise out of the a ee ee - me eeee = eee 15. same transaction, provided it arose out of a transaction that was closely related to the claim. See also Federal Commerce & Navigation Co. Ltd. v. Molena Alpha Inc. [1978] 1 Q.B. 927. Where there is an equitable set-off, it extinguishes pro tanto the debt: Covino v. Bandag Manufacturing Pty Ltd [1983] 1 N.S.W.L.R. 237 at 238; Meagher, Gummow and Lehane, Equity Doctrines and Remedies, 2nd ed., sec.3712; Hanak v. Green [1958] 2 0.B. 9. Upon the principles referred to, a serious question to be tried as to whether a right to an equitable set-off had been shown was raised by the evidence before Spender J. Spender J. proceeded to consider whether an exclusively federal claim was involved. Of course, even if no such claim arose, and both this Court and the Supreme Court had jurisdiction over every aspect of the dispute, there would remain a question as to which Court should more appropriately exercise its jurisdiction. It should not be left to chance, or the outcome of tactical manoeuvres by the parties, to decide which Court gets to hear the case first. When this Court is confronted by such a situation, it should generally try to achieve a resolution, either by restraining the parties from proceeding further in the Supreme Court, or by refusing to do so and staying its own proceedings. The choice to be made in each particular case will depend upon an evaluation of all the circumstances. But it is appropriate, in most cases, first to decide whether an aspect of the whole controversy is exclusively within the jurisdiction of this Court because, 1f it is, the implications of that fact may be very significant for the choice to be made. ee weer bee orn 16. Spender J. referred to Carlton and United Breweries Ltd. v. Castlemaine Tooheys Ltd. (1986) 66 A.L.R. 347. In that case at 352, the joint judgment of the High Court cited earlier authority for the proposition that "the jurisdiction of the Federal Court which is made exclusive is the hearing and determination of claims for the penalties or relief for which Part VI provides." In the present case the claims made under s. 52, which are the subject of one version of the set-off propounded, though other versions rely on principles of contract and negligence, are claims for relief for which Part VI provides. Accordingly this Court has exclusive jurisdiction in respect of those claims pursuant to s. 86 of the Trade Practices Act. In Stehar Knitting Mills Pty Ltd v. Southern Textile Converters Pty Ltd [1980] 2 N.S.W.L.R. 514 the nature of a set-off was analysed and 1t was held (as Hutley J.A. put it at 521) that "claiming to' set off a sum of money is commencing a proceeding ... . It is 2e.- a Claim." (See also Hanak v. Green [1958] 2 0.B. 9 at 23-4; Henriksens Rederi A/S v. T.H.%. Rolimpex (The Brede) [1974] 1 Q.B. 233 at 250-2, 260-1; Aries Tanker Corporation v. Total Transport Ltd. [1977] 1 All E.R. 398 at 405, per Lord Wilberforce.) Equity permits certain privileged cross-claims to put on the armour of a set-off, but they do not therefore lose the character of cross-claims. They operate to extinguish the debt, not by ceasing to be cross-claims, but by virtue of being cross-claims which possess additional features. It is convenient to note, too, though the point did not arise before Spender J., that upon the appeal senior counsel for wurst es eee ter ee 17. Eltran made it clear that s. 87 of the Trade Practices Act would be relied upon. Relief under s.87 is also exclusively within the province of this Court. Resort to it may require an amendment, but the basis is already pleaded insofar as it is alleged the whole transaction of loan was induced by misrepresentation, an allegation which must go to the guarantees in the security documents as well as to the loan facility agreement. Senior counsel for the Bank said Eltran's representatives had disclaimed any intention of amending the Statement of Claim, but that was in response to the suggestion they should do so before the Bank pleaded the alleged fresh defaults. Though a cross-claim relying on s.52 of the Trade Practices Act would be outside the jurisdiction of the Supreme Court, the Bank contended a set-off could be asserted which depended on s.52, and therefore the whole matter could and should properly be determined in that Court. Because this contention fails to take account of the nature of such a set-off, as an emanation of the cross-claim the Supreme Court cannot entertain, it must be rejected. It was sought to be supported by reference to dicta of Sheppard J. in Westco Motors (Distributors) Pty Ltd v. Palmer [1979] 2 N.S.W.L.R. 93 at 99. But Sheppard J. was not concerned with a set-off flowing from a cross-claim; his dicta emphasize that he was simply construing the terms of a contract of guarantee, and he thought that if the contract itself allowed deduction of a s.52 claim in order to arrive at the amount guaranteed, the Supreme Court would necessarily determine the amount of that deduction. The Supreme Court would do so, not in the exercise of a jurisdiction to convert a cross-claim under T REST no re ere aoe -v Bt ye By ' - 18. the Trade Practices Act into a set-off available in the Supreme Court, but under its jurisdiction to enforce the terms of the only obligation undertaken by the contract of guarantee. That is an entirely different case from the present, where a set-off is claimed against the debt to which the terms of the contract entitle the Bank. Whether or not the view expressed in the Westco Motors case is correct in the context of the purely contractual obligations of a guarantor, s.86 of the Trade Practices Act cannot be so construed as to allow the jurisdiction to assess damages under s.82 in respect of a breach of s.52, which is exclusively committed to this Court, to be exercised by another Court merely because those damages, when assessed, will be set-off in equity against another claim. See, per Sheppard J., Gardiner v. Sutton's Motors (Homebush) Pty Ltd (1983) 48 A.L.R. 142 at 154, where the point is put explicitly. Spender J. went on to consider the second basis on which 1t was said the Bank was not entitled to make the demand which it made on 2 September 1986. This was an argument that, on the true construction of clause 13 of the facility letter, Eltran could not be denied the option of either providing the security referred to in para. (a) of the clause or providing the deposit referred to in para. (b). Accordingly, it was argued, the notice was bad in purporting to require Eltran to deposit the amount demanded. Spender J. concluded, after considering this argument: "There are difficulties with the interpretation of that clause but, for present purposes, I do not think the contention by the applicants is an unarguable one." 19. For the Bank, 1t was submitted that his Honour should have held the argument had no substance at all. However, it was also submitted that the point was in any event no longer available to Eltran since, shortly after the interlocutory hearing, the Bank had given a fresh notice which allowed Eltran the option it asserted it was entitled to. On the hearing of the appeal, fresh evidence was admitted to establish this fact. Spender J., having expressed the doubts about each of the two bases on which the argument was put before him which have been indicated above, referred to the principles in Epitoma Pty. Ltd. v. Australasian Meat Industry Employees Union (1984) 3 F.C.R. 55, and to a number of cases where the Court has been concerned with federal and non-federal claims which constituted one controversy, and has been called upon to exercise its "discretion to allow the non-federal claims to be determined in a State court" (see Stack v. Coast Securities (No. 9) Proprietary Limited (1983) 154 C.L.R. 261 at 294-5). It is clear from these references both that Spender J. applied to his findings the test as to whether interlocutory relief should be granted which is stated in the Epitoma Case, and also that he considered whether, as a matter of discretion and in all the circumstances, that relief should be granted in a form which precluded the exercise of State jurisdiction in respect of the non-federal claims which formed part of the controversy. He came to the conclusion that he should grant the orders already referred to only after taking into account the promptness with which the relief had been sought in this Court and the fact that the proceedings in the State court had reached but a very early stage. He found that there Fe rr rn ie ng a ne rr ee ger - - ' we - rn fe 20. was a single controversy which included a federal claim genuinely put forward, and accepted that determination of the controversy in the Federal Court had the important advantage conferred by the Court's ability to "resolve the entire controversy" (see Stack's Case at 298). Even if, having regard to the fresh evidence, the second argument referred to by Spender J. is dismissed from consideration, the argument in respect of the set-off claimed by Eltran and the other applicants provides a sufficient basis for a grant of interlocutory relief. No error appears in his Honour's application of the principles relating to a grant' of interlocutory relief (see Adam P. Brown Male Fashions Proprietary Limited v. Philip Morris Incorporated (1981) 148 C.L.R. 170; Hadmor Productions Ltd v. Hamilton [1983] 1 A.C. 191 at 220), nor in his consideration of the questions arising under the accrued jurisdiction of the Court and the discretion whether to assume its exercise (see Fencott v. Muller (1983) 152 C.L.R. 570 at 610). He was not bound, nor in the circumstances was it appropriate, to exercise a discretion to decide, in advance of a full hearing but as if hearing the matter finally, the true construction of the facility agreement (see Cohen ve Peko-Wallsend Ltd. (1986) 61 A.L.J.R. 57; P.R.D. La _ Costa Management Pty Ltd v. The Proprietors "Beachpoint" Building Units Plan No. 3149 (1985) 2 Qd. R. 227 at 229). Nor is it correct to say that his reasons suggest he wrongly held he had no discretion to do so. In all the circumstances now appearing, the interlocutory orders appealed against remain appropriate. aaa ST eo tengns sceeerepapes ener Sn ere . 21. It is now necessary to turn to the application for leave to appeal in respect of the further order made on 24 March 1987. In his reasons of 24 March 1987, Spender J. referred to a number of developments since his earlier decision. The receivers had been reappointed on 17 November 1986. The Bank had given a fresh notice pursuant to clause 13 of the facility agreement in a form not open to the objection which had been one of the bases upon which the argument for Eltran had previously been put, and that notice had not been complied with. The Bank also claimed that there had been a number of other defaults which Spender J. found it unnecessary to examine in detail. Two considerations appear to have been decisive in his judgment. First, he said no prejudice was suggested to Eltran and its co-applicants if the Bank had the leave which it sought, other than that the costs might be exacerbated. But this depended on the rejection of a claim which his Honour recognized Eltran did make, that by reason of its entitlement to a set-off it was not at any time in default and that the due date for payment of moneys claimed by the Bank had not been effectively accelerated. There could be no doubt about prejudice unless Eltran's contention was first rejected in respect of the Bank's claim that the Australian dollar equivalent of "the Loan" exceeded 70 per centum of the value of the security within the meaning of clause 13 of the facility letter already discussed, or unless default on some other basis was established. Spender J. did not consider any other basis of default. He reiterated his previous expression of doubt about the validity of Eltran's argument concerning the effect of clause 13, and added: "I must say that time and further thought has not brought any illumination". ye Seg 22. On the basis of the view already expressed in these reasons that an application of the definition of "Loan" in clause 15 to the construction of clause 13 makes it clear that there is a serious argument in favour of the proposition asserted by Eltran and its co-applicants, his Honour, with respect, erred at this point, and as a consequence also in taking the view that Eltran would suffer no significant prejudice if he made the order sought by the Bank. The error is fundamentally an error of construction of the document, and not as to the exercise of discretion. It explains the apparent inconsistency between the interlocutory injunction originally granted restraining the Bank from continuing the two actions it had commenced in the Supreme Court, and the later grant of leave to commence a third action of a very similar kind, there being the significant difference that in the first case the argument under clause 13 which Spender J. thought was difficult had been bolstered by a further argument, not available on the later occasion, that the notice given under the clause was itself deficient. Spender J. also referred, as a significant matter, to the availability in the Supreme Court of s. 95 of the Property Law Act 1974 of Queensland, under which relief could be given, in the discretion of the Supreme Court, against the provision for acceleration of payment. He expressed doubt whether, under either its accrued or its associated jurisdiction, the Federal Court could exercise the power conferred by that section. The difficulty felt by his Honour may be illustrated by reference to In the Marriage of Smith (1986) 66 A.L.R. 1. But no application sae peer ee oes 23. had been made by Eltran under s. 95, and we were informed that senior counsel for Eltran and its co-applicants relied on s. 87 of the Trade Practices Act, though that also had not been specifically pleaded. The wide powers in s. 87 of the Trade Practices Act would more than make up for any lack of the narrower power conferred by s. 95 of the Property Law Act. Having regard to these matters of principle, to the inconsistency apparent between the two orders made by Spender J., and to the weighty considerations which moved him in making the original order, and in all the circumstances, it seems (subject to some questions to be discussed) an appropriate case in which to grant leave to appeal, and for the same reasons to allow the appeal, from the order made on 24 March 1987. In that event, senior counsel for Eltran (in the course of his argument) asked the Court to grant, under s.28 of the Federal Court of Australia Act, relief specifically restraining the continuance of the third action commenced in the Supreme Court by the Bank. As the whole matter was fully argued, and the motion for leave was brought by the Bank in the first place for the purpose of settling this very question, it was appropriate that the relief sought by Eltran should be granted. Senior counsel for the Bank contended that Spender J., in making his original order, had erred in not requiring payment of the full amount claimed by the Bank into court, and that this Court should make such an order as a condition of any grant of relief. It is sufficient to point out that the case is not just concerned with Bitran's cross claim, but with the fundamental 24. question whether, in the events which have happened, the Bank ever became entitled to demand the very large deposit which it demanded, to accelerate the repayment date of the loan, and to appoint receivers. This is not a case where the only dispute relates to the amount due to the Bank or the mode of exercise of an admitted or clearly available power. See Glandore Pty. Ltd. v. Elders Finance & Investment Co. Ltd. (1984) 4 F.C.R. 130; Batemans Bay Holdings Pty. Limited v. Elders Finance & Investment Co. Ltd. (unreported, Burchett J., 5 September 1986). Spender J. did not base his order of 24 March 1987 upon the further defaults which were said by the Bank to have occurred since his original order. However, the Bank relied on those alleged defaults to seek to sustain his order, and as fresh evidence in its appeal against his original orders. So far as it was alleged there had been a failure to pay money, senior counsel for Eltran responded by pointing both to the claimed set-off and to the fact that the Bank had appointed receivers of the whole of the property of Eltran and its co-applicants. He relied on the challenge to the validity of the appointment of the receivers as going to the question whether they had received the income of the properties (at a rate equal to about $1,000,000 per annum) as agents for the Bank, and not Eltran and its co-applicants. It was put also that the section 52 claims would go to the correct amount upon which interest should be calculated. For all these reasons, it was submitted there is a serious question to be tried as to whether any sums alleged to be payable were due to the Bank at the alleged dates, or have become due. The failure of the Bank, while alleging in detail fresh defaults, to plead to, or co open ee en reer rina ae ~— a er ie etre ee pe oe > 25. file affidavits denying, the allegations evidenced by Mr. King and Mr. Hippmann must be relevant to these arguments. The Bank alleges, as a fresh default, the failure of Eltran to deliver balance sheets and profit and loss statements by 30 September 1986, as required by a letter of 6 July 1984. But Eltran's answer to this is that the terms of the letter in question made it clear that it would be supplanted by a later agreement, which was the agreement constituted by the facility letters to which reference has already been made. Those letters contained no such obligation. The Bank's riposte to this argument was to refer to cl. 12.01(b) of the facility agreement (set out earlier in these reasons) which brings in obligations under "any other agreement or arrangement between the Borrower and the Bank"; but that must mean any other subsisting agreement or arrangement. In any case, the documents were delivered, after the Bank's complaint, and a question would arise whether Eltran should have relief in equity against the consequences of such a default, and other defaults alleged of a technical nature, not productive of substantial damage to the Bank, to the occurrence of which the challenged appointment of receivers may well be supposed to have contributed. Other issues arising in respect of alleged fresh defaults have already been adverted to in these reasons. Finally, an argument was put that s.23 of the Federal Court of Australia Act should not be construed, having regard to s.4(5) of the Queensland Judicature Act 1876, as authorizing the ae eee eee te ey 26. injunctions qranted, or if it authorized them, the jurisdiction should have been declined. This argument cannot be sustained: Denpro Pty Ltd v. Centrepoint Freeholds Pty Ltd (1983) 72 F.L.R. 156. For these reasons, it waS appropriate to dismiss the Bank's appeal with costs, to grant leave to the applicants to appeal from the orders made on 24 March 1987 and to allow that appeal with costs, and to make the further orders which were made at the hearing. I certify that this and the preceding twenty-five (25) pages are a true copy of the Reasons for Judgment herein of their Honours Mr. Justice Fox and Mr. Justice Burchett. Lip ho Associate Dated: 26 Jun 1987. IN THE FEDERAL COURT OF AUSTRALIA ) ) QUEENSLAND DISTRICT REGISTRY ) Q. No. G 162 of 1986 ) ) GENERAL DIVISTON ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA BETWEEN : WESTPAC BANKING CORPORATION and OTHERS Appellants and ELTRAN PTY. LIMITED and OTHERS Respondents COURT: FOX, NORTHROP AND BURCHETT JJ. DATE: 26 JUNE 1987 PLACE: SYDNEY REASONS FOR JUDGMENT NORTHROP J. This is an appeal from an interlocutory order of the Court made on 16 October 1986 and brought pursuant to leave granted by Spender J.. The Court ordered that proceedings instituted by Westpac Banking Corporation (the "Bank") in the Supreme Court of Queensland Action No. 4002 of 1986, be stayed until trial or further order and that proceedings instituted by the Bank and John Geoffrey Allpass and Alan Raphael Tuttle (together, the "appellants") in the Supreme Court of Queensland Action No. 4052 of 1986, he stayed until trial or further order. There is also before this Court an application by the respondents to the appeal ene me ee oo rrr eres oe (the "respondents") for leave to appeal from further orders made on 24 March 1987 in which the Court gave the Bank leave to proceed in the Supreme Court of Queensland with a summary judgment application based upon defaults which occurred subsequent to the orders of 16 October 1986. Both the appeal and the application for leave to appeal came on for hearing by this Court on 9 April 1987. On 10 April 1987, the Court gave its decisions on these two matters but reserved its reasons for judgment. The Court, by majority, Fox and Burchett JJ., dismissed the appeal with costs and gave leave to appeal from the orders made on 24 March 1987 and made consequential orders. I would have allowed the appeal and would have set aside the orders made on 16 October 1986. T would have refused the motion for leave to appeal from the orders made on 24 March 1987. I now proceed to give my reasons. The relevant facts may be stated as follows. Between July 1984 and October 1984, the first respondent in this appeal, Eltran Pty. Limited ("Eltran"), borrowed from the Bank the sum of A§8,000,000. The amount was advanced pursuant to facility letters dated 11 July 1984, 18 July 1984 and 10 October 1984 respectively, and was drawn down in the sum of Swiss Francs 14,552,725.78 and Japanese Yen 167,672,000. wos a \ © deme enn roe a es The second to eighth respondents each granted mortgages to the Bank of substantial income producing properties, most of which were shopping centres, as security for the facility and Mr. King, the major shareholder and managing director of each of the first to eighth respondents, gave a personal guarantee. Clause 13 of the facility letter dated 11 July 1984 is of principal concern. It provides as follows:- "13. Additional Security 13.01 If at any time, or from time to time, the Bank in its absolute discretion determines that the Australian Dollar equivalent of the Loan at that time (converted at the Hank's spot rate of exchange on the relevant date) exceeds seventy per centum (70%) of the Value of the Security (such excess being hereinafter called the ('Shortfall') then, without prejudice to any other rights which the Bank may have hereunder, the Bank may, at its option, give notice to the Horrower requiring the Borrower within five (5) Banking Days to do either of the following: (a) provide the Bank with additional Security over assets acceptable to the Bank with a value (in the opinion of the Bank) at least equal to the Shortfall, such Security to be in form and substance satisfactory to the Bank; or (b) deposit with the Bank to such account and in such currency as the Bank shall specify cash deposits in immediately available funds equal to the Shortfall and to provide the Bank with such Security over such deposits as the Bank shall require. 13.02 For the purposes of this clause 13, the following definitions shall apply: 2 are are —s ek 'Security' at any time any mortgage, letter of set-off, charge, lien, encumbrance or other security interest subsisting at that time for the payment of any moneys owing or to become owing by the Borrower to the Bank hereunder; and 'Value' at any time the aggregate of the value of all assets covered by any Security as determined by the Bank (the Bank's determination to be conciusive and binding on the Borrower) and ail deposits lodged pursuant to sub-clause 13.01 (unless such deposits are covered by a Security) but excluding all deposits lodged pursuant to sub-clause 14.02." Subsequent to the borrowings in 1984, there was a marked depreciation in the Australian dollar as against the Swiss Franc and the Japanese Yen. On 2 September 1986, the Bank advised Eltran in writing that the Australian dollar equivalent of the loan was AS16,416,198, an amount in excess of seventy per centum of the value of the security (which was determined to be AS12,418,551). As a yesulit, and in accordance with the provisions of clause 13 of the facility letter, the Bank gave Eltran five banking days notice to deposit with the Bank the amount of the excess, namely, the sum of AS7,723,212, and to provide the Bank with security over those moneys in accordance with clause 13.01(b). Eltran failed to comply with this demand, and on 12 September 1986, the Bank, pursuant to the terms of the respective mortgages, appointed ee esol -- om; John Geoffrey Allpass and Alan Raphael Tuttle receivers of the properties of the second to seventh respondents. As a consequence of Eltran's failure to comply with the notice of 2 September 1986, on 18 September 1986 the Bank exercised its option under clause 12.01 of the facility letter to declare the whole of the moneys owing to the Bank under the facility letters to be immediately due and payable, namely, Swiss Francs 14,937,463.47 and Japanese Yen 172,433,186. Clause 12.01 provides that:- "12. Events of Default 12.01 The Loan together with interest accrued thereon and any other amounts payable hereunder shall, at the option of the Bank and notwithstanding any delay or previous waiver of the right to exercise such option, become immediately due and payable and the facility shall be at an end without necessity for demand in the event that: (a) the Borrower shall fail to make any payment at or before the due time on the due date, in the currency and in the manner specified in this letter; or {b) the Borrower defaults in duly performing any of the agreements or obligations on its part herein contained or contained in any mortgage, charge or other security executed by the Borrower in favour of the Bank or contained in any other agreement or arrangement between the Borrower and the Bank; Fe ye te eo Se ocooe peme oe les acer: . - reer ore Similar demands were made on the mortgagor companies pursuant to clause 2 of their respective mortgages. The Bank also served notices of exercise of power of sale under the mortgages on each of the second, third, fourth, fifth, sixth and seventh respondents on the grounds of non-compliance with the said notices of demand. On 23 September 1986, the Bank commenced proceedings in the Supreme Court of Queensland claiming, inter alia, the principal sum of Swiss Francs 14,552,725.78 together with interest thereon of Swiss Francs 384,737.69 and Japanese Yen 167,672,000 with interest in the sum of Japanese Yen 4,761,186. Additional interest was claimed from 18 September 1986 (the date of demand pursuant to clause 12 of the facility letter) to the date of judgment or earlier payment. In the alternative, the Bank claimed the sum in Australian dollars equivalent to the value of such moneys referred to above as at the date of judgment. On 26 September 1986, the Bank and the receivers commenced proceedings in the Supreme Court of Queensland, Action No. 4052 of 1986, against the mortgagor companies claiming, inter alia, a declaration that the appointment of the receivers was valid. Finally, on 3 October 1986, Eltran, Mr. King and each of the mortgagor companies commenced proceedings in this Court in Q. No. G 141 of 1986. Eltran sought a declaration that it was not in default under the loan agreement, and meee eee i ses SO eae Paneee 7 = ON 7 Toye ee ee cere , ee wt we re wee eee x, race aereenehered Sone nena Ape caer damages pursuant to s.82 of the Trade Practices Act 1974 or alternatively, damages for breach of contract, or alternatively, damages for negligence. The mortgagor companies each sought a declaration that the appointment of the receivers was null and void, a declaration that the Bank was not entitled to exercise its power of sale under the mortgages, an order restraining the receivers from exercising their powers as receivers and an order restraining the Hank from exercising the power of sale in respect of the mortgaged premises. The first to ninth respondents also claimed a declaration that no moneys were presently owing by them to the Bank. Each of the first to seventh respondents claimed by way of interlocutory relief an injunction until trial or further order restraining the Bank from prosecuting or taking any further proceedings in the Supreme Court actions, an injunction until trial or further order restraining the Bank from exercising its power of sale and an injunction until trial or further order restraining John Geoffrey Allpass and Alan Raphael Tuttie from exercising their powers as receivers. The basis of the claims for relief was that there was no relevant breach of the agreement by the respondents for two reasons. First, it was argued that the amount which it was said was owed to the Bank as at 2 September 1986, when the notice of default was issued, was less than 70% of the value of the securities by reason of claims which it was spp ce ree ee a u ay v4 cart: maaleres alleged Eltran had against the Bank for damages, these claims being pleaded as a set off against the Bank's entitlement to repayment of principal and payment of interest. It was argued by Eltran that in calculating the Australian dollar equivalent of the loan (i.e. As16,000,000) when delivering the notice of default the Bank should have taken into account the value of the set off (which it was alleged amounted to AS9.9 million), with the result that only As6.1 million would have been owing to the Bank, a lesser amount than that which would entitle the Bank to require Eltran to provide the security. The AS9.9 million comprised various foreign currency exchange losses which Eltran alleged arose as a result of the Bank's negligence, breach of contract or misleading and deceptive conduct. Eltran contended that it was an oral term of the loan facility, or alternatively, it was represented to Eltran by officers of the Bank, or alternatively, it was an implied term of the advance, that in consideration of the acceptance of the facility by Eltran the Bank would make hedging facilities and advice in relation thereto readily available to Eltran in order to protect Eltran's exposure to foreign currency fluctuation and would act upon any decision made by Eltran as to the taking out or reversing of any such hedging contracts. It was alleged that the said representations were misleading or deceptive contrary to 5.52 of the Trade Practices Act 1974 in that at the time they were made, the officers of the Bank did not intend to act upon the instructions of Eltran except where such instructions a —— followed advice or direction from the Bank, and that at no material time were the officers responsible for Eltran's account skilled in the management of foreign currency accounts. But for the said promises or representations, Eltran has stated that it would not have accepted the facility. The statement of claim set out in considerable detail specified instances of alleged negligence or misleading and deceptive conduct in relation to the hedging facilities and the loss or damage suffered as a result. The exact amount of such loss was stated to be As9,944,027. Eltran claimed that it was entitled to set off in equity that amount against the amount of the advance from the Bank, and that this right impeached the Bank's right to require the "topping up" pursuant to clause 13. Alternatively, Eltran alleged that it suffered loss in an amount equivalent to the difference between AS8,000,000, being the Australian dollar equivalent of the advance, and the Australian dollar equivalent of the amounts drawn down as at the date of the application, and that it was entitled to set off such loss against the present Australian dollar value of the advance. The second argument as to why Eltran was not in breach of the facility letter rested on an interpretation of clause 13. It was contended that clause 13 required the Bank to give to the borrower the option to provide the Bank with additional security or to make a cash deposit along with security over such deposit. . Veer cae + aus panes s Sat ee pegs rene - 10 - In relation to the first argument, the learned trial Judge doubted whether Eltran's claim for a right of set off impeached the Bank's entitlement to require topping up of the security, as clause 13.01 did not make such an entitlement dependent on the indebtedness between the Bank and Eltran (if any), but upon the Australian dollar equivalent of the loan, with the result that the claim may have been better characterised as a counter claim and not as a set off. However, the learned trial Judge was satisfied that the claim was genuinely advanced and was not merely a matter of defence. The learned trial Judge also had difficulty in accepting Eltran's contention with respect to the option contained in clause 13.01. However, he thought that such an interpretation was not an "unarguable one." The learned trial Judge then turned his mind to the principles to be applied, first in determining an application for interlocutory relief and second, in determining whether or not to stay the Supreme Court proceedings. He concluded that there was a single controversy centred upon the meetings with the Bank officers, involving both federal and non federal claims, and found no circumstances which would justify a departure from the prima facie preference for a forum which had the power to completely resolve the dispute. He therefore ordered that the Supreme Court proceedings be stayed. - lil - Pursuant to notice dated 9 March 1987, the Bank moved the Court oni18 March 1987 for leave to issue fresh proceedings in the Supreme Court of Queensland against the first to ninth applicants claiming the sum of Swiss Francs 15,054,794.91 and Japanese Yen 173,885,173 in respect of debt and interest thereon from 31 October 1986 to the date of judgment, subject to the Bank undertaking to:- (a) proceed with a summary judgment application in the Supreme Court for the said sums, and to execute, if summary judgment is obtained, only to the extent of the difference between the said sums and the amount sought to be set off by the first to ninth respondents; and (b) apply to the Supreme Court for a mareva injunction against the assets of the ninth applicant. The motion was based on defaults which had occurred subsequent to the orders made on 16 October 1986 and which, it was argued, made those orders inappropriate. The defaults alleged to have occurred included non-compliance by Eltran with a further letter of demand pursuant to clause 13 in which the borrower was given the option contained in that clause, and non-production of various documents, such as leases and profit and loss statements, as required by the facility letter or the mortgages. On the basis of Eltran's failure to comply with the second demand, John Geoffrey - 12 - Allpass and Alan Raphael Tuttle were reappointed receivers to the second, third, fourth, fifth, sixth and seventh respondents on 17 November 1986 and to the eighth respondent on 20 January 1987. During the hearing of this appeal, this Court somewhat reluctantly gave the appellants leave to introduce new evidence of these defaults, notwithstanding that the questions raised by the fresh evidence should have gone before the learned trial Judge in the form of an application to vary his original order, and not in the form of an application to commence further proceedings in the Supreme Court. On 24 March 1987, the Court constituted by a single Judge ordered that the Bank be given leave to proceed with a summary judgment application in the Supreme Court subject toa the abovementioned undertakings and to apply fora mareva injunction. In so deciding, the learned trial Judge took into consideration the following factors:- (a) The application could be pursued as expeditiously in the Supreme Court as if it was brought by way of cross-claim in the Federal Court; (b) the doubt surrounding the Federal Court's ability to grant a mareva injunction; ir er yrs yer erm ns ee - 13- (c) there would be no prejudice to the respondents, in terms of costs of litigation, if the Bank was permitted to proceed in the Supreme Court; and (d) the possible inability of the Federal Court to exercise, in its accrued jurisdiction, the power under 5.95 of the Property Law Act 1974 (Qld.) which essentially permits the Supreme Court or any Judge thereof to give relief against provisions for the acceleration of payment. Pursuant to this order, the Bank commenced fresh proceedings in the Supreme Court on 24 March 1987 and on 1 April 1987 issued a summons seeking summary judgment. On 3 April 1987, the first to ninth respondents by way of notice of motion sought leave to appeal against the orders made by the learned trial Judge on 24 March 1987. On 7 April 1987, the Court constituted by Fox 7., granted a stay of the orders of the learned trial Judge until the conclusion of the present application for leave to appeal. Notwithstanding this stay, on 8 April 1987 the Bank applied to Master Weld in the Supreme Court for summary judgment in respect of its debt. The respondents immediately applied to the Master for a stay of the application pending the outcome of their application to this Court for leave to 2 ere, were wy eter ES 2hht Pas , ae ETA Speen, ae aT , eye ae ey te A wee wes ho sears - 14 - appeal against the orders made on 24 March 1987. The Master refused the application for a stay but agreed to stay his decision pending an appeal by the respondents to a Judge of the Supreme Court against the order of Master Weld refusing to stay the Supreme Court proceedings. The issues arising out of this multiplicity of actions which fall to be decided by this Court are twofold; namely, whether the appeal against the orders made on 16 October 1986 should be allowed and whether the respondents should be granted leave to appeal against the orders made on 24 March 1987. In determining whether to grant an interlocutory injunction, the Court must consider whether there is a serious question to be tried and if there is, to consider the balance of convenience between the granting and the refusing to grant interlocutory relief. In considering whether to allow an appeal from an interlocutory order, the appellate court is not free to exercise its own discretion. It must he satisfied that some error has been made by the court from which the appeal is brought. Where the order appealed from relates to a matter of practice and procedure, and an interlocutory injunction is a matter of practice and procedure, the appellate court should not interfere with the discretion exercised by the trial Judge unless some error has occurred and a failure to correct that error would result in an injustice; see Adam P. Brown Male Fashions Pty. Ltd. v. Philip Morris Incorporated (1981) 148 C.L.R. 170 at pp.176-7. Sone ye eee - 15 - Accordingly, as the first step, it is necessary to determine whether the trial Judge, in granting the interlocutory orders appealed from, was in error. It was submitted by counsel for the appellants that the learned trial Judge ought not to have ordered a stay of the two Supreme Court actions as the respondents' claims in the Federal Court were matters capable of being set up as grounds for defence in the Supreme Court proceedings or as a set off to the Bank's claims in those proceedings. The common law claims for damages for negligence and breach of contract brought in the accrued jurisdiction of the Federal Court were clearly justiciable in the Supreme Court. In support of their contentions that the Federal claims based upon s.52 of the Trade Practices Act were capable of being set up as grounds for defence in the Supreme Court proceedings, counsel relied on two cases. In Westco Motors (Distributors) Pty. Ltd. v. Palmer £1979] 2 N.S.W.L.R. 93, Westco Motors sued a Mr. Palmer upon a guarantee he had given. Palmer, in his defence, alleged that W.H. Motors had a counter claim for damages equal to or in excess of Westco''s claim, based on alleged breaches by Westco of s.45 of the Trade Practices Act which he, Palmer, was entitled to set off against the amounts due under the guarantee. The question before the Court, constituted by Sheppard J. sitting as a Judge of the Supreme Court of New South Wales, was whether the argument that W.H. Motors' indebtedness to Westco was reduced by Westco's claim for damages, was bad in law. It eye te cer ore segs ee et ees woot - 16 - was not disputed that s.86 of the Trade Practices Act, which confers exclusive jurisdiction on the Federal Court to determine claims for damages pursuant to s.82 of the Act, would prevent the Supreme Court from granting damages; the real question was whether the guarantee prevented the raising of such claims by way of defence or set off. The Court held that it did, as the alleged cause of action of W.H. Motors Was separate and distinct from the cause of action which Westco Motors had for the money which it was owed. That is, it was the amount owing upon Westco's cause of action which Palmer had guaranteed to pay. However, Sheppard J. went on to state that had the claim based upon s.82(1) been one which the guarantee contemplated might operate to reduce or extinguish the amount for which Palmer might otherwise be liable thereunder, the Supreme Court would have had jurisdiction to determine it. In so doing, the Supreme Court would not have been assuming a jurisdiction under 5.86 which it did not have, but would have been ascertaining the amount, if any, of Palmer's liability under the guarantee. The jurisdiction of the Supreme Court to determine defences based on the Trade Practices Act was confirmed by the High Court in Carlton & United Breweries Ltd. v. Castlemaine Tooheys Ltd. (1986) 66 A.L.R. 347. There the plaintiffs had commenced an action in the Supreme Court. The defendants alleged that to allow the plaintiffs to succeed in the action would involve enforcing an agreement which was in breach of the Trade Practices Act or implying into the agreement a term which contravened that Act. The plaintiff I re ee re eee en t sae ser wa TRE EE? Re nen ee per ot -1i7 - raised the question whether the Supreme Court had jurisdiction to determine the defences based on 5.86 of the Act. The High Court, Gibbs C.J., Mason, Wilson, Brennan, Deane and Dawson dJ., held that the Supreme Court was competent to determine the defences, as 5.86 conferred exclusive jurisdiction on the Federal Court only in those matters which answered the description contained in that section, namely, "actions, prosecutions and other proceedings" under Part VI. Therefore, the jurisdiction exercised by the Supreme Court was not that jurisdiction conferred exclusively on the Federal Court by 5.86. In my opinion, these cases are authority for the proposition that the Supreme Court is capable of considering matters which arise under the Trade Practices Act, notwithstanding that proceedings have already been commenced in this Court, and notwithstanding that the Supreme Court cannot award damages under s.82. See also Bestoys Pty. Ltd. v. George Wills and Co. Ltd. (1981) 36 A.L.R. 366 and Stack v. Coast Securities No. 9 Pty. Ltd. (1983) 46 A.L.R. 451. Therefore, in my opinion, the Supreme Court was capable of dealing with the respondents' claims. It was also argued by the appellants that the learned trial Judge wrongly regarded himself as constrained by Epitoma Pty. Ltd. v. Australasian Meat Industry Employees Union (1984) 3 F.C.R. 55 from deciding the arguments outlined above concerning the set off and the interpretation of clause 13.01 adversely to the respondents, notwithstanding that he we SST pn Src spree roses > ny Sete dred - 18 ~- disagreed with those arguments. More specifically, it was alleged that the learned trial Judge equated an "arguable" contention of law with a "serious question to be tried." In Epitoma Pty. Ltd. v. Australasian Meat Industry Employees Union, above, Sheppard, Morling and Beaumont Jd., in a joint judgment, adopted a passage from Lord Diplock's judgment in Dimbleby & Sons Ltd. v. National Union of Journalists [19841 1 W.L.R. 427 at p.436 where it was said that "it is no part of the Court's function on an application for an interlocutory injunction to decide difficult questions of law which call for detailed argument and mature considerations." In PRD La Costa Management Pty. Ltd. v. The Proprietors "Beachpoint" Building Units Plan No. 3149 (1985) 2 QOd.R 227, Ryan J., in a judgment with which Campbell C.J. and Williams J. agreed, referred to that statement of Lord Diplock, and at p.229 said:- "It does not follow from this that, when the facts are not in dispute, a court should decline to decide questions of law, even if they involve some complexity, particularly if refusal to give a decision may cause substantial hardship to one of the parties ... . If a Judge comes to a conclusion on hearing an application for an interlocutory injunction, that a question of law upon which the applicant's right to relief depends must be determined against him, it will in my opinion be a proper exercise of his discretion to dismiss the application. The issue before a court of appeal will then be whether his decision on the question of law was right." See also Cohen v. Peko-Wallsend Ltd. (1986) 61 A.L.J.R. 57, where the High Court held that although it is not the duty of the Court on an interlocutory application to decide questions a re errors: Pellnalate eet dieeaslaeie a bemmereter: ated a ae roy . la pheennatel - 19 - of law, it is desirable for the Court to doso if the question is susceptible of resolution without further evidence and the urgency of the matter does not render it impracticable to give proper consideration to the question. It is therefore clear that it was open to the learned trial Judge to decide such contentions against the respondents. However, it would appear that the learned trial Judge equated an "arguable" interpretation with a "serious question to be tried", with the result that he felt constrained not to decide the arguments adversely to the respondents. In doing this, the learned trial Judge was, in my opinion, in error. Tam of the opinion also that the learned trial Judge erred regarding the principles to be applied when this Court is called upon to stay Supreme Court proceedings. In such cases, it is necessary for the party seeking a stay of such proceedings to show that the Federal Court claims were genuine. I considered this type of question in Francis CC. Mason Pty. Ltd. v. Citicorp Australia Ltd. (1984) 57 A.L.R. 130 and held that on the facts of that case, the claim in the Federal Court was not genuine. In the present case, what is important is whether the respondents' claims under the Trade Practices Act are genuine and give rise toa substantial issue. I am not satisfied that they are. I have formed the opinion that the Federal Court proceedings have all the outward appearance of being brought in order to delay the Supreme Court proceedings. spe ye oe - 20 - The respondents argued that if the proceedings were to take place in the Supreme Court, prejudice would he suffered by the respondents because of the inability of the Supreme Court to award damages under s.82 of the Trade Practices Act or to provide relief under s.87. However, I am not convinced by this argument. I have already stated that 5.52 can be used as a defence in the Supreme Court. Section 87 was not pleaded by the respondents; indeed it was first yaised during the hearing of this appeal. All the substantive claims in this case are within the jurisdiction of the Supreme Court, and I am therefore of the opinion that the Bank should be permitted to pursue its legal remedies in the forum which usually deals with contract and breaches of contract. It was argued further that the balance of convenience lay heavily in favour of permitting the Bank to pursue its claims in the Supreme Court, because inter alia:- (a) the claim in the Federal Court was brought belatedly and the Federal Court aspect of the claim is "shadowy"; (b) the respondents' undertakings as to damages are worthless; and y % ore x aN errors i nee . cohen sana - 21-~ (c) the Bank's claim in the Supreme Court exceeds the value of the respondents' claims in the Federal Court by more than AS6,000,000. However, I consider that these factors are equally applicable to the question of whether the Federal Court claim was genuine, and in view of my finding that it was not, I find it unnecessary to deal with the argument based on the balance of convenience, Counsel for the appellants submitted that having regard to sub-section 4(5) of the Judicature Act 1878 (Qld), the power conferred upon the Federal Court by s.23 of the Federal Court of Australia Act 1976 should not be = construed so as to empower this Court to restrain a party from pursuing rights in the State Courts of Queensland. Sub-section 4(5) is similar to Judicature Act provisions applicable in Victoria. In Denpro Pty. Ltd. v. Centrepoint Freeholds Pty. Ltd. (1983) 72 F.L.R. 156 at pp.162-165, I rejected a similar submission. I see no reason to depart from the views expressed. There is no room to apply any type of implied prohibition to the terms of s.23 of the Federal Court of Australia Act. In my opinion, this Court has power to make the type of order appealed from. Nevertheless, an order of that kind should not be made lightly. wes eae a — "a - 22 -~ Therefore, I allowed the appeal from the orders made on 16 October 1986. I refused the motion for leave to appeal from the orders made on 24 March 1987 since there was nothing upon which those orders could operate even though the orders were made on the motion of the Bank. ot te rt ie hs Se 1 caiify that tla- aad she twenty-one (21) yrecading pages ave a Re sopy of the Seasons for Judgment hercin of the Honourable Mr. Justice R.M. Northrop. Sharon P. Wilson Assoviste Dated: 26 June, 1987. f ET Ee, _— STIs n en eer ert = cry wy i Title of Action File Number Dates of Hearing Judgment Delivered Counsel for Appellants Solicitors for Appellants Counsel for Respondents ATTACHMENT A be oe Solicitors for Respondents: Signed .Sharon:P, Wilson... Date 26 June 1987 WESTPAC BANKING CORPORATION and OTHERS v. ELTRAN PTY. LIMITED and QTHERS Q. No. G 162 of 1986 9 and 10 April 1987 26 June 1987 J.H. Byrne Q.C., R. Wensley and P. Keane Messrs. Feez Ruthning N. McLauchlin 9.C. and P. Dutney Messrs. Kootsookos & Co. ' ¢ ¢ eo pee es P 0 3 Tot