Marshall v Sheahan [1999] FCA 863

FEDERAL COURT OF AUSTRALIA

Marshall v Sheahan [1999] FCA 863

JILLIAN HELEN MARSHALL, RICHARD JOHN COOPER & SIMON VINCENT

COOPER v JOHN SHEAHAN as Trustee of the bankrupt estates of JILLIAN HELEN

MARSHALL, RICHARD COOPER & SIMON VINCENT COOPER and

W J FOUNTAIN PTY LTD (ACN 075 652 318) and WILLIAM JOHN FOUNTAIN S 7097 OF 1997 MANSFIELD J ADELAIDE 4 JUNE 1999

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY S 7097 OF 1999

BETWEEN: JILLIAN HELEN MARSHALL,

RICHARD JOHN COOPER &

SIMON VINCENT COOPER

Applicants

AND: JOHN SHEAHAN as Trustee of the bankrupt estates of

JILLIAN HELEN MARSHALL, RICHARD COOPER &

SIMON VINCENT COOPER

First Respondent

W J FOUNTAIN PTY LTD

(ACN 075 652 318)

Second Respondent

WILLIAM JOHN FOUNTAIN

Third Respondent

JUDGE: MANSFIELD J

DATE: 4 JUNE 1999

PLACE: ADELAIDE

REASONS FOR DECISION

HIS HONOUR:

1 On 25 February 1999, the applicants, who were all bankrupts by order made on 20 April 1998, applied for orders first for removal of the first respondent as trustee of their bankrupt estates pursuant to s 179 of the Bankruptcy Act 1966 (Cth) ("the Act"), and for the appointment of an alternative trustee, and secondly, for an order to review the decisions of the first respondent as their trustee generally, but in particular a decision to enter into a contract of sale for certain land known as Rothmore Farm, in which they have a partial interest, to the second and third respondents, to the intent that that decision be rescinded. 2 On the evidence, it appears that the first respondent entered into a contract on 20 April 1999 to sell the land known as Rothmore Farm to the second or third respondents for $1.5 million to settle on 1 June 1999 or such other date as occurs (I am told) when the Minister approves the proposed transfer. The allegations of the applicants generally in the proceedings in relation to that contract are that the value of the land is worth considerably more than $1.5 million and possibly up to $5 million. There are also allegations made in the proceedings of serious impropriety on the part of the first respondent in his conduct as the applicants' trustee in the performance of his duties, and of non-performance of his duties. It is not necessary for the purposes of this ruling to enumerate those allegations. There are also other orders sought in the application to which it is not necessary presently to refer. 3 The application sought interlocutory orders, in particular to restrain the settlement of the contract for the sale of the land known as Rothmore Farm. That application for interlocutory relief came on for hearing on 27 May 1999 when directions were given concerning its further resolution. On that occasion, issues were clearly identified for the applicants as to whether they were in a position to, and would, proffer an undertaking as to damages in the usual form from themselves or from someone else if they were to be granted the interlocutory relief which they sought, and bearing in mind that they are bankrupts, whether any undertaking as to damages which was to be offered was to be supported by security proffered from resources other than their own resources. 4 Accordingly, the Court on that date made directions including that they file and serve by 4.00 pm on 28 May 1998 any undertaking which they or any other person on their behalf may proffer if the interlocutory orders or any of them were to be granted, and also that they file and serve by that time the terms of any proposed security to be offered in support of any such undertaking. 5 The application for interlocutory relief came on today. No undertaking, and no document recording the terms of any proposed security, had been filed in accordance with those directions or, indeed, filed at all. Early in the course of the hearing, the applicant sought to adduce oral evidence from Mr Tennyson Turner ("Mr Turner") to provide an undertaking as to damages on behalf of the applicants. I refused that application and gave brief reasons for that ruling. It was clear that the proposed evidence was to the general effect that Mr Turner would also offer an undertaking as to damages in the usual terms, and that he asserted that he had very substantial assets available to support any such undertaking. There was no suggestion that he would offer specific security in support of that undertaking which was contemplated. It was evident that such evidence as he proposed to give would have required the respondents to have had an opportunity to consider and, if appropriate, to test or challenge his evidence as to his assets. The purpose of the directions given was to enable the respondents to do so, and I ruled that it was not fair to the respondents to be confronted with such evidence without notice on the date of the hearing. The failure to comply with the directions in relation to that proposed evidence was not explained. 6 I then directed that the applicants' submissions and evidence should be confined to the question of whether the Court should make an order in the nature of the interlocutory relief sought, upon the assumption that the applicants established that there was a serious question to be tried that the first respondent was not entitled to be their trustee in bankruptcy and should be removed as their trustee in bankruptcy and that the first respondent was not entitled to enter into, and should not have entered into, the contract for the sale of the land known as Rothmore Farm. I was also prepared to assume that, subject to any such appropriate undertaking being proffered, the balance of convenience rested with the applicants in relation to their claim for an interlocutory order restraining the respondents from proceeding to settle the contract for the sale and purchase of the property known as Rothmore Farm. 7 The issue then was whether, on those assumptions, interlocutory orders of the nature sought would be made in the absence of an undertaking offered, or in the light of any undertaking offered by the applicants with or without security in support of it. In the events which had happened, there was no such undertaking offered at the time of the hearing. I refused an application for an adjournment to enable an undertaking to be offered. I had previously directed it to be done by 28 May 1999. It was not. I also gave reasons briefly for that refusal. The circumstances clearly required that the respondents be given the opportunity to consider any such undertaking and security. 8 On the assumptions favourable to the applicants which I have been prepared to make for the purposes of this ruling, I indicate that I will not make an order in the nature of the interlocutory relief sought without an undertaking as to damages proffered by the applicants or by some other persons on their behalf and, bearing in mind that the applicants are bankrupts, without some security to support any undertaking which they may have proffered. The purpose of an undertaking is simply to enable the Court, if it thinks that the justice of the case requires it, to recompense a person who has been temporarily injuncted from proceeding in a way which that person claims to be entitled to do. That temporary injunction may lead to the person being unable to enjoy that person's rights as finally ascertained, if the action against the person is unsuccessful. 9 It will only be in the most exceptional circumstances that an interlocutory injunction will be granted without an undertaking as to damages in the conventional form to protect the position of the person against whom the injunction is sought. The general rule is recognised, for instance, in the decision of the High Court in Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 623, and was referred to also by Davies J in Trade Practices Commission v Santos Ltd (1992) 38 FCR 382 at 389. 10 There are circumstances where the Court will not require an undertaking to be proffered in support of an interlocutory injunction but they are exceptional. They encompass the sort of circumstance to which French J referred in Century Metals & Mining NL v Yeomans (1988) 85 ALR 29 esp at 59. Those circumstances may include that there is a significant element of public interest in the matter, as distinct from a matter where the consequences are entirely commercial. 11 In Yeomans (above, at 58-59), French J referred to some remarks of Brennan J in World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181 at 199, concerning the applicability of general equitable principles in the grant of interlocutory relief to circumstances in which the Court is exercising a statutory injunctive power. It is unclear at present whether the applicants rely upon s 178 of the Act or some more general equitable jurisdiction of the Court in seeking the injunction. In either event, in my view, nothing of a sufficiently exceptional nature has been demonstrated in the material before me to warrant a departure from the normal rule. 12 I bear in mind the submission that the applicants are bankrupts. I do not regard that fact, nor the fact that they have an application under ss 178 and 179 of the Act as themselves constituting exceptional circumstances so as to justify departure from the normal practice. As Mr White QC of counsel for the first respondent pointed out, that would mean that in many circumstances an injunctive interlocutory order would be made without an undertaking as to damages being proffered, simply because those who seek the order may be unable to meet the consequences of the order sought, even though the entitlement to the relief sought is not ultimately established. It would therefore undermine the rationale underlying the expectation that such an undertaking will generally be offered as a condition of the grant of interlocutory relief. 13 I do not consider there to have been any particular circumstance identified by counsel for the applicants beyond that matter as constituting an exceptional circumstance. 14 On the other hand, there is clear evidence of a risk of significant loss to each of the respondents and perhaps to a third party, the sharefarmer Mr Butler, if the applicants proceed with this claim on the basis they presently assert and if they are unsuccessful. 15 In those circumstances it seems to me that I should simply decline the application for interlocutory relief. I do so. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Decision herein of the Honourable Justice Mansfield.