Supreme Court New South Wales Medium Neutral Citation: The Checkout Pty Ltd v Cordell Jigsaw Productions Pty Ltd [2020] NSWSC 1238 Hearing dates: 10 August 2020 Date of orders: 10 August 2020 Decision date: 11 September 2020 Jurisdiction: Equity - Commercial List Before: Henry J Decision: See paragraph [80]. Catchwords: EQUITY – Interlocutory relief – where defendant seeks interlocutory injunction that the plaintiffs pay 40% of certain tax rebates received by the first plaintiff into a controlled monies account – where defendant established a serious question to be tried – whether balance of convenience favours the grant of an injunction – whether damages an adequate remedy –where the first plaintiff provided an undertaking not to reduce its cash levels beyond the amount claimed by the defendant, excepting payments incurred in the ordinary course of business – interlocutory injunction refused on basis of undertaking Legislation Cited: Nil Cases Cited: AMMG Pty Limited v Arndell [2016] NSWSC 203 Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199; [2001] HCA 63 Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57; [2006] HCA 46 Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618; [1968] HCA 1 Cardile v LED Builders Pty Limited (1999) 198 CLR 380; [1999] HCA 18 Castlemaine Toohey Limited v South Australia (1986) 161 CLR 148; [1986] HCA 58 Fox Entertainment Precinct Pty Limited v Centennial Park and Moore Park Trust [2004] NSWSC 214 Frigo v Culhaci [1998] NSWCA 88 GE Capital Asset Services & Trading Asia Pacific Pty Ltd v Rocks Excavations & Plant Hire Pty Ltd [2003] NSWSC 99 Luxcon Developments No 2 Pty Limited v Ratner [2014] NSWSC 861 Schering Pty Ltd v Forrest Pharmaceutical Co Pty Ltd [1982] 1 NSWLR 286 Westralian Farmers Limited v Commonwealth Agricultural Services Engineers Limited (1936) 54 CLR 361 Texts Cited: Nil Category: Procedural and other rulings Parties: The Checkout Pty Ltd (First Plaintiff/Third Cross-Defendant) Giant Dwarf Pty Ltd (Second Plaintiff/First Cross-Defendant) Julian Francis Xavier Morrow (Second Cross-Defendant) Cordell Jigsaw Productions Pty Ltd (Defendant/Cross-Claimant) Representation: Counsel: C O'Neill (Plaintiffs) B Katekar and L McGovern (Defendant) Solicitors: Kay & Hughes Entertainment Lawyers (Plaintiffs) Bird & Bird (Defendant) File Number(s): 2019/343896 Publication restriction: Nil Judgment 1. On 10 August 2020, the defendant/cross-claimant, Cordell Jigsaw Productions Pty Ltd, sought an interlocutory injunction that the first and second plaintiffs, The Checkout Pty Ltd (TCPL) and Giant Dwarf Pty Ltd, pay into a controlled monies account 40% of the funds received by TCPL from the Australian Taxation Office (referred to as PDV Offsets) relating to the production of the satirical consumer affairs show known as "The Checkout". 2. At the end of the hearing, I declined to grant the interlocutory order sought by Cordell Jigsaw noting the undertaking given by TCPL to keep cash at a level equivalent to 40% of the PDV Offsets and to not use that cash except for limited business purposes. I gave summary reasons at the time with more detailed reasons to follow. These are those reasons. Background facts and claims in the proceedings 1. On or around 23 January 2012, Cordell Jigsaw and Giant Dwarf formed TCPL (then known as Jigsaw Dwarf Pty Ltd) as the vehicle for them to jointly produce "The Checkout" for the Australian Broadcasting Corporation (ABC). Cordell Jigsaw and Giant Dwarf each held 50% of the shares in TCPL. From around January 2014, it was agreed that TCPL's profits were to be divided with 60% going to Giant Dwarf and 40% to Cordell Jigsaw. 2. Between 2013 and 2018, TCPL produced six series of The Checkout for the ABC. The last episode of series six was delivered to the ABC on 6 April 2018. 3. On 4 July 2018, Julian Morrow, the sole director of Giant Dwarf and the second cross-defendant in the proceedings, advised Nicholas Murray, a director of Cordell Jigsaw, that it looked like the ABC had "decided to axe the Checkout". On 6 July 2018, the ABC released a statement to the effect that it had put The Checkout "on hiatus". 4. In 2018, Giant Dwarf made an application to the ATO on behalf of TCPL for PDV Offsets relating to series five and six of The Checkout. PDV Offsets are tax rebates that are calculated at 30% on qualifying Australian production expenditure related to certain post, digital and visual effects undertaken in relation to eligible television programs. The Checkout is an eligible program. 5. In January 2019, TCPL received PDV Offsets from the ATO of approximately $587,000 for the 2018 financial year in relation to series five and six of The Checkout (2018 PDV Offset). 6. Between around 19 February and late March 2019, Mr Murray and Mr Morrow discussed an arrangement whereby Cordell Jigsaw would cease to be a shareholder of TCPL and the parties would get access to the 2018 PDV Offset. On 1 April 2019, Mr Morrow sent an email to Mr Murray stating that he wanted to get the deal sorted in the next couple of days as he needed to access Giant Dwarf's share of the retained earnings for the 2018 PDV Offset to pay off an outstanding loan. 7. On 8 April 2019, Cordell Jigsaw, Giant Dwarf and TCPL executed a share sale agreement, under which Cordell Jigsaw agreed to sell its shares in TCPL to Giant Dwarf for $50 (SSA). In accordance with a condition precedent to the SSA, Cordell Jigsaw received $270,000, which comprised, in part, a proportion of the 2018 PDV Offset. 8. The SSA provides that: 1. Cordell Jigsaw is entitled to receive, and TCPL will pay, 40% of TCPL's net income from exploitation of series one to six of The Checkout and 40% of TCPL's net income from any tax rebates or other income from the exploitation of series one to six of The Checkout: cls 4.2(a), 4.2(b); 2. TCPL must notify Cordell Jigsaw each 30 June and 30 December of any income cl 4.2 applies to and pay Cordell Jigsaw its share of that income within 28 days of receipt of a tax invoice: cl 4.2(c); 3. TCPL must pay Cordell Jigsaw a fee of 2% of TCPL's cash budget on subsequent series of The Checkout produced by TCPL, Giant Dwarf or any affiliated company: cl 4.3(a); 4. Giant Dwarf and Cordell Jigsaw acknowledge they each have the separate right to produce another consumer affairs show provided they did not use the name or format of The Checkout or any intellectual property owned by TCPL: cl 4.6; 5. all intellectual property rights in relation to The Checkout, including the format, are owned exclusively by TCPL and, to the extent those rights have not previously been assigned to TCPL, they are assigned by the SSA: cls 5.1, 5.2; 6. Giant Dwarf and Cordell Jigsaw agree to do all things TCPL considered reasonably necessary to perfect the assignment of the intellectual property rights in The Checkout: cl 5.3; 7. Giant Dwarf and Cordell Jigsaw released each other from all liability arising out of them holding or having held shares in TCPL, any obligations they have to the other in relation to TCPL or its business and the transfer of the shares under the SSA, including any damages, costs and expenses: cl 7.1 and 8. each party must do anything that the other party may reasonably require to give full effect to the SSA: cl 9.7. 1. Prior to execution of the SSA, Mr Morrow had been in communication with the ABC about the potential for a future consumer affairs show. Mr Morrow did not inform anyone at Cordell Jigsaw of those matters. In late March 2019, Mr Morrow told the ABC that he was in discussions with Cordell Jigsaw and whether the new consumer affairs program would become The Checkout depended on the outcome of those discussions. 2. On 10 April 2019, Mr Morrow sent an email to the ABC stating that they could now proceed on the basis that the "Consumer Show – 2019" would be series seven of The Checkout and would be produced by TCPL. 3. Before the ABC was prepared to proceed with a new series of The Checkout, it required Cordell Jigsaw to execute a Deed of Quit Claim, which provided, amongst other things, for Cordell Jigsaw to release and discharge TCPL and the ABC from all existing and future claims that arise out of or are incidental to any further series of The Checkout (Quit Claim Deed). 4. On 30 May 2019, TCPL sent to Cordell Jigsaw a draft of the Quit Claim Deed and requested Cordell Jigsaw to execute it. In June 2019, Mr Morrow made further requests for Cordell Jigsaw to execute the Quit Claim Deed. Cordell Jigsaw refused to sign the Quit Claim Deed. 5. On 28 June 2019, TCPL and Giant Dwarf purported to terminate the SSA, claiming that Cordell Jigsaw's failure to execute the Quit Claim Deed was in breach of Cordell Jigsaw's obligations under cls 5.3 and 9.7 of the SSA and an implied duty to co-operate. They also claimed that Cordell Jigsaw was in breach of and had repudiated the SSA by refusing to acknowledge that all intellectual property rights were exclusively held by TCPL and that the SSA was valid, and by refusing to affirm its intention to perform its obligations under the SSA. 6. On 1 November 2019, TCPL and Giant Dwarf commenced the proceedings claiming that Cordell Jigsaw had breached the SSA by failing to execute the Quit Claim Deed and that they were entitled to terminate the SSA. They also claim that Cordell Jigsaw breached a mediation agreement by disclosing certain information to the ABC. They say that Cordell Jigsaw's breaches have caused TCPL and Giant Dwarf loss of income as a result of the ABC not commissioning series seven of The Checkout and not entering into a contract with TCPL for series eight, and seek declaratory relief and damages. 7. By its commercial list response filed on 29 November 2019, Cordell Jigsaw denies that it breached the SSA, that the SSA has been validly terminated or that its actions have caused TCPL and Giant Dwarf any loss. 8. On 21 February 2020, Hammerschlag J ordered TCPL and Giant Dwarf to provide $20,000 by way of security for costs, which was paid into Court on 24 February 2020. 9. On 24 February 2020, TCPL received PDV Offsets of $276,338.52 for the 2017 financial year in relation to series four of The Checkout (2017 PDV Offset). 10. On 26 February 2020, Cordell Jigsaw asked TCPL and Giant Dwarf to transfer 40% of the 2017 PDV Offset into a controlled monies account pending final determination of the proceedings. It claimed an entitlement to that money on the basis that the SSA was not validly terminated or as an accrued right under the SSA. Giant Dwarf and TCPL did not agree to the request. 11. By notice of motion filed on 9 March 2020, Cordell Jigsaw sought a freezing order against TCPL and Giant Dwarf seeking to restrain them from disposing or dealing with assets up to the value of $110,535.20, an amount reflecting 40% of the 2017 PDV Offset. The freezing order sought by Cordell Jigsaw included the usual exceptions for payment of reasonable legal expenses and dealing with and disposing of assets in the ordinary course of business, including payment of bona fide and properly incurred business expenses. Pending resolution of that motion, TCPL undertook not to allow TCPL's cash at hand to fall below $110,535.20. 12. On 18 June 2020, Cordell Jigsaw filed a cross-claim against Giant Dwarf, Mr Morrow and TCPL. In its cross-claim, Cordell Jigsaw claims that: 1. Mr Morrow and Giant Dwarf engaged in misleading and deceptive conduct by representing that Giant Dwarf's desire to acquire Cordell Jigsaw's shares in TCPL was motivated by the need to access the 2018 PDV Offset to pay a loan, that Giant Dwarf did not wish to continue producing television programs and by not informing Cordell Jigsaw of the discussions with the ABC regarding a future consumer affairs program. Cordell Jigsaw alleges that it would not have entered into the SSA had it been aware of Mr Morrow's discussions with the ABC and desire to produce another series of The Checkout and that, as a consequence of the misleading conduct, Cordell Jigsaw is entitled to an order that the SSA be rescinded or damages as its shares in TCPL are worth more than $50. 2. Mr Morrow's conduct, of secretly discussing a potential new consumer affairs show with the ABC and negotiating the SSA on the basis that Giant Dwarf needed to access the 2018 PDV Offset to pay off a loan, was in breach of Mr Morrow's fiduciary and equitable duties owed to Cordell Jigsaw as a director of TCPL and joint venture partner. Cordell Jigsaw also claims that Giant Dwarf's conduct, through Mr Morrow, was in breach of a joint venture agreement entered into by Cordell Jigsaw and Giant Dwarf in 2010 for the purposes of creating, developing and producing The Checkout (JV Agreement). By reason of those matters, Cordell Jigsaw claims equitable compensation from Mr Morrow and Giant Dwarf and damages from Giant Dwarf. 3. TCPL's failure to pay 40% of the 2017 PDV Offset to Cordell Jigsaw is in breach of the JV Agreement and cl 4 of the SSA and that it is entitled to an order for payment of that amount and for 40% of any future PDV Offsets because: 1. Cordell Jigsaw's rights under cl 4 of the SSA to payment of 40% of the PDV Offsets continue to apply if the SSA had not been validly terminated by Giant Dwarf; or 2. if the SSA was validly terminated by Giant Dwarf, Cordell Jigsaw's rights to payment of 40% of the PDV Offsets under cl 4 of the SSA is an accrued right that existed prior to termination. 1. Giant Dwarf and Mr Morrow's response to Cordell Jigsaw's cross-claim, filed on 20 April 2020, denies that they engaged in conduct that was misleading and deceptive or in breach of any fiduciary or other duties alleged to have been owed to Cordell Jigsaw, and that any such conduct caused Cordell Jigsaw loss. They say that the SSA was validly terminated, that Cordell Jigsaw's rights under cl 4 were not accrued rights that existed prior to termination and that cl 7 of the SSA operates to bar Cordell Jigsaw from obtaining any of the relief sought. They also claim that Cordell Jigsaw is estopped from relying on its claims because Cordell Jigsaw departed from certain representations alleged to have been made by Mr Murray by, amongst other things, interfering with Giant Dwarf's right to exploit The Checkout. Cordell Jigsaw's claim for interlocutory relief and other evidence 1. By further amended notice of motion filed in Court on 10 August 2020, Cordell Jigsaw sought interlocutory relief in the following terms: (1) Upon [Cordell Jigsaw] by its counsel giving the usual undertaking as to damages, order that until further order of the Court, [TCPL and Giant Dwarf] are restrained from disposing of, and are to pay into a controlled monies account in the joint names of the solicitors of [Cordell Jigsaw and TCPL and Giant Dwarf]: (a) $273,707.86 [1] ; and (b) 40% of any further amount for any PDV Offset (as that term is defined in the Amended Commercial List Cross Claim Statement) received by [TCPL] from the Australian Taxation Office in respect of series 1 to 6 of The Checkout. (2) In the alternative to order 1(a), a freezing order to apply until further order of the Court against [TCPL and Giant Dwarf] in the terms specified in Annexure A. 1. At the hearing, Cordell Jigsaw did not press its alternative claim for a freezing order, contending that an interlocutory injunction in the terms of order 1 was appropriate and sufficient. 2. In response to Cordell Jigsaw's application for interlocutory relief, TCPL proffered an undertaking in the following terms (as varied at the hearing): [TCPL] undertakes that its cash at hand will not be reduced beyond the amount of $257,803.86 [2] until hearing of the question of liability in this matter, excluding dealings by [TCPL] with the assets available to it for the purposes of: (i) payment of reasonable business expenses; (ii) payment of reasonable legal fees of [TCPL]; (iii) dealings and dispositions in the ordinary and proper course of [TCPL's] business, including paying business expenses bona fide and properly incurred in relation to "The Checkout" and the intellectual property of [TCPL]; The above undertaking would be conditional on: (i) in the event that [TCPL] receives any further PDV Offset from the Australian Tax Office in regard to series 1 to 6 of "The Checkout", the parties agreeing to revise the above figure to contemplate 40% of the net receipts received by [TCPL] in regard to such PDV Offset; (ii) [TCPL] having liberty to apply on short notice to discharge, vary or be released from the undertaking. (iii) [Cordell Jigsaw] providing the usual undertaking as to damages. 1. The proffered undertaking was not acceptable to Cordell Jigsaw. 2. Cordell Jigsaw's application for interlocutory relief was supported by three affidavits of Hamish Fraser, Cordell Jigsaw's solicitor, affirmed on 9 March 2020, 4 June 2020 and 25 June 2020. 3. Mr Fraser's 4 June 2020 affidavit refers, amongst other matters, to communications between Mr Morrow and the ABC and between Mr Morrow and Mr Murray that Cordell Jigsaw contends is relevant to assessing the strength of its claims that it was misled by Mr Morrow and Giant Dwarf into entering into the SSA. It is apparent from that evidence that Mr Morrow had been in communication with the ABC and was preparing for another consumer affairs type show, which was contemplated to be a further series of The Checkout, as referred to at [11] and [12] above. 4. Mr Fraser also gives evidence that Cordell Jigsaw estimates that TCPL may be entitled to $810,000 in PDV Offsets for series one to three of The Checkout. 5. Cordell Jigsaw also read certain paragraphs of an affidavit of Benjamin Kay, TCPL and Giant Dwarf's solicitor, affirmed 20 December 2019, which had been relied on by TCPL and Giant Dwarf in response to Cordell Jigsaw's security for costs application. 6. Mr Kay's evidence is that, as at 20 December 2019, TCPL and Giant Dwarf did not have sufficient reserves to provide security for Cordell Jigsaw's costs in the amount of $142,927, their cash flow for the 2020 calendar year was highly uncertain and their future financial position was dependent on the production of The Checkout or other consumer affairs content. Mr Kay's evidence also discloses that, at that time, Giant Dwarf had a small number of projects in development but none had been contracted for a full series, TCPL expected to receive limited royalties from the exploitation of previous series of The Checkout and future PDV Offsets, and that Giant Dwarf did not have any programs in production or generate significant income from back-catalogues. 7. Mr Fraser gives evidence that Cordell Jigsaw is concerned that there is a substantial risk that TCPL and Giant Dwarf will spend Cordell Jigsaw's 40% share of the 2017 PDV Offset prior to the conclusion of these proceedings and thereby frustrate the orders that the Court may make on Cordell Jigsaw's cross-claim. 8. TCPL and Giant Dwarf relied on two affidavits of Mr Morrow affirmed 3 June 2020 and 5 August 2020, parts of Mr Kay's affidavit affirmed on 20 December 2019 and Mr Kay's affidavit affirmed on 17 June 2020. 9. According to Mr Morrow and Mr Kay's evidence, although not presently producing The Checkout or generating any other TV content, TCPL continues to engage in efforts to secure funding or to create content for The Checkout and its business activities are not limited to receiving income from the existing exploitation of series one to six of The Checkout. 10. Mr Morrow gives evidence that, on 28 July 2020, TCPL received PDV Offsets of $407,931.13 for the 2016 financial year in relation to series three of The Checkout (2016 PDV Offset). Mr Morrow calculates TCPL's net income for the period from 8 April 2019 until 4 August 2020 to be $644,509.65, comprising the 2016 and 2017 PDV Offsets (of $684,269.65) less the costs associated with the PDV tax rebate applications (of $39,760). Mr Morrow calculates 40% of that net income to be $257,803.86. 11. Mr Morrow deposes that, if the SSA was still on foot, TCPL would have been obliged to notify Cordell Jigsaw of income pursuant to cl 4.2(c) and, if it had received from Cordell Jigsaw a valid tax invoice for 40% of the applicable net amount, TCPL would have been obliged to pay that invoice within 28 days. 12. According to Mr Morrow and Mr Kay's evidence, other than paying Giant Dwarf its share of net income from the exploitation of series one to six of The Checkout, TCPL does not intend to use the funds available to it, which include the 2016 and 2017 PDV Offsets, on Giant Dwarf's projects other than The Checkout and will only deal with those funds in accordance with the proffered undertaking. Mr Morrow is also concerned that the orders now sought by Cordell Jigsaw (which do not contain the usual exceptions for payment of reasonable legal expenses and the disposition of assets in the ordinary course of business, including payment of business expenses) could interfere with, stultify or prevent TCPL from conducting its business and engaging in commercial activities to secure funding for or creating content for The Checkout. Legal Principles 1. The legal principles to be applied on an application for interlocutory relief are well known and were not in dispute at the hearing. 2. The Court must determine whether Cordell Jigsaw has shown that there is a serious question to be tried that it will be entitled to final relief as sought, that damages will not be adequate remedy and that the balance of convenience favours the granting of an injunction of the nature sought: Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57; [2006] HCA 46 (ABC v O'Neill) at 68 (Gleeson CJ and Crennan J) and 81-84 (Gummow and Hayne JJ). 3. Cordell Jigsaw must establish that its claim for final relief raises a serious question to be tried in the sense that, if the evidence remains as it is, there is a probability that at the trial of the action it will be entitled to the relief claimed: ABC v O'Neill at 82; Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618; [1968] HCA 1 at 622-3 (Beecham v Bristol). 4. The factors relevant to the balance of convenience include whether, if the injunction is not granted, the plaintiff will suffer harm for which damages will not be an adequate remedy. The Court will consider the risks of doing injustice according to whether the injunction is granted or refused. It considers what would be the loss and inconvenience to Cordell Jigsaw if the injunction is not granted, compared to the loss to TCPL and Giant Dwarf if it is granted: Castlemaine Toohey Limited v South Australia (1986) 161 CLR 148; [1986] HCA 58 at 153; Beecham v Bristol at 622-623. 5. The purpose of an interlocutory injunction is to preserve the status quo until the rights of the parties can be determined at a final hearing of the proceeding: Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199; [2001] HCA 63 at [62] (Gaudron J), [64] (Gummow and Hayne JJ), at [162] (Kirby J). 6. Whether Cordell Jigsaw has a seriously arguable case of final relief and of the balance of convenience are inter related; the greater the extent to which the balance of convenience favours the grant of interlocutory relief, the less strong a case of final relief might be required; conversely, the stronger the case of final relief, the less may be required to establish that the balance of convenience favours interlocutory relief: AMMG Pty Limited v Arndell [2016] NSWSC 203 at [3]. Consideration and determination 1. There was no dispute that, if it remains on foot, the SSA operates to entitle Cordell Jigsaw to 40% of TCPL's net income from any PDV Offsets and other income related to series one to six of The Checkout. 2. At the hearing, counsel for TCPL and Giant Dwarf also accepted that there was a serious question to be tried as to whether the SSA had been validly terminated. In my view, that concession was appropriately made having regard to the terms of the Quit Claim Deed which required Cordell Jigsaw to release the ABC and TCPL in relation to any further series of The Checkout. I accepted Cordell Jigsaw's submission that it is seriously arguable that the releases sought in the Quit Claim Deed went beyond what Cordell Jigsaw was obliged to do under cl 5.3 and cl 9.7 of the SSA: Fox Entertainment Precinct Pty Limited v Centennial Park and Moore Park Trust [2004] NSWSC 214 at [197]. I was also satisfied that it is seriously arguable that Cordell Jigsaw's refusal to sign to Quit Claim Deed or to make the other acknowledgements sought were not in breach of the SSA or any implied obligation of cooperation and thus did not provide a proper basis for TCPL and Giant Dwarf to terminate the SSA. 3. Cordell Jigsaw also argued that there were serious questions to be tried that it would be entitled to 40% of the PDV Offsets as an accrued right that survived termination of the SSA (assuming it had been validly terminated), or on the basis that Giant Dwarf and Mr Morrow engaged in misleading and deceptive conduct. As Cordell Jigsaw had established there was a serious question to be tried that, at the final hearing, it would be entitled to relief in relation to payment of 40% of the PDV Offsets on the basis that the SSA had not been validly terminated, it is not necessary to deal with those aspects, other than to note the following. 4. Based on the evidence on the application, I was also satisfied that it was seriously arguable that Giant Dwarf and Mr Morrow had engaged in misleading and deceptive conduct as alleged in the cross-claim by failing to inform Cordell Jigsaw of their communications with the ABC in respect of a proposed new consumer affairs show and the possibility of a further series of The Checkout and, in that context, by Mr Morrow indicating to Mr Murray that he wanted to finalise the SSA to gain access to Giant Dwarf's share of the retained earnings for the 2018 PDV Offset to pay an outstanding loan. I was also satisfied that it was seriously arguable that the conduct was in trade and commerce and relied on by Cordell Jigsaw in entering into the SSA. TCPL and Giant Dwarf's counsel did not contend otherwise at the hearing. 5. Cordell Jigsaw submitted that, if it succeeded with its claim that Mr Morrow and Giant Dwarf engaged in misleading and deceptive conduct it would be entitled to payment of 40% of the PDV Offsets either as damages or because the SSA was rescinded and it would have a right to a proportion of the PDV Offsets as a reinstated shareholder. I note that, as pleaded, damages for the alleged misleading and deceptive conduct would be payable by Giant Dwarf and/or Mr Morrow, rather than TCPL. 6. TCPL and Giant Dwarf did not accept that there was a serious question to be tried that Cordell Jigsaw's entitlement to 40% of TCPL's net income survived termination as an accrued right. It argued that payment to Cordell Jigsaw under cl 4.2 of the SSA was subject to acts of performance by both parties after the purported termination on 28 June 2019, including the provision of information by Cordell Jigsaw to TCPL. 7. I did not assess Cordell Jigsaw's accrued rights claim to be as strong as its claim that the SSA has been invalidly terminated, although I was satisfied that there was a serious question to be tried that it had an accrued right to 40% of TCPL's net income calculated by reference to the 2017 PDV Offset. 8. Based on the evidence, it seemed to me to be reasonably arguable that, as at 28 June 2019, Cordell Jigsaw had fulfilled its obligations under the SSA and no further acts of performance were required in so far as the right to claim an entitlement to 40% of TCPL's net income based on the 2017 PDV Offset. To the extent Cordell Jigsaw's right to payment was future and contingent on some events, such as TCPL or Giant Dwarf's application to the ATO and the ATO's determination, those events were arguably external to and did not depend on further performance of the SSA: Westralian Farmers Limited v Commonwealth Agricultural Services Engineers Limited (1936) 54 CLR 361 at 380. 9. The contest at the hearing was, in the main, about whether the interlocutory relief sought by Cordell Jigsaw should be granted having regard to balance of convenience factors, whether damages were an adequate remedy and the undertaking proffered by TCPL. 10. Cordell Jigsaw's Counsel acknowledged that this was an unusual application in the sense that Cordell Jigsaw was seeking an injunction over a "pot of money". But he submitted that the relief sought was warranted as the injunction would not cause TCPL any hardship given it was not currently producing The Checkout for the ABC or any other television content, and because TCPL had 60% of the PDV Offsets available to manage ongoing affairs. 11. There was some force to the submission that TCPL and Giant Dwarf had not established any real hardship if the Court were to grant the relief sought by Cordell Jigsaw. The evidence led by TCPL and Giant Dwarf as to the impacts on TCPL's business if the injunction was granted was of a very general and high level nature, at outlined at [38] above. It did not identify how the orders would interfere, stultify or prevent TCPL from conducting its business, what funds were needed for its ongoing business or why the remaining income from the PDV Offsets could not be utilised. In my view, that was a factor that weighed in favour of granting the relief sought. 12. Cordell Jigsaw also submitted that it would be prejudiced if the injunction was not granted and it was left with the undertaking proffered by TCPL. This was said to be because there was a risk that the funds over which Cordell Jigsaw claims to be entitled would be dissipated by TCPL, by being spent on legal fees and other business expenses. Cordell Jigsaw argued that, as TCPL and Giant Dwarf were otherwise impecunious and the undertaking would enable TCPL to use funds to which Cordell Jigsaw claimed to be entitled to pay TCPL's own legal and other expenses, an order for damages would be an ineffective remedy as there would be nothing left to satisfy its judgment and it would be left without any practical recourse. 13. Cordell Jigsaw relied on the decision of White J (as His Honour then was) in Luxcon Developments No 2 Pty Limited v Ratner [2014] NSWSC 861 (Luxcon Developments), in support of its claims for an injunction over a fund of money rather than a freezing order, and that an award of damages may not be an adequate remedy as Cordell Jigsaw's entitlement to its share of the PDV Offsets was likely to be dissipated. 14. In Luxcon Developments, White J considered an application by a joint venture partner (applicant) to have his share of profits from the sale of joint venture property paid into a solicitors trust account. His Honour found there was a serious question to be tried that the joint venture agreement contained a negative stipulation to the effect that the sale proceeds should not be dealt with until the final balance was to be distributed to the parties as their share of the profits: at [23]-[24]. His Honour noted there was evidence that, in breach of the negative stipulation, the other joint venture partner (Luxcon) had directed substantial payments to be made from the sale proceeds for purposes unrelated to the joint venture prior to any proper accounting for its own benefit, including to pay personal expenses and as funding for related developments: at [25], [27] and [29]. 15. White J also found there was a serious question to be tried that the applicant was entitled to invoke some restraint on Luxcon's dealing with that part of the sale proceeds to which the applicant was likely to be entitled prior to the taking of an account in circumstances where Luxcon had asserted a need to use the sale proceeds for other developments undertaken by related entries, it appeared likely that Luxcon would have to recover loans made to those entities of $1.5 million to meet the applicant's claim and there were doubts that the related entities had the capacity to repay the loans: at [30], [55] and [58]. His Honour was of the view that an interlocutory injunction should be granted restraining Luxcon from dealing with the net proceeds except to the extent of the applicant's claimed share, to await the outcome of the final account: at [59]. 16. TCPL and Giant Dwarf submitted that the position in this case is relevantly different to and can be distinguished from that considered by White J in Luxcon Developments. I agreed. 17. At the outset, I note that, unlike in this case, there was no dispute that the applicant in Luxcon Developments was entitled to some share of profits and the amount he asked the Court to set aside did not represent the total of his claim to a proportion of profits following a final account: at [14]. 18. More relevantly, the SSA does not contain a negative stipulation to the effect that TCPL is not to deal with its income in any way until the outcome of some final accounting or other step to be taken pursuant to the SSA. The SSA includes a contractual promise by TCPL to pay to Cordell Jigsaw 40% of TCPL's net income from the PDV Offsets after they have been received, expenses had been taken into account and a tax invoice rendered by Cordell Jigsaw: cl 4.2 of the SSA. 19. In my view, cl 4.2 of the SSA does not carry with it some implied negative stipulation that TCPL is not entitled to use income derived from its business, including PDV Offsets, for purposes related to its ongoing business prior to payment of a proportion to Cordell Jigsaw such that there is a serious question to be tried that Cordell Jigsaw is entitled to invoke some restraint on TCPL dealing with any part of the 40% of the PDV Offsets claimed by Cordell Jigsaw pending final determination in this case. Further, if, as Cordell Jigsaw alleges, TCPL has breached cl 4.2 of the SSA, Cordell Jigsaw's loss would seemingly be compensable by a quantifiable award of damages. 20. TCPL is not currently producing The Checkout, does not have another television show in production and is making less revenue and profits than it did previously. But there is evidence that it continues to receive income from the exploitation of series one to six of The Checkout and is creating content and seeking to secure funding for that program. In that sense, unlike in Luxcon Developments, TCPL's business is continuing. 21. There is also no evidence that TCPL had used, or intends to use, the PDV Offsets over which Cordell Jigsaw makes a claim for "non-TCPL" purposes, such as to fund different projects undertaken by Giant Dwarf or to pay for Giant Dwarf's or Mr Morrow's unrelated expenses. The evidence is that TCPL intends to use the income available to it for the purpose of exploiting existing intellectual property relating to The Checkout and, in accordance with the proffered undertaking, will retain an amount of cash the subject of the dispute and only use it (if needed) in the ordinary and proper course of TCPL's ongoing business. 22. In my view, the position in this case also differed to that in Luxcon Developments as to the risk of Cordell Jigsaw being unable to recover the amount to which it claims to be entitled from the 2016 and 2017 PDV Offsets if it obtains judgment. 23. I accepted that TCPL's 2019 profit and loss statement and other evidence in response to Cordell Jigsaw's security for costs motion raised doubts as to their financial capacity earlier this year. But since then, TCPL has received approximately $680,000 by way of the 2016 and 2017 PDV Offsets and, based on Mr Fraser's estimate, may be entitled to recover an additional amount of just over $400,000 in relation to series one and two of The Checkout. Accepting that there is a serious question to be tried that Cordell Jigsaw is entitled to 40% of those amounts, it seemed reasonable to infer that the financial position of TCPL and/or Giant Dwarf had improved since the beginning of this year, and will continue to improve from the receipt of further PDV Offsets, such that they could no longer be described as impecunious. 24. I was unpersuaded by Cordell Jigsaw's submission that the financial circumstances of TCPL and Giant Dwarf might incline the Court to the view that damages may not be an adequate remedy in this case. As TCPL and Giant Dwarf's counsel submitted, the availability of the other funds indicated that the risk of dissipation of the "cash" amount referred to in the undertaking (or a significant part of that amount) falls away or is greatly reduced. In my view, this significantly lessened the risk of prejudice that Cordell Jigsaw claimed might arise if the injunction were not granted. 25. Cordell Jigsaw referred me to GE Capital Asset Services & Trading Asia Pacific Pty Ltd v Rocks Excavations & Plant Hire Pty Ltd [2003] NSWSC 99 (GE Capital Asset Services) at [61]-[62] and Schering Pty Ltd v Forrest Pharmaceutical Co Pty Ltd [1982] 1 NSWLR 286 (Schering) at 290 in support of a submission that an interlocutory injunction may be granted on the basis that damages would be an inadequate remedy because TCPL and Giant Dwarf might be unable to satisfy an eventual award of damages. GE Capital Asset Services and Schering are cases where final injunctive relief was considered appropriate or granted (to hand over building plant and equipment in GE Capital Asset Services, and to restrain a breach of a franchise agreement in Schering), rather than interlocutory injunctions to restrain the disposition of a fund of money pending a final hearing. In each case, the Court had to determine whether the final injunctive relief should be declined because damages would be a sufficient remedy. In doing so, the Court took into account the financial position of the parties from whom the relief was sought. 26. In this case, the final relief sought by Cordell Jigsaw, in respect of which the interlocutory relief is claimed to be in aid, is the payment of money or damages rather than some other form of injunctive relief. As a matter of principle, it seemed to me to follow that damages should be an adequate remedy for the wrongs in relation to which the final relief is sought and there was, therefore, arguably no need for equity to intervene at this stage. 27. TCPL and Giant Dwarf also submitted that the relief sought by Cordell Jigsaw, in reality, amounted to a freezing order. In my view, there was some merit to that submission given the order seeks to restrain TCPL and Giant Dwarf from dealing with cash assets in an amount to which Cordell Jigsaw claims to be entitled until further order. It seemed to me that granting such an order would have an effect akin to creating security for Cordell Jigsaw's judgment in circumstances where there was no evidence that TCPL was disposing of its assets or dissipating them in a way that was said to be in order to defeat a prospective judgment: Frigo v Culhaci [1998] NSWCA 88 (Frigo v Culhaci) at 16. 28. As the Court of Appeal stated in Frigo v Culhaci at 10, cited with approval by Gaudron, McHugh, Gummow and Callinan JJ in Cardile v LED Builders Pty Limited (1999) 198 CLR 380; [1999] HCA 18 at 403-404: A [freezing order], if granted, imposes a severe restriction upon a defendant's right to deal with [their] assets. It is granted at the suit of a plaintiff whose status as a creditor is in dispute and need not be a secured creditor. Its purpose is to preserve the status quo, not to change it in favour of the plaintiff. The function of the order is not to "provide a plaintiff with security in advance for a judgment that he hopes to obtain and that he fears might not be satisfied; nor is it to improve the position of the plaintiff in the event of the defendant's insolvency" (Abella v Anderson [1987] 12 Qd R 1 and 2-3 per McPherson J). 1. In my view, the risk of doing injustice to Cordell Jigsaw by not granting the injunction was also ameliorated by the terms of the undertaking proffered by TCPL. The undertaking is, in substance, on more generous terms to the orders initially sought by Cordell Jigsaw in its motion filed on 9 March 2020 as the undertaking extends to future PDV Offsets and limits the use of cash (if needed) to dealings and dispositions in the ordinary and proper course of TCPL's business, including paying business expenses, to those incurred in relation to "The Checkout" and to the intellectual property of TCPL, rather than all of TCPL's business activities and projects, such as those it might be undertaking with Giant Dwarf. 2. The carve-out for the payment of reasonable legal fees is also limited to TCPL's fees. It seemed reasonable to expect that TCPL would not be bearing the bulk of the legal expenses in this case given Giant Dwarf is a co-plaintiff and most of Cordell Jigsaw's cross-claims are advanced against Mr Morrow personally and Giant Dwarf. 3. Having considered all the factors, the conclusion I came to was that, while finely balanced, justice was best served by not granting the injunction notwithstanding that Cordell Jigsaw had established there was a serious question to be tried that it was entitled to payment of 40% of TCPL's net income for the 2016 and 2017 financial years from the 2016 and 2017 PDV Offsets. This was primarily for the reason that I considered the status quo was best preserved by the regime provided for by TCPL's undertaking rather than making an order that might interfere with its continuing business. I was also not satisfied that the evidence demonstrated that the undertaking regime would result in Cordell Jigsaw's interests being insufficiently protected such that damages were likely to be an inadequate remedy in this case. 4. At the hearing, I indicated that some form of notification process would be appropriate to enable Cordell Jigsaw to have visibility of the position in respect of future PDV Offsets. The parties subsequently agreed to a regime which has been incorporated into TCPL's undertaking, as noted by the Court and set out below. 5. According to the regime, Cordell Jigsaw will be notified of TCPL's claims for and receipts in respect of future PDV Offsets and if TCPL's cash at hand reduces below the levels provided for by the undertaking. Cordell Jigsaw will also be provided with supporting documents and bank statements relating to any reduction in cash levels. To the extent that the documents received by Cordell Jigsaw raise doubts as to the probity with which TCPL has dealt with its cash assets or other matters arise which might indicate some significant detrimental change in TCPL or Giant Dwarf's position, it will, of course, be open to Cordell Jigsaw to exercise its right to apply to the Court for further relief. 6. At the hearing, there was also some debate about the expenses which should be taken into account in calculating the amount of cash referred to in the undertaking. Cordell Jigsaw did not dispute that the fees charged by Christopher Coote & Co Chartered Accountants for the PDV Audit should be taken into account, but disputed amounts charged by Giant Dwarf. I considered that amounts recorded in two invoices rendered to TCPL by Giant Dwarf for work undertaken in relation to the preparation of PDV Offset applications should be taken into account in calculating TCPL's net income for the purposes of the undertaking as they were, on their face, expenses incurred by TCPL relating to its business. Costs and orders 1. TCPL and Giant Dwarf sought their costs of the motion, which Cordell Jigsaw's counsel did not resist. Accordingly, I ordered Cordell Jigsaw to pay TCPL and Giant Dwarf's costs. 2. For these reasons, I made the following orders and notations: 1. Dismiss the defendant's further amended notice of motion filed in Court on 10 August 2020. 2. Defendant to pay the first and second plaintiffs' costs of the further amended notice of motion filed in Court on 10 August 2020. 3. Liberty to apply on 3 days' notice. The Court notes the following undertakings; 1. On the basis of the defendant, by its counsel, providing the usual undertaking as to damages, the first plaintiff undertakes that: 1. its cash at hand will not be reduced beyond the amount of $257,803.86 until the determination of the hearing of the question of liability in this matter, excluding dealings by the first plaintiff with the cash at hand available to it for the purposes of: 1. payment of reasonable business expenses of the first plaintiff; 2. payment of reasonable legal fees of the first plaintiff only; or 3. Subject to (ii) above, dealings and dispositions in the ordinary and proper course of the first plaintiff's business, including paying business expenses bona fide and properly incurred in relation to "The Checkout" and the intellectual property of the first plaintiff; 1. it will not reduce its cash at hand below $257,803.86 without first providing the defendant's solicitors 3 days' notice by email that a reduction permitted under paragraph (a) is about to occur and supporting documents in relation to that reduction; 2. it will directly or via its lawyers provide the defendant's solicitors with a copy of its bank statement for each of its operative accounts for any month in which its cash at hand is below $257,803.86. The first plaintiff or its representatives will provide the defendant's solicitors with the relevant statement within 7 business days of the end of that month; 3. it will directly or via its lawyers inform the defendant's solicitors by email within 7 days of each of the following events occurring: 1. the first plaintiff submitting an amended income tax return to the Australian Taxation Office (ATO) claiming a PDV rebate for either and each of series 1 or series 2 or further amended income tax returns for series 1 to 6 of The Checkout; and 2. receipt of the PDV Offset rebate for either and each of series 1 or series 2 or additional PDV Offset rebates for series 3 to 6 of The Checkout from the Australian Taxation Office, including provision of: 1. a statement of the amount of remaining funds held by the first plaintiff, inclusive of the PDV Offset rebate just received; and 2. a statement of the net income to the first plaintiff in relation to the applicable PDV Offset rebate and supporting documents detailing that calculation. If any of the above events has already occurred, such notification is to be given within 7 days of the giving of this undertaking; and 1. in the event that the first plaintiff receives any further PDV Offsets from the Australian Tax Office in regard to series 1 to 6 of "The Checkout", the above figure will be increased by 40% of the net income received by first plaintiff in regard to such PDV Offset; ********** Endnotes 1. This amount comprises Cordell Jigsaw's estimate of 40% of TCPL's net income (relating to the 2016 and 2017 PDV Offsets). 2. This amount comprises TCPL and Giant Dwarf's estimate of 40% of TCPL's net income (relating to the 2016 and 2017 PDV Offsets) to which Cordell Jigsaw would be entitled if the SSA remains on foot. The difference between this amount and that of Cordell Jigsaw relates to TCPL and Giant Dwarf's claimed expenses. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 September 2020