CLIFT v WINDRUM SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MAHONEY, CLARKE and MEAGHER JJA 20 August 1991, 2 September 1991 [1991] NSWCA 54 APPEAL from Equity Division — Injunctions — Interlocutory orders — Claim for compensation for damage suffered by third party as the result of an interlocutory injunction — Power of court to refuse application for compensation because of conduct of applicant — Considerations to be taken into account. LEAVE TO APPEAL — Grant of leave nunc pro tunc. Mahoney JA The plaintiffs Messrs George, Ronald and Peter Clift sought an enquiry as to the damages suffered by them as the result of an interlocutory injunction granted in proceedings between Dr Graham Melrose Windrum and Rejilo Pty Limited. Their application was refused. They have appealed to this Court against that refusal. The plaintiffs were not parties to the proceeding between Dr Windrum and Rejilo. Their claim was that they fell within the words "any person... affected by the operation of the interlocutory order or undertaking..." within the undertaking given in the proceeding by Dr Windrum. It was accepted that this was so. In any application for compensation under such an undertaking, it may be convenient for the court to deal with the claim in two stages: first, to consider whether an entitlement to compensation has been shown; and, second, to provide for the assessment of the appropriate compensation to be paid. The present was, I think, such a case. The learned judge did not proceed to the assessment stage: he refused to order a reference of the application to the Master for that purpose. The matter to be determined on this appeal is primarily whether the learned judge was right in so doing. The learned judge's decision was, in one sense, discretionary. It was necessary for him, having determined the facts in dispute, to weigh the considerations to be taken into account when determining whether the plaintiffs had an entitlement to compensation. Mr Graham QC, for the defendant Dr Windrum, submitted that, for the plaintiffs to succeed, they must show that the learned judge's discretion miscarried, within the principles established for this purpose: see Gronow v Gronow (1979) 144 CLR 513; Norbis v Norbis (1986) 161 CLR 513. Mr Rayment QC, for the plaintiffs, submitted that his Honour had erred in that he had misunderstood the principles involved and that he had acted upon wrong findings of fact. In order to consider the submissions made for the plaintiffs, upon this basis and upon other bases advanced in the appeal, it is necessary to refer to the circumstances of the undertaking and the application. The learned judge dealt with this by reference, in part, to the judgment of Hodgson J in the original proceeding. It is not necessary for present purposes to state all of the relevant facts: I shall state summarily the facts directly relevant to the submissions which have been made. 2 UNREPORTED JUDGMENTS The plaintiffs, as a partnership, had for many years carried on businesses in the grazing and pastoral area. They formed the company Rejilo Pty Ltd as the "vehicle" to buy the grazing property here in question, "Kiaka" near Dungog. The plaintiffs were, at all times here relevant, the only directors of that company. On 25 September 1987, the company contracted to sell the property to DR and JA Holdings Pty Limited and, by an associated agreement, the plaintiffs entered into arrangements with that company in respect of livestock on the property. On and before 25 September 1987 Rejilo Pty Ltd had been in negotiation with Dr Windrum to sell the land to him. A draft contract had been prepared which, in its terms, referred to livestock of particular kinds. Dr Windrum claimed that the company had made a binding contract to sell the land to him. The company denied this and proposed to complete its contract with DK and JA Holdings Pty Limited. On 30 September 1987 Dr Windrum commenced proceedings against the company for specific performance of the contract he alleged. He sought an interlocutory injunction against the company to restrain it completing the contract it had propounded and on 2 October 1987, upon the basis of a conventional undertaking as to damages, an interlocutory injunction was given. That or consequential restraints continued during the course of the proceeding. On 29 July 1988 Hodgson J held that no contract had been made with Dr Windrum and dismissed his proceeding against the company. On 18 August 1988, at the request of the company, his Honour directed an inquiry by a Master as to the damages suffered by the company by reason of the interlocutory relief which had been given. Appeal proceedings by Dr Windrum to this Court and to the High Court of Australia were unsuccessful: on 14 October 1988, Dr Windrum's application for special leave to appeal to the High Court of Australia was dismissed. The proceedings before the Master in respect of Dr Windrum's undertaking as to damages resulted, on 31 October 1989, in judgment being entered by consent for the company for $32,000. On the same day, the plaintiffs, by motion in the proceeding moved for orders that they be made defendants in the proceeding and that the court direct an inquiry by a Master as to the damages suffered by them as the result of such interlocutory restraints. On 3 April 1991 Needham J refused such orders and dismissed the motion. The plaintiffs' appeal against the order of Needham J was brought to this Court without leave. On the hearing of the appeal the question arose as to whether leave to appeal was necessary: see Supreme Court Act 1970, s101(2). Leave to appeal is necessary where the order appealed from is an interlocutory order or a judge of the court: s101(2)(c). It is not necessary for present purposes to examine the nature of an interlocutory order for this purposes. It is sufficient to say that, in accordance with the principles now established by the High Court of Australia, an order is interlocutory if it does not "finally determine the rights of parties": see Carr v Finance Corporation of Australia Ltd (No 1) (1981) 147 CLR 246 at 248. This principle leaves for determination what, in the particular case, are "the rights of the parties". It was the contention of Mr Rayment QC, for the plaintiffs, that the plaintiffs were not parties to the original proceeding, that their dispute with Dr Windrum was the separate and distinct dispute as to compensation to which I have referred, and that that their rights in respect of that matter were finally determined against them by his Honour's dismissal of their motion. URJ CLIFT v WINDRUM (Mahoney JA) 3 It is not necessary for present purposes that this Court form a concluded view upon these submissions. It has been the long standing practice of this Court, where there is doubt whether leave to appeal is necessary in such a context and where the court is of the view that, if leave be necessary, it should be granted, for the court to order that, if and insofar as leave be necessary, it be granted. In the present case, it is proper that the court order that, nunc pro tunc, leave to appeal be granted and that the appeal proceed accordingly. The argument on the appeal has proceeded on the basis that the undertaking for damages given by Dr Windrum was generally in the form of "the usual undertaking", with appropriate amendments to meet the instant case: see Pt28 17(2), where the form of "the usual undertaking as to damages" is set forth. The undertaking was extended from time to time. Nothing has been urged to turn upon the precise form of the undertaking and the appeal may be dealt with on that basis. Needham J refused to order the inquiry for damages sought essentially for two inter-related reasons: because of the delay by the plaintiffs in seeking compensation; and because of the circumstances of the judgment given for damages in favour of Rejilo Pty Ltd. These two matters are, as the learned judge's judgment indicated, inter-related but it will be convenient to deal with them, at least initially, separately. 1. Delay: The principles upon which entitlement to and assessment of compensation pursuant to such an undertaking are to be determined have been considered in detail by the High Court of Australia in Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd 146 CLR 249. The members of the court there referred to the established decisions in this regard: see, eg, Smith v Day (1882) 21 ChD 421; Griffith v Blake (1884) 27 ChD 474 and Victorian Onion and Potato Growers' Association v Finnigan (1922) VLR 819. The views of their Honours in relation to these matters were not, I think, in all respects congruent but, except to the extent to which I shall refer, it is not necessary for present purposes to detail and compare them. It has not been in contest but that delay in bringing an application for damages consequent upon such an undertaking is a matter relevant to be taken into account in determining a party's entitlement. The objection that was made for the plaintiffs was that his Honour erred in the manner in which he took that factor into account. It was submitted that - I put the matter generally - he took into account delay as such rather than "all the circumstances of the case". Mr Rayment QC submitted that the reference Cussen J to "all the circumstances of the case" in Victorian Onion and Potato Growers' Association v Finnigan should be taken as establishing the relevant principle. I do not think that the learned judge erred in what he did in this regard. His Honour said: "The question is whether, in the circumstances of this case, an order should be made directing an enquiry as to the damages suffered by the applicants by virtue of the delays caused by the interlocutory orders." Having referred to some of the authorities, his Honour said: "The two principles which have emerged from the cases tending against the right to claim damages in these circumstances are: (a) delay, (2) the existence of 'special circumstances': Graham v Campbell 7 ChD 490 at 494, or lack of fairness and reasonableness (Aickin J) or conduct of the defendant making it inequitable for such an order to be made (Gibbs J). 4 UNREPORTED JUDGMENTS The plaintiff relies on both of these principles. The notice of motion was filed just over a year after Hodgson J's judgment, and that delay is unexplained." (The reference to Aickin J and to Gibbs J was a reference to what had been said by them in the Air Express case). The plaintiffs submitted that his Honour's conclusion that the delay was "unexplained" was wrong. Reference was made to the events which took place and the way in which the claim by Rejilo Pty Ltd had been processed. These facts, the suggestion was, explained what had happened. But, in my opinion, what the learned judge meant was that there was no acceptable explanation as to why, if the plaintiffs were to make a claim, their claim was not made at or about the time of the company's claim. It may be suggested that the plaintiffs' claim was not brought earlier because of error or for some other reason. But the learned judge, in my opinion correctly, concluded that in the circumstances no satisfactory explanation was offered to the court for leaving the plaintiffs' claim until the point at which the company's claim had been determined. Properly understood, I do not think that what the learned judge did in this respect was wrong. 2. The judgment for Rejilo Pty Ltd: Needham J, in what he did in taking into account the judgment obtained by the company and the circumstances of it, took the view that there was, to an extent, a discretion in the court as to whether an undertaking should be enforced and he saw this matter as relevant in that regard. He saw the delay as being one of the "other factors" showing "that the grant of the order sought would be unreasonable, unfair or inequitable". His Honour said: "The applicants, as I have set out, are directors of the first defendant, and must be taken to be fully aware of the facts of the case. Throughout the preparation of the first defendant's case for damages, the applicants were parties to the first defendant's claim for damages suffered by it and by them. Whenever the first defendant's claims were particularised, they included claims for damages which were clearly damages suffered by the applicants. On more than one occasion, the plaintiff's solicitors drew attention to this fact, which then became quite apparent to the applicants, if they had been ignorant of it. On one occasion they responded by saying that it had been intended that the first defendant would buy the cattle from the applicants to meet its obligations under the proposed contract. The combined claim was continued to be pressed right up to 18 October 1989. The plaintiff made an offer to compromise this claim. He could not have been contemplating making an offer to settle any claim other than that which was being pursued by the first defendant. This fact must have been known to the applicants. After the offer had been made and received by the first defendant, and after discussions between counsel had raised the question, once more, of the respective entitlements of the first defendant and the applicants, counsel for the first defendant told counsel for the plaintiff that he, the latter, 'may well be right' and that 'what we probably propose to do is get an adjournment and to apply to Hodgson J for an order that an inquiry be had as to the damage suffered by the Clifts'. No such application was made on 19 October, but the first defendant, on the morning of the hearing, served notice of acceptance of the offer and the notice of motion. The offer could not have been withdrawn by the plaintiff for 28 days, URJ CLIFT v WINDRUM (Mahoney JA) 5 unless the court ordered otherwise. The obligation of the first defendant, in my opinion, if it wanted to separate the claims of itself and the applicants, was to reject the offer, not to accept it. At the hearing of the motion, the applicants sought to revert to the position which prevailed before the first defendant accepted the offer. They offered to consent to the judgment being set aside as a condition of being allowed to make their claim. It was said that the plaintiff would suffer no prejudice, as any order in favour of the applicants for interest could be tailored to meet the altered circumstances. What is being proposed, in effect, is that both the first defendant and the applicants should be permitted to claim damages against the plaintiff. The plaintiff would be put to further expense and delay in defending both claims. I do not think it is fair, reasonable or equitable to allow the applicants what is really a second attempt, they having belatedly realised that their first attempt was based on a false premise. As I have said, there is no explanation for the initial delay and that factor must also be taken into account. In my opinion, the motion should be dismissed with costs." In the Air Express case, Gibbs J: at 311-2; said: "The insistence upon the giving of an undertaking is a very important, if not an essential, means of preventing injustice from being done by the court when it makes an order at an interlocutory stage, before the rights of the parties have been finally determined. The court has a discretion not to enforce such an undertaking, but unless the defendant has been guilty of conduct that would render it inequitable to enforce the undertaking it would seem just, speaking generally, that a plaintiff who has failed on the merits should recompense the defendant for the damage that he has suffered as the result of the making of the interlocutory order." Stephen J: at 319: said: "Damages awarded under such an undertaking are, therefore, of a rather different nature from those awarded at common law. This special character appears from the fact that their source lies in the plaintiff's own voluntary undertaking, given as the price of obtaining an injunction. It may also be seen in the words of the common form of the undertaking, that they must not only be sustained by reason of the grant of an injunction but the court must form the opinion that the plaintiff 'ought to pay' them. It was in the context of such an undertaking that, in Finnigan's case, Cussen J said (32): 'I think the terms of the undertaking are themselves of importance. It provides that there may be an order as to damages if the court shall be of opinion that the defendant has sustained any. I think the word 'damages' in that undertaking is to be given a very general meaning, and is not necessarily to be given the same meaning as the word 'damages' when used in connection with breaches of contracts. 'Damages' in this case seems to me to mean real harm, rather than to have any strictly defined meaning.'" Mason J, in a dissenting judgment: at 323; said: "There are statements which indicate that the court has a discretion to decide whether it shall order an inquiry for damages for breach of an undertaking given to the court: see Smith v Day (1882) 21 ChD 421 at 425, 427. But the discretion is to be exercised according to well settled principle. Generally speaking, so long as the claim for damages is not trivial or trifling an inquiry should be directed and the defendant will be entitled to recover the loss which is the natural consequence of the grant of the injunction. The Supreme Court of Canada has held that the 6 UNREPORTED JUDGMENTS court will be entitled to refuse a reference as to damages where there are special circumstances, ie, when the plaintiff is a public body and acts in the public interest to hold the situation until the rights are determined or when the defendant, having succeeded on technical grounds, has been guilty of misconduct: Vieweaer Construction Co Ltd v Rush and Tompkin's Construction Ltd (1964) 48 DLR (2d) 509 at 519. It has not been suggested that there are any special circumstances in the present case." Needham J, in my opinion correctly, addressed himself to the question whether what happened in respect of the judgment for Rejilo Pty Ltd and the context of the claim generally warranted the discretionary refusal of the plaintiffs' claim that there should be an assessment of their damages. The question therefore to be determined is whether his Honour rightly determined the nature of what had happened and whether there were in what had happened circumstances justifying such a refusal. The circumstances in which the company's claim was made, pursued and compromised are not uncomplicated. I shall refer to an outline of them sufficient to indicate the matters to which, in this regard, the learned judge had reference. On 18 August 1988 Hodgson J referred to a Master the claim made by the company. As far as appears, relevant correspondence in relation to the claim between the solicitors commenced on 15 December 1988 and, on 15 March 1989, the company's claim was particularised. The particulars showed that, in general terms, the claim was based upon two things: the loss of the use of the moneys that would have been received as the price of the land and the cattle, and the expenses incurred in the running of the property pending the determination of Dr Windrum's claim for specific performance. The total amount then claimed was $282,269.25. Correspondence then ensued in which, inter alia, Dr Windrum's solicitors raised questions as to whether particular sums which were itemised could be claimed and the basis of the claim for them; reference was also made to whether the company owned cattle in respect of which a claim was being made and to other matters going to the company's entitlement. A number of documents were produced to substantiate the company's claim. The hearing of the claim before the Master was fixed for a date in October 1989. It appears to be agreed that on 17 October 1989, Mr Graham QC spoke to Mr Officer QC, then senior counsel for the company, and the following conversation took place: "MR GRAHAM: I assume your application is intended to cover all damages suffered by your client as a result of my fellow's undertakings. The order for inquiry as to damages made by Hodgson J only relates to the period up to 18 August 1988. It will be necessary to obtain an order from the court tomorrow extending the inquiry up to the date the High Court refused the leave application. Do you agree with that? MR OFFICER: Yes, we want to cover all damages - I agree that we should have a consent order extending the inquiry but it would have to go a bit beyond the leave application as although the injunction was only a restraint 'on completion' from 18 November 1987 the matter could not have been completed on the day the High Court refused leave to appeal. Rejilo's entitlement to damages must extend up to the date on which completion actually takes place." On 18 October 1989, Dr Windrum forwarded to the company a formal offer of compromise for $32,000. Later on the same day, at approximately 4.45 pm, final details of the claim made by the company were sent by the company's counsel URJ CLIFT v WINDRUM (Mahoney JA) 7 to Dr Windrum's counsel. These details showed a claim for "interest on" the sale price of the land and the "price of cattle" over particular periods, together with a claim for "Kiaka Station expenses". They totalled $271,086.03 plus "interest at Supreme Court rates from 21.11.88 to 19.10.89 at 15%... $37,274.33". The total was therefore $308,360.36. On 19 October 1989 at approximately 11 am, a formal acceptance of Dr Windrum's offer of compromise was delivered by the company. On the same day, the company filed a notice of motion seeking the relief now in question. On 19 October 1989 the company's claim was mentioned before Master Windeyer and orders were made in accordance with the acceptance of Dr Windrum's offer. The court then noted that "the aforesaid judgment is made upon the acceptance on 19 October 1989 of an offer of compromise made on 18 October 1989 pursuant to Pt22 of the Supreme Court Rules". It was in respect of these matters that Needham J made the observations to which I have referred. It was submitted for the company that it was open to Dr Windrum, on learning of the filing of the claim by Messrs Clift, to have applied to the court for an order under Pt22 that the acceptance of the compromise be not effective: the submission was that an offer could, in the circumstances of this case, have been deemed withdrawn notwithstanding that it had previously been accepted. And the company, before Needham J and before this Court, offered to set aside the agreement. It is not necessary for present purposes to pursue the question whether it would then have been open to Dr Windrum to have withdrawn from the agreement made with the company. Reference was made to, as it was suggested, the principle that the court has a particular control over agreements made by way of compromise of pending litigation: see Neale v Gordon Lennox (1902) AC 465 and Waitemata City Council v Mackenzie (1988) 2 NZLR 242. Counsel referred to the unreported judgment of Finlay J in TJ Lewis v Combell Constructions Pty Ltd, 29 November 1989. Evidence was given at the trial to suggest that, in making the agreement, those advising Dr Windrum had acted upon the basis that the amount to be paid to the company was the total of what was claimable under the undertaking, at least by the company and those associated with it. The learned judge held that such evidence was not admissible and no appeal has been pressed against his Honour's ruling. There was no evidence before this Court to indicate whether the amount of $32,000 agreed to be paid represented a calculation of what was, on strict analysis, claimable only by the company and did not include (or was not calculated by reference to) amounts claimed by the company but which might properly be claimed by the present plaintiffs. However, Mr Graham QC has suggested in argument that it is clear that the two claims (that of the company and that of the Messrs Clift) substantially overlapped. He suggested, for example, that the documentation produced to support the company's claim for the working expenses of the land while the interlocutory restraints were in force showed that the amounts claimed by the company in that regard were substantially identical with the amounts now claimed by the present plaintiffs. And he referred to the fact that, during the negotiations concerning the company's claim, reference was made to the fact that some of the amounts claimed were or might properly be damages suffered not by the company but by the present plaintiffs. 8 UNREPORTED JUDGMENTS It was not argued by Mr Graham QC that the compromise of the company's claim was a legal bar to the claim by the plaintiffs. It is proper to proceed on that basis. But, the submissions suggested, the fact that the plaintiffs' claim was made only when it was was a matter which could and should weigh heavily against the allowance of it. In this regard, the absence of any satisfactory explanation from the plaintiffs as to why their claim was not made earlier is, in my opinion, of significance. If it were established that what the plaintiffs did was to allow Dr Windrum to settle a claim which contained amounts proper to be claimed both by the company and the present plaintiffs, with the intent that subsequently a claim covering some at least of the items in question would be made by the plaintiffs, that would, in my opinion, be a proper ground to be taken into account in the refusal of the plaintiff's claim. So to hold is not, I think, contrary to the principles established or recognised in the Air Express case. Mason J described an injured party's right to claim compensation in terms less conditional than did Gibbs J or Stephen J. But I would respectfully not understand what Nason J said as holding that, if that party asked in a fashion unacceptable in Equity, he was yet entitled to require that his loss be assessed and paid. The undertaking is given to the court and it is given in the context of the grant of equitable relief. The court would have the power, in my opinion, to refuse to allow a party who has acted in an unacceptable manner to obtain one agreement to make a further claim whilst maintaining in force an agreement of the nature of the original agreement here in question. Nor, I think, would it allow such a party, when the circumstances of the first agreement were objected to, to set aside the first agreement so that it might then proceed with each claim separately. There was in this case no detailed examination of why the plaintiffs did not pursue their claim until after compromise of the company's claim. But as his Honour pointed out, they were directors of the company, and it is proper to infer that they knew of the company's claim and of the basis on which it was pursued. If they allowed that claim to be pursued deliberately, knowing that they would subsequently pursue a claim of their own, that in my opinion would be conduct justifying a refusal to allow them to pursue their own claim in addition. If they had done what they did by accident and because of a failure initially to appreciate they might separately have a claim, different considerations might arise. But, as his Honour indicated, no attempt was made by the plaintiffs to deal with that aspect of the matter. These matters were open in the proceedings before Needham J and, if the plaintiffs had had an acceptable explanation for what had occurred, it was to be expected that they would advance it. I do not mean by this that they were obliged in law to do so. But, in the absence of an explanation of the position, I do not think that his Honour was wrong in coming to the conclusion he did. It was not suggested before this Court that Dr Windrum, in accepting the agreement made by the plaintiffs' acceptance of his offer, acted improperly for the purpose of excluding a possible claim by the plaintiffs or otherwise. His conduct was, in the circumstances, not the subject of attack. In my opinion, therefore, the plaintiffs' appeal should be dismissed with costs. Clarke JA I agree with the judgment of Mahoney JA. Meagher JA I agree with Mahoney JA. Appeal dismissed with costs. URJ CLIFT v WINDRUM (Meagher JA) Counsel for the Appellant: BW RAYMENT QC/P BIGGINS Counsel for the Respondent: PR GRAHAM QC/R R I HARPER Solicitors for the Appellant: WALKER BEER and ASSOCIATES Solicitors for the Respondent: SLY and WEIGALL