New South Wales Supreme Court CITATION : Saxby Bridge Mortgages Pty Ltd v Saxby Bridge Pty Ltd [1999] NSWSC 251 CURRENT JURISDICTION : Equity FILE NUMBER(S) : 1618/99 HEARING DATE(S) : 16, 19 & 22 March 1999 JUDGMENT DATE : 22 March 1999 PARTIES : Saxby Bridge Mortgages Pty Limited (P) Saxby Bridge Pty Limited (D) JUDGMENT OF : Hamilton J COUNSEL : R J Webb (P) A G Hartnell, Solicitor (D) SOLICITORS : Webster O'Halloran & Associates (P) Atanaskovic Hartnell (D) CATCHWORDS : EQUITY [36] - General principles - Fiduciary obligations - Particular cases - Joint venturers - Common interest in "trail commissions" from mortgage transactions. CASES CITED : United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 DECISION : Interlocutory injunctions granted. KLV:CAT 2 ~22/03/99 5 THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J MONDAY, 22 MARCH 1999 1618/99 SAXBY BRIDGE MORTGAGES PTY LIMITED v SAXBY BRIDGE PTY LIMITED JUDGMENT HIS HONOUR: 1 In this matter the defendant is a provider, largely to retail clients, of a variety of financial services. One of the services is the provision of mortgage finance. In late 1994 and early 1995, Dr Braysich, principal of the defendant, had discussions with Mr Kingston, who became the principal of the plaintiff about the creation of an entity to be the principal vehicle for the provision of mortgage finance to the defendant's clients. The plaintiff was created as that entity at that time. Thereafter, until earlier this year, it performed that role, although it seems on the evidence that it was not the sole provider of mortgage finance to clients of the defendant. The plaintiff operated in part of the premises leased by the defendant, which part is sublet to the plaintiff. 2 In 1999 the relationship between the plaintiff and the defendant broke down and, indeed, has now been effectively severed. There is an exception to this. Part of the arrangement in respect of mortgages was that, after mortgages were entered into, there were continuing "trail commissions" payable in respect of mortgages which were shared during the lifetime of the mortgages between the plaintiff and the defendant. In addition to a large number of mortgages in this category which still exist, there are a number of instances in which the provision of mortgage finance in the future by the plaintiff to clients of the defendant has been negotiated but the transactions have not yet been settled. Some of these settlements may be some time into the future because the arrangements are in respect of units which have been sold "off the plan", so that the drawdown of the borrowings is still some time hence. 3 As a result of the parting of the ways between the plaintiff and the defendant, the plaintiff seeks injunctive relief in two areas. 4 The first is that the plaintiff claims that the defendant is threatening to persuade clients to refinance existing mortgages with other mortgage providers or, in the case of mortgages not yet settled, to cancel the arrangement and take their finance from other mortgage providers. These threats, if carried out, would deprive the plaintiff of its ongoing "trail commissions". Now that the relationship between the plaintiff and the defendant has been severed, the plaintiff, a large part of whose business was through the defendant, will need to find alternative clients to whom to provide mortgages. A wholesale cutting off of the "trail commissions" to which it is at present entitled could, if the downturn in income was sufficiently large and sudden, threaten the existence of the plaintiff's business. The way in which the plaintiff has sought to demonstrate that it has an arguable case for relief in respect of this first matter is based alternatively in contract and upon an alleged fiduciary relationship. As far as contract is concerned, I am not convinced that the plaintiff has a case sufficiently arguable to found relief. The contract was not in writing and its terms are not certainly established. It may be that if there is further evidence of conversations and a course of conduct, a case in contract may be made out, but that is not so at present. In relation to the arguable case sought to be put forward of a fiduciary relationship, Mr Hartnell, solicitor for the defendant, has pressed upon me that the relationship is a purely commercial relationship; that the courts are cautious in finding fiduciary relationships in such circumstances; and that there is nothing to indicate a fiduciary relationship in the present circumstances. Mr Webb, of counsel for the plaintiff, has urged upon me that there is a fiduciary relationship between the parties that arises at least in one area, and that is the area that the parties have an ongoing commercial interest in the income stream by way of commission from a body of existing mortgages and already approved future transactions. Whilst not at any time losing sight of the caution necessary before finding a fiduciary relationship in purely commercial areas to which Mr Hartnell has correctly adverted, it seems to me, also reminding myself of the principles laid down in the well known passage in the majority judgment in the High Court in United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 at 10-11, that there is an arguable case that there is a fiduciary relationship between the plaintiff and the defendant in relation to this income stream and that the fiduciary obligation in relation to that income stream may be breached if the defendant were to seek to divert that stream from the plaintiff. 5 Even so, there are further problems which the plaintiff has in relation to the granting of injunctive relief. The first is that the evidence of threat to base the granting of a quia timet injunction is slight. Parts of two of the affidavits tendered deposed to threats by unnamed continuing employees of the defendant. They are paragraph 6 of the affidavit of J B Kingston sworn 9 March 1999 and paragraph 8 of the affidavit of M L Stephens sworn 11 March 1999. I reserved my decision on the admissability of those two paragraphs in view of the lack of identification of the source of the information. I now reject those paragraphs. However, there is other evidence of threats in conversations to divert from the plaintiff the income stream both from existing mortgages and from the approved but unsettled transactions. Those conversations, it should be said at once, are denied by the participants in them on the defendant's behalf. Nonetheless, bearing in mind what I say about the balance of convenience, in my view sufficient evidence of threat exists to found the granting of injunctive relief. 6 Another objection taken to the granting of injunctive relief is that it is said that there is evidence of a breach of undertaking as to non contact by the plaintiff with the defendant's consultants. That undertaking, while recorded in short minutes of order made by the Court, was not an undertaking to the Court, but an undertaking entered into inter partes. Mr Webb has told me that evidence answering this allegation would be filed, but has not been filed because of the late receipt of the affidavits making the allegation. However, I do not think it is necessary to investigate this matter, by reason of the fact that it does not go to the heart of the subject matter in respect of which injunctive relief is sought. Bearing in mind the above matters, I do not think that injunctive relief should be refused by reference to that alleged breach. 7 Another matter that Mr Hartnell has put in objection to the injunction is that his client or its agents are themselves under a fiduciary duty to their clients, so that if, for example, they become aware of more advantageous mortgage finance available in the market, they would be obliged to inform their clients, so as to permit them to take advantage of the more beneficial finance. However, I think it is fair to say that he concedes that that problem is more token than actual at the moment. He also points to difficulties that may arise if an existing client, with a mortgage provided through the plaintiff, wishes to refinance to obtain more extensive finance; should or should not the defendant in those circumstances be precluded from recommending another finance provider? Again, that is a problem that I think can easily be attended to by the form of the order. 8 Turning to the balance of convenience, and bearing in mind what has been said in relation to the last two objections taken by Mr Hartnell, it seems to me that the defendant need in the short term suffer no harm from an appropriately drawn injunction, whereas, as I have already indicated, the wholesale withdrawal of clients from mortgages provided or to be provided by the plaintiff could have serious consequences for it. In those circumstances I propose to grant appropriately framed injunctive relief in respect of the first area. In further discussion with counsel for the parties, I have explored the appropriate form of that relief. 9 The other aspect of the matter in respect of which injunctive relief is sought is the defendant's desire to eject the plaintiff from its sublet premises. It has given a notice to quit expiring at the end of March. The plaintiff sought to make out a case, as part of the contractual arm of its submissions, that the contract it propounded was indefinite in duration; that it had not been validly terminated; that it was a term of the subletting between the plaintiff and the defendant that the sublease should have a similar indefinite duration; and that the purported termination of the sublease was not valid. I have already indicated that I do not think that an arguable case has been made out on of the basis of contract, and this is no more so in the case of the subletting aspect of the case than of the general aspect. It seems to me plain, on the evidence available, that the tenancy arrangement between the plaintiff and the defendant was a subletting from month to month. However, there is an additional matter which is relevant. On 28 June 1998 the plaintiff tendered, and the defendant accepted, 12 months rent, for the period expiring on 30 June 1999. The plaintiff says that it is to be inferred from that payment that there was an agreement that the sublease would not be terminated before 30 June 1999. However, if the payment of the advance rent was a genuine one - there are obviously other consequences if it was not, and I have no reason to think it was not a genuine transaction - then I think there is an arguable case that there was an agreement that the sublease would not be terminated before 30 June 1999. It seems to me that the consequences to the plaintiff of ejectment are greater than the disadvantage to the defendant of the plaintiff remaining in possession for the moment, and I propose to grant injunctive relief in this regard also. It should be noted that the defendant's head lease terminates on 31 March 1999, a fact which, it is not denied, has at all times been known to the plaintiff. There are currently negotiations between the defendant and its lessor as to continuation in the premises by the defendant after 31 March. Those negotiations are not yet concluded, so that Mr Hartnell is unable to inform the Court whether or not the defendant is in fact continuing in the premises after 31 March, and for how long. The relief will need to be framed so that the defendant can seek to procure the plaintiff's ejectment from the premises if in fact the defendant ceases to occupy them before 30 June, 1999. 10 I note that the plaintiff informs the Court that it would not regard the cutting off of its telephone services as a breach of the injunction relating to quiet enjoyment, whatever other rights that act might give rise to. 11 As to the draft minutes of order before the Court, I note the undertaking of the plaintiff given by its counsel to the Court. Order 4 now reads, "Note the undertaking of the plaintiff given by its counsel to the Court that until further order it will not enter the defendant's premises by its servants or agents except to have access to its subleased premises. I shall maintain liberty to apply or restore for directions since both might be necessary. Order 9 is the same. I make orders in accordance with short minutes of order initialled by me and placed with the papers. …oOo… Last Modified: 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.