Idoport Pty Ltd & Ors v Efficiency Investment BV and Anor [2001] NSWSC 1197

New South Wales Supreme Court

CITATION : Idoport Pty Ltd & Ors v Efficiency Investment BV and Anor [2001] NSWSC 1197 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 5539/01 HEARING DATE(S) : 17-19 December 2001 JUDGMENT DATE : 24 December 2001

Idoport Pty Limited [First Plaintiff] Negubo Pty Limited [Second Plaintiff] PARTIES : John Malcolm Maconachie [Third Plaintiff] Mary Jennifer Maconachie [Fourth Plaintiff] Efficiency Investment BV [First Defendant] John Sheahan [Second Defendant] JUDGMENT OF : Palmer J

COUNSEL : R.G. Forster SC, N.L. Manousaridis [Plaintiffs] M.L.D. Einfeld QC, V.F. Kerr [Defendants] SOLICITORS : Withnell Hetherington [Plaintiffs] Piper Alderman [Defendants] CATCHWORDS : CONTRACT - CONSTRUCTION - Whether the Defendants have validly terminated their obligations to continue funding the Idoport Proceedings. DECISION : The Defendants' obligation to continue funding has been validly terminated.

Introduction

1 The issue in these proceedings is whether and to what extent the Plaintiffs can continue to require the First Defendant ("Efficiency") to continue funding current litigation between the First Plaintiff (`Idoport") and an associated company, Market Holdings Pty Ltd ("Market") on the one hand, and the National Australian Bank and other parties on the other hand. I will for convenience refer to those proceedings as "the Idoport Proceedings". 2 The Idoport Proceedings have been continuing before Einstein J in this Court for more than a year. As at September 2001 Efficiency had paid a total of $7.5M into a bank account, called the "Idoport Account", for the purpose of funding the litigation. Payments out of the account could be made only with the authority of a representative of the Plaintiffs and a representative of Efficiency. The Second Defendant, Mr Sheahan, is an authorised representative for that purpose and is a party to some of the agreements the subject of this dispute. He has taken no active part in the proceedings. 3 By mid-September this year $6,791,500 had been paid out of the Idoport Account for costs and expenses incurred in the Idoport Proceedings, leaving the balance in the account of some $867,000. On 13 September Einstein J delivered a judgment indicating that he would order the Plaintiffs to provide security for the continuing costs of the Defendants in the Idoport Proceedings. The amount of the security was unspecified but it was obvious that, when calculated, it would be substantial. 4 Efficiency decided to cap its liability to continue funding the Idoport Proceedings by invoking provisions of one of the funding agreements which, it says, enabled it to convert loans already made to the Second Plaintiff ("Negubo") into share capital in Negubo, and thereafter entitled it to bring to an end the Plaintiffs' right to call for further funds under the loan arrangements. On 15 and 16 September 2001 Efficiency gave notices to the Plaintiffs under one of the agreements which, it contends, brought about that result. 5 The Plaintiffs dispute that Efficiency has validly brought to an end its obligations to continue funding the Idoport Proceedings. On 16 November 2001 it filed a Summons seeking orders that the balance of $867,000 in the Idoport Account be paid out to it and an order that Efficiency pay a further $1M to it pursuant to what the Plaintiffs say is a valid demand made on 25 October 2001 in accordance with the funding agreements. 6 By its Defence and Cross Claim filed on 30 November 2001 Efficiency claims that its obligation to continue funding has been brought to an end. It claims an order that Negubo issue to it one fully paid share and one share partly paid to $7,007,605 pursuant to what it claims has been the valid exercise of its right to convert loans made to Negubo into share capital. Efficiency also seeks a declaration that it is not liable to make any further payments towards the costs of the Idoport Proceedings. Alternatively, it seeks rectification of the funding agreements with the Plaintiffs. Finally, it seeks an order that the balance of the funds in the Idoport Account be paid out to it. 7 Because the Idoport Proceedings have been adjourned to 29 January 2002 to await the outcome of these proceedings, these proceedings have been heard as a matter of extreme urgency during the Court vacation. 8 One of the issues raised by the Plaintiffs was whether signatures on certain documents of Efficiency were forgeries. On 14 December it became obvious that the parties would not be able to obtain sufficient expert evidence to deal with that issue properly by 17 December, the date fixed for commencement of the trial. It seemed to me that determination of all issues other than the issue of whether the disputed signatures were forgeries could and should proceed on 17 December, since resolution of those issues in a certain way would make it unnecessary to determine the issue of forgery. 9 Accordingly, on 14 December I ordered pursuant to SCR Pt 31 r2 that the issue of whether the disputed signatures were forgeries be tried separately from, and after, all other issues in the proceedings. 10 The trial commenced on 17 December and continued until late on 19 December. The case was argued with admirable thoroughness and ability by Messrs Forster SC and Manousaridis for the Plaintiffs and by Messrs Einfeld QC and Kerr for the Defendants, and they raised a great number of points. I trust I do no disrespect to their arguments if, due to the urgent need for need for a decision, I concentrate on those issues which seem to me to be decisive of the case.