New South Wales Supreme Court CITATION : Kama & Anor v Wong & Anor (No 1) [2005] NSWSC 427 HEARING DATE(S) : 18 April, 2005 JUDGMENT DATE : 18 April 2005 JURISDICTION : Equity Division JUDGMENT OF : Palmer J DECISION : Interlocutory injunction refused. CATCHWORDS : INTERLOCUTORY INJUNCTION - Alleged agreement to lend money to a third party from proceeds of sale of land - whether terms of agreement created equitable interest in proceeds - whether equity will aid by injunction enforcement of simple agreement to lend money. Simione Kama - First Plaintiff Seaview Kama - Second Plaintiff PARTIES : Alex Ernst Wong - First Defendant Vicki Bee-Geok Teoh - Second Defendant FILE NUMBER(S) : SC 2473/05 A. Gee - Plaintiffs COUNSEL : G. Rundle - Defendants Ben Gelin Solicitors - Plaintiffs SOLICITORS : Savio Solicitors - Defendants LOWER COURT JURISDICTION : Ex tempore 1 The Plaintiffs seek the extension today of an ex parte order made on 15 April 2005 which restrained the Defendants from disposing of the net proceeds of sale of their home. The order was limited to expire at 4:00pm today. 2 When the matter was called on today Mr Rundle of counsel appeared for the Defendants to oppose any further extension of the order. The matter has therefore been contested on an interlocutory basis. It is, of course, for the Plaintiffs to establish that there is a serious question to be tried as to whether they have an equity in the fund which they seek to have quarantined until termination of the dispute. There is, of course, the additional question of where the balance of convenience lies if the Plaintiffs surmount the first hurdle. 3 The Plaintiffs say that they have an equitable interest in the proceeds of sale which arises in the following circumstances. In about October 2004 the Plaintiffs and the Defendants, who apparently knew each other, decided to go into a commercial venture together. According to the Plaintiffs' evidence, there was a meeting in October 2004 attended by the Plaintiffs and the Defendants in which it was agreed that the parties would establish an overseas company for the purpose of carrying on a business of selling various games. 4 A memorandum of what transpired at that meeting was prepared. Relevantly it provides that each of the two sides, that is the Plaintiffs on one hand and the Defendants on the other, would lend $200,000 to the new company for the purposes of providing working capital. The Plaintiffs say that thereafter they caused to be established a company called eBankQ SA ("eBanQ") which was incorporated in the Turks and Caicos Islands. The Plaintiffs say that, in accordance with the agreement between the parties made in October 2004, they lent slightly less than $200,000 to eBanQ. They say, however, that the Defendants have not honoured their agreement to lend eBanQ an equivalent sum of $200,000. 5 There were discussions between the parties which led to a meeting in Singapore in January 2005. At that meeting, so the Plaintiffs say, the Defendants agreed to lend eBanQ $217,000 which was the amount then agreed as the amount of the loan, together with some additional expenses. 6 The Plaintiffs claim that at that meeting in January the Defendants – principally the First Defendant, Mr Wong – assured them that the sum of $217,000 to be lent by the Defendant to eBanQ would be paid out of the proceeds of the sale of the Defendants' home in New South Wales in Glenwood. 7 The evidence of the Plaintiffs, however, is that what was actually said by Mr Wong at that meeting was that the $217,000 would be paid either from the proceeds of sale of the Defendants' home at Glenwood or out of the income of a company owned by the Defendants carrying on business in Singapore called Battle Games and that the payment would be made from one or other of those sources, whichever first became available. 8 It is on the basis of this alleged agreement that the Plaintiffs now say that they are entitled to maintain the injunction which they obtained ex parte. 9 The Plaintiffs place their case to continue the restraining order on either or both of two bases. First, it is said that by reason of the agreement made between the parties either in October 2004 or in January 2005, the Plaintiffs have an equitable interest in the proceeds of sale of the Defendants' house. Second, there is a risk that the Defendants will dissipate their assets in Australia so that a freezing order of the Mareva type is justified. 10 I think that this application fails at the threshold. There is no serious question to be tried on either submission in my opinion. The first difficulty which the Plaintiffs face is that, as their counsel has submitted, what they really seek is specific performance of a simple agreement to lend money, that is, the agreement by the Defendants to lend $200,000 to eBanQ for working capital. It is very well established that equity very rarely, if ever, grants specific performance of a simple agreement to lend money. There must be extraordinary circumstances before equity will compel an unwilling lender to outlay loan funds in a transaction which the lender feels is not worth the risk. If a simple loan agreement is breached by the lender then equity usually leaves the disappointed borrower to its remedy in damages. 11 So, the first difficulty which the Plaintiffs face in this case is that they seek an injunction in aid of an agreement which equity will not enforce. I have seen nothing in the circumstances of this case to take it outside the usual rule that equity does not grant specific performance of a simple agreement to lend money. 12 The second difficulty is that the nature of the so-called equitable interest in the proceeds of sale of the Defendants' house has not been identified. There is nothing in the terms of the alleged agreements between the parties made either in October 2004 or in January 2005 which gives the slightest suggestion that the parties intended that there be some security interest or charge over the proceeds of sale in aid of the Defendants' alleged obligation to lend money. All that the words indicate, in my opinion, is that the Defendants were reassuring the Plaintiffs that they would be able to make the loan to eBanQ as they had promised because they had a source of funds from which they would be able to make that payment. This interpretation, in my view, is reinforced by the fact that in the January 2005 discussion, the Defendants allegedly gave not one but two possible sources of payment: the proceeds of sale of the house and, alternatively, the income from their company in Singapore. 13 Accordingly, even if equity would grant specific performance of the loan agreement, nevertheless, the words of the agreement alleged by the Plaintiffs are not sufficient to support any proprietary or security interest in the fund as alleged by the Plaintiffs. 14 As to the second ground upon which the application is made, there is no evidence to suggest that the Defendants house is being sold in order to avoid the Defendants' alleged obligation to pay the debt. It seems that the house was being sold for reasons other than to do with this debt, although in January 2005 the proceeds of the sale were actually indicated by the Defendants as one source out of which their obligations could be discharged. 15 There is no evidence before the Court suggesting that the Defendants are dishonestly making away with funds which would otherwise be available in Australia to satisfy their obligations. 16 For those reasons it seems to me that the application to continue the injunction must fail. I decline therefore to extend the injunction. 17 I will stand these proceedings over into the Registrar's list for further directions on 26 April 2005. I order that the Plaintiffs pay the Defendants' costs of the interlocutory application. – oOo – DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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