Wonway Marketing Group Pty Ltd v Fritona Pty Ltd & Anor [2005] NSWSC 961

New South Wales Supreme Court

CITATION : Wonway Marketing Group Pty Ltd v Fritona Pty Ltd & Anor [2005] NSWSC 961

HEARING DATE(S) : 21 September 2005

JUDGMENT DATE : 21 September 2005

JURISDICTION : Equity Division

JUDGMENT OF : Palmer J

DECISION : Application for interlocutory relief refused.

CATCHWORDS : INTERLOCUTORY INJUNCTION - DELAY - Plaintiff sells goods to Defendant - third party disputes Plaintiff's title - balance of purchase price placed into solicitor's trust account pending litigation to establish title - Plaintiff delays inordinately in commencing litigation - whether injunction should restrain distribution of fund in solicitor's trust account.

Wonway Marketing Group Pty Ltd - Plaintiff PARTIES : Fritona Pty Ltd - First Defendant Maurice May - Second Defendant

FILE NUMBER(S) : SC 5104/05

M. Vassili (Sol) - Plaintiff COUNSEL : D.A. Smallbone - Defendants M.J. Heath - Third Party (by leave)

Legal Services Group - Plaintiff SOLICITORS : Maurice May & Co - Defendants

LOWER COURT JURISDICTION :

Ex tempore

1 By a document entitled "Bill of Sale" dated 5 November 2003, the Plaintiff agreed to sell to the First Defendant a large printing press identified by serial number for the sum of $80,000, exclusive of GST. 2 Shortly after the date of the sale document, the First Defendant took possession of the machinery. The Plaintiff says that, although the sale agreement contains a warranty that the equipment was unencumbered and makes no reference to title in the equipment being vested in anyone other than the Plaintiff, in fact it was agreed and understood between the parties that as at the date of the sale agreement the title in the equipment was vested in a finance company and the Plaintiff was in possession of the equipment under a hire purchase agreement. 3 The Plaintiff says that there were oral terms to the agreement in addition to the written terms, including a term that upon settlement of the sale the First Defendant would, at the direction of the Plaintiff, pay the purchase price to the hire purchase company in order to discharge the hire purchase agreement and thereby put the Plaintiff in a position where it acquired good title to the equipment from the finance company and could pass good title to the First Defendant. 4 The First Defendant denies that there were any such additional oral terms to the agreement. However, matters took a sudden unexpected turn shortly after the First Defendant took possession of the equipment because a third party claimed that the equipment was owned neither by the finance company nor by the Plaintiff, but was in fact owned by it. That third party is a company called GM Computers or possibly its principal, Mr Mekrizis. 5 The First Defendant had paid a deposit of $8,000 and owed a balance of $72,000 under the sale agreement at the time that it took possession of the equipment. However, when the First Defendant was put on notice by the solicitors for the third party that the equipment was not owned either by the finance company or by the Plaintiff, the First Defendant, who had no independent means of knowing whether the assertions of the third party or the Plaintiff were correct, did not know to whom to pay the balance of the purchase price. 6 On 2 December 2003, the First Defendant's solicitor wrote to the Plaintiff's then solicitor offering a temporary solution to the impasse. In that letter the solicitor asserted his client's essential position, namely, that it had entered into the purchase agreement in good faith, believing that the Plaintiff had an unencumbered title to the equipment. The letter proceeds: "We confirm that our client has taken delivery of the printer as a custodian pending the determination of the unencumbered title to the printer. We can confirm that the printer has been received by our client at its premises at 79 King Street, Newtown and we have received into our trust account the sum of $72,000 which is the unpaid balance of the moneys outstanding under the "Bill of Sale" dated 5 November 2003. These funds will be held in our trust account until such time a you are able to demonstrate that your client is entitled to the unencumbered title to the printer following which the moneys will be paid to the proper owner or to the financier of the printer as the case may be. In the event that moneys are found to be payable to the financier once the ownership of the printer has been resolved then payment will be made to the financier." 7 By that stage it ought to have been clear to the solicitors for the Plaintiff, the First Defendant and the third party, that it was highly probable that legal proceedings would have to be commenced in order to resolve the dispute as to title to the equipment. It was open to either the Plaintiff or the third party to initiate those proceedings and either one of them could have conveniently done so. 8 The Plaintiff could have immediately sued the First Defendant for debt in the District Court claiming the balance of the purchase price of the equipment. The Plaintiff would simply have pleaded that it had entered into an agreement to sell the equipment, that it was able to pass good title upon settlement by directing payment to the financier, and that the First Defendant had failed to pay the amount due under the agreement. The First Defendant would then simply have pleaded that it did not know and could not admit that the Plaintiff could pass good title to the equipment, as a third party had claimed title to the equipment. It could have sought interpleader relief in respect of the fund of $72,000 under DCR Pt 42 r.2; it could have invited the Plaintiff to join the third party as a defendant in the District Court proceedings in order that the title to the goods would have been determined as between the Plaintiff and the third party. The First Defendant in those circumstances would merely have entered a submitting appearance pleading by its Defence that it was prepared to pay for the equipment or to deliver up the equipment to whichever of the Plaintiff or the third party proved that it was the rightful owner of the goods. However, the solicitors for the three parties did not seem to know how to resolve the legal tangle in which their clients found themselves enmeshed. 9 From 2 December 2003 until yesterday, no legal proceedings had been commenced by anyone, that is, neither the Plaintiff nor the third party, to establish title to the equipment, or to payment of the fund which was placed in the trust account of the First Defendant's solicitor on 2 December 2003. What happened was that the solicitors for the three parties simply kept on sending each other correspondence in which each repeated its respective position over and over again. 10 Eventually the matter was taken over on behalf of the First Defendant by a new solicitor, who is now the Second Defendant. The Second Defendant endeavoured to bring matters to a head. In February 2005, after considerable periods of inactivity between the parties during 2004, the Second Defendant, who had received the $72,000 into his own trust account, wrote to the Plaintiff's solicitors inviting them to take action to establish their title to the funds within fourteen days. 11 Those requests were repeated throughout April and May 2005 with some increasing and understandable urgency and insistence. For example, on 24 May 2005 the Second Defendant wrote to the Plaintiff's then solicitors recounting the history of demands for the Plaintiff to initiate some action to resolve the proceedings and saying: "We are of the view that there is no undertaking to hold the $72,000 in our trust account forever and a day. This dispute has been going on for an extremely long time. If your client asserts that a sale has taken place, let it commence the appropriate proceedings. The very fact that no such proceedings have been commenced indicates to us that your client has no claim against our client."