New South Wales Supreme Court CITATION : Lym International Pty Ltd v Chen [2006] NSWSC 1363 HEARING DATE(S) : 1 December 2006 JUDGMENT DATE : 4 December 2006 JURISDICTION : Equity JUDGMENT OF : Hamilton J DECISION : Interlocutory injunction granted. CATCHWORDS : EQUITY [338] - Equitable remedies - Injunctions - Interlocutory injunctions - Appropriate balancing exercise. CASES CITED : Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 PARTIES : Lym International Pty Limited (P) Yu Po Chen (D) FILE NUMBER(S) : SC 5533/06 COUNSEL : S A Wells (P) D R Pritchard (D) SOLICITORS : Lazarus Tomko Lawyers (P) Middletons (D) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J MONDAY, 4 DECEMBER 2006 5533/06 LYM INTERNATIONAL PTY LIMITED v YU PO CHEN JUDGMENT 1 HIS HONOUR: In this matter I heard a contested interlocutory injunction application on Friday, 1 December 2006. The proceedings concern a property at Mona Vale on which there are being erected 15 units to be strata titled. The property is close to the beach. The projected sale price of the units when completed will be some $18 million. The units are close to completion and the process of obtaining registration of the strata plan is under way. 2 Late in the history of the building operations the property was sold by the plaintiff, which was the original owner and developer, to the defendant, who was at the time of the sale playing the role of project manager. The plaintiff's claim in the proceedings and in the interlocutory injunction application is based upon frauds allegedly committed by the defendant on the plaintiff in relation to that contract. 3 The summer season is almost upon us and, although this is a dull selling season in respect of much urban property, there seems little dispute that it may be a lively selling time for beachside properties. The plaintiff seeks to restrain the selling of any of the units off the plan or otherwise until these proceedings can be determined. 4 The proper approach to the determination of the interlocutory injunction application was most usefully set out by McLelland J in Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at 535 - 6 as follows: "As I see it, the position is as follows. Where a plaintiff's entitlement to ultimate relief is uncertain, the Court, in deciding to grant or refuse an interlocutory injunction, must consider what course is best calculated to achieve justice between the parties in the circumstances of the particular case, pending the resolution of the uncertainty, bearing in mind the consequences to the defendant of the grant of an injunction in support of relief to which the plaintiff may ultimately be held not to be entitled, and the consequences to the plaintiff of the refusal of an injunction in support of relief to which the plaintiff may ultimately be held to be entitled: see, eg, Appleton Papers Inc v Tomasetti Paper Pty Ltd [1983] 3 NSWLR 208 at 216; A v Hayden (No 1) (1984) 59 ALJR 1 at 4-5; 56 ALR 73 at 79. Where the uncertainty depends in whole or in part on a contested question of fact it is not appropriate for the Court to decide that question on the interlocutory application. Where the uncertainty depends in whole or in part on a contested question of law, it may or may not be appropriate for the Court to decide that question on the interlocutory application, depending on circumstances, eg, whether the question is novel or difficult, or is susceptible of resolution on the present state of the evidence, or whether the urgency of the matter renders it impracticable to give proper consideration to the question: see, eg, A v Hayden (No 1) (at 4; 78); Cohen v Peko-Wallsend (1986) 61 ALJR 57 at 59; 68 ALR 394 at 397. If the Court does decide the question of law the uncertainty is to that extent removed. Unless the plaintiff shows that there is at least a serious question to be tried which if resolved in its favour would entitle it to final relief, then the requirements of justice as between the parties will dictate that an interlocutory injunction should be refused: Australian Coarse Grain Pool Pty Ltd v Barley Marketing Board of Queensland (1982) 57 ALJR 425; 46 ALR 398; Tableland Peanuts Pty Ltd v Peanut Marketing Board (1984) 58 ALJR 283; 52 ALR 651; A v Hayden (No 1) ; Castlemaine-Tooheys Ltd v South Australia (1986) 60 ALJR 679; 67 ALR 553 and Cohen v Peko-Wallsend Ltd ." 5 The plaintiff claims to have been defrauded in relation to its sale of the property to the defendant in at least two ways. The first of these ways is clearly stated and easy to divine. It is alleged that, the plaintiff having two directors, the defendant proffered to one of those directors a resignation by the other as a director of that company and thereafter proceeded to deal with her on the basis that she was the sole director of the plaintiff. The plaintiff's case is that the other director's signature on the resignation was not his signature and was a forgery. The defendant's answer to this allegation is equally clear. He says that he saw this document only at a very late time, that wherever it came from he did not proffer it to anyone and, in any event, he challenges the proposition that the signature on the resignation is a forgery. The parties are, therefore, very clearly at issue on this head of fraud and it is clearly inappropriate that any determination of the truth of that allegation take place in the present proceedings. 6 The second head of fraud is much less clear. There were very complicated dealings between the defendant and the plaintiff through its director, Limin Yang, and, frankly, I did not perceive at the end of the submissions exactly what was the precise fraud alleged. At one stage it was alleged that the defendant, having promised to pay out some $7 million under a first mortgage of the property, the amount owing that it did pay out was in effect only $3.8 million, so that the plaintiff lost the benefit of some $3 million in this regard. However, on the facts, as I have been able to perceive them, it seems clear enough that the defendant did pay out some $7 million in respect of the mortgage on the settlement of the purchase. 7 It is unnecessary to attend further to the rather convoluted second head of fraud, since it seems to me that it is clear that a serious question to be tried arises in respect of the first head of fraud, as I have set it out above. As I have said, there can and will be no determination of that question on this application, so the application falls to be determined on the balance of convenience. 8 The plaintiff essentially puts two matters on the balance of convenience. It says that the market for such units is dull or falling and that if, it wins the proceedings, it will not wish to sell the units, but to lease them at this stage until the market improves. The other thing that it says is that the defendant, being guilty of fraud, cannot be trusted and that the conduct of sales by the defendant exposes the plaintiff to too great a risk of being further defrauded. It says that the fears it has in this regard are, first, of the defendant entering into side deals with purchasers so as to defraud the plaintiff and, second, that it fears improper marketing generally by the defendant. 9 Evidence as to valuation has been obtained by both sides. The evidence appears to show some fall in value of the property during 2006, perhaps to the extent of about 4 per cent. The market is clearly dull, but there is no evidence as to if and when the market is likely to pick up. 10 The defendant says that it is of importance that the present selling season not be lost; that realistically the suit could not be determined before about April or perhaps May next year; and that by then we shall be going into winter, so that realistically a whole 12 months selling opportunity will be lost. There is no evidence as to whether the market is likely to pick up in the foreseeable future and there is a fear that the market may fall further allowing for its present gentle downward trajectory. 11 The defendant has at all times offered a comprehensive regime of undertakings to protect the plaintiff in respect of its method of selling and for ensuring the proper preservation of any proceeds of sale that are received before the proceedings are determined and has met every request by the plaintiff for further tightening of the regime. 12 I have come to the conclusion that the status quo is that the defendant is in possession of the property and in control at the moment of the processes of perfecting the various relevant consents and of being in a position and having an intention to sell the units. It is my view that this status quo should be preserved while the proceedings are tried and that the defendant should not be restrained from selling, but should be subject to a regime which gives the plaintiff full protection. 13 I am of the view that in all the circumstances it would be better if that regime be imposed by order of the Court rather than by the giving of undertakings. Mr D Pritchard, of counsel for the defendant, has indicated to the Court that his client has no objection to the regime being put in place by orders rather than undertakings. 14 I shall not set out in these reasons for judgment the comprehensive regime of precautions to be put in place. They appear clearly in the minutes, by reference to which I shall make the orders. 15 The defendant did complain of undergoing any restraint on the undertaking as to damages of the plaintiff itself, owing to its impecuniosity, and asked for security for the undertaking as to damages. The plaintiff has proferred to the Court the undertakings as to damages of the two directors of the plaintiff. In the circumstances, it is my view that this is an adequate arrangement as to the undertakings as to damages. I shall accept those undertakings, which have already been proferred. I regard those as creating an adequate regime as to the undertaking as to damages in relation to the orders in fact to be made. 16 There is a great deal to be said for both the costs submissions that have been put to me. However, in the end, I prefer the plaintiff's submission and the order will be that the costs of the application be reserved. ********** 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. 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