New South Wales Supreme Court CITATION : McCleary v Bullabidgee [2008] NSWSC 534 HEARING DATE(S) : 2 May 2008 JURISDICTION : Equity Division Expedition List JUDGMENT OF : Brereton J EX TEMPORE JUDGMENT DATE : 2 May 2008 DECISION : Application for interlocutory injunction declined. CATCHWORDS : INJUNCTIONS – Interlocutory injunction – where plaintiff propounds proprietary claim to proceeds of crop – where defendant has arguable cross-claim for compensation under the Agricultural Tenancies Act – balance of convenience LEGISLATION CITED : (NSW) Agricultural Tenancies Act 1990 (NSW) Conveyancing Act 1919, s 55(2A) CATEGORY : Procedural and other rulings Brian John McCleary (first plaintiff) Peter Joseph Rae (second plaintiff) Bullabidgee Pty Ltd (first defendant) PARTIES : Towool P/L, Towool West P/L, Towool Water P/L (second defendants) Warrawool P/L, Warrawool North P/L, Warrawool Water P/L (third defendants) MHD Echuca Pty Ltd (fourth defendant) Ian Tayles (fifth defendant) Ricegrowers Ltd (sixth defendant) FILE NUMBER(S) : SC 2244/08; 1813/08 Mr S Galitsky (plaintiffs) COUNSEL : Mr A Justice (first - fifth defendants) Mr W Davies (sol) (sixth defendant) Francis Kelly & Grant (plaintiffs) SOLICITORS : McDermott & Associates (first - fifth defendants) Dibbs Abbott Stillman (sixth defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EXPEDITION LIST BRERETON J 2 May 2008 2244/08 Brian John McCleary & Ors v Bullabidgee Pty Ltd & Ors 1813/08 Bullabidgee Pty Ltd & Ors v Brian John McCleary & Ors JUDGMENT (ex tempore) 1 HIS HONOUR: The plaintiffs, who are the trustees for sale of properties in the Riverina the subject of these proceedings, are the vendors of those properties under contract to the first to fifth defendants ("the purchasers"), which they claim to have terminated for default by the purchasers, and seek an interlocutory injunction restraining the sixth defendant Ricegrowers Limited from distributing any payment for the proceeds for rice delivered to Ricegrowers from the subject properties until the hearing or further order. 2 It is common ground that the purchasers, who went into occupation under the contract, sowed, cultivated, and harvested the crop, and that it was the purchasers who entered into the growers' contracts with the Ricegrowers. 3 I am content to accept that the vendors have a seriously arguable claim that they were entitled to terminate and have effectively terminated the contracts for sale of the properties to the purchasers, and upon such termination became entitled to the rice that was growing on them (and now, its proceeds), noting of course that the validity of the termination remains in dispute in these proceedings. However, it also seems to me that the purchasers have a seriously arguable case that they are entitled to compensation, under the (NSW) Agricultural Tenancies Act 1990, for the expenditure incurred by them in growing the crop. 4 The purchasers have adduced evidence, supported by invoices, that they have incurred expenditure in sewing, cultivating and harvesting the rice crop, amounting to some $305,000, whereas the likely proceeds are estimated to not exceed $245,000. Thus, I accept that the vendors have a seriously arguable claim that they are beneficially entitled to the proceeds, but that the purchasers have a seriously arguable claim that they are entitled to compensation in an amount not less than the amount of the anticipated proceeds. That means that the balance of convenience is dispositive. 5 On the one hand, it is correct, as Mr S Galitsky points out, that the vendors' claim is of a proprietary character: the interlocutory relief they seek is not in the nature of a Mareva injunction, but a conventional interlocutory injunction to preserve the very property in which the vendors claim a beneficial interest; whereas, the purchasers' claim, if made good, is in the nature of a claim for damages, and not a proprietary claim. The practical significance of this, on the balance of convenience, is that if the proceeds are dissipated in the meantime, the vendors will be relegated from the position of having a specific asset to which they are entitled, to that of an unsecured creditor or to a tracing remedy. That is a prejudice which weighs in the vendors' favour on the balance of convenience. 6 On the other hand, as the evidence stands at the moment, the quantum of the claim for compensation prima facie exceeds the value of the proprietary claim. Secondly, the vendors already hold some $560,000 – $440,000 being deposits paid under the subject contracts, and $120,000 being the balance purchase price paid under the contract for sale of plant and equipment. If the vendors ultimately succeed, they will not just recover the land but will also be entitled to retain the deposit – subject of course to any order that might be made under (NSW) Conveyancing Act 1919, s 55(2A) for its return – and that affords them some element of protection. Thirdly, it has not been suggested, and the evidence does not suggest, that the purchasers are impecunious or would be unable to satisfy a monetary judgment for the value of the rice crop. Fourthly, and to my mind very importantly, the rights of a bona fide purchaser for value without notice – in the form of beneficiaries of growers deduction authorities, at least to the extent of nearly $140,000, have intervened; they have given value for irrevocable authorities to pay them from the proceeds of the crop. And finally, in respect of the balance of the proceeds, after payment of those grower deduction authorities, the purchasers have offered to submit to a restraint on their disposition without prior notice to the vendors, who could then, if so advised, make a further application in that behalf. 7 In those circumstances – particularly because it seems to me that the purchasers do have a strongly arguable claim for compensation exceeding the likely proceeds, because of the intervention of the rights of third parties, and because on any view there would be an element of windfall to the vendors in being able to obtain the benefit of the crop grown by the purchasers, the balance of convenience favours declining the interlocutory relief sought by the vendors. I will, however, grant the more limited relief to which the purchasers offered to submit. 8 My orders are: 1. Upon the plaintiffs by their counsel giving to the Court the usual undertaking as to damages, order that the first to fifth defendants be restrained until further order from by themselves, their servants or agents disbursing or directing, authorising or procuring the disbursement of any of the nett proceeds of the rice crops delivered to the sixth defendant from the properties Bullabidgee, Towool and Warrawool, Deniliquin (after deduction of any amounts the subject of Growers Deduction Authorities, referred to in tab 18 of exhibit IT1 referred to in the affidavit of Ian Tayles, sworn 30 April 2008 in these proceedings), except upon having given seven days written notice to the solicitor for the plaintiffs, any such notice to specify to the parties to, quantum and purpose of the proposed disposition. ********** 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.