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Equitable Remedies Assoc Prof Cameron Stewart. Injunctions Injunctions are orders made by the courts either restraining or requiring performance of a.

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Presentation on theme: "Equitable Remedies Assoc Prof Cameron Stewart. Injunctions Injunctions are orders made by the courts either restraining or requiring performance of a."— Presentation transcript:

1 Equitable Remedies Assoc Prof Cameron Stewart

2 Injunctions Injunctions are orders made by the courts either restraining or requiring performance of a specific act in order to give effect to the legal rights of the applicant. An injunction that prevents a course of action is said to be prohibitive in nature, and this is the traditional essence of injunctive relief - it commands cessation of a wrongful act. Somewhat rarer, yet not too distant from this core principle, are mandatory injunctions that compel some behaviour of the person to whom they are directed. In cases where mandatory injunctions are granted it is clear that the defendant, while not positively engaged in wrongful conduct, has nevertheless, by a failure or omission to act, infringed upon the rights of the applicant. In commanding the doing of an act by such a defendant, the court is in effect commanding the harmful dormancy to cease.

3 Jurisdiction? The origins of injunctive relief are found in equity’s exclusive jurisdiction where it was used solely in support of equitable rights. But equity soon developed an auxiliary jurisdiction through which it offered more flexible forms of relief when those of the common law proved to be inadequate. Thus, in particular circumstances, injunctive relief is available to restrain breaches of contract, tortious wrongs and an array of other conduct that infringe upon rights recognised by the common law. In addition to the exclusive and auxiliary jurisdictions of equity to order injunctions, the common law courts were granted the ability to do the same through statutory reform enacted in the Common Law Procedure Act 1854 (UK) which provided a distinct jurisdiction from both the exclusive and auxiliary operations of equity. It was narrower than the exclusive jurisdiction in that it did not enable the common law courts to issue injunctions in respect of equitable rights, nor did it enable the making of quia timet injunctions. At the same time, it was seen as wider than equity’s auxiliary jurisdiction as there was no requirement of either a proprietary interest or inadequacy of damages

4 Judicature Act Judicature Act 1873 (UK) - Section 25(8) stipulated as follows: [A]n injunction may be granted or a receiver appointed by an interlocutory order of the court in all cases in which it shall appear to the court to be just or convenient that such order should be made; and any such order may be made either unconditionally or upon such terms and conditions as the court thinks just. Supreme Court Act 1970 (NSW) s 66;

5 Exclusive Injunctions granted in aid of equitable rights (such as the equitable obligation of confidence or a beneficiary’s rights under a trust) are said to be awarded in equity’s exclusive jurisdiction.

6 Auxiliary Injunctions granted in aid of common law rights (such as the restraint of breaches of contract or tortious wrongs) or statutory rights are said to be awarded in equity’s auxiliary jurisdiction. The distinction is important because with injunctions in the auxiliary jurisdiction, a plaintiff must first establish that damages at common law are an inadequate remedy, and secondly, it may be the case in some situations that he or she must also show that the right being protected is a proprietary right.

7 Why does it matter? The distinction is important because with injunctions in the auxiliary jurisdiction, a plaintiff must first establish that damages at common law are an inadequate remedy, and secondly, it may be the case in some situations that he or she must also show that the right being protected is a proprietary right. However, in the exclusive jurisdiction, neither the inadequacy of damages nor the proprietary in nature of the plaintiff’s right are relevant in assessing whether the injunction should be granted.

8 Injunctions Protect Rights Injunctive relief will not be ordered if there has been no violation of the plaintiff’s rights: North London Railway Co v Great Northern Railway Co (1883) 11 QBD 30

9 Inadequacy of damages Graham v K D Morris & Sons Pty Ltd [1974] Qd R 1, Morris was building a significant construction on adjoining land owned by Graham. A crane on the building site was left to rotate freely and, when the wind blew in a certain direction, its jib encroached over Graham’s property and was suspended over the roof of her house. Campbell J held that the invasion of Graham’s airspace constituted a trespass and that damages at common law were inadequate because the danger of the jib suspended over Graham’s house were very real and would last for 18 months until the construction work was completed. The trespass would also negatively impact on the sale price Graham could get if she wished to sell her home during that time. Morris argued that the grant of the injunction would constitute hardship because it would have to dismantle the crane at considerable expense. His Honour rejected this defence on the basis that the positioning of the crane stemmed from Morris’s negligence and its cavalier attitude towards the building project.

10 The requirement of a proprietary right In Attorney-General v Sheffield Gas Consumers Co (1853) 43 ER 119, at 125, Turner LJ, in refusing to grant an injunction, said that ‘[i]t is on the ground of injury to property that the injunction of this court must rest’. However, in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380, at 395; 162 ALR 294, at 304, the High Court held that there is no general requirement that the right must be proprietary before injunctive relief can be granted.

11 The requirement of a proprietary right Most commentators now agree that the availability of injunctive relief in equity’s auxiliary jurisdiction is not limited to the protection of legal rights that are proprietary in nature. A more accurate statement as to the relevance of the proprietary nature of the right in question is given by Spry when he writes as follows: [A]lthough it is incorrect to assert that an injunction can be obtained only in aid of property or in aid of a proprietary right, there are cases where in the particular circumstances the only possible reason for equitable intervention happens to lie in the support of what may be described as a proprietary right. I C F Spry, The Principles of Equitable Remedies, 7th ed, Lawbook Co, Sydney, 2007, p 340.

12 Types of Injunctions Prohibitive or mandatory? Interlocutory or perpetual injunctions?

13 Mandatory injunctions Two kinds The first is the mandatory restorative injunction which compels the defendant to repair the consequences of some wrongful act that he or she has committed. In order to obtain such an injunction, the plaintiff must show that, where the wrongful act had not occurred but was merely threatened, he or she would have obtained a prohibitory injunction in relation to the apprehended wrong. For example, in a situation where a house has been built in contravention of statutory planning approval requirements, a mandatory restorative injunction will be granted requiring the defendant to demolish it, provided that, before the house was built, the plaintiff can establish that he or she would have obtained a prohibitory injunction preventing the defendant from building it.

14 Mandatory restorative injunctions Jessica Estates Pty Ltd v Lennard [2007] NSWSC 1434, at [22], in the context of granting a mandatory restorative injunction where the defendant had almost completed the construction of a house in violation of a restrictive covenant, Brereton J said: Factors relevant to the exercise of the Court’s discretion in this respect include the defendant’s knowledge of the wrongful nature of his or her acts; whether the defendant has hastened the completion of the wrongful acts so as to steal a march on the Court (or the plaintiff); the hardship which would be caused to the plaintiff by the refusal of an injunction; the hardship which would be caused to the defendant by the grant of an injunction; and the extent to which the injuries suffered by the plaintiff are compensable by an award for damages. Appeal successful in Lennard v Jessica Estates Pty Ltd [2008] NSWCA 121, but test a relevant statement of the law

15 Mandatory enforcing injunctions The second type of mandatory injunction is the mandatory enforcing injunction which compels the defendant to do some positive act that he or she has promised to do for valuable consideration. In such cases the court will need to be satisfied that the agreement is specifically enforceable and that, in all the circumstances, it is just and equitable to grant the injunction: Burns Philp Trust Co Pty Ltd v Kwikasair Freightlines Ltd (1963) 63 SR (NSW) 492, at 496. In Businessworld Computers Pty Ltd v Australasian Telecommunications Commission (1988) 82 ALR 499, at 501, it was observed that courts will be extremely reluctant to grant a mandatory enforcing injunction if the agreement would not also have attracted the remedy of specific performance.

16 Perpetual injunctions Injunctions can also be classified according to the period of time for which the order is to remain in force. A perpetual injunction is the injunction granted after a full hearing of the claim on its merits. Because the merits of the case have been argued, the perpetual injunction is intended to finally settle relations between the parties.

17 Interlocutory injunctions An interlocutory injunction is a provisional order made at an earlier stage in the proceedings before the court has had the opportunity to assess the merits of the application. Generally, interlocutory injunctions are expressed to be in force until the trial of the action or further order of the court. The term ‘interim injunction’ is often used interchangeably with interlocutory injunction. However, there is a technical difference between the two, in that an interim injunction is more temporary than an interlocutory injunction, and is usually expressed to remain in force until a specified date prior to the final hearing. Thus, in Commonwealth of Australia v John Fairfax & Sons Ltd (1980) 32 ALR 485, the plaintiff obtained an ex parte interim injunction on 9 November 1980 that remained in force until 11 November 1980. On that date the defendant entered an appearance and the court granted an interlocutory injunction pending a final hearing of the matter.

18 Interlocutory injunctions In Films Rover International Ltd v Cannon Film Sales Ltd [1986] 3 All ER 772, at 780–1, Hoffmann J put is as follows: The principal dilemma about the grant of interlocutory injunctions, whether prohibitory or mandatory, is that there is by definition a risk that the court may make the ‘wrong’ decision, in the sense of granting an injunction to a party who fails to establish his right at the trial (or would fail if there was a trial) or alternatively, in failing to grant an injunction to a party who succeeds (or would succeed) at trial. A fundamental principle is therefore that the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong’ in the sense I have described.

19 Interlocutory injunctions In general, interlocutory injunctions will only be granted after notice of the application has been given to the defendant, so that the defendant has the opportunity to resist the claim. Thus, the hearing of such application is usually ‘inter partes’. However, in urgent cases, interlocutory or interim injunctions can be granted in the absence of the defendant, or ‘ex parte’, as occurred initially in Commonwealth of Australia v John Fairfax & Sons Ltd.

20 Interlocutory injunctions In considering whether an interlocutory injunction should be granted the court must apply the test set out in Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618, at 622-3, where the High Court noted that the following two requirements had to be satisfied: The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief... The second inquiry is... whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted.

21 Interlocutory injunctions The prima facie case requirement was discussed in Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] 1 NSWLR 729, at 735-7, where Mahoney JA noted the following points: (i) it did not mean a finding that at trial the plaintiff would win; (ii) the term prima facie is used in the sense of ‘likelihood’, and does not refer to a prediction, but rather to the nature of the plaintiff’s case; (iii) the term ‘prima facie’ may mean something less than ‘more likely than not’, and there is no requirement that the plaintiff must show a ‘better than even’ chance of ultimate success; and (iv) a prima facie case must always be established, irrespective of whether the second test of balance of convenience favours the grant of interlocutory relief.

22 Interlocutory injunctions In various cases judges use the expression ‘serious question to be tried’ rather than ‘prima facie case’. Thus, in Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57, at 68; 229 ALR 457, at 466, Gleeson CJ and Crennan J, observed that a plaintiff had to establish ‘that there is a serious question to be tried as to the plaintiff’s entitlement to relief’. The use of the ‘serious question to be tried’ formulation stems from a passage in American Cyanamid Co v Ethicon Ltd [1975] AC 396, at 407: [1975] 1 All ER 504, at 510, where Lord Diplock said: The use of such expressions as ‘a probability’, ‘a prima facie case’, or ‘a strong prima facie case’ in the context of the exercise of a discretionary power to grant an interlocutory injunction leads to confusion as to the object sought to be achieved by this form of temporary relief. The court no doubt must be satisfied that the claim is not frivolous or vexatious; in other words, that there is a serious question to be tried.

23 Interlocutory injunctions In relation to the ‘balance of convenience’ requirement, the court must weigh up the comparative injury that will arise from granting or withholding an injunction pending trial of the action, seeking out the major risk of damage and, in particular, of any irreparable damage. In Cayne v Global Natural Resources plc [1984] 1 All ER 225, at 237, this aspect was referred to as ‘the balance of the risk of doing an injustice’. In assessing the risk of damage, it does not matter that, at the stage of the interlocutory application, the plaintiff has suffered no damage, provided that actual damage will reasonably result if the interlocutory injunction is not granted: Swimsure (Laboratories) Pty Ltd v McDonald [1979] 2 NSWLR 796.

24 Example In Hermescec v Carcagni [2008] NSWSC 183, Hermescec purchased an Italian restaurant in Newcastle – the Benevenuti - from Carcagni. Soon thereafter, Carcagni opened up a competing Italian restaurant – the Grifone - a short distance away from the Benevenuti. Hermescec claimed that this constituted a breach of a covenant in restraint of trade that was agreed to when Carcagni sold his restaurant. He initiated proceedings for an injunction to enforce the restraint. Even though Hermescec established that he had a strong case against Carcagni, the application for an interlocutory injunction failed on the grounds of the balance of convenience. On this issue, Barrett J, at [21]- [23], said

25 Example If an interlocutory injunction is granted, Grifone would have to close down pending the court’s final decision on the entitlement of [Hermescec] to relief by way of permanent injunction or damages or both. That would be a drastic result. If Grifone were able to stay open with an injunction in place, it could only be on the basis that the company of which [Carcagni] is sole shareholder and director was no longer the operator and [Carcagni] himself was no longer the manager. On [Carcagni’s] evidence, such a situation would be impossible to achieve in any real sense, given that Grifone is in substance a one-man business operated by [Carcagni], albeit with the assistance of employees. The practical result of an interlocutory injunction would be suspension of [Carcagni’s] Grifone business … [T]his is a case in which any injunction pending trial would produce the very result to be put in issue at a final hearing. Such an interlocutory injunction would affect rights in a permanent fashion on evidence which may be supplemented and may be found to bear some different complexion at the trial. At this stage, therefore, ‘the balance of the risk of doing injustice’ favours [Carcagni], even though the prospects that he will in due course be subjected to a permanent injunction and also be ordered to pay damages and costs appear, at least at this stage, to be strong.

26 Interlocutory mandatory injunctions Gummow J in Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499, at 502-503: [M]andatory injunctions generally carry a higher risk of injustice if granted at the interlocutory stage [because]: they usually go further than the preservation of the status quo by requiring a party to take some new positive step or undo what he has done in the past; an order requiring a party to take positive steps usually causes more waste of time and money if it turns out to have been wrongly granted than an order which merely causes delay by restraining him from doing something which it appears at the trial he was entitled to do; a mandatory order usually gives a party the whole of the relief which he claims in the writ and makes it unlikely that there will be a trial … An order requiring someone to do something is usually perceived as a more intrusive exercise of the coercive power of the state than an order requiring him temporarily to refrain from action. The court is therefore more reluctant to make such an order against a party who has not had the protection of a full hearing at trial.

27 Interlocutory mandatory injunctions For some time it was said that a plaintiff seeking an interlocutory mandatory injunction would need to show that there was a ‘high degree of assurance’ that he or she would succeed at trial: Shepherd Homes Ltd v Sandham [1971] Ch 340, at 351; [1970] 3 All ER 402, at 412. However, this test has now been rejected. Tymbook Pty Ltd v State of Victoria [2006] VSCA 89 Burke v Frasers Lorne Pty Ltd [2008] NSWSC 988, at [4], Brereton J said that ‘the same considerations apply to an interlocutory mandatory injunction as to any other interlocutory injunction, although the mandatory nature of the relief sought, and the potential consequences if it later be undone, is often telling on [the issue of] the balance of convenience’.

28 Interlocutory injunctions in the context of defamation Australian Broadcasting Corporation v O’Neill, at CLR 68-9; ALR 466-7, after referring to the basic principles governing the granting of interlocutory injunctions, Gleeson CJ and Crennan J said: In the context of a defamation case, the application of those organising principles will require particular attention to the considerations which courts have identified as dictating caution. Foremost among those considerations is the public interest in free speech. A further consideration is that, in the defamation context, the outcome of a trial is especially likely to turn upon issues that are, by hypothesis, unresolved. Where one such issue is justification, it is commonly an issue for jury decision. In addition, the plaintiff’s general character may be found to be such that, even if the publication is defamatory, only nominal damages will be awarded.

29 Undertaking as to damages A usual condition of granting an interlocutory injunction is that the plaintiff must give an undertaking as to damages. The undertaking operates as a protection to the defendant should the court later rule that the interlocutory injunction should not have been granted. The undertaking binds the plaintiff to compensate the defendant for any damage suffered by the defendant on account of the granting of the interlocutory injunction. If the plaintiff refuses to give the undertaking, the interlocutory injunction will be refused: First Netcom Pty Ltd v Telstra Corporation Ltd (2000) 101 FCR 77

30 Undertaking as to damages Thus, in Cambridge Credit Corporation Ltd v Surfers’ Paradise Forests Ltd [1977] Qd R 261, an undertaking given by an insolvent company that was in receivership was taken to be worthless and interlocutory relief was denied. However, the interlocutory injunction will be granted if a satisfactory third person provides the undertaking. It may be the case that the defendant or third party may also have to provide adequate security so as to ensure that the undertaking is not rendered worthless or less valuable by subsequent events leading up to the final hearing of the matter.

31 QUIA TIMET INJUNCTIONS Generally, injunctive relief relates to some infringement or alleged infringement of the plaintiff’s rights. However, inunctions can be granted in relation to circumstances where there has not yet been an infringement of rights. Injunctions granted on the basis that there is a threat that the plaintiff’s rights will be infringed are known as quia timet injunctions. The expression ‘qui timet’ means ‘since he fears’. The essential purpose of a quia timet injunction is to prevent a wrong being committed: Proctor v Bayley (1889) 42 Ch D 390, at 398. Traditionally the quia timet injunction was only available in relation to equitable rights, but is now seemingly available in respect of all matters by virtue of the injunction provisions of legislation implementing the judicature system

32 QUIA TIMET INJUNCTIONS In Redland Bricks v Morris, at AC 665; All ER 579, Lord Upjohn observed that a quia timet injunction arises in the following two types of case: (i) where, as yet, no harm to the defendant has occurred but it is threatened or intended, and (ii) where harm has been done by the earlier actions of the defendant, and the plaintiff has been compensated, but the plaintiff fears that future wrongs may be committed by the defendant

33 QUIA TIMET INJUNCTIONS In assessing whether to grant a quia timet injunction the courts have framed the test for the likelihood of an infringement of the plaintiff’s rights with expressions such as ‘reasonably certain’ in FCA Finance Pty Ltd v Moreton Central Sugar Mill Co Ltd [1975] Qd R 250, at 253, and ‘very strong probability’ in Redland Bricks v Morris, at AC 665; All ER 579. As to the necessary loss or damage that is threatened, it has been said by the courts that it must be ‘grave damage’ in Thynne v Petrie [1975] Qd R 260, at 262, ‘substantial’ in FCA Finance v Moreton Central Sugar Mill, at 253, and ‘very substantial’ in Hooper v Rogers [1975] Ch 43, at 50; [1974] 3 All ER 417, at 421

34 Injunctions to Enforce Negative Stipulations Generally, the equitable enforcement of contractual rights is by means of an order for specific performance which requires the defendant to carry out his or her contractual obligation. This is the order that is usually sought in relation to positive contractual obligations. However, where there is a negative contractual obligation, the injunction is the usual equitable relief that is sought. A negative contractual obligation is one where inactivity on the part of the promisor is the essence of the obligation. Negative contractual obligations can be express or implied. The classical illustration of an enforceable negative contractual obligation is a reasonable restraint of trade.

35 Injunctions to Enforce Negative Stipulations An important illustration of injunctive relief being sought to enforce negative contractual obligations is with restraints of trade in the context of personal service contracts. The typical example of such cases occurs when X, a person with particular skills and talents, promises to provide those skills and talents for the benefit of Y (the positive contractual obligation), but also promises not to provide those skills and talents for the benefit of anybody else (the negative contractual obligation). If X attempts to breach the negative contractual obligation, Y will seek to enforce it by obtaining injunctive relief to prevent X performing those services for some other person. The usual reason that X wants to breach the negative contractual obligation is that he or she no longer wants to perform the positive contractual obligation and wants to offer his or her skills and talents to Z. Y’s motivation for seeking the injunction is that, if X is prevented from offering his or her skills and talents to Z, X will decide to perform his or her positive contractual obligation. Y will rarely seek to obtain an order against X for specific performance of the positive contractual obligation because it will, in most cases, be refused on the basis that contracts for personal services are rarely specifically enforced

36 Injunctions to Enforce Negative Stipulations Lumley v Wagner (1852) 42 ER 687. The background to this seminal case was a cut- throat battle between the managers of two London opera houses for the services of Johanna Wagner, a famous opera singer. Lumley, the manager of the established Her Majesty’s theatre, was first to contract Wagner for a three-months’ season in 1852. Significantly, Wagner was held to have also promised that during that period she was ‘not to use her talents at any other theatre, nor in any concert or reunion, public or private, without the consent of Mr Lumley’. Before her contract with Lumley started, Gye, the manager of the recently established Covent Garden opera theatre, negotiated a contract with Wagner for the opera singer to perform at Covent Garden. Performance by Wagner of her contract with Gye would have meant breaching the negative contractual obligation in her contract with Lumley. Lumley sought, and obtained, an injunction to prevent her from doing so. Lord St Leonards, at 693, observed that the effect of the injunction was only to prevent Wagner from appearing at Covent Garden and that it did not require her to fulfil her obligation to Lumley at Her Majesty’s theatre, something which his Lordship said he could not directly enforce, although he conceded that the injunction could well tempt Wagner to perform her contract at Her Majesty’s theatre.

37 Injunctions to Enforce Negative Stipulations Warner Bros Pictures Inc v Nelson [1937] 1 KB 209, - Warner Bros movie studio obtained an injunction against Bette Davis, precluding the legendary movie star from starring in movies produced by other movie studios for a period of three years. Branson J, at 219-20, conceded that Davis could well be tempted to continue to make movies with Warner Bros, but ruled that this was no grounds for refusing the injunction. A crucial factor in his Honour’s decision was the fact that Davis was an intelligent and capable woman who could readily obtain alternative employment if she resolved not to work for Warner Bros. The fact that this alternative employment would be less financially rewarding than acting was not relevant

38 Injunctions to Enforce Negative Stipulations In Page One Records Ltd v Britton [1967] 3 All ER 822, members of the pop group ‘The Troggs’ entered into a management and agency agreement with Page One Records for a term of five years and promised not to engage anyone else to be their manager and agent. The Troggs sought to engage another manager and agent. Page One Records sought an injunction to prevent them from doing so. In refusing the application, Stamp J, at 827, after referring to Warner Bros v Nelson, said: [W]here a contract for personal service contains negative covenants, the enforcement of which will amount either to a decree of specific performance of the positive covenants of the contract or to the giving of a decree under which the defendant must either remain idle or perform those positive covenants, the court will not enforce those negative covenants.

39 Injunctions to Enforce Negative Stipulations Stamp J doubted that The Troggs could continue to function without the services of a manager and agent or seek other employment, and that they would need a manager and agent to function successfully as a pop group. According to Stamp J, at 827, this was so because: The Troggs are simple persons, of no business experience, and could not survive without the services of a manager … I entertain no doubt that they would be compelled, if the injunction were granted, … to continue to employ [Page One Records] as their manager and agent … [I]t would be a bad thing to put pressure on the Troggs to continue to employ as a manager and agent one, who, unlike the plaintiff in those cases [such as Lumley v Wagner and Warner Bros v Nelson] who had merely to pay the defendant money, has duties of a personal and fiduciary nature to perform and in whom the Troggs, for reasons good, bad or indifferent, have lost confidence and who may, for all I know, fail in its duty to them.

40 Injunctions to enforce statutory rights Where there has been a breach of statute, there are a number of possibilities in so far as obtaining an injunction is concerned. First, the legislation may expressly or impliedly exclude any remedy other than those which it expressly provides for, thereby excluding the remedy of an injunction: Ramsay v Aberfoyle Manufacturing Company (Australia) Pty Ltd (1935) 54 CLR 230, at 239-40, 255-6.

41 Injunctions to enforce statutory rights A second possibility is that the statute directly confers upon a person or category of persons the right of enforcement. This often occurs in the context of local government legislation. Thus, in Cooney v Ku-ring-gai Municipal Council, the local council was authorised by s 587 of the then Local Government Act in New South Wales to seek injunctive relief to restrain the defendant from using premises for the purposes of a trade or business contrary to the provisions of a residential proclamation

42 Injunctions to enforce statutory rights The third possibility is that, if no private right is infringed by a breach of statute, a person will be able to seek injunctive relief if he or she can bring themselves within the principles of Boyce v Paddington Borough Council [1903] 1 Ch 109

43 In exercising its discretion to grant relief, a court will grant an injunction only if the breach of statute also amounts to an infringement of public rights: Ramsay v Aberfoyle Manufacturing Company (Australia), at 239. Repeated infringements of the statute may constitute an infringement of public rights. In Gouriet v Union of Post Office Workers, at AC 481; All ER at 83, Lord Wilberforce stated that the granting of relief in such cases was ‘an exceptional power confined … to cases where an offence is frequently repeated in disregard of a, usually, inadequate penalty or to cases of emergency’. In Newport Borough Council v Khan [1990] 1 WLR 1185, at 1193, Beldam LJ observed that the discretion to grant the injunction is not based upon the defendant’s deliberate and flagrant flouting of the law. Rather, the court needs to draw the inference that the defendant’s unlawful acts will continue unless and until effectively restrained by the law and that nothing short of an injunction will suffice to so restrain the defendant

44 Mareva orders In Fourie v Le Roux [2007] 1 All ER 1087, at 1090, Lord Bingham of Cornhill described the purpose of Mareva orders as follows: Mareva (or freezing) injunctions were from the beginning, and continue to be, granted for an important but limited purpose: to prevent a defendant dissipating his assets with the intention or effect of frustrating enforcement of a prospective judgment. They are not a proprietary remedy. They are not granted to give a claimant advance security for his claim, although they may have that effect. They are not an end in themselves. They are a supplementary remedy, granted to protect the efficacy of court proceedings, domestic or foreign.

45 Mareva orders The Mareva order was initially known as a Mareva injunction. However, in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380, at 395-6, 401; 162 ALR 294, at 304, 308, Gaudron, McHugh, Gummow and Callinan JJ pointed out that the word ‘injunction’ was inappropriate and should be replaced with the word ‘order’ on the basis that the doctrinal basis of an injunction differs from that of the Mareva order. The difference stems from the fact that an injunction protects a claimant’s legal or equitable rights whereas the purpose of a Mareva order is to prevent the frustration of the court process: RFD Ltd v Harris [2008] WASCA 87, at [37]. In Cardile v LED Builders, at CLR 412; ALR 318, Kirby J preferred the term ‘asset preservation order’. In England a Mareva order is generally now referred to as a ‘freezing order’

46 Jurisdiction The most controversial issue surrounding the Mareva order when it first appeared was the question of the jurisdiction of the court to make such an order. The Mareva order’s effect was to prevent an alleged debtor from freely dealing with his or her assets. However, established authority had long ago declared that a person ‘cannot get an injunction to restrain a man who is alleged to be a debtor from parting with his property’: Lister v Stubbs (1890) 45 Ch D 1, at 14. Initially the English courts asserted that the then successor provision to s 25(8) of the Judicature Act 1873 granted them jurisdiction to make Mareva orders. Section 25(8) and its equivalent provisions in Australian jurisdictions enable the court to grant interlocutory injunctions in any cases where it is just and convenient to do so Supreme Court Act 1970 (NSW) s 66

47 Requirements for obtaining a Mareva Order In Glenwood Management Group Pty Ltd v Mayo (1991) 2 VR 49, at 49-54, Young CJ indicated that there are three basic requirements to be satisfied before a court will grant a Mareva order. They are: (i) that the plaintiff a good arguable case; (ii) that there is a risk of dissipation or secretion of assets so as to render any judgment which the plaintiff may obtain nugatory; and (iii) that the balance of convenience favours the grant of a Mareva order. His Honour, at 54-5, also observed that ‘the three elements overlap and that the granting of a Mareva [order] is always a matter of discretion’. For example, ‘as the strength of the arguable case diminishes so the balance of convenience moves in favour of the defendants and vice versa’.

48 A risk of dissipation of assets The risk that the defendant will dissipate assets before judgment refers to the underlying basis of the Mareva order and has been described as ‘the heart and core’ of the Mareva order: Barclay-Johnson v Yuill [1980] 3 All ER 190, at 194. There must be a real danger that the defendant will default if judgment is obtained against him or her

49 The plaintiff’s cause of action A Mareva order can only be obtained if the plaintiff has a cause of action that is justiciable within the jurisdiction. If the Mareva order is not ancillary to some such pre-existing cause of action it will not be granted. In Siskina v Distos Compania Naviera SA [1979] AC 210, at 256; [1977] 3 All ER 803, at 824, Lord Diplock said: A right to obtain [a Mareva order] is not a cause of action. It cannot stand on its own. It is dependent upon there being a pre-existing cause of action against the defendant arising out of an invasion, actual or threatened by him, of a legal or equitable right of the plaintiff for the enforcement of which the defendant is amenable to the jurisdiction of the court. The right to obtain [a Mareva order] is merely ancillary and incidental to the pre-existing cause of action. It is granted to preserve the status quo pending the ascertainment by the court of the rights of the parties.

50 Balance of convenience In exercising its discretion whether or not to grant a Mareva order the court weighs up the strength of the plaintiff’s cause of action and the risk that the defendant will dissipate his or her assets against various discretionary factors such as delay and whether there has been a full and frank disclosure by the plaintiff. In Cardile v LED Builders, at CLR 380; ALR 311, the High Court said: Discretionary considerations generally also should carefully be weighed before an order is made. Has the applicant proceeded diligently and expeditiously? Has a money judgment been recovered in the proceedings? Are proceedings (for example civil conspiracy proceedings) available against the third party? Why, if some proceedings are available, have they not been taken? Why, if proceedings are available against the third party and have not been taken and the court is still minded to make a Mareva order, should not the grant of the relief be conditioned upon an undertaking by the applicant to commence, and ensure so far as is possible the expedition of, such proceedings? It is difficult to conceive of cases where such an undertaking would not be required. Questions of this kind may be just as relevant to the decision to grant Mareva relief as they are to a decision to dissolve it. These are matters to which courts should be alive.

51 Anton Pillar Orders The Anton Piller order derives its name from the case of Anton Piller KG v Manufacturing Processes Lt An Anton Piller order is similar to a Mareva order in that it seeks to preserve property and prevent the defendant frustrating the administration of justice. But, rather than ensuring that the judgment debt will ultimately be met by the defendant, it aims to gather and protect crucial evidence to the plaintiff’s case, which may be yet to commence. The Anton Piller order enables this by ordering the defendant to allow the plaintiff access to the defendant’s premises so that the plaintiff may inspect, copy and collect material which is necessary for it to successfully bring its case but which it fears will be destroyed: Long v Specifier Publications Pty Ltd (1998) 44 NSWLR 545, at 547 d [1976] 1 Ch 55

52 Jurisdiction In Simsek v Macphee (1982) 148 CLR 636, at 640-1; 40 ALR 61, at 65, Stephen J, in a single instance decision in the High Court, stated that the power of the court to grant an Anton Piller order stemmed form the court’s inherent jurisdiction. In other cases it has been said that the jurisdiction rests either on the inherent jurisdiction of the court or the statutory conferral of powers to aid the operation of the courts, such as s 23 of the Federal Court Act 1976 (Cth): Microsoft Corp v Goodview Electronics Pty Ltd (1999) 46 IPR 159. In all Australian jurisdictions the court rules now explicitly confer power upon the court to grant Anton Piller orders

53 Requirements for an Anton Piller Order In Anton Piller KG v Manufacturing Processes Ltd, at Ch 62; All ER 784, Ormrod LJ set out the essential elements of obtaining this ex parte relief as follows: First, there must be an extremely strong prima facie case. Secondly, the damage, potential or actual, must be very serious for the applicant. Thirdly, there must be clear evidence that the defendants have in their possession incriminating documents or things, and that there is a real possibility that they may destroy such material before any application inter partes can be made

54 Requirements for an Anton Piller Order The ‘clear evidence’ of both possession and risk of destruction required under the third element is certainly the greatest challenge to the plaintiff. Despite an early generosity in granting Anton Piller orders by the courts, it is apparent that more is needed these days than a mere suspicion that the defendant will shred the evidence. An Anton Piller order is not an investigatory order: Microsoft Corp v Goodview Electronics Pty Ltd (1999) 46 IPR 159, at 164; Hytrac Conveyors v Conveyors International Ltd [1982] 3 All ER 415, at 418

55 The rights of the defendant A defendant who is confronted on his or her doorstep by a party of persons wishing to execute an Anton Piller order faces a fairly onerous task in resisting them. Refusal to comply with the court’s order is, of course, contempt and this will be found even when the defendant has refused to comply in order to launch an ultimately ill-fated application to have the order dissolved. The order may be challenged on the ground that any of the requirements the plaintiff was supposed to meet - including the manner of the order’s execution - have not been properly addressed. Given the high importance which the court places upon a plaintiff in respect of meeting these requirements prior to an order being granted, it is extremely unlikely that such an order will be set aside upon application by the defendant

56 Specific Performance In Wolseley Investments Pty Ltd v Gillespie [2007] NSWCA 358, at [33], Santow JA (Ipp and Tobias JJA agreeing) said that ‘the trigger for the commencement of a specific performance suit will be some threat of refusal, express or at least implied, or some actual refusal, on the part of a contracting party to perform the contract in whole or part’. His Honour, at [19], also noted that, in cases of a threatened breach of a contract, the threat does not need to be explicit, but there must be more than merely a theoretical or remote possibility of a breach. However, in such cases, his Honour, at [47], also observed that a court has ‘to consider the likelihood or degree of risk of non-performance before granting specific performance. Also to be considered is the discretionary factor of hardship and balance of convenience’.

57 In personam Like most equitable remedies specific performance is in personam in nature. This essentially means that the remedy attaches to the person of the defendant rather than to his or her property (in rem). This has the result that, provided the defendant is within the jurisdiction of the court, specific performance can be ordered even though the property the subject of the contract may be outside the court’s jurisdiction. Thus, in Richard West & Partners (Inverness) Ltd v Dick [1969] 2 Ch 424, an English court ordered specific performance of a contract for the sale of land where the property was located beyond the court’s jurisdiction in Scotland. Because of the in personam nature of specific performance, the sanction for non-compliance with an order for specific performance focuses on the person and not on the contract or property the subject of the contract. Thus, a defendant who fails to comply with the order will be guilty of contempt of court with the ultimate consequence of being imprisoned for such contempt

58 Binding contract not for valuable consideration Need valuable consideration

59 Inadequacy of damages at common law If a plaintiff can be adequately compensated by an award of damages at common law the court has no jurisdiction to order specific performance. The adequacy or inadequacy of common law damages is determined by reference to the date of the order for specific performance and not the date of the contract: ANZ Executors & Trustees Ltd v Humes Ltd [1990] VR 615, at 632

60 Inadequacy of damages at common law The question to be answered on the issue of the adequacy of damages is ‘whether relegating the plaintiff to damages would leave it in as favourable a position in all respects as would exist if the defendant’s obligation were specifically performed’: International Advisor Systems Pty Limited v XYYX Pty Limited [2008] NSWSC 2, at [41] Contracts for personalty Contracts for land

61 Personal services contracts Equity will not enforce a contract if to do so would result in compelling the defendant to maintain a personal relationship with the plaintiff. The underlying rationale for this principle lies in human nature and the undesirability of maintaining a personal relationship against the will of one of the parties to the contract. As was observed by Fry LJ in De Francesco v Barnum (1890) 45 ChD 430, at 438, courts ‘are bound to be jealous, lest they should turn contracts of service into contracts of slavery’

62 Constant court supervision Contracts in which the parties’ obligations are imprecisely defined will generally not be specifically enforced. The rationale for this principle stems from the fact that that non-compliance with an order for specific performance is punishable as a contempt of court. Given the quasi-criminal consequence of contempt, it is entirely appropriate that the obligation to be specifically enforced be sufficiently certain and precise so as to make the defendant’s duty, in complying with the order, clear. In Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1, at 12–13; [1997] 3 All ER 297, at 1302–3, Lord Hoffmann said: It is the possibility of the court having to give an indefinite series of rulings to ensure the execution of the order which has been regarded as undesirable. Why should this be so? A principal reason is that … the only means available to the court to enforce its order is the quasi-criminal procedure of punishment for contempt … The prospect of committal or even a fine, with the damage to commercial reputation which will be caused by a finding of contempt of court, is likely to have at least two undesirable consequences. First, the defendant … has to make decisions under a sword of Damocles … Secondly, the seriousness of a finding of contempt for the defendant means that any application to enforce the order is likely … to be expensive in terms of cost to the parties and the resources of the judicial system.

63 Hardship An order for specific performance will be refused if it would result in unconscionable hardship upon the defendant. It is not any hardship to the defendant that will suffice. As was made clear in Dowsett v Reid (1912) 15 CLR 695, the court must balance the potential hardship to the defendant that would result if specific performance were granted with the potential hardship to the plaintiff if specific performance were refused. If the two cancel each other out, specific performance will be ordered despite the hardship to the defendant.28

64 Vitiating factors Equitable relief will be refused if the contract is affected by vitiating factors due to the defendant’s conduct or actions. Thus, contracts induced by a defendant’s misrepresentation, mistake, duress, undue influence Unconscionability

65 Lack of mutuality Specific performance is not available to a plaintiff unless the defendant could also have obtained relief against the plaintiff. This principle of mutuality cannot be raised by a defendant if the reason that the defendant could not get equitable relief against the plaintiff is to be found in the defendant’s own conduct or default. Thus, if the defendant cannot get equitable relief because of some misrepresentation, unconscionable conduct, undue influence, laches and the like on his or her part, the plaintiff will not be denied relief on lack of mutuality grounds. The classic example of a lack of mutuality is a contract with a minor. The minor will be unable to receive an order for specific performance against the other party as that person will be unable to insist upon his or her rights against the minor. Thus, there is a lack of mutuality, which impairs the minor’s own ability to seek the equitable remedy: Boyd v Ryan (1947) 48 SR (NSW) 163

66 Lack of mutuality The critical aspect of the mutuality principle is the question of when mutuality must be present. In Price v Strange [1978] Ch 337; [1977] 3 All ER 371, it was held that the critical time for mutuality to be present is the date on which the court is to make the order for specific performance. The fact that mutuality may not have existed at an earlier time is irrelevant. In Price v Strange, mutuality was not present at the time of the breach of contract because the plaintiff’s obligation to repair and renovate an aparatment would have required the constant supervision of the court, thus precluding the defendant from obtaining specific performance However, by the time of the hearing, the repairs and renovations had been completed, and thus there was no reason why the defendant would not have been able to obtain specific performance against the plaintiff. Thus, mutuality was present at the date of hearing and the plaintiff obtained his order for specific performance.

67 Plaintiff in substantial breach and/or not ready, willing and able to perform A plaintiff will be denied equitable relief if he or she is in substantial breach of the contract. A substantial breach means a breach that would enable the other party to terminate the contract for that breach. Other breaches do not disqualify a plaintiff from obtaining relief in equity. In Green v Sommerville (1979) 141 CLR 594, at 610; 27 ALR 351, at 363, Mason J said: It is well settled that a plaintiff in a suit for specific performance is not required to show that he has strictly complied with all of his obligations under the contract; it is enough that he has performed and is ready and willing to perform the substance of the contract.

68 Contracts unenforceable at law and Part performance The relief given is such cases was described by Young CJ in Eq in Ciavarella v Polimeni [2008] NSWSC 234, at [119], as follows: [I]f it would be fraudulent in the eyes of equity for the opposing party to rely on the statute, equity will order that that party execute a note or memorandum of the contract and will then proceed to grant specific performance. The plaintiff is not given relief because of the contract, rather the conduct of the parties subsequent to the contract raises an equity.

69 Equitable compensation and damages There are two possible bases for an order for the payment of money to an aggrieved party at equity. The first arises from the inherent jurisdiction of equity to make orders for monetary compensation as an appropriate means to remedy a purely equitable wrong such as breach of fiduciary duty. This is known as ‘equitable compensation’. The second is the ability conferred by statute for an order of damages to be substituted for, or added to, specific performance or injunction where those remedies have been sought in respect of contracts, torts or any wrongful act. Thus, in certain situations, equity has the power to provide for a remedy of damages in respect of a common law wrong. This is referred to as ‘equitable damages’.

70 Equitable compensation Although equity courts never ordered damages as a remedy for the infringement of equitable obligations, they did provide for monetary forms of relief. In Ex parte Adamson (1878) 8 Ch D 807, at 819, James and Baggallay LJJ noted that relief in such cases was by way of ‘a suit … for equitable debt or liability in the nature of a debt. It was a suit for the restitution of the actual money or thing, or value of the thing, of which the cheated party had been cheated’. Equitable compensation orders were originally restricted to cases involving breaches of fiduciary obligations. Thus, in Re Dawson (dec’d) [1966] 2 NSWR 211, a trustee who had improperly dealt with trust funds was ordered to pay equitable compensation to the trust to restore the trust to the position it would have been in had there been no default on his part.

71 Equitable compensation The modern authority for the availability of equitable compensation is Nocton v Lord Ashburton [1914] AC 932 in which Ashburton sought to recover compensation from his solicitor Nocton for advice that had resulted in a loss for him, but an advantage for the solicitor. Ashburton’s claim for common law damages in the tort of deceit failed, but the House of Lords was prepared to award monetary compensation on the basis of Nocton’s breach of fiduciary obligations. Viscount Haldane LC, at 952, affirmed the longstanding ability of the equity courts to order monetary compensation, and said: Operating in personam as a Court of conscience it could order the defendant, not, indeed, in those days, to pay damages as such, but to make restitution, or to compensate the plaintiff by putting him in as good a position pecuniarily as that in which he was before the injury.

72 The nature of equitable compensation In achieving its goal of restoring the position of the plaintiff to the position that he or she was in before the breach of equitable obligation occurred, equity’s approach to compensation, like all other equitable remedies, is conditioned by its ‘flexible character’: Cole v Manning [2002] NSWCA 150, at [63]. The appropriate date for the assessment of equitable compensation is the date on which the court makes the order for compensation and the quantum of compensation should reflect the amount that is necessary to put the plaintiff back into the position in which he or she would have been had there been no breach of equitable obligation: McNally v Harris (No 3) [2008] NSWSC 861, at [12]-[17].

73 The relationship to the common law conception of damages An important question in relation to equitable compensation is the extent to which equity’s purpose of restoring a plaintiff to his or her original position differs from that of common law damages. Common law damages are also focused upon returning the plaintiff to the position he or she would have been in had the wrong not occurred: Wenham v Ella (1972) 127 CLR 454. Although both common law and equity share the aim of providing monetary compensation to a plaintiff, there are significant differences between them in relation to the principles to be applied in assessing the quantum of monetary relief. The most important of these differences is that the liability under equity for breach of trust or fiduciary duty is more absolute than liability that arises under the common law of contract or tort.

74 Causation. In Maguire v Makaronis (1997) 188 CLR 449, at 473; 144 ALR 729, at 744, Brennan CJ, Gaudron, McHugh and Gummow JJ observed that, in equitable compensation cases, a common sense view of causation required that there be ‘an adequate or sufficient connection between the equitable compensation claimed and the breach of [equitable obligation]’.

75 Causation A consequence of this approach is that a defendant in equity cannot resist a finding of adequate causation by arguing that there was a break in the causal connection between breach of loss suffered by reason of some intervening act (novus actus interveniens). Equity is not readily susceptible to such speculation about other possible causes for loss when there is a clearly identifiable breach present

76 Plaintiff’s contribution to loss In New Zealand and Canada courts have held that a plaintiff’s claim for equitable compensation may be successfully defended on the basis that his or her contribution to the loss may be a complete or partial defence to liability on the part of the defendant: Day v Mead [1987] 2 NZLR 443, at 451; Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534, at 585; (1991) DLR (4th) 129, at 151.

77 Plaintiff’s contribution to loss In Australia, however, this approach has been rejected by the High Court in Pilmer v Duke Group Limited (in liq) (2001) 207 CLR 165; 180 ALR 249. In this case, the facts concerned the takeover by Kia Ora Gold Corp Ltd of Western United Ltd, a company in which many of Kia Ora’s directors held an interest. Under such circumstances, law required the preparation of a report by ‘independent qualified persons’ for the information of shareholders whose approval was ultimately required at a general meeting. The firm of chartered accountants engaged by Kia Ora had, in fact, a long history of dealing with both that company and Western United Ltd. The report asserted that the price to be paid for the shares in Western United was fair and reasonable. In reality this was not the case with Kia Ora paying out around $26m for $6m worth of shareholdings and thus enabling huge personal profits to be made by the Kia Ora directors who held shares in Western United. Kia Ora subsequently brought an action against the partners of the accountancy firm seeking to recover for its loss.

78 Plaintiff’s contribution to loss The Full Court of the Supreme Court of South Australia in Duke Group Limited (in liq) v Pilmer (1999) 73 SASR 64 found the accountants to be in breach of the contractual, tortious, and fiduciary duties which they owed to the company. Ultimately, the court measured the damages payable by the defendants using the principles relevant to breach of contractual duty, since these resulted in the higher figure.

79 Plaintiff’s contribution to loss However, although thus not strictly necessary to decide, the Full Court considered the effect which a plaintiff’s contribution to loss would have upon an assessment of equitable compensation for breach of fiduciary duty. In this respect, the Full Court, at 250, said that it would be: … inherently unjust, and we would say, inequitable, to require a defendant, whose fiduciary breach unlocked the door to the plaintiff acting in obvious disregard of its own interests, to bear sole responsibility for the total loss thereby suffered by the plaintiff where the plaintiff’s own conduct has made a material contribution to that loss.

80 Plaintiff’s contribution to loss The appeal to the High Court by the former partners of the accounting firm succeeded on the basis that the calculation of damages to compensate for Kia Ora’s loss had been incorrect and also that no fiduciary obligation had been breached. Although Kirby J disagreed on the latter score, the court was of one mind in rejecting any place for reduction on the basis of the plaintiff’s conduct in the determination of equitable compensation. The reasons included an appreciation of the essence of the fiduciary relationship in which the beneficiary has no obligation to protect himself or herself against the fiduciary and the nature of contributory negligence in tort law. McHugh, Gummow, Hayne and Callinan JJ, at CLR 201–2; ALR 274, said: Contributory negligence focuses on the conduct of the plaintiff, fiduciary law upon the obligation by the defendant to act in the interests of the plaintiff. Moreover, any question of apportionment with respect to contributory negligence arises from legislation, not the common law. Astley indicates that the particular apportionment legislation of South Australia which was there in question did not touch contractual liability. The reasoning in Astley would suggest, a fortiori, that such legislation did not touch the fiduciary relationship.

81 Other factors Mitigation Exemplary damages - Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298 Aggravated damages - Giller v Procopets [2008] VSCA 236

82 E QUITABLE D AMAGES Chancery Amendment Act 1858 (UK), more popularly known as Lord Cairns’ Act s 68 of the Supreme Court Act 1970 (NSW) which states: Where the Court has power: (a) to grant an injunction against the breach of any covenant, contract or agreement, or against the commission or continuance of any wrongful act, or (b) to order the specific performance of any covenant, contract or agreement, the Court may award damages to the party injured either in addition to or in substitution for the injunction or specific performance.

83 Lord Cairns Act damages In Wentworth v Woollahra Municipal Council (1982) 149 CLR 672, at 676; 42 ALR 69, at 72, Gibbs CJ, Mason, Murphy and Brennan JJ referred to the purpose of Lord Cairns’ Act in the following terms: The main object of the Act was to enable the Court of Chancery to do ‘complete justice’ between the parties by awarding damages in those cases in which it formerly refused equitable relief in respect of a legal right and left the plaintiff to sue for damages at common law.

84 Jurisdiction to award equitable damages Before equitable damages can be awarded, the court must have the jurisdiction to order a decree of specific performance or an injunction. Thus, if such equitable relief is refused on the basis that damages at common law are adequate, the court has no jurisdiction to award equitable damages.

85 Equitable damages in addition to specific relief The provisions of Lord Cairns’ Act clearly envisage the making of an order for damages in addition to specific performance or injunctive relief. This is especially useful in enabling the court to address the issue of any losses caused to the plaintiff by the defendant’s breach that are not properly addressed by an order for equitable relief.

86 Equitable damages in lieu of specific relief the fact that specific relief is denied on discretionary grounds does not preclude the court from ordering equitable damages. where specific relief once ordered becomes impossible to carry out due to intervening circumstances, a court will readily make an order for equitable damages in lieu of specific relief.

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