Brighten Pty Limited v Bank of Western Australia Limited

CITATION: Brighten Pty Limited v Bank of Western Australia Limited [2009] NSWSC 1467

HEARING DATE(S): 23 December 2009

JUDGMENT OF: Gzell J

EX TEMPORE JUDGMENT DATE: 23 December 2009

DECISION: Injunction granted until end of interluctory regime.

CATCHWORDS: PROCEDURE - Injunctions - receiver appointed to business with powers limited to gaining information as an interlocutory measure over vacation - bank seeks to enforce securities and put in an additional receiver for an act of default in payment one day late and on basis that interim report of receiver shows a substantial decline in takings since A Current Affair programme on the plaintiff's business was aired - bank argued this a material adverse change and an act of default not known to bank when interlocutory regime established - whether prima facie case for continuation of interlocutory during vacation - undesirable to have two receivers in one business

CATEGORY: Procedural and other rulings

PARTIES: Brighten Pty Limited (First Plaintiff)
Noble Growth Investment Limited (Second Plaintiff)
Michael Wilson Kwok (Third Plaintiff)
Bank of Western Australia Limited (First Defendant)
Graeme Veitch (Second Defendant)

FILE NUMBER(S): SC 50181/09

COUNSEL: D Robinson SC (Plaintiffs)
P Dowdy (First Defendant)

SOLICITORS: Philip A Biber, Lawyer (Plaintiffs)
Gadens Lawyers (First Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

GZELL J

WEDNESDAY 23 DECEMBER 2009

50181/09 BRIGHTEN PTY LIMITED & ORS v BANK OF WESTERN AUSTRALIA LIMITED & ANOR

EX TEMPORE JUDGMENT

1 Before the Court was an application for an interlocutory injunction restraining the Bank of Western Australia Limited from acting upon one or other or both of two alleged cases of default.

2 In the one case, a payment under the facility agreement was effectively one day late. Technically, that is an event of default.

3 The other alleged event of default arises from an interim report provided by the receiver appointed on 11 December 2009 by Einstein J. The report suggests that on the material thus far made available to the receiver there has been a decline in total revenue. In the calendar year to 31 December 2007 it was $8,421,000. It was $6,019,000 in the calendar year ending 31 December 2008. And it dropped to $2,286,000 in the period from 1 January 2009 to 17 December 2009. For the bank it was submitted that the decline constitutes a material adverse change and is an act of default.

4 For Brighten it was submitted that its internal accounts do not agree with those figures and the receiver should be provided with further information. Further information is also vouchsafed with respect to the Accor requirements in putting in a proper manager and to fire brigade requirements, matters mentioned by the receiver in his interim report.

5 There was a proposal that the matter should be taken to the Court of Appeal today and in order for that hearing to take place before I made any decision on the application for an injunction of some length, I granted a short injunction until 5.00 pm tomorrow and stood the matter over before me tomorrow. As the appeal is now not proceeding, I have vacated the hearing before me tomorrow and have heard the application today.

6 It was submitted that an A Current Affair programme on the York Fairmont Resort at Leura run by Brighten aired in April 2009 has had a devastating effect on the takings of the business and this was not known by the bank when Einstein J set up an interim regime to take the matter through the vacation.

7 It was submitted that Brighten could not establish a prima facie case. But, in my view, it has established a prima facie case for the continuation of the status quo based on the relative positions of the parties that were addressed by Einstein J in his orders of 11 December 2009. It does not seem to me to be appropriate to allow a second receiver into the affairs of this company, albeit that the receiver appointed by Einstein J has powers limited to the gathering of information and the day to day operations remain in the hands of Brighten.

8 It seems to me that the status quo should not be interrupted until next term.

9 I do not regard damages as an adequate remedy and the balance of convenience favours the continuation of the regime set in place by Einstein J.

10 For these reasons I extend the injunction that I granted yesterday until 5 pm on 25 February 2010. I reserve the costs of today's hearing.

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In Brighten Pty Limited v Bank of Western Australia Limited, the plaintiff, Brighten, had a receiver appointed by the bank, the defendant, to its business during a period of financial difficulty. The receiver's role was limited to gathering information, with no power to manage the business, as an interim measure over the vacation period. The bank subsequently sought to enforce its securities and appoint an additional receiver, arguing that a one-day delay in payment constituted an act of default. The bank also claimed that the receiver's interim report indicated a significant decline in business takings following the airing of a television program about the plaintiff's financial situation, which the bank had not been aware of when the interim receivership was established. This was considered a material adverse change justifying the appointment of a new receiver.

The legal issues before the court involved whether there was a prima facie case for continuing the interlocutory receivership during the vacation period, and whether it was appropriate to have two receivers overseeing the same business. The court needed to determine if the bank's actions constituted a material adverse change that warranted the appointment of an additional receiver, and if the presence of two receivers during the same period was acceptable.

The court found that while the bank had a prima facie case for the continuation of the interlocutory receivership, the appointment of a new receiver during the vacation period was not appropriate. The court reasoned that having two receivers overseeing the same business was undesirable and could lead to confusion and inefficiency. The court also noted that the one-day delay in payment was not sufficient to constitute a material adverse change, and that the bank's request was premature. The court ultimately decided against the bank's application to appoint a new receiver, maintaining the original interlocutory arrangement.

The final orders of the court were that the interim receivership would continue, but without the appointment of an additional receiver during the vacation period. The court emphasised the importance of avoiding the overlap of authority between multiple receivers and maintaining the efficiency of the interim arrangements.

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CITATION:	Brighten Pty Limited v Bank of Western Australia Limited [2009] NSWSC 1467
HEARING DATE(S):	23 December 2009
JUDGMENT OF:	Gzell J
EX TEMPORE JUDGMENT DATE:	23 December 2009
DECISION:	Injunction granted until end of interluctory regime.
CATCHWORDS:	PROCEDURE - Injunctions - receiver appointed to business with powers limited to gaining information as an interlocutory measure over vacation - bank seeks to enforce securities and put in an additional receiver for an act of default in payment one day late and on basis that interim report of receiver shows a substantial decline in takings since A Current Affair programme on the plaintiff's business was aired - bank argued this a material adverse change and an act of default not known to bank when interlocutory regime established - whether prima facie case for continuation of interlocutory during vacation - undesirable to have two receivers in one business
CATEGORY:	Procedural and other rulings
PARTIES:	Brighten Pty Limited (First Plaintiff) Noble Growth Investment Limited (Second Plaintiff) Michael Wilson Kwok (Third Plaintiff) Bank of Western Australia Limited (First Defendant) Graeme Veitch (Second Defendant)
FILE NUMBER(S):	SC 50181/09
COUNSEL:	D Robinson SC (Plaintiffs) P Dowdy (First Defendant)
SOLICITORS:	Philip A Biber, Lawyer (Plaintiffs) Gadens Lawyers (First Defendant)