Glass Reinforced Products (Grp) Pty Limited v White Constructions (ACT) Pty Limited and National Australia Bank Limited [1987] ACTSC 78 (1 December 1987)

SUPREME COURT OF THE ACT

GLASS REINFORCED PRODUCTS (G.R.P.) PTY. LIMITED v. WHITE CONSTRUCTIONS
(A.C.T.) PTY. LIMITED and NATIONAL AUSTRALIA BANK LIMITED
S.C. No. 1518 of 1986
Courts

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Miles C.J.(1)

CATCHWORDS

Courts - undertaking given to court by litigant - application to withdraw undertaking - change in circumstances since undertaking given - matters to be considered - no new question of principle.

Adam P. Brown Male Fashions Pty. Limited v. Philip Morris Incorporated and Another (1981) 35 ALR 625

Pearson Bridge (NSW) Pty. Limited v. State Rail Authority of NSW (unreported, Supreme Court of New South Wales, 28 June 1982)

Wood Hall Limited v. The Pipeline Authority and Anor [1979] HCA 21; (1979) 141 CLR 443

HEARING

CANBERRA
1:12:1987

ORDER

The first defendant be granted leave to withdraw the undertaking given to the Court on 12 September 1986 not to enforce or seek to enforce any of the several banker's undertakings executed by the second defendant in favour of the first defendant on or about the 24th day of January 1986.

The plaintiff pay the first defendant's costs of this application.

There by a stay of proceedings for one week.

Leave to appeal be granted.

DECISION

This is an application by the first defendant for leave to withdraw an undertaking given to the court. Leave is necessary and a change of circumstances must be established by evidence. I refer to Adam P. Brown Male Fashions Pty. Limited v. Philip Morris Incorporated and Another (1981) 35 ALR 625, a decision of the High Court.

2. By statement of claim of 17 October 1986, amended on 14 November 1986, the plaintiff sought to enforce an alleged contractual obligation on the part of the first defendant not to seek enforcement of certain so called bank guarantees. The plaintiff alleged that such guarantees had been given by the bank, that is the second defendant, in order to secure performance by the plaintiff of its obligation to supply wall cladding to the first defendant who was engaged in a building project in Canberra. The plaintiff further alleged that a dispute had arisen between the parties whereby the first defendant had been shown to be in breach of its contractual obligations to the plaintiff so that the first defendant was no longer entitled to enforcement of the guarantees. The plaintiff sought declarations to that effect and also an injunction to restrain the first defendant from enforcing the guarantees. The plaintiff also sought an order for delivery by the first defendant to the plaintiff of the guarantees for cancellation.

3. In its defence of 5 December 1986 the first defendant claimed it was the plaintiff who was in breach of the contractual obligations and so was not entitled to the relief claimed. Further, the first defendant brought a counter-claim for a sum in excess of two million dollars for breach of contract. On 6 February 1987 this Court ordered a stay of the counter-claim on the ground that it was already the subject of proceedings between the parties in the Supreme Court of Queensland. The matter has come before this Court many times on an interlocutory basis. On 12 September 1986 an undertaking was given by the first defendant to the Court in the following terms:

"An undertaking to the court by the first

defendant that until 10 a.m. 17 September 1986
the first defendant will not enforce, or seek to
enforce any of the several bankers' undertakings
executed by the second defendant in favour of the
first defendant on or about 24 January 1986 being
those referred to in annexure C to the affidavit
of Graham William Clews, sworn 12 September 1986
and filed herein."

4. On 7 November 1986 the matter was stood over to another date and the Court noted the following:

"Undertaking to continue until further order with
liberty to first defendant to apply for discharge
of undertaking with two days notice. A reason
for discharge application is if plaintiff fails
to prosecute action expeditiously."

5. A perusal of the file suggests that there is an outstanding matter of an application by the first defendant to amend its defence.

6. By notice of motion taken out on 2 November 1987 the first defendant now seeks leave to withdraw the undertaking given on 12 September 1986.

7. The evidence discloses that there have been at least two significant developments since that date. On 23 July 1987 the second defendant who held a debenture charge over the assets of the plaintiff appointed a receiver of the property of the plaintiff. On 30 July 1987 an order to wind up the plaintiff was made in the Supreme Court of Queensland on the petition of a creditor. The liquidator's statement of affairs shows that there are no funds for distribution to unsecured creditors. The first defendant now claims that it should be released from its undertaking of 12 September 1986. Two major reasons have been advanced. The first is that the plaintiff has not prosecuted its claim without delay. There is, in my view, some substance in that contention but it is not sufficient to be decisive of the application. The second reason advanced is that the bank guarantees do not cover the interest which is accruing on the amounts owing by the plaintiff to the first defendant, or rather do not cover any interest that might in due course be awarded to the first defendant if it succeeded in a claim for damages against the plaintiff.

8. The interest on the amounts covered by the guarantees is said to be accruing at the rate of about $2,000 per week. The liquidator and receiver oppose the lifting of the undertaking and argue that to grant leave would be, in effect, to order summary judgment in favour of the first defendant without trying the issues in the ordinary way. However, I do not accept that argument. In my view the effect of the undertaking has been similar to that of granting an injunction pending the hearing in terms similar to those sought by the plaintiff in its statement of claim. To give leave to withdraw the undertaking would have an effect similar to refusing an application for an interim or interlocutory injunction. I note that there was a claim for an interim injunction sought on 12 September 1986 which was, of course, the day on which the undertaking was given. On the material before me a case for granting an interlocutory injunction has not been made out, or would not have been made out if it had been sought.

9. In an unreported decision of Mr. Justice Yeldham in the Supreme Court of New South Wales on 28 June 1982, Pearson Bridge (NSW) Pty. Limited v. State Rail Authority of NSW, his Honour made orders in favour of a sub-contractor against a building contractor restraining it from calling upon a bank guarantee given to secure performance of a building contract by the sub-contractor. In doing so his Honour emphasised the commercial detriment that the subcontractor would suffer once it became known in the industry that the guarantee had been called up. His Honour made the order notwithstanding his recognition that the decision of the High Court in Wood Hall Limited v. The Pipeline Authority and Anor [1979] HCA 21; (1979) 141 CLR 443 was authority for the proposition that an owner of works is entitled to be paid performance guarantees whether or not there has been want of due and faithful performance. The consideration of commercial detriment is absent, or at least considerably reduced in the case before me now that the plaintiff is in receivership and liquidation. Moreover an interim injunction is usually granted subject to the applicant giving an undertaking as to damages. Such an undertaking, in the present case, unless it were given personally by the liquidator, would appear to be of little worth, having regard to the plaintiff's financial situation. In my view the balance of convenience would lie in refusing an application for an interlocutory injunction. There is nothing to suggest that if the plaintiff is ultimately successful in making out its claim for relief, damages would not be an adequate remedy. I recognise that no claim for damages is sought in the statement of claim at this stage and presumably none could be sought until the bank tried to exercise some right of recourse against the first defendant in the event that the bank guarantees had been called up.

10. I am of the view that the balance of convenience accordingly does not lie in preserving the status quo but in allowing the first defendant to pursue its rights under the guarantees and permitting the rights and obligations between the plaintiff and first defendant to be adjusted thereafter. Accordingly I make the orders set out in paragraph 1 of the notice of motion of 2 November 1987.

11. I order the plaintiff to pay the first defendant's costs of this application. I order a stay of proceedings for one week. Leave to appeal granted.