Kaye v Brailey [2004] FCA 101 (16 February 2004)

Last Updated: 16 February 2004

FEDERAL COURT OF AUSTRALIA

Kaye v Brailey [2004] FCA 101

TRADE PRACTICES – application for interlocutory injunctions – where injunction sought against consumer advocate holding proxies in respect of creditors’ meeting convened pursuant to s 439A of the Corporations Act 2001 (Cth) – whether relief sought was final relief – where no point in granting limited relief sought.



Corporations Act 2001: Pt 5.3A




























HENRY KAYE v DENISE BRAILEY

V 115 of 2004


GOLDBERG J
16 FEBRUARY 2004
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 115 of 2004

BETWEEN:	HENRY KAYE Plaintiff
AND:	DENISE BRAILEY Respondent
JUDGE:	GOLDBERG J
DATE OF ORDER:	16 FEBRUARY 2004
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. The application for interlocutory relief be dismissed.

2. The plaintiff pay the respondent’s costs of and incidental to the application for interlocutory relief on the following basis:

(a) up to the commencement of the hearing on 13 February 2004, on a solicitor and client basis with such costs to be taxed and paid forthwith pursuant to O 62 r 3 of the Federal Court Rules;

(b) from the commencement of the hearing on 13 February 2004, on a party and party basis.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 115 of 2004

BETWEEN:	HENRY KAYE Plaintiff
AND:	DENISE BRAILEY Respondent

JUDGE:	GOLDBERG J
DATE:	16 FEBRUARY 2004
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

1 These reasons should be read together with the reasons in Kaye v National Investment Institute Pty Ltd (Administrator Appointed) [2004] FCA 100 ("the extension of time proceeding"). Those reasons are incorporated in these reasons.

2 The plaintiff, Mr Henry Kaye, is the sole director of National Investment Institute Pty Ltd (Administrator Appointed) ("the company"). The company was placed in voluntary administration under Pt 5.3A of the Corporations Act 2001 (Cth) ("the Act") on 25 November 2003, on which day, Andrew Stewart Reed Hewitt ("the administrator") was appointed administrator of the company pursuant to s 436A(1) of the Act.

3 The meeting of creditors required by s 439A(1) of the Act was initially convened for 22 December 2003 and has now been adjourned to 18 February 2004. The administrator has prepared and sent to the creditors a number of reports pursuant to s 439A(4) of the Act. In the last report, dated 9 February 2004, the administrator has stated that he considers that it is in the creditors’ best financial interest to accept the proposed deed of company arrangement.

4 This proposed deed of company arrangement has met with criticism. On 10 January 2004 the respondent, Ms Denise Brailey, sent a letter to creditors of the company which was apparently received within a day or so thereafter. The letter was written by Ms Brailey in her capacity as National President of the Real Estate Consumer Association (Inc). The association is concerned with protection of consumers. Ms Brailey is not, as I understand the position, herself a creditor of the company, but for present purposes, that is not a relevant matter. Nor is her involvement in other consumer issues which are unrelated to the company’s group of companies a relevant issue.

5 In the letter, Ms Brailey made a number of statements and allegations (of which there are more details in the reasons in the extension of time proceeding) relating to the conduct of Mr Kaye and the conduct of the administrator and she expressed a number of views and opinions about financial matters relating to the administration, in particular, the likely return to unsecured creditors. In particular, she made the following statements:

• Mr Kaye had deceived creditors;

• the administrator had misled the creditors;

• the figures which give rise to the rate of return to creditors were unsubstantiated;

• the creditors stood a similar chance of recovery on a liquidation as they would if the company entered into a deed of company arrangement.

6 Mr Kaye initially sought very wide interlocutory relief effectively preventing Ms Brailey from participating in the creditors’ meeting or speaking out about it at all. However, counsel recognised that the interlocutory relief sought in the application was so wide as to result, if granted, in the determination of final relief. Counsel recognised the difficulties to be overcome in obtaining such relief and limited the relief sought to restraining Ms Brailey from exercising the proxies so as to vote on any issue at the meeting to be held on 18 February 2004, other than to adjourn the meeting. In the course of the hearing before me this relief was further limited and indeed, altered quite significantly. In its final form the interlocutory relief claimed was an injunction restraining Ms Brailey from voting against a resolution to adjourn the meeting.

7 In the present form of the statement of claim (and counsel for the plaintiff foreshadowed amendments to it), it is claimed that the statements made in the letter by Ms Brailey were misleading and deceptive and that she relied upon them in procuring the proxies from the shareholders.

8 Ms Brailey raised a number of issues in opposition to the application for interlocutory relief. I summarise them as follows:

• Mr Kaye is only a director of the company and in respect of the relief sought based on the misrepresentations alleged, it is the administrator who should be a party;

• as Mr Kaye is seeking to restrict creditors’ rights it is the creditors who ought to be the respondents;

• the statement of claim does not allege that the creditors who provided proxies relied upon the statements in the letter; rather it is alleged that Ms Brailey herself relied upon the representations;

• the statement of claim does not identify who it is that has been misled. If it is alleged that creditors have been misled there is no evidence to that effect;

• the conduct alleged is not "in trade or commerce". Ms Brailey relied upon Concrete Constructions (NSW) Pty Ltd v Nelson [1990] HCA 17; (1990) 169 CLR 594, at 602-603.

9 Ms Brailey also relied on the following matters in opposition to the application for interlocutory relief:

• the statements made are not misleading and deceptive having regard to the context in which the statements were made;

• the plaintiff has delayed in bringing the proceeding

• the conduct complained of was stale and had been superseded by later reports and letters.

10 It is also relevant to note that no creditor has come forward to give evidence that he or she received the document and relied on it.

11 It was also submitted that Mr Kaye was incapable of being able to provide any undertaking as to damages. The more correct position was that the plaintiff was in a position to give an undertaking as to damages but not if the undertaking could not be based upon financial resources which were available to, or could be reached by, Ms Brailey.

12 As I have dismissed the application in the extension of time proceeding to extend the period during which the creditors’ meeting may be adjourned, there is no point in Mr Kaye obtaining an interlocutory injunction restraining Ms Brailey from exercising the rights given to her under the proxies to cast the shares against a resolution to adjourn the meeting, as the creditors do not have the ability to adjourn the creditors’ meeting beyond 20 February 2004. Irrespective of the other reasons against such an order, I would not grant the injunction for only two days. There is no reason to grant such relief for such a short period.

13 Even if I had granted the relief sought in the extension of time proceeding I would have not have been disposed to have granted the interlocutory relief sought in this proceeding, albeit limited, as it came to be in its final form. A significant number of the statements complained of by the plaintiff are not so much statements of fact as statements of opinion or belief.

14 However, there is a more fundamental reason why the interlocutory relief sought should not be granted, namely that it is not fairly related to, or based upon, the claims made in the statement of claim. The gravamen of the complaint was the repetition of the offending words and the procuring of the proxies on the basis of false information. However, as noted in the extension of time proceeding, Mr Kaye took advantage of the opportunity to put his point of view to the creditors when he wrote to them on 10 February 2004. In that letter he sought to correct a number of matters, albeit not all of them. Nevertheless, he took advantage of the situation and the opportunity open to him to put his point of view and respond to Ms Brailey’s statements. I take this into account as a matter of discretion in determining where the balance of convenience lies, even if there is a significant question to be tried on the substantive issue of the misleading nature of the statements in the letter.

15 Counsel for Mr Kaye submitted that it was in the interests of creditors who had given proxies to Ms Brailey that the question be investigated whether, in the light of the statements said to be misleading, the creditors would still proceed in the way they had by giving their proxies to Ms Brailey. Counsel submitted that the investigation could be done by the administrator circulating a notice of adjournment of the meeting, presumably if that was the will of the creditors, and include further proxy forms which could replace the earlier forms which had been sent to Ms Brailey. The parties could then await the outcome and see if new proxies were sent to the administrator. Apparently this proposal was submitted as an alternative to the proposal that the creditors be given the opportunity to adjourn the meeting for a sufficient period of time to enable a determination of the issues arising from Ms Brailey’s letter. Counsel appeared to accept that the time required to have those issues determined was too long and that it would be necessary to have the future of the company determined well before that time could be achieved.

16 However, the administrator is content with the material which has been placed before the creditors and did not support the submissions made by Mr Kaye involving the creditors adjourning the meeting. This submission was a belated submission by Mr Kaye and I do not accept it. It was integral to the submission that the creditors should be given further information. However, they have received the reports from the administrator, a letter from the administrator dated 13 January 2004 and a letter from Mr Kaye dated 10 February 2004. In Mr Kaye’s letter he enclosed a proxy form which could be sent to the administrator and he strongly recommended that it could be faxed immediately to the administrator’s office.

17 Although there are a number of commercial alternatives available depending upon the outcome of the proceedings before Merkel J, the range of possibilities has been placed before the creditors.

18 There was no support for Mr Kaye’s proposition that it was in the interests of creditors that the time be extended to enable them to adjourn the meeting if so disposed. No member of the committee of creditors supported the application, nor did the administrator, and the Commission’s view was, in substance, that it was a matter for the creditors whether or not they wanted to adjourn the meeting but that there were grounds against such an adjournment.

19 Further, it has not been made specifically clear that Mr Kaye or, for that matter anyone else, is proposing to move a motion for adjournment.

20 I would also not be disposed to grant the interlocutory relief for the following reasons. The application seeks relief which is tantamount to final relief, Mr Kaye has delayed in commencing the proceeding and Mr Kaye, by letter to creditors dated 10 February 2004, responded to Ms Brailey’s letter. I have expanded on those matters in the reasons in the extension of time proceeding.

21 I would also have refused to grant the relief sought as it affected the rights of persons, namely creditors, who were not joined as parties or represented in the proceeding.

22 The application for interlocutory relief will be dismissed.

I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg.

Associate:

Dated: 16 February 2004

Counsel for the plaintiff:	G Bigmore SC and P J Cosgrave
Solicitor for the plaintiff:	Maddocks
Counsel for the Defendant:	M Clarke
Solicitor for the Defendant:	Slater and Gordon
Date of Hearing:	13 February 2004
Date of Judgment:	16 February 2004