Qi Wang –v- Kaymet Corporation Pty Limited

HIS HONOUR: The defendant developer entered into contracts with each of the plaintiffs for the sale to each of a unit in a development at Lusty Street, Wolli Creek. The defendant claimed an entitlement to rescind, which the plaintiffs disputed. On 6 December 2013, each of the plaintiffs obtained an interlocutory injunction against the defendant restraining it from dealing with the units.

The injunction was obtained against each of the plaintiffs giving to the Court the usual undertaking as to damages.

The terms of the usual undertaking are found in Pt 25 r 25.8 of the Uniform Civil Procedure Rules 2005 (NSW). It is an undertaking to the Court to submit to such order (if any) as the Court may consider to be just for the payment of compensation (to be assessed by the Court or as it may direct) to any person (whether or not a party) affected by the operation of the interlocutory order or undertaking or of any interlocutory continuation (with or without variation) of the interlocutory order or undertaking.

There then ensued a trial in which the plaintiffs were unsuccessful, and the defendant was held to have been entitled to rescind: see Wang v Kaymet Corporation Pty Ltd [2015] NSWSC 1459 (Stevenson J). The consequence was that on 15 October 2015, the injunctions were dissolved. It is not in issue that each plaintiff’s contract has been rescinded.

The defendant now moves for an order for compensation reflecting the loss that it suffered as a consequence of not being able to rent out each of the units, for the period from the date or rescission in each case to the date the injunction was dissolved. The parties are agreed that, but for the injunction, the defendant would have rented out the units and they are agreed as to the amount of rental forgone.

The plaintiffs resist the defendant’s claim on one basis only, namely that the capital sale value of the units increased during the relevant period (of the injunction) by more than the lost rental. They put that this unrealised gain falls, on equitable principles, to be set off against the defendant’s loss. In support of this proposition they rely on the two decisions of Young CJ in Eq in Churnin v Pilot Developments Pty Ltd [2007] NSWSC 1459 and [2008] NSWSC 831, in which his Honour held that when the Court assesses compensation to be paid under the usual undertaking as to damages it is applying equitable principles and that it is just, in appropriate circumstances, to offset losses made by the object of the injunction, against gains made by it.

The difference between that case and this one is that there the gains were realised, whereas here they have not been. It is not suggested that the defendant has sold, or that it should have sold, any of the units. The defendant was under no obligation to sell the units. There is no basis in equity or in law for applying the principle to unrealised or potential gains. No gain has been made by the defendant as it had been made in Churnin's case.

In these circumstances, the defendant is entitled to compensation in the agreed amounts with respect to lost rental and I so order.

The plaintiffs are to pay the defendant’s costs.

Postscript. Two of the plaintiffs apparently passed away in mainland China after the proceedings were dismissed by Stevenson J. Although there is a solicitor formally on the record for them, neither party suggests that final judgment should be entered against them at present.

In the circumstances, there will be judgment against each of the plaintiffs, bar the aforementioned two, in the amounts agreed. I will give the defendant liberty to apply on three days' notice with respect to the two deceased plaintiffs.