Aquamore Credit Equity Pty Ltd v Pamada Pty Ltd (in liquidation)

These reasons for judgment concern the plaintiffs’ application for an interim injunction restraining the second and fifth defendants from negotiating for, making offers in relation to, entering into, performing or giving effect to any agreement to sell, transfer, dispose of or grant any interest in the intellectual property in respect of a project for the development of a renewable energy facility in the Upper Hunter region of New South Wales.

For the reasons that follow, an interim injunction will be granted, but in terms retraining only the making of offers for sale, sale, transfer, disposition of or granting any interest in that intellectual property. The injunction will not restrain negotiations. Moreover, there will be no order of the kind sought by the plaintiffs requiring the second and fifth defendants to serve an affidavit disclosing all persons with whom such negotiations have been conducted or to whom such offers have been made since the commencement of these proceedings on 28 April 2020.

The following matters are uncontroversial, at least for the purpose of this interlocutory application.

The first defendant, Pamada Pty Ltd (in liq) (Pamada) is named as the proponent of an approval issued by the Minister for Planning dated 31 January 2010 pursuant to the former Part 3A of the Environmental Planning and Assessment Act 1979 (NSW) for the construction and operation of a renewable energy generation facility and associated infrastructure at two sites in the Upper Hunter local government area in New South Wales (the Project).

Mr Mark Sydney (also known as Mark Sydney von Somogy) is the fifth defendant in these proceedings. Mr Sydney is, and was at all relevant times, the sole director and shareholder of Pamada.

At the time the contract the subject of these proceedings was allegedly entered into in December 2018, Mr Sydney was also the sole director of the second defendant, Upper Hunter Energy Park Pty Ltd (Upper Hunter) and the second plaintiff, UHEP Pty Ltd (receiver and manager appointed) (UHEP).

The plaintiffs adduced evidence on this interlocutory application to the effect that Mr Sydney or members of his family were the ultimate beneficial owners of Pamada, Upper Hunter, UHEP, the third defendant, Pamada Management Pty Ltd (in liq) (Pamada Management) and the fourth defendant, Pamada Management Northshore No. 3 Pty Ltd (in liq) (Pamada NS) at all relevant times. No evidence to the contrary was adduced by Mr Sydney or Upper Hunter.

In December 2016, Pamada transferred its rights in respect of the Project, including its rights to the intellectual property, to Upper Hunter.

The first plaintiff, Aquamore Credit Equity Pty Ltd (Aquamore) is in the business of providing loans to borrowers with urgent finance requirements.

In March 2018, Aquamore lent approximately $1.2 million to Pamada Management. The loan was guaranteed by Mr Sydney, Ms Sally Sydney (who is the sixth defendant in these proceedings), Pamada NS and UHEP. The borrower’s obligations were secured by a charge over all present and after-acquired property of Pamada Management. The guarantors’ obligations were secured by unregistered mortgages over property in Queensland owned by Pamada NS and a property in Mosman owned by Ms Sydney (the Mosman property) and by charges over all present and after-acquired property of Pamada NS and UHEP. Caveats were subsequently lodged by Aquamore in respect of its interest under the two unregistered mortgages.

In May 2018, the loan was varied by extending the repayment date and by Aquamore lending an additional sum of approximately $489,000 to Pamada Management.

Later in May 2018, Aquamore made a further loan to Pamada Management in the sum of approximately $1.6 million on essentially the same terms and with the same guarantees and security as the first loan referred to above.

The two loans, including the variation of the first loan referred to above, were the subject of formal, written agreements.

Pamada Management failed to repay the loans to Aquamore by the due dates in July 2018.

In September 2018, Aquamore appointed receivers to the assets of Pamada Management, Pamada NS and UHEP.

In October 2018, Ms Sydney entered into a contract for the sale of the Mosman property.

The controversy in these proceedings relates to a contract that the plaintiffs allege was entered into between Aquamore, Upper Hunter, Pamada, Pamada Management and the guarantors under the two loans (UHEP, Pamada NS and Mr and Mrs Sydney) in about December 2018. I will refer to this as the December 2018 contract, acknowledging that the defendants dispute that any such contract came into existence.

The plaintiffs allege that, pursuant to the December 2018 contract, the parties referred to immediately above agreed that:

The December 2018 contract was not the subject of a formal, written agreement. It is alleged to have been partly express and partly implied, and the plaintiffs rely on email correspondence and conversations as evidencing the express terms.

At the hearing of the present application, the plaintiffs relied on an affidavit sworn on 21 September 2020 by Mr Allen Hsu, a director of Aquamore, as establishing a serious question to be tried in relation to the existence of the December 2018 contract and the plaintiffs’ claims for relief referred to below.

Mr Hsu’s evidence may be summarised as follows.

In late November and early December 2018, Mr Sydney made several requests to Mr Hsu for Aquamore to withdraw its caveats over the Mosman Property so as to permit the sale of that property to be completed. Mr Sydney told Mr Hsu that he (Mr Sydney) would otherwise be made bankrupt.

On behalf of Aquamore, Ms Hsu agreed in principle to release the caveats, subject to an assignment of the intellectual property in the Project to UHEP. It will be recalled that Aquamore’s security for the two loans referred to have included a charge over the assets of UHEP, but Aquamore did not have a charge over the assets of Pamada or Upper Hunter.

On 3 December 2018, Mr Sydney sent an email to Mr Hsu in the following terms:

The plaintiffs submitted that the references in the email to the “Wind Farm” and the “Wind project” are references to the whole of the Project. Upper Hunter and Mr Sydney did not make any submission to the contrary.

By separate email on 3 December 2018, Mr Sydney sent to Mr Hsu:

The draft email referred to in each of the above minutes was in the terms of the email sent by Mr Sydney to Mr Hsu on 3 December 2018 that I have referred to above.

Mr Sydney signed each of the three sets of minutes referred to above in his capacity as director of Pamada, Upper Hunter and UHEP respectively.

Mr Hsu’s evidence is that he did not withdraw the caveats over the Mosman Property after he received Mr Sydney’s 3 December 2018 emails because his legal representatives remained unsatisfied with Aquamore’s ability to enforce the agreement that Mr Hsu understood was evidenced by the emails and the minutes. Mr Hsu deposes that he had a meeting with Mr Sydney on or about 12 December 2018, during which the following exchange occurred:

Mr Hsu’s evidence of that conversation is consistent with an email that Mr Sydney sent to him later in the day on 12 December 2018 attaching “notes from our meeting where we hope to find a path forwards”. Relevantly, the attached notes include the following statement under the heading “Wind Farm”:

It is not in dispute that Aquamore withdrew its caveats on the Mosman Property on or about 18 December 2018 and released the Mosman Property as security for the moneys owing under the first and second loans. The sale of the Mosman Property was completed and Ms Sydney paid $300,000 to Aquamore.

Mr Hsu gave evidence that he would not have authorised the release of the Mosman Property if not for the licences granted pursuant to the 3 December 2018 minutes referred to above, the commitments made by Pamada and Upper Hunter recorded in those minutes, the further commitments made by Mr Sydney on behalf of Pamada and others on 12 December 2018, and certain further assurances from Mr Sydney on 18 December 2018 that UHEP would be the vehicle with carriage of the Project.

Mr Hsu was not cross-examined. Upper Hunter and Mr Sydney did not adduce any evidence on the hearing of the plaintiffs’ application for the interim injunction.

The plaintiffs claim that, in breach of the December 2018 contract, Upper Hunter and Pamada have refused and failed to license the intellectual property in respect of the Project to UHEP, have continued to use that intellectual property and have failed to give UHEP carriage or control of the Project.

Alternatively, the plaintiffs claim that Upper Hunter and Pamada are estopped from departing from their alleged representations that they would license the intellectual property in respect of the Project to UHEP and transfer carriage and control of the Project to UHEP within a reasonable time. The plaintiffs claim that Aquamore relied on those alleged representations to its detriment by withdrawing the caveats from the Mosman Property and releasing the Mosman Property from the security for the two loans.

The plaintiffs claim a declaration that there was a binding contract on the terms of the December 2018 contract referred to above and orders for specific performance of that contract, including (relevantly) orders that:

Alternatively, the plaintiffs claim damages or equitable compensation against Pamada and Upper Hunter.

Mr and Ms Sydney deny the alleged December 2018 contract. The representations alleged to have been made in relation to the licence and carriage and control of the Project are also denied, save for a representation by Mr Sydney in his capacity as director of Upper Hunter to the effect that UHEP would be granted a “limited and revocable licence to use certain intellectual property for a short period of time, to aid in the marketing and sale of the Project”.

Upper Hunter also denies the alleged December 2018 contract. Without limiting the generality of that denial, Upper Hunter denies that the alleged contract was supported by sufficient consideration and denies that the alleged terms are sufficiently certain to constitute a binding contract. Upper Hunter also raises, by way of cross-claim and defence of set-off, a claim against the plaintiffs under the second limb of Barnes v Addy in respect of any benefits to which they claim to be entitled under the alleged December 2018 contract. Upper Hunter contends that, if the alleged December 2018 contract was entered into (which is denied), Mr Sydney’s conduct in causing Upper Hunter to enter into it constituted a breach of his fiduciary duties as a director of Upper Hunter and the plaintiffs were knowingly involved in that breach.

Pamada neither admits nor denies the plaintiffs’ allegations in these proceedings, but says that it lacks the requisite authority to perform any acts ordered in specific performance of the alleged December 2018 contract because it transferred its rights in relation to the Project (including intellectual property) to Upper Hunter in December 2016.

In separate proceedings in this Court, summary judgment was entered against Mr Sydney in favour of Aquamore on 20 October 2020 in the amount of $2,539,500, being the amount then owing under the loans guaranteed by Mr Sydney: see Aquamore Credit Equity v Von Somogy [2020] NSWSC 1493. That judgment remains unsatisfied.

By notice of motion filed on 28 May 2021, the plaintiffs sought an interim injunction restraining Upper Hunter and Mr Sydney from negotiating for, making offers in relation to, entering into, performing or giving effect to any agreement to sell, transfer, dispose of or grant any interest in “the Project Assets”.

During the hearing of the motion on 20 August 2021, the terms of the proposed injunction were revised to, inter alia, narrow the assets to the intellectual property in respect of the Project. The revised terms of the injunction sought by the plaintiffs were as follows:

Upper Hunter and Mr Sydney opposed the plaintiffs’ application. Each of them offered an undertaking to the Court to give 14 days’ notice to the plaintiffs of any intention on their part to enter into any binding contract to sell, transfer or grant any interest in respect of the Project.

Consistently with its position referred to at [40] above, Pamada did not wish to be heard in relation to the interim injunction application.

The principles governing the grant of interim injunctions are well established: see Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199, especially at [8]-[13], [18] (Gleeson CJ), [91] (Gummow and Hayne JJ, Gaudron JJ agreeing); and see also Papas v Grave [2013] NSWCA 308 at [83] (Emmett JA, Sackville AJA agreeing).

The purpose of an interim injunction is to preserve the status quo until the rights of the parties can be determined at a final hearing of the proceeding or, to adopt the language of Gleeson CJ in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (supra) at [12], to “prevent the practical destruction” of the right in respect of which the plaintiff claims final relief “before there has been an opportunity to have its existence finally determined”.

A plaintiff must establish that:

The inadequacy of a remedy in damages is often stated as a separate factor to be considered, but it is more accurately assessed as one aspect of the balance of convenience. The Court must determine 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: Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622-623.

If a serious question to be tried is identified, the strength of the plaintiff’s case for final relief will also be relevant to the Court’s assessment of the balance of convenience. However, the extent to which it is necessary to examine the strength of the plaintiff’s case will depend on all the circumstances of the case.

In my opinion, the presently unchallenged evidence referred to at [7] and [20]-[32] above establishes that the plaintiffs’ claim for specific performance of the alleged December 2018 contract raises a serious question to be tried in the sense described in the authorities referred to above. Indeed, it was not submitted on behalf of Upper Hunter and Mr Sydney that there was no serious question to be tried. Rather, their submissions were directed to whether the strength of the plaintiffs’ case was sufficient to warrant an interim injunction in the terms sought.

In the absence of any evidence adduced by the defendants on this application, and in the absence of any cross-examination of Mr Hsu, I consider that the plaintiffs have demonstrated a reasonably strong case for the purpose of this application.

For present purposes, I do not regard Upper Hunter’s Barnes v Addy cross-claim as diminishing the strength of the plaintiffs’ claim for the purpose of this application. The evidence referred to at [7] above and other documentary evidence adduced by the plaintiffs indicates that the Project has been propounded by Mr Sydney through several corporate entities, all of which are ultimately beneficially owned by him or by members of his family. Upper Hunter adduced no evidence in relation to its cross-claim at the hearing of the interim injunction application.

Of course, it will ultimately be a matter for the trial judge to assess the merits of the plaintiffs’ case, together with the merits of the defences and Upper Hunter’s cross-claim, after hearing all of the evidence adduced by all parties.

The plaintiffs adduced documentary evidence of many instances of Mr Sydney, through various corporate entities, negotiating with potential purchasers of the Project and soliciting investment in the Project, including investment in the form of debt to be secured against the assets of the Project. The assets of the Project include the intellectual property in relation to the Project, which is very broadly defined in the Amended Commercial List Statement in terms that reflect the intellectual property transferred by Pamada to Upper Hunter in December 2016 as set out in a schedule to the deed pursuant to which that transfer occurred. Indeed, it is tolerably clear that the intellectual property comprises substantially the whole of the Project assets. The evidence before the Court on this application did not reveal any other Project assets, save for a licence and option in respect of the land on which the Project is proposed to be developed. Much of the documentary evidence to which I have referred post-dates the commencement of these proceedings and came to the knowledge of the plaintiffs only relatively recently through the discovery process in the proceedings.

Neither Upper Hunter nor Mr Sydney denied these efforts to sell or deal with the Project intellectual property. On the contrary, they maintain that they are entitled to deal with those assets.

On the basis of that evidence, I am satisfied that there is a danger that the plaintiffs will suffer irreparable harm for which damages would not be an adequate remedy if an interim injunction is not granted restraining the sale, transfer, disposal of or granting of an interest in the intellectual property in respect of the Project.

As the plaintiffs submitted, the danger is that Upper Hunter and/or Mr Sydney will sell, transfer, or dispose of, or grant an interest to a third party in, the very intellectual property that the plaintiffs claim that Upper Hunter and Pamada agreed to licence to UHEP. If that were to occur, it is likely that the plaintiffs’ claim for specific performance would be defeated by the third party’s interest in the intellectual property and/or by a third party purchaser or investor’s right to assume or participate in the carriage and control of the Project. As the plaintiffs submitted, that danger arises from any sale, transfer, disposal or granting of an interest to a third party, even if such a transaction is for fair value.

Upper Hunter and Mr Sydney emphasised that the plaintiffs have an alternative claim for damages. However, that does not reduce the likelihood of the plaintiffs suffering irreparable harm if their claim for specific performance is effectively defeated before it has been determined on its merits. There is unchallenged evidence of Mr Sydney’s statements to Mr Hsu in December 2018 about his financial position and the judgment debt entered against him almost one year ago in respect of moneys owing to Aquamore remains unsatisfied. According to Upper Hunter’s financial statements for the year ended 30 June 2020, it has a net asset deficiency of approximately $772,000. I infer from the lack of progress in relation to the Project since 2018 and from the evidence of Mr Sydney’s activities referred to at [55] above that Mr Sydney and his related entities, including Upper Hunter, lack the funds to progress the Project and that their available options are to sell the Project or to attract a substantial investment to finance the Project. Senior counsel for Upper Hunter accepted that this inference was open, and Mr Sydney (who appeared in person) did not demur. Accordingly, any damages award would most likely prove to be a hollow victory for the plaintiffs in this case.

Upper Hunter and Mr Sydney submitted that any sale or dealing with the Project intellectual property was likely to “further the realisation of the monies owed” to Aquamore and this would in fact be in the interests of the plaintiffs. However, the submissions fell short of positively asserting that Mr Sydney and his associated entities intend to apply any proceeds of dealing with the Project intellectual property in repayment of monies owing to Aquamore under those loans. Moreover, there was no evidence of any realistic prospect of a third party investing funds in the Project on the basis that an amount in excess of $2.5 million would be applied to repay existing debt. Those submissions therefore do not detract from the danger referred to at [58] above, particularly when viewed in light of Mr Hsu’s presently unchallenged evidence that Mr Sydney said to him in October 2019 that “[t]he security you have is illusory” and suggested that he would arrange for repayment of the principal only if Aquamore would waive its right to payment of interest in respect of the loans.

However, I accept the submissions made on behalf of Upper Hunter and Mr Sydney that the terms of any injunctive relief should not extend to preventing them from negotiating for the sale, transfer or disposal of the Project intellectual property or negotiating the grant of an interest in that intellectual property to a third party. Such negotiations will not prejudice the plaintiffs if they do not result in any agreement, and the terms of the injunction will restrain Upper Hunter and Mr Sydney from entering into an agreement or from making an offer, the acceptance of which by a third party may give rise to a binding agreement. By eliminating negotiations from the scope of the conduct to be restrained by the injunction, Upper Hunter and Mr Sydney will not suffer the prejudice of having their hands completely tied in relation to the Project. It was submitted on their behalf that they wish to be negotiating with third parties to get themselves into a position whereby, if these proceedings are determined in favour of the defendants, they will be able to sell or grant an interest in the Project to a third party promptly thereafter.

It was also submitted on behalf of Upper Hunter and Mr Sydney that they should not be restrained from giving effect to any binding agreement already entered into as this would put them in breach of contractual obligations to third parties. In circumstances where they did not submit that any such agreement had entered into, much less adduce evidence of any such agreement, I reject that submission.

Provided that the terms of the injunction are limited in the manner referred at [61] above, I am satisfied that the danger of the plaintiffs’ claim for specific performance being effectively defeated before it has been determined on its merits if the interim injunction is refused outweighs any prejudice to Upper Hunter and Mr Sydney if the injunction is granted. Neither Mr Sydney nor Upper Hunter adduced any evidence of prejudice. They submitted that the prejudice is self-evident, in that they will be unable to put themselves in a position of being able to negotiate a sale of, or significant investment in, the Project or the Project intellectual property that they can then complete if they succeed in defending the plaintiffs’ claims in these proceedings. However, that prejudice does not arise given that the interim injunction is to be limited in the manner I have indicated.

I do not regard the undertaking offered by Upper Hunter and Mr Sydney to give the plaintiffs 14 days’ prior notice of any intention to enter into a contract as tipping the balance against granting an interim injunction. The plaintiffs have established after a contested hearing that an interim injunction is appropriate. The prospect of the Court having to hear and determine that debate in relation to specific transactions on potentially multiple occasions whenever Mr Sydney has a proposed deal in sight is singularly unattractive and inconsistent with the overriding purpose. [1]

I decline to make the disclosure orders sought by the plaintiffs. The plaintiffs failed to demonstrate any legitimate interest in knowing the identity of the various parties with whom Mr Sydney has conducted negotiations in the previous 18 months without concluding any agreement. In addition, as Upper Hunter submitted, the proposed disclosure orders would be onerous in that they would require it to trawl back through extensive documents already discovered in these proceedings in order to provide a subset of the information therein to the plaintiffs in affidavit form.

No issue was raised about the adequacy of the undertaking as to damages offered by the plaintiffs.

The plaintiffs sought an order that the second and fifth defendants pay the plaintiffs’ costs of the interim injunction application. I see no reason why costs should not follow the event.

For the reasons above, I make the following orders: