ICON CENTRAL LIMITED V ANTONY COLLINGWOOD AND CAROLYN SCANLEN & ORS HC AK CIV-2008-404-007424 [2009] NZHC 980 (10 August 2009)

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
                                                           CIV-2008-404-007424



              BETWEEN                    ICON CENTRAL LIMITED
                                         Plaintiff

           
  AND                        ANTONY COLLINGWOOD AND
                                         CAROLYN SCANLEN & ORS
             
                           Defendants


Appearances: B O'Callahan, G S G Erskine and J Puah for Plaintiffs
             P Dale and
D Grove for Defendants

Judgment:     10 August 2009

Reasons:      10 August 2009


                REASONS FOR JUDGMENT OF VENNING
J




Solicitors:   Ellis Law, Auckland
              Carter & Partners, Auckland
Copy to:      P J Dale/D W Grove, Auckland
   
          B O'Callahan, Auckland




ICON CENTRAL LIMITED V ANTONY COLLINGWOOD AND CAROLYN SCANLEN & ORS HC AK
CIV-2008-404-007424
10 August 2009

Introduction


[1]    The defendants have sought an injunction in the following terms:

       Restraining the claimant
[Icon] from call upon New Zealand Home bonds
       Limited to pay out deposit bonds in respect of any of the defendant's
      
agreements for sale and purchase pending Judgment ...

[2]    The application was filed on Friday and referred to me today. Coincidentally
I am Duty Judge this week. After hearing from counsel at a telephone conference I
declined the application for interim injunction.
I now set out the reasons why I did
so.


Background


[3]    Icon has now physically completed the development and called upon investor
purchasers to settle. Icon has received the deposits where deposits were paid by
cash. A number of the investors in the Icon Development
provided deposits by way
of home bond as opposed to providing cash deposits. To satisfy its obligations to its
funder Westpac, Icon
has assigned the bonds to Westpac.               Icon, through its
solicitors, has now called upon New Zealand Home Bonds Limited
to pay the
deposit. Under the bond New Zealand Home Bonds has until 12 August 2009 to pay
the deposits in accordance with that direction.


[4]    In the substantive proceedings the investors argue that they are not obliged to
settle and were entitled to cancel the agreements
for sale and purchase pursuant to
which the deposits are payable. Judgment is reserved in those proceedings.


Parties' cases


[5]
   Mr Dale for the applicant investors submitted the injunction should be
granted pending delivery of the judgment on the plaintiffs'
claims.


[6]    Icon opposed the injunction on the grounds that inter alia the injunctive relief
sought is not available because:

       ·   Icon has already called upon the bonds;


       ·   the relief sought is not available as a matter of law;


     
 ·   the particular investors who seek the injunction are not identified;


       ·   the balance of convenience does not favour
granting the injunction.


Decision/reasons


[7]    After hearing from counsel I came to the view that the applicant investors
were
not able to establish a basis for the injunction sought primarily because the
horse had bolted and also because of the existing authorities
relating to letters of
credit and performance bonds referred to by Mr O'Callahan.


[8]    While clearly the applicant investors
have a seriously arguable claim to
cancel the agreements for the reasons advanced in the substantive proceedings, that
does not address
the issue of whether they have a seriously arguable case for the
injunctive relief sought. The order sought is directed at restraining
Icon from doing
something that it has already done, namely calling upon New Zealand Home Bonds
Limited to pay out the deposit bonds.
There is no basis to make an order which
would be futile.


[9]    Nor am I minded to make some form of mandatory order in order
to undo the
call. In the limited time available this afternoon counsel have referred to a number
of authorities on the approach the
Courts have taken to injunctions concerning the
performance of bonds. The most helpful is perhaps the case of Fortex Group
Limited (In Receivership
and In Liquidation) v The New Zealand Meat Producers
Board & Anor HC WN CP118/95 16 June 1995 Doogue J. That case involved an
application
for injunction to prevent a party certifying that money was payable to it
and thereby call upon a letter of credit drawn in its favour
on the bank. Doogue J
discussed the relevant principles applying in such cases at pp 12 to 17 and in
particular referred to the decision
of Deutsche Ruckversicherung AG v Walbrook
Insurance Co Ltd  [1994] 4 All ER 181. In that case Phillips J confirmed that where

an injunction is sought against a beneficiary (in this case Icon) fraud is required
and
an injunction will not issue unless the plaintiff demonstrates the beneficiary (Icon)
knows that he has no right to draw on the
letter of credit. Phillips J also declined to
accept an alternative submission that a different test fell to be applied where an
injunction was sought directly against the beneficiary. He concluded:

       I consider that the correct contractual inference that
should normally be
       drawn is that the beneficiary will be entitled to draw on the letter of credit
       provided that he
has a bona fide claim to payment under the underlying
       contract.

[10]   Doogue J approved the Phillips J discussion of the
principles and then noted
the position was similar in Australia.


[11]   In the present case Icon has a bona fide claim for performance
of the bond
under the underlying agreements for sale and purchase. Just as the investors have a
bona fide claim to cancel the agreements
Icon itself has a bona fide arguable claim
against the investors for settlement. Whether ultimately Icon or the investors will
succeed
will be resolved by the substantive judgment.


[12]   Mr Dale suggested that a distinction could be drawn between letters of credit
and bonds, particularly the home bond in this case but similar principles have been
applied in the case of bonds in RD Harbottle
Mercantile Ltd v National Westminster
Bank Ltd  [1978] QB 159 and Edward Owen Engineering Ltd v Barclays Bank
International Ltd  [1978] 1 All ER 976. I do not apprehend the principle is different
between letters of credit and bonds. Both are in the nature of cash.


[13]   For those
reasons the applicants failed to satisfy the Court an injunction
should issue.


[14]   There are further reasons why the application
could not succeed on the basis
of the current application. The actual investors in relation to whom it related were
not identified
in the application. That is not a mere technicality. Undertakings
would be required. No undertakings were provided.

[15]    Next,
as the bonds have been assigned to Westpac the moneys will not be
held by Icon but by Westpac. There is no suggestion Westpac would
not be in a
position to repay if ultimately the effect of the judgment is that Icon was not entitled
to the bonds. I understood from
counsel that Westpac had given an undertaking in
relation to certain other deposits received and that an undertaking in relation
to the
receipt of the bonds would be available.


[16]    As that position was not clear, however, I did reserve leave to Mr Dale
to
seek to reformulate the injunction if he were able to do so in a more appropriate
form, either preventing Icon from taking any
further steps in relation to settlement
(which Mr Carter indicated it had no intention of doing) or if the position in relation
to
Westpac could not be clarified satisfactorily as Westpac is not formally a party to
the proceedings.


Costs


[17]    Mr O'Callahan
sought costs on a category 3B basis. He submitted that it had
been necessary to respond to the injunction at short notice. However,
while Icon has
succeeded in opposing the injunction it has brought the matter on itself. The bonds
were not due to mature until 26
October 2009, by which date a judgment is expected.
The situation has arisen because Icon chose to take a commercial approach to
the
matter to satisfy its obligation to its banker, Westpac as Mr O'Callahan suggested.


[18]    The investors will now be left
in the position of having to respond to
demands by New Zealand Home Bonds as a result of Icon's action. The action was
not required
to be taken to avoid the expiry of the bonds but rather to satisfy Icon's
commercial interests. In the circumstances I am not minded
to make any order for
costs in favour of Icon despite its successful opposition.




                                           
  __________________________
                                              Venning J