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Fair play

Feature Articles

Cite as: (2007) 81(6) LIJ, p. 52

In the interests of both sides, the Victorian Court of Appeal has endorsed a single “lower risk of injustice” test for courts when deciding applications for interlocutory injunctions.

By John K Arthur

In the interests of both sides, the Victorian Court of Appeal has endorsed a single “lower risk of injustice” test for courts when deciding applications for interlocutory injunctions.
By John K Arthur

In the recent case of Bradto Pty Ltd v State of Victoria; Tymbook Pty Ltd v State of Victoria (Bradto),[1] which was an appeal from the Victorian Civil and Administrative Tribunal (VCAT), the Court of Appeal laid down important principles relating to the law of interlocutory injunctions in Victoria.

It was decided that in determining whether to grant an interlocutory injunction, a court should take the same approach whether the application was for a prohibitory or a mandatory injunction, and whether equivalent to final, or merely interim, relief.[2] A court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been “wrong”.

Since Bradto, the High Court has decided Australian Broadcasting Corp v O’Neill[3] (O’Neill), which elucidates the power of Australian courts to grant interlocutory injunctions, reiterating and explaining the “prima facie case” test laid down in Beecham Group Ltd v Bristol Laboratories Pty Ltd[4] (Beecham). The majority of the High Court confirmed that the Beecham test was the law in Australia, contrasting it with, and clarifying the “serious question to be tried” test, enunciated by Lord Diplock in American Cyanamid Co v Ethicon Ltd (American Cyanamid).[5] In light of O’Neill, the question arises whether the “lower risk of injustice” test adopted in Bradto will now need to be reconsidered.

Interlocutory injunctions: nature and power to grant

Before examining Bradto in more detail, a number of general points may be made about the nature of, and the court’s power to grant, interlocutory injunctions.

The purpose of an interlocutory injunction is to preserve the subject matter of a dispute and to maintain the status quo, pending the determination of the parties’ rights at trial.[6] The right to obtain an interlocutory injunction is generally, and possibly invariably, merely ancillary and incidental to a pre-existing cause of action.

In an urgent case, including where a Mareva order is sought, the applicant for an injunction will often initially apply to a court ex parte (without notice to the respondent) for an interim injunction. This will commonly take place before any proceeding has issued (see r4.08 Supreme Court Rules). If an interim injunction is granted, the further hearing of the application will be adjourned for a week or so to enable the proceeding to be filed and the respondent served with the originating process, summons (naming the respondent/s and specifying the orders sought and the return date), affidavit material and an authenticated copy of the “interim” order. At the interlocutory hearing, at which all parties are present, the court will adjudicate on whether or not an interlocutory injunction should be granted, and if so on what terms and conditions.[7] 

The jurisdiction of the Supreme Court to grant injunctions, whether permanent or interlocutory, is discretionary and very wide. It is virtually identical to that of VCAT. Simply, the jurisdiction may be exercised “if it is just and convenient to do so”.[8] 

In all applications for an interlocutory injunction, a court will ask whether the plaintiff has established that:

  • there is a serious question to be tried, or that the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief;
  • he or she will suffer irreparable injury for which damages will not be adequate compensation unless an injunction is granted; and
  • the balance of convenience or justice favours the granting of an injunction.[9] 
  • These elements are not entirely separate but must be examined together.[10] 

In O’Neill, the High Court referred to these three elements as “organising principles” which are “to be applied having regard to the nature and circumstances of the case under which issues of justice and convenience are addressed”.[11] It was explained that in assessing whether the applicant had made out a prima facie case, “it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial” rather than it needing to be demonstrated that it was more probable than not that the plaintiff would succeed at trial [65]. “How strong that probability (or likelihood) needs to be depends, no doubt, upon the nature of the rights [the plaintiff] asserts and the practical consequences likely to flow from the order he seeks”.[12] 

If the first two elements are satisfied, the court must go on to consider whether the balance of convenience favours the grant of an injunction. The balance of convenience is the course most likely to achieve justice between the parties pending resolution of the question of the applicant’s entitlement to ultimate relief, bearing in mind the consequences to each party of the grant, or refusal, of the injunction.[13] The strength of the applicant’s case is relevant in determining where the balance of convenience lies.

Whether or not to grant an interlocutory injunction may, given the nature and circumstances of the case, also depend on such factors as the effect of the injunction on the respondent and also on third parties, questions of hardship, the availability of alternative remedies, delay, any undertakings offered by the respondent (or in some cases, both parties), and the respondent’s conduct.[14] 

Before a court will grant an interlocutory injunction, the applicant will almost always be required to give the “usual undertaking as to damages”, which is in effect the price of the grant of an interlocutory injunction.[15] 

An interlocutory injunction may be varied or discharged if new facts come into existence or are discovered which render its enforcement unjust.[16] 

The principles in Bradto and the effect of O’Neill

Bradto involved two applications to the Victorian Court of Appeal for leave to appeal from a decision of VCAT to grant interlocutory injunctions against the applicants on the application of the State of Victoria (the State).[17] 

The case arose out of the Victorian government’s plans to redevelop the land on which The Palace nightclub and Palais Theatre are situated. The sites were held by the applicants as lessees pursuant to 50-year Crown leases which the State alleged were due to expire on 31 March 2006. The State had called for expressions of interest for the redevelopment of the site and a shortlist of developers had been announced.

In order to provide the developers with “relevant information”, the State claimed that it was entitled to obtain access to the premises to examine whether asbestos or other hazardous materials were present. The access was opposed by the applicants. At VCAT, the state was successful in obtaining interlocutory injunctions against the applicants, restraining them from obstructing such access.

The Court of Appeal rejected the applications. In so doing, it endorsed the “serious question to be tried” test, noting that it had been applied in Australia for more than 20 years. The test “ ... has been found, in countless cases, to afford an appropriate criterion for determining – at the threshold – whether the claims of the party seeking injunctive relief are of sufficient substance to justify the court’s consideration of the exercise of its injunctive power pending trial” [12]. In O’Neill, notwithstanding the reiteration of the Beecham test, the majority stated that there was no objection to the use of the phrase “serious question”, as long as it was understood as conveying the notion that “the seriousness of the question, like the strength of the probability, depends ... upon the nature of the rights asserted and the practical consequences likely to flow from the interlocutory order sought”.[18] 

In Bradto, the applicants contended that a more stringent test ought to be applied because the injunction sought, although prohibitory in its terms, was mandatory in substance [15]. They relied on a significant body of authority in Australia and in England that if the injunction sought mandatory relief, the plaintiff had to establish a further matter: the court “must feel a high degree of assurance that at the trial it will appear that the injunction was rightly granted”.[19] 

Even though the Court of Appeal held that the injunction was prohibitory in both form and in substance [16], it went on to decide that even if it had been mandatory in substance, this would not have affected the approach to be adopted [16], [33]. A single test should be applied in all cases where an interlocutory injunction is sought. “[W]hether the relief sought is prohibitory or mandatory, the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong’, in the sense of granting an injunction to a party who fails to establish his right at the trial, or in failing to grant an injunction to a party who succeeds at trial” [35]. The Court of Appeal endorsed the approach adopted by Hoffman J (as he then was) in Films Rover International Ltd v Cannon Film Sales Ltd[20] and rejected the “high degree of assurance” test.[21] Bradto decided that it is not necessary for a Victorian court to feel a “high degree of assurance” before granting a mandatory interlocutory injunction, but “the remedy of an injunction should be available whenever required by justice” [33].

Even where “the practical result of [the] injunction being granted would be that the plaintiff would obtain the whole of its relief”, there was again no necessity for any special rule that the plaintiff must establish that there was a degree of likelihood that the plaintiff would be successful at trial in obtaining a permanent injunction [39]. Rather, in every application for an interlocutory injunction it is relevant to consider the likelihood of the plaintiff succeeding at trial.

In O’Neill, the High Court noted that the degree of likelihood of success of the plaintiff’s case required in a given case will depend on the nature of the rights asserted and the practical consequences likely to flow from the interlocutory order sought. Such practical consequences would include where the grant or refusal of the injunction would effectively dispose of the action.

The Court of Appeal held that the decision of VCAT that there was a serious question to be tried was clearly correct. It found no error with the VCAT vice president’s analysis of the balance of convenience favouring the State over the applicants (the respondents at VCAT).

Bradto in light of O’Neill

It is suggested that the lower risk of injustice (Hoffman) test endorsed in Bradto is not incompatible with the High Court’s decision in O’Neill. In O’Neill, while confirming the orthodox approach or “organising principles”, the High Court placed particular importance on a consideration of the strength of the plaintiff’s case in evaluating the first element of the test. To justify the imposition of an interlocutory injunction, the plaintiff must be able to show a “sufficient likelihood of success”. How likely? This will depend on the nature of the rights asserted and the practical consequences likely to flow from the grant.

In Bradto, the Court of Appeal considered that the plaintiff’s prospects of succeeding at trial will always be relevant both “as a necessary part of deciding whether there is a serious question to be tried” and as an almost invariable factor in evaluating the balance of convenience [39]. The assessment of the strength of the probability of success is an essential factor in deciding which course – whether or not relief should issue and, if so, on what terms – carries the lower risk of injustice.

In recent Victorian cases which have followed Bradto, reference has been made to O’Neill without noting any conflict between the two cases.[22] Indeed, in Petros v Biru, Morris J expressed the opinion that the lower risk of injustice test “is complementary to the approach recently articulated by the High Court, and is not in conflict with it. [The Hoffman test] is, in essence, a test that assists a court in determining where the balance of convenience lies in a particular matter, bearing in mind that that question is influenced by the strength of each party’s case” [9].

Conclusion

In Bradto, the Court of Appeal gave its endorsement to the “lower risk of injustice” test, deciding that this approach should be adopted in all cases where an interlocutory injunction is sought. This test, in their Honours’ opinion, would best serve “the flexibility and adaptability of the remedy of injunction as an instrument of justice”.

It is suggested that it is sensible to keep the remedy unfettered, because it is impossible to foresee every circumstance in which it may be thought right to make the remedy available.[23] It is now clear that the “organising principles”, established in Beecham and reiterated and explained in O’Neill, will determine in a given case where the lower risk of injustice lies.[24] 

Postscript

VCAT has now decided each of these substantive cases.[25] In both cases Deputy President Macnamara held that the State was entitled to succeed on its claim for possession of the premises. Applications for leave to appeal were made in both cases. Each application has recently been heard by the Supreme Court. In Bradto Pty Ltd v State of Victoria; Palais de Danse Pty Ltd v State of Victoria,[26] Harper J refused leave to appeal. It is understood that the decision in Tymbook is pending.


JOHN K ARTHUR is a Victorian barrister, practising in sale of land, property, retail tenancies, equity, probate and wills, and general commercial law.The numbers in square brackets in the text refer to the paragraph numbers in the judgment.


[1] [2006] VSCA 89 (constituted by Maxwell P and Charles JA). Bradto has been applied in Bayley Walk Pty Ltd v Bayley Views Pty Ltd [2006] VSC 213 per Warren CJ; Melbourne University Student Union Inc (in liq) v Ray & Ors [2006] VSC 205 per Hollingworth J; Husqvarna v McLean [2006] VSC 381 per Morris J; Darra Exploration Pty Ltd [2006] VSC 454 per Whelan J; and Petros v Biru [2006] VSC 383 per Morris J.

[2] Bradto, note 1 above, at [16] and [33]-[35], [38] and [39]; Bayley, note 1 above, at [27].

[3] (2006) 229 ALR 457; (2006) 80 ALJR 1672; [2006] HCA 46. The majority consisted of Gleeson CJ and Crennan, Gummow and Hayne JJ (see [19] and [65]–[72]). In O’Neill, Heydon J approved of the lower risk of injustice test at [248] and was the only judge to make any reference to it.

[4] (1968) 118 CLR 618.

[5] [1975] AC 396.

[6] Jacobs et al, Injunctions: Law and practice, Lawbook Co, at [1.100]; Gillard J in Waikato Pty Ltd v Kaplan [2002] VSC 310 at [33]; ICF Spry QC, Equitable Remedies (6th edn), 2001, Lawbook Co, at pp446-47.

[7] N Williams QC, Civil Procedure Victoria, LexisNexis, at [38.01.245]; The Siskina [1979] AC 210, 256; Waikato, note 6 above, at [35]–[39].With respect to Mareva injunctions, see new O.37A and Practice Note No 3 of 2006. In relation to interim injunctions, see Williams, Civil Procedure Victoria at [38.01.275ff]. The Full Court in a well-known case stressed that interim injunctions should be granted sparingly and if it is practicable to give notice of the application then it should be given: National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386 at 541.

[8] VCAT: s123(1) VCAT Act; Supreme Court: s37(1) Supreme Court Act 1986 (Vic).

[9] Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 at 153-54 per Mason CJ, approved in ABC v Lenah Game Meats (2001) 208 CLR 199; [2001] HCA 63 at [13] per Gleeson CJ.

[10] Bradto, note 1 above, at [84].

[11] O’Neill, note 3 above, at [19] per Gleeson CJ and Crennan J.

[12] Beecham, note 4 above, at 622, quoted by Gummow and Hayne JJ in O’Neill at [65]; see Beecham at 622–23.

[13] Jacobs, note 6 above, at [1.140].

[14] Jacobs, note 6 above, at [1.160]–[1.210] and [1.240].

[15] It is an undertaking by the applicant to pay damages to the respondent for any loss sustained by reason of the injunction if it should be held at the trial that the injunction was wrongly granted.

[16] Jacobs, note 6 above, at [1.270].

[17] State of Victoria v Bradto Pty Ltd (Palace Entertainment Complex) and Tymbook Pty Ltd (Palais Theatre) (Retail Tenancies) [2006] VCAT 99. VCAT was constituted by the vice president, Judge Bowman.

[18] These remarks must now be read in light of what the High Court said in O’Neill: see Gleeson CJ and Crennan J at [19] and Gummow and Hayne JJ at [65]–[72].

[19] Bradto, note 1 above, at [15], referring to Shepherd Homes Ltd v Sandham [1971] Ch 340 at 351 per Megarry J.

[20] [1987] 1 WLR 670 at 680-681, Hoffmann J, now a Law Lord, Lord Hoffmann.

[21] Bradto, note 1 above, at [33]–[35], on the basis that the “lower risk of injustice” test should now apply.

[22] For example, Husqvarna and Petros per Morris J. However, it is suggested that the statement in Bradto at [13] that “ ... unless upon such examination the court concludes that the applicant’s claims are not reasonably arguable, that is, they do not have ‘any real prospect of succeeding’, then the court will ordinarily be satisfied that there is a serious question to be tried” may need to be reconsidered in light of the remarks of Gummow and Hayne JJ in O’Neill at [71] disapproving of a similar statement by Lord Diplock in American Cyanamid at 408, as it appeared to “reverse matters of onus”.

[23] Adopting the words of Lord Goff of Chieveley in South Carolina Insurance Co v Arrurantie Maatschappij [1987] AC 24 at 44.

[24] It may be added, as Dawson J pointed out in A v Hayden (1985) 59 ALJR 1 at 5, that a court should not be misled by an overstrict application of verbal formulae to depart from its primary duty to do complete justice in the cause.

[25] [2006] VCAT 2299 (15 November 2006); [2006] VCAT 2298 (15 November 2006).

[26] [2007] VSC 106.

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