Substituting two Petitioners into a Winding Up Petition

The High Court in Allied Empire Plantations Sdn Bhd v Chip Lam Seng Berhad [2014] 6 CLJ 81 (“Allied Empire”) touched on some of the principles on the substitution of a Petitioner in a winding up Petition and where two parties were allowed to be substituted in as co-Petitioners.

The law governing the substitution of a party as Petitioner in a winding up Petition is contained in rule 33 of the Companies (Winding-up) Rules 1972 (“Rules”). Rule 33 provides that:

“… the Court may upon such terms as it thinks just substitute as petitioner any person who, in the opinion of the Court, would have a right to present the petition and who is desirous of proceeding with the petition.”

The case of Allied Empire involved two parties applying to be substituted as a petitioner. The first was Jadeline and the second was AmBank.

Jadeline

After the presentation of the Petition in August 2012, Jadeline had entered into an assignment with the Petitioner for the absolute assignment of the chose in action to claim the underlying debt giving rise to the Petition. The question of law that then arose was whether Jadeline could be deemed to be a creditor at the time of the presentation of the petition (and therefore “would have a right to present the petition) or whether Jadeline’s status as the creditor only crystallised after the entering of the assignment. In essence, the Court found that with the debt having been absolutely assigned to Jadeline by the Petitioner, the effect under the law is that all rights to present the Petition would also now be with Jadeline.

Procedurally though, here are cases that have found that not only must the intended substituting party be a creditor, that party must have also had issued the statutory notice (under section 218(2)(a) of the Companies Act 1965) (“218 Notice”) in order to fall within the definition of “would have a right to present the petition” (see for example, the High Court decision of Teoh Vin Sen v True Creation Sdn Bhd [2008] 4 CLJ 393). Presumably, the High Court in Allied Empire would have considered that the effect of the absolute assignment was that the complete chose in action of presenting the Petition had been absolutely assigned by the Petitioner over to Jadeline. Therefore, even the procedural issuance of the statutory notice would have been deemed to have been “assigned” to Jadeline.

AmBank

Where AmBank was applying for it to be substituted as a petitioner as well, AmBank had issued its statutory notice in December 2012 and applied for the substitution in September 2013. While AmBank had issued its 218 Notice, Jadeline had raised the objection that AmBank had not issued the 218 Notice prior to August 2012 (i.e. the time of the presentation of the Petition). Therefore, in short, AmBank did not fall within the definition of “would have a right to present the petition.” The Judge made short shrift of this argument by finding that the debt owing to AmBank was not seriously disputed. Section 218(2)(c) would also allow for a presumption of insolvency and there i snothing to prevent a creditor from presenting a petition to wind up a debtor without relying on the presumption in the statutory notice if the evidence is so clear that the debtor is in any event insolvent.

Substitution of Both Parties as Co-Petitioners

The Court then had to consider whether to allow only one of the parties to be substituted in as a Petitioner. Jadeline had made its application first while AmBank had the larger debt. The Court ordered that both parties be made Petitioners while AmBank was allowed to be the first Petitioner and which had the responsibility to ensure the necessary advertisement, gazetting and other getting up were complied with (but with costs to be born equally by the two Petitioners).

While it is true that there is nothing to prevent there being two or more Petitioners, there appears to be a general rule that Plaintiffs (or in this case, the two Petitioners) must be represented by the same set of solicitors. Allowing AmBank and Jadeline to be substituted in as Petitioners and yet, being represented by two different solicitors, may not have been possible.

The rationale of having plaintiffs, claimants or petitioners  to have a common set of solicitors appears to be in order to ensure consistency in the prosecution of a claim. The rule can be seen as far back as in Wedderburn v Wedderburn (1853) 17 Beav 158, where Sir John Romilly M.R. held that:

“Mr. and Mrs. Hawkins may, in concurrence with the other four co-plaintiffs, remove their solicitor, and the other four may allow him to conduct the proceedings for all. But if the plaintiffs do not all concur, Mr. Hawkins cannot take a course of proceeding different and apart from the other plaintiffs, for the consequence would be, that their proceedings might be totally inconsistent. When persons undertake the prosecution of a suit, they must make up their minds whether they will become co-plaintiffs; for if they do, they must act together. I cannot allow one of several plaintiffs to act separately from and inconsistently with the others.”

In the English Court of Appeal case of Lewis And Another v Daily Telegraph Ltd. (No. 2) [1964] 2 QB 601, it was held that:

“In my view, it was not regular, and not in accordance with the proper practice, that two firms of solicitors should be placed on the record as representing the plaintiff Lewis and the plaintiff company separately.”

Similarly, in the Supreme Court of Victoria decision of Goold and Porter Proprietary Limited v Housing Commission [1974] VR 102, it was held that:

“There seems to be a long line of authority to the effect that plaintiffs, where there is more than one plaintiff in an action, must appear by the same counsel. The cases seem very largely to be equity cases but the matter is stated categorically in the authorities Wedderburn v Wedderburn (1853) 17 Beav 158; Davey v Watt (1902) 28 VLR 24; Lewis v Daily Telegraph [1964] 2 QB 622 [*4]; [1964] 1 All ER 705; Odgers on Pleading and Practice, 18th ed., p. 16; Halsbury, 3rd ed., vol. 3, p. 72; Newton v Ricketts (1848) 2 Phil 624; Ballard v White (1843) 2 Hare 158 at p. 159; Swift v Glazebrook (1842) 13 Sim 185; Re Norwoods Patents (1895) 11 RPC 214, at p. 221; Re Wright, [1895] 2 Ch 747 at p. 748) to which I have been referred, including one in this Court which was decided by Holroyd, J, Davey v Watt (1902) 28 VLR 24; 8 ALR 90.

In Lewis v Daily Telegraph (No. 2) [1964] 2 QB 601 at p. 623, [1964] 1 All ER 705, there is a dictum of Russell, LJ, which does indicate his Lordship’s view that where there are a number of plaintiffs in an action, whether that action is a consolidated action or not, there is a discretion to allow separate representation to the plaintiffs. But that appears, on a review of the authorities by counsel, to be the only reference to the possibility in an action of this kind which is not a consolidated action, of plaintiffs appearing by separate counsel. The condition of the plaintiffs so doing is stated to be to avoid injustice, and his Lordship indicates that it must be rare.

In the absence of any other authority suggesting that there is a discretion, I am disposed to the view that there is no discretion in the case of an action which is not a consolidated action, and that, therefore, I should refuse the application which has been made by Mr. Marks and by Mr. Eames, for the plaintiffs, in this action, or some of them, to appear by separate counsel. I say ‘or some of them’ because some of the plaintiffs are not here at this moment, either in person or by solicitor or counsel, so I am told. However that may be, and assuming that I have a discretion, I am of the opinion that no injustice would be done to the plaintiffs by requiring them all to appear by the same counsel. I am satisfied that the only conflict that might arise between them is not related in any way to the relief sought in the action; it might well be that different considerations would actuate different plaintiffs in certain eventualities but those eventualities, which I do not more particularly refer to, seem to me to have nothing to do with the actual conduct of the action as it appears on the pleadings. And I think that the interests of the plaintiffs to the extent that they may differ, could be well looked after by solicitors or solicitors and counsel who are not appearing in the action, and they do not have anything to do with the conduct of the action.”

Therefore, allowing both AmBank and Jadeline to be co-Petitioners may not have been possible since both parties would have wanted their own solicitors. The Court would then have had to make the difficult choice on who to select from the two competing parties. I am not aware of what are the guiding principles on how to select between these two competing parties.

 

 

Indemnity Costs for Initiating Court Proceedings in Breach of Arbitration Clause

I had earlier written about the case for indemnity costs in opposing arbitral awards. This was in the context of costs being awarded on an indemnity basis where there was an unsuccessful attempt at setting aside an award or resisting an enforcement of an award.

In my earlier article, I had pointed out that the English courts may award indemnity costs where proceedings are brought in breach of a binding arbitration agreement. In the High Court decision of A v B (No 2) [2007] EWHC 54 (Comm), court proceedings were stayed as the proceedings were brought in breach of an arbitration agreement. It was held that as the breach had caused the innocent party to incur legal costs, those costs should normally be recoverable on an indemnity basis.

The approach in A v B has now been adopted in Australia in the Supreme Court of Western Australia decision of Pipelines Services WA Pty Ltd v ATCO Gas Australia Pty Ltd [2014] WASC 10. The Court had ordered Pipeline to pay costs on an indemnity basis to ATCO when ATCO had successfully applied for a stay of proceedings under section 8 of the Commercial Arbitration Act 2012.

In making this order, the Court confirmed the application of the principle in the English case of A v B [2007] EWHC 54 that indemnity costs will generally be awarded where a party commences legal proceedings in breach of a contractual obligation to refer a dispute to arbitration.

I am not aware of the Malaysian Courts having determined whether costs on an indemnity basis should be allowed if there is a successful stay of Court proceedings under section 10 of the Arbitration Act 2005. Hopefully this case for indemnity costs can be canvassed before the Courts.

Shareholder Oppression Action Not Arbitrable

The Singapore High Court in the Silica Investors case (Silica Investors Ltd v Tomolugen Holdings Limited and others [2014] SGHC 101) refused a stay of an oppression action initiated by a shareholder pending a reference to arbitration. The Court found that based on the facts of the case, the minority oppression claim was non-arbitrable. There were relevant parties, including other shareholders, who were not parties to the arbitration. Further, the Plaintiff in the oppression action was seeking for remedies that the arbitral tribunal could not grant, including winding up.

Briefly, there was an arbitration clause in an agreement between only two of the shareholders. The Plaintiff filed an oppression action against both the party to the arbitration agreement as well as against non-parties (being the directors and some of the other shareholders of the Company). The Plaintiff sought a share buy-out order, an alternative prayer for winding up, and for several declaratory orders.

The Judge took great lengths in looking at the developments in Australia, Canada and the UK, and the academic commentary arising from those cases. In particular, the Judge distinguished the English Court of Appeal decision in Fulham Football Club (1987) Ltd v Richards and another [2012] Ch 333 (where an unfair prejudice action was stayed pending arbitration) as the unfair prejudice relief in that case was for a specific injunction Order. There was no possibility of a share buy-out or winding up in that case.

This is a fascinating area of the law where there is still no clear answer on the right balance to be struck. On the one hand, there is the policy of interpreting an arbitration clause as wide as possible in order for contracting parties to be bound by their bargain to go to the exclusive forum of arbitration. On the other hand, parties e.g. shareholders, may still want to rely on their statutory remedies and the Court will have to consider whether a dispute is arbitrable or not.

Leave to Proceed Against Company in Voluntary Liquidation

The Court of Appeal departed from well-established insolvency principles that leave of Court is not required for an action or proceeding against a company in a members’ voluntary winding up. The Court of Appeal in Westech Sdn Bhd (in voluntary liquidation) v Thong Weng Lock (as surviving partner of Thong Kee Trading Co) [2014] 3 MLJ 427 held that case law had established that leave of Court under section 263 of the Companies Act 1965 (“Act”) was required whether the winding up was a members’ voluntary winding up or otherwise. This finding appears to have been made obiter dictum since the the company before the Court was in creditors’ voluntary winding up, and not in a members’ voluntary winding up.

By way of background, there are two forms of voluntary winding up. The first is termed a members’ voluntary winding up. The company must be solvent, and the directors and members resolve to wind up the company. The creditors must be paid in full in such a situation. The second is a creditors’ voluntary winding up. The company in this case is insolvency. The decision to wind up the company is still made by the directors and members, but the creditors (through a creditors’ meeting) have the ability to choose the liquidator of the company. These forms of voluntary winding up is contrasted with a compulsory winding up, or otherwise known as the Court-ordered winding up. Here, the common situation is of a creditor filing a Petition to wind up the company on the grounds of insolvency.

It is quite clear that section 263 of the Act applies only in a creditors’ voluntary winding up situation. Section 263(1) refers to the “commencement of a creditors’ voluntary winding up” and where section 263(2) states that after the “commencement of the winding up no action or proceeding shall be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes.” Further, section 263 is contained in the section of the Act titled “Subdivision (3) – Provisions applicable only to Creditors’ Voluntary Winding up.” This provision requiring leave of Court is similar to a compulsory winding up situation where section 226(3) provides for a similar stay and no action or proceeding shall be proceeded with or commenced against the wound up company except by leave of Court. The legislative intent of these two provisions is that the liquidator of the wound up company should not be forced to incur unnecessary expenses through defending legal actions if the creditors can obtain their relief within the winding up process through the filing of a Proof of Debt.

On the other hand, the situation is different in a members’ voluntary winding up. The company would have been solvent and the creditors should be paid off in full. Therefore, the Act is silent in providing any form of statutory stay of proceedings or enforcement. In fact, ordinarily in a members’ voluntary winding up, the onus is then on the liquidator to formally apply to the Court for an order for a stay of such actions and proceedings. This could be done through an application under section 274(1)(b) read with section 226(3) of the Act. There is some discussion of these circumstances in a members’ voluntary winding up in the English Court of Appeal decision of Gerard v Worth of Paris Ltd [1936] 2 All ER 905.

Having set out the law, we then come to the facts of Westech. The High Court had allowed a leave application filed under section 263(2) of the Act and where the Court of Appeal overturned this High Court decision. I will not touch on the merits of the decision although it was an unusual leave application and on the merits, the Court of Appeal had very good grounds in setting aside the High Court decision. It is important to emphasise that it appears that Westech concerned a creditors’ voluntary winding up. Publicly available information shows that Westech Sdn Bhd commenced its creditors’ voluntary winding up process on 26 October 2006. However, it appears that the arguments made before the Court of Appeal (see for example [24]) was on the basis that the company was in a members’ voluntary winding up. Hence, the reference to the Declaration of Solvency made under section 257 of the Act (which applies only to a members’ voluntary winding up).

Nonetheless, I am unable to agree with the finding by the Court of Appeal at [34] of the decision that the language of section 263(2) of the Act makes no distinction between a voluntary winding up by members of the company or winding up by a creditor on the ground of the company’s insolvency. I have set out the analysis above on how section 263 of the Act should only apply to a creditors’ voluntary winding up situation.

 

 

10 Things I Wish I’d Known as a Young Lawyer

I will be speaking at the University of Malaya Law Career Convention 2014 tomorrow from 12-1pm on a topic entitled “10 Things I Wish I’d Known as a Young Lawyer.” You can click over to my Prezi presentation (I can’t seem to embed it anymore to WordPress).

Also, I set out below a list of recommended reading which I will be referring to in my talk tomorrow.

List of Recommended Further Reading

Good English

Read Widely, Store Knowledge

  • Kehakiman website for the latest unreported Malaysian appellate authorities.
  • UK Supreme Court for recent Supreme Court decisions and the useful Press Summaries.
  • Lexis MLJ alerts and CLJLaw alerts.
  • LoyarBurok for legal-related posts and current affairs.
  • Modern Advocacy Perspectives from Singapore – each chapter is written by a Senior Counsel to shed their thoughts and tips on the litigation process.
  • Ladies and Gentlemen of the Jury: Greatest Closing Arguments in Modern Law – in particular, the closing arguments for the Nurenberg trial is awe-inspiring.

Embrace Technology

  • Inbox Zero.
  • Feedly for cloud RSS.
  • Storage of all information, contacts and calender on the cloud.
  • Desktop search engines.

Gaining Commercial Knowledge

Finding Your Passion

Significance of the Malaysian Bar

Other recommended reading

Corporate Rescue Talk at MIA

I was invited by the Malaysian Institute of Accountants to deliver a talk on 4 March 2014 focusing on the insolvency-related provisions of the Companies Bill. It was an interesting session, with a lot of questions and a lively discussion among the participants. The areas I touched on were the changes to the receivership, winding up and schemes of arrangement provisions, and the introduction of judicial management and the corporate voluntary arrangement.

rescue

A copy of my slides can be downloaded here.

The Opposed Ex Parte Hearing: Contradiction in Terms?

This will be the first in a series of articles I will touch on issues relating to general ex parte hearings, ad interim orders, inter partes hearings and the tactical considerations relating to these matters.

Introduction

The Latin term ex parte means “for one party” and in legal proceedings, an ex parte application is heard by the Judge only in the presence of one party. Due to the extraordinary situation of a Judge only hearing from one party, an ex parte application is normally only allowed in circumstances of urgency, and where if notice is given to the other side, it may alert that party to dissipate assets or to frustrate any possible injunctive relief that may be granted. So it is common to see ex parte applications for a Mareva or freezing injunction, or for other types of urgent injunctions.

To safeguard against any possible abuse of the ex parte process, both the common law and the procedural rules require a full and frank disclosure of material facts, as well as for the applicant to not only make submissions in support of the application but to also highlight potential arguments against the grant of the application.

The Pickwick opposed ex parte procedure

A modern practice that has evolved is for the applicant to file an ex parte application but to give notice to the other side prior to the ex parte hearing. The opposing respondent may then choose to appear at the ex parte hearing and where the hearing may then proceed on an opposed ex parte basis, in that the Court will hear submissions from both parties. This in itself may already sound like a contradiction in terms for both parties to be present at the ex parte hearing. Nonetheless, the utility of this has been highlighted in the leading English High Court case of Pickwick International Inc (GB) Ltd v Multiple Sound Distributors Ltd and another [1972]3 All ER 384.

Megarry J in that cases highlighted that the Court would be greatly assisted in deciding whether or not to grant the ex parte injunction by knowing what contentions may be advanced against the grant of the application. The Court would also be aware of the general line of evidence in opposition to the application when it moves into the formal inter partes stage. It makes it possible for the real points of contention to emerge more quickly and thus saves Court’s time. Megarry J points to one advantage to the applicant is that the Court, having heard what there is to be said in opposition to the grant of the injunction, may sometimes be encouraged to grant an injunction that otherwise would be refused. I am not entirely convinced as to how true this so-called advantage is. I would imagine that the Court may then get a fuller picture as to how weak the injunction application may be, having heard the submissions from the opposing party.

Megarry J also pointed to potential disadvantages to each side when parties engage in an opposed ex parte hearing. The opposing party may go to the trouble of preparing submissions at short notice in which a truly ex parte application would have failed in any event. For the applicant, this more modern Pickwick procedure carries the risk that if his application fails he may be ordered to pay the costs of the party who has successfully opposed the application. The Court has jurisdiction to make an order for costs against the applicant in such cases, whether in the cause or in any event. It was held that it cannot be right that the applicant should issue an express or tacit invitation to be present to the party whom he is seeking to enjoin, and then deny him any claim to the costs of what has proved to be a successful opposition.

In Malaysia

The opposed ex parte procedure has been referred to approvingly here in Malaysia. The Singapore High Court decision in Castle Fitness Consultancy Pte Ltd v Manz [1990] 1 MLJ 141 was one of the first cases referring to the Pickwick procedure approvingly and it was the Court’s view that such a procedure should be adopted. An example of an opposed ex parte hearing is also seen in the High Court case of Azman & Tay Associates Sdn Bhd v Sentul Raya Sdn Bhd [2002] 4 MLJ 390.

The one advantage in the Malaysian context of an applicant giving notice of the ex parte hearing and then anticipating the opposed ex parte hearing is in the situation where the applicant expects the Court, or a particular Judge, to be reluctant to proceed with the ex parte application without notice having been provided to the other side. An example of this is the strict approach taken by Mohd Hishamudin JCA in his dissenting judgment in the Court of Appeal case of Westform Far East Sdn Bhd v Connaught Heights Sdn Bhd and other appeals [2010] 3 MLJ 459. This appeal involved the grant of an ex parte injunction to prevent the presentation of a winding up Petition and there was no notice provided to the opposing party. His Lordship felt that there was no urgency justifying proceeding on an ex parte basis and that notice should have been given. His Lordship referred approvingly to his earlier High Court decision in University of Malaya Medical Centre v Choo Chee Kon & Anor [2008] 3 MLJ 278.

Coming Soon

This discussion on the opposed ex parte procedure is predicated on the applicant having the choice to proceed ex parte, or to give notice and then head to an opposed ex parte hearing or to file an inter partes application. In my next article,I will touch on two applications where the applicant must follow the procedural rules and must file the application on an ex parte basis. The Rules of Court 2012 provide that both the leave applications for judicial review and committal must be filed ex parte. So is there discretion on the Court to allow for the application to be heard inter partes or an opposed ex parte basis?

How to Unwind a Voluntary Winding Up

The Singapore High Court in Zi-Techasia [2014] SGHC 09 analysed the considerations to be applied in staying a voluntary winding up and the effect of such a stay. This case is interesting since as far as I am aware, Malaysia does not have a reported decision touching on these same issues.

Members Voluntary Winding Up

As a quick introduction, this case involved a members voluntary winding up. This process involves the members passing the necessary special resolution to resolve that the company be wound up and the members appoint the liquidator. Unwinding such a voluntary winding up cannot be done through the members subsequently passing a resolution to reverse this process.

Decision

As recognised by the Singapore High Court, the Court has the power under the Companies Act to grant an Order to stay a winding up. In Malaysia, that would be the equivalent power set out in section 243 of the Act. However, this power is only provided to the Court where it involves a Court-ordered winding up and therefore, this section 243 of the Act would have to be read together with section 274 of the Act. Section 274 allows the liquidator or any contributory or creditor to apply to the Court to exercise all or any of the powers which the Court might exercise if it were a Court-ordered winding up. The test to be applied therefore in staying a voluntary winding up would be the same principles for a stay of a winding up under section 243 of the Act (in Malaysia, the leading case on these principles are set out in the Federal Court decision of Vijayalakshmi). In essence, one would have to show that the creditors are not prejudiced.

The Singapore High Court expressed some doubts as to whether the Court could ever exercise its inherent jurisdiction to set aside or stay a winding up and made a passing reference to the Malaysian Court of Appeal decision of Megah Teknik (I have written about this decision previously).

In determining when such a stay should come into effect, the Singapore High Court held that the stay should only take effect from the date of the stay Order and is not backdated to the date of the winding up Order or date of the commencement of the voluntary winding up. The winding up is merely stayed moving forward, and not set aside or rescinded. Therefore, such a stay does not undo the actions of the liquidators but only halts the proceedings. The Court was guided by the Malaysian Court of Appeal decision in American International Assurance Bhd (another decision I had written on previously).

Postscript

By way of postscript, the Court also highlighted two interesting questions in the present stay regime that may require legislative intervention. The first is the proper procedure if the defendant company were to be wound up in future. It might be thought that as the winding up is only stayed, it would be open to any interested party to apply to court to have the stay order set aside or varied so that winding up could, in a sense, continue. However the present winding up proceedings were commenced on the footing of a members’ voluntary winding up and it is uncertain whether, in future, should the company become insolvent, a creditor could apply afresh for the company to be wound up by the court. In Re Intermain, Hoffmann J was of the opinion that an existing petition should be regarded as exhausted by a perfected winding up order which being stayed would make it necessary for a fresh winding up petition to be presented. But nothing was said whether this principle would apply also to cases of voluntary winding up.

The second issue is on the powers of directors. There is an issue that were the directors to quit office whether through the efflux of time or by the effect of provisions in the Articles of Association, there could be nobody to take up the reins of the company in the case that winding up was stayed altogether. This was the concern raised by Young J in Austral Brick. In such a case the court may need to make further orders to appoint new directors, but we currently have no statutory provisions dealing with that. By way of comparison, s 482(3) of the Australian Corporations Act 2001 states that where a court has made an order terminating a winding up, it may also give directions for the resumption of the management and control of the company by its officers, including directions for the convening of a general meeting of members of the company to elect directors of the company to take office upon the termination of the winding up. Also, I do not doubt that there may be other conceptual conundrums thrown up because a permanent stay of winding up is, in the words of Tipping J in Re Kim Maxwell Ltd [1992] 1 NZLR 69, a contradiction in terms. The insolvency regime may benefit from legislative clarity on the issue.

Malaysia’s Amendments to the Companies Act

Under the pending Companies Bill, we will be introducing a mechanism (as set out in Clause 477 of the present version of the Bill) to give the Court the power to also terminate a winding up. This is in addition to the present power to order a stay of winding up. In deciding on a termination of winding up, the Court may take into account the satisfaction of debts, agreement by parties or other facts that the Court considers appropriate. This would in future allow for an easier route to unwind a winding up. However, based on the present termination clause in the Bill, it would still not resolve the above two issues highlighted by the Singapore High Court. Further, the power to terminate a winding up would also appear to only take effect from the date of the Order. It does not appear to provide for the winding up to be rescinded or set aside and therefore have retrospective effect as if the winding up never was.

Contractual Clause that Damages are Not an Adequate Remedy

The Federal Court in the AV Asia v MEASAT decision (Grounds of Judgment dated 20 January 2014) dealt with the issue on the existence of a contractual clause providing that “monetary damages will not be sufficient … and that injunctive relief would be appropriate to prevent any actual or threatened use of disclosure of such Confidential Information …”

Would such a clause bind the Court in holding that damages are not an adequate remedy for the purpose of granting an injunction?

The Federal Court agreed with both the High Court and the Court of Appeal in finding that the Court would not be bound by this contractual term. The Federal Court referred to two Canadian and American authorities. Those authorities held that where a clause stipulates that damages may not be adequate and that injunctive relief may or shall be the appropriate remedy, that does not mean that such relief will be granted as of right. The party seeking to secure equitable relief must still satisfy the Court that the pre-requisites for granting injunctive relief are prevalent.