FEDERAL COURT OF AUSTRALIA
NSD 1424 of 2017
Date of judgment:
21 September 2017
PRACTICE AND PROCEDURE – interlocutory application for order to appoint receiver and manager to take control of vessel and business operated on-board – whether there is a serious question to be tried – balance of convenience – whether damages are an adequate remedy – application dismissed – undertakings to Court noted
Federal Court of Australia Act 1976 (Cth) ss 23, 57
Shipping Registration Act 1981 (Cth)
Federal Court Rules 2011 (Cth) r 14.21
In the matter of AJ Roberts Removals & Storage Pty Limited  NSWSC 1054
Optical Distributors and Manufacturers Association of Australia Ltd v Expertise Events Pty Ltd  FCA 209
Samsung Electronics Co Ltd v Apple Inc  FCAFC 156; (2011) 217 FCR 238
University of Western Australia v Gray (No 6)  FCA 1825
Woods v Harrison, in the matter of Telco Service Holdings Pty Ltd (in liquidation)  FCA 732
New South Wales
National Practice Area:
Admiralty and Maritime
Number of paragraphs:
Counsel for the Plaintiffs:
Mr T D Castle with Mr A Flecknoe-Brown
Solicitor for the Plaintiffs:
Holman Webb Lawyers
Counsel for the Defendant:
Ms C O Gleeson
Solicitor for the Defendant:
Barringer Leather Lawyers
KANKI SEA TOURISM HOSPITALITY & ENTERTAINMENT PTY LTD
DATE OF ORDER:
21 SEPTEMBER 2017
THE COURT ORDERS THAT:
2. The Plaintiffs pay the Defendant’s costs.
THE COURT NOTES THAT WITHOUT ADMISSION, THE DEFENDANT BY ITS SOLICITOR GIVES THE FOLLOWING UNDERTAKING TO THE COURT UNTIL FINAL DETERMINATION OF THE PROCEEDINGS:
3. The Defendant undertakes not to make any additions or alterations to the vessel called “Seadeck” (Vessel) without the consent of the First Plaintiff.
4. The Defendant undertakes to keep the Vessel in the same condition and state of repair as at the date of the filing of the Originating Application.
5. The Defendant undertakes to allow the First Plaintiff’s representatives to inspect the vessel on three days’ notice.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
1 The present dispute concerns the continued operation of a joint venture formed for the purpose of operating a business that provides hospitality and entertainment to guests aboard a vessel called “Seadeck”. The owner of Seadeck is the first plaintiff, Ozmen Entertainment Pty Ltd (Ozmen), which entered into a Charter and License Agreement on 6 January 2016 (Charter Agreement) with the second plaintiff, Kanki Sea Tourism Hospitality & Entertainment Pty Ltd (Kanki) and the defendant, Neptune Hospitality Pty Ltd (Neptune). The relationship between Kanki and Neptune is governed by a joint venture agreement (JVA) entered into on the same day as the Charter Agreement.
2 In a statement of claim dated 11 August 2017, Kanki claims that by reason of various acts of default by Neptune it was entitled to terminate the JVA and successfully did so on 25 July 2017. Ozmen claims that by reason of the same breaches relied upon by Kanki and the termination of the JVA itself, it was entitled to and successfully did terminate the Charter Agreement on 4 August 2017. Kanki seeks, as final relief in the proceedings, orders that, inter alia, Neptune account to it for the profits of the business established by the joint venture, an order that Neptune indemnify Kanki for any liability that Kanki may have to Ozmen in relation to the Charter Agreement, damages and declarations. Ozmen seeks, inter alia, orders that Neptune deliver up possession of Seadeck, that Neptune take all necessary steps to ensure that its name does not appear in any register maintained under the Shipping Registration Act 1981 (Cth) in respect of Seadeck, as well as damages and declarations.
3 In the present application, the plaintiffs seek interlocutory relief in the form of an order pursuant to ss 23 and 57 Federal Court of Australia Act 1976 (Cth) (FCA Act) for the appointment of a receiver and manager to take control of the Seadeck, and any business operated on it, pending final trial. They have nominated Mr Brian Silvia, a registered and official liquidator and a registered trustee in bankruptcy with over 45 years of experience in insolvency matters to be the receiver and manager.
4 Neptune denies that it has acted in breach of its agreements and disputes the validity of the termination of the Charter Agreement and the JVA. It contests the appointment of any receiver to the operation of the business and contends that the matter should proceed to trial with the operations of Seadeck continuing as they have been since they commenced on Sydney Harbour in March 2016.
5 The evidence indicates that during the course of the winter months Seadeck has operated in Brisbane. It is due to return to Sydney on 30 September 2017, whereupon it will commence operations for the months that follow. The plaintiffs urge upon the Court that interlocutory relief should be granted prior to the commencement of the Sydney season.
6 For the reasons set out below, I find that it is not appropriate to appoint a receiver and manager of the business pending final hearing, and dismiss the interlocutory application with costs.
7 There was a significant body of evidence filed in relation to the interlocutory application, much of it given on information and belief. The recital of factual matters below represents a summary of that evidence. Given the interlocutory nature of the application, the facts stated below do not represent conclusive findings.
8 In 2014 Seadeck was located in Turkey. Mr Gavin Douchkov and Mr Carmelo Como incorporated Neptune with a view to bringing Seadeck to Australia, fitting her out and conducting a charter hire and entertainment business. To that end they reached an in-principle agreement with Mr Mert Ozmen, a director of Ozmen. Arrangements were made for Seadeck to sail from Turkey to Australia, and around October 2014 she left Turkey. Her voyage was not trouble free. Seadeck was stopped in Port Said in Egypt, where she was detained by the port authority. In April 2015 two consultants on behalf of Neptune, Mr Robertson and Mr Auld, travelled to Egypt in order to arrange for her release. This was achieved in May 2015. However, during the time that she was detained in Egypt, Seadeck sustained damage and so when, in about July 2015, she arrived in Batam, Indonesia, Neptune arranged for a shipyard to repair the damage. In about October 2015 Seadeck departed Indonesia and on about 14 November 2015 she arrived in Sydney. From November 2015 until March 2016, further works were undertaken in order to repair the vessel and to obtain a survey approved by the Australian Maritime Safety Authority. The evidence indicates that by July 2015, Mr Douchkov and Mr Como had personally incurred costs totalling $4,204,000 getting Seadeck ready for business.
9 In October 2015 a meeting was held in Melbourne to negotiate agreements pursuant to which Neptune was to operate the business on board Seadeck. At this meeting, Mr Douchkov was informed by Ozmen’s representatives that an additional party, Kanki, would be included in the contractual arrangements. Ozmen was incorporated on 26 August 2014. Its shares are equally owned by Mr Ozmen and Mr Kartal Altikulacoglu, who were both directors until Mr Ozmen ceased to be a director in September 2016. Since December 2015, Gunay Koyunoglu has also been also a director of Ozmen. Kanki was incorporated on 11 December 2014. Its sole director and non-beneficial shareholder is Mr Koyunoglu. Neptune was incorporated on 2 September 2014. Its directors are Mr Como and Mr Douchkov. They, together with Mr Scott Robertson are also the shareholders.
10 On 6 January 2016 the JVA and Charter Agreement were entered.
11 Recital A to the Charter Agreement provides that for the purpose of the JVA Ozmen agrees to demise charter Seadeck to operate the business more properly defined in the JVA (which was said to be annexed to the Charter Agreement). In the agreement Charter Party 1 is Kanki and Charter Party 2 is Neptune.
12 Clause 1 of the Charter Agreement provides as follows:
a) The owner agrees that during the term of this Agreement:
i) The Vessel shall be in the full possession of Charter Party 1 and Charter Party 2 and under their complete control;
ii) Charter Party 1 and Charter Party 2 shall at its own cost and risk crew, manage, maintain, navigate, operate, victual, fuel, provision, supply (whenever the same may be necessary) the Vessel;
iii) The Master, officers, crew and all other employees on board the Vessel shall be the servants and representatives of Charter Party 1 and Charter Party 2 for all purposes whatsoever.
b) Charter Party 1 and Charter Party 2 will be required to pay an upfront fee of $1.00 to the Owner within seven (7) days of the ate of this Agreement.
c) The parties have agreed that Charter Party 2 will carry out the daily operation of the Vessel.
d) Charter Party 1 and Charter Party 2 must not make any additions or alterations to the Vessel without the Owner’s consent.
e) The Charter Parties must keep the Vessel in the condition and state of repair as at the date hereof and must allow the Owner and Owner’s agents to inspect the Vessel at all reasonable times.
f) It is agreed that Charter Party 2 will be registered as an Agent of the Vessel upon registration of the Vessel with the Australian Maritime Safety Authority.
g) The Charter Parties shall ensure that the Vessel will be seaworthy at the time of its operation and its hull machinery, equipment, appurtenances, plumbing, electrical systems, lighting systems and spare parts in a good state of repair, in efficient operating condition and ready for service under this Agreement, in accordance with good commercial maintenance practice.
13 Clauses 4, 5 and 10 of the Charter Agreement provide as follows:
4. Severable Liability
Each party under this Agreement is severally liable in the event that there is a breach of this Agreement.
5. Area of Permitted Use
The Vessel may be operated worldwide provided that Charter Party 1 and Charter Party 2 undertakes that the Vessel will not operate within any area prohibited by the laws of the Commonwealth of Australia or any of the Vessel’s insurers.
In the event that this Agreement is terminated pursuant to any terms of this agreement other than due to a Purchase in Clause 9, all licences in relation to the Vessel will be terminated or assigned in the name of the Owner.
14 The JVA is between Kanki and Neptune. The recitals record that the parties have agreed to participate in an unincorporated joint venture to undertake the project more fully described in the JVA, and that they have agreed to enter into the Charter Agreement with Ozmen for the purposes of operating the business.
15 The “business” is defined in clause 1(c) to mean such hospitality, entertainment or other business as may be conducted jointly by the parties on or from Seadeck from time to time. By clause 2 of the agreement each of the parties must nominate a firm of solicitors and a firm of accountants. By clause 3, each party must appoint a representative to manage the affairs of the joint venture on its behalf and notify the other party in writing of the appointment. The clause provides that the representative shall report to the directors of its respective corporate party. Kanki nominated Mr Kartel Altikuloqoglu and Neptune nominated Mr Scott Robertson. Clause 3 provides that each nominated representative “will also be an on-board employee of the Vessel and occupy a full-time related role further governed by Clause 6”.
16 Clause 6 provides as follows (Kanki is Party 1 and Neptune is Party 2):
6. Management of the Business
(a) The Parties agree that Party 1 and Party 2 are equally responsible for the day-to-day running of the Business.
(b) The parties must ensure that they:
(i) Do everything possible to warrant that decisions are made promptly and that full cooperation is given so that the Business is successfully managed and profitable;
(ii) Do not use or disclose Confidential information of the Business or any other associated entity or person and each party promises to ensure compliance by its employees with this obligation;
(iii) At all times act in the best interests of the Business and in good faith;
(iv) Will not directly or indirectly be involved in any undertaking or venture, joint or otherwise, which may compete with that of the Business on Sydney Harbour;
(v) Comply with their obligations under the contracts, arrangements and property and equipment leases to which it is a party; and
(vi) Comply with all applicable laws relating to the business and its assets.
(c) The rights and obligations of the parties under this Agreement are individual and nothing in this Agreement constitutes the parties as partners of one another nor do they have any other relationship except that of joint venturers, namely Party 1 and Party 2, to this Agreement.
(d) Each party owes the other a duty of trust, and must immediately inform the other of any conflict of interest, must not profit separately from the Business unless otherwise agreed to by the other party.
(e) Party 2 must reasonably keep Party 1 informed of all corporate and private bookings, pricing for general admissions as well as the quality of the beverages and food served on the Vessel. Both parties will jointly operate and manage the business. These arrangements are to be constantly discussed and finalised by both parties so that all decisions are made jointly.
(i) Guests must be over the age of 18 unless accompanied by an adult and Party 2 must do all things necessary to avoid any breaches of any Maritime, Liquor Licensing or associated laws
(f) No party may unilaterally incur debts or commit another party to liabilities.
(g) If the Vessel requires maintenance and or repair from its use throughout the Term Party 2 must notify Party 1 and if requested by Party 1 ensure that it obtains a minimum of three (3) quotes for said maintenance or repair.
(i) Party 1 acknowledges that they will consider the cost of same and any necessary maintenance and or repair throughout the Term to ensure that the Vessel is in a seaworthy condition;
(ii) If Party 1 can provide a comparable quote for the same works and of the same quality then they have the sole discretion to select same in the interest of saving the expenses incurred by the Business.
17 Clause 9 provides that the parties will operate the Business under the Business Name (which I assume to be Seadeck). It also provides that the Business and its assets, other than Seadeck, are the shared property of the parties.
18 Clause 10 provides a fairly detailed mechanism for the sharing of net profits between the parties to the JVA. Amongst other terms, it provides that Neptune agrees to pay Kanki 50% of the net profit of the Business (net profit being defined to mean revenue less expenses before taxation, if a positive amount). In the event that there is a net loss of the business, clause 10.(b) provides that Neptune will bear the net loss (net loss being defined to mean the revenue less expenses before taxation, if a negative amount). Clause 10(c) provides that within 5 business days of each fortnight during the term of the agreement, Neptune must calculate the net profit of the business for the preceding fortnight and provide all related details to Kanki (it is not presently necessary to describe the details). By clause 10(d), Kanki must within 3 days thereafter give Neptune written notice whether it accepts its calculations. Within one day of confirmation of acceptance of Neptune’s calculations, clause 10(h) provides that Neptune will pay Kanki its 50% share of the net profit. The latter part of clause 10 provides that Neptune guarantees that Kanki’s share of the net profit will be at least $5 million at the end of the first full season (30 September 2017), and each subsequent season, subject to various provisos. It is not presently necessary to go into detail of those provisos.
19 Clause 13 provides that the parties default under the agreement if (inter-alia) there is a failure to make a payment and this is not remedied within 7 days’ of written notice being provided by the other party, or there is a failure to rectify a breach of any obligation under the agreement after receiving 14 days’ notice to remedy the breach. Subclause 13(b) provides that if a default by a party occurs, the agreement is terminated.
20 It may be surmised from the arrangements described above that Ozmen is to reap profits from the Charter of Seadeck in the form of regular payments from Neptune to Kanki pursuant to the JVA. Further, it might be surmised that the JVA provides a mechanism whereby Ozmen can maintain a level of supervision and joint control over Seadeck whilst clause 1(f) of the Charter Agreement and clauses 6(e) [first sentence] and 6(g) of the JVA indicate that it was intended to leave the day-to-day management of the vessel to Neptune, with the proviso that both parties are jointly responsible for the management of the business (clause 6(e) [second sentence]). For present purposes, it is not necessary to make any definitive conclusions as to the effect of the contracts.
21 In March 2016 Seadeck commenced operations in Sydney. On 1 October 2016 a certificate of survey and operation was issued to the vessel with Neptune noted as its operator. The certificate allows Seadeck to carry a maximum of 10 crew and 450 passengers. On 12 October 2016, an on-premises liquor licence was issued in relation to Seadeck and Mr Mark Tarrant, an employee of Neptune, was registered as the licensee.
22 In the period from March 2016 until May 2017, Seadeck operated cruises on Sydney Harbour.
23 In February 2017 Mr Kyle Clarke was appointed pursuant to the terms of the JVA as the accountant representing Kanki’s interests. On 14 March 2017 Mr Clarke attended a meeting at Neptune’s offices with several of its representatives during which he voiced concerns about the accounts of the joint venture, including that the cost of sales were overstated. On 17 March 2017 he was invited to a further meeting at which he was introduced to Mr Borella, who was described as the new accountant for Neptune. Following that meeting, he was informed that Mr Borella had retained a bookkeeping firm for the purpose of preparing the accounts for the business and sometime after that Mr Clarke started to receive fortnightly profit and loss statements. After he started to receive fortnightly statements, Mr Clarke observed that there had only been one fortnightly period between March and May 2017 in which the business traded profitably. All other fortnights recorded the business as incurring losses on average of $50,000 per fortnight.
24 On 1 May 2017 and 16 May 2017 Mr Clarke sent emails requesting meetings with representative of Neptune to discuss the business and his concerns in relation to it. He gives evidence that he received no response from Neptune in relation to those emails.
25 On 15 May Mr Auld sent an email to “all” (the evidence does not indicate who the addressees were) which states that he has been working over the previous few months on finding a berth in Queensland for Seadeck. The email indicates that he has located a marina in Brisbane and that Mr Robertson’s contacts are able to assist in the promotional side and corporate side of the hospitality business. They would also permit the use of their liquor licence. The email states that the marina is attached to a shipyard and that the work there is half the price of what it would cost in Sydney. Mr Auld indicates that he is taking two full-time crew and two full-time staff to assist him in the running of the business and that all other employees would be hired in Brisbane. He states that he is personally relocating to Brisbane for 10 weeks to run the business, and that “all partners” are welcome to come up whenever they are free to assist. The email concludes:
If we were not to trade during this period we would go into next season another $650K behind, so this is the best option.
26 Mr Ozmen replied by email less than 2 hours later, saying (errors in original):
Dear David, Your group can not make these decisions on your own. They must be joint decisions with us. Our accountant has been asking you to attend a meeting with Kanki group but your group has not answered. We now require a meeting with Neptune by the end of this week.
Mert Ozmen for Kanki
27 Mr Auld responded by email within 20 minutes thereafter, saying:
As previously discussed with you I only locked things in last week and I informed you that I would send an email today informing everyone of the plan as I did. … [B]ut I do appreciate the fact that we are in a JV so let me know a time and day that suits you and your side and we will meet to discuss everything moving forward.
28 On 18 May 2016 Mr Clarke attended a meeting with Mr Borella, Mr Como, Mr Auld and Mr Robertson. He records a conversation to the following effect:
Clarke: I’d like to discuss moving the Business forward and how we are going to continue to work together.
Response [he could not remember from whom]: You are not the authorised representative of Kanki and such we are not comfortable discussing with [sic] any plans with you. However, do you know if Mr Ozmen is trying to sell the vessel?
Clarke: Not as far as I am aware…
29 On 31 May 2017 Mr Clarke met with Mr Koyunoglu and Mr Ozmen at which time he was appointed as Kanki’s authorised representative under the JVA, and on 1 June 2017 he notified Neptune of that fact.
30 On 15 June 2017 Mr Clarke was copied into an email sent by Mr Koyunoglu to Mr Douchkov in which he said:
The partners and owner of the 50% Joint Venture have previously raised that we do not agree with SEADECK being taken up north or approve of any decision until we have at least have [sic] had a chance to review the business proposal.
To date we have yet to receive confirmation of your proposal and the intention to conduct interstate business on the SEADECK in the off-season.
Kanki is formally extremely our disapproval [sic] on this decision and reiterate that at no time, an official proposal was present to our group for review, and we again take this opportunity to highlight your breach of our agreement should you proceed to relocate SEADECK without the Joint Venture’s approval.
31 Later in the day Mr Douchkov responded that his email had been “noted” and referred to Mr Borella (the accountant).
32 On 17 June 2017 Mr Ozmen sent an email, apparently to a group of people (the addressees are not disclosed in the evidence) that was responded to by Mr Auld. In the email Mr Ozmen, on behalf of Ozmen, referred to Mr Auld’s email of 15 May 2017 stating that Seadeck would go to Brisbane for 10 weeks for repairs and for business. Mr Ozmen wrote:
Repairs to my ship must be carried out by experts. As it is my ship, it is for me to decide who will carry out the necessary repairs. The captain has reported to me the extent of the serious damage to the ship which has been caused because of the poor quality of the work carried out on it in Indonesia including a fall in the dry dock there.
I also note that some of the damage to the ship was caused by the inexperienced captain you appointed who bumped into bridges a number of times.
As I have told you many times, the decks must be washed twice a day otherwise the timber opens leading to water damage and rust on the metal below. Despite my warnings about this, the washing was not done and the steel has started to rust.
I also note that Anthony, your technical person, has drilled holes in the Green room, the middle bar and the main deck. As a result, water is going into the basement and into the captain’s room.
If the necessary repairs are not carried out, the ship will be destroyed.
The ship cannot be repaired like a building. Expert knowledge and experience are essential as is regular maintenance and washing. These have not been done despite my repeated requests.
In view of the extent of the damage and the importance of getting the ship prepared properly, it is not possible for it to be taken to Brisbane without my approval as to the shipyard carrying out the repairs and my approval of the captain.
33 On the same day, Mr Auld responded with a justification for stopping in Indonesia and carrying out the repairs. The email concluded:
I don’t feel after everything we have done you have the right to stop us from making money which is in the best interest of all parties!
If you stop the business from making money please inform us on how you propose to cover the losses!
34 On 18 June 2017 Mr Ozmen again sent an email (CB 621) to Mr Auld saying:
… I never said that I had no problems with the boat going to Brisbane.
The shipyard in Brisbane could be the best in Australia but, as the owner, I should be informed by the partners as to which shipyard which repairs that are to be carried out.
David, we are not trying to stop Neptune making money at all. It is in all our interests that the operation works as well and as profitably as possible.
If you check your emails, you will see that we have been requesting meetings with you and the partners. We have been sending emails to the partners but there has not been any response from them, only from you. You did say that you would organise a meeting for us all but nothing has happened to date.
I am at a loss to understand why the partners have failed to meet with me when they want to do all these operations, particularly as it involves the repair and removal from Sydney of my property.
35 Mr Auld sent an answer to this email 2 hours later (to six of the interested parties including Mr Como and Mr Douchkov) as follows:
We can honestly go on for days arguing about who is responsible for what but this will not get us anywhere!
You and I have spoken about Brisbane on numerous occasions and it is the only way to continue making money!
Let’s agree and move forward!
36 The Seadeck was sailed to Brisbane on or about 21 June 2017. Since the start of July 2017, Neptune has operated a hospitality and entertainment business on-board the Seadeck on the Brisbane River. It appears that Mr Auld himself went to Brisbane and took with him two crew members and two staff members.
37 The affidavit of Mr Leather, solicitor for Neptune, gives evidence, on information and belief from instructions provided by Mr Douchkov and Mr Auld. It indicates that tickets for hospitality on board the Seadeck have been sold in Brisbane online through a third party ticketing system or through Seadeck’s support staff. In the time that the Seadeck operated in Brisbane it sold about 11,800 tickets and earned an estimated revenue of $378,000. The Seadeck is scheduled to remain in Brisbane until the end of September 2017 and, I am informed, is due to return to commence operations in Sydney on 30 September 2017.
38 Mr Leather gives evidence that the business has started taking bookings for events on board Seadeck for the Sydney summer season, which includes bookings for 17 corporate and private functions in the period from 4 October 2017 until 27 April 2018.
39 Mr Leather gives evidence that Neptune has caused a safety management system and risk assessment log to be maintained in relation to the Seadeck. He also exhibits marketing materials utilised to promote cruises in Sydney and in Melbourne, together with a summary of various emails encapsulating customer feedback and testimonials in relation to events conducted on board Seadeck. The feedback indicates that various corporate customers (which include businesses and corporations which might be characterised as household names) have highly recommended the services provided to them on the Seadeck. The cost of functions is recorded to have ranged from about $35,000 to almost $100,000. Relevantly, Mr Leather also provides a summary of corporate and private bookings made for functions on the Seadeck in the period from 4 October 2017 until 27 April 2018.
40 On 22 June 2017 the solicitors now acting for the plaintiffs sent a letter to two directors of Neptune giving notice of their appointment pursuant to clause 2(a)(i) of the JVA and that Mr Ryan Fox is the Kanki representative to manage the affairs of the business on Kanki’s behalf. He is also to be the on-board employee pursuant to clause 3 of the JVA. The letter also advised of Kanki’s concern about the relocation of the vessel and the repair work done to it.
41 On 11 July 2017, the solicitors acting on behalf of the plaintiffs sent a letter in which a number of complaints were made about Neptune’s conduct and concluding with the following notice:
On behalf of Kanki, we hereby give Neptune notice to rectify the following breaches in accordance with clause 13(a)(iii) of the JVA as follows:
1. Provide copies of the following documents to Kanki, by forwarding those copies to this firm, concerning the operation of the Business:
a. Details of all decisions made jointly by the parties;
b. The business plan concerning the relocation of the Vessel to Brisbane;
c. All financial information including but not limited to:
i. Calculations of the Net Profit of the Business including all cash income;
ii. All expenditure and outgoings including the Awnings, RINA Survey Fee, the Generator Cost, fit outs and installation of all equipment;
iii. Incurred losses, debts and liabilities;
iv. Business Activity Statements submitted to the Australian Tax Office.
d. Details of all prior and current employees including National Police Checks, relevant requisite licenses and permits, payslips, nature of duties and period of employment;
e. Chronology of all corporate and private bookings as well as pricing for the admissions upon entry;
f. The quality and pricing of the beverages and food served on the Vessel;
g. Repairs and maintenance to the Vessel.
2. Provide access to Kyle Clarke and/or the writer, as an authorised representative of Kanki, to inspect all of the original books and records, whether held electronically or in hard copy, of the Business, and allow either Mr Clarke or the writer to take such copies of the documents as he may require at such inspection.
3. Cause the Vessel to return to Sydney Harbour at Neptune’s expense for the continued operation of the Business on Sydney Harbour.
4. Remove any reference on the Business website (www.seadeck.com.au) to any further operations of the Vessel in Brisbane, take no further bookings in Brisbane and cancel all bookings in Brisbane.
5. Terminate the services of all employees who were directly or indirectly responsible for improper conduct in Brisbane and/or in the course of their employment.
6. Rectify the modification and alterations to the Vessel at Neptune’s cost.
Neptune is required to complete each and all of the above actions within 14 days of the provisions of this letter, and if it fails to do so Neptune will be in default of the JVA and the JVA will thereby be terminated.
42 The response received from the solicitors representing Neptune dated 14 July 2017 relevantly provides as follows:
1. Neptune has not taken sole control of the business. Kanki has had the opportunity to be involved in the operation of the business at all times that has consistently declined to do so.
… Mr Clark did not directly involve himself in the day to day operations of the business. He did keep himself remotely appraised of the financial management of the Business. He was also advised of the proposal to relocate the Vessel to Brisbane for the off-season and expressed no concerns or reservations, nor did he object to that proposal.
All repairs, alterations and modifications to the Vessel have been carried out with the knowledge of officers of Kanki, save for the removal of approximately one metre from the top of the mast on arrival in Brisbane to allow the vessel to move under a bridge. …
2. The Business has been conducted in consultation with Kanki at all times. …
3. The statement that the decision to trade in Brisbane in the off-season was not a decision made jointly by Kanki and Neptune is misguided. There is no obligation set out in the JVA for decisions to be made jointly. Our client has already advised you that Kanki was advised of the proposal and made no objection, by its letter of 23 June 2017 in response to your letter of 22 June 2017.
The decision was accordingly not made unilaterally, nor was it a decision involving the incurrence of expenditure not authorised by Kanki. Indeed, Kanki had been advised that the running costs for the Vessel in Sydney while not trading in the off-season were approximately $50,000 per week and that relocating to Brisbane was an opportunity to trade and generate revenue …
… [P]rovisions of the JVA such as Clause 6(e), 6(g), 8 and 10 clearly contemplate that Neptune will manage the Business and carry out the daily operation of the Vessel while keeping Kanki fully informed. The manner in which Kanki and its representatives have conducted themselves throughout the term of the joint-venture to date reflects that understanding on their part.
43 In response to Kanki’s demand that the vessel be returned to Sydney Harbour, the letter of 14 July 2017 said:
There is no basis for the demand set out here and it is rejected. There is no breach of the JVA that justifies such a demand.
44 On 11 July 2017, the solicitors representing the plaintiffs sent a further letter to Neptune providing notice under the Charter Agreement that unless the breaches of the JVA referred to in their letter of the same date were rectified, Ozmen would consider Kanki and Neptune to be in fundamental breach of the Charter Agreement. Subsequently, on 4 August 2017 the plaintiff’s solicitors observed that as Neptune had failed to rectify the breaches notified in its 11 July 2017 letter within 14 days, the JVA was terminated on and from 25 July 2017. The letter of 4 August 2017 then provided notice that by reason of the termination of the JVA, Seadeck is no longer in the joint possession of Kanki and Neptune but is in the possession of Neptune only pursuant to clause 1(a) of the Charter Agreement. Accordingly, Ozmen terminated the Charter Agreement for fundamental breach.
45 The plaintiffs submit that there is a strong prima facie case of breach of contract and that the balance of convenience favours the appointment of the receiver. Ozmen submits that its right to possession of Seadeck depends upon there being a valid termination of the Charter Agreement. It contends that it was of the essence of the Charter Agreement that there was a business being operated by Kanki and Neptune on Seadeck (recital A), and that Seadeck was under the “complete control” of Kanki and Neptune (clause 1(a)(i)). Furthermore, no alterations were to be made to Seadeck without Ozmen’s consent (clause 1(d)). It submits that Neptune has acknowledged that an alteration was made to Seadeck without the consent of either Ozmen or Kanki, by removing the top of the mast. It further submits that it is not in issue that the Seadeck was relocated to Brisbane, and operated in Brisbane without any consent or involvement by Kanki. The termination of the JVA recognised explicitly a state of affairs that had been implicit for some time, namely that Neptune alone was conducting the business on the Seadeck and that it was not under any form of control by Kanki.
46 The plaintiffs submit that the balance of convenience favours the interlocutory orders sought, pending final determination of the proceeding.
47 Neptune disputes the entitlement of either Kanki or Ozmen to terminate their respective agreements. It disputes that the acts relied upon by the plaintiffs were breaches and/or that they were sufficient to warrant service of notices of termination. It submits that the fact that one party to a joint venture asserts a breakdown of trust and confidence is not sufficient to lead to the conclusion that a receiver should be appointed, to the detriment of the other party. This is especially so, it submits, where there has been no dispute that Kanki is entitled to share in the profits of the venture. Neptune submits that there has been no breakdown of relationship between the parties, that at all material times it has cooperated with Kanki in the conduct of the joint venture and that the correspondence indicates that it was Kanki, not Neptune, that failed to engage cooperatively in the operation of the joint-venture. In this regard, Neptune points particularly to the reasonableness of its decision to take Seadeck to Brisbane during the Sydney winter, and submits that Kanki owed an obligation under the JVA not to withhold its consent unreasonably to the sensible management of the vessel. It submits that at no point in time did any representatives of Kanki actively engage in the management of the Seadeck, and even in June 2017 when Mr Fox was appointed as the on-board representative there is no suggestion that he went on board or became engaged.
48 Neptune submits that the balance of convenience stands firmly against the appointment of a receiver. It submits this would have a drastic consequence for Neptune because it may place the liquor licensing arrangements on-board Seadeck at risk, it is likely to signal to customers and suppliers that the business is in trouble, with adverse consequences to the trading arrangements of the business, and that damages would not be an adequate remedy. Furthermore, the business has been operating over the course of the last 9 months and is now enjoying “considerable success”, the Seadeck is booked out for the remainder of its time in Brisbane and is close to fully booked for the summer Sydney season.
49 The principles relevant to the grant of interlocutory relief are well-settled and were not in dispute between the parties. Both parties urged that the summary of principles set out by me in Optical Distributors and Manufacturers Association of Australia Ltd v Expertise Events Pty Ltd  FCA 209 at  and  be adopted in the present case. Those are set out in the following 2 paragraphs.
50 The principles which govern the grant of interlocutory injunctive relief in private litigation are set out in Castlemaine Tooheys Ltd v South Australia  HCA58; (1986) 161 CLR 148 (Castlemaine Tooheys) at 153 where his Honour Mason ACJ said:
In order to secure such an injunction the plaintiff must show (1) 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; (2) that he will suffer irreparable injury for which damages will not be an adequate compensation unless an injunction is granted; and (3) that the balance of convenience favours the granting of an injunction.
51 The Full Court in Samsung Electronics Co Ltd v Apple Inc  FCAFC 156; (2011) 217 FCR 238 (Samsung) at  –  summarised the relevant principles. After discussing whether proof of irreparable harm was a necessary ingredient in the Court’s consideration of such an application (at ), the Full Court said at  – :
62. The assessment of harm to the plaintiff, if there is no injunction, and the assessment of prejudice or harm to the defendant, if an injunction is granted, is at the heart of the basket of discretionary considerations which must be addressed and weighed as part of the Court’s consideration of the balance of convenience and justice. The question of whether damages will be an adequate remedy for the alleged infringement of the plaintiff’s rights will always need to be considered when the Court has an application for interlocutory injunctive relief before it. It may or may not be determinative in any given case. That question involves an assessment by the Court as to whether the plaintiff would, in all material respects, be in as good a position if he were confined to his damages remedy, as he would be in if an injunction were granted (see the discussion of this aspect in Spry, The Principles of Equitable Remedies (8th edn, 2010) at pp 383–389; at pp 397–399; and at pp 457–462).
63. The interaction between the Court’s assessment of the likely harm to the plaintiff, if no injunction is granted, and its assessment of the adequacy of damages as a remedy, will always be an important factor in the Court’s determination of where the balance of convenience and justice lies. To elevate these matters into a separate and antecedent inquiry as part of a requirement in every case that the plaintiff establish “irreparable injury” is, in our judgment, to adopt too rigid an approach. These matters are best left to be considered as part of the Court’s assessment of the balance of convenience and justice even though they will inevitably fall to be considered in most cases and will almost always be important considerations to be taken into account.
64. Gleeson CJ also observed in Lenah Game Meats (at  (p 219)), that, where there is little or no room for argument about the legal basis of the applicant’s claimed private right, the court will be more easily persuaded at an interlocutory stage that a prima facie case has been established. The court will then move on to consider discretionary considerations, including the balance of convenience and justice. But, as his Honour also observed at  (p 219):
The extent to which it is necessary, or appropriate, to examine the legal merits of a plaintiff’s claim for final relief, in determining whether to grant an interlocutory injunction, will depend upon the circumstances of the case. There is no inflexible rule.
65. The resolution of the question of where the balance of convenience and justice lies requires the Court to exercise a discretion.
66. In exercising that discretion, the Court is required to assess and compare the prejudice and hardship likely to be suffered by the defendant, third persons and the public generally if an injunction is granted, with that which is likely to be suffered by the plaintiff if no injunction is granted. In determining this question, the Court must make an assessment of the likelihood that the final relief (if granted) will adequately compensate the plaintiff for the continuing breaches which will have occurred between the date of the interlocutory hearing and the date when final relief might be expected to be granted.
67. As Sundberg J observed in Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth  FCA 595; (2009) 81 IPR 339 at  (p 342), when considering whether to grant an interlocutory injunction, the issue of whether the plaintiff has made out a prima facie case and whether the balance of convenience and justice favours the grant of an injunction are related inquiries. The question of whether there is a serious question or a prima facie case should not be considered in isolation from the balance of convenience. The apparent strength of the parties’ substantive cases will often be an important consideration to be weighed in the balance: Tidy Tea Ltd v Unilever Australia Ltd (1995) 32 IPR 405 at  per Burchett J; Aktiebolaget Hassle v Biochemie Australia Pty Ltd  FCA 496; (2003) 57 IPR 1 at  per Sackville J; Hexal Australia Pty Ltd v Roche Therapeutics Inc  FCA 1218; (2005) 66 IPR 325 at  (p 329) per Stone J; and Castlemaine Tooheys at 154 per Mason ACJ.
52 The plaintiffs specifically seek orders for the appointment of a receiver and manager. Section 57 of the FCA Act provides:
(1) The Court may, at any stage of a proceeding on such terms and conditions as the Court thinks fit, appoint a receiver by interlocutory order in any case in which it appears to the Court to be just or convenient so to do.
(2) A receiver of any property appointed by the Court may, without the previous leave of the Court, be sued in respect of an act or transaction done or entered into by him or her in carrying on the business connected with the property.
(3) When in any cause pending in the Court a receiver appointed by the Court is in possession of property, the receiver shall manage and deal with the property according to the requirements of the laws of the State or Territory in which the property is situated, in the same manner as that in which the owner or possessor of the property would be bound to do if in possession of the property.
53 This section should be read in conjunction with s 23 of the FCA Act, which provides:
The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, writs of such kinds, as the Court thinks appropriate.
54 Rule 14.21 of the Federal Court Rules 2011 (Cth) provides:
14.21 Application to appoint receiver
A party may apply to the Court for an order:
(a) appointing a receiver to have the powers of a receiver and manager; and
(b) requiring the person appointed as receiver to file a guarantee; and
55 In University of Western Australia v Gray (No 6)  FCA 1825 French J (as his Honour then was) said:
The powers of the Court
71. The power of the Court to appoint a receiver is statutory. It has its origins, however, as an equitable remedy. An order in the nature of an equitable remedy can be made under s 23 of the Act. The class of circumstances in which such power may be exercised is not closed. Nor are the purposes for which a receiver may be appointed and the powers and conditions attaching to such an appointment. There may be many circumstances of considerable diversity which would warrant such an order and it is important that the discretion not be unnecessarily confined by any particular line of cases to which it has been applied.
72. Examples of cases in which receivers have been appointed on an interlocutory basis can be multiplied. Relevantly, a court may appoint a receiver to a trust in order to protect trust property. Such an appointment may be made where the trust is “in a state of disarray” — Martyniuk v King  VSC 319 at  (Warren J). Her Honour there observed, citing Halsburys Laws of England (4th ed, Vol 39, para 827), that the general ground upon which a court appoints a receiver is ultimately in every case the protection or preservation of property for the benefit of persons who have an interest in it. She went on to say (at ):
The basis upon which a receiver may be appointed has been regarded by the courts on even as wide a basis as when the circumstances render it just and convenient.
See Manchester and Liverpool District Banking Co v Parkinson (1888) 22 QBD 173. And further (at ):
The court may appoint a receiver of trust property where that it necessary for the wellbeing of the trust.
See Ford & Lee The Principles of the Law of Trusts (2nd edition) at .
56 The plaintiffs place emphasis on the language of s 57(1), and point in particular to the broad discretion conferred by that section for the Court to appoint a receiver “in any case in which it appears to the court to be just or convenient to do so” (emphasis added). They point to the equitable origins of the power of the Court to appoint a receiver and submit that where, as here, arrangements between the parties are in the nature of a quasi-partnership, and the relationship between those parties appears to have broken down, then it is appropriate for the power to be exercised by the Court pending determination of the proceedings. In this regard, they submit that there is a real danger that they will suffer irreparable harm in the event that the control of the joint venture is not taken out of the hands of Neptune.
57 The defendant points to the specific language of the JVA in clause 6(c), where the parties stipulate that the rights and obligations under the agreement are individual and nothing in the agreement constitutes the parties as partners. It submits that the authorities cited by the plaintiffs which concern applications under the Corporations Act 2001 (Cth) or partnerships have no relevance to the current dispute.
58 Although Neptune and Kanki are not engaged in a partnership, the terms of the JVA make clear that they are in a relationship of mutual trust and obligation in respect of the conduct of the business relating to Seadeck. As much is made explicit in the terms of the JVA pursuant to which they agreed that they are equally responsible for the day-to-day running of the business (clause 6(a)), they are obliged and warrant the decisions will be made promptly and that full cooperation is given between them (clause 6(b)(i)), they agree that each owes the other a duty of trust (clause 6(d)) and they agree that both will jointly operate and manage the business, with arrangements to be constantly discussed and finalised by both parties so that all decisions are made jointly (clause6(e)). These provisions are sufficient to mean that guidance may be obtained from earlier authorities concerning the appointment of receivers and managers to businesses operating as partnerships or as corporations. That is to say, those authorities may, by analogy, be of assistance.
59 In Woods v Harrison, in the matter of Telco Service Holdings Pty Ltd (in liquidation)  FCA 732 Beach J said at :
The condition on the grant of the statutory power under s 57 is expressed in broad terms, being where it is “just or convenient so to do”. It may be noted that the statutory power does not confine itself to the scenario of a Mareva receiver nor does it countenance a limitation on the exercise of the power or an implicit fetter based upon phraseology of the type: “the appointment of a receiver is an extraordinary and drastic remedy, to be exercised with utmost care and caution and only where the court is satisfied there is imminent danger of loss if it is not exercised” or the power “should be exercised only after great scrutiny and in extraordinary circumstances”. That is not the phraseology of the statutory power that I was requested to exercise and nor is any such limitation consistent with the authority of this Court. The applicable position is that stated by French J (as his Honour then was) in University of Western Australia v Gray (No 6)  FCA 1825 at  …
60 In the present application, as the authorities referred to in the previous section indicate, the factors to take into account in the grant of interlocutory relief include whether there is a serious question to be tried, whether there is likely to be irreparable harm such that damages would not be an adequate remedy and the balance of convenience; Castlemaine Tooheys at 153. The interaction between the Court’s assessment of the likely harm to the plaintiff, if no injunction is granted, and its assessment of the adequacy of damages as a remedy, is an important factor in the Court’s determination of where the balance of convenience and justice lies; Samsung at . In exercising that discretion, the Court is also required to assess and compare the prejudice and hardship likely to be suffered by the defendant, third persons and the public generally if an injunction is granted, with that which is likely to be suffered by the plaintiff if no injunction is granted. In determining this question, the Court must make an assessment of the likelihood that the final relief (if granted) will adequately compensate the plaintiff for the continuing breaches which will have occurred between the date of the interlocutory hearing and the date when final relief might be expected to be granted; Samsung at .
61 In the present case, there is no doubt that there exists a serious question to be tried. The evidence indicates that on about 21 June 2017 Seadeck was sailed to Brisbane. The correspondence reveals that by that date Kanki and Ozmen had repeatedly expressed the view that the decision to move Seadeck should be a joint one, preceded by a meeting of the joint venture partners to discuss it. The evidence also discloses that Mr Ozmen requested such a meeting on 15 May 2017 and that Mr Auld agreed that it should be held. Even so, when Mr Clarke met with representatives of Neptune on 18 May 2015 he was rebuffed, because he was not an authorised representative. On 15 June 2017 Mr Koyunoglu, the director of Kanki, indicated in clear terms that the partners and owner of the 50% joint venture did not agree with Seadeck being taken to Brisbane until they had at least had a chance to review the business proposal. The response from Mr Douchkov, a principal of Neptune, was that the matter had been referred to Neptune’s accountant, Mr Borella. On 18 June 2017 Mr Ozmen, the owner of the vessel, signalled his opposition to the plan, and concerns as to the state of repair of the vessel. Mr Auld responded on the same day, not disputing the criticisms made as to the condition of the vessel, but rather seeking to explain them.
62 It is apparent that there will be a contest at final hearing as to the correct legal characterisation of the issues raised. On Neptune’s part, it is submitted that it was entirely reasonable for Seadeck to be sailed Brisbane, that the business was losing money in Sydney and that an implied term of the JVA must be that Kanki would not unreasonably refuse to provide its consent to decisions concerning the management of the vessel. Conversely, it will contend that there was no fundamental breach and that the purported termination of the JVA and Charter Agreement was invalid and that both agreements remain on foot.
63 In my assessment, purely on the basis of the evidence and arguments advanced on this urgent interlocutory application, there is a reasonably arguable case on the part of the plaintiffs that Neptune acted in breach of the JVA. At least one available construction of clauses 4, 6(a), (b)(i) and (e) of the JVA suggests that Neptune ought to have done more than merely notify Kanki of its decision to take the vessel from Sydney to Brisbane. The letter from Neptune’s solicitors of 14 July 2017 indicates that their view at the time was that “there is no obligation set out in the JVA for decisions to be made jointly” and that the JVA only required that “Neptune will manage the business and carry out the daily operations of the vessel while keeping Kanki fully informed”. The view so expressed clearly reflected Neptune’s own position in relation to the JVA. There is also a reasonably arguable defence.
64 However, in considering the grant of interlocutory relief it is also necessary to have regard to; the likely harm to be suffered by Ozmen and Kanki, the question of whether any harm is compensable by the payment of damages after a final hearing, and the balance of convenience in the context of the relief sought and the harm that the plaintiffs submit they will suffer.
65 In relation to the relief sought, the plaintiffs seek the appointment of Mr Silvia as receiver and manager of the business of the joint venture pending final hearing. Mr Silvia is a principal of BRI Ferrier, who completed accounting qualifications in 1977, and since 1981 has accepted several hundred insolvency appointments. Those appointments include acting as provisional and official liquidators in respect of businesses in the shipping industry, including acting as official liquidator of CTC Package Holidays Pty Ltd, which involved addressing questions concerning the catering for passengers and crew. He has also acted as provisional liquidator for businesses in the hospitality and catering industry and acted in various insolvency capacities for numerous hotels, motels, pubs and other establishments that operate licensed premises.
66 The orders that the plaintiffs seek are, in summary, that Mr Silvia and his colleague Mr Currie be appointed receivers and managers of Seadeck and the business established by the JVA, and that they take possession of the vessel and make any and all decisions as they consider appropriate to conduct the business on an ongoing basis, including taking possession of the bank accounts and other assets of the business, undertaking repairs or maintenance of the vessel, employing staff and exercising such other powers as may be agreed in writing between the parties and receivers. The receivers would, under the proposed regime, pay all expenses and debts of the vessel and the business operated from it from money received from the operations of the business. The proposed orders provide that the receivers are entitled to draw their professional fees as and when incurred on a time cost basis, that they are to provide a report to the Court within 28 days of each calendar quarter (the first being 31 December 2017) and that in the event that takings from the business are insufficient to discharge the obligation of the receiver to pay the costs of the business, receivers will have a right of indemnity and security over the vessel and also from Kanki and Neptune. The proposed orders provide that within 7 days Neptune is to deliver up possession of the vessel as well as control of all staff records, accounting and finance records, website domains, and unperformed contracts and permits and licences concerning the operation of the vessel.
67 Aside from opposing the appointment of the receiver, Neptune raised no specific criticisms of the terms of appointment other than to dispute the entitlement of the receivers on an interim basis to receive a right of indemnity and security from Neptune.
68 At this point it is necessary to note that Neptune, during the course of closing submissions and subsequently confirmed in writing offered the following undertakings to the Court until the final determination of these proceedings:
1. The Defendant undertakes not to make any additions or alterations to the Vessel without the consent of the First Plaintiff;
2. The Defendant undertakes to keep the Vessel in the same condition and state of repair as at the date of the filing of the Originating Application;
3. The Defendant undertakes to allow the First Plaintiff’s representatives to inspect the vessel on three days’ notice.
69 I now turn to the questions of harm, convenience and adequacy of damages.
70 The status quo is that Neptune has been in control of the day to day operations on board Seadeck since it commenced operations in March 2016. Although Kanki has had the right under the JVA to have a full-time representative on-board, no evidence suggests that it has done so. In essence, Neptune has maintained the Vessel, procured catering and event management services and organised bookings for it. It has continued to do so throughout the Sydney 2016/2017 cruise season and also did so in Brisbane. It is perhaps not surprising that in its first season in Sydney it did not perform as well as expected given that it is a fledgling hospitality business.
71 Seadeck was controversially taken to Brisbane in June 2017, where it traded for 10 weeks or so. The evidence suggests that during this period Neptune was reasonably successful in attracting business and raising revenue. Neptune continued to promote Seadeck cruises on Sydney Harbour and it took substantial bookings for the Sydney 2017/2018 cruise season. The evidence indicates that Seadeck will resume operations in Sydney by 30 September 2017. All the while, Neptune has remained in day-to-day control of the vessel.
72 Against this background, I do not accept the plaintiffs’ submission that the status quo is that there is no current business operation or reputation in the business operated on Seadeck. A better characterisation is that a fledgling business has started to get some traction in Sydney. The question is whether the balance of relevant considerations favours the interlocutory relief sought. In this context, I have accepted there is an arguable case for breach of the JVA and Charter Agreement. I also accept that there is an arguable case that the agreements have been validly terminated. The question of the strength of the defences to these claims is not for present determination, although I also note that they are also reasonably arguable. However, in respect of past conduct (the trip to Brisbane and events that took place there) damages will have to be the remedy. The present analysis must necessarily focus on the likelihood of harm in the immediate future until trial. In this regard, I note that the plaintiffs were offered an opportunity for the matter to be listed for early final hearing. They contended that the proceedings could not be prepared sufficiently quickly for that to take place and pressed on with their current application.
73 For the following reasons, I consider that the plaintiffs have not established that the interlocutory relief sought is warranted.
74 First, I consider it likely that the appointment of the receiver will cause significant disruption to the operations of the business. Mr Silvia will have to become acquainted with the operations, retain staff and organise supply services. His evidence is that it would take him up to 2 weeks upon orders being made for him to undertake assessments of the business and determine appropriate staffing and continuing operations of the business. During that time he would endeavour to keep the business going as an ongoing operation. Nevertheless, it may be accepted that the handing over of the books and records of the business, the examination of its operations and the investigation of existing contracts and key personnel will necessarily cause a disruption to the business and likely a significant disruption. In addition, although there was no attempt to quantify the cost of paying for the services of the receiver, undoubtedly the payment of the receiver’s cost would place an additional strain on the resources of the business. I further accept Neptune’s submission that the disruption caused by the appointment of a receiver and manager could well cause current and future clients to hesitate in maintaining their bookings. It is also entirely possible that it will cause a cloud to hang over the business such that customers and suppliers alike doubt its on-going viability. This type of reputational harm is difficult to quantify, but there is at least a danger that it could extinguish all goodwill in the business.
75 Secondly, Neptune and its principals have invested about $4.2 million in the preparation of Seadeck for operations. They are, it might be observed, committed to the success of the business on-board the vessel, as the correspondence recited above tends to confirm. Neptune may be criticised, perhaps justifiably, for taking steps without adequate consultation with Kanki, but Neptune’s counter allegation is that Kanki was insufficiently engaged in the business operations and ought reasonably to have consented to its operational suggestions. Either way, Neptune’s interest appears consistently to have been in the continuation and improvement of the business. There has been no suggestion that Neptune has set out to harm the business. On the contrary, such criticism as is made is in relation to conduct which suggests a zealous interest in maximising the profitability of the business. Such an approach tends in favour of the view that a continuation of the status quo, with Neptune in charge of day to day operations, would not harm the joint asset of the parties being the business operations on board Seadeck.
76 Thirdly, Kanki and Ozmen submit that there is a danger of reputational harm to the vessel Seadeck. In this regard they point to evidence of an email written on 13 January 2013 from Mr Koyunoglu to representative of Neptune that raises concerns about a number of matters such as: the cleanliness of the floors, tables and glasses; the adequacy of customer service and security; marketing of the cruises, and so on. In an email dated 12 March 2017 concerns were expressed about unruly behaviour by guests and that the security and wait staff did not respond appropriately or under adequate supervision. The email chain exhibited includes a lengthy report from a Mr Karin Gharbi from an organisation called “The VIP Sydney” which records in detail the behaviour of various customers and responses by the Seadeck staff. It makes detailed recommendations for improvements and better control of operations. There is no evidence of subsequent correspondence.
77 I interpret this email as being part of an ongoing attempt by representatives of Neptune to ensure better control over operations and supervision of events. In this context, I have noted above the current and past bookings for corporate and other events on-board Seadeck, both in Sydney for the coming season and in Brisbane. In my view, those past and future bookings provide a far more reliable indication of the reputational success of the business than the 2 matters identified above.
78 In summary, the plaintiffs have not demonstrated that there is a sufficient likelihood that Seadeck or the business, will suffer significant reputational harm, or that there is a likelihood that the Seadeck liquor license is in peril.
79 Fourthly, the plaintiffs contend that they will suffer unquantifiable financial harm unless a receiver is appointed because of a lack of transparency in the books and records of the joint venture business. In this regard it is necessary to go into a little detail as to the evidence. In the period from February 2017 until June 2017, Mr Clarke attempted to obtain information about aspects of the accounts of the joint venture. It appears that as a result of his concerns as to the adequacy of the records, Neptune appointed Mr Borella as its accountant in March 2017 and also a book keeper. Mr Clarke gives evidence that when he started to receive fortnightly profit and loss statements, there was only one fortnight period between March to May 2017 in which the business traded profitably, all other fortnights recording losses on average of $50,000. Mr Clarke reports that he was concerned about the operations of the business, but on 18 May 2016 was not able to discuss it with Neptune’s representatives. He also reports that he was concerned that the business was trading insolvently and requested the provision of the Business Activity Statements sent to the Australian Tax Office on behalf of Neptune. Despite requesting those statements in early June 2017, he had not by the time of his affidavit of 8 August 2017 received any. Emails exhibited by Mr Clarke indicate that Mr Borella was reluctant to submit Business Activity Statement returns until there was an appropriate balancing within the accounting system, which he was attempting to fix. As events transpired, correspondence produced and tendered at the hearing in response to a Notice to Produce served upon Neptune indicate that the Australian Tax Office has levied fines against Neptune for failure to lodge activity statements in the period from February to May 2017 inclusive. Furthermore, it appears that no Pay-As-You-Go tax returns have been lodged by Neptune since January 2017. In addition, the evidence of Mr Clarke reveals that Neptune has a superannuation liability for the period from 12 November 2016 until 12 September 2017 of $89,569. In relation to the accounts of Neptune, Mr Clarke gives evidence that he is unable to review and verify all of the expenses incurred by the business because they have not been correctly recorded in the accounts system and he has not been provided with weekly transactional details of revenue, supplier invoices and payee records.
80 Taking each of these matters at its highest, it appears that there are accounting defects in Neptune’s records and that there may be liabilities jointly owned by the joint venture in respect of which there is exposure for Kanki. However, even assuming (in favour of Kanki) that there are such defects and that there was a failure on the part of Neptune to provide records to Kanki on request, in my view this factor does not indicate harm that could not be recompensed in damages.
81 Fifthly, the plaintiffs point to Neptune’s unilateral decision to remove the top of the mast of Seadeck so that it could operate on the Brisbane River. This, they contend, was a breach of clause 1(c) of the Charter Agreement. They submit that there is a danger that further unauthorised changes could be made to the vessel, including some which cannot be recompensed by damages.
82 Neptune disputes the contractual significance of its actions in relation to the mast. However, it separately offers the undertaking to the Court set out above. The principals of Neptune have previously been entrusted with the task of transferring Seadeck by sea from Turkey to Australia. Kanki has apparently not availed itself of the opportunity to place a representative on-board Seadeck to observe the day-to-day conduct of operations, but rather has left operational decisions in the hands of Neptune. This is the case, even after the recent appointment of Mr Fox as the representative, at a time when formal letters were being exchanged between solicitors. In my view, the plaintiffs have not demonstrated that there is sufficient likelihood of harm to the vessel. I am fortified in this view by the undertaking to the Court that Neptune has proffered.
83 Sixthly, the plaintiffs submit that the relationship between the joint venturers has broken down. They submit that mutual cooperation was contemplated under the JVA and Charter Agreement. Neptune has refused to provide transparent accounting documents of the events concerning the operation of the vessel in the Brisbane River, which shows that Neptune has arrogated to itself full control of Seadeck, thereby subverting the purpose of the JVA and the Charter Agreement. The plaintiffs submit that unless the relief sought is given, the summer operations of the Seadeck business will in effect be subject to the regular supervision of the Court, with disputes as to management issues brought before the Court. This, they submit, is undesirable.
84 The question of the appropriateness of Neptune’s conduct and the level of cooperation required between the parties is substantially a matter for consideration in relation to final relief. The appointment of a receiver pursuant to s 57 of the FCA Act as a form of interlocutory relief must be made having regard to considerations of whether or not it is just and convenient to do so, in light of the principles applicable to the grant of interlocutory relief. In this regard, it is my view that it is not just and convenient on an interlocutory basis, to appoint a receiver. Plainly enough, tensions exist between the parties, but they have consistently maintained communications between each other. Perhaps each side could have engaged more promptly and more fully from time to time. But in weighing the strength of the plaintiffs’ case, the balance of convenience and where the justice of this matter lies, I do not consider that the appointment of the receiver is warranted.
85 The Court notes the undertaking of Neptune to the Court to the following effect:
1. The Defendant undertakes not to make any additions or alterations to the Vessel without the consent of the First Plaintiff;
2. The Defendant undertakes to keep the Vessel in the same condition and state of repair as at the date of the filing of the Originating Application;
3. The Defendant undertakes to allow the First Plaintiff’s representatives to inspect the vessel on three days’ notice;
until the final determination of the proceedings.
Dated: 21 September 2017