Background
The claimant, Ciright Inc, and the defendant, Centili Group Ltd, are both technology companies. In January 2025, they entered into a “Facility Agreement” for a $3 million loan and a “Licence Agreement” for Ciright’s technology. The parties dispute the nature of these agreements. Ciright contends the Facility Agreement was not a cash loan but rather documentation for a $3 million loan note provided in exchange for a software licence, which would ultimately convert to equity. Centili argues they were separate agreements, obligating Ciright to provide both a cash loan and a technology investment.
In January 2026, Ciright’s CEO, Mr. Callahan, asked Centili’s CEO, Mr. Javarone, if Ciright could temporarily transfer approximately $3.5 million to Centili’s bank account, to be held for Ciright and returned immediately upon request. Mr. Javarone agreed. Ciright subsequently transferred the funds. However, when Ciright requested the money back in March 2026, Centili, after initially indicating it would repay, refused.
Centili’s position became that the transferred funds were not held on trust but were a drawdown of a loan under the pre-existing Facility Agreement, and therefore not repayable until January 2027. Ciright initiated proceedings, arguing the money was held on a bare trust, and obtained a short-notice interim proprietary injunction to freeze the funds. The matter came before the court to determine whether the injunction should be continued until trial.
The Court’s Holding
The High Court granted Ciright’s application and ordered the continuation of the interim proprietary injunction, preserving the disputed funds until trial. The court applied the established principles from American Cyanamid v Ethicon Ltd to reach its decision. First, it held that there was clearly a “serious issue to be tried.” The court did not need to resolve the conflicting accounts of the January 2026 conversation between the CEOs. Ciright’s claim of a bare trust, supported by witness evidence and Centili’s initial communications suggesting repayment, was sufficient to cross the threshold. Centili’s defense that the funds were advanced under the Facility Agreement also raised triable issues.
Second, the court determined that damages would not be an adequate remedy for Ciright. Because Ciright was asserting a proprietary claim—that the specific funds in Centili’s account were its property—an award of damages at a future trial would be an inadequate substitute if Centili were to dissipate the funds in the meantime. The purpose of a proprietary injunction is to preserve the specific asset in dispute.
Finally, the court found that the balance of convenience lay in favour of continuing the injunction. Maintaining the status quo by freezing the funds would prevent irremediable prejudice to Ciright if its proprietary claim were ultimately successful. The court considered and dismissed Centili’s arguments that the injunction should be discharged for alleged material non-disclosure by Ciright at the initial hearing, finding any omissions were not substantial enough to justify such a step. The injunction was therefore continued until the full trial.
Key Takeaways
- When a claimant asserts a credible proprietary claim over specific assets, such as funds held on trust, courts are more inclined to grant an interim injunction to preserve those assets, as damages are generally considered an inadequate remedy for the potential loss of specific property.
- To obtain an interim injunction, a claimant does not need to prove their case will succeed, but only that there is a “serious issue to be tried.” The court will not conduct a mini-trial of disputed facts at the interim stage.
- A party’s conduct and communications following an event, such as initially agreeing to return funds before later asserting a legal right to retain them, can be significant evidence in supporting the existence of a serious issue to be tried.
Why It Matters
This decision underscores the critical importance of documenting commercial arrangements clearly and unambiguously, particularly in complex transactions involving both funding and licensing elements. The dispute arose directly from the parties’ conflicting interpretations of their agreements, which were apparently drafted without direct legal oversight, and a subsequent informal oral agreement concerning the transfer of millions of dollars.
The case also serves as a powerful illustration of the strategic value of the proprietary injunction. By successfully framing its claim as one of a bare trust over specific funds, Ciright was able to freeze the assets, preventing Centili from using the money for its business operations. This provides a significant tactical advantage over a standard debt claim, where the claimant has no right to the defendant’s specific assets before judgment and faces the risk of the defendant being unable to pay by the time the case is decided.