FEDERAL COURT OF AUSTRALIA

Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) v Oswal [2011] FCA 424

THE COURT ORDERS THAT:

1.    The respondents’ motion for a stay be dismissed.

2.    The respondents are to pay the applicant’s costs of the motion to be taxed or agreed unless submissions to the contrary are filed and served within ten days.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

INTRODUCTION

1    The respondents seek a temporary stay of these proceedings on the basis that similar issues have been raised by one of the respondents in proceedings initiated 23 days earlier than these in the Supreme Court of Victoria. For reasons that follow, I consider that these proceedings should not be stayed.

2    The first respondent (Mr Oswal) is a director and shareholder of the applicant (BFPL). BFPL owns and operates a liquid ammonia plant in Western Australia. It produces 6% of the total world output of tradable ammonia. Its head office is in Perth as are its executive directors. At the time of the material events, Mr Oswal and the second respondent (Mrs Oswal) lived in Perth.

3    The affidavit evidence indicates the following matters:

    BFPL is a wholly owned subsidiary of Burrup Holdings Ltd (BHL). The shares in BHL have been held, as to 35% by Yara Australia Pty Ltd (Yara), as to 30% by Mr Oswal and as to 35% by Mrs Oswal. Until the appointment of the receivers to BFPL (the receivers), Mr Oswal was the managing director of BFPL.

    The Australian and New Zealand Banking Corporation Ltd (ANZ) holds a share mortgage over all of Mr Oswal’s BHL shares and approximately 82 million of Mrs Oswal’s shares being 7.5% of the shares in BHL. Therefore, ANZ is the mortgagee of 37.5% of the shares in BHL. The share mortgage secures loans by ANZ to Mr Oswal amounting approximately to USD537 million. BFPL is also indebted to ANZ in amounts totalling USD360 million. That sum is secured, amongst other ways, by a fixed and floating charge over the assets and undertakings of BFPL.

    Mr Oswal has guaranteed indebtedness to ANZ to the extent of USD928 million. Mrs Oswal has guaranteed the indebtedness to ANZ to the extent of USD568 million.

    On 3 December 2010, ANZ made demand under those guarantees but no payments have been received. ANZ appointed the receivers on 16 December 2010 as receivers and managers to the BHL shares mortgaged by Mr and Mrs Oswal.

    The receivers have been fully engaged in examining the books and affairs of BFPL and the multiple transactions which have given rise to the statement of claim in this proceeding.

4    In this proceeding (the Federal Court proceeding) the receivers allege breaches by Mr Oswal of directors’ duties under the Corporations Act 2001 (Cth) (CA) and related equitable obligations. The receivers pursue Mr Oswal for compensation exceeding AUD95 million. Claims are also made against Mrs Oswal and a related family company, the third respondent (Comical). Those claims allege accessorial liability and receipt of benefits said to have been obtained as a result of Mr Oswal’s breach of directors’ duties.

5    Prior to the commencement of the Federal Court proceeding, proceedings were issued in the Supreme Court of Victoria (the Victorian proceeding). The Victorian proceeding was issued by Mrs Oswal against BFPL and the receivers. In the Victorian proceeding, Mrs Oswal challenges the validity of the appointment of the receivers to BFPL seeking declaratory relief that the appointment of the receivers was invalid and of no effect. Alternative orders were sought removing the receivers as receivers and managers of property owned by BFPL which was the subject of the relevant mortgages in favour of ANZ. Mrs Oswal seeks a permanent injunction restraining the receivers from acting as such. The Victorian proceeding commenced on 15 February 2011, with a statement of claim. A defence has been filed. No reply was filed as at the time of hearing of this motion on 20 April 2011.

6    Mrs Oswal undertakes to pursue the Victorian proceeding with expedition. Mr Oswal indicated that there are good prospects that it will be completed ‘well before the end of the year’. A directions hearing was listed for 28 April 2011.

7    The respondents all contend that the Federal Court proceeding should be temporarily stayed pending the determination of the Victorian proceeding. The argument is that the Victorian proceeding was commenced first and is more advanced than the Federal Court proceeding. Secondly, the stay is sought on the basis that determinations in the Victorian proceeding are likely to have a material effect on the Federal Court proceeding and may result in the withdrawal of the Federal Court proceeding. Thirdly, it is contended that it is in the public interest that the Federal Court proceeding be stayed and the validity of the controller of BFPL be determined before the Federal Court proceeding continues. Fourthly, it is argued that costs and resources will be wasted (including those of the Court) in the event that the Supreme Court of Victoria determines that the receivers have not been validly appointed and the Federal Court proceeding is discontinued by BFPL. Fifthly, it is argued that there is a risk of duplication of issues and inconsistent findings if the Federal Court proceeding proceeds concurrently. Finally, it is argued that the balancing of advantages and disadvantages to each party favours a temporary stay.

RELEVANT PRINCIPLES

8    The Court has a general power to control its own proceedings pursuant to s 23 of the Federal Court of Australia Act 1976 (Cth). The general power enables the Court to order temporary stay of proceedings in various circumstances including where a proceeding is pending in another court and it is desirable that such earlier proceeding proceed to its conclusion before the Federal Court proceeding is determined.

9    The parties advance arguments by reference to a list of considerations collected in Sterling Pharmaceuticals Pty Ltd v The Boots Company (Australia) Pty Ltd (1992) 34 FCR 287. A number of cases in this Court and others have followed the approach taken by Lockhart J in Sterling Pharmaceuticals. Sterling Pharmaceuticals concerned litigation in New Zealand similar to that subsequently commenced in Australia between related parties. The New Zealand litigation had included the dismissal of an application for an interim injunction. Lockhart J noted that ‘extensive affidavit evidence was filed’ in the New Zealand proceeding. This included a significant number of expert affidavits from witnesses from various countries. Seven interlocutory applications had been heard subsequent to the application for interim injunction relief. Discovery by exchange of lists of documents had occurred and the New Zealand proceeding was expected to occupy some 21 days of hearing and expected to take place before the end of that year. (The application for a stay was heard at the end of February). A stay of the Australian proceeding was sought.

10    Lockhart J noted (at 291):

In my opinion relevant considerations to be taken into account in the present case include the following:

•    Which proceeding was commenced first.

•    Whether the termination of one proceeding is likely to have a material effect on the other.

•    The public interest.

•    The undesirability of two courts competing to see which of them determines common facts first.

•    Consideration of circumstances relating to witnesses.

•    Whether work done on pleadings, particulars, discovery, interrogatories and preparation might be wasted.

•    The undesirability of substantial waste of time and effort if it becomes a common practice to bring actions in two courts involving substantially the same issues.

•    How far advanced the proceedings are in each court.

•    The law should strive against permitting multiplicity of proceedings in relation to similar issues.

•    Generally balancing the advantages and disadvantages to each party.

11    Although resolution of the issues in New Zealand or Australia would not have given rise to an issue estoppel in the other country, his Honour observed that it:

… would be quite unreal to regard companies from the same international group as if they were totally independent of each other such that the success or reversal of one of them in proceedings in one country would not materially, as a practical matter, affect the conduct of their associates in another country where the proceedings involve similar issues.

12    The issues in the New Zealand case were not identical with the Australian case but his Honour was satisfied that the basic issue was the same in each proceeding. His Honour noted that resolution of issues in the New Zealand case, unless there was some serious deficiency in the evidence of the unsuccessful party in the New Zealand proceeding, should determine the issues in the Australian proceeding. His Honour went on to say:

Indeed, whether the parties to the Australian proceeding do or do not agree to accept the result of the New Zealand proceeding, this Court will be able to control the future conduct of the Australian proceeding by giving directions with the benefit of the findings in New Zealand which may substantially reduce the scope of the issues in the Australian proceeding, in particular, the medical issues.

13    His Honour referred to the duplication in preparation for the conduct of the two sets of proceedings, inconvenience for expert witnesses and for officers of the respective companies. Both proceedings were public interest proceedings, dealing in part with drug safety claims, rather than proceedings to protect exclusively proprietary rights of corporations. The Australian proceeding commenced ‘many months’ after the complaint had been made by Sterling Australia against Boots Australia. Sterling Australia received advice in September 1989 as to the conduct of Boots Australia and did not issue any proceeding until November 1991. In the meantime, the New Zealand proceeding had commenced in November 1990 (a year before the Australian proceeding).

14    The significant state of advancement of the New Zealand proceedings and the significant delay of the Australian proceedings in Sterling Pharmaceuticals stand in stark contrast to the circumstances of the present case. The Victorian proceedings are not substantially advanced. They were commenced only a short time prior to the Federal Court proceedings. A complete statement of claim accompanies the Federal Court proceeding and, while the defence to the statement of claim has not been filed, neither has a reply been filed in the Victorian proceedings. No extensive evidence has been filed in the Victorian proceedings unlike the New Zealand proceeding in Sterling Pharmaceuticals. No significant interlocutory disputes have arisen or been determined in the Victorian proceeding.

15    In Sterling Pharmaceuticals, Lockhart J weighed the advantages and disadvantages to each party in the Australian proceeding and concluded that while there should not be a stay, even on a temporary basis, the matters should be stood out of the list to a date later in the year with liberty being reserved to either party to restore the matter to the list on reasonable notice in the event that circumstances changed.

16    The parties, mainly the respondents, have presented arguments by reference to the list in Sterling Pharmaceuticals. Judgments on occasions set out a check list of relevant principles gathered from preceding cases and which may guide the exercise of judicial discretion. That approach is often helpful both for the writer and the reader but more often than not, such a list is accompanied by a caveat perhaps to the effect that the list does not purport to be exhaustive. In this case the description given was that the considerations, in his Honour’s view, ‘include the following’. The fact that such a list is a non-exhaustive guide accords with the task of exercising judicial discretion and sets it apart from ‘ticking off’ strictly prescriptive statutory preconditions. There are occasions of which this is one, where few of the elements in such a list have particularly weighty significance in the circumstances. In this case, the infancy of the litigation in both instances is a significant factor.

17    In Union Steamship Co of New Zealand Ltd v The Caradale (1937) 56 CLR 277, Dixon J observed (at 281) in relation to situations involving multiple proceedings with respect to the same subject matter in different courts in Australia that ‘[t]he inconvenience and embarrassment of allowing two independent actions involving the same question of liability to proceed contemporaneously in different courts needs no elaboration’.

18    However, in that case, Dixon J also declined to grant a stay. Following a ship collision, the owner of one ship commenced an action for damages against the owner of the other in the Supreme Court of Victoria. Shortly after, the owner of the latter ship commenced an action for damages against the former ship in the High Court in its Admiralty jurisdiction. The defendant in the High Court sought to stay the action to enable the responsibility for the damage caused by the collision to be determined in the Supreme Court. Dixon J held that the plaintiff in the High Court was entitled to proceed in rem and was not obliged to assert its claim by counterclaim in the action in the Supreme Court. Dixon J noted that the Admiralty jurisdiction was established for the hearing and determination of kinds of causes of which this case presented an ordinary example.

19    The institution of the action was quite proper. The two actions were begun almost at the same time and the circumstance that the defendant was a little quicker in the actual issue of the writ was not a very substantial consideration. His Honour continued:

The plaintiff brings in an appropriate jurisdiction an action for a very large claim. There are no questions as to the existence or sufficiency of the jurisdiction or as to the mode of trial. The action was instituted for a proper purpose which might not otherwise be achieved. I do not think that the defendant can show any sufficient reason for this court’s refusing to try the plaintiff’s claim and turning it into the Supreme Court, where the admiralty jurisdiction is in doubt and the mode of trial may prove unsuitable and perhaps other difficulties may be raised. It is not a sufficient reason that the defendant’s writ was issued three days earlier and the defendants are now ready to allow the security that they were forced to give by the process of this court to give stand until the conclusion of the proceedings in the Supreme Court.

20    Palmer J observed in J Aron Corporation v Newmont Yandal Operations Pty Ltd [2005] NSWSC 1159, when granting a stay of a second set of proceedings where overlapping issues were raised, that questions of whether or not a temporary stay should be granted were essentially questions of case management. There are a number of cases where stay applications have been refused largely on case management grounds: see, for example, Arkin v Tridon Australia Pty Ltd [2002] FCA 1629 per Heeley J; Owners-Strata Plan No 51487 v Broadsand Pty Ltd (2001) 132 IR 361 per Bryson J. In Broadsand Bryson J said (at [9]) that the reasoning in the various decisions, such as those cited in the present motion, is enmeshed in the facts and circumstances of each case under consideration, and ‘… in my respectful view the decisions do not establish broad principles, nor do they establish any clear practice or course of proceedings; and it would not be appropriate for them to do so as each matter must be addressed in its own circumstances’.

21    The Full Court of the Supreme Court of South Australia dismissed an appeal against a refusal to stay in Balescope Pty Ltd v Pegasus Leasing Ltd (1994) 125 ALR 483. In that case, Pegasus instituted proceedings in the Supreme Court of South Australia claiming a sum said to be due on an agreement pursuant to which it alleged that Balescope agreed to lease 14 thoroughbred horses. Six weeks after that, Balescope issued Federal Court proceedings out of the Australian Capital Territory Registry seeking various heads of relief including a declaration that the agreement was void pursuant to s 87 of the Trade Practices Act 1974 (Cth). Balescope sought an order to stay the South Australian Supreme Court proceedings pending final judgment in the Federal Court action or alternatively, a transfer of the South Australian proceedings to the Federal Court pursuant to the cross-vesting legislation. The motion was dismissed. Perry J followed Gibbs J in Cope Allman (Aust) Ltd v Celermajer (1968) 11 FLR 488 where Gibbs J observed (at 494) ‘Before I may decline to exercise jurisdiction and deny to the plaintiff its prima facie right to proceed in this Court I must be satisfied that there would be something amounting to vexation, oppression or injustice to the defendants. I am not so satisfied’. Bolen and Prior JJ agreed with Perry J.

22    The respondents also rely on Henry v Henry (1996) 185 CLR 571 (at 590) and Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd (2009) 239 CLR 75. In Henry v Henry, dealing with matrimonial proceedings, the High Court said (at 590) (footnotes omitted):

Parallel proceedings in another country with respect to the same issue may be compared with multiple proceedings with respect to the same subject matter in different courts in Australia. In Union Steamship Co of New Zealand Ltd v The Caradale, Dixon J observed of that latter situation that "[t]he inconvenience and embarrassment of allowing two independent actions involving the same question of liability to proceed contemporaneously in different courts needs no elaboration". From the parties' point of view, there is no less — perhaps, considerably more — inconvenience and embarrassment if the same issue is to be fought in the courts of different countries according to different regimes, very likely permitting of entirely different outcomes.

It is prima facie vexatious and oppressive, in the strict sense of those terms, to commence a second or subsequent action in the courts of this country if an action is already pending with respect to the matter in issue. And although there are cases in which it has been held that it is not prima facie vexatious, in the strict sense of that word, to bring proceedings in different countries, the problems which arise if the identical issue or the same controversy is to be litigated in different countries which have jurisdiction with respect to the matter are such, in our view, that, prima facie, the continuation of one or the other should be seen as vexatious or oppressive within the Voth sense of those words. (emphasis added)

CONSIDERATION

Which proceeding was commenced first?

23    This aspect is neutral in the present circumstances. The approach taken by Dixon J in Union Steamship and by the Full Court in Balescope is apposite. The timing difference is totally insignificant in the context of litigation of this obvious magnitude, complexity and likely duration.

24    Further, as a matter of principle, to give this first factor too much weight could in an appropriate case (not this case) lead to an abuse in itself by one party pursuing a limited pre-emptive strike to preclude pursuit of the substantive dispute and relief.

25    The receivers were appointed on 17 December 2010 pursuant to cl 6.3(t) of the Fixed and Floating Charge and pursuant to that clause, they have an express power to commence proceedings in the name of BFPL. No injunction, interim or interlocutory, has been brought by either Mr or Mrs Oswal to stop the receivers from doing so or otherwise prevent them from discharging their duties. Indeed, at this stage, Mr Oswal has not instituted proceedings of any nature challenging the appointment of the receivers.

26    The Victorian proceeding was commenced on 15 February 2011 and the Federal Court proceeding on 10 March 2011. The timing of the Victorian proceeding needs to be viewed in the context of communications made by the receivers’ legal advisors to Mr and Mrs Oswal well in advance of the commencement of the Victorian proceeding putting them on notice that:

(a)    the receivers were investigating the alleged improper payments made by Mr Oswal for the benefit of himself and Mrs Oswal; and

(b)    if suitable explanations and undertakings were not given, the receivers (on behalf of BFPL) reserved the right to commence proceedings to recover those sums.

27    Five days prior to the commencement of the Victorian proceeding, solicitors for the receivers sent Mr Oswal a notice pursuant to s 430 CA requiring a report as to the payments that he had caused BFPL to make. At no time has any response been received to that notice. Rather, a writ was issued. In oral argument, it was contended that the notice was invalid because there was no power in the invalidly appointed receivers to issue the notice. Be that as it may, it was clear to Mrs Oswal at the time of issue of the Victorian proceedings, five days after receipt of the s 430 notice, that the receivers intended to issue proceedings if there was no compliance with the notice.

28    Mrs Oswal had also been aware of the circumstances of the receivers’ investigation prior to this. The receivers’ solicitors wrote to Mrs Oswal on 20 and 28 January 2011 confirming that they had been investigating a number of payments to or for the benefit of Mrs Oswal from the funds of BFPL.

29    It follows, therefore, that there can be no suggestion, if it be made, that the Federal Court proceeding was brought as some afterthought to the Victorian proceeding or in some attempt to thwart the Victorian proceeding. Clearly the Federal Court proceeding, whether in this Court or another, was contemplated and foreshadowed to Mr and Mrs Oswal well in advance of the Victorian proceeding and represented the culmination of complex inquiries pursued by the receivers into the books and records of BFPL.

30    The respondents note that there was a three month delay between the appointment of the receivers and the issuing of proceedings but given the substantial scope of the investigations as described on affidavit and as indicated in the pleadings, that interim period was not spent idly.

31    I also accept the receivers’ submission that the earlier commencement of the Victorian proceeding is not as important (in this dispute at least) as the question of the relative status of the respective proceedings, another consideration in the Sterling Pharmaceuticals list. The status of the respective proceedings is not dissimilar. The only step which has been taken in the Victorian proceedings since the commencement of the action was the filing of the defence which has been the subject of close examination in the course of argument on this motion. The only correspondence which has been received from Mrs Oswal’s lawyers pertaining to the conduct of the action was a letter of 14 April 2011 (being the day after the stay motion was filed in the Federal Court proceeding) proposing certain directions nearly four weeks after the Victorian Supreme Court wrote to the parties requesting that they confer about the directions to be made.

32    Although an assurance has been given from Mrs Oswal that the Victorian proceedings would be pursued expeditiously, they will be complex. In the Federal Court proceeding, the defence will presumably be similar to the statement of claim in the Victorian proceeding and there may be, as there would be if the Victorian proceeding is pursued, other causes of action ventilated. In this proceeding, a deal of material has already been collated and argument advanced in relation to this stay motion itself.

33    I am not persuaded that there is any valid argument that the Victorian proceedings were significantly first in time or are realistically more advanced than the Federal Court proceedings. Both are in their infancy.

Material effect

34    The respondents argue that the disposition of the Victorian proceedings is likely to determine whether the Federal Court proceeding continues at all. The determination of the Victorian proceeding is likely to have a material effect on the Federal Court proceeding because if the appointment of the receivers is found to be invalid, control of BFPL will return to the company’s directors. The directors will then need to determine whether to continue or discontinue the Federal Court proceeding on behalf of the company. On the other hand, if the directors wish to discontinue, it is appropriate that their decision not be rendered otiose by the advancement of the Federal Court proceeding towards trial.

35    There is, or will probably be, significant commonality of facts and the pleadings in both proceedings. The receivers say that there will be no material effect on the Federal Court proceeding as a result of the outcome of the Victorian proceeding. They argue that if the receiver appointment challenge succeeds in the Supreme Court of Victoria, then BFPL will have to decide through its directors, including Mr Oswal, whether to continue the Federal Court proceeding in the name of the company. If the Victorian proceeding is dismissed, the receivers, if validly appointed, can then proceed with their substantive recovery action in the Federal Court proceeding.

36    Mr Oswal and Comical are not parties to the Victorian proceeding but, in my view, it is more than likely that they would be bound by an issue estoppel given that issue estoppel generally applies to parties or their privies. Mr Oswal has been clear in submissions to stress that he has been aware at all times, as might be expected, of the Victorian proceeding commenced by Mrs Oswal.

37    The receivers argue that although the making of the payments is placed in issue in the Victorian proceeding, the primary consideration is whether or not there was a ‘Material Adverse Effect’ as defined in the relevant finance documents so as to justify, ultimately, the appointment of the receivers. (If there was a ‘Material Adverse Effect’, the Security Trustee was entitled to appoint receivers and managers). In the Victorian proceeding, the receivers also rely upon the payments to Mrs Oswal, the Board deadlock and the breakdown of governance as events which constitute singularly and collectively a ‘Material Adverse Effect’. The latter two considerations do not arise at present in the Federal Court proceeding although it is not difficult to imagine they may arise if the proceeding is not stayed and the authority of the receivers is challenged.

38    The issues in the Federal Court proceeding are whether Mr Oswal directed payments to be made by BFPL in breach of Mr Oswal’s statutory and fiduciary duties such that he ought to repay them to BFPL; whether payments made by BFPL at the direction of Mr Oswal to discharge liabilities of Mrs Oswal and to purchase assets for Mrs Oswal are held on constructive trust; and whether the luxury launch purchased using BFPL funds at the directions of Mr Oswal and received by Comical is held on constructive trust by that company.

39    While some of the issues presently differ, it is possible the issues in the two proceedings may become increasingly similar.

40    Moreover, from a practical consideration and a case management perspective, it is, at least at present, the broader relief which distinguishes the Federal Court proceeding from the Victorian proceeding. There would be, for example, even if the authority of the receivers was successfully challenged, no theoretical reason why the company could not seek to pursue the present substantial recovery of funds claimed in the Federal Court proceeding. I am not reaching any conclusion or finding that the company would do so but simply observing that there is no theoretical reason in principle why it should or would not do so. Of course whether validly appointed directors decide to do so will be a significant practical consideration. In contrast at present, the Victorian proceeding will determine only whether the appointment of the receivers was valid and will not (at least as presently formulated) determine any of BFPL’s rights to relief against Mr Oswal, Mrs Oswal and/or Comical.

41    At present, the range of possibilities as to how the respective proceedings may unfold (or even cease altogether) is so broad that it is impossible to say that the outcome of the Victorian proceeding could have no material effect on the conduct and outcome of the Federal Court proceeding. If both proceedings are pursued it is entirely likely that one would have an effect of some sort on the other. To determine at this stage that there would be a material effect which would be contrary to the interests of justice when each case is in its infancy, has been properly pursued and when both parties can take sensible precautions to avoid adverse consequences of dual proceedings, would be premature and speculative.

Public interest

42    The respondents contend that the public interest would be served by the efficient disposition of the Victorian proceeding before time and costs are incurred in relation to the Federal Court proceeding. Such an approach is said to be consistent with s 37M(1) of the Federal Court of Australia Act 1976 (Cth). Section 37M(1) emphasises that the overarching purpose of civil practice and procedure of the Federal Court Rules is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible. The point is also made that there is substantial public interest in avoiding a trial which, on the face of the statement of claim, is likely to be lengthy and costly for all parties as well as a drain on the resources of the Court. There is a risk that to refuse a stay would result in the perception of or the reality of an unseemly race to judgment between the two sets of proceedings in circumstances which would generate substantial further legal costs and impose unnecessary hardship upon the parties.

43    I do not consider that this is likely to be ‘racing’ litigation. An examination of the sums involved, the number of transactions, issues concerning the respective states of mind of the respondents and foreshadowed cross-claims would all suggest otherwise.

44    With the exception of the highly undesirable situation that there be a risk of inconsistent judgments, my view is that the public interest factors are neutral. I am not at this stage convinced that there is a real likelihood that if the stay motion is not granted, Mrs Oswal will necessarily pursue the Victorian proceeding to its ultimate conclusion, (including appeals). Although that is the present intent, the very existence of the Federal Court proceeding raising a broader range of matters, including those to be resolved in the Victorian proceeding, may militate against the likelihood of the Victorian proceeding being fully pursued. Alternatively and if that impression is wrong, the greater likelihood is that the more limited range of matters and relief presently arising in the Victorian proceeding may enable that proceeding to be resolved prior to the Federal Court proceeding. In that circumstance, it seems, as presently advised with only limited pleadings for guidance, more likely than not that whatever outcome is reached in the Victorian proceeding would have a binding effect as an issue estoppel in the Federal Court proceeding. However, even assuming Mrs Oswal is successful in the Victorian proceeding such that the receivers can no longer pursue the Federal Court proceeding, it also seems more likely than not that serious attempts would be made to pursue the balance of the issues in the Federal Court proceeding such as the allegedly improper payment. I emphasise ‘attempts’.

45    It is both inappropriate and premature to conclude at this point that Yarra would be permitted to pursue this or a related proceeding by way of a statutory derivative action without hearing competing arguments on that contention. It would be safe to assume, however in light of the evidence, that it would attempt to do so if the receivers can not continue this proceeding. If it were to succeed, then even if the receivers were held to be invalidly appointed, this substantive recovery proceeding, be it with or without merit, in part or in whole, would not have been a wasted exercise.

46    If absence of authority on the receivers is established in the Victorian proceedings and, as a separate consideration, no party can pursue the Federal Court proceeding, then the respondents would be likely to be compensated with dismissal and costs orders.

Costs and resources

47    Given the infancy of each set of proceedings, it is impossible to accurately predict whether all or any of the possibilities or complaints raised for the respondents will eventuate. Just as it is speculative to anticipate what course Yarra or ANZ may take to attempt to protect their interests, to speculate that there must inevitably be the difficulties to which the respondents point, also invites speculation at this very early stage of the litigation.

48    One critical observation that can be made with some certainty is that it lies within the power of both parties to avoid incurring additional costs by duplicating preparation in two parallel sets of proceedings. It is open to both parties to deal with all matters in one court only. Given the seriousness of the issues and sums in dispute, some sensible negotiation to agree to some such arrangement without cost or other penalty is not beyond imagination and would no doubt be encouraged by both courts.

49    In this regard, one matter raised by the receivers was that service difficulties could arise if they were to join Mr Oswal and Comical to the Victorian Proceeding because Mr and Mrs Oswal no longer reside within Australia. An assurance from Mr Oswal’s solicitors that they are authorised to accept any relevant service going to that point has been received. The service issue has not been a factor in my resolution of the stay motion. It falls again into the speculative area.

50    The respondents point to the fact that ‘there is the prospect’ that Mr Oswal will bring a cross-claim against BFPL by way of defence seeking to recover amounts that were contributed by him to or for the benefit of BFPL. The preparation of such a cross-claim is likely to involve interlocutory steps such as an application for non-party discovery and applications for leave to issue subpoenas. Mr Oswal contends that as a conservative estimate, the preparation of a cross-claim is likely to exceed AUD100,000 which would be wasted if the Federal Court proceeding is not pursued.

51    This argument, as with other matters of speculation, raises a ‘prospect’. A ‘prospect’ is not sufficient a basis to shut out even on a temporary basis, the receivers from pursuing the substantive relief which they are on the face of matters, entitled to have determined.

Risk of duplication of issues and inconsistent findings

52    While not all parties to the proceedings are the same, there are common parties, namely, BFPL against whom declaratory relief is sought (albeit as against the receivers) and Mrs Oswal. Mr Oswal submits that there is a risk of duplication of issues and inconsistent findings in the event that both proceedings proceed concurrently. The validity of the receivers’ appointment necessarily arises in both matters. Although no defence has yet been filed in the Federal Court proceeding, the challenge to the appointment is foreshadowed and, in any event, the appointment of the receivers to BFPL is expressly pleaded at para 12 of the statement of claim.

53    As noted a number of times, at this early stage of the litigation, it is by no means apparent that the sort of risks raised under this heading by the respondents are real. It depends very much on how events unfold from this early stage of proceedings. Further, depending on the situation, and as a number of judges have noted including Lockhart J in Sterling Pharmaceuticals (at 292), such risks may be capable of management by the court.

54    The receivers’ choice of court and venue was proper and reasonable having regard to the place of the numerous transactions, the location of the property affected by the transactions, the place of business of the Burrup companies and the only Australian residence of Mr and Mrs Oswal. In the absence of a clear indication that there is a risk of inconsistent findings (as distinct from a more likely issue estoppel), it would be inappropriate for the reasons expressed by Dixon J in Union Steamship to deprive the receivers of their entitlement to have the Federal Court proceeding for recovery of substantial sums heard and determined where they legitimately instituted them.

55    There is no basis at all to infer from any aspect of argument on this motion that one court is better placed than another to resolve either of the legitimately instituted proceedings. I do not understand any such argument to have been advanced by either party.

Witnesses

56    It is too early to say where most witnesses for a trial would be based. Unsurprisingly there is little evidence on that point. At a later time the picture may become clearer. There were sound reasons for the selection of a court and venue in relation to each proceeding.

Jurisdictional consideration

57    The discussion on remaining considerations under the Sterling Pharmaceuticals list has been addressed within the earlier topics. There is, however, one remaining point raised by the respondents.

58    The submission by the parties in one of the security documents to the exclusive jurisdiction of the Supreme Court of Victoria has been raised in argument. This issue, however, has not yet arisen on the pleadings in this proceeding. It is said that BFPL by cl 7.3 of the Fixed and Floating Charge entered into between BFPL and ANZ Fiduciary Services Pty Ltd purported to irrevocably submit to the exclusive jurisdiction of the courts of Victoria. (This, as well as the determination of the security documents in accordance with Victorian law, made the choice of court and venue in the Victorian proceedings, a logical choice).

59    What role the clause would now play in the Federal Court proceeding, given that BFPL is controlled by the receivers who were themselves appointed by ANZ, is something on which present speculation would not assist. I accept the possibility that the issue may arise. Just how it will arise and how it will be resolved is not a matter for present conjecture. It will be necessary to address that and other issues referred to in argument as and when they arise.

60    I would not rule out the possibility of a stay motion being pursued again at an appropriate juncture if there is proper support for it. At present, there is not.

ABUSE OF PROCESS

61    Mrs Oswal relies, not only on the factors as identified in Sterling Pharmaceuticals but also contends that the issuing of the Federal Court proceedings is an abuse of process.

62    The content of the assertions in the Federal Court proceeding is substantially identical to the assertions raised in the Victorian proceeding in the defence. In the Victorian proceeding, the matters are set out in 40 subparagraphs. In the Federal Court proceeding, they are set out in the statement of claim at [3]-[43] inclusive.

63    Mrs Oswal contends that the prima facie rule is that it is vexatious or oppressive to bring a second proceeding where an existing proceeding is on foot and the subject matter of those proceedings is the same or substantially overlaps: Henry v Henry (at 591). It is said that the vexation and oppression is acute in respect of the position of Mrs Oswal. In the absence of a stay, she would need to prepare for two proceedings involving the same subject matter at the same time and would incur the costs of meeting the same allegations twice. Further, it is the resources of the company which the receivers are using and in which she has a significant interest through her shareholding in BFPL which is being ‘wasted by the receivers on duplicated proceedings’.

64    Much has been written about the long established doctrine of prevention of abuse of the court’s process. Two legitimately instituted cases may give rise (but not in their statements of claim) to similar issues between similar parties. Where they have barely commenced in different courts it would take a powerful argument to conclude (without more) that the party commencing the case in a logical venue but just second in time should for that reason alone, have the proceeding stayed as an abuse. Such an argument (if it was advanced), did not appeal or occur to Dixon J in Union Steamship.

65    I am unable to accept that there has been an abuse of process. The rule in Henry v Henry is a prima facie rule and is capable of being displaced in an appropriate circumstance.

66    The prima facie rule referred to in Henry v Henry, in my view, is displaced in the circumstances of this case as the receivers are pursuing substantive relief (the total payments allegedly exceeding AUD115 million) which is not sought in the Victorian proceeding. There can be no suggestion that BFPL is seeking to re-litigate issues on which it has lost in earlier proceedings. The receivers’ reasons, like the reasons in Union Steamship for proceeding in the Admiralty jurisdiction and thus without a jury, were entirely legitimate. If there were any hint that the purpose of issuing this (foreshadowed) proceeding was to gain some strategic advantage which would have a corresponding oppressive or vexatious effect on Mrs Oswal, the position would be different. It is impossible to form such a conclusion either on the direct evidence or by inference.

67    The receivers have a role and duty in respect of the creditors and shareholders of the company to ensure that the actual recovery of funds is pursued for the benefit of those parties if entitlement to recovery can be established. The receivers foreshadowed this proceeding before the issue of the Victorian proceeding and have subsequently pursued this recovery proceeding. Nothing in Mrs Oswal’s Victorian proceeding which was directed initially to a limited authority point, was designed to deal with recovery of funds. I am not persuaded that there is a good reason for the proceeding to be stayed as an abuse of process.

CONCLUSION

68    It may be that as events unfold, a stay of one of either the Victorian proceeding or the Federal Court proceeding could be seen to be desirable. Arguments at present in support of any stay are premature.

69    Alternatively as avoidance of duplication difficulties is entirely within the power of the parties, it may be that the problem of two sets of proceedings can be overcome by negotiation.

70    The respondents’ motion will be dismissed. The respondents are to pay the applicant’s costs of the motion to be taxed or agreed unless submissions to the contrary are filed and served within ten days.

Associate:

Dated:    29 April 2011