FEDERAL COURT OF AUSTRALIA

Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) v Oswal (No 5) [2012] FCA 191

THE COURT ORDERS THAT:

1.    The first respondent/second cross-claimant provide security for costs for the applicant/seventh cross-respondent in respect of the first respondent/second cross-claimant’s cross-claim up until the date he files an affidavit of discovery in the amount of $100,000 to be held in an interest bearing trust account in the joint names of the solicitors for the applicant/seventh cross-respondent and first respondent/second cross-claimant.

2.    The first respondent/second cross-claimant’s cross-claim be stayed until security is given in accordance with order 1.

3.    In the event that the first respondent/second cross-claimant does not give security in accordance with order 1 within 30 days of this order, the applicant/seventh cross-respondent have leave to apply for further or other relief.

4.    The applicant/seventh cross-respondent has liberty to apply for further security following the date on which the first respondent/second cross-claimant files and serves an affidavit of discovery.

5.    The first respondent/second cross-claimant pay the applicant/seventh cross-respondent’s costs of this application, to be taxed if not agreed.

6.    The parties have liberty to apply.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

INTRODUCTION

1    In Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) v Oswal (No 3) [2011] FCA 1502 (Burrup No 3) I determined that security for costs should be given by the first respondent (Mr Oswal) in respect of the cross-claim he advances against the applicant (BFPL).

2    I directed BFPL to draw up a minute to reflect the content of my decision.

3    BFPL sought an order in the following terms:

1.    The first respondent/second cross-claimant provide security for costs for the applicant/seventh cross-respondent in respect of the first respondent/second cross-claimant’s cross-claim up until the date he files an affidavit of discovery in the amount of $100,000.00 to be held in an interest bearing trust account in the joint names of the solicitors for the applicant/seventh cross-respondent and first respondent/second cross-claimant.

2.    The first respondent/second cross-claimant’s cross-claim be stayed until security is given in accordance with order 1.

3.    In the event that the first respondent/second cross-claimant does not give security in accordance with order 1 within 30 days of this order, the first respondent/second cross-claimant’s cross-claim in these proceedings be dismissed.

4.    The applicant/seventh cross-respondent has liberty to apply for further security following the date on which the first respondent/second cross-claimant files and serves an affidavit of discovery.

5.    The first respondent/second cross-claimant pay the applicant/seventh cross-respondent’s costs of this application, to be taxed if not agreed.

6.    The parties have liberty to apply.

4    To the extent that non-compliance with provision of security should give rise to dismissal of the proceeding (proposed order 3), Mr Oswal strongly objects to such a sanction being imposed. Mr Oswal contends that such an order would be ‘extraordinary’ and that BFPL cannot satisfy the requirements of making a self-executing order of that nature.

5    BFPL presses for the dismissal sanction on the basis that there is nothing ‘extraordinary’ about such a sanction as it is clearly and unambiguously contemplated by r 19.01(1)(c) of the Federal Court Rules 2011 (the Rules). BFPL argues that the Court has a broad and unfettered discretion with respect to the manner in which the security is to be given, bearing in mind all of the relevant circumstances to the case.

6    For BFPL it is suggested that Mr Oswal has a history of delay or non-compliance with Court orders. Reference is made to Mr Oswal’s failure to pay an initial tranche of $150,000 by way of security in the Victorian Supreme Court proceedings as discussed in Burrup No 3. BFPL also points to the fact that Mr Oswal has been on notice of the orders sought by BFPL in this proceeding including the dismissal order since the application was filed but no specific objection to that order was raised. BFPL complains that it should not be forced to undergo the time and cost of having to apply separately to the Court to obtain a self-executing order for dismissal of the cross-claim which would be an additional cost it would be unable to recover.

7    There will be prejudice, BFPL contends, if the proceeding is simply stayed as there will be uncertainty as to when the cross-claim may resume. BFPL argues that the Court is entitled to take into account the proper utilisation of its resources (Idoport Pty Ltd v National Australia Bank Ltd [2002] NSWSC 18 (at [51]-[52] and [53]-[55]). Accordingly, if Mr Oswal wishes to maintain a claim of such magnitude utilising the Court’s resources, BFPL submits that he should face the prospect of dismissal if he fails to provide security ‘particularly in circumstances where the Court is entitled to be extremely suspicious of the merits and bona fides of the Costs Overruns Agreement and/or Costs Overruns Assumption’.

CONSIDERATION

8    I am not persuaded that dismissal as a self-executing order is appropriate. Equally, I do not think a simple stay is the answer. For the reasons which follow, I propose adopting a similar approach to that adopted by Jessup J in Thirteenth Corporation Pty Ltd v State (2006) 232 ALR 491 (at [56]), where his Honour was not persuaded that dismissal was an appropriate step on failure to provide security in circumstances where there was some scope for limited optimism that the applicant in that proceeding might find the means to provide security. His Honour saw fit to grant the respondents leave to apply for an order dismissing the proceeding if the security had not been paid by a fixed date. His Honour indicated in his reasons that in the event that such an application were necessary, he would regard the applicants as being prima facie entitled to further relief.

9    The failure to pay costs in the proceedings in the Supreme Court of Victoria may well be explained by the fact that the appeal from my refusal to stay these proceedings was unsuccessful and Mr Oswal has chosen to pursue matters raised in that proceeding within these proceedings in accordance with options I suggested and which were also suggested clearly by the majority of the Full Court. In those circumstances, I am not persuaded there is any indication of deliberate delay or contumacy. There is no certainty that Mr Oswal is unlikely to make the first tranche of security. I have taken into account also that the initial sum concerned is relatively modest having regard to the sums at issue in the proceedings.

10    I do not propose at this stage (prematurely) examining all the reasons which might notionally support a claim for dismissal in the event that such an application is brought if there is to be non-compliance with the security payment order. Factors listed in Idoport Pty Ltd (at [24]) and approved in Porter v Gordian Runoff (No 3) [2005] NSWCA 377 (at [24]-[27]), however, will be relevant.

11    I am not persuaded that the prejudice to which BFPL points is significant in the context of this litigation.

CONCLUSION

12    For those reasons, I will amend the minute sought by BFPL to provide for the words ‘the applicant/seventh cross-respondent have leave to apply for further or other relief’ to be substituted for the words ‘the first respondent/second cross-claimant’s cross-claim in these proceedings be dismissed’ in order 3.

13    The following orders are made:

1.    The first respondent/second cross-claimant provide security for costs for the applicant/seventh cross-respondent in respect of the first respondent/second cross-claimant’s cross-claim up until the date he files an affidavit of discovery in the amount of $100,000 to be held in an interest bearing trust account in the joint names of the solicitors for the applicant/seventh cross-respondent and first respondent/second cross-claimant.

2.    The first respondent/second cross-claimant’s cross-claim be stayed until security is given in accordance with order 1.

3.    In the event that the first respondent/second cross-claimant does not give security in accordance with order 1 within 30 days of this order, the applicant/seventh cross-respondent have leave to apply for further or other relief.

4.    The applicant/seventh cross-respondent has liberty to apply for further security following the date on which the first respondent/second cross-claimant files and serves an affidavit of discovery.

5.    The first respondent/second cross-claimant pay the applicant/seventh cross-respondent’s costs of this application, to be taxed if not agreed.

6.    The parties have liberty to apply.

Associate:

Dated:    6 March 2012