FEDERAL COURT OF AUSTRALIA

Coeclerici Asia (Pte) Ltd v Gujarat NRE Coke Limited [2014] FCA 130

THE COURT ORDERS THAT:

1.    Pursuant to r 40.02(b) of the Federal Court Rules 2011, the costs of the applicant payable by the respondents pursuant to Order 8 made by Foster J on 7 August 2013 be awarded in a lump sum, instead of being taxed, the lump sum being $278,000.

2.    The respondents pay the said amount of $278,000 forthwith.

3.    Order 4(c)(iii) of the Orders made by Foster J on 7 August 2013 as varied by Order 1 made by Foster J on 13 December 2013 be further varied by deleting the word “and ” where it appears in subpars (A) and (B) thereof after the words “judgment amounts” and by adding to both subpars (A) and (B) after the words “... post-judgment interest …” the following words:

“… and any costs order made in this proceeding or in proceeding NSD 1673 of 2013 in the Full Court of the Federal Court of Australia …”

so that the said subparagraphs now read:

(A)    sell the shares referred to above, or a sufficient number of them, as may be required to discharge the judgment amounts, post-judgment interest and any costs order made in this proceeding or in proceeding NSD 1673 of 2013 in the Full Court of the Federal Court of Australia, on market (if applicable), by private sale or auction, by 31 March 2014 or by such later date as the Court may fix;

    and/or

(B)    cause the sale by GNL of sufficient shares held by it in Gujarat NRE Coking Coal Limited as may be required to discharge the judgment amounts, post-judgment interest and any costs order made in this proceeding or in proceeding NSD 1673 of 2013 in the Full Court of the Federal Court of Australia, and the payment of the proceeds of such sale to the Receivers by way of dividend, including if required the calling of a general meeting of GNL to appoint new directors in lieu of the current directors in order to effect the said sale and payment of the said dividend; and …

4.    The applicant be immediately released from that part of the undertaking given by it to the Court in par (7) of Schedule A to the Freezing Orders made by the Court on 14 March 2013 beginning with the words “… or seek in any country …” so that the said undertaking is now in the following terms:

(7)    The applicant will not, without the leave of the Court, seek to enforce these Freezing Orders in any country outside Australia.

5.    The respondents pay the applicant’s costs of and incidental to the Amended Interlocutory Application filed by the applicant on 19 December 2013.

6.    The proceeding be listed for further directions at 9.30 am on 26 March 2014 before Foster J.

THE COURT NOTES THAT:

7.    The applicant by its legal representative gives to the Court an undertaking in the terms of revised undertaking (7) set out in Order 4 above.

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

REASONS FOR JUDGMENT

1    On 7 August 2013, I ordered the respondents to pay the applicant’s costs of this proceeding in respect of the period from the date of its commencement (13 March 2013) to and including 7 August 2013.

2    By Interlocutory Application filed on 2 December 2013, the applicant claimed lump sum costs orders in respect of the conduct of this proceeding before me in the period up to and including 7 August 2013 and in respect of subsequent proceedings in the Full Court. The applicant also sought a variation of the orders made by me on 7 August 2013 in order to authorise the Receivers whom I had appointed on that day to use the proceeds of the sale of shares over which they had been appointed receivers (the relevant shares) to discharge the respondents’ liability for costs in addition to the respondents’ liability for the judgment debt and interest thereon.

3    The applicant’s Interlocutory Application was supported by an affidavit sworn by Hazel Brasington, who is the applicant’s solicitor, on 29 November 2013. That affidavit was filed on 2 December 2013.

4    On 12 December 2013, which was the day before the applicant’s Interlocutory Application was to be returned before the Court (13 December 2013), the applicant’s solicitors notified the Court and the respondents’ solicitor that, at the listing on 13 December 2013, they intended to seek leave to amend the applicant’s Interlocutory Application in accordance with a draft Amended Interlocutory Application provided to the Court and to the respondents’ solicitor on that day.

5    On 13 December 2013 I granted leave to the applicant to amend its Interlocutory Application in the manner sought by it. An Amended Interlocutory Application was subsequently filed and served on 19 December 2013.

6    By its Amended Interlocutory Application, the applicant seeks:

(a)    A lump sum costs order in its favour in respect of the proceedings before me in the amount of $278,000;

(b)    An order that the said amount be payable forthwith;

(c)    Variations to the orders which I made on 7 August 2013 authorising the Receivers to use the proceeds of sale of the relevant shares in order to discharge the respondents’ liability for costs (both in respect of the proceedings before me and in respect of the proceedings in the Full Court) in addition to the respondents’ liability for the judgment debt and interest thereon (even though, by its Amended Interlocutory Application, the applicant abandoned, for the time being, its claim for a lump sum costs order in respect of the proceedings in the Full Court); and

(d)    A variation to the undertakings given by it to the Court when it obtained the Freezing Orders which were first made by me on 14 March 2013 so as to permit the applicant to seek freezing orders and to take other enforcement steps against the respondents in jurisdictions outside Australia.

7    When the applicant’s Interlocutory Application was returned before the Court on 13 December 2013, the solicitor for the respondents sought an adjournment of all of the applicant’s applications for a period of seven (7) days. I did not accede to that request although I did allow the respondents more time in which to deal with some of the applicant’s applications (as to which, see Coeclerici Asia (Pte) Ltd v Gujarat NRE Coke Limited [2013] FCA 1395).

8    After extending the time by which the Receivers are obliged to sell the relevant shares to 31 March 2014 or such later date as the Court might fix and granting leave to the applicant to amend its Interlocutory Application, I made a number of other orders designed to progress the applicant’s remaining applications to finality. Those orders were in the following terms:

THE COURT:

4.    GRANTS leave to the applicant to file in Court its Written Submission dated 13 December 2013 directed to its application for a lump sum costs order and other matters.

5.    DIRECTS that by, 19 December 2013, the applicant file and serve any additional Written Submissions upon which it intends to rely in support of its claim for relief described in Order 6(c) below.

6.    DIRECTS that, by 31 January 2014, the respondents file and serve all affidavits upon which they intend to rely in meeting the three claims for relief made by the applicant described in subparagraphs (a), (b) and (c) below and that, by the same date (31 January 2014), the respondents file and serve Written Submissions containing such submissions as they may be advised to make in order to address the applicant’s Written Submissions made in support of those claims, being:

(a)    the applicant’s claim for a lump sum costs order;

(b)    the applicant’s claim to have subparagraphs (iii)(A) and (B) of Order 4 made by Foster J on 7 August 2013 further varied in order to provide that the sale of the shares referred to therein and the proceeds thereof also be used to satisfy costs orders made in favour of the applicant in this proceeding and in proceeding NSD 1673 of 2013; and

(c)    the applicant’s claim to be released from part of the undertaking first given by it to the Court on 14 March 2013 and renewed thereafter, which is set out in par (7) of Schedule A to the Freezing Orders made by the Court on that day, namely, that part of its undertaking which prevents it from seeking to obtain in any country outside Australia, Freezing Orders or orders of a similar kind or orders conferring security or a charge over the respondents’ assets.

7.    DIRECTS that, by 14 February 2014, the applicant file and serve any evidence-in-reply and any Written Submissions in Reply to the evidence and submissions filed and served by the respondents pursuant to Order 6 above.

8.    GRANTS to the respondents liberty to apply to have Order 1 above discharged or varied on three (3) days’ notice or on such shorter notice as a Judge might allow.

9.    GRANTS liberty to apply to all parties in relation to the subject matter of Orders 6 and 7 above on three (3) days’ notice or on such shorter notice as a Judge might allow.

10.    ORDERS that, after 14 February 2014, the applicant’s claims described in Order 6(a), 6(b) and 6(c) above (being the remaining claims for relief made by the applicant in its Amended Interlocutory Application) be determined on the papers.

11.    ORDERS that the costs of and incidental to the listing before the Court this day (13 December 2013) be reserved.

12.    ORDERS that the solicitor for the applicant send a copy of these Orders and the Ex Tempore Reasons for Judgment delivered this day (13 December 2013) to the solicitors for the receivers.

9    The respondents have not filed or served any affidavits pursuant to Order 6 made on 13 December 2013. Nor have the respondents applied to have Order 1 made on 13 December 2013 discharged.

10    On 20 December 2013, the applicant filed an additional Written Submission dated that day. That submission was confined to the applicant’s application to be released from its undertaking not to apply for a freezing order or other enforcement orders in jurisdictions outside Australia.

11    On 3 February 2014, the respondents filed and serve a Written Submission dated that day in which they addressed the applicant’s application to be released from that undertaking.

12    On 6 February 2014, the applicant filed and served a Written Submission dated that day by which (amongst other things) it replied to the respondents’ Written Submission of 3 February 2014.

13    I note that the respondents have not contested the applicant’s application for a lump sum costs order or its application to vary the orders made on 7 August 2013. The only matter which remains in contest is the applicant’s application to be released from its undertaking first given on 14 March 2013 not to apply for freezing orders and other enforcement orders in jurisdictions outside Australia.

14    By these Reasons for Judgment, I determine the outstanding claims for relief made by the applicant in its Amended Interlocutory Application filed on 19 December 2013.

The claim for a lump sum costs order

15    This claim was supported by Ms Brasington’s affidavit to which I have referred at [3] above. In that affidavit, Ms Brasington addressed the costs of the proceedings before me, with which, of course, I am very familiar, and also the costs of the proceedings in the Full Court. The applicant’s revised application for a lump sum costs order is, for the time being, confined to its costs of the proceedings before me.

16    Ms Brasington proved that:

(a)    Her firm rendered memoranda of fees and disbursements to the applicant in which fees in the amount of US$414,936 and disbursements in the amount of US$243,798.95 were charged. Some of these fees and disbursements related to work done in connection with the arbitration and other matters. The fees and disbursements referrable to the arbitration are not recoverable under the costs order which I made on 7 August 2013.

(b)    An expert legal costs consultant, Mr Balmer, of JB Legal Costing Pty Ltd of Hampton, Victoria, had informed her that, in his expert opinion, after considering and examining all relevant materials, he was of the view that the applicant’s party/party costs of and incidental to the proceeding before me would tax at a figure in the range between A$180,000 and A$200,000 for fees and at a figure in the range between A$130,000 and A$150,000 for disbursements.

(c)    For reasons which are more fully explained at pars 11 to 17 of her affidavit, the prospects of the applicant recovering any part of its costs are diminishing with the passage of time and that, at present, the applicant has some prospect of recovering some part of its costs if the amount of those costs is quantified in the near future.

(d)    A full taxation of the applicant’s costs will take 5-6 months and cost a significant amount of money.

17    Ms Brasington testified that the applicant is prepared to accept an amount for its costs and disbursements which represents the total of that amount which is 85% of the figure at the low end of Mr Balmer’s range in respect of solicitors’ professional fees and that amount which is 96% of the figure at the low end of Mr Balmer’s range in respect of disbursements. This approach translates into the following calculations:

(a)    Professional costs                $153,000

    85% of A$180,000

(b)    Disbursements                 $125,000

    96% of A$130,000 ($124,800,

    rounded up to $125,000)

                            _______

                TOTAL        $278,000

18    By letter dated 20 November 2013, from the applicant’s solicitors to the respondents’ solicitor, the applicant’s solicitors sought the respondents’ consent to the making of a lump sum costs order in respect of the proceedings before me covering the period up to and including 7 August 2013 in the amount of $278,000. The respondents’ solicitor immediately sought clarification of the basis upon which the figure of $278,000 had been arrived at. That clarification was given by letter dated 21 November 2013. No further correspondence was entered into.

19    I intend to deal with the applicant’s application for a lump sum costs order by applying the following principles:

(a)    The applicant has the benefit of a costs order which covers the period from the date upon which the proceeding before me was commenced up to and including 7 August 2013. If the costs the subject of that order are required to be taxed, they will be taxed on the party/party basis.

(b)    The applicant relied upon r 40.02(b) of the Federal Court Rules 2011 (FCR). That rule gives to the Court a broad discretion which should be exercised whenever the circumstances warrant it (see Dunstan v Human Rights and Equal Opportunity Commission (No 3) [2006] FCA 916 at [23]; Black and Decker Inc v GMCA Pty Ltd (No 4) [2008] FCA 1737 at [3]; and Playcorp Group of Companies Pty Ltd v Peter Bodum A/S (No 2) [2010] FCA 455 at [3]).

(c)    The Court should not be slow to exercise the relevant discretion in an appropriate case.

(d)    Any exercise of the discretion to make a lump sum costs order should reflect the overarching principle embodied in s 37M and s 37N of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act). The discretion should be exercised logically, fairly and reasonably (see Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 120F and 123C; Ginos Engineers Pty Ltd v Autodesk Australia Pty Ltd (2008) 249 ALR 371 at 377 [22]; and Sony Entertainment (Australia) Ltd v Smith (2005) 215 ALR 788 at 813 [198] and [199]).

(e)    The rule serves to avoid expense, delay and aggravation involved in the taxation of costs and associated litigation. In particular, in cases where the incurring of additional costs in taxing bills will result in an additional burden on the successful party, there is strong reason for making a lump sum costs order. A relevant factor in favour of a lump sum costs order will often be that the party against whom the order is sought is in financial difficulties with the consequence that the prospects of the successful party recovering its costs of taxation are poor (Bitek Pty Ltd v IConnect Pty Ltd (2012) 290 ALR 288 at 292 [15] per Kenny J).

(f)    The approach to be taken by the Court in deciding whether to make such an order, and in arriving at the quantum thereof, should be a broad brush approach. It is one of estimation or assessment, and not of arithmetic. The Court should avoid, in effect, carrying out a taxation under the guise of performing a lump sum costs assessment.

(g)    The fact that the making of such an order may cause hardship on the party against whom the order is made is not relevant.

(h)    The evidence of an expert cost assessor is both relevant to and probative of whether a lump sum costs order ought to be made and the quantum of any such order.

20    A consideration of the above factors leads inevitably to the conclusion that a lump sum costs order should be made in the present case. I am reinforced in that conclusion by the circumstance that the respondents have not opposed the making of such an order nor have they opposed the quantum sought by the applicant.

21    My reasons for deciding to make a lump sum costs order in the present case may be shortly stated as follows:

(a)    The respondents have been found liable in respect of the judgment debt by a duly constituted arbitral tribunal. This Court has enforced the final award made by that tribunal. The English Commercial Court has also refused to set aside the award. Notwithstanding these circumstances, the respondents have refused to pay the judgment debt. It must be remembered that the underlying claim made by the applicant against the respondents was for the refund of a substantial sum of money which had been paid by it in advance against a contract for the supply of coke which was never supplied.

(b)    The first respondent appears to be in financial difficulties.

(c)    Because of the complexity of the issues in the proceedings and the resistance to the applicant’s claim mounted by the respondents, a taxation of the applicant’s costs will be time-consuming and expensive. Recovery of any reasonable sum towards the applicant’s costs is currently problematic. The prospects of recovering any contribution appear to be diminishing with the passage of time.

(d)    There is a real risk that the relevant shares will be sold before the taxation process is complete.

22    For all of the above reasons, I propose to make a lump sum costs order in the amount sought by the applicant in respect of the proceedings before me. The applicant’s entitlement to pursue a similar claim in respect of the costs incurred by it in the Full Court proceedings remains on foot and will not be determined by the orders which I intend to make in order to give effect to these Reasons.

Consequential variations to the orders made on 7 august 2013

23    I am satisfied that I ought also to make the consequential variations sought by the applicant to the orders made on 7 August 2013 resulting from the lump sum costs order which I will make.

24    I note that those variations encompass not only the consequences of the making of a lump sum order in respect of the proceedings before me but also cover the possibility that an appropriate lump sum order will be made, in due course, in respect of the proceedings in the Full Court.

claimed variation to the undertakings given by the applicant on 14 march 2013

25    I made Freezing Orders against the respondents on 14 March 2013. Those orders were made ex parte and were granted on an interim basis. On 2 April 2013, those orders were continued until further order. Those orders were confined in their operation to the Australian assets of the respondents. They did not have effect against assets held by the respondents in other jurisdictions.

26    On 28 May 2013, the first respondent and a non-party corporation associated with the first respondent, Gujarat NRE Limited (ACN 121 382 438) gave undertakings to the Court in the following terms:

2.    The first respondent by its Counsel undertakes to the Court not to dispose of, deal with, encumber or diminish any of the shares it holds in Gujarat NRE Limited ACN 121 382 438 up to and including the earlier of the date of the determination of either:

(a)    The applicant's Interlocutory Application filed on 22 May 2013; or

(b)    Any Interlocutory Application filed by the respondents to vary the Orders in Annexure A to the Orders made on 14 March 2013 (varied on 22 March 2013 and 25 March 2013).

3.    Gujarat NRE Limited ACN 121 382 438 by its Counsel undertakes to the Court not to dispose of, deal with, encumber or diminish any of the shares it holds in Gujarat NRE Coking Coal Limited (ASX code GNM) up to and including the earlier of the date of the determination of either:

(a)     The applicant's Interlocutory Application filed on 22 May 2013; or

(b)     Any Interlocutory Application filed by the respondents to vary the orders in Annexure A to the Orders made on 14 March 2013 (varied on 22 March 2013 and 25 March 2013).

4.    The undertakings given by the first respondent and by Gujarat NRE Limited in paragraphs 2 and 3 above are given without prejudice to the rights of the respondents and Gujarat NRE Limited ACN 121 382 438 to contest the joinder of Gujarat NRE Limited ACN 121 382 438 to the Interlocutory Application filed on 13 March 2013 and to contest the relief sought against them at any hearing of the Interlocutory Application filed on 22 May 2013.

27    The undertakings given to the Court by the first respondent and by Gujarat NRE Limited on 28 May 2013 gave an additional measure of protection to the applicant pending the final hearing of its Application. Those undertakings continued in force right up to the date of the hearing before me and the making of final orders by me on 7 August 2013.

28    As part of the Orders and Notes made by me on 7 August 2013, I noted that:

… in aid of enforcement of the above declaration and orders and upon the applicant by its solicitor continuing the undertakings as to damages given to the Court on 14 March 2013 (and continued thereafter) and on 28 May 2013:

11.    The first respondent by its solicitor undertakes to the Court that, until further order, it will not dispose of, deal with, encumber or diminish any of the shares which it holds in Gujarat NRE Limited (ACN 121 382 438).

12.    Gujarat NRE Limited (ACN 121 382 438) by its solicitor undertakes to the Court that, until further order, it will not dispose of, deal with, encumber or diminish any of the shares which it holds in Gujarat NRE Coking Coal Limited (ASX code GNM).

13.    In accordance with Order 3 made on 2 April 2013, the Freezing Orders in Annexure “A” to the Orders made on 14 March 2013 (as varied on 25 March 2013) are to continue in place until further order.

29    The effect of the matters which I noted as part of the Orders and Notes made on 7 August 2013 was that the freezing order regime first ordered on 14 March 2013 as supplemented by the undertakings given to the Court by the first respondent and by Gujarat NRE Limited on 28 May 2013, were continued post-judgment, in aid of enforcement and until further order.

30    The freezing order regime which continued in place after I made final orders on 7 August 2013 was ordered pursuant to r 7.35 FCR and the inherent power of the Court.

31    An appeal by the respondents from the orders which I made on 7 August 2013 was dismissed by the Full Court with costs on 30 September 2013 (Gujarat NRE Coke Ltd v Coeclerici Asia (Pte) Ltd [2013] FCAFC 109).

32    Schedule A to the Freezing Orders made by me on 14 March 2013 contains the undertakings which the applicant gave to the Court on 14 March 2013 as a condition of the Court granting the Freezing Orders.

33    Paragraphs (6) and (7) of Schedule A to those Freezing Orders are in the following terms:

(6)    The applicant will not, without leave of the Court, use any information obtained as a result of this Order for the purpose of any civil or criminal proceedings, either in or outside Australia, other than this proceeding.

(7)    The applicant will not, without leave of the Court, seek to enforce this Order in any country outside Australia, or seek in any country outside Australia an order of a similar nature or an order conferring a charge or other security against the respondent or the respondent’s assets.

34    By its Amended Interlocutory Application, the applicant seeks to be released from that part of the undertaking set out in par (7) of Schedule A which begins in the second line with the words “… or seek in any country …” and continues to the end of that paragraph. If so released, para (7) of Schedule A would read:

(7)    The applicant will not, without the leave of the Court, seek to enforce this Order in any country outside Australia.

35    Given that the existing Freezing Orders operate only in respect of the respondents’ Australian assets, it is difficult to imagine what could be done to enforce those orders outside Australia. Nonetheless, the applicant has not sought to be released from the first part of undertaking (7) and I will deal with its present application upon the basis that that part of the undertaking is to remain on foot.

36    In its Reply Submissions filed on 6 February 2014, the applicant informed the Court and the respondents’ solicitor that, if necessary, in order to obtain the variation which it seeks, it would be willing to give an additional undertaking to the Court in the following terms:

If the applicant seeks in any country outside Australia an order of a similar nature or an order conferring a charge or other security against the respondents or the respondents’ assets, it will take steps to relist this proceeding for directions within seven (7) days of doing so, or as directed by the Court.

37    The undertakings which the applicant gave in Schedule A to the Freezing Orders made by me on 14 March 2013 reflect the terms of the example form of Freezing Order made without notice forming part of the Court’s Practice Note CM9 dated 1 August 2011 (the FCA example Freezing Order). In particular, paragraphs (6) and (7) of Schedule A to the Orders made by me on 14 March 2013 are in precisely the same terms as paragraphs (6) and (7) of Schedule A to the FCA example Freezing Order.

38    It is important to note the following matters in respect of Practice Note CM9:

(a)    Paragraph 2 of the Practice Note itself is in the following terms:

This Practice Note addresses (amongst other things) the Court’s usual practice relating to the making of a freezing order and the usual terms of such an order. While a standard practice has benefits, this Practice Note and the example form of order annexed to it, do not, and cannot limit the judicial discretion to make such order as it appropriate in the circumstances of the particular case.

(b)    The terms of the heading to Practice Note CM9 and of the language deployed in the various paragraphs contained in Practice Note CM9 make reasonably clear that the Practice Note is primarily directed to asset preservation orders granted as an interim remedy before judgment. The Practice Note is not particularly directed to Mareva-time relief granted in aid of enforcement of a judgment.

(c)    If granted on an interim basis before judgment, the freezing order should not be in place for an extended period before being reconsidered by the Court in the presence of the parties affected by the freezing orders.

(d)    Par 15 of the Practice Note is in the following terms:

The rules of court confirm that certain restrictions expressed in The Siskina [1979] AC 210 do not apply in this jurisdiction. First, the Court may make a freezing order before a cause of action has accrued (a ‘prospective’ cause of action). Secondly, the Court may make a free-standing freezing order in aid of foreign proceedings in prescribed circumstances. Thirdly, where there are assets in Australia, service out of Australia is permitted under a new ‘long arm’ service rule.

39    Practice Note CM9 does not provide any explanation or guidance as to why the FCA example Freezing Order contains undertakings in the terms of pars (6) and (7) of Schedule A to that example Order.

40    Division 7.4 FCR (being the Rules of Court in relation to Freezing Orders) was developed under the auspices of the Australian Council of Chief Justices. Practice Note CM9 and the FCA example Freezing Order conform to similar Practice Notes promulgated by other courts in Australia (for example, see Practice Note SC Gen 14, promulgated by the Supreme Court of New South Wales).

41    The Example Freezing Order adopted by Australian courts as part of such Practice Notes has its provenance in the Example Freezing Order adopted by the English High Court of Justice as part of Practice Direction 25A of the Civil Procedure Rules (Eng) (the English Practice Direction).

42    Paragraphs (6) and (7) of Schedule A to the FCA example Freezing Order correspond with the undertakings set out in pars (9) and (10) of the undertakings contained in the Example Freezing Order attached to the English Practice Direction. The terms of pars (9) and (10) in that Practice Direction are virtually identical to the terms of pars (6) and (7) in the FCA example Freezing Order.

43    I note that the part of par (7) from which the applicant presently seeks to be released is bracketed by square brackets in par (10) of the Example Freezing Order contained in the English Practice Direction. Those brackets indicate to me that the English Courts take the view that that part of the undertaking will not always be required to be given.

44    In support of its application to be released from part of the undertaking set out in par (7) of Schedule A to the Freezing Orders which I made on 14 March 2013, the applicant submitted that the Court should not be reluctant to depart from a pro forma undertaking if the circumstances demand it. The applicant submitted that the Receivers have experienced difficulty in selling the relevant shares. The applicant also submitted that it is only natural that it should now look at taking steps to enforce its award in other places. The applicant also submitted that there was no reason in principle for the undertaking to be maintained. Whilst it acknowledged that, in England, observations have been made by judges and commentators that the purpose of requiring an applicant to give undertakings in the terms of par (6) and par (7) of Schedule A to the FCA example Freezing Order was to prevent harassment of a defendant by having to confront multiple actions around the world, no such concern arises in the present case. The applicant submitted that, at the present time, all that it wished to do was to leave open the possibility of taking enforcement action in jurisdictions outside Australia and that it should now be permitted to do so.

45    The respondents opposed the applicant’s application to be released from part of its undertaking. The respondents submitted that the purpose of the undertaking was to prevent the harassment of the respondents in multiple actions around the world. In support of that proposition, the solicitor for the respondent cited and relied upon a passage from Tate Access Floors Inc v Boswell [1991] Ch 512 at 525F per Browne-Wilkinson VC. The passage relied upon is in the following terms:

… I wholly accept that, in any case where a world-wide order is made, it is capable of operating oppressively if the plaintiffs are free to start other proceedings in other jurisdictions (thereby exposing the defendants to a multiplicity of proceedings) and to use information obtained under compulsion in this jurisdiction for the purposes of pursuing criminal or civil remedies in other jurisdictions. It is for that reason that the Court of Appeal has laid down that, as a term of any world-wide Mareva relief, the order should contain undertakings not, without the leave of the court, to start such proceedings or use such information: see Derby & Co Ltd v Weldon [1990] Ch 48, 55, 56, 60, 63; Babanaft International Co SA v Bassatne [1990] Ch 13, 46; Republic of Haiti v Duvalier [1990] 1 QB 202.

46    In Tate Access Floors Inc, Brown-Wilkinson VC was dealing with an application that world-wide Mareva and Anton Piller orders be discharged. They had been granted on an interim basis before judgment against all defendants, some of whom resided in England and some of whom were based elsewhere.

47    The solicitor for the respondents then submitted that the Receivers had recently informed the Court that they were hopeful that a sale of the relevant shares could be achieved by late March 2014 and that, while the Receivers were continuing to endeavour to sell the relevant shares, the undertaking should not be varied. To vary it, according to the solicitor for the respondents, would lead to oppression of the respondents. It was also submitted on behalf of the respondents that the Court should not entertain the present application unless full particulars of the action which the applicant intends to pursue are provided both to the Court and to the respondents.

48    In reply, Counsel for the applicant submitted that, given the uncertainty currently surrounding the potential sale of the relevant shares, the applicant should be permitted to take steps to enforce its award elsewhere. In addition, it offered the undertaking which I have extracted at [36] above.

49    There is no doubt that the undertakings set out in Schedule A to the FCA example Freezing Order have their provenance in the English Practice Direction. This Practice Direction and, for that matter, its predecessors, contains in the Example Freezing Order forming part of the Practice Direction, par (10) in the following terms:

The Applicant will not without the permission of the court seek to enforce this order in any country outside England and Wales [or seek an order of a similar nature including orders conferring a charge or other security against the Respondent or the Respondent’s assets].

50    However, as is the case in this Court, the English Practice Direction and the Example Freezing Order included therein which contains undertakings to be given by the applicant when seeking Mareva-type relief are meant to provide general guidelines to parties contemplating seeking Mareva-type relief. Those guidelines are not intended to be prescriptive nor are they intended to be applied rigidly without due regard being paid to the particular circumstances of the case at hand.

51    The observations made by Browne-Wilkinson VC which I have extracted at [45] above and which were relied upon by the respondents in the present case do not constitute a statement of principle. Rather, his Lordship’s remarks were, as I understand them, intended to offer some explanation for requiring an applicant to give an undertaking in the terms of the undertaking set out in par (10) of the undertakings set out in the schedule to the English Example Freezing Order in circumstances where the application for Mareva-type relief is made before judgment and includes an application for world-wide Mareva relief. His Lordship was, I think, making the point that, if an applicant seeks and obtains from an English court a Mareva injunction which has world-wide operation, it should not be permitted to commence other proceedings in other jurisdictions claiming relief which replicates the relief already granted by the English court.

52    There are three features of the present case which distinguish it from the type of case which his Lordship had under consideration and which might generally engage the requirement to give an undertaking in the terms of par (10) of the undertakings set out in the schedule to the English Example Freezing Order.

53    The first distinguishing feature is that the applicant’s claim in the present case is to enforce an award pursuant to s 8 of the International Arbitration Act 1974 (Cth) (IAA) which, of course, is intended to give effect to the Convention on the Recognition and the Enforcement of Foreign Arbitral Awards Adopted in 1958 by the United Nations Conference on International Commercial Arbitration at its Twenty-Fourth Meeting (the Convention). In the present case, as would be the case in all cases where an award creditor is seeking to enforce an arbitral award pursuant to the Convention, the relevant arbitral award was made in a jurisdiction other than Australia (here, in England) in circumstances where, from the moment the award was made, the applicant had an entitlement pursuant to the Convention to enforce that award in many countries. The idea that this Court should routinely impose an undertaking in the terms of par (7) of Schedule A to the FCA example Freezing Order is antipathetic to the principles embodied in the Convention and in s 8 of the IAA.

54    In my opinion, if freezing orders are sought in connection with an application by an award creditor to enforce a foreign arbitral award pursuant to s 8 of the IAA, this Court should not require the award creditor to provide an undertaking to the effect that it will not seek in any country outside Australia an order of a similar nature or an order conferring a charge over security against the award debtor or against the award debtor’s assets. To require an award creditor to give such an undertaking would impose a constraint upon enforcement which is inconsistent with the award creditor’s rights under the Convention.

55    Second, I think that the rationale for requiring the giving of such an undertaking in support of an application for Mareva-type relief prior to judgment (harassment of the respondent) disappears when the Mareva-type relief is given in aid of execution or in aid of enforcement of a judgment already given. This is the view expressed by Lawrence Collins in his work: Essays in International Litigation and the Conflict of Laws (Clarendon Press, Oxford, 1994) at 221. There, the learned author said:

Secondly, it is also very clear from the decisions that an order relating to foreign assets will more readily be granted if the order is made after judgment than before [See especially Babanaft [1900] Ch 13; Republic of Haiti [1990] 1 QB 202; Derby & Co Ltd v Weldon (Nos 3 and 4) [1900] Ch 65 (CA). In Babanaft it was held that Article 16(5) of the 1968 Convention (which gives exclusive jurisdiction to the courts of the Contracting State where judgment is to be enforced) did not preclude provisional measures affecting assets in other Contracting States as a prelude to execution in those States. This is clearly right: cf. Collins, Civil Jurisdiction and Judgments Act 1982 (1983) at p 83]. It should follow that there will be other differences in the exercise of the discretion after judgment. Thus after the plaintiff has obtained judgment, and is therefore ex hypothesi bound to recover if there are assets available (subject to any question of appeal), there is no reason in principle why he should have to give the usual cross-undertaking in damages, still less security for the cross-undertaking [Nor should a judgment debtor be entitled to ‘Angel Bell’ relief (Iraqi Ministry of Defence v Arcepey Shipping Co SA (The Angel Bell) [1981] QB 65) to pay his trade creditors out of the foreign assets]. This conclusion is obvious if there is no stay of execution pending appeal, and there seems to be no reason why, if there is a stay of execution (which is only given in exceptional circumstances [RSC Ord 59, r 13]), the judgment creditor should not be adequately and unconditionally protected. Nor, despite the view of Neill and Nicholls L JJ in Babanaft to the contrary, is there any reason in principle why, after judgment, a disclosure order (whether under RSC Order 48 or ancillary to the injunction) should be subject to an undertaking not to use the information without the consent of the court. The whole purpose of the order is to aid execution, and measures of execution at any rate should be permitted freely until the judgment is satisfied.

56    I agree with Mr Collins’ views.

57    Third, in the present case, the Freezing Orders which I granted did not have world-wide operation. They did not attach to the respondents’ foreign assets. For that reason, this Court never presumed to control or regulate enforcement of the award in other jurisdictions.

58    For all of the above reasons, I have concluded that the applicant should be released from that part of par (7) of Schedule A to the Freezing Orders made by me on 14 March 2013 from which it seeks to be released. I do not consider that there is any reason to require the applicant to give the fresh undertaking which it has proffered (as to which, see [36] above). However, I would expect that the applicant would inform the Court of the details of any recovery actually achieved in jurisdictions outside Australia so that, in managing the enforcement processes undertaken or to be undertaken here, double recovery in favour of the applicant is avoided.

conclusions

59    The applicant has had complete success in the relief claimed by it in its Amended Interlocutory Application. In those circumstances costs should follow the event. There will be orders accordingly.

Associate:

Dated:    24 February 2014