FEDERAL COURT OF AUSTRALIA

Mining Standards International Pty Ltd v Atlantic Nickel Mineracao Ltda [2022] FCA 623

ORDERS

THE COURT ORDERS THAT:

1.    The applicant has leave pursuant to rr 10.43(2) and 10.44(1) of the Federal Court Rules 2011 (Cth) to serve the following documents on the respondent, in Brazil, in accordance with the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters done at the Hague on 15 November 1965:

(a)    the Originating Application filed on 1 November 2021;

(b)    the Amended Statement of Claim filed on 18 March 2022; and

(c)    this Order.

2.    The respondent shall file a notice of address for service in accordance with r 5.02 of the Federal Court Rules 2011 within 21 days after service upon it, in Brazil, of the Originating Application and other documents.

3.    Costs reserved.

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

REASONS FOR JUDGMENT

DERRINGTON J:

Introduction

1    Mining Standards International Pty Ltd (MSI) seeks leave pursuant to the Federal Court Rules 2001 (Cth) (the Rules) to serve an Originating Application and associated documents on the respondent, Atlantic Nickel Mineracao Ltda (formerly Mirabela Mineracao Do Brasil LTDA) (MMB) in Brazil. Service is intended to be effected in accordance with the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters done at the Hague on 15 November 1965 (Hague Convention).

2    The circumstances in which MSI has commenced the current action concern a somewhat complex multiparty transaction pursuant to which it sought to acquire control of the Santa Rita nickel mine in Bahia, Brazil. MMB was a party to that transaction as were its shareholders and others. The complexity of the current application is exacerbated by reason of the existence of proceedings in the Western Australian Supreme Court (the WASC Proceedings) in which certain parties to the sale agreement, but excluding MMB, have sought declarations as to their interests and the interests of MSI in it.

3    The current application is necessarily ex parte although the respondent, MMB, appears to be aware of the proceedings generally and of this application. Further, the parties participating in the WASC Proceedings are also aware of the current application. They were invited to intervene but declined to do so. There can be no criticism of them for taking that position. However, as will be seen, some of them have raised issues which they consider should be addressed by MSI in relation to the obtaining of leave. Again, no criticism can be made of them for raising their concerns, although their failure to take up the invitation to intervene has the consequence that there was no contradictor in relation to those matters in respect of which they expressed an interest.

Background

4    MMB is the owner of the Santa Rita nickel mine. At all times relevant to the current proceedings, being until about July 2018, the shareholding in MMB (referred to as “quotas” under Brazilian law) were held by Mirabela Nickel Limited (MBN) as to 99.9% and, as to the balance, Mirabela Investments Pty Limited (MBI), which itself was wholly owned by MBN.

5    Further, at all relevant times MMB was indebted to MBN under various loan agreements in an amount of approximately USD57.3 million. It was also indebted to Banco Bradesco S.A. (Bradesco), a Brazilian bank, in the sum of approximately USD47 million. In addition, MMB, MBN and MBI were indebted to the company, Certes CT Pty Ltd (formerly AET Structured Finance Services Pty Ltd) (AET), in the sum of, at least, approximately USD129.2 million. That indebtedness had arisen upon the provisions of notes, the repayment of which was secured over all of the property and undertakings of MBI and MBN.

6    In October 2015, AET appointed Messrs Richard Tucker, Martin Madden and Scott Langdon (the Receivers) as receivers and managers of the property of MBN and MBI, which included the shareholdings in MMB and the loan to MMB.

7    The Receivers entered into a sale process of the shares or quotas in MBN and MBI along with the loan owed to MBN by MMB of some USD57.3 million. The shares and loan are referred to as “the Assets”.

8    On or about 10 November 2017, MSI entered into a written agreement with MBN, MBI, MMB and the Receivers for the sale of the Assets, with MBN and MBI as “the Sellers” to MSI as the purchaser. It is referred in these reasons as the “MSI Sale Agreement”.

9    Pursuant to that agreement, MBN and MBI were to sell the Assets to MSI for USD50 million which included the assignment to MSI of MMB’s indebtedness to MBN. The obligations of both MSI and the Sellers were subject to certain conditions precedent. They included:

(a)    the obtaining of consent to the transaction from the financial institution, Bradesco (Bradesco Condition); and

(b)    the entry into by MSI of unconditional financing agreements in an amount of USD50 million. This is referred to in these reasons as the “Finance Condition”.

10    Other relevant clauses of the MSI Sale Agreement were:

(a)    by cl 2.2(a) each party was obliged to use all reasonable endeavours to ensure that each condition precedent was satisfied as soon as possible after the date of the agreement;

(b)    by cl 2.2(b) the sellers and MMB were obliged to provide all reasonable assistance requested by MSI to satisfy the conditions precedent, including by providing all reasonable access to the business and employees of MMB and by facilitating access to Bradesco for MSI;

(c)    by cl 2.5 any party was entitled to terminate the MSI Sale Agreement by notice to the other parties if:

(i)    the terminating party had complied with its obligations under cl 2.2; and

(ii)    the Finance Condition was not satisfied by the date which was 14 days after the date of exchange of signed copies of the MSI Sale Agreement;

(d)    by cl 2.6(c) the Sellers and MMB undertook that they would not, and would procure that the employees of MMB would not, between the date of the MSI Sale Agreement and the earlier of its completion or termination:

(i)    provide information regarding the Assets to any potential purchaser of them; or

(ii)    solicit any offers for the Assets from any person;

other than MSI;

(e)    by cl 10 the parties were obliged to keep it and its terms confidential.

11    On or about 22 November 2017, the Sellers purported to terminate the MSI Sale Agreement pursuant to cl 2.5(a) on the basis of MSI’s alleged non-satisfaction of the Finance Condition.

12    Subsequently, the Assets were sold to a third party, Appian Natural Resources Fund (Appian), which sale settled in about July 2018.

MSI’s claims

13    By the current proceedings MSI seeks relief in relation to the alleged wrongful loss of its contractual rights under the MSI Sale Agreement and the resultant loss of its opportunity to acquire the Assets. Its claims in that respect are articulated in its statement of claim, some of which have been supported by the affidavit material relied upon in support of the application for leave to serve out of the jurisdiction. It should be noted that the claims made are numerous and diverse.

14    In general terms MSI contends that the Sellers breached the MSI Sale Agreement and subsequently repudiated it by their purported termination and the subsequent sale of the Assets. It is alleged that the Sellers had no right to terminate on 22 November 2017, as the date for the satisfaction of the Finance Condition had not been reached. It is also asserted that the Sellers had no right to terminate the agreement because they were in breach at the time by:

(a)    having failed to provide the reasonable assistance requested by MMB to satisfy the Finance Condition;

(b)    their undermining of MSI’s attempts to obtain the consent of Bradesco; and

(c)    otherwise failing to use all reasonable endeavours to ensure that the conditions precedent were satisfied.

15    It is also contended that the Sellers and the Receivers breached an implied term to the effect that they would not solicit further bids for the Assets from any third party or would not engage in conduct calculated to bring about the termination of the MSI Sale Agreement.

16    The statement of claim further alleges that the impugned conduct resulting in the breaches was unconscionable and in contravention of s 21 of the Australian Consumer Law (ACL).

17    It is appropriate to note that in these proceedings MSI does not seek relief against the Receivers or against MBN and MBI (which are in liquidation and insolvent). Rather its claim is directed solely against MMB although that liability is, in part, derivative upon the alleged conduct of the Receivers, MBN and MBI.

MSI’s allegations against MMB

18    Before turning specifically to the allegations against MMB some background, being the allegations against the Receivers, needs to be mentioned. In essence it is alleged that after the Receivers executed the MSI Sale Agreement on 1 November 2017, they wrongly perceived that a binding agreement had been effected. As MMB had not signed the document, that may be unlikely, but it is an open issue. It is alleged that from that time the Receivers acted contrary to the interests of MSI and contrary to the terms of the agreement by seeking to prevent MSI from completing.

19    MSI alleges that the agreement was not fully executed until 10 November 2017, after which it became binding on all parties and it is further alleged that the Receivers and MMB, the latter by a person called Mr Mundim, continued to act in a way that prevented MSI from completing and, instead, entered into a new agreement with a different purchaser, Appian. Subsequently, the Receivers purported to terminate the MSI Sale Agreement on 15 November 2017 due to the alleged non-satisfaction of the Finance Condition. That action was taken on the assumption that the agreement had been entered into on 1 November 2017, rather than 10 November 2017. It is then alleged that from 15 November 2017 the Receivers and MMB acted as if the MSI Sale Agreement had been terminated and, by doing so, engaged in further breaches of it.

20    It is also alleged that the Receivers and MMB then purported to terminate the MSI Sale Agreement on 22 November 2017, again for non-satisfaction of the Finance Condition. This was apparently on the assumption that the contract had, in fact, been entered into on 10 November. The Receivers and MMB thereafter are alleged to have repudiated the MSI Sale Agreement by selling the Assets to Appian.

21    The foregoing conduct is relied upon as constituting breaches and repudiation of the MSI Sale Agreement by the Receivers, the Sellers and MMB. Much of the same conduct is alleged to constitute unconscionable conduct in contravention of s 21 of the ACL.

22    In relation to the conduct of MMB specifically, MSI makes an array of allegations including that MMB:

(a)    failed to comply with MSI’s requests for assistance in connection with its attempts to satisfy the Finance Condition;

(b)    removed and thereafter failed to restore MSI’s access to information which was necessary or useful to satisfy the Finance Condition; and

(c)    sought to undermine MSI’s attempts to satisfy the conditions precedent.

23    This alleged conduct, it is said, gave rise to breaches by MMB of cl 2.2(a) of the MSI Sale Agreement between 10 and 22 November 2017, with the consequence that MMB failed to use reasonable endeavours to ensure that the conditions precedent were satisfied.

24    It is further contended that MMB breached cl 2.2(b) of the MSI Sale Agreement between 10 and 22 November 2017 by failing to provide the reasonable assistance requested by MSI to satisfy the conditions precedent and, particularly, the Finance Condition.

25    Additionally MSI contends that MMB breached cl 2.6(c) of the MSI Sale Agreement between 10 and 22 November 2017, by providing information to Appian concerning MMB’s financial position.

26    MSI also relies upon the above identified conduct for its allegation that MMB engaged in unconscionable conduct in contravention of s 21 of the ACL, that it induced the Sellers and Receivers’ breaches of the MSI Sale Agreement, and that it was involved in the Sellers and the Receivers’ contraventions of s 21 of the ACL.

27    It claims that, as a consequence of MMB’s conduct, it lost the opportunity to satisfy or waive the conditions precedent of the MSI Sale Agreement and, thereupon, complete it so as to become the owner of the Assets and, through them, the control of the mine. Reliance is also placed on the alleged wrongful repudiation of the MSI Sale Agreement by the Receivers, the Sellers and MMB, in subsequently selling the Assets to Appian. It is claimed that the value of that lost opportunity is approximately USD745 million, reflecting the Santa Rita mine’s value.

28    MSI seeks damages from MMB for breach of contract, for inducing breaches of contract, and pursuant to s 236 of the ACL for contravention of s 21 of that Act as well as for being a person involved in a contravention of that section.

Non-contentious issues of the “service out” application

29    Pursuant to r 10.43(3) of the Rules, an application of the present nature must be accompanied by an affidavit stating (relevantly):

(a)    the name of the foreign country where the person to be served is or is likely to be;

(b)    the proposed method of service; and

(c)    that the proposed method of service is permitted by the Hague Convention.

30    These matters have been addressed in the second affidavit of Mr Russell filed in these proceedings where it is evidenced that:

(a)    MMB is a company located or likely to be located in Itagiba in the State of Bahia in Brazil.

(b)    the Originating Application is proposed to be served by the Department of Assets Recovery and International Legal Cooperation, which is part of the Brazilian Ministry of Justice, by any method prescribed by the law of Brazil for service of such documents.

(c)    those methods of service are permitted by Art 5, para 1(a) of the Hague Convention.

Contentious issues

31    Relevantly, r 10.43(4) of the Rules provides:

(4)    For subrule (2), the party must satisfy the Court that:

(a)    the Court has jurisdiction in the proceeding; and

(b)    the proceeding is of a kind mentioned in rule 10.42; and

(c)     the party has a prima facie case for all or any of the relief claimed in the proceeding.

Jurisdiction

32    In relation to the issue of jurisdiction the following was observed in Tiger Yacht Management Ltd v Morris (2019) 268 FCR 548, 557 (Tiger Yacht Management) [43]:

First, as to jurisdiction, there must be jurisdiction as to the whole of the proceeding. This will only be the case where a claim to each head of relief that is sought may be established by the material facts as alleged on the basis of a cause of action that is within the subject matter jurisdiction of the Court.

33    This is satisfied in the present case. MSI seeks relief pursuant to s 236 of the ACL consequent upon MMB’s alleged contraventions of s 21 of the ACL and its involvement in contraventions of that section by the Sellers and Receivers. As these causes of action arise under Federal legislation they are within this Court’s jurisdiction: s 39B(1A)(c) of the Judiciary Act 1903 (Cth). That jurisdiction extends to all matters within the scope of the controversy which involves the Federal claim: Wakim; ex parte McNally (1999) 198 CLR 511, 583 – 584 [135]: including the claim for damages for breach of contract and for inducing breaches of contract.

Proceedings of the kind in r 10.42

34    Pursuant to r 10.42, an Originating Application may be served in a foreign country in a proceeding that consists of or includes any one or more of the kinds of proceedings mentioned in that rule. It is well established that it is not necessary for the whole of the proceeding to be brought within one or more of the items in r 10.42 and it suffices if the proceedings includes one or more of them.

35    For the purposes of the application it is the material facts alleged in the relevant pleading which determine whether the claim is of the requisite kind. For present purposes the current proceedings include claims within those itemised in r 10.42 namely:

3    Proceeding in relation to a contract that … is governed by the law of … a State … in which the applicant seeks … an order for damages … in relation to a breach of the contract …

15    Proceeding seeking any relief or remedy under an Act …

19    Proceeding in which the person to be served has submitted to the jurisdiction of the Court

36    Here, the MSI Sale Agreement is governed by the law of Western Australia in respect of which the Federal Court of Australia has jurisdiction by reason of the federal nature of the matter in which the contractual dispute arises. This meets the requirements of item 3.

37    Additionally, the Originating Application seeks relief under Competition and Consumer Act 2010 (Cth) in respect of the claims arising under the ACL and such claims are within item 15.

38    Further, pursuant to the MSI Sale Agreement, MMB (cl 16.8(a)):

irrevocably submits to the non-exclusive jurisdiction of the courts having jurisdiction in [Western Australia] … with respect to any proceedings that may be brought at any time relating to this agreement.

39    It follows that these proceedings also fall within item 19 of r 10.42.

40    It is likely that the proceeding also falls within other sundry items of r 10.42.

Prima facie case

41    Pursuant to r 10.43(4)(c) the Court must be satisfied that the party seeking the order for service has a prima facie case for at least some of the relief claimed in the proceedings. The prima facie case must be demonstrated in respect of a claim of the kind listed in r 10.42 on which the Court’s jurisdiction is founded: Tiger Yacht Management at 557 – 558 [45] – [46].

42    As to what constitutes a prima facie case for the purposes of r 10.42, the observations in Ho v Akai Pty Ltd (in liq) (2006) 247 FCR 205, 208 [10] are relevant. There the Court observed:

As has been observed on many occasions, the prima facie case requirement has to be met at the outset, usually on an ex parte basis, and without the advantage of discovery and other procedural aids to the making out of a case: … . It “should not call for a substantial inquiry”: … . For present purposes it is sufficient to say that a prima facie case for relief is made out if, on the material before the court, inferences are open which, if translated into findings of fact, would support the relief claimed: … . Or, to put the matter more prosaically as Lee J did in Century Insurance Ltd (in prov liq) v New Zealand Guardian Trust Ltd [1996] FCA 376:

What the Court must determine is whether the case made out on the material presented shows that a controversy exists between the parties that warrants the use of the Court’s processes to resolve it and whether causing a proposed respondent to be involved in litigation in the Court in Australia is justified.

43    Those observations are applicable to r 10.43(4)(c) of the Rules: Israel Discount Bank Ltd v ACN 078 272 867 Pty Ltd (In Liq) (formerly Advance Finances Pty Ltd) (2019) 367 ALR 71, [46] – [47].

44    For the purposes of this application it is not necessary that the applicant make out a prima facie case on direct evidence. The case may be established as a matter of inference and the authorities indicate that a relevant inference may be drawn more readily than it would be at a trial: Tiger Yacht Management at 558 [46].

45    For the purposes of establishing this part of its application MSI addressed only its claim against MMB for a breach of cl 2.2 of the MSI Sale Agreement. That clause imposed obligations on MMB to use all reasonable endeavours to ensure that the conditions precedent were satisfied as soon as possible (cl 2.2(a)) and to provide all reasonable assistance requested by MSI to satisfy the conditions precedent (cl 2.2(b)). It is alleged that MMB breached each of them.

46    To some extent these claims turn upon the date on which the MSI Sale Agreement was actually entered into. MSI alleges that it was 10 November 2017, being the date on which MMB executed the agreement and exchange occurred. On the evidence it is possible to infer that the contract did not come into existence and commence until the last of the parties entered into it. That would be the usual inference in respect of a multipartite agreement in that it can be expected that the parties do not intend to be bound unless and until all have signed. On the evidence it appears that MMB only executed the MSI Sale Agreement on 10 November 2017. On that basis, there is a reasonable argument that the date by which the Finance Condition was to be satisfied was 25 November 2017, being 14 days after the contract was entered into: cl 2.5(a).

47    The date of entry into the agreement is to be compared with that period following 1 November 2017 (to 10 November 2017) when the Sellers and the Receivers had signed and executed copies of the MSI Sale Agreement together with MSI. In broad terms it is suggested that during this period MMB, or persons within it, actively sought to undermine the sale. This, so the submission goes, gives colour to the obligations of MMB once the agreement was finally entered into. As an aside, it might be observed that, on the basis of the allegations in the statement of claim, the position may well be that MMB believed the MSI Sale Agreement to have been entered into on 1 November 2017. However, if that were so, its conduct from that time was contrary to the contractual obligations which it must have assumed existed.

48    In any event, the material produced discloses, at least to a prima facie level, the following instances of MMB’s failure to comply with its obligations:

(a)    From about 2 November 2017 (including after 10 November 2017) MMB refused to assist PPB Advisory (which was acting for MSI) in the preparation of a valuation of the Santa Rita nickel mine and which was intended to be used for the purpose of obtaining finance for the sale. A draft valuation had been prepared and delivered to Mr Mundim of MMB who was asked to provide factual verification of certain matters. He failed to do so at any time, either before or after 10 November.

(b)    MMB disabled an email account which Mr Milbourne, a director of MSI, had previously used and which have given him access to a substantial volume of MMB’s information which was necessary for the purposes of obtaining finance to complete the sale. Despite requests for it to be reinstated, MMB refused to do so and this limited MSI’s access and ability to satisfy the Finance Condition.

(c)    MMB refused to comply with MSI’s request to assist it in obtaining funding by sourcing a quote to restart the mining operations, prepare an assignment of two receivables from MMB, and preparing a pledge of MMB’s cash held at the time of closing under the MSI Sale Agreement. Again, the evidence suggests that MMB’s failure to act continued after 10 November 2017.

(d)    MSI also relied upon the existence of material from which it can be inferred that between 3 and 10 November 2017, Mr Mundim for MMB communicated to Bradesco that it should not consent to MSI’s acquisition of the assets. As was submitted by Mr Stewart QC, this conduct by MMB had the consequence that more was required of it once it executed the MSI Sale Agreement to fulfil its obligation to use all reasonable endeavours to ensure that the conditions precedent were satisfied. The evidence raises a sufficient inference that MMB fell short of meeting its obligations in that respect.

(e)    On 14 November 2017, MSI requested the assistance of MMB to identify a valuer to value MMB’s mining equipment to permit the disposal of some of it so as to assist with financing. MMB did not respond at all to this request.

(f)    On 16 November 2017, MMB refused to respond to a request to provide assistance in the preparation of a contract mining proposal.

49    MSI also relied on material which evidenced that MMB, by Mr Mundim, effectively undermined its attempts to obtain finance by advising the proposed financier that MSI was unlikely to be able to procure finance in the amount required and that MMB’s management team no longer supported MSI’s acquisition. The material also showed that MMB failed to respond to attempts to progress MSI’s attempts to obtain binding finance agreements. Whilst there may be some merit in these allegations, on the material provided it must be approached with some degree of caution given that the events in question mostly occurred prior to entry into the sale agreement by MMB; that is 10 November 2017. It may be that this claim can be improved in the course of time and with additional information. For present purposes this aspect of the claim should not be accorded any substantive weight.

50    Given the above it is possible to identify a not insignificant prima facie case that MMB sought to undermine MSI’s attempt to acquire the shares in it. There is more than an arguable case that MMB failed to comply with the relatively high standards required of it in the MSI Sale Agreement and there is sufficient to reach the conclusion that there is a prima facie case that MMB inhibited MSI’s attempts to satisfy the Finance Condition and the Bradesco Condition and thereby inhibited the completion of the MSI Sale Agreement. By doing so it breached its obligations under cl 2.2 of the agreement. On that assumption, MMB also repudiated the MSI Sale Agreement when participating in the sale of the Assets to Appian. There is also sufficient, if it be required, to establish that the result was the loss by MSI of the opportunity to complete the agreement.

51    In that latter respect, even if in the assessment of damages the value of the loss of opportunity sustained by MSI is reduced by reason of those contingencies which might otherwise have inhibited completion: Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64: given the nature of the damages sought and the significance of the loss, even a reduced amount may be significant. It follows that the existence of some damage having been sustained by MSI has been established to the required standard.

52    The consequence is that MSI has satisfied the requirements for leave pursuant to r 10.43 to serve the proceedings in Brazil.

Residual discretions

53    The Court retains a residual discretion to refuse leave to serve out of the jurisdiction, even if the conditions in r 10.43(4) are satisfied. The nature of that discretion was discussed by Beach J in Trina Solar (US) Inc v Jasmin Solar Pty Ltd (2017) 247 FCR 1, 26 [117] – [119] (Trina Solar) where his Honour said:

[117]    Now the residual discretion to refuse leave is not at large in the sense that if the three necessary conditions for leave have been satisfied, there must be a good if not compelling reason why nevertheless leave should be refused in the face of such satisfaction.

[188]    If a stay of the proceeding would be granted or this was inevitable, then that could provide a compelling reason for the exercise of the residual discretion to refuse leave. Before his Honour, Trina US recognised as much. Trina US couched its submissions before his Honour in terms that “it would be futile to serve Trina US because the proceedings would subsequently be stayed by application of s 7(2)”. But if all that could be established was that a stay might be granted or that it was reasonably arguable, but all of this below the threshold of inevitability or a strong case for a stay, then it may not be appropriate to exercise the residual discretion to refuse leave. Rather, the appropriate course may be to grant leave to serve out, and to then allow the respondent to apply for a stay of the proceeding under s 7(2) of the IA Act on proper material. It is inappropriate to be definitive on such questions given that a discretion is being exercised and each case will turn on its own circumstances. But the context of the application that his Honour was dealing with is not unimportant.

[119]    Generally, questions of leave to serve out are to be dealt with expeditiously, as his Honour did in the present case. A mini trial of whether a stay would be granted ought not to be carried out under the umbrella of the availability and exercise of any residual discretion associated with an application to serve out of the jurisdiction an originating process, except in the clearest case. … . Unless a case for a stay is inevitable or strongly made out, alternatively expressed it is not reasonably arguable that no stay would be granted, the better course is to grant leave to serve out and to deal with the stay question at a later stage by application at the behest of the respondent .

54    These observations were approved of in Tiger Yacht Management where, at 569 [100] the Court drew the relevant principles together as follows:

Drawing these matters together, the following points may be made concerning the residual discretion exercised by the primary judge in this case:

(1)    it is necessary to pay close attention to the terms of the Rules as to service out of the jurisdiction when considering the relevance of past decisions;

(2)    in this Court, leave is required by the Rules before there can be service of an application on a respondent out of Australia;

(3)     the requirement for leave does not invite a mini trial;

(4)     if the three conditions expressed in r 10.43 are met, then there remains a residual discretion;

(5)     the residual discretion may only be exercised for good reason;

(6)     if, at the time of considering whether to grant leave, a stay of the proceeding would be granted or this was seen to be inevitable, then that could provide a compelling reason for the exercise of the residual discretion to refuse leave;

(7)     to the extent that the making of orders to allow service out of the jurisdiction is seen to be exorbitant, and therefore a matter requiring circumspection or restraint or caution by reason of comity, provision is made as to those matters mainly by the principles concerning forum non conveniens;

(8)     save where it appears inevitable at the time that leave is sought that a stay would be granted on forum non conveniens grounds, the issue of the appropriate forum is a matter that should be left for any application by the respondent;

(9)     at both the leave stage and upon an application to set aside service (or for a stay) the onus is upon the party seeking leave to serve and have the matter proceed in the home jurisdiction; and

(10)     as the onus remains on the party seeking to have the matter proceed in the home jurisdiction when there is a set aside application, it is important to recognise that if a set aside application is brought then it is for the applicant to provide sufficient detail as to the nature of the claim to enable the Court to evaluate whether the home jurisdiction is an inappropriate forum. If there is a failure by the applicant to do so then service should be set aside. It is not for the respondent to place those facts before the Court. It may choose to put evidence on in support of the set aside application, but need not do so.

55    On this application the matters which might give rise to the exercise of the discretion to refuse service out were identified by Mr Stewart QC for MSI as being threefold. Firstly, whether the proceedings are liable to be stayed due to the existence of the WASC Proceedings. Second, whether the claim is based on inappropriate allegations against a professional person, being one of the Receivers, Mr Tucker. Third, whether the Court should refuse to hear MSI’s application because the proceedings are in some way tainted by the use of documents obtained in the WASC proceedings which have the protection of the implied undertaking not to use documents obtained in the course of a proceedings for another purpose: Hearne v Street (2008) 235 CLR 125 (Hearne v Street).

The potential stay of the action

56    In the period following the purported termination of the MSI Sale Agreement by the Sellers, disputation arose as to whether they were entitled to do so. That resulted in the litigation referred to as the WASC Proceedings. In that action MBN, MBI and the Receivers sought declarations that they had validly terminated the MSI Sale Agreement and that, by certain of its terms, MSI had released the Receivers from the claims which MSI had threatened in relation to the alleged wrongful termination.

57    For reasons which are unclear, MMB was not a party to that action. In a letter of 3 November 2021 from Clayton Utz, the Receivers’ solicitors, to Russells Law, a statement was made to the effect that in the course of the litigation in the Western Australian Supreme Court Senior Counsel for MSI had informed the trial judge, Hill J, that MSI would not need to deal with other persons who were not parties to the proceedings. On the other hand, the letter accepted that there was a dispute in relation to whether the necessary parties were before the Court.

58    At the level at which the Court is able to assess the underlying evidence on an application such as the present, there is difficulty in understanding why MMB was not a party to the WASC Proceedings in which a declaration was sought that the MSI Sale Agreement had been validly terminated. Although it was suggested that MMB would not be bound by any order made by the Court, that is not the test. It is difficult to see how a declaration as between two parties to a multipartite agreement that the agreement has been terminated would not impact the interests of another party to it. The principles concerning the obligation of a party to join all necessary parties to proceedings, either as plaintiffs or defendants, were recently elaborated in Tahmoor Coal Pty Ltd v Visser [2022] NSWCA 35 [17] where the New South Wales Court of Appeal (Basten, Gleeson and Payne JJA) held:

[17]    The principles applicable to the joinder of parties are well settled, although their application in particular cases may give rise to controversy. They were stated by Leeming JA in Ross v Lane Cove Council:

[51]    It is settled law that a person who is directly affected by the orders sought in a proceeding is a necessary party, and that the obligation to join that person rests upon the plaintiff or applicant or person applying for those orders.

[52]    In the Superleague case (News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410) at 524 – 526, the Federal Court (Lockhart, von Doussa and Sackville JJ) applied the test stated by Lord Diplock delivering the advice of the Judicial Committee of the Privy Council in Pegang Mining Co Ltd v Choong Sam [1969] 2 MLJ 52 criticising the dichotomy between ‘legal’ and ‘commercial’ interests. His Lordship said at 56:

A better way of expressing the test is: will [a non-party’s] rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?

[53]    That test has very regularly been followed. Most recently, in John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1 at [131], a unanimous High Court said:

[131]    Walker Corporation submitted that where a court is invited to make, or proposes to make, orders directly affecting the rights or liabilities of a non-party, the non-party is a necessary party and ought to be joined. That submission is correct. (Citations omitted)

[54]    Sometimes it is said, as it was said in the present appeal, that merely giving notice to the person affected by the order is sufficient. It will be necessary to return to this in more detail below, but it should be recognised immediately that joinder, not notice, is the default position. In the Superleague case, their Honours said at 526:

In our opinion, the notice given to the players before trial does not, and could not, extend the jurisdiction of the Court to make orders which offend the test stated in Pegang Mining. Absent an application for joinder by a defendant, or by a third party who claims to be directly affected by the proposed orders, it is for the party prosecuting the proceedings to choose who are the necessary parties to enable the Court to make the orders sought. Generally speaking, to permit [the party prosecuting the proceedings] to transfer to others who might be affected by the outcome of the proceedings the responsibility of deciding whether or not they should apply to be joined could be productive of uncertainty and inconvenience. At times, it could lead to the need to halt expensive litigation part-way through, because a third party insufficiently understood the proceedings, or, through impecuniosity or some other reason, was not adequately advised. (Emphasis added)

[55]    In John Alexander’s Clubs the last two sentences of that passage were reproduced, and endorsed by the High Court in these terms at [140]:

[140]… News Ltd v Australian Rugby Football League Ltd was a case where players who had not been joined in the proceedings but only informed of them were not debarred from attacking the orders made. There is no doubt that Walker Corporation was aware of the first proceedings, and it informed the Court of Appeal of that fact. Walker Corporation said there was a reasonable explanation for its delay in seeking to be joined. Whether or not that is so, it had no duty to seek to be joined, and its delay does not in this case call for explanation.

[56]    …

[57]    … The joinder of a party directly affected by an order is not, at least not ordinarily, a matter of discretion: it is a matter of obligation upon the party seeking the order. That is why the High Court referred to the position of the non-party Walker Corporation in John Alexander’s Clubs at [153] as depending on ‘matters of right affecting non-parties which rest on general law principles of natural justice’.

[58]    For that proposition, the High Court cited Victoria v Sutton [1998] HCA 56; (1998) 195 CLR 291 at [77], where McHugh J said:

[77]    The rules of natural justice require that, before a court makes an order that may affect the rights or interests of a person, that person should be given an opportunity to contest the making of that order. Because that is so, it is the invariable practice of the courts to require such a person to be joined as a party if there is an arguable possibility that he or she may be affected by the making of the order. (Footnote omitted)

59    In the light of these principles, it is, with respect, difficult to accept that the rights of MMB under the MSI Sale Agreement could not be affected if the declarations sought in the WASC Proceedings were made. However, the more pertinent question may well be how those rights might be affected in relation to the claim which MSI now seeks to advance against MMB.

60    To a degree MSI’s claim in this action seems to proceed partly upon the basis that the MSI Sale Agreement was effectively terminated by the Sellers, as a consequence of which MSI suffered loss and damage. The gravamen of the allegation appears to be that the consequence of MMB’s conduct, being either in breach of the terms of the MSI Sale Agreement or in breach of the obligation imposed by the ACL not to engage in unconscionable conduct, was the non-satisfaction of the conditions precedent which permitted the agreement to be terminated and that this deprived MSI of its benefit. In these circumstances, the granting of relief sought against MMB in the current proceedings could be assisted by a determination that, as between MSI and the other parties to the agreement, it was validly terminated. On the other hand, it may well be that MMB will assert that the agreement was validly terminated with the result that the plaintiffs’ success in the WASC Proceedings is either immaterial or beneficial to it.

61    It is in these circumstances that the Receivers have asserted by their solicitor’s correspondence of 3 November 2021, that the discretion to serve out of the jurisdiction should be refused. In broad terms the reasons are that:

(a)    any relevant claim which MSI might have against MMB is dependent upon the outcome of the WASC Proceedings;

(b)    MSI’s claim arises from substantially the same facts and the matters the subject of the WASC Proceeding, and that any alleged breaches of the agreement should have been raised in those proceedings;

(c)    in the WASC Proceedings MSI had raised and then withdrawn a defence based upon the allegation that the Receivers, Sellers and MMB had breached cl 2.2 of the MSI Sale Agreement; and

(d)    there existed a significant overlap of issues between the current proceeding and the WASC Proceeding, which creates a risk of inconsistent findings.

Whether any Anshun estoppel arises in the present matter

62    To a not insignificant degree much of the criticism from the Receivers’ solicitors appears to involve the allegation that MSI will be estopped from pursuing the proceedings once they are served, or that service will be set aside. Whether that result will ultimately occur is not necessary to decide on the present application. Here, all that needs to be determined is whether the prevention of the continuation of this action is “inevitable”: Trina Solar, 26 [117] – [119]: and that question is to be answered at a high level of abstraction rather through the undertaking of a mini trial.

63    One initial difficulty is that it cannot be said with any degree of certainty that service will be set aside on Anshun estoppel grounds or an abuse of process grounds because it may well be that an appearance will need to be entered in this action prior to the delivery of judgment in the WASC Proceedings. In the absence of any determination in those proceedings the scope for any Anshun estoppel or abuse of process to arise is limited.

64    In general terms Anshun estoppel precludes the assertion of a claim which is so connected with the subject matter of a prior proceeding that it was unreasonable, in the context of the prior proceeding, for the claim in question not to have been raised in it: Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, 602-3 (1981) 147 CLR 589, 602-3 (Anshun); Timbercorp Finance Pty Ltd (in liq) v Collins (2016) 259 CLR 212, 229 [27] per French CJ, Kiefel, Keane and Nettle JJ; 245 [97] per Gordon J (Timbercorp). In this formulation much turns on the notion of what constitutes “unreasonableness” in the circumstances of the earlier litigation. It has been stressed that it is a fundamental error in the application of Anshun estoppel principles to hold that simply because a claim could have been raised in earlier proceedings that it was unreasonable not to do so. Rather, the claim must have been so “relevant” in the first proceedings that it was unreasonable for the party seeking to advance it in later proceedings not to have raised it: Champerslife Pty Ltd v Manojlovski (2010) 75 NSWLR 245 (Champerslife).

65    It is well established that the principle can extend to claims that could have been raised by way of cross-claim in prior litigation: Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287, 297-8: although it is generally more difficult to conclude that a party acted unreasonably by refraining from litigating a cross-claim as opposed to raising a defence: Champerslife, 253 [41]. In Anshun itself it was observed at 600 that, “[t]o require that the defendant always raise his cross-claim or set-off at the first available time could cause great inconvenience”. This observation supports the established principle that the question to be answered is not whether the cause of action “could” have been raised in the earlier proceedings, but whether in the circumstances it “should” have been: Champerslife 247 [3]-[4], 255 [52], 262 [89]. The greater the inconvenience or difficulty in making the cross-claim, the less unreasonable it will be not to raise it. On that basis, it will usually be even more difficult to establish that a cross-claim should have been made in an earlier proceeding when it is one to be made against an entity who was not a party to that earlier action.

66    Further, the mere fact that the earlier proceedings and those which is sought to be stayed have similarities or are closely related, is not sufficient to attract the principle. In Timbercorp the majority stressed that the determination of the issue is not dependent upon the degrees of similarity between matters raised in the two actions.

67    It follows that an evaluative judgment is required of the conduct in the earlier proceedings in the circumstances of that case so as to determine whether there is sufficient connection between the two claims to justify preventing the agitation of the later claim. The following factors, as identified by MSI in its written submissions, are generally relevant to that determination:

(a)    whether the claim now sought to be advanced could have been raised in the earlier proceedings;

(b)    whether the matter was closely connected with the subject matter of the earlier proceedings;

(c)    whether the omission to raise the matter in the earlier proceedings would contribute to conflicting judgments;

(d)    whether, if the omitted matter were postponed, there would be an increase in costs; and

(e)    whether there was a reasonable explanation for the omission.

68    In respect of the latter point, in Anshun itself Gibbs CJ, Mason and Aickin JJ (at 602 – 603) observed:

In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings e.g. expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few.

69    There can be little doubt that when an Anshun point is raised, an important issue is whether the continuation of the later proceedings creates the possibility of there being conflicting judgments. Where the point or claim sought to be raised is in direct conflict with the determination in an earlier proceedings, that may of itself provide a justification for staying the subsequent action. However, the concern here is with conflicting or inconsistent judgments rather than merely inconsistent findings. In this respect MSI relied upon the observations of Santow J in Minero Pty Ltd v Redero Pty Ltd (unreported, NSWSC, Santow J, 29 July 1998) where his Honour said:

But it does not follow that every issue of fact determined or, importantly, expressly assumed in the course of a judgment is to be treated as giving rise to inconsistent judgments if attempted to be re-visited in a subsequent proceeding. In Port Melbourne Authority (above) at 603, Gibbs CJ, Mason and Aickin JJ cite the decision of Brewer v Brewer (1953) 88 CLR 1 as “illuminating”. …. According to Fullagar J, a conflicting judgment is one that contradicts an assumption “which was fundamental to the decision in the sense that, if the assumption had not been made, the decision must have been different”.

The quoted passage from Fullagar J makes clear that “assumption” includes not only a point which might have been raised but was omitted in the first proceedings, but also the point which was not argued but expressly assumed against the party who might have argued it. Both are of course potential examples of Anshun estoppel. ...

[T]he principle of avoiding conflicting judgments is not truly involved, where the second proceedings is in relation to a claim reasonably omitted from the first though based on the same matrix of facts. If a different result occurs in the second proceedings, the conflict is not truly between decisions but ultimate result; the first decision never dealt with the omitted claim nor reasonably should it have.

70    Here, a conflict of a relevant type might arise. If in the WASC Proceedings it is determined that the agreement was not legitimately terminated by the Receivers, MBN and MBI, that conclusion may conflict with a decision in the present action in which it is alleged that the agreement was terminated. That necessarily raises concern although, at present, there is no decision in the WASC Proceedings. In these circumstances the prospect of there being inconsistent judgments or findings is entirely speculative. As Mr Stewart QC submitted, in the absence of any decision in the WASC Proceedings, consideration of Anshun estoppel is somewhat premature.

71    An important consideration is that MMB was not and is not a party to the WASC Proceedings. Whilst an Anshun estoppel may arise in relation to a claim which could have been brought in the earlier proceedings against a third party to them: Deep Investments v Casey (2018) 125 ACSR 564, 599 [173]; ACCC v Swishette Pty Ltd [2018] FCA 55 [113]: such an issue usually arises where a plaintiff has proceeded against one party but failed, and then commenced new proceedings against an alternative defendant which had not been joined to the original action. In those cases the potential for conflicting judgments is obvious and the unreasonableness of not joining all potential defendants in the one action may loom large.

72    However, different evaluative considerations must necessarily apply where the complaint is that a claim was not brought in the original proceedings by way of a cross-claim against a third party by a defendant. In such circumstances the authorities identify that any unreasonableness in not joining the third party should amount to an abuse of process before denying the plaintiff its entitlement to litigate its valid claim in the most convenient manner to it: Redowood Pty Ltd v Link Market Services Pty Ltd (formerly known as ASX Perpetual Registrars Ltd) [2007] NSWCA 286 [45], [50]. In that case, it was observed that there is no inveterate rule that a litigant must bring all its claims in relation to a matter in the one proceedings thereby complicating the litigation and rendering it more expensive for all involved. In Solak v Registrar of Titles (2011) 33 VR 40, 54 - 55 [69], Warren CJ (Neave JA agreeing) recognised that a similar position existed in the United Kingdom. The Chief Justice said:

The English Court of Appeal has expressed a similar sentiment. In Aldi Stores Ltd v WSP Group Plc, [[2008] 1 WLR 748] Thomas LJ stated [at 764, [25].]:

[T]here is a real public interest in allowing parties a measure of freedom to chose whom they sue in a complex commercial matter and not to give encouragement to bringing a single set of proceedings against a wide range of defendants or to complicate proceedings by cross-claims against parties to the proceedings. That freedom can and should be restricted by appropriate case management.

73    The Chief Justice went on to explain (at 55 [70] – [71]):

70.    All of the Australian cases to which the court was referred where a defendant who was not a party to the first proceeding was able to successfully rely on Anshun estoppel in the second proceeding involved the estopped plaintiff attempting to assert in the second proceeding some proposition inconsistent with the judgment in the first proceeding. Even if such a collateral attack by the plaintiff is not a necessary precondition for Anshun estoppel, its absence is a significant factor militating against a finding that Anshun estoppel has arisen.

71.    It is not necessary in this case to decide whether special principles or a different test applies where the person asserting Anshun was not a party to the first proceeding. It is clear that the test is at least as strict as the test applicable in a case where the parties are the same. Applying that test, I am satisfied that no Anshun estoppel arises in this case.

74    It follows that a conclusion that it was unreasonable for the plaintiff not to join the third party in the earlier proceedings is neither conclusive nor of such a nature that the latter proceedings should necessarily be regarded as an abuse of process: Ekes v Commonwealth Bank of Australia (2014) 313 ALR 665, 698 [131] – [132] per Bathurst CJ (Beazley P agreeing).

75    Mr Stewart QC also referred to the possibility of MMB raising a claim of “abuse of process” in relation to the proceedings on the basis that it raises a similar issue of law in a subsequent proceeding. The nature of this kind of abuse of process was considered by the High Court in Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507, 518 – 519 [25] – [26], where the plurality observed:

25    Abuse of process, which may be invoked in areas in which estoppels also apply, is inherently broader and more flexible than estoppel. Although insusceptible of a formulation which comprises closed categories, abuse of process is capable of application in any circumstances in which the use of a court’s procedures would be unjustifiably oppressive to a party or would bring the administration of justice into disrepute. It can for that reason be available to relieve against injustice to a party or impairment to the system of administration of justice which might otherwise be occasioned in circumstances where a party to a subsequent proceeding is not bound by an estoppel.

26    Accordingly, it has been recognised that making a claim or raising an issue which was made or raised and determined in an earlier proceeding, or which ought reasonably to have been made or raised for determination in that earlier proceeding, can constitute an abuse of process even where the earlier proceeding might not have given rise to an estoppel. Similarly, it has been recognised that making such a claim or raising such an issue can constitute an abuse of process where the party seeking to make the claim or to raise the issue in the later proceeding was neither a party to that earlier proceeding, nor the privy of a party to that earlier proceeding, and therefore could not be precluded by an estoppel.

76    As with Anshun estoppel, this principle can extend to those cases where a party seeks to relitigate against a party an issue which has already been determined in earlier proceedings against as between different parties: Rippon v Chilcotin Pty Ltd (2001) 53 NSWLR 198. However, the weight of authority, albeit not all, suggests that for the subsequent proceedings to constitute an abuse of process, the issue which is sought to be relitigated was one which has been determined against the putative abuser.

77    Some guidance to the application of the concept of “abuse of process” in circumstances involving the prior litigation of an issue was given by Gyles CJ in State Bank of New South Wales Ltd v Stenhouse (1997) Aust Torts Reports 81-423, 64,089, where the Chief Justice said:

It is apparent from this brief review of the decisions that whether proceedings are, or an aspect of proceedings is, an abuse of process because a party seeks to relitigate an issue already decided depends very much on the particular circumstances. The guiding considerations are oppression and unfairness to the other party to the litigation and concern for the integrity of the system of administration of justice, and amongst the matters to which regard may be had are –

(a)     the importance of the issue in and to the earlier proceedings, including whether it is an evidentiary issue or an ultimate issue;

(b)     the opportunity available and taken to fully litigate the issue;

(c)     the terms and finality of the finding as to the issue;

(d)     the identity between the relevant issues in the two proceedings;

(e)     any plea of fresh evidence, including the nature and significance of the evidence and the reason why it was not part of the earlier proceedings; all part of –

(f)     the extent of the oppression and unfairness to the other party if the issue is relitigated and the impact of the relitigation upon the principle of finality of judicial determination and public confidence in the administration of justice; and

(g)     an overall balancing of justice to the alleged abuser against the matters supportive of abuse of process.

78    The application of these principles requires a consideration of the precise issue in question and the circumstances surrounding the reasons why it was not advanced in the prior proceedings, including the ability of the alleged abuser to advance it on that occasion. Further it must be kept steadily in mind that staying a claim on this ground involves preventing a party seeking redress before the Court in respect of a claimed right which, prima facie, it is the obligation of the court to determine. That starting point of any consideration carries with it the usual reluctance of courts to exclude persons with valid claims from litigating them. It is, perhaps, for this reason that it is accepted that the power to stay a proceeding should be exercised with caution and only in the most exceptional or extreme case: Walton v Gardiner (1993) 177 CLR 378, 392.

Whether MSI’s proceedings against MMB would inevitably be stayed

79    With the above principles in mind it is appropriate to turn to the question of whether, in the circumstances of the present case, it would be inevitable that MSI’s proceedings would be stayed on an application by MMB once it is served. In answering that question the court proceeds upon the material before it with full awareness that the party on whom the process is to be served has not had the opportunity to defend the application. It follows that a conclusion that the proceedings would not “inevitably” be stayed would be irrelevant on the hearing of any future application to set aside service or to stay the proceedings. The hearing of any such application is likely to be heard on different material.

80    Nevertheless, on the evidence currently before the Court it is not possible to conclude that the proceedings would inevitably be stayed on Anshun estoppel principles or by reason of an abuse of process.

The nature of the WASC Proceedings

81    The essential issue of the WASC Proceedings is whether the Sellers validly terminated the MSI Sale Agreement on 22 November 2017, consequent upon the alleged non-satisfaction of the Finance Condition. That issue turned in part on the identification of the date by which the condition had to be satisfied. That was not a mere matter of construction, but required consideration of whether the Sellers were estopped by reason of their representations from contending other than that the date was 25 November 2017 and, conversely, whether MSI was estopped from denying to the Sellers that the date was 15 November 2017. A related claim was whether the Sellers had made material falsehoods in relation to their entitlement to terminate the agreement. A second issue was, if the date for the satisfaction of the conditions precedent in accordance with the MSI Sale Agreement was 25 November 2017, did the parties agree to change it to 22 November. A third issue was whether the Sellers and Receivers were in breach of their obligations under the MSI Sale Agreement such that they were not entitled to exercise any right to terminate the agreement due to non-satisfaction of the conditions precedent. As between the plaintiffs and MSI there are competing allegations of misleading or deceptive conduct relating to the parties’ rights inter se under the agreement.

Overlap with the Federal Court proceedings

82    The general nature of the proceedings in this Court are set out above and need no repeating. However, some parts of MSI’s statement of claim are a little opaque. In particular, it is not entirely clear whether it accepts that the MSI Sale Agreement was validly terminated by the Sellers although that seems to be assumed as otherwise the conduct alleged of MMB in relation to the conditions precedent would not be causative of loss. This appears to be somewhat inconsistent with MSI’s defence in the WASC Proceedings to the effect that the alleged termination of the agreement was neither valid nor efficacious.

83    In MSI’s written submissions it is said that, “The Applicant does not make any allegations in this proceeding that are inconsistent with those it made in the WASC Proceedings.” Whilst that may be technically true, in substance, MSI’s position in each matter is not entirely coherent. This is particularly so in relation to the issue of termination. In the WASC Proceedings it alleges that the termination of the agreement by the Sellers and the receivers was ineffective although, in the current proceedings against MMB, the claim appears to be founded upon the tacit assumption that MMB’s conduct prevented MSI from satisfying the conditions precedent with the result that the Sellers became entitled to and did terminate the agreement. On the other hand, that is not the entirety of MSI’s claims which are broadly expressed and appear to encompass assertions that the Receivers, the Sellers and MMB repudiated the agreement thereby providing it with an alternative path to the claim for damages. In addition, by reliance on substantially the same facts, claims are made for damages consequent upon unconscionable conduct which, so it is alleged, breached s 21 of the ACL.

84    There are other instances of overlap between the two actions. In particular, in the current proceedings there are allegations that the Sellers and the Receivers breached the terms of the MSI Sale Agreement by dealing with third parties and that they engaged in misleading or deceptive or unconscionable conduct. Not dissimilar allegations appear in the WASC Proceedings. However, the allegations against the Sellers and the Receivers which underpin the alleged derivative liability of MMB, are far more extensive in the current action. In particular, the causes of action on which MSI rely to render MMB liable for the loss extend beyond those which may be affected or impacted by the findings in the WASC Proceedings. In the result MSI’s submission that, even if the issues in the WASC Proceedings wholly went against it it would nevertheless be able to pursue the entire relief sought in the Originating Process in this Court, should be accepted.

85    Perhaps the most significant factor in relation to this issue is that, as yet, there has been no decision in the WASC Proceedings. It may be that there is the potential for inconsistent determinations as to whether the MSI Sale Agreement was terminated or whether the Sellers and Receivers engaged in particular conduct, but that presently remains more a matter of speculation. There may be no necessary conflict if the Sellers and the Receivers are successful in the WASC Proceedings and, even if they are not, it is possible that the causation issue in the current proceedings can exist despite that finding.

86    To the extent that there existed potential for conflicting judgments between the two actions, it is speculative and, in any event, insufficient to found an estoppel or an abuse of process.

MMB is not a party to the WASC Proceedings

87    It is very significant that MMB is not a party to the WASC Proceedings. It is not useful to speculate as to the cause of its absence from that action or whether that will impose an insurmountable hurdle to the plaintiffs’ success in it. Rather, the point is that the plaintiffs did not, rightly or wrongly, regard MMB as a necessary party on the basis that it was somehow unaffected by the issues they raised. In such circumstances, it is difficult to see how it was inevitably unreasonable for MSI not to join it for the purposes of commencing a cross-claim against it. The issues which would have been involved in any such cross-claim, as they now appear from the current statement of claim, would not have significantly overlapped with those otherwise in dispute in the WASC Proceedings, save in relation to the issue of the termination. The plaintiffs in the WASC Proceedings would have had a substantial basis for complaining that the bringing of a cross-claim in their action would overly complicate it and involve them in extensive and expensive additional work.

88    The fact that MMB was not a party to the WASC Proceedings has the consequence that it is difficult to conclude that the bringing of the current proceedings oppresses it or is otherwise unfair to it. It has not been and will not be party to a determination which may be inconsistent with the claims which are now made against it and it has not been troubled by the expense of the WASC Proceedings.

Reasonableness of not joining MMB

89    Determining whether it was unreasonable for MSI to have failed to join MMB as a cross-defendant in the WASC Proceedings requires an intense factual analysis of the circumstances in which MSI found itself as defendant in that action. In that respect, the evidence discloses that the facts on which the claims now pursued against MMB are based did not all become apparent to those advising MSI until late in the course of the WASC Proceedings. The relevant information included documents obtained on subpoena and on discovery. In other words, until part of the way through the WASC Proceedings, MSI was not aware of the availability of the claim which it now wishes to pursue. The third affidavit of Mr Stephen Russell on which the applicants relied on this application sets out the circumstances in which MSI acquired knowledge of those facts. In effect he deposes that by the time MSI became aware of its causes of action against MMB, pursuing them in the WASC Proceedings would have interfered with the orderly conduct of that litigation. Had MMB been joined, the interlocutory steps in that action would have to have been started again.

90    The evidence also discloses that MSI sought the expeditious resolution of the WASC Proceedings and agitated for a trial as soon as possible. Further, the relief sought in that action was limited to the issue of whether there had been a valid termination of the MSI Sale Agreement and, for the majority of time during the interlocutory steps, it appeared to MSI that if it failed in that action it would have no claim against any other party. On that basis, there was no reason why it would have considered commencing proceedings against MMB. By the time that its claims against MMB became apparent it was, objectively speaking, too late to attempt to commence a cross-claim and there was a very real prospect that any application for leave to do so would have failed.

91    The evidence further establishes that at the time when MSI ascertained that it may have had a cross-claim against MMB, it was not in a financial position to pursue it. In particular, it would not have been able to provide security for the costs of the action if that were sought. MSI has subsequently obtained litigation funding in relation to the claim which it now seeks to pursue.

92    It follows that, on the material presently available, the circumstances of the WASC Proceedings do not suggest that it was unreasonable for MSI not to pursue a cross-claim against MMB in that action once the possible cause of action became apparent to it.

Conclusion as to whether Anshun estoppel or abuse of process requires the exercise of the discretion

93    From the foregoing, it is not possible to conclude that it would be inevitable that the proceedings against MMB would be stayed on Anshun estoppel grounds or as an abuse of process if service out of the jurisdiction were permitted. The several factors discussed, considered alone or collectively, do not suggest that a claim based on either principle would inevitably succeed. It follows that neither of those matters provide a basis for exercising a discretion to refuse leave to serve the proceedings in Brazil.

Claims based on inferences against professional persons

94    In its correspondence Clayton Utz, for the Receivers, has suggested that leave to serve the proceedings out of the jurisdiction should be refused as a matter of discretion because the claim is based upon serious allegations concerning a professional person. The alleged foundation for this submission was said to arise from the decision in Perdaman Chemicals and Fertilisers Pty Ltd v ICICI Bank Ltd [2013] FCA 175 (Perdaman Chemicals v ICICI) which was also concerned with an application for service of proceedings out of the jurisdiction. In his reasons in that case, McKerracher J observed that a number of serious allegations had been made against third parties to the proceedings (who had in fact intervened on the application for service out), and that their presence warranted the exercise of the discretion to refuse the application. His Honour said at [57]:

… The Court should not, in my view, exercise its discretion to allow the service abroad of court process involving serious and multiple allegations against the Interveners in circumstances where Perdaman does not seek relief in this Court against them and where the allegations are freestanding and not material to the case sought to be pleaded against the Bank. As the Interveners have had success on that point, leave to intervene will be granted.

95    In its correspondence, Clayton Utz alleged that similar circumstances existed in the present case where several allegations are made against Mr Tucker, one of the receivers. However, the observations of McKerracher J have no relevance to the present matter. Here, whilst relief is not sought against Mr Tucker, the allegations against him are germane and relevant to the claims against MMB for inducing the breaches of the MSI Sale Agreement by the Sellers and Receivers as well as the claim in respect of MMB’s involvement in their contravention of s 21 of the ACL. In the current pleading Mr Tucker is alleged to have been involved in the campaign to sell the Assets the subject of the MSI Sale Agreement and his dealings with Mr Mundim of MMB are critical to the allegations which are advanced against MMB. There is nothing in the pleading which appears to be gratuitous, irrelevant or unnecessary and there is nothing in the letter from Clayton Utz which suggests that to be the case. Indeed, if the allegations in the statement of claim against Mr Tucker are established, prima facie there would appear to be a not insignificant claim for the relief sought to the extent that it relied upon his conduct. That said, it must be again stressed that the allegations have not been responded to, MMB has not yet had the opportunity to adduce evidence concerning them, and nor has it made any submissions. When those events occur, a very different picture may well emerge. Nevertheless, for present purposes the point to be made is that the allegations in respect of Mr Tucker’s conduct are far from the irrelevant and gratuitous ones considered in Perdamon Chemicals v ICICI.

96    The decision in that case provides no basis for exercising the discretion against granting leave to serve out.

Breach of the rule in Hearne v Street

97    In the course of the hearing of the application, Mr Stewart QC spent a good deal of time dealing with a further matter raised by Clayton Utz. It concerned the possible unintentional contravention of the implied undertaking by legal practitioners not to use documents obtained as a result of compulsory curial processes in the course of litigation, for unrelated purposes. Most recently the principle was articulated by the High Court in Hearne v Street.

98    The background to this issue is that since 2017, MSI has been involved in six pieces of litigation, including the present, in relation to the MSI Sale Agreement and its termination. Mr Stephen Russell of the firm “Russells Law” has acted for MSI in all of them. It can be inferred that this complex litigation and, in particular, the WASC Proceedings, involved the discovery of substantial numbers of documents.

99    Prior to the commencement of the WASC Proceedings, MSI had foreshadowed the commencement of proceedings against the Receivers, MBN, MBI, MMB and Appian, as well as related parties. It had prepared and obtained leave to issue, but it had not issued or served, those proposed proceedings which were articulated in a draft statement of claim (DSOC). In the course of the WASC Proceedings, MSI gave an undertaking to the Receivers, albeit denying that it was required to do so, that it would not institute any proceedings in relation to any cause of action which it had pleaded in the DSOC without giving appropriate notice.

100    On 13 July 2021, Russells Law sent a letter to Clayton Utz, the Receivers’ solicitors, attaching a draft originating application and statement of claim, the latter apparently in substantially the same form as the DSOC, and advising that MSI intended to issue them in the near future.

101    On 2 August 2021, Clayton Utz wrote to Russells Law noting that some of the information and documents referred to in the redrafted DSOC appeared to have been derived from documents which had come into MSI’s possession in the course of the WASC Proceedings and that no release from the implied undertaking had been obtained. Clayton Utz sought to be informed as to how the information and documents had come into MSI’s possession.

102    By an email of the following day Mr Russell responded as follows:

Dear colleagues

By way of interim response, it appears that some of the documents referred to in the draft pleading were not tendered in evidence. This is a matter of great regret. The draft will not be filed in that form.

We will either omit the relevant documents or seek leave of the court to use them; and if MSI adopts the latter course, such an application will of course be made on reasonable notice to your clients.

Either way, we will not file the document in its current form without further notice to your clients.

We apologise unreservedly for the inconvenience caused by these oversights and thank you for the courtesy of raising the matters with us, without seeking injunctive relief.

103    Subsequently, a further draft statement of claim was delivered to Clayton Utz under cover of a letter of 30 September 2021. The letter explained that the new pleading deleted any reference to the documents or information which may have been derived from any documents which were obtained during the course of the WASC Proceedings and which were not tendered in evidence in the course of the trial.

104    In its letter of 3 November 2021, Clayton Utz nevertheless alleged that documents obtained in the course of WASC Proceeding had been used for preparing the initial DSOC and that this was in breach of the implied undertaking. It added that, by issuing the DSOC and stating an intention to institute proceedings in that form, Russells Law and MSI had breached the implied undertaking. The breach first occurred, according to the letter, when the DSOC was sent to Clayton Utz. The letter thereafter provided:

We urge you to give consideration to the consequences of the breaches which we refer to above, and in particular whether your firm or MSI may be heard in the Federal Court Proceeding until such consequences have been remedied: Evans v Citibank Ltd [2000] NSWSC 1017; Little v Lewis [1987] VR 798 at 804-5; Slea Pty Ltd v Connective Services Pty Ltd (2017) 53 VR 161 at [31]-[33] and [50].

105    The letter did not elucidate the expression “until such consequences have been remedied”.

106    It seems that the essence of the Receivers’ concern is that MSI delivered to their solicitors a draft pleading which they indicated they intended to issue and which utilised information or documents that had been obtained from them in the course of the WASC Proceeding. It is said that this amounted to a breach of the implied undertaking. However, neither the originating application nor the DSOC in that form were filed. Rather a new pleading was prepared which did not rely on the allegedly protected information and the current action was commenced solely in reliance on it. As a result there was no disclosure of any protected document or information to any third party. At most, the breach of the undertaking, if there was one, was the previous proffering of the DSOC to the entity whose rights to confidentiality might have been infringed if it had been filed. In such circumstances it is apparent that no damage has been suffered by the Receivers as a result of the potential unintended breach and none has been suggested.

107    In its letter of 3 November 2021, Clayton Utz further asserted that the decision in Slea Pty Ltd v Connective Services Pty Ltd (2017) 53 VR 161, 168 – 169 [31] – [33], 174 [50] (Slea Pty Ltd v Connective Services Pty Ltd), had relevance to the present circumstances, although precisely how was not identified. In that case a party had unintentionally used documents obtained in earlier proceedings against the defendant to commence fresh proceedings without having obtained relief from the implied undertaking. The plaintiffs’ application for leave nunc pro tunc to use the documents was resisted by the defendants who claimed that the application should not be entertained unless and until the plaintiffs had purged their contempt by making an unreserved apology to the Court, paying any damages suffered by the defendants occasioned by the breach, and paying their costs of the application to the Court. Judd J recognised that an incident of a breach of the implied undertaking was that a court may refuse to entertain an application by the party in breach until they have purged their contempt. However, the rule was neither invariable nor inflexible. His Honour referred to the observations of Lord Denning in Hadkinson v Hadkinson [1952] P 285, 298 who identified the modern form of the rule in the following manner:

Those cases seem to me to point the way to the modern rule. It is a strong thing for a court to refuse to hear a party to a cause and it is only to be justified by grave considerations of public policy. It is a step which a court will only take when the contempt itself impedes the course of justice and there is no other effective means of securing his compliance. ... extreme measures are sometimes necessary to preserve men’s rights, that is, if no other pertinent remedy can be found. ... Applying this principle I am of the opinion that the fact that a party to a cause has disobeyed an order of the court is not of itself a bar to his being heard, but if his disobedience is such that, so long as it continues, it impedes the course of justice in the cause, by making it more difficult for the court to ascertain the truth or to enforce the orders which it may make, then the court may in its discretion refuse to hear him until the impediment is removed or good reason is shown why it should not be removed.

The present case is a good example of a case where the disobedience of the party impedes the course of justice. So long as this boy remains in Australia it is impossible for this court to enforce its orders in respect of him.

108    In his reasons Judd J specifically recognised the changing nature of litigation and, in particular, the far greater degree of supervision by Courts over interlocutory processes, including discovery. In the case before him there was no flagrant breach of the implied undertaking and no step was required to be taken to rectify the state of affairs before justice could be achieved between the parties. The impugned conduct merely facilitated the commencement of the second proceedings which would continue under the Court’s supervision. Although he accepted (at 172 [45]) that the “requirement that a party found in contempt of an order or undertaking purge the contempt, before any application may be entertained, is plainly justified where it is necessary to do justice between the parties”, that did not apply to the case before him where the grant of leave would negate the existence of any contempt. In the circumstances, his Honour held that the plaintiff was not required to purge its contempt before the application for leave could be heard.

109    The observations of Judd J are persuasive on this application. The blanket rule as may have previously existed is no longer useful in the context of closely managed litigation. Although here the application is not one to be relieved from the implied undertaking, which is owed to the Supreme Court of Western Australia, the proceedings now sought to be advanced do not rely on information or documents in respect of which any implied undertaking existed. Whilst the previous DSOC may have done so, the amendments made to it remove any offending use of that material. It follows that there is no connection between any previous breach of the implied undertaking and the current action. No step is required to be undertaken before justice can be achieved between the parties.

110    In addition, unlike the circumstances in Slea Pty Ltd v Connective Services Pty Ltd, here there has been no finding of contempt arising from a breach of an implied undertaking. It may well be that the reference to information or documents in the DSOC may have occurred in breach of the undertaking, but no finding to that effect has been made. The issue of whether there was, in fact, any breach is particularly acute where the Receivers allege that it occurred by giving them the DSOC which relied on information or documents to which the undertaking attached. It is well established that the underlying rationale for the implied undertaking is the protection of the confidentiality in the documents or information for the benefit of the person who provided them: Science Research Council v Nassé [1980] AC 1028, 1065, 1067 per Lord Wilberforce. As was observed by the majority in Hearne v Street at 158 – 159 [107]:

The expression “implied undertaking” is thus merely a formula through which the law ensures that there is not placed upon litigants, who in giving discovery are suffering “a very serious invasion of the privacy and confidentiality of [their] affairs”, any burden which is “harsher or more oppressive … than is strictly required for the purpose of securing that justice is done”. …

The majority’s subsequent discussion discloses the object of the implied undertaking is the protection of the privacy and confidential information of persons who are required to disclose documents for the purposes of litigation. That being so, it is possibly arguable that in order for a breach of the undertaking to occur the use of the document or information would necessarily have to involve a disclosure to a third party. Merely to aver to another an allegation based on a document or information which that other provided in the course of litigation, does not self-evidently result in a use which the implied undertaking protects. Were it otherwise, a letter by a solicitor to the opposing party advising that an application will be made to be relieved from the implied undertaking so as to commence an action against that party based on information gleaned from discovered documents, would likewise involve a breach.

111    As this important issue arose in an unusual way and there was no contradictor before the Court in relation to it, it is not appropriate to reach any final conclusion on it. However, on the presently available material, it is not apparent that there has necessarily been any breach of the implied undertaking. The privacy or confidentiality in the information or documents has not been violated.

112    Even if a breach has occurred, it should be recognised that Mr Russell acted with the utmost propriety and professionalism when its possibility was called to his attention. Without questioning the assertion by Clayton Utz, he apologised for any breach and indicated that no action would be taken which might disclose the information or documents which were subject to the implied undertaking. It was indicated that the DSOC would not be filed. It was further indicated that the pleading would be redrafted to ensure that it did not refer to the documents or information which had not been tendered in evidence in the course of the WASC Proceedings. Again, an unreserved apology was given for the inconvenience caused. This conduct strongly suggests that, if there was a breach of the undertaking, it was unintentional. The immediate remediating actions of Mr Russell had the consequence that, prima facie, no damage was caused to the Receivers. As has been mentioned, it has not been alleged by Clayton Utz that any damage was sustained.

113    It is also necessary to keep in mind that it is not alleged that the proceedings which MSI seek to serve overseas is based on information or documents which have been used in breach of the implied undertaking. The redrafted statement of claim is not said by Clayton Utz to contain any such information. In those circumstances to refuse MSI’s entitlement to make the application for service out would amount to the prevention of the conduct of litigation on the basis that MSI may have breached the implied undertaking arising from other litigation which has no present relevance to the present proceedings. It is far from apparent that the refusal to allow the application is necessary to do justice between the parties in this or other litigation.

114    At present there has been no application to the Western Australian Supreme Court by Russells Law or MSI for the purging of the contempt, if it occurred. Any such application would need to be made in accordance with the principles in United Telecasters Sydney Ltd v Hardy (1991) 23 NSWLR 323, 340. It may be that a cautionary application or that an application for leave nunc pro tunc to use the documents will be made in the future, but that is irrelevant for present purposes.

115    It should be acknowledged that it is essential and critical for legal practitioners to be vigilant to maintain the confidentiality of documents obtained in the course of litigation and to act in accordance with the implied undertaking. This is vital to the continued expectation of Courts that documents will be produced in the course of litigation so as to ensure that justice can be achieved between disputing parties. Nevertheless, anyone with an understanding of the pressures of practice can appreciate how easily an inadvertent breach might occur. See the observations of Hamilton J in Evans v Citibank Limited [2000] NSWSC 1017 [4]. In complex litigation where documents are obtained from various or sundry sources and some are tendered in the course of a trial but some not, practitioners may lose track of those which remain subject to the undertaking. That can be particularly so in circumstances such as the present where several pieces of litigation have occurred. This does not excuse any breach of the implied undertaking although it may explain why it happened. On the other hand, it emphasises that in modern litigation great care needs to be taken to accurately record the documents obtained and their use so as to preserve the confidentiality of those to which the implied undertaking attaches.

116    In this case, there is nothing arising from the circumstances of the possibility of a breach of the implied undertaking given in the WASC Proceedings which necessitates the exercise of the discretion not to permit service of these proceedings overseas.

Relief

117    It follows that the applicant has satisfied the requirements for an order permitting it to serve the proceedings in Brazil on MMB and there are no circumstances which would justify the exercise of the discretion to refuse leave. The orders set out at the commencement of these reasons should be made.

Associate:    

Dated:    30 May 2022