Thirteenth Corp Pty Ltd v State (with Addendum dated 2 August) [2006] FCA 979 (2 August 2006)

THIRTEENTH CORP PTY LTD v SCOTT EUGENE STATE & ORS

VID 106 of 2006

JESSUP J
2 AUGUST 2006
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 106 of 2006

BETWEEN:	THIRTEENTH CORP PTY LTD (ACN 007 380 449) APPLICANT
AND:	SCOTT EUGENE STATE FIRST RESPONDENT JOSEPH MICHAEL ZIKA SECOND RESPONDENT BEVEN EDWARD SCHWAIGER THIRD RESPONDENT LEO MARTIN GULLEY FOURTH RESPONDENT
JUDGE:	JESSUP J
DATE OF ORDER:	2 AUGUST 2006
WHERE MADE:	MELBOURNE

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

PRACTICE AND PROCEDURE – abuse of process – multiple proceedings – previous proceedings in State court – same subject matter – previous proceedings terminated by default order – whether abuse of process to commence proceedings in Federal Court

PRACTICE AND PROCEDURE – costs – security for costs

Federal Court of Australia Act 1976 (Cth), s 56
Trade Practices Act 1974 (Cth), ss 51A, 52, 75B, 82, 87
Fair Trading Act 1987 (NSW), ss 42, 68, cl 11D of Sch 5
Corporations Act 2001 (Cth), ss 588G, 588M

Federal Court Rules, O 28 r 3(1), O 28 r 5(1)(b)

Baines v State Bank of NSW (1985) 2 NSWLR 729 cited
Bell Wholesale Co Pty Ltd v Gates Export Corporation (No 2) (1984) 2 FCR 1 applied
Clout v Klein [2001] QSC 401 considered
Deangrove Pty Ltd (Rec & Mgrs Aptd) v Commonwealth Bank of Australia [2001] FCA 173; (2001) 108 FCR 77 considered
Equity Access Limited v Westpac Banking Corp (1989) ATPR 40-972 applied
Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404 cited
Hart v Hall & Pickles Ltd [1969] 3 All ER 291 cited
Hunter v Chief Constable of the West Midlands Police [1982] AC 529 cited
Moore v Inglis (1976) 9 ALR 509 distinguished
Pople v Evans [1969] 2 Ch 255 cited
Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589 considered
Rippon v Chilcotin Pty Ltd [2001] NSWCA 142; (2001) 53 NSWLR 198 cited
Samuels v Linzi Dresses Ltd [1981] QB 115 cited
Sea Culture International Pty Ltd v Scoles (1991) 32 FCR 275 cited
Williams v Hunt [1905] 1 KB 512 distinguished
Williams v Spautz [1992] HCA 34; (1992) 174 CLR 509 considered
Wilson v Commonwealth of Australia [1999] FCA 1308 cited

THIRTEENTH CORP PTY LTD v SCOTT EUGENE STATE & ORS

VID 106 of 2006

JESSUP J
2 AUGUST 2006
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 106 of 2006

BETWEEN:	THIRTEENTH CORP PTY LTD (ACN 007 380 449) APPLICANT
AND:	SCOTT EUGENE STATE FIRST RESPONDENT JOSEPH MICHAEL ZIKA SECOND RESPONDENT BEVEN EDWARD SCHWAIGER THIRD RESPONDENT LEO MARTIN GULLEY FOURTH RESPONDENT
JUDGE:	JESSUP J
DATE OF ORDER:	2 AUGUST 2006
WHERE MADE:	MELBOURNE

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 106 of 2006

BETWEEN:	THIRTEENTH CORP PTY LTD (ACN 007 380 449) APPLICANT
AND:	SCOTT EUGENE STATE FIRST RESPONDENT JOSEPH MICHAEL ZIKA SECOND RESPONDENT BEVEN EDWARD SCHWAIGER THIRD RESPONDENT LEO MARTIN GULLEY FOURTH RESPONDENT

JUDGE:	JESSUP J
DATE:	2 AUGUST 2006
PLACE:	MELBOURNE

1 By notice dated 14 April 2006, the first and second respondents move the Court for orders that –

2 This proceeding concerns certain events in 1999 and 2000 in which the applicant and a company, since placed into liquidation, called E M Mactec Pty Ltd ("Mactec") participated. Four of the directors of Mactec at the time are the respondents. Mactec is not a respondent. I shall later set out in more detail the applicant’s claims, but broadly they are that the respondents misled it in relation to a loan of $500,000 which it made to Mactec in 2000. The loan was not repaid. The applicant relies on ss 52, 75B and 82 of the Trade Practices Act 1974 (Cth) and on ss 42 and 68 of the Fair Trading Act 1987 (NSW) and claims damages, interest and costs.

3 At the hearing of this motion, I was informed by Mr Parncutt, who appeared for the applicant, that the third and fourth respondents have not yet been served. They did not participate in the hearing. In what follows, unless the context indicates otherwise, when I refer to the "respondents", I mean the first and second respondents only.

4 It will be convenient if I first provide a broad outline of the events of 1999 and 2000 which gave rise to this, and to certain other, proceedings. Although most of these events have not been proved as a matter of evidence, they either form the basis of the applicant’s allegations or were set out in affidavits filed in support of, or in opposition to, the motion, on which there was no cross examination. To the extent referred to below, unless otherwise stated, the facts appear to be uncontroversial.

5 As I have indicated, the respondents were two of the directors of Mactec in 1999 and 2000. In July 1999, Mactec and certain other companies entered into an agreement called a landfill project operation agreement ("the landfill agreement"). It is not suggested that the applicant had anything to do with this transaction. The landfill agreement did, however, become relevant to the applicant in April 2000, when it lent the sum of $500,000 to Mactec, pursuant to an agreement ("the loan agreement") which contained the following provision (cl 3.1 thereof):

6 In the mortgage to which this provision refers ("the landfill mortgage"), the "mortgaged property" was defined as "all of the present and future right, title and interest of the mortgagor [Mactec] as are comprised in, or arise under, the landfill agreement". Clause 2.1 of the mortgage then provided:

7 The $500,000 lent under the loan agreement should have been repaid on 23 May 2000. It was not, and shortly thereafter Mactec went into liquidation.

8 On 18 April 2002, the applicant commenced an action in the Supreme Court of Victoria (No 5226 of 2002) ("the Victorian proceeding") against five individuals, including the four respondents to the present proceeding. In its Statement of Claim in the Victorian proceeding, the plaintiff (ie the applicant in the present proceeding) referred to the $500,000 loan which it made to Mactec in April 2000 and alleged that, at the time when that loan ought to have been, but was not, repaid in May 2000, Mactec was insolvent. Alternatively, it was alleged that Mactec became insolvent by incurring the debt constituted by the non-repayment of the loan, or that there were reasonable grounds for suspecting that Mactec was, or would become, insolvent. It was alleged that the defendants (including all four respondents in the present proceeding) were, at the time, directors of Mactec, and in that capacity permitted Mactec to incur the debt whilst insolvent in contravention of s 588G of the Corporations Act 2001 (Cth). The Victorian proceeding had the object of recovering compensation against the directors pursuant to s 588M(3) of that Act which the plaintiff quantified at $643,836, being the $500,000 which was lent and not repaid, plus interest. It was also alleged by the plaintiff, and substantially admitted by the first and second defendants (the respondents here) that, in June 2000, an administrator was appointed by Mactec and that, in July 2000, a meeting of creditors of Mactec resolved that Mactec be wound up under s 439C(c) of the Corporations Act.

9 Various interlocutory steps were taken in the Victorian proceeding down to about mid-2004, none of which needs to be mentioned for present purposes. In June 2004, the proceeding was fixed for trial in October 2004. However, in July 2004, solicitors for the first and second defendants wrote to the plaintiff’s solicitors seeking security for their costs, but referring also to a basis upon which it was said that the action would fail, namely, that the debt upon which the plaintiff relied was not "wholly or partly unsecured" as required by s 588M(1)(c) of the Corporations Act. This correspondence was followed by a summons, on behalf of these defendants, in which they sought leave to amend their Defence, they sought to have the proceeding struck out under r 23.01 of the Supreme Court Rules and, alternatively, they sought the security for costs to which their correspondence had referred. When the matter came on before Mandie J, these defendants’ argument under r 23.01 was, or at least included, a proposition to the effect that the loan to Mactec in April 2000 was secured by the landfill mortgage and, therefore, that the plaintiff could not satisfy the requirement arising under par (c) of s 588M(1) of the Corporations Act. In his judgment given on 1 September 2004, Mandie J expressed the provisional view that the arguments of these defendants were quite strong but, since the matters were, in his Honour’s view, of some complexity and difficulty, he declined to strike out the action under r 23.01.

10 Mandie J then turned to consider the application of the first and second defendants for security. His Honour referred to various financial transactions involving the plaintiff and a director of the plaintiff, and concluded:

His Honour observed that the shareholders of the plaintiff had not disclosed their financial position, and also took into account "the real difficulties facing the plaintiff in this proceeding". In the result, Mandie J made an order that the plaintiff provide security to these defendants in the sum of $114,000. His Honour also ordered that the proceeding be stayed, and the October trial date be vacated unless the security were provided on or before 9 September 2004. That did not occur, in consequence of which, by the operation of Mandie J’s order, the Victorian proceeding was stayed.

11 Nothing further appears to have happened, at least relevantly here, in the Victorian proceeding until August 2005, when the first and second defendants sought to have the action dismissed under r 62.04 of the Supreme Court Rules. In response, the plaintiff applied for an extension of time to provide the security for costs ordered by Mandie J in September 2004. On 23 September 2005, Mandie J ordered that, unless on or before 9 February 2006 the plaintiff provided security in the sum of $114,000, the proceeding stand dismissed. That security was not provided by 9 February 2006, but before reaching that date, it is necessary to refer to intervening developments in this Court.

12 On 16 January 2006 the applicant commenced a proceeding against Mactec (in liquidation) in this Court: NSD 69 of 2006 ("the NSW proceeding"). In the NSW proceeding the applicant sought to set aside the landfill mortgage pursuant to ss 266 and 500(2) of the Corporations Act. Since Mactec was in liquidation, the leave of the Court was necessary to commence this proceeding. In its Statement of Claim in the NSW proceeding, the applicant referred to the landfill agreement, to the loan agreement and to the landfill mortgage. It also alleged that it was a fundamental term of, and a condition precedent to the operation of, the landfill agreement that a further agreement, called a waste supply and acceptance agreement ("the waste supply agreement") be executed by all parties to the landfill agreement. The applicant proceeded to allege that the waste supply agreement never came into existence and, therefore, that "the purported mortgage created no interest whatsoever", and was void for uncertainty and of no effect. Upon being served with process in the NSW proceeding, the liquidator of Mactec told the applicant’s solicitor, by letter dated 18 January 2006, that, since the landfill agreement itself had been terminated (resulting in no realisation for Mactec), the existence or otherwise of a security over the landfill agreement had no financial impact on the administration of Mactec. The liquidator stated that he did not oppose the landfill mortgage being voided ab initio should the Court so determine. He said that he did not consider that it was necessary for him to be represented at the hearing of the NSW proceeding, and asked for his letter dated 18 January 2006 to be presented to the Court.

13 When the NSW proceeding came before Graham J on 25 January 2006, his Honour said that the application was curious, in that it was an application by a mortgagee to have a mortgage, which conferred rights on the mortgagee, set aside as void ab inito. His Honour proceeded to explain the applicant’s apparent strategy as follows:

According to his Honour’s reasons given on 25 January 2006, after about two hours of hearing time, counsel for the applicant applied for an adjournment because the applicant would "wish to consider its position and the possibility that it may ‘re-group’." His Honour concluded:

14 In the present proceeding, the applicant’s solicitor has sworn an affidavit in which he states that, on 3 February 2006, he caused to be filed a Notice of Motion in the NSW proceeding with a view to amending the applicant’s Statement of Claim. It is not clear whether leave was given to make this amendment, but the proposed Amended Statement of Claim had the purpose of introducing into the NSW proceeding claims under ss 52 and 87(2)(a) of the Trade Practices Act. The relevant allegation arising under s 52 was that, prior to and at the time of entering into the loan agreement and the landfill mortgage, Mactec represented to the applicant (falsely) that the waste supply agreement had been executed, and the applicant relied on that representation in making its $500,000 loan to Mactec. I should add that, after the hearing of the motion, the applicant’s solicitor filed an affidavit to which he exhibited a proposed Amended Application in the NSW proceeding, which document likewise foreshadowed the introduction of claims under ss 52 and 87(2)(a) of the Trade Practices Act. The deponent did not in this affidavit state when the proposed Amended Application was prepared, but the exhibit itself bears the date 22 December 2005, the same date as endorsed on the originating Application in the NSW proceeding as the "Date of Document". The Application was, as I have mentioned, filed on 16 January 2006. In the circumstances, I infer on the probabilities that the proposed Amended Application was filed with the proposed Amended Statement of Claim on 3 February 2006. In both documents, the only respondent was Mactec, as had always been the case in the NSW proceeding.

15 The NSW proceeding next came before Rares J on 7 February 2006. It seems that his Honour was concerned about the absence of a proper contradictor, since the parties with the most obvious interest in resisting the proceeding were the first and second defendants in the Victorian proceeding (the respondents here). In the result, the hearing of the NSW proceeding was adjourned on 7 February 2006, with Rares J granting leave to the applicant to approach his associate in chambers with documents for the purpose of obtaining an order under O 8 of the Federal Court Rules to serve such persons in the United States of America as it was advised may be proper contradictors to its application. Those persons, I understand, were the former directors of Mactec (including the respondents in the present proceeding).

16 I mention the applicant’s motion to introduce claims under s 52 of the Trade Practices Act into the NSW proceeding on 3 February 2006 at this stage since it indicates that, at least about six days before the operation of the self-executing order made by Mandie J in the Victorian proceeding in September 2005, the applicant had in mind proceedings under s 52 of the Trade Practices Act in relation to conduct engaged in at or about the time of the making of the loan agreement.

17 On 8 February 2006, the plaintiff in the Victorian proceeding applied by summons for a further extension of time within which to provide security for costs. It relied upon the fact that it had instituted the NSW proceeding in which it sought to set aside the mortgage which presented difficulties for it under s 588M(3)(c) of the Corporations Act.

18 On 9 February 2006, the present proceeding was commenced. In it’s Statement of Claim the applicant alleges that, prior to and at the time of entering into the loan agreement and the landfill mortgage, Mactec represented to the applicant –

It is alleged that these representations were made by the third and fourth respondents (who are not before the Court) for and on behalf of Mactec, and also on behalf of the first and second respondents. It is alleged that the representations were false and/or misleading or deceptive in that, at the time they were made, the waste supply agreement had not been executed and Mactec was not in a position to repay the loan of $500,000 before 23 May 2000 or at all. It is also alleged that Mactec and the respondents had no reasonable grounds for believing that Mactec could repay the loan as Mactec "was at all material times insolvent", which I take to be an invocation of s 51A of the Trade Practices Act.

19 The applicant alleges that, by making the representations to which I have referred, Mactec engaged in misleading or deceptive conduct in breach of s 52 of the Trade Practices Act. The applicant relies upon s 75B(1) of the Trade Practices Act to attach liability to the individual respondents for damages under s 82 of that Act. The damages claimed are quantified at $500,000 exactly – the sum which the applicant lent to Mactec and which was never repaid.

20 The applicant relies also upon s 42 of the Fair Trading Act to set up a case of direct, as distinct from accessorial, liability against the individual respondents. However, Mr Parncutt accepted that, both at the time when his cause of action, as alleged, was complete, and for more than three years thereafter, the applicable limitation period under s 68 of the Fair Trading Act was three years, with the result that the applicant’s claim under that Act must be regarded as having been statute-barred, notwithstanding the subsequent enlargement of the relevant limitation period to six years in 2003: see cl 11D of Sch 5 to the Fair Trading Act.

21 The next relevant event occurred in the Victorian proceeding. The plaintiff’s summons dated 8 February 2006 came before Hargrave J on 3 March 2006. In evidence before me is a copy of the transcript of the hearing before his Honour that day. I note that counsel for the plaintiff informed his Honour that the NSW proceeding had not been discontinued, and was still alive, but it was apparently the existence, and potential outcome, of the present proceeding upon which counsel placed greatest reliance in seeking, as he did, a stay of the self-executing order made by Mandie J in September 2005. The plaintiff submitted, in effect, that it should have the opportunity to prosecute the present proceeding in this Court without the Victorian proceeding having been dismissed in the meantime pursuant to the plaintiff’s failure to provide security for costs. Hargrave J accepted that he had power to make the orders then sought by the plaintiff (notwithstanding that the self-executing order made in September 2005 by Mandie J had operated on 9 February 2006) but expressed the view that the Supreme Court had jurisdiction to entertain the claims contained in the present proceeding, that those claims were directly related to the relief sought in the Victorian proceeding and that the plaintiff’s attempt to proceed in the Federal Court might be regarded as an abuse of process. In the result, his Honour dismissed the plaintiff’s application for a stay of the orders of September 2005 and ordered the plaintiff to pay the costs of the first and second defendants on a solicitor-client basis.

22 In was in this state of things that the respondents filed their notice of motion on 14 April 2006. It was supported by the affidavit of Galit Alon sworn on 13 April 2006 and by a further affidavit of the same deponent sworn on 7 July 2006. The deponent is the respondents’ solicitor, and has placed in evidence a very large amount of factual and documentary material which may be relevant to the respondents’ motion. The applicant has filed affidavits which are limited to some short factual details as to the NSW proceeding, and on the question of security for costs, to which I shall refer below.

23 In support of the respondents’ motion, Mr Frenkel, who appeared for them, submitted that, although the cause of action in this proceeding is different from that upon which the Victorian proceeding was based, exactly the same factual circumstances gave rise to each and the same loss and damage is alleged in each. He submitted that there was no legitimate explanation why the applicant had chosen to institute this proceeding, rather than to apply to amend its claims in the Victorian proceeding so as to introduce the cause of action based on s 52 of the Trade Practices Act, a course which would have been open to it: see s 86(2) of that Act. He submitted that the conclusion was inescapable that the applicant had adopted the course of commencing the present proceeding predominantly with a view to avoiding the operation, or the consequences, of the security for costs order made in September 2005 in the Victorian proceeding. He submitted, in effect, that his clients ought not to be vexed in different proceedings in this way and that the course adopted by the applicant was an abuse of the process of this Court. He pointed out with considerable force that the applicant had not caused to be filed any affidavit justifying its apparent choice to commence a new proceeding, and submitted that, in those circumstances, I should readily infer that the applicant’s purpose was the malign one of avoiding the costs orders in the Victorian proceeding. Mr Frenkel made it clear that nothing turned on the circumstance that the present proceeding has been brought in the Federal Court, rather than in the Supreme Court. He said that his submission would have been exactly the same had the applicant chosen to institute a new proceeding in the Supreme Court, rather than making its s 52 allegations in the Victorian proceeding where it was subject to a requirement to provide security for costs. He also made it clear that it was the existence of the Victorian proceeding, not the NSW proceeding, that made the present proceeding an abuse of process.

24 On behalf of the applicant, Mr Parncutt submitted that there was no evidence from which it might be inferred that his client’s intention, in commencing the present proceeding, was predominantly to avoid the operation, or the consequences, of the security for costs order made in the Victorian proceeding. Mr Parncutt referred me to the course of the NSW proceeding and submitted that his client, having commencing that proceeding but finding it inconvenient to proceed therewith for various reasons, commenced another proceeding in this Court because it was, in effect, viewing things within a Federal Court frame of reference. I was told that the present proceeding was issued out of the Victorian Registry of the Court purely for the sake of convenience, since the liquidator of Mactec was not intended to be a party and it was his presence in Sydney that had caused the NSW proceeding to be issued out of the New South Wales Registry of the Court. After the hearing of the motion, the applicant caused to be filed the affidavit of its solicitor to which I have referred in par 14 above. The applicant did not seek leave to proceed in this way, and the respondents have had no opportunity either to reply to that affidavit or to address on it. I shall, however, receive it and take it into account. It does not assist the applicant. Whereas I was told in court that Rares J had expressed his concern as to the absence of a proper contradictor, the deponent in this affidavit has said that "it was envisaged by the Court that the proceeding ... would be amended to include the directors of [Mactec] who were also parties to the Supreme Court proceeding so that they could defend the proposed amended proceeding in the Federal Court."

In this passage, the applicant’s solicitor has stated what he did, but not why. Importantly, he
stated neither here nor anywhere else why a separate proceeding of any kind, in any court, was contemplated against the same persons who were the defendants in the Victorian proceeding, rather than amending that proceeding to make the same allegations.

26 The applicant’s explanation for it’s decision to commence a new proceeding, rather than to seek leave to introduce its s 52 claims in the Victorian proceeding, has left me quite unconvinced. The applicant had known since September 2004 that its further prosecution of the Victorian proceeding was dependant upon its providing the security which the Supreme Court ordered first in that month and again about a year later. The applicant has been represented by the same solicitors since the Victorian proceeding was commenced in April 2002, and it has throughout been very much in its interests to find every reasonable jurisprudential basis for recovering damages or compensation in relation to the loss which it alleges. I do not hold that the particular articulation of a claim under s 52 of the Trade Practices Act which the applicant now makes ought necessarily to have been made at the outset, but I can think of no reason why the applicant’s advisers would not have been alive to the possibilities in this regard by the time of, or shortly after, the hearing before Mandie J in September 2005 at the latest. By then they knew that the landfill mortgage presented a real threat to the success of their claims under s 588M of the Corporations Act and they were, after all, already in a mature proceeding in which the former directors of Mactec were defendants.

27 Moreover, the material before me justifies the conclusion (particularly in the absence of any contrary evidence from the applicant) that the applicant had a s 52 claim in mind by 3 February 2006 at the latest. But for the applicant’s failure to provide security, I can think of no legitimate reason why it might not have made an expedited application to the Supreme Court to introduce the s 52 claims into the Victorian proceeding even at that late stage. Indeed, even on 3 March 2006 when the matter was before Hargrave J, it is apparent from the tenor of his Honour’s observations that, but for the failure to provide security, the then plaintiff would have been heard on an application for leave to amend, had it chosen to make one. The inferential case advanced on the motion by the respondents is powerful. It required a clear answer by way of affidavit filed on behalf of the applicant. No forthright answer was provided and I do not regard the applicant’s limited explanations for this omission as adequate.

28 In the circumstances, I find that the predominant reason that the present application in this Court was commenced was that the security for costs order in the Victorian proceeding, and the applicant’s inability to provide that security, stood four-square in the way of what I would regard as the more obvious and legitimate course, namely, to apply to the Supreme Court on summons to introduce the s 52 allegations by way of amendment.

29 The finding which I have just made does not, however, mean that the respondents succeed on their abuse of process arguments. Their difficulty, as Mr Frenkel frankly acknowledged, was that the present circumstances do not fit neatly within any recognised category of abuse. Mr Frenkel referred me to the statement by French J in Sea Culture International Pty Ltd v Scoles (1991) 32 FCR 275, 279 that "the possible varieties of abuse of process are only limited by human ingenuity and the categories are not closed." With respect, I agree; but I cannot, as at present advised, envisage the circumstances in which I, sitting as a single Judge, would take it upon myself to create a new category, and I do not understand Mr Frenkel to have submitted that I should. Rather, while accepting that the facts of the present case were not on all fours with those of any binding or persuasive authority, he submitted that the principles which informed the decided cases should likewise lead to the conclusion that the applicant’s conduct in commencing the present proceeding constituted an abuse of process.

30 The judgment of the High Court in Williams v Spautz [1992] HCA 34; (1992) 174 CLR 509 is often regarded as the leading Australian authority on abuse of process. The particular concept of abuse with which that judgment was concerned, however, was that of commencing and prosecuting proceedings for a purpose collateral to that for which the proceedings were designed: 174 CLR at 526-527. The Court was there concerned with the kind of case in which court proceedings are used as an instrument of oppression in the sense of seeking to achieve some collateral end rather than to vindicate the moving party’s legitimate legal rights for which proceedings of the relevant kind were intended. A ready answer to the present problem is not provided by Williams v Spautz. It could not be suggested that the applicant had any purpose collateral to that achievable under s 52 of the Trade Practices Act in mind when the present proceeding was commenced. It is true that, as I have held, it was commenced as a separate proceeding because the more obvious expedient of seeking to amend the Victorian proceeding was unattractive. But on no view could it be asserted that the applicant is seeking to achieve some object extraneous to the rights and protections which it claims to have under the Trade Practices Act.

31 Mr Frenkel relied upon the judgment of the High Court in Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589. But Anshun estoppel, as the principle for which that case stands is sometimes called, is concerned with the ability of a party in later proceedings to rely upon a point of claim or defence which was so relevant to the matters adjudicated upon in earlier proceedings to which that party was also a party that it would have been unreasonable not then to have relied on it. As is apparent from the statement in Henderson v Henderson (1843) 3 Hare 100, 115 which the High Court regarded as stating the law, the principle applies only where there has been an adjudication by the Court in the earlier proceedings. Anshun does not stand as authority for the proposition that it is an abuse of process to make a claim in a later proceeding that could have been made in an earlier proceeding, where the earlier proceeding has been stayed or dismissed without adjudication.

32 There is, of course, no shortage of authority for the proposition that it is an abuse of process for a party to seek to contest, in later proceedings, a point which it has lost, or substantially lost, in earlier proceedings, even where there may not be complete overlap between all facts, parties, and causes of action: see eg Hunter v Chief Constable of the West Midlands Police [1982] AC 529; Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404; Wilson v Commonwealth of Australia [1999] FCA 1308; Rippon v Chilcotin Pty Ltd [2001] NSWCA 142; (2001) 53 NSWLR 198; However, these authorities, like Anshun, speak only of situations in which the earlier point was actually decided by the court concerned.

33 By contrast, there is no res judicata nor, as I understand the law, Anshun estoppel, when the earlier proceedings have been discontinued. In relation to res judicata at least, the same conclusion applies when the earlier proceedings have been dismissed on account of default in compliance with orders for discovery (Baines v State Bank of NSW (1985) 2 NSWLR 729), on account of default in the provision of particulars (Samuels v Linzi Dresses Ltd [1981] QB 115) or for want of prosecution (Hart v Hall & Pickles Ltd [1969] 3 All ER 291; Pople v Evans [1969] 2 Ch 255). The question with which these cases do not deal, however, is whether, notwithstanding that there would be no res judicata, it might nonetheless be regarded as vexatious, and in that sense as an abuse of process, for a moving party, by his or her own default, to allow proceedings to be terminated, without adjudication, to his or her disadvantage, and then to bring new proceedings seeking the same remedy on closely related grounds.

34 I think the answer to that question is: not necessarily. In Deangrove Pty Ltd (Rec & Mgrs Aptd) v Commonwealth Bank of Australia [2001] FCA 173; (2001) 108 FCR 77, one of a number of points which Sackville J had to decide arose from the circumstance that the applicants had, in a previous proceeding, several times failed to comply with an order that they file a Statement of Claim, in consequence of which that proceeding was dismissed. A few months later, the instant proceeding was commenced by the same applicants against the same respondent as had been parties to the earlier proceeding. Identical relief was claimed. Sackville J dealt with the argument that the later proceeding amounted to an abuse of process as follows (108 FCR at 82-83):

In Deangrove, the applicants’ solicitor gave evidence that counsel had advised that their cause of action was not then complete, in consequence of which a Statement of Claim could not be drawn. Counsel advised that the applicants should allow the self-executing order to take effect. Sackville J accepted this evidence, and observed that it demonstrated that the applicants’ behaviour had not been contumacious or such as to reflect wilful disobedience to the orders of the court.

35 The proposition that the later proceedings in Deangrove might have been regarded as an abuse of process not in the sense of demonstrating contumely but in the sense of an attempt to relitigate a matter which had previously been the subject of a final order disposing of identical proceedings appears not to have been the way the matter was put to Sackville J. That proposition was put to Holmes J in Clout v Klein [2001] QSC 401. There the earlier proceeding had been terminated not by a self-executing order but by a direct order of a Judge of the court. The ground which sustained the order, however, was that the plaintiffs in that proceeding had failed to comply with an order for security for costs. His Honour referred (at [44]) to some cases in which the application of the Anshun principle to situations in which there had been no adjudication had been doubted; doubts which, in my respectful view, would almost always be regarded as well-founded. However, on the facts, his Honour held that it was not unreasonable for the plaintiff which was common to both proceedings not to have raised the relevant claim in the earlier proceeding.

36 Moving to a somewhat different line of authority, it is at least regarded prima facie as an abuse of process for a moving party to vex his or her opponent by instituting multiple proceedings to right a single wrong. In Williams v Hunt [1905] 1 KB 512, the Court of Appeal restored the order of a master in the Kings Bench Division to stay an action on a specially indorsed writ claiming principal and interest under a covenant in a mortgage deed, when there was waiting for trial in the Chancery Division an earlier proceeding in which the same plaintiff claimed, in relation to the same mortgage, an account, payment of the sum found to be due, and in default, sale or foreclosure. Collins MR said (at 514):

37 In the facts leading to the judgment of Mason J in Moore v Inglis (1976) 9 ALR 509, the plaintiff had commenced a proceeding in the Supreme Court of the Australian Capital Territory alleging conspiracy, and seeking damages. While those proceedings were pending, the plaintiff commenced a proceeding in the original jurisdiction of the High Court alleging, in a reformulated way, what was essentially the same conspiracy, or series of conspiracies. In the High Court, the plaintiff sought declarations and injunctions only, not damages. The parties in the two actions were different. Mason J granted the defendants a perpetual stay upon the principle that it was prima facie vexatious to sue concurrently in different courts for the same thing, relying in this regard upon Logan v Bank of Scotland (No 2) [1906] 1 KB 141, 150; Slough Estates Ltd v Slough Borough Council [1968] Ch 299, 314-5; and Re Christiansborg (1885) 10 PD 141, 148. His Honour considered it inconsequential that the plaintiff sought different kinds of relief in the two proceedings: the Supreme Court of the ACT had jurisdiction to grant relief by way of declarations and injunctions, should the plaintiff choose to seek that, either in substitution for, or in addition to, her existing claim for damages (9 ALR at 514-5). Mason J continued at 515:

On the subject of different parties, Mason J noted that, if a proper case were made out, the Supreme Court proceeding could be amended so as to add or remove parties. With respect to this and other potential amendments, his Honour said (at 515):

His Honour held that the commencement and continuation of the action in the High Court was vexatious and oppressive, and constituted an abuse of the process of the Court.

38 Turning to the motion before the Court, it is necessary to examine the applicant’s respective causes of action in the Victorian proceeding, and here. In the Victorian proceeding, aside from the defences that the respondents raised, the applicant would have been required to establish that –

In the present proceeding (as pleaded by the applicant, and again putting aside any defences that might be raised), the applicant would be required to establish that –

39 There are several obvious differences between the causes of action, and the factual elements that would be required to be established, as between the Victorian proceeding and this proceeding. Section 588M of the Corporations Act involves no element of conduct by company directors: it is concerned with their knowledge, or constructive knowledge, as to the state of the company’s solvency; and, of course, with the objective fact of solvency. Under s 52 of the Trade Practices Act, by contrast, conduct is everything, whereas the company’s condition of solvency or otherwise is not, at least directly, relevant; and the respondents’ ignorance of the falsity of the representations made by Mactec may not be fatal to the applicant’s case. The waste supply agreement, and the questions of whether it was executed at the relevant time, of what representations were made about it, and the like, will constitute very significant elements of the applicant’s case in the present proceeding, whereas, it does not appear that such matters would have been agitated in the Victorian proceeding.

40 On the other hand, there is an equally obvious region of overlap between the two proceedings with which I am here concerned. The parties are the same, and the applicant sues, in effect, to achieve compensation for the same loss in each proceeding. One of the two bases upon which the representation is said to be misleading etc in the present proceeding – that Mactec was not in a position to repay the loan – lines up in substance with the allegation of insolvency in the Victorian proceeding. Indeed, the allegation in the present proceeding that Mactec and the respondents had no reasonable grounds for believing that Mactec could repay the loan because Mactec was insolvent would require proof of a fact which is central to the case which the applicant sought to make in the Victorian proceeding. The foreshadowed defence of the respondents in the Victorian proceeding – that based on the security constituted by the landfill mortgage – is an important element in the applicant’s allegations in this proceeding.

41 The cases to which I have most recently referred above, especially Moore v Inglis, show that the question whether a later proceeding is an abuse of process because of similarity with an earlier, extant, proceeding is not concluded in the negative merely because the parties, the causes of action, the specific relief sought, or even the forensic issues which may arise, are not identical. In that case Mason J held that the later proceeding was abusive notwithstanding that, to accommodate all its elements, some amendments to the earlier proceeding might be required. The important, perhaps critical, point was that the court in which the earlier proceeding was commenced had jurisdiction to deal with everything raised in the later proceeding and there was no reasonable justification, based on legitimate considerations of convenience, cost or the like, for commencing the second proceeding rather than seeking to amend the earlier. One sees the same underlying values as to the requirements of a fair and efficient system for the administration of justice here as are to be seen, in a different but analogous context, in Anshun.

42 In the present case, were it not for one factor to which I shall turn next, I would consider that the commencement of the present proceeding was an abuse of process in the sense of being a course preferred by the applicant over what I would regard as the more obvious, more convenient, less costly and less vexing expedient of seeking to make the necessary amendments to the pleadings in the Victorian proceeding. The applicant was, as plaintiff in the Victorian proceeding, suing to achieve compensation for the very loss around which this proceeding is constructed. It was suing the same parties as are respondents here. Broadly speaking, it was putting the same series of transactions in 2000 into controversy. Had the Victorian proceeding still been on foot when this proceeding was commenced, I would have regarded the present case as covered by Williams v Hunt and Moore v Inglis.

43 However, the Victorian proceeding was dismissed on 9 February 2006 – the very day on which the present proceeding was commenced – as a result of the operation of the self-executing order which Mandie J had made in September 2005. This takes the present situation, in my view, out of the Moore v Inglis line of authority. The evil with which the principle in such cases is concerned arises where a plaintiff tries to have a foot in each camp, as it were, by keeping more than one proceeding alive at the same time. I am not aware of any instance in which the same or an analogous principle has been applied to a situation of successive, rather than concurrent, proceedings. In the case of successive proceedings, it may be that the plaintiff in the later proceeding will be met by a successful plea of res judicata or of Anshun estoppel; or it may be shown, on the facts, that the commencement of the later proceeding revealed a contumacious disregard for the authority of the court, or of another court. But, absent any of these situations, there is no established basis upon which I should regard the commencement of a later proceeding making the same or similar claims as those previously, or even contemporaneously, disposed of in an earlier proceeding by a self-executing order as necessarily amounting to an abuse of process.

44 I do not believe that I would, on the facts of the present case, be justified in finding contumely on the part of the applicant apropos the self-executing order in the Victorian proceeding. Mr Frenkel did not put his case on this basis, at least explicitly, but he did urge me to find that the applicant’s purpose in commencing the present proceeding was to "avoid" the operation and consequences of that order. In a sense it was, but in another sense so to conclude is to do no more than to beg the question. Although the applicant appears to remain in breach of so much of the order of Mandie J as required it provide security (a matter which is not for me to decide), it has suffered the adverse consequences of the self-executing part of that order. On one view, the respondents have achieved more from this sequence of events than they could have hoped for had security been provided and the Victorian proceeding continued. As in Deangrove, I think that the correct approach is to treat the applicant as, prima facie at least, entitled to allow the Victorian self-executing order to operate to its own disadvantage without holding that such conduct involves contumely.

45 The circumstances before Hargrave J on 3 March 2006 were, of course, different from those now confronting me. His Honour had before him an application which, if granted, would have kept alive two proceedings covering essentially the same things. It was a conventional Moore v Inglis situation. His Honour, quite correctly in my respectful view, recognised the objective of the then plaintiff as involving an abuse of process. He would not allow it. He refused to keep the Victorian proceeding alive, the result of which is that that proceeding was finally terminated on 9 February 2006 and the present proceeding remains the only relevant one which the respondents are obliged to defend.

46 For the above reasons I shall dismiss so much of the respondents’ motion as seeks that the proceeding be dismissed or stayed as an abuse of process.

47 I turn then to the respondents’ application for security for costs. The power to order security arises under s 56(1) of the Federal Court of Australia Act 1976 (Cth), the discretionary exercise of which is not limited to the particular circumstances set out in O 28 r 3(1) of the Rules of Court: Bell Wholesale Co Pty Ltd v Gates Export Corporation (No 2) (1984) 2 FCR 1, 2-3. Mr Frenkel drew my attention to the list of considerations referred to in Equity Access Limited v Westpac Banking Corp (1989) ATPR 40-972. Those matters are the applicant’s chances of success, whether the order would shut out the applicant from pursuing its claim, whether the applicant’s impecuniosity arose out of the breaches alleged against the respondent, the public interest, discretionary matters peculiar to the present case and the risk that the applicant would not be able to satisfy an order for costs.

48 Mr Frenkel relied upon affidavits which had been filed in the Victorian proceeding. According to those affidavits, the applicant has a total paid up share capital of $2, the applicant does not own any real property in Victoria, the applicant is not registered for GST purposes, and the applicant is encumbered pursuant to charges in favour of third parties in the total sum of $7,220,500. At the hearing of the respondent is Notice of Motion, Mr Parncutt conducted this aspect of the case on the basis, and made it quite clear, that the applicant was in no position to provide security. This indication justifies the inference, which I draw, that, if the respondents were successful in the proceeding, the applicant would be unable to satisfy any costs order out of its own resources.

49 A special circumstance which I should take into account is the history of orders made in the Victorian proceeding. I can think of no reason, and none was advanced by Mr Parncutt, why I should view the circumstances any differently from the view taken on two occasions by Mandie J in the Supreme Court. Although, as I have held above, the present proceeding is not an abuse of process simply because it corresponds closely with the Victorian proceeding, that correspondence provides a strong reason for maintaining a consistency of approach on this aspect of the respondents’ motion.

50 Although the respondents urged me to find that the applicant’s case was a weak one, I do not feel competent to make such an assessment on the limited exposure which I have had to the underlying facts and circumstances which will determine the outcome of this proceeding. On the face of it, the applicant lent a substantial sum to a company which was very shortly placed into liquidation. The requirement under s 588M(1)(c) of the Corporations Act which was necessary in the Victorian proceeding will not apply here. On the other hand, given the derivative way in which the applicant makes out its case against the respondents (ie calling in aid s 75B of the Trade Practices Act), it may be that the applicant’s task will not be altogether straightforward. In the result, I am unable to express a view about the underlying strength or weakness of the applicant’s case.

51 The question whether an order for security would shut out the applicant from pursuing its claim at all requires me to advert to the way in which this aspect of the respondents’ motion was addressed by the applicant in the hearing before me. If I detected any resistance by Mr Parncutt to the proposition that an order for security of some kind was required in the circumstances, it was expressed very faintly. Rather, he proposed what I consider to be a somewhat unusual course. The applicant caused to be filed an affidavit affirmed by Homai Kermani, the wife of the director of the applicant. That affidavit contained the following statement:

There followed a form of agreement which purported to contain an assignment to the deponent of the whole of the cause of the action herein, subject to a condition precedent that the Court should give a direction to the effect that the applicant had the power to make such an assignment. I informed Mr Parncutt that the Court was not prepared to advise the applicant in the terms proposed. I stated then, and it remains my view, that if there is someone on the applicant’s side who has the means and the inclination to underwrite the risk that an adverse costs order might be made against the applicant, it should be a matter for the applicant as to how that circumstance is given a practical effect that will result in security for costs being provided in the conventional way.

52 Mr Parncutt also proposed that I should receive security from Ms Kermani, rather than from the applicant itself. I was then, and I remain, unsure as to precisely what was proposed here. The point can and should be dealt with, however, by adverting to the only power which the Court has under s 56 of the Federal Court Act – it is a power to order the applicant to give security, and, if I do make an order for security, it will follow the form of that section.

53 The course proposed by the applicant has given me cause to consider that it might yet have a means by which security might be provided. In her affidavit, Ms Kermani stated that, if the Court were to "permit" her to prosecute the proceeding in her own name, she would undertake to satisfy any costs orders made against her and keep the applicant indemnified against any adverse costs orders. If Ms Kermani has the means to offer these undertakings, and is prepared to place those means at the disposal of the applicant – which the course proposed effectively does – it is not apparent to me why she should not deploy those means in a way which would facilitate the applicant’s provision of security in the conventional way. Having made these observations, in the result I am prepared to decide, and I do decide, this aspect of the motion on the more conservative basis that an order for security would in all probability shut out the applicant from pursuing its claim. This is an important consideration, but ultimately not important enough to outweigh the other factors which favour the making of the order which the respondents seek.

54 In his written outline of argument, Mr Parncutt submitted that his client’s want of means had been caused, or contributed to, by the conduct of the respondents in relation to the transaction the subject of the proceeding. He did not develop this argument orally and, in any event, it was unsupported by evidence. The applicant has filed no evidence which would explain how its admitted "want of means" came about and how the respondents might have caused or contributed to it.

55 In all the circumstances, I take the view that the respondents have established their case for the making of an order for security for costs. On the subject of quantum, the respondents took the step of engaging the services of Mahlab Costing Pty Ltd for the purposes of obtaining an assessment of their party and party costs involved in defending this proceeding. That company provided its assessment in the sum of $81,204.00. Although the applicant did not accept this sum, it has not provided its own sworn estimate and has put nothing before me by way of argument which would provide any satisfactory basis for questioning the estimate upon which the respondents rely. I shall order that the applicant give security for the payment of the costs of the respondents in the sum of $81,204.00.

56 The respondents have sought a stay of the proceeding until such time as the applicant provides security and, given the history of the matter in the Victorian proceeding, I would regard that as an appropriate course. The respondents sought that I make an order pursuant to O 28 r 5(1)(b) dismissing the proceeding as against them in the event that security is not provided. I am not persuaded that such a step is appropriate at this stage. As referred to above, there is some scope for limited optimism that the applicant might find the means to provide the security I shall order. I do not propose to set a date by which the security must be provided, but I shall grant the respondents leave to apply for an order dismissing the proceeding if the security has not been provided by the end of September 2006. I indicate now that, in the event that the respondents make such an application, I would regard them as prima facie entitled to an order requiring security to be provided within a further 14 days or thereabouts, and to an order under O 28 r 5(1)(b) which is referrable to that period.

I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup.

Counsel for the Applicant:	Mr G J Parncutt

Solicitor for the Applicant:	ComLaw

Counsel for the First and Second Respondents:	Mr N Frenkel

Solicitor for the First and Second Respondents:	Gadens Lawyers

Date of Hearing:	26 July 2006

Date of Judgment:	2 August 2006

•	the respondents were directors of Mactec at the time it incurred the debt to the applicant;
•	Mactec was insolvent at that time, or became insolvent by incurring the debt;
•	there were reasonable grounds for suspecting that Mactec was insolvent, or would become insolvent by incurring the debt;
•	the respondents were aware, or a reasonable person in a like position in a company in Mactec’s circumstances would have been aware, that there were reasonable grounds for so suspecting;
•	the respondents failed to prevent Mactec from incurring the debt;
•	because of Mactec’s insolvency, the applicant suffered loss or damage;
•	the debt was wholly or partly unsecured; and
•	Mactec was being wound up.

•	Mactec was a trading corporation;
•	Mactec represented to the applicant, at or prior to entering into the loan agreement, that the waste supply agreement was executed and in place and/or that Mactec could repay the $500,000 loan before 23 May 2000;
•	the representations were misleading or deceptive either in fact (ie, as the case requires, that the waste supply agreement was not executed or in place or that Mactec could not repay the $500,000 loan before 23 May 2000) or in the statutory sense that, when made, its maker or makers had no reasonable grounds for believing that Mactec could repay the loan, on account of Mactec’s insolvency;
•	the applicant relied on the representations in advancing the amount of the loan to Mactec;
•	the respondents were involved in the making of the representations within the meaning of s 75B of the Trade Practices Act; and
•	the applicant suffered loss or damage.

(a)	that the waste supply agreement was executed and in place; and
(b)	that Mactec could repay the loan of $500,000 before 23 May 2000.