Amalia Investments Ltd v Virgtel Global Networks N.V. [2011] FCA 409 (21 April 2011)

Last Updated: 19 May 2011

FEDERAL COURT OF AUSTRALIA

Amalia Investments Ltd v Virgtel Global Networks N.V. [2011] FCA 409

Citation:	Amalia Investments Ltd v Virgtel Global Networks N.V. [2011] FCA 409
Parties:	AMALIA INVESTMENTS LTD, AMALIA ZABUSKY and HARVEY ZABUSKY v VIRGTEL GLOBAL NETWORKS N.V., HENDRIK VAN LEEUWEN, MARIA ANTONIA JOSEPHINA ADRIANA VAN LEEUWEN-VAN HAL and VISCAYA ARMADORA S.A.
File number(s):	QUD 3 of 2009
Judge:	GREENWOOD J
Date of judgment:	21 April 2011
Catchwords:	PRACTICE AND PROCEDURE – consideration of an application for an order that costs of an interlocutory application be paid forthwith pursuant to Order 62, rule 3(2) of the Federal Court Rules
Legislation:	Federal Court Rules, Order 62, rule 3
Cases cited:	Allstate Life Insurance Co & Ors v Australia & New Zealand Banking Group Limited & Ors (No. 14) (unreported decision, 18 August 1995, [1995] FCA 660) - cited Allstate Life Insurance Co & Ors v Australia & New Zealand Banking Group Limited & Ors (No. 13) (Full Federal Court, 17 August 1995, unreported [1995] FCA 626) - cited Life Airbag Company of Australia Pty Limited & Ors v Life Airbag Company (New Zealand) Limited & Ors [1998] FCA 545 - cited Courtney v Medtel Pty Limited (No. 3) [2004] FCA 347 - cited McKellar v Container Terminal Management Services Ltd [1999] FCA 1639 - cited
Date of hearing:	20 April 2011
Date of last submissions:	20 April 2011
Place:	Brisbane
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	28
Counsel for the Applicants:	Mr C Wilson
Solicitor for the Applicants:	Mr D Tucker, Tucker & Cowen Solicitors
Counsel for the Respondents:	Mr G Newton SC and Mr S Monks
Solicitor for the Respondents:	Mr J Conomos, James Conomos Lawyers

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION	QUD 3 of 2009

BETWEEN:	AMALIA INVESTMENTS LTD First Applicant AMALIA ZABUSKY Second Applicant HARVEY ZABUSKY Third Applicant
AND:	VIRGTEL GLOBAL NETWORKS N.V. First Respondent HENDRIK VAN LEEUWEN Second Respondent MARIA ANTONIA JOSEPHINA ADRIANA VAN LEEUWEN-VAN HAL Third Respondent VISCAYA ARMADORA S.A. Fourth Respondent

JUDGE:	GREENWOOD J
DATE OF ORDER:	21 APRIL 2011
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1. The costs of the respondents of and incidental to their notices of motion filed on 16 February 2011 and 11 March 2011 thrown away by reason of the adjournment of each notice of motion on 20 April 2011 be paid by the applicants in the principal proceeding.
2. The question of whether the costs the subject of Order 1 are to be the subject of a further order under Order 62, rule 3(2) of the Federal Court Rules is reserved to be determined upon the disposition of the notices of motion referred to in Order 1.
3. The applicants file and serve an amended statement of claim by 4.00pm on 11 May 2011.
4. The proceedings be listed for directions at 9.30am on 18 May 2011.
5. The notices of motion referred to Order 1 of these orders are adjourned to a date to be fixed.
6. The parties have liberty to apply on three days notice.
   

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

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION	QUD 3 of 2009

BETWEEN:	AMALIA INVESTMENTS LTD First Applicant AMALIA ZABUSKY Second Applicant HARVEY ZABUSKY Third Applicant
AND:	VIRGTEL GLOBAL NETWORKS N.V. First Respondent HENDRIK VAN LEEUWEN Second Respondent MARIA ANTONIA JOSEPHINA ADRIANA VAN LEEUWEN-VAN HAL Third Respondent VISCAYA ARMADORA S.A. Fourth Respondent

JUDGE:	GREENWOOD J
DATE:	21 APRIL 2011
PLACE:	BRISBANE

REASONS FOR JUDGMENT

1. On 7 January 2009, Amalia Investments Ltd (“Amalia”), Amalia Zabusky (“AZ”) and Harvey Zabusky (“HZ”) commenced these proceedings supported by a statement of claim also filed on 7 January 2009.
2. By their application, the applicants recite the following matters.
3. By para 1 they claim the recovery of $US10,110,750.00 as damages, pursuant to the “Corporation[s] Act 2001 (Cth) s 236, Foreign Corporation[s] (Applications of Laws) Act 1989 s 7, the Foreign Judgement[s] Regulation[s] 1992 (Cth), and the Common Law”, represented by the lost value of the first applicant’s shares in the first respondent, Virgtel Global Networks N.V. (“VGN”), as a consequence of the fraudulent registration of the third respondent [although para 1 incorrectly recites that party as the first respondent] by the second to fourth respondents as the shareholder of the relevant issued shares in VGN, rather than the first applicant, as was said to have been agreed between HZ and the second respondent.
4. VGN is said to be a company incorporated and registered in the Netherlands. That company since 1 November 2000 is said to have been the owner of all of the share capital of a Nigerian company incorporated in 1995 called Virgin Technologies Ltd (“VTL”). In brief terms, the subject matter of the proceedings before this Court concern the circumstances relating to an agreement described as a Protocol of Understanding and Undertaking (the “Protocol”) dated 20 October 2000 by which the third applicant, HZ and the second respondent, Hendrik van Leeuwen (“HVL”) agreed that their respective companies (Amalia in the case of HZ and Viscaya Armadora S.A. (“VASA”), the fourth respondent, in the case of HVL) would hold an equal number of shares in a new company to be called Virgtel Global Networks N.V. (a new holding company of VTL to be incorporated in the Netherlands) and the contended fraudulent conduct on the part of HVL and his wife, the third respondent, by which HVL, his wife and HVL’s entity VASA secured the registration of all of the shares in Virgtel Global Networks N.V. (the first respondent) in the third respondent, thus displacing the first applicant, Amalia, as an equal shareholder in VGN, as required by the agreement of 20 October 2000.
5. By para 2, the applicants seek a freezing order under Order 25A, rule 2(2) of the Federal Court Rules restraining the respondents from removing their assets from the jurisdiction of the Court or otherwise disposing or dealing with any of their assets pending the determination of a claim for interlocutory relief.
6. By para 3, the applicants simply recite that the proposed relief is not prejudicial to the respondents.
7. By para 4, the applicants recite that VGN is a public limited liability company incorporated in the Netherlands and an unregistered foreign corporation for the purposes of s 9 of the Corporations Act 2001 (Cth).
8. By para 5, the applicants recite that HVL is a director of VGN.
9. By para 6, the applicants recite that HVL’s wife, the third respondent, is registered as the sole registered shareholder in VGN.
10. By para 7, the applicants recite that the fourth respondent, VASA is an offshore company incorporated under the laws of the Republic of Panama and an unregistered foreign corporation for the purposes of s 9 of the Corporations Act.
11. By para 8, the applicants recite that HVL and VASA “commenced business dealings within the jurisdiction of the Court on or about August 2000”. VGN is said to have commenced business dealings within the jurisdiction of the Court on or about 24 September 2003 and is said to have been conducting business dealings within the jurisdiction of the Court as at 7 January 2009.
12. By para 9, the applicants recite that VGN does not have any assets anywhere in the world other than its assets within the jurisdiction of the Court and those assets are said to be the benefit of four costs orders amounting to $282,307.19 in proceeding 6547/2005 before the Supreme Court of Queensland; and the sum of $650,000.00 deposited with James Conomos Lawyers in Brisbane.
13. By para 10, the applicants recite that the Federal Court of Australia is invested with jurisdiction to determine the matters the subject of the proceeding by reason of s 51(xx) of the Commonwealth Constitution.
14. Although paras 1 and 2 describe matters which are framed in terms of claims, the claims for relief are an order requiring VGN to pay damages to AZ and HZ; an order for the taking of accounts; an order for the payment of damages framed by reference to the matters recited at para 1 above; interest on the damages; and, costs.
15. Amalia is a British Virgin Islands entity. VTL is a Nigerian company. VGN is a company incorporated and registered in the Netherlands. VASA is a Panamanian company. HZ seems to have been a resident of Nigeria at the time of the relevant events. The Protocol was entered into between HZ and HVL on behalf of Amalia and VASA in Rotterdam. The fraudulent events were discovered, it is said, by HZ at an AGM of VTL held in London on 13 February 2004. It is not clear from the statement of claim that the events the subject of the proceeding occurred in Australia or have a relevant connection with Australia or that the respondents are present within the jurisdiction.
16. On 9 March 2011, each of the four respondents entered a separate conditional appearance in the proceedings.
17. On 16 February 2011, the first respondent filed a notice of motion by which VGN seeks an order that the proceedings be struck out for want of jurisdiction and that the applicants pay VGN’s costs of and incidental to the proceedings on an indemnity or alternatively a party/party basis. On 11 March 2011, the second, third and fourth respondents filed a notice of motion by which they seek orders that the proceedings be struck out for want of jurisdiction and, similarly, an order that the applicants pay their costs of the proceedings on the same basis. Those notices of motion were originally returnable on 24 March 2011. They were adjourned to 20 April 2011 by consent. The adjournment date accommodated the availability of counsel for each side. The respondents contend that the application and statement of claim filed on 7 January 2009 fails to reveal any jurisdictional basis upon which this Court can entertain the controversy framed by those documents.
18. On 19 April 2011, the solicitors for Amalia, AZ and HZ, sent an email to the solicitors for the respondents advising that the applicants in the principal proceeding proposed to address the jurisdictional point within 21 days by formulating an amended statement of claim. The respondents (being the applicants on the notices of motion) are content to see the notices of motion adjourned to a date to be fixed to enable the applicants to deliver an amended statement of claim by 4.00pm on 11 May 2011. The matter will then be listed for directions on 18 May 2011 at which time the respondents expect to be in a position to say whether the amended statement of claim identifies a basis upon which this Court is invested with jurisdiction in respect to the controversy.
19. Orders were made on 20 April 2011 adjourning the notices of motion to a date to be fixed with the proceedings being listed for directions at 9.30am on 18 May 2011. The outstanding question is that of costs. The applicants on the notices of motion seek an order for the payment of their costs of and incidental to the notices of motion to be taxed; an order that the taxed costs be paid forthwith pursuant to Order 62, rule 3 of the Federal Court Rules; and an order that the costs are to be taxed on the footing that senior and junior counsel are to be allowed as party and party costs of and incidental to the notices of motion having regard to the potential complexity of the question of jurisdiction and the complexity of the controversy reflected in the existing statement of claim which relies upon allegations of fraud on the part of HVL, his wife and HVL’s entity VASA. The respondents on the notices of motion contend that the proper order for costs is that the applicants on the notices of motion ought to have their costs of the adjournment on the usual basis with no order that those costs be paid forthwith. They also contend that the question of whether two counsel ought to be allowed is a matter for the taxing officer.
20. The applicants on the motions say that they ought to have the costs of and incidental to the motions rather than the adjournment costs because the election to file and serve an amended statement of claim is, in effect, an abandonment of the existing pleading (and presumably the existing initiating application which is also likely to be amended) and any subsequent question arising on the notices of motion on any adjournment date will deal with what is in substance a new or separate question by reference to the new pleading. Therefore, it is said, the question of the costs of the motions ought not to await the determination of the motions on the merits as the new question on the merits then emerging will never be the same question alive on the merits now.
21. The respondents on the motion do not accept that they have abandoned the foundation statement of claim and such a description overstates the matter. The degree of that overstatement cannot be judged until the new statement of claim is seen. Moreover, the respondents on the motion say that the applicants’ motions are directed to a strikeout of the proceedings at large rather than simply a matter directed to the pleading.
22. The applicants on the motion say that they should have their costs now on either basis (that is costs of the motion or the adjournment costs) under Order 62, rule 3 because the proceeding was commenced on 7 January 2009 and no steps have been taken to properly progress the matter and thus there has been unnecessary delay; the proceedings are complex and involve questions of fraud which ought to have been pleaded properly from the very outset; the proceedings are unlikely to be determined within a short timeframe having regard to the nature of the controversy and thus the applicants on the motion ought not to be deprived, in the interim, of the benefit of a costs order they might obtain; the election to file and serve an amended statement of claim has the substantive effect of resolving the matter; as a matter of principle, the power conferred upon the Court under Order 62, rule 3 is “somewhat under utilised” in achieving justice between the parties on the merits of particular applications prior to the determination and disposition of the principal proceeding; and the present issue is truly a discrete issue. Those considerations in support of an order under Order 62, rule 3 are said to be consistent with principles derived from (Allstate Life Insurance Co v Australia & New Zealand Banking Group Limited & Ors (No. 14) (Lindgren J, 18 August 1995, unreported; [1995] FCA 660); Allstate Life Insurance Co & Ors v Australia & New Zealand Banking Group Limited & Ors (No. 13) (Full Federal Court, 17 August 1995, unreported; [1995] FCA 626) per Lockhart, Lindgren and Tamberlin JJ; Life Airbag Company of Australia Pty Limited & Ors v Life Airbag Company (New Zealand) Limited & Ors [1998] FCA 545 per Branson J; Courtney v Medtel Pty Limited (No. 3) [2004] FCA 347 per Sackville J and McKellar v Container Terminal Management Services Ltd [1999] FCA 1639 per Weinberg J.
23. Allstate was a case in which the Full Court had finally disposed of the question before it and took the view that the successful party ought not to be deprived of the benefit of that costs order having regard to the likely time between the date of that order and the ultimate trial of the action. In the proceedings before Branson J in Life Airbag Company of Australia Pty Ltd, there had been substantial interlocutory failures with the applicant finally delivering its fifth statement of claim in the proceeding. Having regard to those circumstances her Honour ordered that the costs ought to be paid forthwith thus displacing the usual order.
24. In Courtney, Sackville J had determined, as an entirely separate question, particular foundation facts going to the question of whether a class claimant in a class action was entitled to succeed on claims for compensation in connection with a pacemaker device. Sackville J departed from the ordinary order as to costs as the separate question had been finally determined; the foundation facts in relation to the class claim were truly discrete questions and the class action would take some time to resolve.
25. It is true that a party who has obtained a costs order ought not, in principle, to be held out of the benefit of that costs order where the question is truly discrete, the principal proceedings engage complex questions and the likely determination of those proceedings is well down the track. However, the power has generally been exercised in circumstances where there has been a final determination on the merits of a particular question. In the present notices of motion, no ultimate determination has been made on those motions. They are to be adjourned to a date to be fixed (which is not very far away) and it may be that the motions will come on for further consideration on the merits (probably on or about 8 June 2011). Alternatively, at the directions hearing on 18 May 2011, the position might emerge that the amended statement of claim (and amended application) raises a proper ground of jurisdiction upon which the controversy reflected by those documents reflects a justiciable controversy before this Court. It may not. Although the proceeding was commenced on 7 January 2009, the question of jurisdiction has come on for determination quite promptly upon the filing of the conditional appearances. The question of whether the applicants on the motion ought to have the benefit of an order that the costs be payable forthwith ought to be put over for determination once the amended statement of claim has been filed and served.
26. If the amended statement of claim fails to reveal a justiciable controversy, the proceedings are likely to be struck out on the merits in which event the applicants on the motions will have their costs in any event upon the determination of the motions. That may well involve a hearing of the motions as the question of whether jurisdiction is enlivened might be a contestable question on the merits. If it emerges at, for example, the directions hearing, that the amended statement of claim raises a justiciable controversy, a question will emerge as to whether the applicants in the principal proceeding ought to have filed a statement of claim which properly enlivened the jurisdiction from the very outset. If an application and statement of claim can be framed which enlivens the Court’s jurisdiction, the failure to do so at the outset, may well lead to the conclusion that the respondents in the principal proceeding have been put to unnecessary expense in agitating the matters agitated upon both motions having regard to the first statement of claim. This is especially so having regard to the very serious claims made in the first statement of claim and the failure on the part of the applicants in the principal proceeding to plead the material facts in a disciplined way avoiding argumentative propositions and matters of evidence.
27. It seems to me that the proper course is to order that the costs of the applicants of and incidental to the adjournment of both motions be paid by the respondents to the motions. The motions are to be adjourned generally. The question of the costs of and incidental to the motions will be determined either at the directions hearing or upon the determination of the motions having regard to the position adopted by the applicants on the motions once they have seen the amended statement of claim. If the motions are to be pressed in the light of the amended statement of claim, a view can be formed about the extent to which the amended statement of claim either “abandons” or not the existing statement of claim. Upon the resolution of the costs, the questions raised at [26] of these reasons will be alive.
28. For present purposes, the proper order as to costs is that the applicants ought to have their costs of the adjournment with no present order that those costs be paid forthwith.

I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood.

Associate:

Dated: 21 April 2011