Idoport Pty Ltd v National Australia Bank Ltd - [2002] NSWCA 271

No judgment structure available for this case.

CITATION: IDOPORT PTY LTD v NATIONAL AUSTRALIA BANK LTD & ORS; IDOPORT PTY LTD v ARGUS; IDOPORT PTY LTD v NATIONAL AUSTRALIA BANK LTD & ORS [2002] NSWCA 271

FILE NUMBER(S): CA 40124/02; 40125/02; 40126/02

HEARING DATE(S): 23 July 2002

JUDGMENT DATE:
15 August 2002

PARTIES :

IDOPORT PTY LTD v NATIONAL AUSTRALIA BANK LTD & ORS
IDOPORT PTY LTD v ARGUS
IDOPORT PTY LTD v AUSTRALIA BANK LTD & ORS

JUDGMENT OF: Mason P at 1; Stein JA at 86; Giles JA at 87

LOWER COURT JURISDICTION : Supreme Court - Equity Division

LOWER COURT
FILE NUMBER(S) : ED 50113/98
ED 50026/99
ED 3991/00

LOWER COURT
JUDICIAL OFFICER : Einstein J

COUNSEL: Appellant: B W Walker SC/ M G McHugh
Respondent: T F Bathurst QC/ H K Insall SC

SOLICITORS: Appellant: Freehills
Respondent: Withnell Hetherington

CATCHWORDS: PRACTICE AND PROCEDURE - order for payment of security for costs - limited liability plaintiff - prodeedings dismissed for non-compliance - relevant factors - Supreme Court Rules pt 53 r4 - APPEAL - discretionary judgment - requirement of substantial injustice (D)

CASES CITED:
Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 .
Australian Conservation Foundation v Forestry Commission (1988) 19 FCR 125
Australian Coal and Shale Employees' Federation v The Commonwealth (1953) 94 CLR 621
Bowen v Hickey (1958) 78 WN(NSW) 820
Cachia v Hanes (1994) 179 CLR 403 .
Cowell v Taylor (1885) 31 Ch D 34,
Harpur v Ariadne [1984] 2 Qd R 523
House v The King (1936) 55 CLR 499
Lovell v Lovell (1950) 81 CLR 513
Melville v Craig Nowlan & Associates Pty Ltd (2002) 119 LGERA 186
Micallef v ICI Australia Operations Pty Ltd & Anor [2001] NSWCA 274).
Minister for Aboriginal Affairs v Peko Wallsend Ltd (1986) 162 CLR 24
Multicon Engineering Pty Ltd v Federal Airports Corporation (1997) 47 NSWLR 631
Rugby Union Players Association Inc v Australia Rugby Union Ltd (SCNSW, 50225/96, unreported, 30 July 1997):
Sinclair v British Telecommunications plc [2001] 1 WLR 38
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514

DECISION: Appeal dismissed with costs

CA 40124/02
CA 40125/02
CA 40126/02

MASON P
STEIN JA
GILES JA
Thursday 15 August 2002

IDOPORT PTY LTD v NATIONAL AUSTRALIA BANK LTD & ORS

IDOPORT PTY LTD v ARGUS

IDOPORT PTY LTD v NATIONAL AUSTRALIA BANK LTD & ORS

JUDGMENT

1 MASON P: On 29 January 2002 Einstein J dismissed three related proceedings, having earlier that day refused the plaintiff an adjournment (Idoport Pty Ltd & Anor v National Australia Bank Ltd & 8 Ors; Idoport Pty Ltd & Anor v Donald Robert Argus; Idoport Pty Ltd “JMG” v National Australia Bank Ltd [2002] NSWSC 18). His Honour exercised the power conferred by Pt 53 r4 of the Supreme Court Rules consequent upon the plaintiff's continuing failure to pay security for costs previously ordered. Rule 4 provides:

Where a plaintiff fails to comply with an order under this Division, the Court may, on terms, order that the proceedings on any claims by the plaintiff for relief in the proceedings be dismissed.

Application for leave to appeal

2 The appellant, the plaintiff below, seeks leave to appeal from the dismissal orders. The three applications have been heard together and there has been full argument as on an appeal, subject to the grant of leave.

3 The appellant submits, in effect, that the Court should have little trouble in satisfying itself that there should be leave to appeal. The orders under challenge are technically interlocutory but final in practical effect. And, to the extent that limitation bars would descend upon any fresh proceedings the dismissal has shut a door that cannot be reopened. The dismissal orders, including those relating to costs, have negative impact upon the appellant’s capacity to obtain alternative funding for this horrendously expensive litigation.

4 The judgment under appeal concerned a matter of “practice and procedure” as defined in Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 176-7. It follows that this Court should focus on issues of substantial injustice. In that context, it is relevant to observe that nothing has changed since January 2002, in the sense of funding having “turned up” (in Mr Micawber’s terms ) in the six months that have elapsed since the dismissal of the proceedings. There was no application to tender evidence on this matter and Mr Walker SC frankly admitted that the funding position has not changed since January.

5 It is also relevant to observe the appellant’s comparative dilatoriness in these proceedings (in which holding appeals and active appeals were filed at the last moment). At the very least, these considerations mute the stridency of its complaint about the negative impact of the pendency of the dismissal orders on its prospects of getting alternative funding.

6 I would grant leave to appeal. In doing so I have weighed the above matters as well as concluded that one of the foreshadowed grounds of appeal (1(a)) is arguable.

Overview of proceedings

7 The substantive proceedings are vast by any measure.

8 The “Main proceedings" (No 50113/98) were commenced in September 1998. The "Argus proceedings" (No 50026/99) were commenced in March 1999. The hearing started in July 2000, being a trial as to liability and damages. A third proceeding (No 3991/98, known as the "MLC proceedings") was commenced in September 2000 and, from its inception, it was heard concurrently with the other two proceedings.

9 Opening submissions by both sides took 57 hearing days. The current statement of claim in the "Main proceedings" runs to 232 pages. Hundreds of witness statements have been served. There have been at least 25 contested interlocutory applications. The transcript is roughly 15,000 pages. When the proceedings were stayed finally on 1 December 2001, the trial was on its 222nd day of hearing. It was estimated that they were likely to continue until at least late 2003 even if uninterrupted.

10 The damages claimed against the Bank are US $29.3 billion, a sum exceeding the bank's market capitalisation. Similar damages are claimed against the individual defendants and those claims involve serious allegations of misconduct. The causes of action include claims of breach of contract, procuring and inducing breach of contract, breach of fiduciary duty and threatened participation in the same, unjust enrichment and under the Trade Practices Act 1974 (Cth).

11 By the end of 2001 the Bank’s estimated costs of the proceedings were in excess of $60 million ([2001] NSWSC 1081 at [97]).

12 Cross-examination of the appellant's witnesses commenced in March 2001. Significant credit issues will need to be resolved by the trial judge.

13 The burden upon judge, legal practitioners and the Court generally of managing and determining proceedings of such immensity is manifest. The significant case management difficulties are documented in the judgment of 26 November 2001, the reasoning of which was specifically incorporated into the judgment under appeal (see [2001] NSWSC 1081 at 40-41).

Orders for security and dismissal

14 In December 2000 the appellant and its then co-plaintiff Market Holdings Pty Ltd foreshadowed significant amendments to the statement of claim in each proceeding. These became known as the “modification amendments”.

15 The defendants filed motions for security for costs in January 2001. The parties agreed to defer the hearing of those applications until late August 2001.

16 Security was not sought generally, but was limited to:

17 A significant ground for the application was that there were persons standing behind the appellant who were funding the proceedings in return for a share of the proceeds, should the appellant succeed.

18 Einstein J gave judgment on 13 September 2001 (see [2001] NSWSC 744). The orders, made on 27 September 2001, required:

a) in the MLC proceedings, that the plaintiffs provide security comprising a lump sum payment of $479,305 by 31 October 2001 and thereafter a monthly payment of $23,179 up to a total of $942,895; and
b) in the Main proceedings, that the appellant provide security by monthly payments of $48,178 as from 1 November 2001 (such security being for the defendants’ costs insofar as they relate to the “modification amendments”).

19 On 17 October 2001 Market Holdings was removed as a party in the Main and Argus proceedings on the motion of its liquidator.

20 The appellant failed to make the payment of security in the MLC proceedings by the due date. Accordingly, as from 1 November 2001 the MLC proceedings were stayed. In the other two proceedings only the first monthly payment was made on 1 November 2001.

21 On 13 November 2001 the defendants filed a motion seeking dismissal of the MLC proceedings.

22 On 26 November 2001 Einstein J rejected the plaintiff’s application to vacate the orders for security for costs; adjourned the proceedings generally until 29 January 2002; adjourned to 29 January 2002 the defendants’ application to dismiss the MLC proceedings; and gave detailed directions that included leave to the defendants to file a notice of motion returnable on 29 January 2002 seeking that the other proceedings also be dismissed. There were also directions for the service of evidence relating to the foreshadowed dismissal orders.

23 In granting the limited adjournment, Einstein J noted the very significant problems for the ongoing conduct of the proceedings which would be caused by any lengthy adjournment. He made it clear that the Court would not lightly countenance further adjournments (see [2001] NSWSC 1081 at 49ff, 104). Of particular relevance to the present appeals are his reasons at [49]-[50]:

49 The short point which I see as unarguable, is that to grant the plaintiff’s application for the adjournment and to make ancillary orders staying until further order, the orders of the Court for the provision of security for costs made on 24 September 2001 (or by whatever route, to procure an adjournment of the final hearing until some time in February of next year) will cause very considerable inconvenience and additional costs to the defendants and will present a number of extremely difficult problems in relation to the ongoing case management of and hearing of the final proceedings. These problems include the uncertainty as to:

(1) the amount of court time which a continuance of the hearing would require; and

(2) when the final hearing could practicably resume following a new regime in terms of directions.

50 The problems concerning the situation with respect to the Court are very real for a number of reasons. Special arrangements have obviously had to be made to make one of the three Commercial List judges available to hear the final hearing over the last 18 months and available to be in a position to continue that hearing through the whole of next year and quite probably thereafter until its conclusion. Those arrangements have included use of the Technology Court with its ancillary complex document management facility…. The short point is that uninterrupted use of the Technology court cannot of course, be taken as a given, where other pending litigation may require use of that Court room with its special facilities.

24 By 1 December 2001 the Main proceedings and the Argus proceedings were also stayed as a result of the plaintiff’s failure to pay the security due by that date.

25 The defendants filed motions for dismissal and supporting evidence in accordance with the directions. The plaintiff did not. Despite having been directed to serve its evidence by 24 January 2002 it did nothing until 29 January 2002, i.e. the adjourned hearing date and return date of the motions for dismissal. On that day it filed an affidavit by Mr McConochie, one of its directors.

26 The plaintiff unsuccessfully sought an adjournment. The motions were heard and determined that day. The formal orders were:

In the Main proceedings

Upon the first and second defendants by their counsel undertaking to the Court, subject to any application under Part 32A, or any successful appeal against the dismissal of the proceedings, or any application by any party for dismissal for want of prosecution, not to prosecute the Cross-Claim unless fresh proceedings are brought concerning any cause of action or the whole or any part of any claim for relief by any of them in these proceedings: The Court orders: 1. That the Plaintiff’s Amended Summons and Fourth Further Amended Statement of Claim, and the Second Cross-Claim be dismissed. 2. that the Plaintiff pays the defendants’ costs of the proceedings. 3. That the Plaintiff and each of the Cross-Claimants to the Second Cross-Claim be barred from bringing fresh proceedings concerning any cause of action or the whole or any part of any claim for relief by any of them in these proceedings, until costs in these proceedings have been paid in full. 4. That these orders be entered forthwith.

In the Argus proceedings

The Court orders: 1. That the proceedings be dismissed. 2. That the Plaintiff pay the Defendant’s costs of the proceedings. 3. That the plaintiff be barred from bringing fresh proceedings concerning any cause of action or the whole or any part of any claim for relief by it in these proceedings, until costs in these proceedings have been paid in full. 4. That these orders by entered forthwith.

In the MLC proceedings

The Court orders: 1. That NSW Supreme Court Proceedings No 3991 of 2000 be dismissed. 2. That the Plaintiff pay the Defendant’s costs of the proceedings. 3. That the Plaintiff be barred from bringing fresh proceedings concerning any cause of action or the whole or any part of any claim for relief by it in these proceedings, until costs in these proceedings have been paid in full. 4. That these orders be entered forthwith.

27 The appellant challenges the orders for dismissal and (alternatively) the costs orders.

28 The appellant does not suggest that Einstein J had regard to any irrelevant factors. His Honour detailed the failure to pay the security as ordered with the consequential stay of the three sets of proceedings. He also observed that notices of ceasing to act had been filed on 3 December 2001 by the appellant's solicitors and that counsel who had previously represented the appellant had returned their briefs. The crux of the reasoning is set out in paragraphs 24 - 60 of his judgment which it is convenient to set out in full. Key findings of fact are underlined, none of them being challenged in this appeal.

Relevant circumstances in the present proceedings
24. I accept as correct the defendant's submission that the following five matters at the least, require to be taken into account on the issue of whether the Court should now dismiss the Main Proceedings. The list is by no means exhaustive as all relevant circumstances require to be taken into account, including the Court straining wherever practicable consistently with the interests of justice to avoid taking the radical step of denying a plaintiff it’s day in Court. Clearly the proper exercise of the Court’s discretion requires all relevant factors to be weighed in balance, the ultimate decision reflecting the interests of justice. The principles were generally set out in paragraphs 23 – 37 of the November judgment.

The five factors identified by the defendants are:

(1) the period that has elapsed since security was ordered;

(2) the fact that the plaintiff has been on notice of the application for dismissal;

(3) the seeming inability of the plaintiff to further fund the Main Proceedings;

(4) the prejudice to the defendants;

(5) the position of the Court.

The ability of the plaintiff to further fund the proceedings
25. The November judgment dealt with the appropriate exercise at that time of the relevant discretion in paragraphs 94 and following. Generally the plaintiff succeeded in obtaining a period of two months in which to secure further funding by a series of orders which had the inevitable consequence of interfering very substantially with the many steps then in place for the regular continuance of the final hearing in an uninterrupted way. The very clear difficulties raised by such a placing of a freeze upon the interim steps necessary to permit the regular continuance of a final hearing due to continue for a number of years were identified in the November judgment [see in particular paragraphs 43-48 of the judgment]. The interests of justice however required that the plaintiff be given that period of time in which to put its house in order.

26. Paragraph 104 of the November judgment was in the following terms:

“At the same time it is necessary for the Court to make quite clear to the plaintiff that this one chance being granted to it [referring to the adjournment of the motions and the proceedings to the commencement of term in 2002] will almost certainly not be repeated on a subsequent occasion. There is a very real limit to the extent to which the Court may be expected to accommodate a "stop-start" regime in litigation of this order. The effective deferral of the further hearing until next year carries with it a clear indication that should the funding problems remain pervasive or should the Court not be satisfied that the plaintiff has shown that it can realistically continue the final hearing, the stay may well not be lifted (a matter to be determined as part of the merits of an application to lift the stay) and the proceedings will very likely be dismissed on appropriate application next year."

27. Clearly Idoport has since 26 November 2001 been on the clearest of notice of the very real prospect of a dismissal of the proceedings.

The proceedings [SC 5539/01] brought by Idoport Pty Ltd against Efficiency Investment BV
28. Between 17 and 19 December 2001 Palmer J heard proceedings brought by Idoport and others against Efficiency Investment BV and another. Efficiency had entered into a series of complex funding arrangements generally providing for the lending of money by Efficiency to Idoport. The final hearing of the proceedings against Efficiency was expedited by Palmer J. as a matter of pressing urgency and heard during the vacation. His Honour delivered judgment on 24 December 2001 ([2001] NSWSC 1197). The judgment is self-explanatory and to be found at pages 133 and following of Exhibit DGL1 to Mr Lovell's affidavit of 21 January 2002, now Exhibit DJ1 on the hearing of the motions before me. The central holdings were that Efficiency had validly exercised its rights to terminate further funding of the Idoport Proceedings as at 16 September 2001 pursuant to Clause 5.4.1 of the Shareholders Agreement and that Efficiency was obliged to provide run-off funding in accordance with Clause 5.4.2.

29. It is apparent from the judgment of Palmer J. that Efficiency has lawfully capped its funding arrangements with Idoport and that the amount that it is required to release to Idoport is less than the existing liabilities which Idoport had in relation to the litigation as detailed in paragraph 64 of Mr Lovell's affidavit of 21 January 2002, which liabilities total in excess of $1.5 million.

30. Idoport has adduced no reliable evidence to show that it has any prospect, let alone any reasonable prospect, of
securing further funding to continue the final hearing. The affidavit sought to be relied upon by Idoport is made by Mr Maconochie on 29 January 2002. Idoport essentially seeks a further, although fairly short, period of time in which to pursue what Mr Maconochie sees as possible further funding avenues. The application for the adjournment pursued by Mr Newton of counsel today was for an adjournment of ten days or, in the alternative, for an adjournment until tomorrow morning when senior counsel (about, as I understand it, to be briefed or briefed this morning, be the new senior counsel with, as I understand it, no familiarity with these proceedings), would apparently be available or may be available to address the court.

31. The time has passed for those funding affidavits (sic) to be pursued. As this judgment otherwise makes plain, Idoport had been upon the clearest of notice since late November that its funding difficulties would require to be resolved by today. Whether Mr Maconochie's optimism in respect of the acquisition of further funding is or is not well grounded is impossible to estimate. The fact is that a solid period of time having now been granted to Idoport to resolve these funding difficulties, Idoport must now face the hard realities of litigation. Commencing litigation against its major funder may not seem to auger well for the general relationship between Idoport and Efficiency. Possibly more importantly, the fact that against the background of the November judgment and the clear indications in it, no firm settlement of the difficulties with Efficiency has been reached by the all important first day of term, gives the court no assurance whatever of the imminent achieving of such a settlement. Optimism is one thing. The position in this mammoth litigation is another and the terms of the November judgment could not have been more plain, both to Idoport and to Efficiency, or to any other past or future funder with whom Idoport had dealt.

32. I turn to examine the terms of Mr Maconochie's affidavit of 29 January 2002. The first point to notice in relation to the affidavit is that apparently the first time when negotiations between Efficiency and Mr Maconochie on behalf of Idoport as to the continued provision of financial assistance to Negubo by Efficiency within the existing shareholders agreement took place was between 26 January 2002 and 29 January 2002. Mr Maconochie is therefore referring to the period on Saturday, Sunday, yesterday and today in terms of an affidavit in which he asserts that these negotiations took place. As I would read the affidavit, those negotiations were the first occasion of any negotiations presumably following the Palmer J litigation, which litigation presumably, one assumes, took place in a situation in which it is unlikely that there were continuing negotiations, although there may have been.

33. The Court receives no particular assurance of the prospect of an agreement now being reached between Efficiency and Idoport when on the Saturday, Sunday and Monday before the first day of term negotiations apparently take place.

34. The second point to note is that one has as annexures “A” and “C” to the affidavits, very carefully drafted materials. Indeed, the communications which comprise annexures A and C are referred to as drafts. Mr Maconochie describes annexure A as “a draft letter received from Efficiency to the plaintiff dated 28 January 2002”. That letter appears on Efficiency Investments letterhead and is unsigned. In the place of a signature one has the word "draft”. The letter purports to confirm that Efficiency has decided to continue to make monies available pursuant to the shareholders agreement "so long as the Stay Orders are lifted" . The letter appears to make clear that any question of Efficiency continuing to make monies available is contingent upon the earlier event of the stay orders being lifted.

35. The second sentence of the second paragraph, which appears to be carefully drafted, reads:

"If the stay is lifted so that the proceedings continue, then pursuant to the Shareholders Agreement funds will be made available to meet the obligations to pay amounts ordered against Idoport, for security for costs of the Bank up to and including 1 February 2002."

36. In short, the paragraph, albeit in this draft letter from Efficiency, or prepared for Efficiency, proceeds upon the basis that if the stay is lifted then Efficiency, pursuant to the Shareholders Agreement, will make available funds to meet the obligations to pay only the amounts for security up to and including 1 February 2002.

37. The final sentence also requires close attention. It reads:

"Efficiency is also aware of the continuing obligation of Idoport to pay security for costs on a monthly basis."

The final sentence includes no suggestion that Efficiency is content to fund that further security for costs.

38. Turning to annexure C, this is a draft letter which Mr Maconochie in his affidavit describes as

Importantly, paragraph 3 of that letter provides that:

"Upon receipt of Negubo's written acceptance below, the Share will become partly paid to AU$7.5 million and Efficiency will pay further calls on the Share as made by Negubo from time to time subject to..” [two important matters are then set out]

39. The first of these matters requires that the stay of the proceedings be lifted by order of the court and the second identifies the provisions of clause 5.4 of the shareholders agreement. It will be recalled that clause 5.4 of the shareholders agreement is the clause which provides an entitlement in Efficiency at certain stages to withdraw from further funding obligations.

40. Possibly the most important sentence in the whole of Mr Maconochie's affidavit of today is the sentence which reads:

"I am presently unable to say whether funding arrangements with Efficiency can be concluded."

41. The following sentence reads:

"If they are, the plaintiff will be able to fund the continuation of the proceedings."

42. The court is not able to receive any real assurance from Mr Maconochie's affidavit in terms of a probability or likelihood, or a high probability or likelihood, that any additional time granted to Idoport will lead to Idoport securing further funding with which to pay the outstanding security for costs amounts and, most particularly, to continue the final hearing.

43. The transcript of today will record the events of the morning and the afternoon. The events of the morning saw Mr Maconochie seeking leave initially to represent Idoport, albeit that he is not a legal representative. The morning saw Mr Maconochie's attention being drawn to the provisions of the Supreme Court Rules concerning a corporation carrying on proceedings otherwise than by a solicitor, and his attention being drawn to the fact that the Rules provide that where an authorised director joins as a plaintiff with a corporation for the purpose of permitting the corporation to take advantage of Part 4 Rule 4A, the Court may make against the corporation and the authorised director any order for costs which, if the authorised director had not been made a party, it would have made against the corporation.

44. Mr Maconochie made it very plain that he was not content with the possibility that by the route of himself joining as a plaintiff he may be liable to pay some or all of the costs of the proceedings.

45. After lunch an appearance for Idoport was announced by Mr Newton of junior counsel who very frankly and fairly conceded that, as I understood him, his knowledge of these proceedings was close to zero and that having been instructed presumably, as I gather, over the luncheon adjournment for the purpose of making an application for an adjournment, he was generally unable to assist at all in terms of the substance of the defendants current motions.

46. The events of the day leading up to the commencement of the delivery of the ex tempore judgment suggests to the Court that Idoport is in a state of high disarray in relation to the further continuance of these proceedings. The adjournment application was not acceded to and is dismissed. These reasons for judgment generally deal with not only the defendants' motions but in my view provide the background circumstances and factors which clearly indicate the impropriety of presently granting Idoport any further time at all with which to secure or procure legal representation and/or with which to seek further adjournments of the defendants' motions.

47. I accept as correct the defendants submission that the evidence, as it stands, reveals that:

(a) the principal funder, Efficiency, sought to cap its liability to fund at $7.5 million;

(b) the proceedings brought by Idoport and others challenging the validity of the actions of Efficiency have failed and no appeal has yet been lodged.

48. Idoport, despite the timetable laid down by the Court by the orders of 26 November 2001 has not explained, outside of Mr Maconochie’s affidavit of today, by affidavit evidence or otherwise, its attempts to obtain funding and the results of such attempts. Outside of the affidavit to which I have already referred, there is for example no evidence:

(a) as to whether there has been any attempt to obtain funding from Idoport's other funders, OAMPS Ltd or North & South Group SA or from the other shareholders or from the directors of Idoport;

(b) as to whether there has been any attempt to obtain funding from any other source; and

(c) as to Idoport having any prospect of raising further funds to continue the several sets of proceedings.

49. The evidence before the court discloses that by facsimile addressed to Efficiency and its officers dated 20 November 2001 signed by Mr Maconochie on Negubo Pty Ltd letterhead, the following information was communicated:

“Assuming that the trial runs until the end of 2003 as now seems likely, a substantially further amount of money will be required to be advanced by Efficiency under the Negubo Loan Agreement.

The estimated total amount is as follows:

(a) Main trial (including separate hearings by examiner of expert witnesses), at AUD700,000 per month for 28 months, total AUD$19,6000,000.

(b) Security for cost AUD$1,906,445.

(c) Court of Appeals at AUD$150,000 per month for 12 months commencing 2004 (includes preparation, hearing and possible security for costs), total AUD $1,800,000.

(d) High Court Appeals at AUD$60,000 per month for 12 months commencing 2005 (includes preparation, hearing and possible security for cost), total AUD$720,000.

Summary of estimated expected costs are:

Cost Item	Future Cost (AUD$)
Main Trial	19,600,000
Security for costs	1,920,000
Court of Appeals	1,800,000
High Court Appeals	720,000
Total	24,040,000

Excluding security for costs of AUD$1,920,000 ordered in the main proceedings, the estimated total expected costs are AUD$22,120,000.

Instructing solicitors and counsel require certainty that they can be paid without interruption. Once started, as is the situation, the trial must be able to be continued without interruption to judgment to preserve and/or realise Negubo’s asset in Idoport and accordingly, Negubo has incurred this cost (as a future cost) in preserving and/or realising its Assets. Otherwise, unless these costs are paid there will be a stay, and in due course a discontinuance, of the proceedings. In that case, Negubo would be unable to preserve and/or realise its asset in Idoport.

Therefore, in accordance with Clause 4.1 of the Negubo Loan Agreement, Negubo requests that Efficiency forthwith advance an amount of $$22,120,000 to the Withnell Hetherington Trust Account (and notionally via Negobo in accordance with clause 4.3 of the Negubo Loan Agreement) to enable the costs and expenses to be paid direct from that Account, as follows:

Bank Account: Withnell Hetherington Trust Account
Bank: Australia & New Zealand Banking Group
BSB: 012-003
Account No. 3530-06897

If Efficiency does not notify Negubo by return that it is advancing Negubo this amount of AUD$22,120,000 as soon as practicable, Negubo will take it that Efficiency has refused and will continue to refuse with Negubo’s request, and Negubo will reserve its rights.”

50. The absence of reliable evidence from Idoport as to its ability to further fund its actions, the expected length of the final hearing which will clearly run until at least the end of 2003, and the estimate by Idoport's parent company Negubo that Idoport requires $21,520,000 in order to fund the prosecution of its claims at first instance to finality provides powerful support for the proposition that on the evidence presently before the Court, Idoport has no real prospect of being able to fund the continuance of the proceedings at first instance to finality . Whilst arguably the Court may not be entitled to now require Idoport to identify otherwise than in broad generality , precisely where when and how it proposes to secure this dimension of funding, the Court is entitled in considering Idoport's past and continuing failure to honour the security for costs orders, to take into account the seemingly dismal if not altogether hopeless position facing Idoport in terms of its ability to fund the proceedings at first instance up to conclusion . At least bearing in mind the immediate history and the scale of the proceedings and the courts list, the Court is entitled at this stage in these proceedings to require to be reasonably satisfied that Idoport has in place at least some program having some prospect of success in terms of funding arrangements. In fact Idoport has simply not shown that it can realistically continue the final hearing. To the contrary the funding problems appear to remain pervasive. Mr Maconochie’s affidavit, to which I have already referred, gives the Court no assurance with sufficient precision of any reliability in Idoport’s prospects of success in terms of funding arrangements . These matters can be taken into account in the exercise of the Court's discretion to presently dismiss the proceedings.

Prejudice to the Defendants

51. Paragraphs 66 and following of Mr Lovell's affidavit of 21 January 2002 identify the following pertinent facts:

“66 The effluxion of time during which the hearing of the Main Proceedings and the MLC Proceedings is stayed, without being dismissed, cause prejudice to the Defendants in a number of respects. That prejudice would increase with the period of time that elapses. Some aspects of that prejudice are outlined below.
67 Many of the Defendants' witnesses are persons who, both at the time of the events of which they give evidence and at the time they gave statements which have been served in the Main Proceedings, were employees of one or another of the corporate Defendants. A number of these witnesses are no longer employed by either the corporate Defendants or any other company in the National Group. It is very likely that, as time passes, further witnesses will leave the employ of the National, and no longer be within the control of the National. That would lead to greater difficulty in securing those witnesses' attendance to give evidence when required, such as increased cost (particularly if the witness moves overseas) and difficulty in arranging time to confer with witnesses and obtain their instructions.

68 The evidence on many aspects of the Main Proceedings relates to witnesses' recollections of events which took place in 1996, 1997 and 1998. For example, the Plaintiff's pre-contractual misrepresentation claims revolve around meetings and conversations which took place in mid-1996, and the Defendants' statements on those claims were filed and served in April 1999. Witnesses' recollections of events will diminish with time.

69 While the proceedings are adjourned or stayed, the uncertainty as to when the hearing will resume (and whether it will resume at all) makes it very difficult for the Defendants to make plans in respect of the legal resources needed to prepare for and conduct the hearing. For instance:

(a) Counsel briefed by the Defendants are likely to take other briefs, which may hinder their availability to return to this matter if the hearing were to be resumed.

(b) Partners and solicitors at Freehills will cease to work on the matter, and will be re-deployed to other work, which may also hinder their availability to return to this matter.

70 Prior to the proceedings being stayed, the Defendants were undertaking work required to comply with a number of Court directions, including directions to file expert statements, give discovery and prepare for the hearing of the interlocutory motions in the Main Proceedings. That work ceased once those directions and the proceedings were stayed. The greater the period that passes before that work is to be resumed, the greater the time and cost of resuming that work.

71 Generally, the longer the proceedings are adjourned, the greater the legal costs to the Defendants of resuming the hearing. Legal representatives would need to re-familiarise themselves with material in the proceedings, both generally and in respect of specific issues to be dealt with shortly after the resumption of the hearing. Those issues would include preparation for the cross-examination of Mr Martin, Mr Coleman and Mr Gillick. These are issues on which work had been done by the Defendants' legal representatives prior to the proceedings being stayed, at least part of which work would need to be redone. Given the scope of the issues, the number of statements and the length of the hearing (both as to openings and cross-examination) the task of re-familiarising oneself after even a moderate length of time is likely to be considerable.”

52.

I accept as correct the following summary

(taken from the defendants submissions of 25 January 2002)

of the prejudice to the defendants if the Main proceedings continue to be stayed without being dismissed. Generally the same issues seem to me to arise in relation to the MLC proceedings

:

“25 In summary, this prejudice falls into two categories. The first is the prejudice suffered by the defendants in their ability to defend the Main Proceedings should they be stayed for any length of time and then recommenced. This prejudice takes the following forms :

(a) the effluxion of time is likely to have an effect on the defendants’ witnesses . First, witnesses who, at the time of giving statements, were employed by the National are increasingly likely to change employment. This increases the time and cost of conferring with those witnesses, and securing their attendance to give evidence. Secondly, the events the subject of the plaintiff’s claim include events in the period 1996 to 1998, and encompass a number of disputed conversations during this period. The longer the Main Proceedings are stayed the more difficult it is for witnesses (see paragraphs 67 to 68 of the Third Lovell Affidavit).

(b) the scope and complexity of the Main Proceedings mean that any lengthy stay raises the question of whether or not the defendants need to continue to retain their legal representatives to work on preparing the defence. If the defendants elect not to continue to retain their legal representatives the defendants are likely to experience difficulties in preparation if the stay is subsequently lifted, as the knowledge of the legal representatives and the systems developed in the course of conducting the defence during the final hearing will need to be extensively reviewed or recreated. The longer the stay is in place before any recommencement or dismissal the greater the risk , and it is no exaggeration to say that given the extraordinary size of the claims, the extent of the evidence and the transcripts and the length of the hearing to date, there may come a time when the knowledge and know-how of the defendants’ legal representatives becomes irrevocably lost. Further, counsel and solicitors briefed by the defendants will, if not retained, inevitably become involved in other matters and may not easily be able to return to work on the defence of the Main Proceedings should the hearing recommence. On the other hand, if the defendants continue to work on their defence, during the period the proceedings are stayed in order to preserve the knowledge carefully built up since the commencement of the Main Proceedings in September 1998, the costs incurred during the stay are likely to be irrecoverable if the Main Proceedings are later dismissed (see generally paragraphs 69 to 71 of the Third Lovell Affidavit).

26

The second category of prejudice that will be suffered by the defendants if the Main Proceedings remain stayed without being dismissed arises from intangible factors associated with litigation such as the effect of the litigation on the reputation of the defendants, and, in the case of the personal defendants, the personal strain of being subject to a claim of such seriousness and magnitude

. The speech of Lord Griffiths in Ketterman v Hansel Properties Ltd [1987] AC 189 at 220, made in the context of an adjournment application, is equally apposite to the defendants’ application for dismissal:

“… justice cannot always be measured in terms of money and in my view a judge is entitled to weigh in the balance the strain the litigation imposes on litigants, particularly if they are personal litigants rather than business corporations …”.

The position of the Court
53. The defendants further submit and I accept that it is now settled that a Court may, in relation to the exercise of a discretion to grant an amendment to pleadings, or to grant an adjournment, take into account the proper utilisation of the Court's resources. I accept that it is similarly a proper exercise of discretion in relation to dismissal of proceedings to take the Court's position into account.

54. Clearly as the defendants submit there is an increasing responsibility on the part of judges to have regard, in controlling their lists and the cases that come before them, to the interests of the community, and the litigants in cases awaiting hearing, and not merely to the concerns of the parties in the instant case: see Gleeson CJ in State Pollution Control Commission v Australian Iron and Steel Pty Ltd (1992) 29 NSWLR 487 at 493. [See generally the authorities referred to in paragraphs 15-22 of the November judgment] In Sali v SPC Ltd (1993) 67 ALJR 841 at 849, Toohey and Gaudron JJ made the point that the need to avoid disruptions in the Court lists with consequent inconvenience to the Court and prejudice to the interests of other litigants waiting to be heard are " pressing concerns to which a Court may have regard ".

55. It is also clearly necessary to take into account the difficulties which the Court will have in proceedings of the complexity of these proceedings, in being able over a sustained adjournment period to come back to the facts so as to be in a position to properly deal with the issues . Over 15,000 pages of transcript already require to be taken into account. There is simply a limit to the allowances which can be made whilst Idoport goes about further searches for funding. And all of this time it must be remembered that there is no evidence presently before the Court to the effect that any director of Idoport has advanced any funds at all to support the litigation sought to be pressed.

No issue estoppel or res judicata
56. A dismissal under Part 52 of the Rules will not, in law, shut out the plaintiff from commencing fresh proceedings relating to subject matter of the proceedings dismissed. No issue estoppel or res judicata arises. As the defendants point out Part 40 Rule 8 of the Rules permits new proceedings to be commenced in circumstances such as the present. A dismissal, of itself, will not shut Idoport out from litigating an issue which is fairly arguable (see, for example, Queensland v J. L. Holdings Pty Ltd at 154). A dismissal merely provides certainty to a defendant when proceedings have been stayed.

The MLC Proceedings
57. By and large most of the above considerations relate not only to the Main Proceedings but also to the MLC proceedings. Up until they were stayed, the MLC proceedings were being heard and determined together with the Main Proceedings, evidence in the one being the evidence in the other. In both the MLC proceedings as well as the Main Proceedings an extensive case management exercise was undertaken leading to the Court’s judgment of 5 October 2001 ([2001] NSWSC 868) and the directions and orders made by the Court on that date.

Dealing with the issue
58. Anyone familiar with the history of this litigation would accept that the proceedings are unusual in the extreme. In any case where orders for security for costs have not been complied with and the Court is faced with an application thereafter for the proceedings to be dismissed the justice of the situation requires to be treated with. The Court must take into account the nature of the proceedings and every aspect of or related to the circumstances in which the security for costs orders have not have been complied with. The identity of the parties, the nature of the proceedings, the issues involved, the nature of the tribunal hearing the proceedings, the special arrangements, if any, which may have had to be made to permit the proceedings to be heard in a particular way, all require to be taken into account. In short every circumstance would require to be weighed in balance when the Court was asked to take the extreme step of dismissing the proceedings. This is generally how I approach the instant applications.

59. To my mind Idoport has been given the last two months to place its funding house in order. The November judgment represented a standing back from the minutiae and a concerted effort, albeit at high expense, of halting, for Idoport's assistance, every step then in place for the regular continuance of the final hearing. Even if the proceedings were now re-enlivened upon immediate payment of all outstanding amounts due under the security for costs orders, it would take probably months before the Court could expect the defendants to be ready to continue the final hearing. The whole of the momentum of the final hearing reached by late November last year simply stopped in mid air from one moment to the next. This meant that many steps then in the course of being taken in a particular order, ceased. Witnesses who had been planned to be called in late November and early December had to be put off . A United Kingdom witness, Mr Hume, whose personal convenience had led to special steps for him to be given what amounted to a ‘special fixture’ for the taking of his evidence, could no longer be cross-examined early in the new term. Important questions in terms of the testing of the Court's order for the appointment of an examiner were not able to be dealt with. And in all of this one has to recall that these are commercial proceedings being heard in the commercial list which naturally strain the ability of the Court to deal with other cases. Notwithstanding that fact, any suit for an amount exceeding the capitalisation of what is probably the largest bank in this country has to be given very special attention. And a suit in which Idoport (and originally Market Holdings) made very serious claims generally outlined in the interlocutory judgment delivered in mid 1999 required and received very special attention from the Court. But the courts resources are not unlimited. A stop-start regime in litigation of this order cannot generally be permitted. The many reasons include the complexity of the issues. As earlier stated the current transcript covers over 15,000 pages. The number of witnesses anticipated to be called, the number of statements filed, the complexity of the issues to be dealt with and the general nature of those issues which include for example a patent suit in which United States patent law requires to be proven and understood, all serve to make the point that the final hearing cannot stop and start and stop again, certainly for very long. It should also be recalled that the Technology Court is being used for the final hearing. An outside Project Manager has been appointed. The funding difficulties have meant that Idoport has ceased to pay, as I understand it, the Project Manager. An independent Court Reporting company has been responsible for producing the transcript. The funding difficulties have meant that Idoport has ceased to pay, as I understand it, that Court Reporting company. Reference was made in paragraph 116 of the November judgment to the point made by McHugh J in Oshlack v Richmond River Council (1998) 193 CLR 72 and 97 in terms of the importance that a party contemplating litigation, [or, as here, contemplating continuing the current mammoth final hearing], be under a sober realisation of the potential financial expense involved in that exercise.

60. The proper exercise of the Court's discretion is in my view to presently dismiss the application for the adjournment and to presently dismiss each of the proceedings. Time has simply run out for Idoport. There is a real limit to the extent to which the Court can continue to accommodate Idoport’s attempts to procure funding.

Grounds of appeal

29 The notice of appeal in each matter raises the following grounds of appeal:

GROUNDS

1. The Trial Judge erred, in the exercise of his discretion, in failing to take into account in determining to refuse the Appellant’s application for an adjournment and in dismissing the proceedings:-

(a) the irreparable prejudice caused the Appellant by dismissing the proceedings rather than leaving the proceedings stayed, particularly in relation to those aspects of the Appellant’s claim based on the Trade Practices Act;

(b) that as recently as 5 October 2001 his Honour had declined an application made by the Defendants for a 12 month adjournment of the proceedings.

2. The Trial Judge erred in the exercise of his discretion in giving weight, or undue weight, to factors relied upon by the Respondents, namely:-

(a) the period that had elapsed since security was ordered;

(b) the fact that the Plaintiff had been on notice of the application for dismissal;

(c) the seeming inability of the Plaintiff to further fund the proceedings;

(d) the prejudice to the Defendants.

3. The Trial Judge erred, in the exercise of his discretion, in failing to give sufficient weight to:-

(a) the enormity of the task faced by the Appellant in obtaining further funding (in the order of $20 million) whilst at the same time seeking to resolve issues with its principal funder in the period from the end of November 2001 to the end of January 2002;

(b) the disparity between the resources available to the Plaintiff compared with the Defendants;

(c) the facts that Security for Costs orders had only been in default for less than 2 months in the Principal proceedings and less than 3 months in the MLC proceedings;

(d) the fact that the Appellant was, initially, un-represented, and, subsequently, represented by Junior counsel with very limited knowledge of the proceedings.

30 The language of these grounds seeks to engage the classical criteria for appellate review of a discretionary decision formulated in House v The King (1936) 55 CLR 499 at 404-5, as developed in later authoritative decisions (Lovell v Lovell (1950) 81 CLR 513 at 518-9, 532-3; Australian Coal and Shale Employees’ Federation v The Commonwealth (1953) 94 CLR 621 at 627; Micallef v ICI Australia Operations Pty Ltd & Anor [2001] NSWCA 274). The later decisions recognise that failure to give “sufficient weight” to a relevant consideration may betoken error. However, as Kitto J pointed out in Lovell (at 533):

The proposition that the appeal court will consider whether “no sufficient weight” has been given to relevant considerations is not inconsistent with the principle that the appeal court does not deal with the appeal as if it were exercising the original jurisdiction; even if it considers that insufficient weight has been given to some relevant consideration, it will still not substitute its judgment for that of the primary judge unless it comes clearly to the conclusion for that reason that the discretion has been exercised wrongfully.

Some general considerations concerning the relevant power to dismiss

31 The written and oral submissions of the appellant were effectively prefaced by reference to general principles touching access to justice and a proper exercise of discretionary powers to dismiss proceedings otherwise than on their merits. It was submitted that the learned primary judge had overlooked these issues or at least failed to give them sufficient weight.

32 Reference was made to the overriding purpose of the Supreme Court Rules to facilitate the “just, quick and cheap” resolution of the real issues in civil proceedings (Part 1 r1.3). In the present case this injunction clearly cuts both ways, for reasons which are developed below.

33 From this uncontroversial starting point we were taken to Lord Woolf’s interim and final reports on Access to Justice and the discussion of the requirements which should be met in a civil justice system to ensure that goal. Particular reference was made to the basic principle that litigants have an equal opportunity, regardless of their resources, to assert or defend their legal rights. This principle may readily be acknowledged, but so too should the other desiderata stated in Chapter 1 §3 of the Interim Report, which should be set out in full:

3. In considering the problems of the civil justice system I have had in mind the basis principles which should be met by a civil justice system so that it ensures access to justice:

(a) It should be

in the results it delivers.

(b) It should be

and be seen to be so by:

- ensuring that litigants have an equal opportunity, regardless of their resources, to assert or defend their legal rights;

- providing every litigant with an adequate opportunity to state his own case and answer his opponent’s;

- treating like cases alike.

(c) Procedures and cost should be

to the nature of the issues involved.

(d) It should deal with cases with reasonable

.

(e) It should be

to those who use it.

(f) It should be

to the needs of those who use it.

(g) It should provide as much

as the nature of particular cases allows.

(h) It should be

: adequately resourced and organised so as to give effect to the previous principles.

34 Once again, the total picture puts the appellant’s position in an adjusted focus.

35 The appellant also cited passages from Lord Woolf’s Final Report expressing concern about the lack of equality between the powerful, wealthy litigant and the under-resourced litigant. Part of his Lordship’s reforms were designed to enable “parties of limited financial means” to “conduct litigation on a more equal footing” (p7). Lord Woolf recommended inter alia (section 1, par 9):

(c) Limited procedures and tight timetables on the fast track, and judicial case management on the multi track, will make it more difficult for wealthier parties to gain a tactical advantage over their opponents by additional expenditure.

(d) When deciding upon the procedure which is to be adopted the court will, if the parties’ means are unequal, be entitled to make an order for a more elaborate procedure, conditional upon the other side agreeing to meet, in any event, the difference in the cost of the two possible procedures.

36 The appellant is drawing a long bow in invoking the Access to Justice reports as the springboard for the criticism of the judgment below. I readily accept that the appellant lacked the ready access to the vast financial resources of the respondent bank, even taking account of the appellant’s litigation funders. But the immensity of its claims (which in terms of damages exceed by many times the total market capitalisation of the bank) takes the present litigation well outside the type of situation contemplated by Lord Woolf when he spoke of unequal litigants. The respondent bank and the respondent individuals who were also sued for comparable sums were fully entitled to defend themselves with all the means at their disposal, subject to their own duties as litigants and the duties imposed upon their legal representatives to conduct the litigation in a proper manner.

37 The second broad reason why reliance upon Lord Woolf’s reports is inapt is that (to put the matter at its lowest) the appellant has simply not demonstrated that the respondents’ conduct of the litigation was the effective cause of the appellant’s funding difficulties. It is sufficient to draw attention to the immensity of the three cases instituted by the appellant (measured for example by the size of the pleading and the number of statements relied upon filed by the appellants themselves), the extent of the late amendments to the appellant’s pleadings and the pattern of procedural defaults quite apart from those associated with the orders for payment of security for costs (see Main proceedings WB 5/1154-5, MLC proceedings WB 4/1158).

38 One aspect of the appellant’s invocation of access to justice jurisprudence was its subliminal criticism of the orders for payment of security for costs themselves. These orders were not and are not the subject of any appeal. Nevertheless, there were hints that they were oppressive, and references to the situation that might have prevailed were the appellant other than a corporation. But it needs reiteration that the appellant is a corporation, not a natural person. Like its predecessors stretching back to the mid nineteenth century, the Corporations Act exposes a plaintiff corporation to the risk of security for costs if there is good reason to believe that it may be unable to pay costs at the end of the day. This is part of the legislative package that includes the privilege of limited liability.

39 In Rugby Union Players Association Inc v Australia Rugby Union Ltd (SCNSW, 50225/96, unreported, 30 July 1997) Giles CJ Com Div described the rationale behind the exceptions to the general rule that the impecuniosity of a plaintiff should not be a ground for making an order for security for costs. This general rule is well established at common law in relation to natural persons: Cowell v Taylor (1885) 31 Ch D 34, Melville v Craig Nowlan & Associates Pty Ltd (2002) 119 LGERA 186 at 192-3, 212-3, 223. Giles J explained why corporations are different, when he pointed out the injustice:

… that those who will benefit from success in the proceedings, as shareholders in or creditors of a corporation or as third parties for whose benefit the plaintiff (whether a natural person or a corporation) sues, should be able to litigate and expose the defendant to the risk of irrecoverable costs while themselves shielded, by reason of the interposition of the impecunious plaintiff, from the burden of an adverse order for costs.

40 Einstein J cited this passage in his reasons for judgment ordering the payment of security ([2001] NSWSC 744 at 54). His Honour continued:

55. The Court in

Harpur v Ariadne

[1984] 2 Qd R 523 at 532 described the rationale behind this principle in the following terms:

The mischief at which the provision is aimed is obvious. An individual who conducts his business affairs by medium or a corporation without assets would otherwise be in a position to expose his opponent to a massive bill of costs without hazarding his own assets. The purpose of an order for security is to require him, if not to come out from behind the skirts of the company, at least to bring his own assets into play.

56. The inability of a plaintiff company to pay the costs of the defendant not only opens the jurisdiction for the giving of security, but also provides a substantial factor in the decision whether to exercise it:

Pearson v Naydler

[1977] 1 WLR 899 at 906; cited with approval in

Sent v Jet Corporation of Australia Pty Ltd

(1984) 2 FCR 201 at 215.

I agree.

The power under Part 53 Rule 4

41 The appellant accepted that the power of dismissal conferred by Pt 53 r4 arises, in terms, when there has been breach of an “order” for payment of security.

42 This power is distinct from the power to dismiss for want of prosecution or for default in procedural directions (Part 33 r6). Of course, a failure to pay security may be evidence of the former and accompanied by the latter.

43 The appellant submitted that breach of an order for payment of security is categorically different from default in compliance with procedural directions or the due prosecution of litigation, at least as regards the weight or force with which the discretionary power of dismissal is engaged. It was said that an impecunious litigant in default of an order for security is different to a litigant delinquent in complying with procedural directions. I find it unnecessary to reach a concluded view on this interesting topic of comparative forensic obloquy. For one thing I see no appealable error in the general way in which Einstein J addressed the ultimate issue. It is not suggested that the factors that he took into account were extraneous to the proper exercise of the power.

44 I content myself with remarking that the distinction sought to be drawn becomes increasingly illusory if one examines the impact of the defaulting plaintiff’s conduct upon the other party and the proper conduct of the litigation itself. Whatever the cause of default, the capacity for disruption to the administration of justice is the same; in either situation, the court is required to weigh up the actual impact of the plaintiff’s “default” (whatever its nature) as part of the calculus for determining whether it is appropriate to exercise the power of dismissal in the particular circumstances.

45 Somewhat at variance with this isolating approach to Pt 53 r4, the appellant sought to have the Court apply by analogy various principles touching the power to dismiss proceedings for want of prosecution. The appellant submitted that:

• The power to dismiss an action for want of prosecution should be exercised only where the plaintiff’s default has been intentional and contumelious or where there has been inordinate and inexcusable delay giving rise to a substantial risk that a fair trial would not be possible or to a risk of serious prejudice to the defendants.

• A balance must be struck between the plaintiff and the defendant and the Court must decide whether or not, in all the circumstances, justice requires that the proceedings should be dismissed.

46 These principles do not control the power exercised in the present case. But if they did, they would not suggest that Einstein J erred in the exercise of his discretion.

47 It is now appropriate to address the grounds of appeal, although in a different order from the notice of appeal.

Ground 2: The Trial Judge erred in the exercise of his discretion in giving weight, or undue weight, to factors relied upon by the Respondents, namely:-

(a) the period that had elapsed since security was ordered;

(b) the fact that the Plaintiff had been on notice of the application for dismissal;

(c) the seeming inability of the Plaintiff to further fund the proceedings;

(d) the prejudice to the Defendants.

48 The appellant submits that Einstein J erred in failing to give due weight to the relative shortness of the period of default having regard to the immensity of the past investment in the litigation and the issues at stake in the appellant’s claims. It was said to be no real answer to show that the appellant had been on notice of the application for dismissal for a period of two and half months. The appellant thought that it was entitled to certain funds held in an account up until the time when this belief was dashed by the judgment of Palmer J on 24 December 2001. Thereafter the difficulties were exacerbated by the Christmas break.

49 Einstein J did not overlook these matters, nor did he fail to give them due weight.

50 The appellant had been on notice of the threat that security might be ordered from the beginning of 2001. This must have conveyed awareness of the likelihood of consequential orders for stay and subsequent dismissal.

51 The clearest of warnings and explanation were given in November. There is no minimum period established by legislation, rules or practice within which an application for dismissal might be made following default in compliance with an order for payment of security. No judicial discretion is uncontrolled, but it is common ground that the discretion to dismiss conferred by r4 is a broad one, unfettered by any express limitations (see Microbio Resources Inc v Betatine Ltd unreported, FCA (Full Court), Black CJ, Sheppard and Einfeld JJ, 8 October 1993, Asian Investments Corporation Ltd v Symons (SC(NSW), unreported, Young J, 10 April 1996), Billinudgel Pastoral Co Pty Ltd v Westpac Banking Corporation FCA, (1998) unreported, Cooper J). There is no written or unwritten minimum time, although I would accept that something more than a technical or accidental default is required.

52 The circumstances of the present case cried out for resolution having regard to the huge difficulties that would ensue if the proceedings adjourned to the beginning of 2002 would be unable to recommence at about the start of that new term. And the probability that things were not likely to change was established to Einstein J’s satisfaction.

53 On the evidence, the appellant is not in a position to suggest that the judgment of Palmer J in Idoport Pty Ltd v Efficiency Investment DV [2001] NSWSC 1197 came like a bolt out of the blue. Subject to any appeal, it must be taken to have vindicated the (absence of any) right to further funding from that particular source. In any event, as the respondents point out, the appellant’s claims in that litigation would not have yielded the requisite level of funding to meet the security for costs orders even if the appellant had succeeded. Furthermore, since no appeal from Palmer J had been instituted or even foreshadowed by 29 January 2002, Einstein J was perfectly entitled to proceed on the basis that that door was firmly shut.

54 These complaints are particularly lacking in merit when it is recognised that the appellant’s submissions of 15 November 2001, opposing the defendants’ then motion to dismiss the MLC proceedings, contained the following:

12. It is submitted that the appropriate period of grace in the present case, given the nature and extent of the case, where an explanation has been provided such as that referred to … above, should be at least 3 months.

13. It is submitted that an order for dismissal of the proceedings in three months is appropriate if the security fo costs outstanding is not provided.

55 It is true that Mr Maconochie was making frantic efforts to obtain further funding in the three or four days before 29 January 2002. Einstein J did not overlook this, but he was entitled to conclude that in all the circumstances this was far too little far too late.

56 Next, the appellant complains that the primary judge erred in giving weight or undue weight to the seeming inability of the plaintiff to fund the balance of the proceedings and to the defendants’ ensuing prejudice. It is submitted that a court should not concern itself unduly with enquiries about the source of a litigant’s funding. I see no merit in these submissions. It would have been a profound error not to have given these matters significant weight in all of the circumstances. It was incumbent on his Honour to assess the likelihood of the litigation coming back into a state of equilibrium and to do so having regard to the evidence before him, including the evidence as to past defaults. If, as Einstein J concluded (correctly in my view), the probability was that nothing would change in the foreseeable future, then it was entirely appropriate that he should move from stay to dismissal.

57 It was not the case, as the appellant submits, that his Honour gave no consideration to the difficulty and time which might be involved in funding the balance of the litigation. That indeed was the primary focus of his enquiry.

58 The prejudice to the defendants if the litigation were allowed to remain hanging over their heads (though stayed indefinitely) is so clearly compelling as not to require extended discussion in these reasons. Einstein J dealt properly with it, especially at J51-2.

Ground 3: The Trial Judge erred, in the exercise of his discretion, in failing to give sufficient weight to:-

(a) the enormity of the task faced by the Appellant in obtaining further funding (in the order of $20 million) whilst at the same time seeking to resolve issues with its principal funder in the period from the end of November 2001 to the end of January 2002;

(b) the disparity between the resources available to the Plaintiff compared with the Defendants;

(c) the facts that Security for Costs orders had only been in default for less than 2 months in the Principal proceedings and less than 3 months in the MLC proceedings;

(d) the fact that the Appellant was, initially, un-represented, and, subsequently, represented by Junior counsel with very limited knowledge of the proceedings.

59 These issues (which partially repeat Ground 2) cannot be elevated into matters invalidating the exercise of the discretion. They were all taken into account. The appellant’s real complaint is that they did not sway his Honour.

60 Ground 3(d) is an indirect and inappropriate way of complaining about his Honour’s refusal to grant a substantial adjournment. The appellant has not grasped that nettle, nor should this Court. I content myself with observing that there was no evidence that the appellant was unable to retain experienced counsel on 29 January 2002 if it had wished to do so. The appellant was on clear and formal notice that dismissal orders were being sought and were likely to be considered receptively by his Honour.

Ground 1(b): Failure to take into account that as recently as 5 October 2001 his Honour had declined an application made by the Defendants for a 12 month adjournment of the proceedings.

61 The submission that the primary judge placed undue emphasis upon the defendants’ prejudice is also raised as this separate ground of appeal.

62 On 5 October 2001 Einstein J dealt with several notices of motion (see [2001] NSWSC 868). These included motions by the plaintiff for leave to amend its pleadings and for case management directions, and motions by the defendants for leave to file additional technical reports and for case management directions. One of the defendants’ claims was for the adjournment of the main proceedings and the MLC proceedings for 12 months. The defendants’ solicitor, Mr Lovell, explained the basis for this “suggested way forward” at pars 189-200 of an affidavit sworn on 26 September 2001.

63 The appellant submits that the respondents’ willingness to seek such a lengthy adjournment should have been borne in mind by Einstein J when he came to address the dismissal application the following January. It is submitted that a prolonged interruption would not have had the significant problems for the case that were relied upon by his Honour in support of the decision to dismiss the proceedings rather than allow the stay to continue.

64 This criticism of the dismissal orders should be rejected on a number of grounds.

65 In the first place, the defendants’ application in September/October 2001 was based upon particular difficulties that had arisen at that stage of the trial. They are spelt out in detail in Mr Lovell’s affidavit. The problems were related to the way the plaintiff was conducting the trial, including problems stemming from late applications to amend and late changes in previously agreed arrangements as to the order of witnesses.

66 Second, the defendants did not press their application for an adjournment in September/October, when a proposal was put forward by the plaintiff which appeared to alleviate the difficulties inherent in the ongoing conduct of the litigation. The proposal emerged during the argument on the motions when, in the words of Einstein J ([2001] NSWSC 868 at 70):

…. It became reasonably clear to both parties that the adjournment being sought by the defendants had little chance of success and that the Court’s specific interest was in endeavouring to closely examine the best use of hearing time so as to permit the continued final hearing to go forward ….

67 At no time during the adjournment application was there any suggestion that the orders for security would not be complied with.

68 In these circumstances his Honour was quite entitled to regard this matter as having passed into history. Merely because the defendants had for a time applied for an adjournment in September/October was of little or no relevance to the situation as it presented itself in late January 2002 after the continuing default in compliance with the security orders had become manifest.

Ground 1(a): Failure to take account of the irreparable prejudice caused by dismissal, especially in relation to the claims under the Trade Practices Act

69 This is the ground that initially troubled me.

70 Einstein J said:

No issue estoppel or res judicata

56. A dismissal under Part 52 of the Rules will not, in law, shut out the plaintiff from commencing fresh proceedings relating to subject matter of the proceedings dismissed. No issue estoppel or res judicata arises. As the defendants point out Part 40 Rule 8 of the Rules permits new proceedings to be commenced in circumstances such as the present. A dismissal, of itself, will not shut Idoport out from litigating an issue which is fairly arguable (see, for example,

at 154). A dismissal merely provides certainty to a defendant when proceedings have been stayed.

71 The pleaded claims included allegations of misleading and deceptive conduct contrary to the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 (NSW). These were said to have occurred in July-September 1996 in the course of negotiations leading to the entry into certain transactions by Mr Maconochie and Market Holdings Pty Ltd (Fourth Further Amendment Statement of Claim §9). The pleaded representations were said to be of continuing operation (§10). In reliance upon them Mr Maconochie and Market Holdings are said to have entered into various Agreements and to have caused the plaintiff to have done likewise (§11). The plaintiff also pleads detrimental reliance by entry into a September 1996 Agreement (§12). The plaintiff and Market Holdings claimed damages (§56).

72 The appellant correctly points out that, if and when fresh proceedings are commenced, they would be statute-barred having regard to s82(3) of the Trade Practices Act and s68(2) of the Fair Trading Act. The primary judge did not consider this particular aspect of prejudice to the plaintiff. Indeed, it is arguable that he decided to the contrary in J56 quoted above.

73 The respondents seek to meet the argument by showing that only the Trade Practices/Fair Trading causes of action are affected; and by pointing to the plaintiff’s allegations of continuing representations occurring after September 1996. No such claims are pleaded in the MLC proceedings. These factors reduce the scope of the plaintiff’s complaint, but do not remove it altogether.

74 The respondents also submit that, as this issue was not raised by the plaintiff on 29 January, his Honour cannot be criticised for not taking it into account. The affidavit of Mr Maconochie and the written submissions signed by him, each of 29 January 2002, are silent on this matter. The appellant’s retort is that neither Mr Maconochie nor the junior counsel retained on 29 January in an unsuccessful attempt to get an adjournment should be faulted for not having thought of the point: it was up to Einstein J to do so if he was to consider all matters relevant to the discretion to dismiss.

75 The respondents’ rejoinder is that this is not enough to show error in the exercise of a discretion. The appellant’s rights do not rise and fall depending on whether or not it is legally represented. The respondents also point to evidence and arguments that could possibly have been raised at first instance had the point been taken (CA Tr pp45-6. Cf Multicon Engineering Pty Ltd v Federal Airports Corporation (1997) 47 NSWLR 631 at 645). They cite a passage in the judgment of Heydon JA (with whom Sheller JA and Studdert J agreed) in Micallef where he said (at [83]):

… while it is legitimate to criticise a primary judge considering a discretionary judgment for not understanding matters of which he had been informed, it is not legitimate to criticise a primary judge for not taking account of matters not drawn to his attention. If there was some inadequacy in the primary judge’s understanding because of what he had not been informed of by the plaintiff’s representative, it was not an inadequacy of which the plaintiff can complain on appeal.

76 I am not sure that this statement can be elevated to a universal principle. There will I think be some considerations of such importance and obviousness that failure to take them into account will not save a discretionary judgment even if they were not pointed out or relied upon by the litigant.

77 Nevertheless, I have concluded that the exercise of the discretion cannot be faulted legally, in light of the various matters stated in the penultimate paragraph. I would add reference to the fact that Einstein J had given clear directions as to the filing of affidavits and submissions for the 29 January adjourned dismissal application and the appellant had not complied with them.

78 In any event, I am firmly satisfied that the omission occasioned no substantial injustice, having regard to the principle stated by Kitto J in Lovell in the passage quoted at par 30 above. Cf also the related principle in administrative law (Minister for Aboriginal Affairs v Peko Wallsend Ltd (1986) 162 CLR 24 at 40, Australian Conservation Foundation v Forestry Commission (1988) 19 FCR 125 at 135. Had the point been taken into account the decision would have been the same in view of the weight of factors supporting dismissal, including (of particular relevance here) the probability that matters were unlikely to change.

79 Alternatively, were the discretion to be exercised afresh at this point of time I would in any event reach the same decision as Einstein J.

Costs

80 Finally, the appellant submits that even if it is unsuccessful in overturning the orders for dismissal, the costs orders were unjust and ought to be set aside. It is submitted that the costs orders should have been limited to costs thrown away by the dismissal of the proceedings. The orders barring the commencement of fresh proceedings until the costs are paid were precedented but unduly burdensome.

81 The propositions were stated but barely developed.

82 There are two insurmountable difficulties with the submission. First, it does not point to any basis of appealable error in the exercise of the costs discretion. Second, the submission treats the dismissal orders as somehow contingent in its implicit attempt to park the costs not thrown away pending something “turning up”. By leaving those costs unresolved and unallocated, it deprives the successful party of the usual measure of indemnity attendant upon success in litigation (Cachia v Hanes (1994) 179 CLR 403 at 410).

83 If and when the appellant commences fresh proceedings it will, in the normal course, have to pay or secure the respondents’ costs of the dismissed proceedings before being allowed to prosecute those proceedings (Bowen v Hickey (1958) 78 WN(NSW) 820, Sinclair v British Telecommunications plc [2001] 1 WLR 38 at 40). Einstein J did no more than spell this out explicitly. This type of order may well be most burdensome, but it seems a better outcome in the interests of justice than leaving matters in a costs limbo, which would be the result of the appellant’s proposal. There will be some savings that stem from work already done for the instant proceedings and these can be taken into account in the costs orders made in those fresh proceedings.

84 In each matter the orders should be:

1. Grant leave to appeal.

85 STEIN JA: I agree with Mason P.

86 GILES JA: Subject to what follows, I agree with the reasons of Mason P.

87 Ground of appeal 1(a) was that Einstein J failed “to take into account the irreparable prejudice caused by dismissal, especially in relation to the claims under the Trade Practices Act”. The irreparable prejudice on which the appellant relied was that in any fresh proceedings the appellant would be met with a defence that its claims of misleading and deceptive conduct in the period July to September 1996 were out of time.

88 The misleading or deceptive conduct alleged in the period July to September 1996 is the making of various representations. The pleading of that misleading or deceptive conduct is found in the Main proceedings. The convoluted pleadings in the Argus proceedings may take it up, but it is not found in the MLC proceedings. The loss or damage alleged in the Main proceedings, apparently taken up in the Argus proceedings, is that the appellant would not have entered into a number of agreements but for the representations and that it suffered “loss of opportunity of making profits being the loss of the opportunity of making profits by exploiting and/or disposing of the AUSMAQ Service and the AUSMAQ IP to a party other than NAB or NMG”.

89 Three matters should be noted.

90 First, the appellant put forward claims of misleading or deceptive conduct otherwise than in the period July to September 1996, not only by alleging that the representations in question were continuing representations but also by alleging further and later misleading or deceptive conduct. The appellant also put forward claims of breach of contract, breach of fiduciary duty and unjust enrichment. Depending on when any fresh proceedings were commenced, the appellant could be met with defences that these other claims were out of time. The appellant did not rely upon that as irreparable prejudice. Even in the appeal, therefore, prejudice caused by dismissal was selectively formulated.

91 Secondly, the claims of misleading or deceptive conduct in the period July to September 1996 would be out of time if the appellant’s cause or causes of action accrued more than three years before the commencement of the fresh proceedings. The cause or causes of action would not accrue until the suffering of loss or damage. As consideration of cases such as Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 shows, it is by no means obvious that the loss or damage alleged was suffered in or about September 1996. When any loss or damage was suffered would depend upon how the appellant put its case and the evidence it led. It may not have been suffered until long after September 1996: when it was suffered could be a complex issue.

92 Thirdly, the appellant accepted in the appeal that its proceedings could not be “allowed to drift on indefinitely”: in substance, its position was that Einstein J should have declined to dismiss the proceedings on 29 January 2002 and should have given the appellant something like a further three months to obtain funding. It is evident that a similar approach of a period of grace of the order of three months was the context of the hearing before Einstein J, and it is worth repeating from the appellant’s submissions of 15 November 2001 opposing the application to dismiss the MLC proceedings -

“12. It is submitted that the appropriate period of grace in the present case, given the nature and extent of the case, where an explanation has been provided such as that referred to … above, should be at least 3 months.

13. It is submitted that an order for dismissal of the proceedings in 3 months is appropriate if the security for costs outstanding is not provided.”

93 In these circumstances I do not think it was incumbent on Einstein J to seek out for himself, from the complex pleadings and speculating how the appellant relevantly put its case of suffering loss and damage, prejudice from any claims of misleading or deceptive conduct in the period July to September 1996 being out of time in any fresh proceedings. Particularly is that so when his Honour found that the prospect of the appellant obtaining funding was remote, see -

“50. The absence of reliable evidence from Idoport as to its ability to further fund its actions, the expected length of the final hearing which will clearly run until at least the end of 2003, and the estimate by Idoport's parent company Negubo that Idoport requires $21,520,000 in order to fund the prosecution of its claims at first instance to finality provides powerful support for the proposition that on the evidence presently before the Court, Idoport has no real prospect of being able to fund the continuance of the proceedings at first instance to finality. Whilst arguably the Court may not be entitled to now require Idoport to identify otherwise than in

, precisely where when and how it proposes to secure this dimension of funding, the Court is entitled in considering Idoport's past and continuing failure to honour the security for costs orders, to take into account the seemingly dismal if not altogether hopeless position facing Idoport in terms of its ability to fund the proceedings at first instance up to conclusion. At least bearing in mind the immediate history and the scale of the proceedings and the courts list, the Court is entitled at this stage in these proceedings to require to be reasonably satisfied that Idoport has in place at least

having some prospect of success in terms of funding arrangements. In fact Idoport has simply not shown that it can realistically continue the final hearing. To the contrary the funding problems appear to remain pervasive. Mr Maconochie's affidavit, to which I have already referred, gives the Court no assurance with sufficient precision of any reliability in Idoport's prospects of success in terms of funding arrangements. These matters can be taken into account in the exercise of the Court's discretion to presently dismiss the proceedings.”

94 It follows, in my opinion, that the appellant can not complain that Einstein J failed to take into account, as a relevant matter, the irreparable prejudice raised in ground of appeal 1(a). His Honour was not asked to take it into account, and in the circumstances it was not a matter calling for his attention of his own motion. I do not think that, in what he said concerning issue estoppel and res judicata, his Honour denied any limitations prejudice; whether there might be prejudice in that fresh proceedings alleging misleading or deceptive conduct in the period July to September 1996 would be out of time was not in issue, and was (and is) not self evident.

95 I am prepared to accept that ground of appeal 1(a) warrants the grant of leave to appeal, but I am not as troubled by it as Mason P. There is in any event some unreality in the ground. When the appeal was heard in late July 2002 the appellant was in no better position to fund the proceedings than as found by Einstein J. If the appellant had been given something like a further three months, even four or five months, to obtain funding, there was no evidence to suggest that it could have done so. It was said from the bar table that obtaining funding for the dismissed proceedings was more difficult than obtaining funding for current proceedings, but that also was without evidence and one would think that funding would be on condition that the dismissal was overturned and unaffected by the passing status of the proceedings. At least retrospectively, it is difficult to see that there was the irreparable prejudice required for ground of appeal 1(a).

96 I agree with the orders proposed by Mason P.

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Citations

Idoport Pty Ltd v National Australia Bank Ltd [2002] NSWCA 271

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CITATION:	IDOPORT PTY LTD v NATIONAL AUSTRALIA BANK LTD & ORS; IDOPORT PTY LTD v ARGUS; IDOPORT PTY LTD v NATIONAL AUSTRALIA BANK LTD & ORS [2002] NSWCA 271
FILE NUMBER(S):	CA 40124/02; 40125/02; 40126/02
HEARING DATE(S):	23 July 2002
JUDGMENT DATE:	15 August 2002
PARTIES :	IDOPORT PTY LTD v NATIONAL AUSTRALIA BANK LTD & ORS IDOPORT PTY LTD v ARGUS IDOPORT PTY LTD v AUSTRALIA BANK LTD & ORS
JUDGMENT OF:	Mason P at 1; Stein JA at 86; Giles JA at 87

LOWER COURT JURISDICTION :	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S) :	ED 50113/98 ED 50026/99 ED 3991/00
LOWER COURT JUDICIAL OFFICER :	Einstein J

COUNSEL:	Appellant: B W Walker SC/ M G McHugh Respondent: T F Bathurst QC/ H K Insall SC
SOLICITORS:	Appellant: Freehills Respondent: Withnell Hetherington
CATCHWORDS:	PRACTICE AND PROCEDURE - order for payment of security for costs - limited liability plaintiff - prodeedings dismissed for non-compliance - relevant factors - Supreme Court Rules pt 53 r4 - APPEAL - discretionary judgment - requirement of substantial injustice (D)
CASES CITED:	Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 . Australian Conservation Foundation v Forestry Commission (1988) 19 FCR 125 Australian Coal and Shale Employees' Federation v The Commonwealth (1953) 94 CLR 621 Bowen v Hickey (1958) 78 WN(NSW) 820 Cachia v Hanes (1994) 179 CLR 403 . Cowell v Taylor (1885) 31 Ch D 34, Harpur v Ariadne [1984] 2 Qd R 523 House v The King (1936) 55 CLR 499 Lovell v Lovell (1950) 81 CLR 513 Melville v Craig Nowlan & Associates Pty Ltd (2002) 119 LGERA 186 Micallef v ICI Australia Operations Pty Ltd & Anor [2001] NSWCA 274). Minister for Aboriginal Affairs v Peko Wallsend Ltd (1986) 162 CLR 24 Multicon Engineering Pty Ltd v Federal Airports Corporation (1997) 47 NSWLR 631 Rugby Union Players Association Inc v Australia Rugby Union Ltd (SCNSW, 50225/96, unreported, 30 July 1997): Sinclair v British Telecommunications plc [2001] 1 WLR 38 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514
DECISION:	Appeal dismissed with costs