Musgrave Minerals Limited, in the matter of Musgrave Minerals Limited
[2014] FCA 1155
•30 October 2014
FEDERAL COURT OF AUSTRALIA
Musgrave Minerals Limited, in the matter of Musgrave Minerals Limited [2014] FCA 1155
Citation: Musgrave Minerals Limited, in the matter of Musgrave Minerals Limited [2014] FCA 1155 Parties: IN THE MATTER OF MUSGRAVE MINERALS LIMITED; MUSGRAVE MINERALS LIMITED File number: SAD 236 of 2014 Judge: WHITE J Date of judgment: 30 October 2014 Catchwords: PRACTICE AND PROCEDURE – prospective applicant seeking release from undertaking to commence proceedings – undertaking given in support of application under r 7.01 of the Federal Court Rules 2011 – seriousness of undertaking given to Court – whether changed circumstances justified release Legislation: Australian Constitution ss 75, 76, 77
Federal Court of Australia Act 1976 (Cth) s 19
Federal Court Rules 2011 (Cth) rr 7.01, 7.23
Judiciary Act 1903 (Cth) s 39BCases cited: Lifeplan Australia Friendly Society Pty Ltd v Ancient Order of Foresters in Victoria Friendly Society Ltd [2013] SASC 5; (2013) 115 SASR 223
Allsop J, “Federal Jurisdiction and the Jurisdiction of the Federal Court of Australia in 2002” (2002) 23 Aust Bar Rev 29
Date of hearing: 1 October 2014 and 21 October 2014 Place: Adelaide Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 30 Counsel for the Prospective Applicant: Mr S White Solicitor for the Prospective Applicant: O'Loughlins Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
SAD 236 of 2014
IN THE MATTER OF MUSGRAVE MINERALS LIMITED
BETWEEN: MUSGRAVE MINERALS LIMITED
Prospective Applicant
JUDGE:
WHITE J
DATE OF ORDER:
21 OCTOBER 2014
WHERE MADE:
ADELAIDE
THE COURT ORDERS THAT:
The Applicant be released from the undertaking which it gave to the Court on 23 September 2014 to commence proceedings in this Court.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
SAD 236 of 2014
IN THE MATTER OF MUSGRAVE MINERALS LIMITED
BETWEEN: MUSGRAVE MINERALS LIMITED
Prospective Applicant
JUDGE:
WHITE J
DATE:
30 OCTOBER 2014
PLACE:
ADELAIDE
REASONS FOR JUDGMENT
On 23 September 2014 and prior to the commencement of an action proposed by the prospective applicant, the Court made an order on its application freezing a bank account and requiring National Australia Bank Limited (NAB) to provide to the prospective applicant the name and address of the account holder as well as copies of the statements relating to the account.
The order was made pursuant to r 7.01 of the Federal Court Rules 2011 (Cth) which permits the Court, in circumstances of urgency, to make orders of certain kinds before the commencement of proceedings.
In support of its application for the pre-action order, the prospective applicant proffered the usual undertakings to damages and an undertaking to commence a proceeding in relation to the subject matter of the action. Initially, it undertook to commence the action by 1 October 2014 but subsequently that time was extended to 24 October 2014.
NAB complied with both aspects of the pre-action order. After it had done so, the prospective applicant’s solicitors informed the Court that they had been instructed not to issue proceedings “as foreshadowed” and sought an order releasing the prospective applicant from its undertaking. They also sought the discharge of the order freezing use of the bank account.
The affidavit from the prospective applicant’s solicitor stated (relevantly) only the following by way of support for the application for release:
I am instructed by the Prospective Applicant that it wishes to consider its position following the provision of information by NAB and [to] be relieved of the undertaking to issue proceedings by 4.30pm on Wednesday, 1 October 2014.
At the hearing of the oral application for release from the undertaking, I indicated some concern about the position. That concern arose from the very serious nature of the undertaking, the reliance which the Court had placed on it in acceding to the application and making the urgent order sought by the prospective applicant, and the limited explanation for the change of position by the prospective applicant. I adjourned the hearing in order to give the prospective applicant the opportunity to consider the matter further.
Subsequently, the Managing Director of the prospective applicant provided a more extensive affidavit and, on 21 October 2014, I heard further submissions. I made an order that day releasing the prospective applicant from its undertaking and said that I would provide my reasons for doing so later. The following are those reasons.
Rule 7.01 of the Federal Court Rules 2011 provides:
Order before start of proceeding
(1)If a matter is urgent, a person who intends to start a proceeding (a prospective applicant) may apply to the Court, without notice, as if the prospective applicant had started the proceeding and the application had been made in the proceeding, for an order:
(a) granting an injunction; or
(b) if the matter relates to property:
(i)for the detention, custody, preservation or inspection of the property; and
(ii)to authorise any person to enter any land, or do any other act or thing, for the purpose of giving effect to the order; or
(c)if the matter relates to the right of a prospective applicant to an amount in a fund - that the amount in the fund be paid into Court or otherwise secured; or
(d) appointing a receiver with the power of a receiver and manager.
(2)An application mentioned in subrule (1) must be in accordance with Form 12 and accompanied by an affidavit stating the facts on which the prospective applicant relies.
(3)A prospective applicant seeking an order under this rule must give an undertaking to the Court to start a proceeding in relation to the subject matter of the application within 14 days after the application has been determined.
As can be seen, r 7.01 provides for applications, in circumstances of urgency and without notice to any other party, for orders of a particular kind before an action has actually been commenced. It implicitly empowers the Court to make orders of the contemplated kind in the circumstances to which the rule refers. Sub-rule (1) requires that the matter be urgent and that the prospective applicant intend to commence proceedings in this Court. If those conditions are satisfied, the prospective applicant may apply for an order “as if the prospective applicant had started the proceeding and the application had been made in the proceeding”. Sub-rule (3) requires a prospective applicant seeking an order to give an undertaking to the Court to start a proceeding in relation to the subject matter of the application within 14 days after the application has been determined. In the present case, the prospective applicant undertook to commence the proceedings by 1 October 2014.
In effect, r 7.01 vests a discretionary power in the Court which can be exercised on the Court’s satisfaction of the specified circumstances. Its principal, but not only, purpose is to allow the Court to make orders securing the status quo until proceedings have been commenced and the matter is properly before the Court.
Unlike r 7.23, r 7.01 contemplates that an order may be made against a third party as well as against a prospective respondent. It authorises therefore the making of orders against persons who may never be before the Court. This is an indication by itself that the power should be exercised with restraint.
The affidavits filed by the prospective applicant in support of the application under r 7.01 contained evidence suggesting that misappropriations of its funds had occurred. The information implicated a particular employee of the prospective applicant (the Employee). At that stage, the prospective applicant was not in a position to make detailed allegations but its material suggested the following: that monies had been withdrawn from a particular account of the prospective applicant; that those monies had been shown in the prospective applicant’s records as paid to a number of different persons or entities; and that, despite the second matter, each of the payments had been paid into the account in respect of which the prospective applicant sought the freezing orders (the Subject Account). In addition, the affidavit evidence indicated that the personnel within the prospective applicant who ought to have had knowledge of the subject account if it was being used as part of its regular operations had no knowledge of it. Further, some material contained what appeared to be a partial admission by the Employee.
The prospective applicant was concerned that funds in the Subject Account may be dispersed and lost to it. In these circumstances the prospective applicant sought to freeze the account and to obtain information regarding the Subject Account for its use in the anticipated action.
I was satisfied in terms of r 7.01 that the matter was urgent, given the possibility of monies being withdrawn from the Subject Account and dissipated or otherwise put beyond the prospective applicant’s reach.
As noted, the more extensive affidavit provided in support of the application for release from the undertaking was sworn by the prospective applicant’s Managing Director, Mr Waugh. He deposed to the following, relying in part on the information provided by the NAB pursuant to the Court’s order:
(a)The Subject Account is in the name of the Employee’s husband or former husband;
(b)The prospective applicant has terminated the employment of the Employee;
(c)The prospective applicant has reported the matter to the police and the various transactions in question are now the subject of a police investigation;
(d)Correspondence from the Employee since the Court’s order contains statements which may amount to admissions by the Employee of at least some misappropriations;
(e)The prospective applicant has had correspondence with the Employee from which it can be inferred that the Employee is willing to make restitution and in fact has made one payment by way of apparent restitution;
(f)The amount remaining in the Subject Account with the NAB is modest only in comparison with the amounts apparently misappropriated.
Mr Waugh also deposes that the Board of the prospective applicant does not wish to pursue civil proceedings against the Employee “at this time” for the following reasons:
(a)A criminal investigation is on foot by the Western Australia Police in respect of the alleged appropriation of funds committed by [the Employee]. As set out above, I verily believe that civil proceedings may be stayed whilst that criminal investigation and any subsequent proceedings are on foot;
(b)The Subject Account is not in [the Employee’s] name, although I verily believe that it is in the name of [the Employee’s] husband, or former husband;
(c)The Subject Account only had a nominal sum of $2,520.22 as at 25 September 2014;
(d)[The Employee] has made admissions in respect of her appropriation of funds. She has agreed to pay the amount appropriated. We are in the process of finalising and confirming the amount appropriated and arrangements for repayment of the appropriated amount. Given the developments that have occurred since this application, if Musgrave were to issue proceedings it would add an additional expense to the parties in the face of admissions made by [the Employee], and her representations to repay the funds appropriated.
Mr Waugh went on to depose that, at the time its solicitor provided the undertaking to the Court to commence proceedings, the prospective applicant was not aware of the account into which the funds appropriated had been deposited and as to whether those appropriated funds had been preserved.
The undertaking required by r 7.01(3) is a serious commitment and is not lightly to be given. It goes to the very jurisdiction of the Court to make the orders sought, as well as to the exercise of the discretion in doing so. This Court has jurisdiction pursuant to s 19 of the Federal Court of Australia Act 1976 (Cth) as is vested in it by laws made by the Commonwealth Parliament. By reason of ss 75 to 77 of the Constitution and s 39B of the Judiciary Act 1903 (Cth), such jurisdiction may be granted only in respect of a “matter”. In an article entitled “Federal Jurisdiction and the Jurisdiction of the Federal Court of Australia in 2002” (2002) 23 Aust Bar Rev 29, Allsop J (as he then was) summarised the concept of “matter” for the purpose of these provisions as follows:
The “matter” is the justiciable controversy between the actors to it comprised of the substratum of facts and claims representing or amounting to the dispute or controversy between or amongst them. It is not the cause of action or the causes of action brought by the plaintiff. A justiciable controversy is identifiable independently of proceedings brought for its determination. It is not characterised by the form of the proceedings. It is the whole controversy in respect of which it is the function of the court (State or Federal) exercising the judicial power of the Commonwealth to quell. It is the “subject matter for determination in a legal proceeding”.
(Citations omitted)
Rule 7.01 contemplates an exercise by the Court of power with respect to the subject matter of an action before proceedings have been commenced. It is a power which can be exercised only in relation to, and for the purposes of, such a matter. The Court does not have jurisdiction generally to assist investigations or enquiries unconnected with a matter which is properly before it. Hence the importance of the Court having an assurance, when it exercises the power, that it will have a matter of the kind contemplated by ss 75 and 76 before it to which the orders it is asked to make may be properly related.
Prospective applicants proffering an undertaking under r 7.01 should be conscious of these matters and, accordingly, of the solemn and serious nature of the undertaking they give. It is to be expected that the legal practitioners for prospective applicants will impress these matters on prospective applicants before accepting instructions to proffer the undertaking.
Other than in exceptional circumstances, it would be inappropriate for a party having obtained the benefit of a pre-action order to use material thereby obtained in connection with proceedings in another court, and in particular a court exercising non-federal jurisdiction. The powers vested by r 7.01 are exercisable in relation to anticipated proceedings in this Court and this Court only. A party invoking r 7.01 with the intention of using the information thereby obtained in proceedings in another court or for another purpose may well be engaged in an abuse of the process of this Court: see in a related context Lifeplan Australia Friendly Society Pty Ltd v Ancient Order of Foresters in Victoria Friendly Society Ltd [2013] SASC 5; (2013) 115 SASR 223 at [44]-[47].
These matters indicate that the circumstances in which a party may properly seek to be released from the undertaking given to the Court are likely to be of a rare and exceptional kind. A mere change of mind by the prospective applicant is insufficient.
There is a second reason why the undertaking required of a prospective applicant pursuant to r 7.01(3) is important. As mentioned, the power in r 7.01 is discretionary. The high level of assurance that proceedings will be commenced in this Court goes to the exercise of that discretion.
Some of the matters on which the prospective applicant relied for its application for release cannot reasonably be regarded as justifying that course. Mr Waugh’s assertion that the prospective applicant was not aware of the account into which the misappropriated funds had been deposited is only partly correct. It had hard evidence at the time demonstrating the deposit of at least some of the monies into the Subject Account, but it did lack information as to whether the misappropriated funds had been preserved. However, I doubt that that assists the prospective applicant as it chose to proffer the undertaking despite that lack of knowledge. Moreover, if the prospective applicant had sought to qualify the proffered undertaking by stating that proceedings would be commenced only if the monies still in the Subject Account were of an amount deemed by the prospective applicant to be sufficient, then it is doubtful that the Court would have made the orders it did.
The circumstance that the prospective applicant has now learnt that the subject account is not in the Employee’s name and that the account has only a nominal sum remaining in it do not seem by themselves to be particularly significant for present purposes. Similarly, the prospect of a criminal investigation and a criminal prosecution, with the associated prospect that civil proceedings will be stayed until those matters are finalised, are matters which the prospective applicant should have been able to foresee at the time it proffered the undertaking. The circumstance that a criminal investigation is now a reality is not to my mind a significant change in circumstance.
If the Court were to refuse the grant of the release from the undertaking, the prospective applicant would be required to commence proceedings. There is an obvious awkwardness in the Court compelling the commencement and pursuit of proceeding by an unwilling or reluctant applicant. However, at least insofar as that would cause detriment to the prospective applicant, it is reasonable for the Court to proceed on the basis that this possibility was considered and accepted by the prospective applicant when it proffered the undertaking.
To my mind, the most significant matters are the apparent admissions by the Employee and her commitment to make restitution. That may not be an unqualified commitment but it does indicate that proceedings may not be necessary at all. It is not in the public interest that parties pursue proceedings which are unnecessary and, for the parties themselves, it is undesirable that they incur the costs in doing so.
Those considerations persuade me that this is a case in which it is appropriate for a prospective applicant to be released from its undertaking.
The question of the proper use which the prospective applicant can make of the information and documents disclosed to it by reason of the Court’s orders of 23 September does not arise for consideration presently.
These are my reasons for the order made on 21 October 2014.
I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice White. Associate:
Dated: 30 October 2014
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