PS Chellaram & Co Limited v China Ocean Shipping Company

[1991] HCATrans 224

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S66 of 1991

B e t w e e n -

P.S. CHELLARAM & CO LIMITED

Respondent/Appellant

and

CHINA OCEAN SHIPPING COMPANY

and FIVE STAR SHIPPING &

AGENCY COMPANY PTY LIMITED

Applicant/Respondents

Application for security

for costs

McHUGH J

(In Chambers)

Chellaram(2) 1 23/8/91

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 23 AUGUST 1991, AT 10,15 AM

Copyright in the High Court of Australia

MR A.W. STREET:  May it please the Court, in this matter I

appear for the appellant with my learned friend,

MR D. FARTHING. (Instructed by Sly & Weigall)

MR o. O'DOWD:  I appear for the respondents, the applicants

in this application.	(instructed by Norton Smith
& Co)

HIS HONOUR:	Yes, Mr O'Dowd.
MR O'DOWD:	Your Honour, the applicant makes this

application in respect of a summons filed and

served and dated 7 August 1991 and relies on -

HIS HONOUR:  I have read the summons. I have read the

affidavits. Is there any objection to any parts of

any of the affidavits?

MR STREET:	No, Your Honour.
MR O'DOWD:	No, Your Honour.  Your Honour, the applicant

makes - - -

MR STREET: If that is all my learned friend's evidence, I

do have some other evidence.

HIS HONOUR: In addition to the affidavits or - - -

MR STREET: There are some documents I would wish to tender,

yes, such as the Hong Kong legislation.

HIS HONOUR:	Very well, Mr Street.
MR STREET: First of all,	wr Honour, I would seek to

tender a copy of Hong Kong Foreign Judgments

Reciprocal Enforcement Ordinance, together with a

copy of the Foreign Judgments Reciprocal

Enforcement Order. I will seek to take Your Honour

to it in due course. Next, I think it is

appropriate probably to seek to tender it, but

there was a judgment of His Honour

Mr Justice Carruthers which was referred to in the	affidavit, delivered on 16 February 1988, relating
to a security for costs application at first
instance. I do not think it is necessary to tender
it but I do seek to hand it up - - -

HIS HONOUR:	No, just make a copy available.
MR STREET:	If Your Honour pleases. The next matter I seek

to have tendered, Your Honour, is simply, although

there may be a copy already on the Court file, is a

copy of the bill of lading which I seek to tender.

HIS HONOUR: That will be exhibit B.

Chellaram(2) 2 23/8/91

EXHIBIT:	Exhibit B ..... Bill of lading
MR STREET:	Does Your Honour have the affidavit that was

filed in support of the application for special

leave?

HIS HONOUR:  No, I do not. It will be on the file.

MR STREET: Could I hand up to Your Honour a copy of the

special leave book which has a copy of the

affidavit in support of special leave and it is

simply in relation to the question of reasonable

prospects, but can I just identify the paragraphs

that I would seek to read. Page 132, paragraphs 2,

3, 5, 6(b), 6(c), 9, 10, 11, 12, 13, 14, and 15. That is the evidence on behalf of the appellant.

HIS HONOUR:  Mr O'Dowd, is there any particular authority that you rely on?

MR O'DOWD:  Yes, Your Honour. I have some authorities that

I want to hand up.

HIS HONOUR:  What is your best case?

MR O'DOWD:  Your Honour, there are a number of them. We are

relying on the established authority in Bell

Wholesale Co Pty Ltd v Gates Export Corporation.

We are also relying on, in relation to another aspect of our case, the case of Kent Heating Ltd v

Cook-on Gas Products, and I will hand Your Honour a copy of that which distinguishes Connop's case, and

of course BIL (NZ Holdings) Ltd & Anor v ERA House,

Mr Justice Rogers' decision.

HIS HONOUR:  Perhaps you might take me to these.

MR O'DOWD: Yes, Your Honour, I shall. First, Your Honour,

the applicant makes this application pursuant to

the power vested in the Court pursuant to Order 70

rule 7 of the High Court Rules, in conjunction with

Order 71 rule 6 which, of course, deals with

plaintiffs resident outside the Commonwealth.

HIS HONOUR:	Yes.
MR O'DOWD:	Your Honour, we also would be relying on

section 1335 of the Corporations Law as it applies

to the appellant corporation. Just in respect of

that, Your Honour, we would be relying on the

decision of Mr Justice Rogers - - -

HIS HONOUR:  What does 1335 say, the equivalent of the

old - - -

Chellaram(2)	23/8/91
MR O'DOWD:	It is the equivalent of 533(1) of the Code.

There was a slight glitch with that in that when it

was drafted, Your Honour, there was a provision

that it said "when dealing with the proceedings,

whether these proceedings were themselves an action

or a legal proceeding under the Corporations Law"

and there was an argument in the case of Bil (NZ

Holdings) Ltd & Anor v ERA House that because of

that provision, that did not apply to proceedings

other than those commenced under the Corporations

Law. Now, Mr Justice Rogers dealt with that. That

decision has been followed once by another single

judge decision which I do not have, I am afraid,

Your Honour, but what His Honour had to say about

that was - in summary, Your Honour, he determined
that in any event, in the inherent jurisdiction of

the court, they could determine that security could

be granted and that he did not have to decide that question, but he also went further to say that, on page 618 of the extract I have given Your Honour,

the right-hand column at point 8:

In the result, even ifs 1335(1) be

inapplicable otherwise than to proceedings or
actions founded on the Corporations Law, the

inherent power of the Court is a sufficient

jurisdictional basis for the Court's order for

security against an impecunious company and

accordingly I propose to make an order.

But he went further, Your Honour, over the page:

Before parting with the matter I should

mention that, although I am making this order

for security in exercise of the Court's
inherent power, in my view, on its proper

construction, s 1335(1) is also available to

be relied upon. Construed in accordance with

the Parliamentary instruction for the

interpretation of the Corporations Law (cf

s 10 of the Corporations Law of New South

and he goes on to basically say, Your Honour, he
does not restrict that section to - - -

Wales 1990 -

HIS HONOUR:  Where is the section set out? Does it have any

provision - there is no evidence in this case, is

there, that there is reason to believe that the

appellant will be unable to pay its costs?

MR O'DOWD: Well, we say there is, Your Honour, based on the

evidence of Mr James in his affidavit and on the

appellant's own evidence in their affidavit.

HIS HONOUR:  I do not read that evidence to that effect. I

am surprised you did not object to it, but it has

Chellaram(2) 23/8/91

very little weight as far as I am concerned. If

Mr Street wanted to rely on the impecuniosity of

his client, I would have expected some proper

evidence to be put before me.

MR O'DOWD:  Your Honour, we would seek to rely on their

admission as to the impecuniosity of their client.

HIS HONOUR: It is not an admission to that effect. It is

very carefully drawn, is it not?

MR O'DOWD:	We would say, Your Honour, in any event, that that adds weight to the applicants' fear that in
the event that they were successful in defending the appeal, they would not be likely to get their
costs.  They say that in their affidavit,
Your Honour.
HIS HONOUR:	Once special leave is granted in this Court,

the public importance which is necessarily involved
in the grant of special leave would usually mean
that an impecunious appellant will not be required

to give security for costs because otherwise he

might stultify the litigation. But the evidence in

this case is that the solicitor says:

I am informed by Mr Chellaram and believe that

an order for security for costs in favour of

the respondents at this time would cause the

appellant financial hardship in that in the

current economic climate it does not have

readily available funds to place on security.

Well, what does that mean?

MR O'DOWD:	Your Honour, the applicant
HIS HONOUR:	And there is no evidence from Mr Chellaram as

to what his means are. Those who are behind this

company have not put on any evidence.

MR O'DOWD:  Your Honour, we would say to that that Order 70

rule 7 applies only in respect of situations when

an application for special leave has been made and

has succeeded, so it clearly contemplates that

there are situations that will - - -

HIS HONOUR: There is no doubt about it, and has been made.

Orders were made in San Sebastian; orders were made

in Paul v Pavey & Matthews, just to name two. They

were made at the time of the grant of special

leave. I should ask you: why was not an

application for security made to the Court at that

time?

MR O'DOWD:  I have no instructions, Your Honour. In any

event, Your Honour, if I take you to Mr James'

Chellaram(2) 23/8/91

affidavit of 6 August, he annexes a copy of a

search -

HIS HONOUR:	Yes, I have seen that.
MR O'DOWD:	- - - which we concede does not show a great

deal. It shows secured liabilities in a

significant sum. It does not seem to show, to us,

any assets that exist.

HIS HONOUR: Well, it is obviously not required to, but it

does show that shares have been allotted to the

value of $2.5 Hong Kong, does it not?

MR O'DOWD:  Yes, Your Honour, it does.

HIS HONOUR: Against an indebtedness of $636,000 secured by

mortgage. I mean, there is just simply no evidence

as to the cash flow of this organization, no

evidence at all as to what its assets are, nothing.

I do not want to hear you any further. I will hear

Mr Street and I will hear you in reply.

MR O'DOWD:  I have one further submission, Your Honour, on

another point in respect of the fact that the
appellant is a company resident in Hong Kong.

There is, of course, the concern and the power that

we rely upon in Order 71 rule 6 that where there is

a plaintiff ordinarily resident outside the

Commonwealth he may be ordered to give security for costs notwithstanding that he may be temporarily

resident within the Commonwealth. We say that

gives the Court a power, in its discretion,

to - - -

HIS HONOUR:	That rule was designed to overcome the old cases about people coming temporarily within the
jurisdiction.
MR O'DOWD:	Yes, Your Honour. We say that in itself is a

order for security for costs in these proceedings. reason sufficient to persuade the Court to make an

HIS HONOUR:  I doubt if any factor is ever sufficient to

either refuse or to make an order for security for

costs. It is a question of weighing up a

considerable number of factors.

MR O'DOWD:  Your Honour, in respect of that, there is

authority to the effect that in such situations,
where there is a treaty for reciprocal enforcement

of judgments in place, that there have been cases,

for example in Connop's case, 1984, where

Mr Justice Rath determined that the security would

be given, but only to the extent of the costs of

registering that judgment in the foreign country.

We would say to that, Your Honour, we would refer

Chellaram(2) 6 23/8/91

to the case of Kent Heating Ltd v Cook-on Gas

Products, a single judge case of

Mr Justice Sheppard in the Federal Court. In that

case, Your Honour, Connop's case was distinguished

on the basis - and it would be my submission that

the relevant New South Wales legislation, the

Foreign Judgments Act being a State Act, deals with

judgments and orders made by courts and it is also

further defined in there, Your Honour, to say, in

the definition section of that Act:

"Judgments given in the Supreme Court" include

judgments given on appeals against judgments

given in the Supreme Court, and judgments that

have become enforceable as judgments of the

Supreme Court though not given therein;

The applicants' contention is that in the

absence of - so based on Kent's case, that was

distinguished on the basis that although the

Foreign Judgments Act or the then applicable Act

cited New Zealand as a reciprocal nation, there was

no evidence that they had in their reciprocal

legislation put into effect laws that would go in

Federal Court or High Court orders, having regard

to the fact that if it does not, then it is

arguable that the New South Wales Act applies to

New South Wales court decisions and does not extend as far as the Federal Court or the High Court, in

this case an order of the High Court, for security

for costs.

Now, unless - and my friend may be able to do

that, but unless they can prove in evidence that

there is a provision in the Hong Kong legislation

that facilitates or guarantees that if an order

like that were made, that the appellant would be

able to get his costs through that means and an

order for security in that amount made, then I

would submit that that is grounds upon which the

appellant would be entitled to an order for

security for costs.

Kent's case, I will just take you in that

case, Your Honour, to the relevant passage. It is

at page 278, on page 2 of the photocopy, Your

Honour, about point 5:

The Reciprocal Enforcement of Judgments Act is

not available in the present case because it
has not been extended by order-in-council New

Zealand to apply to judgments of this court,

nor I think, of the High Court.

Our contention would be, by virtue of the reliance

upon a State Act to found this authority to enforce

and register a judgment in Hong Kong, unless it

Chellararn(2) 7 23/8/91

specifically reciprocates with reference to orders

of the High Court, then that is not available to
the appellant and therefore he would be deprived of

his right to seek to recover his costs,

particularly in the event that there is no evidence

of assets within the jurisdiction.

HIS HONOUR:  Yes.

MR O'DOWD:  They are my major contentions, Your Honour. I

will deal with anything else in reply.

HIS HONOUR:  Thank you, Mr O'Dowd. Yes, Mr Street.

MR STREET: If the Court pleases. With Your Honour's leave,

could I hand up a copy, and a copy for the recorc,
of an outline of submissions which I would invit 0

Your Honour to read.

HIS HONOUR:  Yes, thank you, Mr Street. Just before you

start, could I get clearly what is your submission

about your client's position?	You seem to be
wanting your cake and eating it.	Is your position

that your client cannot provide this security or is

it your position that the present respondent to the appeal will be protected because it will be able to

enforce a judgment? You cannot have it both ways.

MR STREET: Yes, Your Honour is quite right and we have

sought to have our cake and eat it in that regard

but, in substance, it is really the former.	Our
position is one where we are, in essence,

impecunious and it is in that regard that we are

seeking to bring ourselves -

HIS HONOUR: Well then, Mr Street, if that be the case, why

has not proper evidence been put on setting out the

financial position not only of your client, the

appellant, but those who may profit by this

litigation?

MR STREET: Well, Your Honour, I think the form of the

evidence that had been put on by the respondent
directly impacted on the way in which the evidence

was put on by the appellant, namely, the nature of the evidence that they had put on, the adequacy of

it, as Your Honour had indicated, and Your Honour's

initial reaction was the initial reaction of one

looking at that evidence, namely, that the evidence

did not go far enough to establish impecuniosity
and, in that regard, if we were able to have our

cake and eat it we would seek to do so. But,

Your Honour, I frankly accept that, in substance,

our application is one where we are in the position

of impecuniosity and it is in that regard that we

are seeking to say there are still factors that the

Court should take into account and not make an

Chellaram(2) 23/8/91

order. Your Honour, I will seek to make that good

in light of what Your Honour has asked.

HIS HONOUR:	Yes.
MR STREET:	Your Honour, can I first go briefly - and in

that regard, Your Honour, there is reference in the

written submissions to some earlier authorities

that Your Honour, no doubt, is familiar with. I

have copies of those cases if I could hand them up

to the Court but I do not seek to take Your Honour

to them in detail at this stage.

HIS HONOUR:  Are you talking about cases like Brundza v

Robbie and Willey - - -?

MR STREET:	Yes, Your Honour but, in essence, they are
HIS HONOUR:	- - - and Willey v Synan, and cases -

MR STREET: Yes, but they -

HIS HONOUR: Well, they are in a different category

altogether.

MR STREET: Quite, Your Honour, and could I just also at the

outset seek to indicate that, in our submission,

Order 71 that my learned friend sought to rely upon

actually applies to a plaintiff, not to an appeal.

It is Order 70 that this application must be

founded on, rule 7. The discretion, obviously,

Your Honour, in essence, does not differ in

substance that it is an absolute discretion but

there is not the criteria that is identified under

Order 71 and none the less that is a matter which

we do seek to distinguish that rule from.

Your Honour, the affidavit of Mr Wylie does

indicate that the appellant is in the position

where it has no readily available assets to meet an

adverse order, if made, as set out in paragraph 5.

In paragraph 6 it is identified the amount that has

been lost.

As Your Honour will recall, the nature of these proceedings arise out of goods that were to

be carried under a bill of lading dated 6 May 1985

in which the appellant was the shipper. Those
goods were ones which the respondents, having
obtained an indemnity from a particular party, had

handed over the goods without the delivery up of

the bill of lading.

HIS HONOUR:  Yes. And is my understanding correct - I have

only just gathered this from the notice of appeal -

that the respondents succeeded in the Court of

Appeal on an exemption clause only?

Chellaram(2) 9 23/8/91

MR STREET: That is so, Your Honour, and the provision on

which it succeeded was only raised in the Court of

Appeal, that is, it sought to amend - to raise

clause 10(2). What we seek to say is that when one

goes to clause 10(2) and I would, if necessary,

seek to take Your Honour briefly to it to identify

that there is a reasonable argument.

HIS HONOUR: Well, the fact that the Court has granted

special leave to appeal indicates two things: (a), that you have an arguable case of error on the part

of the Court of Appeal and, (b), that the matter is

of sufficient public importance to grant leave.

So, you need not address me any further on that.

MR STREET: If Your Honour pleases.

HIS HONOUR:  On that point, Mr Street. I want to hear you

on paragraph 5 of this affidavit.

MR STREET: Well, can I just, having identified - the

factors, in summary, that we rely upon are, in

essence, these: the history of delay, and in that

regard -

HIS HONOUR: Well, what delay is there in relation - this is

a fresh application altogether. These are fresh

proceedings and as long ago as 21 January or

11 January, was it not, an application was made for

security for costs long before the matter came on.

MR STREET: Quite so, but as the Chief Justice identified in

the decision -

HIS HONOUR: In Bennell v Buckley?

MR STREET: Devenish v Jewel Food Stores, the history of the

litigation is relevant and the history of the

litigation in this regard is one of delay in

relation to the making of an application for

security.	Now, none the less, I accept that there
has been no delay in making the application since

the filing of special leave here but it is relevant

that the appellant was allowed to pursue its claim

on grounds which are substantially the same grounds

that are now advanced until what was the third day

of a trial before His Honour Mr Justice Carruthers.

His Honour picks it up in a way which is actually

quite relevant and on which we seek to rely.

If Your Honour goes to the judgment of

His Honour Mr Justice Carruthers. He identifies

the date of commencement of the proceedings on the

first page of 29 October and the matter coming

before His Honour Mr Justice Yeldham on

18 June 1987 and then being fixed for hearing in

October, and the trial commencing on the 2nd or

Chellaram(2) 10 23/8/91

3rd. He says at page 2 that the application for

security is made on the third day, namely, on

16 February. It is belated.

One of the things he cites though is the

President's judgment in Buckley and could I just ask Your Honour to read what is said there?

HIS HONOUR:	Yes.
MR STREET:	The appellant has embarked on that litigation in the absence of that application for security being
made and has pursued its claim and successfully at
first instance. And that is none the less a factor
which we seek to rely upon and a factor which was
also cited in that regard by a judgment of
His Honour Mr Justice Beach, picking up
Mr Justice Waddell in Southern Cross
Exploration - - -
HIS HONOUR:	I appreciate the full force of that argument in

so far as the matter was litigated in the New South

Wales courts but this is a fresh matter altogether

now.

MR STREET:  Your Honour, I accept that there has been no

delay here but none the less what we say is a
factor the Court should take into consideration is
the history of delay of making an application on

these grounds in this type of case and, at least,

on substantially the same grounds, at first

instance and that, in essence, the appellant, as

His Honour the President said, pursued its case on

the basis that it had no such application before it

at that stage. Your Honour, that is one factor

that we seek to rely upon other than the two that

Your Honour has already identified of importance

and reasonably arguable.

The next matter we seek to identify,

Your Honour, is the particular prejudice, and the

particular prejudice is a ground which, in essence,

arises from the plaintiff's financial position,

namely, having made the concession of

impecuniosity, as I have sought to, Your Honour, in

light of the -

HIS HONOUR: Well, that was your assertion.

MR STREET:	Your Honour, I am caught by it now.
HIS HONOUR:	That is the case you seek to make but, look,

the only concrete evidence before me is that shares

have been allotted to the value of $HK2,S00,000 and

there are two mortgages totalling $636,000. On top

of that, there is a statement on information and

belief that a security for costs order:

Chellaram(2) 11 23/8/91

at this time would cause the appellant

financial hardship and that in the current

economic climate it does not have readily

available funds to place on security.

What does that mean? You might be able to go down

to the bank and raise the money without any

interest? It is just saying it does not have

readily available funds.

MR STREET:  Your Honour, I think I accepted at the outset

that what we were seeking to do was to get the

benefit of the absence in evidence by the

respondent in its application but in so far as

having been pinned down in that regard, we do not

seek to hide behind that tactical consideration.

We accept that our position is one where we have

financial difficulty.

Now, Your Honour, my learned friend, if he

does not seize on the concession I have sought to
make, loses one of his grounds for the making of an

order in any event so that without that ground, in

my respectful submission, it would not be

appropriate to make an order so that, again, it is

perhaps a two-edged - - -

HIS HONOUR: Well, except you start with the position that

you are a foreign corporation with no assets within the jurisdiction and there was a time when an order
would have been made as of course against such

a - - -

MR STREET: Quite so and, Your Honour, it used to be, under

the old High Court Rules, that it was one of the

identified grounds such as under Order 71 which

deals with plaintiffs at first instance.

But, Your Honour, the steps back that the

appellant seeks to take is that taking into account

other factors, and these are the factors which it

matter of its financial difficulty as spelt out in	seeks to say should be taken into account, are the
paragraph 5 and Your Honour would, no doubt, have
little hesitation in light of what has been said
from the bar table in drawing the inference that
there is such a financial hardship in so far as
the - - -

HIS HONOUR: Frankly, I have great difficulty in drawing

that inference at the moment unless you can

persuade me because I ask the simple question: if

you really did have financial difficulties, why did

you not put your cards on the table, why did you
not demonstrate what the exact financial position
of this corporation is? As I said to you, the only

concrete evidence is that it has allotted shares to

Chellaram(2) 12 23/8/91

the value of $2,500,000 and it has got $660,000

worth of indebtedness which gives it, one assumes,

a working capital of $HK1,S00,000.

MR STREET:  Your Honour, the evidence of the information and

belief is one which, in my respectful submission,

is entitled to weight.

HIS HONOUR:  It is, and I will give it weight but it is very

carefully drawn.

MR STREET:  Your Honour, I accept it was carefully drawn

and, Your Honour seized right at the very

outset - - -

HIS HONOUR:	Mr Baron Parke would have been very pleased with this. It is -
MR STREET:	Yes. Well, Your Honour seized right at the

outset the deficiency which was manifest from the material that the respondent had put on. Now, at

that stage that material was sought to be answered

in circumstances where it did not make out a case

to the point of establishing impecuniosity but,

none the less, it is the case that the issue having

been raised we do not resile from, Your Honour

having put it in that way, that our position is one

where what paragraph 5 says is, in fact, the

position and it is one from which - - -

HIS HONOUR:  I appreciate that but even if I drew that

inference, what about Mr Chellaram's position,

because on the evidence before me he is one of the

two principal shareholders in it, or is he the

principal shareholder?

MR STREET:  Your Honour, his position is one which, from

paragraph 4, identifies that it is a small sole

trader.

HIS HONOUR:  Yes. What does that mean, "a small sole trader"? Because, after all, it is a company, so

what else would it be?

MR STREET: It simply identifies, in part, Your Honour, that

his position is one of running what is a small

trading company.

HIS HONOUR:  You see, there is no evidence before me as to

the finances of Chellaram Investment Pty Limited or

Mr Chellaram, and they are the two shareholders,

and I assume that Chellaram Investment is connected

with the individual.

MR STREET: Quite so, Your Honour. But, Your Honour, there

is this evidence and it is, none the less, one

which Your Honour should take into account, namely,

Chellaram(2) 13 23/8/91

in comparison between the appellant and the

respondent, the respondent is in a position where

it is one which, as identified in paragraph 7 -

arise out of an incident relating to the vessel

which is entered with one of the P & I clubs. Now

the appellant is not, in these proceedings,

bringing them subject to some insured position as

identified in paragraph 4. So, there is no insurer

standing behind it, the appellant, and the Court
should, in my respectful submission, none the less,

take into account what is said to be the hardship

in paragraph 5.

Your Honour, we seek to rely not only on that

in relation to the delay, we say that that

financial position is one which has been

contributed to by the respondents' conduct, namely,
in essence, we have been deprived of the value of

our goods or the interest thereon which is the

subject-matter of these proceedings, and that must

have contributed to our financial position.

HIS HONOUR: Well, your position on that point is

strengthened by the fact that the respondents are

guilty of breach of contract and succeeded on an

exemption clause, so you have quite a powerful

point there but it is the evidence concerning the

company and those who stand behind it wich concerns

me most. If there was evidence that this appeal

might not be prosecuted if an order for security was made, in all the circumstances of this case,

Mr Street, I would not have the slightest

hesitation in refusing this order. But, at the

moment, unless you can persuade me to the contrary,

I am not certain that that is the case. In fact, I

do not even think it is probable that that is the

case. After all, there is evidence that Sly and

Weigall have been paid $34,000 in legal costs.

MR STREET:  Yes. Would Your Honour just permit me to get

some instructions just for one moment?

HIS HONOUR:	Yes.
MR STREET:	Your Honour, I hear what Your Honour has said.

I think, in part, the appellant would be seeking an

indulgence in seeking to reopen its case but I

would seek to reopen the case to tender some

accounts, a statement of accounts. If there is
objection that Your Honour upholds to reopening at

this stage, then I will not pursue that but if

there is no objection then I would seek - - -

HIS HONOUR:	Yes. Well, what do you say, Mr O'Dowd?
MR O'DOWD:	Your Honour, I think the appropriate cliche or

phrase has already been used, "having your cake and

Chellaram(2) 14 23/8/81

eating it as well". Your Honour, the appellant has

set its course. It has adduced evidence in reply

to the evidence in-chief of the applicant and now

it seeks, because it finds itself between a rock

and a hard place, to take a different approach.

Now, with respect, Your Honour, I do not think that

is proper and I do not think it is a position that

the - - -

HIS HONOUR: Well, I appreciate that and if you want to

pursue your objection, apparently, Mr Street will

not press it but, I mean, I am really not

interested in technicalities in this case, I want

to get to the merits and the justice of the case.

It is a matter of surprise, to say the least, that

parties are litigating over an application for

$8250.

MR O'DOWD:  I say this only, Your Honour - it is the obvious

observation to make - "the cake and eating it"

analogy, in the absence of any evidence as to the

financial resources of those people behind the

company, then the obvious inference can be drawn

that in the event that a cost order is made and the

company itself - that entity is impecunious, then

the directors or the shareholders can hide behind

that corporate veil. And that, of course, is the

very reason this legislation and these authorities

were decided in the way they were. It just seems

to me that that is the approach that they have

taken in this case.

HIS HONOUR:  Well, I appreciate that. Even if Mr Street was

allowed to tender the documents of the company, he

still has to face up to the position of

Mr Chellaram and Chellaram Investments who would be

the principal beneficiaries of this litigation if

this appeal was to - - -

MR O'DOWD:  You see, that would be our contention, that that is exactly what they are trying to do. We would

not be surprised at all to find Mr Chellaram - - -

HIS HONOUR: Well, Mr Street, what is your position now?

MR STREET:	Your Honour, I understand my learned friend objects and, in the light of that, I am not going
to seek to protract the matter. Would Your Honour
just let me confirm that instruction?
HIS HONOUR:	Yes.
MR STREET:	Your Honour, I hesitate to take this course but,

Your Honour, I think I will seek to press the

tender unless Your Honour rejects it and if

Your Honour is disposed to allow the plaintiff to

reopen its case to tender a document that will go

Chellaram(2) 15 23/8/81

not to the position of Mr Chellaram per se or the

investment company but go to the appellant itself,

it would be necessary to obtain a document that

would take approximately 5 to 10 minutes to have

that document brought up.

HIS HONOUR:  Yes. Well, I am certainly prepared to allow

you to reopen your case, subject to any question of prejudice. Before I made any ruling on it, I would want Mr O'Dowd to look at the document because if

there was any prospect that further evidence had to

be put on in reply to it, then I would be loath to

allow you to reopen. I am already concerned about

the costs of this application. I certainly do not

want to increase them in any way. But, by all

means, I will grant you an adjou:i:::nment for

15 minutes to get that document

MR STREET: If the Court pleases.

HIS HONOUR:  But you must appreciate, Mr Street, that even

if the document was to show that this company was

impecunious, you still have the position - - -

MR STREET:  I understand that, Your Honour. I understand

what Your Honour has raised but, I think, having

elected our course, we would wish to adhere to it.

HIS HONOUR:  Yes. Well, I will grant an adjournment for

15 minutes, and as soon as you get the document you

might show it to Mr O'Dowd so that he can have a

look at it.

MR STREET: If the Court pleases.

HIS HONOUR: Mr O'Dowd, anything?

MR O'DOWD:	No, thank you, Your Honour.
HIS HONOUR:	Very well, I will adjourn for 15 minutes.
AT 10.58 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.17 AM:

HIS HONOUR:  Yes, Mr Street.

MR STREET:  May it please the Court. I seek to reopen and

tender a document entitled "Statements of Account

for the year ended 31 December 1990", together with

annexed to it three pages of a current account for

Chellaram(2) 16 23/8/91

the appellant with the Bank Nationale de Paris,

together with the handwritten notation on the last

page of that document.

MR O'DOWD:	No objection.
MR STREET:	Your Honour, that is the only application to

reopen and that is the only evidence I seek to

call.

HIS HONOUR:  Yes. I will just have a - is there any

particular paragraphs you want me - - -

MR STREET: Yes, could I take Your Honour briefly to -

Your Honour will see from the auditor's report on page 3 of the document the reference to the loss

that was sustained.

HIS HONOUR:  $HK26 million

MR STREET: If Your Honour goes to the shareholders' deficit

funds - - -

HIS HONOUR:  The company may be unable to continue trading.

MR STREET:  Yes. And Your Honour will see the shareholders'

loss on the balance sheet, shareholders' deficit of funds of some $22 million; Your Honour will see the

loss of profit of $24 million. If Your Honour goes

over then to the overdraft account Your Honour will

see on the last page of the document there is a

notation that was included in the tender - - -

HIS HONOUR:	The last page: overdraft limit .... in Hong Kong.
MR STREET:	And Your Honour will see the amount of the overdraft as at - - -
HIS HONOUR:	Overdrawn.
MR STREET: That is at 31 July 1991.
HIS HONOUR:	That has blown your enforcement point out of the window, I think.
MR O'DOWD:	Yes, Your Honour.
MR STREET:	Your Honour, can I do this before I go further

and seek to resume the address in relation to

submissions. I am also instructed to proffer to

the Court an undertaking by the individual,

P.S. Chellaram, an undertaking to this Court, to

pay the amount referred to in the notice of motion.

It is with that proffered undertaking that I seek

to resume my address, together with the evidence

that has been put on.

Chellaram(2) 17 23/8/91

HIS HONOUR:  Yes. There are problems about enforcing an

undertaking of somebody who is outside the

jurisdiction who is not a party to the proceedings.

MR STREET:  Your Honour, an undertaking to the Court would

mean that the Court could make an order. The High

Court making an order is enforceable and that is what I was going to seek to take Your Honour

briefly to in relation to the Hong Kong reciprocal legislation. Could I just take Your Honour to the

last page of exhibit A. If Your Honour has the

last page, that is the Foreign Judgments Reciprocal

Enforcement Order, Your Honour will see that in
rule 2 it identifies those parts of the

Commonwealth to which the reciprocal legislation

extends. Under the First Schedule Part I, does

Your Honour see the reference tot High Court?

HIS HONOUR:	Yes.
MR STREET:	Can I take Your Honour then briefly back to the

Act itself. Section 3(1) identifies those

countries where there is reciprocity, namely New

South Wales and Australia so far as the granting of

the provisions which mirrors, in essence, ours,

Your Honour.	Under subsection (2) is identified
the nature of the order.	If an order is made by

the High Court it would be a final and conclusive

order. It would be for a sum of money and,

Your Honour, it would fall within subsection (2).

There are provisos in subsection (4) relating to

enforcement, namely that it obviously has not been

paid and that it could not be enforced by

execution. Neither of those are applicable.

HIS HONOUR: This is section 4 subsection (6)?

MR STREET: Yes. Section 4 identified certain factors

affecting the judgment under subsection (1), none

of which are applicable. Under subsection (6) the

enforcement includes the costs and interest in that
regard in relation to the enforcement.	Does

Your Honour see that under subsection (6)?

HIS HONOUR:  Yes.

MR STREET: Under section 6 itself, grounds on which it

could have been moved to set it aside under

paragraph (a). None of those grounds, on its face,

would be applicable.

HIS HONOUR:  But how could an undertaking by somebody who is

not a party to the proceedings be enforced?

MR STREET:  By order of the Court. As I understand it, an

undertaking would usually result in an order by the

Court. For example, where there is a company that

Chellaram(2) 18 23/8/91

needs to give a secured undertaking, an undertaking

would be proffered by - - -

HIS HONOUR:  This is somebody who is not even a party to the

proceedings.

MR STREET:  No, Your Honour, but my instructions are -

Your Honour has identified him as being a

shareholder of the company and that is identified

from the documents that have been handed up, both

in the affidavit of Mr James and, I think, from the

accounts. Your Honour, the undertaking to the

Court is one to pay an order by this Court by

Mr Chellaram the costs up to the amount identified

in the notice of motion. What we say is that that

would be an order that, if made by this Court,
would fall within this reciprocal enforcement

legislation. We seek to place that proffering of

that undertaking as a further factor that we ask
this Court to take into account in dealing with the

application.

Can I then just come back to the other

factors. I sought to address briefly in relation

to the question of the appellant's present

financial position being in part contributed to by

the respondents' conduct. In my respectful

submission, that has considerable force as a factor

to be taken into account, in light of the history

which Your Honour has briefly been taken back to in

respect of the breach of contract and the exclusion

clause and -

HIS HONOUR:  But that is rather different. What is the

amount of the judgment Hong Kong, $350 million or

something, was it?

MR STREET:  No, Your Honour, I think it is $237,000,

referred to in paragraph 6.

HIS HONOUR: Paragraph 6 of?

MR STREET: Mr Wylie's affidavit. There are two factors to

be taken into account in that regard: firstly,

that the date of this is as at 1985 that this loss

occurs. So the loss of these goods valued at some

$HK237,154 has occurred back in 1985.

HIS HONOUR:  But you would have to compound it at a very

high rate of interest to explain a deficiency of 22

million.

MR STREET:  Your Honour, I cannot say that it has caused,

and I did not seek to.	I sought to put contributed
to.	I cannot put it higher and have not sought to.

But, Your Honour, none the less, we say it must have contributed to it and we say in 1985 it is

Chellaram(2) 19 23/8/91

clear that that would have been a sum of money that

has had financial impact on the respondent. It has

been kept out of that money. It has been kept out

of the interest on those funds in circumstances

which I have sought to briefly outline in the

nature of the case.

Your Honour, the last matter that we seek to

advance is that the Court should take into account

the different positions between the appellant and

the respondent. The respondent is not one where it

can be said that it is being harassed or hazarded

by the application, and to the extent of

enforcement, can I just deal very briefly with the
distinction that my learned friend sought to draw

between Mr Justice Sheppard's judgment in Kent and

Connop. In so far as it is relevant, what

His Honour Mr Justice Sheppard went on to say, that
Your Honour was not taken to on the next page in
Kent was that he would have made an order.

Page 279, point 20. His Honour distinguished it by

reason of, in part, he referred to the fact that
section 56 and he also referred to the reflection

in the judgment of Mr Justice Rath that there were

assets. When one reads the judgment of

Mr Justice Rath that was not a consideration that

he took into account and, indeed, he said his

judgment is one in which it appears the contrary

was the position.

But, Your Honour, it is only a further factor

and none the less we simply say that factor should

be linked in with the factor that there has been evidence given of, namely, the history of delay,

the particular prejudice, the contribution by the

respondent to that position, that effectively the

appellant would be shut out, the question of public

importance and, Your Honour, that - - -

HIS HONOUR:	How can you say that the appellant will be shut out when you have given an undertaking that
Mr Chellaram will pay the costs in any event, if
this appeal is unsuccessful?
MR STREET:	The proffered undertaking is one which
HIS HONOUR:	But if he has got the funds to pay it at the

end of the day, then one is entitled to assume he

is more likely to have the funds at the present

time.

MR STREET:  Your Honour, I think it should be taken into

consideration in determining whether or not - that

undertaking itself is one which is one we seek to

incorporate with the other factors. I have no

evidence that I can take Your Honour to to show

Mr Chellaram's financial position. What we do say,

Chellaram(2) 20 23/8/91

though, is that the impecuniosity is one which

having been reflected on the material that has been

tendered, taken together with these other factors,

we say that in all the circumstances the Court

should not make an order and that it would not be
in the interests of justice in light of the nature

of the question and the history relating to the

matter and the prospects of success which we also

seek to focus on in supporting the opposition of

the application, if the Court pleases.

HIS HONOUR:  What do you say about costs in this matter? I

had proposed to give judgment at the end of the

argument but because of this new matter that you

have raised about the undertaking being given by

somebody, I think I should reserve my judgment in

the matter.

MR STREET: If Your Honour pleases. In relation to costs I

do not think I could be heard to say that if the

motion was unsuccessful it should be other than

costs in the appeal.

HIS HONOUR:	What about costs against you?
MR STREET:	Your Honour, I think I would not invite

Your Honour to do so, but the course I would invite

Your Honour to take is that it should be costs in

the appeal, which would fairly reflect the interest

of the case and, Your Honour, it is one where the

appellants' affidavit, as Your Honour said right

from the outset, is one which did not go to the

full extent that it could have.

HIS HONOUR:	Thank you, Mr Street. Yes, Mr O'Dowd.
MR O'DOWD:	Your Honour, I will just briefly revert to a

couple of the other discretionary factors my friend

raised. He raised the issue of the P&I Club

standing behind the claim. Mr James' affidavit of

22 August - - -

HIS HONOUR:	That says that they are not supporting it.
MR O'DOWD:	They are not supporting this, Your Honour, just

to clear that. Although it might be a matter for

discretion, the test is not whether or not this

litigation is harassing one party or another; it is

a question of weighing up all the circumstances and

I make no - - -

HIS HONOUR:	Yes, although there is something to be said for the view that this jurisdiction should have firmly
in mind principles concerning abuse of process to a
large - - -

Chellaram(2) 21 23/8/91

MR O'DOWD:  Yes, Your Honour, but one cannot go past the

fact that the status quo is, at the moment, a

three/nil decision by the Court of Appeal, albeit on the basis of an exclusion clause, but albeit a valid and binding and legal decision. One cannot,

I would respectfully submit, place too much weight

on that.

In respect of the new evidence proffered by

the appellant, Your Honour, I will not do
anything - that speaks for itself and that, I

respectfully submit, supports entirely the

applicants' position and it fairly and squarely

puts it within the ambit of Bell's case in that

there is a company which may not be able to

continue trading; it cannot lose. In the event

that it loses the appeal, there is no money to be

got by the successful party.

HIS HONOUR: 

I appreciate that, but I think in this Court,

perhaps more than many other courts, the fact that
special leave has been granted is an important

matter because it indicates that there is some

public interest in this particular litigation which

transcends the respective rights of the parties.

MR O'DOWD: 

But that, I think, Your Honour, is well dealt

with by the rationale in Bell's case in that what

it says is, it is not for the person seeking

security to adduce evidence as to the financial

position of those standing behind the company,

those who would benefit; it is for that company

that is opposing the order, and in that event,

having established that the company is impecunious

on our own evidence and, of course, on the evidence

of the appellant, I would submit that there is

really no other course but to follow that. As was

the case in Bell's case, the appellant was at

liberty to adduce evidence as to the financial or

non-financial position of those who would otherwise

benefit and in that way avoid an order for security

for costs. They have not done so and therefore

they seek by not having done so to avail themselves

of protection by not doing that.

HIS HONOUR:  The undertaking constitutes an admission that

Mr Chellaram at least can fund this litigation.	So
in one sense the real question becomes whether he
should be required to do it now, in effect, or
whether you should rely on the undertaking.

MR O'DOWD:  I have difficulty with the concept of an

undertaking by a non-party. I mean I note that the

Court would note an undertaking by somebody; I do

not think the Court makes an order. I do not see
how it can make an order against a non-party as

such. I would think that there would be, perhaps,

Chellaram(2) 22 23/8/91

a remedy in contempt but that is far removed from an order made by the Court as to one or the other

party. Having regard to Your Honour's comment

about it being an admission in substance that

somebody there has got the money to fund this, why

then should the rationale in Bell's case not be

applied.	I mean, it follows that therefore there
is somebody there with the funds.	Why should the

order not be made against the company who can then

say to that person, Mr Chellaram, "Well, put up the

money now, we have made that admission.", as it

falls squarely within the reasoning of His Honour

in that case. I would see no other reasonable

course that the Court should take, with respect,

and having said that, of course, Your Honour, will

consider your decision.

In respect of the position as to costs,

Your Honour will know that we brought this

application and we put on certain evidence and

evidence was called in reply in such a way

that - - -

HIS HONOUR:	I do not want to give any encouragement to special leave days being converted into
applications for security for costs, but why was
not the application made to the three Judges who
heard the matter?
MR O'DOWD:	Your Honour, if you look at Mr James' affidavit,

initially it was, I think, thought at the time that

it would be a matter that would be fairly quickly

disposed of, on my instructions; agreed to in terms
of the not significant amount of costs security

they were seeking. There was an exchange of

correspondence which is annexed to Mr James'

affidavit. It was not anticipated at that time

that there would have to be an application made

and, of course, we now find ourselves having to

make that application in light of our suspicions

which have been borne out by the evidence today.

HIS HONOUR:  In simple cases, no doubt it is appropriate to

make an application to the Court that hears the

special leave application, but this cannot really

be said to be a simple case.

MR O'DOWD:  And as to costs, Your Honour, the appellant has,

in fact, changed streams, so to speak, and they

have called this new evidence and in substance I

think that in having regard to all the
circumstances, an order for costs in these
proceedings. If, for example, Your Honour, were to

make an order that recognized this undertaking,

and I would submit in essence, although not

technically, we have succeeded in our application.

We have established that this company is

Chellaram(2) 23 23/8/91

impecunious and we need some sort of security. If

we get it by way of an order or by way of an
undertaking, we would submit that an order is the

appropriate course, that we should be entitled to

our costs because we have, in essence, succeeded in
our application.

Just one point I did not address, Your Honour: on that one point about Order 71 rule 6 and a

plaintiff, I think Your Honour is probably aware of the authorities which deal with a plaintiff being a person not necessarily restricted to an appellant

but in general terms being the person who would be

deprived of his remedy of costs in the event that

certain circumstances flowed. I do not think there

is any basis for a restriction of a reading of

Order 71 rule 6 to only apply to plaintiffs as opposed to appellants.

HIS HONOUR: There is a question of inherent jurisdiction as

well, but you do not seem to have relied on that.

MR O'DOWD:  We would, of course, rely on the inherent

jurisdiction of the Court, Your Honour, not to a

matter that is specifically put in submissions but

as a matter that the Court always has a discretion

to act upon. May it please the Court.

MR STREET: Before Your Honour adjourns, there is one matter

which we would wish to clarify, so there is no

doubt about it. The undertaking I proffered was an

undertaking to abide an order by this Court by

Mr Chellaram in that regard, up to the amount

of - - -

HIS HONOUR:  Yes, but it does seem to carry with it an

admission that he will be in funds at some time in

the future, should an order be made. It is a short

step then to draw the further inference that he is

in funds now.

MR STREET: It is one which Your Honour would, though, take

into account the other surrounding circumstances,

namely that the financial position of the actual

appellant and the other submissions that we sought

to put in relation to the actual appellant, and

what we would invite Your Honour to do is to

balance all of those factors - - -

HIS HONOUR:  I appreciate that. I might also point out to

you though, Mr Street, that there is no evidence as

to the position of the investment company or, for

that matter, Mr Chellaram.

MR STREET:  I appreciate that, Your Honour, and I have to

live with that.

Chellaram(2) 24 23/8/91

HIS HONOUR:  I will reserve my decision in this matter and I

would hope to be able to get it out within the next

week.

AT 11.38 AM THE MATTER WAS ADJOURNED SINE DIE

Chellaram(2) 25 23/8/91