FEDERAL COURT OF AUSTRALIA People Telecom Limited v Phatchat Pty Limited [2007] FCA 536 PEOPLE TELECOM LIMITED (ACN 091 714 699)v PHATCHAT PTY LIMITED (ACN 100 266 000), BODRUM PTY LIMITED (ACN 070 141 945), PETER JAMES KELLY, PHATCHAT PTY LIMITED (ACN 100 266 000), BODRUM PTY LIMITED (ACN 070 141 945), PETER JAMES KELLY, PEOPLE TELECOM LIMITED (ACN 091 714 699) AND SINGTEL OPTUS PTY LIMITED (ACN 052 833 208) NSD 2044 OF 2006 GYLES J 11 APRIL 2007 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 2044 OF 2006 BETWEEN: PEOPLE TELECOM LIMITED (ACN 091 714 699) Applicant AND: PHATCHAT PTY LIMITED (ACN 100 266 000) First Respondent BODRUM PTY LIMITED (ACN 070 141 945) Second Respondent PETER JAMES KELLY Third Respondent PHATCHAT PTY LIMITED (ACN 100 266 000) First Cross-Claimant on the First Cross-Claim BODRUM PTY LIMITED (ACN 070 141 945) First Cross-Claimant on the Second Cross-Claim PETER JAMES KELLY Second Cross-Claimant on the First and Second Cross-Claims PEOPLE TELECOM LIMITED (ACN 091 714 699) First Cross-Respondent SINGTEL OPTUS PTY LIMITED (ACN 052 833 208) Second Cross-Respondent JUDGE: GYLES J DATE OF ORDER: 11 APRIL 2007 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The motion be stood over to 8 May 2007 at 9.15 am. 2. The matter be stood over for further directions to 8 May 2007 at 9.15 am. 3. The documents produced today by the cross-claimants under the notice to produce be returned to the cross-claimants. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 2044 OF 2006 BETWEEN: PEOPLE TELECOM LIMITED (ACN 091 714 699) Applicant AND: PHATCHAT PTY LIMITED (ACN 100 266 000) First Respondent BODRUM PTY LIMITED (ACN 070 141 945) Second Respondent PETER JAMES KELLY Third Respondent PHATCHAT PTY LIMITED (ACN 100 266 000) First Cross-Claimant on the First Cross-Claim BODRUM PTY LIMITED (ACN 070 141 945) First Cross-Claimant on the Second Cross-Claim PETER JAMES KELLY Second Cross-Claimant on the First and Second Cross-Claims PEOPLE TELECOM LIMITED (ACN 091 714 699) First Cross-Respondent SINGTEL OPTUS PTY LIMITED (ACN 052 833 208) Second Cross-Respondent JUDGE: GYLES J DATE: 11 APRIL 2007 PLACE: SYDNEY REASONS FOR JUDGMENT 1 I have heard comprehensive argument on this application for security for costs by the two cross-respondents. I normally would like to take a little time to formulate some reasons, but I am about to depart on three weeks' leave, and I have come to a clear view. It is as well that I express it and, having done so, I will then be able to manage matters thereafter. I do not intend to recite the comprehensive arguments of counsel, or the references to the authorities, which have been most illuminating, but show no bright line applicable to this hearing. 2 There are two matters that are principally in issue, but the fundamental point is that it is accepted that the corporation is impecunious, and would not be able to meet claims for costs if it were not successful. The first point of substance is that this is a cross-claim, not an action commenced in the normal way. That does not protect against Singtel Optus Pty Limited, they being a newly and freshly joined party, albeit they are mixed up in a cross-claim against the existing party. 3 In my view, this is a borderline case. Much of the cross-claim against People Telecom Limited can be viewed as defensive in a broad sense. Indeed, it has been put that the claims based upon s 45 and s 46 of the Trade Practices Act 1974 (Cth) can also be viewed in the same light as they essentially, in the end, depend upon or at least involve the repudiatory conduct which is at the heart of the rest of the case. There is, thus, a link to the subject matter of the action. 4 However, particularly having in mind the trend of some of the later authorities and viewing what I consider to be the substance of the matter, I think it is fair to see the claims against both cross-respondents, based upon s 45 and s 46, as discrete enough to place the cross-claimants in a position of plaintiff, so far as those claims are concerned. Notwithstanding the link to the agreement sued upon, the relief claimed, the basis for it and the scope of it lead me to the conclusion which I have mentioned. 5 The second point of substance concerns the position of the individual, Mr Kelly, as being a party to the cross-claims, and so available to both of the cross-respondents for costs, in the event that the claims are unsuccessful. That requires some analysis of the nature of the claims brought on behalf of Mr Kelly and, in doing so, I do not propose to go beyond the pleadings, one way or the other. On the one hand, although the essence of the case for the cross-respondents is that Mr Kelly is by way of being a formal party with no real connection with the cross-claim, on the other hand he is a party, and I cannot ignore that situation. I must have regard to the claims made on his behalf in the pleading as it stands, without regard to some of the suggestions by counsel on behalf of the cross-claimants as to theoretical arguments which might involve Mr Kelly in relief which is not sought, but which might be sought. 6 In my opinion, the position of Mr Kelly as a guarantor does not, in a relevant sense, have anything to do with the claims pursuant to s 45 and s 46, they being the claims which concern me as to the position of the cross-respondents. He might, as a guarantor, ultimately reap the benefit if the claim against the company is defeated in some way by the claims under s 45 and s 46, and so may have an interest in that topic. However, Mr Kelly is not, in my opinion, a person who would be naturally liable for the costs of the proceeding if the corporate cross-claimants fail on the s 45 and s 46 claims. Whilst, I suppose, there is the possibility that that might be the result, his mere presence is, in my opinion, not enough to avoid the consequence that the claims brought by the corporate cross-claimants must be viewed by claims brought by them, and not, in the relevant sense, by Mr Kelly. 7 Any claims which go beyond s 45 and s 46, even against Singtel Optus Pty Limited, in my opinion, would not warrant a grant for security for costs against the corporate claimants in any event, and Mr Kelly's presence in relation to those claims is more likely to lead to an order for costs against him if the cross-claimants fail. 8 It is of some importance that this is not a situation in which it is alleged that a reasonable order for security for costs would stultify the proceedings. That is no doubt because there is a litigation funder acknowledged to be behind the cross-claimants. So that factor is not part of the equation. 9 Thus, in principle, I would make an order for security for costs, but limited to the s 45 and s 46 cases. I am not going to deal with quantum at the moment, because I have not heard full argument. I have read the submissions, I have read the evidence, but I will need to read the evidence with more care than I have, in order to form a view about quantum. I can, however, make some remarks about quantum. The first is that this case, like all cases of this type, is case-managed. The old notion that security for costs should be dealt with early, and once, in my opinion, has no real application to the present situation. 10 It is submitted for the cross-respondents that the s 45 and s 46 cases are considerable cases, which would involve very extensive preparation and presentation. That is challenged by the applicant. I am unable to judge that at the moment. A great deal depends upon how the applicant chooses to present its case. I can imagine various approaches to that, some of which would involve considerable preparation and presentation, some of which would not. The evidence elicited in cross-examination demonstrates that Singtel Optus Pty Limited, at least, has not yet engaged an expert economist, an expert valuer, or indeed, senior counsel for the purposes of a final hearing. No doubt, they are waiting to see the whites of the eyes of the cross-claimants, as I would expect. That does not mean, of course, that they sit on their hands and do nothing in the meantime. But it does mean that it is far too early to tell the dimensions of this case. Indeed, even making an educated guess as to the length of hearing is really little more than speculation at this stage. I can imagine it could be as little as a week, or as long as two months. 11 So, in my opinion, the task at the moment is to fix an amount which would be reasonable for those steps which should be taken to meet the s 45 and s 46 case, pending receipt of the evidence, which will be led by the applicant. It is at that point that both the cross-respondents, and myself, will have a better idea as to what is required for security. I will stand the matter over for further directions to 8 May 2007 at 9.15 am. If, in the meantime, that guidance helps you work something out, so much the better. 12 The orders that I have foreshadowed will be the orders of the Court. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles. Associate: Dated: 13 April 2007 Counsel for the Cross-Claimants: Dr AS Bell SC, Mr JC Giles Solicitor for the Cross-Claimants: Levitt Robinson Counsel for the Applicant/First Cross-Respondent: Mr CA Moore Solicitor for the Applicant/First Cross-Respondent: Ebsworth & Ebsworth Counsel for the Second Cross-Respondent: Mr MA Jones Solicitor for the Second Cross-Respondent: Baker & McKenzie Date of Hearing: 11 April 2007 Date of Judgment: 11 April 2007