New South Wales Supreme Court CITATION : Idoport Pty Limited & Anor v National Australia Bank Limited & 8 Ors; Idoport Pty Limited & Anor v Donald Robert Argus; Idoport Pty Limited "JMG" v National Australia Bank Limited [52] [2002] NSWSC 18 FILE NUMBER(S) : SC 50113/98; 50026/99; 3991/00 HEARING DATE(S) : 29/01/02 JUDGMENT DATE : 29 January 2002 Idoport Pty Limited (Plaintiff) PARTIES : National Australia Bank Limited (Defendant) Donald Robert Argus (Defendant) JUDGMENT OF : Einstein J COUNSEL : Mr GA Newton Mr T Bathurst QC, Mr J Sackar QC, Dr A Bell, (Defendants) SOLICITORS : Freehills (Defendants) CATCHWORDS : Practice and procedure - Discretion to adjourn proceedings - Failure to comply with orders to provide security for costs - Principles - Application for dismissal of proceedings following automatic stay of proceedings operative when security for costs not provided Federal Court Act LEGISLATION CITED : Supreme Court Rules Trade Practices Act 1974 (Cth) Anstee v. Jennings (1935) VLR 144 Asian Investments Corporation Ltd v Symons (unreported) NSW Supreme Court, 10 April 1996 Billinudgel Pastoral Co Pty Ltd v Westpac Banking Corporation [1998] 278 FCA Cilli v. Abbott (1981) 53 FLR 108 Kelly v. Noumenon Pty Ltd (1988) 47 SASR 182 CASES CITED : Ketterman v Hansel Properties Ltd [1987] AC 189 Latoudis v Casey (1990) 170 CLR 534 Oshlack v Richmond River Council (1998) 193 CLR 72 Pacific Acceptance Corporation Ltd v Forsyth (No. 2) [1967] 2 NSWR 402 Queensland v J. L. Holdings Pty Ltd at 154 Sali v SPC Ltd (1993) 67 ALJR 841 State Pollution Control Commission v Australian Iron and Steel Pty Ltd (1992) 29 NSWLR 487 DECISION : Application for an adjournment dismissed. In proceedings No. 50113/98. 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 proceedings No. 50026/99. 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 be entered forthwith. In proceedings No. 3991/00. 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. IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION – COMMERCIAL LIST Einstein J 29 January 2002 ex tempore Revised 30 January 2002 50113/98 IDOPORT PTY LIMITED & ANOR v NATIONAL AUSTRALIA BANK LIMITED & 8 ORS 50026/99 IDOPORT PTY LIMITED & ANOR v DONALD ROBERT ARGUS 3991/00 IDOPORT PTY LIMITED ("JMG") v NATIONAL AUSTRALIA BANK LIMITED Judgment General Background 1 The judgment delivered on 26 November 2001 ([2001] NSWSC 1081) ["the November judgment"] sets out a number of matters by way of the general background against which the motions presently before the court arise for determination. The November judgment and this judgment should be read together in terms of identifying the principles and circumstances which are to be taken into account presently. The Motions before the Court 2 There are before the Court a number of notices of motion being heard together. Motion 51 3 Motion 51 filed on 13 November 2001 ["the motion to dismiss the MLC proceedings"] was summarised in paragraph 2 of the November judgment and seeks an order dismissing proceedings No 3991 of 2000 [generally referred to as "the MLC proceedings"]. The motion was stood over to 29 January 2002 for hearing at noon or on such later occasion as the circumstances which obtain on that day may dictate [November judgment paragraph 117]. Leave was granted on 29 January 2001 to amend the motion to seek orders that the plaintiff pay the defendants' costs of the proceedings and an order: "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." Motion 54 4 By Motion 54 the defendants seek an order dismissing the plaintiff's Amended Summons and Fourth Further Amended Statement of Claim and the Second Cross-Claim; an order that the plaintiff pay the defendants costs of the proceedings and an order: "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" Motion 55 5 By Motion 55 the defendants seek an order dismissing proceedings No 50026 of 1999 ["the Argus proceedings"]; and an order: "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". Application for adjournment 6 Idoport, by its counsel Mr Newton, by application made from the bar table, seeks an adjournment of the hearing of the defendants' motion either for a ten day period or until tomorrow morning. The Orders made on 26 November 2001 7 These orders provided inter alia: (a) for the granting of leave to the defendants to file a notice of motion on or before 21 January 2002, returnable on 29 January 2002, seeking that the proceedings be dismissed; (b) for service of evidence in support of such a motion on or before 21 January 2002; (c) for the granting of leave to the plaintiff to file a notice of motion on or before 21 January 2002, returnable on 29 January 2002, seeking that the stay orders be lifted; (d) for the serving of evidence in support of such a motion, also on or before 21 January 2002; and (e) for the serving of evidence in reply to such motions on or before 24 January 2002. The evidence relied upon by the defendants in support of the motions 8 The defendants rely upon the following affidavits made by Mr Lovell: · An affidavit made on 12 November 2001 [a copy was appended to the November judgment]; · An affidavit made on 26 September 2001 [a copy is appended as Appendix "A" to this judgment]; · An affidavit made on 20 November 2001 [a copy was appended to the November judgment]; and · An affidavit made on 21 January 2002 [a copy is appended as Appendix "B" to this judgment]. The evidence relied upon by the plaintiff in opposing the motions and in support of an application for an adjournment of the hearing of the motions 9 Idoport relies upon an affidavit made by Mr John Malcolm Maconochie on 29 January 2002. A copy of that affidavit is appended as Appendix "C" to this judgment. The Principles 10 The broad areas of principle which inform the issues presently for consideration concern: · The principles dealing with the exercise of the courts discretion to make orders for the provision of security for costs [These principles were generally the subject of the judgment delivered on 13 September 2001 ([2001] NSWSC 744)]; · The principles dealing with the exercise of the courts discretion to dismiss proceedings for failure to provide security including the terms upon which such orders may be made; · The principles dealing with the exercise of the courts discretion to make orders for the award of costs; and · The principles dealing with the exercise of the court's discretion in determining whether to grant an adjournment of proceedings. [These principles were generally the subject of the November judgment]. Principles relating to costs and security 11 Generally the submissions of the defendants of 25 January 2002 correctly set out certain aspects of the principles relating to costs and failure to provide security. I adopt those submissions which are set out below. 12 The ordinary rule that costs follow the event is a distinguishing characteristic of our legal system. The rationale for the rule was stated by McHugh J. in Latoudis v Casey (1990) 170 CLR 534 at 566-567: "An order for costs indemnifies the successful party in litigious proceedings in respect of liability for professional fees and out-of-pocket expenses reasonably incurred in connection with the litigation: Kelly v. Noumenon Pty Ltd (1988) 47 SASR 182, at p 184. The rationale of the order is that it is just and reasonable that the party who has caused the other party to incur the costs of litigation should reimburse that party for the liability incurred. The order is not made to punish the unsuccessful party. Its function is compensatory. Thus, in civil proceedings an order may, and usually will, be made even though the unsuccessful party has nearly succeeded or has acted reasonably in commencing the proceedings. It may, and usually will, be made even though the action has failed through no fault of the unsuccessful party. In Cilli v. Abbott (1981) 53 FLR 108, Keely, Toohey and Fisher JJ. pointed out (at p 111) that "the object of costs is not to penalize; it is to indemnify the successful party in regard to expense to which he has been put by reason of legal proceedings"; see also Anstee v. Jennings (1935) VLR 144, at p 148." 13 In Oshlack v Richmond River Council (1998) 193 CLR 72 at 97, his Honour expanded on what he had said in Latoudis, and in so doing, identified a rationale for the general rule that had a public as well as a private dimension. His Honour said: "The expression the "usual order as to costs" embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation. As a matter of policy, one beneficial by-product of this compensatory purpose may well be to instil in a party contemplating commencing, or defending, litigation a sober realisation of the potential financial expense involved. Large scale disregard of the principle of the usual order as to costs would inevitably lead to an increase in litigation with an increased, and often unnecessary, burden on the scarce resources of the publicly funded system of justice." 14 The jurisdiction to award security for costs protects the efficacy of the exercise of the jurisdiction to award costs. The discretion is to be exercised with the same rationales in mind. A basis for the exercise of the jurisdiction to order security for costs against a company is that the company is impecunious. This recognises that if a company wins it will obtain the benefit of a verdict and an order for costs against the defendant to the advantage of those who have an interest in the assets of the company, but that the defendant sued will, if successful, be at a disadvantage in being unable to recover its costs if the company is financially insecure. Therefore it is fair that a defendant be placed in an equal position with the company by the company providing or having provided by those concerned in the fruits of the litigation a means of the defendant sued recovering its costs if it wins: see Pacific Acceptance Corporation Ltd v Forsyth (No. 2) [1967] 2 NSWR 402 at 407. 15 It is a natural consequence of a failure to provide security that a plaintiff's proceedings are stayed. Further, it is in the ordinary course of events that if there is non-compliance with an order to provide security for costs notwithstanding that the proceedings are stayed until the security is given, the opposing party may move for dismissal of the suit: see Young J in Asian Investments Corporation Ltd v Symons (unreported) NSW Supreme Court, 10 April 1996 (BC 9601190). 16 The principles were also set out in the security for costs judgment at paragraphs 44 and following. Dismissal of proceedings for failure to provide security 17 The dismissal of the MLC proceedings and of proceedings No 50113 of 1998 and the Argus proceedings [generally together referred to as "the Main Proceedings"] is sought pursuant to Part 53 Rule 4 of the Supreme Court Rules and/or in the exercise by the Court of its inherent jurisdiction to control its own processes. 18 Part 23 Rule 4 is in the following terms: "Where a plaintiff fails to comply with an order under this Division [being Division 1 of Part 53], the Court may, on terms, order that the proceedings on any claims by the plaintiff for relief in the proceedings be dismissed". 19 The Court's discretion to dismiss proceedings for failure to provide security is an "unfettered discretion to be exercised in the circumstances of the case": see Cooper J. in Billinudgel Pastoral Co Pty Ltd v Westpac Banking Corporation [1998] 278 FCA (27 March 1998) (a decision concerning section 56 of the Federal Court Act, which is in relevantly similar terms to Part 53 Rule 4). 20 In Asian Investments Corporation Ltd v Symons (unreported-New South Wales Supreme Court, 10 April 1996) Young J. held that the rule that proceedings may be dismissed if security for costs is not provided "has been part of the law for a long time". His Honour held that in his view it was quite clear that in the ordinary course of events if there is non-compliance with an order to provide security for costs, notwithstanding that the proceedings are stayed until the security is given, the opposing party may move for a dismissal of the suit. Background facts 21 It seems generally unnecessary to repeat yet again the background facts against which the subject motions fall for determination. If ever there was a set of proceedings where the background facts had been identified in interim judgment after interim judgment then this is that set of proceedings. Most particularly the relevant background facts are set out in the judgment delivered on 13 September 2001 in relation to the security for costs motions and in the November judgment. The November judgment in particular explains the then position in relation to Idoport's failure to comply with the security for costs orders. The position is updated by Mr Lovell's affidavit of 21 January 2002 where paragraph 42 makes clear that as at 21 January 2002 no security had been posted in the MLC proceedings and that no security had been posted in the main proceedings since 1 November 2001. Paragraph 50 of the same affidavit makes clear that as at 3 December 2001 searches disclosed that no payment of security for costs had been made by the plaintiff on or before 1 December 2001. In the result the following table records the defaults by Idoport in terms of a failure to comply with security for costs orders: 'Security in proceedings Nos 50113 of 1998 and 50026 of 1999 Total security ordered against the Plaintiff is $963,560.00, to be paid in instalments of $48,178.00 by no later than the first day of each month for the period commencing 1 November 2001 to 1 June 2003. Current status of instalments due to date Date due Amount of security ordered Status 1.11.01 $48,178.00 Paid 1.12.01 $48,178.00 Not paid 1.01.02 $48,178.00 Not paid Total amount outstanding = $96,356.00. Security in proceedings No 3991 of 2000 Total security ordered against the Plaintiff is $942,895.50, with the amount of $479,305.50 to be paid by no later than 31 October 2001, and the amount of $23,179.50 to be paid by no later than the first day of each month for the period commencing 1 November 2001 to 1 June 2003. Current status of instalments due to date Date due Amount of security ordered Status 31.10.01 $479,305.50 Not paid 1.11.01 $23,179.50 Not paid 1.12.01 $23,179.50 Not paid 1.01.02 $23,179.50 Not paid Total amount outstanding = $548,844.00. Total amount outstanding in all proceedings = $645,200.00.' 22 Notices of ceasing to act in each of the three sets of proceedings were filed on 3 December 2001 by Withnell Hetherington. The Court had been informed by Mr Garnsey QC that none of the several counsel were prepared to continue to represent Idoport in the absence of an instructing solicitor. I proceed upon the basis that all counsel for the plaintiff have returned their briefs and presumably did so at or about late November or the commencement of December last year. The precise date is of no particular moment. Certain of the distinguishing characteristics of the Main Proceedings 23 In their written submissions of 25 January 2002 the defendants particularly highlight the importance of the application for dismissal to be considered against the background of what I accept as part of the following distinguishing characteristics of the Main Proceedings: (a) that the damages claimed by the plaintiff against the National Australia Bank Limited is a sum of up to US$29.3 billion and exceeds the bank's market capitalisation; (b) that the plaintiff has made serious allegations against six individuals in the two statements of claim including a claim under section 75B of the Trade Practices Act 1974 (Cth) , and claims against a further two individuals in the Second Cross Claim; (c) that the plaintiff's claim for damages against the individual defendants is also for an amount of up to US$29.3 billion (see paragraph 5 of the First Lovell Affidavit); (d) that the plaintiff has been financed by three parties, two of whom are overseas entities, in circumstances where, if the plaintiff's claims were to ultimately succeed, those parties would share in a significant proportion of the proceeds of any judgment (see [2001] NSWSC 744 Appendix A); (e) that the plaintiff has to date been funded by those parties in an amount of approximately $10 million (see [2001] NSWSC 1081 para 56); (f) that the final hearing of the Main Proceedings has taken in excess of 200 court hearing days (see paragraph 51 of the First Lovell Affidavit), and prior to the stay was estimated to continue to the end of 2003 or beyond (see [2001] NSWSC 1023 at para 5); (g) that the Court has recognized the exceptional scope of the proceedings (see for example [2000] NSWSC 338 (14 April 2000) at para 45; [2001] NSWSC 427 (23 May 2001) at paras 6-8; [2001] NSWSC 868 (5 October 2001) at para 63) and has acknowledged the right of the defendants to defend the proceedings in the manner they have: "…I do not accept that the defendants have not been legitimately entitled to mount this form of defence to proceedings of the nature prosecuted by the plaintiff, taking into account the way in which the plaintiff has seen fit to conduct the proceedings. Whilst the plaintiff might complain of the scale and approach taken by the defendants in defending the proceedings, a mere glance at the 232-page Further Amended Statement of Claim in proceedings no. 50113 of 1998 or the volume and content of the statements relied upon by the plaintiff makes plain the difficulties faced by the defendants in dealing with the issues." (see [2001] NSWSC 1081 at para 102). "Whilst the precise ambit of the plainitffs' claim to damages may be said to have moved over time arguably from $20 billion to in excess of $50 billion, there was never any shadow of a doubt but that the defendants would defend the claim to the hilt and would do so in a careful and considered way using every resource available in that regard. It is not surprising that the defendants have retained one of Australia's largest law firms and built up a considerable legal team built up of many counsel and solicitors, no doubt backed by the National Australia Bank in every way possible. Previous judgments have described the defence as mobilising massive legal resources in relation to the litigation. It is not surprising that the defendants would have carefully investigated any possible cross-claims and in due course determined to pursue the first cross-claim. It is not surprising that the defendants would have gone about investigation of factual issues in the most meticulous fashion and would then have filed statements from their many witnesses." ([2001] NSWSC 744 (13 September 2001) at para 83.) 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 being 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 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 "a draft letter proposed by the plaintiff which addresses the mechanism of the proposed funding arrangements within the existing Shareholders Agreement". 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. 61 The first and second defendants by their counsel have indicated a willingness to the Court in the following terms: The first and second defendants undertake, subject to any application under Part 32A or any successful appeal against the dismissal of the proceedings 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. 62 It seems to me appropriate that such an undertaking having been proffered be noted. To my mind, in circumstances where that form of undertaking is given to the Court, the appropriate costs order will require the plaintiff to pay the defendants' costs of each of the separate sets of proceedings. In my view, the orders sought in paragraphs 3 of the defendants' amended motion 51 and in paragraph 3 of motions 54 and 55 are appropriate to be made. I certify that paragraphs 1 - 62 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on 29 January 2002 ex tempore and revised on 30 January 2002 ___________________ Susan Piggott Associate 30 January 2002 Last Modified: 06/13/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.