Mainland Property Holdings Pty Ltd (Receivers and Managers Appointed) v Naplend Pty Ltd

11 To this sum Registrar Luxton then added: Costs incurred to date (excluding costs of Interlocutory application filed 17 March 2023) $190,000 Costs of interlocutory application filed 17 March 2023 $22,000 Future costs $1,115,000 Total security $1,327,000

12 The respondents were content that I adopt the referee report. The applicants were not. I heard the competing submissions at a case management hearing on 1 June 2023. Specifically, I rejected the applicants' submissions that the quantum of the security should be determined by adopting a staged approach, with the first tranche to and including the anticipated date of mediation in the amount of $161,000. I accepted the reasoning and conclusions of Registrar Luxton and determined the appropriate amount of the security at $1,327,000. As I have noted, and at the request of senior counsel for the applicants, I determined that the security be provided in the form of a bank guarantee by 4 pm on 31 July 2023. I made further case management orders as follows: 2. By 4 pm on 7 August 2023, the respondents shall file and serve any interlocutory application and supporting affidavit(s): a. seeking to dismiss the proceeding pursuant to the leave granted in paragraph 6 of the November Order; and / or b. seeking to strike out all or any part of the applicants' statement of claim dated 13 April 2022. 3. By 4 pm on 14 August 2023, the applicants shall file and serve any affidavit(s) in respect of the respondents' application. 4. By 4 pm on 21 August 2023, the respondents shall file and serve any written submissions in support of their application. 5. By 4 pm on 28 August 2023, the applicants shall file and serve any written submissions in respect of the respondents' application. 6. The respondents' application is listed for hearing to commence at 10.15 am on 4 September 2023, on an estimate of a half day. 13 Mr Mawhinney failed to provide the security in accordance with those orders. The applicants' interlocutory application to extend time is dated 31 July 2023 and was lodged for filing at 2:13 pm that day. It is supported by two affidavits, one by Mr Rhys Roberts made on 1 August 2023 and the other by Bojana Balen made on 4 September 2023. Mr Roberts is the managing director and senior partner of Roberts Gray Lawyers, which firm is the solicitor for the applicants in this proceeding. Ms Balen is a solicitor in the employ of that firm. There is no affidavit from Mr Mawhinney. 14 The respondents oppose an extension of time and rely on several affidavits made by their lawyers David McIntosh on 7 August 2023 and Bianca Williamson on 28 August and 1 September 2023. The respondents rely on the same affidavits in support of their application that the proceeding be dismissed by reason of the failure of Mr Mawhinney to provide the security. 15 Each of the affidavits were read into evidence before me without objection and without any application for leave to cross-examine the deponents. I received evidence and heard argument sequentially commencing with the extension application followed by the dismissal application.

Extension application 16 Mr Gronow for the applicants submits that the relevant power to extend the time limited for the provision of the security is s 56(3) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) which confers permissive power to increase or reduce the amount of any security ordered to be given and to "vary the time at which, or manner or form in which, the security is to be given". This is a reference to the provision of security for "the payment of costs that may be awarded" against an applicant pursuant to s 56(1). In developing that submission, Mr Gronow also relies upon r 1.39 of the Federal Court Rules 2011 (Cth) (Rules) which confers power to "extend or shorten the time fixed" by the Rules or by an order of the Court. Particular emphasis is placed on Remagen Lend ADA Pty Ltd, in the matter of Adaman Resources Pty Ltd (Administrators Appointed) v Contento Investments Pty Ltd [2021] FCA 911 (Remagen) at [8] (Banks-Smith J) and Idoport Pty Ltd v National Australia Bank Ltd [2002] NSWSC 18 (Idoport) at [24] (Einstein J). Each of those decisions address the familiar considerations that arise upon an application to extend time, particularly in this Court by reference to the overarching purpose at s 37M of the FCA Act. Those matters are the period of the delay, the reason for and the explanation of the delay, any prejudice to the other parties and the interests of justice. Additionally, upon an application to extend time for the provision of security for costs, it is relevant to consider whether the applicant has been on notice of an application to dismiss the proceeding and the ability of the applicant to fund it. As an overarching consideration, summary dismissal of a proceeding is a power that should only be exercised in clear cases, properly balancing the prejudice to an applicant in being denied the ability to prosecute a proceeding against each other relevant factor. 17 In contrast, Mr Maiden KC for the respondents submits that s 56(3) is not relevant because this is not a case where the applicants were ordered to provide security for the costs of the respondents. Rather, Mr Mawhinney is obliged to provide an indemnity in favour of the applicants for their costs of the proceeding as between solicitor and client and in their favour in respect of any costs that may be ordered to be paid to the respondents as between party and party. In addition Mr Mawhinney is obliged to provide security for costs in the amount of the security and in the form of a bank guarantee which on his submission is to support the indemnity that Mr Mawhinney has provided in favour of the applicants. 18 I do not accept the submission of Mr Maiden. As explained in my primary reasons at [58]-[59] the provision by Mr Mawhinney of an indemnity and security for costs is the price that must be paid as the condition for the continuation of this proceeding. The third order made on 4 November 2022 requires security for costs in the form of a bank guarantee in favour of each of the respondents. In any event the distinction sought to be drawn by Mr Maiden in my view does not require a materially different approach to the factors that are relevant to my discretion. Properly understood, what the applicants seek is an extension of time for the provision of the security as required by the first order made on 1 June 2023. The object to be achieved by the exercise of the power to extend the time fixed for the provision of security pursuant to that order is to avoid injustice to the parties: Remagen at [25]. 19 Mr Gronow accepts that the applicants must discharge the onus of establishing to my satisfaction that the discretion to extend time should be exercised in their favour. A sound reason to vary the order is required: Pampered Paws Connection Pty Ltd (on its own behalf and in a representative capacity) v Pets Paradise Franchising (Qld) Pty Ltd (No 7) [2010] FCA 626 at [15]-[18] (Mansfield J). Quite apart from consideration of the usual matters that I have referenced, this application also requires consideration of the overarching purpose which is to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible: s 37M of the FCA Act. A failure to comply with orders or directions made in the practice and procedure in this Court may have the consequence that a proceeding is dismissed in the exercise of power at s 37P(6)(a) of the FCA Act. 20 The applicants' evidence by way of explanation for the failure to comply with the time limited for the provision of the security is, to put it mildly, sparse and is limited to the following six paragraphs in the affidavit of Mr Roberts: I am informed by Mr Mawhinney and believe that he was not be able to obtain the funds necessary to obtain the security by 31 July 2023. The reasons for this are explained below. In July 2022, there was a settlement in two separate proceedings in the Supreme Court of Victoria in which Roberts Gray acted for Mr Mawhinney and four companies controlled by him. The plaintiffs in those proceedings were liquidators of several companies known as the 'IPO' Group. In one of those proceedings, the liquidators sought, amongst other things, that a parcel of shares in a company known as Accloud PLC (domiciled in the United Kingdom) be registered in the name one of [sic] the companies in liquidation (a copy of the statement of claim can be provided if necessary). I infer from this that the liquidators considered those shares to be of sufficient value to justify litigation. The terms of the settlement are confidential until all formalities are completed. The settlement required approval of the Supreme Court of Victoria, which occurred on 30 November 2022. I am further informed by Mr Mawhinney and believe: (a) there are outstanding formalities which must occur in order to finalise that settlement; (b) once those formalities are completed, Mr Mawhinney expects that he will have access to unencumbered assets capable of being utilised to satisfy the order that he provide security for costs by way of bank guarantee; (c) Mr Mawhinney has financiers whom he and his companies have existing relationships with and who are aware of the assets the subject of the settlement and who are capable of providing the necessary funding to satisfy the security for costs; (d) Mr Mawhinney expects the formalities to be completed by the end of September; (e) Mr Mawhinney had previously expected that these formalities would be completed by now, but this has been delayed by the following: (i) one significant asset which is the subject of the settlement is some shares which are domiciled in India and local regulatory requirements in India meant that a large volume of original notarised documents had to be couriered from Australia, Singapore, and the British Virgin Islands to New Delhi; and (ii) a 'Demat' account needed to be opened in India in order to dematerialise the shares (that is, convert them to digital form so that they can be traded); (iii) a bank account for a company domiciled in the British Virgin Islands had to be opened in order for the Demant [sic] account to be opened, which was difficult as there are limited options for doing this; (iv) the liquidators are seeking legal advice from Indian lawyers with respect of the transfers which has caused further unanticipated delays. (f) although he is not aware of specific processing times, Mr Mawhinney's expectation is that such processing will take another 60 days and that a further 60 days after that would be required to make arrangements with those assets to satisfy the order. As I have said above, the terms of the settlement are confidential and so I cannot comment on their contents. However, having read the terms of settlement, I consider Mr Mawhinney's expectation that he will have access to unencumbered assets capable of being utilised to satisfy the order for security once the formalities are completed to be a reasonable one. I am further informed by Mr Mawhinney and believe that due to the delays in the settlement he has separately been in contact with various private financiers regarding the provision of lending facilities and that those financiers are presently making evaluations of whether those facilities can be provided. I am further informed by Mr Mawhinney and believe that he intends to seek clarification and if necessary dispensation from orders made on 13 August 2020 in proceeding VID524/2020 to the extent that those order prevent him from utilising the assets referred to in paragraph 9 above. By those orders, Mr Mawhinney has been restrained on an interlocutory basis from receiving funds in connection with any 'financial product' (as defined in Division 3 of Chapter 7 and section 9 of the Corporations Act 2001). On 27 July 2023, I wrote to the solicitors for the Respondents (Dentons) requesting that the respondents agree to an extension of the date by which Mr Mawhinney must provide the security. On 28 July 2023, I received a written response from Dentons. These letters are at pages 7 - 10 of RR-4. 21 The letter of 27 July 2023 that is referenced does not provide further illumination as to why Mr Mawhinney was unable to comply with the 31 July 2023 deadline, the assets that he expects to have access to in order to satisfy the security order or the reasons why it is outside of his control that he was not able to comply with the order. These are not the only criticisms of the applicants' evidence. I accept the force of the submission made on behalf of the respondents that the disclosed reasons are "inscrutable and inadequate". That is, no explanation is provided as to why Mr Mawhinney did not make or was incapable of making an affidavit in support of the extension of time application in order to personally depose to facts within his knowledge that are primarily relevant to the exercise of my discretion. No source documentation is attached to the affidavit of Mr Roberts, notwithstanding the evidence that the terms of settlement are confidential and cannot be disclosed. Accepting that unchallenged evidence, there is simply no explanation as to why Mr Roberts could not have given evidence about the proceedings in the Supreme Court of Victoria, the fact of which is not claimed to be confidential. All that is disclosed is that the firm of which Mr Roberts is the principal acted for Mr Mawhinney and for corporations controlled by him in two separate proceedings in the Supreme Court of Victoria. No evidence is given in relation to the subject matter of those proceedings, the scope of the claims made or the role of Mr Mawhinney and his corporations. 22 The inference that Mr Roberts draws that the liquidators, as the plaintiffs in those proceedings considered shares in Accloud PLC "to be of sufficient value to justify litigation" fails to disclose the basis for it. In contrast, there is evidence from the respondents which attaches a company search of this corporation in the United Kingdom comprising the audited financial statements for the year ended 31 March 2022. For that period the company made a loss of USD1.35 million. In the previous year it made a loss of USD2.42 million. To 31 March 2022, the liabilities exceeded the assets to the extent of USD8.78 million. The strategic report, signed by a director on 4 July 2023, discloses that the company financed its operations through share capital "and advance contract payments from customers". It remains "pre-revenue and as such its business plans and actual survival were threatened. The founder made payments to the company to sustain it." On that evidence, I reject as lacking any proper foundation the inference drawn by Mr Roberts. 23 There is no disclosure of the identity of the "financiers" who have existing relationships with Mr Mawhinney and his corporations. No attempt is made to define, even in the most general way that does not intrude upon the confidentiality of the terms of settlement, the assets which might be realised in order to "provid[e] the necessary funding to satisfy the security for costs". No evidence is given as to what are the "formalities" that Mr Mawhinney expects will be completed by 30 September 2023. 24 The explanation for the delay, that has impacted upon the previous expectation held by Mr Mawhinney that "these formalities would be completed by now" lacks substance. No evidence is provided as to what are said to be the "local regulatory requirements in India". Regulatory requirements are matters of law, not private confidentiality arrangements between parties. Accepting that a large volume of documents had to be sent from Australia to Singapore, the British Virgin Islands and to New Delhi, provides no evidence as to what steps were taken and when in order to have the documentation completed and dispatched. There is no explanation as to what steps were taken and when in order to open the conversion account for the shares in India so that they could be traded. We are not informed as to when steps were taken to open a bank account for a company domiciled in the British Virgin Islands, nor is there any explanation as to why this process was "difficult as there are limited options for doing this". No evidence is given as to when the liquidators sought legal advice from "Indian lawyers with respect of [sic] the transfers which has caused further unanticipated delays". This begs the question, what period of delay is being referred to? 25 No basis is set out for the further expectation of Mr Mawhinney that "such processing" will take another 60 days, with a further 60 days thereafter "to make arrangements with those assets to satisfy the order". These are steps which according to the affidavit evidence, must be taken by Mr Mawhinney after satisfaction of the terms of settlement and in order to satisfy the security order. On no view could these steps be the subject of the confidentiality regime pursuant to the terms of settlement. 26 Mr Roberts explains that having read the terms of settlement, "I consider Mr Mawhinney's expectation that he will have access to unencumbered assets capable of being utilised to satisfy the order for security once the formalities are completed to be a reasonable one". The difficulty with that statement is that it is an expectation of the deponent that turns upon the expectation of Mr Mawhinney and which lacks, for reasons of confidentiality, any adequate basis. On this evidence these matters were fundamental to Mr Mawhinney's explanation for his inability to comply with the time limit and in support of his application to extend it. One might have expected in those circumstances that steps would have been taken in order to secure the consent of the counter-parties to the terms of settlement for disclosure, even disclosure on a confidential basis, in this proceeding. I put this matter specifically to Mr Gronow in argument. He informed me that his instructors had not been able to reach agreement with the solicitors for the counter-parties, so that the terms of settlement could be exhibited to the affidavit. Accepting that is so, it fails to explain why Mr Roberts did not in his affidavit say what steps were taken and when and with what response. 27 Quite properly, Mr Gronow accepted that the evidence places the applicants "in a difficult position". The real problem for the applicants is that difficulty ought to have been realised at an early stage and evidence ought to have been adduced by Mr Roberts as to what steps were taken in order to secure consent, even for a limited disclosure of redacted copies of the terms of settlement, in order to satisfactorily explain the failure of Mr Mawhinney to comply with the security order. 28 There are further difficulties with the applicants' evidence. I accept, in summary, the following submissions made for the respondents: no evidence is given to explain the basis upon which Mr Mawhinney contends that he will be able to utilise the assets of the IPO group of companies in order to provide the security, there is no evidence as to why the difficulties identified in the evidence of Mr Roberts were not apparent to Mr Mawhinney on 1 June 2023 when Mr Gronow agreed to the provision of the security on or before 31 July 2023, and there is no evidence as to why the clarification of or dispensation from the freezing orders has not already occurred. 29 These difficulties are compounded for the applicants in that Mr Mawhinney has not given evidence, or instructed his solicitor to give hearsay evidence, as to his assets and liabilities or those of his associated corporate entities in order to explain why it is that his ability to provide the security is dependent upon satisfactory completion of the terms of settlement. Nor has he given evidence in relation to any application that he has made to any financier for the purpose of assisting him to obtain the bank guarantee that is required. 30 I am therefore not satisfied that the applicants and Mr Mawhinney have discharged their initial onus which requires a satisfactory explanation of the reasons why the security was not able to be provided by Mr Mawhinney within the time frame required by the orders, nor have they satisfactorily explained why, by the grant of the extension sought, there is a sufficient degree of likelihood that the security will be complied with within the extended period of time that is sought. 31 On the question of prejudice, I am not satisfied that if the extension sought were to be granted, that the respondents would likely suffer any material prejudice. The prejudice argument that as framed rests on acceptance of the proposition that the corporate respondents, and the individuals who are appointed as the receivers and managers, have suffered and will continue to suffer reputational harm by reason of the relatively serious allegations that are set out in the statement of claim. Even accepting the gravity of those claims, what is apparent is that any reputational harm as claimed must have been suffered by reason of the fact of the commencement of this proceeding, which has been stayed since 4 November 2022. Any prospect of continued reputational harm is in my view minor at best. 32 As to the interests of justice, I accept that a consequence of rejection of the extension application is that the applicants will be exposed to the dismissal application. The summary termination of an applicant's claim is a serious matter, which Einstein J quite properly described as a "radical step" in Idoport at [24]. See also in a different context but which emphasises caution before a proceeding is dismissed without adjudication on the merits: Spencer v Commonwealth [2010] HCA 28; 241 CLR 118 at [24] (French CJ and Gummow J). 33 When considering the interests of justice in this particular case and more generally, the statutory imperative of the overarching purpose obliged the applicants directly and Mr Mawhinney indirectly, to conduct the proceeding consistently with it. Mr Mawhinney as the individual responsible for decision-making by the applicants in this proceeding, has been aware since 4 November 2022 that security was required as a fundamental condition to its prosecution. Since 1 June 2023, he has been aware of the amount required. Despite the large quantum, he did not instruct his lawyers on 1 June 2023, to seek a date beyond 31 July 2023 to provide it. He did not make an application to extend time until 31 July 2023. The inability to comply was not raised until 27 July 2023, in correspondence with the lawyers for the respondents. 34 The serious consequences of any non-compliance must have been known to and appreciated by Mr Mawhinney not later than 1 June 2023, when the quantum was fixed and a further order was made which foreshadowed an application by the respondents, in the event of default, to be filed by 7 August 2023 and which also fixed the hearing date of 4 September 2023 for that application. Despite the seriousness of the applicants' position, Mr Mawhinney did not file an affidavit by way of explanation and the evidence of Mr Roberts is unsatisfactory and inadequate. It is not unreasonable to expect that, to assist in the efficient and just determination of the extension application, far more detailed evidence by way of explanation of the inability to comply and the necessity for the extension would have been placed in support. Beyond the rather anodyne fact that Mr Mawhinney has not complied and cannot comply until 28 November 2023 due to complexities that attend finalisation of the settlement of other litigation, there is no satisfactory explanation grounded in evidence which justifies a favourable exercise of the discretion to grant the indulgence sought by the applicants. And this is so despite the minor prejudice that is likely to be suffered by the respondents were time to be extended and the significant prejudice that flows by exposure to the dismissal application. The most significant factor that weighs against an extension is the failure to satisfactorily explain why there has been non-compliance and why an extension is justified based on comprehensive and adequate evidence, even allowing for the fact that the settlement terms are confidential as between the parties. 35 For these reasons, I dismiss the extension application.

Dismissal application 36 This is framed in the alternative: paragraph 6 of the orders of 4 November 2022, s 31A(2) of the FCA Act and r 26.01(1)(a) or (d) of the Rules. It was argued primarily as a summary judgment application pursuant to s 31A and r 26.01 that the applicants have no reasonable prospect of successfully prosecuting the proceeding or it is an abuse of process. For the reasons I have given, s 56(4) of the FCA Act also confers power to dismiss the proceeding. As to the first (non-compliance with the orders), the submission is that the entitlement of the applicants to continue the prosecution of the proceeding is conditional upon the provision of the indemnity by Mr Mawhinney supported by the security. The failure to satisfy the condition removes the entitlement to prosecute it. 37 Relatedly it is submitted by reference to the authorities that I referred to in my primary reasons at [32]-[33], that if a proceeding is commenced without authority then it is liable, in appropriate circumstances, to be dismissed rather than stayed. 38 The respondents also submit that the failure of Mr Mawhinney to provide the security justifies the conclusion that its continued prosecution is unfairly burdensome and prejudicial. The respondents emphasise the point that I made in my primary reasons at [58] that if the proceeding fails, then the interests of the secured creditors will be harmed and the assets the subject of the receivership will diminish. In those circumstances the assets of the applicants, charged in favour of the secured creditors (some of whom are the respondents), are at risk absent an indemnity with supporting security. 39 On the evidence and in support of those contentions, the respondents emphasise the following: (1) Mr Mawhinney for a considerable period of time has been on notice of the application for security (framed as the alternative relief in the interlocutory application of 20 June 2022), since 4 November 2022 has been on notice that he would be required to provide security in support of his personal costs indemnity and since 1 June 2023, has known the quantum of the security and the time limited for its provision, which time period he instructed his lawyers to request; (2) No adequate explanation for the failure to provide the security has been given by Mr Mawhinney, nor as to why he should have an extension of time; (3) In various respects the penalty claims and breach of duty claims as pleaded in the statement of claim suffer from "fundamental flaws"; and (4) The proceeding was begun on 13 April 2022, has been stayed since 4 November 2022, and has not advanced in any substantive way beyond the statement of claim which was also filed on 13 April 2022. The respondents contended that some of the allegations made in the statement of claim seek to impugn the professional integrity of the individual receivers and managers, particularly in relation to duties of honesty and good faith. These allegations made against professionals are serious. 40 In response, Mr Gronow emphasises the following matters in his submissions: (1) The correct lens through which the dismissal application is to be viewed is s 56(4) of the FCA Act. It is relevant to consider the extent of delay, the explanation for it, the inability of Mr Mawhinney to satisfy the security requirement, prejudice to the applicants, prejudice to the respondents and ultimately whether dismissing the proceeding is the appropriate order to make in the administration of justice in the circumstances of this case, particularly having regard to the overarching purpose; (2) The onus falls upon the respondents to show that the proceeding should be dismissed, and why some other form of order should not be made which better serves the overall administration of justice; (3) Prejudice has not been caused to the respondents or to the administration of justice in that the proceeding has been stayed since 4 November 2022. In particular I should reject the submission put for the respondents that the individuals concerned will suffer reputational harm if the proceeding is not dismissed; (4) This is not a case where I should conclude that the applicants have no reasonable prospect of successfully prosecuting the proceeding, and reliance is placed (by way of example) where self-executing orders have been made for the dismissal of the proceeding if security is not paid within a further defined period of time; (5) The proceeding is not an abuse of process for the reason that there is nothing that is "burdensome, prejudicial or damaging" to the respondents because they have no obligation to take any step in the proceeding unless and until the security is provided; (6) The applicants have adequately explained the failure to provide security by reference to the affidavit of Mr Roberts; (7) If there are deficiencies as asserted in the statement of claim, the proper forum for the determination of that contention is upon a strike-out application, once the stay is lifted; and (8) The appropriate order in all of the circumstances is not to immediately dismiss the proceeding, but rather to grant a further period of time. I infer that this submission is framed on the basis that I put to Mr Gronow in argument - that if I concluded that it is appropriate to grant any further indulgence to the applicants, then any order that I make should be conditional by way of attachment of a self-executing order that, upon the filing of an affidavit of non-compliance, the proceeding be dismissed. Upon taking specific instructions, Mr Gronow informed me that his client had no objection to a self-executing order of that type, should I reach that conclusion. 41 The evidence that I have referred to, the findings that I have made and my criticisms of the applicants' evidence in relation to the extension application, apply relevantly to the dismissal application although bearing in mind, importantly, that the applicants do not carry the onus. It does not logically follow from dismissal of the extension application that the proceeding should be dismissed now. The question is whether the respondents have persuaded me that it is in the interests of the administration of justice to take that step, rather than to allow one further opportunity to provide the security. 42 The respondents in my view have a strong case to the effect that the applicants' prosecution of the proceeding is conditional upon the provision of security, it has not been provided and there is no proper explanation as to why. The condition imposed for the prosecution of the proceeding has not been satisfied. In that circumstance, the respondents submit that the applicants have no reasonable prospect of successfully prosecuting the proceeding. Indeed, they have no prospect at all of prosecuting it absent satisfaction of the security condition. 43 Relatedly, it is important to recall that the orders made on 1 June 2023, specifically put the applicants and Mr Mawhinney on notice that if the security was not provided by 4 pm on 31 July 2023, then an application would be filed by the respondents on 7 August 2023 to dismiss the proceeding pursuant to the grant of leave to do so at paragraph 6 of the orders made on 4 November 2022. A proceeding may be dismissed for non-compliance with orders made either pursuant to s 37P of the FCA Act or r 5.23 of the Rules. The principles which inform the exercise of the discretion are well settled. Whilst the discretion is a broad one it is not constrained by immutable rules. This is not a case where there is a history of non-compliance by Mr Mawhinney which is indicative of inability or unwillingness on his part to cooperate in order to progress the proceeding: Lenijamar Pty Ltd v AGC (Advances) Ltd (1990) 27 FCR 388 at 396 (Wilcox and Gummow JJ). Rather there is a single default that of itself can be characterised as significant because it goes to the heart the conditional ability of the applicants to prosecute this proceeding. And the default continues. 44 Nonetheless, it does not follow by reason of that circumstance alone that dismissal of the proceeding is the appropriate order in the interests of justice in this case. There is a balancing exercise. The starting point is the serious and obvious consequence which will be visited upon the applicants in the event that they are not permitted to have their claims determined on the merits. That explains why many judges have observed that the making of a dismissal order, in consequence of non-compliance with an earlier order, requires careful consideration: Lawson v New South Wales Minister for Land and Water Conservation [2007] FCA 8 at [22] (Stone J); Zirk-Sadowski v University of New South Wales [2023] FCA 805 at [10] (Anderson J). One must balance the harsh consequence that dismissal of the proceeding will have upon the applicants with, relevantly in this case, identifiable prejudice to the respondents, achievement of the overarching purpose, the delay in compliance, whether there is any adequate explanation for the delay and the likelihood of compliance (in the event that the proceeding is not immediately dismissed) in order to form a view whether the applicants have no reasonable prospect of successfully prosecuting the proceeding or that otherwise it is an abuse of the process of the Court. 45 Self-evidently, the applicants will suffer significant prejudice if the proceeding is dismissed. Although the proceeding has not progressed to the point of particularisation of the claim for damages, I infer that the quantum is significant. The case concerns the sale of multiple properties and a claimed indebtedness of many millions of dollars. That factor weighs heavily in favour of the applicants, despite the failure to provide satisfactory evidence as to why the security was not provided as ordered or why the Court should extend the time period for compliance. That point was made, in a security for costs case, by Robertson J in Strategic Financial and Project Services Pty Ltd v Bank of China [2012] FCA 701, where the respondents applied for the dismissal of the proceeding in the event that the applicants did not provide further security for costs within an extended period of time. As in this case, the applicants had not "descended to any level of particularity, let alone by way of evidence", as to the basis for the expression of confidence by their solicitor that security could be provided within an extended period of time: [10]. Nonetheless, his Honour extended the time for the provision of the security, but in so doing imposed a self-executing dismissal order. At [11] his Honour observed: The relevant principles are not in doubt. The respondents referred to the Full Court decision in Microbio Resources Inc v Betaten Ltd (unreported, Black CJ, Sheppard and Einfeld JJ, 8 October 1993). The Full Court said: The Court is careful to see that orders for security for costs do not work injustice to parties against whom such orders are made, but if those parties do not comply with the orders and give no evidence or explanation as to why they have not complied with them, they cannot be heard to complain of injustice if, after a considerable length of time, and extensions of time, the ultimate sanction of dismissal is applied. It is incumbent upon parties in such circumstances to provide evidence of their position. 46 In the exercise of his Honour's discretion, the question of prejudice despite a satisfactory explanation, outweighed the likelihood of prejudice to the respondents if a further short period to provide the security was allowed. A similar approach was adopted by Gleeson J in Austcorp Project No. 20 Pty Ltd v The Trust Co (PTAL) Ltd, in the matter of Bellpac Pty Limited (Receivers and Managers Appointed) (in liq) (No 4) [2015] FCA 850, which is another example of the exercise of the discretion to grant one further indulgence to provide security, conditional upon a self-executing dismissal order in the event of non-compliance. Whether I should immediately dismiss the proceeding, rather than make a self-executing order for dismissal at a later point in time in the event of further non-compliance, is a matter that I have given very careful consideration to. 47 The submission of the respondents, that the entitlement of the applicants to prosecute this proceeding was conditional and that failure to satisfy the condition removes the entitlement, is of significant weight. However, that failure to comply when the proceeding is stayed and cannot be progressed absent compliance militates in favour of the applicants. As does the absence of real prejudice to the respondents if a further short period for the security to be provided is granted. 48 The respondents submit that the applicants' case "suffers from fundamental flaws". On their submission the penalty claim is speculative in that it does not plead the material facts necessary to establish that the interest charged pursuant to the facilities amounted to a penalty, the breach of duty and breach of statutory duty claims are rolled up and embarrassing and each is pleaded without particularity, the pleading is such that the respondents did not know the case that they must meet and the applicants had failed to identify what sales could have been made by the receivers and managers, but were not, in breach of the duties asserted. In my view this application is not the forum for determining those submissions. I have not heard full argument in relation to the pleading. It would not be appropriate that I determine the relative merit of those submissions upon these applications. 49 This is a case of one failure to comply by 31 July 2023, which continues. Apart from the costs expended by the respondents in bringing the dismissal application and in answering the extension application, they have not suffered the detriment of expending money in defending this proceeding since the making of the orders on 1 June 2023. It must not be overlooked that the respondents have the indirect benefit of the personal costs indemnity from Mr Mawhinney, which indemnifies the applicants in respect of any costs that they are ordered to pay to the respondents as between party and party in the proceeding in the form of and as required by the orders made on 16 December 2022. 50 Taking all of these matters into account, I am not persuaded that I should dismiss the proceeding on publication of these reasons. There should be afforded one further opportunity to provide the security, conditional upon a self-executing dismissal order. As I have explained, in addressing the extension application, there is no satisfactory evidence from the applicants as to what that period should reasonably be. This is despite their written submissions at [9], where self-executing orders are exampled as an appropriate exercise of the discretion in cases of non-compliance with security orders. I am not satisfied that a further period to 28 November 2023 is either necessary or reasonable, given the history of this matter and the period within which Mr Mawhinney has been on notice of the requirement to provide security. In my view a further relatively short period of 6 weeks is appropriate. The new date will be 4 pm on 20 October 2023.

Outcome 51 I order as follows:

1. If the security required pursuant to order 3 made on 4 November 2022 and order 1 made on 1 June 2023, is not provided by 4 pm on 20 October 2023, then upon the filing of an affidavit deposing as to non-compliance: (a) the proceeding is dismissed; (b) any application for the costs of the proceeding is to be made in writing within 7 days and if made is to be responded to in writing 7 days thereafter in each case limited to 5 pages; and (c) subject to any other order, the question of costs will be determined on the papers.
2. The applicants' interlocutory application filed on 1 August 2023 is dismissed. 52 I will hear the parties as to the costs of the applications. I certify that the preceding fifty-two (52) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McElwaine.

SCHEDULE OF PARTIES VID 192 of 2021 Applicants Fourth Applicant: MAINLAND PROPERTY HOLDINGS 4 PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ACN 635 951 807) Fifth Applicant: MAINLAND PROPERTY HOLDINGS 5 PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ACN 635 955 814) Sixth Applicant: MAINLAND PROPERTY HOLDINGS 8 PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ACN 636 594 208 Seventh Applicant: JARRAH LODGE HOLDINGS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ACN 632 018 458) Respondents Fourth Respondent: WILLIAM JAMES HARRIS Fifth Respondent: ANTHONY NORMAN CONNELLY