Supreme Court of WA|2010-09-24|Before: Mr J, Miere J

NORILYA MINERALS PTY LTD -v- ADAM JONATHON IRELAND as Named Executor of the Estate of DEAN EDWARD IRELAND [2010] WASC 260 (24 September 2010)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : NORILYA MINERALS PTY LTD -v- ADAM JONATHON IRELAND as Named Executor of the Estate of DEAN EDWARD IRELAND [2010] WASC 260

ADAM JONATHON IRELAND as Named Executor of the Estate of DEAN EDWARD IRELAND

Abuse of process - Categories of unfairness - Whether proceedings brought for an improper purpose - Whether proceedings serve no useful purpose - Whether court has inherent power to make order for security for judgment - Whether application has already been litigated - No discretion when there is an abuse of process

Anglo Swiss Holdings Ltd v Packman Lucas Ltd [2009] EWHC 3212

Batistatos v Road and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256

Campbells Cash & Carry v Fostif Pty Ltd [2006] HCA 41; (2006) 229 CLR 386

Chaffers v Goldsmid (1894) 1 QB 186

Commonwealth of Australia v Albany Port Authority [2006] WASCA 185

Dawkins v Prince Edward of Saxe Weimar (1876) 1 QBD 499

Easterday v The Queen [2003] WASCA 69

Easterday v The State of Western Australia [2005] WASCA 105; (2005) 30 WAR 122

Easterday v The State of Western Australia [2005] WASCA 202

Flower & Hart (a firm) v White Industries (Qld) Pty Ltd [1999] FCA 773; (1999) 87 FCR 134

Hammond Suddard Solicitors v Agrichem International Holdings Ltd [2001] EWCA Civ 2065

Jackson v Stirling Industries Ltd [1987] HCA 23; (1987) 162 CLR 612

Jeffery & Katauskas v SST Consulting [2009] HCA 43; (2009) 239 CLR 75

Moore v Assignment Courier [1977] 1 WLR 638

Norilya Minerals Pty Ltd v Easterday [2009] WASC 191

Norilya Minerals Pty Ltd v Ireland [2008] WASC 53

Re R (Restraint Order) [1990] 2 QB 307

The Fuohshan Maru [1978] 1 Lloyd's Rep 24

1 In June 1990 the plaintiff (Norilya) entered into an agreement by which it acquired an interest in mining tenements near Mount Gibson about 260 km south east of Geraldton. Subsequent drilling programmes disclosed that there was no significant gold on the tenements. In August 1990 Norilya commenced action against Dean Ireland, Clark Easterday and Leonard Ireland (the Prospectors) claiming that it was induced to acquire its interest in the tenements by fraudulent misrepresentations or misleading or deceptive conduct by the Prospectors. Norilya claims that the Prospectors had salted the tenements, that is, added gold to samples from the tenements submitted for assay to deceive Norilya.

2 On 28 July 1993 each of the Prospectors was found guilty of conspiracy to defraud and false pretences in relation to the sale of the tenements. The trial judge ordered the Prospectors, and the other defendants in this action (the additional defendants) to make restitution to Norilya of specified assets obtained by them as a result of the commission of the offences by the Prospectors. The Prospectors unsuccessfully appealed against their convictions. After the appeals were dismissed Norilya enforced the restitution orders and recovered approximately $5.8 million from the Prospectors and the additional defendants. Upon recovering those sums Norilya paid the recovered money to an associated company from which it had borrowed the money it used to acquire its interest in the tenements.

3 Later the Attorney General granted the Prospectors leave to again appeal their convictions. On 28 March 2003 the Court of Criminal Appeal overturned the convictions and subsequently ordered Norilya to repay to each of the defendants the amount received by Norilya from them on enforcement of the restitution orders. Norilya has not repaid to the defendants any of the payments received by Norilya on enforcement of the restitution orders because it has no funds or assets.

4 The trial of Norilya's action against the defendants is due to commence on 11 October 2010. The defendants now apply for an order that unless and until Norilya pays into the court the amount due from it to the defendants pursuant to the orders of the Court of Criminal Appeal these actions be stayed or alternatively that unless and until Norilya files an affidavit disclosing that it has sufficient assets from which to pay the amounts due to the defendants pursuant to the orders of the Court of Criminal Appeal then these actions be stayed.

5 Noranda Inc, a company incorporated in Canada, owned a group of companies which were incorporated, and carried on business, in Australia including Noranda Group Pty Ltd and Noranda Pty Ltd. Noranda Inc owned all of the issued share capital in Noranda Group Pty Ltd and Noranda Group Pty Ltd owned all of the issued share capital in Noranda Pty Ltd. From 8 June 1990 all of the issued share capital in Norilya was owned by Noranda Group Pty Ltd and Perilya Mines NL (Perilya).

6 The Prospectors were the registered proprietors of prospecting licences and an exploration licence at Karpa Spring located near Mount Gibson (the tenements). At various dates they arranged for drilling programmes to be conducted on the tenements:

In September 1988 - phase one drilling. The results of the phase one drilling showed little gold of interest on the tenements.
In March 1990 - phase two drilling. The results of the phase two drilling were very good generally and the assays showed high levels of gold.

7 In about March 1990 the Prospectors began to negotiate with Acarus Pty Ltd (Acarus) in relation to the sale of the tenements by the Prospectors to Acarus. Also, in March 1990 Perilya became interested in acquiring the tenements. Mr Cranney, the exploration manager of Perilya, contacted Mr Easterday and expressed interest in the tenements. He told Mr Easterday that Perilya was associated with the Noranda Group and that the two companies jointly owned Norilya. Dean Ireland informed Mr Clifton, the Managing Director of Perilya, that the Prospectors proposed to enter into an agreement with Acarus.

8 On 8 June 1990 Norilya entered into an agreement with Acarus whereby Norilya would acquire a 30% share interest in Acarus in exchange for providing the $6 million purchase price to the Prospectors for the tenements. The agreement also gave to Norilya the right to acquire a further 20% interest in Acarus in consideration of the payment of an additional $4 million upon completion of an additional exploration programme.

9 On 11 June 1990 the Prospectors commenced a confirmatory drilling programme, known as the phase three drilling, and the phase three assay report showed a fairly good correlation between the phase two and phase three drilling results.

10 On 9 July 1990 Acarus exercised its option to purchase the tenements. On that day, and in accordance with the agreement between Norilya and Acarus, Norilya paid the purchase price of $6 million to the Prospectors. Norilya obtained the $6 million by way of a loan from Noranda Pty Ltd. Subsequently the Prospectors made a number of payments to, or on behalf of, the additional defendants.

11 Between 22 July 1990 and 6 August 1990, Acarus and Norilya conducted a further confirmatory drilling programme, known as the phase four drilling, and the result of this was that there was no gold mineralisation of any significance in the tenements. Officers of Acarus and its owners suspected that the drilling samples from phases 2 and 3 had been salted with gold by the Prospectors. On 31 July 1990 they made a formal complaint to the Western Australia Police. Between 12 and 21 August 1990 the Department of Minerals and Energy arranged and controlled a further drilling programme, known as the phase five drilling. No gold mineralisation of any significance was found.

12 On 15 August 1990 Norilya commenced CIV 2232 of 1990 against the Prospectors. Norilya claimed damages for fraudulent misrepresentation, alternatively damages for misleading or deceptive conduct, arising out of representations made by the Prospectors concerning the tenements and the phase 1, 2 and 3 drilling programmes. On the same day Norilya obtained an injunction restraining the Prospectors from dealing with their assets to preserve the monies that had been paid.

13 On 10 October 1990 the injunction was extended to the additional defendants in respect of monies that had been paid to them by the Prospectors and assets acquired with those monies. In respect of the additional defendants in CIV 2364 of 2007, Norilya says that each of these parties received the payments as volunteers. That is, they were not purchasers for value. Further, Norilya says that Webgo and FIM, at least, received the funds with the knowledge, through their respective directors, that the money had been procured from Norilya by means of fraudulent representations by the Prospectors and therefore with notice of Norilya's interest.

Prospectors convicted and the restitution orders made

14 On 28 July 1993 each of the Prospectors was found guilty of one count of conspiracy to defraud pursuant to s 411 of the Criminal Code 1913 (WA) (Criminal Code) and 10 counts of false pretences pursuant to s 409 of the Criminal Code in relation to the sale of the tenements.

15 On 30 July 1993 the trial judge, Hammond DCJ, ordered the Prospectors and the additional defendants to make restitution to Norilya of specified assets (primarily money) obtained by them as a result of the commission of the offences by the Prospectors. The restitution orders, which were later amended on 20 August 1993, were made pursuant to s 717 of the Criminal Code.

16 The Prospectors each appealed their convictions and enforcement of the restitution orders did not take place pending the outcome of those appeals. On 6 May 1994 the appeals were dismissed. After the appeals were dismissed Norilya enforced the restitution orders and recovered approximately $5.8 million from the Prospectors and the additional defendants. Upon restitution being made Norilya repaid its loan to Noranda Pty Ltd. Norilya has engaged in no other business.

17 On 18 August 1994, in reliance on the convictions, Norilya obtained summary judgment for damages to be assessed in CIV 2232 of 1990.

18 The matter was subsequently referred by the Prospectors to the Attorney General of Western Australia, who granted leave for the Prospectors to again appeal their convictions to the Court of Criminal Appeal. On 28 March 2003 the Court of Criminal Appeal overturned the convictions of the Prospectors: see Easterday v The Queen [2003] WASCA 69.

19 On 4 March 2005 the Court of Criminal Appeal declared that the restitution orders made on 30 July 1993 against the Prospectors and the additional defendants were null and void, that the court had power to order repayment with interest to the Prospectors and the additional defendants of what was paid by them pursuant to those restitution orders and that the power is discretionary: see Easterday v The State of Western Australia [2005] WASCA 105; (2005) 30 WAR 122. The Prospectors and the additional defendants then applied for orders against Norilya for repayment of what was paid by them to Norilya, with interest. They also sought an order that the judgment entered against them in favour of Norilya in CIV 2232 of 1990 be set aside. Norilya acknowledged the entitlement of the Prospectors and the additional defendants to repayment of what was paid by them pursuant to the restitution orders, together with interest, but contended that the execution of the orders for repayment should be stayed pending determination of its claims in CIV 2232 of 1990. The Court of Criminal Appeal refused Norilya's application for a stay: see Easterday v The State of Western Australia [2005] WASCA 202.

20 On 28 October 2005 the Court of Criminal Appeal ordered Norilya to repay to each of the defendants the amount received by Norilya from him, her or it on enforcement of the restitution orders. Steytler J, with whom the other members of the court agreed, said that both parties accepted that the judgment in CIV 2232 of 1990 should be set aside but that is something which ought be done by a civil court and not by the Court of Criminal Appeal: see Easterday v The State of Western Australia [2005] WASCA 202 [21]. Subsequently, Norilya consented to the summary judgment it had obtained in CIV 2232 of 1990 being set aside and the summary judgment was set aside.

21 Dean Ireland died on 26 December 2005. Following the death of Dean Ireland, his executor, Adam Jonathon Ireland, was added as a defendant in his place in CIV 2232 of 1990.

22 On 21 December 2007 Norilya commenced CIV 2364 of 2007. The defendants in CIV 2364 of 2007 are Clark Easterday, Leonard Ireland, Kaylene, Brenda Easterday, Webgo, FIM and Paul Ireland. By its indorsement of claim Norilya said that its claim arises from representations made by the Prospectors concerning the tenements, payments made by Norilya to the Prospectors in reliance on the representations, a total failure of consideration in respect of the payments made by Norilya, certain further payments of the funds received by the Prospectors from Norilya to the additional defendants, the orders for restitution made by Hammond DCJ against the defendants in favour of Norilya, the order of the Court of Criminal Appeal made 28 October 2005 pursuant to which the court ordered Norilya to repay certain sums to Clark Easterday and Leonard Ireland and the order of the Court of Criminal Appeal made 8 February 2006 pursuant to which the court ordered Norilya to repay certain sums to the additional defendants. The relief claimed by Norilya is:

declarations that for the period of time those parties held funds, or property derived from the funds, of Norilya that were paid to the defendants, those funds or property were held on trust for Norilya;
declarations that any sums repaid by Norilya to any of these parties pursuant to the repayment order made on 8 February 2006 are to be held on trust for Norilya;
declarations that Norilya is entitled to retain the monies it received pursuant to the restitution orders made by the District Court by way of restitution for the total failure of consideration in respect of the payment of the purchase price for the tenements.
declarations that Norilya is entitled to an equitable set-off in respect of its liabilities to the parties who have issued the statutory demands to such an extent that it has no liability to make any payments to them.

23 Norilya also says that the defendants, in the event that any sums are repaid to them by Norilya, would be receiving those funds with knowledge that the funds were procured from Norilya by means of fraudulent representations by the Prospectors and with knowledge that Norilya is and will remain the beneficial owner of the funds.

24 Norilya says that CIV 2364 of 2007 became necessary because the original constructive trust that arose as the result of the transfer of funds from the Prospectors to the additional defendants was extinguished when the funds were repaid to Norilya in accordance with the orders made on 30 July 1993 and amended on 20 August 1993. Norilya's case is that a new constructive trust will arise on repayment of the funds by Norilya.

25 On 16 October 2007 Norilya was served with various creditor statutory demands for payment issued by some of the defendants. Norilya filed an application to set aside the statutory demands. On 17 April 2008 Master Sanderson set aside each of the statutory demands: Norilya Minerals Pty Ltd v Ireland [2008] WASC 53.

The defendants' application that the plaintiff not be heard or action be stayed

26 On 28 October 2005 the Court of Criminal Appeal ordered that Norilya repay sums received by it pursuant to the restitution orders of Hammond DCJ made on 30 July 1993. On 8 February 2006 the Court of Criminal Appeal ordered that Norilya repay amounts paid to Norilya pursuant to the restitution orders made by Hammond DCJ. On 14 November 2008 the Court of Appeal ordered the plaintiff to pay interest and costs to the parties named in the orders made on 28 October 2005 and 8 February 2006. I will refer to these orders as the CCA orders.

27 Clark Easterday has sworn that the total amount outstanding and due to be paid by Norilya to the defendants under the CCA orders as at 14 November 2008, inclusive of principal and interest, was $11,361,117. Norilya has made no payment of any of the sums ordered to be paid to the defendants.

28 The defendants say that Norilya has shown the capacity to make payments as ordered in these and other court proceedings against the defendants as follows:

(a) initial payment of security for costs of $25,500 in 1990;

(b) the further order for security of costs complied with in 2008 for $30,000; and

(2) In the Federal Court matter no (P) WAD 158 of 2006 concerning the late Dean Edward Ireland, $5,000 by way of security for costs.

29 Robert Henry Neil Symons, a director of Norilya, has sworn that Norilya has no assets or liabilities other than:

the choses in action constituted by proceedings CIV 2232 of 1990 and CIV 2364 of 2007; and
the CCA orders in favour of the defendants.

Mr Symons has sworn that Norilya does not have the capacity to pay $11 million, or any amount, to the defendants in compliance with the CCA orders but has a chose in action of at least the same amount.

30 Mr Symons has sworn that Norilya does not carry on any business and has not carried on any business at any time other than the transaction with Acarus giving rise to these proceedings. The ultimate holding company of Norilya is Xstrata Plc, an international mining company based in the United Kingdom (Xstrata). To date, the Xstrata group of companies has provided funds from time to time to Norilya to enable it to prosecute these proceedings, including the provision of funds to meet orders for security for costs made in these proceedings. However, there is no agreement between Xstrata and Norilya which requires Xstrata to fund the litigation or to provide Norilya with sufficient funds to comply with any order of the court to provide security for costs or to make any other payment. Norilya's capacity to make a payment for security for costs or any other payment is dependent upon whether Xstrata is willing to advance the necessary funds to Norilya.

Applications that plaintiff not be heard and CIV 2364 of 2007 be struck out

31 On 16 January 2009 I heard applications by the defendants for orders that Norilya not be heard until it has complied with the CCA orders or alternatively that the action be stayed until Norilya complies with the CCA orders.

32 In submitting that Norilya should not be heard until it complied with the CCA orders the defendants relied upon the principle that a person in contempt of court must not be heard. I dismissed that application on two grounds. First, the evidence did not establish that the plaintiff is in contempt of the CCA orders. Non-payment of an order for the payment of money could in some circumstances be contempt, but it is not always contempt. The defendants had not established, and had not attempted to establish, that Norilya was in contempt of the CCA orders. Secondly, if there is a principle that a party in contempt should not be heard it should not be applied to prevent Norilya being heard in this case for two reasons. The first reason is that the general rule that a party in contempt is not to be heard is subject to an exception when the contempt has been committed in different proceedings to the one in which it is contended that the litigant should not be heard. The second reason is that as a matter of discretion Norilya should not be deprived of the opportunity to pursue its rights claimed in the action because of its inability to comply with the CCA orders.

33 I declined to stay the actions on the grounds that they are an abuse of process. I did not accept the defendants' submissions that the actions are an abuse of process because they were issued and maintained to avoid the consequences of the CCA orders or because Norilya had not complied with the CCA orders.

34 The defendants submit that the court has an inherent power to prevent misuse of its procedures in a way which, although not inconsistent with the literal application of procedural rules of court, would nevertheless be manifestly unfair to the defendants or would otherwise bring the administration of justice into disrepute. Counsel for the defendants, Mr Thomson, submitted that the power to prevent an abuse of process is only exercised where the prejudicial effect of proceedings upon a party is significant. Categories or the types of unfairness which are capable of representing an abuse of process are not closed and cannot be exhaustively defined.

35 Mr Thomson referred to types of civil proceedings which have attracted the intervention of courts to prevent an abuse of process which are referred to by Jacob IHJ, 'The Inherent Jurisdiction of the Court' [1970] CLP 23, 43. Mr Thomson submitted that the four types of civil proceedings referred to are examples of proceedings where certain types of unfairness may arise which attracts the inherent jurisdiction of the court to prevent an abuse of process. Mr Thomson submitted that although it is not possible to exhaustively state the categories of abuse of process, it is possible to identify established types of unfairness which have caused courts to use their inherent jurisdiction to prevent various abuses in civil cases.

36 Mr Thomson referred to five types of unfairness. One type of unfairness is where proceedings are brought for an ulterior or improper purpose. Mr Thomson submitted that a particular example where the ulterior purpose unfairness has been said to arise and constitute an abuse of process is litigation funding. It has been said that the ulterior purpose of a funder making a profit might lead to uncontrolled excesses in the conduct of funded litigation. However, the mere fact of funding does not create unfairness, without more, because the fact that a funder may have a financial interest in litigation does not by itself make it manifestly likely that the conduct of that litigation will be unfairly prejudicial to the opponent: Campbells Cash & Carry v Fostif Pty Ltd [2006] HCA 41; (2006) 229 CLR 386 [62], [93], [126], [147], [148], [266].

37 A type of unfairness which will activate the court's inherent jurisdiction to prevent an abuse of process and which Mr Thomson submitted is particularly relevant to the present case, is the unfairness which arises where the court's orders will have no practical utility or operation. In order to avoid the situation of an impecunious or foreign plaintiff litigating and losing an action, and then being unable to pay the defendant's costs, courts will act to order security for costs prior to proceedings. Similarly, courts have inherent jurisdiction to ensure that a plaintiff pay interlocutory or prior costs orders before allowing the plaintiff to litigate further: eg Re Wickham (1887) 35 Ch D 272.

38 Mr Thomson submitted that a set of cases which demonstrate judicial concern to ensure that a court's orders have practical utility are those where the court makes a freezing order or mareva injunction to avoid practical frustration of its orders.

39 Mr Thomson relied upon authorities in the United Kingdom where an appellant has been prevented from pursuing an appeal except on condition that the appellant pay the judgment amount into court. That is to ensure that the appellant does not put the respondent, which was successful at trial, to the cost and expense of an appeal when there is little prospect that the appellant will pay the judgment sum if the appeal fails: Hammond Suddard Solicitors v Agrichem International Holdings Ltd [2001] EWCA Civ 2065 [41] - [42]. Mr Thomson also referred to Anglo Swiss Holdings Ltd v Packman Lucas Ltd [2009] EWHC 3212 where Akenhead J stayed civil proceedings which were designed to establish a claim offsetting the plaintiff's established liability to the defendant until the plaintiff actually paid its liability to the defendant, albeit in circumstances where there were additional elements of bad faith by the plaintiff and a suspiciously weak claim. Nevertheless, Mr Thomson submitted, one factor relevant to the exercise of jurisdiction to order security to be provided for the judgment amount was the oppressive conduct of the plaintiff in bringing the offset proceedings whilst ignoring payment of its liability to the defendant.

40 Mr Thomson submitted that there are a number of features of the present case which render the plaintiff's actions an abuse of process. First, Norilya has not complied with the CCA orders.

41 Secondly, the CCA orders which Norilya has failed to comply with are not simply procedural orders which, if enforced, may lead to an overemphasis upon procedural matters barring litigation of the substantive merits of a good arguable claim. The CCA orders are substantive orders consequential upon setting aside the Prospectors' criminal convictions.

42 Thirdly, it is significant that, although Norilya has no assets, it has been able to pursue the present litigation throughout. Xstrata is supporting Norilya in the pursuit of the litigation. Mr Thomson submitted that it cannot and should not be inferred that the relief sought by the defendants, if granted, would prevent litigation of the present actions. Mr Thomson submitted that the inference is that the decision not to apply the funds available to Norilya for litigation purposes towards compliance with the CCA orders is a matter of deliberate choice by Norilya's owners, ultimately Xstrata. They would rather cause Norilya to litigate than to abide by orders made by the CCA.

43 Fourthly, Mr Thomson submitted that the claim by Norilya in these actions is intimately connected with Norilya's liability pursuant to the CCA orders. The present action is, in substance, the civil re-litigation of the subject matter of the criminal charges previously brought against the Prospectors. In essence, Norilya's claim is to setoff the value of its civil claim against its liability pursuant to the CCA orders. The claim and the basis for the CCA orders arise out of the same factual matters and the CCA orders have been specifically pleaded by Norilya in the present proceedings.

44 Fifthly, the relief sought by the defendants is not immediate payment to enforce the CCA orders. Recognising the connection between the CCA orders, and the setoff claimed by Norilya, the defendants seek only to ensure that if they are successful in resisting the claims made by Norilya, they will not have litigated in vain.

45 Sixthly, Mr Thomson submits that, in substance, Norilya is seeking to establish that it has an entitlement to retain money which it no longer has in its possession. If Norilya fails to establish that entitlement, the decision of the court in the present action will mean that the CCA orders may be enforced without any argument about setoff. But that result will be of no practical utility to the defendants because Norilya has no assets.

46 Seventhly, Mr Thomson submits that if Norilya succeeds, its assets will only be increased in a small way. There will be no significant payments by the defendants, as almost the full extent of the funds sought have already been paid.

47 The defendants submit that litigation in all of these circumstances involves two of the particular types of unfairness referred to by Mr Thomson. The litigation involves the type of unfairness which arises when orders of a court are of no practical utility. If the court dismisses Norilya's setoff claim, then although there will be no further reason why the CCA orders should not be enforced, this result will be of no practical effect unless the type of relief sought by the defendants in this application is granted. Mr Thomson submitted that the unfairness of allowing a claim to be litigated where, if unsuccessful, the respondent to the claim will have no practical substantive remedy involves the precise unfairness perceived by Clarke LJ in Hammond Suddard.

48 The defendants say that the second type of unfairness involved in this case is unfairness where proceedings are brought for an ulterior or improper purpose. The defendants submit that, given that there is no prospect of Norilya paying the amounts due under the CCA orders if it loses at trial, and only the prospect of minor gain to Norilya if it succeeds, it may be inferred that the purpose of the present litigation is not to protect Norilya and its assets but to establish the Prospectors acted fraudulently. Hence, it is submitted, it should be inferred that the litigation has not been conducted predominately for the benefit of Norilya, given that apparently it has no assets, business or creditors and little to gain from the litigation. The inference is that the actions are being conducted substantially for the purposes of establishing that the Prospectors were fraudulent, even though they have had their convictions set aside.

49 Mr Thomson submitted that the types of unfairness relied on in this application are different to the types of unfairness which grounded the failed application for a permanent stay in 2009. Mr Thomson submits that that application depended on unfairness in the sense of a collateral attack upon the decision of the CCA and unfairness based upon disobedience to past court orders, not the likelihood that in the future the orders of this court will be of no practical effect if the Prospectors succeed. The defendants do not submit that the unfairness is pursuing the present actions whilst the CCA orders have not been paid. That was the failed argument made by the defendants in 2009. Mr Thomson submits that the relevant unfairness is that the actions are designed to allow Norilya to have its setoff claim determined so that it may say that the CCA orders should not be enforced. Prior to that determination, the defendants will always be met with the argument that there is a genuine dispute if they seek to enforce the CCA orders. That was what occurred when they issued a statutory demand and it is the argument which would be made upon a winding up application. However, if Norilya ultimately fails in its argument, it will have litigated its claim but left the defendants practically unable to enforce the CCA orders. In these circumstances, the defendants submit that the orders sought should be granted.

50 Norilya resists the application on three bases. First, Norilya submits that the question of whether it ought to be required to pay into court or otherwise secure the sums claimed by the defendants has already been litigated and resolved in its favour. Counsel for Norilya, Mr Davies SC, submitted that that issue was litigated in the statutory demand proceedings in which Master Sanderson held that this was not an appropriate case to impose a condition that Norilya pay the amounts claimed by the defendants into court or otherwise secure that sum: Norilya Minerals Pty Ltd v Ireland [2008] WASC 53. Further, Norilya says that the grounds for the present application are in substance the same as the previous application for a stay dismissed in 2009: Norilya Minerals Pty Ltd v Easterday [2009] WASC 191.

51 Secondly, Norilya submits that, in any event, the current application has no proper foundation. Mr Davies SC submits that there is no head of abuse of process in respect of cases where it might be said that a plaintiff has 'nothing to lose'. The defendants, having been provided with security for costs, are in no different position than any defendant being sued by an impecunious plaintiff. Mr Davies SC submits that the argument that the court's orders in the present case will have no practical utility is wrong. If Norilya succeeds, it will obtain orders for damages, for interest on damages and other relief. Those sums will either be offset against the CCA orders or will enable Norilya to pay the CCA orders. There will also be a surplus. If Norilya is not successful, the court's orders will also have utility. The dismissal of the action will mean that there is no longer any impediment to the enforcement of the CCA orders.

52 Mr Davies SC submitted that the authorities relied on by the defendants do not assist them. Hammond Studdard is not a case about abuse of process. It is a case about the power under English CPR r 52.9(1) which authorises an appeal court to impose conditions upon which an appeal may be brought. Anglo-Swiss Holdings Ltd is not a case about a stay for abuse of process. The case concerned a stay under English rule CPR pt 3.1(2). The court's findings as to what power it had as a consequence of the rule under consideration provides no assistance as to the scope of the power of an Australian court, under its inherent jurisdiction, to prevent abuse of its processes.

53 Thirdly, Norilya submits that the orders sought by the defendants should not be granted in any event because of the defendants delay in bringing this application until a time after significant costs have been incurred in preparing the matter for trial and the defendants have sought and obtained security for costs.

54 In Jeffery & Katauskas v SST Consulting [2009] HCA 43; (2009) 239 CLR 75 French CJ, Gummow, Hayne & Crennan JJ said (omitting reference to authority):

... the contemporary approach in the United Kingdom and Australia which takes no narrow view of what can constitute 'abuse of process'. Nevertheless, certain categories of conduct attracting the intervention of the courts emerged in the nineteenth and twentieth centuries and included:

'(a) proceedings which involve a deception on the court, or are fictitious or constitute a mere sham;

(b) proceedings where the process of the court is not being fairly or honestly used but is employed for some ulterior or improper purpose or in an improper way;

(c) proceedings which are manifestly groundless or without foundation or which serve no useful purpose;

(d) multiple or successive proceedings which cause or are likely to cause improper vexation or oppression.'

The term 'abuse of process', as used in Australia today, is not limited by the categories mentioned above or those which constitute the tort. It has been said repeatedly in the judgments of this Court that the categories of abuse of process are not closed. In Walton v Gardiner (1993) 177 CLR 378 at 393 the majority adopted the observation in Hunter v Chief Constable of the West Midlands Police [1981] UKHL 13; [1982] AC 529 at 536 that courts have an inherent power to prevent misuse of their procedures in a way which, although not inconsistent with the literal application of procedural rules of court, would nevertheless be 'manifestly unfair to a party to litigation ... or would otherwise bring the administration of justice into disrepute among right-thinking people'. This does not mean that abuse of process is a term at large or without meaning. Nor does it mean that any conduct of a party or non-party in relation to judicial proceedings is an abuse of process if it can be characterised as in some sense unfair to a party. It is clear, however, that abuse of process extends to proceedings that are 'seriously and unfairly burdensome, prejudicial or damaging' or 'productive of serious and unjustified trouble and harassment' (93 - 94).

55 One of the categories of abuse of process identified by the plurality in Jeffery & Katauskas is 'proceedings where the process of the court is not being fairly or honestly used but is employed for some ulterior or improper purpose or in an improper way'.

56 In Williams v Spautz [1992] HCA 34; (1992) 174 CLR 509 Mason CJ, Dawson, Toohey and McHugh JJ made the following observations about the boundaries of abuse of process:

The observations of the Privy Council in King v Henderson (1864) 10 LT (NS) 414 at 415 and those of Isaacs J in Dowling (1915) 20 CLR at 521 - 522, to which we referred earlier, represent an attempt to achieve a formulation which keeps the concept of abuse of process within reasonable bounds. To say that a purpose of a litigant in bringing proceedings which is not within the scope of the proceedings constitutes, without more, an abuse of process might unduly expand the concept. The purpose of a litigant may be to bring the proceedings to a successful conclusion so as to take advantage of an entitlement or benefit which the law gives the litigant in that event.

Thus, to take an example mentioned in argument, an alderman prosecutes another alderman who is a political opponent for failure to disclose a relevant pecuniary interest when voting to approve a contract, intending to secure the opponent's conviction so that he or she will then be disqualified from office as an alderman by reason of that conviction, pursuant to local government legislation regulating the holding of such offices. The ultimate purpose of bringing about disqualification is not within the scope of the criminal process instituted by the prosecutor. But the immediate purpose of the prosecutor is within that scope. And the existence of the ultimate purpose cannot constitute an abuse of process when that purpose is to bring about a result for which the law provides in the event that the proceedings terminate in the prosecutor's favour.

It is otherwise when the purpose of bringing the proceedings is not to prosecute them to a conclusion but to use them as a means of obtaining some advantage for which they are not designed or some collateral advantage beyond what the law offers. So, in Dowling, Isaacs J pointed out that 'if, for instance, it had been shown that the Society had simply threatened Dowling that unless he did what they had no right to demand from him, namely, give up certain names, they would proceed to sequestration, and they had proceeded accordingly, there would have been in law an abuse of the process'. However, because the Society wished to use the process for the very purpose for which it was designed, there was no abuse of process (526 - 527).

57 The essence of this type of abuse of process is that the person has used some aspect of the machinery of the law to achieve a purpose which was outside the ambit of the legal claim upon which the court is asked to adjudicate. Hence, to institute proceedings with the predominant purpose of delaying the enforcement of a claim made against that party would constitute abuse of process: Flower & Hart (a firm) v White Industries (Qld) Pty Ltd [1999] FCA 773; (1999) 87 FCR 134 [64].

58 The defendants submit that it should be inferred that the present actions are not being conducted predominantly for the benefit of Norilya, given that it has no assets, business or creditors and little to gain from the litigation and it should be inferred that Norilya is prosecuting the actions substantially for the purposes of establishing that the Prospectors were fraudulent, even though they have had their convictions set aside.

59 I do not draw the inference submitted by the defendants. CIV 2232 of 1990 was plainly not instituted for the improper purpose advanced by the defendants. The action was commenced before the Prospectors' convictions were quashed, indeed before they were convicted. I am not satisfied that Norilya commenced CIV 2364 of 2007 for the purpose submitted by the defendants or that it has continued CIV 2232 of 1990 since the Prospectors' convictions were quashed for the reason submitted by the defendants. If Norilya succeeds in the actions it will obtain orders for damages, interest on damages and other relief. Those sums will, in one way or another, offset the amounts payable by Norilya to the defendants under the CCA orders. There will also be a surplus. The surplus will include the interest payable on the $6 million paid by Norilya to the Prospectors for the period from payment to repayment, a period of approximately four years. Interest on $6 million for four years is a substantial amount. Norilya also claims consequential losses in the order of $900,000 plus interest on that sum.

60 There is no evidence from which it might be inferred that the persons controlling Norilya are motivated by wanting to establish that the Prospectors salted the tenements or otherwise acted fraudulently. The evidence is that the ultimate owner of Norilya is now Xstrata but there is no evidence that Xstrata, or any of its directors or employees, were involved in the transaction giving rise to these proceedings or have any motive for establishing that the Prospectors salted the tenements or otherwise acted fraudulently.

61 Furthermore, the beliefs or motivations of the plaintiff in proceedings have generally been treated as irrelevant, unless they reach the stage of an improper purpose. Thus, in Williams v Spautz, the High Court held that proceedings would constitute an abuse of process, where brought, not to prosecute them to a conclusion, but to use them as a means of obtaining some advantage extraneous to the legal process. The defendants have not established that Norilya has used, or is using, these actions as a means of obtaining some advantage extraneous to the legal process.

62 One of the categories of abuse of process identified by the plurality in Jeffery & Katauskas was 'proceedings which are manifestly groundless or without foundation or would serve no useful purpose'. The defendants do not submit that the present actions are manifestly groundless or without foundation but they do submit that they serve no useful purpose.

63 The categories of abuse of process quoted by the plurality in Jeffery & Katauskas was outlined by Jacob IH, 'The Inherent Jurisdiction of the Court' (1970) 23 CLP 23, 43. Jacob wrote the following about that category of abuse of process:

Indeed, the typical circumstances in which abuse of process is held to take place are where the proceedings are frivolous or vexatious. These words either separately, or more usually in conjunction, are often used interchangeably with the term 'abuse of the process of the court ...' A proceeding may be said to be 'frivolous' when a party is trifling with the court, or when to put it forward would be wasting the time of the court, or when it is not capable of reasoned argument. A proceeding may be held to be 'vexatious' on many grounds, eg where it is or is shown to be without foundation or where it cannot possibly succeed or where an action is brought or defence raised only for annoyance or to gain some fanciful advantage. Thus, in Willis v Earl Beauchamp (1886) 11 PD 59, an action was brought to obtain revocation of letters of administration after nearly ninety years. It was dismissed as frivolous and vexatious (41).

64 The case that gave rise to the statement that a proceeding may be said to be frivolous when a party is trifling with the court is Chaffers v Goldsmid (1894) 1 QB 186. In Chaffers v Goldsmid, Mr Goldsmid having proffered two previous petitions by Chaffers only to have them returned by the Speaker, refused to proffer a third petition seeking the removal of Lord Esher MR for 'gross abuse of judicial office'. Chaffers argued that his MP was duty bound to present his petition. Chaffers argued that as he had a 'right' to petition Parliament the law must provide a remedy in the form of an enforceable legal duty on a local MP to receive and present his constituent's petition to the House. Chaffers' action was for mandamus and damages. In the view of Wills J this brought the inherent jurisdiction into play in order to prevent harassment of the MP for not doing something that could not possibly succeed as the decision was in the hands of others, such as the Speaker and the Committee Clerk.

65 The case giving rise to the statement that a proceeding may be frivolous when to put it forward would be wasting the time of the court is Dawkins v Prince Edward of Saxe Weimar (1876) 1 QBD 499 where the plaintiff was suing in a merely frivolous and vexatious action the members of a court of enquiry with reference to a claim which had been already disposed of in the House of Lords in an action in which Colonel Dawkins was also the plaintiff.

66 The present actions are not wasting the time of the court nor raised only for annoyance or to gain some fanciful advantage. The plaintiff has a seriously arguable case. The outcome of the actions will determine the rights of the parties in relation to a large sum of money. In practice, if the plaintiff succeeds it will obtain judgment for a substantial amount, even allowing for the offset of the amounts owing to the defendants under the CCA orders.

67 The English and Australian cases do not contain any definition which unifies and fixes the limits of the inherent jurisdiction. In 'The Inherent Jurisdiction to Regulate Civil Proceedings' (1997) 113 LQR 120 Professor Dockray suggests that in these circumstances the most reliable general guide to the ambit and nature of inherent jurisdiction was a notable group of decisions of courts of England and Wales in which the court had denied that it has inherent power to make a procedural order of some particular sort. Those cases include judgments which deny that the court has inherent jurisdiction to make interim payments (Moore v Assignment Courier [1977] 1 WLR 638 CA; The Fuohshan Maru [1978] 1 Lloyd's Rep 24) or to order compensation to be paid to someone who has suffered by the implementation of an order of the court (Re R (Restraint Order) [1990] 2 QB 307). Professor Dockray observed:

These decisions are quite inconsistent with the idea that the inherent jurisdiction is an unlimited reservoir from which new powers can be fashioned at will ... In fact, the general approach adopted in dealing with arguments about the existence of particular inherent powers is much the same as the approach to any other question of common law. That is, the cases recognise or reject claims after argument in a conventional form about the precedents which relate to the power in question and about the merits, consequences and alternatives to the particular power which it is claimed the court possesses (130).

68 Mr Thomson submitted that in this application the defendants are seeking security for judgment. In Jackson v Stirling Industries Ltd [1987] HCA 23; (1987) 162 CLR 612 the respondent applied to the Federal Court for an order that the appellant pay into court the sum of $3 million as security for payment of any judgment that might be given against them. The judge ordered that the appellant provide security in the sum of $3 million. The High Court held that the order should not have been made. The court held in effect that a court has power to grant a freezing order, or mareva order, preventing a defendant from disposing of his assets so as to defeat any judgment obtained but does not have power to make an order providing security for judgment. Deane J, with whom Wilson and Dawson JJ agreed, said that the source of the power to grant a mareva injunction is the power of a court to prevent the abuse or frustration of its process in relation to matters coming within its jurisdiction. Deane J said that the order to provide security in the sum of $3 million fell 'in a different category to any interlocutory order for the preservation of assets which has previously been made, at least in a reported case in this country' (624). Deane J said:

... when an order for the preservation of assets goes beyond simply restraining the defendant from disposing of specific assets until after judgment, it must be framed so as to come within the limits set by the purpose which it can properly be intended to serve. That purpose is not to create security for the plaintiff or to require a defendant to provide security as a condition of being allowed to defend the action against him. ... It is to prevent a defendant from disposing of his actual assets (including claims and expectancies) so as to frustrate the process of the court by depriving the plaintiff of the fruits of any judgment obtained in the action. It may be appropriate in a rare case that such an order requires the defendant actually to deliver assets to a named person or even to the court itself or (in 'a most exceptional case') extends to the appointment of a receiver of all or part of the assets of a defendant company: see the discussion in the judgment of Street CJ, Ballabil Holdings. Even in such cases however, the order must be confined to preserving assets until after judgment or, arguably, until there has been an opportunity to seek execution: it should not purport to create security over them in favour of the plaintiff and it should make clear that it goes no further than to deprive the defendant of possession of them for the purpose of precluding his disposal of them so as to defeat a judgment (625 - 626).

Deane J then considered the form of the order made by the primary judge and continued:

Notwithstanding those considerations however, it seems to me that the express formal orders of the Federal Court to provide 'security' in the amount of $3,000,000 in the manner directed cannot properly be construed as not involving the creation of any security at all or as going no further than an order for the preservation of assets actually within the control of the appellant. That being so, the orders were not of a kind that it was within the power of the Federal Court to make as 'appropriate' in relation to the proceedings before it or as an incident of its substantive jurisdiction to deal with those proceedings (626 - 627).

69 Counsel for the defendants sought to distinguish Jackson v Stirling Industries on the basis that in Jackson v Stirling Industries the payment by the appellant by way of security would have given the respondent a secured position against other creditors but that is not an issue in this case because Norilya has no other creditors. I do not accept that argument for three reasons. First, that was not part of the reasoning of Deane J. The other majority judges, Mason CJ, Wilson, Dawson and Brennan JJ, all expressly agreed with Deane J. Secondly, the judges who adverted to the issue raised the matter as one of principle not as a circumstance of the particular case. Wilson and Dawson JJ said:

... The mareva injunction represents a limited exception to the general rule that a plaintiff must obtain his judgment and then enforce it. He cannot beforehand prevent the defendant from disposing of his assets merely because he fears that there will be nothing against which to enforce his judgment nor can he be given a secured position against other creditors. The remedy is not to be used to circumvent the insolvency laws (618).

To make an order giving an applicant, who has no more than a personal claim for damages, security for the payment of an amount that might be awarded is to go beyond what is reasonable protection of his right, for it would convert him from an unsecured to a secured creditor. A judicial power to make an interlocutory order in the nature of a mareva injunction may be exercised according to the exigencies of the case and, the schemes which a debtor may devise for divesting himself of assets being legion, novelty of form is no objection to the validity of such an order. In this case, however, an objection to the order made is not novelty of form but error in principle. Although there is power to make an order in the nature of a mareva injunction, it is wrong in principle to extract from the appellant's pocket a fund which, presumably, was to be available to satisfy any judgment for damages which might be awarded against him (621).

70 I am not satisfied that the present actions fall with any recognised category of abuse of process. Furthermore, the defendants' case that the plaintiff should give security for judgment is inconsistent with Jackson v Stirling.

71 It is not an abuse of process merely because Xstrata, or some company in the Xstrata group, is funding the actions but is not, or may not, be willing to provide Norilya with funds to pay the defendants the amount due to them under the CCA orders. In Jeffery & Katauskas the High Court held that there is no general proposition that those who fund another's litigation must place the party funded in a position to meet any adverse order for costs. The fact that a funder is to receive a benefit from the litigation does not support the conclusion that a funding arrangement constitutes an abuse of process. It would be inconsistent with those principles to characterise the maintenance of proceedings where a funder funds an impecunious plaintiff but does not indemnify the other party for any sum owing by the plaintiff to the other party as an abuse of process.

72 I am not satisfied that the features of this case identified by the defendants, individually or collectively, amount to an abuse of process. I have previously held that the fact that Norilya prosecutes this action without complying with the CCA orders is not for that reason alone an abuse of process: Norilya Minerals Pty Ltd v Easterday [2009] WASC 191. This is not a case where a third party is funding the plaintiff's action in circumstances where the plaintiff will not be able to pay the defendant's costs if the defendant is successful in the action. Orders for security for costs have previously been made. Norilya has obtained funds to provide security for the defendants' costs if the defendants are successful in the action. The defendants have not established that Norilya brought, or is maintaining, the actions for an improper purpose nor that they are conducting the litigation in an improper way. The essence of the defendants' claim is that Norilya should provide security for judgment so that if the defendants are successful they will be able to recover the amounts due to them under the CCA orders. There is no reason in principle why the defendants should obtain security for amounts due to them under the CCA orders if the court would not make orders to give them security for any judgment that might result in the present actions. To give security for judgment in the action is contrary to the principles underlying the judgments in Jackson v Stirling Industries.

73 Norilya submits that the question of whether it ought to be required to pay into court or otherwise secure the sums claimed by the defendants has already been litigated and resolved in its favour.

74 Norilya did not state the basis for its submission that the defendants' application should be refused because it has already been litigated and resolved in favour of Norilya. Mr Davies accepted that the decisions of Master Sanderson in Norilya Minerals Pty Ltd v Ireland [2008] WASC 53 and Norilya Minerals Pty Ltd v Easterday [2009] WASC 191 respectively do not give rise to any relevant res judicata or issue estoppel. However, the court may dismiss a second application seeking the same relief as has been unsuccessfully sought in an earlier application on the grounds that it is an abuse of process. In Commonwealth of Australia v Albany Port Authority [2006] WASCA 185 Pullin JA said:

More recently, courts in New South Wales, Victoria, in the federal jurisdiction and in this State, have had reason to consider the question about whether it is per se an abuse of process to bring a second interlocutory application seeking the same relief as had been unsuccessfully sought in an earlier interlocutory application. These cases are not directly on point because they concern abuse of process by a party, but the discussion about whether the same issues should be reventilated in successive interlocutory applications is relevant even if the second application is brought about by motion of the court rather than by a party. In Todd v Novotny [2000] WASC 308, Parker J reviewed the cases, particularly DA Christie Pty Ltd v Baker [1996] VicRp 89; [1996] 2 VR 582 and Nominal Defendant v Manning [2000] NSWCA 80; (2000) 50 NSWLR 139, which reveal some differences of opinion. Parker J said he would not regard it as settled that a second application would per se be treated as an abuse of process. He accepted, however, that it would be open to the court to dismiss the second application in the exercise of discretion. Since then the issue has been referred to in appellate decisions of this Court. See Pioneer Concrete (WA) Pty Ltd v Elwood [2005] WASCA 48 and Gandini v Legal Practitioners Complaints Committee [2005] WASCA 214 and in recent single Judge decisions in the Federal Court and in the Supreme Court of Victoria. See Paras v Public Service Body Head of Department of Infrastructure (No 2) [2006] FCA 562 and Tenth Vandy Pty Ltd v Natwest Markets Australia Pty Ltd [2006] VSC 170.

I agree with the observations of Heydon JA in Manning that it is difficult to propound a general rule suitable for all cases (see [45]) and that it is too extreme to say that no second interlocutory application can be entertained unless there is a change of circumstance or unless evidence is relied on which could not reasonably have been obtained earlier [72]. By analogy it may be argued that a Judge exercising inherent power may, on his or her own motion, set aside a subpoena as an abuse of process when another member of the court has granted leave under O 36 r 12(4).

I will assume (but not decide) that the primary Judge had such power and consider whether the power should have been exercised in this case [71] - [73].

75 If I was satisfied that the maintenance of these actions by Norilya was an abuse of process I would not refuse the defendants' application on the grounds that their claim has already been litigated and found against them. The matters argued by the defendants were not the subject of the decision of Master Sanderson in Norilya Minerals Pty Ltd v Ireland [2008] WASC 53 or by myself in Norilya Minerals Pty Ltd v Easterday [2009] WASC 191. In the latter case I considered the defendants arguments based on unfairness in the sense of a collateral attack upon the orders of the CCA and unfairness based on a failure to comply with the orders of the CCA. In this case the defendants' application is based upon unfairness in that it is likely that in the future the orders of this court will be of no practical effect and will serve no useful purpose in circumstances where Xstrata, or some company in the Xstrata group, is funding the actions but is not willing to provide Norilya with funds to pay the amounts due to the defendants under the CCA orders.

76 If the court finds that there is an abuse of process then there is no discretion whether or not to make an appropriate order to remedy the abuse; there is no discretion to refuse a stay if proceedings are an abuse of process: Batistatos v Road and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256 (Gleeson CJ, Gummow, Hayne & Crennan JJ) [7]; R v Carroll [2002] HCA 55; (2002) 213 CLR 635 (Gaudron & Gummow JJ) [73]; Commonwealth of Australia v Albany Port Authority (Pullin JA) [83]. If I had found that the commencement or maintenance of the actions by Norilya was an abuse of process then there is no discretion to refuse a stay.

NORILYA MINERALS PTY LTD -v- ADAM JONATHON IRELAND as Named Executor of the Estate of DEAN EDWARD IRELAND [2010] WASC 260 (24 September 2010)

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (125 paragraphs)

NORILYA MINERALS PTY LTD -v- ADAM JONATHON IRELAND as Named Executor of the Estate of DEAN EDWARD IRELAND [2010] WASC 260 (24 September 2010)