Oswal v Burrup Fertilisers Pty Ltd [2011] FCA 536 | Case summary

application for leave to appeal and appeal to be heard by a full court 1 On 15 February 2011, Radhika Oswal (Mrs Oswal) commenced proceedings in the Supreme Court of Victoria against the Australia and New Zealand Banking Group Limited and others, including the receivers and managers of Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) ACN 095 441 151 (BFPL) in which she claims relief, amongst other relief, to the effect that the appointment on or about 17 December 2010 of the receivers and managers of BFPL (the shares of which are wholly owned by Burrup Holdings Limited (BHL)) was invalid and of no effect. 2 By their defence in the Victorian Supreme Court proceedings dated 18 March 2011, filed on behalf of all defendants save for BHL, those defendants deny that Mrs Oswal is entitled to the relief claimed in the proceedings. 3 Part of the pleaded defence of those defendants is that the bank validly appointed the receivers and managers having regard to certain transactions that Pankaj Oswal (Mr Oswal) had caused between 1 April 2009 and 17 December 2010 by which BFPL had made payments totalling $115,737,577.89 and the Burrup Trust to repay the sum of $19,972,665.30 to be BFPL. Put shortly, those defendants plead that Mr Oswal acted in breach of statutory and equitable duties to which he was subject thereby causing material adverse events that justified the appointment by the bank of the receivers and managers of BFPL. 4 On 10 March 2011, BFPL commenced proceedings in this Court, the Federal Court of Australia (Western Australia District Registry) against Mr Oswal, Mrs Oswal and Comical Ali Militant Vegetarian Pty Ltd ACN 129 299 172 (the related company) in which, as against Mr Oswal, as first respondent, BFPL claimed compensation of $95,764,912.59 for breach of Mr Oswal's statutory duties as a director of the applicant under the Corporations Act 2001 (Cth) and equitable compensation in the same sum for breach of his fiduciary duties as a director of BFPL. 5 The Federal Court proceedings also claim against Mrs Oswal a declaration concerning her involvement in the contravention by her husband of his statutory duties, compensation of $13,437,130 by reason thereof, and a deduction that she holds certain property on constructive trust for herself and the applicant. 6 The application filed in the Federal Court on 10 March 2011 was accompanied by a statement of claim, the terms of which, so far as the claim against Mr Oswal for breach of statutory and equitable duties are concerned, and the claim against Mrs Oswal in respect of her involvement in Mr Oswal's contravention of his statutory duties, is in similar terms to the defence raising those issues in the Victorian Supreme Court proceedings. 7 Accordingly, in terms of time, the Victorian Supreme Court proceedings are first in time, having been commenced by Mrs Oswal on 15 February 2011 against parties that included BFPL, and the Federal Court proceedings are second in time, having been commenced by BFPL on 10 March 2011 against Mr Oswal, Mrs Oswal and the related company. 8 Mr Oswal, Mrs Oswal and the related company, as respondents in the Federal Court proceedings then filed a notice of motion to temporarily stay the Federal Court proceedings pending the resolution of the Victorian Supreme Court proceedings, on Mrs Oswal's undertaking to pursue the Victoria proceeding with expedition. In short, the respondents in the Federal Court proceeding relied on the fact that the Victorian Supreme Court proceeding was first in time and that in all the circumstances it was inappropriate for the Federal Court proceeding to proceed in circumstances in which it raises similar if not identical issues to those concerning the validity of the appointment of the receivers and managers of BFPL. The respondents said that BFPL had not provided any adequate explanation as to why it could not have proceeded by counterclaim in the Victorian proceeding rather than commence a fresh proceeding in the Federal Court in Western Australia. In short, the respondents contended it would be an abuse of process for the Federal Court proceeding to continue while the Victorian Supreme Court proceeding was underway. 9 The respondents' motion came before the primary judge on 20 April 2011. On 29 April 2011, his Honour dismissed the motion for a temporary stay: Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) v Oswal [2011] FCA 424. 10 Mr Oswal then applied for leave to appeal against the refusal of the stay application, as did Mrs Oswal and the related company, in two separate proceedings. Leave to appeal to a Full Court is required under the Federal Court of Australia Act 1976 (Cth) (FCA Act) because the primary judge's refusal to grant a stay on the Federal Court proceeding is in the nature of an interlocutory decision. By s 25(2) of the FCA Act, applications for leave to appeal to the Court must be heard and determined by a single judge unless: (e) a Judge directs that the application be heard and determined by a Full Court; or (f) the application is made in a proceeding that has already been assigned to a Full Court and the Full Court considers it is appropriate for it to hear and determine the application. 11 The applicants, Mr Oswal in WAD 142 of 2011 and Mrs Oswal and related company in WAD 146 of 2011, now seek a direction that their applications for leave to appeal be heard and determined by a Full Court. BFPL as the respondent in each of these applications opposes the application for such a direction.

consideration 12 It might be said that s 25(2) of the FCA Act creates the expectation that an application for leave to appeal to the Court will be heard and determined by a single judge, unless some good reason is advanced to suggest that there is some value, some benefit or advantage to be gained by having a Full Court determine the leave application. 13 As a matter of first principle, one might surmise that s 25(2) is designed to ensure that unless a Full Court is already apprised of a proceeding in which the application is made, a Full Court should not be troubled to deal with such an application unless the circumstances of the application warrant it. Such a principle would recognise that the judicial resources of the judges of the Federal Court should not be expended where one would do. 14 It is otherwise clear that s 25(2) does not lay out any criteria by which a single judge might decide to direct that an application be heard and determined by a Full Court. There is, for example, no requirement such a direction only be given in relation to a "significant" or "exceptional" matter or the like. 15 It may be expected that the circumstances of each case in which the question of a direction is raised will suggest whether there is some value, some benefit or advantage in making a direction that the Full Court hear and determine the application for leave to appeal. Where a single judge decides to make such a direction, one would ordinarily think that the single judge would have in mind that a Full Court would, in all likelihood, expect to hear argument on the proposed substantive appeal as a result of which the Full Court will decide whether or not leave to appeal should be given and, if so, then to dispose of the appeal substantively one way or the other at the same time. 16 It therefore comes as no surprise to discover that the decisions of this Court, necessarily by judges at first instance, have suggested that clear cut cases for the grant, or refusal of leave to appeal will obviously be more readily, and speedily, dealt with by a single judge than by requiring the attention of a Full Court: Optiver Australia Pty Ltd v Tibra Trading Pty Ltd [2008] FCA 47 at [8] (Optiver), Buchanan J; but that where the case for the grant or refusal of leave is more evenly balanced, considerations of a different kind are raised: Optiver at [9]; and that it may not be necessary to express any firm view about the strength of contentions advanced by an applicant where a case is evenly balanced: Optiver at [18]; or that a direction that the application be determined by a Full Court should not be made in a case which can be characterised as a minor interlocutory squabble over discovery or the like: TS Production LLC v Drew Pictures Pty Ltd [2008] FCA 1329 (TS Production) at [7] per Heerey J; but that that there may be cases where the presence or absence of either substantial injustice or sufficient doubt is so clear and obvious that the application should be disposed of on that ground alone: TS Production at [11]; or that the case is one, identifiable through experience, where it is not really practicable to separate out the leave issue of whether the decision below is attended with sufficient doubt from the substantive merits: TS Production at [13]; or that the application to appeal is "hopeless": Allphones Retail Pty Ltd ACN 008 168 090 v Weimann [2009] FCA 849 (Allphones) at [13], McKerracher J; and where the decision has serious implications for the parties or one of them if the decision to be appealed against is allowed to stand: Allphones at [22]; or where the application for leave to appeal is not straight forward, suggesting that on efficiency and cost consideration grounds the direction to the Full Court should be made: Edwards v Santos Limited [2010] FCA 34 at [10], per Collier J. 17 It is well established in this Court that in determining whether leave to appeal, where required, should be granted, the Court will consider whether the decision at first instance was attended with sufficient doubt to warrant it being reconsidered and whether substantial injustice would result if leave is refused, supposing the decision at first instance was wrong. Nevertheless, there may be circumstances in which the tests are not appropriate for application by a court, for example leave may more readily be granted where substantive rights, rather than points of practise are at issue. See generally Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397. 18 In the present instance the applicants for leave submit there is sufficient doubt to warrant the first instance decision being reconsidered and also suggest that a substantial injustice would result, in the sense that the consequences of the error, if it exists, not being corrected are sufficiently great to justify the leave being granted. 19 So far as the submissions are concerned that the primary judgment is attended by sufficient doubt, counsel for the applicants recognise that the primary judge had regard to the criteria suggested by Lockhart J in Sterling Pharmaceuticals Pty Ltd v Boots Co (Aust) Pty Ltd (1992) 34 FCR 287 (Sterling), but contend that in considering and applying those criteria in the circumstances of this case, the primary judge erred in concluding that a temporary stay ought not be granted. In particular, counsel submit that insufficient regard was paid to the question of which proceeding was commenced first, and that the "prima facie rule" that first in time should proceed and second in time should be stayed, discussed in the majority judgment of Dawson, Gaudron, McHugh and Gummow JJ in Henry v Henry (19951996) 185 CLR 571 at 590591, was misapplied by the primary judge in this case. 20 In a related submission, the applicants contend that the primary judge impermissibly relied on the judgment of Dixon J in Union Steamship Co of New Zealand Ltd v The Caradale (1937) 56 CLR 277 (Union Steamship) in support of his view that the later commenced Federal Court proceeding could, in the circumstances, be considered different in nature from the Victorian Supreme Court proceedings. 21 Counsel further submit that the primary judge erred in having regard to or in giving any weight to the capacity of the parties to avoid duplication of the two sets of proceedings by "sensible precautions" or " negotiation", as referred to in [41], [48] and [69] of the primary judgment. Counsel submitted that in this regard his Honour relied on a speculative factor in weighing the relevant criteria. 22 So far as prejudice to the applicants is concerned, the applicants contend that the primary judge gave insufficient regard to the expense that the applicants, and indeed the parties generally, will incur in having to maintain two sets of proceedings, where the issues that are common to both will be agitated in two different places. The potential for different case management directions, for example in relation to the nature or scope of discovery, was particularly mentioned by counsel for Mrs Oswal and the related company. Counsel for the applicants contend that these issues are not likely to be resolved by the speculative approach of the primary judge that the parties can negotiate their way to a more convenient arrangement. 23 Counsel for the applicants also submitted that the resources of the two courts, the Supreme Court of Victoria and the Federal Court, would necessarily be applied to the maintenance of two competing proceedings. 24 Counsel for the respondent, BHPL, though briefed late in relation to the applications, submitted that there was insufficient reason to doubt the correctness of the primary judge's decision, the primary judge having identified all the relevant criteria mentioned by Lockhart J in Sterling and having carefully weighed those considerations before refusing to stay the Federal Court proceedings. 25 As to the question posed by counsel for the applicants, why a counterclaim was not lodged in the Victorian Supreme Court proceedings rather than a fresh claim in the Federal Court proceedings after the commencement of those earlier proceedings, counsel submitted that this was explicable by the fact that Mr Oswal was not himself a party to the Victorian Supreme Court proceedings, everything had happened in Western Australia, the head office was in Western Australia and that the receivers and managers had foreshadowed action which eventually came to pass. He also submitted that at material times before the stay application was considered, there was no indication on behalf of Mr Oswal that he would accept service of any process in relation to the Victorian proceedings. 26 In the event, this seems to me to be a case in which the question of whether leave to appeal should be granted is not clear cut, one way or the other. It might be said to be, as Buchanan J said in Optiver, "evenly balanced". 27 I recognise that the primary judge considered all of the criteria identified by Lockhart J in Sterling as relevant to the exercise of the question whether directions should be given under s 25(2) of the FCA Act as counsel for the applicants agree are relevant. However, I also accept that there may be considered to be an issue as to the strength of the socalled prima facie rule, which suggests that the first in time proceeding should be allowed to proceed and the later proceeding stayed, at least all other things being equal. The question of just what weight should be given to that rule is something that may tend to support the grant of leave to appeal, as well as consideration of the guidance to be obtained from the judgment of Dixon J in Union Steamship. 28 Rather than these two particular issues being decided by a single judge, it seems to me that there is some value, some benefit or advantage to be gained by the Full Court considering these issues on the application for leave to appeal, as it is a general issue which has arisen in the past and may arise again in the future. This is not a mere practice and procedure point. 29 I am also inclined to make the direction that the application for leave to appeal be referred to the Full Court because, if that application is determined by a single judge, following which there will be no appeal, there seems to me to be little doubt that, as things stand, significant financial and other resources will be applied by the parties to the separate pieces of litigation that will then be fought in two separate Australian jurisdictions. This potential consequence suggests that the Full Court should look at the issue and there is some value, some benefit or advantage to be gained from a determination by the Full Court of the leave application.

Oswal v Burrup Fertilisers Pty Ltd

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