Freedom Foods Pty Ltd v Blue Diamond Growers

• Jurisdiction: Australia Federal only
• Judgment Date: 03 May 2021
• Neutral Citation: [2021] FCA 461
• Court: Federal Court
• Date: 03 May 2021

Federal Court of Australia

Freedom Foods Pty Ltd v Blue Diamond Growers [2021] FCA 461

Appeal from:	Freedom Foods Pty Ltd v Blue Diamond Growers [2021] FCA 172
File number:	VID 138 of 2021
Judgment of:	ALLSOP CJ
Date of judgment:	3 May 2021
Catchwords:	PRACTICE AND PROCEDURE – application for security for costs in an application for leave to appeal and an appeal, should leave be granted – where applicants have minimal assets – where parent company of applicants is undergoing recapitalisation – where parent is liable for applicants’ debts pursuant to a deed of cross-guarantee – whether there is credible testimony that there is reason to believe that the applicants will be unable to pay the costs of the respondent – appropriate quantum of security for one day appeal from interlocutory judgment – application dismissed
Legislation:	Corporations Act 2001 (Cth) s 1335 Federal Court of Australia Act 1976 (Cth) s 56 International Arbitration Act 1974 (Cth) s 7(2)
Cases cited:	Dimitriou v Pineview Property Holdings Pty Ltd [2019] FCA 2123 Freedom Foods Pty Ltd v Blue Diamond Growers [2021] FCA 172 Kemppi v Adani Mining Pty Ltd [2018] FCA 2012 Langbein v Mottershead Investments Pty Ltd (No 2) [2020] FCA 188 Mathews v All Options Pty Ltd [2019] FCA 1972 Pleash (liquidator) v Tucker [2018] FCA 168 Stallion (NSW) Pty Ltd v Commissioner of Taxation [2020] FCA 554
Division:	General Division
Registry:	New South Wales
National Practice Area:	Commercial and Corporations
Sub-area:	Commercial Contracts, Banking, Finance and Insurance
Number of paragraphs:	48
Date of hearing:	3 May 2021
Counsel for the Applicants:	Mr P D Crutchfield with Mr A M Dinelli and Ms A Staker
Solicitor for the Applicants:	Arnold Bloch Leibler
Counsel for the Respondent:	Ms H Tiplady with Mr T Farhall
Solicitor for the Respondent:	Norton Rose Fulbright Australia

ORDERS

		VID 138 of 2021
BETWEEN:	FREEDOM FOODS PTY LTD (ACN 068 972 181) First Applicant ; FREEDOM FOODS GROUP INGLEBURN PTY LTD (ACN 600 569 382) Second Applicant ; FREEDOM FOODS GROUP TRADING PTY LTD (ACN 614 863 286) Third Applicant ; PACTUM AUSTRALIA PTY LTD (ACN 112 913 336) Fourth Applicant
AND:	BLUE DIAMOND GROWERS Respondent

order made by:	ALLSOP CJ
DATE OF ORDER:	3 MAY 2021

THE COURT ORDERS THAT:

1. The application for security for costs be dismissed with costs.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

ALLSOP CJ:

1. In this matter, the respondent to an application for leave to appeal and the appeal, if leave be granted, seeks orders for security for costs to be provided by the four applicants and prospective appellants. The application for leave to appeal and the appeal, if leave be granted, are fixed for hearing on 19 May 2021 at 10:15am, having been expedited. The matter is a commercial matter between sophisticated commercial parties well advised by experienced lawyers and counsel.

2. On 29 September 2020, the four applicants to whom I will refer collectively as Freedom Foods, sought orders in an originating application restraining the respondent, Blue Diamond Growers, from commencing, prosecuting or otherwise taking any other step in an arbitration in the United States. The applicants also sought declarations under the Competition and Consumer Act 2010 (Cth) that the Freedom Foods Group companies had not breached relevant provisions of a license agreement and that Blue Diamond had behaved in a way contrary to the Australian Consumer Law, together with damages.

3. The background to that application, broadly for present purposes, was a body of disputes about a license agreement entered into by the first applicant, Freedom Foods Pty Ltd and Blue Diamond. The relevant agreement between the parties had an arbitration provision should the parties fall into dispute. Blue Diamond is a foreign corporation incorporated in California and is one of the largest suppliers of almonds in the world. Almonds are a raw material for various food and drink products prepared and sold by the various Freedom Foods Group companies. The originating application was supported by a concise statement, the precise terms of which are not relevant for this application.

4. On 20 November 2020, the applicants filed an interlocutory application seeking orders restraining Blue Diamond from taking any step in the arbitration. The applicants also sought an anti-suit injunction against Blue Diamond from prosecuting, continuing with or taking any step in a proceeding commenced by Blue Diamond in the United States District Court for the Eastern District of California, Sacramento Division, and other orders.

5. On 15 December 2020, Blue Diamond filed an interlocutory application seeking, amongst other things, to set aside service and also, most relevantly, an order that the proceeding be stayed, insofar as it was commenced by the first applicant, in accordance with s 7(2) of the International Arbitration Act 1974 (Cth). That provision is one of Australia’s responses to the implementation of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards to force parties to go to arbitration which they had agreed to conduct. That application proceeded before a judge of this Court on 4 and 17 February 2021 with further submissions being filed on 19 February 2021.

6. Both sides were represented by senior counsel. The Freedom Foods parties were represented also by junior counsel. Blue Diamond was represented, not only by senior counsel, but two juniors. In a prompt, careful and comprehensive judgment, if I may respectfully say, the learned primary judge, Moshinsky J, stayed the proceedings, otherwise dismissed Blue Diamond’s interlocutory application and dismissed the applicants’ interlocutory application seeking to restrain both the arbitration and the United States District Court proceeding: Freedom Foods Pty Ltd v Blue Diamond Growers [2021] FCA 172. It is against those orders that leave to appeal is sought, and the appeal prospectively is brought.

7. The parties agreed that the matter was one for expedition. Administratively, the Court agreed with that and granted expedition and set the matter down in May 2021. There was no application for security for costs attending the exercise of original jurisdiction by the Court.

8. The financial history of the Freedom Foods Group is the subject of this application. The four companies that are the four Freedom Foods applicants do not have substantive assets, and the application for security for costs is not resisted by Freedom Foods on the basis that each company, from its own assets, is able to meet any adverse costs order in the application for leave to appeal or the prospective appeal. Rather, the four companies are part of the Freedom Foods Group and that group is led by the parent company, Freedom Foods Group Limited. Freedom Foods Group Limited is listed on the Australian Stock Exchange (ASX). Its trading was suspended from a period in the middle of last year to March this year. Those who are interested in the group have put together a recapitalisation plan for the listed company, which recapitalisation has been the focus of attention in this application. There is a deed of cross-guarantee between Freedom Foods Group Limited and companies in the group including three of the four Freedom Foods applicants in these proceedings.

9. That cross-guarantee is sufficient, by reference to the Australian Security Investments Commission (ASIC) instrument to permit the group to present accounts on a consolidated basis without the preparation of individual accounts of the subsidiaries. The deed of cross-guarantee provides...