ACN 007 528 207 Pty Ltd (in Liquidation) v Bird Cameron and Ors (No 5) No. Scciv-99-1392

ACN 007 528 207 PTY LTD (IN LIQUIDATION) V BIRD CAMERON AND ORS (NO 5)
[2002] SASC 236

JUDGE BURLEY. By application dated 8 March 2002 the defendants have sought, pursuant to SCR 100.04, additional security for costs. An initial order for security for costs was made by Bleby J on the 13th day of July 2001: ACN 007 528 207 Pty Ltd (In Liquidation) v Bird Cameron and Ors (2001) 214 LSJS 421. The amount of the security the subject of the order was $40,000.00. The defendants now seek an additional $100,000.00.
SCR 100.04 enables the Court to increase or decrease the amount of security for costs to be provided after the determination of the initial application for security for costs. The application was supported by the affidavit of Mr AJ Keane affirmed on 7 March 2002. Mr Keane stated in his affidavit that he examined the accounts rendered to the defendants since 13 July 2001 when the initial order was made. He has estimated that the defendants incurred costs in relation to this action in excess of $40,000.00 on or before 20 January 2002. In addition, he has exhibited to his affidavit a draft short form bill of costs setting out the costs incurred between 21 January 2002 and 5 March 2002 and an estimate of costs thereafter to the date of trial. Those costs and disbursements, including counsel fees of $40,000.00, are in excess of $100,000.00.
It is apparent from Mr Keane’s affidavit that when the initial application for security for costs was made, there was a serious under‑estimate of the costs to be incurred by the defendants prior to trial.
The application for an increase in security for costs was opposed by the plaintiff. Mr Brohier, on behalf of the plaintiff, approached the matter in two ways: first, he said that if the original application had included the additional $100,000.00 now sought, the plaintiff would have opposed the application overall instead of conceding before Bleby J that it was appropriate for an order for security for costs to be made; and, second, he argued that it was not now open to the Court to award any additional security or, if it was, the additional security should be considerably less than the $100,000.00 sought.
As to the first point, during the course of argument, once the parties’ respective submissions were completed on the point, I ruled that it was not open to the plaintiff to reopen the original application for security for costs by asserting now that the Court should not exercise its discretion to make such an order. I gave ex tempore reasons for that ruling. The effect of my ruling was that the plaintiff was limited to arguing that the defendants did not bring themselves within the principles applicable to an application for an increase in security for costs.
Even without a rule permitting an application for an increase in an order for security for costs, the defendants may apply for such an increase (and the plaintiff may apply for a decrease) where there has been a material change of circumstances since the date of the initial order: Security for Costs, Stephen Colbran at para 16.11 and JL Holdings Pty Ltd v State of Queensland and Anor (1996) 71 FCR 545. I think that the requirement that the applicant demonstrate a material change of circumstances is equally applicable to an application pursuant to SCR 100.04: Corradini and Anor v O’Brien Lovrinov Crafter Pty Ltd, unreported, Judgment No [2000] SASC 351. Otherwise it would be open to a defendant to apply twice for an order for security for costs based on the same affidavit material. This would be undesirable, if not an abuse of the Court’s process. Consequently, I have approached this matter on the basis that some reasonable explanation must be established by the defendants as to why it is now necessary to apply for an increase in security.
As I have said, it is apparent from Mr Keane’s affidavit, that when the initial application for security for costs was pursued, the defendants misjudged the amount of the security that would be needed. It seems to me that that misjudgement came about largely because there was a failure to appreciate that there would be a need for a substantial number of pre-trial interlocutory applications before the matter could be said to be ready for trial. This is in no small part due to the fact that the plaintiff’s statement of claim has required amendment and, is likely to be the subject of further debate as to its sufficiency. The defendants have to accept part of the responsibility for failing to anticipate the extent of the interlocutory argument necessary in order to have the pleadings reduced to their final form but, it is equally the case that there have been found to exist serious flaws in the fourth statement of claim filed by the plaintiff, as appears from my reasons delivered today in respect of the plaintiff’s application for leave to amend.
It is to be noted that this matter was tentatively set down for trial in May this year, but it became apparent by late 2001 that the parties would not be ready for trial. At a management conference in January this year, the tentative trial date was vacated because of the volume of the interlocutory applications anticipated by both parties.
In these circumstances I accept that there has been a material change in circumstances which now justify the Court considering whether or not an increase in security for costs should be awarded.
I have carefully considered Mr Brohier’s submissions to the contrary but I consider that, in all the circumstances, it is appropriate to make an order increasing the security for costs beyond the $40,000.00 originally awarded.
In determining what further security should be ordered, I must take into account the nature and extent of interlocutory applications which either have been heard and determined or are to be heard and determined since the management conference in January this year. They include applications for discovery, for leave to amend pleadings and for the striking out of either causes of action or parts of pleadings in relation to various defendants. To the extent that orders for costs have not been made in respect of pending applications, there is a likelihood that the costs of those applications will follow the event, but there will also need to be a determination as to whether or not the costs are to be “in any event” or whether the nature of the costs order is to be such that the successful party would be entitled to have those costs taxed and paid without waiting for the determination of the action as a whole. It is not now possible to be precise as to the net result of the costs of the various applications that either have been or have to be determined.
It is also necessary to take into account a number of criticisms that have been made by Mr Brohier as to the quantum of the additional security for costs that is now sought. He asserted that it was not clear whether any of the costs incurred up to January of this year included the costs of a mediation which took place prior to that time. I agree that such costs should not be included in the costs of action, and that, in the absence of clarification, I should assume that the mediation costs which have been included by Mr Keane in his statement regarding costs was to January this year.
Mr Brohier submitted that it was not clear from the draft short form bill of costs as to whether or not those costs were included on a party and party basis or a solicitor and client basis. He submitted, and I accept, that only party and party costs may be considered on an application for security for costs.
Mr Brohier also submitted that it was not clear whether the costs of third party proceedings were taken into account in the short form bill of costs. However, I accept Mr Strawbridge’s assurance that it was accepted by the defendants that the costs relating to the third party proceedings could not be (and were not) included in the estimate of costs referred to by Mr Keane in the draft short form bill of costs.
Mr Brohier also submitted that the plaintiff was at a disadvantage in assessing the quantum of the defendants’ costs because, when the plaintiff sought discovery from the defendants in relation to their costs, it was met with a claim for privilege which was upheld by the Court. I think it is appropriate to take such a matter into account when making an assessment of the additional security, if any is to be ordered. Because of the privilege that applies between solicitor and client, it is not open to the opposing party, nor to the Court, to question the basis upon which costs in the past have been incurred, let alone what costs might be incurred in the future.
It was submitted by Mr Brohier that there is a potential for doubling up in the draft short form bill of costs in the sense that a claim was made for attendances upon clients and attendances upon witnesses. He submitted that many of the clients were also witnesses and, to that extent, there could only be allowed for one attendance or series of attendances upon an individual who is both a client and a witness. I agree that it is not clear from the draft short form bill of costs whether or not there has been a doubling up of costs to some extent and I think I should make some deduction from the amount claimed to allow for that.
It is impossible to be precise about any further allowance for security for costs. I think the affidavit material, in particular the short form bill of costs, establishes that some further allowance should be made. The extent of that allowance may only be based on the broadest of assessments of all of the matters put by counsel both for and against an increase in the quantum of the security for costs. I think that the impossibility of predicting how costs on interlocutory applications will eventually be balanced is a significant factor which requires an appropriate deduction. This is because, as I understand it, the short form bill of costs is based on the assumption that the defendants will be successful in respect of all of the further interlocutory applications pursued after the making of the application for an increase in security. I think the next significant matter, which works in favour of the plaintiff, is the question of party and party and solicitor and client costs. In the absence of some specific evidence before me that the short form bill of costs has been prepared on a party and party basis, I think it appropriate to assume that it has been prepared on a solicitor and client basis and that, consequently, a deduction of at least a third should be made to account for the difference between solicitor/client and party/party costs.
In all of the circumstances I consider that an increase in security for costs to the extent of $50,000.00 should be allowed.

[2002] SASC 236

25 July 2002