Airlie Group Pty Ltd v John Fairfax Group Pty Ltd

Re: THE AIRLIE GROUP PTY. LIMITED AND ORS and THE DREXEL BURNHAM LAMBERT GROUP
INC.
And: JOHN FAIRFAX GROUP PTY. LIMITED and ORS
Nos. G100 and 28 of 1991
FED No. 416
Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Sheppard J.(1)

CATCHWORDS

Practice and Procedure - security for costs - complex litigation - applicants outside jurisdiction and having no assets in Australia - Court's discretion to order security - evidence of amounts incurred by respondents for costs down to inspection of documents - evidence consisting in part of evidence by costs consultants - reference of costs consultants' material to taxing officer for report on appropriateness of the amount to be awarded.

Federal Court of Australia Act 1976, s.56

Federal Court Rules, Order 28, rule 3

HEARING

SYDNEY

#DATE 7:6:1991

Counsel for the Applicants: Mr C.P. Comans

Instructed by: Phillips Fox

Counsel for the First Respondent: Mr M. Speakman

Instructed by: Blake Dawson Waldron

Counsel for the Second Respondent: Mr N.A. Cotman

Instructed by: Baker and McKenzie

Counsel for the Third Respondent: Mr N.C. Hutley

Instructed by: Mallesons Stephen Jacques

ORDER

Each of the applicants in matter No. G28 of 1991 and the applicant in matter No. G100 of 1991 provide, by way of security for each respondent's costs of the proceedings, the sum of $100,000.

The amounts so ordered are provisional and are not to be treated as a finding that they represent the costs incurred by any respondent for any particular period or for any particular work.

Each of the amounts is to be available in its entirety to meet any order for costs which any respondent may recover against any one or more of the applicants.

Such security is to be provided on or before 14 June next in such manner and form as the parties may agree or, in default of agreement, as the Registrar or, on reference by him to a judge, a judge, may determine.

A Deputy Registrar of this Court make a further report setting out a provisional estimate of the costs incurred, or to be incurred, by each respondent since the commencement of the litigation down to and including 31 July next.

Each respondent furnish to the Deputy Registrar such evidence or other material as it may wish to rely upon for the purposes of the report referred to in paragraph 5 on or before 21 June 1991.

The applicants furnish to the Deputy Registrar such affidavits or other material as they may wish to rely upon for that purpose on or before 28 June 1991.

The Deputy Registrar give such further directions as he may think necessary, including directions as to when, and in what manner, each party is to be heard on or before 5 July next.

The Deputy Registrar circulate to the parties and to me a draft report on or before 12 July 1991, and afford parties an opportunity then of making further submissions to him.

The Deputy Registrar circulate a final report to the parties and to myself on or before 26 July 1991.

The applicants pay the costs of each respondent of the motions for security for costs up to and including today.

Leave to tax bills of costs forthwith.

The matter be listed for further directions on 28 June at 9.30a.m. before me as already fixed.

NOTE: Settlement and entry of Orders is dealt with by Order 36 of the Federal Court Rules.

JUDGE1

These are applications by each of the respondents in these two actions for security for costs. The grounds of the applications in each case are that the applicants in the proceedings are outside the jurisdiction. They are not resident here, nor do they carry on business here, and they do not have assets in the jurisdiction.

The Court's jurisdiction to award security in such a case derives from s.56 of the Federal Court of Australia Act 1976 which provides that the Court or a judge may order an applicant in a proceeding in the Court or an appellant in an appeal in the Court to give security for payment of costs that may be awarded against him. Section 56 is supplemented by Order 28 of the Court's rules, which provides in rule 3 that, where in any proceedings it appears to the Court on the application of the respondent that an applicant is ordinarily resident outside Australia, the Court may order that applicant to give such security as the Court thinks fit for the costs of the respondent of and incidental to the proceeding.
The jurisdiction of the Court is of course discretionary and the discretion is a wide one. There are numerous cases in a variety of courts in which there is to be found discussion of the circumstances in which the court will, in cases such as the present, order security. I do not refer to the detail of those cases, but they are conveniently collected in the Victorian Supreme Court Practice or more correctly, Civil Procedure in Victoria by Mr N.J. Williams at pp 5566 and following. Here I think that the circumstances are such as to warrant the exercise of the discretion in favour of the respondents. The litigation is complex. It involves a very substantial sum of money. The costs of conducting the litigation are extremely high and it seems to me that no other course is warranted in the circumstances than the ordering of security. I should, perhaps, say that it was not submitted on behalf of the applicants that any of them was without means or unable to satisfy an order for security.
It was at one time submitted on behalf of the applicants in the case that I should order security in a nominal sum only because a judgment, including a judgment for costs recovered in Australia, could be registered in at least one of the American States, New York I think was the State selected, and that the enforcement of that judgment by the courts in New York would be automatic. In other words, there would be no opportunity for the applicants in the case, if the respondents to the application were successful here, to raise any matter in bar to the enforcement of the judgment in the United States, or at least in the State of New York, in the sense of raising a matter of some substance.
The applicants consulted a lawyer familiar with the laws of the State of New York in relation to this matter and there is an affidavit on the file by him. There is also some other evidence on the file put forward by the respondents about the matter. In the end counsel for the applicants indicated the he no longer wished to rely on that submission.
There were also submissions which suggested that the amount of security to be ordered ought not amount to a full indemnity. Some reference was made to English authority and to my own decision in Kent Heating Limited v Cook-on-Gas Products Pty. Limited (1984) 59 ALR 277, in which English authorities to that effect were applied. I have considered those cases and also later authorities which are referred to in the submissions of the parties about them. I have reached the conclusion that there is no such rule, at least in the sense of a binding rule which governs the way in which the discretion which the Court has should be exercised. To me, at least as I look at the matter now, and perhaps not as I looked at it in Kent Heating, the matter is at large and wholly within the discretion of the Court.
The evidence which I have to consider consists of a number of affidavits put on by costs consultants and solicitors for the respondents in an endeavour to make some accurate estimate, albeit an estimate only, of what the costs of each of them would be likely to be down to the time of inspection of documents, if those costs were taxed on a party and party basis. Those estimates indicate that in each case the costs of the respondents would be of the order of $200,000 or somewhat more.
No evidence was put on by the applicants about the matter and none of the witnesses to whom I have referred was cross-examined. It would have been appropriate in those circumstances for me to have adopted the course simply of taking the view, there being no cross-examination and no evidence in opposition, that I should accede more or less to the evidence that I had and order by way of security amounts of the order of $200,000, or somewhat more, in respect of the costs of each of the respondents.
I have had the benefit of written submissions and I have of course considered the affidavit evidence. But it occurred to me, after I had given the matter some consideration, that the task of arriving at an appropriate amount, especially in a case of this complexity, is extremely difficult for a judge, even bearing in mind the fact that there was not the cross-examination nor the evidence in opposition to which I have referred. In those circumstances it seemed to me appropriate that I should consult one of the Court's taxing officers about the matter to obtain an overview from him of what he thought the position might be, but again not on any concluded or final basis, but simply as a guide.
In due course I received from one of the Court's deputy registrars a memorandum, which I have had circulated to the parties, in which he has reached conclusions about the costs of each of the respondents markedly different from those reached in the affidavits of the costs consultants and solicitors to whom I have referred. The difference is startling and I agree with counsel for the respondents that, on the face of it, both the evidence of the costs consultants and the assessment of the Deputy Registrar require some more detailed consideration and some attempt to ascertain where the very substantial differences between the two lie. For instance, the Deputy Registrar has reached the conclusion that the costs incurred or to be incurred by the first respondent down to inspection of documents would be of the order of $73,000 if they were taxed on a party and party basis, rather than the $200,000 to which I have referred. In the cases of the second and third respondents the amounts are approximately $83,000 and $94,000 respectively. The differences are thus quite enormous and the matter has given me a degree of anxiety.
When the matter was called on this afternoon I discussed the matter with counsel for each of the parties and made the suggestion that what I should do was to order a substantial sum, but short of the amount which each of the respondents wanted, and that I should refer to the Deputy Registrar for more detailed consideration the question of what should be awarded. He would reach that assessment after considering whatever further documentary material each of the parties wished to place before him and after hearing, if the parties wished to make them, submissions from each party about the significance of the differences between the Deputy Registrar's assessment, to which I have referred, and the affidavit material.
It was submitted by Mr Hutley of counsel for the third respondent that, whilst that course might be taken, I should nevertheless award security in sums of the order now claimed by each of the respondents, leaving it to the applicants, if they could, to satisfy the Deputy Registrar that the amounts were excessive and should be reduced. Mr Hutley said that unless this were done, each of the respondents was at risk in the event that the litigation were discontinued by one or more of the applicants. I see the force of this submission, and I think it is entitled to substantial weight. It was adopted by counsel for each of the other respondents. Having considered it, I have nevertheless decided that at this stage I should reject it. My reason for doing so is that the litigation is ongoing. I take the view that the likelihood of discontinuance, at least at this stage, is remote. The applicants obviously already have a very large stake in this litigation in their own expenditure.
Security for costs in complex ongoing litigation is never ordered once and for all. The Court considers the matter as necessary from time to time, and makes orders supplementing the amount which has previously been awarded by way of security. That is the course which I propose to follow in this case, and I would expect there to be from time to time, applications made for further security. I wish to make it clear that, in taking the course I propose to, I am not determining at all the dispute - or rather, the difference which there is - between the evidence on the one hand, and the Deputy Registrar's views on the other. I am leaving the matter open so that nothing is decided finally.
What I propose to do is to make an order for security now in a substantial sum for the costs of each of the respondents, and to direct the Deputy Registrar to conduct an enquiry into the amount which ought to be provided by way of security for costs for the period from the commencement of the litigation until the end of July. I do not have in mind that the exercise performed by the Deputy Registrar will be a taxation of costs, or anything like it. It will have to be an estimate. It will be done on such material as the parties care to put before him. After he has considered that material and any submissions they may wish to put, he is to make a draft report which is to be given to the solicitors for each of the parties, and to me. The parties will then be entitled to put submissions to him by way of final submissions, before he makes his report final. I make it clear that I do not intend that report to be binding on me. It will be used by me as a guide and not have any conclusive effect on what I should do.
The amount I have decided should be awarded by way of security for the costs of each of the respondents is $100,000. The amounts will be security in both proceedings so that the whole amount will be available to meet the costs of any one respondent, including any of the respondents in the Drexel Burnham matter, which is separate from the Airlie Group matter and which has been the principal matter so far prosecuted.
Accordingly, I make the following orders and directions:-

1. I order that each of the applicants in matter No. G28 of 1991 and the applicant in matter number G100 of 1991 provide, by way of security for each respondent's costs of the proceedings, the sum of $100,000.

2. The amounts so ordered are provisional and are not to be treated as a finding that they represent the costs incurred by any respondent for any particular period or for any particular work.

3. Each of the amounts is to be available in its entirety to meet any order for costs which any respondent may recover against any one or more of the applicants.

4. Such security is to be provided on or before 14 June next in such manner and form as the parties may agree or, in default of agreement, as the Registrar or, on reference by him to a judge, a judge, may determine.

5. I direct a Deputy Registrar of this Court to make a further report setting out a provisional estimate of the costs incurred, or to be incurred, by each respondent since the commencement of the litigation down to and including 31 July next.

6. I direct each respondent to furnish to the Deputy Registrar such evidence or other material as it may wish to rely upon for the purposes of the report referred to in paragraph 5 on or before 21 June 1991.

7. I direct the applicants to furnish to the Deputy Registrar such affidavits or other material as they may wish to rely upon for that purpose on or before 28 June 1991.

8. I direct the Deputy Registrar to give such further directions as he may think necessary, including directions as to when, and in what manner, each party is to be heard on or before 5 July next.

9. I direct the Deputy Registrar to circulate to the parties and to me a draft report on or before 12 July 1991, and afford parties an opportunity then of making further submissions to him.

10. I direct the Deputy Registrar to circulate a final report to the parties and to myself on or before 26 July 1991.

11. I order the applicants to pay the costs of each respondent of the motions for security for costs up to and including today.

12. Leave to tax bills of costs forthwith.

13. The matter is to be listed for further directions on 28 June at 9.30a.m. before me as already fixed.

[1991] FCA 416

07 JUNE 1991