Betterway Health Care International Group Pty Ltd v Ferngrove Pharmaceuticals Pty Ltd & Wei Tang (No 4) - [2025] SADC 54

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Interlocutory Application)
BETTERWAY HEALTH CARE INTERNATIONAL GROUP PTY LTD v FERNGROVE PHARMACEUTICALS PTY LTD & WEI TANG (No 4)
[2025] SADC 54
Judgment of her Honour Judge Thomas
15 May 2025
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS
Relying on r 115.1(1)(d) of the Uniform Civil Rules 2020 (SA) and s 1335(1) of the Corporations Act 2001 (Cth), the respondents seek security for costs up to and including the first day of trial at a very late stage of the proceeding, five years after the commencement of the action against the first respondent and shortly after joinder of the second respondent. The proceeding is now ready to list for trial.
The respondents rely on their solicitor’s affidavit estimating their recoverable costs to trial as $360,000 ($180,000 for past and future costs to the first day of trial and a further $180,000 to the end of trial).
The application is made in circumstances where past costs incurred are the subject of existing costs orders made in favour of the applicant that after set-off would substantially reduce its liability for an adverse costs order should the respondents succeed in their defences. Certain undertakings have been proffered by the applicant and its director should the application be dismissed.
The applicant criticises the costs estimate relied on by the respondents as so untenable that the application should be dismissed at the outset. The applicant’s potential net liability for the respondents’ costs and the quantum of any sufficient security for costs is therefore a central dispute.
There is also contention as to whether the respondents have discharged their onus in establishing the threshold requirement under s 1335(1) of the Corporations Act 2001 (Cth), bearing in mind the existing costs orders and if so, whether in all the circumstances, the Court should exercise its discretion in the respondents’ favour.
Held, dismissing the application on the condition that the applicant undertakes to the Court not to enforce the Special Leave Cost Order in its favour until further order:
1.On an evaluative assessment of the evidence before the Court, the respondents have established the threshold requirement for an order for security for costs under s 1335(1) of the Corporations Act 2001 (Cth).
2.The costs estimate relied on by the respondents is superficial and grossly excessive in material respects. It is so untenable that it provides a wholly inadequate foundation for estimating the applicant’s potential liability for the respondents’ costs should they succeed in their defences. Significantly, no reduction is made for past irrecoverable costs and this aspect of the application fails at the outset.
3.There is, however, an adequate evidentiary basis for the Court to assess future costs based on the affidavit evidence of the applicant’s solicitor. The Court’s assessment of the respondents’ recoverable future costs to the end of trial is $78,400, being $44,800 to the first day of trial and $33,600 thereafter.
4.The existing costs orders of approximately $74,000 may be set-off against the applicant’s potential liability for the respondents’ costs, resulting in a net potential liability of $4,400.
5.The delay in bringing the application and its timing are significant and compelling reasons for exercising the Court’s discretion in favour of dismissing the application. The proposed undertakings and existing costs orders fortify such a conclusion.
6.Having regard to the full circumstances of his joinder, an order for security should not be made in favour of the second respondent director, major shareholder and controller of the first respondent for a net potential liability for his costs of $1,100 as assessed by the Court.

A New Tax System (Goods and Services Tax) Act 1999 (Cth) s 23.15; A New Tax System (Goods and Services Tax) Regulations 2019 (Cth) reg 23.15.01; Corporations Act 2001 (Cth) s 1335(1); Uniform Civil Rules 2020 (SA) r 115.1(1)(d), referred to.
Adelaide (SA Pools & Spa) Manufacturing and Installation Pty Ltd & Ors v Westcourt General Insurance Brokers Pty Ltd [2016] SASC 60; Betterway Health Care International Group Pty Ltd v Ferngrove Pharmaceuticals Pty Ltd [2021] SADC 63; Betterway Health Care International Group Pty Ltd v Ferngrove Pharmaceuticals Pty Ltd [2023] SADC 107; Betterway Health Care International Group Pty Ltd v Ferngrove Pharmaceuticals Pty Ltd [2024] SADC 47; Ferngrove Pharmaceuticals Pty Ltd v Betterway Health Care International Group Pty Ltd [2022] SASCA 31; Ferngrove Pharmaceuticals Pty Ltd v Betterway Health Care International Group Pty Ltd [2022] HCASL 156; Hung v Aquamore Credit Equity Pty Ltd [2022] NSWCA 123; Indigo Financial Money Pty Ltd & Anor v Bolivar Road Pty Ltd (In Liq) [2012] SASC 214; Cornelius v Global Medical Solutions Australia Pty Ltd (2014) 98 ACSR 301; Mannix Electrical Pty Ltd v Belport Pty Ltd [2019] SASC 159; ASCF Managed Investments Pty Ltd v De Pasquale & Ors [2023] SASC 157; Mathew (SA) Nominees Pty Ltd v Belconnen Automotive Pty Ltd [2019] SASC 39; Reschke v Trevor Reschke Nominees Pty Ltd; Reschke v Australian Executor Trustees Ltd [2020] SASC 60; Tucker v McKee [2022] FCA 315, considered.

BETTERWAY HEALTH CARE INTERNATIONAL GROUP PTY LTD v FERNGROVE PHARMACEUTICALS PTY LTD & WEI TANG (No 4)
[2025] SADC 54
Introduction

By interlocutory application dated 11 November 2024,[1] the respondents seek orders that the applicant Betterway Health Care International Group Pty Ltd (Betterway) provide security in an amount and form to be determined by the Court for their costs of action, or in the alternative, for their costs of action up to and including the first day of trial, pending the provision of which the action be stayed.
[1] FDN 98.
The respondents foreshadowed the application by their solicitors’ letter dated 22 October 2024 (the October Letter) at a very late stage of the proceeding. They did so just over five years after commencement of the action against the first respondent Ferngrove Pharmaceuticals Pty Ltd (Ferngrove), [2] and shortly after the joinder of the second respondent director and controller of Ferngrove, Mr Wei Tang (Mr Tang) on 8 October 2024.[3]
[2] Claim and Statement of Claim dated 11 October 2019 (FDN 1 and 2).
[3] FDN 93 and FDN 94.
The respondents’ application is brought under s 1335(1) of the Corporations Act 2001 (Cth) and r 115.1(1)(d) of the Uniform Civil Rules 2020 (SA) (UCR).[4]
[4] That is, the Court may order that an applicant in an action provide security for costs if the order is authorised by statute.
In written submissions, the respondents relied on r 115.1(1)(e) of the UCR as a second basis of their application, with the caveat that it provides no wider basis for ordering security should the requirements of s 1335(1) not be met.[5] Betterway had no notice of this new ground before it filed its written submissions. It was not identified in the application and the respondents filed their submissions late and after Betterway had filed its.
[5] Respondents’ Submissions on Application for Security for Costs (FDN 110) (Respondents’ Written Submissions) [2].
Ultimately, the application was not pressed under r 115.1(1)(e), the respondents’ counsel accepting in oral argument that the application would be disposed of under r 115.1(1)(d) one way or another, despite the different legal tests that apply to each ground.[6] The application was therefore determined under r 115.1(1)(d) and s 1335(1) alone.
[6] Transcript for 24 February 2025 (T) 36.5-37.9; 5.3-.33.
The Affidavit Evidence
The tendered affidavits were read into evidence on the basis that the Court would treat any argumentative material as submission.[7]
[7] T2.34-3.7.
The respondents’ application is supported by an affidavit of their solicitor, Mr Yu Chen.[8] In it, Mr Chen estimates the respondents’ recoverable costs of action.[9] Whilst his affidavit was received in evidence without objection or any cross-examination, Mr Chen’s costs estimate is strongly criticised by Betterway as overinflated, lacking an evidentiary basis and failing to address Mr Tang’s costs as distinct from Ferngrove’s.
[8] Exhibit R1 comprising the affidavit of Mr Yu Chen made on 11 November 2024 (FDN 99) (the Chen Affidavit).
[9] Ibid [17]-[25].
Betterway submits Mr Chen’s costs estimate is so untenable that the respondents have failed to prove an essential element of the threshold test with the result that the application should be dismissed outright. In answer, the respondents submit the Court should make its own assessment of the appropriate amount of security to be provided by ‘swinging a broad axe’ despite the defects in Mr Chen’s estimate that were acknowledged in argument.
Mr Chen’s affidavit also addresses certain features of the procedural history and Betterway’s alleged impecuniosity. As regards the latter issue, he exhibits various filed documents, various solicitors’ correspondence including the October Letter, an ASIC current and historical extract for Betterway dated 22 October 2024 (Company Search), a credit report dated 22 October 2024 (Credit Report), a search certificate of the Personal Property Securities (PPS) Register for Betterway dated 25 October 2024 (PPSR Search) and Betterway’s 2017 and 2018 financial statements.
In opposing this application, Betterway relies on two affidavits sworn by its solicitor, Mr Graney.[10] Mr Graney’s first affidavit addresses Betterway’s grounds of opposition to the respondents’ application, setting out in detail the relevant procedural history and the remaining pre-trial steps. He further identifies issues with Mr Chen’s costs estimate. Mr Graney’s second affidavit deposes to Mr Balfour’s sole ownership of real property and exhibits a real property search showing the property was purchased in August 2017 for $800,000 and is unencumbered.
[10] Exhibits A2 and A3 comprising respectively the affidavits of Timothy John Graney made on 24 January 2025 (FDN 106) (the First Graney Affidavit) and on 20 February 2025 (FDN 109) (the Second Graney Affidavit).
Mr Graney’s account of the procedural history is comprehensive and closely accords with events shown in the Court copy of record and the judgments handed down in relation to the proceeding to date. [11] By comparison, Mr Chen’s account is incomplete and inaccurate (both by omission and in emphasis). [12] Specifically, his criticism of Betterway’s “prolonged period of inaction, followed by a recent and unexpected series of requests concerning taxation and costs” is not justified having regard to the procedural history. [13] Specifically, it is entirely at odds with Ferngrove’s unsuccessful pursuit and opposition of interlocutory applications and related appeals, its delay and non-compliance with orders of this Court and, more recently, its delay in filing an amended defence[14] and not filing expert evidence[15] until December 2024, despite being provided with Betterway’s expert report[16] in May 2023.[17]
[11] First Graney Affidavit [5]-[28].
[12] Chen Affidavit [1]-[10].
[13] Ibid [9].
[14] FDN 102.
[15] FDN 104.
[16] FDN 44.
[17] A convenient summary is set out in the First Graney Affidavit [28].
Submissions
The parties rely on written submissions and oral arguments made at the hearing of the application on 24 February 2025.[18] Whilst the parties were provided with a further opportunity to address two issues arising on the evidence that were not addressed in submissions or argument, they did not file any supplementary submissions. [19]
[18] Respondents Written Submissions and the Applicant’s Outline of Argument (FDN 108) (Applicant’s Written Submissions).
[19] FDN 114.
Contrary to the approach taken in the respondents’ written submissions, the threshold requirement under s 1335(1) was not conceded by Betterway. Argument proceeded as to whether the incomplete and dated evidence before the Court as to Betterway’s financial position established a reason to believe it will be unable to meet an adverse costs order.
Should the Court find the threshold requirement established, the parties identified in argument the same discretionary factors as relevant to disposition of the application but disagreed about their implications.
The Law
Rule 115.1(1)(d) provides:
(1) The Court may order that an applicant in an action provide security for costs if -
…
(d) the order is authorised by statute; or
The relevant statute is s 1335(1). It empowers the Court to order security for costs in the following circumstances:
Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given.
The applicable legal principles are well established and uncontentious.
Both parties rely on the judgment of Justice Doyle in Mannix Electrical Pty Ltd v Belport Pty Ltd as a contemporary and convenient summary of the relevant law. [20] Both parties accept that the application of r 115.1(1)(d) and s 1335(1) involves a two-stage test.[21]
[20] [2019] SASC 159 (Mannix), [11]-[17], cited with approval in ASCF Managed Investments Pty Ltd v De Pasquale & Ors [2023] SASC 157 (ASCF Managed Investments) (Kourakis CJ).
[21] Reschke v Trevor Reschke Nominees Pty Ltd; Reschke v Australian Executor Trustees Ltd [2020] SASC 60, [43] applied in ASCF Managed Investments.
It is therefore unnecessary to restate the law at length save to reiterate matters pertinent to the issues in this case.
First, that the discretion to order security for costs under s 1335(1) is conditioned upon satisfaction of the threshold requirement that it appears by credible testimony there is reason to believe that Betterway will be unable to pay the respondents’ costs if they are successful in their defences.[22]
[22] Mannix [11].
Secondly, whilst the threshold requirement is acknowledged to be a low one and undemanding, satisfaction of it requires more than satisfaction of a risk that Betterway will be unable to pay the costs of the respondents if successful.
Thirdly, the issue of Betterway’s financial position cannot be approached in an overly strict manner. Almost inevitably, the Court will not be able to undertake a thorough assessment and it will be preliminary, based on limited materials. Nonetheless, for the power to order security to arise, the Court’s assessment must be that there is “reason to believe” Betterway “will be” unable to meet an adverse costs order.[23]
[23] Ibid [15]-[17] citing Cornelius v Global Medical Solutions Australia Pty Ltd (2014) 98 ACSR 301, [16].
Fourthly, it is the respondents’ onus to establish the threshold requirement (that is, the onus of adducing “credible testimony” and establishing that the requisite “reason to believe” exists) and it remains on them throughout the application. The respondents must therefore establish that the material before the Court is sufficiently persuasive to permit a rational belief to be formed that Betterway will be unable to meet an adverse costs order. The evidence should have “some characteristic of cogency” to be credible.[24]
[24] Ibid [13].
In this regard, failure to respond to a request for financial information will only be relevant and assist in reaching a conclusion that the threshold requirement is satisfied in a case where there is other evidence that casts doubt or gives rise to concerns about the financial capacity of the plaintiff corporation. The Court must be astute not to use the corporation’s failure to provide a full account of its financial position as a make-weight or to fill gaps in the evidence.[25]
[25] Ibid [55].
Fifthly, once the threshold requirement is established, the Court’s discretion is enlivened to require sufficient security for costs be given if it is appropriate to do so in all the circumstances of the case. The discretion is unfettered.
Delay is an important and often critical factor in the Court’s exercise of discretion. It is unfair and unjust for a plaintiff corporation to conduct its case and incur significant costs on the assumption that no application for security is being made. The longer the delay and greater expense incurred, the greater the unfairness arising from an order to provide security for costs, and hence the significance to be attached to the delay.[26]
[26] Mathew (SA) Nominees Pty Ltd v Belconnen Automotive Pty Ltd [2019] SASC 39, [78] (Doyle J).
Finally, there is no predisposition in favour of, or against, requiring security. The Court must balance the potential hardship or injustice the respondents may suffer if there is no security for their costs against the hardship or injustice that Betterway may suffer if required to give security.[27]
The Threshold Requirement
[27] Adelaide (SA Pools & Spa) Manufacturing and Installation Pty Ltd & Ors v Westcourt General Insurance Brokers Pty Ltd [2016] SASC 60, [12] (Doyle J).
The Parties’ Positions
The respondents rely on the Company and PPSR Searches, the Credit Report and Betterway’s 2017 and 2018 financial statements for their contention that: [28]
Prima facie, the applicant does not appear to own any fixed or liquid assets and does not appear to have traded since 2018.
[28] Respondents’ Written Submissions [9].
Mr Chen deposed that he is informed by his “client and [believes] that he is not aware of any evidence as to whether Applicant is continuing to trade in Australia”.[29] This statement was unconnected to any other evidence and should be disregarded. It has no weight in the absence of any disclosed basis for his (unnamed) client’s knowledge and belief.
[29] Chen Affidavit [12].
In opposing the application, Betterway made the forensic decision not to provide any evidence of its current financial position in answer to the respondents’ solicitors’ letter demanding assurances about its capacity to meet an adverse costs order or adduce any such evidence in opposition to the application, as it was entitled to do so. Betterway contends the respondents cannot discharge their onus on the threshold requirement because the evidence of its financial position is limited and dated, emphasising it continues to exist as an entity, has prosecuted this proceeding since October 2019, has a neutral Credit Report with no reported defaults or actions against it and has substantial costs orders in its favour.
Self-evidently, the Court’s assessment of Betterway’s capacity to meet an adverse costs order will depend on the magnitude of its potential liability for the respondents’ costs of action. The more significant the quantum of such liability, the greater the reason to believe that Betterway will be unable to pay it and vice versa.
Betterway’s Potential Liability for Costs
The Issues
The applicable principles for fixing an appropriate sum for security for costs are well-established. A full taxation of the respondents’ costs is not required. Rather, a ‘broad brush’ assessment of the respondents’ likely costs of action should be undertaken, identifying what is broadly reasonable in all the circumstances to provide sufficient security for costs.[30]
[30] Tucker v McKee [2022] FCA 315, [33] (Murphy J).
In such an application, it is accepted practice for the moving party’s solicitor to provide in an affidavit an estimate of the party’s recoverable costs should its defence succeed. Given the notorious difference between time-charged and scale costs, a percentage reduction is then applied to estimated solicitor/client costs to approximate recoverable costs on a standard costs basis.

Where costs are estimated at an early stage in the litigation, there are uncertainties about what may occur and therefore the likely costs to be incurred. By contrast, where costs are estimated at a late stage, there is greater certainty about the issues in dispute and the work and costs required to the end of trial. Past costs are already incurred and known.
Whilst an exact assessment of the respondents’ costs is not required, there must be a tenable evidentiary foundation for the Court to assess and fix an appropriate sum of security. To be credible, the evidence relied on to establish the respondents’ recoverable costs and thus Betterway’s potential liability must have “some characteristic of cogency”.[31] By contrast, where the costs estimate relied on bears no relationship to the realities of the defence and is substantially overinflated, the security sought is not just more than sufficient, it has been considered “quite wrong for such an estimate to be propounded” at all. [32] In such cases, the application may be dismissed for failure to prove an essential element of the threshold requirement. Such deficiencies may also inform the exercise of the Court’s discretion against ordering security for costs.
[31] Mannix [13] (Doyle J).
[32] Hung v Aquamore Credit Equity Pty Ltd [2022] NSWCA 123, [22]-[26] (Leeming JA).
As explained below, the tenability of Mr Chen’s cost estimate and therefore the proper quantum of security are in serious contention for good reason.
Procedural History & Current Status
As mentioned, the application was foreshadowed on 22 October 2024 and filed on 11 November 2024, five years after the action was commenced by statement of claim on 11 October 2019.[33]
[33] FDN 2.
Since the respondents’ application for security for costs was filed, the respondents have filed their amended defence and expert report on 10 December 2024 and this application argued. The proceeding is ready to be listed for trial at the next directions hearing on 15 May 2025, allowing five to seven days.[34]
[34] Transcript for 24 April 2025, pages 2.1-5; 5.23-25.
The Court record shows that between July 2020 and August 2024, almost all the interlocutory steps taken, and costs incurred in relation to the proceeding, concern interlocutory applications determined in Betterway’s favour that are the subject of existing costs orders against Ferngrove. In the ordinary course, Ferngrove would also not be entitled to have the costs for certain other steps taken (amendments, extensions of time, adjournments, costs arguments) as its costs of action should it succeed in its defence.
These important considerations are not addressed by Mr Chen in estimating Betterway’s potential liability for the respondents’ costs of action should their defences succeed.
Mr Chen’s Estimate
Mr Chen estimates the respondents’ total costs of action as being “in the vicinity of $450,000 (incl. GST)”[35] and applies a 20% discount to estimate total “recoverable costs of $360,000 (incl. GST)”.[36]
[35] Chen Affidavit [23].
[36] Ibid [24] and [25].
Less than three weeks earlier, in the October Letter, Mr Chen gave quite different figures. He wrote that since his “client has incurred costs and disbursements in these proceedings amounting to approximately $200,000” and his client’s total costs of action will exceed $400,000, his client requests security be provided in the amount of $150,000 for the anticipated costs and disbursements up to and including a final hearing.[37] His letter does not substantiate these figures in any way.
[37] Chen Affidavit, Exhibit “YC-1”, unnumbered page.
In written submissions, the respondents pressed for orders for security for their costs of action to the first day of trial for yet a different amount again. Relying on Mr Chen’s costs estimate, they sought $225,000 based on the estimate of costs up to trial on a solicitor-client basis and proposed to renew the application and seek a further $225,000 for their costs of trial near to the first day of trial. [38]
[38] Respondents’ Written Submissions [1].
At the hearing of the application, the respondents’ counsel conceded that the $225,000 security sought would be more than sufficient and the Court would likely award a lesser amount on three counts.
First, the amount of security sought to trial should be reduced by 20% to reflect Mr Chen’s estimate of recoverable costs because the respondents accepted that solicitor-client costs would not be the appropriate measure.[39] Secondly, due to “the timing of the application”, it was accepted that the Court was unlikely to be minded to award security for all past costs.[40] Thirdly, there should be some further reduction to reflect a standard costs basis bearing in mind the usual discount for taxations in this Court was notoriously more than the 20% reduction made by Mr Chen from the hourly rates being charged to the respondents.[41] However, the respondents’ counsel could not be drawn in argument as to how much any such reduction might be, submitting that it was for the Court to fix an appropriate amount for security by wielding a ‘broad axe’.
[39] T31.11-.23
[40] T30.8-31.9.
[41] T31.37-.32.8
Betterway’s strong criticisms of Mr Chen’s costs estimate are well made. Despite Mr Chen’s stated experience and expertise as a litigation solicitor, his costs estimate is superficial and grossly excessive in material respects. Furthermore, his estimate is so untenable that it provides a wholly inadequate evidentiary foundation for estimating Betterway’s potential liability for the respondents’ costs and fixing a sufficient and appropriate sum for security for costs.
The reasons for these conclusions follow.
In estimating the respondents’ costs to trial, Mr Chen does not provide any breakdown between past and future costs or identify the items of work relevant to past costs. Despite the late stage of the litigation, he does not even identify the amount the respondents have incurred to date (that could have readily been proven), despite the unsubstantiated claim in the October Letter that his client had already incurred costs and disbursement amounting to approximately $200,000. The figure in his letter has no weight in the absence of any proper substantiation.
Most significantly, no allowance is made for the significant irrecoverable past costs incurred by Ferngrove in unsuccessfully prosecuting or defending the interlocutory applications and appeals that are the subject of existing costs orders in favour of Betterway. This omission is significant for two reasons. First, the work the subject of the existing costs orders is not recoverable as part of the respondents’ costs of action. Secondly, under rr 194.3 and 194.7 of the UCR, the existing costs orders may be set-off against any liability Betterway may have for the respondents’ costs of action should they succeed in their defence.[42] The existing costs orders therefore inform what would be a sufficient amount of security in this case.
[42] Indigo Financial Money Pty Ltd & Anor v Bolivar Road Pty Ltd (In Liq) [2012] SASC 214 [39]-[46] (White J).
Further, Mr Chen fails to provide any evidentiary foundation for quantifying past recoverable costs, whether by identifying the interlocutory steps involved or costs incurred in taking such steps. It is not for the Court to conduct its own investigation into past recoverable costs when the respondents’ solicitor has made no attempt to prove them.
As a result, Mr Chen’s costs estimate is grossly over-inflated and bears no relationship with the costs of action already incurred that would be recoverable on a standard costs basis should the respondents succeed in their defence.
As to the remaining pre-trial steps, Mr Chen’s evidence of what work may be needed is materially deficient and of little real assistance in determining the respondents’ recoverable future costs. As Mr Graney’s first affidavit identifies, Mr Chen’s estimate includes work that has already been done (that should have been the subject of a separate estimate of recoverable past costs) and work that is not required to be done or would not be recoverable in any event.[43]
[43] First Graney Affidavit [43]-[44].
Mr Chen also does not identify the respondents’ costs of the remaining pre-trial steps. These costs are rolled into his estimate of total solicitor-client costs up to trial of approximately $225,000, that he then discounts by 20% to arrive at his estimate of recoverable costs of $180,000.
Mr Chen estimates the cost of trial to be $225,000 on a solicitor/client basis on advice from counsel of 15 sitting days.[44] The only other foundation for his estimate are the hourly rates his clients are currently being charged by solicitors and counsel.
[44] Chen Affidavit [20] & [23].
His estimate is excessive. First, the proposed listing is seven days, based on Mr Graney’s and both counsels’ current estimate of five to seven days.[45] Secondly, Mr Chen does not address why it is reasonably necessary and proper for both senior and junior counsel to be retained to appear at trial for the purposes of assessing costs on a standard costs basis. Whilst no criticism should be made of the respondents’ commercial decision to incur the cost of engaging senior counsel, it is incumbent on them to justify such expenditure as reasonably necessary or proper before an order for security for such costs can be made.
[45] Mr Graney’s estimate of five to seven days: First Graney Affidavit [39]-[42].
Mr Chen allows a 20% discount to reflect “recoverable” costs.[46] This is inadequate having regard to the notorious difference between the calculation of costs for time worked on the daily rates being charged to the respondents to costs on a standard basis that are calculated on the applicable higher court costs scales by items of work done, even where counsel’s fees are a significant proportion of the costs. A discount of 30% would be more realistic having regard to taxations in this Court.
[46] Chen Affidavit [25].
Finally, Mr Chen does not address the proportion of costs attributable to the defence of the primary claims against Ferngrove as distinct from the claims against Mr Tang for tortious interference in the contractual relations between Betterway and Ferngrove. These are important matters bearing in mind the timing of the application following the joinder of Mr Tang and inform the exercise of the Court’s discretion on security for costs as discussed below.
A Sufficient Quantum
The deficiencies in Mr Chen’s costs estimate are so serious that it should be disregarded in assessing Betterway’s potential liability for an adverse costs order should the respondents succeed in their defences.
Specifically, the deficiencies in his estimate of past costs are so serious that the Court is unable to come to its own assessment as the respondents’ counsel urged the Court should do. There is simply no evidentiary foundation to support a reasonable assessment of the respondents’ past costs bearing in mind the existing costs orders in Betterway’s favour. Accordingly, this aspect of the respondents’ application fails at the outset.
As to future costs, whilst Mr Chen’s affidavit does not, Mr Graney’s first affidavit provides an adequate evidentiary basis for estimating the respondents’ recoverable costs.
Mr Graney estimates the respondents’ future costs up to the commencement of trial (excluding this application) at $57,500 including GST,[47] assuming among other things common representation and the retainer of two counsel by the respondents. In oral argument, counsel for the respondents accepted this estimate was reasonable.[48]
[47] First Graney Affidavit [37(b)].
[48] T.27.33-.38.
However, this estimate does not reconcile exactly with the table in his affidavit of the upper limits of expected fees to be incurred by the respondents on a solicitor/client basis. Preferring his table for the detail, it shows a total of $56,000 comprising future costs of $40,000 for solicitors’ and $16,000 for junior counsel’s work in preparing for trial (excluding senior counsel’s preparation time[49] and allowances for the costs of interlocutory matters for which there is no need).[50] Mr Graney then allows a 10% deduction of GST and another 10% to reflect unrecoverable costs. The basis for these deductions is not further explained.
[49] $28,000 for four days of work at $7,000 per day: First Graney Affidavit [46].
[50] Ie Item 1 for solicitors work of $7,500 and Item 1 for counsel work of $10,000: ibid.
Mr Graney’s evidence nevertheless provides a sufficient starting point for the Court to make a broad-brush assessment of the respondents’ future costs of action to the first day of trial on a standard costs basis. On the assumption of common representation and the retainer of junior counsel only for the work identified as reasonably necessary to be done to prepare for trial, a reasonable assessment on a solicitor/client basis would be of $64,000 excluding GST.[51]
[51] Calculated as $40,000 + $16,000 + $8,000 including the first day of trial.
As regards the respondents’ costs of trial after the first day, assuming six further sitting days for the attendances of a solicitor and junior counsel, transcript and other disbursements, a reasonable assessment of costs on a solicitor/client basis would be $48,000 excluding GST.[52]
[52] Calculated as 6 days at $8,000 per day.
This results in an estimate of total future solicitor/client costs of $112,000 excluding GST. Allowing a discount of 30% to reflect the respondents’ future costs on a standard costs basis yields a quantum of $78,400 excluding GST.
Existing Costs Orders
As already mentioned and accepted by the respondents’ counsel in oral argument,[53] the existing costs orders may be set-off against any liability Betterway may have for the respondents’ costs of action should they succeed in their defence.
[53] T34.14-.22.
Specifically, Ferngrove has been unsuccessful in three substantive interlocutory applications in this Court (one as to preliminary issues[54] and two as to discovery[55]), an appeal to the Court of Appeal that affirmed this Court’s determination of the preliminary issues[56] and an application for special leave to the High Court from the Court of Appeal decision.[57]
[54] Betterway Health Care International Group Pty Ltd v Ferngrove Pharmaceuticals Pty Ltd [2021] SADC 63 (Durrant J).
[55] Betterway Health Care International Group Pty Ltd v Ferngrove Pharmaceuticals Pty Ltd [2023] SADC 107 (Betterway v Ferngrove (No 3)) and Betterway Health Care International Group Pty Ltd v Ferngrove Pharmaceuticals Pty Ltd [2024] SADC 47 (Slattery J).
[56] Ferngrove Pharmaceuticals Pty Ltd v Betterway Health Care International Group Pty Ltd [2022] SASCA 31.
[57] Ferngrove Pharmaceuticals Pty Ltd v Betterway Health Care International Group Pty Ltd [2022] HCASL 156.
As a result, Ferngrove has a significant liability to Betterway for the following costs orders made in its favour that have been quantified on the basis set out in Mr Graney’s first affidavit totalling $74,327.29:[58]
·the special leave application costs order - $18,552.39
·the separate issues determination costs order - $19,451.90
·the specific disclosure application costs order - $18,233.50
·the discovery compliance application costs order - $18,089.50
[58] First Graney Affidavit [31]-[33].
The respondents accept Mr Graney’s quantification of recoverable costs for the special leave application is reasonable[59] and do not challenge his quantification of other costs orders other than to submit they are “not really substantiated”,[60] but they should be given “some credit”.[61]
[59] T33.23-34.7.
[60] T33.25-.26.
[61] T34.12-.13.
Having regard to the issues canvassed in the judgments delivered on these applications, it should be accepted that Mr Graney’s estimates are reasonable and sufficient for the purposes of determining this application. They are unchallenged by any contrary evidence. There is substantiation to the extent they are consistent with the costs estimate given in the affidavit Mr Graney made at the time of opposing the separate issues determination in September 2020. [62]
[62] FDN 15 as referred to in the First Graney Affidavit at [39].
For these reasons, this application should be approached on the basis that Ferngrove’s liability to Betterway for existing costs orders is in the order of $74,000 excluding GST.
Betterway’s Net Potential Liability for Costs
The Court’s assessment of Betterway’s potential liability for the respondents’ costs of action is $78,400 excluding GST and after set-off of Ferngrove’s existing liability for existing costs order is $4,400 excluding GST.
Evidence of Impecuniosity
The next issue to be addressed is the limited and dated evidence of Betterway’s alleged impecuniosity.
Company Search
The Company Search is a convenient starting point. It shows that as at 22 October 2024, Betterway was first registered on 5 June 2012 in South Australia and continues to be registered.
Betterway’s principal place of business is the address of its sole shareholder, director and secretary, Mr Balfour. This is the street address of the real property owned by Mr Balfour and purchased in August 2017 for $800,000. Its registered address is that of the accountants, Optus Chartered Accountants, who prepared the 2017 and 2018 financial statements.
PPSR Search
The PPSR Search discloses that as at 25 October 2024 there were no securities registered on the PPS Register for Betterway and therefore it does not own any personal property over which there are any registered security interests at that date. This is consistent with the 2017 and 2018 financial statements which show that as at 30 June 2017 and 2018 Betterway did not own any personal property of significant value and no encumbered personal property.
Credit Report
The Credit Report records that Betterway is not registered for GST.[63] This indicates that Betterway has not resumed trading since it ceased trading in 2018, given its 2017 financial statements show it accounted for GST and therefore must have been registered for GST when trading.
Dated Public Record Searches
[63] GST registration is required for a turnover of more than $75,000: A New Tax System (Goods and Services Tax) Act 1999 (Cth) s 23.15; A New Tax System (Goods and Services Tax) Regulations 2019 (Cth) reg 23.15.01.
The Company and PPSR Searches and Credit Report were not renewed for the 24 February hearing. Despite being somewhat dated, it is reasonable to conclude that nothing material has changed since these searches were obtained in October 2024, bearing in mind that Betterway did not challenge their relevance or adduce any contrary evidence and relied on the Credit Report as favouring its position.
2017 Financial Statements
The 2017 financial statements dated 31 May 2018 are unaudited and unsigned. On the evidence that these reports were provided to Betterway’s forensic accounting expert for the purposes of analysing its trading history,[64] there is no reason to doubt that they give a fair and true view of Betterway’s financial position as at 30 June 2017.
[64] This expert report was not in evidence.
Whilst the 2017 financial statements disclose a modest gross profit from trading ($64,571) and a small profit before income tax ($17,719), there is an excess of liabilities over assets ($94,902), being a modest improvement on the previous financial year. The balance sheet shows total assets of $639,580, an increase from the previous year. The principal asset is stock on hand ($583,457) and other assets are modest: being trade debtors ($18,654), foreign exchange ($11,848), cash at bank ($1,443), depreciated plant & equipment ($1,126) and patents and trademarks ($21,465). Current liabilities total $734,482, comprising primarily shareholder loans[65] ($572,482) and trade creditors ($162,000).
[65] The lenders of the loans identified as current liabilities and in note 16 are the current and former shareholders shown in the Company Search.

The notes to the 2017 financial statements state that notwithstanding the deficiency of net assets in the company, the financial report of the company has been prepared on a going concern basis because the directors have received a guarantee of continuing financial support and believe that such support will continue to be made available.
2018 Financial Statements
The 2018 financial statements are dated 9 April 2019. Whilst unaudited, unsigned and disclaimed as being prepared from information provided by the director, there is no reason to doubt their reliability, accuracy and completeness on the evidence. They too were relied on by Betterway’s expert forensic accountant in preparing an expert report for the proceeding.
The 2018 financial statements disclose a notable change in the financial position of Betterway in two respects. First, they have been prepared as a special purpose report for the sole purpose of distributing a financial report to members since the director has determined the company is not a reporting entity.[66] This is consistent with the trading statement that shows no sales but a deficiency of (unspecified) other income to opening stock and a material trading loss ($160,111), indicating that Betterway ceased trading in the financial year ended 30 June 2018.
[66] 2018 Financial Statements, Note 1, pages 127 of 147.
Secondly, there is a significant deterioration in the company’s financial position from the previous balance date. Notably, its deficiency of net assets has increased more than threefold (from ($94,902) to ($332,915)), stock on hand has been liquidated and trade debtors are nil. There are no trade creditors and there has been a significant decrease in loans to shareholders since 30 June 2017 ($734,482 to $359,793) likely funded by the liquidation of stock on hand and the payment of trade debtors.
Liquid assets (cash and GST) are modest: $3,901.
Conclusion
Betterway submits the respondents’ application should be refused outright because of Ferngrove’s existing liability for costs orders in Betterway’s favour. Whilst finely balanced, on the Court’s assessment, Betterway’s potential liability for the respondents’ costs of action exceeds Ferngrove’s existing liability. Although the amount is modest, on the evidence there is good reason to believe that Betterway will be unable to pay the respondents’ costs should their defences succeed.
In summary, the evidence establishes that Betterway does not own any fixed or any significant liquid assets and has not traded since 2018. Its current assets as at 30 June 2018 were $3,901 comprising cash and GST. The 2017 and 2018 financial statements disclose a material deterioration in Betterway’s financial position, that it ceased trading in the 2018 financial year and its solvency depends entirely on the continuing support of its current director/shareholder Mr Balfour and former shareholders, Messrs Yong and Dong. Betterway’s current GST status indicates that is has not resumed trading.
These conclusions as to Betterway’s impecuniosity are not negated by its continued existence, neutral credit report or prosecution of this proceeding. These facts do not give rise to any relevant inferences about its capacity to meet an adverse costs order of any magnitude in circumstances where there is uncertainty about the continuing financial support of its director/shareholder and former shareholder and no evidence of its financial arrangements with its legal representatives.
In these circumstances, Betterway’s failure to respond to the respondents’ requests for financial information or adduce evidence about its full financial position is of evidentiary significance. It fortifies the concerns and doubts arising from Betterway’s non-trading status and lack of assets as to its financial capacity to pay an adverse costs order despite being mindful of the respondents’ onus to establish the requisite reason to believe throughout.
It should therefore be accepted that, in all the proven circumstances, Betterway is impecunious and despite the substantial costs orders in its favour, there is good reason to believe that it will be unable to pay the respondents’ costs of action should they succeed in their defences. The threshold requirement is therefore established, enlivening the Court’s jurisdiction to require sufficient security for costs be given.
Exercise of the Discretion
Delay
The first discretionary consideration is the respondents’ delay in bringing the application and its timing.
In oral argument, the respondents’ counsel accepted that there is some element of prejudice to Betterway because of the time elapsed and costs spent but submitted there is no evidence of substantial prejudice. Whilst Mr Graney’s evidence on this topic was not directly challenged, it was criticised as carrying little weight and should have been addressed by Betterway’s director, Mr Balfour.[67]
[67] First Graney Affidavit [30].
The respondents’ submissions are not persuasive. The more than five-year delay between the commencement of the proceeding and when the application was foreshadowed is a significant and compelling reason for refusing the application alone. The proximity of a trial increases the significant unfairness to Betterway arising from the delay in bringing the application and its timing.
Forensic decisions have been made about the conduct of the case in circumstances where there has been sufficient opportunity for an application for security for costs to be made. As Mr Graney identifies, if the application had been brought earlier, Betterway may have made different forensic decisions. Any such opportunity had been lost by the time the application was foreshadowed. Substantial prejudice flows from Betterway conducting its case for five years and joining Mr Tang on the basis that there would be no application and order for security for costs made.
Self-evidently, substantial work has been undertaken and substantial costs incurred by Betterway in progressing the proceeding to trial on the assumption there would be no order for security as to costs. Having regard to the existing costs orders in its favour, Betterway has undoubtedly incurred substantial irrecoverable costs on this same assumption that an earlier application would have avoided and which would be wasted if an order for security had the effect of ending the proceeding. It was not necessary for Mr Graney to identify any specific costs as wasted or avoidable.
The respondents have also not given any adequate explanation for their delay in bringing the application. They were on notice of Betterway’s alleged impecuniosity since discovery of the 2017 and 2018 financial statements in May 2020. An expert report based on these financial statements that analysed Betterway’s trading history was filed in May 2023. Mr Chen does not address why there was no concern about potential costs liabilities at either of these times.
Moreover, the explanation proffered by Mr Chen in his affidavit is not credible. There has been no “period of inaction by the Applicant”[68] and the requests concerning taxation and costs can hardly be described as unexpected when the procedural history is properly appreciated. Whether security is granted or not does not have any bearing on the orderly progression of the litigation.
[68] Chen Affidavit [9].
Proposed Undertakings
Mr Graney sets out in his first affidavit the following undertakings that Betterway and its controller, Mr Balfour, would be willing to submit to the Court for the application to be summarily dismissed:[69]
a. [Betterway] will not enforce the Special Leave Cost Order by demanding payment of any assessed sum until the resolution of this proceeding (whether by agreement or determination of the Court), thereby providing security of approximately $74,327.29;
b. subject to any set-off for costs owing to [Betterway] (whether by agreement or determination of the Court, Mr Balfour will personally meet any costs order against [Betterway] obtained by [Mr Tang] in the proceedings up to the sum of $25,000.
[69] First Graney Affidavit [47].
Betterway offered an alternative in its written submissions:[70]
c.alternatively, if security is refused outright against [Ferngrove], [Betterway] would be willing to submit to an undertaking to hold the monies paid by [Ferngrove] subject to the Special Leave Cost Order in its solicitors trust account for meeting any potential costs order of [Mr Tang] in the proceedings.
[70] Applicant’s Written Submissions [21(c)].
The respondents accept these undertakings are a relevant consideration but submit they are not a complete answer. As regards Mr Balfour’s proposed undertaking, they submit it has no value in the absence of any evidence from him.
These undertakings are important considerations that militate in favour of dismissing the application. Betterway’s proposed undertaking as to the Special Leave Cost Order would avoid the risk of a substantial portion of the existing costs orders not being available as a set-off against Betterway’s potential costs liability to the respondents. In exercising the Court’s discretion on security for costs in favour of Betterway, this undertaking should be a condition of an order dismissing the application.
As to the undertaking proffered by Mr Balfour, at face value there is substance to the criticism made about its value in the absence of any sworn evidence from him on this topic. Whilst Mr Balfour is the sole owner of unencumbered real property, his liabilities and net asset position are unknown. However, when it is appreciated that the potential net liability for Mr Tang’s costs as assessed by the Court is $1,100, Mr Balfour’s proposed undertaking has considerable weight.
Nonetheless, given the other considerations informing the Court’s discretion on security for Mr Tang’s costs (as discussed below), it is not appropriate for Mr Balfour’s undertaking as to Mr Tang’s costs to be a condition of an order dismissing the application.
Existing Costs Orders
Ferngrove’s existing liability for costs orders in Betterway’s favour is a relevant consideration further weighing against an order being made for security for the respondents’ costs. The total quantum of the existing costs orders significantly reduces Betterway’s potential net liability to the respondents for their costs should their defences succeed.
As already mentioned, to be an effective answer to the application, Betterway’s proposed undertaking not to enforce the Special Leave Cost Order must be a condition of any order dismissing the application. This is because unlike the other costs orders, this order is payable forthwith and capable of immediate enforcement.
Should an order be made in Mr Tang’s favour?
Whilst the respondents’ application for security for costs was made and pressed jointly, the respondents’ counsel in oral argument suggested the Court might approach the application as it if was only being made by the second respondent, Mr Tang.[71]
[71] T17.32-18.4.
It was submitted that, strictly speaking, there has been no delay on the part of Mr Tang, a new respondent, in bringing the application since Mr Tang was joined on 8 October 2024 and the application for security was made on 11 November 2024. However, it was accepted that it might not be appropriate for Mr Tang to have all the costs that have been and will be incurred by both respondents, and some reduction should be made.[72]
[72] T19.11-.17.
The claim made against Mr Tang is for tortious interference in the contractual relations between Betterway and Ferngrove. Ferngrove’s alleged breaches of contract were summarised by Judge Slattery in Betterway v Ferngrove (No 3). Plainly, there is substantial overlap between the claims made against Ferngrove and Mr Tang and the respondents’ counsel accepted as much. He acknowledged that Mr Tang’s defence will primarily involve defending the claim against Ferngove for breach of contract,[73] and the evidence relating solely to Mr Tang will concern his conduct and knowledge of relevant matters. Further, in the absence of any evidence from Mr Chen about Mr Tang’s defence costs as distinct from Ferngrove’s, Mr Graney’s estimate of 25% was accepted as reasonable: “as good an estimate as any are made and may even be slightly high…”.[74]
[73] T20.13-.17.
[74] T22.11-.17.
Accordingly, when Mr Graney’s estimated 25% is applied to the Court’s assessment of Betterway’s potential liability for the respondents’ costs of action after set-off of Ferngrove’s existing liability for existing costs orders, the potential liability to Mr Tang as distinct from Ferngrove is a very modest amount: $1,100.[75]
[75] First Graney Affidavit [37(f)]. That is, 25% of $4,400.
Despite the concessions made by the respondents’ counsel in argument, there are compelling reasons for not exercising the Court’s discretion on security in Mr Tang’s favour.
First, the respondents’ submissions overlook the full circumstances of Mr Tang’s joinder as second respondent and that Mr Tang as Ferngrove’s director, majority shareholder and controller of the wider corporate group was aware of all relevant matters in dispute since the proceeding was commenced. As Betterway submitted, Mr Tang is not an independent third party and cannot disentangle himself from Ferngrove’s delay in bringing the application for security for costs and its timing. Delay is fatal to both respondents’ application for security for costs.
Secondly, Mr Tang was joined in circumstances where it was not reasonable to plead a claim against him until Ferngrove had fully complied with its discovery obligations, plainly acting on Mr Tang’s instructions,[76] bearing in mind that Court orders were required to compel compliance and the latest Court order for compliance was made on 26 August 2024.[77]
[76] See FDN 88 [4] comprising as Exhibit YC-1 to the Chen Affidavit.
[77] FDN 84.
When the respondents’ consent to Betterway’s application to join Mr Tang was communicated to Mr Graney by Mr Chen on 25 September 2024, no application for security for costs was foreshadowed. By the time it was foreshadowed, consent orders had already been made for Mr Tang’s joinder and the filing of his defence and an amended reply. It follows that the opportunity for Betterway to alter the forensic decisions that led to the joinder of Mr Tang as a second respondent and avoid the costs of doing so had already been lost before the respondents’ joint application was foreshadowed. These decisions included pursuit of the discovery applications against Ferngrove in the first place that are in part the foundation of the claim made against Mr Tang.
Thirdly, Mr Chen did not address Mr Tang’s defence costs separately from Ferngrove’s. His evidence only addressed their joint costs because that was not the basis of the filed application.
For these reasons, the Court’s discretion on security for costs should not be exercised in Mr Tang’s favour.
Conclusion
Together, the relevant considerations point strongly against the Court exercising its discretion in the respondents’ favour, either jointly or for Mr Tang separately, on the condition that Betterway undertakes not to enforce the Special Leave Cost order in the sum of $18,552.39 by demanding payment of any assessed sum until such further order of the Court.
It follows the respondents’ application for security for costs should be dismissed on this condition.
The parties should be heard as to the form of the orders and undertaking and costs.