Bufalo Corp P/L v Lendlease Primelife Corp Ltd (No 3)
[2010] VSC 263
•21 June 2010
IN THE SUPREME COURT OF VICTORIA
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
No. 6668 of 1999
| BUFALO CORPORATION PTY LTD (ACN 007 122 296) (RECEIVER AND MANAGER APPOINTED) (IN LIQUIDATION) | Plaintiff |
| - and - | |
| LENDLEASE PRIMELIFE LTD (ACN 084 563 413) and others | Defendants |
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JUDGE: | JUDD J | |
WHERE HELD: | Melbourne | |
DATES OF HEARING: | 10, 25 and 26 May 2010 | |
DATE OF JUDGMENT: | 21 June 2010 | |
CASE MAY BE CITED AS: | Bufalo Corp P/L v Lendlease Primelife Corp Ltd & Ors (No 3) | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 263 | |
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PRACTICE AND PROCEDURE – Security for costs – Relevance of litigation funder
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J R Dixon SC with Ms C E Shaw | Tresscox |
| For the First and Fourth Defendants | Mr S K Wilson QC with Mr P J Marzella | Russell Kennedy |
| For the Fifth Defendant | Mr J P Gorton | Minter Ellison |
| For the Sixth Defendant | Mr M L Sifris SC with Mr G W Moffatt | Holding Redlich |
HIS HONOUR:
On 30 April 2009, I delivered judgment on an application by the defendants for security for their costs up to and including the trial. The total amount of additional security sought by the first and fourth defendants, Primelife and Sent, was $1,681,520.30. The fifth defendant, a firm, Darrer Muir Fleiter, made a claim for $532,055. The sixth defendant, Gideon Isaac Rathner, made a claim for $603,089. Primelife and Sent had also applied to top-up an award for security previously made by Mandie J in 2004 in the sum of $350,000 for a defined period.
As the Reasons for Judgment[1] reveal, I was not satisfied by the material in support of the claims, in part because the issues for trial were imprecisely defined. The lack of sufficient precision in the definition of the scope of the case was reflected in the estimates of the likely duration of trial at between 25 and 81 days. The defendants eventually confined their applications for security to the period up to and including the first day of trial. That was an appropriate concession. Nevertheless, in the absence of a better understanding of the issues, it was not possible to make the necessary assessments of the appropriate security if further awards were to be made.
[1][2009] VSC 171.
The imprecision of the issues was compounded by unsatisfactory supporting material. There were also other factors which militated against any substantial award of security, even if there was otherwise a proper basis for further awards. The factors included the nature of the proceeding as one which might be characterised as “defensive” and the extent to which it was said that the defendants had caused the insolvency of the plaintiff. There was also the uncertain impact of the counterclaim by Primelife and Sent.
When it is necessary, as on applications such as this, to consider the nature of the proceeding, its merits or the cause of the plaintiffs’ insolvency, great care must be taken to avoid any predetermination of an issue for trial. The evidence is necessarily limited. The evidence about such matters is advanced only for the purpose of the application for security for costs. Insofar as I expressed or now express views about the nature of the proceeding or the cause of the plaintiffs’ insolvency, such views are tentative, open to review and should be understood as formed for the limited purpose of the application. It has become conventional wisdom in many jurisdictions for a judge other than the trial judge to deal with such applications. For that reason, I proposed to the parties that the present application should be heard and determined by an Associate Justice. I was persuaded by the parties that, because of my familiarity with the issues in the case, which has a tortured and complex history, I should hear and determine this application.
On the last occasion, I ordered that the plaintiff provide security only in amounts which reflected the estimated cost of completing discovery, and for a case management conference at which the proceeding would be set down for trial. An amount of $8,000 was awarded in favour of each group of defendants for that purpose.
For the purpose of this application, the plaintiff did not contend that jurisdiction to make further awards was not enlivened. That was an issue on the last occasion, when the plaintiff submitted that the court was entitled to conclude that the existence of a litigation funder created an asset. The plaintiff relied upon the asset to contend that there was no reason to believe that it would be unable to pay the costs of the defendants if they were successful.
To support its contention that their existed the new asset, the plaintiff’s solicitors had written to the defendants’ solicitors informing them of an indemnity given by the litigation funder to the liquidator which was extended to the plaintiff. That further indemnity provided,
The parties hereto agree, and LLS expressly acknowledges, that the indemnity provided by LLS to the Insolvency Practitioner (Mr Andrews) in clause 5.1 of the Funding Agreement extends to indemnify both the Insolvency Practitioner and the company from and against any Order for Costs against the Company or the Insolvency Practitioner made in the Proceedings in respect of the period from the date of the Funding Agreement up to the date or termination or conclusion of that agreement.
The plaintiff’s solicitors also proffered the following undertaking on behalf of the liquidator:
1.our client undertakes that he will pursue, on his own behalf and on behalf of the plaintiff, the indemnity contained in the funding agreement for the benefit of each of your clients in circumstances where he or the plaintiff suffers an adverse costs order in this proceeding;
2.our client undertakes to assign or to hold on trust for each of your clients the benefit of the indemnity contained in the funding agreement and the proceeds of it in respect of any adverse costs order as referred to in the preceding paragraph; and
3.our client undertakes to inform each of your clients immediately in the event:
(a)LLS terminates or threatens to terminate the funding agreement or the deed of acknowledgement (including any intention or threat by LLS to do so communicated by our client);
(b)he terminates or intends to terminate the funding agreement or the deed of acknowledgment; and
(c)any variation is agreed or there is any proposal put to him to vary the funding agreement or the deed of acknowledgement so as to amend or alter the affect of the indemnity provided by LLS to his and the plaintiff’s benefit.
The extension of the indemnity and the proposed undertakings are set out because, at the conclusion of submissions on the present application, the plaintiff’s counsel announced that the undertakings would be given, if required, to support the plaintiff’s submission that further awards of security should be refused in the exercise of the court’s discretion, or that any award should be substantially discounted.
The plaintiff raised, as a threshold issue, the construction of my previous Reasons for Judgment. It submitted, by reference to the formulation of the Court’s order confining each group of defendants to $8,000, “such security be provided for their costs until orders for trial are made”, that the defendants were not entitled to any further security for the period prior to the date upon which the proceeding had been set down for trial. Orders for trial were not made until 29 November 2009.
A plain reading of the Reasons for Judgment discloses that the defendants were not shut out from making a further application for security. It was contemplated that such an application might even be made in relation to costs already incurred, although not to “top-up” the award already made by Mandie J. Accordingly, the defendants were at liberty to renew their applications for security.
The defendants filed and relied upon new material as well as selected parts of affidavits, reports and submissions prepared for their respective applications in 2008. Primelife and Sent relied upon an affidavit of Leonard Adrian Warren, affirmed 4 March 2010, and an affidavit of Ariel Weingart, sworn 16 March 2010. Mr Weingart is a legal cost consultant. He exhibited a report dated 16 March 2010. Darrer relied upon an affidavit of Raffaela Pisano, sworn 1 March 2010, which exhibited a report from John White Consultancy Pty Ltd, legal cost consultants, dated 1 March 2010. There was an additional affidavit from Ms Pisano, dated 6 May 2010, and an affidavit from Mr White, sworn 6 May 2010. These earlier affidavits were in reply to an affidavit sworn on behalf of the plaintiff and a report by the plaintiff’s cost consultant, Cate Dealehr. Rathner relied on an affidavit of Penelope Alice Pengilley, sworn 5 March 2010, which exhibited a report from Mahlab Costing, dated 4 March 2010. There was also an affidavit of Penelope Jane Van Den Berg, sworn 25 February 2010. She is a legal practitioner employed by Mahlab Costing. Ms Van Den Berg prepared an additional report, dated 25 February 2010. Ms Pengilley swore a further affidavit, dated 6 May 2010, in response to the affidavit of Philip Anthony Jones, sworn 3 May 2010.
The plaintiff relied upon an affidavit of Philip Anthony Jones, sworn 27 April 2010, to which he exhibited his affidavit, sworn 1 December 2008, in opposition to the previous applications for security. Mr Jones swore an additional affidavit on 3 May 2010, and Cate Dealehr swore an affidavit on 3 May 2010. Ms Dealehr is a principal of Compucost – The Australian Legal Costing Group – Lawyers and Consultants.
The analysis undertaken by or on behalf of the defendants was substantially more detailed and precise than the material advanced by them in support of their applications for security made in December 2008. That was to be expected as the issues had been refined and the parties had been required to disclose the identity of their witnesses and the topics on which they were expected to give evidence. Directions had been made for the staging of the trial in an attempt to enable parties, who may not necessarily desire to fully participate in some part of the trial, to absent themselves without prejudice to their interests. It was impossible to predict how successful those directions might be to achieve cost savings. In a proceeding such as this, every step must be taken to limit the scope of the proceeding.
Issues
The parties substantially agreed on the issues for determination. The first issue was whether the order made by Mandie J on 29 October 2004, granting to the first and fourth defendants security in the sum of $350,000, expired on about 26 August 2005, following the conclusion of the first mediation before Mr Jolson QC.
Primelife and Sent argued that the grant of security was only intended to address their costs up to and including the mediation before Mr Jolson, because that was the event anticipated by the parties and his Honour at the time his ruling was made. The plaintiff argued that the scope of that order for security extended until trial. In the alternative, the plaintiff argued that the grant extended until the completion of the last mediation, concluded on 2 April 2008. In my opinion the scope of the order made by Mandie J was confined to a period coinciding with the conclusion of the mediation before Mr Jolson.
The second issue for determination was whether the order for security, made on 30 April 2009, precluded any further application for security for the period prior to the date upon which the proceeding was set down for trial, namely, 27 November 2009. I have already dealt with that issue.[2]
[2]Above at [10] and [11].
The third issue was whether the cost estimates and actual assessments made on behalf of Primelife and Sent should be reduced or discounted because of the existence of their counterclaim. Darrer and Rathner did not make any counterclaim against the plaintiff, but are party to contribution proceedings as between defendants.
The plaintiff argued that, notwithstanding the instructions given to Mr Weingart (the cost consultant engaged on behalf of Primelife and Sent) the work assessed by him, past and future, probably included work attributable to the counterclaim, as well as the contribution proceedings between defendants. The plaintiff submitted that in the absence of any explanation by Mr Weingart as to how he differentiated between work attributable to the plaintiff’s case and the counterclaim and contribution proceedings, the court was not in a position to conclude that his instructions had been appropriately implemented or the extent to which he had made any adjustment to reflect the counterclaim and contribution proceedings.
Primelife and Sent submitted that the instruction to Mr Weingart should be taken at face value but that, in any event, the counterclaim and contribution proceedings were inseparable from the claim, arising out of the same facts, and that no material discount would have properly been made by Mr Weingart to reflect work referable only to the counterclaim.
The fourth issue concerned the way in which various discretionary considerations might impact upon the decision to order security at all, or as a discounting factor. The discretionary considerations were as follows: whether the defendants or some of them caused the plaintiff’s impecuniosity; the nature of the plaintiff’s case as defensive; and the significance of the litigation funder. As a discretionary consideration, this last factor deserved and will receive separate and detailed consideration.
In my previous Reasons for Judgment, I concluded on the evidence then before me that the plaintiff’s case was defensive in nature and that its impecuniosity may be said to have been caused by at least some of the applicants for security. Primelife and Sent argued that these conclusions were, by their nature, tentative and capable of review if I was persuaded to a different point of view. I agree. Such conclusions are necessarily tentative, based on less than complete facts. They are the product of a relatively high level overview of the case.
The plaintiff submitted that I should reach the same conclusions and that such findings should at least result in a very substantial discount, if not a refusal to make any awards at all.
The fifth, and perhaps most important issue, concerned the significance of the litigation funder. Primelife and Sent argued that the litigation funder had agreed to underwrite the plaintiff in prosecuting the proceeding in order to secure a commercial gain. They submitted that discretionary considerations, such as whether the proceeding was defensive and whether some of the defendants had caused the plaintiff’s impecuniosity, were effectively neutralised by the presence of a litigation funder. They submitted that the significance of the litigation funder was not confined to deflecting a stultification argument.
The plaintiff did not seek to characterise the existence of the litigation funder as providing an asset which would deny jurisdiction to make an award for security. Instead, the plaintiff invoked the existence of the funder as a factor militating against an order for security because, without the support of the litigation funder, the plaintiff would not be in a position to proceed with this litigation. It argued that the administration of justice was assisted by a mechanism to provide impecunious plaintiffs with access to the courts. Thus, the litigation funder should not be penalised by being required to also pay the costs of the defendants in advance of any order.
The sixth issue was whether the cost estimates were reasonable, whether the claims should be discounted and if so by how much. The plaintiff challenged the cost estimates on an item by item basis and also challenged the credibility of the estimates made by Primelife and Sent as inherently unreliable. The plaintiff relied on past estimates made by Primelife and Sent and examples of, what it described as self-evident overstatement and double-dipping. Thus, the plaintiff sought to substantially reduce the scope of the claims and then have applied substantial discounts by reference to various discretionary considerations.
A seventh issue was whether claims which were the subject of existing orders for costs or cost obligations arising under the Rules of Court, should be the subject of any award for security. The plaintiff argued that its existing obligations, whether arising by reason of an order or the operation of the Rules of Court, should not be the subject of an order for security because the obligation had crystallised. The defendants argued that the existence of an order or an obligation arising under the Rules was irrelevant because they remained exposed to the risk that the costs would not be paid.
There was, as may be observed, a significant gulf between the plaintiff’s position and that of the defendants. The defendants’ claims were large and detailed. In addition to the affidavit material, I have relied upon a table prepared as an aide memoir by the plaintiff in which it summarised the claims and its own allowance based upon the evidence of Ms Dealehr.
Primelife and Sent
Primelife and Sent divided their application into five categories, they were:
(a)The period from the conclusion of the initial mediation on 26 August 2005 until 7 November 2008. Those dates were selected because it was argued that the only mediation contemplated by Mandie J was that conducted before Henry Jolson QC on 26 August 2005. The significance of 7 November 2008 was that it was the first occasion on which the proceeding was listed for directions before me. The claim for that period is for $51,734.50.
(b)From 7 November 2008 up to and including 27 November 2009, being the date upon which the proceeding was set down for trial. The claim for that period is $110,190,41.
(c)28 November 2009 until 4 March 2010, which is the date upon which Leonard Adrian Warren affirmed his affidavit in support of the present application for security for costs. The amount of the claim was $2,392.05
(d)4 March 2010 until the commencement of trial on 11 October 2010. The amount of the claim was $742,288.50.
(e)Applications for security for costs $69,295.62. This amount includes an estimate for the costs of this application. But does not seem to include the fees for counsel and solicitors for the hearing.
In respect of the claim mentioned in paragraph 29(a) above, in the sum of $51,734.50, the plaintiff did not concede anything on the basis that the items were included and formed part of the scope of the order for security made by Mandie J in 2004. Security had been ordered in favour of Primelife and Sent in the sum of $350,000. The claim mentioned in paragraph 29(b) above, in the sum of $110,190.41, was also rejected in whole by the plaintiff on the basis that the items were dealt with under the order for costs made on 30 April 2009, or that costs orders or obligations already existed by reason of an order of the court or under the Rules of Court.
The modest claim mentioned in paragraph 29(c) above was also rejected by the plaintiff because of the operation of the Rules of Court in relation to costs associated with amendments.
The very substantial claim of $742,288.50, mentioned in paragraph 29(d) above, includes “instructions for brief” and “preparation for trial”. The plaintiff’s estimate was $139,996.30. The claims include a number of items that require special attention. For example, Primelife and Sent claimed $59,850 for senior counsel’s fees to settle lay-witness statements. The plaintiff rejected that claim. Primelife and Sent claimed $148,540 for “instructions for brief”. The plaintiff said that it was unable to provide any estimate. The next item, “preparation for trial”, included three components – solicitor’s fees of $141,710, junior counsel’s fees of $58,806 and senior counsel’s fees of $126,000. As against that claim, the plaintiff allowed $25,800 for solicitor’s fees, $18,711 for junior counsel’s fees and $42,000 for senior counsel’s fees.
The last category is the claim for $69,295.62, mentioned in paragraph 29(e) above, for costs of the applications for security for costs. The plaintiff rejected the whole of that claim on the basis that, in relation to costs incurred prior to 7 November 2008 they were covered by the order for security made by Mandie J; and following that date, cost orders in respect of the applications for security would almost certainly be made. It was the plaintiff’s argument that where there were or might be cost orders made prior to trial, it was inappropriate to also grant security in respect of that sum or make an allowance in respect of the work.
Darrer
Darrer’s claim was divided into five components which did not precisely correspond with the time periods or items employed by Primelife and Sent. The components were as follows:
(a)The period commencing 30 April 2009 (being the date of judgment in the previous application) until 27 November 2009 (when trial orders were made) in the sum of $62,582.30.
(b)The period commencing 27 November 2009 until 23 February 2010, which is significant only because it is the date upon which Mr White, costs consultant, was instructed to make estimates. The sum claimed is $4,292.50.
(c)The period commencing 23 February 2010 until the first day of trial. The sum claimed is $183,090.
(d)Darrer’s costs for the application for security for costs made in 2008 in the sum of $26,583.40.
(e)Darrer’s estimated costs in relation to this application for security for costs from 30 April 2009 until final orders, $23,870.
The cost estimates prepared on behalf of Darrer did not attract the dramatic adjustment by the plaintiff as did those propounded on behalf of Primelife and Sent. There were, however, some common objections. For example, the plaintiff would not allow costs already ordered against it or those that were imposed by operation of the Rules of Court. Thus, the plaintiff rejected the whole of Darrer’s claims mentioned in paragraph 34 (d) and (e) above, on the basis that a separate order for costs may be made in that respect.
The claim mentioned in paragraph 34(c) above, in the sum of $183,090, covered the period of preparation commencing on 23 February 2010 and continuing up to and including the first day of trial. The plaintiff only allowed $43,975 for that period. During the course of submissions counsel, on behalf of Darrer, conceded that the costs attributable to “brief to counsel to appear” should be reduced by $20,000 because of the plaintiff’s agreement to provide an additional copy of the Court Book. Darrer also conceded that from the amount of the total claim should be deducted the sum of $8,000 already allowed as security in April 2010.
Rathner
The claim by Rathner had the following components:
(a)An estimate made by Ms Van Den Berg, dated 25 February 2010, of Rathner’s party/party costs from 29 July 2009 until the first day of trial in the sum of $243,495.80.
(b)A subsequent estimate made by Judith Headstrom, dated 4 March 2010, for the period 1 May 2009 to 8 February 2010 in the sum of $59,151.02.
The second estimate was made after allowing for security already provided. I am not certain why that period has been selected as it falls within the period of the estimate mentioned in paragraph 37(a) above, unless it is to provide a more accurate estimate of costs already incurred by that date. Rathner initially sought security for costs until the end of the trial, which increased the total amount of the claim to $491,353.80.
In response to Rathner’s claim for preparation, up to and including the first day of trial, the plaintiff only allowed $3,165. The substantial issue between the parties was the extent to which Rathner would reasonably be required to prepare for the first part of the trial, which had been structured in such a way to enable him to absent himself until the plaintiff presented its case against him during the second stage.
There is now every indication that Rathner proposes to participate during the first stage of the trial. In any event, he will need to prepare his case in advance of the second stage.
Legal Principles and application
The defendants’ applications are brought pursuant to r 62.02(1)(b) of the Supreme Court (General Civil Procedure) Rules and s 1335(1) of the Corporations Act 2001 (Cth). The threshold jurisdictional condition to be satisfied was whether there was reason to believe that the corporation would be unable to pay the costs of the defendants if successful. The plaintiff did not pursue the argument, advanced during the previous application for security, that the existence of a litigation funder created a new asset. In my Reasons for Judgment, I held:[3]
On the basis of the evidence at this time, I am satisfied that the defendants have discharged the onus to show that there is reason to believe that the plaintiff will be unable to pay their costs if successful. That position may, of course, change should any further application be made.
The plaintiff has not advanced any further evidence concerning the relationship between the litigation funder, the liquidator and the plaintiff, nor has it provided any additional information about the financial position of the litigation funder. Accordingly, there is no reason to reach any other conclusion in relation to the threshold condition, and it was not submitted that I should do so.
[3][2009] VSC 171, [XX].
The discretion to grant security is now accepted as unfettered. It is for the applicant for security to persuade the court, once the jurisdictional condition has been satisfied, that the discretion ought to be exercised in its favour. It is accepted, however, that circumstances may arise in which a plaintiff company may bear an evidentiary burden. That is particularly so should the company advance its own financial position, or connection with the liquidator, or a litigation funder, as a basis upon which to contend that security should not be given or to diminish or discount the amount of security that might otherwise be awarded.[4]
[4]Livingspring Pty Ltd v Kliger Partners [2008] 20 VR 377, [18]-[22].
The discretionary considerations raised by the plaintiff in connection with the defendants’ applications were as follows:
(a) the significance of the litigation funder;
(b) the nature of the proceeding as defensive; and,
(c) the cause of the plaintiff’s impecuniosity.
The plaintiff advanced submissions to contend that each of those matters militated against any award for security in favour of any of the defendants. Alternatively, the plaintiff relied upon those matters as the basis of a substantial discount to be made to any award. The plaintiff also submitted that the assessments made by its cost consultant should be preferred over those made by the defendants, which were excessive. The focus of the plaintiff’s attack was on the very substantial claim made by Primelife and Sent. The plaintiff submitted that, by reference to the earlier claims made on their behalf before Mandie J, the application made in December 2008, and the present application, the court should conclude that the claims were extravagant and unreliable.
When assessing the appropriate quantum of security, the court should have regard to the probable cost to which the defendants may be put so far as it can be ascertained. The amount of security ordered should not be illusory or oppressive – not too little, nor too much. The nature of the proceeding must be taken into account.[5] When ordering security for costs, the court does not set out to give a complete and certain indemnity to the successful applicant.[6]
[5]Procon (GB) v Provincial Building Co Ltd [1984] 2 All ER 368, 374.
[6]Brundza v Robbie & Co (No.2) (1952) 88 CLR 171, 175; Saint-Gobain RF Pty Ltd v Maax Spa Corporation Pty Ltd [2004] VSC 335.
The approach taken by the defendants was to have a cost consultant assess work already done or their solicitor’s estimate of work to be undertaken on the basis of party/party costs likely to be allowed by a taxing officer of the court. Such an approach in relation to forward estimates seems misconceived. The assessment involved a detailed and technical analysis of uncertain forward estimates. The assessment of party/party costs in relation to work previously undertaken is one thing, but such an analysis in relation to forward estimates does not rise above an assessment based on what are, after all, merely projections. That is, no doubt, why courts have cautioned against approaching the quantification as if the taxation of costs or so as to provide a complete indemnity to the applicant.[7]
[7]Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ASCR 621, 628; Shannon v ANZ Bank (No.2) (1994) 2 Qd R 563, 569; Errol Fincott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497, 569.
When undertaking an assessment for the purpose of making an order for security for costs, the judge is entitled to rely upon his or her own experience about the amount of work likely to be involved in preparation for trial rather than approaching the assessment as if a taxation. The court is not equipped to undertake a hypothetical taxation, relying on estimates made by solicitors of the amount of work to be undertaken. That is not to say, of course, that such assessments, made by those who will actually participate in the preparation, are to be disregarded. But as this case demonstrates, those who have made the estimates or who provided instructions to cost consultants, have in some instances made “ambit claims” which undermine the credibility of the assessments. I adopt, with respect, and echo the general approach of Byrne J in Premier Building & Consulting Pty Ltd v Spotless Group Ltd (No.7)[8] which seem uncannily apt in the present context:
(1)My concern is to assess the costs of each of the applicant defendants which have been incurred and are to be incurred from the mediation up to and including Day 1 of the trial...
(2)The onus of proving that the work was or will be done within the period and its reasonable cost on a party and party basis falls upon the applicant in each case.
(3)The aggregate of the amounts sought by the defendants is, on the face of it, enormous. This is, to some extent, the product of the decision of [the plaintiff] to sue ten defendants rather than discriminating between all candidates. This is its forensic choice and it must abide the consequences of it.
(4)In making my assessments I have had regard to what I perceive at this stage to be the issues and the respective positions of the parties in the proceeding which I have been managing now for some 12 months.
(5)I have not and will not, for the purposes of these applications, descend into the detail of the work done and to be done by the defendants to prepare for trial. My task is not that of a Taxing Master confronted with a bill of costs; it is to make an estimate of what, in the light of the evidence before me and in the light of my familiarity with the case, is a fair amount to achieve to objective of an order for security. This not to provide a defendant with an indemnity for the expenses of defending the claims against it, but to provide it with protection against the risk that an order for party and party costs in its favour might not be satisfied…
[8](2005) VSC 275, [5].
By far the most contentious issue in these applications was the role and significance of the litigation funder. The applicants argued that the existence of a litigation funder had the effect of neutralising discretionary considerations such as whether the proceeding was defensive and whether the defendants had caused the impecuniosity of the plaintiff. This was because there was a party which had contracted to fund the prosecution of the proceeding in return for a share of any proceeds in addition to recovery of its costs.
The precise financial arrangements were not disclosed, although enough has been made known to explain the relationship. When the position of the litigation funder was first raised, at the time of the previous application for security for costs, it was a factor relied upon by the plaintiff to advance the proposition that it had a “new asset”. In the absence of information about the value of the asset, the argument had little force. Now it is the defendants – the applicants for security – who rely upon the existence of the litigation funder, calling in aid the reasoning of Heydon J in Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd & ors.[9]
[9](2009) 239 CLR 75, (‘Jeffery’).
The issue before the High Court in Jeffery was whether a litigation funder was liable to pay the costs of a successful defendant on the ground that it had committed an abuse of the process. The High Court, by a majority, rejected that proposition. In the course of his dissenting judgment, Heydon J examined cases in which the role of a litigation funder on an application for security for costs, had been considered. His Honour’s analysis was undertaken in the following context:[10]
It is convenient to turn from these general statements to examine the language used in the authorities in relation to the liability of non-parties who have supplied funds to plaintiffs for the conduct of litigation from which they hope to profit, but who have not indemnified the plaintiffs against their potential liability to pay the defendants' costs. Although only one of those authorities relates directly to r 42.3(2)(c), they all have some relevance to its construction.
[10]Ibid [59].
Having examined non-party costs cases, Heydon J turned to examine cases concerning applications for security for costs. His Honour said:[11]
[11]Ibid [61] – [64].
Security for costs cases. Then there are cases in which the funding of litigation by non-parties has stimulated consideration of the justice of making security for costs orders. Mr Jackson QC placed particular stress on Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd. In relation to an application for security for costs by a defendant against a liquidator plaintiff in litigation financed by a litigation funder, Hodgson JA said:
"a court should be readier to order security for costs where the non-party who stands to benefit from the proceedings is not a person interested in having rights vindicated, as would be a shareholder or creditor of a plaintiff corporation, but rather is a person whose interest is solely to make a commercial profit from funding the litigation. Although litigation funding is not against public policy ..., the court system is primarily there to enable rights to be vindicated rather than commercial profits to be made; and ... courts should be particularly concerned that persons whose involvement in litigation is purely for commercial profit should not avoid responsibility for costs if the litigation fails."
The funder in this appeal attempted to distinguish this passage as being concerned with the species of which Green's case is an example – a "trafficking" case. The funder stressed the word "solely" in the first sentence. But neither that word, nor the word "purely" in the second sentence, should restrict Hodgson JA's reasoning to a point short of cases like the present. Here the funder was hazarding $300,000 (or $200,000) to gain the return of that money plus a $630,000 (or $730,000) success fee. The funder was not a professional litigation funder or a "trafficker", but the extent to which it was a creditor of the plaintiff before the litigation was not something upon which the plaintiff's evidence cast much light. Hodgson JA's reasoning is equally applicable to cases like the present, where a non-trafficker funding an impecunious plaintiff is substantially or primarily motivated by a desire for commercial profit but has not assumed responsibility for the costs which the impecunious plaintiff is ordered to pay when the litigation fails. If the court system is "primarily there" to enable rights to be vindicated rather than to enable commercial profits to be made, it follows that a non-plaintiff who funds the plaintiff with the primary purpose of making commercial profits out of the litigation is behaving extraneously to the proper function of litigation, at least where the funder avoids responsibility for the costs of the defendant. It is behaviour outside the purpose which the process is supplied to serve. It is not making a legitimate use of that process. Rather it abuses that process.
The extent to which Hodgson JA's thinking is adverse to the funder's stance in this case may be appreciated from the submission which his reasoning rejected. The submission was:
"the circumstance that someone other than a plaintiff who is a natural person stands to gain, along with the plaintiff, from success in the proceedings was not an important factor which could justify an order for security ... [T]his was particularly so where this other entity had indemnified the plaintiff against costs ordered to be paid to the defendant, and thus could be made liable to pay them at the instance of the defendant."
Hodgson JA's rejection of that submission reveals a concern that a non-party who funded litigation purely for commercial profit, should not avoid responsibility for costs if that litigation fails, even where the litigation funder had indemnified the plaintiff against costs ordered to be paid to the defendant. Hence he ordered security for costs. That order operated as a supplement, so to speak, to the indemnity. Had there been no indemnity, the case for an order for security for costs would have been much stronger.
Hodgson JA referred to Fiduciary Ltd v Morningstar Research Pty Ltd. Austin J there said, in ordering two corporate plaintiffs to provide security for costs where they were backed by a litigation funder not shown to be incapable of providing security: "[I]t is fair for the courts to proceed on a basis which reflects the proposition that those who seek to benefit from litigation should bear the risks and burdens that the process entails." Austin J relied on, and Hodgson JA referred to, an observation by Young CJ in Eq in Chartspike Pty Ltd (in liq) v Chahoud. It was part of the Chief Judge's reasons for making an order that the plaintiff provide security for costs to the effect that where an insolvent corporate plaintiff had contracted to have litigation funded by a third party in return for that third party receiving a share of the verdict. He said: "it is appropriate that the third party bear part of the risk." Young CJ in Eq's evident contemplation was that the third party funder would arrange for the security to be provided. He made the order even though the funding agreement had given indemnities to the plaintiff against adverse costs orders.
Similarly, the primary judge in Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd, Einstein J, spoke of "the disinclination of the Court to permit a win-win situation for an outside party: that is to say to permit a lender who stands behind the [plaintiff] awaiting to benefit from a success in the proceedings to avoid having a fair responsibility for the costs of the [plaintiff] in the event that the proceedings fail".
The defendants seized upon the apparent approval by Heydon J of the passage from the judgement of Young CJ in Eq in Chartspike Pty Ltd v Chahoud,[12] in which the Chief Judge said:
The situation is that the plaintiff is a company which is insolvent. It is contracted to have the liquidation funded by a third party, in return for that the third party receiving a share of the verdict. In such a circumstance it is appropriate that the third party bear part of the risk. The costs of a ten day hearing are estimated at about $120,000 and it seems to me I should make an order for $60,000 in the first instance and as the case gets closer to hearing there can be liberty to apply to increase that amount.
[12][2001] NSWSC 585, [5].
Great care must be taken when drawing upon the approval of previous authorities in a dissenting judgment of a higher court. It seems to me that Heydon J employed his analysis of the security for costs cases in aid of his conclusion that the litigation funder in Jeffery’s case had committed an abuse of process. The decisions in the cases mentioned by his Honour remain, however, undisturbed and are not in some way infected by the fact that they are relied upon as part of a course of reasoning in a dissenting judgment.
There is much to be said for the proposition that where a litigation funder has elected not to provide an irrevocable indemnity to a plaintiff for all costs that may be ordered against the plaintiff and declined to provide information to satisfy the court of its ability to meet any order for costs, it should provide a full indemnity to the defendants for any order for costs in their favour made against the plaintiff.
As against such a proposition, the plaintiff argued that the litigation funder should not be penalised for providing the plaintiff with access to justice by funding its claim. Such an argument may have greater weight in a jurisdiction, such as the United States of America, where orders for costs against an unsuccessful party are usual. In this jurisdiction, however, access to justice carries with it financial responsibilities. One such responsibility is to meet orders for costs. In a jurisdiction where, in the ordinary course, costs follow the event, the failure of the plaintiff’s case will usually result in an order that the plaintiff pay the successful defendants’ costs.
In Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd,[13] the Court of Appeal in New South Wales held, by a majority,[14] that a court should be ready to order security for costs where the non-party who stands to benefit from the proceedings is not a person interested in having their rights vindicated, such as a shareholder or creditor of a plaintiff corporation. The litigation funder was regarded as a person whose interest was solely to make a commercial profit from funding the litigation.
[13](2008) 67 ACSR 105 (‘Green’).
[14]Hodgson JA and Campbell JA (Baston JA dissenting).
In that case, the plaintiff was the liquidator. A number of issues raised by the appeal concerned the exercise of discretion where there was an individual plaintiff. In that proceeding, the liquidator sought to recover in excess of $22 million from CGU as insurer of the directors and officers of Arimco. The liquidator alleged that the directors and officers had allowed Arimco to incur debts at a time when it was insolvent or there were reasonable grounds for suspecting that was so. The liquidator contracted with a litigation funder to underwrite his costs of the litigation. CGU applied for security well after the proceeding had commenced and after the liquidator had spent more than $1 million on the proceeding. The trial judge rejected that claim for security for past costs but granted security in the sum of $450,000 for reasonably anticipated costs up to and including the conclusion of the first trial.
The trial judge held that an important factor in the exercise of discretion was the existence of a person who stood behind an impecunious plaintiff who sought to take the benefit of the system of justice, sharing in the proceeds of victory, without the corresponding burden of potential adverse costs orders. The relevant ground of appeal, formulated by the liquidator, was to the effect that the trial judge erred in considering that the existence of the plaintiff’s litigation funding arrangement was an important factor in determining whether to order that the plaintiff give security for costs. In rejecting that ground of appeal, Hodgson JA said,[15]
However, in my opinion a court should be readier to order security for costs where the non-party who stands to benefit from the proceedings is not a person interested in having rights vindicated, as would be a shareholder or creditor of a plaintiff corporation, but rather is a person whose interest is solely to make a commercial profit from funding the litigation. Although litigation funding is not against public policy (Campbells Cash and Carry Pty Limited v Fostif Pty Limited[2006] HCA 41; 229 CLR 386 at [87]- [95]), the court system is primarily there to enable rights to be vindicated rather than commercial profits to be made; and in my opinion, courts should be particularly concerned that persons whose involvement in litigation is purely for commercial profit should not avoid responsibility for costs if the litigation fails.
In this case, the funder could perhaps be liable for costs, at the instance of the defendant; although Young CJ in Eq in Chartspike Pty Limited v Chahoud[2001] NSWSC 585 said there would be difficulty in enforcing this kind of indemnity, because the funder is not an insurer who could be sued pursuant to the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) s6. If in such a case the funder did not willingly pay a costs order against the plaintiff, there is a question whether the defendant could bring proceedings in which the plaintiff and the funder were joined as defendants in order to enforce the indemnity against the funder; and even if this were possible, the proceedings would be cumbersome and could well be highly contentious. I note also that, in this case, the funder can avoid liability for future costs by terminating the funding agreement; and this could happen in such a way that CGU would need to expend further costs in order to obtain a decision in its favour, with no possibility of enforcement of those costs against the funder. (Problems such as these could possibly be overcome if the funder undertook to the court to be subject to any order for costs the court might make or consented to be joined as a party for that purpose: cf UCPR 42.3.)
In all these circumstances, in my opinion, the existence of the funder and the funding agreement is a matter that favours an order for security which, according to the funding agreement, the funder would be obliged to comply with. This view is supported by the consideration that in this case the court is left in the dark as to the proportion to which the funder is entitled of any verdict obtained by the liquidator; although, because this is the result of a claim of legal professional privilege, the court would not be justified in drawing any conclusion that the proportion to which the funder is entitled is unreasonably high: cf Wentworth v Lloyd[1864] EngR 492; (1864) 10 HL Cas 589; 11 ER 1154. (It may be that where the court knows the extent of the funder’s interest in the outcome of the case, this could be a factor which might lead the court to order security for less than the totality of the costs.)
Accordingly, I find no error by the primary judge in his regard to the involvement of a litigation funder.
[15]Green (2008) 67 ACSR 105 [51] - [54].
The existence of a litigation funder, of course, militates against the proposition, if advanced, that an award of security might stultify the litigation. In the present case, the plaintiff did not advance such a proposition. Nevertheless, it did rely upon a number of discretionary considerations which it argued should militate against an award of security, or result in a substantial discount of security, which might otherwise be awarded.
The plaintiff submitted that the proceeding brought by the plaintiff was defensive in nature and relied upon a finding to that effect in my previous Reasons for Judgment.[16] The plaintiff also relied upon a finding that Primelife and Rathner effectively disabled the plaintiff from repaying the debt.[17]
[16][2009] VSC 171, [71].
[17]Ibid [72].
A finding to the effect that a plaintiff’s impecuniosity had been caused by the applicant for security militates against an order for security because a plaintiff should not be denied access to a system of justice to remedy an alleged wrong committed by a defendant whose actions caused or contributed to the existence of the precondition to the exercise of the discretion to grant security – an inability to pay costs if ordered. The rationale for such an approach assumes that a grant of security would have a disabling effect upon the plaintiff’s ability to prosecute the action. The existence of a litigation funder effectively neutralises that rationale.
The defensive nature of the plaintiff’s case, as a factor militating against an order for security is not, of course, determinative of the outcome. The discretion is unfettered. As a general rule, defendants are not required to give security. Defendants do not, as a rule, initiate proceedings. If a plaintiff’s claim is in substance defensive, the plaintiff is to be treated as if a defendant.
While it remains my view that the plaintiff was compelled to bring proceedings against Primelife, the scope of this proceeding extends beyond a challenge to the validity of security which Primelife was enforcing. The plaintiff seeks to restore its balance sheet, which it alleges was destroyed by Primelife, Sent, Darrer and Rathner. The proceeding is not wholly defensive, although its origins may be so explained. In that sense, the plaintiff’s status as a party compelled to litigate merges with its complaint about the cause of its impecuniosity.
The plaintiff formulated an argument in which it relied on the existence of the litigation funder as a discretionary factor favouring a refusal of security, alternatively as justifying a substantial discount. It argued that the litigation funder incurred a financial risk to enable the plaintiff to vindicate its rights in court. It will not derive the whole of the benefit, if any, but share that with the plaintiff. The argument proceeded on the assumption that litigation funders performed an important role in the administration of justice and should not be penalised by orders for security. While it was argued that the funder did not enjoy the whole of the proceeds of any judgment and undertook risks, the extent of the risk remained undisclosed. Relevant parts of the funding agreement were masked.
Views may differ as to the contribution made by litigation funding enterprises to the administration of justice. It is unnecessary to express any view for the purpose of this application. The plaintiff accepted that the existence of a litigation funder was a relevant consideration in the exercise of the discretion. In the circumstances of this case I propose to follow the approach enunciated by Hodgson JA in Green and regard the presence of the funder in this case as a factor that favours an order for security.
The litigation funder has not seen fit, or is unable to provide, evidence of its financial position. I have already found that in the absence of further information about its financial position, the value of the indemnity and undertakings advanced by the plaintiff remain uncertain and do not provide an adequate measure of protection for the defendants. I note that in Green the litigation funder provided financial statements to the court suggesting net assets of about $2.5 million. No such information was provided in the present case.
The jurisdiction to award security for costs is a mechanism to protect the efficacy of the exercise of the court’s jurisdiction to award costs. The court should not permit a situation where a defendant’s success is Pyrrhic.[18] In my opinion, the interests of justice are best served in this case by requiring the plaintiff to provide reasonable security for the defendants’ costs. The litigation funder may then decide whether it will satisfy that obligation under its funding relationship with the plaintiff. If it does, the order for security will do no more than require the funder to secure part of the risk of the litigation.
[18]Oshlack v Richmond River Council (1998) 193 CLR 72, [67].
The decision of Forrest J in Quadrant Constructions Pty Ltd v Morgan Smith Barney Australia Pty Ltd[19] is consistent with the view I have taken as to the weight to be given to the presence of a litigation funder in the exercise of discretion. In that case, his Honour said:[20]
The question then arises as to what relevance, if any, this consideration has in a case in which the plaintiff’s claim is funded by a litigation funder. Quadrant asserted that it was a relevant discretionary consideration. However, this submission is inevitably intertwined with a stultification argument so as to resist an order for security for costs. Together, the two considerations may provide a powerful reason for a Court to refuse to grant security or to order security in a modest amount.[21]
I accept the submission made on behalf of CSB that the presence of the litigation funder changes the dynamics of this equation. I think that it does, as CSB said, neutralize this issue. Given that the case will be able to be seen through to judgment with LLS’ involvement, there is no reason to attach any real weight to this consideration.
[19][2009] VSC 455.
[20]Ibid [41], [42].
[21]Australian Quarry Holdings Pty Ltd (in liq) v Dougherty & Ors (1992) 8 ACSR 569, 570.
In Saunders & ors v Houghton and Jones[22] the Court of Appeal in New Zealand held that the presence of a litigation funder alters the balance between the plaintiffs and defendants. The court held:
Security for costs is often a vexed question. The principle of access to justice is no doubt why r 5.45 our High Court Rules does not empower orders for security against a natural person who is resident in New Zealand. Many, if not most, of the persons represented in this litigation are natural persons resident in New Zealand, although among them is an Australian trustee company in which a large number of investors are interested; it may be ordered to provide security under r 5.45(a)(ii). It is the risk of impecuniosity and failure to pay an adverse costs order that leads a court to order security where it has jurisdiction to do so. Yet a large security order may deter a plaintiff from pursuing a claim with merit. Further, as earlier noted, Jeffery & Katauskas shows that the presence of a litigation funder can give rise to a range of judicial responses.
The making of orders for both representation and admission of a funder substantially alters the balance between plaintiffs and defendants. We consider that the change is so radical as to justify the High Court, in exercise of its inherent jurisdiction under s 16 of the Judicature Act 1908, to consider ordering security as a term of such orders, even where numerous natural persons are among the plaintiffs, as the price of the privilege to employ such a procedure. That is in order to protect defendant against the effect of a procedure which could otherwise be oppressive. The facts that the funder has no personal right at stake, that takes part of the proceeds of any claim, and that it is is motivated by the financial considerations that gave rise to the common law prohibition of champerty point to the need for the funder to provide security for costs in most cases. Arkin v Borchard Lines Ltd(Nos 2 and 3) [2005] 1 WLR 3055 (CA) applied to a litigation funder Lord Denning MR’s dictum in Hill v Archbold [1968] 1 QB 686 (CA) that maintenance “[i]s lawful, provided always that the one who supports the litigation if it fails, pays the costs of the other side”. Where there is doubt about the bona fides of the funder or bad behaviour on the funder’s part, the case for declining approval or ordering such security, perhaps on an indemnity basis, is strengthened. Where an application for approval of a funder is met by an application for security for costs the enquiry may include not only the funder’s means but also whether it is of such standing that its decision to fund provides a worthwhile pointer to the merits of the case. We make no comment on the competing views in Jeffery & Katauskas, which turned on the terms of a costs rule which has no New Zealand equivalent. But the result, where the funder of a failed case escaped liability for costs, provides a cautionary example.
[22][2009] NZCA 610, [35] - [36].
In my opinion the defendants are entitled to renew their applications for security for costs notwithstanding the limited special purpose allowances made on 30 April 2009. They have not delayed and, insofar as time elapsed between the making of the first application before Mandie J and the present application, the effluxion of time is explained by extensive mediations followed by a renewal of the applications for security after the attempts at mediation failed. Accordingly, insofar as the applications are for past costs incurred, the defendants are entitled to have those costs taken into account for the purpose of calculating an appropriate quantum of security.
Primelife has a significant counterclaim against the plaintiff. The plaintiff submitted that an order for security might lead to a situation where the plaintiff’s case was stayed (because security was not given) whereas the counterclaim might proceed. Whatever might be the merit of such a submission, Primelife and Sent agreed that any order having the effect of a stay of the plaintiff’s claim, in the event that security was not given, could also operate as a stay of the counterclaim.
I reject the plaintiff’s submission that where costs have already been awarded, or are likely to be awarded or will be incurred by reason of the operation of the Rules of Court, no security should be granted. There is no suggestion that any such costs forming part of any of the defendants’ claims have been paid. If and to the extent they are paid, an adjustment may be made to the level of security given by or on behalf of the plaintiff to reflect any such payment.
Quantum
The litigation between the plaintiff and defendants is complex and the trial on liability is expected to occupy about two months of court time. The issues have been refined and narrowed to some extent. Most witnesses have been identified and a real attempt was made by most defendants to re-quantify the work required in preparation for trial. I remain astonished at the estimated cost of preparation, particularly those advanced by Primelife and Sent.
Some of the items claimed by Primelife and Sent seem excessive. From the amounts of the claim made before Mandie J, the claims made in December 2008 and the present claims, I am left with an abiding concern that Primelife and Sent are prepared to over-estimate work and costs and in some instances double-dip. I have expressed, from time to time, a view about the propriety or desirability of counsel settling witness statements. Significant fees have been estimated for that work. If and insofar as counsel are instructed to settle witness statements, it should not require both senior and junior counsel. I propose to make a corresponding discount to the estimates.
The “big ticket” items in the estimates prepared by Primelife and Sent are items described as “instructions for brief” in the sum of $148,540 and “preparation for trial” in the sum of $326,516. A comparison between the description of the work required under each heading discloses what I regard as a substantial overlap of activity between solicitors and counsel and between items. The breakdown of items for costing by Primelife and Sent may follow conventional costing practices, but as the basis for an estimate of forward costs to establish the quantum of an order for security, it is unreliable.
I remain sceptical of the forward estimates made by Primelife and Sent. For example, separate claims have been made for obtaining instructions for witness statements, drawing, settling and engrossing settled statements and for “152 hours of attendances by a solicitor involving an exercise of skill or legal knowledge interviewing the witnesses to elicit their evidence…” Under the heading, “preparation for trial”, a further substantial amount of time has been allowed for conferences/consultations with 42 witnesses. An allowance has been made of 10 days for junior counsel, in conferences and consultations and a similar period for senior counsel, in addition 12 days for junior counsel in preparation for trial and 10 days for senior counsel in preparation for trial. To those claims must be added a further 95 hours each for senior and junior counsel to settle witness statements.
There is substance in the plaintiff’s submission that with the continuity of legal representatives and the familiarity they must have with the case, including a thorough knowledge of material facts, the evidence that will be adduced, the relevant documents and the applicable principles of law, the estimates made of the work and time required to prepare witness statement, interview witnesses and general preparation are excessive. The estimates made by all parties seem to suppose that work has only recently commenced or is about to commence to interview witnesses, prepare witness statements and review documents. No allowance seems to have been made for past knowledge and information acquired, some of which is covered by earlier awards of security or which does not fall within the scope of the present claims. I propose to make significant discounts, against the estimates advanced by the defendants, to reflect work already undertaken and knowledge already acquired. While any order for security should be meaningful it should not be based upon a theoretical assessment which ignores history and common sense.
The estimates made by Darrer and Rathner are more realistic, although given the relative focus of each of their cases, and the familiarity their legal representatives must have with the case, I do not regard the time claimed for preparation is justified. With the knowledge and understanding of the issues and evidence they now must have, I am persuaded that the claims for preparation for trial have also been overestimated.
Doing the best I can, from the information provided by each party and their cost consultants and with a much clearer understanding of the issues and complexity of the trial, I would allow further security on each application in the following amounts:
(1) Primelife and Sent
(a)I would allow the claim of $51,734.50 mentioned in paragraph 29(a) above.
(b)The period mentioned in paragraph 29(b) above spans the previous application for security for costs, directions hearings, case management conferences, various pleading disputes and the leave granted to the plaintiff to file and serve a further amended statement of claim. There was a substantial amount of work involved and I would allow that claim in the sum of $101,190.41.
(c)I would also allow the claim for $2,392.05, for the period 28 November 2009 until 4 March 2010.
(d)I am most sceptical of the estimate of $742,288.50 as the amount of the claim from the period 4 March 2010 until the first day of trial. In my opinion a sum of $250,000 is a generous allowance for preparation for the relevant period up to and including the first day of trial, but that allowance is to include the amounts mentioned in paragraphs (a), (b), and (c) above.
(e)I do not understand why a separate claim has been made for the security for costs applications mentioned in paragraph 29(e) above. While the claim is certainly more specific it appears to overlap with the more general description of the work mentioned in paragraph 29(b) above. It is true that there is not a complete overlap, but the isolation of the costs associated with the applications for security for costs has made it difficult to be satisfied with the reasonableness of the overall claim for the period. Accordingly, I will not allow that claim in addition to the claim mentioned in paragraph 29(b) above.
(f)Accordingly, I would allow Primelife and Sent additional security for costs until the first day of trial in the sum of $250,000.
(2) Darrer
(a)I would allow in full the claim mentioned in paragraph 34(a) above.
(b)I would allow in full the claim mentioned in paragraph 34(b) above.
(c)In relation to the claim mentioned in paragraph 34(c) above, Darrer has already conceded that this amount should be reduced by $28,000. In my opinion it should be reduced by a further sum of $22,000 reflecting an excessive claim for preparation for trial.
(d)I would allow the claim in paragraph 34(d) above only because there is no overlapping period to which the claim relates.
(e)I will not allow the claim mentioned in paragraph 34(e) above as it falls within the periods (a), (b) and (c). The overlap creates uncertainty as to its validity as a separate item of charge.
(f)Accordingly, I would allow Darrer additional security for costs up to and including the first day of trial in the sum of $225,000.
(3) Rathner
The starting point for Rathner is the assessment made by Ms Van Den Berg of an estimated cost of preparation for trial in the sum of $243,495.80. Having reviewed the basis of the assessment, I consider that no allowance should be made for a notice to admit. The claim for the preparation of a witness statement for Mr Rathner seems excessive. The claim of $41,378 to read witness statements filed by the other parties seems excessive. The claim of $111,066.80 for “trial preparation” is excessive. Of that sum, $94,120 is counsel’s fees. I would allow five days for each of senior and junior counsel only. The item, “instructions for brief to date of trial” seems to overlap with other items, in particular, preparation of Rathner’s witness statement. I will allow Rathner the sum of $150,000 by way of additional security until the first day of trial.
These amounts are in addition to any security awarded on 30 April 2009, and the prior award of security by Mandie J in the case of Primelife and Sent and by agreement in relation to the other defendants. I will order that such additional security be provided in a form acceptable to the Prothonotary by a date to be fixed, and in default of such security the claim and counterclaim be stayed.
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