Camping Warehouse v Downer (Security for Costs)
[2016] VSC 23
•28 January 2016
| IN THE SUPREME COURT OF VICTORIA AT MELBOURNE | Not Restricted |
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2014 1423
| CAMPING WAREHOUSE AUSTRALIA PTY LIMITED (formerly MOUNTAIN BUGGY AUSTRALIA PTY LIMITED) (ACN 097 355 578) | Plaintiff |
| v | |
| DOWNER EDI LIMITED (ACN 003 872 848) | Defendant |
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JUDGE: | Digby J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 25 January 2016 and on submissions subsequently filed on 27 January 2016 |
DATE OF RULING: | 28 January 2016 |
CASE MAY BE CITED AS: | Camping Warehouse v Downer (Security for Costs) |
MEDIUM NEUTRAL CITATION: | [2016] VSC 23 |
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RULING in relation to defendant’s foreshadowed application for Security for Costs
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APPEARANCES: | Counsel | Solicitors |
| For the plaintiff | Mr N O’Bryan SC with Mr M Symons | Elliott Legal |
| For the defendant | Mr S Finch SC with Mr G Meehan and Mr M Guthrie | Colin Biggers & Paisley |
HIS HONOUR:
General outline of the parties’ positions
This proceeding is a group proceeding in which the plaintiff is funded.
The proceeding relates to the plaintiff’s allegations that an announcement to the market by the defendant on 1 June 2010, that the defendant would make a provision of $190m against a rolling stock manufacturing contract it was undertaking as part of the Waratah Train Project, resulted in a substantial fall of the value of the defendant’s shares on the Australian Securities Exchange (ASX), in circumstances where from about mid-January 2010 the defendant had failed to fully, properly and in a timely manner, disclose information material to that project to the ASX.
The plaintiff alleges that the defendant’s above outlined conduct contravened its continuous disclosure obligations under the ASX Listing Rules and the Corporations Act 2001 (the Act), and was misleading and deceptive in contravention of that Act.
The plaintiff claims that it, and defined group members in relation to the proceeding, suffered loss as a result of these alleged contraventions.
This proceeding has been on foot since 2014 and the trial of this proceeding is fixed to commence on 2 February 2016.
The plaintiff in June 2015 consented to providing a sum to secure the defendant’s costs and during 2015 it was contemplated in Court orders and discussions at directions hearings, that the defendant would probably seek to obtain additional security for its costs at an appropriate time in the future.
The defendant has now foreshadowed an application for additional security for costs and at a recent pre-trial directions hearing on 25 January 2016 a dispute crystallised as to whether the defendant was, at this stage of the proceeding, entitled to file and have determined, its foreshadowed application for additional security for costs.
In the above circumstances, including as a result of the impending trial, there is an urgent need for the security for costs issues which have recently emerged to be managed and if possible determined.
Plaintiff’s Submissions
The plaintiff submits that the defendant ought not be permitted to now make or agitate any application for additional security for costs. It also submits that in no circumstances should the defendant’s late application for security cause a trial date, fixed six months ago to now be vacated which would cause a grave injustice to the plaintiff.
The plaintiff also submits that if the defendant is permitted to agitate an application for additional security, such application will not be capable of being heard until well after the commencement of the trial on 2 February 2016 because the plaintiff requires certain costs information from the defendant before the plaintiff can brief its costs expert and because such an application will take some months to finalise.
For the above reasons, the plaintiff submits that the defendant’s application should be dismissed.
The plaintiff also submits that there has to date been no determination of the plaintiff’s liability for security of costs and the Court’s discretion toward security for costs has not been enlivened in this proceeding. The plaintiff relies on earlier submissions dated 4 June 2015, and notes that:
(a) even with the benefit of an additional 7½ months from the defendant’s receipt of the plaintiff’s submissions of 4 June 2015, the defendant still has filed no evidence that the plaintiff will be unable to satisfy an adverse costs order; and
(b) the compromise in June 2015 of the defendant’s claim for security for costs filed on 30 May 2014 occurred without any judicial determination as to liability for security for costs and the plaintiff repeats that it disputes that the discretion to make an order for security for costs is enlivened.
The plaintiff submits that the order made by Gardiner AsJ on 11 June 2015 requiring the plaintiff to deposit security in the sum of only $120,000 was made by consent and on the papers, without any admission or finding of liability (Exhibit “PAB-1”).
The plaintiff contends that it consented to orders permitting the defendant to bring a further application for security (Gardiner AsJ orders made on 11 June 2015, Exhibit “PAB-1”), and the date by which such an application could be made was then limited by Sifris J’s orders made on 6 November 2015 (Exhibit “PAB-2”), namely 27 November 2015, so that any application for security would have to be made more than two months prior to trial.
The plaintiff contends that by 25 January 2016, when the defendant’s foreshadowed application was, the plaintiff asserts, first seriously agitated, the plaintiff had undertaken the bulk of the preparatory work for trial, and it had done so in circumstances in which the defendant had threatened (or said that it was “considering” making application) but never acted on that threat by actually commencing an application for further security.
The security which the defendant has foreshadowed it will seek is in the sum of $1,864,723 (see defendant’s draft summons given to the plaintiff on 25 January 2016 which refers to a letter exhibited at “PAB-4”).
The plaintiff submits that it would be gravely unjust to any plaintiff in any proceeding for security in such a sum to be ordered days prior to hearing where an inability to give security within a day or two’s time would cause a long-standing trial date, in respect of which significant time and costs have been expended, to be lost.
The plaintiff submits that there was apparent overreach of the defendant’s initial claim for security, and therefore in the event that the defendant’s application for additional security is permitted to go to hearing, it is imperative that the plaintiff be given an opportunity to properly brief its own costs expert. Mr Trimbos, the plaintiff’s cost consultant, raised many points of substance in relation to the first application for security, and the plaintiff would seek to adduce expert evidence in relation to the present application if that proposed application was permitted to proceed.
The plaintiff points out that by the 10 January 2016 letter, it sought clarification of matters referred to and arising from the affidavit of Ms Harris served on 23 December 2015 which is relied on in relation to further security for costs by the defendant and the defendant’s letter of 15 December 2015 (Exhibit “PAB-4”). The plaintiff contends that there is a good deal of information outstanding from the defendant in relation to its claim for further security.
The plaintiff also submits that, by reference to its earlier submissions of 4 June 2015, the indemnity provided by Mr Elliott in relation to this proceeding, as detailed below, means that the defendant is not subject to the prospect that the plaintiff may be unable to satisfy an adverse costs order.
Defendant's Submissions
Downer's first security for costs application
The defendant’s submissions highlight the following
(i) Downer filed a Summons on 30 May 2014 seeking security for costs which at paragraph 4 sought -
An order that the plaintiff provide security in an amount to be determined by the Court for the defendant's costs up to and including close of pleadings and that until security is provided by the plaintiff, the proceedings be stayed.
That application was contested as to liability and quantum.
Litigation funding for the plaintiff
(ii) Pursuant to order 3 of Sifris J made on 28 July 2015 Downer was provided with a copy of a Litigation Funding Agreement entered into between BSL and the plaintiff dated 18 June 2015 (a copy of the funding agreement is attached hereto as Annexure B.)
(iii) Under that funding agreement BSL is obliged to pay any Adverse Costs Orders[1] where that is defined in the funding agreement to mean:
[1]Clause 8.4 of the Funding agreement.
any costs order made in favour of the defendant or any of them) against the plaintiff and/or BSL in the Proceedings in respect of costs of the defendant incurred during the terms of this BSL Agreement.
(iv)Pursuant to the above funding agreement BSL is obliged to provide the security for costs of Downer if the Court orders the plaintiff to provide any security for costs.[2]
[2]Clause 8.5 of the Funding agreement.
Background to current application for top up security
(v) Associate Justice Gardiner made orders by consent on 11 June 2015 which included:
[7] Liberty to the defendant to apply to bring a further application for security.
(vi)Orders were made by Justice Sifris on 11 November 2016 which included:
[26] Any application by the defendant for further security for costs and supporting affidavit to be filed and served by 27 November 2015.
(vii) At that directions hearing, Senior Counsel for the plaintiff stated at Transcript page 8.16 that:
... of course, it is always open to Downer to seek further security for costs if it is so minded to do and we say nothing further about that, Your Honour; we will wait and see what application is made and primarily on the basis of what materials,
(viii) At the directions hearing on 11 December 2015, Senior Counsel for Downer had the following exchange with the Court when discussing vacating order 26 made on 6 November 2015:
... The parties have in the past managed to agree about security.
If it's convenient to Your Honour, what we thought we'd propose is that the parties confer about the need for an amount of any further security, and in the event and to the extent that there's any disagreement that the matter could be relisted at Your Honour's convenience? But to leave it in that slightly amorphous and inchoate state, but really depending on whether Your Honour thinks that's an appropriate thing to do in the circumstances?
HIS HONOUR: I wouldn't be at all troubled by that providing the applicants are mindful of any criticism that might arise as a result of the timing of the application ultimately.
MR FINCH: Yes, yes. So if we could do that, Your Honour, if Your Honour's happy with that?
HIS HONOUR: I'm content with that.
(ix) Pursuant to the process envisaged, Downer's solicitor wrote to the plaintiff's solicitor on 15 December 2015 setting out the further security sought and correspondence was had between the solicitors on 24 and 25 December 2015 as deposed to in the Bannon affidavit[3] served upon the plaintiff's solicitor on 22 January 2016.
[3]Affidavit of Paul Anthony Bannon sworn 22 January 2016.
(x) The parties consented to the order which was then made thereby vacating paragraph 26 of the 11 November orders.
(xi) Downer's expert cost consultant's report on quantum for the work in respect of which top up security is sought was served upon the plaintiff's solicitor on 5 January 2016.
(xii) The plaintiff's solicitor sought information said to be relevant to instructing their own costs expert on 10 January 2016. That letter remained unanswered as at the directions hearing on 25 January 2016. That letter has been answered on 26 January 2016.
The defendant submits that it has not in fact delayed in pursuing the application. It relies upon the facts are as deposed to by Mr Bannon in his affidavit of 22 January 2016, and short of having the matter listed before the duty judge sitting at the start of January, the defendant could not have otherwise caused the application to be heard earlier. The plaintiff's solicitor advised that he was going to be away overseas from Christmas to 23 January. The defendant also submits that the plaintiff has not been put in a position where it has continued to expend legal costs in a misapprehension created by the defendant, that further security would not be sought by the defendant.
The defendant also submits that:
(a) The plaintiff is funded, has the benefit of a personal indemnity from Mr Elliott (which has not been provided to Downer) and an indemnity from a company associated with Mr Elliott (assumed to be BSL) and has entered into a funding agreement with BSL whereby BSL is obligated to provide any security the Court orders the plaintiff to pay.
(b) BSL is entitled pursuant to the funding agreement to be paid from any Resolution Sum[4] the case Costs and a further amount as Consideration for financing the Case and performance of its obligations under the agreement, being a maximum of 40% of that Resolution Sum.[5]
[4]Resolution Sum is defined in the funding agreement to mean any money received or payment made to settle, compromise or resolve one or more of all the Claims. Claims means the claim or claims the plaintiff may have against Downer as alleged in this proceeding.
[5]Clause 12.1 of the funding agreement.
(c) No prejudice to the plaintiff in dealing with an application for top-up security has been identified other than its legal team being 'distracted' from preparation for the trial,[6] if it chooses to oppose the making of an order for further security. Similarly and critically, no prejudice to the plaintiff in providing top up security has been identified.
[6] Mr O'Bryan SC at transcript page 45, commencing line 19 in the transcript of 25 January 2016.
(d) Downer served its expert cost consultant's report on 5 January 2016. The report dealt with:
(xiii) incurred costs of -
(A) the event study expert and
(B) the November discovery exercise - both solicitor's costs and a third party supplier who assisted with the task of electronic stamping of the documents and creation of the excel spreadsheet and electronic copies of the documents provided to the plaintiff's solicitor in compliance with orders 15 and 16 made by the Court on 6 November 2015;[7]
[7] See Bannon affidavit paragraph 30.
(xiv) estimated costs of preparation from 15 December 2015 to 1 February 2016 for solicitors, counsel, expert and disbursements on the assumptions set out in the worksheet provided to the plaintiff's solicitor on 15 December 2015; and
(xv) estimated costs for a 2 week hearing on the assumptions of time involved for solicitors, counsel, experts and disbursements as set out in the worksheet provided to the plaintiff's solicitor on 15 December 2015.
(e) The plaintiff has to date sought:
(i) a missing invoice from the Event study expert of US$5,400 (now provided) and an explanation for the discrepancy in the expert's report on his fees (now provided);
(ii) all instructions given to Lit Support in respect of its work for which a detailed tax invoice showing work done, quantities involved and a price per quantity and item of work was provided;
(iii) fee and disbursement invoices of Counsel for work done (which was the subject of an estimate as to time at the rates shown);
(iv) other disbursement invoices for costs such as copying, travel, accommodation and transcript (which were estimates).
The Court vacation period, the closure of the plaintiff's solicitor's office on 24 December 2015, and his absence overseas until 23 January 2016 are not matters of which the plaintiff should be entitled to take advantage of in this case.
Interlocutory determinations
Consequences of the recent history of this matter
In my view, as a result of deficits in the way both the plaintiff and the defendant have dealt with the defendant’s anticipated application for further security for costs, a regrettable situation has now arisen in which there is very little time now available before the commencement of the trial of this matter within which to address and determine issues in relation to the defendant’s desire to obtain a further order for additional security for costs for legal expenditure incurred up to the conclusion of the forthcoming trial.
For clarity I specify the deficits referred to as follows. On the part of the defendant it was inadequate for it not to make further and more sustained efforts after 4 January 2016 to ensure the foreshadowed applications be brought on for determination as early in January 2016 as possible, given the trial of the matter was fixed to commence approximately four weeks later on 2 February 2016.
This is particularly so given that the defendant should have anticipated at the latest by 25 December 2015, upon receipt of Mr Elliott’s email at [10.14am] that day, that it was most unlikely that there would be any agreement with the plaintiff about the provision of additional security.
Furthermore, in light of the position outlined by the Supreme Court Registry to Mr Bannon’s Melbourne office on 5 January 2016, and my comments to the parties on 11 December 2015[8] the defendant should have approached the duty judge in the Supreme Court Practice Court as soon as could be done after 5 January 2016, to arrange for the earliest possible hearing of its foreshadowed application.
[8]T3 L7-10.
It should also in my view have been sufficiently clear to the defendant and its advisers that deferring or delaying its application for further security for costs until Monday 25 January 2016, in circumstances including the scheduled commencement of the trial of the relevant proceeding five business days later, and where I had warned on 11 December 2015 that the defendant needed to bear in mind that it might ultimately be criticised in relation to its timing of any application for additional security for costs, any delay in prosecuting its security for costs application might well result, amongst other things, in potential disruption to the trial and might also result in some prejudice to the plaintiff and or to the defendant’s own application.
In respect of the plaintiff, I consider that after 15 December 2015 [“PAB-4”], the plaintiff and its advisers should have commenced addressing and preparing to respond to the security for costs demand which had been made in the defendant’s solicitor’s letter dated 15 December 2015.
Furthermore, by Thursday 24 December 2015 [“PAB-7” and “PAB-8”], the battle lines had been drawn between the parties in relation to the defendant’s demand for additional security for costs. Therefore, when on 5 January 2016 the defendant served its cost report in the form of an Affidavit of Elizabeth Harris sworn 23 December 2015 in support of its demand for additional security well in excess of $1m, the plaintiff should also have been astute to immediately commence undertaking whatever steps it considered were necessary to respond to the defendant’s supporting materials. For these reasons I do not regard it as cogent or reasonable for the plaintiff to complain that an expeditious timetable for the disposition of the defendant’s application prejudices the plaintiff.
In this regard I note that Mr Elliott’s email of 25 December 2015 [10.41am] [“PAB-8”] claims that because of the immediacy of the trial to commence on 2 February 2016, all the plaintiff’s resources were dedicated to preparing for trial.
It is also noteworthy in my view that on 5 January 2016 the defendant’s solicitors also provided a copy of Ms Harris’ Affidavit to Junior Counsel for the plaintiff who had been in touch with Counsel for the defendant on 4 January 2016.
Finally, for the above reasons I conclude that there has been no disentitling delay on the part of the defendant which foreshadowed its intent to pursue top up security for costs prior to the directions hearing on 6 November 2015, resulting in Order [26], and again at the hearing on 11 December 2015 and also very explicitly notified it relevant intentions in correspondence with the plaintiff from at least 15 December 2015.
Additionally, in my view for the reasons referred to in the last preceding paragraph there is no basis upon which I should conclude that the plaintiff was put in a position where it could reasonably consider that it was expending legal costs in circumstances where the defendant did not intend to make a further application for security for costs.[9]
[9]I also note in relation to Mr Bannon’s communications with the plaintiff about his client’s foreshadowed application that the plaintiff has chosen not to file any affidavit material supporting its position in relation to these current issues and this application for a Ruling.
Liability for Security for costs
In my view the question of the plaintiff’s liability to furnish security for the defendant’s costs has been foreclosed by the plaintiff, without reservation in respect of its liability in that regard, and in the context of the defendant’s formal application for security which was at the outset contested, agreeing on 11 June 2015 to pay $200,000 in relation to the defendant’s legal costs. In my view the plaintiff by its conduct admitted and accepted liability for security for the defendant’s costs, as appropriately determined, in the proceeding.[10]
[10]Although the plaintiff argues that its consent in June 2015 to provide $200,000 security for the defendant’s costs was effected without any admission of liability, the Orders of 11 June 2015 do not reflect such a position and the plaintiff pointed to no evidence of any reservation of liability.
Furthermore, on 11 June 2015 the plaintiff agreed to consent orders that the defendant be at liberty to apply to bring a further application for security later in the proceeding and at the hearing before Sifris J on 6 November 2015 acquiesced to Order [26] providing for any application by the defendant for further security for costs being made by 27 November 2015.[11]
[11]T8 L14-19.
It is convenient here to note that in relation to the hearing before Sifris J on 6 November 2015 that it was submitted to me on 25 January 2016, that Order [26] made by his Honour on 6 November 2015 was in the nature of “a drop dead date for such a security application” by the defendant. I have read the transcript of the hearing before his Honour on 6 November 2015 and can see no support for this characterisation, which I reject.
Furthermore, the undisputed and unqualified statements in Court on 11 December 2015[12] and Mr Elliott’s email to Mr Bannon on 24 December 2015 [11.15am] [“PAB-6”] are inconsistent with either party considering that on 6 November 2015, Sifris J fixed, or intended to fix, a drop dead date by which the defendant was to make any further application for security for costs.
[12]T2 L19 to T3 L23.
For the above reasons I reject the plaintiff’s argument that to deal with the defendant’s foreshadowed application I must first determine the plaintiff’s liability for security for costs and its contention that at this time the Court’s discretion to order security has not been enlivened. In my view, in the above circumstances, the defendants proposed application for additional security for costs should be entertained and dealt with on its merits, and as quickly as can be done.
I add in relation to the plaintiff’s liability for security for costs, although I do not consider that I need in any way to rely on the following for the purposes of this Ruling, and do not do so, that:
(xvi) Pursuant to that funding agreement BSL is obliged to pay any Adverse Costs Orders[13] where that is defined in the funding agreement to mean -
[13]Clause 8.4 of the Funding agreement.
any costs order made in favour of the defendant or any of them) against the plaintiff and/or BSL in the Proceedings in respect of costs of the defendant incurred during the terms of this BSL Agreement.
(xvii) In that agreement, 'defendant' is defined as Downer and 'Proceedings' is defined as 'Class Action', which in turn is defined as these proceedings S CI 2014 01423 in the Supreme Court of Victoria;
(xviii) Furthermore, pursuant to that funding agreement BSL is obliged to provide the security for costs of Downer if the Court orders the plaintiff to provide any security for costs;[14]
[14]Clause 8.5 of the Funding agreement.
(xix) The plaintiff is funded, has the benefit of a personal indemnity from Mr Elliott (which has not been provided to Downer) and an indemnity from a company associated with Mr Elliott (assumed to be BSL) and has entered into a funding agreement with BSL whereby BSL is obligated to provide any security the Court orders the plaintiff to pay;
(xx) BSL is entitled pursuant to the funding agreement to be paid from any Resolution Sum[15] the case Costs and a further amount as Consideration for financing the Case and performance of its obligations under the agreement, being a maximum of 40% of that Resolution Sums; [16]
these factors are also in my view indicative of the plaintiff’s likely liability to secure the defendant’s costs in this proceedings. This is particularly so absent any evidence that the indemnity referred to above is not said by the plaintiff to be supported by any evidence as to its substance.
[15]Resolution Sum is defined in the funding agreement to mean any money received or payment made to settle, compromise or resolve one or more of all the Claims. Claims means the claim or claims the plaintiff may have against Downer as alleged in this proceeding.
[16]Clause 12.1 of the funding agreement.
Because of the immediacy of the forthcoming trial an expedited timetable should now be fixed to afford the parties the opportunity to present material and submissions as to contested issues in relation to the quantum of the additional security for costs which may be justified and appropriate. I set out below the interlocutory orders directed to this end.
To best obviate potential prejudice to the plaintiff and the defendant , and disruption to the Court, in relation to the commencement and conduct of the trial of these proceedings I should endeavour to determine the defendant’s application as quickly as possible and I foreshadow that as part of that determination I shall likely give consideration to what, if any, portion of the defendant’s claimed security ought to be disallowed because it will not be possible now to determine the defendant’s application before the commencement of the trial next Tuesday. As I have detailed, both parties bear some measure of responsibility for this unfortunate situation.
I am however, firmly of the view that the present unfortunate situation which prevents the timely determination of the defendant’s application for more security need not, and should not, interfere with the hearing of this matter commencing next Tuesday or with its continuation thereafter.
Insofar as the below timetable may be demanding for the parties, probably particularly for the plaintiff, I consider that the plaintiff should have been preparing its responses to the defendant’s application from mid-December 2015. It is in these imperfect circumstances appropriate to manage the defendant’s application as set out below, and necessary to do so to minimise delay and disruption to the forthcoming trial which will involve the evidence of many witnesses and at least one overseas expert witness, and to best serve the interests of justice in this proceeding.
I consider that in the circumstances the orders made in the last paragraph of this Ruling are those most likely to result in a just, efficient, timely and cost effective disposal of the proposed application and also the overall proceeding.
In making the orders I have also considered the distraction created for the parties, particularly the plaintiff as a result of having to respond to the defendant’s application.
Although such efforts as are necessary will no doubt add to the plaintiff’s burden, its legal team is made up of at least two counsel, and as I have pointed out, it is reasonable to take into account that the plaintiff and its advisers, and any cost consultant retained by the plaintiff, should have been working toward a detailed response to the defendant’s application for some weeks.
I also observe that because the plaintiff has since late December 2015 been aware of the amounts asserted by the defendant to be the appropriate additional sum of security required the plaintiff should be diligent in making such arrangements as are needed to be able to very promptly provide security to meet the possible contingency that such an order may soon be made in favour of the defendant, and because delay in provision of security, were it to be ordered, has the potential to delay the prosecution of the plaintiff’s own case.
For the above reasons I order:
1.By 4.00pm on Friday 29 January 2016, the defendant file and serve any application for additional security for costs, together with any materials and submissions in support[17] of such application.
[17]The authenticated Order made 28 January 2016 is to be read taking into account this change. The Court does not consider it necessary to produce a further authenticated order.
2.By 4pm on Tuesday 2 February 2016, the plaintiff file and serve any material, including submissions, on which it intends to rely in response to the defendant’s application for additional security for costs.
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