Crawley Investments Pty Ltd v Noble Group Ltd [No 2]
[2015] WASC 16
•16 JANUARY 2015
CRAWLEY INVESTMENTS PTY LTD -v- NOBLE GROUP LTD [No 2] [2015] WASC 16
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WASC 16 | |
| Case No: | CIV:2713/2013 | 16 JANUARY 2015 | |
| Coram: | EDELMAN J | 16/01/15 | |
| 8 | Judgment Part: | 1 of 1 | |
| Result: | Security for costs ordered for the period up to and including mediation in the amounts of $25,000 (for action against first defendant) and $20,000 (for action against third defendant) | ||
| B | |||
| PDF Version |
| Parties: | CRAWLEY INVESTMENTS PTY LTD NOBLE GROUP LTD PAWAY LTD CRAWLEY RESOURCES LTD |
Catchwords: | Practice and procedure Security for costs Amount of security to be posted |
Legislation: | Corporations Act 2001 (Cth), s 1335 |
Case References: | Brundza v Robbie & Co (No 2) [1952] HCA 49; (1952) 88 CLR 171 Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 Crawley Investments Pty Ltd v Elman [2014] WASC 233 Pathway Investments Pty Ltd & Anor v National Australia Bank Limited [2012] VSC 97 Pearson v Naydler [1977] 3 All ER 531 Quadrant Constructions Pty Ltd v Morgan Smith Barney Australia Pty Ltd [2009] VSC 455 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
NOBLE GROUP LTD
First Defendant
PAWAY LTD
Second Defendant
CRAWLEY RESOURCES LTD
Third Defendant
Catchwords:
Practice and procedure - Security for costs - Amount of security to be posted
Legislation:
Corporations Act 2001 (Cth), s 1335
Result:
Security for costs ordered for the period up to and including mediation in the amounts of $25,000 (for action against first defendant) and $20,000 (for action against third defendant)
Category: B
Representation:
Counsel:
Plaintiff : Mr S J Lemonis
First Defendant : Mr M D Cuerden SC
Second Defendant : No appearance
Third Defendant : Mr S T Halls
Solicitors:
Plaintiff : Lemonis & Tantiprasut Lawyers
First Defendant : Clayton Utz
Second Defendant : No appearance
Third Defendant : Hotchkin Hanly
Cases referred to in judgment:
Brundza v Robbie & Co (No 2) [1952] HCA 49; (1952) 88 CLR 171
Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497
Crawley Investments Pty Ltd v Elman [2014] WASC 233
Pathway Investments Pty Ltd & Anor v National Australia Bank Limited [2012] VSC 97
Pearson v Naydler [1977] 3 All ER 531
Quadrant Constructions Pty Ltd v Morgan Smith Barney Australia Pty Ltd [2009] VSC 455
- EDELMAN J:
(This judgment was delivered orally after the hearing and has been edited including for grammar and syntax and inclusion of footnote references and authorities.)
Introduction
1 These are applications by two of the defendants (Noble Group and Crawley Resources) to this action. These two defendants seek for security for costs under s 1335 of the Corporations Act 2001 (Cth). An application by another defendant (Paway) was resolved by consent shortly before this hearing.
2 Initially, there were two matters in dispute on the applications. The first was whether security for costs should be ordered. The second was the amount of security that should be posted if security were to be ordered.
3 On 13 January 2015, in an email to the Court, copied to the defendants, Crawley Investments conceded that security should be ordered. But dispute remained concerning the quantum of security, particularly the quantum sought by the Noble Group.
4 Crawley Investments submitted that security should be in the range of $15,000 to $20,000 for each defendant for the period leading up to and including mediation on the basis that it is not necessary for discovery to take place prior to mediation.1 Crawley Investments said that it did not need any discovery in order to mediate the matter. If discovery were to be provided during the period for security then Crawley Investments submitted that the quantum should be $20,000 to $25,000.
5 In contrast, the Noble Group sought security for its costs incurred during a period in which it will file a defence and go to mediation in the amount of $75,000.
6 Crawley Resources sought security of $26,692 if the period were to include a filing of defence and mediation as well as discovery.
7 Paway sought security of $25,000. Paway's application was resolved by consent with orders including that Crawley Investments post $22,500 security for costs.
8 The assessment of quantum of security for costs is not intended to provide a complete indemnity for costs. It is not an exercise in mathematical precision; much can depend on an assessment of the feel of the case. In this case, and on any conceivable view, the amount sought by the Noble Group is a multiple of what I consider could be reasonably recovered on a taxation. The approaches of both Crawley Investments and Crawley Resources were far more measured.
9 For reasons I explain below the amount of security for costs that should be posted by Crawley Investments in relation to the Noble Group and Crawley Resources is, respectively, $25,000 and $20,000.
The Noble Group's submissions
10 Initially, the position of the Noble Group was that security for costs should be posted for the period leading up to, and including, discovery and then mediation. The amount sought was $75,000.2
11 The amount of $75,000 sought by the Noble Group was based, in part, upon an estimate of the cost of discovery being around $30,000. The Noble Group submitted that it 'would be an unusual course for a matter to go to mediation immediately after the close of pleadings'.3
12 Prior to the hearing this morning, my associate emailed the parties indicating that I wished to hear submissions concerning the timing of discovery and mediation. My particular concern was why the Noble Group considered it to be 'unusual' for mediation to be delayed until after $30,000 of costs were expended on discovery. An early mediation, if successful, could avoid all these costs. And even if the mediation somehow stalled because of a need to consider discovered documents then the mediation could always be adjourned and the documents sought could be provided even on a without prejudice basis. Contrary to the submission of the Noble Group, it would be unusual if a mediation were delayed until after substantial discovery had been completed. This would have the effect that large legal costs would be incurred; a sunk expense making commercial resolution more difficult.
13 Senior counsel for the Noble Group on this application filed supplementary submissions in response to these questions. He properly conceded that it was not necessary for full discovery prior to mediation. He submitted that discovery was required by the Noble Group in relation to at least three categories. But the amount of security for costs sought remained at $75,000 despite a considerable reduction in the amount of work to be performed, on the basis that the taxed cost of a one day mediation (which had not previously been included in the estimate) would be around $30,000.
14 It was ultimately common ground that some discovery prior to mediation might be appropriate. Senior counsel for the Noble Group gave an indication of the types of categories for that discovery. Counsel for Crawley Investments suggested that there would be unlikely to be a large number of documents in those categories. If there were, then the discovery orders that I would make would limit the discovery to small categories that were the most important. In any event, it is not appropriate in this case for substantial (in the sense of costly) discovery prior to mediation.
15 The Noble Group relied upon the affidavit evidence that I discuss below to assert that a total indemnity for party/party costs (excluding the costs of discovery and inspection and the costs of this application) would be around $93,000.
16 There are a number of aspects of this $93,000 figure which are surprising.
17 First, from a broad perspective, and drawing upon my knowledge of the litigation, the figure is a large amount for the development of a case to an early mediation where the case ultimately is not overly complex, although it does involve transaction documents which are not simple.
18 Secondly, this assessment was based upon an estimate contained in an affidavit from a barrister who said that she had drawn the Draft Bill of Costs based on a review of court documents in the action (which do not yet include a defence) and the accounts rendered.4 The barrister was not one of the legal practitioners involved with the conduct of this matter. She did not say the extent to which she had taken instructions, if any, about the nature of the issues in dispute. She did not annex, and the Noble Group did not provide, any of the actual accounts rendered. Substantial figures in the 'estimate' were said to be based on matters where the scale limits would be lifted.
19 Thirdly, and descending to the detail of the $93,000 figure, there is a surprising estimate of $33,848 which was said to be the cost to the Noble Group of a one day mediation. Several points should be made about this figure.
20 One point is that the estimate for mediation included $10,000 as travel costs for a representative from the Noble Group. The representative of the Noble Group is based in Hong Kong where the Noble Group is located. But there was no evidence that the representative of the Noble Group who will attend the mediation does not travel (even travel regularly) to Australia for Noble Group business. Nor was any evidence given in support of the premise that an airfare and a night's accommodation after the flight from Hong Kong (if indeed the flight were to be from Hong Kong) to Perth would cost $10,000.
21 Another point is that the assertion of $33,848 as the cost of preparing for and attending mediation contrasts sharply with the estimate of Paway ($10,000 to $11,000)5 and the estimate of Crawley Resources in submissions ($10,918).6 A significant amount of the cost assigned to mediation by the Noble Group involved preparation by, and conferences attended by, senior counsel and a senior practitioner. There was no evidence or submissions concerning whether a separate figure of $40,000 for 'preparation for trial' also involved time spent by the same senior counsel and senior practitioner.
22 Fourthly,the estimate also included $25,000 for 'preparation for trial' prior to this application and another $15,000 for 'preparation for trial' in the period leading up to mediation.
23 There was no evidence concerning the matters on which that $40,000 had been or would be spent in 'preparation for trial' independently of the amount claimed in relation to the filing of a defence ($5,000, which would requiring the lifting of the Scale). There was not even any evidence that the $25,000 in the period before today's hearing had actually been spent. All that was said below the reference to those amount was (in what appears to be around 6 point font) 'Scale limits lifted'.
24 Fifthly,there was no evidence that any costs incurred by the legal representatives for the Noble Group had been reduced in any way as a result of any costs that had been charged to Mr Elman. Mr Elman had been the first defendant to this litigation until I ordered that the writ and service upon him be set aside on the basis that Crawley Investments had no prospect of successfully establishing that he was a party to the relevant agreements. The legal representatives for the Noble Group were also the representatives of Mr Elman and Mr Elman's application involved detailed and careful consideration of the same transaction documents and the same alleged oral agreements.
Crawley Resources' submissions
25 Crawley Resources was far more temperate in its submissions and claim for security for costs. It conceded that mediation could reasonably take place prior to discovery. On that basis it sought security of $26,692 if the period were to include filing of a defence and mediation. That was supported by an affidavit from a solicitor involved in the litigation who deposed to costs incurred and anticipated of around this amount.7
26 When, as here, an application is brought promptly, security for costs can include costs already incurred.8 Unlike Noble Group's estimate from a lawyer not connected to the litigation, Crawley Resources provided detail of the actual costs incurred to date of $3,476.9 Its further anticipated costs to mediation include a defence ($4,730), a reply ($4,730), directions hearings ($2,838), discovery ($4,730) and inspection ($4,730). Crawley Resources also estimated costs for a one day mediation of $10,918.
27 Counsel for Crawley Resources properly accepted that the included amount for preparing a reply was an error. And, as I have explained, the cost of discovery and inspection can be reduced on the basis that it is unlikely that I will order full discovery and inspection of documents discovered by Crawley Investments prior to mediation.
Quantification and conclusion
28 The assessment of security for costs is not an exercise in precision. Much depends on the 'feel' of the case.10 As Forrest J has said, '[d]escending into too much detail does not assist in the conduct of the exercise because by its nature it is necessarily imprecise and requires guesstimates as much as estimates'.11 In making the assessment, the security ordered should not be in an amount which is disproportionate to the issues in dispute.12 Further, the amount of security is not intended to provide a complete indemnity for the costs incurred by a defendant.13 At one time there was a practice in England of fixing security for costs at two thirds of the estimated party/party costs up to the stage when security was ordered.14
29 I take into account, as counsel for Crawley Investments accepted, that the costs incurred by the Noble Group are likely to be more than those incurred by Paway or Crawley Resources. Noble Group is likely to be essentially the lead defendant.
30 I also take into account that the claim is not a small one. Crawley Investments appears to quantify its loss as $12.7 million. That is a matter that will affect the amount of work involved. But, on my assessment of the issues in the case, based in part upon my decision on a preliminary issue between the parties (in which, as I have mentioned, the solicitors for the Noble Group performed substantial work for Mr Elman),15 the claim is not one of great complexity. The ultimate question may depend upon an assessment of the content of oral conversations that are said to amount to agreements, although these conversations will need to be considered in the context of the transaction documents and other contemporaneous materials.
31 I accept that the transaction documents which provide some context to those oral conversations are not simple. But, even apart from the particular concerns that I have mentioned, on my broad assessment at this stage, and in light of the matters I have mentioned above, the estimate of costs by the Noble Group substantially exceeds the likely costs that it would recover up to and including a mediation.
32 Overall, I consider that security for costs should be posted by Crawley Investments in relation to each defendant in the following amounts:
Noble Group $25,000
Crawley Resources $20,000.
1 Crawley Investments' submissions, 26 November 2014, [28].
2 Noble Group's chambers summons, 30 September 2014.
3 Noble Group's submissions, 31 December 2014, [19].
4 Affidavit of Ms Coulson, 30 September 2014, [12].
5 Affidavit of Mr Chesterman, 30 September 2014, page 22.
6 Crawley Resources' Submissions, 15 January 2015, [6(1)(a)(iii)].
7 Affidavit of Mr Halls, 12 January 2015.
8Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497, 515 (French J).
9 Affidavit of Mr Halls, 12 January 2015, [8].
10Pearson v Naydler [1977] 3 All ER 531, 537 (Megarry VC); Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497, 515 (French J).
11Quadrant Constructions Pty Ltd v Morgan Smith Barney Australia Pty Ltd [2009] VSC 455 [56] (Forrest J).
12Pathway Investments Pty Ltd & Anor v National Australia Bank Limited [2012] VSC 97 [47] (Davies J).
13Brundza v Robbie & Co (No 2) [1952] HCA 49; (1952) 88 CLR 171, 175 (Fullagar J).
14Pearson v Naydler [1977] 3 All ER 531, 537 (Megarry VC).
15Crawley Investments Pty Ltd v Elman [2014] WASC 233.
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