Global Medical Imaging Management Limited (in liquidation) v Australian Mezzanine Investments Pty Limited - [2003] NSWSC 432

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CITATION: Global Medical Imaging Management Limited (in liquidation) v Australian Mezzanine Investments Pty Limited & Anor [2003] NSWSC 432

HEARING DATE(S): 16/04/03

JUDGMENT DATE:
16 April 2003

JURISDICTION:
Equity Division
Commercial List

JUDGMENT OF: Einstein J

DECISION: Additional security ordered.

CATCHWORDS: Practice - Costs - Security for costs - Requirement for timely application - Stepped orders - Unfairness involved in failing to press further applications for increased security until shortly before final hearing

LEGISLATION CITED: Trade Practices Act 1974

CASES CITED: Idoport Pty Limited v NAB (2001) NSWSC 44

PARTIES :
Global Medical Imaging Management Limited (in liquidation) (formerly called Minotaur Funds Limited) (Plaintiff)
Australian Mezzanine Investments Pty Limited (First Defendant)
Perpetual Trustee Company Limited (Second Defendant)

FILE NUMBER(S): SC 50157/01

COUNSEL: Mr D Robertson (Plaintiff)
Mr NC Hutley SC, Mr Jones (First Defendant)
Mr PM Wood (Second Defendant)

SOLICITORS: Morgan Lewis Alter (Plaintiff)
Baker & McKenzie (First Defendant)
Blake Dawson Waldron (Second Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Wednesday 16 April 2003 ex tempore
Revised 21 May 2003

50157/01 Global Medical Imaging Management Limited (in liquidation) v Australian Mezzanine Investments Pty Limited

JUDGMENT

1 There are before the court motions for the provisions of additional security pursued by the two defendants.

2 The proceedings commenced on 20 April 2000 against the first defendant. The second defendant was joined into the proceedings on about 10 August 2001.

3 The current Statement of Claim sought to be propounded was filed on 8 November 2001 and is an extensive document covering 87 paragraphs. The general nature of the dispute was outlined in a Statement in support of an application to enter the proceedings into the commercial list prepared by the second defendant and filed on 210 October 2001. It suffices for present purposes to give that very broad and general summary:

A. NATURE OF DISPUTE

1. A claim for damages at law and/or in equity (including damages under section 82 of the Trade Practices Act), equitable compensation and an account of profits, and for declaratory relief, arising from communications between the Plaintiff and First Defendant preceding an acquisition of a business by the Second Defendant in its capacity as trustee of two trusts known as the Australian Mezzanine Investments No. 2 Trust ("AMIT 2") and the Australian Mezzanine Investments No. 3 Trust ("AMIT 3"). The Plaintiff claims that the First Defendant could not proceed with the acquisition of the business other than in conjunction with the Plaintiff. It is alleged that by proceeding with the acquisition without the First Defendant the Plaintiff breached an agreement, misused confidential information, breached section 52 of the Trade Practices Act 1974 and breached fiduciary duties owed by it to the First Defendant.

2. Claims by the Plaintiff that the Second Defendant is liable for the conduct of the First Defendant complained of by the Plaintiff because (a) the First Defendant, as manager of AMIT 2 and 3, was the agent of the Second Defendant as trustee of AMIT 2 and 3, or (b) alternatively because that conduct was conduct of First Defendant as manager of the trusts for or on behalf of the Second Defendant.

The position with respect to security for costs and orders and communications between the parties

4 Orders for security for costs have been made on an interim basis from 26 July 2001 in relation to the first defendant and from 12 October 2001 in relation to the second defendant. Generally these orders have been carefully worded so as to make quite explicit an acknowledgement that each defendant retains an entitlement to apply for further security for the reason that the costs of the proceedings as a whole are likely to exceed amounts ordered by way of security on an interim basis by a significant amount.

5 Notwithstanding that the question of security for costs has been before the court during directions hearings and at least once on a formal application for security for costs, it appears that there has never been required a judgment from the Court in relation to security. By and large parties have accommodated the particular requests for further security by correspondence and by the consent orders.

6 Up to this point in time the plaintiff has, through this regime, paid $340,000 by way of security for the costs of the first defendant and $208,000 by way of security for the costs of the second defendant.

First defendant’s position

7 The short position insofar as the first defendant is concerned is that by approximately 6 December 2002 it had received payment of security for its costs in the sum of $340,000, having by then incurred professional costs and disbursements which had been billed at $350,000 and having incurred unbilled professional costs and disbursements of $70,000, bringing of a total exposure of $420,000.

8 The position since 6 December 2002 is that an estimate of costs to be incurred by the first defendant to the end of hearing on a solicitor-client basis, results in costs for preparation of $218,500, costs to be incurred during the hearing of $211,050, bringing up a total of solicitor client costs of $429,550.

9 A claim is made to additional security by way of 60 percent of the $429,000 550 amount - that is to say, the claim is advanced to additional security in the sum of $257,730.00.

10 Mr Christopher has deposed as follows:

Costs to be incurred by the First Defendant

a) In the period between the date of swearing of this Affidavit and the commencement of the hearing, I anticipate the First Defendant will incur costs in performing a number of tasks. These tasks include, but are not limited to, the following:

"third party"

b) The First Defendant has retained Mr Noel Hutley SC and Mr Michael Jones of Counsel to appear at the hearing.

c) At the date of swearing of this affidavit, Mr Hutley charges $500 per hour or $5,000 per day (exclusive of GST) and Mr Jones charges $280 per hour or $2,500 per day (exclusive of GST).

d) In addition to my involvement, I also anticipate the involvement of Todd Marskell, an employed solicitor of B&M. There may also be occasions where assistance from paralegals at B&M will be needed.

e) At the date of swearing of this Affidavit, my rate for these proceedings is $435 per hour (exclusive of GST) and Mr Marskell's rate is $295 per hour (exclusive of GST). I do not expect these rates will increase prior to the hearing.

Preparation: $218,500

Hearing: $211,050

Total: $429,550

g) The estimates in paragraph 34 have been calculated on the following basis:

h) Assuming the First Defendant is successful in these proceedings and obtains an order that the Plaintiff pay its costs, I estimate that at least 60% of the costs actually incurred by the First Defendant would be awarded on assessment, that is not less than $257,730.

Second defendant’s position

11 The short position insofar as the second defendant is concerned is that it claims on the basis of a 3 weeks hearing that its total solicitor-client costs will be $561,931.00 - detail is given in paragraph 32 of the affidavit of Mr Carter of 15 April 2003. Its estimate as likely to be recoverable as party-party costs to the end of a three-week hearing, give the following alternatives:

· 70 percent of solicitor-client costs recoverable as party-party costs-$393,352.28;

· 60 percent of solicitor-client costs recoverable as party-party costs-$337,159.09.

12 Mr Carter has deposed as follows:

Second Defendant's Further Costs

1. At the date of swearing this affidavit, the second defendant has been invoiced total costs and disbursements in respect of defending the proceedings of approximately $332,601.83 inclusive of goods and services tax. This is a conservative figure, as it does not include an amount of $110,000 further costs and disbursements incurred in advising the second defendant on matters related to this litigation but which may arguably not be considered solicitor - client costs of the proceedings. In addition, at the date of affirming this affidavit, the second defendant has incurred liability to pay an additional $32,646.24, which amounts have not been rendered. Of that amount, in my opinion at least $25,000 would be likely to be recoverable as solicitor – client costs.

(a) I have requested Mr Wood of Counsel, who is briefed to appear for the second defendant, to set aside a week for preparation including certain of the steps required by the usual order for hearing in Practice Note 100, and the orders made by his Honour Justice Einstein on 14 April 2003. Mr Wood's daily rate is $4,000, exclusive of GST, and I estimate his fees in respect of this work will be approximately $22,000;

(b) Between the date of swearing this affidavit and the commencement of the hearing, I anticipate it will be necessary for Ms Susan Goodman, who was admitted in October 2000, to identify documents for possible inclusion in the tender bundle, liaise with witnesses to keep them informed as to when they are likely to be required to attend and to undertake research for the purposes of preparing submissions. I estimate that this will take 40 hours of her time between now and the commencement of the hearing. Her hourly charge out rate is $242.25 (exclusive of GST). These further costs to the commencement of the hearing are likely to be approximately $9690 exclusive of GST or $10,695 inclusive of GST.

(c) Between the date of swearing this affidavit and the commencement of the hearing, I anticipate it will be necessary for me to review documents for inclusion in the tender bundle where there are questions as to whether they ought to be included, hold one or more conferences with counsel in relation to the proposed submissions, identify documents for the purposes of submissions and cross-examination and otherwise provide assistance to Mr Wood and obtain instructions from the second defendant in relation to any matters which may arise. I estimate that this will take 40 hours of my time between now and the commencement of the hearing. My hourly charge out rate is $437 (exclusive of GST). These further costs to the commencement of the hearing are likely to be approximately $17,480 exclusive of GST, or $19,228 inclusive of GST.

(d) It is likely that Mr Wood will be engaged on the matter for 5 days a week for the first two weeks of the hearing, and for four days in the final week of the hearing. His fees for the hearing are likely to be $56,000 inclusive of GST, or $61,600 inclusive of GST.

(e) I anticipate that for the period of the hearing, either Susan Goodman or I will be instructing, but that there will only be limited times when it will be necessary for both of us to be in attendance. However, having regard to the need to arrange for witnesses, review of documents and transcript for the purposes of cross-examination and submissions, and tasks which emerge as being necessary in the course of the hearing, it is likely that we will each spend approximately 90 hours in relation to the matter over the course of the hearing. Fees, exclusive of GST, in respect of Ms Goodman over the period of the hearing are likely to be $21,802.50, and in respect of myself, $39,330. These figures inclusive of GST are $23,982.75 and $43,263 respectively.

(f) It is also likely that there will be miscellaneous research tasks, review of documents and other tasks leading up to or during the hearing, which can be undertaken by an experienced paralegal or junior lawyer at rates of $150 or more, exclusive of GST. I estimate that over the approximately six weeks between now and the end of the hearing, approximately 50 hours of time will be expended in undertaking such tasks by a paralegal or junior solicitor. The associated costs are likely to be $7,500 exclusive of GST, or $8,250 inclusive of GST.

$ 204,330.00

$ 561,931.83

4. In my experience, it is usual for a party in litigation of this kind to recover between 60% and 70% of solicitor – client costs of defending the proceedings. Given that in making the above estimates I have excluded significant amounts in estimating solicitor – client costs, and in my opinion the allowance I have made for such amounts is favourable to the plaintiff, I would anticipate the amount recovered as party – party costs may be towards the higher of this range.

(a) If 70% of solicitor – client costs are recovered as party – party costs, $393,352.28.

13 As stated, the plaintiff has paid into Court $208,000 by way of security for the secured defendant's costs. The further amount necessary to provide security for 70% of the second defendant's estimated solicitor – client costs is $185,352.28, and the further amount necessary to provide security for 60% of the second defendant's estimated solicitor – client costs is $129,159.09.

14 The plaintiff has already agreed to pay $39,000 of this amount back on 26 November 2002.

Holding

15 It is regrettable that the security position was not clarified with more precision some considerable time prior to the present being now approximately a fortnight from the commencement of the final hearing.

16 To my mind and notwithstanding the fact that very clear indications that further applications may well required to be made and preserving rights in this regard, have been given at every point in the negotiations between the parties and through the several tranches of consensual orders by way of the security for costs regime, the defendants have had and continue to have the onus of pressing the issue through a court determination as necessary. Clearly enough in the ordinary case the passage of time and the continued expenditure of large sums of money by the plaintiff in preparation for hearing becomes a very important parameter indeed when an application for security is made only very late in the peace. Such an application may sometimes be disallowed for that reason.

17 That is not this case. It cannot be said that security has not been agitated from very early times by each defendant. Nor can it be said that either defendant has ever failed to make very plain that further applications may be pursued as and when necessary and that the interim arrangements should be regarded as no more than that.

18 During the course of the submissions which have been taken this morning, a number of particular disparate matters have been raised. One concerns the evidence before the Court that litigation funding has been, and presumably remains, the order of the day, insofar as the plaintiff is concerned. Litigation funding is recorded on a copy of the most recent Form 524 (presentation of accounts and statement by liquidator) dated 20 January 2003 appended to the affidavit of Ms Goodman of 15 April 2003, where the accounted receipts and payments records litigation funding by reference to Foktin International in the sum of $200,000, the date of receipt being 19 August 2002, litigation funding from Litigation Funding, the date of the receipt being 8 November 2002 and the amount being $25,000, and litigation funding being received on 17 December 2002 by Blyth Corporate Services Pty Limited in the sum of $60,000. Clearly enough, as is made plain in Idoport Pty Limited v NAB (2001) NSWSC 44, a particular form of significance attaches to circumstances where there are outside funding agreements or arrangements. That then becomes a material consideration in dealing with claims for security in terms of circumstances where detail of the outside funding agreements or arrangement is simply not before the Court. In that circumstance, the Court should infer that some form of benefit from recovery from the proceedings is on foot by regular arrangement with litigation funders. Litigation funders, being legally removed from a party are prima facie, and subject to limited exceptions, immune from the burden of an adverse costs order, in the event that the defendants succeed. That is a fact, matter and circumstance taken into account in the determination presently by the Court.

19 The central attack by Mr Robertson, who appears for the plaintiff, on the now claims to security, centres upon the submission that the evidence falls very far short of being a discharge by the defendants of the onus upon them to prove that the estimated costs and disbursements referred to in the several affidavits now read on behalf of the defendants, on examination can be regarded as fair and reasonable in the circumstances.

20 That submission is not one which it seems to me the Court should accept as of substance. The fact is that the evidence, at least by the first defendant, in terms of the general issues and amounts by way of estimate comes, inter alia, from Mr Andrew Christopher, a partner of Baker and McKenzie, who has deposed that he has had the conduct of or been involved in many litigious matters which have proceeded to a final hearing and as a result has also had the conduct of or been involved in taxation and assessment of costs relating to many litigious matters. That evidence is unchallenged.

21 Mr Andrew Carter, a partner of Blake Dawson Waldron, has given evidence on its behalf by way of the general detail of estimates and other issues concerning these proceedings. He has been a solicitor since 1990 and has primarily practised in the area of commercial litigation since commencing employment with Blake Dawson in 1993. In that time, on his evidence, he has been involved in numerous matters in which he has assisted or of which he has had the carriage or has supervised, which have proceeded to taxation.

22 Nor am I satisfied that there is insufficient detail in terms of the materials put forward by the defendants seeking to substantiate the particulars of the estimates given in the evidence which they have put forward.

23 The approach that is appropriate to be made where a security for costs application in terms of proceedings with the complexity of the current proceedings are concerned, as it seems to me, obliges the Court to assume the usual as it were, that is to say the agreed bundle will take time for preparation. The volume of the agreed bundle remains at large. The experience of the Court in complex commercial litigation is that the agreed bundles tend to occupy, if not one, then certainly any number of trolleys.

24 The approach to the presentation of the case requires to be taken into account. The Court will require that the plaintiffs produce overview written submissions and that the case be properly and regularly opened at the commencement of the hearing. The Court is then likely to invite each of the defendants' counsel to also, albeit relatively briefly, open their cases. The usual circumstance is that parties who give an estimate of a case which is likely to be as complex as this case cannot be expected at the last minute to produce a proper estimate of the period of time for the hearing. Any case in my experience which takes over 14 days is debatable as to precisely what the length of time that the hearing will take.

25 The procedure in the Commercial List, as the parties will well know, is that the Court endeavours to complete hearings without any hiatus so that all parties are at risk of a blow-out in certain circumstances.

26 Having made all of those matters clear in terms of the general experience of the Court, I have no doubt but that close attention has been given by the respective counsel who have put forward the estimate of three weeks and I proceed upon the basis that this security for costs motion should be determined accordingly.

27 In my view it is necessary for defendants, when the final hearing is rapidly approaching, particularly in the last month or two of that event, if they intend to move for additional security, particularly where substantial claims are to be pursued, to take up the cudgel and to move before the Court and to have the matter clarified, so that for very obvious reasons, the Court is not faced at the last minute, in the last week or the last fortnight, with applications similar to the current application. Whilst the Court commends to the parties to endeavour to accommodate the need for provision of security for costs on a stepped basis, it has to be said that unless there are very clear guidelines as to the future obligation of a plaintiff to make stepped payments up to and through the hearing, waiting until, as in this case, a fortnight or thereabouts before the final hearing, to pursue the matter is far from commendable. Indeed, unless I mistake the position, the need for and the bringing forward by the defendants of this very application, received very substantial stimulus from me when I had a pre-trial directions hearing earlier this week on Monday afternoon. It should not be up to the Court to galvanise the parties into action in this regard.

28 Having given careful consideration to the principles which inform the proper exercise by the Court of its discretion in terms of the making of security for costs order [Idoport v NAB supra] I have reached the view that the proper exercise of the discretion here is to oblige the plaintiff to pay fifty percent of the $211,050 which had been pursued by the first defendant, rather than paying 60 percent of that sum.

29 The same approach as was taken with respect to the first defendant cannot be taken with respect to the second defendant for the reason that the evidence concerning and approach to security for costs from the second defendant has been put on a holistic basis. In that regard it seems to me that, doing the best that I can on the figures and approaches taken respectively and somewhat differently by the first and second defendants, the proper course is to note the second defendant's evidence and application before the Court, which was to the effect that on the basis of a three weeks hearing, its total solicitor client costs would be $561,931, detail being given in paragraph 32 of Mr Carter's affidavit of 15 April 2003. What was sought in that regard was security for costs by way of 60 percent of $561,931, being $337,159, [but in respect of that $337,159 the second defendant already has received $208,000 and so needed only $129,159]. It does seem to me that, as I am not prepared to award to the second defendant the 60 percent figure, the appropriate approach is as suggested by Mr Wood, which is to, as a rule of thumb, to take five sixths of the $129,159.07, being $107,630, which will be the award for the second defendant.

30 A further question had arisen as to the time by when the security should be provided. To my mind the proximity of the final hearing and the general circumstances require that the security should be forthcoming on or before Thursday week, that is to say 24 April. As I have understood the parties, there is no issue as to the manner in which the security is to be granted as it has been granted up to this point in time, as I understand it, by bank guarantee.

I certify that paragraphs 1 - 30

are a true copy of the reasons

for judgment herein of

the Hon. Justice Einstein

given on

16

April 2003 ex tempore

and revised on 21 May 2003

Susan Piggott

Associate

21 May 2003

Last Modified: 05/30/2003

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Citations

Global Medical Imaging Management Limited (in liquidation) v Australian Mezzanine Investments Pty Limited [2003] NSWSC 432

Cases Citing This Decision

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Cases Cited

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Statutory Material Cited

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Ainsworth v Burden [2005] NSWCA 174

CITATION:	Global Medical Imaging Management Limited (in liquidation) v Australian Mezzanine Investments Pty Limited & Anor [2003] NSWSC 432
HEARING DATE(S):	16/04/03
JUDGMENT DATE:	16 April 2003
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Additional security ordered.
CATCHWORDS:	Practice - Costs - Security for costs - Requirement for timely application - Stepped orders - Unfairness involved in failing to press further applications for increased security until shortly before final hearing
LEGISLATION CITED:	Trade Practices Act 1974
CASES CITED:	Idoport Pty Limited v NAB (2001) NSWSC 44
PARTIES :	Global Medical Imaging Management Limited (in liquidation) (formerly called Minotaur Funds Limited) (Plaintiff) Australian Mezzanine Investments Pty Limited (First Defendant) Perpetual Trustee Company Limited (Second Defendant)
FILE NUMBER(S):	SC 50157/01
COUNSEL:	Mr D Robertson (Plaintiff) Mr NC Hutley SC, Mr Jones (First Defendant) Mr PM Wood (Second Defendant)
SOLICITORS:	Morgan Lewis Alter (Plaintiff) Baker & McKenzie (First Defendant) Blake Dawson Waldron (Second Defendant)