In the Matter Of Torrens Constructions Pty Ltd

The case before the court involved an application by the respondents for an order that the applicant provide security for costs. The applicant, who is a trustee company, had commenced an action against the respondents alleging breaches of contract, tortious liability, and oppressive conduct under the Corporations Act 2001 (Cth). The legal issues before the court were whether the applicant, as a trustee company, should be ordered to provide security for costs and if so, what amount should be ordered. The respondents argued that the applicant should be ordered to provide security for costs as it was necessary in the interests of justice. The applicant contended that an order for security would stultify the action. The court considered various factors, including the applicant's status as a trustee company, the conspicuous silence of any person standing behind the applicant, and the lack of evidence of the applicant's ability to enforce its right of indemnity. The court also considered the respondents' delay in bringing the application, their disregard for the pre-action steps required by the Rules, and their refusal to engage in mediation without incurring significant costs.

The court found that the applicant's status as a trustee company, the lack of evidence of the applicant's ability to enforce its right of indemnity, and the conspicuous silence of any person standing behind the applicant supported the conclusion that an order for security should be made. On the other hand, the respondents' delay in bringing the application, their flagrant disregard for the pre-actions steps required by the Rules, and their refusal to engage in mediation without incurring significant costs led to the conclusion that an order for security should not be made. The court considered that the interests of justice demanded that an order for security should be made, albeit one that took into consideration the conduct of the respondents. The court accepted the assessment of legal costs provided by a highly respected and experienced costs specialist, who estimated that the costs incurred to the date of his report were $35,000 and the total costs likely to be incurred to the first day of trial was $112,000. The court considered that an appropriate amount for security was half of the amount estimated by the costs specialist as the costs of the matter to the first day of trial, the amount of $56,000. The court also considered that such amount should not be payable until 14 days after the mediation listed for 10 March 2023 had concluded, either by way of a settlement being reached or by way of termination by the mediator.

The court's decision was based on Rule 115.1 of the Rules, which provides that the Court may order that an applicant in an action provide security for costs if the order is necessary in the interests of justice. The court considered all relevant circumstances, including the applicant's status as a trustee company, the lack of evidence of the applicant's ability to enforce its right of indemnity, and the conspicuous silence of any person standing behind the applicant. The court also considered the respondents' delay in bringing the application, their flagrant disregard for the pre-actions steps required by the Rules, and their refusal to engage in mediation without incurring significant costs. The court concluded that an order for security was necessary in the interests of justice, albeit one that took into consideration the conduct of the respondents. The court's decision was also influenced by the well-established principle that security for costs ought not ordinarily be ordered against a natural plaintiff if that would stultify the action. In this case, the court found that an order for security would not stultify the action.