Robert Mills Architect Pty Ltd v Moufarrige

Case •

[2025] NSWDC 139

•

16 April 2025

No judgment structure available for this case.

District Court


New South Wales

Medium Neutral Citation: Robert Mills Architect Pty Ltd v Moufarrige [2025] NSWDC 139
Hearing dates: 11 April 2025
Date of orders: 16 April 2025
Decision date: 16 April 2025
Jurisdiction:Civil
Before: Andronos SC DCJ
Decision:

(1)   Dismiss the defendant’s notice of motion of 17 February 2025.

(2)   Direct the parties to liaise as to an appropriate costs order and either notify my Associate:

(a)   of such agreement; or

(b)   of a range of mutually agreeable dates for a hearing on costs,

by 5pm on 30 April 2025.

Catchwords:

COSTS — Security for costs — Legal nature of the plaintiff — Plaintiff is a company

COSTS — Security for costs — Quantum and form

COSTS — Security for costs — Relevant factors — Other factors   

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 60

Contracts Review Act1980 (NSW)

Uniform Civil Procedure Rules 2005 (NSW), r 42.21

Cases Cited:

Acohs Pty Ltd v Ucorp Pty Ltd (2006) 155 FCR 181

April Fine Paper Macao Commercial Offshore Ltd vMoore Business Systems Australia Ltd (2009) 75 NSWLR 619; [2009] NSWSC 867

Buckley v Bennell Design & Construction Pty Ltd (1974) 1 ACLR 301

Cornelius v Global Medical Solutions Australia Pty Ltd; Farag v Global Medical Solutions Australia Pty Ltd [2014] NSWCA 65

Fiduciary v Morningstar Research [2004] NSWSC 664

Gispac Pty Ltd v Michael Hill Jeweller (Australia) Pty Ltd [2020] NSWSC 577

Idoport Pty Limited & Anor v National Australia Bank Limited & 8 Ors; Idoport Pty Limited & Market Holdings Pty Limited v Donald Robert Argus; Idoport Pty Limited “JMG” v National Australia Bank Limited [2001] NSWSC 744

J & M O’Brien Enterprises Pty Ltd v Shell Co of Australia Ltd (No2) (1983) 7 ACLR 790

Li v State of New South Wales [2013] NSWCA 165

Lynnebry Pty Ltd v Farquhar Enterprises Pty Ltd (1977) 3 ACLR 133

MA Productions Pty Ltd v Austarama Television Pty Ltd (1982) 7 ACLR 97

Maritime Services Board of New South Wales & Federal Airports Corporation v Citizens Airport Environment Association Inc (Third Runway case) (1992) 83 LGERA 107

Modakboard Australia Pty Ltd v Matthew Howard Brady [2018] NSWSC 399

Narradine Pty Ltd & Anor v Mascot Steel and Tools Pty Ltd & Ors [2012] NSWSC 385

Pioneer Park Pty Ltd (in liq) v Australia and New Zealand Banking Group Ltd (2007) 65 ACSR 383; [2007] NSWCA 344

Skalkos v T & S Recoveries Pty Ltd (2005) 65 NSWLR 151; [2004] NSWCA 281

Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd (1985) 1 NSWLR 114

SSABR Pty Ltd v AMA Group Ltd [2024] NSWCA 104

Suchand Pty Ltd v Jonathan Kingsley Colbran and Richard Stone as Receivers and Managers of Suchand Pty Ltd [2024] NSWCA 250

Wollongong City Council v Legal Business Centre Pty Ltd [2012] NSWCA 245

Category:Procedural rulings
Parties: Robert Mills Architect Pty Ltd (plaintiff/respondent)
Fern Mourfarrige (defendant/applicant)
Representation:

Counsel:
Mr J McLeod (plaintiff/respondent)
Mr S Sykes (defendant/applicant)

Solicitors:
Piper Alderman (plaintiff/respondent)
Paradise Charnock Hing (defendant/applicant)
File Number(s): 2024/00170205
Publication restriction: Nil

JUDGMENT

  1. By notice of motion filed 17 February 2025, the defendant, Ms Fern Mourfarrige, seeks security for costs from the plaintiff, Robert Mills Architects Pty Ltd, pursuant to r 42.21(1)(d) of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”). The sum sought is $146,104.00.

  2. The defendant relies on two affidavits of her solicitor, Eric Cabrera, affirmed 17 February 2025 and 10 April 2025. The plaintiff relies on the affidavit of its solicitor, Robert Riddell, affirmed 1 April 2025 and a bundle of correspondence.

  3. These proceedings were commenced by statement of claim on 8 May 2024. They are proceedings for the alleged breach of the payment obligation under a contract for the provision of architectural services in the liquidated sum of $385,461.04, together with interest and costs. The architectural services concerned the renovation and extension of a large house in Bronte, New South Wales, in respect of which the fee due to the plaintiff was expressed as a percentage of the final construction cost.

  4. On 12 August 2024, the defendant filed a defence. She defends the claim, inter alia, on the basis that there was no agreement as to the approved plans and works or about the budget for the completion of the works, which was a condition of the obligation to pay. She also alleges repudiation and breach by the plaintiff of an essential implied term of the agreement as to the exercise of care and skill. An affirmative defence under the Contracts Review Act1980 (NSW) is also pleaded.

  5. The plaintiff served its evidence in chief in the substantive proceedings in December 2024. That evidence comprises three affidavits and close to 1,000 pages of material, including exhibits. The defendant served her evidence in the substantive proceedings in late March or early April 2025.

  6. Although the parties attempted to resolve the security application, including by way of open correspondence, they were unable to do so.

  7. The issues before me were:

  1. Whether there is reason to believe that the plaintiff, being a corporation, would be unable to pay the costs of the defendant if ordered to do so, sufficient to enliven the discretion to order security.

  2. If the discretion is enlivened, how the following factors affect its exercise:

  1. the timing with which the application for security was brought; and

  2. the open offer by the director of the plaintiff, to provide a personal guarantee in the sum of $80,000, which offer is now withdrawn.

  1. If security were to be ordered, what quantum ought be ordered.

  1. For the reasons set out below, on the evidence before me, I have not found that the discretion is enlivened. The evidence before me, and the available inferences, do not persuade me that there is reason to believe that the plaintiff would be unable to pay the costs of the defendant if ordered to do so. Accordingly, the motion of 17 February 2025 will be dismissed.

  2. As the defendant has failed on the motion, I see no reason why the defendant should not pay the plaintiff’s costs, as assessed or agreed. I will give the parties an opportunity to address me as to whether any special costs order should be made.

  3. Had I found the discretion was enlivened and was otherwise satisfied that there was the requisite degree of impecuniosity, I would have ordered security in the sum of $80,000, to be provided, by way of bank guarantee or such other mechanism as agreed in writing by the parties, within 28 days.

Evidence as to the plaintiff’s ability to meet an adverse costs order

  1. The defendant says that publicly available materials support at least a prima facie inference that the plaintiff would be unable to meet a costs order in the sum she estimates would be recoverable if she were to succeed in the proceedings. Those materials concern the plaintiff’s paid up capital, lack of any real property and registered security over its assets. There is also a suggestion that other claims may be brought against the plaintiff, although it is not clear how the mere existence of such claims demonstrates a relevant inability to meet a costs order.

  2. The plaintiff has been in existence since 5 May 1995. According to newspaper articles in evidence, it is an award-winning architecture firm, with an apparently national footprint, which is corroborated by the fact that the plaintiff’s agreement with the defendant was for a project in Bronte, even though its registered office is in Melbourne. The nature of the plaintiff’s work is “high end”, as demonstrated by the renovations and construction referred to in the case studies, references and the agreement between the parties itself.

  3. The plaintiff has been registered under its current name for the whole period since 5 May 1995. Its principal place of business since 14 June 2007 has been in Grattan Street, Melbourne, Victoria. Mr Robert Mills, the eponym of the plaintiff, has been the sole director and secretary since 5 May 1995. The plaintiff has issued capital of two fully paid shares issued at $1.00 each and has maintained the same share structure since 5 May 2006. No court actions, payment defaults or tax defaults are recorded in the ASIC (creditor) watch attached to the search extract in evidence.

  4. The plaintiff does not own any real property in New South Wales. As at 31 January 2025, an updated search of the Personal Property Securities Register (PPSR), first undertaken on 13 May 2024, disclosed:

  1. An all present and after-acquired property security interest to the Commonwealth Bank (CBA);

  2. Two motor vehicle security interests to the CBA; and

  3. Other goods security interests to Berwick’s (Gold Coast) Pty Ltd, HP Financial Services (Australia) Pty Ltd and an entity formerly known as Angle Asset Finance. An “other goods” security interest in favour of Stylecraft Australia Pty Ltd, which was disclosed on the PPSR in May 2024, but no longer appears on the Register.

  1. A Google search undertaken on behalf of the defendant in respect of the plaintiff on 24 January 2025 disclosed claims of workplace bullying. According to Mr Cabrera, two former employees have lodged claims against the plaintiff in the Fair Work Commission. There is no evidence as to the status of any such claims, what the likely range of damages, if any, would be if the former employees were to succeed, or whether any insurance policy would respond to the claims.

  2. The plaintiff relies on a letter from its accountant, dated 19 September 2024, which states that the plaintiff is an Australian resident company that is currently trading, and which is an ongoing concern and which has a substantial surplus of assets over liabilities.

  3. In his affidavit of 1 April 2025, Mr Riddell records his instructions as to the amounts owing in respect of the relevant registered securities. On his instructions, the only sums outstanding relate to car finance in respect of a Mercedes M class GLE450 ($48,800 plus interest) and a Land Rover Defender ($88,390). There is no reason not to accept this evidence.

  4. There is otherwise no evidence as to the plaintiff’s trading or asset position, no balance sheet, no profit and loss statement and no tax returns. The plaintiff did not volunteer such evidence and the defendant did not issue a Notice to Produce to compel it. Each party sought to rely on the absence of such material to submit that the other party had failed to meet their burden. There is no evidence of any history of impecuniosity or inability to meet debts as and when they fall due in respect of the plaintiff.

Security correspondence

  1. On 3 September 2024, the solicitors for the defendant (PCH) wrote to the solicitors for the plaintiff (PA) reciting the matters at paragraph 14 above and requesting copies of bank statements, financial reports with respect to assets and liabilities and profit and loss, tax returns, current balance sheet and profit and loss statements, current ATO portal, BAS statements, demands for payment over the preceding 12 months and guarantees executed by the plaintiff or its directors.

  2. On 17 September 2024, PA responded to PCH stating that the plaintiff is solvent, has traded for many years, and continues to trade without any history of solvency issues, including court action. PA went on to state that no ground in PCH’s letter established that the plaintiff would not be able to satisfy an order for costs in respect of a matter of the scale of the present claim. In the letter, PA went on to address a number of factors relevant to the discretion to order security. Enclosed with PA’s letter was the 19 September 2024 (sic) letter from the plaintiff’s tax agents and accountants, EGA Corporate Advisers, which stated that the plaintiff has a substantial surplus of assets over liabilities.

  3. On 4 October 2024, PCH again wrote to PA adhering to its earlier position and asking the plaintiff to reconsider its position on producing documents or, alternatively, offering a personal guarantee to meet any costs order which the Court might grant in favour of the defendant. By email on 23 October 2024, PA responded that the plaintiff’s director declined to give a personal guarantee.

  4. The present motion was filed on 17 February 2025. On 20 March 2025, without admissions, the plaintiff offered a personal guarantee from its director, Mr Mills, in the sum of $80,000, which it contends is the proper amount of any security, if ordered. It did so on the basis that the motion be dismissed with no order as to costs. The defendant did not reply to that offer.

  5. On 3 April 2025, PCH wrote to PA rejecting the plaintiff’s offer. The defendant counter-offered that she would accept $80,000 by way of security paid into Court.

  6. On 7 April 2025, PA rejected PCH’s counter-offer and put a further counter-offer on behalf of the plaintiff. PA’s further counter-offer was that the plaintiff would procure a bank guarantee in the sum of $80,000 with no order as to costs of the motion for security.

  7. Also on 7 April 2025, the defendant rejected the plaintiff’s most recent counter-offer in an email from PCH to PA. She made a further counter-offer of security in the sum of $80,000, by way of guarantee or as directed by the registrar, with the plaintiff to pay the defendant’s costs forthwith.

  8. On 8 April 2025, the plaintiff rejected the defendant’s most recent counter-offer. It essentially re-put its own offer of 7 April 2025, modified to provide for an order that costs be reserved. The offer was open until midday on 9 April 2025.

  9. On receipt of that counter-offer, PCH suggested, in an email and on a without instructions basis, that the parties proceed on the basis of the plaintiff’s proposed orders, other than with respect to costs, which could be determined by the Court on 11 April 2025. By response later that same day, the plaintiff rejected this course, but expressly left its own offer of 8 April 2025 open for acceptance.

  10. The plaintiff’s counter-offer of 8 April 2025 expired on 9 April 2025, but was, in any event, rejected by the defendant on 10 April 2025. By email from PCH to PA, the plaintiff’s position was essentially agreed other than with respect to costs. The defendant sought an order that the plaintiff pay her costs.

  11. On 11 April 2025, the motion came before me. The parties continued to discuss possible settlement of the motion during an adjournment on the day, but without success.

Quantum

  1. In his affidavit of 17 February 2025, Mr Cabrera sets out his calculation of the defendant’s costs to date and his estimate of future costs to be incurred in these proceedings. That evidence was updated in Mr Cabrera’s affidavit of 10 April 2025. In summary, Mr Cabrera’s evidence is:

  1. As at 9 April 2025, the defendant has incurred $123,751.10 (including GST) in billed fees and disbursements (including counsel’s fees) and $7,557.00 in unbilled fees and disbursements (including GST).

  2. Costs incurred in relation to the defendant’s request for security for costs, as at 9 April 2025, are approximately $19,804.40.

  3. Costs incurred to date have included the preparation and service of two affidavits in the substantive proceedings, being an affidavit of the defendant affirmed 31 March 2025 (42 pages with a 336-page exhibit) and an affidavit of the defendant’s husband affirmed 1 April 2025 (22 pages with a 110-page exhibit).

  4. The proceedings have a degree of complexity requiring a supervising partner and special counsel monitoring the file with the assistance, where required, from a senior associate and an associate. Respective charge out rates vary according to seniority: a partner is charged out at $700 per hour, special counsel at $540 per hour, senior associate at $490 per hour and associate at $270 per hour to $430 per hour (exclusive of GST).

  5. Junior Counsel is briefed and charges $450 per hour or $4,500 per day (exclusive of GST).

  6. Estimated future steps (not including the preparation of evidence) can be summarised as follows:

Preparation for trial:

Professional costs:

$26,850

Subpoenas and disbursements:

$10,070

Counsel’s fees:   

$22,500

Attending trial, estimated at 3 days:

Professional costs:   

$33,000

Counsel’s fees:

$13,500

Mediation:

Professional costs:   

$23,750

Counsel’s fees:   

$6,750

Mediator (50% of fees):

$4,200

Total(not including GST):

$140,620

  1. At the time of Mr Cabrera’s first affidavit, the defendant’s substantive evidence had not been prepared. Therefore, his estimate included estimates for the preparation of the defendant’s lay evidence. That has now been subsumed by the actual figure of $123,751.10 costs to date in his second affidavit.

  2. The total figure for past and estimated future defendant’s costs, therefore, including GST, would be in the order of over $260,000.

Relevant principles

  1. The relevant power to order security arises under r 42.21(1) and the factors ordinarily relevant to its exercise are set out in r 42.21(1A). Relevantly, r 42.21(1) and (1A) provide:

42.21 Security for costs

(1)   If, in any proceeding, it appears to the court on the application of a defendant –

…

(d)   that there is reason to believe that a plaintiff, being a corporation, will be unable to pay the costs of the defendant if ordered to do so, or

…

the court may order the plaintiff to give such security as the court thinks fit, in such manner as the court directs, for the defendant’s costs of the proceedings be stayed until the security is given.

(1A)    In determining whether it is appropriate to make an order that a plaintiff referred to in subrule (1) give security for costs, the court may have regard to the following matters and such other matters as it considers relevant-

(a)  the prospects of success or merits of the proceedings,

(b)  the genuineness of the proceedings,

(c)  the impecuniosity of the plaintiff,

(d)  whether the plaintiff’s impecuniosity is attributable to the defendant’s conduct,

…

(f)  whether an order for security for costs would stifle the proceedings,

…

(j)  the costs of the proceedings,

(k)  whether the security sought is proportionate to the importance and complexity of the subject matter in dispute,

(l)  the timing of the application for security for costs,

...

Threshold question: reason to believe that the plaintiff will be unable to pay the costs of the defendant if ordered to do so

  1. A court can order a corporate plaintiff to provide security for costs where there is “reason to believe” it will be unable to discharge any liability for the costs of the proceedings. This is a threshold question for the discretion to be enlivened.

  2. The defendant bears the relevant onus: Fiduciary v Morningstar Research [2004] NSWSC 664 at [36]. The “reason to believe” criterion has been described as “undemanding”, and one that requires only a “reasonably possible inability to pay the costs”: see Modakboard Australia Pty Ltd v Matthew Howard Brady [2018] NSWSC 399 at [244]. However, it requires satisfaction about a rational basis for an actual prospective inability to pay, and not merely a risk of such an inability: Cornelius v Global Medical Solutions Australia Pty Ltd; Farag v Global Medical Solutions Australia Pty Ltd [2014] NSWCA 65 at [15]–[17] (per Macfarlan JA), at [56] and [60] (Ward JA and Tobias AJA).

  3. The distinction between a “risk” of prospective inability to pay costs, and “reason to believe” that such an inability will eventuate, is likely a matter of impression and emphasis. It is an inherently predictive assessment: Idoport Pty Limited & Anor v National Australia Bank Limited & 8 Ors; Idoport Pty Limited & Market Holdings Pty Limited v Donald Robert Argus; Idoport Pty Limited “JMG” v National Australia Bank Limited [2001] NSWSC 744 at [58] (per Einstein J); Narradine Pty Ltd & Anor v Mascot Steel and Tools Pty Ltd & Ors [2012] NSWSC 385 at [5] (per Black J).

  4. A “practical commonsense approach” to the examination of the financial affairs of the corporation is appropriate: Wollongong City Council v Legal Business Centre Pty Ltd [2012] NSWCA 245 at [28].

Discretionary consideration: merits of the proceedings

  1. If the relevant threshold under r 42.21(1)(d) is crossed, the Court must then consider the relevant discretionary criteria on the basis of the evidence before it. Relevantly, those criteria include merits, timeliness, the effect of an offer by Mr Mills to provide a guarantee and the quantum of security sought.

  2. Consideration of prospects inevitably requires satisfaction that the claim is made in good faith and that, at the least, it appears to be reasonably arguable: Lynnebry Pty Ltd v Farquhar Enterprises Pty Ltd (1977) 3 ACLR 133; J & M O’Brien Enterprises Pty Ltd v Shell Co of Australia Ltd (No 2) (1983) 7 ACLR 790. It is not an occasion to speculate on the outcome of the proceedings.

Discretionary consideration: timeliness of the application

  1. An application for security for costs should be made promptly, after service of the originating process: Buckley v Bennell Design & Construction Pty Ltd (1974) 1 ACLR 301 at 309.

  2. The principal reason for requiring applications to be made promptly is to minimise the risk of the plaintiff incurring costs in relation to proceedings it will not be able to pursue: Li v State of New South Wales [2013] NSWCA 165 at [39]. However, delays are not an automatic bar to the making of the order for security for costs: Li at [37]-[39] (per Ward JA).

  3. Relevant considerations include the length of any delay, the reasons for it, the nature of the acts done during the intervening period, and whether security is sought both for future costs and those which have already been incurred: Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd (1985) 1 NSWLR 114. The stage of the proceedings and the comparative timeliness of its progress will also be relevant: Acohs Pty Ltd v Ucorp Pty Ltd (2006) 155 FCR 181 at [63]–[64].

Discretionary consideration: impecuniosity and likelihood of stifling the proceedings

  1. The Court is generally reluctant to order security if its effect would be to shut out a plaintiff from proceedings with a bona fide claim.

  2. The plaintiff, however, bears the onus of establishing that an order for security would be likely to stifle the proceedings. Proof of lack of funds is not, by itself, proof that an order will stultify the proceedings; stultification must be proved in its own right: Pioneer Park Pty Ltd (in liq) v Australia and New Zealand Banking Group Ltd (2007) 65 ACSR 383; [2007] NSWCA 344 at [51] (per Basten JA).

  3. The Court of Appeal recently considered the impact of an undertaking by an impecunious director of an impecunious corporate plaintiff on the exercise of the discretion to order security for costs. In Suchand Pty Ltd v Jonathan Kingsley Colbran and Richard Stone as Receivers and Managers of Suchand Pty Ltd [2024] NSWCA 250, Stern JA considered that an undertaking from an impecunious director will be a factor in the exercise of the discretion to order security for costs against an impecunious company.

  4. The fact that an offer of an undertaking from a director has been made will be of less relevance, if relevant at all, if the offer does not remain open when the question of security is being determined. That is because it is no longer an alternative source of protection for the defendant’s costs. The fact that such an offer has been made and was not accepted may be relevant, however, on the question of costs.

Discretionary consideration: proportionality of costs

  1. Proportionality is a relevant consideration because of both the directive contained in s 60 of the Civil Procedure Act 2005 (NSW) and because of the principles that apply to the assessment of costs: see Skalkos v T & S Recoveries Pty Ltd (2005) 65 NSWLR 151; [2004] NSWCA 281. The Court must consider the proportionality of the amount of security sought in relation to the issues at stake: Maritime Services Board of New South Wales & Federal Airports Corporation v Citizens Airport Environment Association Inc (Third Runway case) (1992) 83 LGERA 107. This can require some consideration of the quantum of estimated costs relative to the amount claimed as relief in the proceedings: see, for example, April Fine Paper Macao Commercial Offshore Ltd v Moore Business Systems Australia Ltd (2009) 75 NSWLR 619; [2009] NSWSC 867.

  2. Inevitably, the discharge of that onus by the defendant will involve providing a rationally explained, and reasonably based, estimate of the costs for which security is sought.

  3. The Court is not bound to accept a defendant’s proffered costs estimate: MA Productions Pty Ltd v Austarama Television Pty Ltd (1982) 7 ACLR 97. Indeed, the Court ought form its own view as to whether the estimate: (i) reflects a proper approach to the conduct of the proceeding; (ii) is otherwise a reasonably based estimate; and (iii) satisfies the requirement of proportionality: April Fine Paper Macao Commercial Offshore Ltd.

Assessment

Whether discretion is enlivened

  1. I am not satisfied that the defendant has made out a proper discretionary basis for the grant of the relief she seeks. Principally, this is because I do not consider that the defendant has demonstrated a reason to believe that the plaintiff, being a corporation, will be unable to discharge any liability for the costs of the proceedings.

  2. The evidence in this regard was slight. There was nothing, however, that indicated that the plaintiff would not be able to meet an order for costs. I attach little weight to the plaintiff’s corporate structure and only nominal paid up capital. The facts of there being secured assets (prestige motor vehicles) and no real property owned by the plaintiff do not augment a picture of impecuniosity. These matters are not evidence of the plaintiff’s asset position or its cashflow. Of more relevance was the fact that the plaintiff has traded for 30 years and has maintained the same principal place of business since 2007.

  3. In my view, the absence of any evidence of financial difficulty is consistent with the defendant’s evidence rising no higher than a subjective concern about a speculative risk of an inability to pay. It does not establish a rational basis for an actual prospective inability to pay. Similarly, I attach little weight to the evidence of workplace claims having been foreshadowed, or even brought, against the plaintiff. That evidence provides no basis to infer any inability, on the part of the plaintiff, to meet an order for costs.

  4. On the other hand, I have attached little weight to the letter from the plaintiff’s accountant, other than to the extent it corroborates that the plaintiff is an ongoing concern.

  5. Each party invited me to draw an inference adverse as to the other’s contentions from the absence of evidence as to the actual financial position of the plaintiff. The defendant relied on comments by Adamson J in Gispac Pty Ltd v Michael Hill Jeweller (Australia) Pty Ltd [2020] NSWSC 577, in which her Honour noted at [37] that an unsubstantiated assertion of wealth provided no assurance to the defendant that the plaintiff would be able to meet an adverse costs order.

  6. It is not clear from the reasons in Gispac what the basis was on which the defendant first apprehended that the plaintiff, in that case, would be unable to meet an order for costs. At [6], her Honour extracts only part of the defendant’s letter which refers to an absence of real property and an inability on the part of the defendant to ascertain the plaintiff’s asset and liability position. A Notice to Produce, served by the defendant, seeking financial records was not called on its return date but appears to have been extant as at the date on which the motion was due to be heard. It was in that context that the plaintiff capitulated and agreed to provide the full measure of security sought.

  7. The context of Gispac is therefore quite different to the present case. In Gispac, her Honour drew the inference that the plaintiff capitulated rather than have to provide its financial documents. The question of whether the defendant had established a rational basis to believe that the plaintiff could not meet an order for costs was not addressed. Here the anterior question of whether the defendant had established a rational basis to believe the plaintiff would be unable to meet an order for costs was very much in issue. The defendant continues to bear the onus in this regard. I do not accept that Gispac stands for the proposition that the mere failure to adduce financial records will always support an inference that those records would not assist the plaintiff and thereby assist the defendant in discharging her onus.

  8. In the present case, I do not see a basis to draw an inference adverse to the plaintiff arising from the absence of evidence as to its financial position, even though it is clear that it could have led such evidence if it chose to do so. That is because I am not satisfied that the defendant’s evidence established a sufficient case for the plaintiff to answer. The onus remains on the defendant to establish a prospective inability to meet an order for costs. In my view, the evidence the defendant relies on does not do so. While I accept that the relevant evidentiary test is not demanding, I do not consider that the defendant has met it. The plaintiff did not need to go into evidence in this regard.

Discretionary factors

  1. Nevertheless, in case I am wrong about whether the discretion is enlivened, I have considered whether, if it was enlivened, I would have exercised my discretion to order security and, if so, in what sum. For the purpose of this exercise, I have assumed (contrary to my finding that the evidence does not establish this to be so) that the plaintiff is relevantly impecunious. If the plaintiff were found to be impecunious, this would be a significant factor in favour of granting security.

  2. Of the discretionary considerations that were argued before me, I consider that the merits of the proceedings weigh slightly against the order being made. I consider that, on their face, the proceedings are at least reasonably arguable. It is neither necessary nor appropriate to attempt to determine the merits of the plaintiff’s claim in any greater detail.

  3. I do not consider that the offer of an undertaking by Mr Hills affects the exercise of my discretion at all. The offer was limited to $80,000 and was no longer available for acceptance at the time of the hearing. The fact of the offer might be relevant to costs, however, it does not affect the exercise of my discretion.

  4. Similarly, I do not consider that the timing with which the motion was brought would affect the exercise of the discretion much one way or the other. There was a delay of a few months during which time the plaintiff served its evidence in chief. This might have affected the exercise of the discretion if impecuniosity was established, because the plaintiff might have incurred wasted costs in the meantime if the proceedings were thereby stultified. However, stultification was not an issue before me and the delay of a few months in bringing the application was of little practical effect.

  5. Accordingly, if I had considered that the discretion had been enlivened and I have found relevant impecuniosity, I would have ordered security on the basis of that impecuniosity. In other words, the discretionary factors that were argued before me do not provide a basis not to order security if the plaintiff were found to be unable to meet an order for costs.

  6. As to quantum, I cannot accept the defendant’s estimates. While I do not doubt the genuineness of Mr Cabrera’s estimate, I am not bound to accept it and do not. In my view, these proceedings are comparatively straightforward. The parties agree that a hearing, on the merits, will take no more than three days. All of the affidavit evidence is on. There will likely be a one-day mediation. There may be documents produced on subpoena. There appears to be nothing unusual or overly complex that would justify costs in the range of $260,000 being incurred in defending a claim for the approximate sum of $385,000.

  7. Adopting a broad brush approach, I consider that the defendant’s estimates are overly generous, both as to the amount of time allocated to each task and the number of practitioners engaged in each task. The defendant proposes to have four solicitors – a partner, special counsel, senior associate and associate – engaged in many tasks. This is in addition to counsel. I accept that some time may be required to be spent on the matter by the partner, however there is a likelihood of duplication and work being generated as a matter of internal management that would be disproportionate and may be irrecoverable on the ordinary basis.

  8. As Payne JA stated in SSABR Pty Ltd v AMA Group Ltd [2024] NSWCA 104 at [14]:

“(3) The appropriate amount of security should be assessed on a ‘broad brush’ basis: Palermo Seafoods Pty Ltd v Lunapas Pty Ltd [2015] NSWCA 149 at [9] per Leeming JA; Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd [2019] NSWSC 1082 at [206] per Ward CJ in Eq.

(4) The Court’s power is to require ’sufficient security’. The Court does not set out to provide a complete indemnity to a respondent in respect of their costs: Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2008] NSWCA 283 at [90] per Gyles AJA; Tyneside Property Management Pty Ltd v Hammersmith Management Pty Ltd [2014] NSWCA 417 at [163] per Emmett JA. Even where a relatively detailed and realistic estimate of actual and apprehended costs of an appeal is provided in the evidentiary material, it is the ordinary course for only a fraction of those costs to be ordered by way of security: Palermo Seafoods Pty Ltd at [8] per Leeming JA.”

  1. Although of only minor additional significance, I consider the position that both parties treated as a possible compromise for the security dispute to be instructive. Although the parties could not agree on the costs of the motion, the fact that both saw $80,000 as an acceptable compromise on the substance of the application accords with my view that, if security were to be ordered, it would be at a substantial discount to the sum sought in the motion.

  2. In my view, taking each of the above matters into account, the appropriate amount of security, given the quantum in dispute and the nature of the issues to be determined, would have been $80,000.

Conclusion

  1. In my view, the defendant has not made out a proper basis for the exercise of the Court’s discretion to order security for her costs. The motion of 17 February 2025 will be dismissed.

  2. Had I found that the discretion was enlivened and that there was reason to believe that the plaintiff would be unable to meet an order for costs, I have not found any discretionary reasons that would have mitigated against making an order for security.

  3. On the question of quantum, I have concluded that the appropriate amount of security would have been $80,000, taking into account the quantum claimed in the proceedings and the level of complexity of the claim. I have also paid some regard to the parties’ agreement on that figure, although that was not a decisive consideration.

Costs

  1. In the circumstances, the plaintiff has been successful and in the usual course it would be entitled to an order for costs, agreed or assessed on the ordinary basis.

  2. I will not make an order for costs at this stage but, against the possibility that either party might seek a special costs order, I will give them an opportunity to agree on an order for costs or if there is no agreement, make an application.

Orders

  1. I will hear from the parties as to what programming orders are appropriate. Otherwise, the orders of the Court are:

  1. Dismiss the defendant’s notice of motion of 17 February 2025.

  2. Direct the parties to liaise as to an appropriate costs order and either notify my Associate:

  1. of such agreement; or

  2. of a range of mutually agreeable dates for a hearing on costs,

by 5pm on 30 April 2025.

**********

Decision last updated: 24 April 2025

Actions
Download as PDF Download as Word Document
Cases Citing This Decision

0