Roo Roofing Pty Ltd v Commonwealth of Australia (No 2)
[2018] VSC 268
•23 May 2018
IN THE SUPREME COURT OF VICTORIA Not Restricted
AT MELBOURNE COMMON LAW DIVISION MAJOR TORTS LIST
S CI 2015 03382
ROO ROOFING PTY LTD (ACN 131 182 093)
and MATSUH PTY LTD (ACN 105 461 818)
Plaintiffs
v
COMMONWEALTH OF AUSTRALIA Defendant
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| JUDGE: | Lansdowne AsJ |
| WHEREHELD: | Melbourne |
| DATE OFHEARING: | 16 May 2018 |
| DATE OFJUDGMENT: | 23 May 2018 |
| CASEMAY BE CITED AS: | Roo Roofing Pty Ltd & anor v Commonwealth of Australia (No 2) |
| MEDIUMNEUTRALCITATION: | [2018] VSC 268 |
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PRACTICE AND PROCEDURE – Variation to security for costs – Whether material change of circumstance – Significance of delay in making request for further security – Whether proposed undertakings sufficient – Further security allowed for increase in trial costs, but not for discovery ordered prior to request for further security – Calculation of further security – Supreme Court (General Civil Procedure) Rules 2015 r 62.05.
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APPEARANCES:Counsel Solicitors
For the Plaintiffs Mr C E Shaw ACA Lawyers by their Victorian agents Arnold Bloch Leibler
For the Defendant Ms R Enbom with
Mr J Hooper
Australian Government Solicitor
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
Change in circumstances .................................................................................................................. 3
Analysis and conclusion............................................................................................................... 5
Delay ..................................................................................................................................................... 6
Quantum .............................................................................................................................................. 9
Pre-trial ........................................................................................................................................... 9
During the trial ............................................................................................................................ 10
Number and hours of counsel ......................................................................................... 10
Solicitors instructing.......................................................................................................... 11
Solicitors in the office ........................................................................................................ 11
PII team ............................................................................................................................... 13
Experts................................................................................................................................. 13
Other disbursements ......................................................................................................... 14
Post evidence: preparation of closing submissions................................................................ 14
Quantum allowed ....................................................................................................................... 15
Undertakings..................................................................................................................................... 15
Conclusion and orders .................................................................................................................... 17
i
HER HONOUR:
Introduction
I delivered reasons in respect of the defendant’s first application for security for costs on 16 November 2017 (First Reasons).1 The parties prepared orders in agreed form to give effect to the First Reasons, and those orders were made on 23 November
2017. The orders provided for the payment of security for the defendant’s costs of and incidental to the proceeding up until the conclusion of the trial of the common questions in the sum of $1,423,613.00. Order 3 provided as follows:
The Defendant has liberty to apply, on seven day’ notice, to vary the amount of security for costs required to be provided in accordance with the order of the Court.
The defendant has now sought to exercise that liberty to apply. The defendant first made the request for further security by letter to the solicitors for the plaintiffs dated
16 April 2018. That letter sought that the plaintiffs pay further security in the sum of
$3,102,127 by the first day of the trial, which was 23 April 2018. The defendant formalised its request and made application to the Court for relisting by affidavit of Louise Kristine Rafferty sworn 30 April 2018. After some exchange of correspondence with the Court about suitable dates, which did not result in any agreed date, I directed by email sent by my associate on 4 May 2018 that the application be listed before me for hearing not exceeding two hours on 16 May 2018. I made the following additional directions:
Any affidavit in response by the plaintiffs be filed and served by 4pm on
Wednesday 9 May 2018;
Any affidavit in reply by the defendant be filed and served by 4pm on
Monday 14 May 2018; and
The parties file and serve written submissions by 4pm on Tuesday 15 May
2018.
[2017] VSC 694.
The plaintiffs filed an affidavit in purported compliance with these directions one day late on 10 May 2018. The defendant did not take issue with that lateness. At the hearing on 16 May 2018, the plaintiffs sought to rely on a further affidavit in answer sworn and filed the day before the hearing, 15 May 2018. Counsel for the defendant informs me that that affidavit was served on the defendant around the middle of that day, but she was not able to consider it until later that day. The affidavit did not come to my attention until the morning of 16 May 2018, shortly before the hearing. The defendant opposed the grant of leave to rely on this affidavit, and for reasons which I gave orally I refused that leave.
Exhibited to the late affidavit was a proposed undertaking to be given by the litigation funder for the plaintiffs, Harbour III (Proposed Amended Undertaking). Counsel for the plaintiffs informed me that he had instructions to proffer that undertaking, and also to offer again the undertaking which had been offered at the first application, which is attached to the First Reasons. I allowed both undertakings to be offered, and a copy of the Proposed Amended Undertaking to be handed up, on the basis of those instructions, although not supported by the other material exhibited to the affidavit sworn 15 May 2018.
In its written submissions dated 15 May 2018, the defendant sought the sum of
$2,756,325 by way of additional security (a reduction from the amount initially sought in its letter of 16 April 2018). After I made some preliminary observations, the defendant amended its application for further security to only seek further security for costs incurred from the date of its request, 16 April 2018. The amount sought by the defendant by way of further security became $2,485,201 comprised of
$1,019,126 being 67% of professional fees and $1,466,075 for counsel and expert fees, and other disbursements.
The plaintiffs oppose the application for further security on the following bases:
No material change in circumstances to justify variation to the earlier order;
Delay on the part of the defendant in making the request for further security;
The quantum sought is excessive; and
The Proposed Amended Undertaking offers adequate further security.
The plaintiffs also took an initial objection to the entitlement of the defendants to invoke the liberty to apply to seek further security, submitting that this provision was intended to apply only if the funding agreement between the litigation funder and the plaintiffs terminated. I do not consider that there is any evidence that the provision was so limited. I make no reference to such a provision in the First Reasons. The liberty to apply was included in the proposed orders by the lawyers for the defendant, and, as is apparent from the face of the orders, agreed by the lawyers for the plaintiffs. On its face, the right to apply is not limited to any particular factual circumstance. I do not consider this initial objection by the plaintiffs is made out.
In any event, the rules specifically empower the Court to vary an order for security for costs - r 62.05 of the Supreme Court (General Civil Procedure) Rules 2015.
Change in circumstances
I accept the proposition advanced by the plaintiffs that while the Court has a broad unfettered discretion pursuant to r 62.05 the discretion will usually be exercised against variation unless there has been a material change in circumstances.2 In my view, the same approach should be taken to relisting pursuant to the liberty to apply. Accordingly, the defendant needs to show a material change in circumstances to justify an increase in security, which on the face of the earlier orders was to be until the close of the trial on the common questions.
The first matter to note is that quantum was not disputed on the last occasion. I do not accept, however, that this shows, as the plaintiffs submit, that the amount ordered was in the nature of a compromise. The quantum was not opposed, but that could be for a number of reasons, and does not necessarily indicate any concession
GB Radio (Australia) Pty Ltd v Marchant [2005] VSC 222 per Hargrave J, [26]-[27].
by the plaintiffs.
I have compared the circumstances that were relied upon at the time of the first application and those that now prevail, as evidenced by the affidavits of Ms Rafferty sworn 25 August 2017 (first application), 30 April 2018, and 15 May 2018 (relisted application). The first application for security assumed that the defendant would incur costs to trial by reason of:
four solicitors (none full time);
three counsel;
a mediation;
work related to seeking discovery from the plaintiffs (but not related to discovery sought by the plaintiffs) in the sum of $30,000;
preparation for trial (number of witnesses not identified and lists of witnesses not yet served); and
a four week trial.
In her affidavits for this relisted application, Ms Rafferty deposes that costs from
16 April 2018 have and will be incurred by reason of:
seven solicitors and a paralegal (the four most senior of whom are working 6 days per week);
four counsel (all working at least 6 days per week);
substantial costs related to discovery sought from the defendant, including costs related to public interest immunity and legal professional privilege disputes (Ms Rafferty estimates these further costs ‘conservatively’ as totalling
$500,000 to 30 April 2018);3
fees for experts and objections to experts;
costs of what is now estimated to be a nine week trial, the commencement of which was delayed from 4 April 2018 to 23 April 2018; and
preparation for final submissions.
Affidavit of Ms Louise Kristine Rafferty sworn 30 April 2018, [29] and [37].
The plaintiffs dispute the quantum of the costs sought for these changes, and in some instances (for example, the number of solicitors and counsel) the need for increased costs. They do not dispute some other matters, however. In particular, there is no dispute that orders for discovery had not been made at the time of the first application. From my reading of orders made in the proceeding, the first occasion on which the trial judge ordered that the defendant provide discovery was by orders made 1 December 2017. Counsel for the defendant confirms that this is correct. Those orders also envisaged potential claims for legal professional privilege or public interest immunity. Ms Rafferty deposes, and this is not contradicted, that the plaintiffs sought (presumably further) discovery of the defendant by letter dated
8 December 2017; that following a dispute about these categories, orders were made by the trial judge for discovery on 22 March 2018; and that production is continuing of the documents ordered to be discovered.
Nor do the plaintiffs dispute the defendant’s estimate of the length of the trial, although they dispute the amount of counsel time said to be necessary for the preparation of final submissions.
Analysis and conclusion
It is plain that there have been at least two major changes to the size of this litigation from what was envisaged at the time of the earlier application: the substantial discovery sought by the plaintiffs of the defendant and the costs thereby incurred, including in relation to claims of privilege; and the length of the trial.
In hindsight it is somewhat surprising that the defendant did not allow any amount for discovery sought of it in the earlier application, but I am informed by counsel for the defendant, who has been engaged at least since the first application, that the plaintiffs initially said that they would only seek informal discovery. Whatever the reason for the absence of discovery by the defendant in the quantum sought in the first application, I accept that it is a material change in circumstances.
I also consider the length of the trial to be a material change in circumstances. Lists of witnesses had not been exchanged at the time of the first order for security and there have been multiple changes since (in the pleadings, as to the number and type of witnesses, and as to the documents to be relied upon to name a few). This increase in trial length and identification of expert witnesses have led to an increase in anticipated costs, presumably for both parties.
Delay
However, I do not consider that an order for increased security should be made that takes into account the costs associated with discovery from the defendant and the associated disputes. This is because orders were made for discovery by the defendant from 1 December 2017 yet the defendant did not flag a request for further security arising from these changed circumstances until 16 April 2018.
I accept the defendant’s submission that events have been moving very quickly, and that the attention of the defendant’s legal practitioners has been focused on responding to the requests for discovery (and associated disputes) and trial preparation. I also accept that it may not have been possible to quantify the increased costs thereby incurred until 16 April 2018, or thereabouts. Nevertheless, it should have been possible at an earlier point in time to at least alert the plaintiffs that further security may be sought, having regard to the fact that formal discovery was now sought, the extent of review of documents thereby required, and the possibility of public interest immunity claims.
I also accept the defendant’s submission that there is no evidence of particular prejudice occasioned to the plaintiffs by reason of the failure to give earlier notice of a possible application for further security for costs. I do not, however, consider this is an entire answer to the plaintiffs’ submission on delay. First, there is evidence as to the steps taken by the plaintiffs in the litigation since the date of the first order.4 It is sufficient that in the absence of such a flag, the plaintiffs were allowed to proceed
Affidavit of Justin Taede Vaatstra sworn 10 May 2018, [14].
in this manner on the basis that the security already ordered was all that they would be required to provide until the conclusion of the trial of the common questions. Further, the number of documents to be reviewed, the steps that need to be taken to review them and the possibility of a privilege or immunity claim are matters peculiarly within the knowledge of the party required to give discovery, here the defendant, and cannot be assumed to be known by the other party.
For these reasons, I consider that the delay in the making of the application for further security for costs is a persuasive discretionary factor against the grant of such further security in relation to costs relating to discovery by the defendant. I take into account that all production had not been completed by 16 April 2018 (the date the defendant now accepts as the date from which costs incurred may ground its request for further security) and indeed is continuing. Although further costs will be incurred in relation to discovery from 16 April 2018, the basis for those costs is in orders made well before that date. I will not order further security in relation to costs relating to discovery by the defendant pursuant to orders made before 16 April
2018.
I accept that delay in making the request in relation to increased trial length is also a factor to be given considerable weight against an increase in security, particularly given the proximity of the request to the trial date.5 However, I do not consider that the delay in flagging a request for further security has the same force in relation to the increased trial costs. The evidence does not disclose at what point it became apparent that the trial was now likely to be nine weeks, but counsel for the defendant submits that this was not until 19 March 2018. On one view the defendant had the opportunity to flag a request for further security for the increased trial length from that time, but I do not consider that there was the same necessity to do so as in relation to the defendant’s internal costs associated with discovery. This is for two reasons. First, the increase in trial time is something of which the plaintiffs
would also be aware, as it directly affects them as well, and so the absence of earlier
Matthews v SPI Electricity Pty Ltd (No 9) [2013] VSC 671, [117].
notice from the defendant that further security may be sought for that reason is of less weight. The second reason is that there is nothing in the evidence to suggest that the increase in trial length is due to any one or more identifiable factor or factors occurring at a known point in time (as opposed to costs related to discovery). It seems likely that the increased length is due to a number of factors, occurring over a period of time. A final matter of relevance is that the trial had not commenced at the time of the request on 16 April 2018.
For completeness, I note that in the course of argument I enquired as to when the defendant’s costs had exceeded the amount of security already ordered. I was informed that 67% of the defendant’s actual professional costs (being the proportion utilised for security) exceeded the amount of security deposited by approximately
$200,000 by the date of the request, 16 April 2018. I assume that this comparison does not include disbursements, including counsel fees, which may be the reason for the submission that the total costs ‘probably’ equalled the security sum by mid to late March 2018.
On reflection, I consider that while the point at which recoverable costs incurred exceeded the security may be a relevant matter in relation to delay, the better analysis is to identify the steps that have led to a material change in circumstances, and when they were identifiable. This is the approach I have now taken.
I will consider the impact of the increase in numbers of solicitors and counsel, the costs of experts, and the time sought for the preparation of final submissions as elements of increased trial time. In broad terms, I propose to determine an appropriate estimate of the defendants’ costs of a nine week trial, plus one week of preparation time and an appropriate period for the preparation of final submissions, and subtract from it the amount previously allowed for the trial, then conceived as being of four weeks in duration.
Quantum
Evidence for the plaintiffs on quantum is given not by the solicitors with the personal conduct of the matter, but by a solicitor employed by their town agent, Mr Justin Vaatstra. He deposes that he has obtained his information from Mr Stephen Lewis, who gave evidence for the plaintiffs on the first application, and, I infer, is one of the partners with the personal conduct of the proceeding for the plaintiffs. By contrast, the evidence for the defendant is given by the principal solicitor with the conduct of the proceeding, Ms Louise Rafferty, who deposes that she is also present in court instructing each day. Her evidence is that she has not observed Mr Lewis in court every day, and has never seen Mr Vaatstra there. Her evidence on these matters is not challenged.
Further, as Ms Rafferty notes Mr Vaatstra does not depose to any experience in the conduct of class actions, in large scale and complex common law trials or in relation to public interest immunity. For these reasons, combined with his lack of personal exposure to this particular large class action trial, I consider that Mr Vaatstra’s evidence as to the required steps and number of required legal personnel should be approached with caution.
As against this, I do not unreservedly accept all of the defendant’s evidence as to the required steps or required legal personnel. That note of caution is not because I find that some steps and or some personnel are not reasonably necessary. That is a question for taxation. My caution arises because security for costs is not intended to be perfect security, and need only be adequate.
I now turn to a consideration of quantum relating to the trial, which I will consider in three stages.
Pre-trial
The defendant seeks that the further security take account of the costs of four counsel and the whole of its legal team for the pre-trial week between 16 April 2018 and the commencement of the trial on 23 April 2018. I will allow for the same
number of counsel and solicitors as during the trial, to which I now turn.
During the trial
Number and hours of counsel
The defendant’s evidence is that four counsel have been retained for the duration of the trial, and beyond. Each of these is said to be working at least 6 days a week, and in two cases 6.5 days per week. Ms Rafferty deposes that the fourth counsel was retained due to the need to review a large number of documents provided by the plaintiff on 18 April 2018, and also assists the team generally.
The plaintiffs do not challenge the rates for the defendant’s counsel or the number of days to be worked, but does object to the need for the fourth counsel. Mr Vaatstra deposes, on information from Mr Lewis, that the plaintiffs’ legal team also has four counsel, although only three generally appear during the course of the trial on any given day.
I will allow 3.5 counsel at the rates and hours deposed to by Ms Rafferty for the estimated nine week duration of the evidence, and one week preparation, being a total of ten weeks. I allow half only for the fourth counsel, on the basis that the need for that counsel appears to relate to documents to be used in the plaintiffs’ case.
The resulting figure is calculated as follows:
Senior Counsel (Doyle): ten weeks at six days per week, at $7,700 per day, totalling $462,000;
Senior Junior (Enbom): ten weeks at six and a half days per week, at $3000 per day, totalling $195,000;
Junior (Brown): ten weeks at six and a half days per week, at $1550 per day, totalling $100,750; and
Junior (Hooper): ten weeks at six days per week, at $1400 per day, at half rate, totalling $42,000.
The resulting figure for counsel for preparation and during the trial prior to final submissions is $799,750. The defendant seeks that the whole of counsel fees and
other disbursements, without discount for recoverability, be taken into account. The plaintiffs do not disagree with that approach and I will follow it.
Solicitors instructing
The defendant’s case is that two-three solicitors are instructing each day.6
Mr Vaatstra’s evidence is that two senior lawyers should be sufficient. I prefer the evidence of Ms Rafferty on this issue, given that she specifically addresses the need for a solicitor in court to manage the e court database. I will allow 2.5 solicitors instructing each day in court for nine weeks, and one week preparation.
The resulting figure is calculated as follows:
Principal Lawyer (Rafferty): ten weeks at six days per week, eleven hours per day, at $481 per hour, totalling $317,460;
Senior Lawyer (Thomson): ten weeks at six days per week, eleven hours per day, at $350 per hour, totalling $231,000; and
Senior Lawyer (Matheson): ten weeks at six days per week, eleven hours per day, at $350 per hour, at half rate, totalling $115,500.
The total resulting figure for solicitors instructing and engaged in preparation is
$663,960 in allowable actual costs. The defendant proposes that security be calculated on the basis of 67% of actual costs. This results in a figure of $444,853.20.
Solicitors in the office
The table attached to Ms Rafferty’s affidavit in support claims that seven solicitors, and one paralegal are members of the defendant’s ‘legal team’. Three of the eight are identified by counsel for the defendant as the solicitors who instruct in court. All but three of the eight are claimed to be working at least five days per week. In her affidavit in reply, Ms Rafferty gives more detail as to their roles. She deposes that ‘at least one member of our core legal team has remained in the office on most days of the hearing’.7 She also deposes that other solicitors have been required to work on
Affidavit in Reply of Ms Louise Kristine Rafferty sworn 15 May 2018, [17].
Ibid [18].
discovery and related issues. However, in her affidavit in reply she explains the roles being performed by only seven of the eight members of the team.8 My starting point is thus seven members for the defendant’s legal team.
Mr Vaatstra deposes on information from Mr Lewis that the plaintiffs’ legal team comprises five solicitors, together with two solicitors and two paralegals engaged in discovery related tasks.9 This is a total of nine persons, or five if discovery tasks are excluded.
For the reasons given earlier, I will not include the defendant’s costs specifically identified as relating solely to discovery by the defendant in the further security sought. I otherwise consider that the same number of solicitors as has been retained by the plaintiffs for tasks other than discovery is a fair estimate. Accordingly, I will allow 2.5 solicitors for out of court work during the evidence (nine weeks) and for the week before, being a total of five members of the legal team for ten weeks, including the solicitors instructing. Having regard to the defendant’s table, I will exclude the two juniors and paralegal.
The additional professional costs (additional to those of solicitors instructing) are calculated as follows:
Senior Lawyer (Matheson): ten weeks at six days per week, eleven hours per day, at $350 per hour, at half rate, totalling $115,500;
Lawyer (Flynn): ten weeks at six days per week, eleven hours per day, at $253 per hour, totalling $166,980; and
Lawyer (Bott): ten weeks at four days per week, seven hours per day, at $253 per hour, totalling $70,840.
The total resulting figure for allowable actual costs for solicitors in the office during trial preparation and the trial prior to final submissions is $353,320. The figure on the basis that recoverable costs are 67% of actual is $236,724.40.
Ibid [16].
Mr Vaatstra’s affidavit, [21].
The resulting calculation for all solicitors’ professional fees on a recoverable basis at
67% is $681,577.60
PII team
As noted earlier, I will not include costs related to the public interest immunity disputes before the commencement of the trial. I will, however, allow an amount for public interest immunity issues that may arise during the trial. I do so having regard to the nature of the witnesses to be called for the plaintiffs, in particular the former Prime Minister Mr Kevin Rudd. I also accept the defendant’s case that solicitor and counsel with special security clearance is required for the assessment of public interest immunity. In reaching these conclusions, I prefer the evidence of Ms Rafferty to that of Mr Vaatstra on this point, who has not shown sufficient familiarity with the likely issues.
I will not, however, allow for an extra counsel given that I am informed that one of the counsel already allowed for during the trial, Mr Brown, has the necessary security clearance. I will allow the extra senior lawyer claimed at the rates and hours claimed.
The resulting calculation for professional fees relating to public interest immunity issues arising during the trial is as follows:
Senior Lawyer (Cooper): three weeks at two days per week, five and a half hours per day, at $350 per hour, totalling $11,550.
Discounted to 67% this figure becomes $7,738.50.
Experts
The table annexed to Ms Rafferty’s affidavit in support includes a witness no longer to be called, from FTI. As a result, costs in respect of only one accounting expert are sought. Mr Vaatstra accepts that there will be five experts.10 Excluding the FTI witness, I will allow the claimed $230,000.
Affidavit of Mr Justin Taede Vaatstra affirmed 10 May 2018 [23].
Other disbursements
The plaintiffs do not challenge the other disbursements claimed, and I will allow them in the claimed amount of $167,000.
Post evidence: preparation of closing submissions
The defendant seeks an allowance for three weeks for each of three counsel for the preparation of closing submissions, and one week for each of two senior solicitors (Rafferty and Thomson). The plaintiffs challenge the need for the claimed period of time on the basis that ordinarily counsel would commence this preparation during the evidence.
I accept that this would ordinarily be the case. However, I accept Ms Rafferty’s evidence that out of hours work by counsel to date has been consumed by other matters arising from the plaintiffs’ case.11
I will assume that counsel will be able to commence some preparation out of court during the evidence once the trial has settled to a greater degree. Accordingly, I will discount the amount sought for senior counsel and for the senior junior by one week each. I will allow senior counsel (Ms Doyle) for two weeks; senior junior (Ms Enbom) for two weeks; Mr Brown for three weeks; and the two senior solicitors for one week each.
The resulting figure is calculated as follows:
Senior Counsel (Doyle): two weeks at six days per week, at $7,700 per day, totalling $92,400;
Senior Junior (Enbom): two weeks at six and a half days per week, at $3000 per day, totalling $39,000;
Junior (Brown): three weeks at six and a half days per week, at $1550 per day, totalling $30,225;
Senior Lawyer (Rafferty): one week at six days per week, eleven hours per day, at $481 per hour, totalling $31,746; and
Senior Lawyer (Thomson): one week at six days per week, eleven hours per day, at $350 per hour, totalling $23,100.
I apply the discount to 67% for the allowable solicitors’ costs, resulting in a figure of
$36,746.82 for those costs. I allow the whole of the allowable counsel fees. The resulting figure for preparation of closing submissions is $198,371.82.
The total figure arrived at by these calculations as allowable for security for costs for the whole of a nine week trial, with one week preparation and three weeks for the preparation of closing submissions is $2,084,437.92.
Quantum allowed
From this sum must be deducted the amount calculated by the defendant for the first application for a four week trial. Ms Rafferty estimated this amount, prior to any discount, as $582,466, including $236,966 for solicitors’ fees.12 Applying the discount of 67% to the solicitor component of that estimate, the resulting figure is $504,267.22. I will subtract this from the sum I have calculated for the trial in this relisted application. The resulting figure is $1,580,170.70.
Undertakings
The first hearing in relation to security for costs was concerned with the form of the security to be ordered. The plaintiffs did not dispute either the need for security or its quantum, but proposed that they provide it in a package consisting of three elements
A proposed undertaking to the Court and to the defendant to be given by their litigation funder Harbour III (a copy of which is attached to the First Reasons);
After the event insurance (ATE Insurance) against an adverse costs order taken out by that funder; and
The deposit of $30,000 as security for the costs of overseas registration and enforcement of a costs order against the litigation funder.
In the First Reasons I considered this proposed form of security in detail and concluded that it was not adequate. I ordered that security be provided in the form proposed by the defendant, being either cash or a bank guarantee from an Australian bank.
The plaintiffs now put forward the undertaking previously offered as a discretionary consideration against the grant of further security, on the basis that it is now coupled with the security already provided.
By that undertaking, Harbour III would undertake not to oppose the making of a costs order against it and not oppose its enforcement. The undertaking includes a promise to make a claim on the ATE Insurance, and subject to certain qualifications to institute proceedings to enforce the policy if the claim is rejected. At the time the undertaking was first offered in the first application, it was supported by evidence that substantial ATE Insurance was in place. That was significant given that I concluded that there was not sufficient certainty that at the time any adverse costs order was made or was to be enforced Harbour III would itself have sufficient funds to meet it.13
The undertaking is now offered again, but without any evidence that the ATE Insurance is still in place. There is also no mention of the deposit of any funds for overseas enforcement, and there is no dispute that any costs order against Harbour III would need to be enforced overseas. It may perhaps be thought that funds for this enforcement could be found, or are not necessary, given the substantial funds already deposited for security. In the absence of evidence in relation to the ATE Insurance, however, I accept the submission by the defendant that the undertaking as earlier offered does not provide adequate security for the further costs of the defendant, as allowed above.
The fresh undertaking takes a different approach. It no longer relies on the ATE Insurance. New sub-clause 2(h) apparently responds to a suggestion I made in the
first hearing, that the litigation funder undertake to preserve a certain portion of its liquid funds.14 The fresh undertaking is also not accompanied by proposed deposit of funds for enforcement, although given the funds already deposited I do not consider this fatal.
The difficulty for the plaintiffs is that in the absence of evidence as to what ‘cash at bank’ means (one account or more than one? which bank? where located?); what is currently held as ‘cash at bank’; and as to other potential calls on that ‘cash at bank’ the proposed undertaking does not offer much certainty. The plaintiffs perhaps intended to provide this evidence by way of the further affidavit sworn 15 May 2018 on which they sought to rely. I refused that leave, given the lateness of the affidavit;
the absence of sufficient explanation for that lateness; and the prejudice to the defendant and potentially other litigants that would flow if it was allowed, given that adjournment of the hearing may be required.
Even if these matters had been addressed by evidence, however, the fresh undertaking has a fatal flaw to the extent it is proposed as adequate security rather than deposit of funds or a bank guarantee. I accept the submission of the defendant that if Harbour III can preserve in its own accounts more than the amount of further security that is now sought, and substantially more than I will order, there is no explanation given as to why it cannot deposit that sum with the Court or with an Australian bank which would then give a bank guarantee.
Conclusion and orders
I consider that the defendant has shown a material change in circumstance, being the length of the trial and resulting increase in costs, which justifies an increase in the security for costs required. I quantify the increase in allowable costs as $1,580,170. I will order security in that amount to be deposited in the manner previously ordered. I ask the parties to prepare appropriate orders. In that regard, my
Ibid [76]-[80].
preliminary view, subject to argument if necessary, is that as the trial has commenced those orders should not include the usual consequence of an order for security for costs, being stay until that security is provided. Further, my preliminary view is that any consequence from non-compliance should be a matter for the trial judge.
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