Rusiti v Alkhoshaibi

[2007] NSWSC 1374

CITATION:	Rusiti v Alkhoshaibi [2007] NSWSC 1374
HEARING DATE(S):	6, 7 and 8 November 2007
JUDGMENT DATE :	8 December 2007
JUDGMENT OF:	McDougall J at 1
DECISION:	See paragraph 82 of the judgment.
CATCHWORDS:	PRACTICE – Production of documents – pursuant to notices to produce – Whether notices to produce valid – Use of notice to produce as substitute for discovery – Whether “vexatious and oppressive” – Security for costs – Whether defendants the cause of plaintiffs’ impecuniosity – Delay – Whether delay caused prejudice to party against whom order was sought. - CORPORATIONS – Where leave granted earlier pursuant to Corporations Act s237 – Whether condition as to costs can now be attached pursuant to s242. -
LEGISLATION CITED:	Corporations Act 2001 Uniform Civil Procedure Rules 2005 Fisher & Lightwood's Law of Mortgage
CASES CITED:	Adams v Bank of New South Wales [1984] 1 NSWLR 285 Carpenter v Pioneer Park Pty Ltd (in liq) (2004) 51 ACSR 299 Cowell v Taylor (1885) 31 Ch D 34 Fiduciary Limited v Morningstar Research Pty Ltd (2004) 208 ALR 564 Fiduciary Ltd v Morningstar Research Pty Ltd (2005) 53 ACSR 732 Kennedy v General Credits Ltd (Court of Appeal, 14 May 1982, unreported) KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 Gentry Bros Pty Ltd v Wilson Brown & Associates Pty Ltd (1992) 8 ACSR 405 Hughes Bros Pty Ltd v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney (7 November 1995, unreported; BC 95079079 Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744 MA Productions Pty Ltd v Austarama Television Pty Ltd (1982) 7 ACLR 97 Roach v Winnote Pty Ltd [2006] NSWSC 231 Scandinavian Pacific Ltd v Burke (1991) 5 BPR 11,846
PARTIES:	Sali Rusiti v Ahmed Alkhoshaibi
FILE NUMBER(S):	SC 2799/07
COUNSEL:	Lindsay SC / C P Locke (Plaintiff) M Dawson (Third and Fourth Defendants) M Ashhurst SC / S O'Brien (Fifth and Sixth Defendants)
SOLICITORS:	Oliveri Lawyers (Plaintiff) Mills Oakley Lawyers (Third and Fourth Defendants) Kemp Strang Lawyers (Fifth and Sixth Defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

McDOUGALL J

8 November 2007 (ex tempore – revised 9 November 2007)

02799/07 SALI RUSITI v AHMED ALKHOSHAIBI

JUDGMENT

1 HIS HONOUR: On 24 December 2003, the second plaintiff (Orara) and the second defendant (Alko) entered into a joint venture agreement for the development of land at Rockdale. The development comprised the construction of some 108 strata title residential lots and a smaller number of strata title commercial lots, and the sale of those lots. Ostensibly, the development will produce a loss. The joint venture parties have fallen out. These proceedings, rather than the projected profits, appear to be the fruits of the development.

The parties and the proceedings

2 Orara is a company associated with and in effect controlled by the first plaintiff (Mr Rusiti).

3 The third plaintiff (Soho) became the joint venture vehicle. It owned the land as "the bare trustee of the joint venturers" (clause 5.3 of the joint venture agreement). It had the responsibility for managing and carrying out the joint venture. It was originally controlled by Mr Rusiti and the first defendant (Mr Alkhoshaibi). Mr Rusiti has ceased to be a director of Soho, in circumstances of some controversy.

4 The second defendant (Alko) is a company associated with and controlled in effect by Mr Alkhoshaibi, although the third defendant (Mr Taouk) owns one half the issued shares in Alko.

5 The fourth defendant (TQM) is a licensed builder. It is associated with and in effect controlled by Mr Taouk, although his brother, Mr Mark Taouk (who appears to play no present part in these proceedings) owns one half the issued shares in TQM.

6 The fifth defendant (CFA) is a financier. It provided in excess of $43 million in finance for the development. It has a first registered mortgage over the land and improvements, and a first registered fixed and floating charge over all the other assets and liabilities of Soho. CFA claims that Soho is in default under those securities. It has appointed the sixth defendant (Mr Silvia) as receiver and manager of Soho's assets.

7 In the proceedings as presently pleaded, the plaintiffs sue the first four defendants for various alleged misdeeds in relation to the joint venture. The plaintiffs allege fraud, oppression, breach of fiduciary duty and misleading or deceptive conduct in a number of respects.

8 As against CFA, the plaintiffs, having offered to redeem (an offer made by Mr Rusiti and Orara) seek a declaration as to their entitlement to redeem on the taking of accounts. As against CFA and Mr Silvia, the plaintiffs seek an order for the taking of those accounts.

9 Mr Rusiti and Orara have been given leave pursuant to s237 of the Corporations Act 2001 to bring Soho's claims in a derivative capacity. The only relief claimed by Mr Rusiti alone and in his own right is in relation to restoring him as a director of Soho. The bulk of the relief claimed is relief claimed by or for the benefit of Soho. The claims in relation to redemption are made by "the Plaintiffs". The order for the taking of accounts appears to be claimed by or on behalf of Soho, although the relevant prayer for relief (prayer 97(x)) is not specific.

The questions for decision

10 These reasons deal with some seven interlocutory applications. Those applications relate in part to production of documents pursuant to notices to produce given by the plaintiffs to the third to sixth defendants; in part to applications by those defendants for security for costs and associated relief; and in part to claims by the fifth and sixth defendants for summary judgment or associated relief.

11 Since the questions to be decided have reduced in scope I will not set out in detail all the issues originally propounded for my decision.

The plaintiffs' interlocutory process filed 14 August 2007

12 By this application, the plaintiffs sought the following relief:

(1) An order that various specified persons be examined on oath as to the sufficiency of their answers to subpoenas or notices to produce (prayers 1 and 2);
(2) Orders for the production of documents (prayers 4 to 6);
(3) An order staying the fifth and sixth defendants' notice of motion filed on 27 July 2007 (prayer 7);
(4) An order that parts of the various defences of the first, second, fifth and sixth defendants be struck out, and associated relief (prayer 8); and
(5) Relief in relation to amendment of the originating process (prayer 9).

The third and fourth defendants' initiating process filed 10 July 2007

13 By this application, the third and fourth defendants sought an order that the notices to produce dated 7 June 2007 served on them by the plaintiffs be set aside.

The third and fourth defendants' interlocutory process filed 5 September 2007

14 By this application, the third and fourth defendants sought security for costs. The interlocutory process was amended on 6 November 2007 (the first day of the hearing before me) to claim an order that Mr Rusiti indemnify Soho for all costs et cetera incurred by it, and pay its costs of the proceedings.

CFA's notice of motion filed 11 July 2007

15 By this application, CFA sought an order that a notice to produce dated 7 June 2007 served on it by the plaintiffs be set aside.

Mr Silvia's notice of motion filed 11 July 2007

16 By this application, Mr Silvia sought an order that a notice to produce dated 7 June 2007 served on him by the plaintiffs be set aside.

The fifth and sixth defendants' notice of motion filed 27 July 2007

17 By this notice of motion, the fifth and sixth defendants sought:

(1) Summary dismissal of the proceedings against them or alternatively as against Mr Silvia (prayers 1 and 2);
(2) Orders for separate trials or separate determination of issues in relation to the redemption proceedings (prayers 3 and 4); and
(3) Security for costs and related relief (prayers 5 and 6).

Production of documents

18 At least by the time the various interlocutory applications to which I have referred were heard, the parties seem to have come to accept that the further production of documents should be on discovery rather than pursuant to notices to produce. Orders for discovery as between the plaintiffs and the third and fourth defendants were made on 10 September 2007. No such orders were made as between the plaintiffs and the fifth and sixth defendants: presumably, because of the latter's outstanding application for summary dismissal of the proceedings against them.

19 For the plaintiffs, Mr Lindsay SC submitted that:

(1) It had been necessary for the plaintiffs to obtain some documents from the defendants, to know how to frame their case;
(2) One way or another, the plaintiffs had got sufficient documents from the defendants to allow them to do this; and
(3) The plaintiffs had therefore succeeded in part on their interlocutory process insofar as it sought production of documents.

20 For the third and fourth defendants, Mr Dawson of counsel submitted that such documents as had been produced by his clients to the plaintiffs were produced voluntarily in late 2006, to the plaintiffs' then solicitors, well before the relevant notices to produce were served on his clients. He submitted (correctly) that there was no evidence that any of his clients' documents tendered by the plaintiffs on the hearing of the interlocutory applications were shown to have been produced after service of those notices to produce. In this context, I note that the plaintiffs could have adduced such evidence easily enough. Their solicitor, Mr Oliveri, gave evidence on the hearing of the interlocutory applications.

21 For the fifth and sixth defendants, Mr Ashhurst SC submitted that such documents as his clients had produced in answer to the notices to produce served on them were produced in answer to limited paragraphs of those notices, and without prejudice to his clients' objections to the remaining paragraphs. It must be said that CFA’s application in relation to the notices to produce served on it did not reflect this distinction.

22 It is clear that the use of a subpoena in effect as a substitute for discovery is vexatious and oppressive. Mr Lindsay did not question this principle. In my view, it applies equally to the use of a notice to produce, which as between parties to proceedings has the effect of a subpoena.

23 The width of the notices to produce in question - both as between the plaintiffs and the third and fourth defendants and as between the plaintiffs and the fifth and sixth defendants (to the extent that CFA takes objection) is sufficient to invoke this principle. Mr Lindsay did not submit otherwise.

24 Further, in the case of the notices to produce served on the third and fourth defendants, their vexatious and oppressive character is reinforced by the consideration that those defendants had voluntarily produced documents to the plaintiffs' former legal representatives.

25 As I have indicated, Mr Lindsay did not challenge the relevant principles or their prima facie application. His submission was in effect that the plaintiffs had been justified in doing what they did, and that the justification was demonstrated by the success that they achieved. For the reasons that I have given, I do not accept that this justification has been made out.

26 In my view, the third to sixth defendants are entitled to the orders sought (limited, in the case of CFA, to those paragraphs of the notices to produce that it has not answered), including that the plaintiffs pay their costs of the relevant interlocutory processes.

27 Further, the plaintiffs are not entitled to the relief sought by them in the relevant prayers - 1 to 6 - of their interlocutory process, which were either not pressed at all, or were relied on only in relation to costs. For the avoidance of doubt, I note that the refusal of relief in relation to prayers 1, 2, 3 and 6 does not involve any examination of or decision upon their merits; it follows only from the fact that they were not pressed, and in my view should not be left in abeyance.

Summary dismissal

28 This application related to a claim by Mr Rusiti and Orara that they are entitled to redeem the mortgage and charge given by Soho to CFA, and to an order for the taking of accounts.

29 Mr Ashhurst submitted that the claim for redemption could not succeed because:

(1) Mr Rusiti and Orara lacked standing to seek an order for redemption; and
(2) In any event, their offer to redeem was worthless because they lacked the funds to redeem.

30 Mr Lindsay submitted that:

(1) Mr Rusiti and Orara were liable with Soho for its debts incurred in respect of the joint venture, and thus had standing; and
(2) The question of the sufficiency of the offer to redeem should not be determined on an interlocutory hearing.

31 Mr Ashhurst submitted further that, in the absence of a real or substantial offer to redeem, neither Mr Rusiti nor Orara (nor, for that matter, Soho) could call on CFA to account. He relied on the well-known and oft cited observations of Hutley JA (with whom Moffitt P and Samuels JA agreed) in Adams v Bank of New South Wales [1984] 1 NSWLR 285 at 296:

“There is authority in this Court for the view that the bar to the obtaining of a declaration as between mortgagor and mortgagee, except where there is an offer by the mortgagor to redeem, is not merely procedural, but substantial, that is, the only circumstances under which a mortgagor can call upon a mortgagee to account is where the mortgagor is prepared to make an offer to redeem: Kennedy v General Credits Ltd (Court of Appeal, 14 May 1982, unreported). The reason is simple – any other rule would enable a mortgagor to involve a mortgagee in futile litigation because the result could have no effect upon the legal rights of the parties.”

32 Mr Lindsay submitted that the "rule" asserted by Mr Ashhurst was not absolute, and that the question was not one to be decided on an interlocutory hearing. He relied on Fisher & Lightwood's Law of Mortgage (2nd Australian edition by Tyler, Young and Croft, 2005) at 775-776 [33.8] and 801-802 [39.2].

33 Some support for this aspect of Mr Lindsay's submissions may be found in the decision of Cole J in Scandinavian Pacific Ltd v Burke (1991) 5 BPR 11,846 at 11,851:

“(12) In Adams v Bank of New South Wales [1984] 1 NSWLR 285 at 296, Hutley JA with whom Moffitt P and Samuels JA agreed, explained why it is that:

‘… the only circumstances under which a mortgagor can call upon a mortgagee to account is where the mortgagor is prepared to make an offer to redeem: Kennedy v General Credits Ltd (CA(NSW), 14 May 1982, CA 1/82, unreported). The reason is simple – any other rule would enable a mortgagor to involve a mortgagee in futile litigation because the result could have no effect upon the legal rights of the parties.’
That explanation makes clear that his Honour was dealing with the situation where the mortgage still encumbered the land: because such legal rights, such as the exercise of a power of sale, flowed from the encumbrance, they would not be affected by a claim for accounts. To affect or interfere with those legal rights, there must be an offer to redeem. Such offer, if accepted, would extinguish the mortgagees’ legal rights whilst then permitting the taking of accounts between the parties. That reasoning can have no application after exercise of the power of sale because the mortgagees’ legal rights as mortgagee have been extinguished.”

34 It may be, however, that his Honour was talking of the position after the power of sale had been exercised (see his Honour's reference to Adams in the previous proposition, and his observations immediately preceding the passage that I have set out).

35 Mr Ashhurst submitted further that in any event there was no basis shown for an accounting as between the plaintiffs and Mr Silvia. Mr Lindsay submitted that as Mr Silvia was the agent of Soho, there was a basis for ordering accounts. In principle, Mr Lindsay's submission is correct. It was common ground that any receiver appointed under the mortgage or the charge would be the agent of the mortgagor, Soho. In general, a principal is entitled to call upon its agent to account. Mr Ashhurst did not submit otherwise. Whether there is any real basis to order accounts as between the plaintiffs and Mr Silvia is a different matter, and one that was not argued.

36 CFA's evidence, from its manager, Mr Nicodemou, was that the shortfall was likely to be of the order of $1.6 million. That evidence was based on stated assumptions and proved business records. Mr Lindsay attacked it, on the basis that the underlying primary records had not been produced. I do not accept that attack. Whilst I make no finding as to the shortfall, I accept Mr Nicodemou's evidence that on the assumptions made by him, the shortfall may well be of the order stated.

37 The plaintiffs adduced no evidence of their ability to meet such a shortfall. Such evidence as there is suggests strongly that they could not. In truth, I think, their hopes are based on success (including recovery) in these proceedings, or on somehow reducing the amount owed to CFA through the taking of accounts. Their offer to redeem has to be viewed accordingly.

38 Further, it is quite unclear that, by the time accounts are taken (if that should occur) there will be anything left to redeem. The plaintiffs did not suggest that they could pay or provide security for the present amount of CFA's claim: of the order of $40 million. Again, the plaintiffs' case appears to be that somehow they can reduce that claim through the process of taking accounts.

39 CFA is selling units in the development, and will no doubt continue to do so until its debt has been repaid. The plaintiffs have not sought to restrain those sales. It may well be that all the units will be sold before (if it should occur) the "true" balance owed is established on the taking of accounts.

40 It is not necessary to express a concluded view on any of these matters. But I am left with the uneasy impression that unless the plaintiffs can bring home to CFA (as an alleged accessory) any of the claims they make against the other defendants, or unless the plaintiffs can overturn CFA's imposition of the "default" rate of interest (in total, about $2 million of additional interest, charged and capitalised monthly), the proceedings against the fifth and sixth defendants may go nowhere.

41 In any event, the point is now relevant only to the question of costs, since the plaintiffs have sought leave further to amend their pleading, and I have indicated that I will grant that leave.

42 In those circumstances, I think, the better course is to dismiss the relevant prayers (1 to 4) of the fifth and sixth defendants' notice of motion filed on 27 July 2007, but to state that I do so because of the way in which events unfolded, not because of an examination of or decision upon their merits.

43 That being done, and bearing in mind that the question may remain alive, my tentative view is that the appropriate costs order would be that the costs of those prayers abide the outcome of any application to strike out the equivalent pleadings and prayers to relief in the further pleading that the plaintiffs are to file, and that if no such application be made, they should be costs in the proceedings as between the plaintiffs and the fifth and sixth defendants.

Security for costs and related relief

44 It was common ground that the corporate plaintiffs were in no present position to meet any costs orders that might be made against them. Thus, the powers given by s1335(1) of the Corporations Act 2001 and UCPR r42.21(d) are enlivened. The question debated was whether those powers should be exercised.

The relevant principles

45 The discretion to order security for costs, once the power to do so has been enlivened, is limited only by the requirement that it be exercised judicially. I take that to be a requirement that the discretion be exercised on reasoned and not capricious grounds, taking into account all relevant circumstances so far as the evidence discloses them. That having been said, a number of "guidelines" have been identified in the cases. Beazley J referred to some seven in her decision in KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 196-198. I paraphrase what her Honour said, omitting citations and explication:

(1) The application should be brought promptly.
(2) Regard should be had to the strength and good faith of the plaintiff's case.
(3) Was the plaintiff's impecuniosity caused by the defendant's conduct, the subject of the plaintiff's claim?
(4) Is the application for security oppressive, being used merely to deny an impecunious litigant its right to litigate?
(5) (A related issue) are there persons standing behind the impecunious plaintiff who would benefit from any litigation and who are willing to provide the necessary security?
(6) (A further related issue) have persons standing behind the impecunious litigant offered any personal undertaking to be liable for costs; if so, what is the form and strength of that undertaking?
(7) Security should only be ordered against a party that is in substance a plaintiff and not against a party that is in substance defending itself.

46 Not all of those guidelines will be relevant in all cases, nor do they between them set out the universe of possibly relevant guidelines. As Cooper J said in Gentry Bros Pty Ltd v Wilson Brown & Associates Pty Ltd (1992) 8 ACSR 405 at 415, in a passage cited with approval by Beazley J in KP Cable at 196:

“[i]t is not possible or appropriate to list all of the matters relevant to the exercise of discretion. The factors will vary from case to case. The weight to be given to any circumstance depends upon its own intrinsic persuasiveness and its impact on other circumstances that have to be weighed.”

The third and fourth defendants' application

47 Mr Geary, a solicitor in the employee of the third and fourth defendants' solicitor with the day-to-day conduct of the proceedings on their behalf, gave unchallenged evidence that:

(1) The third and fourth defendants had incurred costs to date in excess of $150,000 in relation to these and other (said to be related) proceedings; and
(2) The third and fourth defendants would incur at least $100,000 in costs from the date (4 September 2007) his affidavit was sworn.

48 Mr Geary gave a brief break-up of future costs. The total of the amounts, excluding GST, was in fact $118,000. Mr Geary did not indicate how this was related to his estimate of $100,000, nor did he say whether his estimates (however one looks at them) reflect solicitor and client or party and party costs.

49 Mr Lindsay submitted that there should be no order for security. He relied on:

(1) Alleged delay in bringing the application.
(2) The proposition that any order for security would stifle the litigation.
(3) The proposition that the defendants were the cause of the plaintiffs' impecuniosity.
(4) Mr Rusiti's acceptance of the proposition that the Court could order him to pay any costs ordered to be paid by the plaintiffs, notwithstanding his relatively limited involvement (in his own right) in the prayers for relief.
(5) The defendants' failure to seek any order for security, or other relief or condition, when they either consented to or did not oppose the making of orders under s237.

50 All but the first of those submissions are relevant also to the fifth and sixth defendants' application for security for costs.

51 Mr Lindsay submitted further that the Court was in no position to undertake any examination of the merits of the plaintiffs' case.

52 As to delay: there are three answers. The first is that the plaintiffs must have been aware of the third and fourth defendants' attitude. Mr Dawson pointed to correspondence in November 2006 when, in relation to a not dissimilar claim then sought to be mounted by Orara as a cross-claimant in earlier proceedings, the (now) third and fourth defendants had notified their intention to seek security if not satisfied of Orara's solvency.

53 The second answer is that delay is not of itself dispositive. On a proper analysis, I think, the authorities make it plain that delay is not to be looked at in the abstract. What is important is whether, assuming that delay has been shown, such delay causes actual prejudice to the party against whom the order is sought. Even if prejudice is not shown, the application need not fail. But unless prejudice is shown, the significance of delay as a dispositive factor disappears. See the decision of Hunter J in Hughes Bros Pty Ltd v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney (7 November 1995, unreported; BC 95079079).

54 In this case, there is no evidence of actual prejudice. Nor, having regard to the plaintiffs' failure to adduce evidence on the topic, am I prepared to infer prejudice on some general basis.

55 The third, and related, answer is that the amount for which security is sought is for costs to be incurred after the application for security was made.

56 As to stifling the litigation: the plaintiffs adduced no evidence to show that they had no prospect of putting up or obtaining security. A plaintiff who wishes to submit that an order for security would stifle the litigation bears the onus of showing that this is so. See Austin J in Fiduciary Limited v Morningstar Research Pty Ltd (2004) 208 ALR 564 at 582 [78] and Einstein J in Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744 at [66]. In this case, the plaintiffs have not discharged that onus.

57 As to the cause of the plaintiffs' impecuniosity: once again, it is the plaintiffs' onus. See Needham J in MA Productions Pty Ltd v Austarama Television Pty Ltd (1982) 7 ACLR 97 at 100 and Austin J in Fiduciary at 585 [88] and 587 [100]. Again, the plaintiffs have not discharged that onus.

58 As to Mr Rusiti's position: it is correct to say that, as a general rule, security for costs will not be ordered against an impecunious individual plaintiff. See Bowen LJ in Cowell v Taylor (1885) 31 Ch D 34 at 38.

59 It may be that this general rule should be extended for the benefit of an impecunious corporate plaintiff where there is an impecunious individual co-plaintiff, on the ground that to stay the corporate plaintiff's action would be pointless if the individual plaintiff's action, for substantially the same relief, would continue in any event.

60 In this case, Mr Rusiti has made it perfectly clear that his acceptance of the power of the Court to make orders for costs against him does not extend to a present offer to accept liability for all costs orders made in favour of the defendants.

61 The principal (although not the only) part that Mr Rusiti plays in the litigation as presently constituted is as a vehicle by which, through the s237 order, the claims of Soho are pressed in the statutory derivative action. Austin J held, in another "Fiduciary" decision, that the fact that a company's claims were asserted by an individual through a statutory derivative action did not convert them into claims by that individual; they remain claims of the corporation. See Fiduciary Ltd v Morningstar Research Pty Ltd (2005) 53 ACSR 732 at 744 [53]. I agree.

62 The fifth point is based on s242, and the failure to invoke it at the time the s237 orders were made. Section 242 relevantly empowers the Court "at any time [to] make any orders it considers appropriate about the costs of" parties to proceedings brought under s237, and to require indemnification for costs. That power is not exercised only for the benefit of those other parties. Its fundamental purpose is to protect all the creditors of the corporation. See the decisions of Barrett J in Carpenter v Pioneer Park Pty Ltd (in liq) (2004) 51 ACSR 299 at 311 [38]-[39] and Roach v Winnote Pty Ltd [2006] NSWSC 231 at [25]-[29]. Protection of those other parties is in a sense collateral to this fundamental purpose.

63 I do not know why an order under s242 was not sought or made when leave was granted under s237. But the wording of s242 makes it plain that an appropriate order may be made "at any time". In my view, the underlying policy requires that an order should now be made attaching to the grant of leave a condition that Mr Rusiti and Orara indemnify Soho for all costs payable by it as a plaintiff and any costs orders that may be made against it.

64 That does not mean that an order for security should not be made. In the circumstances of this case, I think that the discretionary considerations clearly favour the making of an order that the plaintiffs give security for the third and fourth defendants' costs of the proceedings.

65 I should make it plain that Mr Lindsay's opposition to the provision of security was put at the level of principle. He did not (for example) submit that if security were to be ordered, it should be ordered as against some only of the plaintiffs. Nor did he put submissions as to the amounts sought, or as to the manner, form and timing of any security ordered to be given.

66 Whilst there was no issue as to the amount for which the third and fourth defendants seek security, the estimate was based on the present formulation of the plaintiffs' claim. That claim is to be reformulated. The reformulation may affect the estimate of costs. Thus, the third and fourth defendants should have a reservation of liberty to apply to seek any increase in the amount of security if that is necessitated by the reformulation of the plaintiffs' claim.

67 The parties did not address the timing of the provision of security. Mr Geary's evidence is that some $67,000 will be incurred in preparation for hearing and for the hearing. In my view, bearing in mind that security is sought in the total amount of $100,000 as against an estimate of costs of $118,000, the appropriate course is to order the plaintiffs to provide security by instalments as follows:

(1) $50,000 by 14 December 2007; and
(2) A further $50,000 within seven days of the making of an order setting the proceedings down for hearing.

68 That security is to be provided in such manner and form as the plaintiffs and the third and fourth defendants agree, or in default of agreement in such manner and form as may be approved by the Registrar.

69 The proceedings against the third and fourth defendants should be stayed if security is not provided accordingly.

70 As to costs: the third and fourth defendants have succeeded. However, if the plaintiffs succeed on their case against the third and fourth defendants, it would not be just that the plaintiffs nonetheless should bear the costs of the application for security. My tentative view is that the costs of the third and fourth defendants' application for security for costs should be those defendants' costs in the proceedings.

Fifth and sixth defendants' application

71 The fifth and sixth defendants' solicitor, Mr Graham, gave unchallenged evidence that those defendants' costs to 6 September 2007 were $32,259.14, and they would incur a further $24,250.00 in costs in respect of the interlocutory applications with which I am dealing. He said that no estimate of costs could be made for the future, until the fate of those applications was made.

72 The issues as between the plaintiffs and the fifth and sixth defendants on the question of security were in substance the same as those between the plaintiffs and the third and fourth defendants save that:

(1) There was no real question of delay (nor, on the evidence, could there be); and
(2) Mr Ashhurst raised as an issue the strength (or lack of strength) of the plaintiffs' case against the fifth and sixth defendants.

73 It is not necessary to deal with the second issue; nor, having regard to the proposed further amendment of the plaintiffs' claim, is it desirable to do so.

74 For the reasons that I have given on what may be called the common issues, I conclude that the fifth and sixth defendants should have security for their costs to date, with liberty to apply for further security once the plaintiffs have filed and served their further amended process.

75 Although there was no challenge to the amounts to which Mr Graham deposed, I think adequate protection will be given (in respect of party and party costs) by an order that the plaintiffs by 14 December 2007 give security for the costs of the fifth and sixth defendants in the sum of $50,000, with such security to be in a manner and form agreed by the plaintiffs and the fifth and sixth defendants or in default of such agreement in a manner and form approved by the Registrar. There should be as well liberty to apply for further security.

76 As to costs: for the reasons given in respect of the third and fourth defendants' claim, my tentative view is that the costs of the fifth and sixth defendants' application for security for costs should be those defendants' costs in the proceedings.

The remaining issues

77 I deal with the remaining issues under the plaintiffs' interlocutory process filed on 14 August 2007.

78 Prayer 7 sought an order staying the fifth and sixth defendants' notice of motion filed on 27 July 2007 (the notice of motion dealing with summary dismissal or alternative relief and with security for costs). I have not dealt in finality with all of that notice of motion; but I have concluded that as to part it should be dismissed and as to the balance the fifth and sixth defendants should have security for their costs. Thus, it is not appropriate to make any order as sought in prayer 7 of the plaintiffs' interlocutory process.

79 Prayer 8 sought an order striking out various parts of various defences, and associated relief. That need not be dealt with having regard to the plaintiffs' desire to reformulate their case.

80 Prayer 9 was directed to that reformulation. In my view, the quickest way to deal with this is to grant the plaintiffs leave further to amend, and to direct them to file their further amended originating process by 7 December 2007. Of course, that should be on the usual terms as to costs. If the defendants desire to challenge the case propounded by that reformulated originating process, they may do so.

81 If the parties wish, I will hear them as to those outstanding costs issues that will not be dealt with by orders in accordance with the reasons that I have given.

Orders

82 I make the following orders:

(1) Grant the plaintiffs leave further to amend their originating process.
(2) Direct that any further amended originating process be filed and served by 5.00pm on 7 December 2007.
(3) Order the plaintiffs to pay the defendants' costs of and incidental to and thrown away by that amendment.
(4) Order that the plaintiffs' interlocutory process filed on 14 August 2007 otherwise be dismissed.
(5) Subject to order (3), reserve for further consideration the costs of that interlocutory process.
(6) Make orders in accordance with prayers 1 and 2 of the third defendant's interlocutory process filed on 10 July 2007.
(7) Make an order in accordance with prayer 1 of the fifth defendant's notice of motion filed on 11 July 2007, but limiting such order to paragraphs 1, 3(b), 4, 6, 7 and 13 to 16 of the notice to produce in question.
(8) Make an order in accordance with prayer 1 of the sixth defendant's notice of motion filed on 11 July 2007.
(9) Order the plaintiffs to pay the fifth and sixth defendants' costs of the interlocutory process and notices of motion the subject of orders (6), (7) and (8).
(10) Make orders in accordance with prayers 1 (up until and including the words "be set aside" and not further) and 2 of the fifth defendant's interlocutory process filed on 11 September 2007.
(11) Order the plaintiffs to provide security for the costs of the third and fourth defendants as follows:

(1) In the sum of $50,000 by 5.00pm on 14 December 2007; and
(2) In the further sum of $50,000 within 7 days of the making of an order setting these proceedings down for hearing.

(12) Order the plaintiffs by 5.00pm on 14 December 2007 to provide security for the costs of the fifth and sixth defendants to date in the sum of $50,000.
(13) Order that all such security be provided in such manner and form as the parties agree or in default of agreement in such manner and form as the Registrar may approve.
(14) Reserve liberty to the third to sixth defendants to apply on 14 days' notice for further security for costs.
(15) Order that, subject to orders (12) to (14) and (16), the fifth and sixth defendants' notice of motion filed on 27 July 2007 otherwise be dismissed.
(16) Reserve for further consideration the costs of:

(a) The third and fourth defendants' interlocutory process filed 5 September 2007 (including the amendment thereto made on 6 November 2007); and
(b) The fifth and sixth defendants' notice of motion filed on 27 July 2007.

(17) Order any party seeking an order in respect of the costs reserved by orders (5) or (16) to notify the party against whom an order is sought of the order that is sought and in brief the reasons why it is sought; such notification to be delivered by 5.00pm on 23 November 2007; a copy of any such notification to be delivered to my associate at the same time.
(18) Reserve liberty to apply on 14 days' notice in respect of any costs orders sought pursuant to order (17)
(19) To the extent that costs orders are not sought in accordance with order (17), order that:

(a) Subject to order (3), the costs of the plaintiffs' interlocutory process filed on 14 August 2007 be costs in the proceedings;
(b) The costs of the third and fourth defendants' interlocutory process filed on 5 September 2007 and their amended interlocutory process filed on 6 November 2007 be those defendants' costs in the proceedings;
(c) The costs of prayers 1 to 4 of the fifth and sixth defendants' notice of motion filed on 27 July 2007 be costs in the proceedings; and
(d) The costs of prayers 5 and 6 of the fifth and sixth defendants' notice of motion filed on 27 July 2007 be those defendants' costs in the proceedings.

(20) Order that there be attached to the grant of leave to the first and second plaintiffs under s237 of the Corporations Act a condition that those plaintiffs indemnify the third plaintiff for all costs payable by it as a plaintiff and any costs orders made against it in these proceedings; such condition to be effective from the date on which leave under s237 was granted.
(21) Order that the exhibits on the interlocutory applications be handed out.

83 I list the proceedings for directions before the Corporations List Judge on Monday 11 February 2008.

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