Taurus Mining Finance Fund AIV L.P. v Sandfire Resources Limited

[2021] WASC 52

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   TAURUS MINING FINANCE FUND AIV L.P. -v- SANDFIRE RESOURCES LIMITED  [2021] WASC 52

CORAM:   REGISTRAR WHITBY

HEARD:   15 FEBRUARY 2021

DELIVERED          :   26 FEBRUARY 2021

PUBLISHED           :   26 FEBRUARY 2021

FILE NO/S:   CIV 1802 of 2020

BETWEEN:   TAURUS MINING FINANCE FUND AIV L.P.

First Plaintiff

TAURUS MINING FINANCE ANNEX FUND AIV L.P.

Second Plaintiff

AND

SANDFIRE RESOURCES LIMITED

Defendant

Catchwords:

Security for costs - Assets within the jurisdiction - Whether entitlement to future royalties is an asset - Turns on its own facts

Security for costs - Timing of the application - Whether the application is premature - Whether the plaintiffs are unable to meet an order for costs - Where the plaintiffs have entitlement to royalties - Turns on its own facts

Legislation:

Civil Judgments Enforcement Act 2004 (WA)
Legal Profession (Supreme and District Courts) (Contentious Business) Determination 2020 (WA)
Legal Profession Act 2008 (WA)
Rules of the Supreme Court 1971 (WA), O 25

Result:

Defendant's application for security for costs refused

Category:    B

Representation:

Counsel:

First Plaintiff	:	Mr K De Kerloy
Second Plaintiff	:	Mr K De Kerloy
Defendant	:	Mr G Croft

Solicitors:

First Plaintiff	:	Herbert Smith Freehills
Second Plaintiff	:	Herbert Smith Freehills
Defendant	:	Johnson Winter & Slattery - Perth

Case(s) referred to in decision(s):

Christou v Stanton Partners Australia Pty Ltd [2011] WASCA 176

Corporation of the City of Adelaide v City of Port Adelaide Enfield [2001] SASC 207

David Clarke Air Conditioning Pty Ltd v Quann [No 2] [2016] WASC 176

Green v Australian Industrial Investments Limited [1989] 90 ALR 500

Knights Capital Group Ltd -v- Bajada & Associates Pty Ltd [No 2] [2017] WASC 245

Mabrouk Minerals Pty Ltd v Mabrouk Holdings Ltd [2008] WASC 132

Sugarloaf Hill Nominees Pty Ltd v Reward Projects Limited [2011] WASC 19

Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2013] WASC 57

REGISTRAR WHITBY:

1. This is the defendant's application dated 8 September 2020 pursuant to O 25 of the Rules of the Supreme Court 1971 (WA) (RSC) for the plaintiffs' to provide security for costs in the sum of $453,933 by either payment of that amount into court or an unconditional bank guarantee in favour of the defendant (application).

2. The defendant seeks that security for costs be paid by the plaintiffs in the following tranches:

   (a)Tranche 1 in the amount of $116,885 to be provided within 7 days of the date of these orders, as security for the defendant's costs up to and including pleadings, mediation, discovery and inspection;

   (b)Tranche 2 in the amount of $150,955, to be provided within 7 days of discovery being given by the defendant, as security for the defendant's costs up to and including service of the parties' lay evidence and expert evidence; and

   (c)Tranche 3 in the amount of $186,093, to be provided at least 28 days before the date that the trial of the action is listed to commence, for costs to be incurred in preparing for and attending the trial.[1]

   [1] Second Affidavit of George Alexander Croft in support of the application sworn on 4 December 2020 [28].

3. For the reasons that follow, I refuse to make an order for security for costs against the plaintiffs on the grounds that the plaintiffs’ entitlement to receive future royalty payments from the defendant is a fixed and permanent asset within the jurisdiction that is an available fund against which the defendant can enforce a judgment for costs.

Evidence

1. The defendant relies upon the following in support of its application:

   (a)affidavit of George Alexander Croft sworn 8 September 2020 (First Croft Affidavit);

   (b)affidavit of George Alexander Croft sworn 4 December 2020 (Second Croft Affidavit);

   (c)affidavit of Donal Joseph Langdon affirmed 4 December 2020 (Langdon Affidavit);

   (d)defendant's submissions in support of the application dated 4 December 2020; and

   (e)defendant's submissions in reply dated 24 December 2020.

2. The plaintiffs rely upon the following in opposition to the application:

   (a)affidavit of James Phillip Black sworn 16 November 2020 (First Black Affidavit);

   (b)affidavit of Peter Keeves affirmed 16 November 2020 (Keeves Affidavit);

   (c)affidavit of James Phillip Black sworn 18 December 2020 (Second Black Affidavit);

   (d)affidavit of Peter Richard Keeves affirmed 17 February 2021(Second Keeves Affidavit);[2]

   (e)plaintiffs' submissions in response dated 18 December 2020.

   [2] On 15 February 2021, I made an order granting the plaintiffs leave to file and serve a further affidavit in response to the application by 17 February 2021.

Background

1. The plaintiffs are:

   (a)limited partnerships registered in Delaware in the United States;

   (b)part of a group of companies carrying on the business of investment and fund management.[3]

   [3] Statement of Claim dated 24 July 2020, par 1(a).

2. The defendant:

   (a)is a company incorporated in Australia and listed on the Australian Securities Exchange (ASX); and

   (b)carries on the business of mining copper ore and gold.[4]

   [4] Statement of Claim dated 24 July 2020 par 2; Defence dated 20 August 2020, par 2.

3. In October 2017, the plaintiffs and Talisman A Pty Ltd (Talisman) entered into a royalty deed.  On 7 August 2018, the royalty deed was amended and restated (Royalty Deed).[5]

   [5] Statement of Claim dated 24 July 2020, pars 3 and 4.

4. The Royalty Deed required, inter alia, Talisman to pay a royalty to each of the plaintiffs in respect of gold and copper ore extracted or recovered from the defendant's mining tenements that comprise the Monty Deposit Area (Monty).

5. On 19 December 2018, Talisman's obligations as payer of royalties to the plaintiffs under the Royalty Deed were assigned to and assumed by the defendant.[6]

   [6] Statement of Claim dated 24 July 2020, par 7.

6. The plaintiffs allege that the defendant is in breach of the Royalty Deed in the following respects:

   (a)the defendant weighed and continues to weigh the gold and copper ore on Loadrite weightometers affixed to front end loaders in breach of the requirement under the Royalty Deed that the defendant weigh the gold and copper ore on a static weighbridge;[7]

   (b)the defendant has not provided certain data, information and documents to the plaintiffs in breach of its reporting obligations under the Royalty Deed.[8]

   [7] Statement of claim dated 24 July 2020 [12].

   [8] Statement of claim dated 24 July 2020, [13].

7. The defendant denies that it has breached the Royalty Deed because:

   (a)on a proper construction of the Royalty Deed, it is not required to weigh the gold and copper ore on any particular static weighbridge, and in any event, the plaintiffs have not suffered any loss and damage by virtue of the gold and copper ore being weighed on Loadrite weightometers affixed to front end loaders; and

   (b)it has complied, and continues to comply, with its reporting obligations under the Royalty Deed.[9]

   [9] Defendant’s submissions in support of the application dated 4 December 2020 [20]-[22]

Security for costs – Legal principles

1. Order 25 RSC provides:

   1.Factors that are not grounds for ordering security for costs

   The Court may order security for costs to be given by a plaintiff, but no order shall be made merely on account of the poverty of the plaintiff or the likely inability of the plaintiff to pay any costs which may be awarded against him.

   2.Grounds for ordering security for costs

   Without limiting the generality of rule 1 the Court may order security for costs to be furnished where the plaintiff –

   (a) is ordinarily resident out of the jurisdiction, notwithstanding that he may be temporarily within the jurisdiction;

   …

   3.Court has discretion

   The granting of security shall be in the discretion of the Court, and in determining whether an order should be made the Court shall take into consideration –

   (a)the prima facie merits of the claim;

   (b)what property within the jurisdiction may be available to satisfy any order for costs against the plaintiff;

   (c)whether the normal processes of the Court would be available within the jurisdiction for enforcement of any order for costs made against the plaintiff.

2. In Mabrouk Minerals Pty Ltd v Mabrouk Holdings Ltd,[10] Newnes J said:

   It is well-established that the discretion to order security for costs is unfettered and depends upon an examination of all of the relevant circumstances.  The circumstances in which the discretion should be exercised cannot be stated exhaustively.  They will vary from case to case and the weight to be given to any circumstance in a particular case will depend not only upon its own intrinsic persuasiveness but upon the impact of the other circumstances which have to be weighed (citations omitted).

   [10] Mabrouk Minerals Pty Ltd v Mabrouk Holdings Ltd [2008] WASC 132 [57].

3. In Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd,[11] Edelman J listed the 'most commonly cited, non‑exclusive factors' (emphasis added) which guide the court's discretion in determining whether security for costs ought be provided:

   [11] Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2013] WASC 57 [4].

   (i) the strength and bona fides of the plaintiff's case;

   (ii) the likelihood of the plaintiff being unable to pay the defendant's costs;

   (iii) whether the plaintiff's impecuniosity was caused by the defendant's conduct which is the subject of the claim;

   (iv) whether the application for security is oppressive;

   (v) whether the award of security would deny an impecunious applicant a right to litigate;

   (vi) whether there are persons standing behind the plaintiff who were likely to benefit from the litigation;

   (vii) whether the persons standing behind the plaintiff have offered any security or personal undertaking to be liable for the costs, and if so, the form of such an undertaking;

   (viii) whether the applicant was in substance a plaintiff or proceedings were defensive in the sense of directly resisting proceedings already brought or seeking to halt the defendant's self-help procedures;

   (ix) whether the application for security had been brought promptly;

   (x) whether the applicant has any rights which it can exercise against assets of the plaintiff to satisfy an order for costs in its favour; and

   (xi) any factors relating to public interest.

4. The defendant bears the onus of satisfying the court that it should exercise its discretion and order security for costs.[12]

   [12] Sugarloaf Hill Nominees Pty Ltd v Reward Projects Limited [2011] WASC 19 [34(f)].

5. Where a plaintiff is a foreign entity, the court may exercise its discretion to make a security for cost order in order to eliminate the risk that a defendant will not be able to enforce a costs order at all or only with significant resources and time.  However, residence outside of the jurisdiction alone is not a sufficient ground for making a security for costs order.[13]

   [13] Mabrouk [58].

6. If a foreign entity has assets within the jurisdiction to satisfy a costs order, it is not likely that a court will make an order for security for costs.  As Newnes J said in Mabrouk: [14]

   it will generally not be appropriate to order security if the court is satisfied that the plaintiff has assets within the jurisdiction which will remain available to meet the defendant's costs if the plaintiff is unsuccessful at trial.  In determining whether the plaintiff has such assets it may be relevant to consider the value and nature of the assets, including whether they are of a fixed and permanent nature… or whether the court can ensure that the assets will not be dissipated.(citations omitted)

   [14] Mabrouk [60].

7. Against the background of these legal principles, I will consider each of the discretionary factors contained in O 25 r 3 RSC.

Merits of the claim

1. The parties agree that this is a neutral factor and is not a factor to be considered in favour of either party in the exercise of my discretion to award security for costs.[15]

   [15] Defendant's submissions in reply dated 24 December 2020 [17]; Plaintiff's submissions in response dated 18 December 2020 [27] ‑ [29].

Assets within the jurisdiction

1. As evident from the submissions of both parties, the primary issue to be determined in this application is whether the plaintiffs have sufficient assets within the jurisdiction to meet any adverse costs orders.

2. It is not in dispute that the plaintiffs do not have any registered interests in real property within Australia.[16]  What is in dispute is whether the plaintiffs' entitlement to receive future royalty payments from the defendant constitutes an asset within the jurisdiction which is available to meet any adverse costs order.

   [16] First Croft Affidavit Annexures 'GOC6' and 'GOC7'.

3. The defendant submits that the plaintiffs' entitlement to receive royalty payments is not valuable property within the jurisdiction for the following reasons:

   (a)an entitlement to receive a payment at some future time is not property as it is not a fund or asset against which a potential costs award can be secured;

   (b)the future royalty stream is not of a fixed and permanent nature ‑ the amounts to be paid under the Royalty Deed in the future do not presently exist.  The royalty stream will stop and cease to exist ‑ either because the royalty caps in cl 3.7(a) of the Royalty Deed are reached or because Monty is fully mined or another extraneous event causes mining at Monty to finish;

   (c)the entitlement to future royalty payments, even if it is classified as an asset, is not an asset located within the jurisdiction.  It is a contractual entitlement which is shared by two entities registered and domiciled in the United States;

   (d)there is real and tangible possibility that payments to the plaintiffs under the Royalty Deed may have ceased by the conclusion of the proceedings and any costs order is made in favour of the defendant; and/or

   (e)pursuant to cl 10.5 of the Royalty Deed, the plaintiff may assign their rights and interests under the Royalty Deed to any other person (provided the plaintiffs first deliver an executed Assumption Deed to the defendant).  This means that the plaintiffs could transfer their right to receive the royalty stream to a third party and leave the defendant with no recourse to any royalty payment in the future to satisfy a costs order.[17]

   [17] Defendant's submissions in reply dated 24 December 2020 [20] ‑ [23].

4. Conversely, the plaintiffs submit that its entitlement to receive royalty payments from the defendant pursuant to the Royalty Deed is an asset within the jurisdiction which is sufficient to meet any adverse costs orders.[18]

   [18] Plaintiff's submissions in response dated 18 December 2020 [14].

5. The plaintiffs refer to the case of Corporation of the City of Adelaide v City of Port Adelaide Enfield[19] as an example (of which they submit are many such cases) of where the court has determined that a future royalty stream is a valuable asset.  In that case, the court accepted that the value of the land that had been used for the purposes of dumping rubbish can be determined by a capitalised future royalty stream.

   [19] Corporation of the City of Adelaide v City of Port Adelaide Enfield [2001] SASC 207.

6. I am persuaded that the entitlement to future royalty payments is a valuable asset of the plaintiffs.  This conclusion accords with commercial standards; to hold otherwise would be contrary to well-established principles applied by courts in cases involving the valuation of royalties for the purposes of compulsory acquisition of land, for the assessment of taxation liabilities and for stamp duty purposes.  In any event, the proposition that future royalty streams have value is accepted by counsel for the defendant.[20]

   [20] ts 32.

7. The defendant says that even where the entitlement to royalty payments is considered to be an asset of the plaintiffs, it is not of a fixed and permanent nature, nor is it an asset within the jurisdiction.

8. The defendants are particularly concerned that the plaintiffs' entitlement to receive royalty payments from the defendant will cease before the issue of costs in these proceedings is finally determined or agreed.  In support of this contention, the plaintiffs say that, based on the defendant's current modelling, the mine life at Monty is predicted to end around October 2022.[21]  The plaintiffs also say that there is no guarantee that the mine life may not cease sooner than October 2022, either due to a ramp up in mining at Monty (thus reaching the royalty caps sooner) or economic conditions that cause Monty to cease being mined.[22]

   [21] Langdon Affidavit par 19; First Black Affidavit pars 21 to 27.

   [22] Langdon Affidavit par 26.

9. It is this uncertainty as to the life of Monty and the date upon which royalty payments may cease that is the basis for the defendant's contention that the royalty stream is not of a 'fixed and permanent' nature, a requirement that was held to be necessary in Mabrouk.

10. In Mabrouk, the assets which the plaintiff asserted were valuable security were shares it held in Cashmere Iron and Mabrouk Minerals.  The court did not consider that the current existence of those shares as assets of the plaintiff provided sufficient assurance that after trial there would be a fund capable of meeting any costs order.  The court was persuaded that there was a possibility that a third party could make a claim that it had security over the shares, that the shares could be readily encumbered or that the plaintiff could dispose of the shares outside of the jurisdiction.[23]

    [23] Mabrouk [70] - [71].

11. Similarly, in Knights Capital Group Ltd v Bajada & Associates Pty Ltd,[24] Pritchard J held that shares in a private company did not satisfy the objective of providing a fund or asset against which the defendant by counterclaim could readily enforce a costs order against the plaintiff by counterclaim, as it could not be assumed that those shares would readily be able to be sold.

    [24] Knights Capital Group Ltd -v- Bajada & Associates Pty Ltd [No 2] [2017] WASC 245.

12. I was also referred by the defendant to Green v Australian Industrial Investments Limited.[25]  In this case, French J held that the lodgement of share certificates with the applicant's solicitors was sufficient security where the applicant was ordinarily resident outside of the jurisdiction.  The share certificates were for shares which were not presently tradeable but which did have a real and substantial value.

    [25] Green v Australian Industrial Investments Limited [1989] 90 ALR 500, 513 – 514.

13. What is clear from the cases I have been referred to is that whether or not an order for security is made will depend upon the circumstances of each case.

14. The royalty stream that the plaintiffs have received from the defendant since the commencement of the Royalty Deed are as follows:[26]

    [26] First Black Affidavit par 17.

Quarter	Date received	Gross Royalty ($)	Net Payment ($)
Mar 2019	30 Apr 2019	61,897.28	61,897.28
June 2019	2 Aug 2019	247,464.00	154,655.62
Sept 2019	25 Oct 2019	195,998.02	137,198.61
Dec 2019	4 Feb 2020	286,055.87	200,239.11
Mar 2020	29 Apr 2020	451,459.32	316,021.53
June 2020	31 July 2020	415,389.35	290,772.55
Sept 2020	29 Oct 2020	449,585.93	314,710.15
Totals		2,107,849.76	1,475,494.83

1. The defendant, as a publically listed company, has made a number of announcements to the ASX, in the form of its financial reports and ore reserve and mineral resource updates, that indicate that the life of Monty will continue until the third quarter of 2022.[27]

   [27] First Black Affidavit Annexures 'JPB3', 'JPB4', 'JPB5', 'JPB6', 'JPB7' and 'JPB8'.

1. It is not in dispute that while mining at Monty continues, the defendant will be obliged to pay royalties to the plaintiffs.  The plaintiffs expect to receive further royalty payments under the Royalty Deed totalling A$3.55 million.[28]  

   [28] Second Black Affidavit [13].

2. The defendant does say however, that there is no guarantee that mining at Monty will continue, no assurance of the amount of royalties (for example, if the cap on gold is reached the amount of royalties will reduce) and no certainty that these proceedings will be concluded before the payment of royalties comes to an end.[29]  The defendant submits that all of these factors combine to lead to the conclusion that the royalty stream is not a fixed and permanent asset.

   [29] ts 17 (15 February 2021).

3. In contrast, the plaintiffs say that the royalty stream is an income stream emanating from the defendant, an Australian company, mining in Western Australia and making the royalty payments from Western Australia which can be intercepted in the event of an adverse costs order.[30]  The plaintiffs submit that the amount of the royalty stream, given the history of payment of royalties, is more than adequate to meet any adverse costs order.[31]

   [30] ts 28 (15 February 2021).

   [31] ts 26 (15 February 2021).

4. It is worth noting that a security for costs order is not designed to operate as a 'guarantee' of payment of a costs order.  In David Clarke Air Conditioning Pty Ltd v Quann [No 2],[32] Le Miere J said:

   The purpose of ordering security for costs against a plaintiff ordinarily resident outside the jurisdiction, or about to depart the jurisdiction, is to ensure that a successful defendant will have a fund available within the jurisdiction of the court against which it can enforce a judgement for costs… The term 'ensure' in this context should not be read as 'guarantee'; it is used to refer to the object of the order rather than its effect. (citations omitted)

   [32] David Clarke Air Conditioning Pty Ltd v Quann [No 2] [2016] WASC 176.

5. On the basis of the evidence before me, being the defendant's announcements to the ASX in the form of its financial reports and ore reserve and mineral resource updates, I am satisfied that the defendants will continue to pay royalties to the plaintiffs for a period into the future.  I am not required to be satisfied, at this stage of the proceedings, as to when those royalties are most likely to cease.

6. A further issue that impacts upon whether the royalty stream is of a fixed and permanent nature is the plaintiffs' right to assign the royalty payments pursuant to cl 10.5 of the Royalty Deed.  This issue has been addressed in the Second Reeves Affidavit in which the plaintiffs give the following undertaking:

   The plaintiffs each undertake to the Court that, for so long as these proceedings remain on foot, they will not sell, transfer, grant, assign or otherwise dispose of any of their rights and interests under the royalty Deed (as amended and restated by the deed dated 7 August 2018) unless the plaintiffs have first given the Court and the defendant 28 days' written notice of their intention to do so. [33]

   [33] Second Reeves Affidavit par 4.

7. Although this undertaking does not prevent the plaintiffs from assigning the right to receive the royalty payments to a third party, it does require the plaintiffs to put the court and the defendant on notice of any proposed assignment.  This provides the defendant with sufficient time to make any further application to the court for security for costs or otherwise.

8. Finally, the defendant submits that the future royalty payments, given they are paid in quarterly instalments, may be dissipated as the proceedings progress.  This is a valid concern on the part of the defendant.  Absent an order for security for costs, there is nothing to prevent the plaintiffs from transferring those royalty payments out of the jurisdiction.  The question of how much each royalty payment is likely to be and the amount of security sought is relevant to this issue.

9. There is evidence before me that the amount of each quarterly payment is likely to be in the order of the royalty payments that the plaintiffs have already received.[34]  The royalty payments for the June and September quarters of 2020 were $290,772.55 and $314,710.15 respectively.[35]  The total amount of security sought by the defendant is $453,933.  This is supported by a draft bill of costs annexed to the First Croft Affidavit.[36]

   [34] First Black Affidavit par 21(b).

   [35] First Black Affidavit par 17.

   [36] First Croft Affidavit Annexure 'GAC9'

10. The plaintiffs say that the amount of security sought is grossly excessive given the nature of issues in dispute and the estimated length of trial of three to four days.[37]  The plaintiffs submit that a more accurate estimate of the defendant's likely recoverable costs is $253,410.  This estimate is supported by a draft bill of costs annexed to the First Keeves Affidavit.[38]

    [37] Plaintiffs' submissions in response to security for costs application dated 18 December 2020 par 49; Second Croft Affidavit par 8.

    [38] First Keeves Affidavit Annexure 'PRK1'

11. The defendant consolidates the competing draft bills of costs in a table annexed to the Second Croft Affidavit[39] and annexed to these reasons as Schedule A.

    [39] Second Croft Affidavit Annexure 'GAC10'

12. An overarching factor in the calculation of the defendant's estimate is the assumption that the court will make a special costs order pursuant to s 280(2) of the Legal Profession Act 2008 (WA) removing the limits in the Legal Profession (Supreme and District Courts) (Contentious Business) Determination 2020 (WA) (the scale).  The plaintiffs submit that an order for security is not designed to indemnify the defendant for its costs, rather the quantum of security is assessed by reference to what is fair and reasonable.  The plaintiffs submit that the scale is determined by reference to that very consideration, that is what is fair and reasonable, and therefore, the estimate of costs ought be assessed by reference to the scale. In any event, that plaintiff submits, the issues in these proceedings are not of unusual difficulty, complexity or importance so as to justify a special costs order.[40]

    [40] Plaintiffs' submissions in response to security for costs application dated 18 December 2020 par 51.

13. On the basis of an estimated length of trial of three to four days trial and the issues in dispute in these proceedings, I accept that the amount of any security for costs ought be assessed by reference to the scale.  For the purposes of assessing the amount of a royalty payment which would be required to satisfy any adverse costs order, I find that a royalty payment in the vicinity of $300,000 would be adequate to satisfy any order for security for costs.

14. Accordingly, given the royalty payment in the October quarter of 2022 is likely to be in the vicinity of $300,000, I find that any risk of dissipation of the royalty payments is mitigated by the fact that subsequent royalty payments will be sufficient to meet any adverse costs order. 

15. In summary, as the evidence currently stands, the future royalty stream is sufficient to ensure that the defendant, if successful, will have a fund available in the jurisdiction against which it can enforce a judgment for costs.

Normal processes for enforcement of a costs order

1. The normal processes of the court would be available within the jurisdiction of the court for enforcement of any costs order against the plaintiffs. Pursuant to s 49 of the Civil Judgments Enforcement Act 2004 (WA), the defendant may obtain a debt appropriation order in relation to the unpaid royalties owing to the plaintiffs.

Timing of the application

1. The defendant submits that it was required to make this application at the time that it did in order to avoid any submission from the plaintiffs that the action was not brought promptly, a factor outlined as weighing against the exercise of discretion outlined in Westonia.[41]

   [41] ts 14 ‑ 15 (15 February 2021).

2. Similarly in Christou v Stanton Partners Australia Pty Ltd,[42] Newnes JA (with whom Murphy JA agreed) cautioned against delay in bringing an application for security for costs:

   It is, however, incumbent upon a defendant who wishes to obtain security for its costs to apply promptly for that relief once it is, or ought reasonably be, aware that the plaintiff would be unable to meet an order for costs.  Security for costs is not a card that a defendant can keep up its sleeve and play at its convenience.  Delay is an important consideration in the determination of an application for security for costs because it is capable of causing prejudice or unfairness to the plaintiff.  A plaintiff is entitled to know at the earliest opportunity, before it has committed substantial resources to pursuing the litigation, whether it will be required to provide security, the grater the costs that will have been wasted.

   …

   I would add that in an era when the need to ensure the efficient use of judicial resources has become increasingly important, delay may also be significant in that regard.  A late application which frustrates the action will mean that the judicial resources already devoted to the case will have been wasted… [20] - [21]

   [42] Christou v Stanton Partners Australia Pty Ltd [2011] WASCA 176 [20]-[21].

3. The defendant submits that any delay in bringing this application would be inconsistent with the authorities.  If the defendant did make the application only when the royalty stream was about to come to an end, it submits it would have been met with a submission from the plaintiffs that the application should be dismissed due to delay.[43]

   [43] ts 14 ‑ 15 (15 February 2021).

4. The plaintiffs submit that this application is premature, in that while there remains an entitlement for the plaintiffs to receive royalties from the defendant, the application ought not have been made.[44] 

   [44] ts 14 (15 February 2021)

5. It is not in dispute that the defendant is in control of the payment of the royalties to the plaintiff.  I have determined that, on the evidence currently before me, there is a sufficient fund, in the form of the future royalty payments, available within the jurisdiction to meet any adverse costs order.

6. The plaintiffs accept that if these circumstances change and an unforeseen event arises that shortens the life of Monty or otherwise impacts upon the payment of royalties, or if the proceedings are not concluded before the last royalty payment is paid, then the defendant would be entitled to bring an application for security for costs at that time.[45]  There is no risk to the defendant that it will not be aware of such a change in circumstances as the defendant is in control of the payment of the royalties.  The defendant will know when the royalty stream is about to come to an end ahead of time.  The defendant will then be in a position to make an application to the court for security for costs in which they rely upon evidence that the asset, in the form of the royalty stream, is about to come to an end and will no longer be sufficient to satisfy any adverse costs order. 

   [45] Plaintiffs' submissions in response to security for costs application dated 18 December 2020 at par 41.

7. The plaintiffs have also submitted openly that they would not raise delay as an objection to any later application made by the defendant for security for costs.[46]  This alleviates the defendant's concerns that it may be put against them that an application for security for costs should be refused due to the timing of the application.

   [46] ts 32 (15 February 2021).

8. In any event, the passage from Christou cited above demonstrates that the timing of the application is to be considered by reference to a defendant's knowledge about a plaintiff's ability to meet an adverse costs order.  I emphasise the relevant portion of that passage:

   It is, however, incumbent upon a defendant who wishes to obtain security for its costs to apply promptly for that relief once it is, or ought reasonably be, aware that the plaintiff would be unable to meet an order for costs. (emphasis added)[47]

   [47] Christou [20]

9. The plaintiffs' submission that the application is made prematurely is therefore not inconsistent with the authorities, contrary to the view of the defendant.

10. While I find that the defendant's application for security for costs ought not be granted given the current evidence before me in relation to the future royalty payments, I do so on the basis that if that evidence changes, the defendant will be entitled to bring a future application for security for costs without being met with objections based upon delay in making that application.

Orders

1. I refuse to grant the defendant's application for security for costs.

2. The parties are required to confer in relation to the form of final orders.  In the event that orders cannot be agreed within seven days of these reasons, each party is required to file a Minute of Proposed Orders.

Schedule A

"GAC-10"

Comparison of Draft Bills of Estimated Costs

JWS Estimate  HSF Estimate
Scale item	Description	FE	Time	$	FE	Time	$	Diff
3(a)	Memorandum of Appearance	99	99	0
3(b)	Defence	SP	10hrs	4,950	SP	10 hrs	4,950	0
6(a)	Requesting particulars of the Statement of Claim	JP	3hrs	1,056	JP	3hrs	1,056	0
6(b)	Giving particulars of the Defence	JP	5hrs	1,760	JP	5hrs	1,760	0
7(b)	Giving discovery of documents	RP JP SP	140hrs 30hrs 10hrs	41,580 10,560 4,950	SP	10hrs	4,950	67,410
8	Inspection of discovered documents	SP	10hrs	4,950	SP	10hrs	4,950	0
10(a)	Proceedings in chambers	SC C	2 days prep, 1 day hearing	20,460 13,530	SC C	2 days prep, 1 day hearing	20,460 13,530	0
10(b)	Attending on a reserved judgment	SP	2hrs	990	SP	1hrs	495	495
16(b)	Offer of compromise	SP	4hrs	1,980	-	-	0	1,980
19	Preparation of case for trial	SC C SP JP	2 days 3 days 120hrs 120hrs	13,640 13,530 59,400 42,240	-	-	59,400	69,410
22(a)	Fee on brief for junior counsel	C	3.5 days prep, 1st day trial	20,295	C	3.5 days prep, 1st day trial	20,295	0
22(b)	Fee on brief for senior counsel	SC	3.5 days prep, 1st day trial	30,690	SC	3.5 days prep, 1st day trial	30,690	0
22(c)	Counsel fee for second and each consecutive day of hearing	C	3 days	13,350	SC	2 days	9,020	4,510
22(d)	Senior Counsel for second and each consecutive day of hearing	SC	3 days	20,460	SC	2 days	13,640	6,820
22(e)	Instructing legal practitioner attending trial	SP	4 days at 8hrs per day	15,840	SP	3 days at 7 hrs per day	10,395	5,445
22(e)	Clerk of Restricted Practitioner attending trial	RP	4 days at 8hrs per day	9,504	-	-	0	9,504
22(g)	Preparation of closing submissions	-	-	0	SP	16hrs	7,920	-7,920
22(i)	Attending on reserved judgment	-	-	0	SP	2hrs	990	-990
27(a) 27(c)	Attendance by Counsel and the instructing legal practitioners at the conferrals and conferences	SP SC C	5 hrs 5 hrs 5 hrs	2,475 3,410 2,255	SP - -	10 hrs - -	4,950	27,610
27(d)	Preparation undertaken for conferrals and conferences	SP SC C	5 hrs 5 hrs 5 hrs	2,475 3,410 2,255
27(e)	Conferences between Counsel and instructing legal practitioner	SP SC C	10 hrs 10 hrs 10 hrs	4,950 6,820 4,510
28	Settling and extracting judgment or order with appointment	RP	2 hrs	594	-	-	0	594
33	Copying at $0.165 per page	-	5,000 pages	825	-	-	0	825
35	Other work	-	-	0	SP	20 hrs	10,890	-10,890
36(b)	Fee for preparation of expert report	-	-	50,000	30,000	20,000
36(b)	Travel and expenses of 1 lay witness for a 3 day trial	-	-	5,000	-	-	0	5,000
36	Court transcript fees - $19.80 per page	-	50 pages per day for 4 days	3,960	-	50 pages per day for 3 days	2,970	990
36(b)	Disbursements for discovery of documents	*	*	15,000	-	-	0	15,000
TOTALS				453,933	253,410	200,523

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

TG

Court Officer

26 FEBRUARY 2021