Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd

[2009] NSWSC 563

CITATION:	Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2009] NSWSC 563
HEARING DATE(S):	16/06/08, 17/06/08, 18/06/08, 19/06/08, 20/06/08, 23/06/08, 24/06/08, 25/06/08, 26/06/08, 27/06/08, 30/06/08, 04/07/08, 28/07/08, 29/07/08, 27/08/08, 28/08/08, 24/11/08, 25/11/08, 26/11/08, 27/11/08, 28/11/08, 10/06/09, 11/06/09
JUDGMENT DATE :	18 June 2009
JURISDICTION:	Equity Division
JUDGMENT OF:	Barrett J
DECISION:	Upon Chow Chan Lum and Ka Kow Yeung, by their solicitor, Ted Dorotheos Tzovaras, undertaking to the court to satisfy any adverse costs order that might be made against the first plaintiff up to an amount of $120,000, I order that the defendant’s notice of motion filed on 13 May 2009 be dismissed.
CATCHWORDS:	PROCEDURE - costs - security for costs - application for security for costs seven years after commencement of proceedings - part-heard after 21 days - changed financial context affecting corporate plaintiff - not disputed that corporate plaintiff impecunious - whether security should be ordered for past costs - whether security should be ordered for future costs - where new owners of corporate plaintiff offer to the court an undertaking to meet adverse costs order up to stated amount
LEGISLATION CITED:	Corporations Act 2001 (Cth), ss 440D, 1335 UIniform Civil Procedure Rules 2005, rule 42,21
CATEGORY:	Principal judgment
CASES CITED:	Brocklebank & Co v The King’s Lynn Steamship Co (1878) 3 CPD 365 Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd & Ors (1987) 16 FCR 497 Buckley v Bennell Design and Constructions Pty Ltd (1974) 1 ACLR 301 Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 5) [2006] FCA 1672 Estates Property Investment Corporation Ltd v Pooley (1975) 3 ACLR 256 Gentry Bros Pty Ltd v Wilson Brown & Associates Pty Ltd (1992) 8 ACSR 405 Harvey v Jacob (1817) 106 ER 59 Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744 Intercraft Cabinets Pty Ltd v Sampas Pty Ltd (1997) 18 WAR 306 Jazabas Pty Ltd v Haddad [2007] NSWCA 291; (2007) 65 ACSR 276 JWH Turner & Co Ltd v O’Riordan (1923) 40 WN (NSW) 64 Liberty Grove (Concord) Pty Ltd v Mirvac Projects Pty Ltd [2008] NSWSC 48 Massey v Allen (1879) 12 ChD 807 Morris v Hanley [2001] NSWCA 374 Procon (Great Britain) Ltd v Provincial Building Co Ltd [1984] 1 WLR 557 Project 28 Pty Ltd v Barr [2005] NSWCA 240 Project 28 Pty Ltd v Tim Bar Pty Ltd (No 2)[2005] NSWCA 420 Sagacious Procurement Pty Ltd v Symbion Health Ltd [2007] NSWCA 205 Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd (1985) 1 NSWLR 114 Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2004] NSWSC 986; (2004) 187 FLR 31
PARTIES:	Tim Barr Pty Limited - First Plaintiff Timothy James Barr - Second Plaintiff Narui Gold Coast Pty Limited - Defendant
FILE NUMBER(S):	SC 2762/02
COUNSEL:	Mr J E Lazarus - Plaintiffs Mr I M Neil SC/Mr A C Harding - Defendant
SOLICITORS:	Tzovaras Legal - Plaintiffs Verekers - Defendant

- 11 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BARRETT J

THURSDAY, 18 JUNE 2009

2762/02 TIM BARR PTY LIMITED & ANOR v NARUI GOLD COAST PTY LIMITED

JUDGMENT

1 The hearing of these proceedings to date has occupied twenty-one days. The evidence is virtually complete. The plaintiffs’ final written submissions have been drafted. Four further hearing days have been allocated in August, in the expectation that the hearing will then be completed.

2 The proceedings were last before the court for substantive hearing in November 2008. Certain questions on the admissibility of evidence were at that stage reserved. Two rulings were later made, one in February 2009 and the other in April 2009. It was expected that the hearing would continue on 10 June 2009. Instead, that and the following day were devoted to the hearing of a notice of motion filed by the defendant on 13 May 2009. It is with that notice of motion that this judgment is concerned.

3 The defendant seeks an order that the first plaintiff (“TBPL”) provide security in the sum of $325,000 for the defendant’s costs for the period commencing 6 May 2009 and an order that TBPL provide security in the sum of $2,400,000 for the defendant’s costs up to and including 5 May 2009.

4 It is necessary to refer to a number of matters of background.

5 The proceedings were commenced on 17 May 2002. The central question is whether the defendant validly terminated a lease of the Cudgen Paddock created in 1999 between the defendant as lessor and TBPL as lessee, which lease contained an option for TBPL as lessee to purchase the property. On 17 April 2003 (that is, when the proceedings had been on foot for almost a year), TBPL purported to exercise the option to purchase. Shortly before that event, TBPL had granted to Austcorp Group Ltd (“Austcorp”) an option to purchase the Cudgen Paddock from TBPL, which option Austcorp purported to exercise, at the same time nominating its wholly owned subsidiary Austcorp Project No 3 Pty Ltd as purchaser.

6 By an agreement of 23 May 2003, TBPL and its co-plaintiff in these proceedings (Mr Barr) delegated to Austcorp what was, for all practical purposes, complete control over the conduct of the proceedings.

7 On 26 May 2004, the defendant applied for orders staying or dismissing the proceedings on the grounds of champerty and maintenance. The application was dismissed on 25 October 2004: Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2004] NSWSC 986; (2004) 187 FLR 31. There was an appeal to the Court of Appeal which, on 25 July 2005, made an order as follows (see Project 28 Pty Ltd v Barr [2005] NSWCA 240):

“The Lease Proceedings are stayed until Austcorp provides TBPL and Mr Barr with an indemnity against any costs that they might be ordered to pay Narui.”

8 The “Lease Proceedings” are these proceedings; and “Narui”, of course, is the present defendant.

9 The Court of Appeal’s decision was based on a perceived need to guard against an abuse of the process of the court. The situation was seen to be one in which Austcorp had control of the litigation and the ability to direct the actions of the plaintiffs without having, at the same time, any exposure to adverse financial consequences that the plaintiffs might suffer. Ipp JA (with whom Hodgson JA and M W Campbell AJA agreed) said at [114] – [115]:

“It has long been recognised that a tendency to abuse can arise if a nominal plaintiff sues for the benefit of some other party and is not able to pay the successful party’s costs. This, for example, explains the rule that an assignee may only sue in the name of the assignor if the assignee gives the assignor a complete indemnity as to costs.

Courts have expressly recognised that an abuse may arise where ‘artificial persons [are] manipulated by natural persons’ (per Megarry VC in Pearson v Naydler [1977] 1 WLR 899 at 905). Thus, the controller of a corporation will not be allowed to hide behind the corporation and thereby avoid liability for costs: Harpur v Ariadne Australia Ltd [1984] 2 Qd R 523 at 527, Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 208 ALR 564 at 577 [53].”

10 His Honour then said at [117]:

“The contractual arrangements between Austcorp and Narui give Austcorp absolute control over the Lease Proceedings without providing that Austcorp in any way be responsible for Narui’s costs were Narui to be successful (being costs for which the Barr Interests would ordinarily be liable under the usual costs rule).”

11 The conclusion was stated at [120] – [121]:

“The discipline that the usual rule as to costs imposes on the client is an essential safeguard of the adversarial system. The ethical character of the client’s legal representation does not compensate for its omission. In my view, a paramount consideration in the weighing of the relevant different factors in the present case is that, under the existing contractual arrangements, this discipline is missing.

After giving due consideration to all the factors I have mentioned, I have come to the conclusion that, to the limited extent that the arrangements between Austcorp, TBPL and Mr Barr remove any liability for Narui’s costs from the factors that Austcorp has to bear in mind in controlling and conducting the Lease Proceedings, a material tendency exists for the proceedings to result in the ‘misuse of [the Court’s] procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it’ per Lord Diplock in Hunter v ChiefConstable of the West Midlands Police [1982] AC 529 at 536). In other words, I have come to the view that, without an appropriate indemnity by Austcorp to the Barr Interests for Narui’s costs, there is a material tendency that the processes and procedures of the Court could be ‘converted into instruments of injustice or unfairness’ ( Walton v Gardiner at 392-393).”

12 On 17 August 2005, Austcorp, by deed, indemnified the plaintiffs in the manner contemplated by the stay order made by the Court of Appeal on 25 July 2005.

13 Before the hearing in the Court of Appeal, the defendant made an application in these proceedings for security for costs. This happened in March 2005. When the Court of Appeal ordered a stay on 25 July 2005, the defendant apparently saw no need to pursue its application for security for costs. The defendant let the possibility of security for costs rest.

14 The defendant nevertheless sought to obtain for itself a position more directly secure than that envisaged by the Court of Appeal’s order. It applied to the Court of Appeal for a variation of the 25 July 2005 order so that the indemnity the creation of which would cause the stay to be lifted was an indemnity by Austcorp given to the defendant itself (not to TBPL and Mr Barr) in respect of costs that TBPL and Mr Barr might be ordered to pay the defendant. That application was dismissed on 2 December 2005: Project 28 Pty Ltd v Tim Bar Pty Ltd (No 2)[2005] NSWCA 420.

15 I come now to more recent events. In December 2008, the defendant’s solicitors raised with the solicitors for Austcorp concerns that the defendant held about Austcorp’s financial position. Austcorp’s solicitors, no doubt on instructions, gave certain assurances. The response by the defendant, on each occasion, was to repeat the concern and express anxiety about Austcorp’s financial health. When Austcorp’s accounts for the year ended 30 June 2008 became available in December 2008, the defendant submitted them to a forensic accountant for expert assessment. He expressed doubt about Austcorp’s ability to meet its obligations under the indemnity given to TBPL and Mr Barr, should it be required to do so at some time after July 2009.

16 On 9 March 2009, the defendant made a new application to the Court of Appeal. It was, in terms, an application for an order that Austcorp give security for the defendant’s costs in these present proceedings, although correspondence between solicitors makes it reasonably clear that the parties regarded it as an application for an order that Austcorp provide security for the indemnity given by it to TBPL and Mr Barr in order to lift the stay imposed by the Court of Appeal in July 2005.

17 Austcorp entered voluntary administration under Part 5.3A of the Corporations Act 2001 (Cth) on 6 May 2009 pursuant to a resolution of its board of directors. Austcorp had, on 4 May 2009, requested a trading halt until 6 May 2009 in respect of its securities listed for quotation on the Australian Securities Exchange.

18 Also on 6 May 2009, but apparently before the appointment of voluntary administrators, Austcorp entered into a series of agreements with Mr Chow Chan Lum (and interests associated with him) by which it disposed of its interests in TBPL and in the project related to the Cudgen Paddock. By those and related transactions entered into between 3 and 6 May 2009, Austcorp relinquished its contractual right to control TBPL’s conduct of these proceedings (but confirmed the indemnity in respect of costs given by it to TBPL and Mr Barr); Mr Chow became the owner of the whole of the issued share capital of TBPL in place of Emerald No 1 Pty Ltd (a wholly owned subsidiary of Austcorp); and Emerald and Wintime Developments Pty Ltd (a new company owned by Mr Chow) entered into a joint venture for the development of the Cudgen Paddock. Mr Chow is a director of Austcorp’s parent company and a resident of Hong Kong.

19 None of these transactions of early May 2009 required Mr Chow or his interests to replace or stand behind the indemnity in respect of costs given by Austcorp to TBPL and Mr Barr for the purposes of the Court of Appeal’s stay order.

20 The defendant became aware of these transactions on 8 May 2009. Thereafter, on 13 May 2009, the defendant filed the notice of motion seeking security for costs with which I am now dealing.

21 When that notice of motion came before the court for hearing, therefore, the position was as follows:

1. The Court of Appeal’s order of 25 July 2005 continued in force but the fact that Austcorp had granted to TBPL and Mr Barr an indemnity as contemplated by that order meant that the stay was not operative.
2. The defendant’s application to the Court of Appeal by notice of motion filed on 9 March 2009 (see paragraph [16] above) was pending and undetermined but, because of s 440D of the Corporations Act , that application is stayed and cannot be progressed without the administrators’ consent or the leave of the court.
3. Because Austcorp is insolvent or may become insolvent, the worth of the Austcorp indemnity held by TBPL and Mr Barr is, at least, problematic.
4. Such comfort as the defendant may have formerly derived, in practical terms, from the existence of the Austcorp indemnity has therefore evaporated.
5. Mr Chow, rather than Austcorp, is in a position to control the litigation being prosecuted by TBPL and Mr Barr and has a financial interest in its outcome.

22 I must, at this point, mention a significant matter. It comes from an affidavit sworn by the plaintiffs’ solicitor, Mr Tzovaras, and read on this application. Mr Tzovaras, on the express instructions of Mr Chow and his wife (Ka Kow Yeung), offers to the court an undertaking of Mr Chow and Mrs Chow “to satisfy any adverse costs order that might be made against the first plaintiff [TBPL] up to an amount of $120,000”.

23 I turn now to the defendant’s application which is, as I have said, an application for both security for past costs and security for future costs. The application is an application against TBPL only. It is not in contest that TBPL is an impecunious company. TBPL does not dispute that the court has jurisdiction to make an order for security, whether pursuant to s 1335 of the Corporations Act or under rule 42.21 of the Uniform Civil Procedure Rules 2005. The contest is therefore in relation to the exercise of the court’s discretion.

24 The defendant maintains, and I accept, that, since the threshold jurisdictional requirement is satisfied, TBPL carries the evidentiary burden of satisfying the court that, taking into account all relevant factors, security ought not be granted or, if granted, should be ordered in an amount less than the defendant seeks: Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744 at [62]. TBPL accepts that this is so.

25 I therefore turn to matters raised by TBPL.

26 The first matter is delay. Mr Lazarus of counsel, who appeared for TBPL, drew attention to the observation of Moffitt P in Buckley v Bennell Design and Constructions Pty Ltd (1974) 1 ACLR 301 at 309:

“The right to seek security for costs and to stay proceedings, with the possible result that a claim for damages is frustrated, is a powerful weapon. Therefore, the litigant who seeks to use it against his opponent is at risk of not having it available, unless the application is made and persevered with in circumstances involving the least oppression of his opponent. The primary reason why the application should be brought promptly and pressed to determination promptly is that the company, which by assumption has financial problems, is entitled to know its position in relation to security at the outset, and before it embarks to any real extent on its litigation, and certainly before it is allowed to or commits substantial sums of money toward litigating its claim.”

27 A long and unexplained delay will usually be fatal to any security for costs application: Morris v Hanley [2001] NSWCA 374 at [30].

28 The reason why delay acts against an applicant is that it allows a plaintiff to proceed without interruption and without any warning that his or her preparations and expenditures on them may be rendered worthless by the intervention of a stay brought about by inability to furnish security. The point was made in these terms by Einstein J in Liberty Grove (Concord) Pty Ltd v Mirvac Projects Pty Ltd [2008] NSWSC 48 at [7]:

“The comprehensive treatment of the appropriate principles which fall to be considered in relation to applications for security for costs to be found in Idoport v National Australia Bank [2001] NSWSC 744 (‘ Idoport ’) (at [69] and following) is accepted as correct for present purposes. One of the first and most important such principles concerns the need for an application for security for costs to be made promptly: Foss Export Agency Pty Ltd v Trotman (1949) 67 WN (NSW) 1; Buckley v BennellDesign & Construction Pty Ltd (1974) 1 ACLR 301 at 308; Southern Cross Exploration NL v Fire and All Risks Insurance Co Ltd (1985) 1 NSWLR 114 at 123. The authorities have recognised that it would often be patently unjust to permit a defendant who stood by and allow a plaintiff to work on their case to ask for security after expenses had been incurred: Smail v Burton; Re Insurance Associates Pty Ltd (in liq) (1975) 1 ACLR 74 at 75. Indeed the longer the delay, the proximity of the hearing and the more acts done during the interval, the greater the significance of the delay and the more difficult it will be to persuade the Court that an order for security will not, in the circumstances, be unfair or oppressive: see French J in Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 at 514.”

29 It is clear that there has been delay in this case – at least in the sense that the application for security was filed a few days before the seventh anniversary of the commencement of the proceedings. The defendant says, however, that this is an exceptional case. The indemnity provided by Austcorp to TBPL and Mr Barr to cause the stay imposed by the Court of Appeal to be lifted operated, in a practical sense, to alleviate TBPL’s impecuniosity, from the point of view of protection of the defendant in respect of costs. First the stay and later the de facto protection or assurance derived from the existence of the Austcorp indemnity put the defendant into a position, it says, where it saw no need to pursue the security for costs application it had initiated in March 2005.

30 TBPL points out, however, that the defendant did not, in reality, accept the existence of the Austcorp indemnity as a satisfactory substitute for security for costs. The defendant showed this, TBPL points out, by the application made by it to the Court of Appeal which became the subject of that court’s decision of 2 December 2005 already mentioned, Project 28 Pty Ltd v Tim Barr Pty Ltd (No 2) [2005] NSWCA 420. The defendant sought to have the order of 25 July 2005 varied so that the indemnity to be given by Austcorp was given not to TBPL and Mr Barr but to the defendant direct. The Court of Appeal recorded the grounds for seeking this modification as follows:

“The grounds on which Narui seeks to have the order varied are:

(a) In the appeal, Narui made no submissions as to the form of the order.

(b) If the existing order (d) stands, and a costs order is eventually made in favour of Narui, TBPL and Barr might never call on the indemnity ordered to be provided by Austcorp.

(c) If TBPL and Barr were to call on the indemnity, and were it to be met by Austcorp, there would be no compulsion upon TBPL and Barr to pay the fruits of the indemnity to Narui. TBPL and Barr might dissipate the funds or become insolvent, thereby denying Narui the benefit of the judgment.

(d) Austcorp might deny that it has any obligation to indemnify TBPL and Barr on the grounds that it has a set-off or right of discharge against TBPL and Barr.”

31 Items (b), (c) and (d) show that the defendant was fully aware of the weaknesses of the Austcorp indemnity as a form of protection for the defendant itself. It recognised quite clearly that, even if TBPL and Mr Barr received payment from Austcorp after suffering a costs order in favour of the defendant, the funds might never reach the defendant itself.

32 This is, to my mind, a significant point. The defendant did not, in reality, see the regime imposed by the Court of Appeal as an equivalent of security for its costs. On the contrary, it recognised that that regime did no more than give Austcorp responsibility to protect the plaintiffs financially, but without any assurance that that protection would ultimately rebound to the benefit of the defendant. The defendant, by allowing its earlier application for security for costs lapse, made it clear that it did not consider itself in need of that form of protection.

33 Now, however, the defendant says that the landscape has changed; and that the change occurred on 6 May 2009. At that point, the comfort the defendant had derived from the existence of the Austcorp indemnity held by the plaintiffs evaporated. The plaintiffs – and TBPL in particular – were, at that point, seen to have entered into a new phase of impecuniosity. It is said that TBPL now lacks such financial strength as it might previously have had because of both the Austcorp indemnity and the intangible “backing” implied by Austcorp’s ownership. That ownership has now been replaced by that of Mr Chow and, so far as is known, he is not, in any formal way, committed to provide financial support to TBPL.

34 The circumstance just mentioned is, I think, sufficient to warrant the attention of the court to the present application despite the late stage at which it arises.

35 I pass then to the next issue which concerns security for past costs. An application for security for costs was entertained by Waddell J in Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd (1985) 1 NSWLR 114 after sixty-five days of a hearing expected to occupy between 95 and 105 days. In dealing with the part of the application that concerned security for past costs, his Honour noted cases in which security of that kind had been ordered, including Estates Property Investment Corporation Ltd v Pooley (1975) 3 ACLR 256 and Procon (Great Britain) Ltd v Provincial Building Co Ltd [1984] 1 WLR 557. The first was a case in which security for the whole of the defendant’s costs was ordered after the trial had commenced, but there was no argument about that course. The plaintiff effectively volunteered security. In the second case, the proceedings had been on foot for a long term, although the hearing had not commenced. Again, the appropriateness of ordering security for past costs (or, I suppose, the undisected element related to past costs) had apparently not been regarded as controversial. In Southern Cross Exploration itself, security for the past costs element was refused.

36 The cases to which I was referred in which security was ordered for a combination of past and future costs were cases where the hearing had not commenced: Brocklebank & Co v The King’s Lynn Steamship Co (1878) 3 CPD 365; Massey v Allen (1879) 12 ChD 807; JWH Turner & Co Ltd v O’Riordan (1923) 40 WN (NSW) 64; Harvey v Jacob (1817) 106 ER 59; Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd & Ors (1987) 16 FCR 497. More recently, in Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 5) [2006] FCA 1672, the Federal Court declined to order security for past costs after ten days of the trial had elapsed, holding that there had been unacceptable delay.

37 One point acknowledged by the cases is that a supervening event may justify a security application at what is, on the surface, a late stage. Supervening insolvency of the plaintiff is an example: see, for example, Brocklebank & Co v The King’s Lynn Steamship Co (above); JWH Turner & Co Ltd v O’Riordan (above). Another example is departure from the jurisdiction: Massey v Allen (above); Harvey v Jacob (above). In the Citrus case (above), Collier J referred to this type of event as a “catalyst”.

38 In Sagacious Procurement Pty Ltd v Symbion Health Ltd [2007] NSWCA 205, Mason P noted “decisions in which a court has ordered security in a sum that includes an allowance for costs already incurred in the proceedings”. His Honour then said:

“[T]he cases all appear to involve the not uncommon situation of an application for security being made by a defendant promptly after the commencement of proceedings. In that context, it is understandable that the quantum of security ordered might address costs already incurred. An insolvent plaintiff could hardly complain if an application is made that the defendant looks to be protected with reference to the costs of the entire proceedings.”

39 In the present case, the defendant has allowed the plaintiffs to proceed for more than seven years without pressing any application for security for costs. The defendant may well have drawn some comfort from the existence, since August 2005, of the Austcorp indemnity held by the plaintiffs from that date. But the defendant showed, by its application that resulted in the Court of Appeal’s decision of 2 December 2005, that it did not regard that regime as a satisfactory substitute for security for costs. The decision not to press the original motion for security was deliberately taken even though the defendant accepted that the Austcorp indemnity regime did not afford direct protection. In those circumstances, I do not regard the loss of the indemnity’s value, from the plaintiffs’ perspective, as a “catalyst” of the type that might make the court willing to consider an order for security including some element for costs already incurred.

40 The reality of the situation is that, if the defendant had pressed an application for security for costs in 2002, the proceedings may have effectively ended at that point. An order for security for past costs now might well cause the proceedings to end now, after seven years of activity and very substantial outlays by the plaintiffs in prosecuting them. That would be a quite unacceptably oppressive result.

41 Future costs (with the future appropriately seen, in my view, as measured from and including 6 May 2009) warrant separate consideration. The same consideration of oppression does not, in my opinion, apply.

42 As to the future, it is of particular relevance to consider the undertaking proffered by Mr Chow and Mrs Chow. It is set out in Mr Tzovaras’ affidavit in these terms:

“Mr and Mrs Chow have instructed me to give to the Court and, with this affidavit, on behalf of each of Mr and Mrs Chow, I provide to the Court their undertaking to satisfy any costs order that might be made against the First Plaintiff up to an amount of $120,000.”

43 Mr Tzovaras’ affidavit goes on to say that Mr and Mrs Chow own assets in Hong Kong and that Mrs Chow is the owner and registered proprietor of two townhouses in Darwin which Mrs Chow believes to have a combined current value in excess of $1.4 million. Title searches in evidence show Mrs Chow to be the registered proprietor of the two Darwin properties, subject to an encumbrance securing $146,800.

44 The security sought by the defendant for costs from 6 May 2009 is in the sum of $325,000. The quantum is based on an estimate made by the defendant’s solicitor, Mr Tassell, of the assessable costs involved for the remainder of the proceedings. He puts these at $322,700. Mr Tassell was cross-examined and it is fair to say that some of his items may be excessive – in particular, his estimate that each of senior counsel, junior counsel and instructing solicitor (Mr Tassell himself) would spend 21 days full-time preparing closing submissions seems excessive. Mr Tassell accepted that it may turn out to be an over-estimate.

45 In an affidavit of 9 March 2009 prepared for the Court of Appeal application of that date to which I have referred, Mr Tassell estimated four days work by senior counsel and junior counsel and 12 hours work by the instructing solicitor for this very task. Nothing so significant as to cause that earlier estimate to be multiplied by more than six seems to have happened in the meantime. Mr Tassell accepted that his earlier estimate may turn out to be a reasonable estimate.

46 Other aspects of Mr Tassell’s estimates were challenged. I do not need to go into them. Mr Tzovaras, the plaintiffs’ solicitor, has given his own estimates for the various items referred to by Mr Tassell. His total is $82,000 but I am bound to say that it is possible that some of the items have been taken into account by him at low amounts.

47 In the end, I think a reasonable working assumption is that the tasks remaining from 6 May 2009 should be taken into account at $137,500, being Mr Tassell’s estimate of $233,700 reduced by taking into account the $33,200 in his 9 March 2009 affidavit for four days for preparation of closing submissions, instead of his later figure of $218,000 based on 21 days.

48 On this footing, the undertaking of Mr and Mrs Chow in the sum of $120,000 should be regarded as very substantially in line with the likely future costs.

49 The existence of that undertaking is of great significance in deciding how the court’s discretion should be exercised. It was suggested in Gentry Bros Pty Ltd v Wilson Brown & Associates Pty Ltd (1992) 8 ACSR 405 that once a company’s shareholders have agreed to accept personal responsibility for any costs awarded against the company the “statutory purpose” of s 1335 of the Corporations Act “has been satisfied” and “the weight to be given to the statutory purpose is gone”. This approach has not been universally accepted. Criticisms of it are referred to by members of the Court of Appeal in Jazabas Pty Ltd v Haddad [2007] NSWCA 291; (2007) 65 ACSR 276. But even if the acceptance of personal financial exposure by shareholders does not have a forestalling effect of the kind the Gentry Bros case suggests, it is still an important factor to be taken into account in exercising the court’s discretion with respect to security for costs: Intercraft Cabinets Pty Ltd v Sampas Pty Ltd (1997) 18 WAR 306 at 316 per Malcolm CJ.

50 Mr and Mrs Chow offer the undertaking to the court. There is evidence that Mrs Chow has real estate assets of significant value in Australia. The court may, in the exercise of its discretion, accept that undertaking and then, in light of the estimated future costs to which I have referred, view the case as one in which the appropriate course is not to award security for costs. That is the course I propose to take in the exercise of the court’s discretion.

51 Upon Chow Chan Lum and Ka Kow Yeung, by their solicitor, Ted Dorotheos Tzovaras, undertaking to the court to satisfy any adverse costs order that might be made against the first plaintiff up to an amount of $120,000, I order that the defendant’s notice of motion filed on 13 May 2009 be dismissed.

52 I shall hear the parties on costs at a time to be fixed.

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