FEDERAL COURT OF AUSTRALIA

Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited (No 5) [2011] FCA 1041

THE COURT ORDERS THAT:

1.    The Applicants provide security for costs to the Respondent in the sum of $250,000 within 28 days of this Order.

2.    The costs of this motion be costs in the proceedings.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE PRESENT MOTION

1    By notice of motion dated 27 July 2011 the respondent (‘Colliers’) seeks an order that the applicants (collectively hereafter referred to as ‘Arizona’) provide additional security for costs in the amount of $460,000 within 21 days of the Court’s order. In the alternative, Colliers seeks the provision of a further security for costs in the amount of $280,000. Consequential orders are also sought, namely that pursuant to O 28 r 5 of the extant Federal Court Rules (‘the old Rules’) the proceedings be stayed until any further security as ordered by the Court be paid, and for the costs of the motion.

2    The motion for further security is supported by affidavits of Mr Alistair Woodward Little sworn 27 July 2011 and 3 August 2011. The former affidavit incorporates the calculations of potential costs of the proceedings to support the orders sought by Colliers and the latter affidavit lists Colliers’ witnesses and the estimated length of the future hearing.

3    Arizona opposes the relief sought and relies upon two affidavits of Mr Eric Gregory Moore, sworn 10 August 2011 and 16 August 2011. Both Colliers and Arizona have provided the Court with voluminous submissions and at the hearing of the motion on 17 August 2011 Mr Moore was extensively cross-examined.

BACKGROUND

4    This is not the first application made by Colliers for security for costs in these proceedings. By letter dated 11 December 2009 Colliers requested that Arizona provide security for costs in the amount of $100,000. By letter dated 16 December 2009 Arizona agreed to do so and such funds were provided on 21 January 2010.

5    The proceeding was initially set down for hearing in May 2010, but the parties found it necessary to seek a vacation of the hearing dates. On 21 September 2010 Colliers made an application for security for costs in the amount of $300,000. On 5 November 2010 the Court ordered an amount of $250,000 be paid by Arizona to Colliers by way of security: see Australian Equity Investors, an Arizona Limited Partnership v Colliers International (NSW) Pty Limited (No 2) [2010] FCA 1209 (‘Arizona No 2’).

6    Arizona was unable to provide the security ordered by the Court and accordingly on 15 December 2010 Arizona applied by motion to vacate the order for security made on 5 November 2010. The Court determined that it was necessary to vacate such order and to hold a hearing confined to separate questions formulated by the parties, and dependent upon the result of that hearing, to proceed to a hearing on the remaining issues. On 15 February 2011 the Court made orders to reflect such determination. However the Court ordered that Arizona provide security for costs to Colliers in the amount of $100,000: see Australian Equity Investors, an Arizona Limited Partnership v Colliers International (NSW) Pty Limited (No 3) [2011] FCA 100 (‘Arizona No 3’).

7    The hearing on the separate questions was held in March 2011. The Court found that Colliers had engaged in misleading and deceptive conduct in relation to the valuation which was the subject of the proceedings and ordered that Colliers pay the costs of the separate hearing, including indemnity costs from 2 March 2011. The Court also ordered that the security for costs in the amount of $100,000 paid pursuant to the Court’s order on 15 February 2011 be repaid to Arizona: see Australian Equity Investors, an Arizona Limited Partnership v Colliers International (NSW) Pty Limited (No 4) [2011] FCA 442 (‘Arizona No 4’).

8    The hearing on the balance of the issues has been set down to commence in December 2011 and, as a result, the motion now before the Court has been made by Colliers for further security for costs. The application is made for costs incurred by Colliers between 25 March 2011 to the date of the filing of this motion, and from the hearing of the motion to the conclusion of the December 2011 hearing.

SUBMISSIONS

9    Colliers submits that security should be ordered by the Court as Arizona is resident outside Australia and has no assets in Australia. Colliers submits that there is no relevant delay on its part since its intention to apply for additional security was foreshadowed; that Arizona previously provided security for costs having been ordered to do so; and that Arizona has a weak case.

10    Arizona submits that no security should be granted as it is highly likely that Arizona will succeed on the issue of damages, especially since Colliers’ conduct has been found to contravene ss 52 and 53A(1)(b) of the Trade Practices Act 1974 (Cth) (‘the TPA’) and that Arizona’s impecuniosity resulted from Colliers’ conduct. Arizona also submits that an award for security would be oppressive, that the application for security has not been brought promptly and therefore Colliers should be disentitled to seek security, and lastly, that Colliers’ conduct during the hearing on the separate questions should disentitle Colliers to further security. Such conduct refers to the fact that Colliers was found to have known that from 2 March 2011 (14 days prior to the separate question hearing) its defences to the alleged contraventions were unsustainable.

STATUTORY REGIME

11    Whether a Court should grant security for costs is a matter entirely within the discretion of the Court pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth) (‘the Act’) which provides:

56     Security

(1)     The Court or a Judge may order an applicant in a proceeding in the Court, or an appellant in an appeal under Division 2 of Part III, to give security for the payment of costs that may be awarded against him or her.

(2)     The security shall be of such amount, and given at such time and in such manner and form, as the Court or Judge directs.

(3)     The Court or a Judge may reduce or increase the amount of security ordered to be given and may vary the time at which, or manner or form in which, the security is to be given.

(4)     If security, or further security, is not given in accordance with an order under this section, the Court or a Judge may order that the proceeding or appeal be dismissed.

(5)     This section does not affect the operation of any provision made by or under any other Act or by the Rules of Court for or in relation to the furnishing of security.

12    When Colliers’ motion for security was filed, the relevant rule was contained in Order 28 of the old Rules. Part 19 of the Federal Court Rules 2011 (the ‘current Rules’) now governs this application, but it may be assumed that the principles guiding the Court under both the old Rules and under the current Rules remain the same.

DELAY

13    Arizona submits that the application for further security has not been brought in a timely manner and accordingly Colliers has foregone its right to seek further security.

14    The chronology of these proceedings illustrates that throughout these proceedings Colliers has foreshadowed repeated applications for security for costs. When the Court delivered its decision on 15 February 2011 in which it vacated its order that the security of $250,000 be paid by Arizona and substituted the lower security of $100,000, the Court made the following observation at [45] of its decision (Arizona No 3):

If, during the continuation of the hearing the expenses are such that Colliers are exposed to the risk of further costs that are not secured, Colliers may apply to the Court for further security.

15    Further, when the Court delivered its decision on the separate questions on 5 May 2011 the Court observed at [69] (Arizona No 4):

As the litigation progresses, Colliers may be justified in making a further application for security in respect of the hearing relating to damages, at which hearing the issue of contributory negligence and apportioned liability will arise. However, it is not expected that such hearing will take place for at least a further six months. The Court considers that there is no justification to withhold the amount of $100,000 from Arizona. The Court will accordingly order that the amount of $100,000 be refunded within seven days to Arizona.

16    It is well established that an application for security for costs must be made promptly and that the failure to do so should prevent the delayed application from being granted: see Buckley v Bennell Design & Constructions Pty Ltd (1974) 1 ACLR 301 at 308; Foss Export Agency Pty Ltd v Trotman (1949) 67 WN (NSW) 1 at 2; Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd and Others (1987) 16 FCR 497 at 514: Southern Cross Exploration NL and Others v Fire & All Risks Insurance Co Ltd and Others (1985) 1 NSWLR 114 at 123C-D; Darelvale Holdings Australia Pty Ltd v Waterjet Designs Pty Ltd [2003] FCA 863 at [15].

17    One of the reasons to require a prompt application was considered by Moffitt P in Buckley v Bennell where his Honour said 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 permits substantial sums of money towards litigating its claim.

18    However, as was observed by Einstein J in Idoport Pty Ltd v National Australia Bank & Others [2001] NSWCA 744 at [70]:

On the other hand, evidence of delay does not necessarily render the application fatal on its own. The passage of time is merely one factor to be taken into account during the balancing exercise undertaken by the Court: Commonwealth of Australia and Another v Cable Water Skiing (Australia) Ltd (1994) 14 ACSR 760 at 762. For example, security for future costs was awarded to the defendant in Commonwealth v Cable where there had been a delay of 4 years after the proceedings had commenced.

19    In weighing up the various factors in order to determine the manner in which the Court’s discretion should be exercised, it is significant that some forewarning may operate to negate any delay. In Crypta Fuels Pty Ltd and Another v Svelte Corporation Pty Ltd and Others (1995) 19 ACSR 68 at 71 Lehane J referred to two factors which may have an impact upon delay. The first factor was the fact that the hearing or resumed hearing ‘was not immediately imminent’ and secondly:

...that there has been some forewarning: usually correspondence concerning the financial standing of those who might benefit from the success of an applicant or plaintiff, and often detailed correspondence foreshadowing an application for security for costs.

20    In Southern Cross Exploration NL and Others, Waddell J referred (at 125E) to Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221 at 240 in which the rationale of the doctrine of laches was explained. That is, that the length of the delay and the nature of the acts done during the interval might ‘cause a balance of justice or injustice in taking one course or another so far as relates to the remedy’. To similar effect, French J (as he then was) in Brian E Fencott and Associates Pty Limited said at 514:

The further a plaintiff has proceeded in an action and the greater the costs it has been allowed to incur without steps being taken to apply for an order for costs, the more difficult it will be to persuade the court that such an order is not, in the circumstances, unfair or oppressive.

21    Colliers made it plain from the date of the Court’s decision in Arizona No 4 that it would be seeking further security. On 12 May 2011 orders were made by the Court making provision for Colliers to file their motion for further security for costs. Accordingly, Arizona has been on notice of the prospect of such application for many months. In these circumstances there can be no suggestion that Arizona has incurred costs unaware that the application would be made. It could scarcely be asserted in these circumstances that Arizona has acted to its prejudice in continuing with the litigation because the application had not been brought, or has otherwise been taken by surprise.

22    Further, Arizona has not suggested that it would not have proceeded with the litigation or acted in some different way to the manner in which it has in fact acted. Further, taking into consideration the fact Colliers’ motion was filed a little over two months from the decision in Arizona No 4, the Court considers that there is no basis for finding that Colliers engaged in delay which should disentitle it to the relief it now seeks.

WASTED COSTS

23    As to Arizona’s submission that Colliers is disentitled to any further security in view of its past conduct, the Court notes that the discretion to award costs is, by virtue of s 56 of the Act, unfettered and subject only to the qualification that the power must be exercised judicially.

24    In Bryan E Fencott and Associates Pty Ltd French J (as he then was) at 505-512 considered various considerations to be taken into account in determining whether such an application for security for costs should be granted. Those considerations included whether the orders sought would frustrate the claim, the merits of the claim, the cause of the plaintiff’s impecuniosity, and whether there was delay on the part of the applicant.

25    Even if the past conduct of Colliers was unmeritorious, the Court found that such conduct existed only over a relatively short period, namely from the date when Colliers knew that it could not justify its defence to the hearing on the separate questions. Such conduct has already attracted an award of indemnity costs against Colliers which will compensate Arizona for its costs incurred during that period. Accordingly the Court does not consider in the exercise of its discretion, that such conduct is sufficient to disentitle Colliers from being granted security for costs.

STRENGTH OF ARIZONA’S CLAIM

26    As to Arizona’s submission that it is highly likely to succeed in the substantive hearing and obtain an award of damages, such an assertion must be balanced by Colliers’ submission that Arizona’s case is weak.

27    It is well established that the Court is entitled to consider the strength and the bona fides of a party’s claim: see KP Cable Investments Pty Ltd v Meltglow Pty Ltd and Others (1995) 56 FCR 189 at 197C-197D where Beazley J (as she then was) observed that if prima facie a claim is regular and discloses a cause of action, the Court should proceed on the basis that it is bona fide ‘with a reasonable prospect of success’. Such decision has recently been adopted by this Court in Power Infrastructure Pty Ltd v Downer EDI Engineering Power Pty Ltd [2010] FCA 1222. However, the prospects of success has been held to be a neutral factor in ensuring the Court’s discretion: see Jazabas Pty Ltd v Haddad [2007] NSWCA 291 at [84]; Litmus Australia Pty Ltd (in liq.) v Canty [2007] NSWSC 670 at [28]; Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 208 ALR 564 at [37]-[38].

28    The Court has been apprised of the nature of the evidence to be adduced by each party. It is apparent that complex issues will arise concerning the issues of both reliance and causation. Colliers’ foreshadowed evidence will attempt to demonstrate that Arizona’s failure to act upon the impugned valuation for a period of 12 months breaks the chain of causation.

29    Whether Colliers’ defences to Arizona’s claim will be established can only be determined at the trial and it is inappropriate for the Court to attempt to reach any conclusion concerning the strength or weakness of Arizona’s claim: see at 624; J & M O’Brien Enterprises Pty Ltd v The Shell Company of Australia Ltd (1983) 70 FLR 261; Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972 at 50-636.

30    The fact that the Court has found that Colliers contravened the TPA does not lead to the conclusion that Arizona should be exempted from complying with an order that it give security for costs. Conversely, there is no suggestion that the claim has not been brought bona fide or that for some reason the claim should be dismissed summarily. Accordingly the Court will consider Arizona’s claim as one which has potential prospects of success.

IMPECUNIOSITY

31    In relation to Arizona’s submission that its alleged impecuniosity resulted from the acts of Colliers, the Court notes the general principles referred to by Smithers J in Tradestock Pty Ltd v TNT (Management) Pty Ltd & Ors (1977) 30 FLR 343 at 351 where his Honour said:

… the Court may well look with disfavour upon a defendant seeking security for costs if the acts of that defendant have disabled the plaintiff from complying with an order for such security. But this is not such a case. So far as appears the plaintiff company’s impecunious condition has existed since the company came into being, and before it attempted to do business with the defendants or any of them. It may be that the defendants’ conduct, wrongful or otherwise, has created a situation in which the plaintiff has had less opportunity than it otherwise might have had to cure its original impecuniosity, but it did not cause it.

32    Such principle was also adopted in Lynnebry Pty Ltd v Farquhar Enterprises Pty Ltd (1977) 3 ACLR 133 and followed by Ball J in Welzel v Francis [2011] NSWSC 477 at [14]. Nevertheless, as was observed by Ball J at [14]:

There must, however, be "a real causal connection between the conduct and the impecuniosity which, in the exercise of the Court's discretion, would make it unjust to require security": Dalma Formwork Pty Limited (Administrator Appointed) v Concrete Constructions Group Limited [1998] NSWSC 472 per Rolfe J.

33    The financial position of Arizona prior to the events which are alleged to have caused its impecuniosity is not known, and the Court would be only speculating if it attempted to draw any inferences concerning the causes of its impecuniosity. Such a course would not be appropriate: see BPM Pty Ltd v HPM Pty Ltd (1996) 131 FLR 339 at 344-345; Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2002] NSWSC 609 at [96].

34    In the absence of evidence which establishes that Arizona’s impecuniosity results directly from Colliers’ conduct, the observations of Bergin J in Ingot Capital Investments Pty Ltd at [96] are relevant when her Honour observed:

There is no evidence of the financial position of any of the plaintiffs prior to the alleged wrongdoing by the defendants. I simply do not know what the position was and in those circumstances I reject the plaintiff’s submissions on this aspect of the applications.

35    Although Arizona submits that its impercuniosity results from Colliers’ conduct, it is not possible for the Court to give such submission any weight given the lack of evidence before the Court regarding Arizona’s prior financial position.

STIFLING OF CLAIM

36    The next issue of substance relates to the assertion by Arizona that the litigation will be stifled if an order for security for costs is made. It is a well established principle that the Court, subject to other considerations, would usually not make an order for security for costs if the making of such order would prevent the litigation from continuing and therefore result in an injustice: see Gartner v Ernst & Young (No 3) [2003] FCA 1437 at [10]; The Airtourer Co-operative Limited v Millicer Aircraft Industries Pty Limited [2004] FCA 1400.

37    The evidence has established that Arizona has no assets or resources from which to meet an order for security for costs and that Arizona has been unsuccessful in seeking to obtain funding from a litigation funder. However, that is not the end of the inquiry, since there may be parties who could benefit from the litigation and who could provide security. In Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1 at 4, the Full Court said:

In our opinion a court is not justified in declining to order security on the ground that to do so will frustrate the litigation unless a company in the position of the appellant here establishes that those who stand behind it and who will benefit from the litigation if it is successful (whether they be shareholders or creditors or, as in this case, beneficiaries under a trust) are also without means. It is not for the party seeking security to raise the matter; it is an essential part of the case of a company seeking to resist an order for security on the ground that the granting of security will frustrate the litigation to raise the issue of the impecuniosity of those whom the litigation will benefit and to prove the necessary facts.

38    Such principle has been reaffirmed in PS Chellaram & Co Ltd v China Ocean Shipping Co and Another (1991) 102 ALR 321 per McHugh J. Although his Honour recognised that in a limited class of cases where there were strong prospects of success and public interest, security may not be ordered McHugh J said at 323:

In the present case, not only is the appellant resident out of and without assets within the jurisdiction but the evidence establishes that it is hopelessly insolvent. Nevertheless, it does not necessarily follow that an order for security for costs should be made against it. Special leave to appeal is ordinarily not granted in this Court unless there is an arguable case that the decision below is erroneous and involves a question of public interest extending beyond the immediate interests of the parties. That seems to be the situation in the present appeal. In those circumstances, I would hesitate to make an order for security for costs if the effect of that order would be that the appeal could not be pursued because neither the appellant nor those who stand behind it could provide security for the costs of the appeal.

39    However, his Honour then said at 323:

As I have indicated, there is no evidence before me that the two shareholders in the appellant are not in a position to put the appellant in sufficient funds to provide the security sought.

40    Further, in Yandil Holdings Pty Ltd v Insurance Company of North America (1985) 3 ACLC 542 Clarke J said:

The principles which should guide me in resolving the present dispute are not in doubt. The court is vested with an unfettered discretion as to whether an order is made and, if so, upon what terms. The fact that the ordering of security will frustrate the plaintiff's rights to litigate its claim because of its financial condition does not automatically lead to the refusal of an order. Nonetheless it will usually operate as a powerful factor in favour of exercising the court's discretion in the plaintiff's favour.

It must be observed however in this respect that the mere fact that the plaintiff is financially unable to provide security does not lead inevitably to the conclusion that the making of an order will stultify the plaintiff's claim. There is a line of authority, commencing with the unreported decision of Yeldham, J. in Tulloch v Walker, (8th December, 1976), standing for the proposition that if the personnel behind the corporate plaintiff, or other parties who will benefit if the plaintiff succeeds, are financially able to provide adequate security then it is, generally speaking, inappropriate to refuse an order.

Indeed in Bell v Gates (No 2), 8 CLR 588 [sic] the Full Bench of the Federal Court said, at p. 59: "In our opinion a court is not justified in declining to order security on the ground that to do so will frustrate the litigation unless a company in the position of the appellant here establishes that those who stand behind it and who will benefit from the litigation if it is successful (whether they be shareholders or creditors or, as in this case, beneficiaries under a trust) are also without means."

41    For authorities to similar effect, see: Memetu v Lissenden (1983) 8 ACLR 364; Sent v Jet Corporation of Australia (1984) 2 FCR 201; Hession and Others v Century 21 South Pacific Ltd (in Liq) (1992) 28 NSWLR 120 at 123; Bryan E. Fencott at 513; Rhema Ventures Pty Ltd v Stenders [1993] 2 Qd R 326 at 333.

42    In Hession Meagher JA at 123 said as follows:

...a company in liquidation against whom an order for security for costs is sought cannot successfully resist such an order merely by proving that it cannot fund the litigation from its own resources if an order for security is made; it must prove that it cannot do so even if it relies on the other resources available to it (the company's shareholders or creditors)...Finally, whilst it is both true and important that poverty must be no bar to litigation, what that means is that the courts must be astute to see that no person pursuing a claim which is not frivolous is precluded from doing so by the erection of obstacles which poverty is unable to surmount; it does not mean that proof of insolvency automatically confers an immunity from statutory provisions which deal with insolvent plaintiffs.

43    The above principles are important in view of the evidence of the entities associated with Arizona, as disclosed by the evidence hereunder.

FINANCIAL EVIDENCE

44    Mr Moore provided evidence of the numerous interlocking business structures associated with Arizona. The basic framework of such businesses were set out by this Court in Arizona No 3 at [11] to [17] and need not be repeated here. Nevertheless, the thrust of Mr Moore’s evidence before the Court establishes that neither of the applicants nor their associated entities have the necessary funds to provide security for costs in the quantum sought by Colliers.

45    It is an accepted principle that security for costs will usually be ordered where the party instituting the proceedings is resident outside Australia and has no assets in this jurisdiction: see Arizona No 2 at [18]-[19] and the cases referred to therein. The rationale for such provision lies in the fact that a successful litigant may only have redress in a foreign court. See also Singer v Berghouse (No 2) (1993) 114 ALR 521 in which Gaudron J at 521-522 observed:

It may well be that, in the absence of special circumstances and in a case where costs follow the event the need to bring action in a foreign court will weigh very heavily in favour of an order under O 7 r 7.

46    However, the mere fact that a party is resident outside the jurisdiction does not necessarily result in an order for security being made: see Energy Drilling Inc v Petroz N L (1989) ATPR 40-954 at 50,422.

47    It would be unfortunate if an order were made against such a party with the consequence that the litigation was stifled. But in the present application, for the reasons referred to hereunder, the Court is not satisfied that Arizona’s claim will be stifled by the making of an order for security.

48    During Mr Moore’s cross-examination it emerged that there are note holders which will benefit from any damages award granted in favour of Arizona. The names of the note holders and the amounts advanced by them are set out in the following table:

49    The Court notes that no evidence has been provided by Arizona regarding the asset position or liquidity of the above entities.

50    In accordance with the principles referred to above, it is apparent that some or all of these entities, in the absence of any evidence to the contrary, might be able to provide security for costs.

UNDERTAKING BY MR MOORE

51    During closing submissions, counsel for Arizona informed the Court that Mr Moore offered to give an undertaking to comply with any costs order the Court might make in the proceedings. The provision of an undertaking of such kind is a factor for consideration: see Cameron's Unit Services Pty Ltd and Another v Kevin R Whelpton & Associates (Aust) Pty Ltd and Another (1986) 13 FCR 46 at 53; Mantaray Pty Ltd v Brookfield Breeding Co Pty Ltd (1990) 8 ACLC 304; Clyde Industries Ltd v Ryad Engineering Pty Ltd (1993) 11 ACLC 325.

52    However, the undertaking was offered without prior warning to the Court or to Colliers. Colliers indicated that it would accept the undertaking, but informed the Court that even with such an undertaking, Colliers would maintain their motion for further security for costs.

53    It is not clear on Mr Moore’s evidence whether he possesses the personal resources to support such an undertaking. Bearing in mind that Mr Moore is not an Australian resident and is without any assets in Australia, the Court does not consider the informal undertaking to be an adequate substitute for an order for security.

QUANTUM OF SECURITY

54    In the present motion Colliers seeks additional security in the amount of $460,000 or alternatively $280,000. It can be discerned from Mr Little’s affidavit filed on 27 July 2011 that the first sum encompasses both past costs (from 25 March 2011 to the date of the motion) and future costs (from the date of the motion to the end of the hearing).

Past Costs

55    Arizona submits that Colliers cannot seek security for costs for any past costs incurred in these proceedings. However, the grant of such award is entirely within the court’s discretion. Waddell J in Southern Cross Exploration NL at 122 said (of an equivalent provision):

It is submitted for the plaintiffs that the court has no power to make an order for security in respect of costs which have been incurred before the making of the order. In my view the words of the subsection are in sufficiently wide terms to give the court such a power.

56    For other examples of this principle see: Electrona Carbide Industries Pty Ltd v Tasmanian Government Insurance Board [1985] Tas R 68; Bryan E Fencott and Associates v Eretta Pty Ltd at 515; Brocklebank & Co v The King’s Lynn Steamship Co (1878) 3 CPD 365; Procon (Great Britain) Ltd v Provincial Building Co Ltd [1984] 1 WLR 557.

57    Whether an award for security for past costs is granted will depend entirely on the circumstances of the particular matter. An important consideration is whether a party has delayed in making the application for security such that costs have been incurred in respect of which that party now seeks security and which the other party might not have incurred. However, where a party has already incurred costs and applies promptly for security it is more likely that such past costs will be taken into consideration by a court in determining the appropriate security: see Sagacious Procurement Pty Ltd v Symbion Health Ltd [2007] NSWCA 205 per Mason P at [49]-[50].

58    Where costs have been incurred over a long period of time, it is unlikely that an award for past costs will be made: see Southern Cross Exploration NL and Others at 125F-G; Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2009] NSWCA 563 at [39]-[40].

59    There was a delay of two months in the filing of this motion following delivery of the judgment in Arizona No 4. However, upon the application of the above authorities and Arizona’s knowledge of Colliers’ intention to file a motion seeking further security, such delay is not sufficient to disentitle Colliers to a security for both past and future costs.

60    In respect of the portion of the claim relating to costs already incurred, the Court is mindful that a sum of $100,000 for security has already been provided by Arizona. It is an established principle that a court will not usually order costs so as to provide a complete indemnity: see Bryan E Fencott and Associates v Eretta Pty Ltd at 515; Menhaden Pty Ltd v Citibank NA (1984) 1 FCR 542 at 547 per Toohey J.

61    Mr Little’s affidavit sworn on 27 July 2011 establishes that from 25 March 2011 to 27 July 2011, Colliers incurred costs amounting to $240,809.05, which Mr Little acknowledged that on taxation an amount of approximately $180,000 might be allowed.

Future Costs

62    Mr Little’s estimation of Colliers’ future costs (costs forecasted to be incurred from 27 July 2011 onwards) take into consideration the costs associated with the present motion and also the costs relating to a separate motion filed by Arizona regarding proportionate liability. The Court notes that this motion is no longer pressed by Arizona.

63    In respect of the hearing of the principal proceedings, it is anticipated that approximately 10 days of hearing will be required, and substantial evidence will be called. The hearing, on Colliers’ part, will require the engagement of Mr Little, Mr Guy Moloney, senior and junior counsel and experts from various disciplines. Such experts include a financier, accountant, project manager, quantity surveyor and architect.

64    The preparation for the hearing will be extensive and will require conferences, meetings, filing of documents and day to day management. In summary, Mr Little estimates that the overall future costs assessed on a solicitor and client basis and exclusive of GST are as follows:

65    Based upon the current Rules, Mr Little estimates that approximately 80% of the above amount will be recovered on taxation, namely $381,664. Mr Little deposes that after deducting the amount of $100,000 which has been held by way of security, Colliers is exposed to an amount of approximately $280,000 in respect of the future costs for the hearing.

66    Arizona has provided its calculations of the amount of security which might be awarded. If the Court is mindful of granting an order for security for costs in favour of Colliers, Arizona submits that an appropriate amount for security for future costs is the amount of $141,664.

67    Detailed calculations have been provided recording reductions for costs in respect of various items put forward by Colliers. For example, Arizona calculates that an amount of $90,000 should be deducted from the estimate of senior counsel’s fees, based upon the current National Guide to Counsel Fees (‘the guide’). Pursuant to such guide, a maximum daily rate for senior counsel is set at $6,000 per day. Mr Little’s estimate of counsel’s fees allows $11,000 per day. Colliers point out that the guide is referred to in the current Rules at Schedule 3 Item 16.1 which provides:

An amount may be allowed for counsel’s fees according to the circumstances of the case. That amount may be assessed by reference to the National Guide to Counsel Fees. The fees are to be claimed as a disbursement.

68    Nevertheless, Colliers submits that the current Rules do not expressly provide that the guide is to bind a taxing officer. Rather, reference to the guide is entirely discretionary since the guide, in its introductory passages, provides:

The following guide may be applied by taxing officers of the Federal Court… [emphasis added]

69    Colliers submits that the issues to be determined in these proceedings raise complex questions requiring a highly experienced senior counsel and that the assessment by Arizona makes no allowance for such factor.

70    Having considered the submissions of the parties, the Court agrees that the hearing will raise complex issues requiring skilled senior counsel. Further, the hearing will involve experts from numerous disciplines which will greatly add to the costs of the proceedings. There will of necessity be submissions on issues of both law and fact. It is not appropriate for this Court to attempt to make a detailed calculation of a precise amount which might be recovered on taxation and at this stage of the proceedings it would be impossible to do so since such calculation would be entirely speculative: see Idoport Pty Ltd at [154].

CONCLUSION

71    The Court has considered that costs have already been incurred by Colliers and that Arizona has been successful in proving that Colliers contravened ss 52 and 53A of the TPA. The Court has also taken into account the sum of $100,000 already held by way of security. The Court also has discounted Colliers’ estimation of senior counsel’s fees.

72    As Needham J in MA Productions Pty Ltd v Austarama Television Pty Ltd and Anor (1982) 7 ACLR 97 said at 100:

…as far as possible the court should do justice to each of the parties, attempting not to prejudice the defendant and attempting not, if possible, to shut out the plaintiff from litigating its complaints.

73    The Court has weighed up two principal considerations: firstly, whether an award of security of costs would stifle the litigation; and secondly the principle that a non-resident corporation with no assets in the jurisdiction is usually required to provide adequate security. In this instance, there is greater force in the second consideration as the evidence discloses that even if proceedings were taken in a foreign jurisdiction to recover costs, Arizona has no assets with which to satisfy any costs order that might be made against it in the proceedings.

74    The Court is satisfied that security for costs in the sum of $250,000 is appropriate. This sum takes into consideration a substantial part of the costs which are likely to be awarded on a taxed basis if Colliers is successful in the balance of the proceedings, and incorporates some recognition of the costs which have been incurred by Colliers since March 2011. The order for security also takes into account Arizona’s success in the proceedings thus far and its criticisms of Colliers’ estimation of future costs.

Associate:

Dated:    7 September 2011