Federal Court of Australia

Quarter Turn Pty Ltd v Reinteractive Pty Ltd [2025] FCA 1110

ORDERS

THE COURT ORDERS THAT:

1.    The applicant provide security for the respondent’s costs of this proceeding in the amount of $175,000.00, by payment of that amount into Court within 28 days of the date of these orders.

2.    In the event of non-compliance with Order 1, the proceeding be stayed.

3.    The respondent’s interlocutory application filed on 14 July 2025 otherwise be dismissed.

4.    Costs be reserved.

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

REASONS FOR JUDGMENT

GOODMAN J:

A.    Introduction

1    These reasons for judgment address an application for the provision of security for past and estimated future costs in circumstances where it is plain that the applicant is unable to meet an adverse costs order; and where there has been substantial delay in the making of the application.

2    For the reasons set out below, it is appropriate to make an order for the provision of security of costs, referable only to estimated future costs.

B.    background

3    The background relevant to the application is as follows.

4    The applicant is a company in which Mr Brett Earl and Mr Kok An Andric Liew are the directors. The members of the applicant are Mr Earl and a company associated with Mr Liew.

5    On 22 January 2024, the present proceeding was commenced by the filing of an originating application and concise statement. In broad terms, the applicant contends that it engaged the respondent to develop a website and mobile application, but the respondent: (1) failed to deliver that product in breach of contract; and (2) engaged in misleading and deceptive conduct.

6    On 15 March 2024, the respondent filed a concise statement in response.

7    On 21 March 2024, an order was made for the filing of evidence by the applicant. The time for compliance with that order was subsequently extended and on 27 June 2024, the applicant completed the filing of its evidence in chief when it filed an expert report of Dr Brent Coker.

8    On 12 July 2024, the respondent issued a notice to produce to the applicant and on 25 July 2024, the applicant produced documents in response to the notice to produce including various financial documents.

9    On 8 August 2024, in response to a request for further and better particulars of quantum (the date of which request is not apparent), the solicitors for the applicant wrote to the solicitors for the respondent setting out a series of figures based upon Dr Coker’s report which suggested an amount claimed for loss in excess of $20,000,000.00.

10    On 8 October 2024, the solicitors for the respondent wrote to the solicitors for the applicant in the following terms :

Introduction

1.    We refer to the above matter. As you know, we act on behalf of Reinteractive Pty Ltd (Reinteractive) in the above proceedings.

2.    The purpose of this letter is to request details of the financial position and assets of Quarter Turn Pty Ltd (Quarter Turn) and its ability to meet any order for costs that is made against it in the proceedings.

Reinteractive’s costs and estimated future costs

3.    Reinteractive has incurred very significant costs in the proceedings to date, and there remains significant risk that the parties will not resolve this matter prior to trial.

4.    We set out below a summary of the estimated costs that Reinteractive expects to incur in defending Quarter Turn’s claim up to the end of trial (estimate of 5-7 hearing days). The estimated costs are on a standard basis under the Federal Court Scale.

Quarter Turn’s financial position

5.    According to Quarter Turn’s financial statements for the period 1 December 2021 to 30 April 20231:

5.1    its net losses totalled $635,945; and

5.2    its income was negligible.

Request for information

6.    Having regard to Reinteractive’s estimated costs to trial, please provide details of the financial position and assets of Quarter Turn, including but not limited to:

6.1    balance sheets;

6.2     profit and loss statements; and

6.3     any further information indicating Quarter Turn’s ability to meet any order for costs that is made against it.

7.    Please provide your response within 14 days of today’s date.

8.    In the absence of a satisfactory response, Reinteractive reserves the right to make an application to the Court for an order for security for costs without further notice.

1.    Documents provided by Quarter Turn in response to Category 1 of the Notice to Produce dated 12 July 2024

(emphasis in original)

11    On 21 October 2024, the Court made various orders including an order that the parties attend a mediation by 20 December 2024.

12    On 22 October 2024, the solicitors for the applicant responded to the 8 October 2024 letter, contending that the respondent was not entitled to security for costs by dint of delay. Further correspondence was exchanged on 18, 27 and 29 November 2024..

13    From about 29 November 2024, the respondent determined to put the issue of security for costs on hold in view of the mediation scheduled for 13 December 2024, so as to avoid the unnecessary incurrence of costs. The mediation commenced on 13 December 2024 and was terminated on 26 March 2025..

14    On 1 April 2025 the Court made orders, including orders that the parties confer regarding security for the respondent’s costs by 6 May 2025 and that, if necessary, the respondent file any application seeking security for costs by 23 May 2025. An order was also made setting the proceeding down for a final hearing commencing 10 February 2026 with an estimate of seven days.

15    On 7 May 2025, the solicitors for the respondent wrote to the solicitors for the applicant foreshadowing an application for security for costs in an amount of $591,662.00..On 29 May 2025 the solicitors for the applicant responded, reiterating the applicant’s position that the respondent was not entitled to security for costs. On 19 June 2025, the solicitors for the respondent wrote to the solicitors for the applicant indicating that they held instructions to file an application for security for costs, which application was being finalised and would be served shortly thereafter..

16    On 14 July 2025, the respondent filed the application for security for costs.

17    The applicant has adduced evidence that it has incurred costs to date in the order of $270,000.00.

18    Mr Liew has also provided evidence that:

5.    I have been funding these proceedings on behalf of Quarter Turn to date. The other director and shareholder of Quarter Turn, Brett Earl, has not funded the proceedings. I understand that he does not have the financial capacity to do so.

6.    Reinteractive’s late application for security has prejudiced my ability to make choices in this litigation, including in mediation, with the benefit of knowing early in the proceedings whether or not security for costs would be ordered and before Quarter Turn had incurred significant fees.

7.    I also do not have assets in Australia that would allow me to pay the amount of security sought by Reinteractive. I was born in Singapore and moved to Australia in January 2017. I am a permanent resident. My assets are primarily located overseas, including in Singapore where I am a citizen. I do not have $544,126 in cash in Australia available to pay into Court for security for costs.

8.    If security for costs was ordered in the amount sought by Reinteractive, I would have to try and source this from my assets overseas.

C.    Consideration

19    The application is brought pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth) and r 19.01(1) of the Federal Court Rules 2011 (Cth).

20    The amount of $544,126.00 sought by the respondent by way of security for costs is calculated as follows:

Costs to date    $458,942.00

Estimated future costs    $318,380.00

    Total    $777,322.00

    (x 0.7)    $544,125.40

21    The multiplier of 0.7 represents an estimated return of 70 per cent of costs incurred after taxation of those costs.

22    The applicable principles were conveniently summarised by Allsop CJ in All Class Insurance Brokers Pty Ltd (in liquidation) v Chubb Insurance Australia Limited [2020] FCA 840 at [40] to [43] (albeit in that case reliance was also placed upon s 1335 of the Corporations Act 2001 (Cth)):

40    Where the applicant is a corporation, the Court is empowered to order security for costs pursuant to s 1335 of the Corporations Act if “it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant”. Once this threshold is met, the Court will turn to the matters relevant to the exercise of its discretion to order security for costs: Cornelius v Global Medical Solutions Australia Pty Ltd [2014] NSWCA 65; 98 ACSR 301.

41    Section 56 of the Federal Court of Australia Act does not expressly impose any threshold to be met before the Court considers the various discretionary matters. However, the applicant’s inability to pay the costs of the respondent remains an important consideration in the exercise of the Court’s discretion.

42    The Court’s discretion to require the provision of security for costs is broad and the factors informing the exercise of that discretion cannot be stated exhaustively. The only limitation is that the discretion be exercised judicially: Bell Wholesale Co Ltd v Gates Export Corporation [1984] FCAFC 29; 2 FCR 1 at 3. The matter which lies at the heart of the discretion is one of fairness, both in terms of whether security should be granted, and if so, in what amount: Madgwick v Kelly [2013] FCAFC 61; 212 FCR 1 at 21 [92]. The Court aims to achieve a “balance between ensuring that adequate and fair protection is provided to the defendants, and avoiding injustice to an impecunious plaintiff by unnecessarily shutting it out or prejudicing it in the conduct of the proceedings”: Rosenfield Nominees Pty Ltd v Bain & Co (1988) 14 ACLR 467 at 470 (Giles J).

43    The Court’s discretion should be exercised having regard to all of the circumstances of the case (see Merribee Pastoral Industries Pty Ltd v Australia and New Zealand Banking Group Ltd [1998] HCA 41; 193 CLR 502 at 513 [26] (Kirby J)). There are a number of well-established factors relevant to the Court’s exercise. These include (see KP Cable Investments Pty Ltd v Meltglow Pty Ltd [1995] FCA 76; 56 FCR 189 at 197–198 per Beazley J): whether the application for security for costs has been brought promptly; the strength and bona fides of the applicant’s case; whether the applicant’s impecuniosity was caused by the respondent’s conduct subject of the claim; whether the respondent’s application for security is oppressive, in the sense that it is being used merely to deny an impecunious applicant a right to litigate; and whether there are any persons standing behind the company who are likely to benefit from the litigation and who are willing to provide the necessary security.

23    It is common ground that the applicant is impecunious.

24    The principal issue between the parties on this application is the effect of the delay in making the application for the provision of security for costs. In summary, the applicant contended that the delay in the present case is fatal to the application; and the respondent contended that although delay is one factor to be taken into account in the exercise of the Court’s discretion, it is but one factor and in all of the circumstances of the present case the delay is not severe, with the application having been brought well in advance of the hearing scheduled for February 2026.

25    It is a principle of long standing that applications for the provision of security for costs are to be brought promptly: see, e.g., Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd (1985) 1 NSWLR 114 at 123 (Waddell J); Devenish v Jewel Food Stores Pty Ltd [1990] HCA 35; (1990) 64 ALJR 533 at 534 (Mason CJ); KP Cable Investments Pty Ltd v Meltglow Pty Ltd [1995] FCA 76; (1995) 56 FCR 189 at 197 (Beazley J); Li v State of New South Wales [2013] NSWCA 165 (Ward JA); and Moubarak by his tutor Coorey v Holt (No 2) [2019] NSWCA 188 at [13] (Bell P).

26    In the present case, there has been significant delay in the bringing of the application. In particular:

(1)    no application was made before the applicant filed its evidence in chief, which concluded in June 2024;

(2)    by late July 2024, the respondent’s solicitors were in possession of documents produced in answer to a notice to produce, which suggested that the applicant’s financial position was parlous. So much is clear from paragraph 5 of the 8 October 2024 letter and the footnote thereto ([10] above);

(3)    by 8 August 2024, the solicitors for the respondent were aware that the amount claimed exceeded $20,000,000.00 ([9] above);

(4)    several months then passed until the question of security for costs was first flagged in the 8 October 2024 letter ([10] above);

(5)    further correspondence ensued until the end of November 2024, when the respondent determined to put the issue of security for costs on hold, pending the mediation ([13] above);

(6)    following the termination of the mediation on 26 March 2025, it appears that no steps were taken until the 7 May 2025 letter, which started a further round of correspondence, ending on 19 June 2025 with a statement by the respondent’s solicitors that they were instructed to file an application for the provision of security for costs ([15] above); and

(7)    a period of almost four weeks then passed before the application was filed.

27    Thus, the application was filed almost one year after the respondent received financial documents putting it on notice of the applicant’s parlous financial position; and almost 18 months after the commencement of the proceeding. Further, by the time the application was filed, the proceeding had been set down for hearing (albeit in February 2026).

28    The delay is not satisfactorily explained. The explanations proffered are as follows.

29    First, that the applicant’s concise statement (filed in January 2024) did not reveal the quantum of the loss and damage alleged to have been suffered by the applicant and it was not until service of Dr Coker’s report and the 8 August 2024 letter ([9] above) that the respondent became aware that the applicant was seeking to recover damages exceeding $20,000,000.00, at which point there was a re-evaluation by the respondent’s solicitors of the amount of work required to defend the proceeding (including obtaining expensive quantum evidence and, perhaps, discovery relevant to the applicant’s financial position and mitigation of its alleged loss). This, it was said, prompted the 8 October 2024 letter and the correspondence which ensued.

30    I do not regard this as a sufficient explanation for the delay between January 2024 and November 2024. It is quite often the case that the quantum of loss claimed is unknown until evidence is served (or particulars are sought and provided) and the absence of this information is not an impediment to seeking security for costs. The application should be made promptly and if it transpires that more costs will be incurred because more work is required than originally anticipated, an application to increase the amount of security can be made in the absence of agreement between the parties. Further, as explained above, the respondent was on notice as to the applicant’s financial position from July 2024.

31    Secondly, the decision to put any application for an order for the provision of security for costs on hold pending the outcome of the mediation. This is an acceptable explanation for the delay between December 2024 and March 2025. There is no suggestion that during this period the parties were not genuinely seeking to resolve their dispute.

32    Thirdly, the application was re-agitated following the termination of mediation. I accept that the application was re-agitated following the termination of the mediation. However, this did not occur until 7 May 2025; and despite the solicitors for the respondent indicating on 19 June 2025 that the application would be made, this did not occur until 14 July 2025.

33    The presence of such a significant delay is a matter which weighs against the making of an order for the provision of security for costs. However, it is not of itself fatal to the application.

34    As Bell P and Simpson AJA explained in PPK Willoughby Pty Ltd v Baird [2019] NSWCA 48 at [11], delay will invariably be a relevant discretionary factor in any application for security for costs, but the degree and extent of its relevance will vary according to the circumstances of the particular case, along a spectrum from the slight to the extreme. Similarly, in All Class Insurance Brokers, Allsop CJ explained at [58]:

Applications for security for costs ought to be brought promptly. Precisely how any delay in applying for security for costs will impact on the exercise of the Court’s discretion will depend on the prejudice likely to be suffered by the respondent to the application and the reasons, if any, for the delay in applying for security: see Jianshe Southern Pty Ltd v Get Motor Cycles Pty Ltd (No 3) [2007] FCA 1078 at [30] (Besanko J).

35    Thus, it remains necessary to address other salient matters informing the exercise of the discretion, and in particular the prejudice to the applicant caused by the delay; and the fact that any costs order made against the applicant is unlikely to be met from the applicant’s assets.

36    The evidence concerning the prejudice to the applicant is set out at [17] and [18] above. Notably, the applicant has not suggested that an order for the provision of security for costs would stultify the proceeding, with the consequence that the costs it has incurred to date would be wasted. Such evidence would have placed the importance of the delay at the extreme end of the spectrum described in PPK. Conversely, its absence tends to suggest that delay is of lesser importance in the exercise of the discretion: Chief Disruption Officer Pty Ltd as Trustee for the McDonald Family Trust v Michel, in the matter of Laava ID Pty Ltd [2022] FCA 148 at [52] to [53] (Goodman J).

37    Rather, the evidence of prejudice concerns a Delphic description of restriction of choices. Without more, I am not persuaded that there is significant prejudice to the applicant from the delay. Further, the mere incurrence of costs to date is not a sufficient prejudice when there is no suggestion that an order for the provision of security for costs would stultify the proceeding.

38    As noted above, it is unlikely that the applicant could meet any adverse costs order made at the end of this proceeding. This is an important factor informing the exercise of the discretion.

39    In the exercise of the discretion, I proceed on the basis that the respondent was content to incur the costs which it incurred prior to the bringing of the application without the protection of an order for the provision of security for costs. A party which unreasonably delays in applying for an order for the provision of security for costs cannot ordinarily expect to obtain security for costs it has incurred during the period of the delay: Christou v Stanton Partners Australasia Pty Ltd [2011] WASCA 176 at [29] (Newnes JA); Big Review TV Ltd (in liq) v FC Securities Pty Ltd [2025] FCA 222 at [37] and [41] (Moore J).

40    Taking all of the above matters into account, the appropriate exercise of the discretion is to order the provision of security for costs in an amount which: (1) does not include provision with respect to past costs; and (2) takes into account estimated future costs, with the quantum of security reflecting the well-established broad brush approach, and the principle that the purpose of such an order is not to provide a respondent with a complete indemnity for its future costs. In my view, an appropriate amount is $175,000.00. I will make orders accordingly.

Associate:

Dated:    10 September 2025