ADLU Pty Ltd v Ertech

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - where the first defendant applied for an order that the plaintiff provide security for costs to the first day of trial - where the plaintiff company was not taking on new construction projects and the source of any future income or entitlement to capital was uncertain - whether the precondition in r 671(a) of the UCPR was satisfied

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - FACTORS RELEVANT TO EXERCISE OF DISCRETION - where the first defendant applied for an order that the plaintiff provide security for costs to the first day of trial - where the first defendant alleged that the plaintiff company was restructured to evade liabilities - where the plaintiff company was not undertaking new projects and another company was obtaining work on the plaintiff company's credentials - where prejudice was alleged if the claim was stayed for a failure to pay security and the counterclaim relying on similar factual circumstances and analogous issues was able to proceed - where the first defendant offered an undertaking not to proceed with the counterclaim if the claim were stayed - whether there was a delay in bringing the application for security for costs - where the first defendant received new information about the plaintiff's restructure of financial affairs and submitted that this explained the delay in bringing the application - whether the plaintiff or the first defendant bore the evidentiary onus and the persuasive onus in respect of the discretionary factors - whether the Court's discretion should be exercised to award security for costs

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - AMOUNT AND NATURE OF SECURITY - where the first defendant applied for an order that the plaintiff provide security for costs to the first day of trial - where the overlap between the claim and counterclaim was substantial - whether there was a risk of overestimation and double-counting - where the amount of security for costs to be ordered was in dispute

Uniform Civil Procedure Rules 1999 (Qld), r 670, r 671, r 672

Cornelius v Global Medical Solutions Australia Pty Ltd (2016) 98 ACSR 301; [2014] NSWCA 65, considered

Covecorp Constructions Pty Ltd v Indigo Projects Pty Ltd [2007] QSC 262, considered

DGR Global Ltd v P.T. Limited [2025] QCA 122, followed

Great Barrier Reef Yacht Club Villas Pty Ltd v Insurance Australia Ltd [2024] QSC 320, considered

Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377; [2008] VSCA 93, considered

Robson v Robson [2008] QCA 36, considered

Woollongong City Council v Legal Business Centre Pty Ltd [2012] NSWCA 245, considered

• [1] Pursuant to r 670 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR), or alternatively in the Court's inherent jurisdiction, the first defendant applies for an order that the plaintiff provide security for costs from 4 July 2025 to the first day of the trial in the amount of $847,936.
• [2] The plaintiff opposes the order sought. Alternatively, the plaintiff submits that if security is to be ordered it should be in the lesser amount of $205,281.
• [3] Rule 670 of the UCPR provides:

"(1) On application by a defendant, the court may order the plaintiff to give the security the court considers appropriate for the defendant's costs of and incidental to the proceeding.

(2) This rule applies subject to the provisions of these rules, particularly, rules 671 and 672."

(a) Has the first defendant satisfied one of the preconditions in r 671 of the UCPR?

(b) If so, should the Court's discretion be exercised to order security for costs?

(c) If so, what amount of security for costs should be ordered?

• [5] Turning to consider these issues in turn.

Has the first defendant satisfied one of the preconditions in r 671 of the UCPR?

• [6] Rule 671 of the UCPR sets out a number of preconditions which, if established, give rise to the Court's jurisdiction to order security for costs. The first defendant relies upon the precondition in r 671(a) of the UCPR.
• [7] Rule 671(a) of the UCPR provides:

"The court may order a plaintiff to give security for costs only if the court is satisfied -

(a) the plaintiff is a corporation and there is reason to believe the plaintiff will not be able to pay the defendant's costs if ordered to pay them."

• [8] The threshold test in r 671(a) of the UCPR was considered recently by the Court of Appeal in DGR Global Ltd v P.T. Limited.[1] In joint reasons, the Court[2] stated:

"[60] It can be accepted that, in terms of the threshold question posed by these statutory provisions, the phrase 'reason to believe' is 'the touchstone of jurisdiction'.[3] The phrase 'reason to believe' has been contrasted with other expressions such as 'if the court is satisfied that' or 'if in the view of the court it is likely that'.[4] ...

[61] In Cornelius v Global Medical Solutions Australia Pty Ltd,[5] Macfarlan JA (with whom Tobias AJA agreed) emphasised that the statutory language, 'reason to believe', does not 'refer to risk'. Macfarlan JA then said:[6]

'The words "reason to believe" acknowledge that on an application for security for costs, as a matter of practicality, a court will not be able to undertake as thorough an examination of the financial position of a plaintiff as it would if an issue as to that arose at a final hearing. Almost inevitably, the court's assessment will be a preliminary one based on limited materials. Nevertheless, for the power to order security to arise, the outcome of the assessment must be that the court considers that there is "reason to believe" that the plaintiff "will be" unable to meet an adverse costs order. A conclusion that there is a risk that that will, or may, be the case is insufficient.

The words of the statute and rule are clear and should be applied according to their terms without a gloss being placed upon them.'

[62] In Monto Coal 2 Pty Ltd v Sanrus Pty Ltd,[7] Gotterson JA, with whom McMurdo JA and Boddice J agreed, adopted the reasoning of Macfarlan JA and made the following observations about that reasoning:

'In my view, it accords with the earlier observations of a full bench of the High Court in George v Rockett as to the meaning of the expression "reason to believe". In a joint judgment, their Honours said:

"The objective circumstances sufficient to show a reason to believe something need to point more clearly to the subject matter of the belief, but that is not to say that the objective circumstances must establish on the balance of probabilities that the subject matter in fact occurred or exists: the assent of belief is given more slender evidence than proof. Belief is an inclination of the mind towards assenting to, rather than rejecting, a proposition and the grounds which can reasonably induce that inclination of the mind may, depending on the circumstances, leave something to surmise or conjecture".

I draw from these observations that for a reason to believe that a fact will exist, the objective circumstances must be sufficient to incline the mind towards accepting, rather than rejecting that the fact will exist. By way of contrast, the requisite belief is not merely that the circumstance may come into existence, or that there is some risk that it may. It is a belief that the fact will come into existence.'" (emphasis in original).

"[64] Monto Coal is authority for the proposition that for there to exist 'reason to believe' within the meaning of r 671(a), the objective circumstances must be sufficient to incline the mind towards accepting that the plaintiff will not be able to pay the costs. The inclination of mind is established by reference to objective circumstances and can exist even though the likelihood is not proved on the balance of probabilities[8] and despite some matters being left to, as distinct from being informed by, conjecture or surmise. Nothing in Monto Coal or Cornelius is inconsistent with the statement in Livingspring to the effect that the phrase 'reason to believe' requires a 'rational basis for the belief - and no more'. Indeed, subsequent single judge decisions in New South Wales have cited Livingspring and Cornelius together as reflecting settled principle.[9]"

• [10] In that case, the primary judge erred in principle in failing to undertake the kind of assessment upon which reason to believe could be based. The Court of Appeal described the required assessment as:

"[68] ... The power to order security requires an assessment to be undertaken, the outcome of which is reason to believe that the plaintiff will be unable to pay an adverse costs order. The assessment required may differ from case to case and be dependent upon the objective circumstances of a particular case. ... The threshold test fell to be satisfied only if the outcome of that kind of assessment inclined the mind towards reason to believe that the appellant would be unable to pay an adverse costs order when it likely fell due."

• [11] On the facts, the first defendant contends that the precondition in r 671(a) UCPR is satisfied. The plaintiff contends it is not.
• [12] The first defendant contends that the costs at the end of the trial will be substantial, and it is likely that if the first defendant is successful the plaintiff could be ordered to pay over $2 million in respect of costs of the claim.[10]
• [13] Further, the following factors are relevant to whether the Court is satisfied that there is reason to believe the plaintiff will not be able to pay an adverse costs order:

(a) The paid-up share capital of the plaintiff is $10.00.

(b) The plaintiff owns no real property in Queensland.

(c) The sole share-holder of the plaintiff is Whish Contractors Pty Ltd, which has a paid-up share capital of $1.00.

(d) The plaintiff's Queensland Building and Construction Commission (QBCC) licence has been inactive since April 2019 due to unpaid fees.

(e) Between January 2020 and April 2020, the QBCC issued infringement notices in relation to its failure to respond to a payment claim and to pay an adjudicated amount.

(f) On 2 April 2020, the plaintiff was the respondent to an adjudication determination under the Building Industry Fairness (Security for Payment) Act 2017 (Qld) (BIF Act) and ordered to pay $206,125.38.

• [14] The first defendant points to the plaintiff's lack of assets and the previous difficulties paying amounts due and payable when they fell due as being the basis of the necessary "reason to believe" to satisfy the threshold question.
• [15] The plaintiff contends that the threshold question has not been met, including that the plaintiff has funded the conduct of the proceeding to date. However, the first defendant submits that where there is a lack of evidence about the origins of the funds, such a fact would carry limited persuasive value.[11] The first defendant points to the lack of evidence of the entity by which payment was made to the solicitors, as well as the source of the funds.
• [16] In these circumstances, the first defendant submits that there is a reasonable basis for the Court to be satisfied that the plaintiff will be unable to pay the first defendant's costs if ordered to do so, particularly given the amount of costs likely to be involved. Further, the first defendant submits that there is a proper basis for the Court to be satisfied that the threshold requirement in r 671(1) of the UCPR has been met.
• [17] In response, the plaintiff contends as follows:

(a) The plaintiff is solvent and able to trade, although currently inactive.

(b) The plaintiff has managed its liabilities and left no subcontractor unpaid on the project.

(c) The plaintiff has not dissipated assets or engaged in any restructure to evade creditors.

(d) The plaintiff is not affected in its trading capacity by not having a current QBCC licence.

(e) There are substantial existing protections, being the $4 million bank guarantee held by the Court and $648,370 in converted securities.

(f) The legal costs paid to date.

• [18] At the hearing, the first defendant traversed the evidence relevant to the threshold question in considerable detail. In response Counsel for the plaintiff stated:

"... the evidence has been so thoroughly canvassed by my learned friend, I don't propose to address it again. It's been accurately cited in terms of the threshold question, and I can put the matter no higher than the explanations that Mr Whish has given in relation to the present status of [the plaintiff] ...

[T]he evidence is, at its highest, in Mr Whish's affidavit, as summarised in the submissions and now as cited by my learned friend. I can't put any more favourable characterisation on the evidence in relation to [the plaintiff's] ability to meet an adverse costs order...

I am not instructed to make any concession on that point ...".[12]

• [19] The test for the threshold question is a "low threshold" and is an "undemanding test", being a preliminary view based on limited materials.[13] The evidence includes the affidavits filed by the first defendant as well as the affidavit of the plaintiff's sole director, Mr Whish.
• [20] The approach is to consider whether the objective circumstances are sufficient to incline the mind towards accepting that the plaintiff will not be able to pay the first defendant's costs if ordered to pay them.[14] Here, the objective circumstances include that:

(a) the plaintiff has undertaken no new construction projects for approximately six years, since late 2019;

(b) the plaintiff does not own any real property or heavy machinery; and

(c) the plaintiff has a paid up share capital of $10.00.

• [21] Further, there is no evidence in respect of the plaintiff deriving or expecting to receive any income, any source of capital to which it has a present or future entitlement, or any related company or other assurance to make assets available to the plaintiff to meet any adverse costs order. Mr Whish's evidence is that:

(a) The plaintiff not undertaking new construction projects was "a deliberate strategic decision, not a sign of insolvency or cessation".[15]

(b) The plaintiff "elected to pause new work while this dispute ... remained unresolved".[16]

(c) The plaintiff "continues to operate, is solvent, and retains the capacity to trade. It intends to resume full operations once this dispute is resolved and the funds owed are recovered".[17]

• [22] This last point is particularly relevant to the consideration of the plaintiff's ability to pay the first defendant's costs if ordered to pay them. In the ordinary course, that would arise if the plaintiff was unsuccessful. While there are various scenarios that could ultimately arise, if the plaintiff was totally unsuccessful the plaintiff would not recover the funds it says it is owed and would not have recourse to the moneys paid into Court or the securities. In those circumstances, on the plaintiff's own evidence the plaintiff would have no ability to pay a costs order.
• [23] Taking into account these objective circumstances, I am satisfied that the first defendant has established that there is a rational basis to be satisfied there is reason to believe the plaintiff will not be able to pay the first defendant's costs if ordered to pay them.
• [24] Accordingly, the threshold requirement in r 671(a) of the UCPR is established.

If so, should the Court's discretion be exercised to order security for costs?

• [25] The second issue gives rise to the consideration of several sub-issues, one of which is contentious between the parties.
• [26] Firstly, if a precondition in r 671 of the UCPR is met, the Court has a discretion to order that security for costs be provided. Rule 672 of the UCPR sets out the discretionary factors that the Court may have regard to at this second stage.
• [27] Rule 672 of the UCPR states:

"In deciding whether to make an order, the court may have regard to any of the following matters -

(a) the means of those standing behind the proceeding;

(b) the prospects of success or merits of the proceeding;

(c) the genuineness of the proceeding;

(d) for rule 671(a) - the impecuniosity of a corporation;

(e) whether the plaintiff's impecuniosity is attributable to the defendant's conduct;

(f) whether the plaintiff is effectively in the position of a defendant;

(g) whether an order for security for costs would be oppressive;

(h) whether an order for security for costs would stifle the proceeding;

(i) whether the proceeding involves a matter of public importance;

(j) whether there has been an admission or payment into court;

(k) whether delay by the plaintiff in starting the proceeding has prejudiced the defendant;

(l) whether an order for costs made against the plaintiff would be enforceable within the jurisdiction;

(m) the costs of the proceeding."

• [28] This list of discretionary factors is not prescriptive, nor is it exhaustive. The Court's discretion to order security for costs is unfettered and is to be exercised taking into account all of the circumstances of the case.[18]
• [29] The exercise of the discretion was described by Margaret Wilson J (with whom McMurdo P and Applegarth J agreed) in Base 1 Projects Pty Ltd v Islamic College of Brisbane Ltd[19] as follows:

"[23] The determination of an application for security for costs calls for the exercise of a judicial discretion in all the circumstances of the particular case. The exercise of that discretion requires the assessment and weighing of relevant factors, some of which may be inter-related..."

• [30] The second sub-issue is who bears the onus at this second stage.
• [31] The first defendant contends that the onus shifts to the plaintiff, which must demonstrate why security for the defendant's costs should not be ordered to be provided. Reliance for this contention is placed on Wollongong City Council v Legal Business Centre Pty Ltd[20] and Great Barrier Reef Yacht Club Villas Pty Ltd v Insurance Australia Ltd.[21]
• [32] Conversely, the plaintiff contends that the onus is on the first defendant to satisfy the Court that security ought to be ordered. Reliance for this contention is placed on Robson v Robson.[22]
• [33] The question of the onus was also considered by the Court of Appeal in DGR Global Ltd v P.T. Limited.[23] In joint reasons, the Court[24] stated:

"[69] ... it is tolerably clear that the judge erred at the stage of exercising the discretion by reversing the onus, placing it upon the appellant. The reasons reveal that the judge effectively imposed a persuasive burden on the appellant by approaching the applications on the basis that once the threshold condition had been satisfied, the power to order security for costs fell to be exercised in the respondents' favour unless the appellant persuaded the court by reference to discretionary matters, that the power should not be exercised. That error was of the same kind as the error made by the judge in Livingspring.[25] In this case, the error would seem to have been promoted by unqualified reference to the statement in Wollongong in written submissions made to the judge."

• [34] As part of the reasoning, the Court of Appeal referred to the New South Wales Court of Appeal decision in Cornelius v Global Medical Solutions Australia Pty Ltd[26] relevantly as follows:

"[65] Cornelius is also a leading authority in relation to the onus of proof on an application for security for costs. In Cornelius, the New South Wales Court of Appeal considered a submission that a judge had erred by stating that the burden of proof rested upon an applicant for security 'from first to last'. It was submitted that a statement to that effect was inconsistent with a previous statement by Beazley JA in Wollongong City Council v Legal Business Centre Pty Ltd.[27] In dealing with that submission, Macfarlan JA reasoned as follows:[28]

'The defendants contended on appeal that the judge erred in stating that the burden of proof rests upon applicants for security "from first to last" ... They submitted that this was contrary to the following statement of Beazley JA in Wollongong City Council at [30]:

"... Once the defendant has discharged the onus of establishing that there is reason to believe that the other party to the litigation will be unable to pay the costs of the litigation if unsuccessful, the onus shifts to the party against whom the order is sought (who I will refer to the plaintiff) to establish a reason why security should not be granted ...".

I do not consider that there is an inconsistency, as alleged, as Beazley JA was in my view referring to the evidentiary (or evidential) burden shifting in the circumstances described to the party against whom security is sought. In fact, her Honour made that explicit in her earlier decision in Prynes Pty Ltd v Nemeth (2010) 28 ACLC 10-026; [2010] NSWCA 94 at [16] where in the same context she referred expressly to the evidentiary burden shifting.

The expression 'evidential burden' can be used in at least three senses: Strong v Woolworths Ltd (2012) 246 CLR 182; 285 ALR 420; [2012] HCA 5 at [46]-[64]. For present purposes, it is sufficient to say that it includes reference to the principle that in certain circumstances a party who does not bear the ultimate burden of proof may have to raise for consideration matters that favour it if it wishes them to be taken into account in the determination of the case. The evidential burden of raising a matter is thus distinct from the legal onus of proving entitlement to an order for security for costs which it is correct to describe as resting throughout on an applicant for such an order.'

[66] These paragraphs of the reasons of Macfarlan JA were approved of in Monto Coal.[29]"

• [35] The Victorian Court of Appeal[30] in Livingspring Pty Ltd v Kliger Partners[31] under the heading "the onus does not shift" relevantly observed that once the threshold test has been met:

"[20] On ordinary principles, it is for the defendant-applicant to persuade the court that the discretion should be exercised in its favour...

[21] ... [The judge at first instance] had approached the application, it was said, on the basis that once the threshold condition was satisfied the power would be exercised in the defendant's favour, unless the plaintiff corporation persuaded the court (by reference to discretionary factors) that it should not be so exercised. In our view, this objection is made out. While the satisfaction of the threshold condition in the relevant sense 'calls for' the exercise of the power, this does not alter the fact that the burden rests on the defendant, from first to last, to persuade the court that the order for security should be made.

[22] There are, of course, particular discretionary matters of which the plaintiff must necessarily have carriage. If, for example, the plaintiff corporation asserts that an order for security would impose on it such a financial burden as would stultify the litigation, the plaintiff must establish the facts which make good that assertion ... The same would be true of a contention that the plaintiff's impecuniosity was caused by the defendant.[32]"

(a) Having established the precondition in r 671(a) of the UCPR, the persuasive onus is on the first defendant to persuade the Court to exercise the discretion to order security for costs, by reference to the discretionary factors and in all of the circumstances.

(b) The evidentiary onus may be on the first defendant or the plaintiff depending on the nature of the particular discretionary factors sought to be relied upon.

• [37] Turning to consider the discretionary factors and other matters relied upon.
• [38] As the first defendant proceeded on the erroneous basis that the onus was on the plaintiff at this second stage, the first defendant's primary submissions only address the factors of prejudice should the plaintiff's claim be stayed and delay in bringing the application as these had been previously raised by the plaintiff in correspondence. The plaintiff addresses relevant factors from r 672 of the UCPR in its written submissions and the first defendant then responds to them in reply submissions.
• [39] In these circumstances, it is appropriate to consider all matters raised in respect of each discretionary factors in undertaking the task of the "assessment and weighing of relevant factors".

The means of those standing behind the proceeding

• [40] The plaintiff contends that there is no evidence that the proceedings are financed by any third party or that the company relied on non-commercial funding. Further, the proceedings have been conducted over six years with funding from its own operations, consistent with an ongoing capacity to satisfy any adverse costs order.
• [41] The first defendant contends that this factor includes whether those standing behind the proceeding are unable, not merely unwilling, to meet an adverse costs order,[33] and is related to the ground of whether an order for security for costs would stifle the proceedings discussed below.
• [42] Further, the first defendant contends that the onus would be on the plaintiff to provide evidence of the financial position of the persons who stand to benefit from the litigation,[34] and that has not been done. Where Whish Contractors Pty Ltd is the sole shareholder of the plaintiff and Mr Whish is the director of Whish Contractors Pty Ltd, there is no evidence from Mr Whish as to his personal or Whish Contractors Pty Ltd's capacity to meet an adverse costs order.
• [43] In all of the circumstances, this issue tends to be neutral in the assessment and weighing exercise.

The prospects of success or merits of the proceeding

• [44] The plaintiff submits that the Court is to consider whether the claim is bona fide and has reasonable prospects of success and in doing so does not conduct a mini-trial or attempt to predict the outcome. The question is whether the claim is so weak or speculative that it would be unjust to expose the defendant to unrecoverable costs, or conversely whether the plaintiff's case appears bona fide and arguable so as to resist an order for security. This assessment is to be undertaken by a broad, impressionistic assessment based on the pleadings and available evidence.
• [45] The plaintiff submits that the claim arises directly from work performed which was included in Progress Claim #05 and certified but not paid for under the subcontract. In these circumstances, the plaintiff contends that the claim is bona fide and has real prospects of success. This factor therefore weighs against an order for security.
• [46] The first defendant submits that it is not possible for the Court to form a view about the merits of the claim, and it would be inappropriate to do so. This is particularly so given that the complexity of the claim and the multifaceted relief sought, the total value of the claim is unknown, many claims require expert evidence, lay evidence is yet to be delivered, the trial is expected to be lengthy, and the pleadings are extensive and have been through a number of revisions. At this interlocutory stage, the first defendant submits that this factor is neutral.
• [47] In all of the circumstances, this issue tends to be neutral in the assessment and weighing exercise.

• [48] The plaintiff relies on the same matters as outlined above in respect of the prospects of success. The plaintiff also contends that:

(a) The claim is not speculative or an abuse of process.

(b) The conduct of the first defendant has materially contributed to the need for the plaintiff to bring this claim. This is discussed further below in respect of the first defendant materially contributing to the plaintiff's financial position.

• [49] The first defendant relies on the same matters as discussed above.
• [50] In all of the circumstances, this issue tends to be neutral in the assessment and weighing exercise.

For rule 671(a) - the impecuniosity of a corporation

• [51] The plaintiff relies on the Affidavit of Owen Whish filed on 9 October 2025 and contends that the plaintiff company is solvent and able to trade, including as follows:

(a) The company is registered with no insolvency proceedings and has continued to operate throughout the litigation.

(b) The company is solvent, retains the capacity to trade, and "intends to resume full operations following resolution of this dispute; the decision not to take on new construction projects after 2019 was a deliberate pause rather than any cessation through financial distress".[35]

(c) The nominal paid up capital is "typical for small proprietary companies and does not reflect the business's actual financial capacity".[36]

(d) The absence of ownership of real property and heavy plant is explained by the "leasing model" and is common in the industry. It is not indicative of insolvency.

(e) The company has managed its debts and has no outstanding liabilities to subcontractors in respect of the project the subject of the proceedings.

(f) There has been no dissipation of assets or steps taken to avoid enforcement of any future judgment.

(g) The company continues to meet all liabilities from its own resources, including litigation expenses.

(h) The inactive QBCC contractor's licence is irrelevant to the company's trading status or solvency. The licence was not required for the civil roadworks the subject of the proceedings.

(i) The judgment debt arising from the 2020 adjudication of a dispute with Moore Civil Pty Ltd was resolved in January 2021 and the settlement payments made.

• [52] In respect of the allegation by the first defendant that the plaintiff was restructured to evade liabilities, the plaintiff denies any "purposeful restructuring to avoid liabilities"[37] and says:

(a) Gulf Civil Pty Ltd was incorporated in September 2019 for projects in the Gulf of Carpentaria.

(b) Mr Whish sold all shares and resigned as a director on 4 August 2025; and

(c) There has been no cross-ownership or mingling of assets between Gulf Civil Pty Ltd and the plaintiff.

• [53] The first defendant submitted at the hearing that there had been dissipation of assets in a more "nuanced" sense. The first defendant does not submit that the recent sale of the interest in Gulf Civil Pty Ltd was other than a third party transaction.[38] Rather, the first defendant points to the plaintiff being in what may be described as "hibernation" until the conclusion of the proceeding as a result of a "deliberate strategic decision" and those controlling the plaintiff effectively redirecting construction projects using the plaintiff's credentials to Gulf Civil Pty Ltd.
• [54] Gulf Civil Pty Ltd on the evidence appears to be obtaining work on the basis of the plaintiff's project credentials, in the circumstance where the plaintiff is not seeking or undertaking new work. This effectively puts on hold the plaintiff's usual source of income from on-going projects and also its ability to attract or be qualified for new work[39] in the future.
• [55] When these factors are considered in the context of the threshold test being met, this reinforces that the plaintiff is from a practical perspective impecunious, even though technically it may not be insolvent. This is a factor which tends to favour an order that security be provided.

Whether the plaintiff's impecuniosity is attributable to the defendant's conduct

• [56] The plaintiff relies on the Affidavit of Owen Whish filed on 9 October 2025 and contends that the conduct of the first defendant has materially contributed to the financial position of the plaintiff (but does not submit that there is a lack of solvency).
• [57] The plaintiff contends that the following conduct by the first defendant has contributed to the plaintiff's financial position:

(a) Refusal to certify and pay Progress Claim #04. The first defendant certified the amount of $983,537.82 and then suspended payment, withholding the certified amount.

(b) Rejection of Progress Claim #05 while adopting the quantities in its own head-contract claim. Progress Claim #05 was rejected despite supporting quality-assurance documentation. The plaintiff contends that the plaintiff was denied payment while the first defendant obtained the benefit of that work under the head contract.

(c) Conversion of security and cash retentions. The plaintiff points to the first defendant converting the bank guarantees and cash retentions into cash in the amount of $648,370 and retaining the funds despite the absence of any unsatisfied defect claims.

(d) Interference with subcontractors and reputation. The plaintiff contends that the first defendant contacted subcontractors and suppliers and asserted that the plaintiff was in breach. Further, it is contended that the first defendant encouraged the subcontractors and suppliers to pursue claims directly against the plaintiff.

(e) Effect of conduct on cashflow and the litigation. The plaintiff submits that this conduct was a tactic designed to apply financial pressure and stifle the plaintiff's capacity.

• [58] The first defendant contends that the plaintiff has adduced no evidence demonstrating that its alleged impecuniosity is caused by the first defendant. In particular, there is no evidence to "chart the historical trajectory" of the plaintiff's financial position to determine whether the plaintiff's financial decline is attributable to the alleged conduct of the first defendant.
• [59] The first defendant submits there are "bare assertions" by Mr Whish but, as there is no corroborative material, this evidence should be given little weight. Further the first defendant points to the plaintiff's evidence that it denies it is impecunious in any event and also that it elected not to undertake new construction work since late 2019. In this context, the first defendant submits that this factor does not weigh against the making of an order for security.[40]
• [60] Apart from the plaintiff's assertions that the first defendant is the cause of the plaintiff's financial position, the evidence does not demonstrate the causation asserted. The plaintiff's evidence tends to support that its current position is as a result of a "deliberate strategic decision" not to undertake new projects. Again, this is a factor that tends to support an order for security to be provided.

Whether the plaintiff is effectively in the position of a defendant

• [61] The first defendant acknowledges that where the counterclaim raises issues similar to those raised in the claim, the plaintiff would be unfairly prejudiced should the plaintiff fail to provide security, the claim was stayed, and the counterclaim proceeded.
• [62] The first defendant offers by its director, Mr James Giumelli, an undertaking to the Court not to proceed with the counterclaim if the plaintiff's claim is stayed because of the failure to meet an order for security for costs.
• [63] The first defendant submits that this addresses the prejudice to the plaintiff and neutralises it, such that this fact does not weigh against ordering security.[41] A similar undertaking was accepted in Earthtec Pty Ltd v Livingstone Shire Council.[42]
• [64] This factor was also addressed further in reply.
• [65] The plaintiff submits that this is a significant factor in the current proceeding as there is substantial overlap between the plaintiff's claim and the first defendant's counterclaim. The Court should consider the following features:

(a) The true position of the parties is an important consideration. By the first defendant's counterclaim, the plaintiff is put in the position of having to defend allegations of default, breach, and liability for completion costs. There is also substantial factual overlap with the plaintiff's claim for non-payment of work. In these circumstances, the plaintiff submits that the case for security is materially reduced.

(b) The counterclaim arises out of the exercise of clause 44 of the subcontract to take the work out of the plaintiff's hands and a claim of the costs to complete the work. This is the same type of work for which the plaintiff claims payment under Progress Claim #05. Common questions arise as to:

(i) The proper construction of the subcontract.

(ii) The plaintiff's entitlement to payment for work up to 6 September 2019, which includes Progress Claim #05.

(iii) The specifications in respect of the Quality Plan and "MRTS 50".

Consequently, the same factual and technical material is relevant to the claim and the counterclaim.

(c) Progress Claim #05 and completion costs are "two sides of the same coin". The first defendant certified as zero Progress Claim #05 and the counterclaim alleges the failure to perform those works to the required standard and seeks the costs of rectification or completing that work. Both claims involve the consideration of the non-conformance reports, field inspection checklists, test results, and quantity registers. The overlap involves consideration of the same work, the same documentation, and the same contractual performance.

(d) The counterclaim means that the litigation will proceed regardless, even if the plaintiff's claim is stayed for non-payment of security. As a consequence, the Court would still need to determine whether the plaintiff performed the works claimed in Progress Claim #05, whether the first defendant validly took the work out of the plaintiff's hands, and the quantum of any completion costs recoverable under clause 44.

(e) The undertaking offered by the first defendant is not an answer. It is revocable with leave and preserves the first defendant's ability to later seek to dismissal and costs of the entire proceeding.[43]

(f) Further, the undertaking does not address the delay and prejudice already identified. It also does not address the stultification risk. The undertaking offered at best neutralises the factor of the counterclaim proceeding regardless, while leaving open a pathway for the first defendant to seek dismissal and costs of the whole proceeding.

(g) In the circumstances, the plaintiff is effectively in the position of a defendant, and this renders an order for security unjust and unnecessary.

• [66] In reply the first defendant acknowledges that there is a factual overlap between the claim and the counterclaim. Further, the first defendant acknowledges that prejudice would arise if the plaintiff were ordered to provide security but failed to do so and the claim was stayed while the counterclaim proceeded. The first defendant submits that the offered undertaking addresses this prejudice.
• [67] The plaintiff's criticisms of the value of the undertaking are not accepted, particularly where they are not supported by authority or a rule. The first defendant points to Freeburn J's reasons in Earthtec Pty Ltd v Livingstone Shire Council[4] where a similar undertaking was accepted as neutralising any potential prejudice. Where the undertaking has been offered by the first defendant, it is submitted that this factor does not weigh against ordering security.[44]
• [68] The counterclaim is a significant factor in the assessment and weighing exercise in the circumstance where there is a substantial claim and a substantial counterclaim. The courts have taken various approaches where there is a counterclaim, including:

(a) Declining to exercise the discretion to award security for costs where the counterclaim is properly characterised as defensive in character.[45]

(b) Exercising the discretion to order security for costs, reflecting the counterclaim by excluding the costs of the counterclaim in the security amount, and on the basis of an undertaking by the defendant not to pursue the counterclaim if the claim is stayed due to non-payment of the security.[46]

• [69] In the proceedings parts of the claim and counterclaim are the opposite side of the same issue. Parts may be described as defensive, but parts are also the exercise of rights under the subcontract. The issues arise out of the same factual circumstances.
• [70] There is some potential prejudice to the plaintiff if the claim is stayed for nonpayment of any security amount. However, the first defendant's offered undertaking not to proceed with the counterclaim if the claim is stayed due to nonpayment of any security ordered significantly mitigates this factor. In light of the undertaking offered by the first defendant, the weight to be given to the factor of there being a counterclaim is significantly reduced.
• [71] Further, if the discretion is exercised to order that security be provided, at the quantum stage further moderation can be applied to the amount of security to be provided to take into account the counterclaim.
• [72] On balance, given the undertaking offered by the first defendant, this factor does not outweigh the impecuniosity of the plaintiff in the assessment and weighing exercise.

Whether an order for security for costs would be oppressive

• [73] The plaintiff submits that, given the very substantial costs in expert and legal work that have been paid to date, an order for security for costs would be oppressive and unjust and would serve no purpose beyond further delaying and "financially exhausting" the plaintiff.
• [74] The first defendant does not separately address this factor.
• [75] In the context of the plaintiff being in "hibernation" and effectively impecunious, the assertion of any order for security being oppressive is not supported by cogent evidence. The considerations in respect of other factors outlined above are also relevant here. This factor in all of the circumstances does not outweigh the impecuniosity of the plaintiff.

Whether an order for security for costs would stifle the proceeding

• [76] The plaintiff submits that given the very substantial costs in expert and legal work that have been paid to date, an order for security for costs would give rise to a genuine risk of stultification. This is particularly in the circumstances where a large amount of security is sought that would potentially terminate the proceeding where the first defendant holds $648,370 in converted securities, has the protection of the $4 million bank guarantee held by the Court, and has enjoyed the benefits of the work included in Payment Claim #05.
• [77] The first defendant contends that this factor needs to be considered along with the factor of the means of those standing behind the proceeding discussed above. In the context of the matters discussed above and the lack of evidence from the plaintiff, the first defendant contends there is no basis for the Court to conclude that an order for security for costs would stultify the proceeding. The first defendant contends this does not weigh against making an order.[47]
• [78] The absence of evidence about who is funding the litigation in circumstances where the plaintiff has no objective source of income is relevant to the assessment and balancing exercise.
• [79] In the context of the plaintiff being in "hibernation" and effectively impecunious, the assertion that any order for security will stultify the proceeding is not supported by cogent evidence. The considerations in respect of other factors outlined above are also relevant here. This factor in all of the circumstances does not outweigh the impecuniosity of the plaintiff.

Whether the proceeding involves a matter of public importance

• [80] No issue is identified by the plaintiff or the first defendant in respect of this factor.

Whether there has been an admission or payment into Court

• [81] The plaintiff submits that the first defendant holds $648,370 in converted securities and has the protection of the $4 million bank guarantee held by the Court.
• [82] Relevantly:

(a) The funds were secured in the proceeding under the BIF Act. The second defendant paid approximately $7.245 million into Court on 7 April 2020.

(b) By consent orders dated 17 July 2020, $3.245 million was released to the first defendant. The balance of $4 million was replaced with an unconditional bank guarantee, until further order of the Court. These funds are held in place of the retained funds.

(c) The first defendant converted the project securities and retentions into cash in September 2019, in the amount of $648,370.

• [83] The money paid into Court and the converted securities are the subject of the substantive claims in the proceedings. They will be dealt with in any ultimate judgment and are not a fund against which costs would be recovered.
• [84] This factor tends to support security being awarded as:

(a) Without successfully being able to recover the funds paid into Court and the converted securities, the plaintiff's evidence is that the plaintiff will not "resume full operations".

(b) Logically if the plaintiff is unsuccessful and ordered to pay the first defendant's costs, the funds paid into Court and the converted securities will not be available to meet any costs order.

Whether delay by the plaintiff in starting the proceeding has prejudiced the defendant

• [85] No issue is identified by the plaintiff or the first defendant in respect of this factor.

Whether an order for costs made against the plaintiff would be enforceable within the jurisdiction

• [86] No issue is identified by the plaintiff or the first defendant in respect of this factor.

• [87] The plaintiff submits that substantial costs have been incurred to date in respect of expert reports and the conduct of the litigation. The proceedings are advanced and are case managed on the Building, Engineering and Construction List.
• [88] The first defendant points to the steps that still need to be completed before the matter is ready for trial. This includes the lay evidence of both parties and finalising the expert evidence.
• [89] While the proceeding is advanced and is being case managed, there are still substantial steps to be completed before the matter is ready to be set down for trial. In the context of the plaintiff being in "hibernation" and effectively impecunious, this factor in all of the circumstances does not outweigh the impecuniosity of the plaintiff and tends to support an order that security be provided.

Delay in bringing the application for security for costs

• [90] Another significant factor to be considered is the delay in bringing the application for security. The first defendant addressed this factor in its primary submissions, as well as in reply.
• [91] The first defendant submits that delay is a factor to be weighed with the other discretionary factors.[48] Delay in itself does not mandate the refusal of an application for security.
• [92] The factors to be considered in relation to delay and the weight to be afforded to the delay include:[49]

(a) Is there an explanation for the delay and, if so, what is its weight?[50]

(b) Was the length of the proceeding not foreseen when commenced?[51]

(c) What is the level of prejudice caused to the plaintiff if required to lodge security at a late stage?[52]

(d) What is the timing of the application for security?[53]

• [93] The first defendant recognises there has been a delay in bringing the current application for security and that such a delay may ordinarily justify a refusal of the application. However, the first defendant submits that there is a "sufficient and compelling explanation" for the delay and that the Court should give that explanation significant weight.
• [94] The issue of security for costs first arose in June 2021 when there was correspondence between the parties. The first defendant did not proceed with an application for security for costs. At that time the first defendant was satisfied that the plaintiff would be able to comply with any adverse costs order, based on correspondence and other information from the plaintiff, including as follows: [54]

(a) On 25 June 2021, the first defendant wrote to the plaintiff foreshadowing a security for costs application. The letter referred to the representations made by the plaintiff of its strong financial position.[55]

(b) On 7 July 2021, the plaintiff wrote to the first defendant stating that the precondition in r 671 of the UCPR had not been established and asserted that there was no reason to believe that the plaintiff would be unable to pay the first defendant's costs if ordered to do so.[56]

(c) On 16 July 2021, the first defendant wrote to the plaintiff requesting confirmation that it was not impecunious.[57]

(d) On 30 July 2021, the plaintiff wrote to the first defendant advising that any application for security for costs would be premature until the first defendant filed an amended defence.[58]

• [95] Based on the representations and assertions in June and July 2021, it was consistent with the obligations pursuant to r 5 of the UCPR, and also the precondition in r 671 of the UCPR, that the first defendant did not bring an application for security of costs at that time.
• [96] However, in June 2025 Mr Giumelli received information that caused that view to be reconsidered.
• [97] On 13 June 2025, Mr Giumelli, a director of the first defendant, had a telephone conversation with Mr Mitch McMullen. Mr McMullen is an operations manager employed by Gulf Civil Pty Ltd and McMullen said words to the effect of:

(a) Owen Whish, the plaintiff's sole director, was now carrying on the same business through Gulf Civil Pty Ltd that the plaintiff had previously conducted.

(b) The plaintiff is no longer carrying on any business.[59]

• [98] Mr Giumelli's evidence is that this was the first time that he became aware of this information.[60]
• [99] Subsequently to the telephone conversation, further inquiries and investigations have been undertaken. Relevant matters include:

(a) This proceeding was commenced on 25 November 2019.

(b) Gulf Civil Pty Ltd was registered on 5 September 2019 and Mr Whish was its sole director.

(c) The plaintiff has no employees listed publicly.[61] Gulf Civil Pty Ltd has over 15 employees listed publicly.[62]

(d) Mr Whish does not publicly list his role as the plaintiff's director. Mr Whish only publicly lists that he is the director and general manager of Gulf Civil Pty Ltd.[63]

(e) In respect of the plaintiff:

(i) Its QBCC licence has been inactive since April 2019 as a result of unpaid fees.[64]

(ii) The QBCC issued infringement notices between January 2020 and April 2020 in respect of a failure to respond to a payment claim and a failure to pay an adjudication amount.[65]

(iii) On 2 April 2020, the plaintiff was the respondent to an adjudication determination under the BIF Act for $206,125.38.[66]

(f) In respect of Gulf Civil Pty Ltd:

(i) The sole shareholder is Kalor Pty Ltd, which was registered on 1 August 2019 and Mr Whish is its sole director.[67]

(ii) The LinkedIn page for the company lists eight completed projects, all said to have been completed in 2017 and 2018, before it was registered.[68]

• [100] In all of these circumstances, the first defendant contends that the inference arises that the plaintiff has intentionally restructured its financial affairs in a manner that materially increases the risk of its inability to satisfy any adverse judgment or costs order.
• [101] Consequently, the first defendant contends that the explanation for the delay is this change in circumstances which gives rise to a real concern that the plaintiff will be unable to pay an adverse judgment or costs order. The change in circumstances includes that the plaintiff's assertions in June and July 2021 were made despite the fact that at the time those controlling the first defendant alone knew that it had not undertaken new constructions projects for 18 months.[69]
• [102] The first defendant's position is that the explanation for the delay is compelling and should be given substantial weight and that the application was brought in a timely way once the new facts emerged. Overall, this factor weighs in favour of an award of security for costs.
• [103] In respect of the other factors identified in Covecorp and summarised at [92] above:

(a) While the proceedings were commenced in October 2019, expert evidence is yet to be completed and lay witness evidence is yet to be filed.

(b) No trial date has been set.

• [104] The plaintiff accepts that the relevant principles are those derived from Covecorp Constructions Pty Ltd v Indigo Projects Pty Ltd[70] as identified by the first defendant. Delay is a central discretionary factor and includes consideration of whether the delay has caused prejudice to the plaintiff.
• [105] A long and unexplained delay which is prejudicial to the plaintiff weighs heavily against ordering security.[71] The plaintiff points to the following facts in respect of delay:

(a) The application for security was filed almost six years after the proceeding was commenced, and more than four years after the issue of security was first raised.

(b) The correspondence on 25 June, 7 July, 16 July and 30 July 2021.

(c) The matters now relied on by the first defendant, namely the company structure, the shareholding, and the QBCC register, were all available in 2021.

(d) The alleged "new information" is not new nor accurate.

(i) It is inaccurate that the plaintiff is no longer trading. The plaintiff continued to trade and meet its obligations.

(ii) Gulf Civil Pty Ltd has existed openly since September 2019 and Mr Whish sold his interest in August 2025.

(iii) The delay is unexplained.

• [106] The plaintiff also points to prejudice arising from the delay, including:

(a) The plaintiff continued to prosecute its claim and defend the counterclaim in reliance on the absence of any security order. Substantial expert and legal costs have been incurred in doing so.

(b) The matter is now well advanced. The costs incurred to date would be wasted if the claim were now stayed as a result of the inability to pay security.

(c) The plaintiff has met all of its subcontractor debts, has managed its liabilities, and remains solvent.

(d) Additionally, if security in the amount sought by the first defendant was ordered to be paid, the prejudice to the plaintiff would include:

(i) The plaintiff would be forced to divert or immobilise funds to pay the amount. This would stifle the claim.

(ii) The plaintiff would be deprived of the ability to recover sums claimed under the subcontract where the first defendant already has the protection of the converted securities and the $4 million bank guarantee held by the Court under the orders of 17 July 2020.

(iii) The plaintiff would be forced to abandon its claim while the first defendant could continue with its counterclaim.

• [107] In all of the circumstances, the plaintiff submits that the delay in the current case is "inordinate, unexplained, and productive of substantial prejudice". The plaintiff submits that the Court's discretion should be exercised against ordering security and the application be dismissed.
• [108] The Court of Appeal in DGR Global and PT Limited stated in respect of delay:

"The discretionary power to award security for costs, once engaged, is broad and unfettered. However, in the context of the exercise of that discretionary power, there is a well-established guiding principle that an application for security for costs should ordinarily be brought promptly. That principle has been described as 'long standing'.[72] A particular reason why delay is an important consideration is because it is ordinarily unjust to permit a defendant who has stood by and allowed work to be performed by a plaintiff to come to court and ask for security after such expense has been incurred.[73] As Mason CJ once observed, one of the vices in a late application for security is that the application 'comes at the heel of the hunt'.[74] In James v ANZ Banking Group Ltd,[75] Toohey J found there to be a compelling reason to refuse security by reference to the proximity of the proceeding to trial and the fact that 'so much time and costs have been expended, that it would work a grave injustice to the applicants if they were ordered to provide security for costs when it is apparent that they could not comply with such an order'.

The other particular reason why delay is a relevant consideration is that a delayed application for security for costs can disrupt the efficient case management of a proceeding and jeopardise allocated trial dates leading to a waste of public resources. This consideration has been recognised by the courts for decades, even before the conduct of civil litigation was subject to the overriding obligation of parties to proceed expeditiously as now reflected in r 5 of the UCPR."[76]

• [109] The Court of Appeal also referred to the comments of Lehane J in Crypta Fuels Pty Ltd v Svelte Corporation Pty Ltd where his Honour in considering the requirement for a prompt application for security observed that:

"[there] are degrees of promptness and obviously, equally, security for costs being a discretionary matter, there are cases where delay will weigh more heavily with the court than it does in other cases." [77]

• [110] Here, the first defendant raised the issue of security for costs in June/July 2021 and no further steps were taken until more recently. In the absence of an explanation, this delay in bringing the application would weigh heavily against the exercise of the discretion.
• [111] However, the first defendant's explanation for the delay in bringing the application for security is persuasive. While the plaintiff maintains that no assurance was previously given:

(a) the information conveyed in the telephone conversation between Mr Giumelli and Mr McMullen has resulted in a "change in circumstance"; and

(b) the identification of evidence relevant to the issue of the plaintiff's ability to pay an adverse costs order if ordered to do so has caused the issue of security to be considered in that new context.

• [112] The "deliberate strategic decision" by the plaintiff not to continue to undertake new construction projects until the determination of the proceedings was not an objective fact that was readily identifiable by a publicly available means.
• [113] While the plaintiff maintains that the matters said to have been conveyed by Mr McMullen in the telephone conversation with Mr Giumelli were not made on instructions from the plaintiff and are denied (at least in part), the plaintiff does not put in any evidence from Mr McMullen that what he said in the telephone conversation was untrue.
• [114] The factor of delay does not weigh as heavily in the assessment of the various discretionary factors in the particular circumstances of the current proceedings. Substantial steps are still be completed and the matter has not been set down for trial.
• [115] The explanation provided by the first defendant and the evidence obtained subsequently to the telephone conversation between Mr Giumelli and Mr McMullen should be given substantial weight. Further, the application was brought in a timely way once the new facts emerged. These matters weigh in favour of an award of security for costs.
• [116] Accordingly, in assessing the various discretionary factors and weighing them, I am satisfied that it is appropriate to make an order that the plaintiff provide security until the first day of trial.
• [117] Next it is necessary to consider the amount of security to be provided.

What amount of security for costs should be ordered?

• [118] In determining the quantum of security to be paid the Court is to adopt a "broad brush" approach, rather than a strict mathematical approach. That is uncontroversial between the parties.
• [119] The first defendant quantifies the appropriate security amount as $847,936, based on the estimate of costs undertaken in the First Speechly Affidavit.[78] Mr Speechly's approach:

(a) Seeks to estimate the recoverable costs in a large and complex construction dispute.

(b) Seeks to quantify the amount of costs to which the plaintiff would be exposed by reasons of an adverse costs order in respect of the plaintiff's claim.

(c) Only estimates costs from 4 July 2025 until the first day of trial, excluding costs incurred to date. This in effect discounts the amount in respect of the delay in bringing the application.

(d) Only includes the costs of defending the plaintiff's claim, excluding costs associated with prosecuting the counterclaim.[79]

• [120] The first defendant contends that this is an appropriate approach, particularly in respect of (c) and (d) above which reflect approaches in the authorities.[80]
• [121] The plaintiff contends that the amount claimed by the first defendant is excessive and contends that significant deductions should be made by the Court in arriving at the appropriate amount.
• [122] The plaintiff points to relevant principles from the authorities to inform the approach, including:

(a) The Court is to look at the whole case, including the chance of it resolving before trial.[81]

(b) The Court does not give a complete and certain indemnity.

(c) The estimation process includes the "feel" of the case after considering the relevant factors.

(d) Courts have been conservative in the approach to quantum and the Court is to make a realistic estimate of recoverable costs.[82]

• [123] Given the significant overlap in the issues between the claim and the counterclaim, the plaintiff submits:

(a) The counterclaim is a defensive set-off. That is, the first defendant is alleging that even if the money was otherwise due, it is "eclipsed" by the completion-cost damages that arise from the same contract and the same events.

(b) The Court should avoid the claim being stayed due to the inability to provide security while the counterclaim arising out of the same factual issues proceeds.[83]

(c) The factual and evidentiary overlap between the claim and the counterclaim is substantial. Both involve the same documents, witnesses, and expert evidence. Further, the issues and facts are intertwined.

(d) Given the significant overlap, much of the costs would be incurred anyway. Therefore, the costs are common costs.

(e) Ordering security would be oppressive as it would in effect give the first defendant protection on costs it would have incurred on its own counterclaim.

• [124] In respect of the overlap between the claim and the counterclaim, the plaintiff submits that the shared evidence and issues includes:

(a) the valuation of the same scope of work and consideration of the same site records and documents;

(b) the same sequence of contractual notices and correspondence;

(c) the same pre-contract communications; and

(d) the same witnesses.

• [125] Further, the estimate relied upon by the first defendant is deficient in a number of respects, including:

(a) There is no proper evidentiary foundation for the estimate as it does not disclose the underlying calculations or reasoning. Further, five layers of lawyers are included in the estimate.

(b) The assumption of 15 days for the trial is speculative and inflated. Further, the estimate for trial preparation is also speculative and inflated. There appears to be duplication in the estimate, which is inconsistent with the conservative approach required.

(c) The "care and consideration" uplift results in double-counting.

(d) GST should not be included. The inclusion of GST before discounting further inflates the estimate.

(e) Some tasks are excessive, for example the time provided for case management is disproportionate.

• [126] Overall, the plaintiff contends that the first defendant's estimate is "unsound, internally inconsistent, and contrary to the conservative approach mandated by authority".
• [127] The plaintiff has prepared an alternative estimate by adjustments including as follows:

(a) Apportioning 50% to reflect the overlap with the counterclaim.

(b) Applying a 60% standard costs recovery basis.

(c) Excluding GST.

(d) Applying care and consideration to professional fees only, not counsel and expert fees.

(e) Reducing the number of hours in respect of various steps including case management hearings, reporting and instructions, reviewing lay evidence, preparing lay evidence, joint expert reports, trial preparation, expert fees, other disbursements, and care and consideration. This includes adjustments to remove duplication and reflect efficiencies.

• [128] The plaintiff estimates the amount of recoverable costs on a standard basis as being $410,562. Applying a 50% apportionment in respect of the counterclaim, the plaintiff estimates the recoverable costs on the standard basis as $205,281.
• [129] The first defendant relies on the affidavit evidence of an experienced solicitor estimating the recoverable costs in respect of the plaintiff's claim. The estimate seeks to exclude costs of the counterclaim. There is no reason not to except this evidence as the starting point.
• [130] There are usually a number of uncertainties in any estimate as to what would ultimately be recoverable on an assessment of costs. At this stage it is not necessary or appropriate to undertake a mini-assessment of costs.
• [131] The appropriate starting point is the estimate of costs and then to make adjustments to that amount to reflect the identified uncertainties. It is at this stage that further consideration can be given to the overlap of issues between the claim and counterclaim and also the uncertainties of litigation, including that the proceedings could resolve before trial.
• [132] Courts have often applied a discount for general uncertainties and the risk of over-estimation to arrive at a sum that represents a fair and proper security against the risk of non-payment in all of the circumstances.[84] However, consistent with the protective objective of security for costs, this factor should not outweigh the assessment of the estimated recoverable costs.[85]
• [133] I generally accept the evidence of Mr Speechly in respect of the estimate of costs but consider that the estimate of costs should be reduced to reflect the overlap between the claim and the counterclaim. The claim and the counterclaim are substantial, and both will contribute time and costs to the preparation of the proceedings for trial. As is common with complex construction disputes, there is an interrelationship between the issues, including that often the same facts and issues are relevant to both the claim and counterclaim but from different perspectives. That arises here.
• [134] The estimate of costs and the allocation of time and costs between the claim and counterclaim is not an exact science. The authorities say that the Court is to adopt a "broadbrush" approach. Realistically, only a very "broadbrush" assessment of the costs can be done at this stage of the proceedings given the lay and expert evidence is yet to be completed.

(a) the overlap with the counterclaim to a greater extent than provided for in the estimate;

(b) excluding GST;

(c) a reduction to avoid duplication, reporting, and other items that would not be recoverable on an assessment of costs of defending the claim; and

(d) a reduction in the care and consideration amount to apply only to professional fees.

• [137] Accordingly, in all of the circumstances and considering the various completing factors, the amount of the security should be moderated to an amount less than half of the amount claimed by the first defendant.
• [138] Rule 673 of the UCPR empowers the Court to order that security be given "in the form, at the time, and on any conditions the court directs". The Court is to consider the protective purpose of the power and weigh all the relevant circumstances, including any countervailing considerations. Regard is also to be had to the objective in r 5 of the UCPR.[86]
• [139] The "usual way" is for security to be provided by payment of money into Court or a form acceptable to the Registrar of the Supreme Court, such as a bank guarantee.[87]
• [140] No issues were raised as to the form of security, should security be ordered. Further, there is no evidence that a particular form of security would be oppressive or stifling.
• [141] In all of the circumstances, the form of security most consistent with r 5 of the UCPR, the protective purpose of r 670 of the UCPR, and the interests of justice is the provision of security by payment into Court or in a form acceptable to the Registrar of the Supreme Court.
• [142] As to the issue of timing, the first defendant seeks an order that security be provided within 14 days. Given the Registry closes for the Christmas/New Year period on 19 December 2025, it is reasonable that the security be provided prior to that date.

• [143] It is appropriate to hear further from the parties as to costs. Further submissions on costs and submissions in reply are to be provided. It is also appropriate that the issue of costs be dealt with on the papers, without the need for a further hearing.

• [144] Accordingly, upon the first defendant giving the undertaking not to proceed with its counterclaim if the plaintiff's claim is stayed because of the plaintiff's failure to provide security in accordance with the Court's order, the Court orders that:
  1. The plaintiff provide security for the first defendant's costs of defending the plaintiff's claim up until the first day of trial in the sum of $350,000 by way of payment of moneys into Court or in a form acceptable to the Registrar of the Supreme Court of Queensland.
  2. The security be provided by 4pm on 18 December 2025, failing which the plaintiff's claim in the action is stayed until the security is provided.
  3. The parties file and serve submissions on costs of not more than three pages by 4 pm on 9 December 2025.
  4. The parties file and serve submissions on costs in reply of not more than two pages by 4 pm on 11 December 2025.
  5. The issue of costs be dealt with on the papers.

[1] [2025] QCA 122.

[3] Livingspring Pty Ltd v Kliger Partners [2008] VSCA 93; (2008) 20 VR 377, 382 [15].

[5] [2014] NSWCA 65; (2014) 98 ACSR 301, 305 [15].

[7] [2018] QCA 309; [2019] 3 Qd R 143, 154 [42] and [43].

[9] Treloar Constructions Pty Limited v McMillan [2016] NSWCA 302 at [11]; Classic Bet (NSW) Pty Ltd v KRM (Vic) Pty Ltd [2020] NSWCA 43 at [9]; Valmont Interiors Pty Ltd v Giorgio Armani Australia Pty Ltd [2021] NSWCA 90 at [9]; and Litigation Fund WCX Pty Ltd v Darren Mitchell [2025] NSWCA 27 at [31].

[10] Affidavit of Samuel George Speechly sworn 19 September 2025 at [6] to [9], and the Exhibits to the Affidavit (SGS-1, SGS-2 and SGS-3).

[11] LPD Holdings Pty Ltd v Russells [2022] QSC 48, at [23]

[13] Re Skytraders Pty Ltd [2024] NSWSC 984 at [20] citing Re Felan's Fisheries Pty Ltd [2016] NSWSC 1351 at [10]; Monto Coal 2 Pty Ltd v Sanrus Pty Ltd [2018] QCA 309; (2019) 3 Qd R 143, 153-154 [41] citing Cornelius v Global Medical Solutions Australia Pty Ltd [2014] NSWCA 65; (2014) 98 ACSR 301, 305 [16] - [17].

[14] DGR Global Ltd v P. T. Limited [2025] QCA 122.

[15] Affidavit of Owen John Whish sworn 9 October 2025 at [117].

[16] Affidavit of Owen John Whish sworn 9 October 2025 at [118].

[17] Affidavit of Owen John Whish sworn 9 October 2025 at [119].

[18] Valeba Pty Ltd v Mulpha Sanctuary Cove (Developments) Pty Ltd [2012] QSC 286 at [6].

[19] [2012] QCA 114.

[20] [2012] NSWCA 245 at [29] - [30].

[21] [2024] QSC 320 at [50], citing with approval Wollongong City Council v Legal Business Centre Pty Ltd [2012] NSWCA 245 at [29] - [30].

[22] [2008] QCA 36, per Muir JA and McMeekin J.

[23] [2025] QCA 122.

[25] [2008] VSCA 93; (2008) 20 VR 377 at 383 [21].

[26] [2014] NSWCA 65; (2014) 98 ACSR 301.

[27] [2012] NSWCA 245.

[29] [2018] QCA 309; (2019) 3 QR 143 at 155 [49].

[31] [2008] VSCA 93; (2008) 20 VR 377.

[32] See Colbran, "Security for Costs against Corporations - Section 1335 of the Corporations Law", (1993) 11 Company and Securities Law Journal 272, pp 283-4.

[33] Combined Property Holdings Pty Ltd v Galea & Ors [2020] QSC 338 at [56].

[34] Zenith Corporation Australia Pty Ltd v Optus Mobile Pty Ltd [2020] NSWSC 1110 at [65].

[35] Respondent Plaintiff's Security for Costs Submissions filed 9 October 2025 at [4], referencing the Affidavit of Owen Whish sworn 9 October 2025 at [117]-[118], see also [119].

[36] Affidavit of Owen Whish sworn 9 October 2025 at [120].

[37] Respondent Plaintiff's Security for Costs Submissions filed 9 October 2025 at [16].

[39] For example, having current and relevant experience.

[40] This submission needs to be understood in light of the persuasive onus remaining on the first defendant.

[41] This submission needs to be understood in light of the persuasive onus remaining on the first defendant.

[42] [2023] QSC 22.

[43] For example, for non-compliance with any security order or by reliance on delay during the stay.

[44] This submission needs to be understood in light of the persuasive onus remaining on the first defendant.

[45] For example, the decision of Cooper J in Denjim Pty Ltd v National Gold (No 2) [2023] QSC 54.

[46] For example, the decision of Freeburn J in Earthex Pty Ltd v Livingston Shire Council [2023] QSC 22.

[47] This submission needs to be understood in light of the persuasive onus remaining on the first defendant.

[48] Commonwealth of Australia v Cable Water Skiing (Australia) Ltd (1994) 116 FLR 153, 156; Rhema Ventures Pty Ltd v Stenders [1993] 2 Qd R 326, 331 - 333.

[49] Covecorp Constructions Pty Ltd v Indigo Projects Pty Ltd [2007] QSC 262; Go Gecko (Franchise) Pty Ltd v Plyable Pty Ltd [2017] QSC 329 at [68].

[50] Bailey v Beagle Management Pty Ltd (2001)105 CFR 136, 144.

[51] Buckley v Bennell Design and Constructions Pty Ltd (1974) 1 ACLR 301, 308; Thirteenth Corp Pty Ltd v State [2004] VSC 320; (2004) 50 ACSR 425; James v Australia and New Zealand Banking Group Ltd (No 1) (1985) 9 FCR 442, 446; Stack v Brisbane City Council (1996) 71 FCR 523, 532.

[52] Rhema Ventures Pty Ltd v Stenders [1993] 2 Qd R 326, 333.

[53] James v Australia and New Zealand Banking Group Ltd (No 1) (1985) 9 FCR 442.

[54] Affidavit of James Patrick Guimelli sworn 13 Augst 2025 at [9] to [10] and pages 1 to 10 of Exhibit JPG-1; Affidavit of Samuel George Speechly sworn 13 August 2025 at [16] and pages 68 to 77 of Exhibit SGS-13.

[55] Affidavit of Samuel George Speechly sworn 13 August 2025 at [16] and pages 68 to 69 of Exhibit SGS-13.

[56] Affidavit of Samuel George Speechly sworn 13 August 2025 at [16] and pages 70 to 71 of Exhibit SGS-13.

[57] Affidavit of Samuel George Speechly sworn 13 August 2025 at [16] and pages 72 to 73 of Exhibit SGS-13.

[58] Affidavit of Samuel George Speechly sworn 13 August 2025 at [16] and pages 74 to 77 of Exhibit SGS-13.

[59] Affidavit of James Patrick Giumelli sworn 13 August 2025 at [12].

[60] Affidavit of James Patrick Giumelli sworn 13 August 2025 at [16].

[61] Affidavit of Samuel George Speechly sworn 13 August 2025 at at [8(d)(ii)] and pages 38 to 40 of Exhibit SGS-9.

[62] Affidavit of Samuel George Speechly sworn 13 August 2025 at at [8(d)(iii)] and pages 41 to 43 of Exhibit SGS-10.

[63] Affidavit of Samuel George Speechly sworn 13 August 2025 at [8(d)(i)] and pages 33 to 34 of Exhibit SGS-8.

[64] Affidavit of Samuel George Speechly sworn 13 August 2025 at [8(a)] and [10(e)] and pages 2 to 3 of Exhibit SGS-1.

[65] Affidavit of Samuel George Speechly sworn 13 August 2025 at [8(a)] and [10(f)] and page 7 of Exhibit SGS-1.

[66] Affidavit of Samuel George Speechly sworn 13 August 2025 at [9] and [10(h)] and page 58 of Exhibit SGS-11.

[67] Affidavit of Samuel George Speechly sworn 13 August 2025 at [8(b)(iii)] and pages 16 to 17 of Exhibit SGS-4.

[68] Affidavit of Samuel George Speechly sworn 13 August 2025 at [8(e)] and pages 43 to 54 of Exhibit SGS-10.

[69] Mr Whish's affidavit deposes to the plaintiff ceasing new construction projects in late 2019: Affidavit of Owen John Whish sworn 9 October 2025 at [117].

[70] [2007] QSC 262 at [28].

[71] Robson v Robson [2010] QSC 378.

[72] KP Cable Investments v Meltglow Pty Ltd [1995] FCA 76; (1995) 56 FCR 189, 197.

[73] Smail v Burton [1975] VicRp 76; [1975] VR 776, 777.

[74] Devenish v Jewel Food Stores Pty Ltd (1990) 64 ALJR 533, 534.

[75] (1985) 9 FCR 442, 446.

[76] [2025] QCA 122 at [86] and [87].

[77] (1995) 19 ACSR 68, 71.

[78] Affidavit of Samuel George Speechly sworn 13 August 2025 at [11] to [15] and pages 66 to 67 of Exhibit SGS-12.

[79] Affidavit of Samuel George Speechly sworn 13 August 2025 at [11].

[80] See for example in respect of (c): Felsink Pty Ltd v City of Maribynong [2007] VSC 49 at [25]; Christou v Stanton Partners Australasia Pty Ltd [2011] WASCA 176 at [29]; and Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jaques [2016] QSC 2 at [24] and [60]. See for example in respect of (d): Suncare Construction Australia Pty Ltd v Gainspace (Mackay) Pty Ltd [2016] QSC 67 at [58]- [59].

[81] Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd [1987] FCA 102; (1987) 16 FCR 497,515 per French J.

[82] Aqua Blue (Noosa) Pty Ltd v Soil Surveys Engineering Pty Ltd [2010] QSC 176 at [41]; Emanuel Management Pty Ltd (in liq) v Foster's Brewing Group Ltd [2003] QCA 552 at [16] per Dutney J.

[83] Colmax Glass Pty Ltd v Polytrade Pty Ltd [2013] VSC 311. See also T Sloyan & Sons (Builders) Ltd v Brothers of Christian Instruction [1974] 3 All ER 715, 721.

[84] Great Barrier Reef Yacht Club Villas Pty Ltd v Insurance Australia Ltd [2024] QSC 320 at [273].

[85] Les & Zelda Investments Pty Ltd v Whitehaven Coal Ltd [2020] NSWSC 1091 per Parker J in respect of the analogous provision, s 1335 of the Corporations Act 2001 (Cth).

[86] Adeva Home Solutions Pty Ltd v Queensland Motorways Management Pty Ltd [2021] QCA 198; (2021) 9 QR 141.

[87] Adeva Home Solutions Pty Ltd v Queensland Motorways Management Pty Ltd [2021] QCA 198; (2021) 9 QR 141.