Austcorp Project Number 20 Pty Ltd v LM Investment Management Ltd

Date of hearing: 23 October 2014

Place: Sydney

Division: GENERAL DIVISION

Category: Catchwords

Number of paragraphs: 114

Counsel for the Plaintiffs: Mr J E Lazarus

Solicitor for the Plaintiffs: Tomaras Lawyers

Counsel for the First Defendant: Mr D R Sulan

Solicitor for the First Defendant: Pikes & Verekers Lawyers

Counsel for the Second Defendant: Mr R M Foreman

Solicitor for the Second Defendant: Minter Ellison Lawyers

Counsel for the Third Defendant: Mr J A Gracie

Solicitor for the Third Defendant: DLA Piper Australia

Counsel for the Fifth, Sixth and Seventh Defendants: Mr S Kanagaratnam

Solicitor for the Fifth, Sixth and Seventh Defendants: Moray & Agnew Lawyers

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 186 of 2013

BETWEEN: AUSTCORP PROJECT NO 20 PTY LTD ACN 111 470 725

COMPROMISE CREDITORS MANAGEMENT PTY LTD ACN 077 208 461

AND: LM INVESTMENT MANAGEMENT LTD (IN LIQUIDATION) ACN 077 208 461

TREVOR POGROSKI AND GRAHAM KILLER, IN THEIR CAPACITY AS JOINT AND SEVERAL RECEIVERS AND MANAGERS OF BELLPAC PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 101 713 017

AMLIN CORPORATE MEMBER LTD (UK COMPANY NO 02969411) T/AS AMLIN SYNDICATE 2001 AT LLOYD'S

DUAL AUSTRALIA PTY LTD ON BEHALF OF ARCH SYNDICATE 2012

MARKEL CAPITAL LTD (UK COMPANY NO 03114572) T/AS MARKEL SYNDICATE 3000 AT LLOYD'S AND THE CHANNEL SYNDICATE LLP (UK COMPANY NO 13359898) T/AS CHANNEL SYNDICATE 2015 AT LLOYD'S

JUDGE: GLEESON J DATE OF ORDER: 15 DECEMBER 2014 WHERE MADE: SYDNEY

1. The plaintiffs give security for the costs of the first defendant by provision to the first defendant of a bank guarantee in favour of the first defendant in a form acceptable to a Registrar of the Federal Court of Australia in the sum of $150,000.
2. The proceedings against the first defendant be stayed until order 1 above has been complied with.
3. The plaintiffs give security for the costs of the second defendant by provision to the second defendant of a bank guarantee in favour of the second defendant in a form acceptable to a Registrar of the Federal Court of Australia in the sum of $150,000.
4. The proceedings against the second defendant be stayed until order 3 above has been complied with;
5. The plaintiffs give security for the costs of the third defendant by provision to the third defendant of a bank guarantee in favour of the third defendant in a form acceptable to a Registrar of the Federal Court of Australia in the sum of $150,000.
6. The proceedings against the third defendant be stayed until order 5 above has been complied with.
7. Stand over paragraphs 1 and 2 of the third defendant's interlocutory application dated 4 September 2014 for directions at 9.30 am on 5 February 2015.
8. Liberty to the third defendant to apply to vacate the directions hearing referred to in order 7 above in the event that the proceedings against the third defendant remain stayed as at 30 January 2015.
9. The plaintiffs give security for the costs of the fifth, sixth and seventh defendants by provision to the fifth, sixth and seventh defendants of a bank guarantee in favour of the fifth, sixth and seventh defendants in a form acceptable to a Registrar of the Federal Court of Australia in the sum of $100,000.
10. The proceedings against the fifth, sixth and seventh defendants be stayed until order 9 above has been complied with;
11. List the proceedings for directions at 9.30 am on 5 February 2015.
12. Liberty to the parties to apply to vacate the directions hearing referred to in order 11 above in the event that the proceedings against any of the defendants remain stayed as at 30 January 2015.
13. The plaintiffs pay the costs of the defendants' applications for security for costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 186 of 2013

BETWEEN: AUSTCORP PROJECT NO 20 PTY LTD ACN 111 470 725

COMPROMISE CREDITORS MANAGEMENT PTY LTD ACN 077 208 461

AND: LM INVESTMENT MANAGEMENT LTD (IN LIQUIDATION) ACN 077 208 461

TREVOR POGROSKI AND GRAHAM KILLER, IN THEIR CAPACITY AS JOINT AND SEVERAL RECEIVERS AND MANAGERS OF BELLPAC PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 101 713 017

AMLIN CORPORATE MEMBER LTD (UK COMPANY NO 02969411) T/AS AMLIN SYNDICATE 2001 AT LLOYD'S

DUAL AUSTRALIA PTY LTD ON BEHALF OF ARCH SYNDICATE 2012

MARKEL CAPITAL LTD (UK COMPANY NO 03114572) T/AS MARKEL SYNDICATE 3000 AT LLOYD'S AND THE CHANNEL SYNDICATE LLP (UK COMPANY NO 13359898) T/AS CHANNEL SYNDICATE 2015 AT LLOYD'S

JUDGE: GLEESON J DATE: 15 DECEMBER 2014 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 The defendants have filed applications for security for costs, pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth) ("Federal Court Act"), s 1335 of the Corporations Act 2001 (Cth) ("Corporations Act") and rule 19.01 of the Federal Court Rules 2011 (Cth) ("Federal Court Rules"). 2 The plaintiffs oppose the applications. The plaintiffs submit that there is very little risk of any costs order made in favour of the defendants not being satisfied, in view of an undertaking provided by Austcorp Group Pty Ltd ("Austcorp Group") and Dover Investments Pty Ltd ("Dover Investments"). Austcorp Group is a parent company of the plaintiff companies (although not the ultimate holding company) and Dover Investments is a member of the Austcorp Group of companies. In effect, Austcorp Group and Dover Investments undertake to the Court and the defendants to be liable for any adverse costs order.

THE SUBSTANTIVE PROCEEDINGS 3 The proceedings are brought pursuant to s 12GF of the Australian Securities and Investments Commission 2001 (Cth) ("ASIC Act") or s 236 of Schedule 2 to the Competition and Consumer Act 2010 (Cth) ("Competition Act") and in respect of alleged breaches by controllers of property of Bellpac Pty Ltd ("Bellpac") of duties imposed by s 420A of the Corporations Act. 4 The case concerns the settlement of New South Wales Supreme Court proceedings ("Supreme Court proceedings") pursuant to a deed of settlement between Bellpac, Gujarat NRE Coking Coal Limited ("Gujarat"), the first defendant ("LM Investment Management"), the second defendant ("PTAL") and others, resulting in the sale of land owned by Bellpac ("Bellambi land") at what is alleged to have been a gross undervalue, as well as the extinguishment of Bellpac's claims against Gujarat, and Gujarat's liabilities to Bellpac, for grossly inadequate consideration ("Bellpac settlement"). 5 It is alleged that PTAL sold the Bellambi land to Gujarat for $10 million, when the market value of the land was not less than $82 million. 6 The plaintiffs claim that: (1) PTAL, as controller of property of Bellpac, in the exercise of its power of sale, breached "its equitable duty under the general law in accordance with the test for liability provided in s 420A of the Corporations Act" and engaged in unconscionable conduct in contravention of s 12CB(1) of the ASIC Act, or alternatively ss 21 and 22 of Schedule 2 to the Competition Act; (2) The receivers, by their involvement in the Bellpac settlement, breached their duties to exercise their powers in good faith and their duties under s 420A of the Corporations Act, and engaged in unconscionable conduct in contravention of s 12CB(1) of the ASIC Act, or alternatively ss 21 and 22 of Schedule 2 to the Competition Act; (3) LM Investment Management was knowingly concerned in the breaches of duty and unconscionable conduct by PTAL and the receivers relating to the Bellpac settlement. 7 In addition, the plaintiffs seek a declaration, that policies of insurance obtained by LM Investment Management from the fifth, sixth and seventh defendants ("insurers") for the period 31 July 2012 to 31 October 2013 indemnify LM Investment Management for its alleged breaches.

Defendants' evidence in support of the applications 8 The defendants adduced evidence concerning both the exercise of the discretion to order security for costs and their respective likely costs and disbursements. 9 LM Investment Management read two affidavits of its solicitor, Robert Tassell, and tendered documents including: (1) ASIC form 524 "Presentation of accounts and statement" dated 12 June 2014, referring to a Deed of Company Arrangement to which Austcorp Group Limited was then subject; and (2) Notice to creditors of execution of a deed of company arrangement by Austcorp Group Limited dated 18 January 2010. 10 PTAL read two affidavits of its solicitor, Michael Hughes. 11 The receivers read an affidavit of James Berg, their solicitor. 12 The insurers read two affidavits of their solicitor, Peter Tredinnick. 13 The plaintiffs did not oppose the use of each defendants' evidence in all applications.

Evidence tendered by the plaintiffs in opposition to the applications 14 The plaintiffs read: (1) Two affidavits of John Tomaras; (2) An affidavit of Ted Tzovaras; and (3) Two affidavits of David Fisher. 15 Mr Tomaras is the plaintiffs' solicitor, and Mr Tzovaras is assisting him in conducting this litigation. Mr Fisher is the company secretary of the first plaintiff ("Austcorp Project No 20") and Austcorp Group. He is also the external accountant for the Austcorp Property Group of companies of which Austcorp Project No 20 is a member. 16 The plaintiffs tendered an undertaking ("the undertaking"), proffered to both the Court and the defendants and given by Austcorp Group and Dover Investments, in the following terms: (1) to pay such costs, as agreed or assessed, as the Federal Court of Australia may order the Plaintiffs, Austcorp Project No. 20 Pty Limited and Compromise Creditors Management Pty Ltd, to pay to the Defendants, or any of them, in the event that the Plaintiffs do not themselves pay any such costs; (2) pending the determination of the proceeding, not to sell or otherwise dispose or encumber any of its assets, otherwise than in the ordinary course of business, without giving 14 days prior written notice to each of the Defendants of its intention to do so; and (3) pending the determination of the Proceeding, not to make any distribution to its or their shareholders in the event that the net asset position of those companies falls below positive $1,000,000.

RELEVANT STATUTORY PROVISIONS 17 Section 56 of the Federal Court Act provides: (1) The Court or a Judge may order an applicant in a proceeding in the Court, or an appellant in an appeal under Division 2 of Part III, to give security for the payment of costs that may be awarded against him or her. (2) The security shall be of such amount, and given at such time and in such manner and form, as the Court or Judge directs. (3) The Court or a Judge may reduce or increase the amount of security ordered to be given and may vary the time at which, or manner or form in which, the security is to be given. (4) If security, or further security, is not given in accordance with an order under this section, the Court or a Judge may order that the proceeding or appeal be dismissed. (5) This section does not affect the operation of any provision made by or under any other Act or by the Rules of Court for or in relation to the furnishing of security. 18 Section 1335(1) of the Corporations Act provides: Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, 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 if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given. 19 Rule 19.01 of the Federal Court Rules provides: (1) A respondent may apply to the Court for an order: (a) that an applicant give security for costs and for the manner, time and terms for the giving of the security; and (b) that the applicant's proceeding be stayed until security is given; and (c) that if the applicant fails to comply with the order to provide security within the time specified in the order, the proceeding be stayed or dismissed. (2) An application under subrule (1) must be accompanied by an affidavit stating the facts on which the order for security for costs is sought. (3) The respondent's affidavit should state the following: (a) whether there is reason to believe that the applicant will be unable to pay the respondent's costs if so ordered; (b) whether the applicant is ordinarily resident outside Australia; (c) whether the applicant is suing for someone else's benefit; (d) whether the applicant is impecunious; (e) any other relevant matter. 20 In Health Information Pharmacy Franchising Pty Ltd v Khoo [2010] FCA 438 at [5] ("Khoo"), Yates J said: Unlike s 1335(1) of the Corporations Act, s 56 of the Federal Court Act does not require "credible testimony that there is reason to believe that the corporation will be unable to pay the costs of [the respondents]". The differences between the two provisions have been considered by decisions of this Court: see, for example, Instyle Contract Textiles Pty Ltd v Good Environmental Choice Services Pty Ltd [2009] FCA 1422; (2009) 181 FCR 360 at [6]-[8]; MHG Plastic Industries Pty Ltd v Quality Assurance Services Pty Limited [2002] FCA 821 at [8]- [9]. However, given that the applicant's impecuniosity was the cornerstone of their motion, the respondents submitted that the Court's jurisdiction under both provisions was, in this case, relevantly identical. They proceeded on the basis that they were required to satisfy the threshold requirement of s 1335(1) in order to succeed on the motion. This approach is understandable. Where the only asserted basis for an order for security relates to the alleged inability of the applicant to meet a future costs order, it is difficult to see in practice a difference between the operation of the two provisions: see the observations of Perram J in Soul Pattinson Telecommunications Pty Ltd v Subex Americas Inc [2009] FCA 651 at [6] 21 In this case, as in Khoo, the defendants' applications are founded upon the plaintiffs' impecuniosity. Accordingly, there is no practical difference in the approach to deciding whether to make an order under either s 56 or s 1335(1). 22 In their written submissions, the plaintiffs submitted that the defendants had not established that there is "reason to believe that any adverse costs order would not be able to be satisfied by Austcorp Group". That is not the question required to be asked by s 1335(1), which is concerned with the position of the corporate plaintiffs. 23 During oral submissions, counsel for the plaintiffs, Mr Lazarus, conceded (appropriately) that the jurisdictional hurdle in s 1335(1) was crossed. However, he maintained that the ability of any costs order to be satisfied by Austcorp Group (or the plaintiffs, considered with Austcorp Group as a single financial entity) was an important factor in deciding whether, in the exercise of the Court's discretion, to make an order for security for costs. 24 Accordingly, the issues for determination by this court are: (1) Whether the discretion to make an order for security for costs should be exercised in this case, in favour of each of the defendants; and (2) If so, the quantum of security that should be ordered.

ONUS OF PROOF 25 Once it appears by credible testimony that there is reason to believe that a corporation will be unable to pay the costs of the defendant if successful in its defence, there is an evidentiary burden on the party resisting the order for security for costs to establish a reason why security should not be granted: Wollongong City Council v Legal Business Centre Pty Ltd [2012] NSWCA 245 at [30] ("Wollongong City Council"), Topcide Pty Ltd v Charter Financial Planning Ltd [2010] FCA 1151 at [12] and Power Infrastructure Pty Ltd v Downer EDI Engineering Power Pty Ltd [2010] FCA 1222 at [9]. 26 Even so, the burden rests on the defendants, from first to last, to persuade the court that the order for security should be made: Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377 at [21]. 27 In Cornelius v Global Medical Solutions Australia Pty Ltd (2014) 98 ACSR 301; [2014] NSWCA 65 at [18] to [20], Macfarlan JA said: The defendants contended on appeal that the primary judge erred in stating that the burden of proof rests upon applicants for security "from first to last": see [5] above. They submitted that this was contrary to the following statement of Beazley JA in [Wollongong City Council] at [30]: [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 as the plaintiff) to establish a reason why security should not be granted: KP Cable Investments v Meltglow [1995] FCA 76; 56 FCR 189; Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972; Pioneer Park v Australia and New Zealand Banking Corporation (2007) 65 ACSR 383; [2007] NSWCA 344; Prynew Pty Ltd v Nemeth [2010] NSWCA 94. 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 Prynew Pty Ltd v Nemeth 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 246 CLR 182; [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. 28 In oral submissions, Mr Lazarus described the evidentiary burden as "very low". He suggested that the plaintiffs simply had to produce evidence in support of whatever matters it sought to raise for consideration and that, once this was done, the burden fell back on the defendants. This submission seemed to be directed to the challenge made by the defendants to the strength of the plaintiffs' evidence, particularly as to the weight to be accorded to the undertaking. However, Mr Lazarus did not go so far as to say that the defendants were not entitled to contest the weight of that evidence or that they were not entitled to argue that evidence adduced by the plaintiffs provided no or little reason why security should not be granted. The cases below illustrate that the Court is entitled to consider those matters in the exercise of its discretion.

Legal principles 29 In Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972, the following matters "appropriate for consideration" were identified: the chances of success of the applicant; whether the applicant's claim is bona fide or a sham; the quantum of risk that the applicant cannot satisfy a cost order; whether use of the power would shut out a small company from making a genuine claim against a large company, i.e. is the power being used oppressively; whether the impecuniosity arises out of the Act in respect to which relief is sought; whether there are aspects of public interest which weigh in the balance against the making of an order; whether there are any particular discretionary matters peculiar to the circumstances of the case. 30 In KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 196, Beazley J said: The law is now settled that the discretion to order security for costs is unfettered and should be exercised having regard to all the circumstances of the case without any predisposition in favour of the award of security: …In Gentry Bros Pty Ltd v Wilson Brown and Associates Pty Ltd (1992) 8 ACSR 405 at 415, Cooper J stated that: [i]t is not possible or appropriate to list all of the matters relevant to the exercise of the discretion. The factors will vary from case to case. The weight to be given to any circumstance depends upon its own intrinsic persuasiveness and its impact on other circumstances which have to be weighed: PS Chellaram and Co v China Ocean Shipping Co [1991] HCA 36; (1991) 65 ALJR 642 at 643. Notwithstanding the broad unfettered discretion with which the Court approaches an application for security for costs, there are a number of well established guidelines which the court typically takes into account in determining any such application. They are: 1. That such applications should be brought promptly. … 2. That regard is to be had to the strength and bona fides of the applicant's case are relevant considerations: …As a general rule, where a claim is prima facie regular on its face and discloses a cause of action, in the absence of evidence to the contrary, the court should proceed on the basis that the claim is bona fide with a reasonable prospect of success… 3. Whether the applicant's impecuniosity was caused by the respondent's conduct subject of the claim… 4. 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 … This factor is related to the next, namely: 5. 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: see Memetu v Lissenden (1983) 8 ACLR 364; Sent v Jet Corporation of Australia (1984) 2 FCR 201; Bell Wholesale Co Pty Ltd v Gates Export Corporation (1984) 2 FCR 1; Hession v Century 21 South Pacific Ltd (1992) 28 NSWLR 120 at 123; [Bryan E Fencot & Assocs Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497] at 513; [Yandil Holdings Pty Ltd v Insurance Co of North America (1986) 7 NSWLR 571] at 545. The combined effect of these two principles was summarised by Meagher JA in Hession at 123 as follows: ...a company in liquidation against whom an order for security for costs is sought cannot successfully resist such an order merely by proving that it cannot fund the litigation from its own resources if an order for security is made; it must prove that it cannot do so even if it relies on the other resources available to it (the company's shareholders or creditors) ...Finally, whilst it is both true and important that poverty must be no bar to litigation, what that means is that the courts must be astute to see that no person pursuing a claim which is not frivolous is precluded from doing so by the erection of obstacles which poverty is unable to surmount; it does not mean that proof of insolvency automatically confers an immunity from statutory provisions which deal with insolvent plaintiffs. 6. An issue related to the last guideline is whether persons standing behind the company have offered any personal undertaking to be liable for the costs and if so, the form of any such undertaking: see Cameron's Unit Services Pty Ltd v Kevin R Whelpton and Associates (Australia) Pty Ltd (1986) 13 FCR 46 at 53; Mantaray Pty Ltd v Brookfield Breeding Co Pty Ltd (1990) 8 ACLC 304; Clyde Industries Ltd v Ryad Engineering Pty Ltd (1993) 11 ACLC 325. 7. Security will only ordinarily be ordered against a party who is in substance a plaintiff, and an order ought not to be made against parties who are defending themselves and thus forced to litigate… 31 The plaintiffs' unsatisfactory financial position is in itself a substantial factor in the exercise of the discretion to order security for costs: Fiduciary Ltd v Morningstar Research Pty Ltd [2004] NSWSC 664; (2004) 208 ALR 564 at [35] to [36]. There, Austin J said: [35] An order for costs is made to indemnify the successful party: Oshlack v Richmond River Council (1998) 193 CLR 72, 97 per McHugh J. The purpose of an order for security for costs against a corporate plaintiff is to protect the defendant against the risk of being deprived, through the plaintiff's inability to pay, of the benefit of a costs order made for that purpose, should the defendant be successful. The general approach of the courts to an application for security for costs against a corporate plaintiff was described by Einstein J in Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744. As his Honour pointed out (at [20]), the defendant has the evidentiary onus of satisfying the court that the corporate plaintiff will be unable to meet the defendant's reasonable costs if the defendant succeeds in the litigation. Once that is established, the court's discretion is triggered, though it is not an unfettered discretion: Yandil Holdings Pty Ltd v Insurance Company of North America [(1986) 7 NSWLR 571]. [36] Not only does proof of the unsatisfactory financial position of the corporate plaintiff trigger the court's discretion, but that evidence is also substantial factor in the exercise of the discretion: Idoport, at [56]-[57]. And once the defendant has shown that the corporate plaintiff will be unable to meet its reasonable costs, the evidentiary burden shifts to the plaintiff to satisfy the court that, taking into account all relevant factors, the court should exercise its discretion by refusing to order security or by ordering security of a lesser amount than the defendant seeks: Idoport, at [60]-[62].

Significance of undertaking 32 In Jazabas Pty Ltd v Haddad [2007] NSWCA 291; (2007) 65 ACSR 276 at [79] and [80] ("Jazabas"), McClellan CJ at CL cited with approval passages from Epping Plaza Fresh Fruit & Vegetables Pty Ltd v Bevendale Pty Ltd [1999] 2 VR 191 and Intercraft Cabinets Pty Ltd v Sampas Pty Ltd (1997) 18 WAR 306, which emphasised that the availability of an undertaking is an important factor, but is not decisive, in deciding whether to order security for costs. In each of those passages, the Court was concerned with undertakings given by individuals standing behind the relevant company, as opposed to a corporate entity. 33 Mr Lazarus argued that it was a matter of no significance that the undertaking came from corporate entities rather than an individual. On the other hand, the defendants contended that an undertaking from corporate entities should be given little to no weight. It is not necessary to resolve this issue: what is plainly important is that the value of the undertaking is relevant to the question of whether an order for security for costs should be made. As Beazley JA observed in Prynew Pty Ltd v Nemeth 28 ACLC 10-026; [2010] NSWCA 94 at [45]: A defendant is a captive audience to a plaintiff's claim. In my opinion, the purpose of the security for costs jurisdiction would be rendered ineffective if a defendant sued by an impecunious company was denied security because persons, themselves impecunious, were prepared to offer to be responsible for the costs of the litigation.

Significance of presence of litigation funder 34 The presence of a litigation funder is a powerful factor in favour of the grant of security: Green v CGU Insurance Ltd (2008) 67 ACSR 105; [2008] NSWCA 148 at [51] to [53], [82] to [88]. 35 In Green, Hodgson JA (with whom Campbell JA agreed) said (at [51]): …in my opinion a court should be readier to order security for costs where the non-party who stands to benefit from the proceedings is not a person interested in having rights vindicated, as would be a shareholder or creditor of a plaintiff corporation, but rather is a person whose interest is solely to make a commercial profit from funding the litigation. Although litigation funding is not against public policy (Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386; 229 ALR 58; [2006] HCA 41 at [87]-[95]), the court system is primarily there to enable rights to be vindicated rather than commercial profits to be made; and in my opinion, courts should be particularly concerned that persons whose involvement in litigation is purely for commercial profit should not avoid responsibility for costs if the litigation fails. 36 On the other hand, the presence of a litigation funder may also have a positive impact on the financial position of a plaintiff because it may mean that there would be further funds available for any costs awarded in favour of the defendants: cf Bakers Investment Group (Australia) Pty Ltd v Caason Investments Pty Ltd [2014] VSC 154 at [18] to [20].

Causation 37 In BPM Pty Ltd v HPM Pty Ltd (1996) 131 FLR 339 at 346, Anderson J said: If the plaintiff wishes to resist an application for security because the defendant's wrongful actions have brought about its lack of means it must surely be tfor the plaintiff to establish this… I do not mean to say that this is anything but an evidentiary onus. It is enough to say… that if there is no evidence to show that the defendant was to blame for the plaintiff's lack of means, the plaintiff cannot say that the application should be refused on that ground. There was no direct evidence before the master of the plaintiff's financial condition at the time the first defendant was engaged to advise it and there is not really any evidence on which to safely base any inferences. 38 In Jazabas, on the question whether the claimants' impecuniosity was caused by the opponents, at [84], McClellan CJ at CL (Mason P and Basten JA agreeing) said: The claimants carried the onus of establishing both the adequacy of their financial position before their dealings with the opponents and that the opponents' action have caused or at least materially contributed to the claimants' inability to meet an order for security for costs… 39 At [95], McClellan CJ at CL cited with approval, the following passage from Dal Pont GE, Law of Costs (LexisNexis Butterworths, 2003): [T]he plaintiff must be able to support the allegation with relatively straightforward and unambiguous evidence of a fairly compelling nature, because otherwise the hearing of the issue of security might become a trial within a trial. For this reason, it is not enough that the defendant's conduct is merely a contributing factor - it must be the material contributor to or cause of the plaintiff's impecuniosity. [(at [29.96] emphasis added] 40 Ordinarily before a court could accept that the plaintiff's impecuniosity was caused by the defendant's conduct, it would be necessary to form a provisional view as to the strength of the plaintiff's case: cf Sylverton Pty Ltd v Minter Ellison [2011] FCA 1072 at [10].

Consideration 41 There is no complaint by the plaintiffs that the applications were not brought reasonably promptly. Nor is it contended that the applications for security are oppressive, in the sense that they are being used merely to deny an impecunious applicant a right to litigate. 42 Equally, the defendants did not suggest that the plaintiffs' claim is not bona fide, or lacks reasonable prospects of success. 43 The plaintiffs put forward two reasons why security for costs should not be ordered, namely: (1) The risk that the plaintiffs could not satisfy a costs order is low when the undertaking is taken into account; (2) The plaintiffs' impecuniosity has been caused by the conduct of the defendants (apart from the insurers) that is the subject of the claim.

The undertaking 44 The defendants contended that the undertaking should be accorded no or little weight by reason of the following matters: (1) It is given by corporate entities and not by an individual; (2) The available financial information does not permit the Court to form a reliable assessment of the worth of the undertaking; (3) The value of the undertaking is based on the expression of an opinion by Mr Fisher that the Austcorp Group will be able to raise finance on the security of land at Bayview in the Northern Territory, held by Dover Investments pursuant to one or more crown leases which have been extended every one or two years since 1998 ("Bayview land"). The opinion is given on the explicit basis that the Bayview land is unencumbered. However, the opinion cannot be given any weight because the land is encumbered by a mortgage in favour of Honeysuckle Drive Holdings Pty Ltd ("Honeysuckle") to secure a loan ("Honeysuckle mortgage"); (4) Dover Investments is not permitted to raise finance on the security of the Bayview land without the prior written consent of Honeysuckle. Mr Fisher's opinion did not address the question of whether that consent would be given; (5) The undertaking is presently not expressed to cover all circumstances in which the plaintiffs may not pay costs; (6) The undertaking is only expressed to apply pending the determination of the proceedings; (7) The undertaking does not prevent Austcorp Group and Dover Investments from disposing or encumbering assets in the ordinary course of business, without giving 14 days prior written notice. First, the effect is that the defendants would have to apply for an injunction to restrain dealings outside the ordinary course of business and would probably have to provide some sort of undertaking as to damages. Second, as Austcorp Group and Dover Investments are in the business of property development, it is reasonable to expect that they might seek to dispose of or encumber their assets in the ordinary course of business. The extent of this risk is demonstrated by the Deed of Company Arrangement made in 2010. (8) The undertaking not to make any distribution to shareholders (paragraph 3 of the undertaking) does not preclude loans or other encumbrances. Under the Honeysuckle loan, more money can be lent under a security that would have priority over the rights of the defendants.

Undertaking provided by corporate entities 45 As I understood the defendants' argument, it was that an undertaking from a corporate entity was inferior to one given by an individual standing behind the plaintiffs because a corporate entity necessarily is not affected by the disincentives affecting an individual who risks bankruptcy. The plaintiffs did not address this argument in terms. However, in this case, Austcorp Group and Dover Investments are not insubstantial companies. In those circumstances, there may well be good commercial reasons why the companies would generally be motivated to comply with the undertaking. Accordingly, I accept that the mere fact that the undertaking is given by corporate entities and not by an individual is not necessarily fatal.

Financial position of Austcorp Group and Dover Investments 46 The plaintiffs argued that the financial statements annexed to Mr Fisher's first affidavit ("financial statements") should be accepted as providing a true and fair view of the position of the Austcorp group of companies including Austcorp Group and Dover Investments as at 30 June 2014. 47 For the following reasons, I accept the defendants' contention that the available financial information does not permit the Court to form a reliable assessment of the worth of the undertaking. 48 The financial statements are unaudited. They are described as consolidated statements, but there was no evidence identifying the companies that are the subject of the statements. Accordingly, as counsel for the first defendant, Mr Sulan, submitted, the precise financial position of Austcorp Group and Dover Investments cannot be determined from the consolidated statements. 49 The statement of financial position states that total current assets are $5,021,296.12. The main asset is inventories ($4,693,659.91). Total equity in the group is $5,254,239.89. According to note 4 to the statement of financial position, the inventories comprise land held for resale, comprising cost of acquisition ($4,076,000) and capitalised development expenses ($615,059.91). 50 The statement of significant accounting policies in the notes to the financial statements includes the following: Land held for development and resale is valued at director's value and development costs spent during the year. Cost includes the cost of acquisition, development, borrowing costs and holding costs until completion of development. Borrowing costs, and holding charges incurred after development are expensed. Profits will be brought to account on the signing of an unconditional contract of sale. 51 It appears from Mr Fisher's affidavit that the land comprising the inventories is the Bayview land. 52 Mr Fisher's affidavit contains the following statement: (a) as at 30 June 2014, the balance of the land at land at Bayview 1, including part of the land at Bayview II, is unencumbered and is reflected in the consolidated financial statements of Austcorp Group, at Note 4 - Inventories at $4,693,659.91. This is comprised of: Lot A (25 townhouse sites)* 1,350,000 Lot C (19 townhouse sites)* 800,000 Land Fill Stockpile # 1,630,000 Rock Armour# 250,000 Marina Berths^ 48,000 Subtotal 4,078,000 Development Costs incurred to 30.6.14 615,660 Total $4,693,660 *(i) Annexed hereto and marked 'DF-8' are copies of property searches in respect of the balance of land comprised in CLT 1251 which includes Lots A & C, Bayview, NT. In the NT, a Crown Lease can be issued for a specific term (Crown Lease Terms or CLT) or in perpetuity. Crown Lease Terms generally contain conditions and covenants requiring development to be undertaken in accordance with the agreed development plan, and may be eligible for conversation to freehold title or a Crown Lease in Perpetuity once the development has been completed in accordance with the lease terms. This is the case with the balance of the land comprised in CLT 1251. (ii) Annexed hereto and marked "DF-9" is a copy of a market value report (Draft) from Colliers of 13 May 2014, which indicates that Lots A & C, Bayview, NT, being part of the balance of land compromised in CLT 1251, have values of $1,350,000 and $800,000 respectively. Dover did not have Colliers complete the draft valuation in final form as Dover no longer require the valuation. Dover will be combining the balance of the Crown Leases (CLF 1251 and 2155) with additional Crown Lease (Proposed Crown Lot 8690) which it will be acquiring from the NT Government in order to expand and improve the Bayview Phrase (sic) II development. # Subdivision materials on site at replacement cost (confirmed by the directors after discussions with consulting engineers and contractors) ^ Subsequent to 30 June 2014, all remaining marina berths have been sold at a net value of $267,000 (these sales proceeds were used to partially discharge the debt to QBE). 53 Mr Fisher's explanation of the value of the inventories is inconsistent with the financial statements in that the financial statements say that $4,078,000 of the value is the cost of the land at acquisition, while Mr Fisher gives the detailed explanation set out above. Assuming Mr Fisher's explanation is accurate in that a substantial portion of the value is attributable to "land fill" and "rock armour", it seems highly unlikely that the financial statements are correct to the extent that they say that the cost of acquisition of the land was $4,078,000. Further, Mr Fisher's explanation of the figure of $4,078,000 cannot be accepted at face value because: (1) As to "Lot A" and "Lot C", it is based on a draft valuation dated 13 May 2014. The draft valuation explicitly states that it is "for Asset Valuation purposes only". It further states that its authors "do not assume any responsibility or accept any liability where this valuation is relied upon after expiration of 3 months from the date of the valuation". That period has expired. Further, it is not possible to read significant parts of the document because of the word "DRAFT" printed in large bold letters across the page. In these circumstances, I do not accept that the values given by Mr Fisher for "Lot A" and "Lot C" are reliable. (2) The figure includes $1,630,000 for "land fill stockpile" and $250,000 for "rock armour". These amounts are said to be "subdivision materials on site at replacement cost (confirmed by the directors after discussions with consulting engineers and contractors)". This evidence is manifestly insufficient for me to place any confidence in the accuracy of the $1,630,000 figure. 54 Note 7 to the financial statements (financial liabilities) records two liabilities, namely unsecured loans from shareholders and related parties and a secured loan from QBE. The unsecured loans are said to total $1,050,000. In his second affidavit, Mr Fisher said that a loan from Honeysuckle to Dover Investments is included in the amount of $1,050,000. However, the loan from Honeysuckle is secured by the Honeysuckle mortgage and by a charge over the assets of Dover Investments. The consolidated financial statements make no reference to this loan, as a secured loan. 55 Without reliable financial statements, I am not able to form a reliable assessment of the financial position of Austcorp Group and Dover Investments. On that basis alone, I would not give the undertaking significant weight.

Mr Fisher's opinion 56 However, there is a further significant difficulty with the undertaking. The proposition that Austcorp Group would be able to raise finance on the security of the Bayview land to pay any adverse costs order is based upon the opinion expressed by Mr Fisher in his first affidavit. In turn, Mr Fisher's opinion was based on the following matters: (1) As at 30 June 2014, the Bayview land was unencumbered and was worth $4,693,659.91; and (2) His experience in assisting clients in raising finance for their business activities, and in particular the Austcorp Property Group, which led Mr Fisher to conclude that Austcorp Group would be able to raise finance on the security of the Bayview land on a loan to value ratio of around 50% of $2.3 million. 57 In his second affidavit, Mr Fisher acknowledged that the Bayview land was encumbered by the Honeysuckle mortgage. He said that the amount advanced by Honeysuckle to Dover Investments was $700,000. Mr Fisher did not state in his second affidavit whether he maintained the opinion expressed in the first affidavit and, if he did, the reasons why he maintained it. 58 Mr Fisher did not offer an explanation for his error in stating that the Bayview land was unencumbered. This is a matter which warranted explanation, particularly since ASIC records show that Mr Fisher is the company secretary of Honeysuckle and the Honeysuckle mortgage document shows that Mr Fisher witnessed the signatures of both mortgagor and mortgagee on the mortgage, and of both lender and borrower on the deed of loan. 59 In these circumstances, I do not accept that Mr Fisher's opinion as to the capacity of Austcorp Group and Dover Investments to raise finance is reliable. 60 It follows that I am not satisfied Austcorp Group would be able to raise finance on the security of the Bayview land of about $2.3 million, or of an amount that would be sufficient to cover any adverse costs order.

Restrictions imposed on Dover Investments 61 The deed of loan between Honeysuckle and Dover Investments provides for a loan facility of $700,000 "or such higher amount as the Lender and the Borrower may agree in writing". The deed also contains a "negative pledge" undertaking by the borrower not to, without the lender's prior written consent, create or allow to exist any encumbrance whether ranking ahead of, pari passu with, or after the Honeysuckle mortgage to secure any indebtedness of Dover Investments. 62 In addition to the Honeysuckle mortgage, by general security deed made on 14 October 2013, Dover Investments granted to Honeysuckle a PPSA Security Interest over all PPSA personal property, and a fixed charge over all other property to secure the payment of the monies advanced and the punctual performance of Dover Investments' other obligations to Honeysuckle at any time. 63 For Mr Fisher's evidence to be accorded substantial weight, it would have been necessary for him to address in his evidence the effect of these arrangements on the financial capacity of Austcorp Group. 64 Although Mr Lazarus pointed to the fact that the loan agreement is expressed to expire on 31 December 2015 ("or such later time"), the plaintiffs did not adduce any detailed evidence about Austcorp Group's plans over the likely period of the litigation, including any plans for financing the Bayview property development. As a result, I am in no position to conclude that, even if Austcorp Group could obtain a financial facility of $2.3 million, that this amount or a sufficient proportion of it would be available to cover any order for security for costs.

Terms of the undertaking 65 In my view, the evidence demonstrates that there is no reason to be confident that the undertaking would significantly reduce the risk that the plaintiffs will be unable to pay or procure payment of an adverse costs order. To the contrary, there are good reasons to doubt its value. 66 In those circumstances, it is unnecessary to address the defendants' criticisms of the detail of the undertaking.

Litigation funder 67 Mr Lazarus submitted that the presence of the litigation funder, as a factor favouring security for costs, was reduced (or negated) by the undertaking given by parties who had an interest in the outcome of the proceedings. 68 The plaintiffs tendered a heavily redacted version of an agreement between them and LCM Litigation Fund Pty Ltd ("LCM") dated 15 September 2014. The introduction to the agreement includes the following statement: The Litigant shall prosecute the Action for the joint benefit of the Litigant and the Funder and the Funder will fund the costs of such Action on the terms of this Agreement. 69 In his first affidavit, Mr Fisher said: Pursuant to the terms of the litigation agreement, LCM is required to pay for all of the Plaintiffs' future costs of this Proceeding, and to satisfy any costs order that may be made against them and in favour of any of the Defendants. 70 I give little weight to this assertion in the absence of evidence of the precise relevant terms of the agreement, or the financial position of LCM. 71 I accept that the litigation funding agreement affects the risk to the extent that the plaintiffs are not required to fund the litigation themselves but, as they do not have any substantial funds in any event, the precise impact of this factor, if any, is not apparent.

Conclusion 72 I cannot conclude that the risk of any costs order against the plaintiffs remaining unsatisfied is low because of the undertaking. 73 In my opinion, the undertaking should be given only little weight in the exercise of my discretion.

Other matters 74 In their written submissions, the plaintiffs contended that the evidence established that the "Austcorp Property Group" has a long history of successful property developments in New South Wales, Victoria, Queensland and Northern Territory. 75 The plaintiffs relied upon the following statement by Mr Fisher: Since its establishment, Austcorp Property Group has been carrying on the business of property development in New South Wales, Victoria, Queensland and Northern Territory. It has completed a wide range of major property developments including master planned residential communities, residential land subdivisions, major apartments and townhouse complexes, services apartments, hotels, marinas, commercial office buildings, business parks (office/warehouse) and self-storage facilities. 76 Mr Fisher's affidavit referred to fact that Austcorp Group and several subsidiaries were placed under voluntary administration in May 2009 and, in December 2009, entered into a deed of company arrangement. His evidence was that the arrangement was a consequence of financial difficulties caused by the global financial crisis from about mid-2008, including the inability of Royal Bank of Scotland to meet its obligations to the group under an agreed finance facility. Mr Fisher did not address the impact of the deed of company arrangement upon creditors of the group including unsecured creditors. 77 Mr Sulan submitted, and it was not disputed, that various companies within the Austcorp Group had contributed to create a deed fund, and a dividend had been paid out about three years later. Unsecured creditors appear to have been paid less than 4 cents in the dollar. 78 In those circumstances, while I accept that the Austcorp Property Group has a long history of property developments, the extent to which its business has been successful is uncertain.

Cause of plaintiffs' impecuniosity 79 The plaintiffs submitted that, but for the conduct of at least LM Investment Management, PTAL and the receivers, the plaintiffs would not be impecunious. 80 The plaintiffs sought to rely in particular on paragraphs 18 to 22 of Mr Tomaras's first affidavit. In summary, those paragraphs disclosed: (1) The entry into a joint venture agreement by Bellpac and Austcorp Project No 20 in July 2005, for the development of certain land into 525 residential lots; (2) That Austcorp advanced $3 million to Bellpac pursuant to the joint venture agreement; (3) The $3 million loan was and remains secured by a mortgage over the Bellambi land and a fixed and floating charge between Bellpac as charger and Austcorp Project No 20 as chargee; (4) At as 30 June 2013, the amount owed by Bellpac to Austcorp Project No 20 was over $9.8 million and there was a further loan, which appears to be owed by Bellpac to the second plaintiff, of over $42 million. (5) Pursuant to a priority deed between PTAL, LM Investment Management and others dated 23 June 2006, the plaintiffs rank third in priority on a pari passu in respect other mortgages over the Bellambi land and charges over Bellpac's assets and undertaking. 81 That evidence does not enable me to form any view as to the cause of the plaintiffs' current impecuniosity and, in particular, how PTAL, LM Investment Management and the receivers may be responsible for causing that impecuniousity.

Conclusion on the exercise of the discretion 82 I am satisfied that this is an appropriate case in which to order security for costs, having regard to: (1) The impecuniosity of the plaintiffs; (2) The uncertain value of the undertaking; (3) The absence of credible evidence that the plaintiffs' impecuniosity was caused by the conduct of the relevant defendants (apart from the insurers); (4) The absence of factors that would weigh in the balance against the making of such orders; and (5) The presence of a litigation funder.

Legal principles 83 In determining an appropriate amount of security, the Court does not sit as a taxing officer but rather seeks to fix such amount as it thinks fit in all the circumstances of the case: Reinsurance Australia Corporation Ltd v HIH Casualty & General Insurance Ltd (in liq) [2003] FCA 803 at [94] to [100]. The amount will not exceed the estimate of party and party costs but it may be less; see Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd [1995] FCA 1778; (1995) 134 ALR 187 at 200 (Lindgren J) ("Allstate"). It is appropriate to adopt a "broad brush" approach: Allstate at 201. See also Bryan E Fencott & Assocs Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 at 515 84 In Khoo at [77], Yates J said: In ordering security for costs the Court does not set out to give a complete and certain indemnity to a respondent: Brundza v Robbie & Co [No. 2] [1952] HCA 49; (1952) 88 CLR 171 at 175. The discretion as to the amount of security to be ordered is unfettered… 85 The defendants have adduced evidence of their likely costs and disbursements to prepare the matter up to but not including a trial (and trial preparation). PTAL and the receivers also adduced evidence of likely costs and disbursements through to the conclusion of a final hearing but accepted, in oral submissions, that it would be appropriate to make an order only up to the same point as proposed by the other defendants. 86 The experience of the solicitors who gave evidence, on behalf of the defendants, of likely costs and disbursements was not challenged and none was cross-examined, although the estimates were criticised in various respects by counsel for the plaintiffs, and in Mr Tzovaras' affidavit. At a global level, and having regard to the nature of the proceedings and the amount in dispute, the defendants' estimates are not obviously excessive. On the other hand, the estimates given by Mr Tzovaras do appear lower than I would have expected. Even so, I have not disregarded Mr Tzovaras' evidence on this account, taking into account his substantial experience as a litigation solicitor. 87 As far as the appropriate rates to be applied, to determine an amount not exceeding party and party costs, I accept the approach adopted by Mr Tassell. In particular, it is appropriate to have regard to the Costs Schedule of the Federal Court Rules and the National Guide to Counsel's fees as rates that would probably be allowed on a party and party taxation of costs. 88 Concerning the various estimates of time required to conduct the litigation, I am satisfied that the defendants' estimates are reasonable. In my view, Mr Tzovaras' estimates of time are unrealistically low. For example, in my view, in the case of LM Investment Management, it is unreasonable to allow only two hours for junior counsel and one hour for senior counsel to settle affidavits. 89 Mr Tzovaras contended that LM Investment Management, PTAL and the receivers should not be "permitted" to engage separate experts in the same discipline because they are parties in relevantly the same interest. I understand this contention to be, in effect, that they could not be expected to be allowed costs on a taxation for engaging separate experts. At this stage of the proceeding, I am not satisfied that this contention is correct. Particularly having regard to the nature of the case and the significant amount in issue, in my opinion, I should accept the inclusion in the sworn estimates of the various defendants' costs of amounts for expert evidence.

LM Investment Management, PTAL and the receivers 90 In addition to matters already addressed, the plaintiffs made the following criticisms of Mr Tassell's estimate of $167,075: (a) it has not been established that LM would need to engage an "independent receiver" to give expert evidence; (b) there is likely to be significant overlap in the discovery provided by the various defendants, which has not been sufficiently accounted for in Mr Tassell's estimates; (c) no costs should be allowed in respect of the perusal of the evidence of the insurers, as the issues between them and the plaintiffs do not affect LM Investment Managemnt; 91 In my view, Mr Tassell's estimate is credible and sufficiently justified. I do not have sufficient information about the proceedings, and I do not consider that it is appropriate or necessary for me to attempt to adjudicate on the criticisms set out above. 92 Even so, recognising that the appropriate amount for security for costs may be less than the estimate of party and party costs, the possibility that efficiencies of the kind identified by Mr Tzovaras may be achieved, and noting that Mr Tassell's estimate is not put forward as the minimum likely cost, I will order the plaintiffs to provide security for the costs of the preparatory steps identified by Mr Tassell of $150,000. 93 Subject to the particular matters addressed below, in my view, it is appropriate to order security for costs for PTAL and the receivers in a similar amount on the basis that the party party costs of their respective defences are reasonably likely to be similar to those of LM Investment Management. This approach is intended to address, in a "broad brush" way, the plaintiffs' contention to the effect that they should not be required to provide a higher level of security to defendants who have chosen more expensive legal representation.

PTAL 94 At the hearing, PTAL agreed that it would be appropriate not to order security for costs for hearing preparation and the hearing itself at this stage. Accordingly, the amount of security for costs now sought is 70% of $253,242.50 (or $177,269.75), comprising: (1) Past costs; (2) Discovery; (3) Evidence; and (4) Miscellaneous costs. 95 In addition to matters already addressed, the plaintiffs made the following criticisms of Mr Hughes's estimate: (1) security in respect of costs which have been already incurred is sought, which is not appropriate in the circumstances of this case: see Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2009] NSWSC 563 at [35]-[38]; and (2) Mr Hughes has claimed security for the costs of the present application, which is not appropriate and is not a position shared by any of the other defendants. 96 I do not accept the first criticism. In Sagacious Procurement Pty Ltd v Symbion Health Ltd [2007] NSWCA 205, Mason P noted "decisions in which a court has ordered security in a sum that includes an allowance for costs already incurred in the proceedings". His Honour then said: [T]he cases all appear to involve the not uncommon situation of an application for security being made by a defendant promptly after the commencement of proceedings. In that context, it is understandable that the quantum of security ordered might address costs already incurred. An insolvent plaintiff could hardly complain if an application is made that the defendant looks to be protected with reference to the costs of the entire proceedings. 97 Nor do I accept the second criticism. Yates J made an order extending security for costs to the costs of the motion in Khoo at [79]. 98 Accordingly, I will order the plaintiffs to provide security to PTAL for costs up to the trial, including past costs and this application in the sum of $150,000.

Receivers 99 The receivers seek security for costs in the sum of $350,000 for the proceeding since the engagement of DLA Piper on about 25 July 2014. If the estimated costs of the trial are deducted, then the amount sought is $175,420 to $185,500. 100 The plaintiffs made the following particular criticisms of the Mr Berg's estimate: (1) The costs of unspecified cross claims should be "disallowed" entirely; (2) No costs for "general advice" should be "allowed"; (3) The costs of a mediation should be disallowed entirely; and (4) It has not been established that the receivers would need to engage any expert other than a valuer and a town planning consultant. 101 In In the matter of Staway Pty Ltd (in liquidation) (receivers and managers appointed) [2013] NSWSC 819 at [59], Black J noted that the costs of a mediation would not be allowed on a taxation, at least in the Supreme Court. I accept the plaintiffs' submission that security should not be ordered for those costs. 102 As to the other matters raised, the appropriate quantum is not to be determined by allowance or disallowance of particular items. In this case, the matters raised do not cause me to consider that I should not order security for costs for the receivers in the same amount as for LM Investment Management and PTAL. 103 Accordingly, I will order the plaintiffs to provide security for the receivers' costs since the engagement of DLA Piper up to the trial in the sum of $150,000.

Insurers 104 The insurers seek security for costs in the sum of $168,000. 105 The plaintiffs dispute the amount of security sought by the insurers on the following bases, in addition to matters dealt with above: (1) it is unnecessary for the legal advisors to travel to the United Kingdom for the purpose of obtaining instructions and preparing either primary or supplementary affidavits from the four underwriters of the insurers, given that interviews can readily be conducted by video conference or telephone; (2) there is no basis for anticipating any other significant interlocutory applications; and (3) the costs of the insurers' "monitoring role" in relation to LM Investment Management's defence of the proceedings should be disallowed entirely. 106 While I accept that the first and third of the matters raised by the plaintiffs might justify the reduction or disallowance of costs in hindsight on a taxation, I do not consider that I should reduce the amount of security on that basis because it is not obvious to me that these amounts would ultimately be disallowed. As to the second matter, in my view, it is not unreasonable for Mr Tredinnick to have estimated his clients' likely costs by reference to this prospect. 107 Additionally, the plaintiffs argued that they are entitled to a reduction in the amount of any security ordered as a "set-off" on account of costs orders in their favour against the fifth and seventh respondents arising out of the application for joinder of the respondents, the determination of the separate question in the plaintiffs' favour and the insurers' failed appeal to a full court of this Court. 108 Mr Tzovaras gave evidence that the fifth and seventh defendants' likely liability pursuant to these costs orders is in the order of $135,000. The insurers disputed that the costs identified by Mr Tzovaras were all referable to the costs orders, but did accept Mr Tzovaras' estimate of the plaintiffs' assessable costs of the appeal in the sum of $20,539.23. A cursory review of a tax invoice dated 26 September 2014 and relied upon by Mr Tzovaras to support the figure of $135,000 shows that the first eight pages of the invoice concerns tasks undertaken up to 31 October 2013, when the insurers obtained a costs order in their favour against the plaintiffs in respect of the insurers' costs of an abandoned application under s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW). Five of the barristers' invoices concern work done prior to 31 October 2013. 109 I consider it reasonable to make a reduction to the amount of security ordered in favour of the insurers to take account of the costs orders made in the plaintiffs' favour. I do not accept that the fact that the orders were not made against the sixth defendant, who is represented jointly with the fifth and seventh respondents, precludes a reduction. In the absence of clear evidence about the likely quantum of the costs orders in the plaintiffs' favour, except for the costs of the appeal, I will order the plaintiffs to provide security for the insurers costs up to the trial in the sum of $100,000.

CONCLUSION 110 The plaintiffs should be required to give security for the costs of each of the first, second and third defendants by provision of bank guarantees in a form acceptable to a Registrar of the Federal Court of Australia, in the sum of $150,000 in each case. 111 Further, the plaintiffs should be required give security for the costs of the fifth, sixth and seventh defendants by provision of a bank guarantee in a similar form in the sum of $100,000. 112 As these orders are only intended to provide security for the defendants' costs up until any trial (including trial preparation), I note that the defendants may seek further security for costs in the event that the matter proceeds to trial. 113 The proceedings should be stayed until the appropriate bank guarantees are provided. 114 As the plaintiffs have been substantially unsuccessful in defending the applications, they should pay the costs of the applications. I certify that the preceding one hundred and fourteen (114) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.