Australian Equity Investors, An Arizona Limited Partnership v Colliers International

GENERAL DIVISION NSD 1344 of 2009

BETWEEN: AUSTRALIAN EQUITY INVESTORS, AN ARIZONA LIMITED PARTNERSHIP

AND: COLLIERS INTERNATIONAL (NEW SOUTH WALES) PTY LIMITED (ACN 0001 401 681)

REASONS FOR JUDGMENT 1 Before the Court is an application by the first respondent that the applicants pay further security for the first respondent's costs in the amount of $300,000 within seven days of any order requiring such payment. Such application is made pursuant to O 28 of the Federal Court Rules ('the Rules').

Facts 2 These proceedings were commenced by Statement of Claim on 25 November 2009. In summary, the applicants allege misleading and deceptive conduct under the Trade Practices Act 1974 (Cth) ('the Act') by the first respondent ('Colliers') in respect of a valuation of land. Liability is denied. 3 The proceedings came before the Court for the first time on 16 December 2009 when orders were made, inter alia, requiring that the respondents file and serve their defence by 17 February 2010. A foreshadowed motion by the applicants for a separate determination of the issue of liability pursuant to O 29 r 2 of the Rules was made returnable on 23 February 2010. It should be noted that the second respondent filed a Notice of Discontinuance on 19 October 2010 and is no longer a party to the proceedings. 4 By letter dated 11 December 2009, Colliers requested the applicants provide security for costs in the amount of $100,000. By letter dated 16 December 2009 the applicants agreed to provide such security and security of $100,000 was subsequently deposited by Colliers into a controlled monies account in January 2010. 5 A Notice of Motion was duly filed on 10 February 2010 seeking a separate determination of the issues of liability and quantum. The Court heard arguments on 17 March 2010 in support of such motion. By orders made on 22 March 2010, the Court declined to make such order (see Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited [2010] FCA 254). Instead the Court, by orders dated 23 March 2010, imposed a regime of case management in preparation for the hearing listed to commence on 28 June 2010. 6 In accordance with the Court's directions the applicants filed and served their affidavits by 12 April 2010. However, on 12 May 2010, on the application of Colliers, the Court granted an extension of time until 2 June 2010 to enable them to file and serve their affidavits. 7 On 24 May 2010 Colliers notified the applicants of its intention to seek a vacation of the hearing date in a 19 page letter addressed to the applicants' solicitors ('the Colliers letter'). Such letter provided numerous reasons for Colliers' inability to comply with the timetable, reasons which primarily related to the nature of the evidence that had been served by the applicants. In particular the letter referred to the need to call expert evidence on numerous issues which had not previously been foreseen. Significant issues were also raised concerning matters arising under Part VI and VIA of the Act. Colliers indicated that they would seek to establish that other parties namely Zepher Pty Limited, Mr Gregory Moore, The Gregory Moore Real Estate Company Inc and a developer, Citysquare Pty Limited were concurrent wrongdoers pursuant to s 87CE of the Act and further that the Court will be asked to apportion any damages under s 87CD(1)(a) and (b) of the Act. 8 The issue of apportionment gave rise to new factual issues. The applicants recognised that it would be, in view of these developments, impossible for the hearing to take place during the period allocated commencing on 28 June 2010. Accordingly on 7 June 2010 the hearing was vacated by consent. 9 Since the vacation of hearing the parties have proceeded to two mediations but they have proved unsuccessful. Accordingly the parties are now preparing for the hearing. 10 On 27 August 2010 Colliers filed a substantially amended defence and on 21 September 2010 Colliers filed the Notice of Motion for additional security for costs, which is the subject of this application.

Applicants' response 11 The applicants oppose the grant of any further security for costs. The applicants submit that the respondents are in default under the directions of the Court concerning the preparation for hearing and that such conduct is such as to infringe the requirements of s 37M of the Federal Court of Australia Act 1976 (Cth) ('the Court Act') which provides: The overarching purpose of civil practice and procedure provisions

(1) The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes: (a) according to law; and

(b) as quickly, inexpensively and efficiently as possible.

(2) Without limiting the generality of subsection (1), the overarching purpose includes the following objectives: (a) the just determination of all proceedings before the Court; (b) the efficient use of the judicial and administrative resources available for the purposes of the Court; (c) the efficient disposal of the Court's overall caseload; (d) the disposal of all proceedings in a timely manner; (e) the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute. (3) The civil practice and procedure provisions must be interpreted and applied, and any power conferred or duty imposed by them (including the power to make Rules of Court) must be exercised or carried out, in the way that best promotes the overarching purpose. (4) The civil practice and procedure provisions are the following, so far as they apply in relation to civil proceedings: (a) the Rules of Court made under this Act;

(b) any other provision made by or under this Act or any other Act with respect to the practice and procedure of the Court. 12 In particular the applicants refer to the Colliers letter which raised numerous issues concerning the need to issue subpoenas, obtain expert evidence and expert advice. The applicants submit such procedures could have been undertaken in a more timely manner. The applicants also submit that Colliers had apparently received differing advice and have accordingly altered their position throughout the interlocutory stage of the proceeding. The applicants point to the fact that while a separated trial as to liability and quantum was not opposed when first raised in December 2009, Colliers had changed its approach to the litigation and had expanded it substantially. 13 The applicants submit that, in accordance with the approach taken by Branson J in Hopeshore Pty Ltd v Melroad Equipment Pty Ltd (2004) 212 ALR 66, the Court should dismiss the application for costs in this case because of the failure by Colliers to prepare for hearing in a timely manner. Such decision was handed down before s 37M(3) of the Court Act was enacted. Nevertheless the applicants submit that the same principle applies with equal, if not more force, in view of the amendment of the Court Act to include s 37M(3). 14 The applicants submit that the fact that mediations had occurred was not a reason for Colliers to cease its preparation for the hearing. The applicants rely upon the fact that evidence has not yet been filed by Colliers and that Colliers assert that it has not been able to do so because it has not had complete discovery. However, the applicants assert that no steps have been taken by Colliers to seek further discovery since 23 March 2010 when an order was made requiring the parties to provide discovery in accordance with O 15 r 2(3) of the Rules. 15 In addition, the applicants submit that the amount claimed by way of security has not been calculated upon the basis of the costs which the Court will award as set out in Schedule 2 to O 62 r 12 of the Rules. Accordingly the applicants submit that the Court has no legitimate guide to determine the sum which would be appropriate if in fact the Court came to the conclusion that further security was justified. 16 The applicants finally submit that Colliers' delay in making an application for further security for costs is a compelling factor for the Court to refuse such security. The applicants submit that they have incurred substantial costs in the interim and any order requiring them to pay further security after such delay would be unfair or oppressive.

Findings 17 Section 56 of the Court Act invests the Court with power to award security for costs. Such power is broad (see James and Others v Australia and New Zealand Banking Group Ltd and Others (No 1) (1985) 9 FCR 442 at 444; Bell Wholesale Co. Ltd v Gates Export Corporation (1984) 2 FCR 1 at 3), but is to be exercised rationally (see CBS Records Australia Ltd and Others v Telmak Teleproducts (Aust) Pty Ltd (1987) 72 ALR 270 at 285). It has been described as a power which is 'essentially one of risk-management between the parties having regard to their legitimate interests both as applicant and respondent': East Grace Corporation v Xing (No 1) [2005] FCA 219 at 6. The power however must be exercised judicially: Airtourer Co-operative Ltd v Millicer Aircraft Industries Pty Limited [2004] FCA 1400 at [17]. 18 The applicants acknowledge that they have no assets in the jurisdiction. Accordingly, prima facie, they are a party against whom an application for security for costs can properly be made (see Energy Drilling Inc. v Petroz N .L. & Ors (1989) ATPR 40-954 at 50,422). In P S Chelleram & Co Ltd v China Ocean Shipping Co and Another (1991) 102 ALR 321 at 323, McHugh J observed that the fact that an applicant is resident out of the jurisdiction and has no assets within the jurisdiction 'has been seen as a circumstance of great weight in determining whether an order for security for costs should be made.' 19 It has been held that the practice in Australia has 'for a very long time' required that a party who is not ordinarily resident and who has no assets within the jurisdiction 'is normally ordered to give security for costs': see NV Sumatra Tobacco Trading Company v British American Tobacco Australia Services Ltd (ACN 004 069 649) (2008) 79 IPR 286 at [13]. 20 The Court is mindful that there has been a delay in the preparation of the matter for hearing including the vacation of the original hearing date. Such delay has materialised from Collier's conduct in deciding that it was necessary to raise the various sections of the Act relating to proportionate awards of damages. However the Court accepts that there is an explanation for such delay. The evidence of the applicants was served on 12 April 2010. Counsel briefed for Colliers in the proceedings was not available to consider the matter until early May because of existing court hearings. It was at this point that attention was paid to the evidence obtained. After such consideration, Colliers deemed it necessary to respond to the evidence in such a way as to substantially expand the issues to be determined in the proceedings. Those issues relate both to liability and quantum and will involve substantial expert evidence from a variety of experts. 21 The Court accepts that there have also been mediations which may have had the effect of deflecting the parties from the preparation of the matter for hearing. No doubt such suspension resulted from the desire to save expenditure on avoidable legal costs. 22 Taking into account the above circumstances, the Court is unable to agree that Colliers have engaged in conduct contrary to the provisions of s 37M(3) of the Court Act, nor is it responsible for conduct of the kind referred to by Branson J in Hopeshore. 23 Nor is the Court able to conclude that Colliers' delay in making the application for further security will render any further costs order oppressive or prejudicial to the applicants.

Quantum of claimed costs 24 The Court notes that the total costs to be incurred by Colliers are estimated by solicitor Mr Alistair Little to amount to $476,119.34. Such assessment has been modified by 25% in recognition of the fact, in Mr Little's opinion, that only 75% of solicitor/client costs would be recovered on taxation in this Court. Incorporating that modification and subtracting the $100,000 that has already been provided as security for costs, Colliers seek further security for costs in the amount of $357,089.50. Such assessment is made upon the basis of a hearing of 15 days duration. 25 The basis of the charges do not accord with those set out in Schedule 2 of the Rules entitled 'Scale of Costs for Work Done and Services Performed'. Order 62 rule 12 of the Rules provides that such schedule will limit the charges that solicitors are entitled recoup for work undertaken in this Court. 26 The rates nominated by Mr Little's affidavit appear to be costs which will be charged to Colliers rather than costs that might be ordered in accordance with Schedule 2 of the Rules. Nevertheless they do provide some indication of the amounts which might be incurred on a solicitor/client basis. 27 The principles governing the grant of an application for security for costs are well known, see for example Equity Access Ltd v Westpac Banking Corporation & Ors (1989) ATPR 40-972 per Hill J; KP Cable Investments Pty Ltd v Meltglow Pty Ltd and Ors (1995) 56 FCR 189 at 197-8 per Beazley J; Cultivaust Pty Ltd v Grain Pool Pty Ltd [2004] FCA 1366 at [13] per Finn J; Chapman v Luminis Pty Ltd [2002] FCA 496 at [13] per Tamberlin J; Croker v Sydney Institute of TAFE (State of New South Wales) [2003] FCA 942 per Bennett J. 28 The relevant considerations in an application for security for costs may be summarised as follows: 1. the chances of success of the applicant and whether the claim is bona fide; 2. the risk that the applicant could not satisfy a costs order; 3. whether the application for security for costs has been promptly brought; 4. whether the application for security for costs is being used oppressively to deny an impecunious litigant access to the court; 5. whether the applicant's impecuniosity arises out of the act in respect of which relief is sought; 6. whether there are third parties standing behind the applicant who are likely to benefit from the litigation and if so, whether they have proffered security for the costs of the litigation; 7. whether an order for security for costs would frustrate the litigation; 8. whether there are any public interest considerations to be taken into account; 9. any matters relevant to the discretion which are distinctive to the circumstances of the case. 29 In this instance, consideration 2 above is of the utmost significance taking into consideration the fact that the applicants are not present in Australia and have no assets in this jurisdiction.

Should an award be made? 30 The Court is mindful that Colliers, if successful in the litigation, may have substantial difficulty in recovering any costs since the applicants are not resident in Australia and have no assets in Australia. Such factor weighs heavily in favour of the grant of an award of additional costs. 31 The Court also takes into account the nature of the proceedings. Whilst Colliers claim that the case against it is weak, the Court cannot draw such conclusion. However, it is apparent that major factual and other issues will arise in the proceedings with the consequence that the proceedings will be complex and will require a hearing of at least ten days. 32 The applicants have submitted that because the proceeding might be extended by virtue of the numerous issues which Colliers seek to raise, they should not be held responsible for meeting an award for additional security. Despite such submission the defences raised by Colliers may be availed of and, as far as the Court is able to determine, there is no suggestion that the defences are being raised vexatiously or for improper purposes. In these circumstances, the Court considers that the estimated duration of the hearing is an inevitable result of complex proceedings. 33 There is no suggestion raised by the applicants that an award of costs would stifle the litigation, nor that they are unable to meet an order for additional security. In these circumstances the Court is satisfied that further security for costs is warranted. 34 The remaining question is the quantum which should be ordered. The Court takes note of the various issues raised by Mr Little in his assessment. It is not necessary to formulate a precise calculation, and at this stage of the proceedings, any such calculation would only be an estimate. 35 The Court notes that costs to date of $134,719.34 have been incurred, albeit based upon a calculation which does not accord with Schedule 2 set out above. In Mr Little's assessment, the further costs will amount to approximately $341,000. 36 I consider that a further sum of $250,000 should be awarded by way of security. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Cowdroy.