Canberra Residential Developments Pty Ltd v Brendas

REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT) 1 This is an application for security for costs in proceedings in the appellate jurisdiction of the Court. The appeal is brought from the decision of a judge of the Court: Canberra Residential Developments Pty Ltd v Brendas (No 5) (2009) 69 ACSR 435. It is common ground that the appellant should give security for costs and the only substantive issue before me is the amount of security that should be given. 2 The first and second respondents filed a motion for security on 26 March 2009, a little over a month after the notice of appeal was filed. The notice of appeal raised over 19 grounds of appeal, some of them involving a number of subparagraphs and sought 11 different orders including, an order for a rehearing by a different judge. On 13 March 2009 the first and second respondents filed a notice of contention containing six grounds that had been briefly dealt with in obiter dicta by the primary judge. 3 In support of the motion Ian Gillespie-Jones, the solicitor who had acted for the first and second respondents and another party (who has not been joined to the appeal) in the proceedings before the primary judge, outlined the basis of the claim for security for costs, then sought in an amount of $135,000. Mr Gillespie-Jones is a solicitor of considerable experience having specialised in commercial litigation for over 30 years. He deposed to seeking to retain on the appeal the same senior and junior counsel as had appeared at the trial. He ascertained their charge out rates and made estimates of the fees which the first and second respondents would be entitled to recover were a taxation to proceed. 4 The then solicitors for the appellant were asked by Mr Gillespie-Jones in a letter sent on 27 February 2009 to discuss the provision of security. It is significant that they responded on 4 March 2009 by indicating that they anticipated receiving instructions to provide security by consent, once the appellant had consulted "various parties including the litigation funder." Thereafter, Mr Gillespie-Jones wrote a number of letters that were apparently not responded to in writing, but through telephone conversations prior to filing the motion. None of the responses put in doubt the first and second respondents' entitlement to security, but they also did not agree on its quantum. 5 No suggestion has been raised that the first and second respondents have delayed in applying for security. It is common ground that goods and services tax should not be included in the amount of security, because that tax would not be an expense that would be allowed by a registrar on an assessment for taxation. On 24 April 2009 Stone J set the motion down for hearing today. 6 Until Friday, 26 June 2009, the evidence on the motion was solely contained in the affidavit of Mr Gillespie-Jones of 26 March 2009. However, on Friday, Mr Gillespie-Jones filed an updating affidavit in which he identified that his previous estimate required some adjustments. Ultimately, Mr Gillispie-Jones estimated the amount of $63,000 for which the first and second respondents claimed security for senior counsel at the rate of $7,000 per day for nine days and approximately $19,100 for junior counsel at the rate of $1,909 for 10 days together with profit costs for himself that would be taxed on a party/party basis of $40,000. In addition, he estimated that the recoverable costs for the present motion would be in the order of $7,300 comprised of counsel's fees for the hearing and preparation of approximately $4,800 and party/party solicitors costs of about $2,200 together with some disbursements. 7 Counsel for the first and second respondents also filed detailed written submissions in support of the motion last week. When the motion was called on for hearing today, counsel for the appellant sought to cross-examine Mr Gillespie-Jones on his affidavit. He also informed me that the solicitor acting for the appellant, who had sworn an affidavit on Friday, would not be available for cross-examination. The appellant sought to tender and rely upon a report of a costs consultant, also provided to the first and second respondents late on Friday, in circumstances where the consultant was available for cross-examination but had not made any affidavit in the proceedings. 8 I considered that the appellant had given no satisfactory explanation of basis on which it sought to lead detailed and somewhat complicated responsive evidence as late as the Friday before the hearing and to seek to cross-examine on an interlocutory motion, that involves a deal of assessment by way of impression, as to an appropriate sum to provide for security. The motion had been set down for hearing today some two months ago. I rejected the application to cross-examine Mr Gillespie-Jones and to adduce the costs consultant's report by way of it being verified by the cost consultant in the witness box, first, on the basis that there had been no indication whatever of the amount which the respondents sought to advance until as late as Friday. Secondly, that indication had been contained in the costs consultant's report. In my opinion, the late addressing of evidence by the appellant on this motion was unsatisfactory and inappropriate. The first and second respondents had asked the appellants for the documents upon which the costs consultant's report had been based as soon as they were received but these were only provided this morning. This is commercial litigation in which the appellant, on the evidence before me, at least, has the benefit of litigation funding and should have properly advanced and articulated its case on the motion well before last Friday. If I were to give a fair opportunity to the first and second respondents to reply to the report of the costs consultant it would have necessitated an adjournment. That was not in the interests of justice. Therefore, I rejected the costs consultant's report as evidence. But I allowed the appellant to rely on that report by way of a submission, but it did not do so. 9 In those circumstances, I considered that the first and second respondents had prepared for the hearing of motion on the basis of the appellant not relying on any evidence on that point and the appellant had had ample opportunity well prior to Friday last week to have put its house in order. There was no reason I should not proceed to hear the motion today substantially on the basis of the evidence as it had stood prior to the most recent intervention. Although Mr Gillespie-Jones had supplemented his affidavit, that had not caused any significant difficulty for the appellant, over and above the difficulty it had beforehand when it had no evidence. 10 The appeal is from a trial that took 11 days to hear. The trial judge's judgment is extensive. The notice of appeal and notice of contention reveal that it is likely that there will be substantial contest in the appeal on findings of fact as well as the legal issues that were before the primary judge. The case involved allegations of a joint venture having been constituted and of the first and second respondents participating in a breach of their alleged fiduciary duties. The primary judge rejected that case. But at the heart of the appellant's grounds of appeal is the claim that, on a proper analysis of the evidence, fiduciary duties were owed by the first and second respondents and that his Honour, in the ways articulated there, erred in failing to find that those duties were owed and to give relief on the basis of the breaches alleged. Likewise, the notice of contention relies on some analysis of the evidence and the legal conclusions to be drawn from that analysis. 11 Mr Pappas, who appeared for the appellant, took me to a number of paragraphs in the written submissions put forward by the first and second respondents and their co-respondent at the trial (who is not proceeded against in the appeal) which dealt in substance with the grounds in the notice of contention. He claimed that Mr Gillespie-Jones' estimate that senior and junior counsel would each need to spend about five days in preparation of written submissions advancing the primary case of the first and second respondents as well as responding to the appellant's written submissions in the appeal was an overestimate and that I should allow about three days for that work. He contended that much the same ground had already been traversed in preparing the submissions for the primary judge that would be needed in the task of counsel preparing written submissions for the appeal. 12 Mr Gillespie-Jones had estimated also that senior and junior counsel would need to spend a further two days in preparing oral argument for the hearing of the appeal together with any written submissions of the appellant in reply. He based that in part on the discussions he had with counsel. Mr Gillespie-Jones' revised estimates, in his latest affidavit, increased the amount for his own costs on a party/party basis from his previous estimate of $32,000 to $40,000. He said that in contrast to his earlier estimate, he had already rendered net costs of about $26,000 to the first and second respondents up to the end of May. He considered that he would render another substantial sum which, of course, would have to be discounted back to what would be recoverable on a party/party basis. He concluded that on a party/party basis, his solicitor's costs of the appeal would be about $40,000. 13 Mr Pappas argued that it was not realistic to estimate that counsel would require seven days preparation time for a two day appeal. He thought three days should be allowed. 14 I must deal with this application broadly as a matter of impression. On the material before me and on the basis of the arguments, it seems to me that the case sought to be run on appeal by both parties will involve a substantial investigation into the factual basis of the claims for relief made by the appellant to the primary judge. Not infrequently in appellate advocacy does one find that new counsel, as here, being a different senior, but common junior, counsel who settled the notice of appeal in contrast to the person who was senior counsel at the trial, will present the case differently. Indeed, it is not infrequent that the case is presented differently when the same counsel appear on the appeal. 15 There is a considerable amount of documentary evidence. I have been informed that there are over 800 pages of transcript of the trial. It is also important that the security to be provided will be adequate to cover contingencies that may arise in the conduct of the appeal. The trial concluded in April 2008 and his Honour gave judgment on 30 January 2009. It is now the end of June and the appeal papers have not yet been settled. It is unrealistic to expect that the detail of a lot of what transpired at the trial will be retained in counsel's or solicitors' memory. Careful and appropriate preparation for a case which involves a claim for a considerable sum of money and complex issues of fact and law will need to be undertaken. I consider that it would also be necessary for counsel for the first and second respondent to deal with any submissions by the appellant in reply to their contentions on the notice of contention, probably in the form of a written response. 16 Of course, I am not a taxing officer but I am able to form, on the basis of experience, a reasonable estimate of the time involved in preparation of serious litigation such as this. A two day appeal necessarily will involve a considerable amount of preparatory work by the legal representatives of the parties. One with over 19 grounds of appeal and 6 grounds of contention will have an additional degree of complexity. Mr Gillespie-Jones is an experienced practitioner and the appellant has not, apart from making submissions, identified any substantial over-estimation by him in the allocation of time necessary to meet the first and second respondents' lawyers' responsibilities to properly prepare their cases. 17 Nonetheless, I think that I should err slightly on the side of caution. I consider that, overall, I should allow six days of preparation time for senior and junior counsel to enable the matter to be properly prepared for hearing. I see no reason why I should not allow the preparation at the rates which Mr Gillespie-Jones deposed those counsel charge. It is not unreasonable for senior counsel, from Sydney, who appeared at the trial to be briefed to argue this appeal in Canberra. There will be some additional expense as a result of that. On that basis it seems to me that I should allow a total eight days of fees, including two days for the actual hearing, for each of the counsel being $56,000 for senior counsel and approximately $16,000 for junior counsel. 18 In relation to Mr Gillespie-Jones' costs, he explained that the increase in his estimate had come about for a number of reasons. First, there had been additional attendances trying to settle the appeal index which still had not been finalised. The appellant had changed solicitors and the appellants had been involved in some delay in the prosecution of the proceedings. True it is, as Mr Pappas argued, that there has been no detailed breakdown of how Mr Gillespie-Jones prepared his estimate of $40,000 on a party/party basis. If I allow for the fact that what he has rendered to his client might, on a solicitor/client taxation, tax out at somewhere between 60% and 70% of the solicitor/client charges, there will be about $16,000 to $17,000 recoverable from what Mr Gillespie-Jones has rendered to the end of May 2009. Some of that involved preparation for this hearing. 19 Doing the best I can, and having regard to the volume of material that will be needed to be collated for the appeal papers, and the attendances in settling indices, briefing counsel, the consideration of submissions and assistance in preparing those submissions, I think it is reasonable to allow a sum for security for solicitors' costs on a party/party basis, excluding work for this motion, in the sum of $32,500. I base that on Mr Gillespie-Jones' estimate with some discounting to reflect the view I have formed that there may be less work involved by his firm than he has anticipated. 20 The costs of this motion were estimated at about $7,300. Having considered the matter and the detail of the submissions prepared by the counsel for the first and second respondents I am not able to see that those fees are exceptional or unreasonable. I think I should allow $6,500 as security in respect of this motion, thus discounting a small sum that might be taxed off for possible unnecessary fees. I also allow sums for senior counsel's disbursements for travel to and accommodation in Canberra and for general contingencies. I consider a reasonable sum to order overall is $120,000. 21 The Court of Appeal of the Supreme Court of New South Wales has considered the presence of a litigation funder standing behind an appellant to be of significance in ordering security for costs. In Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd (2008) 67 ACSR 105 at 120-121 [51] Hodgson JA said that: "[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 a person whose interest is solely to make a commercial profit from funding the litigation." He noted that litigation funding is not now contrary to public policy but the court system was there: "primarily to enable rights to be vindicated rather than commercial profits to be made; and in my opinion the 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." 22 And his Honour repeated those sentiments at 122 [61]. Campbell JA agreed: Green 67 ACSR at 128-129 [85]-[88]. He considered an extremely relevant factor was the extent to which, if the litigation were successful, it would be for the private profit of the funder. In that case he observed the court had no information as to what the funder would receive. I am in the same position. I have been informed, however, that in addition to a litigation funder, 19 members of the syndicate promoting the appellant also have some interest in, or had some interest in, funding the proceedings below. The primary judge found in Canberra Residential Developments 69 ACSR at 437 [6] that: "The applicant has no bank account in its own name as opposed to in a representative capacity. It has never "earned $1" and never lodged a tax return on its own account." 23 Clearly, there are persons who will seek to benefit from the conduct of this appeal. At present, they are not obviously at immediate risk were the appeal to fail and the appellant ordered to pay costs. On the material before me, the appellant would not be able to pay any costs ordered against it. 24 It is therefore important that an order for security provide, in a case like the present, protection for respondents who may well not be able to recover costs, were they to have the appeal against them dismissed. They should not then need to bring other applications to seek third party costs orders in the event that what is set aside as security is not sufficient. The first and second respondents have the benefit of a decision by the primary judge in their favour. However, there are many challenges to the primary judge's findings which may require extensive investigation. 25 In arriving at the figure of $120,000, I have borne all of these factors in mind in order to be able to ensure that there will be a sum set aside that is sufficient to enable proper recovery of costs by the first and second respondents without that sum being oppressive on the appellant. 26 There is no suggestion or evidence before me that the order for security would in any way interfere with the appellant's ability to bring or prosecute the appeal. Indeed, if a litigation funder is behind the appellant, there is no doubt at all that it will be able to provide that security without difficulty. In addition, there are numerous others personally involved in the syndicate, the subject of the joint venture to which the first and second respondents allegedly owed fiduciary duties, who will also benefit from the litigation. I am satisfied that the figure I have suggested would not be oppressive. In those circumstances I think I should order the appellant provide security in the sum of $120,000. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.