CIP Group Pty Ltd v So

Background 6 There is no need to set out the metes and bounds of the intense disputation between the parties or the precise nature of the complaints made by each side. They have been articulated extensively in other interlocutory decisions in these proceedings: see CIP Group Pty Ltd v So (2022) 164 ACSR 566 (CIP (No 1)) and CIP Group Pty Ltd v So (No 3) [2023] FCA 518 (CIP (No 3)). 7 However, it is useful to provide some description of the circumstances of the litigation to date. The relevant matters were helpfully set out in the written submissions filed by the So interests, from which the following is partially taken. 8 The present proceeding was commenced on 25 March 2022. By an originating process, the Clancy interests (being CIP Group Pty Ltd, CIP 1 Pty Ltd and Pyrmont Portfolio Pty Ltd) sought relief including orders for leave to bring proceedings under ss 236 and 237 of the Corporations Act 2001 (Cth) (Corporations Act) in the name of the Carver's Reach entities. Those entities were the operational companies involved in the Carver's Reach development pursued by Mr So and Mr Clancy. 9 The substance of the derivative proceedings relates to, first, the enforcement of a written loan agreement and associated guarantees entered into in November 2019 by one of the So interests (Ultimate Investment Portfolio Pty Ltd) in favour of one of the Carver's Reach entities (GGPG Pty Ltd), and secondly, the subsequent receivership of the some of the Carver's Reach entities. The substantive relief sought by the Clancy interests in the proceeding includes an order that, pursuant to s 233 of the Corporations Act, shares held by the Clancy interests in the Carver's Reach entities be purchased by the companies associated with Mr So (being the So interests). 10 On 16 December 2022, this Court granted leave under ss 236 and 237 of the Corporations Act for the Clancy interests to bring derivative proceedings in the name of the Carver's Reach entities. That was subject to the Clancy interests' undertakings: (a) to indemnify the second to thirteenth respondents (Companies) against any costs orders made against them in the proceeding; (b) to increase the sum held by their solicitors to support that indemnity to $750,000 and not to deal with that sum unless the parties agree or the court otherwise orders. 11 An amended originating process and amended statement of claim was filed by the Clancy interests on 10 February 2023. 12 On 10 March 2023: (a) UIP 1 Pty Ltd, an entity associated with Mr So, was joined as the eighteenth respondent to the proceeding; (b) the orders giving the Clancy interests leave to pursue the derivative proceedings were varied to include the claims made and the relief sought in the amended originating process and the statement of claim filed 10 February 2023; (c) the security provided by the Clancy interests by way of the undertaking was modified on the basis that they paid a further $100,000 to the trust account of Bartley Cohen (such that the total amount held would become $850,000); and (d) leave was given for the Clancy interests to amend their originating process in the form filed on 10 February 2023. 13 The Clancy interests filed a further statement of claim on 14 March 2023. 14 On 28 July 2023, the nineteenth to twenty-first respondents (being Ms Lai Wah Wong, Ms Suk Kuen Leung and SEL Property Investments Pty Ltd) were joined to the proceedings. 15 On 5 September 2023: (a) Mr Paul Wong, a solicitor of the firm Thynne + Macartney, was joined as the twenty-second respondent; (b) the orders granting leave to the Clancy interests to bring the derivative proceedings were again varied to cover the claims in a further amended originating process and amended statement of claim. That leave remained subject to the undertakings recorded in the orders of 16 December 2022 and as modified on 10 March 2023; and (c) the proceeding was listed for a four-week trial commencing on 9 September 2024, to be heard together with proceeding QUD 462 of 2022. 16 The further amended originating process and the amended statement of claim were filed on 8 September 2023. 17 The respondents variously filed their defences to the amended statement of claim between 12 October 2023 and 7 November 2023. 18 Directions were made on 30 November 2023 for the undertaking of certain interlocutory steps including the making of discovery and the exchange of lay and expert evidence. An order was also made that evidence filed in QUD 462 of 2022 be evidence in the present proceeding. 19 Replies to the defences were filed on 22 December 2023. 20 On 6 March 2024, Colin Biggers & Paisley, the solicitors for the So interests (or some of them at that time), sent a letter to Bartley Cohen, the solicitors for the Clancy interests, raising (amongst other things) concerns as to the Clancy interests' ability to meet any adverse costs order, and as to the value of the indemnity given in connection with the claims raised in the derivative proceedings. As a first step, the letter requested further information as to the financial position of the Clancy interests and Mr Clancy himself. 21 Bartley Cohen responded on 27 March 2024, advising that the Clancy interests declined to provide any further information as to their financial position, and further stating that any application for security for costs and/or to increase the sum of the indemnity would be resisted. 22 On 22 April 2024, the So interests filed the present application for security. For a number of reasons, the application was not able to be heard until 12 July 2024. 23 On 8 May 2024, orders were made in relation to the action, including that: (a) the trial commencing on 9 September 2024 be vacated; (b) there be an extension of time for the filing and serving of the lay and expert evidence; and (c) the proceeding be listed for a four-week trial commencing on 7 April 2025, to be heard together with QUD 462 of 2022. 24 On 19 June 2024, by a letter to Colin Biggers & Paisley, Bartley Cohen indicated that they had received instructions from the Clancy interests to seek leave to amend the statement of claim to expand the derivative claims and to add the law firm, Thynne + Macartney, as a respondent to the proceeding in relation to its alleged liability for Mr Wong's conduct, and for amounts received by it from the receiver of some of the Carver's Reach entities. 25 On 3 September 2024, orders were made joining Thynne + Macartney as the twenty-third respondent to the proceeding. Orders were also made under s 241, or alternatively ss 236 and 237, of the Corporations Act amending the leave granted to commence derivative proceedings to incorporate the claims against Thynne + Macartney.

Principles relating to security for costs 26 There was little dispute as to the principles to be applied in determining whether to make an order for security for costs. The following statements in relation to the same have been taken from the helpful written submissions filed by the parties. 27 In this case the order for security is sought pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act), r 19.01(1)(a) of the Federal Court Rules 2011 (Cth) (Rules) and s 1335 of the Corporations Act. Both s 56 and s 1335 have been regarded as conferring a discretion that is broad and essentially unfettered, albeit that it must be exercised judicially: General Trade Industries Pty Ltd (in liquidation) v AGL Energy Limited (No 2) [2023] FCA 556 [22] (General Trade (No 2)), citing Hopkins v AECOM Australia Pty Ltd (No 5) [2015] FCA 1228 [44], [57] and Chopsonion Pty Ltd (Controllers Appointed) v Watts Meat Machinery Pty Ltd [2022] FCA 1309 [22]. 28 The fundamental purpose of making an order for security for costs is to ensure that a successful party has protection for costs incurred in successfully defending a proceeding: Capital Webworks Pty Ltd v Adultshop.com.Limited [2008] FCA 40 [13] (Capital Webworks). At the heart of the discretion is fairness, both in terms of whether security should be granted, and if so, in what amount: Madgwick v Kelly (2013) 212 FCR 1, 21 [92]. 29 In cases such as the present - that is, where the application is made on the basis that the applicant is impecunious and will be unable to satisfy a potential costs order in the event it is unsuccessful - there may be no practical difference in the operation of s 56 and s 1335: General Trade (No 2) [22]; Austcorp Project Number 20 Pty Ltd v LM Investment Management Ltd (in liq) [2014] FCA 1371 [20] - [21]. 30 However, one distinct requirement of s 1335(1) is the threshold issue that "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". It is not doubted that this requirement is "undemanding", and it need only be shown that there is "a rational basis for the belief that [an applicant] will be unable to pay its costs": Cruz Industries Pty Ltd v Sunny Girl Pty Ltd [2017] FCA 1343 [20]. 31 Once it is established that the applicant will be unable to meet an order for costs, the evidentiary burden shifts to it to establish why security should not be granted. However, the onus always remains with the party seeking the security to persuade the Court that an order should be made: General Trade (No 2) [22]. 32 The authorities indicate that there are several regularly recurring considerations which arise in applications for security for costs. They include the following: (a) the applicant's prospects of success in the action; (b) whether an order for security would stifle the proceedings and thereby prevent the applicant from pursuing its claim; (c) if the applicant is impecunious, whether the impecuniosity arises from the conduct of the respondent; (d) the quantum of the risk that the applicant could not satisfy an order for costs; (e) the time in the proceedings in which the application is brought and, in particular, whether it has been brought promptly; (f) whether there are any persons standing behind the applicant who are likely to benefit from the litigation and who are willing to provide the necessary security; and (g) whether the persons standing behind the applicant (if any) have offered any personal undertaking to be liable for the costs and, if so, the form of any such undertaking. See General Trade (No 2) [25]; Acohs Pty Ltd v Ucorp Pty Ltd (2006) 155 FCR 181, 185 - 186 [12], citing Equity Access Limited v Westpac Banking Corporation [1989] ATPR ¶40-972. 33 In relation to the first matter, it must be kept in mind that the Court should not embark on a detailed consideration of the merits of the applicant's case. What is usually required is to ascertain whether or not there is an arguable bona fide claim: Hill v Zhang [2019] FCA 1562 [40]; Chief Disruption Officer Pty Ltd as Trustee for the McDonald Family Trust v Michel, in the matter of Laava ID Pty Ltd [2022] FCA 148 [54]. It is often observed that the applicant's prospects should be regarded as somewhat of a neutral consideration: Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited [2012] FCAFC 57 [15]. No doubt this is because it will only be in rare cases that the Court will be in a position to make any sufficiently accurate assessment of the merits of the applicant's case so as to allow the prospects of success to have any relevant impact on the exercise of discretion. 34 Whilst any delay in making the application is relevant, its weight is variable. Though it is generally regarded that the application should be made promptly: Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd (1985) 1 NSWLR 114, 123: that is not an immutable rule, and the impact of any delay will vary with the circumstances of the particular case: PPK Willoughby Pty Ltd v Baird [2019] NSWCA 48 [11] (PPK Willoughby). Certainly, an applicant should not usually be permitted to expend time and costs in the pursuit of a claim only to be brought to a halt or have added expense imposed by a late application for security. Where it can be shown that the delay in the making of the application is productive of prejudice to the applicant of something more than a minimal amount, it becomes a not insignificant factor in the exercise of power. Some authorities suggest that it cannot generally be presumed that delay, even substantial delay, is prejudicial: see, for example, United Commercial Projects Pty Ltd v PHHH Investments No 2 Pty Ltd [2019] VSCA 192 [36] - [39]. Whilst that might be accepted, the longer the delay, the easier it will be to show that it prejudices the applicant. 35 The essence of the above authorities was accurately summarized by Kelly J in Bartter Enterprises Pty Limited v PFJV Pty Limited [2024] QSC 87 [21] - [22] (Bartter v PFJV), where his Honour observed the following: [21] The issue of delay will weigh more significantly in some cases than others. It is not always a critical consideration. In Crypta Fuels Pty Ltd v Svelte Corporation Pty Ltd, Lehane J noted that cases in which orders for security were made despite delay usually involve one or both the following factors: (a) the hearing or resumed hearing was not immediately imminent; and (b) there had been forewarning, usually correspondence, concerning the financial standing of those who might benefit from the success of an applicant or plaintiff and often detailed correspondence foreshadowing an application for security for costs. [22] The cases are replete with statements to the effect that an application for security must be made promptly and delay is relevant. But as I have indicated, delay is not in every case necessarily particularly significant. Where there is no suggestion that security will stifle litigation, delay can be, depending upon the facts of the case, a matter of less significance. In the present case, there is no suggestion that ordering security will stifle the litigation; however, the facts of the case in the present matter include that the trial is now to be regarded as imminent and there are some peculiar aspects about the history of this particular litigation as revealed by the affidavit relied upon by the defendant's solicitor. (Footnote omitted). 36 In that case, and in the light of the significant delay in the making of an application for further security and certain undertakings having been given by the directors, his Honour refused to make the orders sought. 37 In the end, whilst any delay in making an application will be a relevant discretionary factor, the degree or extent of its relevance will vary according to the circumstances along a spectrum from the slight to the extreme: PPK Willoughby [11]. 38 As to the quantum of the amount of security ordered, it is not appropriate to provide a complete and certain indemnity to an applicant: Brundza v Robbie & Co (No 2) (1952) 88 CLR 171, 175; Capital Webworks [14]. Further, it is not expected that the process will require a full assessment of costs, but rather that the Court should adopt a "broad-brush" approach having regard to the information before it: Carrano Investment Holding Pty Ltd v Siennamia Investments Pty Ltd [2022] NSWCA 262 [24].

Principles relating to orders about the costs of derivative proceedings 39 Relevant to this part of the application is s 242 of the Corporations Act, which provides the following: The Court may at any time make any orders it considers appropriate about the costs of the following persons in relation to proceedings brought or intervened in with leave under section 237 or an application for leave under that section: (a) the person who applied for or was granted leave; (b) the company; (c) any other party to the proceedings or application. An order under this section may require indemnification for costs. 40 There is no doubt that this section is broadly worded and affords the Court considerable flexibility as to the orders which it may make in relation the costs of derivative proceedings: see Austin & Black's Annotations to the Corporations Act (LexisNexis) at [2F.242], citing (amongst others) Carpenter v Pioneer Park Pty Ltd (in liq) (2004) 51 ACSR 299 and Peters v Coastace Pty Ltd (2006) 57 ACSR 241. That includes the power to make orders for the provision of security for the costs of the respondents to any derivative action. 41 It can be accepted that different principles will apply depending upon whether the application is one for the provision of security or for the variation of an existing order in relation to security. In relation to the latter, it is generally accepted that the applicant for additional security should satisfy the requirements identified by McLelland J in Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44, 46: The overriding principle governing the approach of the court to interlocutory applications is that the court should do whatever the interests of justice require in the particular circumstances of the case. In giving effect to that general principle, and in recognition of the public and private interests earlier referred to, rules of practice have been developed in accordance with which the discretionary power of the court to set aside, vary or discharge interlocutory orders will ordinarily be exercised. Not all kinds of interlocutory orders attract the same considerations. … In the present case I am dealing with an interlocutory order of a substantive nature made after a contested hearing in contemplation that it would operate until the final disposition of the proceedings. In such a case the ordinary rule of practice is that an application to set aside, vary or discharge the order must be founded on a material change of circumstances since the original application was heard, or the discovery of new material which could not reasonably have been put before the court on the hearing of the original application. (Citations omitted). 42 The above principles are referred to as a result of a submission made by the Clancy interests that the So interests were, in effect, seeking an enlargement of the amount which had already been provided as security. This point was advanced on the basis that the sum held by Bartley Cohen in relation to the derivative action was the first tranche of security and that further security was being sought by the current application. However, that contention is not sustainable. No order has been made for the provision of security for costs by the Clancy interests in favour of the So interests, even though some security has been provided in respect of the derivative action. The current application should be treated as the first brought by the So interests, such that the foregoing principles concerning the variation of interlocutory orders are not relevant. 43 As will be discussed, whilst that conclusion initially weighs in favour of the So interests, it also creates the difficulty that those parties' first application for security has been brought at a very late stage of the proceeding.

The application for security for costs 44 As mentioned, the So interests seek security for costs from the Clancy interests in respect of the non-derivative claims brought directly against the So interests, as well as security in respect of the derivative claims. They seek an amount of $1,380,000 for their costs up to and including the last day of trial or, alternatively, $880,000 for their costs up to and including the first day of trial. 45 Mr Glen Williams, a partner at Colin Biggers & Paisley, gave evidence as to the costs incurred and those which are expected to be incurred by the So interests. He deposed that: (a) the costs incurred as at 19 April 2024 were $1,200,667.30, with the recoverable amount being $816,287.79; and (b) the further costs expected to be incurred up to and including the first day of trial were $1,102,615.00, with the recoverable amount being $918,728.50. 46 As will be discussed further below, for various reasons, Mr Williams' analysis of the expected costs lost some of the weight which might have otherwise attached to it. It is, however, convenient to consider whether it is appropriate to order security at all before considering the quantum sought. 47 The So interests sought security on the basis that the Clancy interests are impecunious in the sense that there was a risk that they will not be able to satisfy an order for costs if they are unsuccessful in the litigation. That was not disputed, with the result that the power in s 1335 of the Corporations Act is enlivened. The factors which were most relevant to whether an order for security should be made in this case are considered below.

The security provided in relation to the derivative proceedings 48 It is relevant that the Clancy interests have already provided substantial security for the costs of the derivative proceedings which will be available to meet any costs orders made against the Carver's Reach entities if the claims brought in their name fail. At present, the amount which has been paid into the trust account of Bartley Cohen is $1,175,000. However, recourse to that amount is limited by the terms of the orders associated with it. In particular, the sum of $175,000 is earmarked for any claim for costs made by Mr Wong, and is not available to the So interests, should they become entitled to claim against the security. 49 Though the So interests sought to downplay the relevance of this security, it is important to the outcome which they seek to achieve. On any view, they will be entitled to seek access to that fund if they are successful in relation to the derivative claims and, though the present application was essentially in respect of the non-derivative claims, there is substantial overlap between the two groups of causes of action. Moreover, following the filing of the present application, the parties agreed that the sum held by Bartley Cohen should be made available as security for costs in respect of all claims made against the So interests in the proceeding. For that reason, the issue of the overlap in the circumstances of the several claims falls away substantially. The difficulty here is that it is not possible to know in advance all of the claims which will be made on that security and what the apportioning of it will be amongst the several respondents. 50 During the course of the hearing, it was acknowledged by the So interests that the amount held by Bartley Cohen would be available to them, subject to the potential limitations mentioned. Nevertheless, it was identified on their behalf that as at the date of the hearing of the application, the So interests had incurred some $816,000 by way of costs which were said to be recoverable on assessment. There was no real challenge to that figure, and it can be accepted as being accurate. The So interests further claimed that they will expend substantially more costs in the finalisation of the action, and Mr Williams' affidavit estimated the further amount of recoverable costs to be expended to the first day of trial to be $918,728.50. 51 In the circumstances, although the existence of the indemnity weighs against making an order for security, it is not possible to ignore the fact that it will be insufficient to cover all the respondents' costs in the event that it needs to be called upon.

The undertaking offered by Mr Clancy 52 The interlocutory application seeks an order that the "applicants (Clancy Entities) provide security". That indicates that the security is sought against the three named applicants, CIP Group Pty Ltd, CIP 1 Pty Ltd and Pyrmont Portfolio Pty Ltd. Although Mr Clancy is not himself a party to the proceedings (and, obviously, no application is brought against him), he nevertheless figures prominently as a person who stands behind the applicant companies. 53 In an earlier interlocutory application for security for costs brought by Mr Wong (which was resolved by consent), Mr Clancy offered a personal undertaking to be responsible for any costs order in favour of Mr Wong. As soon as that was raised by the So interests in relation to the current application, he made a similar offer to them in the same form as that made to Mr Wong. That is a relevant factor in the approach to be taken on this application. 54 However, the weight to be given to the proffered undertaking is reduced by the absence of any substantial evidence of Mr Clancy's actual assets. Whilst there was some indication that he is a person who is able to call upon substantial financial support should he need to, that does not suggest that others would provide him with it in circumstances where he was not willing to make a payment. It can be accepted that in an earlier interlocutory application in this matter and on the evidence then put before the Court, Mr Clancy was said to be a person who had "extensive property and business interests": CIP (No 3) [100]. Whilst that may be so, there was little evidence as to the manner in which those interests are held, and it may still be that no creditor would be able to obtain access to them without considerable difficulty. It is hardly unknown for land developers to ensure that they are effectively judgment proof, despite remaining able to access substantial funds when it is convenient for them to do so. Whether that is so in this case need not be determined. Even so, all that the evidence reveals is that Mr Clancy has access to substantial funds, but he has not gone on oath to identify what his actual assets are. If the Clancy interests are not successful in the litigation it may mean that Mr Clancy will need to make a choice between obtaining funds to meet his undertaking to be liable for the costs or having a sequestration order made against him. That, of course, is of little comfort to respondents who are seeking security in relation to their position. 55 Nevertheless, Mr Clancy is a person who stands behind the Clancy interests and the fact that he has offered a personal undertaking is relevant on this application. In that connection, it is noted that the parties put on further submissions following the hearing as to the current state of the law in relation to the offer of a personal undertaking by a person standing behind a company, and the significance which should be afforded to such an undertaking in the exercise of the Court's discretion. 56 As was observed recently in Fitzpatrick v Isaacs [2024] FCA 1187 on this point, it is well accepted that individuals who conduct their affairs through impecunious corporations ought not be permitted to expose their opponents to significant costs without being at risk of facing an adverse costs order. The unfairness in such a situation is patent, and an order for security often requires the individual to bring their own assets into play to correct that imbalance. If, however, the individual is already available for what they are worth, the object of the legislation may be seen to be satisfied: see, for example, Harpur v Ariadne Australia Ltd (No 2) [1984] 2 Qd R 523, 532. Similarly, before a corporate litigant can be heard to assert that an order making provision for security for costs will stifle an action, it should be clear that those who stand behind the company are also without means to meet the company's costs of the litigation, including the risk of an adverse costs order. In this context, an undertaking proffered by the shareholders of an impecunious plaintiff company to meet any adverse costs order is a significant factor in the exercise of the Court's discretion to order security. Indeed, it may be determinative in a particular case: see Jalpalm Pty Ltd v Hamilton Island Enterprises Pty Ltd (1995) 16 ACSR 532, 534; Intercraft Cabinets Pty Ltd v Sampas Pty Ltd (1997) 18 WAR 306, 316. However, the weight to be given to the undertaking is ultimately affected by its value, whether it is given by all of the shareholders or interested persons, and whether the form of any security backing the undertaking is adequate: Fitzpatrick v Isaacs [62]. 57 The weight of Mr Clancy's undertaking in this case is reduced where not all of the members of the applicant companies have exposed their assets to the risk of the litigation. The shareholders of the three applicant companies include Mrs Melissa Clancy (Mr Clancy's wife). The litigation is therefore pursued for her benefit as a member of the companies, but without her assets being at risk if the litigation is not successful. That factor weighs heavily in favour of the making of an order granting security: see Fitzpatrick v Isaacs [74], [79]. Substantial unfairness arises where a party is brought to court by another who might litigate through an impecunious company and whose personal assets are protected by the corporate veil. That unfairness is often addressed by the making of an order for the provision of security.

Delay and lateness of the application 58 It cannot be denied that the application for security was made late in the proceeding. It was filed in April 2024 which was some substantial time after the commencement of the action in March 2022. It was also after a number of interlocutory steps had been taken in the proceedings. Further, as stated above, it cannot be denied that this was the first application brought by the So interests for security for costs in relation to the non-derivative claims which are being advanced by the Clancy interests. As the authorities referred to earlier explain, the lateness of the application ameliorates against the granting of relief. 59 Though it can be accepted that delay in making an application might be adequately explained by the evolving nature of a proceeding, that could not be relied upon in the present case where most of the So interests have been parties since commencement. Whilst it may be that some changes have occurred and new parties have been added, the substance of the claims made against most of them has not altered. It is also not without relevance that the matter was set down for trial on 5 September 2023, and the application for security for costs was not filed until more than six months later. Though the initial trial dates have been vacated and new trial dates set, that occurred subsequent to the filing of the application in question. 60 The reason for the making of the application at this late stage in the proceedings was not made apparent during the hearing. In the course of cross-examination, it became clear that the So interests had at all relevant times been aware that the hearing of the proceeding would take in excess of four weeks. That had become clear from about 5 September 2023, being the date when the trial was initially set down. Yet, somewhat surprisingly, no application for security for costs was made by them at that time. It is therefore unusual that, in his affidavit, Mr Williams referred to the fact that the matter was set down for hearing as being a reason why an application for security for costs is now made. There was an absence of any sufficient explanation as to why, if the need for an application was then recognised, the So interests waited until April 2024 to file it. 61 The So interests also relied on the fact that the Clancy interests had filed a further amended originating process and amended statement of claim on 8 September 2023 as a reason for their bringing the application at this stage. Again, whilst those events occurred, they do not seem to support any valid reason as to why the application for security was only recently made. 62 On 6 March 2024, Mr Williams wrote an extensive letter to Bartley Cohen which set out the history of the matter and, at paragraph 40 stated: Given the developments in the proceeding since derivative leave was granted, the amount of the security is now grossly and demonstrably inadequate to support the Derivative Leave Indemnity. 63 Ultimately, the letter was of little use in understanding why the So interests' application was not made sooner. The reality is that the essence of the claim against them has remained substantially the same throughout the course of the proceeding. Although they identified some steps which had occurred in the course of the litigation, there is nothing in them which affected the nature of the case against them. Whilst additional parties were brought into the action and some proceedings were effectively joined with the present proceeding, none of that can be said to have impacted the parties who now seek further security. 64 It is unfortunate that there was a notable absence of any rational reason for why the application for security was not pursued at an earlier time in the litigation. There was ample time and opportunity for it to be made and, particularly so, given that security in relation to the derivative actions had been given. It was well within the competency and skill of Mr Williams to recognise both that the litigation was likely to be expensive and that the Clancy interests may not be in a position to meet an order for costs at the conclusion of the proceeding. In such circumstances, the absence of an explanation is concerning.

Prejudice from the delay 65 In the ordinary course, the unexplained delay is relevant to the Court's discretion. It might generally be assumed that the Clancy interests have progressed the litigation on the basis that any application for security will be made at in its early stages. They will necessarily tailor their expenses accordingly and, perhaps, on the basis that no late application will be made. When it is, it can be assumed that some level of financial disruption will occur. However, in this case it was not suggested that the Clancy interests would be unable to provide the amount sought to be ordered as security, and nor was it suggested that the action might be stymied if an order were made. That is to say, whilst there has been delay in relation to the making of the application for security, there was no evidence that the delay has caused the Clancy interests any specific prejudice (other than the generalised prejudice referred to above). This substantially negates the dilatoriness on the part of the So interests.

The re-litigation of earlier decisions 66 In the Court's reasons allowing the Clancy interests to pursue derivative actions in the name of and on behalf of the Carver's Reach entities: see CIP (No 1): it was found that the bringing of the actions was in the best interests of the companies and that there was sufficient financial support from the applicants for the litigation. It was also found that there was more than a little merit in the causes of action sought to be pursued. Whilst those findings were made in the context of the interlocutory application that was then before the Court, they were not matters that were finally determined and no "interlocutory issue estoppel" arises from them. On the earlier occasion, the Court was necessarily required to take an impressionistic view of the claims sought to be advanced, taking into account both the allegations in the pleading and the supporting evidence. There was little, if any, contradictory evidence in relation to those issues at that time as might be expected. Conversely, the issues before the Court on this occasion are to be determined on the evidence now before it, and any findings made in the earlier proceedings were merely preliminary in any event. 67 As has been mentioned, for the purposes of security for costs, the prospects of success are often not regarded as being relevant. Certainly, before the Court on this occasion there was no attempt to delve into the evidence which has been filed and on which the final merits are to be determined. The issues in the present case are far too complex for the Court to reach even a preliminary view about the prospects which the parties have on the matters raised in various claims: General Trade (No 2) [207] - [211].

Conclusion on security for costs 68 Given that the right of indemnity to the amount held in respect of the derivative action now extends to the So interests and that Mr Clancy has given an undertaking to be responsible for any order for costs of those parties, the circumstances of the application are quite different to those that existed when it was filed. Both of those factors weigh against the ordering of security. Similarly, a significant factor against ordering security is the fact that the application was brought very late in the course of the litigation and after the matter had been set down for hearing for some time. Though some attempt was made to justify that course, it was not sufficient. In this context, the observations of Kelly J in Bartter v PFJV loom large. As a general rule, parties should not be faced with applications of the present kind towards the end of the proceedings. 69 That said, it cannot be doubted that the current proceedings have not followed the usual course of litigation, and this rather sets the circumstances of this case apart from most. Despite the unexplained lengthy delay by the So interests in making the application, it is clear that no substantial prejudice will be suffered by the Clancy interests if an order for security is now made. Beyond that, although the existence of the indemnity and the protection that it now offers to the So interests initially weighs against making an order for security, it is necessary to take account of the fact that there could be a number of claims on that fund and there can be little doubt that it will not be sufficient if it needs to be called upon. Whilst Mr Clancy has offered an undertaking to be responsible for any order for costs made against the Clancy interests, it is noted that not all of those who stand to benefit from the litigation have been prepared to expose their assets to the risk of it - Mrs Clancy has not provided any such undertaking and she remains in the position of a person who stands to benefit substantially from the litigation without the risk of paying costs. Further, it is not apparent that Mr Clancy's undertaking is of sufficient value to provide any serious protection for the So interests. These are significant matters in favour of making of an order for security in circumstances where the Clancy interests have been shown to be without funds. 70 On balance, this is a case where some further security should be provided.

The quantum of security 71 In the calculus of the amount of security which might be provided, it is necessary to keep in mind that the sum of $850,000 has been held in the trust account of Bartley Cohen as security for the costs of the derivative proceedings since March 2023. Thereafter, additional sums have been added in respect of security for the costs of additional respondents to the derivative actions, with the result that the total amount now held is $1,175,000. As mentioned, following the filing of this application, the parties agreed that an order should now be made to the effect that the amount held in the trust account be treated as security for all of the So interests' claims for costs in respect of the derivative action. The making of that order will provide substantial security for those parties. On the other hand, the evidence indicates that the costs expended by the So interests to date well exceed that amount, as do the costs which are expected to be incurred in future. Further, the sum may also be used to cover the costs of the other respondents, such that it may not be sufficient in the event that it needs to be called upon. 72 Mr Williams gave evidence as to the costs incurred or expected to be incurred by the So interests. Unfortunately, the force of that analysis was deprived of some of the weight which it would otherwise have had, by reason of the calculations having been prepared by a solicitor in the employ of Colin Biggers & Paisley, rather than by Mr Williams. That solicitor did not give evidence and was unable to be cross-examined about it. Mr Kelly KC, counsel for the Clancy interests, took an appropriate forensic decision not to cross-examine Mr Williams on that topic and, though he was criticised for that, it was not justified. There would have been little point in cross-examining Mr Williams on the detail of the information appearing in an analysis which he did not prepare; it would be most unlikely that he would have been able to explain any assumptions underlying the conclusions reached. 73 It must be doubted whether solicitors, whilst exercising their duty to a client, are capable of proffering an impartial affidavit on an application of the present kind: see, for example, General Trade Industries Pty Ltd (in liquidation) v AGL Energy Limited [2020] FCA 1562 [39]; Gumm v Commissioner of Taxation [2024] FCA 71 [128] - [130]. Even a solicitor of extraordinarily high standing such as Mr Williams will find it difficult to make a calculation that, in the evaluative process, does not tend in favour of their client's interests. It is not merely by accident that, on applications of this kind, the costs estimated by the solicitor for the applicant for security are almost always greater than the costs estimated by the solicitor for the party resisting the making of the order. 74 Here, there was no affidavit from the solicitors for the Clancy interests which suggested a lower figure and that may indicate, to some extent, the general accuracy of Mr Williams' calculations. That said, Mr Benjamin Cohen, the solicitor for the Clancy interests, did make a number of observations about particular parts of Mr Williams' costs estimates which, if accepted, would lead the Court to reach a lower amount of costs for the purposes of the application. For the reasons referred to above, there is no need to descend into the relative merits in this case. 75 It can be accepted that the cross-examination of Mr Williams did disclose that, whilst he is the partner responsible for the conduct of the litigation on behalf of the So interests, he is not heavily involved in it on a day-to-day basis, and it was apparent that he was not regularly taking instructions from the clients, nor closely involved in the discovery process. That is in no manner a criticism and, indeed, it is to be expected given the structure of major legal firms. However, in the present circumstances one might have expected that a person more closely aware of the particular circumstances of the case would put themselves forward such that they would be able to fully justify each item of the expected expenditure. It was also of some concern, as Mr Kelly KC submitted, that Mr Williams was unable to explain why it was that an expert's costs estimate was not obtained for this application as had been obtained for similar previous applications. 76 In any event, after taking into account the amount which is held by Bartley Cohen as security for the costs of the derivative action, the amount actually sought by the So interests on this application was said by Mr Williams to be a further $800,000, being for the costs expected to be incurred up to the first day of trial. 77 However, even when it is understood that only a further $800,000 is sought, it should be recognised that the evidence as to the expected future costs was advanced at a high level of generality. That is particularly unfortunate in circumstances where the amount sought would be a substantial order for security at a late stage in the proceedings. As the action has been on foot for some time, it might be expected that some detail could be given as to the steps which have to be taken to finalise the proceedings, so as to properly explain the amount of the expenditure claimed. 78 As was submitted on behalf of the Clancy interests, the available calculations do not take into account that, by the orders made by agreement, the So interests will have the benefit of the money which has been provided by way of indemnity for the costs the derivative claims brought by the Carver's Reach entities. That is significant in the present context. 79 Further, as has been mentioned, it is well accepted that in making an order for security, the Court does not give the party seeking the order a complete indemnity against costs. That is more poignant in this case where the evidential support for the figure of approximately $800,000 is weak and where the evidential basis for the claims made by the Clancy interests on the one hand, and on behalf of the Carver's Reach entities on the other, overlap substantially.

Conclusion on quantum 80 Given the lateness of the application and the paucity of the quality of the evidence called in support of the So interests' assertion as to the amount which will be expended by the conclusion of the proceedings, the order for security should be modest. To award the substantial sum sought by the So interests would place a heavy onus on the Clancy interests mere months before the commencement of the trial. That is not appropriate in the circumstances. 81 Other factors which make it appropriate to award a discounted amount include the fact that security ought not be a complete indemnity for the respondents' costs, that there should be room for variations in the amounts which will be expended, and the existence of the indemnity which partially protects the So interests. In addition, although the undertaking offered by Mr Clancy was not of sufficient weight to cause the Court to not make an order for security, it carries greater weight in considering the quantum to be ordered. Taking a broad-brush approach, discounting the amount of $880,000 sought up to and including the first day of trial, it is appropriate to order that the applicants provide security in the sum of $450,000. That amount is sufficient in the circumstances to provide adequate, but not total, protection for the So interests for the period mentioned.

Disposition 82 For the reasons given, it should be ordered that the Clancy interests provide security for the So interests' costs of the proceeding in the sum of $450,000. It is also appropriate to order that the proceeding be stayed indefinitely or dismissed if the Clancy interests fail to provide the security within the required time. 83 The parties agreed that there should be a variation to the orders in relation to the amounts held as security for the costs of the derivative proceedings and it is appropriate to make such orders, especially as that underpins the form of the orders which are otherwise made. The So interests sought to strengthen that by seeking a further order that the Clancy interests are not to deal with such sum, save on the order of the Court or if the parties agree. Such an order is appropriate to ensure that the amount set aside is only used for its intended purpose. 84 The parties are entitled to be heard on the question of costs. I certify that the preceding eighty-four (84) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Derrington.

SCHEDULE OF PARTIES QUD 93 of 2022 Respondents Fourth Respondent: PARK RIDGE 96 AND 98 PTY LTD ACN 618 802 618 (RECEIVER AND MANAGER APPOINTED) Fifth Respondent: PARK RIDGE 132 PTY LTD ACN 619 053 735 (RECEIVER AND MANAGER APPOINTED) Sixth Respondent: 168 PARK RIDGE PTY LTD ACN 619 549 334 168 (RECEIVER AND MANAGER APPOINTED) Seventh Respondent: PARK RIDGE 180 PTY LTD ACN 616 431 157 (RECEIVER AND MANAGER APPOINTED) Eighth Respondent: ROCHEDALE HOLDINGS PTY LTD ACN 610 535 076 (RECEIVER AND MANAGER APPOINTED) Ninth Respondent: ROCHEDALE HOLDINGS NO.1 PTY LTD ACN 610 550 199 (RECEIVER AND MANAGER APPOINTED) Tenth Respondent: GGPG DEVELOPMENTS (NO.48) PTY LTD ACN 608 771 857 (RECEIVER AND MANAGER APPOINTED) Eleventh Respondent: PARK RIDGE DEVELOPMENT MANAGEMENT PTY LTD ACN 627 401 094 (RECEIVER AND MANAGER APPOINTED) Twelfth Respondent: COORPAROO HOLDINGS PTY LTD ACN 609 979 446 (RECEIVER AND MANAGER APPOINTED) Thirteenth Respondent: AXIS NORTH PTY LTD ACN 609 653 821 (RECEIVER AND MANAGER APPOINTED) Fourteenth Respondent: SIP GROUP PTY LTD ACN 610 480 914 (RECEIVER AND MANAGER APPOINTED) Fifteenth Respondent: SIP 1 PTY LTD ACN 611 408 925 (RECEIVER AND MANAGER APPOINTED) Sixteenth Respondent: MT FAMILY PTY LTD ACN 605 720 947 Seventeenth Respondent: ULTIMATE INVESTMENT PORTFOLIO PTY LTD ACN 611 531 778 Eighteenth Respondent: UIP 1 PTY LTD ACN 655 578 733 Nineteenth Respondent: LAI WAH WONG Twentieth Respondent: SUK KUEN LEUNG Twenty First Respondent: SEL PROPERTY INVESTMENTS PTY LTD ACN 612 436 950 Twenty Second Respondent: PAUL WONG Twenty Third Respondent: THYNNE & MACARTNEY (A FIRM)