Classic Bet (NSW) Pty Ltd & anor v KRM [2020] NSWCA 43 | Case summary

PAYNE JA: Before the Court are two separate appeals from proceedings heard by Rein J in this Court in 2019: KRM (Victoria) Pty Ltd v Classic Bet Pty Ltd [2019] NSWSC 1773. The matters first came before me in the referrals list where a conditional stay was ordered: Classic Bet (NSW) Pty Ltd & anor v KRM (Vic) Pty Ltd & anor; Kay v KRM (Vic) Pty Ltd [2020] NSWCA 6.
Two motions have been filed in proceedings 2020/12237, in which the appellants are two companies, Best Bet (NSW) Pty Ltd (Best Bet) and Classic Bet (NSW) Pty Ltd (Classic Bet). I am conscious that the names of those parties have changed, but we will refer to them in this way for the purposes of this judgment.
The first and second respondents in proceedings 2020/12237, Messrs Ryan and Alexander Kay, filed a motion dated 5 March 2020 seeking security for costs together with a supporting affidavit of Mr Price affirmed 5 March 2020, which was read without objection.
The third respondent in proceedings 2020/12237, KRM (VIC) Pty Ltd (KRM), filed a separate notice of motion seeking security for costs on 6 March 2020. An affidavit of Mr Webster sworn 6 March 2020 in support of the orders sought in the motion was read before me today without objection.
Both motions relied, inter alia, upon the Court's power to order security for costs under s 1335 of the Corporations Act 2001 (Cth).
At the hearing of the motions today, Mr Walker, who appeared for Best Bet and Classic Bet, accepted that the Court's jurisdiction to award security for costs in this appeal was enlivened and accepted that an order for security should be made. No submission was made that an order for security for costs would stultify the proceedings.
In relation to quantum, which was the only issue before me, the positions of the parties were, broadly speaking, on behalf of the first and second respondents, Messrs Kay, that the Court should make an order for security in the amount of $78,000. In relation to the third respondent, KRM, a range was given, but the lower bound of that range was an amount for security for costs of $57,000.
No evidence was led by the respondents on the application for security for costs, however, Mr Walker handed up a document containing the appellant's submissions about what the Court should conclude in relation to the amount of security to be ordered. In that document, Mr Walker ultimately submitted that in relation to the Kays, the Court should order security in an amount of $25,850 including GST and, in the case of KRM, the Court should order security for costs in an amount of $14,000 including GST.
The principles in relation to security for costs under s 1335 of the Corporations Act are well known. In Treloar v McMillan [2016] NSWCA 302, Beazley ACJ ordered security for costs against a corporation under s 1335 and distilled the relevant principles as follows: "[9] An order for security for costs may be made against a corporation that is, relevantly, an appellant, if it appears by credible testimony that there is a reason to believe that the corporation will be unable to pay the costs of the respondent if the respondent is successful in opposing the appeal. The Court may require sufficient security to be given for those costs and stay all proceedings until security is given: the Corporations Act, s 1335(1); Pioneer Park Pty Ltd v Australia and New Zealand Banking Group [2007] NSWCA 344 at [20]. [10] The principles governing the making of an order for security for costs under s 1335(1) are well established. Unlike the position where an application for security is made under UCPR, r 51.50, it is not necessary, under s 1335 that an applicant for security for costs demonstrate special circumstances for the making of an order: Pioneer Park at [22]. [11] The test to be applied in determining whether an applicant has satisfied the jurisdictional requirements of s 1335 has been described as 'undemanding': HP Mercantile Pty Ltd v Dierickx [2013] NSWCA 87 at [17]. In Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377; [2008] VSCA 93, Maxwell P and Buchanan JA stated, at [15], that the phrase 'reason to believe' in s 1335 'is the touchstone of jurisdiction. It requires a rational basis for the belief - and no more'. See also HP Mercantile v Dierickx at [6]-[10]; Wollongong City Council v Legal Business Centre Pty Limited [2012] NSWCA 245 at [29]-[30]; Cornelius v Global Medical Solutions Australia Pty Ltd [2014] NSWCA 65 at [16]. [12] In Livingspring v Kliger Partners their Honours further observed, at [15], that the section required the making of a risk assessment as to whether the corporation would be unable to pay, and that: 'The section calls for a practical, commonsense approach to the examination of the corporation's financial affairs.' [13] Relevantly, for the purposes of this case, their Honours stated, at [16], that the assessment that must be made under s 1335 is 'a low threshold', reflecting the policy of the section, which is to protect a party against the risk of a corporation's impecuniosity. Maxwell P and Buchanan J stated, at [17], that the foremost consideration in determining whether to exercise the discretion conferred by s 1335 was whether 'an order for security would work an injustice'. [14] Specific factors that have been identified in the authorities as relevant to the exercise of the discretion conferred by s 1335 include whether the applicant's conduct was the cause of the company's impecuniosity; and whether an order for security for costs would stifle the proceedings: KP Cable Investments Pty Ltd v Meltglow (1995) 56 FCR 189 at 196-197; Pioneer Park at [48]-[51]. [15] The onus in proving that a party will be unable to pay costs ordered against it remains at all times on the party making the application: see Livingspring v Kliger Partners at [20]; HP Mercantile Pty Ltd v Dierickx at [11]. However, as discussed in Wollongong City Council v Legal Business Centre at [30], if a corporation who seeks to resist an order for security for costs, in circumstances where the applicant for security has established that there is reason to believe that the corporation will be unable to pay the costs of litigation if successful, contends that an order should not be made, for example, because it would stifle the litigation, there may be an evidentiary burden on the corporation to demonstrate that this is the case."
On the basis of the evidence and the submissions made today, I am satisfied in relation to each motion that there is reason to believe that Best Bet and Classic Bet will not be able to pay the costs of the respondents if the respondents are successful and I am satisfied that an order for payment of security will not work an injustice.
In relation to the quantum, I propose to adopt a broad brush approach, conscious of the following matters. First, the evidence which has been led in the proceedings by the applicants for security for costs was not challenged. Secondly, I am not bound to accept estimates of costs given (even by very experienced solicitors in this area). Thirdly, I must approach the matter having regard to the terms of s 1335. Fourthly, I should assess the criticisms made of the applicants' evidence by Mr Walker. Fifthly, in applying the relevant broad brush approach, I should be astute not to accord undue precision to estimates of costs in a case like the present. Sixthly, I should test the final amount of any proposed order by reference to the Court's experience of the likely costs awarded to successful respondents for an appeal set down for one day plus.
I do not propose to go through line by line each of the items claimed in each appeal, as to do so would be quite inappropriate by reference to the broad brush approach which I propose to adopt.
In relation to the first and second respondents, the Messrs Kay, whilst I accept the very considerable experience of the solicitor who gave evidence in relation to the matter, there are sufficient uncertainties in the correct allocation of costs between the two matters that I think a substantial discount is appropriate. I do not accept, however, the degree of discount suggested by Mr Walker in his submissions, which I think would take the matter outside the appropriate range. Accordingly, in the case of Messrs Kay, security for costs in the amount of $50,000 will be ordered.
In relation to the third respondent, KRM, I am cognisant that $57,000 was the lower bound of the estimate, however, particularly by reason of the uncertainty of the allocation of costs between the two matters, I propose to order security in an amount of $45,000 in relation to the third respondent's motion.
The proceedings will be stayed until the security for costs I have ordered is provided. I will bring the matters back before me for directions on 23 March to ensure that the steps in preparation I have ordered have been completed.
The Court makes the following orders in matter 2020/12237: (1) The appellants (Classic Bet and Best Bet) provide security for the costs of the first and second respondents, Messrs Ryan and Alexander Kay, of the appeal in a sum of $50,000, such sum to be paid into court or by way of an irrevocable bank guarantee issued by an Australian bank and realisable on an order of the Court. (2) The proceedings in case 2020/12237 be stayed until such time as the appellants have provided security for costs in accordance with order (1). (3) The appellants (Classic Bet and Best Bet) provide security for the costs of the third respondent, KRM (Vic) Pty Ltd, of the appeal in a sum of $45,000, such sum to be paid into court or by way of an irrevocable bank guarantee issued by an Australian bank and realisable on an order of the Court. (4) The proceedings in case 2020/12237 be stayed until such time as the appellants have provided security for costs in accordance with order (3).
In each of cases 2020/12237 and 2020/6311, for case management purposes, the Court orders: (5) List the matters before Payne JA at 9.15am on Monday 23 March 2020 for directions. (6) Confirm that both matters 2020/6311 and 2020/12237 are listed to be heard on 7 and 8 April 2020, with an estimate of 1 day plus. (7) Liberty to apply to the associate of Payne JA by email. The Court notes that: (8) The solicitors for the appellants in case 2020/12237 (Classic Bet and Best Bet), Yates Beaggi Lawyers, undertake to the Court to pay to Ryan and Alexander Kay half of the invoice issued by Law in Order regarding the production of appeal books for matters 2020/12237 and 2020/6311 within seven days from the date they are sent that invoice.

Classic Bet (NSW) Pty Ltd & anor v KRM [2020] NSWCA 43 | Case summary | Zoe

Classic Bet (NSW) Pty Ltd & anor v KRM

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