1. As note above, the Applicant alleges that the Respondent's wrongful repudiation of the contract was the cause of the Applicant becoming insolvent, that is, being unable to pay its debts as and when they fell due.
2. Mr Howell, in his affidavit, simply affirms the allegation on the basis of instructions provided to him by the Applicant. There is nothing in Mr Howell's affidavit to suggest that he formed his opinion - that the insolvency of the Applicant was due to the repudiatory conduct of the Respondent - on anything other than the instructions he received from a director of the Applicant.
3. An allegation (contested) that the Respondent's conduct caused the Applicant's insolvency is, on its own, not enough to make any finding, even a cautious or preliminary finding, on the issue. I am not satisfied, on the material before me, that the Respondent caused or materially contributed to the Applicant's insolvency.

1. It appears likely, from Mr Howell's affidavit, that an order that the Applicant provide security for costs will result in the Applicant abandoning the proceeding. Mr Howell makes the following comments in his affidavit:

"If an order against the Applicant for payment of security for costs were made, and the proceeding was stayed pending payment, the Applicant would be unable to pursue its claim against the Respondent, to the detriment of the creditors of the Applicant ... It is my view that an order that the Applicant pay an amount as security for the Respondent's costs would have the effect of stultifying both this proceeding and the process of the liquidation of the Applicant generally, to the detriment of the creditors of the Applicant".

1. That the Applicant will likely not proceed with the proceeding if an order for security for costs is made does not, of itself, mean that an order should not be made. I note the comments of Maxwell P and Buchanan JA in the Court of Appeal in Livingspring Pty Ltd v Kriger Partners (2008) VSCA 93 at paragraph 22:

"There are, of course, particular discretionary matters of which the plaintiff must necessary have carriage. If, for example, the plaintiff corporation asserts that an order for security would impose on it such a financial burden as would stultify the litigation, the plaintiff must establish the facts which make good that assertion. We respectfully adopt what the full Federal Court said in this regard in Bell Wholesale Co Pty Ltd v Gates Export Corporation:

"In our opinion a court is not justified in declining to order to award security on the ground that to do so will frustrate the litigation unless a company in the position of the appellant here establishes that those who stand behind it and who will benefit from the litigation if it is successful (whether they be shareholders or creditors or, as is the case, beneficiaries under a trust) are also without means. It is not for the party seeking security to raise the matter; it is an essential part of the case of a company seeking to resist an order for security on the ground that the granting of the security will frustrate the litigation to raise the issue of impecuniosity of those whom the litigation will benefit and to prove the necessary facts".[underlining added]

1. The creditors of the Applicant stand to benefit if the litigation brought by the Applicant is successful. However, there is nothing in the material before me to suggest that the creditors are also without means. Neither is there anything before me to suggest that the liquidators have made enquiries as to whether any of the creditors or shareholders are willing to put up funds or some form of security for the purpose of pursuing the litigation. I am satisfied, by reason of the Applicant's failure to present material on these issues, that I should not decline an order for security for costs simply because the Applicant, through Mr Howell, says that such an order would have the effect of stultifying the proceeding.

1. The Respondent has issued its application in a timely manner and in accordance with orders made by the Tribunal and there is no submission that the Respondent unreasonably delayed bringing the application.

1. The Applicant submits that the Respondent has failed to adduce any evidence to suggest that, even if the Respondent was successful in the proceeding, a costs order would be made in favour of the Respondent under s109 of the Act.
2. In Vero Insurance Limited v The Gombac Group Pty Ltd (2007) VSC 117 at (20) Gillard J sets out the step by step approach to be taken by this Tribunal when considering an application for costs pursuant to s109 of the Act:
   • - the prima facie rule is that each party should bear their own costs of the proceeding;
   • - the Tribunal should make an order awarding costs, being all the specified part of costs, only if it is satisfied that it is fair to do so. That is a finding essential to making an order:
   • - in determining whether it is fair to do so, that is, to award costs, the Tribunal must have regard to the matter stated in s109(3).
3. In my view, it is not incumbent on the Respondent to present evidence at this very early stage of the proceeding that an award for costs would be made in its favour in the event it successfully defended the claims brought against it. Given the discretionary nature of costs orders, what evidence might one present?
4. Having regard to the size of the claim and noting, as I have above, that the proceeding will involve issues of legal and factual complexity, I am satisfied that it can be said, and it is sufficient reason to consider an order for security, that a costs order might be made in favour of the Respondent in the event the Respondent successfully defends the claims brought against it.

1. It appears from the material before me that the prospect of creditors of the Applicant receiving a dividend out of the liquidation rests on the success of the Applicant's claim in this proceeding. It also seems quite likely that if an order for security is made the liquidators will abandon the proceeding unless the creditors agree to make funds available to satisfy the order.
2. For the reasons discussed above, I do not accept that the possible or likely stultification of the proceeding, if an order for security is made, is reason enough to decline to make the order.
3. The Respondent faces the prospect of incurring considerable expense in defending a claim involving complex issues. I consider it unreasonable to require the Respondent to undertake that task in circumstances where the Applicant is in liquidation and it is known that if the Respondent succeeds in defending the claim and obtaining a costs order in its favour, the Applicant will be unable to pay the costs ordered. In my view the Respondent is entitled to fair protection on costs, and I do not think it unreasonable in this case to expect creditors, whose interests are at stake, to make funds available to satisfy an order for security. It will be a matter for the liquidators to convince the creditors that they have good reason for their estimate as to the realisable value of the Applicant's claim and that it is in the creditors' interests to make funds available to allow the claim to proceed. If the creditors are not convinced then, in my view, no injustice will have occurred.
4. For all the reasons canvassed above, I am satisfied that an order for security for costs should be made.

1. In his affidavit of 11 January 2013, Mr Greenham has provided his estimate of the party/party costs that the Respondent will likely incur in the proceeding. He allows for the usual interlocutory steps including preparation of defence, discovery of documentation, compulsory conference, ongoing carriage of the matter including directions hearings and other attendances, preparation for the hearing including drafting of submissions and a hearing lasting four days. He also includes the costs of the Respondent's application for security for costs. His total estimate is $84,250. He does not identify the Court scale upon which his party/party estimate is based.
2. At the hearing, the Respondent submitted an estimate of costs prepared by a Mr Pedler, a legal costs consultant. On the basis of instructions received from Mr Greenham and his perusal of the documents filed and served, Mr Pedler estimates that the Respondent's costs of the proceeding, assessed on a party/party basis pursuant to the County Court Scale, and assuming a four day hearing, would be around $108,000.
3. Mr Daly-Thompson, the solicitor for the Applicant, says in his affidavit that Mr Greenham's estimate contains a number of arbitrary figures which appear to be "solicitor-client" rather than "party/party". Mr Daly-Thompson exhibits to his affidavit County Court and Supreme Court scales of costs and, without nominating a sum, says that he believes the Respondent's costs of the proceeding would be significantly lower than Mr Greenham's estimate.
4. If the Respondent is successful in defending the claims and a costs order is made in its favour, the costs will, in my view, likely be ordered to be assessed, in default of agreement, on a party/party basis, pursuant to the County Court scale. That is a scale commonly referenced in cost orders in domestic building cases involving claims of significant value.
5. Having regard to the Points of Claim filed by the Applicant and the the matters raised by the Respondent as set out in Mr Greenham's affidavit, I think it likely that this proceeding will involve the full range of usual interlocutory steps, including extensive discovery and inspection of documents, the preparation of witness statements and a Tribunal Book of documents, and a hearing of at least 4 days duration. I consider $60,000 as a reasonable estimate for the Respondent's costs of the proceeding, assessed on a party/party basis pursuant to the County Court Scale.
6. In his affidavit Mr Daly-Thompson requests on behalf of the Applicant that if security for costs is ordered, the Tribunal order that the security be given by way of tranches that are payable upon the occurrence of certain steps in the proceeding. There is no material before me to suggest that the Applicant will acquire funds along the course of the proceeding and I decline to make an order that the security be given by way of instalments.

1. For the above reasons I will order the Applicant to lodge with the Principal Registrar security for the Respondent's costs of the proceeding in the sum of $60,000.
2. I think it fair that the liquidators be given some time to discuss the matter with creditors of the Applicant and I will order that the security be lodged by 20 August 2013, failing which the Applicant's application will stand dismissed.
3. I will order that this matter be referred to a directions hearing at 9.30 am on 21 August 2013. Costs of this application are reserved with liberty to apply for costs at the directions hearing.

[1] (2013) VCAT 955 at paragraph 19

[2] [2013] VCAT 141 at paragraph 18

[3] See Urumar Marble Pty Ltd v Thiess Pty Ltd [2005] VCAT 2081