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[2025] NSWSC 1567
General information, not legal advice.
Supreme Court of NSW
2025-12-18
Bennett J
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Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: FINAO Pty Ltd v Rosebery 2021 Pty Ltd [2025] NSWSC 1567
Hearing dates: 22 October 2025
Date of orders: 18 December 2025
Decision date: 18 December 2025
Jurisdiction: Equity
Before: Bennett J
Decision: (1) The Notice of Motion filed by the second defendant on 26 February 2025 is dismissed.
(2) The costs of the Notice of Motion be costs in the cause.
(3) The matter is listed before the Registrar in Equity on 12 February 2026.
Catchwords: COSTS — Security for costs — Relevant factors — Other factors — Impecuniosity conceded — Application by second defendant — Where second defendant separately represented from first defendant — Where there is significant overlap in the cases of the defendants — Whether second defendant’s choice to obtain separate legal representation disentitles it from obtaining security for costs — Consideration of the effect of separate legal representation on whether security for costs should be ordered — Where the sum of money in dispute in these proceedings is “modest” for proceedings in the Supreme Court — Where security is sought for approximately $180,000 — Whether quantum of security for costs sought is proportionate to the importance and complexity of the subject matter in dispute
Legislation Cited: Civil Procedure Act 2005 (NSW), s 60
Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law, ss 18, 236, 237
Corporations Act 2001 (Cth), s 1335(1)
Home Building Act 1989 (NSW), s 4
Uniform Civil Procedure Rules 2005 (NSW), r 42.21
Cases Cited: ACN 115 918 959 Pty Ltd v Hoeys Lawyers Pty Ltd (Costs Ruling) [2018] VSC 508
Acohs Pty Ltd v Ucorp Pty Ltd (2006) 155 FCR 181; [2006] FCA 1279
AMP Capital Investors Ltd v Parsons Brinckerhoff Australia Pty Ltd [2013] NSWSC 1633
Bardi v Giannaros (No 2) [2025] NSWSC 917
Buses + 4WD Hire Pty Limited v Oz Snow Adventures Pty Limited [2016] NSWSC 1017
Cornelius v Global Medical Solutions Australia Pty Ltd (2014) 98 ACSR 301; [2014] NSWCA 65
Daracon Engineering Pty Ltd v Kelsall [2025] NSWCA 189
Downs v Civil Aviation Authority (1992) 57 SASR 303
Global Medical Solutions Australia Pty Ltd v Axiom Molecular Pty Ltd [2013] NSWSC 1433
Globus Investments v William [2016] NSWSC 613
Haselhurst v Toyota Motor Corporation Australia Ltd t/as Toyota Australia [2020] NSWSC 1607
Hurworth Nominees Pty Ltd v ANZ Banking Group Ltd [2005] NSWSC 1360
Idoport Pty Limited v National Australia Bank Limited [2001] NSWSC 744
In the matter of Australian Style Holdings Pty Ltd as trustee of The Australian Style Investments Unit Trust [2018] NSWSC 1368
In the matter of Bailey Roberts Group Pty Ltd [2023] NSWSC 1147
Interslice Pty Ltd v CCA Investments – Bass Hill Pty Ltd [2021] NSWSC 1578
January Force Pty Ltd v Tricon Restaurants Australia Pty Ltd [1999] FCA 1746
KP Cable Investments v Metglow Pty Ltd (1995) 56 FCR 189
Laith & Fadi Investments Pty Ltd v Fogo Brazilia Holdings Pty Ltd [2024] NSWSC 1508
Ong v Ping [2015] EWHC 3258 (Ch)
Ong v Ping [2015] EWHC 3766 (Ch)
Proclear International Pty Ltd v United Beverage Co-Packers Pty Ltd [2023] NSWSC 1633
Recycling Holdings Pty Limited v Fuji Xerox Businessforce Pty Limited [2013] NSWSC 1312
Spotlight Pty Ltd v Maintek Roofing Pty Ltd [2017] NSWSC 165
The Owners Strata Plan No 87881 v Frasers Broadway Pty Ltd
Treloar Constructions Pty Limited v McMillan [2016] NSWCA 302
Van Eeden v Henry (2005) 62 NSWLR 301; [2005] NSWCA 14
Wollongong City Council v Legal Business Centre Pty Limited [2012] NSWCA 245
Category: Procedural rulings
Parties: FINAO Pty Ltd (Plaintiff/Respondent)
Rosebery 2021 Pty Ltd (First Defendant)
Geoffrey Cottrell (Second Defendant/Applicant)
Representation: Counsel:
M R Gracie (Plaintiff/Respondent)
J Pokoney (Second Defendant/Applicant)
Solicitors:
O’Loughlin Westhoff (Plaintiff/Respondent)
neolaw (First Defendant)
Dentons Australia (Second Defendant/Applicant)
File Number(s): 2023/00115317
Publication restriction: Nil
The plaintiff company, FINAO Pty Ltd (FINAO), describes itself as operating a project management business, particularly in the construction industry (SOC [2]). Mr Terry Down is the sole director of FINAO.
FINAO is represented by the law firm O’Loughlin Westhoff in these proceedings.
The first defendant, Rosebery 2021 Pty Ltd (Rosebery), formerly FINAO Operations Pty Ltd, is the former registered proprietor of a property at XX XXXXX St, Mosman (the Property).
Rosebery is represented by the law firm neolaw in these proceedings.
Mr Down was a director of Rosebery from its incorporation on 22 October 2013 until 4 August 2021. The second defendant, Mr Geoffrey Cottrell, was appointed as a director of Rosebery on 15 October 2020, and has been its sole director since Mr Down ceased to be a director on 4 August 2021.
Mr Cottrell is represented by the law firm Dentons Australia (Dentons) in these proceedings.
Given Mr Cottrell’s role as sole director of Rosebery, Mr Cottrell provides instructions to the legal representatives for Rosebery as the first defendant, as well as providing instructions to the separate legal representatives for himself as the second defendant. Mr Cottrell’s counsel acknowledged this circumstance in the course of the hearing (TR P11 L1-13), as well as acknowledging that Mr Cottrell is the controlling mind of Rosebery (TR P45 L28-30).
Mr Cottrell and his wife Marilyn Cottrell are the directors of Berkhamsted Pty Ltd, the sole shareholder of Rosebery. Mr Cottrell and Marilyn Cottrell are also shareholders of Berkhamsted Pty Ltd, together with, Anna Cottrell, Susan Cottrell, and Atlon Investments Pty Ltd (at least as at July 2025).
Anna Cottrell is a daughter of Mr Cottrell. She was also once married to Mr Down but is now Mr Down’s former wife. Accordingly, Mr Cottrell is Mr Down’s former father-in-law.
At some point during the events the subject of the pleadings (the exact timing is not clear on the evidence), Mr Down and Anna Cottrell separated, and later divorced, in the context of family law proceedings. The evidence does disclose, however, that the family law proceedings were in train by at least early 2022 and that final parenting and property orders were made by the Federal Circuit and Family Court of Australia (Division 1) on 3 April 2023. Amongst other things, the final parenting and property orders included the following order (emphasis added):
“13. That within 7 days from the date of these Orders, the Father [Mr Down] shall do all acts and things and sign all documents necessary to provide all consents necessary for the mother [Anna Cottrell] to register any or all of the children for enrolment at [the private school] but nothing in this order provides that the Father shall pay any of the tuition costs or any other expenses for [the private school] unless agreed in writing between the parties.”
FINAO commenced the substantive proceedings against Rosebery by a Statement of Claim filed in the District Court of New South Wales on 11 April 2023 (SOC). The SOC seeks damages for breach of contract, alleging that FINAO and Rosebery entered into an agreement in November 2020 (the Agreement) for the provision of planning and project management services by FINAO to Rosebery to enable the development and resale of the Property, and alleging that Rosebery has failed to pay to it a “Development Fee” owing under the Agreement. FINAO valued the “Development Fee” at approximately $215,000 but, on the evidence before me, it could be as much as $366,536.69.
At its most simple, in oral submissions FINAO set out the context of the claim in the following terms (TR P25 L39-41):
“A joint venture by which the first defendant was to own property. The plaintiff was to improve it. Both parties were going to share in the profit, and the plaintiff was to receive a development fee. That’s the transaction. …”
In its Defence filed on 9 May 2023 (Defence), Rosebery denied the existence of the Agreement and otherwise alleged in the alternative that the alleged Agreement was otherwise void for illegality pursuant to s 4 of the Home Building Act 1989 (NSW). As to the whole of the SOC, Rosebery said that FINAO and Rosebery had embarked on an “arrangement”, and accepted that some amount would be payable to FINAO following the sale of the Property, however that “the amount payable to the plaintiff, if any, was to be held by it on trust for the sole purpose of making payments to assist Mr Down and Anna Cottrell in discharging their future liability to pay private school fees for their children” (Defence [22](c)(ii)) (the private school fees trust allegation).
Mr Cottrell verified Rosebery’s Defence on 9 May 2023 in his role as sole director of Rosebery.
On 16 June 2023, Rosebery filed a Cross-Claim against FINAO seeking a declaration that if Rosebery is liable to pay FINAO any amount by reason of FINAO’s claims, that FINAO’s interest is to be held by FINAO on trust for the sole purpose of making payments to assist Mr Down and Anna Cottrell “in discharging their future liability to pay private school fees for their children”.
Mr Cottrell verified Rosebery’s Cross-Claim in his role as sole director of Rosebery.
On 18 July 2023, upon Rosebery’s application the proceedings were transferred to this Court.
On 30 August 2023, FINAO filed a Defence to the Cross-Claim.
An amount of time then passed between Rosebery’s filing of its Defence and Cross-Claim, and FINAO filing its Defence to the Cross-Claim and the next step in the filing of pleadings.
In its Reply to Defence filed on 1 October 2024 (RD), FINAO joined Mr Cottrell to the proceedings as the second defendant, with Rosebery becoming first defendant. In addition to (or alternatively to) the claim for damages for breach of contract, FINAO sought damages pursuant to s 236 or compensation pursuant to s 237 of the Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law (ACL) for contraventions of s 18 of the ACL. FINAO alleged first that Mr Cottrell had engaged in conduct that was misleading and deceptive (RD [31]-[32]). FINAO then alleged that by reason of Mr Cottrell’s conduct, “in reply to the [first] defendant’s contention that at all times Cottrell was acting as an authorised officer of the [first] defendant, in contravention of s 18 of the ACL, Cottrell was directly and knowingly concerned with aiding, abetting, counselling or procuring the misleading and deceptive conduct of the [first] defendant” (RD [34]).
The issue of security for costs was first raised by Rosebery in a letter from neolaw to O’Loughlin Westhoff dated 16 May 2023. Following the informal disclosure of a document by FINAO the issue was resolved. However, in an email sent by neolaw on Rosebery’s behalf to O’Loughlin Westhoff on 14 September 2023, which was sent as part of Rosebery initially resolving the issue with FINAO in 2023, Rosebery indicated it was “reserving the possibility that the position may be agitated again as the circumstances of this proceeding continue to unfold”.
The issue of security for costs was next raised by Rosebery in a letter from neolaw to O’Loughlin Westhoff dated 10 July 2024. In that letter, the 16 May 2023 letter was referred to, as were the terms of a message personally sent by Mr Down to Anna Cottrell dated 26 June 2024 (the personal June message). I have referred to this message as the “personal” June message as it was not sent through legal representatives, but rather, was sent directly from a former husband to a former wife (namely, from Mr Down to Anna Cottrell). The letter did not state how the personal June message came to be in the hands of Rosebery (or in effect, Mr Cottrell, as Rosebery’s sole director) or its legal representatives, however it may be reasonably inferred that Anna Cottrell provided a copy of the personal June message to her father, who in turn provided a copy of the message to Rosebery’s legal representatives for use in the proceedings. Following reference to the personal June message, including the terms of that message, the letter asked whether “[FINAO] now accepts there to be credible evidence that [it], a corporation, is likely to be unable to pay the [d]efendant’s costs, if unsuccessful in its claim; and so the Court’s jurisdiction to order security for costs is enlivened”.
On 16 July 2024, O’Loughlin Westhoff sent a letter to neolaw, which stated, amongst other matters, that it was instructed FINAO was able to meet an adverse costs order “in the vicinity of $100,000”. That amount was an amount neolaw included in the 16 May 2023 letter as an estimate of Rosebery’s total recoverable costs in these proceedings, and was the amount which neolaw had initially requested FINAO consider when responding to the initial inquiry regarding FINAO’s ability to meet a future adverse costs order. In the 16 July 2024 letter, O’Loughlin Westhoff said FINAO was willing to provide financial documents in evidence of its claim it could meet the adverse costs order as just mentioned.
On 1 October 2024, FINAO filed its Reply to Defence, where Mr Cottrell was joined in the proceedings as second defendant.
On 24 November 2024, neolaw sent an email to O’Loughlin Westhoff on behalf of Rosebery serving Rosebery’s Rejoinder, stating:
“… We further attach a copy of our letter to you dated 10 July 2024.
We note that since that letter was sent (and supervening your letter dated 16 July 2024, to the extent responsive to our letter), your client has now caused joinder of a Second Defendant and has served further affidavit evidence.
Kindly indicate by reply, within 14 days from the date of this letter, whether your client now accepts that it is liable to pay security for our client’s costs. As per the approach adopted in our letter dated 10 July 2024, we will then revert on quantum. In the absence of acceptance that security is payable, we anticipate instructions to apply to the Court for appropriate orders without further notice to your client.
Obviously, if your client considers that it has documents or information the effect of which is that the Defendants should be comfortably satisfied as to its ability to meet an adverse costs order then this should be provided without delay.”
On 25 November 2024, Dentons wrote on behalf of Mr Cottrell to O’Loughlin Westhoff, also raising the issue of security for costs in relation to Mr Cottrell’s costs (as opposed to Rosebery’s). The letter also referred to and relied on, amongst other things, the terms of the personal June message. The letter was signed off by Louise Massey, a Partner at Dentons.
On 28 November 2024, the Court made orders for the preparation and service of evidence by the parties. In accordance with the orders, FINAO filed its further evidence on 22 January 2025, noting this was 5 days after the time specified in the 28 November 2024 orders.
The 28 November 2024 orders also required the defendants to file their evidence by 14 February 2025.
On 18 February 2025, Rosebery filed a Notice of Motion (Rosebery**’**s Motion) seeking relief in the following terms:
“ORDERS SOUGHT
1 Pursuant to r 42.21 of the Uniform Civil Procedure Rules 2005 (NSW), the Plaintiff within 14 days pay $168,073.95 or such other amount as the Court sees fit as security for the First Defendant’s costs of the proceedings.
2 The security for costs described in Order 1 is to be provided by payment into Court or in such other manner as the Court thinks fit.
3 If security for costs is not provided in accordance with Orders 1 and 2, the Plaintiff’s claim against the First Defendant in the proceedings be stayed.
4 That Orders 2 and 5 made on 28 November 2024 (and any order extending those orders) be vacated so far as concerns the First Defendant.
5 Costs.
6 Such further or other order as the Court sees fit.”
In a letter to neolaw and Dentons dated 20 February 2025, O’Loughlin Westhoff referred to a directions hearing listed for that day that had been adjourned to 17 March 2025, and observed that the Registrar in Equity had made a number of orders in the Online Court in relation to Rosebery’s Motion. The letter, amongst other things, also stated those orders did not disturb any orders made on 28 November 2024. In particular, the letter observed the defendants were “in default of Order 2, which requires that [the defendants] serve any affidavit evidence in chief upon which they rely in the principal claim by 4pm, 14 February 2024”. FINAO sought an explanation for the default and requested that the defendants serve their evidence by 28 February 2025.
On 25 February 2025, neolaw provided a letter in reply to the 20 February 2025 letter from O’Laughlin Westhoff, wherein it denied the defendants (or perhaps just Rosebery, given the letter was not purporting to be on Mr Cottrell’s behalf) were obliged to serve their evidence, and pointed to a comment made by the Registrar in Equity that no further orders were to be made in the substantive proceedings until the security for costs issue was resolved.
As to the security for costs issue, neolaw again raised the personal June message as the basis of its concerns in relation to the capacity of FINAO to meet an adverse costs order.
On 26 February 2025, Mr Cottrell filed a Notice of Motion (Mr Cottrell**’**s Motion), this being the interlocutory application the subject of this judgment, seeking relief in the following terms:
“ORDERS SOUGHT
1 Pursuant to r 42.21 of the Uniform Civil Procedure Rules 2005 (NSW), or alternatively pursuant to section 1335 of the Corporations Act 2001 (Cth), the Plaintiff within 14 days pay $182,764.45 or such other amount as the Court sees fit as security for the Second Defendant’s costs of the proceedings.
2 The security for costs described in Order 1 is to be provided by payment into Court or in such other manner as the Court thinks fit.
3 If security for costs is not provided in accordance with Orders 1 and 2, the Plaintiff’s claim against the Second Defendant in the proceedings be stayed.
4 That Orders 2 and 5 made on 28 November 2024 (and any order extending those orders) be vacated so far as concerns the Second Defendant.
5 Costs.
6 Such further or other order as the Court sees fit.”
As is apparent from their terms, the Notices of Motion (together, the Motions) filed by the defendants are materially identical, save for the quantum of security sought and the additional reference to s 1335 of the Corporations Act 2001 (Cth) (Corporations Act) in Mr Cottrell’s Motion. Notably, Rosebery’s Motion primarily sought a sum of $168,073.95 as security for its costs, and Mr Cottrell’s Motion primarily sought an even greater sum of $182,764.45 as security for his costs.
In an open letter dated 12 March 2025 to both neolaw and Dentons, O’Loughlin Westhoff referred to the Motions, set out the basis for FINAO’s claim that the defendants’ prospects of successfully defending the proceedings are weak, and raised further concerns in relation to what it described as the “unjustified and duplicative” defence costs incurred by the defendants (a comment presumably arising from the fact that Mr Cottrell is instructing separate legal representatives as sole director of Roseber, and for himself). On the issue of FINAO’s ability to meet an adverse costs order, O’Loughlin Westhoff said that Mr Down was prepared to make available a sworn affidavit, annexing various FINAO accounting documents. It was suggested that the accounting documents would “clearly demonstrate” that FINAO “is a financially significant and well-resourced entity, capable of meeting any costs orders made in these proceedings”.
On 21 March 2025, Rosebery issued a Notice to Produce addressed to FINAO, following which FINAO produced three packets of documents on 28 March 2025, 31 March 2025, and 12 June 2025.
On 23 April 2025, Rosebery issued a Subpoena to Produce to FINAO’s accountants, who in turn produced on 10 June 2025 copies of the documents sought.
Rosebery’s Motion was settled by consent on 15 October 2025, with the Court making orders in chambers in accordance with consent orders provided by the parties, wherein FINAO had agreed to provide security for Rosebery’s costs in the sum of $140,000.
The terms of the consent orders for Rosebery’s Motion did not address the relief sought in prayer 4 of Rosebery’s Motion. Prayer 4 in each of the Motions seeks to vacate orders 2 and 5 of the orders of the Court made on 28 November 2024. These orders were the orders requiring Rosebery and Mr Cottrell to serve their evidence (in Rosebery’s case, on both its defence of FINAO’s principal claim and the cross-claim) by 14 February 2025. Whether that particular relief should be granted is dealt with below, separately from the main security for costs application, from [131] onwards.
Mr Cottrell’s Motion now falls to be determined.
The hearing of the Motion took place on 22 October 2025. Mr J Pokoney of counsel appeared on behalf of Mr Cottrell. Mr Pokoney read and relied on the affidavit of his instructing solicitor, Louise Massey, affirmed on 26 February 2025.
Mr M Gracie of counsel appeared for FINAO. Mr Gracie read and relied on two affidavits of his instructors, one of Jonathan O’Loughlin sworn on 14 August 2025 (JOL affidavit), and one of Michael Baltins affirmed on 9 April 2025.
Mr Cottrell and FINAO provided a written outline of submissions (CWS and FWS respectively) prior to the hearing and made oral submissions in reply following the reading of evidence at the hearing.
For the reasons set out below, I have determined that the Court’s jurisdiction to make an order for security for costs under Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 42.21 (or s 1335 of the Corporations Act*)* is engaged because there is reason to believe that FINAO, being a corporation, will be unable to pay the costs of Mr Cottrell if ordered to do so.
Notwithstanding jurisdiction to make an order for security, I have determined that the proper exercise of the Court’s discretion in all the circumstances of the case is not to make any order.
Mr Cottrell seeks an order for security for costs pursuant to UCPR r 42.21, or alternatively, s 1335(1) of the Corporations Act.
In support of his application, Mr Cottrell relied on the legal principles set out in Wollongong City Council v Legal Business Centre Pty Limited [2012] NSWCA 245 (Wollongong City Council*)* (Beazley JA, Barrett JA agreeing):
“[26] The Uniform Civil Procedure Rules 2005 (UCPR), r 42.21 provides:
‘42.21 Security for costs
(1) If, in any proceedings, it appears to the court on the application of a defendant:
...
(d) that there is reason to believe that a plaintiff, being a corporation, will be unable to pay the costs of the defendant if ordered to do so ...
the court may order the plaintiff to give such security as the court thinks fit, in such manner as the court directs, for the defendant’s costs of the proceedings and that the proceedings be stayed until the security is given.
(2) Security for costs is to be given in such manner, at such time and on such terms (if any) as the court may by order direct.
(3) If the plaintiff fails to comply with an order under this rule, the court may order that the proceeding on the plaintiff’s claim for relief in the proceedings be dismissed.
(4) This rule does not affect the provisions of any Act under which the court may require security for costs to be given.’
[27] The Corporations Act 2001 (Cth), s 1335(1) is in relevantly the same terms:
‘1335 Costs
(1) Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if 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, require sufficient security to be given for those costs and stay all proceedings until the security is given.’
[28] Both sources of power involve the exercise of a discretionary judgment. In approaching its task in the case of a corporation, the court should adopt a practical commonsense approach to the examination of the financial affairs of the corporation: Livingspring Pty Ltd v Kliger Partners [2008] VSCA 93; 20 VR 377 at [15].
[29] The principles governing the exercise of the discretion are well established and are relevantly the same in respect of each source of power: see Livingspring v Kliger Partners at [10]. The party seeking an order for security for costs (who, for convenience I will refer to as the defendant) bears the onus of establishing that there is reason to believe that the other party to the litigation will be unable to pay the costs of the litigation if unsuccessful: see KP Cable Investments Pty Ltd v Meltglow Pty Ltd [1995] FCA 76; 56 FCR 189; Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972; Pioneer Park Pty Ltd (in liq) v Australian and New Zealand Banking Corporation [2007] NSWCA 344; Prynew Pty Ltd v Nemeth [2010] NSWCA 94.
[30] There is no predisposition to the making of an order: see Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 at 509; Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ACSR 621 at 623-624; KP Cable Investments v Meltglow. Once the defendant has discharged the onus of establishing that there is reason to believe that the other party to the litigation will be unable to pay the costs of the litigation if unsuccessful, the onus shifts to the party against whom the order is sought (who I will refer as the plaintiff) to establish a reason why security should not be granted: KP Cable Investments v Meltglow; Equity Access Ltd v Westpac Banking Corporation; Pioneer Park v Australia and New Zealand Banking Corporation; Prynew Pty Ltd v Nemeth.”
“[18] The defendants contended on appeal that the primary judge erred in stating that the burden of proof rests upon applicants for security ‘from first to last’ (see [5] above). They submitted that this was contrary to the following statement of Beazley JA in Wollongong City Council v Legal Business Centre:
‘Once the defendant has discharged the onus of establishing that there is reason to believe that the other party to the litigation will be unable to pay the costs of the litigation if unsuccessful, the onus shifts to the party against whom the order is sought (who I will refer as the plaintiff) to establish a reason why security should not be granted: KP Cable Investments v Meltglow [1995] FCA 76; 56 FCR 189; Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972; Pioneer Park v Australia and New Zealand Banking Corporation [2007] NSWCA 344; Prynew Pty Ltd v Nemeth [2010] NSWCA 94.’
[19] I do not consider that there is an inconsistency, as alleged, as Beazley JA was in my view referring to the evidentiary (or evidential) burden shifting in the circumstances described to the party against whom security is sought. In fact, her Honour made that explicit in her earlier decision in Prynew Pty Ltd v Nemeth [2010] NSWCA 94; 28 ACLC 10-026 at [16] where in the same context she referred expressly to the evidentiary burden shifting.
[20] The expression ‘evidential burden’ can be used in at least three senses (Strong v Woolworths Ltd [2012] HCA 5; 246 CLR 182 at [46] - [64]). For present purposes, it is sufficient to say that it includes reference to the principle that in certain circumstances a party who does not bear the ultimate burden of proof may have to raise for consideration matters that favour it if it wishes them to be taken into account in the determination of the case. The evidential burden of raising a matter is thus distinct from the legal onus of proving entitlement to an order for security for costs which it is correct to describe as resting throughout on an applicant for such an order.”
“The law is now settled that the discretion to order security for costs is unfettered and should be exercised having regard to all the circumstances of the case without any predisposition in favour of the award of security: see the review of the authorities by French J in Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 at 509. See also Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ACSR 621 at 623-624 and Zeeman J’s decision in Weily’s Quarries v Devine Shipping Pty Ltd (1994) 14 ACSR 186 at 188. In Gentry Bros Pty Ltd v Wilson Brown & Associates Pty Ltd (1992) 8 ACSR 405 at 415, Cooper J stated that:
‘[i]t is not possible or appropriate to list all of the matters relevant to the exercise of the discretion. The factors will vary from case to case. The weight to be given to any circumstance depends upon its own intrinsic persuasiveness and its impact on other circumstances which have to be weighed: P S Chellaram & Co Ltd v China Ocean Shipping Co (1991) 65 ALJR 642 at 643.’
Notwithstanding the broad unfettered discretion with which the Court approaches an application for security for costs, there are a number of well established guidelines which the court typically takes into account in determining any such application. They are:
- That such applications should be brought promptly. This is a principle of longstanding: see Grant v The Banque Franco-Egyptienne (1876) 1 CPD 143; see also Smail v Burton; Re Insurance Associates Pty Ltd [1975] VR 776 per Gillard J at 777; Caruso Australia Pty Ltd v Portec (Australia) Pty Ltd (1984) 1 FCR 311 at 313; Bryan E Fencott at 514. I should state immediately that there is no issue of delay in this case.
- That regard is to be had to the strength and bona fides of the applicant’s case are relevant considerations: see M A Productions Pty Ltd v Austarama Television Pty Ltd (1982) 7 ACLR 97 at 100; Bryan E Fencott at 514. As a general rule, where a claim is prima facie regular on its face and discloses a cause of action, in the absence of evidence to the contrary, the court should proceed on the basis that the claim is bona fide with a reasonable prospect of success. (Bryan E Fencott at 514).
- Whether the applicant’s impecuniosity was caused by the respondent’s conduct subject of the claim: see M A Productions v Austarama Television at 100.
- Whether the respondent’s application for security is oppressive, in the sense that it is being used merely to deny an impecunious applicant a right to litigate: see M A Productions v Austarama Television at 100; Yandil Holdings Pty Ltd v Insurance Co of North America (1985) 3 ACLC 542 per Clarke J at 545; Bryan E Fencott at 513. In Yandil Holdings at 545 Clarke J stated the principle in these terms:
‘[t]he fact that the ordering of security will frustrate the plaintiff’s rights to litigate its claim because of its financial condition does not automatically lead to the refusal of an order. Nonetheless it will usually operate as a powerful factor in favour of exercising the court’s discretion in the plaintiff’s favour.’”
The matters to be considered in a security for costs application set out in KP Cable have been considered to be “broadly consistent” with the factors listed in UCPR r 42.21(1A): In the matter of Australian Style Holdings Pty Ltd as trustee of The Australian Style Investments Unit Trust [2018] NSWSC 1368 (Australian Style Holdings) at [32] (Black J).
In relation to how the Court is to go about its consideration of whether to make an order for security, Einstein J in Idoport Pty L**imited v National Australia Bank Limited [2001] NSWSC 744, in considering an application for security for costs under s 1335 of the Corporations Act (and Part 53 of the Supreme Court Rules 1970 (NSW), the precursor to UCPR r 42.21), stated (at [47]):
“It is clear that the discretion to award security for costs requires to take into account all of the relevant facts matters and circumstances and is a judicial discretion to be exercised following the adducing of all evidence by each party to an application seeking to have such an award made. As Giles J (as His Honour then was) made plain in Rosenfield Nominees Pty Ltd v Bain and Co (1988) 14 ACLR 467 at 470, in exercising the discretion as to whether or not to make an order for costs, the Court must have a concern to achieve a balance between ensuring that adequate and fair protection is provided to the defendant, and avoiding injustice to an impecunious plaintiff by unnecessarily shutting it out or prejudicing it in the conduct of the proceedings [cf Street CJ in Buckley v Bennell (1974) 1 ACLR 301 at 304]. …”
“[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.”
42.21 Security for costs
…
(1A) In determining whether it is appropriate to make an order that a plaintiff referred to in subrule (1) give security for costs, the court may have regard to the following matters and such other matters as it considers relevant--
(a) the prospects of success or merits of the proceedings,
(b) the genuineness of the proceedings,
(c) the impecuniosity of the plaintiff,
(d) whether the plaintiff’s impecuniosity is attributable to the defendant’s conduct,
(e) whether the plaintiff is effectively in the position of a defendant,
(f) whether an order for security for costs would stifle the proceedings,
…
(j) the costs of the proceedings,
(k) whether the security sought is proportionate to the importance and complexity of the subject matter in dispute,
(l) the timing of the application for security for costs, …
“[10] Counsel also agree that, as the language of the rule makes clear, the list of relevant factors set out in r 42.21(1)(a) is not exhaustive, nor is it necessary for me to refer to each of those factors. Rather, it is sufficient if in weighing up whether an order should be made, I refer to the matters upon which counsel have placed particular reliance. I will not deal with them in any particular order.
[11] Counsel also accept that no one factor in the circumstance of this case is likely to be of determinative significance, rather, all relevant factors should be weighed in an overall evaluation of the question of whether the order sought by the defendant should be made.”
“[12] In determining the quantum of an order for security the Court does not set out to give a complete and certain indemnity to a defendant and there is no principle that entitles a defendant to be given security for the whole of its recoverable costs (CBX2 Pty Ltd v National Australia Bank (No 2) [2015] NSWSC 1969 at [54] and [55]).
[13] Rather the Court embarks on a process of estimation which embodies to a considerable extent, necessary reliance on the ‘feel’ of the case after considering relevant factors (see, e.g., Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 at 515 (French J)).
[14] Whilst the Court requires some evidentiary basis for the estimate of costs, a precise estimate is not required. The Court is not fixing a gross sum amount, and should not decline to act on the evidence before it because the evidence was not the ‘best evidence’ available to support the application (Pathway Investments Pty Ltd & Anor v National Australia Bank Limited [2012] VSC 97 at [35]-[38]; DIF III Global CoInvestment Fund LP v BBLP LLC [2015] VSC 484). Although a discount for exigencies may be required (see, e.g., Pathway Investments Pty Ltd & Anor v National Australia Bank Limited [2012] VSC 97 at [55]).
[15] Further the Court is to stand back from the amounts claimed and the precise assessment of costs to consider the case on its particular facts and will make an order that is just and reasonable in the circumstances (Wollongong City Council v FPM Constructions Pty Ltd [2004] NSWSC 523 at [50]).
[16] In embarking on such a process the Court is not required to attempt its own detailed costs assessment but can take a ‘broad brush’ approach having regard to the information before it, seeking to prevent (on the one hand) prejudice to the party paying costs by overestimating the costs and (on the other hand) injustice to the party recovering costs by adopting an arbitrary ‘fail safe’ discount across the board on the costs claimed (see, e.g., Allstate Life Insurance Co v ANZ Banking Group Ltd (1995) 134 ALR 187 at 199–201; Ashington Capital Pty Ltd v Parissen Capital (Project X) Pty Ltd [2012] NSWSC 410 at [17]–[18]; Pathway Investments Pty Ltd & Anor v National Australia Bank Limited [2012] VSC 97 at [25]).
[17] An important factor informing the exercise of the Court’s power to order security for costs where a person such as a litigation funder stands behind the plaintiff is that those who seek to benefit from litigation should bear the risks and burdens that the process entails (see, e.g., Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 208 ALR 564 at 584 [83] (Austin J)).
[18] However in Allen Dodd as Trustee for the Dodd Superannuation Fund v Shine Corporate [2018] QSC 40 Martin J noted that the involvement of a funder may loosen slightly the stringency which normally attaches to the calculation of the appropriate security amount.
[19] It has also been accepted that where multiple defendants have a common interest but are separately represented the Court has a discretion to make an order having the effect that the unsuccessful plaintiff does not pay full costs in respect of all defendants. That may be achieved by disallowing the costs of the additional defendants or reducing the costs payable by the plaintiff in respect of each defendant (ACN 115 918 959 Pty Ltd v Hoeys Lawyers Pty Ltd & Ors (Costs Ruling) [2018] VSC 508 at [39]; see also Local Democracy Matters Inc v Infrastructure NSW (No 2) [2019] NSWCA 118 at [21]-[23]; Andrianakis v Uber Technologies (Ruling No 1) [2019] VSC 850).”
These principles were recently cited and relied on in Laith & Fadi Investments Pty Ltd v Fogo Brazilia Holdings Pty Ltd [2024] NSWSC 1508 at [216] (McGrath J).
On the issue of the “broad brush” approach, Black J in Australian Style Holdings stated (at [41]):
“The Court will take a ‘broad brush’ approach to the quantum of an order for security for costs and will not attempt a detailed cost assessment in that regard: Ashington Capital Pty Ltd v Parissen Capital (Project X) Pty Ltd [2012] NSWSC 410 at [18]; Re Colorado Products Pty Ltd (in prov liq) above at [66].”
Having regard to the procedural background set out above, it will be noted that Mr Cottrell as second defendant has elected to instruct separate legal representation to that of Rosebery, in circumstances where Mr Cottrell has verified all pleadings for each of Rosebery as first defendant, as sole director, and on behalf of himself as second defendant. It will also be noted that the Rejoinders filed by each of the defendants are materially identical, and the terms of the Motions were also near identical.
On the issue of defendants obtaining separate legal representation, both Mr Cottrell and FINAO took the Court to the decision of Downs v Civil Aviation Authority (1992) 57 SASR 303 (Downs), where Mullighan J stated (at 306-307):
“These various reasons, even as explained in detail during Miss Singh’s argument, do not immediately give the impression that there is an obvious need for the defendants to conduct their cases in the way which they have. However, in my view, it should not be assumed that this course of action is not justified. Generally speaking, parties to litigation should be at liberty to choose their own legal representatives. Joint defendants may choose to be represented by the same or different solicitors. If there is no conflict of interest they will usually choose to be represented by the same solicitor, but that is not to say that they must do so. Even if their cases and interests are identical, they may be represented separately. If separate representation causes unnecessary costs to the opposing party or parties, the remedy is usually in orders for costs. The Court is slow to assume, particularly at the pre-trial stage, that there should be joint representation. In Mamham v Grice (1896) 22 VLR 108, Madden CJ, upon discussing an objection to the decision of a taxing officer allowing separate counsel fees for defendants who appeared by the same solicitors where they had identical defences and where copies of the same brief were sent to each counsel, said (at 108-109):
‘When there is a common interest and defendants choose to sever in their defence they do so at the risk of having to pay the costs themselves consequent upon such severance. The rule is thus laid down in *Daniell’*s Chancery Practice (6th ed), p 506: “Two or more persons may join in the same defence, and where their interests are the same and they appear by the same solicitor they ought to do so. The Court will not, however, before the trial and at a time when it cannot be known how the defence should be conducted, visit the defendants with costs as a penalty for not joining in their defence, and it is only at the trial, when all danger of prejudice to the parties is over, that the Court will make any order upon the subject ... No general rule can be laid down determining when defendants appearing by the same solicitor may sever in their defence.” So that though the parties might if the trial proceeds to its maturity be shown to have a common interest, yet if that fact is not established - if, for instance, the trial is cut short and not concluded - the Court will not assume against the defendants that they had no right to sever in their defence. It often happens that it is only after the case has fully developed the defendants can know whether or not their interest is common.’
He went on to say that where one solicitor appears for several defendants, that fact is suggestive of a common interest, but it does not of itself conclude the matter.
In Sunday Times Newspaper Co Ltd v McIntosh (1933) 33 SR (NSW) 371, Long Innes J, upon considering security for costs in favour of defendants to an action, acknowledged that he could not, before trial, arrive at any conclusion as to whether the defendants were justified in being separately represented.”
“When multiple defendants have a common interest but are separately represented, the Court has a discretion to make an order having the effect that the unsuccessful plaintiff does not pay full costs in respect of all defendants: this may be achieved by disallowing costs of the additional defendant(s) or by reducing the costs payable by the plaintiff in respect of each defendant.”
“[21] As Hodgson JA explained in Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121]:
“underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs.”
[22] In HP Mercantile Pty Ltd v Hartnett at [14] this Court said that:
“the ultimate question is not (as the respondents submit) whether they have acted reasonably, nor whether there has shown to be duplication. The question is whether it is reasonable for the unsuccessful litigant to bear more than one set of costs.”
[23] We do not think it is reasonable for the unsuccessful appellant to bear three sets of costs of an appeal which was so tightly confined both in terms of the three grounds and also in terms of the timing. The appropriate order is one that reflects the actuality of the litigation, which was very substantially carried by the Minister.”
Having regard to the procedural background and the relevant law as set out above, the following issues arise for consideration:
Is there reason to believe FINAO, being a corporation, will be unable to pay the costs of Mr Cottrell if ordered to do so?
If yes to (1), is it appropriate for the Court to make an order for FINAO to give security for costs, having regard to such matters it considers relevant, including factors listed in UCPR r 42.21(1A)?
If yes to (2), what quantum of security does the Court think fit?
I will address each of the issues in turn.
In his submissions in support of his Motion, Mr Cottrell submitted, at CWS [7], that FINAO will be unable to pay his costs if unsuccessful in the litigation, and pointed to evidence in support, namely that FINAO:
does not own any real property in Australia;
operates a services business, and thus likely does not own significant realisable assets;
has not provided any documents that demonstrate an ability to meet an adverse costs order, despite being invited to do so; and
is already the subject of costs orders in favour of Rosebery.
The terms of the personal June message were also relied on as an additional piece of evidence which shows there is reason to believe FINAO would not be able to satisfy any adverse costs order.
“30 As the threshold issue has been resolved vis a vis the first defendant on a commercial basis, the plaintiff concedes that it cannot pay the costs of both defendants if it is unsuccessful in these proceedings.
31 The Court may then take into account the discretionary factors outlined in UCPR r 42.21(1A) and any other discretionary matters it considers relevant in determining whether security for costs should be ordered.
…
35 As stated above, the impecuniosity of the plaintiff has been removed for consideration vis a vis the first defendant but the plaintiff candidly acknowledges that it cannot provide security for both defendants, particularly having regard to the second defendants claim of $182,764.25 for future costs (estimated from 13 March 2025) which exceeds the amount of both the past costs (since 11 April 2023 when proceedings commenced) and future costs claimed by the first defendant but agreed at $140,000.”
Having regard to the evidence relied on by Mr Cottrell (save for the personal June message) and the concession made by FINAO, I am satisfied the threshold issue is established under UCPR r 42.21(1)(d) (and s 1335(1) of the Corporations Act) and the Court’s jurisdiction to order security for costs is enlivened. In achieving this satisfaction, I did not consider it necessary to additionally have regard to the terms of the personal June message, in particular in circumstances where neither party made any submissions of substance in relation to it.
As Mr Cottrell submitted, impecuniosity having been conceded, the onus shifts to FINAO to demonstrate why a security for costs order ought not be made (TR P4 L31-33; CWS [9]).
In his written submissions, Mr Cottrell relied on what he referred to as three discretionary considerations. The first repeated the submission that there was every reason to think that FINAO would be unable to meet Mr Cottrell’s costs, and thus the onus shifts to FINAO to establish a reason why security should not be granted (CWS [9]).
The second submission was that there was no suggestion that an order for security would be oppressive in circumstances where FINAO has produced no evidence as to its financial capacity or of those standing behind it (CWS [10]).
Thirdly, Mr Cottrell submitted that he brought his Motion promptly, having only been joined as a defendant on 1 October 2024, and having raised the issue of security in correspondence on 25 November 2024 (CWS [11]).
FINAO’s primary contention was that Mr Cottrell has not demonstrated a legal or other legitimate basis to justify his separate legal representation from Rosebery. In this, it was submitted there was no substantive difference between the denials and cases advanced by each of the defendants in their respective Rejoinders (FWS [13]).
More generally, FINAO submitted that in the absence of any adequate explanation or established basis, it may be reasonably inferred that Mr Cottrell’s application for security is (FWS [14]):
for an ulterior and tactical purpose; and/or
disproportionate to the importance and complexity of the subject matter in dispute: s 60 of the Civil P**rocedure Act 2005 (NSW) (CPA).
The submission as to the disproportionality comes from a comparison of the sum of the pleaded “Development Fee” claimed by FINAO, approximately $215,000, with the combined quantum of security sought by the defendants ($140,000 as agreed with Rosebery, and approximately $182,000 sought by Mr Cottrrell, summing to approximately $322,000).
As submitted by FINAO, an antecedent issue to several of the matters which are relevant to the discretion to order security for costs is Mr Cottrell’s decision to engage separate legal representation in these proceedings.
As FINAO submits, and Mr Cottrell acknowledges, Mr Cottrell is the sole director and controlling mind of Rosebery. Prior to being joined to these proceedings, Mr Cottrell verified the Defence filed by Rosebery on 9 May 2023 and the Cross-Claim filed by Rosebery on 16 June 2023. After he was joined, he verified the Rejoinder filed by Rosebery and the Rejoinder filed on his own behalf on 24 November 2024: FWS [9]-[12]. As I have already mentioned, the Rejoinders are materially identical.
For his part, relying on the decision in Downs*,* Mr Cottrell submitted he has a right to the legal representation of his choosing (TR P10 L42).
FINAO did not cavil with that general proposition: FWS [16]; (TR P26 L17-18).
Instead, in its written submissions, FINAO submitted that, in the circumstances, there is no actual or possible conflict of interest which would make engaging separate representation a “legally necessary” or a “legitimate forensic” decision. FINAO submits that, in the absence of any bona fide explanation proffered by Mr Cottrell, Mr Cottrell’s decision to engage separate legal representation and bring a second application for security is made for an ulterior tactical purpose, namely, to maximise the financial pressure on FINAO in its conduct of the proceedings by effectively doubling the amount of security that would be ordered if the defendants were jointly represented, with the effect of denying FINAO its right to litigate (the tactics issue): FWS [14](2), [17], [19], [20], [22].
In any event, FINAO submits that at the time Mr Cottrell filed his Rejoinder on 24 November 2024, he would already have held concerns about FINAO’s ability to meet an adverse costs order in these proceedings, and that he must be taken by that point to have accepted the risk of not recovering the separate legal costs he was going to incur which are additional to those being incurred by Rosebery: FWS [18], [21].
In oral submissions in relation to the tactics issue, Mr Cottrell submitted that this Court would be slow to embrace the submission that he or his solicitors have sought to artificially inflate the costs incurred in conducting the proceedings, given its seriousness (TR P6 L41-42). Additionally, Mr Cottrell made four further submissions in response:
First, multiple defendants are generally at liberty to retain separate legal representation, relying on Downs (at 306-307) (TR P9 L13-20).
Second, Mr Cottrell bears no onus of advancing a positive explanation for why he engaged separate representation in these proceedings because the burden lies with FINAO to establish a reason why security should not be ordered. Accordingly, the Court need only be satisfied that there is no evidence of an ulterior purpose in order to make an order for security (TR P9 L22-30, P11 L43-P12 L19).
(a) Notwithstanding this second point, and although on his own submission the Court does not need to make a positive finding as to why Mr Cottrell has engaged separate legal representation, Mr Cottrell submitted that a plausible reason for engaging separate legal representation for himself (ie, not for an ulterior purpose) may well arise from any or all of the following matters (TR P11 L22-50):
(i) FINAO’s Reply, the RD, puts different claims against each defendant and, in particular, levels allegations of misleading and deceptive conduct against Mr Cottrell personally but not against Rosebery; and (ii) Mr Cottrell has common law and statutory duties as the director of Rosebery, which may make it pertinent to avoid causing Rosebery to incur legal costs to defend allegations made against him personally.
Third is the potential for conflict between Mr Cottrell and Rosebery as the corporate vehicle on the question of any exoneration or indemnification if liability is ultimately found by a Court in these proceedings. In particular, if Mr Cottrell has been found liable for conduct caried out in the course of carrying out his role as a director, he may well seek exoneration or indemnification from the company which would create not just a hypothetical, but direct, conflict between Rosebery’s and Mr Cottrell’s defence of these proceedings (TR P9 L32-35, P12 L23-39).
Fourth is that ultimately what has occurred is that it is FINAO which has made a forensic choice to join Mr Cottrell, and so “it ultimately is the plaintiff that is the author of its misfortune in this respect” (TR P9 L35-38, P12 L41-48).
FINAO later clarified the allegation central to the tactics issue had not been made in relation to Mr Cottrell’s legal representatives. Further, when asked by me, “it’s a serious allegation, something I would be slow to take up?”, counsel for FINAO answered, “[y]es”, adding that “your Honour doesn’t need to make that finding” (TR P26 34-47).
On the tactics issue, I accept the oral submissions made by Mr Cottrell and the concession made by FINAO. I accept the tactics issue contains a serious allegation and that I am not required to make a finding in relation to the issue.
FINAO maintained its position that the inquiry as to whether a conflict does, or may, exist between the interests of Rosebery and Mr Cottrell should be directed not at the RD, but at the nearly identical Rejoinders which I have described at [23]-[24] above. FINAO submitted that speculation as to a potential conflict is not sufficient when there is no identifiable conflict on the pleadings. Additionally, FINAO submitted the Court cannot draw conclusions as to how the defendants may run their respective defences in these proceedings without the benefit of the defendants’ evidence, and the Court’s inability to draw such conclusions exists by reason of the defendants’ own default of this Court’s timetabling orders: TR P23 L27-P24 L23. I address that default, which Mr Cottrell accepts has occurred, in more detail later in these reasons.
I accept the submission made by Mr Cottrell that he need not establish an extant conflict but that it is sufficient for the state of the pleadings to disclose the potential for such a conflict to arise. This is consistent with what the Court said in Downs.
Towards the conclusion of the hearing of Mr Cottrell’s Motion, I posed a question to Mr Cottrell’s counsel whether [34] of FINAO’s RD, which pleads that Mr Cottrell was “directly and knowingly concerned with aiding, abetting, counselling or procuring the misleading and deceptive conduct” of Rosebery, suggests that FINAO brings claims for misleading and deceptive conduct against both defendants. To this Mr Cottrell claimed it was a “curious pleading” (TR P49 L23), noting, amongst other things, that this claim had only been raised in the RD and that there was no primary pleading of misleading or deceptive conduct against Rosebery. For its part FINAO reiterated that the allegation was made against Mr Cottrell and his conduct in matters involving Rosebery. In this I accept there is some “curiosity” in the pleadings in this regard, however, I accept the submission of FINAO that it is the conduct of Mr Cottrell that is central (TR P50 L9-19).
As a general rule, where a claim is prima facie regular on its face and discloses a cause of action, in the absence of evidence to the contrary, the Court should proceed on the basis that the claim is bona fide with a reasonable prospect of success: KP Cable at 197 (Beazley J).
FINAO submits that its claim has good prospects of success because:
Rosebery can no longer maintain the pleaded denial that it agreed on 19 November 2020 to repay the “Development Fee” to FINAO contained in [10] of its Defence, in light of the evidence of Mr Cottrell, his wife, and Anna Cottrell that an express agreement was reached “as to the development of the Property” on 22 October 2020, given in their respective affidavits filed on 11 April 2024; FWS [34] referring to the JOL affidavit at [43].
Rosebery can no longer maintain its pleading, relying on s 4 of the Home Building Act 1989 (NSW), that any agreement that was entered into is void for illegality on the basis that FINAO does not hold a contractor licence authorising it to carry out development work at the Property, because that pleading belies the evidence that FINAO relied on Mr Cottrell’s financial, accounting and tax advice which extended to advice about the corporate structure of the development at the Property and its entitlement to the “Development Fee” if it carried out the development in the structure Mr Cottrell advised; FWS [34] referring to the JOL affidavit at [44].
The terms of the express oral agreement which are pleaded and deposed to in the affidavits of Mr Cottrell, his wife, and Anna Cottrell each dated 11 April 2024, which concern the private school fees trust allegation and an allegation as to how the “Development Fee” was to be calculated, are inconsistent with the contemporaneous documents. FINAO says those documents disclose that it was a term of the Agreement that a “Development Fee” representing the profit made on the sale of the Property would be paid to FINAO as remuneration for services rendered by FINAO in the development of the Property: FWS [34] referring to the JOL affidavit at [45], [67]-[68].
It is not appropriate for me to engage in any meaningful analysis of the merits of FINAO’s claims against Mr Cottrell in these proceedings. Without the benefit of much of the evidence on which FINAO’s submissions rely, and without the issue of the admissibility of some of that evidence having been ventilated before the Court, I am unable to do so in any event.
There was no submission put on the part of Mr Cottrell that FINAO’s claims are not bona fide, frivolous or fail to disclose real issues to be tried. In those circumstances, it is sufficient at this stage that FINAO appears, based upon the pleadings filed to date, to have a reasonably arguable case and that the question of its prospects of success and the genuineness of the proceedings do not weigh strongly in favour of an award of security.
At the hearing of Mr Cottrell’s Motion, Mr Cottrell submitted that FINAO’s impecuniosity is not attributable to Mr Cottrell’s decision to engage separate legal representation and seek security for his costs in addition to the security already given by consent for Rosebery’s costs, because FINAO has pushed itself to a position of impecuniosity by reason of its forensic decisions to:
join Mr Cottrell personally to these proceedings, a choice attended by the risk that he would engage separate legal representation and incur costs separate from Rosebery; and
settle Rosebery’s application for security on terms requiring FINAO to provide security for Rosebery’s costs in the amount of $140,000.
To the extent that Mr Cottrell’s conduct has contributed to that position, it was submitted by Mr Cottrell that the Court could consider that factor, but it should not be decisive in the exercise of its discretion, because it was a possible or probable consequence of FINAO’s forensic decisions that it would find itself in a position unable to meet an adverse costs order in favour of Mr Cottrell.
It was submitted by Mr Cottrell that an order for security would not stifle the entirety of the proceedings because if FINAO failed to provide security ordered in favour of Mr Cottrell, and assuming that it provides the security ordered in favour of Rosebery by consent, only FINAO’s claim against Mr Cottrell will be stayed, and the claim against Rosebery as well as Rosebery’s Cross-Claim will carry on (TR P13 L46-P14 L15).
In response to this submission, I asked counsel for Mr Cottrell whether his proposal created a problem of fracturing proceedings in circumstances where Mr Cottrell’s conduct is likely to be relevant to both proceedings. I asked whether it would be in the interests of the administration of justice for both claims in this matter to be dealt with at the same time (TR P14 L23-29).
Mr Cottrell submitted it was not so. Mr Cottrell accepted that aspects of Mr Cottrell’s conduct will be raised in both proceedings but suggested there was a “very discrete and obviously separate allegation of misleading or deceptive conduct” specifically in relation to Mr Cottrell (TR P14 L33-34). Mr Cottrell did accept however, that to “fracture” the proceedings would be regrettable, and ultimately, that “it’s a case of weighing in the balance, and in my submission, for obvious reasons, I say the balance weighs considerably in favour of protecting Mr Cottrell in those circumstances” (TR P14 L41-P15 L1-2).
I am of the view that a security for costs order in the terms sought by Mr Cottrell may stifle proceedings against Mr Cottrell. I do not accept the submission of Mr Cottrell that there are discrete and separate allegations of misleading or deceptive conduct in relation to Mr Cottrell that could properly be dealt with in different proceedings, and thus this issue ought not militate against the making of an order for security. At a practical level, and as submitted by FINAO, the conduct of Mr Cottrell underpinning those allegations will be substantially common to both his conduct as sole director of Rosebery as first defendant, and in his role personally as second defendant.
Accordingly, based upon the albeit limited information before the Court in these proceedings, I consider it to be in the interests of the administration of justice for all issues raised in the various connected proceedings involving the three parties to be heard and determined at the same time. Accordingly, I consider that a security for costs order has the potential to stifle proceedings, which is a matter that militates against the making of an order for security for costs.
Applications for security must be brought promptly: KP Cable at 197 (Beazley J). However, delay itself is not a disentitling factor: Wollongong City Council at [32] (Beazley JA, Barrett JA agreeing). Promptness is a relative concept, to be considered by reference to whether any delay has occasioned prejudice to the plaintiff, in all the circumstances: Acohs Pty Ltd v Ucorp Pty Ltd (2006) 155 FCR 181; [2006] FCA 1279 (Acohs) at [63] (Jessup J), quoting January Force Pty Ltd v Tricon Restaurants Australia Pty Ltd [1999] FCA 1746 at [22] (Goldberg J). It is necessary to look at not only the length of any delay but the reasons for it, and any acts done in the intervening period: Acohs at [61] (Jessup J).
In its written submissions, FINAO submitted that it has incurred significant costs in the period between 10 July 2024, when Mr Cottrell became aware of FINAO’s potential inability to meet an adverse costs order, and 26 February 2025, when Mr Cottrell filed the present application: FWS [39]-[40].
However, FINAO did not press the issue of timing and delay at the hearing of Mr Cottrell’s Motion (TR P5 L14-15). In this, Mr Cottrell’s submission that his application was made promptly (CWS [11]), is therefore not opposed, and the timing of the application for security is not a factor which weighs against Mr Cottrell succeeding on this Motion.
FINAO submitted that this factor arises only in relation to Rosebery’s Cross-Claim for declaratory relief, and only if the proceedings against Rosebery are stayed by reason of FINAO failing to provide security for its costs in accordance with the terms of the orders made by consent on 15 October 2025: FWS [36]-[37].
This factor was not addressed at the hearing of the application by either party or in Mr Cottrell’s written submissions and does not appear relevant to this application despite FINAO referring to it in its written submissions. In those circumstances, I consider it is not relevant to the present application, and it does not weigh on my consideration of whether to exercise the Court’s discretion to award the security sought.
FINAO submits that the combined security for costs sought by the defendants is disproportionate to the importance and complexity of the subject matter in dispute.
Louise Massey, in her affidavit, estimates Mr Cottrell’s future costs of these proceedings to be $209,393. She has reached that figure on the assumption that the matter will be run by one Partner (being herself), with the assistance of one Managing Associate (with more than 10 years’ experience), one Junior Associate (with 4 years’ experience) and one Graduate Lawyer (in their first year of practice), whose respective hourly rates are $910, $800, $415 and $350, exclusive of GST. Ms Massey gave evidence that those rates are within the ranges provided for by a guideline known as the “Costs Assessment Rules Committee Guideline – Costs Payable Between Parties Under Court Orders” dated 24 October 2023. I note that this document was not in evidence. Ms Massey anticipates that Mr Cottrell will brief junior counsel who will charge an approximate rate of $2,500 per day.
As I have mentioned earlier in these reasons, FINAO has already consented to the order to pay $140,000 as security for Rosebery’s costs. The amount of security sought in Mr Cottrell’s Motion is $182,764.45, which counsel for Mr Cottrell accepted was “at the higher range” of the estimate of recoverable costs that had been given by Ms Massey (TR P22 L4-6), being $166,908.50 to $182,764.45 (including GST). The “Development Fee” which FINAO sues to recover jointly and severally from the defendants is pleaded to be $215,000 but, on the evidence before me, may be up to $366,536.59. That is a relatively modest amount for a claim in this Court, bearing in mind that the proceedings were commenced in the District Court and transferred to this Court on Rosebery’s application to prosecute its Cross-Claim for declaratory relief: FWS [14] and [38].
I consider that the figures to which I have referred at [115] above are at the upper end of the range of rates usually expected to be charged for solicitors of their experience, having regard to the importance and complexity of the proceedings, and within the range usually expected to be charged by junior counsel of two to three years’ experience. In light of the amount in dispute in these proceedings, I accept FINAO’s submission that there is a lack of proportionality between the importance and complexity of the subject matter in dispute, and the estimate of Mr Cottrell’s future costs or the amount of security sought: see also s 60 of the CPA; Proclear at [15] (Rees J).
I consider this to be a factor going strongly against the exercise of the Court’s discretion to make an order for security.
In coming to a final decision as to the exercise of the Court’s discretion, I have had regard to the factors set out above, and the associated legal principles, with particular significance given to the following principles and matters.
On the one hand, and acknowledging that because impecuniosity has been conceded by FINAO the evidential burden is on FINAO to establish why security ought not be ordered, it will be apparent I do not consider many of the factors relevant to this application have moved the metaphorical needle much.
On the issue which took up the most hearing time, that is the significance of Mr Cottrell’s decision to obtain legal representation separately from Rosebery, this factor similarly does not weigh significantly in the balance. I did not accept FINAO’s submissions (and accepted Mr Cottrell’s submissions to the contrary) that the mere fact Mr Cottrell has chosen to obtain separate representation, in the circumstances of this case, was unreasonable or otherwise militates against me declining his application altogether. That being said, there being a risk Mr Cottrell may not get a costs order in his favour if he otherwise succeeds in the proceedings because of the overlap in the work likely to be done does, in my mind, weigh against an order for security in this case, though FINAO’s submissions did not convince me that it should be of significant weight on its own*.*
While FINAO has as a prima facie reasonably arguable case and the proceedings are genuine (such that this weighs against an order for security), FINAO’s submissions did not otherwise suggest the strength of its case was so strong that it should weigh significantly against Mr Cottrell receiving security for his costs. Similarly, the timing of the application takes the matter nowhere, in light of FINAO choosing not to make a point of it in its submissions.
However, in my view, there are two strong factors which I consider to ultimately lead to the conclusion that FINAO should not be ordered to pay security for Mr Cottrell’s costs. First, there is a risk that an order would stifle proceedings, in circumstances where security for costs will be paid to one of the defendants (the stifling of the proceedings issue). I do not accept the proceedings could sensibly continue against Rosebery but not Mr Cottrell if the security was not paid.
Second, and perhaps even more decisively, the security sought is disproportionate to the importance and complexity of the proceedings, in the circumstances (the disproportionality issue). Even on FINAO’s larger estimate as to what it might be entitled to in damages, the security primarily sought by Mr Cottrell of approximately $182,000 is significant.
I also consider it relevant that the security sought is additional to that which has already been ordered in Rosebery’s favour. Even if one accepts, as I have, that I cannot make any determination this early into the proceedings whether the separate representation of the defendants is warranted, on the pleadings, there is clearly a significant overlap in the issues.
Whilst not an “issue” which needed consideration within the security for costs component of the Motions, prayer 4 in each of the Motions seeks orders relating to evidence that ought to have been filed by the defendants by 14 February 2025 in the substantive proceedings.
It will be recalled that in prayer 4 of Mr Cottrell’s Motion he seeks that orders 2 and 5 made on 28 November 2024 be vacated so far as they concern him.
Orders 2 and 5 made on that occasion were:
“2. The Defendants are to serve any affidavit evidence in chief upon which they rely in the principal claim by 4pm, 14 February 2025.
…
- That the Cross-Claimant is to serve any affidavit evidence in reply in respect of its Cross-Claim by 4pm, 14 February 2025.”
Both defendants are in default of those orders.
Mr Cottrell submitted that, pending payment of security, he should not be required to provide any further evidence in these proceedings because the cost of preparing that evidence would be wasted if security is ordered but not provided.
Having regard to the evidence before the Court, I note that the 14 February 2025 deadline for the service of Mr Cottrell’s evidence under the orders made on 28 November 2024 fell prior to the date on which the application for security for costs was filed on 26 February 2025. As referred to above, this issue was being case managed by the Registrar in Equity, who appeared to decline making any further orders in the proceedings “until the security issue is resolved” (this observation being made at a point after Rosebery had filed Rosebery’s Motion but before Mr Cottrell had filed Mr Cottrell’s Motion).
Given this, I consider that the issue of the defendants’ default is a matter properly raised on the next occasion before the Registrar in Equity. I decline to grant the relief sought in prayer 4 of Mr Cottrell’s Motion.
FINAO has succeeded in resisting Mr Cottrell’s security for costs application. However, beyond each side seeking their costs, no party addressed the Court any further on costs.
In the circumstances of this case, I consider the appropriate costs order to be that the costs of Mr Cottrell’s Motion be costs in the cause. On the one hand, FINAO has successfully resisted Mr Cottrell’s application for security. But FINAO also conceded its impecuniosity such that it cannot be said Mr Cottrell’s application was unjustified. The debate before me and my ultimate determination turned on matters of discretion which I consider were relatively balanced, for the most part. While it is not on its own determinative on the question of costs, I also consider it relevant that FINAO ultimately did not succeed both in its serious allegation that separate legal representation was engaged by Mr Cottrell for some ulterior motive (which was not ultimately pressed), and in its lengthy argument that Mr Cottrell’s decision to obtain separate representation effectively disentitled Mr Cottrell from obtaining security for costs (which occupied a substantial portion of hearing time).
For the reasons set out above, I make the following orders:
The Notice of Motion filed by the second defendant on 26 February 2025 is dismissed.
The costs of the Notice of Motion be costs in the cause.
The matter is listed before the Registrar in Equity on 12 February 2026**.**
**********
FINAO Pty Ltd
Rosebery 2021 Pty Ltd [2025] NSWSC 1567
(2006) 155 FCR 181
(1992) 57 SASR 303
(1995) 56 FCR 189
(2005) 62 NSWLR 301
(1987) 16 FCR 497
(1991) 65 ALJR 642
(1984) 1 FCR 311
(1995) 134 ALR 187
(2004) 208 ALR 564
Specifically in relation to the claims made by Rosebery in its Defence, FINAO denied, amongst other things, the terms of the private school fees trust allegation (RD [30]).
On 6 November 2024, Dentons filed a Notice of Appearance on behalf of Mr Cottrell.
On 24 November 2024, each of Rosebery and Mr Cottrell filed a “Rejoinder” to FINAO’s RD (TR P23 L43). Each Rejoinder is a further pleading in answer to the RD. Leave was given to file those further pleadings on 27 September 2024 (the order granting leave was also the order which named these further pleadings “Rejoinders”). The orders made on 27 September 2024 also ordered Mr Cottrell be joined as a second defendant, and granted leave to Rosebery to file the RD. Mr Cottrell verified both Rejoinders.
The first 38 paragraphs of the Rejoinders were materially identical. The Rejoinder filed on behalf of Mr Cottrell contained an additional paragraph, being paragraph 39, which says “[t]he Second Defendant denies that the Plaintiff is entitled to the relief sought in the Reply, or at all”.
In the course of oral submissions, FINAO took the Court to a number of authorities which were said to support the submission that Mr Cottrell ought not have elected to have separate representation, these being:
AMP Capital Investors Ltd v Parsons Brinckerhoff Australia Pty Ltd [2013] NSWSC 1633 (Pembroke J);
Buses + 4WD Hire Pty Limited v Oz Snow Adventures Pty Limited [2016] NSWSC 1017 (Adamson J);
Daracon Engineering Pty Ltd v Kelsall [2025] NSWCA 189 (Ward P, Leeming and Stern JJA);
Ong v Ping [2015] EWHC 3258 (Ch) (Morgan J);
Ong v Ping [2015] EWHC 3766 (Ch) (Morgan J);
Spotlight Pty Ltd v Maintek Roofing Pty Ltd [2017] NSWSC 165 (N Adams J);
The Owners Strata Plan No 87881 v Frasers Broadway Pty Ltd [2025] NSWSC 1073 (Rees J); and
Van Eeden v Henry (2005) 62 NSWLR 301; [2005] NSWCA 14 (Spigelman CJ, Sheller and McColl JJA).
By way of reply to those submissions, Mr Cottrell stated that he does not cavil with the principle, arising from those authorities, that a single party seeking double representation must apply for leave (TR P44 L43-44). Mr Cottrell sought to distinguish those cases from the circumstances currently before the Court. In those cases, there was a party in proceedings (or in connected proceedings) with two distinct roles in the proceedings, for example, where a party acts in their capacity as a trustee, and personally (TR P42 L42-49). By contrast, in the current proceedings, there are two parties that are being sued separately, and in this context, it was submitted that Downs was the relevant authority.
I accept that those cases cited by FINAO are distinguishable on the basis submitted by Mr Cottrell.
The question of whether Mr Cottrell’s decision to engage separate representation in these proceedings was ultimately a reasonable one is not a matter appropriate for determination on an interlocutory application of this kind, bearing in mind that I should be “slow to assume, particularly at the pre-trial stage, that there should be joint representation of all the defendants”: Global Medical Solutions Australia Pty Ltd v Axiom Molecular Pty Ltd [2013] NSWSC 1433 at [91] (Stevenson J) and the authorities there referred to; Downs at 307 (see [63] above). Assuming, without expressing an opinion on the issue, that the defendants are successful in their defence of the proceedings, the question whether each defendant is entitled to recover its costs is a question properly reserved for the conclusion of the proceedings: see In the matter of Bailey Roberts Group Pty Ltd [2023] NSWSC 1147 at [65] (Williams J); Proclear International Pty Ltd v United Beverage Co-Packers Pty Ltd [2023] NSWSC 1633 at [24] (Rees J) (Proclear).
Importantly, and as candidly acknowledged by Mr Cottrell and highlighted in Downs, while it is open to Mr Cottrell to elect to engage separate legal representation in the proceedings, he does so at risk of his costs. In addressing this possibility, Mr Cottrell stated that following a debate on costs at the end of the hearing, and in circumstances where no reason had ultimately emerged as to why the defendants could not have been singularly represented, “then that will be the debate on costs, and the security to the extent there’s any left, would be returned to the plaintiff because no order for costs would be made” (TR P48 L7-9).
Having regard to what the Court said in Down**s, I do not consider that Mr Cottrell’s decision to be separately legally represented disentitles him from receiving security for costs, nor do I consider it a determinative factor that weighs heavily in the direction of the Court declining to exercise the discretion to order security for costs. At the same time as this however, I give some weight, in the direction of declining to make an order, to the possibility that Mr Cottrell may not be granted an order for his costs if circumstances do not arise to justify this additional expense.
I now turn to the other matters raised by the parties in their written submissions and at the hearing of Mr Cottrell’s Motion, noting that the issue that I have considered immediately above occupied the majority of the hearing.
It is one thing to accept Mr Cottrell is entitled to have his own representation, acknowledging that is done at his own risk as to costs. But as recounted earlier in these reasons, there is a close identity between the pleadings, the source of instructions for Rosebery appears to be Mr Cottrell, and there is an accepted overlap in the issues. I have not been convinced that the legal costs to be incurred in Mr Cottrell’s defence that would be secured are likely to be proportionate with respect to the claims advanced against Mr Cottrell specifically. To be clear, I am not suggesting that Mr Cottrell’s legal representatives are incurring costs unreasonably or even that Mr Cottrell should not have his costs in the future as the proceedings play out however they do. It is simply that on this application, I am not convinced that as a matter of discretion, the extra work to be done to advance Mr Cottrell’s defence, additional to whatever work is done to advance Rosebery’s defence, should sound in an order for security. Mr Cottrell’s submissions convinced me he should not be penalised on the application merely for being separately represented, but I do not think they sufficiently dealt with the fact that the obvious factual, legal and practical overlap between himself and Rosebery in these proceedings makes it difficult to know what extra work needs the additional and significant sum of security for costs sought by him (the duplication issue).
In considering whether it is appropriate to make an order, the Court seeks to achieve a balance between ensuring that adequate and fair protection is provided to Mr Cottrell and avoiding injustice to FINAO by unnecessarily shutting it out or prejudicing it in the conduct of these proceedings.
For the reasons set out above, and having regard to all of the circumstances, I consider that FINAO has established, on balance, reasons why security should not be granted, and accordingly, I am of the view I ought not exercise the Court’s discretion and that no order for security for costs should be made.
Given the above determination, the issue of quantum, per Issue 3, does not arise.
Even if I am incorrect in respect of the above determination, and it ought to have been found that some form of security ought to be provided by FINAO, I consider that amount of security ought to be no more than $20,000. Whilst I have had regard to the estimates of future costs provided by each of the parties, my reasons for having included discounts from both of the estimates provided includes an awareness of the associated order for FINAO to pay security for Rosebery’s costs, together with consideration of the disproportionality issue, the duplication issue, and the stifling of the proceedings issue: Bardi v Giannaros (No 2) [2025] NSWSC 917 at [298] (Meek J); Recycling Holdings Pty Limited v Fuji Xerox Businessforce Pty Limited [2013] NSWSC 1312 at [35] (Lindsay J).