Gartner v Ernst & Young

introduction 1 The third respondent (the bank) has applied for security for costs against each of the applicants. In the case of the first and second applicants (the personal applicants), the claim is made under s 56 of the Federal Court of Australia Act 1976 (Cth) (the FCA Act). In the case of the third to eleventh applicants (the corporate applicants), the claim is made under s 56 of the FCA Act and under s 1335 of the Corporations Act. 2 Section 56(1) provides: 'The Court or a Judge may order an applicant in a proceeding in the Court or an appellant in an appeal to the Court to give security for the payment of costs that may be awarded against him or her.' Order 28 of the Federal Court Rules sets out the procedural requirements for an application for security for costs. It is not necessary to refer to its terms for the purpose of considering the present application. 3 Section 1335(1) of the Corporations Act provides: '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.' 4 I have today published reasons for decision concerning the applicants' claim for leave to file and serve a further amended statement of claim (the statement of claim): Gartner v Ernest & Young (No 2) [2003] FCA 1436. Those reasons contain a detailed description of the applicants' claims against the first and second respondents (the accountants) and against the bank. I shall not repeat them. The action concerns the conduct of the accountants from about March 2001, as the applicants' professional advisers, leading to a decision that a further company in the general group of the applicants Gartner Wines Pty Ltd (Gartner Wines) should develop a winery. The further decision was that the winery should be constructed with funds borrowed from the bank, together with funds to refinance existing indebtedness of certain of the applicants, and that the applicants should generally support that fresh financing facility from the bank by a series of interlocking guarantees and by the applicants which held real estate mortgaging their respective interests and by each of the corporate applicants further securing the financing facility by mortgage debentures granted to the bank. The financing facility was agreed upon in November 2001. It is alleged that the accountants were negligent, in breach of contract, in breach of their fiduciary duties and acted in a misleading way and unconscionably in allowing and advising the applicants to enter into the financing facility. 5 The allegations against the bank concern only the period from November 2001. It is alleged that the bank also acted in a misleading way in representing to the applicants (through the accountants) that further funding would be available to support the proposed construction of the winery.

contentions 6 With one qualification, the bank and the applicants are agreed as to the general principles applicable to the determination of the present application. The qualification concerns the applicability of the general rule that security for costs will not be ordered against a personal plaintiff or natural person on the ground of that person's impecuniosity. That general common law rule, enunciated for instance by Megarry VC in Pearson v Naydler [1977] 1 WLR 899 at 902, has been followed and applied in respect of applications for security for costs under s 56(1) of the FCA Act in Barton v Minister for Foreign Affairs (1984) 2 FCR 463 at 469 per Morling J; James v Australia and New Zealand Banking Group Ltd (No 1) (1985) 9 FCR 442 at 445 per Toohey J (citing Pearson at 902); Cameron's Unit Services Pty Ltd v Kevin R Whelpton and Associates (Australia) Pty Ltd (1986) 13 FCR 46 at 53 per Burchett J; Orr v Lusute Pty Ltd (1987) 72 ALR 617 at 620 per Sheppard J; Famel Pty Limited v Burswood Management Ltd (1989) 11 ATPR 40962 at 50514 per French J; and Weston v Beaufils (1993) 43 FCR 292 at 298 per Burchett J. 7 As to those cases, in Melville v Craig Nowlan and Associates Pty Ltd [2002] NSWCA 32; (2001) 54 NSWLR 82, Heydon JA (with whom Stein JA and separately Young CJ in Equity agreed, the latter with some additional comments at 119), said at [110] 112: '… The Federal Court cases on s 56(1) of the Federal Court of Australia Act (Cth) should not be applied to s 69(3). None of them explain how s 56(1) relates to the general law rule. In all of them the result would be justified apart from the general law rule. While the general law rule is of a kind which would call for clear language if it were to be abolished, it is hard to see how language much clearer than that used in s 69(3) could have been employed.' 8 The reference is to s 69(3) of the Land and Environment Court Act 1979 (NSW) which is in terms relevantly to the same effect as s 56(1) of the FCA Act. Heydon JA reached the conclusion that it should not be read down or construed so as to conclude that the Land and Environment Court of New South Wales has no power to make an order for security for costs against an impecunious natural person. Consideration was given by Heydon JA, and by Young CJ in equity, as to whether the common law principle that security for costs would not be ordered against an impecunious litigant in person applied other than in circumstances where not to do so would allow proceedings which were vexatious or oppressive: see the discussion by Young CJ in Equity of McHenry v Lewis (1883) 22 Ch D 397 at 408. 9 In Bell Wholesale Co Pty Ltd v Gates Export Corporation (No 2) (1984) 8 ACLR 588, (Bell Wholesale) the Full Court (Sheppard, Morling and Neaves JJ) said at 590 and 591 that s 56 provides an unfettered discretion to make orders for security for costs, provided that the discretion was exercised judicially. 10 Subject to that consideration, the parties are agreed that the discretion of the Court under s 56(1) of the FCA Act is a broad and unfettered one. It must be exercised judicially. Matters which have been considered as relevant to the exercise of the discretion include:

• the prospects of success in the proceedings, subject to the practical circumstance that the Court will generally not be required to investigate in considerable detail the likelihood or otherwise of success in the action;
• whether an order for security for costs would preclude the applicant from pursuing the claim;
• whether the impecuniosity of the applicant arises out of the breaches of conduct alleged against the respondent;
• the public interest; and
• the timing of the application, namely that it should be brought promptly.

See generally Equity Access Limited v Westpac Banking Corporation. (1989) ATPR 40-972. Not all those circumstances or considerations will be relevant in each matter. In other cases there may be different or additional considerations which require the Court's attention. For instance, in the present matter, the applicants have submitted that, in reality, they are not 'attackers', but that the real aggressor in the proceedings is the bank so that the bank should not succeed in an application for security for costs: see Amalgamated Mining Services Pty Ltd v Warman International Ltd (1988) 19 FCR 324. In some instances, but not in the present case, it has been regarded as relevant that the conduct of the respondent seeking security for costs is oppressive because it is being used as a means to deny an impecunious applicant an opportunity to litigate. 11 Similarly, under s 1335(1) of the Corporations Act, the power of the Court to order security for costs is unfettered. Provided that there is credible testimony that there is a reason to believe that the applicants are unable to pay the costs of the bank if the bank is successful in its defence, the Court may make an order for security for costs without being restricted as to how it should exercise its discretion to do or not to do so. The relevant factors commonly considered in such applications are discussed, for instance, by Beazley J in KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 197-198 (KP Cable). See also Beach Petroleum NL v Johnson (1992) 10 ACLC 525 at 527 and 529. 12 In this matter, counsel for the bank and for the applicants confined their submissions to particular topics. As Wilcox J did in Tobacco Control Coalition Inc. v Philip Morris (Australia) Ltd [2000] FCA 1004; ATPR (Digest) 46-205, I shall limit my consideration in the first instance to consideration of those factors to which the parties drew my specific attention. Those matters were: (1) the financial position of the applicants; (2) the merits of the applicants' claim and of the bank's defence to the claim; (3) the alleged delay in bringing the application; (4) whether the bank's conduct means that, in context, the application is essentially defensive in nature.

It was not submitted on behalf of the applicants that an order for security for costs, if made, would stultify the application from being pursued (cf Bell Wholesale at 591). It was not submitted that the application for security for costs was being advanced by the bank solely for the purpose of oppressing the applicants by precluding them from maintaining the application. It was not submitted that the bank's conduct is alleged to have caused the applicant's impecuniosity (cf KP Cable). 13 Finally, counsel for the applicants contended that, if the Court were minded to make an order for security for costs, the order for security for costs should be nowhere in the region of that which the bank seeks, and in addition should be an order for staged payments in the following four stages: to the completion of discovery, to the matter being listed for hearing, to the commencement of the hearing, and during the hearing itself. It was submitted that any order for security for costs should be limited to costs for the first of those stages only.

the impecuniosity of the applicants 14 It is necessary to separately deal with the personal applicants and the corporate applicants. 15 In the case of the corporate applicants, counsel contended that there was no cogent evidence dealing with their individual circumstances. That is correct. Evidence as to their claimed impecuniosity was based upon a 'group' approach, and upon a valuation which was to some extent contradicted by another valuation, so that (it was argued) no conclusion as to their collective or individual impecuniosity could be reached. That evidence was in turn confined largely to the realisable value of the secured real estate, and the winery operations carried on there. 16 What is clear is that in November 2001, the bank provided to the personal applicants $6 million, to the third applicant $4.4 million, and to Gartner Wines some $13.8 million. At August 2002, the collective indebtedness of the applicants and Gartner Wines was (according to Mr Carter) $24.1 million and according to the first applicant $23.8 million. That indebtedness has remained largely unpaid. It has accumulated interest. There has been limited realisation of assets which has enabled reduction of the indebtedness. As at April 2003, the indebtedness was in excess of $26 million. The receivers and managers have incurred substantial expense in maintaining the value of the assets over which they claim to have been validly appointed as receivers and managers. It has cost in excess of $300,000 per year to maintain and harvest the vineyards operated by the personal applicants. 17 On 8 November 2002 the property known as Bains in the name of Gartner Wines was sold for $1.2 million. The winery of Gartner Wines has been sold recently for $4.8 million (to be settled shortly). It cost about $15 million to construct. There is an ongoing dispute about who is entitled to the proceeds of sale of the 2001 and 2002 vintages from the Gartner Wines vineyards. 18 Mr Carter has deposed to the belief that further realisation of the assets the subject of the security instruments will result in recovery of a sum of about $16 million. That would make the total recoveries from realisation of the secured real estate assets about $22 million (including the Bains property and the Gartner Wines winery complex). He estimates the shortfall on the applicants' collective indebtedness to the bank then to be in the range of $6 million, but possibly up to $11 million depending upon realisation values. His views are based upon the valuation as at September 2002 of FPD Savills as to the likely realisable value of the secured real estate (the Savills valuation). 19 In the Savills valuation, the Gartner Wines' winery complex was valued at $4.5 million and the Bains property at $1 million so the realisation values are slightly in excess of the Savills valuation of those assets. 20 The statement of claim, after describing the role of the respective applicants, asserts that at the beginning of 1999 the value of the net assets of the applicants (not including the Gartner Wines assets) exceeded $22 million. It then further pleads that the applicants now are at risk of losing entirely the value of those net assets. It does not assert that the personal applicants did not have other assets. They are described in the statement of claim by reference to their partnership farming and winery business at Coonawarra under the name 'M J and A W Gartner'. I infer, although it is not entirely explicit, that the detailed description of the activities of the corporate applicants involves an allegation that each of them was 'purpose driven' so that the mortgages over real estate given by them covers their available real estate. The mortgage debentures given by each of them is comprehensively over their assets. The absence of any suggestion by counsel for the bank and by counsel for the corporate applicants also suggests to me that I should proceed on the basis that the corporate applicants have no other assets than those which have been asserted in the statement of claim and in the Savills valuation. However, the material contains no attempt to indicate whether any of the businesses operated by certain of the corporate applicants themselves have value, and if so what value. As the statement of claim asserts that those businesses are conducted on land owned by others of the corporate applicants, and in the absence of any submissions suggesting to the contrary, I assume those businesses will themselves have no value when the underlying real estate is sold. 21 Each of the corporate applicants is in receivership. The contentions of counsel have focused on the adequacy of the total security taken by reference to the realisable value of the secured real estate. The first applicant has deposed to the existence of a valuation from Colin Gaetjens done on 2 March 2001. 22 It is difficult to reconcile precisely the two valuations. There is no complete correspondence between the land of the applicants as identified in pars 2, 5, 8 and 10 of the statement of claim and the land said to have been mortgaged to give effect to the promise to grant security when the financing facility was entered into (par 61 of the statement of claim). There is no precise correspondence between the tables reflecting the summary of values in the Savills valuation and the Gaetjens valuation. That is in part because they have used different descriptions for the same land. By reference to the Savills valuation (which is Exhibit BJC 10 to the affidavit of Mr Carter of 7 October 2002) some closer correlation can be obtained. Nevertheless, there seems to be some additional land valued in the Gaetjens valuation under the description 'Joint Venture' compared to that in the Savills valuation (one relates to three titles and the other to one title). Under the description 'Gumlea Vineyards' Savills have valued two titles, including Certificate of Title Register Book Volume 4845 Folio 629. That land appears not to have been valued in the Gaetjens valuation, but there is a valuation of the land in Certificate of Title Volume 5383 Folio 350 which would appear to correspond with that land. I have not checked to see whether the later numbered title was issued from and in respect of the land in the earlier title. Mr Gaetjens does not appear to have valued what has been called 'Phillip's Block' (the land in Certificate of Title Register Book Volume 5819 Folio 653). He does not appear to have valued the 'Inverness' land (the land and Certificate of Title Register Book Volume 5527 Folios 14, 15 and 23). The valuation figures of Mr Gaetjens then total $22.99 million, but to that I add back the two values ascribed to Phillip's Block and to the Inverness property by Savills. I also add back $4.3 million (the difference between the sale price of Gartner Wines Winery of $4.8 million and the land value as allowed by Mr Gaetjens; at the time of his valuation, the Gartner Wines winery had not been developed). That increases his valuation to $28.31 million compared with that of Savills of $22.03 million. 23 Counsel for the bank contended that I should prefer on this application the Savills valuation. It was pointed out that the valuation for the Bains property by Savills was $1 million and by Mr Gaetjens was $2.5 million and it had been sold for $1.2 million. I do not consider it appropriate to prefer one or other of the valuations on that basis. 24 If the Gaetjens valuation is correct, then it provides an additional figure in excess of $6 million upon realisation of the secured real assets which may be sufficient to discharge the indebtedness of the applicants to the bank, assuming the applicants are unsuccessful in their proceedings. Whether there would then be sufficient residual equity to meet the costs of the bank from realisation of the secured real assets is unclear. But to demonstrate the existence of such competing valuations does not mean the application must fail. The threshold issue is whether the Savills valuation, adopted and relied upon by Mr Carter, provides in the context I have outlined credible testimony that there is reason to believe that each of the corporate applicants will be unable to pay the costs of the bank if it is successful in its defence. In my judgment, the Savills valuation does provide such a foundation for the application. 25 In Warren Mitchell Pty Ltd v Australian Maritime Officers' Union (1993) 12 ACSR 1 at 5, Lee J described the onus of the threshold imposed by s 1335(1) of the then Corporations Law (which in terms is relevantly identical to s 1335(1) of the Corporations Act) in the following way: 'The use of the word "credible" suggests a requirement that evidence to be relied upon has some characteristic of cogency. Qualification of the word "testimony" by the word "credible" suggests that an evidentiary burden is undertaken by the party seeking the order. It amounts to an obligation on an applicant for an order to show that the material before the court is sufficiently persuasive to permit a rational belief to be formed that, if ordered to do so, the corporation would be unable to pay the costs of that party upon disposal of the proceedings. To what extent the satisfaction of that standard may fall short of the demonstration of a likelihood that the corporation will be insolvent at the relevant time is unnecessary to decide. It is enough to say that speculation as to insolvency or financial difficulties likely to confront the corporation will be insufficient to ground the exercise of the discretion.' 26 The picture presented is that each of the corporate applicants carried out a particular enterprise, that each of the corporate applicants offered a security and guarantee in support of the indebtedness to be incurred following acceptance of the Finance Offer and the provision of that finance, and that (subject to the claim of the applicants against the bank that the security instruments are to be set aside) the assets of each of the corporate applicants (and of the partnership) if realised in a normal way are unlikely to produce sufficient funds to discharge the investments of the Gartner Family Group and Gartner Wines to the bank. There will be a significant shortfall. In those circumstances, in my judgment, there is sufficient evidence to show and to persuade me that, if ordered to do so, the corporate applicants would be unable to pay the costs of the proceedings if they are unsuccessful in the application so that the threshold requirement of s 1335(1) of the Corporations Act has been met. 27 The position is not so clear in relation to the personal applicants. I do not think it has been shown that the personal applicants may be unable to meet an order for costs in the proceedings if they are unsuccessful. Nothing is shown about their personal circumstances. Unlike the corporate applicants, where there is evidence that they have granted a debenture over the whole of their assets to secure the moneys advanced by the bank, the securities they have given are limited. There is no information as to whether they own other land or other assets outside the 'partnership assets', either individually or with others. I do not think the picture is sufficient to conclude that they are impecunious in the sense that term is generally used. 28 In those circumstances, it is not necessary to determine whether there is a general disposition, whether strong or conclusive or at all, against making an order for security for costs against impecunious natural persons.

OTHER CONSIDERATIONS 29 It was next contended that the Court should have regard to the strength of the case of the applicants against the bank. It is at this point difficult to form any view on that issue. Plainly, if the allegations against the bank on behalf of the applicants are made out, they will demonstrate misleading conduct and negligence on the part of the bank and an entitlement to some relief. 30 However, it is by no means clear that that cause of action will be made out. As the pleadings presently disclose, there was no direct communication between the first applicant (who in essence was the communicator or driver of the interests of the applicants) and any officers of the bank on the relevant topics. The communications were through officers of the accountants. Moreover, the defence of the accountants denies the content of the alleged communications. 31 The bank through counsel points out also that there is an inconsistency in the allegations of causation on the part of the applicants in the proposed statement of claim (and its earlier versions) and in other proceedings in the Supreme Court of South Australia as to whether what has been called 'the second Beston Proposal' would have proceeded in December 2001 but for the bank's representations and its alleged conduct. It was also pointed out that on 6 March 2003 the applicants executed a Deed of Acknowledgment following a restructuring of the finance arrangements between them and the bank, and that at the time there were no complaints by the applicants about any part of the conduct of the bank. By that time, it was apparent that the further funding sought by the applicants from the bank had been refused and it was necessary to restructure the financing arrangements to some degree. It was also pointed out that it was not until August 2002 that the issue as to the bank's conduct was first raised by or on behalf of the applicants through their solicitors. I was also pointed to some material which indicated that the applicants were conscious in November 2001 of the shortfall in their financial requirements, but nevertheless were prepared to accept the bank's offer of finance without pushing or requesting further finance from the bank at the time. 32 Those obstacles confronting the applicants are not insignificant. It is not a case where the material firmly demonstrates strong prospects of success in the proceedings. However, I do not think that the applicant's case against the bank is so demonstrably weak as to make this factor weigh heavily in favour of the making of an award for security for costs. 33 It is next contended that the applicants are in reality defending their position against the bank and that the bank is, in reality, the aggressor in the proceedings. It is correct to assert, as counsel for the applicants contended, that the Court looks to the substantial position of the parties in the proceedings to determine whether in substance the applicants are in reality defending a claim by the bank: see e.g. the remarks of von Doussa J in Townsend Controls Pty Ltd v Gilead (1989) 14 IPR 441 at 446-447 and in the cases there referred to by his Honour. In this matter, the applicants assert that, by reason of the conduct of the bank, they have validly rescinded or are entitled to rescind certain security instruments and to recover damages from the bank. The bank has cross-claimed for recovery of amounts owing to it. The immediate circumstance apparently giving rise to the proceedings was the imminent appointment by the bank of receivers and managers to the corporate applicants. It is not otherwise apparent that the bank would have proceeded to the institution of proceedings at all. I accept that, if the bank had sued the applicants for recovery of the debt allegedly owing, the applicants would have cross-claimed to impugn the integrity of the security instruments in those proceedings. However, the fact is that it is the applicants who have chosen to impugn the integrity of those instruments in this proceeding. Putting aside that element of their claim, they do not dispute having received the funds advanced by the bank. Nor as I understand it, do they dispute having to repay that amount less any damages which they are able to recover from the bank. Essentially, therefore, in my judgment the action by the applicants to recover damages from the bank for misleading conduct and negligent mis-statements and to impugn or to have set aside the security instruments is not one properly described as 'defensive' or where the real aggressor is the bank. 34 Counsel for the applicants further contended that the Court should decline to make the order for security for costs on the ground that the application was very belated. I do not think that is so. The proceedings were instituted in August 2002. The proceedings were complex. There have been a number of versions of the statement of claim. The bank is, in terms of the substantive allegations made in the proceedings, but a small player. It foreshadowed bringing an application for security for costs at an early point. It made such an application in May 2003. At that time the proceedings had not much progressed. They were delayed by the accountants' challenge to the entitlement of the corporate applicants to have instituted the proceedings in the circumstances, and then the appeal of the accountants against that decision. In practical terms, the application has been unable to much progress until resolution of those issues. I do not therefore consider that the bank has engaged in delay in instituting the present application or in maintaining it. There is also nothing to persuade me that the elapse of time before this application has in any way caused unfairness to the applicants. There is no evidence to suggest that. 35 I have mentioned in these reasons other matters which have attracted attention in applications for security for costs. I have considered them, but they do not seem to be of any real significance in this matter. There are no other factors which the parties identified, or which I have considered relevant, which require express consideration.

conclusion 36 The personal applicants are not shown to be impecunious. There is no information about their assets and liabilities, outside the partnership assets which are described in the statement of claim and which are the subject of the valuations. Because I do not have that information, I do not propose to make an order for security for costs against them. I am not of the view, in the circumstances, that it is appropriate in the exercise of my discretion to make such an order. The interests of justice between the applicants and the bank do not call for it. I have considered the various matters to which I was referred in reaching that view. 37 The position of the personal applicants is also, in my judgment, relevant to whether an order for security for costs should be made against the corporate applicants. Although the threshold imposed by s 1335(1) of the Corporations Act has been stepped over, and although the other factors to which my attention was drawn on balance would lead to the making of an order for security for costs, that additional factor weighs in the scales against making such an order. There is the real prospect (on the material) that an order for costs against the applicants generally will be able to be met despite the apparent impecuniosity of the corporate applicants. Subject to the peculiar position of the second applicant, because she has raised an 'Amadio' defence, (The Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447), any order for costs is likely to be made against all the applicants if they are unsuccessful. They will each be liable to meet those costs. Even if the corporate applicants will be unable to do so, the personal applicants and in particular the first applicant may well be able to do so. I have no reason to think he will not be able to do so. At the worst and from the point of view of the applicants collectively, it is merely speculative to think that he will be unable to do so. The present application was made on the basis of the 'group' position of the applicants. I consider it to be appropriate to address it on that basis, including the circumstances of the personal applicants. On that basis, I consider it no more than speculative on the material presently before me that the applicants, including the corporate applicants, will be unable to meet an order for costs against them and in favour of the bank if their application against the bank is unsuccessful. 38 That factor weighs, in my judgment, quite heavily in the scales in determining overall whether to make an order for security for costs against the corporate applicants. I have come to the view, finally, that I should not do so. 39 Accordingly, the application by the bank for security for costs against the applicants is refused. 40 The bank sought an order for the payment of $750,000 for security for costs. Had I been minded to make such an order, it would not have been in that amount. There is considerable evidence as to the costs which the bank may incur in the defence of the proceedings. Those estimates include assumptions as to the amount of discovery and as to the length of the trial (up to 120 hearing days). I think those estimates err substantially on the side of conservatism. In my view the trial will take a considerably shorter period. As best I can determine from the material, although there are a significant number of potential witnesses, the number of witnesses other than experts who may be of any length to be called on behalf of the applicants would be not more than four, on behalf of the accountants not more than eight, and on behalf of the bank not more than two. No doubt their evidence-in-chief will be given by the adoption of written statements. It is unclear how long the cross-examination will take, particularly as I have not had the benefit of detailed submissions as between the applicants and the accountants as to the issues between them. There may be the need for expert evidence of an accounting nature, from wine industry experts, or from experts in corporate finance. Assuming expert witness reports are exchanged and the experts consult privately prior to the hearing, the extent of any disagreement between them and thus the need for extensive cross-examination may be abridged. 41 The pre-trial procedures will be extensive. Mutual discovery will have to be given. It is almost complete. I am told that the accountants will discover some 82 lever arch files of documents, and the bank some 20 lever arch files of documents. The extent to which all that material requires thorough perusal is unclear. It may contain much in the nature of copies or repeat copies of documents. It is unlikely that each of the pages of those folders will contain unique and potentially significant material. Much of the material discoverable is likely to include documents such as the various security instruments and copies of them. Nevertheless all documents in the nature of primary records, notes of conferences, working papers, records of conversations and the like will need to be carefully inspected. 42 The critical material will no doubt be assembled for the purposes of an agreed set of documents for the Court, and for the purpose of submission to and consideration by expert witnesses. There is no point in expert witnesses being briefed with different material, so that different opinions which they may come to express may be simply the result of different factual foundations upon which they are asked to express views unless there is good reason why different factual foundations should be presented to them. There may be the need for some non-party discovery. 43 The solicitors for the bank have provided an upper range of costs for the trial of $1.74 million. That assumes a hearing of 120 days, and allows in excess of $500,000 for perusing documents. I think both those estimates are generous. It is impossible however to form any firm view as to the likely length of the trial, or as to the costs likely to be involved in the bank preparing the matter for trial. I think all I could have done would have been to form a view that the trial and the legal costs of the bank may be significantly less than its estimate both because the trial will be shorter and possibly considerably shorter, and because the amount of work in pre-trial material to be examined will be considerably shorter than estimated. I do not think it would be helpful to extend my observations beyond that. 44 Counsel for the applicants contended that, if I were minded to make an order for security for costs, I should make a staged order. I would not have acceded to that contention. Principally that is because, given the prospects of the hearing in the relatively near future, the staging of the order for security for costs will be unlikely to be of any real utility. I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.

Associate: Dated: 8 December 2003 Counsel for the First to Eleventh Applicants: Mr D Kennelly with Mr J Cudmore

Solicitor for the First to Eleventh Applicants: Cosoff Cudmore Knox

Counsel for the Third Respondent: Mr M Hoffmann

Solicitor for the Third Respondent: Finlaysons

Date of Hearing: 27 November 2003

Date of Judgment: 8 December 2003