Ingot Capital Investment & Ors v Macquarie Equity Capital Markets & Ors

Adams v Thrift [1915] 1 Ch 557 Calderbank v Calderbank [1976] Fam 93 Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248 HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 Ingot Capital Investment & Ors v Macquarie Equity Capital Markets and Ors [2003] NSW SC 1012 Ingot Capital Investments Pty Ltd and Ors v Macquarie Equity Capital Markets Pty Ltd and Ors [2004] NSW SC 406 Ingot v Macquarie [No.3] [2005] NSWSC 255 Ingot v Macquarie (No.6) [2007] NSWSC 124 CASES CITED : Lahoud v Lahoud [2006] NSWSC 126 Ogilvie Grant v East (1983) 7 ACLR 669 Potts v Miller (1940) 64 CLR 282 Preston v Preston [1982] 1 All ER 41 Sagacious Procurement Pty Ltd v Symbion Health Ltd [2006] NSWSC 779 Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254 Thors v Weekes (1989) 92 ALR 131 Vagrand Pty Limited (In Liquidation) v Fielding (1993) 41 FCR 550 White ACT (in liquidation) v G B White [2004] NSWSC 303

Ingot Capital Investments Pty Limited (First Plaintiff) Stocks Convertible Limited (formerly AOIT Limited) (Second Plaintiff) ASC Pty Limited (Third Plaintiff) Stocks Convertible Trust plc (formerly Australian Opportunities Investment Trust PLC) (Fourth Plaintiff) Eastern States Securities Limited (Fifth Plaintiff) Ingot Capital Management Pty Limited (Sixth Plaintiff) Macquarie Equity Capital Markets Limited (First Defendant) Macquarie Equities Limited (Second Defendant) Macquarie Bank Limited (Third Defendant) Udayan Daniel Ghose (Fourth Defendant) PARTIES : Jonathan Paul Beach (Fifth Defendant) Azmin Firoz Daya (Sixth Defendant) Craig Deery (Seventh Defendant) Michael J Morrissey (Eighth Defendant) William Peck (Ninth Defendant) Paul Lauerence Williams (Tenth Defendant) Peter Aroney (Eleventh Defendant) John Trowbridge Consulting Pty Limited (Twelfth Defendant) Patrick Murray and the persons listed in Schedule "B" to the summons (PwC) (Thirteenth Defendant) Andrew Mutton and the Persons in NSW Listed in Schedule "A" to the summons (Phillips Fox) (Fourteenth Defendant) NCRA (36th Cross-claimant) Guy Carpenter Parties

R G Forster SC / P J Dowdy (for the Plaintiffs) A S Bell SC / J R Williams (for the First, Second and Third Defendants) P Silver (for the Fourth Defendant) A P Cheshire (for the Fifth, Seventh and Eighth Defendants) L Gor (for the Ninth Defendant) COUNSEL : M J Cohen (for the Tenth Defendant) P S Braham (for the Eleventh Defendant) S A Goodman (for the Twelfth Defendant) T F Bathurst QC / S Nixon (for the Thirteenth Defendant) R Dick / J Watson (for the Fourteenth Defendant) M A Pembroke SC / L P Menzies (for the Guy Carpenter Parties) B Coles QC / D Cook (for NCRA)

Deacons (for the Plaintiffs) Mallesons Stephen Jacques (for the First, Second and Third Defendants) Chang Pistilli & Simmons (for the Fourth Defendant) Colin Biggers & Paisley (for the Fifth, Seventh, and Eighth Defendants) William Peck (for the Ninth Defendant) SOLICITORS : Dibbs Abbott Stillman (for the Tenth Defendant) M D Nikolaidis & Co (for the Eleventh Defendant) Minter Ellison (for the Twelfth Defendant) Blake Dawson Waldron (for the Thirteenth Defendant) Freehills (for the Fourteenth Defendant) TressCox (for the Guy Carpenter parties) Henry Davis York (for NCRA)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

50169/01 INGOT CAPITAL INVESTMENTS & ORS v MACQUARIE EQUITY CAPITAL MARKETS & ORS [No 7]

1 HIS HONOUR: On 30 March 2007, I gave judgment in these proceedings: Ingot v Macquarie (No.6) [2007] NSWSC 124 (Ingot (No.6). I ordered that:

(1) The plaintiffs' claim be dismissed against all defendants other than the twelfth, Trowbridge (as between the plaintiffs and Trowbridge, orders had been made already by consent).

(2) All cross-claims for contribution or indemnity in respect of any claim made by the plaintiffs be dismissed.

(3) Two other cross-claims, the 33rd and the 36th, brought by NCRA against various cross-defendants, be dismissed.

(4) All cross-claims for contribution or indemnity in respect of the 33rd and 36th cross-claims likewise be dismissed. 2 I reserved for further consideration the question of costs. These reasons deal with some, but not all, of the claims for costs that have been made in consequence of my conclusions in Ingot (No.6). 3 I assume that the reader of these reasons will have read, or at least skimmed, Ingot (No.6). Thus, in these reasons:

(1) I shall not give any background or explanation, except where it is necessary to do so to decide any costs issue with which I am presently concerned; and

(2) I shall use, without further explanation or elaboration, the terms used in Ingot (No.6) to describe the various parties and, where necessary, witnesses. The plaintiffs' concessions 4 The plaintiffs have taken a sensible attitude to the various claims for costs that have been made. They have accepted liability for many of those claims, including, in some cases, for claims that certain costs be paid on the indemnity basis. In particular:

(1) The plaintiffs accept that they should pay the costs of all defendants of the proceedings.

(2) The plaintiffs accept that they must bear the costs incurred by all defendants in bringing or defending cross-claims for contribution or indemnity by one defendant against another where those cross-claims merely reflect, or (in the words of Dr Bell SC, who appeared with Mr Williams of counsel) are parasitic upon claims made by the plaintiffs against the relevant defendant (the first to 25th and 29th cross-claims).

(3) Further, the plaintiffs accept that they must bear the costs of cross-claims for contribution or indemnity against NCRH or NCRA (the 26th to 28th and 30th to 32nd cross-claims). This concession extends both to costs incurred by the various cross-claimants in bringing those cross-claims and to the costs, prima facie payable by those cross-claimants, of NCRH or NCRA as cross-defendants.

(4) As to all cross-claims falling within subparas (2) and (3) (compendiously, the 1st to 32nd cross-claims) the plaintiffs did not oppose the proposition that the proper order for costs would be that they pay the costs of the various cross-claimants and cross-defendants. The cross-claimants and cross-defendants had pressed for an order that the plaintiffs pay the cross-defendants' costs direct, although with a reservation of rights in the event that, for whatever presently unforseen reason, the plaintiffs in fact did not in fact pay any costs as agreed or assessed. Clearly, there are substantial practical reasons, relating to the difficulty of separating out and assessing separately costs relating to the prosecution and defence of particular cross-claims, that favour the imposition of direct liability. Equally clearly, the position of the various cross-defendants vis a vis the cross-claimants who joined them should be protected.

(5) With two exceptions, the plaintiffs accept that, in the case of defendants who have made Calderbank offers, they should pay the costs of those defendants on the indemnity basis from the date those offers were made in circumstances where they were either rejected or not accepted. (The exceptions relate firstly to an offer made by Mr Beach - there is a dispute as to whether it should be characterised as a " Calderbank " offer and, more strenuously, as to whether it was unreasonable for the plaintiffs not to accept it - and secondly to an offer made by PwC late in the course of the hearing - PwC did not rely on this as a Calderbank offer, but nonetheless submitted that the plaintiff's failure to accept it was an instance of unreasonable conduct.) (6) The plaintiffs accept that insofar as they are liable to pay the costs of any defendant on the indemnity basis, that liability extends to costs incurred (from the date from which costs become so payable) by that defendant as a cross-claimant or cross-defendant in respect of the 1st to 32nd cross-claims. Thus, the plaintiffs accept that if they are liable to pay costs of a particular defendant on the indemnity basis from a particular date, they should pay that defendant's costs in relation to those of the 1st to 32nd cross-claims to which that defendant was a party either as cross-claimant or as cross-defendant on the same basis from the same date.

(7) The plaintiffs accept that they should pay interests on costs pursuant to s101(4) of the Civil Procedure Act 2005. In substance, it was accepted that interest should be payable in accordance with the formula developed by Campbell J in Lahoud v Lahoud [2006] NSWSC 126 at [85]; and see order 3 at [91]. In other words, the plaintiffs accepted that interest should be payable, in respect of each payment of costs actually made, on the portion of that payment that reflects the ratio between the total amount of the costs actually ordered to be paid and the total of the costs actually claimed. The parties other than Guy Carpenter accepted that this was an appropriate basis for the calculation of interest on costs.

(8) The plaintiffs accept that the costs payable by them to any party should include costs incurred by that party in connection with any mediation that took place in which that party was involved. 5 As to the concession recorded in subpara (4): the costs orders that will be made on the 1st to 32nd cross-claims (and on any other cross-claims where I conclude that the plaintiffs should pay the costs of both the cross-claimants and the cross-defendants) will be framed so as to impose the primary costs liability on the plaintiffs, but to reserve the position of the various cross-defendants in the event that the plaintiffs do not pay. This then leads to a complication, having regard to the concession recorded in subpara (6). If the plaintiffs pay, the costs will be assessed on the indemnity basis from whatever is the applicable date. That regime will include not just the costs of any defendant as an unsuccessful cross-claimant, but also the costs of any defendant (or third party to whom the regime is extended) as a successful cross-defendant. However, if the plaintiffs do not pay the costs of any of the parties to any of the cross-claims in question, the cross-defendants will look to the cross-claimants who joined them. The parties accepted that this residuary entitlement (and liability) should be protected. However, no cross-defendant to any of the relevant cross-claims (and at this stage, it is enough to except from "relevant cross-claims" the 33rd and 36th cross-claims) sought an order for indemnity costs against the cross-claimant on the basis that the cross-claimant had been guilty of some relevant misconduct or delinquency in relation to the cross-claim. Thus, if matters proceed one way, relevant cross-defendants will get at least some of their costs on the indemnity basis; but if matters proceed another way, they will not. I do not think that there is any practical way to resolve this potential anomaly. 6 The plaintiffs reached agreement with some defendants on the question of costs. Specifically:

(1) The plaintiffs reached agreement with Mr Daya as to his costs, and effect was given to that agreement in orders made by consent on 10 December 2007.

(2) The settlement between the plaintiffs and Trowbridge, which was reflected in orders made on 29 June 2006 as between them, dealt among other things with costs between them up to that date. The further costs incurred by Trowbridge after that date (it was a cross-claimant and a cross-defendant under various of the 1st to 32nd cross-claims, and a cross-defendant to the 34th cross-claim brought by NCRA) were the subject of further consent orders made on 6 February 2008. The issues as between the plaintiffs and the defendants 7 Having regard to the various concessions made by the plaintiffs, the issues that were pressed before me were:

(1) Whether any defendant was entitled to have his or its costs assessed on the indemnity basis either from the commencement of the proceedings or from some other date, even if that defendant had not made a Calderbank offer. I note that all defendants except Mr Daya, Mr Williams and Trowbridge asserted this entitlement. It was based on what was said to be relevantly unreasonable conduct in the way the plaintiffs framed and conducted the litigation. In PwC's case, and as I have foreshadowed, the alleged unreasonable conduct extended to the rejection of an offer of settlement.

(2) As between the plaintiffs and Mr Beach, there was the question of whether an offer made by Mr Beach on 14 August 2002 was a Calderbank offer and, if it were, whether the plaintiffs had acted unreasonably in rejecting or not accepting it.

(3) Whether any defendant should be permitted to call upon guarantees given by financial institutions on behalf of the plaintiffs in satisfaction of orders for security for costs. The plaintiffs submitted that I should not deal with this claim. They submitted further that if I were to deal with it, I should hesitate before accepting the evidence given on behalf of those defendants as to the amounts of costs allegedly expended and, in some cases, their likely recoverability on the party and party basis of assessment. It might be noted that the only objection to that evidence was on the ground of relevance (saving one particular case, where I rejected the evidence because of its completely unsatisfactory and inadmissible nature). The objection as to relevance was based on the proposition that the issue was not one of those ordered to be dealt with in the hearing with which these reasons are concerned. There was otherwise no challenge to the evidence, cross-examination of the witnesses in question, nor evidence in answer.

(4) Whether the plaintiffs should be liable for the costs of the 34th and 35th cross-claims brought by NCRA, and of cross-claims for contribution or indemnity in respect of those cross-claims. In essence, NCRA's 34th and 35th cross-claims were brought by it against various defendants seeking contribution or indemnity in respect of other defendants' cross-claims against it. Separate issues relating to the 30th to 32nd cross-claims 8 The 30th cross-claim was brought by Macquarie against NCRA. The 31st cross-claim was brought by PwC against NCRA. The 32nd cross-claim was brought by Trowbridge against NCRA. Each was brought pursuant to leave earlier granted by the Court. Each sought contribution or indemnity from NCRA in the event that the cross-claimant were found liable to the plaintiffs. Each was based upon the proposition that if the plaintiffs made good their case against the directors and officers of NCRA, the actions of those directors or offices should be imputed to NCRA and it should be held liable for the consequences of those actions. 9 As an aside: similar cross-claims were brought on similar bases against NCRH. NCRH submitted save as to costs. There is no extant costs issue in relation to the cross-claims against NCRH. 10 It will be seen that the costs relating to the 30th to 32nd cross-claims are covered by the plaintiffs' concession recorded at [4(6)] above. However, NCRA insisted that it was entitled to have its costs of each cross-claim from the relevant cross-claimant. 11 Further, in the case of the 30th cross-claim, NCRA sought an order that Macquarie indemnify NCRA for costs incurred by it as cross-defendant or cross-claimant in respect of any cross-claim. The order sought did not extend to what might be called the independent aspects of the 33rd and 36th cross-claims: i.e, the claims made by NCRA against Guy Carpenter (33rd cross-claim) and the directors and officers (36th cross-claim) that did not simply reflect any claim against those cross-defendants that had been advanced against them by another party in the proceedings. (The qualification in relation to the 33rd cross-claim is illusory rather than real, because the paragraphs of the contentions referred to in NCRA's notice of motion do not repeat any claim made against Guy Carpenter by any other party but, rather, claims made by NCRA against the directors and officers in the 36th cross-claim.) NCRA submitted that such an order was needed so that the funds available to its creditors would not be depleted, in circumstances where Macquarie could have chosen, but did not choose, to prove in the winding up. 12 Macquarie opposed the making of such an order. It submitted further that if such an order were made, the plaintiffs should pick up the tab pursuant to their concession in relation to the 30th cross-claim. It submitted further that if such an order were made, the costs burden should be shared between all three cross-claimants against NCRA: i.e. Macquarie, PwC and Trowbridge. The plaintiffs, PwC and Trowbridge did not embrace those further submissions. 13 NCRA sought also an order that Macquarie indemnify it for the costs of the 33rd and 36th cross-claims that simply reflected, and were parasitic upon, claims for relief brought by other parties against the cross-defendants to those cross-claims. For the reasons that I have indicated at [11], this issue is really relevant only to the parasitic or reflexive aspect of the 36th cross-claim; but even so limited, Macquarie opposed the order sought. The issues relating to the 33rd and 36th cross-claims 14 The 33rd cross-claim was brought by NCRA against Guy Carpenter. The 36th cross-claim was brought by NCRA against its directors and officers Messrs Ghose, Daya, Peck, Williams and Aroney. I described the elements of those cross-claims at [1346] to [1351] of Ingot (No.6). 15 The discrete costs issues arising out of the 33rd and 36th cross-claims were:

(1) Whether NCRA should pay Guy Carpenter's costs of the 33rd cross-claim on the indemnity basis, either from the date of filing the 33rd cross-claim or from one of various specified later dates.

(2) The extent to and basis upon which Guy Carpenter's costs in proceedings 2371 of 2002 should be paid as costs in these proceedings. (The earlier proceedings were brought by NCRA against Guy Carpenter, based in substance on the matters alleged in the 33rd cross-claim in these proceedings. There were various interlocutory applications in those earlier proceedings. Ultimately, Young CJ in Eq ordered that Guy Carpenter's costs in those earlier proceedings be dealt with as costs in these proceedings.)

(3) Whether Guy Carpenter was entitled to interest on costs, calculated on payments made by it from time to time, or on so much of each payment as might be recovered by agreement or on assessment. 16 There are questions between NCRA and Guy Carpenter as to whether Guy Carpenter is entitled to recover, as disbursements in these proceedings, certain costs charged by its solicitors in London, Herbert Smith LLP, and Value Added Tax on those costs. Although initially those questions were said to require my consideration, NCRA and Guy Carpenter ultimately agreed - at the conclusion of submissions - that they were matters to be dealt with in the first instance by a costs assessor. (Guy Carpenter has not claimed an order for gross sum assessment.)

17 Either shortly before or in the course of the hearing with which these reasons are concerned, orders were made by consent as between NCRA and each of Messrs Daya, Peck, Williams and Aroney for the costs of the 36th cross-claim.

Issues relating to the 37th cross-claim 18 The 37th cross-claim was brought by Macquarie against Guy Carpenter. Macquarie sought contribution or indemnity from Guy Carpenter in respect of NCRA's cross-claim against Macquarie. It is thus one of the cross-claims referred to in para [7(4)] above. 19 Guy Carpenter sought an order that Macquarie (the unsuccessful cross-claimant) pay those costs. Macquarie opposed this order on the basis that the 37th cross-claim was "only brought after Guy Carpenter had been joined to the proceedings by NCRA" and "was entirely parasitic of NCRA's claim against Guy Carpenter under the 33rd cross-claim" (Macquarie's written submissions in reply to NCRA, Trowbridge and Guy Carpenter dated 13 July 2007, para 41). Macquarie sought in the alternative an order that any costs payable by it to Guy Carpenter in respect of the 37th cross-claim "should be limited to those costs specifically and solely attributable to [Guy Carpenter's] response to the 37th cross-claim" (ibid, para 42). As flagged at [7(4)] above, Macquarie submitted that if such an order were made, the plaintiffs should either pay, or indemnify it for, those costs. Indemnity costs: applications not depending on Calderbank offers 20 In this section, I deal with the defendants' applications for indemnity costs that were based on the alleged unreasonable or "delinquent" conduct of the plaintiffs generally, and not on the making and rejection (or nonacceptance) on Calderbank offers.

The competing cases 21 The defendants submitted that the plaintiffs' commencement of the proceedings had been relevantly unreasonable, or "delinquent", because the plaintiffs must have appreciated, or if properly advised should have appreciated, that the proceedings had no real prospects of success. Alternatively, the defendants submitted, the plaintiffs' continuation of the proceedings became unreasonable by reason of events that should have brought home to them that they had no real prospects of success.

22 The plaintiffs submitted that the factors on which the defendants relied did not amount to misconduct or relevant delinquency. They submitted that this was so whether the matters were considered individually (as the plaintiffs submitted they should be) or cumulatively. 23 Further, the plaintiffs submitted that the conduct of some of the defendants was such as to disentitle them from receiving any order for indemnity costs, even if I were to conclude that the plaintiffs' conduct of the proceedings and other matters did exhibit the required misconduct or relevant delinquency. The plaintiffs relied on findings that I had made as to the credibility of the relevant defendants or their witnesses, and on what the plaintiffs said were those defendants' roles in the misfortunes of which the plaintiffs had complained. The principles 24 I attempted to summarise the applicable principles in my judgment on costs in White ACT (in liquidation) v G B White [2004] NSWSC 303 at paras [5]-[11]. The parties accepted that what I there said could be applied to the present case, although they referred to additional authority. I said: "The basic rule is that a successful party is entitled to its costs on a party and party basis: see for example Pt 52A r 32. See also the judgment of Mason P in Rosniak v Government Insurance Office (1997) 41 NSWLR 608, 616.

It is clear, of course, that there is a discretion to award costs on the indemnity basis. That follows from, among other sources, s 76(1) of the Supreme Court Act and Pt 52A r 32.

The basis upon which the discretion to award indemnity costs should be exercised has been examined in a very great number of cases. But, as those cases make clear, the discretion is not confined or limited except to the extent that it is required to be exercised judicially: see for example Harrison v Schipp [2001] NSWCA 13 at [139] (Giles JA, with whom Handley and Fitzgerald JJA concurred); see also Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248, 256-257.

What is required, in any case, is that the Court examine the facts of that case in the light of such statements of principle as may be relevant. In the ordinary way, the Court will take into account, as offering guidance, statements of principle made by those to whom the particular judicial officer should have regard. At the most basic level, the statements of principle indicate - not unsurprisingly - that there must be some sufficient special or unusual feature to justify departure from the ordinary rule. I take the basic principle to be as stated by Gaudron and Gummow JJ in Oshlack v Richmond River Council (1998) 193 CLR 72, 9. Their Honours said at [44] (I omit citations):

"It may be true in a general sense that costs orders are not made to punish an unsuccessful party. However, in the particular circumstance of a case involving some relevant delinquency on the part of the unsuccessful party, an order is made not for party and party costs, but for costs on a 'solicitor and client' basis, or on an indemnity basis. The result is more fully or adequately to compensate the successful party to the disadvantage of what would otherwise have been the position of the unsuccessful party in the absence of such delinquency on its part."

I read what their Honours said on the basis that "some relevant delinquency" does not mean moral delinquency or some ethical shortcoming, but delinquency bearing a relevant relation to the conduct of the case: see for example Council of the Municipality of Botany v Secretary, Department of the Arts, Sport, the Environment, Tourism and Territories (1992) 34 FCR 412, 415; NMFM Property Pty Limited v Citibank Limited (No 2) (2000) 109 FCR 77."

25 The defendants referred also to the judgment of Sheppard J in Colgate Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 428. His Honour dealt at length with the principles relating to indemnity costs. In a passage that is frequently quoted and applied, his Honour at 256-257 distilled a number of principles out of the cases to which he had referred. It seems to me that the following principles or guidelines can be distilled out of the authorities to which I have referred:

1. The problem arises in adversary litigation, ie litigation as between parties at arm's length. Different considerations apply where parties may be found to be entitled to the payment of their costs out of a fund or assets being administered by or under the control of a trustee, liquidator, receiver or person in a like position, eg a government agency or statutory authority.

2. The ordinary rule is that, where the court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis. In this court the provisions of O 62, rr 12 and 19, and the Second Schedule to the rules will apply to the taxation. In many cases the result will be that the amount recovered by the successful party under the Order will fall short of (in many cases well short of) a complete indemnity. 3. This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of court) or a decision of an intermediate Court of Appeal or of the High Court would be required to alter it. No doubt any consideration of whether there should be any change in the practice would require the resolution of the competing considerations mentioned by Devlin LJ in Berry v British Transport Commission and Handley JA in Cachia v Hanes on the one hand and by Rogers J in Qantas on the other. The relevant passages from the respective judgments have been earlier referred to. 4. In consequence of the settled practice which exists, the court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v Barnes (39 Ch D at 141) said the court had a general and discretionary power to award costs as between solicitor and client ``as and when the justice of the case might so require''. Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston ([1982] 1 All ER at 58) namely, there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at 8) in Tetijo : "the categories in which the discretion may be exercised are not closed". Davies J expressed (at 6) similar views in Ragata . 5. Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152 evidence of particular misconduct that causes loss of time to the court and to other parties (French J in Tetijo ); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp );the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata ); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525 ; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724(Court of Appeal); Crisp v Kent (SC(NSW)(CA), 27 Sept 1993, unreported) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records ). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis. 6. It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice. 26 Nonetheless, it is important to bear in mind that the principles distilled by his Honour out of the authorities are guides to the exercise of the discretion. They neither define the circumstances in which the discretion is to be exercised nor limit its width. It remains, as I said in White ACT, a discretion that is constrained only by the requirement that it be exercised judicially. That is to say, it is a discretion to be exercised on a consideration of all (and only) relevant facts, taking into account relevant statements of principle and revealing a conclusion supported by principled and logical reasoning. A party is not entitled to indemnity costs simply because (for example) one or more of the factors identified in cases such as Colgate Palmolive is present. Nor is a party disentitled to indemnity costs simply because none of those factors is present. 27 As I have noted, the plaintiffs submitted that the conduct of certain defendants was such as to disentitle them to an order for indemnity costs even if (contrary to the plaintiffs' principal submission) any ground for awarding indemnity costs had been made out. The defendants at whom this submission was directed appeared to accept in principle that their conduct could be relevant to a decision on the question of indemnity costs. At the level of principle, that must be so. It is unnecessary and probably unhelpful to give examples of what might be called disentitling conduct. However, the defendants submitted that many of the matters of which the plaintiffs complained were attempts to traverse my findings in Ingot (No.6), or to rerun the case that had failed against them; and that other matters relied upon did not amount to disentitling conduct. The circumstances on which the defendants relied 28 The defendants relied on a number of matters. Although individual defendants put their submissions in different ways, it is convenient to list and consider the various factors on which they relied. Those factors were:

(1) My conclusion that, in general, I should not accept Mr Saville's uncorroborated evidence ( Ingot (No.6 ) at [146]) and my rejection of Mr Saville's evidence of reliance ( Ingot (No.6 ) at [427] and following). The defendants submitted that the plaintiffs must have known, or properly advised should have known, that they would fail on reliance and therefore on a crucial aspect of their case.

(2) The complex and indiscriminate way in which the plaintiffs pleaded their case (referred to from time to time as a "scattergun" approach); and in particular the failure of the plaintiffs to confine particular allegations of misleading or deceptive conduct to particular defendants. The defendants who relied on this submitted that the proceedings had been vastly complicated and extended in duration by the plaintiffs' approach to the articulation of their case.

(3) An associated matter: the plaintiffs' failure to trim from their case trivial and manifestly unsustainable allegations of misleading or deceptive conduct: for example, the allegation relating to exchange rates (i.e, that the draft prospectus and prospectus were misleading or deceptive because they presented AUD figures calculated by reference to an exchange rate that was not current at the date the draft prospectus was given to Mr Saville or the date the prospectus was registered).

(4) The serious nature of the allegations made by the plaintiffs against many of the defendants. PwC in particular relied on this, referring to the allegation (which I rejected) that Mr Murray knew of leg two of the GCR transaction.

(5) The plaintiffs' failure to lead evidence of their loss (Ingot) (No.6) at [1126] to [1141]). The defendants submitted that, loss being an element of each of the causes of action on which the plaintiffs relied, the plaintiffs must have known, or properly advised should have known, that they would fail if they did not prove that they had suffered loss. 29 In addition, particular defendants relied on particular matters. For example, Macquarie referred to the "hopeless" implied term case (6 FAS paras 91-103; Ingot (No.6) at [592] - [600]). It stressed that in continuing this aspect of their case, the plaintiffs had not sought to advance the arguments to which I referred at [597]. 30 Messrs Beach, Deary and Morrissey asserted that their limited involvement in the matters of which the plaintiffs complained, and their reliance on the work and conclusions of the DDC, had been overlooked or ignored by the plaintiffs; and that the plaintiffs had failed to take into account what had been learnt through the lengthy and detailed examination of various witnesses conducted by the liquidator of NCRH and NCRA. 31 I deal with these matters in turn. Failure to prove reliance 32 There is a difficulty with this aspect of the defendants' submissions. If Mr Saville's statements were to be taken at face value, there would have been at least an arguable case of reliance. To put the matter another way: a person who read Mr Saville's witness statements, in the process of analysing the plaintiff's claim, could well conclude that if Mr Saville came up to proof, the plaintiffs might make good their case on reliance. 33 It was not suggested that the various statements made by Mr Saville, and relied upon as his evidence in chief in the proceedings, did not reflect instructions given by him at the time those statements were prepared. Had Mr Saville adhered to the substance of what he had said in those statements, and, more importantly, if Mr Saville had been accepted as a witness on whose evidence the Court could rely, the plaintiffs may well have made good their case on reliance. The difficulty is that Mr Saville did not come up to proof; and I did not accept him as a reliable witness. 34 Macquarie in particular submitted that if the plaintiffs had thought about the matter, they must have realised that Mr Saville's evidence on the topic of reliance would fall short of what was required. In essence, Macquarie's submission was that if Mr Saville had been subjected to some sort of private cross-examination, the deficiencies in his evidence might have been exposed. 35 It must be remembered that Mr Saville was subjected to a detailed and searching cross-examination, extending over some ten days of hearing. It is not surprising that the process exposed some deficiencies in his recollection, and difficulties in his evidence. It is quite another thing to say that Mr Saville, or those advising the plaintiffs, should have realised that his testimony would be damaged to the extent that it would be found unreliable. 36 It may be - I do not know - that Mr Saville underestimated the ordeal that he was to face; and that for this and other reasons he devoted insufficient time in preparation to rereading his statements and the numerous documents to which he referred in them. It may be that more could have been done, within the bounds of propriety and not extending to coaching, to prepare him to give evidence. It does not follow that, if these things were not done so that in consequence Mr Saville's evidence suffered the fate that I have described, the plaintiffs should pay costs on the indemnity basis. 37 It is frequently the case in litigation that a witness - including a party - is not believed. That is an incident of the adversary system. Party and party costs are another incident of the adversary system, and will remain so until the legislature takes a different view (see Mason P in Rosniak at 616). If indemnity costs were available as a matter of course whenever a party was disbelieved, there would be a shift de facto in the "normal" basis of assessment of costs. 38 Thus, I do not regard the failure of the plaintiffs' case on reliance, for the reasons that it did fail, as justifying the conclusion that the plaintiffs so misconducted themselves as to incur a liability to pay costs on the indemnity basis. The "scattergun" approach; trivial and unsustainable allegations 39 It is convenient to consider together the matters referred to in [28(2), (3)] above. 40 The plaintiffs' case was complex. The difficulties in its articulation may be gathered from the fact that it took the plaintiffs at least nine attempts to formulate it in a way that they wished to take to trial (the hearing proceeded on the basis of the 6th further amended summons (6 FAS); and in addition, there were a number of drafts formulated and circulated in respect of which leave to amend was either not sought or, if sought, refused). It is correct that the plaintiffs maintained a number of allegations that should not have been made or, more accurately, should not have been taken to trial. However, I do not think that either of those matters had a significant impact on the costs that were incurred. 41 The Macquarie parties in particular raised this point at the conclusion of the plaintiffs' evidence in chief. Issue 26 reflects this (the issues, which are set out in Ingot (No.6) at [116], were revised from time to time). Further, some responsibility for the complexity of the issues at trial must be attributed to the defendants: see in particular the statement of the issues as between the plaintiffs and Macquarie, and the plaintiffs and Phillips Fox. 42 I do not think that the way in which the plaintiffs formulated their case, or the fact that they maintained a number of trivial and ultimately unsustainable allegations of misleading or deceptive conduct, substantially enlarged either the work undertaken by the defendants in preparation or the duration of the hearing; let alone that they (in particular, the first matter) did so "unreasonably". 43 Thus, I do not see in these matters any justification for the award of indemnity costs. Failure to prove loss 44 I said in Ingot (No.6) at [1135] that the plaintiffs accepted "that the assessment of their damages requires a comparison of the price they paid with the real or fair value of what they brought". The parties referred to this as the "Potts v Miller " approach (Potts v Miller (1940) 64 CLR 282). As the headnote to Potts states, "[t]he measure of damage in a case in which a person is induced by fraud to take up shares in a company is the difference between the amount he paid for the shares and the real value of the shares at the time of allotment, and not at any subsequent period …". 45 Mr Forster appeared to suggest that the plaintiffs had not confined, or articulated, their case at trial in this way (T109.1-.15): Your Honour did ask me as to our position in relation to paragraph 1135, where your Honour says in the first sentence:

The plaintiffs accept that the assessment of their damages requires a comparison of the price they paid with the real or fair value of what they bought.

That much is clear, but there is more than one way of proving that. Potts v Miller was, of course, the method advocated and put up by the various defendants in the various communications that they referred to, but it is, in our submission, not the only way that damages might have been proved. 46 He then made the following submission (T109.38-110.05): Now, your Honour, I am, of course, conscious of the fact that your Honour has delivered a judgment and your Honour has found that we failed to prove our loss, and that, of course, is accepted in every way for the purpose of this application. This, of course, is not an appeal. But in order to avoid an order for indemnity costs to be made against us, it is not necessary for me to persuade your Honour that there has been any error on your Honour's part, so long as the course we took had reasonable prospects of success, or some prospects of success, which of course your Honour rejected, and we of course. So long as there is a reasonable attempt in a reasonable manner to prove our loss, the fact that we failed does not mean that that, of itself, is sufficient to have indemnity costs against us.

47 Mr Forster submitted that there was a difference between the direct reliance case and the indirect causation case, and that this was relevant to the quantification of loss (T110.27-111.05): MR FORSTER: I accept that, your Honour, but, as I understand it, amongst the arguments that were put was that there was the indirect causation. Your Honour rejected that, but if your Honour had accepted that and if your Honour takes the view - and in our submission your Honour ought to take the view - that there was at least a reasonable basis for putting that argument, and of course if that argument had succeeded, the plaintiffs would have at least succeeded against some people and your Honour would have had to consider other issues --

HIS HONOUR: But damages are still an essential part of that cause of action. It is still a cause of action for misleading or deceptive conduct in one or other of the statutory analogues, isn't it?

MR FORSTER: But, your Honour, as I understand the submission that was put, if certain of those representations had not been made, the issue would not have gone ahead, the plaintiffs would not have invested in this particular transaction. Your Honour, that is the way we put it. 48 There are real difficulties in these submissions. The first is that what I said in Ingot (No.6) at [1175] reflected accurately the way in which the plaintiffs put their case at trial, as articulated in their closing written submissions. In section 1.5(1) of those submissions, the plaintiffs referred to two authorities: the decision of the High Court of Australia in HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640, and the decision of Eve J in Adams v Thrift [1915] 1 Ch 557. From the former case, they took the proposition that "[w]here a contract for the acquisition of land, chattels, businesses or shares is induced by misleading or deceptive conduct, it is permissible for the court to calculate damages (apart from consequential loss) as is done in deceit cases, by taking the difference from the price paid and the real value of the land at the relevant date. The relevant date is strictly speaking not the date when the contract is completed, but the date when it is made - the day on which the buyer became obliged to pay the purchase price on completion… . The law does not limit the buyer to market value for various reasons." 49 From the second case, the plaintiffs took the proposition that, in the case of an allotment of shares pursuant to an application based on false statements as to minimum subscriptions received, "[t]he true measure [of damages] is the difference between the amount paid and the value of the shares at the date of allotment". 50 In section 4.7.2 of their closing written submissions, the plaintiffs submitted, based on the evidence of Mr Gibbons to which I referred to Ingot (No.6) at [1128] to [1134], "that the true value of the Shares and Notes from at latest 31 December 1998 were [sic] zero." The plaintiffs submitted that evidence of market sales should be disregarded, because the market was misinformed: a point that I accepted in part (Ingot (No.6) at [1138]). 51 The plaintiffs' oral submissions on damages did not qualify, let alone depart from, the basis of assessment set out in the written submissions. It is plain from those written submissions that the plaintiffs did indeed accept - I might say, did indeed embrace - the Potts v Miller basis of assessment. 52 The plaintiff's case on damages, as articulated in their written and oral submissions, is not inconsistent with their pleaded case. I say "not inconsistent" because there is not to be found in 6 FAS any express allegation that the rights, notes or shares acquired by the plaintiffs had no value at any particular time. The case on damages is set out in 6 FAS paragraphs 272 to 299. Paragraphs 273 to 295 set out the rights, notes or shares acquired by the various plaintiffs, and the amounts paid. Paragraphs 296 to 298 set out dealings between the plaintiffs in respect of those rights etc. Paragraph 299 alleges that in the premises each of the plaintiffs is the person who has suffered loss. There are then given particulars of "losses incurred." Those particulars set out the rights etc acquired by each plaintiff and the prices at which they were acquired. They then allege the "Total Cost": a sum in excess of $41 million. That appears to be the quantification of the "losses incurred". It is at most implicit in the particulars that the rights etc acquired had no value, although the plaintiffs did not condescend to allege the date (or dates) at which the quantification of their loss by that means was undertaken. 53 For the reasons that I gave in Ingot (No.6) at [1126] to [1141], the plaintiffs failed to prove that they had suffered any loss. They thus failed to prove an element of each cause of action against each defendant. 54 The defendants' attitude can hardly have come as a surprise to the plaintiffs. Macquarie's solicitor, Mr Ashley Black of Mallesons Stephen Jaques, referred to "[t]he issue of quantification of the plaintiffs' loss" in an affidavit sworn 18 December 2003. That affidavit was sworn in connection with an application for security for costs. In paragraphs 8 and 9 of that affidavit, Mr Black said: [8] It is my understanding that the measure of the plaintiffs' recoverable loss, should they succeed in establishing their claim that their investment in converting notes and other securities in NCRH was made in reliance on misrepresentations allegedly made by the Macquarie Parties, is the difference between the price paid for those securities and their true value at the date of allotment or acquisition by the plaintiffs. For the significant majority of the plaintiffs' investments, that date will be 12 January 1999, the date on which the converting notes were allotted to the plaintiffs. [9] In my opinion, based on the experience to which I refer in paragraph 2 above, the true value of converting notes and other securities in NCRH as at 12 January 1999 will depend on NCRH's true consolidated net assets as at that date, which would in turn depend on the true value at that date of the assets and liabilities of its subsidiaries including NCRA. In my opinion, those assets will or may include the value of any rights of action which had already accrued at that date to NCRH or its subsidiaries, including NCRA, even though proceedings in respect of those causes of action were not commenced until a later date. 55 The plaintiffs cannot have thought that the issue disappeared thereafter. Phillips Fox prepared before the commencement of the hearing an outline of issues and topics to be addressed. That document was dated 29 September 2005. It raised, among the "[p]rincipal issues relating to Phillips Fox", the following: "[11] Have the plaintiffs proved the quantum of any loss, in particular when various recovery actions by NCRA are incomplete? If not, what relief can be moulded?" 56 The matter was raised on day 28 of the hearing, when Mr Douglas QC for the plaintiffs foreshadowed that the plaintiffs might seek to lead further evidence dealing with the value of the notes (T2320 and following). That was after Mr Saville had been cross-examined; indeed, it was at a time when the plaintiffs were proposing to close their case "subject to" this point. Mr Dick of counsel for Phillips Fox referred to the outline of issues, and Mr Oslington QC for Macquarie referred to Mr Black's affidavit. Mr Douglas said in answer (T2329.34): "Your Honour, I am well aware of Mr Black's contention in his affidavit in December 2003 that it is the difference between what we paid for them and what the market value was. But that is a matter for legal argument and I will address your Honour on that at the end of the day. There is plenty of evidence in court already as to what the effect of the disclosures which were made in February and March [1999] was upon the value of these shares. That of itself indicates what the effect of this information was on the market value of those shares." 57 In their submissions in reply on the question of costs, the plaintiffs referred to the exchange on day 28. They said (para 2.1.6): 2.1.6 Secondly, Senior Counsel for the Plaintiffs did not concede that damages had to be computed in the manner asserted. What he said was that he was "well aware" of the basis on which the Macquarie Parties contended that the Plaintiffs should calculate their damages. He did not concede that they were right or that it was necessarily the only manner in which damages might be established. 58 That submission is correct so far as it goes. But it overlooks the fact that, as I have demonstrated, the plaintiffs in their closing written submissions did put their case on damages on "the basis on which the Macquarie Parties contended that the Plaintiffs should calculate their damages". 59 In amplification of the submission recorded at [57] above, the plaintiffs submitted (in the same document, para 2.1.10) that "[t]here were two alternative ways in which the Plaintiffs could reasonably have expected to succeed even if they did not attempt to prove their loss in the manner that the Macquarie Parties considered that that loss should have been proved." Even if that is to be accepted - and I have to say that either of the ways then advanced would still require a comparison of the amount paid with the value of that for which it was paid - it fails to meet the basic point that the plaintiffs did not put their case in this way at the hearing. 60 In this context, the plaintiffs in their submissions on costs relied on what the Court had said in HTW Valuers at 666-667 [63]. Their Honours there considered the decision of the House of Lords in Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254. They referred in particular to the speech of Lord Steyn, who as their Honours said "pointed out that the fundamental rule was that the plaintiff should be compensated; that the rule that turns on an assessment of value is only a means of giving effect to the overriding compensatory rules; and that the valuation of assets as at the date of the transaction is "simply a second order rule applicable only where the valuation method is employed…". Their Honours said at 667 [65] that the approach might be open under s82 of the Trade Practices Act 1974. 61 The plaintiffs overlook the Court's observations at 667 [65] that "a primary reason for the common adoption, in assessing damages in deceit, of the test of comparing the price paid for an asset with its true value when acquired is the desirability of separating out losses resulting from extraneous factors in the later history of the asset." 62 In this case, it is clear that there were factors other than the alleged misleading or deceptive conduct that bore on the value of the assets - the notes and shares - acquired by the plaintiff. No doubt that explains the plaintiffs' adoption of the Potts v Miller approach in their closing written submissions. The plaintiffs did not submit on the costs hearing that the approach to proof of damages adopted by them in their final submissions was something forced upon them by unforeseen circumstances, or anything other than the approach that they had intended all along to take. Nor do they suggest that the approach in fact taken by them in closing submissions was novel; and no such submission, if made, could be upheld. 63 I repeat that in final submissions the plaintiffs:

(1) Asserted that damages were to be quantified in accordance with the Potts v Miller measure (although they did not refer to that decision); and

(2) Relied upon the evidence of Mr Gibbons, as to the position in December 2005, to which I referred in Ingot (No.6) at [1128] and following. 64 The inference that I draw from all of this is that the plaintiffs, knowing or accepting that they would have to prove damages by comparing the amounts paid by them for the rights, notes or shares with their true value at the relevant time, elected to do so on the basis of evidence that suffered from the fundamental defects to which I adverted in the relevant paragraphs of Ingot (No.6). 65 It seems to me to be inevitable that the plaintiffs, properly advised, must have realised that the evidence led by them at the trial could not prove that they had sustained any loss according to the methodology for quantification of loss that they advanced. I think that this is an example of relevant delinquency sufficient to justify an award of indemnity costs. The inevitable result of the plaintiffs' approach was to subject the defendants to what turned out to be a six month hearing, to defend a case that was bound to fail. It follows that, in principle, the defendants have made out their claim to have costs assessed on the indemnity basis.

Three further questions 66 That conclusion means that there are three further questions to be considered:

(1) If indemnity costs are to be awarded, from what date should they be payable?

(2) Is the conduct of any defendant sufficient to deprive him or it of the benefit of indemnity costs?

(3) Should all defendants receive the benefit of my conclusion even though not all of them raised the issue during or before the commencement of the hearing? Operative date 67 The defendants submitted, although with varying degrees of enthusiasm, that if I were to conclude that the plaintiffs were guilty of relevant misconduct of or delinquency, in going to trial without evidence of proof of damages, then indemnity costs should run from the commencement of the proceedings. I do not accept that proposition. There is no basis for inferring that the plaintiffs never turned their mind to the question of quantification of loss. They did, but in a way that failed to address, or provide evidence in accordance with, the appropriate measure of damages. 68 From time to time, orders were made for the plaintiffs to serve the evidence on which they proposed to rely at the hearing. They served evidence more or less in accordance with those directions. The evidence so served did not include any affidavit or statement by Mr Gibbons. It appears that his statement (exhibit PX14) was not available until shortly before Mr Gibbons was called to give evidence on 5 December 2005 (T2354.34). For the reasons appearing from the cross-examination of Mr Gibbons and summarised in Ingot (No.6) at [1129] and following, that evidence did not prove the plaintiffs' loss as at the relevant date; and for this purpose it matters not whether the relevant date is the date on which the offer closed (or the antecedent dates when the plaintiffs committed themselves to their underwriting and firm placement offers) or the date of allotment, 12 January 1999. 69 In circumstances where Macquarie drew to the plaintiffs' attention what it contended to be, and the plaintiffs subsequently accepted was, the proper basis for the assessment of damages (Mr Black's affidavit; Ingot (No.6) at [1135]), the date from which indemnity costs should run is I think sometime between 14 December 2003 and the commencement of the hearing on 17 October 2005. 70 The selection of a commencement date is not a matter of precise science. It needs to take account of the fact that, had the plaintiffs turned their minds to the question of proof of loss, they could have served appropriate evidence at some time during 2005 but well in advance of the date for trial without prejudicing (at least in any significant way) the hearing date that had been allocated. (It may be noted that the hearing date did shift to some extent in any event, because of perfectly understandable pre-trial developments and difficulties). 71 6 FAS was filed on 14 April 2005, pursuant to leave granted on 4 April 2005 (Ingot v Macquarie [No.3] [2005] NSWSC 255 at [71]). By then, the time for the filing of the plaintiffs' evidence had passed, and there were directions for the filing of the defendants' evidence by 3 August 2005 - that time was extended, in the case of some defendants). The 6 FAS did not change the way in which the plaintiffs put their case on damages. 72 In the circumstances, I think, the plaintiffs, properly advised, should have reviewed their case on damages and should have served appropriate evidence, before the question of amendment, which led ultimately to the filing of 6 FAS, was agitated and disposed of. Taking what I acknowledge is a somewhat broad brush approach, I think that the appropriate balancing of the considerations to which I have referred requires that the order for indemnity costs operate generally (but subject to individual considerations in the case of individual defendants) from 1 January 2005. Disentitling conduct 73 As I have noted at [27] above, the defendants in question appear to have accepted in principle that a defendant's conduct may be relevant to the question of whether that defendant should be awarded indemnity costs if otherwise a ground for the award of costs on that basis has been made out. 74 The plaintiffs referred to the evidence given by or for many of the defendants in question. They submitted that my findings as to the credibility of those witnesses mean that they, or the party who called them, should not have indemnity costs. I do not understand why this should be so. The plaintiffs did not submit that (for example) the hearing was extended in some material way by reason of the alleged unsatisfactory aspects of the evidence to which they referred. Nor did the plaintiffs submit that their conduct of the proceedings was in some way influenced by, or a reaction to, the alleged unsatisfactory evidence. Indeed, having noted the findings that I made as to various witnesses, the plaintiffs did not really explain how those findings might operate to disentitle a particular witness, or the party by whom he was called, from receiving indemnity costs. 75 The plaintiffs submitted, in relation to Mr Saville's unsatisfactory evidence, that my findings did not mean that he was "knowingly giving false evidence nor… that the evidence that he was giving was necessarily untrue "(submissions in reply on costs dated 1 February 2008, para 2.3.4). Those comments apply equally to at least some of the other witnesses whose evidence was unsatisfactory, although it is correct to say that I found that some features of the evidence given by Mr Peck, Mr Aroney and Mr Williams were evasive or untruthful. Indemnity costs are not awarded to punish an unsuccessful party, but more fully to compensate the successful party. They should not be withheld to punish a party. If a party's conduct (including the evidence of the party or its witnesses), is to amount to a ground for withholding indemnity costs, it must be because it is demonstrative of some relevant misconduct or delinquency on its part. Thus, I think, there must be some causal connection between the conduct alleged against the party and the relevant misconduct or delinquency of which (by hypothesis) the other party has been found guilty. In this case, there is no such connection; and the plaintiffs' submissions did not seek to demonstrate one.

Should all defendants have the benefit of indemnity costs? 76 Although not all defendants raised the point relating to failure to prove loss, they all took it in final submissions. It was a failure that was fatal as against all of them. This is most conspicuous in the case of Mr Daya, whom I had found to have been guilty of misleading or deceptive conduct in relation to his concealment of material matters from the DDC (Ingot (No.6) at [908] to [926] and in particular at [931]). As I have noted at [7(1)] above, Mr Daya did not assert an entitlement to indemnity costs. 77 A notable feature of this case was that some defendants undertook a disproportionate burden in meeting the plaintiffs case. In very general terms, those defendants with the most resources appeared to undertake the bulk of the work in defending the plaintiffs' claims. Inevitably, having regard to the structure of 6 FAS and the way that the plaintiffs put their cases against the various defendants, much of the work undertaken by one defendant or group of defendants enured for the benefit of all defendants, to the extent that it attacked the general basis on which the plaintiffs put their case rather than considerations peculiar to a particular defendant or group of defendants. 78 In those circumstances, I do not think that the plaintiffs' submission is of any particular significance, although that is not to say that a similar submission in a different case might not attract some support. In this context, it is necessary to bear in mind that the basis for the awarding of indemnity costs is some relevant misconduct or delinquency on the part of a party. Where that misconduct or delinquency is constituted by the advancing of a case that, on proper reflection, should have been seen to be doomed to fail, it is not necessary that the party should have been warned of this in advance. In circumstances where the party was warned in advance, it is not necessary that all other parties should have undertaken the warning. The question is really one of the assessment of the conduct of the party against whom indemnity costs are sought in the light of all relevant circumstances. To my mind, the relevant circumstances include the warnings that were given; and the warnings do not become irrelevant in the case of parties who did not give them. 79 The plaintiffs appear to characterise as in some way opportunistic the attitude of those defendants who did not refer in express terms to the Potts v Miller approach to quantification of damages or to the inadequacy of the plaintiffs' evidence in that regard. However, I think, that submission to a large extent overlooks the way in which these proceedings were run. In the particular circumstances with which I am faced, I do not regard the failure of a particular defendant to add his or its voice to the warnings given as a reason for depriving that defendant of the benefit of indemnity costs if otherwise the entitlement is made out. Conclusion 80 I therefore conclude that the costs payable by the plaintiffs to all defendants except Mr Daya, Mr Williams and Trowbridge should be paid on the party and party basis up until 31 December 2004 and on the indemnity basis from 1 January 2005, unless in the case of any relevant defendant an entitlement to indemnity costs has been engendered by an antecedent unaccepted or rejected Calderbank offer. Indemnity costs: Calderbank offers and related considerations 81 In this section, I deal with Calderbank or alleged Calderbank offers. It is not however necessary to consider the plaintiff's concessions based on Calderbank offers made after January 2005. Macquarie 82 The plaintiffs concede that they are liable to pay Macquarie's costs on the indemnity basis from 6 July 2003, by reason of an unaccepted or rejected Calderbank offer of that date.

Mr Beach 83 Mr Beach relies on a letter dated 14 August 2002. The plaintiffs appear to accept that it was a Calderbank offer. They submit however that they did not act unreasonably in not accepting it. 84 The letter set out various (more or less non-contentious) matters relating to Mr Beach, including that he was never a member of the audit committee or the DDC. (My observation in Ingot (No.6) at [33] that "Mr Beach was also a member of the audit committee…" was incorrect, and the plaintiffs accept that. I note that this observation was not intended to be a finding of fact: see Ingot (No.6) at [10]. The correct position was recorded at [878].) 85 One of the matters stated in the letter was "that Mr Beach relied upon the efforts of the Due Diligence Committee, Management, PriceWaterHouseCoopers [sic], Trowbridge and Messrs Phillips Fox in the preparation of the prospectus and the verification of the contents thereof. 86 The operative part of the letter reads as follows: "Against the above background, we are instructed to offer to settle the proceedings brought by the Plaintiffs against Mr Beach on the basis that there be a verdict in favour of Mr Beach with the Plaintiffs and Mr Beach making payment of their own respective costs and disbursements. Mr Beach would waive any entitlement to costs pursuant to the costs order on the security for costs application and would also return the guarantee providing security for costs." 87 The offer was expressed to be open until 6 September 2002: i.e., in effect, for some three weeks. The plaintiffs did not submit that this was an inadequate time for them to consider and respond to the offer. 88 As the letter of 14 August 2002 indicated, an order had been made that the plaintiffs give Mr Beach security for costs, and the plaintiffs had been ordered to pay Mr Beach's costs of the application for security for costs. It was agreed between the plaintiffs and Mr Beach that the costs payable to him on that application were quantified (I think, by consent, but it does not matter) at some $23,000.00. The total costs incurred by Mr Beach as at 14 August 2002 were said to be approximately $192,000.00. 89 Mr Forster submitted that the value of Mr Beach's offer was therefore $23,000.00 foregone, as part of his offer to assume responsibility for all of his costs to the date of the offer. He submitted that it was not unreasonable for the plaintiffs to reject the offer. 90 In my view, the offer if accepted would have given something of value to the plaintiffs. On any view, and as must have been appreciated at the time, it would relieve them of the burden of Mr Beach's costs of his application for security for costs. With hindsight, it would have relieved them also of the burden of his costs of defending the proceedings; but hindsight is not a safe tool to assist the exercise of the discretion as to indemnity costs. 91 It is correct to say, as the plaintiffs did, that if the proceedings had been settled against Mr Beach, they would have continued against his fellow non-executive directors Mr Deery and Mr Morrissey. It is correct to say that there was little (if anything) to distinguish the position and potential liability of Mr Beach from the position and potential liability of either of Mr Deery or Mr Morrissey. It is correct to say that the plaintiffs would have continued to incur the expenses of running their case against Messrs Deery and Morrissey. But it does not follow that the plaintiffs were entitled to ignore Mr Beach's offer. 92 The letter of 14 August 2002 pointed out facts that should have made the plaintiffs aware (if they were not already aware) of the very limited nature of Mr Beach's role in the circumstances leading up to the preparation of the draft prospectus and the issue of the registered prospectus. They should also have made the plaintiffs aware that Mr Beach may well have had the benefit of the statutory defences (ss1011 and 1318 of the Corporations Law as it then stood). 93 Thus, both because the offer proposed something of value and because it raised very serious questions as to Mr Beach's role and his prospects of successfully defending the litigation, I think that it was incumbent on the plaintiffs to give it more consideration than apparently they did. In this context, I note that the plaintiffs have not put on any evidence as to their consideration of, or reasons at the time for rejecting or not accepting, Mr Beach's offer. 94 In the circumstances, I conclude that Mr Beach is entitled to have his costs paid on the indemnity basis from a date earlier than 1 January 2005. Since his offer gave the plaintiffs until 6 September 2002 to accept it, I think that indemnity costs should flow from the date of expiry of the offer. In other words, in Mr Beach's case, I think that the appropriate order is that the plaintiffs pay his costs on the ordinary basis up until 6 September 2002 and on the indemnity basis thereafter. Mr Peck 95 Mr Peck submits that his costs should be paid on the indemnity basis either ab initio (by reason of the plaintiffs' failure to prove their loss; and I have rejected this approach) or from 9 September 2004. The latter alternative appears to be based on a mediation which took place on that date. Mr Peck's submissions in support of the latter order suggest that the mediations (there were in fact three occasions when the parties sought to resolve their differences through mediation) offered the plaintiffs an opportunity "to discontinue these proceedings on the basis of payment of all the parties' costs" and submit that "[t]he court can infer that no such offer was made" (written submissions dated 25 June 2007, para 11). 96 All I know about the mediations is that they failed to produce a resolution of the matters in dispute. There is no evidence from which I can infer that the failure of the mediations was due to some unreasonable conduct on the part of the plaintiffs. The failure of the mediations does not entitle Mr Peck to the particular order sought. Interest 97 As I have noted at [4(7)] above, the plaintiffs and the defendants agree that interest should be payable in accordance with what I might call the "Lahoud" formula. I will so order. Access to security 98 There are two separate matters that require consideration under this heading. The first is whether the Court should deal with it. The second, assuming a favourable answer to the first, is whether any order should be made, and if so in what form. Is the question of access to guarantees to be decided at this stage? 99 The plaintiffs submitted that the question of access to the guarantees given to the various defendants was not among those ordered to be dealt with in the hearing to which these reasons relate. 100 When the matter was before the Court on 15 June 2007, orders were made that parties seeking an order for costs file and serve, within a specified time, a notice of motion setting out the costs orders sought and the evidence on which they relied in support of orders in respect of indemnity costs, costs of cross-claims and interest. 101 A number of the notices of motion filed pursuant to that order did include prayers for access to guarantees. Those defendants who did not seek this initially sought to do so by amendment. The plaintiffs submit that those prayers were not within the terms of the orders made on 15 May 2007. 102 The written submissions served and filed by the various defendants addressed the question of access to the guarantees. In very general terms, each defendant submitted that the costs incurred by him or it vastly exceeded the total of the amount for which he or it had been given security, and that on any basis the costs recoverable on assessment could not be less than the amount of the security. 103 There is no doubt that the plaintiffs were aware that the question of access to the guarantees was one which the defendants wished to canvas at this hearing. The plaintiffs did not submit that they were taken by surprise; nor could they. Indeed, the plaintiffs put on evidence (in the form of an affidavit from Mr Bass sworn 1 February 2008) dealing with issues relevant to some of the claims for access to the guarantees. Further, the plaintiffs addressed the substance or merits of those claims in their written submissions in reply. 104 In those circumstances, and regardless of the strict terms of the orders made on 15 May 2007, I think that the claims for access should be dealt with on their merits. I turn now to those merits. The issues 105 The particular issues relating to the merits were:

(1) Whether having regard to the terms of the guarantees the Court could (or, if it could, should) make an order giving a defendant access to them;

(2) Whether an order for access should be made without first giving the plaintiffs the opportunity to pay the amount that would be demanded of the guarantor;

(3) Whether any defendant or group of defendants had made out a sufficient reason for an interim costs order;

(4) Whether the defendants' evidence was sufficient to demonstrate that each defendant or group of defendants must recover, on any assessment, costs at least equal to the amount of the guarantees given in favour of that defendant or group of defendants;

(5) Whether in the case of particular defendants there was any credit risk: i.e, a risk that if costs were paid, and the plaintiffs' appeal in respect of that defendant later succeeded and the costs orders were set aside, that defendant would have the means to repay any amount paid to him or it. The plaintiffs did not put any submission as to credit risk against Macquarie. They were ambivalent as to whether such a submission was put against PwC (saying that it was in one place and that it was not in another). They put it against the other defendants excluding Trowbridge (with whom, as I have said, the plaintiffs had reached a settlement); and

(6) Related to the credit risk issue: whether the plaintiffs had shown any reasonable likelihood that their appeal would succeed against any particular defendant or group of defendants. Terms of the guarantees 106 From time to time, the plaintiffs were ordered to provide security for the defendants' costs. Security was provided by way of bank guarantee given by HSBC Bank Australia Limited ("the Bank") in favour of the relevant defendant or defendants. The guarantees were in a standard form. Each stated that at the request of the various plaintiffs, "the Bank guarantees payment to the Beneficiaries [i.e., the defendant or defendants to whom the guarantee was addressed] up to a maximum of [the amount for which security was ordered]… in respect of any cost order entered in favour of the Beneficiaries or any one of them against the Client [i.e., the plaintiffs] or any of them ("Order")" in the Ingot proceedings.

107 Each guarantee stated also: "The Bank unconditionally hereby undertakes to pay the Beneficiaries, upon receipt of your written demand from the Beneficiary [sic] attaching a sealed copy of the Order, the whole or any part of the amount of costs due pursuant to the Order (as set out in a certificate issued by a costs assessor in respect of that order… or as otherwise determined by a costs assessment or court order specifying the amount of costs or as agreed as between the parties…" up to the total amount of the guarantee. 108 The plaintiffs' primary - and in my view correct - submission was that no defendant could have access to any guarantee until there was an "amount of costs due" pursuant to an order of the Court, assessment or agreement. The plaintiffs submitted that since there was no order, assessment or agreement, there was no basis on which the Court could (or, if it could, should) permit any defendant to have access to a guarantee issued in its favour. The defendants sought to counter the plaintiffs' submission by seeking an order now for the payment of costs, to any defendant, in an amount equal to the total of guarantees issued in favour of that defendant. However, no defendant except Mr Peck and PwC had sought such an order in his or its notice of motion or amended notice of motion seeking costs orders. In Mr Peck's case, such an order was sought by paragraph 25AA of his amended notice of motion dated 30 January 2008. That notice of motion was circulated on or shortly after its date, and was filed in Court during the costs hearing with which these reasons are concerned.

First issue - the terms of the guarantees 109 For the reasons that I have indicated, I think that the terms of the guarantees do not permit a defendant to have access to any guarantee in his or its favour unless there is a costs order in his or its favour. Thus, I think, the only way that the Court could make an order in relation to access to the guarantees is if it first makes an interim costs order in favour of a defendant. The relevant question is, therefore, whether any such order should now be made. Second issue - opportunity to the plaintiffs to pay 110 If the pre-condition - the making of an interim costs order - is satisfied, I think that the plaintiffs should be given a reasonable opportunity themselves to pay without having their guarantees called upon. There was no serious opposition to this, although there might have been differing views as to what might be a reasonable time. 111 The plaintiffs submitted that if an interim costs order were made in favour of a particular defendant, and the plaintiffs satisfied that costs order, then any guarantee given in favour of that defendant should be returned for cancellation. (It is of course implicit in this that the amount ordered and paid be at least equal to the amount of the guarantee.) Although the defendants did not address that submission at length, it should be accepted. The defendants are entitled to the benefit of the guarantees so long as any sum ordered to be paid for which guarantees stand as security is unpaid. They are not entitled to retain guarantees once costs in at least the amount of the guarantees, and for which the guarantees stand as security, have been paid. Third issue - evidence of need 112 The plaintiffs submitted that the defendants were all protected by the plaintiffs' concession that interest would be payable on what I have called the Lahoud formula. They submitted that no defendant who sought access to guarantees given in his or its favour had put on any evidence showing why interest was not a sufficient protection. That submission is correct. 113 For Macquarie, Dr Bell submitted that Macquarie was entitled to the money, and should be permitted to have it so that it could use it for the purposes of its business. Perhaps understandably, there was no evidence that Macquarie had any particular need for the money, or any particular project for which that money might be utilised. 114 The other defendants put their case on the basis that they were entitled to the money and that it should be in their pockets rather than the plaintiffs'. No defendant gave evidence of particular need or particular hardship. Mr Peck gave evidence of asset sales undertaken to finance his defence. He did not however suggest that interim payment was necessary for any particular purpose, apart from the obvious one that, assuming his entitlement, he would like to have the money to replenish his resources. Evidence as to amount of costs 115 Each defendant or group or defendants gave evidence as to the total amount of costs that he or it had incurred. Some gave evidence of amounts, or percentages, recovered on prior assessments; and others gave evidence of the percentages that they expected might be recovered on assessment. Macquarie 116 Mr Black gave evidence for Macquarie that Macquarie had expended (in round figures) some $7.4 million in costs and disbursements in relation to the proceedings. (This and all other figures in this section are stated, I think, on a basis exclusive of GST.) The amount of security that the plaintiffs had given for Macquarie's costs totalled $2.59 million. Mr Black pointed out that on previous costs assessments (at least some of which were undertaken on the indemnity basis) Macquarie had recovered on average 82.5% of its actual costs. (The assessments related to the costs of applications for security for costs and various of the plaintiffs' applications for leave to amend or further to amend.) 117 Thus, Mr Black said, he estimated that Macquarie would recover at least 70% of its actual costs, other than costs that had already been the subject of assessment or agreement. He pointed out that on this basis the recoverable costs - some $5.18 million in round figures - would far exceed the $2.59 million of security. 118 Mr Black's evidence was not challenged. It may be that the plaintiffs did not seek to do so because they thought or hoped that the question of access to the guarantees was not to be debated at the hearing to which these reasons relate. Although I do not regard the absence of any challenge as decisive, I am comfortably satisfied, on the basis of Mr Black's evidence, that Macquarie's recoverable costs (which I note are to be paid on the indemnity basis from 6 July 2003) will exceed substantially the total of the amounts provided to Macquarie by way of security for costs.

Mr Ghose 119 Ms Fiona Lovell, a solicitor in the employ of the solicitors retained by Mr Ghose, gave evidence that Mr Ghose's solicitors in Australia (initially Atanaskovic Hartnell and subsequently Chang Pistilli and Simmons) had rendered fees of $3.08 million. In addition, she said, Mr Ghose's American lawyers Becker Glynn Melamed Muffy LLP had rendered fees exceeding AUD $553,000.00. It is by no means clear, on the basis of Ms Lovell's evidence, why the latter fees might be recoverable. 120 Ms Lovell swore that the plaintiffs had given security for Mr Ghose's costs. She did not state the amount for which security was given. Nor did she attempt any exercise estimating what proportion of the costs charged to Mr Ghose might be recoverable on assessment. She gave no evidence of the fate of any previous assessments or agreements as to costs that might have been undertaken or made. 121 It might be possible to go back through the Court's records and identify all of the orders for security for costs. However, the Court "file" comprises three boxes of documents. The records of proceedings occupy a number of lever arch files. It would be an extraordinarily time consuming and laborious task to search through the various records in an attempt to identify the orders made for security for costs. There is no certainty that, in any particular case, all the orders would be located. I would have expected each party to know the amounts from time to time ordered in his or its favour. I would expect the parties, in their own interests as well as in the interests of efficiency and "economy", to have put before the Court evidence of each of the matters on which they relied. In circumstances where there is no such evidence I do not see why the Court should be put to the time and labour of searching many thousands of documents in an attempt to supplement deficiencies in a party's evidence. 122 In the circumstances, I cannot be, and am not, satisfied that Mr Ghose is likely to recover costs in an amount that exceeds the total amount of the security given for his costs. Messrs Beach, Deery and Morrissey 123 Ms Nancy Mee Ying Har, a solicitor employed by the firm of solicitors representing Messrs Beach, Deery and Morrissey, gave evidence of the costs and disbursements charged to each of them. That evidence was not entirely easy to follow. In paragraph 5 of her affidavit, Ms Har referred to individual bills rendered to and paid on behalf of each of Messrs Beach, Deery and Morrissey. She summarised this in paragraph 6 by saying that they had incurred a total of $3.7 million (in round figures) "in legal fees and disbursements…". 124 However, in paragraphs 16 to 20, Ms Har referred to amounts charged and paid to various "experts" who were said to have been retained in connection with the proceedings. Those fees totalled, in round terms, $1.3 million. Further, she said in para 34, some $1.9 million in round figures had been paid to counsel. Finally, she said, none of those figures included travel expenses incurred by Messrs Beach, Deery and Morrissey; according to para 33, these totalled $65,000.00. 125 On that basis, the total claim would appear to be (again in round figures) $6.9 million. Ms Har gave no evidence of the likely recoverable amount. Nor did she give any evidence of the result of any previous assessment or agreement as to costs. 126 The total amount of security for costs given in favour of Messrs Beach, Deery and Morrissey is a little under $1.4 million. Whilst it might seem to be almost inevitable that the amount of recoverable costs will exceed the amount of security (in particular because of the orders for indemnity costs that I have indicated I will make), I am somewhat reluctant to draw inferences when the parties seeking the drawing of inferences do not provide some rational basis for those inferences to be drawn. I suppose that the evidence given by Mr Black could be extended to the case of Messrs Beach, Deery and Morrissey (and, as will be seen, Mr Peck seeks an equivalent exercise to be undertaken in his favour). 127 On the view to which I have come, it is not necessary to express a concluded view on the amount that Messrs Beach, Deery and Morrissey are likely to recover, because - for reasons that will follow shortly - I think that the Court should not make any interim costs order in their favour. Mr Daya 128 Mr Daya did not press a claim for immediate access to securities given for his costs.

Mr Peck 129 Mr Peck gave what his counsel Mr Gor described as a "high level estimate of… costs" of $1.78 million (supplementary written submissions dated 3 February 2008, paragraph 18). Mr Gor submitted that even if some 30% of those costs were said to be referable to the 36th cross-claim, the costs "referable to the Plaintiffs' failed case" were "of the order of $1.232 M" (ibid). The arithmetic may be accepted; but the suggested basis of apportionment is unsupported by evidence. 130 There is no evidence of the amount of the securities given by the plaintiffs for the payment of Mr Peck's costs. Again, I suppose, it might be possible to tunnel through the court files in an attempt to find all the orders, and to tally up the amounts ordered. For the reasons I have indicated, I do not propose to do so. 131 Even if I knew (or should be taken to know) the total amount of security given for Mr Peck's costs, I am in no position to undertake any assessment of what might be recoverable. Mr Peck gave no evidence that would assist in this task, and Mr Gor sought to rely on Mr Black's exercise undertaken for Macquarie. Again, I am very reluctant to draw inferences in favour of a party where the party has not put before the Court any evidence justifying the drawing of those inferences. 132 In any event, there is no need to express a concluded view on this point because I am satisfied, for reasons that will appear shortly, that no interim order should be made in favour of Mr Peck. Mr Williams 133 Although Mr Williams by his amended notice of motion sought an order giving him liberty to call on the bank guarantees provided as security for his costs, that order was not pressed (or so I understand Mr Williams' position as set out in his last submissions, dated 4 February 2008 - paragraph 7 of those submissions stated that Mr Williams sought certain orders which did not include access to the guarantees, and paragraph 8 stated that the remaining issue between him and the plaintiffs "is as to the application for a gross sum to be made payable"). Accordingly, it is unnecessary to review the evidence as to the amount of Mr Williams' costs and the estimate of recoverability. Mr Aroney 134 Nor is it necessary to do so in Mr Aroney's case, because he made no claim for access to any security that may have been given in his favour. PwC 135 PwC did seek access to the security given, and did so by amended notice of motion which sought an interim order for its costs "on account of its costs in the proceedings". PwC's solicitor, Mr Andrew Carter, gave evidence that PwC's costs of the proceedings were approximately $7 million. As in the case of Mr Black's estimate of Macquarie's costs, this excluded costs referable to applications in respect of which costs orders had already been made.

136 Mr Carter said further that on previous assessments PwC had recovered by assessment percentages ranging (in most cases) between 59 and 65% of the actual costs charged, and on one occasion 92.5% of the actual costs charged. 137 The total of the security for costs given to PwC is $2.588 million. 138 Mr Carter's evidence was unchallenged. (I refer, in this context, to what I have said at [118] above as to Mr Black's evidence.) I am satisfied that on any assessment of costs PwC will recover at least $2.588 million: particularly given that its costs are to be assessed on the indemnity basis from 1 January 2005.

Phillips Fox 139 Phillips Fox's solicitors, Mr Bruce Ramsay, swore an affidavit dealing with the question of costs. He said that Phillips Fox had incurred in total some $7.64 million in costs and disbursements, and that after allowing for costs that were the subject of costs order already made, the balance was $6.98 million. Mr Ramsay pointed out that on prior assessments Phillips Fox had recovered percentages ranging from 60 to 77% of the actual costs charged. 140 The total of the securities given by the plaintiffs for Phillips Fox's costs is $2 million. 141 Mr Ramsay's evidence was unchallenged. (Again, I refer to what I said at [118] above.) I am satisfied that Phillips Fox will recover at least $2 million on any assessment of costs: particularly bearing in mind once again that costs are payable on the indemnity basis from 1 January 2005. Other matters 142 It will be noted that where there is acceptable evidence of costs incurred and of the amounts provided by the plaintiffs as security for costs, the costs incurred exceed the security provided by a very substantial amount. That is so notwithstanding that applications were made from time to time by various defendants for further security, and the plaintiffs, either pursuant to orders of the Court or by agreement, "topped up" the amount of security provided to some defendants. 143 The discrepancy between the amounts of costs incurred and the total amounts of security given was the subject of some evidence. It does not seem to be in doubt, and I find (to the extent that it may be relevant), that notwithstanding the provision of further security from time to time, the duration and complexity of the hearing, and of the antecedent preparation, were such that the costs incurred exceeded the estimates given in connection with the applications for security. It is also pertinent to note in this context that in at least some cases, and not surprisingly, defendants were not always given security in the total amounts claimed.

Credit risk 144 One thing that must be noted is that the defences of a number of defendants were conducted on their behalves by insurers. Where this is so, the benefit of any interim costs order would presumably flow to the insurer concerned. In no case did any insurer offer any undertaking in relation to repayment of costs should it become necessary to do so. 145 There was some dispute between the parties as to who bore the onus of proof in relation to credit risk. For the plaintiffs, Mr Forster submitted that the defendants were seeking the exercise of a discretion in their favour, and that they bore the onus of proof on all relevant matters. He submitted that those relevant matters included the capacity of any particular defendant to repay costs in whole or in part if the plaintiffs' appeal succeeded and the costs orders were overturned, or if the costs ultimately recovered by that defendant fell short of any amount awarded on an interim basis and paid. 146 The defendants submitted that, the issue of application to bank guarantees having been raised, it was up to the plaintiffs to identify, and to substantiate through evidence, relevant grounds of opposition. 147 In substance, I accept the plaintiffs' submissions on this point. The terms of the orders for security costs are clear. The bank guarantees that have been provided reflect the terms of those orders. It is plain that the question of access to the guarantees was not expected to arise until costs had been quantified by assessment, order or agreement. The defendants (to the extent that they seek access to the guarantees) are seeking a variation of the orders made. It is for them to satisfy the Court that it is appropriate to make the orders that they seek. It is clear that what may be called for convenience credit risk is a relevant factor to be considered.

Macquarie 148 As I have already noted, the plaintiffs accepted that there was no question of credit risk in relation to Macquarie. PwC 149 In relation to PwC, the plaintiffs did not point to any question of credit risk in the correspondence between their solicitors and PwC's solicitors in relation to the question of access to securities. By contrast, in the cases of other defendants who sought access to securities, the plaintiffs' solicitors expressly raised the credit risk issue in correspondence. 150 Nor did the plaintiffs' written submissions in reply point in express terms to any credit risk in the case of PwC. That having been said, paragraph 4 of the relevant section of those submissions referred to "the risk that if the appeal is allowed, the recipient of the funds may be unwilling or unable to repay them". That proposition was said to be "particularly [so] in respect of" Messrs Ghose, Beach, Daya, Deery, Morrissey, Peck and Williams. The plaintiffs did not expressly advert to (or for that matter deny) the risk in the case of PwC or Phillips Fox. 151 It was uncontroversial that the partnership sued as PwC comprised approximately 450 individuals. There was some evidence of the assets and insurance of those individuals, raised in connection with a limitation of liability defence under the Professional Standards Act 1994. 152 At T118.34, Mr Forster said, in relation to PwC, that there was "a possible credit risk there". That submission was not amplified. Further, at T120.8-.14, Mr Forster referred to "the three big players, the non or substantially non-risk defendants - for the purposes of this submission, I keep Phillips Fox in the same big players category". It was clear that Macquarie and PwC were the two other "big players". 153 Although I have concluded that a defendant seeking the exercise of the Court's discretion (through the variation of orders already made) bears the onus of proof on matters relevant to the consideration of that application, it is fair to note, in the case of PwC, that the issue had not been flagged in correspondence as one requiring its attention. The situation is different in relation to Phillips Fox (notwithstanding Mr Forster's apparent concession at T120 referred to in the proceeding paragraph). In the circumstances, having regard to the vacillating position taken in submissions, the failure to flag credit risk as an issue in the case of PwC and the evidence (such as it was) relating to the defence under the Professional Standards Act, I think it is safe to conclude that there is no real likelihood that PwC could not repay any amount of costs paid to it pursuant to any interim order should it become necessary to do so. Phillips Fox 154 The plaintiffs' attitude in relation to Phillips Fox was somewhat inconsistent. As I have said, the credit risk issue was raised in correspondence. On the other hand, Mr Forster appears to have included Phillips Fox in the "non-risk" category in his submission at T120 to which I have referred already. 155 The firm sued as Phillips Fox comprised some 43 partners. As I noted in Ingot (No.6) at [62], the firm that was sued has since been dissolved, and a new firm, carrying on business under the name Phillips Fox, was constituted. (The name, and perhaps the firm, appear to have changed since I wrote Ingot (No.6); no one suggested that anything turned on this.) There was no evidence as to the resources of the 43 partners who were sued, save that they had themselves funded the defence of the litigation, which cost them in total in excess of $7.6 million (some of which is recoverable, or has been recovered, pursuant to costs orders already made). There was no evidence of the assets or liabilities, or employment or income, of any of those 43 defendants. 156 In circumstances where the issue was raised and not dealt with, I do not think that I should draw an inference in favour of those defendants on the question of credit risk. There is no sufficient basis on which I could conclude that the making of an order in favour of those defendants would not expose the plaintiffs to credit risk. Mr Peck 157 As to Mr Peck: the evidence is that he too funded his own defence. He said that he had been required to sell assets to do so. He gave no evidence of his ability to repay any amount now paid to him should it become necessary to do so. There is no basis on which I could conclude that a making of an order in his favour would not expose the plaintiffs to credit risk.

Other defendants 158 As to Messrs Ghose, Beach, Deery and Morrissey, the evidentiary position is equally unsatisfactory. Each of them lives and works overseas. The plaintiffs' evidence shows that none of them is registered as proprietor of any real property in New South Wales, and that none of them is shown in ASIC's records as a director or officer of, or shareholder in, any company registered with ASIC. (The same evidence makes the same points, as to real property and companies, in relation to Mr Peck.) Further (and if I am incorrect in stating as I have done at [133] above that the question of access to securities is not pressed by Mr Williams) the same evidence shows that he too is not registered as proprietor of any real property in New South Wales, nor is he shown in ASIC's records as a director or officer of or shareholder in any company registered with ASIC. 159 I conclude, in the case of the defendants referred to in the previous paragraph (including Mr Williams, if the issue is live) that the making of the orders sought by them would expose the plaintiffs to significant credit risk, flowing in particular from the overseas domicile of all but one of them (Mr Peck) and the apparent dearth of assets in the jurisdiction in all cases. None of those defendants gave evidence of assets to which the plaintiffs could readily have recourse to recover any amounts paid by way of interim costs. Prospects of success on appeal 160 The defendants submitted that the plaintiffs' position was analogous to that of a defendant, unsuccessful at trial, who sought a stay pending the hearing and determination of an appeal. They submitted that the defendant in that position would have to show not only that there was a significant credit risk if the amount of the judgment were paid to the plaintiff, but also that the appeal had reasonable prospects of success. 161 The plaintiffs did not dispute that the principle, in relation to unsuccessful defendants seeking a stay pending the hearing and determination of an appeal, was other than as stated by the defendants. Nor did the plaintiffs appear to contest that the principle might provide, by analogy, some guidance in the present case. 162 The parties did not address in detail on the prospects of success. The defendants submitted, perhaps unsurprisingly, that my judgment was clearly correct and would withstand the rigours of the appellate process. The plaintiffs, again perhaps unsurprisingly, put no material before me to suggest that their prospects of success on appeal were strong. I have to say that I feel extremely diffident in considering the topic. In circumstances where (as I shall explain) the issue is not dispositive, that diffidence leads me to think that the better course is to leave the point unresolved, as I shall do. Decision on this issue 163 In my view, each of the applications for access to security, or for an interim costs order as a step along the road to such access, should be refused. I have reached this conclusion because:

(1) At a level of generality, none of the defendants seeking such an order has satisfied me that there is an appropriate case (based on some material change in the relevant circumstances) for disturbing the usual process whereby the amount of costs payable is quantified by an appropriate process (assessment, agreement, gross sum order or whatever); the party liable for costs is given some opportunity to pay; and, in default of payment, the securities given for payment of those costs are called upon.

(2) Specifically, no relevant defendant has satisfied me that there is any particular reason why he or it should now have access to some amount on account of costs. No defendant has demonstrated any need other than the normal and understandable desire to be recouped pursuant to what prima facie is a legal entitlement. No defendant has demonstrated by evidence that the prejudice to him or it of being kept out of his or its money is something that will not be redressed by a Lahoud order for payment of interest on costs.

(3) In some cases, I am not satisfied that defendants have demonstrated that the amount of costs that they are likely to recover is at least equal to the amount of the securities given. This applies particularly to Mr Ghose, Mr Peck and (if it is relevant) Mr Williams, and perhaps also to Messrs Beech, Daya and Morrissey. I should however note that some defendants recognised this, and sought in the alternative an order for partial access.

(4) Phillips Fox has not satisfied me that the making of the order sought would not expose the plaintiffs to credit risk (in circumstances where, as I have said, I think that Phillips Fox as the applicant bore the onus of that issue once it had been flagged in correspondence). Having regard to the absence of evidence (one way or the other) I would not regard this of itself as dispositive (contrast the cases of the defendants to whom I refer in the next subparagraph). However, the unrebutted possibility of credit risk is another factor to take into account in the case of Phillips Fox.

(5) I am satisfied that the making of the order sought in the case of Messrs Ghose, Beach, Deery, and Morrissey (and in the case of Mr Williams if, contrary to my understanding, he continues to seek it) would expose the plaintiffs to a degree of credit risk. The same applies to Mr Peck. As to each defendant referred to in this subparagraph, I would conclude that the possibility of credit risk is of itself sufficient to refuse the orders sought. 164 The first and second factors are in my view sufficient in themselves to lead to the conclusion that the Court should not exercise its discretion in the favour of the defendants, and should refuse the applications. The remaining factors, to the extent that they are applicable, support that conclusion in particular cases; and the last factor is of itself a sufficient reason to refuse the orders sought in the case of the defendants to whom it applies. 165 Before leaving this topic, I should note that the relevant defendants relied on the decision of Einstein J in Sagacious Procurement Pty Ltd v Symbion Health Ltd [2006] NSWSC 779. One of the matters that his Honour dealt with was an application by the defendant for the payment to it of funds provided by or on behalf of the plaintiff as security for the defendant's costs. Einstein J noted at [29] that "the orders of the Court [made with the agreement of the parties] are now sought to be outflanked by the defendants' application that this is appropriate, following what is put as "material changes in circumstance" exhibited by the actual costs of the proceedings far exceeding the amount of the security actually provided". The significance of that was, as his Honour pointed out at [30], that the defendant would not recover costs except to the extent of the security (the plaintiff was insolvent), and in a practical sense would not recover any interest on those costs. 166 Einstein J made the order sought. His Honour appears to have considered that the plaintiff would suffer no practical detriment should its appeal be successful: the defendant would be able to repay the amount plus interest. He considered that there was "a material change of circumstances" that justified the exercise of the discretion in the defendant's favour. That material change of circumstances, as his Honour explained it at [31] and [32], was that the plaintiff was impecunious (and, I assume, unable to satisfy any order for costs or interest on costs except through payment out of the security for costs given by it), that the costs incurred had substantially exceeded the estimates given, through no fault of the defendant, and that in practical terms the defendant would "not be able to make any application for interest on its costs" (because in practical terms the plaintiff did not have the means to satisfy any order for interest). 167 Those circumstances are not the circumstances of this case. There is no evidence to suggest that any of the plaintiffs are insolvent. There is no evidence to suggest that any of the plaintiffs, or for that matter the plaintiffs in concert, will be unable to satisfy any order for costs that may be made, and any order for interest upon those costs. Orders for security for costs were made because the plaintiffs are overseas corporations, not because they are or were feared to be insolvent. 168 The only point of similarity between the case before Einstein J and this case is that, through no fault of the defendants, the costs incurred by the defendants have exceeded substantially the amounts estimated by them in connection with their applications for security or further security. Unhappily, that is a normal incident of large scale commercial litigation. Whilst it might represent a change in circumstances, it cannot be said to represent an unforseen or unforeseeable change in circumstances. 169 I have already pointed out that no defendant has adduced evidence to demonstrate that the prejudice that he or it will suffer by being kept out of his or its money cannot be compensated by an order for interest. In circumstances where no defendant has suggested that any order for interest on costs will not be satisfied, I do not think that the change in circumstances to which I have referred in this case justifies the making of the orders that the defendants seek.

Separate issues relating to the 30th to 32nd cross-claims 170 The 30th to 32nd cross-claims failed because the plaintiffs claims' against the cross claimants failed (and so did the plaintiffs' claims against the directors and officers, on which those cross-claims were parasitic). Thus, prima facie, the cross-claimants are liable to pay NCRA's costs of those cross-claims. The plaintiffs have accepted responsibility for the costs of those cross-claims (including both the costs of the cross-claimants in bringing them and the costs for which, prima facie, those cross-claimants are liable to NCRA as cross-defendant). 171 It appeared to be common ground that, where the plaintiffs accepted liability for the costs of any cross-claim (either costs incurred in bringing it or costs payable by reason of its failure), the primary costs order should be that the plaintiffs pay those costs; but that there should be a secondary order giving the cross-defendants in question an alternative entitlement to their costs, against the cross-claimant, in the event that the plaintiffs did not pay; or at least preserving that entitlement. 172 That position is as much applicable to the 30th to 32nd cross-claims as it is to the 1st to 29th. In all of those cases, and as well in the cases of the 34th and 35th cross-claims (discussed in a later section of these reasons) the plaintiffs should be ordered to pay the costs of all parties to the cross-claims, but the costs orders should preserve the rights of the cross-defendants to seek their costs from the cross-claimants in the event that the plaintiffs do not pay. NCRA's application: indemnity from Macquarie

173 With that out of the way, I turn to the more serious issue: namely, whether Macquarie should indemnify NCRA for all costs incurred by NCRA as cross-defendant or cross-claimant in respect of any cross-claim. If such an order were made, then there is the question of whether the other cross-claimants against NCRA (Trowbridge and PwC) should share the burden. NCRA's submissions 174 NCRA put its case thus:

(1) Macquarie was the defendant that first brought NCRA into the proceedings. (2) NCRA was then and at all material times a company in liquidation.

(3) The proper course for Macquarie to have taken was to prove in the winding up of NCRA in the event that the plaintiffs' case succeeded against both Macquarie and NCRA's former directors and officers, in circumstances making NCRA vicariously liable for the acts or omissions of those directors and officers, and therefore liable to contribute to or indemnify Macquarie for any damages recovered by the plaintiffs against Macquarie.

(4) Macquarie had not done so, but had sought and obtained the leave of the Court to join NCRA as a cross-defendant.

(5) The assets available to NCRA's creditors should not be depleted by the costs of litigation, in circumstances where Macquarie could have pursued, but chose not pursue, the remedy of proof of debt.

(6) In consequence, Macquarie should indemnify NCRA for all costs incurred by NCRA in relation to the litigation, except its costs of the "independent" claims against Guy Carpenter and the directors and officers. 175 Mr Coles QC, who appeared with Mr Cook of counsel for NCRA in relation to costs, submitted that the categories in which the Court might order indemnity costs were not closed. If the reference to "categories" is intended to be a reference to the classes of case that Sheppard J distilled from the authorities in Colgate Palmolive (see [25] above), the submission is correct. The discretion to award costs on some basis other than the party and party basis is not confined to specific categories of case; it is a discretion to be exercised judicially if the justice of the case so requires. Mr Coles relied on the decision of the English Court of Appeal in Andrews v Barnes (1888) 39 Ch D 133 at 141. That decision turned specifically on the practice and powers of the Court of Chancery, and their Lordships expressed no view on the position at law. 176 Mr Coles submitted that, when someone who claimed to be a creditor of a company in liquidation chose to sue the company rather than to prove in the winding up, the justice of the case required the claimant to indemnify the company for the costs thereby incurred, so that other creditors of the company would not suffer by depletion of its assets. Alternatively, he submitted, there was in those circumstances "some special or unusual feature… to justify the Court in departing from the ordinary practice": Preston v Preston [1982] 1 All E R 41 at 581 (Brandon LJ, with whom Ormrod LJ and on this point Hollings J agreed). Macquarie's submissions 177 Macquarie submitted that there was no general principle that a company in liquidation is, simply by reason of that fact, entitled to an order for indemnity costs where a claim against it is pressed through litigation rather than by proof of debt. Macquarie referred to a number of cases in which companies in liquidation had sought and been awarded costs, and in which no general rule of the kind for which NCRA contended had been enunciated. Macquarie submitted further that there was no relevant delinquency on its part. The joinder application 178 The parties referred in some detail to the circumstances in which NCRA had been joined, and to the judgment of Bergin J on the joinder application (Ingot Capital Investments Pty Ltd and Ors v Macquarie Equity Capital Markets Pty Ltd and Ors [2004] NSWSC 406). 179 As Bergin J noted at [6], the principal debate before her was whether there were any good reason shown for departing from the usual procedure, namely proof of debt (referring to the decision of McPherson J in Ogilvie Grant v East (1983) 7 ACLR 669 at 672). The good reason upon which Macquarie relied was that, following the grant of leave to the plaintiffs to amend their case in the form that was expounded by the fifth further amended summons (see my judgment in Ingot Capital Investment & Ors v Macquarie Equity Capital Markets and Ors [2003] NSW SC 1012), there was a proper basis for Macquarie to make what became the 30th cross-claim against NCRA. 180 Macquarie first of all asked NCRA's liquidator to admit that NCRA was liable to Macquarie for the full amount of any liability that Macquarie might be held to owe the plaintiffs, together with costs. The liquidator declined. Macquarie sought in the alternative that the liquidator agree that NCRA would be bound by findings of fact and law to be made in what I might call the main proceedings and in any appeal therefrom, for the purposes of any proof of debt that Macquarie might lodge. Again, the liquidator did not agree. (See the reasons of Bergin J at [10].) 181 It is apparent that Bergin J took into account the likely heavy costs that would be incurred if NCRA were joined (see her Honour's reasons at [14] and following). Her Honour considered the alternative that might arise where the liquidator had declined to agree that NCRA would be bound by all findings made: namely, that there might be re-litigation with the usual complications of increased costs and the risk of inconsistent findings. The liquidator had apparently indicated that he "would pay close regard to the judgment and reasons for judgment" in considering any proof of debt that Macquarie might lodge. Her Honour regarded this as inadequate, because "[t]he permutations and combinations of findings possible in this case… on the pleadings, both in the main pleadings and in the 28 [to that date] cross-claims, are such that paying close regard to the findings… may not mean anything else than [that] the liquidator might grant some portion of the claims in the proofs of debt, all of them or none of them" (see her Honour's reasons at [24]). 182 Bergin J granted leave to proceed on terms (at [29]). One of those terms was the usual one, that any judgment recovered on the cross-claim would not be enforced without the further leave of the Court. Another condition was "that the Macquarie parties will use their best endeavours to ensure that case management of the cross-claim against NCRA and NCRA's involvement at any trial are proceeded with so as to minimise the costs that will be incurred by NCRA." NCRA did not suggest that Macquarie had breached this second condition. 183 It is apparent from the transcript of the hearing before Bergin J that Mr Coles (who then appeared, as he appeared before me, for NCRA) sought, as a condition of the grant of leave, "orders that protected the NCRA's estate from the deprivation [sic] that costs would occasion. We would be suggesting… there be somebody identified who must be responsible for the payment of the liquidator's costs. That must be the party at whose instance the company is joined" (T29.30 - 45). Mr Jackman SC, who then appeared for Macquarie, submitted that no such condition should be imposed as a condition of the grant of leave, and that the question should be reserved to the trial court (T32.40-55). He referred, although not by name, to the decision of the Full Court of the Federal Court of Australia in Vagrand Pty Limited (In Liquidation) v Fielding (1993) 41 FCR 550 at 557 (a case in which Mr Coles appeared for the appellant and advanced before the Full Court the argument that some years later he advanced to Bergin J). The Full Court referred to this question at 557, summarising Mr Coles' submission as being that the court below "should have imposed upon the applicants for leave a condition that they undertake to pay the liquidator's costs of the principle proceedings, regardless of its outcome". Their Honours said that "[t]his proposition has only to be stated to be rejected." In substance, their Honours' reasoning was that where there was a demonstrated case for the grant of leave to proceed, the imposition in advance of a condition as to payment of costs regardless of the outcome might result in "the court closing its door to the applicants" because of fear of the costs burden. 184 Nonetheless, as is apparent, NCRA's position is not foreclosed by the decision of Bergin J; and Macquarie recognised as much in its submissions to Bergin J. Analysis and decision 185 The underlying premise of NCRA's position in the dispute with which I am now concerned was that Macquarie had chosen to depart from the usual procedure - proof of debt - and should therefore carry the consequences - including payment of all of NCRA's costs save its costs of the "independent claims (see [174(6)] above). The submission overlooks the proposition that, as Bergin J said, Macquarie needed to show good reason for departing from the usual procedure, and that, in her Honour's view, it had discharged that burden. 186 The liquidator could have accepted that NCRA would be bound by findings of fact and law to be made in the main proceedings (including, of course, in any appeal in those main proceedings). He chose not to do so. It follows that, whilst no doubt the liquidator was sincere in saying that he would pay close regard to the Court's findings, he was reserving as a real possibility that he would not regard NCRA as bound by them (as, in law, it would not be bound if it were not a party) if it suited him, or NCRA, so to act. 187 It should be noted that NCRA did not seem to submit before Bergin J, and certainly did not submit before me, that the case that Macquarie sought to advance (being the case that was ultimately expounded in the 30th cross-claim) was untenable, or so frail that Macquarie's desire to pursue it was unreasonable. The submission instead was that it was unreasonable for Macquarie to proceed by seeking leave to join NCRA rather than by waiting until the end of the proceedings and, if necessary, utilising the statutory mechanism of proof of debt. 188 It is apparent from the reasoning of Bergin J that she did not regard it as unreasonable of Macquarie to proceed in the way that it sought to do. I respectfully agree. The question of reasonableness is to be judged at the time that the application for leave was made, not now; and at the time the application was made, the liquidator's attitude made it plain that there was a real risk of re-litigation of any conclusions of fact and law with which the liquidator might wish to disagree. 189 This deals with the primary submission of NCRA: that, Macquarie having chosen to proceed by joining it rather than utilising the mechanism of proof of debt, "the justice of the case" requires Macquarie to indemnify NCRA for all of its costs incurred. That being so, the remaining ground for ordering indemnity costs is the search for some relevant misconduct or delinquency. It is sufficient to say that, to the extent that this second level test was pressed, there is no basis for finding any relevant misconduct or delinquency. 190 It follows, as to the 30th cross-claim, that the costs orders should reflect the plaintiffs' concessions (including as to the payment of costs on the indemnity basis from, in the case of Macquarie, 6 July 2003); but that NCRA's rights against Macquarie should be reserved in the event that the plaintiffs do not pay NCRA's costs of the 30th cross-claim. 191 Because I have concluded that Macquarie should not indemnify NCRA for all NCRA's costs incurred as cross-defendant or cross-claimant in respect of any cross-claim, it is unnecessary to consider Macquarie's further submission recorded at [12] above.

Guy Carpenter's claim 192 I have set out at [15] above the issues between NCRA and Guy Carpenter. NCRA did not appear to dispute that Guy Carpenter was entitled to interest on costs, or that the formula propounded by Guy Carpenter was appropriate. 193 The second issue can be dealt with shortly. NCRA submitted that the costs relating to proceedings 2371 of 2002 should exclude all costs claimed by Guy Carpenter in earlier applications for assessment following costs orders made in those proceedings on 4 April 2005. Guy Carpenter accepts this is so. Thus, as to the second issue, the costs order should be to the effect that NCRA pay Guy Carpenter's costs in proceedings No.2731 of 2002 to the extent that those costs have not been the subject of applications for assessment in respect of any existing costs order. The question, whether those costs should be assessed and paid on the party and party basis or the indemnity basis, stands or falls with Guy Carpenter's principal application, to which I now turn. Guy Carpenter's application for indemnity costs 194 Guy Carpenter claimed indemnity costs from one of four alternative dates (see prayer 1 of its amended notice of motion filed in court):

(1) The commencement of the proceedings against it (i.e, from service of the 33rd cross-claim on 18 June 2004);

(2) 1 November 2005 (when Guy Carpenter's defence of the 33rd cross-claim was opened, in the course of which Mr Pembroke SC, who appeared with Mr Menzies of counsel for Guy Carpenter, referred to a fundamental, and as events proved fatal, flaw in NCRA's case against Guy Carpenter; (3) The date of expiry of an alleged Calderbank offer; 16 March 2006; or

(4) 3 May 2006; the date when NCRA's then senior counsel informed the court that Mr Valencourt would not give evidence (see Ingot (No.6) at [1360]). 195 It is convenient to discuss the first, second and fourth of those dates together. The fundamental flaw in NCRA's case against Guy Carpenter 196 NCRA's case on causation was in substance that NCRA's results were overstated because leg one of the GCR transaction was brought to account as at 30 June 2006 and leg two was not (and thereby, on consolidation, NCRH's results were equally overstated); that thereby NCRH was able to report compliance with the net worth covenant in the Dresdner facility; and if the results had not been so overstated, so that the compliance certificate could not be issued, Dresdner would have enforced its securities and effectively "pulled the plug" on the capital raising. 197 I set out the pleaded case on causation in Ingot (No.6) at [1357]. As I observed at [1359], it was clear that if Dresdner had decided to terminate the facility, call up the loan and exercise its powers on default, the capital raising would not have proceeded. Thus, as the subheading preceding that paragraph suggested, Dresdner's attitude was the key to the question of causation. 198 The evidence available to NCRA on the question of Dresdner's attitude included memoranda and the like produced by Mr Valencourt and his colleagues, and (at least at some stage) a statement from Mr Valencourt. I analysed the documentary evidence at some length in Ingot (No.6) at [1360] to [1387], and in the last of those paragraphs concluded that "Dresdner would have continued to negotiate with NCRH for an amended facility even if the "true" net worth as at 30 June 1998 had been disclosed to it, and that it would not have acted… to terminate the facility, call up the loan and exercise its rights on default in that hypothetical event".

199 Thus, the documentary evidence did not support NCRA's case on causation. I have to say that I do not understand how anyone who read that documentary material carefully and objectively could have thought that it did. 200 NCRA did however have available to it a statement from Mr Valencourt. With some reluctance, I am prepared to assume, from the circumstance that Mr Valencourt was prepared to make a statement, that at some time he might have been willing to travel to Australia for the purpose of giving evidence, or at least to make himself available for cross-examination via video link. I say "with some reluctance" because NCRA put on no evidence as to Mr Valencourt's willingness at any time to give evidence. 201 Mr Valencourt's statement dealt with a number of topics, including:

(2) His functions in relation to the New Cap Group; and

(3) The events of 1998, as they were relevant to the banking relationship between Dresdner and the New Cap Group. 202 Taking Mr Valencourt's statement at face value, his role was as "Dresdner's principal contact person with… NCRH … and, by extension, for its operating subsidiaries". It is reasonably clear from the documents that although Mr Valencourt had responsibility for managing the relationship, and making recommendations, he did not have ultimate decision - making responsibility: either in relation to making the facility available or in relation to terminating it for default. 203 In dealing with the events of 1998, Mr Valencourt referred to the net worth covenant and to the attempts from time to time to renegotiate it. He dealt also with the renegotiation of the facility (whereby in effect the facility limit was reduced and all lenders other than Dresdner - the original facility was syndicated among a number of lenders - were paid out). He dealt with the attempts further to renegotiate that facility. 204 In general, Mr Valencourt's evidence proceeded by referring to relevant documents and offering some commentary on or analysis of them. At no stage, at least so far as his statement discloses, did Mr Valencourt suggest that his attitude at the time might have been anything other than as disclosed in documents created by him. 205 Thus, there is nothing in Mr Valencourt's statement to dispel what in my view was the strong and clear inference available from the Dresdner documents: namely, the conclusion that I recorded in Ingot (No.6) at [1387], that I have extracted at [198] above. 206 NCRA did not submit that it had any other material available to it that bore on the key question of causation, at least in so far as that question related to the attitude of Dresdner. Thus, this aspect of the costs debate must proceed on the basis that at no time did NCRA have any realistic prospect of adducing evidence on the key question of causation except through the documents to which I have referred and the statement of Mr Valencourt (in circumstances where the statement did no more than refer to and comment on, without in any way affecting the inferences to be drawn from, the documents). The flaw is pointed out 207 There was a mediation on 7 and 8 September 2004. Guy Carpenter's position paper at that mediation was put into evidence (without objection). It adverted, although briefly, to the causation argument. There was a second mediation a little over a year later, on 27 September 2005. If Guy Carpenter prepared a separate position paper for that mediation, it was not referred to in evidence. However, the question of causation may have been raised at that second mediation, because Mr Valencourt's statement was signed a few weeks later, on 5 October 2005. 208 One of the key documents on the question of causation was a memorandum of 11 October 1998 to Dresdner's credit committee. I dealt with that briefly in Ingot (No.6) at [389], and more extensively at [1383] to [1385]. For the reasons that I gave in those paragraphs, that memorandum raised immense difficulties for NCRA's case on causation. The memorandum does not appear to be among the documents considered by Mr Valencourt in his statement. It would appear that it came into NCRA's possession in October 2005, and certainly no later than 13 October 2005. The date of 13 October 2005 can be fixed because on that date Henry Davis York (for NCRA) sent to TressCox (for Guy Carpenter) a list of the documents to be included in NCRA's tender bundle. Those documents included the memorandum in question. It was one of those with which Mr Pembroke dealt in his opening when he referred to the causation issue. 209 On 14 October 2005, Guy Carpenter's London lawyers, Herbert Smith LLP, wrote to Henry Davis York. That letter set out what its author considered to be weaknesses in NCRA's case against Guy Carpenter. It dealt (among other things) with the question of causation, and in the course of doing so referred specifically to Dresdner's attitude. By then, Mr Valencourt's statement had been made available. The letter said of this statement that [n]othing in [it] is to the effect that Dresdner would have stopped negotiating and called in the facility." For reasons that will be apparent from what I have said, I agree with that proposition. 210 Further, the letter noted that "the evidence points the other way". It illustrated the point by referring to relevant documents. In substance, it made relatively briefly the points that I made at greater length in Ingot (No.6) at [1360] to [1387]. 211 As a follow-up to the letter of 14 October 2005, there was a meeting between the legal representatives of Guy Carpenter and NCRA on 19 October 2005. Settlement was discussed but not achieved. 212 Mr Pembroke opened Guy Carpenter's case on 1 November 2005. He referred to the question of causation at T869.9 - 870.21. He made the point that the case on causation "is not… born out… by the documents" (T869.22) and that "Dresdner … was prepared to assist New Cap to the fullest to ensure the successful issue of a prospectus to the public. The issue of the prospectus offered Dresdner an exit strategy…". He identified, although he did not refer specifically to, the documents that supported his submission; they were in substance the documents on which my analysis was based. 213 There was subsequent correspondence and discussions between the legal representatives of Guy Carpenter and NCRA, in the course of which suggestions were made as to possible ways in which their disputes might be resolved. As I have indicated, the correspondence after 1 November 2005 included what Guy Carpenter said was a Calderbank offer dated 16 February 2006, which expired on 16 March 2006. 214 Finally, in this context, it is necessary to note that senior counsel then appearing for NCRA informed the court on 3 May 2006 that Mr Valencourt would not make himself available to give evidence (T6782.3).

Guy Carpenter's submissions 215 Guy Carpenter submitted in essence that it was relevantly unreasonable for NCRA to have commenced proceedings, by filing the 33rd cross-claim, when it could not be certain that it would succeed on the critical question of causation. Alternatively, Guy Carpenter submitted, it was relevantly unreasonable for NCRA to have continued the prosecution of the 33rd cross-claim, in circumstances where the deficiencies in its case on causation had been pointed out at the mediations of September 2004 and September 2005, and at length in the letter of 14 October 2005, and again in Mr Pembroke's opening; and where the material available to it (including the key memorandum of 11 October 1998, and Mr Valencourt's statement) either supported the criticisms made or (in the case of Mr Valencourt's statement) did not address them. 216 Guy Carpenter submitted that NCRA's failure to consider the question fully was all the more egregious in circumstances where the proceedings were commenced by its liquidator, and where funds otherwise available to meet the claims of creditors were diverted into the litigation.

NCRA's submissions 217 NCRA noted that its case against Guy Carpenter included a "parasitic" claim to which the Dresdner issue was irrelevant. That may be so (although I refer to what I have said at [11] and elsewhere above on this topic); but it goes nowhere. To the extent that there was in truth a parasitic claim, it was immaterial in terms of costs. The real issue between NCRA and Guy Carpenter, to which virtually all the evidence and submissions were directed, was the case of involvement in the breaches of duty alleged against the directors and officers relating to the GCRA transaction. 218 NCRA submitted that its case on causation was not one recklessly undertaken or prosecuted. In essence, this aspect of its submissions on costs rehashed its submissions on causation in the main proceedings. Those submissions did not grapple with the Dresdner documents or the inferences to be drawn from them, but pointed to what was said to be "evidence that the motivations of certain NCRA directors and officers at the time… was to permit results to be reported to Dresdner which did not reveal a breach, for fear that a breach would prompt the obligation to repay" (submissions in reply on costs filed 8 August 2007, para 27). 219 Further, NCRA submitted that nothing in Ingot (No.6) "suggests that the Court apprehended that [case on causation] to be an unarguable hypothesis" (ibid, para 29). That may be so; but the question is not whether it was unarguable but whether, in all of the circumstances, it was relevantly unreasonable for NCRA to have commenced or prosecuted a case to which that causation element was crucial.

Analysis 220 In my view, it was not relevantly unreasonable for NCRA to commence proceedings against Guy Carpenter by filing the 33rd cross-claim. To this limited extent, its reliance on evidence as to the views of some of the directors and officers - that if the "true" financial position were revealed, Dresdner would "pull the plug" and the capital raising would not proceed - provided a sufficient justification for the commencement of proceedings. One might think that directors or officers who had had dealings with Dresdner would have some appreciation of its likely attitude if unfavourable financial results, showing a breach of the net worth covenant, were released. 221 However, that can provide no explanation for the decision to continue with the proceedings once the question of causation had been highlighted as a key issue and once the evidence on that point had been assembled. NCRA's submissions really did not grapple with this point. 222 Although Guy Carpenter relied on the first mediation as an alternative commencement date for indemnity costs, I do not think that it was relevantly unreasonable of NCRA to continue with prosecution of the 33rd cross-claim after the date of that first mediation. The documentary evidence had not been assembled, and NCRA had no statement from Mr Valencourt. However, the very fact that the issue had been raised at that mediation (and, I would infer, raised again at the September 2005 mediation) ought to have focussed NCRA's attention on causation, even if the ordinary processes of preparation did not. 223 Further, in this context, I think that the Herbert Smith letter of 14 October 2005 is of key significance. That letter, written with the benefit of both Mr Valencourt's statement and the 11 October 1998 memorandum, pointed out in what I think was an accurate way the essential flaw in the causation case. Of course, a party to litigation is not obliged to accept everything that its opponent says. But even if preceding events had not focused attention on the question of causation, the letter of 14 October 2005 should have done so. The issues that it raised demanded the closest consideration. 224 That letter is the background to Mr Pembroke's opening on 1 November 2005. The points made in the letter were reinforced, and the relevant documents were identified. The evidence was complete. As I have said, I am prepared to assume that NCRA then had some reasonable ground for thinking that Mr Valencourt would give evidence. But even if it did have that reasonable ground, it had no reasonable ground (at least, so far as the evidence on the question of costs has shown) for thinking that he could be of any real assistance in dispelling the inference available from the contemporaneous documents. Decision 225 In those circumstances, I think that it was relevantly unreasonable for NCRA to have continued the prosecution of the 33rd cross-claim after 1 November 2005. In circumstances where the issue of causation had been drawn repeatedly to the attention of NCRA and its legal advisers, I think that the unreasonable conduct to which I have referred is sufficient to justify an order that NCRA pay Guy Carpenter's costs on the indemnity basis after 1 November 2005. The alleged Calderbank offer 226 The conclusion to which I have come makes it unnecessary to consider the competing submissions in relation to the offer of 16 February 2006 which expired on 16 March 2006. I should however note that although the offer was to pay a sum of money ($500,000.00), NCRA did not accept that it should properly be characterised as a "Calderbank" offer, or at least as an offer, the nonacceptance of which would engender the costs consequences commonly sought to be invoked by reference to Calderbank v Calderbank [reference]. Conclusion 227 NCRA should pay Guy Carpenter's costs on the party and party basis up until 1 November 2005, and on the indemnity basis thereafter. To the extent that there are outstanding unresolved costs questions relating to proceedings 2371 of 2002 then NCRA, subject to any existing costs order, should pay the costs in question on the party and party basis. Parasitic aspects of the 33rd and 36th cross-claims

228 So far, I have excluded from consideration the parasitic aspects of the 33rd and 36th cross-claims. The 33rd may be dealt with briefly. 229 Although NCRA's written submissions suggested that the 33rd cross-claim as well as the 36th cross-claim had some parasitic element, that can be disregarded essentially for the reasons indicated at [11] above: namely, that it was parasitic not on any claim brought by another party against Guy Carpenter but upon one aspect of NCRA's cross-claims against the directors and officers. 230 In the 36th cross-claim, NCRA advanced three claims against the cross-defendant directors or officers. The first was based on the GCR transaction, and the circumstances relating to the non-disclosure of leg two. The second related to the failure to put the company into run-off. The third was simply a case for contribution or indemnity, which was entirely parasitic upon the plaintiffs' claims against those directors and officers. There was a question as to what costs order should be made in respect of the costs of the parasitic claim. 231 The reality is that the separable costs relating to the parasitic aspect of the 36th cross-claim will be minimal or less. It is difficult to imagine how the directors and officers could have incurred costs in relation to that aspect of the 36th cross-claim that they have not already incurred in relation to their defence of the equivalent claims brought by the plaintiffs against them. The directors and officers will have their costs from the plaintiffs, and will also have their costs of the 36th cross-claim from NCRA. I have difficulty in understanding how any significant costs will have been incurred either by NCRA in pursuing the parasitic aspect of the 36th cross-claim or by the cross-defendants in defending it. I have great difficulty in understanding how the amounts involved could be sufficient to justify the difficulty and expense of seeking to isolate and quantify them. In circumstances where the directors and officers will not be out of pocket in any relevant way (because of the costs orders that will be made in their favour against the plaintiffs and against NCRA), I have very great difficulty in seeing why the question should be pursued. 232 I therefore see no reason for including in the costs recoverable by NCRA such costs (if any) as may relate purely to the parasitic aspect of the 36th cross-claim.

Costs of the 34th and 35th cross-claims and related cross-claims 233 As I have noted at 4, (4)], the plaintiffs accepted that they should bear the costs of the 1st to 32nd cross-claims. Those cross-claims include cross-claims brought by defendants against NCRA for contribution or indemnity in respect of the plaintiff's claims against those defendants. Those cross-claims against NCRA were parasitic upon the plaintiffs' case against the directors and officers of NCRA. The relevant cross-claimants said that if the plaintiffs made good that case, the relevant acts or omissions of those directors and officers should be imputed to NCRA. 234 In those circumstances, it was hardly surprising that NCRA brought its own cross-claims against other defendants, seeking contribution or indemnity in relation to the 30th to 32nd cross-claims against it. (For present purposes, I exclude from NCRA's cross-claims the 33rd and 36th cross-claims). The "relevant" cross-claims by NCRA (i.e., the 34th and 35th) were parasitic upon the plaintiffs' claims against the relevant defendants. They simply asserted that if the plaintiffs made good their case against those defendants then those defendants were thereby liable to indemnify NCRA for any liability that it might have as cross-defendant, or to contribute to any such liability. 235 The 34th and 35th cross-claims failed, because the cross-claims against NCRA (and in any event, the plaintiffs' claims upon which they were parasitic) failed. NCRA as cross-claimant is prima facie liable for the costs of those cross-claims. However, in the circumstances to which I have referred - including that the 34th and 35th cross-claims were responsive to the 30th to 32nd cross-claims in respect of which the plaintiffs have accepted a liability for all costs incurred - I see no reason why the plaintiffs should not bear the costs of the cross-defendants to the 34th and 35th cross-claims. Given the nature of those cross-claims, the amount of costs (or separate costs) is likely to be relatively small, if not insignificant.

The 37th cross-claim 236 This can be dealt with briefly. Guy Carpenter seeks its costs from Macquarie. There is no reason why Macquarie should not pay those costs, although the limitation sought by Macquarie - that the costs so payable "be limited to those costs specifically and solely attributable to [Guy Carpenter's response to the 37th cross-claim" (see [18] above) - is appropriate. 237 I see no reason why the plaintiffs should pay those costs or indemnify Macquarie for them. The 37th cross-claim did not arise out of anything alleged by the plaintiffs against Macquarie, nor can it be said to be reflexive of or parasitic upon any claim made by the plaintiffs against Guy Carpenter, because the plaintiffs made no claim against Guy Carpenter. Costs to date of the application for costs 238 My tentative view is that, as between the plaintiffs and the defendants, the plaintiffs should pay the costs to date of the applications for costs, but that those costs should be paid on the party and party basis. This is reflected in the draft orders to which I shall shortly turn. The regime for notification in respect of those draft orders applies as much to the proposed order for the costs of the applications to date as it does to any other draft order. 239 As to the 33rd cross-claim, my tentative view is that the costs of the application for costs in respect of it should be paid by NCRA, on the party and party basis. 240 As to the 36th cross-claim, my tentative view is that the costs of the applications for costs in respect of it should be paid by NCRA, on the party and party basis. 241 Again, the direction for notification extends to the costs orders proposed in relation to the 33rd and 36th cross-claims.

Draft orders 242 As indicated in the course of hearing, I will set out in draft the orders that I think should be made. I will give the parties an opportunity to consider and respond to those draft orders. 243 Unless any of the matters raised in the notifications that I will direct to be given in relation to the draft orders is such as to require further hearing (and if any party considers this to be so, it should so state in its notification) I will consider the notifications, and the appropriate form of orders to be made, without further hearing from the parties. 244 Before I set out the draft orders, I will mention a matter that is relevant to the next step that has been flagged: the applications for the making of gross sum orders for costs. There are conceptually two steps embodied in those applications. The first is to consider whether it is appropriate to make gross sum orders. The second, assuming a positive answer to the first, is the assessment of the amounts. The plaintiffs appeared to take the view that those two steps should be dealt with separately. As indicated in argument, I do not agree. I think that to do so would lead to prolongation and yet further expense. Thus, in principle, the parties should be ordered to file all evidence on which they rely in support of or answer to the claim for gross sum assessments, on the basis that there will be a hearing at which the Court will consider not only whether to make gross sum orders but, if they are to be made, in what sums they should be made. 245 I have to say that I feel less than fully qualified to decide questions of quantification of costs, as opposed to questions of principle that may arise before or in the course of quantification. One course might be to refer the question of quantification (should it arise) to a referee. That course will certainly lead to prolongation and further expense. Another course might be to appoint an expert to inquire into and report on any issues that are unresolved between the plaintiffs and any defendant on the question of gross sum costs. That again would lead to prolongation and further expense, but would give the Court independent assistance on what are likely to be very difficult questions. A third course might be to make an order under UCPR Rule 31.54 for the Court to obtain the assistance of an appropriate specially qualified person to advise on the questions in dispute. If that were done, I would envisage the appointment of a qualified costs consultant or costs assessor, who would consider all of the material relied upon by the parties, provide assistance to me in relation to the matters in dispute (which assistance of course would be disclosed to enable the parties to address it), and who would sit with me in effect as an assessor. 246 The parties should consider the difficulties with which the Court will be faced, and the possible means of alleviation of those difficulties to which I have referred. If the parties are able to suggest any other course, it will be considered. If the parties agree that any of the courses that I have proposed should be followed, then they should cooperate in the nomination of a suitably qualified person (or panel of persons) to act as a referee, court expert or "assessor". 247 The orders that, as at present advised, I propose to make are:

(1) Subject to order (2), order the plaintiffs to pay the first to eleventh, thirteenth and fourteenth defendants' ("relevant defendants") costs of the proceedings.

(2) Order that the costs payable pursuant to order (1): (a) Are in addition to and not in derogation of any costs order already made in these proceedings, and do not include or extend to the costs the subject of any such order. (b) Include each relevant defendant's costs of prosecuting or defending those of the first to 32nd, 34th and 35th cross-claims to which he or it was a party, and extend to costs payable by him or it to any cross-defendant in any of those cross-claims. (c) As between the plaintiffs and the first to third defendants, be paid on the party and party basis up until 5 July 2003 and on the indemnity basis thereafter. (d) As between the plaintiffs and the fifth defendant, be paid on the party and party basis up until 6 September 2002 and on the indemnity basis thereafter. (e) As between the plaintiffs and all other relevant defendants, be paid on the party and party basis up until 31 December 2004 and on the indemnity basis thereafter.

(3) Order the plaintiffs to pay to each relevant defendant interest on that defendant's costs and disbursements: (a) At the rate from time to time applicable set out in schedule 5 to the Uniform Civil Procedure Rules ; (b) On the Allowed Percentage of each amount of costs and disbursements actually paid by that defendant; and (c) From the date of payment by each relevant defendant of each such amount of costs and disbursements until the costs due under these orders have been paid.

Note: (d) The "Allowed Percentage" is a percentage calculated as (Y/X) * 100; (e) X = the total amount of costs and disbursements which each relevant defendant has paid or is liable to pay in connection with these proceedings, and (f) Y = the total amount of costs and disbursements payable pursuant to order (1) as agreed, assessed or fixed as a specified gross sum.

(4) Dismiss all applications for interim costs orders and access to securities given by the plaintiffs for payment of any defendant's costs.

(5) Order each cross-claimant on each of the first to 32nd, 34th and 35th cross-claims to pay the cross-defendant's or cross-defendants' costs of each such cross-claim, in each case on the basis that the costs so payable are limited to those costs specifically and solely attributable to the cross-defendant's or cross-defendants' response to that cross-claim.

(6) Order that enforcement (save for quantification by agreement, assessment or otherwise of the amount of costs involved) of order (5) be stayed until the further order of the Court.

(7) As between the cross-claimant on and the cross-defendant to the 30th cross-claim: dismiss the cross-defendant's application for indemnity costs.

(8) Order the cross-claimant on the 33rd cross-claim to pay the cross-defendants' costs of that cross-claim.

(9) Order that the costs payable pursuant to order (8) be paid on the party and party basis up until 31 October 2005 and on the indemnity basis thereafter.

(10) Order the cross-claimant on the 33rd cross-claim to pay the cross-defendants' costs, as defendants, of proceedings 2371 of 2002 to the extent that those costs are not the subject of any existing order of the court.

(11) Order the cross-claimant on the 33rd cross-claim to pay to the cross-defendants interest on the cross-defendants' costs and disbursements the subject of orders (8) and (10): (a) At the rates from time to time applicable set out in schedule 5 to the Uniform Civil Procedure Rules ; (b) On so much of each amount of costs and disbursements actually paid by the cross-defendants as they recover by agreement or assessment; and (c) From the date of payment by the cross-defendants of each amount of costs and disbursements until the costs due under these orders have been paid.

(12) Order the cross-claimant on the 36th cross-claim to pay the cross-defendants' costs of that cross-claim.

(13) Order the cross-claimant on the 37th cross-claim to pay the cross-defendant's costs of that cross-claim, on the basis that the costs so payable are limited to those costs specifically and solely attributable to the cross-defendant's response to that cross-claim.

(14) Order as between the plaintiffs and the relevant defendants that the plaintiffs pay each relevant defendant's costs to date of his or its application for costs.

(15) Order the cross-claimant on the 33rd cross-claim to pay the cross-defendant's costs to date of that cross-defendant's application for costs.

(16) Order the cross-claimant on the 36th cross-claim to pay the cross-defendants' costs to date of that cross-defendants' application for costs.

(17) Order (for the avoidance of doubt) that the costs payable pursuant to orders (5), (10), (12), (13), (14), (15) and (16) be assessed on the party and party basis.

(18) Direct each party seeking an order to the effect that his or its costs be paid in a specified gross sum to serve his or its evidence in support of such an order by [ insert ].

(19) Direct each party against whom there is sought an order to the effect that the party pay the costs of another party in a specified gross sum to serve his or its evidence in answer to that order by [insert].

(20) Stand proceedings over to the directions list on [insert] .

(21) Reserve liberty to any party to apply on one week's notice to the other parties and to my Associate. Orders 248 I make the following orders:

(1) Direct any party seeking a variation in any of the draft orders just set out, or any additional order, in relation to the matters that are the subject of these reasons to give written notice within 28 days of the date of publication of these reasons to my Associate and the other parties. That written notice should set out both the variation or other orders sought and, in brief, the reasons why it is sought; and whether the party desires to be heard further.

(2) Direct any other party opposing the making of the variation or other order to give written notice to my Associate and the other parties within a further 14 days. That written notice should set out in brief the reasons why the variation or further order is opposed; and whether the party desires to be heard further.

(3) Stand the proceedings over to 9:30am on Friday 9 May 2008 before me for the making of orders and for directions in respect of the applications for gross sum costs orders.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.