(4) The sixth plaintiff is subject to costs orders against other defendants that exceed, in a substantial way, the value of the securities given by it to them.
54 On the first two assumptions, the net worth of the sixth plaintiff would reduce to about $14M. If the third assumption be applied cumulatively, its net worth would drop to about $5M. It is only if the fourth assumption is applied, also cumulatively, that any real concern might arise as to the ability of the sixth plaintiff to meet its further (hypothetical) liability to the Macquarie parties.
55 The amount for which further security is sought is a percentage (I discuss what should be the applicable percentage in paras [82] and following below) of $1.65M. It is only if one assumes that all the matters to which I have referred are resolved adversely to the sixth plaintiff, and if the results shown in the financial report as at 30 June 2005 are adjusted accordingly, that it is unlikely to be able to meet those additional costs.
56 I do not think that considerations of adequacy and fairness require all these adverse assumptions to be made cumulatively.
57 I note that the Macquarie parties submitted that on the plaintiffs' evidence, the financial position of the sixth plaintiff was said now to be as it must have been when the last top up application was resolved by consent in September/October 2005 (the application was made in September, and the formal orders were made on 5 October 2005). Of course, the financial report to which I have referred was not then available: it was signed by the directors on 21 December 2005, and the audit report was signed on 22 December 2005. In any event, the commencement of the hearing was scheduled to start within a week (ultimately, as a result of shifting the date back to accommodate various exigencies, it commenced on 17 October 2005). I do not think that the plaintiffs should be criticised, or that any adverse inference should be drawn against them, by reason of their decision to compromise the application for top up, rather than to use vital preparation time in resisting it.
58 In reaching the conclusion set out in para [50] above, I have (as is apparent from what I have said in para [55] above) taken into account also the consideration set out in para [42] above. It may be said (and the Macquarie parties submitted) that this takes no account of costs that the sixth plaintiff might be ordered to pay other parties. However, in many cases, the sixth plaintiff has provided security for the costs of those other parties: see the orders made by Bergin J on 9 July 2002. Presumably, those other parties remain satisfied with the security so provided (or, perhaps, as increased - I do not know the position as between the sixth plaintiff and other parties to whom it has been ordered to give security). Thus, I think, the impact of any costs order against the sixth plaintiff and in favour of parties other than the Macquarie parties will be ameliorated, substantially if not in whole, by the securities already given. The Macquarie parties' submissions on this point did not recognise this; and the same may be said of their submissions as to the ability of the sixth plaintiff to meet costs that it might be ordered to pay to them.
59 I therefore conclude that the jurisdictional basis for making an order for security for costs under either s 1335(1) of the Corporations Act or UCPR r 42.21(1)(d) does not now exist in the case of the sixth plaintiff.
Financial position of the first, second, third and fifth plaintiffs
60 Those plaintiffs did not submit that there was any basis upon which I could conclude that they had even a remote possibility of satisfying costs orders against them, or that there was such a material change in circumstances since July 2002 that Bergin J's conclusion, that they could not, ought to be revisited.
61 As I have indicated, the real dispute in the case of those plaintiffs was not their ability, or lack of it, themselves to satisfy any costs orders that might be made, but rather the effect of the undertakings offered (in the case of the second plaintiff) by the fourth plaintiff and (in the case of all) by the sixth plaintiff.
Effect of undertakings on the position of the first, second, third and fifth plaintiffs
62 For the reasons that I have given in paras [25] to [28] above, the position as to the second plaintiff is clear. The only conclusion available is that, although the second plaintiff could not meet any order for costs made against it, the fourth plaintiff could do so. If the fourth plaintiff's undertaking to the Court is accepted, then the Macquarie parties will be protected adequately against the inability of the second plaintiff to meet any costs order against it.
63 For completeness, I add that exactly the same conclusion would apply regardless of the undertaking, having regard to the identity of interest between the second and fourth plaintiffs. There is no readily discernible basis on which different costs orders might be made against the second and fourth plaintiffs, and the Macquarie parties did not submit otherwise. In other words, regardless of the position in relation to other plaintiffs, if the situation arises where the Macquarie parties become entitled to costs against the second plaintiff, they will become entitled to exactly the same costs against the fourth plaintiff; and as I have said more than once, I am satisfied that the fourth plaintiff is likely to be in a position to meet any such costs.
64 However, in relation to the first, third and fifth plaintiffs, any alleviation of their inability to meet costs orders that may be made against them must come either through the undertaking to the Court offered by the sixth plaintiff, or from a top up of the existing security for costs that has been given on behalf of all plaintiffs.
65 Bergin J said in para [99] of her reasons, and I agree, that the Court's aim, in ordering security for costs, "is to achieve adequate and fair protection to the defendants who are being sued by impecunious plaintiffs in separate claims and at the same time avoid prejudice to those impecunious plaintiffs." Her Honour pointed out that, on the evidence before her, "[t]here is presently no protection of the defendants that is adequate or fair." In my view, the undertakings to the Court now offered by the very far from impecunious fourth and sixth defendants, in respect of the impecunious first, second, third and fifth defendants, do achieve adequate and fair protection to the Macquarie parties. To go further, and require the fourth and sixth plaintiffs to tie up more of their assets in securities, and to lose the use of those assets for so long as the securities remain in place, is not something that is required by considerations of adequacy or fairness, and is something that will cause prejudice to those plaintiffs.
66 If the financial position of the sixth plaintiff is such that no further security should be ordered against it, on the basis that I have concluded that it would be able to meet any adverse costs order, then, it seems to me, it would only be appropriate to order further security against the first, third and fifth plaintiffs (who are the subject of the sixth plaintiff's proposed undertaking to the Court) if there were some ground to think that the costs that might be ordered against those plaintiffs were so different from, and so much in excess of, those that might be ordered against the sixth plaintiff that there was a real likelihood that the sixth plaintiff could not meet all its (direct or assumed) costs obligations.
67 I have recognised, as did Bergin J, the possibility that there may be different costs orders made against different plaintiffs. However, I am quite unable to discern any basis upon which it could be concluded that substantial costs - let alone costs sufficient to imperil the sixth defendant's present position of solvency - might be ordered against any one or more of the first, third or fifth defendants but not against the sixth defendant. I am therefore unable to conclude that there is any reason to believe that the sixth plaintiff is, or is likely to be, unable to meet the obligations that it would assume under its undertaking to the Court, if accepted, as well as its direct obligations, if costs were ordered against it. To put the matter positively: I am satisfied, essentially for the reasons that I have given in paras [51] to [58] above, that the sixth plaintiff is likely to be able to meet both costs ordered to be paid by it, and any even remotely conceivable additional costs that might be ordered to be paid by any of the first, third or fifth plaintiffs.
68 In reaching that conclusion, I am of course comforted by the circumstance that substantial security has already been provided, in the form of bank guarantees, to the Macquarie parties. The debate is not about the entirety of the Macquarie parties' costs, but about the top up sought by them, in respect of estimated additional costs of $1.65M. Taking the most adverse view, and assuming that the whole of that were ordered to be paid by some or all of the first, third and fifth defendants but not by the sixth defendant (a hypothetical circumstance, and one so unrealistic as hardly to merit consideration), the likely ability of the sixth defendant to meet that obligation pursuant to an undertaking rather than pursuant to a direct costs order can hardly be doubted.
69 I therefore conclude that the undertaking offered by the sixth defendant on behalf of the first, third and fifth defendants offers sufficient protection to the Macquarie parties for any costs order that might be made in their favour against the first, third or fifth defendants but not against the sixth defendants.
Overseas plaintiffs
70 As I have indicated, the Macquarie parties relied on the circumstance that the second, fourth and fifth plaintiffs were incorporated in the United Kingdom. In the case of the fifth plaintiff, the financial position of which is such that it is clearly unable to meet any order for costs, this is not relevant. It may however be relevant in the case of the second and fourth plaintiffs, given what I have said as to the ability of the fourth plaintiff to meet any costs order and as to the sufficiency of its undertaking in respect of the second plaintiff.
71 In this context, as in the context of s 1335 or UCPR r 42.21(1)(d), one must bear in mind that if the relevant jurisdictional fact is found to exist, what is enlivened is a discretion to order security for costs. Whether or not the discretion should be exercised, and the form or manner of giving any security thought to be appropriate, are matters to be considered independently of, although consequent upon, the finding as to the existence of the jurisdictional fact. Put shortly, it does not follow that security must be ordered in any case where the relevant jurisdictional fact, empowering the Court so to order, is found to exist.
72 In my view, the rationale for UCPR r 42.21(1)(a) and its equivalents is to ensure that a defendant that obtains an order for costs is not left lamenting because it cannot enforce, or can only enforce with difficulty, delay and expense, a costs order against the plaintiff in the jurisdiction where the plaintiff is to be found. However, as the Macquarie parties accepted, there is a legislative mechanism in place for the reciprocal enforcement of judgments between Australia and the United Kingdom. In those circumstances, I think, there is no need to protect the Macquarie parties over and above such measure of protection (if any) as may be necessitated by the impecunious state of the relevant plaintiffs.
73 The authorities suggest that where there is a mechanism for reciprocal enforcement of judgments, the appropriate amount for which security should be ordered is ordinarily the cost of enforcing the judgment in the foreign jurisdiction. See Connop v Varena Pty Ltd [1984] 1 NSWLR 71; Barton v Minister for Foreign Affairs (1984) 2 FCR 463.
74 I do not find the rationale for those decisions easy to understand. The relevant rule, and its predecessor or analogue with which those decisions were concerned, assume that the foreign plaintiff is solvent. They seek to address problems associated with the enforcement of a costs order against such a plaintiff. Where those problems have been addressed by legislation, and where the costs of enforcement (of a costs or other) judgment pursuant to that legislative mechanism will be recoverable as costs in the foreign jurisdiction, I do not see why the defendant should have security for those costs of enforcement when, by hypothesis, it is not entitled to security for the other costs that it may recover. But since the question was not argued before me, and the Macquarie parties did not seek security on this basis, I express no concluded view. For completeness, I add that the Macquarie parties led no evidence that would enable me to assess the amount of costs that might be incurred in enforcing in the United Kingdom any costs orders that they might recover against the second, fourth or fifth plaintiffs. Although Rath J in Connop was prepared to fix a sum of $750 as the appropriate amount of security - an exercise that his Honour described at [75] as "an arbitrary exercise" justified "only on a general appreciation of costs" - I do not regard myself as able to undertake a similar exercise in this case, were it necessary to do so. I have no understanding of the amount of work involved, including what might be required to be done by agents in the United Kingdom and of the charges that might be made by such agents. In those circumstances, the selection of a figure would be more than arbitrary: it would be entirely lacking in a reasoned basis.
75 I therefore conclude that it is not appropriate to make the order sought against the second, fourth and fifth plaintiffs on the basis of UCPR r 42.21(1)(a).
Amount sought
76 In case I am wrong in what I have said, I will deal briefly with the amount of the further security sought by the Macquarie parties.
77 The question of top up was last dealt with when Einstein J made orders by consent on 5 October 2005. The effect of those orders was to recognise an agreement between the plaintiffs and the Macquarie parties that the plaintiffs would provide further security, and thereupon to dismiss the Macquarie parties' notice of motion seeking further security. The agreement did reserve (with a presently irrelevant exception) the Macquarie parties' right to seek yet further security. Since those orders were made it has become apparent , as I have noted in para [1] above, that the duration of the hearing will exceed the estimate that was current in September/October 2005.
78 The Macquarie parties' solicitor, Mr Ashley John Black, has sworn an affidavit in which he estimates the costs to be spent by the Macquarie parties from 6 March 2006 until what is now thought to be the end of the proceedings (the current estimate fixes that date as 15 September 2006). He then concludes that some $1.65M remain to be spent which is not the subject of the securities given to date.
79 As I have said, the plaintiffs raised some quibbles. They submitted that there was an unexplained discrepancy between the estimate now given and that given to Bergin J, which discrepancy could not be explained by the greater length of the trial. They submitted further that the costs claimed assumed an excessive level of representation, given that the case against the Macquarie parties has been completed for some time.
80 Mr Black was not cross-examined on his affidavit. I do not think that it is open to me in that circumstance to make a finding against Mr Black's sworn evidence but consistent with the submissions now put by the plaintiffs. In any event, I do not accept that the level of representation contemplated in Mr Black's estimate is excessive. It is correct to say that the case against the Macquarie parties is complete. However, the Macquarie parties are deeply involved in cross-claims, as cross-claimants or cross-defendants. The witnesses to be called for the balance of the hearing will be relevant, among other things, to those cross-claims. The Macquarie parties are entitled to be represented (as they have been throughout) and to seek to support their positions, both vis a vis the plaintiffs and vis a vis the cross-claimants/defendants, in cross-examination of the remaining witnesses.
81 The plaintiffs did not challenge the relevant hourly and daily rates of solicitors or counsel. They did, however, challenge the percentage by which Mr Black sought to estimate the costs that would be recoverable on a party and party basis on assessment.
82 In all previous applications, the relevant percentage of actual costs that was used to assess recoverable costs was 70%. Bergin J accepted this figure, which appears to have been derived both from the evidence of the solicitors for the various applicants and from the evidence of a costs assessor.
83 In this application, the Macquarie parties sought security for 80% of their estimated actual further costs. Mr Black sought to justify that percentage by reference to three assessments that had already taken place in respect of costs ordered to be paid by the plaintiffs to the Macquarie parties. Those costs related to the original application for security, an application by the plaintiffs in 2003 for leave to amend, and an application by the plaintiffs in 2004 for leave to amend. The Macquarie parties recovered on assessment 72.6% of their costs on the first of these, 95% of their costs on the second, and 70% of their costs on the third. Somewhat surprisingly, the first and second sets of costs were assessed on the party and party basis, whereas the third was assessed on the indemnity basis. The overall average recovered on the three assessments was 80.6%.
84 I do not think that one can necessarily extrapolate from percentages recovered on assessment of costs payable in respect of interlocutory orders to costs payable in respect of final hearings. Particularly in lengthy and complex litigation such as this, experience suggests that the amount of preparation time (relative to hearing time) that will be expended on a final hearing may well be greater than the proportion of preparation time to hearing time on an interlocutory application. On a solicitor and client basis, the actual preparation done for a final hearing of complex and lengthy litigation may justifiably be substantially higher than the reasonable amount recovered on a party and party assessment. Ordinarily, one would not expect to see this in respect of interlocutory applications.
85 Further, I think, the illusion of certainty given by the overall average of 80.6% is somewhat undermined by the disparate percentages, or the wide variations between them, actually recovered on assessment.
86 In short, I do not think that the Macquarie parties have shown a sufficient basis to depart from the 70% factor used by Bergin J and that formed the basis of subsequent applications before this one.
87 It follows that if I had been minded to order further security, I would have ordered it in the amount of 70% of the amount sought: ie, $1,155,000.
Conclusions and orders
88 I conclude that, viewed realistically, the financial position of the fourth and sixth plaintiffs is such that they are, and are likely to be, in a position to meet any costs that might be ordered to be paid by them in respect of the further costs that are the subject of this application. If it were necessary to go further, and to conclude that they are, and are likely to be, in a position to meet any costs (without restriction) that might be ordered to be paid by them, I would do so.
89 Further, I conclude, having regard to the financial position of the fourth and sixth plaintiffs, that the undertakings offered by them in respect of costs that might be ordered to be paid by the second plaintiff (the subject of the proposed undertaking of the fourth plaintiff) and the first, third and fifth plaintiffs (the subjects of the proposed undertaking of the sixth plaintiff) achieve adequate and fair protection for the Macquarie parties in respect of the costs that are the subject of this application, to the extent that costs orders might be made against the first, second, third or fifth plaintiffs but not against the fourth and sixth plaintiffs.
90 I make the following orders: