25 Mr Jacobs submitted that the claim in the District Court had been viewed as involving a smaller sum and that the failure to move for an order for security was to be assessed in that context. When it became clear that the plaintiffs were advancing a claim for substantial damages the defendants had moved in a timely fashion to file the present application. In Mr Jacobs' submission, while the delay was a factor to be taken into account, it should not be viewed as necessarily defeating the application. By confining the application to the future costs of the proceedings the defendants had taken into account the observations of Waddell J in Southern Cross Exploration NL (Ors) v Fire & All Risks Insurance Co Ltd & Ors (1985) 1 NSWLR 114 at 125.
26 Mr Jacobs also relied on the judgment of Hunter J in Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (unreported) 7 November 1995:
I think the correct approach to this case is acceptance of the proposition that, while an application for security for costs should be made in a timely way, it may be made at any time. Mere delay in making such an application, in itself, is not bar to an order for security for costs. Nevertheless such delay resulting in prejudice to the party to whom such an order is sought, may be fatal to the application. While the onus to show prejudice must rest on the respondent to such an application, that onus may be readily discharged, for example, when it is apparent that substantial costs have been incurred by the respondent that would otherwise not have been incurred but for the dilatory nature of the application for security for costs.
27 I accept Mr Jacobs' submissions and do not approach the defendants' application on the basis that the delay in the period when the proceedings were before the District Court is to be viewed as necessarily determinative of it.
28 Brereton J discussed the discretionary considerations that bear on an application for security in KDL Building v Mount [2006] NSWSC 474 at [12]-[19] citing the judgment of Hill J in Equity Access Ltd v Westpac Banking Corporation [1989] ATPR 40-972, 50, 635. I have regard to those considerations. The first addresses the plaintiffs' prospects of success.
29 Mr Samuel in his report of 15 March 2006 (the first report) commented on the documents produced in answer to subpoena in support of the plaintiffs' claim for damages for lost profits, revenue and good will, as set out in their second amended statement (exhibit CJR30 to the affidavit of Carolyn Jane Rasaiah). Mr Samuel noted that the documents did not include any financial statements, documents of prime entry, tax returns or any systematic record of the financial transactions of Lesvos or Koffee. He also noted the absence of source documentation (such as sales invoices or purchase invoices) or working papers that would enable a reconstruction of actual sales, gross profits or costs saved. In his opinion there was insufficient documentation available to determine the actual profits made by the business either prior to the period of the alleged lost profit or during the period of the alleged lost profit and no documentation that could be relied upon to estimate the profit that would have been made absent the alleged breach of contract (at [31]). Mr Samuel also noted that the plaintiffs had not provided any supporting documentation to enable a calculation of any loss due to alleged loss of goodwill.
30 Following service of Mr Samuel's first report the plaintiffs served the Katehos report which quantifies their economic loss on one assumption in the amount of $1, 231,956. In a further report that is dated 11 July 2006 (the second report) Mr Samuel comments on the Katehos report. Appendix D to the second report identifies the documents referred to in the Katehos report which Mr Samuel had not previously seen. These include a copy of the Whitewater Café Penrith profit and loss statement for the 10 months ended 20 June 2000 and a copy of the Whitewater Café General Journal 1/07/99 to 1/08/2001. Mr Samuel states in the second report at [12]:
In my opinion, the existence of a profit and loss statement and General Journal indicates that other financial records should be available but have not been provided to me, including:
(a) Source documents supporting the income earned and expenses incurred, such as till receipts, purchase invoices and cheque stubs;
(b) other relevant third party documents, such as bank statements;
(c) accounting records which provide detail as to the transactions incurred, such as a cash book, general ledger and detailed general journal; and
(d) a statement as to the financial position of the Whitewater Café (i.e. a balance sheet).
[13] The only accounting documents relating to the operations of the Whitewater Café that I have seen prior to receipt of the Katehos Report were those included in the Annexure marked "MM2" to the affidavit of Maria Mihas sworn 8 October 2001. Those documents comprised:
(a) Copies of invoices to the Whitewater Café from Penrith Whitewater Stadium Ltd for the lease of the café at $833.33 per month and monthly garbage collection charges. The monthly rental expense is equivalent to an annual figure of $10,000. I note that the summary of income and expenses shows a monthly rental cost of approximately $500 and the profit and loss statement shows total rent for ten months of $5,000. I am unable to say why these figures are inconsistent with the invoices from Penrith Whitewater Stadium Ltd. Also, I have been unable to identify the garbage collection costs in either the profit and loss statement or the summary of income and expenses; and
(b) A schedule totalling $149,486.75 entitled "Whitewater Café Fit-out Costs", together with the documents purporting to support that schedule.
31 In the defendants' submission, either there are no documents to support the case that the plaintiffs seek to make or they have deliberately failed to produce them despite the efforts made by them to obtain them on subpoena. Mr Jacobs submitted that the inference was open that the plaintiffs' claim for damages was not brought bona fide.
32 Mr Baran submitted that the Court should not be drawn into a consideration of whether there was a basis for the assumptions made in the Katehos Report, since this was a matter for trial. In his submission, in addition to the delay in bringing the application, the content of Maria Mihas' affidavit, which sets out the history of the dealings between the plaintiffs and the defendants tells against making an order for security in that the conduct of the defendants was said to have brought about the situation in which they were arguably without the funds to pay any order for costs against them. In the course of developing the first submission Mr Baran acknowledged, "We accept there is a very live issue about damages and about the cause of action generally, there is no doubt about it" (T 14/07/06 at 15.32-34). I do not consider that I should approach the application upon a view that the plaintiffs' impecuniosity has been brought about by the defendants' conduct.
33 I do not conclude that the plaintiffs' claim for damages is not brought bona fide. However Mr Baran's concession was realistic and the defendants' prospects of successfully defending the claim are not without significance in considering the exercise of the discretion. In this respect I note the observations of Brereton J in KDL Building v Mount Brereton J at [13].