Morony & Ors v Reschke & Ors

Supreme Court of NSW|2015-05-29|Before: Black J

SWSC 560 - Re Colorado Products Pty Ltd (in prov liq) [2013] NSWSC 611 - Re Pioneer Energy Holdings Pty Ltd [2013] NSWSC 1366 - Walton Construction Pty Ltd v Illawarra Hotel Co Pty Ltd [2008] NSWSC 1248 - Wollongong City Council v Legal Business Centres Pty Ltd [2012] NSWCA 245 Category: Procedural and other rulings Parties: Andre Morony (First Plaintiff) Joseph Edward Duggan (Second Plaintiff) Richard William Turner (Third Plaintiff) Chanturn Pty Ltd atf Staff Superannuation Fund (Fourth Plaintiff) Tadeusz Skoczek (Fifth Plaintiff) Helkad Pty Ltd atf Staff Superannuation Fund (Sixth Plaintiff) Lynbar Pty Ltd atf Roberts Super Fund (Seventh Plaintiff) Rosa Genovesi (Eighth Plaintiff) Denis William Sullivan (Ninth Plaintiff) Anna Lee (Tenth Plaintiff) Barry John Callanan (Eleventh Plaintiff) Hugh Ronald Alexander Millikin (Twelfth Plaintiff) Benjamin David Kirkpatrick (Thirteenth Plaintiff) Stanley Norman Berry (Fourteenth Plaintiff) Ian David McMurtie (Fifteenth Plaintiff) Tolmer Products Pty Ltd (Sixteenth Plaintiff) Peter Charles Thomas (Seventeenth Plaintiff) Burke Robert Stanley Reschke (First Defendant) Coonawarra Property Holdings Pty Ltd (formerly Coonawarra Property Holdings Ltd) (Second Defendant) Koonara Management Pty Ltd (Third Defendant) Rocky Castle Finance Pty Ltd (Fourth Defendant) Advanced Horticultural Management Ltd (formerly Australian Hardwood Management Ltd) (Fifth Defendant) Alan Jessup (Sixth Defendant) Fergus Robert McLachlan (Seventh Defendant) Ian Dugald Murray McLachlan (Eighth Defendant) Ian Murray McLachlan (Ninth Defendant) Representation: Counsel: L P Robberds QC (Plaintiffs) C E Bannan (First to Fourth Defendants) J McDonald (Fifth, Seventh-Ninth Defendants) J McDonald (mentioned for Sixth Defendant)

Judgment

These proceedings were commenced in April 2011 - over four years ago - and seek, inter alia, declarations that a prospectus dated 11 June 1999 and a prospectus dated 29 May 2001 in relation to the Coonawarra Wine-Grape Project ("Project") contained misleading or deceptive statements in contravention of s 728 of the Corporations Law; declarations that the Defendants have engaged in unconscionable conduct in relation to the Project; that several Defendants have engaged in conduct in relation to financial services involving accepting payment without intending or being able to supply the relevant services in contravention of s 12DI of the Australian Securities and Investments Commission Act 2001 (Cth) ("ASIC Act"); and that joint venture agreements between the Plaintiffs, the Second Defendant ("CPH") and the Fifth Defendant ("AHM") are void or unenforceable and that loan agreements between the Fourth Defendant ("RCF") and various Plaintiffs are also void or unenforceable.
The proceedings have a long history of interlocutory disputes between the parties, and this judgment is directed to the latest iterations of those disputes. By Amended Notice of Motion filed on 29 May 2015, RCF initially sought an order under s 64 of the Civil Procedure Act 2005 (NSW) and r 19.3 of the Uniform Civil Procedure Rules 2005 (NSW) that it have leave to file and serve an Amended Statement of Cross-Claim ("ASOC") in the form annexed to its motion. By an Amended Notice of Motion filed on 22 April 2015, the Plaintiffs/Cross-Defendants to that Cross-Claim (to whom I will refer, for convenience, as the "Cross-Defendants") in turn seek orders for security for costs against RCF in respect of the new matters raised by the ASOC. RCF sought leave to file a further motion to add two additional Cross-Defendants and claims against them when the matter was relisted before me, primarily to deal with issues as to the further conduct of the proceedings, on 19 June 2015. I declined that leave and indicated I would have dismissed that motion on its merits in any event, for reasons that I set out below.
By Amended Notice of Motion filed on 29 May 2015, the Third Defendant, Koonara Management Pty Ltd ("Koonara") also seeks an order under s 64 of the Civil Procedure Act and r 19.3 of the Uniform Civil Procedure Rules that it have leave to file and serve a Cross-Claim in the form annexed to its motion. By an Amended Notice of Motion filed on 22 April 2015, the Plaintiffs in turn seek security for costs and verified discovery of documents against Koonara. Koonara also sought leave further to file a further motion to add two additional Cross-Defendants and claims against them when the matter was relisted before me on 19 June 2015. I also declined that leave and indicated I would have dismissed that motion on its merits in any event, for reasons that I set out below.

The affidavit evidence in respect of the applications

Each of the parties relied on several affidavits in respect of the motions, which annexed voluminous correspondence between their solicitors in respect of the applications, the proposed Cross-Claims, security for costs and discovery. A solicitor representing RCF and Koonara, Mr Abbott, referred to such correspondence in his affidavit dated 8 April 2015, and also referred to a list of discovery categories proposed by the Cross-Defendants in respect of Koonara's proposed Cross-Claim. Discovery of numerous categories of documents was sought, although a number of those categories were relatively narrow, and others refer to matters addressed by evidence given by the First Defendant, Mr Reschke, whose evidence is relied on in support of the Cross-Claims, in other proceedings or to matters specifically raised by Koonara's proposed Cross-Claim. The parties were ultimately able to agree the scope of further discovery in respect of Koonara's proposed Cross-Claim and several other aspects of the timetable for further evidence in the proceedings and I made orders in that regard on 19 June 2015.
The Cross-Defendants in turn rely on an affidavit of a solicitor acting for them, Mr Noble dated 22 April 2015, which also refers to correspondence between the parties in respect of RCF's proposed ASOC and Koonara's proposed Cross-Claim and requests for particulars in respect of them. Mr Noble also set out the basis on which he quantified the security for costs sought by the Cross-Defendants in respect of RCF's proposed ASOC and Koonara's proposed Cross-Claim and the evidence available to the Plaintiffs in respect of their financial positions. Significant parts of that evidence related to RCF's and Koonara's financial position in 2012 and 2013, which provides limited assistance in determining their present financial position. Mr Noble also referred to evidence led in other proceedings and observations by other Courts in other proceedings based on evidence which was not led in this application as to that issue, which also seems to me to provide little assistance in the determination of this application. Mr Noble's affidavit would have been substantially shorter had it not set out, in its text, extensive portions of documents that were already annexed (although they should have been exhibited, given their length) to that affidavit. There seems to me to be little utility in such a practice, which should preferably be avoided.
Mr Abbott's further affidavit dated 29 April 2015 responded to Mr Noble's affidavit dated 22 April 2015. Mr Abbott took issue with Mr Noble's views as to the extent of overlap between the matters raised in the Plaintiffs' principal claim and RCF's proposed ASOC and also led evidence, on information and belief from the First Defendant, Mr Reschke, that financial statements of RCF and Koonara to the end of March 2015 will be available within a short time and would show a different financial position from those set out in Mr Noble's affidavit. No such financial statements were tendered in this application. Koonara and RCF also read parts of Mr Reschke's affidavit dated 28 April 2015, filed in the substantive proceedings, which related to the lease and sub-lease of the relevant vineyard, the alleged satisfaction of minimum acceptance level conditions for the issue of units under the first prospectus on or before 30 June 2000, RCF's financial capacity, and Mr Reschke's evidence that he believed that loan deeds between borrowers and RCF were valid and enforceable and that RCF had advanced the principal referred to in the loan deeds to each Cross-Defendant on that basis.
By a further affidavit dated 30 April 2015, Mr Noble in turn responded to Mr Abbott's affidavit dated 29 April 2015. That affidavit referred to particulars provided by RCF's and Koonara's solicitors in respect of RCF's proposed ASOC and Koonara's proposed Cross-Claim and made the unhelpful observation, to which I will refer further below, that: "some of the responses to the requests for further and better particulars of RCF's proposed [ASOC] and Koonara's proposed Cross-Claim are inadequate and the inadequacies will be particularised in the [Cross-Defendants'] Outline of Submissions." That affidavit also indicated that the Plaintiffs took issue with paragraphs 6-8 of Mr Abbott's affidavit, which referred to the extent of overlap between the matters raised in the Cross-Claims and the Plaintiffs' primary claim, but did not identify the basis of any disagreement beyond indicating that that matter "will be responded to in the [Cross-Defendants'] Outline of Submissions". That letter identified other aspects of Mr Abbott's evidence to which response would also be made in the Cross-Defendants' outline of submissions.
A further affidavit of Ms Crawford, dated 28 May 2015 filed on behalf of Koonara and RCF annexed a substantial amount of further correspondence between the solicitors for the parties to the proceedings.

Amendment application by RCF

I have set out the application orginally made by RCF in paragraph 2 above. By way of the background to that application, on 27 February 2015, I dealt with an application by RCF for leave to file an earlier version of an Amended Cross-Claim. I declined to grant that leave on the basis that the proposed amendment was not pleaded in a manner that made clear the case that the Cross-Defendants had to meet, without foreclosing the opportunity for RCF to renew its application for leave if it properly identified the facts, matters and circumstances relied upon in the proposed amendment. The Cross-Defendants also then sought security for their costs of defending RCF's Statement of Cross-Claim filed 7 May 2012, being the version of the Statement of Cross-Claim filed prior to the proposed amendment to the Cross-Claim. I declined that application, on the basis of the overlap which then existed, to the point of substantial identity, between the then Cross-Claim brought by RCF against the Cross-Defendants and RCF's defence of the claim brought by the Plaintiffs against it. I noted that, if RCF proceeded with its amendment application to introduce new causes of action, as it now does, those causes of action, which were expressly premised upon the failure of RCF's defence of the primary proceedings, would not be defensive in character, and that a security for costs application might succeed in respect of those aspects of the proceedings.
RCF's proposed ASOC introduces an alternative claim for restitution directed to the position if orders are made that, broadly, have the effect that the Cross-Defendants have no liability to RCF under loan deeds that are under challenge in the Plaintiffs' claim. RCF relevantly pleads that the Cross-Defendants were indebted to AHM for annual management fees (ASOC [30]) and that the Cross-Defendants requested RCF to pay and discharge those debts (ASOC [31]) and that RCF did so by delivery of a promissory note, or alternatively two or more promissory notes for each of the two prospectuses in issue in the proceedings. The delivery of those promissory notes is particularised (ASOC [32]), to some extent, by reference to the total amount of the promissory notes delivered on or before specified dates. The particulars indicate that RCF can provide a copy of some but not all of those promissory notes. RCF in turn pleads subsequent steps by which those promissory notes were endorsed by AHM to Koonara, and then by Koonara to RCF. That process has been described in other proceedings involving the project as in the nature of a "round robin". Paragraph 33 of the ASOC pleads the Cross-Defendants have subsequently authorised and ratified the payment of the relevant debts. Paragraph 33A of the ASOC pleads an understanding by RCF that the relevant loan deeds were enforceable or alternatively that it made a payment or discharged a liability of the Cross-Defendants by receipt of a mistaken belief that the loan deeds were enforceable. Subsequent paragraphs of the ASOC identify the amounts alleged to be owed by particular Cross-Defendants and paragraph 43 pleads a claim in unjust enrichment.
The applicable principles in respect of an amendment to a pleading, or leave to file a new pleading, are well established and it is not necessary to set them out at length. I am required to exercise my discretion whether to allow the amendments having regard to the provisions of ss 56-58 and 64 of the Civil Procedure Act. Section 58 requires the Court to have regard to the dictates of justice when considering an order for the amendment of a document and requires the Court to have regard to the provisions of ss 56 and 57. Section 56 identifies the overriding purpose of the just, quick and cheap resolution of the real issues in dispute in the proceeding and s 57 requires proceedings to be managed having regard, inter alia, to the just determination of the proceedings. Section 64(2) provides, subject to s 58, for all necessary amendments to be made for the purpose of determining the real questions raised by the proceedings.
The Cross-Defendants ultimately did not oppose the amendments on the basis of delay, and the issues in this application are of narrower scope. The Cross-Defendants' current position is set out in their submissions dated 27 May 2015. Those submissions indicated that the Cross-Defendants do not oppose leave being granted to RCF to file and serve the proposed ASOC on certain conditions, namely that RCF provide an "adequate response" to several requests for particulars; that a specified timetable for filing evidence be ordered; and that RCF provide security for the Cross-Defendants' costs in relation to the new claims. Those conditions were not accepted by RCF (although the issues as to timetable have now been resolved) and the Court must therefore determine, first, whether to permit the filing of the ASOC and, second, whether to make the orders for security for costs proposed by the Cross-Defendants. I will address the issues as to security for costs below. The Cross-Defendants at one point also submitted that it was necessary on this application for RCF to establish that the circumstances pleaded in paragraphs 30 - 43A of the proposed ASOC indicate that receipt or retention of a benefit by the Cross-Defendants from RCF is unjust, although it is not clear whether that submission is pressed. I do not accept that submission. A party need not, in order to amend its case, establish the elements that are necessary to succeed on that case at the final hearing. The Cross-Defendants did not seek to establish that the case put by RCF was not properly arguable.
The first issue in dispute is whether RCF should be required to provide further particulars. The Cross-Defendants initially sought detailed particulars in respect of the proposed ASOC; particulars were then provided by RCF; and the Cross-Defendants first identified several responses that they contended were inadequate in their submissions shortly before the hearing of this application. Mr Bannan, who appears for RCF submits, and I accept, that that approach was unsatisfactory, since it was likely to deprive RCF of adequate notice of the issues that were to be raised by the Cross-Defendants. RCF resists the claim for further particulars and refers to the observation of French J (as his Honour then was) in Police & Nurses Credit Society Ltd v Burgess Rawson (WA) Pty Ltd [2006] FCA 1395 at [17] that: "What are 'necessary' particulars of any claim, defence or other matter pleaded is a matter of judgment. The underlying principle is that the case of each of the parties is adequately exposed to the other. It is important to maintain a sense of balance in the detail of particulars sought and ordered. The provision of particulars should not be allowed unduly to increase the cost and delay associated with litigation. In contemporary commercial litigation where, frequently, the court will direct the filing of witness statements or affidavits on either side subject to the right to cross examination, the necessity for elaborate particulars and lengthy debates about them is even more questionable." I accept the correctness of that approach. However, whether further particulars should be ordered must be determined by reference to the specific paragraphs as to which there is a continuing dispute between the parties.
The issues that now remain in dispute are, first, the position in respect of particulars to paragraph 32 of the proposed ASOC. The Cross-Defendants requested particulars of that paragraph and copies of documents and details of various matters by letters dated 27 March 2015 and 2 April 2015. RCF responded by reference to the affidavit of Mr Burke Reschke sworn 28 April 2015, which is said to address RCF's financial capacity to meet any demand that may have been made on it under the promissory notes and the circumstances in which the promissory notes were delivered and endorsed by AHM to Koonara. RCF's solicitors in turn provided further particulars by letter dated 29 April 2015, which noted that it was RCF's position that it had sufficient capacity to meet any demand by AHM under the promissory notes.
By letter dated 27 March 2015, the Cross-Defendants' solicitors requested further particulars in respect of paragraph 32.1 of RCF's proposed ASOC: "15.1.2 Is it contended by [RCF] that if AHM called upon the demand [sic] in the amounts particularised in this said paragraph 32.1, that the Cross-Claimant had the financial capacity to meet the demands of AHM? If so, please supply copies of all documents relied upon by the Cross-Claimant in support thereof and advise where and when the originals may be inspected." RCF's solicitors responded to the request for particulars by contending that: "As a matter of evidence and submission it will be contended that, so far as is relevant, if AHM made a demand in the amounts of the Promissory Notes, [RCF] had the financial capacity to meet the demand."
I do not consider that it is necessary or appropriate to order further particulars of that matter. First, it is plain that the proposed ASOC does not plead the material facts necessary to establish a claim that RCF had the financial capacity to meet the demands of AHM. At least so far as the proposed ASOC is concerned, the efficacy of the relevant transactions is to be determined on the basis that RCF does not advance any affirmative contention in the ASOC that it had the capacity to meet the relevant demands. Mr Bannan initially conceded as much in oral submissions, although he later somewhat sought to retreat from that position to suggest that RCF would be entitled to plead that matter in reply, and that it was addressed in Mr Reschke's affidavit. I see no reason to order that particulars be provided, in respect of the ASOC, of a case that it is not put by RCF in the ASOC.
The position in respect of that paragraph is, I recognise, further complicated by the fact that the Cross-Defendants, in their capacity as Plaintiffs, seek to establish an affirmative case that RCF did not have the financial capacity to meet the demands of AHM. As I noted above, Mr Bannan points out that the question of RCF's financial capacity is addressed in paragraphs 123 - 133 of Mr Reschke's affidavit, and that there is no lack of clarity as to RCF's response to the claim brought by the Plaintiffs in that respect. Mr Robberds, who appears for the Cross Defendants, in turn contends that RCF should provide particulars of its financial position because it was already part of the Plaintiffs' primary case that RCF did not have the financial capacity to advance the amounts contemplated by the relevant promissory note. That proposition seems to me to lead to the contrary conclusion. To the extent that the Plaintiffs seek to establish an affirmative case that RCF does not have such financial capacity, then it is a matter for them to establish that case. It seems to me that RCF's pleading in its proposed ASOC, which does not raise that issue, provides no reason to order that RCF provide further particulars in respect of it.
The Cross-Defendants also sought particulars in respect of paragraph 30 of the proposed ASOC, which amounted, in effect, to a concession that RCF's claim for restitution should be dismissed if the relevant joint venture agreements were set aside and, if not, particulars of the facts, matters and circumstances on which it was alleged that each of the Cross Defendants was indebted to AHM. RCF's solicitors responded that those matters were not proper requests for particulars, but matters for submission, and that RCF's submissions would not include the concession sought. It seems to me that that response was a proper one. The function of particulars was for RCF to identify matters necessary for the Cross-Defendants properly to understand the case that was put, not to debate contingencies as to what might follow from it or the consequences of its failure.
Next, the Cross-Defendants sought particulars as to paragraph 33A of the proposed ASOC, as to whether RCF solely relied on specified matters to support the allegation in that paragraph and, if not, what other matters were relied upon. RCF responded that it presently relied on the matters identified in the particulars provided, but "reserves the right to amend or seek leave to amend if that position changes". It seems to me that RCF has properly responded to that request by indicating the nature of the case on which it relies. I should note that RCF does not have any unqualified "right" to amend, even in respect of particulars, so far as any such amendment may raise issues that are properly the subject of case management within a complex case. However, it is entitled to reserve the right to seek leave to amend its particulars, which is a matter within the Court's control.
The Cross-Defendants' solicitors also sought to agree a timetable with RCF and RCF's solicitors responded, unhelpfully, that they were "happy to consider a timetable for further evidence and discovery of documents not already supplied". It seems to me that, where the amendments to the ASOC were sought to be made at a late stage in the preparation of the proceedings for hearing, and where that preparation has already extended over a lengthy period, then it is necessary that timetabling orders in respect of the amendment be made at the same time as any amendment is permitted. As I noted above, issues as to timetable were progressed by further discussions between the parties and orders have now been made to address them.
I am satisfied that the matters raised by the Cross-Defendants do not provide reason not to grant leave to file RCF's proposed ASOC in the form proposed by the Amended Notice of Motion filed on 29 May 2015 and I grant that leave. I did not grant leave to file a Further Amended Notice of Motion seeking to make further amendments on 19 June 2015, and I would not have permitted those further amendments, for the reasons noted below.

Security for costs against RCF

The Cross-Defendants seek security for costs of RCF's proposed ASOC in the amount of $95,523.65 against RCF, if leave is granted to file it. The Cross Defendants contend they have limited their application for security for costs against RCF to the new allegations pleaded, or proposed to be pleaded, in paragraphs 29-44 of the proposed ASOC. They submit, and I accept, that those claims are not merely defensive so far as they seek to introduce new causes of action, against the contingency that RCF's defence to the Further Amended Statement of Claim will fail. They submit that, in effect, RCF has become a plaintiff, to the extent of the claim brought by it in the Cross-Claim and he is, to that extent, susceptible to an order for security costs: Bank of Western Australia v Daleport Pty Ltd [2010] NSWSC 1207 at [11]-[16].
The Cross-Defendants rely on UCPR r 42.21(1)(d) of the Uniform Civil Procedure Rules which relevantly provides that if, in any proceedings it appears to the Court, on the application of a defendant, that there is reason to believe that a plaintiff, a corporation, will be unable to pay the defendants' costs if ordered to do so, the Court may order the plaintiff to give such security as the Court thinks fit, in such manner as the Court directs, and that the defendant's costs of the proceedings and the proceedings be stayed until the security is given. Rule 42.21(1A) in turn identifies matters to which the Court may have regard in determining whether it is appropriate to make an order for security for costs, in an inclusive manner, including the prospects of success or merit of the proceedings, the genuineness of the proceedings, the plaintiff's impecuniosity, whether the plaintiff's impecuniosity is attributable to the defendant's conduct, whether the plaintiff is effectively in the position of a defendant, whether an order for security for costs would stifle the proceedings, whether the proceedings involve a matter of public importance, whether delay by the plaintiff in commencing the proceedings has prejudiced the defendant, the costs of the proceedings, whether the security sought is proportionate to the importance and complexity of the subject matter in dispute and the timing of the application for security for costs. The Cross-Defendants also rely on s 1335 of the Corporations Act which permits an order for security for costs to be made if it appears, by credible testimony, that there is reason to believe that a corporation will be unable to pay the costs a defendant that is successful in defending the proceedings. In Polstead Pty Ltd (in liq) v Shah [2009] NSWSC 560 at [6], Brereton J identified the issues that arise in a security for costs application, namely, whether the grounds referred to in the rule are established; if those grounds are established, whether an order for security for costs should be made as a matter of discretion; and the quantum of any order to be made and the terms on which it should be made.
The Cross Defendants accept that they bear the onus of establishing that there is reason to believe that RCF will be unable to pay the costs of the Cross Claim if unsuccessful in defending it. This requirement will generally be satisfied if there is a real chance, in events that are reasonably possible, that the relevant corporation will be unable to pay those costs: Beach Petroleum NL v Johnson (1992) 7 ACSR 203 at 205; Deangrove Pty Ltd v Buckby [2002] FCA 1544 at [4]; ACN 105 921 962 Pty Ltd v Wiggett [2012] NSWSC 1526 at [4]. The Cross Defendants also refer to the observation of the majority in Livingspring Pty Ltd v Klinger Partners [2008] VSCA 93 at [15] that the concept of "reason to believe" in these provisions requires a rational basis for the relevant belief, by reference to a "practical, commonsense approach to the examination of the corporation's financial affairs." In Wollongong City Council v Legal Business Centres Pty Ltd [2012] NSWCA 245, Beazley JA (with whom Meagher and Barrett JJA agreed) again observed that the Court should adopt a "practical commonsense approach" to the examination of a corporation's financial affairs (at [28]) and noted that the defendant bears the onus of establishing that there is reason to believe that the plaintiff will be unable to pay those costs if unsuccessful and, if that is established, the onus shifts to the plaintiff to establish a reason why security should not be granted (at [29]-[30]).
The Cross-Defendants contend that they can establish a reasonable belief that RCF will be unable to pay costs ordered against it in respect of the Cross-Claim. They refer to evidence of the inquiries that they have made of RCF's solicitors as to its financial position and those solicitors' response that RCF does not trade in its own right and to the information which is been obtained from public sources as to the financial position of RCF. RCF submits that no security for costs should be ordered because, it contends, the Cross-Defendants have failed to discharge the onus of establishing that there is reason to believe RCF would be unable to meet an adverse costs order. In my judgment in respect of the earlier security for costs application I had accepted a similar submission and observed that: "The only basis on which it was said that RCF was unable to meet those costs was that it was a company with a share capital of $1.00. There are many companies with a share capital of $1.00 that are in fact wealthy companies, and well able to meet a costs order against them, because, for example, they have retained profits. There are other companies with a share capital of $1.00 which would have no prospect of meeting an order for costs. The difference between the two is why it is conventional practice, in security for costs applications, to serve a notice to produce to require company's financial reports, prior to bringing such an application. The fact that the trust had limited assets will not support a security for costs application, if the company itself has assets sufficient to satisfy an order for costs against it. A judgment for costs would be enforceable against the company in its own right, notwithstanding that it brought the proceedings as trustee, and would be able to be met if the company had sufficient assets, notwithstanding the trust did not".
There is, however, now more evidence before the Court than the fact that RCF has nominal share capital, and there are other areas where the absence of evidence supports an inference that that evidence would not have assisted RCF. First, there is now evidence that RCF does not trade in its own right and its only capacity is as trustee of the trust, and RCF has not sought to establish that it has assets outside the trust that might meet a costs judgment. Second, RCF has not produced current financial information, although it had foreshadowed it would do so, and I can infer that such information would not have assisted it. Third, bank statements that were in evidence at the hearing before me, having been produced by RCF only just before the hearing, indicate that RCF has a substantial debit balance in its bank account, its available overdraft is nil, it is paying an interest rate well above ordinary rates that would appear to be a default rate, and enforcement costs are being charged by its bank to that account. RCF was requested, by letter from the Plaintiffs' solicitors, to produce documents that went to those matters and did not do so.
At the further hearing on 19 June 2015, Mr Robberds sought leave to reopen the Plaintiffs' case as to security for costs in respect of RCF specifically to draw attention to the content of those bank statements. He also sought leave to reopen to tender the letter dated 9 June 2015 by which production of the relevant documents was sought. Mr Bannan responded that the relevant bank statements were for the trust rather than for RCF, but RCF did not seek to tender any further evidence as to its financial position other than as trustee. It seems to me that leave to re-open should be granted, where the time involved in doing so was minimal; the submission Mr Robberds made and the tender of the letter would clarify the evidence already before the Court in RCF's bank statements; the relevant bank statements had only been made available by RCF immediately before the previous hearing; and RCF had a week's notice of the issue and sufficient time to produce the additional documents or seek to lead further evidence of its financial position if it wished to do so.
It seems to me that that the matters to which I have referred above indicate that there is reason to believe that RCF would not be able to pay a costs order against it. That position is reinforced by the fact that RCF appears to be the trustee for the Rocky Castle Finance Trust and its ability to have recourse to the assets of that trust to meet a judgment would again be limited, both by the existing liabilities of that trust, and by any limits to any right of indemnity against the trust assets at the relevant time. The authorities establish that the Court may have regard to the practical difficulties in enforcing an order for costs against a trustee company, particularly where its directors have not offered an undertaking to exercise any right of indemnity against trust assets: Narradine Pty Ltd v Mascot Steel and Tools Pty Ltd [2012] NSWSC 385 at [8] and the cases there cited.
RCF submits that no security should be ordered given the overlap between the Cross-Claim and the Further Amended Statement of Claim. RCF also submits that no security should be ordered given suggested inadequacies in the Cross-Defendants' evidence as to the quantum of costs or, alternatively, the amount of any security should be de minimus. RCF accepted in submissions that additional causes of action were proposed, which were premised on the failure of RCF's defence in the primary proceedings, are not defensive in character. RCF submits, and I understand the Cross-Defendants to accept, that the amount of any security ordered should be reduced in respect of RCF's Cross-Claim so that it relates only to those aspects of the Cross-Claim that are not properly characterised as defensive: Interwest v Tricontinental Corporation Ltd (1991) 5 ACSR 621; Bank of Western Australia v Daleport above at [16]. RCF also points to the possibility that security may not be ordered where a Cross-Claim is substantially defensive: Dunnet Properties Pty Ltd v Cussen [2009] NSWSC 961. It seems to me that that proposition has less weight where, as in this case, RCF seeks to amend its Cross-Claim, at a late stage of the preparation of the proceedings for hearing, to introduce new claims that are not defensive in character. RCF also submits, and I accept, that the court may decline to order security for costs where any part of the Cross-Claim is not defensive, and there is insufficient evidence to quantify the amount referable to that aspect of the Cross-Claim: Walton Construction Pty Ltd v Illawarra Hotel Co Pty Ltd [2008] NSWSC 1248 at [55].
RCF points to the extent to which the matters raised in its claim for unjust enrichment, including whether RCF had advanced the relevant funds, will be raised by the Cross-Defendants, as Plaintiffs in their principal claim that the loan deeds between them and RCF are void and unenforceable. It seems to me that the substantial part of the Cross-Claim is, as RCF points out, derivative of the facts pleaded in the Plaintiffs' primary claim, and otherwise turn on the legal consequences of those facts. RCF acknowledges that its restitution claim does raise an additional issue as to whether RCF proceeded on the basis of a mistaken belief that the loan deed was enforceable, which is the subject of evidence given by Mr Reschke in his affidavit dated 28 April 2015, which is fairly treated as new evidence. RCF also recognises that Mr Reschke may well be cross-examined as to that belief.
RCF also submits that the issues raised by the Plaintiffs' claim, as to the dealings between RCF and the Cross-Defendants in their capacity as Plaintiffs, overlap with the issues raised in RCF's unjust enrichment claim to such an extent that, although the claim is a new claim, an order for security for costs is not justified. I do not accept that submission, so far as the Cross-Claim raises new factual issues that are likely to require cross-examination and new legal issues of some complexity. I recognise that, as RCF points out, the consequence of a failure by RCF to provide security would be that the Cross-Claim, or at least the aspects of it that are the subject of the order for security for costs, would be stayed, notwithstanding that the Plaintiffs would be addressing some of the same factual matters and some of the same costs would be incurred in the primary claim: Dunnet Properties Pty Ltd v Cussen above at [27] - [29], [35]. In the present case, that proposition is of limited weight where, if that occurs, other factual issues will not need to be addressed in cross-examination and significant legal issues would not need to be addressed, so that the Cross-Defendants will avoid costs of addressing those matters which, on my findings, there is reason to believe they will not recover if costs are ordered against RCF. I am satisfied that security for costs should properly be ordered in respect of those parts of RCF's proposed ASOC that are not defensive in nature.
The Cross-Defendants rely on Mr Noble's affidavit dated 22 April 2015 to support the quantification of the security for costs claimed in respect of RCF's Cross-Claim. Mr Noble estimates that 40 hours of additional preparation work by the Cross-Defendants' solicitors would be required in respect of the new issues raised by the Cross-Claim; three additional days of work would be required for junior counsel and three additional days for senior counsel, and two additional hearing days would be required for each junior counsel and senior counsel. Mr Noble's evidence was that the legal work for the Cross-Defendants would be carried out by certain solicitors within the firm for which he works, by Mr Robberds and by Mr Newton of Counsel. He set out the work that he considered would need to be done in relation to RCF's application for leave to file the proposed Amended Cross-Claim and in respect of the Defence of that Amended Cross-Claim and quantified the relevant costs as solicitors' costs of $41,822 inclusive of GST, after applying a 20% discount to solicitor/client costs; Counsels' fees of $53,240, inclusive of GST, and modest disbursements.
RCF advanced criticisms of that estimate. Mr Robberds points out in reply, with substantial force, that the addition of a claim for restitution to RCF's existing Cross-Claim is sufficient, in itself, to establish that additional costs will be incurred by the Cross-Defendants in responding to that new claim, and also points to the fact that Mr Noble was not required for cross-examination. I give some weight to that matter, but also recognise that, in an interlocutory application of this character, leave may well have been required for a cross-examination of Mr Noble, and little useful purpose would have been served in such a cross-examination as to matters where opinions may genuinely differ, and where the authorities indicate that the Court may have regard to its own institutional experience of these matters.
It seems to me that Mr Noble's estimate of the time that will spent in responding to the new issues raised in RCF's proposed ASOC is too high, given the extent to which the relevant issues are already raised by the Plaintiffs' claim and that the only new matters raised by the Cross-Claim are Mr Reschke's evidence of mistake and the legal issues arising in respect of the claim for unjust enrichment. It also seems to me that significant parts of the work that were taken into account by Mr Noble in quantifying the Cross-Defendants' claim for security for costs, including the review of affidavits served by RCF and Mr Reschke's affidavit, and the review of documents discovered and produced on subpoena, would be required in respect of the conduct of the Plaintiffs' primary claim, and are not properly the subject of security for costs in respect of the Cross-Claim.
RCF propounded an alternative calculation of the amount of security which might appropriately be ordered against RCF, if the Court were to make an order for security for costs against it. Mr Bannan submits that, if the Court takes the view, as I do, that it is appropriate to order security for costs against RCF and that it is possible to discern the costs properly referable to the proposed amendments (which RCF submits is not possible), then costs would at most be an additional day of solicitors' work through preparation of amended defences and other work actually referable to the proposed amendments, estimated at $5,800, an additional day of preparation for each of senior counsel and junior counsel estimated at $8,000, and an additional half day of hearing for each of senior and junior counsel estimated at $5,000 for a total of $18,800, and a discount figure should then be allowed for the amount of costs recoverable on a costs assessment. It seems to me that, where I am satisfied that costs will be incurred but have not accepted Mr Noble's estimate of those costs, and in the absence of an evidentiary basis for an alternate approach, I should broadly adopt that suggested approach.
Mr Noble's estimate of recoverable costs also proceeds on the basis that 80% of solicitor/client costs and all of counsels' fees would be recoverable by the Cross-Defendants on assessment. I do not consider I can accept that estimate, which was not supported by any expert evidence of a costs consultant. However, while it will usually be desirable that estimates of costs recoverable on assessment be supported by such evidence, and that was not done here, the Court has from time to time accepted that two-thirds or more of solicitor/client costs would likely be recovered on assessment, and that Counsel's fees will generally be recoverable in full, in the context of lump sum costs orders and security for costs applications: Dubow v Fitness First Australia Pty Ltd (No 2) [2012] NSWSC 961 at [14]-[20]; Liberty Industrial Pty Ltd v Donald McCarthy Trading Australia Pty Ltd [2013] NSWSC 279 at [17]; Re Colorado Products Pty Ltd (in prov liq) [2013] NSWSC 611 at [68]; Re Pioneer Energy Holdings Pty Ltd [2013] NSWSC 1366 at [25]. I consider that I may properly do so here. Adopting RCF's estimate of solicitor/client costs and Counsels' costs, and treating two-thirds of solicitor/client costs and all of Counsels' fees as recoverable, the amount of security that RCF should be required to provide is therefore $16,865.
Mr Bannan referred to Norcast SarL v Bradken Ltd [2012] FCA 765 as supporting a further discount to the costs that would be awarded on a party/party basis. Gordon J there referred to a degree of controversy in the case law as to whether security for costs should be discounted, by reference to a practice (or "rule" of practice) adopted in the United Kingdom, to two-thirds of party/party (ie recoverable) costs, so that a further discount is applied in addition to that adopted in determining the amount of recoverable costs for which security would otherwise be awarded. That approach (or "rule") has been applied in some cases, and criticised as lacking justification in law or logic in other cases. Gordon J noted (at [28]) that that approach may be applied to have regard to factors such as the chances of settlement, the merits of the case, whether an order of security would effectively deny the applicant from pursuing the claim, the strength of the evidence regarding the quantification of the security, the possibility that costs may be reduced on a particular assessment and the possibility of off-setting costs orders. Plainly, the amount allowed for security for costs will to some extent be a matter of impression in a particular case. I do not understand the authorities to require that approach to be applied, and Gordon J herself did not apply it in Norcast SarL v Bradken Ltd above. I would prefer to treat the matters to which Gordon J referred as relevant to determining whether security should be awarded, and to determining the amount of security to be ordered, rather than as supporting a second discount to the amount of security ordered, with the likely result that the amount ultimately provided by way of security would be substantially less than the amount properly recoverable against an unsuccessful party that is unable to pay those costs. I would add that there are many cases in which this Court has allowed security for costs without applying an additional discount of the kind referred to in Norcast SarL v Bradken Ltd above.
Mr Bannan accepted in submissions that, if I concluded that leave should be granted to file the proposed ASOC, on terms that security for costs be provided, there would be no difficulty, as a matter of case management, with making the ability to file the proposed ASOC conditional upon the provision of the security for costs (T13). I think it preferable not to delay the timetable in that manner, but RCF's Cross-Claim should be stayed if that security is not provided by payment into Court or lodgement of a bank guarantee in a form acceptable to the Registrar within 21 days of entry of the orders to give effect to this judgment. I consider this is ample time to provide such security, where RCF has had notice of the possibility that security may be required, for a considerable time. In expressing the view that RCF's Cross-Claim should be stayed if that security is not provided, I consider that the whole Cross-Claim and not only the amended parts of it should be stayed in the event of a failure to provide security, where the Cross-Claim will then take its amended form. Further questions as to the costs of this application may need to be addressed if RCF either does not proceed to amend the Cross-Claim in accordance with the leave granted or provide the security ordered, and then seeks to proceed with the Cross-Claim in its unamended form. I will reserve liberty to apply as to the costs of this application so any such issues can be addressed.

Application by Koonara for leave to file a Cross-Claim

I have referred above to the application by Koonara for leave to file a Cross-Claim, as originally brought by Amended Notice of Motion filed on 29 May 2015. I will address the further amendment sought to that Cross-Claim to be made on 19 June 2015 below.
The Cross-Defendants also do not oppose leave being granted to Koonara to file and serve the proposed Cross-Claim on several conditions, namely that a reference to the agreement between Huntley Management Ltd ("Huntley") and AHM at the commencement of paragraph 6 of the proposed Cross-Claim, to which I will refer below, and the particulars to that paragraph be struck out; paragraph 18.3 be struck out and paragraph 21 be amended; Koonara file and serve all further evidence upon which it intends to rely within 28 days and the Cross-Defendants have 28 days to file and serve evidence in reply; Koonara provide verified discovery of documents within specified categories of documents; and Koonara provide security for the Cross-Defendants' costs in relation to the Cross-Claim. The Cross-Defendants support these conditions on the basis that Koonara and its sole director, Mr Reschke, have been Defendants in the proceedings since they were commenced in 2011 and, if Koonara now seeks to bring a Cross-Claim, it should be in a position to serve the evidence on which it seeks to rely in respect of that Cross-Claim promptly. Koonara did not accept those conditions, although the issues as to discovery and orders for the conduct of the proceedings have now been resolved. I will address the question of security for costs below.
The Cross-Defendants requested particulars of the Cross-Claim sought to be brought by Koonara by letters dated 26 March 2015 and 2 April 2015. Koonara relies on particulars provided on 29 April 2015, together with Mr Reschke's affidavit dated 28 April 2015. The Cross-Defendant's solicitors advanced a contention that the particulars provided were inadequate in affidavit evidence filed in the application, while again not identifying the inadequacies that were pressed until submissions, shortly before the hearing.
The first dispute relates to whether the reference to an agreement between Huntley and AHM at the commencement of paragraph 6 of the proposed Cross-Claim and the associated particulars should be struck out or, more precisely, leave should not be granted in respect of it. Koonara's proposed Cross-Claim relies, inter alia, on an alleged assignment by Huntley to Koonara of certain debts that are said to have arisen under joint venture agreements between AHM and Huntley on the one hand and the Cross-Defendants on the other in relation to the Coonawara Wine Grape project and to have been due to Huntley and, by reason of the further assignment, to Koonara. Paragraph 6 of that proposed Cross-Claim relevantly pleads that: "Pursuant to agreement between Huntley and AHM … and by virtue of section 601FS and 601FT of the Corporations Act, Huntley on the Changeover Date became a party to, was assigned and became entitled to the rights and subjects to the obligations and liabilities of AHM under the Scheme Constitution, the Joint Venture Agreements and the Subcontract."
Section 601FS of the Corporations Act broadly provides that, on a change of responsible entity of a managed investment scheme, the rights, obligations and liabilities of the former responsible entity in relation to the scheme (subject to specified exceptions) become rights, obligations and liabilities of the new responsible entity and s 601FT provides for a change of responsible entity on documents which the former responsible entity is party, with the intent of causing an incoming responsible entity to step into the shoes of its predecessor. The particulars to that paragraph indicate that particulars of the alleged agreement between Huntley and AHM will be supplied after those entities respond to requests to produce documents made by Koonara, and those particulars have not to date been provided.
Koonara relies on the decision in DFD Rhodes Pty Ltd v Hancock Prospecting Pty Ltd [2015] WASC 105, where the plaintiff alleged the existence of an agreement formed in 1969, although it indicated that it was unable to say whether that agreement was oral or in writing and that further particulars would be provided after discovery, and also identified further matters from which contended the agreement should be inferred. Le Miere J held that the plaintiff should not be required to give further particulars until after the defendants had given discovery and, if, after the defendants had given discovery, the plaintiff did not provide further particulars or those further particulars were inadequate, the defendants could renew the strike-out application. That decision does not seem to me to assist Koonara and is to some extent adverse to it, so far as it preserved the opportunity to strike out the claim if it was not properly particularised. This is not a case where Koonara can obtain access to documents that will assist it in particularising the agreement from the Cross-Claimants, whether on discovery or otherwise, since they were not party to the alleged agreement between Huntley and AHM.
Mr Robberds supports the strike-out application, in respect of the failure to particularise or produce the assignment from AHM to Huntley, on the basis that Koonara's solicitors, Piper Alderman, also variously act for AHM and Huntley. Mr Bannan responds that there is no evidence that Piper Alderman acted for Huntley and Mr Robberds in turn points to a reference to that matter in a conversation that is evidence. There is also some evidence, including in Mr Abbott's affidavit dated 8 April 2015, that Huntley is represented by solicitors other than Piper Alderman, at least in respect of the recent assignments from Huntley to Koonara. Mr Bannan also points out that even if that firm acts for two different clients, it must act on the respective clients' instructions in that regard.
It seems to me that paragraph 6 of Koonara's proposed Cross-Claim is properly pleaded, in the sense that it makes clear the case that the Cross-Defendants have to meet. The Cross-Defendants did not contend that that paragraph would be unarguable, where a claim under ss 601FS and 601FT of the Corporations Act can be brought in any event, even if the claim for an agreement between AHM and Huntley could not be established. However, the agreement between AHM and Huntley is, as Mr Bannan (who also appears for Koonara) properly conceded, an essential step to the pleading, so far as Huntley could only have assigned the rights to Koonara if they had been first assigned to it, either by virtue of the relevant agreement or by virtue of ss 601FS and 601FT of the Corporations Act. Where Koonara seeks to bring a new Cross-Claim some four years after the proceedings commenced, it seems to me that it would not be consistent with the just, quick and cheap resolution of the real issues in dispute in these proceedings, as required by s 56 of the Civil Procedure Act, that it neither identify the terms of the agreement on which it relies for that claim nor promptly lead evidence of it, so as to allow the Cross-Defendants to determine whether that agreement existed and had the asserted effect. The continuance of such a position would obscure the real issues in respect of this aspect of the proceedings, which would not then be clarified unless and until Koonara particularised or produced the relevant agreement or evidence that it existed and of its terms.
It seems to me that there is no unfairness to Koonara, at this late stage of the preparation of these proceedings for hearing, in requiring that it promptly obtain and disclose the evidence on which it relies as to this issue. Orders have now been made for the service of affidavit and documentary evidence in respect of RCF's Cross Claim, which require that Koonara serve all documents on which it relies to establish the alleged agreement between Huntley and AHM by a specified date, and provide that no further evidence may be led as to that matter after that date other than by leave. Those orders were ultimately not contested by Koonara. Where such orders have been made and will sufficiently secure the Cross-Defendants' ability to know the case they have to meet, it seems to me that the absence of further particulars will not cause any real prejudice to the Cross-Defendants and there is no basis to decline leave for this aspect of the Cross-Claim.
The Cross-Defendants also contend that paragraph 18.3 of Koonara's proposed Cross-Claim should be struck out, or that leave not be given in respect of it. That paragraph pleads that Huntley has incurred expenses in relation to the project not related to management services, which it appears would arguably be payable by the Cross-Defendants. The Cross-Defendants requested particulars of that allegation by letter dated 2 April 2015 and the Cross-Claimants responded that they were unable to access copies of documents establishing expenses incurred by Huntley and invoiced to the Cross-Defendants and were unable to give further particulars of the expenses referred to and would give such particulars as they could after obtaining further disclosure from Huntley. It does not seem to me that the absence of such particulars will cause any real prejudice to the Cross-Defendants, where, as I noted above, orders for the service of affidavit and documentary evidence have been made in respect of the Cross-Claim, and require that Koonara serve all documents on which Koonara relies to establish such expenses, with no further evidence to be led as to that matter after that date other than by leave. Again, it seems to me that there is no unfairness to Koonara, at this late stage of the preparation of these proceedings for hearing, in requiring that it promptly obtain and disclose the evidence on which it relies as to this issue. Where such orders have been made and will sufficiently secure the Cross-Defendants' ability to know the case they have to meet, there is also no basis to decline leave for this aspect of the Cross-Claim.
The Cross-Defendants also take issue with paragraph 21 of Koonara's Cross-Claim which pleads the balance owing to Huntley by each Cross-Defendant. The Cross-Defendants' solicitors requested copies of documents relied on by Koonara in relation to that balance and Koonara responded by sending copies of invoices rendered by AHM and indicating that they could not supply copies of invoices rendered by Huntley. It seems to me that that matter is also addressed by the orders that have been made requiring that Koonara serve any affidavit and documentary evidence on which it relies in relation to the Cross-Claim within a short time, with no further evidence to be led as to that matter after that date other than by leave. Where such orders have been made and will sufficiently secure the Cross-Defendants' ability to know the case they have to meet, there is also no basis to decline leave for this aspect of the Cross-Claim.
In summary, these matters do not, in my view, prevent the grant of leave to file the Cross-Claim by Koonara or presently require the exclusion of particular matters from it. If Koonara cannot produce the evidence on which it relies to support that the relevant aspects of that Cross-Claim within the time in which it has been ordered to do so, and cannot later obtained leave to file evidence outside that time, the consequence is simply that those aspects of the Cross-Claim may well fail. I grant leave to Koonara to file its proposed Cross-Claim in the form proposed by this Amended Notice of Motion filed on 29 May 2015. I did not grant leave to file a Further Amended Notice of Motion seeking to make further amendments on 19 June 2015, and I would not have permitted those further amendments, for the reasons noted below.

Security for costs against Koonara

The Cross-Defendants seek an order that Koonara should be required to provide security for costs in the amount of $86,672.15 if leave is granted to it to file that Cross-Claim. The Cross-Defendants again rely on UCPR 42.21(1)(d) and s 1335 of the Corporations Act and I have set out the relevant principles above.
Koonara adopts the same position as RCF in respect of security for costs. Koonara again submits that the Cross-Defendants failed to establish that there is reason to believe that it would be unable to meet any adverse costs order. The Cross-Defendants accept that they bear the onus of establishing that there is reason to believe that Koonara will be unable to pay the costs of the Cross-Claim if it is unsuccessful in defending it. The Cross-Defendants lead evidence of their review of Koonara's financial position by reference to publicly available information and the inquiries that they have made of Koonara's solicitors in that regard. Koonara's solicitors have advised them that Koonara is the trustee for the Koonara Management Trust and does not trade or hold significant assets in its own right, such that all its activities and significant assets and liabilities are undertaken on behalf of the trust. Koonara has minimal paid-up capital and it appears the trust has limited assets. The financial reports of the Koonara Management Trust, to which reference is made in Mr Noble's evidence, indicate that the trust had made substantial losses in both the 2013 and 2014 financial years, had a substantial deficiency of assets over liabilities in each of those years and also owes substantial amounts to trade creditors, to the Rocky Castle Financial Trust and by way of another loan exceeding $2.4 million. Koonara's ability to have recourse to the assets of that trust to meet a judgment would be limited, both by the existing liabilities of that trust, and by any limits to any right of indemnity against the trust assets at the relevant time, and I have referred to the relevance of the difficulty in enforcing costs orders against trustee companies above. Koonara otherwise did not rely on discretionary factors relevant to an application for security for costs, as to which the onus would shift to it to establish a reason why security should not be ordered.
The Cross-Defendants recognise that Koonara's claim for debts payable under the joint venture agreements that were assigned to it has a connection with their claim, as Plaintiffs, that the relevant joint venture agreements should be set aside and submit that Koonara should be required to provide security for their costs in relation to other claims made in its proposed Cross-Claim. Nonetheless it seems to me that Koonara's Cross-Claim raises factual issues of significant scope, including the dealings between AHM, Huntley on the one hand and the Cross-Defendants on the other, the existence of the agreement between AHM and Huntley on which Koonara relies to establish its claim and the quantification of the amounts properly recoverable by AHM and Huntley against the Cross-Defendants.
Koonara submits that issues are raised in the existing proceedings as to the enforceability of the joint venture agreements involving AHM, including whether they were frustrated, breached or repudiated, but does not point to any aspect of the existing proceedings that raise either the assignments, or the quantification of the amounts payable to AHM and Huntley, on which it now relies pursuant to those assignments. Koonara submits that, if the Cross-Claim had been brought by AHM as counterparty to the joint venture agreements, it would have been wholly defensive. I do not accept that submission, since a Cross-Claim brought by AHM would also raise issues of quantification, and the claims in fact brought by Koonara also raises the position as between Huntley and the Cross-Defendants and, as Koonara concedes, the assignments by AHM to Huntley and by Huntley to Koonara. Koonara also submits that security for costs should not be awarded in respect of the Cross-Claim by reference to the principles in Dunnet Properties Pty Ltd v Cussen above. I do not accept that submission, since it seems to me that that significant additional issues are raised by Koonara's Cross Claim.
Koonara also submits that the quantification of the security for costs claimed by the Cross-Defendants is not limited to costs referable to new matters raised in the Cross-Claim and not elsewhere in the proceedings, and that the Cross-Defendants' evidence would not satisfy the Court as to the additional work required and additional costs incurred by reason of the matters introduced by reason of the filing of the proposed Cross-Claim. Again, the costs involved are quantified in a broad way by Mr Noble, who estimates an additional day's preparation and two additional days of hearing of the Cross-Defendants' solicitors; two additional days of preparation for each of junior counsel and senior counsel; and two additional days of hearing fees for Counsel. As Mr Bannan pointed out, some of the work which Mr Noble identified in respect of that Cross-Claim overlapped with work which Mr Noble had attributed to the RCF Cross-Claim. Mr Noble's estimate of costs in respect of the defence of Koonara's Cross-Claim is $86,672, being solicitors' costs of $42,380 inclusive of GST, after applying a 20% discount to solicitor/client costs, Counsels' fees of $44,000 inclusive of GST, and modest disbursements. Koonara also submits that no attempt is made by Mr Noble to identify the work that is properly referable to its Cross-Claim, as distinct from overlapping allegations made in the Further Amended Statement of Claim. While there is some force in that criticism, it seems to me that the new issues raised by Koonara's Cross-Claim are substantial, and it seems to me that Mr Noble's estimate of the time involved in addressing them is realistic.
I would, however, reduce the amount of security that is to be awarded in respect of solicitors' costs from the amount of $36,725 that is claimed to $24,500, treating two-thirds of solicitor/client costs as recoverable on assessment, consistent with the approach that, as I noted above, the Court has adopted in other cases relating to gross sum costs orders and security for costs applications. The amount of security for costs to be ordered in respect of Koonara's Cross-Claim is therefore $64,500. I do not accept Koonara's further submission that the amount of costs involved is de minimus and at the most should be in the order of $9,400, prior to the application of any "two third rule", and I also do not accept that such a "rule" should be applied for the reasons noted above in respect of RCF.
As I noted above, Mr Bannan accepted in submissions that, if I concluded that leave should be granted to file a cross-claim, on terms that security for costs be provided, there would be no difficulty, as a matter of case management, with making the ability to file the pleading conditional upon the provision of the security of cost (T13). I think it preferable not to delay the timetable in that manner, but Koonara's Cross-Claim should be stayed if the security in the amount of $64,500 that I have ordered is not provided by payment into Court or lodgement of a bank guarantee in a form acceptable to the Registrar within 21 days of entry of the orders to give effect to this judgment. I consider this is ample time to provide such security, where Koonara has had notice of the possibility that security may be required, for a considerable time. Further questions as to the costs of this application may again need to be addressed if Koonara does not proceed to file the Cross-Claim in accordance with the leave granted or provide the security ordered. I will reserve liberty to apply as to costs of this application so any such issues can be addressed.

Other matters raised

By their Amended Notice of Motion filed on 22 April 2015, the Cross-Defendants sought an order that the First Defendant, Mr Reschke, make an application under the Freedom of Information Act 1982 (Cth) to the Deputy Commissioner of Taxation to obtain access to taxation returns submitted by him and associated entities for the financial years 2000-2014. That order was not pressed, on the basis that there has been discussion between the parties which appears to have recognised that, to the extent that such documents are properly discoverable, Mr Reschke would need to take steps to obtain them and give discovery of them.
In the course of the initial hearing before me, I also drew the parties' attention to the fact that the issues raised by their respective motions involved not only issues as to whether the proposed amendments were properly pleaded, but also whether the grant of leave for them would be consistent with ss 56-58 of the Civil Procedure Act, such that it would not unreasonably delay the conduct of the proceedings or result in waste of time and waste of costs, and that in turn depended on the process by which further discovery would be given in respect of RCF's Amended Cross-Claim, and Koonara's new Cross-Claim, to the extent that it was required, and what evidence was to be led and when it was to be led. I am conscious that, as Mr Bannan pointed out, any order for disclosure would fall within the scope of SC Eq Practice Note 11, so far as the need for disclosure and the likely costs of it have to be addressed. Having said that, the proceedings have reached the point that substantially all of the evidence in chief has been filed including, Mr Bannan submitted, substantially all of RCF's evidence, and in those circumstances any order for discovery can be made with knowledge of the evidence that is to be led by the parties in the proceedings, and with an ability to assess the need for that discovery on that basis. Mr Bannan acknowledged in the course of that hearing that one way in which those issues could be addressed would be making orders for further evidence which might provide for guillotine orders.
I directed that the parties undertake further discussions as to discovery categories, to the extent that discovery may be required, and as to orders for the filing of evidence, in the period prior to delivery of my judgment and I relisted the matter to hear them as to that issue. Those issues were largely resolved by those discussions and have now been addressed by further orders made by the Court, substantially reflecting the outcome of the parties' discussion.

RCF's and Koonara's further amendment applications on 19 June 2015

When the matter was again listed before me on 19 June 2015, RCF and Koonara sought to file a Further Amended Notice of Motion (MFI 1) seeking leave to join the Plaintiffs' solicitor, Mr Stephen Rockcliff, and a partner in his law firm, Ms Michelle Rockcliff, as Cross-Defendants to RCF's proposed ASOC and Koonara's proposed Cross-Claim and to introduce claims against them in the form set out in an exhibit to an affidavit of Ms Alison Crawford dated 18 June 2015. The claims to be brought by RCF against them were a claim for debt in an amount that had apparently not been quantified, since it was blank in the proposed amendment to the ASOC, and a restitutionary claim also for an amount that was blank. The amount of the proposed claims was not further clarified by evidence or submission. Koonara's proposed Cross-Claim identified the balance claimed to be due by Mr Rockcliff and Ms Rockcliff to Huntley, but not the payments they had made, and the alleged balance owed by them was also blank in the proposed Cross-Claim.
Ms Crawford's affidavit in support of the amendments provided, at best, a perfunctory explanation for them, having regard to the significance of the joinder of the Plaintiffs' solicitor as party to the proceedings several years after their commencement and as final steps are taken to prepare them for hearing. Ms Crawford noted that RCF and Koonara wished to bring claims against Mr Rockliff and Ms Rockcliff and that they considered that could "most conveniently" be done by joining them as additional Cross-Defendants in the proceedings. Ms Crawford explained the perceived convenience of that course in a somewhat formulaic manner, without any reference to the timing of the application, pointing to the desirability of ensuring that all relevant parties to the dispute are dealt with together; avoid a multiplicity of actions; achieve finality of litigation and facilitate potential cost saving. I do not doubt these are desirable objectives but it seems to me that, if Ms Crawford sought to contend they would be achieved by the proposed Cross-Claims, it would have been necessary for her to explain why that was so in the particular circumstances. Ms Crawford also annexed a letter sent to the Plaintiffs' solicitors, Rockcliffs, advising of the suggested joinder and expansion of the Cross-Claims on 17 June 2015, two days before the further hearing before me.
In written submissions in support of the application, Mr Bannan described the proposed amendments as involving a "slightly amended version" of the respective Cross-Claims, a characterisation that scarcely did justice to the significance of what was sought to be done for the conduct of the proceedings. He pointed out that the claims against Mr Rockcliff and Ms Rockcliff, as investors in the project who executed the same documents as the Plaintiffs, related to or were connected with the subject matter of the proceedings for the purposes of s 22 of the Civil Procedure Act. That submission, while correct, might have had greater weight had the joinder application been made shortly after the proceedings were commenced, rather than four years later. Mr Bannan properly recognised that the joinder of the Plaintiffs' solicitor and another partner in the firm acting for them could prevent him continuing to act in the proceedings under r 27.2 of the New South Wales Professional Conduct and Practice Rules (Solicitors' Rules) 2013, if he would be required to give evidence material to determination of contested issues before the Court - I interpolate, such as the facts relevant to the Cross-Claim sought to be brought against him - and his continuing to act would prejudice the administration of justice. In written submissions, Mr Bannan indicated RCF and Koonara would not contend there was such prejudice, although Ms McDonald for other Cross-Defendants and Mr Bannan ultimately took a somewhat more qualified position in oral submissions. Mr Bannan submitted that the commencement of separate proceedings against Mr Rockcliff and Ms Rockcliff would be consistent with the overriding purpose under s 56 of the Civil Procedure Act.
Mr Robberds, who expressly made submissions in respect of this issue for the Plaintiffs and not for Mr Rockcliff or Ms Rockcliff, opposed their joinder to the proceedings. Mr Robberds outlined the chronology of the proceedings since their commencement in April 2011; pointed to RCF's unsuccessful application to amend its Cross-Claim filed in October 2014, to further directions made by Brereton J as to RCF's further amendment application on 30 March 2015, including orders that no further evidence be served after a specified date, and to the hearing of the amendment application before me on 29 June 2015, without any claim being foreshadowed of the kind now sought to be raised; and also pointed to the fact that the claim was first raised by submissions by Koonara and RCF on 15 June 2015, which were permitted in respect of other matters.
Mr Robberds submitted that RCF's claim for "efficiency" in the proposed course of joinder of Mr Rockliff and Ms Rockliff could relate only to their wish to bring proceedings against them, and, implicitly, not to the Plaintiffs' or the community's interest in the orderly conduct of these proceedings. Mr Robberds relied on the High Court's decision in Aon Risk Services Australia Ltd v Australia National University [2009] HCA 27; (2009) 239 CLR 175, and he pointed to the adverse effect of the joinder of any new party to the proceedings at this late stage, with the risk that new legal representatives would need to be involved and new applications would be brought, which was exacerbated where the parties sought to be joined were the Plaintiffs' solicitor and a partner in the law firm representing them. Mr Bannan in turn referred in reply to the decision of the Full Court of the Federal Court in Cement Australia Pty Ltd v Australian Competition & Consumer Commission [2010] FCAFC 101, where the Court rightly recognised that the weight to be given to the factors identified in Aon would depend on the facts of particular cases, and again referred to the suggested efficiency of joinder of Mr Rockcliff and Ms Rockcliff for the future conduct of the proceedings.
I delivered an ex tempore judgment on 19 June 2015 indicating that I was not satisfied that I should grant leave to file the Further Amended Notice of Motion (MFI 1). I also indicated that, if I had granted such leave, I would have been satisfied that the amendments should not be permitted. I indicated that I would address that matter further in this judgment, which provides slightly expanded reasons for my decision.
As I noted above, I was not satisfied that I should grant leave to file in Court the Further Amended Notice of Motion (MFI 1), on the basis that the filing of that Motion seems to me to be inconsistent with the intent of the directions made by Brereton J on 30 March 2015, which contemplated that a long running process by which the cross-claims were sought to be amended would be brought to completion. That objective would not be promoted by reopening the scope of the Cross-Claims in so substantial a way after substantive argument about them had been heard on 29 May 2015.
If I had granted leave to file the Further Amended Notice of Motion, I would have been comfortably satisfied that it should be dismissed. In reaching that view, I have had regard to the relevant provision of the Civil Procedure Act as set out above and to the analysis of those principles in the case law. In Aon Risk Services Australia Ltd v Australia National University above, the joint judgment observed, in relation to rules of court that are similar to s 56 of the Civil Procedure Act that: "Speed and efficiency, in the sense of minimum delay and expense, are seen as essential to a just resolution of proceedings. This should not detract from a proper opportunity being given to the parties to plead their case, but it suggests that limits may be placed upon re-pleading, when delay and costs are taken into account. The Rule's reference to the need to minimise costs implies that an order for costs may not always provide sufficient compensation and therefore achieve a just resolution. It cannot therefore be said that a just resolution requires that a party be permitted to raise any arguable case at any point in the proceedings, on payment of costs."
The need for the Court to have regard to the prejudice arising from delay in dealing with applications of this kind was also emphasised in Bi v Mourad [2010] NSWCA 17. The principles identified by the Court in Aon above are, of course, to be applied having regard to the statutory context established by the Civil Procedure Act and particularly the emphasis on the dictates of justice and the need for the just, quick and cheap resolution of the real issues in dispute in the proceedings. In Hans Pet Constructions Pty Limited v Cassar [2009] NSWCA 230 at [36], Allsop P observed that these provisions bring about: "… a new statutory balance among various factors in litigation including court and party efficiency and the delivery of individual justice. Delay and case backlog are not merely matters affecting the public cost in delivering justice, they corrode the ability of the courts to provide individual justice. … The reforms that have taken place under the Civil Procedure Act … can thus be seen not merely to reflect worthy governmental and judicial efforts for efficiency, but also to be vital for the provision of timely individual justice. To these salutary ends, the significant powers of case management have been placed in the hands of judicial officers which, if exercised, can often be seen to have sharp, and sometimes detrimental effects on the claims of the parties."
There are several reasons which would have led me to form the view that the joinder of Mr Rockcliff and Ms Rockcliff and the further amendments to RCF's and Koonara's Cross-Claims should not be permitted. First, it seems to me, if an application is to be made several years into these proceedings to join the Plaintiffs' solicitor and a partner in his law firm as a party to the proceedings, the Court ought at least be afforded an adequate explanation of why that is now regarded as desirable, and why it has not been done in the several previous years. As I noted above, no such adequate explanation was offered by Ms Crawford's affidavit. In the absence of such an explanation, it seems to me that there is no reason to think that the failure to join the Plaintiffs' solicitor to the proceedings since the commencement of the proceeding in 2011 was a mere matter of inadvertence or inattention, as distinct from a deliberate choice, since it can scarcely be thought that RCF has conducted these proceedings over the last four years without recognising that the Plaintiffs' solicitor was an investor in the relevant project. Certainly it led no evidence to suggest it previously failed to recognise that matter. So far as it was suggested that the recent assignment from Huntley to Koonara explains the latter's late application, that assignment had occurred before the matter was argued before me on 29 May 2015, and that matter provides no explanation of why such a joinder should take place in respect of a Cross-Claim brought by RCF.
Next, and irrespective of the fact that the persons sought to be joined are the Plaintiffs' solicitor and a partner in his law practice, it seems to me that the joinder of persons who are not presently party to the proceedings, four years after their commencement, and in circumstances where substantially all of the evidence has been filed, would be inconsistent with the just, quick and cheap resolution of the matters in issue in the proceedings, for the purposes of s 56 of the Civil Procedure Act, and is not justifiable by reference to the principles in Aon above or the principles summarised by the Court of Appeal in Hans Pet Constructions Pty Limited v Cassar above. Any new party now joined to the proceedings would be entitled to be represented by new legal representatives, and the cost to that party's legal representatives of absorbing the matters that have been passed over the last four years would be substantial. A choice of separate legal representatives might also be forced upon the Plaintiffs' solicitor, who might prudently take the view that it would be unwise for him to represent himself in the proceedings, depriving him of the choice that at least a third party might have had to retain the Plaintiffs' solicitors, so as to seek to minimise such costs. Steps would also have to be taken for that party to be permitted to lead evidence as to all relevant issues in respect of the Cross-Claims which, as RCF and Koonara themselves contended, have a significant overlap with the issues in the primary claims.
Next, on any view, it seems to me that the disruption involved in these proceedings, if the Plaintiffs' solicitor was now joined to them, would be substantial. As I noted above, both Mr Bannan and Ms McDonald took a somewhat qualified approach in oral submissions, indicating that their respective clients would not take certain points, merely because the Plaintiffs' solicitor was potentially a material witness in respect of his own defence of the proposed Cross-Claims against him, while implicitly reserving the ability to rely on that matter to object to the solicitor continuing to act for the Plaintiffs if other issues arose. That proposition seemed to me to neglect the fact that, first, the Plaintiffs' solicitor might consider that position was untenable, as a matter of his professional and ethical obligations, irrespective of whether that point was taken by the Defendants and, second, the Court might consider the position was problematic even if the Defendants did not take the point. The qualified nature of the position taken by Mr Bannan and Ms McDonald also seemed to me to seek to reserve the ability to rely on the difficulties arising from the solicitors' involvement in the proceedings to support a future challenge to his retainer, which would have obvious adverse consequences for the Plaintiffs in a substantial case. I do not accept Mr Bannan's submission that there was always a potential conflict of that kind, since it seems to me that the fact that the Plaintiffs' solicitor did not become a plaintiff in the proceedings would have avoided the conflict which he would have faced had he become a plaintiff to the proceedings, and which the Defendants, four years into the conduct of the proceedings, now seek to thrust upon him.
It also seems to me that the disruption caused by the joinder of the Plaintiffs' solicitor in the proceedings would be entirely disproportionate, by comparison with the other steps which are available to the Defendants so far as they wish to bring claims against the Plaintiffs' solicitor and his partner in his law firm. In particular, it is open to them to bring such proceedings as separate proceedings. Any such separate proceedings might well be stayed, by agreement of the parties or by the Court, pending the outcome of these proceedings, whether on the basis of an agreement between the parties that the determination of issues in these proceedings bind the parties in the other proceedings, or on the narrower basis that the outcome of these proceedings would, in any event, likely have practical impact for the outcome of any such proceedings. It seems to me that the course that RCF and Koonara seek to take is filled with procedural disadvantage and risk to these proceedings, by comparison with that much more straightforward course, would allow them to vindicate their legal rights without disrupting the preparation of these proceedings for hearing.
For all these reasons, as I have noted, I declined leave to file the Further Amended Notice of Motion and, had I granted leave to file it, I would have dismissed it. I also dealt with the question of costs of that motion in my ex tempore judgment and need not repeat that aspect of my judgment here.

Orders and costs

In summary, I have held that RCF should be granted leave to file its proposed ASOC in the form proposed by the notice of motion filed on 29 May 2015 and I grant that leave. RCF must provide security for costs of its proposed ASOC in the amount of $16,865 by payment into Court or lodgement of a bank guarantee in a form acceptable to the Registrar within 21 days of entry of the orders to give effect to this judgment, and RCF's Cross-Claim should be stayed if that security is not provided within that period.
I have also held that Koonara should be granted leave to file its proposed Cross-Claim in the form proposed by the notice of motion filed on 29 May 2015 and I grant that leave. Koonara must provide security for costs of the proposed Cross-Claim in the amount of $64,500 by payment into Court or lodgement of a bank guarantee in a form acceptable to the Registrar within 21 days of entry of the orders to give effect to this judgment, and its Cross-Claim should be stayed if that security is not provided within that period.
My preliminary view is that each party has had a measure of success and a measure of failure; that both parties adopted positions in it that would have benefited from greater cooperation between them and a more realistic assessment of their prospects; and that there should be no order as to costs, other than the orders I made against RCF and Koonara in respect of their further amendment application on 19 June 2015. That position may need to be revisited, as I noted above, if RCF's proposed ASOC or Koonara's Cross-Claim is not filed pursuant to the leave granted or the security for costs ordered is not provided. As I noted above, I will reserve liberty to apply as to the costs of this application, on 3 days' notice, specifying the relief sought, in that event.
The parties should bring in agreed short minutes of order to give effect to this judgment, including as to costs, within 7 days.

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. Decision last updated: 07 July 2015

Civil Procedure Act 2005(NSW)s 22, 56, 57, 58, 64, 64(2)

Corporations Act 2001(Cth)ss 601FS, 601FT, 728, 1335

Uniform Civil Procedure Rules 2005(NSW)r 19.3, 42.21(1), 42.21(1A)

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