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Judgment 1By Originating Process filed on 3 August 2011, the Plaintiffs, Narradine Pty Limited ("Narradine") and Mr Douglas Nelson, sought interim and final orders under ss 233 and 461 of the Corporations Act 2001 (Cth). By a Statement of Claim filed on 5 October 2011, Narradine and Mr Nelson bring a misleading and deceptive conduct case and Narradine brings a claim for breach of a Partnership Agreement and a claim for oppression. A Defence to the Statement of Claim was filed by the Defendants on 8 December 2011. 2Narradine hold a 40% interest in the Mascot Steel and Tools Partnership ("Partnership") which conducts business as a retailer and industrial supplier of steel products. It appears that Narradine holds that interest in trust for the Nelson Family Trust. Mr Nelson is a director and shareholder of Narradine and was formerly the general manager of and a director of Mascot Steel and Tools Pty Ltd. The First Defendant ("Mascot Steel") is the manager of the Partnership. The Second Defendant ("Jaskip") holds a 60% interest in the Partnership and provides administration, accounting and other services to the Partnership and another entity. 3Narradine and Mr Nelson allege, and the Defendants deny, that Jaskip and the Third Defendant ("Mr Wright") engaged in misleading or deceptive conduct in respect of representations made in January 2010 concerning the nature of monthly administration fees paid by Mascot Steel to Jaskip, prior to Narradine's acquisition of an interest in the Partnership. The Defendants contend that contemporaneous correspondence indicates that the nature of those fees was properly disclosed prior to Narradine's acquisition of that interest. Narradine also contends that Jaskip breached the Partnership Agreement in respect of the conduct of the Partnership and the termination of Mr Nelson's employment as general manager and his removal as a director of Mascot Steel. Narradine also brings a claim in oppression in respect of additional contributions required to the Partnership, the removal of Mr Nelson as general manager and his removal as a director of Mascot Steel. Applicable principles in respect of an order for security for costs 4By Notice of Motion filed on 28 December 2011, the Defendants seek orders under Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") r 42.21, s 1335 of the Corporations Act or the Court's inherent jurisdiction that Narradine provide security for their costs in such amount as the Court considers fit, to comprise monies paid into Court or to take such other form and be paid in such other manner as is acceptable to the Court, and that the proceedings be stayed pending lodgement of that security. 5The principles applicable to an application for security for costs under UCPR r 42.21 and s 1335 of the Corporations Act are well-established. An order for security for costs can be made under s 1335 where it appears to the Court by credible testimony that there is reason to believe that, relevantly, Narradine will be unable to pay the Defendants' costs if they are successful in their defence. That criterion is satisfied where: "[C]redible evidence establishes that there is reason to believe there is a real chance that in events which can fairly be described as reasonably possible the plaintiff corporation will be unable to pay the costs of the defendant on service of the allocatur, if judgment goes against it. This will be so even if in other events which can also be fairly described as reasonably possible the plaintiff corporation would be able to pay the costs": Beach Petroleum NL v Johnson (1992) 7 ACSR 203 at 205; Deangrove Pty Ltd v Buckby [2002] FCA 1544 at [4]. That question is to be determined by reference to the Plaintiffs' likely financial position at the time of judgment: Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744 at [58]. UCPR r 42.21(1)(d) 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. 6In Polstead Pty Ltd (in liq) v Shah [2009] NSWSC 560 at [6], Brereton J observed that three issues generally arise in a security for costs application. The first is whether the ground referred to in the section or rule is established; the second is whether, if the ground has been established, as a matter of discretion an order should be made; and the third is the quantum of any order to be made and the terms on which it might be made. Whether jurisdiction to make an order for security for costs is established 7The Plaintiffs oppose the order for security for costs, first, on the basis that they will be able to meet any costs order in favour of the Defendants as estimated. However, a number of factors suggest that Narradine would be unable to meet an order of costs, at the time of judgment, if it is unsuccessful in the proceedings. A company search for Narradine indicates that it has issued and paid up share capital of $2 comprised of two $1 shares; one share is held by Mr Nelson and the other by his wife; and Narradine has no interest in any real property in New South Wales. Narradine has not traded since incorporation and its only activity is its ownership of an interest in the Partnership. Although Narradine contends that interest has significant value, its future worth is uncertain in circumstances that the bulk of its value amounts to goodwill and the business has recently been making losses and it would not be readily realisable. The fact that Narradine could only realise its interest in the Partnership by taking steps which are likely to involve complexities and take an extended time is a factor which tends in favour of an order for security for costs: Street v Luna Park Sydney Pty Ltd [2006] NSWSC 1317 at [16]. 8Narradine has also not provided financial information to establish its financial position when requested by the Defendants to do so nor have financial statements in respect of Narradine or the Nelson Family Trust been led in evidence in these proceedings. In these circumstances, the Court can more readily infer that such information would not establish that Narradine would be able to meet an order for costs against it: Prynew Pty Ltd v Nemeth [2010] NSWCA 94 at [49]. Although it appears that Narradine has a right of indemnity against the Nelson Family Trust, the Court must also have regard to the practical difficulties which the Defendants would face in enforcing an order for costs, particularly where the directors of Narradine have not given any undertaking to exercise that right of indemnity in respect of an adverse costs order: Laundry Coin-Wash Nominees Pty Ltd v Dunlop Olympic Ltd (1985) 7 ATPR 40-584 at 46,279-46,731; Lagarna Pty Ltd v Bridge Wholesale Acceptance Corporation (Australia) Ltd [1995] 1 VR 150; Second Lenbourne Pty Ltd v Beagle Management Pty Ltd [1999] FCA 486 at [18]; Transocean Capital Pty Ltd v AFSIG Pty Ltd [2006] NSWSC 806; (2006) 202 FLR 270 at [34]ff. Factors relevant to the exercise of the Court's discretion 9Both parties accepted that, if the power to order security for costs under s 1335 and r 42.21 existed, the Court has a discretion whether to make such an order. The factors relevant to the exercise of that discretion include delay on the part of the defendants in bringing the application for security; the strength and bona fides of the plaintiffs' case; whether the defendants' conduct has caused the plaintiffs' financial position; whether the defendants' application for security is oppressive, in that it is being used to deny an impecunious plaintiff a right to litigate; and whether there are persons standing behind the company who are likely to benefit from the litigation and are willing to provide the necessary security: KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189; Jazabas Pty Ltd v Haddad [2007] NSWCA 291; (2007) 65 ACSR 276 at [73]ff. Narradine contended that its claims are brought in good faith and are reasonably arguable and I proceed on that basis, consistent with the approach referred to in KP Cable Investments Pty Ltd v Meltglow Pty Ltd. 10The Plaintiffs contend that Narradine's claims are brought in good faith and are reasonably arguable and the Defendants have not submitted to the contrary. Once it is established that a claim is brought in good faith, then it will generally be appropriate to consider the other discretionary factors in respect of an application for security for costs without undertaking too detailed a review of the strength and weaknesses of the claim and the prospects of success are treated as a neutral factor on the application: Street v Luna Park Sydney Pty Ltd above at [20]; Power Infrastructure Pty Ltd v Downer EDI Engineering Power Pty Ltd [2010] FCA 1222; Ryberg Telecommunications Pty Ltd (in liq) v Optus Mobile Pty Ltd [2011] NSWSC 1286. 11The Plaintiffs contend that an order for security for costs will stultify the proceedings. However, there is no evidence that Mr Nelson and other persons who stand behind Narradine could not provide security for costs if ordered to do so, and the evidence as to Mr Nelson's personal assets suggest that he in fact has capacity to provide such security in his own right or at least with access to property which he and his wife jointly hold. In these circumstances, I do not find that an order for security for costs would stultify the proceedings: KP Cable Investments Pty Ltd v Meltglow Pty Ltd above; Ryberg Telecommunications Pty Ltd (in liq) v Optus Mobile Pty Ltd above at [16]. 12The Plaintiffs did not contend that any action of the Defendants caused Narradine's current financial position, nor could they do so in circumstances that the Defendants' conduct had no connection with the level of its capitalisation or its role as a trustee. 13The Plaintiffs place considerable weight on the fact that a submission had been made by Counsel for the Defendants on 15 December 2011 that the Defendants were prepared to buy out Narradine's interest in the Partnership and the Court had, on that date, directed the parties to confer with a view to having the Court make orders for the appointment of a single expert to value the Partnership and/or Mascot Steel. However, a substantial issue has subsequently arisen between the parties as to the date on which the valuation is to be undertaken, with the Plaintiffs insisting that the relevant value must be assessed on two alternate dates and the Defendants insisting that the relevant value must be assessed at the date of the valuation. It is not relevant, for present purposes, which of those positions has greater merit, because the Court would not direct a valuation to be undertaken for the purposes of a buy-out without the consent of the parties, prior to a determination of the proceedings on their merits. For present purposes, it is apparent that the parties have not agreed the basis on which a valuation will proceed; neither party appears inclined to accede to the other's preferred position as to the basis for the valuation; and I cannot assume that the valuation or the consequential buy-out proposal will proceed. Narradine contended that the Court will in due course order a joint expert report. That is possible but not certain, particularly if there is a dispute as to the basis on which the valuation is to be undertaken. Even if such an order is made, it would not avoid the need for a contested hearing. In these circumstances, I do not regard this matter as likely to avoid the need for a contested hearing or as having significant relevance to the exercise of my discretion. 14The Plaintiffs also oppose the order for security for costs on the basis of delay. An application for security for costs should be brought promptly: Caruso Australia Pty Ltd v Portec (Aust) Pty Ltd (1984) 1 FCR 311; 8 ACLR 818 at 820; Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 at 514. The Plaintiffs point out that the proceedings were filed on 3 August 2011 and there have been two interlocutory applications since that date. On the other hand, the Court has directed the matter proceed by way of pleadings; the Statement of Claim was filed in August 2011 and the Defence in December 2011, and the application for security for costs was brought promptly after the Defence had been filed. I do not consider that the extent of delay is sufficient to exclude an order for security for costs, where the application for security for costs was brought shortly after the pleadings had closed and the matters in issue in the proceedings had thereby been clarified. Relevance of individual co-plaintiff in the proceedings 15An issue also arises as to whether the fact that these proceedings are brought by Mr Nelson as an individual plaintiff as well as by Narradine indicates that an order for security for costs should not be granted. The fact that there are one or more individual co-plaintiffs in proceedings against whom an order for security could not or would not be made is relevant to the exercise of the Court's discretion whether to order security for costs. In John Bishop (Caterers) Ltd v National Union Bank Ltd [1973] 1 All ER 707, Plowman J made an order for security against a company although there was a co-plaintiff who was a natural person, where there was not a complete overlap of the causes of action and his Lordship was not satisfied that the natural person would necessarily be ordered to pay all of the costs of the proceedings. On the other hand, in Harpur v Ariadne Australia Ltd (No 2) [1984] 2 Qd R 423; (1984) 8 ACLR 835, no order for security for costs was made against a corporate plaintiff where it could be said that each plaintiff would necessarily be liable for the whole of the costs of the proceedings. 16In Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2002] NSWSC 609 at [84], Bergin J (as her Honour then was) observed that the rule that security for costs should not be ordered against a corporate plaintiff where there was also a natural person co-plaintiff was: "... applicable to cases in which there is a complete overlap or identity of issues between the cases brought by co-plaintiffs. There is also the question of whether the court hearing the application for security can be satisfied that the substantial plaintiff will, at the conclusion of the trial, be subject to a costs order that has the effect that it is liable for the costs of the impecunious plaintiffs. If there is not such an overlap or identity of issues and satisfaction it seems to me that the 'rule' is not applicable." The view which her Honour has expressed seems to me to be consistent with the approach adopted in John Bishop (Caterers) Ltd v National Union Bank Ltd to which I have referred above. In Ingot, her Honour ordered security for costs against the corporate plaintiffs where she was not satisfied that such an identity of issues existed. 17In Street v Luna Park Sydney Pty Ltd above at [28], Brereton J noted that differing results may arise in different situations: "Where there is a complete identity between the corporate plaintiff and the individual plaintiff, so that all plaintiffs are suing in relation to one and the same defendant, and all plaintiffs must succeed or fail together, security will not ordinarily be ordered against only one of them. But where the various plaintiffs' claims have different elements and aspects, so that they will not all necessarily succeed or fail together, although the existence of individual plaintiffs is a factor that diminishes the defendant's claim to be entitled to security against the corporate plaintiff, it does not extinguish it. And where the degree of overlap between the claim of the individual and corporate plaintiffs is comparatively small, such that separate orders for costs might be made in respect of each of the plaintiffs, it is usually appropriate that an order for security be made". [citations omitted] In that case, his Honour ordered security for costs against a corporate plaintiff where there was a real prospect of differing outcomes as between its case and the cases brought by individual plaintiffs. 18The relevant principles were further reviewed by Kirby J in K & J Acquisitions Pty Ltd v Manauzzi [2009] NSWSC 279 and by Brereton J in Funds First Pty Ltd v Owners Corporation Strata Plan 66609 (No 2) [2008] NSWSC 428 at [12], where his Honour noted that: "even where there is not a complete identity between the corporate plaintiff and the individual plaintiff, such that it can be said that all plaintiffs are suing in relation to one and the same defendant and must succeed or fail together, the presence of a natural party plaintiff against whom security would not be ordered remains a relevant consideration". In that case, his Honour declined to order security for costs against a corporate plaintiff where, by contrast with Street v Luna Park, there was no realistic possibility of different outcomes as between each of the plaintiffs. 19In the present case, both Narradine and Mr Nelson are Plaintiffs in the misleading and deceptive conduct claim. Although the Defendants contended that the relevant claims were not identical, and Narradine and Mr Nelson do not claim to have suffered the same loss, the claims turn on a common representation and I can see no realistic likelihood that one party could succeed and the other fail in respect of that claim. However, there is a real and substantial possibility of different outcomes so far as Mr Nelson and Narradine could succeed on the misleading and deceptive conduct claim but Narradine could fail on the claims for breach of the Partnership Agreement and oppression. This is also not a case where Mr Nelson would necessarily be liable for costs in respect of the claims for breach of the Partnership Agreement and for oppression; to the contrary, he could reasonably contend in a costs assessment that he should not be held liable for the costs of a claim under the Partnership Agreement and an oppression claim to which he was not party. 20The misleading and deceptive conduct claim also appears to be in a relatively narrow compass, with the Plaintiffs relying on an alleged oral representation at a single meeting and the Defendants relying on contemporaneous correspondence to establish disclosure of the administration fees. On the other hand, the claims for breach of the Partnership Agreement and for oppression cover a substantially longer time period and, it appears, will be the subject of evidence from several witnesses. These claims would not exist in the proceedings, which would be of correspondingly narrower scope, if Narradine had not been joined as a plaintiff in the proceedings. The costs associated with the defence of the Plaintiffs' claim are likely to be significantly greater, where they involve the claims for breach of the Partnership Agreement and oppression, than they would if the proceedings were limited to the misleading and deceptive conduct claim brought by Mr Nelson, with or without Narradine's involvement. 21In these circumstances, I do not consider that Mr Nelson's involvement in the proceedings, so far as he brings the misleading and deceptive conduct claim, means that security for costs should not be allowed against Narradine. The amount of security to be ordered should be reduced to make a broad allowance for the fact that it should reflect only the costs for which Narradine would be liable if it failed in respect of the claims for breach of the Partnership Agreement and oppression. Any stay of the proceedings if security for costs is not provided should be limited to the claims made by Narradine in the proceedings rather than the misleading and deceptive conduct claim brought by Mr Nelson personally. I note that Austin J made orders in a similar form in Fiduciary Ltd v Morningstar Research Pty Ltd [2004] NSWSC 664; (2004) 208 ALR 564; see also Fiduciary Ltd v Morningstar Research Pty Ltd [2005] NSWSC 442; (2005) 53 ACSR 732. Amount of security for costs 22The Defendants contend, and I accept, that an order for security for costs may extend not only to future costs but also to costs already incurred, if an application for security for costs is made promptly: Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd above; Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2009] NSWSC 563 at [35]ff; Szanto v Bainton [2011] NSWSC 985. Although I have held that the delay in bringing the security for costs application in this matter was not such to warrant refusal of security for costs generally, it tends against an order in respect of past costs and I do not consider that security should extend to past costs in this matter: Karl Suleman Enterprizes Pty Ltd (in liq) v Pham [2010] NSWSC 886 at [50]. 23The Defendants' solicitor, Mr Pickles, has set out his calculation of the costs likely to be incurred going forward in the proceedings. The work set out by Mr Pickles is reasonable on its face and the rates stated by Mr Pickles for a junior solicitor at his firm and for junior and senior counsel appear to be reasonable. Mr Pickles has assumed recovery of 50%-60% of solicitor/client costs on assessment. Although that estimate was not supported, as is common and desirable practice, by evidence of a costs assessor, no objection was taken to it and it appears to be a reasonably conservative estimate. The Plaintiffs have not contested the detail of that calculation although they contended that it was not appropriate to allow the costs of retainer of senior counsel in the matter. I would allow security for costs of the retainer of senior counsel, but noting that this case is not of a scale of complexity which would warrant retaining the most senior of senior counsel. The rates adopted by Mr Pickles in his calculation are consistent with that approach. The estimate made by Mr Pickles is also within a range which has been considered in other cases to be an appropriate estimate of party/party costs for proceedings of this length: for example, April Fine Paper Macao Commercial Offshore Ltd v Moore Business Systems Australia Ltd [2009] NSWSC 867; (2009) 75 NSWLR 619 at [32]. 24In quantifying the amount of security to be permitted I consider that I should adopt a percentage of 45% of solicitor/client costs, being a discount to the lower end of the range referred to in Mr Pickles' affidavit, as a means of making a broad adjustment for costs attributable to the misleading and deceptive conduct claim, so that the total estimated future solicitor/client costs to be secured would be in the order of $68,000 (being approximately 45% of the mid-point of Mr Pickles' estimates of future costs). 25I consider that security for costs should be ordered by way of tranches so that the Defendants are initially secured for costs of preparation for the hearing and subsequently secured for the costs of the hearing before it takes place. The Defendants contend that 75% of the costs of the proceedings should be required to be secured within four weeks and the second tranche should be secured eight weeks prior to the date fixed for hearing and should be 25% of the amount to be secured. These percentages reflect Mr Pickles' estimates of the respective costs of work to be done prior to and at the hearing. The Plaintiffs contend that, if security is to be ordered, then security for 50% of future costs should be provided on or before 1 October 2012 and that security for the remaining 50% of future costs should be provided eight weeks before the date fixed for the commencement of the hearing. 26I consider that it is preferable that the amount of security to be provided in each tranche corresponds to the estimated costs which will be incurred prior to the hearing and on the hearing of the proceedings respectively. I do not consider that I should allow until 1 October 2012 for the provision of the first tranche of security, since this would either require that no further substantive steps be taken in the proceedings for a period of several months or expose the Defendants to costs of undertaking such steps where they had not been secured for them. 27Accordingly, I order that:

1. The First Plaintiff provide security for the Defendants' costs of the proceedings in such form as may be agreed between the parties, or otherwise in a form to be determined by a Registrar, in two tranches: (a) the amount of $51,000 within 28 days; and (b) the amount of $17,000 no later than 8 weeks prior to the date allocated for the commencement of the final hearing of the proceedings.
2. The proceedings be stayed, in respect of the First Plaintiff, if security is not provided when due in accordance with Order 1 above. 28In the ordinary course, costs should follow the event, since the Defendants have been successful in the motion and would not have been put to the costs of the hearing had it not been contested by the Plaintiffs. However, either party may send any submissions as to costs to my Associate within 7 days. I will then make orders as to costs in chambers unless either party requests an oral hearing.