Plaintiffs v Defendants

1 On 20 September 2022 the Court made orders requiring the first and second plaintiffs to provide a sum in security for the costs of the first to third and seventh defendants (collectively, the Lenders). On the same date the Court ordered the first plaintiff to provide a sum in security for the costs of the eighth defendant (Coface). By the terms of those orders, the security was in relation to the defendants' costs for steps in the proceeding up to but not including discovery.

2 The Lenders and Coface have now applied for orders that the plaintiffs provide further security. The Lenders seek a further sum of $2,764,214.29 be paid by both plaintiffs for their costs of giving discovery, preparing and filing lay and expert evidence and attending pre-trial mediation. Coface seeks further security in the sum of $2,359,988[1], for its costs in the proceeding up to and including a mediation. Coface seeks that sum be paid by the first plaintiff only.

3 The plaintiffs do not, subject to discrete disputes about certain categories of work, dispute their obligation to pay security. The real dispute between the parties is about the quantum of security to be paid.

4 As was the case with the first applications for security for costs, the Lenders and Coface have sought to justify the amounts sought by reference to workstreams they expect to undertake, and in relation to Coface to one workstream already undertaken. Both the Lenders and Coface have in relation to each workstream calculated their estimated costs by reference to charge out rates of their solicitors, counsel and expected disbursements for a series of identified tasks and stages involved in each workstream.

5 For the reasons given below I have decided that the plaintiffs are to pay the Lenders further security for costs in the sum of $2,424,675.69 and the first plaintiff is to pay Coface further security for costs in the sum of $2,275,566.40 (plus a further $31,631.12 for every 2000 documents over the first 20,000 documents discovered by other parties).

6 In my first security for costs ruling[2] (First SFC Ruling) I set out the nature of the dispute between the parties and the procedural history of the case. Since that time both the Lenders and Coface have filed their defences. The Lenders' submissions conveniently summarised the nature of the proceeding as follows:

The proceeding relates to a complex set of multi-party finance agreements pursuant to which the Lenders (who comprise four of the five defendants) agreed to provide finance to fund a satellite project (the "Jabiru-1 Project"). The plaintiffs allege, in respect of the Lenders, breaches of an implied duty of good faith as a matter of English law and breaches of statutory unconscionable conduct. The vast majority of allegations concern the conduct of the Lenders, including allegations about their communications with the plaintiffs and the Lenders' knowledge. The amended statement of claim comprises 95 pages, the Lenders' defence is 100 pages and the eight defendant's (Coface) defence is 81 pages. There are additional extensive requests for particulars.

The Lenders comprise four separate international financial institutions located throughout the world. The key persons involved in the transaction the subject of the proceedings on behalf of the Lenders were located in France, Singapore, Luxembourg, Switzerland and the United States.

The relevant events alleged in the amended statement of claim occurred between 2009 and April 2015. In relation to the more critical events, the plaintiffs make allegations on virtually a month-by-month basis between February 2014 and April 2015.

The plaintiffs allege that their loss includes the failure of the Jabiru-1 Project, the failure of the plaintiffs' business and loss of opportunity. Such allegations will require complex evidence, including expert evidence, about the value of the plaintiffs' businesses.

[citations omitted].

7 It is necessary to set out some of the procedural history relevant to two matters which have occurred since the first security for costs applications. The first concerns what the parties referred to as Coface's Hague Evidence Convention application, a workstream already undertaken but not included in Coface's first application for security. The second concerns Delany J's ruling[3] made on 2 November 2023 about further security for costs and orders for the parties to confer over discovery.

8 On 7 July 2023 Delany J made orders for the filing of defences and replies and for the Lenders and Coface to make disclosure of critical documents pursuant to s 26 of the Civil Procedure Act 2010 (Vic).

9 On 9 August 2023 Coface's solicitors wrote to the plaintiffs' solicitors to inform them that Coface would have difficulty making disclosure of critical documents by 25 August 2023 (the date for disclosure ordered by Delany J), due to the necessity for Coface to comply with French Law 68-678 of 26 July 1968[4] (French Blocking and Channelling Law). The French Blocking and Channelling Law restricts the disclosure of documents by French litigants in foreign proceedings and requires any disclosure to be made pursuant to a Letter of Request under the Convention on the Taking of Evidence Abroad in Civil or Commercial Matters[5] (Hague Evidence Convention). Coface's solicitor's letter stated that:

(a) the solicitors had become aware of the French Blocking and Channelling Law after Delany J had made his orders on 7 July 2023 and obtained advice from French lawyers on the operation of the Law;

(b) the French Blocking and Channelling Law required Coface to make a disclosure request to a French Government authority (SISSE)[6] which manages the process of making disclosure, if permitted;

(c) SISSE had advised Coface by letter dated 13 July 2023 that Coface must follow the process under the Hague Evidence Convention in order for the documents to be disclosed; and

(d) the process under the Hague Evidence Convention would involve Coface applying to the Supreme Court of Victoria to issue a letter of request to the French Ministry of Justice, requesting disclosure of certain documents in the proceeding.

10 On 18 August 2023 Coface filed its defence in the proceeding.

11 On 24 August 2023 Coface made its application that the Court issue a letter of request under the Hague Evidence Convention.

12 On 1 September 2023 Coface's solicitor informed the Court that the plaintiffs would not consent to the orders sought in Coface's Hague Evidence Convention application.

13 On 8 September 2023 the Lenders filed their joint defence.

14 On 11 September 2023 the plaintiffs served a notice to produce on Coface seeking immediate production of twenty one documents referred to in Coface's defence.

15 On 12 September 2023 Coface wrote to the plaintiffs indicating Coface would need to comply with the Hague Evidence Convention in order to comply with the notice to produce.

16 On 14 September 2023 Coface filed submissions in support of its Hague Evidence Convention application and indicated that Coface also sought an order setting aside the plaintiffs' notice to produce. On 13 September 2023, one day earlier, the plaintiffs had filed submissions in opposition to Coface's Hague Evidence Convention application.

17 On 21 September 2023 the plaintiffs indicated to Coface they would no longer oppose Coface's Hague Evidence Convention application but would not consent to orders for Coface's letter of request being made.

18 On 22 September 2023 Delany J convened a directions hearing and made orders:

(a) issuing the letter of request under the Hague Evidence Convention;

(b) extending the timetable for disclosure of critical documents and compliance with the notice to produce;

(c) requiring the Lenders and Coface to file their applications for further security for costs by 11 October 2023, if the parties were unable to agree on the form and quantum of the further security; and

(d) requiring the parties to exchange proposals for any categories of discovery to be given in the proceeding and a protocol for electronic discovery and to confer in good faith to attempt to agree on proposed discovery orders.

19 Following the making of the 22 September 2023 orders the parties fell into dispute about the relationship between the orders concerning conferral about further security and the orders concerning conferral about discovery. Specifically, the plaintiffs contended discovery conferral should take place prior to the hearing of any security applications. The Lenders and Coface did not agree. Ultimately the plaintiffs agreed to provide a sum of $71,837 as security for the discovery conferral process to the Lenders and a sum of $70,000 as security to Coface. On 13 November 2023 I made orders reflecting the parties' agreements.

20 In my First SFC ruling, I set out the legal principles relevant to applications for security for costs.[7] I have again relied upon those principles to the extent they are relevant to these applications.

21 Given the issues raised on this application about whether the plaintiffs have engaged in double discounting and the proper application of a global discount, it is helpful to review the principles relevant to those matters. In Bogan v The Estate of Peter John Smedley (Deceased)(Security for Costs)[8] Hetyey AsJ reviewed the authorities relevant to the circumstances and manner in which the Court might apply a global discount. Having reviewed the authorities, Hetyey AsJ distilled the relevant principles as follows:

(a) a global discount may be applied in addition to an evidentiary assessment of what may be recoverable in respect of individual items or categories of work within the costs estimate proffered by the applicant seeking security. In other words, the two approaches are not mutually exclusive;

(b) as a matter of discretion, both methods may be utilised in combination so that individual tasks are separately discounted after broadly having regard to the evidence at a more granular level, with a global discount being applied at the end of the exercise;

(c) depending on the extent of individual reductions applied on a category-by-category basis, the Court may determine, as a matter of fairness, to not also apply a global discount, apply a nominal global discount, or to only apply a global discount in respect of certain categories;

(d) conversely, if the global discount is significant, it may not be necessary to also undertake an evidentiary assessment and adjustment of certain work categories and items claimed;

(e) the global discount should be calibrated to ensure the costs estimate is appropriately reduced to bear some relationship to the party-party costs that would ultimately be recoverable on taxation;

(f) one of the factors that may justify a substantial discount on the amount of security sought is the margin of difference between the estimates obtained by the parties where there is no significant error in the reasoning process demonstrated;

(g) similarly, where the costs are claimed up to the commencement of trial, a substantial discount may be warranted to account for the prospect that the matter may well resolve at mediation or prior to the hearing of the matter;

(h) where the fees charged by the defendant's lawyers are expensive, or where a deluxe defence is being run, a larger discount may be applied. At the same time, a defendant in complex litigation is not expected to run a defence on a shoestring budget; and

(i) whatever the approach taken in a particular case, the Court must arrive at a reasonable estimate of the defendant's costs, which the plaintiff would, if unsuccessful at trial, be ordered to pay.[9]

22 During the course of the hearing there was some debate about the approach I adopted in determining the defendants' first security for costs applications. My approach in the First SFC Ruling was as described by the Lenders and Coface. First, I removed workstreams for which costs were not recoverable. Significantly, other than an adjustment to the rates of professional staff for Allen & Overy solicitors, I did not apply further reductions to reflect recoverability or inappropriate levels of delegation and the like. Rather I applied an overall discount to address those sorts of issues as well as the inherent uncertainties in the estimates given the stage of the litigation and what I considered on the basis of the material before the Court on that application, the defendants' deluxe approach. I applied an overall reduction of 50% to professional staff costs and 20% for counsels' fees to the Lenders estimate of costs and an overall reduction of 40% to professional staff costs and 20% to counsels' fees to Coface's estimate of costs.

(a) the affidavits of Michael Shepherd affirmed 20 May 2022 (First Shepherd affidavit), 22 July 2022 (Second Shepherd affidavit), 13 October 2023 (Fourth Shepherd affidavit) and 16 February 2024 (Fifth Shepherd affidavit); and

(b) the expert report of David Ross Nicholas dated 30 July 2022 and filed on 1 August 2022 (First Nicholas report) and further expert report dated and filed on 16 February 2024 (Second Nicholas report).

24 Mr Shepherd is a partner at Allen & Overy, solicitors for the Lenders. Mr Shepherd deposed that the security ordered as a result of the Lenders' first security for costs application has been exhausted.

25 Mr Shepherd's Fourth affidavit set out in tabular form the charge out rates he used to prepare the Lenders' estimate of costs of undertaking discovery, preparing and filing lay and expert evidence and attending pre-trial mediation. Mr Shepherd set out the hourly rates for Allen & Overy professional staff by reference to seniority, including rates for partners, counsel (which I have taken to be in-house counsel), senior associates, junior associates and members of the eDiscovery team. Mr Shepherd explained that the hourly rates for Allen & Overy professional staff in his tables reflect the hourly rates I allowed in the First SFC Ruling. Those rates were derived from the opinion of Mr Nicholas on the reasonableness and recoverability of the Lenders' estimated costs, provided in the course of the Lenders' first security for costs application.

26 Mr Shepherd then set out both hourly and daily rates for both Victorian and English counsel. Mr Shepherd explained that the charge out rates for counsel have increased from 1 January 2024, which he said accounted for the difference between estimated counsel fees in correspondence exchanged earlier by the parties and estimated counsel fees in this application.

27 Finally, the Fourth Shepherd affidavit exhibited a lengthy and detailed table arranged by workstreams. The table broke down each workstream into a series of tasks and identified various staff positions or counsel involved in that task, how many hours each position would need to complete the task and a description of each position's particular role or task.

28 The Lenders sought an expert report from Mr David Ross Nicholas, a legal costs expert with over thirty years' of experience in the area and solicitor. Mr Nicholas was asked to provide his expert opinion on:

(a) the extent the claimed hourly charge out rates for Allen & Overy professional staff involved in the Discovery workstream are recoverable in accordance with the principles that apply to party/party costs assessments in respect of proceedings in the Supreme Court of New South Wales;

(b) whether the issuing of the Costs Assessment Rules Committee Guideline Costs Payable between Parties under Court Orders dated 24 October 2023 (CARC Guideline) had affected Mr Nicholas' opinions expressed in his First Report;

(c) whether the Lenders' costs of complying with the Hague Evidence Convention and foreign banking secrecy and data protection laws was recoverable on a party/party basis in accordance with the principles that apply to party/party costs assessments in respect of proceedings in the Supreme Court of New South Wales; and

(d) the likely recoverability of the estimated Allen & Overy professional staff and English counsel's fees for each workstream described in the Fourth Shepherd affidavit, excluding the "negotiation of discovery categories and discovery conferral" sub-workstream.

29 The assumptions the Lenders asked Mr Nicholas to make in forming his opinion were set out in Mr Nicholas' report. They are not the subject of criticism on this application and it is unnecessary to set them out again here.

30 Mr Nicholas' report sets out how a costs assessor in New South Wales would determine the fair and reasonable amount of costs for the work undertaken. Mr Nicholas makes specific reference to s 76 of the Legal Profession Uniform Law Application Act 2014 and the factors set out in s 172(1) and (2) of the Legal Profession Uniform Law (NSW) (LPUL) that a costs assessor may have regard to in determining fair and reasonable party/party costs. Mr Nicholas stated that he considered these factors when reaching his opinions.

31 In summary, Mr Nicholas' opinion on the first three matters he was requested to consider was:

(a) taking into account the CARC Guideline issued 25 May 2023 and reissued 24 October 2023 and the discovery tasks set out in the exhibit to the Fourth Shepherd affidavit, the recoverable rate on a party/party assessment on the ordinary basis for a law graduate/recently admitted solicitor performing a first level document review and for eDiscovery team members would be the hourly rate estimated by Mr Shepherd of $273.

(b) had the Fourth Shepherd affidavit calculated the estimates of future costs using the hourly rates anticipated to be charged by Allen & Overy as set out in Annexure A to the First Shepherd affidavit, Mr Nicholas would have taken into consideration the reissued CARC Guidelines and revised his opinion of the recoverable hourly rates;

(c) relevantly, the effect of Mr Nicholas' revised opinion would be to increase the recoverable hourly rate of Allen & Overy partners to $800 (when the recoverable rate sought by the Lenders in the Fourth Shepherd affidavit was $775) and for Allen & Overy Senior Associates to $550 (when the recoverable rate sought by the Lenders in the Fourth Shepherd affidavit was $500); and

(d) a defendant who has to comply with obligations arising under foreign law in order to comply with its obligations to make discovery and file lay evidence in New South Wales proceedings would be able to recover party/party costs on the ordinary basis for its costs of compliance, subject to the test of reasonableness of those costs.

32 In relation to the recoverability of the costs of Allen & Overy professional staff and English counsel's fees for each of the workstreams identified in the Fourth Shepherd affidavit, Mr Nicholas:

(a) identified the discounted rates for Allen & Overy professional staff adopted by me in my First SFC Ruling which were used by the Lenders in preparing estimates set out in the Fourth Shepherd affidavit;

(b) opined that, having regard to the reissued CARC Guidelines, these rates would be recoverable in full;

(c) confirmed his opinion that the discounted rates used by Allen & Overy for eDiscovery team members would be recoverable on a party/party assessment on the ordinary basis;

(d) opined that English junior counsel's time of 17 hours at workstream 3 "Expert evidence" would be allowed at $600 per hour, taking into account the CARC Guideline rates of $240 to $560 for junior counsel, the fact that English counsel's rates are not subject to the CARC Guideline and the complexity of the proceeding;

(e) identified the Lenders' six future work streams being, discovery, preparing and filing lay and expert evidence, attending pre-trial mediation, other direction hearings, advices and care and conduct and the costs of the top up security for costs application; and

(f) considered the estimated spread of work between fee-earners at Allen & Overy on each of the six workstreams and opined that the discovery workstream showed a good spread of work between fee earners and that for the other workstreams, while the spread of work between fee earners was not unreasonable, there could be some reduction to recoverable professional costs on the basis of lack of delegation.

33 Mr Nicholas then considered the anticipated costs set out in each of the six workstreams as set out in the Fourth Shepherd affidavit.

34 In relation to the discovery workstream, Mr Nicholas, as instructed, deducted the estimated fees for Allen & Overy professional staff for the discovery conferral sub-workstream. Working from a reduced estimate of $1,351,053.53 for the Allen & Overy professional fees for the discovery workstream, Mr Nicholas considered the work and tasks anticipated to be undertaken and opined that an amount of 80% of the discounted rates for Allen & Overy staff costs or $1,080,842.82 is likely to be recoverable. Mr Nicholas confirmed that in making the percentage reduction to the party/party costs he had regard to the factors at s 172 of the LPUL, including the number and importance of documents involved.

35 In relation to the lay evidence workstream Mr Nicholas opined that an amount of 70% of the discounted Allen & Overy costs or $261,180.15 would be recoverable on assessment, explaining that his percentage reduction took into account the relatively low level of delegation to associates in this workstream.

36 In relation to the expert evidence workstream, Mr Nicholas identified the Lenders' estimated costs of $177,930 for Allen & Overy professional staff and $10,200 for English counsel. Mr Nicholas considered the particulars of the tasks to be undertaken as outlined in the Fourth Shepherd affidavit. In Mr Nicholas' opinion an amount of 70% of the discounted Allen & Overy costs, or $124,551 and 100% of English counsel's fees would be recoverable on a party/party assessment on the ordinary basis. In reaching this view Mr Nicholas took into account the relatively senior Allen & Overy fee earners anticipated to contribute to this workstream, the tasks involved and the possibility of duplication.

37 In relation to the pre-trial mediation workstream, Mr Nicholas' opinion was that an amount of 60% of the discounted rates for Allen & Overy staff costs, or $46,224 would be recoverable, taking into account that almost all anticipated attendees are partners and counsel employed by Allen & Overy and the likely unrecoverable duplication of work involved.

38 In relation to the workstream entitled 'Other directions hearings, advices and care and conduct', Mr Nicholas opined that an amount of 65% of the reduced rates for Allen &Overy staff costs or $121,381.65 would be recoverable. He explained the reason for his percentage reduction being duplication between Allen & Overy fee earners including multiple attendances by fee earners at directions hearings in addition to two counsel, duplication of reviewing, considering and settling inter partes correspondence and his opinion that some of the communications with and advice to the Lenders may not be fully recoverable on a party/party assessment on the ordinary basis.

39 In relation to the workstream costs of the top-up security for costs application, Mr Nicholas' opinion was that an amount of 75% of the discounted rates for Allen & Overy staff costs, or $65,232 would be recoverable. In reaching this view Mr Nicholas took into account the possibility of duplication between Allen & Overy fee earners, but that more of the work undertaken in this workstream, other than Mr Shepherd's own work as a partner, was undertaken by more junior fee earners.

40 Mr Nicholas summarised his opinions about the future Allen & Overy professional staff costs and English counsel fees estimated to be recovered on assessment in the following table:

Future costs & English counsel fees estimated to be incurred

Future costs & English counsel fees estimated to be recovered on assessment

5 Other directions hearings, advices and care and conduct

6 Costs of the Top-Up Security for Costs Application

The plaintiffs' evidence in response to the Lenders' claim

(a) the affidavit of Elan David Sasson, affirmed 31 January 2024 (First Sasson affidavit);

(b) the affidavit of Elan David Sasson, affirmed 20 February 2024 (Second Sasson affidavit);

(c) the affidavit of Raymond John De La Rue sworn 1 February 2024; and

(d) the affidavit of Raymond John De La Rue sworn 20 February 2024.

42 Mr De La Rue is a costs consultant employed by Blackstone Legal Costing Australia Pty Ltd. He has practised as a professional costs consultant in Australia for over 48 years. Mr De La Rue's evidence sought to address both the Lenders and Coface's applications for security for costs and was the only evidence of a costs consultant sought to be adduced by any party.

43 Both the Lenders and Coface objected to the admission of Mr De La Rue's evidence. The basis of their objections were as follows:

(a) while Mr De La Rue is an experienced costs consultant with the expertise to opine on the recoverability of costs in Victoria, he is not an admitted legal practitioner nor an experienced commercial litigator;

(b) Mr De La Rue does not have the experience or expertise to estimate the work required to perform future work;

(c) Mr De La Rue has conflated an assessment of likely recoverability with an assessment of the number of hours and level of legal experience required to undertake projected tasks;

(d) Mr De La Rue has purported to provide an expert opinion of the appropriate estimate of future costs of the proceeding without regard to the nature of the issues in dispute, the complexity of the proceeding, the issues of foreign law or the scope of anticipated discovery and in circumstances where he was not provided with the pleadings;

(e) Mr De La Rue has slavishly followed the opinions of Mr Sasson rather than forming his own independent opinion;

(f) absent consideration of the pleadings, the Court should have serious reservations about whether Mr De La Rue has complied with the Court's expert code of conduct, particularly the duty of the expert to made all enquiries which the expert believes are desirable and appropriate.

44 Coface's counsel submitted that should the Court determine that Mr De La Rue's evidence be admitted, the Court should give it little weight because Mr De La Rue admitted that he has not read the pleadings and so the Court could infer he had very little understanding of the real issues in dispute between the parties.

45 Counsel for the plaintiffs submitted that the Court should admit Mr De La Rue's expert evidence. Counsel submitted:

(a) Mr De La Rue is a very experienced costs consultant with experience of taxation of costs in all Australian jurisdictions;

(b) while where New South Wales practitioners are retained, the New South Wales scale of costs would fix the amount, the real issue for the Court, which Mr De La Rue opines upon, is what will be recoverable in Victoria;

(c) if Mr De La Rue's evidence is rejected the Court will have no expert evidence on recoverability of costs;

(d) any criticism of Mr De La Rue's evidence on the basis that he has not considered the pleadings is misconceived because his opinion of recoverability of costs in Victoria is based on examination of the evidence adduced by the Lenders and Coface to justify their respective claims for security and the evidence of Mr Sasson;

(e) a fair reading of Mr De La Rue's affidavits does not support the submission that he has slavishly followed Mr Sasson's opinion; and

(f) Mr De La Rue has positively deposed that he did not regard consideration of the pleadings necessary to form his expert opinion on recovery of costs in Victoria and so his declaration was given appropriately.

46 Mr De La Rue has over 48 years' of experience in legal costing. He is based in Victoria and works for a national legal costing firm. Mr De La Rue deposed that throughout his career he has been involved in assessing costs both as between parties and on a solicitor/client basis, as well as drawing bills of costs and appearing on taxation in all Australian jurisdictions.

47 Prior to preparing his first affidavit, the plaintiffs' solicitor provided Mr De La Rue with the following material:

(a) the Lenders' application for security for costs of the proceeding up to and including a pre-trial mediation;

(b) Mr Shepherd's affidavit affirmed 13 October 2023, including exhibits;

(c) Coface's application for security for costs of the proceeding up to and including a pre-trial mediation;

(d) Mr Hennessey's affidavit sworn 19 October 2023, including exhibits; and

(e) Mr Sasson's affidavit affirmed 31 January 2024, including exhibits.

48 Armed with this material the plaintiffs' solicitor instructed Mr De La Rue to consider the material and provide his opinion as to:

(a) the reasonableness of the amount of security sought by the Lenders' application (having regard to the contents of Mr Shepherd's affidavit);

(b) the reasonableness of the amount of security sought by the Coface application (having regard to Mr Hennessey's affidavit); and

(c) the reasonableness of the criticisms of the Lenders' and Coface's respective costs estimates made by the plaintiffs as set out in Mr Sasson's affidavit.

49 Mr De La Rue structured his opinions by the discovery, lay evidence, expert evidence and care and conduct work categories. Within each of these categories Mr De La Rue set out separate opinions in relation to the Lenders and Coface. He then provided his opinion, to the extent it was not already provided in his response to the work categories mentioned, of the specific criticisms made by Mr Sasson.

50 In relation to the Lenders' discovery work category, Mr De La Rue opined that the number of hours estimated by Mr Shepherd was wholly unreasonable and excessive, 'particularly when regard is had to the fact that the scope of discovery to be given in the proceeding is not yet known' and the parties are subject to a court order to confer. Mr De La Rue said that he could see no justification for the estimate in the material provided. He proceeded to consider the number of hours of work claimed for each level of legal practitioner and in particular the work to be done by senior associates or associates, calculating that if three lawyers were working full-time on the discovery task the Lenders' estimate contemplates that discovery would take almost nine months to complete. Mr De La Rue then made reference to the Victorian Supreme Court Scale of Costs[10] which distinguishes between perusals, scanning and examination involved in the discovery task before stating that having regard to his experience, he would discount the Lenders future costs relating to discovery by at least 50%.

51 In relation to Coface's discovery work category, Mr De La Rue opined that, Coface's estimate of barrister involvement in discovery is excessive, resulting in a 'top-heavy' estimate. Mr De La Rue proposed an adjustment of hours from barristers to junior solicitors who could undertake the tasks involved. Mr De La Rue then concluded that having regard to 'these matters' and based on his experience, the estimate of Coface's future costs in relation to discovery should be discounted by at least 40%, prior to the application of an overall discount in line with discount I applied in my First SFC ruling.

52 In relation to the Lenders' lay evidence workstream, Mr De La Rue opined that the estimate of hours for senior practitioners in the Fourth Shepherd affidavit was exaggerated and disproportionate to hours that could be allocated to lawyers and law graduates under the supervision of senior colleagues. He also opined that the estimate of hours for barristers in this workstream was exaggerated and, in his view, could not be justified. Mr De La Rue concluded that having regard to these matters and based on his experience, this workstream should be discounted by at least 50% prior to the overall discount being applied.

53 Mr De La Rue then proceeded to consider each of the remaining workstreams identified by the Lenders and Coface. In relation to each workstream Mr De La Rue expressed the opinion that the estimates were excessive, often top heavy, could not be justified and, in his opinion should be discounted by at least 50%, prior to the application of the overall discount.

54 In relation to the specific criticisms made by Mr Sasson, Mr De La Rue opined, 'To the extent not expressly referred to above, the specific criticisms made by Mr Sasson (of the Lenders' and Coface's respective costs estimates) are, in my opinion, reasonable and appropriate.'

55 In his second affidavit Mr De La Rue opined that he did not consider it necessary to read the pleadings filed in the proceeding to have formed the opinions expressed in his first affidavit. He confirmed that he had read the Lenders' and Coface's evidence filed in support of their security for costs applications and the First Sasson affidavit. He noted that the evidence was produced to justify their respective claims for security and was directed to the facts in issue on the basis of the current pleadings. Accordingly, Mr De La Rue maintained his opinions expressed in his first affidavit.

56 Section 76 of the Evidence Act 2008 (Vic) (Evidence Act) provides that evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion was expressed. Section 79(1) of the Evidence Act provides an exception to this opinion rule:

If a person has specialised knowledge based on the person's training, study or experience, the opinion rule does not apply to evidence of an opinion of that person that is wholly or substantially based on that knowledge.

57 In Dasreef Pty Ltd v Hawchar[11] (Dasreef), the majority of the High Court explained that:

...the opinion rule is expressed as it is in order to direct attention to why the party tendering the evidence says it is relevant. More particularly, it directs attention to the finding which the tendering party will ask the tribunal of fact to make. In considering the operation of s 79(1) it is thus necessary to identify why the evidence is relevant: why it is "evidence that, if it were accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding". That requires identification of the fact in issue that the party tendering the evidence asserts the opinion proves or assists in proving.

To be admissible under s 79(1) the evidence that is tendered must satisfy two criteria. The first is that the witness who gives the evidence "has specialised knowledge based on the person's training , study or experience"; the second is that the opinion expressed in evidence by the witness "is wholly or substantially based on that knowledge".[12]

[citations omitted].

58 In Dasreef, Heydon J in his separate judgment stated:

There is ample authority supporting the view that it is not enough for evidence tendered under s 79 merely to state the expert's qualifications in a field of expertise and the conclusion. It is necessary to avoid the insidious risk that the trier of fact will simply accept the opinion without careful evaluation of the steps by which it was reached, and hence the evidence must state the criteria necessary to enable the trier of fact to evaluate that the expert's conclusions are valid. The evidence must reveal the expert's reasoning - how the expert used expertise to reach the opinion stated. It is not enough for evidence tendered under s 79 to merely state the experts qualifications in a field of expertise and the conclusion. Admissibility does not depend on the reasoning being accepted as correct; that is a matter for consideration at the end of the trial. But admissibility does depend on the reasoning being stated.

....In principle, that line of authority is correct. There is nothing in s 79 which suggests that the corresponding common law rule has been abolished. And the language of s 79 positively supports its continuance: without a statement of the expert's reasoning it is not possible to say whether the opinion is wholly or substantially based on the specialist knowledge claimed.[13]

[citations omitted].

59 In my view there is no real doubt that Mr De La Rue has relevant expertise to provide an opinion on likely costs recovery by virtue of his lengthy experience of legal costing across Australian jurisdictions. The plaintiffs requested that Mr De La Rue provide his opinion on the reasonableness of the security amounts sought by the defendants. There is no doubt likely costs recoverability is relevant to the appropriate quantum of security to be ordered. Mr De La Rue's expertise to provide an opinion on an appropriate overall discount, in addition to any reductions to quantum based on costs recoverability, is less clear.

60 The admissibility of his evidence falls to be considered against the requirements of s 79 in light of the relevant principles articulated by the authorities. Accordingly, the fact that if Mr De La Rue's evidence is excluded the Court would be left without any expert evidence on recoverability of costs in Victoria is not a relevant consideration in assessing its admissibility. Nor can I accept the plaintiffs' counsel's submission that if Mr De La Rue's evidence is excluded, the defendants' applications must fail. Many applications for security for costs are decided on the basis of evidence provided by experienced litigators without additional expert evidence of a costs consultant.

61 The main criticisms made of Mr De La Rue's evidence were that he had not read the pleadings, he did not appear to consider in relation to the Lenders' application the principles of appropriate rates and recovery of costs relevant in New South Wales, and his opinions did not articulate his path of reasoning to reach the conclusions expressed.

62 I find it difficult to accept Mr De La Rue's statement that it was unnecessary for him to have regard to the pleadings because he looked at the parties' evidence of the work required in each workstream which evidence was based on the facts in issue in the current pleadings. In my view, it is difficult to understand how Mr De La Rue assessed the parties' evidence about the work necessary to be undertaken without undertaking an assessment of the extent, nature and complexity of the facts in issue as illuminated by the pleadings. Put another way, without an understanding of the facts in issue in this case, the Court is left with Mr De La Rue's experience as the basis of his opinions without an explanation of how he has applied the expertise gained through that experience to the particular facts of this case.

63 Similarly, too often having identified that the proposed spread of work in a particular workstream was top heavy Mr De La Rue then relied on his experience to posit a percentage discount without any further explanation for the amount of the discount. Nowhere does Mr De La Rue explain why he thinks it appropriate that the Court apply his posited discounts to the workstreams in addition to the overall discount I applied in the First SFC Ruling.

64 In my view Mr De La Rue's lack of explanation for the discounts he opines appropriate beyond, in most cases, general statements that the spread of work in each workstream is exaggerated or top heavy and reliance on his experience, render his evidence inadmissible as expert evidence.

65 If I am wrong about the inadmissibility of Mr De La Rue's evidence as expert opinion evidence, in my view its absence of detailed reasoning means that it could be afforded only little if any weight.

66 Mr Sasson is a partner at Quinn Emanuel Urquhart & Sullivan, solicitors for the plaintiff, and has conduct of this matter for the plaintiffs. Mr Sasson has almost fifteen years' experience as a lawyer, almost exclusively in litigation. Mr Sasson's affidavits canvassed both the Lenders' and Coface's applications. I will set out his evidence in relation to the Coface application later in these reasons.

67 In response to the Lenders' application for top-up security, and excluding evidence Mr Sasson later resiled from, Mr Sasson deposed:

(a) the amount of security sought by the Lenders fails to take into account the overall discounts applied by me in the First SFC ruling, ie. 50% of professional costs and 20% to counsel's fees, to reflect the deluxe approach the Lenders have adopted in respect of their defence of the proceeding;

(b) the Lenders' costs estimate is excessive and a disproportionate amount of estimated time to undertake tasks has been allocated primarily or solely to partners, counsel and senior associates at Allen & Overy rather than associates:

(i) in the discovery workstream 8 hours of partner time and 45 hours of counsel time have been allocated to negotiate the discovery categories and protocol, in addition to 45 hours of junior counsel and 17.5 hours of senior counsel time;

(ii) in the lay evidence workstream 30 hours of partner time has been allocated to the task 'Plaintiffs' Witness Statements' which exceeds the 25 hours each allotted to counsel and senior associates and zero hours are allocated to associates;

(iii) in the lay evidence workstream 21 hours of partner time, 80 hours of counsel time and 60 hours of senior associate time has been allocated to the task of 'Witness statements', with only 7 hours being allocated to associates to 'finalise, file and serve each lay witness statement.'

(c) on 15 November 2023 the plaintiffs paid into Court security in the amount of $71,837 for discovery conferral, a task which remains ongoing, with the result that the Lenders' costs estimate for the discovery workstream is thus preliminary and may be subject to further evidence;

(d) the Lenders' current costs estimate for discovery is excessive having regard to:

(i) not all the documents presently held by the Lenders will require review and once categories of documents are agreed, agreed targeted keyword searches may be used to produce a significantly smaller pool of documents for review;

(ii) the Lenders' propose the first level review of documents be undertaken by graduates and the second level review undertaken by associates but have applied the associate charge out rate for the graduates undertaking the first level review;

(iii) it is premature to seek security for costs for the possibility of issuing subpoenas to third parties as whether this step is required, and its scope, will only become apparent following review of discovery;

(iv) a discount of 40% to the total costs claimed for the discovery workstream is appropriate before the overall discount is applied;

(e) the Lenders' estimate of costs for the lay evidence workstream is top heavy and if associates were to perform the bulk of this work under supervision the costs would be reduced by 40%, before the application of the overall discount;

(f) the Lenders' estimate for the expert evidence workstream is top heavy and could be reduced if associates performed the bulk of this work under supervision and the estimate of costs to identify areas for expert evidence and appropriate experts is also excessive given the areas of expertise required have already been identified;

(g) the Lenders' estimated costs for the expert evidence workstream should be reduced by 40% before application of the overall discount;

(h) the Lenders' estimate for the other directions hearings, advice and care and conduct workstream is top heavy and could be reduced by 40%, before application of the overall discount, if associates carried out the bulk of this work under supervision;

(i) the Lenders' seek almost double the amount sought by Coface for the costs of the security for costs application, which is excessive and the Court should allow no more than $30,000 for this workstream.

68 Mr Sasson concluded that an appropriate amount of claimable costs for the Lenders for all steps up to and including pre-trial mediation is $2,554,390.69, being $1,379,264.02 for professional costs, $556,460.00 for counsel fees and $618,666.67 for disbursements and experts. After applying the overall discount to these figures the appropriate amount of top-up security for the Lenders, in Mr Sasson's opinion, is $1,753,466.68, being $689,632.01 for professional costs, $445,168.00 for counsel fees and $618,666.67 for disbursements and experts.

69 Putting to one side for the moment the question whether an overall discount should be applied and, if so, in what amount, it is useful to compare Mr Sasson's opinions as to the appropriate discounts to the professional costs for each workstream (albeit before application of a further global discount) and Mr Nicholas' corresponding opinion.

Mr Sasson's proposed percentage discount (before global discount)

Mr Nicholas' proposed percentage discount to Allen & Overy professional staff costs

70 The Fifth Shepherd affidavit was affirmed in response to Mr Sasson and Mr De La Rue's affidavits and having read Mr Nicholas' report.

71 It sets out the steps undertaken by the parties in relation to the discovery conferral ordered by Delany J on 22 September 2023. The Lenders confirmed to the plaintiffs' solicitors that any amount paid into court by the plaintiffs for the discovery conferral steps would be excised from the Lenders' top-up security for costs application. Mr Shepherd deposed that, as at 16 February 2024 (the date his affidavit was affirmed):

(a) the document management protocol had not been finalised and the last draft in circulation is the version sent by Allen & Overy on 22 December 2023;

(b) the plaintiffs had not responded to either the Lenders' response to the plaintiff discovery categories, or Coface's response to the plaintiffs discovery categories;

(c) conferral on the defendant discovery categories had not proceeded beyond Coface's response to the plaintiffs' response to the plaintiff discovery categories and the Lender's adoption of Coface's response;

(d) accordingly, none of the plaintiff discovery categories (or any modification) had been agreed;

(e) the Lenders had not agreed to any of the defendant discovery categories (or any modification);

(f) Mr Shepherd anticipated, taking into account the number of categories currently disputed, that any hearing of the discovery dispute will take no less than one day; and

(g) the security paid by the plaintiffs in relation to the Lenders' costs of discovery conferral did not include the estimated costs of the hearing of any discovery application.

72 Mr Shepherd deposed that on 21 December 2023 the plaintiffs served the Lenders with a request for further and better particulars of 34 paragraphs of the Lenders' defence.

73 Mr Shepherd revisited his estimates of the hourly rates charged by Allen & Overy professional staff. Mr Shepherd took into account the further expert opinion obtained from Mr Nicholas, who identified a revision, published in 2023, of the CARC Guidelines. Mr Shepherd deposed that the effect of the revision of the earlier (2016) Guidelines was to increase the likely recoverable rates of Allen & Overy professional staff and English counsel. Mr Shepherd set out the old and new rates in a further table.

74 Mr Shepherd deposed that applying a similar approach to that I adopted in relation to my First SFC ruling would result in the following steps:

(a) deducting the estimated fees for any workstreams which are no longer pressed or which the Court considers are not recoverable on a party/party basis;

(b) in relation to Allen & Overy's estimated fees, applying a discounted hourly rate to reflect a rate that would be recoverable on a costs assessment, for example the rates identified by Mr Nicholas, and then apply an overall discount to those fees;

(c) in relation to English counsel, applying a discounted hourly rate that would be recoverable on a costs assessment, for example the rate identified by Mr Nicholas and then not applying any further discount to those fees;

(d) utilising Victorian counsels' estimated fees at their actual hourly rates which are all within the scale rate, and then applying an overall discount to Victorian counsels' actual fees, for example the 20% discount that was applied to both the Lenders' and Coface's first security for costs application; and

(e) allowing the estimated disbursements in the amount estimated.

75 Mr Shepherd said that in contrast to the above, the plaintiffs have sought to:

(a) have the discovery conferral steps assessed as part of this application and to deduct the amount of security already paid for this step from the total amount of security to be paid as a result of this application; and

(b) apply significant discounts on the basis of recoverability before applying a further significant overall discount.

76 Mr Shepherd rejected the suggestion that the spread of work in the discovery workstream was top heavy with too much time allocated to partners. He said that in his experience in complex proceedings such as this one, the negotiation of discovery categories requires a deep understanding of the pleadings and issues in dispute and thus requires proportionately more senior lawyer and counsel time. It was not a task that could be undertaken efficiently by primarily using associates.

77 Mr Shepherd outlined the assumptions he had made in relation to discovery:

(a) that the majority of the documents to be discovered by the Lenders would be within the "key" date range of 23 April 2014 to 16 April 2015;

(b) the total number of documents within that date range to be reviewed will be 50% of approximately 162,000 documents held across five separate databases; and

(c) a reviewer will take on average 2 minutes per document to review for relevance and privilege and code the documents accordingly.

78 Mr Shepherd said he had now considered those assumptions against the plaintiffs' proposed discovery categories which sought documents across a significantly broader key date range and formed the opinion that it is now likely more documents than he had initially estimated will need to be reviewed and the costs of undertaking discovery will be higher. Mr Shepherd estimated there will be an additional 199,000 documents to be reviewed on top of the 162,000 documents within his previously assumed narrower date range.

79 Mr Shepherd said that having reviewed the plaintiffs' proposed discovery categories he did not think the categories as drafted would likely lend themselves to the further application of key word searches that would materially reduce the need for the dataset to be reviewed manually. Additionally assuming only 63 of the 94 categories in the plaintiffs' proposed discovery categories were adopted, it was likely that a reviewer would require more than 2 minutes per document to review for responsiveness, privilege and to code the documents.

80 In relation to whether it was premature to seek security for the costs of subpoenas to third parties, Mr Shepherd deposed that even if these costs were to be removed, it would not, in his opinion, significantly reduce the estimated costs.

81 In relation to the lay and expert evidence workstreams Mr Shepherd deposed that he was unable to determine how Mr Sasson formed the opinion that only 30% of the estimated fees for Allen & Overy staff would be recoverable on the standard basis. Additionally he said that while the fields of expertise required for expert evidence had been identified at a high level they would need to be refined and appropriately qualified experts identified and contacted.

82 Mr Shepherd said the costs of the Lenders' security for costs application would be higher than he previously estimated because of changes to allowable Victorian counsel fees, his previous estimate did not include the costs relating to the costs ruling of Delany J about discovery conferral and because it had been necessary for Mr Shepherd to prepare a further affidavit.

83 Mr Shepherd deposed that the Lenders will be required to undertake work to respond to the plaintiffs' request for further and better particulars of their defence and that these costs were not anticipated at the time he prepared the Fourth Shepherd affidavit. Mr Shepherd estimated these costs would likely exceed $15,000.

84 Mr Shepherd said Mr Sasson's proposed discounts to the workstreams were excessive and without basis, especially given the evidence of Mr Nicholas.

85 Mr Shepherd summarised that taking into account the matters raised in the Fifth Shepherd affidavit, including removal of the discovery conferral step, and the opinions expressed by Mr Nicholas, he considered the likely recoverable amount of the Lenders' estimated costs to be $2,764,214.29 comprised of:

(a) Victorian counsel fees of $435,936;

(b) Allen & Overy professional fees and English counsel fees of $1,709,611.62; and

(c) disbursements of $618,666.67.

86 The Lenders provided the Court with an aide memoir setting out a comparison of their estimated costs by workstream with the estimates proposed by the plaintiffs. The plaintiffs also prepared an aide memoir setting out the comparison by reference to the effect of deductions proposed by their experts, Mr Sasson and Mr De La Rue.

87 Drawing on the information in those aides memoir the following table reflects the position of the Lenders and the plaintiffs at the time of the hearing, without Mr De La Rue's proposed deductions or the application of an overall discount.

Effect of Plaintiff's Sasson deductions before global deduction

Other directions hearings, advice and care and conduct

Parties' submissions on the Lenders' application

88 As is apparent from the above table, leaving to one side the application of any overall discount, there was comparatively little difference between the Lenders and the plaintiffs in relation to the recoverable costs of the lay evidence, expert evidence and other directions hearings workstreams. For that reason I will focus on the Lenders and plaintiffs' submissions in respect of the discovery, mediation and security for costs workstreams and the appropriate percentage overall discount to be applied.

89 The Lenders submitted that the amount of security they sought was appropriate, just and reasonable given the nature of the proceeding, the complexity of the steps needed to be undertaken and the costs involved. Their application was supported by detailed evidence from Mr Shepherd that underpinned the costs estimates. The Lenders submitted the amount of security proposed by the plaintiffs (noting that with the application of the plaintiffs' proposed overall discount of a further 50% of Allen & Overy professional costs would be $1,742,934.38) would fail to provide adequate and sufficient protection to the Lenders in light of the size and complexity of this significant commercial litigation.

90 In terms of the relevant principles to be applied, the Lenders said the task for the Court was to adopt a broad brush approach to fix an amount it considered adequate in the circumstances of the case. The relevant circumstances include the nature of the proceeding, the nature and complexity of the steps to be undertaken, the likely costs in undertaking those steps, the length of the trial, any security already provided and the possibility the proceeding may settle.[15] The amount of security fixed must not be so low that it fails to provide any real protection to the party seeking security, or so high that it is oppressive to the party required to provide the security.[16] The amount must be just and reasonable in all the circumstances of the particular case.[17]

91 The Court has a discretion to apply an overall discount to reflect the uncertainties inherent in litigation and the imprecision associated with predicting future costs. The factors relevant to the discount to be applied include the chance of the case collapsing before trial with the consequence that the security ordered turns out to be an over-provision; to the extent they are discernible, the apparent prospects of success; the extent and quality of the information provided to the Court about the likely amount of costs, the fact that security should not effectively deny the applicant a right to pursue the claim, the extent a defendant's costs may relate to a case that is not essentially defensive; and the real prospect the amount sought would be reduced on taxation.[18]

92 The Lenders submitted that in the First SFC Ruling, the Court:

(a) deducted in full the costs of workstreams the Court determined were not claimable;

(b) accepted that the Lenders could recover professional costs of their Sydney based solicitors, assessed as recoverable by reference to the principles that would apply on a costs assessment undertaken in respect of proceedings in the New South Wales Supreme Court under New South Wales principles;

(c) applied, as a consequence, the hourly rates assessed as recoverable by a New South Wales costs consultant, Mr Nicholas, as the recoverable rates for Allen & Overy solicitors and English counsel; and

(d) then applied to the Lenders' estimate of future costs a global discount of 50% to the costs of solicitors and English counsel and a discount of 20% to Victorian counsel costs.

93 The Lenders submitted that on this application the Court should:

(a) discount Australian counsel fees by 20%;

(b) accept the amounts assessed by Mr Nicholas as recoverable in respect of Allen & Overy professional fees and English counsels' fees; and

(c) accept disbursements as wholly recoverable.

94 The Lenders said the Court should derive comfort that the amount of security sought by the Lenders was reasonable because, first, Mr Nicholas had provided evidence of the revised CARC Guidelines and that the recoverable rates for partners and senior associates would be higher than the rates applied in the Court's First SFC Ruling; and second, based on the exchange of categories of discovery since the Lenders filed the Fourth Shepherd affidavit, Mr Shepherd has formed the view the costs associated with discovery will be greater than the amount sought by the Lenders in this application and the Lenders will incur costs in responding to the plaintiffs request for further and better particulars.

95 The Lenders submitted that the plaintiffs' proposed approach involves:

(a) applying a significant discount to the Lenders' estimates following workstreams: 40% of solicitor and counsel costs for discovery, 40% of solicitor costs for lay evidence, expert evidence and directions hearings and effectively 65.5% of solicitor costs for the security for costs application;

(b) then applying a further discount of 50% professional costs and 20% of Australian counsel fees; and

(c) deducting the amount already paid for discovery conferral from the amount reached following the application of the discounts.

96 In relation to the discovery workstream the Lenders submitted that their estimate of costs is robust and reasonable. There are four Lenders located in different jurisdictions, as are the relevant documents, so that there are five Relativity databases involved, hosted in four countries. The documents sought are potentially voluminous given the nature and extent of the allegations and defences and the timeframes involved. The Lenders estimate factors in the use of technology assisted review of documents to estimate a 50% reduction of the dataset to be reviewed and has applied a conservative estimate of the time required to review each document for the first and second level reviews. A significant number of documents are likely to be subject to claims of privilege and redactions will need to be applied for privilege and to comply with data protection and banking secrecy laws. The Lenders have not sought to increase their estimate of costs of discovery despite Mr Shepherd now holding the opinion that the volume of documents involved is likely to be much greater than his earlier estimate because of the extent of the plaintiffs' proposed discovery categories.

97 The Lenders submitted that the plaintiffs' criticism that their costs of discovery reflected a 'top heavy' approach was incorrect as the majority of hours allocated for this workstream are at the associate level. The Court should not heavily discount the security for this workstream on the basis that the categories of discovery have not been finally determined because it is clear that the scope of discovery sought, and thus the associated costs, will be far higher than Mr Shepherd estimated in his fourth affidavit. Additionally, the Court should not discount the costs on the basis that graduates would be conducting the first level review because Mr Shepherd has clarified that associates will be undertaking this work.

98 In relation to whether the Court should order security for the costs of issuing subpoenas, the Lenders submitted that the plaintiff's allegations will inevitably require evidence from third parties such as potential funders, the Lenders' advisors and Lockheed Martin, who had a central role in the relevant events. It is reasonable to assume that one of the parties will issue subpoenas and the Lenders should be appropriately secured for their costs of reviewing documents produced by third parties.

99 The Lenders said the plaintiffs' proposal that the security already paid for discovery conferral be deducted after applying discounts to all the tasks in this workstream and a global discount was inappropriate and unjustifiable. The correct approach would be to remove the costs of discovery conferral at the outset and not at the end as the plaintiffs propose.

100 In relation to the other directions hearings, advice and care and conduct workstream, the Lenders submitted that Mr Sasson's criticism that the Lenders' estimate is 'top heavy' is not correct. The greatest number of hours are allocated to associates or senior associates rather than partners or counsel. The Lenders also submitted that Mr Sasson has not explained how he formed the opinion that only 30% of the estimated solicitor fees would be recoverable on an standard basis.

101 In relation to the top up security application workstream, the Lenders submitted that the plaintiffs' proposed sum of $30,000 security equated to 34.5% of the solicitors' actual costs estimated by the Lenders. If the overall discount were then applied the plaintiffs' proposal would amount to 17% of the Lenders' estimated actual solicitors' costs for the security application. This level of discounting was excessive and inconsistent with the Court's First SFC Ruling.

102 The Lenders submitted that it could not be fairly said that they have taken a deluxe approach to defending the proceeding and that the evidence from Mr Shepherd reflects a realistic and reasonable approach to their application.

103 In relation to an overall discount, the Lenders submitted that the plaintiffs' proposed double discounting was plainly excessive and would result in an amount of security that failed to provide any real protection to the Lenders. The Lenders said:

(a) as to the chance of the case resolving before trial, the fact the Lenders only sought security to the mediation stage warranted a reduced global discount;

(b) the apparent prospects of success was a neutral factor at this stage of the proceeding;

(c) the Lenders have provided detailed information from an experienced practitioner about the estimated costs of defending the proceeding;

(d) the estimated costs relate to the Lenders case which is defensive in nature;

(e) as to the real prospect that the Lenders cost would be reduced on taxation, the Lenders submitted Mr Nicholas' evidence of likely recovery rates meant that this factor does not warrant a significant discount;

(f) any overall discount, for these reasons, should not be of the magnitude applied in the First SFC Ruling and should be no greater than any overall discount applied to Coface, noting their relative respective roles in the proceeding and similar estimates of costs of the relevant workstreams.

104 The plaintiffs' primary contention was that the Lenders and Coface sought an excessive amount of security, with the Lenders' approach being particularly unmeritorious. The plaintiffs submitted that it was not necessary for the security to be paid in a lump sum and that requiring a lump sum payment would be premature and inherently oppressive given the significant amounts involved. They proposed that the Court order security in a sum of $1,705,988.48 for the Lenders and that, along with the amount to be paid as security for Coface, be paid in four tranches in the weeks before making discovery, filing lay evidence, filing expert evidence and attending mediation.

105 The plaintiffs submitted that the Court's discretion to order security must be exercised judicially, meaning the Court must determine a just and reasonable amount involving guestimates as much as estimates provided there is an adequate evidentiary basis. Both the Lenders and Coface's applications call for significant discounts because of the deluxe approach adopted by the defendants. The larger and more expensive the case, the higher the discount is likely to be. Where quantum is based on interstate rates, a discount should be applied because there is a risk of disallowance of that rate. Imprecision in evidence and unreliable assumptions warrant a larger discount, in part because any insufficiency in security may be addressed later.

106 The plaintiffs submitted that they had approached the quantum of security by:

(a) reducing the Lenders' estimates to what Mr Sasson considered would be recoverable;

(b) then applying an overall discount to reflect the factors identified above and in my First SFC Ruling.

107 The plaintiffs noted that the percentage recoverability reductions proposed by Mr Nicholas and Mr Sasson were not widely divergent. Mr Sasson had, however, then applied an overall discount of 50% to professional fees and 20% to counsel fees, in line with the overall discount the Court applied in the First SFC Ruling.

108 The plaintiffs submitted the following matters indicated that the Lenders were conducting a deluxe approach in this proceeding:

(a) Mr Shepherd, in his fifth affidavit, conceded the Lenders would not recover in a taxation the amount originally sought by the Lenders;

(b) the Lenders have not applied the global discount to Allen & Overy professional costs that the Court applied in the First SFC Ruling;

(c) Mr Shepherd has allocated an excessive, disproportionate and dubious level of work to senior lawyers, and this lack of delegation was rejected by the Court in the First SFC Ruling;

(d) the amount sought by the Lenders for discovery is both excessive and premature;

(e) Mr Shepherd has identified the areas of expertise that the plaintiffs and Coface have already indicated will be required and so there is no basis for the Lenders seeking an additional amount for this work;

(f) there is no order for subpoenas and subpoena costs were not contemplated by Delany J to be included in this security for costs application; and

(g) the Lenders' estimate for the security for costs application is excessive, particularly when compared to Coface's estimate for the application.

109 The parties submitted, correctly, that I was not bound to follow the approach I adopted in the First SFC Ruling. It appears to me that, to the extent possible and appropriate, based on the evidence presented on this application, a consistent approach is desirable.

110 There was no dispute between the parties that this proceeding involves a complex, multi-party commercial agreement, the application of foreign law and that the sum sought by the plaintiffs is very significant. The complexity of the proceeding and the issues in dispute has only been confirmed by the filing of defences and the various interlocutory disputes that have arisen to date. As the authorities make clear, where the fees charged by a defendant's lawyers are expensive, or where a deluxe defence is being run, a large discount may be applied. At the same time, a defendant in complex litigation is not expected to run a defence on a shoestring budget.

111 The Lenders have filed detailed evidence of the assumptions upon which their estimates of the costs involved in each workstream were calculated. It appears to me that, taking into account the adjustment to Mr Shepherd's estimates to take into account Mr Nicholas' opinion, but with the exception of the lack of application of a global discount, those assumptions are fair and reasonable and I am not able to identify any obvious flaw in the Lenders' reasoning.

112 Conversely, it appears to me that the plaintiffs' proposed approach involves at least a degree of double discounting. Even if I accepted counsel's submission that the second overall proposed discount was only to take account of the vicissitudes of litigation and the Lenders' deluxe approach, in light of the earlier adjustments to the estimates, I cannot except a 50% overall discount is appropriate. In my view an overall discount of that magnitude is not warranted given the same magnitude of discount was applied in the First SFC Ruling to take account of the vicissitudes of litigation and the Lenders' deluxe approach but also criticisms that the Lenders' estimates were top heavy or involved duplication.

113 The largest dispute between the Lenders and the plaintiffs appears to be in relation to the professional costs of discovery. I accept that the scope of discovery remains uncertain, pending the outcome of the hearing of the remaining disputes about certain categories of discovery. It is clear however that the discovery task, involving large numbers of documents stored on different databases located in different continents, will be significant. In my view a larger discount to the Lenders' professional staff costs of discovery is warranted.

114 The Lenders have conceded, following receipt of the Second Nicholas Report, that a further discount should be applied given Mr Nicholas' opinion as to the recoverability of professional costs for the lay evidence, expert evidence, mediation, other directions and top up security for costs application. Mr Nicholas' opinion that further discounting is required was based on the Lenders low levels of delegation in the lay evidence workstream and the likelihood of duplication in the expert evidence, mediation, other directions and security for costs application workstreams.

115 The plaintiffs complaint, contained in Mr Sasson's evidence, about the lay evidence, expert evidence and other directions workstreams is that the Lenders' proposed structure of the work is 'top heavy'. It appears to me that this is really another way of saying that the Lenders have not applied an appropriate level of delegation.

116 I accept that it is appropriate to further discount the Lenders' professional costs of the lay evidence, expert evidence, other directions and security for costs application workstreams. The plaintiffs make no complaint about the Lenders proposed 40% discount to the mediation workstream and so I will not discount that further.

117 For reasons given later in this judgment I have decided to allow security in relation to subpoena costs. Put, shortly, to defer consideration of security for subpoena costs would in my view increase the parties costs. Additionally, the parties could not rule out the possibility of some subpoenas being issued prior to mediation.

118 Taking a broad brush approach, I have decided to apply a 40% discount to the professional costs of each of the Lenders' workstreams in the Fourth Shepherd affidavit and a 20% discount to counsels' fees of each of those workstreams. This will have the effect of further discounting the estimate of professional costs in each workstream from the figures in the Fifth Shepherd affidavit. I will not discount English counsel fees, which are in any event modest and which Mr Nicholas opines would be fully recoverable. The only exception to the 20% discount on counsel fees is the amount I have allowed for counsel's fees in the discovery workstream, which the parties agree, taking into account sums already paid, should be $19,360. This is consistent with my approach in the First SFC Ruling. The parties are in agreement in relation to disbursements and so I will not apply any discount to those projected costs.

119 I have decided not to apply a further overall discount. My reasons for not applying an overall discount are as follows. First, given the additional evidence of the issues in dispute between the plaintiffs and Lenders on this application, a discount of the Lenders' costs in a lessor amount than the discount I applied in the First SFC Ruling is appropriate. The discounts I have applied to both the Lenders' professional staff costs and counsels' fees are already significant and in my view encompass not only a reduction for lack of delegation, duplication and the like but also the inherent uncertainties of litigation and any deluxe approach. Second, applying an overall discount to the already discounted amounts would amount to double discounting and would lead to an amount of security that, in my view, would not reflect a reasonable estimate of the Lenders' costs that, if the plaintiffs were unsuccessful at trial, they would be ordered to pay. Third, such an outcome would be unfair to the Lenders.

120 Applying the discounts I have decided results in the following:

$19,360.00 (agreed position between the Lenders and the plaintiffs taking into account sums already paid)

Other directions hearings, advice and care and conduct

121 Coface's relied on the evidence of Mr Hennessey, contained in his affidavits sworn 19 October 2023 and 15 February 2024. Mr Hennessey is a Partner at Dentons Australia Limited, the solicitors for Coface. He has practised as a litigation lawyer for 18 years across Australian state courts.

122 In his first affidavit Mr Hennessey deposed to the procedural history of the proceeding since my First SFC ruling. It is unnecessary to rehearse this again beyond what I have set out earlier in these reasons. Like Mr Shepherd, Mr Hennessey identified the likely steps Coface would need to undertake in this proceeding up to and including mediation. Leaving aside the step entitled critical disclosure review costs which, at the hearing, was no longer pressed by Coface, Mr Hennessey's identified steps were: top up security, discovery categories resolution, discovery, subpoenas, lay evidence, expert evidence, mediation and miscellaneous costs. Mr Hennessey then deposed to the current solicitor and counsel team who would be involved in undertaking the work and their various hourly rates, noting that the fees charged by the counsel involved were all below the Supreme Court Scale and the hourly rates charged by solicitors average out to approximately the allowable Supreme Court Scale. In addition, Mr Hennessey outlined the process Coface's solicitors had undertaken in its Hague Evidence Convention application and deposed to costs of $200,344.00 directly attributable to that process.

123 Mr Hennessey's first affidavit exhibited a table setting out detailed estimates of the time of the particular lawyers in the team required for each anticipated step. Mr Hennessey deposed that he based his estimation of the number of hours required for each on his experience in litigation in Victoria and discussions with the counsel involved. He noted that his estimate of costs had increased since his earlier correspondence with the plaintiffs because of factors including that a contested hearing on Coface's Hague Evidence application had been prepared although ultimately not required, the Lenders had indicated an increase in the number of documents likely to be involved in discovery and he had now included the costs involved in issuing subpoenas.

124 Mr Hennessey set out the assumptions he had made to formulate Coface's likely costs of discovery, broken down by Coface's own discovery costs and Coface's costs of other parties' discovery.

125 In relation to its own discovery costs, Mr Hennessey estimated that once the categories of discovery had been agreed or ordered by the Court, Coface would need to collate the documents to be discovered, translate key documents from French into English using where possible a technology solution to limit costs, create a library of documents in an electronic database, review documents against the categories of discovery and for relevance and claims of legal professional privilege. Mr Hennessey estimated $40,000 of likely costs of a National Accreditation Authority for Translators and Interpreters (NAATI) translator and $150,000 of costs of licence fee and technology support costs for the document library database.

126 In relation to other party discovery costs Mr Hennessey noted the uncertainty in the number of documents likely to be discovered by the Lenders and the plaintiffs. He proposed that the Court fix an amount of security for Coface on the assumption that the Lenders and plaintiffs will collectively discover at least 20,000 documents to Coface and fix a further amount for every additional 2,000 documents discovered by the Lenders and plaintiffs beyond the 20,000 documents. Mr Hennessey deposed to estimated costs of $504,349.00 for the 20,000 documents which he based on an informed estimation of the length of each document and two stages of review, the first stage being undertaken by a graduate lawyer to establish relevance and identify centrally relevant documents and the second stage being a review of centrally relevant documents by more senior lawyers including junior counsel. Mr Hennessey estimated that about 10% (or 500) of the documents reviewed in the second stage would be identified as central other party documents which would then be reviewed by senior counsel. Mr Hennessey proposed an amount of $50,434.90 be allowed for each additional 2,000 documents, being 10% pro rata of the costs estimated for the 20,000 documents.

127 Mr Hennessey set out his assumptions underpinning his estimate of pre-trial mediation costs which included identifying and agreeing a mediator and other logistical matters, participating in a pre-mediation conference with the mediator, preparing a written mediation position paper and collating any necessary documents to provide to the mediator, reviewing the other parties' mediation position papers, preparing advice and conferring with Coface and attending the mediation.

128 Mr Hennessey summarised Coface's estimate of costs in the following table.[19]

Total after allowances applied by Court in the First SFC Ruling (exclusive of GST)

Plaintiffs' evidence in response to Coface's application

129 Mr Sasson, in his first affidavit, said that Coface's estimate of costs was excessive.

130 In relation to Coface's past costs of the Hague Evidence Convention application, Mr Sasson deposed that this aspect of Coface's application amounted to an application to reopen the evidence led by Coface in connection with its first security for costs application, the subject of my earlier ruling. Second, Mr Sasson said that approximately 21 of the 62 documents that were the subject of Coface's letter of request were documents referred to in Coface's defence and the subject of the plaintiffs' notice to produce. Mr Sasson said that as these costs related to steps in the proceeding 'up to and including discovery' they were costs that had been the subject of my first decision and should not be allowed as part of this application.

131 In relation to Coface's application for future costs Mr Sasson said that two junior counsel were not necessary or appropriate for the top up security workstream; that it was unnecessary for Coface to review pleadings as part of the discovery categories resolution task and that in any event the cost of reviewing pleadings was the subject of my First SFC ruling; that it was excessive to have two junior counsel working on discovery conferral; and that no further security should be ordered in relation to discovery conferral because the $70,000 already provided by the plaintiffs for this workstream was sufficient.

132 In relation to Coface's own discovery costs, Mr Sasson said that, as discovery conferral was ongoing, his opinion in respect of Coface's costs of this workstream was necessarily preliminary. Mr Sasson's preliminary view was that Coface's estimate for this work was excessive given there was no evidentiary basis for Mr Hennessey's estimate of the costs of maintaining an electronic documents database and that the 10 hours of senior counsel time allocated to this task should be reduced to 2 hours and the 60 hours of junior counsel time reduced to no more than 10 hours. Mr Sasson concluded that Coface's estimate of own discovery costs should be reduced by 40% before the Court applied a further overall discount.

133 In relation to other party discovery costs, Mr Sasson again said that as conferral about discovery categories was ongoing his views were necessarily preliminary. Subject to that qualification, Mr Sasson said that Coface's costs estimate for this category was excessive because Coface had allowed double the Lenders' estimated time (4 minutes as opposed to 2 minutes) to review each document at the stage 1 review and that 80 hours of junior counsel time and 20 hours of partner time was excessive when usually junior counsel and partners would have very limited involvement in document review workstreams. Mr Sasson also said that 50 hours of senior counsel time to review central other parties' documents was excessive because this work would normally be undertaken by junior counsel. Mr Sasson suggested that senior counsel should be allocated no more than 5 hours to confer with junior counsel in respect of key documents. Mr Sasson concluded that this workstream should be discounted by 40% before a further overall discount was applied.

134 In relation to the lay evidence workstream, Mr Sasson said that the $100,000 allocated to NAATI translators and the $100,000 allocated for Coface's legal team to travel to France to interview witnesses was unreasonable in light of the ready availability of inexpensive video conferencing technology. In Mr Sasson's view these costs were properly characterised as non-recoverable standard costs.

135 In relation to the subpoena workstream, Mr Sasson said it was premature to seek security for costs associated with the possibility of issuing subpoenas to third parties because on Coface's evidence the necessity of this step would only become apparent following review of discovery. Additionally, Mr Sasson noted that subpoena costs were not anticipated in Delany J's orders in relation to the top up security applications.

136 Mr Sasson summarised the plaintiffs' response to Coface's application as follows. Taking into account his views of Coface's costs which should be disallowed or reduced, and then applying a global discount to Coface's appropriate amount of claimable costs, a total amount of $1,665,222.04 top up security should be allowed.

137 Mr Hennesey's second affidavit addressed a number of matters, some of which were no longer relevant at the time of the hearing because the issues between the parties had been refined. In relation to the circumstances leading to Coface's Hague Evidence application Mr Hennessey sought to rely on earlier affidavits he had sworn and filed in the proceeding. In relation to subpoena costs, Mr Hennessey deposed that, given the factual complexity of the proceeding, it was highly likely that numerous subpoenas would need to be issued, including to the key customers, contractors and advisors the plaintiffs had identified in their amended statement of claim. Mr Hennessey acknowledged there was uncertainty whether the subpoenas would need to be issued before the parties attended mediation but said he included these costs to avoid the need to make a further application for security should subpoenas need to be issued prior to mediation.

138 Mr Hennessey said that Mr Sasson's proposed approach to the overall discounting of Coface's estimates of security was extreme and not appropriate given the complex nature of the proceeding and significant quantum in dispute. He confirmed his estimates of Coface's discovery costs given the number of categories of documents being discussed by the parties at the time. Mr Hennessey also confirmed the basis of his estimate of the costs of establishing and maintaining the discovery documents database and Coface's estimate of the costs of further compliance with the Hague Evidence Convention associated with Coface's own discovery costs. Mr Hennessey disagreed with Mr Sasson's estimate of the time required to conduct the proposed stages of document review saying Mr Sasson's estimates were unreasonable. Finally Mr Hennessey deposed that the use of NAATI translators was necessary in the preparation of lay evidence given that all of Coface's witnesses are located in France, predominately speak French as their first language and the vast majority of Coface's business records were in French. Mr Hennessey agreed that some witnesses could be interviewed using an online meeting platform but said that, given the document heavy nature of the litigation and language difficulties, there would still be a need for Coface's legal team to conduct some meetings with at least six to ten critical witnesses in person and comply with the Hague Evidence Convention before filing witness statements.

139 Both the plaintiffs and Coface provided the Court with aides memoire to summarise their positions at the time of the hearing.

140 Drawing on the information in those aides memoir the following table reflects the position of the Coface and the plaintiffs at the time of the hearing, without Mr De La Rue's proposed deductions but after applying the same overall discount applied by me in the First SFC Ruling.

$857,389.12 [allowing 40% of $21,128.80 for Discovery Categories Resolution]

[allocating the total $953.80 for Discovery Categories Resolution to Solicitors fees]

[allowing 60% of $21,128.80 for Discovery Categories Resolution]

The parties' submissions on Coface's application

141 As can be seen in the above table, the parties were in agreement on the amount of security to be provided in relation to the expert evidence, mediation and miscellaneous workstreams, and very close in relation to the top up security workstream. Accordingly, I will focus on the parties submissions on the workstreams that remain in dispute.

142 Coface submitted that the following three matters were centrally in dispute between it and the plaintiffs:

(a) whether Coface ought be awarded any security for costs in connection with the Hague Evidence Convention application;

(b) the discounts, if any, that ought to be applied to Coface's claim for security for costs; and

(c) whether Coface ought be awarded any security for costs for subpoenas now or whether that ought to be considered at a later time.

143 Coface submitted that the rates for Coface's legal team, set out in Mr Hennessey's affidavits averaged out at approximately the Supreme Court scale allowable rates. The fees charged by counsel are below the Supreme Court scale. Coface submitted that given their proposed rates are within the parameters of standard costs, and given their estimates already applied the overall discounts applied by the Court to Coface's estimates in the First SFC ruling, there is no reason for the Court to further discount Coface's estimates in this application. Coface noted that Mr Sasson, for the plaintiffs, observed that the discounts underpinning Coface's application were reasonable and appropriate.

144 Coface submitted that the $70,000 already provided as security for discovery conferral was expressly not provided as security for any discovery dispute remaining after the discovery conferral process and that given the exchange of categories between the parties, such a dispute was highly likely. Coface sought a further $21,128 in security for discovery categories dispute costs, after application of discounts to the actual estimated costs.

145 Coface rejected the suggestion that their estimate of discovery costs should be reduced by deducting the amount allocated to lawyers to review the pleading. It submitted this was an appropriate and conventional approach to drafting categories for discovery and necessary given the complexity of the pleadings in this proceeding.

146 Coface submitted that the Court should disregard Mr Sasson's opinion that it is not appropriate to have two junior counsel working for 50 hours each on discovery conferral. According to Coface the relevant parameter is the total hours estimated rather than the number of counsel involved. Coface said its time estimate was appropriate given there are over 150 categories of documents identified by the parties for discovery after three rounds of written conferral between the parties.

147 Coface submitted the plaintiffs' proposed reduction to Coface's estimate for the discovery workstreams in addition to applying the overall discount involved a double deduction approach and was inconsistent with the discount applied by the Court in the First SFC Ruling. Coface said its estimation of costs was built on a solid foundation and was in fact conservative in light of the extensive categories of discovery proposed between the parties and the reasonable estimate of the costs of database management over a two year period.

148 In relation to the subpoena workstream, Coface submitted that it was likely that subpoenas will be served on key customers identified by the plaintiffs and that it would be pragmatic for the Court to order security for those costs now rather than defer the issue. Deferral would cause the parties to incur the further time and costs involved in connection with another application for security.

149 In relation to the lay evidence workstream, Coface submitted the travel and NAATI translator costs were reasonable and appropriate because Coface's proposed witnesses are all presently located in France and are not native English speakers and the overwhelming majority of Coface's business records are in French. Based on interviews already conducted by video conference, Coface estimated that six to ten witnesses would need to be interviewed in person in France. Coface said it was critically important to sit with the key witnesses 'around a table' to finalise their evidence.

150 The plaintiffs submitted that there were six difficulties with Coface's estimates:

(a) Mr Hennessey' affidavits lacked detailed analysis and did not include any evidence from a costs consultant;

(b) Coface seeks security for past costs that should have properly formed part of its first security for costs application;

(c) Coface's estimate for discovery is excessive and should be reduce by 40%, and the claim of $150,000 for document database management is unsubstantiated;

(d) Coface's estimate of $150,000 for NAATI translator fees and travel and accommodation costs is not supported by any analysis on how it estimates the number of witnesses likely to be required and does not adequately take account of savings that could be made through the use of video conferencing;

(e) Any claim for security for subpoena costs is premature;

(f) Coface's estimate for the costs of its security for costs application includes 45 hours for two junior counsels' time which, with the costs of senior counsel is excessive such that the estimate should be reduced by $4,095.00.

Should Coface get security for its past costs incurred in connection with the Hague Evidence Convention application?

151 Coface submitted that its first application for security for costs did not contemplate any of the work required to bring an application under the Hague Evidence Convention necessary to comply with the French Blocking and Channelling Law. The reason for this was because Coface's Australian lawyers were, at the time of the first application for security, unaware of the French Blocking and Channelling Law.

152 Coface conceded that the terms of the Court's order made on 20 September 2022 required the first plaintiff to provide security to Coface for 'steps in the proceeding up to but not including discovery' and that the work undertaken in relation to Coface's Hague Evidence Convention application was performed prior to discovery. Coface submitted however that the first plaintiff would not be prejudiced by the Court ordering security in relation to these costs in circumstances where Coface:

(a) was obliged to incur the costs of the Hague Evidence Convention application as a result of being a defendant in the proceeding;

(b) was successful in its Hague Evidence Convention application; and

(c) if it had sought security for these costs as part of its first security for costs application it was highly likely security would have been ordered.

(a) the obligation to disclose critical documents arises at the earliest reasonable time after a party becomes aware of the existence of the document or any such further time as the Court may direct;

(b) Coface refers to many of the critical documents in its defence;

(c) the costs associated with the disclosure of critical documents are therefore properly costs of the defence and fall within the first tranche of security which included costs up to but not including discovery;

(d) Coface has not properly explained its failure to seek security for these costs in its first security for costs application;

(e) the Court should infer that Coface was aware of the French Blocking and Channelling Law because:

(i) the French Law is not new;

(ii) Coface is a French institution that has operated internationally for many years; and

(iii) Coface has previously been a party to litigation in Australia;

(f) Coface is a sophisticated and well-resourced party with an experienced legal team; and

(g) it would be unreasonable and unjust to allow Coface to return to issues that could and should have been apparent to Coface at the time it made its first application for security and such an approach would be contrary to the overarching principle of civil litigation, being the just, timely and cost-effective resolution of the real issues in dispute.

154 Coface's application for further security for costs is made under r 62.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Rules), s 1335 of the Corporations Act 2001 (Cth) (Corporations Act) and in the exercise of the Court's inherent jurisdiction. The Court's power to order security for costs exists and derives from the Court's inherent power to regulate its own procedure.[21] Order 62.02 sets out grounds upon which an order for security may be made. Section 1335 of the Corporations Act gives the Court the discretion to order security for costs against a corporate plaintiff. The Court's discretion to order security for costs under the Rules, the Corporations Act or in the exercise of its inherent jurisdiction is broad but must be exercised judicially and according to the circumstances of the case.

155 The Court may vary an order requiring a plaintiff to pay security for costs.[22] Coface and the plaintiffs were in agreement that the Court has discretion to vary an existing security for costs order in special circumstances[23] or where there had been a change in circumstances.[24]

156 In GB Radio, Hargrave J had been referred by the parties to a decision of the Court of Appeal of England in Gordano Building Contractors Ltd v Burgess.[25] In that case Mann LJ (with the agreement of Sir Denys Buckley) expressed doubt that a plaintiff against whom an order for security for costs had been made could seek a variation of that order by producing fresh evidence as to the state of affairs extant at the date of the order. Mann LJ expressed the view, based on obiter observations made by Kerr LJ in the unreported case of Parkinson v Myer Wolff & Manley,[26] that a plaintiff could apply to vary or discharge an order for payment of security if the plaintiff could demonstrate a material change of circumstances. After considering these cases Hargrave J stated:

In my view, r 62.05 gives a broad unfettered discretion to be exercised according to all of the circumstances of the case existing at the time of the application to vary or discharge.

I accept, however, that in the absence of a material change in circumstances, the discretion will usually be exercised against variation or discharge, for the reasons stated by Mann LJ in Gordano. Fresh evidence of facts existing at the time of the original order for security will not usually be sufficient to enliven the Court's discretion. I say usually, because there may be circumstances where there are good reasons for the fresh evidence being unknown to the party who has provided security. For example, the beneficiary of the security may have misled the Court or the other party about the existence of material facts.[27]

[citations omitted].

157 In ECW Payments[28] Cameron J considered an application by the defendant Bank for further security for costs. The Bank's application sought an additional amount for past costs associated with tasks for which security had previously been ordered. The Bank argued that these additional costs were due to a number of matters including substantial amendment of the plaintiff's case; the Bank's solicitor had underestimated the scope and complexity of the matter which had also increased since the time of the first security for costs application; and issues relating to discovery, including the imposition of a confidentiality regime in respect of some of the Bank's documents had led to costs not anticipated at the time of the original estimates.[29] In refusing the Bank's application for security for these past costs, Cameron J stated:

It is almost often the case in large scale and factually complex litigation that pleadings will be refined, discovery issues will be the subject of dispute and unanticipated interlocutory applications will be necessary. However, consistently with the objectives of the Civil Procedure Act 2010 (Vic), I do not consider that it is in the interests of the 'just, efficient, timely and cost-effective resolution of the real issues in dispute' that the court revisit (in the absence of some exceptional circumstance) some nearly four years down the track, orders for security for costs. Those orders were made by this court on responsible estimates by experienced practitioners and based on the best available information at the time (necessarily with the limitations of trying to predict the future). This is not to say that there may conceivably be instances where it is appropriate to revisit previous orders for security for costs in the absence of an appeal of such orders. Ordinarily the court would not allow a party to revisit past orders for costs (absent an appeal), and I do not see any sound reason for departing from that approach in this case.[30]

[citations omitted].

158 During the course of the hearing there appeared to be some disagreement between counsel for Coface and the plaintiff's counsel about whether, in order to establish a material change in circumstances, it is necessary to point to circumstances originating external to or beyond the control or knowledge of the party seeking to rely upon them. I have not been able to ascertain such a necessity from the authorities although it is tolerably clear that it will be more difficult for a party to establish a material change in circumstances where the factors it seeks to rely upon were within its knowledge and control at the time of the earlier application. In my view, whether or not such circumstances are established must be assessed against all the circumstances of the case.

159 I am satisfied that Coface has established special circumstances and a variation of the first order for security for costs to include an amount in relation to the past costs of the Hague Evidence Convention application is appropriate. I have reached this view for the following reasons:

(a) Coface's lawyers have explained that while experienced litigators, they were unaware of the French Blocking and Channelling Law at the time of their first application for security;

(b) while Coface may have been involved in litigation in Australia the plaintiff did not go so far as to submit that Coface's current legal team had been involved in any of those cases;

(c) while Coface has engaged very experienced legal practitioners there is no evidence that those practitioners are very experienced in French Law, indeed Mr Hennessey's evidence was that on becoming aware of the Law he sought advice from French lawyers about its meaning and application;

(d) the requirement to comply with foreign law is reasonably unusual in the course of Australian commercial litigation;

(e) this is not a case where Coface is seeking additional security in relation to a workstream identified in its first security application, it involves an entirely new workstream;

(f) the first plaintiff has conceded the costs of complying with the requirements of a foreign law in order to enable a party to comply with the Australian law or a Court order are recoverable;

(g) the plaintiff's counsel did not contest Coface's counsel's submission that absent an order for security, in circumstances where the first plaintiff is in liquidation, Coface's costs of the litigation would not be recovered;

(h) having regard to all of the above circumstances, a variation of the existing order for security to include a sum for past costs of Coface's Hague Evidence Convention application is not inconsistent with the just, timely and cost-effective resolution of the real issues in dispute.

160 I am satisfied that the first plaintiff should pay the sum of $141,646.00 as security for the past Hague Evidence Convention application. This sum reflects the actual costs incurred, discounted by 40% in relation to solicitors' professional fees and 20% for counsels fees. Given these costs are actual past costs it was open to Coface to argue that a lesser discount should be applied.

How should the Court treat security already paid for discovery conferral?

161 As noted above, on 13 November 2023 the Court made orders for the payment of security in relation to discovery conferral which Delany J had ordered[31] the parties to undertake. The scope of the discovery conferral task was set out in the orders and encompassed:

(a) exchange and respond to proposals for any categories of discovery to be given;

(b) agree a protocol for the electronic exchange of documents; and

(c) confer in good faith to try to agree on proposed discovery orders, including the form of any Hague Evidence Convention letters of request regarding discovery.

162 Delany J ordered that if the parties were unable to agree on proposed discovery orders, any discovery dispute would be considered at a future directions hearing.

163 The plaintiffs argue that any sum for security in relation to discovery in this application should be reduced by the sums previously ordered to be paid in relation to discovery conferral. Both the Lenders and Coface disagree.

(a) the plaintiffs provided the defendants with proposed defendant discovery categories, comprising a total of 94 categories spanning a date range from 2010 to 25 January 2024;

(b) the plaintiffs also circulated a first draft of the document management protocol; and

(c) the defendants provided the plaintiffs with their proposed plaintiff discovery categories, comprising 56 categories of documents.

(a) the Lenders provided preliminary comments on the draft document management protocol;

(b) Coface and the Lenders provided the plaintiffs with their comments on the defendant discovery categories; and

(c) the plaintiffs provided Coface and the Lenders with their comments on the plaintiff discovery categories.

166 On 5 February 2024 Coface provided the plaintiffs with a response to the plaintiffs' response to the plaintiff discovery categories and the Lenders adopted Coface's response.

167 Mr Shepherd, for the Lenders deposed that as at 16 February 2024:

(a) the document management protocol had not been finalised, with the last draft sent by the Lenders' solicitors on 22 December 2023;

(b) the plaintiffs had not provided a response to either (1) the Lenders' response to the plaintiffs discovery categories or (2) Coface's response to the first plaintiff's discovery categories;

(c) in the relation to the defendant discovery categories, the conferral had not yet proceeded beyond Coface's response to the plaintiffs' response to the plaintiff discovery categories and the Lenders' adoption of that response;

(d) none of the plaintiff discovery categories (or any modifications) have been agreed; and

(e) the Lenders have not agreed to any of the defendant discovery categories (and the plaintiffs have not responded to any proposed modifications).

168 Mr Shepherd anticipates that there will be residual disputes between the parties regarding the discovery categories which will need to be resolved by the Court. He notes that the discovery conferral security already paid did not include an amount for the costs of such a hearing.

169 In my view the defendants should be allowed security for the costs of resolving the outstanding discovery categories. I accept that Coface sought to specifically exclude these costs from the discovery conferral costs for which the first plaintiff has provided $70,000 security. The amounts that will be allowed for the Lenders and Coface to resolve the outstanding discovery categories will be subject to the 40% discount for solicitor fees and 20% discount to counsel fees.

Should the Court order security for subpoena costs?

170 I have decided to order an amount of security be paid for the costs of subpoenas as part of this application. I have done so because it was apparent there was some possibility that subpoenas would be issued prior to the mediation and because I agree with Coface's counsel's submission that to defer the issue of security for subpoena costs would likely cause delay and increase the parties' costs of resolving this issue.

What discounts are appropriate for Coface's estimated workstreams?

171 As I have noted above, the parties submitted that the Court was not bound to follow the approach it adopted in its First SFC Ruling. I accept that is correct. It appears to me that to the extent possible and appropriate, a consistent approach is desirable.

172 In my view the plaintiffs' proposed application of reductions to individual workstreams before the application of the same overall discount I applied in the First SFC Ruling involves a double reduction. I do not accept the plaintiffs' counsel's submission that the overall reduction applied reflected a reduction solely for a deluxe approach. As I have explained the overall reduction applied in the First SFC Ruling was intended to reflect, using a broad brush, the inherent uncertainties in the parties' estimates of future costs and the uncertain course of the litigation as well as an adjustment for Coface adopting a deluxe approach to the litigation.

173 Coface's application was supported by detailed evidence of the assumptions underpinning its estimates. It is not uncommon for security for costs applications to include evidence from experienced litigation solicitors, with or without further evidence from costs consultants. I do not accept the plaintiffs' criticism of Coface's application for not including cost consultant evidence. Indeed, such criticism appears contrary to Mr Sasson's concession about the appropriateness of Coface's proposed discounting. I have not detected any obvious errors in the reasoning Coface has employed to reach its estimates of costs.

174 Coface's costs estimates already applied the overall discount I applied to both its professional costs and counsels' fees in the First SFC Ruling.

175 I accept Coface's explanation of the need for NAATI translators and for its legal team to travel to France to finalise witness statements. Given the preliminary use of videoconferencing, the central importance of witnesses who are based in France and are not native English speakers, these steps are appropriate and reasonable. As Coface noted, the Court will require any of Coface's business records to be relied upon at trial to be translated from French to English. I accept the plaintiffs' criticism that Coface has not provided a breakdown of its estimated travel costs. I have not discounted the travel costs because, unlike the Lenders, Coface has already applied an overall discount to its projected disbursements. Coface's inclusion of NAATI translation and travel costs in its lay evidence workstream is appropriate and should be allowed.

176 As noted above, I have decided to allow Coface's application for security in relation to the Hague Evidence Convention application and the subpoenas workstreams. I propose to allow Coface's amount in the top up security application, expert evidence, mediation and miscellaneous workstreams given the parties are either not in dispute or extremely close in their respective estimates.

177 In relation to the discovery categories, I accept Coface's evidence that graduates are to be paid the same amount as junior associates. I also accept that, while the categories of documents to be discovered remains uncertain, based on the parties' correspondence, it is likely that more documents than were first estimated will need to be considered. I do not accept the plaintiffs' evidence of the time necessary to review each document. An estimate of two minutes per document seems to me unreasonably parsimonious given the likely number of categories against which each document will need to be considered, the average length of the documents and the necessity to check for claims of privilege and confidentiality. Based on Mr Hennessey's evidence, I accept that Coface's estimate of four minutes per document is reasonable.

178 Coface's suggestion that security for other party discovery be provided on the basis of an amount for the first 20,000 documents and a 10% pro rata amount for each further 2000 documents appears to me a sensible suggestion given the current uncertainty as to the final number of documents involved.

179 I am satisfied that Mr Hennessey's Fifth affidavit explains the basis for Coface's estimate of the costs of the proposed database periodic user licence fees.

180 I will order that the first plaintiff pay security reflecting the following:

$316,311.20 (+ $31,631.12 for each 2,000 documents over the first 20,000 documents discovered by other parties)

Should the plaintiffs pay the security in tranches?

181 The plaintiffs' counsel submitted that it would be inherently oppressive if the plaintiffs were required to pay security in lump sums rather than in tranches. This submission was opposed by counsel for the Lenders and Coface. Counsel for Coface submitted that there was no evidence that a lump sum payment would be oppressive to the plaintiff and that the suggested tranches did not take account of the inherent overlap in work required for the different workstreams. Coface's counsel also expressed concern that the plaintiffs would seek to revisit the sums of security ordered for particular workstreams if security was to be paid in tranches.

182 While the plaintiffs have not provided evidence of the likely impact of an order that security be paid in a lump sum, I accept that, given the sums involved, and the likely delays due to the necessity for the defendants to follow the Hague Evidence Convention, the plaintiffs' counsel's submission that it is likely that significant sums of money will sit in an account for years.

183 In _DIF III Global Co-Investment Fund, L.P. & Anor v BBLP LLC & Ors,[32]_Hargrave J noted the following about the exercise of the Court's broad discretion as to the form of security for costs:

(1) the plaintiff is entitled to propose security in a form least disadvantageous to it;

(2) the plaintiff bears a 'practical onus' of establishing that the proposed security is adequate and does not impose an 'unacceptable disadvantage' on the defendant;

(3) in order to be adequate, the proposed security must satisfy the protective object of a security for costs order, namely, to provide a fund or asset against which a successful defendant can readily enforce an order for costs against the plaintiff; and

(4) based on these and other relevant considerations, the Court will determine how justice is best served in the particular circumstances of the case.

184 Bearing in mind the likely overlap between some of the defendants' workstreams, my view is that the defendants would not be unacceptably disadvantaged if the security was paid in tranches. I will leave it to the parties to confer on an appropriate number and the timing of the tranches.

185 Nothing in my acceptance that the plaintiffs should be allowed to pay security in tranches should be taken to endorse any suggestion that the amount of security ordered can be revisited, other than in accordance with the principles articulated in the authorities.

186 I have decided to order that the plaintiffs pay further security for the Lenders' costs in the amount of $2,424,675.69. I have further decided that the first plaintiff must pay further security for Coface's costs in the amount of $2,275,566.40 (plus a further $31,631.12 for every 2000 documents over the first 20,000 documents discovered by other parties).

187 I request the parties confer and provide a form of order giving effect to these reasons.

JABIRU SATELLITE LIMITED (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)

NEWSAT LIMITED (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)

LA COMPAGNIE FRANCAISE D'ASSURANCE POUR LE COMMERCE EXTERIEUR (REGISTRE DU COMMERCE ET DES SOCIETES OF NANTERRE 552 069 791)

[1] In oral submissions Coface's counsel further refined the total security sought by Coface was $2,269,661.

[2] Jabiru Satellite Ltd (in liq)(recs & mgrs apptd) & Anor v Societe Generale & Ors [2022] VSC 521 [1]-[38] ('Jabiru v Societe Generale').

[3] Jabiru Satellite Ltd v Societe Generale (No 4) (Unreported, Supreme Court of Victoria, Delany J, 2 November 2023).

[4] Loi n° 68-678 du 26 juillet 1968 [Law No 68-678 of 26 July 1968] (France) JO, 26 July 1968.

[5] Convention on the Taking of Evidence Abroad in Civil or Commercial Matters, opened for signature 18 March 1970, 847 UNTS 231 (entered into force 7 October 1972) ('Hague Evidence Convention').

[6] Le Service de l'information Stratégique et de la Sécurité de Economiques, Ministère de l'Économie et des Finances - Direction générale des Entreprises.

[7] Jabiru v Societe Generale (n 1) [95]-[100].

[8] [2023] VSC 105 [15]-[19].

[10] Supreme Court (General Civil Procedure) Rules 2015 (Vic) ('Rules') app A Supreme Court Scale of Costs ('Supreme Court Scale').

[11] (2011) 243 CLR 588.

[14] This figure includes an amount of $10,200 for English counsel fees which accounts for the differences between solicitor fees and counsel fees between this table and Mr Shepherd's figures above, which add English Counsel fees to the Allen & Overy professional fees.

[15] Trailer Trash Franchise Systems Pty Ltd and Dale Cooney v GM Fascia & Gutter Pty Ltd [2017] VSCA 293, [63]-[65].

[19] I have not reproduced the estimate of costs involved in the critical disclosure review as this category was not pressed by Coface at the time of the hearing.

[20] At the hearing Coface's counsel said Coface sought a total amount of $2,269,661 being the amount sought in the summons less $70,000 received for discovery conferral and less $20,327 being its abandoned claim for critical disclosure review costs). The total figure in the table above is based on the figures in Annexure A of Mr Hennessey's affidavit sworn 19 October 2023, Mr Hennessey's affidavit evidence and the submissions made by Coface's counsel at the hearing.

[21] Lines v Tana Pty Ltd (1987) VR 641, 642.

[22] Rule 62.05.

[23] EWC Payments Pty Ltd v Commonwealth Bank of Australia [2015] VSC 53 [70] ('EWC Payments').

[24] GB Radio (Aust) v Marchant (No 3) [2005] VSC 222 [21]-[22] ('GB Radio').

[26] (Unreported) 23 April 1985, Court of Appeal (Civil Division) Transcript No UB 1888 of 1985.

[32] [2016] VSC 401, [40].