Plaintiffs v Defendants

2 The defendants rely upon the affidavits of their instructing solicitor, Liam Thomas Prescott, made 28 November 2025 and 16 February 2026, to which Mr Prescott exhibits two reports of cost consultant Gavin Wood, dated 28 November 2025 and 16 February 2026. The defendants seek further security of $3,755,597.97. This is based upon an estimate of anticipated professional costs and disbursements of $2,888,921.51 together with a 30% contingency uplift.

3 The plaintiffs have already provided a total of $976,260 in security for costs incurred to 28 November 2025. There has been a history of delay in providing the security ordered.[1]

4 The plaintiffs accept that further security should be provided, but should be in the sum of $1,250,996.27. This is based on, what they submit, are the reasonable costs of the defendants likely to be recovered on taxation between the date of the summons and the conclusion of the trial in the amount of $1,667,995.02, less a 25% discount.

5 The sole issue in dispute is the quantum and the proposed form of orders. The dispute as to the form of orders relates to whether the further security should be payable in one or two instalments, and whether the consequence of non-provision should be a stay or dismissal.

6 The plaintiffs relied upon the affidavit of their instructing solicitor, Nicholas McKenzie-McHarg, sworn 10 February 2026 and of Sharon Lea Drew, a costs consultant.

7 The difference in the size of security is just over $2.5 million.

8 As both parties agree, ultimately, the question is what is a reasonable estimate of the costs that an unsuccessful plaintiff will be ordered to pay. Both parties accept that a broadbrush approach is appropriate.[2]

9 Although the quantum of the dispute is large in dollar terms, the essence of the dispute is relatively narrow.

10 The estimate of professional costs and disbursements which is likely to be recovered is that recoverable on a party/party basis. The largest dispute between the parties is that which relates to professional costs with the defendants submitting that the likely figure is $1,302,236.24 and the plaintiffs $557,449. The differential in disbursements including counsel's fees is much narrower; the plaintiffs' assessment is $1,110,545.67 and the defendants' assessment is $1,586,685.25.

11 However assessed, the quantum of the professional fees is the product of both the applicable rate charged for the work and the time estimated for the work to be completed. The plaintiffs contend that the defendants' estimates of both rates and time are excessive and will not be recoverable on a party/party assessment. Separately, they take issue with the inclusion of costs relating to a yet to be identified potential further interlocutory application. As adverted to above, there is also a dispute as to whether an uplift or a discount should be applied to the estimate of anticipated further costs.

12 The issue as to the apportionment between the claim and the counterclaim can be considered at the outset. The issue is not so much whether costs are incurred in the prosecution of a counterclaim as opposed to the prosecution of the claim. Rather, the issue is whether the counterclaim is purely defensive or not. Where the counterclaim is purely defensive, it is nothing more than a shield, not a sword, and has no different characterisation in substance to that of a standard defence.

13 The defendants' costs consultant, Mr Wood, has applied a 15% discount to the defendants' costs on the basis that 15% relate to the counterclaim alone. The counterclaim here seeks declarations and orders setting aside the agreement that the plaintiffs are suing on, based on alleged misrepresentations, which induced the defendants' entry into the agreement. The counterclaim is wholly defensive. That being so, the counterclaim discount is not necessary, or at the very least, is excessive. Mr Wood's assessment, which reflects this discount, errs on the side of generosity to the plaintiffs. Nevertheless, I propose to apply it but will bear its generous nature in mind when assessing the overall reasonableness of the defendants' security estimate.

14 Given that the primary difference relates to the estimate of recoverable professional fees, I intend to commence my analysis first with that issue.

15 Mr Wood commences his analysis by adopting a blended rate for solicitor's costs, calculated by reference to the Victorian rates charged by the senior solicitor with carriage of the matter, Ms Lei, and the rates of the Queensland solicitor, Mr Prescott. His assessment of the blended rate is based on the recoverable party/party rates for solicitors of their experience.

16 Mr Wood's revised estimate proceeds on the basis that a blended rate calculates at $705.45 per hour. Mr Wood then applies a 15% discount to the blended rate to reflect the fact that ordinarily, party/party costs will be recovered. Given Mr Wood's selection of the blended rate, which itself reflects a party/party assessment, the further 15% discount necessarily allows for the fact that some of the time estimates may not be recoverable on a party/party assessment and/or some of the work the subject of his analysis may only be recoverable at rates charged by more junior solicitors than Ms Lei and Mr Prescott.

17 Ms Drew does not agree with 85% of the costs being recovered and submits that generally, somewhere between 50% and 75% of solicitor/client costs are recovered on a taxation. Mr Wood notes that there is limited data on taxation of party costs post the introduction of hourly rate charging. He does however, say that costs on a solicitor-client basis generally tax between 75% to 90% of actual costs. This is interesting, but not particularly informative in the present context because neither his report, nor the evidence, generally identifies the estimated actual professional costs that will be billed to the client by the defendants.

18 At its core, Mr Wood's approach is something of a hybrid; on the professional fees as to rates, he deploys a hybrid rate, representing his assessment of the rates likely to be recovered on a party/party basis. He then applies those rates to the time estimates, the subject of his instructions from Ms Lei. As an overall catch all allowance, he then applies a discount of 15% to recognise that not all of those assessed changes will be recovered on a party/party basis whether due to time allowances, or the hybrid rate being too high generally or for tasks requiring less senior lawyers than Ms Lei and Mr Prescott. As noted earlier, Mr Wood also reduces the professional costs by 15% to allow for an apportionment of some portion to the counterclaim.

19 In respect of the fees for junior counsel, Mr Wood allows $440 per hour for junior counsel and $1,067 for senior counsel, which is the maximum, noting that senior counsel is charging $1,700 per hour. He then applies those rates to the time estimates the subject of his instruction. It is a similar approach to the first part of his analysis concerning the professional fees, although he does not apply the 15% discount to reflect lesser party/party non-recovery. He does however, apply the 15% counterclaim discount.

20 There are a number of aspects of his reasoning which are contested by Ms Drew. I have had regard to the entirety of her report and have also conducted my own review of the time estimates provided to Mr Wood which influenced his assessment. Those asserted to be excessive were also emphasised in oral submissions by senior counsel for the plaintiffs.

21 In my view, the appropriate starting point is Mr Wood's estimates. In the broad, I accept the hybrid rate and the rates for counsel and the estimated expert's fees. Ms Drew's estimates for expert fees at $20,000 per report were far too low and I put them to one side. Mr Wood's estimates for expert reports appear more realistic.

22 Ms Drew's estimates as to total professional costs of $557,449.35 also appear excessively low. The proceeding involves a 4-5 week trial, and in excess of 20 witnesses, including experts. Many of the witnesses are coming from overseas. There is also a mediation to be completed by the end of May 2026. As a back of the envelope check of the reasonableness of the trial's estimate, Ms Drew's $557,449 estimate is near exhausted by deploying a calculation based on 1.5 solicitors working 45 hours per week for 12 weeks at a hybrid rate of $675 per hour.[3] Experience suggests that far more work will be required than that for the defendants' solicitors.

23 Mr Wood's time estimates present a more realistic starting point. Some struck me as being at the outer limits of the time likely to be taken; in particular, the time estimates for the Court Book, the list of issues, the statement of agreed facts, the two further directions hearings, and the yet to be identified possible further interlocutory application. I do not propose to effect a specific alteration, but I have taken such matters into account in relation to the appropriateness or otherwise of any further discount beyond those that Mr Wood has already deployed.

24 In respect of the estimate of disbursements, I am disposed to start with Mr Wood's assessment, although his assessment is a little overstated due to the total disbursements associated with the unspecified interlocutory application and estimates for counsel's fees being based on time estimates for the court book, list of issues, statement of facts and directions hearing, which seems overly generous. In respect of other matters such as expert fees, flight fees and hotel charges I see no basis to depart from Mr Wood's approach.

25 On its own, I do not consider that a 15% discount as applied by Mr Wood solely to professional fees is sufficient due to the time estimates, the inclusion of the unspecified and possible interlocutory application, and the fact that the professional fees assume that the rates recoverable will be a hybrid of the senior solicitors Ms Lei and Mr Prescott. However, the insufficiency of this discount must also be balanced against the fact that the overall fees for professional fees and disbursements is further discounted by the excessively generous counterclaim discount of 15%.

26 Before returning to the overall assessment, it is necessary to turn to the question of the uplift sought by the defendants. The defendants seek an uplift of 30% on the basis that litigation is notoriously expensive and the case may well take longer and be more expensive than presently anticipated. Mr Prescott deposes that in recognition of this, he applies a 30% contingency to his budget for clients. I do not regard this as a persuasive basis to uplift the estimate of party/party costs. It is one thing to provide for a contingency as a matter of client management. It is another, and less appropriate thing for such a practice to inform the approach to estimating the party/party costs that a successful defendant may recover. Whilst it is self-evidently the case that litigation may cost more and take longer than anticipated, the converse is also true, albeit that the former happens more than the latter. In any case and as noted above, many of the time estimates deployed here appear to sufficiently allow, indeed more than sufficiently, for the likely time for preparation and trial.

27 There was no dispute between the parties as to the general approach to be taken, including as to the global discount. The relevant principles were recently summarised in Bogan v The Estate of Peter John Smedley (deceased)[4] as follows:

It is therefore possible to distil from the above authorities the following principles concerning the proper application of a global discount when determining an adequate amount of security for a defendant's costs:

(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

28 I note that some of the matters taken into account concerning global discounts are already reflected in the defendants' assessment - actual costs have not been used and the estimates have been based on assessed party/party rates.

29 Other factors often taken into account are the possibility that cases may settle or otherwise resolve prior to trial.

30 I have been the trial judge managing this case for some time. Experience does not make me particularly optimistic that the case will settle prior to trial. The dispute has been lengthy and hard fought. Whilst settlement is always possible, little in this hard fought contest to date gives cause for much confidence.

31 I am less pessimistic, however, about the prospect that some issues may fall away or reduce in scope, including some of the matters that will apparently be the subject of some of the expert evidence upon which the defendants intend to rely.

32 Whilst I consider that many of the matters raised by the plaintiffs are largely accommodated by maintaining the overly generous 15% counterclaim discount, I propose to apply a further small discount of 10% to Mr Wood's estimates. This further discount, assessed on a broad brush, sufficiently recognises any fat in the time estimates which underpin Mr Wood's calculations, and allows for the fact that some professional costs may be recoverable at lesser rates than those adopted by Mr Wood. Thus, the amount of security will be 90% of $2,888,921 which equates to $2,600,028.90. In effect, I have started with Mr Wood's estimate which already reflects a 15% party/party discount and the 15% counterclaim discount, which I have noted is overly favourable to the plaintiffs and applied a further 10% discount.

33 The security will be payable in two equal instalments of $1,300,014.45. The first by 30 April 2026, and the second by 31 July 2026. The first date is sufficiently prior to the scheduled mediation completion date of 20 May 2026 and the second is sufficiently in advance of the scheduled trial commencement date of 19 October 2026, such as to adequately protect the parties and allow for orderly mediation and trial preparation.

34 I do not propose to make the orders sought by the defendants to the effect that the entirety of the security be provided in one payment, or that non-provision results in dismissal of the action. I will make the usual orders that the proceeding shall be stayed in the event that security is not provided. Otherwise, and having regard to the unfortunate history of this matter with respect to the provision of security by the plaintiffs, I intend to list the matter for mention seven days after each date for provision of security, such mentions to be conducted remotely by audiovisual link. The mentions will be vacated in the event that security is provided. In the event that security is not provided, and the defendants wish to make application for an order that the proceeding be dismissed, that can be can be raised at the mention and any such application will be accommodated in short order.

Second Plaintiff / Second Defendant by Counterclaim

Second Defendant / Second Plaintiff by Counterclaim

[1] Lighthouse Corporation Limited & Anor v Republica Democratica de Timor Leste & Anor (No 5) [2025] VSC 319.

[2] Quadrant Constructions Pty Ltd v Morgan Barney Aust Pty Ltd [2009] VSC 455, [56].

[4] [2023] VSC 105, [42].