Planet Plumbing (ACT) Pty Ltd v Gentec Australia Pty Ltd

The issues

1. It was common ground at the hearing that Tradelink was entitled to security for costs. The main issue was the amount of security that should be provided. Also in dispute was the appropriate form and timing - that is, when, and in how many instalments, security should be provided.
2. As I have already said, the amount sought by Tradelink in the form of security was approximately $170,000. Tradelink sought that security in two tranches, with the first tranche payable within 14 days of the date of order and the second "within 14 days after service of [Tradelink's] evidence …". Ms Taylor gave evidence in an affidavit dated 28 September 2022 that the fees incurred to date in these proceedings are approximately $54,000. Ms Taylor then estimates that the costs Tradelink is likely to incur for future work are $208,500 (excluding GST). That amount included costs for this application for security, costs of mediation, expert's fees, solicitor's fees and Junior Counsel's fees (including fees in respect of a five-day trial). Ms Taylor gave evidence that in her experience, 60 to 70 percent of solicitor's fees, 75 to 85 percent of counsel's fees, and 100 percent of disbursements (including expert's fees), are recoverable. Taking that into account, Ms Taylor estimated Tradelink's recoverable costs at approximately $208,000. The further reduction to $170,000 was "on account of an overlap of the issues between [Tradelink's] original District Court proceedings and these proceedings …".
3. Planet, on the other hand, submitted that the appropriate amount of security was $80,000, payable in three tranches, with the first tranche due within 14 days after mediation, the second within seven days after service of Planet's evidence on Tradelink, and the third on the day prior to commencement of the final hearing. This reflected the terms of an offer made on 27 October 2022 by Planet to provide security to Tradelink. At the hearing, Planet advanced five reasons in support of its position. The first was that the sum proposed by Tradelink inappropriately included an amount of $15,000 in respect of the security for costs application. The second was that no amount for security should be ordered for the anticipated costs of mediation. The third was that the security sought in respect of past costs was excessive and inadequately explained in the evidence, with the consequence that in the exercise of its discretion the Court should not order $50,000 security for past costs. The fourth was that a reduction had to be made to account for any overlap in issues between these proceedings and Tradelink's claim against Planet. The fifth was that the discount applied by Ms Taylor to reflect the fact that security is generally only provided in respect of recoverable costs was vague and that the appropriate course was to adopt a broad-brush approach and apply a 30 percent discount.

Quantum

1. As to the costs of this application, Planet submitted that no amount of security should be allowed for those costs. Alternatively, Planet argued, if some amount should be included, then the amount sought by Tradelink of $15,000 was excessive and should be reduced. In my opinion, it is appropriate that the amount of security claimed by Tradelink includes an amount in respect of its application for security for costs. This is because Tradelink would be entitled to recover its costs of this application if it is ultimately successful in the proceedings. Nor is the amount sought of $15,000 so excessive as to require reduction. In determining the appropriate amount of security to be ordered the Court is to adopt a broad-brush approach: see Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd [2019] NSWSC 1082 at [206] per Ward CJ in Eq (Broadway Plaza) and the authorities there cited. In my opinion, it would be inconsistent with that approach to apply a reduction to the $15,000 sought by Tradelink in circumstances where that amount does not appear to be unreasonable and where I propose to apply a general discount to make an allowance for irrecoverable costs.
2. Much of the same can be said in response to Planet's second set of contentions, which concerned security for the costs of the mediation. If the mediation fails and the matter proceeds to trial, Tradelink's costs of the mediation would normally be recoverable on assessment if it is the successful party: Civil Procedure Act 2005 (NSW) s 28; Newcastle City Council v Wieland (2009) 74 NSWLR 173; [2009] NSWCA 113 at [30]-[36] per Ipp JA; Wende v Horwath (NSW) Pty Ltd (2014) 86 NSWLR 674; [2014] NSWCA 170 at [247]-[248] per Barrett JA. Although a substantial amount is included for the mediation, it is not so great that some discount should be made to it over and above the general discount I propose to apply. Adopting a broad-brush approach, it is inappropriate to apply a specific reduction in respect of the amount sought for the costs of mediation because doing so risks double counting when the general reduction is applied.
3. Turning to the issue of past costs, Planet submitted that the amount of security sought was, again, excessive. For example, counsel for Planet argued that Ms Taylor's breakdown of Tradelink's past costs results in double counting since it includes provision for the costs of "preparing for and advising in respect of this motion for security for costs". Counsel also submitted that it includes costs for which security would not ordinarily be granted, such as the costs of drafting the cross-claim. There may be a question whether the security sought in respect of past costs is reasonable or otherwise takes into account matters it should not. However, in my opinion, in circumstances where the application for security was made promptly, and having regard to what I have already said about the Court favouring a broad-brush approach, it is appropriate to deal with that issue by making some general allowance.
4. The fourth issue raised by Planet concerned the overlap in issues between these proceedings and the issues raised in the District Court Proceeding, which has since been transferred to this Court. Those proceedings include a claim for set-off by Planet in its defence. Tradelink sought to address these concerns by applying a reduction of approximately $38,000 from $208,000. Tradelink submitted that that reduction was reasonable since the issues in these proceedings are broader and Planet's claim for approximately $6 million in damages expands the issues. Planet contended that, although its claim in these proceedings is broader than its defence in the District Court Proceeding, there remains "significant overlap between the two of them". Counsel for Planet submitted that Ms Taylor's breakdown of Tradelink's estimated future costs included a number of items concerning both sets of proceedings, which should therefore be reduced by 50 percent to be treated as costs in both. Adopting that approach, Planet submitted that the $38,000 reduction applied by Tradelink was too small and that a reduction in the order of $70,000 to $80,000 was more appropriate.
5. It is plain from Ms Taylor's breakdown that of the $208,500 estimated future costs, approximately $50,000 relates to work that is solely relevant to these proceedings. That $50,000 contemplated the estimated costs of this application, the costs of reviewing documents provided by Planet that are referred to in its statement of claim, counsel's fees on advising on the evidence and on settling pleadings, the costs of attending at least four directions hearings, and the costs of reviewing Planet's evidence and preparing lay evidence in reply. That leaves a figure of about $160,000 for estimated future costs of items relating to both proceedings. In my opinion, in the absence of a detailed analysis of the issues raised by the set-off in the District Court Proceeding and the claim in this proceeding it is reasonable to treat 50 percent of those estimated costs as costs relating to the District Court Proceeding and the balance as costs relating to these proceedings.
6. That leaves the issue of whether the discount applied by Ms Taylor was appropriate or whether, as Planet submitted, the Court should apply a general 30 percent discount on the total sum. In my opinion, it is not apparent from Ms Taylor's affidavit precisely what discount has been applied. Ms Taylor's evidence is that in her experience approximately 60 to 70 percent of solicitor's fees and 75 to 85 percent of counsel's fees are recoverable. Counsel for Tradelink accepted that the precise calculation is not disclosed "on the face of the affidavit" but that, having added the past costs and estimated future costs together and produced a figure of $262,500, "in broad terms [the calculation] yields [a figure of] $208,000". In my opinion, adopting a broad-brush approach, the appropriate discount to apply to Tradelink's total costs is in the order of 30 percent.
7. In the light of those findings, the appropriate amount of security to be provided by Planet is $120,000. That figure is arrived at by taking the sum of approximately $50,000 in respect of the past costs, approximately $50,000 in respect of the future costs that relate solely to these proceedings, and half of the approximately $160,000 of estimated future costs of both proceedings, and discounting that amount by 30 percent.

Form and timing

1. Planet submitted that in circumstances where Tradelink has not provided a particular reason for why it would be prejudicial to it (Tradelink) if security was provided in three tranches instead of two, "the appropriate course is to order it in three tranches, particularly given that [the] application [was] brought at a relatively early stage …". However, in my opinion, having regard to the relatively low amount of security to be paid, it seems appropriate that security be paid in two tranches.
2. Most of the dispute around the timing for providing security fell away during the course of oral argument. In determining the timing of provision of the tranches, reference may be made "to particular aspects of the pre-trial preparation and the hearing itself": see Broadway Plaza at [207] per Ward CJ in Eq, citing Pacific Acceptance Corporation Ltd v Forsyth (No 2) [1967] 2 NSWR 402. Given a mediation is scheduled to occur on 22 November 2022, it seems appropriate that the first tranche be provided no later than shortly after the mediation occurs, and that the second tranche should be provided two months before the date on which the matter is fixed for trial.

Orders and costs

1. Both parties had some success as a consequence of the findings I made in relation to the application. It was therefore appropriate to order that the costs of the application be costs in the cause. Neither party raised any objection during the hearing to the Court adopting that approach.
2. Accordingly, the orders of the Court are: 1. The plaintiff is to provide security for the second defendant's costs of these proceedings, as follows: 1. $60,000 to be paid by 29 November 2022; 2. $60,000 to be paid within two months before the date on which the matter is fixed for trial. 1. The form of the security is to be by payment into court. 2. The proceedings be stayed if security is not provided in accordance with order 1.

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