Proclear International Pty Ltd v United Beverage Co-Packers Pty Ltd

Proclear International Pty Ltd v United Beverage Co-Packers Pty Ltd - [2023] NSWSC 1633 - NSWSC 2023 case summary — Zoe

Facts

These proceedings commenced in December 2021. A motion for security was filed in February 2022 by the then defendants, being the first and second defendants, who were then also represented by the same firm of solicitors.
In March 2022, Ball J made orders by consent that the plaintiff provide security in the amount of $160,000 for the defendants' costs, noting that the defendants reserved their rights to seek further security if needed. The security was to be provided in tranches, the last tranche to be provided shortly before the commencement of trial. The application for security, and the amount fixed for security, proceeded on the assumption that the trial would take four days.
Since then, the proceedings have unfolded in ways which were, perhaps, not anticipated at the inception of the proceedings.
In July 2022, a third defendant, Michael Gordon was joined. He was represented by the same firm of solicitors who were acting for the first and second defendants.
In October 2022, the plaintiffs sought pre-evidence disclosure, offering to provide additional security in respect of the defendants' costs of disclosure. In November 2022, Stevenson J ordered pre-evidence disclosure, together with further security for costs of $15,000 in respect of the costs of disclosure.
In December 2022, the second defendant's insurer took over the conduct of the proceedings for their insured, and on 19 December 2022 filed a notice of change of solicitor. The first and third defendants, and the second defendant, were now represented by different firms.
By the end of 2022, the amount of security which had been ordered by the Court was exceeded by the actual costs incurred by the solicitors for the first and third defendants. Indeed, according to an email from that firm, actual costs eclipsed the security by July 2022. No notice was given to the plaintiff of this fact.
Directions were made for the plaintiff to put on its evidence. The plaintiff did so in early 2023. The plaintiff also amended its pleadings in May 2023. Obviously enough, attending to these tasks would have put the plaintiff to some cost.
On 22 May 2023, the solicitors for the first and third defendants wrote to the plaintiff's solicitors, advising that the "time has come" to reconsider the amount of security. On 29 May 2023, the plaintiff's solicitors replied, raising a number of questions about the defendants' request, but there was no reply.
The defendants then embarked upon putting on their evidence and thereby, no doubt, also incurred significant costs. On 10 October 2023, the solicitors for the first and third defendants finally replied to the plaintiff's letter of 29 May 2023, requesting an additional amount of security of $572,000. Ultimately, the first and third defendants filed a motion, seeking further security of $500,000.
On 2 November 2023, the second defendant also requested further security of some $350,000 and filed a motion. Both motions were heard today.

[4]

Consideration

The plaintiff accepts that there is reason to believe that it will be unable to pay the costs of the defendants, if ordered to do so, and, thus, the Court's jurisdiction to order security for costs is enlivened. Turning to the criteria in rule 42.21(1A) of the Uniform Civil Procedure Rules 2005 (NSW), the impecuniosity of the plaintiff is a relevant factor: rule 42.21(1A)(c). I also take into account that there is no evidence that an order for additional security for costs will stifle the proceedings: rule 42.21(1A)(f). Both factors favour making an order for further security.
Also relevant is rule 42.21(1A)(k), "whether the security sought is proportionate to the importance and complexity of the subject matter in dispute". If I were to order an increase in the amount of security for costs as sought by the defendants, the total security for costs will be some $1.025 million. The plaintiff seeks damages of between $1.7 million and $2 million. The defendants point to the importance of the injunctive relief sought by the plaintiff for their wider business. I am not in a position to assess whether that is so, on an application such as this. It does appear, however, that there is a lack of proportionality between the security sought and the importance and complexity of the subject matter of these proceedings, where the plaintiff's claim is relatively modest for a claim in this List.
Another relevant criteria is rule 42.21(1A)(l), "the timing of the application for security for costs." The defendants have waited until after the security for costs had been surpassed, and until after the plaintiff had incurred further costs putting on its case, before raising the prospect that additional security may be sought. Having done so, the first and third defendants did not respond to the plaintiff's questions in respect of this request until after the defendants had proceeded to expend further costs themselves in putting on their evidence.
Where orders for security have been made and the amount proves insufficient, it is obviously important to keep the party who provided the security appraised of the situation, and the likelihood that further security for costs will be sought. This will likely be an important factor in that party's own decision making as to how to expend their resources, either in the pursuit of litigation or otherwise. As Barrett J observed in Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2009] NSWSC 563 at [28]: The reason why delay acts against an applicant is that it allows a plaintiff to proceed without interruption and without any warning that his or her preparations and expenditures on them may be rendered worthless by the intervention of a stay brought about by inability to furnish security.
See likewise Karl Suleman Enterprizes Pty Limited (in liquidation) v Pham and Ors [2010] NSWSC 886; Kupang Resources Pty Ltd v Commonwealth of Australia (No 2) [2023] NSWSC 1337.
This was a significant oversight on the defendants' part, which I take into account.
The matter has now been allocated for a hearing date in September 2024. The parties' estimates as to the likely trial date vary widely from six days to 12 days. In these circumstances, it is necessary to estimate the likely hearing date myself.
Where the plaintiff has three lay witnesses and the defendants have four lay witnesses, I estimate that the time taken to hear the lay evidence will be three and a half days, allowing half a day per witness. No doubt, some lay witnesses will occupy more time, while others will take less time.
Looking at the expert evidence, the plaintiff relies on the expert evidence of one witness, while the defendants rely on the expert evidence of five witnesses. I have assumed that it will take two days for expert evidence, where the bulk of the defendants' experts appear to have no counterpart. Thus, I have assumed that the plaintiff's expert and the corresponding defendants' expert will together take one day. I have allowed a second day to take the remainder of the expert evidence.
That takes us to five and a half days. Allowing for openings and closings, that takes me to seven days. Where the original order for security for costs was based on a four-day trial estimate, and it seems likely to me that the trial will now take seven days, I consider it appropriate that additional security for costs should be provided. As to the amount, I consider that an appropriate starting point for the amount of additional security is a pro-rata increase, using the calculations which formed the basis of the consent orders made in March 2022, thereby increasing the costs allowed for a four-day trial to seven days. Applying this 'broad brush' approach, the security for costs will need to be increased by $105,000 to allow for the lengthier trial time.
However, the second defendant is now separately represented. There will be an issue at the conclusion of the trial - assuming for the purposes of today that the defendants are successful in defending the plaintiff's claims - as to whether the plaintiff is liable to pay for the separate representation of the second defendant. I am in no position to say, today, what the result of that argument may be. I consider it appropriate to make some allowance for the second defendant's costs above and beyond the pro-rata increase. I will increase the additional security to $120,000 to allow for the fact that there is now a separately represented second defendant.
The additional security of $120,000 should be provided in two tranches, being the date for the last two tranches as already ordered on 24 March 2022. The appropriate mechanism for the provision of security is the same as that which has already been ordered: the security ought be paid into the trust account of Hall & Wilcox.
For these reasons, I make the following orders: 1. Vary order 1 made on 24 March 2020 such that the last two tranches of security for costs to be provided by the plaintiff will now be: 1. Six weeks before any final hearing, $90,000; and 2. One week before any final hearing, a further $90,000. 1. Further vary Order 1 made on 24 March 2020 such that the security is provided for the first, second and third defendants' costs of the proceedings.

At a glance

Court

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Judgment (5 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (3)