Prynew Pty Limited & Anor v Nemeth & Ors

Prynew Pty Limited & Anor v Nemeth & Ors - [2010] NSWCA 94 - NSWCA 2010 case summary — Zoe

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6 May 2010 Prynew Pty Limited & Anor v Ferdinand Nemeth & Ors Judgment 1 BEAZLEY JA: The appellants, Prynew Pty Limited (Prynew) and Peter Tsu, appeal from orders made by Macready AsJ adopting, with certain modifications, the Referee's Report of Janet Grey, dated 1 February 2007. His Honour made consequential orders for judgment and verdicts. 2 The claim brought by the plaintiffs, Mr and Mrs Nemeth, was in respect of damage caused to their property as a result of excavation work being carried out on the adjoining property owned by Prynew and Mr Tsu as tenants in common with an interest of 70 per cent and 30 per cent respectively (the Prynew property). Both Prynew and Mr Tsu had applied for development consent to construct a block of units on the site. Mr Tsu is the sole director and shareholder of Prynew. As I understand the facts, Mr Tsu acted on behalf of Prynew in respect of all aspects of the development. Indeed, when the matter was before the Referee, senior counsel for the appellants submitted that if there was any finding made against Mr Tsu, it ought to be on the basis that he was the directing mind and will of Prynew and not against him as an individual. 3 Mr and Mrs Nemeth brought proceedings against Prynew and Mr Tsu. Piling Contractors (Qld) Pty Limited (Piling), which undertook certain aspects of the excavation work on the Prynew property, was initially joined in the proceedings by the appellants by way of a first cross-claim. The plaintiffs then joined Piling as a third defendant in the action. 4 Mr and Mrs Nemeth were substantially successful in their claims against the appellants and Piling, both before the Referee and on adoption of the Report. However, the Referee's apportionment as between Prynew and Mr Tsu was adjusted from 70 percent and 30 per cent to 75 per cent and 25 per cent respectively. This readjustment was to reflect his Honour's finding that only Prynew was negligent in respect of the "short pile", whereas the Referee had found that both Prynew and Mr Tsu were negligent. 5 QBE Mercantile Mutual Limited (QBE) was joined as a party in the proceedings on about 12 September 2002 by way of a second cross-claim filed by Prynew. Prynew claimed that it was entitled to indemnity under a policy of insurance issued by QBE, which Prynew claimed responded to the occurrence of the excavation risk subject of the principal action brought by Mr and Mrs Nemeth. Macready AsJ declined to adopt certain portions of the Referee's Report that were favourable to QBE. QBE has filed a cross-appeal in respect of Macready AsJ's orders in that respect. 6 One of the determinations made by the referee was in respect of a debt Piling claimed to be owing to it by Prynew. The referee found that the debt was owing and Macready AsJ adopted that part of the report. There is no appeal from that finding. Prynew made part-payment of that debt by way of bank guarantee. The balance of the judgment debt was not in dispute, but Prynew claimed that interest was not owing for the entirety of the period claimed by Piling. Prynew offered to provide a bank guarantee in respect of the balance of the judgment sum (although not in respect of the interest for the period claimed by Piling). That offer was not accepted. 7 Piling and QBE each filed notices of motion seeking security for costs of the appeal in the sum of $150,000 from Prynew. They seek consequential orders for a stay of the appeal until the security has been provided, and for dismissal of the appeal should security not be paid within 21 days of an order for security of costs. 8 Piling also sought a stay of the appeal until Prynew paid the judgment sum ordered in Piling's favour in full. Piling no longer seeks a stay on this basis as that matter has been resolved. 9 On the morning of the hearing of the applications for security, Senior Counsel for Prynew and QBE informed the Court that Prynew and QBE had agreed upon an order for security. I made orders in accordance with the agreement reached by the parties. 10 Senior Counsel for Prynew then made an open offer in Court in respect of Piling's application for security. That offer, which had been conveyed to Piling the previous evening, was in the following terms: "WITHOUT PREJUDICE SAVE AS TO COSTS

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(2) The costs of any proceeding before a court under this Act are to be borne by such party to the proceeding as the court, in its discretion, directs." 13 Piling also advanced its application under the Uniform Civil Procedure Rules 2005 (UCPR), r 51.50 which relates to applications for security on an appeal. It requires that a party demonstrate that there are "special circumstances" for ordering security on the appeal. In contrast, s 1335 confers an unfettered discretion on the court to award security for costs: J & M O'Brien Enterprises Pty Ltd v The Shell Company of Australia Ltd (No 2) (1983) 70 FLR 261; Winnote Pty Ltd (In liq) v Page & Ors [2005] NSWCA 362; (2005) 64 NSWLR 244; Deepsilver Pty Ltd v Aquatherm Australia Pty Ltd [2007] WASCA 171; Chris Poulson Insurance Agencies Pty Ltd v National Mutual Life Association of Australasia Ltd [1998] TASSC 86. 14 In Pioneer Park Pty Limited (In Liq) & Ors v ANZ Banking Corporation [2007] NSWCA 344 this Court held that the general discretion conferred by s 1335 is not constrained by UCPR, r 51.50, so that it is not necessary for an applicant for security for costs in the Court of Appeal to satisfy the court that there are special circumstances. Piling, understandably, advanced its application under s 1335. 15 The rationale for the Court's jurisdiction to order security for costs against a corporate plaintiff is well traversed in the authorities. In Buckley v Bennell Design & Constructions Pty Ltd (1974) 1 ACLR 301 Street CJ (Moffitt P and Hutley JA agreeing) explained the rationale at 303-304, in the following terms: "In cases of contract the other party to the dealing would be on notice of the limited liability of the company and, the transaction being voluntary, he could be presumed to be competent to look after his own interests in that regard. Where, however, a company commences litigation against another party, that other party could find himself involuntarily prejudiced by the limited liability character of the plaintiff who had commenced proceedings against him. To protect the other party from this consequence of limited liability, there has always in companies legislation been a provision along the lines of [a predecessor to s 1335 of the Corporations Act ]."

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Prynew and Mr Tsu also seek an order that the costs ordered against Prynew, Mr Tsu and Piling be apportioned in accordance with the liability finding. In its cross-appeal, Piling seeks that costs be apportioned in the same ratio as the existing liability finding. To that extent, Prynew and Piling have a similar interest in the appeal. 23 In oral submissions, senior counsel for Prynew submitted: "So we took the view rightly or wrongly when we first lodged the appeal that although we were seeking to appeal from the costs order and that costs order affected Pilings because Pilings was jointly and severally liable but since we were only seeking apportionment of that would reduce our individual responsibilities and also the Piling responsibility but Piling would not regard itself as having an interest in the appeal, that it wanted to preserve. Anyway Pilings indicated they wanted to participate in the appeal, we joined them …" 24 There was no evidence before the Court to support the submission that Piling sought to participate in the appeal and Piling rejected any assertion that it is a voluntary respondent to the appeal. 25 Piling acknowledged that the position of Prynew as a plaintiff must be looked at as a matter of substance. However, it contended that as a consequence of Prynew seeking to avoid liability totally on the claim against the Nemeths, Mr Nemeth has brought a protective cross-appeal against Piling in which he seeks to make Piling fully liable for the defective work, should Prynew be successful on its appeal against the Nemeths. Piling submitted therefore that it has a real interest in opposing the orders sought by Prynew. 26 Piling also acknowledged that its appeal in respect of the costs order sought the apportionment of costs in proportion to the apportionment of liability, as does Prynew and Mr Tsu. However, as it pointed out, Prynew's primary position on the appeal is that it was not liable at all for the defective work. If it is successful in that argument, Piling would likely be liable not only for the entirety of the defective work, but also for the entirety of the costs, that is, for the Reference, the adoption hearing and the appeal of Mr and Mrs Nemeth. 27 It followed on Piling's submission that, as against it, Prynew was a plaintiff of substance. 28 In my opinion, although Prynew is not seeking any order against Piling in the appeal, Piling's interests are potentially adversely affected by Prynew's appeal. If Prynew is successful in overturning the finding that it was liable for defective work, there is a significant, if not inevitable, likelihood that on Mr Nemeth's appeal, Piling will be held liable for the whole of any defective work. Further, Piling's interests would be directly affected by the appeal brought by Mr Nemeth if the order made by the Court on the appeal was that the matter be remitted to the Referee, as sought alternatively by Prynew and Mr Tsu. It cannot be said in these circumstances that Prynew's position vis-à-vis Piling is defensive in the sense discussed in the authorities to which I have referred. Accordingly, I reject the first basis upon which Prynew seeks to resist an order for security of costs.

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[45] If, for any reason, Mr Roach were to cease to be a party to this appeal, the situation would merit review … Likewise, if compelling material emerged to cast doubt on his capacity to meet an adverse order for the costs of the appeal." 32 Prynew did not adduce any evidence of Mr Tsu's financial position and did not submit that he was a person of substantial means, as was the case with Mr Roach in Winnote v Page. To the extent that there is evidence of Mr Tsu's financial position, it is either neutral or tends to indicate that he is not a person of substantial means, as I explain below. However, in this case, unlike the position in Winnote, Mr Tsu is not only a co-appellant, he has also offered to be responsible for the costs of the appeal should he and Prynew be unsuccessful. Prynew relied therefore, upon both Mr Tsu's status as a cross-appellant as well as his offer. In either case, it submitted that the financial situation of an individual, whether a co-plaintiff or person prepared to "step out" from behind the corporate entity and offer an undertaking in respect of any costs order, is irrelevant. This submission was centrally based upon the remarks of Basten JA in Jazabas v Haddad and the decision of Lindgren J in Instyle Contract Textiles Pty Limited v Good Environmental Choice Services Pty Ltd [2009] FCA 1422; (2009) 181 FCR 360. 33 In Jazabas v Haddad, Basten JA examined the different approaches that had been taken to the ordering of security where an individual, or individuals, likely to benefit from litigation by the company had "stepped out" from behind the corporation and offered to be responsible for any costs order, should the claim not succeed. His Honour considered, at [27], that this Court should: "… accept the reasoning in [ Buckley v Bennell Design & Constructions Pty Ltd ], which has not been expressly rejected, and to accept the logic of [ Gentry Bros Pty Ltd v Wilson Brown & Associates Pty Ltd & Ors (1992) 8 ACSR 405] which, whilst not inexorable, provides a principled basis upon which to exercise the discretionary power to order security for costs, in circumstances where the principle is engaged." 34 However, the approach that Basten JA considered ought to be taken was not endorsed by Mason P, nor by McClellan CJ at CL. If it was considered that the remarks of Basten JA were of relevance to the argument, the remarks of the other members of the Court, who did not agree with his Honour, should have been brought to the Court's attention, 35 McClellan CJ at CL observed, at [79], that the approach in Gentry Bros v Wilson Brown & Associates had not found favour with the Victorian Court of Appeal or the Western Australia Court of Appeal. Mason P stated, at [2], that he was strongly inclined to agree with the remarks of Winneke P and Phillips JA in Epping Plaza Fresh Fruit & Vegetables Pty Ltd v Bevendale Pty Ltd [1999] 2 VR 191 at 197-8. His Honour continued, at [3]: "If and when the issue presents itself again in this Court, any tension between the Victorian decision and earlier decisions of this or other intermediate appellate courts will need to be explored, perhaps by a bench of five judges and in the context of an application for leave to challenge Buckley v Bennell Design & Constructions … if it is truly inconsistent with the views in Epping Plaza. " 36 As I understand the reasoning of Basten JA in Jazabas v Haddad, it is that regard must be had to the rationale for the principle explained in Buckley v Bennell Design and Constructions. Given that rationale, it is then necessary to determine how the discretion is properly to be exercised where a person is prepared to come out from behind the shield of the company and be responsible for the costs of the impecunious corporate plaintiff. In this regard, Cooper J in Gentry Bros v Wilson Brown & Associates said, at 415: "In the instant case once the shareholders of the applicant have agreed to accept personal liability for any judgment for costs against the applicant, the statutory purpose of s 1335 as explained in the authorities to which reference has been made is satisfied. The making of an order which secures the personal liability of the shareholders is in itself the provision of security: see for example Memutu Pty Ltd v Lissenden (1983) 8 ACLR 364 at 366; Yandil Holdings Pty Ltd v Insurance Co of North America (1985) 3 ACLC 542 at 546; Appleglen Pty Ltd v Mainzeal Corp Pty Ltd (1988) 79 ALR 634 at 635-6.

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The offer by the shareholders of the applicant to accept personal liability for the applicant's costs is a factor weighing heavily against the making of an order against the applicant for provision of a cash or other security for costs notwithstanding that the worth of the shareholders may ultimately prove insufficient to satisfy any judgment in whole or in part." (emphasis added) 37 However, this reasoning did not find favour with Winneke P and Phillips JA in Epping Plaza v Bevendale, if its effect was to constrain the manner in which the discretion to order security was to be exercised. As their Honours explained: "[23] If the comments made by Cooper J. in Gentry Bros. at A.C.S.R. 415; A.C.L.C. 1399 were intended to suggest that the broad discretion, to which the authorities refer, is now to be fettered by a principle to the effect that, in cases where those who stand behind the impecunious company are prepared to expose themselves to a personal liability for the defendant's costs, the court's discretion should rarely be exercised in favour of making an order for security, then, like Powell J. in Erolen at A.C.S.R. 456; A.C.L.C. 524 and Malcolm C.J. in Intercraft , we simply cannot agree - though whether Cooper J. should be read as having said as much is of course another matter; it did not appear so to Beazley J. in K. P. Cable Investments at 203-4. Not only does the suggested principle cut across the authorities which make it abundantly clear that the discretion is to be unfettered and exercised in accordance with what the circumstances of the particular case require, but it ascribes a purpose for its existence which we do not accept; namely that the statutory purpose of s. 1335 is to align the position of impecunious corporate plaintiffs with impecunious individual plaintiffs. The fact that those who stand behind the company are prepared to give an undertaking to the court to pay a successful defendant's costs might be a factor which, on balance, will influence the court's discretion in a particular case - or, more strictly perhaps, influence the manner of its exercise. But to elevate it to a position of critical importance or decisive significance in general seems to us to be requiring the judge to enter upon his or her discretion with a particular predisposition, something which the authorities make clear that the judge should not do .

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[24] Furthermore, in our view the court should not readily accept an undertaking to pay costs from impecunious individuals who, at least at the time when such an undertaking is given, have no chance of making it good. Such an undertaking could not be an effective alternative security because it could only be enforced (at least for the time being) by proceedings for contempt: cf. P S Chellaram & Co v China Ocean Shipping Co (1991) 102 A.L.R. 321 at 324; 65 A.L.J.R. 642 at 643. Perhaps, as contended in Intercraft , such an undertaking could have some worth if given by established businessmen who, though impecunious for the time being, might feel impelled by the threat of bankruptcy to honour the undertaking by gaining assistance, perhaps, elsewhere. But, if so, that can be but a relevant consideration; no rule can be laid down - which is how the matter was approached in Intercraft where in all the circumstances the court approved the order for security in the form of a personal guarantee from shareholders and directors though the guarantors were impecunious. In this instance the offer of personal liability was not from all those behind the trusts, nor, on the material put forward, could it be seen as being of any real significance." (emphases added) 38 In Intercraft Cabinets Pty Ltd v Sampas Pty Ltd (1997) 18 WAR 306 (to which reference was made in Epping Plaza v Bevendale), Malcolm CJ said at 316: "… the availability of an undertaking of personal liability by the persons who stand behind the company is no more than a factor, albeit an important factor , to be taken into account in the exercise of discretion." (emphasis added) 39 In KP Cable Investments v Meltglow, I took the view that Gentry Bros v Wilson Brown & Associates did not stand for the proposition that once the shareholders or others standing behind the company agreed to be responsible for any judgment for costs of an impecunious corporate plaintiff, the purpose of s 1335 had been fulfilled. (This was the view of the case taken by Powell J in Erolen v Baulkham Hills Shire Council (1993) 10 ACSR 441.) Rather, as I stated, at [63], I understood the judgment of Cooper J in Gentry Bros to stand for the proposition that: "… the offer of security by way of a guarantee from the directors or shareholders or other persons interested in the outcome of the litigation was a factor, which could be decisive in a given case, to be considered in determining whether any other form of order for security for costs should be made. In my opinion, this is the correct approach to take when such an offer has been made." 40 I do not consider the view I expressed in KP Cable Investments v Meltglow to be out of accord with what was said by the majority in Epping Plaza v Bevendale and as I explain below, I endorse that view. 41 Notwithstanding the strong statement by the Victorian Court of Appeal in Epping Plaza v Bevendale, it is clear that there remains judicial disagreement as to how a court should approach the award of security where an individual offers to be responsible for the costs of the corporate plaintiff. In Instyle Contract Textiles Lindgren J refused to order security against a corporate plaintiff, in circumstances where the principal of the company offered to give a deed of guarantee, so as to secure the costs that might be ordered against the company if it was unsuccessful in the litigation. In doing so, his Honour relied upon Harpur v Ariadne Australia Ltd [1984] 2 Qd R 523; (1984) 8 ACLR 835, in which Connolly J (Campbell CJ and Demack J agreeing) stated, at 533: "The mischief at which the provision is aimed is obvious. An individual who conducts his business affairs by medium of a corporation without assets would otherwise be in a position to expose his opponent to a massive bill of costs without hazarding his own assets. The purpose of an order for security is to require him, if not to come out from behind the skirts of the company, at least to bring his own assets into play. If however he is already available for whatever he is worth, the object of the legislation is seen to be satisfied ." (emphasis added)

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Connolly J also observed, at 533, that in that case, the financial worth of the individual was " not really relevant ". 42 In Instyle Contract Textiles Lindgren J, at [53], considered that the effect of the decision in Harpur v Ariadne was that if the respondents in the case before him could be: "… placed in a position in which they will enjoy the same remedies against Mr Fitzsimons in respect of costs as they would if he were the applicant instead of Instyle , the object of s 1335(1) of the Corporations Act would be achieved and Mr Fitzsimons's own worth would be 'not really relevant'. The basis of this approach is the proposition that the impecuniosity of an individual is not a ground on which to order him or her to give security for costs: see Cowell v Taylor (1885) 31 ChD 34 at 38; Pearson v Naydler [1977] 1 WLR 899 at 902; Barton v Minister for Foreign Affairs [1984] FCA 89; (1984) 2 FCR 463 at 469." 43 Lindgren J, at [54], also referred to the decision of Burchett J in Cameron's Unit Services Pty Ltd v Kevin R Whelpton & Associates (Australia) Pty Ltd (1986) 13 FCR 46, where his Honour refused to order security in circumstances where both the corporate and individual applicants were impecunious. Burchett J considered that provided the individual accepted responsibility for the costs of the proceedings then the individual was entitled to rely on the general rule that poverty was no bar to a litigant. (It should be observed that the Federal Court Rules are in different terms to the UCPR and save for the general principle as to impecuniosity, accommodate an order for security against an individual applicant.) 44 For my part, I prefer the approach of the Victorian Court of Appeal in Epping Plaza v Bevendale, endorsed by Mason P and McClellan CJ at CL in Jazabas v Haddad. I consider that approach to be consistent with the underlying rationale of the jurisdiction to award security for costs. As Street CJ observed in Buckley v Bennell Design & Constructions, a party to a contract can take appropriate steps to protect itself from the consequences of the impecuniosity of the other contracting party. It can, for example, require the other party to the contract to secure the performance of the other party's obligations under the contract. 45 A defendant cannot do that. A defendant is a captive audience to a plaintiff's claim. In my opinion, the purpose of the security for costs jurisdiction would be rendered ineffective if a defendant sued by an impecunious company was denied security because, persons themselves impecunious, were prepared to offer to be responsible for the costs of the litigation. Correspondingly, if the principles that relate to exercise of the discretion where there is an impecunious co-plaintiff, also apply where an impecunious person agrees to be responsible for the costs of the litigation, the corporate plaintiff would be unfairly advantaged. Indeed, it would expose the captive defendant to a form of double jeopardy. 46 In short, I do not consider the position of an individual co-plaintiff to be analogous to the position of an impecunious shareholder, or other person interested in the litigation, who agrees to be responsible for the costs of the litigation. 47 In any event, as I have already indicated I do not consider that there is a relevant inconsistency between the approach in Buckley v Bennell and Epping Plaza v Bevendale or, for that matter, Gentry Bros v Wilson Brown & Associates, for the reasons I gave in KP Cable Investments v Meltglow. However, it has to be accepted that whilst Cooper J acknowledged the discretionary nature of the jurisdiction, his Honour considered that the offer of a shareholder or other individual who would benefit from company's litigation was a factor that weighed heavily against the favourable exercise of the discretion. If there is a difference in the two approaches, then I prefer the approach taken by the majority in Epping Plaza v Bevendale, which was endorsed by Mason P and McClellan CJ at CL in Jazabas v Haddad.

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(3) What weight should be given to the open offer made by Mr Tsu to personally guarantee any costs of the appeal that may be ordered in Piling's favour? 49 Piling relied upon the following circumstances to demonstrate that Mr Tsu was not a person of sufficient means as to be able to meet an order for costs, should the appellants be unsuccessful on the appeal. By letter dated 5 August 2009 to the solicitors for Prynew and Mr Tsu, the solicitors for Mr Nemeth notified their intention to seek security for costs and requested that Prynew and Mr Tsu provide sufficient evidence of their financial status and ability to cover any costs order that might be made in Pilings' favour. There was and remains no response to that request by either Prynew or Mr Tsu. I pause to note that a review of recent cases in the Supreme Court indicates that this is a practice which has developed in applications for security for costs. Whether it is an appropriate practice and of itself sufficient in a particular case is another question, which I leave to others to decide. In this case I propose to infer first, from Mr Tsu's failure to respond to the request to provide financial information and, secondly, from Prynew's failure to adduce any evidence of Mr Tsu's financial circumstances in support of its defence to the application for security, that Mr Tsu is not a person of substantial means: see Payne v Parker [1976] 1 NSWLR 191. 50 The other evidence relevant to Mr Tsu's financial circumstances was a title search, which revealed that Mr Tsu was the registered owner of a unit at Darling Point. Matthew McDonald, solicitor in the employ of Curwoods Lawyers, assisting the solicitor on the record for QBE, deposed in his affidavit that this property is one of the lots in the development which is subject of the proceedings. 51 The following interests were recorded in the second schedule, and the following notation made: "SECOND SCHEDULE (2 NOTIFICATIONS) ------------------------------- 1 INTERESTS RECORDED ON REGISTER FOLIO CP/SP69483 2 AA65219 MORTGAGE TO NATIONAL AUSTRALIA BANK LIMITED …" (Affidavit McDonald, Annex E)

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The evidence does not reveal what the recorded interests are. Nor is the amount outstanding on the mortgage in evidence. 52 Searches of ASIC's records reveal that Mr Tsu is a director of Prynew and the holder of its nine issued $1 shares. He is a shareholder in three other companies. The shareholdings in these companies are not of any substantial value. He is also the chargee of a fixed and floating charge over Prynew's assets. Prynew has granted a fixed and floating charge to the National Australia Bank. 53 A property search undertaken in respect of Prynew has failed to reveal ownership of any property. As I have indicated, Prynew has not responded to requests from Piling's solicitors to provide documentary evidence of its financial status and its capacity to pay any costs order that may be made against it on the appeal. The Court is also cognisant that an order for security has been made by consent against Prynew. 54 In my opinion, the totality of the evidence, including the inference I have drawn in respect of Mr Tsu's financial status, is sufficient to establish to my satisfaction that each of Prynew and Mr Tsu would be unable to meet a costs order if made against them and in favour of Piling. 55 The second consideration relevant to the determination of the application for security for costs is that Mr Tsu is a co-plaintiff. Prynew contended, therefore, that he would be able to prosecute the appeal in any event so that no order for security should be made against Prynew, in accordance with the principles discussed, inter alia, in KP Cable Investments v Meltglow and Winnote v Page. 56 I do not consider that the matter is as simple as Prynew contends. The fact that Mr Tsu is a co-plaintiff is a relevant factor. However, in a particular case, it may be relevant to have regard to the extent to which the claims made by parties are co-extensive. If the claims of each are co-extensive, that may provide a strong basis for not ordering security. If the claims are not co-extensive at all, that factor may point to the exercise of the court's discretion in the opposite manner. There are then a multitude of intermediate positions which may need to be considered in a particular case. 57 It is apparent both from the Referee's Report and the judgment of Macready AsJ that Prynew was found to be negligent in circumstances where Mr Tsu was found to have no liability. Rather, his liability arose as a result of his part ownership of the property and the obligations imposed under the Conveyancing Act 1919, s 177. 58 In the amended notice of grounds of appeal, grounds 13, 14, 15, 24, 25, 26 and 27 are challenges made solely by Prynew to the orders made Macready AsJ. As I understand the case, it also appears that grounds 11 and 12 are challenges made solely by Prynew, as these grounds challenge the underlying findings of negligence made against Prynew. Grounds 16-21 appear to relate to the appeal brought by Prynew and not by Mr Tsu, notwithstanding the manner in which they are pleaded. However, because I am not entirely certain of this, I leave those grounds aside in determining whether an order for security should be made. 59 In my opinion, having regard to the grounds of appeal that relate solely to Prynew, this case would not be proceeding in any event against Piling at the instance of Mr Tsu. Mr Tsu's case is not co-extensive with Prynew's and may not relate to Piling at all. In any event, I consider that a substantial proportion of the time on appeal will be occupied by the challenges made solely by Prynew. 60 In these circumstances, I consider that an order for security should be made against Prynew. In that regard, I am not satisfied that a personal guarantee will be effective security, having regard to my finding as to Mr Tsu's financial status.

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Ten days preparation time for each of senior and junior counsel, including the drafting of written submissions - costs estimate: $80,000; 30 hours preparation by each of Mr McDonald and Mr Curwood at an hourly rate of $282 per hour - costs estimate: approximately $17,000 (the nominated amount of $8,450 was, I believe, an error); Appeal hearing of five days - costs estimate: counsel $50,000-$55,000; solicitors: $6000-$8000. 63 QBE estimated costs and disbursements in the order of $161,700-$169,400, including GST. It sought and accepted security in an amount of $150,000. 64 I do not accept that this matter will take five days in the Court of Appeal. Indeed, as the judge with the case management of the matter, I am able to indicate to the parties that five days will not be allocated for the hearing of the appeal. I have already given directions that the appellants carefully review their numerous and repetitive grounds of appeal, so as to ensure that they reflect the issues upon which they seek the Court's determination, and to attend to their written submissions, so as to ensure they properly reflect the real issues in this case and are referable to the grounds of appeal. Those directions, once complied with, should bring the matter into manageable proportions and, given the nature of the appeal, it is likely that two days or two days plus will be allocated to the hearing. Accordingly, the estimate of the costs of the hearing of the appeal will have to be reduced proportionately. 65 It is more difficult for the Court to assess whether the time and costs claimed for preparation are a reasonably accurate estimate of what will be required to prepare for the appeal. In this regard, I have two concerns. 66 First, the estimate of the time for preparation has been made in conjunction with an assessment of the time for hearing of five days. I have rejected that assessment. It may be that, in accordance with current practices in the Court of Appeal, a shorter hearing time is only facilitated by careful and focussed preparation, which may take longer than was previously the case in the era of unrestrained written submissions and oral argument. However, the preparation time is more than I would have considered necessary, even including the time required for written submissions. 67 I am fortified in this view when regard is had to the fact four legal representatives will be involved in preparation for the appeal. When the total preparation time is tallied, it appears that Piling's representatives are claiming in excess of 28 days. I accept that there must be some overlap in the preparation by the various legal representatives, for example, where senior and junior counsel must work together. Likewise, one or both solicitors may need to assist counsel at various times. However, I do not accept that there would be a complete overlap between the time spent on preparation by Piling's representatives. In my opinion, a reasonable time that should be allowed for preparation is five days for each of counsel and two days for each of the solicitors. 68 Secondly, I have a concern that the costs appear to be estimated on a solicitor/client basis. There is no material to assist me in determining what a reasonable assessment of costs would be on the ordinary basis. Given that lack of assistance, I would only be prepared to accept the estimate of costs at 70 per cent of the rate claimed. 69 I have given consideration to whether I should make a further allowance for the fact that there is some overlap in the grounds of appeal as between Prynew and Mr Tsu. I have decided against doing so for two main reasons. First, Piling has been joined in the appeal and will need to be in attendance for the whole proceedings and secondly, it is not clear the extent to which those overlapping grounds may have any impact on Piling's liability. 70 Accordingly, I make the following orders:

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