Second Lenbourne Pty Ltd v Beagle Management Pty Ltd

REASONS FOR JUDGMENT 1 The first to fifth respondents, the sixth, seventh and eighth respondents have each applied by motion for an order that the applicants provide security for the respondents' costs of the proceeding. 2 The applicants are claiming damages from the respondents in respect of their participation and involvement in a pine plantation leasing scheme. Their claim, in brief, is as follows - on 11 April 1988 the first respondent ("Beagle Management") and the eighth respondent ("the Trustee") executed a deed of trust whereby they established the "Templegate Forestry Trust". Beagle Management was to be the manager and the Trustee was to be the trustee of the trust. The purpose of the deed was to enable Beagle Management to invite members of the public to lease pine plantation allotments from Beagle Management and to enter into management agreements with Beagle Management to manage the growth and harvest of pine trees. Under the trust deed the Trustee was to create four separate trust funds for each plantation, the Trust (Application) Fund, the Trust (Maintenance) Fund, the Trust (Insurance) Fund and the Trust (Proceeds) Fund. Under the deed investors became lessees of relevant allotments and acquired proportionate interests in the four trust funds. The interest conferred on investors by the leases and the management agreements constituted a "prescribed interest" under the then Companies (Western Australia) Code ("the Code") and now the Corporations Law. 3 The trust deed was an "approved deed" for the purposes of offering the relevant prescribed interest for subscription. On 11 March 1988 the National Companies and Securities Commission, by declaration, granted an approval of the trust deed as an "approved deed" and the declaration required adequate buy‑back arrangements to be maintained as required by s 168 of the Code and s 1069 of the Corporations Law. The declaration contained an exemption from the inclusion in the trust deed of a "buy‑back covenant" and it was a condition of that exemption that the trust deed would contain a covenant that Beagle Management would use its best endeavours to create a secondary market for the leases and management agreements. The trust deed required Beagle Management, if a lessee wished to assign its leases and management agreements, to use its best endeavours to introduce an assignee. 4 Beagle Management issued a prospectus on 12 April 1988 signed by the fourth, fifth, sixth and seventh respondents as directors by which it offered to the public the opportunity to invest in the pine forests by means of leasing and management agreements. The pine forests included the Jeremy 1 plantation, the Jeremy 2 plantation and the Wombat plantation. The prospectus also provided that Beagle Management would use its best endeavours to ensure that there was a secondary market for leases and management agreements, that it had covenanted to use its best endeavours to introduce a buyer to an investor wishing to sell and that it would keep a list of lessees who wished to assign their leases and management agreements. These statements are also relied on as representations. 5 On 27 June 1988 each of the applicants applied for leases and management agreements in relation to allotments or areas in the Jeremy 1, Jeremy 2 and Wombat pine plantations. Their applications were accepted. The first applicant paid $18,080 for a two hectare interest in the Jeremy 1 plantation and $9040 for a one hectare interest in the Jeremy 2 plantation. The second applicant paid $52,700 for a five hectare interest in the Wombat plantation and $18,800 for a two hectare interest in the Jeremy 2 plantation. A total consideration of $98, 620. 6 On 5 September 1995 Beagle Management resigned as manager of the trust and the second respondent ("B M") was appointed manager of the trust. In June 1995 each applicant informed Beagle Management that it might desire or that it wished to assign its leases and management agreements. Beagle Management failed to introduce the applicants to any prospective purchaser and it is alleged to have failed to do all that it reasonably could to assist and promote the assignment of the applicants' leases and management agreements. The same allegation is made against B M. It is then alleged that Beagle Management and B M failed to use their best endeavours to create a secondary market for the leases and management agreements issued pursuant to the trust and thereby acted in breach of their obligations under the trust deed as a result of which the applicants have suffered loss and damage. It is also alleged that the Trustee failed to protect the interests of lessees by failing to monitor breaches of trust engaged in by Beagle Management and B M and in other specified respects. It is also alleged that Beagle Management engaged in misleading and deceptive conduct and that the third, fourth, fifth and sixth respondents as directors aided and abetted those contraventions and were concerned in them. The applicants seek damages claimed on a number of bases. 7 Although the jurisdiction is invoked by reference to O 28 r3 of the Federal Court Rules (because the applicants bring the proceeding as trustee), s 56 of the Federal Court of Australia Act 1976 (Cth) and s 19 of the Service and Execution of Process Act 1992 (Cth) it is convenient to address the jurisdiction by reference to the language in s 1335(1) of the Corporations Law which provides: "Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction of the matter may, if it appears by credible testimony that there is reason to believe the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given." 8 There are a number of decisions which establish that the jurisdiction to be exercised under s 1335 is unfettered. Although it is unfettered it is still a jurisdiction which I must exercise judicially. It is also established by authority that the Court should approach its task under s 1335 without any "predisposition," either in favour of the application or against it: Ariss v Express Interiors Pty Ltd (In Liq) [1996] 2 VR 507 at 514. In Warren Mitchell Pty Ltd v Australian Maritime Officers' Union (1993) 12 ACSR 1, Lee J said at 5: "The use of the word 'credible' suggests a requirement that evidence be relied upon has some characteristic of cogency. Qualification of the word 'testimony' by the word 'credible' suggests that an evidentiary burden is undertaken by the party seeking the order. It amounts to an obligation on an applicant for an order to show that the material before the court is sufficiently persuasive to permit a rational belief to be formed that, if ordered to do so, the corporation would be unable to pay the costs of that party upon disposal of the proceedings. To what extent the satisfaction of that standard may fall short of the demonstration of a likelihood that the corporation will be insolvent at the relevant time is unnecessary to decide. It is enough to say that speculation as to insolvency or financial difficulties likely to confront the corporation will be insufficient to grant the exercise of the discretion." 9 I will shortly turn to the evidence placed before the Court but before doing so I should turn in anticipation to one submission made on behalf of the respondents which is that the refusal by the applicants to provide the respondents with any further financial information other than that which the respondents have been able to glean from published annual returns should compel me to apply the principles identified in Jones v Dunkel (1959) 101 CLR 298. It is submitted that the evidence before the Court raises inferences that the applicants are heavily indebted and have no assets or other means with which to satisfy those debts, that the onus is on the applicants to adduce evidence of their ability to pay their debts and that their failure to do so should compel the Court to conclude that the applicants have no such means, relying on Jones v Dunkel (supra). However, I do not consider that there is any onus on the applicants to adduce evidence of their ability to pay their debts or that the issue should be determined on the basis whether or not that onus has been satisfied. Rather the appropriate proposition is that there has to be credible testimony before the Court that there is reason to believe the applicants will be unable to pay the respondents' costs if the respondents are successful. In Tipperary Developments Pty Ltd v State of Western Australia (1996) 22 ACSR 241, in particular at 244, Murray J explained why the adoption of the rule in Jones v Dunkel does not enable the opportunity to draw an inference to be converted into circumstantial evidence itself tending to prove the fact in issue against a silent party. His Honour said at 244: "For the defendant it is argued that I may have regard to the failure of the plaintiff to provide complete information about its financial position and prospects by applying what is generally referred to as the rule in Jones v Dunkel (1959) 101 CLR 298, that the unexplained failure of a party to give evidence may, in appropriate circumstances, lead to an inference that the uncalled evidence would not have assisted that party's case, so entitling the court the more readily to draw an inference against that party which might otherwise fairly be drawn from the evidence which was adduced. That is, of course, an important limitation upon the operation of the rule. It is limited to assisting the court to draw an inference which is available from circumstantial evidence. The absence of evidence to the contrary may not, however, be directly converted into circumstantial evidence itself tending to prove the fact in issue against the silent party, as was made clear in Jones v Dunkel itself. The rule cannot be used to fill gaps in the evidence or to convert conjecture or suspicion into a matter of inference." I would, with respect, adopt that approach and limit the application of the rule in Jones v Dunkel (supra) to drawing an inference which may be available from circumstantial evidence. See also Aspendale Pastoral Co Pty Ltd v WJ Drever Pty Ltd (1983) 7 ACLR 937 at 940 - 941; Chester & Fein Property Developments Pty Ltd v Candam Investments Pty Ltd (1985) 9 FCR 419. 10 The evidence disclosed the following matters. 11 Each of the applicants is a trustee company and has a paid up capital of $2. The first applicant has a registered charge over its interest in the Templegate Forestry Trust and all its other assets in favour of Equus Financial Services Limited ("Equuscorp") securing a loan of $27,527. The amount presently owing under that loan is $27,824.26. That charge has been partially discharged in relation to a one tenth interest of the first applicant in a property in Queensland. The first applicant has also given a charge overall its assets in favour of the National Australia Bank Limited. That charge, created on 5 May 1994, is fixed and floating and secures all monies which may be owing from time to time by the first applicant. No maximum prospective liability is specified in the charge. The property charged is the whole of the assets and undertaking of the first applicant and includes a charge over the trust fund of the Lenbourne Trust held by the first applicant. 12 A charge was also created by the first applicant in favour of Equuscorp on 30 June 1989 to secure the repayment of $51,165 but that loan according to the applicants' solicitor has been repaid although the charge has not been formally lifted or discharged. 13 The second applicant has a number of registered charges over its assets such as a charge over 30 units in a film in favour of Equuscorp securing a loan of $150,663. However, although there is a charge registered over its interest in the Templegate Forestry Trust it has produced evidence that it is has discharged that loan in full having paid the sum of $71,054.42 in August 1992. Although the second applicant has repaid the amount in respect of which that charge is a security with the result that its interest in the Templegate Forestry Trust should be unencumbered by that charge, a charge created on 27 July 1996 by the second applicant in favour of Challenge Bank Limited secures all amounts presently owing or which may in the future be owing by the second applicant to the bank. The maximum prospective liability of the second applicant under the charge is $1,250,000. The property charged is the whole of the assets and undertaking of the second applicant and specifically include any trust fund of which the second applicant is or becomes a trustee including the "Nick Russo Family Trust" which is the trust apparently the beneficial owner of the interests held by the second applicant in the plantations. 14 In correspondence between the solicitors for the parties, the solicitor for the applicants offered as security for the respondents' costs the interests of the applicants in the pine plantations. The solicitor, in cross‑examination, accepted that having regard to the charges to which I have referred over the assets of the first and second applicants they could not offer their interests in the plantations as security and that there had been a false basis for the offer which had been made. The solicitor said that when he wrote the letters and said that the applicants were prepared to provide their interests in the plantations as security for the respondents' costs he was not aware of the charges which had been created in favour of Equuscorp or the banks. 15 Apart from their interest in the pine plantations the applicants do not appear to have any other assets other than the first applicant's ownership of some real estate in Glen Waverley which is mortgaged to the National Australia Bank Limited. There is no evidence as to the value of the land or the amount outstanding under the mortgage. 16 One of the unresolved factual issues before the Court is the value of the interests of the applicants in the various plantations. The purchase price for the interests was $98,620. The interests were purchased in June 1998. For the purposes of the security for costs applications the applicants have made a number of requests to the respondents to supply them with estimates of the value of their interests in the plantations or of any valuations they have of the plantations. They point to reports which the manager has supplied from time to time and they submit that the respondents ought to have some idea of the value of the plantations and the applicants' interests in the plantations. The respondents have not been forthcoming with any such information. The respondents were able to tender, as a result of material obtained upon subpoena a report and valuation of the Jeremy 1 plantation on 5 February 1991 which valued that plantation at $2,617 per hectare. Applying the figure to all the plantation interests of the applicants a total of $26, 170 is derived. However there is no evidence which enables me to form any view at the present time as to what the valuation of the applicants' interests in the plantations might be. 17 The applicants submitted that in such circumstances if the Court is not told what the value of the assets is it cannot be said that there is credible evidence that the applicants will not be able to pay the respondents' costs in the event of failing in the proceeding. It was put in substance that the fact that the Court was not told by the respondents what the value of the plantations was placed an impediment in the path of the applications for security for costs. I do not accept this submission. Notwithstanding the absence of a current or relatively recent valuation of the plantations and the applicants' interests in them I must examine such evidence as is placed before the Court to determine whether there is credible testimony as required by s 1335. The absence of such evidence is just one of the matters I have to take into account in determining whether there is credible testimony as required by s 1335. The applicants submitted that their interests in the plantations were worth at least what they paid for them. There is little basis for making that assumption but for present purposes I am prepared to do so. 18 The evidence discloses that each applicant has a paid up capital of $2. It is not disputed that each applicant is a trustee company so that it has no other assets. On this ground alone I consider that there is credible testimony that there is reason to believe that the applicants will be unable to pay the respondents' costs if the respondents are successful. Assuming that the applicants have a right of indemnity out of the relevant trust funds which they administer is it necessary to consider what is the position of those trust funds. The first applicant has an acknowledged liability to Equuscorp of $27,824.26 whereas the second applicant's indebtedness in respect of which the purchase of the plantation interests was made has been discharged. I am prepared to accept that for the purposes of the applications the loans in respect of which the charges were given over interests in films have been discharged in the terms identified by Mr Leaker (the applicants' solicitor) in his latest affidavit sworn 20 April 1999. All assets owned by the trust funds of which the applicants are trustees are encumbered by the charges to National Australia Bank Limited and Challenge Bank Limited. I consider such charges to be relevant to the issues before me. In Armstrong White Killham (Managing Agents) Pty Ltd v Insurance Exchange of Australia Group Ltd (unreported, Supreme Court of Victoria, Byrne J, 31 October 1997) Byrne J found that the existence of a similar charge "entirely neutral" on the issue. With respect to his Honour I would venture to disagree as such a charge is an inhibition on the freedom of the charge to use its assets to discharge unsecured debts where it has no other form of income or cash flow. I do not consider that the evidence of such a charge is "entirely neutral". In any event the circumstances before his Honour can be distinguished from the facts presently before me. In particular I am faced with applicants with paid up capital of $2 involved in litigation as trustee companies. 19 The respondents assess their costs up to trial (including costs of preparing defences and any mediation which may be held) in excess of $150,000. The applicants will also have to fund the preparation of their own case assuming the applicants' interests in the plantations are worth no less than their purchase price of $98,620 and allowing for the present secured indebtedness of the first applicant to Equuscorp of $27,824.26, there would be insufficient assets available if the applicants failed in their claim to pay the costs of the respondents incurred prior to trial. 20 I am therefore satisfied that it appears by credible evidence that there is reason to believe the applicants will be unable to pay the costs of the respondents up to the commencement of the trial if the respondents are successful. 21 A finding that the relevant credible evidence exists does not resolve the matter but only satisfies the threshold test. Having found that there is credible testimony the question then arises whether the Court should exercise its discretion in favour of ordering security. Commenting on an earlier English equivalent of s 1335 of the Corporations Law, Lawton LJ said in Sir Lindsay Parkinson & Co Ltd v Triplan Ltd [1973] 1 QB 609 at 629: "[The Court's] discretion ought not to be hampered by any special rules or regulations, nor ought it to be put into a straitjacket by considerations of burden of proof. It is a discretion which the court will exercise having regard to all the circumstances of the case." (cf Barton v Minister for Foreign Affairs (1984) 2 FCR 463). However as Megarry V-C said in Pearson v Naydler [1997] 1 WLR 899 at 906: "It seems plain enough that the inability of the plaintiff company to pay the defendants' costs is a matter which not only opens the jurisdiction but provides a substantial factor in the decision whether to exercise it". (See also Newtons Travel Services Pty Ltd v Ansett Transport Industries (Operations) Pty Ltd (1982) 44 ALR 163 at 165 - 166; Ariss v Express Interiors Pty Ltd (In Liq) (supra) at 514 ‑ 515.) 22 It is a relevant consideration that the applicants are trustee companies. In Appleglen Pty Ltd v Mainzeal Corporation Pty Ltd (1988) 79 ALR 634 at 635 Pincus J said: "As a general rule, it appears to me undesirable that those interested in a small applicant trustee company - small in the sense of having no significant capital - should be able to defeat applications for security merely on the basis that the applicant company may well be able to obtain indemnity out of the trust assets, including assets such as stock and goodwill, to meet an order for costs. Trustee companies of this sort are usually formed to reduce the impact of income tax which may, from the point of view of those interested in them, be a laudable objective. If the applicant's submissions here are accepted, trading in this way has accorded another advantage, namely one with respect to costs." It is also submitted that the Court should have regard to the difficulty that the respondents would face in executing against a trustee company. This matter was adverted to by Smithers J in Laundry Coin‑Wash Nominees Pty Ltd v Dunlop Olympic Ltd (1985) ATPR 40‑584 at 46,729 where he said: "With respect to the indemnity, unless the applicant itself co‑operated, or the applicant company were wound up, benefit could not be obtained by the respondents thereunder. No direct process of execution would be available for the purpose of obtaining that benefit. Further, the extent to which the indemnity would in any event be productive would depend upon the state of the finances of the trust. And the possibility of some defence cannot be ignored. Where the only tangible assets of an applicant company are held in trust for another entity and its solvency depends on its right as trustee to indemnity against that entity it is necessary for the Court to have in mind the difficulties which a successful respondent would face attempting to execute in respect of an order for costs. Indeed, unless some step is taken to alleviate those difficulties it is reasonable and just to treat the applicant company as if it were without assets to meet such a liability." (See also Lagarna Pty Ltd v Bridge Wholesale Acceptance Corporation (Australia) Ltd [1995] 1 VR 150, 153 - 154; World Class Alpacas Pty Ltd v Ostrich Farms (Cook Islands) Ltd (unreported, Sundberg J, 30 October 1997). 23 In the proceeding before me there is no evidence in relation to the trust funds against which the trustees might have an indemnity for any order for costs awarded against them. 24 In Crypta Fuels Pty Ltd v Svelte Corporation Pty Ltd (1995) 19 ACSR 68 Lehane J considered a submission that a trustee is not a nominal party for the purpose of rules of Court such as O 28 r3(1)(b). At 70 - 71 his Honour said: "I was referred also to other authorities, for example, the decision of Sheppard J in this court in Orr v Lusute Pty Ltd (1987) 72 ALR 617, to the effect that in certain circumstances it may not be appropriate to make an order for security for costs against a trustee. I confess to a considerable degree of scepticism in relation to that argument. Principally and obviously, this is not a motion under the rules of court, but rather, one relying on ss 56 and 1335 of the Federal Court of Australia Act and Corporations Law respectively, as I have said. Consequently, the question whether for the purposes of O 28 r3(1)(b) Crypta is a nominal plaintiff probably does not arise. In any event, I must say that I can see no reason why authorities which hold that security for costs may, as a discretionary matter, be awarded where an impecunious corporate applicant or plaintiff has substantial parties standing behind it, whether they be shareholders or creditors as in the recent decision of Finn J in Pasdale Pty Ltd v Concrete Constructions (1995) 131 ALR 268 should not apply equally to a situation where a trustee company has standing behind it, and in a position to benefit from any decision in its favour, substantial beneficiaries of a trust." With respect I adopt those observations in relation to the matters presently before me. 25 The respondents contend that the proceeding is not being run for or on behalf of the applicants but rather as being run for the benefit of the financier Equuscorp. There is considerable evidence to support the submission that there is at the least a very close association between Equuscorp and the applicants and that in some way Equuscorp is running the action for and on behalf of the applicants. Although Mr Leaker, the solicitor for the applicants (and also the General Manager and corporate solicitor for Equuscorp), said that there was no arrangement for any benefit of the litigation to go to Equuscorp he also said that he was only involved as a solicitor on the record of proceedings when Equuscorp was involved. The endorsement on each of the affidavits filed on behalf of the applicants is endorsed "MARK LEAKER, Solicitor Equuscorp Pty Ltd". A number of letters written on behalf of the applicants to the respondents' legal advisers have been written on Equuscorp letterhead. I refer, for example, to a facsimile transmission from Equuscorp Pty Ltd to the solicitors for the first to fifth respondents dated 23 July 1998, a letter from Equuscorp to the solicitors for the first to fifth respondents dated 27 July 1998 in which Mr Leaker referred in a number of places to his "client" and a letter from Equuscorp to the solicitors for the first to fifth respondents dated 31 July 1998 signed by Mr Leaker, again referring to his "clients". More recently in response to Notices to Produce served on the applicants by the solicitors for the eighth respondent on or about 13 April 1999 Mr Leaker in a letter dated 15 April 1999 on the letterhead of Equus Corp stated: "Will you please note that I am instructed by my client not to produce the documents referred to in those two notices." 26 I am satisfied that Equuscorp is in some way promoting or participating in the litigation but I am not satisfied on the evidence before me that there is an arrangement whereby any benefit from the litigation is to flow through to Equuscorp. In any event Equuscorp appears to have a significant role in the conduct of the litigation which is a matter I consider I am entitled to take into account in exercising my discretion: cf Sent v Jet Corporation of Australia Pty Ltd (1984) 2 FCR 201 at 215 per Smithers J. 27 There is another matter to which I wish to draw attention. It is not uncommon in applications such as these for the applicants to put before the Court, or for the respondents to bring before the Court by way of subpoena or notice to produce, the latest or more recent financial accounts of the applicants. The eighth respondents sought to achieve that result by asking the applicants by way of notice to produce to produce all balance sheets, profit and loss statements, annual accounts, annual reports, and income tax returns for the financial year 1996/1997 and 1997/1998. The response of the applicants to the notices was to instruct their solicitor "not to produce the documents referred to in those two notices". It was not put on the basis that the documents referred to in the notices to produce were either unavailable, difficult to produce or would take some time to produce. In circumstances such as this it lies ill in the mouth of the applicants to say that I should not conclude where I have found that there is credible testimony that there is reason to believe that they will be unable to pay the respondents' costs from the evidence which the respondents have placed before the Court, that I should not exercise my discretion in favour of ordering security for costs. 28 In determining whether there is such credible testimony as is required by s 1335 I have taken into account the potential costs of the proceeding. There is separate representation on behalf of the first to fifth respondents, the sixth respondent, the seventh respondent and the eighth respondent. All the respondents have placed evidence before the Court as to what they estimate their costs up to trial and including trial will be. That evidence has been given by experienced practitioners who were not cross‑examined and the applicants have not placed any material before the Court to contradict the respondents' evidence. Although the respondents have made estimates of their costs including the costs of trial I do not consider it appropriate in applications being brought at this stage of the proceeding to consider the issues of costs at trial. If I am to make any orders to security for costs I think such an order should be staged in the sense that it should only be ordered up to shortly before the commencement of trial. Any further application to cover the costs of trial can be made towards the end of the interlocutory part of the proceeding and before the trial is scheduled to commence. The first to fifth respondents estimate their pretrial costs at $47,248, the sixth respondent estimates its pretrial costs at $24,000, the seventh respondent estimates pretrial costs at $32,500 and the eighth respondent estimates its pretrial costs at $56,839. This brings the respondents' estimated pretrial costs (excluding mediation costs) to a total of $155,087. It seems to me that I should also take into account the fact that the applicants themselves will incur legal costs in preparing their case for trial. 29 On the material before me I am satisfied that there is credible testimony that there is reason to believe that the applicants will be unable to pay the pretrial costs of the respondents totalling $155,087 if they are successful in the proceeding. As I have already pointed out each of the applicants has a paid up capital of $2 and is a trustee of trusts of whose assets are encumbered to banks. 30 The respondents have placed before the Court all the material they are able to obtain in relation to the applicants' assets and it appears from that material the only assets of the applicants (save for the Glen Waverley land) are their interests in the plantations. Counsel for the applicants, quite properly, said he did not assert the applicants had other assets other than the plantations. Although I do not have a present day value of the plantations I am satisfied having regard to the price for which they were purchased, the valuation of the Jeremy 1 plantation in February 1991 and the fact that the interests in the plantations are leasehold interests with three years to run that whatever their value is they are still encumbered by the two bank charges. 31 I am satisfied that there is sufficient evidence before me to demonstrate the inability of the applicants to pay the respondents' pretrial costs. The refusal of the applicants to produce their financial accounts in response to the notices to produce also assists me in drawing an inference of that inability from the evidence to which I have referred. I have not used the rule in Jones v Dunkel (supra) to fill gaps in the evidence or to convert conjecture or suspicion into a matter of inference: Tipperary Developments Pty Ltd v State of Western Australia (supra) at 244. 32 The applicants have not sought to invoke any discretionary consideration which militates against the awarding of security for costs such as the actions of the respondents causing the impecuniosity of the applicants or that any order for security for costs will stifle the proceeding. 33 I have proceeded on the basis for present purposes that the applicants' claim is made bona fide and has prospects of success. I make this assumption because I am unable at this stage of the proceeding on the material presently before me unable to form any judgment on the merits of the case. No respondent submitted that I should not proceed on this basis. 34 In all of those circumstances I consider it appropriate that I should exercise my discretion in favour of ordering the applicants to provide security for the costs of the respondents up to the commencement of the trial and that in the absence of the provision of any such security in relation to any respondent the proceeding against such respondent be stayed until further order of the Court. 35 I do not consider it appropriate to give the respondents an indemnity against their costs. As Fullagar J said in Brundza v Robbie & Co (No 2) (1952) 88 CLR 171 at 175: "… the Court does not set out to give a complete and certain indemnity to a respondent…" Any provision for security of costs is, at best an estimate and is intended to provide a security and not an indemnity to cover all the costs. Further, any order for security for costs is a security for future costs to be incurred and should not take into account costs already incurred: see Caruso Australia Pty Ltd v Portec (Australia) Pty Ltd (1984) 1 FCR 311 at 314. Each of the sixth, seventh and eighth respondents filed his or its defence before filing the notice of motion for security of costs. The first to fifth respondents filed their notice of motion on 18 February 1999 and their defence was filed on 19 February 1999 and for present purposes I proceed on the basis that the costs of preparing their defence were incurred before the notice of motion was filed. I also do not consider it appropriate to include in the security the costs of any anticipated mediation. There should not be any inhibition on parties attempting to resolve their disputes by mediation and I therefore do not consider it appropriate or desirable that the applicants provide security for any costs which might be incurred in mediation. 36 The estimates of costs provided by the respondents are, in general terms, as follows: First to Fifth respondents Preparation of defence $ 4,087 Interlocutory activities 35,195 Mediation 7,966 Preparation for trial 5,547 Trial 62,950 Sixth respondent Preparation of defence $ 2,000 Interlocutory activities 18,000 Mediation 4,000 Preparation for trial 7,500 Trial 51,600 Seventh respondent Preparation of defence $ 2,500 Interlocutory activities 24,500 Mediation 3,000 First day of Trial 2,500 Eighth respondent Preparation of defence $ 2,924 Interlocutory activities 53,915 Mediation 5,752 Trial 81,389 37 In all the circumstances I consider the appropriate amounts to order as security for the respondents' costs up to the commencement of the trial are as follows: First to fifth respondents $ 30,000 Sixth respondent 20,000 Seventh respondent 20,000 Eighth respondent 40,000 38 As the respondents have succeeded in their applications the applicants should pay the costs of each respondent of and incidental to its or his motion. I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg