Application of third and fourth defendants
1 HIS HONOUR: By Notice of Motion filed on 31 August 2007 the third and fourth defendants seek an order pursuant to (NSW) Uniform Civil Procedure Rules 2005 r 42.21(1)(d) and (e) that the fourth plaintiff provide further security for their costs in the sum of $151,000, or such other amount as the Court deems fit. On 20 September 2006, I gave judgment on the third and fourth defendants' application for security for costs [[2006] NSWSR 1317]. As result of that decision, the establishment of the threshold requirements for an order for security are no longer in issue, and were not argued on this application, the only real question being whether, as a matter of quantum, any, and if so how much, further security should be ordered in the light of the original assessment having been made on the basis of a then anticipated 10 day trial when, in fact, the trial has now occupied some 15 days and has been adjourned part heard to resume in about a month's time for a further 10 days approximately.
2 As Ms Sibtain submits, the starting point for evaluation of the amount appropriate to be ordered where it is accepted that security is appropriate, is the likely reasonable party-party costs which the party giving security would be liable to pay to the party for whose benefit the order is made in the event that the party giving security fails in the substantive proceedings and is ordered to pay the other party's costs. The order made on 20 September 2006 for security totalling $375,000 was made on that basis. That amount was based on reducing the charge-out rate for a partner solicitor in the firm acting for the third and fourth defendants to an amount that was conceded to be reasonable, and I took to be what would be allowed on party-party assessment. In paragraph 40 of the previous judgment I made this clear, saying that I accepted that rates of $600 an hour for a partner solicitor and $7,000 per day for senior counsel were excessive "at least on party-party assessment". I then applied a further discount of 70 percent to take into account a range of matters, including that some of the costs that the defendants would incur would be in the defence of the claims of the individual plaintiffs and would not necessarily be the responsibility of the fourth plaintiff.
3 The third and fourth defendants have incurred costs to date in the proceedings totalling approximately $526,000 on a solicitor-client basis. That amount includes the costs of the partner solicitor at $600 an hour; extracting the difference between the $430 and $600 per hour from those costs, on the information provided to the Court by Mr Clarke, would reduce the amount by $62,000 to $464,000.
4 There is no issue for present purposes as to the reasonableness of the amount of $172,000 for counsels' fees.
5 The balance of the solicitors' costs are attributable to the costs of Mr Capizzi, then a graduate clerk in the employ of the third and fourth defendants' firm. In some cases it might be suggested that, due to the simplicity of the matter, a party is not entitled on a party-party basis to recover costs of having a solicitor instruct counsel when the work could have been done by a clerk. This is not such a case; I do not think there would be the slightest prospect that costs of a solicitor instructing Mr Clarke would be disallowed on assessment. In those circumstances, I do not see that the much lesser amount charged on account of Mr Capizzi's attendance as an unqualified clerk should be reduced. I, therefore, do not propose to apply a further discount to the costs and disbursements already incurred on that account.
6 That means that, for the purpose of evaluating the extent to which security already ordered is sufficient, the amount of $464,000 should have applied to it the 70 percent factor, which produces a figure of approximately $325,000, leaving available as security for further costs a sum of $50,000.
7 So far as the estimate of additional costs to be incurred after 30 June 2007 and in the resumed hearing of the matter is concerned, there has not been a significant challenge (save in a couple of respects, to which I will come), to the estimate of $216,205, which proceeds on the basis of the reduced charge-out rate of $430 per hour for a partner and half that for a junior solicitor, Mr Capizzi having since been admitted. It is accepted by the third and fourth defendants that it is appropriate to apply the 70 percent factor which I applied on the previous occasion, which would reduce the amount provision for which ought be made to just over to $150,000; given the availability of $50,000 from the security already ordered, that would suggest further security of $100,000 would be appropriate.
8 However, Ms Sibtain has pointed to some potential duplication between work to be done by counsel and work to be done by the solicitors. In circumstances where, as it has eventuated, senior counsel has not been retained, and there will necessarily be more work to be done by the solicitors as well as by counsel, I think the force of this is reduced, but not entirely extinguished. For example, if provision is to be made for counsel to prepare written submissions, a further five days for the partner solicitor and two and a half days for the junior solicitor may be too generous on a party-party basis.
9 Having regard overall to the circumstance that senior counsel has not been retained (for which substantial provision was made in the original allowance), that the third and fourth defendants have not obtained expert reports (for which substantial provision was also made in the original allowance), and that a number of other matters for which provision was originally made have not, in fact, been incurred by the third and fourth defendants, but acknowledging, on the other hand, that in this situation there are swings and roundabouts and other costs have, no doubt, reasonably been incurred for which provision was not originally made - including, in particular, that the case has already run for 15 days rather than for the 10 days then allowed - coupled with the slight duplication in respect of the assessment of future work, an overall allowance for a further $85,000 would be appropriate.
10 I order that the fourth plaintiff give further security for the costs of the third and fourth defendants of the proceedings in a form acceptable to the Registrar within 21 days in the sum of $85,000. I order that if security is not given in accordance with order 1, the proceedings as against the third and fourth defendants be stayed.
[Counsel addressed on costs]
11 Despite Ms Sibtain's submissions, it seems to me that the correspondence which sought particulars was directed to identifying the costs "expended in defence of the fourth plaintiff's claim", as distinct from the costs expended generally, and neither in the previous application for security nor in the present has the assessment of costs ever been undertaken on the basis of the costs attributable to the fourth plaintiff's claim separately from those attributable to the claims of the other plaintiffs. Indeed, such an exercise would be largely impossible. Instead, the possibility that some costs might be disallowed if claimed against the fourth plaintiff, on the basis that they were attributable to the separate claims of other plaintiffs, was a component of the 70 percent factor I applied to the costs estimate.
12 The argument on the costs of the motion would have been quite different of course had there been any evidence of an offer of or around the amount of $85,000, but there is no such evidence. In those circumstances, I see no reason for departing from the ordinary consequence that the fourth plaintiff pay the costs of the third and fourth defendants of the Motion.
13 I order that the fourth plaintiff pay the costs of the third and fourth defendants of the Motion.
Application of first and second defendants
14 By Notice of Motion filed on 3 September 2007 the first and second defendants also move for an order for further security, security in the sum of $375,000 having previously been provided as a result of a consent order made by the Court on 13 October 2006.
15 The plaintiffs have not adduced on this application any evidence of the costs incurred by them to date. Although strictly it might have been desirable that they do so, that in itself would have involved the further incurring of costs and, given the scope of these proceedings, the fact that the first and second defendants have (unlike the third and fourth defendants) been parties since their commencement, and have carried a significantly greater burden in the conduct of the defence to date, I think I can use my knowledge of the proceedings to this point and the evidence that is before me on this application of the charge-out rates of the defendants' counsel and solicitors to infer that, making all due allowance for costs that might be disallowed as not being applicable to the proceedings brought by the fourth plaintiff and for costs that might be disallowed on the basis that they are solicitor-client items the sum of $375,000 would, nonetheless, have been well and truly exhausted.
16 That said, the argument focused on the assessment of the first and second defendants' costs since 1 July and future costs in these proceedings. The assessment tendered by Mr Briggs comprised solicitors costs of $346,000, counsels' fees of $90,000, and expert witness attendances for the trial, including preparation and attendances to give evidence at trial, between $100,000 and $150,000.
17 So far as the solicitors' costs are concerned, they were prepared on the basis of charge-out rates for a partner of $569 an hour, a senior associate of $433 an hour and a paralegal of $131 an hour. Mr Parker SC, for the first and second defendants, conceded that in order to achieve consistency with the charge-out rates I had earlier adopted, it would be appropriate to apply an overall 25 percent discount from the amounts of the solicitors costs, the effect of which is to reduce the charge by $85,000, from $347,000 to $262,000.
18 However, the assessment overall involves a level of servicing of the clients substantially higher than that involved in the assessment tendered on behalf of the third and fourth defendants. While there is force in the submission that the case involves a large potential liability for the first and second defendants, that they have the burden of the defence, and that if the matter is resolved adversely to them they may have a very substantial liability indeed, nonetheless, the level of servicing that the assessment contemplates, while it may be entirely appropriate on a solicitor-client basis, is more than the party required to provide security should be required to meet. The exercise is necessarily a broad brush one, but I propose to reduce the amount allowed for solicitors' costs from the figure of $262,000 to $200,000 on that account.
19 No submission has been made that the amount provided for counsels' fees, which is essentially ten days further hearing and five days further preparation, is otherwise appropriate.
20 So far as the attendance of expert witnesses are concerned, I think I should adopt the lower figure of the range, on the basis that it has not been shown that the costs will be more than the lower figure, and I will allow for $100,000 on that account.
21 Those figures of $200,000, $90,000 and $100,000 produce a total of $390,000. Consistent with the approach I have previously taken in this matter, on account of the circumstance that some of the costs will not be attributable to the fourth plaintiff's claim, and some others may be disallowed as solicitor-client items, provision should be made for security in an amount equal to approximately 70 percent of that figure.
22 I order that the fourth plaintiff give further security for the costs of the first and second defendants of the proceedings in a form acceptable to the Registrar within 21 days in the sum of $270,000. I order that if security is not given in accordance with order 1, the proceedings against the first and second defendants be stayed. I order that the fourth plaintiff pay the first and second defendants' costs of the Motion.