Street & 7 ors v Luna Park Sydney Pty Ltd & 3 ors

DECISION : Order made for security for costs.

CATCHWORDS : COSTS - Security for costs - corporate plaintiff - where plaintiff is trustee - where recourse to trust assets available - whether assets sufficient to meet adverse costs order - relevant discretionary considerations - where individual co-plaintiffs in jurisdiction against whom order for security would not be made - where cases of plaintiffs are not co-extensive - where corporate plaintiff's case is more complex and costly - where corporate plaintiff is funding other plaintiffs.

Corporations Act 2001 (Cth), s 1335(1) LEGISLATION CITED : Crown Lands Act 1989 (NSW), s 114 Trade Practices Act 1974 (Cth), ss 52, s 75B Uniform Civil Procedure Rules 2005 (NSW), r 42.21(1)(d)

Beach Petroleum NL v Johnson (1992) 7 ACSR 203 Dalrymple Park Pty Ltd v Tabe & Lees Pty Ltd (1996) 6 Tas R 111; (1996) 22 ACSR 71 D'Hormusgee & Co v Grey (1882) 10 QBD 13 Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972 Fiduciary Ltd & Ors v Morningstar Research Pty Ltd & Ors (2004) 208 ALR 564 Harpur v Ariadne Australia Ltd (No 2) [1984] 2 Qd R 523; (1984) 8 ACLR 835 Hurworth Nominees Pty Ltd v ANZ Banking Group Ltd [2005] NSWSC 1360 Interwest Ltd v Tricontinental Corporation Ltd & Anor (1991) 5 ACSR 621 John Bishop (Caterers) Ltd v The National Union Bank Ltd [1973] 1 All ER 707 CASES CITED : KDL Building Pty Ltd v Mount [2006] NSWSC 474 Lagarna Pty Ltd v Bridge Wholesale Acceptance Corporation (Australia) Ltd [1955] 1 VR 150 Laundry Coin-Wash Nominees Pty Ltd v Dunlop Olympic Ltd (1985) ATPR 40-584 Maples v Hughes [2002] NSWSC 617 Pacific Acceptance Corporation Ltd v Forsyth (1970) 92 WN (NSW) 29 Pearson v Naydler [1977] 1 WLR 899 Prestige Sunglasses Pty Ltd v Bernhaut Nominees Pty Ltd (Le Specs case) (1985) 9 FCR 13; (1985) ATPR 40-619 Street v Luna Park Sydney Pty Ltd [2006] NSWSC 230 Sykes v Sykes (1869) LR 4 CP 645 World Class Alpacas Pty Ltd v Ostrich Farms (Cook Islands) Ltd, De Vere & Chanesman [1997] 1193 FCA

Joan Street (first plaintiff) Ros Dwyer (second plaintiff) Michael Hesse (third plaintiff) Glen Eight Pty Ltd (fourth plaintiff) Susan Hesse (fifth plaintiff) PARTIES : Robert Simpkin (sixth plaintiff) Glen Federick Billington (seventh plaintiff) Fiona Jeanette Billington (eighth plaintiff) Luna Park Sydney Pty Ltd (first defendant) Metro Edgley Pty Ltd (second defendant) Peter Hearne (third defendant) Warwick Doughty (fourth defendant)

T Alexis SC & P Sibtain (plaintiffs) COUNSEL : G Parker SC (first & second defendants) J Clarke (third & fourth defendants)

Wise Legal (plaintiffs) SOLICITORS : Clayton Utz Lawyers (defendants) Esplins Solicitors (third & fourth defendants)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2246/05 Joan Street & 7 ors v Luna Park Sydney Pty Ltd JUDGMENT (ex tempore) 1 HIS HONOUR: The plaintiffs are the occupiers of premises adjacent to Luna Park at North Sydney. They allege, first, that the first defendant Luna Park Sydney, the operator of Luna Park, is conducting its operations in contravention of Crown Lands Act 1989 (NSW), s 114, in respect of which they claim injunctive relief. Secondly, they allege that the second defendant Metro Edgeley, the developer of Luna Park, which is also a fifty percent shareholder in Luna Park Sydney, engaged in misleading and deceptive conduct in contravention of Trade Practices Act 1974 (Cth), s 52, in connection with development applications relating to Luna Park, in respect of which they claim damages. Thirdly, they allege that the third and fourth defendants Peter Hearne and Warwick Doherty, former directors of Metro Edgeley and current directors of Luna Park Sydney, were persons involved in the second defendant's alleged contravening conduct, within the meaning of Trade Practices Act, s 75B. 2 The proceedings now have a relatively lengthy history, the details of which can be seen from my judgment of 6 April 2006 [Street v Luna Park Sydney Pty Ltd [2006] NSWSC 230]. Relevantly, the third and fourth defendants were joined by an order made on 6 April 2006. By notice of motion filed on 12 July 2006 they seek security for their costs of the proceedings against the fourth plaintiff Glen 8 Pty Ltd, which is the developer of a property at 8 Glen Street, Milsons Point. They seek security on the ground which may be described, somewhat compendiously and imprecisely, as corporate impecuniosity, referred to in Corporations Act 2001 (Cth), s 1335(1), and the Uniform Civil Procedure Rules 2005 (NSW), r 42.21(1)(d). 3 Corporations Act, s 1335(1), provides as follows: (1) Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that 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. 4 Uniform Civil Procedure Rules r 42.21(1)(d), relevantly provides as follows: 42.21 Security for costs (cf SCR Part 53, rules 2, 3, 4 and 5; DCR Part 40, rule 1; LCR Part 31, rule 11A, Part 31A, rule 11)

(1) If, in any proceedings, it appears to the court on the application of a defendant:

(d) that there is reason to believe that a plaintiff, being a corporation, will be unable to pay the costs of the defendant if ordered to do so, … the court may order the plaintiff to give such security as the court thinks fit, in such manner as the court directs, for the defendant's costs of the proceedings and that the proceedings be stayed until the security is given. 5 On an application for security for costs under s 1335 or under r 42.21(1)(d), three issues generally arise: the first is whether the ground referred to in the section or the rule is established; the second is whether, if the ground has been established, as a matter of discretion an order for security should be made; and the third is the quantum of and terms upon which any order for security is to be made. 6 I turn then to consider whether the ground which I have described as corporate impecuniosity, has been established. In Beach Petroleum NL v Johnson (1992) 7 ACSR 203, Von Doussa J said at [205]: In my opinion the power of the court under s 1335 arises if credible evidence establishes that there is reason to believe there is a real chance that in events which can fairly be described as reasonably possible the plaintiff corporation will be unable to pay the costs of the defendant on service of the allocatur, if judgment goes against it. This will be so even if in other events which can also be fairly described as reasonably possible the plaintiff corporation would be able to pay the costs. The degree of likelihood of the plaintiff corporation being unable to pay the costs along with all the circumstances, actual and possible, about its financial position, would be then taken into account in the exercise of discretion, and in framing the orders of the court if the decision is to order security. 7 This test has been applied in this Court [Hurworth Nominees Pty Ltd v ANZ Banking Group Ltd [2005] NSWSC 1360, [25] (White J); see KDL Building Pty Ltd v Mount [2006] NSWSC 474, [5]]. In Hurworth Nominees, White J - correctly, in my respectful opinion - described it (at [41]) as an undemanding test. 8 Glen 8 is the trustee of a joint venture between its shareholders Henroth Investments Ltd and Platino Properties Pty Ltd. In that capacity, it is the registered proprietor of 8 Glen Street Milsons Point, on which stands a building now known as Azure - a block of 75 residential strata units, of which about 55 have now been sold. Glen 8 is a trustee for the joint venture, and its only asset is its right of indemnity as a trustee against the trust assets.

9 In those circumstances, the applicant for security will be taken to have satisfied the onus of establishing that there is reason to believe that the plaintiff will be unable to pay a costs order if so ordered, unless the plaintiff can establish that it will have recourse to property or assets held by it on trust [Lagarna Pty Ltd v Bridge Wholesale Acceptance Corporation (Australia) Ltd [1955] 1 VR 150, 154; see also Laundry Coin-Wash Nominees Pty Ltd v Dunlop Olympic Ltd (1985) ATPR 40-584; Prestige Sunglasses Pty Ltd v Bernhaut Nominees Pty Ltd (1985) 9 FCR 13; (1985) ATPR 40-619; World Class Alpacas Pty Ltd v Ostrich Farms (Cook Islands) Ltd, De Vere & Chanesman [1997] 1193 FCA]. As Smithers J explained in Laundry Coin Wash, this is because, where the only tangible assets of the plaintiff are held on trust for another entity, so that the plaintiff's solvency depends on its right of indemnity, the Court must bear in mind the difficulty which a successful defendant may encounter in attempting to execute in respect of an order for costs. These observations of Smithers J were approved by Tadgell J in Lagarna (at 154). 10 Ultimately, Glen 8 provided an undertaking and acknowledgement by its directors - which its counsel made clear was also given by those directors in their capacity as directors of the beneficiaries of the trust - that Glen 8 would be permitted to have recourse to the assets of the joint venture to satisfy any adverse costs order. In those circumstances, it becomes necessary to consider whether the assets of the joint venture are sufficient, or whether notwithstanding that recourse to them is to be permitted, impecuniosity is nonetheless made out because of their insufficiency. 11 Although, as I have said, Glen 8, as trustee for the joint venture is the proprietor of the land on which the Azure stands and of the unsold units in the building, between 30 June 2000 and 30 June 2005 the balance sheet of the trust revealed net assets of only five dollars. As at 30 June 2006, as a result of sales of units and the application of the proceeds of sale to the reduction of debt, the financial position of the trust, according to its balance sheet, showed current assets (comprised of receivables) amounting to $33,390, total assets of $39.9 million, current liabilities of $10.9 million, total liabilities of $39.2 million and net assets of $783,500. Management accounts as at 31 August 2006 reveal a still further improved position, with current assets (still receivables) of $25,000, total assets of $29.6 million, current liabilities of $11.5 million, total liabilities of $26.5 million and net assets of $3.1 million. 12 Of these accounts, it is relevant to make the following observation. 13 First, even on the most favourable view of the trust's financial position, its current assets of $25,000 as at 31 August 2006 were insufficient to meet any costs order that might be made against it in these proceedings. 14 Secondly, on its most recent and most favourable statement of financial position, against those current assets of $25,000 stand current liabilities of $11.5 million. It is plain that on a current (as distinct from long term) basis, the fourth plaintiff Glen 8 could not conceivably satisfy an adverse costs order. It is clear, therefore, that the only prospect of any adverse costs order being met by Glen 8 is from the sale of the remaining units in the Azure. 15 Thirdly, the Azure - or at least the remaining units in it - are subject to a mortgage in favour of Henroth Investments and Henroth Pty Ltd, which, while currently expressed to secure only an amount of $100,000, may be increased by written notice given by the mortgagee to Glen 8, and the evidence indicates that if it became necessary for either of the Henroth companies to protect their interests they would be in a position and are likely to exercise their right to give such a notice, so that the whole indebtedness due to them would be secured. In effect the Henroth companies have financed the development, and they are owed most of the moneys which comprise the long term liabilities of Glen 8. Moreover, the evidence suggests that the remaining units have now been on the market for some time and remain unsold. In any event, they are shown as long term assets. As is conceded in Glen 8's own submissions, paragraph 4.1: The financial position of G8 and the joint venture into the future is dependent upon the sale of units in the Azure development that remain for sale. 16 A corporation is to be taken to be unable to pay an adverse costs order if it can only do so if allowed extended time to realise assets, even if upon realisation the assets may produce a surplus over liabilities sufficient to pay the costs [Beach Petroleum, 205; Dalrymple Park Pty Ltd v Tabe & Lees Pty Ltd (1996) 6 Tas R 111; (1996) 22 ACSR 71]. 17 The current position is that Glen 8 is a developer and has insignificant income. There remain 20 unsold apartments, and I accept that I should infer that those apartments are not proving easy to sell. Although it is possible that on realising all its assets Glen 8 would be able to pay a costs order, there is also a real chance that Glen 8 will be unable to pay the defendants' costs if judgment in the case goes against it. The potential surplus of assets of approximately $3.1 million, in the context of alleged total assets of $29.6 million - but in the absence of provision for the plaintiffs' costs or of the costs of realisation - gives little comfort that there will in fact remain sufficient assets, after a substantial trial and a lengthy process of realisation, to pay an adverse costs order. In those circumstances, for the purpose of a security for costs application, the proper conclusion is that there is a serious possibility or a real chance that Glen 8 will be unable to do so. 18 I am accordingly satisfied that the requirements of the test in s 1335, and/or r 42.21.(1)(d), are satisfied, and I turn to the question of discretion. 19 The relevant discretionary considerations were identified by Hill J in Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972. 20 The first is the plaintiff's prospects of success. This does not involve any detailed evaluation of the plaintiff's prospects, but only the formation of a view as to whether the claim is bona fide, or a sham. While a finding that a claim is a sham would ordinarily lead to an order for security, once it is established that the claim is a bona fide one then it is appropriate to consider the other discretionary factors without too detailed a review of the strengths and weaknesses of the case. The defendant's prospects also are of some significance: if the defence appears to be capricious, then that will be a strong indicator against making an order for security; but, once again, if it is established or apparent that the defence is bona fide, not too detailed a review of the merits is warranted. In this case, I am certainly not prepared to find that either the claim or the defence is a sham, or is other than bona fide. In those circumstances, the prospects of success are essentially a neutral factor on this application. 21 The second discretionary factor is the magnitude of the risk that the plaintiff will be unable to satisfy a costs order in the event that it fails. In this case, while it is not apparent that the plaintiff will definitely be unable to satisfy an adverse costs order, there is at least a real or moderate risk that it will be unable to do so. It is of some significance that a large amount of money is likely to be at risk, since the hearing time is anticipated to be in the order of ten days. That there is a risk, and a moderate one, and that the amount of costs at issue is likely to be large, are factors that weigh in favour of an order for security. 22 The third discretionary factor is whether use of the power to order security would be oppressive or would stultify prosecution of a genuine claim. No evidence or submission has been made that these proceedings would be stultified by an order for security. This factor therefore does not tell against making an order for security. 23 The fourth discretionary factor is whether the plaintiff's impecuniosity is caused by the conduct of the defendant in respect of which relief is sought in the proceedings. Although it has been submitted that difficulty in selling the remaining units is attributable to the alleged contravening conduct of the defendant, that rather begs the question as to whether there is contravening conduct at all. Glen 8 is a developer, and it has embarked on a large scale residential development, the Azure. It is notorious that such activities almost always involve an element of financial and commercial risk. I do not think that it has been established that the financial position of Glen 8 is the result of any conduct of the defendants. 24 The fifth discretionary factor is whether any public interest considerations bear on whether or not an order for security for costs should be made. No public interest issue has been invoked in the submissions made on behalf of Glen 8 in resistance to the application for security.

25 Another consideration is whether the application for security has been brought sufficiently promptly. The third and fourth defendants, who are the applicants for security, were joined by order made on 6 April this year. They brought their application for security, after some preliminary inquiries, promptly, by motion filed 12 July. It has not been submitted that they are disqualified by delay from seeking security. 26 On balance, the factors which I have so far considered weigh in favour of making an order for security. However, against that is raised a significant argument that security should not be ordered against one corporate plaintiff, notwithstanding impecuniosity, if there are other natural plaintiffs against whom an order for security would not be made. 27 It is undoubtedly relevant to the exercise of the discretion to order security that there is one or more individual co-plaintiffs against whom an order for security could not or would not be made [Pearson v Naydler [1977] 1 WLR 899; Interwest Ltd v Tricontinental Corporation Ltd & Anor (1991) 5 ACSR 621, 635 (Ormiston J); Fiduciary Ltd & Ors v Morningstar Research Pty Ltd & Ors (2004) 208 ALR 564]. This appears to have originated with cases in which there was a plaintiff outside the jurisdiction (against whom security might be ordered) but also a plaintiff, albeit an impecunious one, within the jurisdiction. The view was taken that the defendant's position should not be improved by the mere circumstance that there was an additional plaintiff. In other words, as the defendant would not have been able to get an order for security against the impecunious plaintiff in the jurisdiction, it should be no better off by reason of the circumstance that a plaintiff outside the jurisdiction was also joined [Sykes v Sykes (1869) LR 4 CP 645; D'Hormusgee & Co v Grey (1882) 10 QBD 13]. The rationale of these cases was examined in this court by Studdert J in Maples v Hughes [2002] NSWSC 617, in the course of which his Honour referred to Harpur v Ariadne Australia Ltd (No 2) [1984] 2 Qd R 523; (1984) 8 ACLR 835, a decision of the Queensland Full Court in which a natural person was joined with three companies as plaintiffs. The leading judgment was given by Connolly J who (at 841) having posed the question "What is the rule when there is more than one plaintiff", proceeded: The "two plaintiff" cases start with the situation in which one is out of the jurisdiction. Prima facie he ought to be ordered to provide security but his co-plaintiff is within the jurisdiction. In such a case it was considered that there was no ground for ordering security. See Sykes v Sykes (1869) 4 LR CP 645 at 648 per Byles J and Montague Smith J. This principle was held to apply even where the plaintiff within the jurisdiction was insolvent. I take the underlying reason to be that the defendant was really in no worse position than if he had been sued by a single plaintiff resident within the jurisdiction and insolvent. As Brett J remarked at 650, the cases show that, unless there is ground for making an order for security against all the plaintiffs, it cannot be made against any. 28 However, this is not an absolute rule, as appears from the judgment of Plowman J in John Bishop (Caterers) Ltd v The National Union Bank Ltd [1973] 1 All ER 707; see also Fiduciary Ltd v Morning Star Research. Where there is a complete identity between the corporate plaintiff and the individual plaintiff, so that all plaintiffs are suing in relation to one and the same defendant, and all plaintiffs must succeed or fail together, security will not ordinarily be ordered against only one of them [Bishop, 709-710]. But where the various plaintiffs' claims have different elements and aspects, so that they will not all necessarily succeed or fail together, although the existence of individual plaintiffs is a factor that diminishes the defendant's claim to be entitled to security against the corporate plaintiff, it does not extinguish it [Interwest Ltd v Tricontinental]. And where the degree of overlap between the claim of the individual and corporate plaintiffs is comparatively small, such that separate orders for costs might be made in respect of each of the plaintiffs, it is usually appropriate that an order for security be made [Bishop, 716; Fiduciary v Morning Star, 33-36]. 29 In the present case, while all the plaintiffs rely on similar facts, they do not sue on the same cause of action. This is particularly so in respect of the Trade Practices claims. Each plaintiff separately has to prove reliance, and each plaintiff separately has to prove that plaintiff's own damages. Importantly, it is only in respect of the Trade Practices claims that liability is asserted against the third and fourth defendants. 30 Particularly on the questions of reliance and damages, the position of the fourth plaintiff Glen 8 differs significantly from those of the other plaintiffs, as I explained in the judgment of 6 April 2006. The individual plaintiffs essentially say that they relied on certain representations or assumptions about the use of Luna Park in purchasing their properties; that those assumptions or representations have been falsified; that the defendants' misleading conduct led to this result; and that as a result they paid more for their units than they were worth. 31 Glen 8, however, says that it relied upon misrepresentations, said to be contained in the relevant development applications, by proceeding with a commercial-to-residential conversion of its property, which it had already purchased; marketing units in it "off the plan"; exchanging contracts for sale of units; and losing the opportunity to consider the impact, on the saleability of the units that overlook Luna Park, of the operation of the amusement rides, and of determining whether to seek amendments to the development consent, or instead to abandon the residential development and proceed with a commercial development, or alternatively to retain existing tenants and proceed with no redevelopment at all. That is quite a different case of reliance and damage from those made by the other plaintiffs. Because of the differences in the cases that they make on reliance, it is quite conceivable that the fourth plaintiff could ultimately fail, and the other plaintiffs ultimately succeed. Accordingly, not only are the cases not entirely interlocked, but there is a substantial possibility of different outcomes for the fourth plaintiff and the individual plaintiffs. 32 Glen 8 submits that any and all of the plaintiffs can only succeed against the third and fourth defendants if they establish "involvement" within Trade Practices Act s 75B; but that does not mean that all the plaintiffs' cases are the same. It simply poses a further obstacle - not necessarily insuperable - to the case against the third and fourth defendants, which does not affect the case against Luna Park or Metro Edgley. 33 The rationale for the rule in Sykes v Sykes to which I have referred does not apply to this case for the further reason that the costs associated with the defence of the fourth plaintiff's case are likely to be much greater, because of the complex nature of its case on reliance and damages, than the costs associated with the defence of the case brought by the individual plaintiffs. This is not a case in which the defendant is no worse off as a result of the joinder of the fourth plaintiff: the costs and complexity of the case are significantly increased by the inclusion amongst the plaintiffs of Glen 8. 34 It is also relevant that the fourth plaintiff is essentially funding the whole litigation, having agreed to indemnify all the individual plaintiffs in respect of costs, except to the extent of a contribution which each of the individual plaintiffs has made. In that way it is Glen 8 that, above the other plaintiffs, is promoting the litigation; yet at the same time is seeking to hide behind the individual plaintiffs to avoid providing security for costs. In Fiduciary v Morning Star, Austin J observed that, in Pearson v Naydler, Megarry V-C had referred, on the exercise of discretion, to the circumstance that the plaintiff company in that case was in truth the only real plaintiff, the case not being one of a plaintiff company which had a natural person as a true co-plaintiff. The role of Glen 8 in this litigation is such that it is much more than a mere co-plaintiff of the natural plaintiff. The present circumstances may be distinguished from cases such as Harpur v Ariadne, in which the natural plaintiff was the prime plaintiff, who was not seeking shelter behind the company, and who should therefore not be in any different position from any other individual plaintiff by reason of joining corporate plaintiffs under his control for the purpose of establishing his own rights. 35 Submissions have been made as to the financial position of the individual plaintiffs, but I do not consider that they are relevant. Even if the individual plaintiffs were impecunious, so long as they are within the jurisdiction, no order for security would be made against them. If circumstances which take the corporate plaintiff outside the rule in Sykes v Sykes were not established, impecuniosity of the individual plaintiffs would not be a reason for making an order against a corporate co-plaintiff. But where the cases do not overlap and there is a potential for different costs orders in respect of different plaintiffs, the fact that the individual plaintiffs may be able to satisfy a costs order against them is no comfort to the position of the defendant who may fail against the individual plaintiffs but succeed against the corporate plaintiff, yet be unable to recover costs against it. 36 For those reasons, as a matter of discretion in my view an order for security should be made, and I come to the question of quantum. 37 The defendants rely on an affidavit of their solicitor, who estimates the costs of the proceedings to total in excess $642,275. 38 Although not exclusively, I generally accept the submissions of Mr Alexis SC as to the quantum of that estimate. 39 I do not accept that costs incurred prior to the application for security should be disregarded, and I would provide for costs incurred from the time of joinder of the third and fourth defendants to date. I accept that 40 hours for interlocutory hearings is excessive, and about half that time would be appropriate. 40 I accept that a rate of $600/hour for a partner solicitor, and $7000/day for senior counsel, is excessive, at least on party/party assessment. I regard the concession by Glen 8 of $430/hour for a partner, and $5000 a day for senior counsel, as generous, and I adopt it. 41 Making those adjustments, but restoring the previous partner solicitor costs from 6 May to June 2006, the claim is about $530,000, but even that I think - for the purposes of an application for security, which is necessarily an imprecise exercise in impression and involves balancing the interests of both parties - is excessive. I take into account that some of the costs which the defendants will incur will be incurred in the defence of the claims of the individual plaintiffs, which are not necessarily the responsibility of the fourth plaintiff. I think an order for about seventy percent of that sum, or $375,000 would be appropriate. 42 The majority of the costs will be incurred in preparation for and conduct of the trial. There is no reason why the whole of the security should be provided long before it is required, to secure costs that will not be incurred for some time. I propose to follow the course adopted by Moffitt J in Pacific Acceptance Corporation Ltd v Forsyth (1970) 92 WN (NSW) 29, by requiring security to be given for the pretrial component now, but for the trial component only when the matter is approaching final hearing. 43 My orders are:

1. Order that the fourth plaintiff give security for the costs of the third and fourth defendants of the proceedings, in a form acceptable to the registrar, as follows:- 1.1 within 28 days, a sum of $175,000; and 1.2 not less than 42 days prior to the date fixed for hearing, a further $200,000. 2. Order that if security is not given in accordance with orders 1.1 and 1.2, the proceedings be stayed.

3. Order that the fourth plaintiff pay the third and fourth defendants' costs of the motion.

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