Consolidated with CIV 2173 of 1997 and CIV 2244 of 1997

Practice and procedure - Application for security for costs - Turns on its own facts

Appleglen Pty Ltd v Mainzeal Corp Pty Ltd (1988) 79 ALR 634

Aspendale Pastoral Co Pty Ltd v W J Drever Pty Ltd (1983) 7 ACLR 937

Bentley v Nelson [1963] WAR 89

Black v Eastern Goldfields Mining Co Pty Ltd, unreported; FCt SCt of WA; Library No 930039; 27 January 1993

Brunza v Robbie & Co [No 2] [1952] HCA 49; (1952) 88 CLR 171

Buckley v Bennell Design & Construction Pty Ltd (1974) 1 ACLC 301

Classic Ceramic Importers Pty Ltd v Ceramic Antiga SA (1994) 13 ACSR 263

Clay v Clay [1999] WASCA 8; (1999) 20 WAR 427

Commonwealth v Cable Water Ski Pty Ltd (1994) 14 ACSR 760

Cowell v Taylor [1885] 31 Ch D 34

Crypta Fuels Pty Ltd v Svelte Corporation Pty Ltd (1995) 19 ACSR 68

Dalecoast Pty Ltd v Guardian International Pty Ltd, unreported; SCt of WA; Library No 990168; 7 April 1999

Devenish v Jewel Food Stores Pty Ltd [1990] HCA 35; (1990) 64 ALJR 533

Espanol Holdings Pty Ltd v Banning [1999] WASC 49

Field v Commissioner of Railways (NSW) [1957] HCA 92; (1957) 99 CLR 285

GPI Leisure Corp Ltd (In Liq) v Yuill (1997) 42 NSWLR 225

Green & Clara v Bestobell Industries Pty Ltd [1982] WAR 1

Harpur v Ariadne Australia Ltd (1984) 2 ACLC 356

Hughes v Canon Australia Pty Ltd [1990] FCA 27; (1990) 8 ACLC 209

Impex Pty Ltd v Crowner Products Ltd (1994) 13 ACSR 440

Intercraft Cabinets v Sampas Pty Ltd (1997) 18 WAR 306

Jennings Ltd (In Liq) v Cole [1934] VLR 165

Lines v Tania Pty Ltd [1987] VicRp 53; [1987] VR 641

Loreva Pty Ltd v CEFA Agencies Pty Ltd (1982) 7 ACLR 164

Lynnebry Pty Ltd v Farquhar Enterprises Pty Ltd (1977) 3 ACLR 133

Memutu Pty Ltd v Lissenden (1983) 8 ACLR 364

Naamlooze Vennootschap Beleggings Compagnie "Uranus" v Bank of England [1948] 1 All ER 465

National Bank of NZ Limited v Donald Export Trading Limited [1980] 1 NZLR 97

Neck v Taylor [1893] 1 QB 560

Permanent Building Society (In Liq) v Wheeler (1994) 11 WAR 187

Perre v Apand Ltd [1999] HCA 36; (1999) 164 ALR 606

Plaza Print Pty Ltd v South British Insurance Co Limited (1984) 8 ACLR 797

Porzelack KG v Porzelack (UK) Ltd [1987] 1 WLR 420

Ravi v Phillips Fox (1992) 10 ACLC 1313

Re Apollinaris Co's Trademarks [1891] 1 Ch 1

Redondo v Chaytor [1879] 4 QBD 459

Ricochet Pty Ltd v Equity Trustee Executors & Agency Coy Ltd, unreported; FCA (French J); 24 June 1992

Rodgers v Rodgers [1964] HCA 25; (1964) 114 CLR 608

Simaan General Contracting Co v Pilkington Glass Ltd [1987] 1 WLR 516

Sir Lindsay Parkinson & Co v Triplan Limited [1973] 2 All ER 273

Southern Cross Exploration NL v Fire and All Risks Insurance Co Limited (1985) 1 NSWLR 114

Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 73 ALR 289

Ta Ho Ma Pty Ltd v Allen [1999] NSWCA 202; (1999) Aust Torts Rep 81-512

Temwood Holdings Pty Ltd v Oliver [1999] WASC 213

Temwood Holdings Pty Ltd v Oliver, unreported; SCt of WA; Library No 980459; 17 August 1998

Temwood Holdings Pty Ltd v Oliver, unreported; SCt of WA; Library No 980115; 13 March 1998

Tipperary v State of Western Australia (1996) 22 ACSR 241

Walker v Wilsher [1889] 23 QBD 335

Westralian Gold Mines Ltd v Westralian Minerals & Drilling Pty Ltd (In Liq) (1986) 4 ACLC 167

1 MASTER SANDERSON: This is an application by the first and second defendants seeking an order that the plaintiff provide security for the costs of the action. The application is made under O 25 of the Rules of the Supreme Court and pursuant to the Court's inherent jurisdiction. The application was not brought pursuant to s 1335 of the Corporations Law. In that sense the application is somewhat unusual. The defendants' submissions referred only to O 25 and the Court's inherent jurisdiction and counsel for the plaintiff approached the application on that basis. During the course of submissions I raised this question with counsel for the defendants. Counsel directly eschewed reliance upon s 1335 of the Corporations Law and submitted that there was, in reality, no difference between an application brought under that section and an application brought under O 25. Be that as it may, this is not a case to which the principles developed in relation to s 1335 has any direct application.

2 This matter is entered in the Long Causes List and it has been case managed by Steytler J. On 3 November 1999 his Honour published reasons dealing with an application for contempt brought by the plaintiff against the first and second defendants (Temwood Holdings Pty Ltd v Oliver & Ors [1999] WASC 212). In the course of his reasons his Honour gave a brief summary of the nature of the action and its progress to date. Insofar as the facts of the case are relevant to this application, I can do no better than quote what his Honour had to say at par 2 to par 5:

"The parties are involved in bitterly contested litigation. Three separate sets of proceedings have been instituted in this Court and these have been consolidated into one action. That action encompasses a number of claims brought by the plaintiff against the first and second defendants as well as other claims, not presently relevant, against the third defendant. It also involves a counterclaim by the second defendant against the plaintiff which arises as a consequence of the consolidation, together with the other actions to which I have referred, of a District Court action which has been instituted by the second defendant against the plaintiff.

Many of the claims brought by the plaintiff against the first and second defendants in the consolidated proceedings arise out of the making of an agreement, on 18 September 1991, whereby the plaintiff appointed the second defendant as its consultant with respect to the development of land at Singleton Beach in Western Australia. The making of that agreement, which was said to have been disadvantageous to the plaintiff, is alleged to have been procured by the first defendant to his own advantage (he was a shareholder of the second defendant) in breach of fiduciary obligations owed by him to the plaintiff as one of its directors. The plaintiff seeks a range of declarations and monetary relief arising out of events surrounding this and other transactions. It also claims damages from the second defendant arising out of what it says were a number of breaches of the agreement and of a later management agreement entered into between it and the second defendant.

The claim by the second defendant against the plaintiff which, as I have said, has become a counterclaim in the consolidated proceedings, is one for payment of a reasonable fee which, it contends, was payable to it by the plaintiff for consultancy services provided by it in respect of the Singleton Beach development. While the statement of claim in that proceeding refers to the two agreements which are relied upon by the plaintiff in its claim against the first and second defendants the claim for payment is made under what are described as "further agreements" made between the plaintiff and the first defendant for the provision of other consultancy services in respect of the Singleton Beach development ("the development"). There is also a claim for repayment of various disbursements incurred by the second defendant in the course of providing those services.

The consolidated proceedings have been marked by preliminary skirmish after preliminary skirmish. A date for trial is nowhere in sight. However the proceedings have arrived at the point at which discovery has been given. After inspecting the discovered documents the first and second defendants took out, on 3 September 1999, a chamber summons for an order for discovery pursuant to O 26A r 4 and O 26 r 6 of the Rules of the Supreme Court. ... "

3 There was extensive evidence relied upon both in support of and in opposition to this application. The main affidavit relied upon by the defendants was sworn by the first defendant on 25 August 1999. That affidavit including annexures ran to 274 pages. In reply, the plaintiff filed an affidavit of Bruce Hoy Charn Chin sworn 26 October 1999 which ran to 62 pages including annexures. In addition to these two main affidavits the defendants relied upon three further affidavits of the first defendant sworn, respectively, 27 August 1999, 30 August 1999 and 8 November 1999. In addition, the defendants relied upon an affidavit of Colin Edward Chenu sworn 26 August 1999. During the course of the hearing counsel for the plaintiff tendered and affidavit of Lara Jayne Edelman sworn 30 November 1999. That affidavit was received into evidence. In his written submissions, counsel for the plaintiff took objection to a number of paragraphs in the various affidavits filed by the first defendant. As a consequence of these objections I struck out the fourth sentence of par 8 of the first defendant's affidavit of 25 August 1999 and the last two sentences of par 13 of the same affidavit. In my view, these parts of the affidavit dealt with matters which were the subject of "without prejudice" negotiations. As such, the material was privileged and in the absence of waiver by the plaintiff was not admissible. It was therefore struck out. Subject to these deletions, the affidavits were received into evidence.

4 Much of the argument put by counsel for the defendants during the course of his submissions had to do with the financial position of the plaintiff. It was counsel's submission that the evidence disclosed that, if called upon to do so, the plaintiff would not be in a position to meet any costs order against it at the conclusion of a trial. The way counsel's argument was structured, it seemed as though the submissions were directed at satisfying the jurisdictional requirements of s 1335 of the Corporations Law - that is to say, establishing that there was credible testimony that, if called upon to do so, the plaintiff would not be able to meet a costs order. As I have already said, s 1335 was not the basis of the defendants' application. Under O 25 an order for security for costs is not to be made on the basis of the impecuniosity of the plaintiff alone. However, it was counsel's submission that in considering whether or not an order for security for costs ought be made the financial position of the plaintiff was relevant. Counsel accepted that impecuniosity alone could not be the basis for making any order for security. Counsel for the plaintiff accepted that the financial position of the plaintiff was a relevant consideration in determining whether an order should be made. It was the plaintiff's primary submission that it was in a position where it could meet any adverse costs order which might be made against it.

5 Appearing as Annexure "NO8" to the affidavit of the first defendant sworn 25 August 1999 is a company extract for the plaintiff. This extract discloses that the ultimate holding company of the plaintiff is Goldcore Investments Ltd ("Goldcore"). The address given for Goldcore in the extract is Hong Kong. However, it is common ground that Goldcore is a Liberian registered corporation. Nothing more is known about the company. There is no evidence as to who its directors might be, what assets it has in this jurisdiction, in Hong Kong or elsewhere and its current financial position is unknown. All that can be said is that it has been in a position in the past to advance considerable funds to the plaintiff.

6 As the plaintiff is controlled by a foreign company it is required to lodge annual financial reports and directors' reports with the ASIC pursuant to s 292(2) of the Corporations Law. It appears that, for a number of years, the plaintiff has been in breach of its obligations under the Corporations Law. However, under pressure from the defendants, it has lodged financial statements for the year ended 31 December 1998. This document appears as Annexure "NO11" to the first defendant's affidavit of 25 August 1999. It is to be noted that the accounting year for the plaintiff follows the calendar year rather than the usual Australian financial year. That being the case, the accounts dated 31 December 1998 are for the full preceding year. Both counsel had some difficulty interpreting the accounts so as to ascertain with precision the plaintiff's financial position. The accounts show that the plaintiff's current assets are valued at $5,941,671. Of this amount, "Inventories" accounts for $5,588,367. A note to the accounts shows that the amount for "Inventories" is broken up between "Land at directors' Valuation 1994" in the sum of $585,419 and two other amounts being capitalised development expenses and capitalised rates, taxes and financing costs. Under non-current assets there is again an entry for inventories which is put at $12,393,569. Of that amount, $5,984,820 is said to be "Land directors' valuation; 1994". The rest is made up, once again, of capitalised development expenses and capitalised, rates, taxes and financing costs. In relation to the directors' valuation, reference is made to a report by David Moore, an independent licensed valuer, the report being dated 20 May 1994. It is said that this report was adopted by the directors in the financial year ended 30 June 1997. Moving to liabilities, the current liabilities show borrowings at $4,170,161. The notes show that the bulk of this liability is a secured bank loan. The non-current liabilities show borrowings of $8,400,792. The notes show that of this amount $6,494,903 are loans from a controlling entity. That must be Goldcore. Total assets are said to be $18,400,147 and total liabilities are said to be $13,940,192. Relying on the balance sheet then, the plaintiff's net assets are said to be $4,459,955.

7 The statement of cash flow shows the net cash provided by the operating activities of the plaintiff for the financial year to be $999,871. The notes in relation to this entry show that it is made up in part by project costs written off in the sum of $1,386,073. The statement also shows repayment of bank borrowings at $2,065,601 and advances from controlling entity as $100,000. The net result is that over the 12 months to 31 December 1998 the plaintiff's cash position improved by an amount of $414,613. The accounts also show that the loans from the controlling entity stood at $6,494,903. The notes to the account (note 13) contain the following:

"The loan from the controlling entity is unsecured and has no fixed terms for repayment. As from 1 July 1997 it has been agreed that interest will accrue but payment is contingent upon the company achieving a positive cash flow."

8 On that basis a non-current liability is shown in the accounts for deferred interest in a sum of $1,252,486. It is to be noted that, although agreement appears to have been reached in relation to interest on the loan to the controlling entity, there is no detail contained in the accounts as to when and in what circumstances the principal will be repayable. On that basis it is reasonable to assume that the loan is repayable on demand. Nothing in the accounts or elsewhere in the evidence suggests otherwise.

9 It is apparent from the accounts that the financial position of the plaintiff is largely dependent upon the valuation of its land holdings described as "Bayshore Development". The accounts rely on a valuation prepared in May 1994. Appearing as Annexure "BHCC1" to the affidavit of Chin is a valuation of the Bayshore Garden Estate prepared by the firm Christie Whyte Moore and dated 11 October 1999. It was on this valuation that the plaintiff sought to rely for the purposes of this hearing. The valuation was undertaken by David Moore ("Moore") a certified practising valuer. The development consists of three constituent parts. The land available for residential development can be subdivided into 401 lots. Presently, 33 of these lots are available for sale. Moore has valued this land on two separate basis. First, he has assumed that the land will be divided into 401 lots and progressively sold. As an alternative, Moore assumes that 33 lots are presently available and 368 lots will be realised and subsequently sold. The difference between the two values appears to be the costs associated with developing the 33 lots. There is also land to be used for group housing sites, a retirement village and a hotel site. He has put the value of this land at $3,200,000. Finally, there is a retail site which he has valued at $650,000. He has valued the land, assuming a subdivision into 401 lots at $5,750,000 and assuming the 368 lots at $5,300,000. On that basis he has two alternative valuations. The first, assuming the 401 lots and all of the other property puts the value of the development at $10,600,000 or, alternatively, $10,150,000. Chin says in his affidavit that to date eight of the 33 lots available for sale have been sold. He also says (at par 8.1) that "a large portion of the proceeds of these sales have been used to reduce Temwood's loan from the National Australia Bank". In fact, this is not correct. Of the eight lots apparently sold, none have settled and no amount has been repaid to the National Australia Bank. This fact came to light as a result of research undertaken by the first defendant with DOLA. Counsel for the plaintiff, during the course of his submissions, admitted Mr Chin had been in error and in fact none of the blocks had settled. This was a serious error and it should have been rectified by further affidavit evidence explaining how the mistake arose. It is not enough for counsel to acknowledge the mistake in the course of his submissions. Affidavits are sworn evidence of the deponent and all care must be taken to ensure that the information provided in the affidavits is correct.

10 The valuation did not take into account a shopping centre constructed in 1997 and a medical centre constructed around the same time. However, Moore's valuation of 20 February 1998 which appears as Annexure "NO14" to the first defendant's affidavit of 25 August 1999 values the shopping centre and medical centre together at $1,550,000. Subsequent to the hearing, solicitors for the plaintiff forwarded a copy of an affidavit of Douglas Howard Solomon sworn 2 December 1999. Appearing as Annexure "DHS2" to that affidavit is a written offer by a third party for the retirement village land. The plaintiff sought to rely on that offer as establishing that the valuation of the development generally was accurate. The offer itself was for $889,000. Moore's valuation of the retirement village of land was $751,934.40. What the plaintiff sought to draw from this further affidavit was simply to confirm that Moore's valuation was conservative and should be accepted. In my view the subsequent affidavit of Solomon, although I have taken it into account, is of little value. What is in evidence is expert opinion of Moore which puts the value of the development in total at $12,150,000 (assuming the 33 blocks are included). That is the total value of the plaintiff's land holding at present and it compares with the value of $12,393,569 to be found in the accounts. Apart from this market valuation of the plaintiff's land holding, Moore, in his report, has produced two cash flow projections. Annexure "4" to his report is based on 401 lots and Annexure "5" is based on 368. What these projections are intended to show is the return to the plaintiff if all possible lots in the subdivision are progressively developed and sold. Both projections show that it will not be until the middle of the year 2006 that the development will be completely sold. Perhaps most relevantly, however, the projections show that it will be late 2003 or 2004 before the plaintiff achieves a positive cash flow. These cash flow projections are of limited value in my view because they take in the land at valuation - that is to say, $5,750,000 or $5,300,000. Development and maintenance costs are then taken into account and sales are projected forward on the basis that 60 lots per year will be sold at $60,000. No account is taken of the present balance sheet position of Temwood. That is to say, the projections do not take into account interest charges, nor is any account taken of the debt owing to the controlling entity. What is more, in his affidavit of 8 November 1999 the first defendant challenges the assumption that it will be possible to sell 60 lots per year at $60,000. He challenges this assumption on the basis of the past performance and sales of the development. There is undeniable logic in his attack upon Moore's assumptions. But in any event, it seems to me the cash flow analysis is singularly unhelpful and goes no way to provide any realistic assessment of the actual financial position of the plaintiff.

11 In my view, the plaintiff's financial position can be fairly summarised in the following way. The plaintiff owns property which is worth something over $12,000,000. It has a debt to the National Australia Bank of just over $4,000,000. It owes its controlling entity over $9,500,000 (taking into account principal plus deferred interest) and that debt will go on increasing by more than $1,000,000 per year. It is plain that the continued existence of the plaintiff is dependent upon the support of its controlling entity. If that support was withdrawn and demand was made for repayment of existing loans, the plaintiff would collapse. The plaintiff does have available to it further credit facilities which may allow it to subdivide the remaining development without further recourse to its controlling entity. However, the position is marginal and the attitude of the controlling entity is crucial. Whether or not the plaintiff would be able to meet any costs order which may be made against it at the conclusion of trial is entirely dependent upon the attitude taken by its controlling entity.

12 The defendants concede that none of the matters mentioned in O 25 r 2 are relevant to this present application. In their submissions they set out a list of 13 matters which they say provide a basis upon which security should be ordered. A number of these relate to the way in which the action is being conducted. At present no statement of claim is on foot. The plaintiff has prepared a seventh version of its pleading and, as I understand the position, the first and second defendants do not object to the form. The position with respect to the third defendant is still to be resolved. However, the defendants make the point that this action has now been on foot for some two years and there is still no proper statement of claim in place. Furthermore, the plaintiff has initiated appeals against certain interlocutory decisions but has taken no steps to progress those appeals. In my view neither of these factors, nor indeed any other procedural failings on the part of the plaintiff, are relevant to this application. Any failings on the part of the plaintiff with respect to its pleading can be dealt with in the context of a strike out application or an application for leave to amend. If appeals are not being progressed in line with time frames established by the rules then the defendants can apply to strike out those appeals for want of prosecution. But none of that is relevant to whether or not security for costs ought be provided.

13 Equally, it seems to me to be of no relevance that the plaintiff has breached the requirements of the Corporations Law by filing its accounts late or not at all. If the Corporations Law has been breached in this regard then it is open to the ASIC to take proceedings. But that is not relevant to this application.

14 There are a number of factors, however, which are relevant to the exercise of the wide and unfettered discretion conferred by O 25. First, there is the question of the merits of the plaintiff's claim. In this case it is not possible to determine on the evidence as it stands who is likely to succeed at trial. As I have indicated above, the case is extremely complex. The present amended minute of reamended consolidated statement of claim dated 23 November 1999 runs to 84 pages. Furthermore, both the plaintiff and the defendants have applied in the past for summary judgment and both were unsuccessful. Although a detailed examination of the merits of a claim is never appropriate on an application for security for costs, there may be occasions when the strength of one parties case is determinative of the issue. This is not one of those cases.

15 Equally, it is not clear that it is the action of the defendants which has led to the plaintiff's impecuniosity. As appears from the analysis of the financial position of the plaintiff, its accounts are complicated and it is difficult to make a firm decision about its present financial health. It is even more difficult to ascertain who or what has been responsible for its present financial position. I could not conclude on the evidence one way or the other whether the defendants have been responsible for the plaintiff's impecuniosity. Furthermore, this question is very much bound up with the merits of the action. If the plaintiff establishes its case at trial then it is able to say that any impecuniosity was the result of the defendants' actions. If the defendants succeed, they will be able to say that they were in no way responsible for the plaintiff's position. As it is not possible to reach even a tentative conclusion as to where the merits lie in the action, it is also not possible to reach any conclusion about responsibility for the plaintiff's impecuniosity.

16 A further consideration is whether or not any order for security for costs would stultify the proceedings. Chin's affidavit does not deal with this question at all. As I understood the submissions put on behalf of the plaintiff, the contention was that the plaintiff was in a sound financial position and would be in a position to meet any costs order which might be made against it. As a necessary corollary of that position, it follows that the plaintiff would not be prevented from conducting this litigation if an order for costs were made. The plaintiff's position is that its financial position is not that precarious. That being the case, I could not conclude that any order for costs would stultify the proceedings.

17 For its part, the plaintiff raised two matters which it said mitigated against any security for costs order being made. First, it was said that there was a delay in bringing this application. It is apparent that delay can, in certain circumstances, lead to an application for security for costs being refused. It is also the case that this matter has been on foot now for almost two years and that the application for security for costs was not made until July 1999. Discovery has been given by both parties and inspection has taken place. Discovery was extensive and time consuming and has resulted in the plaintiff incurring considerable costs. Nonetheless, I am not satisfied that in this case any delay in bringing the application would preclude an order for security for costs being made. Rather, it would seem to me preferable to order that any security be provided in relation to costs incurred after determination of the application. That course would, I think, protect the plaintiff's position.

18 The second matter raised by the plaintiff was the question of whether or not the counterclaim by the first defendant against the second defendant would in any event require all the matters raised in the original action to be litigated. The claim by the plaintiff by counterclaim (the second defendant) is relatively simple. It is seeking payment of amounts it claims it is due under certain deeds. There is no question that the primary action is the action brought by the plaintiff against the second defendants. In my view, the limited nature of the counterclaim means that it is not a factor which would preclude an order for security for costs being made.

19 Taking into account all of the evidence put by the plaintiff and the defendants in this matter and having considered all the submissions by counsel, I am satisfied that this is a case where security for costs ought be ordered. In reaching that conclusion I have found three matters to be decisive. First, the plaintiff is in an uncertain financial position. As I have indicated above, the continued existence of the plaintiff is dependent upon support from its controlling entity. That support could be withdrawn at any time and there is nothing in the evidence that suggests a change of circumstance would not lead to a withdrawal of support. If that were to occur the plaintiff could not continue as a trading entity. It is not a question of the plaintiff's impecuniosity. Rather, it is a question of the uncertain status of the plaintiff both now and in the future. That uncertainty puts the defendants at risk were they at some stage in the future to obtain a costs order against the plaintiff.

20 Secondly, the party that stands to benefit from this litigation is the controlling entity. Apart from the National Australia Bank, the plaintiff has few creditors. For its part, the National Australia Bank is protected by registered mortgages held over the plaintiff's property. The amount of the borrowings from the National Australia Bank as against the value of the plaintiff's land holding puts the bank in a secure financial position. But the position of the plaintiff at present indicates that, even if all the land it presently holds is subdivided and sold, it will be some time before the plaintiff's controlling entity recovers all of its investment. In the circumstances, it is the only party who stands to benefit from this litigation. To allow Goldcore to stand behind the plaintiff and take none of the risks associated with litigation, while leaving the defendants exposed to the prospect that they may not recover their costs, seems to me to work an injustice. It is a compelling reason for ordering security.

21 Finally, there are no factors which would seem to me to operate in the plaintiff's favour and preclude an order being made. Any delay in the application, such as there has been, is not excessive, there is no suggestion that the making of an order for security for costs will stultify the proceedings. The defendants have a prima facie defence to the claim. I could not conclude that the plaintiff's impecuniosity is due to any action on the part of the defendants. Taken together, these discretionary considerations seem to me to favour the granting of security for costs.

22 That then leads to the question of the amount of the security. Annexed to the affidavit of Chenu, sworn 26 August 1999, is a draft bill of costs. The bill anticipates senior counsel being instructed on a trial which would last six weeks. The bill also includes the costs of giving discovery and inspection of documents. In total, the costs are said to be just over $320,000. For its part, the plaintiff submits that a trial is likely to last four weeks and that the costs would be considerably less. In my view, there is much to be said for ordering security for costs to be provided in instalments. If that approach is adopted, the impact upon the balance sheet of the plaintiff is not so significant as they do not have to absorb one heavy hit. On the other hand, the defendant is protected because they can from time to time seek to top up the security. Adopting that approach, it would seem to me I should order that the plaintiff provide security for costs in the sum of $75,000. Once the matter is entered for hearing, the defendants can apply to top up the security. By that stage the issues might be more clearly defined and the parties will have a better idea of how long a trial might last. Furthermore, any potential for settlement should, by that late stage, have been explored.

23 One matter which was not explored during the course of proceedings was the question of whether or not guarantees from the directors of the plaintiff in relation to the defendants' costs would be appropriate. Less this issue be raised once I publish my reasons, I should say that I am not satisfied that this is a case where directors' guarantees would be appropriate. All the directors of the plaintiff, save one, are resident outside Australia. The one who resides in Australia does not reside in Western Australia. While the mere fact that directors are not resident within the jurisdiction would not preclude in some circumstances security being provided by way of directors' guarantee, I am not satisfied this is the proper case for such an order.

24 I will hear the parties as to the precise form of the orders and as to costs.