(d) Austcorp might deny that it has any obligation to indemnify TBPL and Barr on the grounds that it has a set-off or right of discharge against TBPL and Barr."
31 Items (b), (c) and (d) show that the defendant was fully aware of the weaknesses of the Austcorp indemnity as a form of protection for the defendant itself. It recognised quite clearly that, even if TBPL and Mr Barr received payment from Austcorp after suffering a costs order in favour of the defendant, the funds might never reach the defendant itself.
32 This is, to my mind, a significant point. The defendant did not, in reality, see the regime imposed by the Court of Appeal as an equivalent of security for its costs. On the contrary, it recognised that that regime did no more than give Austcorp responsibility to protect the plaintiffs financially, but without any assurance that that protection would ultimately rebound to the benefit of the defendant. The defendant, by allowing its earlier application for security for costs lapse, made it clear that it did not consider itself in need of that form of protection.
33 Now, however, the defendant says that the landscape has changed; and that the change occurred on 6 May 2009. At that point, the comfort the defendant had derived from the existence of the Austcorp indemnity held by the plaintiffs evaporated. The plaintiffs - and TBPL in particular - were, at that point, seen to have entered into a new phase of impecuniosity. It is said that TBPL now lacks such financial strength as it might previously have had because of both the Austcorp indemnity and the intangible "backing" implied by Austcorp's ownership. That ownership has now been replaced by that of Mr Chow and, so far as is known, he is not, in any formal way, committed to provide financial support to TBPL.
34 The circumstance just mentioned is, I think, sufficient to warrant the attention of the court to the present application despite the late stage at which it arises.
35 I pass then to the next issue which concerns security for past costs. An application for security for costs was entertained by Waddell J in Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd (1985) 1 NSWLR 114 after sixty-five days of a hearing expected to occupy between 95 and 105 days. In dealing with the part of the application that concerned security for past costs, his Honour noted cases in which security of that kind had been ordered, including Estates Property Investment Corporation Ltd v Pooley (1975) 3 ACLR 256 and Procon (Great Britain) Ltd v Provincial Building Co Ltd [1984] 1 WLR 557. The first was a case in which security for the whole of the defendant's costs was ordered after the trial had commenced, but there was no argument about that course. The plaintiff effectively volunteered security. In the second case, the proceedings had been on foot for a long term, although the hearing had not commenced. Again, the appropriateness of ordering security for past costs (or, I suppose, the undisected element related to past costs) had apparently not been regarded as controversial. In Southern Cross Exploration itself, security for the past costs element was refused.
36 The cases to which I was referred in which security was ordered for a combination of past and future costs were cases where the hearing had not commenced: Brocklebank & Co v The King's Lynn Steamship Co (1878) 3 CPD 365; Massey v Allen (1879) 12 ChD 807; JWH Turner & Co Ltd v O'Riordan (1923) 40 WN (NSW) 64; Harvey v Jacob (1817) 106 ER 59; Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd & Ors (1987) 16 FCR 497. More recently, in Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 5) [2006] FCA 1672, the Federal Court declined to order security for past costs after ten days of the trial had elapsed, holding that there had been unacceptable delay.
37 One point acknowledged by the cases is that a supervening event may justify a security application at what is, on the surface, a late stage. Supervening insolvency of the plaintiff is an example: see, for example, Brocklebank & Co v The King's Lynn Steamship Co (above); JWH Turner & Co Ltd v O'Riordan (above). Another example is departure from the jurisdiction: Massey v Allen (above); Harvey v Jacob (above). In the Citrus case (above), Collier J referred to this type of event as a "catalyst".
38 In Sagacious Procurement Pty Ltd v Symbion Health Ltd [2007] NSWCA 205, Mason P noted "decisions in which a court has ordered security in a sum that includes an allowance for costs already incurred in the proceedings". His Honour then said:
"[T]he cases all appear to involve the not uncommon situation of an application for security being made by a defendant promptly after the commencement of proceedings. In that context, it is understandable that the quantum of security ordered might address costs already incurred. An insolvent plaintiff could hardly complain if an application is made that the defendant looks to be protected with reference to the costs of the entire proceedings."
39 In the present case, the defendant has allowed the plaintiffs to proceed for more than seven years without pressing any application for security for costs. The defendant may well have drawn some comfort from the existence, since August 2005, of the Austcorp indemnity held by the plaintiffs from that date. But the defendant showed, by its application that resulted in the Court of Appeal's decision of 2 December 2005, that it did not regard that regime as a satisfactory substitute for security for costs. The decision not to press the original motion for security was deliberately taken even though the defendant accepted that the Austcorp indemnity regime did not afford direct protection. In those circumstances, I do not regard the loss of the indemnity's value, from the plaintiffs' perspective, as a "catalyst" of the type that might make the court willing to consider an order for security including some element for costs already incurred.
40 The reality of the situation is that, if the defendant had pressed an application for security for costs in 2002, the proceedings may have effectively ended at that point. An order for security for past costs now might well cause the proceedings to end now, after seven years of activity and very substantial outlays by the plaintiffs in prosecuting them. That would be a quite unacceptably oppressive result.
41 Future costs (with the future appropriately seen, in my view, as measured from and including 6 May 2009) warrant separate consideration. The same consideration of oppression does not, in my opinion, apply.
42 As to the future, it is of particular relevance to consider the undertaking proffered by Mr Chow and Mrs Chow. It is set out in Mr Tzovaras' affidavit in these terms:
"Mr and Mrs Chow have instructed me to give to the Court and, with this affidavit, on behalf of each of Mr and Mrs Chow, I provide to the Court their undertaking to satisfy any costs order that might be made against the First Plaintiff up to an amount of $120,000."
43 Mr Tzovaras' affidavit goes on to say that Mr and Mrs Chow own assets in Hong Kong and that Mrs Chow is the owner and registered proprietor of two townhouses in Darwin which Mrs Chow believes to have a combined current value in excess of $1.4 million. Title searches in evidence show Mrs Chow to be the registered proprietor of the two Darwin properties, subject to an encumbrance securing $146,800.
44 The security sought by the defendant for costs from 6 May 2009 is in the sum of $325,000. The quantum is based on an estimate made by the defendant's solicitor, Mr Tassell, of the assessable costs involved for the remainder of the proceedings. He puts these at $322,700. Mr Tassell was cross-examined and it is fair to say that some of his items may be excessive - in particular, his estimate that each of senior counsel, junior counsel and instructing solicitor (Mr Tassell himself) would spend 21 days full-time preparing closing submissions seems excessive. Mr Tassell accepted that it may turn out to be an over-estimate.
45 In an affidavit of 9 March 2009 prepared for the Court of Appeal application of that date to which I have referred, Mr Tassell estimated four days work by senior counsel and junior counsel and 12 hours work by the instructing solicitor for this very task. Nothing so significant as to cause that earlier estimate to be multiplied by more than six seems to have happened in the meantime. Mr Tassell accepted that his earlier estimate may turn out to be a reasonable estimate.
46 Other aspects of Mr Tassell's estimates were challenged. I do not need to go into them. Mr Tzovaras, the plaintiffs' solicitor, has given his own estimates for the various items referred to by Mr Tassell. His total is $82,000 but I am bound to say that it is possible that some of the items have been taken into account by him at low amounts.
47 In the end, I think a reasonable working assumption is that the tasks remaining from 6 May 2009 should be taken into account at $137,500, being Mr Tassell's estimate of $233,700 reduced by taking into account the $33,200 in his 9 March 2009 affidavit for four days for preparation of closing submissions, instead of his later figure of $218,000 based on 21 days.
48 On this footing, the undertaking of Mr and Mrs Chow in the sum of $120,000 should be regarded as very substantially in line with the likely future costs.
49 The existence of that undertaking is of great significance in deciding how the court's discretion should be exercised. It was suggested in Gentry Bros Pty Ltd v Wilson Brown & Associates Pty Ltd (1992) 8 ACSR 405 that once a company's shareholders have agreed to accept personal responsibility for any costs awarded against the company the "statutory purpose" of s 1335 of the Corporations Act "has been satisfied" and "the weight to be given to the statutory purpose is gone". This approach has not been universally accepted. Criticisms of it are referred to by members of the Court of Appeal in Jazabas Pty Ltd v Haddad [2007] NSWCA 291; (2007) 65 ACSR 276. But even if the acceptance of personal financial exposure by shareholders does not have a forestalling effect of the kind the Gentry Bros case suggests, it is still an important factor to be taken into account in exercising the court's discretion with respect to security for costs: Intercraft Cabinets Pty Ltd v Sampas Pty Ltd (1997) 18 WAR 306 at 316 per Malcolm CJ.
50 Mr and Mrs Chow offer the undertaking to the court. There is evidence that Mrs Chow has real estate assets of significant value in Australia. The court may, in the exercise of its discretion, accept that undertaking and then, in light of the estimated future costs to which I have referred, view the case as one in which the appropriate course is not to award security for costs. That is the course I propose to take in the exercise of the court's discretion.
51 Upon Chow Chan Lum and Ka Kow Yeung, by their solicitor, Ted Dorotheos Tzovaras, undertaking to the court to satisfy any adverse costs order that might be made against the first plaintiff up to an amount of $120,000, I order that the defendant's notice of motion filed on 13 May 2009 be dismissed.
52 I shall hear the parties on costs at a time to be fixed.
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