Topcide Pty Limited v Charter Financial Planning Ltd

Counsel for the Second Respondent: Mr A Henskens Solicitor for the Second Respondent: TressCox Lawyers

Counsel for the Third Respondent: Mr D Sulan Solicitor for the Third Respondent: Johnson Winter & Slattery

1. In the motion filed by the first respondent: (1) The applicant is to give security by payment into Court or by an irrevocable bank guarantee issued by an Australian bank in the sum of $135,000 within 28 days of the date of this order and in the sum of $66,360 not less than 28 days before the date fixed for hearing. (2) The applicant is to pay the first respondent's costs of and incidental to the motion. (3) In the event that security is not given in accordance with order 1, the proceeding on the applicant's claim for relief from the first respondent is stayed. (4) Liberty is granted to the first respondent to apply for additional security on five days' notice to the applicant.

2. In the motion filed by the second respondent: (1) The applicant is to give security by payment into Court or by an irrevocable bank guarantee issued by an Australian bank in the sum of $102,000 within 28 days of the date of this order and in the sum of $73,000 not less than 28 days before the date fixed for hearing. (2) The applicant is to pay the second respondent's costs of and incidental to the motion. (3) In the event that security is not given in accordance with order 1, the proceeding on the applicant's claim for relief from the second respondent is stayed. (4) Liberty is granted to the second respondent to apply for additional security on five days' notice to the applicant.
3. In the motion filed by the third respondent: (1) The applicant is to give security by payment into Court or by an irrevocable bank guarantee issued by an Australian bank in the sum of $60,000 within 28 days of the date of this order and in the sum of $55,000 not less than 28 days before the date fixed for hearing. (2) The applicant is to pay the third respondent's costs of and incidental to the motion. (3) In the event that security is not given in accordance with order 1, the proceeding on the applicant's claim for relief from the third respondent is stayed. (4) Liberty is granted to the third respondent to apply for additional security on five days' notice to the applicant. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA

REASONS FOR JUDGMENT 1 The applicant ("Topcide") is a $2 company. Gregory McCarten ("McCarten") is its sole director, secretary and shareholder. 2 In June 2007 Topcide bought units in a trust financed by a loan from the third respondent ("Macquarie") of over $7 million, secured against those units and by McCarten's personal guarantee. Topcide alleges that the transaction was plainly improvident. It sues the first respondent ("Charter") who, it alleges, through its authorised representative Craig Dangar, recommended to McCarten that he invest in the trust, arranged for the purchase of 7 million units, financed under a loan and security agreement with Macquarie, and, it alleges, arranged the investment without regard to Topcide's ability to satisfy its obligations to Macquarie under the agreement or its (or McCarten's) true financial position. The second respondent ("Atkins") was Topcide's accountant, who, it claims, acted negligently in relation to the transaction, and engaged in misleading or deceptive conduct in contravention of the Fair Trading Act 1987 (NSW). The case against Atkins largely turns on the certification in the loan application form completed by an alleged employee and authorised representative of Atkins (something denied by Atkins in his defence) in which McCarten's income, assets and liabilities are said to be misstated and the true and accurate financial position not disclosed. Its action against Macquarie is that it negligently failed to inquire sufficiently or at all into the financial position of Topcide or McCarten or Topcide's capacity to service the loan and thus engaged in unconscionable conduct in breach of s 51AB or s 51AC of the Trade Practices Act 1974 (Cth)and comparable provisions of the Australian Securities and Investments Act 2001 (Cth). Topcide claims damages from each of the respondents as well as an order declaring the loan and security agreement void. 3 Macquarie has cross-claimed against both Topcide and McCarten, who is not a party to the main proceedings, seeking the amount outstanding under the loan and security agreement, approximately $1.7 million, together with the interest for which the agreement allegedly provides. 4 Each respondent has filed a notice of motion seeking security for costs. This judgment is concerned with those motions. The motions were heard together and, by consent, evidence on one was received as evidence on the others. 5 The three motions seek orders pursuant to each or either of s 56 of the Federal Court of Australia Act 1976 (Cth) or s 1335 of the Corporations Act 2001 (Cth) that Topcide provide security for costs and that the proceeding be stayed until it does so. There are, however, some slight variations in the orders sought. First, the sums proposed differ. Charter seeks security in the sum of $203,634.26, Atkins in the amount of $175,000 and Macquarie in the sum of $140,000, although a second affidavit supporting its motion revised its estimate down to approximately $128,000. Both Atkins and Macquarie ask for payment into Court within 28 days of the order. Charter offers an alternative source - the provision of an irrevocable bank guarantee from an Australian bank. All respondents were content with the alternative form of security Charter proposed. Charter also sought an order granting liberty to apply for additional security on 5 days notice to the applicant, a proposal which the other respondents embraced. 6 I am satisfied in each case that an order for security should be made.

General principles 7 Section 1335(1) of the Corporations Act provides that: [w]here a corporation is plaintiff in any action or other legal proceedings, 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. 8 Section 56 of the Federal Court of Australia Act also confers a power on this Court to require an applicant in a proceeding to give security for the costs that may be awarded against it, him or her and to dismiss a proceeding in the event of non-compliance with the order. The power is not expressly constrained by the need to present credible testimony and is not limited to corporations. Moreover, as Lindgren J observed in Instyle Contract Textiles Pty Ltd v Good Environmental Choice Services Pty Ltd [2009] FCA 1422, 181 FCR 360 at [6] there may be circumstances in which it is appropriate to order security although there is no question of an applicant's capacity to satisfy an adverse costs order, such as where the applicant has no assets within the jurisdiction, as his Honour did in Austin, Nichols and Co Inc v Lodestar Anstalt [2009] FCA 1228. But, as Perram J observed in Soul Pattinson Telecommunications Pty Ltd v Subex Americas Inc [2009] FCA 651 at [6], where the only basis for seeking security is the applicant's asserted inability to pay the respondent's costs, it is difficult to see the practical difference between the two provisions. In the present case, no party argued there was and each was content to approach the matter on the basis that the requirements of s 1335 of the Corporations Act needed to be met. 9 The authorities make it clear that there is a threshold or jurisdictional question that must first be answered. That is whether it appears by credible testimony that there is reason to believe that the corporation will be unable to pay a respondent's costs if the proceeding is successfully defended. Once the Court has jurisdiction there is an unfettered discretion about whether or not it should exercise it. See Livingspring Pty Ltd v Kliger Partners [2008] VSCA 93, 20 VR 377 ("Livingspring") at [18] and the discussion inFFE Minerals Australia Pty Ltd v Mining Australia Pty Ltd [2000] WASCA 69, 22 WAR 241. 10 The first question, then, is the jurisdictional one. Does it appear by credible testimony that there is reason to believe that Topcide will be unable to pay the respondents' costs if successful in its defence? The inquiry involves a risk assessment based on a practical, commonsense approach to the corporation's financial affairs: Livingspring at [15]. There is "reason to believe" if there is a rational basis for the belief. Nothing more is required: Livingspring at [15]. Von Doussa J in Beach Petroleum NL v Johnson (1992) 7 ACSR 203 at 205 said the section requires credible evidence to establish "reason to believe that 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...if judgment goes against it". With respect, there is no justification for such a reformulation when the statutory test is clear and can be readily applied in its own terms: Livingspring at [14]. If his Honour was intending to suggest a different standard, I am bound by the opinion of the Victorian Court of Appeal in Livingspring: Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22,230 CLR 89 at [135]. I also happen to agree with it. 11 The section imposes on the respondents an evidentiary onus: Warren Mitchell Pty Ltd v Australian Maritime Officers Union (1993) 12 ACSR 1 ("Warren Mitchell") at 5; Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744 ("Idoport") at [60]. In Warren Mitchell Lee J observed: The use of the word "credible" suggests a requirement that evidence to 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 ground the exercise of the discretion. 12 Once the jurisdictional basis for an order is made out, the evidentiary burden shifts to the applicant to show why security should be refused or ordered in a lesser amount than is sought: Idoport at [62]; Fiduciary Ltd v Morningstar Research Pty Ltd [2004] NSWSC 664, 208 ALR 564 ("Morningstar") at [35]-[36] per Austin J. Of course, the legal burden always remains with the moving party (here the respondents) to establish that the orders sought should be made: Livingspring at [19]-[22].

The evidence on the motions 13 The evidence each respondent adduced is similar. In substance it shows that costs for each of them are likely to be substantial. It also shows that Topcide has a paid up share capital of $2; the Commonwealth Bank of Australia ("CBA") has a registered charge securing an unspecified amount of money against the assets Topcide holds as trustee for the "McCarten Investment Trust"; Topcide owns no property in NSW (though it owns a parcel of land in rural Victoria, the value of which is unknown); and it has declined invitations to provide documents showing that it has the means to pay the respondents' costs. 14 Charter's motion is supported by an affidavit of Larissa Pickford, a partner in the firm of Atanaskovic Hartnell, and the solicitor on the record for Charter in the proceeding. On 6 July 2010 Atanaskovic Hartnell wrote to Michael Mazzone, a partner of Diamond Conway, Topcide's solicitors, flagging their concern that Topcide may not be in a position to meet any order for costs, pointing out what was disclosed by the public records, and seeking copies of company accounts for the last two financial years, any interim or management accounts prepared in the period from 1 July 2009 to date and any document upon which Topcide relies to evidence its ability to meet any adverse costs order. Ten days later Mr Mazzone replied rather tersely: The financial accounts for the years ended 2009 and 2010 have not yet been finalised. Accordingly at this time copies cannot be provided as requested. Further, nothing in this email acts as an admission that our client is unable to meet an adverse costs order. 15 It appears from a second letter from Charter's solicitors to Mr Mazzone, dated 20 July 2010, that on 16 June 2010 it issued a notice to produce. Apparently, some documents were produced in answer to the notice. In that letter the firm, amongst other things, reminded him of the scope of the request in the 6 July letter, drawing his attention to the parts that seemed to have been overlooked. There was no response to that letter. 16 Topcide confined its evidence to the assessment of the amount of security and Mr Griscti, its counsel, made no submissions on the question of whether security should be ordered. 17 Atkins's motion is supported by two affidavits of Alistair Little, a solicitor in the firm of TressCox Lawyers who acts for Atkins. His second affidavit attached a further breakdown of the estimate of costs to his client attached to the first affidavit and revised the total down by $200 to $232, 300. Atkins also read a third affidavit which merely corrected a typographical error in the second one. Mr Little's first affidavit discloses that he wrote to Mr Mazzone on 14 July 2010 seeking certain documents, including current financial information detailing Topcide's financial position, foreshadowing an application for security for costs. Another of TressCox's solicitors chased up the request on three occasions but Mr Mazzone never replied to the letter and never supplied the information. 18 Once again, Topcide tendered no evidence on the threshold question and made no submissions against the making of an order. Its submissions in this case were confined to the exercise of the discretion and to the amount of security. 19 Macquarie relied on two affidavits from Samuel Johnson, a solicitor at Johnson, Winter & Slattery ("JWS"), its solicitors. 20 On 23 June 2010 JWS wrote to Mr Mazzone in similar terms to the letters the other respondents sent, expressing their concern about Topcide's capacity to meet any costs order in their client's favour, drawing attention to the matters to which I have already referred. They asked whether Topcide was prepared to give security for Macquarie's costs in the amount of $140,000, said to be 70% of their clients estimated costs, by way of payment into Court or acceptable bank guarantee. They attached a detailed assessment of their costs. They also asked Mr Mazzone to outline the basis upon which Topcide declined to give such security and, in doing so, to provide them with a copy of its half year profit and loss and balance sheet and management accounts for each month to June 2010, Topcide's bank statements showing "cash at bank", a list of Topcide's current and aged debtors, and a copy of Topcide's most recent declaration of solvency signed by the director. It foreshadowed an application to the Court in the event that Topcide declined to provide security for appropriate orders including costs. 21 On 8 July 2010 Mr Johnson received Mr Mazzone's reply. He rejected Macquarie's request on the basis that Topcide was being "attacked" rather than "attacking" (citing Amalgamated Mining Services Pty Ltd v Warman International Pty Ltd (1988) 19 FCR 324) and refused to provide the information sought in the 23 June letter. Importantly, the letter did not indicate Topcide would be able to meet any costs order. The legal argument suggested by this correspondence was a live one at the hearing of the motions and I return to it below. 22 In his affidavit Mr Johnson also referred to CBA's charge. He noted that the documents on the public record held by ASIC do not indicate the terms of the mortgage, including whether Topcide is in default, the terms of the loan repayments or the amount secured. He stated: Given the Applicant's failure to state that it would be able to meet any costs order made against it and also its failure to address the Third Respondent's concerns as noted above, I am concerned that the terms of the mortgage and the amount secured, negatively affect the Applicant's ability to meet any costs order made against it. 23 In all the circumstances, I am satisfied that each of the respondents has discharged its or his evidentiary onus and I have jurisdiction to make the orders sought. In other words, I am satisfied on the credible testimony offered by the respondents to which I have referred, and which was neither challenged nor contradicted, that there is reason to believe that Topcide will be unable to pay the respondents' costs in the event that they are successful in their defences.

Discretionary factors 24 The next question is whether there are any factors which would persuade me in the exercise of my discretion not to order that Topcide give security. InKP Cable Investments v Meltglow Pty Ltd (1985) 56 FCR 189 ("KP Cable") at 197-8 Beazley J set out some guidelines. These guidelines are widely cited and were approved by the NSW Court of Appeal in Jazabas Pty Ltd v Haddad [2007] NSWCA 291, 65 ACSR 276 ("Jazabas") at [74]. The following considerations are material here. (a) The applications were made early in the litigation. The proceeding was commenced on 6 April 2010. Atkins and Macquarie Bank have filed defences denying the allegations. Charter is yet to file a defence. (b) No-one suggested I should not proceed on the basis that Topcide's action was brought bona fide and that it has an arguable case. In these circumstances the merits are a neutral consideration. See Morningstar at [37]-[38] per Austin J; Jazabas at [84]. (c) There is no evidence to indicate that Topcide's impecuniosity was caused by the conduct of any of the respondents. (d) There is no suggestion that the application for security is designed merely to stultify the right of an impecunious party to litigate the proceeding and no evidence was led to show that McCarten, who stands behind the company and is the person who will benefit from the litigation if it succeeds, is without means. See also Bell Wholesale Co Pty Ltd v Gates Export Corporation (1984) 2 FCR 1 at 4. (e) There is no evidence that an order for costs in this case would stifle the litigation so that it would be oppressive to make it. (f) There is no evidence that McCarten, the person likely to benefit from the litigation, is willing to provide the necessary security. (g) Topcide did not point to any public interest aspects which affect whether or not an order for security should be made. 25 Topcide raised only two discretionary considerations. The first concerns Atkins's motion, the second Macquarie's. The argument concerning Atkins's motion can be shortly disposed of. Topcide argued that the notice of motion had been filed outside the timetable fixed by the Court. It submitted that the fact that the motion had been brought late was a relevant discretionary matter militating against the making of an order. It is true that the notice of motion was filed outside the timetable. But the evidence shows that the reason for non-compliance with the timetable and for the delay was a failure on the part of Topcide's solicitor to reply to Atkins's solicitor's correspondence. There is no evidence that Topcide was disadvantaged by the delay or incurred any costs as a result of it. In the circumstances the delay is a red herring. Mr Griscti accepted that if his argument were rejected, there was no basis for denying Atkins security for costs. 26 There are, in fact, sound reasons to justify the orders sought. Despite repeated invitations to show otherwise, Topcide has not produced any material to show that it can meet any costs order. The conclusion Mr Henskens, who appeared for Atkins, urged is inescapable. The person who will benefit from the action is seeking to use his company as a vehicle to receive any damages that may be awarded but, if the litigation does not go well, will try to use the company as a shield to avoid a personal costs order. It was to avoid this kind of injustice that the jurisdiction was developed. Proof of the unsatisfactory financial position of the corporate applicant is not only the trigger for the Court's discretion, but it is also a substantial factor in its exercise: Idoport at [56]; Morningstar at [36]. 27 I now turn to the argument concerning Macquarie. As it had asserted in its correspondence with Macquarie, Topcide submitted it should not have to provide security because it is "the party attacked" rather than "the party attacking". Mr Griscti argued that Topcide was forced to litigate because of a letter of demand it received from Macquarie in October last year, about five months before it filed the application and the action was merely a pre-emptive strike. He claimed that it should not be disadvantaged by the mere fact that it took the initiative. He submitted that the fact that Topcide owed $1.7 million plus interest under the loan agreement was sufficient to warrant the proceedings. 28 In KP Cable (at 198B-C), Beazley J propounds the last of her guidelines: Security will only ordinarily be ordered against a party who is in substance a plaintiff, and an order ought not to be made against parties who are defending themselves and thus forced to litigate: see Interwest at 626; Heller Factors Pty Ltd v John Arnold's Surf Shop Pty Ltd (1979) ACLC 32,446; Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 5 ACLC 480; Weily's Quarries v Devine Shipping where Zeeman J stated (at 189): [t]he general proposition that security ought not to be ordered where the proceedings are defensive in the sense of directly resisting proceedings already brought or seeking to halt self-help procedures is no more than that, a general proposition. It ought not to be elevated to being a rule of law. In many cases of that nature it could be considered oppressive to require security and that in itself may be sufficient to refuse to make an order...[see] Sydmar Pty Ltd v Statewise Developments Pty Ltd and Interwest Ltd v Tricontinental Corporation Ltd. 29 Mr Sulan, who appeared for Macquarie, relied on the remarks of Zeeman J in Weily's Quarries v Devine Shipping Pty Ltd (1994) 14 ACSR 186 ("Weily's Quarries"),quoted by Beazley J in the passage above. Hepointed out that Topcide was not directly resisting proceedings that had already been brought, nor in his submission seeking to halt self-help procedures, and there was no evidence that it would be oppressive to require security. This much was common ground. Mr Griscti did not argue, either, that Zeeman J was wrong. He submitted, however, (in effect) that the matters to which Zeeman J referred were not prescriptive, but merely illustrative. 30 Mr Sulan also distinguished Willey v Synan (1935) 54 CLR 175, Re Travelodge Australia (1978) 21 ACTR 17 and Amalgamated Mining Services Pty Ltd v Warman International Ltd (1988) 19 FCR 324 ("Warman"), other cases in which courts had considered it was appropriate to refuse to order security. 31 In Willey v Synan the plaintiff claimed to have found on board a ship, of which he was a crew member, silver coins which were confiscated by Customs officers when he arrived in Australia. The Collector of Customs issued a notice under the Customs Act 1901 (Cth), the effect of which was that unless the plaintiff began proceedings to claim the coins they would be forfeited. The High Court dismissed the Collector's motion for security for costs on the ground that the plaintiff was in substance "the party attacked" not "the party attacking". Latham CJ said (at 180) that "as the Collector has given him a notice under sec. 207 [of the Customs Act], he is, in effect, forced into legal proceedings, not merely to enforce his claim, but to prevent his claim from being extinguished". In my view, Dixon J adopted the same reasoning in substance and concluded (at 186) that, although the plaintiff could have initiated proceedings before the Collector issued the notice, once the notice was issued this "made it necessary for the plaintiff to sue or allow the forfeiture to take place". 32 In Re Travelodge Australia an analogous statutory scheme was at issue. The respondent had made a takeover offer for Travelodge Australia and issued a statutory notice whose effect, if no action was taken by the applicant shareholder, would be to cause the compulsory acquisition the applicant's shares. Blackburn CJ, relying on the obvious similarities with the statutory scheme in Willey v Synan, dismissed the respondent's application for security for costs. 33 Both these cases concerned proceedings which, as a matter of law, were necessary to avoid compulsory acquisition of property rights. Mr Sulan is undoubtedly correct that the present case is distinguishable. 34 In Warman, however, Wilcox J extended this line of authority. In that case the solicitors for one of the respondents (Warman) had written to a business (QMS) offering to supply the applicant (Amalgamated Mining) with replacement parts for pumps supplied by Warman. In that letter it was alleged that QMS was infringing Warman's copyright in the design drawings. The letter required QMS to stop offering the parts for supply on threat of further action. Amalgamated Mining then initiated proceedings under s 202 of the Copyright Act 1968 (Cth), which confers a statutory right of action on a person aggrieved by threats of copyright infringement. Warman then filed a defence and cross-claim alleging copyright infringement by Amalgamated Mining. 35 Wilcox J found (at 328) that, although there was no legal necessity for Amalgamated Mining to bring the proceedings and the case was therefore weaker than Willey v Synan, "in a practical sense" it was "forced to take legal action". He reached this conclusion essentially on the basis of the damage to Amalgamated Mining's business, saying that the letter from Warman's solicitors "[put] Amalgamated Mining in the position either of suffering losses of sales of those pump parts or of going to court to assert its rights". By sending the letter Warman was the attacker and left Amalgamated Mining "in a commercial sense…very little alternative" other than to initiate legal action. 36 I agree that the matters to which Zeeman J referred in Weily's Quarries are illustrative, rather than prescriptive. But I am persuaded that I should not refuse Macquarie's motion for security in the exercise of my discretion. 37 Accepting that Warman extends the principle articulated in the earlier cases, it is plainly distinguishable. Mr Griscti did not argue otherwise. Topcide called no evidence about the impact of Macquarie's letter of demand on its business - in fact, there is no evidence about whether it conducts any business at all, as opposed to being simply an investment vehicle for McCarten. The only circumstance upon which Mr Griscti relied was that the longer his client waited, the higher the interest on the amount outstanding under the loan and security agreement. There is no evidence relevant to the kind of "practical necessity" that influenced Wilcox J. Topcide led no evidence about what motivated it to institute the proceeding but no evidence of this kind seems to have been before Wilcox J either. Wilcox J, however, may have been influenced by the terms of Warman's letter. He described it as "a carefully drafted letter". He said the recipient of the letter must have realised that Warman had taken legal advice and there was a clear threat in the letter to take legal proceedings against QMS unless the required undertakings were acceded to. He said that the express purpose of "such a letter" was to dissuade QMS from dealing with Amalgamated Mining in respect of pump parts and so deny to Amalgamated Mining at least one customer and there was a prospect that similar letter to other customers would follow. In the present case Topcide did not see fit to tender the letter of demand and its terms are not disclosed in the pleading. 38 Mr Griscti was unable to point to any truly analogous case in which security had been refused. The implications of extending the principle beyond the current case law were not explored in argument. 39 I therefore doubt whether it is correct to conclude that Topcide is in substance the party under attack. Ultimately, however, it is unnecessary for me to come to a firm conclusion. Even if Topcide were, in substance, the party defending itself, forced to litigate in the sense contemplated in the authorities, Mr Griscti accepted that this is no more than a factor to be taken into account. Here, none of the other discretionary considerations points in Topcide's favour. In particular, there is no evidence of oppression and Topcide's failure to offer any evidence about its or McCarten's means are powerful factors in support of the motion. On balance, therefore, I consider it appropriate to order that Topcide give Macquarie security for its costs, but setting off an amount referable only to the prosecution of the cross-claim.

The amount of security 40 It is common ground that in ordering security for costs a court does not set out to provide a complete indemnity: Brundza v Robbie & Co (No 2) (1952) 88 CLR 171 at 175 per Fullagar J. Mr Griscti argued that the question to be asked was "what are the respondents' 'probable recoverable costs'?". He referred me to the formulation by McDougall J in Sharjade v Darwinia Estate Pty Ltd [2006] NSWSC 708 at [51] where his Honour said that "what the Court is required to is to assess the likely amount of costs that will be incurred until the conclusion of the hearing." Mr Darke, Charter's counsel, argued that this test was inappropriate if it presupposed that what was involved was an analysis of what was more probable than not. Rather, he contended the question was "what is the most realistic assessment?" For my part, I doubt there is any material difference between the two approaches. 41 The solicitors for all the respondents have provided detailed assessments of their costs. In every case Topcide takes issue with the estimate. In no case, however, does it provide an alternative costing and, apart from disputing the opinions given about the likely duration of the hearing and Mr Little's opinion about the time in respect of lay and expert evidence, Mr Mazzone offered no opinion of his own about the time likely to be spent in the other tasks involved in the litigation. Topcide's approach was to argue that the assessments were all too high and should be halved. That was unhelpful. 42 Each of the deponents is an experienced solicitor, well versed in commercial litigation. There is nothing really to choose between them on the basis of experience. 43 Each of the solicitors for the respondents estimated that the hearing will take five days. Mr Mazzone, on the other hand, testified that it was likely to conclude in two to three. Each of the respondents argued that the case was a complex one. Topcide insisted it was simple and straightforward. Mr Mazzone said that "[t]he key facts in the proceedings will relate to the financial position of the applicant at the time it made the loan application and the background leading to the making of the written loan application or (sic) about 21 May 2007". On any view of the pleaded cases this is a gross oversimplification. 44 Mr Mazzone also asserted that there is unlikely to be a significant factual inquiry or significant issues of credit requiring cross-examination. Having regard to the defences that have been filed and the nature of the allegations made in the statement of claim I find that very hard to accept. 45 Mr Mazzone considered that Topcide's documentary evidence "which will be discovered or relevant to the proceedings" would fill approximately three to four lever arch folders. He estimated that Topcide would rely "primarily" on the evidence of one witness, McCarten, and did not feel that there would be any requirement for expert evidence. 46 There is, of course, much speculation involved at this point by all parties. It is not insignificant, however, that the solicitors for each of the respondents are of the opinion that the hearing will run for five days. Of course, until the issues are crystallized, it is difficult to know how much evidence needs to be called. But I am generally persuaded by the respondents' arguments and unimpressed by Topcide's resistance. It is true, as Topcide argued, that the basis for the respondents' assessments of the time likely to be spent on the various tasks was not the subject of evidence and that might have been helpful. Much, however, can be gleaned from the pleadings. What we do know is that the proceeding involves multiple causes of action against three respondents and one cross-claim. At least four lay witnesses are likely to be called and, although their evidence in chief may well be given by affidavit, they will be cross-examined, one would expect, at some length. Both liability and quantum are in issue in each case. There is also the question of proportionate liability. 47 As for expert evidence, all the respondents submitted that expert evidence would be required, in the case of the first two on both liability and quantum. Mr Mazzone surmised that if expert evidence is required it will be "unexceptional and limited in scope". On the basis of the pleadings I think it is more likely than not that all the respondents will retain at least one, if not two experts, and while, as Topcide contended, there will be issues where their interests are common, there is an issue of proportionate liability with respect to the first and second respondents, where their interests will diverge. Mr Darke also pointed out - and I agree - that the focus of any expert evidence is likely to be different for each respondent, negating Mr Griscti's suggestion that a common expert could be qualified. 48 In these circumstances, an estimate of two to three days is wildly optimistic and the basis for Topcide's arguments falls away. 49 Ms Pickford provided an assessment of Charter's costs and disbursements based on the hours involved and the rate specified in item 31 in Schedule 2 to the Federal Court Rules, with a 25% discount applied to arrive at an estimate of costs recoverable on a taxation. The amount she seeks is $203,634.26. 50 Mr Little for Atkins also put forward a detailed assessment of his costs and disbursements totalling $232,300 exclusive of GST. Like Ms Pickford, based on his experience he states that he would expect his client to recover about 75% of the actual or solicitor/client costs if it were successful. In his opinion the recoverable figure, then, would be $174,375, which he rounded up to $175,000. 51 Although the figures given by Charter and Atkins are $28,000 apart and some of the individual items differ significantly, the difference between the overall amounts is largely explained by the disparity in the work the two parties have carried out to date. 52 Mr Johnson for Macquarie Bank originally estimated his client's party/party costs at $140,000 but revised the figure down to $128,640.25 based on a five day hearing and in accordance with the Court's scale fees, allowing for a 15% uplift (item 41) and the same 25% discount as the others. After the hearing concluded Macquarie submitted a further revised assessment to separate the costs of prosecuting the cross-claim, which it estimated at $13,205. Deducting that amount from the revised figure, would reduce Mr Johnson's estimate from $128,640.25 to $115,435.25, which, given the uncertainties, I would round down to $115,000. 53 No serious challenge was mounted to the hourly rates (or in the case of counsel the daily rates) for which any respondent allowed. 54 As the exercise of predicting costs is more of an art than a science, there is room for disagreement about some of the opinions, but the overall figures are unsurprising. Having regard to the conclusions I have reached and the views I have expressed, in the absence of any evidence from a costs expert or concessions from the respondents' witnesses (none was required for cross-examination), I accept the assessments they made as realistic and genuine estimates of the likely costs of the proceeding. 55 Charter's estimate of the party/party costs of preparing for hearing and of the hearing are $66,360. That takes into account 70 solicitor hours and 40 counsel hours on preparation, including briefing counsel, meeting witnesses and preparing necessary documents, and allows for 60 solicitor hours and 40 barrister hours associated with the days when it is anticipated the matter will be heard. The latter figure takes into account incidental work such as post-court conferences, checking transcript and preparation of additional submissions. The amount sought for the first stage, which is everything up to the point of preparing for hearing, is $137,274.26. I consider it appropriate to round that figure down to $135,000. 56 Atkins's estimate of the party/party costs of preparing the hearing and of the hearing are $73,000 and of all steps before that $102,000. 57 Macquarie's estimate is that $68,765 (or 55%) of its costs relate to matters up to the preparation for hearing, with $8,891 attributable to the cross claim, and $58,877 (or 45%) to preparation and hearing, with $4,314.20 to the cross claim. Thus, the two figures are $59,873.50 and $54,562.50 respectively, which I would simply round out to $60,000 and $55,000 respectively.

Lump sum or staged approach? 58 Mr Griscti argued that if security were to be ordered, it should be provided in stages and argued for a three-stage approach. There was some opposition to a staged approach, however, particularly from Mr Henskens, because of Topcide's failure to adduce any evidence that it would have any difficulty complying with an order that security be provided upfront for the whole proceeding. Nevertheless, as three orders for security will be made I am disposed to order that the amount be paid in stages. I am not, however, attracted to Topcide's proposed three-stage approach. I require security to be given in two stages, up to the date the proceeding is fixed for hearing and thereafter, the second stage incorporating the costs of preparing for hearing and the hearing as well as any recoverable post-hearing costs.

Costs 59 Costs should follow the event. It is unfortunate in the circumstances that the respondents were forced to file their motions. Topcide clearly never had a basis for resisting orders for security for costs (at least in the case of the motions filed by the first two respondents) and has now, not only run up additional costs of its own, but will have to meet a costs order against it with respect to each of the notices of motion.

Orders 60 In the motion filed by the first respondent I order that: (1) The applicant give security by payment into Court or by an irrevocable bank guarantee issued by an Australian bank in the sum of $135,000 within 28 days of the date of this order and in the sum of $66,360 not less than 28 days before the date fixed for hearing.

(2) The applicant pay the first respondent's costs of and incidental to the motion. (3) In the event that security is not given in accordance with order 1, the proceeding on the applicant's claim for relief from the first respondent is stayed. 61 I also grant liberty to the first respondent to apply for additional security on five days' notice to the applicant. 62 In the motion filed by the second respondent I order that: (1) The applicant give security by payment into Court or by an irrevocable bank guarantee issued by an Australian bank in the sum of $102,000 within 28 days of the date of this order and in the sum of $73,000 not less than 28 days before the date fixed for hearing. (2) The applicant pay the second respondent's costs of and incidental to the motion. (3) In the event that security is not given in full in accordance with order 1, the proceeding on the applicant's claim for relief from the second respondent is stayed. 63 I also grant liberty to the second respondent to apply for additional security on five days' notice to the applicant. 64 In the motion filed by the third respondent I order that: (1) The applicant give security by payment into Court or by an irrevocable bank guarantee issued by an Australian bank in the sum of $60,000 within 28 days of the date of this order and in the sum of $55,000 not less than 28 days before the date fixed for hearing. (2) The applicant pay the third respondent's costs of and incidental to the motion. (3) In the event that security is not given in accordance with order 1, the proceeding on the applicant's claim for relief from the third respondent is stayed.

65 I also grant liberty to the third respondent to apply for additional security on five days' notice to the applicant. I certify that the preceding sixty-five (65) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katzmann.