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[2000] FCA 1140
Federal Court of Australia
2000-08-16
Foster J, Hely J
Original judgment source is linked above.
REASONS FOR JUDGMENT 1 This matter was last before me on 10 July 2000. On that occasion, for the reasons which I then gave, I ordered that the motion for summary judgment taken out by the respondent ("Macquarie") be refused. I also indicated that I proposed to order that the applicant ("TAM") provide security for Macquarie's costs of the proceedings, the form and amount of such security to be the subject of later determination. 2 The matter which is currently before me is the determination of the form and amount of security which TAM should provide for Macquarie's costs of these proceedings. It is necessary to have regard to the history of the proceedings in this Court in order to fully understand the competing contentions which were put in relation to the quantum of security. 3 The proceedings were commenced by an application filed on 9 October 1997. On 13 February 1998 Foster J made orders dismissing an application by Macquarie to strike out the Statement of Claim and ordered that the costs of the application should be applicant's costs in the cause. 4 On 6 March 1998 Macquarie filed an application for security for costs. That application was supported by an affidavit of Anne Christina Sexton sworn on 5 March 1998 in which she estimated "the absolute minimum of party/party costs" likely to be incurred on a hearing estimated to last five days at $138,850.53. Of that sum, only $25,130.53 represented costs and disbursements incurred up to the time of preparing the affidavit. 5 On 2 April 1998 Foster J commenced to hear the security for costs application. On that day TAM sought access to documents on which Ms Sexton's estimates in pars 12 and 13 of her affidavit were based. Foster J dismissed the application for access upon the basis that client legal privilege continued to subsist in relation to the documents. The further hearing of the security for costs application was adjourned until 8 April 1998. 6 On 8 April 1998 TAM sought an adjournment of the hearing of the security for costs application, and in the meantime sought an order that Macquarie and others file affidavits stating when certain documents which had not been produced in response to subpoenas, were last in the possession, custody or control of the company which had been subpoenaed to produce them. TAM contended that it was prejudiced in its opposition to the security for costs application by the non-production of those documents which, it was contended, would assist TAM in demonstrating the strength of its case. Foster J was not persuaded that documents had been withheld in response to subpoenas and his Honour dismissed the application for an order for the furnishing of affidavits by the subpoenaed party. However, the hearing of the application occupied most of the day. His Honour was critical of the form of TAM's pleading and adjourned the Motion for Security for Costs until after the pleadings had been satisfactorily completed. 7 On 18 May 1998 Foster J ordered that particular paragraphs of the Statement of Claim be struck out, and that the applicant be granted liberty to re-plead as it might be advised. TAM was ordered to pay Macquarie's costs of the strike out motion. During the course of his Honour's reasons for decision, reference was made to the fact that much interlocutory effort had already been expended in the proceedings on the basis, as claimed by TAM's counsel, that access to the documents of Macquarie and other persons and organisations was necessary in order to demonstrate the strength of the applicant's "case" by way of resisting Macquarie's application for security for costs. 8 On 1 July 1998 Foster J had before him a Notice of Motion brought by Macquarie to set aside subpoenas and a Notice to Produce issued by TAM on 17 June 1998. TAM applied for an order that Macquarie not be heard in relation to the application on the ground that Macquarie was then in contempt of an order of the Court. Foster J held that there was no reasonable basis for the application that Macquarie not be heard and he dismissed TAM's application in that respect with costs. The decision on the motion to set aside the subpoenas and notice to produce was reserved. 9 On 30 July 1998 Macquarie filed an application in the High Court for the removal of the proceedings into that court. 10 On 18 August 1998 Foster J delivered his decision on Macquarie's motion. During the course of his reasons for judgment Foster J said: "This application is made in the context of a security for costs motion which has been part heard since 8 April 1998. On that date, whilst the applicant was still in evidence, the applicant moved for an adjournment of the security for costs motion on the basis of the alleged non-production of subpoenaed documents which it contended would assist to demonstrate the strength of its case in the main proceeding. It asserted that the failure to produce the documents severely damaged its case in the security for costs motion." His Honour noted that on 5 June at a directions hearing Macquarie stated that it would not, in the security for costs application, assert that the applicant did not have an arguable case. Notwithstanding that concession, TAM still sought to demonstrate that it had a strong case. Macquarie was successful in resisting the production of the documents the subject of the subpoenas and Notice to Produce. Its motion in that respect was allowed, the subpoenas and Notice to Produce were stood over generally and the costs of the Notice of Motion were reserved. 11 On 19 August 1998, TAM sought revocation of certain confidentiality orders which had earlier been made so as to enable a further expert's report to be prepared as to the strength of the applicant's case. Foster J refused that application and reserved the costs of the day so that all questions of reserved costs could be determined in October prior to his Honour's retirement. For some reason that did not occur. 12 On 20 November 1998 the case was removed to the High Court. The High Court delivered judgement on 9 March 2000, and the matter came into my docket shortly thereafter. 13 On 2 August 2000 an affidavit was sworn by Alan Robinson in which he estimated the party/party costs incurred by Macquarie in all aspects of the proceedings in this Court between 18 February 1998 and 20 August 1998, and between 10 March 2000 and 26 July 2000. He also estimated the future party/party cost to be incurred by Macquarie from 27 July 2000 up to and including the conclusion of the hearing of the proceedings. Mr Robinson is a well-qualified costs consultant who has given a detailed and rational basis of his assessment of costs incurred and likely to be incurred. By way of example, Mallesons recorded profit costs to date are $255,581.50, which he has reduced to $109,160 as a reasonable estimate of the likely party/party costs. Mr Robinson was not cross-examined on his affidavit nor was he contradicted by evidence. No specific matters were referred to by counsel for TAM by way of criticism of Mr Robinson's estimations or calculations except in terms of comparison with those earlier made by Ms Sexton. The comparison between the two estimates is reflected in the following table which was helpfully prepared by counsel for Macquarie: Stage Sexton Robinson To the conclusion of the Security for Costs Motion $30,432 (actual and prospective) $141,339 (actual)
From now to the commencement of the hearing $59,175 $96,854 Hearing costs $49,243 (5 days) $54,577 (7 days) Totals $138,850 $292,770
14 Ms Sexton's estimates for stage 1 did not take account of the large number of interlocutory hearings which took place on and after 2 April 1998. With the exception of the judgment delivered on 18 May 1998 (which was concerned with amendments to the pleadings, and in relation to which Foster J made a costs order against TAM) all of the other applications were in some way related to steps which TAM was attempting to take in pursuit of its contention that its case against Macquarie was a strong one, and for that reason security of costs ought not be ordered. 15 Ms Sexton's assessment of costs actually incurred appears to include costs referable to the strike out application heard on 13 February 1998. It would not be appropriate for TAM to be ordered to provide security for costs in relation to matters which are the applicant's costs in the cause. However, the affidavit of Mr Robinson takes as its commencing point 18 February 1998, hence I would infer that it does not include costs in connection with the strike out application which was resolved on 13 February 1998. No doubt, for this reason, counsel for TAM did not submit that any adjustment to the figures was required in order to deal with this aspect of the matter. Whilst it was submitted that Ms Sexton's estimate was a "more reasonable" figure to allow, this contention was not developed in submissions. 16 An order for the provision of security for costs is not intended to indemnify the respondent in relation to its likely costs. A court only orders security to be given in an amount which it assesses as being reasonable. Contrary to the submissions of counsel for TAM, there is no established convention that security should be fixed at about two-thirds of the expected party/party costs. The cases on this supposed convention were collected and discussed by Burchett J in Quad Consulting Pty Limited v David R Bleakley & Associates Pty Limited (28 June 1991, unreported) which was in turn considered by Lindgren J in Allstate Life Insurance Co v Australia & New Zealand Banking Group Limited (1995-1996) 134 ALR 187 at p 201. Lindgren J took "broad brush" approach to the exercise of the discretion but ordered that the estimated party/party costs be paid without deduction of one-third or of any other fraction. 17 The discretion whether to order security for costs, and if so in what amount, is unfettered, but it is a judicial discretion the exercise of which ought to be informed by rational considerations. The nature and quality of the information before the Court as to the likely costs to be incurred on a party/party basis is a factor relevant to the exercise of the discretion. Here there is a reasonably detailed, apparently rational and uncontradicted estimate put forward by Mr Robinson, and of the $258,193 which is his estimate, about $141,000 has already been incurred. I do not think that any inference can be drawn adversely to Mr Robinson's estimates from the extent to which they depart from those originally made by Ms Sexton; the two estimates were made at different points in time, and upon the basis of different information. 18 Apart from referring to the discrepancy between the two figures, the only other submissions put by TAM's counsel were based upon the supposed conventional deduction, which I have rejected, and the proposition that this is public interest litigation. Reference was made to the fact that in Tobacco Control Coalition Inc v Philip Morris (Australia) Ltd [2000] FCA 1004 Wilcox J thought it appropriate to select "a relatively low figure at this stage" as the amount of the security. 19 In a case such as the present, consistently with my earlier reasons for judgment, it would be just to order the provision of security for costs in a sum which represents the likely recovery on taxation on a party/party basis if Macquarie were successful in its defence. Mr Robinson's affidavit is an estimate of that likely recovery. In the absence of cause shown to the contrary, I think I should adopt it. It was not submitted by TAM that the costs of the High Court proceedings should be taken into account, nor was a specific submission put that the costs of the strike out motion should be taken into account. However, I consider that the costs ordered to be paid by Macquarie on the strike out motion which I dismissed should be taken into account. Whilst I have no specific information as to the quantum of those costs, I propose to allow an adjustment of $15,000 in that regard. 20 TAM submits that it should have a period of 90 days within which to provide the security, and in the circumstances I consider that to be a reasonable request. Further, the order for security which I am about to make should be confined to stages 1 and 2, that is, up to the commencement of the hearing. It will be open to Macquarie, if it wishes, to seek any further or other sum to cover the costs of the hearing as it might be advised. 21 TAM should pay Macquarie's costs of the application for security for costs, except to the extent to which those costs include the costs of Macquarie's application for summary dismissal of the proceedings. In my view, the costs of the hearings before Foster J on 2 April 1998, 8 April 1998, 1 July 1998, 18 August 1998 and 19 August 1998 are all costs of and incidental to the security for costs application as the hearings on those days were concerned with TAM's objective of resisting an order for the provision of security upon the basis of the strength of its case under the Trade Practices Act 1974 (Cth). I have reached that conclusion upon the basis of a consideration of Foster J's judgments with respect to those days. I have not consulted the transcripts. I have qualified the order which I propose to make in that respect to preserve TAM's entitlement to demonstrate, if it can, that the costs of the hearings on those days was increased by the inclusion of other matters. 22 The orders which I make are: 1. Unless the applicant provides by 4 November 2000 security in the sum of $223,193 for the respondent's costs up to and including the commencement of the hearing in this matter, these proceedings be stayed. 2. The security referred to in Order 1 is to be provided to the Registrar in such form as may be acceptable to the Registrar. The sum so ordered is without prejudice to the respondent's right to seek any further or other sum as it may be advised. 3. The applicant is to pay the respondent's costs of the application for security for costs, being the costs of and incidental to the Amended Notice of Motion dated 17 March 1998 and the Further Amended Notice of Motion of 22 June 1998, but excluding the costs of the respondent's application for summary dismissal under those motions. Those costs are to include the costs of and associated with the hearings before Foster J on 2 April 1998, 8 April 1998, 1 July 1998, 18 August 1998 and 19 August 1998, except to the extent to which the costs of the hearings on any of those days was increased by the inclusion of matter not associated with the security for costs application. 4. The respondent is to pay the applicant's costs of the application for summary dismissal. 5. The matter will be listed for further directions at 9.30 am on 6 November 2000. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hely.
Dated: 16 August 2000 Counsel for the Applicant: Mr J Glissan QC, Mr J Johnson
Solicitor for the Respondent: Mallesons Stephen Jaques
Truth About Motorways Pty Ltd (ACN 080 135 191)
Macquarie Infrastructure Investment Management Ltd