The appropriate amount of quantum
25 In the course of the hearing, the respondents sought to rely upon the affidavit of Mr Luke Buchanan, a solicitor with extensive experience in litigation matters. His affidavit identified, in detail, the steps which he perceived would be required in the course of the proceeding and what he anticipated were the rates at which the persons engaged in fulfilling those steps would charge. Appropriately, the respondents also obtained an independent expert's opinion as to the costs of the proceeding. That came in the form of a report by Ms Elizabeth Harris, an expert on matters of costs, which report complied with the Court's requirements for expert evidence. In Ms Harris' opinion, if the respondents were successful, their recoverable costs would be $203,011.
26 The applicant relied upon the affidavit of one of its solicitors, Mr Wayne Davis, and his assessment of the costs of the proceeding, including the steps involved and the costs of each of those steps. He concluded that the respondents' recoverable costs would be in the order of $77,000.
27 On any view, and without any disrespect whatsoever to Mr Davis, when the Court is required to choose between independent expert evidence on the one hand, and the evidence of a solicitor acting for one of the parties in the litigation on the other, it is difficult to go past the independent expert's evidence. I have often queried the ability of solicitors, whilst exercising their duty to a client, to proffer an impartial affidavit, even one being within the scope of their expertise: see, for example, General Trade v AGL [39]; Gumm v Commissioner of Taxation [2024] FCA 71 [128] - [130]. Happily, in this case, there is little need to choose between the two competing opinions. Where appropriate, however, the evidence of Ms Harris has been preferred, simply because of her independence.
28 One issue which attracted the attention of the parties in the course of the hearing was whether the applicant, the Lucas Shareholder, is effectively in the position of a defendant. In other words, whether the proceedings are properly characterised as being defensive in nature: see Willey v Synan (1935) 54 CLR 175. Where that is the case, courts are prone to decline making an order for security or will reduce the amount required to be provided.
29 The concept of a plaintiff being in the position of a defendant was discussed at length by Applegarth J in Global Access Limited v Educationdynamics, LLC [2010] 1 Qd R 525. There, his Honour dealt with a similar question in the context of a disputation between parties as to the registration of a domain name, that being a matter which was regulated by an external dispute body. Relevantly, the parties had entered into an agreement which required any disputes about domain name registration to be adjudicated by an external dispute body. In accordance with that agreement, the first defendant (being the "complainant" in the dispute process) filed a complaint which ultimately resulted in a decision concluding that the domain name should be transferred to it by the plaintiff (being the "respondent" to the complaint). The plaintiff then commenced proceedings in the Supreme Court of Queensland seeking to overturn that decision. On an application by the first defendant seeking an order for security for costs, the plaintiff argued that its action was defensive in nature. In addressing that question, Applegarth J considered the possibly analogous position of a person who might seek to challenge an adjudicator's determination under the building and construction industry security of payment legislation, which is common in each State. His Honour referred to the decision in Procorp Civil Pty Ltd v Napoli Excavations and Contracting Pty Ltd (No 2) [2006] NSWCA 147, in which it was held (at [10]) that a party instituting court proceedings to challenge an adjudicator's determination is fairly regarded as being in substance a plaintiff, rather than merely defending a claim made against it. That was compared with the circumstances where a company seeks to challenge a statutory demand, being one where it is recognised that the applicant may be in the position of a defendant. After considering these matters, Applegarth J held (at 533 [29]) that, whilst an adjudicator's decision under security of payment legislation has statutory recognition, the analogy between that and the circumstances of determination of the rights to a domain name was strong. However, his Honour then observed that, in ascertaining whether proceedings are truly defensive in nature, it is preferable to have regard to the character of the adjudication decision and the nature of the proceedings that the plaintiff was obliged to commence if it wished to avoid its consequences.
30 Ultimately, his Honour determined that the plaintiff in the case before him had voluntarily submitted to the process which meant that any complaint raised would be referred to an adjudicator. That process had the consequence that the plaintiff was bound by the adjudication and if it chose to challenge it, it would be required to commence the proceedings. His Honour observed that the consequences which the plaintiff sought to avoid in that case did not arise by force of statute, but merely by the contractual terms to which it had voluntarily agreed. As his Honour observed (at 539 [57]), the proceedings sought to avoid consequences that arose by reason of the plaintiff's contractual acceptance of an adjudication process, and it was the one invoking or resorting to the Court's jurisdiction for the purpose of establishing rights or obtaining relief. It was not, therefore, in substance in the position of a defendant for the purposes of the security for costs application.
31 The observations of Applegarth J are applicable in the present case. Here, the parties voluntarily entered into the Shareholders' Agreement which contained a clause which refers a dispute between the parties to an expert for determination. That has the consequence that, if one party wishes to challenge that determination, they themselves are required to commence a proceeding and are the prosecutors of that action. It follows that the proposition that the present action is defensive in nature, cannot be accepted.
32 That, however, is far from the end of the matter.
33 As Mr Psaltis, counsel for the respondents, submitted, applications to set aside an expert determination are akin to applications for judicial review: see Canaipa Developments Pty Ltd v TLC Jones Pty Ltd [2021] QSC 237 [60]. The Court's obligation on applications of this nature is to assess whether or not the decision made by the expert accords with the contractual agreement between the parties. That is, usually, a question of whether the adjudicator or expert decided that which the relevant contract required them to decide. In many instances, that ought not be a relatively difficult task - one generally needs to look only at the contractual powers or the agreement between the parties to refer the matter to an expert, what was referred to the expert, and what the expert in fact decided: see Vale Belvedere Pty Ltd v BD Coal Pty Ltd [2011] 2 Qd R 285, 297 [36]. In most cases, the evidence is very limited and it should be.
34 Whilst in this case the concise statement leaves something to be desired in terms of the articulation of the applicant's case, it became evident in the course of submissions that this is a relatively straightforward matter which has developed undue complexity by reason of the case advanced by the respondents. As has been mentioned, the letter referring the matter to the ADC for consideration set out the terms of the dispute. Unfortunately, the articulation of the dispute was poor with the result being, at least on one view, that Mr Lindgren's determinations possibly exceeded the matters he was required to decide. That, of course, is only a preliminary observation, and far from a final determination.
35 On another view, the matters referred for determination may have been broader than those expressly identified in the letter. As Mr Psaltis correctly identified, the articulation of the "Event of Default" alleged to have been committed by the Lucas Shareholder was not conclusory or conclusive, but inclusive. The letter alleged that the Lucas Shareholder had breached multiple provisions of the Shareholders' Agreement, "including" those provisions set out in the letter. This is relied upon by the respondents as justifying the existence of a broader dispute than that which appears from the face of the referral letter. That, of itself, may give rise to difficulties that would not usually arise in matters of this nature. However, Mr Psaltis added that the respondents might argue that the applicant is estopped from denying that Mr Lindgren's determinations exceeded the dispute which was referred. That seems to be supported by allegations that the Lucas Shareholder engaged in the process before Mr Lindgren to some extent and with knowledge that the dispute was wider than that specifically referred to in the letter. The claims of estoppel are perhaps joined with issues of waiver and election. This, as Mr Psaltis submitted, requires the adducing of greater evidence than that which might normally be found on an application of this nature. It might also be apprehended that it is these issues which gives rise to the conclusion that the matter will involve a two-day hearing rather than a single day - the length of the hearing being another matter which was in issue between the parties.
36 Thus the question to be answered is, "How does this affect the outcome of the application for security for costs?". On the one hand, for the applicant, it is said that these arguments implicitly go beyond the case raised by it and are, in effect, in the nature of a counterclaim. There is some force in that. On the other hand, the respondents might contend that the arguments are just a defence to the claim that the expert's determinations should be set aside. There is also force in that.
37 On any view, the issues of estoppel, waiver and election take this case out of the ordinary for this type of proceeding. Whilst not acknowledging the existence of any fault on the part of the expert, it assumes that such might have occurred. If that is so, as it may be, the cause of that is more than likely to have been the poorly written letter of referral. On that basis, if the respondents are in the position of having to rely upon estoppel, waiver or election, one might query why the applicant ought pay for the respondents' costs of rectifying that which arose from their default. In such circumstances, it is preferable that the applicant not be required to provide security in relation to the resolution of those issues at this juncture. That might be different by the end of the hearing, but, at present, the burden of the issues for which the respondents are responsible, should not be borne by the applicant. It is, therefore, appropriate to assess the likely costs in this matter on the basis of a standard application of this nature, being one which would require only one day for the hearing.
38 Helpfully, Mr Psaltis identified that it was quite possible to reduce Ms Harris' estimate to account for a one-day hearing, rather than two. He suggested that, taking a broad brush approach, the estimate would reduce to some $160,000.
39 One has to pause at that point because it requires acceptance that, removing from Ms Harris' assessment the steps required for a two-day hearing, the resulting calculation is correct. That is difficult to do. Even in these days of exorbitant legal fees, a one-day hearing in this Court ought not to cost $160,000. I suspect that most judges would baulk at the proposition that that would be so, even though it is based on Ms Harris' assessment.
40 At this point, Mr Davis' evidence should also be taken into account. He assessed an amount of $100,000 as being appropriate for a one-day hearing, and applied a reduction of 26% to calculate costs on a party/party basis at $77,000. He then reduced the amount slightly more to $62,000. That approach is, generally not inappropriate, but it pitches the amount too low. One must take into account that, at the end of the day, if the respondents are successful, it may be on the estoppel, waiver or election claims, in which case the amount of $62,000 would be not insignificantly below the costs payable on a party/party basis. Taking into account all the considerations, an amount of $100,000 should be adopted as the appropriate starting point.
41 Nevertheless, it is important to be mindful that, in an ordinary case of this kind, only a few documents would be required for a hearing. That would suggest that there should be a substantial diminution to the amount of $100,000. However, as has been mentioned, the circumstances of this case are slightly unusual. Whilst the sum of $100,000 for a one-day hearing seems to be excessive, it is not greatly so in the circumstances. Ultimately, on a broad brush analysis, the amount of $90,000 appears to be appropriate security for the respondents' costs of these proceedings.
42 For completeness, it ought to be noted that it was suggested that the reductions ought to take account of the fact that an order for security might stifle the proceedings. That submission must be rejected on the basis that there is no evidence that those who stand behind the Lucas Shareholder and who might benefit from the proceedings have exposed their assets to the risk of litigation.