Wollongong Coal Limited v Gujarat NRE Properties Pty Ltd

Supreme Court of NSW|2019-02-21|Before: Ward CJ

Background

The history of these proceedings, which have been on foot since 2014 is not uncomplicated. The underlying dispute between the parties relates to a residential property located in Wollongong (the Cliff Road Property). The Cliff Road Property was acquired in 2008 (and is still owned) by the first defendant, Gujarat NRE Properties Pty Ltd, to which I will refer as Gujarat NRE. Between June 2008 and June 2013, Gujarat NRE was a wholly-owned subsidiary of Wollongong Coal Limited and was the special purpose vehicle established for the purpose of holding the Cliff Road Property.
Wollongong Coal Limited's primary complaint is that Mr and Mrs Jagatramka (then two of the directors of the company) breached general law and statutory duties owed by them, as directors, to the company in relation to the acquisition and development of the Cliff Road Property and the ultimate sale by Wollongong Coal Limited of its shareholding in Gujarat NRE. In essence, Wollongong Coal Limited alleges that Mr and Mrs Jagatramka caused it to fund the acquisition and development of the Cliff Road Property in pursuit of their own interests, being a desire to construct a residence in which they intended to reside rent-free, which motivation it is said was not disclosed to Wollongong Coal Limited or the other members of the board (see amended statement of claim filed 19 April 2016 at [42]).
In particular, complaint is made by Wollongong Coal Limited as to Mr and Mrs Jagatramka's conduct in: causing it to subscribe for 800,000 shares in Gujarat NRE in June and July 2008 at $1 per share (which money was applied to purchasing the Cliff Road Property) (see amended statement of claim filed 19 April 2016 at [43]-[57]); causing it to advance to Gujarat NRE the sum of approximately $5m in June 2008 to facilitate the purchase by Gujarat NRE of the Cliff Road Property (see amended statement of claim at [58]-[106]); causing it, between 30 April 2010 and 17 June 2013, to advance to Gujarat NRE the sum of about $4.3m to facilitate the demolition and construction of a new residence at the Cliff Road Property (see amended statement of claim at [112]-[124]; [139]-[168]); permitting (but not actually causing) it on or about 18 June 2013 to convert into equity the advances it had made to Gujarat NRE ($9,353,050) and by voting (in June 2013) in favour of the company thereafter selling its shareholding in Gujarat NRE (and therein the Cliff Road Property) for $3.75m (see amended statement of claim at [169]-[181]; [189]-[218]); and causing it on 4 July 2013 to transfer the sum of $1,158,526 to the fourth defendant, Gujarat NRE India Pty Ltd (GNI), following the sale of Wollongong Coal Limited's shareholding in Gujarat NRE (see amended statement of claim at [182]-[188]) (which sum it is said is now unrecoverable by Wollongong Coal Limited - see [11] below).

Relevant principles

There is no dispute between the parties as to the principles applicable on an application for security for costs.
There is a threshold question (on which the applicant for security bears the onus) as to whether there exists credible evidence to establish that there is a reason to believe that the party from whom security is sought will be unable to pay an adverse costs order that may be made against it in the proceedings (see Beach Petroleum NL v Johnson (1992) 7 ACSR 203 at 204 and 205 per von Doussa J (Beach Petroleum); Polstead Pty Ltd (in liq) v Shah [2009] NSWSC 560 at [4]-[5] per Brereton J; Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744 at [20] per Einstein J; 15 Management Pty Ltd v Newstar Sports Management Pty Ltd [2009] NSWSC 1208 at [29]-[31] per Nicholas J (15 Management); Cornelius v Global Medical Solutions Australia Pty Ltd; Farrag v Global Medical Solutions Australia Pty Ltd (2014) 98 ACSR 301; [2014] NSWCA 65 at [17], [56]-[59] (Cornelius v Global Medical)); and the test has been described as an undemanding one, setting a low threshold (see Hurworth Nominees Pty Ltd v ANZ Banking Group Ltd [2005] NSWSC 1360 at [41] per White J; 15 Management at [32] per Nicholas J; Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377; [2008] VSCA 93 at [15]-[16]; Cornelius v Global Medical at [57]-[59]; HP Mercantile Pty Ltd v Dierickx [2013] NSWCA 87 at [6]-[9]; In the Matter of Felan's Fisheries Pty Limited [2016] NSWSC 1351 at [10]). It has been said that the Court should adopt a "practical commonsense approach" to the examination of the financial affairs of the corporation (see Wollongong City Council v Legal Business Centre Pty Ltd [2012] NSWCA 245 at [28] (Wollongong City Council)).
As noted by the second to fourth defendants, in Beach Petroleum (at 205) von Doussa J said that: A corporation "will be unable to pay" the costs within the meaning of the section if it can only do so if given extended time to realise assets which might be difficult to realise, at least at a price sufficient to provide a surplus over other liabilities, sufficient to pay the costs... The company will also be unable to pay the costs within the meaning of the section if the payment would be one that will amount to a preference of the defendant over other creditors such that the payment would be liable to be set aside either as a preference or as a fraudulent disposition...
Once the threshold question is satisfied, the next issue to be considered is whether, in the exercise of the Court's discretion, security should be granted. That discretion is one which should be exercised having regard to all the circumstances of the case without any predisposition in favour of the award of security (see KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 196 per Beazley J, as her Honour then was) (KP Cable). In that regard, it has been said that there is an evidentiary onus on the part of the party from whom security is sought to establish a reason why security should not be granted (see Wollongong City Council (at [30]) and Cornelius v Global Medical (at [18]-[20])).
A number of discretionary considerations were identified in KP Cable (at 196-198); and these are now largely reflected in r 42.21(1A) of the Uniform Civil Procedure Rules 205 (NSW) (UCPR). Those factors include: the prospects of success and genuineness of the proceedings (r 42.21(1A)(a)-(b)); the impecuniosity of the party against whom the security is sought (r 42.21(1A)(c)); whether any such impecuniosity is attributable to any conduct on the part of the party seeking security (r 4.21(1A)(d)); whether the party against whom security is sought is effectively in the position of a defendant (r 42.21(1A)(e)); delay on the part of the applicant in making its application for security for costs (r 42 (1A)(i)); and the likely costs of the proceedings (r 42.21(1A)(j)).

Threshold question

The second to fourth defendants submit that there is credible evidence to believe that Wollongong Coal Limited will not be able to meet an adverse costs order made in the present proceedings, pointing to the following matters.
First, that Wollongong Coal Limited's financial statements over recent years disclose that it has consistently made sizeable losses from its coal mining business. Its 2018 balance sheet records a net asset deficiency of over $80m, as at 31 March 2018, and its half-yearly report discloses that, as at 30 September 2018, Wollongong Coal Limited had made a net loss of $57.6m and its net asset deficiency position had worsened to a deficiency of $137.9m.
Second, the judgment obtained by GNI against Wollongong Coal Limited in the sum of $23,776,612.82, which remains outstanding and has not been fully secured. The second to fourth defendants have calculated that this judgment debt represents: 32% of Wollongong Coal Limited's current market capitalisation (being $74.94m as at 30 November 2018, with Wollongong Coal Limited's shares having been suspended from quotation since 13 December 2018); 27 times the amount of cash (and cash equivalents) at hand as at 30 September 2018 ($869,000) and four times the amount of cash (and cash equivalents) at hand as at 30 March 2018 ($5,761,000); 82% of Wollongong Coal Limited's total current assets as at 30 September 2018 ($28.912m) and 71% of Wollongong Coal Limited's total current assets as at 30 March 2018 ($33.563m); and 86.7% of Wollongong Coal Limited's gross revenue ($27.4m) in the last full fiscal year (i.e. the fiscal year ending 31 March 2018). The second to fourth defendants argue that the making of "incremental offers" in relation to the provision of security for that judgment debt in the context of the stay application before Robb J in the GNI proceedings speaks against the company's ability to meet that judgment debt or to pay an adverse costs order in these proceedings.
Third, that the vast majority of Wollongong Coal Limited's liabilities are current liabilities and that, as at 30 September 2018, those current liabilities stood at $918m (compared to current assets of only $29m, leading to a net current asset deficiency of $889m and a current ratio of 0.03); a position that it is noted has worsened since the position as at 31 March 2018 (when its current liabilities were $865m, compared to current assets of $33.5m).
Fourth, that the notes to Wollongong Coal Limited's latest financial report (the half-yearly report of 30 September 2018) record that its secured bank debt of $23m has been classified as current due to financial covenant breaches (and that the same position prevailed as at 31 March 2018).
Further, it is noted that Wollongong Coal Limited's current borrowings include nearly $800m from entities associated with the Jindal group. In that regard, the second to fourth defendants argue that letters of comfort supplied to the second to fourth defendants by Jindal Steel & Power (Mauritius) Limited and Jindal Steel and Power (Australia) Pty Ltd provide no comfort, noting that (in respect of the letter from Jindal Steel & Power (Mauritius) Limited), there is a statement in Wollongong Coal Limited's 2018 Annual Report that: Jindal Steel has also provided a letter confirming financial support for at least the next 12 months from the signing of the annual report of Wollongong Coal Group for the period ended 31 March 2018, unless there is an acceleration and demand from the lenders or creditors at WCL of JSPML. [emphasis as per submissions] and that the same qualification is recorded in respect of the letter of comfort from Jindal Steel and Power (Australia) Pty Ltd. It is noted that no different or updated position is recorded in Wollongong Coal Limited's half-yearly report for the six months ending 30 September 2018.
As to the submissions made by the second to fourth defendants as to its financial position, Wollongong Coal Limited submits that the evidence adduced by the second to fourth defendants proves simply that: Wollongong Coal Limited operates an active trading operation in New South Wales which includes a working coal mine near Wollongong; that it has traded at a loss and has done for many years; and that it has been supported by its majority shareholder (Jindal) in India to the tune of many millions of dollars (see T 19.26ff). It is said that "the reason the company still exists and is paying its bills is because the majority shareholder has, apparently happily, supported it for many years" (T 19.31).
Wollongong Coal Limited points to the loan facility in place from its majority shareholder which (at least as at some six months ago) had "head room" of $90 million (see the reference thereto in Wollongong Coal Limited's interim financial report for the half year ended 30 September 2018; T 19.36).
Reference is also made to what was said by Senior Counsel for the second to fourth defendants in the context of the stay application in relation to the GNI judgment, to the effect that it was not a question of impecuniosity but as to the company's willingness to pay (though I note that the response from the second to fourth respondent to this submission s is that this was a reference to the position of the Indian company).
It is asserted for Wollongong Coal Limited (see T 19.40ff) that: … this company is paying its debts as and when they fall due now because it has the support of its majority shareholder. and that: The heart of my learned friend's submission really boils down to this, does your Honour trust the majority shareholder to put up, having put up somewhere between $500 and $800 million to date, do you really think it is not going to pay [a] $120,000 costs order and let the company go under. That is the question. Now, my learned friend says you should have your doubts. In our submission it is actually fanciful, it will pay and by the way these parties whenever someone wins or loses they always appeal so they will have to pay the costs if they lose because they will want to appeal and that is really our point on liability, the overwhelming evidence is the company has paid its debts, does pay its debts and has the support of one of the biggest companies in India.
It is submitted that the practical question is whether Jindal would "let this all go for $120,000" and that, having funded Wollongong Coal Limited to the tune of over $500m, the obvious answer to that question is that it would not. (In response to this, the second to fourth defendants say that this does not take into account the fact that total costs (for which, I interpose to note, security of some $100,000 has already been provided) will be in the order of around $300,000; that there is no evidence from Jindal as to this; and that Jindal's position might depend on what happens in the GNI appeal proceedings (i.e., that Jindal might not let the company go down for some $120,000 or even $300,000 but might take a different position if the appeal is not successful and there is some $15m liability that is unsecured).)

Conclusion on the threshold question

In my opinion the threshold question has here been satisfied. There is no suggestion that, absent support from its ultimate parent company or other companies in the Jindal group, Wollongong Coal Limited would be in a position (having regard to its net asset deficiency) to meet an adverse costs award in the present proceedings; and the financial statements and letters of comfort proffered by members of the Jindal group are qualified in their terms. What the position in relation to support might be once the GNI appeal proceedings have been determined is a matter of speculation.
In those circumstances, and having regard to the undemanding nature of the test, I am satisfied that there is a rational basis on the evidence to believe that Wollongong Coal Limited will be unable to meet an adverse costs order in the present proceedings and that the discretion to order security for costs has been enlivened.

Submissions

As to the discretionary considerations, the second to fourth defendants argue that the following factors militate in favour of the making of an order for the provision of further security for their costs.
First, that security is only sought in respect of future costs. Strictly speaking that is not correct, as was pointed out in oral argument for Wollongong Coal Limited, in that the quantum sought by way of additional security includes costs already incurred in the unsuccessful mediation of the dispute (in respect of which an estimate of the costs has been provided notwithstanding that the costs have already been incurred) (see T 9.15ff). Moreover, the second to fourth defendants acknowledge that their application, which seeks security in respect of the "limited costs", incurred since 2 November 2018 when the issue for security was raised with Wollongong Coal Limited, includes the costs of the present motion.
Second, that there has been a material change of circumstances since Wollongong Coal Limited's first agreement to provide security in October 2014, namely: the vacation in August 2018 of the remaining hearing dates, which it is said will necessitate additional costs being incurred for the preparation of, and appearance at, the hearing now scheduled to commence on 4 November 2019; the judgment obtained by GNI on 23 October 2018 against Wollongong Coal Limited (which it is said carries with it the real risk that, if enforced, could place Wollongong Coal Limited into insolvency, with its net assets insufficient to discharge all present liabilities; the deterioration in Wollongong Coal Limited's financial position; and the suspension of Wollongong Coal Limited's shares from quotation from the ASX on 13 December 2018 (at the request of Wollongong Coal Limited), in which respect it is submitted that if Wollongong Coal Limited were obliged to impair the value of its interests in the Russel Vale and Wongawilli mines, this would increase the company's existing net asset deficiency (currently negative $137.9m as at 30 September 2018).
Third, that Wollongong Coal Limited does not allege that, had the present application been brought sooner (i.e. when the original security sum was exhausted), it would not have continued on with the proceedings. Wollongong Coal Limited also does not allege prejudice. (In this regard, the second to fourth defendants note what is said in Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd (2008) 67 ACSR 105 at [57] per Hodgson JA on the question of prejudice.)
Fourth, that there is no allegation by Wollongong Coal Limited that the provision of security will stultify the proceedings.
Fifth, that Wollongong Coal Limited's ultimate parent company, Jindal, has not proffered any undertaking to meet any adverse costs order made in these proceedings if Wollongong Coal Limited is unable to do so (nor has any entity in the Jindal group). In this regard the second to fourth defendants note that evidence was adduced in the stay application before Robb J as to the significant assets held by Jindal in India; that any benefit obtained by Wollongong Coal Limited in these proceedings will inure predominately to the majority shareholder of Wollongong Coal Limited (Jindal Steel & Power (Mauritius) Ltd, a member of the Jindal group, and which owns 60.385% of Wollongong Coal Limited's issued shares); and that the entities of the Jindal group that have advanced some $800m in loans to Wollongong Coal Limited have provided "only the barest minimum of comfort letters in respect of that financial assistance".
Sixth, that the position that Wollongong Coal Limited has adopted in these proceedings is contrary to that adopted in the appeal proceedings in relation to the GNI judgment (where Wollongong Coal Limited agreed, without admission, to provide $90,000 by way of security for GNI's costs of those proceedings).
The principal issue raised by Wollongong Coal Limited, in oral submissions, against an order for security was that, as a matter of principle, it would be wrong for security for costs to be used as some sort of punishment for what happened at the adjournment (see T 18.34).
Pausing here, I do not understand the second to fourth defendants' claim for further security (nor did I understand their submissions in support of that claim for further security) as being based on some attempt to punish Wollongong Coal Limited for the fact of the adjournment. Rather, as I understand it, the second to fourth defendants emphasised that they were "blameless" in relation to the adjournment (it being sought by Wollongong Coal Limited after issues were raised by other parties as to whether its legal representatives had the proper authority to represent it), lest it be in some way suggested that they were responsible for the delay in the matter proceeding to a concluded hearing and hence should not be entitled to further security. In any event, I have no intention of making any security for costs order on a punitive basis, nor would it be appropriate to do so. The relevance of the adjournment of the hearing, as I see it, is that it is inevitable (as Wollongong Coal Limited accepts) that costs will have to be incurred in Counsel re-familiarising themselves with the matter in preparation for the resumption of the hearing. Those are the costs (together with the costs of the hearing yet to come) that form the bulk of the present application for security.
As to the issue of delay, it is put for Wollongong Coal Limited, in essence, that the second to fourth defendants should have made an application for further security back in August 2018 before Rein J when the hearing dates before his Honour were vacated (T 18.45ff). It is said that this is relevant because part of the assessment in the application before me is an amount sought for security for costs of the bringing of that very application. Senior Counsel asked, rhetorically, "so in those circumstances … even if they get security today why should they get the costs of their security motion, they having brought it late" (T 19.1ff). Thus it was said that the complaint as to delay was not put in a general sense (because it was accepted that there was the adjournment; the adjournment was Wollongong Coal Limited's fault; and there will be extra costs caused by the adjourned hearing) but rather, was limited to the fact that the application for further security was not made back in August 2018.
In response generally to the issue of delay, the second to fourth defendants accept that a failure to move expeditiously in seeking security for costs can be a reason to refuse the application (referring to Owners Corp Strata Plan 64970 v Austruc Constructions Ltd [2007] NSWSC 778 at [12] per Einstein J; Oswal v Australia and New Zealand Banking Group Ltd [2016] VSC 52 at [34]-[44] per Sifris J (and the authorities cited therein) (Oswal)) but say that this is not an insuperable hurdle to the order of security for costs (referring to Commonwealth v Cable Water Skiing (Australia) Ltd (1994) 116 FLR 153 at 157 per Bollen J) and that delay is more significant in relation to security for past costs than for future costs (citing Oswal at [44(b)] per Sifris J). It is submitted that in relation to applications such as the present for further security, the relevance of delay is mitigated by the fact that the plaintiff will have been placed on notice by the earlier application for security for costs (referring to Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 at 514 per French J as his Honour then was (Bryan E Fencott)).
The second to fourth defendants refer, by way of example, to the following matters where the court has acceded to an application for further security (reflecting future costs) notwithstanding that the application was brought well after the initial sum of ordered security had been exhausted: Karl Suleman Enterprizes Pty Ltd (in liq) v Pham [2010] NSWSC 886; DJZ Constructions Pty Ltd v Pritchard (t/as Pritchard Law Group) [2009] NSWSC 359; and Oswal.
It is further noted that delay will not necessarily prevent security for costs being ordered where circumstances have changed during the proceedings such as to throw into doubt (or cast further doubt upon) a plaintiff's ability to pay an adverse costs order (referring to Beluga Developments Pty Ltd v Sobel Investments Pty Ltd [2010] VSC 303 at [12] per Mukhtar AsJ; Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2009] NSWSC 563 at [27]-[29], [32]-[33], [39], [41] and [47]-[50] per Barrett J, as his Honour then was; and Aqua Blue (Noosa) Pty Ltd v Soil Surveys Engineering Pty Ltd [2010] QSC 176 at [23] per Daubney J).
Finally, the second to fourth defendants refer to cases indicating that a late application for security for costs can be acceded to where the length of the proceeding was not foreseen when it was commenced (Buckley v Bennell Design and Constructions Pty Ltd (1974) 1 ACLR 301 at 308 per Street CJ; Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 5) [2006] FCA 1672 at [38(7)] per Collier J) or where a final hearing has adjourned part-heard, with further hearing dates necessitated to accommodate an unforeseen increase in the hearing time (Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd (1985) 1 NSWLR 114 at 124G and 125G-126B per Waddell J).
As to the complaint that the application should have been made back in August 2018, the second to fourth defendants say: that at that time there was an issue as to the legal representatives' authority to represent Wollongong Coal Limited; that the matter was being ordered to mediation; and that the proof of what would have happened had such an application been made is the fact that the present application has been contested (see T 23.45ff). Hence, the defendants submit the delay point is not against them and they should have their costs of the motion if it is successful.

Conclusion as to discretionary factors

Balancing the discretionary matters referred to above (see at [22] above), a number are neutral (such as the prospects of success, which I am not here able to assess) in the present case or not otherwise applicable (such as whether the party seeking security was in the position of a plaintiff) or were not the subject of any debate before me (such as any argument as to stultification of the proceedings if security is ordered). The focus of submissions was, as noted above, on the question of delay.
I am not persuaded that the delay in the making of an application for security (from the time that the hearing dates were vacated in August 2018 to the date of filing the motion seeking security in December 2018) points against the grant of security at this stage (particularly since there was at that time an issue as to whether the solicitors on the record had proper authority to act for the company); nor does any delay from the time the $100,000 security was exhausted (since I assume that if this was close to trial then by the time of the hearing the second to fourth defendants were in the throes of preparation for hearing and it would not have been considered appropriate to make a further application at that stage). I have not been taken to anything to suggest that any prejudice will be suffered by reason of the fact that the application was not made before December 2018.
I am of the view that the discretionary considerations, so far as applicable in this case, weigh in favour of the second to fourth defendants and that an order for the provision of additional security for costs should be made in this case.

Quantum

As to the quantum sought by the second to fourth defendants, it is noted in the second to fourth defendants' submissions that the objective in making an order for security for costs is not to provide a defendant with a full indemnity against all eventualities in the proceedings (see Bryan E Fencott at 515); rather, the objective is to assess what is sufficient security (see Vertical Australia Pty Ltd v Air Company Vertical-T LLC; Air Company Vertical-T LLC v Vertical Australia Pty Ltd [2012] NSWSC 719 at [106]). In determining the quantum of security to be ordered, a "broad brush" approach may be adopted (see Re Felan's Fisheries Pty Ltd [2016] NSWSC 1351 at [40] per Black J; Cody v Live Board Holdings Pty Ltd (No 2) [2017] NSWSC 308 at [165] and [174] per Robb J).
The second to fourth defendants rely upon affidavit evidence from their solicitor (Mr Gillard) as to the estimated costs of the matter up to the end of a contested hearing in November this year. Wollongong Coal Limited, for its part, relies on an affidavit from a partner in the firm acting for it, Ms Fernandez (who does not, however, have the day to day conduct of the case) which challenges various aspects of Mr Gillard's estimate.
Broadly speaking, Mr Gillard's estimate of solicitor/client costs (exclusive of GST) includes: an amount of $16,300 for preparation and attendance at the mediation that has already occurred; $37,305 in preparation for the re-scheduled hearing; and $119,250 for the hearing itself (based on a five day listing). That estimate was calculated by reference to estimated hours and rates per lawyer, partner, junior counsel and senior counsel, which were then added to achieve a total figure. The total solicitor/client costs inclusive of GST were estimated at $190,140.50. As to the costs of the present notice of motion for security, similarly broken down into estimated time for each of the legal representatives involved, Mr Gillard's estimate came to a total of $13,310 (inclusive of GST).
The total estimated solicitor/client costs (including costs of the mediation and of the present notice of motion) are $203,450.50. The amount now sought by way of security for those costs ($120,000), which represents approximately 58.9% of the total sum, is said to reflect a very conservative recovery rate on assessment (Mr Gillard's experience being that 60%-75% of costs may be expected to be recovered on a party/party assessment) (see Mr Gillard's affidavit filed 3 December 2018 at [44]; Mr Gillard's affidavit filed 15 February 2019 at [29] and [30]); and to include a reduction for the possibility that part of the cross-claim (which otherwise overlaps with the allegations made in the amended statement of claim) may ultimately result in costs being incurred in respect of matters not germane to the amended statement of claim (see Mr Gillard's affidavit filed 3 December 2018 at [45]).
Ms Fernandez' estimate as to the costs likely to be incurred by the second to fourth defendants differs in the following respects.
First, as to the inclusion of the costs of the court-ordered mediation that took place on 26 November 2018, Ms Fernandez notes that Mr Gillard's estimate includes an estimate for the attendance of Senior Counsel at the mediation at $16,300. The second to fourth defendants accept that Senior Counsel did not appear at the mediation and thus that Mr Gillard's total estimate of costs should be reduced by $4,800 plus GST.
Second, Ms Fernandez has estimated the time for each of junior and senior counsel for preparation for the five-day hearing at half that estimated by Mr Gillard (15 hours for each rather than 30 hours for each). The second to fourth defendants note that written submissions have already been prepared and served but say that the fact of the adjournment will require both senior and junior counsel to familiarise themselves again with all documents for submissions and cross-examination (as well as further documents served by Wollongong Coal Limited at the hearing). (The two differing estimates are $37,305 (Gillard) and $20,055 (Fernandez)).
Third, as to the costs of the trial, Ms Fernandez' estimate limits the hours for counsel to 10 hours for each of the five days of trial and does not include the cost of a junior solicitor appearing at the final hearing (simply the cost of a partner). Mr Gillard, on the other hand, has estimated a further 20 hours for junior counsel (totalling 70 hours) and 10 hours (totalling 60 hours) for senior counsel for the costs of appearing at the trial, which it is said accounts for the work needed to be undertaken outside of court time and beyond counsels' daily rates. (The two differing estimates are $119,250 (Gillard) and $86,750 (Fernandez)).
Fourth, as to the costs of this motion, Ms Fernandez' estimate is roughly half that of Mr Gillard ($6,605.50 as opposed to $13,310), which among other things is predicated on junior counsel appearing on the motion (rather than, as has occurred, senior counsel appearing).
Finally, as to the proportion of costs that is likely to be allowed on an assessment of costs, Ms Fernandez has adopted 65% as the likely rate and has applied a further discount to bring the total discount down to 55% to account for the cross claim; whereas Mr Gillard has adopted a discount of 58.9%. (In that regard, the second to fourth defendants submit that the vast majority of anticipated costs are counsels' preparation and appearance fees, which they say would be recoverable on a party/party assessment, on "virtually" an indemnity basis, and not at the rate of 65%.)
The second to fourth defendants also emphasise the proportionality of the amount now sought by way of additional security ($120,000) to the subject matter in dispute, noting that the claim by Wollongong Coal Limited against them is in the order of several million dollars. They argue that, on the evidence, Wollongong Coal Limited will suffer no prejudice by ordering the security sought, whereas the potential prejudice to the second to fourth defendants from refusing the application is obvious in that there exists a material risk that they will be out of pocket in respect of their costs if they are successful in defending these proceedings given Wollongong Coal Limited's financial position (see T 15.20ff).

Conclusion

There is authority for the proposition that the Court may fix the amount of security based on a general estimate (see Allstate Life Insurance Co v ANZ Banking Group Limited (1995) 134 ALR 187; [1995] FCA 1778). However, in the present case the solicitor for the second to fourth defendants has gone beyond a general estimate. The affidavit evidence of the respective solicitors is of assistance in identifying the likely steps to be taken in the ongoing conduct of the proceedings.
I consider that Mr Gillard's estimate, viewed broadly, is not unreasonable. The estimated range he gives as to the proportion of costs that would be recoverable on a party/party basis is (60%-75%). The fact that Ms Fernandez considers that less time may be required for preparation by Counsel and during the hearing may be a function of differences in the time estimates given by the Counsel appearing for Wollongong Coal Limited but I am not prepared to dismiss as unreasonable the time estimates on which Mr Gillard's estimate is based.
The only question, to my mind, is whether the costs of the mediation should be included. On balance I think they should, though reduced to reflect that Senior Counsel did not attend at the mediation, in circumstances where I can discern no prejudice from the fact that there was not an application for additional security for costs at that stage and there is no reason to think that Wollongong Coal Limited would have prosecuted its claim(s) differently had it been aware that there might be such an application.
Adopting a broad brush approach (and having regard to the fact that the hearing might take longer than presently anticipated) I consider that the sum of $110,000 is appropriate. It is in line with the amount of security previously ordered (that being a sum of $100,000), which has already been exhausted by the time of the previously scheduled hearing such that the hearing costs of August last year, had the hearing proceeded, would not have been secured; it takes into account a reduction from the mediation costs to reflect the actual level of participation by Counsel at the meeting; and it covers the costs of this motion (that I consider should follow the event - see Hoffmann v Challis (No 2) [2016] NSWSC 269 at [22]-[23] per Campbell J; Globus Investments v William [2016] NSWSC 613 at [45]-[46] per Campbell J); and it is not disproportionate to the amount claimed in the proceedings against the second to fourth defendants. I also bear in mind the possibility that the hearing this year may take longer than the present five day estimate.
As to when security is to be paid, this is not a case where it would be appropriate that security be ordered in tranches by reference to particular aspects of the pre-trial preparation and the hearing itself (see Pacific Acceptance Corporation Limited v Forsyth (No 2) (1967) 85 WN (Pt 1) (NSW) 715 (Moffitt J)) because all that is left now to be done, as I understand it, is preparation for the renewed hearing date and the hearing itself.
I am therefore of the view that security should be awarded in the sum of $110,000 but not payable until around the time at which preparation for the hearing is likely to resume (which I was informed was likely to be some four to six weeks before trial). In that regard, I consider that a two month buffer would be appropriate.
Accordingly, I order as follows: 1. Pursuant to r 42.21(1) of the Uniform Civil Procedure Rules 2005 (NSW) and s 1335(1) of the Corporations Act 2001 (Cth), order Wollongong Coal Limited to provide further security on or before 4 September 2019 for the second to fourth defendants' costs of the proceedings, in the sum of $110,000, such security to be provided by way of payment into Court or provision of an unconditional bank guarantee in a form acceptable to the second to fourth defendants. 2. In the event that the security ordered in order 1 above is not provided within the time specified, order that the proceedings be stayed as against the second to fourth defendants until further order. 3. Order Wollongong Coal Limited to pay the second to fourth defendants' costs of and incidental to this notice of motion.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 March 2019

; [2008] VSCA 93 Oswal v Australia and New Zealand Banking Group Ltd [2016] VSC 52 Owners Corp Strata Plan 64970 v Austruc Constructions Ltd [2007] NSWSC 778 Pacific Acceptance Corporation Limited v Forsyth (No 2) (1967) 85 WN (Pt 1) (NSW) 715 Polstead Pty Ltd (in liq) v Shah [2009] NSWSC 560 Re Felan's Fisheries Pty Ltd [2016] NSWSC 1351 Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd (1985) 1 NSWLR 114 Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2009] NSWSC 563 Vertical Australia Pty Ltd v Air Company Vertical-T LLC; Air Company Vertical-T LLC v Vertical Australia Pty Ltd [2012] NSWSC 719 Wollongong City Council v Legal Business Centre Pty Ltd [2012] NSWCA 245 Category: Costs Parties: Wollongong Coal Limited (Plaintiff) Gujarat NRE Properties Pty Ltd (First Defendant) Arun Kumar Jagatramka (Second Defendant) Mona Jagatramka (Third Defendant) Gujarat NRE India Pty Ltd (Fourth Defendant) Representation: Counsel: C R C Newlinds SC with Mr N Riordan (Plaintiff) D R Pritchard SC (Second to Fourth Defendants)

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