On 22 September 2023, I determined three applications for security for costs in these two related proceedings: In the matter of Bailey Roberts Group Pty Ltd [2023] NSWSC 1147. These reasons, which concern the costs of the security for costs application, assume familiarity with my earlier reasons. Terms used in those earlier reasons have the same meanings in these reasons.
I have considered the parties' written submissions in relation to costs filed on 25 and 28 September 2023.
In the 2021 proceedings, I ordered Strategy to provide security for the fourth to sixth defendants' future costs in the sum of $31,050, and otherwise dismissed the second to sixth defendants' application. No order for security was made in favour of the second and third defendants. The second to sixth defendants seek an order that Strategy pay their costs of the application on the ordinary basis, submitting that they have enjoyed substantial success in circumstances where Strategy unsuccessfully contended that it should not have to pay any security in respect of any of the second to sixth defendants' costs. Strategy contends that the order for security does not represent substantial success for the second to sixth defendants, who had applied for security in the amount of $185,142. Strategy submits that the costs of that application should be the second to sixth defendants' costs in the cause.
In fact, the second and third defendants had no success, and the fourth to sixth defendants had a limited measure of success, in relation to their application for security for costs. All of those defendants made the application jointly and were represented by the same solicitors and counsel. It is unlikely to be practicable in any costs assessment to apportion their jointly incurred costs of the application between them other than equally. In my opinion, the appropriate exercise of the costs discretion under s 98 of the Civil Procedure Act 2005 (NSW) in all the circumstances is to order Strategy to pay three-fifths of the second to sixth defendants' costs of their application for security for costs filed on 31 July 2023 on the ordinary basis, in such amount as may be agreed or assessed.
I ordered Strategy to provide security for Mr Thomas' costs of defending the 2023 proceedings in the amount of $155,753. Mr Thomas' application for security for costs was filed on 31 July 2023. On 29 June 2023, Mr Thomas had made an offer to accept $150,000 on the basis that his estimated costs were $265,000 and his party/party costs would be unlikely to fall short of $200,000. Strategy rejected that offer on 21 July 2023 and declined to pay any amount of security. Mr Thomas seeks an order that Strategy pay his costs of the application filed on 31 July 2023 on the ordinary basis until 21 July 2023 and on an indemnity basis thereafter. In substance, Mr Thomas seeks an order requiring Strategy to pay the whole of his costs of his application filed on 31 July 2023 on the indemnity basis.
As Strategy submitted, its rejection of Mr Thomas' offer does not give rise to a presumption that it must necessarily pay his costs on an indemnity basis by reason of Mr Thomas achieving a better outcome than the offer. The question is whether it was unreasonable in all the circumstances for Strategy to reject Mr Thomas' offer. [1]
In my opinion, it was not unreasonable for Strategy to reject Mr Thomas' offer at the time that it did. As counsel for Strategy submitted, Mr Thomas had not yet filed his application or served any evidence of the amount of his estimated costs at that time. It became apparent during the hearing of the security for costs applications that there was a substantial amount of duplication between the estimates of Mr Thomas' costs of defending the 2023 proceedings and the estimates of the second to sixth defendants' costs of defending the 2021 proceedings. It was only after the conclusion of the hearing that the amount of Mr Thomas' estimated costs - omitting such duplication - was quantified in a supplementary submission. The submissions made on behalf of Mr Thomas in support of his indemnity costs application impermissibly apply a hindsight test to Strategy's refusal of his offer on 21 July 2023, in my opinion. As counsel for Strategy submitted, Mr Thomas' complaint that Strategy failed to make a counteroffer of security when rejecting Mr Thomas' offer is not a basis for awarding indemnity costs in favour of Mr Thomas. In the circumstances, the appropriate exercise of the costs discretion is to order Strategy to pay Mr Thomas' costs of his security application on the ordinary basis, in such amount as may be agreed or assessed.
I ordered Strategy to provide security for Mr Bailey's costs of defending the 2023 proceedings in the sum of $219,914. Strategy accepts that it should pay Mr Bailey's costs of his security application on the ordinary basis. Mr Bailey seeks an order that Strategy pay his costs on the ordinary basis up to and including 1 August 2023, and on the indemnity basis thereafter, on the grounds that Strategy acted unreasonably in not accepting an offer made by Mr Bailey on 1 August 2023 to accept the sum of $200,000 as security for his costs.
Again, I accept that Strategy's failure to accept Mr Bailey's offer does not give rise to a presumption of an indemnity costs order in favour of Mr Bailey. The question is whether Strategy acted unreasonably in all the circumstances by not accepting Mr Bailey's offer.
Mr Bailey's offer was made almost three weeks after his application for security for costs was filed together with the affidavit of Mr Bailey's solicitor setting out his estimate of the costs of Mr Bailey's defence of the 2023 proceedings and setting out the calculation of the amount of security sought. The offer did not represent a large discount on the amount of security sought in Mr Bailey's application. Contrary to the submissions made on behalf of Strategy, the offer was nevertheless a genuine compromise, even after taking into account that the quantum of security sought by Mr Bailey had impermissibly included the costs of the security for costs application. Strategy must have known at the time of the offer that there is reason to believe that it will be unable to pay Mr Bailey's costs of the 2023 proceedings if ordered to do so. Following that concession made by Strategy at the hearing of the security for costs application, the outcome of Mr Bailey's application turned on matters relevant to the discretion and quantum. Strategy's submissions in relation to those matters were without substance for the reasons explained in my earlier reasons at [45]-[53], [62]-[65], and [72]-[80], save for the submission that Mr Bailey was not entitled to include in the quantum of security sought any amount in respect of his costs of prosecuting his application for security. That required a relatively modest adjustment to the quantum of security ordered, and did not result in the quantum of security falling below the amount that Mr Bailey had offered to accept on 1 August 2023. Having regard to all of these matters, I accept the submissions made by counsel for Mr Bailey that it was unreasonable for Strategy not to accept Mr Bailey's offer. In my opinion, the appropriate exercise of the costs discretion in relation to Mr Bailey's application is to order Strategy to pay Mr Bailey's costs of the application on the ordinary basis up to and including 1 August 2023 and on the indemnity basis thereafter.
For those reasons, the orders of the Court are as follows:
[2]
Proceeding 238607 of 2021
1. Order the plaintiff to pay three-fifths of the second to sixth defendants' costs of their application for security for costs filed on 31 July 2023 on the ordinary basis in such amount as may be agreed or assessed.
[3]
Proceeding 163417 of 2023
1. Order the plaintiff to pay the first defendant's costs of the application for security for costs filed on 12 July 2023 on the ordinary basis up to and including 1 August 2023, and on the indemnity basis thereafter, in such amount as may be agreed or assessed.
2. Order the plaintiff to pay the second defendant's costs of the application for security for costs filed on 31 July 2023 on the ordinary basis in such amount as may be agreed or assessed.
[4]
Endnote
Ziegler as trustee for the Doris Gayst Testamentary Trust v Cenric Group Pty Ltd (2021) 37 BCL 219; [2020] NSWCA 85 at [68]-[70] (Leeming JA) and the authorities there referred to.
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Decision last updated: 10 November 2023
Parties
Applicant/Plaintiff:
Ziegler as trustee for the Doris Gayst Testamentary Trust