FEDERAL COURT OF AUSTRALIA Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited [2012] FCAFC 57 Citation: Australian Equity Investors, an Arizona Limited Partnership v Colliers International (NSW) Pty Limited [2012] FCAFC 57 Appeal from: Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited (No 5) [2011] FCA 1041 Parties: AUSTRALIAN EQUITY INVESTORS, AN ARIZONA LIMITED PARTNERSHIP and THE 258 NEST, AN ARIZONA LIMITED PARTNERSHIP v COLLIERS INTERNATIONAL (NSW) PTY LIMITED File number: NSD 1605 of 2011 Judges: JACOBSON, BESANKO & PERRAM JJ Date of judgment: 3 April 2012 Corrigendum: 20 April 2012 Catchwords: PRACTICE AND PROCEDURE – Security for costs – whether the fact that the applicant had succeeded at the determination of a preliminary separate question is relevant to the ordering of security for costs and, if so, the extent to which it is relevant – whether the evidence established that an order for security for costs would stifle the litigation – whether creditors who will benefit from the litigation must also 'stand behind' the applicant in order for their financial circumstances to be relevant Legislation: Trade Practices Act 1974 (Cth) ss 52, 53A Cases cited: Ariss v Express Interiors Pty Ltd (In Liq) [1996] 2 VR 507 cited Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited [2010] FCA 254 cited Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited [2011] FCA 1198 cited Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited (No 2) [2010] FCA 1209 cited Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited (No 3) [2011] FCA 100 cited Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited (No 4) [2011] FCA 442 cited Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited (No 5) [2011] FCA 1041 cited Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191 cited Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1 explained Caruso Australia Pty Ltd v Portec (Aust) Pty Ltd (1984) 1 FCR 311 cited Cosdean Investments Pty Ltd v Football Federation of Australia Limited (No 2) [2007] FCA 163 approved Kenny & Good Pty Limited v MGICA (1992) Limited (1999) 199 CLR 413 cited Date of hearing: 23 February 2012 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 39 Counsel for the Appellants: Mr MBJ Lee SC, Ms JC McDonald Solicitor for the Appellants: Harris Friedman Lawyers Counsel for the Respondent: Mr AJL Bannon SC, MR AJ McInerney, Mr H Chiu Solicitor for the Respondent: TressCox Lawyers FEDERAL COURT OF AUSTRALIA Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited [2012] FCAFC 57 CORRIGENDUM 1. The original medium neutral citation, Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited [2012] FCAFC 322, on the judgment was incorrect and has been replaced by Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited [2012] FCAFC 57. I certify that the preceding one numbered paragraph is a true copy of the Corrigendum to the Reasons for Judgment herein of the Honourable Justices Jacobson, Besanko & Perram JJ. Associate: Dated: 20 April 2012 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1605 of 2011 ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA BETWEEN: AUSTRALIAN EQUITY INVESTORS, AN ARIZONA LIMITED PARTNERSHIP First Appellant THE 258 NEST, AN ARIZONA LIMITED PARTNERSHIP Second Appellant AND: COLLIERS INTERNATIONAL (NSW) PTY LIMITED Respondent JUDGES: JACOBSON, BESANKO & PERRAM JJ DATE OF ORDER: 3 APRIL 2012 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Leave to appeal from the orders made by Cowdroy J on 7 September 2011 be granted to the Applicants. 2. The appeal be dismissed. 3. The appellants pay the respondent's costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1605 of 2011 ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA BETWEEN: AUSTRALIAN EQUITY INVESTORS, AN ARIZONA LIMITED PARTNERSHIP First Appellant THE 258 NEST, AN ARIZONA LIMITED PARTNERSHIP Second Appellant AND: COLLIERS INTERNATIONAL (NSW) PTY LIMITED Respondent JUDGES: JACOBSON, BESANKO & PERRAM JJ DATE: 3 april 2012 PLACE: SYDNEY REASONS FOR JUDGMENT The Court Introduction 1 The applicants apply for leave to appeal from an order of a judge of this Court that they provide $250,000 by way of security for the respondent's costs: Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited (No 5) [2011] FCA 1041. The applicants are both limited partnerships under the laws of Arizona. We shall refer to them collectively as AEI and to the respondent as 'Colliers'. 2 The proceedings arise out of AEI's involvement in the redevelopment of premises at 258 Pacific Highway, Crows Nest which is on Sydney's lower North Shore. AEI claims that, in becoming involved with the redevelopment, it relied upon an appraisal of the value of the premises given to it by Colliers on 8 July 2004. The appraisal is now said in the proceedings below to have been misleading and deceptive contrary to ss 52 and 53A of the former Trade Practices Act 1974 (Cth). 3 Those proceedings were commenced in 2009 and, very shortly afterwards, the fact of AEI's residence in the United States was put as a basis for demanding security for Colliers' costs. On 11 December 2009 Colliers demanded $100,000 by way of security and this was agreed to by AEI. The proceedings were originally listed for trial in June 2010, but on the eve of the trial Colliers signalled that it was going to expand its defences in a way which not only significantly complicated the issues which arose but also, ultimately, caused the vacation of the trial dates. Thereafter Colliers sought further security for its costs and, on 5 November 2010, the learned primary judge ordered that a further $250,000 be provided: Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited (No 2) [2010] FCA 1209. 4 At this point the proceedings took what might be regarded as an unusual turn. AEI was unable to provide the sum so ordered and therefore moved on 15 December 2010 to vacate the order of 5 November 2010. At the same time it sought to have tried as a preliminary issue the question of whether the appraisal letter of 8 July 2004 was misleading and deceptive. This was unusual because an earlier attempt by AEI to secure the trial of separate questions had been rejected: Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited [2010] FCA 254. It is apparent that the procedure of separate questions was perceived, at least by AEI, as providing a way around its inability to provide security for Collier's costs of the whole proceedings. 5 The application of 15 December 2010 was dealt with as follows on 15 February 2011 (Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited (No 3) [2011] FCA 100): the primary judge now found that AEI was unable to provide the security sought (that is, that the claim would be stifled) (at [36]); criticised AEI for not bringing that fact forward at the time of the original security for costs application (at [41]-[45]); and concluded that the circumstances now made it appropriate to try as a preliminary issue the question of whether the 8 July 2004 appraisal was misleading (at [40]). His Honour then ordered AEI to provide a further $100,000 (rather than the original $250,000) by way of security (at [45]). As to the latter course, the primary judge had been informed that AEI could at least put up an additional $100,000 by way of security (at [17]). 6 There then followed the trial of the separate question upon which AEI was successful: Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited (No 4) [2011] FCA 442. Not only was the appraisal found to be misleading but it was held that Colliers had known from 2 March 2011 of circumstances which should have indicated to it that its defence could not be maintained (at [54]-[56], [63]) (the trial of the separate issue had commenced 13 days later on 15 March 2011 and occupied five days). Consequently, the primary judge ordered Colliers to pay the costs of the separate question from 2 March 2011 on an indemnity basis and these costs were to be payable forthwith (at [67]). We were informed from the bar table during the course of the leave application that these costs have been paid. In addition, AEI successfully applied for the return to it of the $100,000 it had previously put up as security (at [52]-[53], [68]-[69]). This the primary judge did on the basis that that sum had been intended to provide security for the costs of the separate question and that purpose could no longer justify its continued provision. His Honour, however, observed that Colliers 'may be justified in making a further application for security in respect of the hearing relating to damages' (at [69]). 7 That remark brought forth a further application for security for costs on 27 July 2011 to which the learned primary judge then acceded: Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited (No 5) [2011] FCA 1041. The primary judge received evidence from AEI directed to proving that it would not be able to meet any further orders for security (at [37]). His Honour found that those who stood to benefit from the proceedings were AEI's creditors and that there was no evidence that these creditors were unable to provide security (at [48]-[50]). Accordingly, applying Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1 at 4, his Honour concluded that it was not shown that the claim would be stifled. His Honour considered the strength of AEI's claim at [26]-[30] and was plainly aware of the fact that AEI had been successful on the separate question. His Honour nevertheless concluded that there were potentially complicated defences relating to causation and reliance and that it was inappropriate to reach any conclusion on the strengths or weaknesses of AEI's claims. He was instead satisfied that it had 'potential prospects of success' but did not think that this fact should 'exempt' it from an order for security. 8 For completeness it should be noted that the primary judge rejected at [13]-[22] AEI's submission that the application should be refused by reason of delay because there had been, so his Honour held, no such delay. He also rejected at [23]-[25] an argument that Colliers had wasted costs incurred by AEI in the conduct of the proceedings noting that the indemnity costs order which had been made somewhat blunted the force of that argument. In the event, the primary judge ordered AEI to provide $250,000 by way of security. In doing so he took into account the $100,000 already provided which, we assume, had not at that stage been returned. 9 It is from those orders that leave to appeal is sought. On 18 October 2011 another judge of this Court directed the application for leave to be heard by a Full Court: Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited [2011] FCA 1198. 10 AEI submits there are two errors in the primary judge's reasoning. First, it is said that his Honour failed to take into account in his assessment of the strength of the matter the fact that AEI had already succeeded on the separate question and was, therefore, that much closer to ultimate success and correspondingly less likely to suffer an adverse costs order. Secondly, AEI submitted that the primary judge had erred in concluding that AEI needed to prove that its creditors could not put up security in order to make good its argument that the litigation would be stifled by an order for security. According to this submission, the creditors concerned were not assisting AEI in the litigation and, properly understood, Bell Wholesale did not apply to creditors in that position. 11 It is useful to deal with these matters separately. The Strength of the Claim 12 AEI's principal submission was that the primary judge had erred in failing to appreciate that its success in demonstrating that Colliers had engaged in misleading and deceptive conduct at the trial of the separate question meant that the chances of Colliers ultimately securing a costs order against it was reduced. Another form of the argument advanced in senior counsel's oral address drew an analogy between AEI's ultimate success and a racetrack; so viewed, AEI's victory on the hearing of the separate question and the fact that Colliers had already been found to have contravened the Trade Practices Act meant that AEI was already substantially advanced towards demonstrating the liability of Colliers. The error in the primary judge's approach lay, on this view, in assimilating the position of AEI with that of a party who had only just commenced proceedings. 13 The primary judge was certainly cognisant of the fact that AEI had already succeeded on the question of whether Colliers had engaged in misleading and deceptive conduct. Indeed, he recorded AEI's submission that this fact made it less likely that Colliers would ultimately be awarded a costs order at [10] and [26]: 10. Arizona submits that no security should be granted as it is highly likely that Arizona will succeed on the issue of damages, especially since Colliers' conduct has been found to contravene ss 52 and 53A(1)(b) of the Trade Practices Act 1974 (Cth) … … 26. As to Arizona's submission that it is highly likely to succeed in the substantive hearing and obtain an award of damages, such an assertion must be balanced by Colliers' submission that Arizona's case is weak. 14 In light of that, we accept the submission of Mr Bannon SC, who appeared for Colliers with Messrs McInerney and Chiu of counsel, that the primary judge had taken the result of the earlier hearing into account. 15 That, however, is not really an answer to AEI's argument; the question it gives rise to is not whether AEI's earlier success was taken into account but rather whether the nature of its relevance had been appreciated. It is clear to us from [27] of his reasons that the primary judge approached the matter on the orthodox basis that, absent a claim for summary judgment, the prospects of success are ordinarily regarded as a neutral matter: 27 It is well established that the Court is entitled to consider the strength and the bona fides of a party's claim: see KP Cable Investments Pty Ltd v Meltglow Pty Ltd and Others (1995) 56 FCR 189 at 197C-197D where Beazley J (as she then was) observed that if prima facie a claim is regular and discloses a cause of action, the Court should proceed on the basis that it is bona fide 'with a reasonable prospect of success'. Such decision has recently been adopted by this Court in Power Infrastructure Pty Ltd v Downer EDI Engineering Power Pty Ltd [2010] FCA 1222. However, the prospects of success has been held to be a neutral factor in ensuring the Court's discretion: see Jazabas Pty Ltd v Haddad [2007] NSWCA 291 at [84]; Litmus Australia Pty Ltd (in liq.) v Canty [2007] NSWSC 670 at [28]; Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 208 ALR 564 at [37]-[38]. [Emphasis in original.] 16 On that usual basis he then briefly assayed the merits of Collier's defences before deciding that a conclusion on merits could not be reached: 29 Whether Colliers' defences to Arizona's claim will be established can only be determined at the trial and it is inappropriate for the Court to attempt to reach any conclusion concerning the strength or weakness of Arizona's claim: see at 624; J & M O'Brien Enterprises Pty Ltd v The Shell Company of Australia Ltd (1983) 70 FLR 261; Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972 at 50-636. 17 That conclusion did not advert, it seems to us, to the fact that AEI was more advanced along the course of the litigation than an applicant in a freshly commenced case might be or that, of the various hurdles to be overcome, an important one had already been surmounted. Ultimately, the primary judge dispatched the argument this way: 30 The fact that the Court has found that Colliers contravened the TPA does not lead to the conclusion that Arizona should be exempted from complying with an order that it give security for costs. Conversely, there is no suggestion that the claim has not been brought bona fide or that for some reason the claim should be dismissed summarily. Accordingly the Court will consider Arizona's claim as one which has potential prospects of success. 18 AEI's submission was not, however, that its prior success provided them with an exemption: it was, rather, that it diminished the prospect that a costs order might ultimately be made in favour of Colliers. 19 Mr Bannon SC sought to equate the position of AEI with that of an out-of-jurisdiction applicant in a suit where the defendant admitted liability and sought trial only on damages. That analogy may well be apt: in such a case the only issue is how much the defendant will have to pay. In such a circumstance there may be reduced scope for security given the ability of the court to permit any costs order to be set off against the ultimate judgment sum. In any event, where security is sought after the determination in an applicant's favour of a preliminary issue, it is a relevant matter that the applicant is no longer at the outset of its case and, ex hypothesi, is closer to its finish. This is a separate matter from the merits of the matter although plainly the two are interrelated. What weight this factor is to be given in any case will vary having regard to the preliminary issue in respect of which there has been success, the point in the life of the case at which that success has occurred and the nature of the issue determined. 20 In the present case, the primary judge did not consider this matter and this was, in our opinion, an error. 21 We reject, however, AEI's other attacks on the primary judge's reasoning on this issue. No error is to be discerned in his Honour's conclusion that the reliance and causation defence of Colliers might give rise to complex issues. It is true that the primary judge did not explain what the complexities were. However, on the application for leave to appeal Mr Bannon SC made the following points: (a) the misleading conduct in issue consisted of a valuation appraisal given to AEI on 8 July 2004; (b) it considered a proposed commercial development of some land at 258 Pacific Highway, Crows Nest, in Sydney; (c) it expressly assumed that the project would be completed by 2006; (d) after the issue of the appraisal the property was redesigned and was not developed as originally proposed; (e) the loss claimed in paragraph 28 of the statement of claim consisted of the development costs in (d) together with, inter alia, not taking steps to exercise a power of sale on 8 July 2004 (the date of the appraisal). 22 Colliers will say that the expenses subsequent to 8 July 2004 are unrelated to the development upon which the appraisal is based; or to put it another way, the losses claimed have nothing to do with the incorrectness of the appraisal: cf Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191 at 213 per Lord Hoffman; Kenny & Good Pty Limited v MGICA (1992) Limited (1999) 199 CLR 413. Apart from these matters, Colliers also pleaded in its amended defence that its liability should be reduced because a number of other persons had given valuations of the property and, in that context, Colliers' liability was to be seen as substantially diminished or reduced. 23 Although the primary judge did not set these matters out in detail, we do not think he was required to go further then he did. The questions of causation which arise are indeed potentially complex. Nor is there substance in the AEI's contention that the primary judge should have confined his attention to the pleadings in addressing this issue, for the complexities which arise do in fact appear in paragraph 27 of the statement of claim. AEI also submitted that Colliers had admitted reliance and causation by asserting in its defence an affirmative case of contributory negligence. We are satisfied that this point was not pursued before the primary judge and it would, in that circumstance, be inappropriate to entertain it on a leave application. 24 We turn then to the second question of whether the primary judge erred in concluding that AEI's claim would not be stifled by an order for security. Stifling of the claim 25 The evidence before the primary judge established that AEI had no assets or resources from which to meet an order for security (at [37]). Further, his Honour accepted that generally a court would not make an order for security if the making of that order would prevent the litigation from continuing (at [36]). Nevertheless, the primary judge ordered security. The principle reason for this lay in his reliance upon what was said by the Full Court in Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1 at 4: In our opinion a court is not justified in declining to order security on the ground that to do so will frustrate the litigation unless a company in the position of the appellant here establishes that those who stand behind it and who will benefit from the litigation if it is successful (whether they be shareholder or creditors or, as in this case, beneficiaries under a trust) are also without means. It is not for the party seeking security to raise the matter; it is an essential part of the case of a company seeking to resist an order for security on the ground that the granting of security will frustrate the litigation to raise the issue of the impecuniosity of those whom the litigation will benefit and to prove the necessary facts. 26 During the cross-examination of the directing mind of AEI, Mr Moore, it emerged that it had six creditors, each of whom held promissory notes issued by AEI. The names of the noteholders and the amounts owed were set out as follows by the primary judge (at [48]): Contracto, Inc Defined Benefit Retirement Plan and Trust $841,000 Carol and Dorothy Young $340,000 Low Income Housing Construction Company $92,500 Gregory Moore Real Estate Company Inc $675,000 'LMA' Defined Benefit Retirement Plan and Trust $100,000 The William S and Dathel J Lackey Revocable Living Trust $1,750,000 27 The primary judge then noted (at [49]) that no attempt had been made to prove the asset position of these creditors. This led him to conclude, by directly applying Bell Wholesale, that he should not decline to order security on the basis that the claim might be stifled. 28 Before this Court, Mr Lee SC, who with Ms McDonald of counsel appeared for AEI, urged that this had involved a misreading of Bell Wholesale. It was not sufficient that the creditors might benefit ultimately from the litigation; they also had to 'stand behind it'. These two requirements were to be seen as equally necessary. This conclusion was said to flow from the phrase in the passage quoted above that required proof 'that those who stand behind it and who will benefit from the litigation… are also without means' (emphasis added). Mr Lee SC placed particular emphasis on the word 'and'. 29 In this case, so Mr Lee SC submitted, the creditors were all at arms length and there was no evidence that they were involving themselves in the litigation. They could not, so viewed, be said to be 'standing behind' AEI. They were not, for example, using AEI as a 'stalking horse'. Further, the person who was standing behind AEI, Mr Moore, had offered his own personal undertaking. 30 We do not accept these arguments. The passage in Bell Wholesale is not to be read like a statute and the discretion thereby ossified. It does not require that the class of those benefited by the litigation be divided into two further sub-classes viz those standing behind the applicant and those standing, presumably, elsewhere. The principle at play is a simple one: those who stand to share the benefits of litigation cannot shirk its burdens. We do not think the Court in Bell Wholesale intended to say any more than that. Indeed this is clear from the last sentence of the passage quoted above which, in terms, talks only of those standing to benefit from the litigation. It follows that the concepts of 'benefiting from' and 'standing behind' are elements in the same concept. It is no surprise, therefore, that arms length creditors have been held to be persons to whom the principle applies: see, for example, Cosdean Investments Pty Ltd v Football Federation of Australia Limited (No 2) [2007] FCA 163 at [15]-[29] per Mansfield J. Mr Lee SC invited us to regard Cosdean as wrongly decided because his Honour had misquoted Bell Wholesale by substituting an 'or' where there should have been an 'and'. The relevant passage is at [25] and does not, so it seems to us, contain the suggested misquotation. Contrary to the submission put, we see nothing heterodox in Cosdean. Indeed, as Mansfield J there observed, security had on other occasions been ordered where it was reasonable that two major and arms length creditors be expected to contribute to the security ordered, citing Caruso Australia Pty Ltd v Portec (Aust) Pty Ltd (1984) 1 FCR 311 at 314 per Toohey J. This is not to say that in every case where stifling is said to be the result of an order for security that the position of those benefitted by the litigation needs to be proved by an applicant. Each case depends on its own facts and an assessment of what is reasonable in the circumstances: cf. Ariss v Express Interiors Pty Ltd (In Liq) [1996] 2 VR 507 at 515 per Phillips JA. 31 In this case, however, it is far from obvious that all of the present creditors were, in truth, at arms length at all. For example, Mr Moore was the president of Contracto and all of its stock was held by the beneficiaries of the JC Moore Grandchildren's Trust (who are Mr Moore's four children). Mr Moore is also the president of Gregory Moore Real Estate Company Inc, which is the 'general partner' of each of the applicants under Arizona law. Further, it was not without relevance that the time for payment of the promissory notes had long passed without any apparent attempt to enforce the notes by the noteholders. These matters suggest a degree of accommodation to AEI by its creditors which might well permit them to be characterised as having a more than a merely passive role. Indeed, Mr Moore himself explained in his affidavit of 10 August 2011 that Gregory Moore Real Estate Company Inc, as 'general partner', conducted the business of each of the applicants. 32 Mr Lee SC submitted that there was no evidence about how these entities were connected to Mr Moore, but the evidence which was available provided material from which an inference of connexion could reasonably be drawn. It was Mr Moore who failed to face up to the consequences of that material. It was submitted that requiring AEI to prove the asset position of the noteholders would place an unreasonable burden on AEI because it would be required to proceed by letter rogatory addressed to the Courts of Arizona. We do not agree. The submission presupposes a lack of co-operation which does not sit easily with the connexions which already appear. 33 In these circumstances, we see no error in the primary judge's approach to this set of issues. Should leave to appeal be granted? 34 It will follow from what we have said that AEI has demonstrated error on the part of the primary judge. Further, it is not difficult to accept that were leave to appeal not to be granted, injustice might well result to AEI. The case, therefore, presents as one in which leave to appeal should be granted. Disposition of the appeal 35 Since we are satisfied that an error was made, it falls to this Court to consider how the discretion should be exercised. Apart from the primary judge's treatment of the issue of the strength of the claim, we agree with his Honour's approach to all the remaining issues in which we detect no matter from which we would dissent. The question for us is, therefore, whether the fact that AEI is somewhat closer to a liability finding than an applicant who has freshly commenced proceedings provides a reason in this case to refuse to grant security. 36 One significant matter in this area is the cost, expense and inconvenience for AEI in pursing the separate question procedure. There is an unfairness in permitting an applicant to expend funds in the pursuit of a claim and then encumbering it after that money has been spent with an order for security. Indeed, it is that concept which lies beneath the usual requirement that security be sought promptly. 37 Ordinarily we would think, therefore, that it would be undesirable to order security in a situation such as the present. There is an additional matter, however, which affects that conclusion. The fact is that Colliers was ordered to pay the costs of the first hearing forthwith and have done so. And, indeed, the costs of the hearing itself were ordered to be paid on an indemnity basis. This reduces significantly the prejudice caused by the separate question procedure. 38 We accept that AEI has demonstrated that Colliers engaged in misleading and deceptive conduct and that it is that much closer to establishing Collier's liability to damages than an applicant in recently commenced proceedings. Likewise, it ought to be accepted that the chances of Colliers ultimately obtaining a costs order in its favour might to some extent be seen as having been reduced. It would, however, be an exaggeration to describe AEI, as Mr Lee colourfully submitted, as being a mere whisker from victory. There are non-trivial issues associated with a case which seeks to hold Colliers liable for losses which are not directly connected to the misleading nature of the appraisal letter. In addition, the fact that the development which in fact proceeded is not the one upon which the appraisal was originally based may generate substantial factual debates about reliance. 39 Taking all that into account, it seems to us that the matter remains one where security should be ordered. It was not suggested that the quantum the primary judge had arrived at was inappropriate. In those circumstances, the Court will order that: 1. Leave to appeal from the orders made by Cowdroy J on 7 September 2011 be granted to the Applicants. 2. The appeal be dismissed. 3. The appellants pay the respondent's costs. I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Jacobson, Besanko & Perram. Associate: Dated: 3 April 2012