MHG Plastic Industries Pty Ltd v Quality Assurance Services Pty Ltd [2004] FCA 105

FEDERAL COURT OF AUSTRALIA

MHG Plastic Industries Pty Ltd v Quality Assurance Services Pty Ltd [2004] FCA 105

MHG PLASTIC INDUSTRIES PTY LTD v QUALITY ASSURANCE SERVICES PTY LTD & ROADS AND TRAFFIC AUTHORITY OF NEW SOUTH WALES N 930 of 2001 WHITLAM J 18 FEBRUARY 2004 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 930 of 2001

BETWEEN: MHG PLASTIC INDUSTRIES PTY LTD

APPLICANT

AND: QUALITY ASSURANCE SERVICES PTY LTD

FIRST RESPONDENT

ROADS AND TRAFFIC AUTHORITY

OF NEW SOUTH WALES

SECOND RESPONDENT

JUDGE: WHITLAM J

DATE OF ORDER: 18 FEBRUARY 2004

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. The orders for security for costs made on 28 June 2002 are varied by increasing the amount of the security to be given to each respondent to $300,000. 2. Security for the increased amount in favour of each respondent is to be provided in a form acceptable to the Registrar within 28 days, failing which the proceeding be thereafter stayed. 3. The applicant is to pay the first respondent the costs of its motion for additional security. 4. The second respondent's costs of its motion for additional security are to be its costs in the cause. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 930 of 2001

BETWEEN: MHG PLASTIC INDUSTRIES PTY LTD

APPLICANT

AND: QUALITY ASSURANCE SERVICES PTY LTD

FIRST RESPONDENT

ROADS AND TRAFFIC AUTHORITY

OF NEW SOUTH WALES

SECOND RESPONDENT

JUDGE: WHITLAM J

DATE: 18 FEBRUARY 2004

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 On 28 June 2002 Sackville J made orders that the applicant ('MHG') provide security for the costs of the first respondent ('Quality Assurance') in the sum of $50,000 and security for the costs of the second respondent ('the RTA') in the sum of $35,000. Pursuant to the terms of those orders each of Quality Assurance and the RTA seeks the provision by MGH of additional security. MHG accepts the inevitability of an order for further security, but disputes the amounts requested by both Quality Assurance and the RTA. 2 Quality Assurance requested security for an additional sum of $250,000 of costs. The evidence in support of that figure was given by its solicitor and a legal costs consultant. This evidence demonstrates that the time spent by the solicitor and his staff on the discovery process has been quite extraordinary. The solicitor acknowledged that such time far exceeded his earlier predictions. Disbursements incurred in relation to discovery also include a sizeable payment to a provider of legal document management services. Assuming that the work done was justified, the legal costs consultant estimated that Quality Assurance would recover on taxation at least $140,000 for past costs for discovery. The solicitor also gave evidence of his estimates of the costs likely to be incurred in preparing his client's case for trial. Based on those estimates, the legal costs consultant considered that at least $156,620 would be recovered on taxation for such costs. 3 The RTA requested security for an additional sum of $477,000 of costs. The evidence in support of that figure was given by two solicitors employed by the RTA's solicitor and by a legal costs consultant. The correspondence to which the solicitors referred shows how tortuous the discovery process has been at many levels. The opinion of the RTA's costs consultant rested on the time sheets of the solicitors and on disbursements to date, including fees of counsel. The time spent on discovery was not separately identified. The costs consultant stated his opinion that the RTA would recover on taxation costs of $477,149.44 for work done to date. 4 I was flabbergasted by the number of hours that Quality Assurance's solicitor and staff have attributed to the discovery process and by the huge amount that the RTA's solicitor has disbursed to date on account of junior counsel's fees. The difference in the costs to date of the two respondents is also puzzling, especially in light of the fact that Quality Assurance has discovered many more documents than the RTA. The correspondence in evidence suggests that, with hindsight, it would have been preferable to have had general discovery in this matter and that the quest for agreed categories of documents for discovery has been productive of endless disagreements between the parties. Such discovery has also been complicated because it was not required by the applicant alone and because the respondents do not appear to have understood their obligations to each other in respect of their discovery to the applicant. (Quality Assurance and the RTA have cross-claimed against each other in this proceeding.) I regret to say too that the correspondence suggests that the protocol for exchange of electronic data during discovery which I was persuaded to impose on the parties may have increased costs. 5 The evidence of the respondents was not challenged, but senior counsel for MGH implied that a challenge to that evidence would be unfruitful and perhaps futile. He vouchsafed the genuineness of the costs consultants' opinions. However, the justification for time spent in a party's case and the likelihood of its allowance on taxation were not matters that could be satisfactorily or easily explored by counsel for the other side at this stage of the litigation. Accordingly he submitted that the respondents' costs should be referred to a taxing officer for assessment. That course has some attraction. The costs involved would be eventually recovered by a successful respondent, and a taxing officer might be able to make such an assessment with limited involvement by an applicant. In the event, I have decided not to put the respondents to the inconvenience of such an exercise on the present motions. 6 The fact that the respondents' evidence is uncontradicted does not mean that I must fix appropriate amounts for security on the basis that the time recorded and the disbursements are necessarily justified. Although this is not a case where there is evidence that the applicant is unable to provide security in the amounts requested, I am unconvinced that the RTA's case has necessarily required much greater costs than that of Quality Assurance. MHG offered to increase to $125,000 the amount provided by way of security for costs to each of the respondents. However, I do not think that figure is sufficient. Quality Assurance has made a case for the extra amount it seeks, and I also propose to increase the amount of RTA's security to the same sum, namely, $300,000. 7 No doubt, there will be applications for further security at a later stage. The estimates for amounts required for hearing should be relatively straightforward once the number of days fixed for trial is known. However, if either respondent is hereafter minded to apply for any additional security in respect of its costs of preparation, I should indicate my attraction to the notion of a referral to a taxing officer for a further indication of quantum. So far as the costs of the present motions are concerned, Quality Assurance has been wholly successful and will have its costs, but the RTA has been given substantially less than it sought and the costs of its motion will be its costs in the cause.