International Gold Mining Limited v Tarong Energy Corporation Limited [2007] FCA 338

FEDERAL COURT OF AUSTRALIA

International Gold Mining Limited v Tarong Energy Corporation Limited [2007] FCA 338 INTERNATIONAL GOLD MINING LIMITED ACN 072 871 133, FORMERLY INTERCOAL LIMITED v TARONG ENERGY CORPORATION LIMITED ACN 078 848 736 WAD 359 OF 2005

SPENDER J

28 FEBRUARY 2007

SYDNEY (HEARD VIA VIDEO LINK) IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY wad 359 OF 2005

BETWEEN: INTERNATIONAL GOLD MINING LIMITED ACN 072 871 133, FORMERLY INTERCOAL LIMITED

Applicant

AND: TARONG ENERGY CORPORATION LIMITED ACN 078 848 736

Respondent

JUDGE: SPENDER J DATE OF ORDER: 28 FEBRUARY 2007

WHERE MADE: SYDNEY (HEARD VIA VIDEO LINK)

THE COURT ORDERS THAT:

1. The total sum of $270,000 be provided by way of further security, for costs until the first day of the trial and for the second and later days of the trial. 2. The ordered sum be provided by 4 pm on 9 March 2007. 3. In the event that the security for further costs is not provided, the proceedings are to be stayed and the parties have liberty to apply on 48 hours notice for orders in respect of the disposition of the proceedings currently listed for trial commencing on 19 March 2007. 4. The costs of the application for further security for costs be the costs of the parties in the principal proceedings. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY WAD 359 OF 2005

BETWEEN: INTERNATIONAL GOLD MINING LIMITED ACN 072 871 133, FORMERLY INTERCOAL LIMITED

Applicant

AND: TARONG ENERGY CORPORATION LIMITED ACN 078 848 736

Respondent

JUDGE: SPENDER J

DATE: 28 FEBRUARY 2007

PLACE: SYDNEY (HEARD VIA VIDEO LINK)

REASONS FOR JUDGMENT 1 This is an application by the respondent ('Tarong') in the principal proceedings for an order that the applicant ('International Coal') provide additional security for the respondent's costs of the proceedings up to and including the first day of the trial and security for the respondent's costs of the trial. 2 Dealing with the second aspect of the matter, in my view, the applicant should provide security for the costs of the second and later days of the trial. On the basis of a present view that the trial will last eight days, a broad brush sum of about $60,000 seems appropriate, and there does not seem to be too much contest in relation to that. 3 The major dispute is in respect of the quantum that should be provided by way of security for the pre-trial and the first day of the trial; and secondly, what is the appropriate order to make concerning the effects or consequences of non provision of the quantum ordered. 4 This case is complicated by the fact that, in respect of the estimates of the costs, particularly for the costs of the first part of the application for security, the experts for the competing parties are in significant disagreement as to what would be an appropriate allowance. 5 Each of those experts, Steven Kenneth Hartwell for International Coal, and Ivan Anthony Garrett for Tarong, are both well respected and well regarded experts in relation to costs, particularly costs in significant commercial litigation. That circumstance complicates the determination of what is, in all the circumstances, an appropriate quantum as to the security that should be ordered. 6 Speaking broadly, the contention on behalf of Tarong is that an amount of about $380,000 would be appropriate to order, while International Coal would contend that the appropriate figure is $160,000. Each of those figures involves the already mentioned figure (in the order of $60,000) for the second and later days of trial, so that I am looking at essentially $320,000 for security up to the first day of trial for Tarong, and $94,000 that Mr Hartwell suggests should be provided by way of security on behalf of International Coal. 7 Dealing with the matter in a broad-brush sort of way, there are three major areas of significant financial difference in the approach of the costs experts. 8 For the purposes of convenience, I will refer to the schedule SKAH2 to the affidavit of Mr Hartwell filed 26 February 2007. The first area of difference between the experts is in relation to what are items number 9 and 10 on Mr Garrett's assessment, where the difference in respect of essentially what is perusal of discovered documents is between $84,000 suggested by Mr Garrett and $12,000 suggested by Mr Hartwell. 9 In respect of that difference, the explanation is that the assessment by Mr Garrett is based on the fact that there are more than 11,000 discovered documents and he has applied a figure of about $4 a folio, being a mid range of the amounts that would ordinarily be allowed for inspection, perusal and examination. 10 The figure that Mr Hartwell contends for is based on his suggestion that a taxing officer would approach the matter on the basis that an appropriate time for an experienced commercial solicitor to consider the discovered documents, would be a particular period multiplied by an appropriate time. It is very, very difficult for me in these circumstances to choose between each of these approaches. Without claiming to be Solomon, it seems to me that it would be fair, recognising the financial position of International Coal as disclosed by the material on this application, and the possibility that, should International Coal fail in the principal proceedings, there is a risk that the successful respondent will be seriously out of pocket, to adopt a figure in the mid range between the two competing claims. 11 Similarly, in relation items 41, 42, 43 and 44, being items in respect of expert reports, for Tarong, the total suggested by Mr Garrett for those figures is the sum of $65,000, $30,000, $45,000 and $37,000. The figure suggested by Mr Hartwell is the sum of $30,000, $15,000, $20,000 and $15,000, a difference of about $100,000. 12 There is, it seems to me, some weight in the criticisms of the large quantum that has been allowed by Mr Garrett. 13 Having regard to the undefined nature of the evidence, I can recognise that the issues confronted on which the experts have to give evidence are serious and important to the disposition of the principal proceedings, but the quantification of those experts' reports is somewhat speculative and depends really on estimates accepted by the solicitors for Tarong. 14 Again, something in the nature of a mid-point would be appropriate in respect of that important area of difference. 15 In respect of counsels' fees, again there is a difference, but not so much in relation to whether the cost of senior counsel on conference ought properly to be allowed (which I take as being essentially conceded by Miss Downes in the course of submissions). In any event, I would not consider the discounting that Mr Hartwell suggests in respect of that item. 16 The major difference is in relation to the question of what should be properly allowed by way of reading and preparation. There, again, the difference is quite stark: $68,000 in respect of Mr Garrett's estimate, and $25,000 by Mr Hartwell. 17 As an exercise in pragmatism, it seems to me that a discount of $110,000 from the total estimate by Mr Garrett is appropriate, having regard to the lack of certainty in respect of the appropriate approach for the perusal of discovered documents, the appropriate figure for experts and the amount of appropriate reading and preparation time by counsel. I reach that figure very much in a broad-brush sort of way, but effectively, $110,000 is an appropriate figure and that essentially is brought about by a reduction of about $50,000 in respect of the estimate for experts' reports; $20,000 in respect of the difference in approach in relation to preparation and reading time, and $40,000 in relation to the amount properly to be allowed for discovery. 18 I am conscious that it is not intended that the provision of security for costs be a complete indemnity, but, at the same time, the purpose of security is to protect, as best one can, the position of a party in the event that it is successful, and is at risk in relation to the necessary costs expended in securing that success. 19 The result is that the amount that I should order for pre-trial and the first day of the trial by way of security for costs is about $210,000, and $60,000 by way of security for the second and later days of the trial. 20 So again, being pragmatic but conscious of the principles behind the ordering of further security for costs, the sum that I order to be provided by way of security until the first day of the trial and for the second and later days of the trial is a total sum of $270,000. 21 I order that that sum be provided by 4 pm on 9 March 2007, and that in the event that the security for further costs is not provided, the proceedings be stayed, and that the parties have liberty to apply on 48 hours notice for orders in respect of the disposition of the proceedings currently listed for trial commencing on 19 March 2007. 22 I also order that the costs of the application for further security for costs be the costs of the parties in the principal proceedings. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Spender.