Court of Appeal Supreme Court New South Wales Medium Neutral Citation: SSABR Pty Ltd v AMA Group Ltd [2024] NSWCA 104 Hearing dates: 6 May 2024 Date of orders: 7 May 2024 Decision date: 07 May 2024 Before: Payne JA Decision: (1) By 4pm on 14 May 2024, the appellants provide security for the respondents' costs of these appeal proceedings pursuant to section 1335 of the Corporations Act 2001 (Cth), in the sum of $80,000, by payment of that sum into court or by provision of security in that amount in a form acceptable to the Registrar of the Court of Appeal. (2) The matter is listed for directions before Payne JA at 9.30 am on Thursday 16 May 2024. (3) If security for costs is lodged with the Court in accordance with order 1, the parties have leave to inform the associate of Payne JA of that matter, at which time the directions hearing in order 2 will be vacated. Catchwords: COSTS – Security for costs – appeal – under Corporations Act 2001 (Cth) s 1335 – where parties agreed order should be made – dispute solely on quantum – competing estimates of appropriate amount of security – where security sought in relation to notice of contention – where security sought in relation to past costs – whether professional costs assessor's estimate to be preferred over solicitor's security estimate Legislation Cited: Corporations Act 2001 (Cth) s 1335 Uniform Civil Procedure Rules 2005 (NSW) r 51.50 Cases Cited: Allco Funds Management Ltd (in liq) v Trust Company (RE Services) Ltd [2013] NSWSC 1450 Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd [2019] NSWSC 1082 HP Mercantile Pty Ltd v Dierickx [2013] NSWCA 87 KDL Building Pty Ltd v Mount [2006] NSWSC 474 LSKF Holdings Pty Ltd v Shield Lifestone Holdings Pty Ltd [2018] NSWCA 109 McMillan v Coolah Home Base Pty Ltd [2023] NSWCA 172 Mualim v Dzelme [2020] NSWCA 333 Palermo Seafoods Pty Ltd v Lunapas Pty Ltd [2015] NSWCA 149 Pioneer Park Pty Ltd (In liq) v Australia and New Zealand Banking Group Ltd [2007] NSWCA 344 Preston v Harbour Pacific Underwriting Management Pty Ltd [2007] NSWCA 247 Reddy v C&P Syndicate Pty Ltd [2013] NSWCA 425 Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2008] NSWCA 283 SSABR Pty Ltd v AMA Group Ltd (No 2) [2024] NSWSC 24 Swift v McLeary [2013] NSWCA 173 Tyneside Property Management Pty Ltd v Hammersmith Management Pty Ltd [2014] NSWCA 417 Category: Procedural rulings Parties: SSABR Pty Ltd (first appellant/first respondent on the motion) HAAPRC Pty Ltd (second appellant/second respondent on the motion) AMA Group Ltd (first respondent/first applicant on the motion) AMA Group Solutions Pty Ltd (second respondent/second applicant on the motion) Representation: Counsel: SK Hill (appellants/respondents on the motion) S Fitzpatrick (respondents/applicants on the motion) Solicitors: CBD Law (appellants/respondents on the motion) K&L Gates (respondents/applicants on the motion) File Number(s): 2023/463461 Publication restriction: Nil Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Division Citation: [2023] NSWSC 1551 Date of Decision: 15 December 2023 Before: Rees J File Number(s): 2021/257009 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] JUDGMENT 1. PAYNE JA: On 15 December 2023, in the Equity Division, the primary judge, Rees J, delivered judgment in SSABR Pty Ltd v AMA Group Ltd [2023] NSWSC 1551. Her Honour ordered that a business sale agreement between the plaintiffs and the first defendant be rectified in the way the defendants sought. Her Honour otherwise dismissed the summons and cross claim. 2. On 2 February 2024, in SSABR Pty Ltd v AMA Group Ltd (No 2) [2024] NSWSC 24, her Honour varied costs orders earlier made such that SSABR were ordered to pay AMA Group's costs of the proceedings on a party and party basis up to and including 12 October 2023 and on an indemnity basis from 13 October 2023. 3. The plaintiffs, SSABR Pty Ltd and HAAPRC Pty Ltd, lodged an appeal and the matter has been fixed for hearing on 22 June 2024 in this Court. The Red Book has been filed; the Black and Blue Books will shortly be filed and, subject to the appellants' submissions in reply, the Orange Book is on track to be filed on time. 4. On 17 April 2024, the respondents on the appeal, AMA Group Ltd and AMA Solutions Pty Ltd (two related companies), filed a notice of motion seeking security for costs pursuant to s 1335 of the Corporations Act 2001 (Cth) in the sum of $136,325.15 or such other amount as the Court sees fit, together with other orders to which I will later return. 5. For convenience, I will refer to the parties' by their roles in the underlying appeal, meaning AMA Group Ltd and AMA Solutions Pty Ltd are the "respondents" and SSABR Pty Ltd and HAAPRC Pty Ltd are the "appellants". 6. In support of the motion, the respondents relied upon an affidavit of their solicitor Alexandra Elizabeth Luck Smith sworn on 26 April 2024 together with its exhibits, and another affidavit sworn by Ms Smith on 1 May 2024. The appellants relied upon an affidavit of an experienced costs assessor Ms Sharron Drew, sworn 26 April 2024, and an affidavit from the appellants' solicitor, John Finney, affirmed 29 April 2024. 7. At the hearing, the respondents were represented by Mr S Fitzpatrick and the appellants by Ms SK Hill. Security for costs under s 1335 of the Corporations Act 1. Section 1335 of the Corporations Act is as follows: (1) Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given. (2) The costs of any proceeding before a court under this Act is to be borne by such party to the proceeding as the court, in its discretion, directs. 1. As Basten JA pointed out in Pioneer Park Pty Ltd (In liq) v Australia and New Zealand Banking Group Ltd [2007] NSWCA 344 at [21], s 1335 confers a discretionary power on this Court to order security for costs against corporate appellants, and further that discretion is unconstrained by the requirement for "special circumstances" that is a feature of r 51.50 of the Uniform Civil Procedure Rules 2005 (NSW). See also LSKF Holdings Pty Ltd v Shield Lifestone Holdings Pty Ltd [2018] NSWCA 109 at [11]-[13] per Leeming JA. 2. An order security for costs usually raises three issues, as Brereton J explained in KDL Building Pty Ltd v Mount [2006] NSWSC 474 at [6]: The first is whether the ground referred to in the section or the rule is established. The second is whether, if the ground has been established, as a matter of discretion an order should be made. The third is the quantum of any order to be made and, perhaps, the terms on which it might be made. 1. See also LSKF Holdings at [12] and [17] per Leeming JA. Leeming JA; Allco Funds Management Ltd (in liq) v Trust Company (RE Services) Ltd [2013] NSWSC 1450 at [5]. 2. In this application, it was accepted that the first and second issues should be resolved in the respondents' favour. On the first issue, Ms Hill for the appellants accepted that s 1335's preconditions were engaged. On the second issue, she made no argument that the Court should, as a matter of discretion, refrain from awarding security for costs. In particular, Ms Hill did not call in aid the respondents' delay in seeking security nor did she submit that, if security were ordered in the full amount claimed, the appeal would be stultified. 3. Rather, the debate between the parties was the third issue, quantum. That is, should the quantum of security be: 1. in the amount of $60,000-$66,000 as suggested by the appellants' expert costs assessor Ms Drew; 2. in the amount of just over $136,000 as calculated by the respondents' solicitor Ms Luck; 3. in an amount somewhere between the two amounts referred to above. 1. In exercising the undoubted discretion to award security for costs, I am guided by the following principles: 1. Any order for security for costs must be crafted to avoid stultifying the appeal proceedings: Preston v Harbour Pacific Underwriting Management Pty Ltd [2007] NSWCA 247 at [18] per Basten JA (Ipp JA and Hoeben J agreeing); McMillan v Coolah Home Base Pty Ltd [2023] NSWCA 172 at [75] per Mitchelmore JA. 2. If the Court is satisfied an award of security should be made, then it is inappropriate to fix the quantum by assessing the strength of the appellant's prospects of success: LSKF Holdings at [14] per Leeming JA; Swift v McLeary [2013] NSWCA 173 at [55]; Reddy v C&P Syndicate Pty Ltd [2013] NSWCA 425 at [34]. The discretion does not involve a preliminary hearing of the appeal: Mualim v Dzelme [2020] NSWCA 333 at [8] per Basten JA. 3. The appropriate amount of security should be assessed on a "broad brush" basis: Palermo Seafoods Pty Ltd v Lunapas Pty Ltd [2015] NSWCA 149 at [9] per Leeming JA; Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd [2019] NSWSC 1082 at [206] per Ward CJ in Eq. 4. The Court's power is to require "sufficient security". The Court does not set out to provide a complete indemnity to a respondent in respect of their costs: Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2008] NSWCA 283 at [90] per Gyles AJA; Tyneside Property Management Pty Ltd v Hammersmith Management Pty Ltd [2014] NSWCA 417 at [163] per Emmett JA. Even where a relatively detailed and realistic estimate of actual and apprehended costs of an appeal is provided in the evidentiary material, it is the ordinary course for only a fraction of those costs to be ordered by way of security: Palermo Seafoods Pty Ltd at [8] per Leeming JA. 5. The Court is not, in any event, bound to accept a respondent's assessment of the costs likely to be incurred or recovered. 1. There were three principal points of difference between Ms Drew's estimate of the appropriate security for costs ($60-66,000) on the one hand and Ms Smith's ($136,000) on the other: 1. Ms Drew's estimate did not allow any part of the likely costs of prosecuting the respondents' notice of contention, while Ms Smith's included those costs in full. This accounted for approximately $27,500.00 of the difference between the two estimates. 2. Ms Drew gave a lower assessment of past costs than Ms Smith, accounting for a difference of approximately $23,000. 3. The remaining difference of approximately $20,000 largely arose from different estimates made by Ms Drew of the time likely to be allowed on an assessment for various tasks which Ms Smith had indicated were necessary to be completed. Consideration 1. I accept, as the appellant's counsel conceded, that this is an appropriate case for an order of security for costs. In fixing the amount of that security, I will address the three areas of dispute on the evidence. 2. As to the first matter in dispute, no authority was drawn to my attention by either of the parties about the principles which should guide the Court in assessing security for costs likely to be incurred in advancing a notice of contention. It is tolerably clear that I have power to make an award of such costs. Ward JA, as the President then was, in HP Mercantile Pty Ltd v Dierickx [2013] NSWCA 87 said at [19]: There was issue taken with the provision of security for costs for the notice of contention as a separate issue, in circumstances where that is, in effect, an application by the plaintiff, but I am satisfied that the notice of contention costs would be likely to form part of the costs of appeal if the appeal were to be unsuccessful. 1. In fixing the amount of security, however, it seems to me that I should approach this subject cautiously. This is because there are a wide variety of possible circumstances in which security for costs for a notice of contention might arise. 2. On the one hand, there may be cases where the Court finds that the basis upon which the respondent succeeded below cannot be supported but concludes that the respondent can succeed on a basis not adopted by the primary judge. In such a case, it may be clear even when considering the matter at the stage of addressing security for costs that there is a real possibility that the final costs award would be a differential one, for example, that the appellant pay the respondent's costs of the notice of contention but that the respondent pay the appellant's costs of the notice of appeal. On the other hand, there may be cases where the notice of contention can be seen at this early stage to be defensive only. 3. In the present appeal, the respondents succeeded on their claim for rectification but failed on their construction of the pre-rectification agreement. It is inappropriate for me to express views about the likelihood of either case succeeding on appeal. I am, however, cautious in addressing this issue as the authorities make clear that security for costs is not intended to provide a complete indemnity. Even the careful discounting applied by Ms Smith to her estimates for the costs of the notice of contention seems likely to give rise to an excessive figure. I will allow $10,000 as security for costs for the notice of contention, effectively a little more than one-third of what the respondents claimed. 4. As to the second matter in dispute, Mr Fitzpatrick very properly alerted me that Ms Smith's estimate for past costs included the costs of the notice of contention, and conceded that there was a prospect of at least some double counting. By far the largest part of those costs, however, related to the costs of this notice of motion. It is inappropriate to award security for costs for the application for security for costs itself. Accordingly, I allow only $4000 for past costs. 5. In relation to the third area in dispute, it seems to me that Ms Smith's estimates are responsibly made and that she is an experienced participant in the costs assessment process. Ms Drew's opinions, however, are based on her extensive experience as a cost's assessor and are therefore a more reliable basis for estimating what the likely assessed costs will be. Bearing in mind that security for costs is not intended to provide a complete indemnity, I prefer Ms Drew's approach. I am also mindful that even where a relatively detailed and realistic estimate of actual and apprehended costs of an appeal is provided in the evidentiary material, as it has been here, it is the ordinary course for only a fraction of those costs to be ordered by way of security. Conclusion 1. The appellants accept that an order for security for costs in the range of $60,000-$66,000 should be made. I will adopt the top of that range. To that sum, I add $10,000 for costs relevant to prosecuting the notice of contention and $4000 for past costs, neither of which sum was included in Ms Drew's calculations. 2. Accordingly, I order security for costs in the sum of $80,000. Security may be effected by payment of that sum into court or by provision of security for payment of $80,000 in a form acceptable to the Registrar of the Court of Appeal. 3. Additional orders were sought by the respondents, in particular an order for the stay of proceedings. However, that order was ultimately not pressed given that such an order may interfere with the orderly preparation of the appeal. Accordingly, I decline to grant a stay at this stage. 4. I will, however, stand the matter over before me at 9.30 am on Thursday 16 May 2024. If the appellants have not lodged security in an appropriate form by that time, I will consider what further orders I should then make. 5. The orders I make are: 1. By 4pm on 14 May 2024, the appellants provide security for the respondents' costs of these appeal proceedings pursuant to section 1335 of the Corporations Act 2001 (Cth), in the sum of $80,000, by payment of that sum into court or by provision of security in that amount in a form acceptable to the Registrar of the Court of Appeal. 2. The matter is listed for directions before Payne JA at 9.30 am on Thursday 16 May 2024. 3. If security for costs is lodged with the Court in accordance with order 1, the parties have leave to inform the associate of Payne JA of that matter, at which time the directions hearing in order 2 will be vacated. ********** Amendments 07 May 2024 - File number corrected 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: 07 May 2024