Supreme Court New South Wales Medium Neutral Citation: Recycling Holdings Pty Limited v Fuji Xerox Businessforce Pty Limited [2013] NSWSC 1312 Hearing dates: 5 September 2013 Decision date: 05 September 2013 Jurisdiction: Equity Division Before: Lindsay J Decision: Orders made for the provision of security and, upon an assumption that it will be provided, for case management directions. Catchwords: PROCEDURE- Costs- Security for costs - Security ordered- Quantum - Liberty to apply for variation of quantum reserved COSTS - Security for costs - Security ordered - Quantum - Liberty to apply for variation of quantum reserved Legislation Cited: Corporations Act 2001 (Cth) s 1335 Uniform Civil Procedure Rules 2005 (NSW) r 42.21 (1)(d) Cases Cited: - Texts Cited: - Category: Principal judgment Parties: Recycling Holdings Pty Limited (ACN 123 236 573) as Trustee for Recycling Holdings Unit Trust ABN 41 746 358 644 t/as Paper Way (NSW) Fuji Xerox Businessforce Pty Limited ACN 001 702 129 Representation: Counsel: M Pesman (Plaintiff) AA Henskens SC with SM Wells (Defendant) Solicitors: Boyd House & Partners (Plaintiff) Herbert Geer Solicitors (Defendant) File Number(s): 2012/0300643 Judgment - EX TEMPORE 1Before the Court is a notice of motion filed by the defendants on 19 April 2013 seeking an order that the plaintiff provides security for costs. 2As the plaintiff is a company, the defendants invoke both the Corporations Act 2001 (Cth) s 1335 and r 42.21(1)(d) of the Uniform Civil Procedure Rules 2005 (NSW). 3The parties accept that the tests to be applied by reference to these statutory provisions are essentially the same. 4The plaintiff concedes that, on a proper exercise of the Court's jurisdiction, an order that it provide security for costs should be made. 5The questions for determination are: First, the quantum of security to be required of the plaintiff; and, secondly, the timing of provision of security required. 6The principal proceedings were commenced by a summons filed on 27 September 2012. The parties subsequently filed pleadings. A statement of claim was filed on 23 October 2012, to which the defendants filed a defence on 8 February 2013. The defendants filed a cross-claim on 8 February 2013, to which the plaintiff filed a defence on 10 April 2013. 7The subject matter of the principal proceedings is a contractual relationship between the parties relating to the provision of waste products by the defendants to the plaintiff. There is a dispute about the terms of the parties' contract. 8The parties' relationship came to an end with competing claims for damages for breach of contract. 9In its statement of claim the plaintiff claims damages (including loss of profits) which have been particularised as totalling approximately $13.4 million. 10In their cross-claim the defendants claim a sum, in debt or as damages, in the total amount of approximately $950,000. 11The plaintiff does not contend that the defendants' cross-claim disentitles them from an order for security on the statement of claim. It contends, rather, that the existence of the cross-claim should be taken into account in assessing the amount of security that the plaintiff should be ordered to provide. 12The defendants contend that the evidence required for a determination of their cross-claim is essentially documentary, and that the substantial costs to be incurred by the parties in the preparation of the proceedings for trial, and on a trial, are likely to be attributable to the statement of claim. 13The defendants contend, and the plaintiff denies, that the trial of questions in dispute on the statement of claim will involve substantial complexity. 14There is no certain, independent, objective way for the Court to assess the degree of complexity that might arise. Neither side of the record has yet served evidence in the principal proceedings. 15The affidavits read on the motion were sworn by the parties' respective solicitors and costs consultants. 16For the record, the defendants read in support of their motion: (a)affidavits by Ms R M G Lynch (solicitor) sworn on 19 April 2013 and 1 July 2013; and (b)an affidavit by Mr R Nicholas (costs assessor) affirmed on 15 August 2013. 17Equally for the record, the plaintiff read in opposition to the motion: (a)an affidavit of Mr K L Emanuel (solicitor) sworn on 7 June 2013; and (b)an affidavit of Mr R P Matters (costs assessor) sworn on 28 August 2013. 18The plaintiff does not contend that the effect of an order for the provision of security would, of itself, stultify its claims for relief. It does, however, suggest the funding it presently has available for the purpose of the proceedings, courtesy of an insurance policy, is limited to a total amount of $500,000. 19The evidentiary foundation for the suggestion of a working fund of $500,000 is insufficient to enable me to make a reliable determination of the amount presently available for the provision of security, or the terms upon which it might be made available, by an insurer. 20It is not necessary for me to dwell on this because my assessment of the orders that should be made is not dependent upon the availability, or otherwise, of insurance funding. 21A principal point of difference between the parties is that, whereas the defendants contend the Court should make a determination (subject to further order) about the amount of security that should be awarded for the conduct of the principal proceedings to judgment, the plaintiff contends that the Court should limit its determination to a relatively modest sum for security that might be reviewed at a later time, if need be. 22The plaintiff's submission is coupled with criticism of the amount of security claimed by the defendants for "the whole case" in terms of: (a)quantification of the defendants' costs on a solicitor-client basis; (b)allowances to be made for the work to be provided in the calculation of that quantified amount; and (c)selection of a percentage recoverable on a party-party assessment. 23The plaintiff points to the element of speculation involved in assessing the future course of the proceedings at such an early stage in case preparation, essentially at the time of closure of the parties pleadings. 24The plaintiff observes, with some justification, that: (a)the ambit of the work required to be undertaken by the defendants in the principal proceedings will become more evident when, as is contemplated as the "next step" in the proceedings, it serves affidavit evidence in support of its statement of claim; and (b)before that time arrives, the defendants will not be called upon to incur any substantial costs. 25The defendants' claim for security is based upon assumptions about the hourly rates of solicitors and counsel which, in my assessment, are reasonable: (a)solicitor fees at the charge out rate of $475 per hour plus GST for "special counsel" and $300 per hour plus GST for other solicitors; (b)for senior counsel, a daily rate of $5,500 plus GST and an hourly rate of $550 plus GST. (c)for junior counsel, a daily rate of $2,800 plus GST and an hourly rate of $350 plus GST. 26Substantial debate has focused on the percentage rate to be applied to an estimate of solicitor-client costs in order to come to an estimate of party-party costs assessed on the "ordinary" (as distinct from the "indemnity") basis. 27It is not necessary, or productive, for me to attempt to resolve this debate in a definitive way. Figures as low as fifty per cent, and as high as eighty-five per cent, have been mentioned in submissions. The defendants suggest that a conservative percentage would be seventy-five per cent, but they accept that seventy per cent would be within an acceptable range. The plaintiff contends for seventy per cent as its version of a conservative selection. Like beauty, conservatism is in the eye of the beholder. 28If it were appropriate, at this stage, to make a determination of the likely future costs of the defendants in conducting the principal proceedings to judgment, I would be tempted to embrace the methodology adopted by the defendants, leading to an order for security, on that basis, estimated at a percentage (which I would select as seventy per cent) of $492,178 (a figure which takes into account the defendants' cross-claim so far as it might be said to overlap with the plaintiff's statement of claim): ie, $344,524.60. In rounded terms, say, $344,500. 29However, I am not satisfied that it is realistic, let alone fair, to make such a determination at this early stage of the proceedings. Rates of remuneration and a percentage discount for a party-party costs assessment, might, provisionally, be selected; but the amount of work required to be undertaken is not sufficiently settled to allow to the defendants more than the plaintiff concedes as a possibility. 30There is merit in the plaintiff's contention that caution should be exercised in making any determination of the likely quantum of costs referable to the whole of the principal proceedings before knowing a little bit more about the likely course of those proceedings. 31Based on its own contestable, and contested, assumptions, the plaintiff contends that an appropriate award of security on a "whole of proceedings basis" should be limited to $210,000. 32There is no utility in conducting a detailed examination of the plaintiff's methodology or assumptions at this stage of the proceedings. 33In the end, an intuitive judgment is required of the Court, taking into account such evidence as may be available, the submissions of the parties and the Court's own experience. 34Making an intuitive judgment of this nature, my determination is that the plaintiff should be ordered to provide security in the sum of $210,000. 35It is plain, on any view of the evidence and the cases advanced for and against the motion, that: (a)an order for provision of that sum will not stultify the plaintiff's claim; and (b)the provision of security in that sum will provide adequate protection for the defendants during the period in which the parameters of the case will, one might reasonably expect, become clearer. 36I do not intend to make, and I expressly do not make, any observations about whether it is likely that more (or less) security could be ordered at a later stage of the proceedings. 37The defendants cannot be shut out from making an application for additional security. Unusual though an application for a reduction in security might be, equally the plaintiff cannot be shut out from making an application for the amount of security provided to be reduced. 38If and when any such application is made, on one side of the record or the other, it will have to be assessed on its merits with the benefit of such evidence as may then be available. 39Whether, at that time, another judge may, or may not, take notice of my observations about the reasonableness of the rates of remuneration claimed by the defendants, or an appropriate percentage to be applied against solicitor-client costs to obtain an estimate of party-party costs, is a matter for the future, not one for me to anticipate or to urge upon anybody. 40I propose to make an order for security (in the sum of $210,000) substantially in the terms that have been suggested by the parties as an appropriate form of orders. 41In doing so, I propose to reserve to both sides liberty to apply for such, if any, variations as they may seek in the amount of security ordered to be provided by the plaintiff. 42I will hear the parties further before making any order for costs referable to the motion for security. 43Leaving aside the question of security, the parties are agreed on the directions that should be made to enable the principal proceedings to advance. In essence, they are agreed that: (a) the plaintiff should have six weeks following its provision of security to serve its affidavit evidence (both lay and expert) in support of the statement of claim; and (b) within a short time thereafter, the proceedings should be returned to the registrar's list for directions. 44[His Honour heard submissions as to costs.] 45I make the following orders: (1)Order, subject to any prior agreement in writing between the parties, that the plaintiff provide security for the defendants' costs by paying into court (without prejudice to such entitlements as the defendants may have to apply for further security) the sum of $210,000 on or before 3 October 2013. (2)Order that the proceedings be stayed until such security is provided. (3)Reserve liberty to apply to both sides of the record for a variation in the amount of security. (4)Direct that the plaintiff serve, on or before 14 November 2013, such affidavits (both lay and expert) as it proposes to file in support of the statement of claim. (5)Direct that the proceedings be listed for directions before the registrar at 9am on 2 December 2013. (6)Order that the plaintiff pay the defendants' costs of the notice of motion filed on 19 April 2013. (7)Order that the plaintiff pay the defendants' costs of the application made before the Chief Judge on or about 18 and 24 July 2013 for leave to adduce expert evidence. ********** 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: 13 September 2013