Supreme Court New South Wales Medium Neutral Citation: Ottoway Engineering Pty Ltd (administrators appointed) v Pooncarie Operations Pty Ltd [2018] NSWSC 1775 Hearing dates: 16 November 2018 Decision date: 16 November 2018 Jurisdiction: Equity - Technology and Construction List Before: Stevenson J Decision: Production of the documents sought by the plaintiff allowed (at [17]). Production of the first category of documents sought by the defendant not allowed (at [23]). Production of the second category of documents sought by the defendant allowed (at [27]). Catchwords: CIVIL PROCEDURE — notices to produce — where both parties issued notices to produce in respect of pending hearing of an application for security for costs — whether it is "on the cards" that production under notice will materially assist on an identified issue Cases Cited: Alister v R [1984] HCA 85; (1984) 154 CLR 404 Forest Pty Ltd v Keen Bay Pty Ltd (1991) 4 ACSR 107 ICAP Pty Ltd v Moebes [2009] NSWSC 306 Rinehart v Rinehart [2018] NSWSC 1102 Save the Ridge Inc v Commonwealth of Australia [2004] FCA 1289 Trade Practices Commission v Arnotts Ltd (No 2) (1989) 88 ALR 90 Category: Procedural and other rulings Parties: Ottoway Engineering Pty Ltd (administrators appointed) (Plaintiff/Respondent) Pooncarie Operations Pty Ltd (Defendant/Applicant) Representation: Counsel: M Sheldon (Plaintiff/Respondent) P Santucci (Defendant/Applicant) Solicitors: Equity Advisory (Plaintiff/Respondent) Grondal Bruining (Defendant/Applicant) File Number(s): SC 2016/340648 Ex TEMPORE Judgment (REVISED) 1. Ottoway Engineering Pty Ltd (administrators appointed) seeks damages from Pooncarie Operations Pty Ltd in relation to delays allegedly caused in the construction of a floating concentrator plant commissioned by Pooncarie. 2. The proceedings were commenced in November 2016. 3. Pleadings have closed. Both Ottoway and Pooncarie have served their evidence in chief. 4. Ottoway was placed into voluntary administration on 11 July 2018. 5. This litigation is now Ottoway's only remaining asset. Ottoway's business plant and equipment were sold shortly prior to the appointment of the administrators. 6. Ottoway estimates that the hearing will take three weeks. Pooncarie estimates six weeks. Either way, this is major litigation. 7. By notice of motion filed on 20 October 2018 Pooncarie seeks security for its costs of the proceedings. Ottoway accepts it must provide security. The only issue is the quantum of the security to be given. The amount sought by Pooncarrie is some $1.7 million. That figure is 75 per cent of the $2.3 million estimate made by Pooncarie's solicitor, Mr Dean Grondal, of Pooncarie's actual past and likely future legal costs. 8. The application for security has not yet been fixed for hearing. 9. That is because each of Ottoway and Pooncarie's legal advisers have exchanged notices to produce, and each objects to production of the documents sought by the other. 10. That issue requires resolution prior to the hearing of the security for costs application itself. 11. Mr Grondal's affidavit reveals that Pooncarie has incurred legal costs to September 2018 in the sum of almost $1 million. Mr Grondal has given a general description of the work done in the narrative of his affidavit and in summary schedules annexed to the affidavit. 12. Ottoway seeks production of the retainers and invoices relevant to those historical costs. 13. Mr Sheldon, who appears for Ottoway, accepts that an application for security should not become a hypothetical taxation of costs in advance of the final determination of the proceedings: Save the Ridge Inc v Commonwealth of Australia [2004] FCA 1289 at [24] (Emmett J). 14. However Mr Sheldon submits, I think correctly, that it is "on the cards" that production of these documents will materially assist on an identified issue (Alister v R [1984] HCA 85; (1984) 154 CLR 404 at 414; Trade Practices Commission v Arnotts Ltd (No 2) (1989) 88 ALR 90; however see also ICAP Pty Ltd v Moebes [2009] NSWSC 306 at [29]-[30] (Nicholas J); and discussion of the principles in Rinehart v Rinehart [2018] NSWSC 1102 at [47] (Ward CJ in Eq)). That is, that production will curtail, or perhaps eliminate, the need for the cross-examination of Mr Grondal on this question (assuming cross-examination were allowed) and may, in any event, assist the Court determining this aspect of the security for costs dispute. 15. Mr Sheldon also pointed out that Ottoway has engaged a costs consultant, Ms Rosati, to produce a report in relation to Pooncarie's likely costs. Mr Sheldon submits, again I think correctly, that production of the documents sought may assist Ms Rosati to produce a report more focused on the key issues and thus of greater assistance to the Court. 16. Mr Santucci, who appears for Pooncarie, accepts that production of the documents would not be burdensome. 17. Accordingly, I propose to require production of the documents sought by Ottoway. 18. Pooncarie seeks two categories of documents. 19. The first is relevant to a statement made by the administrators in their report to creditors that: "It is anticipated that the Trial will run for three weeks. The legal costs of proceeding to full hearing are likely to be significant, and the expert fees and counsel fees alone are likely to exceed $1m." 1. I cannot see how documents relevant to the process by which the administrators came to that view could assist the Court in resolution of the issues on the security for costs application. 2. The acceptance, indeed the assertion, by the administrators that Ottoway's expert and counsel's fees will exceed $1 million may be a factor relevant to the assessment of Mr Grondal's estimate of the corresponding costs that Pooncarie will incur. 3. However, I cannot see how the documents revealing how the administrators arrived at that conclusion could take the matter any further. 4. Accordingly, I do not propose to require Ottoway to produce these documents. 5. The second category of documents that Pooncarie seeks are security documents relevant to a further statement made by the administrators in their report to creditors as follows: "In any event, we point out that any recoveries are subject to [the secured creditors'] securities, and that no funds may be available to unsecured creditors as a result of recoveries from these claims." 1. If, as that statement suggests, any funds recovered by Ottoway in these proceedings will be available only to Ottoway's secured creditors, that is a matter capable of relevance to the fixing of the quantum of security; see, for example, Forest Pty Ltd v Keen Bay Pty Ltd (1991) 4 ACSR 107 at 131 (Williams J). 2. It may go, for example, to the question of what percentage of the likely actual amount of Pooncarie's costs should be allowed as the security. 3. Accordingly, I require production of these documents. 4. I order that the costs of these arguments be costs in the security for costs application. ********** 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: 20 November 2018