Validus Advisory Group Pty v Consolidated Tin Mines Ltd

1. [1]

   On 24 July 2017 I heard a contested application by the defendant for security for costs. On 9 August 2017 I made an order that the plaintiff provide security for the defendant’s costs in the sum of $85,000.

2. [2]

   On delivery of my reasons for the judgment I was asked to reserve the question of costs of the application because there had been some negotiations before the hearing pursuing settlement of the application.

3. [3]

   A submission was made by counsel for the plaintiff that I should order that each party pay its own costs, as this was the “usual order” in such applications. In support of that submission reliance was placed on the decision of Button J in Bright Ceiling Systems Pty Ltd v Merhis Contracting Pty Ltd [2016] NSWSC 631 (Bright Ceiling) at [65] and [66]. In the alternative, it was submitted that because the plaintiff had made a particular settlement offer of $50,000 now and $50,000 “down the track”, the plaintiff had effectively done better than the security offered and accordingly the plaintiff should be awarded its costs of the hearing.

4. [4]

   The defendant was not in a position to argue costs on 9 August and with leave served written submissions which argued that the defendant should be awarded all the costs of and associated with the application because the application was successful and costs should follow the event. (Pursuant to r 42.1 of the Uniform Civil Procedure Rules (the “UCPR”)). It was argued (in summary) that the only basis upon which a different order should be made is where the requirements of Calderbank v Calderbank [1975] 3 All ER 333 were satisfied and that requires that first, the party making the offer satisfy the Court that the result achieved by the party who made the offer is more favourable than that offer, and second, that in all the circumstances the offeree’s failure to accept the offer was unreasonable.

5. [5]

   Relevant to costs is the following history. The proceedings were commenced on 9 March 2017. In late March a number of requests were made by the defendant to the plaintiff’s solicitor to provide details about the plaintiff’s financial viability to pay any adverse costs order should the plaintiff’s case fail. No reply was forthcoming. The defendant’s notice of motion and affidavit in support were filed on 23 May 2017 and served shortly after. It was not until 30 June 2017 that an affidavit by the solicitor for the plaintiff was filed and served. This affidavit estimated the defendant’s potential costs to be significantly less than the estimate provided by the defendant but did not, on its face, make any concessions regarding the defendant’s application.

6. [6]

   On 20 July 2017 a telephone conversation between the solicitors for the plaintiff and the defendant took place in which the plaintiff offered to resolve the application by offering security for costs in the sum of $50,000 within 28 days with an additional $50,000 to be paid six weeks before any final hearing.

7. [7]

   Later the same day, the solicitor for the defendant rejected that proposal by email. There was no counter-proposal made. The notice of motion was listed for hearing on Monday 24 July hence the offer made by the plaintiff occurred effectively only one clear business day before the hearing was to proceed.

8. [8]

   Whilst on 24 July the notice of motion proceeded to argument confined to the question of the amount of security as opposed as to whether security for costs should be ordered at all, the argument still took some hours.

Uniform Civil Procedure Rules and discussion of relevant legal authorities

1. [9]

   Rule 42.1 of the UCPR provides by way of general rule that costs follow the event. It states as follows:

2. [10]

   Also relevant to this application is r 42.7 of the UCPR regarding interlocutory applications and reserved costs which provides as follows:

3. [11]

   In support of the submission that the usual order in applications of this nature is that each party pay its own costs, Mr Weinberger, counsel for the plaintiff, relied upon the decision of Button J in Bright Ceiling at [65] and [66]. The costs decision in that matter is based on the acceptance of a submission made by Mr Weinberger that Collignon Developments Pty Ltd v Wurth (1975) ACLR 314 (Collignon Developments) and Mignon Cakes Pty Ltd v Hiltide Pty Ltd [2004] FCA 142 (Mignon Cakes), as discussed in the latest edition of G E Dal Pont, Law of Costs (3rd ed, 2013, Butterworths) at pp 965-966 have the effect of supporting the proposition that the “usual order”, even if a defendant is successful, is not that costs follow the event and that the successful defendant should be awarded the entirety of its costs of the application.

4. [12]

   I do not accept that those authorities stand together as support for the proposition that in applications of this kind, the defendant is not entitled to be awarded its costs of the application if successful. Nor do they stand for the proposition that a “usual order” in these circumstances is that each party should bear its own costs. In Mignon Cakes Allsop J (as he then was) analysed the circumstances of that application in the context of that particular litigation and formed the view that because there were significant issues regarding credibility and an assertion in the litigation that impecuniosity was caused to one party by the other, the applicant was not in any position to pay costs. His Honour concluded that the appropriate way of dealing with costs in that particular context was to order the costs of the application should be costs in the cause.

5. [13]

   In Collignon Developments, Needham J concluded that the unsuccessful respondent/plaintiff should pay the costs of the application and specifically declined to order costs in the cause.

6. [14]

   The extract from Dal Pont, Law of Costs (at pp 965 – 966) referred to in Bright Ceiling simply states that where the defendant is successful – that is an order for security for costs is made – the costs of the application are “often reserved or declared to be costs in the cause”. In support of that proposition the author footnotes Collignon Developments and Mignon Cakes. The commentary continues:

7. [15]

   This commentary and the authorities to which I have been referred simply illustrate that there are complexities that should be considered in applications for security for costs and that the broader context of the litigation should also be considered when determining an appropriate costs order. In this case, that context must include the plaintiff’s failure to provide the financial information requested, the delay of two months after service of the notice of motion and affidavit before any proposal was made by the plaintiff, and the defendant’s failure to respond with any counter-proposal on or after 20 July when it was clear the plaintiff was open to discussions to resolve the application by making a substantial payment for security for costs.

8. [16]

   The defendant relied upon Kunc J in Brian John Harris v Mark Harris (No. 2) [2013] NSWSC 1157 at [6] to argue that the plaintiff’s offer made on 20 July 2017, should have no effect on costs. His Honour stated applicable legal principles (as drawn from Commonwealth of Australia v Gretton [2008] NSWCA 117 at [38] to [46] and Illawarra Hotel Co Pty Limited v Walton Construction Pty Ltd (No 2) [2013] NSWCA 211 at [17]) as follows:

9. [17]

   I have some doubt that the offer made by the plaintiff on 20 July 2017 was technically a “Calderbank” offer but the principles are apposite regardless.

Decision

1. [18]

   The defendant acted appropriately in making its early requests for information as to the plaintiff’s financial viability. The requests for information were ignored. The filing of the notice of motion for security for costs some two months after the first request was made was an entirely appropriate step given the requirement that such applications be not left too long. There was then a delay of almost two months before the plaintiff made any proposal to resolve the application. The affidavit filed by the solicitor for the plaintiff on 30 June 2017 placed in issue the assessment of costs made by the defendant, but did not telegraph that there was a concession to be made that the plaintiff should or would make some payment for security for costs.

2. [19]

   The offer ultimately made only one clear working day before the hearing was an initial payment of $50,000 to secure the continuation of the proceedings with a payment of a further $50,000 to be made only when there was a hearing date fixed, this payment to be made six weeks before such a hearing date. The offer was not in writing and was not expressed to be a “Calderbank” offer.

3. [20]

   The order I made for the payment of $85,000 security for costs within 28 days of the judgment of 9 August means that the plaintiff has not done better than the offer it made on 20 July 2017 as that offer was to pay only $50,000 with another $50,000 at a later time.

4. [21]

   Further, I accept the defendant’s submission that its failure to accept the offer was not unreasonable given the second proposed payment and when it would be paid was in effect illusory, particularly if proceedings were summarily dismissed or withdrawn before a hearing date was fixed.

5. [22]

   In my view, those considerations, combined with the lateness of the offer, leads me to conclude that the defendant’s failure to accept the plaintiff’s offer was not unreasonable.

6. [23]

   I observe however that the defendant did not make any counter proposal and simply rejected the plaintiff’s offer in circumstances where it was clear from the offer made by the plaintiff that the plaintiff was accepting that a payment for security should be made and that it should be in the sum of, at the very least, $50,000. The failure by the defendant to enter into negotiations leads me to the conclusion that some variation of the usual costs order for a party successful on its application should be made. The sum sought by the defendant was significantly more than the $85,000 ordered so to that extent, and in the absence of any offer to accept an amount less than that sought in its notice of motion, the defendant cannot be said to have been entirely successful.

7. [24]

   Having considered the nature and history of the proceedings and negotiations relevant to this application, the appropriate costs orders are as follows:

   1. (1)

      The plaintiff is to pay the defendant’s costs of and associated with the application for security for costs up to and including Thursday, 20 July 2017.

   2. (2)

      Each party is to bear its own costs of the application for security for costs on and from Friday, 21 July 2017 including the costs of the hearing on 24 July 2017, the appearance on 9 August 2017 and the costs associated with the preparation of written and oral submissions on the question of costs of the application.