FINAO Pty Ltd v Rosebery 2021 Pty Ltd

The plaintiff company, FINAO Pty Ltd (FINAO), describes itself as operating a project management business, particularly in the construction industry (SOC [2]). Mr Terry Down is the sole director of FINAO.

FINAO is represented by the law firm O’Loughlin Westhoff in these proceedings.

The first defendant, Rosebery 2021 Pty Ltd (Rosebery), formerly FINAO Operations Pty Ltd, is the former registered proprietor of a property at XX XXXXX St, Mosman (the Property).

Rosebery is represented by the law firm neolaw in these proceedings.

Mr Down was a director of Rosebery from its incorporation on 22 October 2013 until 4 August 2021. The second defendant, Mr Geoffrey Cottrell, was appointed as a director of Rosebery on 15 October 2020, and has been its sole director since Mr Down ceased to be a director on 4 August 2021.

Mr Cottrell is represented by the law firm Dentons Australia (Dentons) in these proceedings.

Given Mr Cottrell’s role as sole director of Rosebery, Mr Cottrell provides instructions to the legal representatives for Rosebery as the first defendant, as well as providing instructions to the separate legal representatives for himself as the second defendant. Mr Cottrell’s counsel acknowledged this circumstance in the course of the hearing (TR P11 L1-13), as well as acknowledging that Mr Cottrell is the controlling mind of Rosebery (TR P45 L28-30).

Mr Cottrell and his wife Marilyn Cottrell are the directors of Berkhamsted Pty Ltd, the sole shareholder of Rosebery. Mr Cottrell and Marilyn Cottrell are also shareholders of Berkhamsted Pty Ltd, together with, Anna Cottrell, Susan Cottrell, and Atlon Investments Pty Ltd (at least as at July 2025).

Anna Cottrell is a daughter of Mr Cottrell. She was also once married to Mr Down but is now Mr Down’s former wife. Accordingly, Mr Cottrell is Mr Down’s former father-in-law.

At some point during the events the subject of the pleadings (the exact timing is not clear on the evidence), Mr Down and Anna Cottrell separated, and later divorced, in the context of family law proceedings. The evidence does disclose, however, that the family law proceedings were in train by at least early 2022 and that final parenting and property orders were made by the Federal Circuit and Family Court of Australia (Division 1) on 3 April 2023. Amongst other things, the final parenting and property orders included the following order (emphasis added):

FINAO commenced the substantive proceedings against Rosebery by a Statement of Claim filed in the District Court of New South Wales on 11 April 2023 (SOC). The SOC seeks damages for breach of contract, alleging that FINAO and Rosebery entered into an agreement in November 2020 (the Agreement) for the provision of planning and project management services by FINAO to Rosebery to enable the development and resale of the Property, and alleging that Rosebery has failed to pay to it a “Development Fee” owing under the Agreement. FINAO valued the “Development Fee” at approximately $215,000 but, on the evidence before me, it could be as much as $366,536.69.

At its most simple, in oral submissions FINAO set out the context of the claim in the following terms (TR P25 L39-41):

In its Defence filed on 9 May 2023 (Defence), Rosebery denied the existence of the Agreement and otherwise alleged in the alternative that the alleged Agreement was otherwise void for illegality pursuant to s 4 of the Home Building Act 1989 (NSW). As to the whole of the SOC, Rosebery said that FINAO and Rosebery had embarked on an “arrangement”, and accepted that some amount would be payable to FINAO following the sale of the Property, however that “the amount payable to the plaintiff, if any, was to be held by it on trust for the sole purpose of making payments to assist Mr Down and Anna Cottrell in discharging their future liability to pay private school fees for their children” (Defence [22](c)(ii)) (the private school fees trust allegation).

Mr Cottrell verified Rosebery’s Defence on 9 May 2023 in his role as sole director of Rosebery.

On 16 June 2023, Rosebery filed a Cross-Claim against FINAO seeking a declaration that if Rosebery is liable to pay FINAO any amount by reason of FINAO’s claims, that FINAO’s interest is to be held by FINAO on trust for the sole purpose of making payments to assist Mr Down and Anna Cottrell “in discharging their future liability to pay private school fees for their children”.

Mr Cottrell verified Rosebery’s Cross-Claim in his role as sole director of Rosebery.

On 18 July 2023, upon Rosebery’s application the proceedings were transferred to this Court.

On 30 August 2023, FINAO filed a Defence to the Cross-Claim.

An amount of time then passed between Rosebery’s filing of its Defence and Cross-Claim, and FINAO filing its Defence to the Cross-Claim and the next step in the filing of pleadings.

In its Reply to Defence filed on 1 October 2024 (RD), FINAO joined Mr Cottrell to the proceedings as the second defendant, with Rosebery becoming first defendant. In addition to (or alternatively to) the claim for damages for breach of contract, FINAO sought damages pursuant to s 236 or compensation pursuant to s 237 of the Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law (ACL) for contraventions of s 18 of the ACL. FINAO alleged first that Mr Cottrell had engaged in conduct that was misleading and deceptive (RD [31]-[32]). FINAO then alleged that by reason of Mr Cottrell’s conduct, “in reply to the [first] defendant’s contention that at all times Cottrell was acting as an authorised officer of the [first] defendant, in contravention of s 18 of the ACL, Cottrell was directly and knowingly concerned with aiding, abetting, counselling or procuring the misleading and deceptive conduct of the [first] defendant” (RD [34]).

Specifically in relation to the claims made by Rosebery in its Defence, FINAO denied, amongst other things, the terms of the private school fees trust allegation (RD [30]).

On 6 November 2024, Dentons filed a Notice of Appearance on behalf of Mr Cottrell.

On 24 November 2024, each of Rosebery and Mr Cottrell filed a “Rejoinder” to FINAO’s RD (TR P23 L43). Each Rejoinder is a further pleading in answer to the RD. Leave was given to file those further pleadings on 27 September 2024 (the order granting leave was also the order which named these further pleadings “Rejoinders”). The orders made on 27 September 2024 also ordered Mr Cottrell be joined as a second defendant, and granted leave to Rosebery to file the RD. Mr Cottrell verified both Rejoinders.

The first 38 paragraphs of the Rejoinders were materially identical. The Rejoinder filed on behalf of Mr Cottrell contained an additional paragraph, being paragraph 39, which says “[t]he Second Defendant denies that the Plaintiff is entitled to the relief sought in the Reply, or at all”.

The issue of security for costs was first raised by Rosebery in a letter from neolaw to O’Loughlin Westhoff dated 16 May 2023. Following the informal disclosure of a document by FINAO the issue was resolved. However, in an email sent by neolaw on Rosebery’s behalf to O’Loughlin Westhoff on 14 September 2023, which was sent as part of Rosebery initially resolving the issue with FINAO in 2023, Rosebery indicated it was “reserving the possibility that the position may be agitated again as the circumstances of this proceeding continue to unfold”.

The issue of security for costs was next raised by Rosebery in a letter from neolaw to O’Loughlin Westhoff dated 10 July 2024. In that letter, the 16 May 2023 letter was referred to, as were the terms of a message personally sent by Mr Down to Anna Cottrell dated 26 June 2024 (the personal June message). I have referred to this message as the “personal” June message as it was not sent through legal representatives, but rather, was sent directly from a former husband to a former wife (namely, from Mr Down to Anna Cottrell). The letter did not state how the personal June message came to be in the hands of Rosebery (or in effect, Mr Cottrell, as Rosebery’s sole director) or its legal representatives, however it may be reasonably inferred that Anna Cottrell provided a copy of the personal June message to her father, who in turn provided a copy of the message to Rosebery’s legal representatives for use in the proceedings. Following reference to the personal June message, including the terms of that message, the letter asked whether “[FINAO] now accepts there to be credible evidence that [it], a corporation, is likely to be unable to pay the [d]efendant’s costs, if unsuccessful in its claim; and so the Court’s jurisdiction to order security for costs is enlivened”.

On 16 July 2024, O’Loughlin Westhoff sent a letter to neolaw, which stated, amongst other matters, that it was instructed FINAO was able to meet an adverse costs order “in the vicinity of $100,000”. That amount was an amount neolaw included in the 16 May 2023 letter as an estimate of Rosebery’s total recoverable costs in these proceedings, and was the amount which neolaw had initially requested FINAO consider when responding to the initial inquiry regarding FINAO’s ability to meet a future adverse costs order. In the 16 July 2024 letter, O’Loughlin Westhoff said FINAO was willing to provide financial documents in evidence of its claim it could meet the adverse costs order as just mentioned.

On 1 October 2024, FINAO filed its Reply to Defence, where Mr Cottrell was joined in the proceedings as second defendant.

On 24 November 2024, neolaw sent an email to O’Loughlin Westhoff on behalf of Rosebery serving Rosebery’s Rejoinder, stating:

On 25 November 2024, Dentons wrote on behalf of Mr Cottrell to O’Loughlin Westhoff, also raising the issue of security for costs in relation to Mr Cottrell’s costs (as opposed to Rosebery’s). The letter also referred to and relied on, amongst other things, the terms of the personal June message. The letter was signed off by Louise Massey, a Partner at Dentons.

On 28 November 2024, the Court made orders for the preparation and service of evidence by the parties. In accordance with the orders, FINAO filed its further evidence on 22 January 2025, noting this was 5 days after the time specified in the 28 November 2024 orders.

The 28 November 2024 orders also required the defendants to file their evidence by 14 February 2025.

On 18 February 2025, Rosebery filed a Notice of Motion (Rosebery’s Motion) seeking relief in the following terms:

In a letter to neolaw and Dentons dated 20 February 2025, O’Loughlin Westhoff referred to a directions hearing listed for that day that had been adjourned to 17 March 2025, and observed that the Registrar in Equity had made a number of orders in the Online Court in relation to Rosebery’s Motion. The letter, amongst other things, also stated those orders did not disturb any orders made on 28 November 2024. In particular, the letter observed the defendants were “in default of Order 2, which requires that [the defendants] serve any affidavit evidence in chief upon which they rely in the principal claim by 4pm, 14 February 2024”. FINAO sought an explanation for the default and requested that the defendants serve their evidence by 28 February 2025.

On 25 February 2025, neolaw provided a letter in reply to the 20 February 2025 letter from O’Laughlin Westhoff, wherein it denied the defendants (or perhaps just Rosebery, given the letter was not purporting to be on Mr Cottrell’s behalf) were obliged to serve their evidence, and pointed to a comment made by the Registrar in Equity that no further orders were to be made in the substantive proceedings until the security for costs issue was resolved.

As to the security for costs issue, neolaw again raised the personal June message as the basis of its concerns in relation to the capacity of FINAO to meet an adverse costs order.

On 26 February 2025, Mr Cottrell filed a Notice of Motion (Mr Cottrell’s Motion), this being the interlocutory application the subject of this judgment, seeking relief in the following terms:

As is apparent from their terms, the Notices of Motion (together, the Motions) filed by the defendants are materially identical, save for the quantum of security sought and the additional reference to s 1335 of the Corporations Act 2001 (Cth) (Corporations Act) in Mr Cottrell’s Motion. Notably, Rosebery’s Motion primarily sought a sum of $168,073.95 as security for its costs, and Mr Cottrell’s Motion primarily sought an even greater sum of $182,764.45 as security for his costs.

In an open letter dated 12 March 2025 to both neolaw and Dentons, O’Loughlin Westhoff referred to the Motions, set out the basis for FINAO’s claim that the defendants’ prospects of successfully defending the proceedings are weak, and raised further concerns in relation to what it described as the “unjustified and duplicative” defence costs incurred by the defendants (a comment presumably arising from the fact that Mr Cottrell is instructing separate legal representatives as sole director of Roseber, and for himself). On the issue of FINAO’s ability to meet an adverse costs order, O’Loughlin Westhoff said that Mr Down was prepared to make available a sworn affidavit, annexing various FINAO accounting documents. It was suggested that the accounting documents would “clearly demonstrate” that FINAO “is a financially significant and well-resourced entity, capable of meeting any costs orders made in these proceedings”.

On 21 March 2025, Rosebery issued a Notice to Produce addressed to FINAO, following which FINAO produced three packets of documents on 28 March 2025, 31 March 2025, and 12 June 2025.

On 23 April 2025, Rosebery issued a Subpoena to Produce to FINAO’s accountants, who in turn produced on 10 June 2025 copies of the documents sought.

Rosebery’s Motion was settled by consent on 15 October 2025, with the Court making orders in chambers in accordance with consent orders provided by the parties, wherein FINAO had agreed to provide security for Rosebery’s costs in the sum of $140,000.

The terms of the consent orders for Rosebery’s Motion did not address the relief sought in prayer 4 of Rosebery’s Motion. Prayer 4 in each of the Motions seeks to vacate orders 2 and 5 of the orders of the Court made on 28 November 2024. These orders were the orders requiring Rosebery and Mr Cottrell to serve their evidence (in Rosebery’s case, on both its defence of FINAO’s principal claim and the cross-claim) by 14 February 2025. Whether that particular relief should be granted is dealt with below, separately from the main security for costs application, from [131] onwards.

Mr Cottrell’s Motion now falls to be determined.

The hearing of the Motion took place on 22 October 2025. Mr J Pokoney of counsel appeared on behalf of Mr Cottrell. Mr Pokoney read and relied on the affidavit of his instructing solicitor, Louise Massey, affirmed on 26 February 2025.

Mr M Gracie of counsel appeared for FINAO. Mr Gracie read and relied on two affidavits of his instructors, one of Jonathan O’Loughlin sworn on 14 August 2025 (JOL affidavit), and one of Michael Baltins affirmed on 9 April 2025.

Mr Cottrell and FINAO provided a written outline of submissions (CWS and FWS respectively) prior to the hearing and made oral submissions in reply following the reading of evidence at the hearing.

For the reasons set out below, I have determined that the Court’s jurisdiction to make an order for security for costs under Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 42.21 (or s 1335 of the Corporations Act) is engaged because there is reason to believe that FINAO, being a corporation, will be unable to pay the costs of Mr Cottrell if ordered to do so.

Notwithstanding jurisdiction to make an order for security, I have determined that the proper exercise of the Court’s discretion in all the circumstances of the case is not to make any order.

Mr Cottrell seeks an order for security for costs pursuant to UCPR r 42.21, or alternatively, s 1335(1) of the Corporations Act.

In support of his application, Mr Cottrell relied on the legal principles set out in Wollongong City Council v Legal Business Centre Pty Limited [2012] NSWCA 245 (Wollongong City Council) (Beazley JA, Barrett JA agreeing):

In Cornelius v Global Medical Solutions Australia Pty Ltd (2014) 98 ACSR 301; [2014] NSWCA 65 (Cornelius), at [18]-[20], Macfarlan JA (Tobias AJA agreeing) clarified the meaning of the onus shift referred to in [30] of Wollongong City Council in the following terms:

The Court of Appeal in each of Wollongong City Council and Cornelius, both being cases post-dating the commencement of the UCPR, and both dealing with applications for security for costs under UCPR r 42.21(1)(d) and s 1335(1) of the Corporations Act, cited KP Cable Investments v Metglow Pty Ltd (1995) 56 FCR 189 (KP Cable). Justice Beazley set out the applicable legal principles in KP Cable, which relevantly include (at 196-197):

The matters to be considered in a security for costs application set out in KP Cable have been considered to be “broadly consistent” with the factors listed in UCPR r 42.21(1A): In the matter of Australian Style Holdings Pty Ltd as trustee of The Australian Style Investments Unit Trust [2018] NSWSC 1368 (Australian Style Holdings) at [32] (Black J).

In relation to how the Court is to go about its consideration of whether to make an order for security, Einstein J in Idoport Pty Limited v National Australia Bank Limited [2001] NSWSC 744, in considering an application for security for costs under s 1335 of the Corporations Act (and Part 53 of the Supreme Court Rules 1970 (NSW), the precursor to UCPR r 42.21), stated (at [47]):

When considering the Court’s exercise of discretion under s 1335 of the Corporations Act, in Treloar Constructions Pty Limited v McMillan [2016] NSWCA 302, Beazley ACJ stated (at [14]-[15]):

When considering whether it is appropriate to make an order for security, the Court may have regard to a number of matters, including, but not limited to, the matters set out in UCPR r 42.21(1A), which (relevantly for the present application) include:

In relation to a court’s consideration of the matters listed in UCPR r 42.21(1A), in Globus Investments v William [2016] NSWSC 613, Campbell J said at [10]-[11]:

In relation to the issue of the determination of the quantum of security for costs, the legal principles to be applied have been helpfully summarised by Sackar J in Haselhurst v Toyota Motor Corporation Australia Ltd t/as Toyota Australia [2020] NSWSC 1607, at [12]-[19] as follows:

These principles were recently cited and relied on in Laith & Fadi Investments Pty Ltd v Fogo Brazilia Holdings Pty Ltd [2024] NSWSC 1508 at [216] (McGrath J).

On the issue of the “broad brush” approach, Black J in Australian Style Holdings stated (at [41]):

Having regard to the procedural background set out above, it will be noted that Mr Cottrell as second defendant has elected to instruct separate legal representation to that of Rosebery, in circumstances where Mr Cottrell has verified all pleadings for each of Rosebery as first defendant, as sole director, and on behalf of himself as second defendant. It will also be noted that the Rejoinders filed by each of the defendants are materially identical, and the terms of the Motions were also near identical.

On the issue of defendants obtaining separate legal representation, both Mr Cottrell and FINAO took the Court to the decision of Downs v Civil Aviation Authority (1992) 57 SASR 303 (Downs), where Mullighan J stated (at 306-307):

In relation to the issue raised in Downs as to a defendant’s risk as to costs, Blue AJ in ACN 115 918 959 Pty Ltd v Hoeys Lawyers Pty Ltd (Costs Ruling) [2018] VSC 508 stated the following at [39] (references omitted):

On this issue, the Court of Appeal in Local Democracy Matters Incorporated v Infrastructure NSW (No 2) [2019] NSWCA 118 (Leeming JA, Sackville and Emmett AJJA) stated, albeit in the context of an appeal (at [21]-[23]):

Having regard to the procedural background and the relevant law as set out above, the following issues arise for consideration:

I will address each of the issues in turn.

In his submissions in support of his Motion, Mr Cottrell submitted, at CWS [7], that FINAO will be unable to pay his costs if unsuccessful in the litigation, and pointed to evidence in support, namely that FINAO:

For its part, FINAO, had by the time of the hearing of Mr Cottrell’s Motion, conceded that the threshold issue was met as a result of the terms of the consent orders made in relation to Rosebery’s Motion. In FWS at [30]-[31], [35], the following was submitted:

Having regard to the evidence relied on by Mr Cottrell (save for the personal June message) and the concession made by FINAO, I am satisfied the threshold issue is established under UCPR r 42.21(1)(d) (and s 1335(1) of the Corporations Act) and the Court’s jurisdiction to order security for costs is enlivened. In achieving this satisfaction, I did not consider it necessary to additionally have regard to the terms of the personal June message, in particular in circumstances where neither party made any submissions of substance in relation to it.

As Mr Cottrell submitted, impecuniosity having been conceded, the onus shifts to FINAO to demonstrate why a security for costs order ought not be made (TR P4 L31-33; CWS [9]).

In order to address this issue, I will first set out a brief summary of the major contentions for each party, and then consider the various matters raised by the parties in more detail.

In his written submissions, Mr Cottrell relied on what he referred to as three discretionary considerations. The first repeated the submission that there was every reason to think that FINAO would be unable to meet Mr Cottrell’s costs, and thus the onus shifts to FINAO to establish a reason why security should not be granted (CWS [9]).

The second submission was that there was no suggestion that an order for security would be oppressive in circumstances where FINAO has produced no evidence as to its financial capacity or of those standing behind it (CWS [10]).

Thirdly, Mr Cottrell submitted that he brought his Motion promptly, having only been joined as a defendant on 1 October 2024, and having raised the issue of security in correspondence on 25 November 2024 (CWS [11]).

FINAO’s primary contention was that Mr Cottrell has not demonstrated a legal or other legitimate basis to justify his separate legal representation from Rosebery. In this, it was submitted there was no substantive difference between the denials and cases advanced by each of the defendants in their respective Rejoinders (FWS [13]).

More generally, FINAO submitted that in the absence of any adequate explanation or established basis, it may be reasonably inferred that Mr Cottrell’s application for security is (FWS [14]):

The submission as to the disproportionality comes from a comparison of the sum of the pleaded “Development Fee” claimed by FINAO, approximately $215,000, with the combined quantum of security sought by the defendants ($140,000 as agreed with Rosebery, and approximately $182,000 sought by Mr Cottrrell, summing to approximately $322,000).

As submitted by FINAO, an antecedent issue to several of the matters which are relevant to the discretion to order security for costs is Mr Cottrell’s decision to engage separate legal representation in these proceedings.

As FINAO submits, and Mr Cottrell acknowledges, Mr Cottrell is the sole director and controlling mind of Rosebery. Prior to being joined to these proceedings, Mr Cottrell verified the Defence filed by Rosebery on 9 May 2023 and the Cross-Claim filed by Rosebery on 16 June 2023. After he was joined, he verified the Rejoinder filed by Rosebery and the Rejoinder filed on his own behalf on 24 November 2024: FWS [9]-[12]. As I have already mentioned, the Rejoinders are materially identical.

For his part, relying on the decision in Downs, Mr Cottrell submitted he has a right to the legal representation of his choosing (TR P10 L42).

FINAO did not cavil with that general proposition: FWS [16]; (TR P26 L17-18).

Instead, in its written submissions, FINAO submitted that, in the circumstances, there is no actual or possible conflict of interest which would make engaging separate representation a “legally necessary” or a “legitimate forensic” decision. FINAO submits that, in the absence of any bona fide explanation proffered by Mr Cottrell, Mr Cottrell’s decision to engage separate legal representation and bring a second application for security is made for an ulterior tactical purpose, namely, to maximise the financial pressure on FINAO in its conduct of the proceedings by effectively doubling the amount of security that would be ordered if the defendants were jointly represented, with the effect of denying FINAO its right to litigate (the tactics issue): FWS [14](2), [17], [19], [20], [22].

In any event, FINAO submits that at the time Mr Cottrell filed his Rejoinder on 24 November 2024, he would already have held concerns about FINAO’s ability to meet an adverse costs order in these proceedings, and that he must be taken by that point to have accepted the risk of not recovering the separate legal costs he was going to incur which are additional to those being incurred by Rosebery: FWS [18], [21].

In oral submissions in relation to the tactics issue, Mr Cottrell submitted that this Court would be slow to embrace the submission that he or his solicitors have sought to artificially inflate the costs incurred in conducting the proceedings, given its seriousness (TR P6 L41-42). Additionally, Mr Cottrell made four further submissions in response:

FINAO later clarified the allegation central to the tactics issue had not been made in relation to Mr Cottrell’s legal representatives. Further, when asked by me, “it’s a serious allegation, something I would be slow to take up?”, counsel for FINAO answered, “[y]es”, adding that “your Honour doesn’t need to make that finding” (TR P26 34-47).

On the tactics issue, I accept the oral submissions made by Mr Cottrell and the concession made by FINAO. I accept the tactics issue contains a serious allegation and that I am not required to make a finding in relation to the issue.

FINAO maintained its position that the inquiry as to whether a conflict does, or may, exist between the interests of Rosebery and Mr Cottrell should be directed not at the RD, but at the nearly identical Rejoinders which I have described at [23]-[24] above. FINAO submitted that speculation as to a potential conflict is not sufficient when there is no identifiable conflict on the pleadings. Additionally, FINAO submitted the Court cannot draw conclusions as to how the defendants may run their respective defences in these proceedings without the benefit of the defendants’ evidence, and the Court’s inability to draw such conclusions exists by reason of the defendants’ own default of this Court’s timetabling orders: TR P23 L27-P24 L23. I address that default, which Mr Cottrell accepts has occurred, in more detail later in these reasons.

I accept the submission made by Mr Cottrell that he need not establish an extant conflict but that it is sufficient for the state of the pleadings to disclose the potential for such a conflict to arise. This is consistent with what the Court said in Downs.

Towards the conclusion of the hearing of Mr Cottrell’s Motion, I posed a question to Mr Cottrell’s counsel whether [34] of FINAO’s RD, which pleads that Mr Cottrell was “directly and knowingly concerned with aiding, abetting, counselling or procuring the misleading and deceptive conduct” of Rosebery, suggests that FINAO brings claims for misleading and deceptive conduct against both defendants. To this Mr Cottrell claimed it was a “curious pleading” (TR P49 L23), noting, amongst other things, that this claim had only been raised in the RD and that there was no primary pleading of misleading or deceptive conduct against Rosebery. For its part FINAO reiterated that the allegation was made against Mr Cottrell and his conduct in matters involving Rosebery. In this I accept there is some “curiosity” in the pleadings in this regard, however, I accept the submission of FINAO that it is the conduct of Mr Cottrell that is central (TR P50 L9-19).

In the course of oral submissions, FINAO took the Court to a number of authorities which were said to support the submission that Mr Cottrell ought not have elected to have separate representation, these being:

By way of reply to those submissions, Mr Cottrell stated that he does not cavil with the principle, arising from those authorities, that a single party seeking double representation must apply for leave (TR P44 L43-44). Mr Cottrell sought to distinguish those cases from the circumstances currently before the Court. In those cases, there was a party in proceedings (or in connected proceedings) with two distinct roles in the proceedings, for example, where a party acts in their capacity as a trustee, and personally (TR P42 L42-49). By contrast, in the current proceedings, there are two parties that are being sued separately, and in this context, it was submitted that Downs was the relevant authority.

I accept that those cases cited by FINAO are distinguishable on the basis submitted by Mr Cottrell.

The question of whether Mr Cottrell’s decision to engage separate representation in these proceedings was ultimately a reasonable one is not a matter appropriate for determination on an interlocutory application of this kind, bearing in mind that I should be “slow to assume, particularly at the pre-trial stage, that there should be joint representation of all the defendants”: Global Medical Solutions Australia Pty Ltd v Axiom Molecular Pty Ltd [2013] NSWSC 1433 at [91] (Stevenson J) and the authorities there referred to; Downs at 307 (see [63] above). Assuming, without expressing an opinion on the issue, that the defendants are successful in their defence of the proceedings, the question whether each defendant is entitled to recover its costs is a question properly reserved for the conclusion of the proceedings: see In the matter of Bailey Roberts Group Pty Ltd [2023] NSWSC 1147 at [65] (Williams J); Proclear International Pty Ltd v United Beverage Co-Packers Pty Ltd [2023] NSWSC 1633 at [24] (Rees J) (Proclear).

Importantly, and as candidly acknowledged by Mr Cottrell and highlighted in Downs, while it is open to Mr Cottrell to elect to engage separate legal representation in the proceedings, he does so at risk of his costs. In addressing this possibility, Mr Cottrell stated that following a debate on costs at the end of the hearing, and in circumstances where no reason had ultimately emerged as to why the defendants could not have been singularly represented, “then that will be the debate on costs, and the security to the extent there’s any left, would be returned to the plaintiff because no order for costs would be made” (TR P48 L7-9).

Having regard to what the Court said in Downs, I do not consider that Mr Cottrell’s decision to be separately legally represented disentitles him from receiving security for costs, nor do I consider it a determinative factor that weighs heavily in the direction of the Court declining to exercise the discretion to order security for costs. At the same time as this however, I give some weight, in the direction of declining to make an order, to the possibility that Mr Cottrell may not be granted an order for his costs if circumstances do not arise to justify this additional expense.

I now turn to the other matters raised by the parties in their written submissions and at the hearing of Mr Cottrell’s Motion, noting that the issue that I have considered immediately above occupied the majority of the hearing.

As a general rule, where a claim is prima facie regular on its face and discloses a cause of action, in the absence of evidence to the contrary, the Court should proceed on the basis that the claim is bona fide with a reasonable prospect of success: KP Cable at 197 (Beazley J).

FINAO submits that its claim has good prospects of success because:

It is not appropriate for me to engage in any meaningful analysis of the merits of FINAO’s claims against Mr Cottrell in these proceedings. Without the benefit of much of the evidence on which FINAO’s submissions rely, and without the issue of the admissibility of some of that evidence having been ventilated before the Court, I am unable to do so in any event.

There was no submission put on the part of Mr Cottrell that FINAO’s claims are not bona fide, frivolous or fail to disclose real issues to be tried. In those circumstances, it is sufficient at this stage that FINAO appears, based upon the pleadings filed to date, to have a reasonably arguable case and that the question of its prospects of success and the genuineness of the proceedings do not weigh strongly in favour of an award of security.

At the hearing of Mr Cottrell’s Motion, Mr Cottrell submitted that FINAO’s impecuniosity is not attributable to Mr Cottrell’s decision to engage separate legal representation and seek security for his costs in addition to the security already given by consent for Rosebery’s costs, because FINAO has pushed itself to a position of impecuniosity by reason of its forensic decisions to:

FINAO bears the onus of establishing both the adequacy of its financial position prior to the conduct of Mr Cottrell said to have caused its impecuniosity, and that Mr Cottrell’s actions have caused or at least materially contributed to its present inability to meet an order for Mr Cottrell’s costs: Interslice Pty Ltd v CCA Investments – Bass Hill Pty Ltd [2021] NSWSC 1578 at [53] (Ward CJ in Eq). FINAO did not address this issue in its written or oral submissions and thus does not appear to rely on this matter to resist an order for security. In the absence of any positive submissions on behalf of FINAO going to this issue, I do not consider this factor, to the extent I have heard submissions from Mr Cottrell, weighs to any extent in one direction or the other.

It was submitted by Mr Cottrell that an order for security would not stifle the entirety of the proceedings because if FINAO failed to provide security ordered in favour of Mr Cottrell, and assuming that it provides the security ordered in favour of Rosebery by consent, only FINAO’s claim against Mr Cottrell will be stayed, and the claim against Rosebery as well as Rosebery’s Cross-Claim will carry on (TR P13 L46-P14 L15).

In response to this submission, I asked counsel for Mr Cottrell whether his proposal created a problem of fracturing proceedings in circumstances where Mr Cottrell’s conduct is likely to be relevant to both proceedings. I asked whether it would be in the interests of the administration of justice for both claims in this matter to be dealt with at the same time (TR P14 L23-29).

Mr Cottrell submitted it was not so. Mr Cottrell accepted that aspects of Mr Cottrell’s conduct will be raised in both proceedings but suggested there was a “very discrete and obviously separate allegation of misleading or deceptive conduct” specifically in relation to Mr Cottrell (TR P14 L33-34). Mr Cottrell did accept however, that to “fracture” the proceedings would be regrettable, and ultimately, that “it’s a case of weighing in the balance, and in my submission, for obvious reasons, I say the balance weighs considerably in favour of protecting Mr Cottrell in those circumstances” (TR P14 L41-P15 L1-2).

I am of the view that a security for costs order in the terms sought by Mr Cottrell may stifle proceedings against Mr Cottrell. I do not accept the submission of Mr Cottrell that there are discrete and separate allegations of misleading or deceptive conduct in relation to Mr Cottrell that could properly be dealt with in different proceedings, and thus this issue ought not militate against the making of an order for security. At a practical level, and as submitted by FINAO, the conduct of Mr Cottrell underpinning those allegations will be substantially common to both his conduct as sole director of Rosebery as first defendant, and in his role personally as second defendant.

Accordingly, based upon the albeit limited information before the Court in these proceedings, I consider it to be in the interests of the administration of justice for all issues raised in the various connected proceedings involving the three parties to be heard and determined at the same time. Accordingly, I consider that a security for costs order has the potential to stifle proceedings, which is a matter that militates against the making of an order for security for costs.

Applications for security must be brought promptly: KP Cable at 197 (Beazley J). However, delay itself is not a disentitling factor: Wollongong City Council at [32] (Beazley JA, Barrett JA agreeing). Promptness is a relative concept, to be considered by reference to whether any delay has occasioned prejudice to the plaintiff, in all the circumstances: Acohs Pty Ltd v Ucorp Pty Ltd (2006) 155 FCR 181; [2006] FCA 1279 (Acohs) at [63] (Jessup J), quoting January Force Pty Ltd v Tricon Restaurants Australia Pty Ltd [1999] FCA 1746 at [22] (Goldberg J). It is necessary to look at not only the length of any delay but the reasons for it, and any acts done in the intervening period: Acohs at [61] (Jessup J).

In its written submissions, FINAO submitted that it has incurred significant costs in the period between 10 July 2024, when Mr Cottrell became aware of FINAO’s potential inability to meet an adverse costs order, and 26 February 2025, when Mr Cottrell filed the present application: FWS [39]-[40].

However, FINAO did not press the issue of timing and delay at the hearing of Mr Cottrell’s Motion (TR P5 L14-15). In this, Mr Cottrell’s submission that his application was made promptly (CWS [11]), is therefore not opposed, and the timing of the application for security is not a factor which weighs against Mr Cottrell succeeding on this Motion.

FINAO submitted that this factor arises only in relation to Rosebery’s Cross-Claim for declaratory relief, and only if the proceedings against Rosebery are stayed by reason of FINAO failing to provide security for its costs in accordance with the terms of the orders made by consent on 15 October 2025: FWS [36]-[37].

This factor was not addressed at the hearing of the application by either party or in Mr Cottrell’s written submissions and does not appear relevant to this application despite FINAO referring to it in its written submissions. In those circumstances, I consider it is not relevant to the present application, and it does not weigh on my consideration of whether to exercise the Court’s discretion to award the security sought.

FINAO submits that the combined security for costs sought by the defendants is disproportionate to the importance and complexity of the subject matter in dispute.

Louise Massey, in her affidavit, estimates Mr Cottrell’s future costs of these proceedings to be $209,393. She has reached that figure on the assumption that the matter will be run by one Partner (being herself), with the assistance of one Managing Associate (with more than 10 years’ experience), one Junior Associate (with 4 years’ experience) and one Graduate Lawyer (in their first year of practice), whose respective hourly rates are $910, $800, $415 and $350, exclusive of GST. Ms Massey gave evidence that those rates are within the ranges provided for by a guideline known as the “Costs Assessment Rules Committee Guideline – Costs Payable Between Parties Under Court Orders” dated 24 October 2023. I note that this document was not in evidence. Ms Massey anticipates that Mr Cottrell will brief junior counsel who will charge an approximate rate of $2,500 per day.

As I have mentioned earlier in these reasons, FINAO has already consented to the order to pay $140,000 as security for Rosebery’s costs. The amount of security sought in Mr Cottrell’s Motion is $182,764.45, which counsel for Mr Cottrell accepted was “at the higher range” of the estimate of recoverable costs that had been given by Ms Massey (TR P22 L4-6), being $166,908.50 to $182,764.45 (including GST). The “Development Fee” which FINAO sues to recover jointly and severally from the defendants is pleaded to be $215,000 but, on the evidence before me, may be up to $366,536.59. That is a relatively modest amount for a claim in this Court, bearing in mind that the proceedings were commenced in the District Court and transferred to this Court on Rosebery’s application to prosecute its Cross-Claim for declaratory relief: FWS [14] and [38].

I consider that the figures to which I have referred at [115] above are at the upper end of the range of rates usually expected to be charged for solicitors of their experience, having regard to the importance and complexity of the proceedings, and within the range usually expected to be charged by junior counsel of two to three years’ experience. In light of the amount in dispute in these proceedings, I accept FINAO’s submission that there is a lack of proportionality between the importance and complexity of the subject matter in dispute, and the estimate of Mr Cottrell’s future costs or the amount of security sought: see also s 60 of the CPA; Proclear at [15] (Rees J).

I consider this to be a factor going strongly against the exercise of the Court’s discretion to make an order for security.

In coming to a final decision as to the exercise of the Court’s discretion, I have had regard to the factors set out above, and the associated legal principles, with particular significance given to the following principles and matters.

On the one hand, and acknowledging that because impecuniosity has been conceded by FINAO the evidential burden is on FINAO to establish why security ought not be ordered, it will be apparent I do not consider many of the factors relevant to this application have moved the metaphorical needle much.

On the issue which took up the most hearing time, that is the significance of Mr Cottrell’s decision to obtain legal representation separately from Rosebery, this factor similarly does not weigh significantly in the balance. I did not accept FINAO’s submissions (and accepted Mr Cottrell’s submissions to the contrary) that the mere fact Mr Cottrell has chosen to obtain separate representation, in the circumstances of this case, was unreasonable or otherwise militates against me declining his application altogether. That being said, there being a risk Mr Cottrell may not get a costs order in his favour if he otherwise succeeds in the proceedings because of the overlap in the work likely to be done does, in my mind, weigh against an order for security in this case, though FINAO’s submissions did not convince me that it should be of significant weight on its own.

While FINAO has as a prima facie reasonably arguable case and the proceedings are genuine (such that this weighs against an order for security), FINAO’s submissions did not otherwise suggest the strength of its case was so strong that it should weigh significantly against Mr Cottrell receiving security for his costs. Similarly, the timing of the application takes the matter nowhere, in light of FINAO choosing not to make a point of it in its submissions.

However, in my view, there are two strong factors which I consider to ultimately lead to the conclusion that FINAO should not be ordered to pay security for Mr Cottrell’s costs. First, there is a risk that an order would stifle proceedings, in circumstances where security for costs will be paid to one of the defendants (the stifling of the proceedings issue). I do not accept the proceedings could sensibly continue against Rosebery but not Mr Cottrell if the security was not paid.

Second, and perhaps even more decisively, the security sought is disproportionate to the importance and complexity of the proceedings, in the circumstances (the disproportionality issue). Even on FINAO’s larger estimate as to what it might be entitled to in damages, the security primarily sought by Mr Cottrell of approximately $182,000 is significant.

I also consider it relevant that the security sought is additional to that which has already been ordered in Rosebery’s favour. Even if one accepts, as I have, that I cannot make any determination this early into the proceedings whether the separate representation of the defendants is warranted, on the pleadings, there is clearly a significant overlap in the issues.

It is one thing to accept Mr Cottrell is entitled to have his own representation, acknowledging that is done at his own risk as to costs. But as recounted earlier in these reasons, there is a close identity between the pleadings, the source of instructions for Rosebery appears to be Mr Cottrell, and there is an accepted overlap in the issues. I have not been convinced that the legal costs to be incurred in Mr Cottrell’s defence that would be secured are likely to be proportionate with respect to the claims advanced against Mr Cottrell specifically. To be clear, I am not suggesting that Mr Cottrell’s legal representatives are incurring costs unreasonably or even that Mr Cottrell should not have his costs in the future as the proceedings play out however they do. It is simply that on this application, I am not convinced that as a matter of discretion, the extra work to be done to advance Mr Cottrell’s defence, additional to whatever work is done to advance Rosebery’s defence, should sound in an order for security. Mr Cottrell’s submissions convinced me he should not be penalised on the application merely for being separately represented, but I do not think they sufficiently dealt with the fact that the obvious factual, legal and practical overlap between himself and Rosebery in these proceedings makes it difficult to know what extra work needs the additional and significant sum of security for costs sought by him (the duplication issue).

In considering whether it is appropriate to make an order, the Court seeks to achieve a balance between ensuring that adequate and fair protection is provided to Mr Cottrell and avoiding injustice to FINAO by unnecessarily shutting it out or prejudicing it in the conduct of these proceedings.

For the reasons set out above, and having regard to all of the circumstances, I consider that FINAO has established, on balance, reasons why security should not be granted, and accordingly, I am of the view I ought not exercise the Court’s discretion and that no order for security for costs should be made.

Given the above determination, the issue of quantum, per Issue 3, does not arise.

Even if I am incorrect in respect of the above determination, and it ought to have been found that some form of security ought to be provided by FINAO, I consider that amount of security ought to be no more than $20,000. Whilst I have had regard to the estimates of future costs provided by each of the parties, my reasons for having included discounts from both of the estimates provided includes an awareness of the associated order for FINAO to pay security for Rosebery’s costs, together with consideration of the disproportionality issue, the duplication issue, and the stifling of the proceedings issue: Bardi v Giannaros (No 2) [2025] NSWSC 917 at [298] (Meek J); Recycling Holdings Pty Limited v Fuji Xerox Businessforce Pty Limited [2013] NSWSC 1312 at [35] (Lindsay J).

Whilst not an “issue” which needed consideration within the security for costs component of the Motions, prayer 4 in each of the Motions seeks orders relating to evidence that ought to have been filed by the defendants by 14 February 2025 in the substantive proceedings.

It will be recalled that in prayer 4 of Mr Cottrell’s Motion he seeks that orders 2 and 5 made on 28 November 2024 be vacated so far as they concern him.

Orders 2 and 5 made on that occasion were:

Both defendants are in default of those orders.

Mr Cottrell submitted that, pending payment of security, he should not be required to provide any further evidence in these proceedings because the cost of preparing that evidence would be wasted if security is ordered but not provided.

Having regard to the evidence before the Court, I note that the 14 February 2025 deadline for the service of Mr Cottrell’s evidence under the orders made on 28 November 2024 fell prior to the date on which the application for security for costs was filed on 26 February 2025. As referred to above, this issue was being case managed by the Registrar in Equity, who appeared to decline making any further orders in the proceedings “until the security issue is resolved” (this observation being made at a point after Rosebery had filed Rosebery’s Motion but before Mr Cottrell had filed Mr Cottrell’s Motion).

Given this, I consider that the issue of the defendants’ default is a matter properly raised on the next occasion before the Registrar in Equity. I decline to grant the relief sought in prayer 4 of Mr Cottrell’s Motion.

FINAO has succeeded in resisting Mr Cottrell’s security for costs application. However, beyond each side seeking their costs, no party addressed the Court any further on costs.

In the circumstances of this case, I consider the appropriate costs order to be that the costs of Mr Cottrell’s Motion be costs in the cause. On the one hand, FINAO has successfully resisted Mr Cottrell’s application for security. But FINAO also conceded its impecuniosity such that it cannot be said Mr Cottrell’s application was unjustified. The debate before me and my ultimate determination turned on matters of discretion which I consider were relatively balanced, for the most part. While it is not on its own determinative on the question of costs, I also consider it relevant that FINAO ultimately did not succeed both in its serious allegation that separate legal representation was engaged by Mr Cottrell for some ulterior motive (which was not ultimately pressed), and in its lengthy argument that Mr Cottrell’s decision to obtain separate representation effectively disentitled Mr Cottrell from obtaining security for costs (which occupied a substantial portion of hearing time).

For the reasons set out above, I make the following orders: