Classic Bet (NSW) Pty Ltd & anor v KRM (Vic) Pty Ltd & ors; Kay v KRM (Vic) Pty Ltd (No 2)

PAYNE JA: Before the Court are two separate appeals from proceedings heard by Rein J in this Court in 2019: KRM (Victoria) Pty Ltd v Classic Bet Pty Ltd [2019] NSWSC 1773. The matters first came before me in the referrals list where a conditional stay was ordered: Classic Bet (NSW) Pty Ltd & anor v KRM (Vic) Pty Ltd & anor; Kay v KRM (Vic) Pty Ltd [2020] NSWCA 6.

Two motions have been filed in proceedings 2020/12237, in which the appellants are two companies, Best Bet (NSW) Pty Ltd (Best Bet) and Classic Bet (NSW) Pty Ltd (Classic Bet). I am conscious that the names of those parties have changed, but we will refer to them in this way for the purposes of this judgment.

The first and second respondents in proceedings 2020/12237, Messrs Ryan and Alexander Kay, filed a motion dated 5 March 2020 seeking security for costs together with a supporting affidavit of Mr Price affirmed 5 March 2020, which was read without objection.

The third respondent in proceedings 2020/12237, KRM (VIC) Pty Ltd (KRM), filed a separate notice of motion seeking security for costs on 6 March 2020. An affidavit of Mr Webster sworn 6 March 2020 in support of the orders sought in the motion was read before me today without objection.

Both motions relied, inter alia, upon the Court’s power to order security for costs under s 1335 of the Corporations Act 2001 (Cth).

At the hearing of the motions today, Mr Walker, who appeared for Best Bet and Classic Bet, accepted that the Court’s jurisdiction to award security for costs in this appeal was enlivened and accepted that an order for security should be made. No submission was made that an order for security for costs would stultify the proceedings.

In relation to quantum, which was the only issue before me, the positions of the parties were, broadly speaking, on behalf of the first and second respondents, Messrs Kay, that the Court should make an order for security in the amount of $78,000. In relation to the third respondent, KRM, a range was given, but the lower bound of that range was an amount for security for costs of $57,000.

No evidence was led by the respondents on the application for security for costs, however, Mr Walker handed up a document containing the appellant’s submissions about what the Court should conclude in relation to the amount of security to be ordered. In that document, Mr Walker ultimately submitted that in relation to the Kays, the Court should order security in an amount of $25,850 including GST and, in the case of KRM, the Court should order security for costs in an amount of $14,000 including GST.

The principles in relation to security for costs under s 1335 of the Corporations Act are well known. In Treloar v McMillan [2016] NSWCA 302, Beazley ACJ ordered security for costs against a corporation under s 1335 and distilled the relevant principles as follows:

On the basis of the evidence and the submissions made today, I am satisfied in relation to each motion that there is reason to believe that Best Bet and Classic Bet will not be able to pay the costs of the respondents if the respondents are successful and I am satisfied that an order for payment of security will not work an injustice.

In relation to the quantum, I propose to adopt a broad brush approach, conscious of the following matters. First, the evidence which has been led in the proceedings by the applicants for security for costs was not challenged. Secondly, I am not bound to accept estimates of costs given (even by very experienced solicitors in this area). Thirdly, I must approach the matter having regard to the terms of s 1335. Fourthly, I should assess the criticisms made of the applicants’ evidence by Mr Walker. Fifthly, in applying the relevant broad brush approach, I should be astute not to accord undue precision to estimates of costs in a case like the present. Sixthly, I should test the final amount of any proposed order by reference to the Court’s experience of the likely costs awarded to successful respondents for an appeal set down for one day plus.

I do not propose to go through line by line each of the items claimed in each appeal, as to do so would be quite inappropriate by reference to the broad brush approach which I propose to adopt.

In relation to the first and second respondents, the Messrs Kay, whilst I accept the very considerable experience of the solicitor who gave evidence in relation to the matter, there are sufficient uncertainties in the correct allocation of costs between the two matters that I think a substantial discount is appropriate. I do not accept, however, the degree of discount suggested by Mr Walker in his submissions, which I think would take the matter outside the appropriate range. Accordingly, in the case of Messrs Kay, security for costs in the amount of $50,000 will be ordered.

In relation to the third respondent, KRM, I am cognisant that $57,000 was the lower bound of the estimate, however, particularly by reason of the uncertainty of the allocation of costs between the two matters, I propose to order security in an amount of $45,000 in relation to the third respondent’s motion.

The proceedings will be stayed until the security for costs I have ordered is provided. I will bring the matters back before me for directions on 23 March to ensure that the steps in preparation I have ordered have been completed.

The Court makes the following orders in matter 2020/12237:

In each of cases 2020/12237 and 2020/6311, for case management purposes, the Court orders: