Babirusa Energy Pty Ltd v CEP Energy Pty Ltd

1. [1]

   HIS HONOUR: I am dealing with an issue of costs arising from a preliminary discovery application which has been resolved in substance between the active parties.

2. [2]

   These proceedings commenced by way of summons filed 3 July 2025. The primary relief claimed in the originating process was an order for preliminary discovery pursuant to rule 5.3 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”). That prayer sought discovery of categories of documents outlined in Exhibit AMW-2 to the affidavit of Ms Alexandra Madeleine Whitby, affirmed 3 July 2025. Prayer 2 of the summons sought an order for costs.

3. [3]

   The first defendant has acceded to the request for documents required by prayer 1, and accordingly no determination is required on that issue. However, the plaintiff presses its entitlement to costs. Conversely, the first defendant seeks its costs in relation to its compliance.

Background

1. [4]

   I will very briefly canvass the nature of the dispute that gave rise to these proceedings to provide context for my determination of the costs issue.

2. [5]

   The plaintiffs, Babirusa Energy Pty Ltd, Baba Yaga Investments Pty Ltd and Mark McLean, were each participants in three unincorporated joint ventures (“UJV1”, “UJV2” and “UJV3” respectively, “UJVs” together), to the end of investing in solar embedded networks. CEP Energy Pty Ltd (“CEP”) was the ‘investment manager’ in respect of these UJVs, with NBFI Secured Investments Limited (“NBFI”) as its Corporate Authorised Representative. Each of the UJVs were separately governed by a UJV Deed (“the UJV Deeds”), and the relationship between each of the UJVs and CEP was separately governed by a Management Services Deed (together, “the Management Services Deeds”).

3. [6]

   The plaintiffs would provide capital towards the purchase of the assets, with CEP working to ensure the general operation of the UJVs, and ultimately, selling (or disposing of the interests in) the assets of the UJVs. For reasons not ventilated before me, such disposition or sale has not occurred within the time required.

4. [7]

   Without going into any unnecessary detail, the documents sought in prayer 1 of the summons included the bookkeeping records in relation to the UJVs, operational updates, business plans and budgets. These documents were sought by the plaintiffs to assist in determining whether a claim lay against the defendants for breach of their obligations under the Management Services Deed or indeed for deceptive or misleading conduct or as a breach of a fiduciary duty.

5. [8]

   As I have already indicated, due to the provision of material informally (by which I mean not subject to an order of the Court), that claim for relief is no longer pressed. Consequently, the only live issue for dispute was who should bear the costs. At a general level, the plaintiffs contended that as the defendants had “capitulated” to the request, it was appropriate that the defendants pay their costs. Conversely, the first defendant seeks an order pursuant to rule 5.8 of the UCPR that the plaintiffs pay their costs of complying.

6. [9]

   In circumstances where an issue relating to costs arises in proceedings that have not been determined on the merits, I remind myself that it is not appropriate to make those determinations. Indeed, the documents having been produced, this application will never run on its merits. There is likewise no contest that these proceedings will be discontinued following the determination of this costs issue, and I understand that consent orders to this effect have been circulated between the parties. It seems unnecessary to deal with that separately, and at the conclusion of these reasons I will include an order for the dismissal without determination of the merits of the application.

Second Defendant

1. [10]

   I wish to briefly observe that the second defendant did not appear in relation to this application. It is fair to characterise the involvement of the second defendant in these proceedings to date as limited. Its engagement with the issues raised by the summons has largely comprised of the furnishing of affidavit evidence as to the lack of documents in its possession that would be responsive to prayer 1.

2. [11]

   When this matter was before the Common Law Registrar for directions on 13 October 2025, no appearance was made for the second defendant. I was informed by Mr Schatz of counsel for the plaintiffs that his instructing solicitors had corresponded with the solicitors on the record for the second defendant in advance of the hearing. Despite this, there was no appearance for the second defendant. In accordance with the usual practice, I had the matter called outside the courtroom, but there was no appearance. Mr Schatz and Ms Latham, solicitor who appeared for the first defendant, agreed that determination of the costs issue should proceed in the absence of the second defendant, which, given their apparently limited role in the proceedings, I acceded to.

Entitlement to Costs

1. [12]

   By way of evidence, the plaintiffs primarily relied upon the affidavit of Ms Alexandra Whitby affirmed 17 September. The first defendant read the affidavit of Ms Caitlin Maria Murray, sworn 17 September 2025 (“the Murray Affidavit”), which sets out the steps taken by the first defendant in response to the summons.

2. [13]

   Requests for information first passed from the solicitors for the plaintiffs to the first defendant on 6 July 2023 in respect of UJV3, with subsequent correspondence on 13 September 2023. Later that month, certain documents were provided by CEP. The 18 months or so that followed saw emails exchanged between the parties and their representatives, which included informal production of some documents sought.

3. [14]

   On 6 March 2025, the plaintiffs’ solicitors sent a letter to the first and second defendants pressing for production of documents pursuant to clause 6 of the UJV Deeds. This request was apparently unanswered. On 4 April 2025, further letters were sent to the first defendant, expressed as a ‘final demand for documents’ (“the 4 April Letters”). They set out a list of documents and information sought. They too went unanswered, and the summons in this matter was filed on 5 July 2025.

4. [15]

   Exhibited to the Murray Affidavit was correspondence dated 9 July 2025 from Mr Jamie Donnelly of Metrics Credit Partners (“Metrics”), advising the plaintiffs of Metrics’ acquisition of CEP. He then writes:

5. [16]

   At [7] of the Murray Affidavit, Ms Murray deposes to a “without prejudice” telephone conversation on 18 July 2025 with Ms Whitby (I note for completeness she is erroneously referred to in the Murray Affidavit as CEP’s solicitor). The substance of that paragraph was that the first defendant evinced an intention to ‘informally produce’ the documents on the basis that the proceedings be dismissed without an order for costs.

6. [17]

   Subsequently, material was produced on 22 July 2025, which was not to the satisfaction of the plaintiffs. Further correspondence was exchanged between the parties as to existence of documents sought, and extension of time sought by the first defendant to investigate archived email accounts which may identify further relevant documents.

7. [18]

   On 15 August 2025, the Head of Analytics of the first defendant, Mr Neil Robinson, swore an affidavit which set out the steps he and his colleague had taken to answer the request for documents, and on this date further material was provided in answer to that request. On 22 August 2025, Mr Robinson swore a further affidavit, which set out that in the intervening period, additional documents had been discovered and provided. That appears to have been the last provision of documents. The plaintiff appears to be satisfied with the extent of the informal production.

8. [19]

   The overarching submission made on behalf of the plaintiffs is that had the first defendant agreed to the order being entered into at the outset, costs would have followed in the plaintiff’s favour. The plaintiffs contend that they have been substantively successful, given only formal consent is lacking. Indeed, the actual work performed by the first defendant is essentially identical to what would have to have been performed under an order for preliminary discovery.

9. [20]

   Initially, I was referred to the decision of Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 (“Lai Qin”), particularly where McHugh J states (at 625):

10. [21]

    This position may be contrasted to what may be described as the secondary position of the plaintiffs, which relies upon another passage of McHugh J’s judgment in Lai Qin which discusses the situation where a party has acted “so unreasonably” that it ought to pay costs despite the matter not proceeding to a final determination. His Honour held (at 624):

11. [22]

    Both parties acknowledge the relevant of the principle set out by Ward CJ in Eq (as her Honour then was) in Renton v Kelly [2018] NSWSC 1377 (“Renton”) where (at [56]) her Honour stated:

12. [23]

    Important to the plaintiff’s claim is their contention that they were entitled to the documents without an order for preliminary discovery owing to obligations variously found at general law (see Carantinos v Magafas [2008] NSWCA 304), pursuant to UJV Deeds and the Management Services Deeds. This contention is particularly relevant to an assessment of their claim of unreasonableness, to which I will return later.

13. [24]

    Ms Latham makes very clear that her client disputes the plaintiffs’ contention that there has been a capitulation in the sense as Ward CJ in Eq referred to in Renton. Attention was drawn to her Honour’s statement at [60]:

14. [25]

    Ms Latham asserts that this “sensible way” was in fact pursued by the first defendant where, upon receipt of service of the summons seeking preliminary discovery, and it coming to the appropriate attention of the current directors of CEP, such directors acted promptly to conduct the necessary searches, and in turn, provided the documents sought. In those circumstances, the first defendant says it could not be seen as either (1) acting unreasonably or (2) in any way capitulating to the plaintiff’s claim.

15. [26]

    A related submission following from this is that the first defendant’s actions meant that the plaintiffs were not put to the cost and effort of attending a court hearing. At any such hearing, they would have borne the onus of persuading the Court of their entitlement to relief sought under UCPR r 5.3 and overcoming objections raised by CEP. The path taken by the first defendant therefore avoided this cost.

16. [27]

    The first defendant points to the correspondence of Mr Donelley extracted above, and characterises it as an immediate response from the first defendant demonstrating an intention to cooperate in this matter and provide documents as quickly as possible with minimal need for an adversarial contest.

17. [28]

    The first defendant also points to aspects of the UJV Deeds existing between the parties, which, in part, provide that certain expenses incurred by the first defendant relating to the provision of information and documents by the first defendant to the plaintiffs are to be borne by the plaintiffs (an issue of construction of whether this refers to the plaintiffs collectively or each individual plaintiff arose, but I do not consider it necessary for me to determine this). The first defendant points to this as part of the overall consideration about which party ought to bear the expenses. I interpolate here that the first defendant says the documents sought and ultimately disclosed far exceeded any entitlement the plaintiff had under the Management Services Deeds or the UJV Deeds.

18. [29]

    Contrary to the plaintiffs’ position, the first defendant agitates for an order pursuant to UCPR r 5.8 in its favour and seeks that this order be in a lump sum pursuant to section 98(4) of the Civil Procedure Act 2005 (NSW).

General Principles

1. [30]

   As the parties have helpfully adverted to in their submissions, there is no rule of general application from which to start in an assessment of an application for costs in preliminary discovery: Renton at [56]. Indeed, as has been identified by the parties, the terms of UCPR r 5.8 cut both ways and empower me to make an order in either of their favours. In circumstances where both parties agitate for an order under this rule, logically both cannot be successful. It does not follow, however, one must be successful. It is entirely open to me to refuse to make the orders sought by both parties.

2. [31]

   The effect of the absence of a rule is that there is no general presumption militating either in favour of or against the making of an order under UCPR r 5.8. I am guided by the authority of Lai Qin which was relied upon by both parties.

3. [32]

   McHugh J was careful to point out that the role of the judicial officer in hearing applications for costs in the absence of a merit determination must not transgress into hearing the substantive case: Lai Qin at 624. There are very sound policy reasons for this, particularly, if the parties are subjected to extra costs of litigating the merits of the claim after settlement, which must be done on a hypothetical basis, it risks rendering the advantage of settlement nugatory, or at least diminished. While the ever-present temptation to wade into merits should be avoided, the nature of the determination of this application rests on an assessment of the reasonability of the conduct of both parties.

The Plaintiffs’ Claim

1. [33]

   Rule 5.8 of the UCPR is in the following terms:

2. [34]

   The first basis upon which costs are sought is that is one of those “rare cases” contemplated by McHugh J in Lai Qin where, despite both parties acting reasonably, as one party was “almost certain to succeed”, a costs order in their favour is warranted: Lai Qin at 625.

3. [35]

   To my mind, and without delving into a merits determination, this is not such a rare case. Evidently from the correspondence and waves of documents which have passed between the parties following the summons, there remained real issues about the “discovery” of documents and which documents lay in each defendant’s possession. Doubtless, in the 44 categories of documents sought, there are likely to have been valid objections. The parties have resolved this dispute out of Court. It would be counter to the overriding purpose in section 56 of the Civil Procedure Act 2005 (NSW) if the advantage of avoiding a contested hearing was lost on a full inquiry into the categories of rare cases.

4. [36]

   The second contention, and to my mind the stronger, is that the first defendant acted “so unreasonably” that the costs of the plaintiff should be recoverable. The gravamen of this argument is that the first defendant did not answer the requests for documentation by the plaintiffs in the leadup to the filing of the summons, in circumstances where it was reasonable for them to have done so.

5. [37]

   As Ward CJ in Eq observed in Renton, the “so” in “so unreasonably” is established by the circumstances surrounding the incurring of costs. I interpolate that “so” requires some higher level of unreasonableness than if that term was unqualified. It adds emphasis and focus to the necessary degree of reasonableness.

6. [38]

   Counsel for the plaintiffs did not level particular criticism at the conduct of the first defendant after the filing of the summons. The purported unreasonableness, they say, is found in being forced to commence proceedings in the first place. In order for them to succeed, they must establish that this conduct is ‘so unreasonable’ within the meaning contemplated in Renton and Lai Qin. In the context of the pre-existing entitlement to documents, the plaintiffs say, resistance to the provision of documents satisfied the criterion of ‘so unreasonable’. I again note the first defendant’s position is that of the documents ultimately produced, only a small amount would have fallen within the contractual entitlement to information.

7. [39]

   In order to make an assessment of the overall unreasonableness said to have been displayed by the first defendant, it is necessary for me to make an impressionistic assessment of the extent to which all of the documents produced were done under this contractual entitlement.

8. [40]

   To my mind, the 4 April Letters are the determinative documents here. They set out which documents were sought in respect of each UJV. By the terms of those letters, it was the last occasion upon which the first defendant could have produced documents before an order for preliminary discovery was sought, thereby avoiding the costs said to be unreasonably incurred. To the extent that the plaintiffs contend that any non-compliance with requests for documentation prior to the issue of the summons was unreasonable, determination of that issue requires some analysis of the 4 April Letters.

9. [41]

   The 4 April Letters seek specific both specific documents as well as classes of documents at large. Certainly, clause 6 of each of the UJV Deeds provide for information provision by CEP to the plaintiffs. Certain documents, such as budgets and audited financial statements, are required to be provided as a matter of course. But that obligation does not bestow of the plaintiffs a plenary power to request documents. The closest to such a general information provision is found in clause 6.4(e) (emphasis added):

10. [42]

    Evidently, that is subject to some significant qualification, both in relation to the purpose for which the documents are required to be provided and the determination of the question of who should pay.

11. [43]

    Some of the documents referred to in the 4 April Letters are plainly required to be produced under the terms of UJV Deeds. Some, however, are not. Specifically, there is no explicit requirement on the face of the UJVs to provide “documents identifying, with precision, the steps (if any) that have been taken by CEP to market and sell the UJV[1/2]3 Assets”: ([6](b) of the 4 April Letters). The plaintiffs submit that the requirement to maintain these documents emerges as a corollary of the essential condition to procure an exit. It is unnecessary for me to decide that – but what is clear is that the UJV Deeds do not provide an explicit basis for those documents to be provided. Nor does this category fall within the legal, tax, accounting and regulatory requirements of the plaintiffs.

12. [44]

    To the extent that the general law provides an obligation as between participants to share information, this was not the basis on which the documents were sought in the 4 April Letters. Nor was the payment contemplated by clause 6.4(e) proffered. The correspondence is couched in the terms of the requirements of the UJV Deeds in the context of an incipient application for preliminary discovery.

13. [45]

    Whether a failure to respond to these requests for documents was reasonable or not is not the test. Nor is it really for me to determinate whether substantive rights to the provision of those documents existed. It was open to the plaintiffs to sue on the UJVs Deeds for documents they contended ought to have been provided to them: they took the cheaper, wider and easier path of preliminary discovery in order to avoid excessive costs.

14. [46]

    It would have been better for the defendants to respond to the plaintiffs’ letter, but I unable to find that the conduct of the first defendant was ‘so unreasonable’ that the plaintiffs’ costs should be recoverable under the rule and by application of the principles informing this application. The plaintiffs made demands for documents which included documents that went well beyond the express terms of the UJV Deeds. In their correspondence, they did not purport to rely upon another source of their rights to documents. While it may be that some implied term exists, a proper investigation is beyond the scope of this application.

15. [47]

    I refuse the plaintiffs’ application for costs.

The First Defendant’s Claim

1. [48]

   As I have adverted to above, that is not the end of the matter. The first defendant seeks that its costs of complying with preliminary discovery is paid by the plaintiffs.

2. [49]

   The first defendant’s submission that the ‘starting point ought be that CEP is entitled to be reimbursed’ is, with respect, incorrect. That submission is at odds with the preponderance of authority: see e.g. Renton at [14]-[15]. These applications very much turn upon the particular circumstances of the case.

3. [50]

   The nature of the order sought by the first defendant is a lump sum costs order in the sum of $35,000, expressed to represent 70% of the approximate costs of $50,000.

4. [51]

   The plaintiffs seek to draw a distinction between any costs of compliance with the request for preliminary discovery and their legal costs. The first defendant submits that the purpose of preliminary discovery, which disclose that proceedings against them are being considered, necessarily invite the taking of legal advice. They further submit that some aspects of their compliance, such as the provision of a list of documents and affidavit evidence, will occasion legal costs, which is contemplated by UCPR r 5.8(2). I am inclined to accept the submissions of the plaintiffs in this regard that there is a distinction to be observed between the costs of compliance, on the one hand, and costs referrable to anticipated proceedings which may never eventuate, on the other.

5. [52]

   The first defendant places some reliance upon Arnaout v Arnaout [2019] NSWSC 565 at [59], which on its face would seem that the plaintiff should be required to pay the costs of the defendants in a preliminary discovery application. With respect, Lindsay J was dealing with costs following a hearing of the application. His Honour’s judgment does not engage with the narrow principles in relation to legal costs when there has been no merits determination I have set out previously, nor way they relevant there. The decision may have some relevance to the costs of compliance.

6. [53]

   The same principles apply to the first defendant’s application. This is plainly not one of the “rare cases” referred to in Lai Qin. The “so unreasonable” test is the only avenue to success.

7. [54]

   The plaintiffs’ conduct cannot be characterised as such. They sought documents through correspondence and provided ample notice of their intention to seek preliminary discovery. The previous management of the first defendant seems to have ignored the plaintiff’s requests or at least failed to respond in any timely manner. There was no element of unreasonableness on the plaintiffs’ part. They were perfectly justified in filing the summons when they did and their conduct of the application was appropriate. I would not make any order for the costs of the proceedings in favour of the first defendant.

8. [55]

   The argument that the first defendant is entitled to its costs of compliance has a degree of persuasion. I am, however, perturbed by the dearth of evidence setting out how those costs were incurred.

9. [56]

   The letter from the first defendant’s solicitors dated 1 September 2025 and annexed to the Murray Affidavit suggest that $27,552.15 of the approximately $50,000 in total costs relate to ‘costs of production’. With respect, it is very difficult to me to assess the reasonableness of these costs on the evidence read. The invoices from the solicitors to the first defendant show the respective hourly rates charged for work done by a partner and associate and the totals charged. But because the narrative relating to work done has been fully redacted, I am unable to determine what was done by whom and whether the professional task was reasonably necessary in the circumstances. Moreover, for the same reason it is impossible to say whether any of the work which was reasonably necessary could have been more appropriately left in the hands of a more junior solicitor.

10. [57]

    The plaintiffs also argue, given many (but as above, not all) of the documents sought were expressly required to be maintained by the first defendant and provided to each plaintiff on request, that the recoverable costs of compliance should be relatively low. I accept there is force in this argument.

11. [58]

    I would allow some costs for compliance, but I do not consider the figure of $27,552.15 to be borne out by the evidence as reasonable. I would allow a figure of $12,500.00, bearing in mind the categories not covered by the UJV Deeds. One should not adopt arbitrary figures, but I am persuaded some allowance should be made on a gross sum basis especially as the evidence suggests the costs of a costs assessment may be disproportionate to the costs recoverable. The figure I have adopted is the best estimate I can make on the materials available.

12. [59]

    The submission of the plaintiffs is that if any order for costs of compliance is made, it should be treated as an expense incurred by the plaintiffs in preparation for any substantive proceedings which may be commenced. That submission is resisted by the first defendant, primarily on the dual basis that those proceedings are entirely hypothetical at this stage, and the question of costs of those proceedings should be dealt with in their appropriate context.

13. [60]

    I am inclined to accept the submission of the plaintiffs. If no substantive proceedings are commenced the first defendant will have its costs of compliance. Otherwise in the hands of the plaintiffs, the expense of obtaining the documents retains the character of a reasonably necessary step in the process of vindicating their rights.

Second Defendant’s Case

1. [61]

   The second defendant did not appear and made no submissions towards its general claim it should be entitled to costs. I would not make any allowance for legal costs, given the principles addressed above.

2. [62]

   The second defendant confirmed that it had no documents to produce in response to the proposed application for preliminary discovery. An affidavit was furnished to that effect. I will not make any allowance for costs of compliance.

Conclusion

1. [63]

   This is an unfortunate case. The parties sought to resolve this dispute without proceeding to a formal order, for which they should be commended. However, in many respects, this dispute over costs has probably eaten into any savings to the litigants or the Court which may have otherwise been occasioned.

2. [64]

   In accordance with these reasons, I make the following orders:

   1. (1)

      The plaintiffs are to pay the first defendant’s reasonable costs of compliance with its application for preliminary discovery on a gross sum basis, being $12,500.00.

   2. (2)

      In the event that the plaintiffs commence substantive proceedings against the first defendant, costs paid in accordance with order 1 above are to be dealt with as an expense recoverable by the plaintiffs in those substantive proceedings.

   3. (3)

      There otherwise be no order as to costs.

   4. (4)

      Upon entry of these orders the summons is otherwise dismissed.