Ellair Solutions Pty Ltd v Taylor Construction Group Pty Ltd

1. [1]

   The Defendant in these proceedings seeks security for costs in the amount of $411,235 pursuant to its Notice of Motion filed on 26 March 2025.

2. [2]

   It is apparent from previous orders made that on 2 July 2025 the Plaintiff, by consent, provided security in the sum of $50,000 up to the filing of a Defence. As such, the Defendant now seeks a further sum of $361,235.

3. [3]

   Leading up to the aforesaid consent orders entered on 25 June 2025, the Defendant’s solicitor, Mr David Robert Jury, swore lengthy affidavits on 25 March 2025 and 10 June 2025. Thereafter the Plaintiff’s sole director, Mr Ali Norri, affirmed two affidavits, the first affidavit affirmed on 2 June 2025 with a further affidavit affirmed on 17 June 2025. There have since been more affidavits filed by each of the parties.

4. [4]

   It was not in dispute that the Court has the power to order security against the Plaintiff under r 42.21(1)(d) of the Uniform Civil Procedure Rules 2005 (NSW) and s 1335 of the Corporations Act 2001 (Cth). The Court may also order security under its inherent jurisdiction.

5. [5]

   Initial submissions were filed by the Defendant on 11 June 2025 and, thereafter, on 5 November 2025. The Plaintiff, in its submissions served on 28 November 2025, now accepts that the Court's discretion to order security is engaged. The Plaintiff further accepts that there is reason to believe that it will be unable to pay the Defendant’s costs if ordered to do so. It agrees that, on the evidence, the Court should exercise its discretion to order security.

6. [6]

   The only issue in dispute remains the quantum of security to be paid.

Background

1. [7]

   The Plaintiff commenced these proceedings on 3 December 2024 by a Statement of Claim seeking damages for breach of a subcontract.

2. [8]

   The Plaintiff seeks damages in the order of $370,000 to $907,000, such amount varying depending on which, if any, of the pleaded claims are successful. The proceedings arise from a contractual dispute between the Plaintiff, a construction company engaged to erect a four-storey car salesroom and service area on Parramatta Road in the Sydney suburb of Croydon, and the Defendant, the company with which the Plaintiff on 7 September 2017 entered into a subcontract for part of those works.

3. [9]

   It is pleaded that on 7 December 2018, the Defendant informed the Plaintiff that the contract and works were “on hold”. That situation has continued since that time. On 5 November 2024, the Plaintiff issued a notice of termination in relation to the subcontract, contending that the Defendant evinced an intention to not be bound by, and thereby repudiated, the subcontract.

4. [10]

   The proceedings remain at a nascent stage. Pleadings have closed. A directions hearing later this month will make directions for the service of evidence. In anticipation of this next phase of litigation, the Defendant seeks further security for costs.

5. [11]

   In light of the Plaintiff’s concession as summarised in [5] above, it is appropriate to make an order that the Plaintiff provide security for costs. The sole issue in contention is one of quantum. The Plaintiff contends that the amount sought in prayer 1 of the Notice of Motion is disproportionate having regard to the limited issues required to be considered by the Court in these proceedings. The Plaintiff submits that a lesser sum ought to be ordered.

Principles

1. [12]

   The principles informing the determination of the quantum of security for costs are not in dispute and were summarised in Louise Haselhurst v Toyota Motor Corporation Australia Ltd t/as Toyota Australia [2020] NSWSC 1607 at [12] – [16], where Sackar J stated:

2. [13]

   Quantum for security for costs can be determined either by the defendant engaging a costs consultant to produce evidence, or by the defendant’s legal representative adducing evidence as to the likely steps and the costs to be incurred in each step. Where it is the former, it is not uncommon that the calculation is for “actual costs” (costs payable on an indemnity basis) with a discount applied. Evidence as to quantum should be given in the usual way that allows any challenge or testing to be undertaken by the other party: Zisti v Bartter Enterprises Pty Ltd [2013] NSWCA 146 at [74] (Barrett JA, Beazley P and Ward JA agreeing). To that end, the evidence adduced should seek to estimate the costs which the plaintiff would be ordered to pay to the defendant inter partes if their claim was unsuccessful.

3. [14]

   The Court can order security to be paid in tranches. That may be appropriate where a matter is at an early stage, such that it may be difficult to reach “any confident conclusion as to the ambit of the matters which will be in issue at trial (and therefore as to the nature and scope of the evidence that the parties will seek to adduce)”: Vertical Australia Pty Ltd v Air Company Vertical-T LLC [2012] NSWSC 719 at [115] (Ward J).

Evidence informing quantum of security

1. [15]

   The competing evidence informing the quantum of security is given for the Defendant by Mr Jury and for the Plaintiff by Ms Ward, a costs consultant.

2. [16]

   Mr Jury is an extremely experienced litigation solicitor who specialises in construction litigation. I accept that he has very considerable experience and there is no suggestion in the Plaintiff’s submissions to the contrary. Mr Jury has set forth in paragraph 26ff of his affidavit dated 25 March 2025 (First Affidavit) the basis upon which he has arrived at the amount sought by the Defendant as security. In paragraph 27 of that affidavit, Mr Jury identifies five issues in dispute.

3. [17]

   That affidavit was prepared prior to 29 July 2025, when the Defendant filed its Defence. A consideration of the issues articulated by Mr Jury in paragraph 27 of his First Affidavit may not, on my perusal of the Defence, necessarily reflect the full extent of issues that may arise in the proceedings. By way of example, paragraphs 45(g) and 45(i) of the Defence raise limitation issues. Assuming, as I must at this stage, that that issue will be advanced at the trial, I would expect that its determination, in addition to the other issues described by Mr Jury in paragraph 27 of his First Affidavit, will add factual and legal complexity to these proceedings.

4. [18]

   Mr Jury, in paragraph 28 of his First Affidavit, sets out his expectation as to the nature and extent of the evidence to be called from both parties. That expectation is for, in total, two to three lay witnesses, competing expert evidence by quantity surveyors as to the quantum of damages sought by the Plaintiff, as well as a building or design expert called by the Defendant to provide an opinion as to whether certain works were carried out by the Plaintiff in accordance with the subcontract. If the Plaintiff files expert evidence in response from a building or design expert, there will then be two sets of experts.

5. [19]

   At paragraph 31(e) of his First Affidavit, Mr Jury expresses the view that the hearing will run “for no more than three days”. Among the exhibits to Mr Jury's affidavit is a schedule which sets out the anticipated nature of the cost centres that represent the work to be undertaken, including disbursements based on the assumption that the hearing will take three days. That schedule is reproduced below.

6. [20]

   I have assumed that Mr Jury’s estimate adopts a conservative approach in calculating the upper limit of the hearing (i.e. three days). This is an appropriate approach to adopt. Experience dictates that, even with the best intentions, draft trial plans, which seek to carefully step out every integer of a hearing, can often underestimate the time taken.

7. [21]

   The Plaintiff's evidence is largely given by Ms Ward, who, in her affidavit of 18 September 2025, describes herself as a special counsel engaged by Pattison Hardman Pty Ltd, a company of which she was formerly a director.

8. [22]

   Ms Ward provides an estimate for party/party costs of $207,594.33. The reduction from Mr Jury's estimate is based upon:

   1. (1)

      a 40% reduction towards pre-trial costs and disbursements in relation to what Ms Ward perceives to be solicitor/client costs contained in Mr Jury's calculations; and

   2. (2)

      a reduction based upon a hearing of one day rather than three.

9. [23]

   Mr Jury has, in his affidavit of 29 October 2025, responded to Ms Ward’s opinions paragraph by paragraph. In paragraph 28, Mr Jury states that, as per paragraphs 32 and 38 of his First Affidavit, his estimate excluded solicitor/client costs.

10. [24]

    Providing an estimate based on party/party costs is less common than what is, in my experience, usually done, namely, for a solicitor or costs consultant to, first, calculate solicitor/client costs and then apply a discount, at least in relation to those costs exclusive of disbursements, on the basis that such a discount would invariably be applied upon an assessment. There is no reason why the calculation of costs cannot be undertaken using the method employed by Mr Jury. On the basis that Mr Jury has already allowed for some discount in his cost estimate by excluding solicitor/client costs, the observations by Ms Ward and her discount of 40% could, it seems to me, provide a discount on an already discounted estimate.

11. [25]

    Mr Jury also questions the basis upon which Ms Ward has applied a 40% discount. I shall return to this below.

12. [26]

    Another significant point of departure between Mr Jury and Ms Ward is the length of time allocated to the hearing. Ms Ward has adopted, as per paragraph 28 of her affidavit, instructions she has received from the Plaintiff’s solicitor, Mr David Leamey. As noted in the written submissions in reply filed by the Defendant, no evidence has been filed by Mr Leamey and it is not possible for the Defendant, in those circumstances, to challenge the underlying basis of Ms Ward’s instructions as to the length of the hearing. It is apparent from the Plaintiff’s written submissions (prepared by Mr Size of Counsel) that the Plaintiff wished to adhere to that one-day estimate. However, Counsel who appeared for the Plaintiff at the hearing, Mr Odgers, accepted that the hearing would occupy up to two days of hearing time.

13. [27]

    At the present stage of the proceedings, it is difficult for the parties, and the Court, to obtain anything other than a high-level view of the length of the proceedings. The parties would be in a far better position to estimate the duration of the proceedings once the evidence, both lay and expert, has been filed and the Court is in possession of an agreed trial plan.

14. [28]

    As the evidence presently stands, only Mr Jury has given evidence as to the length of the hearing and he has done so based upon an assessment, by him, of two factors:

    1. (1)

       the total number of lay and expert witnesses that will be called by the parties; and

    2. (2)

       the issues in dispute.

15. [29]

    The Plaintiff has not attempted to challenge Mr Jury's evidence as to the likely nature of the expert evidence and how this influences the length of the hearing.

16. [30]

    Of course, my deliberations in relation to the length of the hearing are not circumscribed by opinions expressed in the evidence. Drawing on my own experience, I would be surprised that a hearing that involves up to three lay witnesses and potentially two sets of expert evidence, in addition to a not inconsiderable number of issues that are enjoined on the pleadings, including limitation issues, could be concluded in two days. When one factors into the estimate the usual components of a hearing, including oral openings, evidential objections, cross-examination of lay and expert evidence, and closing submissions, it would be, in my opinion, unlikely for such a hearing to take fewer than two full days. Mr Odgers appears to have accepted this. I have considerable reservations that two days would be sufficient to hear these proceedings. I prefer the more conservative approach adopted by Mr Jury that these proceedings could take “up to three days” and I proceed on that basis in my assessment of quantum.

17. [31]

    Aside from reducing Mr Jury’s estimate of trial costs by two thirds, reflecting her instructions of a one-day hearing, Ms Ward has applied a 40% discount to non-trial costs.

18. [32]

    Ms Thrift of Counsel, who appears for the Defendant, criticised the reasoning that informs such a significant reduction and submits that if any deduction is to be made at all, it should be limited to a sum of no more than 10%. It was submitted that such a large discount, as proposed by Ms Ward, is not justified for several reasons:

    1. (1)

       case law that Ms Ward has taken into consideration, in Table 1 of her affidavit, reveals assessment of party/party costs at anywhere between 40.79% up to 81%;

    2. (2)

       the cases cited by Ms Ward provide the Court with little guidance;

    3. (3)

       Ms Ward has assumed that Mr Jury’s schedule includes solicitor/client costs and duplicated costs, and there is no basis for this conclusion; and

    4. (4)

       Ms Ward has not taken into consideration the reasonableness of the hourly rates charged by the Defendant’s solicitors when compared to the Costs Assessment Rules Committee Guidelines, set forth at pages 115 – 119 of the Court Book.

19. [33]

    In advancing these submissions, Ms Thrift handed up an analysis of the cases referred to by Ms Ward. This table reveals that most of the reductions, if not all, were in the context of gross sum or lump sum orders where the Court was giving consideration to solicitor/client costs that had already been incurred. I do not find that the cases to which Ms Ward has referred are sufficiently close to the factual circumstances that exist here. Nor do I consider that a figure of 40% is properly informed by reasoning. Quite why 40%, as compared to 30% or some other reduction, has been selected remains unclear to me from Ms Ward’s affidavit.

20. [34]

    In addition to this, I do not consider that relying on cases which involve different facts, solicitor/client costs and, indeed, costs which have already been incurred, is a sound basis from which to extrapolate a figure of 40%. Each of these cases turn on their own facts and evidence. More helpful here would be an analysis of line items in Mr Jury’s schedule, identifying whether there were disproportionate or inflated sums claimed.

21. [35]

    To make matters slightly more confusing, Ms Ward has, for reasons that remain unclear and unexplained, only applied the 40% discount to professional fees excluding trial fees, but has not applied such a discount to what she has quarantined as “trial” or “hearing fees”. Quite why “professional fees excluding trial fees” attract a 40% discount, but trial fees attract no discount at all, is confounding and the lack of any rational explanation for this bifurcation undermines the overall reliability of Ms Ward’s analysis.

22. [36]

    Ms Ward has opined at paragraph 32 of her affidavit that Mr Jury’s schedule “includes no global reduction” for the difference between solicitor/client and party/party costs, which ought to give rise to a deduction of at least 30 to 40% which, she added, “would ordinarily be expected in a matter of this kind” (my emphasis). Quite what was meant by this phrase remains elliptical. Generalities of this kind are unhelpful and give the impression that Ms Ward was seeking to justify a 30–40% reduction by invoking some normative standard of innominate description (i.e. “a matter of this kind”).

23. [37]

    In addition to this, it appears that Ms Ward has either not accepted, ignored or overlooked Mr Jury’s evidence that he excluded from his estimate what he considered were solicitor/client costs. The observation by Ms Ward, at paragraph 22 of her affidavit, that Mr Jury’s schedule appears to include no distinction between solicitor/client type attendances and party/party attendances and makes no reduction for costs that would not ordinarily be recoverable on a party-party assessment, is a statement which is at best, incomplete and, at worst, wrong.

24. [38]

    For these reasons, I have not found Ms Ward’s analysis and her conclusion compelling.

25. [39]

    During the hearing, Mr Odgers took a slightly different approach to that which Ms Ward adopted, namely, analysing a number of the line items in Mr Jury’s table. As I have stated, I would have been better assisted had Ms Ward adopted this approach rather than the analysis contained in her affidavit. In short, Mr Odgers contended that several line-item amounts appeared disproportionately high. There is force in this.

26. [40]

    I do not intend to analyse each line as if I were engaged in the task of costs assessment. I have, instead, taken a less refined approach because it is not clear to me the precise factors that inform the line items. By way of example, Mr Jury has estimated $28,100 for correspondence between the parties. This included 40 hours or, more traditionally, a standard working week, devoted to correspondence. In addition, another 20 hours, or half of a working week, has been devoted to a partner presumably reviewing that correspondence.

27. [41]

    Whilst reasonable minds may differ, I consider this to be excessive and do not propose uncritically to accept this amount without some discount. Similarly, in relation to hearing preparation, I note that 30 hours of hearing preparation (i.e. what I assume is three ten-hour days) has been allocated to Counsel’s preparation for a three-day hearing. I accept that Counsel could realistically spend three days preparing for a three-day hearing. It is not clear to me why, taken together, the Defendant’s solicitors would expend 130 hours in contrast to only 30 hours expended by Counsel. I would not be prepared to allow such a disproportionate amount of time to be allocated to the Defendant’s solicitors for this line item.

28. [42]

    I will therefore reduce the amount I am prepared to order as security from the amount claimed by the Defendant in prayer 1 of its Notice of Motion. The amount I am prepared to allow is the sum of $310,000 in total, leaving, after the deduction of $50,000 already paid, an amount of further security in the sum of $260,000.

29. [43]

    Mr Odgers sought time to pay any amount I ordered above the sum of $200,000. Ms Thrift did not oppose this. Accordingly, I make the following orders:

    1. (1)

       The Plaintiff is ordered to provide security for the costs of the Defendant in the Plaintiff’s claim by payment into Court:

    2. (2)

       If the Plaintiff fails to comply with Order 1, the proceedings are stayed.

    3. (3)

       If the proceedings are stayed in consequence of Order 2, the Defendant has liberty to apply to the Court on 7 days’ notice for further orders in respect of such non-compliance, including dismissal of the proceedings.

    4. (4)

       The Defendant is to file and serve submissions on costs of no longer than 3 pages by 13 February 2026.

    5. (5)

       The Plaintiff is to file and serve submissions on costs of no longer than 3 pages by 20 February 2026.