GMW Urban Pty Ltd v Alexandria Landfill Pty Ltd [2014] NSWSC 1806

Supreme Court New South Wales

Medium Neutral Citation: GMW Urban Pty Ltd v Alexandria Landfill Pty Ltd [2014] NSWSC 1806 Hearing dates: 12 December 2014 Decision date: 18 December 2014 Jurisdiction: Equity Division - Technology and Construction List Before: Ball J Decision: (1) In addition to the security that the Court ordered on 19 June 2013 that the plaintiff provide in respect of the first defendant's costs, the plaintiff provide security in the sum of $225,000 in respect of the first defendant's costs in the following tranches: (a) $100,000 by 30 January 2015; (b) $125,000 42 days before the hearing date of the proceedings. (2) The plaintiff pay the first defendant's costs of the first defendant's notice of motion filed on 30 October 2014. Catchwords: PROCEDURE - civil - interlocutory issues - application to vary security for costs order to increase amount of security provided - whether increase in costs incurred by defendant that was not anticipated at time of original application for security is a material change in circumstances Legislation Cited: Civil Procedure Act 2005 (NSW), s 56 Cases Cited: Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44 GMW Urban Pty Ltd v Alexandria Landfill Pty Ltd [2013] NSWSC 660 Category: Procedural and other rulings Parties: GMW Urban Pty Ltd ABN 52 084 753 113 (Plaintiff) Alexandria Landfill Pty Ltd ABN 26 098 849 971 (First Defendant) Westpac Banking Corporation (Second Defendant) Representation: Counsel: D Miller SC with Ms N Shaw (Plaintiff) J Clarke SC with C O'Neill (First Defendant) Solicitors: Vincent Young (Plaintiff) Esplins Solicitors (First Defendant) File Number(s): 2012/50410 Publication restriction: Nil

Judgment 1In a judgment delivered on 30 May 2013 in this matter (see GMW Urban Pty Ltd v Alexandria Landfill Pty Ltd [2013] NSWSC 660), Stevenson J concluded that the plaintiff should provide $400,000 in security for the first defendant's costs. Subsequently, on 19 June 2013, Stevenson J made orders to that effect and ordered that the security be provided in the following three tranches: (a)$150,000 by 18 July 2013; (b)$150,000 within seven days of the plaintiff filing and serving its evidence; (c)$100,000 within 42 days of the hearing date for the proceedings. 2It is clear from the judgment and the form of the orders that the security was intended to cover the whole of the first defendant's costs of the proceedings. It is also apparent that the amount of $150,000 was intended to be security primarily for work done by the first defendant in preparing evidence in response to the evidence filed by the plaintiff and that the third tranche of security was intended primarily to be security for the first defendant's costs of the hearing and preparing for the hearing. 3The plaintiff has provided the first two tranches of security. No hearing date has been fixed and, consequently, the plaintiff has not provided the third tranche of security. 4By a notice of motion filed on 30 October 2014, the first defendant seeks an order that, within 28 days of the date of the order, the plaintiff provide additional security in the sum of $600,000 or such other amount as the Court sees fit. 5It is common ground between the parties that, in considering the first defendants application, the Court should apply the principles stated by McLelland J in Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44 at 46 ("Brimaud"). In that case, McLelland J said: The overriding principle governing the approach of the court to interlocutory applications is that the court should do whatever the interests of justice require in the particular circumstances of the case. In giving effect to that general principle, and in recognition of the public and private interests earlier referred to, rules of practice have been developed in accordance with which the discretionary power of the court to set aside, vary or discharge interlocutory orders will ordinarily be exercised. ... In the present case I am dealing with an interlocutory order of a substantive nature made after a contested hearing in contemplation that it would operate until the final disposition of the proceedings. In such a case the ordinary rule of practice is that an application to set aside, vary or discharge the order must be founded on a material change of circumstances since the original application was heard, or the discovery of new material which could not reasonably have been put before the court on the hearing of the original application. [citations omitted] 6The first defendant submitted that there has been a material change in circumstances justifying an application for further security for two reasons. First, it has been necessary for the first defendant to incur costs in relation to work that was not anticipated at the time the first application for security was made. Examples include the costs incurred in connection with a court-ordered mediation, the costs of dealing with three applications by the plaintiff for extensions of time in which to serve its evidence and the costs of the current application. Second, the first defendant submits that its actual costs to date and its estimated future costs are substantially greater than were anticipated at the time of the original application for security for costs. Mr Rush, the solicitor for the first defendant, gives evidence that the first defendant's actual costs until October 2014 were $616,601.40, which included an amount of $447,178.56 that had been incurred up until the time of the original application for security for costs. He estimates that its future costs (to use calculations performed by Mr Young, the plaintiff's solicitor) range from $725,525 to $1,018,125. The increase in the estimate is explained, at least in part, by the fact that the plaintiff has served more evidence than anticipated and the fact that the first defendant's counsel has recently taken silk. 7The plaintiff takes issue with the first defendant's submissions in various respects. It submits that any unanticipated work is not material in the scheme of things. It points out that the first defendant has filed a cross-claim and some of the costs that it has incurred, which are not identified, would have been incurred in connection with that cross-claim. In its submission, the scope of the case has narrowed since the original application for security because the plaintiff has abandoned a number of its claims. It also takes issue with the first defendant's estimates of its future costs. It relies on Mr Young's estimate of those costs, which is between $369,075 and $495,675. 8Underlying some of the plaintiff's submissions is an assumption that a change in the amount of an estimate of costs cannot itself be a relevant changed circumstance. According to it, what the first defendant must establish is that the nature of the case itself has changed in a way that has brought about an increase in the actual or anticipated costs. 9To the extent that that assumption underlies some of the submissions made by the plaintiff, I do not accept it. As McLelland J pointed out in Brimaud, the overriding principle governing the approach of the court to interlocutory applications is that the court should do whatever the interests of justice require in the particular circumstances of the case. That principle is now expressed in s 56 of the Civil Procedure Act 2005 (NSW) as an overriding purpose "to facilitate the just, quick and cheap resolution of the real issues in the proceedings". But there is no difference in substance in the two formulations in this context. A plaintiff should not be put to unnecessary applications for security for costs. However, in granting security, the court is necessarily required to make some estimate of future legal costs, and if that estimate, through no fault of the defendant, proves to be substantially inadequate, it seems to me that that fact alone may amount to a changed circumstance for the purposes of the rule of practice identified by McLelland J. If it were otherwise, the purpose of the order for security in the first place may be undermined. 10It was not suggested in the present case that the provision of additional security would stifle the proceedings. Nor was it suggested that the plaintiff had organised its affairs or in some other way proceeded on the assumption that the total security it would have to provide was $400,000 so as to cause an injustice if the amount of the security were now increased. 11There is one other feature of this case which is relevant. The plaintiff is insolvent and the current proceedings are being funded by a litigation funder. The evidence is that the plaintiff and funder have agreed that, if the plaintiff is successful, it will refund all the funding that has been provided to it plus pay "an amount equal to 22.5% of the Received Litigation Proceeds as a premium to cover the risk associated with the Funding". Consequently, the funder stands to benefit substantially from the proceedings but is not at risk in relation to costs. In my opinion, that fact favours an increase in security if the true position is that the current security is substantially inadequate. 12The question remains whether the first defendant has established that its costs are materially greater than was anticipated at the time of the original application for security. In my opinion, it has not. The costs up until that time were known to be $447,178.56. The first defendant's costs since then are $169,422.84. However, the evidence does not disclose what proportion of those costs relate to the first defendant's cross-claim; and consequently, it is not possible to determine whether those costs are materially greater than the estimate made at the time of the original application for security. The first defendant points to some unanticipated costs, such as the costs of the mediation and the costs of some additional directions hearings because of the late service of the plaintiff's evidence. However, in my view, those costs are not material. 13It is apparent that there is a major difference of opinion between Mr Rush and Mr Young in relation to estimated costs going forward. Neither estimate seems so unreasonable that it should be discounted altogether. In those circumstances, I accept the suggestion of Mr Clarke SC, who appeared for the first defendant, that the most appropriate approach is to average the two estimates. On that basis, the first defendant's estimated future costs going forward are approximately $650,000. Both Mr Rush and Mr Young estimate that a party is likely to recover approximately 60 to 70 per cent of its actual costs on assessment on a party/party basis. Taking the midpoint of that range, the estimated party/party costs of the first defendant going forward are $422,500. Under the existing order for security, the whole of the third tranche and a substantial part of the second tranche must relate to the costs going forward. That is obviously so in the case of the third tranche. As I have said, it is apparent that the second tranche was intended to provide security for work that includes the preparation of evidence in reply to the evidence served by the plaintiff, and a substantial amount of that work is yet to be done. Assuming that $100,000 of the second tranche relates to work that has yet to be done, the security that has been provided in respect of work going forward is $200,000, which, with rounding, is $225,000 less than the estimated recoverable costs for that work. 14In my opinion, that shortfall amounts to a material change in circumstances which justifies the award of further security. Although that shortfall may result from an underestimate by the first defendant of its expected legal costs at the time it made its first application for security, I do not think that the underestimate could be said to arise through the fault of first defendant in the relevant sense. It was not suggested, for example, that the first defendant did not make a reasonable attempt to estimate its costs originally or that the estimate was based on obviously unreasonable assumptions. What appears to have happened is that, faced with the evidence to which it must respond and some changes that could not necessarily have been expected at the time the original estimate was given - such as the barrister it chose to brief taking silk - it has become apparent that the original estimate it gave was too low. That is not an uncommon feature of litigation. 15In my opinion, the plaintiff should provide additional security in the sum of $225,000. It is reasonable to treat approximately half that amount as relating to the additional costs of pre-trial preparation and the costs of the trial itself. The balance relates to the costs of preparing evidence and other costs of the proceedings. 16The first defendant has been successful in its application for further security, although not for the full amount that it claimed. Its application was opposed by the plaintiff. I can see no reason, in those circumstances, why the first defendant should not have the costs of its successful application. 17Accordingly, the orders of the Court are: (2)In addition to the security that the Court ordered on 19 June 2013 that the plaintiff provide in respect of the first defendant's costs, the plaintiff provide security in the sum of $225,000 in respect of the first defendant's costs in the following tranches: (a)$100,000 by 30 January 2015; (b)$125,000 42 days before the hearing date of the proceedings. (3)The plaintiff pay the first defendant's costs of the first defendant's notice of motion filed on 30 October 2014.

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