Supreme Court
New South Wales	

Case Name: 	Palo IT Australia Pty Ltd v True Ample (Australia) Pty Ltd	
Medium Neutral Citation: 	[2025] NSWSC 602	
Hearing Date(s): 	6 June 2025	
Date of Orders:	6 June 2025	
Decision Date: 	12 June 2025	
Jurisdiction: 	Equity - Commercial List	
Before: 	Nixon J	
Decision: 	1. The Notice to Produce dated 11 February 2025 issued by the Plaintiff to the Defendants be set aside.
2. Pursuant to r 42.21 of the Uniform Civil Procedure Rules 2005 (NSW), the Plaintiff give security for the Defendant’s costs in the amount of $125,000, such security to be provided in a form agreed between the parties, or in the absence of agreement, by payment into Court.
3. In the event that the security set out in Order 2 is not provided within 28 days, pursuant to section 67 of the Civil Procedure Act 2005 (NSW) the proceedings be stayed until such time that the security is provided.
4. The Plaintiff pay 50% of the Defendants’ costs of the motion.	
Catchwords: 	CIVIL PROCEDURE – Notice to Produce – Application to set aside – no issue of principle
 
COSTS – Security for costs – whether there is reason to believe the Plaintiff will be unable to pay the Defendants’ costs if ordered to do so – quantum of security	
Legislation Cited: 	Civil Procedure Act 2005 (NSW) s 67
 
Uniform Civil Procedure Rules 2005 (NSW) rr 21.10, 34.1, 42.21	
Category: 	Procedural rulings	
Parties: 	Palo IT Australia Pty Ltd (Plaintiff)
True Ample (Australia) Pty Ltd (First Defendant)
True Ample Limited Pty Ltd (Second Defendant)	
Representation: 	Counsel:
N Bailey (Respondent/Plaintiff)
E Young (Applicant/Defendants)

Solicitors:
AHD Lawyers (Plaintiff)
Broadside Lawyers (Defendants)	
File Number(s): 	2023/450248	
JUDGMENT
Background
1	By Amended Notice of Motion filed on 14 April 2025, the Defendants, True Ample (Australia) Pty Ltd and True Ample Limited Pty Ltd, sought:
(1)	an order setting aside a Notice to Produce for Inspection which was issued by the Plaintiff, Palo IT Australia Pty Ltd, on 11 February 2025; and 
(2)	an order that the Plaintiff give security for the Defendants’ costs.
2	This application was heard before me on 6 June 2025. At the end of the hearing, I granted the Defendants’ application, but ordered security in a sum substantially less than had been sought by the Defendants. 
3	The Defendants requested reasons for their success on their motion and indicated that they were content for these to be provided at a later date. I accordingly made orders disposing of the application and reserved my reasons.
4	These are my reasons for the orders I made at the end of the hearing.
Notice to Produce
5	On 11 February 2025, the Plaintiff issued a Notice to Produce for Inspection pursuant to r 21.10 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). That rule permits a party to serve a notice requiring another party to produce for inspection any document referred to in any pleading or affidavit filed by that party, or “any other specific document or thing that is clearly identified in the notice and is relevant to a fact in issue”.
6	The Defendants objected to the Notice to Produce for Inspection on the basis that it did not comply with r 21.10 of the UCPR. At the hearing before me, the Plaintiff did not seek to contend otherwise, but instead provided a Notice to Produce to the Court which was issued pursuant to r 34.1 of the UCPR and was otherwise in identical terms (the NTP).
7	The Defendants opposed this course. However, I determined that I should hear submissions on the substance of the categories sought, rather than have an arid debate regarding whether it was permissible to seek such production under one rule but not the other.
8	The NTP sought the following documents:
(1)	All bank statements, receipts and any other Document evidencing the source of payment of the Plaintiff’s invoices numbered 22/05/INAU0040, 22/06/INAU0050, 22/07/INAU0074, 29/09/INAU0093, 22/07/INAU0075, 22/07/INAU0073, 22/09/INAU0092, 22/07/INAU0076, 22/07/INAU0077, including any payments made by a related entity, such as True Ample Pte Ltd. 
(2)	Copies of all Documents that evidence or establish the “informal arrangement” between the First Defendant and the Second Defendant referred to in paragraph [25] of the affidavit of Andrew Stedman sworn on 9 December 2024 (Stedman Affidavit). 
(3)	All agreements, financial statements and other Documents evidencing the Second Defendant as the sole source of funding for the First Defendant as stated in paragraph [27] of the Stedman Affidavit. 
(4)	All loan accounts, ledgers, financial statements and other Documents evidencing credits and debits between two or more of the Second Defendant, the First Defendant and True Ample Pte Ltd from 1 April 2022 to date. 
(5)	All Documents that evidence the ownership by the Second Defendant of the “master IP”, “client agreements” and/or “development” in respect of services provided by the First Defendant, True Ample Pte Ltd, or any other Related Entity as referred to in the email from Andrew Stedman of 14 October 2022 at 17:26, contained in Exhibit TFLR-1, page 423, as referred to in paragraph [28] of the Stedman Affidavit. 
(6)	All documents that evidence the “management/treasury fee” arrangements between the First Defendant and True Ample Pte Ltd, as referred to in [29] of the Stedman Affidavit.
(7)	Copies of the minutes of any meeting of the Second Defendant during the Period where discussions were held regarding the Plaintiff, including but not limited to the payment of its invoices. 
(8)	Copies of all Electronic communications (including intra-company emails) during the period to or from The First Defendant or Second Defendant (excluding Electronic Communications with the Plaintiff or that have already been provided to the Plaintiff in this proceeding) that:
(a)	record or refer to the payment of the Plaintiff’s invoices; 
(b)	refer to any avoidance or minimisation of GST payments to the Plaintiff; and 
(c)	refer to the scope of work the Plaintiff was instructed to perform in respect of all the SOWs (as defined in the commercial list statement filed in this proceeding).
(9)	Copies of all agreements or other Documents recording arrangements or instructions by which the First Defendant was to perform or provide services to the Plaintiff on behalf of the Second Defendant. 
9	These documents were sought in circumstances where the Plaintiff brings a claim for unpaid invoices in respect of services provided by the Plaintiff. 
10	One significant issue arising on the pleadings is whether it was the First Defendant or the Second Defendant who contracted with the Plaintiff, who received the services performed by the Plaintiff, and who is liable to pay for those services.
11	In explaining the forensic basis for the NTP, the Plaintiff referred to an email which was sent to the Plaintiff by Mr Stedman of the Defendants on 14 October 2022, in which he relevantly stated as follows:
“…I know you’ve been invoicing our Australian entity to date [that is, the First Defendant], but I have had another look and think about this and our group topco which holds our master IP, client agreements and development is True Ample Limited in Hong Kong [that is, the Second Defendant].
Accordingly, I think we should adjust this to correctly reflect the correct entity we should be working with and also remove the GST here being charged which I do not believe is applicable given our location and services being performed for an offshore business.
Given the quantum, it’s not an insignificant amount each month!”
12	Mr Stedman has sworn an affidavit on 9 December 2024, in which he relevantly deposed as follows:
“25. Because of the informal arrangement between [the Second Defendant] and [the First Defendant], the fact that [the Second Defendant] is the shareholder of [the First Defendant], and my position in both entities, I had an obligation to minimise the ultimate cost to [the Second Defendant] wherever possible. 
26. In or around October 2022, I began to suspect that there might be a way to remove GST. My suspicion was based on my knowledge that GST is usually not payable when services are provided to an overseas entity, and/or paid for by an overseas entity. 
27. Since [the Second Defendant] was the sole source of funding for [the First Defendant], and was not named on, nor involved in, any of the SOWs, I figured that there would be no practical difference between the invoices being issued to [the Second Defendant] or [the First Defendant], aside from the possible GST benefit. 
28. I was not sure if a GST exemption would apply in the case of the Plaintiff’s services if they were to issue the invoices directly to [the Second Defendant], so I outlined my reasoning in the email of 14 October 2022 and put it to the Plaintiff, who as I understood it, bore the onus of paying the GST, and the obligation to identify whether it was payable or not.”
13	I accept that it is legitimate for the Plaintiff to seek documents relating to the issues in the proceeding regarding the identity of the party who received and is liable to pay for the Plaintiff’s services, and in particular regarding the matters referred to in Mr Stedman’s email and affidavit. However, there are, as I explain below, significant problems with the drafting of the NTP.
14	Paragraph 1 of the NTP is not narrowly drawn so as to require, for example, copies of bank statements for the accounts from which particular invoices were paid. Instead, it calls for “any” document “evidencing the source” of such payments. It is difficult to know what is meant by “the source” and, in particular, whether it refers to the identity of the payer, the account from which the payment was made, or the source of the moneys in such an account or fund from which the payment was made. If the last of these was intended, “the source” of funds in an operating account of a company conducting a business could arguably be any source of revenue which it receives from operation of the business. These problems are compounded by the use of the term “evidencing” which may require judgments to be made about whether any particular document in the Defendants’ possession would provide “evidence” about one or more of those matters.
15	Paragraph 2 of the NTP seeks “all Documents that evidence” the “informal arrangement” between the First and Second Defendants which is referred to in Mr Stedman’s affidavit. One of the difficulties with this paragraph, which is not of the Plaintiff’s making, is that Mr Stedman’s affidavit is wholly opaque as to the nature of the “informal arrangement” in question. I have proceeded on the basis that Mr Stedman (and therefore each of the Defendants) is aware of the nature and scope of this “informal arrangement”. The problem is that paragraph 2 of the NTP is not narrowly drawn so as to require production of any document that records, or refers to, the scope, nature or terms of a particular arrangement. Instead, it seeks documents which “evidence” the arrangement. If the “informal arrangement” was, for example, an arrangement that the operations of one entity would be managed by the other, then potentially every document which “evidenced” the implementation of such an arrangement during the Relevant Period would be caught by paragraph 2. Further, the paragraph would require the Defendants to make assessments as to whether particular documents “evidence” such an “arrangement”, which might require assessments regarding what inferences or conclusions could be drawn from particular documents regarding the arrangements which underlie them.
16	Paragraph 3 of the NTP suffers similar problems. It is difficult to know what is meant by the reference to “Documents evidencing [the Second Defendant] as the sole source of funding for [the First Defendant]”. For instance, assuming that a document shows the Second Defendant to have paid a particular invoice addressed to the First Defendant, a question would arise as to whether this document “evidences” that the Second Defendant is “the sole source” of funding for the First Defendant, or only that it is “a source” of funding. On one view, this paragraph is seeking documents which prove a negative, namely, documents which evidence that there is no other source of funding for the First Defendant besides the Second Defendant. 
17	Paragraph 4 of the NTP is not confined to the ledger for any intercompany loan account between the First and Second Defendants, but extends to “all … Documents evidencing credits and debits” between those entities (emphasis added). 
18	Paragraph 5 of the NTP is not confined to documents recording or referring to ownership of particular intellectual property, but extends to all documents that “evidence” the “development” of services provided by the Defendants or any related entity. This calls for judgments to be made regarding the scope of the notion of “development” of services, and whether or not documents provide “evidence” of such “development”. Even if such material could be readily identified, the paragraph potentially captures a wide range of material relating to the “development” of services provided by the Defendants or any related entity (including various overseas entities) which would appear to have only tangential, if any, relevance to the debt claim advanced by the Plaintiff.
19	Paragraph 6 of the NTP has similar difficulties to paragraph 2, in that it is not confined to documents referring to or recording the terms of the “management/treasury fee” arrangements referred to in Mr Stedman’s affidavit, but extends to all documents that “evidence” those arrangements. This might potentially include all documents “evidencing” the flow of moneys between entities within the Defendants’ group throughout the relevant period (insofar as those documents “evidence” the arrangements pursuant to which such transactions occur).
20	The Plaintiff contended that paragraph 7 of the NTP did not have the same difficulties as the other paragraphs, as it did not require production of documents “evidencing” some proposition or arrangement, but was instead confined to minutes of meetings where particular matters were discussed. However, paragraph 7 has other difficulties, since it is not limited to, for example, minutes of meetings of directors or senior management, but extends to meetings involving any personnel of the Second Defendant, and is “not limited to” meetings where there was discussion about “the payment of [the Plaintiff’s] invoices”, but extends to meetings where any “discussions were held regarding the Plaintiff” (whether or not those discussions related to any of the matters at issue in this proceeding).
21	Paragraph 8 of the NTP is distinct from other paragraphs insofar as it seeks documents referring to identified subject matters. However, it is also broad insofar as it captures emails involving any personnel of either the First or Second Defendant (irrespective of their position in the organisation), that contain any reference to the Plaintiff’s scope of work. The Plaintiff did not articulate a legitimate forensic basis for a document request of this width.
22	Finally, paragraph 9 of the NTP is poorly drafted, as the Plaintiff acknowledged in oral address. It seeks all documents “recording arrangements or instructions by which [the First Defendant] was to perform or provide services to the Plaintiff on behalf of [the Second Defendant]”. However, there is no allegation in the Plaintiff’s pleadings that the First Defendant provided any services to the Plaintiff (whether on behalf of the Second Defendant or otherwise). Instead, its case is that the Plaintiff provided services to the Defendants. The Plaintiff proposed that the references to it and the First Defendant should be transposed in paragraph 9 of the NTP. This would not cure the problems with its drafting. It is difficult to know what would be captured by the references to documents “recording … instructions by which [the Plaintiff] was to perform or provide services to [the First Defendant] on behalf of the [Second Defendant]”. If it is meant to capture instructions to the Plaintiff to provide services to either Defendant, the Plaintiff is already aware of all such documents. Alternatively, if it is meant to capture instructions given as between the Defendants (and not communicated to the Plaintiffs), it is difficult to see how those would be instructions “by which” the Plaintiff provided services to either of the Defendants.
23	The Plaintiff submitted that the Court should read down or amend the NTP (or particular paragraphs of the NTP), and require production in respect of the NTP narrowed in this way. However, on an application such as this, it is not for the Court to redraft the Plaintiff’s document, particularly where the changes required to address the difficulties identified above would require much more than setting aside one or two paragraphs, or omitting or reading down one or two words, but would instead involve a wholesale recasting of the document. 
24	The Plaintiff did not, in response to the criticisms made by the Defendants regarding the scope of the Plaintiffs’ requests for documents, put forward any revised form of the NTP. Instead, as noted above, the only change to the form of the NTP which the Plaintiff proposed at the hearing was a change to the rule pursuant to which the NTP was issued (with the text otherwise remaining the same). 
25	I have considered the only form of the NTP that is before the Court on this application, have accepted the Defendants’ various criticisms in respect of each of the paragraphs in the NTP, and have accordingly determined that this NTP should be set aside. The Plaintiff is, of course, at liberty to issue another Notice to Produce, which is more narrowly drawn, and which takes account of the matters raised in these reasons. 
Security for Costs
26	By their Amended Notice of Motion, the Defendants also sought an order that the Plaintiff give security for the Defendants’ costs in the amount of $350,000.
27	The Plaintiff resisted any order for security for costs, on the basis that it was solvent and had substantial revenue. (The Plaintiff did not lead any evidence, or advance any submission, to the effect that an order for security would stultify the proceeding, or otherwise advance any discretionary reason as to why security should be refused.)
28	In the alternative, the Plaintiff disputed the quantum of security sought by the Defendants, contending that, if an order for security for costs was warranted, the Defendants were only entitled to an amount of around $75,000. 
29	At the conclusion of the hearing, I accepted the Defendants’ contention that security for costs should be ordered, but accepted a number of the Plaintiffs’ submissions regarding the quantum of security.
Should security for costs be ordered?
30	The Defendants sought security for costs pursuant to r 42.21 of the UCPR which, relevantly, provides that:
If, in any proceedings, it appears to the court on application of a defendant:
…
(d) that there is reason to believe that a plaintiff, being a corporation, will be unable to pay the costs of the defendant if ordered to do so, …
the court may order the plaintiff to give such security as the court thinks fit, in such manner as the court directs, for the defendant’s costs of the proceedings and that the proceedings be stayed until the security is given.
31	Accordingly, the issue on this application is not the present solvency of the Plaintiff and, in particular, its ability to meet, from revenue and other sources of funds, its debts as and when they fall due, but whether there is a reason to believe that the Plaintiff would be unable to pay the Defendants’ costs if it were ordered to do so.
32	The present application is brought in the following circumstances:
(1)	on 12 December 2023, the Plaintiff commenced this proceeding against the Defendants, seeking damages in the sum of $1,286,480 in respect of unpaid invoices;
(2)	on 9 July 2024, the Plaintiff was placed into administration;
(3)	on 7 August 2024, the Plaintiff executed a Deed of Company Arrangement (DOCA). The DOCA provided for a dividend to be paid in respect of claims of the creditors of the Plaintiff, which was funded in large part by a lump sum of $350,000 which was paid by the directors of the Plaintiff in their capacity as Deed Proponents; and
(4)	in late 2024, the DOCA was terminated, with management of the Plaintiff returning to its directors.
33	The Plaintiff tendered its Balance Sheet as at 31 March 2025, and its Profit and Loss statement for the three-month period ending 31 March 2025 (P&L).
34	The Balance Sheet reports that the Plaintiff had, as at 31 March 2025, total current liabilities of $1.600m which exceeded its total current assets of $1.184m.
35	The total current assets included cash at bank of $554,383 as at 31 March 2025.
36	However, that point in time figure is of little assistance for determining this application. The bank statements of the Plaintiff disclose that, while the Plaintiff regularly has a six-figure balance in its account, it also regularly pays out the bulk of such funds shortly afterwards. For example, the Plaintiff’s balance sheet as at 31 March 2025 records that, as at that date, it had cash of $229,955 with the Commonwealth Bank, but the bank statement for the relevant account reveals that, by 4 April 2025, the balance had reduced to $21,687. 
37	In broad terms, the amount flowing into the Plaintiff’s accounts with Commonwealth Bank and HSBC largely corresponds with the amount flowing out of those accounts. In particular, focussing on the first few months of 2025:
(1)	the bank statements for the HSBC account disclose that in the two month period from 10 January 2025 to 11 March 2025 an amount of $688,640.30 was paid into the account and an amount of $764,606.36 was paid out of the account; and 
(2)	the bank statements for the Commonwealth Bank account disclose that, in the period from 1 February 2025 to 30 April 2025, an amount of $1.737m was paid into the account and an amount of $1.532m was paid out of the account. 
38	The picture which emerges from these bank statements is broadly consistent with the P&L, which discloses that, in the three months to 31 March 2025, the Plaintiff generated substantial trading income (totalling $1.447m), together with “Other Income” of $95,201, but also had substantial costs of sales and operating expenses (totalling $1.530m), leaving it with a profit of only $13,247 for the quarter.
39	The Plaintiff’s Finance Director, Ms Margaux Veran, deposes that the Plaintiff has the financial capacity to pay an adverse costs order of $300,000, based on the matters set out in her affidavit, which include that the Plaintiff “can rely on financial support from both [Palo IT Singapore Pte Ltd] and the broader Group”. She also deposes that the Plaintiff “is financially supported by its parent company, Palo IT Group Limited based in Hong Kong”. The Plaintiff owes Palo IT Singapore an amount of around $4.134m. Mr Tanguy Le Ray, who is a director of both the Plaintiff and Palo IT Singapore deposes that Palo IT Singapore “has provided ongoing support to [the Plaintiff]” and “does not intend to call in any outstanding debts by [the Plaintiff] in the foreseeable future”. 
40	Having regard to those matters, there is reason to believe that, absent support from Palo IT Singapore or the broader Group, the Plaintiff will be unable to pay the costs of the Defendants if ordered to do so. The Plaintiff has not, in response to the Defendants’ application, proffered any undertaking from Palo IT Singapore or any other Group entity to meet any adverse costs order in favour of the Defendants. That is despite Palo IT Singapore standing to benefit from this proceeding, in that the proceeding will, if the Plaintiff is successful, provide the Plaintiff with the means to repay a substantial part of its debt to Palo IT Singapore.
41	For those reasons, I am satisfied that the Court should order security for costs.
Quantum of security?
42	In their Amended Notice of Motion, the Defendants sought security in the amount of $350,000. However, in their written submissions, the amount sought was reduced to $300,000. 
43	At the end of the hearing, I concluded that the quantum of security sought was significantly overstated, for a number of reasons.
44	First, and most importantly, the Defendants’ costs estimate is based on there being a five-day hearing. 
45	In this proceeding, the Plaintiff advances a debt claim in respect of unpaid invoices. There is, as matters currently stand, only one lay witness on each side of the record. No expert evidence has been served, and no party submitted that any such evidence will be required.
46	Given those matters, I accept the Plaintiff’s submission that, even with extensive cross-examination of the lay witnesses, a hearing should be able to be completed within two days.
47	The Defendants’ submission that the matter would likely require a five-day hearing appeared to be based, in substantial part, on an apprehension that the Plaintiff will amend its pleading, which would involve joinder of at least one other defendant, and which would in turn necessitate further evidence. 
48	No such application to amend has been made by the Plaintiff. I accept the Plaintiff’s submission that the quantum of security should be determined having regard to the current state of the pleadings and the current state of the evidence. If it does transpire that the Plaintiff seeks (and is granted) leave to make some substantial amendment to its pleadings which necessitates further evidence and which would likely extend the length of the hearing, then the Defendants would, of course, be able to make an application for further security for costs at that time.
49	For those reasons, I reduced the Defendants’ estimate of their costs to account for a two-day rather than a five-day hearing, and have made commensurate reductions in the time spent in preparation for the hearing. 
50	For similar reasons, I have put to one side the estimated costs for dealing with any amendment to the List Statement, including drafting an amended List Response, and reviewing further evidence served by the Plaintiff. In addition, I consider that there should be a reduction of, say, one quarter of the amount estimated for “Further evidence preparation generally”, including “considering, identifying and interviewing relevant witnesses, subpoena preparation and/or settle proof of evidence”, to allow for this estimate being based, at least in part, on an assumption that further evidence will be required in order to deal with an amended pleading (of unknown scope). 
51	I also put to one side one half of the Defendants’ costs of the Notice of Motion seeking security, for reasons given below. 
52	I also accepted the Plaintiff’s submission that, in respect of various entries in the solicitors’ invoices, there are grounds for concluding that there would likely be a considerable reduction on assessment. This is not an occasion for any detailed review of the costs incurred to date. However, in circumstances where there is evidence before the Court that costs on a party-party basis usually result in recovery of around 60% to 70% of the actual solicitors’ costs incurred, I am satisfied that the legitimate issues raised by the Plaintiffs provide a basis for calculating the quantum of security at the lower end of this range (assuming 60% recovery) rather than on the basis proposed by the Defendants (assuming 70% recovery).
53	Taking account of the matters set out above, I determined to order security for costs in the amount of $125,000.
54	As I have noted above, the making of this order is without prejudice to the Defendants’ ability to approach the Court seeking further security in the event that, for example, the Plaintiff substantially expands its claim, with the result that the hearing estimate also substantially increases.
Costs
55	The Defendants had substantial success on the Notice of Motion, insofar as I determined that orders should be made setting aside the NTP and requiring the Plaintiff to provide security for costs.
56	However, as outlined above, I accepted many of the Plaintiff’s submissions regarding the issue of the quantum of security.
57	In those circumstances, I determined that the Plaintiff should pay 50% of the Defendant’s costs of the Notice of Motion, as agreed or assessed.
Orders
58	For those reasons, I made the following orders at the conclusion of the hearing on 6 June 2025.
(1)	The Notice to Produce dated 11 February 2025 issued by the Plaintiff to the Defendants be set aside.
(2)	Pursuant to r 42.21 of the Uniform Civil Procedure Rules 2005 (NSW), the plaintiff give security for the Defendant’s costs in the amount of $125,000, such security to be provided in a form agreed between the parties, or in the absence of agreement, by payment into Court.
(3)	In the event that the security set out in Order 2 is not provided within 28 days, pursuant to s 67 of the Civil Procedure Act 2005 (NSW) the proceedings be stayed until such time that the security is provided.
(4)	The Plaintiff pay 50% of the Defendants’ costs of the motion.
**********