IN THE SUPREME COURT OF VICTORIA	Not Restricted	
AT MELBOURNE
Commercial Court
Corporations List
S ECI 2020 02950

IN THE MATTER of CREDIT CLEAR LIMITED (FORMERLY KNOWN AS CREDIT CLEAR PTY LTD) (ACN 604 797 033)

TRENT MARSHALL MCKENDRICK 
(& anor according to the attached schedule of parties)	First plaintiff	
		
v  		
		
CREDIT CLEAR LIMITED (FORMERLY CREDIT CLEAR PTY LTD) (ACN 604 797 033)
(& ors according to the attached schedule of parties)	First defendant	

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JUDGE:	Gardiner AsJ	
WHERE HELD:	Melbourne	
DATE OF HEARING:	On the papers, last submissions filed 2 July 2021	
DATE OF JUDGMENT:	2 September 2021	
CASE MAY BE CITED AS:	Re Credit Clear Ltd (No 2)	
MEDIUM NEUTRAL CITATION:	[2021] VSC 545	

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CORPORATIONS – Security for costs – Quantum of security to be ordered – Trailer Trash Franchise Systems Pty Ltd v GM Fascia & Gutter Pty Ltd [2017] VSCA 293 applied – Australian Battery Distributors Pty Ltd v Robert Bosch (Australia) Pty Ltd [2015] FCA 1164 applied – Troiano v Voci (Security for costs) (2019) 61 VR 511 – Farmitalia Carlo Erba SrL v Delta West Pty Ltd (1994) 28 IPR 336 considered.

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SUBMISSIONS:
	Counsel	Solicitors	
For the Second plaintiff	Mr S Rubenstein	Marshalls & Dent & Wilmoth	
			
For the Defendants	Mr T J North QC with 
Mr E J Batrouney	Deutsch Miller	

HIS HONOUR:
1	By a summons filed 25 November 2020, the defendants made application for an order that the second plaintiff ACN 604 594 621 (formerly known as C Capital Pty Ltd) (‘Capital’) give security for their costs.  The defendants sought that Capital provide security for their costs of $351,314.35, for the period up to and including the first day of trial.  On 21 May 2021, I published reasons which acceded to the defendants’ application.  I had earlier indicated on the occasion of delivery of my reasons as to whether security should be ordered that I would only order security for the defendants’ costs up to and including the second mediation.
2	Capital had foreshadowed at the hearing of the application that in the event that the defendants were successful in obtaining an order for security that they wished to put on further material on the question of quantum.  I gave directions for the filing of further material including written submissions and this has been done.
3	These reasons assume familiarity with the primary reasons which I delivered in this matter on 21 May 2021.
The parties’ submissions
4	Prior to the first hearing of this application, the defendants had filed submissions which included brief submissions as to quantum and on 24 June 2021 the defendants filed submissions specifically directed  to that issue.  The defendants rely on the expert reports of Christopher Grisenti, a costs expert, dated 25 November 2020 and 29 January 2021 (‘Second Grisenti Report’), together with the affidavits of Shane Nicholas Anderton filed on 26 November 2020, 29 January 2021 and 15 February 2021.
5	As well as the expert evidence earlier relied upon, since delivery of my primary reasons the plaintiffs have filed three further affidavits upon which Capital seeks to rely on in its submissions on the question of the quantum of the security:
(a)	affidavit of Judith May Heeps sworn 4 June 2021.  Ms Heeps is a solicitor for the plaintiffs and her affidavit is a critique of the instructions provided by the defendants to Mr Grisenti, their costs consultant;
(b)	the affidavit of Trent Marshall McKendrick sworn 4 June 2021 (‘Fourth McKendrick Affidavit’).  This affidavit deposes to the deterioration in Mr McKendrick’s financial circumstances of recent times.  Its reception is objected to by the defendants; and
(c)	the affidavit of Penelope Van den Berg, a costs expert, sworn 4 June 2021 which exhibits her second expert costs report filed in the proceeding (‘Second Van den Berg Report’).  This report revisits and supplements her earlier report, makes updates where necessary and also critiques the Second Grisenti Report.
6	In addition, Capital has filed written submissions dated 4 June 2021 which were the subject of response by the defendants by submissions dated 24 June 2021.  Capital filed submissions in reply on 2 July 2021.
Legal principles
7	In Trailer Trash Franchise Systems Pty Ltd v GM Fascia & Gutter Pty Ltd, the Court of Appeal of this State identified the relevant principles for application in the assessment of the quantum of an order for security for costs.  It stated (citations omitted):
In deciding what constitutes ‘sufficient security’ for the purposes of s 1335(1), the court does not seek to provide full protection for the estimated costs of the party seeking security. Rather, having regard to the fact that the order for security is usually made at an early stage of a proceeding and there are many contingencies that will affect the actual costs incurred by that party, the court fixes an amount that it considers adequate in all the circumstances of the case. Those circumstances include the nature of the proceeding, the nature and complexity of the steps that need to be undertaken by the party seeking security, the likely costs in undertaking those steps, the length of the trial, any security already provided, and the possibility that the proceeding may settle.
In determining a sufficient amount for security for costs, the court does not undertake precise mathematical calculations. Rather, it adopts a ‘broad brush’ approach involving ‘guesstimates as much as estimates’. However, the broad brush approach does not involve an abstract process. It must have an evidentiary basis. The court must have regard to the evidence adduced by the parties as to quantum — whether in the form of an affidavit by an experienced litigation lawyer or an expert report by a costs consultant — although it is not bound by the parties’ estimates. The court may scrutinise the individual items in the parties’ estimates, but not to the extent of minute examination akin to a taxation.
The amount ultimately fixed by the court must not be so low that it fails to provide any real protection to the party seeking security, or so high that it is oppressive to the party required to provide the security. The amount must be ‘just and reasonable’ in all the circumstances of the particular case.
8	In Troiano v Voci (Security for costs), Riordan J observed that it was appropriate to make an allowance for the likelihood that the amounts claimed by the defendant on a taxation would be reduced by the Costs Court.
9	In Australian Battery Distributors Pty Ltd v Robert Bosch (Australia) Pty Ltd, Edelman J, after citing a number of authorities dealing with the relevant principles to be applied in arriving at the quantum of security to be ordered, collected them as follows:
(1) 	the assessment of the quantum of security is not akin to a taxation of costs; it involves the exercise of an unfettered discretion to award the amount considered to be fit in all the circumstances;
(2) 	the Court does not seek to provide a complete and certain indemnity for the respondent; although the security to be posted will not exceed the assessment of likely party and party costs after trial and it will usually be less;
(3) 	the Court will take into account the possibility of the case settling or being discontinued prior to trial and the discount may be greater at early stages in the proceeding where the prospect of the matter continuing to the end of trial may be remote;
(4) 	the order for security need not be once and for all; it could involve a first tranche of security with the issue to be revisited at a later point particularly where an order in tranches would have the least impact upon the applicant (such as by removing the size of the immediate burden) and the least likelihood of stifling its capacity to prosecute its claims;
(5) 	however, if the ordering of security in tranches would merely generate the unnecessary expense of one or more additional applications then an order for costs in tranches would not conform to the overarching purpose of the civil procedure provisions…; and
(6) 	the quantum can cover costs that have already been incurred but the Court will often be reticent to incorporate these costs into an assessment of the quantum where they were incurred prior to the making of a security for costs application and the potential impecuniosity of the [plaintiff] was not reasonably ascertainable by the [defendant].
10	I note that his Honour did not descend into a close analysis of the material filed by the parties directed to the issue of quantum, nor did he deliver elaborate reasons for his conclusion as to the amount of the security that should be awarded.  His Honour had observed earlier in his reasons:
Security for costs applications are interlocutory processes that should not be complex.  The principles are well understood.  The authorities emphasise that substantial evidence is not required and that the application is not supposed to be a mini-trial.
11	Edelman J went on to order security in the circumstances of that case for the period up to and including a mediation.  He indicated that it did not necessarily mean that further security would be ordered when the matter was revisited and whether that would be appropriate would be a matter to be revisited at that time.
12	Reference was made by Capital to the decision of Heerey J in Farmitalia Carlo Erba SrL v Delta West Pty Ltd as authority for the proposition that in arriving at a conclusion as to the amount which should be ordered to be provided by way of security a “discount” should be applied to the final amount ordered.  In Farmitalia, Heerey J considered an application for security for costs against the plaintiff, a company incorporated in Italy.  In the course of his Honour’s judgment he considered a number of discretionary factors and determined to order security.  Heerey J then turned to what the amount of such security should be and whether there should be a discount applied to the amount established by the defendant’s evidence.  His Honour described a practice which had developed of fixing the sum of security at about two thirds of the estimated party and party costs and observed that this approach was ultimately rejected by the English Court of Appeal in the decision of Procon (GB) Ltd v Provincial Building Co Ltd.  He noted that McPherson J followed Procon in the decision of Bruce Pie & Sons Pty Ltd v R H Mainwaring, English and Peldan.
13	Heerey J identified a number of factors which he stated could be usefully considered in the context of fixing the quantum of security.  These included:
(i)	taking into account the chance of the case collapsing without coming to trial; 
(ii)	the apparent prospects of success, i.e. the weaker the applicant’s case appears on the merits, the stronger the respondent’s application for security is and the less inclined to order any discount;
(iii)	the order for security should not be the means to deny the applicant the right to press the claim; 
(iv)	even accepting that the party seeking security provided an acceptable estimate of security, it is likely that that amount would be reduced by the taxing officer.  I note that this view was confirmed by Riordan J in Troiano.
Heerey J then proceeded to make an allowance for the probable reduction on taxation by reducing the sum of $255,000 which had been the evidence as to the likely party‑party costs order to $230,000, a reduction of approximately 10%.  It is clear from the context that the discount applied by Heerey J was purely in regard to the factor of a probable reduction on taxation of costs.
14	Farmitalia is, in my view, an example of an instance whereby the Court considering the application has reduced the amount it might otherwise have ordered by taking into consideration  the amount that a party-party bill of costs might be reduced by the Costs Court. 
Defendants’ submissions as to quantum
15	The defendants submit that:
(a)	based on the Second Grisenti Report, security should be awarded up to and including a second mediation in the sum of $326,513.19, reserving the defendants’ liberty to apply in respect of the quantum of further security if the proceeding does not settle at the second mediation;
(b)	the security should include the costs of the security for costs application; and
(c)	the quantum of the security should be determined on the basis that Capital is responsible for 100% of the defendants’ costs.
16	In the Second Grisenti Report, Mr Grisenti contended that security for costs be assessed up to the first day of trial and should include the costs of the security application.  Mr Grisenti stated that this should be comprised of:
(a)	$326,513.19 up to and including the second mediation, including the security for costs application, and on the basis that there should be a 90/10 split of the amount ordered, of which $293,861.87 should be borne by Capital; and
(b)	$63,836.09 up to and including the first day of the trial and again on the basis of a 90/10 split, the amount of $57,452.48 to be paid by Capital.
The source for the calculation for a 90/10 split appears to be the instructions provided to Mr Grisenti.  The rationale for that split is not elaborated upon but appears to be a concession that Capital should notionally, for the purpose the present exercise in fixing quantum, bear 90% of the defendants’ costs.
17	The defendants’ submissions annex a table which summarises the differences between the assessment of Mr Grisenti and Ms Van den Berg.  That table is extracted below:
Description	Second Grisenti Report  (incl. disbursements and charges)	Second Van den Berg Report (incl. disbursements and charges)	
Discovery	$87,654.36	Limited Discovery:	$13,930.46
No Discovery:             $0	
Lay Witness Evidence	$106,564.43	$70,940.08	
Expert Evidence	$28,856.27	$0	
Subpoenas	$6,094.48	$0	
Interlocutory Application	$25,712.18	$0	
Directions Hearings	$11,787.51	$7,945.14	
Second mediation	$22,966.60	$23,063.60	
Costs of Security Application	$15,798.34	$0	
Subtotal	$305,434.17	Limited Discovery:	$115,879.28
No Discovery:	$101,948.82	
Loading on Professional Fees	$21,079.03
(12% loading)	Limited Discovery:	$2,917.52 (5% loading)
No Discovery:	$2,548.27
(5% loading)	
Total	$326,513.19	Limited Discovery:	$118,796.80
No Discovery:	$104,497.09	
18	The reference in the table to the percentage loading of 12% and 5% respectively is to an additional amount claimed by reference to the criteria in item 17 of the Supreme Court Scale of Costs.
19	The defendants contend that the steps identified in the Second Grisenti Report, which appear in the summary table above, are necessary and appropriate and submit that by reason of the erroneous instructions provided to Ms Van den Berg, she has improperly excluded the following procedural steps in her analysis of the defendants’ costs.
20	Capital’s contention that there will be no or limited discovery is said to be fanciful.  Rather, the defendants contend that contemporaneous documents will be critical to the resolution of the dispute as they are likely to be the most reliable record of what occurred in 2015 and 2016 when the events the subject of this proceeding took place.  There are a range of factual matters in issue on the pleadings including first, the circumstances in which Mr McKendrick resigned as a director, secondly, Mr McKendrick’s allegations of threats and other misconduct, thirdly, the events occurring at various meetings in 2015 and 2016, fourthly, the circumstances in which the Separation Agreement was signed and fifthly, communications passing between Mr McKendrick and persons who are not parties to the proceeding, including Mr Gallin and Mr Carron.
21	The defendants say that Capital’s submission that expert evidence will not be required because Credit Clear’s shares now trade on the Australian Securities Exchange (‘ASX’) is misconceived.  In support of this proposition, they contend that there is no general rule as to what the date of any valuation of shares should be for the purposes of the oppression provisions of the Corporations Act 2001 (Cth).  The defendants contend that the valuation of the shares should be determined as at the date of the Separation Agreement in 2016, when the plaintiffs allege they were improperly excluded from the affairs of Credit Clear.  As such, the defendants contend that this is a matter on which expert evidence is required as it is relevant not only to the oppression remedy but also to the fairness or otherwise of the Separation Agreement.
22	The defendants contend that documentary records will have importance to the resolution of the dispute and it is reasonable to include the costs of subpoenas and notices to produce.  In this regard, it is likely that Mr Carron, Mr Gallin and Mr McKendrick’s accountant, all of whom are said to hold relevant documents, are likely to be the subject of subpoenas or notices to produce.
23	The defendants contend that in a proceeding making claims in excess of $25 million, it is reasonable for Capital to provide security in anticipation of at least one interlocutory application, particularly in circumstances where the parties are likely to be at odds over the need and extent of discovery.
24	Ms Van den Berg was apparently instructed that Capital would only be ordered to provide security for 50% of the defendants’ costs and the defendants contend that this is misconceived.  In this regard, they submit that if they are successful in the proceeding, the order for costs which is made and the form it takes will be determined at the conclusion of the trial, however the “standard position” is that each plaintiff would be jointly and severally liable for the defendants’ costs.  The defendants point to my finding in my primary reasons that the plaintiffs’ claims overlap and are inextricably enmeshed.  They also emphasise that Mr McKendrick is paying the legal costs of Capital and, in those circumstances, there is no reason to conclude that there will be any departure from the ordinary rule that the costs order be joint and several and that Capital should provide security on that basis.
25	The defendants also submit that the orders for provision of security should include an allowance for the defendants’ costs of this application for security because if this does not occur this will result in the defendants bearing their own costs of that application.  It is said that this would be unjust in circumstances where the defendants were wholly successful and Mr McKendrick is funding Capital’s legal costs.
26	Finally, the defendants contend that Capital’s submission that the quantum of security should be adjusted by a percentage, said to be 10%, relying on a decision of Heerey J in Farmitalia, should be rejected.  They contend that the relevant principles are those recently summarised by Riordan J in Troiano.  In any event, they say there is no reason to apply a percentage discount here and Capital has not identified which of the specific factors mentioned in Farmitalia by Heerey J justify the application of a percentage discount in these circumstances.
27	Finally, the defendants contend that the evidence sought to be adduced by Mr McKendrick in his Fourth Affidavit of 4 June 2021, should be rejected.  They contend that in seeking to adduce the evidence in that affidavit, Mr McKendrick impermissibly seeks to reagitate matters which have already been heard and determined by the Court and that is not open for the plaintiffs to adduce new evidence purporting to show that any order for security would stifle the proceeding or otherwise operate oppressively.  The defendants say that in any event, Mr McKendrick’s affidavit is incomplete in important respects in that he has not, for example, provided details of the redundancy package received from his previous employer nor has he deposed to any attempts to obtain third party funding from financiers or third party contacts.
Capital’s submissions as to quantum
28	In its submissions, Capital contends that:
(a)	security should only be ordered up to and including the costs of the second mediation;
(b)	the total quantum sought by the defendants ought be reduced to the amount of $104,497.09, or alternatively $118,796.80;
(c)	a further discount at the Court’s discretion be imposed on the total quantum claimed in line with the principles identified by Heerey J in Farmitalia; 
(d)	the total costs claimed by the defendants should be apportioned 50/50 between the two plaintiffs; and
(e)	the costs of the security for costs application should not be included in the security provided.
29	In the Second Van den Berg Report, Ms Van den Berg estimates the defendants’ costs exclusive of the security for costs application as being:
(a)	if no further discovery is ordered:
(i)	to the end of the second mediation: $104,497.09, with $52,248.55 payable by Capital on a 50/50 basis;
(ii)	to the end of the first day of the trial: $157,573.31, with $78,786.66 payable by Capital on a 50/50 basis;
(iii)	to the end of the trial: $221,280.23, with $110,640.12 payable by Capital on a 50/50 basis; and
(b)	if further but limited discovery is ordered:
(i)	to the end of the second mediation: $118,796.80 with $59,398.40 payable by Capital on a 50/50 basis;
(ii)	to the end of the first day of trial: $172,389.97, with $86,194.99 payable by Capital on a 50/50 basis; and
(iii)	to the end of trial: $236,096.89, with $118,048.45 payable by Capital on a 50/50 basis.
30	Capital submits that it should only be ordered to pay security for costs up to and including the second mediation.  This submission is based on a contention that there is a possibility that the matter may settle at the second mediation and to make an order for security up to the first day of trial would impose unreasonable hardship on Mr McKendrick, who, it is conceded, is paying the costs on behalf of Capital.  The plaintiffs say that if the matter does not settle at the second mediation, the question of the provision of further security can be revisited at that time.  As I indicated to the parties, I agree with the submission that security should, at this point, only be ordered for the period up to and including the second mediation and it is an approach which is commonly taken in the authorities.  If the mediation is not successful, there can be an approach to the Court for the provision of additional security.
31	As to the assumption that there should be an apportionment of the costs on a 50/50 basis between the plaintiffs, Capital submits that the evidence provided in the Second Grisenti Report was based on instructions received from the defendants’ solicitors in their letter of 17 November 2020 together with a supplementary email of Rosemary Kanan, solicitor for the defendants, of 23 November 2020.
32	Capital contends that this assumption is erroneous because its claims overlap and are enmeshed with Mr McKendrick’s such that any future costs order against the plaintiffs is likely to be joint and several.  In this regard, they point to the passage in my primary reasons in which I state:
the involvement and interest of Mr McKendrick in the outcome of the proceeding and his role as the directing mind and driving force behind Capital in the proceeding are such that it seems to me more than likely that a joint and several order for costs would be made.
33	Capital contends this to be a basis for a submission that any assessment of a quantum of the security should be estimated on a 50/50 basis between the plaintiffs.
34	I do not accept that submission.  If a joint and several order was made for costs in the event of an adverse outcome for the plaintiffs, which I regard is more than likely, each of the plaintiffs would be liable for the whole sum.  If, as Capital contends, there should be a 50/50 apportionment this involves an acceptance that any adverse order for costs would be several as distinct from joint and several and I think that that outcome is somewhat unlikely.
35	Capital says that the instructions provided to Mr Grisenti were incorrect, unreasonable or unnecessary and addresses several categories of activity in which this is said to be so by reference to the description in the table extracted above.
36	As to discovery, Deutsch Miller, the defendants’ solicitors, instructed Mr Grisenti that discovery would be ordered.  In a subsequent email of Ms Kanan of Deutsch Miller, this was qualified and Mr Grisenti was asked to assume that the plaintiffs would give discovery of approximately 500 documents and the defendants 3,000-4,000 documents.  In the Second Grisenti Report, Mr Grisenti estimates the costs of discovery to be $87,654.36, based on an estimate that each discovered document is two pages, being 1,000 pages for the plaintiffs’ discovery and 7,000 pages for the defendants’ discovery.
37	It is contended by Capital that this estimate is overstated and it was asserted that there is a tendency in this Court to limit the discovery of documents in oppression proceedings.  It is also submitted that in “many cases” no discovery is ordered, rather, parties are required to produce critical documents under s 26 of the Civil Procedure Act 2010 (Vic) instead of making discovery.  Reference was also made to the affidavit of Ms Heeps where she deposes that many of the critical documents which are relevant to the subject of the proceeding have already been provided by the parties by being exhibited to the affidavits which have been filed.  As such, it is contended that there should be no costs payable for discovery.  In the alternative, it is submitted, that if an allocation of costs to discovery is granted that that should be limited and an appropriate estimate of the costs of such discovery is $7,385 in professional charges with $6,545.45 in disbursements. 
38	As to interlocutory applications, reference is made to Deutsch Miller’s letter of instruction to Mr Grisenti that there would be at least one contested interlocutory application with an estimated duration of one day together with three directions hearings.  Mr Grisenti estimates that the costs of such an interlocutory application (which are not the costs of the security for costs application, the subject of separate calculation) will be $25,712.18.  Ms Heeps observes in her affidavit that there is no explanation as to why Mr Grisenti was instructed to include the cost of an interlocutory application involving both senior and junior counsel.  Further, there was no indication what the substance of such an interlocutory application would be and therefore no allowance should be made for this category in any estimate as to costs.
39	As to the category of expert evidence, the letter of instructions provided to Mr Grisenti contends that both parties will serve one major and substantive expert report in chief as to damages and/or liability.  In response to that instruction, Mr Grisenti estimates that the defendants’ costs relating to these experts reports will be $28,856.27.  Capital submits that there is no requirement for any expert evidence in this proceeding, particularly as to valuation, as Credit Clear is listed on the ASX and its market value is ascertainable as to its daily share price.  It is said that no allowance should be made for this category.
40	As to subpoenas and notices to produce, Mr Grisenti was instructed that both parties would serve at least two subpoenas and two notices to produce and Mr Grisenti estimates that this will cost the defendant $6,094.48.  Capital submits there is no identification in the letter of instruction as to the nature of the documents that will be subject to such notice or subpoenas and that no allowance should be made in respect of this category.
41	In addition to the categories referred to above, Capital contends that the final quantum should be the subject of a further adjustment by a percentage in accordance with the exercise of the Court’s discretion described by Heerey J in Farmitalia. 
42	In Capital’s submissions it is contended that Capital is impecunious, has no assets other than its claim for relief in this proceeding, and its sole director and shareholder, Mr McKendrick, its co-plaintiff, is of limited means. Reference was made to my observation in my primary reasons that Mr McKendrick’s income was substantial by community standards and would enable him to procure funding.  It is contended that Mr McKendrick’s financial position has deteriorated since the first hearing of this application.  In this regard, reference was made to the Fourth McKendrick Affidavit in which he deposes that his employment was terminated in February 2021.  It is said that since the beginning of April, Mr McKendrick has commenced working with a new company on a 12 month contract but at a reduced salary of $75,000 per annum.  Mr McKendrick states that he has approximately $18,000 cash in bank and $62,000 in shares against a credit card debt of $18,000 and an amount of $53,562 owing in billed legal costs.  It is submitted that the quantum ordered should not be so great so as to deny the plaintiffs the right to pursue their remedies for oppression.
43	As I have said, the defendants resist the Fourth McKendrick Affidavit being received into evidence, but I think it has relevance in the context of fixing quantum.  The Court of Appeal has observed that the Court should be mindful not to make an order for security of an amount: 
…must not be so low that it fails to provide any real protection to the party seeking security, or so high that it is oppressive to the party required to provide the security. The amount must be ‘just and reasonable’ in all the circumstances of the particular case.
I consider the Fourth McKendrick Affidavit should be admitted into evidence as it goes to the issue of arriving at the quantum of security which is not oppressive.  I note the defendants’ observations in regard to the shortcomings of Mr McKendrick’s evidence in his fourth affidavit as to his failure to advert to redundancy packages and the like but I am still minded to have regard to it.
44	It is also submitted that, given the discrepancies in quantum between the two costs experts, the Court should be mindful that the amount claimed by the defendants would be reduced by the taxing officer.
45	As to the costs of the application, Capital acknowledges in its submissions that the defendants have been successful in the application and are entitled to an order for costs but rejects the submission that the costs of the application should be included in the security ordered.  However, Capital says that such costs should not be immediately taxable.
46	By way of conclusion, Capital contends that the Court should not order any more than $47,023.69 to the defendants for their security.  This is calculated by reference to:
(a)	the defendants’ costs up to the second mediation, excluding discovery and the security for costs application, $104,497.09;
(b)	minus a discretionary reduction of 10%, being $10,449.71, i.e. $94,047.38; and
(c)	divided by two, being Capital’s 50% cost obligation, i.e. $47,023.69.
47	It is said that, following the ordering of security, Capital can pay the security into Court in a series of tranches, with the first tranche being the amount of $20,000 and paid within 21 days of the Court’s order.
Consideration
48	As I indicated above, I consider it appropriate to order security for the defendants’ costs up to the conclusion of the second mediation and, if the circumstances require it, the defendants can make application for further security after that.  To order security up to the first day of trial would, in my opinion, be oppressive.  As the Court of Appeal observes in Trailer Trash, the relevant sections of which are extracted above, setting the quantum of security involves fixing an amount which is adequate in all the circumstances of the case, which is not so low that it fails to provide real protection to the defendants or so high that it is oppressive to Capital.
49	I am not inclined to order that security be provided in instalments as Capital submitted.  While it is not unusual for Courts to order that security be provided in tranches identified by reference to various stages of a proceeding, no authority was cited as an example of payment of a tranche by a series of instalment payments.  There are instances in which the parties can agree for payment by instalments but my own research, including of Professor Dal Pont’s Law of Costs, did not reveal an example of a Court providing for payment of security by instalments.
50	As I indicated earlier, in my view it is more likely that a joint and several order would be made for costs in the event of any adverse outcome for the plaintiffs and as such I do not think it is appropriate to split the quantum 50/50 in accordance with Capital’s submission.  I do note, however, that the defendants appeared to concede in their instructions to their costs consultant that there should be a notional split of 90/10.  The reasons for these instructions are not explained, particularly in the context of the defendants contending there is likely to be a joint and several order for costs, but I am minded to bring that into consideration in arriving at the final amount ordered to be provided as security.
51	In light of my views as to the approach I should adopt, I now turn to the individual categories of work described in the parties’ submissions.
52	In regard to discovery, I accept that the defendants will incur costs in the provision of discovery and that this is a case in which the contemporaneously generated documents the subject of that discovery are numerous and seem likely to assume considerable significance.  As such, I do not think that this is a case which lends itself to production of ‘critical documents’.  On the other hand, a good deal of the case would seem to require the consideration of what was said at meetings between the parties, the cost of which would be found in lay witness evidence.  I consider that an appropriate amount in respect of that aspect of the defendants’ costs would be $35,000.
53	As to the costs which should be allowed for the preparation of lay witness evidence I consider that, balancing the various discretionary factors mentioned, there should be an amount of $55,000 allowed for this category.  In doing so, I take into account that a good proportion of the costs associated with this category will likely be incurred after the second mediation.
54	The defendant contends it will be necessary to engage expert evidence whereas Capital considers this to be unnecessary as reference can be made to the price of the company’s shares on the ASX.  I think Capital’s approach is somewhat simplistic and I cannot predict how the trial judge would approach the issue in this instance.  An examination of the authorities reveals a variety of approaches as to how the Court will exercise its discretion in deciding the appropriate date at which a valuation should occur.  In United Rural Enterprises Pty Ltd v Lopmand Pty Ltd, Campbell J observed:
…the opening words of s 233(1) Corporations Act 2001, empowering the court to “make any order under this section that it considers appropriate in relation to the company” is not restricted by the terms of paras (a) to (j) of s 233(1). Further, s 233(1)(d) says nothing about the price for which purchase of shares can be ordered, or the basis for calculation of such a price. The only legal restriction on the way in which the price may be calculated is that it be a proper exercise of a judicial discretion.
55	In Re Quest Exploration Pty Ltd, MacKenzie J observed there was “no hard and fast rule” as to the appropriate date for determination of valuation.
56	There are a variety of possibilities as to which date the Court will determine should be used for the purposes of the valuation of the plaintiffs’ loss if their claim for oppression is made out.  I consider that the defendants are entitled to engage experts for this purpose.  For their part, the defendants contend that if there is any loss it should be measured by reference to the date that the Separation Agreement was entered into and it seems expert evidence would be required for that purpose if it becomes necessary.  I consider that an appropriate allowance for this category is $17,500.
57	On the costs for any subpoenas, I consider it is more probable than not that the defendants will incur the cost of subpoenaing the individuals they have identified in order to obtain any documents that they hold.  I would allow $3,500 for that exercise.
58	The nature of the interlocutory application for which security is sought by the defendants is not identified but I consider that it is probable that there will be interlocutory skirmishes in this proceeding.  I think it is appropriate to require Capital to provide some security for this likely scenario but I think this can be achieved by allowing for the engagement of junior counsel only.  I would allow $10,000 for this category.
59	As to the amount sought in respect of directions hearings, there is not a wide disparity between the parties.  I would allow $10,000 for this category.
60	Similarly, there is no significant difference between the parties as to the amount to be allowed as to the conduct of the second mediation.  I will allow $23,000 for this cost.
61	The respective costs experts engaged by the parties both refer to ‘loading on professional fees’.  Item 17 of the Supreme Court Scale of Costs lists the various criteria to be applied in the assessment of what, if any, loading should be allowed on a taxation.  In summary, the criteria found in item 17 address matters relevant to the complexity of the proceeding.  The relevant practice note prescribes a range of 0% to 15% for this loading, with the most complex and contentious matters being allowed a 15% loading over the scale at taxation.  I consider on the material before me that, for a large part, the case is a “facts case” and not one involving complex questions of law.  I would be more inclined to accept Ms Van den Berg’s assessment that a 5% loading is appropriate.
62	The defendants submitted that the costs associated with the making of this application should be included in the amount ordered to be paid as security.  I do not accept that submission.  I think it is more appropriate that such costs be the subject of a conventional order and I shall deal with what form of order is appropriate later in these reasons.
63	The addition of the amounts I have stated above for the various categories result in a total of $154,000.  An application of a 5% loading brings the total to $161,700.  Using a “broad brush” approach, I would then discount this figure to take into account:
(i)	the likelihood that the Costs Court will reduce the amount on a taxation; 
(ii)	a recognition that the amount ordered is not supposed to be a complete indemnity; and
(iii)	the defendants’ apparent concession that Capital should notionally bear the costs as to a 90/10 split.  
I will order that security be provided in the amount of $135,000.
64	In its submissions, Capital acknowledges the defendants have been successful on the application are entitled to an order for costs.  I think that is an appropriate concession and one borne out by a consideration of the authorities.  In this regard, in Trailer Trash, the Court of Appeal observed:
As the applicants succeeded in obtaining the relief that they sought, namely an order for further security for costs, they were prima facie entitled to an order for costs pursuant to the principle that costs follow the event.  Although that principle is not applied automatically, there must be sound reasons based on the justice of a particular case to justify departure from the principle.  This is particularly so if the court proposes to go beyond refusing to make any order for costs and make an order that the successful party pay the costs of the unsuccessful party.
While Capital will be  ordered to pay considerably less than the amount sought by the defendants, I do not consider that this is a reason to depart from the principle that the costs should follow the event.  Capital’s submissions, however, appear to reserve its right to make submissions on the question of costs following the Court’s decision on quantum and it is not clear, having regard to its acknowledgement on the question, what is meant by this.  If it is necessary, I will hear from the parties on this.
65	I would ask the parties to prepare a form of order which complies with these reasons, which will include the form that the security is to take, the date by which it is to be provided and the consequence if it is not provided.  In the event that the parties cannot reach agreement in that regard they should approach my associate so that the matter can be listed for mention.

SCHEDULE OF PARTIES

		
	S ECI 2020 02950	

BETWEEN:		

TRENT MARSHALL MCKENDRICK	First plaintiff 	
		
ACN 604 594 621 (ACN 604 594 621) 
(FORMERLY KNOWN AS C CAPITAL PTY LTD)	Second plaintiff	
		
- and -		
		
CREDIT CLEAR LIMITED (FORMERLY CREDIT CLEAR PTY LTD) (ACN 604 797 033)	First defendant	
		
CASEY CONSULTING SERVICES PTY LTD 
(ACN 070 047 997) AS TRUSTEE FOR THE CASEY CONSULTING SERVICES TRUST	Second defendant 	
		
ROMANO FAMILY HOLDINGS PTY LTD 
(ACN 169 299 174) AS TRUSTEE FOR THE LEWIS ROMANO FAMILY TRUST	Third defendant