A Judge has dismissed a respondent’s application for security for costs that contained estimates that were “grossly inflated, far beyond the realm of what might be reasonably arguable as an estimate of the costs of an appeal”.
The appeal was against an order dismissing a mortgagor’s claim that the mortgagee breached its duty under s 420A of the Corporations Act in selling the mortgagor’s property; the mortgagee sought security for costs; There was also a cross-appeal from a declaration that a rate of interest, some 79% per annum, was a penalty.
The Judge’s comments
While making some concessions to the difficulties encountered by the applicant’s solicitors, Justice Leeming made these comments, as paraphrased:
Nonetheless, it is troubling when a solicitor of this Court produces an affidavit containing estimates of costs such as those which were relied upon before me. This is not a case where estimates have been given which are contestably high. This is a case where many of the estimates of costs bear no relationship with the realities of defending an appeal. They included amounts (all exclusive of GST) of:
(1) $8,380 (including 2 hours of senior counsel’s time and 16 hours of solicitors’ and junior counsel’s time) attending and preparing for directions hearings;
(2) $16,840 dealing with a potential application seeking leave to amend a notice of appeal – there are few occasions when there can be sensible opposition to an amendment to a notice of appeal, and there is nothing to suggest that there was any proper basis in the present case to oppose an amendment;
(3) $17,550 reviewing the appeal books prepared by the appellants with a view to either including extra documents or excluding documents from them – the burden lies on the appellants to include the evidence and transcript which is relevant and necessary for the determination of the proceedings (UCPR rr 51.28 and 51.29) and if that is complied with, nothing more need be done by the respondents, and there is nothing to suggest that the appellants will fail to do this;
(4) $9,010 for the contingency that the respondents will incur costs in that amount “for any motion dealing with leave of the Court to make any Additions to the Appeal Book” – even if that contingency came to eventuate, when a respondent wishes to supplement the record books, the Registrar will ordinarily direct the preparation by the respondent of supplementary appeal books;
(5) contingencies totalling $111,130 (including the $9,010 mentioned above), all of which had in common that the possible expense was unlikely to be incurred, in which case it is difficult to see a proper basis for ordering the appellants to provide security against the possibility that it is incurred and the respondents obtain a favourable costs order which they cannot enforce;
(6) the astonishing sum of $27,440 for reviewing the appellants’ chronology and preparing the respondents’ own chronology – it is to be borne in mind that (a) only if the appellant’s chronology is inadequate is any chronology by the respondents warranted, and (b) even if a chronology were prepared afresh, it could not conceivably warrant 6.5 hrs of senior counsel’s time, 14 hours of junior counsel’s time, and 44 hours of solicitors’ time;
(7) $3,690 for marking up submissions in order to put blue and black book references on the submissions supplied by the respondents – this is administrative and should be the work of an hour or so.
In the end, more than a quarter of a million dollars of estimated costs contained in the solicitor’s affidavit could not be justified.
“ … it is absurd to think that the respondents to a one or even a two day appeal could properly incur costs of $434,461 or anything like that amount”.
The Judge speculated as to the reasons for these high costs, but expressed no concluded view. But “whatever be the reason, the fact is that the estimates are grossly inflated, far beyond the realm of what might be reasonably arguable as an estimate of the costs of an appeal”.
Justice Leeming concluded:
- … If contrary to what I have already decided this were a case for security for costs, I would, in the exercise of my discretion, order none. That is because, irrespective of the reason such a wildly exaggerated estimate was deposed to, it is quite wrong for such estimates to be propounded in this Court. The respondents seek a discretionary order, but rely on an obviously untenable evidentiary basis for an essential element of the order they seek. As much was pointed out to them in advance of the hearing. No attempt was made to attend to the self-evident deficiencies in the evidence. A less unrealistic amount of security might be $50,000 or $70,000, as was pointed out in the appellants’ submissions, but why should even that amount be ordered when the moving party has so grossly inflated its estimate of its own costs?”.
He dismissed the application. Hung v Aquamore Credit Equity Pty Ltd  NSWCA 123 (4 July 2022) (austlii.edu.au)