In Shoreside Pty Ltd v Wroxton Developments Pty Ltd [2023] WADC 112, a provider of construction services sued a property developer for unpaid invoices under a consultancy agreement. Applications for security for costs were made by the defendants just weeks before the trial, despite the case having commenced over 3 years earlier.
Judge Gething of the District Court of Western Australia considered the principles concerning delay in applying for security and the exercise of discretion under Corporations Act 2001 (Cth) s 1335.
His Honour observed that an unexplained delay is a factor against the grant of security for costs, citing the rationale given by Moffitt P in Buckley v Bennell Design & Construction Pty Ltd (1974) 1 ACLR 301 that a company is entitled to know its position early on before substantial sums are spent on litigation. However, Jackson J has noted the discretionary nature of security powers, finding there can be no strict 'entitlement' to early notice (Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jacques [2016] QSC 2). The position appears best reconciled, as French J put it in Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497, by the further the plaintiff has proceeded before a security application, the harder it will be to justify the order as not unfair or oppressive.
Critically, Judge Gething reasoned that fairness dictates security be sought early so a company can make choices about providing security or allowing proceedings to be stayed before too many resources are expended. The unexplained failure of the defendants to apply earlier weighed heavily against exercise of the discretion. Additionally, any order would likely require vacating the looming trial dates, causing prejudice and wasted costs, factors also weighing against security in Attorney-General of Botswana v Aussie Diamond Products Pty Ltd [2009] WASC 299 per Kenneth Martin J. The balance in s 1335 is to avoid injustice to both parties, and vacating dates at this very late stage could not be justified.
Ultimately security was still ordered, but structured to avoid delaying trial. Rather than the full $150,000 sought or payment into court, Judge Gething ordered the plaintiff company's directors to personally undertake to pay up to $50,000 towards any costs ordered against the plaintiff. This middle ground approach avoided fully staying the claim which would prejudice preparations, but still provided some protection to the defendants. The undertaking was mutually exclusive, so together the directors remained liable for $50,000 maximum. This balanced the defendant's interests while preventing trial disruption. The orders demonstrate that even where delay weighs against security, the court retains a discretion to craft solutions mitigating potential injustice to defendants, provided the remedy does not itself cause disproportionate prejudice. Here, a compromised security undertaking maintained the trial dates without imposing an unrealistic financial burden on the individuals behind the plaintiff company.
This case demonstrates that unexplained delay in seeking security until close to trial will be an influential factor against ordering security for costs, given the potential for wasted expenditure and disruption to litigation at an advanced stage. While s 1335 confers a discretionary power, fairness generally mandates bringing security applications promptly so corporate parties can understand their position early on. Delayed applications without adequate explanation risk denial for being oppressive or causing unnecessary prejudice. The underlying policy is to balance protecting defendants from impecunious companies, with avoiding injustice by hampering companies from pursuing their cases.