NZX Limited v Ralex Commodities Pty Limited [2012] NZHC 1585 (5 July 2012)

Last Updated: 27 July 2012

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2011-485-1299 [2012] NZHC 1585

BETWEEN NZX LIMITED

Plaintiff/First Counterclaim Defendant

AND RALEC COMMODITIES PTY LIMITED First Defendant/First Counterclaim Plaintiff

AND RALEC INTERACTIVE PTY LIMITED Second Defendant/Second Counterclaim Plaintiff

AND GRANT DAVIS THOMAS Third Defendant

AND GRANT THOMAS NOMINEES PTY LIMITED

Fourth Defendant

AND DOMINIC LUKE PYM Fifth Defendant

AND PYM FAMILY PTY LTD Sixth Defendant

AND NZX HOLDING NO 4 LIMITED Second Counterclaim Defendant

AND MARK RHYS WELDON Third Counterclaim Defendant

Hearing: 22 June 2012

Counsel: B Latimour and B Cash for first and second counterclaim defendants

A R Galbraith QC and E M Greig for third counterclaim defendant T J North SC and J K Scragg for first and second counterclaim plaintiffs

Judgment: 5 July 2012

RESERVED JUDGMENT OF DOBSON J (Security for Costs)

NZX LIMITED v RALEC COMMODITIES PTY LIMITED HC WN CIV-2011-485-1299 [5 July 2012]

Introduction

[1] This judgment deals with an application for security for costs that arose in the following context.

[2] In 2009, the plaintiff (NZX) purchased a business in Australia that was in its start-up phase. It had two components, one that was intended to evolve into an on-line grain trading business, and a second that involved the management of, and access to, electronically stored information in relation to supply of, and demand for, primary produce, in particular grain. The first and second defendants (the Ralec companies) were the corporate entities that had devised and were managing the business, with the third to sixth defendants being the driving forces behind the Ralec companies, as well as the separate corporate entities used by the larger shareholders to own their holdings in the Ralec companies.

[3] The sale and purchase agreement (SPA) provided for initial consideration of A$7 million that was paid by NZX. The SPA also provided for the prospect of adding three other components to the consideration for the business, each of which depended on an aspect of subsequent performance of the business.

[4] The business acquired has not performed to NZX’s expectations, and in these proceedings, NZX sues the vendor companies, and those who guaranteed the performance of the vendor companies, for breach of the SPA. There are five causes of action alleging misrepresentation, breach of warranties, failure of on-going obligations, as well as a claim for misleading conduct under the Fair Trading Act

1986 and a claim against the guarantors of the vendors’ performance.

[5] The Ralec companies have counterclaimed for breaches of the SPA, breaches of representations that it claims have induced entry into the contract by the vendors and guarantors, and misleading representations in trade under the Fair Trading Act or equivalent Australian statutes. In addition to bringing the counterclaim against NZX, the Ralec companies have joined as additional counterclaim defendants a wholly owned subsidiary of NZX, NZX Holding No 4 Limited (NZX4) and Mr Mark Weldon who was, at all times material to the causes of action and the counterclaims,

the chief executive of NZX. They also allege breaches of duties of care owed to them by NZX, NZX4 and Mr Weldon, as well as breach of fiduciary duty by NZX and NZX4 in their post-settlement conduct.

[6] The counterclaims allege that the breaches by NZX have deprived the vendors of the opportunity to earn the additional payments that were provided for under the SPA, but were conditional on the subsequent performance of the business. Two of the provisions provided for additional payments totalling A$13 million if certain milestones were achieved, and the third provided a formula which NZX projects might add up to approximately another A$3 million.

[7] NZX for itself, and for NZX4, and Mr Weldon applied for security for costs, which was opposed by the counterclaim plaintiffs.

Jurisdiction to award security

[8] It is accepted that the Ralec companies are impecunious. The sale transaction was structured on terms that the companies would receive the initial consideration for the sale of the business, and then disburse the proceeds to their shareholders. A schedule to the SPA defines somewhat different categories of beneficiaries who would become entitled to different portions of any subsequent consideration that became payable under the SPA.

[9] Accordingly, the two alternative threshold tests for jurisdiction to order security for costs are made out. The counterclaim plaintiffs are corporations incorporated outside New Zealand, and there are good reasons to believe they will be unable to pay costs.1

[10] Once that point is reached, the Court has a discretion as to whether to order security for costs and, if so, on what terms. Such decisions involve a balancing of interests, with the Court being concerned not to prevent a claimant pursuing a claim on the one hand, but on the other protecting a defendant from what may be unjustified litigation following which an entitlement to costs would be rendered

nugatory. Whilst there are numerous helpful examples of the manner in which this discretion is exercised, such authorities also reflect a caution that no single case should be seen as a precedent for others, because of the infinite variety of the factors that will arise on both sides of the evaluation, and the weight to be given to them in the circumstances of a particular case.2

Grounds for an order: Mr Weldon

[11] The entitlement to security for costs was treated by the various counterclaim defendants as raising distinct issues, and separate arguments were advanced respectively for Mr Weldon by Mr Galbraith QC, and for NZX and NZX4 by Mr Latimour. In essence, the arguments for Mr Weldon covered the following

_points:

That he had been joined for strategic or tactical reasons, even although no

_{independent or separate relief was sought from him.}

It was virtually inconceivable to contemplate circumstances in which the counterclaimants could make out a claim for relief against Mr Weldon, but not against NZX. There could not be realistic doubts about the financial capacity of NZX to meet such a judgment and its resources were

_{infinitely more extensive than those of Mr Weldon.}

The tactical motivation of citing Mr Weldon as a separate counterclaim defendant is more pronounced in circumstances where none of the solvent defendants who would be the beneficiaries of any judgment on the counterclaims have been added as a counterclaimant. This leads to the prospect that the counterclaim could, in the absence of security for

_{costs, be pursued with impunity.}

The last concern cited leads to an undesirable imbalance in the conduct of complex litigation, being a variant of the imbalance that may arise where one party is legally aided: if the discipline of the risk of adverse costs

orders applies unequally between the parties, then that can

_{inappropriately or unfairly affect the conduct of the litigation.}

The sums involved are substantial, the issues are likely to be exhaustively argued, and the scope of factual matters raised by the counterclaims are

_{relatively complex.}

The counterclaims against Mr Weldon are weak, and depend, in one claim, on the relatively novel proposition that an employee of one party to the SPA owed duties to the other party as to the manner in which the business would be conducted after its acquisition. Another of the claims against Mr Weldon depends on the proposition that, notwithstanding the allegations of his involvement as chief executive of NZX and/or a director of NZX4, he was participating “in trade” on his own behalf or,

_{further or alternatively, on behalf of NZX.}3

Somehow, between the defendants/counterclaimants, those with financial resources were committing substantial resources to the proceedings. Evidence analysing the asset position of Messrs Pym and Thomas, and corporate entities in which they or their families have beneficial interests, suggest more than sufficient financial resources to fund the proceedings, and in particular to fund any orders for security for costs. It would follow that if those who stood to benefit from successful counterclaims are prepared to fund them, there is no realistic prospect that an order for security for costs could not be met, and such an order would therefore not

_{prevent the counterclaims from being pursued.}

[12] In all of these circumstances, Mr Galbraith argued that staged orders for security for costs in favour of Mr Weldon were appropriate.

Grounds for an order: NZX and NZX4

[13] For NZX, Mr Latimour adopted many of the points advanced by Mr Galbraith. NZX cannot raise concerns that pursuit of the counterclaims against it is tactical, or that there is no independent requirement for its presence, as submitted for Mr Weldon. However, Mr Latimour did emphasise concerns about the imbalance between parties to substantial commercial litigation where one side is free of the discipline of meaningful costs orders against it for unsuccessful initiatives. Mr Latimour also emphasised the lack of meaningful rationale for the beneficiaries of the Ralec companies, who would receive the proceeds of a successful counterclaim, not committing to what he contended was their appropriate position as counterclaimants.

[14] A substantial component of Mr Latimour’s oral argument addressed the extent of difference between the scope of evidence and legal issues arising on NZX’s claim, when contrasted with the nature and scope of issues raised by the counterclaims. Mr Latimour urged the view that they were substantially different, and that the scope of the counterclaims went substantially beyond all that would be raised by a defence to NZX’s claims. Mr Latimour invited analogy with the question

posed by Lord Justice Bingham:4

... as a question of substance, not formality or pleading: is the defendant simply defending himself, or is he going beyond mere self-defence and launching a cross-claim with an independent vitality of its own?

[15] Lord Bingham’s question was adopted in a decision of Clifford J’s in April

2009 that involved an application for security for costs against counterclaimants.5 In that case, factors recognised as potentially relevant are whether the counterclaim arises out of the same transaction, whether the amount counterclaimed exceeds that which is claimed and whether the counterclaim plaintiff would have issued

_{proceedings had the plaintiff not done so.}6

4 _{Hutchison Telephone (UK) Ltd v Ultimate Response Ltd [1993] BCLC 307 (CA) at 317.}

5 Oceania Furniture Ltd v Debonaire Products Ltd HC Wellington CIV-2008-485-1701, 24 April

_2009.

6 At [11].

[16] Mr Latimour also suggested that a difference in scope between the evidence and issues in a claim and those raised by a counterclaim to the extent present in this case, even although they arise out of common origins, may be sufficient to warrant the granting of security for costs. He instanced the decision of Cooper J in McCracken v Burt:7

Whilst it may be that the counterclaim would in part answer the plaintiffs’ claim, it is obvious that it would go a great deal further than that. I am therefore not persuaded that security should be refused on the basis [that the respective claims arose out of common subject matter].

[17] Mr Latimour reinforced the applicability of this point, by citing evidence that suggested the counterclaimants intended to pursue the counterclaims before these proceedings were commenced, and irrespective of whether NZX pursued its claims. NZX has not quantified the damages it seeks, so any accurate comparison of the amounts claimed cannot be made. The counterclaim is certainly for very substantial amounts.

Arguments against any order

[18] Mr North SC offered robust responses to virtually all of these points.

[19] So far as the standing of Mr Weldon as a separate counterclaim defendant is concerned, Mr North argued that the part played by Mr Weldon was critical in setting out the narrative of events giving rise to the bases for liability. Having pleaded against him in the counterclaim, Mr North suggested that citing him as a separate counterclaim defendant was justified by the somewhat opaque denials as to the capacities in which he participated, as pleaded in the statement of defence to the counterclaim. An aspect of the counterclaimants’ procedural concerns was to impose a requirement for separate discovery from Mr Weldon and NZX4.

[20] Having made these points, Mr North also maintained that there was no requirement for a separate defence to be maintained on Mr Weldon’s behalf. He cited the fact that solicitors for NZX were also solicitors on the record for Mr Weldon, and suggested that the high likelihood of NZX indemnifying Mr Weldon

meant he would be indifferent to cost consequences. Only one statement of defence to the counterclaim, and one application for security for costs, have been filed. In his affidavit opposing the present application, Mr Thomas disputes that the counterclaims against NZX4 and Mr Weldon raise any additional legal or factual issues, “...in light of the degree of overlap in subject matter”.8

[21] Mr North was also dismissive of Mr Weldon having any separate reputational concerns that would warrant separate representation. Mr North said that reputational concerns had been foreshadowed as an issue for Mr Weldon in Victorian County Court proceedings, but, on Mr North’s view, such reputational concerns “came to nothing” in those proceedings and he predicted that the same position would pertain here.

[22] More generally, the counterclaimants dispute that security for costs should be granted because the counterclaims arise out of the same matters as NZX’s claims, and the substantial extent of overlap between legal and factual issues means that the same ground would have to be covered for NZX in any event.

[23] Mr Thomas’s affidavit in support of the opposition to the present application also denies that shareholders of the shell companies have made financial advances to the companies to enable them to pursue the proceedings. That denial is in rather confined terms. However, in reliance on it, Mr North argued that orders for security for costs would stifle pursuit of the counterclaims in circumstances where NZX was “the aggressor”, so that injustice would result if claims by both sides were not able to proceed and be heard together.

[24] Allied to the last point, Mr North characterised the Ralec companies’ impecuniosity as caused by NZX, which was likely to lead the Court to decline an order for security.

[25] Mr North also submitted that an order for security was unnecessary because the breadth of the Court’s discretion on costs would entitle it to make an order against defendants with assets in relation to the counterclaims notwithstanding that

they were not counterclaimants, if such an overall outcome was warranted. Mr North acknowledged that the counterclaims were pursued for the benefit of shareholders of the Ralec companies, so that (on his analysis) if the counterclaims failed and costs orders in favour of the counterclaim defendants were appropriate, then all defendants sued by NZX and not just those pursuing the counterclaims could be subject to such costs orders. He suggested that the counterclaims depended on the vendor companies’ status as vendors, so that it was not appropriate to cite as claimants others than the parties who contracted as vendors.

[26] Mr North also cited a provision in the guarantee of the Ralec companies’ performance by the major shareholders, which included indemnity in relation to “claim[s]” as an additional basis for attributing liability for costs orders to the solvent defendants. Schedule 15 to the SPA sets out a range of guarantees by the solvent defendants as guarantors of performance by the Ralec companies that include

an indemnity in favour of NZX as purchaser:9

...from and against any ... claim in any jurisdiction against the purchaser.

[27] Mr North argued that this provision provided adequate comfort for NZX in relation to security for payment of any costs award on the counterclaim. However, when I raised with him the limitations that might reasonably be read into the terms of this guarantee, he agreed that arguments would be open to the solvent defendants, to deny its application in the relevant circumstances. For instance, it could be argued that the indemnity only contemplated claims brought against NZX by third parties. Mr North also acknowledged that the guarantors would not disavow reliance on all such arguments, were a claim ever pursued against them on the guarantee.

Is an order justified in present circumstances?

[28] It is appropriate to consider NZX’s application for security for costs first. The primary issue is the extent of commonality between matters in issue in NZX’s claims, and those raised by the Ralec companies’ counterclaims. Mr Latimour was insistent that the scope of the two are quite distinct. He characterised NZX’s claims

as depending on relatively confined circumstances in the pre-contractual period, leading to terms in the contract sued upon, and similarly confined events post-settlement of the contract. It is understandable that NZX’s case will be run endeavouring to confine the issues to the aspects it identifies as directly relevant to its claim.

[29] However, subject to clear delineations on relevance, claimants in cases alleging breach of contract are seldom able to confine responses on behalf of the opposing contractual party, to a definition of relevance that suits the claimant. Here, the Ralec companies plead the substance of the same events in the same periods, both in defence to NZX’s claims and in advancing their counterclaims. Certain meetings and certain documents are likely to be traversed for both sides, from opposing perspectives.

[30] Without being able to make anything more than an approximate projection of the extent of overlap, I am satisfied that it will be substantial. Accordingly, for NZX to meet matters raised in defence on behalf of the Ralec companies, it will have to do work additional to that which would be involved in merely advancing its claims on its own analysis of the contractual issues.

[31] My present view is that there will remain a discrete series of issues that will need to be traversed, or need to be traversed in significant detail, only by virtue of the terms of the Ralec counterclaims.

[32] In terms of the factors identified by Clifford J in Oceania Furniture, these are counterclaims that do arise out of the same transaction. No precise comparison of the sums claimed is possible, but the counterclaims are certainly very substantial, and if NZX quantifies the damages claimed at anything like those amounts, it would be greater than a complete failure of the consideration paid thus far of A$7 million. On the evidence adduced in relation to the application, I find it more likely than not that the counterclaimants would have pursued claims of the kind raised by their present counterclaims, irrespective of whether NZX commenced the present proceedings. Given both a measure of doubt about that, and the wider

circumstances, this is not a factor that I treat as deserving of substantial weight in the present case.

[33] Certainly, I treat a comparison of claims and counterclaims here as analogous to the situation confronting Cooper J in McCracken, and an approach consistent with that is to be applied here. As in that case, the counterclaim here does much more than answer the plaintiff’s claim and whilst it is in part an answer to the plaintiff’s claim, it would go a great deal further than that if it is eventually traversed on the scope of the present pleadings.

[34] There is not an inter-dependence between the respective outcomes, in that, conceptually at least, both claims and counterclaims could either succeed or fail. In that sense, the counterclaims have a life of their own, and that has some relevance in considering the position of the counterclaim defendants opposing them.

[35] To the extent that orders for security for costs are warranted, I am not persuaded that they are inappropriate because they would stifle pursuit of the counterclaims. Although the counterclaim plaintiffs’ position on funding is opaque, the reality is that substantial benefit of any success in the counterclaims would accrue to the remaining defendants who do not deny being in a financial position to provide security. This feature invites analogy with the approach of the Court of

Appeal in Computer Training Services Ltd v Universal Data Systems Ltd.10 In that

case, the ability of shareholders in an impecunious company to provide security was a factor in favour of granting security for costs, as they stood to benefit from success in the litigation.

[36] Nor do I treat this as a situation in which the impecuniosity of the counterclaimants has been “caused” in the requisite sense by the conduct of NZX. This is not a situation in which NZX has harmed the Ralec companies rendering them impecunious when they would otherwise be solvent litigants. Rather, the parties co-operated in designing the form of the transaction in a way that would leave the Ralec companies as shells, after the initial settlement. NZX must have

_{anticipated distribution of the assets that might otherwise have remained in Ralec,}

10 Computer Training Services Ltd v Universal Data Systems Ltd [2001] NZCA 305; (2001) 15 PRNZ 401 at [41].

but that was to the advantage of the shareholders of those companies and they are the same entities that would benefit from any success with the counterclaims. They are therefore interested and appropriate “backers” of the counterclaims pursued in the name of the Ralec companies.

[37] I am not satisfied that an order for security for costs should be declined because of the prospect that the Court might ultimately be persuaded to exercise a discretion to order costs against the solvent defendants, in relation to an unsuccessful pursuit of the counterclaim, where those defendants were not themselves counterclaimants. Mr North raised a number of points in support of his submission to the effect that the prospect of such an order was sufficient protection for the counterclaim defendants.

[38] First, I took a point he made in oral argument to rely on the terms of r 14.15 of the High Court Rules as at least an analogy for the breadth of the Court’s jurisdiction on costs extending as far as the present situation. However, that rule confines the scope of awards of costs that might be made in favour of successful defendants, if they have separately defended a proceeding and it appears to the Court that they could all have joined in a single defence. Neither that provision, nor r 14.16 (also referred to in passing by Mr North), which addresses the situation on awards of costs where both a claim and counterclaim are established, provide any basis for jurisdiction to order costs against a non-party to a counterclaim proceeding, merely because the “non-party” was a defendant to a claim pursued in the same proceedings.

[39] I would not dismiss entirely the prospect of the Court having a discretion in appropriate circumstances to consider including a non-party to a counterclaim in an order as to costs. However, the circumstances justifying such an unusual move would most likely be exceptional, and the limited prospects for such an outcome cannot constitute an answer to an application for security for costs, if that entitlement is otherwise made out.

[40] Mr North invited an analogy with the Full Court of the Queensland Supreme Court decision in Harpur v Ariadne Australia Ltd.11 There, impecunious companies were joined as plaintiffs by Mr Harpur who was accepted as being of substantial means. A provision in the Queensland Companies Code was invoked that enables orders for security for costs where there is reason to believe that a corporate plaintiff would be unable to pay the costs of a successful defendant. However, such

protection is not necessary where a further claimant who would be good for costs is already vulnerable because of his involvement.

[41] An order for security for costs against the impecunious companies was discharged on appeal on the basis that Mr Harpur’s participation as a plaintiff meant that he had “...come out from behind the skirts of the company, at least to bring his own assets into play”.12 That analysis is not applicable here because thus far at least, the counterclaimants do not include a solvent claimant whose notionally available assets ought to assuage the relevant concerns of the counterclaim defendants.

Mr North was inclined to adopt the metaphor that the solvent defendants had “come out from behind the skirts of the [impecunious] companies”, but that has not occurred within the counterclaim proceeding.

[42] I am also not satisfied that NZX’s entitlement to security for costs is removed by the existence of the guarantee provision in Schedule 15 to the SPA. Its application to the contingency present here is at best arguable. The counterclaim defendants should not have to assume the risk of enforcing this guarantee in order to be paid any costs entitlement in the proceedings.

[43] So far as Mr Weldon’s application is concerned, I am satisfied that his application should not be dismissed on the ground that he could sufficiently rely on solicitors and counsel for NZX to protect his position in all the contingencies that are likely to arise. At this early stage, it appears relatively unlikely that requirements will arise for separate, substantive initiatives on Mr Weldon’s behalf. However, there are realistic prospects for separate analysis and advice. Given his departure

_{from NZX, his wish to be separately advised and potentially separately represented}

11 _{Harpur v Ariadne Australia Ltd [1984] 2 Qd R 523.}

12 At 532/24.

is an understandable reaction to the counterclaimants’ initiative in citing him as a

separate defendant to the counterclaims.

[44] I am accordingly satisfied that grounds are made out for an order for security for costs in his favour. I recognise that the extent to which NZX might reasonably be expected to shoulder the burden of work in defending the counterclaims that is the same for all counterclaim defendants, will affect considerations on quantum.

Quantum

[45] Turning to the issue of the terms of any order for security and its quantum, it is appropriate that orders be made on a staged basis.

[46] There was a healthy divergence on the scope of work involved in defending the counterclaims. Mr Latimour described the additional issues raised by the Ralec companies’ counterclaims as highly complex, involving very substantial disclosure and analysis of documents, the obtaining of expert opinions on relatively esoteric points, and being likely to lead to a substantial extension to the length of the hearing. He instanced in particular the divergent views on one component of the business expected to develop post-settlement, called Agri-Portal. On Mr Latimour’s analysis, the counterclaim will necessarily traverse substantial amounts of evidence as to what NZX should have done and what should have occurred with that aspect of the

business, had it been nurtured as the counterclaimants contend.13

[47] In contrast, Mr North disputed any particular complexity in the proceedings, describing them as “a common or garden sale of business case”, comprising a standard complaint of pre-contractual representations, and a later complaint that the business had not been appropriately managed. In response to Messrs Latimour and Galbraith’s projections of a likely substantive hearing of eight weeks, Mr North considered the issues could adequately be dealt with in a four week hearing. I was not given any reliable projection of the portion of such lengths of trial needed for the

_{additional evidence and arguments on the counterclaims.}

13 Agri-Portal is defined in the fifth schedule to the SPA.

[48] As attractive as Mr North’s assurances are, I am concerned that it would be unrealistic to accept them at this stage, when the parties have not demonstrated any willingness to abandon peripheral points, and are thus far not pursuing any initiatives to truncate procedures so as to expedite an outcome. The characterisation put by Messrs Galbraith and Latimour that the issues raised by the counterclaims are being pursued with a vigour and across a breadth that will incur substantial time, and therefore expense, is reasonable. This recognition of the present attitude to the proceedings does not signal an acceptance on my part of the inevitability that it will stay that way. I will be pressuring the parties to deal proportionately with the dispute, and to focus on what really matters. If such urgings do impact on subsequent stages of the proceedings, the outcome will be reflected in later considerations on quantum of security.

_{[49] On Mr Weldon’s behalf, staged security is sought as follows:}

$50,000 now;

$75,000 on completion of discovery; and

a further $225,000 on all evidence being filed and when the matter is ready to proceed to trial

making a total of $350,000.

[50] NZX sought the same sum in total, without addressing division of the amount by the respective stages of the proceedings.

[51] Different considerations apply in quantifying an appropriate order in favour of NZX on the one hand, and Mr Weldon on the other, relative to what will reasonably be required. Mr Weldon can reasonably be expected to rely on NZX to a greater extent on some parts of the preparation for trial than on others. For NZX, the overlap between work reasonably required on its own claims, and the additional scope of work required to deal with the Ralec companies’ counterclaims, will fluctuate. In determining quantum of security for costs, I am to arrive at figures

which I consider appropriate in all the circumstances. Those are idiosyncratic in the present proceedings. Certainly, I should not necessarily fix amounts by reference to likely costs awards for stages in the proceedings, should the counterclaims fail.14

[52] I deal first with the scope of discrete work reasonably required on behalf of NZX in responding to the counterclaims, up to the point of providing discovery of additional discoverable documents, and inspecting the counterclaimants’ additional discovered documents.

[53] Accepting for the moment the projections for NZX of a likely trial duration of eight weeks, the scale of steps up to the end of discovery and inspection might warrant a first stage of security for costs for the whole proceedings in the vicinity of

$100,000. That has to be substantially discounted to reflect the extent of work necessary in any event for pursuit of NZX’s own claims. I accordingly order a first stage of security up to that point in favour of NZX of $35,000.

[54] So far as Mr Weldon is concerned, he has not filed a separate statement of defence, but I accept Mr Galbraith’s characterisation that the initial pleading has involved separate consideration of Mr Weldon’s position, and provision of advice to him. So, too, with discovery of documents either under his control, or in respect of which he may have a discrete interest, and thereafter inspection of Ralec companies’ documents, Mr Weldon can reasonably be expected to rely in the first instance on solicitors for NZX covering most of the ground. The reasonable obligation on his part will be to reflect on those aspects of the pleading, and then of the documents, in respect of which his discrete interests arise. I order in favour of Mr Weldon an initial sum of $25,000 as security for costs up to completion of discovery and inspection.

[55] As I will be managing the proceedings, it is unnecessary to settle on the quantum of orders for security in respect of later steps in the proceedings, as subsequent developments may alter the present expectation of what is likely to be involved. As matters stand, I indicate my provisional view that security for

_{subsequent stages of the proceedings ought to be as follows:}

14 A S McLachlan Ltd v MEL Network Ltd [2002] NZCA 215; (2002) 16 PRNZ 747 at [27]- [30].

in respect of interlocutory applications - $25,000 for NZX and $10,000 for Mr Weldon;

for preparation of briefs and other steps in preparation for trial up to

_{commencement of trial - $35,000 for NZX and $5,000 for Mr Weldon;}

prior to trial, in respect of trial costs - $60,000 for NZX and $15,000 for

_{Mr Weldon.}

[56] On these numbers, if the proceedings follow more or less the path that I anticipate for them from this preliminary stage, then total security for NZX by the time trial begins would be $155,000, and the corresponding figure for Mr Weldon would be $55,000.

[57] To an extent, the course charted by the counterclaimants for the future of their counterclaims will influence the prospects of variations to these projected amounts.

[58] The counterclaim defendants have sought an order staying the counterclaim pending payment of the first stage of an order for security for costs.

[59] The history thus far of both these proceedings and the Victorian County Court proceedings amply demonstrate that one or more entities associated with all of the defendants have the wherewithal to fund legal proceedings, and have been doing so. That commitment of resources now extends to provision of a measure of security for costs to be provided in favour of the counterclaim defendants and the first stage of that security ought to be in place before the counterclaim defendants are required to take further steps.

[60] Accordingly, this is a case in which a stay is appropriate. I accordingly order that all steps in the proceedings are stayed, until the counterclaimants, or others on their behalf, have provided the first stage of security for costs in the amounts specified in [53] and [54] above.

[61] The counterclaim defendants are entitled to costs on the present application. I will receive memoranda if the parties are not able to agree on quantum of those costs.

Dobson J

Solicitors:

Bell Gully, Wellington for plaintiff and counterclaim defendants

Duncan Cotterill, Wellington for defendants and counterclaim plaintiffs