By Jonathan Nathan, Corporations and Insolvency Law Editor of Wolters Kluwer
In the recent decision of Samadi Developments Pty Limited v SX Projects Pty Limited  NSWSC 1576, Ball J appears to have applied the strict principles applicable to expert evidence to an affidavit in support of an application for security for costs.
The observations made by Ball J are interesting as solicitors are usually required to make estimations of legal costs in affidavits in support of an application for security for costs. Traditionally, there has been some uncertainty regarding whether these affidavits are subject to the same strict rules which expert reports are subject to. For example, a solicitor’s affidavit is not required to take the form of an expert’s report or even acknowledge or annex an expert’s code of conduct employed by most courts.
Under the court rules and s 1335 of the Corporations Act 2001 (Cth), a party defending proceedings or cross-claim proceedings may, in certain circumstances, seek security for its costs of the proceedings by making an application to the court for an order requiring the party who commenced the proceedings or the cross-claim to pay money into court which the defendant can access in the event that it is successful.
In this case, Ball J accepted the submission made by Senior Counsel for the plaintiff, Mark Ashurst SC, that the affidavit sworn by the solicitor for the defendant in support of the application for security did not comply with the principles enunciated in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705, and on that basis, limited weight was attributed to the evidence.
This case tends to suggest that regard must be had in drafting such documents and in making such applications to the principles applicable to expert evidence as expressed in Makita v Sprowles. Some flexibility was granted by the court due to the relatively early stage of the proceedings. The court stated at :
“Necessarily, any estimate of future costs at such an early stage of the proceedings is likely to involve a degree of guess work based on general experience, since the issues have not crystallised and the precise work involved is difficult to estimate.”
For a fuller discussion of the principles involved with an application for security for costs, see ¶313-740 of CCH’s Australian Company Law Commentary Premium and for a discussion on Makita v Sprowles, see ¶15-105 of CCH’s Australian Competition and Consumer Law Reporter.