When security for costs may be ordered
(a) the plaintiff is ordinarily resident out of Victoria;
(b) the plaintiff is a corporation…, and there is reason to believe that the plaintiff has insufficient assets in Victoria to pay the costs of the defendant if ordered to do so;
the Court may, on the application of a defendant, order that the plaintiff give security for the costs of the defendant of the proceeding and that the proceeding as against that defendant be stayed until the security is given.
(1) Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given.
13. Other than the Fuel Supply Agreement, Lighthouse IBC's principal asset is a beneficial ownership of 10% of the shares in Lighthouse DonOilGaz (Lighthouse Don), which has been granted in lieu of payment for fuel supply and energy contract brokerage services.
14. The registered owner of the shares in Lighthouse Don is Mr Vladimir D'Jamirze (Mr D'Jamirze). At page 1 of AJ-2 is a copy of a letter dated 10 December 2015 from Mr D'Jamirze in his capacity as president of Lighthouse Don, which confirms that I have been assigned a 10% non-dilutable ownership interest in Lighthouse Don, which is to be transferred to me at my election to be held on trust for Lighthouse IBC.
15. Further, at page 2 of AJ-2 is a copy of a letter from Russian Pravo I Delo, the solicitors for Lighthouse Don and Mr D'Jamirze. The letter confirms that Mr D'Jamirze has provided Pravo I Delo with an irrevocable instruction that no less than 10% of the shares in Lighthouse Don are held in beneficial trust, ultimately for Lighthouse IBC.
16. Lighthouse Don has a beneficial interest in the Russian company JugGeo. The legal interest in those shares is held by Mr Valerian Sichinava. A copy of a letter signed by Mr Sichinava confirming Lighthouse Don's beneficial interest is at page  of AJ-2. At page 5 of AJ-2 is a memorandum from Mr J'amirze dated 10 December 2015 in which he states that Mr Sichinava holds the shares in JugGeo on behalf of Lighthouse Don.
17. As set out in the report by the Southern Centre of Subsoil Expertise LLC, dated 26 January 2015, which is a page 8 of AJ-2., JugGeo holds sub-soil licences for the following areas in the Rostov region in Russia:
(a) the Grachiksky licence areas;
(b) the Verhneoblivsky licence area; and
(c) the Krasnoborsky licence area.
(The JugGeo Sub-Soil Licences)
18. In addition to the JugGeo Sub-Soil Licences, Lighthouse Don controls, through a combination of beneficial and legal and beneficial share ownership, two companies which together hold a further nine sub-soil licences for nine separate licence areas in the Rostov region. In total therefore, Lighthouse Don through its controlled companies holds a total of 12 sub-soil licences (together, the Lighthouse Don Sub-Soil Licences), including the JugGeo Sub-Soil Licences.
19. For the purposes of Timor-Leste's application for security for costs in the ICSID Proceedings, I engaged Professor Eduard Sianisyan, the Director of the Institute of Earth Sciences and Head of the Department of Oil and Gas Geology, Southern Federal University, Rostov-on-Don, Russian Federation. At:
(a) page 28 of AJ-2 is a English translation of a summary of Professor Sianisyan's valuation of the Lighthouse Don Sub-Soil Licences dated 14 December 2015. The original summary report, which is in Russian, is at page 33 of AJ-2;
(b) page 37 of AJ-2 is the English translation of Professor Sianisyan's complete report. The original Russian version is at page 71 of AJ-2.
(a) evidence (elaborated on above) that Lighthouse IBC holds a substantial interest in Lighthouse Don, the value of which far exceeds the quantum of security sought by the defendants;
(b) the plaintiffs have already paid to the defendants over USD$1.6 million in adverse costs and interest in respect of arbitral proceedings before the International Centre for Settlement of Investment Disputes ('ICSID proceedings'), and approximately AUD$2 million for their own legal costs in those proceedings. The plaintiffs submit that the payment of these costs weighs against the defendants' contention that the plaintiffs would not be able to satisfy an adverse costs order;
(c) any deficiency in the assets of the plaintiffs must be assessed against the significant impact on the plaintiffs caused by the defendants' conduct (referring to expenses of approximately USD$565,000 in respect of the alleged fuel supply agreement ('FSA'), reputational damage, damage to corporate relationships and loss of income) and that the financial harm caused to the plaintiffs by the conduct exceeds the quantum of the security sought;
(d) the defendants have voluntarily assumed the risk that they will be sued by impecunious plaintiffs;
(e) the defendants' conduct of this proceeding has already caused significant prejudice to the plaintiffs, in that the plaintiffs have incurred approximately $570,000 in legal costs of which only a fraction has been recovered to date;4 and
(f) the proceeding has already been delayed by over two years by reason of interlocutory processes and appeals filed by the defendants.
(a) the alleged ownership of 10% of the shares in Lighthouse Don is not a legal interest but a beneficial interest without any trust deed or other document recording it, or any evidence of the payments or services to which the beneficial interest is said to relate or how the interest arises;
(b) Lighthouse Don is a company incorporated in the Russian Federation and control of the company lies in the hands of a third party, Mr D'Jamirze;
(c) the letters dated 10 December 2015 from Mr D'Jamirze (which purport to confirm that Mr Jacobs was lawfully assigned a non-dilutable fully paid up 10% shareholding in Lighthouse Don to be beneficially held on behalf of Lighthouse Corporation Ltd):5
(i) involve assertions none of which can be independently tested;
(ii) contain no evidence of any assignment;
(iii) suggest that any beneficial interest was superseded on 1 February 2014;
(d) the alleged beneficial interest is an interest in another beneficial interest in a different Russian company, JugGeo, which is said to control two other companies through an unexplained and opaque 'beneficial and legal and beneficial share ownership' which is held for the time being by Valerian Sichinava for and on behalf of Lighthouse Don;
(e) no weight should be placed on the purported expert valuation of these assets.
The plaintiffs have not provided evidence of the instructions to the experts, or the basis of their expertise, the basis upon which they were engaged; and
(f) all of the evidence said to support the assertions of Mr Jacobs dates from 2015 and neither Mr Jamirze or Mr Sichiniva have given evidence.
(a) the plaintiffs have no assets in Australia;
(b) whilst there have been expenses incurred in previous interlocutory applications, they are not relevant as it is not suggested they were not arguable or were pursued for a collateral purpose; and
(c) the plaintiffs do not say that provision of security for costs would stifle the litigation.
(i) an unlimited guarantee, or alternatively an undertaking from Mr Jacobs to be responsible for payment of such costs, duly assessed, as may be ordered by the Court to be paid by the plaintiffs; and
(ii) a limited guarantee, or alternatively an undertaking, from a non-party
(Lighthouse Capital Properties Pty Limited ('Lighthouse Capital Properties')) to pay up to $500,000 in costs, duly assessed, as may be ordered by the Court to be paid by the plaintiffs and to retain a net asset position of at least $500,000.
(a) if they were required to pay an amount into Court, Lighthouse Capital Properties would have to liquidate assets at a sub-optimal time in the market and would likely suffer financial detriment as a result;
(b) security in the form proposed would provide the defendants with a contractual claim against Mr Jacobs and Lighthouse Capital Properties;
(c) the offer to be personally liable for adverse costs involves Mr Jacobs stepping out from behind the corporate veil to expose himself to potential liability, which is a significant matter.
(a) the offers by each of Mr Jacobs and Lighthouse Capital Properties of a guarantee (or alternatively, an undertaking) to the Court suffer from the same problem, in that the defendant would be required to take enforcement steps in the event that they were not honoured;
(b) security should be provided by payment into Court of a suitable amount, or alternatively by the provision of a bank guarantee so that security can be accessed on demand without requiring the defendants to engage in a separate enforcement process.
(a) the amount is excessive;
(b) in determining the amount of any security, the Court is to order an amount which is 'just and reasonable' having regard to all the circumstances of the case;
(c) the purpose of security for costs is not to provide full protection for the estimated costs of the party seeking security;9
(d) the amount of security must be assessed against the claims in the amended statement of claim;
(e) the claim is a relatively simply contractual claim;
(f) the matters the subject of the proceeding have been the subject of pleadings and evidence in the ICSID arbitration commenced in 2014 and concern a narrower subset of facts;10
(g) the claims are almost identical to those made in the ICSID arbitration, with each of the defences foreshadowed by the defendants having been canvassed in some detail by the defendants in the ICSID arbitration, and this is reflected by the fact that defendants' likely witnesses of fact, and the issues they could depose to, are the same individuals (save for Mr Pereira).
… [A]t the outset of this proceeding DLA Piper undertook extensive work, primarily in February 2015 and thereafter, to thoroughly examine the Lighthouse entities and those standing behind them. This work required Timor-Leste to incur substantial costs at an early stage in the proceeding and it is intended that the work will be used for the purpose of this application and in any future stage of the p roceeding'.13
(a) consideration of the question whether Timor-Leste was induced to enter into a negotiation process with the plaintiffs and signed documents on the basis of fraudulent misrepresentations;
(b) analysis of procurement processes and processes necessary under Timorese law to enter into any contract with Zebra Fuels or the plaintiffs;
(c) whether any Lighthouse entity was a shareholder in Zebra Fuels;
(d) whether the plaintiffs had the experience, financial standing, size or exclusive agency that they claimed; and
(e) whether documents which the plaintiffs allege form part of the fuel supply agreement were provided to Timor-Leste,
which will not need to be duplicated.
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