Top-up security for costs where proceeding funded
Camping Warehouse Australia Pty Ltd (Formerly Mountain Buggy Australia Pty Ltd) v Downer EDI Ltd  VSC 29
During the trial of a class action a plaintiff was ordered to provide security for costs, at pain of the proceeding being stayed. The case settled not long after. In another case, a delay in an application for security for costs did not prevent it being ordered, however the Court adjusted the period of costs secured.
Background to top-up security for costs application:
- A shareholder class action in the Federal Court of Australia alleged failure to disclosure timely information regarding the defendant’s contract for the Waratah Train Project.
- The class action was funded by BSL, including for adverse costs (and Mr Elliot provided a personal guarantee of that protection from adverse costs). The funding agreement had previously been provided to defendant.
- In June 2015 the plaintiff had consented to providing approximately $200,000 security for costs, and the defendant anticipated an application for top-up security later in the case. On 11 November 2015 it was ordered that any such application be filed and served by 27 November 2016. When those 11 November 2015 orders statements were made in Court along the lines that the defendant could bring such an application any time. Later, the order fixing that 27 November 2015 deadline was vacated by consent, and the Court agreed that the parties would maintain dialogue to resolve between them the issue of any top-up security for costs.
The defendant’s security for costs application comes before the Court
- By the time of a pre-trial directions hearing on 25 January 2016 the parties had not reached any agreement as to top-up security for costs, and the trial was fixed to commence on 2 February 2016 (a date scheduled 6 months earlier). Accordingly, at that directions hearing eight days before trial, the defendant agitated its request for top-up security and the plaintiff asserted it was too late to do so. The Court gave directions as to what the parties should do to progress the security for costs application.
- Ultimately, the application came before the Court on the third day of trial.
- The defendant’s cost expert quantified the future costs at $1.2m. The defendant submitted that the security should be no less than half that sum.
- The plaintiff sought more time. It submitted that the lateness and the defendant’s failure to provide requested material, prevented a complete response and prejudice would flow if the plaintiff was denied more time.
- The Court:
- Criticised both parties for the way they had handled the issue, and the attendant delays, noting that it was sub-optimal for the defendant to be incurring costs during trial when there was inadequate security for costs.
- Made an interim award that the plaintiff provide top-up security for costs in the sum of $685,000, indicating that the plaintiff could make submissions as to the appropriateness of that quantum if it later wished to.
- It may be interesting to note that:
- The Court agreed with the plaintiff’s submission that as the defendant had already performed some of the work covered by the costs estimate, actual costs of the defendant rather than estimates should ideally be made available.
- When the plaintiff consented to providing security of costs of around $200,000 in mid 2015, it did so without reserving the question of its liability, there being no evidence that the agreement was without any admission of liability. The Court treated that as precluding the Plaintiff the right to later argue that the threshold conditions for ordering security for costs were not met. There appears to be a lesson here, namely that when consenting to an order for security for costs, consideration should be given to doing so explicitly without any admission of liability and to reserving the right to argue against being obligated to provide security in the future.
- The Court treated the existence of funding as indicative of liability for security for costs. (especially where no evidence is given as to substance behind such indemnity).
A. After the order requiring security for costs was made, on 5 February 2016 the parties announced that a settlement had been reached. The terms are not yet publicly available.
B. On 24 February 2016 the Supreme Court of Victoria delivered a decision holding that a delay in bringing an application did not entirely disentitle the defendants to an order for security for costs, however the Court adjusted the timeframe covered by that security. (The Oswal matters - application for security for costs  VSC 52)
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