APFC No.1 Corporation v Insurance Australia Limited

In the case of APFC No.1 Corporation v Insurance Australia Limited, the plaintiffs, APFC No.1 Corporation, sought to recover damages for alleged breaches of contract against the defendant, Insurance Australia Limited. The plaintiffs, who had entered into an agreement with a litigation funder, proposed that an after-the-event insurance policy underwritten by a related entity of the funder provided adequate security for costs. The defendant, however, contended that the form and quantum of the security were inadequate and sought security in the form of a cash deposit or bank guarantee. The primary legal issue before the court was whether the after-the-event insurance policy was sufficient to achieve the objective of security for costs and, if not, whether the court should order security in the quantum sought by the defendant.

The court considered the objective of the security for costs provisions, which is to ensure that a plaintiff can meet their costs if they lose the case. It noted that the policy proposed by the plaintiffs, while providing coverage for the costs of the litigation, did not guarantee that the plaintiffs would be able to meet their costs if they lost the case. The court found that the policy did not provide the necessary certainty and immediacy required to achieve the objective of security for costs. Consequently, the court held that the after-the-event insurance policy was not adequate and ordered that security be provided in the form of a cash deposit or bank guarantee as sought by the defendant. This ruling ensures that the defendant is protected against potential liability for the plaintiffs' costs if they are unsuccessful in their claim.

The court further addressed the quantum of security, noting that the amount sought by the defendant was commensurate with the risks involved in the litigation. Given the substantial amount of damages claimed by the plaintiffs and the potential for significant costs to be incurred, the court found that the quantum of security ordered was appropriate. The court's decision emphasised the importance of providing adequate security to protect defendants from undue financial risk while ensuring that plaintiffs can pursue their claims without undue financial barriers.

The final orders of the court were that the plaintiffs must provide security for costs in the form of a cash deposit or bank guarantee, in an amount determined by the court, and that the plaintiffs' proposed after-the-event insurance policy did not constitute adequate security for the purposes of the security for costs provisions.