Bogan v The Estate of Peter John Smedley (Deceased) (Security for Costs)

The defendants in a complex group proceeding involving the proper valuation and reporting of Arrium’s consolidated assets sought security for costs from the plaintiffs. The defendants included directors and former directors of Arrium, and the proceeding was funded by Equite Capital No 1 Pty Ltd. The defendants' application for security for costs was opposed by the plaintiffs, who argued that the amount sought was excessive and unjust. The legal issues before the court involved determining the appropriate quantum of security for costs, taking into account the large discrepancy between the amounts sought and offered by the parties, and the principles to be applied in assessing what is just and reasonable in the circumstances.

The court found that the defendants' application for security for costs was not frivolous or vexatious, and that there was a real prospect that the proceeding would be uneconomical for the plaintiffs if they were required to pay the full costs of the proceeding. The court also found that the plaintiffs had not demonstrated that the amount of security sought by the defendants was excessive or unjust. In assessing the quantum of security for costs, the court took into account the broad brush evidentiary assessment of the costs claimed by the defendants, and applied a global discount to the amount sought. The court also considered the possibility of security being provided by way of an after-the-event insurance policy, and ordered that security be provided in tranches. The court exercised its broad discretion in determining the timing and amount of each tranche, and made orders that the plaintiffs provide security for the defendants' costs in the amount of $16.5 million.

The court made orders that the plaintiffs provide security for the defendants' costs in the amount of $16.5 million, to be provided in tranches. The first tranche was to be paid by the plaintiffs within 14 days of the order, in the amount of $4 million. The second tranche was to be paid by the plaintiffs within 30 days of the order, in the amount of $6.5 million. The third tranche was to be paid by the plaintiffs within 60 days of the order, in the amount of $6 million. The court also made orders that the plaintiffs provide a direct deed of indemnity between an ATE policy provider and the defendants, if the plaintiffs elect to satisfy their security for costs obligations by way of an ATE policy, or seek to substitute any cash paid into Court with an ATE policy. The deed of indemnity must contain certain specified key terms, including an unconditional and irrevocable undertaking from the ATE policy provider to pay the defendants any sum the plaintiffs are legally liable to pay with respect to the defendants' costs of the proceeding.