Forest Carbon Methodology Pty Ltd v Schultz

Forest Carbon Methodology Pty Ltd (FCM) filed proceedings against Schultz and others, seeking various declarations and remedies including breach of fiduciary duty, a constructive trust, and an account of profits from the defendants. Schultz and the other defendants applied for security for costs pursuant to s 1335 of the Corporations Act 2001 (Cth) and s 56 of the Federal Court of Australia Act 1976 (Cth). The court was required to determine whether the defendants met the threshold for security for costs under s 1335 of the Corporations Act and whether the discretion under s 56 of the Federal Court of Australia Act was enlivened. The court found that the defendants had met the threshold and that the discretion was enlivened.

The court considered the financial circumstances of the parties and the potential costs that may be incurred by the defendants if FCM was successful in their claims. The court found that it was reasonable to conclude that there was a risk that FCM may be unable to pay the defendants' costs if they were successful in their defence. The court also considered the defendants' proposal for security in the form of a Deed of Charge, Guarantee and Indemnity, supported by mortgages over properties owned by Noble and Mr Lebbon. The court accepted the proposal as an appropriate form of security for costs at that stage of the proceedings. The court ordered that FCM provide security for costs of the first and second defendants in the sum of $250,000 and for the third defendant in the sum of $150,000. The security was to be in the form of an irrevocable bank guarantee or alternatively be paid into Court as a lump sum. The court also granted liberty to apply for an increase in the amount of security as the proceedings progressed.