Forge Group Ltd (In Liq) (Receivers and Managers Appointed) v Hutchinson (No 2)

In the matter of Forge Group Ltd (In Liq) (Receivers and Managers Appointed) v Hutchinson (No 2), the central issue before the court was the quantum of security for costs required by the director defendants in complex proceedings. The case was heard in the Supreme Court of New South Wales. The proceedings were already set down for 60 days, with the trial commencing on 26 July 2021. The director defendants, represented by six separate law firms and counsel, sought an additional $17.4 million in security for costs, on top of the $2.45 million already provided. This request arose from the potential conflicts of interest among the director defendants, leading to duplication of representation. The court was tasked with determining whether the director defendants should provide further security for six sets of costs, given the earlier agreement described security in three tranches of work, and whether a change in circumstances warranted additional security, considering the assumptions adopted by the expert costs assessor.

The court examined the nature of the proceedings, their complexity, and the potential for conflicts among the director defendants. The duplication of representation was seen as a consequence of the potential conflicts, necessitating separate legal teams for each defendant. The court also considered the earlier agreement for security, which had been based on three tranches of work. The director defendants argued for further security for these tranches, claiming that circumstances had changed since the initial agreement. The court scrutinised the assumptions adopted by the expert costs assessor to determine whether they were realistic in light of the evolving case dynamics.

After thorough deliberation, the court concluded that the assumptions made by the expert costs assessor were indeed unrealistic in light of the changes in the case. The court found that the director defendants should provide further security for the three tranches of work, but only to the extent that the assumptions made were unrealistic. The court ordered the director defendants to provide an additional $17.4 million in security for costs, bringing the total security for costs to $20.85 million. This decision balanced the need for adequate security with the impracticality of the director defendants providing separate security for six sets of costs due to potential conflicts of interest.