Laith & Fadi Investments Pty Ltd v Fogo Brazilia Holdings Pty Ltd

Laith & Fadi Investments Pty Ltd (the plaintiffs) sued Fogo Brazilia Holdings Pty Ltd (the defendants) in the Federal Court of Australia. The plaintiffs sought to represent a group of investors in a representative proceeding for breaches of the Corporations Act. The litigation was funded by a funder, but the funding agreement was terminated, with the funder alleging breaches by the plaintiffs. The plaintiffs sought to have the defendants provide security for the costs of the proceeding.

The central issue was whether the plaintiffs should be ordered to provide security for the defendants' costs, given that the plaintiffs were impecunious and unable to meet an adverse costs order. The court considered whether the plaintiffs' inability to pay was due to the defendants' conduct, whether the proceeding was likely to be stultified by an order for security, and the financial position of the group members who would benefit from a successful outcome. The plaintiffs did not provide precise information about the group members' financial position, making it difficult to determine if they were unable or unwilling to contribute to security.

The court held that there was no causal connection between the plaintiffs' impecuniosity and the defendants' conduct. The court found that the plaintiffs had failed to provide sufficient evidence to demonstrate that the group members were unable, rather than unwilling, to contribute to an order for security. The risk of injustice to the defendants in incurring substantial costs without appropriate security outweighed the risk of stultifying the proceeding. The court ordered the plaintiffs to pay security for costs in instalments, adopting a broad brush approach in determining the quantum of security.