Litigation Fund WCX Pty Ltd v Darren Mitchell

[2025] NSWCA 27

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Litigation Fund WCX Pty Ltd v Darren Mitchell [2025] NSWCA 27

Hearing dates:

24 February 2025

Date of orders:

28 February 2025

Decision date:

28 February 2025

Before:

Griffiths AJA

Decision:

(1) Grant leave under r 7.1(2)(a) of the Uniform Civil Procedure Rules 2005 (NSW) for Mr Robert Coshott to represent Litigation Fund WCX Pty Ltd.

(2) The time for the first respondents to file and serve a short affidavit by Mr Trevor Withane responding to exhibits 1, 2 and 3 together with short accompanying submissions be extended to 4:00pm on 25 February 2025 nunc pro tunc.

(3) Order Litigation Fund WCX Pty Ltd to provide security for the costs of the first respondents in proceedings no 2024/00351500 in the amount of $70,022.50 (incl GST), such sum to be paid into Court within 14 days.

(4) Those proceedings be stayed until such time as the applicant has provided security for costs in accordance with order 3.

(5) The orders dated 11 December 2024 be stayed pending the hearing and determination of the applicant’s summons seeking leave to appeal, on condition that within 14 days hereof the applicant pay into Court the amount of $134,607.95 plus GST.

(6) Within 7 days hereof, the parties are each to provide brief submissions and any evidence concerning the costs of the first respondents’ notice of motion filed 24 January 2025 and the applicant’s notice of motion filed 14 January 2025.

(7) The issue of costs of the two motions will be determined on the papers and without a further oral hearing.

Catchwords:

COSTS — security for costs — relevant factors — where no evidence of financial capacity — where trust monies used to pay costs of earlier application — whether special circumstances required under s 1335 of the Corporations Act 2001 (Cth)

CIVIL PROCEDURE — stay of proceedings — pending application for leave to appeal — where trust monies used to pay costs of earlier application — whether stay should be conditional on payment into Court of the amount of previous unpaid costs order

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 183

Corporations Act 2001 (Cth), s 1335

Roads Act 1993 (NSW), s 179

Uniform Civil Procedure Rules 2005 (NSW), rr 7.1, 51.50

Cases Cited:

Antov v Bokan [2019] NSWCA 40

Flynn v PPK Mining Equipment Pty Ltd [2023] NSWCA 151

Kimberly Developments Pty Ltd v Bale [2024] NSWCA 12

Litigation Fund WCX Pty Ltd v Aversa [2024] NSWSC 1348

Litigation Fund WCX Pty Ltd v Homebuilding Pty Ltd [2025] NSWCA 16

Michael Hill Jeweller (Australia) Pty Ltd v Gispac Pty Ltd [2024] NSWCA 128

Mitchell v Roads and Maritime Services (now known as Transport for NSW) (No 2) [2024] NSWSC 1165

Mitchell v Roads and Maritime Services (now known as Transport for NSW) (No 3) [2024] NSWSC 1593

Suchand Pty Ltd v Jonathon Kingsley Colbran and Richard Stone as Receivers and Managers of Suchand Pty Ltd [2024] NSWCA 250

TomanovicMultiown Pty Ltd v Interlux Projects Pty Ltd [2022] NSWCA 38

Treloar Constructions Pty Ltd v McMillan [2016] NSWCA 302

Texts Cited:

Nil

Category:

Procedural rulings

Parties:

Litigation Fund WCX Pty Ltd (Applicant)
Darren and Rosaline Mitchell (First Respondents)
Roads and Maritime Services (now known as Transport for NSW) (Second Respondent)

Representation:

Counsel:
R Coshott (Applicant, with leave)
J Redwood SC and H Cooper (First Respondents)

Solicitors:
Ironbridge Legal (First Respondents)
Crown Solicitor for NSW (Second Respondent)

File Number(s):

2024/00351500

Publication restriction:

Nil

JUDGMENT

1. Two motions came before me for hearing as the Referrals Judge on 24 February 2025. The first motion, filed 24 January 2025 by Darren and Rosaline Mitchell (first respondents), seeks security for costs in substantive proceedings in which the applicant Litigation Fund WCX Pty Ltd (Funder) seeks leave to appeal from “orders” made by McGrath J on 13 September 2024.

2. The Funder filed the other motion on 14 January 2025, which seeks a stay of the primary judgment dated 13 September 2024.

3. At the hearing before me, the Mitchells were represented by Mr J Redwood SC and Mr H Cooper. Mr Robert Coshott appeared for the Funder. Mr Coshott is the sole director and shareholder of the Funder. As he no longer holds a practising certificate as a solicitor, the Funder requires leave for him to represent it (see rr 7.1(2)(a) and 7.1(3) of the UCPR). The Funder did not make a formal application for leave but the Mitchells raised no objection to Mr Coshott representing the Funder. In these circumstances, leave will be granted (I note that similar leave was granted recently by the Court in Litigation Fund WCX Pty Ltd v Homebuilding Pty Ltd [2025] NSWCA 16 at [3] per Ward P).

4. The proceedings relate to two sets of reasons for judgment by the primary judge, McGrath J. The first reasons for judgment were published on 13 September 2024. The second reasons for judgment were published on 11 December 2024. In the first judgment (Mitchell v Roads and Maritime Services (now known as Transport for NSW) (No 2) [2024] NSWSC 1165), the Mitchells, after filing a notice of motion on 10 May 2024, were successful in obtaining, amongst other relief, an order pursuant to s 183 of the Civil Procedure Act 2005 (NSW) that funds in the amount of $135,180.55 held by their solicitors (Ironbridge Legal) which had been deposited in the firm’s trust account by the Funder were held for the benefit of the plaintiffs in a class action in which the Mitchells were lead plaintiffs. It was further held that the funds could be applied towards legal costs incurred by the Mitchells as lead plaintiffs.

5. In the class action (which is still to be heard), the plaintiffs claim that by acquiring land for the purposes of WestConnex M4-M5 without consent and compensation, and then granting a long-term lease over that land to privately owned entities for substantial consideration, Transport for NSW contravened s 179 of the Roads Act 1993 (NSW).

6. On 20 September 2024, the primary judge made orders in Chambers giving effect to the conclusions he had reached in the first judgment and invited the parties to provide submissions and evidence as to costs.

7. Subsequently, on 11 December 2024, McGrath J published reasons for judgment and orders in Mitchell v Roads and Maritime Services (now known as Transport for NSW) (No 3) [2024] NSWSC 1593 (Costs Judgment). His Honour ordered that the Mitchells were entitled to a specific gross sum in respect of their costs of the notice of motion filed 10 May 2024 and their costs of the costs application in the total amount of $134,607.95 plus GST, calculated on an indemnity basis. The Funder was ordered to pay the costs forthwith and within 14 days of 11 December 2024.

8. In the Costs Judgment at [62] McGrath J explained why he considered that the Funder should pay the Mitchells’ costs on an indemnity basis:

I consider that by the Funder making a demand for the payment of the funds in the Ironbridge trust account to it, the plaintiffs were placed in a situation where they had no alternative other than to make an application to the court to resolve the dispute over those funds. Until that dispute was resolved, the plaintiffs did not have sufficient funds of their own to progress the proceedings on behalf of the group members to whom they owed fiduciary duties. Those circumstances require that the plaintiffs be fully compensated by the Funder paying the plaintiffs’ costs on an indemnity basis. Such an approach meets the considerations mentioned in Oshlack at [67]–[68], particularly resting on the fairness between the plaintiffs and the Funder due to conditions which had been created by the Funder.

9. By a summons filed 9 December 2024, the Funder has sought leave to appeal in respect of the “Whole of decision below”, which literally can only relate to McGrath J’s first judgment dated 13 September 2024. The second judgment was not published until 2 days after the summons seeking leave to appeal was filed.

10. It is important to note that the Funder alone is named as the applicant in the summons seeking leave to appeal. No natural person is named as a co-applicant. As will emerge, this is relevant to the Mitchells’ application for security for costs.

(a) The Mitchells’ application for security for costs

11. In support of their application for security for costs, the Mitchells relied upon several affidavits affirmed by their solicitor, Mr Trevor Withane. They include affidavits dated 24 January 2025, 14 February 2025, 20 February 2025, 21 February 2025 and 23 February 2025. The affidavits described the procedural history, annexed multiple judgments in which Mr Coshott had been involved as a party and set out Mr Withane’s estimates of the Mitchells’ costs of the appeal proceedings. Mr Withane’s most recent estimate is in the amount of $77,476 (incl GST), comprising approximate costs incurred by the Mitchells as at 14 February 2025 and estimated future costs. The costs incurred by the Mitchells as at 14 February 2025 are estimated in the amount of $11,905 (incl GST), comprising $5,191 in respect of counsel and $6,714 in respect of solicitors. The Mitchells’ future costs are estimated in the amount of $65,571 (incl GST), comprising $42,471 in respect of counsel and $23,100 in respect of solicitors.

12. At the hearing on 24 February 2025, leave was granted for Mr Withane to provide an additional short affidavit after the hearing in response to submissions which were made for the first time by Mr Coshott that trust monies had been used to pay the Mitchells’ costs of the proceedings before McGrath J contrary to the way in which the case was allegedly conducted before his Honour. The Funder was granted leave to respond to any additional evidence or supplementary submission. I will return to these matter below.

13. At the hearing, leave was granted for the Mitchells to rely upon an amended notice of motion, which was annexed to their submissions dated 14 February 2025. By the amended motion, the Mitchells made clear that their application for security for costs is based not only on the Court’s inherent power and r 51.50(1) of the UCPR, but also on s 1335(1) of the Corporations Act 2001 (Cth).

14. The Funder relied upon an affidavit sworn by Mr Coshott on 19 February 2025. Mr Coshott deposed that, between March 2021 and November 2023, the Funder had provided $500,000 of litigation funding to the Mitchells under a funding agreement and that, since September 2023, an additional $1,410,310.84 had been provided at the Mitchells’ request. This is the sum which the Funder is seeking to recover from the Mitchells in the separate proceedings commenced on 12 December 2024. He claimed that, to date in those proceedings, the Mitchells had not put on any defence and that the Funder was taking steps to enter judgment against the Mitchells.

15. In addition, Mr Coshott annexed to his 19 February 2025 affidavit, a bank cheque payable to the Funder in the amount of $100,000 issued on 19 February 2025, as evidence of its ability to pay the Mitchells costs if ordered.

16. For the purposes of s 1335(1) of the Corporations Act, the Mitchells must establish by credible evidence that there is reason to believe that the Funder will be unable to pay their costs of the application for leave to appeal if it is unsuccessful.

17. I accept the Mitchells’ submission that Mr Withane’s evidence establishes the following matters:

1. Searches of publicly available registers recording Australian real property holdings and storing ASIC’s records reveal that the Funder does not hold any real property in Australia, and has one issued share (held by Mr Coshott) in the total amount of $1.00.

2. Other searches of publicly available databases, including Google, have not produced any information tending to show that the Funder has any financial means.

3. On 13 December 2024 (promptly following service of the summons seeking leave to appeal on 9 December 2024), the Mitchells’ solicitors wrote to the Funder noting the results of the above searches, and inviting it to provide any information capable of demonstrating that it could meet an adverse costs order. The Funder was expressly placed on notice of this application for security for costs. The Funder has never responded to this request.

4. The Funder has failed to provide basic information as to its financial means notwithstanding previous requests from Ironbridge.

5. The Funder elected not to place evidence before the Court below as to its ability to meet an order resulting from a costs assessment, which was a factor in favour of the gross sum costs order made below (Costs Judgment at [80]).

6. The Funder is currently in breach of orders made by the primary judge for the costs of the notice of motion from which the application for leave to appeal is brought (which ordered such costs to be paid to the Mitchells in the fixed sum of $134,607.95 within 14 days of 11 December 2024). Whilst the Funder belatedly brought an application for a stay of that order (on 14 January 2024), no such stay had been granted, and the Funder has remained in breach of the order. Mr Redwood SC candidly acknowledged that no steps had been taken by the first respondents to enforce that order.

7. This Court has recently made orders for security against the Funder (Litigation Fund WCX Pty Ltd v Aversa [2024] NSWSC 1348).

18. Subject to addressing the Funder’s contentions in opposing the application for security for costs, I am satisfied that these findings meet the threshold requirement in s 1335(1) of the Corporations Act.

19. Significantly, the Funder did not claim that the substantive proceedings will be stifled if the Mitchells succeed in their application.

20. The Mitchells do not submit that the Funder’s application for leave to appeal does not present any ground of appeal. They do submit, however, that the appeal is not a strong one, relying on the matters raised by them in their Response dated 30 January 2025 to the applicant’s summary of argument. It is unnecessary to take this matter any further in circumstances where the Funder advances no contention in support of the merits of the proposed appeal.

21. In brief, the Funder made five primary submissions in opposing the application for security for costs. First, the Funder submitted that security for costs should not be ordered because the Mitchells had failed to establish “special circumstances”. Mr Coshott relied upon several decisions of this Court, including Kimberly Developments Pty Ltd v Bale [2024] NSWCA 12; Antov v Bokan [2019] NSWCA 40 and SuchandPty Ltd v Jonathon Kingsley Colbran and Richard Stone as Receivers and Managers of Suchand Pty Ltd [2024] NSWCA 250. He submitted that special circumstances needed to be established for the purposes of an application under s 1335 of the Corporations Act as well as under r 51.50 of the UCPR.

22. Secondly, the Funder tendered a bundle of documents (which became Exhibits 1, 2 and 3) in support of a submission that the Mitchells had in fact used monies held in trust by Ironbridge Legal to pay their legal costs of their application before McGrath J, contrary to matters noted by his Honour at [79]-[81] of the first judgment, which are as follows (emphasis added):

Amounts held in trust and owing to Ironbridge

[79]   Ironbridge currently holds $135,180.55 in its trust account.

[80]   There is an amount of around $100,000.00 owing in respect of outstanding invoices and unbilled work in progress from Ironbridge and the plaintiffs’ barristers. Of that amount, $40,545.00 (excluding GST) relates to work carried out by Ironbridge prior to the Funder’s purported termination of the Ironbridge retainer on 19 April 2024. Since 19 April 2024, Ironbridge has accrued work-in-progress of approximately $27,925.00 directly referable to the work carried out in respect of and incidental to this application.

[81]   The plaintiffs only intend to seek recourse to the trust funds to the extent necessary to meet the legal expenses in their role as lead plaintiffs in the proceedings, which does not include the costs of this application. Mr Withane considers that any surplus funds in the trust account of about $35,000 would then revert to the benefit of the Funder and be returned to it. Mr Withane also believes that if the Funder is unwilling to provide further funding and if an alternative funder cannot be arranged, the plaintiffs will need to consider whether they should make an application under s 173 of the CPA for approval to discontinue the proceedings.

23. Thirdly, Mr Coshott submitted that the Court should not find that the Funder would be unable to pay the Mitchells’ costs if it failed in its application for leave to appeal, when regard is had to the bank cheque in the amount of $100,000. He submitted that this amount comfortably exceeds the estimate of the Mitchells’ legal costs in opposing the Funder’s application for leave to appeal.

24. Fourthly, Mr Coshott submitted that the Funder’s capacity to pay the Mitchells’ costs is reflected in the fact that it has advanced almost $2,000,000 in the past towards the plaintiffs’ costs.

25. Fifthly, Mr Coshott relies upon the fact that the Funder has commenced proceedings to recover approximately $1,410,000 from the Mitchells in respect of past funding.

26. For the following reasons, I reject those contentions.

27. As to the first, I do not accept that special circumstances must be established for the purposes of obtaining security for costs under s 1335 of the Corporations Act where the only applicant for the substantive proceedings to which the application for security relates is a corporation. This is to be contrasted with the position regarding security for costs under r 51.50 of the UCPR (see Kimberly Developments per Simpson AJA).

28. Mr Coshott cited Suchand in support of his submission.

29. Suchand is distinguishable. In that case, the applicant was a corporation. The respondents sought security for costs against the corporation. An undertaking was proffered by the person who was the sole director, secretary and shareholder of the corporation to be liable for an appropriate amount of security notwithstanding that his unchallenged evidence was that he had limited income and assets. On appeal, the Court held that the primary judge correctly found that jurisdiction to order security for costs under both the UCPR and s 1335 of the Corporations Act was enlivened, but his Honour then erred in not ordering security for costs on condition that the director provide an unconditional undertaking to pay the respondents’ costs. The Court held that the primary judge had erred in finding that different principles apply under the UCPR and s 1335 of the Corporations Act in assessing an undertaking from an impecunious director (see at [76]). In particular, the primary judge was found to have erred in suggesting that an order for security for costs should “in general” be made where an impecunious person undertakes to pay any costs order made against an impecunious corporate plaintiff (see at [77]).

30. Suchand does not stand for the proposition that “special circumstances” need to be established for there to be an order for security for costs under s 1335 of the Corporations Act.

31. The relevant principles guiding the assessment of an application for security under s 1335 are well-established and were summarised by Beazley ACJ (as her Excellency then was) in Treloar Constructions Pty Ltd v McMillan [2016] NSWCA 302 at [11]-[15] (footnotes omitted):

The test to be applied in determining whether an applicant has satisfied the jurisdictional requirements of s 1335 has been described as “undemanding”: … . In Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377; [2008] VSCA 93, Maxwell P and Buchanan JA stated, at [15], that the phrase “reason to believe” in s 1335 “is the touchstone of jurisdiction. It requires a rational basis for the belief – and no more”. …

In Livingspring v Kliger Partners their Honours further observed, at [15], that the section required the making of a risk assessment as to whether the corporation would be unable to pay, and that:

“The section calls for a practical, commonsense approach to the examination of the corporation’s financial affairs.”

Relevantly, for the purposes of this case, their Honours stated, at [16], that the assessment that must be made under s 1335 is “a low threshold”, reflecting the policy of the section, which is to protect a party against the risk of a corporation’s impecuniosity. Maxwell P and Buchanan J stated, at [17], that the foremost consideration in determining whether to exercise the discretion conferred by s 1335 was whether “an order for security would work an injustice”.

Specific factors that have been identified in the authorities as relevant to the exercise of the discretion conferred by s 1335 include whether the applicant’s conduct was the cause of the company’s impecuniosity; and whether an order for security for costs would stifle the proceedings: …

The onus in proving that a party will be unable to pay costs ordered against it remains at all times on the party making the application: … . However, as discussed in Wollongong City Council v Legal Business Centre at [30], if a corporation who seeks to resist an order for security for costs, in circumstances where the applicant for security has established that there is reason to believe that the corporation will be unable to pay the costs of litigation if successful, contends that an order should not be made, for example, because it would stifle the litigation, there may be an evidentiary burden on the corporation to demonstrate that this is the case.

32. This Court’s decision in Flynn v PPK Mining Equipment Pty Ltd [2023] NSWCA 151 does not assist the Funder. There, the primary judge ordered security for costs under both r 51.50 of the UCPR and s 1335 of the Corporations Act. On appeal, Stern JA helpfully set out the relevant principles relating to a r 51.50 application at [36]-[48]. Her Honour also analysed relevant case law regarding the requirement for “special circumstances” under that provision. At [49], her Honour turned her attention to s 1335 of the Corporations Act. Her Honour noted that the discretion under that provision is “unfettered” once the jurisdictional requirement of “credible testimony providing reason to believe the corporation will be unable to pay the respondent’s costs if the appeal fails” is satisfied. Her Honour also noted that this was described in Treloar at [11] as “undemanding test”. Her Honour referred to what Basten JA had said in Tomanovic Multiown Pty Ltd v Interlux Projects Pty Ltd [2022] NSWCA 38 at [8] (footnotes omitted):

Satisfaction of that test does not require that an order for security be made, nor does it say anything about the amount of security which may be appropriate. In Livingspring Pty Ltd v Kliger Partners, Maxwell P and Buchanan JA identified the foremost consideration in determining whether to order security as whether such an order would work an injustice. Thus, it is necessary to assess the degree of likelihood that costs may not be paid if the appeal fails against the possibility that an order for security may stifle the appeal. In considering that balance, such other factors as may be apparent from the limited materials usually available on a security application can be taken into account. One such factor is the apparent merit of the appeal; another is the scope of the appeal, so far as that may be gleaned from the notice of appeal. The conduct of the parties in the course of the trial proceedings may also be relevant.

33. Stern JA proceeded to explain at [59]ff as to why she considered that special circumstances had been established in respect of both the corporation and the individual. This reflects the fact that, in that proceedings, security for costs were sought against both those parties.

34. The position is different here. The Mitchells only seek security for costs against the Funder, which is the sole applicant in the appeal proceedings. This is not a case like Flynn, where a corporation and a natural person were co-applicants. It is clear in the amended notice of motion that the Mitchells’ application for security relies on s 1335 of the Corporations Act as well as relevant provisions in the UCPR (and the Court’s inherent jurisdiction). In my opinion, it is sufficient to address the matter with reference to s 1335, where there is no requirement to demonstrate “special circumstances”.

35. As noted above, the Funder also relied upon Leeming JA’s decision in Antov. That case involved an application for security for costs under the UCPR in relation to a natural person. As I have emphasised, the position is different where, as here, the application for security is against a corporation pursuant to s 1335 of the Corporations Act.

36. As to the second matter raised by Mr Coshott at the hearing, concerning the use of some of the trust monies to pay the Mitchells’ costs of the application before McGrath J as opposed to the substantial proceedings, I have also taken into account the parties’ post-hearing supplementary submissions on this subject. I do not believe that the Mitchells should be disentitled to an order for security for costs having regard to the passages relied upon by the Funder in McGrath J’s first judgment. This is for the following reasons:

1. The notice of motion filed by the Mitchells which resulted in the orders and judgment made by McGrath J plainly gave rise to costs incurred by them on behalf of the plaintiffs in the class action proceeding. As McGrath J stated in the Costs Judgment at [62], the Mitchells were effectively compelled to make that application having regard to the Funder’s claims upon the funds held in Ironbridge Legal’s trust account.

2. McGrath J’s costs order in favour of the Mitchells is properly regarded as a personal liability of the Funder, particularly having regard to the circumstances which led to the Mitchells having to file their motion on 10 May 2024.

3. To the extent that the Funder claims that the Mitchells gave an undertaking or otherwise represented to McGrath J that the monies in their solicitors’ trust fund would not be applied towards the costs of their notice of motion, I accept Mr Withane’s evidence in his affidavit affirmed 25 February 2025 that no such undertaking or representation was ever given or made. The Funder pointed to no evidence which establishes that there was such an undertaking or representation.

4. The Funder submitted at [4] of its supplementary submissions that McGrath J made clear at [205] of his first judgment that the trust monies not used for costs and disbursements in the class action excluded the costs and disbursements of the motion before McGrath J. Paragraph 205 is as follows:

I also hold that the Funder does not have an absolute beneficial entitlement to the funds held in the Ironbridge trust account. The beneficial entitlement of the Funder to the funds held in the trust account is to any surplus funds remaining in the trust account after the purpose for which those funds are held for the benefit of the plaintiffs has been completed. This will only occur when all legal fees, disbursements and costs incurred by Ironbridge are satisfied.

Contrary to the Funder’s submission, the last two sentences of the passage are not expressed in such a way as to exclude the legal fees, disbursements and costs incurred for the benefit of the plaintiffs in respect of the application before McGrath J. In my view, that expenditure is within “the purpose for which those funds are held for the benefit of the plaintiffs”, particularly having regard to what McGrath J said in the Costs Judgment at [62].

5. It should also be noted that substantially similar points were raised by the Funder regarding use of the trust monies in the proceedings below prior to publication of the Costs Judgment. The Funder submitted below that the Mitchells’ costs of their notice of motion had been improperly paid out of monies held in the solicitors’ trust account. This submission was noted by McGrath J in the Costs Judgment at [76(4)]. His Honour also noted at [77(3)] that the Mitchells described the Funder’s claim as “a baseless assertion” that costs of the application had been improperly paid from trust monies. He further noted the Mitchells’ submission that the costs of the application were within the legitimate expenses for which the trust monies could be deployed, because they were costs incurred in the proceedings, referring to the first judgment at [204]. His Honour then explained at [78]-[85] why he did not accept the Funder’s position and he ordered the Funder to pay a gross sum costs order calculated on an indemnity basis in the amount of $134,607.95 plus GST. In doing so, McGrath J did not directly address the parties’ submissions concerning whether trust monies had been improperly used. In my view, however, the Mitchells’ position should be accepted to the effect that there was no improper use of trust monies.

6. It is unclear why McGrath J said at [81] of his first reasons for judgment that the plaintiffs’ intention was to use the trust funds to meet their legal expenses in the proceedings, which did not include the costs of their motion. In any event, I accept the Mitchells’ submission that his Honour’s reference at [81] to an “intention” falls short of saying that an undertaking or representation had been given or made to this effect. I do not consider that any looseness on the part of the primary judge in his language at [81] is sufficient to warrant a finding in response to such a serious allegation that trust monies have been misused in the manner claimed by the Funder.

37. As to the third matter, relating to the bank cheque, I reject the Funder’s contention that this demonstrates that it has the capacity to pay the Mitchells’ costs in the appeal proceedings. That is because there is no evidence of any of the following matters:

1. whether the Funder has other liabilities which exceed the amount of the cheque (it is notable that the Funder has not adduced any financial statements to support its claim that it has the capacity to pay the respondents’ costs);

2. whether in fact the Funder has the benefit of the cheque; and

3. whether the cheque has been drawn or not, whether by the Funder or anyone else.

38. As to the fourth matter, merely because the Funder has been able to provide funding towards the plaintiffs’ costs in the past, does not mean that it has the present capacity to do so. As mentioned, the Funder elected not to provide any formal financial statements upon which an informed assessment could be made of its financial circumstances.

39. As to the fifth matter, little if any weight should attach to the fact that proceedings have been commenced by the Funder seeking recovery from the Mitchells of approximately $1,410,000. I am satisfied with Mr Withane’s explanation as to why, to date, no defence has been filed in that proceeding. I am in no position to assess the strength or prospects of the Funder’s claim.

40. Nor do I accept the Funder’s submission that the Court is not in a position properly to assess the appropriate amount to be provided for security for costs. I find that Mr Withane is appropriately qualified, as an experienced commercial litigator, to give the estimates which he has regarding the Mitchells’ past and future costs in the appeal proceedings. Mr Withane practised as a solicitor in England and Wales for approximately 10 years (and as a barrister there for approximately 2.5 years) before being admitted as a solicitor in NSW in mid-2018. He practices mainly in commercial litigation. In his affidavit affirmed 14 February 2025, Mr Withane provided detailed information regarding the Mitchells’ actual costs of the appeal to date as well as an estimate of their future costs. As to the actual costs, which amounted to $11,905 (incl GST), he provided detailed information relating to the tasks to which those costs relate, as well as to the hourly rates and work done by solicitors and counsel. He provided similar detailed information in support of his estimate as to future costs. I accept that evidence.

41. In his affidavit affirmed 23 February 2025, Mr Withane explained that the Mitchells pressed for security for costs to be ordered in respect of the entirety of the Mitchells’ estimated costs of the appeal, which had been assessed on a solicitor/client basis. In the event security was ordered on a party/party basis, Mr Withane estimated the amount recoverable would be 75% in respect of solicitors’ costs and 100% of counsels’ costs. I accept these figures and consider it appropriate to order security for costs on a party/party basis. Applied to Mr Withane’s figures, 75% of the estimated solicitors’ costs incurred as at 14 February 2025 is $5,035.50 and 75% of the estimated future solicitors’ costs is $17,325. Allowing for 100% of counsels’ past and future estimated fees, the total security for costs figure is therefore $70,022.50 (incl GST). I consider this figure to be reasonable and I reject Mr Coshott’s submission that Mr Withane’s figures are “obviously” excessive for an application for leave to appeal.

42. For all these reasons, I consider that an order for security for costs should be made in favour of the Mitchells. The Funder should pay the amount of $70,022.50 (incl GST) into Court within 14 days hereof. It is also appropriate to stay the proceedings no 2024/00351500 until such security is provided.

43. The Mitchells sought to be heard on the costs of their motion. Appropriate orders will be made accordingly.

(b) Funder’s motion seeking a stay

44. Mr Coshott swore an affidavit dated 10 January 2025 in support of the Funder’s motion filed 14 January 2025. He annexed a copy of a statement of claim filed 12 December 2024 in which the Funder seeks judgment in the amount of $1,414,759.84 against the Mitchells, being additional monies said to have been provided to the plaintiffs in the class action on top of the $500,000 of funds provided by the Funder under a funding agreement. Those proceedings are listed for directions on 27 February 2025.

45. The Mitchells did not oppose the grant of a stay of McGrath J’s costs orders pending the hearing and determination of the Funder’s summons seeking leave to appeal, but sought a condition on the stay that the Funder pay into Court the judgment amount concerning the costs of the Mitchells’ motion filed 10 May 2024 ($134,607.95 plus GST). They submitted that such a condition was appropriate so as to ensure that the stay is one which is fair to all parties, citing Michael Hill Jeweller (Australia) Pty Ltd v Gispac Pty Ltd [2024] NSWCA 128 at [11].

46. The Mitchells submitted that such a condition was appropriate for similar reasons to those advanced by them in support of their application for security for costs. In brief, that is because there is credible evidence that the Funder would not be able to satisfy the costs order, hence the primary judge made an order that the Funder pay the Mitchells’ costs forthwith. They contended that the value of that judgment will be undermined if the Funder continues to litigate against them without providing security. They further added that there is no evidence that such a condition would cause the Funder any prejudice. Finally, they correctly pointed out that what the Funder actually seeks is a stay of the costs orders dated 11 December 2024.

47. The Mitchells’ submissions in support of imposing a condition on the stay should be accepted. Nothing was said by Mr Coshott which persuades me that such a condition is inappropriate. I have explained above why I do not consider that the use of some of the trust monies for this purpose was improper.

48. As noted above, McGrath J made an order for costs on an indemnity basis in the Mitchells’ favour in the amount of $134,607.95 plus GST. In his affidavit affirmed 25 February 2025, Mr Withane acknowledges that some of the trust funds were used to pay his firm’s invoices relating to the notice of motion specifically. The precise amount is, however, unclear on the evidence before me. In particular, while I accept Mr Withane’s evidence that, as at 25 February 2025, his firm was not holding any trust funds on behalf of the Mitchells, it is unclear on the evidence before me how much trust monies were in fact paid towards the legal costs of the Mitchells’ motion filed 10 May 2024. The evidence is too uncertain to support a finding, as sought by the Funder, that the proposed condition would amount to “double-dipping”. The issue can be addressed if and when an application is made to release the amount paid into Court.

49. Mr Coshott did not contend that, if the condition was imposed, the Funder would not be able to recover the Costs Judgment amount if its appeal succeeds.

50. Accordingly, for all these reasons, I consider that the condition sought by the first respondents is fair to both parties. I will order that the orders dated 11 December 2024 be stayed on condition that the Funder pay into Court within 14 days the amount of $134,607.95 plus GST.

51. As requested by the Mitchells, appropriate orders will also be made for the parties to make submissions and provide any evidence regarding costs of the Funder’s motion filed 14 January 2025.

(c) Mr Withane’s affidavit affirmed 25 February 2025

52. Finally, it is necessary to say something more concerning Mr Withane’s affidavit affirmed 25 February 2025. As noted above, the Mitchells were granted leave at the hearing to file and serve “a short affidavit by Mr Trevor Withane” in response to Mr Coshott’s submissions and material relating to what McGrath J said in the first judgment at [79]-[81]. The Court accepted Mr Redwood SC’s assurance that such an affidavit, along with a “short accompanying submission”, could be provided by 5:00pm on 24 February 2025. Leave was also granted for the Funder to file and serve any evidence and a brief written submission in response.

53. Following an email request by the Mitchells, time was extended to 10:30am on 25 February 2025 for the Mitchells to file and serve “a short affidavit” by Mr Withane together with “short accompanying submissions”.

54. Shortly before that deadline expired, a further request was made by email to extend the time to 12:30pm on 25 February 2025. A further extension to noon on 25 February 2024 was granted.

55. The Mitchells’ further written submission, which can appropriately be described as short, was filed at 12:10pm on 25 February 2025. Mr Withane’s affidavit affirmed 25 February 2025 was not filed until 2:06pm on 25 February 2025. This was not only well beyond the deadline which had already been extended twice, but the affidavit was far from “short”. Indeed, together with its voluminous exhibit, the affidavit totalled over 200 pages. Furthermore, inexplicably, the exhibit reproduced lengthy documents which were already before the Court, including copies of McGrath J’s two reasons for judgment.

56. The affidavit also addressed matters which were beyond the grant of leave. In particular, Mr Withane chose to respond to Mr Coshott’s submission that the Funder had not been properly served with certain documents. That evidence is beyond the grant of leave and will not be taken into account by the Court.

57. It should also be noted that at 8:50pm on 25 February 2025, the first respondents emailed to my Chambers a notice of motion seeking an extension of time to 4:00pm on 25 February 2025 for the filing and service of “an affidavit and accompanying submissions in response to Exhibits 1, 2 and 3”, together with an affidavit in support by Mr Withane affirmed on 25 February 2025. Mr Withane sought to explain the delay in filing and serving the first respondents’ documents. Time should be extended nunc pro tunc, but I should make clear that Mr Withane’s explanation for the delay does not overcome the other issues presented by his earlier affidavit dated 25 February 2025, as identified above.

58. Having regard to these matters, my tentative view is that if any costs order is ultimately made in favour of the Mitchells in respect of their notice of motion seeking security for costs filed 24 January 2025, that order should not include the costs of Mr Withane’s first affidavit affirmed on 25 February 2025, the notice of motion filed 25 February 2025 or Mr Withane’s second affidavit affirmed on 25 February 2025.

Conclusion

59. For all these reasons, the following orders will be made:

1. Grant leave under r 7.1(2)(a) of the Uniform Civil Procedure Rules 2005 (NSW) for Mr Robert Coshott to represent Litigation Fund WCX Pty Ltd.

2. The time for the first respondents to file and serve a short affidavit by Mr Trevor Withane responding to exhibits 1, 2 and 3 together with short accompanying submissions be extended to 4:00pm on 25 February 2025 nunc pro tunc.

3. Order Litigation Fund WCX Pty Ltd to provide security for the costs of the first respondents in proceedings no 2024/00351500 in the amount of $70,022.50 (incl GST), such sum to be paid into Court within 14 days.

4. Those proceedings be stayed until such time as the applicant has provided security for costs in accordance with order 3.

5. The orders dated 11 December 2024 be stayed pending the hearing and determination of the applicant’s summons seeking leave to appeal, on condition that within 14 days hereof the applicant pay into Court the amount of $134,607.95 plus GST.

6. Within 7 days hereof, the parties are each to provide brief submissions and any evidence concerning the costs of the first respondents’ notice of motion filed 24 January 2025 and the applicant’s notice of motion filed 14 January 2025.

7. The issue of costs of the two motions will be determined on the papers and without a further oral hearing.

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Decision last updated: 28 February 2025