Litigation Fund WCX Pty Ltd v Mitchell (No 3)

[2025] NSWCA 67

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Litigation Fund WCX Pty Ltd v Mitchell (No 3) [2025] NSWCA 67

Hearing dates:

3 April 2025

Date of orders:

11 April 2025

Decision date:

11 April 2025

Before:

Mitchelmore JA at [1]
McHugh JA at [2]
Ball JA at [3]

Decision:

(1)   The applicant’s notice of motion filed on 11 March 2025 is dismissed;

(2)   Within seven days of the date of this judgment, the respondents file written submissions not exceeding three pages setting out the orders they seek in relation to costs and the reasons for those orders;

(3)   Within a further seven days the applicant file written submissions not exceeding three pages in response;

(4)   Within a further four days, the respondents file written submissions not exceeding one page in reply;

(5)   The question of the costs of the notice of motion be determined on the papers.

Catchwords:

COSTS – review of decision of Judge of Appeal under s 46(4) of the Supreme Court Act 1970 (NSW) – where security for costs granted by Judge of Appeal – whether decision involved an error of principle or was plainly wrong – where Judge of Appeal found special circumstances were not required under s 1335 of the Corporations Act 2001 (Cth) – no error of principle

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 183

Corporations Act 2001 (Cth), s 1335

Roads Act 1993 (NSW), s 179

Supreme Court Act 1970 (NSW), s 46(4)

Uniform Civil Procedure Rules 2005 (NSW), r 42.21, 51.50(1)

Cases Cited:

Antov v Bokan [2019] NSWCA 40

Collier v Lancer [2013] NSWCA 185

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

FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 147

Harrington Services Pty Ltd (in liq) v Harrington [2003] NSWCA 89

Kimberly Developments Pty Ltd v Bale [2024] NSWCA 12

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

Litigation Fund WCX Pty Ltd v Darren Mitchell (No 2) [2025] NSWCA 33

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

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

Pioneer Park Pty Ltd (in liq) v ANZ Banking Corporation [2007] NSWCA 344

Ranclose Investments Pty Ltd v Leda Management Services Pty Ltd [2022] NSWCA 206

Strata Consolidated (Aust) Pty Ltd v Bradshaw [2000] NSWCA 225

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

Treloar Constructions Pty Limited v McMillan [2016] NSWCA 302

Winnote Pty Ltd (in liq) v Page (2005) 64 NSWLR 244; [2005] NSWCA 362

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 with H Cooper (First Respondents)

Solicitors:
Ironbridge Legal (First Respondents)

File Number(s):

2024/351500

Publication restriction:

Nil

 Decision under review 

Court or tribunal:

Court of Appeal

Citation:

Litigation Fund WCX Pty Ltd v Darren Mitchell [2025] NSWCA 27 and Litigation Fund WCX Pty Ltd v Darren Mitchell (No 2) [2025] NSWCA 33

Date of Decision:

28 February 2025 and 10 March 2025

Before:

Griffiths AJA

File Number(s):

2024/351500

JUDGMENT

1. MICHELMORE JA: I agree with Ball JA.

2. McHUGH JA: I agree with Ball JA.

3. BALL JA: On 24 February 2025, Griffiths AJA heard two motions. One, filed by the first respondents, Mr and Mrs Mitchell (the Mitchells), on 24 January 2025, sought security for their costs of the substantive proceedings before this Court in which the applicant, Litigation Fund WCX Pty Ltd (WCX), seeks leave to appeal from orders made by McGrath J on 20 September 2024 following the delivery of reasons for judgment on 13 September 2024. The other, filed by WCX on 14 January 2025, sought a stay of “[t]he judgment of McGrath J dated 13 September 2024”.

4. Griffiths AJA delivered judgment in relation to the two motions on 28 February 2025: see Litigation Fund WCX Pty Ltd v Darren Mitchell [2025] NSWCA 27 (WCX 1). Relevantly, he ordered that WCX provide security for the Mitchells’ costs in the amount of $70,022.50 (including GST) and that the proceedings be stayed if that security was not provided within 14 days. His Honour also ordered that orders made by McGrath J on 11 December 2024 (relating to the costs of the motion dealt with by McGrath J) be stayed pending the hearing and determination of WCX’s summons seeking leave to appeal on the condition that within 14 days WCX pay into Court the amount of $134,607.95 plus GST.

5. On 10 March 2025, Griffiths AJA handed down judgment dealing with the costs of the two motions: see Litigation Fund WCX Pty Ltd v Darren Mitchell (No 2) [2025] NSWCA 33 (WCX 2). In substance, he ordered that WCX pay the Mitchells’ costs of the two motions on an indemnity basis, that those costs be fixed as a gross sum of $69,336.33 (plus GST) and that they be paid within 28 days.

6. By a notice of motion filed on 11 March 2025, WCX seeks an order under s 46(4) of the Supreme Court Act 1970 (NSW) varying or discharging the orders made by Griffiths AJA on 28 February 2025 and 10 March 2025. This judgment is concerned with that motion.

Background

7. The primary proceedings concern a class action brought by the Mitchells as lead plaintiffs against Transport for NSW in which the Mitchells claim that Transport for NSW, in acquiring land for the purposes of WestConnex M4-M5 and then granting long term leases over that land to privately owned entities for substantial consideration, contravened s 179 of the Roads Act 1993 (NSW).

8. WCX provided the Mitchells with funding in respect of that class action, which is yet to be heard.

9. Disputes arose between WCX and the Mitchells concerning the management of the class action, which ultimately led to WCX terminating its funding. A question then arose concerning who was entitled to the balance (amounting to $135,180.55) of an amount that WCX had paid into the trust account of the solicitors who had been retained to conduct the litigation (Ironbridge Legal) on account of legal fees and whether that question could be determined under s 183 of the Civil Procedure Act 2005 (NSW) (the CPA), which gives the Court power in class actions to make “any order that the Court thinks appropriate or necessary to ensure that justice is done in the proceedings”.

10. On 13 September 2024, McGrath J delivered a judgment in which he concluded that the Mitchells were entitled to an order pursuant to s 183 of the CPA that the remaining funds were held for the benefit of the Mitchells and could be applied towards the legal costs they incurred as lead plaintiffs in the class action: see Mitchell v Roads and Maritime Services (now known as Transport for NSW)(No 2) [2024] NSWSC 1165 (Mitchell 1).

11. On 20 September 2024, McGrath J made orders in chambers giving effect to the conclusions he had reached in Mitchell 1.

12. On 11 December 2024, McGrath J ordered that the Mitchells were entitled to a gross sum costs order in respect of their costs of the notice of motion filed on 10 May 2024 and their costs of the application for such an order in the total amount of $134,607.95 plus GST. WCX was ordered to pay that amount forthwith and within 14 days of 11 December 2024: Mitchell v Road and Maritime Services (now known as Transport for NSW) (No 3) [2024] NSWSC 1593 (Mitchell 2).

13. By a summons filed on 9 December 2024, WCX sought leave to appeal in respect of the “whole of decision below”. As Griffiths AJA pointed out (WCX 1 at [9]) taken literally that could only be a reference to the orders made by McGrath J on 20 September 2024. No order for costs had been made at the time the summons was filed. Nevertheless, the hearing before Griffiths AJA proceeded on the basis that WCX also challenged the gross sum costs order made by McGrath J in Mitchell 2 and on the basis that WCX’s application for a stay related to that order. Moreover, the Mitchells were prepared to concede that it was appropriate to grant a stay of that order. The only question before Griffiths AJA was whether a condition of that stay should be that the costs the subject of the order be paid into Court pending resolution of the substantive proceedings (that is, the application for leave to appeal).

14. The Mitchells’ original notice of motion seeking security did so on the basis of Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 51.50(1) or alternatively UCPR r 42.21. By an amended notice of motion served on 14 February 2025 and filed on the day of the hearing before Griffiths AJA, the Mitchells also sought to rely on s 1335(1) of the Corporations Act 2001 (Cth).

Griffiths AJA’s reasons

15. In making the orders in relation to security for costs, Griffiths AJA observed:

1. By the amended notice of motion, the Mitchells made it clear that they sought security under s 1335 of the Corporations Act 2001 (Cth) as well as the Court’s inherent power and UCPR r 51.50(1);

2. 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 [that is, WCX] will be unable to pay their costs of the application for leave to appeal if it is unsuccessful”: WCX 1 at [16];

3. Evidence relied on by the Mitchells established that WCX does not hold any real property in Australia, has only one issued share in the total amount of $1.00 and, according to searches of publicly available databases, has no other financial means. In addition, WCX had failed to provide “basic information as to its financial means notwithstanding previous requests from Ironbridge”, had elected not to place evidence before the Court concerning its ability to meet an order resulting from a costs assessment, had not paid the sum of $134,607.95 in accordance with the orders made by McGrath J and had only belatedly applied for a stay: WCX 1 at [17];

4. the Court could therefore be satisfied that the threshold requirement in s 1335(1) of the Corporations Act was satisfied: WCX 1 at [18].

16. Griffiths AJA, after observing that it was not suggested that an order for security would stifle the substantive proceedings, considered five arguments for why the Court should not order security. The first was that the Mitchells were required to establish special circumstances in accordance with decisions such as 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 and had failed to do so. The second was that the evidence established that the Mitchells had in fact used some of the moneys held in trust to pay their legal costs of their application before McGrath J, which was contrary to what McGrath J had been told. The third was that WCX had received a bank cheque for $100,000, which provided evidence that it could meet any costs order. The fourth was that WCX had funded the Mitchells’ claim in an amount of almost $2,000,000 which again demonstrated that it would be able to meet any costs order. The fifth was that WCX had commenced proceedings against the Mitchells seeking to recover $1,410,000, which provided a discretionary reason for refusing security.

17. Griffiths AJA dealt with each of those arguments. Relevantly, he pointed out that the requirement of special circumstances only applied to an application for security under UCPR r 50.51(1). It did not apply to an application for security against a corporation under s 1335 of the Corporations Act. None of the cases referred to by WCX suggested that it did. In particular, his Honour pointed out that one of the cases relied on by WCX, Flynn v PPK Mining Equipment Pty Ltd [2023] NSWCA 151 (Flynn), was distinguishable because in that case security was ordered against both a corporation and an individual. His Honour also dealt with each of the other arguments raised by WCX. It will be necessary to return to some of them below.

18. In relation to the application for a stay, his Honour recorded the fact that the Mitchells did not oppose the grant of a stay. The only issue was whether as a condition of that stay WCX should be required to pay into Court the amount of the gross sum costs order ($134,607.95 plus GST). On that issue, WCX submitted that, contrary to the basis on which McGrath J had proceeded, the Mitchells had used part of the money held in trust to pay the legal fees of the motion the subject of Mitchell 1. WCX submitted that, in those circumstances, it would be unfair if it was required to pay those costs into Court, since the relevant costs had already been paid from money advanced by WCX.

19. Griffiths AJA dealt with that argument in the following terms (WCX 1 at [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.

Principles applicable to a review

20. The principles applying to a review under s 46(4) of the Supreme Court Act are well settled. They were conveniently summarised by this Court in Collier v Lancer [2013] NSWCA 185 in these terms:

[19] An application for review pursuant to the Supreme Court Act, s 46(4) is not an appeal (s 19(2) of the Act and UCPR, r 51.2 and r 51.58). An applicant for review must show is [sic] that there has been an error of principle in the exercise of the power or that the decision was plainly wrong (Transglobal Capital Pty Ltd v Yolarno Pty Ltd [2004] NSWCA 136; Patrick v Howorth [2002] NSWCA 285). It is noted in Ritchie's Uniform Civil Procedure NSW that this construction of the power derives either from the legislative context of that statutory provision (citing Wentworth v Wentworth (1994) 35 NSWLR 726) or from the proposition that an application to discharge or vary is essentially a matter of practice and procedure.

[20] In Rinehart v Welker [2011] NSWCA 403, this court noted, at [48], the heavy burden that a person seeking a s 46(4) review has to discharge in order to have a Judge of Appeal's order set aside (referring there also to Kiri Te Kanawa v Leading Edge Events Australia Pty Ltd [2007] NSWCA 274 at [14] and Lo v Iverarch [2009] NSWCA 92 at [29]).

WCX’s contentions

21. In its written submissions in chief, WCX advances three reasons for why Griffiths AJA made an error of principle or reached a decision that was plainly wrong in relation to the order for security for costs:

1. His Honour failed to find that special circumstances were required to be proved in order for security for costs to be ordered against a corporation under s 1335 of the Corporations Act;

2. His Honour wrongly concluded that a real property search and other searches satisfied the onus of proof in respect of the threshold question raised by s 1335 of the Corporations Act; and

3. His Honour wrongly ordered security for costs for the whole appeal instead of costs of the summons for leave to appeal.

22. In relation to the application for a stay, WCX submits that his Honour made an error of principle or was plainly wrong in failing to take into account evidence of the amount that was taken from the trust moneys in payment of the orders of McGrath J in determining if any condition should be imposed on the stay of that judgment.

23. WCX did not advance any submissions for why Griffiths AJA made an error of principle or was plainly wrong in ordering that WCX pay the costs of the motion assessed on an indemnity basis and payable as a gross sum fixed by the Court. That was plainly a discretionary decision that his Honour was entitled to make. Nothing further needs to be said about it.

24. I deal with each of the arguments raised by WCX in turn.

The alleged failure to find special circumstances

25. WCX advanced no oral submissions in support of this alleged error. In its written submissions in chief it simply asserts that his Honour erred in holding that Flynn was distinguishable, without explaining why.

26. His Honour made no error of principle in distinguishing Flynn. In the present case, security is only sought against a corporation. Section 1335 of the Corporations Act provides a separate and independent basis for ordering security against a corporate appellant from that provided by UCPR r 51.50 and its predecessors: see Winnote Pty Ltd (in liq) v Page (2005) 64 NSWLR 244; [2005] NSWCA 362 (Mason P) (Winnote) and the cases cited there. Whether security should be ordered in accordance with s 1335 is to be determined by reference to the principles applicable to that section, not the principles applicable to UCPR r 51.50. The existence of special circumstances is not a requirement of s 1335. There can be no basis for an argument that UCPR r 51.50 somehow or another limited the operation of s 1335. Such an argument was rejected by this Court in Pioneer Park Pty Ltd (in liq) v ANZ Banking Corporation [2007] NSWCA 344 (Pioneer Park).

27. In its written submissions in reply, WCX sought to advance for the first time an argument that since both provisions applied, they both should be satisfied before security is ordered. That conclusion is said to follow from decisions such as Ranclose Investments Pty Ltd v Leda Management Services Pty Ltd [2022] NSWCA 206 holding that there is no inconsistency between the provisions in the UCPR concerning security and s 1335. There is no substance in this submission. Section 1335 of the Corporations Act and UCPR r 51.50 do not set out cumulative requirements that must be satisfied before security is ordered. Rather, each provides an independent basis on which security may be ordered. One requirement that must be satisfied in order to engage s 1335 of the Corporations Act is that the security be sought against a corporation. Another is that it must appear by credible testimony that “there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence”. If those two conditions are satisfied, the Court is given a broad discretion to order security. There is no additional requirement that the Court be satisfied that there are special circumstances. WCX’s argument that there is is inconsistent with the decision in Pioneer Park.

28. It was not suggested that s 1335 does not apply to appeals. Such a suggestion would be contrary to authority: see, for example, Strata Consolidated (Aust) Pty Ltd v Bradshaw [2000] NSWCA 225; Harrington Services Pty Ltd (in liq) v Harrington [2003] NSWCA 89; FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 147; Winnote.

The onus of proof

29. There is no substance in WCX’s submissions on this issue.

30. Griffiths AJA correctly summarised the relevant principles applicable to the question whether the threshold requirement set out in s 1335 (whether there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence) is satisfied by reference to the judgment of Beazley ACJ in Treloar Constructions Pty Limited v McMillan [2016] NSWCA 302 at [11]-[15]: see WCX 1 at [31]. As Beazley ACJ pointed out, the test is often described as “undemanding”: at [11].

29. In applying those principles to this case, Griffiths AJA pointed to the fact that the publicly available information suggested that WCX had no assets. In the absence of any other evidence, that provided a reason to believe that WCX would be unable to meet any adverse costs order. WCX sought to answer that inference by pointing to three matters. One was that it had received a bank cheque for $100,000. The second was that it had funded the Mitchells’ class action to an amount of almost $2,000,000. The third was that it had commenced proceedings against the Mitchells claiming $1,410,000. His Honour dealt with each of those arguments. It is not suggested that he did so in a way that involved an error of principle or that was plainly wrong. As his Honour explained, the fact that WCX once had a bank cheque for $100,000 and was previously able to fund the Mitchells’ class action did not prove that it would have assets to meet any costs order against it if the Mitchells were successful on appeal. The fact that WCX had made a claim against the Mitchells did not mean that that claim would succeed. The analysis adopted by Griffiths AJA was an orthodox one and provided a proper basis for concluding that the threshold requirement of s 1335 was satisfied.

Whether security should be limited to the costs of an application for leave to appeal

32. This issue was not raised before Griffiths AJA and was not dealt with by him. Instead, the hearing before his Honour appears to have proceeded on the basis that the application for leave to appeal would be heard concurrently with the appeal itself if leave were granted, making it appropriate to order security for both the application for leave and the appeal. . The Mitchells' written submissions on the security for costs application referred in this regard to the Registrar having indicated, on the first return date, that there would be a concurrent hearing of the leave application and the appeal, consistently with the submissions of both parties that a concurrent hearing would be appropriate.

33. Although JusticeLink does not record the fact that an order for a concurrent hearing has been made, it is apparent from the file that it has. Accordingly, Griffiths AJA was correct to proceed on that basis; and his Honour made no error in doing so.

The issue in relation to the stay

34. WCX submits that Griffiths AJA made an error of principle or was plainly wrong in ordering that it pay the whole of the costs ordered to be paid by McGrath J into Court as a condition of the stay. The argument rests on a contention that some of those costs were paid from the amount held in trust, presumably with the consequence that the amount paid from trust should be treated as a part payment of the gross sum costs order made by McGrath J. It appears to be WCX’s case that it should not be required to provide what in effect is security for an amount that it has already paid.

35. It is not clear on what basis WCX submits that any amount paid from the trust account in respect of the costs of the motion should be treated as payment of the amount the subject of the gross sum costs order made by McGrath J. If the ultimate conclusion is that the money held in trust was available to the Mitchells to fund the class action, it might well be argued they should not be worse off because they have had to incur costs in resisting a failed claim by WCX for a return of those funds. If that is right, they might well have an argument that they are entitled to recover the whole of the gross sum costs order even if part of those costs were paid out of the trust account. That was the view taken by the primary judge: see Mitchell 2 at [77(3)]. Presumably, that is an issue that will be addressed at the substantive hearing before this Court.

36. Griffiths AJA took the view that it was not possible on the evidence before him to determine what amount had been paid from the trust account towards the costs of the motion. Consequently, his Honour thought that the practical solution was to require the whole amount of the gross sum costs order to be paid into Court as a condition of the stay. If ultimately it turned out that WCX was entitled to a reduction in the amount it had to pay in respect of that order because of amounts deducted from the trust account, that could be addressed at the time orders were made for the dispersal of the funds in Court.

37. It was apparent from the evidence that a large proportion of the money that had been paid into the trust account by WCX was used to pay the costs of the notice of motion, although Griffiths AJA was correct to observe that the precise amount could not be calculated or could not easily be calculated from the material before him. In any event, that still left the question (to be resolved at the substantive hearing) whether payments out of the trust account should be treated as discharging the obligation to pay the amount the subject of the gross sum costs order made by McGrath J. In those circumstances, the approach taken by Griffiths AJA of requiring the whole amount to be paid into Court on the basis that the money could be disbursed according to each party’s entitlement to it once that had been determined was a practical resolution of the issue and fell well within Griffiths AJA’s discretion to grant the stay on conditions. It did not involve an error of principle. Nor could it be said to be a solution that was plainly wrong.

Conclusion and orders

38. It follows from what I have said that WCX’s notice of motion filed on 11 March 2025 must be dismissed.

39. The Mitchells sought to be heard on the papers on the question of costs. The orders I propose accommodate that request.

40. I would, therefore, make the following orders:

1. The applicant’s notice of motion filed on 11 March 2025 is dismissed;

2. Within seven days of the date of this judgment, the respondents file written submissions not exceeding three pages setting out the orders they seek in relation to costs and the reasons for those orders;

3. Within a further seven days the applicant file written submissions not exceeding three pages in response;

4. Within a further four days, the respondents file written submissions not exceeding one page in reply;

5. The question of the costs of the notice of motion be determined on the papers;

6. The matter be stood over before the Registrar on 14 April 2025.

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Decision last updated: 11 April 2025