Mitchell v Transport for NSW

The applicants, plaintiffs in representative proceedings, sought leave to appeal an order made by the primary judge requiring them to provide security for costs. The respondent, Transport for NSW, had sought this security on the basis that the identity of the litigation funder, who had agreed to indemnify the plaintiffs against adverse costs orders and provide the security, was not disclosed. The applicants argued that the primary judge erred in ordering security for costs, particularly given the existence of the funding agreement.

The central legal issue before the Court of Appeal was whether the primary judge had erred in exercising their discretion to order security for costs, notwithstanding the existence of a litigation funding agreement where the funder's identity remained undisclosed. This involved considering the scope of the court's power to order security for costs, including under rule 42.21 of the Uniform Civil Procedure Rules 1999 (NSW) and its inherent jurisdiction, and how that power should be exercised when a litigation funder is involved but their financial capacity to meet the indemnity cannot be assessed by the opposing party.

Meagher and Mitchelmore JJA found no reasonably arguable error or question of principle in the primary judge's decision. Their Honours reasoned that while a litigation funding agreement can be a relevant factor in the exercise of discretion regarding security for costs, it does not automatically preclude an order for security, especially where the respondent is unable to assess the funder's financial capacity to meet its indemnity obligations. The court emphasised that the purpose of security for costs is to ensure that a defendant, if successful, can recover their costs, and this purpose is undermined if the source of those costs cannot be adequately identified or assessed.

The application for leave to appeal was dismissed, and the applicants were ordered to pay the costs of the application.