Nathan v Macquarie Leasing Pty Ltd (Security for Costs)

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT

GROUP PROCEEDINGS LIST

S ECI 2020 03924

BETWEEN:

DAIMIN NATHAN	First Plaintiff
TANIA NATHAN	Second Plaintiff
v
MACQUARIE LEASING PTY LTD (ACN 002 674 982)	Defendant

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JUDGE:	Gobbo AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	28 November 2023
DATE OF RULING:	30 September 2024
CASE MAY BE CITED AS:	Nathan v Macquarie Leasing Pty Ltd (Security for Costs)
MEDIUM NEUTRAL CITATION:	[2024] VSC 606

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SECURITY FOR COSTS – Group proceeding – Form and quantum of security – Group Costs Order – Liability of law practice to meet any order for security – Risk that law practice may not be able to meet an adverse costs order – Whether risk necessitates security – Whether form of security proposed adequate – Undertaking offered by law practice – Undertaking not accepted by defendant – Fox v Westpac Banking Corporation (2021) 69 VR 487 – Trailer Trash Franchise Systems Pty Ltd v GM Fascia & Gutter Pty Ltd [2017] VSCA 293 – DIF III Global Co-Investment Fund, L.P. & Anor v BBLP LLC & Ors [2016] VSC 401 – Hall v Australian Finance Direct Ltd [2005] VSC 306 – Stuart v Said (2021) 65 VR 50 – Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377 – Austcorp Project Number 20 Pty Ltd v LM Investment Management Ltd (in liq) [2014] FCA 1371.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs and Maurice Blackburn Pty Ltd	Mr L Armstrong KC with Mr D Fahey of counsel	Maurice Blackburn Pty Ltd
For the Defendant	Mr J Williams SC with Mr S Gerber of counsel	Gilbert + Tobin

TABLE OF CONTENTS

Introduction........................................................................................................................................ 1

Evidence............................................................................................................................................... 2

Principles............................................................................................................................................. 3

The Court’s power to order security for costs.......................................................................... 4

An examination of the corporation’s (Maurice Blackburn) financial affairs......................... 9

Do the interests of justice require an order for security?........................................................ 9
The effect of the GCO................................................................................................................... 9
Will Maurice Blackburn be able to satisfy an adverse costs order?..................................... 12
Audited accounts........................................................................................................................ 13
Expert reports.............................................................................................................................. 17
The Atkins Report.............................................................................................................. 18
The Nicolaides Report....................................................................................................... 24

The parties contentions and consideration............................................................................. 34
Maurice Blackburn’s contentions.................................................................................... 34
Macquarie’s contentions................................................................................................... 37

Is an undertaking sufficient?..................................................................................................... 43

Conclusion on Security................................................................................................................... 48

Quantum............................................................................................................................................ 49

HER HONOUR:

Introduction

This proceeding, which commenced in October 2020, concerns transactions by which group members entered into finance agreements for the acquisition of motor vehicles during the period 1 March 2013 to 31 October 2018 (inclusive) in respect of which a ‘flex commission’ was paid to a car dealer. Macquarie has identified approximately 193,900 potential group members in the proceeding against it. It is one of three ‘flex commission’ class actions advancing the same case theory, with the other class action proceedings being S ECI 2020 02946 Fox v Westpac Banking Corporation (‘Fox Proceeding’) and S ECI 2020 03365 O’Brien v Australian and New Zealand Banking Group Limited (‘O’Brien Proceeding’).

On 9 March 2023, Nichols J made a group costs orders (‘GCO’) (‘Orders’), pursuant to s 33ZDA of the Supreme Court Act 1986 (Vic) (‘SCA’). The GCO provided that the legal costs payable to Maurice Blacburn be calculated as 24.5 percent of the amount of any award or settlement that may be recovered in the proceeding.[1] The Orders also provided that, pursuant to s 33ZDA of the SCA, Maurice Blacburn is liable to pay any costs payable to the defendant, Macquarie Leasing Pty Ltd (ACN 002 674 982) (‘Macquarie’), in the proceeding, and give any security for costs that the Court may order to be given.[2]
[1]Order of Nichols J made 9 March 2023.
[2]Ibid.

By summons filed on 25 August 2023, Macquarie sought security for its costs in this proceeding in the sum of $5,976,773.00 by way of payment into Court, bank guarantee or such other form (or amount) as the Court thinks fit (‘Application’).

Whilst the plaintiffs and Maurice Blackburn resisted the Application,[3] Maurice Blackburn contended that an undertaking by it to pay adverse costs is sufficient and has made such offer to provide security by way of an undertaking.[4] Macquarie has rejected the offer of an undertaking and presses for security.
[3]Maurice Blackburn opposed the Application both on their own behalf and on behalf of the plaintiffs.
[4]Affidavit of Philippa Sally Hofbrucker affirmed 25 August 2023, Exhibit PSH-8, 71-3, 119-122 (‘Hofbrucker Affidavit’).

The issues for the Court to determine are:

(a) whether the interests of justice require an order for security?

(b) assuming that question is answered affirmatively, is an undertaking by Maurice Blackburn to meet any adverse costs order sufficient security?

(c) if an undertaking is not sufficient security, what form of security should be ordered and in what amount?

Evidence

A vast amount of material was filed in relation to the Application. Macquarie relied upon the following:

(a) paragraph 117 of the redacted affidavit of Andrew John Watson (prior to his Honour’s appointment) sworn on 20 May 2020;

(b) paragraph 35 of the redacted affidavit of Andrew John Watson (prior to his Honour’s appointment) sworn on 26 August 2022;

(c) affidavit of Philippa Sally Hofbrucker affirmed on 25 August 2023;

(d) expert report of Forde Nicolaides dated 22 November 2023 (‘Nicolaides Report’);

(e) redacted written submissions dated 27 November 2023;

(f) Portfolio Adverse Costs Insurance Policy underwritten by AMTrust Europe Limited;

(g) Syndicated Facility Agreement;

(h) Class Action Facility Agreement; and

(i) a printout of the Maurice Blackburn website in respect of the Roundup class action proceeding.

The plaintiffs and Maurice Blackburn oppose the Application and relied upon the following:

(a) affidavit of Thomas John McDonald affirmed on 25 October 2023;

(b) expert report of Geoff Atkins dated 26 October 2023 (‘Atkins Report’);

(c) redacted affidavit of Andrew John Watson (prior to his Honour’s appointment) sworn on 26 October 2023;

(d) affidavit of Richard Erle Ryan affirmed on 27 October 2023;

(e) redacted affidavit of Rebecca Gilsenan affirmed on 13 November 2023 (‘Gilsenan Affidavit’);

(f) supplementary expert report of Geoff Atkins dated 14 November 2023;

(g) redacted written submissions dated 24 November 2023;

(h) redacted affidavit of Patrik Valsinger affirmed on 27 November 2023 (‘Valsinger Affidavit’); and

(i) further supplementary expert report of Geoff Atkins dated 27 November 2023.

Principles

Section 33ZDA(2) of the SCA provides that if a GCO is made, the law practice representing the plaintiff and group members:

(a)is liable to pay any costs payable to the defendant in the proceeding; and
(b)must give any security for the costs of the defendant in the proceeding that the Court may order the plaintiff to give.

Noting that an order for security for costs is ‘commonly made in a group proceeding’, the Court of Appeal has observed that s 33ZDA(2) of the SCA ‘imposes a liability on the law practice to pay any costs payable to the defendant and requires the law practice to give any security for costs of the defendant that may be ordered’.[5]
[5]Bogan v The Estate of Peter John Smedley (2023) 72 VR 394, 407 [52] (Ferguson CJ, Niall and Macaulay JJA).

Accordingly, by reason of the GCO and the Orders, and by operation of s 33ZDA(2) of the SCA, Maurice Blackburn must give any security for costs that the Court may order to be given. For these reasons, any order that the plaintiffs give security cannot occasion any prejudice to the plaintiffs or group members, or have the effect of stifling the proceeding – the security, if ordered, is required to be paid by Maurice Blackburn.

The Court’s power to order security for costs

The Application is brought pursuant to s 33ZF of the SCA, Order 62 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’) and the Court’s inherent jurisdiction.

The power of the Court to order security is well established including under r 62.02(1)(b) of the Rules and/or under s 1335(1) of the Corporations Act 2001 (Cth) (‘Corporations Act’) which provides that the Court may order that a plaintiff give security for a defendant’s costs of the proceeding where:

(a) the plaintiff is a corporation; and

(b) there is reason to believe that the plaintiff has insufficient assets in Victoria to pay the costs of the defendant if ordered to do so.

Additionally, s 33ZF of the SCA provides that the Court may, in any group proceeding conducted under Part 4A of the SCA, make any order it thinks appropriate or necessary to ensure that justice is done. If the circumstances warrant it, that power may be exercised to order security for costs against a plaintiff in group proceeding.[6]
[6]Hall v Australian Finance Direct Ltd [2005] VSC 306, [106] (Hollingworth J) (‘Hall’); Matthews v SPI Electricity Pty Ltd (No 9) [2013] VSC 671, [81]-[84] (Derham AsJ).

In exercising the discretion[7] to award security for costs, the Court is required to take into account all of the relevant facts, matters and circumstances, although a number of factors are well recognised as being relevant to the exercise of that discretion, including:
[7]Stuart v Said (2021) 65 VR 50, 52 [7] (Maxwell P and McLeish JA) (‘Stuart’).

(a) whether there is a reason to believe that the plaintiff will be unable to pay the defendant’s costs if so ordered; [8]

(b) the promptness of the application and the stage it is made in the proceeding. Here, the Application was brought at the invitation of the plaintiffs, after the making of the GCO and at the time the plaintiffs requested after discussions between the parties were exhausted;[9] and

(c) whether an order for security would stultify the action and shut the plaintiff out from pursuing an arguable claim. This is not the case here by reason of the GCO.

[8]Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377, 380 [10] (Maxwell P and Buchanan JA) (‘Livingspring’).

[9]Hofbrucker Affidavit, [10], [14]-[21].

Further, the inherent jurisdiction of this Court also permits the making of a security for costs order where that is necessary in the interests of justice.[10] The power is in addition to the Court’s power to regulate its own procedure.[11] It permits the Court to require security for costs in circumstances that fall outside the categories found in r 62.02 of the Rules.[12] The power is not fettered or confined by reference to any specified categories. It may be exercised whenever the interests of justice require, in all the circumstances of the case.[13] Additional preconditions are not necessary to enliven the jurisdiction of the Court.[14] Rather, the determinative factor is what the interests of justice require.
[10]Von Marburg v Aldred (No 3) [2017] VSC 146, [45] (‘Von Marburg’).
[11]Stuart (n 7), 51-52 [5] (Maxwell P and McLeish JA), citing Von Marburg (n 10), [39].
[12]Stuart (n 7), 52 [6] (Maxwell P and McLeish JA).
[13]Ibid, 59 [35] (Maxwell P and McLeish JA).
[14]Ibid.

Determining whether an order for security should be made requires a risk assessment. It is on this point that the parties diverged as to the party to whom that risk assessment should be directed.

Senior Counsel for Macquarie submitted that the relevant assessment was for the Court to consider the ability of the plaintiffs to meet an order for security. It was said that the relevant impecuniosity was that of the plaintiffs which it was contended was uncontroversial and effectively admitted.[15] On this basis, Senior Counsel for Macquarie submitted that statute requires the Court to consider whether the plaintiffs should be required to provide security. The submission on behalf of Macquarie was in the following terms:[16]

MR WILLIAMS: Notwithstanding that they might, on their face, have assets. So for all those reasons we do say one actually doesn’t need to get into the factual question of, is there a basis for thinking Maurice Blackburn may not be able to satisfy a costs order in these proceedings? Because the statute does not direct one to that inquiry. The statute actually operates down a different path.
Should the plaintiff be required to provide security? Yes. Impecunious? Tick. There’s a funder? Yes. Next step: If that’s so then under the statute the law practice having the benefit of the GCO must provide it. Third step, in what form should it be? It should be in the usual form of security, not a personal undertaking. Both because the statute makes plain that’s a separate thing, and separately the authorities make plain if one was a funder, that wouldn't be acceptable. And that, we do say, is actually the end of the inquiry and Your Honour can and should reason to that point that security ought be provided subject to issues about quantum and (indistinct).
It’s only if Your Honour is persuaded that an unsecured undertaking might potentially be an appropriate form of security contrary to the indications in the statute I’ve taken you to and contrary to the authorities about the security that’s required of funders.
If Your Honour embarks upon that inquiry we do say nonetheless on the facts as they’ve fallen out on this application, Your Honour will find that there is a real doubt about the ability of Maurice Blackburn to fund a substantial costs order in these proceedings and one can't have confidence that my client will quickly and easily be able to obtain its costs in the event it obtains an adverse costs order.

[15]Transcript of Proceedings (28 November 2023) 9.31-10.8.

[16]Ibid, 19.29-20.31.

Conversely, Senior Counsel for the plaintiffs and Maurice Blackburn submitted that the position advanced by Macquarie was illogical and fundamentally misconceived. They submitted that a careful reading of s 33ZDA(2)(a) of the SCA made it clear that any liability for costs rests with the law practice not the group members in addition to the law practice. On this basis, the plaintiffs and Maurice Blackburn contended that the relevant risk assessment must be directed to Maruice Blackburn’s ability to meet any adverse costs order.[17] To accept the analysis suggested by Macquarie would, it was submitted, virtually remove any discretion from the Court, a submission which I accept, particularly having regard to the terms of s 33ZF of the SCA.
[17]Ibid, 57.1-57.30.

In Fox v Westpac Banking Corporation (‘Fox’),[18] Nichols J considered the GCO scheme generally concluding as follows (citations omitted):[19]

By incorporating the elements it does, s 33ZDA implicitly permits the linking of risk and reward in the calculation of a group costs order. I say that because the section provides that a legal practice the subject of a group costs order will be made liable to pay the defendant’s adverse costs and to give any security for the defendant’s costs. It follows from the text that the calculation of legal costs in the manner permitted by s 33ZDA may properly take into account not only the value of legal services performed, but the assumption of financial risk by the law practice. The policy reflected in the risk-reward model was discussed in the Victorian Law Reform Commission’s Access to Justice – Litigation Funding and Group Proceedings Report in response to which s 33ZDA was introduced, in these terms –
Class actions are an appropriate forum for lawyers to absorb the risks of litigation and be rewarded for this, because the representative plaintiff has a disproportionate exposure to the financial risk of an unfavourable outcome, compared to both the value of their own claim and the exposure of other class members. The risk is a significant disincentive to taking on the role and is only partly mitigated when lawyers act on a ‘no win, no fee’ basis.
The reference in the VLRC Report to disincentives to a person becoming a plaintiff is a particular manifestation of the broader purpose of s 33ZDA, which was described in the second reading of the Bill introducing the provision, as enhancing access to justice in Victoria “by reducing potential barriers to commencing class actions in the Supreme Court”. Section 33ZDA sits within Part 4A of the Supreme Court Act which permits and governs the conduct of group proceedings in this Court. The principal object of that part of the Act is enhancing group members’ access to justice. Section 33ZDA then, builds on the existing provisions of Part 4A of the Act by conferring on the Court the power, in an appropriate case, to facilitate access to justice for group members by making a GCO, subject to the statutory pre-conditions to the exercise of the discretion being met.

[18](2021) 69 VR 487 (‘Fox’).

[19]Ibid, 495-496 [20]-[21].

Her Honour went on to opine that where a GCO is made, s 33ZDA of the SCA regulates aspects of funding that, as a matter of practical reality, ordinarily require consideration early in a proceeding – who will give security for a defendant’s costs, on what basis the law practice which represents the group is to be paid, and who can be made liable for any adverse costs.

The VLRC Report, to which her Honour referred, was the report that led to the introduction of GCOs. Relevantly, the VLRC Report included a statement that:[20]

Security for costs is generally ordered in class actions involving a litigation funder and the Commission considers that lawyers should similarly relieve the representative plaintiff of this risk if they stand to receive a percentage share of the settlement or judgment amount.

[20]Victorian Law Reform Commission, Access to Justice — Litigation Funding and Group Proceedings (Report, March 2018) 65 [3.80].

Turning then to the issue of security, and more specifically the law practice’s ability to meet an adverse order, Nichols J observed that (emphasis added):[21]

…the requirement that the position of all parties be considered will not apply as generally or as directly in the case of s 33ZDA as it does for the purposes of s 33ZF, because the subject matter of s 33ZDA concerns the plaintiff’s liability in respect of legal costs. I accept the contradictor’s submissions that evidence of the nature and extent of the risk that the legal practice would be prepared to accept might inform the fixing of an appropriate percentage, but the interests of the law practice are not directly in issue. Whether or not a defendant has a legitimate interest in an application for a group costs order (or in aspects of that application) is a question to be decided on a case by case basis. Questions as to the capacity of the law practice to give security may well legitimately concern a defendant. Because these applications were the first of their kind, I indicated to the parties at an early stage that I would receive submissions from all parties on matters relevant to their interests, including as to the principles that should govern the interpretation of s 33ZDA.

[21]Fox (n 18), 500 [37].

Further, Nichols J went on to determine (citations omitted):[22]

…s 33ZDA is a provision of the kind that reflects a legislative intention to confer on courts the widest possible power to do what is appropriate to achieve justice in the circumstances, and it is inappropriate to read provisions conferring jurisdiction or granting powers to a court by making implications or imposing limitations which are not found in the express words.

[22]Ibid, 500-501 [38].

In my view, the relevant risk assessment is, consistent with the observations of Nichols J in Fox, that of the law practice’s ability to meet an adverse order for costs.[23] I reject the analysis contended for by Macquarie.
[23]Ibid, 497-498 [27], 500-501 [38].

That assessment is necessarily imprecise but what is required is a practical, commonsense approach to the examination of the corporation’s financial affairs – here the affairs of Maurice Blackburn.[24] As the Court of Appeal stated in Livingspring Pty Ltd v Kliger Partners (‘Livingspring’):[25]

It may be said, with justification, that this is a low threshold. But the test simply reflects the policy of the provision, which is to protect a defendant against the risk of the plaintiff corporation’s impecuniosity. The provision equips the court with the means to require that the defendant be secured against that risk.
[24]Livingspring (n 8), 382 [15] (Maxwell P and Buchanan JA).
[25]Ibid, 382 [16] (Maxwell P and Buchanan JA).

An examination of the corporation’s (Maurice Blackburn) financial affairs
Do the interests of justice require an order for security?

The burden rests on Macquarie to persuade the Court that an order for security is required. Maurice Blackburn submitted that there were four reasons why Macquarie had not discharged that burden such that an order for security ought not be made:

(a) first, security is unnecessary due to the making of the GCO;

(b) second, Macquarie is unable to demonstrate that Maurice Blackburn will not be able to satisfy an adverse costs order in the future;

(c) third, Macquarie’s application is underpinned by a false and impermissible premise; and

(d) fourth, the additional costs of providing the security sought militate against the making of an order for security.

The effect of the GCO

It is uncontroversial that the Courts recognise that the presence of someone who stands to benefit from funding the litigation is of significance in ordering security for costs.[26] As Maurice Blackburn submitted, the concern is that those who stand to reap commercial benefits from litigation ought also to bear the risk if the litigation fails. This concern is most obvious where a third party litigation funder is involved.
[26]Hall (n 6), [107(d)] (Hollingworth J).

In Green v CGU Insurance Ltd,[27] Hodgson JA observed that Courts ‘should be readier to order security for costs where the non-party who stands to benefit from the proceedings is not a person interested in having rights vindicated’, but ‘rather is a person whose interest is solely to make a commercial profit from funding the litigation’.[28]
[27](2008) 67 ACSR 105.
[28]Ibid, 120-121 [51].

In Austcorp Project Number 20 Pty Ltd v LM Investment Management Ltd (in liq),[29] Gleeson J observed that the ‘presence of a litigation funder is a powerful factor in favour of the grant of security’ against an applicant.[30] This point was also made in Domino’s Pizza Enterprises Limited v Precision Tracking Pty Ltd (No 2),[31] where the Court noted that the presence of a litigation funder was a factor in favour of the grant of security.[32]
[29][2014] FCA 1371.
[30]Ibid, [34].
[31](2017) 35 ACLC 17-007.
[32]Ibid, 138 [75] (Robertson J).

In Augusta Ventures Ltd v Mt Arthur Coal Pty Ltd,[33] Allsop CJ stated:[34]

… The presence of a commercial litigation funder can be seen in the cases to be relevant to variation of the usual principle that a natural person within the jurisdiction, however poor he or she may be, will not be ordered to give security for costs, at least at first instance. There is, or may be, no injustice in staying a natural person applicant’s proceeding if the funder, or the applicant backed by the funder, will not provide security for the costs for which the applicant (and perhaps the funder) will be liable if the proceeding is lost and from which venture the funder, as a non-party, hopes to gain. In such cases, the protection is for the respondent for its costs against the applicant party and there may be seen, in any particular case, to be just reason why a professional funder seeking to use the legal system for commercial profit should provide security. In such a case, there is a just conformity between the making of the order and the consequences of the failure of the condition if there is not compliance with the order.

[33](2020) 283 FCR 123.

[34]Ibid, 134 [25].

In Its Eco Pty Ltd v BPS Financial Ltd (‘Its Eco’),[35] Derrington J remarked:[36]

It is an undisputed aspect of the background of this matter that the solicitors who have the conduct of the proceeding on behalf of the applicants anticipated that they would obtain the assistance of a litigation funder. Had that occurred the funder would undoubtedly have been required to provide security for costs when it was inevitably sought.

[35][2022] FCA 842.

[36]Ibid, [18].

Accordingly, security for costs is a common feature of class action litigation where there is a third party litigation funder. However, the position in the matter before me is distinct from the traditional analysis concerning litigation funders. Here, there is no litigation funder. There is however, a GCO in favour of Maurice Blackburn.

There was no dispute that Maurice Blackburn stands to benefit from the litigation in much the same way as litigation funder would. By reason of the GCO, Maurice Blackburn will receive 24.5 percent of any award or settlement in the proceeding in favour of the plaintiffs. By ‘self-funding’ the action, Maurice Blackburn has the potential to make a very significant commercial profit and that reward is available to it by reason of taking on the risks of the litigation, including liability to pay adverse costs. Its involvement, in this way, should, it was contended by Macquarie, militate strongly in favour of an order for security for costs. In contrast, Maurice Blackburn submitted that the very fact of the GCO obviated the need for security as Maurice Blackburn is liable, under the terms of the GCO, for Macquarie’s costs should the plaintiffs’ case fail.

Adopting the observations of Derrington J in Its Eco and the analysis of Nichols J in Fox above, I do not accept Maurice Blackburn’s submission that the very fact of there being a GCO obviates the need for security. The fact that s 33ZDA(2)(a) of the SCA makes Maurice Blackburn liable for Macquarie’s costs does not transfer the risk of the litigation failing to Maurice Blackburn in the same way that an order for security transfers that risk to, for example, a litigation funder. All it creates is an unsecured risk. The legislation specifically contemplates, in s 33ZDA(2)(b) of the SCA, the making of an order for security for costs notwithstanding that s 33ZDA(2)(a) has transferred liability for those costs to the law practice. The relevant question for the Court is Maurice Blackburn’s ability to meet an adverse costs order.

Will Maurice Blackburn be able to satisfy an adverse costs order?

Maurice Blackburn is a ‘large proprietary company’ as defined in s 45A(3) of the Corporations Act.[37] There are well established principles which address the provision of security for costs by corporations. The authorities in relation to r 62.02 of the Rules and s 1335(1) of the Corporations Act provide that the Court must inquire whether it appears, by credible testimony, that there is reason to believe the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence.
[37]Affidavit of Rebecca Gilsenan affirmed on 13 November 2023, [29] (‘Gilsenan Affidavit’).

In assessing whether there is a ‘reason to believe’, the Court is not required to make an assessment on the balance of probabilities of whether there will be a default in the payment of a costs order. Rather, the Court must consider whether there is a risk that a costs order will not be paid. It is necessarily a low threshold where it is sufficient to identify a real (that is non-trivial) risk. As Macquarie submitted, which I accept, it requires a rational basis for the belief and no more. [38]
[38]Defendant’s Outline of Submissions dated 27 November 2023, [18] (‘Defendant’s Outline’).

Macquarie further submitted, and I accept, that the Court must consider whether there is a risk that the corporation will be unable to pay, taking a practical, commonsense approach to the examination of the corporation’s financial affairs.[39] The focus is on the time at which adverse costs become payable. Maurice Blackburn is required to have ready and certain access to the amount secured if and when entitlement to claim it arises.[40] Maurice Blackburn contended that Macquarie cannot show on the evidence any rational reason to believe (or any real risk) that Maurice Blackburn will be impecunious at the time of the conclusion of a taxation of any costs order made against it in this proceeding.[41]
[39]Ibid.
[40]Ibid.
[41]Plaintiffs’ Outline of Submissions dated 24 November 2023, [15] (‘Plaintiffs’ Outline’).

Before me, the evidence of Macquarie was that:

(a) Macquarie’s estimated recoverable costs of this proceeding are approximately $6million, on a party/party basis;[42]

(b) it may be inferred that the costs incurred by the defendants in the Fox Proceeding and O’Brien (formerly Crawford) Proceeding, being the other two like flex commission cases, with which this proceeding travels are similar;[43] and

(c) as each proceeding advances the same case theory, there is a significant risk - indeed likelihood - that a loss in this proceeding would coincide with a loss in the other two, exposing Maurice Blackburn to adverse costs in the vicinity of $18million, of which it would have recourse to Vannin Capital Investments (Australia) Pty Ltd (‘Vannin’) for $9million, with whom Maurice Blackburn has the benefit of a Costs Sharing Agreement.[44]

[42]Defendant’s Outline, [20].

[43]Ibid.

[44]Ibid.

Macquarie contended that the premise on which this Application must be determined is that the plaintiffs will be unsuccessful in the proceeding and Maurice Blackburn will become liable to pay Macquarie’s costs of the proceeding. Macquarie submitted that in that eventuality, Maurice Blackburn will very likely also be liable to pay the costs of the defendants in the other two like flex commission cases, being the Fox Proceeding and the O’Brien Proceeding. [45]
[45]Ibid.

Audited accounts

Before me, the financial reports of Maurice Blackburn for the 2019 to 2023 financial years were in evidence.

There was no dispute that Maurice Blackburn is, and was, required to prepare, pursuant to s 292 of the Corporations Act, an annual financial report and a directors’ report which complies with the requirements set out in Part 2M.3, Div 1 of the Corporations Act. Section 295 of the Corporations Act mandates the contents of the financial report, which include “financial statements” which are “required by the accounting standards”. Further, s 296 of the Corporations Act provides that the financial report for a financial year must comply with the accounting standards and s 297 of the Corporations Act provides that the financial statements and notes for a financial year must give a true and fair view of the financial position and performance of the company, and the consolidated entity. A note to s 297 of the Corporations Act makes clear that the requirement that accounts give a true and fair view is superlative to the requirement to comply with accounting standards.

In addition to these obligations, Maurice Blackburn has an obligation to have the financial reports audited in accordance with s 301 and Part 2M.3, Div 3 of the Corporations Act. Each of the financial reports have been so audited.

There is no basis for Macquarie to undermine Maurice Blackburn’s audited financial statements and it did not seek to do so. Maurice Blackburn’s financial statements are prima facie evidence of the matters stated therein.

Those accounts record:

(a) Maurice Blackburn’s underlying profits were:[46]
[46]Plaintiffs’ Outline, [17] as extracted from the Gilsenan Affidavit, Exhibit RG-1.

Financial Year

Net operating result

2018

28,660,000

2019

52,070,000

2020

39,810,000

2021

20,777,000

2022

38,866,000

2023

34,399,000

(b) Maurice Blackburn’s statutory profits were:[47]
[47]Ibid, [18] as extracted from the Gilsenan Affidavit, Exhibit RG-1.

Financial Year

Total comprehensive income

2018

(15,714,000)

2019

39,816,000

2020

21,658,000

2021

1,042,000

2022

12,909,000

2023

5,144,000

(c) Maurice Blackburn’s net assets were:[48]
[48]Ibid, [19] as extracted from the Gilsenan Affidavit, Exhibit RG-1.

Financial Year

Net assets

2018

96,648,000

2019

184,901,000

2020

205,231,000

2021

204,512,000

2022

210,891,000

2023

216,035,000

Having regard to the audited accounts, Maurice Blacburn contended that there can be no merit to a suggestion that on the back of total assets of more than $556million, net assets of more than $216million, strong revenues of $240million and cash or cash equivalents of $11.4million in cash and a further significant sum in cash equivalents,[49] that there is a real risk that Maurice Blackburn might not have the ability to pay (or finance for that matter) the sum of $5,976,773.00 (being Macquarie’s estimate of recoverable costs) in the future.
[49]The cash equivalents include the two debt facilities available to Maurice Blackburn. References to debt facilities are to the two Maurice Blackburn facilities being the Class Action Facility Agreement and the Syndicated Facility Agreement. The terms of those facilities were in evidence before the Court but are subject to confidentiality orders.

Conversely, Macquarie submitted that a proper consideration of the accounts discloses a rational basis to believe that Maurice Blackburn will be unable to pay adverse costs as and when they become payable. It submitted that the following summary information derived from Maurice Blackburn’s accounts and which is recorded in the Nicolaides Report is instructive:

(a) Maurice Blackburn’s cash and cash equivalents on hand were:[50]
[50]Expert report of Forde Nicolaides Report dated 22 November 2023, [3.2], Table 3-1 (‘Nicolaides Report’). Figures are rounded to one decimal place.

FY19

FY20

FY21

FY22

FY23

$15.9m

$66.2m

$6.2m

$11.9m

$11.4m

(b) Maurice Blackburn’s cash flow from operations was:[51]
[51]Ibid, [4.10], Table 4-2. Figures are rounded to one decimal place.

FY19

FY20

FY21

FY22

FY23

($2.9m)

$38.1m

($52.6m)

($16.1m)

($18.0m)

(c) Maurice Blackburn’s repayment of borrowings was:[52]
[52]Ibid.

FY19

FY20

FY21

FY22

FY23

($87.5m)

($25.0m)

($82.4m)

($40.8m)

($65.0m)

(d) Maurice Blackburn’s operations are funded by borrowings,[53] including interest as follows:[54]
[53]Ibid, [4.16]-[4.17].
[54]Ibid, [3.2], Table 3-1, [4.2], Table 4-1 and [4.18]; Gilsenan Affidavit, [43].

Interest bearing loans and borrowings

FY19

FY20

FY21

FY22

FY23

$53.2m

$63.8m

$56.9m

$82.7m

$98.4m

Finance Costs

FY19

FY20

FY21

FY22

FY23

($5.4m)

($5.8m)

($6.8m)

($11.7m)

($13.2m)

In relation to these extracts, Macquarie submitted that approximately 80 percent of the total assets of Maurice Blackburn comprised no win no fee work in progress (‘WIP’) and that nearly all of the revenue, and therefore profit, was the incurring on WIP. The WIP is recognised as it is incurred and that in turn explains the substantial assets on Maurice Blackburn’s balance sheet. Macquarie did not suggest that the WIP was not properly recorded or that Maurice Blackburn’s audited accounts did not comply with accounting standards – rather Macquarie submitted that a further analysis is required as the only way WIP, Maurice Blackburn’s primary asset, can be turned into cash is in the event of a successful outcome in the proceeding. To this end, Macquarie submitted that:

(a) the impact of an unsuccessful outcome is twofold on the financial position of Maurice Blackburn. First the WIP carried by Maurice Blackburn in respect of the unsuccessful proceeding must be written off and secondly Maurice Blackburn will have a liability, where there is a GCO in place, to pay the defendant’s legal costs;[55]

(b) where Maurice Blackburn’s business model is changing to focus more on self-funding matters (as the evidence was before the Court), Maurice Blackburn has to fund the costs of running those proceedings (including counsel and expert fees) out of its own resources together with the payment of salaries, all of which impacts the cash resources available;[56] and

(c) the net operating cashflow of Maurice Blackburn over the past five years has been negative. That is, Maurice Blackburn is spending more cash on its operations than it is recovering in successful fees or other receipts, with the firm borrowing to fund its operating cash flow.[57]

[55]Transcript of Proceedings (28 November 2023) 24.4-24.27.

[56]Ibid, 25.13-25.21.

[57]Ibid, 25.12-25.26.

Expert reports

Both of the above sets of data are further considered in expert reports directed at the risk assessment which the Court must perform: Maurice Blackburn relied on the Atkins Report (including the various supplementary reports) and Macquarie relied on the Nicolaides Report. There was no cross examination of either Mr Atkins or Mr Nicolaides.

The Atkins Report

Maurice Blackburn obtained an expert from Mr Geoff Atkins of Finity Consulting Pty Ltd (‘Finity’) for the purpose of the Application. Mr Atkins was instructed to provide ‘an independent report on the capacity of Maurice Blackburn to meet adverse costs orders arising from a group proceeding under Part 4A of the SCA’. Mr Atkins is an experienced actuary. In his report, he sets out his actuarial experience and skill which is relevant to understanding risk and probabilities, analysing historical information, assessing the future scenarios that might be expected and reading and interpreting financial statements including the implications of various items included in notes to the accounts. Mr Atkins states that he has a good working knowledge of the class action environment, accumulated from reading dozens of settlement approval judgements, various law firm and academic reports on class actions and supporting Finity’s maintenance of a database of Australian class actions that is used primarily with Finity’s insurance company clients. In his curriculum vitae attached to his report, Mr Atkins sets out his history of working in various professional services firms, including in leadership positions, and his experience with financial structures, remuneration systems and funding approaches. There was no challenge to the admissibility of the Atkins Report.

Mr Atkins’ response to ‘what is the likelihood of Maurice Blackburn being unable to satisfy adverse costs orders in the future’[58] is based on a ‘probabilistic assessment,’[59] with a comparison of the ‘potential liability’[60] resulting from a model he developed in his assessment of Maurice Blackburn’s ‘ability to pay’ (‘Atkins Model’).[61]
[58]Expert report of Geoff Atkins dated 26 October 2023, [2.1(3)] (‘Atkins Report’); Nicolaides Report, [6.1].
[59]Atkins Report, [2.4]; Nicolaides Report, [6.1].
[60]Atkins Report, [2.4]; Nicolaides Report, [6.2].
[61]Ibid.

In summary, Mr Atkins said that whether Maurice Blackburn can meet an adverse costs order comes down to two things: cash flow (the ability to pay a cash sum without becoming insolvent) and profitability (the ability for the business to reasonably continue after absorbing a loss).[62] In order to assess those criteria, Mr Atkins stated that he has considered Maurice Blackburn’s balance sheet as at 30 June 2023, the case resources and debt facilities available to Maurice Blackburn, the profitability of Maurice Blackburn and recourse to other assets or capital raising initiatives. Having done so, he concluded that:

(a) Maurice Blackburn ‘would be able to meet an unexpected demand for a liability of more than $75million from readily available sources … without creating an insolvency event’;[63] and

(b) Maurice Blackburn could sustain a liability of ‘in excess of $50million, perhaps as much as $75million, from readily available resources’, that would be repaid over subsequent years from reduced profit distributions, by roughly $20million per year.[64]

[62]Atkins Report, [2.3].

[63]Ibid, [4.3].

[64]Ibid, [4.6].

Mr Atkins analysis of whether Maurice Blackburn could sustain an adverse costs order is not confined to this class action alone. His report estimated the risk that Maurice Blackburn’s class actions group would sustain adverse costs liabilities of more than $25million across all of its matters, using the Atkins Model that he has based on the firm’s practice profile.[65] The Atkins Model takes into account the number of cases commenced and concluded in a year (essentially holding the size of the practice constant), the different amount of financial risk taken by the firm in cases, and the probability and likely amount of adverse costs orders.[66] He concluded as follows:[67]

On assumptions roughly reflecting recent history, the chance of MB being liable for total adverse costs orders in any year of more than $25m is only about 0.05% (or 1 in 2000). Even applying very conservative assumptions … the chance of a liability of more than $25m is about 2% (1 in 50).

[65]Ibid, [Section 3].

[66]Ibid, [3.6].

[67]Ibid, [5.1]

In reaching his conclusions, it is relevant to note that Mr Atkins:

(a) opined that the question of ‘capacity to pay’ should consider the continuing viability of the business as well as the immediate ability to meet an obligation without insolvency;[68]

(b) contended that any assessment of Maurice Blackburn’s capacity to meet an adverse costs order in the proceeding must be addressed in the context of Maurice Blackburn’s total portfolio of class action matters and the risk of adverse costs orders in other matters as well as in this proceeding. He said that consideration of this question requires some analysis of the profitability of the firm and a judgment about whether a large loss would represent an existential threat to Maurice Blackburn;[69]

(c) identified, as part of the analysis of Maurice Blackburn’s profitability and the impact of a large loss, what he said are the three relevant questions. First, what amount could Maurice Blackburn be liable for in future in respect of adverse costs orders? Second, what might be the ability of Maurice Blackburn to satisfy the adverse costs orders at the time? Third, what is the likelihood of Maurice Blackburn being unable to satisfy adverse costs orders in future?

[68]Ibid, [4.4]; Nicolaides Report, [4.4].

[69]Ibid.

As to the first question, Mr Atkins concluded that Maurice Blackburn is not at risk for adverse costs orders in all class action matters, noting that many matters involve litigation funders, some are self-funded by Maurice Blackburn where it accepts all the financial risk and others may be partially funded or any costs exposure shared with more than one law practice acting jointly for the class members. As to the second and third questions, having considered Maurice Blackburn’s audited financial statements for the years ending 30 June 2019 through to 30 June 2023, and based on his past experience and expert judgment, Mr Atkins opined that it is reasonable to conclude that Maurice Blackburn has the ability to pay unexpected adverse costs orders of in excess of $50million, perhaps as much as $75million, from readily available resources and existing unused debt facilities and by repaying this amount by reducing profit distributions to shareholders by between $20million to $25million per year over up to three years.[70]
[70]Atkins Report, [4.6].

In respect of this proceeding, Mr Atkins’ opinion is that the $6million amount currently being sought by Macquarie and the $20million amount Mr Atkins was instructed to consider for the purpose of his report are both within the ability of Maurice Blackburn to meet in the event of an adverse costs order.[71] Mr Atkins’ concluded there is a probability:

(a) of 99.95 percent that the $20million could be met; and

(b) of between 0.05 and 2 percent that an adverse costs order over $25million will occur.[72]

[71]Ibid, [5.2].

[72]Ibid, [5.1].

In reaching these conclusions, there are six key findings of Mr Atkins which are noteworthy.

First, Mr Atkins contended that the profitability of a law firm is more difficult to judge from its accounts than its balance sheet due to the extent to which remuneration of partners or shareholders is already included in expenses. He said there is no common definition of what constitutes ‘profit’.[73] In Maurice Blackburn’s accounts, Mr Atkins identified that there is an amount included which is described as ‘member remuneration recognised as an expense’. Mr Atkins said that he is of the understanding that this represents the normal salaries of members and the dividends (measured before tax) paid to shareholders who are currently active members of the firm.[74] He said the profit before member remuneration (and before tax) was $22million in 2023/2024 and averaged $25million over the last four years. An average of $6.1million of this amount represents members’ normal salaries that Maurice Blackburn is contractually required to pay, leaving $19million as the amount representing profit distribution.[75] On the assumption that the shareholders would be prepared to accept no dividend beyond their normal salary and other entitlements, Mr Atkins suggested that from a profitability perspective Maurice Blackburn could sustain an incremental loss from adverse costs orders of about $20million per year (rounded from $19million to avoid spurious accuracy).[76]
[73]Ibid, [4.4]; Nicolaides Report, [4.5].
[74]Ibid.
[75]Ibid.
[76]Supplementary expert report of Geoff Atkins dated 14 November 2023 (‘Atkins Supplementary Report’), impacting the Atkins Report, [4.4]; Nicolaides Report, [4.6].

Second, the Gilsenan Affidavit[77] indicates that Maurice Blackburn receives its cash from clients in a reasonably consistent fashion, and that the majority of its cash receipts from clients are generated by its personal injuries practices in which there is a high volume and regular turnover of cases.[78] From this, Mr Atkins observed that Maurice Blackburn has a consistent inflow of cash from the volume practices and this cash is used to fund its continuing operations, including the payment of disbursements and other expenses associated with its class actions practice.[79]
[77]Mr Atkins refers in his report to the Affidavit of Andrew John Watson sworn on 26 October 2023 (‘Watson Affidavit’). The Watson Affidavit was replaced by the Gilsenan Affidavit following his Honour’s appointment. For the purpose of the judgment, I have treated references to the Watson Affidavit as being references to the Gilsenan Affidavit.
[78]Gilsenan Affidavit, [37]; Nicolaides Report, [4.14].
[79]Ibid.

Third, based on the Atkins Model,[80] Mr Atkins opined that Maurice Blackburn would incur, on average, an adverse costs order liability of about $1.1million in any one year, with an average of 0.15 adverse costs orders per year[81] (or one in seven years) and an assumed average cost of $7.5million which results in average costs of $1.1million per year.[82] On the basis of his analysis, Mr Atkins concluded that there is a 13 percent chance of an adverse costs liability of $7.5million and a one percent chance of a liability of $15million. The likelihood that the liability in one year would be $22.5million or more is 0.05 percent.[83] The most extreme scenario explored by Mr Atkins (with 20 percent or one in five cases resulting in an adverse costs order) concluded that there is about a two percent (or one in 50) chance that the adverse costs orders in one year would exceed approximately $25million.[84]
[80]Atkins Report, [3].
[81]Ibid, [3.7].
[82]Atkins Report, [3.7]; Nicolaides Report, [6.5].
[83]Atkins Report, [3.9]; Nicolaides Report, [6.5].
[84]Ibid.

Fourth, as to the likelihood of Maurice Blackburn to meet future costs orders, Mr Atkins concluded that it is highly likely that Maurice Blackburn would be able to meet any substantial cost order(s). He said Maurice Blackburn would be capable of meeting adverse costs in an aggregate amount, across its class action proceedings, of up to $25million. A total amount between $50million and $75million would also likely be within Maurice Blackburn’s capacity to pay, while an amount above $75million would, in Mr Atkins’ words, ‘put significant stress on the firm’.[85]
[85]Atkins Report, [5.1]; Nicolaides Report, [6.6].

Fifth, Mr Atkins stated that Maurice Blackburn’s management analyses the likelihood of success of class action proceedings. He said this is so where historical averages are not predictive of the probability of outcomes for a given contract, or where the ‘group’ has limited historical experience with similar contracts. In these instances, the expected amount of variable consideration is estimated using a most likely amount approach. Maurice Blackburn submitted that, in such circumstances, a level of judgment is required to determine the likelihood of success of a given matter, as well as the estimated amount of fees that will be recovered in respect of the matter.[86]
[86]Maurice Blackburn FY2023 Consolidated Financial Report, footnote 3.9; Nicolaides Report, [6.9].

Sixth, the Atkins Report then measures Maurice Blackburn’s ability to pay an adverse costs order by assessing its cash and debt facilities, noting the cash balance as of 30 June 2023 was $11million, and making further observations as to Maurice Blackburn’s two available debt facilities. At the time of preparing his primary report, Mr Atkins had not been provided with the debt facility documents. Nonetheless, Mr Atkins concluded that Maurice Blackburn has the ability to pay an unexpected costs order in excess of $50million and perhaps as much as $75million from readily available and existing unused debt facilities noting that, if necessary, Maurice Blackburn could repay this amount by reducing profit distributions to shareholders by roughly $20million per year over up to three years.[87]
[87]Ibid, [4.6].

The Nicolaides Report

Macquarie obtained an expert from Mr Forde Nicolaides, a partner in the Forensic practice of Deloitte Financial Advisory Pty Ltd for the purpose of the Application. Mr Nicolaides, who has over 33 years professional experience, is a qualified chartered accountant having been admitted as a member of Chartered Accountants Australia and New Zealand and a member of the Australian Restructuring, Insolvency and Turnaround Association. Mr Nicolaides, has more than 20 years’ experience providing forensic accounting expertise in the investigation, analysis and review of financial and business records of corporate and business entities, and in the assessment and investigation of the financial viability of businesses in circumstances including pre-insolvency, insolvency, financial loss and damage assessments, mergers, acquisitions and other commercial disputes requiring financial viability to be examined. Mr Nicolaides was tasked with providing his opinion of the observations contained in the Atkins Report. There was no challenge to the admissibility of the Nicolaides Report.

In answer to the Atkins Report, Mr Nicolaides made five key criticisms on the validity of methods, assumptions and other factors used by Mr Atkins in his assessment of Maurice Blackburn’s capacity to pay a costs order:[88]
[88]Nicolaides Report, [2.14].

(a) in relation to the financial position of Maurice Blackburn, the analysis undertaken is limited and incorrect. The approach is performed at a high level and does not appropriately consider realisable assets and the nuances of the assets and liabilities of Maurice Blackburn’s balance sheet;

(b) in relation to the recent performance of the business, the analysis undertaken is limited and inappropriate. Mr Atkins looked at the profits of Maurice Blackburn and did not consider the operating cash flows of the business which have been negative (outflows) in the past three financial years. From an accounting perspective, profit and cash flow are two different measurable items in financial statements and only in very limited circumstances would profit be used as a proxy for cash flow;

(c) Maurice Blackburn’s debt facilities have been inappropriately considered. A detailed assessment is required of the terms, covenants and conditions of the debt facilities, in particular to identify how a change in WIP valuation due, for example, to a material write-off of legal costs not yet billed, may impact borrowing capacity. Based on a review of Maurice Blackburn’s two facility agreements, it is unlikely that the full headroom Mr Atkins outlines in his report would be available to Maurice Blackburn to pay adverse costs orders;

(d) the Atkins Model and his ‘probabilistic assessment’ of the likelihood that Maurice Blackburn can meet an adverse costs order is not a substitute for a financial assessment of each of Maurice Blackburn’s class action proceedings. An individual assessment of the probability of success or failure and the resulting timing of conversion of WIP, cash flows and outflows is required to be undertaken and their impact on Maurice Blackburn’s capacity to pay an adverse costs order. The analysis of Mr Atkins is more appropriate in a valuation context for a large volume of underlying cases, for example, to value a portfolio of motor vehicle insurance claims where a probability based assessment is more commonly used. The relatively small number of class action proceedings conducted by Maurice Blackburn and the significant uncertainty of how each matter will be resolved should be properly assessed individually to determine the overall financial exposure of Maurice Blackburn including its ability to meet a significant adverse costs order; and

(e) as to Maurice Blackburn’s capacity to pay an adverse costs order, Mr Nicolaides disagreed with the assessment undertaken by Mr Atkins. Mr Nicolaides stated that he did not have sufficient material to prepare any cash flow forecast or similar model relating to Maurice Blackburn’s capacity to pay an adverse costs order in the next 12 to 24 months in the order of $6million (or greater should the flex commission proceedings be unsuccessful), being the approximate sum of security for costs sought in the Application.[89] Mr Nicolaides said that to do so would be significantly uncertain given the nature of Maurice Blackburn’s class actions business, its ‘no win no fee’ model and the evident negative cash flows the firm is experiencing from operating activities.[90]

[89]Ibid, [2.15].

[90]Ibid, [2.16].

Mr Nicolaides then considered the financial position and composition of Maurice Blackburn’s FY23 Balance Sheet which he contended has not been appropriately considered in the Atkins Report.[91] Mr Nicolaides made seven critical observations in relation to Mr Atkins’ Report.
[91]Ibid, [3.6].

First, Mr Nicolaides contended that Mr Atkins failed to comment on Maurice Blackburn’s trade receivables and trade payables balances or its quick ratio.[92] The quick ratio is a measure of a company’s ability to use its quickly available or liquid assets to pay its current abilities.[93] Generally, the higher the quick ratio the greater the company’s ability to meet obligations using liquid assets. A quick ratio of more than 1.0 is considered less of a financial risk to meet obligations than companies with quick ratios of less than 1.0.[94] Mr Nicolaides calculated a quick ratio for Maurice Blackburn at 30 June 2023 as 0.6, giving him an indication that Maurice Blackburn is at higher risk of not meeting its obligations.[95]
[92]Ibid, [3.8].
[93]Ibid, [3.9].
[94]Ibid, [3.10].
[95]Ibid, [3.11].

Mr Nicolaides opined that Maurice Blackburn’s financial statements indicate that ‘trade receivables are amounts due from clients for goods sold or services performed in the ordinary course of business’ which ‘are generally due for settlement within 30 days’.[96] Additionally, Maurice Blackburn’s FY23 Balance Sheet shows $35million in trade receivables and $49million in trade payables. Mr Nicolaides said that this deficiency was not factored into Mr Atkins’ assessment of capacity to pay. He contended that it offsets a majority of the cash that Mr Atkins opined is available to pay an adverse costs order in the short term (Mr Nicolaides said this deficit is part of the reason that Maurice Blackburn’s quick ratio is 0.6 at 30 June 2023. The quick ratio and deficiency of payables to receivables indicates to Mr Nicolaides that Maurice Blackburn’s short term working capital position and operational liquidity are not as favourable as the Atkins Report indicates.[97]
[96]Ibid, [3.13].
[97]Ibid, [3.16].

Second, in his report, Mr Atkins noted that the WIP balance is 1.6 times annual revenue and the WIP balance is cited as support for his conclusion regarding Maurice Blackburn’s strong balance sheet.[98] In response, Mr Nicolaides observed that the current ratio is a liquidity ratio which measures a company’s ability to pay short term obligations or those due within one year. Mr Nicolaides stated that a company with a current ratio of less than 1.0 may be an indicator of that company not having enough working capital on hand to meet its short term obligations, while a current ratio greater than 1.0 is an indicator that a company has financial resources to remain solvent in the short term.[99] Although Mr Nicolaides calculated a current ratio for Maurice Blackburn at 30 June 2023 as 3.8, which he concluded indicates that Maurice Blackburn is in a stronger financial position to remain solvent in the short term,[100] he identified that further analysis of the value of Maurice Blackburn’s WIP balance is required.
[98]Ibid, [3.18]; Atkins Report, [4.2].
[99]Nicolaides Report, [3.20].
[100]Ibid, [3.21].

Third, Mr Nicolaides agreed that Mr Atkins has correctly identified the risk around WIP balances in a business model that operates on a ‘no win no fee’ basis. However, he contended that Mr Atkins has not appropriately considered the impact of these risks for Maurice Blackburn’s financial position and capacity to pay.[101]
[101]Ibid, [3.22].

Note 3.4 to Maurice Blackburn’s Consolidated Financial Statements of 30 June 2023 includes a reference to ‘contract assets – WIP’. Mr Nicolaides identified that this relates to work performed on proceedings which are on foot. The account is comprised of personal injury, personal legal, employment, social justice and industrial law, and class action cases.[102] Mr Nicolaides opined that the notes to Maurice Blackburn’s financial statements indicate that revenues from contracts with customers and the valuation of WIP is an area with significant accounting judgment, estimate and assumptions.[103] The notes indicate that fee income (i.e. accounting revenue) and WIP are recognised:[104]
[102]Note 3.4 to the Consolidated Financial Statements 30 June 2023, 17.
[103]Nicolaides Report, [3.23].
[104]Note 3.4(ii) to the Consolidated Financial Statements 30 June 2023, 17.

(a) in some matters based on the ‘time charges incurred in each case, less progress billings’[105] (these time charges are noted as including a profit margin);

(b) for other matters, ‘where fees are not determined with reference to time records, the case is considered a milestone case and accordingly, work in progress is recognised using the milestone stage of completion method…fee income recognised at each milestone stage is based on forecast billings for each case with reference to historical billings for similar cases;’[106] and

(c) success fees on class action proceedings are not recognised until a ‘right to receive has occurred through appropriate legal judgment.’[107]

[105]Ibid.

[106]Ibid.

[107]Ibid.

Mr Nicolaides articulated that with a ‘no win no fee’ basis, the value and collectability of this WIP from a financial position and capacity to pay standpoint is dependent on the probability of success in each case and is recognised in some instances in advance of when the cash would be collected. Whilst he agreed with Mr Atkins that receipt of fees or collection on these WIP balances may be delayed and/or portions of it could be written off if proceedings are lost or abandoned,[108] he said it is relevant that non-current WIP has substantially increased from $54.7million as at 30 June 2019 to $114.2million as at 30 June 2023, which for the period 30 June 2021 to 30 June 2023, mainly relates to an accumulation of unresolved, large class action proceedings.[109]
[108]Nicolaides Report, [3.24].
[109]Note 12 to the FY22 and FY23 Consolidated Financial Statements, 31.

It was Mr Nicolaides’ view that WIP balances of this nature and risk profile extending beyond 12 months have a higher risk of non-recovery and may not be readily realisable to pay a multi-million dollar adverse costs order. Mr Nicolaides said that the uncertainty of these WIP balances as the largest assets on Maurice Blackburn’s FY23 Balance Sheet do not support a ‘strong balance sheet’ as concluded by Mr Atkins.[110] Further, Mr Nicolaides concluded that the uncertainty of the WIP balances also has an impact on Maurice Blackburn’s debt facilities, including available headroom and the calculation of financial covenants for these facilities, some of which are based on balance sheet ratios.[111]
[110]Nicolaides Report, [3.27].
[111]Ibid, [3.28].

Fourth, the analysis undertaken by Mr Atkins in relation to the recent performance of Maurice Blackburn’s business and available headroom on its debt facilities to fund the business, Mr Nicolaides opined, is limited (with the debt facilities not actually reviewed by Mr Atkins) and inappropriate for assessing Maurice Blackburn’s capacity to pay for two key reasons:

(a) when assessing the capacity of Maurice Blackburn to make a cash payment towards an adverse costs order, Mr Nicolaides said that it is necessary to review the potential cash generation of the business. It is Mr Nicolaides’ experience that this would include assessing the recent performance of Maurice Blackburn on a cash basis and cash flow forecasts as well as review of the detailed management assumptions used in those forecasts.[112] The Atkins Report is silent on the cash performance of Maurice Blackburn and instead discusses ‘profits’. Mr Nicolaides opined that accounting profits as analysed and relied upon by the Atkins Report are not an equivalent for cash performance of the business and are not an appropriate measure of cash that may be available to meet an adverse costs order;[113]
[112]Ibid, [4.8].
[113]Ibid, [4.9].

(b) in respect to Maurice Blackburn’s historical cash flows contained in its Consolidated Financial Reports for FY19 to FY23, Mr Nicolaides observed that:

(i) the cash flows from operations, which represents the net amount of cash an entity generates from carrying out its core operating business, has been negative over the last five years with the exception of FY20 indicating Maurice Blackburn does not generate sufficient internal cash flow to support its operations, other than though its debt facilities.[114] This is consistent with Mr Nicolaides comments on the Gilsenan Affidavit, in which Ms Gilsenan deposed that Maurice Blackburn has a stable personal injury volume business which contributes regular cash flows to supporting commitments in the class action practice.[115] Mr Nicolaides interpreted from the statements made by Ms Gilsenan that positive cash flow from the personal injury volume business is funding investment in the class action practice and the increase in class action WIP balances.[116] As the overall cash flow from operations is a net outflow, Mr Nicolaides said this indicates that these cash outflows supporting the class action practice are greater than the cash generated by the personal injury volume business;[117] and

(ii) the net cash inflow from financing activities for FY22 and FY23 (i.e. borrowings) appears to significantly support or ‘fund’ the deficiency in Maurice Blackburn’s operating activities cashflow.[118] Based on the funding of operating losses via debt, Mr Nicolaides said it appears that Maurice Blackburn is dependent on its lenders and Mr Atkins’ assertions that Maurice Blackburn is not ‘under the tight control of lenders’[119] and has ‘reasonable financial flexibility with its business’[120] may not be accurate. Mr Nicolaides was similarly critical of Mr Atkins’ assessment of Maurice Blackburn’s ability to ‘meet an unexpected demand for a liability of more than $75million from readily available sources’[121] as that assessment appears to be based on Maurice Blackburn using the headroom in Maurice Blackburn’s two debt facilities.[122] Mr Nicolaides was of the view that Mr Atkins did not appropriately consider Maurice Blackburn’s loan facilities, the covenants and restrictions on the use of these facilities and what must go right for the headroom to remain available with the WIP balances that are the collateral for these facilities. Notably, Mr Atkins did not have a copy of Maurice Blackburn’s debt facility agreements and was unable to conduct an analysis of these at the time of producing his report.[123] Conversely, Mr Nicolaides considered the terms of both facilities expressing the view that only certain facilities may be available for the payment of adverse costs orders[124] and that this must be factored into an assessment of Maurice Blackburn’s ability to pay. He also concluded that Maurice Blackburn would not be able to leverage the WIP balance to obtain further funding (were it available) as Maurice Blackburn cannot re-pledge any security over its assets.[125]

[114]Ibid, [4.11(a)].

[115]Ibid, [4.14].

[116]Ibid, [4.15].

[117]Ibid.

[118]Ibid, [4.11(b)].

[119]Atkins Report, [4.2].

[120]Ibid.

[121]Atkins Report, [4.3]; Atkins Supplementary Report.

[122]Nicolaides Report, [4.20].

[123]Ibid, [4.21].

[124]Ibid, [4.24]–[4.30]; Class action facility agreement, clause 8.3.

[125]Ibid, [5.6]; Class action facility agreement, clause 22.6(a); Syndicated facility agreement, clause 10.3(f).

As a result, Mr Nicolaides expressed the opinion that accounting profit as used in the Atkins Report is not a reliable measure of assessing the ability of Maurice Blackburn to meet an adverse costs order which would be payable in cash. He said that the negative cash flows indicate that Maurice Blackburn does not have $20million in ‘profitability’ to sustain a loss from an adverse costs order.[126]
[126]Nicolaides Report, [4.13].

Fifth, as to Mr Atkins’ approach of assuming restricting dividends paid to Maurice Blackburn shareholders including current and retired principals to conserve cash flow to meet an adverse costs order, Mr Nicolaides opined that it is not reasonable to assume that all current principals would agree to any such restriction over a two year period. In his opinion, further assessment is required as to whether such restriction(s) would impact the operations of Maurice Blackburn including staff retention and its continued ability to service the loan facilities.[127]
[127]Ibid, [4.47].

Relatedly, Mr Nicolaides observed that the payment of an adverse costs order by Maurice Blackburn may be required immediately. On this basis, he disputed Mr Atkins’ conclusion that payments could be restricted over a two to three year period as he said that Mr Atkins’ analysis did not assist in the potentiality of an immediate need for Maurice Blackburn to meet an adverse costs order.[128] Mr Nicolaides contended that the exclusion of shareholder and partner dividends from profit is an inappropriate approach to measuring capacity to pay, not merely because ‘profit’ does not equate to cash flow, but further assessment would be required by Maurice Blackburn’s management on the impact to Maurice Blackburn and its staff if it withheld dividends.[129]
[128]Ibid, [4.48].
[129]Ibid, [4.52].

Sixth, Mr Atkins also suggested that further capital could be raised from current or new shareholders. Assuming the partners of the firm may be willing and able to raise further capital, Mr Nicolaides opined that this still may not be an appropriate option, as this can often be a lengthy process and the requirement to pay an adverse costs order could be more immediate.[130]
[130]Ibid, [5.9].

Seventh, and finally, Mr Nicolaides expressed the opinion that the Atkins Report and his ‘probabilistic assessment’[131] of the likelihood that Maurice Blackburn can meet an adverse costs order is not a substitute for forward looking projections and a financial assessment of each matter in Maurice Blackburn’s actual class action portfolio to individually assess the probability of success/failure and the resulting timing of conversion of WIP, cash inflows and outflows that would impact Maurice Blackburn’s capacity to pay an adverse costs order. Mr Nicolaides said that this analysis may indicate that the actual class action matters in Maurice Blackburn’s portfolio are riskier or would otherwise perform differently than the theoretical class action portfolio and probabilities in the Atkins Report. As indicative examples:[132]
[131]Atkins Report, [2.4].
[132]Nicolaides Report, [6.11].

(a) based on the listing of Maurice Blackburn’s current class actions, a number of the matters have WIP balances (and Mr Nicolaides assumed potential costs for the defendants that would be subject of an adverse costs order) that are many times larger than the average size of a $7.5million cost order used in the Atkins Report. If one or more of these matters are lost, this could have a detrimental impact to Maurice Blackburn's balance sheet and may require a draw on Maurice Blackburn’s loan facilities. Mr Atkins acknowledged that this is a limitation in his modelling noting, his analysis models only a loss of nil or $7.5million for any one case but in practice the amount will vary over a wide range;[133]

(b) Mr Atkins acknowledged that more and more of Maurice Blackburn’s class actions are going unfunded or are ‘at risk’ (i.e. where Maurice Blackburn carries full cost of the proceeding including disbursements, full exposure to cost orders and/or may not be covered by insurance for cost orders).[134] This could mean that future results of cost orders are not the same as previous results and that WIP balances become inherently riskier; and

(c) Mr Atkins also acknowledged that some of the matters are linked and there may be a concentration of legal risk. For example, if one of the flex commissions cases against Macquarie is lost on liability, as Mr Nicolaides was instructed to assume, Maurice Blackburn would lose the other flex commission related cases at the same time. This would be a much greater, 'real' risk of loss than Mr Atkins’ probability scenarios outline with cost orders, loss of WIP and loss of debt facilities across multiple matters occurring at once.[135]

[133]Atkins Report, [3.7].

[134]Ibid, [3.5.4].

[135]Nicolaides Report, [6.13].

The parties contentions and consideration
Maurice Blackburn’s contentions

Maurice Blackburn’s central contention was that it has offered an indemnity and that should be adequate for the purpose of any security for costs application. It submitted that having regard to Maurice Blackburn’s conspicuous and peerless success,[136] strong and steady financial position and performance, and the analysis of Mr Atkins, there is no basis for a conclusion that in the event the plaintiffs were not successful at trial, following the making of an adverse costs order and following taxation, Maurice Blackburn will be unable to meet the adverse costs order. They contended that Macquarie’s Application is underpinned by an exercise of multilayered speculation, and accordingly, fails to discharge its burden of persuading the Court that its discretion to order security is enlivened or should be exercised.[137] Maurice Blackburn made six further key points before me.
[136]Transcript of Proceedings (28 November 2023) 82.18-82.24.
[137]Plaintiffs’ Outline, [3].

First, Maurice Blackburn submitted that it is a significant commercial enterprise which is far from impecunious. It contended that Macquarie cannot show on the evidence any rational reason to believe (or any real risk) that Maurice Blackburn will be impecunious at the time of the conclusion of a taxation of any costs order against it in this matter.[138]
[138]Ibid, [15].

Second, Maurice Blackburn submitted that there is no basis for Macquarie to undermine Maurice Blackburn’s audited financial statements. Macquarie has filed no evidence that properly contests their veracity, nor could it do so. Moreover, and critically, Maurice Blackburn’s financial statements are prima facie evidence of the matters stated therein.[139]
[139]Ibid, [25].

On this basis, it is submitted that there could be no merit to the suggestion that on the back of total assets of more than $556million, net assets of more than $216million, strong revenues of $240million, and cash or cash equivalents of over $80million that there is a real risk that Maurice Blackburn might not have the ability to pay (or finance for that matter) the sum of $5,976,773.00 (being Macquarie’s estimate of recoverable costs) in the future.[140]
[140]Ibid, [26].

Third, and in addition to its balance sheet and performance, Maurice Blackburn pointed to the fact that is has the benefit of a costs sharing agreement with Vannin.

Pursuant to clause 7 of the costs sharing agreement:[141]

2. Vannin agreed to pay to MB, half (50%) of the amount of any adverse costs MB has to pay on behalf of the lead applicant/s, pursuant to MB’s indemnity or undertaking to pay (as applicable) in favour of the lead applicant/s.

[141]Ibid, [27].

It is submitted that there could be little doubt that Vannin will be incapable of meeting its obligation to Maurice Blackburn. It has the benefit of an Adverse Costs Insurance Policy underwritten by AmTrust Europe up to a limit of $7.5million. Furthermore, as at 30 September 2023, Vannin had cash and cash equivalents of $48,984,485.00, made a profit of $9,476,884.00 and has approximately $100million remaining under a cash advance facility.[142] In these circumstances, it is only half of the potential adverse costs of $5,976,773.00, being $2,988,386.50, that Maurice Blackburn will be required to meet from its balance sheet.[143] The financial capacity of Vannin was not a matter requiring determination by me as the terms of the CGO visit any liability for costs on Maurice Blackburn, not Vannin.
[142]Ibid, [29].
[143]Ibid, [30].

Fourth, and contrary to the submission by Macquarie, Maurice Blackburn contended that it has no current ‘existing exposure’ of approximately $24million. Such a conclusion they contended presupposes a number of highly unlikely and cumulative hypotheticals: that the six other class action proceedings referred to by Ms Hofbrucker will proceed to trial and judgment, that the plaintiffs for whom Maurice Blackburn acts will be unsuccessful, that adverse costs orders will consequently be made, and that those adverse costs orders will amount to approximately $24million. Having regard to the risk profile of Maurice Blackburn’s class actions practice group, it was submitted that it is highly improbable that each of these hypotheticals will come to fruition. In this way, Macquarie’s Application is predicated upon many levels of impermissible speculation.[144] For the reasons that follow, I do not consider it necessary to rely on any submission by Macquarie to the effect that there is an existing exposure of $24million.
[144]Ibid, [38].

Fifth, the upshot urged upon me was that across Maurice Blackburn’s class actions practice group, applying ‘very conservative assumptions’, there is about a two percent chance that the firm will suffer a loss from adverse costs orders in any given year of more than $25million. Even if that unlikely event occurs, that will not present a risk to the firm’s solvency or viability as a business.[145] Based on this evidence, it was submitted that there is no meaningful risk that Maurice Blackburn would be unable to meet an adverse costs order in this matter.[146]
[145]Ibid, [35].
[146]Ibid, [36].

Sixth and finally, it was submitted that although an order for security for costs in this matter will not prejudice group members, it will come at substantial cost to Maurice Blackburn. The indicative cost of providing $6million in security by way of a bank guarantee over five years is approximately $576,000.00. The opportunity cost is even higher (around $612,000.00). Although Maurice Blackburn acknowledged that the cost of giving security is not a matter of great weight, it should tend against any argument that an order for security should be made out of an abundance of caution, particularly when there is negligible benefit to Macquarie having regard to the strength of Maurice Blackburn.

Macquarie’s contentions

In respect of Maurice Blackburn’s audited accounts, Macquarie made eight key submissions.

First, it submitted that the accounts demonstrate that Maurice Blackburn maintains scarcely the amount of cash necessary to discharge the likely costs liability in this proceeding.[147] Macquarie submitted that what is instructive is the cash position of Maurice Blackburn, how it may be affected and whether the Court could be confident that there will be cash in two to three years’ time if the security is called upon, that being the relevant time at which the assessment must be made – when the entitlement to claim it arises.[148]
[147]Defendant’s Outline, [21].
[148]Yara Australia Pty Ltd v Oswal (2013) 41 VR 245, 249-250 [11]-[12] (Redlich JA).

Second, Macquarie contended that Maurice Blackburn's cash on hand is unlikely to be materially greater, and may well be materially less, 12-24 months into the future, when any adverse costs order is likely to be payable.[149]
[149]Defendant’s Outline, [22].

Third, Macquarie submitted, relying on the Gilsenan Affidavit, that the volatility of Maurice Blackburn’s cash position is only likely to increase in future. Ms Gilsenan deposed that Maurice Blackburn's personal injury practices have a ‘consistent inflow of cash’. Macquarie contended that from this it appears that the volatility and losses are the product of its class actions business. Macquarie pointed to Ms Gilsenan’s evidence that Maurice Blackburn is moving from a portfolio of funded, partially funded and unfunded class actions to a higher weighting of self-funded cases (no doubt taking advantage of the GCO regime), to submit that the volatility demonstrated in Maurice Blackburn’s past results is only likely to increase.[150] Ms Gilsenan’s evidence was that currently Maurice Blackburn is conducting 27 class actions which are funded under various models: six are unfunded; one is unfunded but with ATE insurance; one is unfunded but has settled subject to court approval; two are unfunded however Maurice Blackburn has only partial liability to pay an adverse costs order due to an ATE policy and/or cost sharing arrangements with another firm; three are unfunded where Maurice Blackburn has no liability to pay an adverse costs order; seven are subject to cost sharing arrangements; six are funded actions where Maurice Blackburn has no liability to pay an adverse costs order and one action is funded where Maurice Blackburn has partial liability for adverse costs.[151]
[150]Ibid, [24].
[151]Gilsenan Affidavit, [42].

Fourth, Macquarie submitted that when sizeable amounts of cash do come in (as in FY20), they leave just as quickly, apparently to pay down debt. Maurice Blackburn operates a highly leveraged business model, which does not involve building or maintaining large cash balances.[152] Macquarie contended that this pattern is likely to continue into the future as Maurice Blackburn’s class action facility requires recoveries under its funded cases to be applied first to any outstanding balances on the facility.[153]
[152]Defendant’s Outline, [25].
[153]Ibid, [26].

Fifth, Macquarie submitted that Maurice Blackburn’s escalating borrowings have already placed it within reach of limits of its covenants under its debt facilities.[154] A breach of covenant which is not remedied within 20 days, may constitute an event of default, the consequence of which is that all amounts owing under one of the debt facilities may be called in immediately.[155]
[154]Macquarie relies on the whole analysis at paragraphs 4.22 to 4.45 of the Nicolaides Report.
[155]Defendant’s Outline, [30].

Sixth, Maurice Blackburn may, in the near future, have significant exposure in the event that it is unsuccessful in the Roundup class action. The combined impact of adverse costs orders (a cash outflow) and write-off of WIP and disbursements (reduction in revenue) may have a very significant impact on Maurice Blackburn.[156]
[156]Ibid, [31].

Seventh, and contrary to the assertions in the Gilsenan Affidavit and the assumption given to Mr Atkins by Maurice Blackburn, one of the debt facilities is not available to meet an adverse costs order.[157]
[157]Ibid, [32].

Eighth and finally, it is significant to note that neither Mr Atkins in his supplementary reports nor Mr Valsinger in his affidavit in reply meaningfully challenged the conclusions of Mr Nicolaides save for Mr Nicolaides’ conclusion as to timing of the recovery and payment of WIP following a successful outcome.

Before, I turn to address the reasons why I am persuaded by the Nicolaides Report, and why I accept the submissions of Macquarie, some observations must be made about the uncertainty inherent in the probabilistic analysis and outcomes urged upon me by Maurice Blackburn.

The relevance of predictive modelling (if any) in a given case will depend on the subject matter to which the ‘appropriate or necessary’ examination is directed.[158] However, modelling that is burdened with uncertainty undermines the essential proposition that Maurice Blackburn will be able to meet an adverse costs order in the future.
[158]Fox (n 18), 523 [118] (Nichols J).

In Fox, Nichols J made a number of observations in relation to the inherent uncertainty that attaches to modelling outcomes. [159] Those observations are equally apt in relation the predictive analysis embarked upon by Mr Atkins before me and I respectfully adopt her Honour’s analysis and observations.
[159]Ibid, 522-523 [114]-[118].

It would be unhelpful to seek to formulate a general proposition about how one should approach actuarial analysis in a matter such as this, or more broadly, the position of Maurice Blackburn in respect of other class actions and security for costs applications. It is enough to say that the analysis must be done having regard to the financial circumstances at the time, the nature of the security for costs application and the risk assessment required by s 33ZDA(2)(b) of the SCA. Whether or not the risk assessment may be satisfied will depend on the particular evidence.

Unquestionably, Marice Blackburn is a substantial enterprise. Macquire did not seek to undermine Maurice Blackburn’s audited financial accounts. These accounts record net assets of more than $216million. However, and for the reasons identified by Mr Nicolaides, the risk assessment which must be undertaken is not limited to, or properly informed by a simple consideration of the net assets of Maurice Blackburn.

Maurice Blackburn’s primary asset is its WIP. The evidence of both Mr Valsinger and Ms Gilsenan is that Maruice Blackburn’s business model is changing to focus more on self-funding matters. Mr Nicolaides identified, and it was not challenged, that the net operating cash flow of Maurice Blackburn has been negative for the past three years. As Maurice Blackburn focuses more on self-funding matters, Maurice Blackburn has to fund the costs of these proceedings from its own resources. The evidence before the Court was that this had been facilitated via Maurice Blackburn’s debt facilities. Mr Nicolaides’ evidence was that Mr Atkins had not properly identified the risks around the substantial WIP balances in a business model operating on a no win no fee basis. Save for a challenge as to the likely period in which WIP might be collected following a successful outcome, Mr Nicolaides’ assessment was unchallenged including his conclusions that sizable WIP balances with the risk profile of a no win no fee model extending beyond 12 months have a high risk of recoverability. I accept that evidence.

Before me, there were realistic scenarios, urged by Mr Nicolaides where the evidence establishes that there is a risk that Maurice Blackburn may not be able to meet an adverse costs order.

Mr Atkins' actuarial assessment of the probability of Maurice Blackbum incurring an adverse costs exposure of greater than $7.5million, based on historical rates of successful outcomes in past matters, is, in my view, irrelevant to the issue raised on the Application.

The Court must assume for the purposes of the Application that the plaintiffs' claim fails. Mr Atkins assessed the probability of there being an adverse costs order of up to $20million. This is, as Macquire correctly submitted, an anterior question and of limited assistance in determining the Application.

The relevant basis for the inquiry the Court must conduct is, assuming there is an unsuccessful outcome, and a costs exposure, whether Maurice Blackburn can meet that exposure. It is not the probability of there being an adverse exposure.[160]
[160]Transcript of Proceedings (28 November 2023) 29.13-29.31.

The artificiality and limited applicability of the probabilistic model developed by Mr Atkins and indeed his approach generally are amplified by considering one example, being the Roundup litigation. Before me were confidential estimates of the costs referable to that class action litigation. At the time of hearing the Application, the Roundup class action proceeding was listed for trial imminently. There was no dispute that an adverse outcome in that proceeding would result in a very significant costs exposure to Maurice Blackburn. Adopting Mr Atkins probabilistic approach, the conclusion available would be that there is a 0.05 percent (or one in 2,000) chance that an adverse liability in a year, say 2024, would be $22.5million.[161] The shortcoming in that approach is immediately obvious - the Roundup litigation was to shortly go to trial (suggesting attempts at settlement had been unsuccessful). In the absence of submissions as to prospects, the Court must conclude that there is a live chance of an adverse costs order. In no circumstance therefore, could the Court safely find that the chance was limited to one in 2,000.[162]
[161]Ibid, 34.26-35.13; Atkins Report, [3.7].
[162]Ibid.

Additionally, of the 42 matters in the decade to August 2023, Maurice Blackburn had five unsuccessful outcomes. I accept Macquarie’s submission that five is not negligible and that it is sufficient to give rise to a risk in the Livingspring sense.

Mr Nicolaides’ conclusions as to the reliance by Maurice Blackburn on accounting profit as a measure of assessing the ability of Maurice Blackburn to meet an adverse costs order had some force. The overall operating cash flow of Maurice Blackburn is negative and has been for the past three years. Maurice Blackburn is funding its new business model from borrowings. As those borrowings increase so too do the lending costs, which in turn impacts upon cash flow. Cash flow is in turn dependent on the realisation of WIP. As to the realisation of WIP, Maurice Blackburn acknowledged that there had been a significant buildup of WIP as it transitioned to its new business model and the class actions that were self-funded progressed to either a settlement phase or trial. Irrespective of whether a matter is run by Maurice Blackburn under its new business model or otherwise, in the event of an unsuccessful outcome, there would be impacts to Maurice Blackburn's financial position, such as write-off of relevant WIP for that matter. [163] Mr Nicolaides opined that a write down of the WIP would constrain Maurice Blackburn's borrowing capacity.[164] I accept that evidence.
[163]The FY23 Consolidated Financial Statements of Maurice Blackburn, Basis of Preparation, Note 2.5.
[164]Nicolaides Report, [6.13].

With all this in mind, there is real risk in each of the sources of payment of adverse costs that Ms Gilsenan points to in her affidavit: cash and the two debt facilities.

The additional possibilities raised by Mr Atkins - raising further capital and reducing distributions to shareholders - are rightly dismissed by Mr Nicolaides as unrealistic and provide no means of satisfying an immediately enforceable adverse costs order.[165]
[165]Defendant’s Outline, [34].

The suggestion by Mr Atkins in his further supplementary report that Maurice Blackburn’s lenders will renegotiate its facilities and may not seek to enforce them, even in the event of a deficiency in the order of $50million or $75million was speculative at best. Although the Valsinger Affidavit confirmed that the Syndicated Facility had been extended in recent months and the Class Action Facility created, this evidence does not go to nor can it be indicative of what Maurice Blackburn’s lenders may do in the future. In any event, the covenants contained in Maurice Blackburn’s facilities suggest both that the lender requires the covenants to be adhered to and that, in the case of the class action facility, it cannot be used to fund an adverse costs order. There was no evidence before me from which any other conclusion could be drawn. Accordingly, I reject Mr Atkins’ speculation.

Having regard to the competing analysis offered by Mr Nicolaides, the evidence of Mr Atkins was, in my view, simply too uncertain to discharge the real possibility that Maurice Blackburn would be able to meet an adverse costs order such that I would decline to exercise my discretion.

Further, the evidence of Mr Nicolaides identified realistic scenarios and a rationale basis for believe that Maurice Blackburn may be unable to meet an adverse costs order in the future. Whilst those scenarios might be limited, they nonetheless exist. The Court is required to assess whether there is a risk. There, comparative forward-looking projections of litigation outcomes, made on the available evidence despite its limitations, can provide a sufficient foundation on which to choose between competing propositions. In my view the expert evidence of Mr Nicolaides demonstrates that such a risk exists.

I consider that the risks associated with Maurice Blackburn’s financial position exceed the Livingspring threshold. Having reached that conclusion, it follows that the interests of justice require, in this case, an order for Macquarie’s costs.

Is an undertaking sufficient?

As noted, Maurice Blackburn does not oppose an order that it provide security for Macquarie's costs. Rather, Maurice Blackburn has proposed to provide an undertaking “by way of security”.[166] The offer of any undertaking was expressly rejected by Macquarie.
[166]Ibid, [12].

Having determined that security should be ordered, the task for the Court is between Maurice Blackburn's proposed undertaking and security in a liquid form (such as a bank guarantee, payment into Court or an appropriately drafted ATE policy to which Macquarie is a beneficiary and has rights of enforcement).[167]
[167]Ibid, [36].

As to the provision of an undertaking, Macquarie contended that the SCA does not permit Maurice Blackburn to discharge its obligation under s 33ZDA(2)(b) in this way. It contended that an unsecured undertaking by Maurice Blackburn to meet any adverse costs orders made against the plaintiffs is not security for Macquarie’s costs as contemplated by s 33ZDA(2)(b) of the SCA. Macquarie submitted that it was simply a restatement of Maurice Blackburn’s existing, unsecured, statutory obligation under s 33ZDA(2)(a) of the SCA to pay any costs payable to Macquarie in the proceeding.[168]
[168]Ibid, [13].

In support of its position, Macquarie contended that the proceeding Maurice Blackburn has initiated and sponsored is large, will span multiple years from commencement to final determination, and will generate costs in the many millions of dollars. Maurice Blackburn – and ultimately, its shareholders – stand to reap one quarter of the rewards of the proceeding by reason of the GCO and should accordingly, and consistently with established principle and the intention manifest in Part 4A Div 6 of the SCA, bear the adverse costs risks that come with that reward, rather than leaving Macquarie with the risk of non-payment. Macquarie submitted that by reason of s 33ZDA(2)(b) of the SCA, Maurice Blackburn is obliged to provide any security which the plaintiffs are ordered to give.

Macquarie further submitted before me that the plain legislative intention is that a law practice having the benefit of a GCO, and therefore the concomitant obligation under s 33ZDA(2)(b) of the SCA to provide security for a defendant’s costs where such security is ordered, cannot discharge that obligation by providing a personal, unsecured undertaking to meet any adverse costs order in the defendant’s favour. Subsection 33ZDA(2)(b) of the SCA must be do something more than merely restating the liability imposed under s 33ZDA(2)(a) of the SCA. The statute draws a very clear distinction between the law practice’s unsecured liability to pay any costs payable to the defendant (which is imposed automatically whenever a GCO is made) and security for the defendant’s costs (which the law practice must provide if the Court orders the plaintiff to give security for the defendant’s costs).

Macquarie contended that even if, contrary to the construction of s 33ZDA(2) of the SCA advanced above, it were open to the Court to order security in the form of an unsecured, personal undertaking from Maurice Blackburn, as a matter of discretion, security in this form should not accepted.

As against those submissions, Maurice Blackburn does not say that they are unable to provide security. In fact, they submitted they can provide security in any form that is required, and have paid money into Court in other matters.[169] Rather its point is a short one – that it has offered an indemnity which it contended should, in the circumstances, be sufficient.
[169]Ibid, [36].

I accept the submissions by Macquarie which, for the following reasons, have some force.

In DIF III Global Co-Investment Fund, L.P. & Anor v BBLP LLC & Ors (‘DIF III’),[170] Hargrave J set out the principles that are relevant in the exercise of a Court’s discretion as to the form of security. His Honour summarised the relevant case law and said:[171]

Drawing these threads together, in exercising its broad discretion as to the form of security for costs in the relevant security circumstances, the Court will usually apply the following principles:
(1)the plaintiff is entitled to propose security in a form least disadvantageous to it;
(2)the plaintiff bears a ‘practical onus’ of establishing that the proposed security is adequate and does not impose an ‘unacceptable disadvantage’ on the defendant;
(3)in order to be adequate, the proposed security must satisfy the protective object of a security for costs order, namely, to provide a fund or asset against which a successful defendant can readily enforce an order for costs against the plaintiff; and
(4)based on these and any other relevant considerations, the Court will determine how justice is best served in the particular circumstances of the case.

[170][2016] VSC 401.

[171]Ibid, [40] (Hargrave J).

In Trailer Trash Franchise Systems Pty Ltd v GM Fascia & Gutter Pty Ltd (‘Trailer Trash’),[172] the Court of Appeal endorsed those principles and took into account the effect of the Civil Procedure Act 2010 (Vic) (’CPA’). Tate and Kyrou JJA said:[173]

The authorities do not preclude an order that security for costs be in the form of a personal undertaking by a third party other than a financial institution. However, where the court has a choice between security in that form and security in a liquid form that enables funds to be accessed with minimum risk that litigation may be required to enforce the security, ordinarily the court should prefer the liquid form. The need to prefer the liquid form where a choice is available has become more acute since the commencement of the CPA because:
(a)section 8(1) requires a court to seek to give effect to the overarching purpose in the exercise of any of its powers;
(b)section 7(1) provides that the overarching purpose is ‘to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute’;
(c)section 9(1) provides that in making an order in a civil proceeding, a court must further the overarching purpose by having regard to a number of objects, including: the efficient conduct of the business of the court (s 9(1)(c)); the efficient use of judicial resources (s 9(1)(d)); and the timely determination of the civil proceeding (s 9(1)(f)); and
(d)a form of security for costs which does not provide a fund which can be accessed without the cooperation of the opposing party or a person who is connected to that party — and may require the commencement of proceedings to enforce it — has the potential to undermine the overarching purpose. This is because that form of security can give rise to satellite proceedings and additional delay and costs. Such satellite proceedings are contrary to the principle of finality in litigation.

[172][2017] VSCA 293 (‘Trailer Trash’).

[173]Ibid, [59].

Applying DIF III and Trailer Trash, a form of security for costs which does not provide a fund which can be accessed without the cooperation of the opposing party or a person who is connected to that party – and may require the commencement of proceedings to enforce it – has the potential to undermine the overarching purpose. This is because that form of security can give rise to satellite proceedings, additional delay and costs, and is contrary to the principle of finality in litigation. The very fact that a further proceeding might be required to enforce the undertaking lies contrary to the principle of finality in litigation.[174]
[174]Defendant’s Outline, [15].

Here, Maurice Blackburn has proposed a form of security that is least disadvantageous to it as it is entitled to do. However, it bears the practical onus of establishing the that the proposed security is adequate and does not impose an unacceptable disadvantage to Macquarie. The fundamental question is whether the form of security proposed, namely an undertaking, is adequate to protect the party seeking it.

An indemnity from Maurice Blackburn would not provide a ‘fund’ or ‘asset’ that could be drawn upon. It would, in substance, do no more than re-affirm Maurice Blackburn’s existing obligations under the GCO and Orders. Maurice Blackburn has not provided a fund or asset against which Macquarie, if successful, can readily enforce an order for costs against. The undertaking proposed by Maurice Blackburn does not, in my view, satisfy the principles raised by Hargrave J in DIF III.

I accept the submission of Macquarie that the legislative intention must clearly be that a law practice having the benefit of a GCO, and therefore the concomitant obligation under s 33ZDA(2)(b) of the SCA to provide security for a defendant’s costs where such security is ordered, cannot discharge that obligation by providing a personal, unsecured undertaking to meet any adverse costs order in the defendant’s favour. Subsection 33ZDA(2)(b) of the SCA must do something more than merely restating the liability imposed under s 33ZDA(2)(a) of the SCA.

Whilst I accept that the risk of and reputational damage if the undertaking is not honoured by Maurice Blackburn is a factor I must consider, I cannot regard it as determinative in favour of Maurice Blackburn, particularly given the evidence of Mr Nicolaides. Moreover, I accept that analysis of Macquarie that the relevant issue is not Maurice Blackburn’s willingness to honour an undertaking (which was not challenged) but it was their capacity to do so, at a future point in time.[175] That is not to say that there will not be occasions when undertakings or deeds of indemnities will not be regarded as satisfactory. Indeed, it is possible, having regard to the Valsinger Affidavit, that the position of Maurice Blackburn (including the value of the WIP it carries) may well evolve and change as it moves into the GCO space and those proceedings with GCOs begin resolving or being determined. However, for present purpose, I do not consider that the undertaking offered is satisfactory.
[175]Transcript of Proceeding (28 November 2023) 112.20-112.27.

Additionally, whilst I accept that the provision of security will result in direct borrowing costs to Maurice Blackburn, in my view those costs are no more than the costs of running the litigation, more so having regard to the CGO with substantial potential financial benefit to Maurice Blackburn. Adopting the analysis of Parker J in Les & Zelda Investments Pty Ltd v Whitehaven Coal Ltd,[176] those who stand behind this litigation and hope to benefit from it should expect to have to provide fully for the costs of the defendant if the claim is unsuccessful. Those costs should be regarded as part of the expense of mounting the litigation, no less important than the payment of the plaintiff’s own lawyers and the payment of the fees charged by the Court. This is not a basis upon which I would decline to exercise my discretion.
[176][2020] NSWSC 1091, [48].

In the premises I do not accept that Maurice Blackburn’s proposed security by way of an undertaking is acceptable. It is the Court’s view that security should be provided in the form of either a bank guarantee or a payment into Court.

Conclusion on Security

As a result of the making of the GCO, Maurice Blackburn must pay any amount of security that the Court determines. Maurice Blackburn stands to profit from the litigation by means of a 24.5 percent GCO while its ability to meet adverse costs, should the case advanced fail, is subject to real risk. An order for security for costs is appropriate and should be made, such security to be provided by way of a bank guarantee or payment into Court.

Quantum

Ms Hofbrucker’s evidence is that Macquarie’s estimated costs of the proceeding are $5,976,773.00. That evidence is unchallenged and already incorporates a 30 percent discount to reflect recoverability on a party/party basis. Macquarie submitted that the Court can be comfortably satisfied that it is an appropriate quantum.[177]
[177]Ibid, [38].

As to quantum, Maurice Blackburn contended that the quantum of security sought by Macquarie is excessive, that the interests of justice do not require security to be ordered at all, or for the excessive amount sought.[178]
[178]Plaintiffs’ Outline, [4].

In Trailer Trash, the Court of Appeal set out the following principles applicable to the determination of the appropriate quantum of security (citations omitted):[179]

In determining a sufficient amount for security for costs, the Court does not undertake precise mathematical calculations. Rather, it adopts a “broad brush” approach involving “guesstimates as much as estimates”. However, the broad brush approach does not involve an abstract process. It must have an evidentiary basis. The court must have regard to the evidence adduced by the parties as to quantum — whether in the form of an affidavit by an experienced litigation lawyer or an expert report by a costs consultant…
The amount ultimately fixed by the court must not be so low that it fails to provide any real protection to the party seeking security, or so high that it is oppressive to the party required to provide the security. The amount must be “just and reasonable” in all the circumstances of the particular case.

[179]Trailer Trash (n 172), [64]-[65] (Tate and Kyrou JJA).

The principles governing the determination of the quantum for security in the context of a representative proceeding were summarised by Macaulay J in Andrianakis v Uber Technologies (Ruling No 1) (‘Andrianakis’):[180]
[180][2019] VSC 850, [214] (‘Andrianakis’).

In determining the quantum of security, the Court is to apply the following principles:
(a)The Court is to order an amount which it thinks is ‘just and reasonable’ having regard to all of the circumstances of the case.
(b)The purpose of security for costs is not to provide a defendant with full protection for the estimated costs of the party seeking security.
(c)The Court is to adopt a ‘broad brush’ approach to the determination of the amount of security to be ordered. The task of the Court is not to undertake precise mathematical calculations.
(d)That said, the broad brush approach does not involve an abstract process; it must have an evidentiary basis.
(e)The Court is not bound to give security in the amount sought and is not bound by the estimates of the parties.
(f)In making its assessment of the appropriate quantum, the Court may scrutinise individual items but not to the extent of minute examination, akin to a taxation.
(g)The amount ultimately fixed by the Court must not be so low that it fails to provide any real protection to the party seeking security, or so high that it is oppressive to the party required to provide security.
(h)Insufficiency in the evidence substantiating a claim for security may be reason for the Court to look critically at the estimate provided and may be reason for the Court to apply a heavier percentage discount to the amount sought.

In Bogan v Smedley (‘Bogan’),[181] Hetyey AsJ distilled the various authorities as to what discount should be applied and conveniently summarised the factors as follows (citations omitted):[182]
[181][2023] VSC 105 (‘Bogan’).
[182]Ibid, [42].

It is therefore possible to distil from the above authorities the following principles concerning the proper application of a global discount when determining an adequate amount of security for a defendant’s costs:
(a) a global discount may be applied in addition to an evidentiary assessment of what may be recoverable in respect of individual items or categories of work within the costs estimate proffered by the applicant seeking security. In other words, the two approaches are not mutually exclusive;
(b)as a matter of discretion, both methods may be utilised in combination so that individual tasks are separately discounted after broadly having regard to the evidence at a more granular level, with a global discount being applied at the end of the exercise;
(c) depending on the extent of individual reductions applied on a category-by-category basis, the Court may determine, as a matter of fairness, to not also apply a global discount, apply a nominal global discount, or to only apply a global discount in respect of certain categories;
(d) conversely, if the global discount is significant, it may not be necessary to also undertake an evidentiary assessment and adjustment of certain work categories and items claimed;
(e) the global discount should be calibrated to ensure the costs estimate is appropriately reduced to bear some relationship to the party–party costs that would ultimately be recoverable on taxation;
(f) one of the factors that may justify a substantial discount on the amount of security sought is the margin of difference between the estimates obtained by the parties where there is no significant error in the reasoning process demonstrated;
(g) similarly, where the costs are claimed up to the commencement of trial, a substantial discount may be warranted to account for the prospect that the matter may well resolve at mediation or prior to the hearing of the matter;
(h) where the fees charged by the defendant’s lawyers are expensive, or where a deluxe defence is being run, a larger discount may be applied. At the same time, a defendant in complex litigation is not expected to run a defence on a shoestring budget; and
(i) whatever the approach taken in a particular case, the Court must arrive at a reasonable estimate of the defendant’s costs, which the plaintiff would, if unsuccessful at trial, be ordered to pay.

Maurice Blackburn submitted that, applying the principles in Andrianakis and Bogan cannot support the quantum of security sought by Macquarie for three reasons:

(a) first, by seeking the maximum amount recoverable, Macquarie is, in effect, seeking security to provide full protection rather than real protection, which strays from the purpose of security;[183]

(b) second, Macquarie has elected not to file a costs assessor’s report, nor provide meaningful detail surrounding its estimated future costs table[184] which underpins the sum sought by way of security. Accordingly, the quality of the information furnished by Macquarie as to quantum is very low; and

(c) third, a global discount, and a significant one, would be required having regard to the fact that Macquarie’s lawyers are “expensive” and running a “deluxe defence”.[185]

[183]Andrianakis (n 180), [229] (Macaulay J).

[184]Hofbrucker Affidavit, Exhibit PSH-8.

[185]Bogan (n 181), [42(h)] (Hetyey AsJ).

In relation to the costs claimed, it is convenient to set out the calculations of Macquarie. Macquarie stated that, since the matter’s inception, Macquarie’s billed legal costs are $4,820,949.54 (excluding GST) comprised of:

(a) Gilbert + Tobin’s professional fees of $4,290,389.70;

(b) Counsel’s fees of $170,369.83; and

(c) disbursements of $360,190.01.

Past costs have been calculated by reference to the amounts actually charged, which is an orthodox approach to take.

In addition, Macquarie’s legal team had incurred unbilled WIP fees of $430,407.48 (excluding GST) comprised of $405,767.10 in professional fees and disbursements of $24,640.38.

In respect of future costs, Macquarie estimated its future legal costs will be:

(a) $2,143,055.00 (excluding GST) up to and including mediation; and

(b) $3,286,890.00 (excluding GST) up to and including trial (which includes the costs up to mediation) comprised of:

(iii) Gilbert + Tobin’s professional fees of $1,143,055.00 up to mediation and $1,786,890.00 up to trial;

(iv) Counsel’s fees of $100,000.00 up to mediation and $400,000.00 up to trial; and

(v) disbursements of $900,000.00 up to mediation and $1.1million up to trial (including experts).

No point was taken by Maurice Blackburn in relation to the past costs being sought by Macquarie as part of its Application.

In Oswal v Australia and New Zealand Banking Group Ltd (Security for Costs – Stage 2) (‘Oswal’),[186] Sifris J (as his Honour then was) assessed past costs in the context of an application for security for costs. His Honour approached the assessment of past costs by: [187]
[186][2016] VSC 119.
[187]Ibid, [26], [29]-[31], [34]-[35].

(a) considering the solicitor–client costs actually billed and the evidentiary foundation and level of detail provided; and

(b) then applying discounts to past and future disbursements,

to arrive at figures that were reasonable and recoverable.

Maurice Blackburn did not challenge Ms Hofbrucker’s expertise and did not lead any evidence, either from a solicitor or costs expert, as to how the costs should be assessed and in what amount. Further, Maurice Blackburn did not make any submissions as to the appropriateness of specific items and amounts claimed by Macquarie. Rather, Maurice Blackburn’s opposition to was limited to general submissions.

Ms Hofbrucker has taken an orthodox approach to identifying the likely steps and amounts she considers appropriate having regard to the nature of the proceeding and her experience. Mr Hofbrucker has then applied a global discount of 30 percent to reflect recoverability on a party/party basis (or standard basis) including to the actual billed past costs.

Contrary to the criticism by Maurice Blackburn, there is no obligation on a party seeking security for its costs to file a costs assessors report. I accept Ms Hofbrucker’s evidence as being sufficient to provide the Court with a basis to determine the quantum of any security.

Having regard to:

(a) the complexity of the matters raised in the pleadings, and in the proceeding generally;

(b) the volume and nature of the work already undertaken and the advanced nature of the proceeding at the time of the Application;

(c) Ms Hofbrucker’s breakdown of past costs and the work undertaken and the relevant division of that work across an array of appropriately experienced practitioners;

(d) Ms Hofbrucker’s breakdown of future costs and the work to be undertaken and the relevant division of that work across an array of appropriately experienced practitioners;

(e) the charge out rates of Macquarie’s legal practitioners[188] as compared to the amounts provided for the in the Supreme Court Scale; and
[188]Hofbrucker Affidavit, [35].

(f) the fact that Macquarie has already applied a global discount to the past costs, estimating that 70 percent of those actual costs are likely to be recoverable; and

(g) the absence of any specific criticism from Maurice Blackburn in respect of the itemisation provided by Ms Hofbrucker,

and applying the factors set out in Bogan, the Court is left with the impression that the amount of solicitors’ costs claimed is, at best, slightly high. I do not accept Maurice Blackburn’s generalised submission that the costs incurred or estimated are in the nature of full protection or excessive. Further, having regard to the costs summary put before the Court regarding Maurice Blackburn’s costs across its class action portfolio, it is difficult to conclude that Macquarie’s costs are anymore ‘deluxe’ than those of the plaintiffs.

In the exercise of my discretion, and taking a broad brush approach, without engaging in a precise mathematical exercise or embarking on a taxation, I consider that the costs claimed by Macquarie should be discounted by a further 10 percent with the result that security be fixed in the sum of $5,379,096.00 (GST exclusive).

Finally, in exercising my discretion I am guided by the CPA and its requirement that I give effect to the overarching purpose in exercising the Court’s powers, both statutory and procedural.[189]
[189]Civil Procedure Act 2010 (Vic) s 8.

In particular, I must further the overarching purpose by having regard to, amongst other things, the just determination of the civil proceeding, the efficient conduct of the business of the Court, the efficient use of judicial and administrative resources, the fair and just determination of the real issues in dispute, and dealing with a civil proceeding in a manner proportionate to the complexity or importance of the issues in dispute and the amount in dispute.[190]
[190]Ibid, s 9(1).

Balancing all the relevant considerations, I consider that this is an appropriate matter in which to grant security in the sum of $5,379,096.00 (GST exclusive).

The parties are directed to confer as to an appropriate form of order to give effect to these reasons. In the event the parties are unable to reach agreement about those orders, the matter will be listed for a brief further hearing and the parties will be required to set out their respective positions in short written submissions.

SCHEDULE OF PARTIES

S ECI 2020 03924
BETWEEN:
DAIMIN NATHAN	First Plaintiff
TANIA NATHAN	Second Plaintiff
- v -
MACQUARIE LEASING PTY LTD (ACN 002 674 982)	Defendant

Financial Year	Net operating result
2018	28,660,000
2019	52,070,000
2020	39,810,000
2021	20,777,000
2022	38,866,000
2023	34,399,000

Financial Year	Total comprehensive income
2018	(15,714,000)
2019	39,816,000
2020	21,658,000
2021	1,042,000
2022	12,909,000
2023	5,144,000

Financial Year	Net assets
2018	96,648,000
2019	184,901,000
2020	205,231,000
2021	204,512,000
2022	210,891,000
2023	216,035,000

FY19	FY20	FY21	FY22	FY23
($87.5m)	($25.0m)	($82.4m)	($40.8m)	($65.0m)

[2024] VSC 606

30 September 2024