The Trustee for Aqua Stop Trust v Mortlake Constructions Pty Ltd

The Trustee for Aqua Stop Trust brought an action against Mortlake Constructions Pty Ltd in the Federal Court of Australia, seeking damages amounting to $745,000. Mortlake Constructions responded by filing a cross-claim for $27 million. The Trustee then applied for an order that Mortlake Constructions provide additional security for the costs of the proceeding, given the substantial difference in the amounts claimed. The Trustee sought security of $670,500, which was 90% of the amount claimed by the Trustee.

The central legal issue before the court was whether the defendant was entitled to secure the costs of the cross-claim. The Trustee argued that the defendant's undertaking not to press the cross-claim if security was not provided and the proceedings were stayed did not entitle the defendant to secure the costs of the cross-claim. The court needed to weigh this against other discretionary factors in determining the appropriate amount of security for costs. The Trustee contended that the amount of security sought was disproportionate to the claim, amounting to 90% of the claim.

The court found that the undertaking given by Mortlake Constructions did not entitle them to secure the costs of the cross-claim. While the amount of security sought by the Trustee was significant, it did not constitute an abuse of process. However, the court also noted that the total security sought was disproportionate to the amount of the plaintiff’s claim. As such, the court dismissed the application for additional security. The court considered the disproportionate nature of the security sought relative to the claim and the other relevant factors in reaching its decision.