Federal Court of Australia

Stillwater Pastoral Company Pty Ltd v Stanwell Corporation Ltd (security for costs) [2025] FCA 1157

ORDERS

THE COURT ORDERS THAT:

1.    The appellant provide security for the first respondent’s costs of and incidental to this appeal proceeding in the amount of $1,400,000 in two tranches of:

(a)    $930,000 by no later than 4.00 pm on 10 October 2025; and

(b)    $470,000 by no later than 4.00 pm on 13 February 2026.

2.    The appellant provide security for the second respondent’s costs of and incidental to this appeal proceeding in the amount of $1,600,000 in two tranches:

(a)    $1,070,000 by no later than 4.00 pm on 10 October 2025; and

(b)    $530,000 by no later than 4.00 pm on 13 February 2026.

3.    Each tranche of security required by orders 1 and 2 be provided by way of money paid into court, or by way of provision of an unconditional and irrevocable bank guarantee from an Australian trading bank.

4.    In the event that each tranche is not provided as ordered above, this proceeding be stayed until such time as the tranche is provided, with the appellant to pay the affected respondent’s costs thrown away.

5.    The appellant be granted liberty to apply on 3 days’ notice to seek an order to vary the form of security provided to be a deed of indemnity, accompanied by a further $50,000 cash deposit for the purposes of possible enforcement, but only in the event that the appellant can prove it has the benefit of a binding and enforceable indemnity for any adverse costs order on appeal which is materially the same in terms and in effective protection as that provided for the proceeding before the primary judge.

6.    The appellant pay the costs of the first respondent of and incidental to its amended interlocutory application filed on 5 September 2025.

7.    The appellant pay the costs of the second respondent of and incidental to its amended interlocutory application filed on 12 September 2025.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

BROMWICH J:

1    These are reasons for ordering security for costs to be provided by the appellant to each of the respondents in this appeal proceeding, following a contested hearing as to the quantum and form of the security.

2    By an amended interlocutory application filed with leave on 12 September 2025, the second respondent, CS Energy Ltd (CSE) seeks orders that the appellant, Stillwater Pastoral Company Pty Ltd, provide security for the costs of the appeal in the sum of $1,880,000 by way of payment into court or an unconditional and irrevocable bank guarantee from an Australian trading bank.

3    By an amended interlocutory application filed on 5 September 2025, the first respondent, Stanwell Corporation Ltd, originally sought orders that Stillwater provide security for the costs of the appeal in the sum of:

(a)    $1,840,000 by way of a deed of indemnity; and

(b)    $50,000 by way of bank guarantee by an Australian bank or payment into Court, for the purpose of enforcing that indemnity in the United Kingdom.

Stanwell varied its stance at the hearing to seek the security in the sum of $1,840,000 by way of payment into court or an unconditional and irrevocable bank guarantee from an Australian trading bank, if that was ordered in favour of CSE.

4    Both respondents make their application pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth) (the Act) and r 36.09 of the Federal Court Rules 2011 (Cth) (the Rules). Stillwater does not oppose the grant of a security order but challenges the quantum and the form that the security should take.

5    For the reasons below, I have decided that the appellant should provide security for costs to Stanwell in the sum of $1.4 million, and to CSE in the sum of $1.6 million, in two tranches being: approximately two-thirds within three weeks (by 10 October 2025); and approximately one-third by two weeks prior to the appeal hearing (by 13 February 2025). The security in each tranche is to be paid by way of money paid into court, or by way of provision of an unconditional and irrevocable bank guarantee from an Australian trading bank.

6    The appellant will have liberty to apply for an order that the security be paid instead by a deed of indemnity from an overseas insurer, but only if it can establish that it has the benefit of a binding and enforceable indemnity for any adverse costs order on appeal which is materially the same in terms and in effective protection as that provided to it for the proceeding before the primary judge. Each respondent will need to be given an opportunity to be heard as to whether such an order should be made, but I strongly encourage negotiation with a view to at least narrowing any dispute and ideally resolving it.

Background and procedural history

7    On 20 January 2021, Stillwater commenced representative proceedings against the respondents in this Court. Stillwater alleged that the respondents had misused the substantial market power they were said to have in the Queensland region of the National Electricity Market, in contravention of s 46 of the Competition and Consumer Act 2010 (Cth). An initial trial lasting 34 days took place before the primary judge between early June and mid-August 2024. The trial was framed by reference to eight questions of fact or law common to the group members’ claims. The Court considered 13 sample trading intervals during which the respondents were alleged to have misused their market power.

8    On 4 December 2024, the primary judge delivered judgment, dismissing the appellant’s claim: Stillwater Pastoral Company Pty Ltd v Stanwell Corporation Ltd [2024] FCA 1382. On 28 February 2025, Stillwater appealed against the primary judgment. Stillwater filed an amended notice of appeal on 2 April 2025 and a further amended notice of appeal on 25 July 2025 (as directed by the appeal bench, requiring cross-referencing to the primary judgment). Stillwater challenges the primary judge’s findings and orders on seven out of the eight common questions considered at trial.

9    The final iteration of the notice of appeal contains 10 grounds over 14 pages, with a further 40 pages in an annexure detailing asserted errors made by the primary judge in relation to the sample intervals. The appeal is, on any view, immensely complicated.

10    The appeal is to be heard in the March 2026 appeal sittings before myself and Justices O’Bryan and Moore. The appeal is currently listed for a ten-day hearing in Brisbane from 2-13 March 2026. It will not be heard over any longer period of time, but it remains a possibility that the appeal hearing may be shorter than that.

Relevant legal principles

11    There was no real dispute as to the relevant principles associated with the provision of security for costs. The dispute was directed to the application of those principles in circumstances where, as detailed below, Stillwater does not resist providing security for costs, but disputes both the appropriate quantum and the form in which security should be given to each respondent.

12    A security for costs order is protective in nature and its central purpose is to ameliorate the risk faced by the security applicant of succeeding in the case – here, resisting the primary decision being overturned – but being unable to obtain satisfaction of a costs order flowing from that outcome. It is not a mere exercise in arithmetic, but justice must be done to both sides. In this case, satisfaction of any costs orders in favour of the respondents is not likely to be by Stillwater as the lead applicant in this representative action, but rather by the litigation funder. The parent company of the funder in this case is a British company with no assets in Australia.

13    As the dispute is of an essentially evaluative nature, it suffices to state only a few key features of particular relevance to the present applications. I have found most useful for this exercise the analysis and reasoning of Gordon J, when a member of this Court, in Norcast S.ár.L v Bradken Limited [2012] FCA 765. After reproducing s 56 of the Act, and r 19.01 of the Rules, her Honour captured the key issues before her as relevant to these applications in the following pithy way:

[14]    As Lindgren J noted in Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (No 19) (1995) 134 ALR 187 at 197 (referring to the predecessor provisions in O 28 r 3(1) of the Federal Court Rules 1979 (Cth)):

The terms of these provisions do not, apart from the use of the word “security” itself, give any guidance as to the amount of security that should be ordered. The amount is in the discretion of the court and should be such sum as the court thinks just, having regard to all the circumstances of the case. Obviously, a factor of prime importance will be the amount of a respondent's costs which an applicant, if unsuccessful, will be ordered to pay to the respondent if the proceeding continues to a determination by the court. But the estimation of that amount involves many factors, some of them imponderable. …

(Emphasis added.)

[15]    It is the matter emphasised above which is the focus of this application.

[16]    Norcast’s submissions raise three issues which relate to the quantum of the security:

1.    whether it is appropriate to commence the quantification of costs payable as security with an estimate of actual or indemnity costs, discounted by some factor, or whether a calculation of party-party costs is the appropriate starting point;

2.    if actual or indemnity costs are permissible, what is the appropriate discount to be applied, and, as a related issue, what the is the function of the “two-thirds rule”; and

3.    what steps in the proceeding are included in the security to be provided.

14    In relation to the first issue identified above of whether the starting point can or should be party-party costs, or actual or indemnity costs, Gordon J stated:

[17]    As to the first issue, broadly speaking, there are two available approaches to determining the quantum of the security to be provided in a security for costs application. The traditional approach is for the respondent to engage what is known as a “costs consultant” to prepare an affidavit setting out the steps likely to occur up to and including the first day of trial with an estimate of the party-party costs of each step which would be recoverable by the respondent were it to succeed and obtain an order for its costs. That approach avoids any dispute as to whether a party’s actual or indemnity costs are an appropriate starting point and, if so, what discount must be applied to arrive at an estimate of party-party costs.

[18]    An alternative approach is for the respondent’s own solicitor to give evidence as to the likely steps and the costs to be incurred in completing each step. Because the respondent’s solicitor is unlikely to also be a specialist in the field of costs consulting, such evidence usually relies upon a calculation of “actual costs” (ie, costs which would be payable on an indemnity basis) discounted by some factor.

[19]    Both of the available approaches have been considered and applied by this Court: as to the former, see, eg, Digital Cinema Network Pty Ltd v Omnilab Media Pty Ltd [2010] FCA 1242; Farmitalia Carlo Erba SrL v Delta West Pty Ltd (1994) 28 IPR 336; as to the latter, see, eg, Nysan Asia Pacific Pty Ltd trading as Horiso v R & D Automation Technology Corp [2012] FCA 193; Winning Form Pty Ltd v Giddy Up Ratings Pty Ltd [2011] FCA 1140; Austin, Nichols & Co Inc v Lodestar Anstalt [2009] FCA 1228; Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited (No 2) [2010] FCA 1209. The approaches are not inconsistent. Whether one begins with party-party costs or discounted actual or indemnity costs does not matter, provided the end result is the same – a reasonable estimate of the respondent’s costs which the applicant, if unsuccessful at trial, would be ordered to pay to the respondent.

(Emphasis added.)

15    Paraphrasing the last passage emphasised above, it does not matter whether I begin with party-party costs or discounted actual or indemnity costs, provided I arrive at a reasonable estimate of the respondents’ costs which the appellant would be ordered to pay if the appeal fails. However, I consider that the same approach should be taken with both respondents, notwithstanding some differences in their evidence about costs already incurred and estimated to be incurred.

16    When considering the discount to be applied if actual or indemnity costs are used as the starting point, Gordon J stated:

[23]    In relation to the second issue, where actual or indemnity costs are adopted as a basis for estimating costs, the discount factor becomes central. Previous decisions which apply various discounts are of little use. The discount must vary to ensure that the estimate of actual or indemnity costs is appropriately reduced to such a level that it bears some relationship to the party-party costs which would be recoverable on taxation. To put it bluntly, the more expensive the lawyers, the larger the discount. The Respondents submit that the appropriate discount is two-thirds. Norcast submits that it is 45% (Norcast further discounts its 45% figure by two-thirds, that issue is dealt with below).

[24]    It is not the purpose of security to give a full indemnity to the Respondents: see, eg, Brundza v Robbie & Co (No 2) (1952) 88 CLR 171 at 175 per Fullagar J. Further, in Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497, French J stated at 515 that “the process of estimation embodies to a considerable extent, necessary reliance on the ‘feel’ of the case after considering relevant factors” (citations omitted). In Save the Ridge Inc v Commonwealth of Australia [2004] FCA 1289, Emmett J was of the view at [24] that “[i]n assessing quantum of an order for costs, a broad brush approach needs to be taken”. Bearing Fullagar J’s comments in mind, after consideration of the “feel” of the case and adopting a broad brush approach, I consider that the Respondents’ are entitled to 50% of their estimated actual or indemnity costs as an estimate of their party-party costs allowable on taxation.

(Emphasis added.)

Evidence relied on

17    In support of its security application, Stanwell read two affidavits of Ms Kathryn Elizabeth Finlayson, a partner at MinterEllison, sworn on 1 August 2025 and 5 September 2025.

18    In support of its security application, CSE read two affidavits of Ms Elizabeth Poulos, a partner at Herbert Smith Freehills Kramer, affirmed on 29 July 2025 and 4 September 2025. CSE also read an affidavit of Ms Roslyn Walker, a solicitor and legal costs consultant, affirmed on 1 August 2025, which annexed a copy of the expert report prepared by Ms Walker for the purposes of its application.

19    Both Ms Finlayson and Ms Poulos provide tables in their first affidavits detailing the costs already incurred and expected to be incurred in a range of activities commencing with a consideration of the various iterations of the notice of appeal, up to the conclusion of the appeal hearing. Ms Walker assesses the likely recoverable costs based on Ms Poulos’ description of the actual costs expected to be incurred, while Ms Finlayson provides a broad-brush prediction of recoverable costs by discounting the actual costs expected to be incurred by 30%.

20    In response, Stillwater relied upon:

(a)    two affidavits of Ms Valerie Faith Blacker, a partner at Piper Alderman, sworn on 22 August 2025 and 10 September 2025;

(b)    two affidavits of Mr Christopher John Grisenti, a solicitor and costs law specialist, affirmed on 22 August 2025 and 10 September 2025, with the first affidavit annexing two expert reports prepared by him, one for each respondent’s security application; and the second affidavit annexing a further supplementary report containing a reply to both respondents’ evidence.

21    During the hearing, after the respondents had concluded their oral submissions, Stillwater sought leave to read an affidavit of Ms Susanna Ruth Lindsay Taylor, Head of Investments, APAC, of Litigation Capital Management Limited (LCM), sworn on 11 September 2025. There were some objections from the respondents, but the affidavit was ultimately read over those objections. Stillwater sought to rely on this affidavit to show that it would be indemnified by LCM Funding Pty Ltd (LCM Funding), a wholly owned subsidiary of LCM, for any adverse costs order arising out of the appeal. I was not in a position to be satisfied that this filled the evidentiary gap created by there not being a separate funding agreement for the appeal, in circumstances where the trial funding agreement expressly excluded appeal costs.

The quantum dispute

22    In relation to quantum:

(a)    Stanwell seeks security in the sum of $1,840,000, while Stillwater contends it should be as low as $565,596.04 and in any event no higher than $965,146.62;

(b)    CSE seeks security in the sum of $1,880,000, while Stillwater contends it should be as low as $711,809.33 and in any event no higher than $1,136,472.70.

23    Stillwater does not take issue with the bona fides of the costs already incurred or the estimates of future costs provided by the respondents. Upon the necessary assumption that the appeal fails, so as to give rise to a costs order in favour of each respondent, the thrust of Stillwater’s case is a dispute as to the fairness and reasonableness of those costs on a number of different bases.

24    I have read the evidence relied upon by each of the parties (with a focus on the parts to which my attention was directed at the hearing, and to the costs quantum figures, and without close consideration of annexed correspondence and the like), their written submissions, their oral submissions and the authorities upon which particular reliance was placed. In particular, I have considered in some detail the quantum of costs already incurred and expected to be incurred by each respondent, and how those sums have been arrived at, in the context of the appellant’s evidence and submissions about the reasonableness and fairness about them. It has not been necessary or appropriate, let alone practically feasible in the time available, to provide any analysis of those amounts in these reasons.

25    In the case of Stanwell, I accept the unchallenged affidavit evidence of Ms Finlayson as to the quantum of actual costs incurred and to be incurred and her description of the exchanges that have taken place with the appellant on the present issue of security, her examination and assessment of the financial position of the litigation funder, LCM Funding, and its ultimate holding company, LCM, the lack of assets in Australia held by either company, and the reduction in the share price of LCM. She sets out the seniority and charge out rates for the partners (two), other solicitors (five) and counsel (four, later increased to five, with two senior counsel and three junior counsel) involved in this case. The core aspect of her evidence provides an account of costs:

(a)    already incurred, mostly relating to consideration of the iterations of the notice of appeal, initial work on this security for costs application, the first case management hearing before me on 20 May 2025, review of the draft appeal book indexes, anterior work on submissions and chronologies, correspondence, strategy, and ancillary disbursements such as travel, accommodation, transcripts, printing and counsel’s fees: $308,078.46

(b)    expected to be incurred to the end of the appeal hearing, including the security for costs preparation and hearing, finalising the appeal book indexes, further consideration of the further amended notice of appeal, preparation of written submissions and chronologies, preparation of the appeal hearing, attendance at the appeal hearing, a further case management hearing, and counsel’s fees: an estimated $2,324,866.

26    Ms Finlayson applies to the total those two figures, being $2,632,944.46, a party-party discount of 30% to arrive at a discounted sum of $1,843,061.12. At that stage, she sought security in the sum of $1,200,000, plus $50,000 paid into court for the purposes of enforcing a costs order in Stanwell’s favour. She describes that amount as being significantly less than the actual costs that may be recovered on a party-party basis.

27    In her second affidavit, Ms Finlayson addresses certain points made by Mr Grisenti. In particular, she addresses his discounting of counsel’s fees and the additional junior counsel proposed to be briefed, and the input of solicitors in the preparation of the written submissions ordered by the Court. Aspects of what she raises are accepted by Mr Grisenti, such as the appeal hearing transcript costs and the costs of an eTrial provider. The most significant additional evidence relates to concerns about whether there is any binding adverse costs indemnity in place from LCM Funding and concerns about the financial position of Stillwater. That led to Stanwell seeking the higher quantum of security in the sum of $1,840,000, which is almost as much as the estimated party-party costs.

28    In the case of CSE, Ms Poulos engaged in a similar evidentiary exercise to Ms Finlayson, but importantly supplemented by Ms Walker’s report. While CSE also retains two senior counsel, there are some significant differences as to the remaining number of lawyers involved: ultimately four junior counsel rather than three; one partner rather than two; six other solicitors rather than five, and a graduate. I accept her evidence as to the quantum of actual costs to be incurred and the security for costs issues which are further developed.

29    Ms Poulos arrives at a figure of $225,047.56 for costs already incurred (albeit by reference to an end date about a month earlier than Ms Finlayson), and an estimate of future costs measured from 24 June 2025 of $3,174,962.34, producing a total of $3,400,009.90. To that figure, she has applied a discount of 35% to account for uncertainty, producing a rounded down figure of $2.2 million. CSE seeks security in the sum of $1.88 million, being an additional discount of some 15%. Ms Walker’s report brings her expertise in costs assessment to support the figures deposed to by Ms Poulos, and takes a step further by predicting the likely outcome of a taxation assessment as being $2,714,306.57.

30    In summary, Mr Grisenti critiques the costs estimates advanced by each of the respondents and offers his opinion as to what would be allowed in an assessment. His approach is essentially one of carrying out a putative taxation, drawing conclusions as to what he considers would or would not be allowed on taxation. For example, he opines on what would not be allowed as to things such as the number of lawyers at different levels (e.g., disallowing a second senior counsel, having no more than one junior counsel and reducing the number of solicitors), the time spent on a range of tasks (especially on the preparation of written submissions), and ancillary expenses, such as obtaining assistance from experts in framing the arguments to be advanced, appeal book preparation, and travel and the like. He disputes the reasonableness of either respondent having two senior counsel, or more than one junior counsel. He takes issue with the degree of involvement of solicitors in a range of preparatory tasks. He describes in somewhat evocative terms, if not pejorative terms, the sums expended on the 20 May 2025 case management hearing, the consideration of the iterations of the notice of appeal, the appeal book index settlement process, and the volume of work estimated for the submissions. He does not dispute the genuineness of those costs incurred or to be incurred, or even necessarily the reasonableness or fairness of parts of them being incurred, but rather the extent to which they would survive a taxation or assessment process.

31    The thrust of Stillwater’s criticism is that the respondents’ approach equates to “Rolls Royce servicing”. That is, Stillwater objects to providing an amount of security that is calculated using the respondent’ estimated costs, because they contend that those amounts exceed what is reasonable and necessary due to the number of lawyers involved and the amount of time spent. Stillwater does not deny the respondents the right to spend as much as they wish to put themselves in the best possible position to resist the appeal, but contends that this is not something that they should be contributing to.

32    In turn, the thrust of the respondents’ criticism of Stillwater’s approach, apart from defending their own stance and the evidence in support of it, is to characterise Mr Grisenti as not being well-placed to assess the legal and factual issues in the appeal so as to be able to create a credible estimate of the time and effort required, including as to the number, seniority and rates of the lawyers involved.

33    I am satisfied that this is an appeal for which thoroughness of preparation, including as to written submissions, is required for the presentation of the competing arguments at the appeal hearing to be workable, and the preparation of the appeal judgment feasible. An enormous amount of work is required from all concerned – on both the moving and opposing sides – before a word is uttered at the appeal hearing.

34    I am also satisfied that the very complex nature of the submission writing and appeal presentation tasks justifies having, in effect, two overlapping teams of solicitors and counsel to deal with the competition issues and the conduct issues raised by the notice of appeal in its final form, a point convincingly made by counsel for Stanwell by reference to illustrative parts of the further amended notice of appeal. I note in this regard that it was not suggested that Stillwater would be taking a different approach to the preparation of written submissions or the conduct of the appeal, including in particular the division of legal labour to address different parts of the appeal. I am thus unable to accept that this approach alone takes the costs thereby incurred beyond the description of being reasonable or fair. Of course, that does not amount to any determination of whether the actual execution of that approach has remained within that description, being a question for an actual assessment or taxation process of some kind.

35    On the other side of the ledger, I do have a number of concerns about some aspects of the costs already incurred and the estimates that have been made as to future costs. Without purporting to do any assessment or taxation, it does seem to me that the work relating to the 20 May 2025 case management hearing, which was largely concerned with the estimated duration and timing of the appeal hearing, and related timetabling issues, may have been significantly over-resourced. The costs of this security for costs application seem to be very large, especially for CSE. I have a similar concern about the appeal book costs, given that its preparation is in the hands of the appellant, and the main issue concerns what should be included in the index and thus in the appeal book itself. Further, as I advised at the hearing, having conferred with the other members of the bench prior to the hearing, if any future case management hearing is required, it is likely to be confined to the question of shortening the duration of the appeal hearing, noting that no party responded with any enthusiasm to that suggestion. If a case management hearing did take place, it would be directed to that objective, which if achieved would save far more costs through reduced hearing time than might be expended at such a limited case management hearing.

36    Sitting in the middle is the need for expert involvement, not as witnesses, but in the preparation of the appeal submissions. It is not that I cannot see a legitimate role for such assistance, given the complexity of the issues to be addressed, but rather the reasonableness and fairness of that being sheeted home to the appellant at the level and quantum identified. It is impossible to properly assess that degree of granular detail, especially in a prospective way.

37    A baseline point to make about all of the evidence generally described above is that it is necessarily a predictive exercise by all concerned, especially as to future costs, which is the bulk of the respondents’ costs in issue. The evidence gives some approximation of the outcome of a taxation or other assessment process, including lump sum, that can in fact only be done when the appeal process is all over, and the appeal judgment is delivered. That is not a criticism of anyone involved in this process, but rather a statement of the obvious.

38    I am satisfied that the approach taken by Gordon J in Norcast of applying a discount to the undisputed calculation of costs already incurred and to the estimate of costs that are to be incurred to the end of the appeal hearing is the most appropriate among the options available for the case at hand. Lest it be thought that this departure from the approach taken by the Stanwell in particular, and to a lesser extent CSE, has meant their evidence has not been valuable and important to this process, that is not so: it has been both, and indeed indispensable, for the costs incurred and estimated future costs to be set out in such detail, given that is the starting point I have decided to adopt.

39    I consider that some of the costs I have raised concern about above may be the subject of higher discounts than Gordon J applied in Norcast, but that others may be discounted less, perhaps much less. This is a much more complicated case in which to endeavour to arrive at a reasonable estimate of the respondents’ costs for which the appellant could realistically be liable to pay, adjusting downwards somewhat for uncertainty. In the end, after considerable reflection, I have not found a way to improve upon her Honour’s overall approach of a 50% discount on the actual past costs and estimated future costs that the respondents will most likely be paying, albeit that my final approach has been to apply, if reduced to raw arithmetic, a slightly lower discount to Stanwell and a slightly higher discount to CSE, because the latter has a greater amount attributable to the items of some concern that I have referred to.

40    Weighing all the competing considerations raised by the evidence and submissions and taking the approved broad-brush approach to arrive at what feels like a fair and balanced outcome, I have decided that the quantum of security should be:

(a)    $1.4 million for Stanwell; and

(b)    $1.6 million for CSE.

The form dispute

41    As to the form of security, CSE seeks a cash deposit or bank guarantee, in a single tranche, to be put in place within 14 days of the security for costs order being made. Stillwater contends that a deed of indemnity from the funder of the kind put in place in the primary proceeding is sufficient to protect CSE’s legitimate interests, and that this should be ordered in two tranches, being:

(a)    within 28 days of the security for costs order for the costs of work done up to the commencement of the appeal hearing; and

(b)    14 days before the appeal hearing for the costs of that hearing.

42    CSE contends that a deed of indemnity would not provide sufficient security, because unlike the situation before the primary judge, there is no written agreement in evidence confirming that LCM Funding would indemnify the appellant for any adverse costs order relating to the appeal. Proof of such an indemnity arrangement only exists in the form of some loose indications in correspondence and in an affidavit furnished over the lunch adjournment that such an indemnity has been provided by way of an oral notification. CSE contends that the problem with this difference is that, unlike the situation below where:

(a)    its first remedy in the event of an adverse costs order was to enforce the order against the appellant in Australia, and have the documented indemnity in favour of the appellant brought into play in that way; and

(b)    its second remedy was, in the event that the first remedy was not viable or preferable, a more failsafe alternative of suing the funder directly on the deed of indemnity in its registered location in London,

its alternative failsafe remedy below, with its attendant disadvantages, not least the need to institute proceedings in a foreign forum, might well be its only remedy in relation to the enforcement of an appeal costs order. CSE submits that this is insufficient protection. I agree with that stance.

43    Stanwell originally sought only a deed of indemnity in a single tranche, with a $50,000 cash deposit for the purposes of enforcing that deed if it became necessary. However, as further details regarding Stillwater’s indemnity arrangements emerged in the course of CSE’s oral argument, it changed its position to seek the same outcome as CSE (i.e., cash deposit or bank guarantee) if I was not satisfied that the evidence relied upon by Stillwater was sufficient to show that Stanwell has the same level of protection that it had below. Stillwater advances the same arguments in favour of a deed of indemnity as for CSE, and seeks two tranches.

44    If I concluded that a deed of indemnity provides sufficient protection for the respondents, Stillwater contends that the provision of a $50,000 cash deposit for enforcement purposes could be met by extending to the appeal proceeding an existing cash deposit in that sum provided for both respondents, which had been provided for the purposes of enforcing the security for costs order in the proceeding before the primary judge. Stillwater submits that only one enforcement proceeding would be necessary. I am satisfied that this is not fair or reasonable, as a stay of the costs orders below was refused and the process of assessment of costs is well under way. If there is a need for enforcement, that may well emerge before the appeal judgment has been delivered. I am of the view that neither respondent should have to wait for the outcome of the appeal before enforcing the costs order below, not least because that would amount to a de facto stay of those costs orders which has been sought from and refused by the primary judge. It follows that if the security ordered takes the form of a deed of indemnity, then a further $50,000 cash deposit for each respondent for the purposes of possible enforcement is fair and reasonable, and therefore appropriate to order.

45    I am of the view that the form of the security for costs order should be the same for both respondents. I am not satisfied that a deed of indemnity would place either respondent in substantially the same position as they were in below. The evidence adduced does not go far enough to support the conclusion that there is a real possibility of viable direct enforcement against the appellant, especially since the verbal indication from LCM Funding about the indemnity extending to an adverse costs order on appeal appears to be contrary to the terms of the only documented indemnity, which expressly states that it does not extend to an appeal proceeding.

46    I am satisfied that there is a real risk that the failsafe alternative of the respondents suing directly on the deed of indemnity in London (being the location of LCM’s registered office) will be its only option. I do not consider that to be sufficient protection as it is a suboptimal failsafe, not a suitable primary remedy. It follows that the appropriate form of order for both respondents is a cash deposit or bank guarantee. However, I side with the appellant on the issue of tranches. There should be a first tranche to cover past costs and costs up to the commencement of the hearing of the appeal, to be provided within 21 days of the date of the delivery of these reasons on 19 September 2025 (that is, by 10 October 2025). A second tranche covering the costs of the appeal hearing should be provided no later than 14 clear days prior to the commencement of the appeal hearing (that is, by Friday, 13 February 2026).

47    The proportion of security allocated to each of the tranches is derived from and broadly reflective of the amounts that were disclosed in the affidavit evidence as to costs in the pre-appeal hearing phase and the appeal hearing phase (extending to immediate preparation for the appeal), being approximately two thirds for the first tranche and approximately one third for the second.

48    I am willing to make provision in the security for costs order in favour of each respondent for the appellant to provide a written indemnity of the appellant for an adverse costs order on appeal which is materially the same as that provided for the proceeding below, and in that event allow the appellant liberty to apply for the cash deposit or bank guarantee to be substituted by provision of such a deed of indemnity in favour of each respondent, accompanied by a cash deposit of $50,000 for each respondent for enforcement purposes (the existing enforcement deposit being for the enforcement of trial costs orders only). Of course, that is more likely to succeed if the respondents agree to it, and naturally the respondents should not withhold consent except on proper grounds.

Conclusion

49    The orders set out at the commencement of this judgement give effect to the reasons above, namely an order for security for costs by way of a cash deposit or Australian trading bank guarantee, in the sum of $1.4 million for Stanwell and $1.6 million for CSE, to be paid in two tranches of about two thirds within three weeks, and about one third by 13 February 2026, with a self-executing stay in the event of non-compliance with either stage. The appellant will have liberty to apply to replace the cash deposit or Australian trading bank guarantee with a deed of indemnity and an enforcement cash deposit of $50,000, provided this gives no less protection than was available for the costs of the primary proceeding.

Associate:

Dated:    19 September 2025