Federal Court of Australia

CIP Group Pty Ltd v So (No 10) [2025] FCA 1240

ORDERS

THE COURT ORDERS THAT:

1.    By 4pm on 31 October 2025, the applicants must provide additional security for costs as follows:

(a)    In the amount of $251,000 as additional security for the costs of the first and fourteenth to twentieth respondents by causing that sum to be deposited into an interest bearing bank account, jointly maintained by Bartley Cohen and Colin Biggers & Paisley to be held as security for costs until further order;

(b)    in the amount of $916,000 as additional security for the costs of the twenty second and twenty third respondents by causing that sum to be deposited into an interest bearing bank account, jointly maintained by Bartley Cohen and Hall & Wilcox to be held as security for costs until further order.

2.    Liberty is granted to the applicants to apply by interlocutory application, supported by an affidavit made by a deponent with direct knowledge of the facts, to vary the time period specified in order (1), provided that the application and supporting affidavit is filed and served by no later than 4 pm on 30 October 2025;

3.    Order (2) made by Derrington J on 12 July 2024 is varied with the effect that the amount of $175,000 there referred to is to be held, with accretions, as security for the costs of each of the twenty second and twenty third respondents.

4.    Liberty is granted to the first and fourteenth to twentieth respondents and to the twenty second and twenty third respondents to apply by interlocutory application for orders to stay or to dismiss the proceeding in the event that order (1) is not complied with.

5.    The costs of the interlocutory applications dated 8 September 2025 are reserved.

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

REASONS FOR JUDGMENT

MCELWAINE J:

1    A very senior judge of this Court has often remarked that humanity can do without another published decision concerning a security for costs application. Regrettably, I cannot avoid doing so in this proceeding. I do, however, adopt the expedient of short form reasons. The detail of the disputes between the parties is set out in a series of judgements published by Derrington J – in particular: CIP Group Pty Ltd v So (No 4) [2024] FCA 1372; CIP Group Pty Ltd v So (No 5) [2024] FCA 1373; and CIP Group Pty Ltd v So (No 8) [2025] FCA 482. An explanation of the abbreviations in these reasons is to be found in those decisions.

2    The applicants, the Clancy parties, commenced this proceeding on 25 March 2022. On 16 December 2022, Derrington J granted derivative leave pursuant to ss 236 and 237 of the Corporations Act 2001 (Cth) for the Clancy parties to bring the proceeding in the name of the second to thirteenth respondents (the Carver entities) against the first and seventeenth respondents. That order was conditional on certain undertakings given by the Clancy parties (one of which was then subject to the appointment of a receiver and manager) to indemnify the Carver entities against any costs orders made against them in this proceeding and to increase the sum held by the applicant’s solicitors to support that indemnity to $750,000. The orders were complied with.

3    Many amendments to the originating process and statement of claim have been made since commencement of the proceeding. The claim has expanded beyond the original respondents to include, inter alia, Mr Paul Wong (a solicitor) and his firm Thynne & Macartney as the twenty second and twenty third respondents (the TM parties). Presently, the Clancy parties plead multiple claims for relief in accordance with the Second Further Amended Statement of Claim dated 28 August 2025. I granted leave to amend, following a contested application that I determined on 25 August 2025.

4    The claims and defences are factually dense and in part legally complex. The trial is listed to commence on 24 November 2025 for an initial period of four weeks and then to resume on 9 February 2026 for a further period of two weeks. The first and fourteenth to twentieth respondents (So parties) and the TM parties by interlocutory applications each dated 8 September 2025, seek various orders to the effect that the form of security for costs that has been provided by the Clancy parties be varied and increased in quantum. The applications are resisted.

5    Presently, security has been provided in an amount of approximately $1.67 million held in an interest-bearing account in the names of the Clancy parties, the So parties and Mr Wong and controlled by their respective solicitors. Pursuant to orders made by Derrington J on 12 and 25 July 2024 and 4 and 9 December 2024, the security amount comprises:

(a)    $1,000,000 to support the undertakings of the Clancy parties to indemnify the Carver entities against any adverse costs orders;

(b)    $175,000 as security for the costs of Mr Wong;

(c)    $450,000 as security for the costs of the So parties of and incidental to the proceeding to the first day of the trial; and

(d)    approximately $48,000 in accretions.

6    The extant security in favour of the So parties was determined by Derrington J in CIP No 4. It remains relevant that Mr Marc Clancy then declined to provide information as to the financial position of the Clancy parties and himself and adopted the position that any application for security for costs, or to increase the indemnity amount, would be resisted: [20]-[21]. That remains the case. His Honour determined an application as then formulated by the So parties for an amount of $1,380,000 security for their costs up to and including the last day of the trial or alternatively, $880,000 up to and including the first day of the trial. It was not then (and is not now) disputed that the Clancy parties are impecunious “in the sense that there was a risk that they will not be able to satisfy an order for costs if they are unsuccessful in the litigation”: [47].

7    His Honour proceeded on the basis that the amount then held as security to support the indemnity of $1,000,000 for the costs of the derivative proceedings “will be available to meet any costs orders made against the Carver’s reach entities if the claims brought in their name fail”: [48]. Further, that the So parties “on any view… will be entitled to seek access to that fund if they are successful in relation to the derivative claims and, though the present application was essentially in respect of the non-derivative claims, there is a substantial overlap between the two groups of causes of action”: [49]. It was not in dispute on the present applications that this component of the security may be applied generally in satisfaction of adverse costs orders.

8    His Honour also doubted the worth of a personal undertaking given by Mr Clancy to be responsible for any costs order in favour of Mr Wong. The present applications proceeded on the basis that Mr Clancy did not adduce any evidence to dispel that doubt and no contradicting submission was advanced for the Clancy parties.

9    His Honour comprehensively set out the principles that inform the exercise of the security for costs discretion at [26]-[38] and those applicable to the costs of derivative proceedings at [39]- [43]. I do not repeat his Honour’s summary but adopt it for present purposes.

10    How his Honour determined an amount of $450,000 by way of security for the So parties to and including the first day of the trial remains relevant. In part, his Honour reasoned at [71] and [80]-[81] as follows:

In the calculus of the amount of security which might be provided, it is necessary to keep in mind that the sum of $850,000 has been held in the trust account of Bartley Cohen as security for the costs of the derivative proceedings since March 2023. Thereafter, additional sums have been added in respect of security for the costs of additional respondents to the derivative actions, with the result that the total amount now held is $1,175,000. As mentioned, following the filing of this application, the parties agreed that an order should now be made to the effect that the amount held in the trust account be treated as security for all of the So interests’ claims for costs in respect of the derivative action. The making of that order will provide substantial security for those parties. On the other hand, the evidence indicates that the costs expended by the So interests to date well exceed that amount, as do the costs which are expected to be incurred in future. Further, the sum may also be used to cover the costs of the other respondents, such that it may not be sufficient in the event that it needs to be called upon.

Given the lateness of the application and the paucity of the quality of the evidence called in support of the So interests’ assertion as to the amount which will be expended by the conclusion of the proceedings, the order for security should be modest. To award the substantial sum sought by the So interests would place a heavy onus on the Clancy interests mere months before the commencement of the trial. That is not appropriate in the circumstances.

Other factors which make it appropriate to award a discounted amount include the fact that security ought not be a complete indemnity for the respondents’ costs, that there should be room for variations in the amounts which will be expended, and the existence of the indemnity which partially protects the So interests. In addition, although the undertaking offered by Mr Clancy was not of sufficient weight to cause the Court to not make an order for security, it carries greater weight in considering the quantum to be ordered. Taking a broad-brush approach, discounting the amount of $880,000 sought up to and including the first day of trial, it is appropriate to order that the applicants provide security in the sum of $450,000. That amount is sufficient in the circumstances to provide adequate, but not total, protection for the So interests for the period mentioned.

11    It should be understood that his Honour accepted evidence from the solicitor for the So parties that approximately $1.2 million in costs had been incurred as at 19 April 2024 with a recoverable amount of approximately $816,000, and that further costs were expected to be incurred up to and including the first day of the trial of approximately $1.1 million with a recoverable amount of approximately $918,000: [45]. I emphasise this part of his Honour’s reasoning because one of the submissions put on behalf of the Clancy parties on the present applications is that if further security is ordered, the quantum should be reduced by approximately 50% from the figures determined by their expert witness, Ms Sharon Drew.

12    The So parties apply for an order that within 14 days the Clancy parties provide additional security for their costs to the last day of the trial in an amount of $1.3 million or such other amount as determined. The TM parties apply for an order that within 14 days the Clancy parties provide further security for their costs to the last day of the trial in the amount of approximately $1.54 million. The So parties rely on affidavits made by one of their solicitors, Ms Rose Layther-Dixon. The TM parties rely on affidavits made by one of their solicitors, Mr Drew Castley. In addition to the evidence of Ms Drew, the Clancy parties rely on affidavits made by one of their solicitors, Mr Benjamin Cohen. Each of the solicitors’ affidavits were read without objection and without any requirement for the deponent to be cross-examined. The evidence of Ms Drew was read without objection, but she was cross-examined by counsel for the TM parties.

13    Ms Drew is a well-qualified and experienced costs consultant, who is a solicitor with many years’ experience in legal costs assessments. She was engaged as an independent expert to express opinions about the cost estimates provided by the solicitors for the So and TM parties. The basis of her opinions was to provide an assessment of the reasonableness of the estimates in order to arrive at: “an estimate of the costs which in my opinion are likely to be allowed as between party and party for each group of respondents, intended to be a guide to assist in the determination of an appropriate amount of security for costs taking into account the specific circumstances relevant to that group of respondents”.

14    Whilst there were aspects of her analysis that were questioned in cross-examination by counsel for the TM parties (and about which she made appropriate concessions), what must not be lost sight of is that the process of estimating amounts of reasonable recoverable party and party costs of the So and TM parties, in the event that the proceeding fails and party and party costs orders are made in their favour, is necessarily uncertain and requires a broad-brush approach. The matters which she accepted in cross-examination did not undermine the usefulness of her opinions because the amounts were relatively inconsequential in the broadscale of arriving at a reasonable estimate of recoverable party and party costs. It should also be understood that her engagement required only that she assess and analyse the costs estimates as provided by the solicitors for the So and TM parties. As she acknowledged, there were aspects of those estimates that could not be interrogated in detail because of a lack of detail. That is one reason for preferring her evidence. There are others. Ms Layther-Dixon is, with respect to her, a relatively inexperienced practitioner. Her estimates lack supporting detail in the single page spreadsheet that is attached to her affidavit. Although she did provide a supplementary affidavit responding to the analysis of Ms Drew, that evidence was limited to the charge out rates for solicitors, the extent to which solicitors within her firm would be involved in the proceeding, some estimates were given as to the likely time and expense for experts and whether there is any dispute that interpreters will be required for some witnesses. She did not engage with the detail of the analysis of Ms Drew. It is also notable that counsel for the So parties chose not to cross-examine Ms Drew.

15    There is more detail to support the estimates of Mr Castley and he has considerable experience in the conduct of complex litigation. However, he did not provide supplementary evidence in response to the analysis of Ms Drew. And for each of Ms Layther-Dixon and Mr Castley they were not engaged to and could not give independent expert evidence.

16    Ms Drew in her first report of 23 September 2025, concluded that for the So parties the total costs likely to be allowed as between party and party were within the range of $771,702 to $772,292 depending on whether two junior counsel, in addition to senior counsel, would be allowed. For present purposes the difference in the range is inconsequential. In her supplementary report of 2 October 2025, she recalculated that range as between $775,107 and $776,692. It is important to understand the basis for those estimates. They are not for the total costs on a party and party basis for the So parties. Rather, the estimates are from the second day of the trial until its estimated conclusion. To these estimates, Ms Drew applied a global discount of approximately 50% as reasonable, particularly by reference to the methodology of Derrington J that I have set out above. The justification for doing so is set out at [25]-[30] of her first report. With respect to her, the analysis rises no higher than a statement by reference to her experience that courts “will ordinarily apply a global discount to the estimated party and party costs as security for costs is rarely intended to be a complete indemnity”. Whether a discount is appropriate in this proceeding is a matter for me.

17    Dealing next with the TM parties, Ms Drew concludes in her first report that the total costs likely to be allowed as between party and party (in this case for the entirety of the proceeding) and by reference to the detail in the affidavit of Mr Castley total approximately $1.7 million, prior to the application of a global discount and without allowing credit for the extant security of $175,000. She does not revise that estimate in her second report, despite the evidence of Mr Castley. I accept her methodology and explanations.

18    The first issue to be resolved is whether additional security is required. I have concluded that it should be in favour of the So and TM parties. The threshold for the exercise of the discretion is met in that I am satisfied that the Clancy parties are impecunious and will be unable to satisfy an adverse costs order: s 56 of the Federal Court of Australia Act 1976 (Cth) (FCA Act) and s 1335 of the Corporations Act: CIP No 4 at [27]-[31]. The Clancy parties did not submit otherwise.

19    The usual discretionary factors are set out in CIP No 4 at [32]. The list is neither mandatory nor exhaustive. Of particular relevance in this proceeding is that the Clancy parties have not adduced evidence to the effect that they cannot provide additional security or that a requirement to do so will stultify the proceeding.

20    For the So parties, the extant security is limited to the first day of the trial. The objective sought to be achieved by a security for costs order is protective: to strike an appropriate balance between the conduct of a proceeding by an impecunious applicant and the disadvantage that will likely be suffered by a successful respondent if the proceeding fails, and an adverse costs order is made. Put another way, security is ordinarily required to avoid frustration of any subsequent costs order. That risk is established for the anticipated costs of the So parties from the second day of the trial.

21    The Clancy parties resist any further order for several reasons, commencing with the submission that the extant security (in total) is adequate. That is claimed to be so when one commences with the estimate of Ms Drew (say her lower figure of $775,107) which is then discounted to derive an amount of $338,514 which is an effective discount of 43.6% or thereabouts. Proceeding globally, there is sufficient security that may be applied to satisfy a costs order in favour of the So parties from the unallocated amount of $1.048 million held to support the indemnity.

22    I reject that a discount of that magnitude, or at all, is warranted. The principled basis for the application of a discount in applications of this type was identified by Gordon J in Norcast S.r.L v Bradken Ltd [2012] FCA 765 at [17]-[19] and [23]-[24]. The objective is not to provide a full indemnity; rather as explained by her Honour, an amount that “bears some relationship to the party-party costs which would be recoverable on taxation” at [23]. In that case, her Honour applied a 50% discount to the respondents’ actual or indemnity costs to derive a reasonable estimate of recoverable party and party costs.

23    In this case, having accepted the evidence of Ms Drew, I am satisfied that a reasonable estimate of recoverable party and party costs from the second day of the trial to conclusion is approximately $775,000. In some cases, it may be appropriate to apply a discount for contingencies, for example the trial may take less than the estimated time. I do not do so primarily because the Clancy parties have not submitted that they cannot provide an additional amount conformably with the estimates of Ms Drew.

24    As to the estimated costs of the TM parties, I am satisfied that for the entire proceeding (without accounting for the extant amount of $175,000) Ms Drew has appropriately concluded that a reasonable estimate of party and party costs is approximately $1.7 million. For the same reasons I have given for the So parties, I consider that additional security is required to achieve the protective purpose and I reject the submission that a discount should be applied to Ms Drew’s assessed quantum.

25    It follows that I reject the global submission that once one totals the Clancy parties’ estimates for the So parties and the TM parties, there remains a surplus of approximately $350,000. The extent to which the unallocated amount of the extant security may be applied in satisfaction of costs orders is a separate issue that I resolve at the end of these reasons.

26    The next submission of the Clancy parties is that an application to vary security for costs must identify a material change in circumstances since the determination of the original application: Ninan v St George Bank Ltd (No 2) [2013] FCA 273 at [10]-[11]. What Griffiths J said in that case at [10] is that: “it is relatively well established that an order for security of costs made after a contested hearing will generally not be made unless there is a material change of circumstances since the original application was heard or new evidence emerges which could not reasonably have been adduced at the time of the hearing of the original application”. The Clancy parties accepted, at least in one respect, that there has been a material change in circumstances in that the anticipated length of the trial was increased by two weeks at a case management conference before me on 17 July 2025. Further, for the So parties it is obvious that an application for further security was contemplated for the balance of the trial when Derrington J made the initial security orders. For the So and TM parties, there is another material change of circumstance in that the claims were considerably expanded when I granted leave to the Clancy parties to further amend on 25 August 2025 including, in particular, amendments to raise new claims of fraud and dishonesty against Mr So.

27    Ultimately, it must be recognised that the discretion to reduce or increase the amount of security conferred at s 56(3) of the FCA Act is unfettered and its exercise turns on the particular facts and circumstances of individual cases. To the extent that the Clancy parties raise the absence of a material change in circumstances as a reason not to exercise the discretion, I reject the submission.

28    A general submission of delay is advanced by the Clancy parties, which is said to be “particularly significant” in the case of the TM parties. The commencing point for that submission is that in June 2024, the solicitors for the TM parties first inquired as to the adequacy of Mr Clancy’s personal indemnity, were not provided with evidence to support it and were then informed that he did not propose to offer any additional security. Thereafter, the TM parties were joined and raised no contention that the provision of further security should be a condition of joinder. I accept that there has been identifiable delay, but there is an explanation for it as provided in the affidavit of Mr Castley dated 8 September 2025 at [24] to the effect that he did not become aware until the week of 11 August 2025 that there was material, in earlier judgments of Derrington J, which questioned the value of the personal undertaking of Mr Clancy. He was not cross-examined on that evidence, and I accept it as an explanation for a component of the delay. Nonetheless, delay remains a relevant factor to be considered in the exercise of my discretion, but in the circumstances, I do not afford it material weight in that the Clancy parties have not adduced evidence that the period of delay has caused or is likely to cause prejudice. Notably, as I have recorded, it is not said by the Clancy parties that they cannot provide additional security, even at this late stage.

29    A more refined delay submission that is relied on by the Clancy parties is that the TM parties included in the calculation of their security quantum, work undertaken within the delay period. In CIP No 4 delay was a matter that Derrington J took into account in his application of a discount to the assessed anticipated costs at [80], albeit coupled with his Honour’s conclusion about the poor quality of the quantum evidence relied on.

30    On balance, I consider that delay warrants a modest discount from the assessed quantum of likely recoverable costs of the TM parties to carve out a portion of the costs incurred during the delay period. It is impossible to be precise and 5% is appropriate on a broad-brush approach.

31    Finally, a submission is made by the Clancy parties to the effect that no further security should be granted in favour of the TM parties because of a compromise which led to the provision of security in the amount of $175,000 pursuant to the orders made by Derrington J on 12 July 2024. Relevantly, his Honour ordered by consent upon the undertaking of Mr Clancy to indemnify the Clancy entities and the Carver entities against any adverse costs order in favour of Mr Wong that:

1.    As soon as practicable, the Clancy Entities cause the sum of $850,000, presently held in a trust account of Bartley Cohen to support the Clancy Entities’ indemnity of the Carvers Entities against any costs orders made against the Carvers Entities in the proceeding (Indemnity), to be paid to and held with accretions in an interest bearing account at the Commonwealth Bank of Australia in the names of the Clancy Entities, Carvers Entities and the first and fourteenth to twenty-second respondents (CBA Account).

2.    Within 21 days from the date of this Order, the Clancy Entities pay or cause to be paid into the CBA Account:

(a)     $175,000 to be held with accretions as security for the twenty-second respondent’s costs; and

(b)     $150,000 to be held with accretions in further support of the Indemnity.

32    The background to the making of this order is set out in the affidavits of Mr Castley of 26 April 2024 and 8 September 2025. As is usual, the respective solicitors engaged in correspondence on the issue of security for costs. On 24 November 2023, Hall & Wilcox for the TM parties, set out the result of their searches in order to ascertain the financial position of the Clancy parties, to conclude that there were no sufficient assets to meet a costs order. An invitation was extended to “comment” on the financial position. It was then said that the estimated costs of the TM parties to the conclusion of a four-week trial was approximately $1.9 million. Bartley Cohen, for the Clancy parties, responded on 18 December 2023. Inter alia, it was said that the concerns held by the TM parties were unfounded because Mr Clancy had given a personal indemnity undertaking and had caused an amount of $850,000 to be paid into the firm trust account to be held in support of the indemnity. It was also said that:

Mr Clancy is otherwise a man of substantial means, something evident from paragraphs 25 and 26 of Mr Cohen’s affidavit affirmed on 17 March 2023 (copy enclosed). That evidence was (and remains) unchallenged.

33    Hall & Wilcox replied on 15 February 2024. The firm expressed concern that $850,000 was not sufficient security to cover the costs of each of the respondents, but nonetheless made an offer to resolve the TM parties’ security claim as follows:

(a)    Mr Clancy provides a personal undertaking to indemnify the applicants and the 2nd to 13th respondents against any adverse costs order against them in favour of our client; and

(b)     a further $850,000 was paid into your firm’s trust account to support Mr Clancy and the applicant’s undertakings.

34    The offer was not accepted. Further correspondence ensued. Eventually, Hall & Wilcox filed an application for security on 26 April 2024, supported by an affidavit made by Mr Castley on 9 May 2024. On 25 June 2024, Hall & Wilcox in detailed correspondence to Bartley Cohen maintained the position that the amount of $850,000 then held was insufficient to meet the anticipated costs of the TM parties. That said, the following offer was made:

In an attempt to resolve the Security Application, we propose:

(a)     Mr Clancy indemnifies the Carver Entities against any costs order made in our client's favour in this proceeding;

(b)     the amount held by your firm in support of the Applicants indemnity of the Carver’s Entities for any adverse costs orders made in favour of the Respondents (which is currently $850,000), be increased to $1 million (Indemnity);

(c)     the Indemnity be paid into an interest bearing account at the Commonwealth Bank in the names of the first to twentieth and twenty-second respondents;

(d)     an additional amount of $175,000 be paid as security for our costs client's (Security). The Security is to be paid into an interest bearing account in the name of the twenty-second respondents; and

(e)     the application will be dismissed with costs to be reserved.

35    That led to a counteroffer from Bartley Cohen on 1 July 2024 as follows:

Notwithstanding the foregoing, and without prejudice to our clients' position that your client is not entitled to any separate costs orders against our clients (or the costs of separate representation as against our clients), our clients offer to resolve your clients' application for security for his costs by consent orders to be made on 12 July 2024 as follows (with the reference to the Clancy entities being to the applicants in this proceeding):

1.    Subject to [4] below, within 21 days, the Clancy entities will pay into the account there referred to, an additional $175,000 as security for your client's costs;

2.    Marc Andrew Clancy undertakes to indemnify our clients (including the Carver's entities) against any costs order made in your client's favour against them in QUD 93/2022;

3.    Subject to 4 below, within 21 days, the Clancy entities will pay into the account referred to in [4] below, an additional $150,000 in support of the applicants' indemnity of the Carver's entities for any adverse costs orders made in favour of the first to twentieth and twenty-second respondents;

4.    The sum of $850,000 held in the trust account of Bartley Cohen pursuant to the orders of Derrington J made on 16 December 2022 and 10 March 2023 be paid to an interest bearing account at the Commonwealth Bank of Australia in the names of the applicants and first to twentieth and twenty-second respondents;

5.    The funds referred to in [4] above, and any accretions thereto, are not otherwise to be dealt with except in accordance with an order of the Court;

6.    The Clancy entities will promptly provide Hall & Wilcox and Colin Biggers & Paisley with copies of any statements evidencing the making and investment of the payment referred to at [4] above;

7.    Your client's application dated 26 April 2024 and filed on 9 May 2024 be dismissed;

8.    The costs of your client's application be reserved.

36    Hall & Wilcox accepted that offer on 1 July 2024 and attached draft minutes of consent, in the form of the orders ultimately made by Derrington J on 12 July 2024.

37    The Clancy parties do not submit that this compromise precludes the exercise of the discretion at s 56(3) of the FCA Act to order further security in favour of the TM parties; rather that it “weighs heavily against granting further security”: Pampered Paws Connection Pty Ltd v Pets Paradise Franchise (Qld) Pty Ltd (No 7) [2010] FCA 626 at [17].

38    The TM parties submit that the compromise does not have that effect as a clear representation was made to the effect that Mr Clancy was able to give an undertaking of value which induced the TM parties to accept the terms offered by Bartley Cohen. On that submission, it has subsequently emerged that the undertaking is of questionable value: CIP No 4 at [52]-[57].

39    As I made clear to counsel during oral submissions, I do not adopt or endorse those findings of Derrington J. The worth of the undertaking has not been forensically addressed in evidence before me and, in any event, the making of those findings was one basis on which the Clancy parties applied to Derrington J to recuse himself, which ultimately resulted in the proceeding being docketed to me. What is of relevance before me is that the Clancy parties do not seek to resist the applications by evidence to the effect that no additional monetary security is necessary because the undertaking of Mr Clancy is wholly or partially sufficient in addition to the funds held in trust.

40    Returning to the correspondence that resulted in the compromise and the consent orders, objectively I am satisfied that there was a representation to the effect that the personal undertaking of Mr Clancy was valuable and that this was a matter considered by the TM parties in determining to accept the offer. Mr Pomerenke KC for the Clancy parties submits that, accepting there was a representation, it did not operate as an inducement because Hall & Wilcox made it clear in their correspondence of 25 June 2024 that the TM parties were not satisfied as to the worth of Mr Clancy’s personal undertaking. I do not consider that the correspondence goes that far. There is a statement of the obvious: Mr Clancy had not given direct evidence about his personal financial position and the scant documentation provided in support was at best equivocal. In closing, Hall & Wilcox stated that their clients “remain concerned” that the extant security was insufficient.

41    Further, as matters then stood the anticipated recoverable party and party costs of the TM parties were estimated at approximately $1.7 million. The settlement that was agreed to had the effect of increasing the security amount of $850,000, first by an amount $175,000 specifically as security for the costs of the TM parties and second by a further amount of $150,000 in support of the indemnity. At that point, the TM parties potentially had available an unspecified share of $1,000,000 plus the allocated amount of $175,000. Further, it must not be overlooked, that the orders made by Derrington J were specifically framed upon the undertaking of Mr Clancy to provide a full indemnity for the Clancy entities and the Carver entities against any costs orders made in favour of the TM parties. Overall, an inducement need be no more than a cause of the decision to compromise, not the sole or substantial reason. Thus, I accept the submission of Mr Thompson KC for the TM parties that it is difficult to resist the conclusion that the TM parties were induced.

42    This case is factually remote from Pampered Paws where there was no issue about representation and inducement which caused the applicant for security to agree to a consent order. Nonetheless as Mansfield J observed at [17], consent does not preclude the exercise of the variation power.

43    Having cleared that ground, I next consider whether additional security should be required and if so in what respective amounts? In my view this is a clear case for the exercise of the discretion. In the case of the So parties, the extant security does not provide protection for the very substantial costs that will be incurred from the second day of the trial to the anticipated conclusion in February 2026. It was always “on the cards” that the So parties would make a further application to supplement the extant security. Whilst the application could have been made sooner, the Clancy parties do not adduce evidence or formulate any submission to the effect that delay has or is likely to cause prejudice in their ability to provide supplementary security for costs.

44    In the case of the TM parties, the costs estimates have substantially increased since July 2024, there is no evidence that Mr Clancy’s undertaking is sufficient, there have been material changes as evidenced by the recent amendments to the Second Further Amended Statement of Claim and the increase in the anticipated length of the trial. It is objectively clear that the allocated amount of $175,000 for the total costs of the TM parties is inadequate by itself, even if one takes a broad view of what may ultimately be apportioned in favour of the TM parties from the unallocated $1.048 million that is currently held on trust.

45    In each case to achieve the objective of security for costs, a variation to the extant orders is required.

46    As to quantum, I am satisfied that the estimates of Ms Drew are reasonable and appropriate, without discounting, save for a 5% discount that I apply to the TM estimate. However, resolving the quantum of additional security is not as simple as ordering additional security in accordance with those findings. The unallocated $1.048 million must be accounted for. It is not possible to predict at this stage, if the proceeding fails and costs orders are made in favour of the So parties and the TM parties, how, as between each, the unallocated amount will be apportioned. Pragmatically, the best that can be done at this stage is to assume an equal division and adopt a pooling approach.

47    Thus, the additional security required for the costs of the So Parties is $251,000 ($775,000-$524,000 [being 50% of $1,048,000]). The additional security for the costs of the TM parties is $916,000 ($1,700,000 - $85,000 [being the 5% discount] - $524,000- $175,000).

48    The next issue is whether the form of the security should be varied. The So parties seek a complex revision. In short, that a bank guarantee be provided to the Queensland Registry of the Court which secures the entire security amount, or that the additional security be paid into the joint bank account maintained by Bartley Cohen and Colin Biggers & Paisley, that the legal and beneficial owner of the funds held on deposit by the solicitors grants a written charge over the funds in favour of the So parties, that the Clancy parties provide to the Queensland Registry evidence to the satisfaction of the registrar that the person who grants the charge is in fact the legal and beneficial owner of the funds and is not aware of any claim to nor any other interest or encumbrance over the funds and that ultimately the charge be registered on the Personal Property Securities Register.

49    The TM parties seek orders that the amounts currently held as security for costs be replaced with a bank guarantee provided to the Queensland Registry which secures the entire amount or alternatively orders that mirror those sought by the So parties in relation to the legal and beneficial owner of the security funds.

50    I am not satisfied that the variations sought should be ordered. During oral submissions I attempted to tease out from Mr Marckwald for the So parties what evidentiary justification exists for the variations. Regrettably, I did not receive a satisfactory answer. My attention was drawn to certain observations of Derrington J in CIP No 8 at [27]-[31] where his Honour expressed concerns about the value of Mr Clancy’s undertaking as to damages, which was given in support of injunctive relief. His Honour made certain conditional orders, the effect of which was to dissolve the injunction if Mr Clancy failed to procure a bank guarantee in an amount of $4,000,000 and lodge it with the Queensland Registry. Mr Clancy did not meet that requirement, and the injunction was ultimately dissolved (noting that there was an appeal to the Full Court which was resolved by consent on 31 July 2025).

51    No evidence was adduced on these applications to the effect that any third-party claimant has a prior legal or beneficial interest in the security funds currently held or may have such an interest in any top up amounts. Mr Marckwald was unable to identify for me the type of third-party claimants or their potential interests. The basis for the variation is entirely speculative. Notably, in oral submissions, Mr Thompson for the TM parties did not press the variation orders.

52    Further, once money is paid pursuant to a security for costs order the funds become fixed with an equitable charge or lien, enforceable by an order that requires payment out to the ultimately entitled party: Larus Group Pty Ltd (administrator appointed) v Mitsui & Co (Australia) Ltd (No 2) [2023] VSC 412; (2023) 72 VR 551; Equuscorp Pty Ltd v Wilmoth, Field Warne (a firm) [2006] VSCA 123 and Hewett v Court [1983] HCA 7; (1983) 149 CLR 639 at 666.

53    The final issues concern timing, whether the additional security should be staged, an inconsequential variation that the security held in favour of Mr Wong be altered to the TM parties (which is not opposed) and liberty to apply for dismissal or a stay of the proceeding in the event of non-compliance. The So and TM parties each specify a period of 14 days for payment in the interlocutory applications. Mr Pomerenke submits the payments should be staged, with the first amount paid prior to the first day of the trial, or if shortly beforehand, and the second shortly before the resumption of the trial in February 2026.

54    In my view, full payment of the additional security is required in a timely way. We are now six weeks away from commencement of the trial on 24 November 2025. It is obvious that very substantial costs will be incurred from now in trial preparation. It is artificial to contemplate the trial preparation is capable of being divided as between what will be dealt with in the first four weeks of hearing in 2025, and the balance in February 2026. No evidence has been produced by the Clancy parties to the effect that additional cash security cannot be provided quickly. In my view the additional security must be provided by 4 pm on Friday, 31 October 2025, with liberty granted to the Clancy parties to apply by interlocutory application for a variation of that time, supported by an affidavit made by a person who has direct knowledge of the facts (that is not on information or belief). If an application of that character is made, I will accommodate an urgent listing.

55    There is no reason, in the event of non-compliance, why the So and TM parties should not have liberty to apply to stay or dismiss the proceeding.

56    The costs of the interlocutory applications will be reserved. At this late stage, the parties should not be further distracted from focusing on trial preparation and compliance with the balance of the case management orders.

Associate:

Dated:    10 October 2025

SCHEDULE OF PARTIES