Federal Court of Australia

Belmont Park Investments Pty Ltd v Fitch Ratings, Inc (No 2) [2026] FCA 970

ORDERS

THE COURT ORDERS THAT:

1.    The applicants provide security for the respondents’ costs of and incidental to this proceeding in the amount of $12,450,702.19, such security to be paid in a form consistent with Order 2 and by way of four tranches as follows:

(a)    within 21 days of the date of these orders, the sum of $4,065,540.86;

(b)    by one week following the date the respondents serve all their lay and expert evidence, the sum of $3,418,275.67;

(c)    by one week following the deadline for the parties to mediate, the sum of $2,693,005.84; and

(d)    by one week prior to commencement of the trial, the sum of $2,273,879.83.

2.    The security referred to in Order 1 shall be provided by way of either:

(a)    money paid into Court; or

(b)    the provision of an irrevocable bank guarantee from an Australian authorised deposit taking institution.

3.    Pursuant to r 2.42(2)(a) of the Federal Court Rules 2011 (Cth), in the event that the security sum is paid by way of cash into Court, the security sum shall be transferred at the applicants’ expense to an interest-bearing bank account established by the Court.

4.    The applicants pay the respondents’ costs of this interlocutory application.

5.    There be liberty to apply on reasonable notice, including as to the form of security to be provided.

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

REASONS FOR JUDGMENT

Delivered ex tempore

JACKMAN J:

1    This is an interlocutory application by the respondents (Fitch) for security for costs. The applicants accept that security should be given, but dispute the amount sought of $12,450,702.19 by way of past and future costs to be paid in tranches, and contend that an amount of $4,236,117.39 is reasonable.

2    The proceedings are a funded class action in which the applicants allege that Fitch engaged in fraud and dishonesty with respect to events about 20 years ago. The proceedings have been on foot for over two years and I have fixed the matter for final hearing commencing on 3 May 2027 with an agreed estimate of six weeks. The proceedings involve a very large claim for pecuniary relief and the evidence is likely to be technical and complex in nature. The proceedings are potentially of grave consequence for Fitch.

3    The applicants submit that the relevant legal principles, drawing heavily on the summary provided by Edmonds J in Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International BV (No 2) [2012] FCA 23 at [73]–[80], are as follows (omitting citations):

(a)    the onus of leading evidence to establish its entitlement to an order for security in the amount sought lies with the party seeking security and the evidence relied upon must have some characteristic of cogency;

(b)    while the Court may adopt a broad-brush approach to assessing quantum, this does not involve an abstract process and the amount sought must have an evidentiary basis. Where there is insufficiency in the evidence led by the party seeking security, the Court may look critically at the estimate provided and apply a heavier percentage discount to the amount sought;

(c)    the discretion to order security for costs is exercised having regard to all the circumstances of the case without any predisposition in favour of the award of security;

(d)    the amount of security will not exceed the likely recoverable party-party costs. The Court should adopt a conservative approach in this respect. Security for costs is not intended to provide a complete indemnity and must balance the risks and burdens between the parties;

(e)    a longstanding and most important principle is that applications for security for costs must be brought promptly; and

(f)    where security is sought for previous costs over a long period of time it is unlikely that an award of past costs will be made.

4    I accept those propositions, except that the second last of those propositions overstates the position by expressing the principle using the word “must”, rather than “should”. The same overstatement was made by French J in Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 at 514. Delay is a factor, and often an important one, to be taken into account in the exercise of the Court’s discretion: see PPK Willoughby Pty Ltd v Baird [2019] NSWCA 48 at [11] (Bell P and Simpson AJA). Of particular relevance to this case is the proposition that a party which unreasonably delays in making an application for security for costs cannot ordinarily expect to obtain security for costs which it has incurred during the period of delay: Big River TV Ltd (in liquidation) v FC Securities Pty Ltd [2025] FCA 222 (Big River) at [37] (Moore J). In that case, Moore J was not prepared to order security for past costs incurred before February 2025 in circumstances where the question of security was first raised on 8 November 2022, the Court ordered that any application for security for costs be filed by 17 February 2023 (later extended to 3 March 2023) and none was made, and there was generalised evidence to the effect that the applicant was heavily involved in the preparation of the matter for the impending trial (due to commence about seven weeks later) and it was found that the application for security had the potential to distract from the preparation for the hearing.

5    The salient facts in the present matter as follows. Fitch’s solicitors wrote to the applicants’ solicitors on 4 November 2024 indicating Fitch’s intention to seek security for the costs of their proceedings and sought confirmation of various matters. The applicants’ solicitors responded on 6 November 2024 (by letter wrongly dated 24 October 2024) confirming that the proceedings were funded and that the applicant was willing to provide reasonable security for costs in tranches. Following receipt of that letter, Mr Edwards of HSF Kramer (the solicitors for Fitch) understood that the applicants were prepared to provide security for Fitch’s costs and the only issues that needed to be resolved in relation to security were the quantum, timing and form of security. On 3 June 2025, Fitch’s solicitors responded with a proposal for the first tranche of $1.5 million to be provided three weeks after agreement was reached between the parties. That was the first time an amount of security had been put forward by Fitch. On 16 June 2025, the applicants’ solicitors sought further information substantiating the amount of $1.5 million. On 16 July 2025, Fitch’s solicitor’s declined to provide the information sought on the basis that it was not necessary, and reiterated the applicants’ expression of willingness to provide reasonable security in tranches. On 7 August 2025, the applicants’ solicitors reiterated their request for further information. On 24 December 2025, Fitch’s solicitors revised their proposal for security, which was for $4.5 million in three tranches. On 9 February 2026, the applicants’ solicitors reiterated their earlier stance, refused to provide the first requested tranche of $1.5 million for past costs on the ground of significant delays by Fitch in relation to security for costs, and sought further information in relation to the quantum claimed. On 24 February 2026, Fitch’s solicitors provided further information in relation to quantum. As to delay, reference was made to having put the applicants on notice of their intention to provide security in November 2024, and to the applicants’ confirmation of their willingness to provide security in tranches, and Fitch’s solicitors asserted that the applicants had not prosecuted the proceedings by incurring costs they would otherwise have declined to incur on the incorrect assumption that Fitch would not seek security, citing ACN 117 641 004 Pty Ltd (in liq) v S&P Global Inc (No 3) [2024] FCA 1238 at [57]–[63]. Further correspondence ensued, and the present interlocutory application was filed on 18 May 2026.

6    There has certainly been substantial delay by Fitch in seeking a Court order for security for costs, and I do not regard that delay as having been fully explained or justified. It would certainly have been preferable for an application for security to have been made over a year ago, although I recognise that that may well have necessitated further applications as the matter proceeded, unless the amounts of further security were able to be resolved consensually. In my view, however, this is an exceptional case in which prolonged delay should not be treated as denying or reducing the amount of security claimed for costs already incurred. Most importantly, the applicants expressed their willingness to provide reasonable security in tranches when the issue was first raised in early November 2024. They were thus not only on notice of Fitch’s intention to seek security for costs at an early stage of the proceedings, but positively agreed to provide it in a reasonable amount by way of tranches. There is no prejudice to the applicants in having to adhere to that position. They have not incurred costs in the proceedings that might not otherwise have been incurred, nor have they been distracted by this application from pre-trial preparation. Accordingly, in the unusual circumstances of this case, I regard Fitch as entitled to security for past costs despite their delay in seeking a Court order for security, and without any particular reduction in security on account of their delay.

7    As to the quantum of security, Fitch relies on estimates of recoverable costs provided by the solicitor on the record, Mr Edwards of HSF Kramer, which are contested by the applicants’ solicitor, Ms Banton. As Fitch’s solicitor, Mr Edwards naturally has a substantially higher level of information and insight into the work done and to be done by Fitch’s legal team than Ms Banton. Mr Edwards is an experienced litigation partner of HSF Kramer, and has conducted the defence of numerous class action proceedings in Australia as well as in the United Kingdom. Mr Edwards has applied an overall discount of 35% to the actual and anticipated legal costs, bearing in mind that in his experience a party represented by HSF Kramer will generally be able to recover 60–70% of its solicitor’s fees and 80–90% of counsel’s fees and other disbursements when costs are ordered on a party-party basis.

8    In my view, it is appropriate to adopt those discounts for present purposes, which are well-supported by Mr Edwards’ experienced opinion. Whether any further discount would result from the different approach of taking the costs according to scale rates in the first instance and then applying a discount (or perhaps a different discount from that applied by Mr Edwards) is a matter which is more appropriately addressed if and when costs are assessed at the end of the litigation. One aspect which would be taken into account in that analysis would be a potential uplift over scale rates on the grounds of complexity and skill, care and responsibility, which strikes me as likely to arise in this case, although the evidence (including Ms Banton’s evidence) does not deal with that issue.

9    As to past costs, the applicants criticise Mr Edwards’ evidence as being light. The applicants submit that all that the Court has been told is that as at 29 April 2026, Fitch had incurred $6,254,678.24 in past costs, $5,839,920.04 of which comprises HSF Kramer’s fees. As the applicants submit, HSF Kramer’s fees are then broken down into five categories of work, with $2.4 million (roughly 40%) being attributed to “advice and analysis, including key factual and legal issues”, which the applicants submit is otherwise described in vague terms by Mr Edwards. Counsel’s fees and other disbursements are said to be $414,758.80, with no further breakdown of the split of those costs. In this case, I do not regard a further breakdown as necessary for the purposes of estimating the amount of security, whether by way of the number of hours spent on particular work-streams, or the seniority of solicitors so engaged. That conclusion applies also to the similar criticism of Mr Edwards’ estimate of future costs.

10    Particular criticism is made of Mr Edwards’ resourcing for trial preparation and the hearing itself. For example, Mr Edwards estimates that for the six-week trial, two partners, two senior associates, two solicitors and one graduate solicitor, in addition to one senior counsel and three junior counsel, will average ten hours a day. That does not strike me as necessarily excessive in a fraud case of this complexity, where the states of mind of some 18 Fitch employees are referred to in the applicants’ particulars. Nor do I regard the costs associated with three or four expert witnesses as necessarily excessive to be included in the current estimate. It is premature to form any conclusion that the number of proposed experts is unreasonable. I note, however, that the applicants have served expert reports from three different experts. While the estimate put forward by Mr Edwards as to expert costs was originally formulated on the basis that three to five experts were likely to be called, and that number has now been reduced to three or four, I do not regard that as a reason to discount Mr Edwards’ estimate of likely expert costs at this stage.

11    The applicants oppose the costs of this application being included in the amount of security. However, I am minded to make a costs order in Fitch’s favour in relation to the present application, and I see no reason why the costs of this application should not be included in the amount of security. Although it is conceivable that there will be further interlocutory disputation, some of which might result in costs orders in favour of the applicants and therefore offset the costs order on this application, I do not regard that prospect as sufficiently concrete to deduct the amount of costs of this application from the amount of security to be awarded. I note that Fitch has now accepted that the legal costs of preparing for and attending a mediation should not be included in the amount of security, and has deducted $129,259 from the security sought in tranche 3.

12    Accordingly, I accept Mr Edwards’ estimates of likely recoverable costs on a party-party basis. In relation to the proposed tranches to be given by way of security, the only remaining dispute concerns the timing of the third tranche. Fitch proposes that the third tranche be paid one week after the deadline for the parties to mediate (which is currently 15 October 2026). The applicants’ proposed timing for tranche 3 was four weeks before the six-week trial commencing 3 May 2027, although that was revised in oral argument to two months before the trial. It seems to me reasonably likely that a substantial amount of pre-trial preparation is likely to be done more than two months before the trial, particularly if some of the practitioners involved are committed to other work during that two-month period. I note in addition that tranche 3 is not limited to the costs of trial preparation but also includes advising on prospects of the proceedings in terms of liability and quantum, in advance of a mediation. It seems to be likely that Fitch’s trial preparation will commence in 2026 given the complexity of the issues, the duration of the trial, and the customary holiday period in the month of January.

13    As Fitch has succeeded in this interlocutory application over the opposition of the applicants, it seems to me appropriate that the applicants should pay Fitch’s costs of this interlocutory application.

Associate:

Dated:    22 July 2026