Federal Court of Australia

Stelamar LLC v Soar.Earth Limited (Subject to Deed of Company Arrangement) [2026] FCA 981

ORDERS

THE COURT ORDERS THAT:

1.    Within 14 days, the plaintiffs provide security for the second defendants’ costs of defending these proceedings in the amount of $89,520 by payment into Court or the provision of a bank guarantee given by an Australian authorised deposit-taking institution.

2.    The plaintiffs pay the second defendants’ costs of this interlocutory application.

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 application for security for costs made by the second defendants (Deed Administrators) of the first defendant (Company) against the plaintiffs in the revised amount of $89,520. The underlying proceedings concern the plaintiffs’ application for orders pursuant to ss 445D and 447A of the Corporations Act 2001 (Cth) that the Deed of Company Arrangement executed by the Company on or about 10 June 2026 (DOCA) be set aside or terminated, and that the Company be wound up. The plaintiffs are foreign corporations with no Australian assets and do not dispute the threshold question as to whether the jurisdiction to order security is enlivened. However, the plaintiffs submit that the application should be dismissed in circumstances where they have transferred $50,000 to their solicitors’ trust account to be held as security with liberty to the Deed Administrators to seek further security if that amount is inadequate.

2    The hearing has been fixed for 3 September 2026. The Deed Administrators take the view that it is appropriate for them to perform the role of contradictor and, if they consider it appropriate to do so, run an active defence in opposition to the application. That approach is consistent with the guidance provided by the Full Court in Sino Group International Ltd v Toddler Kindy Gymbaroo Pty Ltd (Subject to Deed of Company Arrangement) [2023] FCAFC 110; (2023) 168 ACSR 311 at [69]–[70], where it was also emphasised that the Deed Administrators in doing so must disclose to the Court all relevant information and their submissions must be balanced, accurate and not one-sided. Two days ago, the other defendants filed a submitting appearance in the proceedings, which tends to support the Deed Administrators adopting the role of contradictor against the position taken by the plaintiffs.

3    The Deed Administrators rely in support of the quantum claimed in this application on an affidavit by Mr Williams, the solicitor for the Deed Administrators. He has quantified the actual costs likely to be incurred, and anticipates that the taxed costs on a party-party basis would reflect approximately 70% of solicitors’ costs and close to 100% of counsel’s fees. He reaches a total of $89,520 as an estimate of likely party-party costs. It is not in dispute that the appropriate quantum should be based on a broad-brush estimate of likely party-party costs in the event that the applicant for security is successful in obtaining a costs order in the proceedings.

4    Mr Shaw, the plaintiffs’ solicitor, has made an affidavit in which he expresses a number of criticisms of the quantum sought, particularly in relation to the tasks of reviewing the plaintiffs’ evidence, preparing the Deed Administrators’ responsive evidence and preparation for the hearing. It may well be that Mr Shaw’s views will ultimately prevail at a taxation of costs, but I am not persuaded that I should reduce the amount of security based on his evidence. Mr Williams has put forward a cogent basis for his estimate. As the solicitor for the Deed Administrators, Mr Williams has the benefit of a higher level of information and insight into what is required to be done on behalf of the Deed Administrators, including their being satisfied as to the appropriate approach for them to take, and what must be done to discharge the particular responsibilities which are cast on the Deed Administrators in approaching litigation of this kind.

5    Another issue concerns Mr Williams’s inclusion of the costs of the security application itself. The plaintiffs submit that the costs of the security for costs application should be excluded from the assessment of the appropriate amount of security. The plaintiffs cite, in support of that submission, Eastgate Properties Pty Ltd v J Hutchinson Pty Ltd [2005] QCA 342; [2006] 2 Qd R 1 at [9] (Keane JA, with whom McPherson and Jerrard JJA agreed); Kupang Resources Ltd (Subject to Deed of Company Arrangement) v Elias [2018] NSWSC 1553 at [27] (Parker J); and SSABR Pty Ltd v AMA Group Ltd [2024] NSWCA 104 at [21] (Payne JA). The only explanation given as to why that should be so is Keane JA’s proposition that the application for security is a separate interlocutory application. Mr Williams pointed out that it may be that in some other jurisdictions interlocutory costs orders are payable forthwith, but that does not seem to be given as a reason in the decided cases, and is not the case under r 40.13 of the Federal Court Rules 2011 (Cth).

6    There may be added to that list of authorities Black J’s decision in In the matter of Felan’s Fisheries Pty Ltd [2016] NSWSC 1351 at [47], which was followed in Elip Pty Ltd v Arch Finance Pty Ltd [2020] NSWSC 752 at [99] (Kunc J). Justice Black said that the costs of the security application are properly to be addressed by an order for costs, made in the ordinary way, consequential on the determination of the application. But if the applicant for security succeeds in obtaining the order sought for security for costs, that party will usually obtain a favourable costs order, which may not be satisfied if it is not included in the amount of security. Security for costs is typically assessed on the hypothetical basis that the applicant for security may ultimately obtain a favourable costs order, and a party which is about to obtain a favourable costs order on the security application is in an even stronger position because the hypothesis is about to become a fait accompli.

7    Unsurprisingly, there is a strong body of cases which go the other way, and include the costs of the security application in the amount of security ordered. If the decision of the Queensland Court of Appeal in Eastgate Properties is regarded as the highest of the authorities already referred to, it is out-numbered by two other decisions by the Queensland Court of Appeal, namely Murchie v The Big Kart Track Pty Ltd (No 2) [2003] 1 Qd R 528 at [17] (Davies JA, Jerrard JA and Wilson J) and Toms v Fuller [2010] QCA 73 at [47]–[48] (Chesterman JA, with whom McMurdo P and Holmes JA agreed). The two New South Wales Supreme Court cases are matched by two others, namely Brad’s On Tap Plumbing Pty Ltd v The Owners – Strata Plan No 56443 [2016] NSWSC 512 at [56] (McDougall J) and Planet Plumbing (ACT) Pty Ltd v Gentec Australia Pty Ltd [2022] NSWSC 1490 at [12] (Ball J). Additional authorities supporting inclusion of the costs of the security application are Frigger v Kitay (No 9) [2016] WASC 92 at [45]–[47] (Allanson J), and my decision two days ago in Belmont Park Investments Pty Ltd v Fitch Ratings, Inc (No 2) [2026] FCA 970 at [11].

8    The weight of authority thus favours inclusion of the costs of the security application. More importantly, the issue yields an obvious solution in terms of principle. The simple point is that in circumstances where the successful applicant for security should be awarded its costs of the security application, that party will be entitled to recover those costs (as well as its costs generally in the proceedings) if it is ultimately successful in the proceedings. Indeed, if the Deed Administrators in the present case act reasonably as contradictors by virtue of their office, they may well be entitled to a favourable costs order in the substantive proceedings irrespective of the outcome. The fact that this is a separate interlocutory application from the substantive proceedings is immaterial. There is thus no reason why the amount of security should exclude the costs incurred in successfully obtaining the order for security.

9    As to the form of security, the conventional form of security is payment into Court or the provision of a bank guarantee, and there is no sufficient reason to depart from that position in the present case. The security amount will not be tied up for long, so no real detriment arises in terms of the amount of interest to be earned on the sum. As to the costs of this application, the Deed Administrators have succeeded to almost the full extent of their claim, the only exception being its concession that $3,500 originally sought for discovery should be excluded in circumstances where no order for discovery was made. The Deed Administrators have achieved a result which is substantially more favourable than the offer made by the plaintiffs on 10 July 2026. Accordingly, the plaintiffs should pay the Deed Administrators costs of this application.

Associate:

Dated:    23 July 2026

SCHEDULE OF PARTIES