General Trade Industries Pty Ltd (in liquidation) v AGL Energy Limited

DERRINGTON J: 1 By an application dated 2 December 2022, the respondent in this proceeding, AGL Energy Limited (AGL), applied for an order pursuant to s 1335(1) of the Corporations Act 2001 (Cth) (Corporations Act), s 56(1) and (2) of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act) and r 19.01(1)(a) of the Federal Court Rules 2011 (Cth) (Federal Court Rules) that the applicant, General Trade Industries Pty Ltd (in liquidation) (General Trade), provide a further tranche of security for AGL's costs of the proceeding in the sum of $657,981.72. It also seeks an order pursuant to r 19.01(1)(b) of the Federal Court Rules that the proceeding be stayed until such time as security is given, as well as leave to apply to increase the amount of security pursuant to s 56(3) of the Federal Court Act upon the giving of three days' prior notice. 2 This application follows AGL's earlier application for security, which was granted in General Trade Industries Pty Ltd (in liquidation) v AGL Energy Limited [2020] FCA 1562 (General Trade (No 1)). There, General Trade was ordered to provide $70,000 in security for costs and it did so in about March 2021. 3 The further security now sought by AGL is in respect of its costs for the period 1 November 2022 to the commencement of the final hearing in the proceeding, which is anticipated to take place sometime in 2023. It is sought on the basis that the existing security is inadequate to cover AGL's costs up to the commencement of trial, which are expected to be substantial and are unlikely to be recouped by way of any adverse costs orders ultimately made against General Trade.

Background 4 The factual background to this proceeding is set out in General Trade (No 1) and need not be repeated here at any great length. Since that decision, however, General Trade has filed an Amended Statement of Claim and a Further Amended Statement of Claim, which together have effected material changes to its case. AGL has, in turn, amended its Defence. It is appropriate, for the purposes of this application, to draw from these revised pleadings the key contentions now in issue.

Further Amended Statement of Claim 5 General Trade was engaged by AGL, pursuant to a contract dated 20 December 2013 (the Construction Agreement), to carry out civil, electrical and mechanical works for the construction of certain facilities at AGL's Wallumbilla LPG Plant and Silver Springs Plant (the Project). The Construction Agreement included an amended version of the AS4000-1997 General Conditions of Contract. A dispute emerged between the parties in relation to, amongst other things, particular payment claims made by General Trade in the course of the Project, which were contended to have been prepared in accordance with the Construction Agreement and the security of payment legislation in force in Queensland at that time. That dispute was ultimately sought to be resolved by the parties' entry into a "Deed of Release" on or about 13 August 2014. 6 General Trade advances essentially two overarching claims: (a) First, that AGL engaged in unconscionable conduct within the meaning of the unwritten law and in contravention of the Australian Consumer Law (ACL), being Schedule 2 to the Competition and Consumer Act 2010 (Cth), in connection with the negotiation and execution of the Deed of Release. This may be described as the "Unconscionable Conduct Claim". (b) Secondly, that AGL (by the Superintendent on the Project) issued certain directions or requests to perform additional works, which were carried out and became the subject of a further payment claim by General Trade, but which were not thereafter paid for by AGL. This may be described as the "Additional Work Claim". 7 Central to the Unconscionable Conduct Claim is an allegation that AGL was aware at the time of the execution of the Deed of Release that General Trade was experiencing severe financial distress. This financial distress, to which AGL is alleged to have contributed, is said to have put General Trade in a position of special disadvantage relative to AGL, which was further exacerbated by the parties' inherently disparate bargaining powers. AGL is also alleged, inter alia, to have failed to give reasons for its reduction of General Trade's payment claims and to have breached its obligations under applicable security of payment legislation. It is said to follow that, in procuring the execution of the Deed of Release, AGL took advantage of General Trade's special disadvantage in order to secure a material gain for itself; specifically, to allow it to "short pay" General Trade for work performed on the Project. 8 General Trade seeks $4,314,481.64 in damages under s 236 of the ACL, or in compensation under s 237 of the ACL, or in equitable compensation, for loss allegedly suffered as a result of this conduct. That figure represents the difference between the full amount to which General Trade claims it was entitled under its Payment Claims 1 to 11 made on the Project prior to entry into the Deed of Release (being $31,814,483.93, exclusive of GST) and the total amount ultimately paid to it by AGL in response to those payment claims and under the Deed of Release (being $27,500,002.29, exclusive of GST). 9 The Additional Work Claim begins with certain directions issued by AGL on or about 14 July 2014 and 12 August 2014, which required General Trade to demobilise from the Project sites, subject to certain conditions and in a particular manner. It is alleged that those directions required additional work to be completed, beyond what was contemplated by the scope of works under the Construction Agreement at that time. After making those directions, between 17 September 2014 and 12 December 2014, AGL (by the Superintendent) notified General Trade that it considered certain work to not be compliant with the Construction Agreement, and also directed General Trade to correct certain work. Again, it is alleged that these directions and notices amounted to requests under the Construction Agreement to perform additional work that was not otherwise within the scope of works. General Trade also identifies further items of alleged additional work undertaken at about this time, including work performed after 31 July 2014 in relation to pre-commissioning activities, and work in relation to the preparation of a material data records (MDR) index for the Project, which was "completed up to and including 31 July 2014". 10 General Trade carried out all of these works and issued a final Payment Claim 12 that sought, in respect of them, the sum of $1,195,562.13. AGL has since failed or refused to make any payment in respect of Payment Claim 12. General Trade now seeks the sum of $1,195,562.13 by four alternative claims: damages for breach of contract, restitution lying as upon a quantum meruit, damages under s 236 of the ACL, and compensation under s 237 of the ACL. 11 The claim for damages or compensation under the ACL is made on the basis that AGL's failure or refusal to pay any amount in respect of the relevant works constituted unconscionable conduct, since it knew or ought to have known that: (a) it required or requested General Trade to perform those works; (b) General Trade carried out the works; (c) General Trade incurred costs and expenses in respect of the performance of the works; (d) General Trade was entitled to be paid for the works; and (e) the amount claimed by General Trade for the performance of the works was reasonable.

Amended Defence 12 In its Amended Defence, AGL contests a number of aspects of General Trade's case. However, for the purposes of this application, its responses to the two overarching claims need only be summarised at a high level. 13 In respect of the Unconscionable Conduct Claim, AGL contends that it was not required to pay the payment claims made by General Trade, as they were not made in accordance with the Construction Agreement. For the same reason, it contends that the Superintendent was not required to issue any progress certificates in respect of those payment claims under the Construction Agreement, or any payment schedule under the applicable security of payment legislation. Further, and in any event, it says that General Trade was not at any special disadvantage; rather, it was apparent that it was an experienced industry participant capable of protecting and advancing its own commercial interests. Accordingly, it contends that it did not engage in any unconscionable conduct when entering into the Deed of Release with General Trade. 14 In respect of the Additional Work Claim, AGL contends on multiple grounds that the relevant work to which General Trade refers in its Further Amended Statement of Claim was not work for which it was entitled to be paid under the Construction Agreement. In the first place, certain clauses of the Deed of Release had the effect that General Trade had no entitlement to perform further work under or in accordance with the Construction Agreement, or any entitlement to receive payment for such work. In any event, it says that the work in question fell within the original scope of works to be performed by General Trade under the Construction Agreement, such that General Trade could not be entitled to any further payment. AGL contends further that it was not obliged to make any further payment because Payment Claim 12 was not issued in accordance with the Construction Agreement or the relevant security of payment legislation. 15 In relation to the quantum meruit claim, AGL contends that each category of work identified by General Trade fell within the original scope of works set out in the Construction Agreement, for which payment was already made pursuant to that contract or clause 1 of the Deed of Release. There is accordingly no basis to make restitution. Even if there was, it says that the fair value of the work should not exceed a fair value calculated by reference to the corresponding part of the agreed contract price. 16 Regarding the unconscionable conduct aspect of the Additional Work Claim, AGL makes an initial objection on the basis that the cause of action is deficiently pleaded. Subject to that, it contends that it did not have knowledge of the matters pleaded as the basis for General Trade's allegation of unconscionable conduct. In any event, both parties were commercial entities capable of acting in their own best interests, such that General Trade could not be said to be at any special disadvantage of which AGL was aware. Finally, AGL contends that it was not required to pay General Trade in respect of the relevant works.

Other matters 17 General Trade's Reply does not add any material allegations of fact to the case summarised above. In AGL's submissions on this application, it identified that pleadings closed on 31 October 2022, and this was the point from which it proceeded to calculate its existing and anticipated costs of this litigation in the amount of $657,981.72. 18 Importantly, as General Trade does not dispute the quantum of security sought, it is unnecessary to consider the evidence adduced by AGL in support of the $657,981.72 figure. General Trade also did not dispute that it is presently impecunious, and will be unable to pay AGL's costs if ordered to do so following the final hearing of the matter. Nor did it make any submission that the Court should, for the purpose of determining AGL's application, conclude that AGL was the cause of its impecuniosity.

The relevant legislative provisions 19 The interlocutory application filed by AGL cited s 56(1) and (2) of the Federal Court Act and r 19.01(1)(a) of the Federal Court Rules as the jurisdictional basis for the primary order sought as to the provision of further security for costs. Section 56 of the Federal Court Act confers on the Court a discretionary power to make such orders, relevantly in the following terms: 56 Security (1) The Court or a Judge may order an applicant in a proceeding in the Court, or an appellant in an appeal under Division 2 of Part III, to give security for the payment of costs that may be awarded against him or her. (2) The security shall be of such amount, and given at such time and in such manner and form, as the Court or Judge directs. 20 In its written submissions, however, AGL made reference also to the power to order security for costs conferred by s 1335(1) of the Corporations Act, which provides as follows: 1335 Costs (1) Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given. 21 On the hearing of the application, Mr O'Shea KC for AGL preferred to advance his case by reference to this provision, rather than s 56 of the Federal Court Act. General Trade did not object to this course, and it is appropriate to proceed on that basis. 22 In any event, it is unlikely that AGL's election to rely on one discretionary power over the other would produce any different result in this case. Both s 1335(1) and s 56 have been regarded as conferring a discretion that is broad and essentially unfettered, albeit that it must be exercised judicially: Hopkins v AECOM Australia Pty Ltd (No 5) [2015] FCA 1228 [44], [57] per Nicholas J; Chopsonion Pty Ltd (Controllers Appointed) v Watts Meat Machinery Pty Ltd [2022] FCA 1309 [22] per O'Sullivan J. It has also been acknowledged in several prior decisions of this Court that, where (as here) an application for security for costs is made on the basis that the applicant to the proceeding is impecunious and will be unable to satisfy a potential costs order, there may be no practical difference in the operation of the two provisions: see Soul Pattinson Telecommunications Pty Ltd v Subex Americas Inc [2009] FCA 651 [6] per Perram J; Health Information Pharmacy Franchising Pty Ltd v Khoo [2010] FCA 438 [5] per Yates J; Austcorp Project Number 20 Pty Ltd v LM Investment Management Ltd (in liq) [2014] FCA 1371 [20] - [21] per Gleeson J (Austcorp). An obvious point of divergence is the inclusion of an express threshold requirement in s 1335(1) that "it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence", but here General Trade has conceded this point. 23 As a result, the focus under both provisions turns to the several matters that have been recognised as potentially informing the exercise of the Court's discretion. In considering these matters, it is important to remain cognisant of the onus borne by each party, as explained by Gleeson J in Austcorp at paragraphs [25] - [26] by reference to prior authorities: [25] Once it appears by credible testimony that there is reason to believe that a corporation will be unable to pay the costs of the defendant if successful in its defence, there is an evidentiary burden on the party resisting the order for security for costs to establish a reason why security should not be granted: Wollongong City Council v Legal Business Centre Pty Ltd [2012] NSWCA 245 at [30] … Topcide Pty Ltd v Charter Financial Planning Ltd [2010] FCA 1151 at [12] and Power Infrastructure Pty Ltd v Downer EDI Engineering Power Pty Ltd [2010] FCA 1222 at [9]. [26] Even so, the burden rests on the defendants, from first to last, to persuade the court that the order for security should be made: Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377 at [21]. See also Mecrus Pty Ltd v Industrial Energy Pty Ltd (2015) 327 ALR 523, 528 [22] - [24] per Murphy J. 24 It follows that, in the present case, General Trade bears the evidentiary burden of establishing a reason why security should not be granted, though AGL retains the overall persuasive onus.

The competing contentions 25 A number of matters have been identified in previous decisions of this Court as being appropriate to consider as factors or guidelines in the exercise of the discretion to order security for costs: see, eg, Equity Access Ltd v Westpac Banking Corporation (1989) ATPR ¶40-972, 50,635 per Hill J; KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189, 197 per Beazley J (KP Cable); Acohs Pty Ltd v Ucorp Pty Ltd (2006) 155 FCR 181, 185 - 186 [12] per Jessup J. It is unnecessary to consider each of them in this case, and the parties' submissions have confined the dispute to only a narrower set of specific issues. 26 In particular, General Trade, as the party bearing the evidentiary burden, made two substantive submissions as to why security should not be granted: (a) first, that the Court should find that the underlying litigation would be stifled if the security was ordered, and that this consideration ought be dispositive against granting the orders sought by AGL; and (b) secondly, if the Court was to be satisfied that the litigation would be stifled if the security was ordered, that the Court should not grant the security on the basis of an assessment that General Trade's case has poor prospects of success. 27 AGL did not raise any additional points in its written submissions, other than to contend that it did not cause General Trade's impecuniosity. As noted, this was conceded by General Trade and does not need to be addressed further. 28 The two remaining matters the subject of the parties' submissions may be addressed in turn.

The stifling effect of an order for further security for costs 29 Consistent with the statement from Austcorp set out above, it has been recognised that the onus of establishing that the making of an order for security for costs would stifle (or, to use the language of some other authorities, stultify) the suit rests on the party resisting security: Madgwick v Kelly (2013) 212 FCR 1, 19 - 20 [81] per Allsop CJ and Middleton J (Madgwick v Kelly); General Trade (No 1) [48]. 30 General Trade's submission as to the alleged stifling effect of any order for security in this case is properly treated as raising three separate, though related, questions. In the first place, in accordance with authority, it must be determined whether those who stand behind the impecunious corporate applicant (that is, General Trade) and those who are liable to benefit from the underlying litigation might themselves meet an order to provide security for costs. Secondly, as submitted by AGL, it must also be determined whether General Trade is otherwise capable of funding the litigation to completion, notwithstanding the position that it has taken in opposition to the present application. Finally, it must be determined whether, as General Trade contended in this case, any proven stifling effect of the order is to be treated as dispositive of the application for security for costs. 31 Underlying each of these questions is a more general pair of propositions, which were relied upon by General Trade in its written submissions and at the hearing: that "access to justice trumps costs recovery", and that this principle "do[es] not apply differently in any fundamental way to a corporate plaintiff (in liquidation or otherwise)". Given their apparent relevance to the questions arising for determination on this point, it is useful to begin by considering these propositions.

"Access to justice" in the context of an impecunious corporate applicant 32 It has been well established that the impecuniosity of an individual plaintiff or applicant to litigation will not afford sufficient reason, in and of itself, to order security for costs. The basis for this position is to be found in the oft-cited statement of Bowen LJ in Cowell v Taylor (1885) 31 Ch D 34 at 38 that, both at law and in equity, "[t]he general rule is that poverty is no bar to a litigant". In this Court, it has been said that this "general rule" is derived from the principle that "citizens have a right of access to the courts"; a right that is "immanent in the rule of law": The Airtourer Co-operative Limited v Millicer Aircraft Industries Pty Limited [2004] FCA 1400 [20] per Branson J. This right takes precedence over the opposing party's concern that, if successful, an order for costs in their favour will be fruitless: Shackles v The Broken Hill Proprietary Company Ltd [1996] 2 VR 427, 428 per Byrne J (Shackles). However, impecuniosity will remain a relevant consideration in the exercise of the discretion to order security for costs, and such an order might properly be made against an impecunious natural person where other factors favour that result: Chang v Comcare Australia [1999] FCA 1677 [25] per Moore J; Knight v Beyond Properties Pty Ltd [2005] FCA 764 [32] - [33] per Lindgren J. 33 For almost as long as there has been this attentiveness to the plight of the impecunious individual applicant, the impecunious corporate applicant, in the same position, has been seen as requiring different treatment. Provisions such as s 1335(1) of the Corporations Act are of considerable antiquity, and make the very basis of the jurisdiction to order security for costs against a company the fact that the company is impoverished, albeit that this does not predispose the court to an exercise of its discretion one way or the other: see Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497, 505 - 511 per French J (Bryan E Fencott). The general practice with regard to companies has been said to be "just the opposite" of that prevailing in respect of individuals, and the company's impecuniosity may be a "most significant factor" in the exercise of the discretion: Epping Plaza Fresh Fruit & Vegetables Pty Ltd v Bevendale Pty Ltd [1999] 2 VR 191, 195 [13], [16] per Winneke P and Phillips JA; Pearson v Naydler [1977] 1 WLR 899, 904 - 906 per Megarry V-C (Pearson). The policy objective served by s 1335(1) and its antecedents has been explained on a number of occasions as being, essentially, to ensure that the privilege of limited liability is not misused in such a way as to make the company a "stalking horse", enabling those who stand behind it, and those who are liable to benefit from the proceedings that it has brought, to pursue their own interests in the action without facing any risk as to costs: see J & M O'Brien Enterprises Pty Ltd v Shell Co of Australia Ltd (No 2) (1983) 70 FLR 261, 263 per Bowen CJ; Harpur v Ariadne Australia Ltd [1984] 2 Qd R 523, 532 per Connolly J (with whom Campbell CJ and Demack J agreed); Cameron's Unit Services Pty Ltd v Kevin R Whelpton & Associates (Australia) Pty Ltd (1986) 13 FCR 46, 53 per Burchett J; Cosdean Investments Pty Ltd v Football Federation Australia Limited (No 2) [2007] FCA 163 [25] per Mansfield J; All Class Insurance Brokers Pty Ltd (in liquidation) v Chubb Insurance Australia Limited [2020] FCA 840 [49] per Allsop CJ. 34 The practical effect of this was explained by Sheppard, Morling and Neaves JJ in Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1 (Bell Wholesale) at 4, as follows: [A] court is not justified in declining to order security on the ground that to do so will frustrate the litigation unless a company in the position of the appellant here establishes that those who stand behind it and who will benefit from the litigation if it is successful (whether they be shareholders or creditors or, as in this case, beneficiaries under a trust) are also without means. It is not for the party seeking security to raise the matter; it is an essential part of the case of a company seeking to resist an order for security on the ground that the granting of security will frustrate the litigation to raise the issue of the impecuniosity of those whom the litigation will benefit and to prove the necessary facts. 35 In this way, a particularly clear case in which a court might order the provision of security for costs is where a secured creditor of the impecunious company instigates and financially supports the litigation: Sent v Jet Corporation of Australia Pty Ltd (1984) 2 FCR 201, 215 per Smithers J (with whom Sweeney J agreed); Nambour Valley Estates Pty Ltd v Henebery Holdings Investment Trust [2007] QSC 393 [29] per Daubney J. Likewise where the company is merely a "convenient financially bereft alter ego" for its shareholders: Tradestock Pty Ltd v TNT (Management) Pty Ltd (1977) 14 ALR 52, 59 per Smithers J. In such cases, the company is akin to an impecunious nominal applicant put forward to fight the case on behalf of the real applicant, who is not before the court, this being a long-recognised exception to the general rule that poverty is no bar to a litigant: Bryan E Fencott at 505, 511. 36 Against this background, the overall thrust of General Trade's submission, that a corporate applicant's right of access to justice ought to trump the respondent's interest in costs recovery no less than would the same right of an individual applicant, might at first glance seem to impermissibly equate that which the law has consistently sought to distinguish. However, this is not what was contended. Mr Wood SC, who appeared for General Trade, did not deny that different policy considerations must attend the exercise of the power to order security for costs in respect of an impecunious corporation. He submitted that, this notwithstanding, the underlying concern of the court in access to justice ought to apply just the same. 37 So much might be accepted. The point to be made is that, while the impecuniosity of the corporate applicant introduces certain distinctive policy concerns, they do not exclude from consideration altogether the more fundamental interest in ensuring access to justice. The concerns must simply be addressed, in the manner suggested in Bell Wholesale and other cases, before that interest can be attributed the weight that it would ordinarily bear from the outset in the context of an impecunious individual applicant (other than, of course, a mere nominal applicant). That this interest in access to justice remains relevant in the case of an impecunious corporate applicant is made clear by statements to the effect that the court must be astute not to allow provisions like s 1335(1) of the Corporations Act to "be used as an instrument of oppression, as by shutting out a small company from making a genuine claim against a large company": Pearson at 906; Health & Life Care Ltd (recs and mgrs apptd) v Price Waterhouse (1993) 11 ACSR 326, 330 - 331 per Olsson J; Ariss v Express Interiors Pty Ltd (in liq) [1996] 2 VR 507, 514 per Phillips JA (with whom Ormiston and Charles JJA agreed) (Ariss). Indeed, a dogmatic insistence on distinct treatment for the corporate applicant and the individual applicant is apt to produce arbitrary outcomes: a person's ability to contest an application made against them for security for costs may become more or less difficult merely on account of their decision to adopt (or decline to adopt) a corporate structure for their business operations. 38 The focus therefore turns to the first question posed above, regarding the position of those who stand behind General Trade.

The position of those who stand behind General Trade 39 The parties' written submissions and affidavit material dealt with the position of several persons and entities who might be alleged to be standing behind General Trade and standing to benefit from any success that it might have in this proceeding. They are: (a) the arm's length unsecured trade creditors of General Trade, including in particular the four largest such creditors, being the Australian Taxation Office (ATO) (owed $818,622.15), the National Australia Bank (NAB) (owed $420,617.73), Titan Resources Camp Hire (owed $190,814.69) and Telstra (owed $107,317.85); (b) the solicitors acting for General Trade in this proceeding; (c) the liquidator of General Trade; and (d) the shareholders of General Trade, Mr Geoffrey Pike (as holder of 5000 shares) and Pike & Co Pty Ltd as trustee for the Pike Investment Trust (as holder of 1 share). 40 There was also some evidence and submissions dealing with the possibility that General Trade might seek litigation funding from a commercial litigation funder. 41 It ought to be noted that the position of some of these persons and entities was addressed in General Trade (No 1). There, it was found that General Trade had not established that those who stood behind it and who were liable to benefit from this litigation were without means to provide security. For the purposes of this application, however, General Trade has put on additional evidence. 42 Before considering in turn the positions of each of the persons and entities identified above, it is necessary to address a threshold issue that attracted substantial attention in the hearing. That is whether, in order for General Trade to demonstrate that those standing behind it are not available to meet an order for security for costs, it is sufficient for it to provide evidence that those persons or entities are unwilling to meet such an order, or whether it is necessary for it to provide evidence that they are unable to do so. Again, this was addressed in General Trade (No 1). However, in deference to the parties' submissions on this application, it is appropriate to traverse the point again in greater detail.

Unwilling or unable to meet an order for security for costs? 43 In seeking to resolve this issue, a useful starting point is the passage from the judgment of the Full Court in Bell Wholesale set out above. There, their Honours referred to the need for the company to establish that "those who stand behind it and who will benefit from the litigation if it is successful … are also without means", and subsequently to the "impecuniosity of those whom the litigation will benefit". The reference to the "means" and the "impecuniosity" of those standing behind the company suggests the focus to be on the inability of the persons to meet an order for security, not their unwillingness. Numerous authorities published in the wake of Bell Wholesale cited this passage without objecting to the suggestion in its language that the relevant disposition of those standing behind the company must be inability, rather than unwillingness: see, eg, Yandil Holdings Pty Ltd v Insurance Company of North America (1985) 3 ACLC 542, 545 - 546 per Clarke J (Yandil); P S Chellaram & Co Ltd v China Ocean Shipping Co (1991) 102 ALR 321, 323 - 324 per McHugh J; Rhema Ventures Pty Ltd v Stenders [1993] 2 Qd R 326, 333 per Lee J; Jalpalm Pty Ltd v Hamilton Island Enterprises Pty Ltd (1995) 16 ACSR 532, 534 - 535 per Kiefel J; Pasdale Pty Limited v Concrete Constructions (1995) 131 ALR 268, 273 - 274 per Finn J; Omega Data Furniture Pty Ltd v Email Furniture Ltd [1995] FCA 641. 44 However, after addressing a number of decisions including Bell Wholesale, in Jalpalm Pty Ltd v Hamilton Island Enterprises Pty Ltd [1995] FCA 381, Cooper J stated as follows: Where an approach has been made to others including creditors who might reasonably be expected to furnish security and they refuse to do so and the basis of the refusal is unexplained and not shown to be as a result of an inability to provide it, that refusal and the inferences, if any, to be drawn from it, are to be taken into account and be weighed in the exercise of a proper discretion. If the refusal of creditors to assist with security is because they form the view that the claim is unmeritorious or frivolous it does not follow that an impecunious company with impecunious shareholders or beneficiaries under a trust is automatically or necessarily relieved from an order for security for costs. 45 This passage can, on one reading, be taken to suggest that the relevant inquiry actually centres not just on the means of the persons standing behind the company, but also on the reasons that they give for their refusal to furnish security. This is largely consistent with the approach explained by Anderson J (with whom Kennedy and Ipp JJ agreed) in the subsequent decision in BPM Pty Ltd v HPM Pty Ltd (1996) 131 FLR 339 (BPM) at 344 - 345, as follows: The mere fact that there are creditors with the means to assist the company to give adequate security will not always be a decisive factor. The wealthy creditors may be few and the debts owed to them relatively small. The question is not simply whether there is a person who will derive some benefit from the action should it be successful and who can put up security. It is also relevant to consider whether it is reasonable that he should do so: Ford's Principles of Corporation Law, 6th (1992) par [308]. … I think the master is to be understood as having decided the correct question, namely whether in practical commonsense terms it was reasonable to expect the creditors of this plaintiff company to put up a very substantial sum as security for costs. Their likely attitude, their likely unwillingness to do so, was merely something to be discussed in that context, that is, as to whether in all the circumstances it would be reasonable to require the creditors to provide the first defendant with security for its costs … 46 On this view, the critical issue is not the ability or willingness per se of the persons standing behind the company, but instead the reasonableness of expecting them to meet the order for security for costs. It is not difficult to appreciate that this point might be informed to different extents by both ability and willingness. For example, citing this passage in BPM, O'Loughlin J in Passenger Transport Systems Pty Ltd (in liq) v Darwin Radio Taxi Co-operative Ltd [2000] FCA 147 (Passenger Transport Systems), [30] described the "virtual disinterest" in the proceedings shown by certain unsecured creditors (that is, in effect, their unwillingness), some of whom were identified as "well known trading houses" (that is, in effect, entities of some means), as being "a matter to be weighed in the balance" in the exercise of the discretion to order security for costs. 47 Shortly prior to the decision in BPM, Phillips JA in Ariss explained the aforementioned passage from Bell Wholesale in the course of addressing a submission on appeal that the exercise of the discretion under s 1335 at first instance had miscarried because an order for security was refused on account of mere "unwillingness" on the part of the creditors of the plaintiff company to contribute to the costs of the litigation, which was submitted to be an irrelevant consideration. For its part, the plaintiff contended that the order for security was actually refused because of "commercial impracticability", which it regarded as a relevant consideration. Preferring the plaintiff's characterisation of the reasons for the decision at first instance, Phillips JA proceeded to state as follows at 515 - 516: It is true that commercial impracticability is not the same as plain want of means; and it is true also that in Bell Wholesale a Full Court of the Federal Court held that, if in that case the plaintiff company sought to resist the order for security for costs on the ground that to make the order would frustrate the litigation, then it was up to the plaintiff, itself impecunious ex hypothesi, to establish "that those who stand behind the action and who will benefit from the litigation if it is successful … are also without means". To my mind, there is much force in the contention, advanced before us, that what was said in Bell Wholesale has perhaps been extended beyond its context in later cases. … There can be no absolute rule that, in order to resist an order for security on the ground that the litigation will be altogether frustrated, there must be evidence that those who will benefit from the litigation are without means; it will depend upon how the case is being put. … Bell Wholesale decided only that, if the plaintiff relies upon a want of means to establish that the order cannot be met, the plaintiff must demonstrate that fact by reference, not to its resources (which ex hypothesi must be inadequate if the discretion is called into play), but by reference to the resources of those who will benefit from the litigation and who might reasonably be expected to meet some of the costs … In this case, however, the plaintiff does not rely upon want of means but upon "commercial impracticability", meaning thereby the practical difficulty facing the plaintiff in gaining any advantage from (by applying to the costs of the litigation) such means as may exist in others, and notably its creditors. I see no reason why, as a matter of principle, that should not be a relevant circumstance when the plaintiff seeks to demonstrate that any order for security cannot be met - even though it be different from the circumstance that those who must meet any order for security are themselves without means. 48 There is much to be said for the view that the Full Court's reference in Bell Wholesale to the "means" and "impecuniosity" of the persons standing behind the company was not intended to define specifically and exhaustively the evidence that is relevant to determining the stultifying effect of an order for security. 49 It follows that, in attempting to demonstrate that its claim will be stultified by an order for security for costs, it may suffice for the corporate applicant to make out the commercial impracticability of having those who stand behind it meet such an order. The availability of this avenue, as an alternative to demonstrating a want of means on the part of potential contributors, is supported by the observations of Doyle CJ (with whom Prior and Nyland JJ agreed) in Jeffcott Holdings Ltd v Paior (1996) 15 ACLC 28 at 32. There the Chief Justice framed the relevant question in essentially the same terms as were used in BPM, albeit without citation of that case; namely: "whether a shareholder or creditor or other person standing behind the company could reasonably be expected to satisfy an order for security". 50 Even in the wake of these decisions, however, some cases continued to go no further than consideration of the means of those standing behind the impecunious company: see, eg, Tirops Safety Technology Pty Ltd v Lazer Safe Pty Ltd [2005] WASC 164 [47] - [53] per Newnes M although there Newnes M observed that there were no submissions that it would otherwise be "unreasonable" for shareholders to fund costs; KDL Building Pty Ltd v Mount [2006] NSWSC 474 [24] per Brereton J; Specialised Explosives Blasting & Training Pty Ltd v Huddy's Plant Hire Pty Ltd [2010] 2 Qd R 85, 97 [45] - [47] per Muir JA (with whom Holmes JA and Philippides J agreed); Unified Pty Ltd v Cancer Council Western Australia Inc (No 3) [2011] WASC 161 [13] - [25], [31] per Allanson J. These cases are perhaps best explained as involving circumstances where the stifling effect of the order for security, or lack thereof, was so apparent on the evidence that consideration of subtler concepts of reasonableness, unwillingness or commercial impracticability was not required. Other first-instance cases adopted language suggesting an openness to explanations based on matters other than ability alone: see, eg, Kavcor Pty Ltd (in liq) v Kavanagh [2005] NSWSC 1163 [10] per Palmer J; Mt Nathan Landowners Pty Ltd (in liq) v Morris [2006] QSC 225 [29] - [35] per Mullins J (Mt Nathan Landowners). 51 Notwithstanding the trace of some inconsistency in the authorities so far surveyed, the decisions can collectively be reconciled to a significant extent by the observation that "mere" unwillingness, in the sense of straightforward disinclination, without further reasons, will not in and of itself make it unreasonable to expect those standing to benefit from the litigation to provide security. In attempting to demonstrate the unreasonableness of such an expectation, a decisive factor will be an absence of means on the part of the persons concerned, but it may also be relevant to show "commercial impracticability" of the type considered in Ariss. 52 This reasoning is broadly consistent with that adopted by Austin J in Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 208 ALR 564 (Fiduciary v Morningstar). In that case, at 583 [79], his Honour stated as follows: [I]t is not enough to identify a financially capable person who stands to benefit from the plaintiff's success in the litigation. It is also relevant to consider whether it is reasonable to expect that person to put up security. If, for example, the plaintiff company is in liquidation and it would be in the interests of its creditors for the plaintiff to succeed, it would not be reasonable, in "practical commonsense terms" to expect a financially capable creditor of the company to give security if the debt is small: BPM Pty Ltd v HPM Pty Ltd (1996) 131 FLR 339 at 344-5 per Anderson J. 53 At 583 [81], his Honour then stated that "the question for consideration is not whether those who stand to benefit from the plaintiff's success in the litigation are obliged to willingly provide security, but whether they are able to do so". His Honour went on to state at 583 - 584 [82] as follows, before finding that the corporate plaintiffs in that case had failed to establish that an order for security for costs would stifle the proceeding: In the Jeffcott case at 32, Doyle CJ (with whom Prior and Niland JJ agreed) said that stultification may be shown not only in cases where those standing behind the company or standing to benefit from the litigation are unable to meet an order, but also when it would be "commercially impractical" to gain access to the resources of others. They gave as an example a case where an insolvent company sues for the benefit of its creditors, if there is no practical means of drawing upon the creditors' resources. It seems to me that this principle is inapplicable in the present case, because there is nothing to suggest "commercial impractability" [sic] in drawing upon LLS to meet an order for security. The difficulty is only the unwillingness of LLS to come forward. 54 These statements tend to suggest that the ability of the persons standing behind the corporation will be a matter of foremost significance, alongside which it will be relevant to consider whether it is reasonable to expect those persons to provide security for costs. Commercial impracticability may inform this latter consideration, but mere unwillingness will not. So much can be accepted, except that it might perhaps be preferable to restructure the analysis such that the financial capacity of those standing behind the corporation is treated as a factor relevant to the reasonableness of the expectation that those persons might provide security, rather than a factor to be considered alongside that question of reasonableness. 55 All of this provides a convenient background against which to consider the statement of Hodgson JA (sitting alone) in Dae Boong International Co Pty Ltd v Gray [2009] NSWCA 11 [26] - [27] (Dae Boong). His Honour, after quoting the relevant passage from Bell Wholesale, noted: [26] … Bell Wholesale does indicate that if a company wishes to have the benefit of a finding that litigation will be stultified, the company must prove that the persons who substantially stand to benefit are unable to provide the security. If that is not proved, it does not necessarily make the impecuniosity of the company and difficulties with providing security irrelevant; and if it can be shown that those persons are reasonably unwilling, even though possibly able, to provide the security, that may be a factor that would be taken into account. [27] Ultimately it seems to me the question to be determined by the court is whether it is fair that the person being sued by the company should be in the position of having to incur substantial costs, in this case perhaps tens of thousands of dollars of costs, and being at risk of liability for the company's costs, and yet have no real chance of recovering costs even if the action is unsuccessful, when there are persons who would benefit from the proceedings, who face no risk of liability for costs themselves and are either unwilling or unable to provide security. 56 The use of the word "unwilling" in this passage is perhaps unfortunate, in light of the above, but its appearance in the phrase "reasonably unwilling" in paragraph [26] can safely be understood as drawing its intended meaning closer to the standard indicated by the phrase "commercially impracticable". By way of illustration, it may be "commercially impracticable" for the applicant to gain access to the resources of others because they are "reasonably unwilling" to expose their assets. "Mere" unwillingness, in the sense described above, is an altogether different and distinctly lesser standard. 57 Further support for this understanding is offered by the decision of Le Miere J in SAS Global Forrestdale Pty Ltd v Samsera Pty Ltd [2010] WASC 309, where, after canvassing a number of the above authorities, his Honour found on the facts of the case that 391 investors in a particular scheme were standing behind the plaintiff and were liable to benefit from its success in the proceeding. At paragraph [51], it was said that: It may be inferred that it would be difficult to obtain the agreement of all 391 of the investors to equally fund any required security for costs or to obtain the agreement of some of the investors to fund the required security largely for the benefit of all of the investors. That is not merely a matter of the investors being unwilling to put up the security, it is a matter of commercial practicability. 58 Clearly, the final sentence of this passage is premised on the view that commercial impracticability is properly to be distinguished from "mere" unwillingness. 59 Next to be considered is the decision of Jacobson, Besanko and Perram JJ in Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited [2012] FCAFC 57 (Australian Equity Investors). There, at paragraphs [29] - [30], their Honours stated as follows: [29] In this case, so Mr Lee SC submitted, the creditors were all at arms length and there was no evidence that they were involving themselves in the litigation. They could not, so viewed, be said to be "standing behind" AEI. They were not, for example, using AEI as a 'stalking horse'. Further, the person who was standing behind AEI, Mr Moore, had offered his own personal undertaking. [30] We do not accept these arguments. The passage in Bell Wholesale is not to be read like a statute and the discretion thereby ossified. It does not require that the class of those benefited by the litigation be divided into two further sub-classes viz those standing behind the applicant and those standing, presumably, elsewhere. The principle at play is a simple one: those who stand to share the benefits of litigation cannot shirk its burdens. We do not think the court in Bell Wholesale intended to say any more than that. Indeed this is clear from the last sentence of the passage quoted above which, in terms, talks only of those standing to benefit from the litigation. It follows that the concepts of 'benefiting from' and 'standing behind' are elements in the same concept. It is no surprise, therefore, that arms length creditors have been held to be persons to whom the principle applies: see, for example, Cosdean Investments Pty Ltd v Football Federation of Australia Ltd (No 2) [2007] FCA 163 at [15]-[29] per Mansfield J. Mr Lee SC invited us to regard Cosdean as wrongly decided because his Honour had misquoted Bell Wholesale by substituting an 'or' where there should have been an 'and'. The relevant passage is at [25] and does not, so it seems to us, contain the suggested misquotation. Contrary to the submission put, we see nothing heterodox in Cosdean. Indeed, as Mansfield J there observed, security had on other occasions been ordered where it was reasonable that two major and arms length creditors be expected to contribute to the security ordered, citing Caruso Australia Pty Ltd v Portec (Aust) Pty Ltd (1984) 1 FCR 311 at 314 per Toohey J. This is not to say that in every case where stifling is said to be the result of an order for security that the position of those benefitted by the litigation needs to be proved by an applicant. Each case depends on its own facts and an assessment of what is reasonable in the circumstances: cf Ariss v Express Interiors Pty Ltd (In Liq) [1996] 2 VR 507 at 515 per Phillips JA. 60 Two points should be made in relation to this passage. First, and most straightforwardly, their Honours appear to accept in the final sentence of paragraph [30] that the focus of the inquiry is the concept of "reasonableness". This is consistent with many of the cases discussed above, which place emphasis on whether or not it is "reasonable to expect" those standing behind the corporation to provide security. Secondly, it seems that their Honours considered that, within this broad inquiry, it is incorrect to treat as decisive whether those persons who stand to benefit from the litigation also "stand behind" the impecunious corporate applicant. In the context of the arm's length creditors discussed in Australian Equity Investors, this idea of "standing behind" the applicant might be likened to readiness to provide funding and other support for the litigation, including security for costs. The scenario is in this respect closely analogous to that of the unsecured creditors showing "virtual disinterest" in the proceedings in Passenger Transport Systems. It should not be thought, however, that this concept of "standing behind" is altogether irrelevant, and nothing in the judgment of the Full Court suggests that their Honours intended to go so far. It remains an appropriate matter to take into account, albeit one that might seldom be determinative in and of itself. Accordingly, an arm's length unsecured creditor is not, by reason only of this degree of detachment from the applicant, automatically to be deemed a person from whom it is unreasonable to expect the provision of security for costs. 61 The question of unwillingness versus inability was again considered by the Full Court in Madgwick v Kelly, albeit in the context of a class action where the discretion to be exercised was not that conferred by s 1335 of the Corporations Act. Despite this different context, the joint judgment of Allsop CJ and Middleton J offers statements of principle that are of sufficient generality to be applied equally in the s 1335 setting. Most relevantly, after discussing with apparent approval the judgment of Hodgson JA in Dae Boong, their Honours concluded at 20 [83], in the circumstances of that case, that: [I]t was not wrong for the primary judge to take into account the subject of unwillingness of people to contribute as a relevant factor. This has support in a number of cases: BPM Pty Ltd v HPM Pty Ltd (1996) 131 FLR 339 at 344-345; Ariss v Express Interiors Pty Ltd (in liq) [1996] 2 VR 507 at 515; and Jeffcott Holdings Ltd v Paior (1997) 15 ACLC 28 at 32. Of course, unwillingness in itself is not determinative, and the question of the reasonableness of any unwillingness to contribute must be considered in determining what is fair in all the circumstances. … 62 Considering a number of the authorities so far canvassed, Barrett JA (with whom McColl and Macfarlan JJA agreed) also regarded unwillingness to be a relevant consideration in LRSM Enterprise Pty Ltd v Zurich Australian Insurance Ltd [2014] NSWCA 88 (LRSM). In the context of arm's length trade creditors, his Honour said at paragraphs [37] and [44] - [46]: [37] … It is the ability of the plaintiff to meet an order for security that is in issue; and, just as the inability of persons standing behind it to give it financial support will be relevant to the inquiry, so too may be unwillingness of those persons (despite ability) and all other reasons for the unavailability of their support. A finding of stultifaction becomes available only to the extent that the reasons of relevant persons other than the plaintiff itself for not giving financial support truly reflect an inability, rather than unwillingness, of the plaintiff to marshall the relevant financial resources. It is for this reason that unwillingness of other persons is viewed differently from their inability. … [44] The creditors mentioned at [31] and [32] above are arm's length trade creditors. They have no connection with the company or Mr Naboulsi akin to the connections that existed in the cases mentioned at [40] above - or, for that matter, the connection of the solicitors in Tyneside Property Management Pty Ltd v Hammersmith Management Pty Ltd [2013] NSWCA 404 who were willing to continue acting in the litigation on a deferred payment basis. There is therefore a question as to whether those arm's length trade creditors should be regarded as "standing behind" the corporate plaintiff in the sense relevant to this area of discourse. [45] The focus is, of necessity, on resources that may reasonably be expected to be available to the company. An arm's length trade creditor could be expected to make resources available only if it suited its own selfish commercial purposes to do so; and even then, the matter would be entirely in the discretion of the creditor. A creditor for a relatively small amount might well be content to see the company's action stayed because of non-provision of security for costs and take its chances on having to write off its relatively small debt rather than increase its financial exposure. A creditor for a larger amount might take the view that there was no commercial justification for increased financial exposure to the particular debtor. Credit policies might be compromised. And any creditor might take the attitude reflected by the reply by Service Finance that it was commercially unacceptable to commit funds to litigation where there was no way of assessing the possible outcome. Another rational attitude would be that, if there were to be any financial assistance, the company should, in return, concede some measure of control or influence over the conduct of the litigation. [46] Because of the range of rational and sensible attitudes of mere arm's length creditors, it is artificial to insist on evidence of their inability, as distinct from unwillingness, when a corporate plaintiff seeks to prove that a requirement for the provision of security will stultify its action. The real issue goes to the practical capacity of the company to marshall financial resources - a process in which persons involved in the company's internal decision-making and its ultimate economic success or failure are subject to expectations of financial commitment that do not fall upon independent parties with whom ordinary business transactions are undertaken. 63 There is perhaps some question as to whether the remark regarding "standing behind" the corporate plaintiff in paragraph [44] of his Honour's judgment is consistent with what was said by the Full Court in Australian Equity Investors in the passage extracted above. While that issue is not without difficulty, the cases may be reconcilable if, as explained above, the Full Court's judgment is not to be taken as suggesting that the concept of "standing behind" is wholly irrelevant, but is instead unlikely to be determinative in and of itself, particularly where there is other evidence as to the relevant person's means and the extent of the benefit that they might receive in the event of the applicant's success in the proceeding. 64 What was said in LRSM is otherwise in apparent harmony with what has been said in a number of the other authorities, set out above, regarding the relevance of "reasonable unwillingness" and "commercial impracticability", though the language used by Barrett JA in the paragraphs extracted above perhaps needs to be read carefully. In particular, there is a danger in understanding his Honour's judgment to suggest that, while the inability of the impecunious plaintiff to marshal the necessary resources is in issue, this inability can be demonstrated by evidence of unwillingness (in the sense of "mere" unwillingness) on the part of those standing behind it, in particular arm's length creditors. This would go beyond the limits set and maintained in the prior authorities, and there is no clear indication that his Honour intended such a result. Indeed, between discussing the judgment of Hodgson JA in Dae Boong and the judgment of Allsop CJ and Middleton J in Madgwick v Kelly, his Honour stated at paragraph [43] that: … proof by a corporate plaintiff of what might be termed rationally and practically reasonable unwillingness of creditors to give financial support is something that may be taken into account in the exercise of the undoubtedly wide discretion with respect to security for costs. … 65 This is perfectly consistent with a rejection of "mere" unwillingness as a relevant consideration, even in the case of an arm's length trade creditor. The basis for that rejection is straightforward: if mere unwillingness was to suffice, it would be the practice of every creditor to assert as much, baldly and at the earliest opportunity, so as to preclude any finding that it is reasonable to expect them to provide security for costs. It would be far from satisfactory if a defendant's ability to recover its costs could be defeated on such an arbitrary and opaque basis. 66 The potential conflict between Australian Equity Investors and LRSM was noted by Parker J in Longjing Pty Ltd v Perpetual Nominees Ltd [2017] NSWSC 1690 (Longjing). After recognising that the focus will be on the means of those who stand behind the litigation, and that "there is … no rule that mere unwillingness of a creditor to fund the litigation will in all circumstances require that creditor's interest to be ignored", his Honour relied on LRSM to distinguish the concepts of "standing to benefit" and "standing behind". At paragraph [66], Parker J said: … The two concepts are not the same. A person can stand behind litigation, by funding it or otherwise exercising a degree of influence or control over its course, without necessarily standing to benefit from the outcome at all. On the other hand, a person may stand to benefit from litigation without having, or seeking to exercise, any degree of influence over whether that litigation is pursued and how it is conducted. It may not be reasonable for litigation to be stifled by an order for security simply because a person who stands to benefit, but no more, from the litigation is not willing to provide the security (although this may be open to argument: see [71]-[72] below). But where a person stands behind the litigation as well as standing to benefit from it, it may properly be thought unreasonable for the proceedings to be allowed to continue if that person is not willing to provide security. 67 At paragraphs [71] - [72], his Honour discussed the decision of the Full Court in Australian Equity Investors. After quoting the passage from that decision which is extracted above, he went on to say: This statement of principle does suggest that there may be circumstances where the fact that a creditor, who stands to benefit from the litigation, is at arm's length will not be sufficient to defeat the application for security. At the very least, in such a situation it may be necessary to consider the prospects of success more closely as a discretionary factor. For his part, counsel for Longjing submitted that what the Full Court said is inconsistent with LRSM. It is not necessary to go into this for present purposes. … 68 For the reasons set out previously, it is not necessary to regard Australian Equity Investors and LRSM as inconsistent. The Full Court in the former case found that "benefiting from" and "standing behind" litigation are "elements in the same concept", and that the general principle to be applied was that "those who stand to share the benefits of litigation cannot shirk its burdens". The extent to which a person stands to benefit is therefore a significant consideration to be taken into account in the overall assessment of reasonableness. On this basis, their Honours held that the presence of an arm's length creditor with the necessary means, who does not stand behind the litigation, but does stand to benefit from it, may support a finding that the litigation will not be stifled by an order for security. But the extent to which a person stands behind the litigation is not irrelevant. As explained in LRSM, that factor may bear on whether it is unreasonable to expect an arm's length creditor to provide security, given their professed unwillingness to do so. Earlier cases have approached this latter question in terms of the "reasonable unwillingness" on the part of the person or entity in the position of the creditor, or the "commercially impracticability" of the applicant gaining access to the resources of others. There is nothing to suggest that the Full Court in Australian Equity Investors was intending to depart or in any way detract from those authorities. 69 A somewhat similar understanding of the decision in Australian Equity Investors was expressed by Allanson J in Phoenix Eagle Co Pty Ltd v Tom McArthur Pty Ltd [2019] WASC 378 [58], as follows: … In Australian Equity Investors v Colliers International (NSW) Pty Ltd [2012] FCAFC 57 [30], Jacobson, Besanko and Perram JJ said, 'The principle at play is a simple one: those who stand to share the benefits of litigation cannot shirk its burdens'. I do not see that statement as excluding the need to consider reasonableness. But the position of the directors, shareholders and creditors of the plaintiff, as persons who will share in the benefits of a successful action, should be taken into account in considering the question of reasonableness, and in assessing the weight to be given to the risk of stultification in the exercise of discretion. 70 The overall question therefore remains whether it is reasonable to expect the persons who stand to benefit from the litigation to provide security for costs. The extent to which those persons stand to benefit is a matter to be taken into account, but regard can properly be had to other facets of their position: namely, their means and their reasonable unwillingness to provide security. 71 Finally, there has been a recent series of first-instance decisions in which it has been said that a proceeding cannot be regarded as stultified unless those who stand behind the impecunious plaintiff are "unable (not unwilling) to provide the requisite security for costs": see Ollerenshaw v The Uniting Church in Australia Property Trust (NSW) [2017] NSWSC 1637 [49] per Walton J; Zenith Corp Australia Pty Ltd v Optus Mobile Pty Ltd [2020] NSWSC 1110 [64] per Henry J; Grocon Group Holdings Pty Ltd v Infrastructure NSW (2020) 149 ACSR 112, 128 [113] per Henry J; Equititrust Ltd v Tucker [2020] QSC 269 [73] per Bond J. The same language was used in the much earlier decisions of Einstein J in Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744 [66] and Yes Home Loans Pty Ltd v AFIG Wholesale Pty Ltd [2008] NSWSC 1017 [127]. 72 One might explain these statements on the basis that the "unwillingness" to which they refer is what has been described above as "mere" unwillingness, in the sense of disinclination; that is, something substantially less than the "reasonable unwillingness", informed by commercial considerations, that has been accepted to be a relevant factor in numerous other cases, including at the appellate level. To the extent that the statements must be taken to be suggesting that unwillingness of any kind will be irrelevant to the inquiry, they are inconsistent with that other authority and, with respect, should not be considered good law. 73 For the sake of clarity, the position that emerges from this survey of the authorities can be summarised in the following series of propositions: (a) Where a corporate applicant is impecunious and it is alleged that an order for security for costs against it will stultify the litigation, it is necessary to consider the position of those who stand behind that applicant and those who will benefit from the litigation if it is successful. (b) The overarching question is whether it is reasonable to expect those persons or entities who stand behind the applicant and those who will benefit from the litigation to provide security. (c) In answering that overarching question of reasonableness, it will be relevant first to consider the means of the persons or entities concerned. That factor demands foremost attention because, if the persons or entities are demonstrably without means, then there may be no need to go further in order to demonstrate unreasonableness. (d) Where that initial factor does not lead clearly to the conclusion that it would be unreasonable to expect those persons or entities to provide security, it will be relevant to consider the reasonableness of any expression of unwillingness on their part to do so. Approaching the matter from the perspective of the applicant, it might also be asked whether it is "commercially impracticable" for it to gain any advantage from such means as may exist in others. (e) The determination as to whether or not the relevant persons' or entities' unwillingness is reasonable may be informed by the extent of the benefit that they stand to receive in the litigation, and the extent to which they "stand behind" the applicant, or the litigation more broadly, by funding it or otherwise exercising a degree of influence or control over its course. The former matter may be of particular significance, as a fundamental principle guiding the overall inquiry is that "those who stand to share the benefits of litigation cannot shirk its burdens". For this reason, it is conceivable that, in certain circumstances, even arm's length unsecured trade creditors who ostensibly do not "stand behind" the applicant, but do stand to benefit from the litigation, will reasonably be expected to provide security. On the other hand, if the persons or entities in question stand to receive only a very slight benefit that is wholly disproportionate to the security that they would be asked to provide, then that may assist the applicant in demonstrating that it would be commercially impracticable to have those external parties put up security for costs and/or that their unwillingness to do so is reasonable. (f) Not relevant at any level of the inquiry is the "mere" unwillingness of the persons or entities to provide security for costs, in the sense of their straightforward disinclination, unsupported by any further reasons. 74 As to the form of the evidence required on this issue, it has consistently been recognised that the discharge of the onus borne by the impecunious applicant will usually necessitate that it puts on a full and frank statement of the assets and liabilities of the persons or entities who stand to benefit from its success in the litigation, including shareholders and creditors: see Newtrend Pty Ltd v Oceanic Life Limited [1990] WAR 1, 3 per Staples M; Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2013] WASC 57 [39] per Edelman J; Live Board Holdings Ltd v Cody Live Pty Ltd [2017] NSWCA 302 [90] per Bathurst CJ, Leeming JA and Barrett AJA (Live Board Holdings). Obviously, this will exclude arm's length trade creditors, since they cannot reasonably be required to provide a detailed summary of their financial position to the applicant, nor can the applicant reasonably be required to go to the lengths of obtaining such details from them. Instead, where the party against whom security is sought is attempting to demonstrate that it would be commercial impracticable for its creditors to contribute to the costs of the litigation, that state of affairs will generally need to be established through evidence as to the approaches made to those creditors (particularly the larger ones) with requests for support: see Adelaide (SA Pools & Spa) Manufacturing and Installation Pty Ltd v Westcourt General Insurance Brokers Pty Ltd [2016] SASC 60 [53] per Doyle J.

The unsecured trade creditors 75 As set out above, General Trade has four major unsecured creditors to each of which it owes an amount in excess of $100,000. The affidavit of Mr David Stimpson, the liquidator of General Trade, dated 22 December 2022, identified a number of additional creditors to which the company is indebted in a range of smaller amounts. It also sets out the steps taken by the liquidator and his firm, SV Partners Insolvency (Qld) Pty Ltd (SV Partners), to contact those creditors and ascertain their willingness to fund the litigation, particularly in response to the first security for costs order in the amount of $70,000. 76 This evidence is supplemented by: (a) an affidavit of Ms Eva-Maria Mueller (a Senior Accountant at SV Partners) dated 10 February 2023, in which she deposed to further attempts to contact creditors; (b) an affidavit of Mr Brett Harron (a Manager of SV Partners) dated 10 February 2023, in which he identified the total amount owed by General Trade to unsecured creditors to be $1,816,699.94 as at 8 February 2023, and further deposed to additional attempts to contact the Deputy Commissioner of Taxation (as a representative of the largest unsecured creditor, the ATO) in relation to the possibility of it providing indemnity funding for the proceeding; and (c) further affidavits of Mr Harron dated 24 February 2023 and 7 March 2023, both deposing to further correspondence with the Deputy Commissioner of Taxation regarding the request for indemnity funding. 77 In its written submissions, AGL advanced the global contention that "it cannot be said that the unwillingness or commercial impracticability of all arm's length trade creditors has been proved". However, it focussed more specifically on the position of the four largest unsecured creditors, and devoted particular attention to alleged deficiencies in General Trade's evidence regarding the ATO's disposition to providing assistance. 78 These submissions were, to some extent, overtaken by the evidence in Mr Harron's 24 February 2023 and 7 March 2023 affidavits, which went some way to resolving the uncertainty in respect of the ATO's position. It is perhaps for this reason that Mr O'Shea KC for AGL, at the hearing, acknowledged that the ATO was now "out of the picture" for the purposes of the application for further security for costs. No submissions were made in relation to the other unsecured creditors. Mr Wood SC for General Trade similarly proceeded on the basis that the issue as to the position of these creditors was "off the table". 79 Given the position taken by Counsel at the hearing, it is unnecessary to traverse the evidence in any great depth. The affidavits are listed above and sufficed to demonstrate that the relevant creditors were unable or reasonably unwilling to contribute funds to provide security for costs. In particular, the liquidator of General Trade had approached the company's creditors by multiple means seeking funding for the litigation. For various reasons, which were recorded in the affidavits, many of those requests for funding were turned down. Some of the more common reasons given by the creditors were that: (a) the debts payable by General Trade had been written off; (b) the debts in some cases were minimal, such that there was perceived to be little commercial benefit in contributing funds to the litigation; and (c) certain creditors were not themselves in a financial position to provide funding. 80 In several instances, no response was received from the creditors to the requests made by the liquidator. It may fairly be asked, on that point, how far the impecunious applicant should be expected to go to make contact with its creditors in order to confirm their position in circumstances where earlier correspondence has been met with no response. 81 In answer, it might be supposed that the applicant must make at least a reasonable attempt to contact its creditors, with the reasonableness of the attempt to be assessed in all of the circumstances of the case. A "reasonable attempt" may require, in this context, a concerted effort on the part of the applicant, since it will presumably use the lack of a response from the creditor to argue that it was commercially impracticable for it to gain any advantage from such means as might have existed in that creditor, or that the creditor should be presumed to be reasonably unwilling or unable to provide security, and in turn argue that the litigation will be stifled by an order for security for costs. Those arguments can have serious implications, and the evidence grounding them should reflect this. The reasonableness of an attempt might also be influenced by such matters as the size of the debt in question, the difficulty of contacting the creditor (or the persons within the creditor company who are familiar with the debt and the litigation), and any prior indication of the creditor's attitude towards the litigation. 82 It is unnecessary for the present purposes to consider in detail whether the liquidator's further attempts to contact General Trade's unresponsive creditors were reasonable in this sense. In the absence of any submissions from AGL to the contrary, there is certainly nothing on the face of the evidence to suggest that General Trade's decision to make no further attempts to contact them was unreasonable. Many of the creditors in question were contacted by multiple means on multiple occasions, and none of them was owed a debt of such magnitude as to make it probable that they would seriously consider funding the proceeding. Most notably, numerous attempts were made to contact the largest unsecured creditor, the ATO, which finally provided its response on about 1 March 2023. There is no issue with the adequacy of ATO's expression of unwillingness to provide indemnity funding on the basis that "the high risks associated with providing indemnity funding would significantly outweigh any potential benefits": Cf Ryberg Telecommunications Pty Ltd (in liq) v Optus Mobile Pty Ltd [2011] NSWSC 1268 [15] per Black J. 83 It follows that General Trade has discharged its onus of demonstrating that its unsecured creditors cannot reasonably be expected to provide the further security for costs sought in this application.

The solicitors 84 A good deal of attention at the hearing of this application was devoted to the position of General Trade's solicitors, Clifford Gouldson Lawyers (Clifford Gouldson). AGL alleged that they stood to benefit from the company's success in this proceeding, as a creditor of the company, and that General Trade should therefore be required to prove that they are unable or unwilling to fund the litigation. 85 The position of Clifford Gouldson was established in evidence by three affidavits sworn by Mr Harrison Humphries, the Legal Practice Director of Clifford Gouldson, dated 23 December 2022, 10 February 2023 and 24 February 2023. Across those affidavits, he deposed, amongst other things, to the fact that Clifford Gouldson: (a) had written off the debt that was owing to it by General Trade, and was no longer a creditor of the company; (b) was retained by General Trade on a speculative basis, with payment of its fees being contingent upon its success in the proceeding; (c) had current work in progress on the matter of approximately $713,000 (including GST); and (d) was unwilling to fund the litigation further via the provision of cash for security for costs because: (i) the provision of cash was a far greater financial imposition on its business than the accumulation of work in progress; and (ii) the risk associated with recovery of that cash was not one that it was prepare to take, over and above the risk of not recovering its work in progress. 86 It was not entirely clear how the first of these points was to be reconciled with the third, though it seemed likely that the amount of over $700,000 in work in progress had not yet been billed. Mr Wood SC suggested that the phrase "written off" had perhaps been used somewhat loosely, but, in any event, there had been no attempt to challenge or contradict the ultimate evidence that Clifford Gouldson was not a creditor of General Trade. 87 Counsel for both parties addressed the authorities in relation to this issue in some detail, seeking to apply them by analogy to, or distinguish them from, the present circumstances. It is appropriate, in light of these submissions, to consider that case law. 88 At the outset it should be noted that not all of the authorities cited involved an application for security for costs brought specifically under s 1335 of the Corporations Act. Several involved applications brought pursuant to s 56 of the Federal Court Act. A number of New South Wales cases, relied on by AGL, considered motions brought pursuant to r 51.50(1) of the Uniform Civil Procedure Rules 2005 (NSW) (or its predecessor), which provides: In special circumstances, the Court may order that such security as the Court thinks fit be given for costs of an appeal. 89 This provision has obvious differences on its face from the wording of both s 1335 of the Corporations Act and s 56 of the Federal Court Act. However, once it has been identified in a particular case that the applicant or plaintiff is impecunious, the case law concerning each of those provisions appears to regard it as relevant to ask whether an order for security for costs might stifle the litigation, and in appropriate cases to query whether the position of the applicant's or plaintiff's solicitors ought to have any bearing on the answer to that question. Therefore, subject to one possible caveat noted below, the issue presently under consideration is essentially the same no matter the jurisdictional basis for the application for security for costs. 90 A relatively early authority cited by General Trade in its written submissions was Shackles. There, Byrne J considered an application for security for costs against a large group of impecunious individual plaintiffs. The plaintiffs were represented by Slater and Gordon, who acted on a "no-win-no-fee" basis but stood to benefit substantially from the plaintiffs' success in the proceeding. In response to a submission by the defendants that the solicitors should raise the security since the proceeding was effectively brought for their benefit, his Honour stated as follows at 430: In my opinion it is not correct to say that the solicitors are the persons for whose benefit the litigation has been brought. In any litigation the solicitors acting for a plaintiff stand to benefit from its prosecution. This is no less true in the case where the fee agreement is such that the solicitors are entitled to be paid only in the event of success. It cannot be suggested in the former case that the solicitors stand to benefit from the litigation in the sense that a shareholder in a corporate plaintiff does. Solicitors who undertake to act for an impecunious client at risk to themselves are in principle in no different position. Indeed, it has been said that by so acting they are performing a commendable public service, consistent with the best traditions of the legal profession: Clyne v NSW Bar Association (1960) 104 CLR 186 at 203-4. 91 It is worth noting that nothing in this statement appears to confine its application specifically to cases where the plaintiffs are natural persons. So much is demonstrated by the fact that the passage from Shackles extracted above was subsequently applied in circumstances where the plaintiff was an incorporated association: Environmental Defendants Office (Tas) Inc v Chipman [2003] TASSC 72 [37] per Holt M. 92 The point surfaced again, in the context of a representative proceeding, in Bray v F Hoffman-La Roche Ltd (2003) 130 FCR 317 (Bray). There, Finkelstein J stated as follows at 375 [252]: It is also appropriate to bear in mind that it is commonly the case in a class action that a person will stand behind (I mean fund) the applicant. Usually this will be the applicant's solicitor, who will sometimes charge what is referred to as a "contingency fee" for the privilege. When a proceeding is brought by a "nominal plaintiff" that is a plaintiff who will not himself benefit from the action but is making the claim for the benefit of someone else, an order for security is usually made. A party who is being funded by his solicitor is not really a "nominal plaintiff". Nevertheless, the solicitor does stand to benefit from the action (especially as regards the additional fee) if the action is ultimately successful, as the solicitor will then be able to recover his costs. That is a relevant, though not a decisive, consideration when deciding whether security should be ordered. 93 In apparent contrast to Shackles, this passage suggests that solicitors acting on a contingent basis will "stand behind" the applicant and will "stand to benefit" from the applicant's success in the litigation, particularly by their charging of an additional fee. On this basis, the position of the solicitors may have some bearing on the outcome of an application for security for costs. 94 The same point appeared to be made by Hodgson JA in Porter v Gordian Runoff Ltd [2004] NSWCA 69 (Porter), sitting alone on three motions, including two as to security for costs of an appeal. His Honour ultimately ordered that security for costs be provided by the appellant, finding that a number of considerations favoured that outcome. Most relevantly for the present purposes, he found at paragraph [41]: In my opinion it is also relevant to these applications that each of the respondents has already lost in the order of $1 million by reason of the proceedings, this being money which the respondents appear to have virtually no chance of recovering. The appellant, on the other hand, has not lost much money by reason of the proceedings. It appears that he owes over $1 million to barristers, and it may well be that he owes substantial amounts to his solicitor. This does not mean that his appeal can be considered as being brought on behalf of his legal advisers, but it does mean, I think, that his legal advisers have a large stake as a matter of fact in the success of the appeal. 95 While it was not wholly clear from his Honour's judgment how much weight he placed on this consideration, it can potentially be inferred that the "large stake" of the appellant's lawyers was a matter favouring an order for security for costs. 96 His Honour's decision was upheld on appeal in Porter v Gordian Runoff Ltd [2004] NSWCA 171, where Bryson JA (with whom Sheller and Giles JJA agreed) noted at paragraph [32] that the appellant's evidence was "to the effect that the persons who stand to benefit from success in the appeal are his lawyers". Again, it was not wholly clear how much bearing this evidence had on the conclusion drawn by the Court of Appeal; however, it being mentioned tends to suggest that it was at least of some relevance to the making of the order for security for costs. 97 In Ballard v Brookfield Australia Investments Ltd [2012] NSWCA 434 (Ballard), Ward JA (as her Honour then was), again sitting alone on two applications for security for costs of an appeal, seemed to take into account similar considerations, although the factual setting was somewhat different. The appellant, against whom the applications were made, argued that an award of security would stifle the appeal, but there was evidence that he had entered into a "Funding and Priority Deed", pursuant to which a litigation funder had agreed to pay certain costs and other amounts at first instance and on appeal. It also appeared from that Deed that the solicitors for the appellant had agreed not to charge him for any legal costs that they incurred in connection with the appeal, and agreed to pay all expenses and disbursements arising from the appeal. He would only be liable for those costs, expenses and disbursements to the extent that they could be met from a surplus remaining after the funder had been paid under the Deed. 98 Against this background, her Honour drew the following conclusion as to the stifling effect of an order for security for costs at paragraph [41]: I am not satisfied that the making of an order for security for costs will necessarily stifle the appeal. I say that for the reason that Mr Ballard has been able not only to procure funding for the litigation below but, and more relevantly, has been able to secure an arrangement with his solicitor for the appeal to be carried out at the solicitor's cost. There is nothing to suggest that Mr Ballard would be unable to secure additional funding if required to provide security for costs (or that his solicitor, who would appear from the Deed to have some personal interest in the maintenance of the appeal, would not be in a position to provide such security). 99 Again, it is not wholly clear from this passage to what extent her Honour's conclusion was contingent on the fact that the solicitors had not only agreed to receive payment on a deferred and speculative basis, but had positively offered to advance funds to meet the appellant's other expenses and disbursements as they arose. This unusual arrangement might be regarded as increasing the resemblance that the solicitors bore to a litigation funder. 100 Shortly after the decision of Ward JA in Ballard, the issue was addressed by Allsop CJ and Middleton J in their joint judgment in Madgwick v Kelly. In that case, the solicitors for the applicants in the class action, Macpherson and Kelley, were acting under a conditional costs agreement by reason of which, unless there was success, they would only receive a small proportion of their legal fees and disbursements. It was contended by the respondents that Macpherson and Kelley were receiving a benefit from supporting the litigation because they stood to receive the balance of their costs if it was successful. The primary judge, in Kelly v MIS Funding No 1 Pty Ltd (2012) 300 ALR 675, addressed this submission as follows at 697 [101] - [103] of his judgment: [101] … I consider it a remarkable proposition that a lawyer acting under a conditional costs agreement is relevantly standing behind the litigation or is standing to benefit. I do not understand the position of a lawyer acting for an applicant in a class action to be any different from that of the lawyer for a plaintiff acting on a "no win-no fee" basis in the thousands of such individual cases conducted in many different Australian courts each year. Such arrangements are usually entered into because the plaintiff is unable to pay legal fees and disbursements as they are incurred. It would be remarkable if such claimants, already finding it difficult to meet the expense of litigation, were liable to pay security for costs because their barristers or solicitors were prepared to act on the basis that they are not paid unless the case is successful. This has never been the law in Australia. [102] The preparedness of barristers and solicitors to provide legal services upon a "no-win-no fee" basis is an important aspect of access to justice, particularly in class actions. … [103] One would be surprised if the barristers and solicitors that provide legal services in class actions upon a conditional fee basis would not prefer to be paid at the time the services are provided, rather than having payment for such complex legal work conditional on success. Put another way, I do not accept that it is proper to characterise as a benefit, a payment ultimately made to a lawyer who has agreed that he or she is only entitled to be paid upon winning the case, and is required to wait perhaps years for payment of both legal fees incurred and disbursements advanced. In a class action context the fee uplift involved is little compensation for the risk of non-payment and delay in any payment. It should not militate as a factor in favour of an order of security for costs. There is also nothing in the authorities which indicates that a person that retains a lawyer under a conditional costs agreement should be in a worse position in relation to security for costs than a person who can afford to do so. 101 On appeal, Allsop CJ and Middleton J quoted these paragraphs in full at 12 - 13 [43] before stating at 13 [44]: "We respectfully agree". Their Honours went on to add the following remarks at 13 - 14 [47] - [48], dealing with the decision of Finkelstein J in Bray: [47] … There are principled reasons to distinguish between a commercial litigation funder and solicitors such as Macpherson and Kelley under these agreements. The former take a percentage of the judgment; the latter earn professional fees. Here, the fees could not rise above costs as recovered. Solicitors are entitled to charge professional fees for undertaking the professional responsibilities of running the case, as officers of the court, with all the attendant responsibilities (including duties to the court) that that entails. No one, the solicitors included, should ever lose sight of those responsibilities. The expected or contingent receipt of proper professional fees (and there was not the slightest suggestion here that Macpherson and Kelley's fees, including the "case management fee", were other than proper) is not a basis for requiring an officer of the court to contribute to a fund for the costs of the other side of the litigation. Looking at the matter from the point of view of the solicitors, it could not be considered reasonable for them to be required to fund on an ongoing basis the litigation brought under Pt IVA. [48] To the extent that what was said by Finkelstein J at 375 [252] can be seen as contrary to that, it was comment by way of obiter dicta and, in our respectful view, wrong. … 102 Although references to the immediate class action context are interspersed throughout these passages, there is no clear basis to treat their Honours' reasons, or the reasons of the primary judge with which they agreed, as being confined to that specific setting. Most notably, the primary judge drew an analogy at [101] between "the position of a lawyer acting for an applicant in a class action" and "that of the lawyer for a plaintiff acting on a 'no win-no fee' basis", suggesting that the latter was something different to the former, and was not specifically connected to the class action context. He then observed, apparently in respect of the latter, that "[s]uch arrangements are usually entered into because the plaintiff is unable to pay legal fees and disbursements as they are incurred" and that "[i]t would be remarkable if such claimants … were liable to pay security for costs because their barristers or solicitors were prepared to act on the basis that they are not paid unless the case is successful". Again, Allsop CJ and Middleton J agreed with these remarks in their entirety. 103 In the hearing of the present case, Mr O'Shea KC submitted that the ratio of this part of Madgwick v Kelly was expressed in the final sentence of paragraph [47], in that way confining the precedential value of the case to the setting of litigation brought under Pt IVA of the Federal Court Act. Given what has been said already about the generality with which the principles were expressed in the first instance judgment, with which Allsop CJ and Middleton J agreed, that submission should not be accepted. It seems more likely that the ratio is captured in the preceding sentence of that paragraph, and the final sentence is merely a conclusion drawn by application of that principle. In any event, the penultimate sentence of the paragraph would at least constitute seriously considered dicta, which should not be overlooked. Mr O'Shea KC appropriately acknowledged, in this connection, that the case supported the proposition that, in general, practitioners who provide legal services on a speculative basis should not be required to meet orders for security for costs. 104 Shortly after the decision in Madgwick v Kelly, Sackville AJA (sitting alone) in Tyneside Property Management Pty Ltd v Hammersmith Management Pty Ltd [2013] NSWCA 404 (Tyneside) appeared to take into account, in assessing the possible stifling effect of an order for security for costs, the position of a solicitor acting on a deferred payment basis. The factual background on the point appears sufficiently in the relevant passage at paragraphs [27] - [28] of his Honour's judgment, as follows: [27] As I have indicated, the evidence shows that the appellants' solicitors are owed at least $371,000 on account of costs and that they are prepared to defer their payment of costs and disbursements in relation to the appeal until judgment is delivered. Clearly the solicitors have a substantial interest in the outcome of the appeal: cf Ballard v Brookfield Australia Investments Ltd [2012] NSWCA 434, at [41], per Ward JA. Mr Smallbone asserted from the bar table that the solicitors would not be prepared to contribute towards an order for security, but there was no evidence to that effect. [28] I am not satisfied on the evidence that the solicitors, given that they have such a large stake in the outcome of the proceedings, would not be prepared to advance further funds, if an order for security were made, to ensure that the appeal could go ahead. 105 An application for review of Sackville AJA's decision was determined in Tyneside Property Management Pty Ltd v Hammersmith Management Pty Ltd (2014) 103 ACSR 201. By the time of that application, the solicitors in question, Moray & Agnew, had ceased to act. However, the members of the Court of Appeal made mention of the above paragraphs from the judgment of Sackville AJA without doubting the correctness of the conclusion. In particular, Emmett JA (with whom Meagher JA agreed), stated as follows at 219 [89] - [90]: [89] Given that Moray & Agnew had such a large stake in the outcome of the proceedings, Sackville AJA was not satisfied, on the evidence, that Moray & Agnew would not be prepared to advance further funds, if an order for security were made, to ensure that the appeal could go ahead. His Honour came to that conclusion in the light of the observation that there was no evidence to the effect that the solicitors would not be prepared to contribute towards an order for security. [90] Moray & Agnew are no longer acting for the appellants in the appeal. Thus, a significant change in circumstances has occurred since the orders made by Sackville AJA. While the change in circumstances has no bearing on the correctness of the decision of Sackville AJA, it will have a bearing on the manner in which the court should dispose of the motions. 106 The decision of Sackville AJA was subsequently cited in the judgment of Barrett JA in LRSM at paragraph [44]. There, as set out above, his Honour contrasted the position of arm's length trade creditors with the position of the solicitors acting on a deferred payment basis in Tyneside, querying whether the former should be regarded as "standing behind" the corporate plaintiff in the relevant sense, and in this way suggesting that the latter did "stand behind" the company. His Honour regarded the solicitors in Tyneside as occupying that position on account of their "connection" with the company, arising out of their decision to "continue acting in litigation on a deferred payment basis". 107 Taking stock, the authorities so far considered suggest that courts in New South Wales have adopted a different approach to that prevailing in other jurisdictions when addressing the position of the solicitors for the impecunious applicant in the security for costs context. In the New South Wales Court of Appeal, in particular, there has been a much greater readiness to take into account, as a matter favouring an order for security, the fact that the solicitors "stand behind" the applicant or "stand to benefit" from the litigation. 108 Further cementing this apparent disparity in approach, in Capic v Ford Motor Company (No 2) [2016] FCA 1178 (Capic), Perram J, without specifically addressing the New South Wales authorities, adopted a position consistent with Madgwick v Kelly, stating as follows at paragraph [21]: It is true, I accept, that the lawyers for Ms Capic are acting on a no-win no-fee basis at this point, and that the costs recoverable by them if the class action succeeds may well exceed the fees which might be payable by Ford under an adverse costs order. To that extent, it is possible that some of the damages awarded may ultimately find their way into the lawyers' hands. However, I do not think for the purposes of the issue of stultification that attorneys in that position are to be seen as standing behind the action. A similar conclusion was reached in Madgwick and in Bray. 109 This passage was quoted with approval by Lee J in the more recent case of Schofield v TFS Manufacturing [2020] FCA 1526 (Schofield), where his Honour addressed an application for security for costs in a representative proceeding brought pursuant to Pt IVA of the Federal Court Act. There, it was submitted by one of the respondents that, while the solicitors for the applicants had put on evidence to the effect that they were "not in a position" to provide the security, there was no detail as to what this meant, nor any evidence as to whether consideration had been given to whether another firm would conduct the proceedings and provide necessary security. In relation to this submission, Lee J stated as follows at paragraph [28], immediately before making reference to the judgment of Perram J in Capic: Although those submissions do not say it in terms, if it is suggested that in order to prove stultification, a solicitor acting on a no-win no-fee basis is required to establish that they are not in a position to provide security, then this is a submission that ought be expressly rejected. 110 Again, this statement does not appear to be confined to the context of representative proceedings. 111 The approach taken in recent authorities of this Court stands in apparent contrast to that taken in New South Wales. The point was considered in some detail by Parker J in Longjing, it being expressly in issue in that case whether the plaintiff's solicitors had an interest, as a creditor, in the outcome of the proceedings. The plaintiff submitted on multiple grounds that they did not. In the first place, it argued that an approach that put pressure on the solicitors to provide security would give rise to an undesirable conflict between the solicitors' role as creditor and its professional duties to the client and to the Court. Having regard to the decisions in Ballard and Tyneside, Parker J rejected this submission, stating relevantly as follows at paragraphs [47] - [49]: [47] The question posed by counsel's submission comes down to whether, in a case such as the present, a solicitor creditor should be treated differently from other creditors having an interest in the outcome of the litigation. In my opinion, there is no reason in principle for any such exception to be recognised. I agree that for a solicitor to advance monies to his or her client may put the solicitor in a delicate position so far as his fiduciary duties to the client and his professional duties to the Court are concerned. It may also give rise to issues of undue influence. But these problems are not new and they are not confined to loans for the purposes of legal proceedings. [48] Even if monies are not separately advanced, a solicitor who defers payment of his or her fees pending the outcome of the proceedings, where the client is unable to pay, is effectively speculating on the outcome of the litigation … That is not a criticism of the practice in general or of SR's [the solicitor's] conduct in these proceedings in particular. A retainer on such a basis is entirely legitimate and may be important in affording access to justice. But we should not pretend that such arrangements are not a source of profit for solicitors or that they do not create the potential for conflict. They clearly are and they clearly do. [49] In a case such as this, the rationale for awarding security is to mitigate the unfairness of the defendant being exposed to the full risk of loss if the litigation succeeds, but having no recourse if it fails from those who stand to benefit from the litigation. I see no reason why the fact that the person who stands to benefit is a solicitor should make any difference. A solicitor in such a situation may need to be more careful in explaining the implications to the client, and may perhaps even need to ensure that the client obtains independent legal advice. But that is what the solicitor should do anyway and the difficulty and potential additional expense is no reason to make an exception which would disadvantage the defendant. 112 It is relevant to note from this passage that the firm of solicitors in Longjing was already a creditor of the plaintiff. This provides a potential point of distinction from the decisions of this Court. However, it is not wholly clear to what extent the creditor status of the solicitors motivated the broader statements of principle made by Parker J. His Honour appears to have found that the solicitors stood to benefit from the litigation, but it is not clear whether this finding was made on the basis that the solicitors were creditors, or that the solicitors were acting on a deferred payment basis, or both. His Honour also identified a further matter of some relevance at paragraphs [67] - [68], after a discussion of the decision in LRSM: [67] I have already explained why, in the present case, SR [the plaintiff's solicitors] stands to benefit from the success of the litigation. In my opinion, SR should be seen, in addition, as standing behind the litigation in the relevant sense. [68] SR has the conduct of the proceedings as Longjing's solicitor. SR also has the practical ability to control the proceedings because SR can, under the terms of its costs agreement, require payment of its outstanding fees, and thereby, in effect, bring the proceedings to an end, at any time (see [26] above). SR has also allowed the funding of the litigation from (at least) the China Grand settlement payment. In my opinion, SR is in an entirely different position from the ordinary trade creditors considered by the Court of Appeal in LRSM. It is notable that in LRSM at [44] (quoted at [65] above), Barrett JA expressly referred to solicitors acting on a deferred payment basis as having a relevant "connection with the company" which distinguished them from such trade creditors. 113 The potential conflict between this passage and the decision in Madgwick v Kelly was addressed at paragraph [70]. After quoting paragraph [47] of the judgment of Allsop CJ and Middleton J, his Honour said: If I considered that this was inconsistent with what the Court of Appeal said about solicitors acting on a deferred fee basis in LRSM, I would be obliged to follow LRSM in any event. But I do not think that what the Full Court said is inconsistent with LRSM. A solicitor who accepts a retainer on a conditional basis is obliged, as a matter of contract, to conduct the case through to completion without requiring payment of fees in the meantime (unless the retainer is terminated for some other reason). That is quite different from the position of SR here. 114 It seems that his Honour sought to resolve the apparent inconsistency between Madgwick v Kelly and LRSM by emphasising the importance of the finding as to whether or not the solicitors were "standing behind the litigation". The solicitors in the case before him had a relevant "connection with the company" in the sense described in LRSM and stood behind the litigation, since they could bring the proceedings to an end at any time by requiring payment of their outstanding fees under the costs agreement. Accordingly, they could reasonably be expected to provide security. By contrast, a solicitor acting merely on a conditional basis could not be expected to provide security, since, as Allsop CJ and Middleton J observed in Madgwick v Kelly, they are ordinarily required to conduct the case to completion without requiring payment of fees. Because they lacked that material degree of control over the litigation, they could not be regarded as standing behind the litigation in the relevant sense. 115 Justice Parker further explained the point in Union Steel Pty Ltd v Union Steel Investments Pty Ltd [2020] NSWSC 1511 [85] - [86] (Union Steel), and distinguished the facts of that case from the facts in Longjing as follows: [85] … [I]n Longjing the solicitors were already creditors of the corporate plaintiff as a result of having acted for it in earlier unrelated litigation. Also, the terms of the solicitors' retainer were in evidence. They showed that, contrary to the usual position where solicitors, once retained, are obliged to conduct litigation to its conclusion, Longjing's solicitors were entitled to withdraw at any time, thus in effect giving them control over the conduct of the litigation. [86] In the present case, Mr Kekatos [the solicitor] may have agreed to "carry" the remaining costs of the litigation through to completion on a speculative basis, but it was not clear from the evidence whether he had the sort of control over the ongoing conduct of the litigation which the solicitors had in Longjing. More importantly, there is nothing to suggest that Mr Kekatos was owed any money by Ms Huybers [the sole director and shareholder of the plaintiff corporation] before he started acting for her in the proceedings. 116 On this basis, his Honour found that the solicitor was not a person who was standing behind, or standing to benefit from, the litigation. 117 In Carter v Mehmet t/as ATF Ian G Mehmet Testamentary Trust [2021] NSWCA 32 (Carter), Meagher JA (sitting alone) considered an application for security for costs of an appeal made against the three appellants in the proceeding, each of which was impecunious. It was noted in his Honour's reasons that the appellants' lawyers stood to benefit from the successful prosecution of the appeal by the recovery of their unpaid costs and expenses from the hearing at first instance. Whilst the stated position of the lawyers was that they would not provide security, it was not established that they did not have the means to do so. In addressing this point, his Honour initially stated as follows at paragraph [33]: The present case does not concern a claim for personal injury. In such litigation the supply of legal services on a "no win-no fee" basis ensures access to justice for impecunious plaintiffs. For that reason, including in appeals in which the lawyers may stand to recover earlier unpaid fees as well as those incurred in the appeal, there is a general practice not to order security: see the observations of Handley JA in de Groot v Nominal Defendant [2004] NSWCA 88 at [29]. 118 His Honour proceeded to discuss the decisions in Porter, Tyneside, Madgwick v Kelly and LRSM and drew from those cases the following relevant considerations: (a) whether the solicitors stood to benefit if the appeal was successful; (b) whether the solicitors had communicated their reasonable unwillingness to provide financial support; and (c) whether the solicitors had "some more particular connection with the debtor company or the litigation", such that they could be said to be "standing behind" the appellants. 119 On the facts of the case before him, his Honour concluded at paragraph [37] that: … the lawyers in this case are not "mere" arms-length trade creditors. Their position is similar to that of the solicitors in Tyneside. They have resolved with Mr Carter [the first appellant] that the appeal should proceed on a "speculative" basis. In the absence of that arrangement the appeal could not proceed. Their doing so makes it necessary for the respondents to incur costs which they will not recover (in the absence of any security) in the more likely event that the appeal fails. Addressing the question of fairness as between the appellants (and those "standing behind" them) and the respondents, it is reasonable that those lawyers provide some financial support to secure the continuation of the appeal. There is however a difficulty in determining the amount of that contribution in the absence of evidence as to the quantum of the unpaid fees and the particular arrangements between the lawyers and Mr Carter, all matters which from the appellants' perspective could have been clarified. 120 While the respondents sought to characterise the solicitors in that case as creditors or contingent creditors, his Honour did not seem to regard this point as integral to the resolution of the question of security for costs and it does not feature in the passage extracted above. Rather, the decisive factor appears simply to have been that the solicitors resolved that the appeal should proceed on a speculative basis. 121 This same question was the subject of relatively detailed consideration by Mitchelmore JA (sitting alone) in Kordovoulos v Dixon-Hughes [2022] NSWCA 110 (Kordovoulos). There, the solicitors for the appellants had accepted an arrangement whereby the recovery of their outstanding legal costs from the proceedings before the primary judge were contingent on the outcome of the appeal. Her Honour recognised at paragraph [44] that the case did not involve commercial parties or transactions, and in this way the solicitors' conduct might have a "facilitative aspect to it, in terms of access to justice". However, she proceeded to find that an order for security for costs should be made on account of the solicitors' position, stating as follows at paragraphs [45] - [46]: [45] By reason of the arrangement I have referred to as between the appellants and the appellants' solicitors, the solicitors "stand to benefit from the successful prosecution of the appeal beyond being paid their costs of the appeal incurred on a no win-no fee basis": Mehmet at [32] (emphasis added). For the reasons I have just explained, the amount by which they stand to benefit is likely to be considerable, and gives them a substantial interest in the outcome of the appeal. As a result of the position that the appellants' solicitors have adopted with respect to their costs, the appellants have been able to proceed notwithstanding their impecuniosity; and the first respondent will incur further costs in defending the judgment on appeal which, in the absence of any security, she has no realistic prospect of recovering if the appeal is dismissed: Mehmet at [41]. … [46] I accept that the appellants could not meet a costs order if they do not succeed on the appeal. However, in view of the conclusion I have reached regarding the position the appellants' solicitors have taken in running the appeal, the appellants' impecuniosity does not of itself establish that the appeal would be stultified if an order for security for costs were made. In this respect, as the respondents raised in their respective written submissions, and Senior Counsel for the first respondent raised in oral submissions, there is no evidence from the appellants' solicitors as to whether or not they would be prepared to advance funds by way of security: Tyneside Management Pty Ltd v Hammersmith Management Pty Ltd [2013] NSWCA 404 at [27] per Sackville AJA. 122 The final sentence of this passage, and the reference to Tyneside, perhaps suggests that, if the appellants' solicitors had put on evidence as to their inability or reasonable unwillingness to provide funds by way of security, this might have affected the outcome. 123 A rather different approach to this issue of evidence was taken by Basten AJA (sitting alone) in Anderson v Canaccord Genuity Financial Ltd [2022] NSWCA 168 (Anderson), another case concerning security for costs of an appeal. On the question of stultification, the respondents' submissions invited the Court to draw the inference that the appellant's solicitors were so heavily invested in the success of the appeal that they would provide security to allow the appeal to proceed. To this, his Honour stated as follows at paragraph [80]: I acknowledge that this has been treated as a relevant consideration in earlier cases. As was noted in Carter, the legitimacy of that approach found support in the reasons of Hodgson JA in Porter v Gordian Runoff Ltd, upheld on appeal. Nevertheless, there are troubling aspects underlying that approach. They have to do with the role of lawyers (including both solicitors and counsel) in relation to the conduct of litigation. Starting with the proposition that legal representatives should not proceed with litigation that they deem to be hopeless, the findings with respect to the merits of the appeal mean that this is not such a case. That being so, it is open to legal representatives to proceed on the basis of a contingency fee agreement which provides for a form of success fee, or simply a fee agreement contingent on acceptance that the client will be unable to meet the fees absent success in the litigation. There is no obligation on solicitors or counsel to act on such a basis. However, if an inference were to be drawn from their apparent willingness to act on a particular basis, and in circumstances where they could not reasonably be expected to give evidence as to their assessment of the merit of the case, or their own financial circumstances, such an inference might have unintended ramifications for the future conduct of litigation. (Footnotes omitted). 124 It is not wholly clear why, as noted in the final sentence of this passage, the solicitors could not reasonably be expected to give evidence as to their own financial circumstances. However, the passage otherwise seems to adopt a sentiment somewhat reminiscent of the earlier Federal Court authorities insofar as it observes, from a policy perspective, that there might be "unintended ramifications" to treating the fact that solicitors are acting on a speculative basis as a reason to infer that they will make arrangements to provide security for costs. Going further, his Honour concluded at paragraphs [84] - [85] that: [84] … It is sufficient to decline to draw an inference, in the absence of any evidence to support it, that if security were ordered, the solicitor would make arrangements to provide it. [85] The result in Carter apparently reflected the amount that the solicitors might reasonably be expected to provide, given their interest in recovery of unpaid fees. However, the reasonableness of the expectation, and how it may be applied, will depend upon the circumstances of the individual case. There is a difficulty, as noted above, in accepting that such an expectation arises in this case in an amount which would have a material effect on the interests of the respondents in the present case. I am not prepared to draw such an inference. 125 While the observation that each case will turn on its own circumstances is, with respect, apt in this context, there is a potential difficulty in this passage. The excerpt from paragraph [84] seems to suggest that evidence should have been put on, presumably by the party seeking the order for security for costs, to support the inference that the solicitors would make arrangements to provide security, if ordered. However, it is not clear how exactly that party would go about producing evidence as to the other side's solicitors' ability or willingness to put up the necessary funds. If his Honour's judgment is properly to be taken to suggest that such evidence ought to be provided by the party seeking the order for security, then it would seem to propose a reversal of the usual evidentiary onus in this context. 126 On the whole, this survey of the authorities paints a complicated picture. This Court and courts in New South Wales appear, quite consistently, to have taken different approaches to the relevance of the position of the solicitors for the impecunious applicant or plaintiff in circumstances where it is alleged that an order for security for costs will stifle the proceedings. The Victorian case of Shackles seems to be aligned with the position in this Court. 127 Although all of the relevant cases in this Court, and Shackles, were representative or class action proceedings, there is nothing to suggest that the approach adopted in them is exclusive to that specific context. Instead, the approach has typically been expressed in broad statements of principle, to the effect that solicitors who agree to receive payment of their fees on a deferred or speculative basis do not, by that fact alone, stand to benefit from the litigation, or stand behind the applicant or the litigation, in any sense relevant to the question of stultification. The existence of such an arrangement between the solicitors and their client is therefore not, in and of itself, a basis for the solicitors to be required to put up funds by way of security. This is markedly different to the approach taken in the New South Wales authorities, where consideration is routinely given to whether the solicitors are standing behind their impecunious client or the litigation more generally, or are otherwise liable to benefit from their client's success in the litigation. 128 It may be that the difference between the approaches has its origins in particular findings and underlying assumptions as to the nature of the arrangements between the solicitors and their impecunious clients, arising from the specific jurisdiction being exercised. As noted above, most of the New South Wales decisions have involved applications for security for the costs of an appeal, where the solicitors have deferred the payment of outstanding fees already charged in respect of the first-instance proceedings: see, eg, Ballard, Tyneside, Carter, Kordovoulos. In this setting, it may be natural to understand the deferred fees to be in the nature of or akin to a "debt" and to assume that the solicitors' position is therefore analogous to that of an ordinary creditor, from whom some contribution for security for costs might reasonably be expected. This conclusion may be strengthened in particular cases by the fact that the solicitors have offered positively to pay the appellant's expenses and disbursements as they arise (eg Ballard), or continued to act on terms giving them a substantial measure of control over the conduct of the case (eg Longjing), indicating that they are to some extent a "driving force" behind the litigation, taking on characteristics similar to those of a litigation funder. 129 In the decisions of this Court, by contrast, there has been less reason to assume as a starting point that the solicitors are comparable to ordinary creditors. In the context of class action and representative proceedings, there is no accrued "debt" at the time the application for security for costs is made, but instead more often an amount of "work in progress" that has not yet become due and payable. One therefore starts from the position that the solicitors are not creditors, but instead something different, meriting some more unique treatment. The question, then, is whether there is any good reason to depart from that starting position, or to start instead from the position that solicitors are comparable to ordinary creditors. 130 In the first place, allowing solicitors to act on a speculative basis, without the deterrent of potentially having to put up an amount of funds by way of security for costs, is apt to promote access to justice. This interest in access to justice looms large in the context of class action or representative proceedings, as reflected, in particular, in the judgments delivered by Allsop CJ and Middleton J in Madgwick v Kelly, and by the judge at first instance in that case. It has also been acknowledged in certain decisions of the New South Wales Court of Appeal, including in Carter and Kordovoulos, which seem to suggest that access to justice concerns might militate against a finding that the solicitors ought reasonably to be expected to put up funds for security for costs. Rather unusually, however, those latter cases have seen those concerns as arising specifically in the context of personal injury proceedings or, at least, in cases that are not of a commercial nature. While the interest in ensuring access to justice certainly might be more acute in those circumstances, it is not apparent why it should be regarded as arising only there: if a company is impecunious, for instance, why is there not a similar prima facie interest in ensuring that its solicitors are not dissuaded from acting on a no-win-no-fee basis by the possibility that, as a consequence of doing so, they might be required to put up their own funds to meet an order for security for costs? Why should there be a policy of preserving the utility of speculative costs agreements for solicitors acting in non-commercial contexts only? 131 It is not unreasonable to expect that solicitors will, for various reasons, be less inclined to act on a no-win-no-fee basis in a commercial setting. But if they do ultimately choose to do so, taking into account the circumstances of the case and the attendant risks, it is not immediately apparent why they should thereafter face a more difficult position in the security for costs context. If it is accepted that they should not, and that access to justice concerns may be live in any context that solicitors are acting on a speculative basis, then it is reasonably arguable that the fact that they are acting on such a basis should not provide any immediate reason to regard their position as supporting an order for security for costs. On the contrary, one would think it more likely, if anything, to weigh against such an order. 132 That having been said, the point raised in those cases that regard the solicitors' position as relevant is one developed from the perspective of the respondent in the action. It is recognised that the applicant's solicitors will receive a real benefit from conducting the litigation, including profit, if the applicant is successful, while the respondent will not recover from the applicant if the action fails. Necessarily, there is an asymmetry of risk as between the applicant's solicitors and the respondent in circumstances where those solicitors are actively supporting the applicant's case. While they carry the risk that they will not be paid if their client is not successful, the respondent will be out of pocket regardless of the outcome. As the New South Wales authorities reveal, this has been regarded as a significant matter, as it should be. 133 Whilst that approach is far more satisfactory, I am obliged to follow the approach in this Court in Madgwick v Kelly that "[t]he expected or contingent receipt of proper professional fees … is not a basis for requiring an officer of the court to contribute to a fund for the costs of the other side of the litigation". I apprehend that I must also adhere to what was said by the primary judge in Madgwick v Kelly and Byrne J in Shackles, and held by Perram J in Capic, to the effect that a speculative or no-win-no-fee arrangement between the solicitors and their client will not, in and of itself, afford any reason to treat the solicitors as standing to benefit from the litigation or standing behind that client or the litigation in any sense relevant to the overarching question of stultification of the proceedings. 134 Even adopting that view, it may not be necessary to go as far as Lee J appeared to in Schofield in rejecting the suggestion that a solicitor acting on a no-win-no-fee basis is required to establish that they are not in a position to provide security. While there is good reason to start from the position that the solicitors acting on such a basis are not to be expected to put up funds by way of security, the circumstances of an individual case may justify a departure from this position. It ought to be kept in mind that the impecunious party in the context of a security for costs application bears an evidentiary onus on any question of stultification, and its solicitors are best placed to put on evidence as to the terms and effect of the arrangements in place as to fees, expenses and disbursements. Accordingly, when relevant, the solicitors ought to be expected to provide evidence demonstrating why there is no particular feature of the case that would justify a departure from the usual starting position expressed above. To the extent that what was said by Basten AJA in Anderson runs contrary to this, I would respectfully decline to follow his Honour's views. It may be that the evidence provided by the solicitors ultimately does furnish some reason to expect that they ought to put up security for costs; for instance, where it indicates that: (a) the amounts proposed to be charged by the solicitors in the event of success exceed what is required to recover proper professional fees and any further sum intended to account for the risks inherent in a deferred and contingent payment arrangement, such that there is a true "benefit" to the solicitors; and/or (b) the solicitors have entered into an arrangement with their client pursuant to which they now enjoy a substantially increased degree of control over the conduct of the proceeding and can properly be said to be "standing behind" their client or the litigation. 135 In such circumstances, it will also be relevant to determine whether the solicitors are able and not reasonably unwilling to provide security, in accordance with the series of propositions set out earlier in this judgment. 136 A more difficult question is the extent to which the characterisation of the solicitors as a creditor of the impecunious party, on account of existing unpaid fees or other expenses, might work to displace the usual starting position articulated above. As has been recognised already, this issue seems to surface relatively frequently in the New South Wales authorities, but its precise effect on the outcome of those cases in unclear. It might be thought that, if the solicitors are owed a debt by their client only on account of the fact that they have deferred payment of professional fees already charged, then this should not warrant any departure from the default position; the situation is, in principle, no different to that where the solicitors have entered into a deferred or contingent fee agreement with their client from the outset. If, however, the solicitors are owed an amount because they are taking additional steps to fund the litigation, or because the client has become indebted to them in another manner strictly unrelated to the provision of legal services, then some significance might be attributed to the increased resemblance they might then bear to a litigation funder or an ordinary creditor. 137 In this way, some of the matters taken into account in the New South Wales authorities might continue to find expression. The key distinction is the acknowledgement, at the outset of the exercise, that the existence of the arrangement for the payment of fees on a deferred or contingent basis does not, invariably and in and of itself, constitute a benefit liable to be realised upon the impecunious party's success in the litigation, or amount to standing behind that party or the litigation, for the purpose of determining whether an order for security for costs would stifle the proceeding. 138 Turning to the facts of this case, there appears to be no basis to depart from the default position expressed by Allsop CJ and Middleton J in Madgwick v Kelly. Mr O'Shea KC submitted that this was an "unusual" case, but no particular feature of it seems to render it dramatically different to those surveyed above. On the evidence, which was uncontested, Clifford Gouldson is acting on a speculative basis, has accrued a substantial amount of work in progress, is not a creditor of General Trade, and is otherwise unwilling to put up funds by way of security on account of, amongst other things, the effect that this will have on the firm's cash flow. There is nothing in these facts that is peculiar or warrants departure from the approach in Madgwick v Kelly. In accordance with that approach, Clifford Gouldson cannot be said in the relevant sense to stand to benefit from General Trade's success in the litigation, or to stand behind General Trade or the proceedings more generally, notwithstanding the fact that the firm might recover a substantial sum in the event of General Trade's success. 139 Even if Clifford Gouldson was assumed to be "standing to benefit" or "standing behind" in the relevant sense on account of its acting for General Trade on a speculative basis, its unwillingness to provide security might well be considered reasonable in the circumstances. It is possible to suppose that a law firm would have good commercial reasons not to put up a significant sum by way of security for costs on behalf of a client, given the effect this might have on its cash flow. This is particularly so when the firm has not been able to recover any of its own fees from that client, and runs the risk of recovering nothing from the proceedings at all. 140 Mr O'Shea KC submitted that the solicitors' unwillingness could not be reasonable because General Trade had already sued AGL unsuccessfully in the Queensland Supreme Court, both at first instance and on appeal, and then gone into liquidation, with none of the costs of those proceedings having been paid. If the effect of this submission was intended to be that Clifford Gouldson could not reasonably refuse to provide security here because they have acted for General Trade previously in circumstances that led to AGL being unable to recover costs that it was awarded, the submission should not be accepted. While the result of the prior proceedings might conceivably be relevant to the overall exercise of the Court's discretion to award security for costs in this proceeding against General Trade, it cannot readily be understood to bear on the reasonableness of Clifford Gouldson's unwillingness to provide security for costs itself. The position might be otherwise if the solicitors' conduct in the prior proceedings supported a conclusion that they were standing behind General Trade to a significant extent in the present litigation. But the evidence does not seem to go so far; the observation that Clifford Gouldson previously acted for General Trade in an unsuccessful claim against AGL is too far divorced from the conclusion that the firm should now be required to put up its own funds by way of security for costs. 141 Accordingly, Clifford Gouldson cannot be required to contribute to, or reasonably be expected to provide, the further security for costs sought by AGL.

The liquidator 142 As noted above, the liquidator of General Trade is Mr Stimpson of SV Partners. The position of SV Partners with respect to the provision of security for costs was established in evidence by the affidavit of Mr Matthew Bookless (a Director of SV Partners) dated 24 February 2023. He deposed that: (a) SV Partners and its parent company, SVP Group Pty Ltd (SVP Group), were unwilling and unable to fund security for costs; (b) Mr Stimpson and his staff at SV Partners had undertaken, and would undertake, a significant amount of work in the liquidation of General Trade that would not be met by the funds presently in the liquidation; (c) Mr Stimpson's and SV Partners' remuneration was only expected to be recovered, in part or in full, upon a successful outcome in the proceeding; (d) SV Partners' outstanding work in progress for the matter was $171,000; (e) SV Partners and SVP Group have an informal policy not to fund proceedings, especially in an amount of approximately $700,000 (roughly the amount sought by way of the present application); (f) providing such funding would impose a heavy burden on SV Partners' and SVP Group's ordinary business operations from a cash flow perspective; and (g) an ethical problem could arise if SV Partners and/or SVP Group funded the proceeding and stood to recover those funds, in the event of a successful outcome, in priority to other creditors. 143 In its written submissions, AGL contended that General Trade's liquidator was in essentially the same position as its solicitors. It was submitted that it was incumbent upon General Trade to establish that SV Partners was unable or unwilling to fund the litigation, and that any such evidence would have to be reconciled with the liquidator's apparent willingness to continue to conduct the proceedings without immediate payment. 144 Mr O'Shea KC submitted that SV Partners' $171,000 in current outstanding work in progress reflected a benefit liable to accrue to it upon General Trade's success in the proceedings. Despite standing to receive that benefit, SV Partners was effectively "shirking the burdens" by taking the position that it was unwilling to provide security. SV Partners could not be said to be an arm's length creditor, as it was continuing to put resources into the litigation, and in those circumstances its unwillingness to provide security was unreasonable. 145 In response, General Trade submitted, essentially, that SV Partners did not "stand behind" General Trade in the relevant sense, such that it was inappropriate to treat it as a potential candidate to provide security for costs. In any event, there was evidence in the proceedings, in the form of Mr Bookless' affidavit, that the liquidator was unwilling and unable to fund the litigation. As pointed out by Mr Wood SC, there was no attempt to cross-examine Mr Bookless as to this asserted unwillingness or inability. 146 Mr Wood SC also drew attention to the decision of Doyle CJ in Imagecolor (SA) Pty Ltd (in liq) v Haslam [2002] SASC 200 (Imagecolor). There, the liquidator of the plaintiff had accepted, under an arrangement with the Committee of Inspection, to receive a share of the proceeds of the litigation in substitution for any claim for remuneration that might otherwise have been made on a time basis. It was contended by the defendants, on an application made by them for security for costs, that the effect of the arrangement was that the liquidator had acquired an interest in the claim or in its proceeds and was accordingly "in the same position as a creditor of the company or as an outside funder of the litigation who has funded the litigation with a view to financial gain": at paragraph [30]. The defendants submitted that the liquidator was now a person whose means were to be considered in deciding whether the making of the order for security would frustrate the proceedings. 147 That submission was rejected. The Chief Justice found at paragraph [34] that there was "no difference of substance" between the liquidator in that case and "a liquidator who is charging on a time basis, whose fees are unpaid, and whose only prospect of recovering the fees is from the proceeds of litigation before the court". It is relevant to note in passing that, in the present case, Mr Stimpson and his firm are in precisely this latter position. His Honour proceeded in the same paragraph to note that the defendants had not suggested that the means of a liquidator in this latter position were to be treated as relevant when considering whether the making of an order will frustrate the litigation. The ultimate conclusion on the point was stated at paragraph [36] in the following terms: I find no reason in this to regard the liquidator as a person whose means are to be treated as relevant in deciding whether the making of an order for security will frustrate the litigation. I consider the position of an outside funder of the litigation as quite different. Such a person does not have the responsibilities of a liquidator. Such a person makes a commercial decision to fund the litigation in the hope of financial gain. 148 The position of Mr Stimpson, SV Partners and SVP Group in the present case is materially the same as the position of the liquidator in Imagecolor, and the application here of the reasoning of Doyle CJ would lead to the same conclusion as was reached in that case. The liquidator and his firm are not persons or entities whose means are to be treated as relevant in deciding whether the making of an order for security will frustrate the litigation. 149 Imagecolor is not an isolated authority. It is cited in Dal Pont, Law of Costs (LexisNexis, 5th ed, 2021) at 1105 [29.64] for the proposition that: … the fact that a liquidator agrees to be paid out of the proceeds of proceedings he or she causes the company to bring does not create in the liquidator an interest in the proceedings sufficient to justify a security for costs order against him or her 150 Another statement to similar effect was made by Mullins J (as her Honour then was) in Mt Nathan Landowners. At paragraph [35], her Honour explained, making reference to the facts of that case: The sixth defendant argues that Mr Geroff [the liquidator] stands to benefit from the proceeding by receiving fees for the work he does in relation to the proceeding and that he should offer to provide security for costs or subordinate the mortgage to secure his fees which he has obtained from Mrs Etridge, so as to enable Mrs Etridge to provide security for costs. Mr Geroff is carrying out his duties as liquidator of the plaintiff in causing the proceeding to be pursued by the plaintiff and will be entitled to seek payment for work which he does. It is not a proper characterisation of his role to describe him as a person who "benefits" from the proceeding in the sense that is used for identifying persons against whom security for costs can be sought. 151 While I am not strictly bound to follow the conclusion indicated by these authorities, there are good reasons in policy to do so. Fundamentally, the liquidator owes a duty to act in the interests of the company and its creditors. If the company is ordered to provide security for costs wholly or partly on account of the liquidator's standing to benefit from its success in the proceeding, a potential conflict necessarily arises. The liquidator, acting in the interests of the company and its creditors, will effectively be compelled to put up a sum for that security, else the litigation will be stayed and may come to nothing. Where the amount of the security is significant relative to the liquidator's own funds on hand, as is suggested to be the case here, there arises an immediate incentive for the liquidator to settle or compromise the proceeding, whether or not that course is strictly in the interests of the company and its creditors, in order to ensure that its own short-term financial position is not impaired. It is no answer to this dilemma to suggest, simply, that the liquidator should be prepared from the outset of the litigation to bear the burden of putting up the necessary funds. The liquidator, when commencing proceedings on behalf of a company in the performance of a statutory function, cannot reasonably be taken to assume the risk that they will be required to expose their own assets in the proceeding to a potentially significant extent, which cannot accurately be predicted in advance. 152 For this reason, it will not ordinarily be appropriate to take into account the means of the liquidator in determining whether an order for security for costs will stifle proceedings brought by an impecunious corporate applicant. There is nothing in the present case to suggest that any other conclusion is warranted in respect of Mr Stimpson, SV Partners or SVP Group.

The shareholders 153 As mentioned above, there are 5001 shares in General Trade. Of those shares, 5000 are held by Mr Geoffrey Pike and 1 is held by Pike & Co Pty Ltd as trustee for the Pike Investment Trust. The sole beneficiary of the Pike Investment Trust is Mrs Charmaine Pike, the wife of Mr Geoffrey Pike. 154 Two affidavits of Mr Pike were relied upon in connection with this application, dated 23 December 2022 and 10 February 2023. Both made reference to an earlier affidavit sworn by Mr Pike in this proceeding, dated 11 October 2022. 155 Much of Mr Pike's 23 December 2022 affidavit was concerned with responding to the affidavit of Mr Hamish Macpherson dated 2 December 2022, filed by AGL in support of this application. That material is irrelevant to the question of whether General Trade has sufficiently demonstrated that the proceeding will be stifled by an order that it provide further security for costs. The remainder of the affidavit addressed directly that anticipated stifling effect. In summary, Mr Pike deposed that: (a) he has provided financial support to General Trade in connection with the Project, which exposed him to considerable personal liabilities and ultimately resulted in his bankruptcy; (b) none of General Trade's external creditors were willing to assist in funding the $70,000 in security for costs previously ordered to be provided in this proceeding; (c) instead, he obtained a facility funded by friends and relatives to meet the order for security for costs, which caused him to incur further personal liability and commitment; and (d) he is not capable of extending that commitment, nor could he obtain a further loan to meet any order that further security be provided. 156 Mr Pike deposed, however, that he stands to receive a personal cash benefit in the event that General Trade is wholly successful in the matter. Specifically, his trustee in bankruptcy would receive a surplus in the order of $2 million in connection with his 5000 shares in General Trade, and he would receive a surplus in the order of $1 million after his trustee in bankruptcy resolved all claims. 157 He further deposed that his trustee in bankruptcy has contacted all of his creditors who stand to benefit should funds fall to his bankrupt estate to enquire whether they are willing to fund the litigation, but none have come forward. 158 In his 10 February 2023 affidavit, Mr Pike set out in some detail his present financial position, including his income, expenses, assets and liabilities. Unfortunately, several of the matters to which he referred were not supported by primary documents that might be expected in an affidavit of this kind, such as payslips, bank statements or tax returns. Nevertheless, the veracity of the evidence was unchallenged and it can be accepted that he presently has a modest income which goes almost entirely to meeting his various expenses. His assets are similarly modest, while his liabilities are comparatively considerable, including various loans from his parents and his wife which were obtained for the purposes of funding this proceeding. He deposed, in this connection, that his parents and his wife have both said that they will not lend him any more money. 159 In its written submissions AGL indicated that it did not challenge Mr Pike's evidence that he was without the means to provide security for costs. General Trade, in its written submissions, noted this and pointed out that Mr Pike has gone to some lengths already to fund the litigation, in spite of his limited means. 160 At the hearing, however, Mr O'Shea KC made submissions to the effect that Mr Pike stands to receive a significant financial benefit from this litigation. In support of this contention, he drew on Mr Pike's evidence to that effect in his 23 December 2022 affidavit, as well as a letter from SV Partners to the Deputy Commissioner of Taxation, which was exhibited to the affidavit of Mr Harron dated 10 February 2023. That letter stated, in relation to the funding of the litigation to that point, as follows: The Company's former director, Geoffrey Pike, has provided an indemnity up to an agreed amount of $170,000. The funding agreement provides for distribution to occur in the following priority in the event of a successful outcome: i. Repayment of the amount funded under the agreement (including any supplement funding) and interest at the rate of 10% per annum; ii. The liquidator's fees and costs and the legal fees to rank pari passu; iii. The director's entitlement equal to 30% of the balance after payments in i and ii above; and iv. The balance to be paid to the Liquidator. 161 In response, Mr Wood SC, whilst acknowledging that Mr Pike did have a modest income and an interest in the proceeding, submitted that Mr Pike was nevertheless unable to fund the litigation further. He also submitted that, to date, Mr Pike had personally funded the litigation to a considerable extent and, for that reason, could not be said to be using General Trade as a "stalking horse". On the contrary, his personal interest in the litigation (albeit a "derivative" interest in some respects) stood to be stifled in a manner that would prejudice him severely. 162 In light of the principles set out above, it can be concluded that General Trade has demonstrated that it would be unreasonable to expect Mr Pike to provide the further security for costs sought by AGL. The evidence as to his want of means was unchallenged by AGL. The fact that he might stand to receive some benefit from General Trade's success in the proceedings is rendered less relevant in light of that conclusion as to his financial capacity. His personal impecuniosity, quite simply, makes it impossible for him to put up the further security for costs sought in this application, especially in the amount now sought by AGL. 163 In addition to the evidence of Mr Pike, General Trade relied upon two affidavits of Mrs Pike dated 16 December 2022 and 10 February 2023. Both were very concise and across them Mrs Pike deposed that: (a) she is currently employed at Thargomindah General Store as a Finance Officer, and has insufficient financial means to fund, or support the funding of, this proceeding; (b) she holds no shares or financial interest in General Trade, but is a beneficiary of the Pike Investment Trust; (c) the trustee of the Pike Investment Trust, Pike & Co Pty Ltd, owned one Class A share in General Trade and was a creditor of General Trade in the amount of $2,720.01, though this was not reflected in its accounts; (d) the limited rights attached to the one Class A share meant that, even if General Trade was wholly successful in the proceeding, there was no guarantee that Pike & Co Pty Ltd or the Pike Investment Trust would receive any return on any contribution made to the funding of the proceeding; and (e) she was not prepared to loan any further funds to Mr Pike for the proceeding. 164 The evidence in relation to Mrs Pike's financial position was less than "full and frank", as the authorities would ordinarily require. However, AGL did not challenge it, nor did it make any submission to the effect that it would be reasonable to expect Pike & Co Pty Ltd, the Pike Investment Trust or Mrs Pike to put up security for costs. In any event, there is some force in Mrs Pike's evidence to the effect that the benefit that those entities stand to receive from General Trade's success in the litigation is so slight as to make it commercially unviable for them to contribute towards the significant amount of further security for costs now sought. That should be accepted, and it would be unreasonable to expect them to provide security.

Litigation funders 165 In its written submissions, AGL contended that, in order to establish that the litigation would truly be stifled by an order for further security for costs, General Trade needed to put on evidence as to the enquiries that it had made of litigation funders in relation to the proceeding. In support of that proposition it relied on the following passage from the judgment of Palmer J in Kavcor Pty Ltd (in liq) v Kavanagh [2005] NSWSC 1163 [14]: Before the Court could be satisfied that Kavcor [the corporate plaintiff in liquidation] has a claim deserving of prosecution and that insurmountable impecuniosity will stifle it if a security for costs order is made, the Court would need evidence as to the circumstances in which the Liquidator has endeavoured unsuccessfully to procure litigation funding from Kavcor's creditors; it would need evidence explaining why commercial litigation funding is unavailable or inappropriate. In short, the Court requires evidence to satisfy it that insurmountable impecuniosity justifies departure from the usual requirement that a company in liq provide security for the costs of its litigation. 166 The principles set out in this passage are supported by several subsequent authorities, and can be taken as uncontroversial: see, eg, Duke Holdings Ltd (in liq) v Duke Group Ltd (in liq) [2009] SASC 245 [39] - [40] per White J. In this Court, in Madgwick v Kelly, albeit in the class action context, Allsop CJ and Middleton J stated as follows at 19 [77] - [78]: [77] … The applicants adduced no evidence as to whether litigation funding had been sought; and, if not, why not; and, if so, with what result. The costs agreements contemplated the possibility of litigation funding at a later stage, after a (presumably unsuccessful) mediation. Presumably, the introduction of such an external commercial funder would reduce the available funds for group members on success. That would be a relevant commercial consideration. There may be others. The evidence was silent on the matter. We should not be taken as advocating a rule that a step such as the retention of litigation funding should always be taken to avoid an order for security. This, however, when all is said and done, is a piece of commercial litigation. Investors with sufficient income or assets to protect entered commercial arrangements, many for hoped for taxation advantages. They now seek to engage in commercial litigation to repair perceived wrongs attending the entry into the arrangements. It is not unreasonable to want to understand, in the balancing of the interests of the parties, what has been done, if anything, about commercial funding of the litigation. Without that knowledge, at least in a case such as this, one cannot conclude that the proceedings would be stifled by any order for security. [78] These considerations in part underpin our conclusion that the primary judge could not be satisfied that the litigation was likely to be stifled, in the absence of any information about litigation funding, other than the fact that there was none on foot. 167 The applicability of their Honours' remarks in the present circumstances is not diminished by the difference in context. As a general proposition, where it is alleged in commercial litigation that an order for security for costs against an impecunious applicant will stifle the proceeding, it will be incumbent on that applicant, as a step ancillary to its proving that it is unreasonable to expect those who stand behind it and will benefit from the litigation to provide security, to adduce cogent evidence explaining what attempts it has made, or others have made on its behalf, to obtain litigation funding from a commercial provider. 168 The reason for this is not difficult to appreciate. Where an impecunious applicant has successfully sought litigation funding, the litigation funder will almost invariably have the means to provide security, be an entity that is "standing behind" the applicant in the relevant sense, and also stand to benefit from any recovery by the applicant in the proceeding. In short, it will very rarely, if ever, be unreasonable to expect the funder to provide security. That conclusion can also be reached on policy grounds, as explained by Hodgson JA (with whom Campbell JA agreed) in Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd (2008) 67 ACSR 105 at 120 - 121 [51]: [I]n my opinion a court should be readier to order security for costs where the non-party who stands to benefit from the proceedings is not a person interested in having rights vindicated, as would be a shareholder or creditor of a plaintiff corporation, but rather is a person whose interest is solely to make a commercial profit from funding the litigation. Although litigation funding is not against public policy …, the court system is primarily there to enable rights to be vindicated rather than commercial profits to be made; and in my opinion, courts should be particularly concerned that persons whose involvement in litigation is purely for commercial profit should not avoid responsibility for costs if the litigation fails. 169 Considering that a commercial litigation funder is such a clear candidate to meet an order for security for costs, it is not open to an impecunious applicant in a commercial case to complain that the proceeding will be stifled by such an order in circumstances where it has failed to pursue the possibility of funding. The applicant should not be permitted to advance its position by relying upon what is, in effect, its own default in the prosecution of its case. 170 Here, after the delivery of AGL's written submissions, General Trade filed the affidavit of Mr Humphries dated 24 February 2023, who, as solicitor for General Trade, deposed to his firm's attempts to procure litigation funding for this proceeding from two entities: Pretium Litigation Funding (PLF) and LCM Finance (LCM). 171 PLF was contacted by a representative of Clifford Gouldson on 25 February 2022 and various documents central to the proceeding were provided by to it. On 16 March 2022, in a videoconference between representatives of those parties, PLF effectively communicated that it did not wish to fund the action. Clifford Gouldson did not hear from PLF after that conference. 172 LCM was contacted by a representative of Clifford Gouldson on 1 March 2022. It, too, sought and received various documents relevant to the proceeding. However, on 12 April 2022, it advised by email that it would not be offering to fund the action as the claim did not meet its litigation funding criteria. 173 Questions might reasonably be asked as to the sufficiency of this evidence. In the first place, by the time the present application was heard, the events deposed to by Mr Humphries had taken place over a year previously. Furthermore, it would be difficult to conclude that General Trade (through Clifford Gouldson) had exhausted all reasonable avenues of procuring commercial litigation funding merely by contacting two funders. Finally, the reasons given for PLF's and LCM's refusal to provide litigation funding were not set out in any detail, leaving open the possibility that they might have been peculiar to those funders and not shared by others, had General Trade (or Clifford Gouldson on its behalf) taken steps to approach them. 174 While it is best to avoid being overly prescriptive about how far an applicant ought to go to obtain commercial litigation funding, it is perhaps to be expected, at a minimum, that its evidence discloses that it has made a reasonable attempt to do so. This is essentially the same standard as was proposed above in relation to the extent to which the applicant must try to contact its unresponsive creditors to confirm their position with respect to the funding of the litigation. 175 Again, what is "reasonable" will, of course, depend on all of the circumstances. It may be relevant to consider how many funders the applicant has approached, and over what period of time, both before the proceeding and during its pendency. The number might be smaller, and the time period of less relevance, where the initial funders approached by the applicant did not entertain to any meaningful extent the possibility of funding the proceeding. There is no reason to require an applicant who has already been turned down in no uncertain terms to continue a quest for funding that is likely to prove futile. On the other hand, if the initial funders turn down the applicant for merely technical or procedural reasons or, for instance, due to capacity constraints, it might be reasonable to expect that, as the litigation progresses, additional funders will be approached. For this reason, it is important for the applicant's evidence as to its attempts to secure funding to explain, so far as is possible, the reasons why funding was refused. 176 Here, AGL made no submissions as to the sufficiency of General Trade's attempts to obtain funding from PLF and LCM and the point was not addressed in any detail at the hearing. In these circumstances, it can be concluded that there is enough unchallenged evidence to conclude that General Trade has made a reasonable attempt to secure commercial litigation funding. This point accordingly does not weigh against any conclusion that the litigation would be stifled by an order for security for costs. 177 It can be added that the reasonableness of any attempts to secure funding will be coloured by the nature of the case at hand. Experience would suggest that the present action is not of the type that might normally attract funders since, variously: the costs of running the case would be high compared to the best potential outcome; it is a case where the prospects of success are not easily ascertained; the likely quantum of the claim is spread across a number of different factual scenarios; and, to some extent, the case will turn on the acceptance of the veracity of the evidence of Mr Pike. 178 In the circumstances, I suspect that Mr O'Shea KC was correct not to suggest that insufficient attempts had been made to obtain funds.

Conclusion as to the stifling effect of the order for further security for costs 179 For the reasons set out above, none of the persons or entities identified as potentially standing behind General Trade, or standing to benefit from its success in the litigation, can reasonably be expected to put up funds to meet the order for further security for costs sought by AGL. Accordingly, it can be concluded that this proceeding will be stifled if General Trade is ordered to provide that further security. This conclusion weighs against the making of such an order.

The ability of General Trade to fund the litigation to completion 180 In addition to the matters set out above, AGL raised as a relevant consideration that General Trade's evidence did not establish how it intended to fund the proceeding to completion. It pointed, in particular, to the lack of explanation for the funding of disbursements, such as Counsel's fees, court listing fees, transcript fees and expert witness fees. In the course of the hearing, Mr O'Shea KC further identified specific expenses and amounts that he alleged General Trade might be unable to meet. The overall submission was that the order for further security for costs could not be said to threaten to stifle the proceeding if the proceeding could never be run to completion in the first place. 181 For this submission, reliance was placed on the judgment of Parker J in Longjing at paragraphs [56] - [58]. By way of necessary background to that passage, in that case the plaintiff had been ordered to provide security for costs by a decision of the Registrar. It applied for review of that decision and otherwise failed to obey the order. The decision of the Registrar was ultimately stayed, pending the review, on the condition that the plaintiff provide $22,500 in security for the defendant's costs of the review application. That interim security was provided, but the origin of the funds was not made clear in the evidence. The relevant portion of Parker J's judgment proceeded as follows: [56] SR [the solicitors for the plaintiff] are apparently still deferring payment of their fees, but there are expenses of litigation beyond the solicitor's own fees which cannot be deferred. How are disbursements such as hearing allocation fees going to be funded? And what about counsel's fees? The evidence before me shows that at least some of counsel's fees have been paid out of the China Grand settlement. There is no evidence that counsel have agreed to defer their fees. A full understanding of how the proceedings are to be funded is important. There is no point in refusing security at this stage if the expenditure necessary to carry the proceedings through to completion cannot be funded and the case may collapse at a later point anyway. [57] Mr Ryckmans' [a principal of the solicitors for the plaintiff] affidavit was sworn on 22 June. Mr Ryckmans said that his firm was not prepared to increase its financial exposure by meeting payment of any security for Perpetual's costs at all. Yet, subsequently, the sum of $22,500 has been provided. The evidence does not allow a finding as to where that money came from but whoever did provide the money appears to have calculated that it was worth doing so to preserve Longjing's right to challenge the security order. [58] In my view, considerations like this show that where a respondent to an application for security claims that an order for security will stultify the proceedings, it is incumbent on that respondent to provide a full explanation of how the proceedings are to be funded to completion. To use the language in Bell Wholesale v Gates Export, it should be seen as an essential part of the case of a company seeking to resist an order for security to prove all the necessary facts in this regard. The Court should also recognise that evidence from creditors that they are unwilling to fund security is inevitably self-serving, and that it is often not until security is actually specified and ordered that one finds out exactly how much those who stand behind the litigation are really prepared to pay. 182 Both parties to the present case were content to make submissions based on this passage, and no other relevant authority was drawn to the attention of the Court. There is no clear indication that the rule proposed in the judgment of Parker J, that, "where a respondent to an application for security claims that an order for security will stultify the proceedings, it is incumbent on that respondent to provide a full explanation of how the proceedings are to be funded to completion", had any particular life in the prior case law. It has surfaced only three times since the judgment in Longjing: twice in other judgments of Parker J, in Union Steel [89] and Chen v Golden Land Enterprises Pty Ltd (No 2) [2022] NSWSC 985 [93] (Chen); and once in the judgment of Irving AsJ in Gold Village Pty Ltd (in liq) v Sharma [2021] VSC 600 [33]. 183 With respect, there are good reasons to doubt the appropriateness of the proposed rule. 184 At the outset, the proposition in paragraph [56] of Longjing that "[t]here is no point in refusing security … if the expenditure necessary to carry the proceedings through to completion cannot be funded and the case may collapse at a later point anyway" may run contrary to the well-established policy considerations that lie beneath the rules and principles that apply where an order for security for costs is sought against an impecunious corporate applicant. As explained above, the prevailing policy concern in such a scenario is that the company is being used as a "stalking horse" in the proceeding, allowing persons standing behind it or standing to benefit from its success in the litigation to pursue their claims whilst avoiding any exposure to the ordinary risks of litigation. That concern is allayed by evidence tending to demonstrate that the company is not a mere stalking horse; including, in particular, evidence that the persons behind it cannot reasonably be expected to provide security themselves. The inquiry should begin and end there. Further evidence as to whether the company is or is not able to fund the proceeding to completion does not bear upon that central question. Even if it was to be assumed that the company, at the time that the application for security for costs was brought, had no particular means or strategy whatsoever to fund the matter through to a final hearing and determination, it could not be accused on that basis of being a nominal litigant fighting only on behalf of those behind it. 185 It might be thought that, even if that underlying "stalking horse" policy concern was to be addressed by other evidence, the further evidence as to the applicant's ability to fund the proceeding to completion would at least be a valuable consideration in the exercise of the broader discretion to order security for costs. But, upon closer analysis, it is not apparent that this is the case. In fact, it seems that requiring the applicant to adduce the evidence contemplated by the proposed rule is liable to do more harm than good. 186 If the impecunious corporate applicant is able to resolve the preliminary "stalking horse" policy concern by resort to other evidence in the proceeding, for instance its evidence that those standing behind it are equally without means and are not using the privilege of limited liability as a shield for their assets, then, for reasons explained earlier in this judgment, there is no particular reason to treat that applicant any differently to an impecunious individual applicant in the same position. It follows that considerations of access to justice will be engaged at this juncture: the impecuniosity of the company should not, in and of itself, be a bar to its claim. Access to justice now being the lead policy concern, one might reasonably ask why the company should be put to the task of proving how it will fund the proceeding to completion, this task no doubt having the potential to be quite burdensome and to involve a fair measure of speculation and uncertainty. One might ask all the more pointedly why, if the company fails to provide such proof, it should be told that "there is no point in refusing security" and on that basis face an increased prospect that security for costs will be ordered against it and its case stultified. That would, contrary to the prevailing policy concern, make the applicant's impecuniosity a factor tending to bar its claim. 187 If, on the other hand, the applicant's other evidence is not sufficient to resolve the "stalking horse" policy concern, then that will ordinarily afford near-decisive reason to grant the order for security for costs against it. There is no apparent need, then, to have resort to further evidence as to the applicant's ability to fund the proceeding to completion. That further evidence is liable to create what is, essentially, an immaterial side issue in the proceeding and in that way needlessly consume the parties' time and costs. 188 Accordingly, evidence of the applicant's ability to fund the proceeding will, at best, add little to the exercise of the Court's discretion. At worst, requiring such evidence to be adduced by the applicant may tend to undermine the Court's interest in ensuring access to justice, thereby contradicting one of the most fundamental policy interests underlying this area of law. 189 The same result can be reached by interrogating the policy rationale for the proposed rule. While it was not stated by Parker J, one might infer that it is that the court should be less inclined to refrain from ordering security for costs when there is no evidence to suggest that the matter will progress much further. If that is indeed the underlying policy, then the proposed rule cannot successfully navigate between the two perils indicated above. If the applicant does enough to show that it is not a stalking horse by adducing other evidence as to the inability or reasonable unwillingness of those standing behind it to put up security, then the proposed rule clashes immediately with the concern in ensuring access to justice. It would seem to suggest, improperly, that the interest of the impecunious applicant in attempting to litigate its case must be subordinated to the interest in ensuring that the parties do not waste any additional time and costs on the litigation given the prospect that the applicant will not be able to advance the proceeding to its conclusion. If, instead, the applicant is found to have failed to discharge the burden of demonstrating that it is not a stalking horse, then the proposed rule is essentially immaterial; the evidence produced in compliance with the rule would add little, if anything, to the strength of that prior conclusion in influencing the exercise of the discretion to order security. It is liable to prove a distraction. 190 It is arguable that paragraphs [57] and [58] of Parker J's judgment in Longjing suggest an alternative rationale for the proposed rule; being to ensure that possible sources of funds available to meet an order for security for costs are flushed out in the evidence. His Honour seemed to have been concerned in that case that the amount of $22,500 was put up, apparently without explanation, to meet one order for security for costs, despite the plaintiff continuing to claim that such an order would stifle the litigation. It is perhaps for this reason that he also recognised that "evidence from creditors that they are unwilling to fund security is inevitably self-serving" and that "it is often not until security is actually specified and ordered that one finds out exactly how much those who stand behind the litigation are really prepared to pay". These concerns are, of course, legitimate. However, it is not apparent that they are properly to be addressed by requiring the applicant to provide evidence as to how it will fund the proceedings to conclusion. 191 It is an inherent limitation of almost all evidence that it might, in truth, be self-serving or less than full and frank. However, it is for this reason that evidence can be tested by cross-examination. Such limitations cannot be cured by requiring more evidence to be put on which is equally susceptible to the same vices. This is particularly so when, as is the case here, the proposed additional evidence is likely to be speculative in nature. By way of example, in the hearing of this application, Mr O'Shea KC pointed out that there was no evidence as to whether or not General Trade in future intends to engage Counsel to assist in preparing for and running the final hearing of the matter. But it might be thought that General Trade will, in a sense, cross that bridge when it comes to it; that is, it will decide as the trial progresses whether it needs to engage Counsel, assess its ability to do so having regard to its means at the relevant time, and, if necessary, muster further resources in order to meet the expense. In the same way, it may take steps to pay the necessary Court fees as they arise, based on its financial circumstances when they do. Evidence produced right now as to what expenses General Trade expects in future to incur and when, and how it expects to meet those expenses at those specific times, is unlikely to be especially probative. It could not reasonably be expected to reveal any source of funds available to it for the purposes of this security for costs application that is not already apparent on the existing evidence. 192 A further difficulty with the proposed rule is that it is almost impossible to speculate as to what may become available to the applicant in the future, particularly while the applicant is in the process of confronting the security for costs application. The making of an order for security for costs quite often has a cataclysmic impact on litigation. It is not uncommon for such an order to bring proceedings to an end. However, if the application for security fails, it can be expected that those who were previously sceptical about acting on a "no-win-no-fee" basis will become less averse. It is pellucid that solicitors and counsel would be more prepared to risk the provision of their services to a litigant where the prospect of the proceeding being brought to an end by an application for security for costs has passed. It is substantially more unlikely that they would be prepared to commit to a position in advance of the security for costs application having been heard. The rule proposed in Longjing would therefore seem to require the applicant to put on certain evidence at a time when it is particularly poorly placed to do so. 193 Finally, there is the proposition offered by Mr O'Shea KC, that the order for security is not going to stifle the proceeding if the proceeding is not going to run. It is not immediately clear that this proposition appropriately captures the rule proposed in Longjing. If the impecunious applicant fails to adduce the evidence sought by Parker J, there may be a want of proof that the proceeding will run to completion. But that is not proof that it will not. There is no more than a prospect that it will not, albeit that it might be considered a more likely prospect on account of the applicant's impecuniosity. Accordingly, the foundational assumption for Mr O'Shea KC's proposition, that the proceeding is not going to run if the applicant does not put on evidence of its means to fund the litigation to completion, is unsound. If that assumption is corrected to account for the prospect that the proceeding will run to completion, despite the want of evidence as to how exactly that will occur, then, contrary to the first part of Mr O'Shea KC's proposition, there is a tangible stifling effect. The corrected proposition may be put this way: the order for security is going to stifle the proceeding since, if it is not made, there remains a prospect (albeit, perhaps, a relatively limited one) that the proceeding is going to run. The mere possibility, or even probability, that the proceeding might not run to completion is not a justification for the making of an order likely to compel that result. 194 For these reasons, I respectfully decline to apply the rule proposed by Parker J in Longjing and referred to in the subsequent cases discussed above. In doing so, I keep in mind the standard of disagreement with that view that it has been suggested must be reached: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89. General Trade was not, and ought not to have been, required to prove how it intends in future to fund the progression of this proceeding to trial. Its failure to put on evidence going to that question has no effect on the finding that the order for further security for costs sought by AGL in this case is likely to stifle this proceeding.

Is the stifling effect of the order to be treated as dispositive? 195 This question may be addressed briefly, because the authorities point consistently to a negative answer, contrary to General Trade's submissions. The discretion to order security for costs, whether under s 56 of the Federal Court Act or s 1335 of the Corporations Act, is unfettered. Any contention that the stifling effect of the order for security for costs alone should be treated as dispositive would see the discretion impermissibly fettered and, for that reason, cannot be accepted as a matter of principle. In any event, the case law makes clear that there is no such dispositive effect. In Yandil, Clarke J stated in no uncertain terms at 545 that: The fact that the ordering of security will frustrate the plaintiff's rights to litigate its claim because of its financial condition does not automatically lead to the refusal of an order. 196 This statement has been cited or quoted with approval on numerous occasions, including in this Court: see, eg, KP Cable at 197; Bryan E Fencott at 513. See also Live Board Holdings [92] - [93]. 197 Accordingly, whilst it has been found that the order for further security for costs sought by AGL in this case will have the effect of stifling General Trade's proceeding, that finding is only one factor bearing on the Court's exercise of its discretion. It is necessary, here, to weigh that factor against the other significant factor raised in the parties' submissions, being General Trade's prospects of success in this litigation.

General Trade's prospects of success 198 As set out above, the Further Amended Statement of Claim filed by General Trade contained two overarching claims: the Unconscionable Conduct Claim and the Additional Work Claim. AGL submitted that both had poor prospects of success, which weighed in favour of a grant of further security for costs. Mr O'Shea KC submitted at the hearing that it was possible to make an informed assessment of the strength of General Trade's case, notwithstanding the relatively early point at which it was to be assessed for the purposes of this application. 199 In support of this, AGL relied on the affidavit dated 2 December 2022 of Mr Hamish Macpherson, a Partner of King & Wood Mallesons, the solicitors for AGL. Mr Macpherson deposed at some length to a variety of matters related to the application for further security for costs. Objection was taken by Mr Wood SC to large parts of the affidavit on the basis that they were inadmissible. It is appropriate to say something about this objection before turning to consider the applicable legal principles and the more specific submissions made as to General Trade's prospects of success.

The affidavit of Mr Macpherson 200 Mr Wood SC identified 27 individual paragraphs in Mr Macpherson's affidavit that were allegedly inadmissible, as a whole or in part, on the basis that they purported to give legal opinions as to various matters, including the merits of General Trade's case, the commercial dynamics behind, and the interpretation of, the Construction Agreement, and the ultimate issues of fact and law to be determined by this Court at trial. He submitted that these paragraphs lacked probative value, as the Court did not require the opinion of a non-independent legal expert to reach its own conclusions on the matters that those parts of the affidavit purported to address. 201 While their admissibility was questionable, the paragraphs were not unhelpful in contextualising some of the issues in dispute in the proceeding. For that reason, in the hearing, I advised the parties that I would proceed on the basis that the contentious paragraphs of Mr Macpherson's affidavit, insofar as they contained anything more than admissible statements of fact, would be treated only as submissions made on behalf of AGL. That view was largely accepted by both parties in the hearing; however, Mr O'Shea KC did suggest that there might be pathways to the admissibility of the material under ss 79 or 135 of the Evidence Act 1995 (Cth) (Evidence Act). It is necessary to address that suggestion, given the consequence of the stance otherwise taken towards the evidentiary value of Mr Macpherson's affidavit. 202 By reason of s 76(1) of the Evidence Act, evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion was expressed. Section 79(1) of the Evidence Act provides an exception to this default rule, applicable where the evidence in question is expert opinion evidence: the person proffering the opinion must have "specialised knowledge" that is "based on their training, study or experience", and the opinion must be "wholly or substantially based on that knowledge". If evidence is found to be admissible, the Court retains a general discretion to refuse to admit it pursuant to s 135 of the Evidence Act. 203 In the present case, not all of the paragraphs referred to by Mr Wood SC are clearly statements of opinion, though many are susceptible to that description and are squarely caught by s 76(1). Section 79(1) is the only conceivable gateway to the admissibility of the paragraphs falling within that latter category. Regrettably, it is not apparent that Mr Macpherson contemplated that the material in his affidavit would need to pass through this gateway in order to be admissible, and there are multiple reasons why certain paragraphs cannot do so. 204 Without going through each of those reasons and applying them specifically to the paragraphs in question, it suffices to observe that, in the case of several of the paragraphs, Mr Macpherson has impermissibly purported to opine as to matters that ought properly to have been left to this Court to determine. While s 80(a) of the Evidence Act provides that opinion evidence is not inadmissible only because it is about a fact in issue or an ultimate issue, this does not allow an expert to usurp the function of the arbiter of fact. Referring to that provision in Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 6) (1996) 64 FCR 79 (Allstate (No 6)), Lindgren J explained as follows at 83: In my view, those words are not apt to refer to expert legal opinion which impinges upon the essential curial function of applying law, whether domestic or foreign, to facts. … … It is fundamental that the ascertainment of the law relevant to a matter before a court and its proper application to the facts of the particular case are of the essence of the judicial function and duty. Although those processes are properly the subject of submission, evidence of opinion, whether as to the identification of the relevant law or as to its proper application, is not admissible. The rationale underlying this fundamental principle may be expressed in various closely related ways: to admit such evidence would be to permit abdication of the judicial duty and usurpation of the judicial function; such evidence cannot be allowed to be probative or to rise higher than a submission; such evidence is necessarily irrelevant. 205 In a number of paragraphs, Mr Macpherson purports to give evidence of his opinion as to the identification of the relevant law or its proper application. For instance: (a) In paragraph [15], he deposes that "I consider there are several issues with Claim 1" (this being General Trade's Unconscionable Conduct Claim). One of the "issues" is stated to be that "the Applicant is a corporation, and it is extremely difficult at law to demonstrate that a corporation is at a special disadvantage. Generally the bar to demonstrate 'special disadvantage' is high". This is squarely in the nature of a legal submission. Much of paragraphs [17] and [19] is to similar effect. (b) In paragraph [46], he deposes that certain provisions of the Deed of Release "in my opinion, extend to cover the claims the subject of this Proceeding". It is a question for this Court to determine whether the provisions have that effect. (c) In paragraph [61], he deposes that certain claims initially made by General Trade in this proceeding, but since abandoned in its amended pleading, were "unmeritorious at law, and wrong in fact". If it was relevant, that would clearly be a matter for this Court to determine. 206 It is consistent with the statement of Lindgren J in Allstate (No 6) to treat these paragraphs, and the various others to similar effect, as submissions only. They may, therefore, be considered alongside AGL's already quite detailed written submissions in relation to General Trade's prospects of success in this proceeding. Wherever reference is made to Mr Macpherson's affidavit in the remainder of these reasons, it will expressly be identified whether the material has been treated as a submission or as evidence.

Legal principles 207 In the exercise of its discretion to order security for costs, the court is entitled to consider the bona fides of the claim and its merits. However, in this Court, there is settled authority that, where a claim is prima facie regular on its face and discloses a cause of action, in the absence of evidence to the contrary, the court should proceed on the basis that the claim is bona fide with a reasonable prospect of success: Bryan E Fencott at 514; KP Cable at 197. To similar effect, it has been said that, in determining an application for security for costs, the Court should not embark upon a detailed consideration of the merits of the applicant's case where it is evident that the applicant's claims are bona fide and arguable: Hill v Zhang [2019] FCA 1562 [40] per Griffiths J; Chief Disruption Officer Pty Ltd as Trustee for the McDonald Family Trust v Michel, in the matter of Laava ID Pty Ltd [2022] FCA 148 [54] per Goodman J. 208 In a large number of authorities in this Court and others, it has been said that the applicant's prospects of success should be regarded as a "neutral" matter. Often cited for that proposition is the judgment of Austin J in Fiduciary v Morningstar at 574 [37] - [38] and the judgment of McClellan CJ at CL in Jazabas Pty Ltd v Haddad (2007) 65 ACSR 276 (Jazabas) at 296 [84]. This was precisely the approach taken by the primary judge, and subsequently approved by the Full Court, in Australian Equity Investors. At paragraph [15] of their Honours' joint judgment, they described the primary judge as having approached the matter "on the orthodox basis that, absent a claim for summary judgment, the prospects of success are ordinarily regarded as a neutral matter". 209 This statement must be considered in light of the more recent decision of Bathurst CJ, Leeming JA and Barrett AJA in Live Board Holdings. There, their Honours explained that Fiduciary v Morningstar and Jazabas should not be understood as supporting a proposition of general application to the effect that the strength of a claim is neutral so long as it is advanced bona fide and gives rise to real issues. Rather, it was said at paragraphs [98] - [99] that: [98] … It is true that in many cases it will not be possible to form a meaningful view as to the strength or weakness of a plaintiff's claim for the purposes of an application for security for costs. Such applications are ordinarily brought before pleadings are closed and evidence filed. But that does not mean that, for example, there may never be a case in which a court can be satisfied that an impecunious corporate plaintiff has prima facie a very strong case, such as to inform the exercise of discretion on an application for security for costs. The starting point in the exercise of discretion is the legislation conferring the power, not some gloss upon it. [99] The authorities on which the primary judge relied for the narrower proposition that the strength of a claim was neutral so long as it was advanced bona fide and gave rise to real issues should not be understood as denying an ability on the part of the Court, in an appropriate case, of relying on its assessment of the strength or weakness of the case, in accordance with UCPR r 42.21(1A)(a). … 210 As the final sentence of this extract indicates, their Honours were considering the discretion to order security for costs expressed in r 42.21 of the Uniform Civil Procedure Rules 2005 (NSW). That rule is differently structured to s 1335 of the Corporations Act and the relevant provisions of the Federal Court Act and Federal Court Rules, in that it sets out in r 42.21(1A) a number of matters to which courts in that jurisdiction can have regard in determining whether it is appropriate to make an order for security for costs, one of which is "the prospects of success or merits of the proceedings". However, the difference between the provisions is inconsequential. It is apparent from the authorities that this same matter can be taken into account in the exercise of the discretion under s 1335 of the Corporations Act and s 56 of the Federal Court Act, even though it is not identified expressly in the text of either piece of legislation. The question, then, is how the prior case law is to be approached in light of this decision. 211 The preferable conclusion is that the effect of the joint judgment in Live Board Holdings is not to contradict prior authorities, such as Australian Equity Investors, in which the prospects of the applicant's success in the proceeding were considered to be a neutral matter. It is better understood to be drawing attention to the danger that too readily defaulting to a conclusion of neutrality will have the consequence of impermissibly glossing the discretion, and will reduce any assessment of the merits of the case to an entirely perfunctory exercise. This is not to deny that it may be a rare case in which the court is capable of performing such an assessment, and it may be rarer still that the assessment identifies a claim of such strength or weakness as to affect the exercise of the discretion to order security for costs. But the exceptional nature of a claim that is "doomed to fail" or "obviously hopeless" on one hand, or enjoys "very serious prospects of success" on the other, does not make neutrality the rule: Cf Jazabas at 296 [84]; Power Infrastructure Pty Ltd v Downer EDI Engineering Power Pty Ltd [2010] FCA 1222 [22] per Katzmann J; Hells Angels Motorcycle Corporation (Australia) Pty Ltd v Redbubble Ltd [2016] FCA 530 [34] per Greenwood J. 212 One further point of principle merits discussion. At the hearing of the present application, Mr Wood SC for General Trade placed not insignificant emphasis on the fact that AGL had not brought any application for strike out or summary judgment in conjunction with, or prior to, its application for further security for costs. It was effectively contended that its failure to do so discredited its assertion that General Trade's claims were without merit. Reliance was placed on the statement of the Full Court in Australian Equity Investors as to the neutrality of the applicant's prospects of success as a factor affecting the exercise of the discretion to order security for costs "absent a claim for summary judgment", as well as the statement in Dal Pont, Law of Costs (LexisNexis, 5th ed, 2021) at 1117 [29.84] that "if a proceeding manifestly lacks legal merit, other remedies are available to protect a defendant from needless vexation". The learned author elaborates in the footnote to that sentence that the "other remedies" in question may include the striking out of frivolous or vexatious pleadings. 213 The point made by Mr Wood SC is a fair one, but the fact that AGL has not brought an application to strike out or for summary judgment in this case should not conclude the inquiry into General Trade's prospects of success. I do not consider myself bound by the passing suggestion of the Full Court in Australian Equity Investors to treat the making of such an application as, effectively, a precondition to considering the merits of the case in exercising the discretion as to security for costs. It is not apparent that any other judge of this Court, or any court in another jurisdiction, has proceeded on so strict a basis in light of that decision (or otherwise). Ultimately, in a particular case, there might be good reasons for the party seeking security not to have brought an application of that nature. For instance, picking up on a point made by Mr O'Shea KC in reply, a party defending a claim brought by an impecunious corporate applicant may consider it too high-risk to pursue such an application, and incur additional costs in doing so, when it may prove ineffective to bring the proceeding to an end because, for instance, the other side is simply given leave to re-plead. In such a scenario, the party seeking an early end to the proceeding would be left with even more costs that it might be unable to recover from the impecunious litigant. Accordingly, while the existence of an application for strike out or summary judgment might well be taken into account in the assessment of prospects, the forensic decision not to bring such an application should not ordinarily be held against the party making it. 214 In the context of these principles, it is appropriate to turn to the parties' submissions as to General Trade's prospects of success on its two overarching claims. 215 While remaining cognisant of the caution in the authorities against undertaking too thorough a consideration of the merits on an application of this nature, it is necessary here to step through General Trade's claims in some detail, given the number of points raised by AGL as to the question of prospects.

Unconscionable Conduct Claim 216 AGL advanced two reasons why the Unconscionable Conduct Claim should be regarded as having poor prospects of success. First, it was said that, in order to make out its claim of unconscionable conduct and to prove that it had suffered loss as a result of such conduct, General Trade had to demonstrate some basis for its alleged entitlement to the amount of $31,814,483.93 under Payment Claims 1 to 11. It submitted that, for several reasons, it had failed to do so. Secondly, it submitted that the various matters relied upon by General Trade to support its claim of unconscionable conduct were incapable of being demonstrated in fact or were simply insufficient to make out the cause of action. 217 In its Amended Defence, AGL alleges that the true amount claimed by General Trade under Payment Claims 1 to 11 was actually $31,517,458.90, such that the loss on the Unconscionable Conduct Claim is lower than what is pleaded in the Further Amended Statement of Claim. Given that this issue was not raised in connection with the present application, and the disparity between the figures is relatively minor, these reasons will continue to refer to the amount of $31,814,483.93. This is done only for the sake of clarity, and does not assume the correctness of that figure.

Entitlement to the amount of $31,814,483.93 218 AGL is correct to recognise the importance to the Unconscionable Conduct Claim of General Trade proving some entitlement to the $31,814,483.93 amount. That entitlement is the foundation for its alleged loss. In its pleadings, it identifies that amount as being the cumulative sum that it claimed across Payment Claims 1 to 11. This raises several questions, including: (a) How was the value of each of the payment claims calculated by General Trade? (b) On what basis did their cumulative value exceed the contract price? (c) How was the value of each of the payment claims assessed by the Superintendent? (d) Is the disparity between valuations in (a) and (c), if any, the result of any improper conduct on the Superintendent's part, such that the Superintendent's valuation should be disregarded and General Trade's valuation preferred? 219 The answer to the first of these questions will likely be a matter for evidence. As to the second question, AGL not unfairly pointed out that General Trade has failed to articulate clearly in its pleadings the basis for the sum that it claimed over and above the amount to which AGL agreed it was entitled under the Construction Agreement - that is, the original contract price with some adjustments on account of variations. It seems, from the structure of the Further Amended Statement of Claim generally, that General Trade bases its entitlement to the higher amount, at least in part, on the fact that AGL varied the original works under the Construction Agreement (described as the "Original WUC") by issuing a number of new or revised project documents through the Aconex platform (leading to the "Varied WUC"), and on the fact that it made a number of variation claims in respect of the Original WUC and the Varied WUC during the course of the Project. As AGL submitted, it is not explained in the Further Amended Statement of Claim how the issuing of new and revised documents constituted a variation to the Original WUC under the Construction Agreement. 220 Relatedly, Mr O'Shea KC made a further submission that the claim for the amount of $31,814,483.93 was wrong in principle, since it effectively sought to recover General Trade's costs on the Project, despite the fact that the Construction Agreement was a lump sum contract under which payment was based on the achievement of milestones, not on costs incurred. That explication tended to suggest that General Trade had sought to use its payment claims to recover its costs, rather than to receive remuneration for reaching the specified milestones. There may be a great deal of force in this contention, especially insofar as it relates to Payment Claims 10 and 11, which were explained in detail in Mr Macpherson's affidavit and by Mr O'Shea KC at the hearing. However, it is difficult to conclude that the Unconscionable Conduct Claim is obviously hopeless on this basis, particularly given that the evidence on the point was relatively limited at this stage of the proceeding. The basis for the amounts claimed by General Trade and paid by AGL will require further scrutiny at the trial of this matter or on some other application. 221 The answer to the third question posed above is again potentially a matter for evidence. As to the fourth question, AGL contended in its written submissions that the Further Amended Statement of Claim does not identify with any particularity the alleged conduct of the Superintendent that is said to have resulted in General Trade's variation claims being priced below the amount to which it claims it was entitled. More specifically, it is alleged that General Trade has made no attempt to explain how the Superintendent inaccurately assessed its payment claims or its variation claims, or to allege any particular unreasonable or bad faith conduct on the part of the Superintendent in assessing and paying those claims. It also contended, along similar lines, that General Trade has not specified any failure on AGL's part to follow the proper procedure for directing and pricing variations under the Construction Agreement. So much is probably true, though it is alleged in the Further Amended Statement of Claim that AGL failed to ensure that the Superintendent complied with its obligations in General Condition 20 of the Construction Agreement, which included obligations to act reasonably and in good faith and to arrive at a reasonable measure or value of work, quantities or time. It is also alleged that AGL breached General Condition 37.2 by reason of the Superintendent's failure to pay the sum of $12,175,993 in respect of General Trade's payment claims without justification or any valid reason, and "in the absence of good faith". 222 In addition to these points, AGL contended that, if General Trade was directed to complete work that it considered was not part of the works under the Construction Agreement, or if it considered that it received a direction to complete a variation, then it was entitled to object to completing those works or to issue a notice under General Condition 36.6(b) of the Construction Agreement. This contention responded to a point allegedly made in affidavit evidence filed by Mr Pike, but does not undermine to any significant extent the Unconscionable Conduct Claim as pleaded. 223 In a somewhat similar way, AGL also addressed in its written submissions an allegation in the Further Amended Statement of Claim that it was in breach of General Condition 37.2 of the Construction Agreement by failing to pay the amounts in General Trade's payment claims. However, that allegation of breach does not seem, on the face of the Further Amended Statement of Claim, to be a component part of the Unconscionable Conduct Claim. This is perhaps something of an anomaly in General Trade's pleading, to which I will later return. 224 On the whole, AGL's submissions do not establish the Unconscionable Conduct Claim to be obviously hopeless. While AGL might arguably be right to point out certain irregularities in the way that General Trade has attempted to establish its entitlement to the $31,814,483.93 amount, including potential issues of infelicitous pleading and inadequate particularisation, and to identify associated shortcomings in General Trade's existing evidence, this is not sufficient to demonstrate that General Trade has no real prospect of proving that entitlement and succeeding in its claim more broadly. At this stage of the proceeding, it remains possible for General Trade to put on additional evidence and provide further and better particulars. It might ultimately be the case that this material demonstrates an entitlement to some amount less than $31,814,483.93, but more than what was paid by AGL, such that a cause of action might be made out from a somewhat altered scenario. 225 One other point bears mentioning. As the Further Amended Statement of Claim presently stands, the causal connection between the alleged unconscionable conduct and the loss of $4,314,481.64, being the difference between the $31,814,483.93 sum of the payment claims and the $27,500,002.29 actually paid by AGL, is rather unclear. General Trade's claim for the three alternative remedies on the Unconscionable Conduct Claim, all in the amount of $4,314,481.64, is pleaded at paragraph 67, which begins by stating, "by reason of the matters pleaded in paragraphs 33 to 41". Within that range of paragraphs: (a) paragraph [41] sets out the "loss and financial detriment" allegedly suffered by General Trade (including the amount of $4,314,481.64), which is said to be a result of the unconscionable conduct and contraventions of the ACL pleaded in paragraph [40]; (b) paragraph [40] draws the conclusion that, "[i]n the premises of the matters pleaded in paragraphs 37 to 39", AGL engaged in unconscionable conduct "in entering into the Deed [of Release]"; (c) paragraph [39], in turn, pleads a conclusion of unconscionable conduct and a failure to act in good faith on the part of AGL "[i]n the premises of the matters pleaded in paragraphs 37 and 38"; and (d) the specific conduct alleged to be unconscionable is set out at paragraphs [37] and [38], including that "in the premises of the matters pleaded in paragraphs 33 to 35 above, the Respondent knew of the Applicant's financial position". 226 In this way, the various allegations in paragraphs [33] to [41] attempt to build upon one another to make an overall pleading of unconscionable conduct. It is, however, unclear what relevance the contents of paragraph [36] have to the Unconscionable Conduct Claim, and the reason for that paragraph's inclusion in paragraph 67 is impossible to discern. 227 Most importantly, the conduct at the heart of the Unconscionable Conduct Claim, set out in paragraphs [37] and [38] of the Further Amended Statement of Claim, principally concerns the negotiation and execution of the Deed of Release in the particular circumstances prevailing at that time. It does not appear to have entailed any alleged impropriety on the part of the Superintendent, as agent of AGL, in valuing the payment claims pursuant to General Condition 37.2 of the Construction Agreement. This is despite the fact that, as set out above, demonstrating such impropriety might be considered a necessary step in establishing the loss: for General Trade to have been entitled to the $31,814,483.93 amount, there must have been some wrongdoing in connection with the Superintendent's valuing the payment claims at a lesser amount. 228 It is difficult to say, in those circumstances, that the $4,314,481.64 loss was suffered "because of" the pleaded unconscionable conduct (to use the language of ss 236 and 237 of the ACL) or was otherwise sufficiently causally connected to that conduct to make out the alternative claim for equitable compensation. Put another way, if the pleaded unconscionable conduct had never taken place, General Trade would still have to prove another, apparently quite separate, point in order to obtain relief: namely, that there was some actionable problem with how the Superintendent valued its payment claims, and/or with how AGL thereafter paid them. As explained in relation to the fourth question above, there are some allegations of breach of contract in the Further Amended Statement of Claim going essentially to this point, but these allegations fall within the isolated paragraph [36] of the Further Amended Statement of Claim. As mentioned, the relationship between them and the claim of unconscionable conduct, as well as the relief sought on account of that unconscionable conduct, has not been made apparent. 229 Ultimately, neither party addressed this point on the present application for further security for costs. In such circumstances, it is inappropriate to treat the point as carrying any particular weight, especially since General Trade has not been afforded any opportunity to answer it.

Failure to demonstrate unconscionable conduct 230 In its written submissions, AGL responded to each of the matters pleaded by General Trade in the Further Amended Statement of Claim as comprising the alleged unconscionable conduct at the centre of the Unconscionable Conduct Claim. Mr O'Shea KC did not add further to these points in the hearing. 231 It is difficult to conclude from submissions of this nature that the claim of unconscionable conduct is "doomed to fail" in the sense required by the authorities. Faced with a claim of unconscionable conduct, the Court is required to engage in an evaluative exercise, assessing whether the impugned conduct is to be characterised as a sufficient departure from the norms of acceptable commercial behaviour as to be against conscience or to offend conscience and so be characterised as unconscionable: see Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd (2021) 388 ALR 577, 598 - 599 [92] per Allsop CJ, Besanko and McKerracher JJ. That inquiry is, by nature, essentially fact-based and highly dependent on the evidence. It cannot readily be countered pre-emptively by a volley of legal and factual propositions, each of which is pitched at a fairly high level of abstraction - as AGL's submissions necessarily had to be on an interlocutory application of this nature. 232 This conclusion follows all the more forcefully once it is acknowledged that, in order to succeed in its contention, AGL would effectively have to show that all of the instances of conduct pleaded by General Trade are not, individually or in any combination, even arguably unconscionable. It is sufficient, in light of this, to address just a few of AGL's major submissions. 233 It was first submitted that General Trade was not at a special disadvantage relative to AGL because General Trade held itself out as a capable contractor with the resources to perform the Project and had contracted with AGL previously, and Mr Pike was an experienced businessperson on his own evidence. Reliance was placed on the decision of the Full Court in Australian Competition and Consumer Commission v Samton Holdings Pty Ltd (2002) 117 FCR 301, where it was said at 322 - 323 [64]: At the time they were negotiating for the grant of the second lease, the Ranaldis and Executive Bloodstock were at a serious disadvantage. They had very little bargaining power. As a practical matter, they were not in a position to make any decision other than to pay the price demanded by the respondents. It may be accepted that the categories of special disadvantage are open and may extend to what French J, at first instance in Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2000] FCA 1893, called "situational disadvantage" as well as the constitutional disadvantages engendered by such disabilities as illiteracy or lack of education, illness or infirmity. It is not necessary for present purposes to explore the limits of those categories. On the findings of fact made by his Honour it is difficult to see how it would be correct to characterise the case as one of "special disadvantage" in the relevant sense. The disadvantage under which the Ranaldis and Executive Bloodstock laboured had arisen from a combination of considered commercial judgment (the decision to borrow heavily in order to purchase the business) and Mr Ranaldi's oversight in neglecting to exercise the option in good time. These factors did not impair the Ranaldis' ability to make a decision about the best course of action in the circumstances. At least in the case of an experienced business person there must, in our opinion, be something more than commercial vulnerability (however extreme) to elevate disadvantage into special disadvantage. 234 AGL placed particular emphasis on the final sentence of this passage, effectively suggesting that, because General Trade and Mr Pike were experienced industry participants, any alleged commercial vulnerability on their part in the present case could not constitute a special disadvantage. It is settled that mere inequality of bargaining power does not establish one party to be at a special disadvantage vis-à-vis its counterparty. It is also well established that the commercial experience of a party might weigh against a conclusion that its ability to make a judgment as to its own best interests in a particular scenario has been severely affected by any disabling condition or circumstance. However, in this case, General Trade relies on more than just inequality of bargaining power. It pleads that it was in severe financial difficulty, and that it was AGL's "late payments, short payments and non-payments" that caused this difficulty. 235 Ultimately, these are all points on which General Trade ought to have the opportunity to go into evidence. While AGL might be right to submit that General Trade's claim of special disadvantage contains certain elements that the authorities suggest to be insufficient to establish a claim of unconscionable conduct, it would be inappropriate on the present application to try to characterise in a general way the type of case that General Trade is bringing and then treat that general characterisation as a target on which to pin contrary statements of principle drawn from prior authorities. In this connection, it is apt to recall the statement of Dixon CJ, McTiernan and Kitto JJ in Jenyns v Public Curator (Qld) (1953) 90 CLR 113 at 118 - 119, cited on multiple occasions in more recent High Court decisions concerning statutory unconscionable conduct, that the application of the equitable principles relating to unconscionable conduct: … calls for a precise examination of the particular facts, a scrutiny of the exact relations established between the parties and a consideration of the mental capacities, processes and idiosyncrasies of the [vulnerable party]. Such cases do not depend upon legal categories susceptible of clear definition and giving rise to definite issues of fact readily formulated which, when found, automatically determine the validity of the disposition. Indeed no better illustration could be found of Lord Stowell's generalisation concerning the administration of equity: "A court of law works its way to short issues, and confines its views to them. A court of equity takes a more comprehensive view, and looks to every connected circumstance that ought to influence its determination upon the real justice of the case". 236 A similar conclusion must follow in respect of AGL's next submission, in which it contends that it did not exploit any alleged special disadvantage. AGL relies on evidence indicating that the settlement amount under the Deed of Release was fairly negotiated, and on the fact that the terms of the Deed were negotiated between General Trade's solicitors and AGL's in-house legal team, suggesting that there could be no exploitation or even any disparity in bargaining positions. Finally, AGL draws several propositions from the judgment of Gleeson CJ in Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51 at 64 - 65 [14] - [16] to the effect that it is not unconscionable for one party to take advantage of its superior bargaining position to extract concessions from its counterparty in the course of negotiations. 237 Again, the impression one might gather from these submissions is that they characterise in relatively broad terms General Trade's pleaded case as to this particular aspect of AGL's alleged unconscionable conduct, identifying it essentially as a case about exploitation of unequal bargaining positions, and then assail that broad characterisation. However, it is not entirely clear that the characterisation captures the whole of the position pleaded by General Trade. Even if it did, it is not clear that AGL's submissions would inevitably prove a definitive response to all of the evidence that General Trade might eventually put on in support of its position. In other words, it is simply too early in the proceeding to tell whether AGL's submissions will succeed. General Trade's pleaded position cannot be considered "obviously hopeless". 238 The balance of AGL's submissions on this issue are insufficient to produce a contrary result. Accordingly, it cannot be concluded that the Unconscionable Conduct Claim is inarguable or irregular, or that it fails to disclose a cause of action.

Additional Work Claim 239 In its written submissions, AGL addresses each of the three alternative causes of action relied upon by General Trade on its Additional Work Claim. These may be stepped through in turn.

Breach of contract 240 As explained in summary form earlier in these reasons, the Additional Work Claim captures a variety of different types of work allegedly undertaken by General Trade. They have been grouped by General Trade into four categories, namely: (a) the "Demobilisation Works", being the works required to demobilise plant, equipment and personnel following the directions given by AGL on or about 14 July 2014 and 12 August 2014; (b) the "Further Works Following Demobilisation Directions", being additional works required to be completed by reason of those 14 July 2014 and 12 August 2014 directions; (c) the "Additional Directed Works", being works performed after 31 July 2014 in relation to pre-commissioning activities and works performed in relation to matters directed, requested and required by the notices and the direction issued between 17 September 2014 and 12 December 2014 by the Superintendent; and (d) the "MDR Works", being the works in relation to the preparation of the MDR index for the Project up to and including 31 July 2014. 241 These categories were the subject of different treatment in AGL's written submissions and in Mr O'Shea KC's oral submissions in the hearing. 242 Mr O'Shea KC first submitted that the Demobilisation Works and the Further Works Following Demobilisation Directions already fell within the scope of works under the Construction Agreement, such that they were not "additional" works for which separate and further payment could be sought. He pointed specifically to Schedule 3 of the Construction Agreement, which broke down the original $12,005,579.46 contract sum into a number of smaller amounts that were payable upon the achievement of certain itemised milestones. Relevantly, the milestone at item 22 was described as "Wallumbilla Clean Up and Demobilization" and was assigned an amount of $15,000. A similar milestone was set out in item 29 for "Silver Springs Clean Up & Demobilization". It was not wholly clear whether the contention being advanced was that General Trade had already been paid for these works, or whether the right to payment for the works had been lost by reason of the Deed of Release. 243 Regardless, at the heart of the issue is essentially a question of fact: General Trade claims that the relevant works were additional works not falling within the scope of works under the Construction Agreement, while AGL claims that they are not additional works because they do fall within the scope of works under the Construction Agreement. Whilst Mr O'Shea KC's submission rightly points out that there is perhaps some prima facie basis to suspect that AGL's characterisation is to be preferred, this is quite obviously a point on which further evidence will be required. The works in question must be identified with as much specificity as is reasonably possible and then compared to the scope of works under the Construction Agreement, the boundaries of which must also be ascertained with some precision. There is not, at this stage of the proceeding, sufficient material before the Court to facilitate this comparison exercise. Accordingly, it cannot be concluded that the claim in respect of the Demobilisation Works and Further Works Following Demobilisation is "obviously hopeless". 244 As for the Additional Directed Works, Mr O'Shea KC submitted that these could not have been works that were performed under the Construction Agreement, because the parties had from 13 August 2014 been released from all performance of that contract by the Deed of Release (subject to certain exceptions set out in that document). There could accordingly be no claim for breach of contract in respect of AGL's failure to pay Payment Claim 12 insofar as it pertained to those works. Notably, one of the exceptions within the Deed of Release was that it maintained the parties' obligations in respect of rectification of defects, and there was some indication that the notices and the direction did relate to the rectification of non-compliant work on the Project. Mr O'Shea KC submitted that, insofar as the Additional Directed Works involved defect rectification, they were not "additional" works, as General Trade was already obliged to perform such works under the Construction Agreement without further payment. The same contentions appeared in AGL's written submissions. 245 Again, these submissions do not establish the claim in respect of the Additional Directed Works to be "obviously hopeless". In the first place, they do not deal with the alternative construction of the Deed of Release pleaded by General Trade, pursuant to which it is said that the Deed "did not have any operation with respect to works undertaken by [General Trade] outside that part of the Original WUC and Varied WUC in respect of which Payment Claims 10 and 11 related and were the subject of the Dispute [being the dispute that led to the entry into the Deed]". This construction must be rejected before Mr O'Shea KC's submission can fall for consideration. Secondly, the characterisation of the works the subject of the various notices and the direction as rectification works is again a question of fact on which evidence will be required. Without such evidence, it is not possible to characterise the works with sufficient certainty to determine the point once and for all. 246 Finally, Mr O'Shea KC made two submissions in relation to the inadequate particularisation of the Additional Work Claim. He pointed specifically to paragraph [52] of the Further Amended Statement of Claim, which is a bald assertion that the various notices and the direction issued between 17 September 2014 and 12 December 2014 were "[i]n fact and, on their proper construction … directions or requests to perform additional works". He then contended that the basis for the amount of $1,195,562.13, claimed as damages for breach of contract (and claimed alternatively on a quantum meruit basis, or under the ACL for unconscionable conduct, as set out below), has not properly been explained, but instead left to be intuited from a lengthy and detailed spreadsheet of items of work performed by particular individuals or contractors on particular dates, each of which was assigned an "expense category" and a value, as set out in Annexure B to the Further Amended Statement of Claim. 247 Both of these points are entirely fair, but they do not show the Additional Work Claim to be inarguable. It is relevant to note that, in parallel to this application for further security for costs, it is understood that the parties are corresponding in relation to General Trade's provision of further and better particulars. If these discussions do not remedy the defects of which Mr O'Shea KC complains, it is open to AGL to bring an application in this Court seeking orders that General Trade provide the necessary particulars. It is by that avenue that the issue should be resolved; it should not have any substantial bearing on the present application.

Quantum meruit 248 As identified by Mr Wood SC for General Trade in the hearing, a key issue arising from AGL's submissions in relation to the Additional Work Claim was whether the various works identified by General Trade fell within, or outside of, the scope of works under the Construction Agreement. To the extent that they did not, he submitted that the claim was nevertheless arguable on an alternative quantum meruit basis. Mr O'Shea KC did not address this point in the hearing, but in AGL's written submissions it was contended that General Trade had failed to establish the essential basis for the claim: that is, that the alleged additional work did not fall within the scope of works under the Construction Agreement or amount to rectification of defective work, and that General Trade had not already been paid a fair and reasonable amount for the works under the Construction Agreement or the Deed. 249 Ultimately, it does seem that General Trade pleads at least the basic facts necessary to make out its cause of action. Most importantly, at paragraph [59] of the Further Amended Statement of Claim, it pleads that the works in question were "additional works". In context, this appears to be a pleading that the works fell outside the scope of works under the Construction Agreement. At paragraph [62], it is pleaded that the reasonable cost of the works was $1,195,562.13, this being the unpaid amount of Payment Claim 12 calculated in accordance with the spreadsheet at Annexure B to the pleading. 250 Again, there are obvious problems of inadequate particularisation in the quantum meruit claim. However, this issue ought to be addressed through the parallel process within which AGL is seeking further and better particulars, instead of through the present application for further security for costs. It should not be thought that this permits General Trade to take advantage of its own wrongdoing, so to speak, by using its apparently defective pleading to avoid the order now sought by AGL. The defect appears for the time being to be curable, and indeed it ought to be cured by the other process presently on foot. If it is not, one might imagine that AGL would be justified in making an application to strike out the offending parts of the Further Amended Statement of Claim. 251 Finally, it ought to be noted that Mr Macpherson made certain points in his affidavit regarding the viability of the claim given the decision of the High Court in Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560 (though that case was not specifically mentioned by name), and the fact that the Construction Agreement remained on foot notwithstanding the Deed of Release. These are complex issues of fact and law about which the parties should have the opportunity to make fulsome submissions. The points having been raised here only in a solicitor's affidavit, they were not addressed in sufficient detail to permit the Court to draw any final conclusion as to their merits.

The further unconscionable conduct claim 252 This claim of unconscionable conduct centres on AGL's failure to pay General Trade for the Demobilisation Works, the Further Works Following Demobilisation Directions, the Additional Directed Works and the MDR Works. It is alleged that General Trade carried out those works, as requested by AGL, and incurred costs and expenses in doing so, for which it was entitled to reasonable payment. AGL's failure to make any payment in respect of the works is alleged to be unconscionable. In its written submissions, AGL contends that this claim has poor prospects of success for two reasons. 253 First, it submits that General Trade cannot establish any entitlement to the $1,195,562.13 sum sought pursuant to ss 236 or 237 of the ACL. AGL takes General Trade's pleaded position to be that the entitlement to this payment "arises on the basis of the allegations made in support of the quantum meruit claim". It then submits that, if General Trade was entitled to restitution on a quantum meruit basis, then it would be granted relief on that basis and it would not follow that it would also be granted the same relief on account of alleged unconscionable conduct. It submitted that, conversely, if General Trade failed to establish any entitlement to restitution, then it would not have any entitlement to the amount that AGL has, allegedly unconscionably, refused to pay. 254 The proposition on which this submission is founded appears to be correct. General Trade pleads the conclusion of unconscionable conduct at paragraph [66] of the Further Amended Statement of Claim, which begins: "[i]n the premises of paragraphs 59 to 65 above …". Paragraphs [59] to [64] capture the whole of the quantum meruit claim. In this way, the conclusion of unconscionable conduct somehow incorporates the pleaded conclusion of the quantum meruit claim at paragraph [64], as follows: The Applicant is entitled to restitution on a quantum meruit basis of a sum not less than $1,195,562.13 (GST excluded) in respect of the Demobilisation Works, the Further Works Following Demobilisation, the Additional Directed Works and the MDR Works, calculated in accordance with the items set out in Annexure B to this pleading. 255 AGL is therefore correct to submit that, strictly speaking, if the pleaded premises of the unconscionable conduct claim are made out, then General Trade is already entitled to a remedy in restitution. A further finding of unconscionable conduct would therefore seem superfluous, notwithstanding that it would be more difficult for General Trade to establish. Even if the conclusion in paragraph [64] is put to one side, it is difficult to understand how the recovery of the $1,195,562.13 sum by way of the unconscionable conduct claim could not be contingent on the success of each element of the quantum meruit claim. This having been said, however, the arguable redundancy of the unconscionable conduct claim does not establish it to be "obviously hopeless". 256 Finally, AGL submitted that, in any event, the allegation of unconscionable conduct within the Additional Work Claim suffered from the same weaknesses as the overarching Unconscionable Conduct Claim, in that it will be difficult for General Trade to demonstrate any special disadvantage that was unconscientiously exploited by AGL. This submission misses the mark to some extent, as General Trade does not actually plead any special disadvantage or exploitation in connection with this cause of action. Even if it did, for the same reasons as are set out above in respect of the Unconscionable Conduct Claim, AGL's submission does not at this stage of the proceeding demonstrate General Trade's case to be "doomed to fail".

Conclusion as to prospects of success 257 The Further Amended Statement of Claim is by no means a model pleading. Its flaws were very rightly highlighted by Mr O'Shea KC, and one might certainly hope that, as the proceeding progresses, steps will be taken by General Trade to remedy them. If not, the pleading, or the substance of the claims articulated therein, may be vulnerable to attack by way of a more directly targeted interlocutory application. However, for the purposes of this application, AGL's submissions did not demonstrate, to the high standard required by the authorities, that General Trade's case was so devoid of merit as to make appropriate an order for further security for costs. In these circumstances, and even though significant doubt has been cast upon the propriety of General Trade's claims, it seems to be appropriate to treated the question of prospects of success as a neutral matter.

Conclusion 258 AGL seeks from General Trade $657,981.72 in further security for costs for the period 1 November 2022 to the commencement of the final hearing in the proceedings. For the reasons set out above, an order requiring General Trade to provide further security in that amount would have the effect of stifling the litigation. This weighs against the exercise of the Court's discretion under s 1335 of the Corporations Act to make such an order. 259 At the same time, the two overarching claims advanced by General Trade in its Further Amended Statement of Claim are not clearly inarguable or irregular on their face. The prospects of its success in this proceeding must therefore be considered a neutral matter in the exercise of the discretion. 260 The fact that General Trade is impecunious, and will be unable to pay AGL's costs if ordered to do so following the final hearing of the matter, while favouring an order for security for costs, does not sufficiently counteract the outcome suggested by the preceding considerations. 261 The orders sought by AGL are therefore refused. There is no reason why costs should not follow the event. I certify that the preceding two hundred and sixty-one (261) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Derrington.