Hopkins v AECOM Australia Pty Ltd

Counsel for First Respondent: Dr AS Bell SC and Mr E Hyde

Solicitor for the First Respondent: Baker & McKenzie

Counsel for the Second Respondent: Mr K Lynch

Solicitor for the Second Respondent: Johnson Winter & Slattery

Counsel for the Third Respondent: Mr S Duggan

Solicitor for the Third Respondent: Gilbert + Tobin

Counsel for National Institute of Economic and Industry Research Pty Ltd: Ms EA Collins SC

Solicitor for National Institute of Economic and Industry Research Pty Ltd: Kennedys Lawyers

Counsel for Peter Jeremy Hicks and Leighton Contractors Pty Ltd: Mr R Smith SC and Mr R Yezerski

Solicitor for Peter Jeremy Hicks and Leighton Contractors Pty Ltd: Corrs Chambers Westgarth

Counsel for RBS Group (Australia) Pty Ltd and Malcolm Coleman: Mr R McHugh SC and Dr S Nixon

Solicitor for RBS Group (Australia) Pty Ltd and Malcolm Coleman: Ashurst

Counsel for Bilfinger Berger Project Investments Pty Ltd, Baulderstone Pty Ltd and Charles Mott: Mr JA Watson

Solicitor for Bilfinger Berger Project Investments Pty Ltd, Baulderstone Pty Ltd and Charles Mott: Herbert Smith Freehills

Counsel for BECA Pty Ltd: Mr A Abadee

Solicitor for BECA Pty Ltd: Schweikert Harris

Counsel for Mallesons Stephen Jaques: Mr J Williams

Solicitor for Mallesons Stephen Jaques: Colin Biggers & Paisley

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 757 of 2012

BETWEEN: STEPHEN HOPKINS AS TRUSTEE FOR THE HOPKINS SUPERANNUATION FUND

KIM DENISE HOPKINS AS TRUSTEE FOR THE HOPKINS SUPERANNUATION FUND

AND: AECOM AUSTRALIA PTY LTD ACN 093 846 925

RIVERCITY MOTORWAY MANAGEMENT LTD (ADMINISTRATORS APPOINTED) ACN 117 343 361

RIVERCITY MOTORWAY SERVICES PTY LTD (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) ACN 117 139 992

AND BETWEEN: AECOM AUSTRALIA PTY LTD ACN 093 846 925

JUDGE: NICHOLAS J DATE OF ORDER: 13 November 2015 WHERE MADE: SYDNEY

1. The interlocutory applications seeking security for the costs of the cross-respondents to the second, third, fifth and sixth to tenth cross-claims be dismissed.
2. The proceeding be listed at 9.30am on 27 November 2015 for the purpose of hearing any submissions as to costs of such interlocutory applications. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 757 of 2012

BETWEEN: STEPHEN HOPKINS AS TRUSTEE FOR THE HOPKINS SUPERANNUATION FUND

KIM DENISE HOPKINS AS TRUSTEE FOR THE HOPKINS SUPERANNUATION FUND

AND: AECOM AUSTRALIA PTY LTD ACN 093 846 925

RIVERCITY MOTORWAY MANAGEMENT LTD (ADMINISTRATORS APPOINTED) ACN 117 343 361

RIVERCITY MOTORWAY SERVICES PTY LTD (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) ACN 117 139 992

AND BETWEEN: AECOM AUSTRALIA PTY LTD ACN 093 846 925

JUDGE: NICHOLAS J DATE: 13 november 2015 PLACE: SYDNEY

Introduction 1 In this proceeding various cross-respondents have applied for orders requiring the first respondent ("AECOM") to provide security for their costs. These reasons are concerned with the question of whether any such orders should be made. The parties are agreed that any issue as to the amount of security should be heard and determined at a later date. 2 The following cross-respondents seek security for their costs of the cross-claims brought against them by AECOM: Peter Hicks Cross-respondent to the 2nd Cross-Claim RiverCity Management Services Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) ("RCM Services") Cross-respondent to the 3rd Cross-Claim Leighton Contractors Pty Ltd ("Leighton") Cross-respondent to the 5th Cross-Claim RBS Group (Australia) Pty Ltd ("RBS") Cross-respondent to the 6th Cross-Claim Bilfinger Berger Project Investments Pty Ltd ("Bilfinger") Cross-respondent to the 7th Cross-Claim Lend Lease Building Constructions Pty Limited ("Lend Lease") Cross-respondent to the 8th Cross-Claim BECA Pty Ltd ("BECA") Cross-respondent to the 9th Cross-Claim Mallesons Stephen Jaques ("Mallesons"): Cross-respondent to the 10th Cross-Claim

An application for security for costs filed by the cross-respondent to the first cross-claim ("NIEIR") was resolved by consent. 3 Leighton, Bilfinger, Lend Lease and RBS are usually referred to in the pleadings and submissions as the "Sponsor Clients" or "Sponsor Parties". I shall refer to them in these reasons as "the Sponsor Parties".

FURTHER Background 4 The background to the proceeding has been set out in previous interlocutory judgments. Some of what follows is drawn from other interlocutory judgments delivered by me in this proceeding. 5 Each of RiverCity Motorway Investment Trust ("RCMI Trust") and RiverCity Motorway Holding Trust ("RCMH Trust") is and was, at all relevant times, a registered managed investment scheme. The applicants acquired stapled units ("Stapled Units") in RCMI Trust and RCMH Trust under an offer made by a Product Disclosure Statement ("the PDS"). The second respondent ("RCM Management") was the issuer of the Stapled Units and responsible entity for each of RCMI Trust and RCMH Trust. The PDS was prepared by the third respondent, RCM Services, on behalf of RCM Management. The proceeding was commenced by the applicants as a representative proceeding under Part IVA of the Federal Court of Australia Act 1976 (Cth). In this proceeding the total of the claim made against AECOM is said to range somewhere between $150 million and $250 million (excluding interest and costs). 6 According to the PDS, the purpose of the offer was to raise funds to partly finance the design, construction and operation of the North-South Bypass Tunnel ("NSBT") in Brisbane through the issue of the Stapled Units. 7 The PDS was dated 21 June 2006 and lodged with the Australian Securities and Investments Commission on that date. The offer closed in July 2006 and trade in the Stapled Units on the Australian Securities Exchange commenced in August 2006. 8 Section 9 of the PDS, entitled "Experts' and Consultants' Reports", included a summary ("the Summary Letter") prepared by AECOM of its traffic forecasting methodology and its traffic forecasts for the "base" case (for consideration by the "equity market") scenario but not those for the more conservative "bank" scenario (for consideration by the "debt market") found in AECOM's full traffic report to RCM Management in respect of the NSBT. AECOM consented to the inclusion of this material ("the Consented Material") in the PDS pursuant to s 1013K of the Corporations Act 2001 (Cth) ("Corporations Act"). 9 In this proceeding the applicants allege that AECOM is liable under s 1022B of the Act for a contravention of s 1021L of the Act. Broadly speaking, a person who consents to material for inclusion in a product disclosure statement, contravenes s 1021L if such material contains a misleading or deceptive statement, or omits information, which statement or omission is, or would be, materially adverse from the point of view of a reasonable person considering whether to acquire the financial product. 10 The applicants in this proceeding, Mr and Mrs Hopkins, are the trustees of the Hopkins Superannuation Fund ("HSF"). The applicants allege they acquired 40,000 Stapled Units on behalf of HSF on or about 4 August 2006 and that HSF suffered a loss of $40,000 (excluding interest and costs) as a result of them having done so. 11 The group members on whose behalf the applicants also bring proceedings are those persons who: (a) acquired an interest in Stapled Units on or about 4 August 2006; and (b) suffered loss or damage because of the conduct of the respondents; and (c) entered into a litigation funding agreement with IMF (Australia) Ltd ("IMF") as at 27 July 2012. It seems that an investor may still be within the group even though he or she did not read, consider or rely on the PDS or the Summary Letter. 12 The principal allegation made by the applicants against AECOM is that it did not have reasonable grounds to make its traffic forecasts which, it is alleged, substantially overestimated the annual average daily traffic that would use the NSBT. However, there are other allegations against AECOM including (inter alia) that the Consented Materials omitted the following information: any disclosure of the risks associated with the use of AM peak period modelling only, the use of expansion factors, and the sensitivity of the traffic and revenue forecasts to the assumed expansion factors that were used; any disclosure that AECOM's earlier forecasts prepared in late 2004 or early 2005 for Brisbane City Council used an "all hour" traffic model rather than an "AM peak period model"; any disclosure of the fact that the earlier forecasts were approximately 50% lower than the forecasts summarised in the PDS; any reference to the failure of recently opened Australian toll roads (including the Cross City Tunnel); any disclosure of the fact that AECOM's traffic forecasts were prepared as part of the RCM Group's bid to win the NSBT concession; any disclosure that a significant amount of AECOM's consulting fee (up to $1 million of $2.5 million) would be paid only if and after the RCM Group secured the NSBT concession; and any disclosure that AECOM had been given instructions or directions by a number of members of the RCM Group and sponsor clients in respect of a number of assumptions and methodological steps which AECOM performed when preparing its forecasts and the Summary Letter. The applicants allege that AECOM contravened s 1021L by failing to disclose this information in the Consented Material. 13 The applicants also allege that the PDS was "defective" for the purposes of s 1022A of the Act, that RCM Management is liable under s 1022B of the Act, as the person on whose behalf the PDS was prepared, and that RCM Services is also liable as the person who prepared the PDS or as a person who was involved in the preparation of the PDS who, directly or indirectly, caused or contributed to the PDS being defective. By virtue of s 1022B(3)(b)(ii) of the Corporations Act, a person involved in the preparation of a PDS who, directly or indirectly, caused the PDS to be defective or contributed to it being defective may be liable to a person who suffers loss and damage because the PDS was defective. Central to the applicants' case against AECOM, RCM Management and RCM Services is the allegation that traffic forecasts that were included in the PDS substantially overestimated the average annual daily traffic volumes that would use the NSBT. 14 The applicants also allege that AECOM's traffic forecasts were misleading or deceptive because they omitted to disclose (inter alia) that AECOM considered that the probability of the traffic forecasts being achieved was low and/or that they were not the most appropriate traffic forecasts available for inclusion in the PDS. There was considerable attention given to this allegation in the submissions made on behalf of the various cross-respondents, especially Mr Hicks and Leighton. For convenience, I shall refer to it as the "para 28(aa) allegation" after the paragraph in which it appears in the applicants' second further amended statement of claim. 15 The Sponsor Parties are alleged by AECOM to have participated in a joint venture utilising "special purpose companies" to bid for, and if successful, design, construct and operate the NSBT"), and to raise debt and equity in order to do so. AECOM provided traffic forecasting services to the Sponsor Parties in connection with the NSBT project. 16 Mr Hicks was a senior manager with Leighton who is alleged by AECOM to have had extensive experience in relation to toll roads and traffic forecasting. This experience is said by AECOM to have been acquired by Mr Hicks while working for Leighton on a number of earlier toll road projects including, in particular, the Lane Cove Tunnel project in Sydney. AECOM has filed evidence which, if accepted, suggests that Mr Hicks was, by the time the Lane Cove Tunnel project was completed, extremely knowledgeable with respect to traffic forecasting and that Mr Hicks referred to himself as an expert on the subject. 17 AECOM alleges that Mr Hicks was heavily involved in the preparation of the traffic forecasts and the selection of assumptions used in the modelling including in relation to "expansion factors". It is also alleged that he was heavily involved in decisions made as to how the traffic forecasts would be presented in the PDS including whether the "base" (equity) scenario or the "bank" (debt market) forecasts should be used, and what additional information should be included in the PDS by way of elaboration or qualification concerning various aspects of the modelling and assumptions used.

The para 28(aa) allegation 18 Senior Counsel for Mr Hicks and Leighton placed considerable reliance upon an email communication apparently sent by Mr Johnston of AECOM to Mr Watson and Mr Batchelor of AECOM (then known as Maunsell) dated 7 July 2006. 19 The email suggests that Mr Johnston may have been uncomfortable with the assumptions used to prepare the traffic forecasts which, while including plausible upper and lower bounds, had been pushed to the higher end of the range. The email also suggests that Mr Johnston may have considered that the probability that all such assumptions would be proven correct was low. Importantly, the email suggests that the Sponsor Parties were pressing AECOM to adopt assumptions at the higher end of the range, with "each being pulled to the most favourable position for the revenue …". 20 Also significant is the reference in the email to the population and employment forecasts. Of the 20 key assumptions referred to in Mr Johnston's email, the most important is said to be the population and employment forecasts which Mr Johnston says AECOM did not do. The population and employment forecasts referred to in the email are, or at least include, forecasts which AECOM alleges NIEIR prepared. AECOM has filed a cross-claim against NIEIR seeking (inter alia) contribution from NIEIR in relation to any liability AECOM may have to the applicants.

Aecom's Financial Statements 21 The most recent financial statements in relation to AECOM that are in evidence are those filed with the Australian Securities & Investments Commission ("ASIC") on 17 March 2015. These statements include a profit and loss statement for the 12 months ending 30 September 2014 and a statement of financial position (or balance sheet) as at that date. 22 The financial statements disclose that AECOM made an after tax profit for the financial year ended 30 September 2014 of approximately $916,000. They also disclose that, as at the balance date, AECOM had net assets of approximately $166,490,000. Approximately $98,498,000 of AECOM's current assets is shown as "cash and cash equivalents". The current liabilities disclosed in the financial statements include, as shown in Note 15, a provision for future legal expenses of approximately $24,866,000. 23 Note 19 to the financial statements is headed "Contingent Liabilities" and is concerned with this proceeding and the two related proceedings brought against AECOM by the various RiverCity companies ("the RiverCity Proceeding") and by Portigon AB ("the Portigon Proceeding") in which AECOM is (or at least was) a respondent and cross-claimant. It states: Contingent Liabilities AECOM Australia Pty Ltd had the following contingent liabilities at the end of the reporting period: In 2005 and 2006 the Company performed a traffic forecast assignment for a client consortium as part of their project to design, build, finance and operate a tolled motorway tunnel in Australia. To fund the motorway's design and construction, the client formed special purpose vehicles (SPVs) which, between them, raised approximately $700 million through an initial public offering (IPO) of equity units in 2006 and another approximately $1.4 billion in long term bank loans. The SPVs (and certain affiliated SPVs) went into insolvency administrations in February 2011. A class action lawsuit, which has been amended to include approximately 770 of the IPO investors, was filed against the Company in the Federal Court of Australia on May 31, 2012. Separately, KordaMentha, the receivers for the SPVs, filed a lawsuit in the Federal Court of Australia on May 14, 2012. Portigon AG (formerly WestLB), one of the lending banks to the SPVs, filed a lawsuit in the Federal Court of Australia on May 18, 2012. The lawsuits claim unspecified damages that purportedly resulted from the Company's role in connection with the above described traffic forecast; the damages sought by Portigon AG are, in part, duplicative of damages already included in the receivers' claim. The Company intends to continue to vigorously defend the claims brought against it. A provision has been recognised in relation to the future legal costs as disclosed in Note 15. 24 There was a development after I reserved my decision on the cross-respondents' interlocutory applications seeking security for costs. AECOM settled the RiverCity Proceeding and the Portigon Proceeding. Consent orders dismissing both proceedings were made by me on 17 August 2015 on terms that there be no order as to costs. 25 As a result of the settlement of the RiverCity Proceeding and the Portigon Proceeding, AECOM sought leave to rely upon a further affidavit of Mr Chapple dated 25 August 2015. In his affidavit Mr Chapple refers to a confidential settlement of the claims made against AECOM in the RiverCity Proceeding and the Portigon Proceeding, and deposes to a conversation he had with Mr Gordon Kenwright, the Chief Counsel of AECOM. According to Mr Kenwright: (a) there was no adverse impact upon AECOM's financial position by reason of the settlement; and (b) as a result of the consent orders, AECOM is no longer exposed to the claims previously made against it in the RiverCity Proceeding or the Portigon Proceeding. 26 The cross-respondents were given an opportunity to make submissions in relation to Mr Chapple's affidavit, and I received a joint written submission prepared by counsel for the Sponsor Parties on that topic. That written submission did not raise any objection to AECOM being granted leave to rely on that affidavit nor was there any other objection taken as to its admissibility. Various submissions were made in relation to the contents of Mr Chapple's affidavit including a submission to the effect that it should not be given any weight. In the absence of any objection to Mr Chapple's further affidavit, I have decided to give AECOM leave to reopen to enable it to rely upon that affidavit, which I have admitted into evidence. I will say more about the cross-respondents' submissions in relation to Mr Chapple's affidavit later in these reasons.

Relevant Statutory Provisions 27 The applications for security were made under s 1335 of the Corporations Act and s 56 of the Federal Court of Australia Act 1976 (Cth) ("FCA"). 28 Section 1335(1) of the Corporations Act provides: 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. 29 Section 56(1) of the FCA provides: 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.

The Submissions 30 In so far as the cross-respondents relied upon s 1335, they sought to persuade me that there was reason to believe that AECOM will be unable to pay the cross-respondents' costs of the cross-claims if ordered to do so. It was submitted by the cross-respondents that this was because there was a "real chance" or a "reasonable possibility" that AECOM will be unable to pay such costs. The cross-respondents accept that, if AECOM was required to provide security for their costs today, then AECOM would have no difficulty doing so using its own moneys. However, what the cross-respondents say is that there is a "real risk" or "real possibility" that AECOM will not be able to pay such costs if ordered, because there is a "real risk" or "real possibility" that AECOM will be found liable to the applicants and the group members for a total amount that will render AECOM insolvent. 31 Senior Counsel for Mr Hicks and Leighton sought to demonstrate, principally by reference to the para 28(aa) allegation, that the applicants have a strong case against AECOM because its most senior traffic forecaster involved in the preparation of the traffic forecasts (Mr Johnston) considered that the probability of the traffic forecasts being achieved was low, and that they were not the most appropriate traffic forecasts available for inclusion in the PDS. 32 Senior Counsel then referred me to the quantum of the claims made against AECOM including the claims made by the applicants and the group members in this proceeding and submitted that there was a "real risk" that AECOM would be found liable to the applicants and the group members for damages or compensation of $250 million or more. Of course, at the time that submission was made, AECOM was the sole respondent in the RiverCity Proceeding and the Portigon Proceeding in which the damages claimed by the applicants also ran into many hundreds of millions. According to Senior Counsel for Mr Hicks and Leighton, the damages claimed by the applicants in the RiverCity Proceeding totalled $1.682 billion, and the damages claimed by the applicant in the Portigon Proceeding totalled $76.26 million. As I have mentioned, both the RiverCity Proceeding and the Portigon Proceeding have since been dismissed.

Mr Chapple's affidavit 33 At this point it is convenient to deal with the Sponsor Parties' submission in relation to Mr Chapple's affidavit. 34 In their written submission the Sponsor Parties submitted that, irrespective of any settlement of the RiverCity Proceeding and the Portigon Proceeding, there remains a "substantial risk" that AECOM will not be able to meet the Sponsor Parties' (and the other cross-respondents') costs in the event that AECOM fails in its cross-claims against them. They also submitted that Mr Chapple's affidavit, in so far as it suggests that the settlement of the RiverCity Proceeding and the Portigon Proceeding had no adverse impact upon AECOM's financial position, was based upon hearsay material (ie. Mr Kenwright's statements to Mr Chapple) that was vague and qualified, and that it should therefore be given no weight. 35 I do not regard the Sponsor Parties' criticisms of Mr Chapple's evidence as convincing. In this regard, there are two matters that are of particular significance. First, it is clear that orders have been made dismissing the RiverCity Proceeding and the Portigon Proceeding. Secondly, Mr Chapple's affidavit is unchallenged and is not contradicted by other evidence. 36 There are various possibilities that could explain why the RiverCity Proceeding and the Portigon Proceeding were resolved without any adverse financial impact upon AECOM. One possibility is that the applicants in those proceedings, for good or bad reasons, simply threw in the towel. Another possibility is that the financial impact of any settlement was absorbed by AECOM's parent or an insurer. These possibilities may or may not explain how AECOM extricated itself from the RiverCity Proceeding and the Portigon Proceeding without suffering any adverse financial impact. Whatever the explanation, if the Sponsor Parties wished to submit in the face of the dismissal of the RiverCity Proceeding and the Portigon Proceeding that any settlement did, or may have, adversely impacted AECOM's financial position then it was necessary for them to establish an evidentiary foundation for such a submission, which they have not done. 37 In light of Mr Chapple's uncontradicted evidence, I propose to proceed on the basis that the settlement of the RiverCity Proceeding and the Portigon Proceeding has had no adverse impact on the financial capacity of AECOM to meet any order for costs that may be made against it in this proceeding.

Section 1335 38 The proposition that the discretion to award security for costs under s 1335 is enlivened if the Court is satisfied that there is "a real chance" that the company might be unable to satisfy an order for costs finds considerable support in a number of decisions of single judges, the most well-known of which is that of von Doussa J in Beach Petroleum NL v Johnson (1992) 7 ACSR 203 at 205. The test formulated by his Honour in that case required the Court to determine whether there is: reason to believe there is a real chance that in events which can fairly be described as reasonably possible the plaintiff corporation will be unable to pay … even if in other events which can also be fairly described as reasonably possible the plaintiff corporation would be unable to pay … 39 In recent times, the test applied in Beach Petroleum has been rejected by intermediate appellate courts in Victoria and New South Wales in favour of an approach that is said to adhere more closely to the language of s 1335. 40 In Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377, [2008] VSCA 93, Maxwell P and Buchanan JA observed that the statutory test is clear, and that the court must ask whether there is reason to believe that the corporation will be unable to pay the defendant's costs. Their Honours said at [15]-[16]: [15] The phrase "reason to believe" is the touchstone of jurisdiction. It requires a rational basis for the belief - and no more. The wording adopted may be contrasted with other familiar formulations such as "if the court is satisfied that" or "if in the view of the court it is likely that". The section requires the making of a judgment, a risk assessment: is there a risk that the corporation will be unable to pay? (It adds nothing, in our view, to say that it must be a "real risk".) A risk assessment is, of necessity, imprecise. The section calls for a practical, commonsense approach to the examination of the corporation's financial affairs. [16] It may be said, with justification, that this is a low threshold. But the test simply reflects the policy of the provision, which is to protect a defendant against the risk of the plaintiff corporation's impecuniosity. The provision equips the court with the means to require that the defendant be secured against that risk. (citations omitted) 41 Livingspring was referred to with apparent approval by the New South Wales Court of Appeal in Wollongong City Council v Legal Business Centre Pty Limited [2012] NSWCA 245. In that case Beazley JA (with whom Barrett JA agreed) referred at [28] to Livingspring in support of the proposition that "the court should adopt a practical commonsense approach to the examination of the financial affairs of the corporation." 42 Section 1335 was more recently considered by the New South Wales Court of Appeal in Cornelius v Global Medical Solutions Australia Pty Ltd (2014) 98 ACSR 301, [2014] NSWCA 65. Macfarlan JA and Tobias AJA rejected the test formulated in Beach Petroleum on the basis that it did not reflect the statutory language. Macfarlan JA (with whom Tobias AJA agreed) said at [16]-[17]: [16] The words "reason to believe" acknowledge that on an application for security for costs, as a matter of practicality, a court will not be able to undertake as thorough an examination of the financial position of a plaintiff as it would if an issue as to that arose at a final hearing. Almost inevitably, the court's assessment will be a preliminary one based on limited materials. Nevertheless, for the power to order security to arise, the outcome of the assessment must be that the court considers that there is "reason to believe" that the plaintiff "will be" unable to meet an adverse costs order. A conclusion that there is a risk that that will, or may, be the case is insufficient. [17] The words of the statute and rule are clear and should be applied according to their terms without a gloss being placed upon them. They were so applied in the last Full Bench decision of this court applying the provisions, Wollongong City Council v Legal Business Centre Pty Ltd [2012] NSWCA 245 (Wollongong City Council). In that case, Beazley JA (as her Honour then was) (with whom Barrett JA agreed) referred to the onus of the applicant for security as being to establish "that there is reason to believe that the other party to the litigation will be unable to pay the costs of the litigation if unsuccessful": at [29] and [30]. 43 Ward JA (with whom Tobias AJA also agreed) expressly agreed with parts of Macfarlan JA's reasons, but the specific paragraphs referred to by her Honour did not include [16] or [17]. Her Honour stated that the test applicable under s 1335 was as stated by the Court of Appeal in Wollongong City Council. 44 The discretion to order security pursuant to s 1335, once enlivened, is broad. The Court's discretion must be exercised judicially and for the purpose for which it is conferred, but it is otherwise unfettered: Merribee Pastoral Industries Pty Ltd v Australia and New Zealand Banking Group Limited (1998) 193 CLR 502 at 513. As Kirby J observed in that case, "[t]he governing consideration is what is required by the justice of the matter." In saying this, his Honour was echoing what was said by Rich J in King v Commercial Bank of Australia Ltd (1920) 28 CLR 289 who, in the context of an application under s 36 of the High Court Procedure Act 1903 (Cth) to reduce the amount of security the appellant was required to provide, said at 292: The discretion must, of course, be exercised judicially, which means that in each case the Judge has to inquire how, on the whole, justice will be best served … 45 In the present case I do not find it necessary to embark upon a consideration of the difference of judicial opinion that has emerged in relation to the operation of s 1335. Even if the discretion to award security pursuant to s 1335 is enlivened on the basis that there is a "real chance" that AECOM would be unable to pay the cross-respondents' costs, I would in any event refuse to make such an order on discretionary grounds. 46 The magnitude of the risk that the applicant for security will not be able to recover its costs is an important consideration in the present case. I am not persuaded on the evidence before me that there is anything more than a slight risk that AECOM will not be able to pay the cross-respondents' costs if ordered to do so. 47 Even after making a very substantial provision for legal expenses, AECOM's net assets exceed $166,000,000, most of which is made up of cash or cash equivalents. Nothing put before me by way of evidence or submission suggests that the full value of those assets would not be available to satisfy any orders for the payment of damages, compensation or costs that might be made against AECOM in this proceeding. 48 As I have mentioned, the applicants' and group members' claims against AECOM are said to total between $150 million and $250 million (excluding interest and costs). However, even if I assume, as I do, that the applicants' and group members' claims are made bona fide, and are reasonably arguable, I am not persuaded on the evidence that is currently before me that there is a "substantial risk" (using the words picked up in the Sponsor Parties' joint submission) that AECOM will be found liable for a sum of money within that range. 49 One question that will need to be determined is whether the group members are entitled to recover their alleged losses from AECOM in the absence of any reliance upon AECOM's traffic forecasts. It is quite conceivable that some group members, perhaps a large number of them, never read the traffic forecasts in the PDS and were not influenced by them in any respect. Moreover, some group members are likely to be sophisticated (including institutional) investors who may have paid no regard to the traffic forecasts or placed little or no weight on them because they understood that traffic modelling and forecasting is not a precise science and that it relies upon complex sets of assumptions. 50 The applicants' second further amended statement of claim includes the following particulars of the loss and damage claimed: Each of the Applicants and Group Members have either lost the whole of their investment in the stapled units or, if the stapled units were sold, the diminution of the value of the stapled units between the date of the purchase and the date of sale because: (a) but for their reliance on the Consented Material they would not have acquired the stapled units; (b) had the PDS contained the omitted material they would not have acquired the stapled units; or (c) if the Forecasts had not been significantly inflated the transactions contemplated by the PDS would not have occurred. 51 Paragraph (a) and, it seems, paragraph (b), reflect what may be termed the "reliance based" case. Paragraph (c) on the other hand reflects what has been described in submissions as the applicants' "no transaction" case. As I understand this case, the applicants contend that, had AECOM not significantly overestimated the NSBT traffic flows, the NSBT project would never have made it off the ground, a PDS would never have been issued, and none of the applicants or group members would have acquired Stapled Units. However, the evidence before me does not permit me to make even the most rudimentary assessment of the strength of the "no transaction" case. 52 Senior Counsel for Mr Hicks and Leighton also submitted that the cross-claims against Mr Hicks and Leighton (and, a fortiori, the other Sponsor Parties) are inherently weak and unlikely to result in any order for contribution against them. I do not accept that submission. On the contrary, assuming that the PDS was defective, it is quite conceivable that Mr Hicks, Leighton and at least some of the other Sponsor Parties may be found to have contributed to it being defective. 53 I have previously referred to the information which the applicants allege was not, but should have been, disclosed by AECOM in the Consented Material. If that allegation is made good, it may be open to infer that Mr Hicks, Leighton and the other Sponsor Parties also knew that the Consented Materials did not include such information and approved of, and perhaps even encouraged, the omission of the information or some part of it. Difficult questions may then arise as to the amount of any contribution that should be required of any cross-respondent which is found to have contributed to the PDS being defective. While it is possible that the amount of contribution ordered might be relatively small so far as any particular cross-respondent is concerned, it might still be relatively large when regard is had to the total contribution required of all cross-respondents found to have contributed to the PDS being defective. 54 In the result, I am not persuaded that AECOM's cross-claims for contribution against other cross-respondents, in particular, Mr Hicks and Leighton, should be disregarded as inherently weak when assessing the magnitude of the risk that AECOM will be unable to pay the cross-respondents' costs, if required. 55 I have taken into account the fact that AECOM could provide security in the amount sought by each of the cross-respondents without any difficulty. But this is explained by the strength of AECOM's financial position which, in the circumstances of this case, weighs against rather than in favour of the making of any order for security for costs. 56 In the result, I do not think the interests of justice favour making any order for security to protect the cross-respondents against what I regard as the slight risk that AECOM will not be able to pay the cross-respondents' costs if ordered to do so.

Section 56 57 The discretion conferred on the Court by s 56(1) of the FCA is broad and unfettered. What I have said in relation to the discretion under s 1335 of the Corporations Act at [44] applies to s 56 of the FCA as well. In the circumstances of this case, the magnitude of the risk that AECOM will be unable to pay the cross-respondents' costs if ordered to do so is of central relevance to the exercise of the discretion under s 56 of the FCA. 58 As a matter of discretion, I would not order that AECOM provide security for the cross-respondents' costs pursuant to s 56 unless I was satisfied there was a substantial risk that AECOM would not be able to pay such costs if ordered. For reasons previously given I am not satisfied that there is any more than a slight risk of that occurring.

DISPOSITION 59 I am not persuaded that it is appropriate to make any order requiring AECOM to provide security for costs. The interlocutory applications filed by Mr Hicks, RCM Services, Leighton, Bilfinger, Lend Lease, RBS, BECA and Mallesons will be dismissed. 60 In their joint written submission, the Sponsor Parties said that they wish to be heard on costs. I will give the parties an opportunity to make brief oral submissions on the question of costs when the proceeding is next before me on 27 November 2015. 61 There will be orders accordingly. I certify that the preceding sixty-one (61) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholas.

Associate: Dated: 13 November 2015 SCHEDULE FIRST Cross-Claim: NATIONAL INSTITUTE OF ECONOMIC AND INDUSTRY RESEARCH PTY LTD ACN 006 234 626 Cross-Respondent SECOND CROSS-CLAIM: PETER JEREMY HICKS Cross-Respondent THIRD CROSS-CLAIM: RIVERCITY MOTORWAY SERVICES PTY LTD (ADMINISTRATORS APPOINTED)(RECEIVERS AND MANAGERS APPOINTED) ACN 117 139 992 Cross-Respondent FOURTH Cross-Claim: RIVERCITY MOTORWAY MANAGEMENT LTD (ADMINISTRATORS APPOINTED) ACN 117 343 361 Cross-Respondent FIFTH Cross-claim: Leighton Contractors PTY LTD ACN 000 893 667 Cross-Respondent SIXTH CROSS-Claim: RBS Group (AustRALIA) PTY LTD acN 000 862 797 (formerly ABN AMRO AUSTRALIA LIMITED) Cross-Respondent SEVENTH CROSS-Claim: Bilfinger Berger Project Investments PTY LTD ACN 055 541 770 (FORMERLY BILFINGER BERGER CONCESSIONS PTY LTD) Cross-Respondent EIGHTH CROSS-Claim: Baulderstone Pty Ltd acn 002 625 130 (FORMERLY Baulderstone HORNIBROOK Pty Ltd) Cross-Respondent NINTH CROSS-Claim: Beca Pty Ltd ACN 004 974 341 Cross-Respondent TENTH CROSS-CLAIM mallesons stephen jaques Cross-Respondent