One Lake Macquarie Pty Ltd (In Liquidation) v Athena Rose Capital Pty Ltd (No 2)

Texts Cited: Nil

Category: Procedural rulings

Parties: One Lake Macquarie Pty Ltd (In Liquidation) (Plaintiff)
Athena Rose Capital Pty Ltd (Defendant)

Representation: Counsel:
D Weinberger (Plaintiff)
N Kidd SC/E Ball (Defendant)
Solicitors:
Piper Alderman (Plaintiff)
Mack Lions (Defendant)

File Number(s): 2024/102800

Publication restriction: Nil

JUDGMENT

1. On 11 March 2025, Kunc J gave reasons for setting aside a decision of Acting Registrar Onisforou in relation to the provision of security by the plaintiff for the defendant’s costs of this litigation: One Lake Macquarie Pty Ltd (In L**iquidation) v Athena Rose Capital Pty Ltd [2025] NSWSC 177 (the March judgment). The Acting Registrar had refused to make an order for security for costs. Kunc J disagreed with that conclusion. However, because the question of the amount and timing of security had not been the subject of argument before him, he made orders that the parties ‘endeavour in good faith to agree…on orders to give effect to the Court’s reasons including as to costs, and as to the quantum of security to be provided and in what tranches’. His Honour further ordered that ‘if agreement is reached…consent orders to be made in chambers’ were to be emailed to his Honour’s associate.

2. The parties through their counsel duly engaged in good faith negotiations to agree the form of consent orders. Consent orders were forwarded to the associate to Kunc J who made orders in chambers on 19 March 2025 (the March consent orders). Relevantly, they provided for security to be provided by payment into Court.

3. The plaintiff has now entered into a litigation funding agreement with a litigation funder. Although there was a debate about certain clauses of the funding agreement, I accept (for reasons I will explain in due course) that the funder is only willing to fund the provision of security for costs by way of a bank guarantee. The defendant does not consent to the provision of security in this form.

4. The plaintiff therefore seeks an order pursuant to the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 36.16 varying the 19 March 2025 consent orders to permit the provision of security by way of delivery of an unconditional bank guarantee.

Background

5. I will adopt the same naming convention used by Kunc J and refer to the plaintiff as OLM and to the defendant as ARC.

6. The background to the proceedings was set out by Kunc J at [11] to [13] of the March judgment. It is not necessary to repeat it.

7. The plaintiff is in liquidation. Mr Tonks and Mr Roufeil are joint liquidators. The proceedings were commenced on 9 May 2024. ARC brought an application for security for costs on 28 May 2024. The orders of the Registrar refusing to grant that relief were made on 12 September 2024. Broadly, the Registrar was satisfied that an order for security for costs would have stultified the proceedings.

8. The application to review the Registrar’s decision was heard by Kunc J on 13 December 2024. Before Kunc J, an issue arose as to whether OLM, which was in liquidation, was able to demonstrate that commercial litigation funding was either inappropriate or unavailable: see paragraph [9(5)] of the March judgment. There was evidence, to which his Honour referred at [46], that Mr Roufeil had previously been in ongoing discussions with three separate potential litigation funders. At that stage, the evidence was that Mr Roufeil was ‘currently considering the alternate draft offers for litigation funding and seeking more information and advice to assess which is the best offer in the interest of the Company and its creditors’ and that OLM ‘has not obtained litigation funding’. See also paragraphs [102] to [104] of the March judgment, to like effect.

9. His Honour made the following findings at [120] to [121]:

“[120] These proceedings are commercial litigation (see [11] to [13] above). There is no initial issue of litigation funding being inappropriate. On the contrary, Mr Roufeil has made attempts to obtain it. However, the difficulty for OLM then becomes twofold:

(1) In relation to the offer of funding from Clover Risk, there is no evidence as to the reasons why Mr Roufeil rejected it. In the absence of reasons, the Court cannot determine why that particular funding is not reasonably to be expected to be available to OLM. Contrary to OLM’s submission, the mere facts of obtaining the offer and its rejection are insufficient to establish stultification; and

(2) Mr Roufeil’s evidence is that OLM’s presumptively reasonable efforts to obtain litigation funding are continuing, so the Court does not have evidence to conclude that it is unavailable to OLM.

[121] OLM has undertaken the task of demonstrating that security should not be ordered because it will stultify the proceedings. As part of that task it bears the onus to show that litigation funding is not among the ‘resources that may reasonably be expected to be available’ to it. By reason of the matters identified in the preceding paragraph, OLM has not discharged that onus.”

10. His Honour then expressed his conclusions at [122] to [126]. In the final sentence of [122] his Honour said:

“Therefore, the Registrar’s order dismissing ARC’s application for security will be set aside and an order will be made for the provision of security.”

11. His Honour then identified two remaining issues, being (a) costs and (b) ‘the quantum and timing of security’. As to the latter issue, his Honour said:

“The Court has not heard the parties on quantum. Whatever quantum is ordered, it would, absent particular reasons, be ordered in tranches tied to the course of the proceedings.”

12. Finally, his Honour said at [126]:

“As to both of these issues, the Court will make provision for further brief written submissions and, if necessary, a short hearing to the extent that the parties are unable to agree on the outcome. The parties will be directed to make good faith endeavours to reach an agreement, consistently with their obligation to facilitate the just, quick and cheap conduct of the proceedings.”

13. I have already referred to some of the orders which his Honour made on that day. They should however be set out in full:

“The Court makes orders in accordance with the document which is amended, initialled and dated today by Kunc J and placed with the papers.

1. The parties are to endeavour in good faith to agree on or before 18 March 2025 on orders to give effect to the Court’s reasons including as to costs, and as to the quantum of security to be provided and in what tranches.

2. If agreement is reached in accordance with order 1, consent orders to be made in chambers are to be emailed to the Associate to Kunc J on or before 19 March 2025.

3. If agreement cannot be reached in accordance with order 1, then on or before 20 March 2025 each party is to serve and file by email to the Associate to Kunc J:

1. The form of orders for which that party contends;

2. Any affidavit evidence; and

3. An outline of submissions not exceeding 5 pages.

4. List the proceedings for further hearing not exceeding one hour before Kunc J on 21 March 2025 at 9:30am.

5. Liberty to apply on short notice by email to associate to Kunc J.”

14. There followed several days of correspondence between counsel for the parties. That correspondence shows that the parties, through their counsel, acted promptly and appropriately to reach agreement on a form of orders to give effect to the March judgment, including on the two outstanding issues identified by his Honour.

15. Orders 1 to 5 made on 19 March 2025 were as follows:

“1. The Registrars’ costs order be set aside.

2. The Plaintiff pay the Defendant’s costs of:

(a) the Plaintiff’s security for costs notice of motion; and

(b) the Defendant’s review notice of motion,

such costs to be assessable and payable forthwith.

3. The Plaintiff is to pay into Court the following sums at the following times as security for the Defendants’ costs:

(a) $56,000 within 14 days after the entry of these orders;

(b) $56,000 at the time ordered for the Plaintiff to serves its evidence in chief;

(c) $56,000 at the time ordered for the Plaintiff to serve any evidence in reply; and

(d) $57,000 within 28 days before the date ordered for the commencement of final hearing.

4. If the Plaintiff does not pay the amount of security required by Orders 3.1 (a), (b) or (c) within the time so required by those Orders, then the proceedings be stayed until such time as the Plaintiff has done so.

5. If the Plaintiff does not pay the amount of security required:

(a) by Orders 3 (a), (b) or (c) within 60 days after the time so required by those orders; or

(b) by Order 3 (d) by the time so requires,

then the proceedings be dismissed.”

16. Order 3(a) required OLM to pay $56,000 into Court by 2 April 2025, being 14 days after the orders were entered. That did not occur. By force of Order 4, the proceedings were thereupon stayed.

17. The litigation funder with whom the plaintiff eventually executed a funding agreement is Pretium Funding Pty Ltd (Pretium). It is clear that Pretium had provided a draft funding agreement as early as November 2024. However, as Kunc J found, no such agreement had been entered into at the time his Honour heard ARC’s application to review the Registrar’s decision. In fact, a funding agreement was only entered into on about 23 May 2025.

18. I note that the form of litigation funding agreement originally proposed by Pretium in 2024 included a ‘Reference Schedule’ that defined the proposed ‘Facilities’ in item 4 to include the provision of funding for various matters, including ‘Security for Costs’ in item 4(c).

19. Item 5 in the Reference Schedule was entitled ‘Facility Aggregate’. In relation to the amounts set out in item 4(c), the proposed draft of item 5(c) said:

“Item 4(c) shall be provided in the form of an unconditional irrevocable Bank Guarantee as agreed between the parties.”

20. In other words, the original draft funding agreement proposed that, to the extent the funder would provide funding to enable OLM to post security for costs, such funding would be provided by the provision of an unconditional irrevocable bank guarantee as agreed between the parties.

21. On 12 May 2025, a solicitor acting for the plaintiff proposed some changes to the draft funding agreement. He proposed that item 5(c) be amended to read:

“Item 4(c) shall be paid into court unless otherwise agreed between the parties to the proceeding.”

22. The following day, the director of Pretium, Mr Paneth, attended a meeting with the plaintiff’s solicitors in Sydney. At that meeting, he informed the plaintiff’s solicitors that Pretium ‘only provides funding for security for costs by bank guarantee, that Pretium was not going to fund the security for costs of the proceedings on any other basis, and that it was in the ordinary course of my business’. I am not sure exactly what he meant by that final clause, but I think all he meant was that this is how he ordinarily conducts his business.

23. That same day, no doubt because of what Mr Paneth advised concerning the provision of security as set out in the previous paragraph, one of the liquidators instructed the solicitors for the plaintiff to seek the consent of the defendants to a variation of the March consent orders to allow security to be posted by the delivery of a bank guarantee. The solicitors for the defendant responded on 16 May, refusing their client’s consent.

24. Pretium duly arranged for an unconditional irrevocable bank guarantee to be issued by National Australia Bank Ltd. The guarantee was in evidence. Although there was a faint suggestion that the form of guarantee was uncertain in some respects, it appeared to me to be exactly what the plaintiff said it was, namely an unconditional irrevocable bank guarantee issued by National Australia Bank Ltd in favour of ARC, payable on presentation to meet any costs order in these proceedings. A copy of the bank guarantee was provided to the solicitors for the defendant on 26 May.

25. A Litigation Funding Agreement was duly executed in counterparts on 22 or 23 May. The parties to the agreement were Pretium, the joint liquidators, the plaintiff, and two other companies in liquidation in respect of which Mr Roufeil and Mr Tonks are also joint liquidators. The legal proceedings to which it refers include these proceedings, as well as some related examinations and other matters.

26. As executed, the agreement contains a reference schedule that includes the following:

“4. Facilities

…

(c) Security for Costs The security for costs to be provided in the Legal Proceeding by way of bank guarantee only, in the following tranches:

- $56,000 by 31 May 2025

…

5. Facility Aggregate The amount set out in Items 4(a), (b), (c) and (d) to be provided as follows:

…

(c) Item 4(c) shall be provided in the form of an unconditional irrevocable Bank Guarantee as agreed between the parties.

…”

27. The recitals to the agreement recorded the fact that Pretium ‘agrees to provide the Facility to the Liquidators in accordance with this Agreement’. The expression ‘Facility’ was defined as follows:

“(a) the financial accommodation provided to the Liquidators by Pretium Funding in accordance with this Agreement in the amount and in the form set out at Item 5 of the Reference Schedule in relation to the Legal Proceeding calculated to provide the Liquidators with security against any reasonably foreseeable adverse costs orders during the Facility Period; together with

…

(c) Security for Costs, if applicable…”

28. The expression ‘Security for Costs’ was defined to mean ‘any costs ordered or agreed to be paid as security for the costs of another party, as set out in Item 4(c) in the Reference Schedule’.

29. Clause 6 was entitled ‘The Facility’. It provided in clause 6.1 that Pretium ‘shall provide to the Liquidators the Facility in the manner set out in Item 4 of the Reference Schedule’.

30. Clause 6.2(d) provided that the Liquidators ‘shall be entitled to draw down on the Facility so as to…pay Security for Costs as required of the Liquidators by any court order, or as otherwise agreed in writing between the Liquidators and [Pretium]’.

31. Clause 6.6 was as follows:

“[Pretium] agrees to proffer such form of security as may be reasonably required to meet any order for security for costs or amount which may be agreed to be held as security for the costs of another party.”

The issues in dispute

32. The main issue in dispute is whether the Court should vary the March consent orders to permit security to be provided by the delivery of a bank guarantee. The plaintiff submits that the power to do so is found in UCPR r 36.16 and that there has been a material change in circumstances that warrants the exercise of that power, namely the fact that the plaintiff has now entered into the Litigation Funding Agreement with Pretium on terms that security will only be funded by way of bank guarantee.

33. The defendant submits that where consent orders are the product of party-to-party negotiation, a claimant must demonstrate that there has been a material change in circumstances in the nature of an exceptional case: Lachlan v HP Mercantile Pty Ltd (2015) 89 NSWLR 198; [2015] NSWCA 130 (‘Lachlan’) at [27]. It submitted that the prejudice which the claimant might otherwise suffer (for example, dismissal of the proceedings) will rarely be a sufficient justification for exercising the power. It also submitted that the fact that the opponent is unlikely to suffer any prejudice if the order is varied is not a weighty consideration.

34. So far as the facts are concerned, ARC submits that the Litigation Funding Agreement, properly construed, obliges Pretium to fund security for costs in any form ordered by the Court in any event. This is said to be the effect of clause 6.6 which, ARC submits, overrides the statements in the Reference Schedule to security being provided ‘only’ by bank guarantee. It points out that clause 6.6 is not constrained by reference to either the Facility or to the defined term ‘Security for Costs’. Its position is that OLM is mistaken in its belief that Pretium is not obliged to fund security by paying money into Court.

35. ARC also submits that there has been no relevant change in circumstances here, much less one that could be described as exceptional. It points out that at the time the consent orders were entered into in March 2025, the solicitors for the plaintiff had received a draft funding agreement from Pretium which referred to the provision of security by way of bank guarantee. It submits that the plaintiff should have crafted the March 2025 consent orders with a view to a later Litigation Funding Agreement being entered into with Pretium on the terms proposed in the draft provided in 2024.

Applicable principles

36. The Court has a general power to ‘reconsider, vacate or amend its own interlocutory orders’: Riddell v R [2024] NSWCCA 46 at [47] (Stern JA, Davies and Campbell JJ); see also Douglas v John Fairfax & Sons Ltd [1983] 3 NSWLR 126 at 134. The guiding principle in the exercise of that power was explained by McLelland J in Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44 (‘Brimaud v Honeysett’) at 46-47 as follows:

“Interlocutory orders, of their very nature, create no res judicata or estoppel, and the court retains jurisdiction to set aside, vary or discharge an interlocutory order up to the time of the final disposition of the proceedings. However the general rationale of the principles last referred to applies even in the case of interlocutory orders. It would be conducive to great injustice and enormous waste of judicial time and resources if there were no limit on the power of a party to have any interlocutory application or order relitigated at will.

The overriding principle governing the approach of the court to interlocutory applications is that the court should do whatever the interests of justice require in the particular circumstances of the case. In giving effect to that general principle, and in recognition of the public and private interests earlier referred to, rules of practice have been developed in accordance with which the discretionary power of the court to set aside, vary or discharge interlocutory orders will ordinarily be exercised. Not all kinds of interlocutory orders attract the same considerations. For present purposes one may put to one side orders of a merely procedural nature (as to which see for example Wilkshire & Coffey v Commonwealth (1976) 9 ALR 325 ) and injunctions (or undertakings) made or given by agreement and without contest ‘until further order’ (as to which see for example Warringah Shire Council v Industrial Acceptance Corp (unreported, SC(NSW), McLelland J, 22 November 1979).

In the present case I am dealing with an interlocutory order of a substantive nature made after a contested hearing in contemplation that it would operate until the final disposition of the proceedings. In such a case the ordinary rule of practice is that an application to set aside, vary or discharge the order must be founded on a material change of circumstances since the original application was heard, or the discovery of new material which could not reasonably have been put before the court on the hearing of the original application: see Woods v Sheriff of Queensland (1895) 6 QLJ 163 at 164–5 ; Hutchinson v Nominal Defendant [1972] 1 NSWLR 443 at 447–8 ; Chanel Ltd v F W Woolworth & Co [1981] 1 All ER 745 ; [1981] 1 WLR 485 ;(1988) 217 ALR 44 at 47Adam P Brown Male Fashions v Philip Morris (1981) 148 CLR 170 at 177–8 ; 35 ALR 625 at 629–30 ; Butt v Butt [1987] 1 WLR 1351 at 1353 ; Gordano Building Contractors Ltd v Burgess [1988] 1 WLR 890 at 894.”

37. Additional power to amend orders is contained in the UCPR. UCPR r 36.16 is as follows:

36.16 Further power to set aside or vary judgment or order

(1) The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order.

(2) The court may set aside or vary a judgment or order after it has been entered if--

(a) it is a default judgment (other than a default judgment given in open court), or

(b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order, or

(c) in the case of proceedings for possession of land, it has been given or made in the absence of a person whom the court has ordered to be added as a defendant, whether or not the absent person had notice of the relevant hearing or of the application for the judgment or order.

(3) In addition to its powers under subrules (1) and (2), the court may set aside or vary any judgment or order except so far as it--

(a) determines any claim for relief, or determines any question (whether of fact or law or both) arising on any claim for relief, or

(b) dismisses proceedings, or dismisses proceedings so far as concerns the whole or any part of any claim for relief.

(3A) If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered.

(3B) Within 14 days after a judgment or order is entered, the court may of its own motion set aside or vary the judgment or order as if the judgment or order had not been entered.

(3C) Despite rule 1.12, the court may not extend the time limited by subrule (3A) or (3B).

(4) Nothing in this rule affects any other power of the court to set aside or vary a judgment or order.

38. Where the order in question is an interlocutory order, it is appropriate to exercise the power (whether under UCPR r 36.16 or in the exercise of the Court’s inherent jurisdiction to vary interlocutory orders, as to which see Riddell v R at [47]) according to the guiding principle described by McLelland J in Brimaud v Honeysett as set out above at [36].

39. Although it is often said that where a consent order is based on an agreement between the parties, those orders may not be varied or set aside except on a ground upon which a simple contract might be set aside, the position in New South Wales is as described by McHugh JA in Paino v Hofbauer (1988) 13 NSWLR 193 at 198D-E:

“English courts have gone so far as to say that a court will only interfere with a consent order based on a contract on the grounds that it interferes with any other contract: Siebe Gorman & Co Ltd v Pneupac Ltd [1982] 1 WLR 185; [1982] 1 All ER 377. In Harvey v Phillips (1956) 96 CLR 235 the High Court (at 244) approved the statement of Lindley LJ in Huddersfield Banking Co Ltd v Henry Lister & Son Ltd [1895] 2 Ch 273 at 280, where his Lordship said:

‘… To my mind, the only question is whether the agreement upon which the consent order was based can be invalidated or not. Of course, if that agreement cannot be invalidated the consent order is good.’

The issue in Harvey v Phillips, and in General Credits Ltd v Ebsworth [1986] 2 Qd R 162, which applied it, was whether a consent order based on a compromise agreement could be set aside. The issue in the present case is different. The Court does have a discretion. Moreover, I am not prepared to adopt the English approach to consent orders based on contracts. The discretion conferred by Pt 2, r 3, is not to be equated with the extent of the Court's powers to vary or set aside contracts.”

40. As to how that discretion should be exercised, his Honour said at 198F:

“Nevertheless, when a party asks that a consent order based on a contract should be set aside or varied and the underlying contract could not be set aside or varied, the case would need to be exceptional before the Court would exercise its discretion in favour of an applicant. Moreover, by itself the failure of the applicant to comply with the terms of a consent order based on a contract could rarely, if ever, be a sufficient ground to vary the order. This is particularly so when the parties have stipulated that time for the performance of the parties' obligations was to be of the essence of the agreement.”

41. Paino v Hofbauer generally, and this paragraph in particular, were specifically approved by the Court of Appeal (Bathurst CJ, Beazley P and McColl JA) in the context of ss 56 to 58 of the Civil Procedure Act 2005 (NSW): see Lachlan at [19]-[33].

42. The power to vary an interlocutory order is generally not affected by the fact that the order was made by consent: Mullins v Howell (1879) 11 Ch D 763 at 766. I note that the power in UCPR r 36.16 is not expressed to apply differently in the case of a consent order. However, as I will mention shortly, the circumstances in which consent was arrived at may well be relevant to the exercise of the power.

43. ARC submitted that as soon as it could be said that a consent order reflected an agreement between the parties, then the order could not be varied except in exceptional circumstances, even if the order was an interlocutory order and even if it related to a matter of practice and procedure. Its submission was that the principle described in Paino v Hofbauer and Lachlan concerning the variation of consent orders applies notwithstanding anything said by McLelland J in Brimaud v Honeysett concerning the variation of interlocutory orders, which are frequently made by consent.

44. I am unable to accept ARC’s submission, at least at the level of generality just described. Both Paino v Hofbauer and Lachlan involved cases which had settled on the basis of an agreement which provided for the making of final orders. In each case, the Court was effectively being asked to sanction a departure from a final settlement agreement. Neither case involved the variation of interlocutory orders, much less did either case involve the variation of orders that related to procedural matters. Furthermore, it is important to keep in mind that where orders are expressed as consent orders, care needs to be taken to identify what exactly is meant by the word ‘consent’. As explained by Lord Greene MR in Chandless-Chandless v Nicholson [1942] 2 KB 321 at 324, to describe an order as a consent order may involve an ambiguity:

“If an order is made by consent the practice should invariably be that it should on the face of it be expressed so to have been made. When the court finds an order which is not expressed to be made by consent it certainly is not going to treat it as a consent order unless it is satisfied that it was in fact a consent order. In the present case I am left in considerable doubt whether this order was a consent order in the strict sense. There is a great deal of difference between a consent order in the technical sense and an order which embodies provisions to which neither party objects. The mere fact that one side submits to an order does not make that order a consent order within the technical meaning of that expression, and I am not the least bit satisfied, having regard to the conflicting statements which we have before us as to how this order came to be drawn up, that it was a consent order in the technical sense.”

45. Consent orders may represent a binding agreement between the parties, such as where parties agree to terms of settlement that include the making of orders by consent disposing of the proceedings. However, as is clear from the above passage, parties will very often consent to an order in a specific form notwithstanding that they oppose the making of the order: see also Siebe Gorman & Co Ltd v Pneupac Ltd [1982] 1 WLR 185 at 189 (Lord Denning MR).

46. The requirement to exercise the power in UCPR r 36.16 ‘judicially and consistently with the judicial process’ (CDJ v VAJ (1998) 197 CLR 172; [1998] HCA 76 at 185; Lachlan at [22]) means that where the order in question is an interlocutory order made by consent, the task of determining what ‘the interests of justice require in the particular circumstances of the case’ (Brimaud v Honeysett at 46) will involve a consideration of the nature of the dispute between the parties, the nature of the variation sought and, importantly, the circumstances in which any agreement was arrived at: cf Lachlan at [26]. It is not appropriate to approach all applications to vary interlocutory consent orders dogmatically by requiring exceptional circumstances to be shown in every case, regardless of the particular circumstances that led to the making of the consent order in the first place. Not all consent orders are created equal. It is no doubt for this reason that Rees J said in Guo v Xu [2021] NSWSC 460 in the context of an application to vary freezing orders made by consent that ‘the nature and quality of the consent underpinning the order or undertaking will affect the Court’s willingness to do so’.

Should the March consent orders be varied?

47. The March consent orders should be varied in the manner sought by the plaintiff. I reach that conclusion for the following reasons.

48. First, to say that the March consent orders were made by ‘consent’ is something of an overstatement. OLM did not in any respect consent to the making of orders for it to provide security for costs. Its requirement to post security at all was entirely a function of the determination of that issue by Kunc J. So too was its negotiation of the terms of the order, which Kunc J quite appropriately, in my respectful opinion, ordered the parties to enter into in good faith. I accept that aspects of the order were the subject of agreement between the parties, such as the amount and timing of security. However, it is difficult to pick the March consent orders apart to determine which parts are the product of so-called party-to-party agreement and which parts merely represent those matters to which OLM agreed in order to avoid the Court having to make a further determination.

49. Secondly, to the extent the parties agreed to anything, it was as to ancillary, interlocutory matters of a kind that are commonly subject to variation for reasons of practice and procedure. In Short v Crawley (No 42) [2009] NSWSC 1110, White J said that it may be inferred that parties who agree on consent orders are taken to do so on the understanding that such orders may be varied or set aside. His Honour said at [72]:

“Prima facie, it is to be inferred from the fact that the parties embodied their agreement in the form of consent orders, that they intended they should be able to invoke the Court's power to vary or set aside the orders. There are no express words indicating a contrary intention. There is nothing in the subject matter of the agreement inconsistent with that intention.”

50. Clearly enough, that inference is not always available, such as where final orders are made dismissing proceedings after a settlement. However, the inference is available here. It could hardly be said (although ARC did submit) that either ARC or OLM would be required to show exceptional circumstances in order to seek a variation of the March consent orders if, for example, their expected costs of the litigation were to change because of the way the issues evolved.

51. Thirdly, the change in circumstances on which OLM relies is a sufficient basis to warrant a change in the form of security to be posted. At the time of the hearing before Kunc J and even at the time the March consent orders were made, OLM did not have a funding with Pretium or, indeed, anyone. It now has a funder, save that the funder is only willing to fund security by delivering a bank guarantee. The evidence, which was not challenged, was that the plaintiff’s solicitors were informed that Pretium was not willing to fund the provision of security except by way of bank guarantee on 13 May 2025. The evidence shows that OLM’s solicitors immediately raised the issue with ARC’s solicitors. In fact, they did so on that same day.

52. I do accept that the original draft funding agreement provided by Pretium in 2024 had contemplated that funding for the provision of security would only be provided by bank guarantee, however I do not place much weight on that consideration because no funding agreement with Pretium seems seriously to have been in prospect until after the March consent orders were made.

53. Fourthly, although the Litigation Funding Agreement is somewhat ambiguous, I accept OLM’s submission that it does not require Pretium to provide funding for security for costs except through the delivery of a bank guarantee. The Reference Schedule, by reference to which the expressions ‘Facilities’ and ‘Security for Costs’ are defined, states that the facility which Pretium agrees to provide will include the provision of funding for security for costs by bank guarantee ‘only’. Clause 6.6, on the other hand, is couched in very general terms that do not refer either to the Facilities or to the defined expression, ‘Security for Costs’. If that clause is read as meaning that Pretium is obliged to provide funding for any security for costs order, then the obligation would be entirely inconsistent with the overall obligation to provide funding of the defined Facilities. It would, in effect, amount to an obligation to fund the Facilities as well as security for costs. ARC sought to avoid this construction by submitting that clause 6.6 was concerned only with the form of security and that it could not be read as standing apart from the defined Facilities. The difficulty with that submission is that clause 6.6 refers to both the form and the amount of security for costs.

54. Although I am left in some doubt as to exactly what work clause 6.6 was intended to do, I am at least satisfied that it was not intended to override the much clearer language of the Reference Schedule.

55. Fifthly, even if I am wrong about the construction of the Litigation Funding Agreement, I still consider that it is appropriate to vary the March consent orders. The evidence, which was not challenged, was that the director of Pretium and at least one of the liquidators take the view that Pretium is not obliged to fund security for costs by posting cash. I consider their position to be more than arguable. But the plaintiff has no funds to dispute that position even if it wanted to. The practical reality is that the only way these proceedings can progress is if OLM is permitted to post security by way of bank guarantee.

56. Finally, although this is not a consideration to which I attach much weight, there is no real prejudice to ARC. ARC submitted that its prejudice was that its director, who prefers to deal in cash and is somewhat mistrustful of bank guarantees, lost the opportunity to get a better bargain out of OLM on other aspects of security such as the amount and timing. In other words, ARC says that it could have obtained more security or more favourable timing if the question had been raised earlier. I accept that this is true in theory, but the evidence does not allow me to form a view as to precisely how much better it might have been. I suspect not much, because if the parties had been unable to agree and if the Court had been required to determine the issue, it is likely that the Court would have allowed security to be posted by bank guarantee even if ARC opposed it.

ORDERS

57. The orders of the Court will be as follows:

58. Order 3 of the Orders made on 19 March 2025 by Kunc J (the March consent orders) be varied to read:

“The Plaintiff is to provide, by way of bank guarantee from the National Australia Bank (NAB), or by payment into Court, security for the Defendant’s costs in following sums at the following times:

(a) $56,000 within 14 days after the entry of these orders;

(b) $56,000 at the time ordered for the Plaintiff to serve its evidence in chief;

(c) $56,000 at the time ordered for the Plaintiff to serve any evidence in reply;

(d) $57,000 within 28 days before the date ordered for the commencement of final hearing.”

2. The bank guarantees referred to in Order 1 hereof are to be, upon the making of an adverse cost order in favour of the defendant in these proceedings, unconditional.

3. The defendant is to pay the plaintiff’s costs of the notice of motion filed 23 May 2025.

4. The Court notes:

5. Order 5 of the March consent orders has been stayed pending the outcome of this application. Although Order 5 operates automatically according to its terms, it is unnecessary to make any further order in relation to the stay in circumstances where the obligations under Order 3 of the March consent orders have been varied and overtaken by the obligations set out above.

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