Plaintiff v Defendants

1 The second defendant (SPI) applies by Amended Summons[1] for orders Pursuant to s 33ZF of the Supreme Court Act 1986 (Vic) (SCA) and/or the inherent jurisdiction of the Court that:

(a) Group Member Insurers (as listed in the First Schedule to these reasons) (Insurers);

provide security to SPI for its costs in the proceeding in respect of third party disbursements incurred by SPI on and from 28 March 3013 to the conclusion of the trial of the common questions.

2 The form of the orders sought, and the proportions in which each Insurer against whom application is made is to provide such security, was the subject of a series of detailed proposed orders, the last of which was annexed to the Amended Summons dated 6 June 2013. The form of those proposed orders, as at the conclusion of the hearing, is set out in the Second Schedule to these reasons.

3 The application was referred by J Forrest J to me under Rule 77.05 of the Supreme Court (General Civil Procedure) Rules 2005 ("the Rules") by order made on 15 April 2013.

4 The Group Member Insurers fall into the following categories:

(a) CGU Insurance Ltd (CGU), Elders Insurance Ltd (Elders), Commonwealth Insurance Ltd (CommInsure), QBE Insurance (Australia) Ltd (QBE), Insurance Manufacturers of Australia Pty Ltd (IMA) and Insurance Australia Limited (IAL). These insurance companies are represented by Hall & Wilcox Solicitors, and were described in the application as the Hall & Wilcox Funders. They were described in this way because they, or some of them, agreed to provide funding to the plaintiff's solicitors, Maurice Blackburn Lawyers (Maurice Blackburn) under an agreement referred to below at paragraph 23. They were represented before me by Mr MN Connock SC and Mr CP Young of Counsel;

(b) Suncorp Metway Insurance Ltd, Australian Associated Motor Insurers Ltd, Australian Pensioners Insurance Agency Pty Ltd, GIO General Ltd, Australian Alliance Insurance Company Ltd and AAI Ltd (the Suncorp Insurers). These insurers are represented by Ligeti Partners, solicitors. In the application they were known as the Ligeti Funders. They were described in this way because Suncorp Group Ltd agreed to provide funding to Maurice Blackburn under an agreement referred to below at paragraph 23. They were represented before me by Mr Heath;

(c) Allianz Australia Insurance Ltd (Allianz), also represented by Hall & Wilcox. Allianz is the property insurer of the plaintiff. Allianz was represented by Mr TJ Messer of Counsel;

(d) Calliden Insurance Ltd (Calliden), RJ Kiln & Co Ltd (managing agent of Lloyds acting on behalf of syndicates 510, 807, 958, 1225, 2623, 623, 2003 and 1206) (RJ Kiln), Transcorp Insurance Pty Limited (Transcorp), certain underwriters at Lloyds of London subscribing to policy no. PROP080001443 (Lloyds), Ansvar Insurance Limited (Ansvar), Wesfarmers General Insurance Ltd (Wesfarmers), Zurich Australian Insurance Ltd (Zurich), The Hollard Insurance Company Pty Ltd (Hollard), Sportscover Australia Pty Limited (Sportscover), Lloyds syndicate 2121 "Argenta" (as lead insurer for co-insurers Argenta - Synd 2121, Catlin - Synd 2003, Kiln - Synd 510, Meacock - Synd 727, Atrium - Synd 570, Argo - Synd 1200, Canopius - Synd 985, Kiln - Synd 807, Chaucer - Synd 1084, Ark - Synd 4020, Atrium - Synd 609, and Sagicor - Synd 1206) (Argenta) and Capricorn Mutual Limited (Capricorn) and AAI Limited (AAI). These insurers have been designated the "Other Insurers" in the application.

5 In the group of Other Insurers, there is a sub-group represented by Ligeti Partners that were for the purposes of the proceeding entitled "the Ligeti Non-Funding Insurers". These were Calliden, Wesfarmers, and R.J. Kiln, being insurers 13, 14 and 18 in the first schedule to these reasons. They are referred to as the non-funding insurers as they are not a party to any funding agreement with Maurice Blackburn. They were represented before me by Ms FJ Bentley of Counsel.

6 Zurich was not represented before me. It solicitors, CBP Lawyers wrote to the Court on 4 June adopting the submissions of the Funding Insurers. Some of the smaller insurers were also not represented and not the subject - in the end - of a claim that they give security for SPI's Costs.[2]

(a) The court does have power to require the plaintiff to provide security for SPI's costs;

(b) The power, or jurisdiction, to make an order for the plaintiff to provide security for the costs of SPI is enlivened, but that in the exercise of the Courts discretion it is not appropriate to make any such order;

(c) The power of the Court to order the Insurers to provide security for the costs of SPI, assuming it to exist, is not enlivened;

(d) Further, if that power is enlivened, it is nevertheless not a case where it is appropriate in the exercise of the Court's discretion to make such an order.

(d) The confidential affidavit of Jason Lawrence Betts sworn 6 May 2013;

9 The plaintiff relies upon the affidavit of Andrew Watson sworn 21 May 2013. The Hall & Wilcox Insurers rely on the affidavit of Andrew David Lyle sworn 21 May 2013, the Ligeti Insurers rely upon the affidavit of Jonathan Roden Rupert David Cutler sworn 21 May 2013. Allianz Australia Insurance Ltd relies upon the affidavit of Alexander Wilson McMaster sworn 21 May 2013.

10 The application is made in a group proceeding commenced under Part 4A of the SCA, in which Mrs Matthews, as representative plaintiff, brings claims against SPI, and others, for damages for personal injuries, property damage and economic loss suffered as a result of the Kilmore East/Kinglake bushfire on Black Saturday, 7 February 2009, in Kilmore East (the Kilmore East bushfire). The plaintiff alleges, among other things, that the bushfire was caused by breaches of duty by SPI in the management, inspection and engineering of the Valley Span, a conductor, or powerline, strung between poles 38 and 39 of the Single Wire Earth Return (SWER) line that is alleged to have failed and to have started the Kilmore East bushfire. The Kilmore East bushfire destroyed a number of towns, including Kinglake, destroying 1,242 properties and killing 119 people.

11 In its defence and counterclaim, SPI makes proportionate liability and contribution claims against each of Utility Services Corporation Ltd (now called ACN 060 674 580 Pty Ltd) (called UAM), the Secretary to the Department of Sustainability and Environment (DSE), the State of Victoria and the Country Fire Authority (CFA).

12 The plaintiff makes claims against the five defendants, as follows:

(a) As against SPI she alleges causes of action for breach of statutory duties, nuisance and negligence. The nub of these allegations concerns failures by SPI to inspect, repair and maintain it's electricity assets, which failures are said to have led to the failure of a conductor and the ignition of the fire;

(b) As against UAM, she adopts allegations made by SPI against UAM in it's counterclaim that UAM is liable in negligence for it's failure to inspect, repair and maintain the electricity assets;

(c) As against the Secretary to the Department of Sustainability and Environment (DSE), she adopts allegations made by SPI against DSE that it failed to carry out adequate works for the suppression of the fires, particularly plant burnings. She also contends that DSE failed to give factual and timely information about the fire to others to enable the Police to give bushfire warnings and failed to give bushfire warnings to her;

(d) Against the State of Victoria, (the Victoria Police), she adopts allegations made by SPI that Victoria Police failed to give her specific and adequate bushfire warnings;

(e) Against the Country Fire Authority (CFA), she adopts allegations made by SPI that the CFA failed to give adequate and proper information and advice to Victoria Police to enable the Police to give bushfire warnings to her and that the CFA failed to give proper bushfire warnings to her.

13 On 14 October 2011, J Forrest J made orders about opt out procedures, with 31 January 2012 fixed as the date by which group members might opt out of the proceeding.

14 On 24 January 2013,[3] Forrest J made Class Closure Orders (Class Closure Orders) in respect of property damage and economic loss claims with the effect that, subject to the terms of those orders, registered group members are entitled to participate in any compensation obtained by way of settlement.[4]

15 For economic loss and property damage claims (ELPD Claims), the Court ordered that the class be defined by those who registered as claimants with Maurice Blackburn by a certain date. If a group member did not register, the order precluded that member from participating in any compensation agreed by any settlement. For insurers with subrogated rights in respect of ELPD Claims, registration by the insurer of the group member's loss was ordered to occur by 22 March 2013 and, in the event of settlement, only group members whose subrogated loss was registered would be entitled to participate in any settlement in respect of that claim. Annexure F to the Class Closure Orders identified the names of 21 insurers of group members.

16 Meanwhile, the trial of the proceeding commenced in the Supreme Court before J Forrest J on 4 March 2013. It is apparent from the range and number of Rulings given by J Forrest J before the commencement of the trial (16 Rulings published), the number of Rulings so far during the trial (another 16 published Rulings) and the range of common issues, lay evidence and expert evidence, that the preparation for the trial, and the conduct of the trial up to the hearing of SPI's applications before me, involved huge expense by all parties involved. At the outset the trial was anticipated to have duration of 9 months. In fact it will run longer.

17 Returning to the events leading to the making of this application, following the Class Closure Orders, Herbert Smith Freehills (HSF) corresponded with each of Maurice Blackburn, Hall & Wilcox, and Ligeti Partners in relation to which of those insurers each firm represented, seeking to find out a number of matters thought to be relevant to an application for security for costs that SPI anticipated making against them, including whether the Insurers were contributing to the costs of the litigation and whether they had agreed to indemnify the plaintiff against an adverse costs order, and whether the Insurers were willing to provide security for SPI's costs.[5]

18 On 28 March 2013 HSF notified Maurice Blackburn, Ligeti Partners and Hall & Wilcox of the intention of SPI to apply for security for its third party disbursement costs on a prospective basis, that is, not including any disbursements incurred before 28 March 2013. In that letter, HSF laid out the basis on which it sought security. The basis of the application is dealt with below in the context of the submissions made. However, there are a couple of matters mentioned in the letter that I particularly note:

(a) First, that substantial costs were being incurred in defending the proceeding. In the last 3 months alone SPI had paid disbursements of over $2 million (excluding GST) and that for experts and counsel for the preceding 4 weeks to mid March, an amount of over $770,000 had been spent. By parity of reasoning, costs of a similar order are likely to have been incurred by the plaintiff;

(b) Secondly, in requesting that the Insurers provide security for SPI's costs, HSF noted that should SPI be successful in its defence it proposes to seek to recover its costs of the proceeding (other than costs in respect of which security is provided) from the insurers in accordance with the ordinary principles governing third party costs orders, and referred to Knight v FP Special Assets Ltd.[6]

19 SPI foreshadowed this application to J Forrest J on 12 April 2013 and the matter was referred to me on 15 April 2013. I infer that his Honour was not about to interrupt the progress of the trial with such an application, as was the case with a number of other referrals made throughout the trial.

20 HSF was only partially successful in its enquiries referred to above and in consequence a Notice to Produce was issued to the plaintiff, and subpoenas to Maurice Blackburn and to each Insurer. The subpoenas to Maurice Blackburn and to each Insurer, and the notice to produce issued to the plaintiff, sought the production of:

(a) documents evidencing any agreement between an Insurer and the plaintiff to indemnify the plaintiff in respect of any adverse costs order in this proceeding; and

(b) documents evidencing any agreement by an Insurer to fund or otherwise meet any of the plaintiff's or Maurice Blackburn's costs (legal fees, disbursements or any other costs) in respect of this proceeding.

21 In addition, the subpoenas to the Insurers sought the production of documents evidencing the total amount sought to be recovered by the Insurers in respect of claims paid to insured persons suffering loss as a result of the Kilmore-East bushfire.

22 Nothing was produced in response to the first category of documents referred to in paragraph 20(a). Two agreements were produced in response to the second category referred to in paragraph 20(b), both by the plaintiff and Maurice Blackburn, and by certain of the Insurers. In addition, agreement was reached for the production of a table or list of the amounts sought to be recovered by the Insurers in respect of claims paid to insured persons suffering economic and property damage loss as a result of the Kilmore bushfire, rather than the production of documents relating to such claims.

23 The two agreements produced contain redactions. These agreements are:

(a) An agreement between Maurice Blackburn and Suncorp Group Limited and Ligeti Services Pty Ltd t/as Ligeti Partners dated 20 July 2011 ("the Ligeti Agreement"); and

(b) An agreement between Maurice Blackburn and Insurance Australia Group Limited, Commonwealth Insurance Limited, QBE Insurance (Australia Limited) and Hall and Wilcox dated 23 January 2012 ("the Hall and Wilcox Agreement").

24 The Ligeti Agreement and the Hall and Wilcox Agreement (together, "the Insurer Agreements") are both agreements pursuant to which various insurance companies, which have made payments in respect of insurance claims lodged by group members in the proceeding, agree to contribute to the disbursements incurred by Maurice Blackburn in the proceeding, but not to the legal costs of Maurice Blackburn. Having regard to the confidentiality orders made limiting disclosure of the Insurer Agreements (as to which see below), I will limit what I say about them to general statements.

25 The Ligeti Agreement, the first in time, included in the recitals that the Suncorp Insurers[7] desired to have some input into the decision making processes concerning the proceeding and established a committee of representatives of Maurice Blackburn and the Suncorp Insurers to facilitate consultation (the consultation committee). The disbursements to which the Suncorp Insurers agreed to contribute do not include past or 'internal'[8] disbursements of Maurice Blackburn, exclude certain disbursements and exclude disbursements in respect of certain specific types of loss, and are to be repaid if the proceeding is successful to the extent that those disbursements are recovered from the defendants. There is an exclusion of liability for any costs ordered to be paid by the plaintiff or Maurice Blackburn.

26 When the Hall & Wilcox Agreement came to be entered into in early 2012, the consultation committee was expanded to include representatives of the Hall & Wilcox Insurers. The other provisions were similar to those in the Ligeti Agreement, to which I have referred.

27 The only evidence as to the participation of the Insurers represented by Ligeti Partners and Hall & Wilcox (Funding Insurers) in decision making relating to the proceeding is their representation on the consultation committee. There is no evidence of control of the litigation by the Funding Insurers other than by their representatives participating as members of the consultation committee.

28 On 30 May 2013, In Matthews v SPI Electricity Pty Ltd & anor (No 5),[9] I dealt with claims to client legal privilege in respect of the redacted portions of the Insurer Agreements. I held that:

(a) but for the express waiver of the parts of each Insurer Agreement not redacted, I would conclude that the revealing of the level of contribution to be made by the Insurers, and in the case of the Hall and Wilcox Agreement, the capped limit, in the Agreements would be likely to reveal or lead to an implied disclosure of the plaintiff's legal strategy, in the sense that term is used in the authorities, in particular Re Global Medical Imaging Management Ltd (in liq);[10]

(b) That the redacted portions of the Insurer Agreements did not disclose the plaintiff's legal strategy and were not capable of continuing to attract privilege notwithstanding the waiver of privilege over the other parts of the Agreements.

29 In addition to these Insurer Agreements, Maurice Blackburn produced five conditional costs agreements between it and several insurers, namely Wesfarmers, Capricorn, Sportscover, Hollard and Ansvar. Under these conditional costs agreements Maurice Blackburn was engaged by those insurers to pursue claims for the recovery of insurance payouts to insured's on a no win/no charge basis.

30 On 20 May 2013, orders were made governing the confidentiality of documents produced in response to the Notice to Produce and the Subpoenas.[11] The orders made were to the effect that-

(a) subject to further order, the inspection of the documents produced by the Jointly Represented Insurers[12] in response to the SPI's subpoenas and by the Plaintiff and Maurice Blackburn in response to the SPI's Notice to Produce and subpoena ("Documents"), which included the redacted Insurer Agreements, will be restricted to certain named individuals and SPI's and the plaintiff's legal advisers;

(b) The contents of the Documents will remain confidential and not be disclosed to any third party or used for any purpose other than the proceeding or the Application, subject to some presently immaterial exceptions.

31 In addition to the confidentiality regime relating to the Documents produced, in order to avoid unnecessary production of documents relating to the quantum of the recovery the Insurers were seeking through the proceeding, letters from Ligeti Partners and Hall & Wilcox, setting that out in summary form, were made the subject of a similar confidentiality regime. It is sufficient for present purposes to disclose that the total of the amount sought to be recovered by the Insurers is very large. The breakdown of the amounts recoverable was provided to HSF for the purposes of it calculating the percentages of the security for costs sought to be provided by the several insurers identified in different forms of order set out in the second schedule to these reasons.

32 Lastly in relation to the orders made on 20 May 2013 (largely pronounced on 26 April 2013 but delayed in their authentication by delay in the finalisation of the identification or description of the respondent insurers), is that SPI agreed to notify the respondent insurers by 21 May 2013 whether it would contend at the hearing of the application that any, and if so which, of the respondent insurers may be unable to meet an order for the costs of SPI in the proceeding in the event that such an order were made.

33 SPI duly notified the respondent insurers by letter dated 21 May 2013 that it would not contend that respondent insurers would be unable to meet an order for the costs of SPI in the proceeding in the event that such an order were made.

34 SPI's affidavit material included the second affidavit of Mr Betts. That affidavit includes a summary of some of the publicly available information concerning the financial position of the Insurers. It shows those insurers to which it relates to be very well capitalized and to have made substantial profits in recent times.

35 The evidence given in the affidavit of Andrew David Lyle sworn 21 May 2013 (Lyle affidavit) includes material concerning the relationship between the several Hall & Wilcox Insurers and also gives evidence about their financial position. So for example, CGU and IAL are wholly owned subsidiaries of Insurance Australia Group Limited (IAG). IMA is 70% owned by IAG and 30% owned by Royal Automobile Club of Victoria. IMA carries on business under the name RACV Insurance. IAL, by contrast, carries on business under the name RACV Business Insurance. For the six months ended 31 December 2012, IAG's net income was over $4 billion and its net profit was over $500 million. Its total assets as at 31 December 2012 were over $23 billion. CommInsure is wholly owned by the Commonwealth Bank of Australia. QBE and Elders are wholly owned subsidiaries of QBE Insurance Group Limited, an ASX listed company with net assets as at 31 June 2012 of over US$3 billion and a net profit of US$779 million.

36 The affidavit of J.R.R.D. Cutler sworn 21 May 2013 produced financial reports of the Suncorp Group Ltd, and companies in that group, which show those companies to be very substantial concerns with ample assets and operating profitably.

37 There was no dispute that the Funding Insurers were all substantial concerns. Senior Counsel for SPI, Mr Solomon, agreed that the evidence showed the Funding Insurers, at least, to be very wealthy.

38 The affidavits filed on behalf of SPI and the Hall & Wilcox Insurers shows that there was a good deal of information available in the public domain about the losses sustained by the insurers as a result of the Black Saturday Bushfires. In particular, the Lyle affidavit exhibits a wide range of published material containing information about the various insurers' losses as a result of the bushfires. These include the submissions made by counsel assisting the Victorian Bushfires Royal Commission in 2009, and submissions by RACV, IAG and Insurance Council of Australia to the Royal Commission. SPI appeared at the Royal Commission and was represented by HSF and counsel. The Lyle affidavit also refers to the provision by Hall & Wilcox to HSF of spreadsheets of insurance claims amounts between August and November 2012, albeit provided on a without prejudice basis. These spreadsheets included a great amount of detail about the quantum of the property loss claims.

39 SPI presses four alternative forms of order for the several insurers, or the plaintiff, to provide security for its costs of the proceeding. The final form of these proposed orders did not emerge until the second day of the hearing when SPI sought leave to further amend the amended summons. The particular matters added at that time included that set out in the fourth "alternative" in each of paragraphs 1(c), 2(b), 3(b) and 4(b) (see the second schedule to these reasons).

40 The proposed orders are complicated and may be summarised as follows:

(a) An order for security against the Hall & Wilcox Funders and the Ligeti Funders who are insurers of group members that have -

(ii) entered into a funding agreement with the plaintiff's solicitors (MBL) to "assist in the prosecution of the proceeding";[13]

(Proposed order against the Funding Insurers) (see paragraph 1 of the form of orders sought by SPI set out in the second schedule to these reasons)

(b) An order for security against the Funding Insurers and Allianz. Allianz is -

(i) the plaintiff's insurer and has a subrogated claim in relation to her property loss;

(ii) an insurer of group members that have subrogated claims for property loss.

(Proposed order against the Funding Insurers and Allianz) (see paragraph 2 of the form of orders sought by SPI set out in the second schedule to these reasons)

(c) An order for security against the Group Member Insurers (as defined in the proposed orders). The Group Member Insurers are:

(iii) the other insurers of group members that have subrogated claims for property loss - the other insurers;

(Proposed order against the Group Member Insurers) (see paragraph 3 of the form of orders sought by SPI set out in the second schedule to these reasons)

(d) An order for security against the plaintiff. This alternative is only sought if the proper form of order in relation to any of the foregoing alternative orders is against the plaintiff and not against the insurers.

(Proposed order against the plaintiff) (see paragraph 4 of the form of orders sought by SPI set out in the second schedule to these reasons)

41 The security for costs sought by SPI is limited to its third party disbursements incurred on and from 28 March 2013 to the conclusion of the trial of the common questions. Those disbursements have been estimated to be between $7,110,000-7,710,000.[14] By order made 20 May 2013 I ordered that the quantum be determined separately, if required.

42 SPI has derived the percentages in the several alternative orders set out in orders 1(a), 2(a) and 3(a) of the second schedule to these reasons by reference to the proportion that the amount of each insurer's subrogated claims for property losses bears to the total amount of all insurer's subrogated claims for property losses. These amounts have been derived, in turn, from the letter from Ligeti Partners to HSF dated 26 April 2013.[15] The percentages in the alternative in paragraph 1(b) is derived by reference to the limited reimbursement of disbursements under the Insurer Agreements to which the Hall & Wilcox Insurers and Ligeti Insurers are a parties.

43 In the second and third alternative orders, SPI seeks an amount of security from each insurer that bears the same proportion to the total security ordered as the amount of each insurer's subrogated claims for property loss bears to the total amount of all insurers' subrogated claims for property loss.

44 SPI seeks, by way of sanction for the failure of any party ordered to provide security for costs, that an order be made that if the security is not provided by the insurer, that insurer should not be entitled to any amount of compensation by way of settlement, or the benefit of any judgment in the proceeding, without the leave of the Court. It was submitted on behalf of SPI that this proposed method of enforcing security would not affect the plaintiff's rights, or any group member's rights, to recover non-insured losses, nor would it affect the running of the trial. Only as a later added alternative is a stay of claims for indemnity losses of any subrogated claimant sought.

45 Notwithstanding that SPI put its application against the Insurers at the forefront of its submissions, I propose to deal first with the application against the plaintiff. I do so because it seems to me that the power to make an order against the plaintiff is enlivened, whilst, on the other hand, the power to order security against the Insurers, or the Funding Insurers, is not enlivened, as I will explain.

46 For the power to order security against the plaintiff, SPI relied on s 33ZF of the SCA or the inherent jurisdiction of the Court, or both. It relied on the decision of Hollingworth J in Hall v Australian Finance Direct Ltd (Halls's Case),[16] and the decision of J Forrest J in Matthew v SPI Electricity Pty Ltd (Ruling No 13).[17]

47 SPI also referred to a range of other authorities supporting the existence of power to order security against a plaintiff where the ground was a funding arrangement or other third party involvement.[18]

48 SPI submitted that the general rule that poverty is no bar to a litigant is not applicable in the present application because -

(a) the general rule that an order for security should not be made against an impecunious natural person has no application to an application of this kind in a group proceeding. SPI referred to the observation of Finkelstein J in Bray v F Hoffman - Laroche Ltd,[19] to which I will refer;

(b) where an impecunious party sues for the benefit of somebody else, the general rule against ordering an impecunious natural person to provide security is qualified: see generally the discussion by Hodgson JA in Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd (Green's Case).[20]

49 SPI submitted that there was reason to believe that the Plaintiff would be unable to pay SPI's costs if so ordered, and introduced evidence of her means and of the likely disbursements that would be a part of the costs it would seek should it be successful. I refer to this evidence below.

50 SPI also contended that the orders for security that it seeks will only affect the Insurers' subrogated claims, and will not affect in any way the rights of the plaintiff or the group members to recover sums for their own benefit. This followed from the detailed form of the orders, including the late alternate of a stay of the indemnified loss claim (see proposed order 4(b)(3) in the Second Schedule).

51 SPI canvassed the factors relevant to the exercise of the discretion, to which I will return.

(a) the orders sought were extraordinary because they reached beyond the ordinary bounds of a security for costs application, both in terms of the persons against whom the Orders are directed and the consequences of non-compliance.

(b) In doing so, it raises a serious question as to whether the court has the power to make such orders in addition to the important question as to whether, in the words of s.33ZF of the Supreme Court Act 1986 (Vic) it is "appropriate or necessary to ensure that justice is done in the proceeding".

53 The plaintiff contended that those who claim through a group member (in this case the insurers) do not "stand behind" the plaintiff in the sense used in the cases relating to security for costs in non-group proceedings and for that reason, and others, the power or jurisdiction to order security against the plaintiff was not opened up. The logic of the submission was as follows:

(a) the Court has no power under s 33ZF, or the inherent jurisdiction, to order security for costs against group members, nor power under that section to extinguish substantive rights.

(b) The power given by s 33ZF, and the inherent jurisdiction of the Court, are not unlimited and only exist to the extent that they are consistent with the regime laid down by Part 4A of the SCA and the Rules.

(c) In ordinary (non-group) proceedings, it is accepted that it may be appropriate to make an order for security for costs where standing behind an impecunious plaintiff there are persons who will benefit from the litigation if it is successful and who are in a position to provide security.[21]

(d) Group members (and therefore persons insuring group members) do not 'stand behind' or 'stand to benefit' from the proceeding brought by the representative plaintiff in the sense used in the authorities relating to the making of orders for security for costs against a plaintiff in non-group proceedings, because of the terms of s 33ZD(b), which provides:

(a) may order the plaintiff or the defendant to pay costs;

(b) except as authorised by section 33Q or 33R, may not order a group member or a sub-group member to pay costs.

(e) Thus, except in certain limited circumstances provided for in s 33Q[22] and 33R,[23] which are not presently relevant, a court may not order a group member or a sub-group member to pay costs in a group proceeding;

(f) That section reflects the approach that parliament has taken in enacting the group proceedings legislation. That is to facilitate group proceedings but to keep group members immune from costs orders. Part 4A has been expressed as designed to allow group members to "sit back" and take no positive step in the prosecution of the proceeding to judgment so as to gain whatever benefit its prosecution may ultimately bring: Mobil Oil Australia Pty Ltd v Victoria,[24] Thomas v Powercor Australia Ltd.[25]

(g) Under the 'opt out' model of group proceedings adopted both by the Commonwealth and the Victorian legislatures, the consent of a person to be a group member is not required: See s 33E. Although the group must be identified as a group, the personal identities of the group members are not known nor is the number of the members of the group necessarily known: s 33A. The group members are automatically represented (and bound by the findings of the Court, whether favourable or unfavourable) unless the member opts out of the group: s 33J. Even where the class closure procedure is adopted, as in this case, few active steps are required to participate in a group proceeding.

(h) Those who claim through a group member (in this case the insurers) do not "stand behind" the plaintiff in the sense used in the cases relating to security for costs in non-group proceedings, because:

(i) By subrogation, the insurer stands in the shoes of the insured and enforces its rights in the name of the insured;[26]

(ii) The insurer does not appear as a party on the record;[27]

(iii) The insurer subrogated to the rights of a group member may stand behind that group member, but do not stand behind the plaintiff;

(iv) Section 33ZD(b) does not distinguish between an indemnified and a non-indemnified group member.[28]

54 In Bray v F Hoffman-Laroche Ltd,[30] it was held that the Federal Court did have power to order security for costs in a group proceeding despite the existence of s 43(1A) of the Federal Court of Australia Act 1976 (the Federal Act), which is the equivalent to s 33ZD(b) of the SCA. This was for the reason that s 33ZG(v) of the Federal Act specifically provided that nothing in Part IVA affects the operation of any law relating to security for costs: See Bray at [140] per Carr J and at [250] per Finkelstein J. Section 33ZG(c)(v) of the Federal Act thus operates to permit security for costs applications in group proceedings in the Federal Court despite the apparent inconsistency with s 43(1A).

55 There is no equivalent provision to s 33ZG(c)(v) in the SCA. The plaintiff therefore submitted that Bray's case is of no assistance in the determination of the question of power.

56 In addition, the plaintiff submitted that Bray's case was wrongly decided on this issue of power and relied on the comments of Murphy J in Kelly's Case to the effect that

Until Bray the Court gave the protection for group members in s 43(1A) an effect in relation to security for costs, on the basis that their immunity from costs exposure would in practical terms be removed if they were forced to provide security: see Woodhouse v McPhee at 533 per Merkel J; Ryan at 589 per Wilcox J; Ryan No 2 at 456 per Lindgren J; Tobacco Control Coalition at [29] per Wilcox J; Bray v F Hoffman-La Roche [2002] FCA 1405 at [73] per Merkel J. In my opinion the practical effect of the respondents' arguments in the present proceedings is that this important protection is removed, or at least substantially reduced. [31]

57 This is similar to the argument that Bray's Case was wrongly decided, as referred to in Class Actions in the Federal Court of Australia - the Story so Far, by Professor Vincent Morabito,[32] namely -

The expansion of the circumstances in which security may be ordered, beyond the deliberate selection of a person of straw as representative plaintiff; placing the onus on the representative plaintiff to adduce relevant evidence in relation to an order sought, not by the plaintiff but by the defendant; and the focus on the financial means of the class members and class counsel, all combine to render likely, a security for costs order, whenever the representative plaintiffs are impecunious. It is submitted that this scenario is inconsistent with:

(a) one of the most important principles governing security for costs;

(c) the need not to create significant obstacles to the availability of the Part IVA regime; and

(d) the importance of not removing, in practice, the immunity from costs that is extended to class members by s 43(1A).

58 This seems to me to be, in substance, the submission made by the plaintiff in this case. It accords, more or less with the view of Professor Morabito.

(a) the reliance by SPI on Hall's case and Matthews v SPI Electricity Pty Ltd (Ruling No. 13),[33] as authority for the power to make an order for security for costs pursuant to s 33ZF was itself misplaced. They submitted that in Hall's case the issue of power was not contested and the order, in any event, was never made.[34] In Matthews, s 33ZF was used in order to make Class Closure Orders and those orders are of an entirely different nature to orders of the kind proposed in this application.

(b) the fourth order (see the second schedule to these Reasons), sought by SPI has the effect of curtailing the rights of a group member where the group member insurer does not provide the security ordered.

(c) the Court has no power pursuant to s 33ZF of the SCA to extinguish the rights of group members where the merits of those rights are later established and that is the effect of order four. They submitted in the alternative that the order ought not be made as a matter of discretion.

(d) Section 33ZF of the SCA provides the Court with wide powers, but they are powers directed at regulating how group proceedings should be conducted: See Kirby v Centro Properties Ltd.[35] The power has been held to enable orders regarding the appointment of a litigation committee,[36] orders regularising a proceeding,[37] orders striking out a proceeding as an abuse of process where the proceeding was brought without authority,[38] Class Closure Orders as were made in this case in Ruling No. 13 and orders for particulars and discovery.[39] But there is no authority provided on behalf of SPI for the proposition that the power under s 33ZF is so wide reaching as to enable the Court to extinguish rights later determined to be valid. That is what, the plaintiff submitted, was the effect of order four as proposed by SPI.

60 If the Court were to find that there is power under s 33ZF to make orders of the kind sought by SPI, then the plaintiff submitted that the Court should not exercise its discretion to do so, because:

(a) It is neither necessary nor appropriate in the language of s 33ZF, nor is it consistent with the overarching purpose in s 7 of the Civil Procedure Act 2010 as required to be considered by ss 8 and 9 of that Act;

(b) There has been delay in applying for the security from the plaintiff;

(c) Order four of the proposed orders is inconsistent with the rationale for security of costs;

(d) The funding insurers are not litigation funders in the sense described in the authorities;

(e) The composition of the group should be relevant;

(f) The plaintiff has a bona fide claim and is suing for her own benefit.

61 I will deal with the further material advanced in support of each of these matters when considering the exercise of the discretion.

Security for costs against the Plaintiff - Reasoning

62 The general power of the Court as to costs presently derives from s 24 of the SCA. That section provides

(1) Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court, including the administration of estates and trusts, is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid.

(2) Nothing in this section alters the practice in any criminal proceeding.

63 It is self evident from the opening words of this section that a provision taking away, or otherwise affecting, the exercise of the Courts discretion as to costs, must be 'express'. Should any authority be needed for such an obvious proposition, it has been held that clear words are required to exclude the Courts power as to costs: Bow Ye Investments Pty Ltd v DPP (No 2).[40] The same must be said where a provision is said to affect or circumscribe the exercise of the discretion.

64 Section 33ZD is just such a provision. It prohibits costs being ordered against group members except in the limited circumstances set out in ss 33Q and 33R.

65 So far as the application proceeds against the plaintiff, the question is whether the imposition of this limitation on the Courts discretion affects the ability of the Court to order security for costs against her on the ground that she is relevantly impecunious, but there are group members standing behind her who, or whose insurers, have funds available to provide such security and who stand to benefit from the plaintiff's success in the proceeding.

66 The power to order security against the plaintiff arises either from s 33ZF or the inherent jurisdiction of the Court, or from both. Section 33ZF provides:

In any proceeding (including an appeal) conducted under this Part the Court may, of its own motion or on application by a party, make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding.

67 It has been held that this section gives to the Court the widest possible power to do whatever is appropriate or necessary in the interests of justice in the conduct of a group proceeding: McMullin v ICI Australia Operations Pty Ltd (No. 6),[41] Courtney v Medtel Pty Ltd;[42] Johnson Tiles Pty Ltd v Esso Australia Pty Ltd[43]; Wotton v State of Queensland;[44] Matthews v SPI Electricity Pty Ltd (Ruling No. 1);[45] Matthews v SPI Electricity Pty Ltd (Ruling No. 5);[46] Matthews v SPI Electricity Pty Ltd (Ruling No. 13);[47]

68 In Courtney v Medtel Pty Ltd[48] Sackville J examined the scope of the power in s 33ZF(1)of the Federal Court of Australia Act 1976, which is in the same terms as the Victorian section, and noted the following:

(a) There are good reasons to give s 33ZF a generous interpretation. The section is couched in broad terms;

(b) the Court is given power to act on its own motion;

(c) The language, which is described in the Explanatory Memorandum as "wide", doubtless reflects the drafter's perception that the new statutory procedure for representative proceedings was likely to throw up novel problems that would require close supervision by the Court;

(d) In construing s 33ZF, it is appropriate to recognise the unusual position of group members in a representative proceeding brought pursuant to Part IVA. Group members may benefit from the representative proceeding but their rights also might be adversely affected, since they are bound by any judgment in the proceeding unless they have opted out: s 33ZB(b). Consent is not required for a person to become a group member: s 33E(1). A group member must be given notice of his or her right to opt out of the proceeding (s 33X(1)(a)), but the group member will not necessarily receive personal notice of that right: s 33Y(5) [see s 33Y(7) in the Victorian provisions];

(e) judicial control of a representative proceeding may be essential to protect the interest of group members. Section 33ZF is directed to just such an issue;

(f) The section should not, however, become a vehicle for rewriting the rest of Pt IVA.

69 In Hall v Australian Finance Direct Ltd (Halls's Case),[49] Hollingworth J accepted that s 33ZF confers power upon the Court to make an order for security for costs in group proceedings against the representative plaintiff. Indeed it was not disputed in Hall's Case that security for costs could be ordered either under s.33ZF or under the court's inherent jurisdiction. Her Honour noted that the court's discretion is a broad one and it is not appropriate to seek to limit the situations in which security might be ordered against a representative party.[50]

70 In Matthews v SPI Electricity Pty Ltd (No 13)[51] J Forrest J concluded that s 33ZF confers power upon the Court to make orders directed to group member insurers with subrogated claims. He noted, in relation to making orders requiring insurers of group members to register, that-

(a) although an insurer is not a group member it has an enforceable equitable interest in the damages payable by a wrongdoer to an insured,[52] and that an insured is guilty of unconscionable conduct if he or she does not provide for the insurer out of damages awarded against the wrongdoer;

(b) given the breadth of the power under s 33ZF and the equitable right of an insurer in relation to its payments towards a group member's claim it is within power to make orders directed to the insurers requiring registration if the circumstances warrant such a step.

71 In that case his Honour also observed, in relation to the Class Closure Orders proposed, that ultimately it is a question of balance and judicial intuition, in that instance directed to a determination as to when in the course of a proceeding it is appropriate and in the interests of the group as a whole to require a step to be taken which may promote a prospective settlement.

72 The reliance of the plaintiff on the reasoning in Kelly v Willmott Forrests is now affected by the decision of the Full Court of the Federal Court in Madgwick v Kelly (Madgwick's Case).[53] In Madgwick's Case, Allsop CJ and Middleton JJ said:

[38] Whilst at [81] of the reasons, the primary judge recognised that Bray was inconsistent with this earlier line of authority, he did say in [81] of the reasons, after referring to the earlier line of authority:

In my opinion the practical effect of the respondents' arguments in the present proceedings is that this important protection is removed, or at least substantially reduced.

[39] The "important protection" was that provided by s 43(1A). It is difficult to understand this part of his Honour's reasons as other than a view, operative in the exercise of his discretion, that s 43(1A) would be undermined by the ordering of security. So understood, it is inconsistent with the Full Court in Bray. Both Carr J and Finkelstein J (with both of whose reasons on security for costs Branson J "substantially" agreed) expressed the view, in passages that were critical to their reasoning (at 348 [141] and 374 [250]) that an order for security did not affect the immunity of s 43(1A) and that there was no overlap between ss 43(1A) and 33ZG(c)(v), which operate independently. No party sought to challenge Bray, save in respect of the characterisation of solicitors in the position of Macpherson and Kelley.

[40] It is difficult to see how, at this point, the primary judge's approach at [81] does not contradict Bray.

73 In light of the endorsement of the reasoning in Bray's Case by the Full Court in Madgwick, it is worth looking at Bray's Case in a little more detail. It was, in part, an appeal against a refusal of the primary judge to make an order for the plaintiff to provide security for the costs of one of the defendants. Other appeals concerned service of process outside the Commonwealth of Australia, the requirements for the commencement of representative proceedings under Part IVA of the Federal Act, as well as security for costs. The question of security therefore arose at an early stage of the proceeding.

74 The primary judge had refused to order security on the grounds that included, as a central element, that it would run counter to the general policy of Pt IVA to regard group members for whose benefit a representative proceeding is brought as "standing behind" an applicant in the sense that term is used in security for costs cases. In doing so he relied on his own decision in Woodhouse v McPhee[54] including the following extract:

...[I]t would be incongruous and anomalous for Parliament specially to confer a direct costs immunity under s 43(1A), inter alia to afford represented persons greater access to justice, and then for the courts indirectly to remove the effect of that immunity by making orders for security for costs on the basis that the applicant is bringing the proceedings for the benefit of others who ought to bear their share of the potential costs liability to other parties. In my view, in order to deal with that incongruity and anomaly the fact that an impecunious applicant is bringing a Pt IVA proceeding for the benefit of represented persons, whilst a relevant consideration in favour of granting security, ought not of itself be as significant a consideration as it might otherwise be in favour of the granting of security.

75 It is to be noted that the primary judge's reasoning did not, of course, question the power to make an order for security against a plaintiff in representative proceedings (because of s 33ZG(c)(v) of the Federal Act). As the above reasoning demonstrates, it was the significance of the presence of an impecunious applicant that was a consideration in favour of granting security.

76 Several factors that led the primary judge to conclude that it was inappropriate to make the order for security for costs sought were:[55]

(a) the individual applicant had made out a prima facie case for relief under the TPA;

(b) the claims of the group members arose out of an unlawful price fixing cartel which has been admitted to;

(c) public policy considerations weighed strongly against an order for security of costs that might impede or hinder the group members' claim for injunctive relief and for damages resulting from the cartel arrangement;

(d) the kind of circumstances that might have warranted an order for security for costs against an impecunious individual bringing a representative proceeding were absent.

77 In Bray's Case, the defendant had to establish that the decision of the primary judge, being discretionary, involved an error of law in some respect. Such an error was found.[56] Carr J found error in the elements identified in the third and fourth of the factors referred to in sub-paragraphs 76 (c) and (d) above. He noted that the applicant chose not to adduce any evidence about who was funding the proceedings or what means they might have. He agreed that s 43(1A) of the Federal Act precluded (subject to certain qualifications) an award of costs against a group member other than the representative party and s 33ZG(c)(v) provided that, except as otherwise provided in Part IVA, nothing in that Part affects the operation of any law relating to security for costs.

78 Carr J's view was that an order providing reasonable security for costs does not necessarily operate indirectly to remove the effect of the immunity provided by s 43(1A). It is one thing for a group member to be saddled with an order for what might be joint and several liability for a very substantial costs order at the end of the hearing of a representative proceeding, but it is another thing to have the choice of contributing what might be a modest amount to a pool by which the applicant might provide security for costs. It is a question of balancing the policy reflected in s 43(1A) against the risk of injustice to a respondent which, on the admitted facts, had no chance of recovering very substantial costs from the applicant if it is successful in defending the proceedings.

79 The balancing exercise to which his Honour referred depended on the applicant to adduce evidence about the likely effect of any order for security for costs and as she chose not to do so the discretion of the primary judge miscarried and had to be exercised afresh.

80 Finkelstein J agreed with Carr J about the relationship between ss 33ZG(v) and s 43(1A). In the view of Finkelstein J, there was no overlap between the two sections and nothing incongruous and anomalous (as the primary judge had concluded) in making an order for security in light of the protection given to group members by s 43(1A). Finkelstein J went on:[57]

This is not to say that the fact that a proceeding is a group proceeding is irrelevant to the question whether security should be granted. To the contrary, the character of such a proceeding sometimes gives rise to features not found in ordinary civil litigation which may go against or in favour of the provision of security. What follows is not intended to be an exhaustive list of these features, but they are some of the ones.

Dependent upon the type of proceeding, the represented group may be quite diverse. The group may include corporations as well as natural persons. The members of the group, whether corporate or not, may be rich or poor. In my view, the characteristics of the group should be taken into account on an application for security. Accordingly, if there is still a rule that an order for security should not be made against an impecunious natural person (for a criticism of the absoluteness of this rule see Melville v Craig Nowlan & Associates Pty Ltd [2002] NSWCA 32; (2002) 54 NSWLR 82), the rule may have little application to many class actions. Another matter that should be taken into account is that, contrary to parliament's intention, many class actions become bogged down by interminable and expensive interlocutory applications and protracted and even more expensive appeals from interlocutory orders. It may be necessary to consider which party is responsible for this state of affairs when dealing with the quantum of any security costs that may be ordered. 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.[58] 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. In many cases, it will also be relevant to consider the merits of the claim. I think that the court should not shy away from undertaking a preliminary evaluation of the merits. That task is not as difficult as it might seem. Every day judges are required to decide whether or not a party has made out a prima facie case, or has raised a serious issue to be tried, in an application for an interlocutory injunction, the appointment of a receiver or other serious forms of relief. While class actions provide many benefits to the community, they have their attendant dangers. They can be used as an instrument of oppression. It is not unknown for a class action to be brought in relation to an unmeritorious claim in the hope of compelling the defendant to agree to a settlement to avoid the enormous expense of fighting the case. Those types of actions can be discouraged by an appropriate order for security.

81 The width of the power in s 33ZF of the SCA, despite the absence of a section equivalent to s 43(1A) of the Federal Act, seems to me to enable an order for security for costs against the plaintiff, if the circumstances warrant it. It is not unlike a resort to the inherent jurisdiction of the Court. The justification for ordering security for costs of a defendant pursuant to the inherent power is that it is necessary for the due administration of justice and to prevent abuse of the Court's processes: Rajski v Computer Manufacture & Design Pty Limited.[59] The due administration of justice is served, and abuse of the Court's process is prevented, by protecting a defendant against the injustice of being sued by an impecunious plaintiff and preserving the primary purpose of an award of costs (that is, indemnification of the successful party: Oshlack v Richmond River Council).[60]

82 As stated in Idoport Pty Ltd v National Australia Bank Limited [2001] NSWSC 744 at [33]:

The jurisdiction to award security for costs should thus be seen as protecting the efficacy of the exercise of the jurisdiction to award costs. The discretion should be exercised with the same rationale in mind, namely that, to the extent it can be provided, the court should not permit a situation where a party's success is pyrrhic.

83 The protective purpose of an order for security for costs is confirmed by the history of the jurisdiction. Applications for security for costs have always had a close relationship with the statutory provisions that entitled a party to recover costs. There was no ability to seek security until an entitlement to costs had been first established. The power of the Court to award costs came first - in the common law courts by statute - and was followed by powers to award security for costs.[61] Thereafter applications for security were made as ancillary to, and as protective of, the jurisdiction to award costs.

84 Since the modified power of the Court to make orders as to costs (in s 33ZD) allows costs against a plaintiff, it follows that the power to make an order for security for costs against a plaintiff is a part of the armoury of powers under Part 4A of the SCA. Thus, despite the limited Victorian authority directly supporting the power,[62] in my view the width and purpose of the power extends to enable the Court to order security for costs in appropriate cases.

85 The next question is whether the power is enlivened in this case? Unlike the circumstances that enliven the statutory power under the Corporations Act 2001, or under Rule 62.02 of the Supreme Court (Supreme Court (General Civil Procedure) Rules 2005 Procedure) Rules 2005, what enlivens the inherent jurisdiction or the power under s 33ZF turns upon the general principles that have been established. There is no relevant provision of any statute dealing explicitly with security for costs in relation to plaintiffs who are natural persons, let alone a natural person who is a representative plaintiff.

86 The starting point is the inability of a plaintiff to meet the costs of a successful defendant. Then there is the general rule that a natural person who sues will not be ordered to give security for costs, however poor he is: Pearson v Naydler;[63] Cowell v Taylor;[64] Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd.[65] It is in this connection that it becomes relevant to consider the persons standing behind the plaintiff, or standing to benefit from the litigation. It is that feature that breaks through the operation of the general rule against ordering an impecunious natural person to provide security for costs.

87 It is clear from the evidence that behind the plaintiff are both the group members and their Insurers, particularly the latter. It is also clear the plaintiff is relatively impecunious (as to which see below) and, in relation to the ELPD claims, sues for the benefit of the group members and their Insurers who have subrogated rights to recover the losses for which they have given indemnity to group members.

88 There is therefore reason to believe that if SPI is successful in defeating the ELPD claims made by the plaintiff that it will, or is likely, to be awarded its costs in that respect. These costs the plaintiff cannot pay, and in relation to them is not indemnified by the Funding Insurers. Thus the power to order security for costs is, in my view enlivened.

89 Where the power to make an order for security for costs is enlivened, it is well established that the Court's power to make orders for security for costs is a discretionary power, which power is unfettered save that it must be exercised judicially.[66] The task of the court is to decide which of any number of discretionary factors should be taken into account in determining whether to exercise the discretion and to give them the weight according to the particular circumstances of the case.

90 The exercise of the discretion to make an order, whether it be by way of the inherent jurisdiction of the Court, under the Rules of Court, under the Corporations Act or under the Supreme Court Act (s 33ZF), involves a balancing exercise. The Court must weigh the injustice to the plaintiff if it is prevented from pursuing a proper claim by an order for security (although that is not necessarily the case here), against the injustice to the defendant if no security is ordered and at trial the plaintiff's claim fails and the defendant is unable to recover costs from the plaintiff: See the observations of Smithers J in Tradestock Pty Ltd v TNT (Management) Pty Ltd.[67]

91 This balance is between ensuring that adequate and fair protection is provided to the defendant, whilst avoiding injustice to an impecunious plaintiff consequent upon the making of an order that might prejudice it in the conduct of the proceeding: Rosenfield Nominees Pty Ltd v Bain and Co.[68] In this case, however, the prejudice to the plaintiff is, because of the way the proposed orders are framed, prejudice to the Insurers in respect of the recovery of their subrogated losses in the event that those claims are successful. This itself raises a conundrum, as the plaintiff and the Insurers were at pains to point out.

92 Most of the matters appropriate to be taken into account in the exercise of the discretion have been considered in the decided cases. Those which are relevant will vary from case to case. The class of matters to be taken into account is not closed.

93 The burden rests on the defendant, from first to last, to persuade the Court that the order for security for costs should be made: Livingspring Pty Ltd v Kliger Partners (Livingspring).[69]

94 In Hall's Case,[70] and in Kelly v Willmott Forests Ltd (in liquidation) (Kelly v Willmott Forrests)[71] a summary of the considerations relevant to the exercise of the discretion to make an order for security for costs in a group proceeding was undertaken. The following matters have been considered as relevant:[72]

(a) Whether there is reason to believe that the applicants will be unable to pay the respondents' costs if so ordered, that is, whether the applicants are impecunious?

(b) Whether the applicants' insufficiency of means is caused by the conduct which is the foundation for the action?

(c) The promptness of the application and the stage of the proceedings at which an application for security is brought.

(d) Whether the proceeding has become bogged down with "interminable and expensive interlocutory applications" for which the applicants bear responsibility?

(e) The strength and bona fides of the applicants' claim for relief from the respondents.

(f) Whether the applicants have been deliberately selected as "persons of straw", in order to immunise from costs orders group members of substantial means?

(g) Whether the proceeding is essentially defensive in nature?

(h) Whether the applicants are suing for someone else's benefit?

(i) The characteristics of the group members. For example do they include corporations or natural persons, and are they rich or poor?

(j) Whether someone who stands to benefit from the litigation is funding the applicants?

(k) Whether security would have been ordered if separate actions had been brought by the group members?

(l) Whether an order for security would stifle the action and shut the applicants out from pursuing an arguable claim?

95 It is clear that the circumstances will dictate which of these considerations will be important. The weight to be given to any factor depends upon its own intrinsic persuasiveness and its impact on the other circumstances which have to be weighed and balanced.[73]

96 In the appeal from the decision in Kelly v Willmott Forrests, under the name Madgwick v Kelly (Madgwick's Case),[74] Allsop CJ and Middleton J accepted the catalogue of factors identified by Murphy J, observing that:

All these factors were legitimate to consider in an application such as this. No argument to the contrary was put. Nevertheless, it should not be taken that every case requires an examination of all these factors. Much will depend on the facts of the individual case, and, importantly, how the application is argued by the parties.[75]

Whether there is reason to believe that the plaintiff will be unable to pay SPI's costs if so ordered?

97 It is tolerably clear that the plaintiff will not be able to pay SPI's costs if so ordered. SPI advanced evidence of the plaintiff's financial position to the following effect:

(a) Her taxable income in the 2010 financial year was $54,091;[76]

(b) The plaintiff has not worked since December 2010;[77]

(c) The plaintiff alleges that she is now totally incapacitated for any employment;[78]

(d) The plaintiff's known assets, including her potential damages claim against the State of Victoria for personal injury, is not even close to the likely magnitude of an adverse costs order;

(e) The plaintiff has no agreement with any third party to indemnify her in relation to an adverse costs order.

98 The third party disbursements from 28 March 2013 to the conclusion of the trial of the common questions are estimated to be between $7.11 million and $7.71 million. It is therefore clear that the plaintiff will be unable to pay those anticipated costs of SPI.

Insufficiency of means not brought about by defendants

99 There is no evidence to suggest that the plaintiff's insufficiency of means has been caused by the conduct which is the foundation for the action. Even if the losses claimed by the plaintiff in the proceeding are taken into account, the plaintiff would still be unable to meet any adverse costs order. She is relevantly impecunious independently of the loss she alleges SPI has caused her.

100 SPI made the claims against the Insurers its primary focus. It submitted that it brought the application against the plaintiff if, for any reason, "the proper form of order... is against the plaintiff".[79]

101 The timing of the application against the plaintiff is linked in SPI's submissions to the timing of the application as against the Insurers, and particularly the Funding Insurers. The ability of SPI to enliven the jurisdiction of the court to make an order may be seen - in this case - as I have said, as directly linked to the fact that there are Insurers of the group members 'standing behind' the plaintiff and the group members.

102 SPI submitted that it brought the application against the Funding Insurers with promptness. Although SPI conceded it had a general awareness that insurers would have subrogated claims in relation to group members' property losses, it submitted it did not become aware of the trading names of the complete lists of group members insurers until the plaintiff filed material in support of the Class Closure Orders in January 2013.

103 SPI also contended that after the Class Closure Orders were made, and 21 insurers were identified, it corresponded with Maurice Blackburn, Hall & Wilcox and the Ligeti Partners to "ripen" its application.[80] The Class Closure Orders directed Maurice Blackburn to serve on SPI, as a confidential document, a list of subrogated claimants notified to Maurice Blackburn pursuant to those orders. This occurred on 2 April 2013.[81]

104 SPI then foreshadowed this application to J Forrest J on 12 April 2013 and the matter was referred to me on 15 April 2013.

105 In relation to the Funding Insurers, SPI only became aware that they were funding the proceedings pursuant to the Funding Agreements on 29 April 2013 on the production of those agreements in response to the notice to produce and the subpoenas.[82]

106 SPI submitted that there was a reasonable expectation that the plaintiff should have previously disclosed the information concerning the Funding Agreement because Practice Note No. 9 of 2010, relating to the conduct of group proceedings, provides at [3.5] that at or prior to the initial case management conference, each party will be expected to disclose any agreement by which a litigation funder is to pay or contribute to the costs of the proceeding, any security for costs or any adverse costs order. That practice note commenced to operate on 1 January 2011 and is stated, so far as circumstances permit, to apply to existing group proceedings.

107 These facts should, however, be seen against a broader backdrop. It has been within the power of SPI to know, or find out, the relative strength of the financial position of the plaintiff for a very long time indeed. Ever since she was made the representative plaintiff in 2010 it has been within the power of SPI to unearth the detail of her financial position. More importantly, it has been within SPI's capability to identify many of the Insurers who stand behind the group members from the public information regarding the Insurers and their losses to which reference was made in the Lyle Affidavit, some of which was available in the course of the Royal Commission. Enquiries in this regard would have given SPI a sound basis for further inquiry so as to enable the application to be made long ago. Further, the circumstances of the funding of the proceedings, both by the Funding Insurers and by Maurice Blackburn, could have been revealed much earlier. It took only a Notice to Produce and some subpoena's to reveal the Funding Agreements and the level of the Insurers subrogated losses. No explanation was given for SPI's failure to pursue these avenues at an earlier time.

108 SPI further submitted that even if delay were shown, it is a consideration weighing against the making of an order for security only if it causes actual prejudice to the person against whom the order is sought: Clarence Street v ISIS Projects.[83] Prejudice consists of inconvenience, wasted effort and costs thrown away in circumstances where, if security for costs were granted, the action would be stayed because the security so ordered could not be met.[84] It is for the party against whom the order is sought to establish prejudice.[85]

109 The plaintiff submitted that Mrs Matthews has been the plaintiff in the proceeding since 23 July 2010. Since then SPI has known, or ought to have inferred, that the plaintiff would have a subrogated claim. The plaintiff is prejudiced in that considerable expenditure has been incurred in both preparing and presenting the case and this was done on the assumption that there would be no application for security for costs. It overstates the matter to suggest that in every instance the party against whom application is made must establish that it would not have incurred the expenditure had it known earlier of the prospect of an application for security for costs: See Idoport Pty Ltd v National Australia Bank Ltd.[86]

110 In this regard, the comments of Hodgson JA in Green's Case[87] are relevant. He said that for a plaintiff to show prejudice from delay, it is not necessary to prove what the plaintiff would have done if the application had been made earlier; although if a plaintiff does prove that it would not have gone ahead with the proceeding if the application had been brought when it should have been, this would be a very powerful consideration against granting security. He expressed the view that where substantial costs have been incurred since the time when an application for security should have been brought, it would be unreasonable to deny the existence of prejudice.

111 The plaintiff's submissions were - on this aspect of the matter - characterised by understatement. No doubt this was because at the time of the hearing of the application I had already delivered 5 judgments in matters referred to me by the trial judge and thereby had some familiarity with the issues and the history of the proceeding. Mr Solomon SC, Senior Counsel for SPI, candidly accepted that, as at the day of the argument on 6 June 2013, the trial was in its 50th day, the plaintiff had closed her case and the defendants were into their third witness. There had been a lot of money spent (an understatement if there was ever one). There were very many claims pursued and there had been very many conclaves of experts.[88]

112 In relation to the timing of the application against the plaintiff, in addition to the matters to which I have already referred, the following circumstances seem to me to be particularly instructive:

(a) The events giving rise to the claims in the proceeding occurred in February 2009. A Royal Commission dealt with many of the facts and matters the subject of the claims and defences in that year. SPI was represented in the Royal Commission. The Royal Commission delivered an interim report in August 2009 and its final report in July 2010;[89]

(b) The proceeding, which had been commenced in the name of a different representative plaintiff within 10 days of the fires, was regularised in May 2010 pursuant to orders made by Forrest J consequent upon his reasons in Matthews v SPI Electricity and SPI Electricity Pty Ltd v Utility Services Corporation Ltd (Ruling No 1)(Ruling No 1).[90] SPI was represented in the hearing of that matter by HSF (then Freehills) and Counsel. SPI had submitted that the proceeding was a nullity, having been issued without authority of the then representative plaintiff, and should be dismissed;

(c) Since Ruling No 1, there had been a further 15 Rulings prior to the commencement of the trial and a further 6 Rulings from the commencement of the trial up to the hearing of the application. The Rulings before the commencement of the trial included the identification of common questions in December 2011[91] and orders in relation to the identification of questions for experts, the delivery of experts' reports and the meeting of experts in conference to prepare joint reports (conclaves): Matthews v SPI Electricity and SPI Electricity Pty Ltd v Utility Services Corporation Ltd (Ruling No 4);[92]

(d) Other Rulings concern the identification and use of sample group members in the trial (Ruling No 5), amendments to pleadings (Ruling No 6 and others), an application by the plaintiff for trial by jury (Ruling No 8), and many others;

113 It is apparent from the multiple Rulings made by J Forest J, and the work undertaken to have the plaintiff's case, and the cases of sample group members, ready for trial, with expert evidence of substantial number and scope following numerous conferences and joint reports, that the volume and cost of the work undertaken by all parties (including of course the plaintiff) to have the matter ready to start the trial on 4 March 2013 was huge, expensive and quite forbidding;

114 Quite regardless of whether the plaintiffs' uninsured or underinsured claims remain unaffected by her failure to provide security for SPI's costs (if ordered), an order at this late stage for the plaintiff to give security is prejudicial to her, in that it will (depending on which of the cascade of orders were selected) frustrate recovery by subrogated claimants (that is indirectly by the insurers of the group members with subrogated claims), and/or the plaintiff, (also indirectly for the benefit of her insurers). Considerable expenditure has plainly been incurred in both preparing and presenting the case and this was done without any warning before March this year that there would be an application for security for costs.

115 The prejudice that the plaintiff suffers is therefore substantially the prejudice suffered by the Funding Insurers, who have contributed funds to the prosecution of the claims, and the other insurers who will, if the orders are made, be frustrated in the recovery of the subrogated amounts. It is recovery by the Insurers that will be affected by the proposed orders sought and not the plaintiff personally, nor the group members personally. Since it is the presence of the Funding Insurers, in particular, standing behind and providing some of the funding of the proceeding that provides a substantial element of the enlivening of the jurisdiction to make an order against the plaintiff, the prejudice suffered by them is relevant to this factor. It is the delay in relation to their position that gives rise to real and serious prejudice. They will be precluded, if an order is made, from enforcing their rights of recovery through the plaintiff and the group members even though they are successful. This to my mind is a startling situation and not lightly to be countenanced.

116 Although applications for security shortly before the commencement of trials are not unknown, it is most unusual that they are granted after the trial has begun. An example of an application shortly before trial is James v Australia and New Zealand Banking Group Ltd.[93] In that case Toohey J noted that-

(a) it was well established that an application for security for costs should be made promptly: see Smail v Burton;[94]

(b) The matter was so close to a hearing, and so much time and costs had been expended, that it would work a grave injustice to the applicants if they were ordered to provide security for costs when it is apparent that they could not comply with such an order; and

(c) an order by way of security without a corresponding stay would be in reality no order at all for no sanction would attach to non-compliance.

117 It is difficult to draw parallels between the circumstances of this case and other cases. As a general proposition, however, delay in bringing an application is a factor that carries considerable weight. In the case of applications shortly before the commencement of the trial it has been said that "the closer is the proximity of the hearing of the substantive proceeding to the time at which any application for security for costs is made, the more weight is likely to be given to the delay factor".[95] After the commencement of the trial, ipso facto, the weight will be greater still.

Strength and bona fides of the plaintiff's claims

118 There has been no suggestion that the plaintiff's claim is anything other than bona fide and with merit.

119 SPI submitted that because of the acute difficulties in making an assessment of the prospects of success in class actions it is neither possible, nor appropriate, in the middle of the trial, meaningfully to assess the plaintiff's merits. In these circumstances the approach taken by Murphy J in Kelly v Wilmott Forests was submitted to be the appropriate approach, that is to say, this factor is neutral in the exercise of the discretion.

120 I agree with this approach so far as it goes. There is, however, another aspect that needs to be taken into consideration. It is the nature of the claims, and the public interest in the uninhibited continuation of the plaintiff's claims. As Finkelstein J observed in Bray's Case, the character of group proceedings sometimes gives rise to features not found in ordinary civil litigation which may go against the provision of security. He referred to the composition of the group as relevant. There was no direct evidence of the composition of the group introduced before me, although it may be inferred that in relation to the property damage claims with which this application is concerned, the group is diverse and large, composed very substantially of individuals who lost their property in the Kilmore East bushfires.

121 In addition, the making of an order for the plaintiff to provide security for costs has the potential to expose the plaintiff to contempt of court proceedings, should she be unable to persuade the Insurers to provide it. As the representative of the group members having claims of a much wider variety than just ELPD Claims by subrogated claimants (personal injury, wrongful death, underinsured property damage claims and uninsured property damage claims) that would be, in my view, a damaging event for the group as a whole.

Whether plaintiff a person of straw deliberately selected

122 SPI did not contend that the plaintiff was a person of straw and had been deliberately selected for that reason.[96] Further, SPI submitted that in an application for security for costs in group proceedings, where the financial circumstances of the group members is relevant to the determination of an application for security, it is not necessary for the applicant to demonstrate the additional circumstances that the applicant has been deliberately selected in order to shield group members of substantial means for whose benefit the proceeding is also being brought.[97]

123 The plaintiff is clearly suing for her own benefit, as well as a representative of all other group members. These are not neutral considerations but weigh against the exercise of the discretion to order security.

124 Whether the plaintiff is suing for someone else's benefit is a matter of prime significance in the submissions made by SPI. It was submitted in this respect:

(a) Bray v F. Hoffman La Roche Ltd establishes that where an impecunious plaintiff brings group proceedings, the fact that he or she is doing so for the benefit of the group members (or as in this case, insurers standing behind the group members) may be a significant consideration in granting security for costs;[98]

(b) that the insurers of group members stand in no different position than the group members themselves. This, it was submitted, is reflected in the Class Closure Orders binding the insurers in relation to subrogated claims in the proceeding. It is also reflected in the approach adopted by Gillard J in Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No 4)[99] in relation to the approval of a settlement under s 33V of the Supreme Court Act [at 33];

(c) It is clear that the plaintiff brings the action both in a personal capacity and as a representative of group members, behind whom stand the insurers who have subrogated claims for property loss. The plaintiff is thus suing for the benefit of others;

(d) Bray v F. Hoffman La Roche Ltd also establishes that the characteristics and financial circumstances of the group members and of persons standing behind the group members are relevant to the determination of an application for security for costs.[100] Bray's case has been followed by Hollingworth J in Hall's case and by Blue J in Proude v Visic (No 3) [2012] SASC 234 at [171], and by Murphy J in Kelly v Wilmott Forests (at [171]). It has been confirmed in Madgwick's case;

(e) The Funding Insurers are a cohesive group who have a direct commercial interest in the litigation in an amount of over $463 million.[101] They are protecting that commercial interest by funding Maurice Blackburn in this proceeding. They have both the financial interest and the financial resources to fund the proceeding. This consideration weighs strongly in favour of a security for costs order.

125 It is the presence of the Funding Insurers in particular that enlivens the jurisdiction to make an order in this case. But that fact alone is not enough to warrant the making of an order against the plaintiff. The matters identified by SPI need to be looked at in a wider context, and a balance struck, having regard to the following matters:

(a) the fact that the funding has been provided only in respect of certain third party disbursements pursuant to Funding Agreements entered into in July 2011 and January 2011;

(b) that there has been a long period of preparation for the trial that has involved considerable expenditure both by the Funding Insurers and by Maurice Blackburn, and although that expenditure is unquantified, the evidence of the expenditure by HSF, and the course of the proceedings and number of Rulings of J Forrest J, shows that it must be very large indeed;

(c) that the application was first apparently foreshadowed only in March 2013 after the trial commenced;

(d) that there is no certainty that, if security is ordered against the plaintiff, the Funding Insurers, or any of the other insurers will put the plaintiff in funds to cover the security;

(e) The involvement of Maurice Blackburn in the conduct of the proceedings on behalf of the plaintiff and the group members (now registered following the Class Closure Orders), and the considerable time, resources an skill that that firm has contributed to the proceeding since at least mid 2010;

(f) The fact that the orders sought will not result in the stay of the proceeding, unless it were appropriate to make the order proposed in paragraph 4 (b) (3) of the orders in the Second Schedule to these reasons. That is, that the subrogated claimants registered pursuant to the Class Closure Orders will have their claims for indemnified loss stayed.

126 SPI recognised that the usual sanction for the failure to comply with an order that the plaintiff provide security for costs could not apply in this case. [102] There could be no stopping the trial, the biggest in the history of litigation in this State, that had been planned and prepared for nearly three years, and for which a special Court Room had been constructed in the William Cooper Centre.

127 The sanctions devised for non-compliance with any order for security give rise to further problems. They are, to put the matter colloquially, "back to front". That is, they provide a sanction only where the plaintiff or the subrogated claimants (group members) are successful in recovering ELPD losses. This aspect of the matter raises a question of power as well as affecting the exercise of the Court's discretion.

128 It was put on behalf of SPI that if the sanctions proposed were considered either outside the power of the Court or, as a matter of discretion, inappropriate, then the answer was to simply order the provision of security with no sanction at all, other than the sanction of a risk that the plaintiff would be found in contempt of Court if there were non-compliance with the order.

Whether someone who stands to benefit from the litigation is funding the plaintiff?

129 The presence of a third party funder with a commercial interest in the proceeding, coupled with an impecunious plaintiff, has commonly been considered sufficient to fund an order for security for costs.[103] In Green v CGU Insurance Ltd[104] Hodgson JA was of the opinion that the Court should be ready 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 but rather a person whose interest is solely to make a commercial profit from funding the litigation (at [51]).

130 It is also relevant that a solicitor who has entered into a "no-win-no-fee" agreement with the plaintiff stands to benefit from the proceedings, if ultimately successful, as the solicitor will then be able to recover its costs and an uplift fee: Bray v F. Hoffman La Roche Ltd.[105]

131 In this proceeding, Maurice Blackburn is partly funding the proceeding on a no-win-no-fee basis, and the Funding Insurers are partly funding third party disbursements in the proceeding so as to benefit from any order the plaintiff may obtain in her representative capacity in relation to their subrogated claims. SPI submitted that the position of the Funding Insurers in this case should be equated with a litigation funder because their interest in the proceeding is purely commercial, even though it may not be profit-making.

132 To the extent that the exercise of the discretion of the Court may turn upon whether or not it is appropriate to conclude that there are litigation funders, the funding insurers, standing behind the plaintiff or standing to benefit from the litigation, the plaintiff submitted that SPI equates the funding insurers with litigation funders and that this analogy is incorrect. In this submission I agree.

133 The presence of a third party funding the litigation does not automatically mean security for costs should be ordered. In Green v GCU Insurance Ltd,[106] the New South Wales Court of Appeal considered that the motivation behind this factor must be carefully considered otherwise there is a danger that a practice will develop whereby the presence of a litigation funder will be relied upon to justify the making of such an order simply because the existence of the funder is understood to be a relevant consideration.

134 There is no true parallel between the position of a commercial litigation funder that provides funding for the purposes of commercial profit and the position of the Funding Insurers, let alone the non-funding Insurers. The distinction lies primarily in the fact that they are exercising subrogated rights in the name of the group member in respect of compensation already paid out by them, under policies of insurance, to the group members. Their aim is not commercial profit or benefit. They stand to make no profit.

135 The funding insurers have suffered a loss, that is to say, they have paid or have been required to pay insurance claims to the subrogated claimants. That is the loss to be recovered by the subrogated claimants. It is compensation for this loss and this loss alone. It is not a profit making undertaking or scheme by the funding insurers as it would be if there were a commercial litigation funder supplying the means to pursue the litigation.

136 Thus it seems to me to be clear that although the funding insurers have a commercial interest in the litigation, they are not in the litigation to make commercial profits but to recover amounts paid out. The distinction between this interest and a profit interest of a litigation funder is a key distinction between those cases where security might be ordered where a litigation funder were present and the present case. In this case the Funding Insurers are seeking to vindicate the subrogation rights they have to recover compensation to which group members are entitled so as to recoup the indemnity provided to the group members under policies of insurance. This is an entirely different circumstance from the position of a commercial litigation funder, who is usually entitled to a proportion of any compensation recovered as the price of it funding the costs of the plaintiff prosecting its claims.

137 It is to be noted that the funding insurers are not even funding the entirety of the litigation. Instead they are making only limited contribution towards disbursements.[107]

138 SPI placed emphasis on the level of control that the Funding Insurers have through their membership of the Consultative Committee established initially under the Ligeti Agreement and then expanded under the Hall and Wilcox Agreement. I am inhibited from referring to the detailed provisions that enable the Funding Insurers to have input into aspects of the decision making because of the orders made limiting disclosure of those Agreements.

139 It is sufficient to say that, properly characterised, the Funding Agreements permit the Funding Insurers to be consulted. The Agreements do not confer on them, as SPI submitted, an important contractual power in respect of the progress of the litigation. The committee established is a consultation committee with very limited contractual powers. Further, this representative proceeding is so large and complex, and so dependant on the lawyers' and experts' expertise, that any notion of control by the Funding Insurers is fanciful.

140 The interests of the all the Insurers (funding or non-funding) is relevant, quite regardless of the Funding Agreements. Their interest in the compensation that might be awarded to the subrogated claimants gives them a special interest in the outcome, whether that be by way of settlement or judgment. It is inevitable that the plaintiff and her advisors will have regard to their interests in the determination of the common questions. What happens after that, if there are findings of liability against the defendants or some of them for property damage or economic losses, will also involve the Insurers directly.

If separate actions brought, would security have been ordered?

141 SPI submitted that the facts necessary to address this consideration are known only to the Funding Insurers. Because no evidence has been put forward by the Funding Insurers, the Court should draw the inference most favourable to SPI, that is, that security would have been ordered had relevant group members brought proceedings individually.

142 In this connection, SPI made submissions concerning an insurer's rights of subrogation,[108] and the circumstances in which an insurer may be required to give security for the costs that may be incurred by the insured where the insured is compelled to lend its name to the proceeding.[109]

143 There was no direct evidence given of the composition of the group. But as I have said the very large numbers and the location and impact of the Kilmore East bushfire point to a large component being natural persons with modest means.

144 Having regard, however, to the focus of the application being on the Funding Insurers, and the other Insurers, and the interests they have in the subrogated claims, it is clear that this aspect of the matter is not significant. By this I mean that this factor is not really relevant to the exercise of the discretion because it is not the lack of means of the plaintiff or the group members that is the central ground for the application. It is the presence of the Funding Insurers - in particular - that provides the ground for the enlivening of the power and the exercise of the discretion. Thus I give no weight to this factor.

145 SPI submitted that the onus is on the respondents to the application to show that any order for security would stultify the proceeding.[110] No evidence has been advanced. There is evidence as to the financial capacity of the Funding Insurers and Allianz, that shows that if an order were made against the plaintiff the insurers would undoubtedly have the capacity to meet it should they be so minded.

146 But the real point in relation to this factor is that there is no prospect of the proceeding being stultified. The proceeding is under way and can only be stopped by settlement or judgment. The only prospect of something analogous to stultification is a restriction of the rights of the subrogated claimants, if an order were made, that prevents recovery of compensation for indemnified losses or stays those claims only.

147 The jurisdiction to award security for costs is protective. It protects the efficacy of the exercise of the jurisdiction to award costs. The discretion should be exercised with the same rationale in mind, namely, to the extent it can be avoided, the Court should not permit a situation to arise where a party's success is pyrrhic. Thus the object of the exercise of the power is to protect a defendant against the risk that a costs order obtained at the end of the day may turn out to be of no value because of the impecuniosity of the plaintiff. The jurisdiction therefore assists both the compensation purpose as well as the public interest objective.

148 The plaintiff submitted that the protective purpose has a further objective. It is that by ordering a stay of the proceedings in the event of non-compliance, the defendant is protected from being required to expend further resources in defending the claim unless and until security is provided. But, the plaintiff submitted, most of the proposed orders run contrary to this rationale. There is no stay sought in this case other than the limited stay as a last resort.[111] A stay is, in any event, impossible as a matter of practicality having regard to the timing of the application. Instead, by the terms of proposed orders, in the event that security is not provided, various identified subrogated claimants are precluded from participation in any settlement or from receiving the benefit of any judgment in the proceeding, without the leave of the Court.

149 In the result, if the plaintiff, or the subrogated insurers, do not pay any security for costs if it is ordered, SPI is still required to expend the same amount of resources defending the proceeding. What's more, the plaintiff is still able to, and will, litigate to its full extend the claims she makes as representative plaintiff to a determination. The sole outcome is that the rights of certain subrogated claimants to obtain the benefit of any settlement or judgment is extinguished, even if their claims are ultimately held to be successful. This, the plaintiff submits is merely punitive and contrary to the purpose of the jurisdiction and inconsistent with the pursuit of the interests of justice. I agree.

150 To the extent that the orders proposed by SPI do not involve any stay of the proceedings, it has been submitted by the Funding Insurers that without a corresponding stay of proceedings an order for the provision of security for costs is really no order at all because no sanction would attach for non-compliance: James v Australia and New Zealand Banking Group Ltd.[112] This is a reflection of the source of the inherent power to order security for costs, being to prevent an abuse of process.

151 Quite apart from the effect that an order of this kind might have upon the exercise of the power to make an order for security for costs, it is relevant to the exercise of any discretion. In the case of the fourth "alternative" in each of the four proposed orders, that is that the application be re-listed to determine the orders to be made in consequence of non-compliance, it is relevant to the exercise of the discretion that neither the plaintiff nor the insurers (whose interests are those most substantially affected) will know what is to be sought in the event of noncompliance. Procedural fairness requires, in my view, that at the time of order for security is made the consequences of noncompliance are known. It is quite unsatisfactory to propose an order of this kind.

152 None of the orders proposed protect SPI against the incurring of irrecoverable costs. This is a powerful reason in itself against the making of any order for the provision of security for costs. The form of the 'sanction' for non-compliance with any order for the provision of security is a factor of significance weighing against the making of the orders proposed.

153 The mix of discretionary factors to which I have referred, when weighed in the balance for the purpose of the exercise of discretion, indicates that there should be no order for security against the plaintiff. The factors pointing against an order are overwhelming. Those factors are, in summary:

o that the plaintiff was not selected a 'person of straw';

o the fact that it is made well after the trial commenced;

o the prejudice to the plaintiff and through her to the Funding Insurers of the making of an order at this late stage;

o the fact that the ELPD claims will not, and cannot, be stayed at this stage of the trial;

o the fact that the Funding Insurers are not in the same position as a commercial litigation funder;

o the very large number of people affected by the proceedings and the public interest in a group proceeding of this size;

o the form of the proposed orders and the sanctions proposed for non-compliance, including that the orders cannot protect SPI against the very thing that an order for security is intended to protect.

154 SPI relied upon the same source of power to sustain its application against the Insurers as it relied on in the application against the plaintiff, s 33ZF of the SCA and the inherent power of the court.

155 SPI submitted that the Court should exercise its discretion to make the orders proposed against the Funding Insurers because the discretionary considerations weighed strongly in favour of making the orders.

156 I have already referred at some length to those discretionary considerations in relation to the claim against the plaintiff. In the main they have a similar impact in relation to the insurers.

157 The representatives of the several insurers made separate submissions, although some adopted those made by the others, particularly those made by Hall & Wilcox. There is thus considerable commonality between the insurers in respect of the submissions they made.

158 All the insurers contested the power to make an order for security for costs against them in the current circumstances. They also submitted that the factors to be taken into account in the exercise of the discretion, assuming the power existed, pointed overwhelmingly against the making of the orders sought, or any of them.

159 The common elements in the submissions were as follows:

(a) the nature of the relief sought could not serve the protective purpose for which an order for security for costs is made. The proposed orders preventing the insurers from accessing the fruits of any judgment or settlement in favour of the plaintiff (called by the Hall & Wilcox Insurers Conditional Compensation Orders ) were premised on success by the group members, and -

(i) were thus incongruous (because in that event no security would be needed);

(ii) did not serve the protective purpose and were punitive in character; and

(iii) were beyond the power of the Court;

(b) in the case of an application of this kind, where it is sought that nonparties give security for costs, the preferable course is to permit the plaintiff to prosecute the proceeding and, if it fails, consideration is then given to whether the nonparty should be ordered to pay the costs incurred by the defendant in defending the proceeding. That course is appropriate in this case because there is no suggestion that any insurer lacks the assets to satisfy an order if it is ultimately made and also because the Court is best equipped to deal with such an issue following the disposition of the plaintiff's proceeding.

(c) in any event, the factors to be taken into account in connection with the exercise of any discretion point overwhelmingly against the making of the Conditional Compensation Orders.

160 Hall & Wilcox submitted that the proposed orders sought by SPI have the following features, all of which are in my view substantially correct:

(a) The orders are sought against persons who are not parties to the proceeding;

(b) The orders are sought against persons who are insurers of group members and who have rights of subrogation to claims, or parts of claims, of some of the group members;

(c) The orders are not sought against entities who are litigation funders who stand to, or seek to, profit from the proceeding;

(d) The insurers have indemnified group members against insured losses. Hundreds of millions of dollars have been paid out;

(e) As insurers with subrogated rights, these insurers have entered into agreements with MBL to reimburse disbursements of the solicitors for the plaintiff;

(f) The insurers are substantial entities with sufficient assets to satisfy any costs orders if any orders were ultimately sought and made against one or more of them;

(g) No stay of the proceedings is sought in the event that the security for costs is not provided;[113]

(h) In each of the several alternative orders, the sanction for nonprovision of the security ordered that is proposed by SPI contemplates success by the group members in their claims (with the exception of sub-paragraphs (3) and (4) of each of paragraphs 1(c), 2(b), 3(b) and 4(b) of the proposed orders). This means that there has been success in the claims by the group members and no basis for an order of costs in favour of SPI;

(i) The orders provide that the consequence of a non-party insurers failure to provide security for costs is to conditionally extinguish the group members' entitlement to compensation or other benefit flowing from judgment or settlement and to do so by reference to no specific criteria;

161 One of the important factors that follows from the protective purpose of an order for security for costs is that if there is no reason to believe that the person against whom the security is sought is unable to satisfy any costs order that might be made against it, the power to award security is not enlivened.

162 Section 33ZD(b), as has already been observed, denies the Court's power to order security against a group member. It was submitted that it follows that if a group member chose to contribute to the funding of the representative plaintiff's costs or disbursements, the Court could not order that group member to provide security for SPI's costs. As with the submissions made on behalf of the plaintiff, it was pointed out that this reflects a deliberate and clear policy choice. A choice which follows the recommendations of the Australian Law Reform Commission in its report Group Proceedings in the Federal Court (1988) where it was observed that if a group member cannot be subjected to an order for costs, there could be no order for security for costs against the group member.[114]

163 The Insurers contended that in exercising their subrogated rights to recover amounts they have paid out under the relevant insurance policy, they stand in the shoes of the group members and are, accordingly, in the same position as the group member, with the protection given by s 33ZD(b).

164 Where an insurer exercises its rights of subrogation, and brings proceedings in the name of the insured, the Court's powers in respect of security for costs,[115] discovery,[116] entry of judgment and costs orders as between the parties are all exercised in the name of the insured and not the insurer.[117] The law ignores the fact that the insurer is the real plaintiff where he exercises rights of subrogation.[118]

165 The Insurers submitted that the above propositions were reflected in the fact that not a single case has been found in which an order for security for costs has been made against an insurer exercising its rights of subrogation. This needs to be distinguished from the position where the presence of an insurer is taken into account, in accordance with the principles relating to orders for security for costs, in determining to make an order against a plaintiff (an insured) which it is supposed will be funded by the insurer.

(a) the supposed source of the statutory power to make an order for security for costs in this case, that is s 33ZF, must be read with and be subject to s 33ZD;

(b) Section 33ZD makes exhaustive provision for the Court's power to award costs in proceedings governed by Part 4A of the SCA, which makes a detailed and elaborate scheme for the conduct of group proceedings;

(c) Section 33ZD displaces the operation of s 24 of the SCA (the source of the general power to make orders as to costs). Provisions about costs are a critical element in the balance struck by the scheme introduced by Part 4A;

(d) The result of this analysis is that the Court has no power to make a costs order against any other person other than the plaintiff.

167 Further, the Insurers submitted that s 33ZF did not enable an order requiring a nonparty to provide security for costs as a condition of a group member's entitlement to participate in settlement or judgment. The orders closing the class made by J Forrest J on 24 January 2013 were made for the purpose of identifying the group members with an interest in any judgment or settlement.[119] That at least facilitates settlement, which is a permissible purpose under s 33ZF.[120] But the security for costs orders SPI seeks in this case would require the insurers, who are not parties, to provide security for costs as the price of continued involvement in the proceeding, or at least the recovery of sums awarded by judgment or pursuant to a settlement.

168 As an alternative to the above submissions, which were premised on the basis that there is no power to order costs against a non-party in a group proceeding and therefore no power to order the provision of security for costs, the Hall & Wilcox Insurers submitted that the power to order costs against non-parties in this proceeding is not enlivened because none of the matters identified in Knight v FP Special Assets Ltd,[121] applies in the present case.

169 In Knight v FP Special Assets Ltd,[122] Mason CJ and Deane J[123] described the circumstances, relevant to the facts of that case, that gave rise to the jurisdiction to award costs against a non-party in the following terms:

We consider it appropriate to recognise a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation. That category of cases consists of circumstances where the party to the litigation is an insolvent person or a man of straw, where the nonparty has played an active part in the conduct of the litigation and where the nonparty, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation.

170 Earlier in their reasons, in the course of reviewing the history of the proceedings in which orders had been made against non-parties, Mason CJ and Deane J opined that the cases awarding costs against non-parties are more readily explicable on the footing that there was no absence of jurisdiction to order costs against non-parties in the strict sense and that the jurisdiction could be exercised against persons who were considered to be the "real parties" to the litigation.[124]

171 In Knight v FP Special Assets Ltd,[125] the appellants (who challenged the jurisdiction to order costs against the non-party) argued that the availability of an order for security for costs where the plaintiff is suing on behalf or for the benefit of another is a strong reason for denying the existence of a jurisdiction to order costs against a non-party. Mason CJ and Deane J said of this argument:[126]

Indeed, it has been said that the practice of making such an order for security for costs and of staying the proceedings until it is given is the appropriate remedy. No doubt it is an appropriate remedy in many cases but there are limitations attaching to the availability of security for costs. These limitations are such that security for costs is not a remedy in all cases in which justice calls for an order for the award of costs against a non-party. Security cannot be ordered against a defendant or a plaintiff who is an individual and who resides in the jurisdiction. The amount awarded as security is no more than an estimate of the future costs and it is not reasonable to expect a defendant to make further applications to the court at every stage when it appears that costs are escalating so as to render the amount of security previously awarded insufficient. And the availability of the remedy is scarcely a reason for denying the existence of jurisdiction to make an order for costs against the "real party" at the end of the trial of an action. The availability of an order for security for costs at an earlier stage of the litigation would, in many situations, be a strong argument for refusing to exercise a discretion to order costs against a non-party, but discretion must be distinguished from jurisdiction. (footnotes omitted)

172 In the same case Dawson J said:[127]

When it is said that as a general principle costs ought not be awarded against a person who is not a party to the proceedings, what is really being asserted is, not that there is no jurisdiction to do so, but that there is no justification for it because generally speaking persons who are not parties lack a sufficient connection with the litigation to provide a proper basis upon which to award costs against them.

173 Given that the Insurers are pursuing subrogated rights to recover moneys paid out under insurance policies, and are not permitted to retain sums paid in excess of the indemnity they have provided to the insured, their participation in the proceeding is said not to be for the pursuit of profit but purely to recover the indemnity they have given to the subrogated claimants.

174 I have referred above to my view as to the effect of the Insurer Agreements. In my view it is apparent from their terms that they were made for the purposes of facilitating the recovery of the subrogated claims and not for the purpose of profit making, far from it. The contribution to costs by the Funding Insurers is limited and only relates to certain third party disbursements. The Funding Insurers' rights under those Agreements give them no control, merely a right to be consulted. Moreover, the Funding Insurers have no obligation to pay any sums towards costs that might be ordered to be paid by the plaintiff or Maurice Blackburn. Thus there is neither profit to the insurers, nor control. It may be said with some force that the Funding Insurers have no greater interest in the proceeding than do the members to whose rights they are subrogated.

175 In my view, the power conferred by s 24 of the SCA to make orders for costs against a non-party is not curtailed by s 33ZD. Literally it says nothing on that subject. As Gaudron J said in Knight v FP Special Assets Ltd,[128] in relation to the power to award costs in that case:

It is contrary to long-established principle and wholly inappropriate that the grant of power to a court (including the conferral of jurisdiction) should be construed as subject to a limitation not appearing in the words of that grant. Save for a qualification which I shall later mention, a grant of power should be construed in accordance with ordinary principles and, thus, the words used should be given their full meaning unless there is something to indicate to the contrary. Powers conferred on a court are powers which must be exercised judicially and in accordance with legal principle. This consideration leads to the qualification to which I earlier referred. The necessity for the power to be exercised judicially tends in favour of the most liberal construction, for it denies the validity of considerations which might limit a grant of power to some different body, including, for example, that the power might be exercised arbitrarily or capriciously or to work oppression or abuse.

176 The power in s 24 of the SCA is only curtailed by the express words of s 33ZD. They do not in terms cover the field of all potential orders for costs. The specific mention of the power to order costs against the plaintiff or defendant, and the exclusion of the power to order costs against the group members except as otherwise authorised in ss 33Q or 33R, only qualifies the general power in s 24 as far as it goes. It does not, in my view, exclude the power otherwise existing to make orders against non-parties.

177 The argument against the existence of the power then turns on the argument that the scheme of part 4A and s 33ZD(b) mean that because the Insurers stand in the shoes of the group members, an order against the Insurers would be the same as an order against the group members. Putting it in that simple form suggests the answer. The Insurers may be in the shoes of the group members, and be acting pursuant to their rights of subrogation, but they are not the group members. It is as simple as that.

178 The result is that, in my view, the power exists to make an order for costs against the Insurers. However, in light of the matters to which I refer below, it is not necessary to come to a final conclusion as to the power because, assuming the power to exist, this is not a case where the court should, in the exercise of its discretion, make such an order.

179 The critical factor necessary to enliven the jurisdiction to make an order against a non-party is that there is reason to believe that should an order for costs be made against the Insurers at the conclusion of the proceeding that such an order will not be met. There is no suggestion, nor any submission, of any risk that the Insurers will be unable to pay costs if any are ordered against them at the conclusion of the trial of the common questions or ultimately at the conclusion of all consequent proceedings.

180 It is therefore unnecessary to deal with the factors relevant to the exercise of the discretion, were I persuaded that the jurisdiction is enlivened. Nevertheless, the matters to which I have referred in considering the discretionary factors in relation to the plaintiff are also generally applicable to the application against the Insurers.

181 I therefore conclude, for the reasons set out above, that-

(a) The court does have power to require the plaintiff to provide security for SPI's costs;

(b) The power, or jurisdiction, to make an order for the plaintiff to provide security for the costs of SPI is enlivened, but that in the exercise of the Courts discretion it is not appropriate to make any such order;

(c) The power of the Court to order the Insurers to provide security for the costs of SPI, assuming it to exist, is not enlivened;

(d) Further, if that power is enlivened, it is nevertheless not a case where it is appropriate in the exercise of the Court's discretion to make such an order.

182 I will hear the parties as to the appropriate orders.

SECRETARY TO THE DEPARTMENT OF SUSTAINABILITY AND ENVIRONMENT

SECRETARY TO THE DEPARTMENT OF SUSTAINABILITY AND ENVIRONMENT

1. Allianz Australia Insurance Limited (ACN 000 122 850).
2. CGU Insurance Limited (ACN 004 478 371).
3. Elders Insurance Limited (ACN 081 106 505).
4. Commonwealth Insurance Limited (ACN 067 524 216).
5. QBE Insurance (Australia) Limited (ACN 003 191 035).
6. Insurance Manufacturers of Australia Pty Ltd (ACN 004 208 084).
7. Insurance Australia Limited (ACN 000 016 722).
8. Suncorp Metway Insurance Limited (ACN 075 695 966).
9. Australian Associated Motor Insurers Limited (ACN 004 791 744).
10. Australian Pensioners Insurance Agency Pty Limited (ACN 099 650 996).
11. GIO General Limited (ACN 002 861 583).
12. Australian Alliance Insurance Company Limited (ACN 006 471 709).
13. Calliden Insurance Limited (ACN 004 125 268).
14. R J Kiln & Co Limited (Managing Agent of Lloyd's acting for and on behalf of Syndicates 510, 807, 958, 1225, 2623, 623, 2003 and 1206).
15. Transcorp Insurance Pty Limited (ACN 094 737 970)
16. Certain Underwriters at Lloyds of London subscribing to Policy no PROP 080001443.
17. Ansvar Insurance Limited (ACN 007 216 506).
18. Wesfarmers General Insurance Limited (ACN 000 036 279).
19. Zurich Australian Insurance Limited (ACN 000 296 640).
20. The Hollard Insurance Company Pty Limited (ACN 090 584 473).
21. Sportscover Australia Pty Limited (ACN 006 637 903).
22. Lloyds Syndicate 2121 "Argenta" (as lead insurer for co-insurers Argenta - Synd 2121, Catlin - Synd 2003, Kiln - Synd 510, Meacock - Synd 727, Atrium - Synd 570, Argo - Synd 1200, Canopius - Synd 985, Kiln - Synd 807, Chaucer - Synd 1084, Ark - Synd 4020, Atrium - Synd 609 and Sagicor - Synd 1206).
23. Capricorn Mutual Limited (ACN 129 143 479).
24. AAI Limited (ACN 005 297 807).

1 Pursuant to s 33ZF of the Supreme Court Act 1986 (Vic) and/or the inherent jurisdiction of the Court:

(a) The entities set out below provide security to the First Defendant for its costs in the proceeding in respect of third party disbursements incurred by the First Defendant on and from 28 March 2013 to the conclusion of the trial of the common questions in the amount ordered by the Court, and in the following proportions:

(2) Insurance Manufacturers of Australia Pty Ltd 18.56%

(b) Alternatively to subparagraph (a), the Funding Insurers provide security to the First Defendant for its costs in the proceeding in respect of third party disbursements incurred by the First Defendant on and from 28 March 2013 to the conclusion of the trial of the common questions in the amount ordered by the Court, and in the following proportions:

Australia Pty Ltd, and Insurance Australia Limited: 84%

(c) If a Funding Insurer does not provide security in its respective proportion, as ordered by the Court, within 14 days of this order,

(1) any Subrogated Claimant registered in respect of that insurer pursuant to the Court's Orders of 24 January 2013 shall remain a group member for the purposes of the proceeding but shall not, in respect of the subrogated claim, be entitled to any amount of compensation by way of settlement or the benefit of any judgment in the proceeding without leave of the Court.

(2) alternatively, any Subrogated Claimant registered in respect of that insurer pursuant to the Court's Orders of 24 January 2013 shall remain a group member for the purposes of the proceeding but in the event of a settlement of property or economic loss claims in the proceeding shall not, without leave of the Court, be permitted to claim (by themself or by their insurer) compensation for indemnified loss pursuant to the settlement.

(3) alternatively, the claim for indemnified loss of any Subrogated Claimant registered in respect of that insurer pursuant to the Court's Orders of 24 January 2013 shall be stayed.

(4) alternatively, the application then be re-listed to determine orders to be made in consequence.

(d) The Funding Insurers pay the First Defendant's costs of the application made by summons dated 16 April 2013 and there otherwise be no order as to costs.

2 Alternatively, pursuant to s 33ZF of the Supreme Court Act 1986 (Vic) and/or the inherent jurisdiction of the Court:

(a) The entities set out below provide security to the First Defendant for its costs in the proceeding in respect of third party disbursements incurred by the First Defendant on and from 28 March 2013 to the conclusion of the trial of the common questions in the amount ordered by the Court, and in the following proportions:

(2) Insurance Manufacturers of Australia Pty Ltd: 17.09%

(8) Allianz Australia Insurance Ltd (Allianz): 7.95%

(b) If a Funding Insurer or Allianz does not provide security in its respective proportion, as ordered by the Court, within 14 days of this order,

(1) any Subrogated Claimant registered in respect of that insurer pursuant to the Court's Orders of 24 January 2013 shall remain a group member for the purposes of the proceeding but shall not, in respect of the subrogated claim, be entitled to any amount of compensation by way of settlement or the benefit of any judgment in the proceeding without leave of the Court.

(2) alternatively, any Subrogated Claimant registered in respect of that insurer pursuant to the Court's Orders of 24 January 2013 shall remain a group member for the purposes of the proceeding but in the event of a settlement of property or economic loss claims in the proceeding shall not, without leave of the Court, be permitted to claim (by themself or by their insurer) compensation for indemnified loss pursuant to the settlement.

(3) alternatively, the claim for indemnified loss of any Subrogated Claimant registered in respect of that insurer pursuant to the Court's Orders of 24 January 2013 shall be stayed.

(4) alternatively, the application then be re-listed to determine orders to be made in consequence.

(c) The Funding Insurers and Allianz pay the First Defendant's costs of the application made by summons dated 16 April 2013 and there otherwise be no order as to costs.

3 Alternatively, pursuant to s 33ZF of the Supreme Court Act 1986 (Vic) and/or the inherent jurisdiction of the Court:

(a) The entities set out below provide security to the First Defendant for its costs in the proceeding in respect of third party disbursements incurred by the First Defendant on and from 28 March 2013 to the conclusion of the trial of the common questions in the amount ordered by the Court, and in the following proportions:

(2) Insurance Manufacturers of Australia Pty Ltd: 15.20%

Lloyd's acting for and on behalf of Syndicates 510,

(b) If a Group Member Insurer does not provide security in its respective proportion as ordered by the Court, within 14 days of this order,

(1) any Subrogated Claimant registered in respect of that insurer pursuant to the Court's Orders of 24 January 2013 shall remain a group member for the purposes of the proceeding but shall not, in respect of the subrogated claim, be entitled to any amount of compensation by way of settlement or the benefit of any judgment in the proceeding without leave of the Court.

(2) alternatively, any Subrogated Claimant registered in respect of that insurer pursuant to the Court's Orders of 24 January 2013 shall remain a group member for the purposes of the proceeding but in the event of a settlement of property or economic loss claims in the proceeding shall not, without leave of the Court, be permitted to claim (by themself or by their insurer) compensation for indemnified loss pursuant to the settlement.

(3) alternatively, the claim for indemnified loss of any Subrogated Claimant registered in respect of that insurer pursuant to the Court's Orders of 24 January 2013 shall be stayed.

(4) alternatively, the application then be re-listed to determine orders to be made in consequence.

(c) The Group Member Insurers pay the First Defendant's costs of the application made by summons dated 16 April 2013 and there otherwise be no order as to costs.

4 Alternatively, pursuant to s 33ZF of the Supreme Court Act 1986 (Vic) and/or the inherent jurisdiction of the Court:

(a) Within 14 days of this Order, the Plaintiff provide security to the First Defendant for its costs in the proceeding in respect of third party disbursements incurred by the First Defendant on and from 28 March 2013 to the conclusion of the trial of the common questions in the amount ordered by the Court.

(b) If the Plaintiff does not provide security as ordered by the Court, any Subrogated Claimant registered in respect of:

(2) alternatively to (1), the Funding Insurers and Allianz; or

(3) alternatively to (2), the Group Member Insurers

(1) shall remain a group member for the purposes of the proceeding but shall not, in respect of the subrogated claim, be entitled to any amount of compensation by way of settlement or the benefit of any judgment in the proceeding without leave of the Court.

(2) alternatively, shall remain a group member for the purposes of the proceeding but in the event of a settlement of property or economic loss claims in the proceeding shall not, without leave of the Court, be permitted to claim (by themself or by their insurer) compensation for indemnified loss pursuant to the settlement.

(3) alternatively, shall have their claim for indemnified loss stayed.

(4) alternatively, the application then be re-listed to determine orders to be made in consequence.

[1] Filed on 16 April 2013 and amended on 21 May 2013.

[2] These were Argenta, Capricorn, Transcorp and Lloyds.

[3] The Order was pronounced on 18 January 2013 but not finally made until 24 January 2013.

[4] Matthews v SPI Electricity Pty Ltd (Ruling No. 13) [2013] VSC 17.

[5] Letter of 22 February from HSF to Hall & Wilcox and Ligeti Partners, Exhibit JLB-1 to the Betts affidavit of 12 April 2013.

[6] [1992] HCA 28; (1992) 174 CLR 178.

[7] Referred to in the Agreement by their common names, AAMI, GIO, APIA, Suncorp Insurance, VERO, Shannons, Just Car Insurance, Bingle, CIL Insurance and others.

[8] Such things as photocopying, telephone and fax charges.

[9] [2013] VSC 285.

[10] [2001] NSWSC 476 at [6]- [8].

[12] These are the Insurers for which Hall & Wilcox and Ligeti Partners acted as set out in the Schedule to the orders.

[13] On 20 July 2011 Maurice Blackburn entered into a funding agreement with Suncorp Group Ltd and Ligeti Partners (Ligeti Partners Agreement): see first affidavit of Betts sworn 6 May 2013 Exhibit JLB-6. On 23 January 2012 Maurice Blackburn entered into a funding agreement with Insurance Australia Group Ltd (encompassing CGU Insurance Ltd, Insurance Manufacturers of Australia Pty Ltd and Insurance Australia Ltd), Commonwealth Insurance Ltd, QBE Insurance (Australia) Ltd (including Elders Insurance Ltd) and Hall & Wilcox (the Hall & Wilcox Agreement): affidavit of Betts sworn 6 May 2013, Exhibit JLB-6 at pp.211-219.

[14] Affidavit of Ms Overington sworn 6 May 2013 at [44].

[15] See the affidavit of Betts of 6 May 2013, Exhibit JLB-3.

[16] [2005] VSC 306 at [107].

[17] [2013] VSC 17 at [60]- [62].

[18] Proude v Visic (No 3) [2012] SASC 234 (a representative proceeding under the South Australian Rules); Daya v CX Reinsurance Company Ltd [2012] NSWSC 1213 (an e_x tempore_ judgment of Brereton J where a judgment creditor was funding the plaintiff's claim); Padthaway Investments Pty Ltd v National Australia Bank Ltd [2012] VSC 97 (a group proceeding supported by a litigation funder where there was no dispute that some security was appropriate, the dispute being as to the quantum); Buffalo Corp Pty Ltd v Lendlease Primelife Corp Ltd (No 3) [2010] VSC 263 (where the presence of a litigation funder was relevant); Canberra Residential Developments Pty Ltd v Brendas [2009] FCA 745; Green v CGU Insurance Ltd [2008] NSWCA 148; (2008) 67 ACSR 105 (A Court should be readier to order security for costs where the non-party who stands to benefit from the proceeding is not a party interested in having rights vindicated); Sagacious Procurement Pty Ltd v Symbion Health Ltd [2007] NSWCA 205; Benzlaw & Associates Pty Ltd v Medi-Aid Centre Foundation Ltd [2007] QSC 9; [2008] 2 QDR 215; Baygol Pty Ltd v Huntsman Chemical Co Australia Pty Ltd [2004] FCA 1248; Fiduciary Ltd v Morningstar Research Pty Ltd [2004] NSWSC 664; (2004) 208 ALR 564; Terranora Leisure Time Resort Management Ltd v Harris [2004] FCA 587; Global Finance Group Pty Ltd (In Liquidation) v Marsden Partners (a firm) [2004] WASC 52; Maronis Holdings v Nippon Credit [2000] NSWSC 994.

[19] [2003] FCAFC 153; (2003) 200 ALR 607 at [252].

[20] [2008] NSWCA 148; 67 ACSR 105 at 114[29]-119[45]; and Madgwick's case at [12].

[21] Bell Wholesale Co Ltd v Gates Export Corp [1984] FCA 34; (1984) 2 FCR 1; Hession v Century 21 South Pacific Ltd (In Liq) (1992) 28 NSWLR 120; Rhema Ventures Pty Ltd v Stenders [1993] 2 Qd R 326; Impex Pty Ltd v Crowner Products Ltd (1994) 13 ACSR 440 at 446; Ariss v Express Interiors Pty Ltd (In Liq) [1996] 2 VR 507; Spiel v Commodity Brokers Aust Pty Ltd (In Liq) (1983) 8 ACLR 410; Jeffcot Holdings Ltd (In Liq) v Paior (1996) 15 ACLC 28.

[22] Sub-section (3) provides that if the Court appoints a person other than the plaintiff to be a sub-group representative party, that person, and not the plaintiff, is liable for costs associated with the determination of the question or questions common to the sub-group members.

[23] Section 33R provides so far as presently relevant that where directions are given under section 33Q, the Court may permit an individual group member to take part in the proceeding for the purpose of determining a question that relates only to the claim of that member, in which case that group member and not the plaintiff is liable for costs associated with the determination of the question.

[24] [2002] HCA 27; (2002) 211 CLR 1 at [38]- [41] per Gaudron, Gummow and Hayne JJ.

[25] [2010] VSC 489 at [52] per J Forrest J; See also Second Reading Speech on the introduction of Part 4A of the Supreme Court Act 1986 by the Attorney-General, Victoria, House of Assembly Vic Hansard 1252, 2000.

[26] The Midland Insurance Co v Smith and Wife (1881) 6 QBD 561; King v Victoria Insurance Co Ltd [1896] AC 250 at 256; John Edwards & Co v Motor Union Insurance Co Ltd [1922] 2 KB 249 at 253-254.

[27] Wilson v Raffalovich (1881) 7 QBD 553 at 558; Dawson v Bankers and Traders Insurance Co Ltd [1957] VicRp 65; [1957] VR 491 at 506.

[28] Cf. Livingspring Pty Ltd v Kliger Partners [2008] VSCA 93; (2008) 20 VR 377 at 393. The plaintiff's reliance upon the decision of the Court of Appeal in Livingspring v Kliger is, however, misplaced. That was a case where the defendant was insured. The question was the relevance of that insurance to whether or not an order for security of costs should be made against the plaintiff. That was against a background of some authority (rejected by Hayne J in Quichorn Pty Ltd v Broad)29 that it is not ordinarily appropriate to grant security in favour of a defendant insurer. It has nothing to do with the position of an insured plaintiff.

[30] [2003] FCAFC 153; (2003) 130 FCR 317.

[31] [2012] FCA 1446 at [81].

[32] Canterbury Law Review, Vol 10, 2004, 254-255, quoted in Kelly's Case at [87].

[33] [2013] VSC 17.

[34] [2005] VSC 306 at [106].

[35] [2008] FCA 1505; (2008) 253 ALR 65 per Finkelstein J at [26].

[36] Kirby v Centro Properties Ltd (Supra).

[37] Matthews v SPI Electricity Pty Ltd (Ruling No. 1) [2011] VSC 167.

[38] Matthews v SPI Electricity Pty Ltd (Ruling No. 1) (Supra).

[39] Regent Holdings Pty Ltd v Victoria [2012] VSCA 221.

[40] [2009] VSCA 278 at [18].

[41] [1998] FCA 658, per Wilcox J at [??].

[42] (2002) 122 FCR 168; [2002] FCA 957.

[43] [2003] VSC 212 at [65] per Gillard J.

[44] [2009] FCA 758 at [41]

[45] [2011] VSC 167 at [81]- [82].

[46] [2012] VSC 66 at [42]- [44].

[47] [2013] VSC 17 at [60]- [62] per J Forrest J.

[48] (2002) 122 FCR 168; [2002] FCA 957 at [47]- [54].

[49] [2005] VSC 306 at [107].

[50] Ryan v Great Lakes Council [1998] FCA 646; (1998) 155 ALR 447 at 456; Woodhouse v McPhee [1997] FCA 1509; (1997) 80 FCR 529 at 533.

[51] [2013] VSC 17 at [59].

[52] Napier v Hunter (1993) AC 713, 737-8.

[53] [2013] FCAFC 61; 212 FCR 1 at [39].

[54] [1997] FCA 1509; (1997) 80 FCR 529 at 533.

[55] See the reasons of Carr J in Brays Case at [75].

[56] Carr J at [137]-145], Branson J [214] and Finkelstein J at [250]-252].

[58] This is not a contingency fee in the American sense of a percentage of the damages recovered. It is the uplift fee allowed under the Victorian Legal Profession Act 2004.

[59] [1982] 2 NSWLR 443 at [447]-[448] (Holland J).

[60] [1993] HCA 11; (1998) 193 CLR 72 at 97 [67], per McHugh J and the cases there cited).

[61] see Colbran "The Origin of Security for Costs" (1993) 14 Queensland Lawyer 44; Knight v FP Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178 at 182, 193; Garnett v Bradley [1878] 3 AC 944 at 953-954, 962.

[62] Hall's Case proceeding on an assumption of power and the other authorities relied on dealing with the width and generality of the power in other circumstances.

[63] [1977] 1 WLR 899 at 902; [1977] 3 All ER 531 at 533 per Megarry VC.

[64] (1885) 31 Ch D 34.

[65] [2008] NSWCA 148; (2008) 67 ACSR 105;

[66] Bell Wholesale Co Ltd v Gates Export Corp [1984] FCA 34; (1984) 2 FCR 1 at 3; Ariss v Express Interiors Pty Ltd [1996] 2 VR 507 at 514.

[67] [1977] FCA 1; (1977) 14 ALR 52 at 56.

1. [68] (1988) 14 ACLR 467 at 470; reflecting the words of Street CJ in Buckley v Bennell Design & Constructions Pty Ltd (1974) 1 ACLR 301 at 304.

[69] [2008] VSCA 93; (2008) 20 VR 377, Maxwell P and Buchanan JA at [21];, Colmax v Polytrade at [18].

[71] [2012] FCA 1446 at [13].

[72] As summarised by Murphy J in Kelly.

[73] PS Chellaram & Co Ltd v China Ocean Shipping Co [1991] HCA 36; (1991) 65 ALJR 642 at 643.

[74] [2013] FCAFC 61; (2013) 212 FCR 1 at 8, handed down after argument in this case.

[75] The third judge of appeal, Jessup J, also appeared to accept the factors as generally relevant [at 105].

[76] Affidavit of Betts sworn 7 May 2013 at [36].

[77] Affidavit of Betts sworn 7 May 2013 at [38].

[78] Affidavit of Betts sworn 7 May 2013 at [39].

[79] SPI written submission 28 May 2013 paragraph [94].

[80] Affidavit of Jason Lawrence Betts sworn 12 April 2013, JLB-1.

[81] Affidavit of J.L. Betts sworn 7 May 2013 at [30b].

[82] Affidavit of J.L. Betts sworn 7 May 2013 at [12] - [17].

[83] [2007] NSWSC 380 at [22].

[84] Sandl Trading Pty Ltd v North American Oil Company [1998] VSC 8 at [11] per Harper J; January Force Pty Ltd v Tricon Restaurants Australia Pty Ltd [1999] FCA 1746 at [21] per Goldberg J; Wenco Industrial Pty Ltd v WW Industrial Pty Ltd [2010] VSC 646 at [27] per Gardiner AsJ.

[85] Wenco Industrial Pty Ltd v WW Industrial Pty Ltd [2010] VSC 646 at [27].

[86] [2001] NSWSC 744 at [52].

[87] [2008] NSWCA 148; 67 ACSR 105 at [57].

[89] See Matthews v SPI Electricity and SPI Electricity Pty Ltd v Utility Services Corporation Ltd (Ruling No 1) [2011] VSC 167 at [28].

[90] [2011] VSC 167.

[92] [2011] VSC 613.

[94] [1975] VicRp 76; [1975] VR 776

[95] Trility Pty Ltd v Ancon Drilling Pty Ltd, [2013] VSC 577 at [57].

[97] Kelly v Wilmott Forests at [61] citing Bray v F. Hoffman La Roche Ltd (supra).

[98] [2003] FCAFC 153; (2003) 130 FCR 317 at 348-349 [137]- [145], per Carr J, 361-362, [214] per Branson J and 374-375 [250]-[252] per Finkelstein J.

[99] [2004] VSC 466.

[100] [2003] FCAFC 153; (2003) 130 FCR 317 at 348-349 [142] per Carr J, 361-362, [214] per Branson J, 374-375, [252] per Finkelstein J.

[101] Affidavit of J.L. Betts sworn 6 May 2013 at [11].

[103] See for example Canberra Residential Developments Pty Ltd v Brendas [2009] FCA 745 at [243].

[104] [2008] NSWCA 148.

[105] [2003] FCAFC 153; (2003) 130 FCR 317 at 375 per Finkelstein J at [252].

[106] [2008] NSWCA 148 at [66].

[107] Confidential Affidavit of Jason Betts dated 6 May 2013, Exhibit JLB-6.

[108] SPI written submissions, 28 May 2013, at [69]-[73].

[109] Referring to the observations of Lord Denning MR in Morris v Ford Motor Co Ltd [1973] 1 QB 792 at 800.

[110] Bray's Case at [142]; Kelly v Willmott Forrests at [113].

[111] See paragraph (3) in each order in the Second Schedule.

[112] (1985) 9 FCR 442 at 446 per Toohey J.

[113] This was the position until near to the end of the argument.

[114] Report No 46 at 112-113 [270].

[115] Nylex Corporation Pty Ltd v Basell Australia Pty Ltd [2009] VSC 97.

[116] Wilson v Raffalovich (1881) 7 QBD 553; J. Nelson & Sons Ltd v Nelson Line (Liverpool) Ltd [1906] 2 KB 217.

[117] Halliday v High Performance Personnel Pty Ltd (in liq) [1993] HCA 13; (1993) 67 ALJR 678; 113 ALR 637; Morris v Ford Motor Company [1973] QB 792 at 800.

[118] Petrie v Linsley (1995) 21 MVR 413 (Eames J); Roth v Roads and Traffic Authority [2009] NSWSC 295 at [86].

[119] Matthews v SPI Electricity Pty Ltd (Ruling No 13) [2013] VSC 17 at [23].

[120] Dorajay Pty Ltd v Aristocrat Leisure Ltd [2008] FCA 1311.

[121] [1992] HCA 28; (1992) 174 CLR 178.

[122] [1992] HCA 28; (1992) 174 CLR 178 at 192.

[124] [1992] HCA 28; (1992) 174 CLR 178 at 188.

[125] [1992] HCA 28; (1992) 174 CLR 178 at 192.

[126] [1992] HCA 28; (1992) 174 CLR 178 at 190-1.

[127] [1992] HCA 28; (1992) 174 CLR 178 at 199.

[128] [1992] HCA 28; (1992) 174 CLR 178 at 205.

[129] The Suncorp entities are: Suncorp Metway Insurance Limited; Australian Associated Motor Insurers Limited; Australian Pensioners Insurance Agency Pty Limited; Australian Alliance Insurance Company Limited; GIO General Limited; and AAI Limited.