Incomlend Pte Ltd v Insurance Australia Ltd

By motion filed 25 July 2024, the second defendant (Tokio Marine) and third defendant (BCC) seek the following orders:

In circumstances where the proceedings are funded by LCM Funding Pty Ltd, the plaintiffs are both resident overseas and there was no evidence that they have significant assets in Australia, there was no issue that security should be provided. Rather, the debate between the parties concerned two matters:

The motion was heard on 8 November 2024. Mr J Giles SC and Mr B O’Connor appeared for the plaintiffs and Ms A Horvarth SC and Ms A Avery-Williams appeared for Tokio Marine and BCC.

In support of its motion, Tokio Marine and BCC relied on the following evidence:

The plaintiffs relied on:

Further, the proposed deed of indemnity put forward by the plaintiffs was marked Exhibit 1 (Deed). A copy is attached to these reasons. Minor amendments were proposed by Mr Giles SC for the plaintiffs during argument to deal with matters raised by Ms Horvath SC for Tokio Marine and BCC. I deal with these changes below.

For the reasons set out below, I have determined that the plaintiffs should provide security in the sum of $1.75 million for a first tranche up to and including the completion of the lay evidence of Tokio Marine and BCC. The security should be in the form of the Deed proposed by the plaintiffs as modified during the hearing, together with $45,000 paid into Court to cover enforcement costs, or failing that, by payment of $1.75 million into Court or the provision of an irrevocable bank guarantee for that amount. The parties should seek to agree short minutes to give effect to these reasons, including as to costs. Any remaining dispute will be determined on the papers.

Tokio Marine and BCC sought security in the sum of $2.5 million in respect of what was defined as the “Expanded First Phase”, being their costs up to including the review of the plaintiffs’ lay evidence in the proceedings.

The plaintiffs contended in written submissions that security should be ordered in the sum of $500,000 to cover the period up to the review of the plaintiffs’ evidence.

It became apparent during the course of the hearing on 8 November 2024 that, although expressed in similar terms, there was considerable uncertainty and disagreement about what should be the appropriate cut-off point for a first tranche of security. Ultimately, it was agreed, in effect, that an appropriate cut-off point for the first tranche of security would be up to and including the completion of Tokio Marine and BCC’s lay evidence in the proceedings. The parties remained far apart on quantum.

To understand why such a significant first tranche of security is sought, it is necessary to understand a little about the proceedings.

The proceedings were commenced on 15 November 2023.

The first plaintiff (Incomlend) and second plaintiff (Amicorp) claim they are entitled to indemnity under one or more “Trade Credit Insurance Whole of Turnover” policies, being:

Incomlend is in the business of trade credit finance. It extends finance to customers by a common form of debt factoring (broadly, a line of credit secured against accounts receivable). During the relevant period, suppliers exported commodities to buyers (usually overseas and by ship). Finance was extended to the suppliers (who were due to be paid for the commodities) and Incomlend and/or Amicorp took assignment of the underlying receivable.

To protect against the risk of non-payment, Incomlend and Amicorp took out trade credit insurance underwritten by IAL, Tokio Marine and/or BCC (as the case may be).

During the period coinciding with the COVID-19 pandemic, the buyers began defaulting on debts due to be paid to Incomlend. The debts relate to the non-payment of specified invoices. From on or around August 2020, Incomlend began to lodge claim forms with BCC seeking indemnity from the relevant insurers. Indemnity was not forthcoming. The proceedings were commenced on 15 November 2023 and the insurers, by the filing of their respective commercial list responses, denied indemnity.

The plaintiffs seek indemnity in respect of 162 alleged “Insured Debts” said to arise out of separate transactions involving more than 68 different commodities and trades spanning many countries.

By way of example, the plaintiffs in their amended commercial list statement allege the following regarding one of the 162 separate transactions:

Each of these allegations is either not admitted or denied in the relevant commercial list responses. This is essentially on the basis that Tokio Marine and/or BCC is not aware of whether the underlying factual allegations are true or not and, in any event, the matters relied upon by the plaintiffs in their amended commercial list statement do not make good the allegations alleged.

Prior to putting on their commercial list responses, and in an effort to understand a number of the allegations, the solicitors for Tokio Marine and BCC served a detailed request for particulars. The same request was made in relation to each of the 162 transactions alleged in the commercial list statement. Relevantly, the following particulars were requested:

There was no substantive response from the plaintiffs to these requests. Perhaps understandably, the response was that the requests raised matters for evidence. The plaintiffs’ evidence was due to be served on 8 November 2024 and I was advised from the bar table by senior counsel for the plaintiffs that one substantive affidavit was ready to be served that day.

Having regard to the request for particulars and the response, Tokio Marine and BCC contend that it will be necessary for their solicitors to conduct their own investigations into the 162 purported trades in order to understand whether the contracts were performed. Ms Stephanie Cook, the solicitor with the day-to-day carriage of the proceedings on behalf of Tokio Marine and BCC, gave unchallenged evidence to this effect. Further, she contended that:

Annexed to Ms Cook’s substantive affidavit in support of the motion was a table summarising the costs likely to be incurred in the Expanded First Phase as defined in the motion. The table was as follows:

Ms Cook also set out in her substantive affidavit the costs that were likely to be incurred after the Expanded First Phase up to and including a substantive hearing in the matter. That estimate was in the following form:

In circumstances where it was now accepted that the first tranche of security should extend up to and including the completion of Tokio Marine and BCC’s lay evidence, senior counsel for Tokio Marine and BCC contended that it would be appropriate to include the estimate of $400,000 from the table immediately above (item 5), being referrable to the preparation of Tokio Marine and BCC’s lay evidence into the estimate of total costs for the first tranche.

There was no dispute between the parties as to the principles applicable in assessing the quantum of security to be ordered. They were recently conveniently summarised by Nixon J in APFC No 1 Corporation v Insurance Australia Limited [2024] NSWSC 534 (APFC No 1) at [105] by reference to the decision of Ward J (as the learned President then was) in Vertical Australia Pty Ltd v Air Company Vertical-T LLC [2012] NSWSC 719 at [106] as follows:

It was also not in dispute that the Court is not required to attempt its own detailed costs assessment, but can adopt a “broad brush” approach having regard to the available evidence: see Wollongong Coal Ltd v Gujarat NRE Properties Pty Ltd [2019] NSWSC 187 at [54] per Ward CJ in Eq (as the learned President then was); APFC No 1 at [106] per Nixon J.

For the reasons set out below, I propose to order a first tranche of security in the sum of $1.75 million to cover the period up to the completion of the lay evidence for Tokio Marine and BCC.

The principal dispute related to the amount claimed for future costs, and in particular, the amount claimed for detailed further investigations. The dispute in relation to past costs was essentially between $440,000 (on behalf of the plaintiffs) and $450,000 (on behalf of the Tokio Marine and BCC).

In relation to the need for further detailed investigation, senior counsel for the plaintiffs did not dispute that it was appropriate for Tokio Marine and BCC to investigate each of the 162 trades in respect of which the plaintiffs seek indemnity.

It was also not in dispute that these trades involve up to 60 different companies – 30 suppliers and 30 buyers – based all around the world – something like 26 countries of origin and 30 destinations.

Rather, the plaintiffs’ contention was how much investigative work was required and whether it was necessary for the investigative work to be carried out by solicitors, as Tokio Marine and BCC contend. The plaintiffs’ contend that the evidence relied on by Tokio Marine and BCC is most unsatisfactory in that it provides no detail in support of the estimate of greater than $1.4 million in investigation costs.

In response, Tokio Marine and BCC rely, inter alia, on the fact that Ms Cook was not cross-examined and also that, having regard to the evidence of Ms Rosati in relation to past costs, the Court can have confidence that the costs being incurred by Tokio Marine and BCC will be allowed on an assessment.

Given the breadth of the facts underlying each of the 162 alleged trades in respect of which the plaintiffs’ seek indemnity, I accept that it is by no means an easy task to estimate the work that will be required to investigate these alleged trades so as to conduct Tokio Marine and BCC’s defence of the claim.

The evidence put forward by Tokio Marine and BCC, however, does not really assist me in the task of estimating the amount of work and its cost. Ms Cook has simply asserted the number of hours, broken down by partner, special counsel, senior associate, associate and paralegal, that she estimates will be necessary. There is simply no detail or breakdown provided as to how this estimate has been arrived at, including what each of the solicitor categories will be doing, whether Ms Cook has any experience in running matters of this kind which has been used to estimate the costs estimated in the first phase, whether an assumption has been made as to each of the trades requiring the same amount of investigative work and the like.

The fact that Ms Cook was not cross-examined does not assist Tokio Marine and BCC. It is not for the cross-examiner to seek to identify the basis for the estimates provided. Further, the fact that Ms Rosati has opined that a substantial proportion of past costs were likely to be recovered on an assessment does not assist in the absence of any detailed breakdown of the future work to be performed.

In addition to greater than $1.4 million in solicitor investigation costs, Ms Cook also contended that nine experts would need to be retained, with $50,000 being allowed for each expert. No detail was provided, however, as to why nine experts were thought to be necessary, what disciplines they would cover, what work they would be doing, why $50,000 was an appropriate estimate per expert and the like.

The nature of the matters to be investigated are such that it is likely that considerable legal work will be required. It is also likely that non-legal work will be required. The matters to be investigated include the provenance of the goods, the alleged sales contracts, the movements of the goods, how title was passed, the status of the original bills of lading, the performance of the sales contracts, how the goods physically passed and steps taken for payment. The evidence does not, however, allow me to have any real confidence as to the total work that will be required or any breakdown between legal and non-legal work.

No detailed investigative work has been carried out to date. I was informed that Tokio Marine and BCC wanted the issue of security for costs dealt with before embarking on the expensive investigative work. It would have been possible to perform some limited investigative work, in relation to one or a limited number of the alleged transactions, and then seek to extrapolate from the cost of that work, an estimate of the total investigation costs.

Ultimately, I am left in the position of having to approach quantum in quite a broad brush way, having regard to the relevant principles summarised above and in particular, to order a sum that is just, which is considered adequate in the circumstances. It was not suggested by the plaintiffs that I should simply dismiss the motion.

For past costs, I propose to allow $445,000, being the mid-point between the parties.

For additional detailed further investigation into the 162 purported trades, I propose to allow $700,000 of solicitor time, being a little more than $4,000 per purported trade and approximately one half of what was estimated by Ms Cook. Assuming 70 percent is recovered on assessment, I allow $490,000. I accept this is a best guess on my part, but the evidence does not permit any other approach. It is also likely that the cost will not be the same for each trade and that cost savings will emerge as the investigations progress.

For non-legal investigative work, I propose to allow $100,000, 90 percent of which is assumed to be recoverable on assessment – as such, I allow $90,000.

To consider the plaintiffs’ evidence, I allow $75,000 – being a reduction of Ms Cook’s estimate of $112,500 to account for the fact that there is likely to be a considerable overlap with investigation costs. Assuming 70 percent is recovered on assessment, I allow $52,500.

To prepare Tokio Marine and BCC’s lay evidence, I allow $700,000. This is a slight reduction of the sum of item 2 in the Expanded First Phase Costs Schedule and item 5 in the Costs After the Expanded First Phase. Again, assuming 70 percent recovery, the allowance for this item is $490,000.

For the remaining items in the Expanded First Phase – items 4, 5 and 6, I allow $120,000 – again a slight reduction on Ms Cook’s estimates. Assuming 70 percent recovery, I allow $84,000.

As a final component, I allow $100,000 for the involvement of counsel up to and including the completion of Tokio Marine and BCC’s lay evidence. I assume 90 percent of this will be allowed on assessment – as such, I allow $90,000.

The sum total of these components is $1,741,500. I round this up to $1.75 million.

I accept that the allowance for each of these components is quite arbitrary but the evidence does not permit a more precise approach. A total of $1.75 million is adequate in the circumstances.

I will reserve to Tokio Marine and BCC liberty to apply to the Court for further security to cover the work after the completion of their evidence.

There was no real dispute as to the underlying principles to be applied by the Court in determining the appropriate form of security. The oft cited statement of principles is that of Hargrave J in Dif III Global Co-Investment Fund, LP v BBLP LLC [2016] VSC 401 (Dif III Global) at [40].

In Tiaro Coal Limited (In Liq) [2018] NSWSC 746, Gleeson JA considered Dif III Global and the decision of the Court of Appeal in Blue Oil Energy Pty Ltd v Tan [2014] NSWCA 81. At [8]-[12] Gleeson JA stated as follows:

At [22], Gleeson JA made clear that it would be an error to approach the issue of the form of security by undertaking a comparison exercise of the relative attributes of the security offered by the plaintiff and the “conventional” or “familiar” forms of security by cash deposit or bank guarantee, with a view to determining which form of security was superior and which was inferior. The relevant enquiry is adequacy of the security offered to protect the party seeking it.

Nixon J recently reviewed the authorities in APFC No 1 at [20]ff. At [22], Nixon J observed that in assessing whether the proposed security meets the object of providing a readily enforceable fund or asset, it is necessary to consider the costs, time and steps involved in taking such enforcement action, as well as any attendant risks in doing so. Further, at [23] his Honour observed that:

Senior counsel for Tokio Marine and BCC placed some reliance on the decision of Applegarth J in Adeva Home Solutions Pty Ltd v Queensland Motorways Management Pty Ltd [2020] QSC 361 (Adeva) and on appeal in the Queensland Court of Appeal: Adeva Home Solutions Pty Ltd v Queensland Motorways Management Pty Ltd [2021] QCA 198; (2021) 9 QR 141. In Adeva, Applegarth J was not persuaded that a form of deed of indemnity provided adequate security. His Honour’s decision was not disturbed on appeal.

Whilst the decisions in Adeva highlight issues that may exist where a deed of indemnity from a foreign insurer is proffered as a form of security, I do not regard the decisions in Adeva as laying down any general principle. Indeed, senior counsel for Tokio Marine and BCC did not suggest that they did. Rather, the question in the particular circumstances of each case, is whether the deed proffered provides adequate security in the circumstances.

Reference was also made to the following remarks of Tate and Kyrou JJA in Trailer Trash Franchise Systems Pty Ltd v GM Fascia & Gutter Pty Ltd [2017] VSCA 293 at [59]:

Again, it was not suggested that any general principle was being established by these remarks. Rather, where the proposed security raises the possibility of satellite litigation, this has the potential to undermine the overarching purpose of facilitating the just, efficient, timely and cost-effective resolution of the real issues in dispute. So much cannot be disputed.

Bearing in mind the issue is not an exercise in comparing various forms of security, the question remains whether, in all of the circumstances, including the risk of satellite litigation, the proposed security is adequate.

It would appear that the Deed proffered by the plaintiffs in the present case was something of a moving feast. The form of the Deed tendered before me contained amendments which had only been provided to Tokio Marine and BCC on the morning of the hearing. The form was also slightly amended during the course of submissions by senior counsel for the plaintiffs. One of these amendments was of some significance and, as such, I permitted senior counsel for Tokio Marine and BCC to provide a supplementary note to me in relation to it.

The final form of the Deed proposed is attached to these reasons (absent the changes proposed during the hearing). On its face, it relevantly amounts, subject to its terms, to an unconditional and irrevocable undertaking from AmTrust to pay Tokio Marine and/or BCC any sum or sums which either one of them is legally liable to pay in respect of an Adverse Costs Order. The evidence otherwise disclosed that AmTrust is an entity of substantial means which provides deeds of indemnity like the Deed as part of its business. Deeds like the Deed have previously been accepted in Australia and have never not been honoured by AmTrust. Any enforcement of the Deed against AmTrust would occur in the United Kingdom where there is a ready regime to enforce judgments of Australian courts. There are provisions in the Deed to facilitate enforcement.

Senior counsel for Tokio Marine and BCC contended that the proposed Deed was not adequate or placed Tokio Marine and BCC at an unreasonable or unacceptable disadvantage for three reasons:

The focus during oral argument was on the second of these matters – construction of the Deed – and I deal with this first.

In considering the matters raised by Ms Horvath SC for Tokio Marine and BCC I am conscious that any future satellite litigation will involve AmTrust and AmTrust is not represented at this stage and as such is not bound by any view I may express as to the proper construction of the Deed. At this stage, the issue is one of assessing the risk of satellite litigation as part of considering the adequacy of the security offered. The risk involves at least two elements – namely, the terms of the proposed Deed and the likely propensity of AmTrust to raise points to seek to delay payment. I deal with this latter point later in these reasons.

Senior counsel for Tokio Marine and BCC raised a number of issues in relation to the proposed Deed. I deal with each below.

Complaint was made in relation to the words at the top of the first page of the Deed:

It was contended that the Court could have no certainty that the terms of the Deed were terms that would in fact be agreed to by AmTrust. I accept that there is a risk that AmTrust may not agree to a deed in these terms. In my view, however, that is not a problem that should concern Tokio Marine and BCC. Any order that security be provided by way of the Deed would be on the basis that the Deed is to be provided within a certain period of time of the making of the order and, if such a deed is not provided within that period, the security will be ordered to be paid by way of payment into Court or irrevocable bank guarantee.

In clause 1 of the Deed and the definition of “Adverse Costs Order”, it was contended that the words “Requiring the Claimant to pay either or both the Respondents’ costs in respect of the Claim and which specifies the amount of those costs” was ambiguous in several respects. The reference to “Claimant” was said to be ambiguous because “Claimant” was defined later in clause 1 to be both Incomlend and Amicorp and as such, an “Adverse Costs Order” may be contended to be only one which relates to both Incomlend and Amicorp and not either of them.

It was not in dispute that, consistent with ordinary principles of construction, these words need to be construed in the context of the Deed as a whole and, in particular, the provisions of proposed clause 2 which refer to “a Claimant” being legally liable to pay an Adverse Costs Order. It was contended that in having regard to what was in clause 2, the words in clause 1 in the definition of an “Adverse Costs Order” could not sensibly be construed as only applying to a costs order against both plaintiffs. In any event, senior counsel for the plaintiffs proposed that the words “or either of them” be added after the words “the Claimant” in the relevant part of the definition of “Adverse Costs Order” to make the position beyond doubt. With the addition of these words, I cannot see how the clause could be sensibly construed as only applying to a costs order against both plaintiffs and not each severally.

Complaint was also made as to whether a costs order in relation to an interlocutory matter would be covered by the definition of “Adverse Costs Order” or whether the Adverse Costs Order would only be in respect of a final order. This was said to arise out of the definition of “Claim”. Senior counsel for the plaintiffs responded by reference to the words in the definition of “Adverse Costs Order” that it is, relevantly, an order that the claimants pay the respondents’ costs “in respect of the Claim” and it was contended that the words “in respect of” are sufficiently broad to include any costs order in respect of an interlocutory application. I agree. In my view, the words are sufficiently broad to cover the costs order in relation to an interlocutory application.

Next, senior counsel for Tokio Marine and BCC raised certain matters in relation to the definition of “Certificate of Taxation”. The principal matter raised relates to the words “or any extended review period” in paragraph (A) and it was suggested that this gave rise to the possibility of an open-ended period of review such that Tokio Marine and BCC may have to wait for an extended and indeterminate period for the completion of the taxation process. I do not agree. The process of costs assessment is dealt with in Part 7 of the Legal Profession Uniform Law Application Act 2014 (NSW) (LPULA Act).

In my view, there is nothing in the definition of “Certificate of Taxation” that exposes Tokio Marine and BCC to additional cost or delay beyond that which exists in relation to the ordinary assessment process that would, in the absence of agreement, need to be engaged in with the plaintiffs. The reference to “extended review period” is obviously intended to pick up the ability of the Manager, Costs Assessment to extend the period to lodge an application for review of a cost determination under s 83(1A) of the LPULA Act. The period is not likely to be open ended and is under the control of the Manager, Costs Assessment.

Next, reference was made, in the definition of “Maximum Limit”, to the words “or such lesser sum as is provided for herein in respect of all demands made by the Respondents under this Deed” and it was suggested that these words were ambiguous. Senior counsel for the plaintiffs’ response was that these words were simply intended to make clear that there was no automatic reset of the maximum limit but that it was reduced by demands made by the respondents under the Deed. I agree. These words also somewhat reinforce that the Deed also applies to interlocutory costs orders.

In relation to clause 4, two issues were raised. First, it was contended that the reference to “Respondent” should be a reference to “Respondents” and this was accepted. Second, it was contended that the last sentence of clause 4 was ambiguous and it could be contended that the Maximum Limit was reduced in circumstances where any amount was paid to the respondents in respect of the respondents’ costs in the claim, as opposed to it only being reduced where an Adverse Costs Order was paid to the respondents. Senior counsel for the plaintiffs contended that, to remove any doubt as to meaning of this sentence, “in discharge of an Adverse Costs Order” should be added to the end of the sentence. This amendment was only foreshadowed by senior counsel during the course of his oral address and, as such, I gave an opportunity to senior counsel for Tokio Marine and BCC to provide any further submissions in relation to this sentence.

A brief further submission was provided in which it was contended that the additional words did not resolve the ambiguity with the final sentence remaining open to dispute. It was also contended that the addition may give rise to the unintended consequence, as I understand the submission, that if a costs order is made against the first defendant in favour of Tokio Marine and BCC, this may have the unintended effect of reducing the Maximum Limit under the deed.

In my view, the addition of the words “in discharge of an Adverse Costs Order” removes any potential ambiguity and simply makes clear that there is no reset of the Maximum Limit but rather it is reduced by the payment to Tokio Marine and/or BCC of amounts in discharge of an Adverse Costs Order. The unintended consequence raised by Tokio Marine and BCC is not likely to arise in circumstances where an “Adverse Costs Order” is defined as an order requiring the plaintiffs to pay Tokio Marine and/or BCC, not a costs order against the first defendant.

Concerns were also raised in relation to clause 11.4 of the proposed Deed. It was contended that clause 11.4, when read in conjunction with clause 10, raises an uncertainty as to whether service by email is effective. I do not agree. Read in context, clause 11.4 provides that, regardless of what form of service under clause 10 is availed of, a notice should be copied to a particular email address. The concluding words of clause 11.4 make it clear that such an email copy does not, in and of itself, constitute service of a notice. It simply makes it clear that in order for there to be effective service, the provisions of clause 10 must be complied with.

As such, I am not satisfied that any of the complaints raised by Tokio Marine and BCC give rise to a significant concern in relation to Tokio Marine and BCC’s ability to have a readily enforceable direct right against AmTrust in respect of an “Adverse Costs Order”. Whilst I am obviously aware that AmTrust is not a party to the present application and, as I have set out above, is therefore obviously not bound by any of the observations that I have made above in relation to the terms of the Deed, I do not regard any of the matters raised by Tokio Marine and BCC as raising a significant risk that Tokio Marine and BCC will not have a readily enforceable claim against AmTrust.

Two further issues were raised in relation to security in the form of the Deed. First, that enforcement under the Deed would take longer and cost more than if the monies were paid into Court. Second, there was a risk of non-payment.

I deal with each in turn.

I accept that under the security proposed, once a certificate of taxation is issued, and if the amount is not paid by the plaintiffs, the funder or AmTrust, it will be necessary for Tokio Marine and BCC to commence proceedings against AmTrust in an Australian Court to, in effect, enforce the Deed. By clause 12(a) of the Deed, AmTrust unconditionally and irrevocably undertakes to consent to judgment against it in favour of the respondents in those proceedings.

It will then be necessary for Tokio Marine and BCC to register that judgment in the High Court of Justice of England and Wales under s 2 of the Foreign Judgments (Reciprocal Enforcement) Act 1933 (UK). By clause 12(b) of the Deed, AmTrust consents to that occurring. Further, under clause 12(c) of the Deed, AmTrust agrees not to seek to set aside the registration of the Australian judgment in the High Court.

Whilst I accept that each of these steps will take time and will cost money, and that such steps do not need to be taken where security is by payment into Court, the test is not a comparative one. Rather, the test is whether the security offered is adequate or poses an unacceptable or unreasonable risk on Tokio Marine and BCC. I do not regard either of these matters as rendering such a form of security as inadequate in the circumstances. These matters do not put Tokio Marine and BCC at an unreasonable or unacceptable disadvantage.

The evidence of Ms Cook for Tokio Marine and BCC is to the effect that it would take about seven months for any costs judgment to be registered in England and become payable and that the estimated cost to Tokio Marine and BCC of carrying out the necessary steps would be in the order of $34,130. Further, Ms Cook has given evidence that if further enforcement of the judgment is required, it would take a further four weeks to about 12 months with further estimated costs between $8,943 to $13,411.

These matters are best accounted for in the present case in the usual way by requiring the plaintiffs to pay into Court an additional sum to cover these additional steps. The plaintiffs originally offered the sum of $20,000 on this account. Senior counsel for the plaintiffs ultimately accepted that a higher sum may be appropriate. In my view, a sum of $45,000 should be paid on this account.

In considering the question of adequacy in this context, senior counsel for Tokio Marine and BCC also contended that AmTrust would have no incentive in seeking to agree the quantum of any Adverse Costs Order and as such, Tokio Marine and BCC could be in a worse position than they would be if they were dealing simply with the plaintiffs. I do not agree. I do not regard the fact that AmTrust is not a party to the litigation as likely suggesting that it would take a different approach to the plaintiffs in seeking to agree the quantum of any Adverse Costs Order, such that I would be persuaded on this application that the Deed proposed by the plaintiffs adds an additional risk to Tokio Marine and BCC.

The evidence disclosed that AmTrust is a registered insurance company in England and Wales authorised by the Prudential Regulation Authority and regulated by that authority and the Financial Conduct Authority. It has been in business for a number of years. The issuing of deeds of the kind put forward in the present case and associated products are part of its commercial business. It has issued deeds and other instruments in favour of litigants as a form of security for costs in other proceedings in Australia, which have been accepted. On no occasion has AmTrust failed to honour a deed and on no occasion has AmTrust ever had proceedings commenced against it to enforce an obligation.

These matters tend quite strongly in favour of AmTrust being prompt to honour its obligations. I do not accept that the existence of a deed from AmTrust gives rise to any relevant risk of unreasonable delay in performance, such as to make the Deed inadequate.

In relation to the risk of non-payment, senior counsel for Tokio Marine and BCC accepted, based on AmTrust’s financial statements for the period which ended December 2023, that AmTrust was in an extremely healthy financial position but contended that, as with all insurers, there was inherent risk and uncertainty in relation to its future performance. Reference was made to the statements in the financial statements in relation to those risks and uncertainties. The financial statements disclose that AmTrust has total assets in excess of £1.5 billion, including cash at bank and in hand of nearly £24 million. In the circumstances, I do not regard a risk of non-payment because of a change in the financial fortunes of AmTrust, and even accepting that the period between now and any costs order that would sought to be enforced is likely to be several years, as being very high. The risk is certainly not such as to make security in the form of the Deed inadequate.

Having regard to all of the circumstances set out above, I am satisfied that security in the form of the Deed as modified in the three minor respects indicated during argument, is adequate and does not impose an unreasonable or unacceptable risk on Tokio Marine and BCC. The Deed provides a means by which Tokio Marine and BCC can readily enforce an order for costs against the plaintiffs.

The three amendments to the Deed attached to these reasons are:

For the reasons set out above, security in the amount of $1.75 million should be ordered to cover the period up to the completion of Tokio Marine and BCC’s lay evidence. Security should be provided in the form of the Deed as modified during the hearing together with payment into Court of $45,000 on account of enforcement costs. Failing security being provided in this form, it should be provided by payment into Court or irrevocable bank guarantee.

On costs, my preliminary view is that costs of the motion should be costs in the cause. The plaintiffs have succeeded as to the form of security but Tokio Marine and BCC have succeeded in obtaining substantially more security than was offered by the plaintiffs.

The parties should confer and seek to agree orders, including the time for providing security and as to costs. The orders should provide for:

The Court orders: