Litigation Fund WCX Pty Ltd v Mitchell (No 6)

This is the latest of a number of decisions of this Court and the Court of Appeal involving these parties. [1]

These proceedings arise from funding provided by the plaintiff, Litigation Fund WCX Pty Ltd (the Funder), to Darren and Rosaline Mitchell (the Mitchells) for the representative proceedings they commenced in this Court against Transport for NSW (Darren Mitchell and Rosaline Mitchell v Roads and Maritime Services (now known as Transport for New South Wales) (2021/00088654)) (the Representative Proceedings). The Representative Proceedings are brought by the Mitchells as lead plaintiffs on behalf of group members who allegedly suffered loss and damage from the compulsory acquisition of their land for the construction of the WestConnex M4-M5 project. In essence, the plaintiffs claim that by acquiring land for that project without consent and compensation, and then granting a long-term lease over that land to privately owned entities, Transport for NSW contravened s 179 of the Roads Act 1993 (NSW), causing them (and group members) loss and damage.

The relationship between the Funder and the Mitchells has irretrievably broken down. For the purposes of these reasons, it is not necessary to dive deeply into the reasons why that is so. [2] Suffice to say, the Funder now refuses to provide any further funds to the Mitchells to prosecute the Representative Proceedings.

The Funder has commenced these proceedings seeking to recover all of the funds it has paid for the Mitchells’ legal costs in the Representative Proceedings in the sum of $1,410,310. Relying on the terms of the funding agreement entered into by the Funder with the Mitchells, the Funder claims restitutionary relief for payments made pursuant to that agreement which it is said are in excess of the capped amount the agreement specified. The Funder says the moneys it paid for the legal fees of the Mitchells were moneys had and received by them.

On 4 December 2025, two motions in these proceedings and one motion in the Representative Proceedings came before me. They had been ordered to be heard together, with evidence in one being evidence in the other.

The Mitchells were represented by senior and junior counsel, as was Transport for NSW (which is a defendant in the Representative Proceedings but not a party to these proceedings). Mr Robert Coshott, the sole director of the Funder, sought and was granted leave to appear for the Funder subject to one matter. That matter was whether, in these proceedings, leave should be granted for the Funder to carry on these proceedings through its director Mr Coshott, rather than by a solicitor as required by Uniform Civil Procedure Rules 2005 (UCPR) r 7.1.

In these proceedings, the motions, as amended by each party following directions made by me on 8 December 2025 were:

The motion in the Representative Proceedings is the Amended Notice of Motion of the Mitchells dated 12 September 2025. That motion seeks:

On the second day of the hearing of the motions, following information which had come to light as to the possibility of another funder being prepared to fund the Mitchells in the Representative Proceedings, by consent of all parties I adjourned the hearing of the motion in the Representative Proceedings. That was to enable the Mitchells to take further steps to assess whether an alternative funder could be found for those proceedings.

With respect to the motions in these proceedings, senior counsel for the Mitchells submitted that the appropriate approach was:

Mr Coshott objected to this course and submitted that because the motions in these proceedings and the motion in the Representative Proceedings were being heard together, with evidence in one being evidence in the other, and because the outcome of the investigations as to whether a new funder could be found by the Mitchells for the Representative Proceedings may impact on the Funder’s decision to prosecute these proceedings, all issues should be stood over to the same date.

Mr Coshott also submitted that if the Court was against this course, then it would be appropriate to determine whether the Funder had leave to continue the proceedings through him as its director first. If the Court determined that this was not appropriate, he said that the security for costs issue should not be determined without leave having been granted to him as he would not be able to make submissions with respect to that question.

At the time, I decided that the course proposed by senior counsel for the Mitchells was appropriate. It seemed to me that these two issues were discrete and would need to be determined no matter what the outcome of the investigations with respect to an alternative funder in the Representative Proceedings may be. I granted leave to Mr Coshott to make submissions on behalf of the Funder on each of those issues.

Since that time, whilst judgment on those two issues was reserved, the matter came back before the Court on 16 December 2025 for directions and an update with respect to the possibility of a new funder for the Representative Proceedings being engaged. I received a confidential affidavit of Trevor Withane affirmed 15 December 2025. The position is that there is no new funder. I accept the evidence of Mr Withane that it is unlikely, particularly having regard to the claims by the Funder for recovery of a significant amount of money from the Mitchells in these proceedings.

The matter then came back before me on 3 March 2026. I had anticipated raising one issue with the parties before completing my judgment on the Funder’s application pursuant to s 14 of the CP Act that UCPR r 7.1 be dispensed with such that these proceedings can be carried on by its director Mr Coshott. At that time, I was informed of two significant developments in the matters. First, Mr Coshott gave an undertaking to engage a solicitor within seven days to conduct these proceedings. It seemed to me, and I understood it to be common ground, that subject to the engagement by the Funder of that solicitor in accordance with that undertaking, that meant that the issue with respect to the Funder commencing and carrying on these proceedings other than by a solicitor became redundant.

Secondly, following correspondence received by my Chambers the evening before, it was confirmed that a Notice of Motion seeking substitution of another person for the Mitchells as representative plaintiff in the Representative Proceedings was to be pursued. I made directions for the preparation and hearing of that motion. It was accepted by Mr Coshott on behalf of the Funder that if that motion was successful, these proceedings would not be pursued. In his words, these proceedings “would no longer be necessary” (Tcpt, 3 March 2026, p 2(49)). Mr Coshott accepted that if the substitution application was successful, the Funder could not be successful in these proceedings because “the moneys had and received will still have received consideration” (Tcpt, 3 March 2026, p 6(18-20)). Additionally, if the substitution application was successful, it is probable that the Mitchells’ application to discontinue the Representative Proceedings would also fall away.

The only issue to be dealt with in the meantime, therefore, is the question of whether the Funder should pay security for the Mitchells’ costs of these proceedings. These reasons will therefore deal with this issue.

The Mitchells seek security for their costs of these proceedings. Reliance is placed on s 1335(1) of the Corporations Act 2001 (Cth), or alternatively, UCPR r 42.21(1). They seek a stay of the proceedings pending payment of the amount ordered by way of security.

The principles relevant to determining applications for security for costs are well known. There is no real difference in the principles applicable for applications for security for costs made under the Corporations Act 2001 (Cth) or the UCPR: Litigation Fund WCX Pty Ltd v Aversa [2024] NSWSC 1348 at [7] per Elkaim AJ (“Aversa”).

The principles guiding the assessment of an application for security for costs under s 1335 were summarised by Beazley ACJ (as her Excellency then was) in Treloar Constructions Pty Ltd v McMillan [2016] NSWCA 302 at [9]-[15] with citations omitted:

See also Litigation Fund WCX Pty Ltd v Darren Mitchell [2025] NSWCA 27 at [31] per Griffiths AJA.

Similarly in Aversa at [8]-[9] Elkaim AJ said:

The Mitchells rely on an affidavit of Trevor Withane (Mr Withane), their solicitor, affirmed 26 March 2025 in support of their application for security for costs (Mr Withane’s affidavit).

Mr Withane deposes to the procedural background of these proceedings. In doing so he provided a summary of the amounts Mr Coshott is liable to pay to the defendants and/or the Court at the date of his affidavit:

Mr Withane said at the date of the affidavit, Mr Coshott had not paid the amount in [23](c) and that he did not have personal knowledge as whether the balance of the amounts referred to at [23](a) and (b) had been paid.

Mr Withane deposed to the efforts made to identify the financial position of the Funder. Searches were carried out, including searches of the Australian Securities and Investment Commission’s (ASIC) records and searches of real property registers. Those searches indicated the Funder did not hold any real property in Australia, and is a private company limited by shares, with Mr Coshott being the sole director, secretary and shareholder of the one issued shared (which was issued for one dollar).

Mr Withane also deposed to efforts made to engage directly with Mr Coshott which were annexed to his affidavit. This included a letter sent by Mr Patrick Gallego, solicitor, on 25 February 2025. Amongst other things, the letter recorded that the defendants had previously requested financial information from Mr Coshott. Mr Withane deposes that this occurred on 13 December 2024, and it informed the Funder of the outcomes of the searches mentioned above and inviting it to provide any information capable of demonstration that it could meet an adverse costs order. The letter also referred to the failure of Mr Coshott to satisfactorily answer requests for financial information in the past, and indicated that the defendants were considering an application for security for costs.

Mr Withane estimated that the defendants will incur at least $381,275, excluding GST, in continuing to defend the proceeding of the application through to final hearing, should they not be 100% successful.

The Mitchells accept that they must establish by credible evidence that there is reason to believe that the Funder will be unable to pay their costs if the proceedings is unsuccessful: UCPR r 42.21(1)(d); Wollongong Coal Ltd v Gujurat NRE Properties Pty Ltd [2019] NSWSC 187; 187 ACSR 107 (Wollongong Coal) at [19] (Ward CJ in Eq as her Honour then was); Litigation Fund WCX Pty Ltd v Mitchell [2025] NSWCA 27 at [16] (Griffiths AJA). Once that threshold requirement is satisfied, the Court then considers whether, in the exercise of discretion, security should be granted. It has been said that in that sense, there is then an evidentiary onus on the party from whom security is sought to establish a reason why security should not be granted: Wollongong Coal at [21].

The Mitchells submit that Mr Withane’s affidavit establishes that there is a reason to believe that the Funder will be unable to pay their costs if the proceedings are unsuccessful. They refer to the recent decision of Griffiths AJA where his Honour relied on substantially the same evidence from Mr Withane in finding that this requirement had been satisfied: Litigation Fund WCX Pty Ltd v Darren Mitchell [2025] NSWCA 27 at [17]-[18] (an application to appeal that decision was dismissed by the Court constituted of three judges: Litigation Fund WCX Pty Ltd v Mitchell (No 3) [2025] NSWCA 67).

The Mitchells submit that all the relevant discretionary considerations favour the granting of security for costs. They submit the prospects of success of the proceedings is slim. They note that the Funder is in default of orders to pay costs to the defendants in other proceedings in this Court.

As to quantum, noting this is part of the Court’s discretion, the Mitchells submit the amount of security should be sufficient but not a complete indemnity for all potential costs of the proceedings: Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744 at [38] (per Einstein J); Royal Guardian Management Pty Ltd v Nguyen [2015] NSWCA 148 at [25] (per Basten JA).

The Mitchells submit that the evidence at [50]-[66] in Mr Withane’s affidavit provides a basis for the Court to arrive at the appropriate figure. That figure is $385,333.78 (excluding GST) comprising:

Initially, Mr Coshott submitted on behalf of the Funder that the evidence put forward in Mr Withane’s affidavit does not satisfy the minimum requirements which would allow the Court to confidently determine the quantum of any security. The Funder submitted the estimate in that evidence was grossly excessive.

In supplementary submissions made since the developments in the litigation that I have referred to above, the Funder submits that because of the pending application for substitution of the representative plaintiffs in the Representative Proceedings, the application for security for costs of these proceedings is otiose. That is because, it is submitted, if the substitution application is successful, these proceedings will not be continued. The Funder submits that the security for costs application should await determination of the substitution application in the Representative Proceedings.

In the alternative, the Funder submitted that the hourly rates claimed in the applicant’s evidence is excessive. Any security audit should be based upon the usual assessment of party and party costs, being 60% of the solicitor and client costs incurred. Further, as security for costs provides, at best, a partial indemnity, a further discount should be applied to determine the appropriate amount.

The Mitchells submit that the determination of the security for costs application is not otiose. First, that is because the substitution application remains undetermined and will be for many months to come. Second, the Funder’s submission in that regard proceeds on the assumption that the substitution application will succeed – which is not accepted. Third, the Funder has not unequivocally indicated that if the substitution application succeeds these proceedings will not be pursued. Fourth, determining the application for security for costs would be consistent with the overriding purpose in s 56 of the CP Act. It was submitted that the Mitchells have already gone to considerable time and expense with respect to the application, including detailed evidence and submissions.

With respect to the alternative submissions of the Funder, the Mitchells submit that there are only a series of high-level and undeveloped complaints going to the amount of the security sought. There was no attempt to articulate how any of the rates or amounts specified in the Mitchells’ evidence was inconsistent with any appropriate guidelines.

The Mitchells contend the application should be determined.

I consider that the application ought to be determined despite the pending substitution motion. That motion will not be heard until mid-year at the earliest. Its prospects of succeeding cannot be accurately assessed until all the evidence is complete. Even if it is successful, whilst Mr Coshott has accepted in Court that these proceedings would not continue and could not succeed, I accept the Mitchells have a legitimate scepticism about that acceptance. The evidence of the history of the proceedings and the Representative Proceedings may be thought to justifiably leave them with concern as to whether the Funder, when advised by lawyers, will abandon its claim.

In any event, they have expended a not insignificant amount of money on these proceedings. They have prosecuted this motion, and it was only effectively after the motion had been heard that the substitution application was made and Mr Coshott flagged the possibility of these proceedings ending if that application was successful. In my opinion, the appropriate course is to determine the security for costs application, however, the developments in the Representative Proceedings, and the implication for these proceedings, will be considered on the question of the appropriate quantum of security to be provided.

I accept that the Mitchells have established that there is reason to believe that the Funder will be unable to pay their costs should the proceedings be unsuccessful. Griffiths AJA found the following matters were established by the evidence before him at [17] of Litigation Fund WCX Pty Ltd v Darren Mitchell [2025] NSWCA 27:

I accept that the evidence before me also establishes similar, if not the same, discretionary factors. [3] The Funder did not seek to lead evidence to challenge or rebut any of Mr Withane’s evidence on the security for costs issue. There was no assertion by the Funder that these proceedings would be stifled if the Court ordered security for costs. Apart from the submission that the determination of the security application should await the hearing of the substitution application (which I have rejected), the Funder made no other submissions of substance as to why security should not be ordered. It only made submissions with respect to quantum. I accept the Mitchells’ submissions that those submissions were at a high-level and do not assist.

I consider that security should be ordered. However, I do think that the substitution application, and the likely implication of the success of that application on these proceedings, does impact the appropriate quantum. The motions are all to be heard together. There should not be any significant work to be undertaken in these proceedings pending the determination of the substitution motion.

I will therefore only order security for costs incurred to date with a small cushion for additional work that may need to be done prior to the hearing of the substitution application. If the substitution application is not successful, or if the Funder seeks to continue with these proceedings in any event, the Mitchells can make an application if so advised, for further amounts of security for their costs.

There are no serious challenges to the estimates of Mr Withane, however, I will discount those amounts in [66](a) and (b) of his affidavit, noting they were not updated prior to the hearing. Also, as has been stated, security for costs is not a total indemnity.

In all of the circumstances, I consider an appropriate amount of security to be $40,000 (including GST).

I consider that costs of the application for security should follow the event.

The orders of the Court are: