Mantis Funds Pty Ltd v Edgefolio UK Limited

These reasons address 2 notices of motion concerning security for costs.

The background to the proceedings, including the 2 notices of motion, can be stated briefly.

The plaintiff, Mantis, runs a financial services business based in Sydney. The defendant, Edgefolio, is a software development company based in the United Kingdom (UK).

In January 2023, Mantis and Edgefolio entered into an agreement by which Edgefolio was to develop and then host and maintain a web-based platform, which was to enable Mantis’s customers to manage their accounts and communicate with Mantis.

The parties fell into dispute. On 29 July 2024, Edgefolio purported to terminate the agreement.

In September 2024, Edgefolio communicated with Mantis in terms that indicated that Edgefolio intended to sue Mantis in the UK courts for breaching the agreement. In early August 2025, Edgefolio’s UK solicitors asked Mantis’s UK solicitors if they had instructions to accept service. Before any proceedings were commenced in the UK, Mantis sued Edgefolio in this Court by a summons and commercial list statement, both filed on 14 August 2025. Mantis alleged that certain provisions of the agreement offended the Australian Consumer Law and that those provisions, and the agreement as a whole, are void.

Edgefolio filed a cross-claim on 27 October 2025, by which in general terms, it sues Mantis for damages for the service fees that it contends are payable to it by reason of the agreement. Mantis filed a response to the cross-claim on 9 December 2025, which denies that it breached the agreement and denies that it owes any fees to Edgefolio. Mantis also appears to advance some kind of rectification defence based on an alleged unilateral mistake. It is not clear how that response works. Mantis also asserts that certain clauses in the agreement are penalties. It also relies on the Unfair Contract Terms Act 1977 (UK). In addition, Mantis alleges that Edgefolio breached the terms of the agreement. It alleges that those breaches caused Mantis to suffer loss because it had to incur costs to pay another company to provide the services that Edgefolio was supposed to provide.

I gave leave last Friday, 12 December 2025, for Mantis to file and serve an amended summons and amended commercial list statement. The amendments largely involve a repetition of the positive defences that are pleaded in the response to the cross-claim. Mantis seeks damages for breach of contract and declaratory relief.

The relevant principles on an application for security for costs are well-known and were not in dispute. They are set out at [8]-[13] of Edgefolio’s written submissions and I do not need to repeat them.

I will deal first with Mantis’s application for security for costs, made by notice of motion filed on 14 November 2025.

Mantis seeks security for the costs it will incur in defending Edgefolio’s cross-claim.

Mantis relies on the undisputed fact that Edgefolio is a foreign corporation and has no assets in Australia. Mantis submitted that this is a matter to be given “great weight”: relying on PS Chellaram & Co Ltd v China Ocean Shipping Co [1991] HCA 36 at [7]; 102 ALR 321 at 323 (McHugh J); Commissioner of Taxation v Vasiliades [2016] FCAFC 170; 344 ALR 558 at [74] (Kenny and Edelman JJ); Jianglong Shipbuilding Pty Ltd v Birdon Pty Ltd [2025] NSWSC 683 at [17] (Peden J). Edgefolio accepts that is a factor that may be taken into account. It is a factor that I do take into account, but I consider that the weight to be given to it should reflect that Edgefolio did not initiate the proceedings, it was Mantis, and the relevant claim is a cross-claim. It was Mantis who brought Edgefolio to this jurisdiction. The forensic decision to bring Edgefolio to Australia lessens the weight I give to the fact that Edgefolio is a foreign corporation and has no assets in Australia. To some extent, the disadvantage to Mantis of being sued in Australia by a foreign corporation with no assets in Australia is a problem of Mantis’s own making.

Mantis also contends that there is reason to believe that Edgefolio will not be able to pay Mantis’s costs if ordered to do so because of Edgefolio’s financial position generally. Mantis contends that even putting aside that Edgefolio is a foreign corporation with no assets in Australia, there should be an order for security for costs. I accept this contention.

The unaudited financial statements for Edgefolio for December 2022, December 2023 and December 2024 reveal that Edgefolio owns virtually no fixed assets. It has carried a net negative asset position in each of those 3 years. Evidence from Mr Rowen Pillay, who is the CEO of Edgefolio, explains that Edgefolio’s asset position arises because it generally requires fees to be paid in advance and those fees are carried as a liability until the work has been performed to earn the fees. This accounting treatment seems unexceptional and I do not consider that it means that the net negative asset position is misleading. Moreover, the fees paid in advance (and hence the liabilities) are not particularly substantial – ranging generally from about £1.5 to 2m.

Mr Pillay also gives evidence that Edgefolio does not generate profits because it is in a growth phase and reinvests surplus cashflow to fund growth. The evidence does not enable me to assess the amount of surplus cashflow that Edgefolio has been generating in recent years. Edgefolio’s policy about surplus cashflow provides little comfort about its likely ability to meet a costs order. There is evidence that Edgefolio had cash available in bank accounts, including approximately £600,000 in a bank account as at 28 November 2025 and USD 1.8m in another as at 6 November 2025. But there is evidence that Edgefolio’s cash holdings fluctuate and the cash is used to fund Edgefolio’s operating expenses. It is reasonable to suppose that the cash held in the bank accounts reflects fees paid in advance and is liable to be returned if the work is not performed and will otherwise be utilised, at least in part, in performing the work. Account balances at a point in time do not say very much about Edgefolio’s future financial position.

Given, in particular, that Edgefolio has virtually no fixed assets and has been running on a net negative asset position in recent years, I consider that there is reason to believe that Edgefolio will not be able to pay Mantis’s costs if ordered to do so. I do not consider that Edgefolio has adequately shown how it would be able to fund a substantial costs order.

Mantis seeks $254,936 in security. There was no dispute about quantum. There will be an order that Edgefolio provide security for costs in that amount.

I move now to Edgefolio’s application for security, made by notice of motion filed on 3 November 2025. Edgefolio seeks an order that Mantis provide security in the sum of $297,990.

For the purposes of this application only, and without making admissions more generally, Mantis was prepared to proceed on the basis that there is reason to believe that it would be unable to pay costs if ordered to do so.

There were 2 main issues that arose on this application.

The first is whether security should be denied because, as a matter of substance, Edgefolio is the attacker and Mantis is the defender: see Maatschappij voor Fondsenbezit v Shell Transport and Trading Company [1923] 2 KB 166 at 176-178 (Scrutton LJ), Willey v Synan (1935) 54 CLR 175 at 179-180 (Latham CJ) and Amalgamated Mining Services Pty Ltd v Warman International Ltd (1988) 19 FCR 324 at 325-326 (Wilcox J). It is true that Mantis commenced the proceedings in this Court seemingly in response to the threat that Edgefolio was imminently to commence proceedings against it in the UK. Mantis submitted that the relief it seeks in this Court under the Australian Consumer Law is unavailable to it in the UK. The commencement of proceedings was, in a sense, a pre-emptive defensive strike.

The test of whether a litigant is the attacker or the defender was described in Amalgamated Mining Services v Warman International by Wilcox J at 328 as “homely”. It is a useful conceptual framework and informs the proper exercise of discretion, but I do not regard it as a strict test and the distinction between attack and defence is not always a crisp one.

The present case is not one where, at the time Mantis commenced proceedings, its rights would be affected by any step that had been taken by Edgefolio. It is true that Edgefolio was threatening to commence proceedings. It was threatening a formal attack. But unless Edgefolio sued, Mantis’s rights would be unaffected. I do not think it is correct to say that Mantis had very little alternative other than to sue. In commencing proceedings in this Court, Mantis was both defending and attacking.

By the amended commercial list statement, Mantis sues Edgefolio for breach of contract. On any view, that is a step taken as an attacker. That was not in dispute.

I would not deny Edgefolio security on the basis that as a matter of substance, it is the attacker and Mantis is the defender.

The second main issue concerned quantum. Edgefolio adduced evidence from Ms Mills, who is the solicitor on the record. She estimates that the cost of defending the claim made by Mantis in the initial summons and commercial list statement is $425,700. Allowing a 30% discount to reflect costs that would be expected to be recoverable on a party/party basis, she estimates that Edgefolio would recover costs amounting to $297,990 for successfully defending the claim that was propounded before the recent amendments. Her evidence does not address the costs that may be expected to be incurred and recovered on the recently expanded amended commercial list statement.

Mr Gillis, who is the solicitor responsible for the supervision of the matter for Mantis, gave evidence and expressed the view that Ms Mills’s estimates include amounts that are excessive or impermissible. He has considered the elements making up Ms Mills’s estimates and concludes that a reasonable estimate of the costs that Edgefolio could expect to recover on a party/party basis to defend the original commercial list statement is $70,302. There was no evidence in reply.

Making reliable estimates of the cost of legal proceedings can be difficult, including because the path of litigation can be unpredictable. It is sometimes difficult, for example, to know whether discovery is likely to be ordered and the scope of any discovery orders.

I have concluded that Ms Mills’s estimates may turn out to be realistic but, for the purposes of this application, are too high because the parties could reasonably expect that the proceedings could be conducted more efficiently than is anticipated by Ms Mills. For example, Ms Mills assumes a 3-day trial. If the case only concerned Mantis’s Australian Consumer Law claim, it seems to me at the moment that the case should only take a day. The Australian Consumer Law case does not appear to be overly complicated and it would be reasonable to expect that there would be very little, if any, discovery and that it would not be as complex to prepare for as Ms Mills presently anticipates. Ms Mills includes costs for Edgefolio’s application for security for costs, which is not appropriate because those costs will be addressed as part of this application.

Mantis’s claim has been expanded by the amendments to the commercial list statement. As I have noted, Mantis accepts that it is the attacker insofar as it sues for damages for breach of contract. There is no doubt that this new claim will increase the costs to Edgefolio in defending Mantis’s claim. But there is no evidence from Ms Mills about those expected additional costs.

Apart from the claim for damages for breach of contract, by the amended commercial list statement, Mantis now sues Edgefolio in a positive sense in relation to the positive defences that currently arise in its defence to Edgefolio’s cross-claim. It is not clear to me why Mantis is doing that, but it is.

Mantis contends that all of Edgefolio’s costs associated with the new claims made in the amended commercial list statement (apart from the claim in damages) will be incurred by Edgefolio in the prosecution of its cross-claim and no security should be given in respect of those costs. Edgefolio contends that where costs incurred are not specific to the cross-claim or to the amended commercial list statement, it is appropriate to proceed on the basis that costs will fall 50:50 to the respective claims: see KDL Building Pty Ltd v Mount [2006] NSWSC 474 at [34].

I consider that insofar as Mantis seeks declaratory relief in the amended commercial list statement by reference to the matters that it advances by way of a positive defence to the cross-claim, Mantis is properly regarded, in substance, as a party taking defensive steps. Even if, on a taxation of costs, there was some apportionment of common costs between the cross-claim and the amended commercial list statement, I am satisfied that, for the purposes of security for costs, no allowance should be made on account of the new matters raised in the amended commercial list statement, apart from the claim for damages.

In determining the amount of security that Mantis should be required to provide, I propose to adopt a relatively broadbrush approach. That is appropriate to give justice to the parties and promote the efficient dispatch of interlocutory hearings.

I start with Mr Gillis’s estimate of approximately $70,000. I take that figure as the low point of what Edgefolio might reasonably expect to recover if it succeeds in defending Mantis’s claim. My assessment of the new claim for damages is that it is reasonable to proceed on the basis that it may double the time required for the hearing of that claim and double the time required for preparation generally. The prospect that there will be some discovery is increased. I also give some allowance for the real possibility that Ms Mills’s estimates may turn out to be more accurate. It still seems to me, however, that Mantis’s claim, as relevantly amended, is straightforward.

Taking these matters together, I consider that an appropriate amount of security that should be posted by Mantis is $150,000. There will be an order that Mantis provide security in the amount of $150,000.

Both parties have succeeded on their applications. As presently informed, it seems to me that the unsuccessful party should pay the costs of the successful party on each notice of motion. If either party wishes to submit that there should be a different order they should do so.

There were no submissions about the form of security. That is a matter that should be capable of agreement.

Both parties will have liberty to seek additional security, if appropriate.

The parties are to provide to my Associate, by no later than 5pm on 16 December 2025, proposed orders that give effect to these reasons.