The Victorian Supreme Court recently handed down its
decision in DIF III Global Co-Investment Fund LP & Anor v
BBLP LLC & Ors which considered whether an After-The-Event
(ATE) insurer, based overseas, could provide security for costs by
way of a deed of indemnity.
The matter concerned an application for security for costs in
circumstances where the plaintiffs were not registered in, and had
no assets in, Australia.
The parties agreed that the plaintiffs were to provide security
however a dispute arose as to the form the security ought to take.
The defendants sought security in the usual form, that is, that the
plaintiffs either provide a bank guarantee or pay funds into
By contrast, the plaintiffs' ATE insurer offered security
for costs by way of a deed of indemnity, together with a bank
guarantee in a sum sufficient to cover the costs of enforcement of
the deed in the United Kingdom (UK).
Landsdowne AsJ concluded that security for costs should be
provided in the usual form and not by the ATE insurer by way of a
deed of indemnity. In coming to this decision, her Honour
emphasised that the judgment was based on the circumstances
presently before the court, and made it clear that such an
arrangement may be acceptable in some circumstances.
Unlike other cases regarding security for costs, this decision
focussed on the form of security, rather than whether it should in
fact be granted.
Landsdowne AsJ concluded that the principles which apply to the
court's discretion in respect of whether security should be
granted also apply to the court's discretion as to the form the
security should take.
The overarching principle is that the court must determine how
justice will be best served. This requires an analysis of all the
In the absence of countervailing considerations, the fact that
the party offering security has no assets in Australia is to be
given significant weight. The countervailing considerations include
whether the 'moving party' has assets in an overseas
jurisdiction against which a costs judgment may be enforced and the
cost and complexity of such enforcement.
THE PRESENT CASE
In applying the principles above to the present case, Landsdowne
AsJ concluded that justice was not best served by security being
provided by the ATE insurer by way of a deed of indemnity.
In coming to this decision, her Honour found that the fact that
the ATE insurer did not have assets in the jurisdiction was not
fatal. That is because the court may consider that assets within
the jurisdiction are not necessary if there are sufficient assets
overseas or, alternatively, limit security to the costs of
In this case, the plaintiff had proposed a bank guarantee to the
value of enforcing the deed of indemnity in the UK. However this
was ultimately insufficient to overcome the countervailing
considerations in favour of security being provided in the usual
These considerations included the fact that there was no direct
evidence adduced by the ATE insurer as to its creditworthiness.
Such evidence is critical where third party security is proposed.
This lack of direct evidence, in addition to the limited
information provided by the plaintiffs, left the defendants with
considerable uncertainty as to the nature of the plaintiffs'
proposal, exactly what the ATE insurer had agreed to provide, the
amount of security and the underlying relationship between the
plaintiffs and the ATE insurer.
Other factors her Honour considered included the costs and
delays of enforcing a judgment in the UK and there being no
evidence that the plaintiffs were unable to obtain a bank
guarantee, or of prejudice to them in doing so.
CAN SECURITY EVER BE PROVIDED BY AN ATE INSURER?
This decision does not rule out the possibility that an ATE
insurer may provide security for costs by way of a deed of
In Australian Property Custodian Holdings Ltd (in liq) v
Pitcher Partners (APCH), a Victorian Supreme Court decision
handed down on 24 September 2015, a plaintiff was successful with
the court finding that a deed of indemnity from an ATE insurer was
adequate security. What was critical in APCH was direct evidence
from the ATE insurer, the proposed deed was executed and there was
agreement on its terms.
Clearly, the adequacy of this form of security, will depend on
the circumstances before the court and how justice will best be
served. However, for the court to accept security in the form of a
deed of indemnity from an ATE insurer, direct evidence from that
insurer going to the sufficiency of the security will be
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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