FEDERAL COURT OF AUSTRALIA

ACN 117 641 004 Pty Ltd (in liq) v S&P Global, Inc (No 3) [2024] FCA 1238

File numbers:
NSD 881 of 2020

Judgment of: SHARIFF J

Date of judgment: 25 October 2024

Catchwords: PRACTICE AND PROCEDURE – application for further

security for costs – where further security sought for past
and future costs on basis of substantial amendments to
pleadings – where application resisted on bases of delay
and non-entitlement to additional costs claimed – “Rolls-
Royce defence” in context of “Rolls-Royce litigation” –
application of “broad brush approach” – adjustments made
to amounts sought to account for delay and recoverability –
further security ordered

Legislation: Federal Court of Australia Act 1976 (Cth) s 56(3)

Federal Court Rules 2011 (Cth) r 40.30)

Cases cited: Aqua Blue (Noosa) Pty Ltd v Soil Surveys Engineering Pty
Ltd [2010] QSC 176
Brecher v Barrack Investments Pty Ltd [2018] FCA 472
Bryan E Fencott & Assocs Pty Ltd v Eretta Pty Ltd [1987]
FCA 102; (1987) 16 FCR 497
Christou v Stanton Partners Australasia Pty Ltd [2011]
WASCA 176
Federal Treasury Enterprise (FKP) Sojuzplodoimport v
Spirits International B.V. (No 2) [2012] FCA 23
Karl Suleman Enterprises Pty Ltd (in liq) v Pham [2010]
NSWSC 886
Les & Zelda Investments Pty Ltd v Whitehaven Coal Ltd
[2020] NSWSC 1091
Mathew (SA) Nominees Pty Ltd v Belconnen Automotive
Pty Ltd [2019] SASC 39; 133 SASR 408
Misthold Pty Ltd v NSW Historic Sites and Railway
Heritage Company Pty Ltd [2022] NSWSC 42
Norcast S.ár.L v Bradken Limited [2012] FCA 765
Olson v Keefe (No 5) [2023] FCA 127
Oswal v Australia and New Zealand Banking Group Ltd
 [2016] VSC 52
Pathway Investments Pty Ltd v National Australia Bank Ltd
[2012] VSC 97
PPK Willoughby Pty Ltd v Baird [2019] NSWCA 48
Re Colorado Products Pty Ltd [2013] NSWSC 611
Robertson v Knott Investments Pty Ltd (No 2) [2010] FCA
796
Sandl Trading Pty Ltd v North American Oil Company &
Robert Hicks Pty Ltd [1998] VSC 8
Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2009]
NSWSC 563
Truth About Motorways Pty Ltd v Macquarie
Infrastructure Investment Management Ltd [2001] FCA
1603
Tucker v McKee [2022] FCA 315
United Commercial Projects Pty Ltd v PHHH Investments
No 2 Pty Ltd [2019] VSCA 192
Voxson Pty Ltd v Telstra Corporation Ltd (No 8) [2017]
FCA 1427

Division: General Division

Registry: New South Wales

National Practice Area: Commercial and Corporations

Sub-area: Corporations and Corporate Insolvency

Number of paragraphs: 80

Date of hearing: 30 September 2024

Solicitor for the Applicants Banton Group

(NSD 881 of 2020):

Counsel for the Applicants Mr J Entwisle with Mr B Smith

(NSD 881 of 2020):

Solicitor for the Applicants Webb Henderson

(NSD 73 of 2021):

Counsel for the Applicants Mr R Dick SC with Mr D T W Wong and Mr S Murray

(NSD 73 of 2021):

Solicitor for the Ashurst

Respondents:

Counsel for the Respondents: Mr I Ahmed SC with Mr H Atkin

ACN 117 641 004 Pty Ltd (in liq) v S&P Global, Inc (No 3) [2024] FCA 1238
ACN 117 641 004 Pty Ltd (in liq) v S&P Global, Inc (No 3) [2024] FCA 1238
 ORDERS

NSD 881 of 2020

BETWEEN: ACN 117 641 004 PTY LTD (IN LIQUIDATION) (IN ITS
CAPACITY AS TRUSTEE OF THE VALE CASH
MANAGEMENT FUND)
First Applicant

CITY OF COCKBURN ABN 27 471 341 209

Second Applicant

AND: S&P GLOBAL, INC (A COMPANY INCORPORATED IN

NEW YORK)
First Respondent

STANDARD & POOR’S INTERNATIONAL, LLC (A

COMPANY INCORPORATED IN DELAWARE)
Second Respondent

NSD 73 of 2021

BETWEEN: YAF MASTER (WK-155253) (A COMPANY

INCORPORATED IN CAYMAN ISLANDS)
First Applicant

BASIS PAC-RIM OPPORTUNITY FUND (MASTER) (IN

VOLUNTARY LIQUIDATION) (WK-155158) (A COMPANY
INCORPORATED IN CAYMAN ISLANDS)
Second Applicant

AND: S&P GLOBAL, INC (A COMPANY INCORPORATED IN

NEW YORK)
First Respondent

STANDARD & POOR’S INTERNATIONAL, LLC (A

COMPANY INCORPORATED IN DELAWARE)
Second Respondent

ORDER MADE BY: SHARIFF J

DATE OF ORDER: 25 OCTOBER 2024

ACN 117 641 004 Pty Ltd (in liq) v S&P Global, Inc (No 3) [2024] FCA 1238 i
THE COURT ORDERS THAT:

1. Within seven days, the parties are to confer and provide by email to the Associate to
Shariff J any agreed or competing proposed short minutes of orders to give effect to
the Court’s reasons, including in relation to the timing of payment of the further
security to be ordered.
2. In the event that the parties do not reach agreement as to the proposed orders to be
made by the Court pursuant to Order 1, the matters be relisted at a date convenient to
the Court and the parties for further hearing.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ACN 117 641 004 Pty Ltd (in liq) v S&P Global, Inc (No 3) [2024] FCA 1238 ii
 REASONS FOR JUDGMENT

SHARIFF J:

A. INTRODUCTION
1 By interlocutory application dated 15 September 2024, the respondents (S&P) in NSD 881 of
2020 (Vale Proceeding) and NSD 73 of 2021 (Basis Proceeding) seek further security for
their costs of defending the proceedings.

2 The present application arises in circumstances where on 10 February 2022 the Court made
orders that the first applicant in the Vale Proceeding (First Vale Applicant) provide security
of $3 million and the first and second applicants in the Basis Proceeding (Basis Applicants)
provide security of $3.5 million, with that security to be provided in staggered tranches. Prior
to that, in April 2021, the Court made orders for the Basis Applicants to pay an initial smaller
tranche of security. No security has been ordered against the second applicant in the Vale
Proceeding (Second Vale Applicant), and none is sought by the present application.

3 By the present application, S&P seeks an order for further security of:

(a) $1,646,347.41 against the First Vale Applicant in the Vale Proceeding; and
(b) $2,224,375.62 against the Basis Applicants in the Basis Proceeding.

4 In support of its application, S&P principally relies upon:

(a) an affidavit of its instructing solicitor, Mr Nicholas Mavrakis, sworn on 15 September

2024 (First Mavrakis Affidavit); and
(b) a further affidavit of Mr Mavrakis sworn on 27 September 2024 (Second Mavrakis
Affidavit).

5 S&P also relies upon two earlier affidavits of Mr Mavrakis sworn on 16 June 2023 and 20
December 2021 respectively.

6 Both the First Vale Applicant and the Basis Applicants (together, the Applicants) oppose the
further grant of security. In support of their respective positions, the Applicants principally
rely upon:

(a) in the case of the First Vale Applicant, an affidavit of its instructing solicitor, Ms
Amanda Banton, sworn on 24 September 2024; and

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 (b) in the case of the Basis Applicants, an affidavit of their instructing solicitor, Ms Shaan
Palmer, affirmed on 26 September 2024.

7 The First Vale Applicant also relies upon two earlier affidavits of Ms Banton sworn on 8 July
2022 and 26 July 2021 respectively. The Basis Applicants also rely upon an earlier affidavit
of Ms Palmer affirmed 25 May 2023.

8 For the reasons given below, it is appropriate for further security to be ordered as follows:

(a) $987,808.45 against the First Vale Applicant in the Vale Proceeding; and
(b) $1,334,625.37 against the Basis Applicants in the Basis Proceeding.

B. BACKGROUND
9 S&P claims that the need for further security has been brought about by extensive
amendments made to the pleadings in both proceedings in respect of which leave was granted
by the Court on 25 July 2023 (the Amendments) at a time when the preparation of lay
evidence and the giving of discovery was largely complete. S&P claims, and it is not
disputed, that the Amendments substantially altered and expanded the scope of both
proceedings. In its written submissions, S&P summarised the Amendments (without demur
from the Applicants) as follows:

9. The amendments in the Vale Class Action include:

(a) a repleading of the existing factual allegations in the proceeding, that
touched almost all of the existing claims;
(b) a new fraud claim based on an allegation that S&P knew its ratings
of collateralized debt obligations (CDOs) were false because of the
use in CDO Evaluator versions 3.0, 3.1 and 3.2 (CDOE3) of an
inter-region correlation assumption of 0% for most types of obligors;
(c) a new fraud claim based on an allegation that S&P knew its CDO
ratings produced using CDO Evaluator 2.4.3 (CDOE2.4.3) were
false because of the use of an inter-industry correlation assumption
of 0%;
(d) a new fraud claim based on an allegation S&P knew its CDO ratings
produced using CDOE2.4.3 and CDOE3 were false because of the
use of the Gaussian copula as the dependency function to model joint
obligor correlation;
(e) a new fraud claim based on an allegation S&P knew that its rating for
Constant Proportional Debt Obligations (CPDOs) using S&P’s
CPDO Evaluator model (CPDOE) were false. Prior to the
amendments, CPDOs and CPDOE were not the subject of the Vale
class action;

ACN 117 641 004 Pty Ltd (in liq) v S&P Global, Inc (No 3) [2024] FCA 1238 2
 (f) a new fraud claim based on an allegation S&P knew its CDO ratings
were false because of the default rates assumed for asset-backed
securities (ABS) in CDOE3;
(g) an extension of the fraud claims to CDOs and CPDOs rated AA-,
when previously the claim was made only in relation to products
rated AA or higher; and
(h) the addition of a new ‘key employee’ who is alleged to have had a
fraudulent intent, being Arnaud De Servigny.
10. The amendments in the Basis proceeding include:
(a) all of the Vale applicants’ amended claims, replicated by the Basis
applicants in the Amended Statement of Claim (other than
amendments particular to the class definition or the CPDO claim);
(b) a new fraud claim based on an allegation that, by reason of S&P’s
knowledge of substantial changes in the RMBS market in the period
2000-2006 and knowledge that S&P’s model for estimated loss
severity for RMBS transactions (LEVELS) used a loan data set from
1999, S&P knew its RMBS ratings were based on inadequate data.
No deficiency in the LEVELS model had previously been identified;
(c) a new fraud claim based on an allegation that a decision was made at
a Structured Finance Leadership Team meeting in Vermont in 2004
to relax RMBS ratings criteria, which it is alleged was made for
business considerations and was not based on objective analysis or
empirical evidence;
(d) a wholesale re-drafting of the fraud claim based on S&P’s alleged
knowledge of deterioration in the subprime RMBS market from late
2006 to July 2007;
(e) the identification of 9 individuals who are alleged to have had a
fraudulent intent in relation to RMBS ratings; and
(f) the inclusion of two additional RMBS investments the subject of the
claim, being the Dutch Hill Funding II (Tranche D-3) and Dutch Hill
Funding II (Sub Tranche).
(Emphasis retained).

10 S&P contends that the Amendments have required S&P to incur substantial, additional legal
costs in the preparation of amended defences, and a large amount of additional evidence to
meet the new cases advanced by the Applicants. This has included the need to travel overseas
to meet with witnesses, and to re-review existing documents in the proceedings so as to
determine their relevance to the new claims made. S&P contends that the Amendments have
also required very significant further discovery and have added to the likely length and cost
of the final hearing. In respect of discovery, Mr Mavrakis deposes that an additional 61,770
documents were required to be reviewed, and approximately 16,000 new documents were
produced.

ACN 117 641 004 Pty Ltd (in liq) v S&P Global, Inc (No 3) [2024] FCA 1238 3
 C. RELEVANT PRINCIPLES
11 The Court has a general discretion under s 56(3) of the Federal Court of Australia Act 1976
(Cth) to “reduce or increase the amount of security ordered to be given and [to] vary the time
at which, or manner or form in which, the security is to be given”.

12 The Court may exercise that discretion where there has been a material change in
circumstances since the time when security was first ordered, or where new material has been
discovered which could not reasonably have been put before the Court on the original
application: Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment
Management Ltd [2001] FCA 1603 at [11]; Tucker v McKee [2022] FCA 315 at [56].

13 The making of significant amendments to pleadings so as to alter or expand the case may
constitute a material change in circumstances: see Aqua Blue (Noosa) Pty Ltd v Soil Surveys
Engineering Pty Ltd [2010] QSC 176 at [24]-[26]; Misthold Pty Ltd v NSW Historic Sites and
Railway Heritage Company Pty Ltd [2022] NSWSC 42 [19]-[22].

14 In assessing the quantum of the additional security to be ordered, the Court need not
undertake a detailed assessment and may adopt a “broad brush approach”: Re Colorado
Products Pty Ltd [2013] NSWSC 611 at [66].

15 In Les & Zelda Investments Pty Ltd v Whitehaven Coal Ltd [2020] NSWSC 1091, Parker J
summarised a number of the principles relevant to assessing the quantum of security to be
ordered against a corporate applicant in funded litigation:

(a) the Court is not determining how much will be payable by way of costs. If, on
assessment, the costs are ultimately less than the amount of security provided, the
amount will be returned to the applicant and the only prejudice will be a marginal
financing cost: at [44]-[45];
(b) it is wrong that those who stand behind an impecunious corporate applicant should be
able to benefit from the upside of successful litigation but be protected from the
downside of paying the respondent’s costs if the claim is unsuccessful: [46];
(c) in fixing the amount of security, the Court should not adopt the general approach of
aiming for a figure less than the amount likely to be recovered on assessment, or even
of aiming at the low end of the range: [86].

16 The relevant principles when further security for costs is sought, including in relation to past
costs incurred by a respondent, were helpfully outlined by Edmonds J in Federal Treasury

ACN 117 641 004 Pty Ltd (in liq) v S&P Global, Inc (No 3) [2024] FCA 1238 4
 Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (No 2) [2012] FCA 23 at
[73]-[80]. They may be summarised as follows:

(a) the onus of leading evidence to establish its entitlement to an order for security in the
amount sought lies with the respondent, and the evidence relied upon must have
“some characteristic of cogency”: at [74];
(b) the discretion to exercise security for costs is exercising “having regard to all the
circumstances of the case without any predisposition in favour of the award of
security” at [75];
(c) the “amount of security will not exceed the likely recoverable party/party costs”: at
[76];
(d) a “longstanding and ‘most important’ principle is that applications for security for
costs must be brought promptly”. This principle is of “equal force” where the
application is for further security: at [78];
(e) where security is sought for previous costs over a long period of time “it is unlikely
that an award for past costs will be made”. Relevant factors include the length of the
delay, the nature of the acts done in the interim and the reasons for it: at [79];
(f) the principle “that security must be sought promptly remains applicable where
security has previously been provided in ‘tranches’”. A court may refuse to award
additional security for significant costs already incurred “when it must have been long
apparent that [the respondent’s] original estimates of costs, would be far exceeded”: at
[80].

D. SUMMARY OF THE PARTIES’ CONTENTIONS

D.1 S&P’s contentions

17 S&P seeks security in respect of both past and future costs and disbursements that are said to
have arisen as a consequence of the Amendments.

18 In the First Mavrakis Affidavit, Mr Mavrakis gives detailed evidence of the costs that have
been incurred to date in defence of the Vale and Basis Proceedings, and provides an estimate
of the additional costs that he says have been (or will be) caused by the Amendments to the
Applicants’ respective cases. By Mr Mavrakis’ calculations, the additional costs brought
about by the Amendments are approximately:

(a) $1,646,347.41 in the Vale Proceeding; and

ACN 117 641 004 Pty Ltd (in liq) v S&P Global, Inc (No 3) [2024] FCA 1238 5
 (b) $2,224,375.62 in the Basis Proceeding.

19 Mr Mavrakis derives these amounts in the following way:

(a) first, he calculates S&P’s historical costs incurred from the period 26 July 2023 to 26
August 2024 (inclusive) which are said to arise from the Amendments (Historic
Costs);
(b) second, he adds to this S&P’s estimated further costs incurred and estimated to be
incurred from 27 August 2024 to the conclusion of the trial which are said to arise
from the Amendments (Future Costs);
(c) third, he applies a 20% global reduction to the solicitors’ fees component of the
Historic and Future Costs;
(d) fourth, he increases the amounts by applying an additional global 15% loading to both
Historic and Future Costs due to the additional size and complexity of the matters said
to have been caused by the Amendments;
(e) fifth, he applies a discount on the assumption that 60% of solicitors’ fees and 90% of
disbursements (including Counsels’ fees) will ultimately be recoverable.

D.2 The parties’ contentions as to delay

20 The Applicants each contend that S&P should not be entitled to further security due to a
substantial and unexplained delay in bringing the present application. They point out that
while the bringing of such an application was foreshadowed on 16 June 2023 and 14
December 2023, it was not articulated until 2 July 2024, more than 12 months after the
Applicants’ respective applications to amend their pleadings, and almost 12 months since the
Amendments were allowed.

21 The Applicants contend that the sole basis advanced for the upwards revision of S&P’s
estimate of its costs is the new claims introduced by the Amendments. Those Amendments
were allowed by Lee J on 25 July 2023 and the amended pleadings were filed on 9 August
2023. However, S&P did not write to the Applicants seeking further security until 2 July
2024. Even then, that letter sought security for both Historic and Future Costs based on a
30% uplift on the original cost estimate. The estimate was revised downwards significantly
by letter dated 6 September 2024, shortly before the present application was filed.

22 The Applicants submit that the Court expects an application for security to be made
promptly. Delay will invariably be a discretionary factor on an application such as this, its

ACN 117 641 004 Pty Ltd (in liq) v S&P Global, Inc (No 3) [2024] FCA 1238 6
 degree or relevance varying with the facts of each case, the nature, extent and cause for any
delay and the overall justice of the case: PPK Willoughby Pty Ltd v Baird [2019] NSWCA 48
at [11]. But they submit that there is “assumed and presumed prejudice that inevitably arises
out of… delay” and that delay will therefore “often [be] a decisive factor in deciding whether
to order security and in particular security for past costs”: Oswal v Australia and New
Zealand Banking Group Ltd [2016] VSC 52 at [34]; see also Mathew (SA) Nominees Pty Ltd
v Belconnen Automotive Pty Ltd [2019] SASC 39; 133 SASR 408 at [78] and Christou v
Stanton Partners Australasia Pty Ltd [2011] WASCA 176 at [23].

23 It is submitted that the delay in this case is extensive and that S&P has offered no explanation
for its delay. The Applicants submit that the Court can draw from the evidence that S&P was
content to incur further costs in respect of the amended claims, and to allow the Applicants to
incur costs, without seeking security for the last 14 months. It is said that the principal reason
for requiring applications to be made reasonably promptly is to minimise the risk of the
applicant incurring costs in relation to proceedings they will not be able to pursue: Sandl
Trading Pty Ltd v North American Oil Company & Robert Hicks Pty Ltd [1998] VSC 8 at
[11]. This factor is said to strongly militate against the grant of security here.

24 In the alternative, the Applicants contend that S&P’s delay in bringing the application
supports confining any security ordered to Future Costs: Robertson v Knott Investments Pty
Ltd (No 2) [2010] FCA 796 at [14]; Karl Suleman Enterprises Pty Ltd (in liq) v Pham [2010]
NSWSC 886 at [50]. That is, it is submitted that S&P should be precluded from obtaining
additional security for the Historic Costs incurred to date. The Applicants contend that, if
S&P had truly been concerned that those Historic Costs would not be recoverable in the event
they were successful in the proceedings, then they would have more promptly brought the
application to obtain further security, and that S&P’s unexplained delay should disentitle it
from recovering further security for its Historic Costs.

25 S&P contends that the Applicants’ assertion of delay is falsified by the chronology. It makes
the following points.

26 S&P points out that when the Vale Applicants sought to amend their pleadings, their written
submissions dated 19 July 2023 stated:

It also goes without saying that they [the Vale Applicants] will pay any additional
security for costs ordered or agreed.

ACN 117 641 004 Pty Ltd (in liq) v S&P Global, Inc (No 3) [2024] FCA 1238 7
27 S&P contends that it was therefore always clear that further security would be necessary. The
Vale Applicants’ amended pleading was filed on 9 August 2023, and the Basis Applicants’
on 29 August 2023.

28 S&P then points to the next case management hearing which occurred on 14 December 2023.
In advance of that hearing, S&P provided proposed orders to the Applicants and to the Court
which included the following:

9. By 2 February 2024, the parties are to confer and seek to agree on the
quantum and form of any further tranche of security to be provided by the
Vale Applicants and the Basis Applicants.
10. If the parties are unable to reach an agreement by 2 February 2024 about the
quantum and form of security for costs regarding a further tranche of
security:
(a) by 9 February 2024, the respondents are to file and serve any
application, evidence and submissions in relation to those matters
(not exceeding 5 pages);
(b) by 9 February 2024, the Vale Applicants and Basis Applicants are to
file and serve any evidence and submissions (not exceeding 5 page);
and
(c) the parties are to approach the Associate to Justice Lee to seek a
hearing date for the determination of the quantum and form of
security for costs.

29 S&P contends that these proposed orders made clear its intention to seek further security. The
Vale Applicants did not consent to those proposed orders.

30 The proposal for further security was addressed before Lee J on 14 December 2023. As set
out in the Second Mavrakis Affidavit, his Honour indicated that he wished to revisit the
quantum of security, as a whole, at the next case management hearing in May 2024. The
exchange culminated with his Honour saying the following (at T14.46-15.7):

HIS HONOUR: I think I would wrap that up [the issue of further security] in what
I’m dealing with on 2 May. As I said, I want to deal with every interlocutory, or
potential interlocutory, matter which may arise between that case management
conference and the now set hearing date. So, you will have the extent of the deceit
case. You will have the issues for opinion evidence, will be working out the mode by
which, because if the expert evidence or references will rationally affect the amount
of the quantum of any additional security, because a reference will be a lot cheaper,
in my view…

31 S&P contends that the gravamen of his Honour’s statement was that any consideration of
further security should await: (a) the provision of the Applicants’ particulars of knowledge
document; (b) the finalisation of the expert questions; and (c) the determination of whether

ACN 117 641 004 Pty Ltd (in liq) v S&P Global, Inc (No 3) [2024] FCA 1238 8
 there would be a reference, as those were matters which “will rationally affect the amount of
the quantum of any additional security”. It is submitted that there was no demur from that
suggestion by Counsel for the Applicants.

32 The orders made by Lee J on 14 December 2023 specifically provided that “the orders to be
made concerning… further security for the respondents’ costs” would be the subject of a case
management hearing listed for 7 May 2024. That case management hearing was ultimately
vacated of the Court’s own motion when the proceedings were reallocated to my docket.

33 On 2 July 2024, S&P wrote to the Vale Applicants requesting further security for costs. That
letter went unanswered, and follow-up letters were sent requesting a response on 29 July and
6 August 2024.

34 At a case management hearing before me on 7 August 2024, Senior Counsel for the Vale
Applicants apologised for the delay in responding to S&P’s correspondence and initially
indicated that there was no dispute about S&P’s entitlement to further security (although
some uncertainty as to this was later indicated) (at T52.10-19):

HIS HONOUR: … What’s your client’s attitude to security for costs?

SENIOR COUNSEL: It has to be provided, there’s no dispute about entitlement, it’s
just quantum. And I do apologise. We hadn’t gotten back to them about their
correspondence. That needs to happen. There needs to be a conferral. My learned
friend wants till the 14th to put out an application. The conferral – you don’t need to
make orders about this your Honour, but obviously, we need to respond.

35 Notwithstanding those statements, and further letters sent by S&P on 23 August and 6
September 2024, as at the date of the hearing of this application, the Vale Applicants had not
responded to any of S&P’s letters in relation to security.

36 S&P contends that, in those circumstances, it is wrong for the Applicants to suggest that there
has been any relevant delay on the part of S&P which ought weigh against the exercise of
discretion to award further security for costs. Rather, S&P says that it is the Applicants who
have significantly failed to engage with the issue.

37 Further, S&P submits that the Applicants have failed to point to any actual prejudice suffered
by reason of the asserted delay. It is submitted that, in light of the way matters evolved, the
Applicants were on notice that further security would be sought, and there is no suggestion
that they would have acted any differently (e.g. by not incurring certain costs) had the

ACN 117 641 004 Pty Ltd (in liq) v S&P Global, Inc (No 3) [2024] FCA 1238 9
 application been brought earlier: see Les & Zelda at [24]-[26], comparing Tim Barr Pty Ltd v
Narui Gold Coast Pty Ltd [2009] NSWSC 563 at [28].

38 As for the Applicants’ submission that prejudice can inevitably be “assumed and presumed”
in cases of delay, S&P points to intermediate appellate authority to the contrary that has been
accepted at first instance in this Court: see United Commercial Projects Pty Ltd v PHHH
Investments No 2 Pty Ltd [2019] VSCA 192 at [39] (Whelan JA), [68]-[69] (Kaye JA); Olson
v Keefe (No 5) [2023] FCA 127 at [35](2).

D.3 The parties’ contentions as to the calculation of costs

39 The Applicants contend that S&P has failed to prove its entitlement to the additional costs for
which security is sought. They submit that S&P’s calculations rest on erroneous assumptions
and the amounts claimed are excessive, and that S&P has therefore failed to discharge its
onus to demonstrate that the additional estimated costs have “some characteristic of
cogency”: Federal Treasury at [74].

40 The Applicants’ first complaint is that S&P’s updated cost estimate is entirely premised on
the number of hearing days being increased from 35 days to 40 days. It is submitted that
based on this fact alone, Mr Mavrakis has applied a 15% increase to each of the costs for
expert evidence, interlocutory, pre-trial and trial phases of the proceedings. However, the
Applicants contend that the increase in the number of trial days was not caused by the
Amendments, but rather by orders made by Lee J on 18 October 2022 requiring all evidence
in chief of lay witnesses to be given viva voce. Therefore, it is said that the 15% increase in
costs across all stages of trial preparation is not a cogent basis to estimate the additional costs
resulting from the Amendments.

41 Second, the Applicants submit that in any case, the application of a 15% increase in costs
across all stages of trial preparation is unjustified. It is contended, for example, that there is
no evidentiary basis for finding that the Amendments could result in a 15% increase in costs
for dealing with interlocutory applications or for expert witness travel.

42 Third, the Applicants note that the S&P estimate includes increased amounts for three Senior
Counsel, including a “lead Senior Counsel” with daily rates of $32,500 (excluding GST). The
Applicants submit that such costs are likely to be considered an “unreasonable” and/or
“unnecessary expense” and not recoverable on any taxation of costs under r 40.30 of the
Federal Court Rules 2011 (Cth). Further, they contend that it is very unlikely that all three

ACN 117 641 004 Pty Ltd (in liq) v S&P Global, Inc (No 3) [2024] FCA 1238 10
 Senior Counsel will be present at the hearing for its entire duration and/or giving substantial
assistance in the conduct of the proceedings on each of those days. The Applicants
acknowledge that S&P is entitled to run a “Rolls-Royce defence” if it so chooses, but say that
they should not be required to pay for it, and that “[t]hat deluxe approach to the case… will
be reflected in a significantly decreased rate of recovery on a taxation”: Voxson Pty Ltd v
Telstra Corporation Ltd (No 8) [2017] FCA 1427 at [16] (Perram J); see also Norcast S.ár.L
v Bradken Limited [2012] FCA 765 at [23]-[29] (Gordon J).

43 Fourth, the Applicants make various observations about the basis upon which costs have
been incurred to date, and the way they intend to be incurred into the future. The Applicants
contend that these various matters are not justified, or not justified to the extent of the costs
being claimed. These complaints include those as to the hourly rates being charged for
various items, the number of legal practitioners attending to particular tasks (often with
multiple persons attending to routine matters), and the necessity for travel to overseas
locations to meet and confer with witnesses about their evidence.

44 Finally, the Basis Applicants contend that S&P has inadequately accounted for vicissitudes
and other typical recovery rates in its application. This was previously referred to as the “two-
thirds rule”, the history and purpose of which was explained in Gordon J in Bradken at [24]-
[29]. As her Honour there stated, there is no such “rule” in Australia, but it remains
appropriate to apply a discount of this magnitude where there are factors present which
suggest that the amount of security sought may exceed the actual recoverable costs. The
factors that may be relevant include the possibility of settlement, the merits of the case, the
possibility of off-setting future costs orders, the risk that the litigation may be stifled and so
on: Voxson at [17]. Further, as Davis J observed in Pathway Investments Pty Ltd v National
Australia Bank Ltd [2012] VSC 97 at [55], the amount of security should be “conservatively
reached”, making due allowance for uncertainties as to the estimates prepared by the
solicitors for the parties and the assumptions they have made.

45 The Applicants’ primary position is that S&P’s calculations are so deficient that the
application should be dismissed in its entirety. Alternatively, the First Vale Applicant submits
that any order for additional costs should be for no more than $336,624.18 (based on Ms
Banton’s calculations), while the Basis Applicants submit that the quantum of any security
ordered should be no more than $685,000 (based on Ms Palmer’s calculations).

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46 S&P strongly resists these contentions. First, in relation to the claim that S&P is running a
“Rolls-Royce defence”, S&P submits that the Vale Proceeding is funded litigation where a
commercial litigation funder seeks to make a commercial return, the claims made potentially
run into the billions of dollars and the allegations are of utmost seriousness and complexity.
In those circumstances, it is said that the amounts S&P has incurred and is likely to incur are
both reasonable for a case of this kind and proportionate to the nature of the claims made.

47 Second, S&P contends that Mr Mavrakis’ estimate that the Amendments have increased the
length of the hearing and costs of the proceedings by approximately 15% is a “reasonable
broad-brush approach to estimation” incorporating substantial discounts which adequately
cover the reductions that might be made on taxation. For example, S&P points to the fact that
it has reduced its solicitor costs so as to be in line with scale rates; has adopted a 20% global
reduction on all Historic and Future Costs; and has incorporated a further reduction on the
assumption that only 60% of solicitor/client costs and 90% of disbursements will be
recoverable. S&P otherwise criticises the way in which Ms Banton and Ms Palmer seek to
calculate S&P’s costs and maintains that Mr Mavrakis is best placed to estimate S&P’s actual
additional expenses incurred by reason of the Amendments. In this regard, S&P submits that
this is not an assessment and the Court ought not unduly doubt or scrutinise Mr Mavrakis’
estimate as though it were.

48 Third, S&P submits that there is no warrant to aim for a level of security that is below what
would be recoverable on taxation. While acknowledging that the amount of any order is a
matter for the Court’s discretion, S&P contends that in this case, consistently with the
protective purpose of the orders sought, the amount of security should reflect the amount that
would be recoverable on taxation.

49 Finally, as to any further discount on account of vicissitudes, S&P contends that the
possibility of settlement is best addressed by orders that any further security be provided in
staged tranches, and that this was the approach which Gordon J took in Bradken: see [29].
Further, S&P points to the fact that in both Bradken and Voxson, the Court ordered security
in an amount of 50% of the solicitor/client costs incurred (or estimated to be incurred), which
it says is substantially in excess of the security sought in this case.

50 S&P also relies on the review of the authorities in relation to the application of a discount for
vicissitudes by Parker J in Les & Zelda at [86], where his Honour stated as follows:

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 I think this review of authority confirms that, in an application under CA s 1335(1),
there would be no justification for the court, in fixing the amount of security, to adopt
the general approach of aiming for a figure less than the amount which the defendant
is likely to recover on assessment, or even of aiming at the low end of the range. That
would be contrary to what the language of s 1335(1) requires. Still less would there
be any justification for adopting such a general approach in commercial litigation of
the present type.

D.4 Additional contentions in the Vale Proceeding

51 The First Vale Applicant also resists the making of a further order for security for costs on
the basis that there is no real risk of S&P being out of pocket in circumstances where the
same claims are advanced by the Second Vale Applicant in the Vale Proceeding, and there is
no suggestion that it (being a local statutory authority) is not in a position to meet any costs
order.

52 At the hearing on 28 July 2021, Lee J determined that the Second Vale Applicant would not
be required to provide security for S&P’s costs. This was on the basis of evidence that the
Second Vale Applicant had sufficient means to meet any costs order made against it, even if
it was jointly and severally liable for the costs of the entire Vale Proceeding.

53 S&P is not seeking to reagitate this ruling. It only seeks security from the First Vale
Applicant. In these circumstances, the First Vale Applicant contends that there is no logical
justification for this approach, which is premised on the notion that it will be solely
responsible for 100% of any additional costs arising from the Amendments. The First Vale
Applicant submits that, if a costs order is made against the Vale Applicants, it would almost
certainly be on the basis that they are jointly and severally liable. In the absence of any
evidence that there are sufficiently substantial costs over and above those that would be
incurred in meeting the claims made by the Second Vale Applicant’s case, the First Vale
Applicant contends that the application should be dismissed: citing Brecher v Barrack
Investments Pty Ltd [2018] FCA 472 at [28]-[29].

54 In response, S&P contends that the First Vale Applicant’s position implicitly and incorrectly
assumes that the Vale Applicants claims will necessarily stand or fall together. S&P submits
that each of the Vale Applicants’ claims concern different financial products, and will, at the
very least, give rise to individual questions concerning reliance. Accordingly, S&P says that
it is entirely possible that S&P may obtain a costs order against the First Vale Applicant, but
not the Second Vale Applicant. S&P contrasts this to the situation in Brecher, where there
was “no realistic possibility of different outcomes as between the applicants”, and submits

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 that here it is necessary to obtain security from the First Vale Applicant, being a company in
liquidation.

E. CONSIDERATION
55 Both proceedings are complex. They are presently listed for final hearing before me for a
period of eight weeks commencing on 30 June 2025. Although there are differences between
the proceedings, there are also commonalities. It is common to both proceedings that the
Applicants make allegations of fraud as against S&P in relation to the development of
multiple versions of credit default models to assist in rating complicated financial products. It
is also common ground that the events the subject of both proceedings occurred over a
number of years approximately twenty years ago, and the persons involved in the
development of the models in question are principally located overseas. It is plain that the
nature and the subject matter of the proceedings are such that substantial costs are being
incurred on all sides. It is also plain that the Amendments have occasioned further costs to be
incurred.

56 On the evidence before me, I am satisfied that S&P has established the basis for a grant of
further security and that it is warranted having regard to the costs brought about by the
Amendments. I turn next to consider whether there has been any delay and, if so, whether it is
entirely disentitling as the Applicants contend.

E.1 Delay
57 The Applicants contend that even if I was satisfied that S&P was entitled to further security, I
should decline to order any further security on discretionary grounds due to the substantial
delay in S&P pressing for further security.

58 There is a tension between the parties’ submissions as to the relevance and significance of
delay to the exercise of my discretion. The Applicants contend that delay is always relevant
to the exercise of discretion, and that there is a presumptive prejudice inherent in substantial
delay. S&P contends that the idea of presumptive prejudice arising from delay has been
rejected by authorities that are binding on me, and that it remains for the Applicants to
identify some actual prejudice that they have suffered from the asserted delay.

59 In my view, the correct position is that explained by Bell P (as his Honour then was) and
Simpson AJA in PPK Willoughby at [11], that delay will “invariably be a relevant
discretionary factor in any application for security for costs”, but “the degree or extent of its

ACN 117 641 004 Pty Ltd (in liq) v S&P Global, Inc (No 3) [2024] FCA 1238 14
 relevance will vary according to the circumstances of any given case along a spectrum from
the slight to the extreme”. As their Honours further explained at [14]-[17] by reference to
earlier authorities in respect of which a tension was said to have arisen, in some cases
prejudice may be inferred with the corollary that it is not necessary, in order for prejudice to
be demonstrated, that an applicant prove “exactly” what it would have done had the
application been made earlier, but in other cases it will be necessary to prove such prejudice.
Neither of those two matters indicate that delay is presumptively prejudicial. Nor is it the case
that it will always be necessary for an applicant to demonstrate exactly what they would have
done differently if the application was pressed earlier. These conclusions are inherent in the
fact that the significance of delay will depend on the circumstances of each case.

60 There was a delay in S&P making the present application. On one view, the delay ran from
August 2023 when the amended pleadings were filed to 2 July 2024 when S&P articulated its
position on further security. On another view, there was delay from 14 December 2023 when
the matter was listed for case management before Lee J to 2 July 2024. On either view, there
is an explanation for the delay. That explanation is that: (a) S&P acted on the basis that the
Applicants had acknowledged the need for further security; (b) S&P relied on the matters
raised during the case management hearing on 14 December 2023 to operate on the basis that
its application for security would be agitated on 7 May 2024; and (c) there was thereafter
delay occasioned by the vacation of the case management hearing on 7 May 2024 and the
reallocation of the proceedings to my docket.

61 Whilst there is an explanation for the delay, the fact remains that S&P took no step to
articulate its position as to security until 2 July 2024 knowing that the Applicants did not
have notice of the quantum of security that might be sought. There was no adequate
explanation given as to why S&P did not articulate its position as to the quantum of security
prior to 2 July 2024. Although S&P expected the matter to be addressed at the scheduled case
management hearing on 7 May 2024, it had not taken steps prior to that time to commit to
writing its position in clear terms. Nor did it take such steps for almost another two months
thereafter.

62 As against this, the Applicants have always been on notice that the question of further
security and its quantum was a matter that was on the cards and would be pressed by S&P.
Given what I have come to understand about the litigation overall, I do not accept that the

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 Applicants formed the view, or acted on the basis, that S&P had a sudden change of heart
such that it would not be pressing its claim for security.

63 In my view, there was a delay, but it was not substantial as contended for by the Applicants. I
reject the Applicants’ contention that the delay here was entirely disentitling. The real
consequence of the delay was that the Applicants did not have earlier notice of the work that
was being performed by S&P and the quantum of security that S&P would press in respect of
that work. This position prevailed from at least 14 December 2023 to 4 July 2024. In that
period, S&P was undertaking work, using particular legal personnel at particular hourly and
daily rates which the Applicants did not have an opportunity to challenge or question until
after the fact. Delay occasioning these types of consequences is not always disentitling of
past costs in whole or in part, but it may be so depending on the facts: see generally Barrett
J’s considerations in Tim Barr at [26]-[40]. In my view, the consequence of the delay here
should be accounted for by a modest adjustment to the security that is sought insofar as it
relates to Historic Costs. Without being overly precise or mathematical about it, I have
incorporated such an adjustment in my overall assessment of the appropriate security to be
ordered.

E.2 The appropriate quantum of security

64 There was a chasm between the parties as to the appropriate amount of security that should be
ordered if I was satisfied that there should be an order for further security. On the Applicants’
part there was an overarching complaint about the “Rolls-Royce” approach to S&P’s defence
of the claim and a descent (at times) into the minutiae of the line-by-line costs incurred and to
be incurred by S&P. As noted above, other criticisms were directed at the approach that Mr
Mavrakis had taken to his estimation of the additional trial time arising by reason of the
Amendments and the consequence of that upon costs and disbursements.

65 The contentions made by all parties as to the appropriateness of the quantum of costs being
incurred involved a healthy dose of competitive criticism. That is as one might expect in
hard-fought commercial litigation of this scale. Notwithstanding the criticisms made, I accept
Mr Mavrakis’ evidence as to the way in which he set about in earnest to calculate both
Historic and Future Costs, and to apply measures of discounts and uplifts to account for what
might occur as to the recoverability of such costs. My acceptance of Mr Mavrakis’ evidence
does not mean, however, that I am satisfied that I should order security in the sums sought by

ACN 117 641 004 Pty Ltd (in liq) v S&P Global, Inc (No 3) [2024] FCA 1238 16
 S&P. The exercise of determining an appropriate sum of further security inherently involves
estimation, about which reasonable minds may, and will, differ.

66 In assessing the quantum of the additional security to be ordered, it is not necessary for me to
undertake a detailed assessment and a “broad brush approach” may be adopted: Re Colorado
at [66]. The task here is to determine in a broad brush way the further amount of security that
should be ordered by reason of the change in circumstances brought about by the
Amendments, but with an eye keenly attuned to the recoverability of such costs and
disbursements as have been and are to be incurred. The Court is neither determining the
actual amount that will be recoverable (which would be nigh on impossible), nor should the
Court fix a sum for security that is less than the amount likely to be recovered on assessment
or at the low end of the range: Les & Zelda at [86]. In Bryan E Fencott & Assocs Pty Ltd v
Eretta Pty Ltd [1987] FCA 102; (1987) 16 FCR 497 at 515, French J (as his Honour then
was) said that the process of estimation embodies to a considerable extent necessary reliance
on the “feel” of the case after considering relevant factors.

67 S&P contends that the amount of security now being sought together with the previous
amount of security already ordered is only a relatively small fraction of the total costs that it
has incurred to date in the proceedings. To this end, S&P points out that:

(a) in the Vale Proceeding, it has incurred costs of approximately $9,162,128 as against
ordered security of $3 million. Leaving aside future costs, this represents security for
around 32% of S&P’s costs to date;
(b) in the Basis Proceeding, S&P has incurred costs of approximately $7,960,653 as
against ordered security of $3.5 million. Again, leaving aside any future costs, this
represents security for around 43% of S&P’s costs incurred to date.

68 Whilst this approach might be useful in identifying the scale of the litigation, it is ultimately a
distraction. That is because the task with which I am presently confronted is not to entertain a
re-litigation of security ordered in the past, but to make an order for further security having
regard to a relevant change in circumstances. That relevant change in circumstances in the
present case is said to be the Amendments which it is claimed brought about the necessity of
further security being ordered. Ultimately, the focus must be on ordering a sum of further
security reflecting, in a broad brush way, the further costs arising only by reason of the
Amendments.

ACN 117 641 004 Pty Ltd (in liq) v S&P Global, Inc (No 3) [2024] FCA 1238 17
69 The Applicants’ contentions as to S&P’s “Rolls-Royce defence” must be weighed against the
fact of the sheer scope and scale of the present litigation. It is common ground between the
parties that the Applicants’ claims (if successful) potentially run into the hundreds of
millions, if not billions, of dollars. In this context, S&P is at liberty to run a “Rolls-Royce
defence” if it so chooses and is hardly expected to defend the litigation “on a shoestring”: Les
& Zelda at [49]. Based on my own impression of the resources being brought to bear by the
Applicants, it may well be observed that all parties are conducting the litigation with the
benefit of large purse strings as opposed to shoestrings. Added to this is that the First Vale
Applicant has a litigation funder standing behind it: see Les & Zelda at [48]. Thus, S&P’s so-
called “Rolls-Royce defence” is to be viewed in the context of the “Rolls-Royce” nature of
the litigation overall.

70 None of this is to diminish the serious issues that are to be played out in the proceedings.
There is considerable factual and legal complexity; evidence and witnesses have been and are
to be marshalled from overseas locations; fraud is alleged; the credit of various persons is in
issue; reputations of individuals are to be traduced; and experts will be called and engage in
conclaves and otherwise seek to assist the Court. There can be no doubt that the considerable
resources of the legal practitioners involved in the proceedings and the Court are being
brought to bear on these proceedings. No one party can be faulted for seeking to respectively
prosecute and defend the proceedings as they see fit.

71 It is a matter for each party as to how they choose to run and fund their respective cases. But,
however the parties choose to conduct and fund their litigation, no party should assume that
the legal costs and disbursements will be recoverable, and the due administration of justice
would envisage circumspection in recoverability. That will apply not only to S&P’s defence
of the case, but also to the Applicants in due course if they are ultimately successful.

72 The purpose of security is not to indemnify the respondent who chooses to run a “Rolls-
Royce defence”. As Gordon J observed in Bradken at [23]:

… where actual or indemnity costs are adopted as a basis for estimating costs, the
discount factor becomes central. Previous decisions which apply various discounts
are of little use. The discount must vary to ensure that the estimate of actual or
indemnity costs is appropriately reduced to such a level that it bears some
relationship to the party-party costs which would be recoverable on taxation. To
put it bluntly, the more expensive the lawyers, the larger the discount.
(Emphasis and additional emphasis added).

73 In Voxson, Perram J stated at [16]:

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 In [Bradken], her Honour arrived at a figure of 50%. I propose to do so as well for
the following reasons: on any view, Optus’ costs are at the high end. This is not a
criticism and it is entitled to run a Rolls-Royce defence if it wishes. However, I do
not think that it will be likely to recover on taxation either the 65%–75% implicit in
the views of Mr Nicholas and Ms Harris or even the 57% the parties have discussed.
I take into account that the process of determining the discount is to an extent driven
by the ‘feel’ of the case (see Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd
[1987] FCA 102; (1987) 16 FCR 497 at 515 [156] per French J). My impression of
Optus’ costs is that they are understandably taking the litigation very seriously and
are not sparing the costs. That deluxe approach to the case, however, will be reflected
in a significantly decreased rate of recovery on a taxation.

74 In the present case, Mr Mavrakis had applied a 60% recoverability discount for solicitor’s
fees, and a 90% recoverability discount for disbursements (including Counsels’ fees). He also
applied other discounts to allow for some moderation to his estimate of an increase in overall
trial time by 15% due to the Amendments. Although those discounts were diligently
determined and applied, there is force in the Applicants’ contentions that the discounts were
applied in respect of costs being incurred and to be incurred which of themselves might be
irrecoverable or at rates that may not be recoverable. As I have stated, none of this is intended
as a criticism of the costs that are being incurred and the rates at which they are being
incurred, but my assessment is that each of these is “at the high end” as Perram J put it in
Voxson. There is also force in the Applicants’ contentions that Mr Mavrakis’ assessment of a
15% increase in trial time and costs may have overstated the true costs that flow from the fact
of the Amendments (thought I acknowledge he sought to moderate this by application of
some measure of a discount on costs).

75 Although I accept the force of many of the points the Applicants raised as to the costs that
have been incurred and are being incurred, I do not accept the alternative assessments made
respectively by Ms Banton and Ms Palmer. Their respective assessments, though diligently
undertaken, do not in my view adequately reflect the likely recoverable costs brought about
by reason of the Amendments.

76 I am left with the impression that the further security sought by S&P does not reflect the true
costs that might flow from the fact of the Amendments notwithstanding the discounts and
other steps Mr Mavrakis has taken to moderate his determination of that security. I do not
propose to apply a mathematical approach to the determination of the further security to be
ordered, but rather to apply an impressionistic broad brush approach as to my “feel” of the
litigation. This approach recognises the commercial reality as to how all parties are
conducting this complex litigation but involves a measure of restraint having regard to the
likely recoverable costs and a degree of scepticism about the contentions all parties have

ACN 117 641 004 Pty Ltd (in liq) v S&P Global, Inc (No 3) [2024] FCA 1238 19
 made. In doing so, I also intend to apply a modest adjustment to the evidence before me as to
Historic Costs to account for the delay in the bringing of the application. On this approach,
and without being mathematical, I have applied a factor of 60% to the security sought by
S&P to account for my assessment of both recoverability and delay. I recognise that this
approach applies a further 40% discount to Mr Mavrakis’ estimation of Historic and Future
Costs, but I do consider it to be appropriate having regard to the matters I have addressed.

77 Accordingly, the sums to be ordered as further security are as follows:

(a) $987,808.45 as against the First Vale Applicant in the Vale Proceeding; and
(b) $1,334,625.37 in the Basis Proceeding.

78 In relation to the First Vale Applicant’s position that I should be make no further order for
security against it in light of the potential recoverability as against the Second Vale
Applicant, I am not presently satisfied that S&P will be entitled (if successful) at the end of
the litigation to recovery of costs as against one or both of the Vale Applicants. Whilst there
are common questions to be determined, the outcome of those determinations and their
application to one or other of the Vale Applicants may have an impact on the liability for
costs if S&P is successful in part or in whole. I accept S&P’s contention that in those
circumstances the present case is distinguishable to Brecher where there was “no realistic
possibility of different outcomes as between the applicants”: at [28]. I also reiterate what was
said by Parker J in Les & Zelda at [44]-[45] that in making an order for security, the Court is
not determining how much will actually be payable by way of costs. In the event that one or
both of the Vale Applicants are ultimately unsuccessful in the litigation and some adjustment
for costs needs to be made as between them, then so be it.

F. TIMING OF SECURITY PAYABLE

79 Given the quantum of the overall security I have ordered, it is appropriate that these amounts
be made payable in tranches, referrable to stages in the proceeding. I did not understand this
approach to be in dispute if security were to be ordered.

80 I will invite the parties to provide short minutes of order reflecting these reasons and will hear
them further if the tranches cannot be agreed.

I certify that the preceding eighty

(80) numbered paragraphs are a true

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 copy of the Reasons for Judgment of
the Honourable Justice Shariff.

Associate:

Dated: 25 October 2024

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