Nobody wins
A frustrating and time-consuming process for both solicitors and litigation funders alike is acquiring security for costs. And this impacts no-one more than the plaintiff themselves. The more time spent on this, means the more cost involved in the litigation which unavoidably affects the bottom line of what the client will get in damages.
The defendants pushing back on this issue will end up clocking up more cost that they will likely have to pay. No one wins.
What are the options?
An After-The-Event (ATE) insurance policy is considered an acceptable form of security for costs if a few conditions are met to offer defendants “sufficient protection”, whilst minimising the disadvantage suffered by the plaintiff and provided there is direct evidence from the ATE insurer regarding the sufficiency of the security.
Example of ATE as DIO
ACCEPTED as a form of security for costs:
1. Australian Property Custodian Holdings Ltd (in liquidation) (receivers and managers appointed) v. Pitcher Partners & Ors [2016] VSC 399; and
2. DIF III Global Co-Investment Fund LP & Anor v. BBLP & Ors [2016] VSC 401.
(Victorian Cases)
The Victorian Cases were backed by a litigation funder who had arranged for the ATE policy from Am Trust Europe Limited to be backed by a deed of indemnity (Deed).
The court found the Deed was an acceptable form of security in circumstances, relevantly, where:
• the terms of the Deed of indemnity were irrevocable and unconditional;
• the Deed was directly enforceable by the defendant against Am Trust which was based in the UK
• the Deed was governed by the laws of Victoria and enforceable in the courts of Victoria;
• Am Trust had significant assets in the United Kingdom;
• as a large, regulated insurer and being involved in the business of underwriting legal expense risk, it was unlikely that Am Trust would default on the Deed;
• there were clear and straightforward arrangements for the enforcement of Victorian judgments in the UK; and
• extra security in the form of a $20k bank guarantee was provided to cover the cost of any enforcement in the United Kingdom.
Example of ATE as DIO
REJECTED as a form of security for costs
A proposed ATE policy provided by Am Trust (a UK-based insurer) as a form of security for costs was rejected because of the conditional nature of the policy.
Like the Victorian Cases this matter was backed by a litigation funder, but unlike the Victorian cases, the ATE policy was:
• not in the form of deed of indemnity that was irrevocable and unconditional; and
• not directly enforceable by the defendant against Am Trust.
Following a thorough analysis of the cases, the court rejected the ATE policy in the form submitted as security for costs for, amongst other things:
• there was an original cash payment into court and the request to try and replace with a deed of indemnity
• The defendants were not parties to the policy, and no obligations were owed to them by the insurer under the policy;
• the policy excluded liability for any negligent acts or omissions by Petersen’s legal representatives and the insurer was able to reduce liability or cancel the insurance.
In summary, we have successfully negotiated the use of an ATE insurance policy for many of our clients. It can be a complex landscape to navigate which is why many law firms and funders choose to use a broker like Vie Legal Insurance as their partner.