Equititrust v RM Walsh Land Holdings [2012] NSWSC 427

The trustee of a mortgage fund sued the borrower on their defaulting loans. The borrower sought security for costs against the trustee of the fund.

The rules empower the court to make a security for costs if there is reason to believe that the plaintiff will be unable to pay a costs order.

The trustee of the scheme has no assets in its own right but has a right of indemnity out of the trust assets pursuant to both the common law and its constitution. The law is that a trustee plaintiff should establish that it will have adequate funds to meet a costs order.

The court found that the trustee did have adequate funds, as the scheme assets total $80m and the liquidator has undertaken to set aside $200,000 to meet a future costs order. The argument of the borrowers that the right of indemnity did not exist since the loans involved a breach of trust (through representations given) was not properly pleaded in the cross-claim and could not be considered.

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