Momentum and Equity Trustees jointly loaned money for a development. The loan went into default and they sued the guarantors. The guarantors alleged that Momentum procured their signatures by misleading and deceptive conduct. They asserted that Momentum failed to disclose that it was about to become insolvent, and so was unlikely to be able to fulfill its contractual obligations to the borrower. The guarantors sought security for costs against Momentum (which at the time of the case was still under external administration). The court noted that:
It is for the guarantors to establish there is reason to believe that Momentum will be unable to pay their costs if they win. The test does not call for credible testimony that Momentum would not be able to meet any costs order made against it, but rather no more than that there is “reason to believe that the respondent would be unable”.
After reviewing the evidence the Court ordered that Momentum provide $14,000 as security for costs within 28 days and a further sum of $70,000 within 42 days prior to the hearing.