Background
R&B Investments Pty Ltd, as trustee for the R&B Pension Fund, and David Furniss are applicants in a highly complex class action commenced in 2022 against Blue Sky Alternative Investments Limited and several other respondents, including Ernst & Young. The applicants had filed approximately 1,400 pages of documents articulating their proposed trial case, while interlocutory disputes had slowed the proceeding.
The Court was considering applications for security for costs under s 56 of the Federal Court of Australia Act 1976 (Cth) and r 19.01 of the Federal Court Rules 2011 (Cth). The parties did not oppose further security of $680,000 for each of Blue Sky and EY for future costs through a previously ordered structured conferral process. EY also sought substantially greater security for past costs, having already incurred approximately $2.9 million.
The Court’s Holding
Lee J ordered the applicants to provide Blue Sky with $680,000 in security for its costs through completion of the conferral process. The applicants were ordered to provide EY with an additional $600,000 for past costs incurred through 7 August 2026 and $680,000 for costs from 8 August 2026 through completion of that process. Failure to provide the required security by 8 October 2026 would stay the proceeding against the first through fourth respondents.
The Court treated the additional $600,000 for EY’s past costs as an adequate interim, broad-brush amount. The order did not prevent EY from later arguing that its greater work to date warranted more security when the Court determines security for the balance of the proceeding.
Lee J also ordered the parties, assisted by suitably qualified technology experts, to confer by 6 November 2026 about whether AI could appropriately assist preparation for mediation and trial. The conferral must address uses including identifying and synthesising relevant information, preparing chronologies and document summaries, and managing the documentary record, with the parties to report the results or submit a draft protocol. The Court did not order adoption of any particular AI tool or methodology.
Key Takeaways
- Security was fixed provisionally: $680,000 for Blue Sky’s future costs, and $1.28 million for EY comprising $600,000 for past costs and $680,000 for future costs through the conferral process.
- The Court required investigation of AI-assisted preparation, not machine determination of facts; any methodology must preserve traceability to primary documents, allow errors to be challenged, protect privileged and confidential material, and remain under human supervision.
- Before fixing security through trial, the Court intends to consider whether AI can reduce documentary-review costs and whether discrete expert questions could be handled more economically through qualified referees.
Why It Matters
The decision links security for costs to active, proportionate case management rather than assuming that every remaining stage will follow the most expensive conventional practices. It is also a notable example of an Australian court requiring parties in document-heavy litigation to investigate practical uses of AI while expressly preserving human judgment, evidentiary fairness, confidentiality, and the ability to verify outputs against source documents.