ATE insurance as security for costs – NSW Supreme Court accepts anti-avoidance endorsement

A recent Supreme Court of NSW decision has placed after-the-event (ATE) insurance squarely in the spotlight, confirming that, when carefully drafted, an ATE policy with an anti-avoidance endorsement can constitute adequate security for costs in litigation.

The judgment in i-Prosperity Pty Ltd (in liquidation) v Crown Melbourne Ltd [2025] NSWSC 1525 offers rare Australian guidance on a form of security more commonly litigated in the UK, and signals a pragmatic judicial willingness to accept innovative funding structures where the policy terms eliminate avoidance risk.

Background

The proceedings involved a dispute between the liquidators of the i-Prosperity group and Crown Melbourne (Crown) concerning alleged breaches of contractual and statutory obligations said to have caused substantial loss to the i-Prosperity group. The liquidator, backed by LCM Funding, accepted that Crown was entitled to security for costs totalling $2 million. The issue was not whether