//
© 2026 Zoe. All rights reserved.
Zoe is a legal information platform. Always consult the Federal Register of Legislation for authoritative text.
[2001] SADC 186
respondent. Appeal dismissed; the Chief Judge upheld the Master's exercise of discretion to reserve the question of costs to the trial judge rather than ordering immediate costs for the third party (paras...
1 cited instrument linked from this judgment.
Ahren's sued Welding Industries; Welding Industries joined Hyundai Korea as a third party. The defendant had obtained substituted service on Hyundai's Australian lawyers; Hyundai successfully set aside that substituted service, requiring service in Korea. The Master set aside the substituted service but reserved the question of who should pay costs until trial, because questions about the relationships among Hyundai entities might show the insistence on formal service was unnecessary. Hyundai appealed that reservation seeking immediate costs. The Chief Judge dismissed the appeal, holding the Master properly exercised his discretion to reserve costs because the conduct and factual relationships were relevant to whether costs should follow the event.
AI-generated legal information, not legal advice. Zoe can make mistakes. Check the cited source, and for advice about your situation consult a qualified Australian lawyer.
1,638 words · generated 16/06/2026
This was an interlocutory appeal about costs following an order setting aside substituted service. The underlying dispute concerned defective welding wire supplied for works on the Hindmarsh Island Bridge. The plaintiff, Ahren's Engineering Pty Ltd, sued Welding Industries Ltd. Welding Industries (the defendant) impleaded Hyundai Welding Co Ltd (the third party, registered in Seoul) seeking indemnity should Welding Industries be held liable (para 2).
Prior to the defendant joining the Korean-registered third party, correspondence had passed between the defendant's solicitors (Kelly & Co) and Minter Ellison in Sydney. Minter Ellison identified their client in correspondence as 'Hyundai Welding Co of Australia' (a business name), and referred to "our client's wire" without distinguishing clearly between that business name and Hyundai Welding Co Ltd (para 3). The defendant obtained an order for substituted service on Minter Ellison in Sydney, rather than serving the third party in Korea under Rule 19 and the relevant Convention (para 4).
The third party successfully applied to set aside the substituted service order. The Master set aside that substituted service but, crucially, reserved the question of costs for determination by the trial judge. The third party appealed the Master's reservation, contending that having succeeded in the interlocutory application it was entitled to immediate costs and that the Master erred by reserving costs (paras 1, 4-7). The Chief Judge (Worthington) dismissed the appeal (paras 11-13).
The core legal framework is that costs are discretionary. The Chief Judge referred to the District Court Act 1991 s42(1) and the Rules (Rule 101.01(4) and Rule 101.02(1)) for the proposition that costs are generally in the court's discretion and normally follow the event unless the court orders otherwise (para 8). The judgment applied the established principle, drawn from Cretazzo v Lombardi (1975) 13 SASR 4, that the general discretion is absolute but must be exercised judicially and not on grounds unconnected with the litigation (para 8).
Here the Master had not denied that the third party was entitled to insist on service in Korea under Rule 19; rather, the Master was concerned that unresolved factual questions about the relationships between Hyundai entities and the Australian business name could later demonstrate that the third party's insistence on formal service (rather than, for example, permitting Minter Ellison to accept service) may have been an unnecessary use of party and court resources (paras 4-6, 11). The Master therefore thought it prudent to hear the parties on costs but not make a final costs order until trial when the factual matrix would be clearer (paras 5-6).
The Chief Judge held that those considerations were legitimately connected to the exercise of the costs discretion: it is proper to consider whether a successful party has put other parties to unnecessary expense by the way it has conducted proceedings. Because evidence on the disputed corporate and trading relationships was likely to appear at trial and be relevant to whether the third party's conduct had been reasonable, the Master did not err by reserving costs (paras 11-12). The appeal was dismissed (para 13).
Before this decision the established position was that costs rest in the court's discretion and generally follow the event; Cretazzo v Lombardi was authoritative on the need for judicial exercise of that discretion (para 8). Ahren's Engineering reinforces that position in the interlocutory setting by confirming two propositions:
After the decision, practitioners should understand that in contexts where facts about corporate relationships, agency or acceptance of service are at issue, a successful interlocutory applicant might still face a reserved costs outcome if the court considers that the factual matrix could show the interlocutory conduct to have been imprudent or wasteful.
Master’s observation (quoted at para 5): "Although there are many unanswered questions about the relationship between the third party, the business name and Hyundai Welding & Metal Co Ltd ... an order for substituted service should not have been made until the defendant was able to demonstrate that attempts at service on the third party in Korea were either impossible or futile and had been attempted."
Plain English: The Master thought that, because it was unclear how the corporate and business-name arrangements worked, the court should not have allowed service on the Australian solicitors until the defendant showed it had tried (and failed) to serve the actual Korean company in Korea. Those relationship questions might make substituted service inappropriate.
Master’s reason on costs (quoted at para 6): "The third party has made their submissions knowing my view. ... The technical position adopted by the third party may well have been a complete waste of time, the party's costs and the court's resources in all the circumstances."
Plain English: The third party knew the Master’s concerns and yet insisted on the technical approach. That insistence might turn out to have needlessly consumed party and court resources, so the Master would not finally decide costs until there was more evidence.
Chief Judge’s statement of principle (para 11): "Costs do not necessarily follow the event; there is a discretion. ... it is relevant for a court to consider whether that party has ... put other parties to unnecessary or unreasonable expense ... in the way it has conducted the proceedings."
Plain English: Even if you win an interlocutory application, the court can still decide not to award you costs if your way of litigating has needlessly cost others money.
This decision is especially relevant where:
In such fact patterns the court may lawfully reserve costs until trial rather than award immediate costs simply on the basis of who 'won' the interlocutory point.
This judgment applies established principles rather than creating new law. The Chief Judge expressly relied on Cretazzo v Lombardi as the guiding authority on costs discretion (para 8). Ahren's Engineering confirms that a Master or judge can reserve costs pending trial where factual relationships relevant to costs are unresolved. The decision should be read as a reaffirmation that costs discretion is flexible and fact-sensitive.
Practitioners should expect courts to follow this approach when unresolved questions about agency, corporate identity, or acceptability of alternative service mechanisms may materially affect whether strict adherence to formal service rules was reasonable. It would be routine for subsequent courts to cite Ahren’s for the proposition that a successful interlocutory applicant’s entitlement to immediate costs is not absolute where the applicant’s conduct might have caused unnecessary expense.
Threshold for reserving costs: The judgment affirms that reserving costs is permissible where factual questions relevant to costs are likely to emerge at trial (paras 5-6, 11). But the decision does not specify a precise evidentiary threshold for when reservation is required or merely permissible. Practitioners must draw on the general discretion standard and analogous authorities to predict outcomes.
Appropriate sanctions where conduct is tactical: The Master suggested the third party's tactical choice not to explain relationships might have been a 'complete waste' (para 6). The judgment upholds the Master's right to consider such conduct for costs, but it does not chart when costs should be denied, reduced, or otherwise adjusted. That remains a discretionary, case-by-case enquiry.
Interaction with international service regimes: The court accepted that the third party had the right to insist on service under Rule 19 and the Convention (para 4). The decision leaves open how courts should balance respect for treaty-based service requirements with pragmatic considerations about local agents or business names that may facilitate service. The judgment suggests toleration for pragmatic assessment but does not lay down a detailed rule.
Timing and remedies: The case confirms reservation until trial is appropriate where relevant evidence will then be available (para 11). What if trial is stayed, or evidence becomes available earlier through affidavits or admissions? The decision implies the court may revisit costs when the factual matrix changes, but it does not set timing rules; courts retain flexibility.
In summary, Ahren's Engineering v Welding Industries v Hyundai Welding is a practical, fact-driven reaffirmation that costs remain a judicially administered discretion. Success on an interlocutory application does not guarantee immediate costs where a party's litigation conduct, or unclear but material factual relationships, may warrant postponing that question until full evidence is available (paras 8, 11-12). Practitioners should be ready to explain conduct and corporate relationships promptly if they seek interlocutory relief that could otherwise be characterised as unnecessarily burdensome to opponents.
Judgment No. [2001] SADC 186
AHREN'S ENGINEERING PTY LTD v WELDING INDUSTRIES LTD and HYUNDAI WELDING CO LTD
This is an appeal from the order of a Master. On an interlocutory application by the third party, the Master set aside an order for substituted service, but reserved the question of costs to the trial judge.
The plaintiff, Ahren's Engineering Pty Ltd, was involved in building works on the Hindmarsh Island Bridge. It contracted with the defendant, Welding Industries Ltd, for it to supply welding wire. The plaintiff claims that the material supplied by the defendant was defective, and that it suffered loss because of the increased cost of replacing that wire and delay. The defendant says that the third party, Hyundai Welding Co Ltd, supplied the wire originally and that it was not up to standard. Therefore, the defendant seeks indemnity from the third party for any damages it may be found liable to pay to the plaintiff.
The registered office of the third party is in Seoul, Korea. Prior to the defendant joining the third party in this action, its solicitors, Kelly & Co, had correspondence about this matter with solicitors in Sydney, Minter Ellison, who advised that they were acting for Hyundai Welding Co of Australia (a business name). For present purposes, it is sufficient to say that, even though Minter Ellison named their client as Hyundai Welding Co of Australia, and not Hyundai Welding Co Ltd (the third party), the tone of the correspondence did not distinguish between these two organizations, and, indeed, there were references by Minter Ellison in that correspondence to it being "our client's wire" that was the subject of the action.
When time came to join the third party, the defendant applied for, and obtained, an order for substituted service of the third party proceedings on Minter Ellison, Sydney. The third party was successful in having that order set aside and, therefore, it was necessary for the proceedings to be served on the third party in Korea in accordance with Rule19 because there is a Convention between Australia and Korea. The third party has been represented throughout by Minter Ellison.
In giving reasons for his decision on 10 October 2001, the Master said that there was evidence of a trading relationship that involved Hyundai Welding Co of Australia, Welding Industries of Australia, Hyundai Welding & Metal Co of Korea and the third party. He said at paragraph 82:
Although there are many unanswered questions about the relationship between the third party, the business name and Hyundai Welding & Metal Co Ltd which have not been adequately dealt with in the affidavits, the fact is that an order for substituted service should not have been made until the defendant was able to demonstrate that attempts at service on the third party in Korea were either impossible or futile and had been attempted.
The Master said he would hear the parties on costs and indicated that he would not consider making an order for costs in favour of the third party until "an adequate explanation" had been given about the relationship between the parties to which he had referred earlier. When the question of costs came on for hearing, the third party elected not to proffer any explanation about these matters. In reasons delivered on 15 October 2001, having referred to the third party's choice not to explain the relationship, the Master said (par. 21-23):
The third party has made their submissions knowing my view. The third party says those factors are irrelevant. In my view, they are very relevant to the issue of costs. The technical position adopted by the third party may well have been a complete waste of time, the party's costs and the court's resources in all the circumstances.
I cannot determine the costs issue without the benefit of the material requested. .............
I expect the information will come out during the hearing of the dispute which will go directly to the involvement of Hyundai Industry Co Australia (sic) and the third party, and which will impact on the exercise of the discretion on costs.
The Master reserved the question of costs to the trial judge and that is the order against which the third party appeals.
Subject to certain exceptions which are not relevant here, costs are in the discretion of the court [District Court Act, s42(1)], the court may deal with costs at any stage of the proceedings [Rule 101.01(4)], and costs follow the event unless the court otherwise orders [Rule 101.02(1)]. The well established guiding principle is "that the general discretion is absolute and unfettered except that it must be exercised judicially, not arbitrarily or capriciously, and that it cannot be exercised on grounds unconnected with the litigation." (Cretazzo v Lombardi (1975) 13 SASR 4 per Bray CJ at 11).
The third party submits that as it succeeded on the application to set aside the order for substituted service, there can be no question of it not obtaining an order for costs, and that, therefore, the Master should have dealt with it at the time and made the order in its favour. The third party says that it was entitled to insist on service pursuant to Rule 19, that the order for substituted service should never have been applied for, or granted, and that these other matters play no part. In essence, the third party says that the matters the Master wanted explained were irrelevant to its application for costs. The third party acknowledges that it still has the opportunity to have its application for costs decided by the trial judge, but says that it is prejudiced because it is entitled to have that question determined now.
To succeed in its appeal, the third party must show that the Master erred in the exercise of his discretion. The third party says that there was such an error because he took into account material that was entirely extraneous. I cannot accept that submission.
Costs do not necessarily follow the event; there is a discretion. In deciding whether a successful party should have costs, it is relevant for a court to consider whether that party has, in light of all the circumstances, put other parties to unnecessary or unreasonable expense in the way it has conducted the proceedings. The Master accepted that the third party was entitled to insist on direct service in Korea pursuant to the Rules. However, he was concerned that its insistence upon service under the Rules rather than, say, Minter Ellison agreeing to accept service on its behalf, whilst technically correct, may be shown at the end of the day to have been the waste of resources he described. In my opinion, he was entitled to have regard to that concern for the purpose of ruling on costs. It is likely that the matters which the Master sought to have explained will become evident later in the proceedings, probably at trial. Their relevance will be a matter for the trial judge.
It follows that it cannot be said that the Master erred in regarding these matters as being relevant to the exercise of the discretion, or in reserving the question of costs for later consideration when the information is more likely to be available.
Ahren's Engineering P/L
Welding Industries Ltd & Hyundai Welding Coltd No. DCCIV-20-1665 [2001] SADC 186
(1975) 13 SASR 4
Appeal dismissed; the Chief Judge upheld the Master's exercise of discretion to reserve the question of costs to the trial judge rather than ordering immediate costs for the third party (paras 11-13).