Bakers Investment Group (Australia) Pty Ltd v Caason Investments Pty Ltd

1. Subject to order 2, [Bakers Investments] pay the defendants' costs of and incidental to the proceeding (including reserved costs) on the following bases:

(a) From the date of the writ to 31 March 2013 on a party/party basis; and

(b) From 1 April 2013 on the standard basis.[2]

1. The defendants pay [Bakers Investments'] costs of and incidental to the counterclaim up to and including 19 May 2014 on the following bases:

(a) From the date of the writ to 31 March 2013 on a party/party basis; and

(b) From 1 April 2013 on the standard basis.

1. Subject to there being no application for leave to appeal against the Judgment within the time fixed for the filing of an application for leave to appeal, the security lodged with the court plus any interest allocated or received in respect thereof be released to the defendants on account of their costs immediately on the expiry of the time allowed for filing an application for leave to appeal.

4. Liberty to apply is reserved to the parties for a period of 3 months.

3 There was no application for leave to appeal from the Judgment. Thus, in accordance with order 3 above, on 22 January 2015, the amount of $230,123 was released to the defendants.[3] However, the total costs claimed by the defendants in accordance with the orders above is approximately $839,036, plus certain disbursements. Even taking into account the funds released and any costs due to Bakers Investments pursuant to order 2 above, it is common ground that moneys will remain owing by Bakers Investments pursuant to order 1 above.[4]

4 The first defendant, Caason Investments Pty Ltd ("Caason"), is the ultimate substantial holding company of the second defendant, Hardrock Investments Pty Ltd ("Hardrock Investments"). The third defendant is Hardrock Coal Mining Pty Ltd ("Hardrock Coal Mining"). At the time of trial, Caason owned 98.77 percent of the shares in Hardrock Coal Mining.

5 The case principally concerned an agreement between Bakers Investments and Caason regarding the funding of an exploration and development opportunity in relation to a coal mine in north-east Tasmania. Neither party fully performed their obligations under the agreement. Each made claims against the other with respect to a number of alleged breaches. The original entity by which the investment opportunity was to be pursued was Hardrock Investments. Caason had an agreement to purchase all of the shares in Hardrock Investments, but it needed funding for both the acquisition of the shares and the development of the mine. In pursuit of this funding, it entered into an agreement with Bakers Investments. Bakers Investments claimed an entitlement to shares in Hardrock Investments pursuant to the agreement. In fact, Hardrock Coal Mining acquired all of the shares in Hardrock Investments, to the exclusion of Bakers Investments.

6 The defendants, justifiably,[5] expect that Bakers Investments will not be able to meet the outstanding costs award. Accordingly, they seek their costs, as previously ordered, against non-parties, who may conveniently be classified into 2 groups.

7 Lisa Marie Lombardi ("Lombardi"), Ross Graham Paul ("Paul"), Stanley John Bates ("Bates"), Ian George McPherson ("McPherson") and IQA Pty Ltd ("IQA") are all associated with Bakers Investments. Their association is by reason of the following:[6]

(1) Lombardi is the secretary and general counsel of Bakers Investments. Lombardi is a shareholder of IQA and was a shareholder of Bakers Investments.

(2) Paul is a director of Bakers Investments, is or was a shareholder of Bakers Investments and is a shareholder of IQA.

(3) Bates is a director of Bakers Investments, is a director of Narioka Investments Pty Ltd, which is a substantial shareholder of Bakers Investments, and was personally a shareholder of Bakers Investments and IQA.

(4) McPherson is a director and is or was a shareholder of Bakers Investments and was a shareholder of IQA.

(5) IQA is a shareholder of Bakers Investments. It holds 221,075 of the 738,460 ordinary shares issued,

8 In addition, each of Lombardi, Paul, Bates and McPherson provided funding to Bakers Investments to meet litigation costs. Bates also paid a security deposit on behalf of Bakers Investments in the proceeding to partially satisfy an order for security for costs.[7]

9 Global Litigation Funding Pty Ltd ("Global Litigation") provided funding to Bakers Investments to prosecute its claims in this proceeding.[8] Esplanade Holdings Pty Ltd ("Esplanade Holdings"), Ryan Carter ("Carter Junior") and Rodney Charles Carter ("Carter Senior") are associated with Global Litigation as follows:[9]

(1) Esplanade Holdings is and was at all times the sole shareholder of Global Litigation.

(2) Carter Junior is the secretary of Global Litigation, and has been since 20 January 2014. Carter Junior was a director from that date until 1 October 2014. Carter Junior has been a director (since 1 November 2011), secretary (since 1 February 2014) and shareholder (since 10 February 2015) of Esplanade Holdings.

(3) Carter Senior is now the sole director of Global Litigation, and has been since 1 October 2014. Before his appointment as a director, he held no formal office for Global Litigation, but he attended the mediation of this proceeding on 20 May 2014 on behalf of Global Litigation,

10 The defendants seek orders, pursuant to s 24(1) of the Supreme Court Act 1986 (Vic) and r 63.02 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic), that the Associated Non-Parties and the Funding Non-Parties be jointly and severally liable, together with Bakers Investments, to pay the defendants' costs as ordered against Bakers Investments.

11 Section 24(1) of the Supreme Court Act provides:

Unless otherwise expressly provided by this or any other Act or by the [Supreme Court Rules], the costs of and incidental to all matters in the Court ... is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid.

Rule 63.02 of the Supreme Court Rules requires the power and discretion under s 24(1) of the Supreme Court Act to be exercised subject to, and in accordance with, O 63 of the Supreme Court Rules.[10]

12 The making of orders against non-parties under s 24(1) is exceptional. But care must be taken in using this term, so that it is not understood as imposing a threshold that goes beyond the language of the statutory provision.[11] As was stated by the Privy Council in Dymocks Franchise Systems (NSW) Pty Ltd v Todd:[12]

Although costs orders against non-parties are to be regarded as "exceptional", exceptional in this context means no more than outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense. The ultimate question in any such "exceptional" case is whether in all the circumstances it is just to make the order.[13]

13 The discretion to be exercised is unfettered.[14] There is no onus of proof.[15]

14 In Knight v FP Special Assets Ltd,[16] Mason CJ and Deane J[17] referred to a category of cases in which a non-party order might be made, stating:[18]

For our part, we consider it appropriate to recognize a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation. That category of case consists of circumstances where the party to the litigation is an insolvent person or a [person] of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made.[19]

(Emphasis added.)

15 In determining whether or not a costs order ought to be made against a non-party, the moving party need not establish that the non-party is, in effect, the opposing party. It may be sufficient if the non-party, by its involvement, may properly and fairly be described as a real party to the litigation.[20]

16 Each case must depend upon its own facts, and no restriction ought to be placed upon the court's discretion other than that it is to be exercised judicially.[21] The following factors may be relevant to the exercise of the court's discretion:

(1) The extent to which the non-party has funded the litigation.[22]

(2) The extent to which the non-party has a real interest in the fruits of the litigation if the assisted party were successful.[23]

(3) The level of control the non-party exercised, or was entitled to exercise, over the conduct of the litigation, including its resolution.[24]

(4) Whether or not the non-party attended any mediation of the dispute.[25]

(5) The financial position of the assisted party.[26]

(6) Whether the conduct of the litigation by the assisted party, or, if applicable, the funding non-party, in either prosecuting or defending a claim, was unreasonable, improper or an abuse of process.[27]

(7) Whether security for costs was previously sought.[28]

(8) Whether a timely warning was given by the successful party to the non-party that costs would be sought against it.[29]

(9) The extent of the impact on the court of the involvement of the non-party.[30]

(10) Whether the non-party agreed to provide an indemnity to the assisted party for any adverse costs order.[31]

1. Bakers Investments' financial position and the power to exercise the court's discretion

17 The Associated Non-Parties submitted that Bakers Investments was neither insolvent nor a person of straw. Further, they submitted that it would be a wrongful exercise of the court's discretion to award non-party costs in these circumstances. The Funding Non-Parties adopted these submissions.

18 The Associated Non-Parties contended that at no material time was Bakers Investments insolvent. Reliance was placed upon Bakers Investments' audited financial reports for the years ended 30 June 2011, 2012, 2013 and 2014. At the time of this application, the audited financial report for the year ended 30 June 2015 had not been completed.

19 It is correct to submit that the audited financial reports demonstrate that Bakers Investments, strictly, was not insolvent from 1 July 2010 to 30 June 2014. The financial statements for each of the financial years from 2011 to 2014 have been signed off by the auditors and the directors on the basis that Bakers Investments was a going concern. However, this was only possible for the years ended 30 June 2012, 2013 and 2014 on the basis that either the directors (in 2012 and 2013) or the directors and shareholders (in 2014) committed to continuing to financially support Bakers Investments. But for such commitments, Bakers Investments would have been insolvent from at least 30 June 2012.[32]

20 In other words, the financial support of the same directors and officers of Bakers Investments that are now the subject of this application is the only reason Bakers Investments was able to continue to trade lawfully throughout this period.

21 In addition to the audited financial reports, the Associated Non-Parties led further limited evidence as to Bakers Investments' current trading position. Lombardi asserted that Bakers Investments continued to trade and to generate substantial fees. To support this assertion, the Associated Non-Parties relied on an invoice dated 6 July 2015 issued by Bakers Investments for US$500,000 for "services performed". On the face of the invoice, that amount was payable within 7 days from the date of the invoice. The invoice was addressed to a company in Singapore, about which no further details were given. No amount has been paid pursuant to the invoice, and there was no evidence to suggest that any amount ever would be. Given the lapse of time between the invoice being issued and the hearing of this application (approximately 112 days), there is no proper basis for the court to be satisfied that Bakers Investments will receive any payment pursuant to this invoice.

22 Further, the Associated Non-Parties relied on "current proposals to [Bakers Investments'] clients". These proposals were sent to prospective customers by Bakers Investments, 1 in each of March, April and May 2015. Again, the conspicuous lack of evidence of any response to these proposals not only suggests that Bakers Investments has not earned any revenue to date as a result of the proposals, but also that it is unlikely to do so in the future due to the lapse of many months since the proposals were issued.

23 Furthermore, the Associated Non-Parties further relied on the fact that Bakers Investments has held an Australian Financial Services Licence since 2010. This fact does not advance the non-parties' case. Although certain criteria must be satisfied to hold such a licence,[33] the holding of the licence does not alter the financial position of Bakers Investments as referred to above.

24 In short, the additional evidence did not establish any material change in the dire trading position and the very weak financial position of Bakers Investments as recorded in the audited financial statements for the financial years of 2012, 2013 and 2014. Indeed, the fact that only 1 invoice was produced suggests that Bakers Investments has a very limited ongoing business.

25 Moreover, evidence previously relied upon in seeking to resist an order for security for costs disclosed that Bakers Investments maintained management accounts.[34] On this application, Lombardi confirmed that Bakers Investments still prepares management accounts. No management accounts for the period following the 2014 financial year were produced.[35] Accordingly, I infer that the current financial records of Bakers Investments would not have assisted the Associated Non-Parties in seeking to establish that Bakers Investments was solvent and able to trade on an ongoing basis.[36]

26 The Associated Non-Parties submitted that Bakers Investments was not a "person of straw".[37] In making this submission, it was accepted that the term "person of straw" could apply to a company that was solvent. However, the Associated Non-Parties submitted that the mere fact that a party could not meet a costs order made against it did not necessarily mean that the party would be properly described as a person of straw. Further, it was submitted that because Bakers Investments continued to trade, with ongoing business and clients, it could not properly be so described.

27 There are 2 related Victorian Court of Appeal decisions that shed some light on the meaning of a "person of straw". The term was held to include a company with paid-up capital of $3 and no other assets.[38] In these 2 cases, there was no finding that the company in question was insolvent.

28 In addition, a party lacking the means to pay costs ordered within a reasonable time has been held to be someone who could be regarded as a person of straw.[39] Further, an employee or servant has been described as a "[person] of straw without insurance".[40] Similarly, an employer who was unable to pay compensation to an injured employee has been referred to as a person of straw.[41] In another instance, the term was used to describe a person who could not be located and against whom a plaintiff was trying to bring proceedings.[42] In Pyramid Building Society (in liq) v Terry,[43] a debtor who had already assigned all of its divisible property was described as a "person of straw" for the purposes of future or contingent creditors.[44]

29 In summary, and without being exhaustive, the term has been used to describe an insolvent person, a solvent person with little or no assets, a person who is or would be unable to meet all or substantially all of an adverse costs order within a reasonable period of time, a person who is unable to be sued as they are missing, a debtor who has already assigned all of its divisible property and a person not worth suing because they lack financial substance.[45]

C.3 Summary of Bakers Investments' financial situation

30 Bakers Investments readily fits the description of a person of straw. Its financial position shows that it has either no ability to meet, or possibly an ability to meet only a very small fraction, of the costs that have been awarded against it. Further, but for the support of the directors (and, more recently, its directors and shareholders) in the past, about which there is no evidence of any present ongoing commitment, Bakers Investments would have been plainly insolvent for a number of years.

31 For the purposes of this application, there is no suggestion that the directors or shareholders would meet Bakers Investments' costs obligations. On the contrary, their strident opposition to non-party costs orders suggests the contrary.

32 Finally, this proceeding was commenced during the 2012 financial year, namely on 24 October 2011. Accordingly, at all material times, Bakers Investments has been in a precarious financial position. In light of this, it is unnecessary to consider in any detail a further submission made, at least initially, on behalf of the Associated Non-Parties. This submission was to the effect that the court was required to consider the financial position of Bakers Investments at the commencement of the trial or earlier, but not its current financial position. Suffice to say, such a submission runs contrary to the approach taken in other cases,[46] and to the general nature and purpose of the court's discretion.

33 In light of the findings above concerning Bakers Investments' financial position, it is not strictly necessary to consider a further submission made, namely that such findings were effectively prerequisites to the exercise of the court's discretion to award non-party costs. In making this submission, particular reliance was placed upon the passage quoted above[47] from Knight v SP Special Assets Ltd.[48] For completeness, I will respond.

34 In my view, the submission is misconceived. The passage is illustrative and not exhaustive, as has been recognised in subsequent cases.[49] In fact, in that passage, Mason CJ and Deane J explicitly stated that they were merely recognising a category of cases in which a non-party costs order may be made.

35 Further, and in any event, in that case, the High Court was considering the meaning and operation of a rule of court which did not expressly confer the power to determine by whom costs ought to be paid.[50] The passage in question was directed to whether non-party costs could be awarded without such an express reference. In contrast, s 24(1) of the Supreme Court Act expressly confers that power. The words "by whom" in that section are not confined to the parties in the proceeding [51]

36 The language of the subsection makes it plain that the court has a general discretion. Unless the Supreme Court Rules otherwise provide (and they do not in this situation), the discretion cannot be fettered by the imposition of prerequisites or thresholds.[52] In short, the discretion must be exercised judicially in the interests of justice.

37 The defendants relied upon a number of factors in inviting the court to exercise its discretion to award costs against the Associated Non-Parties. They submitted that, absent the support of the directors and shareholders, Bakers Investments was insolvent or a person of straw. For the reasons stated above, I accept this submission.

38 Next, the defendants correctly submitted that the Associated Non-Parties had played an active role in the conduct of the litigation. Lombardi, Paul, Bates and McPherson, to a greater or lesser extent, each played active roles in the conduct of the litigation. They did this by reason of their positions as 1 or more of director, secretary or general counsel of Bakers Investments. But that, of itself, is not exceptional. In all cases involving a company, it would be expected that some, if not all, such persons would be actively involved in the conduct of the litigation. If it were otherwise, there would be a real risk that they would be in breach of the duties that they owed to Bakers Investments.

39 On the evidence, subject to the issue of funding referred to below, there is nothing to suggest that any of these individuals took an active role beyond performing their duties to Bakers Investments as officers of the company.[53]

40 The position of IQA is even more straightforward. It was no more than a shareholder of Bakers Investments. In these circumstances, no costs order should be made against it.[54]

41 Because of the financial position of Bakers Investments, Lombardi, Paul, Bates and McPherson provided funding for the purposes of the litigation from time to time. This was done in various ways, including by salary sacrificing or taking shares in lieu of directors' fees (thereby allowing those funds to be available for the litigation), direct funding or providing security for costs.

42 However, by whatever means funding was provided, there was no suggestion that any of them were entitled to the proceeds of the litigation, if Bakers Investments were successful, beyond having repaid the moneys they had advanced.

43 Next, the defendants submitted that, although Bakers Investments' claim was not improper or an abuse of process, its prosecution was unreasonable. In the Judgment, in concluding remarks, the claim by Bakers Investments was described as an ambitious claim.[55] It is unnecessary to repeat the reasons for this description.[56]

44 It was not suggested by the defendants at trial that Bakers Investments' claim was hopeless or its prosecution unreasonable. The remarks made in the Judgment were with the benefit of careful consideration of all the evidence. Bakers Investments' may not have been apprised of all facts relevant to such an analysis prior to trial. For example, Bakers Investments may not have had access to 1 of the central players in the facts before the court at trial, being Jeremy Baker ("Baker"), as it appeared to have had a falling out with him. Despite being directly involved in numerous critical events the subject of the proceeding, Baker was not called as a witness by any party.[57]

45 Further, the fact that Bakers Investments sought to recover large sums of money after having made only a very small investment of its own resources does not, of itself, suggest that the prosecution of the claim was unreasonable. Bakers Investments' claim was for the loss of the benefit of a contract. Sometimes, the nature of such a claim will result in substantial damages being awarded notwithstanding that the wronged party has made little financial investment.[58]

46 In short, without going into the complicated and extensive facts the subject of the Judgment, in my view, Bakers Investments' conduct in prosecuting its claim was not unreasonable.

47 Finally, the defendants relied upon an offer by them dated 5 May 2014, which was served without prejudice save as to costs.[59] It was submitted that the matters set out in that letter explained why it was that Bakers Investments' prospects of success were weak. It was further submitted that the rejection of the offer to settle was unreasonable.

48 I do not propose to go into the details of this letter. On 12 December 2014, when the issue of the costs of the trial was before the court, senior counsel for the defendants (in my view, quite properly) chose not to seek indemnity costs based on the contents of the letter. Although there was no ventilation as to why this course was adopted, I infer that at least 1 reason was because the offer made, in substance, was simply for the parties to "walk away". The amount offered would have been unlikely to have covered Bakers Investments' costs at that time. Further, contrary to the defendants' submission, the principal basis upon which Bakers Investments ultimately failed at trial was not referred to in the letter.

49 In my opinion, for the reasons set out above, the circumstances do not warrant making a costs order against any of the Associated Non-Parties.

50 In light of this conclusion, it is unnecessary to consider further factors, such as the defendant's applications for security for costs or whether or not the notice given by the defendants' solicitor of the intention to claim non-party costs against the Associated Non-Parties was adequate.

51 The Funding Non-Parties described the application for the orders sought against them as unprecedented and vexatious. Essentially, it was submitted that the authorities demonstrated that, ordinarily, costs should not be awarded against non-party funders. In making this submission, the Funding Non-Parties principally relied upon 3 decisions.

52 Reference was made to Campbells Cash & Carry Pty Ltd v Fostif Pty Ltd,[60] in submitting that non-party costs orders, generally speaking, should not be made against pure litigation funders because "offering terms which ... would yield ... a significant profit ... [does not] warrant condemnation as being contrary to public policy or leading to any abuse of process".[61] It was further submitted that such condemnation would reintroduce the tort of champerty by a side wind if there was an absence of illegality or public policy grounds for rendering a particular funding agreement void.[62]

53 The difficulty in relying upon this authority for the propositions put is that, in Campbells Cash & Carry Pty Ltd v Fostif Pty Ltd, the High Court was not concerned with costs, but with whether or not a proceeding ought to be stayed as an abuse of process because of the level of involvement of a funder. The mere finding that it was not an abuse of process for a non-party to provide funding and to exercise a degree of control over the conduct of litigation with a view to making a profit, says very little regarding the question of whether such a non-party ought to pay the costs upon the failure of the funded party to establish its case.

54 The Funding Non-Parties also appeared to submit that making a non-party costs order against them would be contrary to the now established public policy position. For example, in Campbells Cash & Carry Pty Ltd v Fostif Pty Ltd, Gummow, Hayne and Crennan JJ held that there was no "... ultimate foundation for a conclusion ... that maintaining an action (or maintaining an action in return for a share of the proceeds) should be considered as contrary to public policy ...".[63]

55 There are difficulties with this submission. In Latoudis v Casey,[64] McHugh J explained the rationale of a costs order as follows:[65]

The rationale of the order is that it is just and reasonable that the party who has caused the other party to incur the costs of litigation should reimburse that party for the liability incurred. The order is not made to punish the unsuccessful party. Its function is compensatory. Thus, in civil proceedings an order may, and usually will, be made even though the unsuccessful party has nearly succeeded or has acted reasonably in commencing proceedings. It may, and usually will, be made even though the action has failed through no fault of the unsuccessful party.

56 Non-party costs orders are guided by the same general principles.[66] Accordingly, the making of a costs order against a non-party does not require a finding that the conduct of the non-party was contrary to public policy.

57 This was acknowledged in Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd.[67] In that case, it was stated that "litigation funding is not against public policy," but it was also observed that the "courts should be particularly concerned that persons whose involvement in litigation is purely for commercial profit should not avoid responsibility for costs if the litigation fails".[68]

58 Similarly, in Bufalo Corp Pty Ltd v Lendlease Primelife Corp Ltd (No 3),[69] Judd J noted that a costs award (or, in that case, a security for costs award) should not be characterised as a penalty in this jurisdiction. In responding to a submission that a litigation funder should not be penalised for providing funding to the plaintiff, his Honour stated that "access to justice carries with it financial responsibilities," including the responsibility "to meet orders for costs".[70]

59 Next, reference was made to another High Court decision of Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd.[71] While this case was concerned with non-party costs, the court's discretion was governed by provisions fundamentally different in scope and object. The applicable legislation and rules,[72] in essence, prohibited the making of costs orders against a person who was not a party to the proceeding unless, relevantly, the person had committed an abuse of process of the court.[73]

60 In particular, the issue directly before the High Court was whether or not the failure of a non-party funder to provide an indemnity for the costs awarded against the funded party was an abuse of process.[74] To that extent, the case is relevant to issues presently before this court as no indemnity was provided by Global Litigation. However, beyond that, the case is clearly distinguishable, as is demonstrated by the following passage:[75]

In a decision relying in part on what was said in Knight [v FP Special Assets Ltd], the Privy Council in Dymocks Franchise Systems (NSW) Pty Ltd v Todd held that "generally speaking, where a non-party promotes and funds proceedings by an insolvent company solely or substantially for his own financial benefit, he should be liable for the costs if his claim or defence or appeal fails".

These authorities and the cases cited in them did not require characterisation of non-party funding arrangements, which attracted the discretion to award costs against the non-party, as an abuse of process. The requirement for that characterisation in this case is imposed by [the Uniform Civil Procedure Rules 2005 (NSW)], r 42.3.

(Citation omitted.)

61 Reliance was also placed by the Funding Non-Parties upon the following passage:[76]

The proposition that those who fund another's litigation must put the party funded in a position to meet any adverse costs orders is too broad a proposition to be accepted. As stated, the proposition would apply to shareholders who support a company's claim, relatives who support an individual plaintiff's claim and banks who extend overdraft accommodation to a corporate plaintiff. But not only is the proposition too broad, it has a more fundamental difficulty. It has no doctrinal route.

(Emphasis added.)

That there is no doctrine which mandates that a funder must be liable itself to pay adverse costs awarded against a funded party is not to the point. The application presently made requires the court to consider whether, in the exercise of its discretion, costs ought to be awarded against a funder and related parties. This is fundamentally different to what was being considered by the High Court.

62 In summary, Campbells Cash & Carry Pty Ltd v Fostif Pty Ltd and Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd provide little direct assistance to the court in this application.

63 Finally, the Funding Non-Parties referred to Gore (trading as Clayton Utz) v Justice Corporation Pty Ltd,[77] a case in which costs were awarded against a non-party funder. In that case, the funded party had the benefit of an indemnity from the funder for any adverse costs order (of which the opposing party had been aware) and the funding agreement deprived the funded party of any right to control the conduct of the litigation. Correctly, it was submitted that this case was distinguishable from the circumstances presently before this court.

64 However, that does not mean, as was submitted by the Funding Non-Parties, that the absence of an indemnity in favour of the unsuccessful funded party should necessarily result in no costs order being made against the non-party funder. It is but 1 factor to take into account.[78] While Gore (trading as Clayton Utz) v Justice Corporation Pty Ltd is relevant to the exercise of the discretion in this matter, it does not stand for the proposition put by the Funding Non-Parties.

65 Accordingly, I will now turn to the matters relevant to the court's discretion.

66 The defendants relied principally upon 3 factors in seeking to have costs awarded against the Funding Non-Parties: (1) the financial position of Bakers Investments; (2) the impact of the Funding Non-Parties on the conduct and potential resolution of the proceeding; and (3) the level of return to the Funding Non-Parties in the event Bakers Investments succeeded.

67 The defendants sought access to the funding agreement between Global Litigation and Bakers Investments over an extended period of time. A document entitled "Litigation Funding Deed" was eventually produced[79] ("the Litigation Funding Deed").

68 The Litigation Funding Deed, which was between Global Litigation as "Funder" and Bakers Investments as "Claimant", required Global Litigation to provide a level of funding, up to a capped amount for legal costs, together with an obligation to pay for disbursements. The Litigation Funding Deed also required Global Litigation to pay up to $100,000 immediately towards security for costs.

69 In return, Global Litigation was entitled to a certain percentage of the "Final Amount", which was defined to mean the gross amount awarded to or agreed to be provided to Bakers Investments, including interest and costs. The amount to which Global Litigation was entitled was defined as the "Additional Sum". Without disclosing the specifics, the amount that Global Litigation would have been entitled to in the event that Bakers Investments had made good its claim constituted a very substantial return on investment. The potential returns exceeded the capped outlay many, many times. In a case in which Bakers Investments claimed $46.8 million against the defendants, Global Litigation stood to reap very substantial rewards in the event that Bakers Investments was successful at trial.

70 In addition to the possible pecuniary reward, the Litigation Funding Deed also contained other provisions relevant to the exercise of the court's discretion on non-party costs. Those provisions were as follows:

(1) Bakers Investments agreed to grant a charge over all of its interest in the proceeding and its claim against the defendants in order to secure Bakers Investments' obligations under the Litigation Funding Deed.

(2) In the event that Bakers Investments was ultimately successful in the proceeding, it was required to cause payment to Global Litigation of all funding actually advanced by Global Litigation for legal costs and disbursements, before paying the Additional Sum.

(3) Bakers Investments was required to provide Global Litigation with detailed reports on the status and progress of the proceeding every month, or at more frequent intervals as requested by Global Litigation.

(4) Bakers Investments retained the right to direct the conduct of the proceeding.

(5) Bakers Investments agreed to consult with Global Litigation "on all matters".

(6) Bakers Investments agreed it would not settle the proceeding, or reject an offer to settle the proceeding, without engaging in reasonable prior consultation with Global Litigation.

(7) If the parties could not agree upon a settlement proposal, there was a mechanism by which the question could be referred to senior counsel for advice (being senior counsel for Bakers Investments or, if unable to be resolved, independent senior counsel). In the event that the parties could still not agree, Bakers Investments retained the unfettered power to settle or not settle the proceeding.

(8) Global Litigation was entitled to request information as it reasonably required in relation to the conduct and progress of the proceeding.

(9) Bakers Investments agreed that it would not retain solicitors to act for it in the proceeding, other than the solicitors identified, without the prior written approval of Global Litigation.

71 In summary, Bakers Investments retained the ultimate control of the conduct of the litigation. That said, Global Litigation had the right to closely monitor the conduct of the proceeding and any settlement discussions. As to settlement discussions, Global Litigation had the right to have direct input in relation to the outcome of those discussions, although Bakers Investments had the final say. Finally, in contrast to the Associated Non-Parties, Global Litigation had a very substantial interest in the proceeds of any judgment in favour of Bakers Investments, which went beyond the mere recovery of funds provided. Global Litigation's interest in such proceeds was represented by both payment of a significant portion of any judgment (including interest and costs) and by way of a security interest over the whole amount.

72 The Funding Non-Parties sought to rely upon the following factors, none of which were controversial:

(1) Bakers Investments was the proper plaintiff and, as 1 of the parties to the contract the subject of the dispute, a real party to the proceeding.

(2) At the time the proceeding commenced, Bakers Investments was operating as a going concern (although only with the ongoing financial commitment of the directors).

(3) Bakers Investments commenced the proceeding and engaged lawyers before it sought and obtained litigation funding.

(4) Global Litigation did not use Bakers Investments as a person of straw to gain the benefit of the proceeding against the defendants with the intention of avoiding liability for costs.

(5) The defendants repeatedly took steps by way of applications for security for costs to protect their position in the event that they were successful.

73 In relation to the last of these factors, the Funding Non-Parties relied on the fact that the defendants' applied for and were granted security for costs in submitting that a non-party costs order should not be made. In circumstances where the Funding Non-Parties funded a substantial portion of the security paid,[80] and the defendants' costs exceeded the security paid despite having made numerous security for costs applications both before and during the trial,[81] the defendants' successful applications for security for costs do not militate against awarding a non-party costs order. These circumstances are but a factor to take into account.

74 There are some further matters relevant to the exercise of the court's discretion.

75 Events unfolded during the course of the trial which demonstrated that the litigation would not have proceeded to the end of trial and judgment, but for the involvement of Global Litigation.[82] On 4 April 2014, the court ordered security for costs in the sum of $113,193 be paid by 4.00 pm on 19 May 2014 (being the first day of trial).[83] On that day, a cheque was provided by Global Litigation in the sum of $113,193 (but see paragraph 77 below). As a result of this cheque being provided, the trial proceeded.

76 Unbeknown to me at the time, Global Litigation made arrangements with the court (through Funds in Court) to replace the cheque provided on 19 May 2014 with another cheque. The later cheque was provided on 21 May 2014. Bates and Carter Senior attended court for this purpose.[84] That cheque was dishonoured. This fact was not drawn to the court's attention until the morning of 27 May 2014, the 6th day of trial.

77 Both cheques, each for $113,193, were drawn on an account entitled "Delia Carter Trust".[85] At the time, there was no suggestion that the real source of the funds provided was Global Litigation.

78 By operation of the court's orders, the proceeding was stayed because of the failure to provide security. An exchange then occurred between Bakers Investments' senior counsel and the court which made it clear that the proceeding would continue to be stayed unless Global Litigation provided the required security. During that exchange, senior counsel referred to the fact that trust funds were being provided to satisfy the security for costs awarded.

79 Although the proceeding was stayed, the court allowed further evidence to be adduced until the luncheon break on 27 May 2014, so that time and money was not wasted. This was done on the understanding that the funding would be provided later that day, which in fact occurred by way of a bank cheque.

80 The defendants submitted a further matter to consider was the nature of Global Litigation's business. It was contended that the court should draw an inference that Global Litigation was incorporated for the specific purpose of funding this litigation. This was based on Global Litigation being incorporated on 20 January 2014 and Bakers Investments informing the court on 7 February 2014 that it had obtained litigation funding.[86] In response to this submission, counsel for the Funding Non-Parties said, in the absence of any evidence, it would be incorrect to draw such an inference, as it was equally open for the court to infer that Global Litigation was involved in funding other proceedings. Whichever is the correct inference, it is not in dispute that Global Litigation is in the business of funding commercial litigation for profit.

81 Another relevant factor is that, on 2 May 2014, before the trial commenced, the defendants' solicitors wrote to Global Litigation, and Carter Junior (who was then the only director and secretary of Global Litigation). The stated purpose of the letter was to put Carter Junior on notice that the defendants reserved their rights to make an application against him "and/or your companies (as [Bakers Investments'] litigation funder; and hence as person(s) standing behind [Bakers Investments] who stand to benefit from the litigation) if they are successful in the proceeding". Thus, the notice gave Global Litigation and those standing behind it more than 2 weeks to consider whether they should continue to support the litigation prior to trial commencing.[87]

82 The letter also noted that a copy of the litigation funding agreement had been sought on 2 previous occasions from Bakers Investments' solicitors and that the security for costs that had already been ordered would be insufficient to cover the costs of the defendants.

83 No response to this letter was received by the defendants.

84 On 20 May 2014, Global Litigation took part at the mediation that was held. It attended that mediation, represented by Carter Senior.

85 Having set out the relevant facts, it is necessary to consider them with respect to each of the Funding Non-Parties.

86 As noted above,[88] it was common ground that Global Litigation is in the sole business of seeking to make profits from commercial litigation. The business model adopted by Global Litigation enabled it to have the potential to make many millions of dollars in this case, while only having to invest a relatively small amount of the potential profit. If Bakers Investments were successful, it would have been entitled to receive all the costs it had paid in addition to the agreed Additional Sum. In other words, Global Litigation's position was that, if Bakers Investments had been successful, its entitlements would have, in effect, included the benefit of a significant part of a costs order in favour of Bakers Investments.

87 This business model has also had consequences for others. By Global Litigation agreeing to fund the litigation, the defendants have had to engage in a 9 day trial[89] involving complicated issues which, appropriately, involved both senior and junior counsel, and a senior solicitor. Further, Global Litigation has used the publicly funded processes of the court, at considerable expense to the community, for the purposes of its commercial gain.[90]

88 Furthermore, Global Litigation had no prior association with Bakers Investments, and its involvement in this litigation was purely for commercial gain. This may be contrasted with the Associated Non-Parties' position and the explanation for their involvement in the litigation.[91] The subject matter of the litigation was a private dispute, about which there was no public interest or benefit other than the public interest of having disputes determined between litigants.

89 Taking into account each of the matters referred to above, it is appropriate that an order be made that Global Litigation is jointly and severally liable for the costs ordered against Bakers Investments. Notwithstanding 4 orders for security for costs, there is a substantial shortfall when the amount of the security is set-off against the defendants' costs as ordered. The shortfall is highly unlikely to be met by Bakers Investments. Although Bakers Investments was a substantive plaintiff, it was of such limited means that it could not pursue the litigation from its own resources. Further, from the time of its involvement, Global Litigation was not merely a passive funder. In short, without repeating all of the matters set out above, it may properly be characterised as a party to the proceeding. However, the order will be limited to those costs incurred from the time of Global Litigation's involvement, which (on the available material) was on or about 7 February 2014.

90 The practical effect of the making of an order in terms referred to in the previous paragraph may be of little comfort to the defendants. Global Litigation has only $100 in paid up capital. There is no evidence to suggest it holds any substantive assets.

91 A direct financial interest in the outcome of the proceeding is not required for a non-party costs order to be made.[92]

92 In my view, it would not be in the interests of justice if corporate funders were able to be established with limited paid up capital and virtually no assets, so that those truly standing behind the litigation would not be exposed to any adverse costs order. A costs order against such persons associated with the funder does not, in substance, ignore the independent legal entity of a company,[93] but rather ensures that the costs order is directed to those persons who in substance were funding the litigation and, to the extent they were, exercising influence or control in relation to the litigation.

93 Carter Junior and Esplanade Holdings, being the sole director and secretary, and the sole shareholder, respectively, of Global Litigation at the relevant times are the persons that have, in substance, stood behind the litigation. As noted in paragraph 81 above, both Carter Junior and Esplanade Holdings were given express notice of the defendant's intention to seek a non-party costs order to be made against them in the event that the defendants were successful. In my view, the costs order ought to include both of them.

94 For completeness, neither of them (or any of the Funding Non-Parties) put any evidence before the court as to their involvement. Although not necessary for the conclusion reached, it should be noted that the absence of any such evidence gives rise to an adverse inference as to the level of their involvement.[94]

95 That leaves Carter Senior. No order for costs ought to be made against him in circumstances where he was not a director, secretary or shareholder of Global Litigation at any time during the course of the trial. He was only appointed a director approximately 5 months after the trial had been completed. Although he attended the mediation on behalf of Global Litigation, that fact, of itself, does not indicate that Carter Senior was "standing behind", or was to benefit from the litigation.[95] Further, there is no direct evidence that Carter Senior received prior notice of any intention on the part of the defendants to make him personally liable for any adverse costs order.

96 For the reasons set out above, orders will be made that each of the Funding Non-Parties, except Carter Senior, shall be jointly and severally liable with Bakers Investments for the costs of the proceeding (as ordered in order 1, set out in paragraph 2 above), but limited to those costs incurred on and from 7 February 2014. Otherwise, the defendants' summons seeking non-party costs against the Associated Non-Parties and Carter Senior shall be dismissed.

[1] Bakers Investment Group (Australia) Pty Ltd v Caason Investments Pty Ltd (No 2) [2014] VSC 598.

[2] See Supreme Court (General Civil Procedure) Rules 2005 (Vic), r 63.28, which came into operation on 1 April 2013.

[3] This amount represents the total of 4 security for costs orders made on 29 March 2012, 4 February 2013, 4 April 2014 and 28 May 2014. The last order for security for costs was in the sum of $27,930. This sum was paid by bank cheque. There was no evidence on this application concerning, nor were any submissions directed to, the source of the funds used to comply with the final security for costs order.

[4] Although the non-parties do not accept the amount of costs claimed by the defendants, there was no issue between the parties as to whether the costs required to be paid by Bakers Investments would exceed the sum of $230,123 already released.

[5] See pars 3 above and 17-31 below.

[6] There was a lack of evidence as to the periods in which some of the relevant shares and positions were held by certain of the Associated Non-Parties. Such uncertainty is of little moment. The decision does not turn on these facts.

[7] See par 77 below and fn 85 below.

[8] As to the means and extent of this, see pars 68, 69 and 75-79 below.

[9] The most recent evidence tendered in relation to the shareholdings and positions of the Funding Non-Parties is dated 24 March 2015. No evidence was put forward to suggest the position had changed since that time.

[10] No party made any submission that any rule in O 63 of the Supreme Court Rules directly addressed the discretion to be exercised on this application.

[11] Thiess v Collector of Customs [2014] HCA 12; (2014) 250 CLR 664, 671 [22] (French CJ, Hayne, Kiefel, Gageler and Keane JJ), quoting Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 250 CLR 503, 519 [39] (French CJ, Hayne, Crennan, Bell and Gageler JJ). See also Legal Services Board v Gillespie-Jones [2013] HCA 35; (2013) 249 CLR 493, 509 [49] and 511 [59] (French CJ, Hayne, Crennan and Kiefel JJ); Baini v The Queen [2012] HCA 59; (2012) 246 CLR 469, 476 [14] (French CJ, Hayne, Crennan, Kiefel and Bell JJ).

[13] See also Ballantyne Suites Pty Ltd v Ballantyne Chambers Pty Ltd (in liq) [2014] VSCA 223, [43] (Ashley, Priest and Santamaria JJA); Ballantyne Suites Pty Ltd v Ballantyne Chambers Pty Ltd (in liq) (No. 2) [2014] VSC 147, [22] (Hargrave J).

[14] Ballantyne Suites Pty Ltd v Ballantyne Chambers Pty Ltd (in liq) (No. 2) [2014] VSC 147, [5]-[8] (Hargrave J), and the cases there cited.

[15] Ipex ITG Pty Ltd (in liq) (receivers appointed) v Victoria [2014] VSCA 315, [45] (Neave, Santamaria and Kyrou JJA); Ballantyne Suites Pty Ltd v Ballantyne Chambers Pty Ltd (in liq) [2014] VSCA 223, [45] (Ashley, Priest and Santamaria JJA).

[16] (1992) 174 CLR 178.

[20] Kebaro Pty Ltd v Saunders [2003] FCAFC 5, [103], [111] (Beaumont, Sundberg and Hely JJ); citing Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) 179 ALR 406, 414 [37] (Callinan J).

[21] Knight v FP Special Assets Ltd (1992) 174 CLR 178, 205.4 (Gaudron J). See also par 36 below.

[22] Kebaro Pty Ltd v Saunders [2003] FCAFC 5, [114] (Beaumont, Sundberg and Hely JJ).

[23] Ipex ITG Pty Ltd (in liq) (receivers appointed) v Victoria [2014] VSCA 315, [52] (Neave, Santamaria and Kyrou JJA); Ipex ITG Pty Ltd (receivers and managers appointed) v Melbourne Water Corporation [2012] VSCA 169, [74] (Mandie JA, with whom Redlich JA and Beach AJA agreed).

[24] Ipex ITG Pty Ltd (in liq) (receivers appointed) v Victoria [2014] VSCA 315, [52].

[26] Ipex ITG Pty Ltd (receivers and managers appointed) v Melbourne Water Corporation [2012] VSCA 169, [74].

[27] Permark International Interiors Pty Ltd v Amoveo Pty Ltd [2013] VSC 563, [81]-[82] (Croft J).

[28] Ipex ITG Pty Ltd (in liq) (receivers appointed) v Victoria [2014] VSCA 315, [49] (Neave, Santamaria and Kyrou JJA).

[29] Ipex ITG Pty Ltd (in liq) (receivers appointed) v Victoria [2014] VSCA 315, [50]-[51].

[30] Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) 179 ALR 406, 414 [36] (Callinan J).

[31] Gore (trading as Clayton Utz) v Justice Corporation Pty Ltd (2002) 119 FCR 429, 434-435 [17], 443 [37], 451-452 [62] (O'Loughlin, Whitlam and Marshall JJ).

[32] The 2012 financial statements included the following:

(1) Bakers Investments incurred a loss of $368,018.

(2) Bakers Investments' operations had declined and it had also incurred significant legal costs during that financial year.

(3) Notwithstanding an increase in issued capital of $120,075 in the 2011 financial year, Bakers Investments had net assets of negative $9,106.

(4) The notes to the financial statements included the following: "[t]he deficiency of net assets and the net loss position indicate the existence of a material uncertainty regarding [Bakers Investments'] ability to continue as a going concern, and therefore, whether the company will be able to realise its assets and discharge its liabilities in the normal course of business. However, the financial statements have been prepared on a going concern basis, which contemplates the continuity of normal business activities and realisation of assets and discharge of liabilities in the ordinary course of business. This basis has been adopted as [Bakers Investments] has received commitment from its directors on their continuing financial support to allow [Bakers Investments] to meet its liabilities as and when they fall due and payable. It is the directors' belief that such financial support will continue to be made available." (Emphasis added.)

(5) The shares in Hardrock Investments were recorded as an asset of Bakers Investments with a value of $67.

The 2013 financial statements included the following:

(2) Bakers Investments' operations had declined and it had also incurred significant legal costs during that financial year. There had been no significant change in Bakers Investments' state of affairs during that financial year.

(3) Bakers Investments had net assets of negative $93,351.

(4) The notes to the financial statements included the following: "[t]he deficiency of net assets and the net loss position indicate the existence of a material uncertainty regarding [Bakers Investments'] ability to continue as a going concern, and therefore, whether the company will be able to realise its assets and discharge its liabilities in the normal course of business. However, the financial statements have been prepared on the going concern basis, which contemplates the continuity of normal business activities and realisation of assets and discharge of liabilities in the ordinary course of business. This basis has been adopted as [Bakers Investments] has received commitment from its directors on their continuing financial support to allow [Bakers Investments] to meet its liabilities as and when they fall due and payable. It is the directors' belief that such financial support will continue to be made available." (Emphasis added.)

(5) The shares in Hardrock Investments were recorded as an asset of Bakers Investments with the value of $67 maintained.

The 2014 financial statements included the following:

(1) Bakers Investments incurred a loss of $681,952.

(2) In calculating that loss, Bakers Investments' total revenue for the year of $585,304 was taken into account. None of that amount was operational income, with $497,871 being described as "litigation funding support". In short, there was no operational income to meet Bakers Investments' rent (of $92,105), let alone other operational expenses.

(3) Notwithstanding an increase in issued capital of $738,460 for that year, Bakers Investments had net assets of negative $36,843.

(4) The notes to the financial statements included the following: "[t]his financial report has been prepared on a going concern basis, which contemplates the continuity of normal business activities and realisation of assets and discharge of liabilities in the ordinary course of business. However, ... [g]iven [Bakers Investments'] negative net asset position, the ability of [Bakers Investments] to continue as a going concern and pay its debts as and when they fall due needs to be considered. The continuation of [Bakers Investments] as a going concern is dependent upon the following: a) The continued financial support, either in the form of long-term loan or equity from [Bakers Investments'] directors and shareholders ... In the event that the above arrangements are not entered into, there is significant uncertainty as to whether [Bakers Investments] will continue as a going concern and therefore, whether, it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial statements." (Emphasis added.) A similar note was made by the auditors.

(5) The shares in Hardrock Investments were still recorded as an asset of Bakers Investments with a value of $67.

[33] Bakers Investments' Australian Financial Services Licence contains conditions relating to its financial position, including that it must "be able to pay all its debts as and when they become due and payable".

[34] Bakers Investment Group (Australia) Pty Ltd v Caason Investments Pty Ltd [2014] VSC 154, [22]-[34].

[35] I previously concluded that Bakers Investments' management accounts were of no probative value due to the particular form and manner in which the management accounts were produced on that application: see Bakers Investment Group (Australia) Pty Ltd v Caason Investments Pty Ltd [2014] VSC 154, [27].

[36] Androvitsaneas v Members First Broker Network Pty Ltd [2013] VSCA 212, [30] (Redlich and Priest JJA and Macaulay AJA); Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298, 308.5 (Kitto J), 312.6 (Menzies J), 320.8-321.2 (Windeyer J).

[37] In some of the authorities, the term "man of straw" is also used.

[38] Ipex ITG Pty Ltd (in liq) (receivers appointed) v Victoria [2014] VSCA 315, [28] and [43] (Neave, Santamaria and Kyrou JJA); Ipex ITG Pty Ltd (receivers and managers appointed) v Melbourne Water Corporation [2012] VSCA 169, [74] (Mandie JA, with whom Redlich JA and Beach AJA agreed).

[39] Yates Property Corporation Pty Ltd v Boland (No 2) [1997] FCA 760; (1997) 147 ALR 685, 695.3 (Branson J).

[40] Fleming, The Law of Torts, (9th ed, 1998), 14, referred to with approval in Hollis v Vabu Pty Ltd [2001] HCA 44; (2001) 207 CLR 21, 54 [86] (McHugh J).

[41] Cribb v Korn [1911] HCA 9; (1911) 12 CLR 205, 212.2 (Barton J).

[42] Simmons v Story [2001] VSCA 187, [1] (Winneke P).

[43] [1997] HCA 48; (1997) 189 CLR 176.

[44] Pyramid Building Society (in liq) v Terry [1997] HCA 48; (1997) 189 CLR 176, 213.9 (Kirby J).

[45] With respect to the last meaning, see Butterworths Concise Australian Legal Dictionary (LexisNexis Butterworths, 3rd ed, 2004), 413.9, col 1.

[46] See, for example, Permark International Interiors Pty Ltd v Amoveo Pty Ltd [2013] VSC 563, [39] and [80] (Croft J).

[47] See par 14 above.

[48] (1992) 174 CLR 178, 192.7 - 193.2.

[49] See, for example, Ipex ITG Pty Ltd (receivers and managers appointed) v Melbourne Water Corporation [2012] VSCA 169, [73] (Mandie JA, with whom Redlich JA and Beach AJA agreed); FPM Constructions v Council of the City of Blue Mountains [2005] NSWCA 340, [210] (Basten JA, with whom Beazley and Giles JJA agreed).

[50] The Rules of the Supreme Court 1900 (Qld), O 91, r 1.

[51] See, for example, Ballantyne Suites Pty Ltd v Ballantyne Chambers Pty Ltd (in liq) (No. 2) [2014] VSC 147, [2] (Hargrave J); Permark International Interiors Pty Ltd v Amoveo Pty Ltd [2013] VSC 563, [16] (Croft J).

[52] The observations of Hargrave J in Ballantyne Suites Pty Ltd v Ballantyne Chambers Pty Ltd (in liq) (No. 2) [2014] VSC 147, [5] are entirely consistent with this proposition. On my reading, his Honour's reference to "open[ing] the door" was no more than a recognition that the circumstances called for a consideration of the discretion, rather than identifying any preconditions to its exercise.

[53] Cf Permark International Interiors Pty Ltd v Amoveo Pty Ltd [2013] VSC 563, [83] (Croft J).

[54] See par 61 below.

[56] See the Judgment, [609]-[614].

[57] Baker was the subject of a subpoena issued at the request of the defendants, but the subpoena was ultimately not called upon. Another critical witness, Tim Alford, was not called by any party. It was unclear why he was not called by any party: see fn 38 of the Judgment.

[58] The "ruling principle" governing damages for contractual breach "captures for the [wronged party] the benefit of the bargain and so compensates the [wronged party] for the loss of that benefit": Clark v Macourt [2013] HCA 56; (2013) 253 CLR 1, 31-32, [109] (Keane J). See also Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272, 285-286 [13] (French CJ, Gummow, Heydon, Crennan and Kiefel JJ).

[59] For the possible use of such an offer, see Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 (Warren CJ, Maxwell P and Harper AJA).

[60] [2006] HCA 41; (2006) 229 CLR 386.

[61] At 433-434, [88] (Gummow, Hayne and Crennan JJ).

[64] [1990] HCA 59; (1990) 170 CLR 534.

[66] Knight v FP Special Assets Ltd (1992) 174 CLR 178, 192.6 (Mason CJ and Deane J).

[67] [2008] NSWCA 148. The appeal was concerned with an order for security for costs against a funded liquidator.

[68] At [51] (Hodgson JA, with whom Campbell JA agreed).

[69] [2010] VSC 263.

[70] At [54]. See also Bakers Investments Group (Australia) Pty Ltd v Caason Investments Pty Ltd [2014] VSC 154, [53].

[71] [2009] HCA 43; (2009) 239 CLR 75.

[72] Civil Procedure Act 2005 (NSW), s 98(1)(a); Uniform Civil Procedure Rules 2005 (NSW), r 42.3(1) and (2)(c).

[73] Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd [2009] HCA 43; (2009) 239 CLR 75, 85-86, [1] (French CJ, Gummow, Hayne and Crennan JJ).

[78] See also Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd [2005] NSWCA 83; (2005) 63 NSWLR 203, 230 [120] (Mason P, with whom Sheller and Hodgson JJA agreed).

[79] The Litigation Funding Deed was not produced until the day of the hearing of this application. Production was resisted on the ground that the Funding Non-Parties maintained confidentiality of the Litigation Funding Deed. The Litigation Funding Deed was tendered on the basis that the specific amount of funding provided by Global Litigation, and the precise details of the potential return Global Litigation would have received in the event Bakers Investments had succeeded at trial, were to remain confidential.

[80] Cf Ipex ITG Pty Ltd (in liq) (receivers appointed) v Victoria [2014] VSCA 315, [49] (Neave, Santamaria and Kyrou JJA).

[81] Cf Knight v FP Special Assets Ltd (1992) 174 CLR 178, 190.8-191.1 (Mason CJ and Deane J).

[82] Cf Kebaro Pty Ltd v Saunders [2003] FCAFC 5, [114] (Beaumont, Sundberg and Hely JJ).

[83] Security for costs had already been ordered up to the first day of trial.

[84] Carter Senior provided a business card, which referred to a company other than Global Litigation or Esplanade Holdings.

[85] The evidence tendered on this application disclosed that Global Litigation provided $100,000 of this amount and Bates, on behalf of Bakers Investments, provided the remaining $13,193, although the full amount of the security was paid into court as a lump sum.

[86] The Litigation Funding Deed is undated, save for a reference to "2014".

[87] Ipex ITG Pty Ltd (in liq) (receivers appointed) v Victoria [2014] VSCA 315, [51] (Neave, Santamaria and Kyrou JJA); Ballantyne Suites Pty Ltd v Ballantyne Chambers Pty Ltd (in liq) [2014] VSCA 223, [45] (Ashley, Priest and Santamaria JJA).

[88] See par 80 above.

[89] Albeit that security for costs up to the first day of trial was provided with funds from sources other than Global Litigation.

[90] In addition to the 9 days of court hearing, there were directions hearings and an interlocutory application after the funding was put in place. Further, the Judgment consisted of 616 paragraphs, with 418 footnotes.

[91] See pars 38-39 above.

[92] Ballantyne Suites Pty Ltd v Ballantyne Chambers Pty Ltd (in liq) (No. 2) [2014] VSC 147, [16] (Hargrave J); Ipex ITG Pty Ltd (receivers and managers appointed) v Melbourne Water Corporation [2012] VSCA 169, [74] (Mandie JA, with whom Redlich JA and Beach AJA agreed).

[93] Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121, 128.4 (Mason CJ, Wilson and Toohey JJ); Lee v Lee's Air Farming Ltd [1961] AC 12, 26.6 (Privy Council).

[94] Ipex ITG Pty Ltd (in liq) (receivers appointed) v Victoria [2014] VSCA 315, [44] (Neave, Santamaria and Kyrou JJA).

[95] For completeness, I note that Carter Senior is a former director of Esplanade Holdings, but that directorship ceased on 1 June 2010. I also note that he was secretary of Esplanade Holdings, but for the limited periods of 18 March 2010 to 1 June 2010 and 20 November 2014 to 15 December 2014.