Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd

Federal Court of Australia|2009-05-15|Before: Corp Pty J, Collier J

The notice of motion be dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using eSearch on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA

BETWEEN: CITRUS QUEENSLAND PTY LTD (ACN 110 885 359)

SUNSTATE CITRUS PTY LTD (ACN 112 847 560) [SUBJECT TO DEED OF COMPANY ARRANGEMENT]

BACKGROUND 1 In this notice of motion filed on 26 September 2008 the first and second respondents to the primary proceedings seek a number of orders including that their costs in the primary proceedings be paid by Mrs Adrienne Tracy, the wife of the second applicant to the primary proceedings. Mrs Tracy was not a party to those proceedings. 2 For consistency, I will continue to refer to the first and second respondents to the primary proceedings as "the first and second respondents" notwithstanding that they are the applicants to this notice of motion. Similarly it is convenient to refer to the applicants to the primary proceedings as "the applicants" for the purposes of this judgment. 3 In Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 7) [2008] FCA 1364, delivered 5 September 2008, the background facts to the proceedings are described in detail. In that judgment I ordered that the amended application filed by the applicants on 16 February 2006 be dismissed, and that the cross-claim filed by the first and second respondents on 5 June 2007 be allowed. Subsequently in Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 8) [2008] FCA 1556, delivered 17 October 2008, I ordered that, with the exception of a number of costs incurred by the applicants in relation to interlocutory applications, the applicants pay the costs of the first and second respondents, such costs to be taxed if not otherwise agreed. In so ordering I rejected the claim of the first and second respondents that their costs be paid by the applicants on an indemnity basis. 4 In detail, the first and second respondents by this notice of motion seek the following orders: 1. Adrienne Elizabeth Tracy (Mrs Tracy), wife of the Second Applicant, pay the First and Second Respondent's costs of the proceedings, including all reserved costs on an indemnity basis. 2. That Mrs Tracy be jointly and severally liable with the Applicants for such costs. 3. The said costs are to be assessed on the basis that: (a) all costs be allowed, except insofar as any costs are of an unreasonable amount or were unreasonably incurred so that, subject to such exceptions, the First and Second Respondents will be completely indemnified for their costs; (b) it was necessary and proper for the attainment of justice and for enforcing the First and Second Respondents' rights to have retained counsel whose appearance was announced (being Mr J Bell QC and Mr PP McQuade); (c) it was necessary and proper for the attainment of justice and for enforcing the First and Second Respondents' rights to have engaged expert witnesses: (i) Mr Elias Lytras of Vincents Chartered Accountants; (ii) Mr Ernest Mark Harrison, Registered Valuer. (4) In the alternative to the relief sought in paragraph 1 above, that Mrs Tracy pay the First and Second Respondents' costs of the proceedings, including all reserved on a party and party basis. (5) That the costs referred to in paragraph 4 above are to be assessed on the basis that: (a) it was necessary and proper for the attainment of justice and for enforcing the First and Second Respondents' rights to have retained counsel whose appearance was announced (being Mr J Bell QC and Mr PP McQuade); (b) it was necessary and proper for the attainment of justice and for enforcing the First and Second Respondents' rights to have engaged expert witnesses: (i) Mr Elias Lytras of Vincents Chartered Accountants; (ii) Mr Ernest Mark Harrison, Registered Valuer. (6) That Mrs Tracy pay the costs of this Notice of Motion on a party and party basis. (7) Such further order as this Honourable Court considers appropriate.

ISSUES FOR DECISION 5 During the course of argument, both written and oral, three clear issues emerged for decision. Those issues can be summarised as follows: 1. Was the jurisdiction of the Court to make an order as to third party costs exhausted once orders as to costs against the applicants were made and entered? 2. Assuming that the jurisdiction of the Court was not exhausted, is Mrs Tracy liable for the costs of the first and second respondents? 3. In the event that Mrs Tracy is liable for the costs of the first and second respondents, should she be liable on an indemnity basis? 6 I shall address each issue in turn.

JURISDICTION OF THE COURT TO ORDER NON-PARTY COSTS 7 It is not in dispute that the orders of the Court of 5 September 2008 and 17 October 2008 have been entered. The applicants have claimed that the issue of jurisdiction arose because, following the entry of those orders, the jurisdiction of the Court has been spent in relation to costs in these proceedings. In summary, the applicants' argument is: · Judgment was given in favour of the first and second respondents in the primary proceedings on 5 September 2008 (Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 7) [2008] FCA 1364). · This notice of motion was filed on 26 September 2008. · On 17 October 2008 in Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 8) [2008] FCA 1556 all outstanding costs issues were dealt with, and, subject to a number of reserved interlocutory costs, the first, second and third applicants were ordered to pay the costs of the first and second respondents. · The orders made on those dates have been entered by the applicants. Other than in the circumstances contemplated by O 35 r 7 of the Federal Court Rules - none of which are relevant in this case notwithstanding the submissions of the applicants concerning O 35 r 7(2)(e) and (f) - an order once entered can only be set aside by an appeal court. · The orders sought by the respondents in the notice of motion are in substitution of orders which have already been entered. They are not supplemental orders, because there are already comprehensive orders dealing with the issue of costs. · Further, the orders sought by the notice of motion is fundamentally different from orders already made in relation to costs. The first and second respondents seek an award of costs against Mrs Tracy on an indemnity basis, compared with the standard basis on which costs were awarded against the applicants on 17 October 2008. 8 Notwithstanding these submissions, I do not accept that the power of the Court to make orders as to non-party costs in these proceedings has been exhausted simply because costs orders have already been made and entered against the applicants. This exact issue was decisively determined by the Full Court in Caboolture Park Shopping Centre Pty Ltd (in liquidation) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224, wherein the Court considered s 4 and s 43 of the Federal Court of Australia Act 1976 (Cth) ("Federal Court Act"). 9 So far as relevant, s 4 defines "proceeding" as meaning: …in a court, whether between parties or not, and includes an incidental proceeding in the course of, or in connection with, a proceeding and also includes an appeal. 10 Further, so far as relevant s 43(1) provides: the Court or a Judge has jurisdiction to award costs in all proceedings before the Court… 11 In Caboolture Park (1993) 45 FCR 224 the respondent to those proceedings obtained judgment against the applicant including an order for costs, which judgment was entered. The applicant subsequently went into liquidation and the respondent sought a supplemental costs order against the applicant's solicitors which would have had the effect of making them liable for those costs. The solicitors submitted that, once the proceedings had been concluded by judgment being entered and by an order for costs being made inter partes, there was no jurisdiction thereafter for the Court to reopen the case. The solicitors also submitted that the jurisdiction contained in s 43 of the Federal Court Act to "award costs in all proceedings" was spent once there was no longer a "proceeding" before the Court. Applying Knight v FP Special Assets Ltd (1992) 174 CLR 178, the Full Court held that s 43 conferred jurisdiction to award costs against non-parties to a proceeding (at 229). In relation to the submission of the solicitors concerning whether there was still a "proceeding" before the Court, the Full Court observed that the submission incorrectly confined the meaning of the word "proceeding" to the original action, and was inconsistent with the definition of "proceeding" in s 4 of the Federal Court Act (at 230). The Court continued: What s43 requires is that the jurisdiction to order costs be one limited to costs relating to a proceeding. In other words, there is no jurisdiction to order costs at large. There has to be or have been, within the Court's jurisdiction, instituted a proceeding. It is irrelevant, subject to the application of common law principles discussed later, that judgment has been given and entered. (emphasis added) 12 The Full Court concluded that the non-party costs order sought was in the nature of a supplemental order, and valid in the circumstances of the case. 13 I note that the decision in Caboolture Park (1993) 45 FCR 224 is consistent with decisions in other jurisdictions, including Dymocks Franchise Systems (NSW) v Todd [2004] 1 WLR 2807, NSW Insurance Ministerial Corporation v Edkins (1998) 45 NSWLR 8 and UTSA Pty Ltd (In Liquidation) v Ultratune Australia Pty Ltd [1999] 1 VR 204. 14 In this case the applicants have submitted that the orders sought by the first and second respondents are in substitution for the costs orders already made rather than supplemental. That is clearly not the case. It is irrelevant that the first and second respondents have sought an award of costs against Mrs Tracy on an indemnity basis, and therefore on different terms from those already obtained against the applicants. As was the case in Caboolture Park (1993) 45 FCR 224 (where the costs were originally ordered on a standard basis but the Court subsequently ordered non-party costs on an indemnity basis), the orders sought pursuant to the notice of motion currently before the Court do not in any way seek to vary or alter the costs orders already made against the applicants. Were the first and second respondents to be successful in relation to this notice of motion, the new orders would properly be characterised as supplemental orders. 15 Accordingly, I find that the submissions of the applicants on this issue are not substantiated, and that the jurisdiction of the Court to award non-party costs, (be they on an indemnity basis or otherwise) pursuant to s 43 of the Federal Court Act was not spent when previous costs orders were entered.

Submissions of the parties 16 I turn now to the key issue in this case, namely whether Mrs Tracy is liable for non-party costs in respect of the costs of the first and second respondents in the primary proceedings. Helpful and detailed submissions as to the liability of Mrs Tracy for costs in the primary proceedings were filed by both parties in this case, and made orally by Counsel at the hearing. 17 Submissions of the first and second respondents may be summarised as follows: · The role of Mrs Tracy in the primary proceedings went considerably beyond that of a spouse to the second applicant. · From the commencement of the proceedings Mrs Tracy stood to be the principal beneficiary in successfully prosecuting the claims made by the applicants against the first and second respondents. At all material times there has existed a close, real, direct and material connection between Mrs Tracy and these proceedings. · Mrs Tracy had a direct financial interest in the commencement and promotion of the proceedings, as evidenced by the facts that: o she was chargee of assets of the first applicant; o she assisted in providing security for costs the applicants were ordered to pay; o she borrowed $1.125 million secured over the house property at Yabba Street Ascot registered in her name to enable the orchard properties to be originally purchased by the first applicant; o in seeking funding from the National Australia Bank Ltd by the first applicant a list of assets and liabilities, including those of Mrs Tracy, was provided in support of the application; o she advanced loans to the first and third applicants, secured by a security over the assets of the first applicant and a guarantee and indemnity provided by the second applicant. After satisfaction of the first ranking charge held by the Bank, Mrs Tracy was to benefit from the judgment; o she was a beneficiary of the Sunstate Unit Trust of which the first applicant was the trustee. · Mrs Tracy sought to maintain control of the benefit flowing from the proceedings and from any damages award, as was evidenced by the fact that the primary proceedings were originally commenced in the name of Janling Pty Ltd in reliance on an assignment of the causes of action from the applicants to Mrs Tracy on 17 June 2005. Mrs Tracy was the sole director of that company. Although the applicants were later substituted for Janling Pty Ltd, there is no evidence to suggest that Mrs Tracy was other than the beneficiary of these actions or that they would hold the proceeds on trust for her beneficially. · By the terms of the third applicant's Deed of Company Arrangement, Mrs Tracy agreed to prosecute in the name of Janling Pty Ltd the claim against the respondents. · From the commencement of the proceedings Mrs Tracy was providing instructions to prosecute the claims, and maintained this role throughout the proceedings. As the sole director of Janling Pty Ltd it may be inferred that the instructions as to the institution of the proceeding were being provided by her, and during the proceedings counsel for the applicants said that he was required to take instructions from both the second applicant and Mrs Tracy. · In the circumstances Mrs Tracy had knowledge of the applicants' inability to meet any adverse cost orders. · Although there is no absolute rule that a warning notice is required, the first and second respondents gave Mrs Tracy notice of an intention to seek costs of the proceedings against her. · It would be contrary to the interests of justice for Mrs Tracy to be able to be shielded by the applicants from any liability for the costs of the first and second respondents. 18 In response, the applicants submitted in summary: · There is no suggestion that the purpose of the advance by Mrs Tracy of $1.15 million to the first and third applicants in March 2005 to enable the first applicant to purchase land and business owned by the first respondent had any connection with these proceedings. · There is no evidence that the list of assets provided to the National Australia Bank in support of the loan application including some of Mrs Tracy's assets was provided with Mrs Tracy's consent, knowledge or authority, as the list was executed by Mr Tracy alone. In any event this list is irrelevant as no security was provided by Mrs Tracy to the National Australia Bank in support of the loan application. · In relation to Mrs Tracy's status as mortgagee, chargee and lender, it should be noted that both the National Australia Bank and, indeed, the first respondent, also had securities over the assets of the first applicant. Like the National Australia Bank and the first respondent Mrs Tracy's rights as mortgagee/chargee accrued to her prior to the commencement of proceedings and none of the funds advanced were used to fund the litigation but rather were used to purchase the orchards. Accordingly, the securities over the orchards gave Mrs Tracy a direct financial interest in the assets of the first applicant, not the proceedings. · Under the Sunstate Orchards Unit Trust Deed, Mrs Tracy is within the class of discretionary beneficiaries contained in Sch 2 Pt 2 of the Deed. Her position as a contingent beneficiary under the Sunstate Unit Trust gave her no direct interest in any of the Trust assets or income of the Trust which might have been received had the litigation been successful. · Any benefits Mrs Tracy received if the litigation brought by the applicants had been successful would accrue only by virtue of the securities, and not by virtue of any action taken by her concerning the proceedings. There is no real, direct and material connection between the granting of the securities to Mrs Tracy and the proceedings. · The fact that the first and second respondents have already obtained orders for security for costs militate against the exercise of the discretion to make an order for non-party costs. · Although the proceedings were initiated by Mrs Tracy as director of Janling Pty Ltd, the significance of the provision of instructions can only relate to the period during which the proceedings were maintained by Janling Pty Ltd. The first and second respondents have already had the benefit of a costs order against Janling Pty Ltd for the period prior to 16 February 2006 when the applicants were substituted for Janling Pty Ltd in the primary proceedings. · The applicants conceded that Mrs Tracy attended court with the second applicant during the trial. A discussion between senior Counsel for the applicants, the second applicant and Mrs Tracy (as the second applicant's wife) was unexceptional and understandable. · Notwithstanding the Deeds of Assignment of the causes of action from the applicants to Mrs Tracy and then from Mrs Tracy to Janling Pty Ltd, from 16 February 2006 Janling Pty Ltd had no involvement in the proceedings and Mrs Tracy had no lawful capacity to provide any instructions for the conduct of the proceedings. The matter was resolved by consent orders made on 15 February 2006.

Relevant principles 19 It became clear during the primary proceedings that, when considering the history of events culminating in the proceedings and all matters concerning the applicants, the second applicant played a pivotal role. All decisions, all discussions, and all negotiations were made, had and conducted by the second applicant on his own behalf and on behalf of the first and third applicants. The position is clouded by the assignment of causes of action, an issue to which I will return shortly, however prima facie the actual authority to make all decisions with respect to the conduct of litigation in the primary proceedings remained with the second applicant because of his historical role and his position as sole director and shareholder of the first applicant, and the sole director of the third applicant. Indeed as I found in the primary judgment, the second applicant was, at all material times, the directing mind and will of the first and third applicants (Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 7) [2008] FCA 1364 at [9]). In light of these findings, was the role of Mrs Tracy such that an award of costs with respect to these proceedings should be made against her? 20 Although as a general rule costs are not awarded against a stranger to litigation, as I have already indicated it is well-settled that the Court has a discretion pursuant to s 43 of the Federal Court Act to order costs against a non-party in appropriate circumstances (Knight (1992) 174 CLR 178, Caboolture Park (1993) 45 FCR 224, Gore v Justice Corp Pty Ltd (2002) 119 FCR 429, Kebaro Pty Ltd v Saunders [2003] FCAFC 5, Life Therapeutics Ltd v Bell IXL Investments Ltd (No 2) (2008) 170 FCR 595). The exercise of such discretion is approached with caution - indeed it has been described as "rare and exceptional" (Vestris v Cashman (1998) 72 SASR 449 at 467, Kebaro [2003] FCAFC 5 at [103]) - and depends on the circumstances of each case as it is a "fact-specific jurisdiction" (Kebaro [2003] FCAFC 5 at [69]). Principles guiding the approach of the Court to the exercise of the include the following: · There must be a real link between the non-party and the proceedings, which is material to the issue of costs (Bischof v Adams [1992] 2 VR 198 at 204-205, Kebaro [2003] FCAFC 5 at [70]). · The mere fact that a person may benefit from litigation will not, without more, suffice to justify an award of costs (Bischof v Adams [1992] 2 VR 198 at 204-205, Vestris v Cashman (1998) 72 SASR 449, Kebaro [2003] FCAFC 5 at [70], Probiotec Ltd v The University of Melbourne (2008) 166 FCR 30 at [48]). · An order for costs may be appropriate - provided the interests of justice so require - where the party to litigation is an insolvent person or a man of straw, the non-party has played an active part in the conduct of the litigation and the non-party has an interest in the subject of the litigation (Mason CJ and Deane J in Knight (1992) 174 CLR 178 at 192). · Regard will be had to whether the non-party had been warned, or the non-party could have been joined as a party or applied to join earlier in the proceedings and thereby obtained the protection of the rules of the court (Vestris v Cashman (1998) 72 SASR 449, Kebaro [2003] FCAFC 5 at [75], Yates v Boland [2000] FCA 1895 at [32]). · It can be appropriate to exercise the power against a person who may be characterised as no more than a real party to the litigation in critical and important respects, albeit not the only such party (Kebaro [2003] FCAFC 5 at [111], Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) 179 ALR 406 at 414, Gore (2002) 119 FCR 429 at 439). · An order for costs may be appropriate where a non-party causes a party to bring or defend proceedings for his or her own financial benefit, either to gain the fruits of the litigation or to preserve assets in which the person has an interest (Carborundum Abrasives Ltd v Bank of New Zealand (No 2) [1992] 3 NZLR 757 at 765). · Where a non-party has maintained or financed an action, or caused an action, or has some management of the action, a costs order may be appropriate (Symphony Group Plc v Hodgson [1993] 3 WLR 830 at 840). This may be the case where, for example, the nominal plaintiff is mentally incompetent and the non-party has a substantial interest in the outcome (Flinn v Flinn [1999] 3 VR 712). 21 Conversely, the courts have declined to order costs against a non-party: · Simply because the non-parties were directors of the plaintiff company and had caused the plaintiff to commence and maintain proceedings in circumstances where they ought to have known that, if the proceedings were unsuccessful, it was unlikely that the plaintiff could meet a costs order: Carborundum [1992] 3 NZLR 757. · Where the non-party had not been separately represented at the hearing of the primary proceedings. · Simply because the non-party is a legal expense insurer (Murphy v Young & Co's Brewery plc [1997] 1 WLR 1591). 22 Significantly, and by analogy with the principles of maintenance and champerty, the courts have also recognised that not only may legitimate financial support in litigation be provided by family members, but that in the event of the failure of the relevant litigation costs will not as a general proposition be awarded against those supporting family members. The rationale for such recognition appears to be that such social or family ties justify the support of the litigation (cf for example Neville v London Express Newspaper Ltd [1919] AC 368). This principle was discussed by the Full Court in Gore (2002) 119 FCR 429, where their Honours in turn referred to the decision of the Court of Appeal in Condliffe v Hislop [1996] 1 WLR 753 and observations of Longmore J in McFarlane v EE Caledonia Ltd (No 2) [1995] 1 WLR 366 at 373. That is not to say, of course, that non-party costs will not be awarded against a spouse or other family member should the circumstances warrant - for example Thistleton v Hendricks (1992) 32 Con LR 123, Locabail (UK) Ltd v Bayfield Properties Ltd [1999] 20 LS GazR 39. 23 In circumstances where financial support for litigation is provided by a spouse the proper starting point may be to regard any such support as motivated by the spouse's natural affection for the litigant, and therefore not such a circumstance where non-party costs should be awarded in the absence of exceptional circumstances (cf Cooper v Maxwell [1992] CA Transcript 273, Murphy [1997] 1 WLR 1591 at [1603]-[1604], Jackson v Thakrar [2008] 1 All ER 601 at 609).

Knight 24 In this case the applicants submitted that the circumstances articulated by Mason CJ and Deane J in Knight (1992) 174 CLR 178 must be present before the Court should exercise its discretion to make a costs order against a non-party, namely as follows at 192: 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 man 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. 25 It cannot be correct that the circumstances described in Knight (1992) 174 CLR 178 constitute necessary pre-conditions to the exercise of the Court's discretion to award non-party costs pursuant to s 43 as submitted by the applicants. While obviously the comments of Mason CJ and Deane J would be an appropriate guide to the exercise of discretion in an appropriate case, they were clearly obiter (see observations of the Full Court in Yates v Boland [2000] FCA 1895). As the exercise of the discretion in s 43 is unfettered, other than the requirement that it be exercised judicially (Knight (1992) 174 CLR 178 at [192]; Gore (2002) 119 FCR 429 at 447-448), it follows that the comments in Knight (1992) 174 CLR 178 could not prescribe prerequisites to the exercise of discretion to award costs against a non-party. Inevitably, as the Full Court pointed out in Gore (2002) 119 FCR 429 at 437: …there is no reason to suppose that the remarks of the members of the High Court in Knight have closed the door to the categories of third parties who may be made liable for the costs of litigation nor that the circumstances that were identified by their Honours were exhaustive. … and later ...the learned trial judge erred when he regarded the passage in Knight as laying down three principles, each of which must be present before a stranger to the litigation could be made liable for costs. (at 451) 26 I consider that it is appropriate to consider any potential liability of Mrs Tracy in terms of principles arising from cases where the courts have considered the exercise of the discretion to award costs against a non-party. The principles articulated in Knight (1992) 174 CLR 178 are relevant as guiding factors only, in appropriate circumstances.

Consideration 27 It is common ground that the causes of action determined in the primary proceedings were purportedly assigned by the applicants to Mrs Tracy on 17 June 2005 and then from Mrs Tracy to Janling Pty Ltd on 4 July 2005. (It is not in contention that at all material times the sole shareholder of Janling Pty Ltd was a corporation the sole shareholder of which in turn was Mrs Tracy, and that Mrs Tracy herself was the sole director of Janling Pty Ltd.) I say "purportedly" because the first and second respondent filed a notice of motion on 8 December 2005 seeking orders that the proceedings be dismissed and/or struck out on the basis that, inter alia, the causes of action the subject of the primary proceedings were not assignable (TS 14 December 2005 p 2 ll 35-43). Whether the assignment of the causes of action was valid ceased to be contentious when the parties agreed, and the Court ordered by consent on 15 February 2006, that the strike out motion of the first and second respondents be dismissed, that Janling Pty Ltd be removed as the applicant to the primary proceedings, and that the first, second and third applicants be substituted as applicants. However notwithstanding the orders of 15 February 2006 there is no evidence that the benefit of the relevant causes of action was reassigned by Janling Pty Ltd to the applicants. Accordingly any purported assignment of the causes of action, to the extent that the assignment took effect, remained with Janling Pty Ltd. It followed that presumably financial benefits of any success of the applicants in the proceedings would flow to Janling Pty Ltd, and thence to Mrs Tracy. The fact that the applicants were unsuccessful with respect to their claims against the first and second respondents (other than with respect to a number of reserved costs) is irrelevant in the context of this notice of motion. 28 However in my view, notwithstanding potential financial benefits accruing to Mrs Tracy from the proceedings, the circumstances of this case do not warrant the exercise of the Court's discretion to award costs against Mrs Tracy pursuant to s 43 of the Federal Court Act. As I have already observed, the mere fact that a person may benefit from litigation will not, without more, suffice to justify an award of costs. I form this view for the following reasons. 29 First, Mrs Tracy was never a director or shareholder of either the first or third applicants. In light of the dominant role played by the second applicant in the affairs of all applicants and the clear professional and financial stake of the second applicant in the businesses of the first and third applicants particularly as director and shareholder, it is clear that the failure of the proceedings would have had a much greater impact on the fortunes of the second applicant than on those of Mrs Tracy. I consider that it is likely that any financial support provided by Mrs Tracy to the applicants' case was motivated by Mrs Tracy's natural affection for the second applicant (cf Jackson v Thakrar [2008] 1 All ER 601 at 609) rather than any financial interest she may have had in the outcome of the proceedings. In my view this is an important distinction between the supportive role played by Mrs Tracy of the applicants, and the motivation of such entities as the third party in Gore (2002) 119 FCR 429. 30 Second, while I note that the proceedings were actually initiated by Janling Pty Ltd following the purported assignment of the causes of action, I also note that costs were awarded to the first and second respondents after the applicants were substituted for Janling Pty Ltd by consent on 15 February 2006. Although the initial involvement of Mrs Tracy's company as the applicant to the proceedings (following various transactions for value implemented for reasons best known to Mrs Tracy, the applicants and the applicants' legal advisers) is a factor to which I should accord some weight, it does not follow that Mrs Tracy subsequently had a continuing active involvement in the proceedings, nor that there was a real and continuing link between Mrs Tracy and the proceedings. Indeed as the applicants submitted, once Janling Pty Ltd was removed as a party to the proceedings any formal authority of Mrs Tracy ended with respect to giving instructions in the proceedings. 31 Third, while it is certainly the case that the court may be receptive to an application for non-party costs against a third party whose conduct has promoted the litigation (Arundel [2001] 179 ALR 406 at 414) or can be characterised as having been that of wanton and officious intermeddling with the disputes of others in which the meddler has no interest whatsoever (Murphy v Young & Co's Brewery [1997] 1 WLR 1591 at 1601, Arundel (2001) 179 ALR 406 at 414), there is no evidence of such intermeddling by Mrs Tracy in this case. So, for example, I infer that the regular attendance by Mrs Tracy at the trial was, not unreasonably, to support the second applicant, because the outcome of the trial was important to the second applicant. Further, the comment by Counsel for the applicants during the hearing that he would discuss the issue of an adjournment with "Mr and Mrs Tracy" in my view is not suggestive of meddling by Mrs Tracy in the applicants' case or an active part played by Mrs Tracy in the proceedings. Rather, as submitted by the applicants the comment merely recognised that Mrs Tracy would be present with the second applicant during the discussions, which was both unexceptional and understandable in the circumstances. 32 Fourth, while I note that Mrs Tracy assisted in providing security for costs which the applicants were ordered to pay, I consider that this is explainable by the natural inclination of a wife to support her husband in litigation to which he is a party and does not constitute an active part played by Mrs Tracy in the conduct of the litigation. As has been observed in numerous cases, funding alone will not justify an order where an otherwise disinterested relative has, out of natural affection, funded costs of a claim (Dillon LJ in Cooper v Maxwell [1992] CA Transcript 273 (Stuart-Smith LJ and Mann LJ agreeing); Phillips LJ in Murphy [1997] 1 WLR 1591 at 1603-1604, Jackson v Thakrar [2008] 1 All ER 601 at 607-608). 33 Fifth, I am not persuaded that financial arrangements of Mrs Tracy to which the first and second respondents have directed my attention result in Mrs Tracy having a "real link" with these proceedings, material to the issue of costs. In particular: · While Mrs Tracy had a charge over the assets of the first applicant, as the evidence demonstrates she was not the only person with a security over assets of the applicants. The National Australia Bank had a prior ranking charge over the same assets of the first applicant as Mrs Tracy, and indeed the first respondent had securities over the assets of the third applicant to secure its own debt. No suggestion is made by the first and second respondents that these securities gave either of those creditors direct financial interests in the success of the applicants' claims in the primary proceedings. Indeed, the most that could be said with respect to Mrs Tracy's charge is that it provided her with protection to the extent of the security held in respect of the debt. While the success of the applicants in the primary proceedings may have been of advantage to all creditors, the interests of secured creditors were already protected to varying extents by their securities. In that respect, the interests of the secured creditors (when the securities were created) were not tied to the success or otherwise of the applicants' claims in the primary proceedings. · The fact that Mrs Tracy borrowed in excess of one million dollars to enable the applicants to purchase the orchard properties the subject of the primary proceedings is, in my view, irrelevant in the context of the proceedings. No connection between that transaction and the proceedings has been demonstrated. · The fact that Mrs Tracy was named as a beneficiary of the Sunstate Unit Trust, while relevant to considering the existence of a connection between Mrs Tracy and the proceedings, is not in my view of particular weight in determining whether non-party costs should be awarded against Mrs Tracy in these proceedings. As a matter of law, Mrs Tracy had no proprietary interest in any asset of the Sunstate Unit Trust or any property of the Sunstate Unit Trust, nor any equitable interest in the assets held by the Sunstate Unit Trust: Kennon v Spry (2008) 251 ALR 257, Queensland Trustees Ltd v Commissioner of Stamp Duties (Qld) (1952) 88 CLR 54. 34 Finally, in relation to the factor articulated by Lander J in Vestris v Cashman (1998) 72 SASR 449 concerning whether Mrs Tracy could have been joined as a party earlier in the proceedings I note that, in fact, the first and second respondents had earlier claimed that Mrs Tracy's company Janling Pty Ltd had no place in these proceedings. It seems somewhat odd to now claim that Mrs Tracy should bear the costs of the unsuccessful claims of the applicants. 35 The first and second respondents have made much of their claims concerning an alleged asset protection strategy of Mr and Mrs Tracy, comprising shifting of assets from the second applicant to Mrs Tracy, and security being given to Mrs Tracy. The first and second respondents have pointed to the alleged potential resultant unfairness to the first and second respondents in relation to their ability to recover costs. As matters stand, however, such claims are speculative. As a matter of legal principle such allegations concerning shifting assets would be of much more relevance in the context of claims, for example, pursuant to s 120 or s 121 of the Bankruptcy Act 1966 (Cth) which deal specifically with improper transfers of property and asset protection by persons who subsequently become bankrupt. Obviously however those provisions are not the subject of these proceedings and consideration of principles associated with those provisions have no place in this judgment. While such claims may be relevant in considering the justice of the case, on balance I do not consider that any private financial arrangements of Mr and Mrs Tracy, the reasons for which must be the subject of pure speculation at this stage and upon which I express no opinion, are of particular weight in the context of this notice of motion, viewed in light of the circumstances as a whole and the factors I have already described. Mrs Tracy was not, in my view "a real party" to the litigation in very important and critical respects (contrast Arundel (2001) 179 ALR 406 at 414). While Mrs Tracy may have benefited financially from the success of the applicants as I have already noted, and as has been held in numerous cases (for example Bischof [1992] 2 VR 198, Vestris (1998) 72 SASR 449, Probiotec (2008) 166 FCR 30) the mere fact that a person may benefit, financially or otherwise, from litigation will not, without more, suffice to justify an award of costs.

BASIS OF MRS TRACY'S LIABILITY 36 In conclusion, I note that even had I been prepared to exercise my discretion so as to order non-party costs against Mrs Tracy, I would not have been prepared to order costs against her on an indemnity basis. In Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 8) [2008] FCA 1556 I ordered the applicants to pay the costs of the first and second respondents on a standard basis, for the reasons I explained in that judgment. I need not repeat those reasons here. No satisfactory reasons have been provided by the first and second respondents in relation to Mrs Tracy to distinguish her circumstances from those of the applicants, so as to warrant a departure from the usual approach of the Court to order costs payable on a party-party basis. 37 The appropriate order in this case is that the notice of motion be dismissed. 38 I will now hear submissions as to costs. I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier.

Associate: Dated: 15 May 2009 Counsel for the First, Second and Third Applicants: Mr CD Coulsen

Solicitor for the First, Second and Third Applicants: Lynch Morgan

Counsel for the First, Second and Third Respondents: Mr J Bell QC and Mr PP McQuade

Solicitor for the First, Second and Third Respondents: McCullough Robertson

Bankruptcy Act 1966(Cth)s 120, s

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