conclusion
61 We do not consider that it was an appropriate exercise for his Honour to hold that it may have been possible for Montague to continue with its case unaided by Justice Corporation. By approaching his task in that fashion, his Honour concluded that he could not be positively satisfied that, absent support from Justice Corporation, that the litigation would have come to a halt. The correct approach, in our opinion, is to examine what did happen, putting to one side issues of speculation. By adopting that attitude, there is a clear answer: Justice Corporation funded the litigation and gave financial support to Montague in terms that were represented by the contents of the Litigation Agreement. Those were the relevant facts upon which a judicial determination was to be made and the judicial discretion was to be exercised.
62 We have also concluded, with respect, that 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. It is true that Justice Corporation had no control over the litigation, as did the receivers in Knight, but Justice Corporation was entitled to share in the proceeds of a victory - a factor that would not have been enjoyed by the receivers in Knight. Furthermore the supply of a copy of the Litigation Agreement to Clayton Utz and the disclosure of the fact that Justice Corporation was, in appropriate circumstances, to pay Clayton Utz's costs, leaves open the inference that this would have lulled Clayton Utz into a false sense of security. The sharing in the anticipated results of the litigation and the obligation to meet Clayton Utz's costs were both factors of material importance and his Honour, with respect, in terms of House v The King (above), failed to have adequate regard to those material considerations.
63 Justice Corporation cannot obtain, in our opinion, any assistance from the cancellation of the Litigation Agreement and the execution of the Loan Agreement. Clayton Utz knew about the Litigation Agreement. It is reasonable to infer that it relied upon its contents. Clayton Utz did not, however, learn of the existence of the Loan Agreement until after the publication of the Full Court judgment. For reasons best known to them, Montague and Justice Corporation withheld disclosure of its existence. Furthermore, it could not be said that these proceedings involved matters of public interest or, indeed, matters that extended beyond the immediate interests of Montague and Clayton Utz such that an order for costs against a stranger would have been inappropriate.
64 Justice Corporation, whilst not controlling the litigation, had a direct financial interest in the outcome of the case; it offered no explanation for its participation in the litigation and the only inference must be that it was a commercial investment. It was prepared to take a commercial risk, to meet Montague's costs, to protect Montague against an order for costs in favour of Clayton Utz and, in return, it hoped to profit from its investment. No extenuating circumstances exist to save Justice Corporation from an order that it pay some of Clayton Utz's costs. There was no question of it being involved through friendship or because of family ties; there was no question of public interest and no moral high ground that might have justified its involvement. It was a simple straightforward commercial arrangement. If Montague had been successful there was every likelihood that there would have been a costs order against Clayton Utz, thereby recouping to Justice Corporation much of what it had outlaid by way of expenditure on Montague's costs. It seems to us, as a logical consequence of these circumstances, that in return for the chance of obtaining 8 per cent of the judgment debt and a recoupment of much of its outlay for costs, Justice Corporation should be expected to incur the risk of a costs order in the event of Clayton Utz being the successful party. Reaching that conclusion is made the easier because of the provision in the Litigation Agreement under which Justice Corporation agreed with Montague that it would pay Clayton Utz costs in the event of Montague losing the case. That factor should not, however, be treated as being the catalyst for the Court arriving at its decision. It was a matter of great significance that the existence of this clause was made known to Clayton Utz but it was still only one of the factors that has led this Court to its conclusion.
65 The drawing of the analogy with lawyers funding an impecunious litigant was not helpful and, so we believe, constituted an error in his Honour's reasoning. As we have noted, the New South Wales legislation now affords a statutory umbrella for certain types of contingency arrangements. If a legal practitioner seeks more than the statute affords him or her, it may be that the practitioner may incur responsibilities as well as enjoying rights, but there is little point in hypothesising. If the cases, particularly the English cases, show nothing else, they show that there are numerous variations in the facts and that each case must be decided on its particular facts.
66 There was further argument during the course of the appeal with respect to his Honour's refusal to receive into evidence certain material which, so it was said, was relevant to questions of the knowledge and the state of mind of Montague and, perhaps, Justice Corporation. In view of the decisions at which we have arrived, we have found it unnecessary to address those issues.
67 In our opinion the appeal should be allowed in part. The orders of the learned trial judge in the Court below should be set aside and in lieu there should be an order that Justice Corporation pay to Clayton Utz on account of their costs, but in full and final satisfaction of Justice Corporation's liability for such costs, the taxed party and party costs of the second and third period. Although Clayton Utz's success in this appeal was limited to its costs in respect of the second and third period, the case was fought out on the larger question of principle: when, if at all, should a stranger to the litigation be visited with a costs order. In this regard, Clayton Utz was successful. The time that was taken up in discussing the details of the first and fourth periods was minimal. In those circumstances we consider that it is appropriate that Clayton Utz should have their costs. There will be a further order that Justice Corporation pay Clayton Utz's costs here and in the Court below of and incidental to the hearing of Clayton Utz's notice of motion and this appeal.
I certify that the preceding sixty-seven (67) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices O'Loughlin, Whitlam and Marshall.