"Obviously, the prima facie general principle is that an order for costs is only made against a party to the litigation. As our discussion of the earlier authorities indicates, there are, however, a variety of circumstances in which considerations of justice may, in accordance with general principles relating to awards of costs, support an order for costs against a non-party. Thus, for example, there are several long-established categories of case in which equity recognized that it may be appropriate for such an order to be made.
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."
14 Dawson J, who agreed with the majority, noted that the appeal was limited to the question of jurisdiction but observed (at 204) that an order for security for costs "must ordinarily be the appropriate remedy where a receiver and manager conducts litigation through a company which will be unable to pay the costs of the defendant if the defendant is successful". In dissent McHugh J noted (at 217) that the companies were the "real" parties and the proceeds of any judgment in their favour would have been their property. The receivers were the agents of the companies and, his Honour thought, were in the same position as directors of a company who bring and defend actions on its behalf. His Honour's view was that provision for security for costs was a better remedy for protecting persons in litigation with insolvent companies.
15 In Hession v Century 21 South Pacific Ltd (in liq) (1992) 28 NSWLR 120 the New South Wales Court of Appeal upheld an appeal against the refusal of the primary judge to make an order for security for costs in favour of defendants sued for money due under a franchise agreement. Meagher JA (with whom Kirby P and Cripps JA agreed) held (at 123) that the judge had been wrong to rely on Re Strand Wood Co Ltd [1904] 2 Ch 1 where an application for security for costs in respect of a misfeasance summons brought by a company liquidator had been dismissed. Meagher JA said that a distinction must be drawn between cases in which the liquidator personally is the plaintiff, as in a misfeasance summons, and cases where the company in liquidation (albeit by its agent the liquidator) is the plaintiff. In the former case, if the proceeding fails, costs will be awarded against the liquidator personally, but no order for security for costs will be made against him because he is exercising a statutory power vested in him personally. In the latter case the Court had jurisdiction to make an order for security for costs under s 1335 of the Corporations Law (now s 1335 of the Act). His Honour went on to say (at 123):
"In this regard, it should also be noted that where a company in liquidation sues and fails, there is no jurisdiction in the Court to order the liquidators personally to pay the defendant's costs."
This seems inconsistent with Knight, the decision which had been handed down more than two months previously but which is not mentioned in Hession. It may be that the position of a receiver can be distinguished from that of a liquidator (see infra) but on the question of the exercise of, as distinct from the existence of, a jurisdiction to award costs.
16 Metalloy Supplies Ltd (in liq) v MA (UK) Ltd [1997] 1 All ER 418 involved an action instigated by a liquidator in the name of the company for goods sold and delivered. The English Court of Appeal held that although the Court had jurisdiction to order a liquidator as a non-party to proceedings brought by an insolvent company to pay costs personally, it would only do so in exceptional circumstances where there had been impropriety on the part of the liquidator, particularly in view of the fact that the normal remedy of obtaining an order for security for costs was available to the defendant. Waller LJ (at 422) referred to Knight and the observations by Dawson and McHugh JJ already mentioned about obtaining security for costs, a view with which his Lordship agreed. His Lordship observed (at 423) that there may be a distinction between the position of liquidators and that of a receiver in that there is a public interest in liquidators being able to perform their duties.
17 In my opinion, the critical element in the present case is that the Administrator instituted this proceeding with himself as an applicant. Knight and Metalloy proceeded on the implicit basis that a liquidator or receiver who is a party will be liable to an order for costs just like any other unsuccessful party; the only question was liability for costs when he was not a party.
18 By becoming a party, the Administrator put himself in the position to seek an order for costs in his own right in the event that the applicants succeeded. As already noted, this is in fact what happened at first instance. While it is now clear, in the light particularly of Knight, that there is jurisdiction to make an order for costs against a non-party (whether liquidator, receiver, administrator or otherwise) in exceptional circumstances, it is difficult to see how a court could make an order for costs in favour of a non-party. As Oliver J pointed out, it would be unfair to confer on some category of litigant the prospect of the fruits of successful litigation without liability for the risk of failure.
19 The fact that the Administrator has at all times been a party means that it is unlikely that an application for security for costs would have succeeded. It would have been said against such an application that the respondents had their remedy for costs against another (presumably solvent) party; they would not be in the position of having to make out the exceptional case of recovery against a non-party.
20 On the face of the originating process, all the relief claimed was sought by "the applicants", that is to say the Administrator and ARA. The originating process does not disclose any claim which is brought by the Administrator in some separate capacity, whether by reason of statutory duty or otherwise. Counsel referred in this regard to s 434A of the Act, but that provides for an application for the removal of a controller to be brought by the corporation of whose property the controller has control.
21 Personal liability of the Administrator is consistent with his liability for debts incurred in the course of administration: s 443A.