Inspector James v Ryan

Industrial Relations Commission (NSW)|2010-05-11|Before: Marks J

CITATION: Inspector James v Ryan (No 2) [2010] NSWIRComm 63

PARTIES: Inspector Wayne James (Prosecutor) Justin James Ryan (Defendant)

CATCHWORDS: COSTS - occupational health and safety proceedings - director defendant found not guilty in substantive proceedings - cost orders in criminal proceedings - discretion to award costs - onus of proof - conduct of defendant - manner in which defendant disclosed defence - litigation funding and third party indemnity - cost orders made

LEGISLATION CITED: Criminal Procedure Act 1986 (NSW) - s 257C Occupational Health and Safety Act 2000 - s 26

Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386 Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Limited [2008] NSWCA 148 CASES CITED: Inspector James v Ryan [2009] NSWIRComm 215 Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd [2009] HCA 43 Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534

HEARING DATES: 11 May 2010 14 & 26 May 2010 (written submissions)

Mr M Joseph SC with Mr D Chin of counsel (Prosecutor) Solicitors WorkCover Authority of New South Wales LEGAL REPRESENTATIVES: Mr L Robberds QC with Mr R Crow of counsel (Defendant) Solicitors Bilbie Dan Solicitors

Prosecution under s 8(1) of the Occupational Health and Safety Act 2000 (in the alternative pursuant to s 10(2)) by operation of s 26 of the Occupational Health and Safety Act 2000

1 The defendant, Justin James Ryan, was charged by the prosecutor, Inspector Wayne James of the WorkCover Authority of New South Wales, with two breaches of the Occupational Health and Safety Act 2000 ("the Act"). The charges were brought under s 26 of the Act, which is in the following terms: 26 Offences by corporations - liability of directors and managers

(1) If a corporation contravenes, whether by act or omission, any provision of this Act or the regulations, each director of the corporation, and each person concerned in the management of the corporation, is taken to have contravened the same provision unless the director or person satisfies the court that: (a) he or she was not in a position to influence the conduct of the corporation in relation to its contravention of the provision, or

(b) he or she, being in such a position, used all due diligence to prevent the contravention by the corporation. (2) A person may be proceeded against and convicted under a provision pursuant to subsection (1) whether or not the corporation has been proceeded against or been convicted under that provision.

(3) Nothing in subsection (1) prejudices or affects any liability imposed by a provision of this Act or the regulations on any corporation by which an offence against the provision is actually committed.

(4) In the case of a corporation that is a local council, a member of the council (in his or her capacity as such a member) is not to be regarded as a director or person concerned in the management of the council for the purposes of this section. 2 The prosecutor alleged that a corporation, namely Dekorform Pty Ltd ("Dekorform"), breached s 8(1), or in the alternative s 10(2), of the Act and that the defendant was a director of Dekorform. The prosecutor alleged that in those circumstances, the defendant was "taken to have contravened" the same provisions of the Act unless he was able to satisfy the Court of either of the matters referred to in s 26(1)(a) or (b). 3 In a judgment published on 18 December 2009, I determined that the prosecutor had failed to make out his case against the defendant. (See Inspector James v Ryan [2009] NSWIRComm 215). In doing so, I held firstly that the prosecutor had failed to establish beyond a reasonable doubt that on the date which was relevant to the charge that the defendant was a director of Dekorform. Secondly, I held that in all the circumstances the defendant was not in a position to influence the conduct of Dekorform in relation to its contravention of the provisions of the Act. For completeness, I add that I had also concluded that that company had been in breach of the provisions of the Act as alleged by the prosecutor. 4 Pursuant to liberty to apply, the defendant has now sought an order for costs in his favour against the prosecutor. The prosecutor resisted the making of any such order. In my substantive judgment I had reason at [154] to infer that the costs of both parties were in the range of $500,000 to $700,000. My assessment was inadequate. I was informed by the parties during submissions that the costs of both parties are approximately $2 million. Obviously the question of costs must now assume great significance when contrasted with the maximum penalty of $55,000. General principles

5 The circumstances in which orders for costs should be made in criminal proceedings conducted by a court of summary jurisdiction where a statutory discretion to award costs is available, have been the subject of consideration by the High Court of Australia in Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534. 6 I should observe at the outset that the power to award costs in the context of these proceedings brought under the Occupational Health and Safety Act is to be found in s 257C of the Criminal Procedure Act 1986 (NSW). The provisions of Part 5 of Chapter 4 of that Act apply to these proceedings. So much was uncontroversial. The parties agreed, also, that the principles discussed in Latoudis applied to the circumstances of these proceedings. 7 The substantial controversy which was determined in Latoudis concerned the proper approach to the exercise of discretion in awarding costs in favour of a defendant. The majority members of the High Court, Mason CJ, Toohey and McHugh JJ, approached the matter by concluding that a power to award costs conferred on a court of summary jurisdiction when a defendant is successful in the proceedings "must be taken to have intended to abrogate the traditional rule that costs are not awarded against the Crown." (Per Mason CJ at 542). Accordingly, a defendant who has been successful in having a criminal charge dismissed should in general terms be entitled to a costs order against the prosecutor. In exercising the discretion to award or refuse costs, the matter should be regarded by reference to the position of the defendant. The awarding of costs is intended to compensate a defendant for costs incurred in the defence of the proceedings and is not to be seen as inflicting some form of punishment on the prosecutor for having commenced the proceedings. McHugh J stated the matter in terms of a successful defendant having "a reasonable expectation" of obtaining a costs order. (At 566). 8 However, each of the judges who comprised the majority in Latoudis discussed circumstances where the successful defendant might not be entitled to the exercise of discretion so as to attract a costs order against the prosecutor. These circumstances were described in general terms by Mason CJ at 544 as follows: However, there will be cases in which, when regard is had to the particular circumstances, it would not be just and reasonable to order costs against the prosecutor or to order payment of all the defendant's costs. If, for example, the defendant, by his or her conduct after the events constituting the commission of the alleged offence, brought the prosecution upon himself or herself, then it would not be just and reasonable to award costs against the prosecutor.

I agree with Toohey J. that, if a defendant has been given an opportunity of explaining his or her version of events before a charge is laid and declines to take up that opportunity, it may be just and reasonable to refuse costs. Likewise, if a defendant conducts his or her defence in such a way as to prolong the proceedings unreasonably, it would be just and reasonable to make an award for a proportion of the defendant's costs. 9 Toohey J put the matter in the following terms at 565: Now, in a particular case there may be good reasons connected with the prosecution such that it would not be unjust or unreasonable that the successful defendant should bear his or her own costs or, at any rate, a proportion of them. To return to the examples given earlier in this judgment, if a defendant has been given the opportunity of explaining his or her version of events before a charge is laid and refuses the opportunity, and it later appears that an explanation could have avoided a prosecution, it may well be just and reasonable to refuse costs: see, by way of illustration, The Queen v. Dainer; Ex parte Milevich (1988) 91 FLR 33. This has nothing to do with the right to silence in criminal matters. A defendant or prospective defendant is entitled to refuse an explanation to the police. But if an explanation is refused, the successful defendant can hardly complain if the court refuses an award of costs, when an explanation might have avoided the prosecution. Again, if the manner in which the defence of a prosecution is conducted unreasonably prolongs the proceedings, for instance by unnecessary cross-examination, neither justice nor reasonableness demands that the successful defendant be indemnified, at any rate as to the entirety of the costs incurred. These illustrations are in no way exhaustive but what they point up is that a refusal of costs to a successful defendant will ordinarily be based upon the conduct of the defendant in relation to the proceedings brought against him or her. 10 McHugh J said at 569: Likewise, a successful defendant in summary proceedings has a reasonable expectation of obtaining an order for the payment of his or her costs because it is just and reasonable that the informant should reimburse him or her for liability for costs which have been incurred in defending the prosecution. Consequently, a magistrate ought not to exercise his or her discretion against a successful defendant on grounds unconnected with the charge or the conduct of the litigation. The fact that the informant has acted in good faith in the public interest or may have to meet the costs out of his or her own pocket is not a ground for depriving the defendant of his or her costs. Speaking generally, before a court deprives a successful defendant in summary proceedings of his or her costs, it will be necessary for the informant to establish that the defendant unreasonably induced the informant to think that a charge could be successfully brought against the defendant or that the conduct of the defendant occasioned unnecessary expense in the institution or conduct of the proceedings: cf. Ritter v. Godfrey (1920) 2 KB 47, at pp 53, 54-60, 66; Sunday Times Newspaper Co. Ltd. v. McIntosh (1933) 33 SR(NSW) 371, at p 377; Redden v. Chapman (1949) 50 SR(NSW) 24, at p 25; Schaftenaar , at pp 274-275; see also McEwen v. Siely (1972) 21 FLR 131, at p 136. Thus, non-disclosure to investigatory police of a tape recording later successfully used in cross-examination of the informant's witnesses may be a relevant matter to be taken into account in determining whether the defendant should be awarded costs: cf. Reg. v. Dainer; Ex parte Milevich (1988) 91 FLR 33. A successful defendant cannot be deprived of his or her costs, however, because the charge is brought in the public interest or by a public official, because the charge is serious or because the informant acted reasonably in instituting the proceedings or might be deterred from laying charges in the future if he or she was ordered to pay costs. Nor can the successful defendant be deprived of his or her costs because the conduct of the defendant gave rise to a suspicion or probability that he or she was guilty of the offence the subject of the prosecution. Hence, in most cases, the successful defendant in summary proceedings, like the successful party in civil proceedings, should obtain an order for costs in respect of those issues on which the defendant succeeds. 11 It will be seen, therefore, that in general terms where a defendant successfully defends summary criminal proceedings, there is a reasonable expectation of a favourable costs order. In discussing the circumstances that might deprive the defendant of such a costs order in terms of the exercise of discretion on just and reasonable grounds, there is a distinction between conduct of a defendant before proceedings are commenced and conduct during the course of the proceedings. Mason CJ spoke of the defendant by his conduct bringing "the prosecution upon himself or herself", or declining to explain "his or her version of events before a charge is laid" when given an opportunity to do so. Toohey J qualified this latter observation by adding "and it later appears that an explanation could have avoided a prosecution". In elaborating on this, his Honour said at 565: This has nothing to do with the right to silence in criminal matters. A defendant or prospective defendant is entitled to refuse an explanation to the police. But if an explanation is refused, the successful defendant can hardly complain if the court refuses an award of costs, when an explanation might have avoided the prosecution. 12 McHugh J spoke of it being necessary for the informant to establish that the defendant unreasonably induced the informant to think that a charge could be successfully brought against the defendant or that the conduct of the defendant occasioned unnecessary expense in the institution … of the proceedings. (At 569).

McHugh J instanced a non-disclosure to investigating police of a tape recording, which was later used in cross-examination. But McHugh J qualified his observations by observing: Nor can the successful defendant be deprived of his or her costs because the conduct of the defendant gave rise to a suspicion or probability that he or she was guilty of the offence the subject of the prosecution. (At 570). 13 These observations were not intended by the members of the Court to be exhaustive. They do, however, give some flavour to the circumstances which might cause a court to decline to make a costs order in favour of a successful defendant. 14 There is also a reference in the several judgments to conduct of the defendant after the initiation of proceedings. Mason CJ referred to a defendant conducting a defence "in such a way as to prolong the proceedings unreasonably." Toohey J referred also to "unnecessary cross-examination." McHugh J referred to the fact that "the conduct of the defendant occasioned unnecessary expense in the … conduct of the proceedings." 15 As Toohey J observed, the focus of attention in all these matters is "upon the conduct of the defendant in relation to the proceedings brought against him or her." 16 I should observe for completeness that the burden of demonstrating the existence of circumstances which would justify depriving a successful defendant of a costs order either wholly or partially will rest upon the party seeking to assert such a position, namely in the circumstances of these proceedings, the prosecutor. So much is clear from the observations of the several judges in Latoudis, to which I have referred. 17 I now deal with those matters to which reference was made by the prosecutor in support of his resistance to the making of a costs order in favour of the defendant. 18 The prosecutor submitted that the principles that may be derived from the judgment of the majority judges in Latoudis "should be considered in the context of the charge where the prosecutor at all times had the onus of proof in proving the offence." This was intended, as I understand it, to direct attention to the fact that s 26 contains within it the elements of defences, the burden of establishing which will fall on the defendant. Thus, once it is established that the corporation was in breach and the defendant was, relevantly, a director then the onus of establishing the available defences falls upon the defendant. This will cause a defendant intending to bring himself or herself within these provisions to adduce evidence. It will not be possible for the prosecutor to anticipate precisely what that evidence might be, and, as was submitted, it was not until the defendant gave evidence and other witnesses were called in support of the availability of the defence that the prosecutor was in a position to know the precise case that he had to rebut. 19 Whilst in given circumstances the shifting burden which I have described may create forensic difficulties for a prosecutor, this is not sufficient, of itself, to create circumstances that would cause the Court to deny the defendant his costs. 20 When the prosecutor determined to institute these proceedings against the defendant, the prosecutor must have been aware of the provisions of s 26(1) and that, if the proceedings were to be defended, he would need to deal with issues about whether or not the defendant was in a position to influence the conduct of the corporation in relation to the contravention and whether the defendant used all due diligence to prevent that contravention. These are matters that are integral to the manner in which s 26 operates, no matter where the burden of proof lies. Once a prosecution has been instituted, the prosecutor must be cognizant that these are issues that will arise and that they will need to be litigated if the matter is defended. I cannot see how the structure of s 26 would dictate that any different approach to that which is mandated by the principles established in Latoudis can apply. 21 The prosecutor directed attention to a number of matters of "critical importance" which it was said, either individually or in the aggregate, would justify a rejection of the costs order sought by the defendant. These are: (a) The Prosecutor did succeed on the matters upon which it carried the burden of proof and to which there was no effective challenge, although the Prosecutor was put to its proof. 22 In essence, the prosecutor was required to prove that Dekorform contravened the Act and that the defendant was a director. The prosecutor claimed that there was no effective challenge to the finding that the corporation had breached the Act, yet the prosecutor was "put to its proof." 23 At the commencement of the prosecution case, there was dialogue between counsel for the prosecutor and the defendant concerning the adducing of evidence about the breach by the corporation. The Court was informed that there had been discussions between counsel but that agreement had not been reached concerning those admissions that the defendant was prepared to make about the breach by the corporation. Mr Robberds QC said that "apart from some minor matters" he had indicated that the defendant was prepared to admit matters that would have "virtually proved the case that the prosecution had to prove that the company committed the offence. We don't take issue about that." Mr Robberds indicated that Mr Joseph SC, counsel for the prosecutor, required additional admissions which the defendant was not prepared to make. It was on this basis that the matter proceeded by the prosecutor calling evidence to establish the breach by the corporation. I do not regard those matters as favouring any exercise of discretion against the defendant's application for costs. 24 The next matter of "critical importance" outlined by the prosecutor in his written submissions is: (b) The Defendant did not reveal its defence to the Prosecutor at any time prior to the Prosecutor completing his case (as he was entitled to). This created a legitimate forensic ambush, but an ambush all the same. This is a reference to the fact that in effect the first indication given to the prosecutor and to the Court that the defendant would deny that he was a director of Dekorform was given in the course of an opening address by Mr Robberds on 16 June 2009, some days after the hearing had commenced and after the close of the prosecution case. Mr Robberds said that he had informed Mr Joseph "earlier in the week" that there was no admission that the defendant was a director. 25 As it transpired, the defendant only became aware that he had not been appointed a director of Dekorform within about a month prior to the trial commencing. Up to that stage, he was of the impression that he had been validly appointed a director and, indeed, had conducted himself as such. I have described the factual background that pertains to the defendant's initial understanding commencing at [58] of the substantive judgment. The prosecutor described what occurred as an "ambush", albeit that it was conceded that it was "a legitimate forensic ambush". It was said that this was conduct that would justify the refusal of a costs order in favour of a defendant, either wholly or in part. 26 The defendant responded in two ways to this submission. Firstly, it was said that at all times the prosecutor knew that he was required to prove that the defendant was a director of Dekorform and was unable to do so beyond reasonable doubt. In these circumstances, the prosecutor could not be said to have been ambushed, particularly as there had never been any indication that the fact that the defendant was a director would be admitted for the purpose of the proceedings. No doubt, the prosecutor had relied on the prima facie position created by the existence of ASIC documents indicating that the defendant was indeed a director of Dekorform. 27 The prosecutor also had regard to a letter from the defendant's solicitors, Bilbie Dan, dated 13 November 2008, which was forwarded to a person, presumably within the "Legal Group" of WorkCover New South Wales. That letter states that "at various times in the period 1 January 2003 to 3 July 2006 … the following persons were directors of 'our client'" and the defendant is named as one of six persons. The letter was also written on behalf of Dekorform as defendant in other proceedings commenced by the prosecutor against that company. I shall proceed on the basis that the reference to "our client" is, in this context, a reference to Dekorform. 28 It follows that as at 13 November 2008 and until 16 June 2009, the prosecutor was at all times under the impression that no issue would be taken in the proceedings that the defendant was indeed a director of Dekorform. 29 In these circumstances, the position of the prosecutor must attract some sympathy in connection with any overall costs order in favour of the defendant. 30 However, the position is complicated by the second matter upon which the defendant relied. That is, that even though the prosecutor failed to prove beyond reasonable doubt that the defendant was a director at law of Dekorform, the prosecutor nevertheless submitted that, in all the circumstances, the defendant should be regarded as a director, that he was a de facto director and s 26 of the Act was not confined to persons who were directors at law but extended to persons who were, in effect, de facto directors or conducted themselves as though they were directors. The defendant submitted that even if this matter had been put at issue at a very early date, the prosecutor would nevertheless have proceeded with these alternative submissions, as indeed he did for the purpose of the hearing. 31 The matters which I have referred to above are indicative of some factual complexity in examining the conduct of the defendant in terms of this issue. The starting point is the requirement that the prosecutor be able to prove that the defendant was at the relevant time a director of Dekorform. However, the letter of 13 November 2008 from the defendant's solicitor could justifiably be understood by the prosecutor as indicating that the defendant was a director of that company. It was not until 16 June 2009 during the course of the proceedings that it was announced in open court that the question of the defendant's directorship of that company would be in issue. However, the prosecutor determined to proceed thereafter on the basis that even if the applicant were not a director at law (which the prosecutor never conceded), nevertheless the defendant was liable because he was acting in the nature of a de facto director and the legislation accommodated this situation. 32 In these circumstances, I am inclined to the view that the defendant should not be entitled to receive his costs of so much of the proceedings as were directed to the question as to whether or not he was a director at law of Dekorform. This would cover in general terms the evidence of Ms Shaqawi and so much of the proceedings that involved a consideration of this issue. 33 The next matter of "critical importance" outlined by the prosecutor in his written submissions is: (c) It is clear that there was co-operation between Alesco and the Defendant (ie the searches undertaken). Such co-operation was not open to the Prosecutor which was required to issue extensive subpoenas for which Alesco solicitors seek $230,000 in costs. This and other costs were incurred by the Prosecutor only because of the conduct of the Defendant in the manner he chose to disclose his defence. 34 Presumably, this is directed to the defence that the defendant was not a director at law of Dekorform. There is absolutely no evidence that, if the defendant had indicated at an earlier time that he wished to raise the question of directorship as an issue in the proceedings, the prosecutor would not have pursued this matter with the same vigour that he did upon becoming aware of such a defence. There is no evidence of any additional expenses having been incurred by the prosecutor only because of the time at which the issue was raised in the proceedings. The prosecutor did not indicate at any stage that if he had been shown the material, which was adduced as evidence in the proceedings, he would have contemplated discontinuing proceedings against the defendant. On this basis, the costs of $230,000 incurred in issuing summonses for production of documents should properly be borne by the prosecutor, assuming that they are determined to have been properly incurred in that amount. 35 The next matter of "critical importance" outlined by the prosecutor in his written submissions is: (d) The greatest amount of time incurred in the matter was in the defence case and which arose because of the manner the Defendant chose to disclose his defence.

The same consideration applies as is referred to in (c) above, assuming that the reference to "defence case" is a reference to the raising of the issue of directorship. 36 The final two matters outlined by the prosecutor in his written submissions are: (e) To some extent the conduct of the Defendant brought the prosecution upon himself by the manner he exercised his right to remain silent in order to gain a significant forensic advantage.

(f) It is clear that the Prosecutor commenced the proceedings with a statement from the Defendant, however, the Defendant refused to allow it to be used in the proceedings claiming, as he was entitled to, the privilege against self incrimination. 37 It is convenient to deal with these matters together. As is made clear in (f), the prosecutor concedes that he had available to him a statement made by the defendant but the defendant refused to allow it to be used in the proceedings, claiming privilege against self incrimination, as the defendant "was entitled to" do. This is said by reference to (e) to have given the defendant "a significant forensic advantage." Just what that forensic advantage was has not been made clear. 38 The approach to the application of the principles referred to in Latoudis requires that some matter of significance be established by the prosecutor in order to disentitle the defendant to a costs order in his favour. During the course of oral submissions, I asked Mr Joseph what the defendant should have done to avoid any criticism that might disentitle him to an order for costs. The prosecutor's position was that the defendant should have disclosed the nature of the evidence that would be given by any persons called in the defendant's case, including the defendant. Whilst the prosecutor properly conceded that the defendant was not obliged to do so, it was the prosecutor's position that by failing to do so, the defendant forewent any entitlement to a costs order in his favour. 39 The difficulty that I have with this proposition is that after the defendant gave evidence, the proceedings were adjourned to allow the prosecutor to undertake further enquiries and, if necessary, to adduce further evidence. There is, again, no evidence that when faced with the defendant's evidence the prosecutor indicated that he would discontinue the proceedings against the defendant. On the contrary, the proceedings were pursued with great vigour. To the extent that this part of the prosecutor's submissions is directed significantly to the defences raised by the defendant under s 26(1)(a) of the Act, the position is further complicated by the submissions made by the prosecutor that a position of director of the corporation ipso facto carried with it a responsibility to make himself familiar with the fundamentals of the business of Dekorform, including its occupational health and safety obligations and that the defendant thereby had the ability and power to influence the conduct of that corporation in relation to the operation of the particular machine which gave rise to the initiation of the proceedings. Such an approach rendered a lot of the evidence given on behalf of the defendant about this issue irrelevant, in the view of the prosecutor. But there is, again, no evidence that, even if there had been full disclosure of all these matters, the prosecutor would have discontinued the proceedings. These matters do not compel rejection of the defendant's costs application. 40 The prosecutor relied on a number of other matters, with which I do not need to deal specifically because they have been dealt with in the observations which I have made above. Some of those matters referred to the position of the prosecutor. I instance "the prosecutor had at all times reasonable prospects of success to overcome any defence given" and "there is no suggestion that the prosecutor did not properly investigate the case nor that it did not have evidence to address the defence. Nor is it suggested that it lacked good faith in bringing the proceedings, nor acted in an improper manner." These are matters that are irrelevant for the purpose of my consideration because of the principles established by Latoudis. 41 The prosecutor also relied on the fact that there was evidence that the defendant's costs were to be indemnified by Alesco. This took the form of a "Deed Of Access, Insurance And Indemnity" which was Exhibit 30 in the proceedings. By its Recitals, the Deed is said to apply to a Director who has been or will be appointed as a director of one or more subsidiaries of Alesco Corporation Limited. The Recitals further state, inter alia, that it is the policy of Alesco Corporation Limited to indemnify directors of a subsidiary as being "necessary to secure the services of suitably qualified and experienced persons to serve as directors" of a subsidiary. 42 By clause 2.1, an indemnity is provided by Alesco in favour of the Director "to the maximum extent permitted by law" against "legal costs, not limited to taxed costs, incurred by the Director as a Director of the Relevant Subsidiary, other than legal costs incurred" in circumstances which it is not necessary to describe. As I understand the relevant provision, the indemnity that would apply to the defendant in these proceedings against legal costs must be costs incurred by the defendant as a director of Dekorform. As I have found that he was not a director of that corporation, it follows that the provisions of the indemnity could not, in any event, apply to him. On this basis, the assertion made by the prosecutor has no application to a consideration of whether a costs order should be made in favour of the defendant. 43 Furthermore, the fact that an indemnity exists does not, of itself, provide any reason for denying a defendant in criminal proceedings a costs order against the prosecutor if the Court were to hold otherwise that it would be appropriate to make such an order. 44 In support of this submission the prosecutor referred to comments made in Latoudis concerning cases where legal aid was available. But, as the defendant submitted, there is nothing in Latoudis that would support any conclusion that the availability of legal aid would constitute a disentitling factor in determining whether costs should be awarded. At 543, Mason CJ said: The availability of legal aid might be regarded as a possible reason for refusing to award costs. But no court can assume that a particular defendant is entitled to, or is in receipt of, legal aid and it would not be right to draw a distinction between defendants based on receipt of legal aid. In any event the courts have traditionally made orders for costs without regard to considerations of that kind. 45 During the course of argument, I asked the prosecutor to ascertain whether there had been any cases at appropriate appellate court level that involved one or more of the parties being funded by a litigation funder, where consideration had been given to the impact of litigation funding on the awarding of costs. In supplementary written submissions, counsel for the prosecutor referred the Court to the decision of the New South Wales Court of Appeal in Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Limited [2008] NSWCA 148. Those proceedings concerned the question whether security for costs should be ordered in circumstances where proceedings had been commenced by a liquidator of a company, but those proceedings were financed by a litigation funder who stood to make a financial gain from the proceeds of the litigation. Those proceedings should be viewed against the general proposition that litigation funding does not, without more, constitute an abuse of process. (See, for example, Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386 (High Court of Australia)). In Green, all members of the New South Wales Court of Appeal agreed that the fact that a litigation funder stood behind a plaintiff was a factor that should be taken into account. Hodgson JA said: 51 However, in my opinion a court should be readier to order security for costs where the non-party who stands to benefit from the proceedings is not a person interested in having rights vindicated, as would be a shareholder or creditor of a plaintiff corporation, but rather is a person whose interest is solely to make a commercial profit from funding the litigation. Although litigation funding is not against public policy ( Campbells Cash and Carry Pty Limited v Fostif Pty Limited [2006] HCA 41; 229 CLR 386 at [87]-[95]), the court system is primarily there to enable rights to be vindicated rather than commercial profits to be made; and in my opinion, 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. …

53 In all these circumstances, in my opinion, the existence of the funder and the funding agreement is a matter that favours an order for security which, according to the funding agreement, the funder would be obliged to comply with. This view is supported by the consideration that in this case the court is left in the dark as to the proportion to which the funder is entitled of any verdict obtained by the liquidator; although, because this is the result of a claim of legal professional privilege, the court would not be justified in drawing any conclusion that the proportion to which the funder is entitled is unreasonably high: cf Wentworth v Lloyd (1864) 10 HL Cas 589; 11 ER 1154. (It may be that where the court knows the extent of the funder's interest in the outcome of the case, this could be a factor which might lead the court to order security for less than the totality of the costs.) 46 Campbell JA said: 85 There is no shortage of judicial statements to the effect the fact that the litigation is being brought in part for the benefit of a litigation funder is a relevant consideration in the exercise of a discretion as to costs under s 1335 Corporations Act ( Spargos Mining NL v Fuller [2003] WASC 37; (2003) 21 ACLC 860 at [10], [23]; Healy Air-conditioning Pty Ltd v Oracle Corporation Pty Ltd [2003] WASC 78; (2003) 21 ACLC 866 at [3]; Global Finance Group Pty Ltd (in liq) v Marsden Partners (a firm) [2004] WASC 52 at [59]-[60], [71]) even if the plaintiff is a company that is insolvent even though not actually in liquidation ( Maronis Holdings Ltd v Nippon Credit Australia Ltd [2000] NSWSC 994 at [11]-[12]; Baygol Pty Ltd v Huntsman Chemical Co Australia Pty Ltd t/a RMAX [2004] FCA 1248 at [37]-[39] ), and there is authority that the involvement of a funder is relevant to whether the court should order security for the costs of appeal ( Winnote Pty Ltd (in liq) v Page [2005] NSWCA 362; (2005) 64 NSWLR 244 at [23]). 47 Basten JA doubted the application of a general rule, but for reasons which I shall shortly develop it is not necessary that I consider this matter further. 48 In my opinion, the part played by a consideration of a commercial gain to be made by a litigation funder in considering whether security for costs should be ordered is relevantly distinguishable from a consideration of whether a successful party in proceedings is entitled to a costs order in his or her favour assuming the existence of a third party indemnity. A litigation funder stands to make a commercial profit from the arrangement with the party. A third party provider of an indemnity for costs does not have, without more, any interest in the proceeds of the litigation. It is of the nature of an arrangement to finance costs incurred by a party to proceedings. Furthermore, there are significant differences in approach that are taken into account in considering whether an order for security for costs should appropriately be made when compared with a consideration of whether a successful party to proceedings should have the benefit of a costs order. 49 In determining whether to exercise the discretion to make an order for the provision of security for costs, a court will have regard to the need to provide protection in appropriate circumstances against a successful party (usually a defendant) being denied a right to recover costs against another party who is impecunious. The discretion is a wide one and was the subject of general consideration in the New South Wales Court of Appeal in Green, previously referred to. However, in determining whether to exercise the discretion to make an order for costs in favour of a defendant who is successful in criminal proceedings, the court is concerned about compensation, as I have earlier discussed. Furthermore, the entitlement to costs has crystallised, whereas in considering matters involving security for costs a court is looking at matters in futuro. 50 Of more relevant consideration is the recent decision of the High Court of Australia in Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd [2009] HCA 43. In those proceedings, the High Court of Australia considered whether or not the Supreme Court of New South Wales had power to order costs against a non-party who was a litigation funder. The High Court held that no such power existed because, fundamentally, the litigation funding arrangement did not constitute an abuse of process of the court. Although neither the High Court of Australia nor the New South Wales Court of Appeal, nor, indeed, the judge at first instance, had given specific consideration to whether or not a party might be deprived of the right to seek costs because of a litigation funding arrangement, the various judgments cast no doubt on the general proposition that the existence of a litigation funding agreement for the benefit of a successful party in proceedings would not in some way disentitle that party from recovering costs in circumstances where he or she would otherwise be entitled to the benefit of a costs order. 51 I am of the opinion that the existence of any indemnity for costs to the benefit of the defendant would not disentitle him to a costs order to which he would otherwise be entitled. Conclusion

52 The prosecutor submitted that the Court should, in the circumstances, decline to order that he be required to pay the defendant's costs of the proceedings. The prosecutor sought one of three alternative orders, namely that each party pay their own costs, that the defendant pay the costs of the prosecution incurred in respect of the liability of Dekorform with no other order as to costs or that the prosecutor pay 20 per cent of the overall costs of the defendant. 53 It follows from the discussion which I have undertaken with respect to the principles established by Latoudis, which I am bound to apply, and the particular matters put forward by the prosecutor in resisting the defendant's application that in general terms the defendant should be entitled to a costs order in his favour. The one reservation that I have concerns the changed position of the defendant about whether he had been validly appointed at law as a director of Dekorform. I have discussed these matters earlier at [24] and following. 54 I am of the opinion that the conduct of the defendant in contradicting the representation made on 13 November 2008 that he was at all relevant times a director of Dekorform, such contradiction occurring after the hearing had commenced, constitutes conduct that would disentitle the defendant from obtaining a costs order in his favour about this issue. In referring to "this issue", I am referring only to the question whether the defendant had been validly appointed a director of Dekorform, something that could only have been attended to by Alesco Corporation, the ultimate parent company. I do not intend to disentitle the defendant from recovering his costs with respect to the remaining controversy concerning whether or not he was otherwise a director for the purpose of s 26 of the Act because it is clear from the manner in which the prosecutor conducted the proceedings that these were issues that the prosecutor would have pursued even if informed that the defendant had not been validly appointed a director of Dekorform. Given also that the prosecutor vigorously contested the evidence that the defendant adduced about the validity of his appointment as a director of Dekorform, there is no justification in my opinion for making any order about this matter in favour of the prosecutor against the defendant. Orders

55 I make the following orders: 1. Subject to Order 2, the prosecutor is to pay the defendant's costs of the proceedings in an amount assessed under the Legal Profession Act in default of agreement. 2. Notwithstanding the provisions of Order 1, the defendant is not entitled to recover against the prosecutor any costs arising out of or in connection with the question whether the defendant was validly appointed a director of Dekorform Pty Ltd by Alesco Corporation.

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