//
© 2026 Zoe. All rights reserved.
Zoe is a legal information platform. Always consult the Federal Register of Legislation for authoritative text.
[2009] HCA 43
respondent. Appeal dismissed with costs.
The High Court held that a litigation funder who backed an insolvent company's losing lawsuit in return for a large success fee did not abuse court processes simply because it did not promise to cover the other side's legal bills if the case failed. Because the funder had not interfered with how the case was run and because rules already exist for ordering security for costs, there was no unfairness that justified making the funder pay the winners' unrecovered costs. The appeal seeking such an order was therefore dismissed.
AI-generated legal information, not legal advice. Zoe can make mistakes. Check the cited source, and for advice about your situation consult a qualified Australian lawyer.
9 cited instruments linked from this judgment.
2,551 words · generated 24/04/2026
In 1998 Rickard Constructions Pty Ltd entered a contract to build pavement at a Port Botany container terminal. The pavement failed shortly after practical completion. Rights to sue those involved in the design and supervision were assigned to Rickard Constructions, which by then was in financial difficulty. In September 2000 it commenced proceedings in the Supreme Court of New South Wales against several defendants including the geotechnical engineer Jeffery & Katauskas Pty Ltd.
Shortly after filing, Rickard Constructions granted a deed of charge to SST Consulting Pty Ltd to secure a loan said to arise from funding the litigation. In December 2000 an administrator was appointed and a deed of company arrangement (DOCA) was executed. Under the DOCA, SST and the director jointly agreed to fund the proceedings initially to $150,000 or until 31 March 2001. SST in fact funded the litigation thereafter. The DOCA contemplated that SST might receive a substantial “success fee” component within the secured sum of $930,000 if the proceedings produced a recovery; the precise advance was found to be $300,000 with the balance characterised as a success fee.
Security for costs was ordered against Rickard Constructions in stages. Rolfe J ordered $47,750 in December 2000. Further orders brought the total security to approximately $187,750. The trial before McDougall J lasted 19 days and the action was dismissed in 2004. The shortfall between Jeffery & Katauskas’ costs and the security recovered exceeded $450,000. An appeal by Rickard Constructions was also dismissed.
The successful defendants applied to McDougall J for orders that SST and its directors pay the trial costs under Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 42.3(2)(c) on the footing that the funding arrangement was an abuse of process. Allianz Australia sought a similar order against the director. Those applications were refused. The Court of Appeal granted leave but dismissed the subsequent appeals and a motion concerning the costs of the substantive appeal.
Special leave was granted to Jeffery & Katauskas. In the High Court the argument narrowed to two elements said to constitute abuse of process: the success fee arrangement and the absence of any indemnity by SST in favour of Rickard Constructions against adverse costs orders. The High Court by majority (French CJ, Gummow, Hayne and Crennan JJ) held that no abuse of process had been committed. Heydon J dissented. The orders in both matters were that the appeals be dismissed with costs.
The majority began from the text of UCPR r 42.3. Rule 42.3(1) prohibits the making of a costs order against a non-party in the exercise of powers under s 98 of the Civil Procedure Act 2005 (NSW). The exception in r 42.3(2)(c) is narrow: it permits an order only against a person who has committed contempt or an abuse of process and only to the extent that the costs were “occasioned by” that contempt or abuse.
The majority accepted that the categories of abuse of process are not closed. Drawing on Walton v Gardiner and Batistatos v Roads and Traffic Authority (NSW), they stated that abuse may be found where proceedings are seriously and unfairly burdensome, prejudicial or damaging or productive of serious and unjustified trouble and harassment, or where the administration of justice would be brought into disrepute among right-thinking people. However, the majority emphasised that the term is not at large. Conduct that is merely unfair in some general sense does not suffice.
Applying that standard, the majority found that the funding arrangement had “no bearing on the merits of the proceedings, nor the way in which those proceedings were conducted”. Rickard Constructions was not a nominal plaintiff. There was no deception of the court, no sham, no ulterior purpose. The fact that a plaintiff is impecunious does not, without more, render proceedings an abuse. The rules themselves contemplate impecunious plaintiffs; that is why security for costs exists under UCPR r 42.21 and s 1335 of the Corporations Act 2001 (Cth).
The majority noted that orders for security had in fact been made and that the defendants’ inability to recover the full costs was the direct result of the amounts fixed by those orders and the operation of r 42.3 itself. To characterise the very situation addressed by those rules as an abuse that then triggers an exception to the prohibition on non-party costs orders was circular. The majority rejected the proposition that a funder must always put the funded party in a position to meet any adverse costs order. Such a rule would be too broad (catching shareholders, relatives, banks) and lacked doctrinal root. It would effectively outflank the security for costs regime and the deliberate policy choice in r 42.3 to restrict non-party costs orders.
The decision in Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd was decisive. That case held that litigation funding for reward is not contrary to public policy and does not inherently constitute an abuse. Existing doctrines of abuse of process and procedural controls are sufficient to address any impropriety. The majority refused to impose an overarching rule that would bar actions according to the degree of control or size of the funder’s reward. Because the SST arrangement did not interfere with the proper conduct of the case, it fell squarely within the Fostif principle.
Heydon J would have allowed the appeal. His Honour considered that the combination of an insolvent plaintiff, a substantial success fee (more than double or treble the sum advanced) and the absence of any practically effective indemnity created manifest unfairness. He viewed the arrangement as an abuse because the funder sought the upside of litigation without accepting the ordinary downside risk of paying costs if the defendant succeeded. He regarded the Court of Appeal’s reading of Fostif as overly broad and noted that the indemnity given in Fostif itself had practical value for defendants. However, the orders of the Court reflect the majority position.
Before this decision the law contained two overlapping but distinct streams. First, Knight v FP Special Assets Ltd recognised a general discretion to order costs against a non-party who plays an active role in litigation where the nominal party is a man of straw and the non-party has an interest in the outcome. That discretion was not expressed in terms of abuse of process. Second, the rule-making power was used in 1993 to insert what became r 42.3, expressly restricting the Knight discretion and abolishing several traditional categories of non-party costs orders. The evident purpose was to confine such orders to the exceptional cases listed in r 42.3(2).
The torts and offences of maintenance and champerty had been abolished in New South Wales in 1995, but the statute expressly preserved rules of public policy that might still render funding contracts illegal or unenforceable. Fostif had already established that third-party funding for reward is not inherently contrary to public policy and does not automatically amount to an abuse. What remained unclear was whether the specific combination of an insolvent plaintiff, a success fee and no indemnity against costs could itself constitute the abuse necessary to engage r 42.3(2)(c).
After the decision the position is clearer. A litigation funder does not commit an abuse of process merely by funding an impecunious corporate plaintiff on terms that include a success fee and that omit an indemnity against adverse costs. The existence of the security for costs regime and the deliberate policy choice in r 42.3 to limit non-party exposure mean that the unfairness said to arise from such arrangements is already addressed by the rules. A defendant who wishes to protect itself must use the security for costs mechanisms at the appropriate time rather than rely on a retrospective characterisation of the funding as abuse. The power under r 42.3(2)(c) remains available for genuine abuses—sham proceedings, improper interference with the conduct of the case, or conduct that brings the administration of justice into disrepute—but the mere commercial structure of modern litigation funding will not suffice.
The decision therefore narrows the circumstances in which a successful defendant can look beyond an insolvent plaintiff to a solvent funder. It reinforces the primacy of the security for costs jurisdiction and confirms that r 42.3 is a genuine restriction, not a mere procedural formality.
Paragraph [40]: “It follows that an agreement by a non-party, for reward, to pay or contribute to the costs of a party in instituting and conducting proceedings is not, of itself, an abuse of the court’s processes.”
Plain English: Simply paying for someone else’s lawsuit because you hope to make money from it is not automatically an abuse of court process. Something more is required.
Paragraph [43]: “It has been said repeatedly in the judgments of this Court that the categories of abuse of process are not closed.”
Plain English: Courts can recognise new kinds of abuse, but they will not treat every unfair outcome as an abuse. The concept has boundaries.
Paragraph [52]: The majority’s quotation and discussion of the Knight category makes clear that the circumstances that might once have justified a costs order under the general discretion do not automatically satisfy the stricter test of “abuse of process” now required by r 42.3(2)(c).
Plain English: Even if a case would once have allowed a costs order against a backer under the old law, the rule change means the backer must have done something that the law now labels an abuse.
Paragraph [59]: “Once it is recognised first, that the UCPR precludes ordering costs against a non-party save in exceptional cases, and secondly, that the plaintiff’s inability to pay costs goes only to questions of security, the appellant’s contention … can be seen to depend upon one of two propositions” which the Court then rejected.
Plain English: The rules deliberately limit when a non-party can be ordered to pay costs. You cannot turn the plaintiff’s poverty and the funder’s profit motive into an abuse just because the rules prevent an ordinary costs order.
Paragraph [61]: “The proposition that those who fund another’s litigation must put the party funded in a position to meet any adverse costs order is too broad a proposition to be accepted.”
Plain English: There is no free-standing legal rule that every funder must promise to pay the other side’s costs if the case is lost. Such a rule would catch too many ordinary supporters and has no foundation in principle.
The precedent is triggered when a defendant who has successfully defended proceedings against an impecunious corporate plaintiff seeks a non-party costs order against a litigation funder under UCPR r 42.3(2)(c) and relies solely on the combination of (a) the plaintiff’s inability to satisfy an adverse costs order and (b) the funder’s commercial interest (including a success fee) together with the absence of an indemnity.
The decision makes plain that such facts, without more, do not constitute abuse of process. The precedent will apply whenever the funding arrangement has not affected the manner in which the proceedings were conducted, there has been no sham or improper purpose, and the defendant has had recourse to the security for costs regime. It will be especially relevant where the deed of company arrangement or funding agreement contains a success fee calculated as a multiple of the sum advanced and where the funder’s control is limited to the ability to cease funding.
Conversely, the decision leaves room for abuse findings where the funder interferes with the conduct of the case, directs lawyers, suppresses evidence, or uses the corporate plaintiff as a nominal party while retaining de facto control and shielding itself from all downside risk. The precedent therefore draws a firm line between ordinary commercial litigation funding (even on onerous terms) and conduct that distorts the proper function of the court’s processes.
Although the judgment is the source text, it itself treats a number of prior authorities in ways that indicate how the principle is to be applied. The majority followed Fostif at [38] and [48], emphasising that the earlier decision had already settled that funding for reward is not inherently an abuse and that existing doctrines suffice to control impropriety. Knight v FP Special Assets Ltd was distinguished at [52] on the basis that the general category of case it described does not automatically satisfy the stricter “abuse of process” test required by r 42.3(2)(c). The Court cited Walton v Gardiner and Batistatos for the flexible but not unlimited content of abuse of process.
The judgment’s treatment of Project 28 Pty Ltd v Barr, Green v CGU Insurance Ltd and Idoport Pty Ltd v National Australia Bank Ltd is instructive. Those decisions were not followed insofar as they suggested that the absence of an indemnity or the presence of a commercial profit motive could itself ground an abuse characterisation sufficient to engage the costs rule. Instead the majority read them as dealing with security for costs or as containing dicta that did not control the construction of r 42.3(2)(c).
Heydon J’s dissent, while not prevailing, records a more expansive reading of earlier New Zealand and English authorities (Arklow, Dymocks, Condliffe v Hislop) that treated funding without risk as wrong or unjust. The majority’s rejection of that approach signals that Australian law under r 42.3 places greater weight on the statutory text and the policy choice to confine non-party liability.
The majority expressly left several questions undecided. First, the interaction between s 14 of the Civil Procedure Act (the dispensing power) and r 42.3 was raised but not resolved; the parties argued only the rule. Whether a court could dispense with the prohibition in r 42.3(1) in an appropriate case remains open.
Second, the precise limits of security for costs principles were not revisited. The majority noted that security will not always be ordered and that the extent of unrecoverable costs reflects the balance struck by those rules. Whether those rules themselves require reconsideration in light of widespread litigation funding was expressly left for another day.
Third, the degree of control that might turn ordinary funding into abuse was not defined. The majority accepted the primary judge’s finding that SST was not involved in day-to-day instructions yet still concluded there was no abuse. The boundary between the capacity to “turn off the tap” of funding and active control that could constitute abuse therefore awaits further litigation.
Fourth, the position where a funder gives an indemnity that is practically ineffective (for example, because the funded plaintiff has other creditors who would rank ahead) was touched on only in Heydon J’s reasons. The majority’s silence leaves open whether a nominal indemnity that does not protect the defendant can still produce an abuse.
Finally, the decision assumes the plaintiff is a corporation. The position of natural persons, who are generally not ordered to provide security merely because they are impecunious, may require separate analysis. Whether funding a natural person on similar terms could ever constitute abuse under r 42.3(2)(c) is not foreclosed.
These open questions mean that while the core proposition is now settled, the precise metes and bounds of non-party costs liability in funded litigation will continue to be worked out case by case.
Jeffery & Katauskas Pty Limited v SST Consulting Pty Ltd
Jeffery & Katauskas Pty Limited v Rickard Constructions Pty Limited
On appeal from the Supreme Court of New South Wales
D F Jackson QC with J A Steele for the appellant in both matters (instructed by Colin Biggers & Paisley)
B W Walker SC with T G R Parker SC and R E Steele for the respondents in S167/2009 and for the fourth to seventh respondents in S168/2009 (instructed by J Biady & Associates)
No appearance for the first respondent in S168/2009
Submitting appearance for the second and third respondents in S168/2009
Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.
Jeffery & Katauskas Pty Limited v SST Consulting Pty Ltd
Jeffery & Katauskas Pty Limited v Rickard Constructions Pty Limited (subject to a deed of company arrangement)
Practice and procedure - Costs - Order against non-party - Where non-party, for a contingency fee, funded impecunious corporate plaintiff without providing plaintiff with indemnity against adverse costs orders - Whether power of Supreme Court of New South Wales to order costs against non-party enlivened - Whether non-party had committed abuse of process of the court within the meaning of Uniform Civil Procedure Rules 2005 (NSW), r 42.3(2)(c).
Words and phrases - "abuse of process of the court", "occasioned by".
(c) to make an order for payment, by a person who has committed contempt of court or an abuse of process of the court, of the whole or any part of the costs of a party to proceedings occasioned by the contempt or abuse of process …"
These appeals raise the question whether the Supreme Court of New South Wales has power to order costs against a non-party which, for a contingency fee, has funded an impecunious corporate plaintiff without providing the plaintiff with an indemnity for adverse costs orders. Whether the Court has the power depends upon whether the litigation funder has "committed … an abuse of process of the Court", thus attracting the application of r 42.3(2)(c).
"The Director and the Secured Creditor will fund the Construction List proceedings to an amount of $150,000 or until 31 March 2001, whichever first occurs. The Director and Secured Creditor may at any time source litigation insurance or other funding to further fund the continued conduct of the Construction List proceedings. Such litigation insurance or other funding shall be subject to the agreement or approval of the Administrator which shall not be unreasonably withheld. Fees and expenses incurred in consequence of an increase in the monetary limit or the extension of the period of the conduct of the Construction List proceedings will form part of the amount payable under sub-clause 6.1.2 of this Deed."
In the event that the monetary or time limits prescribed in cl 15.2 were exceeded, the administrator could decide, in his "complete discretion", whether or not to accept litigation insurance "to further fund" the proceedings[10]. The company was to report to the administrator on the conduct of the proceedings[11] and not to "capitulate in, settle or compromise" the proceedings without the prior written approval of the administrator, which was not to be unreasonably withheld[12]. Mr Rickard undertook to provide all reasonable assistance to the company and to its legal advisers in prosecuting the Construction List proceedings[13].
"15.7 The Company will pay into the Fund all amounts recovered by way of settlement or a verdict in the Construction List proceedings. The Company shall only be obliged to pay into the Fund the net amount actually received by the Company after deducting:
15.7.1 the amount of any cost order made against the Company in the Construction List proceedings
15.7.2 the amount of any legal costs or other costs incurred in the conduct of the Construction List proceedings in addition to the funding by the Director and the Secured Creditor under clause 15.2
15.7.3 the amount paid to any litigation insurance funder or other funder agreed or approved by the Administrator under clause 15.3."
"an abuse of process would occur where a non-party with a commercial interest in the fruits of the litigation funds proceedings by an insolvent plaintiff without providing the plaintiff with an indemnity against cost orders in favour of successful defendants".
"by funding the proceedings and/or by assisting the assignment and prosecution of invalidly assigned bare causes of action in negligence and under s 82 of the Trade Practices Act by an insolvent plaintiff without provision to the plaintiff of an indemnity against a costs order in favour of successful defendants."
As presented, however, the argument on the appeals did not rely upon any alleged invalidity of the assignment to Rickard Constructions of the causes of action in respect of the pavement design and construction. The abuse of process was reformulated by reference to two elements:
"In relation to particular civil proceedings, the court may, by order, dispense with any requirement of rules of court if satisfied that it is appropriate to do so in the circumstances of the case."
This Court raised with counsel for Jeffery & Katauskas whether the general power given by s 14 of the CP Act could not have been engaged in this case. Counsel's response made it clear that the case advanced was based entirely on UCPR, r 42.3(2)(c). It is no doubt arguable that the reference to "any requirement of rules of court" in s 14 limits its application to rules imposing some duty on parties and does not extend it to a rule imposing limitations on the power of the court to order costs. The parties did not pursue the matter in these appeals. They fall to be decided on the construction and application of UCPR, r 42.3.
"The power of each Court over its own process is unlimited; it is a power incident to all Courts, inferior as well as superior; were it not so, the Court would be obliged to sit still and see its own process abused for the purpose of injustice."
That statement foreshadowed the contemporary approach in the United Kingdom[40] and Australia[41] which takes no narrow view of what can constitute "abuse of process". Nevertheless, certain categories of conduct attracting the intervention of the courts emerged in the 19th and 20th centuries and included[42]:
"(a) proceedings which involve a deception on the court, or are fictitious or constitute a mere sham;
(b) proceedings where the process of the court is not being fairly or honestly used but is employed for some ulterior or improper purpose or in an improper way;
(c) proceedings which are manifestly groundless or without foundation or which serve no useful purpose;
(d) multiple or successive proceedings which cause or are likely to cause improper vexation or oppression."
"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."
"generally speaking, where a non-party promotes and funds proceedings by an insolvent company solely or substantially for his own financial benefit, he should be liable for the costs if his claim or defence or appeal fails."
"The principle is that the individuals who order an appearance to be entered in ejectment, in the names of those not really defending the suit, abuse our process, and that, as they substantially are the suitors, we have jurisdiction to make them pay the costs."
Wightman J agreed. Bowen LJ also made reference to the position of the nominal plaintiff in Cowell v Taylor[56] when he qualified the common law rule that poverty is no bar to a litigant referring to "an exception introduced in order to prevent abuse, that if an insolvent sues as nominal plaintiff for the benefit of somebody else, he must give security"[57]. He referred to the nominal plaintiff as "a mere shadow". Observations by Megarry VC in Pearson v Naydler[58] and by Ipp JA in Project 28 Pty Ltd v Barr[59], invoked on behalf of Jeffery & Katauskas, were to like effect.
"Although litigation funding is not against public policy, 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." (citation omitted)
This does not amount to a characterisation of such arrangements or the absence of an indemnity for costs as an abuse of process.
. a plaintiff unable to meet an adverse costs order;
. the provision of that plaintiff with funds to litigate by a person who would not be liable to meet an adverse costs order.
These circumstances were said to render the prosecution of the proceedings "seriously and unfairly burdensome, prejudicial or damaging"[61]. Particular emphasis was given to the notion of "unfairness".
. a general proposition condemning the funding for reward of another's litigation;
. a proposition that despite the provisions and principles governing security for costs and the UCPR's general inhibition against ordering costs against non-parties, those who fund another's litigation for reward must agree to put the party who is funded in a position to meet any adverse costs order.
As discussed earlier in these reasons, a general proposition of the kind first mentioned is not consistent with what was decided in Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd. The second, more particular, proposition should not be accepted.
"subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy … The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation."
"As a matter of policy, one beneficial by-product of this compensatory purpose may well be to instil in a party contemplating commencing, or defending, litigation a sober realisation of the potential financial expense involved. Large scale disregard of the principle of the usual order as to costs would inevitably lead to an increase in litigation with an increased, and often unnecessary, burden on the scarce resources of the publicly funded system of justice."
Abuse of process: funding litigation without indemnifying the plaintiff
"the non-party not merely funds the proceedings but … is to benefit from them, justice will ordinarily require that, if the proceedings fail, he will pay the successful party's costs. The non-party in these cases is not so much facilitating access to justice by the party funded as himself gaining access to justice for his own purposes. He himself is 'the real party' to the litigation".
The defendant submitted that to be a "real party" a funder did not need to exercise exclusive control over the litigation, and that it sufficed if it had a "role as one of the actors in the scene in important and critical respects."[106] The Privy Council also approved[107] the following statement of Tompkins J in Carborundum Abrasives Ltd v Bank of New Zealand (No 2)[108]:
"Where proceedings are initiated by and controlled by a person who, although not a party to the proceedings, has a direct personal financial interest in their result, such as a receiver or manager appointed by a secured creditor, a substantial unsecured creditor or a substantial shareholder, it would rarely be just for such a person pursuing his own interests, to be able to do so with no risk to himself should the proceedings fail or be discontinued."
These references to wrongness and injustice suggest that the judges who used this language had abuse of process in mind.
"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 …[[110]], the court system is primarily there to enable rights to be vindicated rather than commercial profits to be made; and … 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."
The funder in this appeal attempted to distinguish this passage as being concerned with the species of which Green's case is an example - a "trafficking" case. The funder stressed the word "solely" in the first sentence. But neither that word, nor the word "purely" in the second sentence, should restrict Hodgson JA's reasoning to a point short of cases like the present. Here the funder was hazarding $300,000 (or $200,000) to gain the return of that money plus a $630,000 (or $730,000) success fee. The funder was not a professional litigation funder or a "trafficker", but the extent to which it was a creditor of the plaintiff before the litigation was not something upon which the plaintiff's evidence cast much light[111]. Hodgson JA's reasoning is equally applicable to cases like the present, where a non-trafficker funding an impecunious plaintiff is substantially or primarily motivated by a desire for commercial profit but has not assumed responsibility for the costs which the impecunious plaintiff is ordered to pay when the litigation fails. If the court system is "primarily there" to enable rights to be vindicated rather than to enable commercial profits to be made, it follows that a non-plaintiff who funds the plaintiff with the primary purpose of making commercial profits out of the litigation is behaving extraneously to the proper function of litigation, at least where the funder avoids responsibility for the costs of the defendant. It is behaviour outside the purpose which the process is supplied to serve. It is not making a legitimate use of that process. Rather it abuses that process.
"the circumstance that someone other than a plaintiff who is a natural person stands to gain, along with the plaintiff, from success in the proceedings was not an important factor which could justify an order for security … [T]his was particularly so where this other entity had indemnified the plaintiff against costs ordered to be paid to the defendant, and thus could be made liable to pay them at the instance of the defendant."
Hodgson JA's rejection of that submission reveals a concern that a non-party who funded litigation purely for commercial profit, should not avoid responsibility for costs if that litigation fails, even where the litigation funder had indemnified the plaintiff against costs ordered to be paid to the defendant. Hence he ordered security for costs. That order operated as a supplement, so to speak, to the indemnity. Had there been no indemnity, the case for an order for security for costs would have been much stronger.
"the discipline imposed by the knowledge that an unsuccessful party is likely to be ordered to pay the costs of the successful party. This rule provides a bridle against lack of restraint in taking points that are hardly arguable, or not arguable at all, and against other possible excesses in the conduct of litigation. It provides a measure of protection to those involved in litigation, and to the Court itself, against unscrupulous attempts to manipulate the system. It provides an incentive to act carefully in a measured way."
First argument - deficiency in factual findings or absence of factual foundation
"[I]f, in the present case, [the funder] had indemnified [the plaintiff] against [the plaintiff's] liability to the [defendant], the benefit of that indemnity would have flowed to the general body of [the plaintiff's] creditors. It would be surprising if [the funder's] failure to give a (full) indemnity resulted in the [defendant] being put in the far better position of receiving the benefit of a direct costs order against [the funder]."
The assumption as to the plaintiff's insolvency which underlies this submission is inconsistent with the funder's claim, discussed earlier[147], that there was no evidence of its insolvency when it commenced the proceedings, and no finding of its inability to meet the defendant's costs. It is the present assumption which is correct, not the claim rejected above.
"[the funder] stood to benefit in the sense that success in the litigation would have permitted [the plaintiff to repay], at least in part, … the funds it had previously lent to the plaintiff; and such repayment would have received a degree of preference over the plaintiff's ordinary unsecured creditors … The [defendant's] case must be that such a benefit is sufficient to make [the funder] amenable to a third party cost order."
Hence, said the funder, anyone - financier, friend, relative, lawyer, trade union -who lent money to a litigant or supplied, or procured the supply of, legal services without charge, in order to allow the litigant to conduct litigation would become amenable to a third party costs order if repayment depended on the result of the litigation. This wide impact on third party lenders would not only affect them, but would make it harder for impecunious persons to litigate their claims.
Third argument - cutting across existing principles and balances of interest
"the law [does not] have any general policy of restricting a litigant from conducting litigation unless the litigant will be in a position to pay the other party's costs. Indeed, the general principle is that poverty is no bar to a litigant. The rules relating to security for costs are an apparent exception to this, but only to a very limited degree. Security is not available against a defendant, and even against a plaintiff it is available only in restricted circumstances. There are thus many situations where the successful party may be left with a costs order which is of no, or limited, practical value. The law tolerates this because of the need to balance a party's interest in recovering its costs (if successful) against other interests, particularly the overriding principle of open access to justice."
The funder submitted that the defendant's contention would overturn this balance of interests. The funder submitted that the defendant's submission would outflank a supposed immunity of some plaintiffs from giving security. And it submitted that the defendant's submission would enable those who had failed to apply for security, or failed to get it because of their own conduct (for example, their delay), or failed to get enough security to cover the eventual costs, to escape those consequences of their failure by seeking a third party costs order against the funder, exposing the funder to potentially unlimited liability. The funder said that the defendant was impermissibly asking the court "to adopt an essentially legislative task: to introduce a new set of rules which would cut across existing principles and re-strike the balance". Finally, the funder said that it was for the legislature, not the court, to control any problem which arose from persons funding litigation in return for an excessive share of the spoils of victory or which arose from successful defendants not being able to recover costs from impecunious plaintiffs supported by funders.
Fifth argument - the effect of r 42.3(2)(c) on Knight v FP Special Assets Ltd
"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."
The funder submitted that the defendant's proposition in this appeal "is even less stringent than the Knight proposition. Still less, therefore, can the [defendant's] proposition amount to an abuse of process for the purpose of the rule." [166]
Sixth argument - "contingent" or "retrospective" abuse of process
Conclusion on the funder's seven arguments as to the power conferred by r 42.3(2)(c)
"[Y]ou … have no choice about whether to play this game; we are going to provide the means to start and continue it; if our side wins, you pay us; but if you win we will not pay you."
The funder wished to take the chance of financial gain by backing a horse to win without being responsible for paying a component of the sum wagered if the horse lost. The funder wanted to obtain insurance monies without paying a key part of the premium. The funder wanted the palm without much of the dust. A funder who funds litigation instituted by an impecunious plaintiff for the purpose of large personal profit without giving an indemnity to that plaintiff against its liability for the defendant's costs in a manner which will protect the defendant is, in the light of our forensic mores and standards, a funder who commits an abuse of process.
Costs against the directors and shareholders of the funder
Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2004) 220 ALR 267. ↑
Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2006] NSWCA 356. ↑
Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2006) 66 NSWLR 724. ↑
Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2006) 66 NSWLR 724 at 733 [37]. ↑
The submissions for Jeffery & Katauskas in this Court proceeded on the basis, said to be favourable to the respondents, that the larger figure was correct. ↑
Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2006) 66 NSWLR 724 at 733 [35]. ↑
Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2006) 66 NSWLR 724 at 736 [51]. ↑
Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2008] NSWCA 283. ↑
Wentworth v Wentworth (2000) 52 NSWLR 602 at 607-608 [12] per Fitzgerald JA; see also Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 183-184 per Mason CJ and Deane J, 205 per Gaudron J. ↑
Supreme Court Rules (Amendment No 274) 1993 (NSW). ↑
New South Wales Government Gazette, No 65, 25 June 1993 at 3296; and see Wentworth v Wentworth (2000) 52 NSWLR 602 at 635-636 [162] per Heydon JA. ↑
(2000) 52 NSWLR 602 at 635-636 [162] per Heydon JA. ↑
(1992) 174 CLR 178 at 182-193 per Mason CJ and Deane J, 205 per Gaudron J. ↑
Winfield, The History of Conspiracy and Abuse of Legal Procedure, (1921) at 4. ↑
Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2008] NSWCA 283 at [79]. ↑
Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd (2005) 63 NSWLR 203 at 216 [52], 219 [70], 235 [135] and 237 [148]. ↑
Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386 at 435 [93] per Gummow, Hayne and Crennan JJ. ↑
Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386 at 432‑436 [83]-[95] and 451-452 [146]-[148]. ↑
Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2008] NSWCA 283 at [81]. ↑
Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386 at 413 [26]. ↑
Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386 at 407 [1]. ↑
Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386 at 439 [109]. ↑
Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386 at 477 [239]. ↑
Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386 at 489 [270]. ↑
Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2008] NSWCA 283 at [81]. ↑
Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd (2005) 63 NSWLR 203 at 230 [120]. ↑
(1998) 193 CLR 72 at 97 [67]; [1998] HCA 11 (footnote omitted). McHugh J was dissenting, but not on this point. ↑
Oshlack v Richmond River Council (1998) 193 CLR 72 at 97 [68]. ↑
Moevao v Department of Labour [1980] 1 NZLR 464 at 481. ↑
Moevao v Department of Labour [1980] 1 NZLR 464 at 481. This passage was quoted in Walton v Gardiner (1993) 177 CLR 378 at 394 and Jago v District Court (NSW) (1989) 168 CLR 23 at 30; [1989] HCA 46. See also Williams v Spautz (1992) 174 CLR 509 at 520; [1992] HCA 34. ↑
Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197 at 247 per Deane J; [1988] HCA 32, approved in Hamilton v Oades (1989) 166 CLR 486 at 502; [1989] HCA 21; Ridgeway v The Queen (1995) 184 CLR 19 at 75; [1995] HCA 66; and Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256 at 267 [14]. ↑
Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197 at 247 per Deane J, approved in Hamilton v Oades (1989) 166 CLR 486 at 502; Ridgeway v The Queen (1995) 184 CLR 19 at 75 and Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256 at 267 [14]. ↑
Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538 at 554 per Mason CJ, Deane, Dawson and Gaudron JJ; [1990] HCA 55. ↑
CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345 at 391 per Dawson, Toohey, Gaudron, McHugh, Gummow and Kirby JJ; [1997] HCA 33 (emphasis in original). ↑
Jago v District Court of New South Wales (1989) 168 CLR 23 at 74 per Gaudron J, approved in Walton v Gardiner (1993) 177 CLR 378 at 394 per Mason CJ, Deane and Dawson JJ. ↑
Jago v District Court of New South Wales (1989) 168 CLR 23 at 74 per Gaudron J, approved in Walton v Gardiner (1993) 177 CLR 378 at 394. ↑
Ridgeway v The Queen (1995) 184 CLR 19 at 75 per Gaudron J. See also Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256 at 267 [14]. ↑
Hunter v Chief Constable of the West Midlands Police [1982] AC 529 at 536. ↑
Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256 at 265 [9] per Gleeson CJ, Gummow, Hayne and Crennan JJ. ↑
Unreported, 19 May 2000 at [21] (emphasis added). ↑
Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2006) 66 NSWLR 724 at 740 [75], 741 [81] and 742 [90]-[91]. ↑
Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2008] NSWCA 283 at [34]. ↑
Idoport Pty Ltd v National Australia Bank Ltd [2004] NSWSC 695 at [82]-[85]. ↑
Roache v News Group Newspapers Ltd [1992] TLR 551 at 551 quoted by Kennedy LJ in Condliffe v Hislop [1996] 1 WLR 753 at 762; [1996] 1 All ER 431 at 440. ↑
Condliffe v Hislop [1996] 1 WLR 753 at 762; [1996] 1 All ER 431 at 440, as explained in Abraham v Thompson [1997] 4 All ER 362 at 375. ↑
Condliffe v Hislop [1996] 1 WLR 753 at 762; [1996] 1 All ER 431 at 440. ↑
As was done in McFarlane v E E Caledonia Ltd (No 2) [1995] 1 WLR 366 at 373: see Condliffe v Hislop [1996] 1 WLR 753 at 762; [1996] 1 All ER 431 at 440. ↑
155569 Canada Ltd v 248524 Alberta Ltd (1999) 176 DLR (4th) 479 at 501 [50] per Veit J, sitting in the Alberta Court of Queen's Bench. ↑
As suggested by Barrett J in The Australian Derivatives Exchange Ltd v Doubell [2008] NSWSC 1174 at [24]-[25]. ↑
Hearsey v Pechell (1839) 5 Bing (NC) 466 at 468-469 [132 ER 1179 at 1179-1180] (where Tindal CJ noted authority to the effect that "a master was compelled to pay costs for his servant, whom he had put forward as a Defendant instead of himself"). ↑
For New South Wales, see Legal Profession Act 2004, ss 323-328. ↑
DSQ Property Co Ltd v Lotus Cars Ltd [1987] 1 WLR 127 at 129. ↑
Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd (2008) 67 ACSR 105 at 108 [7] (6). ↑
Weger v Boola Boola Petroleum and Natural Gas Co (No Liability) [1923] VLR 570; Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd (2008) 67 ACSR 105 at 119 [45] (3). ↑
Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd (2008) 67 ACSR 105 at 119 [45] (3). ↑
Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd (2008) 67 ACSR 105 at 119 [45] (3). ↑
Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd (2008) 67 ACSR 105 at 119 [45] (3). ↑
Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 190-191 per Mason CJ and Deane J. ↑
Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 191 per Mason CJ and Deane J. ↑
Jeffery & Katauskas Pty Limited
SST Consulting Pty Ltd
[1994] HCA 42
(1992) 174 CLR 178
(2004) 220 ALR 267
(2006) 66 NSWLR 724
(2000) 52 NSWLR 602
(2006) 229 CLR 386
(1989) 166 CLR 486
(1989) 168 CLR 23
Appeal dismissed with costs.
(1993) 177 CLR 378
(1994) 181 CLR 251
(1995) 184 CLR 19
(2006) 226 CLR 256
(1988) 165 CLR 197
(2002) 54 NSWLR 82
(2005) 63 NSWLR 203
(1998) 193 CLR 72
(2005) 223 CLR 1
(1992) 174 CLR 509
(1990) 171 CLR 538
(1997) 189 CLR 345
(2004) 208 ALR 564
[2006] HCA 27
[1998] HCA 11