Plaintiff v Defendant

For the Plaintiff, Mr Warwick Manderson and Mr James Karis

1 This is an application by the defendant ("IPL") by summons dated 25 May 2011 for the following orders:

(a) Pursuant to s 24(1) of the Supreme Court Act 1986, Hillcrest Litigation Services Limited ("Hillcrest"), Warwick Alexander Manderson ("Manderson") and James Anthony Karis ("Karis") be jointly and severally liable with the plaintiff ("MMFC") to pay IPL's costs of the proceeding including all reserved costs;

(i) up to and including 9 March 2010 on a party/party basis; and

(b) IPL's costs of the proceeding including its costs associated with any draft version of the statement of claim notwithstanding that such draft was not pursued by MMFC, and costs of the transcript; and

(c) Such further or other orders as the Court considers appropriate.

2 At the hearing of the summons on 5 July 2011, IPL sought the following orders on the basis of its summons:

(b) IPL's costs of the proceeding, including all reserve costs, be paid;

(i) up to and including 9 March 2010 on a party and party basis; and

(c) Hillcrest be jointly and severally liable for IPL's costs of the proceeding from 1 March 2009 onwards;

(d) Manderson and Karis be jointly and severally liable for IPL's costs of the proceeding; and

(e) IPL's costs of the proceeding are to include its costs associated with any draft version of the statement of claim notwithstanding that such draft was not pursued by the plaintiff, and the costs of the transcript.

3 The hearing of the summons proceeded on the basis of the application for orders in the form as sought at the hearing which, in effect, further clarified the orders sought in the summons. At the hearing, counsel for MMFC also represented Mr Warwick Manderson and Mr James Karis as individuals.

4 The pleadings history of this matter commenced with a statement of claim dated 2 July 2008. This history is summarised in Annexure A to my judgment in Manderson M & F Consulting v Incitec Pivot Ltd (No 2).[1] As noted previously, the first statement of claim was struck out by Hargrave J on 24 October 2008, the second by Efthim AsJ on 12 October 2009 (confirmed by Davies J on appeal) and as a result of a hearing on 4 March 2010 I refused leave to file a draft third further amended statement of claim, with judgment in this respect delivered on 9 March 2010.[2] This judgment set out the relevant principles with respect to the pleading of a claim in a confidential information case[3] and then dealt with issues raised in the then proposed pleading on the basis of these principles.

5 On 29 November 2010, an application for leave to file a further proposed version of the Third Further Amended Statement of Claim was heard in part. As a result of my observations of the deficiencies in that draft pleading, on the basis of the relevant principles as set out in my judgment of 9 March 2010, that hearing was adjourned until 4 February 2010. The principal and critical deficiency in that draft, as with the proposed pleading the subject of my 9 March 2010 judgment, was MMFC's failure to identify with any specificity, or at all, the confidential information it sought to protect; in accordance with the relevant principles as set out in that judgment.

6 I was assured by the newly retained senior counsel who appeared at the 4 February 2011 hearing that the draft pleading would be revised, "root and branch", and simplified so that the critical elements with respect to the identification of the confidential information sought to be protected, as required by the relevant principles, would be clearly and fully set out. The further draft pleading produced as a result, the proposed Fourth Further Amended Statement of Claim, was the subject of an application by MMFC for its filing and service, an application which was heard on 18 March 2011.

7 Following the 18 March 2011 hearing I delivered judgment, on 16 May 2011,[4] in which I found that the claim of MMFC as set out in the further draft pleading failed in that it did not disclose a cause of action within the meaning of rule 23.01 of the Supreme Court (General Civil Procedure) Rules 2005 ("the Rules") and, further, that the whole of MMFC's claim has "no real prospect of success" within the meaning of s 63 of the Civil Procedure Act 2010. Concluding my reasons for judgment I said that the appropriate course was that I should dismiss the proceeding with summary judgment for IPL or permanently stay the proceeding, subject to hearing the parties further in relation to which these alternatives should be adopted. Additionally, I reserved the question of costs. These remaining issues were the subject of the hearing on 5 July 2011, on the basis of the summons and the clarification of the orders sought by IPL, as set out above.

8 The jurisdiction of the Court as to costs is conferred by sub-s 24(1) of the Supreme Court Act 1986, in the following terms:

"24(1) Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court, including the administration of estates and trusts, is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid."

This general discretion must be exercised in accordance with Order 63 of the Rules.

9 The usual order as to costs is an award of costs to the successful party on a party and party basis.[5] This position is reflected in rule 63.31 of the Rules. Nevertheless, the Court has a discretion to make special costs orders. The previously identified categories of circumstances that warrant a special costs order provide guidance in relation to the exercise of this discretion. These categories were identified by Sheppard J in Colgate Palmolive Company v Cussons Pty Ltd as including[6]:

"...the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud ...; evidence of particular misconduct that causes loss of time to the Court and to other parties ...; the fact that the proceedings were commenced or continued for some ulterior motive ... or in wilful disregard of known facts or clearly established law ...; the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions ...; an imprudent refusal of an offer to compromise ...; and an award of costs on an indemnity basis against a contemnor..."

10 In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd, Woodward J commented in relation to the commencement or continuation of proceedings with no chance of success[7]:

"... it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established laws."

11 Further, with respect to this category or circumstance, the Victorian Court of Appeal said in Macedon Ranges Shire Council v Thompson that[8]:

"Where the proceeding has no prospect of success

Costs may be ordered whenever it appears that an action has been commenced in circumstances where the applicant properly advised should have known it had no chance of success. When a litigant presses on where on proper consideration their case should have been seen to be hopeless, the discretion to make a special costs order may be enlivened. French J (as he then was) in J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers Western Australia & Anor[9] considered that the discretion to award such costs would be enlivened when a party persisted, for whatever reason, in what should on proper consideration have been seen to be a hopeless case, and alluding to the presumption referred to by Woodward J in Fountain Selected Meats said that it was an unnecessary condition of the power to award such costs that a collateral purpose or some species of fraud be established. But where the litigant did not recognise that its case was without merit a court may be disinclined to make a special costs order.[10] The Court must measure the litigant's conduct against the facts then known or which ought to have been known, the inquiries that the litigant ought reasonably to have made and the legal advice which the litigant ought reasonably to have obtained.[11] This exercise may be subject to some qualification in respect of a self represented litigant."

12 As was made clear by Sheppard J in Colgate Palmolive Company v Cussons Pty Ltd,[12] a special costs order may be warranted where a party has engaged in misconduct leading to unnecessary costs or delay. An application for a special costs order on this basis was considered by French J (as he then was) in Re Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd[13]:

"[21] Counsel for the respondent next attacked the applicant's conduct of the proceedings saying that interlocutory steps had been protracted by its failure to comply with requests for particulars and discovery and with orders of the Court. Further, it was said, there were untenable applications to amend pleadings and for leave to appeal. Discontinuance of the action was at the last minute and no explanation had been advanced for it. He submitted that it should be inferred that there had been a sudden acceptance by the applicant of the hopelessness of its case and that this was a matter which should have been apparent very shortly after the commencement of the proceedings.

[22] I accept that the interlocutory processes were unduly protracted and that the applicant must bear much of the responsibility for this. However, costs orders were made in favour of the respondent where the applicant was responsible for wasted appearances. When, in an individual case, there is evidence of particular misconduct on the part of a party that causes loss of time to the Court and to other parties then an order for solicitor-client costs and/or costs to be paid forthwith may be made. In my opinion a global order of this kind is not warranted in this case."

13 In the present case there was no issue as to the entitlement of IPL to costs on a party and party basis. The issue is whether IPL is entitled to a special costs order.

14 The "special or unusual feature" upon which IPL bases its application for indemnity costs is the conduct of MMFC after 9 March 2010 in attempting, repeatedly, to plead a cause of action which, IPL submits, had no prospect of success given the deficiencies in the previous versions of the pleading which it said had been identified in the Court's reasons for judgment on 9 March 2010, in numerous letters from IPL's lawyers and in the course of argument in multiple contested court hearings. It submits that in spite of the 9 March 2010 reasons for judgment clearly specifying the reasons for striking out the pleading, including MMFC's failure to sufficiently identify the alleged confidential information, MMFC failed in the five alternative versions of a new pleading prepared over the course of the following year to remedy the deficiencies which I identified in that judgment.

15 IPL stresses in its submissions that the common thread in the deficiency in the pleadings, which it says was identified and remained unremedied, was the failure by MMFC to identify the confidential information sought to be protected. MMFC, on the other hand, seeks to distinguish the basis for failure of the pleading as identified in my reasons for judgment of 9 March 2010[14] from the reasons for failure identified in my judgment of 16 May 2011.[15] In my opinion this is not correct and, in any event, it is made clear in my reasons for judgment, both in 2010 and in 2011, that the failure to plead the nature and extent of the confidential information sought to be protected was the critical issue.[16]

16 IPL submits that the conduct of MMFC since 10 March 2010, that is since my 9 March 2010 judgment, has clearly "cause[d] loss of time to the Court and to other parties", and constituted the continuation of proceedings in "wilful disregard of known facts or clearly established law" and thus to fall within categories which have been established in the authorities as providing a basis for making a special costs order.[17]

17 In response, MMFC submits that it had acted properly in seeking to articulate its claim and had, in particular, engaged competent solicitors and senior counsel well experienced in intellectual property matters to prepare its pleadings. Further, it submitted that the manner in which it had conducted the litigation and sought competent legal advice served merely to demonstrate the difficulty inherent in confidential information cases in defining the nature and extent of the confidential information sought to be protected with the necessary precision. In particular, MMFC submitted:[18]

"32. Fourthly, it cannot reasonably be contended that Mr Manderson and Mr Karis caused MMFC to conduct the litigation in a way that was unreasonable or improper. Prior to the commencement of the proceeding, MMFC informed IPL of the allegations against it. IPL did not provide any substantive response to MMFC's allegations and certainly did not assert that MMFC LTAL Model had not been provided to IPL in a way that IPL could understand. At all times throughout the proceeding, MMFC was represented by reputable solicitors and senior counsel with substantial experience in relation to intellectual property matters. Each version of the statement of claim put forward by MMFC was signed by such senior counsel.

33. In the above regard, the facts pleaded in each version of the statement of claim provided a reasonable basis for MMFC's allegations. MMFC pointed to a signed MDNA by IPL which acknowledged that it would be receiving information that MMFC regarded as confidential. MMFC also pointed to numerous documents and discussions in which MMFC disclosed the MMFC LTAL Model to IPL, asserted that the MMFC LTAL Model was confidential to MMFC and IPL acknowledged those rights. MMFC also pointed to documents which demonstrated that IPL had been a party to a lease transaction entered into without MMFC's consent that utilised a method that appeared to be similar to the MMFC LTAL Model that MMFC had disclosed to IPL. The fact that the Court has concluded that MMFC has not properly identified the confidential information the subject of the proceeding reflects the common difficulties faced by plaintiffs in cases alleging breach of confidence and the onerous obligations placed on such plaintiffs by the court, rather than any unreasonable or improper conduct by MMFC or Mr Manderson and Mr Karis. [Footnotes omitted]"

18 In my opinion, MMFC's submissions that there is no basis for a special costs order should be accepted. Clearly the protracted development of a statement of claim is not desirable in any proceedings but the exercise of the discretion in relation to costs, particularly in relation to the possibility of making a special costs order, must, as the authorities indicate, be exercised in the context of the particular circumstances. Unfortunate though the process might be thought to be it could not be said that there is any evidence of ulterior motive, wilful disregard of known facts or clearly establish law, the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions, by reference to some of the categories referred to by Sheppard J in Colgate Palmolive Company v Cussons Pty Ltd.[19]

19 Neither could it be said, in my view, that there was any "high handed behaviour" on the part of MMFC.[20] Further, having regard to the specific comments from the further authorities considered, as set out above, I do not think it could be said that the case of MMFC should have been seen to be hopeless at any relevant time or that there was any undue prolongation or wasted court proceedings. With a degree of hindsight one might be critical of some aspects of the conduct of MMFC in relation to the conduct of the interlocutory proceedings and be of the view that some things might have been handled more efficiently or expeditiously. Nevertheless, a good deal of this is hindsight, and, in any event, I do not regard the manner in which MMFC did conduct the proceedings as taking the matter "over the line", so to speak, into one of the categories which would justify a special costs order. It was, I think, a difficult case but nevertheless one legitimately brought which ultimately failed a process of rigorous testing at the pleadings stage.

20 Section 24 of the Supreme Court Act empowers the Court to make orders for costs against non-parties. For the jurisdiction in this respect to be enlivened, it is necessary for the non-parties to have a sufficient connection to the proceeding.[21]

21 The parties do not doubt the jurisdiction of the Court in this respect under s 24 of the Supreme Court Act. Nevertheless, MMFC, in particular, argues that the discretion to order a non-party to a proceeding to pay costs of a party to that proceeding is only to be exercised in exceptional circumstances. Particular reliance for this proposition is placed on Knight v FP Special Assets Ltd.[22] The jurisdiction of the Court to make an order of this nature was not doubted, but Mason CJ and Deane J said:[23]

"Obviously, the prima face 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 recognised that it may be appropriate for such an order to be made.

For our part, we consider it appropriate to recognise 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."

22 In the present context it is also important to note the comment of Mason CJ and Deane J in Knight:[24]

"The availability of an order for security for costs at an early stage of the litigation would, in many situations, be a strong argument for refusing to exercise a discretion to order costs against a non-party ..."

23 The question whether costs should be ordered against a non-party has arisen in a number of other cases in relation to the liability of officers of unsuccessful corporate litigants to pay the costs of the other party or parties, FMP Constructions Pty Ltd v Council of the City of the Blue Mountains being one such case.[25] FMP Constructions was an appeal from a costs order made at first instance against a Mr Yazbek personally on the grounds that, as the controller of the company, he played an important and integral role in the proceedings, was the sole witness for the company and the litigation was "effectively run for his benefit". In that case, the company had sued the council under a building contract for monies allegedly due. The Council brought its own proceedings claiming damages against the company for breach of contract. The Council succeeded in both proceedings but Mr Yazbek, the individual who controlled the company, was not a party to the proceedings. The costs order made at first instance was set aside by the Court of Appeal.

24 Basten JA (with whom Beazley and Giles JJA agreed), having noted that the primary judge expressly found that there was nothing to indicate the company was in receivership, said:[26]

"210. ... the principle established in Knight v FP Special Assets cannot be limited to the specific circumstances of the case, the joint judgment having expressed a conclusion in more general terms...It is clear that the categories of case which may attract the exercise of the power are by no means closed, nor should they be. Nevertheless, the requirements of justice should not be allowed to expand an exception to the general rule, so as to undermine the rule itself. What is significant from a survey of the cases in which orders have been made against non-parties is that they tend to satisfy at least some, if not a majority, of the following criteria:

(a) the unsuccessful party...was the moving party and not the defendant;

(b) the source of funds for the litigation was the non-party or its principal;

(c) the conduct of the litigation was unreasonable or improper;

(d) the non-party, or its principal, had an interest (not necessarily financial) which was equal to or greater than that of the party or, if financial, was a substantial interest, and

(e) the unsuccessful party was insolvent or could otherwise be described as a person of straw.

...

The criteria identified in Knight v FP Special Assets should not ultimately be treated as separate and independent factors. Each requires an evaluative assessment of factors which will clearly tend to interact. Nor should it be forgotten that the power is only to be exercised in exceptional cases. In many cases involving individuals in the superior courts the parties may lack the resources to meet the costs of the litigation if unsuccessful. Similarly, there will frequently be a non-party, be it a company officer or solicitor, who will be active in the conduct of the litigation and who will obtain some direct or indirect financial benefit from its success ... Careful attention is required to the conduct of the party said to be involved in the litigation and the nature of the 'interest' in its outcome or subject-matter."

25 Applying the criteria discussed to Mr Yazbek, Basten JA said:[27]

"206. In the present case, it could not be said that FPM Constructions was merely a nominal party or that Mr Yazbek was the "real party" to the proceedings. No doubt it is true, as his Honour found, that Mr Yazbek was the driving force behind FPM Constructions and was its representative for the purposes of the litigation. That does not mean, however, that the benefit of the proceedings brought by FPM Constructions for progress payments, in law, flowed to anyone other than FPM Constructions, nor that the company was other than the proper defendant in proceedings brought by the Council. Nor is the fact that Mr Yazbek was the sole director and secretary of the company inconsistent with that conclusion. Were it otherwise, the corporate veil would, in effect, be nullified at the very point at which it provides protection against personal liability for the shareholders and directors. The carefully crafted exceptions to the principle would overtake the principle itself were that the case."

26 These statements in FPM Constructions were referred to with approval by Handley AJA in May v Christodoulou.[28] However, in relation to the FPM Constructions criteria, Handley AJA also said that whether the unsuccessful party was the moving party and not the defendant was not material. Rather, his Honour said:

"An unsuccessful defendant provides a more promising basis for a non-party order because the successful plaintiff could not protect himself by getting security for costs."[29]

27 The exceptional nature of a non-party costs order was further emphasised by the Full Federal Court in Kebaro Pty Ltd v Saunders:[30]

"103. In my opinion, the authorities establish, on the foregoing analysis, the following propositions:

• A non-party costs order is exceptional relief, although some categories of factual situations are now recognised as within the discretion, for example, the situation described by Mason CJ and Deane J in Knight at 192-3. ...
• Whilst such an order is extraordinary, the categories of case are not closed, although in order to warrant its exercise, a sufficiently close connection, or as Gobbo J expressed it [Bischof v Adams [1992] VicRp 61; [1992] 2 VR 198 at 205], a "real and direct and ... material" connection with the principal litigation, must be demonstrated; in the words of Callinan J, the non-party can fairly be liable if adjudged by its conduct, to be a real party to the litigation, even if not the real party."

28 Similarly, Muir J rejected an application for a non-party costs order against a sole director and shareholder of the unsuccessful corporate party to a proceeding in Rushton (Qld) Pty Ltd v Rushton NSW Pty Ltd.[31] In so doing Muir J emphasised that the fact that the sole director and shareholder was the ultimate decision maker was not necessarily decisive[32]:

"12. In my view the mere fact that a person is the sole director and shareholder of an unsuccessful litigant corporation will not, without more, suffice to justify a costs order against that person. And that is so even if the person was the corporation's sole, principal or ultimate decision maker in relation to the litigation.

13. To conclude otherwise would be to ignore the principle that costs orders against non-parties are "exceptional" and ought be made only if appropriate in the interests of justice. The control of a corporate litigant by a director who is also its sole or majority shareholder is an unremarkable occurrence. It is sanctioned by a long established legislative framework which recognises that a company has an independent legal personality distinct from that of its members and that neither members nor directors, as a general proposition, are personally liable for its acts and defaults.

...

15. A reluctance to ground non-party costs orders merely on the circumstances of sole ownership and control of the defendant corporation is evident in Taylor v Pace Developments Ltd (1991) TLR 228 (CA) in which it was observed that the controlling director of a one-man company was inevitably the person who caused the costs of the litigation to be incurred, by causing the company to defend the proceedings. In that context Lloyd LJ noted -

'But it could not be right that in every such case he should be made personally liable for costs, even if he knew that the company would not be able to meet the plaintiff's costs should the company lose its case.

That would be far too great an inroad on the principle of limited liability. In the great majority of cases the directors of an insolvent company, which defended proceedings brought against it, should not be at personal risk for costs.'"

29 In Gore (trading as Clayton Utz) v Justice Corporation Pty Ltd,[33] the full Federal Court considered the position of a litigation funder in the present context. In so doing the Court considered the history and development of the law of maintenance and champerty, including the changing emphasis in the public policy considerations in favour of facilitating the funding of litigating for the purpose of facilitating access to justice.[34] A significant aspect of Gore in the present context is in the observation that "[t]here may be a case for saying that, within a particular category, notice of intention to seek costs from a third party may be a necessary prerequisite, but probably it might be more appropriate to say that the question of the need for prior notice is no more than one of the many relevant matters that should be considered when considering an application for costs against the stranger to a litigation".[35]

30 Similarly, the existence of an indemnity in the litigation funding agreement is also only a factor in respect to the ordering of costs against a non-party. In this respect, the Court in Gore said:[36]

"64. Justice Corporation, whilst not controlling the litigation, had a direct financial interest in the outcome of the case; it offered no explanation for its participation in the litigation and the only inference must be that it was a commercial investment. It was prepared to take a commercial risk, to meet Montague's costs, to protect Montague against an order for costs in favour of Clayton Utz and, in return, it hoped to profit from its investment. No extenuating circumstances exist to save Justice Corporation from an order that it pay some of Clayton Utz's costs. There was no question of it being involved through friendship or because of family ties; there was no question of public interest and no moral high ground that might have justified its involvement. It was a simple straightforward commercial arrangement. If Montague had been successful there was every likelihood that there would have been a costs order against Clayton Utz, thereby recouping to Justice Corporation much of what it had outlaid by way of expenditure on Montague's costs. It seems to us, as a logical consequence of these circumstances, that in return for the chance of obtaining eight per cent of the judgment debt and a recoupment of much of its outlay for costs, Justice Corporation should be expected to incur the risk of a costs order in the event of Clayton Utz being the successful party. Reaching that conclusion is made the easier because of the provision in the Litigation Agreement under which Justice Corporation agreed with Montague that it would pay Clayton Utz costs in the event of Montague losing the case. That factor should not, however, be treated as being the catalyst for the Court arriving at its decision. It was a matter of great significance that the existence of this clause was made known to Clayton Utz but it was still only one of the factors that has led this Court to its conclusion."

31 Where the relevant considerations weigh in favour of making a costs order against a non-party the existence of "a clear contractual obligation to indemnify the unsuccessful party against his liability to pay the costs of the successful party...[may well make it appropriate] ... to make an order ... that the non-party pay those costs directly to the successful party".[37]

32 IPL submits, apparently on the basis that it is entitled to a costs order against Hillcrest in respect of costs incurred after 1 March 2009 (being the date after which its funding agreement with MMFC provided indemnity), that it was left unprotected for costs during the first eight months of the proceeding. This, it submits, was significant because during that time, substantial work was undertaken:[38]

"(a) Each party filed two versions of its pleadings;

(b) MMFC made an unsuccessful application to strike out IPL's defence;

(c) the parties undertook substantial discovery, with IPL discovering 4,118 documents, including over 15,000 and MMFC discovered 1,056, totalling over 8,000 pages; and

(d) the parties prepared summonses and affidavits in relation to seven interlocutory matters to be heard by Efthim AsJ on 6 March 2009."

In this respect, IPL notes that security had been provided, a reference to the order for security for costs made by Efthim AsJ for the sum of $115,776.50 on 28 July 2009. Relying on the affidavit evidence of Ms Elizabeth Mary Harris, a costs consultant, IPL submits that the costs incurred prior to 1 March 2009 will exceed the security provided.

33 On the basis that there is no guarantee that Hillcrest would be able to meet a costs order against it in respect of the period after 1 March 2009, IPL submits that the interests of justice require that costs orders also be made against Manderson and Karis individually in circumstances where they are each a director of one of the two partnership companies comprising the MMFC partnership and are clearly the only individuals who have directed and controlled the plaintiff's conduct in the proceeding. The submission in relation to Hillcrest's ability to meet these costs is challenged on the basis that there is no, or no sufficient, evidence to support such a proposition. For the reasons which follow, it is not necessary for this issue to be pursued and I neither do so nor, expressly or by implication, express any view in relation to the financial position of Hillcrest. I turn now to consider the nature and extent of the role of Manderson and Karis in the conduct of the proceeding and, further, the nature of the MMFC business structure.

34 The business structure of MMFC is a partnership between two corporate trustees, Kawan Pty Ltd and KK Consolidated Pty Ltd which are, respectively, trustees of the Kawan Family Trust and the IAM Finance Trust. Manderson and Karis are among the possible beneficiaries of the respective trusts and Manderson and Karis are also one of two directors of the respective corporate trustees. It is provided in the trust deeds which constitute these trusts that the trustees' right of indemnity is limited to the trust fund and that the trustees have no recourse to the beneficiaries of the particular trust in order to satisfy any claims against a trustee. The business structure of MMFC is not unusual and the evidence indicates that it has, in any event, been known to IPL since at least 23 July 2008, which was three weeks after the commencement of the proceeding.

35 The thrust of the MMFC submissions is that were the Court to make personal costs orders against Manderson and Karis in the present circumstances, this would be to expand an exception to the general rule, so as to undermine the rule itself as cautioned by Basten JA in FPM Constructions[39] and to make "far too great an inroad on the principle of limited liability" as cautioned by Lloyd LJ in Pace.[40]

36 Further, it is submitted that in all the circumstances, MMFC was the proper plaintiff to the proceeding and could not be regarded as having been put up as a "man of straw" to gain the benefit of the proceedings against IPL whilst avoiding obligations to pay costs with the consequence that the proper plaintiffs would be regarded, on the basis of the authorities, as Manderson and Karis. In this respect, it was emphasised that MMFC was a business of substance which had been in operation for approximately two and a half years before the proceedings were contemplated; it was the entity that entered into agreements with IPL for the provision of services with respect to the use of the MMFC LTAL Model the subject of the proceeding; it was the entity that received payment from IPL's financier, the National Australia Bank, for IPL's authorised use of the MMFC LTAL Model; and it was also the entity that consistently asserted rights in respect of the MMFC LTAL Model since December 2005. MMFC was trading profitably at the time the proceeding was commenced and Manderson's evidence is that it expected to be able to meet its costs obligations in the proceeding, though this position changed later when it took steps to obtain a litigation funder[41]; a step which MMFC emphasised was a responsible one as it protected the costs position of MMFC and protected other parties because of the provision of an indemnity to MMFC. Both Manderson and Karis did have an interest in the proceeding as one of a number of beneficiaries of the trusts for which the MMFC "partnership companies" were trustees, to which the proceeds of any damages awarded to MMFC would be distributed. Nevertheless, there was nothing to suggest that their interest in the proceeding was equal to or greater than the interest of MMFC.

37 Clearly, like any corporate entity, the corporate partners of MMFC can only "think and act" through natural persons. Consequently, it was unsurprising that Manderson and Karis were the directing minds of MMFC in the conduct of the litigation. There is, however, no evidence that the litigation was conducted in a way that was unreasonable or improper. At all times throughout the proceeding, MMFC was represented by reputable solicitors and by senior counsel with very substantial experience and expertise in relation to intellectual property matters. Each version of the statement of claim or drafts were put forward by MMFC signed by one of these senior counsel (or with drafts indicating that one of these senior counsel would sign). There is no suggestion that any of these senior counsel acted otherwise than with absolute professional propriety and in accordance with their obligations as senior counsel in signing a statement of claim or appearing in support of a proposed statement of claim which was indicative of their intention to sign. In these circumstances, and where MMFC was the proper plaintiff to the proceeding, the making of a costs order against Manderson and Karis would have the effect of setting aside the effect of the separate legal personality of the corporate partners of MMFC as corporate entities and put at risk of personal liability directors and, possibly, other officers of these corporations who conducted the litigation on their behalf. For these reasons, I am of the opinion that it would not be appropriate to make any costs order against Manderson or Karis.

38 There are also some other considerations which the authorities indicate are relevant considerations which would also militate against making any such order. The first is that IPL did not take all reasonable steps to protect its costs recovery position. Although the proceedings commenced on 2 July 2008, it took until February 2009 for IPL to make a formal application for security for its costs. It obtained a security for costs order from Efthim AsJ on 28 July 2009. IPL had previously raised the issue of security for costs by letter to EKM legal on 23 July 2008. On 30 July 2008, MMFC's solicitors wrote to the solicitors acting for IPL saying that in their view, any application for security for costs should await the filing of the defence by IPL. IPL did file a defence on 8 August 2008, but subsequent delays were sought to be justified on IPL's part on the basis that issues had arisen in relation to the statement of claim and that an application for security for costs should await resolution of these outstanding matters. IPL's solicitors again raised the issue of security for costs by letter to EKM legal on 7 January 2009. On 4 February EKM Legal replied by stating that MMFC would not provide security for costs until it was provided with an explanation as to why security was not requested earlier and the amount sought. IPL submitted that:[42]

"15. There is nothing more Incitec Pivot could reasonably have done to protect its costs recovery position. When Incitec Pivot sought to make an application for security early in the proceeding, MMFC complained that it was premature before the scope of the dispute was better known, hence the application not being made until February 2009.[43] At all times since security was provided on 11 August 2009, either the plaintiff's pleading has been in dispute or it has not even had a pleading before the Court. The Courts have recognised that 'it is not reasonable to expect a defendant to make further applications to the court at every stage where it appears that costs are escalating so as to render the amount of security previously awarded insufficient'.[44]"

"7. The evidence establishes that Incitec Pivot could not have done anything more to protect its position by making a further application for security for costs, given that at all times since security was provided by MMFC on 11 August 2009 the plaintiff's pleading has been in dispute, or it has not had a pleading before the Court, and the plaintiff itself consistently adopted the position that questions of security could not appropriately be dealt with until the pleadings were settled.[46]"

In other words, the point made was that until the statement of claim was "settled" by the resolution of these issues and pleadings closed on a proper basis, it was not possible, realistically, to assess the likely work involved, hence the sum that should be sought by way of security.

39 Nevertheless, as the affidavit of Ms Elizabeth Mary Harris, a costs consultant, indicates, very substantial costs were incurred by IPL with respect to discovery in late November 2008. Items 80 and 81 of the Draft Bill which forms Annexure C to that affidavit provides as follows:

Perusing the plaintiff's discovery - allow 8475 pages @ 2 folio/page

Perusing the defendant's discovery - allow 1588 pages @ 2 folio/page

40 This evidence of Ms Harris is consistent with the submissions by IPL that very substantial work was undertaken prior to 1 March 2009. IPL's present concern that MMFC is a "$2 company" is not a concern that has apparently arisen recently, particularly as security for costs issues were raised early in the proceedings. Consequently, it seems surprising, to say the least, that costs of this magnitude would have been incurred with respect to discovery either prior to pleadings issues being resolved or, if it was then thought that they were resolved as a result of IPL's filing of a defence on 8 August 2008, without an application for security for costs which would accommodate the undertaking of work of this magnitude. If the position of IPL at that stage was that pleadings issues had not been resolved, it seems all the more surprising that this work would have been undertaken. The point is made in IPL's submissions that it is not usual or desirable that there be multiple security for costs applications with the security being "topped up" from time to time.[47] Even if this is a correct view, this does not explain its failure to protect its position by way of a security for costs order well before February 2009.

41 Additionally, IPL did not warn Manderson or Karis that it would seek personal costs orders against them at any time prior to 20 May 2011. This position needs to be considered against the background that IPL was fully aware of the MMFC corporate-partnership and trusts structure and its financial position. This was made clear in its application for security for costs in March 2009 where IPL provided detailed evidence and submissions in support of its security for costs application, seeking to demonstrate the structure and financial position of MMFC and that it would be unlikely to be able to meet an award of costs in favour of IPL as a result of its limited assets. IPL's submissions in support of its application for security for costs noted specifically that Manderson and Karis were not parties to the proceeding,[48] but no application for personal costs orders against Manderson or Karis were foreshadowed at that stage and, in any event, not until 20 May 2011. As the authorities discussed indicate, this is at least a relevant consideration against a personal costs order being made in the present circumstances. In all the circumstances, I am of the opinion that it is a significant consideration and if IPL intended to pursue this course, Manderson and Karis were entitled to be put on notice at least when it made its submissions for security for costs in March 2009 raising as they did these issues with respect to MMFC.

42 MMFC entered into a litigation funding agreement with Hillcrest on 26 May 2009 ("the Agreement"). The Agreement provides funding for MMFC's costs from the "Effective Date" of that Agreement, which is defined as 1 March 2009. Hillcrest did not have any involvement in the proceedings prior to that date. IPL seeks a non-party costs order against Hillcrest from 1 March 2009 onwards. Hillcrest submits that no non-party costs order should be made against it. It also submits that it was not given explicit notice that a costs order of this kind would be sought against it. Further, it submits that if IPL finds itself in difficulties in recovering costs, that is a problem of its own making in not properly protecting itself by seeking adequate security for costs orders.

43 In support of its application, IPL submits that Hillcrest, in entering into the Agreement, has entered into a commercial arrangement with MMFC. Under that arrangement, in exchange for paying MMFC's legal fees and disbursements and for indemnifying it in respect of any adverse costs orders relating to costs after 1 March 2009, Hillcrest is entitled to receive a refund of its outgoings and a percentage of any settlement amount, damages or account of profits in the event that MMFC were to be successful in these proceedings. Although Hillcrest and MMFC have refused to disclose the percentage amount which Hillcrest would recover in the event of MMFC's success in these proceedings, it is submitted by IPL that Hillcrest typically agrees to receive 30% to 45% of the proceeds of litigation.[49] This, it is submitted, constitutes a very substantial interest in the subject of the litigation. On 18 January 2011, IPL sought an enforceable undertaking in its favour from Hillcrest, but no such undertaking was provided.

44 Reference was made by IPL to discussion in the judgment of Hodgson JA in the New South Wales Court of Appeal in Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd[50] of the basis of and the approach of the courts to the costs liability of litigation funders and potential difficulties encountered by other parties to a proceeding in seeking to take advantage of the litigation funder indemnity in favour of the party against whom costs liability lies. As to the general approach, Hodgson JA said:[51]

"[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 Ltd v Fostif Pty Ltd [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."

Similarly, Young CJ in Eq said in Chartspike Pty Ltd (in liq) v Chahoud:[52]

"[5] The situation is that the plaintiff is a company which is insolvent. It is contracted to have the liquidation funded by a third party, in return for that the third party receiving a share of the verdict. In such circumstances it is appropriate that the third party bear part of the risk ..."

45 It was submitted by IPL that Hillcrest's agreement to indemnify MMFC against any adverse costs order made in the proceeding justified the making of a non-party costs order against Hillcrest. As the indemnity is not in favour of nor directly enforceable by IPL, it was contended that it would be left with no means of satisfying a costs order in its favour as a successful defendant because, as a result of MMFC's impecuniosity, MMFC does not have the ability to fund enforcement of the indemnity. An enforceable undertaking from Hillcrest in favour of IPL would have avoided this problem.

46 The problem of enforcement of litigation funder indemnities was further discussed by Hodgson JA in Green v CGU:[53]

"[52] In this case, the funder could perhaps be liable for costs, at the instance of the defendant; although Young CJ in Eq in Chartspike Pty Ltd v Chahoud [2001] NSWSC 585 said there would be difficulty in enforcing this kind of indemnity, because the funder is not an insurer who could be sued pursuant to the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) s 6. If in such a case the funder did not willingly pay a costs order against the plaintiff, there is a question whether the defendant could bring proceedings in which the plaintiff and the funder were joined as defendants in order to enforce the indemnity against the funder; and even if this were possible, the proceedings would be cumbersome and could well be highly contentious. I note also that, in this case, the funder can avoid liability for future costs by terminating the funding agreement; and this could happen in such a way that CGU would need to expend further costs in order to obtain a decision in its favour, with no possibility of enforcement of those costs against the funder. (Problems such as these could possibly be overcome if the funder undertook to the court to be subject to any order for costs the court might make or consented to be joined as a party for that purpose: cf UCPR 42.3.)

[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] EngR 492; (1864) 10 HL Cas 589; 11 ER 1154. (It may be that where the court knows the extent of the funders' 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.)"

47 IPL relied upon these observations in Green in support of its position that, given that the risks referred to by Hodgson JA could occur in the present proceeding, together with the risk that the terms of the agreement could be varied to IPL's detriment or the Agreement might be found to be unenforceable, it is only just to protect IPL's interest by making a costs order against Hillcrest in respect of costs incurred since 1 March 2009. It was further submitted in support of this proposition that neither Hillcrest nor MMFC would suffer any injustice by the Court so doing because an order of this nature would simply give effect to the intention of the parties as implemented by the terms of the Agreement.

48 In relation to the argument that a non-party costs order should not be made against Hillcrest because it was not given explicit notice that a costs order would be sought against it IPL raised a number of matters. Reference was made to Kebaro Pty Ltd v Saunders:[54]

"Whether such a requirement arises in a particular case depends on the facts and circumstances of the individual case. The necessity to warn a non-party of an intention to claim costs is not a principle applicable in every case in which costs are sought against the non-party. Rather it may be a material consideration depending on the situation disclosed in the case under consideration."

On this basis IPL submitted that the question of notice may be relevant in cases where a costs order is sought against a stranger to the litigation. This, however, it says is not the case in relation to Hillcrest, whose sole business is funding litigation and in circumstances where it has been fully appraised of all steps in the proceeding since March 2009. It contends that in circumstances where Hillcrest voluntarily accept liability to satisfy an adverse costs order made against MMFC, notice cannot be a relevant consideration. Further, it was said that Hillcrest suffered no prejudice from not having been given notice and there was no evidence of any alleged prejudice.

49 IPL also submitted, on the basis of Kebaro, that where litigation funding was "crucial to the maintenance of the momentum of the litigation", the role of the litigation funder cannot be described as other than "active".[55] The evidence contained in the Manderson affidavit does support the position that the funding was crucial to the continuation of these proceedings.[56] Hillcrest, on the other hand, paints a different picture of the extent to which it was actively involved in the proceedings.

50 The Agreement provides, in clause 4(a), that MMFC's legal representatives are to be instructed by MMFC, rather than Hillcrest. Further, reference is made to evidence that Hillcrest has not had any involvement in the proceedings beyond satisfying its obligations under and exercising rights under the provisions of the Agreement.[57] Referring to the authorities, particularly Gore v Justice Corporation Pty Ltd,[58] Hillcrest submits that an analysis of the present facts and circumstances demonstrates that there are a number of distinguishing features in this matter from instances where non-parties have been ordered to pay costs:[59]

"5.1 It cannot be said that the Defendant in any way relied upon the Litigation Funding Agreement as did Clayton Utz in Gore at [44] and [62]. The Defendant applied for and obtained security for costs (paragraphs 5 to 7 of the Affidavit of Alan Van Noort sworn 28 June 2011) and was not provided with a copy of the Litigation Funding Agreement until 24 May 2011 - paragraph 41 of the Jonathan Leigh Kelp sworn 25 May 2011. At no point in time was the Defendant lulled into a false sense of security that their costs would be met by Hillcrest;

5.2 Hillcrest were not placed on notice that the Defendant sought to place them at risk of a non-party costs order until 20 May 2011 - paragraph 6 of the Jonathan Leigh Kelp sworn 25 May 2011. In Gore Clayton Utz had taken the earlier step of applying for security directly from Justice Corporation. The Defendant has not taken any similar steps against Hillcrest. A limited enquiry was made of the Plaintiff late in the piece on 18 January 2011 as to whether the funder would provide an undertaking, but the evidence is that this was not taken up directly with Hillcrest - (paragraph ## of the Affidavit of Alan Van Noort sworn 28 June 2011);

5.3 The case advanced before the court was not hopeless or spurious as in Arundel Chiropractic Centre Pty Ltd v DCT (2001) 179 ALR 406 and in Money Tree Management Services v DCT (2000) 46 ATR 123; and

5.4 The conduct of the proceeding was not controlled or directed by the funder as it was by the insurer in TGA Chapman Ltd v Christopher [1997] EWCA Civ 2052; [1998] 1 WLR 12 at 20."

51 In relation to notice and timeliness on the part of IPL in obtaining a security for costs order, Hillcrest makes reference to the statement of Olsson J in Vestris v Cashman:[60]

"... common fairness dictates that a defendant seeking to place a non-party at risk of an order for costs must, either by bringing a timely application for security or, alternatively, at least by letter advising the defendant's intention, place the non-party on notice of that risk ..."

52 In relation to security for costs, the position of IPL, as indicated previously, is that questions of security could not appropriately be dealt with until the pleadings were settled.[61] This was the explanation for the delay in seeking a security for costs order, in spite of the substantial work that was undertaken with respect to discovery prior to that time. As to this, Hillcrest submits that in circumstances where IPL's own evidence indicates that its party and party costs vastly exceeded the existing security that had been provided and where it took no further steps by way of a timely further application for security nor of notifying Hillcrest that it intended to apply for a non-party costs order, the Court's discretion should be exercised against making such an order.

53 In relation to Hillcrest's liability under the Agreement arising from its indemnity in favour of MMFC, I am of the opinion that it would have been appropriate to make an order in favour of IPL which would, in effect, enable it to enforce this indemnity directly. However, having regard to IPL's failure to seek further security for costs and to provide notice of an intention to seek a non-party costs order against Hillcrest until 20 May 2011 it is my view that a non-party costs should not be made against Hillcrest.

54 On 11 August 2009, Hillcrest provided a bank guarantee in the amount of $115,776.50 in favour of IPL. The bank guarantee was provided by way of security for costs of IPL as ordered by Efthim AsJ.[62] Hillcrest submits that the existing security provided by way of the bank guarantee ought properly be available only for costs incurred from 1 March 2009. Hillcrest submitted that the application for security for costs was made for prospective costs. This is made clear by IPL's submissions at the security for costs application which said "Incitec Pivot only seeks security for prospective costs."[63] IPL's submission that "the bank guarantee is in favour of Incitec Pivot, and on its terms it can be paid in respect of any order of costs against MMFC in this proceeding, regardless of when those costs were incurred, and without prior reference to any other party"[64] does not alter the fact that the security was sought for prospective costs.

55 It is appropriate that IPL should be left to rely upon the provisions of this bank guarantee which may be called upon up to the extent of the guarantee, but only for costs which were secured under the terms of the orders made by Efthim AsJ on 28 July 2009.

56 On the basis of these reasons, I will order that:

(2) the defendant's costs of the proceeding, including all reserved costs, be paid by the plaintiff on a party and party basis;

(3) the defendant's costs of the proceeding are to include its costs associated with any draft version of the statement of claim notwithstanding that such draft was not pursued by the plaintiff, and costs of the transcript; and

(4) the defendant have recourse to the bank guarantee provided by Hillcrest on 11 August 2009 for costs incurred after 11 August 2009, which is in accordance with the security for costs orders made by Efthim AsJ on 28 July 2009.

[1] [2011] VSC 205.

[2] Manderson M & F Consulting v Incitec Pivot Ltd [2010] VSC 63.

[3] Manderson M & F Consulting v Incitec Pivot Ltd [2010] VSC 63 at [8]- [10].

[4] Manderson M & F Consulting v Incitec Pivot Ltd (No 2) [2011] VSC 205.

[5] Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at [67]- [69] (McHugh J).

[6] [1993] FCA 536; (1993) 46 FCR 225 at 233-234; and see also Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 at [7].

[7] 1988] FCA 202; (1988) 81 ALR 397 at 401. This passage has been cited with approval in many subsequent decisions, including by French J (as he then was) in J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers Western Australia (unreported, Federal Court of Australia, 9 February 1993), and in the Supreme Court of Victoria in Murdaca v Maisano [2004] VSCA 123 at [40]; Aljade and MKIC v OCBC [2004] VSC 351; and Macedon Ranges Shire Council v Thompson [2009] VSCA 209 at [15].

[8] [2009] VSCA 209 at [15] (Redlich JA and Beach AJA).

[9] Unreported FCA, 9 February 1993 (French J).

[10] Hurstville Municipal Council v Connor (1991) 24 NSWLR 724; Monitronix Ltd v Michael (1992) 7 WAR 195; Ugly Tribe Co Pty Ltd v Sikola, [2001] VSC 189, [18] (Harper J); Clarke v Deputy Commissioner of Taxation [2002] FCA 75; (2002) 50 ATR 173.

[11] Aljade and MKIC v OCBC [2004] VSC 351.

[12] [1993] FCA 536; (1993) 46 FCR 225 at 233-234; and see above paragraph 9; and see Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189, at [7] (Harper J); also Auswest Timbers Pty Ltd v Secretary to the Department of Sustainability & Environment (No 2) [2010] VSC 513 at [7] (Croft J).

[13] [1991] FCA 187 at [21]- [22].

[14] Manderson M & F Consulting v Incitec Pivot Ltd [2010] VSC 63.

[15] Manderson M & F Consulting v Incitec Pivot Ltd (No 2) [2011] VSC 205.

[16] See Manderson M & F Consulting v Incitec Pivot Ltd [2010] VSC 63 at [8]- [10], [12] and [21]-[22], particularly; and Manderson M & F Consulting v Incitec Pivot Ltd (No 2) [2011] VSC 205, at [11] and following.

[17] Referring to Teijo Holdings Pty Ltd v Keeprit Australia Pty Ltd [1991] FCA 187; J-C Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (WA Branch) (No 2) [1993] FCA 42; (1993) 46 IR 301; both cited with approval in Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189, at [7] (Harper J)(Categories (iii) and (vi), respectively).

[18] Submissions of MMFC, Warwick Manderson and James Karis (28 June 2011), paragraph 32.

[19] [1993] FCA 536; (1993) 46 FCR 225 at 233-234.

[20] See Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 at [16] (Harper J).

[21] Burns Philp & Co Ltd v Bhagat [1993] VicRp 13; [1993] 1 VR 203 at 219 (Brooking J); Guss v Geelong Building Society (in liq) [2001] VSC 288 at [7] (Ashley J).

[22] [1992] HCA 28; (1992) 174 CLR 178 at 192.

[23] [1992] HCA 28; (1992) 174 CLR 178 at 192.

[24] [1992] HCA 28; (1992) 174 CLR 178 at 191.

[25] [2005] NSWCA 340.

[26] [2005] NSWCA 340 at [210] and [214].

[27] [2005] NSWCA 340 at [206].

[28] [2011] NSWCA 75 at [11].

[29] [2011] NSWCA 75 at [20], referring to Gore v Justice Corporation Pty Ltd (2002) 119 FCR 429 (O'Loughlin, Whitlam and Marshall JJ) and TGA Chapman Ltd v Christopher [1997] EWCA Civ 2052; [1998] 1 WLR 12 (CA) and Tharros Shipping Co Ltd v Byas Shipping Ltd (No 3) [1997] 1 Lloyds Rep 246, where orders were sought against a non-party which had assisted the unsuccessful defendant.

[30] [2003] FCAFC 5 at [103] (Beaumont, Sundberg and Hely JJ).

[31] [2004] QSC 47.

[32] [2004] QSC 47 at [12]- [15].

[34] And see the comprehensive history of maintenance and champerty and the public policy issues raised by litigation funding arrangements as discussed by the High Court in Campbells Cash & Carry Pty Ltd v Fostif Pty Ltd [2006] HCA 41; (2006) 229 CLR 386 at 423-6, [61]- [95].

[35] (2002) 119 FCR 429 at 448, [52].

[36] (2002) 119 FCR 429 at 452, [64].

[37] Gore v Justice Corporation Pty Ltd (2002) 119 FCR 429 at 443 [37], referring to Murphy v Young & Co Brewery [1996] EWCA Civ 1000; [1997] 1 WLR 1591 (CA) (Phillips LJ).

[38] Incitec Pivot's Outline of Submissions on costs and appropriate orders to dismiss the proceeding (30 May 2011), paragraph 22.

[41] Affidavit of Warwick Alexander Manderson (28 June 2011), paragraphs 22 - 28.

[42] Incitec Pivot's Outline of Submissions on Costs and Appropriate Orders to Dismiss the Proceeding, [15].

[43] Paragraphs 21 to 22 of the Second Kelp Affidavit.

[44] Knight v FP Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178 at 190-191 per Mason CJ and Deane J, cited by Heydon J in Jeffery v Katauskas Pty Ltd v SST Consulting Pty Ltd [2009] HCA 43; (2009) 239 CLR 75 at [93].

[45] Incitec Pivot's Outline of Submissions in Reply on the Question of Costs, [7].

[46] Paragraphs 29 to 34 of the affidavit of Jonathan Kelp dated 25 May 2011 ("Second Kelp Affidavit") and paragraphs 5 to 9 of the affidavit of Jonathan Kelp dated 1 July 2011 ("Third Kelp Affidavit").

[47] The comments of Young CJ in Eq in Chartspike Pty Ltd v Chaoud [2001] NSWSC 585, at [5] would, however, suggest that it is not.

[48] See IPL's submissions in support of its application for security for costs (3 March 2009), paragraph 40.

[49] See letter from Mallesons to EKM Legal dated 13 July 2009: Exhibit JLK-45 to the first affidavit of Jonathan Leigh Kelp.

[50] [2008] NSWCA 148; (2008) 67 ACSR 105 at 120-121, [49]- [53] (with whom Basten and Campbell JJA relevantly agreed).

[51] [2008] NSWCA 148; (2008) 67 ACSR 105 at 120-121, [51].

[52] [2001] NSWSC 585, at [5].

[53] [2008] NSWCA 148; (2008) 67 ACSR 105 at 121, [52] and [53]; cited with approval by Judd J in Bufalo Corp Pty Ltd v Lendlease Primelife Corp Ltd (No 3) [2010] VSC 263 at [57].

[54] [2003] FCAFC 5, at [94] (Beaumont, Sundberg and Hely JJ), quoting the Full Court in Yates v Boland [2000] FCA 1895.

[55] [2003] FCAFC 5, at [114].

[56] See the affidavit of Warwick Alexander Manderson (28 June 2011), paragraphs 24 to 28.

[57] See the affidavit of Alan Van Noort (28 June 2011), paragraph 4.

[59] See Hillcrest Litigation Services Ltd's Outline of Submissions on Costs and Appropriate Orders to Dismiss the Proceedings (28 June 2011), paragraph 5.

[60] (1998) 72 SASR 449 at 458 (with whom Doyle CJ agreed).

[62] See the order of Efthim AsJ made on 28 July 2009 which stated that: "By 4:00pm on 11 August 2009, the Plaintiff provide security for the costs of the Defendant in defending the proceeding up to the date of a mediation in the amount of $115,776.50, by way of a bank guarantee in a form acceptable to the Defendant, failing which the proceeding is stayed."

[63] Incitec Pivot's Outline of Submissions Supporting its Application for Security for Costs, dated 3 March 2009, [42].

[64] _Incitec Pivot's Outline of Submissions in Reply on the Question of Cost_s, dated 1 July 2011, [28].