Plaintiff v First Defendant

2 Thereafter, Mr Woodward applied for non-party costs orders against Tracey Pauline Rothwell trading as Rothwell Lawyers,[2] and Mr Gregory Charlesworth. Rothwell Lawyers had been the solicitors on the record for the plaintiff ('Ms White') until judgment had been entered in the proceeding. Mr Charlesworth was a witness at trial.

3 On 2 July 2020, having regard to a Calderbank letter that Mr Woodward sent to Ms White prior to trial, I ordered that Ms White pay Mr Woodward's costs of and incidental to the proceeding, to be assessed on the standard basis until 21 November 2019 and thereafter on an indemnity basis. I also made timetabling orders for the determination of the non-party costs applications.

4 On 17 July 2020, the summons against Rothwell Lawyers was dismissed by consent, with no order as to costs.

5 The issue remaining for determination is the non-party costs claim against Mr Charlesworth. By his points of claim, Mr Woodward essentially contended that the basis for the costs order against Mr Charlesworth was that he was the effective plaintiff in the proceeding.

6 Although Mr Charlesworth challenged the adequacy of the points of claim, I see no reason to accede to his submission that the summons be summarily dismissed. I am satisfied from the written submissions and supporting affidavits that were filed by Mr Charlesworth that he understands the basis of the claim and was in a position to respond to it. In my view, it is preferable that the application be dealt with on its merits.

7 The parties were not in significant dispute as to the relevant principles that applied on the application. The relevant line of authorities commences with the decision of Knight v FP Special Assets ('Knight'), where the High Court identified the circumstances that may enliven a court's jurisdiction to make a non-party costs order:

For our part, we consider it appropriate to recognize a general category of case in which an order for costs should be made against a nonparty 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 nonparty has played an active part in the conduct of the litigation and where the nonparty, 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 nonparty if the interests of justice require that it be made.[3]

8 I have also taken account of a number of more recent cases that have considered the Knight principle.[4]

(a) it is accepted that the jurisdiction to make a costs order non-party against a non-party is to be exercised in exceptional circumstances;

(b) it is primarily a question of examining the criteria identified in Knight; and

(c) those criteria are not separate and independent factors, but are directed to the overall question of whether, in the circumstances of a given case, it is in the interests of justice that a non-party costs order ought to be made.

(a) whether the unsuccessful plaintiff is insolvent or otherwise capable of being described as a person of straw;

(b) whether the unsuccessful party was a moving party to the proceeding rather than the non-party against whom relief is sought;

(c) whether, and to what extent, the non-party played an active part in the litigation;

(d) what the source of funds was for the unsuccessful party's involvement in the litigation;

(e) whether the conduct of the litigation was unreasonable, improper or lacked a proper basis; and

(f) whether the non-party had an interest (financial or otherwise) that was equal to or greater than that of the unsuccessful plaintiff.

11 It is necessary to make some brief observations about the evidence on the application. Mr Woodward relied on two affidavits sworn by his instructing solicitor. Mr Charlesworth swore an affidavit and also relied on an affidavit from his sister, Ms Jillian Leon. None of the deponents were cross-examined.

12 The first question that arises is whether Ms White is insolvent or otherwise cannot pay the costs of the proceeding. On the evidence, that proposition had not been tested. It is fair to say, and he pointed to evidence at trial supporting that inference, that Mr Woodward should not be optimistic that Ms White can meet her liability under the costs order I have already made. However, at present, Ms White's financial position is not known. In all the circumstances, I will proceed on the assumption that Ms White is unable to pay the costs of the proceeding, but as I say, I am not particularly persuaded to the requisite standard that that fact has been affirmatively established.

13 The next question is what the source of funds was for the litigation. Ms Leon deposed that she was a friend and supporter of Ms White and had initially approached the Victorian Aboriginal Legal Service ('VALS') for legal assistance. VALS referred her to Justice Connect, who subsequently arranged for Rothwell Lawyers to act for Ms White.

14 Rothwell Lawyers conducted the litigation on a pro bono basis, together, presumably, with counsel, although the evidence on this point was not clear. What is significant is the absence of evidence suggesting that funding was provided from any other source. I find that the funder of the litigation was Rothwell Lawyers (and possibly counsel).

15 The next consideration is whether the conduct of the litigation was unreasonable, improper or lacked a proper basis. Notwithstanding the strong findings that were made against Mr Charlesworth in the trial judgment, the other evidence that was available to Ms White was the evidence of the handwriting expert. It is clear from the trial judgment that I considered that evidence very carefully. Notwithstanding the submission strongly pressed by Mr Woodward that Mr Charlesworth had no credit and was found by me to be a liar, I do not find, in this context, that the conduct of Ms White in instituting and maintaining this proceeding was either unreasonable or improper.

16 Ms Leon stated, and I accept, that Rothwell Lawyers advised Ms White that she had a good case, and Ms Leon and Ms White determined that the proceeding should be initiated on that basis. There was a proper basis for Rothwell Lawyers to give advice to Ms White that she had a case, particularly given the opinions expressed by the handwriting expert, and it was perfectly reasonable for Ms White to accept the advice of her lawyers and to proceed with the case.

17 The next issue is the role that Mr Charlesworth played in the conduct of the proceeding. Mr Woodward's central contention was that Mr Charlesworth was the key person involved in all of the events that gave rise to the litigation. I readily accept that proposition. It is made clear in the trial judgment. However, in the present context, it is not a relevant consideration.

18 Ms Leon's evidence was that Mr Charlesworth played no role in the litigation beyond providing a statement. Immediately following Mr Charlesworth's incarceration, when conflict developed between Mr Woodward and Ms White, Ms Leon asked Mr Charlesworth to provide her with a written note setting out what had occurred with the property and Mr Woodward, to allow her to assist Ms White in dealing with that dispute. Subsequently, Ms White commenced this proceeding, and the note became the basis for Mr Charlesworth's witness statement.

19 Mr Woodward submitted that the note effectively formed Mr Charlesworth's instructions in respect of this proceeding and demonstrated that he was the moving party. I reject that construction of it. The note does nothing more than provide Mr Charlesworth's account of the relevant circumstances, a typical contribution of a prospective witness. Although the lawyers may have referenced the contents of the note in advising Ms White, and she or Ms Leon may have relied on it in determining whether to commence the proceeding, such circumstances are not evidence of any involvement by Mr Charlesworth in the decision to sue or in the conduct of the proceeding.

20 I accept Ms Leon's evidence that, once the proceeding was initiated, she, in conjunction with Ms White, provided the instructions to the solicitors and counsel throughout the whole of its course, and that none of those instructions came from Mr Charlesworth. Ms Leon deposed that Ms White appointed her under a power of attorney, enabling her to give instructions directly to Rothwell Lawyers on her behalf. Ms Leon had the files, documents and computer records from which the instructions were provided to the solicitors. Ms Leon was involved in each and every step that was taken in the proceeding, including, in particular, engaging the handwriting expert, and in considering whether to accept Mr Woodward's offer of compromise.

21 I also find that Mr Charlesworth's evidence about the nature of his communications while he was incarcerated is corroborated by Ms Leon's evidence. I accept her evidence that there was a very limited opportunity for him to have any discussion about the proceeding, and that it rarely occurred.

22 I accept Mr Woodward's submission that Mr Charlesworth was an essential witness in the proceeding, indeed the critical witness, along with the handwriting expert. But, accepting Ms Leon's evidence, I reject the proposition that Mr Charlesworth in any way instigated or controlled the proceeding.

23 The next issue is whether Mr Charlesworth had an interest in the proceeding. Mr Charlesworth did not have a direct financial interest in the proceeding. Had Ms White succeeded in the proceeding, the property would have been transferred into her name, apparently as a trustee, although there was insufficient evidence to form any concluded view about the existence and nature of that trust. Be that as it may, title to the property would have been held by Ms White, either in her own right absolutely, or as the trustee of the relevant trust. Mr Charlesworth would have had no interest in the property, unless it was to arise in some respect through the trust, which is not a conclusion that was open to me on the evidence.

24 It was then necessary to look at whether he had a non-financial interest. The authorities make it clear that such an interest must be equal to or greater than that of the party to the proceeding.[5] Mr Woodward contended that Mr Charlesworth had an interest by reason of his relationship with Ms White, as there was clearly evidence given at the trial that Ms White and Mr Charlesworth were de facto partners, had three children together, and had lived together for a very long time.

25 I have no hesitation in accepting the proposition that Ms White and Mr Charlesworth were de facto partners, at least up until the time when Mr Charlesworth was incarcerated. From that point in time, there was no further evidence from either Ms White or Ms Leon about the nature of the relationship. On the other hand, Mr Charlesworth has said that he had separated from Ms White at the time of his incarceration, and invited me to accept that their relationship has effectively ended.

26 It is not clear to me that that is the case. Mr Charlesworth did not disclose his residential address in his affidavit, but rather stated his address as 'care of his solicitors'. Otherwise, he simply states, 'We separated after my incarceration.' As a matter of fact, that statement is fairly obvious, because until 20 May 2020, Mr Charlesworth was residing in a gaol in Western Australia. What has occurred since 20 May 2020 is unknown, making the nature of any interest that Mr Charlesworth might now have had in the property unclear, assuming Ms White had succeeded.

27 If, as Mr Woodward submits, I should infer that Ms White and Mr Charlesworth are still partners, then he has no claim to any assets, or would have no claim to any assets. If they have separated, the only claim that he might have would be one arising under family law. There is no indication that such a claim has been, or would ever now be brought, because there is no evidence that either Ms White or Mr Charlesworth has any assets that would warrant bringing a claim. There may have been a claim if Ms White had won this case, received title to the property and then separated, but that is not what happened.

28 The extent to which Mr Charlesworth has an interest cannot be any greater than that which he stated in his affidavit:

Had Ms White been successful in relation to these proceedings, she would obtain the property for the benefit of our children. I have no financial interest in the outcome of the litigation, but obviously believe that the property was Nola's and hoped the court would find the same for the benefit of Nola and our children.

29 Possibly, if things had turned out differently, Mr Charlesworth may have had accommodation with Ms White in that property. We will never know.

30 Ultimately, I was not persuaded that the suggested non-financial interest of Mr Charlesworth, contingent on the continuation of their relationship or alternatively under family law, is an interest that was equal to or greater than that of Ms White.

31 For the reasons that I have given, I have not been persuaded that Mr Charlesworth can be adjudged by his conduct to be the real party to the litigation. The court's jurisdiction to make a costs order against him as a non-party was not enlivened. The application will be dismissed.

32 In respect of costs, Mr Charlesworth submitted that as the successful party in the application, costs should follow the event, and I should order that Mr Woodward pay Mr Charlesworth's costs of the application, to be assessed on a standard basis.

33 Mr Woodward accepted that the ordinary rule was applicable, but instead sought a somewhat unusual further order, being that Mr Charlesworth not be permitted to execute his order for costs against Mr Woodward's assets generally, but be confined to any sum that Mr Woodward recovers from Ms White under the costs order made against her in the proceeding.

34 The principle upon which an order of this sort ought to be made was not expressly articulated. I take it to be that costs are in the discretion of the court, and that the court should have regard to where the interests of justice may lie.

35 Having regard to all of the circumstances, I am not persuaded that I ought to restrict the costs order that I make on the basis suggested by Mr Woodward.

36 I will order that Mr Woodward pay Mr Charlesworth's costs of the application, to be assessed on a standard basis.

[1] White v Woodward [2020] VSC 258.

[2] This summons was subsequently amended to seek the non-party costs order from Rothwell Lawyers Pty Ltd, being the properly named respondent.

[3] (1992) 174 CLR, 192-3.

[4] Bischof v Adams [1992] VR 198; FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340 ('FPM'); Permark International Interiors Pty Ltd v Amoveo Pty Ltd & Ors [2013] VSC 563; 1165 Stud Road v Power & Ors (No 2) [2015] VSC 735; Gdanski v Palms Court Management Pty Ltd [2017] VSCA 348.