Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd & Ors; Allianz Australia Insurance Limited v SST Consulting Pty Ltd & Ors; Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd & Ors; Rickard Hails Moretti Pty Ltd v SST Consulting Pty Ltd & Ors

CATCHWORDS: COSTS - costs orders against non-parties - whether abuse of process by non-parties warranting order - whether non-party with commercial interest in litigation commits abuse of process by funding and/or controlling litigation brought by insolvent plaintiff without indemnifying plaintiff against adverse costs orders - whether non-party commits abuse of process by funding and assisting insolvent plaintiff to sue on ineffectively assigned causes of action - whether non-exposure of non-party to costs orders brings administration of justice into disrepute - whether security for costs regime sufficient answer to abuse of process claims - whether proceedings hopeless rendering their conduct an abuse of process - whether unreasonable refusal of Calderbank offer constituting abuse of process - whether conduct of proceedings for purpose of obtaining higher settlement sum is abuse of process - position of directors of corporate third parties - PRACTICE AND PROCEDURE - orders against third parties - costs - WORDS AND PHRASES - "abuse of process"

Civil Procedure Act 2005 Corporations Act 2001 (Cth) LEGISLATION CITED: Uniform Civil Procedure Rules 2005 Supreme Court Act 1970 Supreme Court Rules 1970 Supreme Court Rules (Amendment No 274) 1993

Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965 Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256 Bauhaus Pyrmont Pty Ltd (in liq), In the matter of [2006] NSWSC 879; (2006) 67 NSWLR 289 Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd [2006] HCA 41; (2006) 229 CLR 386 Condliffe v Hislop [1996] 1 All ER 431 Construction, Forestry, Mining & Energy Union v Clarke [2008] FCAFC 143; (2008) 170 FCR 574 Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) [2004] UKPC 39 Flower & Hart v White Industries (Qld) Pty Ltd [1999] FCA 773; (1999) 87 FCR 134 Forest Pty Ltd v Keen Bay Pty Ltd (1991) 4 ACSR 107 Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd [2005] NSWCA 83; (2005) 63 NSWLR 203 Hamilton v Oades (1989) 166 CLR 486 CASES CITED: Hayward v Giffard (1838) 4 M & W 194 Idoport Pty Ltd v National Australia Bank Ltd [2004] NSWSC 695 Knight v FP Special Assets Ltd (1992) 174 CLR 178 Life Therapeutics Ltd v Bell IXL Investments Ltd (No 2) [2008] FCAFC 158; (2008) 170 FCR 595 Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 Project 28 Pty Ltd v Barr [2005] NSWCA 240 Ram Coomar Coondoo v Chunder Canto Mookerjee (1876) 2 App Cas 186 Rogers v R (1994) 181 CLR 251 Trendtex Trading Corporation v Credit Suisse [1982] AC 679 Wentworth v Wentworth [2000] NSWCA 350; (2001) 52 NSWLR 602 Williams v Spautz (1992) 174 CLR 509

TEXTS CITED: Richie's Uniform Civil Procedure NSW, LexisNexis Butterworths

Matter No 40070/05: Rickard Constructions Pty Ltd - Appellant Rickard Hails Moretti Pty Ltd - First Respondent/Applicant on notice of motion Jeffery and Katauskas Pty Ltd - Second Respondent/Applicant on notice of motion Allianz Australia Insurance Ltd - Third Respondent/Applicant on notice of motion SST Consulting Pty Ltd - First Respondent on notice of motion Peter Sweeney - Second Respondent on notice of motion Paul Sweeney - Third Respondent on notice of motion Denys Truman - Fourth Respondent on notice of motion Charles Rickard - Fifth Respondent on notice of motion

Matter No 40541/06: Allianz Australia Insurance Ltd - Appellant SST Consulting Services Pty Ltd - First Respondent Rickard Constructions Pty Ltd - Second Respondent Peter Sweeney - Third Respondent PARTIES: Paul Sweeney - Fourth Respondent Denys Truman - Fifth Respondent Charles Rickard - Sixth Respondent

Matter No 40559/06: Jefffery and Katauskas Pty Ltd - Appellant SST Consulting Services Pty Ltd - First Respondent Peter Sweeney - Second Respondent Paul Sweeney - Third Respondent Denys Truman - Fourth Respondent

Matter No 40562/06: Rickard Hails Moretti Pty Ltd - Appellant SST Consulting Services Pty Ltd - First Respondent Peter Sweeney - Second Respondent Paul Sweeney - Third Respondent Denys Truman - Fourth Respondent

FILE NUMBER(S): CA 40070/05; 40541/06; 40559/06; 40562/06

T G R Parker SC & R E Steele - Rickard Constructions Pty Ltd, SST Consulting Services Pty Ltd, Peter Sweeney, Paul Sweeney & Denys Truman M Dempsey SC & J A Steele - Jeffery and Katauskas Pty Ltd COUNSEL: A S Martin SC & A J McInerney - Allianz Australia Insurance Ltd P Braham - Rickard Hails Moretti Pty Ltd S Reuben - Charles Rickard

J Biady & Associates Pty Ltd, North Sydney - Rickard Constructions Pty Ltd, SST Consulting Services, Peter Sweeney, Paul Sweeney, Denys Truman Colin Biggers & Paisley - Jeffery & Katauskas Pty Ltd SOLICITORS: Moroney Lawyers - Allianz Australia Insurance Ltd Moray & Agnew - Rickard Hails Moretti Pty Ltd Cordato Partners - Charles Rickard

LOWER COURT JURISDICTION: Supreme Court

LOWER COURT DATE OF DECISION: 17 December 2004, 7 April 2005, 27 May 2005

LOWER COURT MEDIUM NEUTRAL CITATION: Rickard Constructions & Anor v Rickard Hails Moretti & Ors [2004] NSWSC 1041

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40070/05 CA 40541/06 CA 40559/06 CA 40562/06

GILES JA TOBIAS JA GYLES AJA

Friday, 19 December 2008 Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd & Ors Allianz Australia Insurance Limited v SST Consulting Pty Ltd & Ors Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd & Ors Rickard Hails Moretti Pty Ltd v SST Consulting Pty Ltd & Ors Judgment 1 GILES JA: I agree with Gyles AJA. 2 TOBIAS JA: I agree with Gyles AJA. 3 GYLES AJA: Consideration of the circumstances under which it is appropriate to make an order for costs against a non-party pursuant to the Uniform Civil Procedure Rules 2005 (UCPR) Rule 42.3(2)(c) is the principal matter for determination in these proceedings. 4 On 14 August 2006 McDougall J rejected an application for such an order by the three successful defendants in a proceeding brought by an insolvent corporate plaintiff, Rickard Constructions Pty Ltd (Rickard Constructions) (Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2006] NSWSC 791). Each of those defendants - Rickard Hails Moretti Pty Ltd (Rickard Partners), Jeffery & Katauskas Pty Ltd (J & K) and Allianz Australia Insurance Ltd (Allianz) - seek leave to appeal from that decision. 5 The substantive decision of McDougall J (Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2004] NSWSC 1041) was upheld in this Court on 14 December 2006 (Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2006] NSWCA 356). By motion, each of the successful respondents to that appeal seeks costs of that appeal against the same non-parties, again pursuant to UCPR Rule 42.3(2)(c). McDougall J had dealt with costs of the substantive proceedings, including ordering Rickard Constructions to pay certain of the costs on an indemnity basis as the result of the rejection of a Calderbank offer (Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2005] NSWSC 481 (the costs judgment)). 6 The parties are agreed that it is appropriate for this Court to hear the motion in the other appeal proceedings as well as the applications for leave and argument on appeal. The Court heard argument in all matters at the same time as the principal issue was common. The extent to which the material to be considered differed in detail will be dealt with where necessary. There is no serious opposition to a grant of leave to appeal in each case.

Commercial background 7 The commercial background can be sufficiently gathered from the following summary taken from the judgment under appeal, with some editing. A fuller account of the background is to be found in the substantive judgment (Rickard Constructions [2004] NSWSC 1041) and the appeal judgment (Rickard Constructions [2006] NSWCA 356). 8 Rickard Constructions constructed a pavement for a container depot at Port Botany. The pavement was designed by Rickard Partners. J & K provided geotechnical services. Allianz issued a contract works insurance policy for the project in favour of Rickard Constructions. The pavement failed shortly after it was put into service. Rickard Constructions rebuilt it. The question for decision in the principal proceedings was as to who should bear the loss. 9 The container depot is located at Lot 1, 55 Friendship Road, Port Botany. Lot 1 was leased initially to Port Botany Container Park Pty Ltd (Container Park). Rickard Constructions and Container Park entered into a building contract, for the construction of the pavement, on 23 April 1998. Rickard Constructions' obligation was to execute the works - namely, the construction of the pavement - in a workmanlike manner in accordance with the design shown in the drawings and specifications prepared by Rickard Partners. 10 Thereafter, Container Park sold its business to Mayne Nickless Ltd (Mayne Nickless) and MPG Logistics Pty Limited (MPG Logistics), a subsidiary of Mayne Nickless (these and other Mayne companies are referred to collectively in these reasons as "Mayne"). As part of that transaction, Container Park assigned its interest in Lot 1 and its interest in the building contract to Mayne Nickless. 11 Rickard Partners and J & K provided services in connection with the construction of the pavement both before and after 18 December 1998. Rickard Constructions continued, after that date, to perform its obligations under the building contract. After considerable delay (in part due to heavy rainfall in the first half of the calendar year 1999), it handed the works over to Mayne on 26 August 1999. 12 The container depot was to be used for the storage of shipping containers. That business involved the use of heavy forklift trucks, to shift and place the containers. The design of the pavement sought to take into account the loads that this usage would impose. However, the pavement failed within three days of being put into service, when substantial portions of it collapsed. 13 The failure of the pavement led to a difference of opinion between Rickard Constructions and Mayne. The former maintained that it had complied with its obligations under the building contract (to construct the pavement in accordance with the design prepared by Rickard Partners; it was not a design and construct contract). Mayne seemed inclined to disregard the separate legal personalities of the builder and the designer, and to focus on the fact that both were effectively directed by Mr Charles Eric Rickard, the principal of both companies at the time. In any event, on 3 May 2000, Rickard Constructions, Mayne Nickless and MPG Logistics entered into an agreement (the 3 May agreement) for Rickard Constructions to carry through to completion the rectification of the failed pavement. 14 Under the 3 May agreement, Rickard Constructions agreed to complete the rectification works. Mayne Nickless and MPG Logistics agreed that the rectification works would constitute a variation under the building contract. However, Mayne Nickless and MPG Logistics were not to pay Rickard Constructions in cash for that variation. Instead, they agreed to assign to Rickard Constructions any right that they might have against the designer of the pavement or the supervisors of the pavement construction "to recover … the amount payable [by them to Rickard Constructions] in connection with" the variation. Rickard Constructions agreed to accept that assignment in full satisfaction of its claim for payment. 15 There were two subsequent assignments, purporting or attempting to perfect Rickard Constructions' rights under the assignment in the 3 May agreement. 16 After the events in issue Container Park changed its name to SST Consulting Services Pty Ltd. I shall refer to it in these reasons hereafter as "SST Consulting".

Chronology 17 A more detailed chronology of events, compiled from the chronologies supplied by the parties is as follows: 23 February 1998 Rickard Constructions enters Building Contract with SST Consulting (then known as Container Park) to construct a container terminal pavement.

4 January 1999 Building Contract assigned from SST Consulting to Mayne Nickless.

26 August 1999 Pavement reaches practical completion.

1 December 1999 Rickard Constructions commences rectification work.

3 May 2000 First Deed of Assignment between Mayne and Rickard Constructions purporting to assign causes of action to Rickard Constructions.

June-August 2000 SST Consulting lends $270,000 to Rickard Constructions for the purpose of carrying out rectification work on the failed pavement and for funding initial work in respect of possible claims by Rickard Constructions against third parties in connection with the failed pavement.

5 September 2000 Rickard Constructions files Summons in proceeding SC 55027/00.

13 October 2000 Deed of Charge over Rickard Constructions to SST Consulting to secure advances by SST Consulting.

19 October 2000 Administrator appointed to Rickard Constructions.

23 November 2000 Mayne sells assets of the Container Park business including any choses in action against defendants to certain Patrick companies.

15 December 2000 Rolfe J orders that Rickard Constructions provide security for costs for J & K in the amount of $47,750.

22 December 2000 Deed of Company Arrangement between Rickard Constructions, Mr Neil Geoffrey Singleton, Mr Rickard, SST Services Pty Limited and SST Consulting (collectively the "SST Companies") by which the SST Companies agreed to provide limited funding for the proceeding to 31 March 2001.

31 March 2001 Expiry date of agreement by the SST Companies to fund the proceeding, pursuant to clause 15.2 of the Deed of Company Arrangement.

13 July 2001 Further Amended Summons introduces claims for consequential losses incurred by Mayne.

15 November 2002 McClellan J orders Rickard Constructions to provide security for costs for Allianz in the amount of $50,000.

22 September 2003 Second Deed of Assignment by which Mayne "assign[s]" rights of action to Rickard Constructions and the SST Companies indemnify Mayne against costs of proceeding.

5 October 2004 McDougall J commences hearing of the primary proceeding.

6 October 2004 McDougall J orders Rickard Constructions to provide further security for costs for J & K in the amount of $140,000.

11 October 2004 McDougall J dismisses Allianz's application for additional security for costs.

15 October 2004 Third Deed of Assignment between Mayne, Rickard Constructions, the SST Companies, Mr Rickard and certain Patrick companies whereby the Patrick companies "assign" rights to Rickard Constructions and the SST Companies indemnify the Patrick companies.

17 December 2004 Judgment of McDougall J in favour of each of the defendants with costs.

January 2005 Rickard Constructions instructs solicitors Maurice Blackburn Cashman to commence appeal provided that SST Consulting is prepared to fund the appeal. Solicitors and counsel accept a retainer on a "no win-no pay" basis. Rickard Constructions files holding appeal.

7 April 2005 McDougall J orders release of security to J & K. McDougall J grants leave to file application for costs against non-parties.

22 April 2005 Rickard Constructions files Notice of Appeal.

27 May 2005 McDougall J orders Rickard Constructions to pay Allianz's costs on a party and party basis until 13 April 2003 and thereafter on an indemnity basis.

3 June 2005 By consent, Rickard Constructions is ordered to pay security for costs of appeal of J & K in the amount of $55,000.

20 June 2005 By consent, Rickard Constructions is ordered to pay security for costs of appeal of Rickard Partners in the amount of $45,000. By consent, Rickard Constructions is ordered to pay security for costs of appeal of Allianz in the amount of $55,000.

7 July 2005 Rickard Partners gives notice to SST Consulting and Mr Peter Sweeney of its claim for payment of its costs of the primary proceeding.

29 July 2005 Allianz gives notice to SST Consulting, Mr Rickard, Mr Paul Sweeney, Mr Peter Sweeney and Mr Denys Truman of claim for payment of its costs of the primary proceeding.

1 September 2005 J & K gives notice to SST Consulting, Mr Paul Sweeney, Mr Peter Sweeney and Mr Truman that it would seek an order for the costs of the appeal from them if the security for costs were insufficient to meet its actual costs.

1 January 2006 Shaw Reynolds Lawyers are retained to act for Rickard Constructions in the substantive appeal on a contingency basis.

14 August 2006 McDougall J refuses applications by Rickard Partners, J & K and Allianz for third party costs orders variously against SST Consulting, Mr Paul Sweeney, Mr Peter Sweeney, Mr Truman and Mr Rickard.

4 September 2006 J & K files application for further security in respect of appeal.

18 September 2006 Mason P dismisses applications for further security for costs of appeal by J & K and Allianz.

30 October 2006 Appeal heard for five days from 30 October 2006.

30 November 2006 Allianz files Summons for Leave to Appeal from the third party costs judgment.

14 December 2006 Rickard Constructions' appeal is dismissed with costs.

8 February 2007 Rickard Partners and J & K file Notices of Motion seeking costs of the appeal.

1 March 2007 Allianz files Notice of Motion for the respondents to pay its costs of the appeal.

27 July 2007 Liquidator is appointed to Rickard Constructions.

30 July 2007 The Court grants leave to J & K to proceed against Rickard Constructions in liquidation and orders release of the security.

Applications for third party costs 18 There is evidence from each of the defendants to the substantive proceedings that there was a significant shortfall between the amount received by way of security including interest as compared with the solicitor/client costs that they incurred in relation to the primary proceedings. There is evidence to the same effect in relation to the costs of the appeal. Rickard Constructions could not meet any of the shortfall. 19 Rickard Partners, J & K and Allianz (the applicants) sought costs orders against SST Consulting and its principal shareholders, Messrs Peter and Paul Sweeney and Mr Denys Truman (to which four parties I refer hereafter collectively as the "SST Parties"). Allianz also sought an order against Mr Charles Eric Rickard, a principal or former principal of both Rickard Constructions and Rickard Partners. Each of those parties is a respondent to the applications. 20 The notice of motion on the part of Allianz was filed in August 2005 supported by an affidavit of Mr Roger Michael Betts of 15 August 2005. No grounds were set out in the motion. The affidavit included the following:

"4. The basis for the application, in general terms, is that the respondents funded the plaintiff's claim against the third defendant in circumstances where such funding amounted to an abuse of process since:

(a) the plaintiff was unable to meet any adverse costs order which might have been made in favour of the third defendant;

(b) the respondent assumed no liability for any such adverse costs order which might be made against the plaintiff;

(c) the plaintiff's claim against the third defendant was futile;

(d) the plaintiff's claim failed against the third defendant for want of proof of matters fundamental to its success."

An amended notice of motion was filed in Court on 24 July 2006 following the coming into force of the Civil Procedure Act 2005 and the UCPR. There were no particulars of the basis for the order sought. 21 The original notice of motion on behalf of J & K was filed by 15 September 2005, on which day Mr Paul Anthony Bannon swore an affidavit in support of the motion. No particular basis for the application was set out in that affidavit. Particular attention was drawn to an affidavit sworn by Mr Peter Sweeney in the course of proceedings for security in which Mr Bannon said he noted that Mr Sweeney deposed to the following facts:

"a. The directors of the first respondent operated the company in the same way as a partnership would operate.

b. The first respondent did not hold any substantial assets or cash.

c. When the first respondent required funds for any purpose, the directors of the first respondent, that is the second to fourth respondents contributed funds in equal shares."

Mr Bannon said that was the first time that he or his client became aware of those facts. The amended notice of motion filed in Court on 24 July 2006 does not state any grounds for the orders sought. 22 The motion on behalf of Rickard Partners was filed by 12 September 2005, on which date Mr David Alan Parker made an affidavit in support of the application. He annexed a letter that he had written to Mr Peter Sweeney care of SST Consulting on 7 July 2005 which included the following:

"5. It is the view of the first defendant that the Supreme Court has power to make an order for costs against a person who not being a party, commits an abuse of process by funding the litigation, taking the interest in the outcome of the proceedings, or who is the controller or instigator of proceedings in which he has no legitimate interest (see Part 52A, Rule 4(5) of the Supreme Court Rules).

6. Affidavits served in the proceedings indicate that you funded Constructions in the litigation through SST. More particularly: 6.1 In or about mid June 2000, you were approached by Mr Rickard of Constructions to lend funds in the relation to the rectification of the pavement. An amount of $300,000.00 was advanced for that purpose;

6.2 When Constructions went into administration in October 2000, SST was admitted as a creditor in the amount of $913,000.00, which included the above amount;

6.3 SST was admitted as the single largest, and only secured creditor;

6.4 On 22 December 2000, Constructions entered into a deed of company arrangement pursuant to which the company reverted to the control of Mr Rickard, and SST agreed jointly with Mr Rickard to fund the litigation to a maximum of $150,000.00 and until 31 March 2001;

6.5 Under the deed of company arrangement, SST was to receive a priority payment of $350,000.00 from the fund constituted by the return on the litigation, and further payments commensurate with the return to other creditors;

6.6 You were aware that Constructions had no significant assets apart from the Proceedings, and was not in a position to meet an adverse costs order if the Proceedings were unsuccessful;

6.7 You continued to fund the litigation on behalf of Constructions beyond 31 March 2001, and confirmed on 5 October 2004 that SST had been funding the Proceedings on behalf of Constructions to that point..

6.8 You attended most, if not all of the hearing, and were involved in giving instructions to Constructions' lawyers.

7. In short, you funded and controlled the litigation. Your involvement in the litigation was in furtherance of commercial interests, and did not relate to any genuine interest in the subject matter of the proceedings. You stood to be a primary beneficiary of any damages awarded if the Proceedings had been successful.

8. In consequence of this, we are instructed to pursue an order that you and SST meet our client's costs of the Proceedings, on the basis that your involvement in the Proceedings, as outlined above, was an abuse of process." 23 The amended notice of motion filed in Court on 24 July 2006 did not include any grounds for the orders sought. 24 Each of the amended notices of motion identified s 98 of the Civil Procedure Act and Rule 42.3(2)(c) of the UCPR as the basis for the orders sought. Section 98 of the Civil Procedure Act is relevantly as follows:

(2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court." Rule 42.3 is as follows:

"42.3 Powers of the court generally (cf SCR Part 52A, rule 4 (2) and (5))

(1) Subject to rule 42.27, the court may not, in the exercise of its powers and discretions under section 98 of the Civil Procedure Act 2005 , make any order for costs against a person who is not a party.

(2) This rule does not limit the power of the court: …

(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 …" (emphasis added) 25 The basis for the orders sought was that each of the respondents was a person who had "committed … an abuse of process of the court". No formal particulars identifying the abuse were given.

JUDGMENT UNDER APPEAL 26 The issues identified by McDougall J in the judgment under appeal (Rickard Constructions [2006] NSWSC 791 at [20]) were as follows:

"(1) What is the meaning of the phrase "abuse of process" where it is used in r 42.3(2)(c)? Specifically, does it connote whatever from time to time the law takes to be an abuse of process, or does it connote only the tort of abuse of process?

(2) To what extent did the respondents: · directly or indirectly fund Rickard Constructions to enable it to pursue the litigation; and · directly or indirectly control decisions from time to time made by Rickard Constructions in the conduct of the litigation? (3) To what extent did the respondents stand to benefit directly or indirectly from any success enjoyed by Rickard Constructions in the litigation?

(4) Did any such control (either of funding or of decision making), together with any such benefit as a respondent may have enjoyed from the success of the litigation, in circumstances where that respondent was not exposed to a liability for the applicants' costs, constitute an abuse of process sufficient to entitle any applicant to a non-party costs order?

(5) Were any of Messrs Peter or Paul Sweeney or Truman liable to suffer a non-party costs order because they funded, and controlled the activities of, SST Consulting, and in a practical sense stood to gain from any benefit that it would receive if Rickard Constructions succeeded?

(6) Was Mr Rickard liable to suffer a non-party costs order because in a practical sense he stood to benefit, through the company controlled by him and his wife, from any success that Rickard Constructions enjoyed in the litigation?

(7) If there were an abuse of process sufficient to empower the Court to make a non-party costs order, should the Court nonetheless, in the exercise of its discretion, decline to make such an order in circumstances where the applicants could have sought (and in some cases did seek) security for their costs?" 27 The trial judge dealt with the questions of fact before returning to the first issue dealing with the meaning of "abuse of process" in the rule. The findings in relation to issue 2 were as follows (at [51]): "In summary, therefore:

(1) Mr Rickard gave instructions on behalf of Rickard Constructions in relation to the litigation.

(2) There is no evidence that SST Consulting was involved in the decision-making process that from time to time led to such instructions.

(3) Mr Rickard and SST Consulting funded the litigation up until 13 March 2001, on the basis and subject to the monetary limits set out in cl 15.2 of the [Deed of Company Arrangement].

(4) SST Consulting funded the litigation thereafter.

(5) At all material times, both before and after 31 March 2001, Mr Rickard had the authority to give instructions to bring the litigation to an end, provided that he obtained the concurrence of the administrator pursuant to cl 15.5 of the [Deed of Company Arrangement] (it is hard to imagine that the administrator would have failed to concur had Mr Rickard and SST Consulting ceased to provide funding, and if no other source of funding were available).

(6) There is no evidence that Mr Rickard would have been trammelled, in giving any such instructions, by some agreement or arrangement between him, or the plaintiff, and SST Consulting.

(7) At any time after 31 March 2001, SST Consulting could have brought the litigation to an end by ceasing to provide further funding.

(8) There is no evidence that SST Consulting had any continuing obligation, under any agreement or arrangement with Mr Rickard, Rickard Constructions or the administrator, that might oblige it to provide funding thereafter.

(9) Thus, Mr Rickard at any time could have brought the litigation to an end, and in addition SST Consulting at any time after 31 March 2001 could have brought the litigation to an end." 28 His Honour found that SST Consulting stood to benefit from any success that Rickard Constructions might enjoy in the litigation. It stood to recover whatever was the amount of its initial advance or advances, what was characterised as a "success fee", and further amounts advanced by it to fund the litigation, with varying measures of priority over certain of the creditors of Rickard Constructions. It was held that there was no evidence that the individuals, Mr Peter Sweeney, Mr Paul Sweeney or Mr Truman, would benefit directly from any success enjoyed by Rickard Constructions. Such benefit as they might receive was of a practical kind in the sense that they were shareholders in SST Consulting, ran it as a "partnership" and had provided it with the funds that it had advanced to and on behalf of Rickard Constructions. It was assumed that the fruits of the litigation would flow back to the individuals through their loan accounts. It was held that Mr Rickard's family company stood to benefit from any success enjoyed by Rickard Constructions in substantially the same way as SST Consulting stood to benefit. It was assumed that Mr Rickard would benefit from recovery by his family company, although there was no precise finding as to how that might take place. 29 The finding on improper purpose was the subject of considerable debate on this appeal. In order to understand it, it is necessary to go back to the judgment that the trial judge had delivered on indemnity costs (Rickard Constructions [2005] NSWSC 481) and also to certain aspects of the substantive judgment (Rickard Constructions [2004] NSWSC 1041). 30 Application was made by Allianz for indemnity costs based upon the refusal by Rickard Constructions to accept a Calderbank offer that exceeded the result. His Honour concluded that the offer was reasonable and that rejection of the offer was not reasonable ([2005] NSWSC 481 at [43]). His Honour went on to say (at [44]-[46]):

"In this context, I think that it is relevant to have regard to what I found in my first judgment were fundamental flaws in the case put by Rickard Constructions against Allianz. In particular, the circumstances that I canvassed in the paragraphs of those reasons referred to in para [17] and, to some extent, paras [20] to [22] above, suggest that the case for Rickard Constructions misconceived, in serious and fundamental ways, what it had to prove if it were to succeed against Allianz in its claim under the policy. In circumstances where, as I infer is more likely than not, those matters were pointed out to Rickard Constructions prior to and in the course of the mediation, the failure to address them thereafter (including in considering Allianz' Calderbank offer) is strongly indicative of unreasonable behaviour; and not by way of hindsight only.

Further, I think, some insight into the reasonableness, or otherwise, of Rickard Constructions' approach may be gleaned from its decision to pursue the claim for consequential loss. It is not insignificant that this claim was abandoned at the hearing. Allianz pointed out to Rickard Constructions the hopeless nature of that case. No explanation has been offered for the decision. The inference that I draw is that the claim was pursued in an attempt to force a more substantial settlement from Allianz. I do not regard that as a reasonable approach; on the contrary, I think, it is an approach that can only be characterised as unreasonable. It is unreasonable because it sought to advance the resolution of the dispute not by the deployment of sound, or even arguable, factual and legal reasons, but by the application of commercial pressure.

There is another matter that I think is relevant. It became apparent that the litigation had been funded by Port Botany Container Park Pty Ltd or a related entity (that company's role is described in para [2] of my earlier reasons). Container Park (as I called it) is a creditor of Rickard Constructions. It is a reasonable inference that the litigation was conducted for the benefit of Container Park. It is a reasonable inference that the decisions to reject the Calderbank offer and the offer of compromise were taken by Container Park. There was no evidence of the reasoning process supporting, or leading to, those decisions; but it may be that the circumstance referred to in para [36] may have played some, if not a leading, part in the decision. In the absence of any evidence or submission as to the reasons of the likely real decision maker, I do not think that it is open to me to conclude that the decision to reject the offers was reasonable." 31 The claim against Allianz had been dealt with at [204]-[228] of the substantive judgment (Rickard Constructions [2004] NSWSC 1041). It was held that an express exclusion in the Allianz policy applied to the claim against it. The relevant exclusion clause is as follows: "1. the costs of repairing, replacing or rectifying Insured Property in which there is a fault, defect, error or omission in material or workmanship, but the Underwriter will pay the costs of loss or damage caused directly by such fault, defect, error or omission less the costs which would have been incurred in repairing, replacing or rectifying the faulty or defective material or workmanship immediately prior to the loss or damage occurring."

It was held that the costs of rectification were directly caught by the exclusion and that Rickard Constructions had not established the material necessary to take advantage of the exception to the exclusion. The case against Allianz included a claim for consequential loss. However, the policy included an express exclusion of such a claim. 32 Improper purpose is dealt with in the judgment under appeal (Rickard Constructions [2006] NSWSC 791) at [56]-[60]. His Honour appears to have taken the view that the only basis upon which it was contended that the proceedings were brought or conducted with some improper or ulterior purpose was the bringing of the hopeless case on consequential loss against Allianz. His Honour adhered to the views that he had expressed at [45] of the costs judgment. He found that that conduct did not infect the balance of the proceedings and so concluded that the proceedings were not commenced or in any relevant way continued in bad faith. Nor (apart from consequential losses) were they of such a character that they were, or should have been seen to have been, hopeless as the fundamental flaws referred to at [44] of the costs judgment could have been addressed in preparation of the case. 33 His Honour went on to consider the proper construction of UCPR Rule 42.3 and concluded (at [78]) that the power to make a non-party costs order would be enlivened under Rule 42.3(2)(c) "whenever the Court is satisfied that there has been an abuse of process, regardless of the precise nature or classification or characterisation of that abuse of process". In so doing his Honour rejected an argument that abuse of process in the rule refers to the tort of abuse of process. His Honour considered a number of authorities in coming to that view. 34 His Honour then went on to consider three particular decisions - those of this Court in Fostif Pty Ltd v Campbells Cash and Carry Pty Ltd [2005] NSWCA 83; (2005) 63 NSWLR 203 and Project 28 Pty Ltd v Barr [2005] NSWCA 240, and that of Einstein J in Idoport Pty Ltd v National Australia Bank Ltd [2004] NSWSC 695. The decisions were all concerned with stay of proceedings. His Honour's decision was given prior to the judgment of the High Court in the appeal in Fostif. His Honour then said the following (at [89]):

"…The inquiry into abuse of process, for the purpose of deciding whether to grant a stay, will be conducted at or near the outset of the proceedings. The inquiry, for the purpose of considering whether to make a non-party costs order, will be considered after the proceedings have been concluded. Thus, the latter inquiry may proceed upon a more complete appreciation of all relevant circumstances. The basal inquiry is therefore not so much as to the tendency of the proved arrangements to subvert the processes of the Court, with consequent injustice or unfairness to one party, but whether such subversion has occurred. In the latter category, it is a better informed inquiry."

After further analysis his Honour concluded (at [94]-[95]): "In the present case, however, the Court can see whether there has been lack of restraint, excess in the conduct of the litigation, unscrupulous manipulation, or careless or irresponsible actions. If there has not, the Court can conclude that the risk, or potential, has not matured into reality. In those circumstances, it is legitimate - and in my view dispositive - to enquire: how can there be an abuse of process if there were no relevant abuse in the conduct of the proceedings?

At the risk of repetition: the inquiry in Project 28 was directed (as was the inquiry in Fostif ) to the existence of a "material tendency" for the Court's processes to be converted into instruments of oppression: see Ipp JA at para [121] (and see Mason P in Fostif (at 234 [132]). In this case, there is no need to speculate about tendency; the Court can consider the events that have occurred, and ask whether the tendency has materialised."

The ultimate finding was that the applicants failed to demonstrate that any relevant abuse of process had occurred because they had failed to demonstrate that in fact the Court's processes had been subverted or corrupted (at [100]). His Honour rejected the submission that if there were control of litigation by a third party coupled with an absence of liability to that party for costs, then there was an abuse of process (at [96]). 35 His Honour gave particular attention to the application by Allianz as it relied upon unreasonable conduct in refusing the Calderbank offer as the basis for finding abuse of process. It was held that there was a substantial difference between conduct being "unreasonable" in the context of an application for indemnity costs on the one hand and the characterisation of it as oppressive for the purpose of considering whether to make a non-party costs order by reason of abuse of process. Apart from that general proposition, the case against Mr Rickard was rejected because the conduct was said to be attributed by Allianz to SST Consulting not to Mr Rickard. So far as SST Consulting is concerned, his Honour accepted evidence that the relevant instructions were not given by or on behalf of SST Consulting notwithstanding [46] of the costs judgment. 36 It is to be noted that (at [85]) his Honour referred with apparent approval to an earlier observation of Bergin J that SST Consulting and its principals were not investing in the litigation for the purposes of profit (Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2006] NSWSC 234 at [56]).

CONTENTIONS OF THE PARTIES 37 The basis for the orders sought by J & K was that in the circumstances of the case the funding of the primary proceedings and the appeal by the SST Parties without provision of an indemnity to the plaintiff for the defendant/respondent's costs constituted an abuse of process for the purposes of UCPR Rule 43.2(3)(c). That basis is raised by each of the other parties seeking orders. That basis was further developed to involve two headings. The first was funding without an indemnity - the funding of the primary proceedings and the appeal by the SST Parties for their own benefit and for the benefit of Rickard Constructions without the provision of an indemnity to Rickard Constructions for J & K's costs. The second was trafficking in actions - the prosecution by the plaintiff of causes of action of third parties, the assignment of which was contrary to public policy and ineffective, in circumstances where the SST Parties procured those assignments by providing indemnities to the assignor without providing an indemnity to Rickard Constructions. 38 It is submitted that for all relevant purposes SST Consulting funded the primary proceedings and the appeal and put up all security for costs in each of those proceedings. Further, they had the ability to bring the litigation to an effective halt by ceasing to provide further funding. SST Consulting stood to benefit from any success that Rickard Constructions might enjoy in the litigation. The directors also stood to benefit from the proceedings in the manner discussed by the trial judge. The orders for security for costs, both at the primary level and on appeal, were inadequate. The appeal could not have been instituted or prosecuted without the funding by the SST Parties including putting up security for costs and resisting an application for further security. It is further pointed out that documents produced by SST Consulting on the motion have disclosed that it itself is insolvent and would be unable to pay costs other than by future contributions from its directors. 39 Counsel referred to broad statements as to the nature of abuse of process in the judgments of the High Court in Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256 and in the authorities referred to in that judgment. Particular reference was made to a passage approved in Batistatos at [6] describing abuse of process as follows: "the inherent power which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people".

It is said that the categories of abuse are not closed and continue to evolve ( Batistatos at [9]). It was submitted that the proceedings as conducted were manifestly unfair and prejudicial to the successful defendants, as they had no effective recourse under the ordinary procedures of the Court to recover their costs from the plaintiff or the real party or parties behind the plaintiff. 40 It was submitted that the trial judge was wrong in distinguishing the decision in Project 28 [2005] NSWCA 240 and that the application of the principle applied in that case should have led to the order for costs being made. 41 It was submitted that the importance of the principle that a successful party is ordinarily entitled to recover costs from the unsuccessful party is expressed clearly by McHugh J in Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at 97 and that, in particular, the unfairness of a non-party maintaining actions in the name of another without exposure to the defendant's costs was recognised in Project 28 [2005] NSWCA 240 at [114] per Ipp JA (Hodgson JA and Campbell AJA agreeing): "It has long been recognised that a tendency to abuse can arise if a nominal plaintiff sues for the benefit of some other party and is not able to pay the successful party's costs." 42 It was submitted that the judgment of Mason CJ and Deane J (with whom Dawson and Gaudron JJ agreed) in Knight v FP Special Assets Ltd (1992) 174 CLR 178 confirmed that there was jurisdiction to make an order for costs against a third party who is the real party behind the nominal party to protect the processes of the Court from abuse, with a broad view being taken of what constituted an abuse of process (see at 187-190). Dawson J provided support for the same view (at 202). It is submitted that the provisions of UCPR Rule 42.3(2)(c) import the effect of Knight into the current rules notwithstanding the changes in the rules which have taken place since Knight was decided. It is submitted that the observation by Heydon JA in Wentworth v Wentworth [2000] NSWCA 350; (2001) 52 NSWLR 602 at [162] should not be read as stating to the contrary. 43 It is submitted that the decision of the High Court in Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd [2006] HCA 41; (2006) 229 CLR 386 can be distinguished because there was an indemnity in that case given by the funder to the claimants in respect of cost orders that may be made against them. There was no doubt about the adequacy of that indemnity. 44 Counsel ultimately refined the submission so that 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. It was submitted that that proposition is supported by the reasoning in Knight and also by the decision of the Privy Council in Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) [2004] UKPC 39 particularly at [25 (3)]. 45 J & K advanced a second proposition, namely that there was abuse of process in the attempted prosecution against the first and second defendants/respondents (without an indemnity) of assigned bare rights of action. Here, it was said, an insolvent plaintiff assignee sought to sue in its own name on the actions of third parties with neither the funder nor the assignor indemnifying the plaintiff in respect of the costs of the defendants. This is to be contrasted with the fact that the SST Parties gave an indemnity to Mayne and the Patrick entities as assignors under separate Deeds of Assignment. It is submitted that to enable this to be done would be to encourage trafficking in actions and the bringing of unmeritorious claims, to enable litigation to be employed as a means of commercial oppression and to encourage the creation of artificial arrangements for the bringing of actions. Reference is made to dicta of Mason P in Fostif, particularly at [108] and [123], and to the judgment of Callinan and Heydon JJ in the High Court in Campbells Cash and Carry at [257]-[259]. 46 It is submitted that the ability to obtain security for costs should not be regarded as a sufficient remedy or protection for defendants, particularly in cases involving trafficking of actions (cf Mason CJ and Deane J in Knight at 190-192). There are limits to the effectiveness of security for costs as is revealed by the facts of this case. 47 It is submitted that the trial judge misunderstood the submissions below. He summarised the proposition as being control coupled with the absence of liability for costs. It was submitted below that either or both of the two propositions would be an abuse of process. In other words, the prosecution of funded proceedings without having a costs protection would be an abuse of process regardless of the control aspect. Furthermore, his Honour did not give any consideration to the second main proposition, namely the prosecution of invalidly assigned actions where an indemnity was provided by the litigation funder to the assignor but not in relation to orders in favour of the successful defendants. 48 It is submitted that the case against the shareholders of SST Consulting was established. SST Consulting was a $3 company which operated as a de facto partnership and is now insolvent. It was found that the directors stood to benefit from any success in the proceedings. The matter should be decided upon substance rather than form. In relation to the costs of the appeal, the fact that some fees were incurred on a contingency basis is irrelevant. 49 Counsel for Rickard Partners adopted and supported the submissions of counsel for J & K, adding a reference to Condliffe v Hislop [1966] 1 All ER 431 at 440. 50 Counsel for Allianz submitted that the abuse of process occurred in the following ways: "(a) the primary proceedings were unjustifiably oppressive to Allianz in that it was required to incur substantial unrecovered costs in successfully defending the proceedings which were being funded for reward and thereby controlled by the respondents who had not accepted liability for any adverse costs order;

(b) the primary proceedings brought the administration of justice into disrepute by undermining the fundamental principle that the party who uses the Court's process should be at risk in relation to costs if the proceedings were unsuccessful.

(c) the primary proceedings were unjustifiably oppressive to [Allianz] in that they were conducted in a manner that demonstrated that the usual discipline imposed upon a party that it was likely to be ordered to pay the costs of the successful party was missing."

It was submitted that the trial judge had adopted too narrow a view of abuse of process by confining himself to ascertaining whether the Court's processes had been subverted or corrupted. The majority of the High Court in Batistatos 226 CLR 256 at [15] had approved the head of unjustifiable oppression to one of the parties and the head of bringing the administration of justice into disrepute set out by McHugh J in Rogers v R (1994) 181 CLR 251 at 286. 51 A summary of the facts relied upon by Allianz is as follows (with references omitted): "14. Rickard Constructions was funded in the primary proceedings by SST Consulting and Mr Rickard up until 31 March 2001 (subject to cl. 15.2 of the [Deed of Company Arrangement) and by SST Consulting thereafter.

15. The SST individuals were the directors of and shareholders in SST Consulting. They operated SST Consulting in the same way as a partnership would operate. SST Consulting did not hold any substantial assets or cash. When it required funds for any purpose, the SST individuals contributed the funds in equal shares, being one third each.

16. The SST individuals provided SST Consulting with the funds which it advanced to or on behalf of Rickard Constructions for the primary proceedings.

17. Mr Peter Sweeney had instigated the appointment of Mr Andrew Quigley as the solicitor to act for Rickard Constructions in the primary proceedings. 18. Mr Rickard had control over the primary proceedings in that he had the authority to bring the litigation to an end provided he obtained the consent of Rickard Constructions' administrator.

19. SST Consulting also had control over the primary proceedings in that at any time after 31 March 2001 it could have brought the litigation to an end by withdrawing, or ceasing to provide, further funding to Rickard Constructions.

20. SST Consulting stood to financially benefit from the primary proceedings if successful by recovering from its proceeds the amount of its initial funding, a " success fee " of at least $630,000 and further amounts advanced by it to fund the litigation.

21. The SST individuals also stood to financially benefit from Rickard Constructions' success in the primary proceedings by the recoveries to SST Consulting flowing back to them through their loan accounts with the company.

22. It was common ground that neither SST Consulting, the SST individuals nor Mr Rickard accepted or assumed any liability for any adverse order for costs against Rickard Constructions in the primary proceedings (other than the monetary and temporal limits set out in cl. 15.2 of the [Deed of Company Arrangement]." 52 It was submitted that the primary proceedings were unjustifiably oppressive to Allianz in that it was required to incur substantial unrecovered costs in successfully defending proceedings being funded for reward and therefore controlled by the respondents who had not accepted liability for any adverse costs order. That is similar to the argument presented on behalf of J & K, although including the element of control. It was submitted that the authorities established that oppression was to be judged by the effect upon the other party rather than moral delinquency or misconduct on the part of the plaintiff (Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 at 247 per Deane J; Hamilton v Oades (1989) 166 CLR 486 at 502 per Deane and Gaudron JJ; Batistatos 226 CLR 256 at [69], [70] and [138]. The submissions under this head largely mirrored those put by the other applicants. 53 It was submitted that the conduct of the respondents brought the administration of justice into disrepute by undermining the fundamental principle that a party who uses the Court's process should be at risk in relation to costs if the proceedings are unsuccessful. Apart from referring to the passage from the judgment of McHugh J in Oshlack 193 CLR 72 at 97 relied upon by the other applicants, counsel referred to a long line of authority dealing with the ability of a Court to order costs to be paid by a "real" third party who uses the Court's processes in bringing and continuing proceedings. It was submitted that all of the parties against whom an order is sought had a sufficiently close connection with the primary proceedings so that each of them could fairly be described as a real party to those proceedings. 54 It was then submitted that even if the narrow view were taken, the lack of restraint as to costs manifested itself in the manner in which the proceedings were actually conducted. Three instances of misconduct were alleged. The first was that the case against Allianz was said by the trial judge to have been "misconceived, in serious and fundamental ways". The finding that those flaws were matters that could have been addressed in preparation was beside the point as the proceedings were brought and continued where no attempt had been made to adduce evidence on or address the essential elements. It was submitted further that the judge had not asked himself the critical question, namely whether those failures to address the essential elements of the case demonstrated that the usual discipline imposed upon a party that it was likely to pay the costs of the successful party was missing. The second instance was that Rickard Constructions had advanced a "hopeless" claim against Allianz for consequential loss for the illegitimate purpose of forcing a settlement from Allianz. Again the question should have been asked as to whether making that claim demonstrated the lack of discipline and restraint imposed by the usual order as to costs. The primary judge was wrong to hold that this did not "infect" the balance of the case. Settlement of the whole case was the aim. Even if that issue did not "infect" the balance of the primary proceedings, UCPR Rule 42.3(2)(c) envisages that an order for costs may be made for part of the costs. The third instance of misconduct was the unreasonable rejection of the Calderbank offer. Again, it was submitted that this demonstrated the lack of usual restraint and discipline. 55 It was submitted that Mr Rickard, as the principal of the insolvent plaintiff, who also partially funded the case and who stood to benefit from the case, was liable in the same way that the SST Consulting principals were liable. It was also sought to rely upon the actual involvement of Mr Rickard in control of the litigation to link him with the actual misconduct in the prosecution of the case. 56 Counsel supported the argument that the availability of an order for security for costs is not of itself sufficient to prevent an order for costs against third parties who have committed an abuse of process, adding a reference to Forest Pty Ltd v Keen Bay Pty Ltd (1991) 4 ACSR 107. 57 It was submitted that the successful defence of the appeal could not be distinguished from the primary proceedings. The fact that some costs were incurred on a contingency basis was not relevant. 58 Counsel for the SST Parties submitted that the basic principle advanced by the applicants is unsupported by authority and is contrary to the restrictions on the making of third party costs orders that follow from s 98 of the Civil Procedure Act and UCPR Rule 42.3. It depends upon the "real party" basis recognised in Knight by Mason CJ and Deane J. This is directly contrary to the explanation in Wentworth at [162] per Heydon JA as to the purpose of UCPR Rule 42.3. It is also submitted that the proposition contended for in this case is even balder than that referred to by Mason CJ and Deane J in Knight as it does not include any requirement that the real party control the conduct of the litigation. 59 Counsel for the SST Parties supported the finding of the trial judge that UCPR Rule 42.3(2)(c) requires identification of particular conduct which can be said to have been an abuse of process by the third party. It is pointed out that the rule is limited to and requires the identification of particular costs incurred by one of the litigants attributable to the third party's conduct. This can only be done after the conduct has taken place and the costs have been incurred. It follows that the mere act of funding litigation cannot be an abuse of process for the purposes of the rule. The primary judge was correct in distinguishing Project 28 and other authorities dealing with the stay of proceedings. 60 The various matters said to involve abuse of process were put to and rejected by the primary judge. They were factual findings which depended upon the particular circumstances of the case and his Honour as the trial judge was uniquely well placed to evaluate them. In any event leave to appeal would not be justified on that aspect of the case. It is pointed out that none of the instances of abusive conduct as such were repeated on appeal. 61 It was submitted that even if the stay authorities were applicable they would not assist the applicants as absolute control of the proceedings by the funder is fundamental to the reasoning in Project 28. The practical ability to bring the proceedings to an end by not funding them is not control. The finding that there was no control of the conduct of the proceedings by SST Consulting at first instance could hardly be challenged when the evidence of Mr Andrew Peter Quigley is taken into account. The same position obtained in the appeal proceedings, particularly as senior counsel and solicitors undertook the appeal on a speculative basis. SST Consulting never had to meet their fees. They could hardly influence the way in which counsel conducted the proceedings. Throughout, the legal right to conduct the proceedings remained with the plaintiff, citing clause 15.4 of the Deed of Company Arrangement. 62 It was submitted that SST Consulting's conduct could not amount to "trafficking" in litigation, whatever that may mean. The proceedings were commenced by the plaintiff on its own account. It was only after the plaintiff went into administration that the parties agreed to the funding arrangement. SST Consulting was a pre-existing creditor of the plaintiff. The Deed of Company Arrangement provided a regime which might have led to payment of some costs. It was only if there was a surplus that SST Consulting would receive repayment of the loans. This was an ad hoc arrangement. SST Consulting did not carry on litigation funding as a business venture. The Deed of Company Arrangement did contain an indemnity although capped in amount and not extending beyond 31 March 2001. Furthermore, SST Consulting did take on the substantial liabilities in connection with the costs including the funding of security. Those liabilities would provide a brake upon any tendency to lack of restraint. 63 It was submitted that the position of the applicants is to shift the balance between impecunious litigants and those who may fund them on the one hand and their opponents in the litigation on the other. The Court should not embark upon such a policy move, particularly because of the constraints imposed by the provisions of UCPR Rule 42.3. 64 Counsel then dealt with the question of the assignments of the causes of action held to be ineffective in the principal proceedings. That finding was challenged by the plaintiff on appeal and this Court expressly found it unnecessary to decide whether it was correct. It was submitted that the assignments were valid and that, even if they were not valid, there was no abuse of process. SST Consulting was not a party to the original Deed of Assignment. In relation to the later deeds to which it was a party, it was a pre-existing creditor of the plaintiff. Oppression was not established in the actual conduct of the assigned claims. There was no attempt to demonstrate any particular oppression relating to those claims. In any event the costs attributable to those matters alone would be small and there was no attempt to quantify them. 65 It was finally submitted for the SST Parties that an order for costs would not be mandatory even if an abuse of process were established. It was submitted that the discretion to make an order would not be exercised in this case. It was submitted that there was no reasons advanced for an order for costs on an indemnity basis. 66 On behalf of the SST directors and shareholders, it was submitted that all of the actions relied upon were corporate actions and there is no basis for lifting the corporate veil.

Funding without an indemnity 67 The broadest proposition is that a non-party with a commercial interest in the fruits of litigation commits an abuse of process if it funds litigation brought in the name of the insolvent plaintiff without providing the plaintiff with an indemnity against costs orders in favour of successful defendants. In my opinion that proposition is inconsistent with the proper construction of UCPR Rule 42.3 and with the dicta of Heydon JA in Wentworth cited by counsel. The starting point for the analysis is the decision of the High Court in Knight 174 CLR 178. 68 That case concerned the power of the Supreme Court of Queensland to award costs against third parties to the proceedings. The relevant provision was held to be Order 91 Rule 1 of the Rules of the Supreme Court of Queensland, which provided that, "[s]ubject to the provisions of the Judicature Act and these Rules, the costs of and incident to all proceedings in the Court, including the administration of estates and trusts, shall be in the discretion of Court or Judge …". It was held (by majority) that the discretion was not confined to orders against the parties to the proceedings. In particular the rule conferred jurisdiction to make an order for costs against the receivers of a company which is an unsuccessful party in proceedings, the receivers themselves not being parties to those proceedings. The decision of the House of Lords in Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965 at 980 was approved. The judges in the majority in Knight (Mason CJ, Deane J (at 192), Dawson J (at 203) and Gaudron J (at 205)) took the view that there was no justification for reading down or implying a limit to the language of the rule. At 192-193 Mason CJ and Deane J said: "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."

Gaudron J agreed with the judgment of Mason CJ and Deane J (at 205). That statement by Mason CJ and Deane J received prominence as it was expressly included in the headnote of the report of the case in the Commonwealth Law Reports. Dawson J indicated that until the decision of the House of Lords in Aiden Shipping the conventional view was that the Court lacked jurisdiction to award costs against a person who was not a party to the litigation (at 193). 69 Judgment in Knight was delivered on 25 June 1992. At that time s 76(1) of the Supreme Court Act 1970 provided: "Subject to this Act and the rules and subject to any other Act:

(b) the Court shall have full power to determinate by whom and to what extent costs are to be paid; …"

Costs were dealt with by Part 52 of the Supreme Court Rules 1970. Rule 4 was as follows: "Powers of the Court generally

4(1) The powers and discretions of the Court under section 76 of the Act (which relates to costs generally) shall be exercised subject to and in accordance with this Part …" 70 The Supreme Court Rules (Amendment No. 274) 1993 was made on 21 June 1993 and published in the Gazette on 25 June 1993. Paragraph 6 was as follows: "The Supreme Court Rules 1970 are further amended as follows:

(2) Subject to subrule (5), the Court shall not, in the exercise of its powers and discretions under section 76 of the Act, make any order for costs against a person who is not a party.

(3) Subject to subrule (4), a person shall not be made a party for the purpose of making an application for costs against the person.

(a) where the person is otherwise a proper party; or

(b) to a claim for relief against the person under section 78 of the Act. (5) Subrule (2) shall not limit the power of the Court to make any order:

(b) for payment by a relator in proceedings of the whole or any part of the costs of a party to the proceedings;

(c) for payment by a person who: (i) is bound by an order made, or judgment given, by the Court in proceedings or is bound by an undertaking given to the Court in proceedings; and (ii) fails to comply with the order or the judgment or breaches the undertaking,

of the whole or any part of the costs of a party to the proceedings occasioned by the failure or the breach;

(d) 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;

(e) in exercise of its supervisory jurisdiction over its own officers; or

(f) against a person who purports without authority to conduct proceedings in the name of another person. (6) Save as mentioned in subrules (1) to (5), this Part has effect subject to the Act and to the rules and subject to any other Act."

The explanation which accompanied the amendment included the following:

"The object of the amendment contained in paragraph 6 is to restrict the power of the court in making a costs order against a person who is not a party." 71 Part 52 then later became Part 52A without any relevant amendment. In 2000 this Court came to consider the effect of s 76 and Part 52A in Wentworth 52 NSWLR 602. After setting out the legislative history, Heydon JA said at [162]: "The effect of Pt 52, and now Pt 52A, is to abolish several traditional categories of jurisdiction to order costs against non-parties discussed in Knight v FP Special Assets Ltd (at 182-190) by Mason CJ and Deane J, and in particular the newly formulated category relating to insolvent persons discussed (at 192-193). While opinions might differ as to the desirability of this abolition, the meaning of Pt 52 and Pt 52A is in this respect plain."

His Honour had earlier said that the area of operation of s 76(1) depended upon the scope of the provisions of other enactments dealing with costs e.g. Part 52A (at [161]). The other members of the Court (Fitzgerald JA at [1] and Davies AJA at [271]) agreed with the reasons of Heydon JA. 72 In my opinion s 98 of the Civil Procedure Act and the UCPR Rule 42.3 cannot be distinguished from the form of the legislation considered in Wentworth. It was submitted that Heydon JA's observations were obiter, but even so, in my respectful opinion, the decision is in this respect plainly correct. The present rule must be construed without regard to the decision of Mason CJ and Deane J in Knight 174 CLR 178 as to the "real party" to litigation. The general rule is now that there is no power to order costs against a third party and the circumstances under which such an order can be made are delineated by the present rule not by judicial exegesis as to the previous law. 73 The judgment of Mason CJ and Deane J in Knight does, however, give a clue to the provenance of Rule 42.3(2)(c). At 186-187 their Honours set out the following statement by Lord Abinger CB in Hayward v Giffard (1838) 4 M & W 194: "If we were at liberty to consult equity and justice, we should probably make this rule absolute. But the authority of the Courts at Westminster is derived from the Queen's writ, directing them to take cognizance of the suits mentioned in the writs respectively, and thus bringing the parties before them. This being so, they have no power to order any particular individual to come before them at their pleasure. In the present case, if it could have been shewn that Spencer had committed any contempt of Court, or been guilty, in respect of this suit, of any thing in the nature of barratry or maintenance, it would have been another matter; but we cannot make any order against an individual who is not party to any suit before us, nor has been guilty of any contempt, but merely because he has an interest in the event of the suit."

Later (at 188) their Honours referred to a statement from the Judicial Committee of the Privy Council in Ram Coomar Coondoo v Chunder Canto Mookerjee (1876) 2 App Cas 186 at 212: "The instances in which persons other than parties to the suit have been held liable to costs in England , have been principally those of solicitors, over whom the Court exercises disciplinary jurisdiction, as in the case of In Re Jones [(1870) LR 6 Ch 497]. The Courts have also ordered the real parties to pay the costs in actions of ejectment, originally on the ground that that action was in form a fictitious proceeding, and having once assumed this power they have continued to exercise it in the actions substituted for that of ejectment. Again, the Courts, it has been said, would so interfere in case of any contempt or abuse of their proceedings: see Hayward v Giffard . But all these cases relate to applications either in the cause itself, or to the summary jurisdiction of the Court."

Later (again at 188) their Honours said: "The cases awarding costs against non-parties are more readily explicable on the footing that there was no absence of jurisdiction to order costs against non-parties in the strict sense and that the jurisdiction could be exercised against persons who were considered to be the 'real parties' to the litigation." 74 In my opinion, it is clear enough that the drafting of UCPR Rule 43.2 is inconsistent with there being any general principle that the jurisdiction can now be exercised against persons who are considered to be the "real parties". Furthermore, it is also clear enough that, by picking up the phrase "contempt or abuse" from Ram Coomar Coondoo, it was intended to refer to actual rather than prospective contempt or abuse of the proceedings. Authorities (such as Dymocks [2004] UKPC 39 and Life Therapeutics Ltd v Bell IXL Investments Ltd (No 2) [2008] FCAFC 158; (2008) 170 FCR 595) in relation to jurisdictions which do not have an equivalent to the current UCPR provisions are of no assistance. 75 The principal contention of the applicants is not consistent with UCPR Rule 42.3(1) as it is not within any of the exceptions in (2). The primary judge was correct in holding that an actual abuse of process must have been committed in order for an order for costs to be made against the third party. On that reasoning the element of control, which is omitted from the principal proposition, would not alter the situation. 76 The primary judge was also correct in taking the view that decisions as to a stay of proceedings are not determinative of the present case. The question as to whether Project 28 [2005] NSWCA 240 should be followed in the light of the later decision of the High Court in Campbells 229 CLR 386 does not arise in this appeal. 77 The only case to which we have been referred which considers the meaning of abuse of process within UCPR Rule 42.3(2)(c) is the decision of Austin J in In the matter of the Bauhaus Pyrmont Pty Ltd (in liq) [2006] NSWSC 879; (2006) 67 NSWLR 289 at [27]-[34]. The relevant finding was that a non-party who had received a subpoena to produce documents was guilty of an abuse of process because he made a baseless claim to privilege over certain documents, thus entitling the Court to make an order for costs against it pursuant to UCPR Rule 42.3(2)(c). The non-party concerned was not represented, although apparently some written submissions were made on his behalf. Austin J had decided that the person concerned was a "party" and the finding in question was an alternative finding. The finding was that there was a completed abuse of process prior to the order for costs being made. That is consistent in principle with the approach of the primary judge in this case. It is not necessary to consider the correctness of the finding as to whether there was an abuse of process in that case. The finding that a party who is subpoenaed to produce documents is a "party" for the purposes of costs is different to the question which arises here and the correctness of that finding also needs not be considered. 78 On this appeal, counsel for the SST Parties did not pursue the argument that abuse of process in UCPR Rule 42.3(2)(c) is limited to circumstances that could constitute the tort of abuse of process. Beyond agreeing with the primary judge that the abuse must have been "committed" it is not necessary to go further and attempt to give exhaustive definition as to what would constitute abuse of process for this purpose. 79 Even if the widest view of UCPR Rule 42.3(2)(c) were taken, the decision of the High Court in Campbells 229 CLR 386 makes success on an argument that litigation funding with or without control constitutes an abuse of process extremely difficult if not impossible (see particularly Gummow, Hayne and Crennan JJ at [83]-[95] - agreed with by Gleeson CJ at [1] - and Kirby J at [146]-[148]). 80 That decision substantially approved the decision in this Court in Fostif 63 NSWLR 203. The leading judgment was given by Mason P. His Honour dealt with the abuse of process issue at [124]-[152], in the light of what he had said concerning "Funding arrangements, public policy, abuse of process and trafficking in litigation" at [88]-[123]. There is nothing in that reasoning to support the principal proposition advanced by the applicants, even in the context of an application for a stay. 81 It was sought to distinguish Fostif as the solicitor concerned had undertaken to meet any costs awarded by the Court against the participants in the matter (see at [61]), and to rely upon the absence of any similar undertaking or indemnity in the present case. In the first place, that circumstance is not referred to by any of the judges who considered the matter. In the second place, such an undertaking or indemnity is for the protection of the plaintiff participants not for the benefit of the defendants. 82 Fostif, of course, was not a case dealing with insolvent plaintiffs.

Funding and assisting an insolvent plaintiff to sue on ineffectively assigned actions against a non-party 83 The proposition distilled in reply on behalf of J & K was that there was an abuse of process because a non-party funded and assisted an insolvent plaintiff to sue on (ineffectively assigned) actions of other non-parties - described as the trafficking proposition. The primary judge did not deal in terms with this proposition. Once his Honour took the view that he did concerning the proper ambit of UCPR Rule 42.3(2)(c) it was unnecessary to do so. As I take a similar view, the point cannot succeed. 84 If a wider view of the rule were taken, the proposition received some support from dicta of Mason P in Fostif 63 NSWLR 203 at [123]: "However, the cases involving the elusive notion of 'trafficking' all appear to involve the funder taking some role akin to that of an assignee in relation to claims that are incapable of assignment because they are bare causes of action for damages."

That proposition does not establish that such cases involve an abuse of the process of the Court. It was essentially a precursor to the positive finding that the causes of action in that case were readily assignable. As the point had not been debated before the Court, the President did not elaborate upon his reasoning. It may be inferred that the President intended to refer to the argument that an assignee may not have a sufficient interest to justify an assignment in accordance with the principles discussed in Trendtex Trading Corporation v Credit Suisse [1982] AC 679. 85 That question was considered by the primary judge in the substantive decision, Rickard Constructions [2004] NSWSC 1041 at [39]-[72], particularly at [62]-[71] where it was found that Rickard Constructions did not have a sufficient interest to support the assignments. The correctness of that decision was not dealt with on the appeal to this Court. 86 It is accepted by counsel for the applicants that this basis for finding abuse of process is novel, but it is pointed out that the categories of abuse of process have not closed. 87 The correctness of the finding that Rickard Constructions did not have a sufficient interest to support the assignments is debatable. Whatever may be the position as to that question, the mere fact that the trial judge found that the assignments were invalid does not establish that to pursue them as valid could properly be described as an abuse of process. If a party has an interest that could arguably support an assignment it cannot be said that prosecuting those claims would be an abuse of process or that the respondents here were involved in the trafficking of claims. In my opinion there was such an interest here. 88 If the principal bases relied upon against SST Consulting fail, the case against the SST directors and shareholders also fails.

No risk as to costs 89 One limb of the argument on the part of Allianz was that the primary proceedings brought the administration of justice into disrepute by undermining the fundamental principle that the party that uses the Court's process should be at risk in relation to costs if the proceedings be unsuccessful. That had been one strand of the argument put on the part of the other parties. All parties relied upon the statements from McHugh J in Oshlack 193 CLR 72 at 97 and Ipp JA in Project 28 [2005] NSWCA 240 at [114] to which reference has been made. Undoubtedly, the general position is that a successful party will receive an order for the payment of costs on a party and party basis. That general position is subject to many variations and exceptions. The question as to whether any order for costs will be met is quite another issue. Action by an impecunious personal plaintiff is, generally speaking, not stayed. Impecunious corporate plaintiffs are subject to security for costs regimes both under the Corporations Act 2001 (Cth) and the UCPR. An impecunious defendant is not inhibited from defending the plaintiff's claim. Security for costs was applied for and ordered both at trial and on appeal in this case. No authority has been cited that establishes the proposition advanced. Any such general principle would permit undue interference with the processes of litigation encouraging collateral attacks as to the conduct of litigation unrelated to the bona fides of the claim brought or defence raised.

Effect of orders for security 90 The respondents contend that the existence of the security for costs regime, particularly in circumstances where it has been availed of, is a complete answer to the claim of abuse. That contention would only be applicable where the gist of the abuse lay in the impecuniosity or insolvency of the plaintiff. Even in such a case, the security for costs regime, generally speaking, is not intended to afford a complete indemnity for costs incurred. It is always an estimate, and may well be incorrect. The fact that the security was inadequate here was not only due to lack of timeliness in the applications. As I do not find that there was any abuse of process of a relevant kind it is not necessary to come to a final view about this argument.

Hopeless case 91 The primary judge did not, when he came to conduct his analysis of the case, deal with the argument on behalf of Allianz that the conduct of the proceedings amounted to an abuse of process as they were hopeless ([2006] NSWSC 791 at [92]-[99]). However, earlier in the judgment, he had said (at [60]): "… Nor were [the proceedings] of such a character that they were, or should have been seen to have been, hopeless. In this context, the fundamental flaws to which I referred in para [44] of my costs judgment were matters that could have been addressed in preparation; they were not inevitable." 92 There can be circumstances where a case is so hopeless that to permit it to continue is an abuse of the process of the Court (see UCPR Part 13 Rule 13.4 and Part 14 Rule 14.28 and the predecessors of each of these rules together with the commentary thereon in Ritchie's Uniform Civil Procedure NSW, LexisNexis Butterworths at [13.4.5]-[13.4.50] and [14.28.5]-[14.28.22]). Such relief is also said to be in the inherent power of the Court. That basis of abuse of process does not depend upon the intention of the plaintiff but, rather, looks to the effect upon the defendant. 93 The remedies of summary dismissal or striking out of a case as hopeless are sparingly exercised as they prevent a party pursuing a case. That factor does not exist where, as in the present case, the matter has been fully tried on the merits. However, in my opinion, the proposition that a failed case is, or may be, an abuse of process should be approached with caution. It not only smacks of re-litigation but may also involve scrutiny of the manner in which a case has been conducted. There also needs to be examination of the relationship of the third party to the litigation to the case and its conduct. These are sensitive topics. There is a line between a party who pursues arguments which are ultimately abandoned or rejected by the Court and a party who commences a proceeding which is misconceived in the sense of being incompetent or insupportable (Construction, Forestry, Mining & Energy Union v Clarke [2008] FCAFC 143; (2008) 170 FCR 574 at [29]). In my opinion, the primary judge is not shown to have been in error when concluding that the proceedings here were not so hopeless as to cross the line and amount to an abuse of process. The fact that a party has not obtained evidence to plug gaps in the case could be explained on any number of bases and is not sufficient to establish an abuse of process. The primary judge did not consider the case to be inherently incapable of succeeding. He did adhere to the view that the case against Allianz for consequential loss was hopeless but held that that matter did not infect the balance of the proceedings. When his Honour came to analyse the case for actual abuse put on the part of Allianz he did not refer to that issue. I shall return to it in below. 94 In any event there was little basis for implicating the SST Parties in any such abuse. The case had been framed and filed by solicitors. At all times during their involvement, the case was conducted by solicitors and counsel. That provides a significant barrier to concluding that the lay clients were party to the conduct or maintenance of the proceeding as an abuse. Furthermore, in my opinion, this head could not be established without establishing control of the proceedings by the SST Parties, that control having been negatived by findings of the primary judge based upon his assessment of the evidence, including oral evidence, which cannot be seriously challenged. I shall consider the case against Mr Rickard later.

Unreasonable rejection of Calderbank offer 95 The primary judge expressly rejected the contention that there had been an abuse of process because of the unreasonable refusal of the Calderbank offer. In my opinion refusal of the Calderbank offer, whether unreasonable or not, could not found an argument that a proceeding is an abuse of process. If it is not an abuse of process, then there is no reason why the proceeding should not proceed. In any event, this heading would require control by those implicated, contrary to the express finding of the primary judge.

Improper purpose 96 Again, in the primary judge's analysis of the issue of actual abuse of process, he did not advert to an argument that the consequential loss claim against Allianz was an abuse of process as it was included not with the genuine intention of pursuing it to judgment but rather to assist in obtaining a higher settlement than might otherwise have been the case. That basis for finding abuse of process was pursued at first instance. However his Honour had expressly adverted earlier ([2006] NSWSC 791 at [57]) to what he had said at [45] of the costs judgment, namely (inter alia): "The inference that I draw is that the claim was pursued in an attempt to force a more substantial settlement from Allianz … it sought to advance the resolution of the dispute not by the deployment of sound, or even arguable, factual and legal reasons, but by the application of commercial pressure."

His Honour then said (at [59]-[60]): "I adhere to the views that I expressed in para [45] of the costs judgment, and I remain of the view that the case on consequential loss was hopeless. I do not, however, find that these matters infect the balance of the proceedings.

I therefore conclude that the proceedings were not commenced or in any relevant way continued in bad faith." 97 Pursuit of proceedings to effect a collateral purpose is a head - perhaps the classic head - of abuse of process (Williams v Spautz (1992) 174 CLR 509). Whether or not a claim brought to obtain a compromise of a claim is in this category is a debatable proposition (cf Brennan J in Williams v Spautz at 532-533; Flower & Hart v White Industries (Qld) Pty Ltd [1999] FCA 773; (1999) 87 FCR 134 at ([62]-[64]). Even if it were, there was no proper basis for the necessary factual finding in this case. I do not read the primary judge as having made the necessary finding, although his statement in [2006] NSWSC 791 at [59] that he adhered to the views expressed at [45] of the costs judgment appears to include such a finding. If it did, then it was plainly wrong. The original finding was made in the context of the proceedings to which the third party respondents were not parties and in which the application of the relevant rule was not in issue. The solicitor for the unsuccessful plaintiff was called in this application but was not cross-examined to suggest that there had been an improper purpose in pursuing the consequential loss claim against Allianz. This assumes considerable importance, bearing in mind the professional responsibility of that solicitor and bearing in mind that the parties were represented by counsel at all material times. I do not think that the primary judge intended to carry over his finding as to purpose into the judgment under appeal notwithstanding the form of [59]. Indeed, he expressly found that the proceedings were not commenced or continued in bad faith or because of an improper purpose.

Hopelessness revisited 98 The finding remains, however, that the claim against Allianz for consequential loss was hopeless because of its express exclusion in the insurance contract. It will be recalled that his Honour held that that did not infect the balance of the proceedings. That finding is challenged. Even if the finding stands, the primary judge did not explain why there was not a question as to whether the costs occasioned by that claim ought to be the subject of an order pursuant to UCPR Rule 43.2, which expressly contemplates an order for part of the costs of an action. 99 However, no order could have been properly made against the SST Parties in view of the findings made as to their lack of control of the proceedings. No abuse of process can be attributed to a party without the actual involvement of that party in the abuse. 100 The position in relation to Mr Rickard is different. The answer that Allianz had primarily attributed control to the SST Parties rather than Mr Rickard would not be a sufficient answer without an analysis of the actual role of Mr Rickard. The findings made about Mr Rickard included the following (from [51]): "(1) Mr Rickard gave instructions on behalf of Rickard Constructions in relation to the litigation.

(3) Mr Rickard and SST Consulting funded the litigation up until 13 March 2001, on the basis and subject to the monetary limits set out in cl 15.2 of the DOCA.

(5) At all material times, both before and after 31 March 2001, Mr Rickard had the authority to give instructions to bring the litigation to an end, provided that he obtained the concurrence of the administrator pursuant to cl 15.5 of the DOCA (it is hard to imagine that the administrator would have failed to concur had Mr Rickard and SST Consulting ceased to provide funding, and if no other source of funding were available).

(6) There is no evidence that Mr Rickard would have been trammelled, in giving any such instructions, by some agreement or arrangement between him, or the plaintiff, and SST Consulting.

(9) Thus, Mr Rickard at any time could have brought the litigation to an end, and in addition SST Consulting at any time after 31 March 2001 could have brought the litigation to an end."

The judge accepted the evidence of Mr Quigley, which supported the findings made by the judge as to Mr Rickard's role. 101 It is submitted for Mr Rickard that this basis for an order against him was not put to the primary judge. That would explain why the primary judge did not deal with it in terms. Unfortunately, the question as to whether or not Allianz relied upon this basis for the order before the primary judge is far from crystal clear. There were no pleadings or particulars. Written submissions were provided prior to the hearing. Those written submissions were supplemented by oral submissions at the close of evidence. Allianz was the only party to proceed against Mr Rickard. There is no doubt that Allianz pursued a case based upon actual abuse, seeking to take advantage of the findings by the primary judge in his earlier judgments, including the finding as to the pursuit of the hopeless case for consequential damages against Allianz. That case was a relatively minor aspect of the submissions that were made, the major concentration being upon funding and control. It is also fair to say that the forensic concentration was upon endeavouring to tie the SST Parties to control. The SST Parties called Mr Quigley who was instructed as the solicitor to conduct the proceedings in about April 2001. The effect of his affidavit evidence was that he took instructions from Mr Rickard. He was cross-examined to suggest that he in fact took instructions from Mr Peter Sweeney on behalf of the SST Parties. In cross-examination he reaffirmed the fact that Mr Rickard gave all relevant instructions. The primary judge accepted Mr Quigley's evidence. As I said previously, Mr Quigley was not cross-examined to suggest that the claim against Allianz was known to be hopeless or that it was proceeded with in order to apply commercial pressure for a settlement of the whole case. 102 Counsel for Mr Rickard suggested in his final submission to the trial judge that the case against his client did not involve any act or omission amounting to actual abuse of process. He contended that the case was limited to the signing of the Deed of Company Arrangement and funding issues. He also pointed to the primary role attributed to SST Consulting. Counsel for Allianz replied as follows: "Mr Reuben this morning has submitted that there was no act or omission by Mr Charles Rickard which would render him liable for a third party cost order.

As we have submitted, firstly, he was involved in 2 material ways. He was giving the day to day instructions to Mr Quigley concerning the conduct of the proceedings . Secondly, he was funding the proceedings albeit in a limiting way than SST Consulting. His involvement was significantly more than just simply the execution of the deed of company arrangement." [emphasis added]

No complaint was made by counsel for Mr Rickard after that statement nor was any application made to his Honour to re-open the evidence. I am satisfied that Mr Rickard's involvement in giving the day to day instructions in the case was a basis put to the trial judge for the making of an order for costs against him because of the pursuit of the untenable claim. 103 As the primary judge did not deal with the issue, it should be sent back for determination unless either it is apparent that it could not succeed or if this Court can satisfactorily dispose of the issue. I do not think it can be said that Allianz could not possibly succeed. However, I am satisfied that this Court is in a position to come to a view on the merits of the issue. On the basis of the primary judge's acceptance of Mr Quigley's evidence (and I can see no reason for departing from it), the issue turns upon the inferences to be drawn from an established body of evidence. 104 In my opinion Allianz did not establish a case sufficient to warrant an order for costs being made against Mr Rickard based upon the pleading of and persistence in the claim for consequential losses against Allianz until shortly before trial. For the purposes of argument, it can be assumed that those circumstances constituted a relevant abuse of process on the part of Rickard Constructions. There is no doubt that Mr Rickard was responsible for giving instructions to the solicitors from April onwards and I would infer that he was in the same position, as the principal of Rickard Constructions, in relation to the solicitors who had acted prior to Mr Quigley. 105 In my opinion that is an insufficient basis on which to find that Mr Rickard "committed an abuse of process". I have no difficulty with the proposition that a person in Mr Rickard's position might commit an abuse of process by giving instructions on behalf of a corporate plaintiff. However, the fact that a lay person may be responsible for giving day to day instructions concerning the conduct of litigation does not implicate that person in an abuse of process because of a particular step taken in the case. It cannot be assumed that such a person would know of a particular step or understand the consequences of a particular step without more evidence. The plaintiff was represented by solicitors at all material times and by counsel for a good part of the time. In my opinion the fact that Mr Rickard did not give evidence does not gainsay that situation. The opportunity to cross-examine Mr Quigley on that point was not taken - probably because his likely answer was not known to the cross-examiner.

Motions concerning appeal costs 106 There is no case made of actual abuse of process in pursuing the appeal. The arguments based upon funding and control fail for the reasons that the appeals should fail. Again it is relevant (although not decisive) to note that an order for security for costs was available, was made and was met.

CONCLUSION 107 Leave should be granted to Allianz to file an amended notice of appeal in the terms of the draft provided. Leave to appeal should be granted in each case but all appeals should be dismissed with costs. All motions should be dismissed with costs. **********

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