Rickard Constructions v Rickard Hails Moretti & Ors

(1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. (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. (3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings. (4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to: (a) costs up to, or from, a specified stage of the proceedings, or (b) a specified proportion of the assessed costs, or (c) a specified gross sum instead of assessed costs, or (d) such proportion of the assessed costs as does not exceed a specified amount. (5) The powers of the court under this section apply in relation to a married woman, whether as party, tutor, relator or otherwise, and this section has effect in addition to, and despite anything in, the Married Persons (Equality of Status) Act 1996 . (6) In this section, "costs" include: (a) the costs of the administration of any estate or trust, and (b) in the case of an appeal to the court, the costs of the proceedings giving rise to the appeal, and (c) in the case of proceedings transferred or removed into the court, the costs of the proceedings before they were transferred or removed.

Powers of the court generally 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: (a) to make an order for payment, by a relator in proceedings, of the whole or any part of the costs of a party to the proceedings, or (b) to make an order 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, or (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, or (d) to make an order for costs against a person who purports, without authority, to conduct proceedings in the name of another person, or (e) to make an order for costs against a person who commences or carries on proceedings, or purports to do so, as an authorised director of a corporation, or (f) to make an order of the kind referred to in rule 42.27, or (g) to make an order for costs in exercise of its supervisory jurisdiction over its own officers, including solicitors , barristers and court appointed liquidators." The issues 20 The principal issues 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? 21 It is convenient to deal with disputed issues of fact before I turn to the first issue. The roles of SST Consulting and Mr Rickard Deed of Charge 22 SST Consulting and Rickard Constructions were parties to a deed of charge made on 13 October 2000. Recital A to that deed stated that Rickard Constructions "is indebted to [SST Consulting] in the sum of $200,000 arising from a loan to fund litigation concerning failed pavement and working capital. Said loan being on the date of this Deed." 23 Clause 1 of the Deed acknowledged "for the purposes of this Deed" that the principal sum (owing by Rickard Constructions to SST Consulting) was $930,000. By cl 2 (read in conjunction with cl 5), Rickard Constructions gave SST Consulting a fixed or floating charge over all its assets to secure repayment of that principal sum together with interest. By cl 3, Rickard Constructions agreed to pay interest on the outstanding balance from time to time as principal at the rate of 8% per annum. The Deed of Company Arrangement 24 Two months later, on 22 December 2000, Rickard Constructions entered into a Deed of Company Arrangement (DOCA) with Mr Neil Jeffrey Singleton as administrator, Mr Rickard as director, and two companies, including SST Consulting, as "secured creditor". It appears that Mr Singleton had been appointed as administrator on 19 October 2000 - some six days after execution of the deed of charge. 25 By cl 2.1 of the deed, the administrator was required to establish a "Fund" into which, according to cl 1.1, payments were to be made as set out in the deed. By cl 2.2, control of Rickard Constructions reverted to Mr Rickard on execution of the deed. By cl 2.3, Mr Rickard and SST Consulting (it is unnecessary to refer to the other company comprehended in the definition of "secured creditor") agreed to continue to fund these proceedings. 26 By cl 2.4, SST Consulting agreed to surrender or defer enforcement of its security as set out in the deed (principally in cl 20.2, to which I shall refer). 27 Clause 6 established the order of priority of creditors to be paid out of the Fund. The first in priority (perhaps not surprisingly) was payment of the administrator's remuneration and expenses. 28 The second ranking set of payments to be made included:

(1) Payment of $30,000 to the solicitors formerly engaged by Rickard Constructions in these proceedings; and

(2) Repayment of the advance of $80,000 made by Mr Rickard and SST Consulting; and

(3) Repayment of further fees and expenses incurred in the conduct of these proceedings; and

(4) Payment of outstanding employee entitlements. 29 Clauses 6.1.3 to 6.1.6 dealt with the third, fourth, fifth and sixth ranking claims to be paid as follows: "6.1.3 third, in payment to the Secured Creditor of the amount of $350,000.00 and to C&D Rickard Pty Limited of the amount of $101,000.00; 6.1.4 fourth, in payment of $0.20 for each $1.00 of the amount of $300,000.00 due by the Company to the Secured Creditor and the amount admitted to proof by the Administrator in respect of the Debts or Claims of the Creditors, other than Land Pac Pty Limited and Michael Major Plumbing Pty Limited; 6.1.5 fifth, in payment to the Creditors (including Land Pac Pty Limited and Michael Major Plumbing Pty Limited) by the balance of the amount admitted to proof by the Administrator in respect of the Debts or Claims and to the Secured Creditor of the balance of the amount of $300,000.00; 6.1.6 sixth, the Secured Creditor as to the balance of its claim." 30 Clause 7 recorded that the amount of $80,000 already advanced by Mr Rickard and SST Consulting had been partly expended on the costs of these proceedings. 31 Clause 15 provided for the conduct of these proceedings as follows: "15 CONDUCT OF THE CONSTRUCTION LIST PROCEEDINGS 15.1 Subject to the limit (which shall include any security for costs ordered by the Court) and until the date in clause 15.2, the Director and the Secured Creditor jointly covenant and agree to pay all legal fees and expenses incurred in the conduct of the Construction List proceedings by the Company. 15.2 The Director and the Secured Creditor will fund the Construction List proceedings to an amount of $150,000.00 or until 31 March 2001, whichever first occurs. The Director and Secured Creditor may at any time source litigation insurance or other funding to further fund the continued conduct of the Construction List proceedings. Such litigation insurance or other funding shall be subject to the agreement or approval of the Administrator which shall not be unreasonably withheld. Fees and expenses incurred in consequence of an increase in the monetary limit or the extension of the period of the conduct of the Construction List proceedings will form part of the amount payable under sub-clause 6.1.2 of this Deed. 15.3 In the event that the Construction List proceedings are not resolved within the monetary limit or the time limit provided by the preceding sub-clause or in any event, litigation insurance may be sought by the Administrator to further fund the continued conduct of the Construction List proceedings. A decision to accept litigation insurance shall be at the complete discretion of the Administrator. 15.4 The Company will prosecute the Construction List proceedings and provide to the Administrator such reasonable reports as the Administrator may require as to the conduct of the Construction List proceedings. 15.5 The Company will not without the prior written approval of the Administrator capitulate in, settle or compromise the Construction List proceedings; such approval shall not be unreasonably withheld. 15.6 The Director will provide all reasonable assistance to the Company and its legal advisors in prosecuting the Construction List proceedings. 15.7 The Company will pay into the Fund all amounts recovered by way of settlement or a verdict in the Construction List proceedings. The Company shall only be obliged to pay into the Fund the net amount actually received by the Company after deducting: 15.7.1 the amount of any cost order made against the Company in the Construction List proceedings 15.7.2 the amount of any legal costs or other costs incurred in the conduct of the Construction List proceedings in addition to the funding by the Director and the Secured Creditor under clause 15.2 15.7.3 the amount paid to any litigation insurance funder or other funder agreed or approved by the Administrator under clause 15.3". 32 Clause 20 set out the terms on which SST Consulting would surrender, or defer enforcement of, its charge as follows: "20 SECURED CREDITOR 20.1 The Secured Creditor has agreed to the terms of this Deed and agrees to be bound by it. In particular: 20.1.1 the Secured Creditor is prohibited from enforcing the charge on the Company's property during the term of this Deed; and 20.1.2 the Secured Creditor agrees that the Administrator's Remuneration and Expenses are to be paid in priority to any claim in relation to the secured debt. 20.2 The Secured Creditor will surrender its security and/or defer enforcement of company charge No. 771232 dated 13 October 2000, as follows: 20.1.1 payment of an amount of $350,000.00 (together with an amount of $101,000.00 to C&D Rickard Pty Limited) after payment of the Administrator's Remuneration and Expenses, the payment of fees and expenses incurred in the conduct of the Construction List proceedings repayment of the Directors Advance and any unpaid employee entitlements as provided by clause 6.1.3 of this Deed. 20.1.2 payment of an amount of $300,000.00 to rank equally with the other Creditors of the Company; and 20.1.3 payment of the balance will be deferred until after payment of the other Creditors of the Company." Payments made to Rickard Constructions 33 Neither Mr Rickard nor any of Messrs Peter or Paul Sweeney or Truman gave evidence on this application. However, the applicants put into evidence (without objection) two affidavits sworn by Mr Peter Sweeney earlier in the proceedings: one on 30 October 2002 and one on 5 October 2004. 34 In the first of those affidavits, Mr Sweeney said (para 2) that Mr Rickard approached him "in about mid June 2000 … to have SST [Consulting] lend money to Rickard Constructions … for the purpose of carrying out rectification work on the pavement and for funding initial work on legal claims which might be made by Rickard Constructions against other parties … ". He said that he agreed on behalf of SST Consulting to contribute $300,000, and that this amount was contributed by 6 instalments between 30 June and 14 September 2000. 35 There was no reconciliation of the amount of $300,000 said thus to have been contributed with the amount of $200,000 referred to as owing in the deed of charge which (it will be recalled) was made on 13 October 2000. The applicants submitted that, absent any explanation from the respondents, I should conclude that the principal debt of $930,000 under the deed of charge in fact comprised advances totalling $300,000 (not $200,000) and a balance, that they were pleased to call a "success fee", of $630,000 (not $730,000). 36 The respondents relied on para 5 of the same affidavit, in which Mr Sweeney gave evidence of further payments made by SST Consulting. Mr Parker submitted that those payments might be taken to have increased the amount actually advanced by SST Consulting to or on behalf of Rickard Constructions, and to reduce the amount described as a "success fee". Given that only one of those amounts - $50,000 - was paid prior to the date of the deed of charge, and given the impossibility of reconciling the figure set out in the deed of charge (as at 13 October 2000) with what is said in the affidavit, I do not feel justified in so concluding: particularly when Mr Sweeney could have given evidence on this application which might have illuminated the matter, but chose not to do so. 37 To the extent that it is relevant, I therefore conclude that the principal debt of $930,000 referred to in the deed of charge should be taken to include both advances made to that date and a balance unexplained by any advances. Whether that balance is $730,000, $630,000 or $580,000 (or some other figure) is obscure. Whether it is properly characterised, in whole or in part, as a "success fee" is a different question. 38 Further in para 5 of the same affidavit, Mr Sweeney referred to a request made through him to SST Consulting "to commit further funds to the continuation of the proceedings". He said that he considered "whether to do so or whether it was better for SST [Consulting] to simply walk away … and write-off the amount it had up to that point contributed." He said that he obtained advice from the solicitors then acting for Rickard Constructions, and attached that advice. The advice set out estimates of likely costs, based on "optimistic" assumptions. In doing so, it referred to a number of matters that might influence the duration and cost of the litigation including "possible interlocutory action by the defendants, for example, discovery, security of [sic] costs". No reference was made to the possibility of an application under SCR Pt 52A r 4 (the predecessor of UCPR r 42.3). 39 Mr Sweeney said in the affidavit that he relied upon that letter in deciding whether to fund the litigation. He considered whether he would have continued to do so had he been told that it was necessary to make substantial payments for security for costs, and set out his hypothetical reasoning process as follows: "Because the question is a hypothetical one, I cannot say definitely what my attitude would have been had I been told at that time that it will be necessary to make such further payment on account of security, but it is my belief that had I been told that the provision of substantial further amounts (say $100,000) would be necessary, then I would have reconsidered continuing to support the litigation and it is very likely that SST [Consulting] would not have pursued the litigation but would instead have in effect have written off the amounts which it was then owed by Rickard Constructions." 40 The respondents relied upon this evidence as the foundation for a discretionary answer to this application. They said that I should infer that the respondents, had they been told that it was a real likelihood that non-party costs orders would be sought against them, would then have dropped the litigation rather than run such a risk. Again, the respondents having chosen not to give evidence that this would have been their reaction at the time when security for costs applications were threatened (which was presumably during 2002, McClellan J having decided the question on 15 November 2002 - [2002] NSWSC 1162), I do not see why I should now draw inferences in their favour from evidence on a different topic that does not in any event deal with the thought processes (only on that different topic) of anyone other than Mr Peter Sweeney. 41 In the second affidavit (5 October 2004), Mr Peter Sweeney explained in para 3 the way in which SST Consulting (there called "SSTCS") operated: "3. The directors operate SSTCS in the same way as a partnership would operate. SSTCS does not hold any substantial assets or cash. When SSTCS requires funds for any purpose the directors of SSTCS contribute those funds in equal shares, being 1/3 each." Control of the litigation 42 In para 8 of the first affidavit, Mr Peter Sweeney stated that the current solicitor for Rickard Constructions, Mr Andrew Quigley, began acting "at my instigation". He confirmed that SST Consulting had funded all Rickard Constructions' legal costs up to that date. It was not in dispute that it has continued to do so. Mr Quigley gave evidence on this application. He said, and I accept, that he would not have continued to act for Rickard Constructions had he not been assured of payment. There was no reason to think that counsel retained by him would have taken any different view. 43 The proceedings were heard over 19 days, from 5 October to 5 November 2004. Mr Peter Sweeney was present in Court for most of that time (by my observation, and this was not a matter in dispute, the great bulk of it). Mr Rickard was present, and gave evidence during two of, the first three days; it was common ground that he did not attend thereafter. 44 Mr Quigley's evidence was that Mr Rickard was responsible for giving instructions on behalf of Rickard Constructions in these proceedings. He denied that Mr Peter Sweeney did so, although he agreed that Mr Sweeney was involved in numerous conferences relating to the proceedings and was provided with copies of advices from time to time given to Rickard Constructions and of relevant correspondence. He said that Mr Peter Sweeney was to his observation the person who made decisions, and gave instructions, in relation to matters of funding. 45 I accept Mr Quigley's evidence. Accordingly, I reject the submission, made by Mr A S Martin SC for Allianz and adopted by the other applicants, to the effect that I should find that SST Consulting or Mr Peter Sweeney were involved in giving instructions relating to the conduct of the proceedings. 46 In this context, I should note that in my costs judgment I said at para [46] that one could reasonably infer that Rickard Constructions' decisions to reject the Calderbank offer and offer of compromise made by Allianz were in fact taken by SST Consulting. As I have already indicated, I did not have the benefit of hearing from Mr Peter Sweeney, or for that matter Mr Quigley, in relation to the application for indemnity costs, and the reasonable inference to which I referred in para [46] was one drawn on the totality of the material that the parties to that application saw fit to put before me. Having now heard from Mr Quigley, and accepting as I have said I do his evidence, I am not prepared, for the purposes of the present application, to draw, or adhere to, the inference that I then drew, set out in para [46] of the costs judgment. 47 Nonetheless, I conclude - and indeed the respondents did not contend to the contrary - that it was SST Consulting that made decisions in relation to funding. The applicants submitted that if SST Consulting ceased to provide funding, the litigation would come to an end. The respondents submitted otherwise. They pointed to the relevant terms of the DOCA (in particular, cls 15.2 and 15.3) which contemplated that other sources of funding might be found, and submitted that I should infer that if SST Consulting had ceased to fund the litigation, Mr Rickard (or Rickard Constructions) might have been able to find funding from other sources. 48 Although I think that I may take notice of the availability of litigation funding from commercial sources, I do not know (far less should I take notice) of the terms on which such funding might be available, or of the degree of comfort that funders might require, as to the strength of the case and other relevant matters, before deciding to advance it. None of these matters was the subject of evidence. I infer from Mr Peter Sweeney's two affidavits to which I have referred that SST Consulting had become committed for far more than it contemplated. In those circumstances, one might think, and in particular bearing in mind cl 15.2 of the DOCA, SST Consulting or Rickard Constructions might have looked for other sources of finance. There was no evidence as to whether any consideration was given to this question (or, if it was not, why not), or of the results of any attempts that were made to find alternative litigation finance. Again, I do not see why I should draw inferences in favour of the respondents when they could have given, but did not give, evidence that would have been relevant to the point. 49 I therefore conclude that at all material times after 31 March 2001 (the date referred to in cl 15.2 of the DOCA) SST Consulting had the ability to bring the litigation to an effective halt by withdrawing, or ceasing to provide further, funding for its continuation. 50 The applicants submitted that SST Consulting and Mr Rickard had no liability beyond that undertaken pursuant to cl 15.2 of the DOCA, and the respondents accepted this. The applicants submitted that the obligation to fund (with the monetary and temporal limits set out in cl 15.2) included an obligation to fund Rickard Constructions to meet any adverse costs order, and again the respondents accepted this proposition. 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 DOCA.

(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 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.

(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. Benefit 52 There is no doubt that SST Consulting stood to benefit from any success that Rickard Constructions might enjoy in the litigation. As I have explained, SST Consulting stood to recover whatever was the amount of its initial advance or advances, what was characterised as its "success fee", and further amounts advanced by it to fund the litigation, with varying measures of priority over certain other creditors of Rickard Constructions. 53 There was no evidence that Messrs Peter or Paul Sweeney or Truman would benefit directly from any success enjoyed by Rickard Constructions in the litigation. 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 advanced to or on behalf of Rickard Constructions. I will assume for the purposes of this dispute that any recoveries made by SST Consulting from the fruits of the litigation would have flowed back to those individuals through their loan accounts with the company; indeed, I think, that is the correct evidence to be drawn from such evidence as there was of the way in which the company operated. 54 There is no doubt that Mr Rickard's family company (see para [16] above) stood to benefit from any success enjoyed by Rickard Constructions in the litigation, in substantially the same way (although to a much lesser extent) as SST Consulting stood to benefit. 55 It may be that Mr Rickard stood to benefit from any recovery made by his family company in the same way as Messrs Peter and Paul Sweeney and Truman stood to benefit from any recovery made by SST Consulting. Again, I am prepared to assume, for the purposes of this application, that Mr Rickard would so benefit. However, I do not think that the evidence goes far enough to enable me to draw an inference equivalent to that which I have said I can draw in relation to SST Consulting and those who stand behind it. No improper purpose 56 The applicants did not submit that the proceedings were brought or (with one exception, to which I shall turn) conducted with some improper or ulterior purpose. Nor, although not unnaturally they fastened on my findings in the main judgment, and in para [44] of my costs judgment, did they submit that the proceedings were, or should have been perceived to be, hopeless. I said in para [44]: "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." 57 The exception in relation to purpose relates to what I said in para [45] of my costs judgment, in relation to the claim for consequential loss: "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." 58 Further, the applicants (specifically, Allianz) submitted that the case against Allianz for recovery of consequential loss was hopeless. 59 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. 60 I therefore conclude that the proceedings were not commenced or in any relevant way continued in bad faith. Nor were they 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. First issue: the meaning of "abuse of process" in r 42.3(2)(c) 61 Mr Parker submitted that the phrase "abuse of process" is used (relevantly) in three different senses in the law:

(1) Firstly, in a sense cognate with the tort of abuse of process: a tort committed when proceedings are instituted or conducted for an illegitimate or extraneous purpose ( Williams v Spautz (1992) 174 CLR 509).

(2) Secondly, in a sense cognate with the power of the Court to dismiss or stay permanently proceedings which contravene some rule of law.

(3) Thirdly, to denote some relevant unfairness in the commencement or prosecution of proceedings: for example, where criminal proceedings are delayed to the point of unfairness to the accused, because he or she cannot receive a fair trial ( Jago v District Court of NSW (1989) 168 CLR 23). 62 Mr Parker's primary submission was that r 42.3(c) referred to the tort of abuse of process, not to what he said were the wider concepts underlying the phrase "abuse of process" summarised above in the preceding paragraph. 63 There is a textual consideration that favours the narrow view advanced in this submission. Rule 42.3(2)(d) authorises the Court to make an order for costs against a person who, without authority, purports to conduct proceedings in the name of another. Such behaviour may constitute an abuse of process. 64 The authorities were reviewed at length by Mason CJ and Deane J in Knight v F P Special Assets Limited (1992) 174 CLR 178, in particular at 186-190; and separately by Dawson J and McHugh J in the same case at 199-202 and 210-213 respectively. Their Honours referred to cases such as Mobbs v Vandenbrande (1864) 33 LJ QB 177, In re Gardiner; ex parte Orgill (1890) 16 VLR 641 and Palmer v Walesby (1868) LR 3 Ch 732, in all of which cases reference was made to a power to order a non-party to pay costs in a case of abuse of process. 65 Thus, Mason CJ and Deane J said at 190: "It is plain enough that the courts from time to time awarded costs against a person who, not being a party on the record, was considered to be the "real party". It may be that these cases are capable of being explained on various grounds, including the ground that the non-party ordered to pay costs was guilty of abuse of process, taking a very broad view of what constitutes an abuse of process, but to say that does not deny that there was jurisdiction to make an order for costs against a non-party … ." 66 If (as the applicants submit is correct) the words "abuse of process" in r 42.3(c) are to be given their ordinary, wide meaning, and are not to be restricted to the tort of abuse of process, para (d) might be thought to be superfluous. Further, Mr Parker submitted, and by analogy, para (e) might be thought to be superfluous. However, the point is not so clear as to require acceptance of Mr Parker's submission. Palmer v Walesby was a case where a solicitor was said to have abused the Court's process by filing a bill without authority in the name of a plaintiff. By contrast, para (d) deals with a wider category: any person who commences proceedings without authority in the name of another. It may be that the legislature intended to ensure that the general case, and not just the particular one that was the subject of authority, was caught. 67 But in any event, I think that the difficulties standing in the way of acceptance of Mr Parker's submission are greater than any difficulty flowing from its rejection. The major difficulty in accepting the submission flows from the fact that the phrase "abuse of process" is used elsewhere in the Rules: specifically, at UCPR r 13.4. That rule (which in substance restates SCR Pt 13 r 5) provides that proceedings may be stayed or dismissed generally or in relation to any claim for relief where, among other things, they are shown to be an abuse of process. It is clear in this context that "abuse of process" is not limited to - indeed, is separate from - the tort of abuse of process. See Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27 at [3]-[5] (Gleeson CJ, Gummow, Hayne and Crennan JJ). I do not think that the legislature intended the concept of abuse of process to have one meaning in one rule and another, narrower, meaning in another. 68 The majority judgment in Batistatos makes it plain that the categories of abuse of process are not closed, and that they continue to develop (see, for example, paras [9], [14]). However, their Honours at para [15] cited with approval the judgment of McHugh J in Rogers v The Queen (1994) 181 CLR 251 at 286, where his Honour observed that: "… abuses of procedure usually fall into one of three categories: (1) the Court's procedures are invoked for an illegitimate purpose; (2) the use of the Court's procedures is unjustifiably oppressive to one of the parties; or (3) the use of the Court's procedures would bring the administration of justice into disrepute." 69 Even if one confines the analysis of the concept of abuse of process to its use in r 42.3(2), it is difficult to see why the legislature would have intended to single out the tort of abuse of process from other kinds of abuse of process. It is as appropriate to speak of an abuse of process being "committed" in the second or third categories referred to in para [61] above as it is to speak of it being "committed" in the first category. And the underlying or unifying concept - that a person is brought to Court improperly when he or she should not have been brought to Court - seems to me to pervade each of Mr Parker's categories (para [61] above). It is quite unclear why a person improperly brought to Court in circumstances that fall within category 1 might be entitled to a non-party costs order, whereas a person improperly brought to Court in circumstances falling within category 2 or category 3 should not. 70 Equally, if one considers instead the three categories identified by McHugh J in Rogers, it is difficult to see in them any basis for limiting the connotation of the phrase "abuse of process" in r 42.3(2)(c) (or, for that matter, in r 13.4). 71 I am conscious that the question in Batistatos was not whether a non-party costs order should be made, but whether proceedings could be stayed by reason of great delay, with consequent unfairness to one party. I do not think that this distinction renders inapplicable to the present context their Honours' discussion of the concept of abuse of process. 72 Mr Parker pointed to the fact that para (c) empowers the Court to order the "payment … of the whole or any part of the costs of a party to proceedings occasioned by the … abuse of process". He contrasted that with the wording of some other paragraphs, including in particular paras (d) and (e). The difference in wording, however, seems to me to be entirely explicable by the different subject matters. An abuse of process may infect the whole of proceedings, or some part only. For example (in the latter category) it may infect only one claim for relief. Where an abuse of process does not infect the whole of proceedings, it might be unjust to order the "abuser" to pay the whole of the costs of those proceedings. By contrast, where the proceedings fall within para (d), they are entirely unauthorised and there is no basis for the "abuser" not to pay the whole of the costs of those proceedings. The same may be said for "contempt of Court", which is joined with abuse of process in para (c). 73 Nor do I think that the history of the rule lends any support to Mr Parker's submission. 74 As I have said, the High Court in Knight considered (among other things) traditional categories in which courts had made costs orders against non-parties. It is apparent that abuse of process was one such category. Mason CJ and Deane J referred at 192-193 to a further category in which a costs order could be made against a non-party. That was a case "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." 75 The precursor to UCPR r 42.3 was SCR Pt 52A r 4 (and, before it, Pt 52 r 4, introduced in 1993. Einstein J dealt with the legislative history in Idoport Pty Ltd v National Australia Bank Ltd [2004] NSWSC 695 at paras [61] to [66]. It is unnecessary to repeat that history). In Wentworth v Wentworth (2001) 52 NSWLR 602, Heydon JA (with whom Davies AJA agreed) noted at 636 that those rules were intended to abolish "several traditional categories of jurisdiction to order costs against non parties discussed" by Mason CJ and Deane J in Knight, "and in particular the newly formulated category relating to insolvent persons discussed" at 192-193. 76 Whilst I accept that the rule and its predecessors were intended to limit the power of the Court to order costs against non parties, it does not follow from this that the legislature intended to limit the power of the Court to order costs against a non-party who was guilty of abuse of process. That was a source of power under the general law (as was recognised in Knight); it remains a source of power now. Whilst it is correct to say in a general sense that the rules were intended to limit the effect of the decision in Knight, they did so by abolishing the power of the Court to make costs orders against non parties in certain classes of case. They did not (at least in express terms) do so by limiting that power in classes of case (such as abuse of process) that continued to provide a source of such power. 77 To my mind, therefore, the enquiry is whether there has been an abuse of process in any of the recognised senses of that phrase. Any other approach would lead to the elaboration of fine distinctions, depending on the nature of the conduct that is alleged to amount to abuse of process (particularly where that conduct could be seen to fall into more than one category, or to lie across the boundaries of two categories). I do not think that the legislature had this in mind. Indeed, I do not think that the legislature should be assumed to have had in mind any categorisation of the concept of abuse of process, whether as suggested by McHugh J in Rogers, or by Mr Parker in submissions, or otherwise. 78 I therefore conclude that the power of the Court to make a non-party costs order will be enlivened under r 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. 79 I should note that Mr S Y Reuben of counsel, who appeared for Mr Rickard, did not submit that the term "abuse of process" in r 42.3(2)(c) should be construed to refer only to the tort of abuse of process. He accepted that the paragraph referred to the concept in any way in which it was used in the law. His submission was that however one read the expression, Mr Rickard was not acting in abuse of process. Abuse of process: other relevant authorities 80 The parties referred me to a substantial number of cases. Without being disrespectful either to those who decided all the cases relied upon, or to the submissions founded upon them, I do not propose to discuss them all. 81 The applicants laid particular stress on three decisions: those of the Court of Appeal in Fostif Pty Ltd v Campbell's Cash and Carry Pty Ltd (2005) 63 NSWLR 203 and Project 28 Pty Ltd v Tim Barr Pty Ltd & Ors [2005] NSWCA 240, and that of Einstein J in Idoport. 82 Both Fostif and Project 28 were applications for permanent stays. In that context, the Court of Appeal stressed that in considering whether there was an abuse of process one should consider the tendency of the funding arrangements of proceedings to produce an abuse of process (see for example Ipp JA, with whom Hodgson JA and Campbell AJA agreed, in Project 28 at paras [39] and [43]). In considering this question, "the court's basal inquiry should be whether the role of the particular funder has corrupted or is likely to corrupt the processes of the court to a degree that attracts the extraordinary jurisdiction to dismiss or stay permanently for abuse of process" (see Mason P, with whom Sheller JA and, with an irrelevant exception, Hodgson JA agreed, in Fostif at 234 [132]). 83 Ipp JA pointed out in Project 28 at para [58] that the categories of abuse of process were not closed. He said that there might be an abuse of process where the very nature of the funding arrangements "result[s] in the defendant being oppressed or prejudiced, or the procedures of the court subverted or improperly manipulated." 84 Fostif and Project 28 were different cases to the present. Both were, as I have said, cases where the defendants were seeking stays. In each, the inquiry as to abuse of process was prospective, or largely so. 85 Further, in Fostif, the funder was funding the prosecution of the claims for its own profit (see the description of the funder's role given by Mason P at 215 [50] and following). By contrast, in Project 28, the funder was found not to be trafficking in litigation (Ipp JA at para [59]). Likewise, in the present case, Mr Parker relied on an 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 para [56]). 86 Ipp JA noted in Project 28 at para [77] that there were circumstances in which one person could prosecute litigation in the name of another, and have "complete or absolute control" over that litigation, without there being an abuse of process. His Honour did say however that such control was "a relevant factor when regard is had to the whole picture, which is required when considering whether or not to grant a stay on the grounds of abuse of process." 87 Ipp JA held in Project 28 that a stay should be granted. The reason was that the funder had absolute control over the litigation without having any responsibility for the defendants' costs if the plaintiff's case against it, controlled by the funder, were to fail (see paras [117], [121]). His Honour said at para [120] that the discipline of the usual rule as to costs "is an essential safeguard of the adversarial system"; and it was a discipline missing in the proceedings as they were presently constituted. Thus, his Honour concluded at para [121], there was a material tendency for the Court's procedures to be converted into instruments of injustice or unfairness where the funder had control of the litigation without any corresponding liability for costs. Those two features justified the granting of a stay: not a permanent stay, but a stay until the funder agreed to indemnify the plaintiffs against any costs that they might be ordered to pay. 88 Along the way to this conclusion, Ipp JA drew a distinction between circumstances that might justify a non-party costs order and circumstances that might justify a stay for abuse of process (see, in particular, para [105], where his Honour noted that "[t]he need to establish an abuse of process under [Part 52A rule 4(5)(d)] is a relatively difficult obstacle for a party wishing to obtain costs against a non-party to overcome"). His Honour appeared to accept that circumstances that might justify the granting of a stay (permanent or otherwise) might not justify the granting of a non-party costs order. 89 Of course, the two questions fall to be considered at different times. Ipp JA appears to have accepted as much in Project 28 at para [111], where his Honour said, among other things, that the prospects of the defendant's "obtaining a costs order against [the funder] while the latter is not a party are dependent on [the defendant's] establishing an abuse of process at the stage it seeks such a costs order." 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. 90 In Idoport, Einstein J recorded at para [80] the submission "that the funding by a third party of litigation as a commercial venture, for reward, without assuming liability for any adverse costs orders is or depending upon the particular circumstances, is capable of amounting to an abuse of process for the purposes of Part 52A rule 4(5)(d)" (his Honour's emphasis). As will be seen from paras [81] and following, his Honour was minded to accept that submission, although it might appear from para [89] that the acceptance was conditional. 91 It should be noted, however, that Einstein J's decision in Idoport predated the decisions of the Court of Appeal in Fostif and Project 28. Thus, what his Honour said must be read in the light of those later decisions. Analysis 92 As I have indicated, there is a conceptual difficulty in applying the principles set out in Project 28 to an application of this nature. In a case such as Project 28, the inquiry is prospective: is there a material tendency for the proceedings to result in manifest unfairness to one party? As Ipp JA explained, that may arise where a funder, who has control of and makes decisions in relation to the litigation, is not constrained by a likely order for costs. His Honour said at para [112] that one of the important features of the adversarial system "is the discipline imposed by the knowledge that an unsuccessful party is likely to be ordered to pay the costs of the successful party. This rule provides a bridle against lack of restraint in taking points that are hardly arguable, or not arguable at all, and against other possible excesses in the conduct of litigation. It provides a measure of protection to those involved in litigation, and to the Court itself, against unscrupulous attempts to manipulate the system. It provides an incentive to act carefully in a measured way." 93 In my view, it is crucial to recognise, and take into account, the distinction between an application of the kind made in Project 28 (at the outset of proceedings, for a stay) and the application with which I am concerned (after the conclusion of the proceedings, for a non-party costs order). Whilst both applications depend for their success on the demonstration of abuse of process, the analysis is different because of the different times at which they are undertaken. In the former case, the Court is concerned (as the passage that I have quoted from the judgment of Ipp JA in Project 28 shows) to protect a defendant against potential lack of restraint, possible excesses, potential for unscrupulous manipulation, or potentially careless and unbalanced action. Those matters might not have occurred at the time the inquiry is undertaken; the risk is that they will occur. It is the lack of discipline, of the kind imposed by a liability for costs, that engenders the risk. It is the risk - the tendency - that may demonstrate abuse of process. 94 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? 95 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. 96 In general, the submissions for the applicants appeared to proceed on the basis that if there were control coupled with absence of liability for costs, there was abuse of process. In putting their cases this way, the applicants failed to take into account, or give appropriate weight to, the time at which their applications were made. With perhaps one exception (in the case of Allianz), the applicants did not seek to demonstrate that there had been any material lack of restraint, excess, manipulation, carelessness or other misconduct in the way that these proceedings were run. Far less did they seek to demonstrate that any such misconduct (to use a general term) flowed from the involvement of SST Consulting as funder. In this context, the distinction between the kind of control that it possessed through its ability to turn off the tap, as opposed to the kind of control that Mr Rickard possessed through his ability to give instructions relating to the conduct of the litigation, is crucial; but it was not addressed. 97 Exactly the same problem affects the application made by Allianz against Mr Rickard. Indeed, the problem (from Allianz' perspective) is exacerbated in his case. That is because the only possible misconduct upon which it relied - relating to rejection of its settlement offers - was attributed by it, seizing in what I had said in my costs judgment, not to Mr Rickard but to SST Consulting. 98 As I have indicated, it may be that on a fair analysis, Allianz did submit that there had been one manifestation of unreasonable conduct, in the rejection of its settlement offers. It is correct to say that I characterised that conduct as "unreasonable", in the course of ordering Rickard Constructions to pay some of Allianz' costs on the indemnity basis. But as I have already explained, SST Consulting was not represented in (let alone a party to) that application, and it cannot be bound by the inference that I then drew implicating it in the decision to reject the settlement offers. Further, in this context, I think it is the appropriate conclusion from the evidence that was adduced on these applications, from Mr Quigley, that the relevant instructions were not given by or on behalf of SST Consulting. 99 In any event, I think, there is a very substantial separation between the characterisation of conduct as "unreasonable", in the context of considering an application for indemnity costs, and the characterisation of conduct as oppressive, for the process of considering whether to make a non-party costs order by reason of abuse of process.

Conclusion and orders 100 Because the applicants have failed to demonstrate that any relevant abuse of process has in fact occurred (because they have failed to demonstrate that in fact the Court's processes have been subverted or corrupted), it follows that their applications should be dismissed. It is therefore unnecessary to consider the other grounds argued, including the discretionary factors upon which reliance was placed one way or the other. The parties' written submissions will be kept with the papers; their oral submissions have been recorded. 101 I make the following orders:

(1) I order that the first defendant's amended notice of motion filed in Court on 24 July 2006 be dismissed.

(2) I order that the second defendant's amended notice of motion filed in Court on 24 July 2006 be dismissed.

(3) I order that the third defendant's amended notice of motion filed in Court on 24 July 2006 be dismissed.

(4) Subject to order (5), I order each applicant to pay the respondents' costs of its notice of motion.

(5) I grant leave to any party (including any respondent to any notice of motion) to move to discharge or vary order (4).

(6) I direct that any application to discharge or vary order (4) be made by notice of motion filed and served within 21 days of today's date.

(7) I order that the exhibits on the applications be retained for 28 days and thereafter retained or disposed of in accordance with the Rules. *****

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