Thompson Land Ltd v Lendlease Shopping Centre Development Pty Ltd [2000] VSC 140

5. Application has been made on behalf of each of the defendant and third party for orders for costs. I have received written submissions relevant to such applications and I have also heard further oral submissions made on behalf of counsel for each party to the proceedings.

8. On behalf of the defendant, application is made for orders, first that the plaintiffs pay the defendant's costs of the proceedings on a solicitor and client basis and secondly that the plaintiffs pay the costs of the third party in the third party proceedings. In the alternative to the first application made on behalf of the defendant for an order with respect to its own costs, the defendant seeks an order that the plaintiffs pay its costs on a party and party basis up to 12 December 1996 or alternatively 24 March 1997 or alternatively 28 February 2000 and that thereafter such costs be paid by the plaintiffs on a solicitor and client basis.

11. On behalf of the third party, application is made for an order that the plaintiffs pay its costs on an indemnity basis in terms that "the plaintiffs pay the third party costs of and incidental to the proceedings to be taxed to include all costs incurred by the third party except in so far as they are of an unreasonable amount or have been unreasonably incurred so that, subject to those exceptions the third party be completely indemnified by the plaintiffs for its costs". In the alternative, the third party seeks an order for costs on an indemnity basis, as against the defendant. In the further alternative the third party seeks an order for costs against the defendant on a party and party basis up to and including 28 February 2000 and for an order for indemnity costs, on the terms previously referred to as against the plaintiffs for the period thereafter. In the further alternative, the third party seeks an order for costs against the defendant to be taxed on a party and party basis.

14. Counsel for the plaintiffs informed the Court that the plaintiffs did not oppose the making of orders that the plaintiffs pay the defendant's costs of the proceedings and that the plaintiffs pay the third party's costs of the third party proceedings. Counsel for the plaintiff further informed the Court that in the event of it being ordered that the defendant pay the costs of the third party, the plaintiffs in those circumstances would not oppose an order that they pay the costs of the defendant to include such costs as it was liable to pay to the third party on the third party proceedings. Counsel for the plaintiffs, however, informed the Court that the plaintiffs opposed the applications for orders that they pay costs of any party other than on a party and party basis.

17. Pursuant to Rule 63.28 of the General Rules of Procedure in Civil Proceedings, it is provided that -

"63.28 Bases of taxation Subject to this Part, costs in a proceeding which are to be taxed shall be taxed on - (a) a party and party basis; (b) a solicitor and client basis; or (c) such other basis as the Court may direct."

21. It is further provided by Rules 63.29 and 63.30 as follows -

"63.29 Party and Party basis On a taxation on a party and party basis all costs necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed shall be allowed." "63.30 Solicitor and client basis On a taxation on a solicitor and client basis all costs reasonably incurred and of a reasonable amount shall be allowed."

25. At this stage I do not seek to address the question whether the nature of the costs orders sought by the third party which were identified as "indemnity costs" differ in practice or in reality from costs on a solicitor and client basis and in particular that provided on taxation by Rule 63.30. However, it is to be observed that the judgment of Sir Robert Megarry, V.-C. in EMI Records Ltd. v. Ian Cameron Wallace Ltd_._ [1983] 1 Ch. 59 and in particular at p.72 he considered that there may be a distinction between costs awarded on an "indemnity basis" as against those awarded on a "solicitor and own client basis". However it is to be noted further that at p.73 in his judgment the Vice-Chancellor held that an order for costs on an "indemnity basis" takes effect as an order for costs on the basis set out in RSC Ord. 62, r.29(1) which Rule provided that on taxation, "all costs shall be allowed except in so far as they are of an unreasonable amount or have been unreasonably incurred."

28. The issues to be determined on these applications is whether in the exercise of the Court's discretion it should be ordered that the plaintiffs pay the defendant's costs in whole or in part on a basis other than a party and party basis, whether it should be ordered that the plaintiffs or the defendant pay the costs of the third party and whether the costs of the third party in whole or in part should be ordered on a basis other than a party and party basis.

31. The power of the Court to make an order for costs of and incidental to a matter in the Court is vested in the Court pursuant to s.24(1) of the Supreme Court Act 1986. That power vests in the Court a wide discretion as to costs which must be exercised judicially. Ordinarily the Court will order costs against a party to proceedings on a party and party basis. That such is the settled practice or ordinary rule of the Court has been accepted by the Court over a long period of time. It is reflected in Rule 63.31 which provides that -

"Except as provided by these rules or any order of the court costs should be taxed on a party and party basis."

However, in the exercise of its discretion to award costs against a party, the Court may order costs on a measure higher than on a party and party basis if there exists circumstances which warrant the Court from departing from the ordinary rule as to costs. The question that must be addressed in each case where costs are sought other than on a party and party basis is whether in the circumstances as existing, justice requires that an order for costs be made other than on a party and party basis. If such circumstances exist then in exercise of the Court's discretion it would be appropriate for an order to be made for costs otherwise than on a party and party basis - Spencer v Dowling [1996] VSC 51; [1997] 2 VR 127, Winneke P at p.147; Colgate Palmolive v Cussens [1993] FCA 536; (1993) 46 FCR 225 at 233; In Re Wilcox (1996) 141 A.L.R. 727 at 732; Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; (1988) 81 ALR 397.

36. On behalf of the defendant it was submitted that the Court should conclude that from the outset of these proceedings the plaintiffs should have known that they had no chance of success against the defendant. It was submitted that the plaintiffs' claim in the proceedings that the payments by the third party to the defendant of each of the four subject bank cheques totalling $3.8m. constituted a disposition of the first defendant's property and were void pursuant to s.368(1) of the Companies (Victoria) Code, completely ignored the fact that the defendant was the possessor of a bank guarantee furnished to it by the third party, for a total sum of $3.8m., as security for the performance of the first plaintiff's obligations to the defendant pursuant to a contract of sale entered into between the first plaintiff and the defendant. It was submitted that in so far as the plaintiffs sought to rely on the fact that on each occasion that the third party paid a bank cheque to the defendant it debited the account of the first plaintiff with it in a like amount, as evidence that the property in each bank cheque was that of the first plaintiff, which it had "purchased" from funds provided to it by the third party, by way of a loan, ignored totally the existence of the agreement between the first plaintiff and the third party which entitled the third party to debit the account of the first plaintiff on it making a payment under the bank guarantee. It was further submitted on behalf of the defendant that the plaintiffs' case as advanced at trial that the payments made by the third party to the defendant by bank cheque could not have been payments made by the third party pursuant to the bank cheque as there had been failure at least on behalf of the defendant to make written demand against the third party for payment under the bank guarantee, ignored the fact that at no time had the third party contended that it was not bound by the bank guarantee and the fact that at all times the third party had purported to make the payments pursuant to the bank guarantee. In substance it was submitted that by the plaintiffs ignoring the matters referred to they instituted and prosecuted proceedings which were destined to fail from the outset and which in the result did fail against the defendant.

39. Further it was submitted on behalf of the defendant, that not only should the plaintiffs have been aware of the fact that its claim against the defendant was without chance of success but that further it should be concluded by the Court that from a very early stage in the proceedings the defendant had drawn attention to the plaintiffs that its claim against it must fail. It was submitted that such matter was relevant for the Court to have regard to in the exercise of its discretion when determining whether costs should be awarded in favour of a successful defendant against a plaintiff on a basis other than a party and party basis. In support of this latter argument the defendant relied on an affidavit sworn by Richard Harris on 30 March 2000 and put before the Court on the hearing of submissions relevant to costs. Harris is the solicitor who has had carriage of the action on behalf of the defendant. In his affidavit Harris deposed to the following matters -

- On 25 May 1993 the second plaintiff made demand against the defendant for payment of $1,011,567.7 (the amount of the first bank cheque paid by the third party to the defendant) claiming that the payment was void. The second plaintiff also sought an acknowledgment of the defendant's receipt of the other three payments and sought reasons why there should not be repayment of the amounts of such moneys to the second plaintiff. - On 8 March 1994 the second plaintiff wrote a letter to the solicitors for the defendant requesting that they advise the defendant that he had demanded payment of the sum of $3.8 million and further advising that in the event of such payment not being forthcoming within 14 days proceedings would be issued. - On 26 November 1996 the then solicitors for the plaintiffs wrote a letter to the solicitors for the defendant again making demand against the defendant for payment of the sum of $3.8 million. - On 12 December 1996 in a letter from the defendant's solicitors to the plaintiffs' then solicitors it was stated in part 'Our client considers that the liquidator's claim is misconceived. Our client's reasons were explained to your client and its former solicitor in a meeting at Cornwall Stodart in March 1994. As discussed at that time the payments made to our client were payments made by ANZ pursuant to obligations owed by ANZ to our client under a bank guarantee. Whatever may have been the arrangement for ANZ to recoup money from Thompson Land Ltd. is a matter between the bank and its customer.' - Again on 24 March 1997 the solicitors for the defendant wrote to the solicitors for the plaintiffs rejecting the plaintiffs' claim against the defendant. At this time a copy of an opinion provided to the plaintiffs by senior counsel had been furnished to the solicitors for the defendant. The letter of the defendant's solicitors to the plaintiffs' solicitors dealt in detail with that opinion rejecting a number of conclusions expressed therein. In that letter the defendant's solicitors further stated that should the proceedings that had been issued against the defendant, but not served, be not discontinued then application would be made to strike out the statement of claim or to move for summary judgment. - On 3 July 1998 the solicitors for the defendant against wrote to the solicitors for the plaintiffs stating in part - 'In the event the plaintiff is unsuccessful at trial the defendant will be seeking its costs and any costs for which it might be liable to the third party ...' - Further on 28 February 2000 (which was the second day of the trial of these proceedings) the solicitors for the defendant wrote a letter to the solicitors for the plaintiffs making a 'Calderbank Offer' to the plaintiffs. In that letter it was stated that the defendant and the third party each regarded the plaintiffs' claim as being 'totally without merit'. By the letter it further stated that the defendant and the third party invited the plaintiffs to discontinue the proceedings immediately and to pay their respective party-party costs up to the conclusion of the hearing that day. The letter further stated 'Alternatively, we are instructed to offer on behalf of our client and ANZ that they will accept $100,000 each in lieu of their entitlement to taxed party costs. We consider that this represents a substantial discount on the defendant's and the third party's entitlement to party-party costs. This will remain open for acceptance until 12 noon on 29 February 2000.' Neither offer was accepted as the trial of the proceedings continued to judgment."

43. In a further affidavit sworn by Harris on 11 April 2000 he has exhibited correspondence between the defendant's solicitor and the third party wherein the defendant's solicitor proposed to the third party that in order to avoid the defendant taking proceedings against the third party in the present action the third party should agree to be bound by any decision of the Court in the proceedings as between it and the plaintiffs and further that in the event of the defendant being held liable to the plaintiffs and issuing proceedings against the third party, it should not rely on any statute of limitations. Harris deposed that the defendant was unable to obtain the third party's agreement to a "stand still" arrangement. In consequence the third party proceedings were instigated and prosecuted against the third party.

46. Further as against the plaintiffs it was submitted on behalf of the defendant that the Court should, in exercise of its discretion, order that the plaintiffs pay the costs of the third party. As to this matter it was submitted that in the circumstances of the case the defence of the defendant was really that of the third party that is that by it making payments by way of bank cheque to the defendant it was not making any disposition of the first plaintiff's property but rather was making payments pursuant to its obligation under the bank guarantee. It was submitted further that in so far as the defendant, by its defence, relied on the integrity of the procedures of the third party and as it was not able to achieve a "stand still" agreement with the third party it was reasonable for it to join the third party in the proceedings. It was submitted that as it was reasonable for it to join the third party as a party to the proceedings and as it was not necessary for the Court to make any determination in the third party proceedings as the plaintiffs totally failed against the defendant, there existed circumstances in which it was appropriate for the Court to order that the plaintiffs pay the third party's costs.

49. The submissions made on behalf of the third party were in substance that although the defendant was successful and in consequence the third party was successful against it, normally an order would be made by the Court requiring the defendant to pay the third party's costs. However it was submitted that in the circumstances of this case where the defendant's case against the third party was dependent on the defendant being found liable to the plaintiff as there was no reasonable prospects of the plaintiffs being successful against the defendant, it should be ordered by the Court that the plaintiffs pay the third party's costs. It was submitted it should be ordered that such costs be on an indemnity basis. It was submitted however that in the event of the third party not obtaining an order for an "indemnity" against the plaintiffs it was appropriate for an order for costs on such terms to be made in its favour against the defendant. It was contended on behalf of the third party that this should be so as the defendant ought to have known that the plaintiff's case against it would not be successful and that notwithstanding that it joined the third party as a party to the proceedings. Further, it was submitted on behalf of the third party that should the Court not order the plaintiffs to pay its costs on an "indemnity" basis or should the Court not order that the defendant pay its costs on an "indemnity" basis then in the event of it recovering costs on a party and party basis that such costs should be awarded in its favour against the defendant and not against the plaintiffs.

52. On behalf of the plaintiffs it was submitted that the Court should award costs against the unsuccessful plaintiffs on a basis more generous than as between party and party only in the event of the Court being satisfied that in the circumstances the proceedings were instituted and prosecuted because the unsuccessful plaintiffs engaged in unmeritorious, deliberate, high-minded or other improper conduct such as to warrant the Court marking its displeasure. It was submitted that the Court ought not to reach such conclusion in this case. It was submitted that the Court should conclude from the first affidavit of Harris and also an affidavit of one Neil Hannan sworn on 11 April 2000 that before the proceedings were served on the defendant the plaintiffs obtained the advice of senior counsel which supported the grounds of their claim against the defendant and that in such circumstances it ought not to be concluded by the Court that there existed circumstances which would warrant the Court ordering costs against the plaintiffs other than on a party and party basis. It was further submitted that although the plaintiffs' case may have been regarded as a difficult or hard case for it to run at trial, nevertheless it was a case dependent upon evidence to be called and tested at trial and it ought not to be concluded by the Court that from outset the proceedings were hopeless. It was further submitted that notwithstanding the threats of the defendant to apply for summary judgment if the proceedings were prosecuted, no such steps were taken and accordingly it should be concluded by the Court that in such circumstances the plaintiffs' case was a case which should not be categorised as hopeless but rather properly able to proceed to trial. It was submitted that although the plaintiffs were unsuccessful at trial they should not be visited with an order for costs against them other than on a party and party basis.

55. In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (supra) Woodward J, after referring to Australian Guarantee Corporation Ltd v De Jager [1984] VR 843 in which Tadgell J allowed solicitor-client costs on finding that the pursuit of the action had been a "high-handed presumption" said at p. 401 -

"I believe that it is appropriate to consider awarding 'solicitor and client' or 'indemnity' costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of known facts or clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion."

59. In J-Corp Pty. Ltd. v. BLF (No. 2) [1993] FCA 42; (1993) 46 I.R. 301, French, J. at p.303, after referring to Fountain Selected Meat said -

"Although there is said to be a presumption in such cases that the action was commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law it is not a necessary condition of the power to award such costs that a collateral purpose or some species of fraud be established. It is sufficient, in my opinion, to enliven the discretion to award costs that, for whatever reason, a party persists in what should on proper consideration, be seen as a hopeless case."

63. Again in Botany Municipal Council v Secretary, Department of Arts, Sport, Environment, Tourism and Territories (1992) 34 FCR 412, Gummow J referred to that which Woodward J said in Fountain Selected Meats. At p.415 he said -

"... I accept that the discretion conferred by s.43 (of the Federal Court of Australia Act) is not so circumscribed that an order of this character may be made only against an ethically or morally delinquent party."

67. It was not suggested in this case, nor could it on the evidence, that the plaintiffs had some ulterior motive in instituting and prosecuting the present proceedings or that this was done for some collateral purpose. Rather, it was submitted on behalf of the defendant that from the outset the plaintiff's case against the defendant was hopeless, that they ought to have known of that matter particularly when regard is had to the matters directed to the attention of the plaintiffs' solicitors by the defendant's solicitors in the correspondence that I have referred to.

70. In David S. Holdings Pty Ltd v Coles Myer Ltd (1995) ATPR 41-383 Drummond J dismissed an application made by the defendant for indemnity costs in circumstances which involved the plaintiff unsuccessfully seeking interlocutory relief, thereafter filing numerous statements of claim after part of the initial statement of claim had been struck out and eventually discontinuing the proceedings. In his judgment, Drummond J stated at p.40-303 -

"If a respondent at an appropriate stage, which may be at the very outset or at some later stage, e.g., after it has received pleading or after discovery, puts an applicant on notice that it regards the action as misconceived and goes further and sets out its detailed reasons for so thinking then if the applicant nevertheless proceeds without indicating any justification for doing so and fails there may be good reason to consider whether indemnity costs should not be ordered."

74. In UFH Holdings Pty Ltd v Ord Minnett Corporation Finance Ltd (S.C. Vic - Chernov J, No. 2020/1998, 26 June 1998, unreported) at p.4, Chernov J, after referring to that said by Drummond J in David Holdings, said -

"... what his Honour was saying was that in circumstances where a plaintiff has been put on notice, proceeds and fails, that does not of itself dictate the imposition of indemnity costs. Nevertheless, in the circumstances such a conclusion is a powerful factor to take into account as to whether or not such costs should be ordered."

78. As appears from the correspondence, that I have referred to, passing between the defendant's solicitors and the plaintiffs' solicitors, from an early stage, the defendant's solicitors expressed the view that the plaintiffs' claim against the defendant was misconceived stating that the monies paid to it by the third party were paid pursuant to the bank guarantee.

81. Although the giving of a warning by a defendant to a plaintiff that the plaintiffs' case is misconceived or cannot succeed is a factor relevant to be had regard to, when considering an application against an unsuccessful plaintiff for costs on a basis other than a party and party basis nevertheless such a matter must not be given disproportionate weight. This is particularly so in my view where disputes between parties are determined before courts in proceedings conducted on an adversarial basis.

84. In my view, from the outset when viewed objectively, it ought to have been appreciated by the plaintiffs and those advising them that it would be extremely difficult for the plaintiffs to be successful in their claim against the defendant. However I am also of the view that when viewed objectively, the plaintiffs' case ought not to have been viewed as a hopeless case. One of the issues of fact to be determined in these proceedings was what fact, matter or circumstance caused the third party, on each occasion that it paid a relevant bank cheque to the defendant, to debit the first plaintiff's overdrawn account with it by an amount equivalent to the bank cheque. This matter was the subject of evidence and determination at trial. The defendant's solicitors by their letter of 12 December 1996 asserted that "whatever may have been the arrangement for ANZ to receive money from Thompson Land Ltd. is a matter between the bank and its customer". This was the subject of evidence at trial and relevant to the issue that I have last referred to. On the evidence placed before the Court at trial and for the reasons expressed in my judgment the plaintiffs failed. The determination of the issue that I have referred to was necessarily made on the evidence at trial. This was not a case where a plaintiff was not able on his pleadings to identify or plead a cause of action. It was not a case where the defendant pleaded and was able to rely on an absolute defence at law. It was a case on which the plaintiffs failed on the evidence placed before the Court at trial. Notwithstanding that by my judgment it has been shown that assertions made by the defendant's solicitors to the plaintiffs' solicitors in the letters of 12 December 1996 and 24 March 1997 were correct, these assertions were assertions of fact which were the subject of contested issues at the trial.

87. There were issues of fact to be determined on the evidence at trial. It was on the evidence that the plaintiff failed. One must be careful on an application as the present not to allow the wisdom of hindsight to overwhelm the circumstances in which the Court must consider whether there exists circumstances which should warrant an order being made for costs on a basis other than a party and party basis. It must be borne in mind that normally an unsuccessful party will pay the costs of the successful party on a party and party basis. It is only where there exists circumstances which in justice requires that costs be ordered on a higher scale, that such order ought to be made.

90. The conclusion I have reached is that there does not exist circumstances in this case that warrant it being determined that the usual rule as to costs should not be adhered to but rather the costs of the defendant from the outset of the proceedings to trial ought to be borne by the plaintiffs on a basis other than a party and party basis. In reaching this conclusion I have taken account of the letters of the defendant's solicitors dated 12 December 1996 and 24 March 1997.

93. It is next necessary to have regard to the letter written by the defendant's solicitors on behalf of the defendant and third party to the plaintiffs' solicitors on 28 February 2000. At the end of the day on 28 February 2000, the plaintiffs' case was still proceeding and the plaintiffs' last witness was being cross-examined. The plaintiffs' case closed during the morning of 29 February 2000. In substance the defendant and third party each offered to accept party-party costs up to the conclusion of 28 February if the plaintiff discontinued the proceedings or alternatively each offered to accept $100,000 in lieu of taxed party and party costs if the proceedings were discontinued by the plaintiffs. It was asserted that the latter offer provided a substantial discount to the plaintiffs as to costs in the event of them discontinuing the proceedings at that time. Whether that is so or not I cannot determine on the material placed before the Court on these applications. Other than an assertion to that matter by counsel no material was placed before the Court on which I could determine this matter. By the terms of the letter it provided that in the event of the offer not being accepted the offer would be used by the defendant and third party to support its application from full indemnity costs from 29 February 2000 to the conclusion of the proceedings. On being unable to assess whether the offer of the defendant and third party to each accept $100,000 in lieu of their entitlement to taxed party and party costs was a substantial discount on their respective entitlement to party and party costs had the plaintiffs discontinued the proceedings at that time, such offers cannot be had regard to in determining whether as and from 29 February 2000 there existed a fact or circumstance which ought to dictate that in justice the defendant and third party should recover costs against the plaintiff other than on a party and party basis. Further, the alternate offer to the plaintiff inviting it to discontinue the proceedings and offering to accept costs on a basis no less then they otherwise would have been entitled to receive had the Court granted leave to the plaintiffs to discontinue the proceedings, is in my view a fact or circumstance which, when such offer is made during the course of a trial, as in this case, does not warrant or give rise to a proper basis for the Court in the exercise of its discretion to award costs from that time to the successful defendant and third party on a basis other than on a party and party basis.

96. Accordingly, the conclusion I have reached is that in the circumstances of this case the successful defendant is entitled to an award of costs against the plaintiffs on a party and party basis.

99. In these proceedings the actions and procedures followed by the third party in drawing and paying the bank cheques to the defendant and debiting the overdrawn account of the first plaintiff in a like amount were pivotal to the success or otherwise of the defendant's defence to the plaintiffs' claim. The defendant's claim against the third party was dependent on the plaintiffs being successful against it and establishing on the evidence that the four payments made by bank cheque by the third party were dispositions of the property of the first plaintiff which would mean that they were not payments made by the third party to the defendant pursuant to the terms of the bank guarantee. Having regard to my decision in the proceedings by the plaintiffs against the defendant it was not necessary for me to determine the proceedings as between the defendant and the third party as the plaintiffs failed in their claim against the defendant.

102. It is not disputed by the defendant or by the plaintiffs that the third party is entitled to recover its costs of the third party proceedings. As referred to, the plaintiff informed the Court that it did not oppose an order being made that the plaintiff pay the third party's costs of the third party proceedings but submitted that such costs ought to be ordered on a party and party basis only. The defendant submitted that it should be ordered that the third party's costs be paid by the plaintiffs. The third party submitted that it should have its costs on a basis other than between party and party against the plaintiffs or alternatively against the defendant but that if the costs to be awarded in its favour were to be awarded on a party and party basis it should have its costs against the defendant. It appeared that the basis of the third party's claim to have its costs against the plaintiff only in the event of it being entitled to recover costs against it on a basis other than a party and party basis whereas if the costs to be awarded to it were on a party and party basis such costs were sought against the defendant, lay specifically, in the instructions of the third party to counsel. Be that as it may it was the application of the third party that in the event of it being awarded costs only on a party and party basis it sought such costs against the defendant.

105. In Devon Downs Administrators Pty Ltd v Theodoropoulos (S.C. Vic. Kaye J No. 7793/78: 7 April 1982, unreported) Kaye J ordered that the third party's costs be paid by the plaintiff. In that case the defendant sought indemnity against the third party in the event of it being held liable to the plaintiff. His Honour found that the joinder of the third party by the defendant was reasonable. In the circumstances where the defendant was successful against the plaintiff it was not necessary for his Honour to consider the defendant's claim against the third party.

108. Other examples of courts determining that there existed power, in the exercise of the Court's discretion as to costs, to order an unsuccessful plaintiff to pay the costs of a third or subsequent party are to be found in Klawamski v Premier Petroleum Co Ltd (1911) 104 LT 567; Edginton v Clark [1964] 1 QB 367 at 383; Thomas v Times Book Co Ltd [1966] 2 All ER 241, and Victoria Institute of Technology v Tullett and Tokyo (Victoria) Pty Ltd, SC Vic Beach J, No. 9430/1992; 29 August 1994, unreported).

34 In Johnson v Ribbins [1977] 1 WLR 1458 the Court of Appeal at p.1464 held that whereas it should be guided by the principal that normally costs follow the event and it should therefore normally order the defendant, although successful in the action, to pay the costs of the third party if he is successful, however, if the circumstances of the case were such that those costs ought fairly to be borne by the plaintiff, the court would order that they be added to the defendant's cost of the action as against the plaintiff.

112. In Burke v Gillett [1966] VicRp 26; [1966] 1 VR 196 Tadgell J, held (as appears by the head note which in my opinion accurately summarises his Honour's judgment) that costs of third party proceedings should ordinarily follow the event so that the defendant pays the third party costs of unsuccessful third party proceedings even where the defendant acted reasonably in joining the third party and the third party succeeded because of the defendant succeeded against the plaintiffs. In his judgment Tadgell J distinguished Devon Down as in that case there had been no adjudication on the third party proceedings whereas in the case before the Full Court there had been an adjudication on the third party proceedings before the primary judge which was subject of the appeal.

115. In the circumstances of this case, not only were the actions and procedures of the third party vital in determining the issue between the plaintiffs and the defendant, as it was alleged that payments made by the third party to the defendant were dispositions of the first plaintiff's property, but it was also reasonable for the defendant to join the third party in the proceedings. This was so, notwithstanding the defendant's contention that the plaintiffs' case against it was destined to fail. If the plaintiffs were to succeed against the defendant in the proceedings, then the defendant sought to recover the sum of $3.8m which it alleged that the third party would be obliged in such circumstances to pay to it on the grounds, in part, that such monies as paid to it by the third party was represented by it to be paid pursuant to the bank guarantee and received by it as such. The defendant offered the third party a "stand still" arrangement but this it declined to agree to. In the circumstances it was reasonable for the defendant to join the third party to have it bound by the decision of the court in the event of it being unsuccessful in its defence to the plaintiffs' claim.

118. In my opinion there exists no good reason why the third party should recover costs in the third party proceedings other than on a party and party basis. The fact that the defendant and third party each joined in the offer made to the plaintiffs on 28 February 2000, during the course of the trial, does not cause me to conclude that that constituted a circumstance which would entitle the third party to recover costs against the plaintiffs on a basis other than a party and party basis if such costs were to be awarded in favour of the third party against the plaintiffs.

121. In the circumstances of this case, notwithstanding there has been no adjudication on the third party proceedings as it became unnecessary for such tasks to be undertaken, I see no good reason why the normal rule should not be followed and that the third party should have its costs against the defendant. There exists in my view no circumstance as between the defendant and the third party which would warrant an order being made that the costs of the third party to be paid by the defendant should be on a basis other than as between party and party. As referred to, the plaintiffs did not resist an order being made in favour of the third party against them. During the course of submissions, counsel for the plaintiffs also informed the court that should an order be made that the defendant pay the third party's costs the plaintiffs would not resist a "Bullock order" being made in respect of the order for costs made against them in favour of the defendant. The conclusion that I have reached is that it should be ordered that the defendant pay the third party's costs on a party and party basis and that in so far as it is ordered that the plaintiffs pay the defendant's costs it should be further ordered that the defendant's costs include its costs of the third party proceedings and further that the plaintiffs should pay the defendant the costs required to be paid by it to the third party in the third party proceedings.

124. For these reasons I propose to make orders in accordance with the following minutes -

(1) that the defendant pay the third party's costs of the third party proceedings on a party and party basis;

(2) that the plaintiffs pay the defendant's costs of the proceedings on a party and party basis, such costs to include the defendant's costs of the third party proceedings and further that the plaintiffs pay to the defendant all costs payable by the defendant to the third party in the third party proceedings.

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