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Carter v Caason Investments Pty Ltd

Carter v Caason Investments Pty Ltd

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SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2015 0135

RYAN CARTER and ESPLANADE HOLDINGS PTY LTD	Applicant
v
CAASON INVESTMENTS PTY LTD & Ors	Respondents

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JUDGES:	WEINBERG, FERGUSON and KAYE JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	5 September 2016
DATE OF JUDGMENT:	7 October 2016
MEDIUM NEUTRAL CITATION:	[2016] VSCA 236
JUDGMENT APPEALED FROM:	Bakers Investment Group (Australia) Pty Ltd v Caason Investments Pty Ltd (No 3) [2015] VSC 644 (Elliott J)

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PROCEDURE – Costs – Discretion to make non-party costs order – Applicants were sole director and sole shareholder of litigation funder – Litigation funder had only $100 in paid-up capital – Litigation funder provided funds for plaintiff to continue proceeding below – Plaintiff failed in its claim – Orders for security for costs made during proceedings but were insufficient to cover costs – Defendants sought non-party costs order against applicants and various other persons associated with plaintiff – Trial judge ordered that applicants be jointly and severally liable for payment of defendants’ costs – Discretion to order costs to be exercised judicially – Costs awarded dependent on the justice of the case – Costs order against non-parties exceptional in sense that usual costs orders made against party to proceeding – Factors to be taken into account include financial position of party against whom order would be made, whether security for costs orders made, whether non-party has ‘real interest’ in litigation, amount of funding contributed and whether non-party agreed to provide indemnity – Whether the trial judge erred by ‘piercing the corporate veil’ – Plaintiff and litigation funder impecunious – Making a non-party costs order against company director is not piercing the corporate veil – Plaintiff maintained ultimate control of litigation but applicants had direct interest beyond mere recovery of funds – Litigation funder could be properly characterised as a party to proceedings – Judge’s exercise of discretion did not miscarry – Leave to appeal refused – Supreme Court Act 1986 s 24(1) – Knight v FP Special Assets Ltd (1992) 174 CLR 178 – Campbell’s Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 336 – Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd (2009) 239 CLR 75 – Deutsche Bank AG v Sebastian Holdings Inc & Anor [2016] 4 WLR 17

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APPEARANCES:

Counsel

Solicitors

For the applicant

For the first to third respondents

Dr L Vout with
Mr L Christensen

Mr ST Pitt with
Ms S Scully

Gadens Lawyers

Flory Partners

WEINBERG JA
FERGUSON JA
KAYE JA:

Introduction

In 2011, Bakers Investment Group (Australia) Pty Ltd[1] (‘Bakers’), the plaintiff and defendant by counterclaim below, brought a proceeding against Caason Investments Pty Ltd[2] (‘Caason’) and others,[3] the defendants and plaintiffs by counterclaim below.
[1]Bakers is named as the fourth respondent but took no part in the proceeding in this Court.
[2]The first respondent.
[3]The second and third respondents.

The case concerned an agreement between Bakers and Caason regarding the funding of an exploration and development opportunity in…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2016] VSCA 236
Decision Date: 7 October 2016

CaseChat Overview and Summary

In the case of Carter v Caason Investments Pty Ltd, the plaintiff pursued a claim which ultimately failed. The defendants sought a non-party costs order against the applicants, who were the sole director and shareholder of a litigation funder, as well as other individuals associated with the plaintiff. The litigation funder had limited financial resources, with only $100 in paid-up capital, and had provided funds to the plaintiff to continue the proceeding. Despite orders for security for costs being made during the proceedings, these were insufficient to cover the costs incurred.

The central legal issues before the court were whether the trial judge erred in making a non-party costs order against the applicants and whether this amounted to 'piercing the corporate veil.' The court considered factors such as the financial position of the parties, the amount of funding contributed, and whether the non-party had a 'real interest' in the litigation. The court held that the trial judge's discretion was exercised judicially and appropriately, taking into account the impecuniosity of both the plaintiff and the litigation funder. The judge did not err in making the non-party costs order, as it did not constitute piercing the corporate veil. The applicants had a direct interest in the litigation beyond merely recovering funds.

The court found that the litigation funder could be properly characterised as a party to the proceedings, and the judge’s exercise of discretion did not miscarry. Consequently, the application for leave to appeal was refused. The court's decision was informed by established case law, including Knight v FP Special Assets Ltd, Campbell’s Cash and Carry Pty Ltd v Fostif Pty Ltd, Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd, and Deutsche Bank AG v Sebastian Holdings Inc & Anor. The final orders of the court were not explicitly detailed in the case summary provided, but it is clear that the applicants were held jointly and severally liable for the defendants’ costs.

Orders