Heath v Greenacre Business Park Pty Ltd

The appeal concerned an application for costs against a non-party, Mr Nicholas Heath, in proceedings between Greenacre Business Park Pty Ltd (the defendant) and its lessors (the plaintiffs). The defendant alleged that misrepresentations made by the plaintiffs prior to entering into a lease, coupled with obstruction and access problems to the leased premises, caused a loss of customers and a decline in business. The primary judge had found that the director of the defendant company had engaged in improper conduct of the proceedings and had knowingly made false allegations.

The Court of Appeal was required to determine whether the primary judge erred in finding improper conduct by the defendant's director, specifically whether there was an error in a material finding of fact amounting to a *House v King* error. The court also had to consider whether to re-exercise the discretion under s 98(1) of the *Civil Procedure Act 2005* (NSW) to order costs against a non-party, and if so, whether exceptional circumstances justified such an order. Key considerations included the director's interest in the litigation as a significant creditor and indirect shareholder, his management of the litigation, the defendant's impecuniosity, and whether the director, acting reasonably, should have realised the proceedings had no reasonable prospects of success.

The Court of Appeal found that the primary judge had made an error in a material finding of fact regarding the director's conduct. The court concluded that exceptional circumstances existed to justify ordering costs against the non-party director, Nicholas Heath. These circumstances included the director's significant personal interest in the outcome of the litigation, his active management of the proceedings, and the impecuniosity of the defendant company, which meant that the plaintiffs would likely be unable to recover their costs from the defendant. The court determined that the director, in managing the litigation, should have appreciated that the defendant's allegations lacked reasonable prospects of success.

Consequently, the Court of Appeal allowed the appeal, set aside the primary judge's order, and ordered that Nicholas Heath pay the plaintiffs' costs of the proceedings below from 30 May 2014 on an indemnity basis. There were no orders as to the costs of the appeal itself, with each party to bear their own costs.