In the matter of Lorie Najjar and Sons Pty Limited (in liquidation) (No 9)

[2014] NSWSC 56

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Lorie Najjar & Sons Pty Limited (in liquidation) (No 9) [2014] NSWSC 56
Hearing dates:	19 December 2013
Decision date:	12 February 2014
Before:	Black J
Decision:	Orders made for termination of voluntary winding up. Parties to bring in agreed short minutes of order to give effect to judgment.
Catchwords:	CORPORATIONS - winding up - orders sought for voluntary winding up to be terminated - where judgment had been made for winding up to be stayed - where separate proceedings had been commenced for equitable contribution - whether stay of winding up should be continued pending determination of separate proceedings - whether winding up should be terminated. PROCEDURE - costs - application for costs order against non-parties - where non-parties funded the conduct of proceedings and had direct interest in outcome of proceedings - where there existed an indemnity clause under the funding agreement - whether it is just for non-parties to pay the liquidator costs ordered against liquidator in proceedings by way of indemnity - whether further costs should be payable by liquidator or non-parties.
Legislation Cited:	-Civil Procedure Act 2005 (NSW) ss 56, 67, 98(1)(b), 135 - Corporations Act 2001 (Cth) ss 482, 11(1)(b), 564, 588FA, 588FF - Supreme Court (Corporations) Rules 1999 (NSW) rr 2.3, 2.13, 2.13(3) - Uniform Civil Procedure Rules 2005 (NSW) rr 6.24, 36.1
Cases Cited:	- Bullock v London General Omnibus Co [1907] 1 KB 264 - Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) [2004] UKPC 39; [2005] 1 NZLR 145; [2004] 1 WLR 2087 - FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340 - Gore (t/as Clayton Utz) v Justice Corporation Pty Ltd [2002] FCAFC 83; (2002) 119 FCR 429; 189 ALR 712 - Gould v Vaggelas [1985] HCA 75; (1985) 157 CLR 215 - HRX Pty Ltd v Scott [2013] NSWSC 451 - In the matter of Lorie Najjar & Sons Pty Ltd (in liq) [2013] NSWSC 798; (2013) 94 ACSR 561 - Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd [2009] HCA 43; (2009) 239 CLR 75 - Johnsons Tyre Foundry Pty Ltd v Maffra Corporation [1948] HCA 46; (1948) 77 CLR 544 - Knight v FP Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178 - May v Christodoulou [2011] NSWCA 75; (2011) 80 NSWLR 462 - Mercy & Sons Pty Ltd v Wanari Pty Ltd (subject to deed of company arrangement) (in liq) [2000] NSWSC 756; (2000) 35 ACSR 70 - QBE Insurance (Australia) Ltd v Hotchin [2013] NSWSC 315 - Re F & A Henry (Gowrie) Pty Ltd (deregistered) [2012] NSWSC 1061 - Re Lorie Najjar & Sons Pty Ltd (in liq) (No 2) [2013] NSWSC 1059 - Re Warbler Pty Ltd (1982) 6 ACLR 526 - Secure Funding Pty Ltd v Stark [2013] NSWSC 1257 - Vero Workers Compensation (NSW) Ltd v Ferretti Pty Ltd (in liq) [2006] NSWSC 292; (2006) 57 ACSR 103 - Young v Hones [2013] NSWSC 1429
Category:	Interlocutory applications
Parties:	Lorie Najjar & Sons Pty Ltd (in liquidation) (First Plaintiff) Peter Paul Krejci in his capacity as Liquidator of Lorie Najjar & Sons Pty Ltd (Second Plaintiff) Najwa Najjar (Defendant) Grenstar Pty Ltd, Robert Najjar, Salam Najjar (joined as party 19 December 2013)
Representation:	Counsel: C Harris SC/T To (Plaintiffs) M Sahade (Defendant) D Eardley (Grenstar Pty Limited, Robert Najjar, Salam Najjar) Solicitors: Colin Biggers & Paisley (Plaintiffs) Pateman Lawyers (Defendant) Downeys Lawyers (Grenstar Pty Ltd, Robert Najjar, Salam Najjar)
File Number(s):	2010/158193

Judgment

1. The Defendant, Mrs Najwa Najjar, seeks an order terminating the winding up of Lorie Najjar & Sons Pty Ltd (in liq) ("Company"). Consequential questions then arise as to the orders to be made in respect of proceedings commenced by the Company and its liquidator, Mr Peter Krejci ("Liquidator") against Mrs Najjar and as to a dispute between the Liquidator and Mr Robert Najjar, Mrs Salem Najjar and Grenstar Pty Ltd ("Grenstar") (together, "Funding Parties") who claim to be creditors of the Company and also funded those proceedings, as to their obligations under the relevant Funding and Indemnity Agreement dated 13 February 2013 ("Funding Agreement").

Background to the present application

1. Before turning to the matters that need to be decided in this application, I should first say something as to the nature of the proceedings. The Company was controlled by Mr Lorie Najjar, the late husband of Mrs Najjar, and was involved in property development and construction, at least partly in conjunction with his father, Mr Robert Najjar. After Mr Lorie Najjar's death, disputes arose between Mrs Najjar on the one hand and Mr Robert Najjar and other members of his family in respect of various dealings. Mrs Najjar subsequently placed the Company in voluntary winding up and the Liquidator was appointed as its liquidator. In late March 2010, Mr Robert Najjar and Mrs Salem Najjar paid out a debt owed by Grenstar and the Company to ING and took an assignment of ING's rights.

1. By a Statement of Claim filed in August 2010, and an Amended Statement of Claim filed in February 2013, the Liquidator contended that certain payments made by the Company to Mrs Najjar were unreasonable director-related transactions under s 588FDA of the Corporations Act 2001 (Cth) and were otherwise in breach of her duties as a director of the Company and, following amendments made in February 2013, also advanced a further claim to recover shareholder loans to Mrs Najjar and her late husband recorded in the Company's financial statements.

1. By an Interlocutory Process filed on 20 February 2012, but not pressed until early 2013, Mrs Najjar initially sought an order under s 482 of the Corporations Act that the winding up of the Company be terminated and alternatively an order that it be stayed pending determination of the costs properly payable to the Liquidator. In February 2012, Mrs Najjar paid the sum of $200,000 into Court in connection with her application to stay or terminate the winding up. An amount of $12,500 was previously paid by Mrs Najjar, by consent, to cover costs incurred by the Company and the Liquidator in respect of the timing of that application.

1. The application for the stay of the winding up was ultimately pressed and was heard on 7-8 and 12 March, 30 April and 16 May 2013, with additional hearing days being allocated when the matter was not completed within the time initially allocated to it. The Funding Parties were granted leave to be heard in that application under r 2.13 of the Supreme Court (Corporations) Rules 1999 (NSW). I summarised the result of that application in my principal judgment delivered on 18 June 2013 ([2013] NSWSC 798; (2013) 94 ACSR 561) at [134]-[135] as follows:

"I have ultimately formed the view that the winding up should be stayed, in what seem to me to be exceptional circumstances. I reach that result because the claims against the Company on which the Liquidator relies do not, in my view, support a finding that the Company is presently insolvent. The claim by Grenstar in respect of the AMP loan and the claim by [Mr Robert Najjar] and [Mrs Salaam Najjar] for contribution or unjust enrichment in respect of the ING loan are unliquidated claims that, on the authority of Box Valley v Kidd, do not support a finding of insolvency. The assignment of the ING debt to [Mr Robert Najjar] and [Mrs Salaam Najjar] does not, for the reasons noted above, support a finding that the Company is presently insolvent. Any claim by [Mrs Najwa Najjar] is also an unliquidated claim that does not support a finding of insolvency; and the Liquidator's reliance on that claim has the additional difficulty that he has rejected a proof of debt for that claim while inconsistently asserting in these proceedings that it should be treated as a debt in assessing the Company's solvency. I have, as I noted above, had regard to the view expressed by Ward J in Yelin Group Pty Ltd above at [46], but it does not seem to me that her Honour's reasoning should be extended to permit a liquidator to bring proceedings under, inter alia, Part 5.7B of the Corporations Act where a company is not presently insolvent.

This result will leave it open to Grenstar, [Mr Robert Najjar] and [Mrs Salaam Najjar] to bring such proceedings against the Company as they may be advised, subject to leave of the Court under s 500(2) of the Corporations Act while the winding up is stayed, and without such leave if the winding is ultimately terminated. The proceedings generally should be stayed while the winding up is stayed."

1. In my further judgment delivered on 8 August 2013 ([2013] NSWSC 1059), I made orders as to the costs of the proceedings, including that the Liquidator should pay the costs of Mrs Najjar's Interlocutory Process filed on 20 February 2012, on the basis that he was the true opponent of the application for the stay of the winding up. In that judgment, I observed that the Liquidator was indemnified against those costs under the Funding Agreement with the Funding Parties and I set out the relevant terms of that Agreement. I noted that the Liquidator had made clear, in the course of the hearing, that he had rights to indemnity under the Funding Agreement and that the Funding Parties had not sought to controvert that proposition in the course of that hearing.

1. After the delivery of my principal judgment and prior to the delivery of my costs judgment, by letter dated 2 July 2013, the Funding Parties' solicitors had advised the Liquidator's solicitors that:

"As previously foreshadowed, we are instructed to advise you that our client terminates the Funding and Indemnity Agreement pursuant to clause 9.1 thereof."

This matter was not addressed in my costs judgment because the Court was not then aware of it. The termination of the Funding Agreement under cl 9.1 affected the Funding Parties' future obligations under that Agreement and certain rights of the Liquidator are expressly preserved by cl 9.2 of that Agreement, which relevantly provided that:

"9.2 If the Funders terminate this Agreement and any Proceedings referred to in this Agreement are continuing:

(a) such termination shall not affect any parties' accrued rights as at the date of termination

(b) the Funders' obligation under clause 4 and clause 2 of this Agreement will continue, and

(c) the Funders must pay into the trust account of the Solicitors without delay an amount reasonably estimated by the liquidator (but all times at the discretion of the liquidator) to cover the Expenses likely to be incurred through to the conclusion of all Proceedings."

Clause 2.1 of the Funding Agreement in turn provided that the Funding Parties agreed to pay the Expenses in accordance with the agreement. The term "Expenses" was defined to include, relevantly, any monies payable to Mrs Najjar or any other party as a result of any costs orders against the Liquidator in respect of the Proceedings. The term "Proceedings" was defined to include the relevant proceedings and expressly extended to the defence of interlocutory proceedings commenced by Mrs Najjar, which would in turn include the Liquidator's costs of defending Mrs Najjar's application to terminate the winding up.

1. For the reasons set out in separate interlocutory judgments delivered at the hearing of this application, I granted leave to the Liquidator to file an Amended Interlocutory Process which, inter alia, sought leave to join the Funding Parties as party to the proceedings and held that the Funding Parties should be joined to the proceedings under r 2.13 of the Supreme Court (Corporations) Rules and r 6.24 of the Uniform Civil Procedure Rules 2005 (NSW), since their interests were directly affected by Mrs Najjar's application to terminate the winding up, with the likelihood of consequential costs orders in the proceedings against the Liquidator and a claim for indemnity against the Funding Parties under the Funding Agreement, and also by the dispute between Mrs Najjar and the Liquidators as to whether certain costs orders should be made directly against the Funding Parties.

Application to terminate the winding up

1. Section 482 of the Corporations Act relevantly provides:

"482 Power to stay or terminate winding up

(1) At any time during the winding up of a company, the Court may, on application, make an order staying the winding up either indefinitely or for a limited time or terminating the winding up on a day specified in the order.

(1A) An application may be made by:

(a) in any case - the liquidator, or a creditor or contributory, of the company ...

(3) Where the Court has made an order terminating the winding up, the Court may give such directions as it thinks fit for the resumption of the management and control of the company by its officers, including directions for the convening of a general meeting of members of the company to elect directors of the company to take office upon the termination of the winding up."

The court's power to terminate a winding up extends to a voluntary winding up, by reason of s 511(1)(b) of the Corporations Act.

1. I summarised the principles applicable to termination of a winding up under s 482 of the Corporations Act in my principal judgment, and referred to the often-quoted summary of the relevant factors by Master Lee QC of the Supreme Court of Queensland in Re Warbler Pty Ltd (1982) 6 ACLR 526 at 533. I also referred to the relevant interests in such an application, identified by Austin J in Mercy & Sons Pty Ltd v Wanari Pty Ltd (subject to deed of company arrangement) (in liq) [2000] NSWSC 756; (2000) 35 ACSR 70 at [47]-[51] and to the summaries of relevant factors in Vero Workers Compensation (NSW) Ltd v Ferretti Pty Ltd (in liq) [2006] NSWSC 292; (2006) 57 ACSR 103 at [17] and in Re F & A Henry (Gowrie) Pty Ltd (deregistered) [2012] NSWSC 1061 at [16]. I also addressed several of the factors relevant to a termination of the winding up in my principal judgment and no party to this application sought to reopen those matters. I held that the Company was presently solvent, although the Funding Parties had asserted substantial unliquidated claims against it. I held that no public interest reason not to terminate the winding up was established.

1. In this application, Mrs Najjar relies on her affidavit sworn 28 October 2013 and the affidavit of her solicitor, Mr Steven Pateman, sworn 17 December 2013 in support of the application to terminate the winding up. Mrs Najjar's affidavit indicates that she is aware that she may presently stand as a creditor of the Company, and undertakes to the Court that she will forgive any and all debts owed by the Company to her and will refrain from asserting the existence of any such debt where it has incurred or has arisen before the date of termination of the winding up of the Company. It is not necessary for me to determine whether such an undertaking should be accepted, since I held in my earlier judgment that Mrs Najjar's claim against the company is an unliquidated claim and not a debt to be taken into account in determining the Company's solvency.

1. The application to terminate the winding up is no longer opposed by the Liquidator and the Liquidator and Mrs Najjar have agreed the amount payable to him, and an amount payable to a creditor of the Company, on termination of the winding up.

1. By letter dated 18 December 2013, the Funding Parties' solicitor advised the Liquidator's solicitors that they did not take a position in respect of Mrs Najjar's application to terminate the liquidation of the Company, which they indicated "has at all times been a matter between the liquidator and [Mrs Najjar]". In their written outline of submissions, the Funding Parties submitted that they did not wish to be heard in respect of Mrs Najjar's application to terminate the winding up of the Company, other than as to the submission that:

"[The Funding Parties] take the view that in considering section 56 of the Civil Procedure Act, a more appropriate course would be for the liquidation to be stayed pending the determination of the contribution proceedings. Such a course may have some benefit and would save costs in the event that the contribution proceedings against [the Company] are successful, and the ultimate outcome would be that [the Company] would re-enter into liquidation, rendering the termination of the liquidation futile."

The reference to the "contribution proceedings" in this submission is to separate proceedings commenced by the Funding Parties against Mrs Najjar, in which they also seek leave to join the Company as a defendant.

1. I granted leave to the Funding Parties to file further evidence, if so advised, in opposition to the application to terminate the winding up after they were joined as defendants in the proceedings, and made directions for all parties to indicate whether they sought a further oral hearing in respect of that evidence. The Funding Parties, the Liquidator and Mrs Najjar each advised that they did not require such a further hearing. Pursuant to that leave, the Funding Parties filed an affidavit of a solicitor in the employ of their solicitors, Ms Suzi Kim, affirmed 31 January 2014. That affidavit refers to the instructions given by Mr Robert Najjar to Ms Kim that Grenstar and the Company jointly borrowed the amount of $1,225,000 from ING Bank and to correspondence, produced on subpoena by ING Bank, between the solicitors for ING Bank, an officer from ING Bank and Henry Davis York, then the solicitors for the Liquidator. That correspondence appears to indicate ING's understanding that the loan was made jointly to Grenstar and the Company and also refers to a revised draft Deed of Assignment, as at 18 February 2010. It may be that that correspondence will be relied upon by the Funding Parties in a claim for contribution against the Company in respect of repayment of the ING loan; however, as I noted in my primary judgment, such a claim is an unliquidated claim and does not give rise to any present debt against the Company which would support a finding that it is presently insolvent.

1. Ms Kim's affidavit also annexes a draft Amended Statement of Claim, which would, if leave is granted to file it, join the Company as Second Defendant to the proceedings. It is difficult to assess the strength of the asserted claims, and I do not consider it appropriate for me to seek to do so, particularly where the proposed pleading contains a number of allegations of a conclusory character which do not identify the material facts relied on to assert them - for example, paragraph 11 asserts a "course of dealings" of a particular kind without identifying any particular dealing falling within it and paragraphs 17-18 plead a common intention of several parties, with the only particulars provided being a reference to an oral agreement of unidentified content formed on an unidentified date - which are not yet supported by substantive evidence. I will refer to other aspects of that affidavit in paragraph 39 below. It does not seem to me that the matters referred to in Ms Kim's affidavit outweigh the difficulties arising with a stay of the winding up, rather than a termination of the winding up, to which I will now refer.

1. I do not accept the Funding Parties' submission that a stay of the winding up would be the more appropriate course pending the determination of the contribution proceedings they have brought against Mrs Najwa Najjar, to which they seek to join the Company. First, although I noted a possibility that the winding up could be stayed pending the outcome of such proceedings in my principal judgment, a significant difficulty with that course is that it would leave the Company exposed to the continuing costs of liquidation, for so long as it took to determine the contribution proceedings. A second difficulty with that course is, as the Liquidator points out, that, if leave were granted to the Funding Parties to pursue the contribution proceedings against the Company, it would leave the Liquidator to defend those proceedings without currently being in funds to do so, or alternatively leave the Company without the opportunity to defend the proceedings on their merits.

1. The Funding Parties also refer to my observations in Secure Funding Pty Ltd v Stark [2013] NSWSC 1257 at [20] as to the circumstances in which the court may stay proceedings against a party under ss 67 and 135 of the Civil Procedure Act 2005 (NSW). I do not consider that that judgment is of any assistance in respect of this application, since the principles applicable to a stay of proceedings involve different issues to those applicable to a stay or termination of a winding up. It may be that the Funding Parties' reference to Secure Funding was intended to support a submission that an order should be made in the "contribution proceedings" they have brought against Mrs Najwa Najjar, staying these proceedings, including the application to terminate the winding up. However, the Funding Parties did not pursue such an application in the contribution proceedings; and the reasons that support a termination of the winding up would also support, in the contribution proceedings, a refusal to stay the application to terminate the winding up.

1. For the reasons set out in my principal judgment and above, and in circumstances that the Liquidator's costs as agreed with Mrs Najjar and the only liquidated debt of the Company that has been shown to exist will be paid from the monies held in Court, I am satisfied that the winding up should be terminated. It is common ground between Mrs Najjar and the Liquidator that the orders made, so far as monies were paid into Court by Mrs Najjar, should be as follows:

"Of the monies paid into Court by Mrs Najjar:

(a) An amount of $7,423.33 be released to the Liquidator for payment to Baker & Company in satisfaction of the debt owed by the Company;

(b) An amount of $56,325.45 be released to the Liquidator in satisfaction of the remuneration, costs and expenses of the liquidation of the Company as agreed between the parties; and

(c) The balance of the monies be paid to Mrs Najjar."

Discontinuance of the proceedings

1. It is common ground between Mrs Najjar and the Liquidator that the termination of the winding up means that these proceedings should not continue. The Liquidator submits that, if the winding up is terminated, he should be permitted to discontinue the proceedings. Mrs Najjar consented to the Liquidator being granted leave to discontinue the proceedings on the basis that costs were ordered against him. I deal with the question as to the costs orders that should be made below. The order sought by the Liquidator that he be granted leave to discontinue the proceedings may be made by consent, since I am satisfied that an order for costs should be made against the Liquidator, although orders should also be made in respect of the Funding Parties as noted below.

Whether an order should be made that the Funding Parties pay the Existing Costs to the Liquidator

1. Mrs Najjar seeks an order for costs against the Liquidator on the basis that the Liquidator was the only person who could have brought the claim under s 588FF of the Corporations Act. The Liquidator ultimately did not press an application to vacate the costs orders already made against him in the proceedings and to have those costs orders made instead against the Funding Parties and now accepts that, as a term of leave to discontinue the proceedings, he should be required to pay Mrs Najjar's costs to the extent they are the subject of existing costs orders in her favour ("Existing Costs"). Accordingly, no further order needs to be made in respect of the Existing Costs as between Mrs Najjar and the Liquidator. Mrs Najjar sought a further qualification in such an order that the Liquidator should be required to pay her costs and be responsible for his own costs and expenses of the proceedings without recourse to the Company's assets. I do not accept that it is necessary to include such a qualification in the costs order, for the reasons indicated in my earlier costs judgment in respect of the same submission in respect of the costs of the application to terminate the winding up.

1. The Liquidator seeks a further order that the Funding Parties pay him costs in the amount of the Existing Costs. That order would provide, in effect, for the Funding Parties to indemnify the Liquidator for those costs. Mrs Najwa Najjar does not oppose such an order. The order sought by the Liquidator in this regard reflects the emergence of a dispute as to whether the Funding Parties will meet the Existing Costs ordered against the Liquidator as, on the face of it, the Funding Agreement requires. By letter dated 1 November 2013, the Liquidator's solicitors requested written confirmation from the Funding Parties' solicitors that, pursuant to the Funding Agreement, the Funding Parties were liable for and would pay the current costs order and any future costs orders made against the Liquidator in favour of Mrs Najjar. This letter anticipated at least the possibility of a dispute as to indemnity, observing that, absent the requested confirmation, the Liquidator's solicitors would obtain instructions to commence proceedings for declarations that the Funding Parties were obligated to pay these amounts. As the Funding Parties point out in submissions, at least at this point the Liquidator's solicitors contemplated that it may be necessary for the Liquidator to bring separate proceedings in that regard. By email dated 13 November 2013, the Funding Parties' solicitor responded that, inter alia, he was "instructed to offer no comment" with respect to the claim for indemnity for the costs orders under the Funding Agreement. At least by that point, it appears that a dispute as to the status of the indemnity had emerged.

1. The Liquidator submits that the Court has jurisdiction under s 98 of the Civil Procedure Act to make a costs order in respect of the Existing Costs (as well as other costs to which I will refer below) against the Funding Parties, although they were not parties to the proceedings. (I interpolate that the Liquidator did not seek to rely on r 2.13(3) of the Supreme Court (Corporations) Rules which might have supported a more limited order for costs against the Funding Parties). The Liquidator contends that the jurisdiction under s 98 of the Civil Procedure Act should be exercised in this case and that the Funding Parties should be ordered to pay him the Existing Costs (as well as pay the further costs that I will address below) because, inter alia, the Funding Parties had a direct interest in the outcome of the proceedings. In my view, a proper basis has been established for an order under s 98 of the Civil Procedure Act that the Funding Parties pay the Liquidator the amount of the Existing Costs that he is ordered to pay Mrs Najjar, so as to give effect to the indemnity provided under the Funding Agreement, for the reasons that I set out below.

1. Section 98 of the Civil Procedure Act relevantly provides that:

"(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."

The reference in s 98(1)(b) to "full power" to determine by whom, to whom and to what extent costs are to be paid is to be understood as providing the Court with power to make a costs order that it regards as just in all the circumstances of the case, which is unconstrained except to the extent that it must be exercised judicially and in accordance with relevant legal principles: QBE Insurance (Australia) Ltd v Hotchin [2013] NSWSC 315 at [54]. It seems to me that power is sufficiently wide, in its terms, to permit an order that an unsuccessful party (here, the Liquidator) pay the costs of a successful party (her, Mrs Najjar) and that a non-party (here, the Funding Parties) pay costs to the unsuccessful party in the amount of the costs ordered against it. Such an order operates, in substance, in the same manner as an order for costs against the non-party as between the unsuccessful party and that non-party, without disturbing the successful party's ability to enforce its order for costs against the unsuccessful party.

1. The Court may, in appropriate circumstances, make an order for costs against a non-party to the proceedings. Whether such an order should be made is to be determined by reference to the factors identified by the High Court in Knight v FP Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178 at 192-193 where Mason CJ and Deane J (with whom Gaudron J concurred at 205) observed that:

"For our part, we consider it appropriate to recognise a general category of case in which an order for costs should be made against a non-party ... That category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made."

In a separate judgment in Knight, Dawson J observed (at 202) that:

"The cases therefore establish a long-asserted jurisdiction to award costs in appropriate cases against a person who is not a party to the proceedings where that person is the effective litigant standing behind an actual party or where there has been a contempt or abuse of the process of the Court."

1. In Gore (t/as Clayton Utz) v Justice Corporation Pty Ltd [2002] FCAFC 83; (2002) 119 FCR 429; 189 ALR 712, the Full Court of the Federal Court held that a litigation funder should pay costs in respect of a specified period. In Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) [2004] UKPC 39; [2005] NZLR 145; [2004] 1 WLR 2087, the Judicial Committee of the Privy Council held that a litigation funder, who was joined to the proceedings for that purpose, should pay the costs of proceedings where the respondents were unable to do so. Lord Brown (speaking for the Judicial Committee of the Privy Council) (at [25]) distinguished the position of, on the one hand, a "pure funder" which had no personal interest in litigation and did not stand to benefit it or control it, which would not generally be the subject of an order for costs, and, on the other hand, a non-party that either substantially controlled or at least stood to benefit from the litigation and was promoting and funding litigation for its own financial benefit. Their Lordships referred to Gore above and noted that they were content to assume that a non-party "could not ordinarily be made liable for costs if those costs would in any event have been incurred without such non-party's involvement in the proceedings". Their Lordships referred specifically to the position where non-parties fund liquidators or financially insecure companies in litigation designed to advance the funder's own financial interests and referred to several authorities dealing with that position. Their Lordships (at [29]) summarised the position established by the authorities as that:

"Generally speaking, where a non-party promotes and funds proceedings by an insolvent company solely or substantially for his own financial benefit, he should be liable for the costs if his claim or defence or appeal fails."

1. In FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340 at [210], Basten JA (with whom Beazley and Giles JJA agreed) noted that relevant criteria for such an order included that the unsuccessful party was the moving party; the source of funds for the litigation was the non-party or its principal; the conduct of the litigation was unreasonable or improper; the non-party or its principal had an interest which was equal to or greater than that of the party or, if financial, was a substantial interest; and the unsuccessful party was insolvent. His Honour also observed (at [214]) that:

"The criteria identified in Knight v FP Special Assets should not ultimately be treated as separate and independent factors. Each requires an evaluative assessment of factors which will clearly tend to interact. Nor should it be forgotten that the power is only to be exercised in exceptional cases. In many cases involving individuals in the superior courts the parties may lack the resources to meet the costs of the litigation if unsuccessful. Similarly, there will frequently be a non-party, be it a company officer or solicitor, who will be active in the conduct of the litigation and who will obtain some direct or indirect financial benefit from its success. The fact that it is entirely proper for legal practitioners to runs cases on a speculative basis, so long as satisfied that they have reasonable prospects of success, demonstrates that care must be taken not to apply the criteria mechanically. Careful attention is required to the conduct of the party said to be involved in the litigation and the nature of the "interest" in its outcome or subject-matter."

The decision of the High Court in Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd [2009] HCA 43; (2009) 239 CLR 75, to which the parties did not refer, in turn deals with the limit to the power to award costs against a non-party under former r 42.3 of the Uniform Civil Procedure Rules which has no application in this case. The relevant principles were summarised by Bergin CJ in Eq in HRX Pty Ltd v Scott [2013] NSWSC 451 at [56], where her Honour made an order for costs against a company which had funded and stood to benefit from its employee's defence of proceedings by his former employer, as follows:

"Factors for consideration in determining whether an order should be made under s 98 of the Act include: that the non-party played an active part in the conduct of litigation; that the non-party funded the litigation; that the non-party had been the cause of the proceedings in that such proceedings would not have been undertaken had it not been for the non-party's intervention; that the unsuccessful party to the litigation is a "man of straw"; and that the non-party, or its principal, had a substantial interest (not necessarily financial) in the litigation ... ."

1. The circumstances referred to by the High Court in Knight in which an order for costs made against a third party are not closed or exhaustive and it is not necessary for each of those circumstances to be satisfied before a costs order may be made under s 98 of the Civil Procedure Act: Gore above at [23], [62]; QBE Insurance above at [58]. The exercise of the power to make a costs order against a third party is nonetheless reserved for cases that are "outside the ordinary run of cases where parties pursue or defend claims for their own benefit at their own expense" and should be used sparingly: Dymocks Franchise Systems above at [25]; FPM Constructions above at [214]; May v Christodoulou [2011] NSWCA 75; (2011) 80 NSWLR 462 at [93]; QBE Insurance (Australia) Ltd v Hotchin above at [55].

1. The Liquidator points out, and I accept, that the Funding Parties were the major persons claiming to be creditors of the Company (with the exception of a creditor with a debt of approximately $7500); that, apart from the Funding Agreement, the Company and the Liquidator were unfunded in respect of the proceedings; and the Funding Parties' undertaking to fund the litigation made the proceedings, including the defence of Mrs Najjar's interlocutory application, possible. The Liquidator also points out that the Funding Parties entered into written funding agreements with the Liquidator on 17 March 2010 and 13 February 2013 by which they required him to commence and prosecute the proceedings. The Liquidator also points out, and I also accept, that cls 2.1 and 2.2 of the Funding Agreement, together with the associated definitions of "Expenses", "Proceedings" and "Supreme Court Proceedings" make clear that the costs otherwise payable by the Liquidator to Mrs Najjar are within the Expenses (as defined) payable by the Funding Parties under the Funding Agreement. There is evidence that the Funding Parties selected both the former and the present solicitors who represented the Liquidator and the Company in the proceedings and selected senior counsel to be engaged by him to appear for the Liquidator and the Company in the proceedings. The Liquidator also points out that, by the terms of the Funding Agreements, the Funding Parties required that the Liquidator either make or acquiesce in their making an application under s 564 of the Corporations Act for priority over any monies recovered by the proceedings. The Liquidator also points to the several occasions in the course of the proceedings where the Funding Parties recognised that their involvement in the proceedings reflected their position as funders (T 31-32, 36, 44, 180).

1. The Liquidator also points to my observation in my principal judgment at [129] that:

"It is not apparent to me why there would be any inequity or unfairness in [the Funding Parties], in their capacity as litigation funders, bearing the costs of proceedings which they have contracted to bear under the terms of the relevant funding agreements or being left to bear the risk that, for whatever reason, the proceedings do not result in a successful conclusion which they have assumed by entry into the funding agreements. I should add that [the Funding Parties], as litigation funders, appear to have taken the benefit of those agreements by exercising a degree of influence over the conduct of the proceedings in their capacity as funders, by at least determining the solicitors who were to be retained by the Liquidators in the proceedings (Initial Funding Agreement, Ex A3, p56; Second Funding Agreement dated 13 February 2013, Ex A8). (I should again interpolate that no allegation of impropriety was put by [Mrs Najjar] against the Liquidator in this respect.) ..."

1. The Liquidator also refers to my observation in the costs judgment at [14], in indicating why I did not consider it necessary to make a specific order that the Liquidator should pay the costs of the proceedings without any right of indemnification from the Company's assets or any of the monies paid into Court in these proceedings, that:

"This question arises in the context that the Liquidator is indemnified against the costs that he will be ordered to pay under a Funding Agreement with [the Funding Parties]. By a Funding and Indemnity Agreement dated 13 February 2013 between the Liquidator and the Funding Parties, which was the successor to an earlier funding agreement, the Funding Parties agreed to indemnify and hold harmless the Liquidator in respect of the "Expenses", as defined, that indemnity to endure and continue to apply notwithstanding any termination of the Funding Agreement (clause 5). The term "Expenses" was defined to include any monies payable to [Mrs Najjar] or any other party as a result of any costs orders against the Liquidator in respect of the Proceedings, as defined. The term "Proceedings" was in turn defined to include the relevant proceedings and any interlocutory applications and any other action necessary to continue to prosecute or defend any interlocutory application. The application brought by [Mrs Najjar] was plainly an interlocutory application within the definition of "Supreme Court Proceedings" in the Funding Agreement; the Liquidator's defence of it was a step taken in defending such an application and was therefore within the definition of "Proceedings" in the Funding Agreement; the monies payable to [Mrs Najjar] as a result of the costs orders are in respect of the Proceedings and therefore within the definition of "Expenses" in the Funding Agreement; and the Liquidator is therefore indemnified in respect of those monies under clause 5 of the Funding Agreement."

1. The Funding Parties resist an order that they pay the Existing Costs to the Liquidator and submit that the relief sought by the Liquidator amounts, in substance, in an attempt to enforce the Funding Agreement by an order in the nature of specific performance of that agreement in circumstances where a dispute has arisen. I accept that the order made sought by the liquidator in respect of the Existing Costs would, in substance, have that effect. However, that submission does not provide reason not to make that order, where it falls within the scope of the power conferred upon the Court by s 98 of the Civil Procedure Act and is otherwise appropriate in the relevant circumstances.

1. By a statement of their grounds of opposition to an orders for costs against them filed on 13 December 2013, pursuant to a direction made by the court, the Funding Parties contend that:

"the Funding Agreement was breached by the [Liquidator] insofar as:

(a) He failed to lead adequate evidence of the date of assignment of the ING loan and the amount of the ING loan in the proceedings in breach of clause 6.1 and the subjoined paragraphs thereto of the Funding Agreement; and

(b) That there were requests for prospects of success advice by the Solicitor for the [Funding Parties] and confirmation of same and that these requests were not met in breach of clause 6.1 and 6.3 of the Funding Agreement."

The Liquidator responded that any claim by the Funding Parties for breach of the Funding Agreement was at an inchoate and general stage and that it would not be appropriate for the Court, in exercising a discretion as to costs, to draw any conclusions as to whether there had been any breach of that agreement. I accept that it is not necessary or appropriate to reach any final decision as to that question, although it is necessary to assess the matters raised by the Funding Parties so far as they are relied on in opposition to an order they the pay the Existing Costs to the Liquidator and any order in respect of other costs of the proceedings.

1. It does not seem to me that the grounds identified by the Funding Parties' in opposition to an order for payment of the Existing Costs under the Funding Agreement are sufficiently cogent to outweigh the other matters on which the Liquidator relies to support the order that the Funding Parties pay him the Existing Costs. As the Liquidator points out, the Funding Parties' statement of their grounds of opposition to an order for costs against them does not, in terms, deny the Liquidator's right of indemnity under the Funding Agreement, although they seek to establish a countervailing claim by reference to the two matters referred to in the grounds of opposition. The Funding Parties' obligations under cl 2 of the Funding Agreement are not conditional upon the Liquidator's compliance with his obligations under cls 6.1 and 6.3 of that agreement. Mr Eardley, who appeared for the Funding Parties, acknowledged in oral submissions that one view would be that the Liquidator's right to indemnity exists irrespective of any claim of the kind identified by the Funding Parties that might otherwise be brought against the Liquidator, and was unable to identify anything that could be put in opposition to that proposition.

1. The first ground of opposition identified by the Funding Parties, in respect of the Liquidator's claimed failure to lead "adequate evidence" of the date of assignment of the ING loan is concerned, relates to an issue addressed in my principal judgment at [81]-[83], as follows:

"The evidence indicates that the extent of the rights assigned may differ significantly depending on the date of the assignment. One of the relevant accounts commenced with a balance on 10 October 2003 of $1,217,802 but shows a balance at 30 April 2009 of $316.63 and at 31 May 2009 of $318.16. On 24 March 2010, the balance of the other relevant account was paid down from $1,003,713.96 to nil. In the result, if the Deed of Assignment was executed prior to 24 March 2010, then the amount subject to the assignment would have been in the order of $1 million; if the Deed of Assignment was executed on that date, there is a question (not adequately addressed in either party's submissions) as to how the amount of the indebtedness is determined, when that amount changed substantially on that date; and, if the Deed of Assignment was executed after 24 March 2010, the amount of the debt due to ING subject to the assignment was in the order of $318.

The issue as to the balance of the ING loan accounts at the date of the assignment arose in the Liquidator's cross examination on 30 April 2013 and I adjourned the proceedings in order to allow an opportunity for the Liquidator to lead further evidence of the matter. In order to ensure that the proceedings would proceed in a fair and orderly way on the next occasion, I made an order that the Liquidator serve any further evidence which he sought to lead in respect of the amount of the ING debt by 8 May 2013, with no further evidence to be led after that date without leave of the Court, and made a corresponding direction for [Mrs Najwa Najjar]'s evidence in response. The Liquidator did not seek to lead evidence of that matter either in accordance with that direction or prior to the resumption of his cross-examination on 16 May 2013. Instead, Mr Miller sought to lead that evidence in re-examination of the Liquidator. I did not permit that course for reasons set out in my judgment on that day. In summary, that course seemed to me to be inconsistent with the direction I had previously made as to how such evidence should be led so as to secure, inter alia, that [Mrs Najwa Najjar] would have fair notice of the evidence and an opportunity to respond to it; second, did not seem to me properly to amount to re-examination; and, third, was likely to have the result that either the Liquidator's cross-examination would then have to be reopened or the matter would again have to be adjourned to allow [Mrs Najwa Najjar] a fair opportunity to investigate the new evidence to be led in re-examination by the Liquidator, without the notice that the Court's direction had been intended to provide. If the Liquidator sought to lead further evidence at to this matter, the proper way to do so was in accordance with the Court's direction rather than in re-examination.

The date of the assignment is not evident from the Deed of Assignment, since each of the counterparts executed by ING and [Mr Robert Najjar] and [Mrs Salam Najjar] is undated. Those who would have direct knowledge of that matter did not give evidence of it. No officer of ING gave evidence as to the date it executed its counterpart of the Deed of Assignment or whether that occurred before or after the ING debt was substantially repaid. It seems to me that the Liquidator could readily have called such evidence on subpoena where the debt balance at the time the assignment took place had plainly become a central issue and an adjournment had been allowed to provide the Liquidator an opportunity to lead further evidence as to that issue. There was no explanation for the Liquidator's failure to call that evidence and I draw a Jones v Dunkel inference that such evidence would not have assisted the Liquidator. [Mr Robert Najjar] also did not give evidence as to the date on which he executed his counterpart of the Deed of Assignment or whether that occurred before or after the ING debt was substantially repaid. In these circumstances, the Court should at least be less likely to draw inferences favourable to the Liquidator from other evidence in respect of the relevant matters: Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418-419; Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361; (2011) 276 ALR 375 at 393-394. SN did not give evidence as to these matters and I draw a Jones v Dunkel inference that such evidence would also not have assisted the Liquidator. [The Funding Parties], who were heard in the proceedings in accordance with rule 2.13 of the Supreme Court (Corporations) Rules, also did not seek to lead evidence as to this matter, although Mr Eardley (who appeared for [the Funding Parties]) had foreshadowed the possibility that they might do so (T182) and directions were made in anticipation of that possibility."

1. The Funding Parties rely on an affidavit of their solicitor, Mr David Downey, dated 12 December 2013 in support of this ground of opposition. That affidavit was filed in the contribution proceedings commenced by the Funding Parties against Mrs Najwa Najjar, but read in this application. That affidavit annexes correspondence contained in the electronic file of the Liquidator's former solicitors, which Mr Downey had forwarded to the current solicitors for the Liquidator by letter dated 27 November 2013, stating in that letter that the correspondence:

"evidences the date of execution [of the Deed of Assignment between the Funding Parties and ING] as March 2010."

1. The attached correspondence appears to evidence the date of the Funding Parties' (as distinct from ING's) execution of that Deed of Assignment. However, the issue addressed in my principal judgment (as the extract quoted above makes clear) was when the Deed of Assignment was executed by both parties to it, including ING, so as to take effect. The documents annexed to Mr Downey's affidavit suggest that the Deed of Assignment was executed by the Funding Parties on 17 March; however, other requirements of ING remained outstanding after that date, as indicated in an email dated 18 March from ING's solicitors; the Funding Parties' solicitor requested a waiver of those requirements so that settlement could proceed on 22 March and the documents do not indicate whether that waiver was given or ING's requirements were subsequently satisfied; and a letter dated 24 March 2010 relating to a new borrowing by Mr Najjar from ING does not indicate when the Deed of Assignment was ultimately executed by ING. I raised with Mr Eardley, in the course of oral submissions, whether there was anything in those documents to which he could draw attention which established when ING executed the Deed of Assignment, as distinct from when the Funding Parties did so, and he was unable to draw my attention to any such matter and indicated that he could take the Court to no further evidence that would otherwise establish the date of the ING assignment.

1. The Funding Parties also rely on a second affidavit of Mr David Downey dated 12 December 2013, also filed in the contribution proceedings commenced by the Funding Parties against Mrs Najjar, but read in this application. That affidavit in turn annexes an affidavit of Mr Downey dated 3 December 2013 sworn in these proceedings, which the Funding Parties did not seek to file or read in this application. Mr Downey's unread affidavit of 3 December in turn set out the circumstances in which Mr Downey attended for the swearing of an affidavit dated 6 May 2013 by Mr Robert Najjar and annexes that affidavit which was also not read in these proceedings. It appears that Mr Downey's affidavit of 3 December 2013 may be directed to the question whether Mr Robert Najjar's affidavit could properly have been read in respect of the question of the date he signed the Deed of Assignment (which, I interpolate, seems to be established by the documentary evidence to which I referred above). However, the Funding Parties relied on Mr Downey's affidavit on 3 December 2013 in this application only to establish the fact that it was sworn and not for its truth. It does not seem to me that there is any matter in this application to which the mere fact that affidavit was sworn, as distinct from its truth, is relevant and I am therefore not assisted by it.

1. So far as the Funding Parties rely upon a suggestion that the Liquidator should have tendered certain documents that are claimed to establish the date of the assignment of the ING loan, it is not apparent to me that those documents establish that matter. At best, they establish the date on which the Funding Parties executed the Deed of Assignment and the date on which there was planned to be a "settlement" as between ING and the Funding Parties, but not whether the proposed settlement proceeded on the date initially scheduled for it, or what was comprised in it, or, critically, when ING executed the Deed of Assignment so that it took effect.

1. The Funding Parties also addressed this issue in Ms Kim's further affidavit dated 31 January 2014, filed by leave, to which I have referred above. I noted, in my principal judgment at [81], that if the Deed of Assignment were executed prior to 24 March 2010, then the amount subject to the assignment would have been in the order of $1 million. Ms Kim's affidavit annexes an exchange of emails with a solicitor employed by the former solicitors for the Liquidator and the Funding Parties, Henry Davis York, who states that:

"Based on a review of our file it appears that the ING executed counterpart of the Deed of Assignment was delivered to us at settlement on 22 March 2010. We are not aware of whether the ING [sic] executed the Deed of Assignment on that day or previously. We suggest that you contact ING's solicitors, Hickson Lawyers in order to confirm."

I do not consider that I should give significant weight to this statement, which is an out of court statement of a solicitor's conclusion drawn from unidentified documents and which is also inconsistent with the case pleaded by the Funding Parties in their contribution proceedings, which allege (in paragraph 26) that the assignment took place on 17 March 2010 rather than 22 March 2010. This is not to say that the Funding Parties may not ultimately be able to establish the position, whatever it might be, by appropriate evidence in the contribution proceedings.

1. The Liquidator contends that this ground of opposition may also not be open to the Funding Parties by reason of the principle of advocate's immunity, which reflects the importance of finality to proceedings: compare Young v Hones [2013] NSWSC 1429. In particular, this ground of opposition would not be open to the Funding Parties if any views as to what evidence was to be led or how it was to be led in the earlier application were formed by the Liquidator's counsel or solicitors, as one would ordinarily expect, rather than by the Liquidator personally. Mr Eardley accepted that a question of advocate's immunity would be raised if, for example, Counsel had chosen not to mark to read particular evidence, although he sought to distinguished the position in respect of the Liquidator giving instructions from that of forensic decisions made by Counsel. I do not consider that it is possible to determine this question, absent evidence as to how the decisions as to what evidence was to be led by the Liquidator were made.

1. A further difficulty with this ground of opposition is that it is not apparent that the suggested failure to lead adequate evidence of the date of assignment of the ING loan would, in any event, amount to a breach of cl 6.1 of the Funding Agreement, which provides only that the Liquidator must instruct the "Solicitors and Counsel" (as defined) in pursuit of the "Services" (as defined) and regularly report in writing to the Funding Parties as to the status of the "Proceedings". A failure to lead evidence of a particular matter does not, on its face, establish any failure of the Liquidator to give instructions to his legal representatives, still less a failure to report to the Funding Parties.

1. As I noted above, the Funding Parties' second ground of opposition to the order sought by the Liquidator is that:

"there were requests for prospects of success advice by the Solicitor for the [Funding Parties] and confirmation of same and that these requests were not met in breach of clause 6.1 and 6.3 of the Funding Agreement."

The Funding Parties rely on Mr Downey's affidavit dated 12 December 2013 in the contribution proceedings brought by them against Mrs Najjar, which refers to correspondence from his firm to the Liquidator's solicitors in February and March 2013 requesting that the Funding Parties be provided with advice as to the prospects of the proceedings. The letter dated 25 February 2013 from the Funding Parties' solicitors to the Liquidator's solicitors "require[s]" the liquidator to provide a prospects advice as to the proceedings and certain other information by a specified date. The letter dated 6 March 2013 from the Funding Parties' solicitors to the Liquidator's solicitors indicates the Funding Parties opposition to the stay of the winding up; that letter was tendered in opposition to the stay application and I referred to it in my principal judgment at [122]. The third letter dated 25 March 2013 states that:

"We put you on notice that our client's [sic] continued to fund the liquidator on the basis that there was firstly, a reasonable prospect of success in the proceedings and, secondly, that there was a reasonable quantum of recovery of monies on the basis that those proceedings were successful."

That letter requested copies of legal advices received by the liquidator from his former solicitors (who, as I noted in my principal judgment, also acted for the Funding Parties) and his current solicitors in relation to the prospects of success and the quantum of recovery and asked whether counsel's advice had been taken as to the prospects of success and quantum and requested that a copy of it be provided to the Funding Parties. In my view, that correspondence has little probative value, so far as any asserted breach by the Liquidator of any obligation to provide such advice is concerned, since Mr Downey's affidavit refers to but does not annex the Liquidator's response to the Funding Parties' request so that whether the requested advice was provided to the Funding Parties has not been established.

1. In summary, the Funding Parties funded the conduct of the proceedings and that the Liquidator could not and would not have brought them without such funding. The Funding Parties stood to gain from a successful outcome in the proceedings as the primary claimants in the winding up and by their proposed application under s 564 of the Corporations Act. In this case, as in Dymocks Franchise Systems above, the proceedings would not have been pursued in their present form and Mrs Najjar would not have been exposed to the costs of them but for the involvement of the Funding Parties, and it was principally the Funding Parties in their capacity as persons claiming to be creditors of the Company who stood to benefit from the success of the proceedings. The Funding Parties exercised a significant degree of control over the conduct of the proceedings through the choice of legal representatives. The Company was in voluntary liquidation and would not have been able to pay the costs of the proceedings, notwithstanding that it is not suggested that the Liquidator could not have satisfied an order for costs made against him personally. These matters seems to me to support a conclusion that it is just that the Funding Parties pay the Liquidator the costs ordered against him, by way of indemnity, although the primary beneficiary of that order is the Liquidator, and Mrs Najjar only benefits from it indirectly to the extent that it may support the Liquidator's capacity to pay the costs ordered against him personally. The matters raised by the Funding Parties, to which I referred above, do not seem to me to outweigh the matters that support such an order, which would not prevent the Funding Parties' pursuing any claim against the Liquidator in respect of those matters in such other proceedings as they may be advised.

1. For these reasons, it seems to me that an order that the Funding Parties should pay to the Liquidator the Existing Costs that he is required to pay to Mrs Najjar should be made under s 98 of the Civil Procedure Act. It seems to me that the same result could be reached on another basis, so far as the Liquidator's Interlocutory Process (filed under rule 2.2 of the Supreme Court (Corporations) Rules) seeks an order enforcing the indemnity provision in the Funding Agreement. That rule makes clear that, in the Corporations List, an application brought by Interlocutory Process may support an application for final relief. Mr Eardley also indicated, in oral submissions for the Funding Parties, that he could put nothing against the proposition that, if such a right of indemnity existed and was not impugned by the matters which the Funding Parties relied (which I have addressed above), the Interlocutory Application would properly invoke the Court's jurisdiction to make an order that the Funding Parties, as the persons ultimately liable to meet the costs orders against the Liquidators, should meet them.

1. I should add, for completeness, that the Liquidator submits that it would be unfair and against the interest of justice to permit the Funding Parties to resile from their commitment to fund the proceedings and pay adverse costs orders, when the Liquidator has relied upon those commitments in the conduct of the proceedings; and that it is in the interests of justice and consistent with the overriding purpose specified in s 56 of the Civil Procedure Act that the Funding Parties should be order to pay him the Existing Costs that he will be required to pay Mrs Najjar, compared with the alternative of the Liquidator having to bring separate proceedings to enforce the Funding Agreement against the Funding Parties. On the other hand, the Funding Parties submit that s 56 of the Civil Procedure Act 2005 is not offended if the Company and the Liquidator are left to commence proceedings in respect of the Funding Agreement by Statement of Claim or Summons in the ordinary way. It does not seem to me that the result that I have reached above is inconsistent with s 56 of the Civil Procedure Act, and it is not necessary to determine whether that section would have been sufficient to support that result where that order can properly made under s 98 of the Civil Procedure Act or on the alternative basis noted in paragraph 44 above.

1. In oral submissions, the Liquidator also contended that the Funding Parties should be required to pay the costs on the alternative basis of a Bullock order, on the basis that the Funding Parties were now defendants in the proceedings. Such an order may be made in favour of an unsuccessful plaintiff which has been ordered to pay costs to a successful defendant, and against an unsuccessful defendant, where the plaintiff acted reasonably in suing the successful defendant and the conduct of the unsuccessful defendant was such as to make it fair to impose some liability on it for the costs of the successful defendant: Bullock v London General Omnibus Co [1907] 1 KB 264 at 272; Johnsons Tyre Foundry Pty Ltd v Maffra Corporation [1948] HCA 46; (1948) 77 CLR 544 at 572; Gould v Vaggelas [1985] HCA 75; (1985) 157 CLR 215 at 229-230. In responding to that submission on behalf of the Funding Parties, Mr Eardley submitted that the overriding consideration in the exercise of the court's discretion to make such an order is whether it is proper to make an unsuccessful party pay the costs involved and submitted that the Funding Parties are not properly characterised as unsuccessful parties in the substantive proceedings, where they were not then party to the proceedings and no relief was then sought against them. That submission seems to me to require at least some qualification having regard to the substantive interest of the Funding Parties in the outcome of the proceedings to which I have referred above. Nonetheless, it does not seem to me that it would be a proper exercise of the court's powers to treat the joinder of the Funding Parties, for the purposes of this application, as having effect so as to permit an order for costs to be made against them on this basis in respect of a hearing in which they were not parties at the relevant time. It seems to me that this matter is preferably approached on the basis of the principles applicable to costs orders against non-parties to which I have referred above.

Whether the Further Costs should be payable by the Liquidator or the Funding Parties

1. By his Amended Interlocutory Process filed, by leave, on 19 December 2013, the Liquidator seeks an order that the Funding Parties pay Mrs Najjar's costs of the proceedings as agreed or assessed, excluding her costs of her Interlocutory Process filed 20 February 2012 and excluding any costs already ordered to be paid by Mrs Najjar ("Further Costs"). That order would not affect the Liquidator's primary liability for the Existing Costs but would place the liability for the Further Costs upon the Funding Parties rather than upon the Liquidator.

1. The Liquidator contends that the jurisdiction under s 98 of the Civil Procedure Act should be exercised and that the Funding Parties rather than the Liquidator should be order to pay the Further Costs, for the reasons I noted above in respect of his claim to an order that the Funding Parties pay him the Existing Costs. The Liquidator similarly contends that it would be unfair and against the interest of justice to permit the Funding Parties to resile from their commitment to fund the proceedings and pay adverse costs orders, when the Liquidator has relied upon those commitments in the conduct of the proceedings; and it is in the interests of justice and consistent with the overriding purpose specified in s 56 of the Civil Procedure Act that an order in respect of the Further Costs should be made against the Funding Parties rather then the Liquidator, compared with the alternative of the Liquidator having to bring separate proceedings to enforce the Funding Agreement against the Funding Parties. Mrs Najjar opposes an order for costs in that form and seeks an order for the Further Costs as against the Liquidator.

1. It does not seem to me that the factors to which the Liquidator refers are sufficient to warrant an order that the Funding Parties pay the costs of the proceedings to the exclusion of an order for costs against the Liquidator as the party seeking leave to discontinue the proceedings in circumstances in which they would otherwise be dismissed. None of the authorities to which the Liquidator refers involve the exercise of the Court's power to order costs against a non-party in a manner that deprived a successful party of an order for costs against the unsuccessful party to the proceedings and substituted a right of costs against a non-party such as a litigation funder. Instead, those cases involve circumstances where the unsuccessful party is impecunious, and the successful party's position is improved by being allowed to recover its costs against a non-party.

1. The Liquidator did not, in terms, claim an alternative order in the Interlocutory Process that the Funding Parties pay him costs in the amount of the Further Costs, as he did in respect of the Existing Costs. In oral submissions, Mr Harris, on behalf of the Liquidator, resisted an order that required the Liquidator to pay the Further Costs and then allowed him to recover those costs against the Funding Parties. On the other hand, Mrs Najjar also did not oppose any order so far as it provided for the Funding Parties to indemnify the Liquidator for the Further Costs. In principle, it is open to the Court to grant relief of that character, although the Liquidator's Interlocutory Application did not claim it, since r 36.1 of the Uniform Civil Procedure Rules permits the Court to grant such relief as the nature of the case requires, whether or not a claim for that relief is included in a notice of motion. Any such relief may well depend upon the same principles as the relief that the Liquidator sought in respect of the Existing Costs. However, I will hear the parties as to whether such relief could and should be granted.

Orders and costs

1. The parties should bring in agreed orders to give effect to this judgment, including as to the costs of this application, within 14 days, or, if no agreement is reached, their respective drafts and short submissions as to the differences between them which should indicate whether an oral hearing is required.

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Decision last updated: 18 February 2014