Jeffery & Katauskas Pty Limited v SST Consulting Pty Ltd & Ors
[2009] HCATrans 186
[2009] HCATrans 186
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
City No S167 of 2009
B e t w e e n -
JEFFERY & KATAUSKAS PTY LIMITED
Appellant
and
SST CONSULTING PTY LTD
First Respondent
PETER SWEENEY
Second Respondent
PAUL SWEENEY
Third Respondent
DENYS TRUMAN
Fourth Respondent
Office of the Registry
City No S168 of 2009
B e t w e e n -
JEFFERY & KATAUSKAS PTY LIMITED
Appellant
and
RICKARD CONSTRUCTIONS PTY LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEMENT)
First Respondent
RICKARD HAILS MORETTI PTY LIMITED
Second Respondent
ALLIANZ AUSTRALIA INSURANCE LIMITED
Third Respondent
SST CONSULTING PTY LTD
Fourth Respondent
PETER SWEENEY
Fifth Respondent
PAUL SWEENEY
Sixth Respondent
DENYS TRUMAN
Seventh Respondent
FRENCH CJ
GUMMOW J
HAYNE J
HEYDON J
CRENNAN J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON WEDNESDAY, 5 AUGUST 2009, AT 10.19 AM
Copyright in the High Court of Australia
MR D.F. JACKSON, QC: If the Court pleases, I appear with my learned friend, MS J.A. STEELE, for the appellant in each matter. (instructed by Colin Biggers & Paisley Lawyers)
MR B.W. WALKER, SC: May it please the Court, I appear with my learned friends, MR T.G.R. PARKER, SC and MR R.E. STEELE, for all the respondents in S167/2009 and for the fourth to seventh respondents in S168/2009. (instructed by J Biady & Associates)
FRENCH CJ: There has been no appearance filed on behalf of the first respondent and I understand submitting appearances for the second and third respondents in S168 of 2009.
MR JACKSON: Your Honour, so far as the first respondent is concerned, there has been an affidavit of service filed of Goce Mitrevski on 4 August 2009 deposing to service upon it.
FRENCH CJ: Yes, Mr Jackson.
MR JACKSON: Your Honours, as the Court will have seen, the appeals turn ultimately on the meaning to be attributed to rule 42.3(2)(c) of the Uniform Civil Procedure Rules (NSW). I will come in just a moment to the way in which that arises. Your Honours will see it set out in short in our written submissions in appeal No S167 paragraphs 5 to 16. May I come back to that in just a moment. The issue arises in two contexts; in appeal No S167 as to the costs of a trial and in the other matter as to the costs of the appeal.
Your Honours, if I could turn first to the costs of the trial, the basic issues appear to be, first, what is meant by “abuse of process” in the rule; secondly, did the circumstances of this case give rise to abuse of process; and, thirdly, if so, what order should be made? Broadly similar issues arise in relation to the appeal. May I go for just a moment to the basic facts. They are set out in our written submissions in S167 at the paragraphs I mentioned before.
Your Honours, in short, the respondent SST funded a case against, amongst others, the appellant. We were one of three defendants. The respondent did so on the basis that he lent some money; your Honours, may I say, say, $300,000 because there is some question about the precise amount and I will come to that later. That loan appears to have been in one sense on commercial terms but in addition to repayment of the money so advanced, SST was to receive a fee of the order of $630,000 in return for making those funds, the funds to which I earlier referred, available.
The primary judge appeared to regard, with a degree of disdain, if I may say so, with respect, the description by those then appearing of the $630,000‑odd as being a success fee but, your Honours, may we, in a sense bold as brass, try to endeavour to persist with that term. The principal proceedings failed at first instance and on appeal. Some security for costs had been provided but our legal costs far outstripped the security. Your Honours will see that it is summarised in our written submissions in 167, first of all, at paragraphs 10 and 11.
In paragraph 10 your Honour will see, and the reference is given, that we had obtained security for costs in the amount of $187,750 which with interest amounted to $202,000‑odd. Then, however, your Honours, the trial went for 19 days. Our legal costs were over $650,000 and we suffered a shortfall in excess of $450,000. The position in relation to the appeal, your Honours, may be seen in our written submissions in‑chief in the other matter, 168, in paragraph 10 and the difference between the figures of $146,000‑odd and $55,000‑odd set out there is nearly $92,000. In short, we were unable to recover those sums.
Your Honours, we sought then orders for payment of our costs by the respondents. If I could just say something about the form of those applications; first of all as to the costs of the trial by an application made to the trial judge. That application failed and itself was the subject of an appeal by leave to the Court of Appeal where the appeal failed. So far as the costs of the appeal in the substantive matter were concerned, there was a motion in the Court of Appeal seeking an order in respect of those costs and that motion failed.
Your Honours, could I come then to the power of the Supreme Court to make the orders which we had sought. The powers of the Supreme Court to make an order for costs against a person not party to the proceedings are provided for in the provisions which are in annexure A to our submissions in 167. Your Honours will see that we have, in effect, paraphrased those in paragraph 17 and following of those submissions, but may I take your Honours to the provisions themselves for just a moment. As I said, your Honours, they are annexure A to our written submissions in 167. Your Honours will see that section 98 of the Civil Procedure Act 2005 provides in section 98(1) that:
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.
The words “subject to rules of court” have been given effect to by the rules and your Honours will see on the next page of the annexure, rule 42.3 which sets out in sub‑rule (1) the general proposition that:
Subject to rule 42.27, the court may not, in the exercise of its powers and discretions under section 98 of the Civil Procedure Act 2005, make an order for costs against a person who is not a party.
However, one then sees sub‑rule (2) which says that:
This rule does not limit the power of the court –
Then your Honours will see paragraphs (a) to (g) where circumstances are set out in which such an order may be made. Your Honours, I noted that there is a typographical error in paragraph 20 of those submissions in the third line it says “(a) and (g)”, it should be “(a) to (g)”. Your Honours, I know it is tiresome to correct these things, but could I also just add one other correction? In the fourth line of paragraph 25 it says “restrictions”, it should be “situations”.
FRENCH CJ: You accept that absent the constraint to abuse of process which you address here, the statutory discretion in relation to costs might have allowed you to recover a third party order without going through an abuse of process window?
MR JACKSON: Sorry, perhaps I misunderstood what your Honour was putting to me, but our position is, your Honour, that were it not for the restriction in sub‑rule (1), then the ordinary provisions would have empowered the making of an order to recover costs. Yes, your Honour, it is a third party.
FRENCH CJ: Without having to demonstrate an abuse of power?
MR JACKSON: Yes, your Honour. Yes, although that would be one of the areas in which ‑ ‑ ‑
FRENCH CJ: Of course, that would be relevant.
MR JACKSON: Yes. Your Honour, the general provision of section 98 is a provision as general, for example, as section 26 of the Judiciary Act in the case of this Court. Yes, your Honour, I accept what your Honour put to me. Could I go then specifically to rule 42.3 and, in particular, to paragraph (c). Your Honours will see in relation to that paragraph that the opening words of sub‑rule (2) say that the previous sub‑rule, that is sub‑rule (1):
does not limit the power of the court –
and then one comes to (c) –
to make an order for payment –
et cetera. There are four features to which we would refer concerning the provision. The first, your Honours, is this, that by those words “does not limit” in the opening part of 42.3 it recognises the power that otherwise would be conferred by the broad words of section 98(1) and, in particular, the specific words saying, “by whom . . . costs are to be paid”.
Your Honours, the second point we would make is that the type of the nature of the order which may be made under 42.3(2)(c) is an order for payment of costs of a party to the proceedings. Now, the plaintiff may be a defendant but it is a broad provision. The third feature is that the costs must have been occasioned by one of two things, contempt of court or an abuse of process and the fourth is that the order may be for payment of the whole or a part of the costs of the party.
Now, your Honours, a point which is in a sense a threshold point and one on which if we do not succeed the appeals would fail, is that the view adopted by the primary judge and by the Court of Appeal was that the abuse of process to which the rule referred was abuse of process in the actual conduct of the proceeding. I will take your Honours to those passages which are, relevantly, short but may I just say that we give the references to them in those submissions at paragraph 15. If I could then take your Honours to those ‑ ‑ ‑
HAYNE J: Just before you do that, Mr Jackson, is a necessary premise for the argument that the provisions of the rules must be given effect to and that the general power given by section 14 of the Act to dispense with rules could not be engaged in this case?
MR JACKSON: Your Honour, we have not addressed that in our submissions, I would say immediately, but the position would seem to be this, that the rules create a prohibition, prima facie, upon the making of an order unless the circumstances set out there apply. It would be possible under the general provision to which your Honour referred to dispense with the provisions of the rules. It would be difficult though, one would have to say, to envisage the making of an order in circumstances where what one is seeking to do is to lift, in a sense, a prohibition which is established by the rules and to which one would give effect, and I would have to say the point has not been raised in the proceedings below as an appropriate case in which to do so.
HAYNE J: It is simply that it struck me that there is a conferral of power by statute and then that power is cut down, as is contemplated by the statute, by this subordinate legislation and that struck me as being unusual, but do not stay to dwell on that if it is not appropriate.
MR JACKSON: No, your Honour. It is clear from section 14 that there is a power to dispense with a requirement imposed by rules of court if the court is satisfied that it is appropriate to do so in the circumstances of the case. The only point I would seek to make about it is that where you have – and I think I have said this before – where you have a provision like the rule giving specific circumstances in which there may be the making of an order otherwise the subject of a prohibition, there may well be circumstances in which section 14 could be applied, but I do not think we would contend that this case derives from more than the 42.3(2)(c).
FRENCH CJ: I suppose it would raise an interesting question about the interaction between section 14 and the qualification in section 98 and what that says about – I am not saying I know the answer to that, obviously, but ‑ ‑ ‑
MR JACKSON: It is a question whether the specific provision of 98 would be treated as overriding the provision of section 14, the more general provision of section 14, no doubt. Your Honours, I was going to take your Honours to the passages in the reasons for judgment of the courts below in which what I would call the restricted view of the rule was taken. Your Honours will see that the primary judge, at page 319 in paragraph 94, in the first sentence he refers to the fact that there had been no lack of restraint, et cetera, and other matters in relation to the conduct of the litigation. He then goes on to say in the last three lines that:
it is legitimate – and in my view dispositive – to enquire: how can there be an abuse of process if there were no relevant abuse in the conduct of the proceedings?
That proposition is dealt with further in paragraph 96 commencing at about line 14 and going to the remainder of that paragraph and then paragraph 100.
HEYDON J: Those are conclusions. To fully appreciate them it is necessary to read from paragraph 56 on for quite a way.
MR JACKSON: Yes, that is so.
HEYDON J: His Honour attempts to justify his conclusions by detailed reasoning.
MR JACKSON: Your Honour, could I just say this. What one sees if one goes to paragraph 61 at page 309 was that there were three propositions advanced. The relevant one appears to be the third:
some relevant unfairness in the commencement or prosecution of proceedings –
Then there is a discussion of the first of those in paragraph 62 through to paragraph 66. If one goes then to paragraphs 68 and 69, you will see that his Honour rejects the narrower views which have been put forward as to abuse of process. But then, your Honours, perhaps it starts about paragraph 72 – I am sorry to be a little uncertain about this, but it is not really terribly clear, with respect, what it is that leads his Honour to this ultimately narrow view of the ambit of abuse of process.
If one goes to his analysis at paragraphs 92 and 93, he seems to be simply drawing a distinction between cases where there is an application for a stay and the point of time at which that issue is to be resolved compared to an application for costs at the conclusion of proceedings. Your Honours, if one does go through the reasoning of his Honour, one is not, and I say so with respect, a great deal more informed than one is by reading what appears in the three paragraphs to which I referred. Could I go then to what the Court of Appeal said at page 522 in paragraph 75 where it was put very shortly in the second sentence:
The primary judge was correct in holding that an actual abuse of process must have been committed in order for an order for costs to be made against the third party.
In our submission, the view that was adopted in both courts restricts the powers of the court in a way not merited by the terms of the rule. Of course the rule applies to cases where a non‑party has been in contempt or has abused process in the actual conduct of the proceedings, but there is not, in our submission, any reason why the concept in the rule should be limited to those circumstances.
FRENCH CJ: There must be some limitation of relevance to the discretion to award costs, must there not, in the sense that the power to order costs against a third party on the basis that the third party has committed an abuse of process is not a punitive power, it must have to do with the redress of some injustice or unfairness that results from that.
MR JACKSON: Your Honour, perhaps the connection is to be seen in the terms of the rule because it speaks an order for payment of the whole or any part of the costs of a party which have been occasioned by the abuse. It is easy enough to see if there has been an abuse of process in the course of proceedings, that the proceedings may have been prolonged or additional expense incurred, because a third party did not obey an order of the court, for example, or delayed in doing so or something of that kind. So, it is easy enough to say, well, the additional costs were those occasioned by the abuse of process or the contempt. But if one is speaking about other types of cases, then the reference to “the whole of the costs”, for example, indicates, in our submission, that one has to be able to say that the costs have been occasioned by the contempt or abuse.
FRENCH CJ: In this case the abuse is the combination of the success fee arrangement and the absence of an indemnity.
MR JACKSON: Yes.
FRENCH CJ: So how does the causal connection work?
MR JACKSON: The causal connection works, your Honour, because the proceedings would not have been brought or proceeded with – and I will come to the detail of that in a moment – absent the arrangements that were made. As I said, I will come to that. Fundamentally, the case comes down to what your Honour has put to me.
GUMMOW J: Is not the complaint – this may not be controversial – the complaint you make is that the Supreme Court misconceived the content of its power, the scope of its power?
MR JACKSON: On this first point, yes, your Honour. I called it a threshold point before, yes.
GUMMOW J: Yes. If you are right about that, what would then happen?
MR JACKSON: Well, what would happen then, your Honour, there are several possibilities. The possibility that we would ask the Court to engage upon is itself to make an appropriate order and I would be seeking to demonstrate what the order should be and that it is not very difficult to arrive at that conclusion, with respect. Another possibility, of course, is that the Court would remit the matter either to the Court of Appeal or a judge. Your Honour, those seem to be the three possibilities.
Your Honour, could I just say that we have lost a lot of money on this case, if I can put it that way, and we would prefer, if it is appropriate for the Court to do so, for the matter to be disposed of.
GUMMOW J: It seems to be assumed, no doubt correctly, that the rules are not limited to the tort of abuse of process, but, paradoxically maybe, the tort of abuse of process can be committed by the institution of proceedings, can it not?
MR JACKSON: Yes.
GUMMOW J: Could that not found an action in tort itself, I would have thought?
MR JACKSON: Well, your Honour, yes.
GUMMOW J: So the rule has somehow been given a narrower construction in the guise of giving a wider operation, if you see what I mean.
MR JACKSON: Well, your Honour, there is in the decisions below a peak and a trough. The peak is to say, in a sense, that it was not the same as the tort. The trough, in a sense, was that it only relates to what goes on in the course of a case. Your Honours, could I come then to say one further thing on that point and that ‑ ‑ ‑
GUMMOW J: If there was a tortious abuse of process – I am not saying there was in this case – but if there were, it would be odd if the rule did not operate. It may operate further, but it would be odd if it did not operate then.
MR JACKSON: Well, your Honour, there would be an anterior question of construction really in that regard. What I mean by that is to say that if one goes to section 98 and the qualification put on it by the rule, section 98 seems to be speaking of an order made by, let us assume for simplicity, the court which has heard the proceedings that a person other than the party pay the costs and it seems to be referring both in the rules and in the section to matters of that kind, to the actual orders for costs as distinct from damages that might be obtained from an action. So, your Honour, it may be that that is the way in which one speaks of the limitations imposed by the rule.
Could I just say, your Honours, the last thing on this point. In paragraph 24 of our written submissions we make the submission that an abuse of process should be given its ordinarily wide and flexible meaning. Your Honours, I will not read out what we have set out there because I want to come back to the passage that we have quoted there in just a moment.
GUMMOW J: But then the question arises whether the rules themselves are part of the process. Rule 42.3, is that part of the process which is said to be abused?
MR JACKSON: It is possible, your Honour. The question of the meaning of “process” in this context can no doubt be one of some difficulty. What I mean by that is that one rather leaps, perhaps, to think that process is processes, meaning the course of litigation, and no doubt it includes that, but it is no doubt theoretically possible that to deal with matters in a way that would prevent an appropriate person, if I can put it that way, otherwise being liable for an order for costs might be regarded as an abuse of process. But I have to say I suspect that the terms of the rule are designed to set out a system where there may not be an order for costs unless one falls within one of the exhaustive conditions there. There would be difficulty, I suspect, in taking the view that there was a broader concept than that involved.
Could I come then to the concept of abuse of process upon which the rule turns. We would seek to make, if we may, two points. The first is that the concept of abuse of process has been described in terms which, while general, are apposite to a case such as this. I will come to that in a moment. The second is that when attention has been directed to cases of this general kind, the term “abuse of process” has been used to describe situations similar to this. Could I come first to the ambit of the concept of abuse of process a little more generally. One can see it dealt with in the reasons of the Court in Batistatos v Roads and Traffic Authority of New South Wales (2006) 209 CLR 256.
In that case, your Honours, the point is made that litigation is to operate fairly to both or perhaps all parties. Can I give your Honours three references to that in the case. The first is in the joint reasons of Chief Justice Gleeson and your Honours Justices Gummow, Hayne and Crennan at page 264. In paragraph 6 your Honours will see the second sentence:
In Walton v Gardiner, the majority . . . accepted as correct the passage in Hunter in which Lord Diplock spoke of ‑
and your Honours will see the passage quoted, but may I refer particularly to the words:
which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it,
Could I refer also to paragraph 8 of the same reasons quoting from Williams v Spautz where it was said in the quotation:
public interest in the administration of justice requires that the court protect its ability to function as a court of law by ensuring that ‑
and your Honours will see the next words –
its processes are used fairly by State and citizen alike.
and I refer particularly to the word “fairly”. Then, your Honours, at paragraph 9 there is reference made to the fact that abuse of process is not, to put it shortly, a closed class. I should also have referred, your Honours, to page 266, paragraphs 19 and 20 – I am sorry, your Honours
GUMMOW J: Page 268, I think.
MR JACKSON: Thank you, your Honour. It should have been paragraphs 14 and 15, to the reference to Ridgeway v The Queen, Justice Gaudron. Your Honours will see the part commencing in the fourth line on page 267 and then in paragraph 15 from Justice McHugh in Rogers, where he says, amongst other things:
the use of the court’s procedures is unjustifiably oppressive to one of the parties –
Your Honours, I recognise, of course, that those are statements of very general propositions but they indicate that the concept of abuse of process is potentially a broad one, including circumstances where one party is unfairly treated, in a sense, by another. Could I turn more specifically then to the position in relation to the costs of civil litigation. The decisions, in our submission, early and more recent, do provide significant support to the view that where litigation is being funded by a non‑party it will be a an abuse of process if the funding non‑party does not accept a liability for the losing party’s costs.
Now, your Honours, one can see that in the ejectment cases and may I just say something about them before going to them and it concerns the submissions made by our learned friends in their written submissions in 167 at paragraphs 34, 38 and 39. We have made some submissions about this in our submissions in reply but may I just say this, that the submissions that are set out in those paragraphs seek to treat the ejectment cases, if I can call them that shortly, as cases that are real party cases and nothing more, but what we would submit is that if one does go to those cases, it is apparent that they do reflect the notion of abuse of process. May I go to the first of them, Doe dem Masters v Gray. Could I just give the English Reports reference, (1830) 109 ER 579. Lord Tenterden, at the bottom of the page, as the basis of his decision said that:
the parish officers put a mere pauper –
that is, someone unable to pay the costs –
into possession, and the lessor of the plaintiff was bound to bring the ejectment against him. The parish officers, therefore, ought to pay –
Your Honours, I recognise immediately that that case does not say directly that to adopt that course was an abuse of process, however, that view of it was taken in the second case, Hutchinson v Greenwood 119 ER 125 at page 126 – and your Honours will see “Lord Campbell, CJ” about a third of the way down the page. About two‑thirds of the way down the first paragraph of Lord Campbell’s reasons for judgment, having dealt with Lord Tenterden as a very cautious judge, he went on to say:
The persons really interested as landlords never would appear themselves, if they could cause an appearance to be entered in the name of a pauper tenant and defend the suit without risk to themselves of having to pay the plaintiff’s costs –
Then he goes on, your Honours, to deal with the principle underlying that and he deals with that in the next paragraph in the second sentence. He says:
The principle is that the individuals who order an appearance to be entered in ejectment, in the names of those not really defending the suit, abuse our process, and that, as they substantially are the suitors, we have jurisdiction to make them pay the costs.
Justice Wightman at the same page of the English Reports says about halfway through his reasons:
the mischief remains; persons, who do not like to appear in their own name, still may appear in the name of a pauper tenant –
et cetera. Now, your Honours, that indicates, in our submission, to put it in a sense at the lowest, that there is a relationship between having persons who are supporting the case but not parties but are not prepared to pay the costs of the proceedings can amount to an abuse of process. Your Honours will also see a reference to that in the decision in the English Court of Appeal in Cowell v Taylor (1885) 31 Ch D 34 at 38. In the third line of Lord Justice Bowen’s reasons he sets out a well known passage:
The general rule is that poverty is no bar to a litigant . . . There is an exception in the case of appeals . . . There is also an exception introduced in order to prevent abuse, that if an insolvent sues as nominal plaintiff for the benefit of somebody else, he must give security . . . plaintiff is a mere shadow . . . Those are the common cases –
having indicated two of them –
I do not say that there may not be others.
Your Honours, one sees again the language of abuse. Your Honours, one can see that referred to ‑ ‑ ‑
HAYNE J: Just before you depart from this case, the outcome here was, was it not, no requirement of security?
MR JACKSON: Yes.
HAYNE J: The ordinary remedy for the abuse identified in the other cases was to make an order against the party supporting the suit, was it not?
MR JACKSON: Yes, your Honour, Cowell v Taylor was an application for security, of course.
HAYNE J: Security denied here. But in the other cases the remedy for what otherwise would have been an abuse was to make an order against the party supporting the suit.
MR JACKSON: Yes, directly against that party, yes.
HAYNE J: Just so.
MR JACKSON: So that in a case of that kind where that is done one ends up with orders for, the simplest case, two persons to pay the costs of the proceedings, one the unsuccessful party, the other the third party, to the extent that the unsuccessful party has paid some of it or where there has been a payment in by security for costs, then that goes to reduce the amount that could be recovered from either.
GUMMOW J: Well, in Hutchinson v Greenwood the litigation had reached a conclusion, so it was too late to seek security because it had gone to finality, the litigation had gone to finality.
MR JACKSON: Yes. Your Honours, security is one course available, but it has a number of aspects to it. There has to be, for example, a demonstration of the likely inability to pay costs. There has to be a quantification of the amount of the costs. There is a discretion whether to give them or not, depending on the time at which an application is made. Your Honours, to make an application for security for costs itself costs, if I can put it that way. It is something that a person may decide, if it is, to take the extreme case, known that there is someone funding it and there is no reason to suspect that they do not have the money to pay, if the issue arises, then there is no particular reason why one should incur further costs. Defendants may or may not be well‑funded parties.
Your Honours, what I was going to say was that one sees also – put a reference to Cowell v Taylor – that the abuse is put slightly differently in the observations of Vice Chancellor Megarry in Pearson v Naydler [1977] 3 All ER 531 at page 533, letters e to f. Could I just pause to say, your Honours, that this case contains a discussion of the different rules that lie at the base of obligations of, on the one hand, individual, him being plaintiffs and, on the other hand, companies to provide security for costs. But the particular point I wanted to refer to was at page 533 halfway down the page where his Lordship spoke of:
The basic rule that a natural person who sues will not be ordered to give security . . . As Bowen LJ said in Cowell v Taylor, both at law and in equity ‘the general rule is that poverty is no bar to a litigant’ . . . but in order to prevent abuse of this rule, an exception was made for an impecunious nominal plaintiff –
et cetera. Your Honours, one sees again the language of abuse being called upon. Now, your Honours, the views to which I have referred in those cases are, in our submission, consistent with the concept of abuse of process as used in the rule. Could I take your Honours for just a moment to the reference to those cases in Project 28 Pty Ltd v Barr [2005] NSWCA 240 and may I go to paragraphs 113 and following, at page 22. Your Honours will see in paragraph 113 a reference to an underlying concept in the notion of abuse of process. They leave the concept of fairness to both parties. In the quoted observation of Justice McHugh in Oshlack, and, your Honours, I will not read out, but your Honours will see the composition there set out through the remainder of paragraph 113 and, in particular, the passage:
As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.
Your Honours, we have provided copies of the underlying case, that is, Oshlack, but I do not want to take your Honours to more than what is in that passage. Could I move on, your Honours, in that case to paragraph 114 – when I say “in that case”, I meant Project 28 – where his Honour Justice Ipp said:
It has long been recognised that a tendency to abuse can arise if a nominal plaintiff sues for the benefit of some other party and is not able to pay the successful party’s costs.
Your Honours will see then in paragraph 115 where it was said that:
Courts have expressly recognised that an abuse may arise where “artificial persons [are] manipulated by natural persons” . . . Thus, the controller of a corporation will not be allowed –
et cetera. Then, your Honours, the reference again to Cowell v Taylor in 116.
GUMMOW J: What did this case decide?
MR JACKSON: Your Honour, it was a case where there was an attempt being made to obtain a dismissal or stay of proceedings on the basis of an abuse of process or maintenance or champerty. I think in the end the proceedings were not stayed, but I presume that is correct.
HEYDON J: They were stayed. I am just looking at the first page, which is an unsafe thing to do, but paragraph (4) under the heading “DECISION” says:
The Lease Proceedings are stayed until Austcorp –
whoever they are –
provides TBPL and Mr Barr with an indemnity ‑ ‑ ‑
MR JACKSON: I am sorry, your Honour, yes. Your Honours, a similar approach can be seen also in, again, the New South Wales Court of Appeal in the decision in Green v CGU Insurance Ltd (2008) 67 ACSR 105. There were two passages to which I wish to refer and they are at page 120, paragraph [51] ‑ ‑ ‑
GUMMOW J: These cases are all very, as it were, circumstances specific. It does not necessarily help much just to get snippets.
MR JACKSON: Your Honour, the points I am seeking to get from them are simply that the situations where there is a person not a party to proceedings who has been supporting the proceedings and seeks to gain from them but is not prepared to finance the other party’s costs if they lose, are circumstances which may amount to abuse of process. I accept they are fact specific but the ‑ ‑ ‑
GUMMOW J: I am not saying that is necessarily adverse to you at all.
MR JACKSON: No, your Honour, I appreciate that, but the point I am seeking to make about it is that one does see statements that are relatively general which it is possible, and I will come to that in a moment, to seek to rely to the present case.
HEYDON J: That last sentence of Justice Hodgson in paragraph [51] is something you would rely on strongly, I take it?
MR JACKSON: Yes, your Honour. The two passages we would wish to refer to are in paragraph [51] and also paragraph [53].
FRENCH CJ: I suppose the question arises whether the proposition that courts should be particularly concerned the person’s involvement in litigation is purely commercial should not avoid responsibility for costs. Whether that is something which informs the exercise of the discretion or something which goes to characterisation of the arrangement as an abuse of process, which is, as I said at the beginning, the door you would have to go through – the window. Door perhaps would be a better metaphor.
MR JACKSON: I hope I do not need to have the.....your Honour, but what we would seek to say is that it is necessary for the rule to apply to be able to characterise the conduct – and I use that term a little loosely at the moment – the conduct as constituting an abuse of process and conduct which has resulted in the costs. So undoubtedly there is a question of characterisation there and that is what we would seek to do.
FRENCH CJ: You said in answer to Justice Heydon that these circumstances may constitute an abuse of a process. So you accept that not every circumstance of a success fee absent then indemnity by a third party funder is going to constitute an abuse of process? Are there other circumstances one has to look for or ‑ ‑ ‑
MR JACKSON: Well, your Honour, there are circumstances, if I can put it this way, that might take away what I would describe as a prima facie characterisation. Principally, they would be related to the way in which the success fee as such is described. If one had a situation where there was a success fee which reflected, in effect, a rate of interest, then that would be unlikely to amount to an abuse of process. It is possible too that there may be other features but, generally speaking, in our submission, the proposition would apply. It would be the rare rather than the usual case that would escape characterisation, in our submission.
Your Honours, could I just say this? In the decisions in this Court and in the Court of Appeal in Campbells Cash & Carry the possibility of there being abuse of process by funders resulting in an order for costs was mentioned. In the Court of Appeal your Honours will see that referred to in (2005) 63 NSWLR 203 at 230. In paragraph 120 it was said:
Defendants may in proper cases seek security for costs and they may obtain special costs orders against funders if the proceedings fail.
Your Honours, his Honour does not refer specifically to the rule, but it is a little difficult to see what else he might have been referring to. Your Honour, in this Court in (2006) 229 CLR 386 at 435 in paragraph 93 about a third of the way down the page:
Why is that fear not sufficiently addressed by existing doctrines of abuse of process and other procedural and substantive elements of the court’s processes?
That case, of course, was one where the funder had agreed to pay the costs if the proceedings failed. You will see that at paragraph 26 at page 413. Your Honours, finally in relation to the cases, the judgment of the Privy Council in the New Zealand appeal in Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) [2005] 1 NZLR 145 at page 155 does seek to set out under, I have to say, your Honours, a general provision dealing with the ability to order costs, the principles that are appropriate, but it is apparent, we would submit, that the concepts referred to do include a concept of abuse of process.
A summary commences at the top of page 156 and your Honours will then see subparagraph (2) referring to the case of the, in effect, ordinary funder. Then paragraph (3) deals with the cases such as the present. I will not read it out, but could we invite your Honours to note the first sentence of that, particularly:
or at any rate is to benefit from them, justice will ordinarily require that, if the proceedings fail, he will pay the successful party’s costs.
Your Honours will see also two‑thirds of the way through that paragraph:
Nor, indeed, is it necessary that the non‑party be “the only real party” to the litigation in the sense explained in Knight, provided that he is “a real party in . . . very important and critical respects” –
Your Honours will see at page 157 between lines 5 and 10:
If a non‑party does so for his own financial benefit, either to gain the fruits of the litigation or to preserve assets in which the person has an interest, it may, depending upon the circumstances, be appropriate to make an order for costs –
Then their Lordships appear to have adopted, in the next paragraph, paragraph [26], what had been said in a decision in New Zealand. Could I refer to the last paragraph there quoted, paragraph 21:
[T]he overall rationale [is] that it is wrong to allow someone to fund litigation in the hope of gaining a benefit without a corresponding risk that that person will share in the costs of the proceedings if they ultimately fail.”
HAYNE J: How does that proposition stand with the commonplace case that the personal injuries solicitor punting litigation for a plaintiff?
MR JACKSON: Well, the personal injuries solicitor, your Honour, is not seeking, in effect, a share in the proceeds. Could I put it this way. The personal injuries solicitor will be in an area – it is referred to, for example, in the second paragraph of that part I quoted from the Privy Council, I think – where it is not an abuse of process, it is something to allow an injured plaintiff to recover the injured plaintiff’s damages. That the entitlement to recover the solicitor’s costs is conditional upon success does not mean – and I say there is a qualification to which I will come – that the solicitor is a litigation funder or that he is seeking to profit from the litigation apart from obtaining ordinary professional fees. The qualification I have is that in some jurisdictions it is possible for a professional person who is speccing, as one would commonly say, litigation to obtain a slightly higher fee because of doing so, but, your Honour, that is a legislative permission in that regard.
HAYNE J: The injection of the so‑called uplift must not obscure the fact that in the cases with which it deals the commonplace is that if you get anything as fees, you will get the fees as uplifted.
MR JACKSON: Yes.
HAYNE J: But at some point in your submissions I would be glad if you would identify the principle which you say sets apart the circumstances with which we are concerned here and, as I say, the commonplace of the personal injuries solicitor punting litigation.
MR JACKSON: If I could deal with it first factually specifically and then generally. What one has in the present case is a situation where, in effect, those funding the litigation, in addition to recovery of the sums they had advanced, were to recover twice as much again, in other words, an extra $630,000, to put it shortly. If it were the case that a solicitor were to engage in litigation on behalf of a client on similar terms, that too, in our submission, would be an abuse of process.
It would be an abuse of process because in each case there would be the two features, one going to the fact of a fee which could be regarded as a success fee and which would appear to be out of alignment with the amount of the costs. So that one cannot say, this is an advance. There is an advance of money to enable you to pay the costs of the litigation. What you have is an advance of money which, as will always happen in litigation funding, goes to pay the costs or some of the costs of the funding but also involves there being a significant gamble, a profit motive, as it were, in that sense, in relation to the outcome of the litigation.
HAYNE J: The proposition that solicitors are disinterested participants unconcerned with profit is an interesting proposition.
MR JACKSON: Of course, your Honour, all professional people – and one hates to even think of the topic – are sometimes concerned with money. One cannot expect legal practitioners or anyone else to carry on a business which is not going to (a) cover their costs and (b) provide something for their families to live on and occasionally to allow a child a second pair of shoes. Having said that, there are questions of limits. A professional person would be struck off for charging excessive fees and disciplined for it, whereas that is not the case in respect of funding. It is a different regime.
There is a need to distinguish between those who are funding simply for the purpose of enabling someone to vindicate their rights and those who are funding for the purpose of themselves making profits out of the litigation simply by being funders. Now, your Honour, I do not know that one can put it in more principle terms, but there is a distinction and the distinction has been made in respect of a number of classes of people, all of whom are seeking to assist in litigation being concluded as distinct from themselves making profits out of it.
GUMMOW J: There may also be the consideration that contingent fee arrangements required specific legislative or regulatory approval in various jurisdictions. Where that approval has been given, that may suggest something about the public policy that is involved in the solicitor in a contingent fee situation, namely, access of plaintiffs or parties to the courts.
MR JACKSON: Yes, your Honour. There is no doubt that in the case of individual plaintiffs – human being plaintiffs, if I can use that expression – that the view that has been adopted is that, with some exceptions, they do not, for example, have to give security for costs. Of course, if they lose the proceedings they are liable for an order for costs. It also is the general proposition that because someone lends them the money to proceed with a claim the mere fact that they have lent them the money does not mean that those persons are persons who should be held liable directly for an order for costs.
A distinction has been drawn between those cases on the one hand and cases where there is to be a percentage of the profits and, as your Honour has put to me a moment ago, where one has cases involving a contingency fee which is more than the costs would ordinarily be, then there is usually to be found some statutory or regulatory basis for permitting that. That reflects a judgment by the body which brings into being those rules, be it the legislature or be it a law society or something of that nature, as to the relative merits of being able to proceed or not to proceed in litigation. But, your Honours, one does not really see legislative or regulatory sanction of very significant success fees as such. What one does see is that, of course, the Court’s decision in Campbells Cash & Carry makes it apparent that the mere fact that there is such an agreement does not necessarily amount to abuse of process.
Your Honours, we would submit that there is no reason why, to put it shortly, the concept of abuse of process in the rule is not capable of applying to the present case and, secondly, does not apply. I will come to that aspect of it in a moment. Your Honours, could I just say this, that there is emphasis placed in the respondent’s submissions on the fact that SST did not control the proceedings in the sense of making the day‑to‑day decisions that were involved in the litigation. Your Honours, that is true. You will see that referred to in the appeal book at page 305 in the reasons for judgment of the primary judge at paragraph 51(2).
Your Honours, what we would submit is, why should it be necessary to take actual control? The ability to turn off the tap of funds is sufficient and SST certainly had that ability. You will see that referred to at page 304, paragraph 49 and you will see in the following subparagraphs of paragraph 51 on page 305 subparagraphs (4), (7), 8) and (9).
Now, I referred your Honours to a passage in the Privy Council in Dymocks Franchise Systems in paragraph 3, perhaps I should come back to that, your Honours. It is (2005) 1 NZLR 145 at page 156, subparagraph (3), the first sentence in that subparagraph and also the second passage to which I referred in the same paragraph, “Nor, indeed, is it necessary”, et cetera. Could I give your Honours a reference without taking your Honours to it to similar effect in a decision in the Full Court of the Federal Court in Kebaro Pty Ltd v Saunders [2003)] FCFCA 5. The relevant paragraphs are 113 and 114.
Now, your Honours, a funder of litigation may be perfectly content to allow the litigation to be conducted by the person funded but to have control of the matter by the ability to say, no more money. Your Honours, could I just say that this case is not one where the respondents had an entire detachment from the proceedings. You will see that referred to in the primary judge’s reasons at page 302 in paragraphs 43 to 45.
The next question is whether it matters, in a sense, that SST itself had an interest. As I have submitted earlier, we will accept that it had some interest in the litigation to the extent that it was in part a lender of funds for the purpose of litigation; in part, your Honours, but not in large part. Your Honours, I need in that regard to go to the deed of charge which is at page 154. You will see, your Honours, that that deed of charge was entered into on 13 October between, in effect, the plaintiff and SST. Then, if one goes to recital A, it refers to a loan of $200,000, but as appears from clause 1 on the same page the principal sum was not that 200 but $930,000.
If I could just pause at that point, your Honours. As the primary judge’s reasons indicate, there was some uncertainty about the precise amount advanced and the 930. You will see that referred to at page 299. Your Honours will see at page 299, paragraph 34 there is a reference to an affidavit by Mr Peter Sweeney saying that he had been approached in about mid June 2000 to have funds lent for the purpose there set out and he said he agreed to contribute $300,000. His Honour goes on to say in paragraph 35:
There was no reconciliation of the amount of $300,000 said thus to have been contributed with the amount of $200,000 referred to as owing in the deed of charge –
We submitted, absent any explanation, he –
should conclude that the principal debt of $930,000 under the deed of charge in fact comprised advances totalling $300,000 (not $200,000) and a balance, that they were pleased to call a “success fee”, of $630,000 (not $730,000).
Your Honours, that no doubt involved an element of generosity, in a sense, on our said in saying 300 rather than 200, but it perhaps did not matter in the scale of things. Then you will see in paragraph 36 that the respondent submitted that, to put it shortly, there was more paid and the judge did not accept that. You will see that in paragraph 37 that he said that he would:
conclude that the principal debt of $930,000 referred to in the deed of charge should be taken to include both advances made to that date and a balance unexplained by any advances. Whether that balance is $730,000, $630,000 or $580,000 (or some other figure) is obscure. Whether it is properly characterised, in whole or in part, as a “success fee” is a different question.
Your Honours, if I could go also to paragraph 52 on page 306 where he adverted to the same matter. The Court of Appeal referred to this matter at page 501, paragraph 28 in, in effect, the first half of that paragraph. Could I just say, your Honours, that you will see in paragraph 28 between about lines 30 and 35 that what was said by the judge there was that:
further amounts advanced by it to fund the litigation, with varying measures of priority over certain of the creditors of Rickard Constructions.
What that seems to refer to, your Honours, is to the provisions of a deed of company arrangement which were summarised by the primary judge at page 295, paragraphs 22 to 32. The deed of company arrangement is at page 171.
CRENNAN J: Mr Walker, as I understood him anyway, was contending that clause 15.2 to be found at 182 of the deed of company arrangement was broad enough to encompass an indemnity – it has a cap of $150,000, so presumably the cap might be reached quickly – but I wondered whether that had any impact in relation to your characterisation of the abuse of process as a failure to provide an indemnity in relation to the successful party’s costs, coupled with the success fee, of course?
MR JACKSON: At the highest it might reduce, we would say, the amount of the order for costs in our favour. We would say it does not go further than that.
CRENNAN J: Does it affect the time at which the abuse commenced? Would it have that possibility?
MR JACKSON: It would not and may I just come to that in a moment, your Honour, because I was going to deal with clause 15.2.
CRENNAN J: Certainly.
MR JACKSON: What I was going to say, your Honours, was that one has a situation where, for provision of let us say X – and, your Honour, I have not come to that point yet – one has a transaction where the provision of X by way of litigation funding SST is to obtain a profit of, in effect, two X or a little more. Now, your Honours, almost all forms of litigation funding are likely to involve an agreement to refund moneys provided for the litigation and a profit element. But, if the case would otherwise be one to which the rule to which we have referred would apply, in our submission, it would not matter that absent the provision for profit there might otherwise have been a perfectly proper loan. Your Honours, I am putting that a little obscurely. What I am seeking to say is the mere fact that part of it might be a perfectly proper loan does not prevent there being a characterisation falling within abuse of process in the rule.
Could I come then, your Honour, to clause 15.2 at page 182. Your Honours will see that that provision is one that is relied upon by the respondents, as we understand it, as demonstrating that there was an indemnity for costs, albeit for a limited amount. The indemnity, your Honours, if it exists, would perhaps seem to come from clause 15.7 which says:
15.7The Company will pay into the Fund all amounts recovered by way of settlement or a verdict in the Construction List proceedings. The Company shall only be obliged to pay into the Fund the net amount actually received by the Company after deducting:
15.7.1the amount of any cost order made against the Company in the Construction List proceedings –
Your Honours, could I just say that document, the deed of company arrangement, was entered into in December 2000, as you will see from the top of page 173. It referred, in clause 2.5 to the payments being made out of the fund, and you will see that if one goes through to clause 2.5.5, the balance of the claim of the secured creditor, that is SST, is to be paid. Now, that claim, of course, was to the $930,000, the subject of the charge which had been earlier executed and, your Honours, the dates on which the various matters took place can be seen in the reasons for judgment of the Court of Appeal. If one goes to page 492 you will see that the proceedings have been commenced on 5 September 2000.
The deed of charge was given – that is the 930,000 charge – is given after that. You will see then that the deed of company arrangement – the second entry on page 493 – was entered into in December 2000 and, your Honours, at that point the estimate of costs – this goes to what indemnity there might have been – the estimate of the plaintiff’s costs at that point was $150,000. You can see that from page 144. This is a document, your Honours, which, as can be seen from Mr Sweeney’s affidavit at page 99, is a document that he saw. It sets out estimates of costs of the proceedings and at page 144:
In estimating the cost of the matter if the program contemplated by the Deed is followed only the following assumptions apply‑
the trial will not be held by 31 March 2001, which is the date in the deed and then the cost estimate $150,000. So, your Honours, to speak of there being some indemnity amount in that seems a matter of some enthusiasm, in our submission, rather than, with respect, reality. Could we also say that in relation to this topic there is no reason why, in determining whether there should be an order against a non‑party, the whole of the circumstances should not be taken into account. We have referred to this in our reply submissions at paragraph 13.
Could I come then to the orders which, if we are successful, we would submit, should be made against SST. I will come to the individual respondents in a moment. There is no reason, if I can use that expression again, it is submitted, why an order should not be made requiring that SST pay the appellant’s costs. The agreement evidenced by the deed of charge was entered into very shortly after the institution of the proceedings. You will see that from the chronology at page 492.
In our submission, the inference should be drawn that the proceedings would not have gone ahead if the agreement had not been made. Your Honours have seen the findings about the relevance of funding to the continuation of the proceedings. If there were to be some trimming or reduction of the order, we would submit that the only trimming or reduction that might be in the range of being appropriate would be the exclusion of costs preceding the date of the deed of charge, at which point the arrangements were settled.
Could I come then to the position of the individual respondents, Messrs Sweeney, Sweeney and Truman; no doubt the origin of the SST name. Those gentleman ran SST as a partnership. You will see that referred to by the primary judge at page 306, paragraph 53. I will not read out the paragraph but would invite your Honours to read it. The question which arises is whether SST and the three individual respondents were liable to an order for the payment of the costs.
The situation which emerged was that each of the individual respondents participated in the conduct in question. First, they provided the money. You will see that in that paragraph. Secondly, they were to receive the benefits. Thirdly, we would submit, it is immaterial that the agency through which they were to make the funding and also to receive the benefit was a company and, fourthly, each of those three respondents, in our submission, was equally liable and the same orders, we would submit, should be made against them as might be made against SST.
Your Honours, so far, and this is the last matter with which I wish to deal, the costs of the appeal, your Honour, we would submit the appeal stands in at least the same position and it is a case where it appears from the written submissions we had on this occasion specifically made it clear that we would be seeking costs against these parties if the appeal was unsuccessful. There does not seem to be a significant difference drawn by
either party in relation to costs of the appeal. Your Honours, those are our submissions.
FRENCH CJ: Thank you, Mr Jackson. Yes, Mr Walker.
MR WALKER: Your Honours, at the outset, in our submission, it is critical to identify, that is, describe in all its elements, the abuse of process which is required by the rule which provided the only basis for the argument against my clients for the making of these costs orders.
GUMMOW J: The first question, in a way, is to understand the sense in which that phrase is used in paragraph (c).
MR WALKER: Unquestionably.
GUMMOW J: And that may involve some consideration of the relation between (c) and the other paragraphs and whether there is any overlapping, in other words, would any of the other paragraphs from (a) to (g) answer the description of abuse of process?
MR WALKER: Maybe (d). Paragraph (d) certainly covers the classic challenge to retainer which brings a sudden halt to certain proceedings from time to time, but it is expressed in terms:
who purports, without authority, to conduct proceedings in the name of another person –
it certainly embraces matters which could be a very serious abuse, not to mention a contempt, if it involved, for example, a lie. It does not necessarily involve a lie in (d), it may involve a mistake, as most challenges to a retainer actually involve.
GUMMOW J: What is rule 42.27, do you know? That is paragraph (f).
MR WALKER: Yes. I am sorry, your Honour, having looked at it, I have not forgotten its content. You will see it also picked up in the opening words of sub‑rule (1). I confess its lack of materiality to the substantive issues has obscured the possibility of its use for the purpose Justice Gummow has raised, and I apologise for that.
FRENCH CJ: This is a person failing to attend in accordance with an order of the court by subpoena or otherwise.
the court may order the person in default to pay any costs occasioned by the default.
I think that is 42.27(1). Similarly with corporations.
MR WALKER: Yes. There had once been, but I think had been settled, controversies about people who might be called parties to subpoenas, that is, not parties to proceedings, and 42.27 dealt with that. People who were the named object or responsible for the conduct of the named object of compulsory process of the Court.
GUMMOW J: Well, (b)(ii) could be a contempt, could it not?
MR WALKER: Yes.
GUMMOW J: And (d) could be an abuse, I suppose.
MR WALKER: And (d) could be an abuse or, as I say, depending upon the state of the mind of the person so doing might be a contempt as well. The same is true of (e) and for the same reason. Now, (g) will include a rather large and dispiriting variety of contempts and abuses of process that can be committed by lawyers and others, not limited to those, but certainly will include all of them. We certainly do not say, apropos (g), for example, that the supervisory jurisdiction provides, textually or otherwise, any limit on what can be seen in (c).
MR JACKSON: Can I say this in response to what your Honour said and removing oneself in a sense from the precise wording as to that passage?
HAYNE J: Yes.
MR JACKSON: The position is that the rules provide and, indeed, the Corporations Act provides that in some cases there may be an order for security for costs. What that does is to put in a fund, which can be done in various ways, which will be available in relation to costs if the plaintiff fails. That is something that is available under the rules but, your Honours, the point we would seek to make is, why does the mere existence of that provision and the ability to avail oneself of it mean that an order for costs at the end of the proceedings should not be made on the basis that there has been an abuse of process?
One can look at it in a number of ways. Is it that the provision for security for costs and the ability to use it means that what may be an abuse of process in concept is reduced? Well, your Honour, we would submit not. Why should it be really? Abuse of process is abuse of process. The fact that you may be able to ameliorate the consequences at some point does not reduce the ambit of the concept itself, in our submission. Nor should it be treated as something which is germane to the exercise of the discretion because one may accept that there is some discretion under rule 42.3 to see some discretion, but in circumstances where there is the finding of abuse of process one would think that the considerations which would militate in favour of the exercise of the discretion against an order for costs would not be very persuasive.
It would require particular considerations because the hypothesis is that there has been an expenditure, the costs, the expenditure has been occasioned by the abuse of process, that is what the rule requires, and in those circumstances, what reason is there for saying, well, the person who did that, they should pay. There are not too many, really, your Honour. It may be that if one tried to deal with circumstances where it was said, well, this was a charitable institution that was behind it, now, of course, the heart strings are pulled, but whether the organ goes with it is another question, your Honours, because one does come down to a situation where the starting hypothesis is loss and loss occasioned by an abuse of process. Your Honour, we would submit that one can understand why there is reference to the ability for security of costs by why in the end that should be either a factor or, secondly, a significant factor, if it be one, is not, in our submission, at all clear.
Your Honours, could I just mention the provision of the Corporations Act section 564 your Honour Justice Hayne referred to before the luncheon adjournment. That provisions is one where it deals with circumstances where:
property has been recovered under an indemnity for costs of litigation given by certain creditors, or has been protected or preserved –
et cetera, and a range of situations, but what it then provides is:
the Court may make such orders, as it deems just with respect to the distribution of that property and the amount of those expenses so recovered with a view to giving those creditors an advantage over others in consideration of the risk assumed –
What that is saying is that it provides a regulation by reference to statute. It can only be something that is just, there is a limited statutory intervention in the matter and does not really take the matter one way or the other except that it provides an instance where if there is to be some inroads or is to be some promotion, in effect, of assisting of some promotion of the rights of particular creditors, that can occur. There have been cases, of course, where it has been held that the unsecured creditors are able to agree amongst themselves for one to have priority over others by reason of paying for litigation.
So far as the Legal Profession Act is concerned, our learned friend has referred to the provisions. May I just say something a little further about them. The concept of uplift fee is defined by section 302(1) to mean:
additional legal costs (excluding disbursements) payable under a costs agreement on the successful outcome of the matter to which the agreement relates.
There is then provision in section 314(1) for there to be disclosure “to the client in writing” of various matters if a costs agreement includes an uplift fee. If one goes to section 323(1), it is provided that:
A costs agreement may provide that the payment of some or all of the legal costs is conditional on the successful outcome of the matter –
et cetera. The conditional costs agreement under 323(3) “must set out” various matters. I do not think I need to take your Honours through one by one. But when one comes then to section 324, the legislative policy of most present relevance is set out:
A law practice must not enter into a conditional costs agreement in relation to a claim for damages that provides for the payment of an uplift fee on the successful outcome of the claim to which the fee relates.
You will see in subsection (5) the maximum uplift fee. Could I just pause to say 324(1) referred to a claim for damages. Then when one goes to 325(1) it says:
A law practice must not enter into a costs agreement under which the amount payable to the law practice, or any part of that amount, is calculated by reference to . . .
(b)the amount of any award or settlement or the value of any property that may be recovered in any proceedings to which the agreement relates.
Then, in section 327 you will see, your Honours, various consequences by entering into agreements that contravene the provisions to which I have earlier referred. I would refer also, your Honours, to section 328(1). Your Honours, the point that I would make from those provisions is that they do, it is right to say, sanction some element of what one might call a success fee. However, the fact of the matter is it is very strictly regulated, it can be only 25 per cent more, in effect, in one class of case than the fees otherwise payable and in those circumstances cannot be related to the actual value of the proceedings. So that one sees, your Honours, a specific but limited and regulated legislative sanction on the one hand, or exception on the other hand.
Your Honours, may I go to the reasons for judgment of the Court of Appeal. I wanted to go to them for two reasons. The first is, we would submit, that it really is pretty clear that the argument we are putting in this case now was put below and the other is that the reasons that argument was rejected but the reasons for rejection of it are, with respect, somewhat sparse. If I could go, your Honours, to that part of the judge’s reasons which are contained under the heading, “CONTENTIONS OF THE PARTIES”. They commence at page 506. You will see, your Honours, in paragraph 37, the first part of it:
The basis for the orders sought by J & K was that in the circumstances of the case the funding of the primary proceedings and the appeal by the SST Parties without provision of an indemnity to the plaintiff for the defendant/respondent’s case constituted an abuse of process –
Now, your Honour, you can see that he speaks “in the circumstances of the case the funding”. Now, that cannot have been without some understanding of what the nature of the case was because that was summarised in the reasons for judgment in the Court of Appeal. If one goes from there to paragraph 44, your Honours, page 508, the first sentence, that is perhaps a paraphrase of the same thing. In paragraph 45 you will see that it said at the fourth line:
Here, it was said, an insolvent plaintiff assignee sought to sue in its own name on the actions of third parties with neither the funder nor the assignor indemnifying the plaintiff in respect of the costs of the defendants.
Well, your Honours, we accept that whether the assignment is good or bad does not really matter very much in a particular case. One sees then, your Honours, if one goes to paragraph 48, why the case against the individuals is of some significance. The reason is that SST Consulting was insolvent. So we have an enthusiasm for obtaining a judgment, if it be right, against the Messrs Sweeney and Mr Truman. Your Honours, if one goes then to paragraph 50 at about line 40 on the same page, the submission was made:
that the trial judge had adopted too narrow a view of abuse of process by confining himself to ascertaining whether the Court’s processes had been subverted or corrupted.
That goes to the first point with which I was seeking to deal this morning, but the court did seem to understand the argument we were advancing. Then one moves on, your Honours, to paragraph 67 under the heading “CONSIDERATION” and what your Honours will see is the broadest proposition there set out. You will see then at paragraph 74 the reference to the contempt or abuse provision having been picked up from the Privy Council case quoted earlier and quoted in Knight. But what is then said at page 521 about line 39:
it was intended to refer to actual rather than prospective contempt or abuse of the proceedings.
That seems to be erroneous in our submission because it only derives from the procedure adverted to in the last sentence of a quotation from Ram Coomar Coondoo which is on page 521 at about line 25. Then if one goes to the last two paragraphs of relevance, paragraph 75, your Honours will see, reciting the contention again:
The principle contention of the applicants is not consistent with UCPR Rule 42.3(1) . . . The primary judge was correct in holding that an actual abuse of process must have been committed ‑
In the context he is referring to abuse in the course of the conduct of proceedings. The argument is then recorded again paragraph 89 in the first five or six lines. So, your Honours, we would say the argument we advance now was advanced before the Court of Appeal and the other comments which I have made applied to it.
Your Honours, our learned friend said, well, this is all too hard, it should go to Parliament really and, your Honours, what we would say is this. This is a case where, in relation to that topic, the legislative body has chosen a criterion broadly expressed, no doubt, in the rule, broadly expressed because there is a great number of areas to which it could apply. The question is simply whether the particular case falls within it. No doubt that involves some conception as to the nature of abuse of process, but the Court in the end decides particular cases. The reasons behind the Court’s decisions are the ones that are followed by other courts in the hierarchy and, to the extent appropriate, by the Court itself, but, your Honours, the situation is not one where the Court is being asked to exercise in any improper way a legislative function.
Could I say one other thing, your Honours. Our learned friend says there was no evidence to show how common or uncommon these things were, clearly there was not much there. Well, there was a bit there, your Honours, and this case has two sides and the burden of adducing evidence on these matters, if relevant, can change. The position was, of course, that what you had a case where the amount of money advanced, we appeared to accept somewhat generously, $300,000, the amount of the success fee, $630,000. A fair difference between the two and, your Honours, a little more, for example, than the 20 to 25 per cent allowed the solicitors by the rule. So it was a prima facie case where there was a very substantial success fee in the scale of things and a very substantial success fee where there was no indemnity.
Now, if that was the case, why did not an evidential burden fall on the other side to say, well this is pretty normal? Everyone is entitled to figures of that order of magnitude. The answer is that they did not choose to do that, perhaps they could not have done, but the fact of the matter is that that was something that lay upon them to do.
Your Honours, can I just say something about the basic facts of the case and the prior involvement of SST. Your Honours, I will not go into the detail of it. We have sought to set it out with the relevant references in our submissions in‑chief in paragraphs 6, 7, 8 and 12. Your Honours, those are our submissions.
HEYDON J: Can I just ask you this, Mr Jackson? You took us to page 510 which records that SST Consulting was a $3 company and is now insolvent. Do you know when it became insolvent?
MR JACKSON: When SST became insolvent? Yes. At page 468 one sees the notes to the financial statements for the year ended 30 June 2004 showing accumulated losses. Your Honour, that is not to my thinking a clear answer to your Honour. Your Honour, would your Honour permit us to endeavour to put something in writing.
HEYDON J: With the Chief Justice’s leave.
MR JACKSON: I am sorry. Would your Honour, the Chief Justice ‑ ‑ ‑
FRENCH CJ: Yes, Mr Jackson.
MR JACKSON: Your Honour would perhaps seven days, if that were possible, and then appropriate time for my learned friends to reply.
FRENCH CJ: Yes. Yes, thank you. The Court will reserve its decision. The Court adjourns to 2.15 pm on Monday, 24 August 2009.
AT 3.31 PM THE MATTER WAS ADJOURNED
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