Knight & Anor v FP Special Assets

[1992] HCATrans 34

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Brisbane No B22 of 1991

B e t w e e n -

DESMOND WILLIAM KNIGHT and

WILLIAM GERARD MALONE

Appellants

and

FP SPECIAL ASSETS LIMITED,
KEEN BAY PTY LTD and MAINDOLLAR

PTY LTD

Respondents

MASON CJ
DEANE J
DAWSON J
GAUDRON J

McHUGH J

Knight(2) 81 5/2/92

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 5 FEBRUARY 1992, AT 9.47 AM

(Continued from 4/2/92)

Copyright in the High Court of Australia

MASON CJ: Yes, Mr Jackson.

MR JACKSON:  Your Honours, I was about to refer the Court to

Bacal Contracting Company Limited v Modern

Engineering (Bristol) Ltd, (1980) 2 All ER 655.

That was a decision of Judge Fay as an official

referee where he held that the court had power to

order the receiver to pay costs of an action

carried on by him after the company had been wound

up compulsorily. In the course of doing so, one

might note in passing His Honour held that the ability to obtain security for costs was not a

factor which prevented the existence of the power.

Your Honours, might I go very briefly to

page 659 and between the letters hand i His Honour

noted that:

his conduct of litigation such as the present
it seems to me reasonably clear that the

receiver is the real plaintiff and the company

is a nominee plaintiff. Does that make the

receiver personally liable for costs?

He noted in the remainder of that page a submission

that the presence of the power to order security

for costs militated against the contention that

there was power to order costs. Then,

Your Honours, at page 660d, referred to the

argument of manifest injustice and the emptiness of

an order. The submission is, in effect, continued

through to 660h, and then His Honour said in the

remainder of the page that it seemed to him that:

s 50 is wide enough to cover the present case,

unless it can be said that its operation is

cut down by the provisions enabling security.

for costs.

He referred to the discretionary basis of that, and

whole of page 661, and I would refer particularly	then his reasons on the present issue go down the
to that part of it ending just after letter g - the
whole of it, Your Honours, but it principally ends
just after the letter g.

Your Honours will see in the course of that an

extract from what had been said, very much in

passing of course, in the Court of Appeal in S & M

Hotels Ltd v Family Housing Association where at

least Lord Justice Buckley appeared to say that an

order providing for a receiver to pay costs was an

order which the court had power to make.

Your Honours, I have referred earlier to other

passages in the reasons for judgment in Bacal

Knight(2) 82 5/2/92

Contracting and, in particular, to the next

paragraph on page 661, but might I also just in

passing refer Your Honours to one further passage

which relates to a matter I mentioned yesterday.

That is at page 662, the first new paragraph on the

page, where His Honour adverted to the fact that of

course he would not have made an order for costs

without giving the receiver an opportunity to be

heard. He observes in the first sentence of that

paragraph that he thought:

Tesco were right to join the receiver as third

defendant.

Your Honours, one might, with respect, doubt the

necessity to join as a party to the original

proceeding a person against whom the order for

costs is to be sought. It is entirely appropriate,

of course, that the application for costs would be

one which would be served upon that person and that

person would, in respect of that application, be a

party but it is perhaps unnecessary to go further.

And, Your Honours, one really doubts why, apart

from perhaps a question of neatness and
satisfaction of matters of form, it would be

necessary to have the receiver joined as a party to the original proceeding, where the only order to be

sought was an order for costs.

DEANE J: What if the person who was not a party wanted to.

dispute liability for costs on the basis that the

decision was wrong? Say, for example, he came

along and said, "I didn't know about these

proceedings"?

MR JACKSON:  Your Honour, might I seek to answer that in

this way. Perhaps I can deal with two aspects of

it really. The first thing I would like to say

about it is this, that if one deals purely with the

aspect with which I was just dealing, the question of the appropriateness of the receiver being a	party to the original proceeding, then, if one were	to make the assumption that the receiver had been a
party to the original proceeding, then presumably
he would be bound by the result of it so the issue
would not further arise.

Your Honour, if I could go then to the second

aspect of it: of course the availability - and I

am speaking in broad terms - of an order against

the receiver may not be apparent at the time of

institution of the proceedings or at any time until after the conclusion of them. It may be, too, that

the availability of the proceedings against the

receiver is seen but it is simply desired not to

take any action about them until one sees what

happens in the proceedings.

Knight(2) 83 5/2/92

So that, Your Honours, a number of situations

can arise, but one does have a situation where,

assuming the receiver has not been a party to the
proceedings, he is entitled, one would think, to

raise issues by way of defence to the claim for

costs.

Now, Your Honours, the ultimate question would

seem to be whether, in respect of the application for costs, he is to be treated as having been, in

effect, a privy, I suppose the right description

would be, for the purposes of issue estoppel, if I

can put it broadly - to have been a privy of the

party whom he was representing, in effect. If he

was he would be bound, if not, then it would seem

to follow he is not bound by it.

Your Honour, we would submit the proper result

would be, probably, that he would be a privy,

because he was the person - the hypothesis would

go - who had instituted the proceedings by the use

of someone else's name. But, Your Honour,

accepting that there may be two views on that, the

view we have submitted we would submit is the

better one, but even if it is not, and the

possibility of the receiver raising the issue again

exists. That should not be regarded as a

sufficient argument against the existence of the

discretion, Your Honour, because it tends to be a

kind of reverse floodgates argument in a

sense - - -

DAWSON J: Well the short answer is the basis on which he is

liable for cost is that he had control of the

action.

MR JACKSON:	Yes, Your Honour.
DAWSON J:	So that he should not be heard to dispute it.

DEANE J:  I was not asking you the question for that narrow

purpose; what I was asking it for was whether there

is a requirement of general privity or control

behind the straw man before the jurisdiction can

properly be exercised against the non-party, and

what was at the back if my mind really was the

undoubted jurisdiction to make an order for costs

against an agent whose fraud underlay the liability

of the principle. I would have thought there that

if the order for costs was required or was desired

and the agent was not, as it were, the agent in the

conduct of the proceedings, notice of the

application would have had to have been given in

equity, at a very early stage of the proceedings,

or the court would simply say it is too late.

Knight(2) 84 5/2/92

MR JACKSON:  Your Honour, no doubt - could I just say my

hesitation is brought about by the fact that I do

not want to be - the way in which I express what I

am about to say - seeking to limit the power or to

covert a question of the normal mode of exercise of

the power into one of jurisdiction. Ordinarily

speaking -

DEANE J:  Except - if I could interrupt you again,

Mr Jackson - it is something we must face. Assume

that you would be correct on jurisdiction under

section 58, or the order, the question then arises

is the jurisdiction an unprincipled one or is it to

be controlled by principles, no doubt derived by

analogy, from the common law and equitable
position. For example, if you had litigation

between a widow with almost no money on the one

hand and the son of a billionaire on the other, the

son being a person of straw, ordinary feelings of

justice would say the fair thing is to make the

father pay the costs, even though he had nothing to

do with it. But obviously that could not be

justified as a matter of legal principle and would

be a wrong exercise of the jurisdiction.

MR JACKSON:  Your Honour, one also, of course, has to bear

in mind considerations such as those which lie

behind the notion that what I can call a human

being plaintiff, resident within the jurisdiction,

will not be ordered to give security for costs, for

example.	I will give Your Honours a case about
that a little later.	So there is a number of

conflicting things. What I was seeking to say,

Your Honours, was this, that a circumstance in

which one would commonly expect the power to be

exercised - and one of the principles on which the

power would be exercised would be if the person

who, for example, instituted or defended

proceedings, was a person who had put up another person as defendant or plaintiff - probably more

often plaintiff one would think - in proceedings

and had done so in circumstances where it was known

that that person, if unsuccessful, would not have

been able to satisfy the order for costs.

It would not be necessary, we would submit,

for example, that there be in effect a substitution

of persons. The receiver's case is the obvious

case, where there is not a substitution but it is a

case of that kind. Your Honours, it may well be

that, in other cases involving the position of

shareholders, that it would be inappropriate for

persons - even though, for example, the majority

and controlling shareholders - to be rendered

liable for orders for costs of unsuccessful

proceedings because it may well be that one has to

Knight(2) 85 5/2/92

have a combination or a balancing of the notions of

limitations of liability on the one hand and, on

the other hand, the ability of persons to satisfy

orders for costs. That is why I would seek to, in effect, limit the application of the principle for

present purposes to situations broadly approaching

the present, but recognizing at the same time there

is a multiplicity of possibilities.

DEANE J: Yes, except our problem is, assuming that we

should be involved in a case about costs, that

there is something to be said for the view that if

there are broad principles controlling the exercise

of jurisdiction which govern the case, we should

seek to identify them rather than, if your argument

be correct, simply saying, "Well, in this case the receiver had an interest distinct from the company

in that he was acting as agent for creditors of the

company. He had control of the proceedings and the

requirements of justice support an award of costs against him", without endeavouring to explain why

it is, by reference to principle, that that result

comes about.

MR JACKSON:  Your Honour, it is a question whether one can

identify a number of underlying principles at a
level between, on the one hand the interests of

justice, as it were, and on the other hand the

particular class of case of receivers. It is

possible, we would submit, to identify, of course,

the various instances to which we have referred

which tend to relate to, in some cases, abuse of

process in the strong sense of the term; in other

cases, what has been regarded as a kind of abuse of

process, namely by the putting up of a person in•

circumstances where, for example, another person

might have brought the action; and what really is

the third class of case where, although one person

is a proper party to the proceedings, that person

is a person for whose own benefit the proceedings

are not being brought or defended but they are

being brought or defended for the benefit of

someone else.

That last is, perhaps, a paraphrase of the present case but we would submit that is a

sufficient principle, with respect, for present

purposes. Your Honour, the more one seeks to try

to define it the more one gets into the difficulty of seeking, really, to have a substituted test for the words of the provisions.

Your Honours, I have just gone past Bacal

Contracting. That decision was followed in British

Colombia in Greenwood Forest Products (1969)

Limited v Newnes Machine Limited, (1986) 32 DLR

(4th) 279, commencing relevantly at page 281, the

Knight(2) 86 5/2/92

decision being a decision of a judge at first

instance, Mr Justice Legg. Under the heading on

that page, "Opinion on the receiver-manager's

personal liability for costs", His Honour sets out
the wide discretion in the first paragraph, and

then refers to a decision of the Court of Appeal

which dealt with the case of a trustee in

bankruptcy but in the course of which some observations are made which are materials.

Your Honours will see that in the Court of

Appeal there had been adopted the passage from Re

Williams & Co, Ex parte the Official Receiver, to

which I referred yesterday, Your Honours will see

the reference to "or a receiver", about six lines

into the quotation from the quotation. Then, on
the next page, at page 282, His Honour refers again
to the Court of Appeal case and says - this is a

third of the way down the page.

I quote only from that passage of

Mr Justice Osler reasons at p 410 which are

mentioned by Mr Justice Macdonald:

"As to costs, the fact that the defendant is a

trustee does not absolve him. He is the real

as well as the nominal defendant, and he may
be ordered to pay costs just as any other

unsuccessful litigant may be ordered to pay

them.

Of course, Your Honours, the trustee is a party.

But then, he goes on to say -

A distinction is sometimes made with regard to

an official liquidator who sues in the name of

the company, at all events as to some

proceedings taken by him, but even he may be

ordered to pay costs in the first instance

personally.

His Honour goes on then to say that:

These authorities show that the

receiver-manager is personally liable for

costs. He may protect himself by an indemnity

but that is irrelevant when considering the

opposite party's right to recover costs from

him.

Your Honours, he discusses the arguments in the next two paragraphs and then, in about the middle of the next page, refers to Bacal as support for

his conclusion.	Then at the bottom of page 283, he
says:

Knight(2) 87 5/2/92

In the case at bar the receiver-manager continued the action against the defendant

when it knew that Greenwood was bankrupt. That is discussed in that paragraph and the first

new paragraph on page 284. Then in the second new

paragraph on page 284:

On the material before me I think it is fair

to conclude that the receiver knew or ought to

have known that the outcome of the action

which it was prosecuting was dependent upon

opinion evidence -

and so on. That would give rise to expense. He

found the reasoning in Bacal apposite:

It would not be just to leave the defendant to

recover its costs from moneys available from

the receiver-manager's realization of

Greenwood's assets.

Your Honours, in one Australian case, Kelaw Pty Ltd v Catco Developments Pty Ltd, (1989) 15 NSWLR 587,

the decision in Bacal was noted by

Mr Justice Brownie, and then at page 593,

His Honour was dealing between letters D and E with

an application in effect for an order prior to the
conclusion of the proceedings that the receiver was

personally liable, and said that he did not think

such a declaration could be made:

It may, in an appropriate case, be right to order that a receiver pay costs -

Bacal -

but it does not seem correct that a

declaration can be made, in advance of the

exercise of a discretion as to costs.

Your Honours will see the next paragraph also. I

think that is the only substantial part of the case
that deals with it. Your Honours, the case does

not of course really itself discuss the proposition

in any detail, but it seems not to cavil, as it

were, at Bacal.

Your Honours, in addition to decisions

relating to the particular position of receivers,

there are observations in a number of cases that if

a person is involved in maintaining the

proceedings, then that person may be made liable

for an order for costs.

Your Honours, maintenance may be of course of

two kinds, lawful or unlawful, and Your Honours

Knight(2) 88 5/2/92

will see, in our outline of submissions, we have

given a short trend to the Trendtex case in the

House of Lords, where an observation to the effect

of the one which I have just made was referred to

by one of Their Lordships in the course of his

reasons for judgment but, Your Honours, I do not

think I need to go to that. But may I take

Your Honours to a number of cases in which the

possibility of an order for costs being made

against a maintainer, that is in the maintained

action, has been adverted to.

The first is Hayward v Gifford, 150 ER 1399

and in the reasons for judgment in that case, at

page 1400, Your Honours will recall that

Lord Abinger said, it is about half-way down the page:

In the present case, if it could have been shewn that Spencer had committed any contempt

of Court, or been guilty, in respect of this

suit, of anything in the nature of barratry or

maintenance, it would have been another

matter.

So that the possibility is adverted to there.

Barratry of course is, in effect, continued

maintenance or continued touting as it were, and I

wonder if I could give Your Honours some extracts

showing what is meant by barratry because one tends

to forget sometimes. Your Honours, these are

simply three extracts from Jowitt's Dictionary, the

Oxford Companion and Strouds Judicial Dictionary

dealing with the nature of barratry.

In Jowitt three meanings are given, the third

of them is this:

At common law it means the offence committed

by a common barrator -

if that be the right pronunciation -

that is to say, one who habitually moves,

excites or maintains suits or quarrels,

whether at law or otherwise -

and to the same effect are the definitions of the

other two abstracts. Your Honours, that is perhaps

of more antiquarian interest these days than

anything else, but it is clearly related to the

maintenance of proceedings.

Your Honours, the view that a person involved

in the support of legal proceedings may be liable

for costs has been adverted to on a number of

occasions in more recent times in decisions in the

Knight(2) 89 5/2/92

Court of Appeal, the observations being those of

Lord Denning when Master of the Rolls but the

propositions being agreed to by the other members

of the court.

There are three decisions: the first of those

is Hill v Archbold, (1968) 1 QB 686 and at page 694

Lord Denning, of whose reasons for judgment Lord

Justices Danckwerts and Winn agree~ said at the

bottom of the page, the third-last iine:

Much maintenance is considered justifiable

today which would in 1914 have been considered

obnoxious. Most of the actions in our courts

are supported by some associations or other,

or by the state itself. Comparatively few

litigants bring suits, or defend them, at

their own expense. Most claims by workmen

against their employers are paid for by a

trade union. Most defences of motorists are

paid for by insurance companies. This is
perfectly justifiable and is accepted by

everyone as lawful, provided always that the

one who supports the litigation, if it fails,

pays the costs of the other side. It is the universal experience in this court that if a

trade union or an insurance company supports a

case and fails, it pays the costs of the other

side. In the light of this experience, I am

satisfied that if Oream v. Hutt were to comes

before us today, we should hold that the union

had a legitimate interest -

and so on -

remembering that if the suit had failed, the

union would have paid the costs.

Now, Your Honours, what His Lordship was there

provided always that the one who supports the saying relevantly for present purposes is that	litigation, if it fails, pays the costs of the
other side. Precisely how that would be worked
out, of course, does not appear in that case. But the proposition to which he adverted was adopted in the Court of Appeal in Trendtex Trading Corporation
v Credit Suisse, (1980) 1 QB 629. This case went
to the House of Lords, but the House of Lords decision does not touch on the point.

Your Honours, at page 653 His Lordship at

letter F said:

It is perfectly legitimate today for one

person to support another in bringing or

resisting an action - as by paying the costs

Knight(2) 90 5/2/92

of it - provided that he has a legitimate and

genuine interest in the result of it and the

circumstances are such as reasonably to

warrant his giving his support.

Then he quoted the passage again from Hill v

Archbold. Finally, Your Honours, so far as those

cases are concerned, there is an unreported

decision of the House of Lords, Orme v Associated

Newspapers, the decision given on 10 November 1980,

Court of Appeal Transcript 809, and - - -

DEANE J: But Mr Jackson, it probably has nothing to do with

this case, but the statement that anyone who

supports a party to litigation in relation to the
costs must pay the other·side's costs if the other

side wins is simply not right. I mean, if a parent

supports his child who is a defendant in litigation

by paying the costs, it is, with respect, quite

absurd to suggest that he has to pay the

plaintiff's costs if the litigation succeeds, even

though the parent has no interest whatsoever in the

subject-matter of litigation.

MR JACKSON:  I really would not suggest that - no doubt what he said is broadly expressed. I would not seek to

suggest that the observations of the Court of

Appeal in these cases were intended to cover cases

of the nature to which Your Honour was referring.

The particular classes of case to which he seems to

be referring are those where the support of the

litigation is not biased, for example, by some

family member or not by, for example, a loan by

someone for money to do it, but rather to cases

where a body which itself has no interest apart

from the fact that someone is a member of it does

that support. No doubt, Your Honour, he gives that

support. And as I said before, it is perhaps not

entirely clear what His Lordship meant by the

method of implementation of it, but he does appear

to be stating a principle, whatever be the precise

edges of it and the precise application of it,

which does not seem, Your Honour, too disparate from what had been said in 1843, or whenever it was.

DEANE J: Well, why I raise it is the same reason I raised

the other matter with you earlier: what His

Lordship says seems to me to be moving right away from principle and simply - I mean, say it is a

union. If a union says to a member, "You're being

sued, we have no interest in it but will contribute $200 towards your defence", why on earth should the

union be liable to pay the plaintiff's costs in an

action in which it has no interest whatsoever?

Knight(2) 91 5/2/92

MR JACKSON:  Your Honour, I do not want to go into a long

argument about the exact correctness of what was

said here but may I just say, in relation to it,

that if one has circumstances where unions, for
example, assist their members and do so entirely

properly and something that would not be regarded

as giving rise to a tort of maintenance, whether

the action succeeds or fails - and costs are not necessarily the only damage sustained that might

have been recovered by a successful defendant in a

maintenance sense - but if one assumes that they do

so entirely properly, so there would be no questi0n
of there being an action for maintenance, it does
not follow, with respect, that the correctness and

propriety of doing that from the point of view of

its lawfulness should necessarily have the

consequence that they may not be liable to

reirnbu ·3 in respect of costs.

Now, Your Honour, the notion that someone who

maintained a proceedings might be liable does

appear at a relatively early point. Now, it may be

that it is stated in too declamatory and too broad

a fashion in these cases, in the case to which I

have just been referring, but the possibility is

certainly one which has been adverted to on three

occasions in the Court of Appeal in England. That

is the point I am seeking to make about it,

Your Honour.

McHUGH J:  It is my understanding that at least one bank in

Sydney will finance litigation, secured on other

property, but will lend the money for the purpose

of the litigation. Now, would that bank be liable

for costs, of the other side?

MR JACKSON:  If one is speaking about a question of

jurisdiction, the possibility probably exists. If

we are speaking about the question of exercise of

jurisdiction, the jurisdiction would almost always

be exercised against making such an order.

Your Honour, I say "almost always" because if what

one had was a situation where one had something

approaching barratry, which might arise, in effect,

then maybe the right thing would be, at some point,

to make an order.

Your Honours, I was about to refer to the

third of those cases, which was Orme v Associated

Newspapers Group and, Your Honours, I gave the

reference a moment ago. If Your Honours look at -

I am not certain of the manner of pagination of the

copy which Your Honours have. It will be, I think,

a computer generated document and on the fourth

page of it you will see, about half-way down the

page, there is a notation "at page 378".

Knight(2) 92 5/2/92

Immediately above that, the second new paragraph on

the page, His Lordship says:

Reading between the lines, it is quite plain that the church will not pay the costs

if the case fails.

And then goes on to say:

What is the position? The judge thought

that, if damages were obtained by Mr Orme,

those damages would find their way back to the

charities. So he was a "nominal plaintiff"

for them. I do not think it is necessary to

go as far as that. I would rather put the

decision on the ground of maintenance. It

seems to me that there is a very strong ground

for thinking that this action is being

unlawfully maintained by the two charities or

by the church. For centuries the law has said

that every person must bring his suit on his

own behalf and at his own expense. No third

person is allowed to support him by paying the

costs of it unless he has some legitimate

interest sufficient to warrant his

interference in it. Maintenance is no longer

a criminal offense. But it is still contrary

to the civil law. It is still contrary to

public policy.

And went on to quote the same passage, and then, in the paragraph further down:

Applying that test to this case, I doubt whether these charities or the church can

legitimately support this action ..... or spend

their moneys upon it. I doubt whether they

have any legitimate interest in it -

and thought they were being unlawfully maintained.

Now the decision was one upholding the

decision ordering security for costs, the actual
decision, but the proposition is certainly stated
more broadly. Your Honours, the approach taken in
that case was applied in a further decision in

England in Singh v Observer Ltd, (1989) 2 All ER 751. It is a decision of Mr Justice Macpherson.

The case came on again but all the facts had

changed and the issue is not further commented on

in the later decision. Now, at the bottom of

page 753 and the top of page 754, His Lordship set

out the basic fact that there was:

no doubt but that another or others are
financing the plaintiff indirectly through

those guarantees, and directly by providing

Knight(2) 93 5/2/92

the money necessary to finance his own costs.

Otherwise, Mr Sykes could not act -

Now, Your Honours will see, between letters c

and d, that the third order which was sought was

an:

order that the plaintiff and his solicitor disclose the name of the person or persons maintaining these proceedings.

And then the issue at the bottom of the same page

is expressed to be:

Has the court power to order a maintainer to

pay costs?

Then, Your Honours, at page 755 between c and d:

In particular, I refer to the plain

wording of s 51 ..... that if the circumstances

justify it, costs can be awarded outside the

categories set out by counsel for the

plaintiff.

Then there is the reference to the Aiden Shipping

Company case and and the quotation from there. And

at the top of page 756 His Lordship referred to

Order 62 - saw:

no restriction which would prevent the court's

jurisdiction extending in proper circumstance,
to somebody proved to be maintaining an

action. Indeed, it seems to me that it would

be wrong to impose such a limitation on the

court's powers. I 'am glad to be able to say that the court would not be helpless to make

an order, should it be proved that an action

has truly been kept going purely because of

outside financing, and thus to have been

maintained, without the maintainer having any

interest whatsoever in the litigation, and by

persons who hope never to be made liable for a

penny of the other side's costs -

Now, there is a reference then to section 14 which

abolished the liability for maintenance, and there

is in the next paragraph a reference to the three

cases to which I have referred and at the bottom of

the page His Lordship say:

In my judgment that is good law land eminently

good sense.

And thought the the abolition of maintenance was

not an obstacle, and then in the next paragraph, on

page 757, dealt with some observations similar to

Knight(2) 94 5/2/92

those that Your Honours were putting to me a moment

ago, where - he said:

During argument reference was made to

common circumstances -

et cetera, and I would refer Your Honours to the

whole of that paragraph, including the concluding

sentence.

So, Your Honours, what seems to emerge from

those cases, we would submit, is the possibility of

there being an order for costs made against a

person maintaining an action is one which has been

recognized for quite some time.

Your Honours, reference has been made to the

use of the term "abuse of process" in relation to

some circumstances in which an order for costs may

be made.	It is true to say that the term "abuse of
process" has been used in a number of cases.	The
sense in which it is used, however - - -

DEANE J:  Mr Jackson, may the distinction be that what

Lord Denning says, that is anyone who supports

litigation, if it fails, pays the costs of the

other side, is simply wrong in a modern context

but, against that, if you have somebody who takes

over the conduct of litigation, it is in a

different context in the sense that when the union

or legal aid authorities or so on come in it is not

to give $1000 towards the cost of it, it is

effectively take over its conduct?

MR JACKSON:  Yes. Your Honour, that certainly is a possible

distinction. May I just say that there are some -

two instances, I think, of first instance decisions

in Canadian courts where a distinction similar to

that which Your Honour has made has been drawn in

relation to public authorities which have

responsibilities for maintenance of deserted
spouses and children.	In one case it was said that

all the body was doing was exercising a statutory

power to assist in the conduct of litigation and in

another, I think, it had taken it over; one

ordered to pay, the other ordered not to pay the
costs.

But it is right to say whether one categorizes what Lord Denning said as being wrong or as perhaps

too broadly expressed or to be treated as related

only to particular classes of cases, it is no doubt

right to say that if one took every word he said

and took it absolutely literally it is too broad.

DEANE J:  The effect would be that it will ·be this Court

saying to anyone caught up in the nightmare of

Knight(2) 95 5/2/92

litigation that "No one can help you.", and help

your costs. It strikes me as utterly absurd, I

must confess.

MR JACKSON:  Your Honour, I do not seek to advance a

proposition as wide as that and, Your Honours, for

present purposes, nor of course do we need to.	I
was just going to say something about the use of
the term "abuse of process". Our learned friend spoke of cases of abuse of process as giving rise

to an entirely disparate jurisdiction, which would

mean that that was a source of power to do what had

been done in previous cases and it was not the

ordinary power as to costs.

Your Honours, the term "abuse of process" has

been used in a number of cases and terms similar,

one would think, to it, but the sense in which the

term seems to be used appears to be that it refers

not really to the improper institution or defence

of proceedings as such, but rather to the use in

proceedings of a party who is a nominal party not

having the means to satisfy an order for costs,

another party having the real interests in the

proceedings.

Your Honours, I wondered if I might perhaps

give Your Honours the references to the cases
without going to them in detail. They are the

cases which are referred to in our outline of

submissions under that heading. Your Honours will

also see, in relation to those cases - and perhaps

I could give Your Honours the pages, because I

think in one or two cases the pages may not have

been given.

The cases to which I wish to refer are Mobbs v

Vandenbrande, (1864) 33 LJ QB 177 at page 180, Reg

v Greene, 4 QB at page 652, Hutchinson v Greenwood,
(1854) 4 E & B 324 at 326, Hearsey v Pechell,

5 Bing NC 467 at pages 468 and 469, where it was

said, I just say in passing: 

If it were an action which the Plaintiff would

not have brought but for the instigation and
countenance of Wood, the case would fall
within the principle of Tenant v Brown, and
another case in the Court of King's Bench,

where a master was compelled to pay costs for

his servant, whom he had put forward as a

Defendant instead of himself.

I also refer to re Sturmer, the Ontario decision to

which I referred earlier, at pages 571 and 575, and

to the decision in the Privy Council to which

reference was made yesterday, which perhaps I can

Knight(2) 96 5/2/92

indicate shortly as being Coondoo v Mookerjee,

(1876) 2 AC 186, at 212.

Your Honours, the last specific category of exceptions, if that be the right word, to which I

would wish to refer - and I can do so very

briefly - is the case of relaters. Your Honours,

in a relater action, the relater is not a party but

is yet liable to costs, the underlying reason, in

our submission, being that the proceedings are at

the instance of the relator.

Could I refer Your Honours to Wentworth v

Attorney-General for New South Wales, (1984)

154 CLR 518, and at page 527, in the joint judgment

of the court, Your Honours will see that there was

adopted a passage from the judgment of Vaughan

Williams Jin Attorney-General v Logan. Half-way

down the page, in that quotation, the last few

lines of it:

I do not think that this practice in any sense

makes the relater a party to the proceedings,

although he is responsible for the costs -

Your Honours, could I proceed then to deal

with a number of arguments raised by our learned
friends and if I could deal first with the argument

based on the 1890 amendment. As we understand the

position, the appellants' argument is that the

decision in Aiden Shipping is based on section 5 of

the 1890 Act, which introduced the "by whom"

language into the then current United Kingdom

provision. It is then said that the "by whom"

language was never introduced into Order 91 rule 1

and that provision is still in the form similar to

the pre-1890 English position. Accordingly it said

either Aiden is inapplicable to the Queensland rule

or, if it is applicable, it is wrong and should not

be relied on.

Your Honours, the first thing we would say

about it is that if one looks at Aiden it does not

appear to be based on section 5 in the sense that

one of the things that occurred in it and occurred
specifically was that the John Fairfax case was

overruled. The overruling of that case, if I could

go to that first, appears in the Aiden Shipping

case, (1986) 1 AC 965. It appears at page 981

where Your Honours will see, at the bottom of that

page and the top of the next page, that John

Fairfax was specifically overruled.

I will come to John Fairfax in just a moment,

but it was a case in which the provision which was
relied on was not the part introduced by the 1890

amendment, but it was a case in which the source of

Knight(2) 97 5/2/92

•.

jurisdiction to award costs was contended to be

Order 65 rule 1, which is in the same terms as

Order 91 rule 1. In particular it does not

contain, or did not contain, the "by whom" language

of the 1890 amendment. Your Honours will see that

first, if one goes back to page 978, at the top of

the page the rule is set out and the context in

which it appears is at the bottom of page 977. At

page 978B:

It is to be observed that that rule did not

continue with the words "and the court or

judge -

et cetera. Then, between letters C and D, no

reference was apparently made to the broad words

used at the end of section 50(1).

Then, Your Honours, at page 979 the paragraph

commencing above letter C, he said that far fuller

argument was presented and the decision should not

be followed. And, if Your Honours look at the

remainder of that paragraph what is absolutely

clear, we would submit with respect, is that

His Lordship is saying that in the John Fairfax

case it was quite wrong to impose limitation upon

the ambit of the rule in circumstances where there

was nothing in the terms of the rule to justify the

making of such a limitation.

Your Honours, if one goes to the John Fairfax

case itself, (1958) 1 QB 323, as appears from

page 328 about three-quarters of the way down the
page, Your Honours will see the sentence

commencing:

Mr Chapman says that the court has such

jurisdiction and he relies on the very wide

words of Order 65 rule 1 -

and it was those very wide words that in the part

of the judgment of Lord Justice Jenkins immediately

above the passage to which I have just referred, and also in the first new paragraph on page 329,

that he imports the limitation.

Your Honours, could I also say two other

things concerning Order 91 rule 1. The first is

that discussions of it tend to overlook what had

been said about its equivalent by Lord O'Hagan in

the House of Lords in Garnett v Bradley,

(1878) 3 AC 944 at page 958, and whilst not

touching on the particular issue, Lord O'Hagan made

it apparent at page 958 that Order 91 rule 1 was

intended to have a very wide operation. Could I
take Your Honours to the second and third

paragraphs of his reasons for judgment, the first

Knight(2) 98 5/2/92

one commencing, "Formerly, the rule as to costs was

different", et cetera, and after discussing in

broad terms some of the relevant history in that
paragraph he went on to say:

The purpose of the Judicature Act was to establish one great tribunal with ..... an

assimilation of practice and procedure. The

matter of costs was one of the most important

with which the Legislature had to deal in

carrying out this purpose: and, in entire

harmony with it, the Order we are considering,

which has the full force of law, declares that

"the costs of and incident to all proceedings

in the High Court shall be in the discretion

of the Court." The operation of that rule is

as large as words can make it, and it was
apparently designed to extend to all

proceedings the discretionary power which had

before governed only those in Equity~

Your Honours, the second observation we would

seek to make is this, that it seems quite unlikely,

with respect, that if the supreme court had

jurisdiction prior to the Judicature Rules to order

a person not a party to the proceedfngs to pay the

costs of them, it seems an extraordinary thing that the introduction of the Judicature Rules would have been intended to have the effect of reducing the

ambit of the power because, of course, there was

absolutely no reason - perhaps I am overstating it,

but no reason immediately appears - why that would

be done.

The second is that, although no doubt its

application may vary from time to time, there

remains the general principle that if there is to

be an alteration in the existing position by

legislation, one would expect that to be made

apparent, either expressly or impliedly, by what

occurs.

Your Honours referred to the - it has been

referred to on a number of occasions, of course, in
the Court. Could I give Your Honours two

references. The first is to the well-known

observation of Justice O'Connor in Potter v

Minahan, (1908) 7 CLR 277 at pages 303 to 304.

Your Honours, these cases are not on our list.	I
will give Your Honours the extracts in just a
moment, if I may.	The second is Bropho Limited v

Western Australia, (1991) 171 CLR 1 at 18. Perhaps

I can give Your Honours copies of those decisions.

The relevant passage, if I could go first to

Potter v Minahan - I am afraid I have just

extracted the relevant parts of these - is at the

Knight(2) 99 5/2/92

bottom of page 303, going through to the end of

that paragraph. Then, in Bropho v Western

Australia, at page 18 there is a discussion of the operation of the rule in a particular and much more

modern context.

Certainly, if one were looking at the

situation at the time when the Judicature Act came

into operation in Queensland, there seems nothing
at all to indicate any intention on the part of the
legislature to have reduced the jurisdiction of the

supreme court, except in relation to things that

were rendered unnecessary and inappropriate by the

fusion, if I could use the expression, of law and equity at that time, such as the abolition by the Judicature Act of the ability of one part of the

court to restrain another part of the court as had

been able to occur with injunctions in Chancery in

England. Those things were rendered unnecessary because of the ability to appeal from orders but,

leaving those aside, the impression one has of the

Judicature Act is not that it was intended to be

restrictive on the powers of courts but, if

anything, to maintain them as they were or to

enlarge them.

Your Honours, might I go, as briefly as I can,

to some decisions on the topic which have occurred

in Canada. I have referred the Court already to

the decision in Ontario of In re Sturmer. Reliance

is placed by my learned friends on a subsequent

decision of the Ontario Court of Appeal prior to

Aiden in Rockwell Developments Ltd v Newtonbrook

Plaza Ltd, (1972) 3 OR 199. I shall not go to the

detail of the case but what it appears to have done

is to say that whilst there was power the

circumstances in which the power should be

exercised were where the person against whom costs

were sought could have commenced the proceedings

himself or herself. That appears at pages 211 and

following.

That view of the case appears in the later

decision of that court to which reference was also

made yesterday. That is Alexanian v Dolinski,

(1973) 2 OR (2d) 609, where, at pages 615 and

following, the relationship of that case - when I

say "that case", Your Honours, I mean Rockwell

Developments and Sturmer is discussed and Sturmer

continues to have some life in that jurisdiction.
But, Your Honours, the later decisions of the Ontario Court of Appeal were received with some

reserve, as it were, in British Columbia. The

issue was discusses in the Court of Appeal of that

province in Oasis Hotel Ltd v Zurich Insurance

Company, (1981) 28 BCLR 230. The judgment of the

Knight(2) 100 5/2/92

court was delivered by Justice Lambert and at

page 232 Your Honours will see a heading, II, in

the middle of that page. There is a discussion of

the sources of jurisdiction on that page and at

page 233 and at page 233, in the first new

paragraph:

In short, the powers of the Supreme Court

of British Columbia flow from several sources.

The court has all the inherent powers of the

High Court of Chancery and of the common law

courts of record -

and so on.

Your Honours, after some discussion of the

English position and discussion of Sturmer, at

page 234 and at the top of page 235, there is a

reference in the first new paragraph on page 235 to
the recent Ontario cases and His Honour says that

the cases:

have asserted that Re Sturmer and Beaverton is

authority only for the proposition that the

real party to the proceedings who promotes
them in the name of the nominal party may be

required to pay the costs -

he refers to those decisions, then says, at the

bottom of the page that -

Arnup JA said that the High court could not order a total stranger sitting in the back of the court to pay costs and so concluded that the section must be given a restricted

meaning.

He referred to that and then said that the reasoning in Rockwell had no direct application,

but then said at the top of page 236:

There is a second reason why -

it -

should be distinguished -

and he referred to the fact that fraud appeared to

have been regarded as a relevant matter and then,

about three-quarters of the way down the page -

Again it is suggested that gross

misconduct will invoke the application of a

different principle -

Knight(2) 101 5/2/92

and then went on to say, Your Honours, I will not

go through the detail of all that, but at page 237

in the paragraph above the heading III -

I conclude that there is no authority in

Canada that either binds me or persuades me to

the conclusion that in a case where the court

is made the instrument to perpetrate ~fraud,

the court cannot award the costs of the

proceedings that are instigated as part of the

fraud to be paid by the active mind that put

the fraud into effect and directed the

institution of the court proceedings.

In British Columbia trial judges have a

wide discretion with respect to costs. That

discretion must be exercised judicially and in

accordance with general legal principles -

that was most undesirable to seek to impair it, and

elaborated upon that in the next few paragraphs.

The restrictions that were sought to be imposed by those decisions do not really seem to

have attracted the court very much in that case,

and, Your Honours, in two other decisions in

British Columbia the ambit of the power has again

been discussed albeit it briefly. The first is

Basran v Basran, (1981) 123 DLR (3d) 508, a single

judge decision, where at page 511, in the last

paragraph on the page, the judge says:

The remaining question is, should the

plaintiff's two brothers share in these costs?

He thought that was appropriate saying at the top

of the next page -

These two brothers should have used their

influence to prevent this family from being

torn further apart, not promote their younger

brother into lengthy, expensive litigation.

Litigation which had absolutely no merit.

Under the circumstances I am satisfied that

Johnder and Jogie should be held equally as

responsible as Karma for the costs of this

action:  see Re Sturmer ..... Curry v. Davison -

the two earlier decisions in Ontario.

That may be perhaps an enthusiastic application of

the power but the power exists, we would submit.

Finally, may I refer to Baker Acceptance Corporation Limited v Gordon, (1986) 70 BCLR 140,

and in that case, at page 142, the judge sets out

shortly the submissions which were made which he

Knight(2) 102 5/2/92

appears to have accepted, commencing in the second

paragraph on the page, and Your Honours will then

see after referring to paragraphs (a), (b) and (c)

the fact:

There is a wide discretion -

and he follows Oasis Hotel and Sturmer and

Beaverton.

Your Honours, there is one matter perhaps I

should mention before I should go on. It was

apparently conceded at first instance, and this

appears from page 18 in the first three lines,

commencing in the third line, that:

Obviously, a purpose of the banks in taking

the charges and appointing the receiver was to

commence this action in the company's name,

and there -

was material indicating a concession to that

effect. I perhaps should mention that.

Your Honours, could I turn then to another

matter. I said yesterday I would return to the

recent Victorian decision in Burns Philp Trustee Co

Ltd v Bhagat, a decision given last Friday. Your

Honours, so far as the discussion presently relevant is concerned, that commences at page 11

and Your Honours will see section 24 of the Supreme

Court Act there set out and the reference at the bottom of page 11 to section 5 of the 1890 Act and

then, Your Honours, at page 12, commencing in the

second new paragraph on the page, there is a

discussion of the old powers of the courts and in

particular I would refer to the fact, about

half-way down the page, His Honour says:

The courts of common law had no inherent power

over costs; they derived their jurisdiction to award costs from statute - ·•

and refers to the fact that the rule was:

modified by statute over many years in

different ways -

including, we would submit, section 58 in

Queensland which covered the situation, and there

is a reference then, at the bottom of the page, to

the Order 91 rule 1. There is then a discussion of

Re Mills Estate and could I refer Your Honours jusi

to one passage in it at page 13. Your Honours will

see a quotation from Lord Esher in London County

Council v Churchwardens of West Ham and, describing

the decision as meaning:

Knight(2) 103 5/2/92

it did not assume to give the Court power over

costs, or jurisdiction over costs, where the

Court had never had jurisdiction before -

So, although one might treat Re Mills Estate and

other cases providing some kind of limitation, the

limitation was not one which operated to contract,

the view was one that did not operate to expand.

Your Honours, the discussion of that case and

cases like it is one which perhaps gives too much

weight to the notion that, absent section 5 in

1890, Order 91 rule 1 did not have any new

operation, but whether that be right or wrong, what

one does see is the passage at page 17 to which I

referred earlier, about half-way down the page,

where the members of the Court take the view that:

leaving aside for the moment the effect of s 5

of the Judicature Act 1890, there does not

seem to have been any inflexible rule that an

order for costs could not be made against

someone who was not a party in the sense of

being named as such on the record.

The discussion of that then follows, the ultimate conclusion being, at page 25, to which I

referred yesterday, that it was impossible to state

with accuracy in what case the courts of common law or the Court of Chancery could or would award costs

against someone who was not a party. Your Honours,

that case, in our submission, supports the

contention that the true view is that there was a

jurisdiction to make an order for costs of the

nature in question.

Your Honours, might I turn now to the question of the relevance of security for costs. The

suggestion seems to be that the only remedy for a

person in the position of the respondents is to

apply for security for costs. That, of course,

that which was adverted to by Your Honour	suffers from a number of defects. The first is
Justice McHugh yesterday, namely that the security
for costs order is fundamentally an estimate. But
it also, Your Honours, is an order which is made at
a different time and is thus a prediction. It is
based also on allegations rather than on the result
of the case; the allegations may or may not be made
out.

Your Honours, I mentioned also that security

for costs is also not granted in the case of a

plaintiff who is a human being and who resides

within the jurisdiction. That practice, if that be

the right description of it, is referred to in a

decision of the Queensland Full Court, Harpur v

Knight(2) 104 5/2/92

Ariadne Australia Limited, (1984) 2 Qd R 523 at

pages 526 and 530. At page 526, the relevant

passage commences at about line 15 and goes through

to line 36. At page 530, at about line 24 to about
the bottom of the page.

Your Honours, another feature of the rule also adverted to in that case is the fact that if one

had a human being plaintiff and a company

plaintiff, then although the company plaintiff by

itself might have been ordered to give security for

costs, the addition of the personal plaintiff had

the consequence that security for costs might well

not be ordered.

Now, Your Honours, the situation which arises,

of course, is that if one is talking about a

receiver appointed pursuant to a security given not

by a company but given by an individual, then

security for costs may not be available at all.	If
that is the case, then security for costs would provide no answer and, Your Honours, the
possibility, whilst no doubt many major borrowings
are by bodies which are corporate, that is not
always true.	One has, of course, substantial

partnerships; one has trading trustees, and one

simply has individuals who are, or hope to become,

wealthy. So that, Your Honours, it is not really a

very satisfactory answer.

Could I say one other thing, Your Honours,

concerning a case to which my learned friend

referred. My learned friend said, "Well, what

about the position of companies? Will it be that

the directors or those in charge of companies will

always be potentially liable?" Well,

Your Honours, the possibility of liability exists,

of course, and that it does so exist appears from,

for example, re Land and Property Trust,

(1991) 3 All ER 409; that is the case to which my

learned friend referred and I shall not go to it.

The jurisdiction was recognized. Later, the appeal

was allowed, but the existence of the jurisdiction

is clear.

So, Your Honours, our submission is that however one looks at the case one does have a

circumstance where there is jurisdiction. It is

impossible, we would submit, to identify a basis

for the exceptions without saying that they

represent exercises or the most common exercises of

the jurisdiction. And once one adopts that

approach neither the words of the provisions nor

any general principle would prevent the discretion

being exercised in a particular case.

Your Honours, those are our submissions.

Knight(2) 105 5/2/92

MASON CJ: Thank you, Mr Jackson. Yes, Mr Gzell.

MR GZELL:  If the Court pleases. The respondents now appear

to rely upon Order 91 rule 1 almost to the

exclusion of section 58 which was relied upon

below. They say that, notwithstanding that before the Judicature Act courts of equity and common law did not assert any general power to order costs

against non-parties, except in those exceptional

circumstances that have been referred to in the

last two days, the rule schedule to the

Judicature Act fundamentally altered that position

and conferred power to award costs generally

against non-parties.

We say, in respect of that thesis, first that

Order 91 rule 1 does not mention non-parties, is

one of a series of rules in an order which deals with costs inter parties. If it was intended to make the fundamental change that our learned

friends submit and to embrace non-parties

generally, one would expect some rule to have at

least dealt with the non-party situation.

McHUGH J: But equally, if the rule was intended to be

confined to parties, you would have expected the

rule to say that the discretion can only be

exercised in relation to parties. It is at large.

MR GZELL:  Your Honour, certainly if one just looks at its

expression, it is at large, but it is in a context

in which, as we submitted yesterday, the rule in

equity being at large in that form was regarded as

being limited to parties. So that the fact that

the rule is expressed in that way is not surprising

in the circumstances that that general discretion

had been regarded as so limited, and the indicia,

we say, is more supportive of our construction than

our learned friend's.

McHUGH J: This seems to be an argument about specific

intent in the minds of those who enacted the

legislation, but do we really not have to look at

what the words say, and what -

MR GZELL:  Yes, and as a matter of construction, we say that

the indicia supports our construction much more

than it supports our friend's; that the fact that

this general statement historically had been

regarded as being limited, not altered in its

framework, placed into an order which deals solely

with the regulation inter parties, supports the

construction that we contend for particularly as,

as we had submitted yesterday, those situations

where non-parties ought to be visited with costs

are separately dealt with under the inherent power.

Knight(2) 106 5/2/92

Your Honour, not only would one have expected

some rule within Order 91 to embrace the non-party

situation but one would also have expected, in our

submission, that section 9, which limits the appeal

to leave, would have been so structured as to deal

with an order for costs against non-parties.

The inherent jurisdiction which existed before the Judicature Act to control abuses of process was not .limited to making orders for costs. For

example, a non-party could be chastened in other

ways. He might be dealt with for contempt. If he

were a solicitor, he might be struck off. Why

should it be supposed that but one remedy at the

court's disposal was hived off and contained in the

rule as to costs.

We say that the exceptions, far from being

ill-defined, can be explained in terms of the

inherent jurisdiction as an abuse of its process,

and there is nothing on the face of Order 91 rule 1

to suggest that that jurisdiction is abolished and

replaced by the rule. Nor should the rule, in our

submission - - -

McHUGH J:  What do you say about Mr Jackson's proposition

that abuse of process in this context only means

that you are conducting litigation in the name of a

person who has no funds?

MR GZELL:  Our learned friend referred to that concept being

stated in a couple of the Canadian cases, but then

went on to indicate other Canadian cases which

suggest that the category is more broad than that.

We would say that that is but one instance of an

abuse of process. If one puts forward a man of

straw as a litigant, that is an abuse of process of

the court. If one is guilty of contempt, that is

another abuse of process of the court.

In circumstances where the maintenance

situation, the unlawful maintenance situation, and

barratry again are instances of an abuse of process

of the court.	It is not necessary to limit the
concept in the way suggested, and nor do we suggest	it should be, but what we do submit to Your Honours
is that those circumstances in which third
parties - and the category was dealt with yesterday
- those situations in which the court did visit
costs against non-parties to a suit can all be
explained in terms of the avoidance of an abuse of process.

I was about to say that nor should be the rule

be read in the way contended for because

traditionally rules have been held not to add to

jurisdiction and there is nothing in Order 91

Knight(2) 107 5/2/92

rule 1 which should be treated differently. We

referred Your Honours yesterday to that decision in

the British South Africa Company v The Companhia de

Mocambique, (1893) AC 602. We should also have

referred Your Honour - and we omitted to do so - to

a decision of this Court in Woolf v Snipe. It is

not on our list and I hand copies of it to

Your Honours.

This was a case in which a solicitor sought to

have his bill taxed and Sir Owen Dixon, at

page 678, about half-way down, says that there

three sources for the suggested power:

the relation to the Court of attorneys and First, a jurisdiction exists founded upon

solicitors considered as its officers.

Then, about a third of the way down page 679:

Second, when a contested claim for costs

comes before the Court it has jurisdiction to determine by taxation or analogous proceeding

the amount of costs.

Third, there is a statutory jurisdiction

derived at first from 2 Geo II c 23 - The last full paragraph on that page:

In the present case, it is plain that the

Principal Registrar had no authority to tax

the bill unless under some statutory

jurisdiction given to this Court, or to him as

its officers.

Then, over the page, at about point 4:

The rule appears upon its face to

contemplate taxation of a solicitor's bill

against his own client as well as a taxation

between parties, and at first I was impressed

with the view that it should therefore be read
as conferring a statutory jurisdiction

exercisable by the Court's officer entitling

solicitor or client to proceed to tax costs in

respect of business done in the Court. Upon

consideration, however, I have come to the
conclusion that it should not be interpreted as
giving a new, or enlarging the former,

jurisdiction, or as conferring upon solicitor

or client a new right to taxation.

He goes on, a little bit further down that

page:

Knight(2) 108 5/2/92

The rule has a full operation if its

application is confined to the existing

jurisdiction of the Court.

And then, on page 681, about point 3:

Rules of Court ought not to be construed as enlarging or conferring jurisdiction or

affecting substantive rights. Many

difficulties would ensue if this general

principle were neglected and the rule were

reads, not as operating only within the

existing jurisdiction of the Court, but as

conferring upon both solicitor and client a

new right - - -

GAUDRON J: But I must say, if that is put forward as a rule

of construction, I have great difficulty with it.

I would have thought the principle was directly to

the contrary. Courts should not read down or limit

powers expressly conferred.

MR GZELL:  Your Honour, I will not go back over what I said

yesterday, but we submit that even if one looks at

it, from the point of view of the words of the rule
itself divorced from the history of the matter for

the reasons that we submitted yesterday, one still

limits the rule, because if one does not limit the

rule it is applicable to any third party whatsoever

and, in our respectful submission, it could not be

contemplated by the legislature that that was so,

particularly in circumstances where appropriate
power under the inherent jurisdiction exists to

visit costs in appropriate circumstances against

non-parties.

DEANE J: This argument is of course dependent upon

acceptance of your argument as a construction of

section 58?

MR GZELL:  Yes, certainly, Your Honour. So far as our

that the exceptions, far from being ill-defined,	friends authorities are concerned we say, first,
can be explained in terms of the abuse of process
concept, and none of the cases cited by our learned friends enlarge that concept save for two cases,
which I will come to in a moment, which when
properly understood do not enlarge the category, in our submission.

Secondly, we would say that the cases which

follow Aiden fall with it, if our submissions as to

Aiden are accepted. Thirdly, the cases dealing

with maintenance first are inapplicable to this

situation because maintenance was never argued as

the basis for the order in this case in the court

below, nor could it, in our submission, because

Knight(2) 109 5/2/92

there is a legitimate interest in the receiver in

bringing the action in the company's name, and the

fact that the receiver is given a statutory power

to do that puts any question of a lack of

legitimate interest beyond question.

The situation in which maintenance does fall

within the exceptions and does, under the inherent

power, enable the court to visit an order for costs

against a non-party are those cases of maintenance

which used to be unlawful maintenance before the tort and the criminal offence were repealed. If

one looks at Hayward v Giffard it is clear, in our

respectful submission, that what is being referred

to there is unlawful maintenance in that sense and,

that being so, it falls within our suggestion of

the category of an abuse of process.

The observation of Lord Denning in Hill v

Archbold cannot, in our respectful submission, be understood to mean that His Lordship was saying

that there was a new parameter to be added and that

was that costs of an innocent maintainer should be

met - the costs of an action supported by a

maintainer who was not guilty of unlawful

maintenance should be visited with costs.

If it is taken to mean that security for costs

is the norm in circumstances where a party is

before the court in indigenous circumstance and

somebody is perceived to be standing behind it, it

can be understood but, in our respectful

submission, no authority is offered by His Lordship

for the statement and it cannot be so that anybody

who assists in litigation can only do so on the

basis that the costs are borne by him.

The two cases that I mentioned that we should

deal with in our friend's cases that he cited

yesterday, are firstly Re Arthur Williams & Co

because the passage to which our friends referred

at page 95 could be interpreted to mean that a

receiver could be ordered to pay costs in any

circumstance and in the absence of any impropriety

on its part. First, the case itself dealt with the

question whether an official receiver was to be
ordered to pay the costs and the passage in

Lord Justice Buckley's judgment at page 95 is

clearly limited to that concept because the party

concerned is referred to as a plaintiff. In the

receiver situation it is the company that is the
plaintiff not the receiver, and secondly,

His Lordship refers to the receiver as having an indemnity out of the fund he represents, and

clearly that is not the case in a receiver

prosecuting an action in the name of the company

under his security.

Knight(2) 110 5/2/92

So that if one looks at page 95 that, in our

respectful submission, becomes clear and the case

is not an authority for the proposition that as an

exception a receiver is subject to being visited

with an order for costs.

We would submit that His Lordship would have

been surprised if his passage was interpreted in

that fashion, and we take it that His Lordship, who

decided in re Arthur Williams, is different from

the Lord Justice Buckley who, in 1979, was one of

the members of the court in S & H Hotels, and we

take it that this Lord Justice Buckley was the

author of the company text, but we may suffer the

same fate about a single Lord Justice Buckley as

our friend suffered in respect of two Lords Goff. In Buckley's text on company law, which is

referred to in a case that I will hand to
Your Honours of re Wilson Lovatt & Sons Ltd, (1977)

1 All ER 274 - I apologize; the copy has been

ta· =n from a working copy that we were using, and

th0re is some underlining. It was held in this
case that:

Where a liquidator initiated proceedings he litigated at his own risk; he was therefore

personally liable for the costs of the

litigation -

At page 277, in the judgment of Mr Justice Oliver,

it is said at the bottom of page 277, about line h:

Counsel for the liquidator says that the

practice which has been assumed in the

Companies Registry is the right practice and

is in accordance, indeed, with the usual

practice of the court in matters of this sort.

I have really to decide on this application

whether he is right, because the matter is

still entirely at large, the order as I say

not having been drawn up. All I can say at	this stage is that, if counsel for the
liquidator is right, it is contrary to what
has been stated in the notes in Buckley on the
Companies Acts and in Halsbury's Laws of
England.

Then His Lordship goes on to quote from Buckley the

text. On page 278, at about line c from the text:

Under the present Act, when the liquidator

does not sue or defend in his own name but in

that of the company, there is no jurisdiction
to order the liquidator who is not a party

litigant to pay costs, any more than directors

of a going company could be ordered to pay

Knight(2) 111 5/2/92

costs. The adverse litigant, if he be

defendant, should apply for security for costs

There is a similar observation at the bottom of

that page and the top of page 279 in the Halsbury

text.

The second case with which I should deal is

the Canadian decision in Greenwood Forest Products

(1969) Limited v Newnes Machine Ltd, (1986) 32 DLR

(4th) 279 in which reference was made to

Lord Justice Buckley's observations in the case to

which I have just referred. The point about this

case - and it is sufficient for my purpose simply

to refer to the headnote - is that the receiver

became a plaintiff. The action was initially

commenced in the name of the company, but

subsequently the receiver was joined as a plaintiff

and the company and the receiver, as plaintiff,

failed. And in those circumstances it was quite

appropriate for an order for costs to be made against the receiver because the receiver had become a party in the litigation. It is not

authority for the proposition that there is any
extension to those type of cases to which we

referred yesterday as exceptions to the general

rule that costs were inter partes, the exceptions

being explicable in terms of an abuse of process.

Finally, one point: in Your Honour

Justice Deane's discussion with Mr Jackson this morning, at one point I thought I understood

Your Honour to suggest that a receiver might be

regarded as an agent of the secured creditor. That

is not so, in our respectful submission. In

Gosling v Gaskell, (1897) AC 575, it was determined

that even after the receiver appointed under his

debenture which specifically stated. that he was an

agent of the company and not an agent of the

secured creditor, even after the company was wound

up so that the agency ceased, it was held that he

did not become an agent of the secured creditor.

DEANE J:  That might be so, but he is exercising the

contractual rights of the secured creditor.	He is
quite different from a liquidator who, under	the
law, is exercising the powers of the company.	The
receiver is exercising the contractual rights	of
the secured creditor to take advantage of the
rights of the company.

MR GZELL: Contractual rights, and in addition to that,

statutory rights, because of the provision - - -

DEANE J: Where they exist.

Knight(2)	112	5/2/92
MR GZELL:	Yes.	I understand what Your Honour is putting to

me - there is a difference. I simply cavil with

the suggestion that when the winding up occurs,

because the contractual agency comes to an end,

therefore there is an assumption of agency between

the receiver and his secured creditor. Before I

resume my seat, I should say this: in answer to

Your Honour Justice Dawson yesterday, I said that

it was my impression that that section of the

Companies Code came in with the Code.	I was wrong
about that. It was a provision in the

Companies Act in 1961, and it may be that it was a

provision in the English Companies Act as well, so

that I was wrong in suggesting that it was a new

provision which came in.

MASON CJ: Thank you, Mr Gzell. Yes, Mr Jackson.

MR JACKSON:  I do not want to say anything, except to give

two references that I omitted to give in answer to

a question from Your Honour Justice Deane before,

and they are the references to the two cases in

which differing views were expressed on the

question whether a public authority should be made

liable for costs of family proceedings. The

decision in which it was held that the authority

should not be made liable is GLP v ML, (1987)

13 RFL (3d) 374. The decision saying the public

authority would be liable is Young v Kirtley,

(1987) 7 RFL (3d) 91.

MASON CJ:  Thank you. The Court will consider its decision

in this matter.

AT 11.32 AM THE MATTER WAS ADJOURNED SINE DIE

Knight(2) 113 5/2/92