Knight & Anor v FP Special Assets

[1992] HCATrans 32

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) 1 4/2/92

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 4 FEBRUARY 1992, AT 10.16 AM

Copyright in the High Court of Australia

MR r.v. GZELL, QC:  May it please the Court, I appear with

my learned friend, MR H.B. FRASER, for the

appellants. (instructed by Blake Dawson Waldron)

MR D.F. JACKSON, QC:  May it please the Court, I appear with

my learned friend, MR E.J.P.F. LENNON, QC and

MR G.M. McGRATH, for the respondents. (instructed

by Purvis Duncan)

MASON CJ: Yes, Mr Gzell.

MR GZELL:  I apologize for one matter and that is that for

some reason the notice of appeal - - -

MASON CJ: Yes, it seems to be the old draft notice of

appeal .

MR GZELL:  - - - is the old draft notice and ought to have

struck out of it paragraph 3. Your Honours, we

have prepared another document if Your Honours

would accept that document or, alternatively,

simply treat paragraph 3 as struck out.

MASON CJ:  You had better hand in the correct document

because you should actually file the notice of

appeal in correct form.

MR GZELL: If the Court pleases, I will seek leave to file

the notice of appeal in the correct form.

MASON CJ: Thank you. Yes.

MR GZELL:  Your Honours, we have handed to Your Honours an

outline.

MASON CJ: Yes, we have the outline of submissions.

.

MR GZELL:  Your Honours, in both matters we are concerned

with orders for costs which were made against

receivers and managers of companies where the

companies were unsuccessful parties in litigation.

managers or the banks who appointed them were There was no suggestion that the receivers or guilty of any impropriety. The orders were made on

the basis that section 58 of the Supreme Court Act

of Queensland overcame any limitation upon the

power to award costs under the general provision of

Lords relied in Aiden Shipping Co Ltd

the rules of court, and that that provision served of

the same function as an amendment to the United

v Interbulk Ltd in 1986, and concluding that the

United Kingdom power to award costs against a

person was not limited to parties to the

proceedings.

Knight(2) 2 4/2/92

Your Honours, we will submit, first, that

section 58 of the Supreme Court Act does not apply

to the matters in question because it only operates

in the absence of some other power to award costs,

and there is such other power regulated by Order 91

rule 1 of the Queensland Supreme Court Rules. Secondly, we will argue that the power which

is regulated by Order 91 rule 1 does not apply

because, except in exceptional cases which we

submit are explicable in terms of the control by

courts of an abuse of their process, the power is

limited to the visitation of costs against parties

to proceedings. The actions of the receivers and

managers were not an abuse of process, and however

one defines parties for the purpose of the power, it should be not defined to include the receivers

and managers as parties in this case. We will

submit that Aiden was wrongly decided and should

not be followed in Australia.

In amplification of those submissions,

Your Honours, and in amplification both of the

submission that section 58 has no application and

that the power to award costs is limited to

parties, with certain exceptions, the history of

the development of the power is important. As

early as the 13th century, statutory provisions

appeared regulating costs at common law.

In Queensland, those statutory provisions were

consolidated in the Costs Act of 1867, to which we

will come. They did not provide that costs could

be awarded against a non-party, but both at common

law and in equity, the courts had granted costs

against non-parties in exceptional cases. Those

exceptional cases, we will submit, can be
categorized as cases in which the. order was made to

prevent an abuse of process.

On the equity side there was a general

discretion as to costs, the origin of which was

regarded as being based in the inherent power of
the court, but even so that power was not regarded

as extending to strangers but was regarded as being

limited to making orders against parties, again,

except in exceptional circumstances which we say
are explicable in terms of the abuse of process

concept.

As we will demonstrate to Your Honours, on the

same day in Queensland as the codification in the

Costs Act of the statutory rules which apply to

common law was passed, the power of the Supreme

Court of Queensland to exercise the equitable

jurisdiction was confirmed and section 58 of the

Act was passed in that context, and when passed it

Knight(2) 3 4/2/92

had a limited scope, in our submission, intended to

apply when neither the common law regime nor the

equitable regime applied; neither of which enabled

an order as to costs against a non-party to the

proceeding with the exception of the abuse of

process.

With the passing of the Judicature Act in

1876, the general discretion as to costs in equity
prevailed over the statutory rules applicable at
common law, but that did not, in our submission,

broaden the power thereby enabling an order for

costs to be made against non-parties, and nothing

which has happened since in Queensland has altered

that position. In the United Kingdom the general

discretion was like that in Queensland, that the
costs of and incidental to proceedings should be in

the discretion of the court. But in 1890 there

were added the words:

and the Court shall have full power to
determine by whom and to what extent the costs

are to be paid.

In 1986 in Aiden the House of Lords fastened upon those words as extending the power to enable the

court to award costs against non-parties. We will

submit that that was wrong and that those words

simply meant that the court could decide which of

the parties before it should pay costs.

Now, Your Honours, that is the outline of the

central argument that we will develop. There is an

alternative argument, if the Court is against us on

that principal submission, and our alternative

argument is, first, that the United Kingdom 1890

amendment is not reflected in Order 91 rule 1 and

Aiden ought not to be followed in the applicatio~.

of that provision.

Secondly, if Your Honours were against us in

relation to section 58 and Your Honours were of the

view that it does have a scope for operation, our alternative submission is that its terms are more

confined than the 1890 United Kingdom amendment and

again, Aiden ought not to be followed in its

application.

So that if I may come to our first argument,

that section 58 does not apply: the section is set

out in the appeal book at page 7:

The Supreme Court shall have power to award

costs in all cases lawfully brought before it

and not provided for otherwise than by this

section.

Knight(2) 4/2/92

So that if there is some provision otherwise

dealing with the matter of costs, section 58 does

not operate.

Order 91 rule 1 - and I invite Your Honours to

look at that rule:

Subject to the provisions of the Judicature
Act and these Rules, the costs of and incident

to all proceedings in the Court, including the administration of estates and trusts, shall be

in the discretion of the Court or Judge:	~
Provided that nothing herein contained shall
deprive an executor, administrator, trustee,
or mortgagee who has not unreasonably
instituted or carried on or resisted any
proceedings of any right to costs out of a

particular estate or fund to which he would be

entitled according to the Rules heretofore

acted upon in Courts of Equity: Provided also, that, subject to the next following Rule, when any cause, matter or issue is tried with a

jury, the costs shall follow the event, unless the Judge by whom such cause, matter, or issue

is tried, or the Court, shall for good cause

otherwise order.

So that materially, for present purposes,

Order 91 rule 1 provides that the costs of all

proceedings before it are in the discretion of the

court. Order 91 rule 1 is not a rule made under

the power of section 58. There is no question of

it being a rule under that power. As we will show,

Order 91 rule 1 was scheduled to the Judicature Act

to regulate the general discretion as to costs in

equity which were thenceforth to apply in all cases

whether formally in equity or common law.

So the first question, in our submission, ls

whether Order 91 rule 1, as a separate rule	1
distinct from section 58, is a provision which
excludes the operation of section 58.	We submit it

is. Order 91 rule 1 regulates costs in all

proceedings; that is, all causes or matters before

the court, and hence all situations in which a

litigant seeks the assistance of the court. In the

instant circumstances, the respondents defended

proceedings and counter-claimed against other
parties. Order 91 rule 1 operated to provide that

the costs of those proceedings were in the

discretion of the court.

So that in our submission there was provision

for costs other than by section 58 and in

consequence section 58 did not apply, and

Their Honours below were wrong in passing upon

section 58 as the basis for the orders made. Order

Knight(2) 4/2/92

91 rule 1 is a rule, it is not a section of a

statute, but that does not prevent it, in our

submission, being a provision otherwise for the

purposes of section 58.

DAWSON J: It does not have statutory force?

MR GZELL: It does have statutory force, Your Honour. It

has statutory force because when it was originally

introduced it was given such, and I was about to

come to that. It has statutory force now because,

albeit, that that section under which it was

originally introduced has subsequently been

repealed, another Act was passed in 1928 in

Queensland which gave the rules the force of

statute.

If I can take Your Honours to that history,

the Judicature Act, section 16, provided: •

The Rules of Court in the Schedule to

this Act -

and I pause to indicate that the rules which were

scheduled to the Judicature Act originally were the

forerunners of the present rules and there was a

rule in the same form which is a forerunner of

Order 91 rule 1 -

shall come into operation at the commencement

of this Act and as to all matters to which they extend shall thenceforth regulate the
proceedings in the Court. But such Rules of Court and also all such other Rules of Court as may be made after the passing and before

the commencement of this Act under the

authority of the next section may be annulled

or altered by the authority by which new Rules

of Court may be made after the commencement.of

this Act - ~

and section 17 provided for such amendments. Your Honours, I will come in a moment to the

subsequent history, but suffice it to say that ih

1928 the rule as presently exists was given the

force of statute. So, in our submission, it cannot

be said that Order 91 rule 1 is not a provision

otherwise for the purposes of section 58 on the~

basis that it lacks the authority of statute.

The next question which we must address,

however, is whether it might be said that

section 58 can have an operation to override a

limitation which might exist in Order 91 rule 1.

In other words, if Order 91 rule 1 limits the	.
circumstance in which costs in proceedings might	be

Knight(2) 6 4/2/92

awarded, can it be said that section 58 then

operates because there is no provision otherwise

referred to therein. We submit that that is not

the position.

Section 58 is not a general font of power

applicable in all cases in which limitations might

apply under Order 91 rule 1. It is not in that

form. If it were intended to be a general font of

power, it would not have had the exclusionary
provision in it. It is meant, in our submission,

to apply where Order 91 rule 1 does not apply at all. For example, Order 91 rule 1 provides that

nothing in the rule should deprive an executor who
has not acted unreasonably of his right to costs

out of the estate. It would be wrong, in our

submission, to read section 58 as conferring power

on the court to deny those costs on the narrow

basis that because the power did not exist under

Order 91 rule 1 there was no provision otherwise

and section 58 was not excluded from operation.

So in our submission, if we are correct in the

view that we submit to Your Honours about Order 91

rule 1 and it does not empower orders as to costs

against non-parties to proceedings, it would be

wrong to construe section 58 as operating.

Order 91 rule 1 regulates all proceedings before

the court.

DEANE J:  Mr Gzell, you said, if I heard you correctly, that

Order 91 rule 1 was given the force of law in 1928.

I did not quite follow the reference.

MR GZELL: Perhaps, Your Honour, I am jumping a little bit.

DEANE J:	Do not let me take you out of your order.
MR GZELL:	No, but I can very briefly. When the forerunner of Order 91 rule 1 first came in, it was empowered
by section 16 of the Judicature Act to which I have
referred Your Honours. Subsequently, there were
some repealing rules which were separately
authorized, and then in 1921 a power was conferred
under a different Act in Queensland to make rules,
and sections 16 and 17 of the Judicature Act were
repealed.

Historically, there was a case which came

before the court in Queensland which cast some

doubt about the rule-making power following the

repeal of sections 16 and 17. In consequence, an

Act was passed in 1928 which ratified all the rules

of court that had been made under the Judicature Act and the Supreme Court Act and expressly gave

the rules the force of statute.	I will come to
that in a moment.

Knight(2) 7 4/2/92

So that in our submission, Order 91 regulates

all proceedings before the court. If it does not

empower orders to be made for costs against

non-parties, it is none the less a provision as to

costs governing the case lawfully brought before

the court and, in terms of section 58, there is

provision otherwise which excludes its operation.

Now, we are strengthened in that submission by

the approach taken to a former provision in New

South Wales which has some analogy to section 58,

by the Court of Appeal in New South Wales which

rejected the type of argument that, because there

is a limitation in Order 91 rule 1, the force of

section 58 is not spent, and that is the case of

Robinson v Carmody, (1948) 48 SR(NSW) 348.

What happened in that case was that two

actions were heard together, one was an action

alleging negligence against Carmody and a second
action alleged negligence against Thompson. The

verdict was for the plaintiff against the defendant

Thompson but a verdict for the defendant Carmody,

and the trial judge came to the conclusion that by

virtue of section llA Supreme Court Procedure Act

the costs of the action were in his discretion, and

he made an order along the lines of a Bullock order

following the decision of Bullock v London General

Omnibus. And in respect of that

Chief Justice Jordan said at page 351, first of all

Your Honours will see the section llA(l) set out

which has some analogy to section 58:

Where by any Act now or hereafter in force,

any cause matter or other proceeding may be

brought before the (Supreme) Court or a Judge,

and no provision is made in the Act for the

costs of such cause matter or proceeding, the

costs shall be in the discretion of the Court

or Judge.

His Honour went on to say this:  The Law Reform (Miscellaneous Provisions)

Act .••.. which ..... enabled the bringing of each

of the actions in the form in which it was

brought, contains no express provision with

respect to costs, and the question is whether

this has the effect of removing the actions

from the operations of ss. 261 and 26S of the

Common Law Procedure Act, 1899. If it has,
the result is that whenever advantage is taken
of the modification of procedure effected by

s. 2(l)(a) the whole costs of the action are

in every respect completely at the discretion

of the trial judge, subject only to the

condition that the discretion must be

Knight(2) 4/2/92

exercised judicially. It is to be observed

that it is only where no provision for costs

is made in the Act by which any cause matter

or other proceeding may be brought before the
Supreme Court or a Judge thereof that the costs are in the discretion of the Court or

Judge. Such provision may be made either

expressly or by necessary implication.	Where
an Act provides for bringing before the

Supreme Court a cause matter or proceeding of

a kind and by a procedure foreign to those for

which the existing statutory provisions

regulating the Supreme Court with respect to

costs are applicable, s. llA fills the gap

which, so far as proceedings at common law are

concerned, would otherwise exist. But where

the Act creates new rights which are

enforceable, or a new jurisdiction which is

exercisable, according to existing procedure

of the Court already governed by statutory

provisions as to costs, or merely varies in

unessential details existing procedure which

is so governed, there is no room for the

operation of s. llA. In such cases, the Act

provides by necessary implication that the

existing statutory provisions as to costs are

to apply.

We rely upon that reasoning in support of the

submission that it cannot be said that section 58

should apply in circumstances where there is a

limitation on the application of Order 91 rule 1.

We say that section 58 was intended to fill

any gaps where Order 91 rule 1 did not apply at

all, and this is exemplified by the decision of the

Full Court of Queensland in In re The Nash Election

Petition. Your Honours, that case is not on our

list and I hand up some photostat copies of it.

Your Honours, the bulk of the decision is not

of relevance. It was an application brought under
the Elections Act by appeal from the Elections
Tribunal to the Full Court of Queensland, and the

Act by which the entitlement to appeal to the

Full Court was given did not provide specifically

for the costs of such an appeal. If I can take

Your Honours to pages 77-78 where, subsequent to

the decision on the substantive issue a question as

to costs arose, Sir Rosslyn Philp said:

The first question arising in this case is the

jurisdiction of this court to award costs to

the successful respondent in this appeal.

That question depends upon the proper

interpretation of a section of a Statute,

Knight(2) 9 4/2/92

..

particularly s 118 of the Elections Acts which

provides that an appeal shall lie to the

Full Court. Under s 58 of the Supreme Court

Act of 1867 there was given power to the

Supreme Court to award costs in all cases

lawfully brought before it. There can be no

doubt that this case was lawfully brought

before the Full Court, and the question is

whether the Full Court, under s 118, means the

Supreme Court.

In my opinion it does. If one looks at

the Supreme Court Act it seems to be quite

apparent that the Full Court is the Full Court
of the Supreme Court of Queensland and is in

fact the Supreme Court of Queensland.

Now, one might have thought, if one goes back

to Order 91 rule 1, that the court in In re The

Nash Election Petition might have approached the question of costs differently and taken the view

that once the application, which was authorized by

the Elections Act, was properly before the court

there was a proceeding before the court and

Order 91 rule 1 enabled the court to determine by

which party to the proceedings the costs should be

borne, thereby overcoming any non-specification in

the Elections Act.

That was not the way in which it was argued in

The Nash Election Petition and that may be because

there was a Court of Appeal decision in In re Mills

Estate to which I will come shortly, which took the

view that the power did not exist. But we would

submit that one way in which the problem may have

been over come in the In re Nash Election Petition
because the parties were before the court on the

application was to treat the matter under Order 91

rule 1. If we are right about that then or course

if gives a very limited scope indeed to the

operation of section 58.

DEANE J: But is that so? Even if you be right that

Order 91 effectively removes most of the operation

of section 58, will it not be of critical

importance in the construction of Order 91.1 to

know whether section 58 did authorize the kind of

order in this case in that if it did it would be

unlikely that Order 91.1 was intended to impose

that sort of restriction upon a power which

existed?

MR GZELL:  We know of no case in which section 58 was

invoked to justify an order as to costs against a

receiver or manager.

Knight(2) 10 4/2/92

DEANE J: Well, we know of the decision of the House of

Lords.

MR GZELL:  No, I am sorry. I answered Your Honour in

respect of section 58. We know of no case under

which section 58 was invoked to justify such an

order. Section 58 appears to have had no

antecedent when it was brought into the legislation

in Queensland. The House of Lords, in 1986, took a

view of the construction of an amendment which had

been brought in in 1890 in the United Kingdom which

broadened the scope, such that if one applied the

general rationale of Aiden, as the courts below

did, it justified such an order. But I will come

to that, and it is clearly critical to our primary

case the the House of Lords was wrong in so
construing the 1890 amendment. Now, if that is so

that carries with it section 58 in our submission.

But we do have the alternative argument that, if

Your Honours are against us on that primary point,

section 58 is less extensive than the United

Kingdom amendment upon which the House of Lords

fastened.

I was saying to Your Honours that if Order 91

rule 1, on its face, were to be construed to

empower an order for costs in the In re Nash

Election Petition situation, there would be a very limited scope indeed now for the operation of

section 58.	We say to that, so be it.
Indeed - - -

DAWSON J: There would be no scope, would there not?

MR GZELL: There is no scope that we can see. There is no

practical example that we can bring forward.

Perhaps there is one. If the Court were acting in

a ministerial capacity rather than in a judicial

capacity, a court determining whether or not to

call upon some person to show cause why he ought

not to be treated for contempt, so that at the

motion whether to cause somebody to be brought	stage that the court is determining of its own
before it, costs for some reason are incurred, ope
might imagine that Order 91 rule 1 does not apply
to that situation because they are costs of a
proceeding to which there are no parties. Even
then, it is difficult to see how one would act
under section 58 to visit costs against any person
thereafter. But I agree with Your Honour
Mr Justice Dawson that the ramification of the
submission that we are making is that section 58,
now for practical purposes, is devoid of operation.

We say that so be it, because when originally

introduced, section 58 had a very limited operation

indeed. Its limited operation was basically to

Knight(2) 11 4/2/92

apply to common law situations which were not

covered by the statutory provisions in common law. abrogated the limited statutory provisions at

common law, so any practical scope for the

operation of section 58 was spent. So that it is

not an impediment to our argument to submit that

section 58 is now a spent force.

Had The Nash Election Petition situation

arisen before the Judicature Act at the time in
which one had the codification of specific common

law rules, none of which would cover the situation

in The Nash Election Petition, then section 58, in

our submission, would clearly have operated to fill

the gap.

In our submission, the history of section 58

supports the construction for which we contend. I

have said to Your Honours that the statutory rules

at common law were codified, and they were in

sections 1 to 20 of the Costs Act of 1867. Those
sections codify provisions that had come into

existence at various stages in history. Section 5

is in the broadest form:

In all cases where the plaintiff is to recover

damages he shall recover costs.

The origin of that is the Statute of Gloucester in

the reign of Edward I.	So it has come considerable
antiquity.	I do not ask Your Honours to read

sections 1 to 20. Suffice it to say that they are

specific statutory rules and none of them contains

a general discretion as to costs. There is one
provision to which I will return later, and that is

section 13, because section 13 codifies a provision

enacted in the reign of James I, limiting costs in

respect of libel actions. I am sorry, it is

section 10, which was introduced late in the reign

of James I:

In all actions on the case for slanderous

words to be sued or prosecuted by any person

or persons in the said Supreme Court or in any
court whatsoever that hath power to hold plea

of the same if the jury upon the trial of the

issue in such action or the jury that shall

inquire of the damages to find or assess the

damages under forty shillings then the

plaintiff or plaintiffs in such action shall

have and recover only so much costs as the

damages so given or assessed amount unto ~

without any further increase of the same any

law statute custom or usage to the contrary in

anywise notwithstanding.

Knight(2) 12 4/2/92

I refer Your Honours to that solely because it is

the provision germane to an English decision to

which I will come later.

Suffice it to say that the provisions in

sections 1 to 20 of the Costs Act do not contain a

general condition but persist with the statutory

specific provisions of common law. That Act was

passed on 28 December 1867 and was to commence on

31 December in that year, according to section 37.

On the very same day as that Act was passed, the

Supreme Court Act of 1867 was also passed, it also

to commence on the thirty first of that year. As

well as containing section 58, the Supreme Court

Act confirmed that that the court in Queensland had

power to exercise equitable jurisdiction, and that

appears in sections 21, 22 and 34. I need only read

one of those provisions, section 22:

The said court shall have equitable jurisdiction within the said colony of

Queensland and its dependencies and such power

and authority to do exercise and perform all

acts matters and things necessary for the due
execution of such equitable jurisdiction as is
possessed by the Lord High Chancellor or other
equity judges of England in the exercise of
similar jurisdiction within the realm of

England and also to do all such other acts matters and things as can and may be done by

the said Lord High Chancellor or other equity

judges within the realm of England in the

exercise of the common law jurisdiction to him

belonging and to appoint guardians and

committees of the persons and estates of

infants and of natural-born fools lunatics -

and so on. I need not read further. But it is

clear, in our submission, that section 22 confirmed

that the supreme court had all the powers of the

equitable jurisdiction, and that carried with it

the general discretion as to costs in equity, which

was based upon the inherent power of the court.

That was concluded in Andrews v Barnes and that

decision is sufficiently dealt with in the judgment

of His Honour, Mr Justice Ryan, below at 57 of the

record, in our submission, where His Honour quotes

from page 138 of the report in Andrews v Barnes:

the jurisdiction of the Lord Chancellor in

costs was essentially different from that at

common law. 'The giving of costs in equity',

said Lord Harwick in Jones v Coxeter ...... 'is

entirely discretionary, and is not at all

conformable to the rule at law'. 'Courts of

Equity', said the same great Judge in another

case, 'have in all cases done it' (i.e. dealt

Knight(2) 13 4/2/92

with costs) 'not from any authority' (i.e., as
we understand, from any statutory or delegated

authority) - but from conscience and arbitrio

boni viri, as to the satisfaction on one side

or other on account of vexation -

and then he cites Corporation of Burford v

Lenthall.

An examination of the older General Orders of

the Court made, not under any statutory

authority, but from the general and inherent

authority of the Lord Chancellor, will shew

that the Court exercised a most wide

discretion not only as to the circumstances

under which costs would be awarded, but

apparently as to the measure and fullness of the costs ... The same control over the amount of costs is shewn by the language frequent in
such orders, which asserts the full discretion

of the Court in this matter."

So that we say that the effect of sections 21, 22

and 34 of the Supreme Court Act was to confirm that

the Supreme Court of Queensland had that general

power. It was a general discretion as to costs of

proceedings in equity before the court. And in

this context, section 58 of the Supreme Court Act

which, as I have said, appears not to have had any

antecedent, came into operation. And in that

context, in our submission, it is not to be

supposed to be a general font of power for that

view of it would be inconsistent with the

codification of the statutory rules on the very

same day. So that by reason of there being a

codification of the specific statutory rules and a

confirmation that the general discretion in equity

were within the power of the supreme court, it

cannot be supposed, in our submission, that

section 58 introduced on the very same day as that

happens was meant to be a general font of power.

If that construction were right it would be

totally inconsistent with the codification of the

common law rules. The fact that the common law

rules are codified indicates that so far as the

common law side was concerned the statutory

provisions were to have effect, and section 58 was

intended to be a gap-filling provision in the event

that a proceeding came before the court at common

law for which a statutory provision did not

exist.In our submission, it matters not that when

those statutory provisions are repealed and the

general discretion of equity takes precedence, that

section 58 becomes a spent force.

Knight(2) 14 4/2/92

The subsequent history of the matter does not

alter that position, in our submission. The

Judicature Act, as I have indicated, provided in

the schedule for the rules and those rules

thenceforth were to regulate all proceedings in the

court. Section 16, to which I have referred,

provided for those rules which adopted the general

discretion in equity. The general discretion in

equity being adopted in the rules thus scheduled to
the Judicature Act - those rules, albeit that they

merely regulated the power that had thencetofore

existed in equity - the scheduling of those rules

impliedly repealed the statutory provisions as to

costs at common law because the rules merely

regulating the general discretion in equity could

not stand consistently with the specific provisions

at common law dealing with specific statutory

matters.

Mr Justice Ryan concluded to that effect in

the court below, and I might simply say,

Your Honours, that I am referring to

Mr Justice Ryan because the other two judges so far

as this matter is concerned agreed with him.

Page 67 of the record, after referring to a

Queensland case of Long v McArthur, which itself

referred to a decision of the House of Lords in

Garnett v Bradley, His Honour concluded at about

line 25:

(b) These provisions -

meaning the provisions in the Costs Act -

limiting the costs which might be ordered were

impliedly repealed by O 91 of the Rules of

Court of 1900 (and perhaps earlier by O 54 in

the Schedule to the Judicature Act -

order 54 being the original provision which was the

forerunner of order 91.

Long v McArthur, (1901) 11 QLJ 136, the case

to which His Honour refers, was a case in which in

a supreme court action the plaintiff was ordered to
give security for costs and in default the action

was remitted to the district court.	He defaulted,
verdict was given for the plaintiff for 10 pounds.	the action was tried in the district court and a costs of the action and that was referred to the
Full Court of the Supreme Court. At pages 138 and
139 of the report the Chief Justice said:

Section 126 provides that plaintiffs in actions in the Supreme Court who recover

judgment for sums not exceeding 30 pounds

Knight(2) 15 4/2/92

shall not recover costs except in certain

cases, of which this is not one. If that

section is still in force, plaintiff is not

entitled to costs, and the Court cannot give

him any. But O DXCI, r 1, provides that,

subject to the provisions of The Judicature

Act and the Rules of Court, costs of or

incidental to all proceedings in the Court

shall be in the discretion of the Court or the

judge. The question is whether s 126 is

repealed by implication by that Rule of Court. It is necessary to refer to the history of the matter. Before The Judicature Act came into

force, the law of the Court as to costs was
contained in The Costs Act in a series of

provisions beginning withs 5, the effect of

which is very much the same as ss 126 and 127

of The District Courts Act. But The

Judicature Act contained a rule in the •

schedule to that Act - 0 LIV, r 1 - which is

identical with the rule now under

consideration as far as is material; and it

was settled by Garnett v Bradley in the House

of Lords, that the effect of that rule was by

implication to repeal all statutes that were

inconsistent with it, and as the rule states

that all costs should be in the discretion of the Court, any statutes that said they should not be given or should be given were impliedly

repealed. One reason given for this decision

was that the rule in The Judicature Act was a

statutory rule embodied in the Act itself, and

therefore repealed prior inconsistent laws.

The result was that after The Judicature Act

was passed all costs were in the discretion of

the court, and the rules laid down in The

Costs Act were repealed by implication.

GAUDRON J: Would the same argument suggest that section 58

was repealed?

MR GZELL:	No, because it does not stand necessarily inconsistently with the rule in Order 91 rule 1.
we say it is inapplicaple for a different reason
and that is the exclusion but the gravamen of this
decision was because you now have a general
discretion it cannot stand against a series of
specific provisions that do not have that general
discretion in it. So the court arrived at the
conclusion that those specific provisions were repealed by the adoption of the general. But that
same argument would not apply so far as section 58
is concerned.  We would just simply say that
section 58 then became a spent force because the common law rules with gaps, having been impliedly repealed, there was nothing left to fill up and so
section 58 ceased to have any practical effect.

Knight(2) 16 4/2/92

McHUGH J: It may have ceased to have any legal effect. It

may not have ceased to have any practical effect

because it increased the jurisdiction of the

Supreme Court of Queensland in relation to costs

and the argument that succeeded in Mills Estate

arguably could not have succeeded in Queensland

because of the presence of section 58 which played

the part of section 5 of the 1890 Judicature Act.

MR GZELL:  I agree with Your Honour up until Your Honour's

observation that section 58 played the same part as

section 5 of the 1890 Amendment Act in the United

Kingdom, because we will submit to the contrary of

that. But I agree with Your Honour that, prior to

the Judicature Act, if there was a limitation in

the common law rules section 58 would apply, and

Judicature Act, operate. But our submission is that, both in the
if, after the Order 91 rule 1 was
construed in the way in which it was in In re Mills
Estate and in the way in which it was in the Nash

In re Mills situation and in the In re Nash

situation - - -

McHUGH J: But in Mills, Lord Justice Bowen and Lord Justice

Fry gave us the equivalent rule to order 91, of

limited construction, because they thought the

Judicature Act simply regulated the old

jurisdiction.

MR GZELL:	Yes, they did.
McHUGH J:	That is not an argument that you can put in this

case, because section 58 clearly extended the costs

jurisdiction of the Queensland Supreme Court, and

when you construe section 16 of the Judicature Act

against that background, then there is a strong

argument for giving Order 91 a different meaning

than the identical words were given in Mills

Estate; indeed, giving it the same meaning as it

was given later in In re Fisher, after the

enactment of section 5 in 1890.

MR GZELL:  We would cavil with that, Your Honour. I

understand the point Your Honour is putting to me,

but we would cavil with that, and let me answer

that by saying that while that approach may be

open, we would submit that the approach that I have

just submitted to Your Honours is the one that

ought to be adopted, because Your Honour is giving

to section 58 an operation which increases the

power in Order 91 rule 1.

McHUGH J:  No, no. Before the Judicature Act of Queensland

of 1876, the Supreme Court of Queensland, in that

period prior to 1876, had a jurisdiction more -

extensive than the combined jurisdiction of the

Knight(2) 17 4/2/92

courts of common law and equity, because section 58

gave it to them.

MR GZELL:	Yes.
McHUGH J:	Now, you then have to argue that, as a result of the enactment of Order 91, in some way that
jurisdiction is being confined - - -
MR GZELL:	No.
McHUGH J:	- - - or that you should construe Order 91 having

regard to the pre-Judicature Act history of costs.

Why should you not construe it in accordance with

the history of costs after 1867?

MR GZELL:  I do both, with respect, Your Honour, and if one

goes back to the pre-Judicature Act situation, we

say that section 58 was not meant to increase the

power to award costs in equity, it had no such

operation, because in any circumstance in which the

general discretion as to costs in equity was

available to the supreme court, section 58 would

not operate because there is provision otherwise

providing for the costs. So that pre the

Judicature Act, section 58's operation was to

increase the power on the common law side, where

the codification of the statutory rules of common

law were limited and, in circumstances like In re

Mills or like In re The Nash Election Tribunal

case, if that situation had come before the

supreme court in its common law jurisdiction before

the Judicature Act, section 58 would clearly have filled the gap and allowed the court to award the

costs.

But our submission is that section 58 never enhanced the power, the general discretion, in

equity. It could not do so because it was excluded

if there was provision to the contrary and, we say,

After the Judicature Act, we say that what has	that in consequence one does not look at section 58 as the correlative to section 5 of the 1890 Act.	happened has been the equitable jurisdiction that
existed before the Judicature Act is now
predominant and section 58 is spent, because
section 58 could not operate to enhance the general
discretion. The general discretion is a provision
to the contrary.

McHUGH J: But can I just come back to - without looking at

the history, just looking at section 16 of the terms, one would think as a matter of construction

it was wide enough to cover the order that was made

in this case and, indeed, in Mills, an estate case,

both Lord Justice Bowen and Lord Justice Spry

Knight(2) 18 4/2/92

thought the same thing, but they construed it

narrowly because of history. But why should we not
regard Order 91 as being at large, it is wide

enough to cover this case?

MR GZELL:	Your Honour, we do not submit that this Court should construe Order 91 rule 1 in the way it was
done in Mills. In fact, I had suggested that one
might have approached the same situation as Mills
in The Nash Election Tribunal case in the way that
Your Honour puts to me, by looking at Order 91
rule 1 and simply saying, it says that, "In any circumstance where there are proceedings properly
before the court, the costs of the proceedings are
in the discretion of the court. So why should not
the court take the view that the costs in respect of the appeal in The Nash Election Tribunal case
were capable of being ordered against one or other
of the parties before it?".  We do not cavil with
that proposition, but where we differ from the
approach that was taken in Aiden is to say that in
all those cases, albeit that the court may have taken a more narrow view of who were the parties to the proceedings before it, none the less the courts
have continued, up until Aiden, to assert the
proposition that, general though the discretion be,
it must have some limitation and the limitation is
a limitation to parties, however that concept might
he defined.

So that while we would agree with Your Honour

Justice McHugh that Order 91 rule 1 is sufficient
to cover the In re Mills situation because there

were clearly parties before the court in that case,

we say that it is not sufficient to cover the

situation in this case because the receiver was not

a party. The receiver - - -

MASON CJ:	What is your argument for restricting 91(1) to parties?
MR GZELL: That, general though the discretion be couched,

it must have some limitation because the purpose of

the provision is to order somebody to pay the costs of proceedings. Costs in proceedings are generated

by parties, the purpose of the legislation is to

visit those costs upon some person. It could not

be supposed, in our submission, that the

legislature intended to grant a power to visit

those costs upon some complete stranger.

MASON CJ: But you concede that, historically, there were

exceptional cases in which the courts made orders

for costs against non-parties?

MR GZELL:  Yes.

Knight(2) 19 4/2/92

MASON CJ:	So why does not the jurisdiction extend thus far?
MR GZELL:	I will put it the other way, Your Honour. Because the legislature was aware that there were
exceptional cases, both at common law and in equity, where the courts visited costs against
non-parties, and we say that they are explicable in
terms of abuse of process concepts.  When Order 91
rule 1 is brought into existence in that context,
it is not to be supposed that it is meant to enable
the court to grant orders for costs generally against strangers. There is already provision for visiting costs against such strangers as ought to
be visited with costs under the inherent jurisdiction of the court to control an abuse of its process, and then a provision comes in
regulating the general discretion in equity, which
general discretion had been regarded as limited to
parties, and we say that it ought not to be
supposed that Order 91 rule 1 is to be construed as
a font of power beyond that which had existed in
equity before.
McHUGH J:	You use the pejorative term "abuse of process"

and I know that was used in one of the judgments in

the last century, but it really is not an abuse of

process, is it? if you take the ejectment cases,

you would not call those Richard Roe and John Doe

cases, abuse of process cases, would you? They

were cases sanctioned by the court. It was just

that there was somebody hiding behind the

fictitious name.

MR GZELL:  Your Honour, I will come to that, but we say that

the history of ejectment and the rationale for

visiting costs against parties other than John Doe

and Richard Roe is explicable in terms of an abuse

of process, because if one of the parties let in -
one of the individuals let in to claim or to

defend, was only let in on the basis that the

fiction was not to be challenged, could then be

heard to say, "You cannot visit an order for costs

against me because I am not a party", that would be

an abuse of process, and the court would be quite

justified in saying, "We will visit the order for

costs against you because we have enabled this form

of proceeding to be brought upon a fiction and we

are not going to allow you to set that fiction

aside and to argue that you are not the real party

to these proceedings. So that the ejectment-type

situation is explicable, in our submission, either.

on the basis of the court's control of an abuse of
process or on the basis that the courts regarded

the real litigants as the parties in substitution

for the fictitious John Doe and Richard Roe.	I
will come to that in a moment, and I have anticipated myself slightly.

Knight(2) 20 4/2/92

I was going to take Your Honours to Garnett v

Bradley, which was the House of Lords decision

referred to in Long v McArthur. It involves that

statute late in the reign of James I which limited

the costs if the slander award was less than forty

shillings. The material part of the judgment in

relation to this concept of impliedly repealing the

statutory provisions as to costs at common law is

at pages 953 to 954 in the judgment of

Lord Hatherley:

I think this will be apparent when you come to consider what the object of this Act of James

was. It was this: in the matter of costs the

Common Law Courts had no discretion such as

the Courts of Chancery had at all times

asserted. The Common Law Courts were obliged

to go back to a legislative enactment in order

to arrive at their power, or rather their

duty, for power they had none, of dealing with

costs. The Statute of Gloucester, which was

passed in the 6th Edw 1, is the foundation of

the Common Law jurisdiction as to costs, and

that statute bound the Common Law Judges, so

that they could not in any way depart from the

rule that was laid down, that costs followed

the event. Therefore it was necessary to

except out of that strict and rigid rule any

case which the Legislature might consider

worthy of such exception. The Legislature,

finding that there was one general sweeping

enactment which deprived the Common Law Courts

of their discretion, and compelled them to

hold in all cases that the costs followed the

event, thought that there was a particular

case in which there might be an exception made

from the hard and fast rule, that costs

followed the event, whatever the particular

circumstances might be. Now, when the

Judicature Act was passed, this difficulty was got rid of for ever, once for all, as regards

were mingled, and the same powers and	the Common Law Courts. The two jurisdictions
authorities were given to what were formerly
the Common Law Courts, - that is to say, to those who had to try what previously were
Common Law actions - the same authority was
given to them as had always existed on the
part of the Courts of Equity. The Legislature
gave its sanction distinctly, as a part of the Judicature Act of 1875, to this Order LV in
the schedule. By the Judicature Act the
Legislature gave a direct authority to all the
Judges of the Courts constituted under the
Judicature Act, and vested in them a
discretion which was to guide and determine

Knight(2) 21 4/2/92

them, according to the circumstances of each

case, in the disposition of costs.

Then later, in His Lordship's judgment at the

bottom of page 957:

It is enough for me to say - and I confine my

observations entirely to that question - that

this particular statute of James has been

operated upon by the Judicature Act, so as to
make it inapplicable to the present case.

Your Honours, we have prepared a summary of

the amendments to the Judicature Act. Without
taking Your Honours to the statutes themselves, I

will invite Your Honours to receive this summary.

McHUGH J: English or Queensland?

MR GZELL: Queensland.

MR GZELL:  I am afraid there are a couple of typographical

errors in the document. The reference to the

Repealing Rules of 1900 - that should be 10/10/1900

and not 10/10/1890 or 1990. Where it says

"repealed existing rules" it should be "including"

the rules scheduled to The Judicature Act.

Again, the Rules of the Supreme Court is

(10/10/1900).	I have taken Your Honours to the
early part of those amendments.	I do not propose

to take Your Honours through the various steps.

Suffice it to say that if Your Honours look at the

Supreme Court Act of 1921 you will see that by

section 12 sections 16 and 17 of the Judicature Act

were repealed, to which I have referred previously.

But then if one looks down to the Supreme Court

Acts Amendment (Rules Ratification) Act of 1928

there was specific ratification of all rules made

under the Judicature Act and the Supreme Court Act of 1921 and subsection (2) expressly gave them the

force of statute.

In our submission, as a matter of

construction, aided by the historical analysis to

which I have referred, section 58 does not apply to

the instance circumstances because there is other

provision dealing with the matter, and that is

Order 91 rule 1.

And so I come to the second plank of our

argument, and that is that Order 91 rule 1 does not

empower the orders for costs and nor do the

exceptional cases at common law and equity, which

are explicable in terms of the prevention of an

abuse of process. This second plank involves two

aspects: first, that the rules under the

Knight(2) 22 4/2/92

Judicature Act did not enlarge the power to award

costs and that was the point that Your Honour

Justice McHugh was putting to me previously, that

the courts in England have taken the view that the

rules under the Judicature Act were merely

regulatory and did not enlarge power. Nor do we

submit to the contrary, but what we do submit is

that courts over time might take a different view

of the general discretion that was being regulated

by Order 91 rule 1. That general discretion was

that the costs of proceedings before the court were

in the general discretion of the court, and the

rule in England was said not to extend the power

that existed theretofore.

McHUGH J: But part of the reasoning of that was that the

Judicature Act simply fused the two courts.

MR GZELL: Yes.

McHUGH J: Is that a view that any longer prevails?

MR GZELL:  It certainly prevails so far as the origin of

Order 91 rule 1 is concerned, that when Order 91

rule 1 came into existence it came into existence
in the process of fusing the courts.

McHUGH J: But if you take the view that the Judicature Act did more than just simply fuse two existing courts but created a new entity, then that would give

Order 91 a very different complexion.

MR GZELL:  Your Honour, we are prepared to debate it on that

basis as well, because exactly the same

considerations, in our submission, apply. Whether

one says Order 91 rule 1 should be treated in its

historical context and in the historical context it regulated merely, and the courts of equity had said

we have no power to visit costs against non-

parties, therefore Order 91 rule 1 did not grant

such power, or one can take it on a different basis

and say "Look at Order 91 rule 1 devoid of its

historical background and construe it" and we say

for exactly the same reasons as the judges in
equity in dealing of their general discretion came

to the conclusion that it should be limited to

visiting orders for costs against parties, so too

should Order 91 rule 1.

McHUGH J: But there is a vital distinction between

jurisdiction and discretion. I noticed on the

special leave argument you said it did not matter

from your point of view whether it was regarded as

a question of jurisdiction or as a question of

discretion but the Court took the view on the

special leave application it mattered a great deal

Knight(2) 23 4/2/92

and you have got to argue that there is no

jurisdiction.

MR GZELL:  Yes, I accept that and I say that for the same

reason as the courts of equity construed their
power of a general discretion as to costs -
construed that power as being limited to visiting

costs against parties only, so too, we say, that a

statutory provision like Order 91 rule 1 should be

so limited. And the Canadian court in a case to

which I will come, the Court of Appeal of Ontario,

took that view; the view being that there is power

to attack non-parties where non-parties have been guilty of some impropriety which the court thinks

is sufficient to have an order for costs visited

against them.

So that the ambit of reach of the court, so

far as third parties, is there. One simply looks

at a provision that says, "The costs of proceedings

before the court are in the discretion of the

court.", and why should, we ask, it be assumed that

the legislature was empowering a court, under those

general words, to visit costs against any stranger

to the proceedings? As a matter of power, not

discretion.

McHUGH J:  You are running together two arguments. Once it

is conceded the rule enables you to make orders

against third parties or non-parties, then you lose

the jurisdiction argument.

MR GZELL:  I do not concede the first part, Your Honour. I

say that Order 91 rule 1 regulates the general

discretion as to costs or is a provision, a
statutory provision, giving the court a general

discretion as to costs. Standing beside it,

independently of Order 92 rule· 1 and independently
of the general rule in equity prior to the

Judicature Act, was an inherent jurisdiction in the

courts to visit costs against third parties.

that I do not concede that Order 91 rule 1 or the So

general discretion in equity, as a matter of power,

extended to third parties. In our submission,

third parties were visited differently by the

inherent jurisdiction of the court to control its

process or to control its officers.

The point that I was seeking to make

previously was that whichever way you view it, we

say that a provision as broad as that, the purpose

of which is to ensure that some person bears the

costs of proceedings, ought to be limited and its

purposes achieved by limiting it to the parties

before the court.

Knight(2) 24 4/2/92

There may be debate about who, in appropriate

circumstances, are the parties and we say that that
debate was capable of being raised under the old
general discretion at equity, capable of being

raised under Order 91 rule 1 in the absence of

section 58, capable of being raised in England

under the equivalent of Order 91 rule 1 before and

in spite of the section 5 amendment in 1890. But I

will see if I can develop that argument as I

progress.

I was saying that that second plank to our

submission has two aspects to it. First, that the rules under the Judicature Act did not enlarge the

power to award costs, it merely regulated that

power; and secondly, the power which existed before

the Act did not extend to non-parties except in

exceptional cases both at common law and in equity,

which do not apply in this case. And I add, if one

looks at the construction quite independently of

its history, exactly the same conclusions ought to

be arrived at, in our submission.

That the rules were regulatory only was stated

by the House of Lords in The British South Africa

Company case, (1893) AC 602.

MASON CJ:  The problem with that case, from your point of

view, is that Lord Justice Bowen made it clear, did

he not, that he would have, uninstructed, come to a

different view?

MR GZELL:  Yes.

MASON CJ: And that all the court was doing was really

bowing to previous authority in respect of which it

seemed to display no marked enthusiasm.

MR GZELL:  Yes, I accept that, Your Honour, and I accept

that that is the way in which they approached the

matter, and if Your Honours did not feel bound to approach it in the same way, the case does not	upset the argument that we present because the case
does not trammel into the area of suggesting that
the power should be construed to award costs
against a non-party. If one simply removes the
limitation that that case suggested existed, one
comes back to looking at what the general
discretion in equity should be construed to cover;
what the power, if it is to be regarded
independently, stated in Order 91 rule 1 should be
construed to cover.

MASON CJ:  Why do you not then construe Order 91.1 as all

embracing in	terms of the power or jurisdiction to
award costs?	Why do you adopt the artificial
expedient of	construing it narrowly, contrary to

Knight(2) 25 4/2/92

the general words in which it is expressed, and at
the same time seek to overcome the problem by
saying, "Oh, well, there is, apart from 91.1, an
inherent jurisdiction to award costs against

non-parties"?

MR GZELL:  I do that because, historically, that is how it

came about, and there is no suggestion, in my

respectful submission, that Order 91 rule 1, when

it was enacted statutorily under the Judicature

Act, was meant to supplant the two separate limbs •

as to costs, if you like, that existed in equity.

Order 91 rule 1 stated in statutory form a general

discretion which the Court of Equity had, but it

was a general discretion in relation to the costs

of proceedings before it. It had, independently of

that notion of its general discretion, established

exceptions and, in our respectful submission, the·re

is no reason to construe the introduction of the

equitable general discretion as a rule to the

Judicature Act as blurring those two founts of

power.

So that I answer Your Honour the Chief Justice in that fashion. If one comes to it without the

historical analysis, then I accept the force of
Your Honour's argument that one might be inclined

to look at it as a fount of power, in which event

my problem is that the exceptions would be brought

within general power under Order 91 rule 1. I

would submit to Your Honour that that power none

the less should not be construed as one which

enables the court to visit costs against any

stranger. There must be, on this hypothesis, some

justifiable connection to the proceedings - - -

McHUGH J: Like being the moving hand behind the

proceedings?

MR GZELL:  No, Your Honour, I cavil with that. There must

be some sufficient connection to the proceedings to

warrant the exercise of power in respect of the

costs of those proceedings, and Your Honour

Justice McHugh's point about being the moving hand

behind the proceedings is not, in our respectful

submission, sufficient.

DAWSON J:	Why not?
MR GZELL:	Because the moving hand behind the proceedings is

not the party which is generating costs. The

moving hand behind the proceedings represents the

interests of the party; the moving hand behind the

proceedings aids the suit of the party, but the

moving hand behind the proceedings has no separate

cause of action which, itself, could be brought

before the court. The fruits of the action that

Knight(2) 26 4/2/92

generate the costs are those of the party not the

moving hand.

To make that proposition, take the situation that we have: the receiver and manager has got no

entitlement to come to court to seek to enforce,

specifically, the contract of sale of the shares in

this case; the company has. If the company

succeeds in that action the benefits are those of

the company. The receiver and manager's rights

are, simply, to ensure that the company honours the

charge that it is given to the secured credit, but

beyond that - - -

DAWSON J: But, ultimately, the benefit is for the receiver

or manager or those whom he represents?

MR GZELL:  Your Honour, not necessarily so. In this action,

if this action had succeeded, there may have been

funds in the company which created a surplus, so

that the secured creditor was paid out and the remainder of the fruits of the litigation were

those of the company. Your Honour could equally

say that the moving hand behind any litigation in

which a company is a party is that of the

directors. The directors are those who control the

company, the directors are those who instigate the

proceedings or defend them, and the ramification of

this debate is that an order for costs, in any

situation as a matter of power, could be visited

against the directors of a company or the insurer

or a bank which is financing a company which is in

a litigious situation.

McHUGH J: That may be the effect of the decision. It might

be a more efficient way of controlling litigation

in orders for security for costs, or you do not

know what the amount is or what the costs are going

to be.

MR GZELL: With respect, Your Honour, we would submit to the

contrary. The security for costs has the advantage

that the court can control any abuse of its process

during the proceedings by ordering that unless

somebody who is standing behind a party comes

forward with funds the action is stayed, and the

problem in this case was that having got a security

of $40,000, they did not go back to seek an order

for increased security. But, in our respectful

submission, the appropriate and efficient way of

handling this type of situation is the security for

costs situation. The ramifications of the effect

of a judgment that goes against us is that after
the event of litigation one may have separate

actions springing up against insurers, banks,

directors, inquiring of their financial position

the extent to which they were the moving hand

Knight(2) 27 4/2/92

behind the litigation and actions commenced against
them for costs that were not covered because there

was insufficient security or for whatever reason.

DEANE J: But there would be nothing very strange in the

notion that those people who cause a company to

incur a liability with full knowledge that it

cannot meet the liability should themselves be

liable, which is what a receiver who takes

proceedings in the name of a company knowing that

the company is completely unable to satisfy an

order for costs if the company fails, does.

MR GZELL:  Your Honour, it is correct to say that in

circumstances where a company has no capacity to

pay and a receiver who commences proceedings on the

law as it stood up until at least Aiden, would be

inviolate from costs. That is a ramification of

the proposition that I am putting. But the answer

to it is that that problem was very easily able to

be overcome and the courts traditionally had viewed

security for costs - - -

DEANE J:  I was not putting it to you as a legal argument

against you. I was putting it to you by way of

query of your surprise that such a result could, as

it were, follow that a receiver who caused a

company to incur costs or to become liable for

costs that it could not pay, should be landed with

them himself. I am simply suggesting to you that I

find nothing at all surprising in that consequence

if that is what the effect of the relevant

statutory provisions is.

MR GZELL:  Your Honour, we say that that result does occur

and properly occurs in circumstances where security

for costs is ordered, and that is the avenue by

which the evil is overcome.

DEANE J: Or it occurs automatically if the receiver happens

to have been appointed by the court.

MR GZELL:  Yes. And, Your Honour, there is no problem, in

our submission, about that procedure. It is an

efficacious way of dealing with a problem. The

problem about dealing with it in the way the House

of Lords did by overturning the perceived wisdom

that had existed up until that time, that the power

to award costs under the general discretion was

limited, raises more problems than it solved. It

raises more problems than are solved because there

is the solution in the security for costs approach.

For example, the section of the Judicature Act which provides that a discretionary order for costs may be appealed only by leave in circumstances

where a party has had a substantive decision

Knight(2) 28 4/2/92

against it and can appeal in respect of the

substantive decision, the requirement of leave to

appeal in respect of the discretionary exercise of

the order for costs is understandable. But what

happens if the case below is confirmed by this

Court and as a matter of power any non-party may be

visited with an order for costs under a discretion?

McHUGH J: There must have been many cases, particularly in

recent years, where companies have commenced
action, where it has not been apparent to those on

the other side that the company was insolvent, and

yet it .ought to have been apparent to the
directors, or perhaps even in some cases receivers,

that the company would not be able to meet the costs of that litigation if it lost. In those circumstances why is it not proper that the

directors or receivers, or whoever has brought

about this unnecessary incurring of costs by third

parties, or the other party to the actions, should

pay the costs?

MR GZELL: Because, in our submission, the power to award

costs should not be construed as extending beyond

the parties, and the problem that Your Honour

Justice McHugh puts to me can be dealt with in one

of two ways: security for costs and - - -

McHUGH J: But it is not always apparent that the company is

insolvent.

MR GZELL:  Your Honour, if there is concealment of the fact

of the insolvency so that the directors are putting

up the company and concealing the fact that it is

incapable of satisfying an order for costs, perhaps
the courts might expand in those circumstances the
inherent jurisdiction against an abuse of its

process, but that is not a reason for construing

the power in any different way from the limitation

that has stood the test of time and as a salutary

limitation because if one throws open the

floodgates, as it were, there is no limit so far as

power is concerned in respect of those upon whom

the order can be visited, and I had not finished

the observation that I was making in relation to

the leave to proceed point because if, as a matter of power, anybody can be visited with an order for

costs and a judge, in the exercise of his

discretion, makes an order against a stranger and

refuses leave, it is an odd result that that person
on that hypothesis has got no redress and the fact

that that section of the Judicature Act seems to presuppose that it is parties to the action that

may be visited with costs because it does not
address at all the notion of the non-party being

refused leave to appeal enforces our argument that

Knight(2) 29 4/2/92

•

Order 91 rule 1, however widely drawn, should be
construed as not applying to non-parties.

That brings me to In re Mills. It is this

decision which may have influenced the absence of

any argument under Order 91 rule 1 in the In re The

Nash Election Petition. Mills followed the earlier decision of Foster in concluding that the

equivalent of Order 91 rule 1 did not confer new

power to award costs and since no power was given
by the particular statute for the award of costs on

the applicant for payment out of the moneys in

court, there was none.

MASON CJ: Well, I have said before, it does not seem to be

a particularly persuasive decision. What is more,

does it stand consistently with Long? Does it

stand consistently with Chief Justice Griffith's

decision - the one to which you earlier referred,

because Long seems clearly to establish that it did

confer power that previously did not exist because

it succeeded in repealing previous decisions that

made inconsistent provision. You cannot really say

that the effect of 91.1 is regulatory only.

MR GZELL:  Your Honour, the Chief Justice's decision and the

House of Lords decision proceeded upon the basis

that once the rule, albeit regulatory only, of the

equitable discretion which existed theretofore was

said to apply generally to court proceedings, there

was a necessary abrogation of the specific rules

that existed statutorily at common law.

So that we would not read In re Mills as

standing inconsistently with Long v McArthur, but I

accept Your Honour the Chief Justice's point that

it was a decision arrived at with not much

conviction. The observation that we would make is

that the court might have approached it quite

differently by saying, "Regulatory though it be,

the order gives us the discretion in equity which applies to parties to proceedings, and once we have	proceedings properly before us and parties to those
proceedings, notwithstanding that previously at
common law there was no right to visit costs if the
statute didn't say so, we now can act under the
equitable discretion in relation to the parties."

We also would submit that In re Mills is not

terribly satisfactory, but for a slightly different

reason.

McHUGH J:  One reason certainly it is not satisfactory is

because its effect is that the rule was not a

discretionary rule, is it not?

Knight(2)	30	4/2/92
MR GZELL:	Yes, quite, Your Honour.	It ignored the fact

that the discretionary rule was now available,
albeit that the discretionary rule was to be viewed

in the same way as the courts of equity had viewed

it and not enlarged, but that general rule was now

available and it ignored the general rule and

failed to apply it. That is why we made the

observation we did about The Nash Election Petition

equally in that case, which suffered exactly the

same problem. We would have thought that the court

might have granted the order for costs on the basis

of an exercise of the equitable power.

It was because of In re Mills and that

limitation that section 5 of the Supreme Court of

Judicature Act of 1890 was introduced, which repeated the rule but extended it by the inclusion of the statement that the court should have full

power to determine by whom and to what extent the

costs were to be paid. It is convenient, I think,

to refer to Daniel at this stage, Daniel's Chancery

Practice, 8th edition, volume 2, page 1022:

This rule confirms the practice of the

Court of Chancery, and will be illustrated in

Sect II of this chapter. It did not, however,

extend it or enable payment of costs to be

ordered where the Court, before the Judicature

Acts, would have had no jurisdiction so to

order, but the jurisdiction was extended by
s 5 of the Judicature Act, 1890, which
provides that, subject to the Judicature Acts
and the Rules of Court made thereunder, and to
the express provisions of any statute, whether
passed before or after the commencement of the

Act, the costs of and incident to all

proceedings in the Supreme Court, including

the administration of estates and trusts,

shall be in the discretion of the Court or

Judge, and the Court or Judge shall have full power to determine by whom and to what extent

such costs are to be paid.

The United Kingdom courts took the view that that section, section 55, was introduced to

overcome and did, in fact, overcome the problem in

In re Mills and, amongst other places, that is

referred to in Knight v Clifton, (1971) Ch 700, at

pages 709 to 710 and I do not think I need read the

passage to Your Honours. The Court of Appeal

follows the earlier decision in In re Fisher, in

which it had been said that the purpose of

section 5 was to overcome the problem in Mills and

it achieved that result.

We say that the extended words may not have

been necessary to enable the court to conclude that

Knight(2) 31 4/2/92

once it had parties before it it had a general

discretion to award costs against a party. It is

unnecessary for us to invite Your Honours to

finally determine on that submission, however,

because whatever the situation was in relation to

parties before the court our case is different

because it involves the question of whether the
power should extend to non-parties.

John Fairfax & Sons is the next case that we had in our outline, (1958) 1 QB 323, at pages 329 and 331. This was a case in which two matters were

heard together, E Ltd VD Ltd and F Ltd VD Ltd. E

succeeded against D, F failed against D. It was

held that the court lacked power in the absence of

consolidation to order F to pay to D the costs that

it had to pay to E.

In a passage in the judgment of

Lord Justice Jenkins, upon which we rely, he said,

at page 329:

After paying the best attention I can to

Mr Chapman's argument, I find myself unable to

accept it. "All proceedings" means all

proceedings, I suppose, commenced in any

manner authorized by the Rules of the Supreme

Court. It is with respect to proceedings in

that sense that the judge is given an absolute

discretion as to costs. But what does that
mean? When the rule says that costs are to be

in the discretion of the court or judge, it

cannot mean that the court or judge can direct

the costs in question to be paid by any person

the judge may choose, whether he is a party to

the proceedings or not. Some limit must be

placed on the language and I should have

thought it reasonably plain that the limit is

this: that the court has a discretion to

order the costs of and incident to all

proceedings to be paid by the parties to those

proceedings, or any of them, as the court in	its discretion thinks right. If that be so,
it seems to me there must be an end of
Mr Chapman's argument, for what he claims
there is jurisdiction in the court to do, is to direct that the unsuccessful plaintiff in
one action shall pay the defendant in that
action the costs of a different proceeding to
which that plaintiff was not a party. That,
as I understand it, would be the result of
holding that there is a discretion of the kind
contended for by Mr Chapman in this case. I
do not think that can be right, and I found
myself on the language of the rule and on the reasons I have attempted briefly to express.

Knight(2) 32 4/2/92

Lord Justice Parker, at page 331:

I agree. Under RSC Ord 65, r 1, the costs of

and incident to all proceedings in the Supreme

Court shall be in the discretion of the court or judge. "Proceedings" there must, I think,

mean proceedings properly brought before the

court in the prescribed manner. It is also, I
think, clear that A cannot be ordered to pay

the costs of B incurred in proceedings to

which A was not a party.

And Lord Justice Pearce agreed.

Now, it may be that a court now would take the

view that, in circumstances where A versus B,

B versus C - without a formal third party proceeding - is before the court; that A, Band C

are parties to the proceedings rather than the

proceedings being regarded as two separate actions

of A against Band B against C; and a court now

might take the view that the proceedings should be

regarded globally and A, Band C, being the parties

thereto, the decision of the Court of Appeal in

that case would have gone the other way, if that

approach had been taken.

The reason that we cite it is because of the

approach taken by Lord Justice Jenkins to the
question of construction, a question of

construction approached by him devoid of the

historical analysis that I have been at pains to

labour thus far. And even approached upon the

basis of looking at the words "as a general

discretion", Lord Justice Jenkins was of the view
that there must be some limitation and we submit to

Your Honours that that view has force and that view is one which we commend to Your Honours.

Now, in Aiden, this case was said to be wrong

because no regard was had in it to the 1890

amendment and the words in section 5 of that

amendment Act. But nonetheless, the approach taken

to the construction question by

Lord Justice Jenkins is a matter that we would

commend to Your Honours because the court looked at

this matter as being determined by the equivalent
of our Order 91 rule 1, so it was a decision

dealing with the equivalent of our rule untrammeled

by the later amendment in section 5 and it is, in

our submission, for that reason a useful decision

and we adopt the approach as a matter of

construction to our rule.

The next cases on our list are the Victorian decision in Australian Guarantee Corporation

Limited v De Jager, 1984 VR 483. That was a case

Knight(2) 33 4/2/92

in which a mortgagor successfully defended an
action for possession on the basis that

registration of the mortgage had been obtained by fraud. She therefore failed in her action for an

indemnity against the Registrar of Titles. As in

Spicer v Carmody and in John Fairfax & Sons Pty Ltd the actions were heard together. Mr Justice

Tadgell followed an earlier decision in

Allman v Daly in holding that he lacked power to

order the mortgagee to pay to the mortgagor the

costs she had to pay to the Registrar. And again -

I will read the passage to Your Honours; it is at

page 500-502. Perhaps I will not read it all. If

I can direct Your Honours's attention to pages 500 to 502, where His Honour took the view that the

general discretion was limited to parties and,

since he regarded the actions before him as two
separate proceedings, he would not order costs

against a party to the correlative proceeding. At

page 501 His Honour referred to Mr Justice Pape in

Allman v Daly. He said:

Pape J, in Allman v Daly ..... had to

consider a question similar to that which now

confronts me. Specifically, His Honour had to
decide whether he had power to order that the

costs of a plaintiff who had successfully sued

a defendant in one action should include the

costs which that plaintiff was ordered to pay
to another defendant whom he had separately

but unsuccessfully sued in a related action,

both actions having arisen out of a single

incident and having been concurrently tried.

His Honour held that he had no such power.

After referring to The Svein Jarl ..... and to

The W.H. Randall ..... Pape J said, at p.623:

"In my view, therefore, there is no power to

order a defendant who has been held to blame

in one action to pay the plaintiff's costs

incurred in another action against a different

defendant, arising out of the same set of

facts. This seems to accord with the

principle, for it is said in the notes to O discretionary power to order the payment of costs 'does not enable the Court to order the costs to be paid by a stranger to the

proceedings', and for this proposition Forbes-

Smith v Forbes-Smith ..... is cited.

Pausing there, Forbes-Smith v Forbes-Smith was a case in which a wife's suit for judicial

separation was heard at the same time as her

husband's suit for dissolution of marriage under a

consolidation order. The wife's petition was

dismissed, the husband succeeded with costs against

the co-respondent but it was held that the

Knight(2) 34 4/2/92

co-respondent was a stranger to the wife's suit and

could not be visited with costs. His Honour cites

from that judgment:

"But if I am wrong about this, and there

is power to make such an order, it seems clear

that the plaintiff has no right to such an

order, but that it is a matter for the

discretion of the judge, taking all the

circumstances into account ... "

McHUGH:  Forbes-Smith was overruled in Aiden, was it not?

MR GZELL:  Forbes-Smith was overruled in Aiden. Now, again

we say that there is nothing wrong with the

construction of the power as being limited to

parties, but that Mr Justice Tadgell might have

viewed the parties to the proceedings as being each
of the mortgagor, the mortgagee and the registrar

of titles, on the basis that two separate actions

being heard concurrently should be regarded as the

one proceeding. If that approach had been taken

then His Honour would not have felt constrained not
to make the order for costs. But the fact that the

section is couched in wide terms ought not, in our

respectful submission, to be construed as extending

beyond the parties to the action.

I might simply tell Your Honours that in

New Zealand in a case of Av S, (1982) 1 NZLR 726

at page 730, the Court of Appeal in New Zealand

took a view similar to that in De Jager, but they took that view without analysis or argument and I

simply refer Your Honours to it. The decision,

itself, does not advance the argument that I am

advancing to you.

We have included a reference to the decision

of this Court in Wentworth v Woollahra Municipal
Council because it is the closest decision of this

Court which bears upon the matter, but it only

bears upon the matter peripherally because that was

a case - I am sorry I should have given you the

citation, (1984) 154 CLR 518 and the passage that I

will take Your Honours to is at page 528.

It was a case in which this Court concluded

that in relater proceedings the New South Wales

provision empowered an order for costs against the

Attorney-General as the party to the proceedings.

The power was viewed as a power to order costs

against parties to proceedings, and that appears at

the bottom of page 527:

It would not be right to give that section a

narrow interpretation and the argument

submitted on behalf of the Attorney-General,

Knight(2) 35

that it does no more than change the rule that

the costs follow the event, cannot be

accepted. Section 76(1) confers a wide

discretion on the Court to decide whether any
and which party to proceedings shall pay costs

to another party, and, if it binds the Crown,

enables the Court to order the Crown, or the

Attorney-General proceeding at the relation of

a person or body, to pay the costs.

Of course, the question whether the power extended to non-parties was not before the Court on that occasion, and the only issue related to non-parties was the question of the position of the relater to

which I will return later, because the position of

the relater is one of those exceptional

circumstances with which I must deal.

So, in our submission, Order 91 rule 1 did not

extend the power to award costs in Queensland which

existed before the Judicature Act. The power in

equity which was adopted was a general discretion

to award costs of proceedings that had been

regarded as limited to the parties to those proceedings. Over time courts might take a

different view of who the parties are, and in the

situation where matters are heard together courts

might take the view that all parties were parties

to the proceedings rather than viewing the causes

or matters discreetly. But whether that is so or

not, the power, in our submission, did not extend

to non-parties except in exceptional circumstances

and nor should it be construed to extend to

non-parties now.

The exceptional circumstances, we submit, are

explicable in terms of an avoidance of an abuse of
the court's process, which is not the situation

covered in this case. The exceptional

circumstances at common law are dealt with by

His Honour Mr Justice Ryan at pages 59 through to

61 of the appeal book.

His Honour referred to Hayward v Gifford and to the judgment of Lord Abinger, Chief Baron, and

His Honour Mr Justice Ryan has set out in his

judgment the passage from Lord Abinger. As

Lord Abinger said, about a third of the way down

his judgment:

In the present case, if it could have been

shown 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,

but we cannot make any order against an

Knight(2) 36 4/2/92

individual who is not party to any suit before

us -

and further down:

The cases where the Courts have interfered in

this way are cases of exception.

And then the next paragraph, omitting one

paragraph:

So in ejectment which is a fictitious

proceeding, the Courts allow the action to be
brought in the name of a nominal plaintiff,

and allow the landlord to come in and defend - Now, one can, in our submission, rationalize the

exceptions spoken about in the case of contempt of

court or barratry or maintenance as being a

situation in which the court views the matter as an

abuse of its process and visits an order for costs

against the guilty party.

Likewise, we submit the ejectment fiction

could be regarded or it could be regarded as simply

a situation in the court in which the courts

regarded the parties who have the interest in the

litigation as being the parties and not the

fictitious names on the record.

In the development of the fiction, the courts

of common pleas had the rights in respect of the
real actions and the tenant who had no freehold

interest could not bring a real action, and in

consequence he brought his action in Kings Bench.

The Kings Bench remedy to the tenant in trespass

was eventually that the sheriff should be ordered

to put the tenant back in position, so that that

form of procedure became a very attractive one so

far as owners were concerned. The Kings Bench form

of procedure, if it could be made available in

substitution for the real action, was an attractive

proposition.

What occurred was that the owner of land who

wished to bring a real action but wanted to do it

in the more simple form of trespass in the Kings

Bench Division, would grant a lease to a friend and

the friend would then bring the action. Then

subsequent to that commencement, what then happened

was that the court entertained an action with two

fictions. John Doe would bring the action alleging

that he had a lease of the premises from the person

who was the real plaintiff, and that he had

entered, and that Richard Roe had ejected him.

Knight(2) 37 4/2/92

The real plaintiff then served the real

defendant with a notice allegedly corning from

Richard Roe, that Richard Roe proposed not to

defend. The real defendant was then admitted to

defend but was admitted to defend only on the basis

that he admitted the lease, the entry and the

ouster and waived any objection to the absence of a

writ or bill.

In those circumstances one can see how the exception in that ejectrnent situation came to be.

One can see the courts viewing the matter either on

the basis that the real parties are those who, by

consent, have come in in substitution for the

John Doe and Richard Roe and therefore an order for

costs can be made in the ordinary case against

parties or, alternatively - - -

GAUDRON J: Having said that, Mr Gzell, does your statement

"in exceptional circumstances amounting to an abuse

of process" mean anything other than "in
circumstances where it is fair and just to do so"?

Or "where it is necessary or desirable to avoid

injustice"?

MR GZELL:  No. Your Honour, we would say that if the power

is, as we say it is, confined to orders against
parties, the cases in which non-parties may be
visited with orders are exceptional and those cases
are cases in which the court has regarded the

activity of the stranger as being reprehensible in

some manner such that an order for costs should be

visited against him.

GAUDRON J: Well, would that not be the same as in the

example Justice Deane put to you, where costs are

incurred knowing that there is no possibility of

their being paid?

MR GZELL:	I answered that, I thought, by saying that in the ordinary event the answer is the security for costs
application and, in circumstances where there has
been no wilful concealment of the financial
position of the company one would have thought, and
we would submit, that it is incumbent upon the
other party to protect its interests by bringing
the application for security for costs. But I think I did say to Justice McHugh that if the
receiver or manager acted wilfully by concealing
the position - - -

GAUDRON J: But surely, when you go to this sort of matter,

you are going to matters to be taken into account

perhaps rather than to definitional matters of the

exception?

MR GZELL:  Yes, I am because - - -

Knight(2) 38 4/2/92

GAUDRON J: And I am really asking you to turn your mind to

the definitional aspect of exception.

MR GZELL:  Your Honour, I am doing it this way because in

answer to the Chief Justice we submitted that it is

not a question of Order 91 rule 1 being a new fount

and a sole fount of power. We submit that Order 91

rule 1 is a statutory enactment of the general
discretion which existed in equity, but side by

side with that general discretion there were

exceptional cases the fount for the order of which
was based upon the inherent jurisdiction of the

court to avoid abuse.

GAUDRON J: And you do not deny that that still exists?

MR GZELL:  We assert that it still exists because we assert,

contrary to the proposition put to me by the Chief

Justice, that Order 91 rule 1 should be construed

upon the basis that it is a provision meant to

cover costs in the ordinary event of proceedings

before the court and it is not meant to cover the
exceptional cases, the fount of power for which is

quite separate and distinct as the inherent

jurisdiction of the court.

GAUDRON J: But what you come to, if you go to notions of

inherent jurisdiction, is that which is necessary

to do justice, not notions of contempt or abuse of

process so much.

MR GZELL: Except to this extent, that because they are

regarded as matters of exception, the field is

limited to such affectations upon the justice of

the matter as are regarded seriously, seriously

enough for an order for costs to be visited against

a non-party. So that, I take Your Honour's point

that it is unnecessary for me to put the exceptions

in a strait-jacket - - -

GAUDRON J:  But it would be wrong to do that, would it not,

if you are talking about inherent power?

MR GZELL:  But they are based on inherent power, and what

I - - -

MR GAUDRON J: Yes, but if you are talking about inherent

power they cannot be strait-jacketed, can they?

MR GZELL:  No, and what I am saying is that the inherent

power thusfar has been exercised in circumstances

which amount basically to an abuse of process. And

I suppose what follows from what Your Honour

Justice Gaudron is putting to me is that in our submission there is no justification for the courts now to extend that inherent jurisdiction exception to a situation such as that with which the Court is

Knight(2) 39 4/2/92

•.,.·.

concerned. Here we have an agency situation with

no suggestion of impropriety whatsoever, and an

agency situation which is justified and contained

in the statute now because the corporations law

provides that - - -

GAUDRON J: Except that it is a real person, I see no

difference between the situation here and John Doe

and Richard Roe.

MR GZELL:  Yes, with respect. I go back to what I said

before. In the John Doe, Richard Roe situation the

real owner and possessor who are let in have a

cause of action to follow, and the fruit of that cause of action is theirs. So that if the owner succeeds under the fiction in getting the order

upon the sheriff to put him back into possession,

he has succeeded in achieving a cause of action.

But, in our situation there is no cause of action

that the receiver has as there is no cause of

action that the director has in standing behind and
assisting his company to bring an action.

So that the position between our situation and the ejectment one is apparent, we would say, an~ in our submission, while I take the force of

Your Honour Justice Gaudron's point about the

inherent jurisdiction, we would say that the
inherent jurisdiction has only been invoked by the

courts in the past in such circumstances as amount

to an abuse of process, and there is no reason why
the inherent jurisdiction should be invoked against
the receiver in this case; and nor was it put on

that basis in the courts below. It was put on the

basis that the power existed in section 58 and, in

our submission, section - - -

GAUDRON J: But I do not see really that it would matter

which way you looked at it. If you looked at it,

58, 91.92, assuming as a matter of construction it

extends so far, or if you look at it in terms of an

exception deriving from inherent jurisdiction, it

would seem to me that surely the considerations are·

going to be within the same general area, and those

considerations which will lead you to exercise the

power will be in the same general area.

MR GZELL: Yes, I take Your Honour's point. I was trying to

escape, but I take Your Honour's point. May I say

this though: you now have in the corporations law a

provision that says any receiver has the right to
bring proceedings in the name of a company. Is it

to be supposed that in any circumstance where a

receiver, without any suggestion of impropriety on

its part whatsoever, which is the case here,

exercises that statutory right that inherent

jurisdiction should say that the justice of the

Knight(2) 40 4/2/92

situation demands if the company is unable to pay
costs and the other side have not been astute
enough to bring an application for security for
costs, or a top-up order if they had, that the

justice of the situation should call for the

visitation of an order for costs against the

receiver, and we would submit no. We would submit

that something more needs to be there to justify

that approach to the matter. So that so far as the

exceptional cases are concerned, we would say that

the courts should not exercise inherent

jurisdiction to visit costs against non-parties

except in the type of exceptional that has been

accepted in the past as being sufficiently serious

to warrant the court interfering.

Let me give Your Honour another example. The

mere fact that a solicitor assists a client in the

furtherance of a proceeding, lends money to the

client so that outgoings are incurred, takes a

charge over property to secure the costs to be

paid. Should it be assumed on that basis that

there is the putting forward, if you like, of a

plaintiff without capacity to pay the costs of the

defence if it is successful such as to justify the

court, in any circumstance, where financial aid is

given to visit costs against the giver, because if

that proposition were right then it would also flow
that when a bank made available funds in the course

of litigation that the bank might have visited

against it an order for costs.

That is why, in our respectful submission, the

approach that has been taken in the past of

limiting the power to parties, and allowing limited

exceptions where the interrneddling of the stranger

is sufficient to justify it, is a salutary approach

to the problem and one that, we submit to the

Court, it ought not to upset in the instant circumstances.

I had got to the bottom of page 59 in the

record. I should refer Your Honours to a case,

which is not on our list but on our learned

friend's list, which deals with the ejectment

proceeding and traces the history of it. I had

relied, for my little exposition of it, on an

extract from Radcliffe v Cross, the English Legal

System, third edition, at pages 157-158, but I have

no doubt that there are other similar observations

in other texts.

The case of Mobbs v Vandenbrande, (1864) 33 LJ

QB 177, also discusses the fictional case, and

there is one part of the judgment to which I should

refer because the justification for the rule is

Knight(2) 41

treated in three different ways. At the bottom of

page 180 in the first column:

In ordinary cases, where there has been no

abuse of its process, the court has no

jurisdiction to order a person not a party on

the record to pay costs. But the action of

ejectment was an anomaly. The fictitious

proceedings in use before 1852 are said to

have been introduced by

Lord Chief Justice Rolle, in the time of the

Commonwealth to avoid the necessity of making an actual entry, and sealing a lease on the

premises, and to obviate the inconvenience

arising from the action being brought against

the casual ejector, and a demise was feigned

to have been made by the person who was

supposed to have the legal title, called the

lessor of the nominal plaintiff, and a notice

was given by the casual ejector, the

defendant, to the tenant, advising him to come

in and defend; and if he did so then a formal

consent rule was drawn up, signed by the

tenant and the lessor of the plaintiff, in

which the tenant was made defendant and bound

himself to confess lease, entry, and ouster,

or in default to pay the plaintiff's costs,

and the lessor bound himself, in the event of

being unsuccessful in proving his title, to

pay the defendant's costs. Thus it was by the

consent rule that the Court had jurisdiction

over the real parties. But if the real

parties had not entered into the consent rule,

the Court had yet jurisdiction over them, on
the ground, I suppose, that there had been an

abuse of the process, or perhaps because the

whole proceeding was the creation of the

Court. It is true that the ~eported cases are

cases in which real defendants only have been

ordered to pay costs; but the Judges do not

so confine the practice: the words they use

are "the parties," without distinction of

plaintiffs or defendants.

His Honour Mr Justice Ryan went on, at page 60

of the record, to deal with the decision in

Evans v Rees, where the headnote states:

"The Court will not order a person not party to the record to pay costs in any action but

ejectment. And in an action of replevin they refused to make such order at the defendant's instance, though it appeared that the nominal

plaintiff had brought the action really to try

a right to valuable minerals claimed by a

third party against whom the application for costs was made, and the plaintiff's attorney

Knight(2) 42 4/2/92

had declared on affidavit that he acted solely

on behalf of the party, who was the real

plaintiff in the cause. The proper cause

where the real plaintiff or defendant does not

appear on the record is to move, while the

cause is pending, that proceedings be stayed

till security be given for costs".

Then His Honour goes on:

A wider view of the jurisdiction to award

costs was taken in R. v. Greene ..... The

question, said Lord Denman C.J., was whether a

person who, on a motion for a quo warranto

information, acts as an attorney, is on that

account to avoid payment of costs when he has,

in fact, been the relator but has put forward

another person in that capacity who is unable

to pay costs. He answered it by saying that

he had no doubt that he was liable, where it

appeared that he was actually and virtually a

relator.

That, again, is explicable in terms of the abuse of

process case. So far as that case is concerned,

the rationale for a relator was that at common law
the Crown neither was subject to an order for costs nor took an order for costs. Hence the relator was

brought in to answer that order for costs. If I

could take Your Honours back to the decision of

this Court in Wentworth v Woollahra Municipal

Council, there is a discussion of that proposition

at page 526, through to page 527.

I do not know whether I need read that passage

from Your Honour's judgment to the Court, but it is

clear that in circumstances where the

Attorney-General representing the Crown was neither

to take costs nor be visited with an order for

costs, the relator was a necessary party in order

that an order for costs could be satisfied.

So that in Reg v Greene, when the Attorney,

who was the person really interested in the quo

warranto information, puts up a man of straw as the

relator, it can be seen to be one of those abuse of

process cases. Alternatively, it can be seen to be a case in which the court has inherent jurisdiction

over its own officer because he was an attorney.

Mr Justice Ryan goes on at page 60 of the record,

referring to Reg v Greene:

That decision was given after reference had

been made to Hayward v Gifford. It was

followed by the making of a Rule of Court for

cases in which the Court granted a rule for

the payment of costs occasioned by the

Knight(2) 4/2/92

application for any writ of mandamus or the

proceeding thereon, or to compel any person,

not a party to an original rule, to pay the

costs of such original rule.

But the mere fact that that rule was made does not

mean that the exceptional category was extended by

the court. It was simply a way in which the court

could deal with the exceptional category.

In Hutchinson v Greenwood it was held by

majority that the Court had jurisdiction in an
action of ejection, as well after the Common

Law Procedure Act 1852 as before, to order the

parties really conducting the defence to pay

the costs of the plaintiff, though the parties

were strangers to the record and claimed no

interest in the property. Campbell C.J.
stated the principle as being 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."

And then His Honour goes on:

It appears from these cases that at the time when the Supreme Court Act of 1867 was-· enacted, the general position in the common

law courts was that they had no power to make

orders against persons who were not parties on the record, but there were exceptions to this.

One clearly recognised exception was in the

case of ejectment, but there were indications

that orders could be made against non-parties

who abused the process of the court, for

example by maintaining an action and putting

forward an impecunious party so as to avoid

liability for costs.

All of which, we say, are explicable on that basis

of abuse of process. In passing I should merely

say that there is no suggestion that this was a

maintenance situation; that there was no suggestion

that the old concept of maintenance, the old tort
of maintenance, applied in this case before the

courts below and nor could it have been suggested,

in our submission, because there was a sufficient

community of interest between the receiver and the
company.

MASON CJ:	Mr Gzell, we will adjourn now and resume at 2.15.
AT 12.47 PM LUNCHEON ADJOURNMENT	;,

Knight(2) 44 4/2/92

UPON RESUMING AT 2.19 PM:

MASON CJ: Yes, Mr Gzell.

MR GZELL:  Thank you, Your Honour. If the Court pleases, I

was referring to Mr Justice Ryan's judgment in the

court below at page 61 of the appeal book, and I

had concluded the portion of that judgment dealing

with the exceptions at common law. His Honour then

goes on, at page 61 over to 62, to deal with the

exceptions in equity, and he refers to

Mathias v Yetts and "the three A rule" referred to

in that case. The "three A rule" is discussed in

Daniel's Chancery Practice, volume 1, 8th edition,

page 205-206, where this is said:

There was, however, one rule of practice which

calls for notice. This was called the rule of

the three A's - attorneys, agents, and

arbitrators - and was to the effect that, if

any of these persons had been participants in

a fraud on the plaintiff, they might be joined

in a suit against the principal defendant,

though no relief could be given under the

practice as it then was, except that they

might be ordered to pay costs. This practice

of adding parties for costs was not

encouraged, and did not extend to adding the

members of a corporation who had instigated

the wrong complained of in an action against
the corporation. At the present day the rule

is of no importance owing to the power of the

Court to award damages, for it will be found

that the Court could only have punished such

parties where they had been guilty of a

distinct wrongful act to the plaintiff, for

which the remedy would now be damages,

measured usually by the costs of the action.

So again we say that that exception in equity

is explicable on the basis of the notion of an

abuse of process. His Honour goes on at the bottom
of page 61 of the record to refer to Scott v

Pascall. Scott v Pascall was a case in which a challenge had been made to the admissibility of

evidence by a person on the basis of his interest

in the case, and the Lord Chancellor said:

"It is said that he is incompetent as a quasi

party to the record. But he could only be so

in respect of his liability for costs if he

could be reached by the defendant in the event

of the bill being dismissed. And it is clear

that the defendant in this case could reach no

Knight(2) 45 4/2/92

one who was not actually a party named on the

record -

again confirming the notion that apart from the

exceptions, the discretion in equity, wide though

it was, had been interpreted by the court as not

extending to non-parties.

We are indebted to our learned friends for a Privy Council case that was not referred to below

and we did not find, and we have not seen it

referred to in the texts or other cases.	It is Ram
Coomar Coondoo v Chunder Canto Mookerjee.	It is on
our friends' list, (1876) 2 AC 186.

That was a case in which the attorney for

parties to proceedings had provided financial

assistance to the clients taking interest at

12 per cent on the moneys and a third of the clear

net profits of the suit. The proceedings favoured

the clients initially, but their suit was dismissed

on appeal to the Privy Council. Pending the appeal

to the Privy Council the solicitor purchased the

property in suit and thereafter conducted the

appeal in his own interest.

An action was brought specifically by the appellants against the solicitor for costs and the
action was founded on the proposition that he had

maliciously instigated the proceedings; that

failed. It was also put on the basis of

Champerdee, and that was rejected by the Privy

Council. It was also put on the basis that the

respondent was the real activarian and had an

interest in them and was therefore responsible for costs. The Privy Council held in relation to that

matter that an action could not be sustained

against a third person on the ground that he was a

mover of and had an interest in the suit in the

absence of malice or want of probable cause. In the process of dealing with that last

matter in the cause of action Their Lordships refer

to the propositions that I have been addressing to

Your Honours as to the limitation upon the extent

of the power to grant costs against non-parties.

At page 210 to 214, the Privy Council deals with this matter. I will not take Your Honours to

the entirety of it, but about half-way down

page 211:

It has, however, been contended that it would

be only in accordance with justice and equity

that he who was the principal mover of a suit,

and had an interest in it, should be made

liable to the costs. It is obvious that a

Knight(2) 46 4/2/92

wide field of new litigation would be opened

if, after the termination of the original

suit, another independent suit might, on such

general grounds, be brought against third

persons. Interminable questions would arise

as to the degree of meddling and assistance

which would create the liability. So far as

precedents exist, it is either in the original suit itself, or by the exercise of the summary

jurisdiction of the Courts, that any such

liability has been enforced. It is ordinary

practice, if the Plaintiff is suing for

another, to require security for costs,	and to
stay the proceedings until it is given.	The
now Plaintiffs were fully aware, during	the
pendency of the former suit, of the
arrangement between the McQueens and the
Defendant, but instead of applying for

security for costs, they petitioned the Court

to make him a Co-Plaintiff under the 73rd

section of Act VIII. Without deciding whether

this application was rightly rejected, it is

enough to say that its rejection cannot give

ground for an action which would not otherwise

lie.

The instances in which persons other than

parties to the suit have been held liable to

costs in England, have been principally those

of solicitors, over whom the Court exercises

disciplinary jurisdiction, as in the case of

In re Jones. The Courts have also ordered the

real parties to pay the costs in actions of

ejectment, originally on the ground that that

action was in form a fictitious proceeding,

and having once assumed this power they have

continued to exercise it in the actions

substituted for that of ejectment. Again, the

Courts, it has been said, would so interfere

in case of any contempt or abuse of their

proceedings: see Hayward v Gifford. But all

these cases relate to applications either in

the cause itself, or to the summary

jurisdiction of the Court.

And then down at the bottom of the page:

It was lastly insisted for the Plaintiffs

that if the costs in India were not
recoverable, the action ought to be sustained
for those incurred in the appeal to

Her Majesty, subsequently to the purchase made

by the Defendant, pending that appeal, of all
the rights of the McQueens in the property and

the suit. Undoubtedly the McQueens after this

purchase became nominal Appellants only, and

the claim of the Plaintiffs to recover these

Knight(2) 47 4/2/92

latter costs is as strong as a case of the

kind can be. But even so, it is not stronger

than many cases of ordinary occurrence, as,
for instance, trustees suing on behalf of
those beneficially interested, or the
assignors of choses in action on behalf of
their assignees; and in these and similar
cases which have long been familiar to the

Courts, whilst modes, such as requiring security for costs, have been devised for reaching the real party, no independent action

for the costs against a stranger to the record

has ever been sanctioned. Their Lordships,

therefore, think that no distinction can

properly be made between the costs of the

appeal and the rest of the costs.

It results from what has been stated,

that by English law an action cannot be

maintained against a third person on the

ground that he was a mover of, and had an

interest in the suit, in the absence of malice

and want of probable cause.

And then towards the bottom of that page:

When it is urged that the claim should be

decided upon general principles of justice,

equity, and good conscience, it is to be

observed, in addition to the considerations

already adverted to, that these principles are

to be invoked only in cases "for which no

specific rules may exist." Now, it appears to

their Lordships to result from what has been

already observed, that rules may properly be
considered to exist which define the character

of actions of this kind, and the circumstances

under which alone they can be brought, and

that it would be out of place to resort to

these general principles in dealing with such

actions.	The consequences of such a resort in
cases of this character would be to make the
law utterly uncertain, to raise, as before
observed, interminable questions as to the
degree of interference which would sustain the
action, and mischievously to multiply and
perpetuate litigation after the termination of the original suit.

We commend that judgment, in so far as it deals

with the general principle towards the latter part

of the judgment, to Your Honours.

I should simply refer Your Honours to the

texts which deal with this matter. We have given

you Daniel but I should give Your Honours a

reference to Lush and Archbold. Perhaps it serves

Knight(2) 48 4/2/92

my purpose simply to inform Your Honours that we

have given Your Honours, on our list of

authorities, a reference to both of those texts and

we commend those passages to Your Honours.

There is a very recent decision that deals with the history of the matter. It was a decision

given last week by the Court of Appeal in Victoria,

Burns Philp & Company v Bhagat. I hand to

Your Honours copies of that judgment.

Mr Justice Brooking gave the judgment in which

Their Honours Mr Justice Fullagar and

Mr Justice Tadgell agreed. Now, Your Honours, I do

not propose to take you through it. The gravamen

of the case was that this was a representative

proceeding and the question was whether those

represented could be visited with an order for

costs. The court took the view that the form of

proceeding in which that relief was sought was

inappropriate, and that is said at page 11 of the

judgment, but in view of the way in which the

events had unfurled the court went on to deal with

the merits. Then, in dealing with the merits, His

Honour, at page 12, indicates that the extension of

the English provision in section 5 of the 1890 Act

in the United Kingdom was introduced in Victoria in

1928 in the consolidation, so His Honour was

dealing with a provision on all fours to the

provision with which the House of Lords dealt in

Aiden and His Honour came to the conclusion, after

history was included the case which is before this court - he concluded that section 5 of the Judicature Act of 1890 in the United Kingdom, since it was intended to cover the situation of non-parties and since it was reflected in the	analyzing the history of the matter - in which governed by the provision in Victoria following
Aiden and following this case.

Your Honours, we do not cavil with the

analysis of the authorities that His Honour goes

through in his judgment, save for one matter. At
page 21, Mr Justice Brooking seems to suggest that

there was another exception in circumstances of a creditor appearing in an administration suit or a

person interested in an estate unnecessarily

attending on the taking of accounts.

When one looks at the authority which is

cited, that is Hatch v Searles, we say it is not a

new and different exception from the ones that we
have analysed this morning because in Hatch v

Searles it is apparent that the person concerned

came in and made a claim in his own right and

Knight(2) 49 4/2/92

became a party, and I hand to Your Honours copies

of the judgment in Hatch v Searles.

The part to which I particularly want to refer

is at page 346, about two-thirds of the way down:

It is said I have no jurisdiction to make

such an order, inasmuch as the creditor is not

a party to the suit. I think he made himself

a party by embarking in this litigation.

And then, further down, the Vice-Chancellor again: In his opinion the proceedings in Chambers must be treated as a litigation, the costs of

which ought to be paid by the unsuccessful

litigant, on the ordinary principle.

So that the only matter in the historical analysis

of Mr Justice Brooking with which we cavil is that

proposition there. Apart from that, we would say

that His Honour's judgment is wrong for the reasons
that we say that Aiden was wrong, and the case

before Your Honours which Mr Justice Brooking

followed was wrong.

So that, in our submission, unless a case of

abuse of process has been made out against the

appellants they, as non-parties, ought not to have

been visited with an order for costs. The

appropriate remedy was security for costs. That

was the traditional view. There is a compelling

logic in this approach because it enables the court

to control an abuse of its process during the

proceedings by staying them unless security for

costs is given, and it avoids the problem of
extending the power to award costs to strangers. I

have indicated to Your Honours the difficulty which

is created by the notion that the power does extend

to strangers by the limitation in the Judicature

Act to leave being required to appeal from a

discretionary order as to costs.

There are two cases that we have referred to

in our outline which suggest are expressions of the

principle that a receiver was inviolate from an

order for costs unless security for costs was

obtained against him. They are Newhart, (1978)

1 QB 814. The passage that I rely on is at

page 819, about a third of the way down:

It is perhaps interesting to note in passing

that when a liquidator is appointed, certainly

in a winding up by the court, the powers of
the directors immediately cease by statutory

provision. There is no such provision in

relation to the appointment of a receiver,

Knight(2) so 4/2/92

whose duty it is to protect the interests of

the mortgagee or debenture holders, as the

case may be. In so far as it is requisite and

necessary for him, in the course of his dealing with the assets of the company,

bringing them in and realising them, and so

on, to bring actions as well, he is empowered

to do so by the debenture trust deed in the

name of the company. That makes it possible

him that power is an enabling provision which invests him with the capacity to bring

for him to institute such proceedings without giving
exposing himself to the risk of a liability

for costs if those proceedings should fail.

an action in the name of the company. It does

not divest the directors of the company of

their power -

and so on. The question was whether the directors

were divested, but the point is that it was

recognized by Lord Justice Shaw that his view of

the law as it then stood was that a receiver was

inviolate from an order for costs. The appropriate

course was security for costs. That is echoed in

an Australian decision in Sent v Jet Corporation of
Australia Pty Ltd, which is in the Federal Court

Reports, 2 FCR, 201, and also in the ALRs at

54 ALR 237.

This was an application for security for costs, and in the course of dealing with the

applications which were opposed, His Honour

Mr Justice Smithers at page 214 to 215 said this,

about three-quarters of the way down page 214:

It is this reality which becomes important

when the matter is approached with reference

to s 533 of the Companies Code -

that is the provision for security.

And in the decision of the matter by reference

to s 533 and the judgment under appeal it does

not appear that this factor was accorded

weight. It would seem that the considerations

of justice involved therein were not the

subject of explicit submission. Indeed it

only emerged in the hearing of this appeal at

a late stage of Mr Archibald's reply. The

situation is that unless security for costs is

provided Citicorp has the privilege of suing
on its initiative and responsibility, for its

benefit, on terms that if it loses it has no

responsibility for costs. From the point of

view of the justice of the situation this is

far removed from a case where a plaintiff or

Knight(2) 51 4/2/92

applicant is the party instituting and

conducting the litigation. The receiver and

manager was appointed on 28 October 1982 -

and so on.	Then further down in the next
paragraph:

Once it appears, not only that there is a

secured creditor in respect of whose claims
against an insolvent company the proceedings

are of special interest, but that the

proceedings have been initiated by, and are

controlled by the receiver and manager

appointed by that secured creditor whose

primary purpose is the recovery of his own

debt, and there is a reasonable inference that

that secured creditor is supporting the

litigation financially, the injustice of that

secured creditor pursuing his own interest in
an action against the appellant parties with

no risk to itself should the appellant parties

succeed in their defence assumes a special

significance on the question of the justice of

granting or refusing an order for security for

costs -

again an expression of the view that unless

security for costs were given the receiver, as a

non-party, was immune from an order for costs.

In our submission, the House of Lords ought

not to have reversed this line of authority as it

did in Aiden and the decision was wrongly decided,

and I now come to Aiden - and I am referring to

Aiden in the House of Lords, (1986) 1 AC 965.

It was, like Spicer v Carmody and John Fairfax

and De Jager, a case of separate applications heard

together.	There was an application by A and Band
an application by Band C.	A was ordered to pay
to B what B was ordered to pay to C by way of
costs.	In our submission, the House of Lords

could have arrived at its result in the way I

submitted to Your Honours this morning by treating

A, Band C, once the two applications were before

the court, as the parties to the proceedings before
the court, and making orders for costs in the

global proceeding against any of the parties. But

it arrived at that result on a much broader basis,

and the much broader basis effectively reversed the

line of authority that we have analysed, and we say
wrongly did so.

The House of Lords fastened on the 1890 amendment which was brought in to overcome the

decision in In re Mills, which said that the court

had full power to determine by whom the costs were

Knight(2) 52 4/2/92

to be paid, and it construed those words as giving

power against any person. And if I can take

Your Honours, and make good that proposition, to

page 974 - perhaps first I should take Your Honours

to 972 where Lord Goff sets out the provision, and

the English provision is the same as the rule but

had added to it the concluding sentence:

"Subject to the provisions of this or any

other Act and to rules of court, the costs of

and incidental to all proceedings in the civil

division of the Court of Appeal and in the

High Court, including the administration of

estates and trusts, shall be in the discretion

of the court -

and then what was added in 1890 were the words -

and the court shall have full power to

determine by whom and to what extent the costs

are to be paid."

Now, at the bottom of 974, His Lordship said:

As I have already stated, the main issue in the case is whether there is to be implied

into section 51(1) of the Act of 1981 a
limitation restricting orders as to costs to

orders made against parties to the.relevant

proceedings. Section 51(1) is (for all

material purposes) identical to section 50(1)

of the Supreme Court of Judicature

(Consolidation) Act 1925, which itself is (for

all material purposes) identical to section 5

of the Supreme Court of Judicature Act 1890

(an Act passed to amend the Supreme Court of

Judicature Acts 1873-1875). In the rules of

court contained in Schedule 1 to the Supreme

Court of Judicature Act (1873) Amendment Act

1875, Order 55, which related to costs, opened

with the words: the Act, the costs of and incident to all "Subject to the provisions of	proceedings in the High Court shall be in the
discretion of the court; ... " The words:
"and the court or judge shall have full power
to determine by whom and to what extent such costs are to be paid" (now to be found in
almost identical terms in section 51(1) of the
Act of 1981) were introduced by section 5 of the Act of 1890. It is of some interest to observe that these words were not added to the
relevant rule of the Supreme Court (now
Order 62, formerly Order 65) until 1959, after
the decisions in both the authorities by which the Court of Appeal felt bound to reach its
conclusion in the present case. The present

Knight(2) 53 4/2/92

rule of court, Ord. 62, r. 2(4), simply

provides:

"The powers and discretion of the court as to

costs under section 51 of the Court (which

provides that the costs of and incidental to
proceedings in the Supreme Court shall be in

the discretion of the court and that the court

shall have full power to determine by whom and

to what extent the costs are to be

paid) ... shall be exercised subject to and in

accordance with this Order."

It is, I consider, important to remember

that section 51(1) of the Act of 1981, is

concerned with the jurisdiction of the court

to make orders as to costs. Furthermore, it

is not to be forgotten that the jurisdiction

conferred by the subsection is expressed to be

subject to rules of court, as was the power

conferred by section 5 of the Act of 1890. It

is therefore open to the rule-making authority

(now the Supreme Court Rule Committee) to make

rules which control the exercise of the

court's jurisdiction under section 51(1). In

these circumstances, it is not surprising to

find the jurisdiction conferred under

section 51(1), like its predecessors, to be

expressed in wide terms. The subsection

simply provides that "the court shall have

full power to determine by whom ... the costs

are to be paid." Such a provision is

consistent with a policy under which

jurisdiction to exercise the relevant

discretionary power is expressed in wide

terms, thus ensuring that the court has, so

far as possible, freedom of action, leaving it
to the rule-making authority to control the
exercise of discretion (if it thinks it right

to do so) by the making of rules of court, and

to the appellate courts to establish

principles upon which the discretionary power

may, within the framework of the statute and

the applicable rules of court, be exercised.

Such a policy appears to me, I must confess,

to be entirely sensible. It comes therefore

as something of a surprise to discover that it

has been suggested that any limitation should

be held to be implied into the statutory

provision which confers the relevant

jurisdiction.

Again, at page 979, after dealing with decisions which were not binding - this is about

line C of 979:

Knight(2) 54 4/2/92

I am satisfied, having been referred to the

terms of the relevant statute (now, of course,

section 51(1) of the Act of 1981) and having,

no doubt, heard far fuller argument than was

presented to the court in either of the two

decisions under consideration, that they

should not be followed.

Then he goes on to deal with John Fairfax and

indicates that that was a case decided without

reference to the extension in section 51(1) brought

about in 1890. Then, towards the bottom of the

page:

Both definitions are expressed not to be

applicable if the context otherwise requires.

It is plain, therefore, that in the relevant

statutes, the word "party" has been given a

technical meaning. It has moreover been

changed in the Act of 1981; and, since it

includes a person upon whom notice of the

relevant proceedings has been served pursuant

to or by virtue of rules of court or any other

statutory provision, it is so wide that it

scarcely seems to provide an apt criterion

upon which to found a limitation upon the

jurisdiction to award costs.

That is His Lordship's discussion of the notion, in his view, that since the concept of a party is so

broad, it is so amorphous, it is hardly likely to

be the gravamen of a limitation. He goes on:

In any event, had the legislature thought it

right to limit the jurisdiction under

section 51(1) of the Act of 1981 in this way,

it would have been very easy to achieve such a

result by drafting the concluding words of the

subsection as follows:

" ... and the court shall have full power to

determine by which party to the proceedings and to what extent the costs are to be paid."

Those are the only passages to which I need draw

Your Honours' attention. It is clear, in our

submission, that the House of Lords regarded the

amendment which was made in 1890 as effecting a

change and as providing a wide jurisdiction or

power in the court to award costs not restricted to

the parties and there His Lordship fastened upon

the words "by whom" in the extension to construe
the words as giving power against any person
without limit.

In our submission, those words should not be so construed. Precisely the same considerations

Knight(2) 55 4/2/92

apply to them as applied to the general words in

the rule beforehand. As Lord Justice Jenkins said

in that passage in John Fairfax, to which I drew

Your Honours' attention this morning, there must be

some limit. To construe the words without limit

detracts from the purpose of the power which is to

award costs of the proceedings. Costs of

proceedings are generated by the parties and it
ought not to be supposed that Parliament intended a

total stranger to the proceedings to fall within the power, particularly as there already existed

the exceptional power to visit a stranger with

costs if he were guilty of an abuse of process.

The purpose of the words, in our submission,

the additional words in section 5, was to make it

clear that any person before the court in the

proceedings could be visited with costs, a view

which we say might have been taken under the former

rule.

I had mentioned to Your Honours that there was

Aiden it, construed it in the manner that I have submitted to Your Honours, and that is Rockwell

a Canadian case which predated in which the before

Developments Ltd v Newtonbrook Plaza Ltd, (1972)

3 OR 199. This was a case in which a solicitor was

ordered personally to pay the defendant's costs of

an action brought against it by a company, the

solicitor being interested in the company, and

there being evidence that there were no formal

resolutions by the board of directors of that

company that the solicitor and his partner made all

decisions in respect of the action on behalf of the

company and when moneys were tendered in respect of

the contract which was the subject of specific
performance those moneys were the moneys of the

solicitor and his partner, did not pass through the

bank account of the company and the like.

Can I refer Your Honours first to page 203.

The provision which was in question is there set

out:

Subject to the express provisions of any statute, the cost of and incidental to all proceedings authorized to be taken in court or before a judge are in the discretion of the court or judge and the court or judge has full

power to determine by whom and to what extent

the costs shall be paid."

So it was identical for all intents and

purposes to the English provision extended after

1890, and in respect of it, at the bottom of

page 205, this is said:

Knight(2) 56 4/2/92

Mr Rolls relies upon s.82 as the authority for

such power and in particular upon the words

"has full power to determine by whom ... the

costs shall be paid". Notwithstanding that
those words have been in the English

Judicature Act since at least 1890, no case

was cited to us (and after diligent search, I

have found none) in which it has been held

that those words empower a Court to make an

order for costs against a stranger to the

proceedings.

And then there is an analysis of various

authorities, and at page 207, about a quarter of

the way down, this is said:

It is my view that a literal interpretation of

the words ins. 82 "and the court or judge has

full power to determine by whom and to what

extent the costs shall be paid" would lead to

obvious absurdities, and that the decisions to

which I have already referred correctly held

that such a literal interpretation should not

be given to the words in question. In my view

the words "by whom" should be ,interpreted to

mean "by which of the parties to the

proceeding before the court or judge".

And then at page 212, at about point 2:

I therefore conclude that in the

circumstances of this case there is a right in

the appellant to assert that the order for

costs is one which Parker, J., had no power to

make, and that an appeal from that order lies

to this Court without leave -

There was a question, because leave had not been given, as to whether the appeal was competent, and

it was held to be competent on the basis of lack of

jurisdiction.

That decision has been followed in the case of

Alexanian v Dolinski, 43 DLR (3d) 649, which is on

our list, and so far as our searches have revealed,

it has not been overruled. We rely upon the

approach that has been taken in Rockwell and submit

to Your Honours that that approach is to be

preferred to the approach taken by the House of

Lords in Aiden in construing those additional

words. We say that the additional words serve the

limited function of indicating by which person in

the proceedings before the court the costs could be

awarded, and that the result in Aiden could have

been achieved under the original rule without the

extension. The decision in Aiden has produced the

odd result in the United Kingdom where leave to

Knight(2) 57 4/2/92

appeal from a discretionary order as to costs -

where that provision in relation to the necessity

for leave to appeal from a discretionary order as

to costs has been held not to apply to an order for

costs made against a non-party, and we say that

that construction strains the language of that

section even more than the construction that the

House of Lords placed upon the 1890 amendment

strains the language and that case is Re Land and

Property Trust Co plc, (1991) 3 All ER 409 and the

part to which I refer is at page 412 to 413.

McHUGH J: It is also in 1 WLR 601.

MR GZELL:  Thank you, Your Honour. About line g:

To my mind, the making of a costs order

against a non-party is such an unusual and far

reaching departure from the normal course of

events to be expected in litigation that I

cannot believe Parliament had this type of

case in mind at all when enacting s 18(l)(f) -

that is the limitation on the right of appeal -

or the corresponding section in the preceding

Acts. It would indeed be remarkable if a

'stranger' to proceedings could be ordered to

pay the costs of a party to those proceedings

and have no right of appeal against that order

in any circumstances unless the judge who made

the order saw fit to give leave to appeal.

Parliament cannot have intended that such a

person should have no right of appeal at all

whatever the circumstances and however severe

or draconian the effect of the order might be.

In my view, s 18(l)(f) is to be

understood and read as applying only to orders

for costs made against persons who were

parties to the proceedings in which the costs

in question were incurred. Costs orders

against persons who were not parties to the

relevant proceedings are not orders which

relate 'only to costs' within the meaning of

that expression in the paragraph. Such orders

necessarily relate to matters other than

merely the outcome of the proceedings. There has to be something more, some conduct by the

non-party which makes it just that he should

bear the costs of the litigation to which he

was not a party.

And then His Lordship goes on to recognize that there are problems associated with that

construction, and so there are, in our respectful

submission, and that is a consequence of the

Knight(2) 58 4/2/92

approach taken in Aiden, which we say ought not to

be followed by this Court.

There is a decision of re Bacal, (1980)

2 All ER 655, that preceded Aiden, in which a

receiver was ordered to pay costs. And the point

about this decision is that His Honour Judge Fay,

QC took the view that when the winding-up order was

made, the agency of the receiver to prosecute on

behalf of the company ceased and His honour went on

to conclude that the receiver should thereafter be

treated as if it were the party in the proceedings.

His Honour, at pages 658 to 659, discusses the

compulsory winding up and the cessation of the

agency. That is at 658 to the top of 659. Then at

about line 7 of 659:

The receiver therefore clearly had power to

continue this action against the first

defendants and to join Tesco as second

defendants, and he had power to use the

plaintiff company's name although he was not,

after the winding-up order, the company's
agent. Neither is he apparently the agent for
the debenture holders.

Then a little bit further down in that paragraph: In 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.

There are a number of things we have to say.

Before I distinguish that case, perhaps if I can

draw Your Honours' attention to page 661,

His Honour deals with a matter in the Court of

Appeal, S & M Hotels Ltd v Family Housing

Association, in which an order was made against a

receiver after a compulsory winding up, but the

point about that case was that counsel for the

plaintiffs agreed in that course.

While Their Lordships in the Court of Appeal

said that that was an appropriate order to be made,

there was no argument as to whether or not the

power existed. we dismiss that case as having been
decided on the basis of consent by counsel
representing the receiver, but so far as Bacal is

concerned, there are a number of things that we say

about it.

It can only apply to the order for costs of the counter-claim in the two matters that are

before this Court. It cannot apply to the order

for costs of the claim, and that is because Forest

Knight(2) 59 4/2/92

was not ordered to be wound up. True it is that Howe was ordered to be wound up and the receiver

continued the defence on behalf of Howe, the

defence to the counter-claim after the winding up,

but the same position does not apply to Forrest.

So that it is not authority for the proposition

that the costs of the claim should have been made

against one of the appellants.

Secondly, section 324A(2)(k) of the Companies (Queensland) Code, which is now repeated as

section 420(2)(k) of the corporations law, gives a

statutory right to a receiver to commence

proceedings in the name of the company, so it no

longer depends solely upon the terms of the

debenture. The statutory power is not curtailed in

any way by the effect of a winding up.

Section 324A(2) says:

Without limiting the generality of

sub-section (1), but subject to any provision

of the court order by which, or the instrument

under which, he was appointed, being a

provision that limits his powers in any way, a

receiver of property of a corporation has, in

addition to any powers conferred on him by

that order or instrument, as the case may be,

or by any other law, power, for the purpose of

attaining the objectives for which he was

appointed -

then (k) -

to execute any document, bring or defend any

proceedings or do any other act or thing in

the name of and on behalf of the corporation.

It does not say anything about that power being

curtailed upon a winding up, whereas the provision

was alive to the issue of liquidation, because in

paragraph (s)(ii), the power was:

where the receiver was appointed under an

instrument that created a charge on uncalled
capital or uncalled premiums of the

corporation -

(ii) upon the giving of a proper indemnity to

a liquidator of the corporation - in the name

of the liquidator -

So that there is - - -

DAWSON J: What was the position before that section?

MR GZELL:  I am sorry, Your Honour, I cannot answer you

specifically, but my recollection is that that

Knight(2) 60 4/2/92

provision was not in the Act before the Code, but I

will have that - I am sorry, I am only speaking

from recollection now. My recollection is that it

was a new provision inserted at the time of the

Code, but I will check that.

DAWSON J:  The agency would previously have ceased upon the

appointment of a liquidator?

MR GZELL:	Yes, the agency established under the mortgage debenture ceased upon the winding up, but the
courts had said none the less the receiver was
entitled to continue to prosecute the proceeding in
the name of the company as part of the receiver's
powers in getting in the assets of the company. It
was just that the agency had ceased. The point we
make is, having been given statutory recognition in
a statute which deals with the question of liquidation but does not curtail the agency upon the winding up, we say that it is at least arguable that the agency continues in Australia. There is a reference to this matter in Re Yates, (1989) 7 ACLC
1039 at page 1043:

In my opinion the authorities upon which counsel for Catco has relied plainly establish

the receiver's right to proceed in Catco's

name. The powers conferred on the receiver by

his appointment and the debenture mortgage in

terms expressly authorise him to do as he
seeks to do, as do the powers conferred upon

him by sec 324A(2) of the Companies Code.

General statements which are to be found in

some texts and authorities may, particularly

if read out of context, have left some with

the impression that winding up terminates a

receiver's authority to act in any capacity on

behalf of the mortgagor.

Mr Justice Dowsett, in the court below, at

page 77 of the record, said this:

Traditionally, it has been thought that the

subsequent appointment of a liquidator

terminates the relationship of agency as
between the receiver and the company, although
the power to prosecute litigation in the name

of the company remains.

Then he cites authority.

However it may be according to general

principles, I consider that pursuant to

s 324A(2)(k), a receiver continues to

prosecute the action on behalf of the company,

even after liquidation. Of course, the

receiver's powers are limited to giving effect

Knight(2) 61 4/2/92

to the security pursuant to which he has been

appointed, but subject to this limitation, any

costs incurred by the company as a result of

the receiver's continuing to prosecute an

action after liquidation would be debts of the

company.

It is arguable, in our submission, that the effect

of section 324A(2)(k) has altered the question of

agency and, if that is so, that is another reason

to distinguish Bacal. The main point of

distinction about Bacal is that in any event, even

if the-agency was terminated by the winding up, the

right to continue the action did not make the

receiver, in our submission, a party, and that was

the gravamen of the judgment in Bacal. The

receiver had no right of action, the benefits were

those of the company, and if there had been any

surplus it would have been that of the company.

There is, in Bacal, some reference to the

insufficiency of orders for security on the basis

that there was a practice in the United Kingdom to

only order two-thirds of the amount involved.	I
simply refer Your Honours to the appeal book at
page 81 where Mr Justice Dowsett deals with a

recent English case that says that the two-thirds

rule should not be followed in the United Kingdom

and we submit that such a rule ought not to be

followed in Australia and that security for costs

should be given in full, and that is the remedy to

the situation, not vouchsafing a power to award
costs against receivers. In our submission, the

Aiden construction of the power ought not to be followed in Australia.

Might I say very shortly the alternative

submission is simply this: if Your Honours are

against us the 1890 amendment is not reflected in

Order 91 rule 1 and Aiden ought not to be followed

under Order 91 rule 1. And if Your Honours are

against us on the construction of section 58 and it

has scope for operation, it is not as extensive as

the 1890 amendment. It empowers an award of costs

in all cases before the court. It does not empower

any person to pay costs and Aiden ought not to be

followed in that context either.

McHUGH J:  Mr Gzell, supposing one came to the conclusion

that there was no power to make this order either

under section 58 or order 91, but there was under

the inherent jurisdiction of the court. What order

should be made in those circumstances, that is,

order on this appeal?

MR GZELL:  Your Honour, if that were the case, we would

submit that the matter go back because that

Knight(2) 62 4/2/92

essentially raises a question of whether or not

there was an involvement in the proceedings of such a nature as to invoke those exceptional cases under

the inherent jurisdiction, and that is a matter of

evidence. That is a matter which was not canvassed

below. I suppose I retract that. I suppose my

first submission should be it is too late for our

friends to put it on that basis now. I refer

Your Honours to the decision of this Court in

Moustakas v The Water Board, I think it is, about

raising matters of appeal at a late stage which

could have been addressed by evidence below, and

this Court has frowned upon raising issues on

appeal which deny the right to go into evidence.

Now, that principle, with respect, applies

here. It was never suggested in the courts below that the receiver should be visited with an order for costs because under the inherent jurisdiction of the court it was guilty of some impropriety

amounting to an abuse of process of the court, or

that in the justice of the matter it was right and

proper that it should, and evidence cc ~d be called

on that issue as to the degree of invo~?ement, the

knowledge of the other party as to the insolvency
of the company, the availability of going back

before the court to seek top up orders for the

security for costs. So that, in my respectful

submission, first, the Court ought not to entertain

a resistance to the appeal on the basis that the
order could have been made under the inherent

jurisdiction, but if you are against me on that

proposition, then, in my submission, send it back

so that that matter can be agitated properly before

the courts at first instance. Those are our

submissions.

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

MR JACKSON:  Your Honours, may I hand to the Court copies of our outline of submissions. Your Honours, the

ultimate question, of course, is whether the

provisions of Order 91 rule 1 or of section 58, in

our submission, enable an order for costs to be

made against a person not a party to the action,

although that person may be the instigator of the

action or of its defence.

Your Honours, we recognize, immediately, that

the issue is one on which two views have been

expressed and, perhaps, indeed, .more than two view

have been expressed in the past. But we would urge

that there are several considerations which

militate in favour of the notion that there always

has been power to award costs against persons not

parties to proceedings but responsible for their

initiation or defence. Also, we would submit that

Knight(2) 63 4/2/92

the better view is that the decisions to the
contrary represent a restriction on the power which

the Aiden Shipping Company case ended.

Your Honours, could I mention in passing - I

will come to the case in more detail later - that

the recent decision of the appeal division of the

Victorian Supreme Court arrived at some conclusions

on the effect of the history. They differ slightly

from the view taken by the Full Court of Queensland

in this case; they differ a little from the view

taken in Ontario in re Sturmer, a case to which I

will come later where the history was also

reviewed.

But, Your H mrs, I wonder if I could refer

Your Honours for moment to the decision which my

learned friend r~~erred, that is Burns Philp &

Company Limited v Bhagat, the unreported decision

of the Victorian court of 31 January this year. At

page 17, Your Honours will see, about half-way down

the page, the statement:

But, 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.

That proposition is expanded upon on that page and

on the next page also. Then, Your Honours will

see, towards the bottom of page 18 that the present case or a decision of the Full Court in the present case is discussed and the conclusion ultimately

arrived at on the history of the matter is at

page 25 where Their Honours say, in the paragraph

commencing about three-quarters of the way down the

page:

I suspect that it is impossible to state

with accuracy in what cases a court of common

law or the Court of chancery could o~ would

award costs against someone who was not a

party according to the record. But one thing
is clear: there was a rule and there were

exceptions to it, so that it could not be said
that before the Judicature Acts the courts

could or would never award costs against

someone who was not a party in the strict

sense.

Your Honours, what we will be submitting in relation to the position emerging from the

decisions is that it is clear that there was power

in the court to make orders for costs against

persons not parties to the proceedings.

Knight(2) 64 4/2/92

Your Honours, the particular provisions of the

rules and the statutes do not, in any way, limit

the power or express their limitation upon the

power, and it becomes then a question of the

circumstances in which it is to be exercised and,

Your Honour -

McHUGH J: Well, then, what is your proposition as to the

construction of, let us say, section 58? Does it

mean the supreme court shall have power to award

costs against any person whatsoever in all cases

lawfully brought before it?

MR JACKSON:  Yes, Your Honour. And so one comes, of course,

to the manner of exercise, another question. In
the Rockwell case to which my learned friend
referred, the Ontario case in the 1970s, it was

said by the members of the court in that case, with

some astonishment perhaps, that the person who was

counsel asserting the wider proposition was asked,
could it apply to make an order against a person in

the court and he said "Yes", in what they assumed

to be a somewhat bare faced way. Your Honour, I

will do the same myself, and the answer to

Your Honour, with respect, yes.	And the same
applies to Order 91 rule 1.

DAWSON J:  No doubt it is a discretion that has to be

exercised judicially with limitations?

MR JACKSON:	Of course, Your Honour. And, Your Honour the court could not just say to someone in the court,
"You have to pay", the person has to be given
notice of the application; the person has got a
right to be heard on the application and no doubt a right to be heard in the full sense of being able
perhaps to adduce evidence in respect of aspects of
the case which were not before the judge hearing
the case, which might militate against the making
of an order for costs but of which, otherwise, the
judge would not be aware.  So it is something to be
exercised judicially and judicially in the fuller
sense. And, Your Honours, one accepts that the probability is that the power will not be exercised in favour of the making of such an order in many
cases, but the power exists and it becomes a
question of the manner and occasion of its
exercise.

McHUGH J: Supposing 91, otherwise, does provide. What

about the proviso - the last proviso to 91 - that

really seems to indicate, does it not, that 91 is

directed to the parties to the proceedings, costs
ordinarily should follow the event? That is not

fateful to your argument but it certainly

goes - - -

Knight(2) 65 4/2/92

MR JACKSON: Well, Your Honour - - -

McHUGH J:  I know it is not faithful to your argument, but

it certainly does - - -

MR JACKSON:  Your Honour, the expression that costs follow

the event involves, really, two and perhaps more

concepts. One concept is that one has to first

identify the event and the event, to take the

simplest case, if one takes a bipartite case, is

that one party succeeds and the other fails. To

say then that costs follow the event is that the

party succeeding would be entitled to be paid the

costs, unless the judge otherwise orders. It is a

question then of against whom the order would be

made.

Your Honour, ordinarily speaking, one would

expect that the person who is ordered to pay the

costs, so that costs shall follow the event, would

be the person who is the other party to the

litigation, but to say that costs shall follow the

event does not exclude two further possibilities,

one possibility being that in addition to the

person who is the unsuccessful party, in the strict

sense, some additional person also be ordered to

pay the costs because, Your Honour, the costs are
still following the event in the sense that the

successful party is obtaining them.

The next aspect of it is this, that even if

one were to have a case where no order for costs

was made against the unsuccessful party - and, Your Honour, I suppose that that is a possible result in

circumstances where the unsuccessful party was

absolutely hopelessly insolvent and it might be

worthless even to bother asking for the order - it

does not mean that an order for costs might not yet

be made against the person who was responsible for

litigation though not a party.	Now, Your Honour,
in that event also - if I could use the word

"event" twice - in our submission, costs would have

followed the event.

So, Your Honour, if I could just seek to

summarize what I was saying on the point by saying

that true it is that when the last proviso, or when

that part of the Order 91 rule 1 speaks of costs

following the event the ordinary result will be

that the unsuccessful party is ordered to pay the
successful party, but that does not exhaust the
meaning of the term; nor does it mean that the

earlier parts of it should not be given the wider

meaning and, Your Honour, could I also perhaps say

one further thing in relation to it and that is

this, that the fact that the order for costs would

Knight(2) 66 4/2/92

•

normally be one party paying another applies really

to all parts of Order 91 rule 1.

Your Honour, so far as Order 91 rule 1 is

concerned we would submit it does not need the

addition of the words that appear in the English

section where it says "by whom", because that is

fundamentally what the provision means: it says

how much they have got to pay, and by whom.	So
that that concept is inherent within it.
Your Honour, if one takes that view it is difficult to see that there is any different

operation of Order 91 rule 1 from the operation of

section 58. What one does see, of course, is that

it is possible to have instances of litigation

which might not be regarded as falling perhaps

within the Supreme Court Rules, but would otherwise

then fall within section 58 and, Your Honour - - -

McHUGH J:  I must say, contrary to the view of the

Full Court, my present view is that Order 91 does

otherwise provide.

MR JACKSON:  Your Honour, it depends on the meaning one

gives to Order 91 rule 1 in some contexts, but it

would be difficult to maintain the proposition that

if Order 91 rule 1 applies to particular

proceedings, that section 58 then has an operation

in relation to those proceedings.

McHUGH J:  I was talking about these particular proceedings.

It would seem to me, at the moment anyway, that 91

is the provision that applied.

MR JACKSON:  Your Honour, that is really why we would,

principally at least, submit that there is really

no difference between the two provisions and that

the ambit of Order 91 rule 1 is wide enough. One

has to bear in mind, Your Honour, that if one

assumes the correctness of the result arrived at in

Aiden's case, without looking particularly at the

reasoning behind it but assumes the correctness of
the result simply as being in effect a paraphrase

of the width of the section, then it is really

difficult, we would submit, to see why the addition

of the concluding words "and by whom costs should

be paid" is any more than in effect epexegetical of

the meaning of the earlier part of the provisions.

Your Honours, in relation to the provisions we

would submit first that the plain meaning of the
words used in Order 91 rule 1 is to confer a

discretion in the widest terms, and if one looks at

the terms of Order 91 rule 1 there are no words in

it which provide expressly for any relevant

limitation.

Knight(2) 67 4/2/92

Yours Honours, section 58 is a provision in

relation to which the same submission could be

made. It has, we would submit, similarly no

limitation on the ambit of the power contained in

the actual words of the provision. Your Honours, we

would also submit that no such limitation should be

implied and, Your Honours, if one is endeavouring

to see whether such a limitation should or should

not be implied, we would submit that the object of

the provisions is to confer a discretionary power
on the court, a discretion conferred in wide terms,

in order to allow justice to be done and to give

the court a freedom of action in relation to the

award of costs.

Your Honours, in that regard could I refer to

the observations of Lord Goff in Aiden,

(1986) AC 965, at page 975, and between letters F

to H where, speaking of the terms of section 51(1), the page:

Such a provision is consistent with a policy

under which jurisdiction to exercise the

relevant discretionary power is expressed in

wide terms, thus ensuring that the court has,

so far as possible, freedom of action, leaving it to the rule-making authority to control the

exercise of discretion (if it thinks it right

to do so) by the making of rules of court -

and His Lordship goes on to say, at the end of that

paragraph:

It comes therefore as something of a surprise

to discover that it has been suggested that

any limitation should be held to be implied

into the statutory provision which confers the

relevant jurisdiction.

It could not have been too large a surprise because

he was the successful counsel in the Fairfax case

to which we refer.

So, Your Honours, if one goes to the

observations of the Court in Wentworth v

Attorney-General for New South Wales, (1984)

154 CLR 518, at the bottom of page 527, speaking of

the provision of the Supreme Court Act of New South

Wales, which said that:

(a)costs shall be in the discretion of the

Court;

(b)the Court shall have full power -

et cetera, members of the Court said:

Knight(2) 68 4/2/92

It would not be right to give that section a

narrow interpretation and the argument

submitted on behalf of the Attorney-General,

that it does no more than change the rule that
the costs follow the event, cannot be

accepted. Section 76(1) confers a wide

discretion on the Court to decide whether any
and which party to proceedings shall pay costs

to another party -

and so on. Your Honours, the Court, of course, was

dealing in the context of parties and it said

"conferred a wide discretion to decide whether any"

et cetera party should pay.

Your Honours, if one makes the assumption that

the object of the provisions is to confer a

discretionary power on the court in wide terms to
allow justice to be done in relation to costs,

then, in our submission, the plain meaning of the provisions, without endeavouring to put any gloss upon them of the nature referred to in the cases

overruled by Aiden, would best, in our submission,

achieve the purpose of the rule and should be

preferred.

Your Honours, if one makes non-parties who

instigate and control litigation commenced in the

name of another entirely invulnerable to awards of

costs, then one creates the possibility of abuse

because, Your Honours, as the Court would know,

much litigation is now instigated and controlled by

or on behalf of persons other than the persons who

are parties to the proceedings.

Your Honours, it is proper, we would submit,

that the real party who will take the costs and the

damages, if the party succeeds, if the proceedings

succeed, should bear at least some risk of having

to compensate a party whom it has involved in

Your Honours, if one looks too at the cases, one	litigation and put to expense if it should fail.
sees comment on a number of occasions that if a
limitation of the nature contended for by our
learned friends is imposed, then the limitation
will work in justice.
Your Honours will see an observation to that effect in John Fairfax & Sons Pty Ltd v EC De Witt
& Co (Australia) Pty Ltd itself. That is
(1958) 1 QC 323, at page 331. At the bottom of the
page, going to the top of page 332, he deals in
passing with the issue. The question is referred
to specifically by members of the courts below in
this case.

Knight(2) 69 4/2/92

May I take Your Honours very briefly to the references. Could I go first to

Mr Justice Connolly at page 6, lines 6 to 9, where

His Honour referred to:

the manifest injustice of permitting a

receiver to litigate from behind a bankrupt

stalking-horse with the prospect of rich

rewards but no liability for costs should he

not succeed.

Your Honours, Mr Justice Williams at page 47 - - -

DEANE J: It is a different Robert Goff, Mr Jackson.

MR JACKSON:  Your Honour, I am sorry, I really should not

have made that observation. Every time I allow

myself to do something like that, it goes wrong, so

I withdraw it.

MASON CJ:  I think you have aged him without justification,

Mr Jackson.

MR JACKSON: Perhaps I say no more about that, with respect.

Your Honour, if I could go to page 47 - - -

MASON CJ:	We could send a page from the transcript here over to him.
MR JACKSON:	Your Honour, if I could go to page 47, lines 9

to 13 in the reasons for judgment of

Mr Justice Williams, Your Honours will see a

reference by His Honour to the circumstances:

If for good reason the judge in those circumstances makes an order for security on

less than a full indemnity basis it would

create a grave injustice to the opposing party

if that party was successful in the litigation

but was unable to recover more than the

security provided.

Your Honours, I will come back to the question of the relevance of security a little later, if I

may. Mr Justice Ryan, at page 71, between lines 25

to 30, adopted the expression "monstrously unfair"
to confine the applicants to orders against

impecunious companies and so on.

Without going to it specifically, could I

adopt an expression by Mr Justice Pearson quoted in

Bacal Contracting, but also refer Your Honours to a number of other references where similar

considerations have been taken into account. The

first is the decision in Hayward v Gifford, (1838)

4 M & W 194, 150 ER 1399, per Lord Abinger, at

page 1400 of the English Reports. That case is the

Knight(2) 70 4/2/92

decision which, in effect, deals with cases of

ejectment, but Your Honours will see, if one looks

at the decision of Lord Abinger, commencing about

half-way down the page, His Lordship refers to

circumstances where, if there had been a contempt

of court, or if he had been guilty of anything in

the nature of barratry or maintenance and so

recognizes the possibility that there will be

circumstances where it is desirable for such an
order to be made.

Your Honours, in Aiden Shipping Co Ltd v

Interbulk Ltd in the Court of Appeal, (1985)

1 WLR 1222, the Master of the Rolls referred to

this aspect in two places. One is at page 1225 at

letter H, the last sentence on that page:

Common sense and justice suggest strongly

that the judge was right.

And then at the top of the next page, said, in

about the fifth line:

I make no secret of my reluctance to conclude

that the judge was wrong, but the fact has to

be faced -

et cetera. Then at page 1228, at letter E, arrived
at the conclusion he had foreshadowed "with

unconcealed regret". Finally, could I refer the

Court to the observations of Mr Justice McPherson

in Singh v Observer Ltd, (1989) 2 All ER 751, and

at page 756 at the top of the page, at the third

line, said:

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, should their action

fail.

Your Honours, what we would submit, if I could

move from that to Aiden Shipping itself, is that

the decision of the House of Lords is authority for

the proposition that jurisdiction exists to require

non-parties to pay the costs of an action.

Your Honours, the decision does not, we would

submit, turn solely upon the words added to

section 51, but if it did that would still not

Knight(2) 71 4/2/92

~

affect the situation, we would submit, because the

true construction of Order 91 rule 1 or section 58

is that it has exactly the same meaning.

Your Honours, it is no doubt a matter of construction, in effect, in that regard to look at

the reasons for judgment. We would simply submit

that if one looks at the passages to which my

learned friend refers they do not base the case

fundamentally on any construction of the provision

different from that for which we contend.

Your Honours, Aiden has been followed in Australia and the decisions following it do not, we

would submit, evidence any reserve about it. Could

I give Your Honours the references first in the

five judgments in the present case to the

consideration of the application of Aiden's case:

Mr Justice Connolly at page 11 lines 1 to 4, the

conclusion of his reasons for judgment, having
discussed the decision he says he is following it

and noted there has been no decision of this Court

with which it is inconsistent; Mr Justice de Jersey

at page 18 about line 7 and going to the bottom of

the page; and in the Full Court

Mr Justice Williams at page 39 line 24, and page 41

line 11; Mr Justice Ryan at page 68 line 8, and

Mr Justice Dowsett at page 74 line 3.

Your Honours, in New South Wales - and I have

to refer to a number of unreported decisions -

Barbaro v Gambocorta, a decision of the Court of

Appeal, No 42 of 1986, a decision given on

26 December 1987, members of the court being

Mr Justice Priestley, Your Honour Justice McHugh

and Mr Justice Clarke. Your Honours, at page 12 in

the paragraph commencing in the middle of the page

Aiden's case is referred to and a proposed order mentioned. That is referred to again when the matter came on for hearing in the page numbered 1

which should follow a couple of pages after the

passage to which I referred Your Honours before.

Your Honours, although the issue was not argued

there is no hint that Aiden's case was thought

inapposite.

At first instance, in New South Wales, some

observations of Mr Justice Waddell in Davidson

v Dobbie, an unreported decision of 11 August 1989,

at page 9 commencing halfway down the page,

His Honour referred to Aiden's case, discussed what

had been said in that case and then at the bottom

of page 10 said that:

the above authorities indicate the width of
the Court's jurisdiction and provide instances

of its proper exercise.

Knight(2) 72 4/2/92

And, Your Honours, if one moves from that to the

third New South Wales case, that is Humphery

v Humphery, a decision of Mr Justice Needham of

19 November 1990 at the bottom of page 4,

His Honour says that:

The logic of the judgment ..... in the

Aiden Shipping case is ..... convincing -

and he elaborates upon that at the top of the next

page. He said in the next paragraph:

there are statements of the ..... High Court

which ..... limit the power of the Court to

order costs to orders that parties pay or

receive costs.

Your Honours, I really do not know what cases

His Honour is referring to, unless he is referring

to what appears earlier in the reasons for judgment

where he refers, at page 4, to Wentworth

v Woollahra Municipal Council but, Your Honours, we

do not know of any case of the Court that decides
the issue and our learned friends of course have

not referred to any.

Your Honours, in Western Australia, the issue was

dealt with in Rendell Holdings Pty Limited

v Athans, No 26 of 1989, a decision given on

15 November 1989 by the Full Court, the

Chief Justice, Mr Justice Brinsden and

Mr Justice Nicholson, and at page 5 Their Honours

simply refer to the fact, about halfway down the

page, that in Aiden's case the discretion in

relation to costs is expressed to be "wide". So

that Aiden's case, whilst it is probably right to

say that it has not been followed expressly, has

been referred to without disapproval.

Your Honours, the argument on behalf of the

appellants relies on the history but there are

several submissions we would wish to make about

that history.

The first thing is that the history is not all

one way and may I, in that regard, refer

Your Honours first to Reg v Green, (1843) 4 QB 646,

at 650; that is 114 ER 1042. Your Honours, that

is a case where there had been - my learned friend

referred to it - a rule nisi for an information for

quo warranto. That had been discharged. The

person making the affidavit as relater was unable

to pay the costs and someone procured him to make

it and that person was the real prosecutor.

Your Honours, the case has got nothing to do

with ejectment, absolutely nothing to do with

Knight(2) 73 4/2/92

ejectment and Your Honours will see that at the

bottom of page 1044 of the English Reports

Lord Denman deals with the issue and he says:

The question is, whether a person who, on a

motion for a quo warrranto information, acts

as an attorney, is on that account to avoid

payment of costs, when he has, in fact, been

the relater, but has put forward another

person in that capacity, who is unable to pay

costs. I have no doubt that he is liable,

where it appears that he is actually and

virtually a relater.

Your Honours, I will not read out any more of it

but it is plain that it is an instance of a party

being ordered to pay costs, or a person being

ordered to pay costs, in proceedings in which he

was not a party but had put someone else forward to

act as close as one gets to a party in that kind of

matter.

Your Honours, that decision is one which is

referred to in a number of places and it is a

decision which is referred to as, in effect, one of the bases for saying that it is not possible to say

that there was no jurisdiction or power to award

costs against persons not parties except in a

number of very limited and defined cases.

Your Honours, the position is perhaps usefully

summarized in a Canadian decision, Re Sturmer v
Town of Beaverton, (1912) 25 OLR 566.

Your Honours, that decision is one which is

referred to in the Victorian case without any

disapproval and it seems to be a convenient enough

summary of the view obtaining in England last

century.

The case was put on three levels. The

reference which I have given Your Honours consists

of the observations of the court, first of the

divisional court which was a divisional court

consisting of three judges, but also, at the

conclusion of it, there is the decision of the

Chief Justice of Ontario, at pages 577 and 578,

refusing leave to appeal.

The decision of the divisional court was an

appeal from the chancellor and the chancellor's

decision is not part of the reference I have given

Your Honours. I wonder if I could go first to

page 568 and, at about point 9, Your Honours will

see the argument urged that the rule was only

applicable in cases of ejectment, and the reason

for that submission was then elaborated upon.	Your
Honours will see then reference to Hayward v

Knight(2) 74 4/2/92

Giffard, which is the leading ejectment case, in a

sense. That is at page 569 at about point 3.

Your Honours, at the bottom of the page there

is the reference to Evans v Rees and the decision

of the Privy Council on appeal from India to which

my learned friend referred and Your Honours will

see the topic discussed. One goes then to page 570

at about point 7 where Reg v Green is referred to

and, Your Honours, Reg v Green is, in that

paragraph, in our submission, exactly described.

There is some potential confusion because of the

role taken by the true party, being on the record

as attorney, but the case is, in our submission,

correctly analyzed in that paragraph.

Your Honours, if one goes then from that to

page 572 commencing at about point 2 - perhaps I

should say I should have gone to page 571.

Your Honours will see a discussion of

Hearsey v Pechell and then Reg v Greene again.

Then about three-quarters of the way down the page:

I do not find that The Queen v Greene has ever

been overruled or questioned. It is, I think,

an authority in an application of this kind to

give costs against the party who is the real

litigant, although his name does not appear
as the applicant making the motion.

That proposition is elaborated upon in the next paragraph. Your Honours will see at the top of

page 572 that Mr Justice Latchford agreed, and

Mr Justice Middleton's decision was to the same

effect. Your Honours will see at page 572, about

point 2, in the passage that goes through to the

end of that paragraph, that he said:

And the Court always had power to award costs

against the real applicant when the motion was

made by him in the name of a man of straw for

the purpose of avoiding liability ..... The

Queen v Greene has never been doubted.

Your Honours will see that dealt with. Then his

discussion of that goes over to page 573, about

point 5. Your Honours will see a reference there

to Reg v Greene where he says:

I can only regard The Queen v Greene as a

deliberate refusal to recognise this

limitation to the general power of the Court.

The limitation is that deriving from Hayward v

Giffard and is referred to in the first part of the

same paragraph. Your Honours, at page 576,

Your Honours will see at about point 4 to point 8

Knight(2) 75 4/2/92

the discussion of the relevant rule. Then in the

penultimate paragraph on that page, His Honour

says:

The power conferred by this statute is one which must be exercised upon principle, and in

accordance with those rules that govern the

exercise of all judicial discretion, and in no

harsh and arbitrary manner; but where, even

in the old cases, it is said that justice and

equity point to the propriety of an order in

such cases as this, and the Court laments the

absence of jurisdiction, there can be no

reason, now that jurisdiction is conferred by
the Act, why the Court should be slow to

exercise it in proper cases.

Your Honours, finally, in relation to that

case, at page 578, when the Chief Justice was

dealing with the application for leave to appeal,

at point 3, he said:

The decision now sought to be appealed from

does not appear to introduce a novel rule of

practice - one hitherto unconsidered and now

early and the later decisions may be pointed

acted upon for the first time by the Courts.

at, it is plain that objections founded on

technical reasons are no longer permitted to

prevent the Court from dealing, so far as

costs are concerned, with one who has so

intervened as to make himself the substantial

though not the ostensible party.

The decision in question here does not

appear to carry the rule beyond what appears

to be well-established by decisions under

somewhat similar circumstances.

Your Honours, it is probably correct to say that if

one were looking at the position prior to, for

example, the decision in Re Sturmer and if one is:

endeavouring, as the Victorian court was recently

endeavouring to do, to look today at what was the

position say a century ago, the probable result is

that one really could not have come to a sound

conclusion one way or the other on whether there

was or was not an overriding principle. What one

does see, however, is that it is clear that the

courts did exercise a power to award costs against

persons who are not parties to proceedings in at

least a number of circumstances.

Your Honours, what one sees in dealing with those is that there appears to be a significant

lack of discussion of any fundamentally underlying

Knight(2) 76 4/2/92

theory for the exceptions. If one asks the

question, "Does the power or absence of power turn

on jurisdiction?", one is left with a difficult

answer because if it does turn on jurisdiction, as

distinct from the propriety of its exercise in

particular cases, where, when one starts to look at

the provisions conferring power to award costs,

where are the words of the provision which justify

the making of orders against non-parties in some

cases but not in others?

McHUGH J: Inherent jurisdiction - summary jurisdiction?

MR JACKSON: Well, Your Honour, if one - perhaps if I could

answer my question, Your Honour, as it were, with

respect, and then seek to answer Your Honour's.

Your Honour, if one looks first at the words of any

of the statutes, they really do not provide any

method of determining why one case is and why one

case is not a case where there is jurisdiction to
make the order. If one says then the Court has an

inherent jurisdiction, Your Honour, the difficulty

in seeking to limit the inherent jurisdiction is

really the same thing because the difficulty one

finds is in endeavouring to identify the principle

that is the underlying principle that would say in

this class of cases, but not in this, or not in any

other class of cases, costs may be awarded.

Now, Your Honours, it would be perhaps an

intelligible, though perhaps not entirely

satisfying result if one were able to say, "Because

of the historical fictional nature of ejectment

proceedings in relation to ejectment proceedings

and ejectment proceedings only, there was such a

power". But there would be two difficulties,

Your Honours, in doing that. The first is that the

cases to which my learned friend referred make it

apparent that the notions whatever they may have

been, which underlay the ejectment cases, kept on

going notwithstanding the entire change in

procedure that occurred. The second thing is, it

is clear if one looks at the cases that the ability

to award costs was exercised not just in relation

to ejectment proceedings, it went far beyond that.

McHUGH J:  I notice in paragraph 5 of your submissions you

note a number of cases. One of them is exceptions,

persons represented in a representative action; is

that correct? I thought the rule was to the

contrary?

MR JACKSON: Well that is what the Victorian Appeal Court

decided the other day, Your Honour.	It may come
here, I do not know, but - - -

Knight(2) 77 4/2/92

McHUGH J: At common law. I thought that the common law

equity rule was that you did not make orders for costs against the persons who are represented as

opposed to the - - -

MR JACKSON:  Your Honour, that is probably right in the

sense that that is the way in which the power has

been exercised but, of course, I suppose two things

have happened: one is that there has been the

Aiden's case
decision in overruling the earlier sees an examination of the ambit of the powers in the Victorian decision, and it is perhaps has not been examined to the same extent in the light of a

power apparently freed from such constraints as

were imposed by the notions in the cases overruled

by Aiden.

McHUGH J: Is that what Bhagat is about, is it, about the

other representative?

MR JACKSON:  Yes, Your Honour. Your Honours, the third

feature, we would submit, in relation to the

suggestion that there is some limitation on

jurisdiction, is that it is clear that there are

many categories of exceptions to the supposed

general proposition. Your Honours, those

categories or such of them as we have been able to

identify, are set out in our outline of submissions

in paragraph 5. I will not go to them all in

detail, but I do intend to go to some of them which

are the ones most particularly germaine. We would

ask Your Honours to note that receivers have been

in cases treated as being in a category where

orders of this kind may be made.

Your Honours, before I come to the particular

instances, we would ask Your Honours to note, with
respect, that the list of exceptions to any rule
against costs being awarded against non-parties is

quite a lengthy list, and at some point the

exceptions must be recognized, we would submit, as

abrogating the so-called rule, and this is

particularly so where the exceptions, or the extent

to which the exceptions have a common factor that

the non-party has practical control of the

litigation or is otherwise responsible for it.

Now, Your Honours, if one again looks at the

list of excepted cases, if one has a situation

where, as the appellants contend, the only

jurisdiction to award costs is statutory, and if
that jurisdiction cannot be exercised against

non-parties, then it would seem inevitable that the

exceptions have been the result of error on the

part of the courts making those orders.

Knight(2) 78

Your Honours, I am about to go to the question of receivers, and what I proposed to do was to take

Your Honours, as briefly as possible, to the cases

dealt with under that heading in our outline of

submissions. Your Honours, may I perhaps go to the

first of them? The potential liability of

receivers was referred to, in passing, in the Court of Appeal in England in In re Arthur Williams & Co.

Ex parte The Official Receiver, (1913) 2 KB 88.

Your Honours, in that case there is an obiter

dictum of Lord Justice Buckley to the effect that a

receiver may be personally liable for costs. May I

hand Your Honours copies of that decision.

Your Honours, at page 94, Your Honours will

see at the bottom of the page, Lord Justice Buckley

says:

The question in this appeal is one that is so

familiar and so well settled with reference to

other jurisdictions that I confess I was

surprised to learn that it was thought capable of being argued in bankruptcy. If trustees of a settlement, or executors, or administrators
of a deceased person, or a receiver, or a

liquidator, raise a contest with another

person and bring him into Court to defend

himself in respect of some claim which is set

up against him, and the claim fails, the

trustees, or executors, or receiver, or

official liquidator, are personally liable to

pay the costs. It is immaterial that in

making the claim they acted bona fide in the

belief that they were doing that which was for

the benefit of the estate which they

represented. They are personally liable as

between them and the defendant; they are

entitled to an indemnity out of the estate

which they are representing unless they have

been guilty of misconduct.

Your Honours, it is possible to read those

passages and the remainder of His Lordship's

reasons for judgment as referring perhaps to cases

where a receiver in some way has an ability in his

own name to institute proceedings. It is possible,

because the case is a case in which the official

receiver was a party, to say that His Lordship may

have been referring perhaps to the official

receiver but it is a little difficult to do that in

a sense because first he puts the receiver and

liquidator rather together; the second is that

when he is referring to the official receiver he

uses the fuller title.

The next thing, Your Honours, is that it is a

little difficult to see quite what kinds of

Knight(2) 79 4/2/92

proceedings a receiver might institute in his own

name. One can comprehend that an official

liquidator might be involved in two classes of

proceedings: those that he brings in the name of

the company; those that he brings in his own

right, in effect, by getting people along for the

compulsory examinations and things of that order.

But whilst I do not suggest for a moment that this

case is at any rate decisive on the point, what

appears to be the case is that His Lordship is

speaking as if it were a very common thing for

there to be a jurisdiction of the kind presently in

question in relation to a receiver.

The view, at least in relation to liquidators,

that he was contemplating orders for costs being

made against liquidators personally in respect of

actions they had instituted in the name of the

company was adopted in a Canadian case to which I

will come later.

Your Honours, the practice to which Lord Justice Buckley adverts may well have been a

practice reflected in the observations of the Court

of Appeal in that part of S & M Hotels Ltd v Family

Housing Association, which is referred to by

Judge Fay in Bacal Contracting Ltd v Modern

Engineering (Bristol) Ltd. Yours Honours, it will

take me a moment to develop. Is this a convenient

time, Your Honour?

MASON CJ: Yes.

MR JACKSON:  I expect to be about three-quarters of an hour

to an hour.

MASON CJ: Yes, we will adjourn, Mr Jackson, until 9.45 am

tomorrow.

AT 4.18 PM THE MATTER WAS ADJOURNED

UNTIL WEDNESDAY, 5 FEBRUARY 1992

Knight(2) 80 4/2/92