Mistrina Pty Ltd v Australian Consulting Engineers Pty Ltd - Costs

Mistrina Pty Ltd brought an action against Australian Consulting Engineers Pty Ltd, seeking damages for professional negligence. The claim was ultimately unsuccessful. The litigation was funded by a third party, who stood to receive a significant financial benefit had the proceedings been successful. The matter was heard in the Supreme Court of New South Wales. The primary legal issue before the court was whether it was appropriate to make a non-party costs order against the litigation funder, considering the unsuccessful outcome of the proceedings and the funder's potential financial gain. The court was also required to decide whether the money paid into court by the plaintiffs should be released to them, and if indemnity costs were appropriate given the defendant's more favourable outcome than their offer of compromise.

The court considered the relevant provisions of the Civil Procedure Act 2005 (NSW) and the Uniform Civil Procedure Rules 2005 (NSW), particularly sections 98(1)(b) and Pt 42.15A, respectively. It determined that the circumstances warranted making a non-party costs order against the litigation funder. The court found that the funder stood to gain a significant financial benefit from the litigation and that the plaintiffs' proceedings were unsuccessful, resulting in a more favourable outcome for the defendant. The court held that indemnity costs were appropriate as the result of the litigation was more favourable to the defendant than the offer of compromise. The court also ruled that the money paid into court by the plaintiffs should not be released until the agreed conditions for costs were met.

The court ordered that the litigation funder pay the defendant's costs from the time of the funding agreement. It also ruled that the money paid into court by the plaintiffs should remain there until the parties had agreed on the costs or the costs were set or fixed by the court. The court's decision emphasised the importance of considering the potential financial gain of litigation funders in determining whether a non-party costs order is appropriate, particularly in cases where the funded party's claim is unsuccessful. The court also highlighted the need for caution in releasing money paid into court by plaintiffs until the agreed conditions for costs were met.