Oxer v Astec Paints Australia Pty Ltd

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
OXER v ASTEC PAINTS AUSTRALIA PTY LTD
[2008] SASC 210
Judgment of The Full Court
(The Honourable Chief Justice Doyle, The Honourable Justice Duggan and The Honourable Justice Anderson)
1 August 2008
PROCEDURE - COSTS - JURISDICTION - PERSONS NOT PARTIES TO PROCEEDINGS
Appeal against master's refusal to make costs orders against certain non-parties in relation to particular applications - on appeal appellant applied to amend the proposed orders, seeking to make liable additional non-parties and to recover costs in relation to the litigation generally - amendments allowed - whether master erred in refusing non-party costs orders - consideration of principles for the award of non-party costs - relevance of prior warning that non-parties will be pursued for costs - consideration of evidence of non-parties' role in litigation.
Trustee Act 1936 s 84B, s 84C; Supreme Court Act 1935 s 40(1), referred to.
Vestris v Cashman (1998) 72 SASR 449; Knight v F.P. Special Assets Limited (1992) 174 CLR 178; Symphony Group PLC v Hodgson [1994] QB 179; Yates v Boland [2000] FCA 1895; House v The King (1936) 55 CLR 499, considered.

OXER v ASTEC PAINTS AUSTRALIA PTY LTD
[2008] SASC 210
Full Court: Doyle CJ, Duggan and Anderson JJ

DOYLE CJ: I agree with the orders proposed by Duggan J, and with the reasons that he gives for those orders.
DUGGAN J. This is an appeal against the order of a master whereby he refused to make orders for costs against non-parties to an action.
The appellant, David Oxer, and one of the non-parties, Mark Waters, were the principals in a paint manufacturing business. The business was operated by Astec Paints Australia Pty Ltd (“Astec Paints”), the trustee of Ceramic Coatings Unit Trust (“the trust”). Mr Oxer and Mr Waters were shareholders in Astec Paints and directors of the company. Mr Waters was the majority shareholder. Both men were employed in the business. The Oxer and MK Waters family trusts were unit holders in the trust. The Waters’ interests were held by MK Waters Pty Ltd, the trustee of the MK Waters Family Trust.
In late 2003 Mr Oxer ceased to be an employee of the business following a disagreement with Mr Waters. In April 2004, Mr Waters used his majority shareholding to remove Mr Oxer as a director of Astec Paints.
Subsequently Mr Oxer applied for the appointment of an inspector to report on the administration of the trust pursuant to s 84C of the Trustee Act 1936. The application was opposed by Astec Paints. The master allowed the application and the inspector was appointed on 30 May 2005. The costs of the application were reserved.
The inspector reported to the court on 27 October 2005.
On 23 February 2006 Mr Oxer applied for the removal of Astec Paints as trustee.
On 22 June 2006 Mr Waters wrote to Mellor Olsson, the solicitors for Astec Paints. He signed the letter in his capacity as Managing Director of Astec Paints. He stated in the letter:
I am in receipt of your letter regarding the costs required by Mellor Olsson both due for immediate payment and required to continue to fight the action of Astec v Oxer.
I have discussed the matter at length with Mr Mrs Waters (sic) and they have stated to me that they are not able to fund the additional 90,000.00 required for the legal action nor continue with their financial support at all.
Later in the letter he wrote:
Mr and Mrs Waters have also advised, that due [to] the financial demands so far their personal finances have depleted to a point were they are not able to finance the allotment of the additional 240 units in the trust and I must therefore cancel the transaction. Those very same funds have also been used to fund the Legal Action.
Mr Waters concluded the letter as follows:
Even though the [advice] from our Barrister is that they will be unlikely to succeed with their action, their action to date has completely destroyed company funds and funding options.
With the retraction of Mr Mrs Waters (sic) financial support, and the fact that DA Oxer Investments has declined all requests for support answered in contrast with the issue of statutory demands and a refusal to repay their overdrawn loan account, I am faced with the reality that I have very limited options to proceed with the litigation or the company at all.
I ask that Mellor Olsson continue to act on a minimal basis while I address the critical funding issue I am faced with, as any abrupt halt in continuing to act for Astec could result in a massive loss for all stake holders in the business of Astec.
The company has no capacity for the immediate repayment of all currently secured borrowings nor the amounts requested now to proceed with the legal action by Mellor Olsson.
Although I am absolutely [fed] up with the entire situation and feel there would possibly be one very simple option for myself personally, as Managing Director my responsibility will be to focus my entire attention to find and take whatever financial option I can within the next fourteen days. Hopefully I can find someone who is prepared to financially support the business in it’s current climate and ensure future interests of all are protected. Not only for the unit holders, but all of the stake holders such as clients, tradesman and distributors that [rely] solely on the supply of Astec products for their livelihood. (emphases added)
On 4 July 2006 Mr Oxer applied for an order that the trust records be produced for examining and copying pursuant to s 84B of the Trustee Act 1936. This application was dismissed on 7 September 2006 and Mr Oxer was ordered to pay the costs of Astec Paints.
The business was sold to other companies controlled by Mr Waters and interests associated with him on 1 August 2006.
On 18 December 2006 Mr Waters wrote to his solicitors, Mellor Olsson about the pending hearing before the master in relation to Mr Oxer’s application for replacement of the trustee. He stated:
In the absence of Mr and Mrs Waters’ financial support, Astec Paints is not in a position to continue to defend Mr Oxer’s actions or continue trading.
He explained in the letter that Astec Paints had a deficiency in assets significantly in excess of $200,000 and “potentially substantially more”. He continued:
You are instructed to: -
1advise Mr Oxer’s solicitors and the Supreme Court of the above;
2advise Mr Oxer’s solicitors that should Mr Oxer wish to continue with his application, Astec Paints is not in a position to oppose the appointment of a new trustee of the Ceramic Coatings Australia Unit Trust. There are no assets of the Ceramic Coatings Australia Unit Trust likely to be available to meet the costs of any new trustee on the Supreme Court action;
3We consent to you ceasing to act on behalf of Astec Paints in this matter.
The effect of this letter was communicated to Mr Oxer’s solicitors on 19 December 2006 and the letter was placed before the master at the directions hearing on 22 December 2006.
At that hearing the master ordered that Mellor Olsson cease to be the solicitors for Astec Paints. Mr Waters did not attend the hearing and there was no representation for Astec Paints. The following orders were made:
1.The Defendant [Astec Paints] be removed as Trustee of the Ceramic Coatings Australia Unit Trust (“the Trust”) and be replaced by Nicholas David Cooper.
2.Subject to previous costs Orders, the Defendant pay the costs of the Plaintiff [Mr Oxer] on an indemnity basis for:
2.1     The Application for the appointment of an Inspector;
2.2     The Application for the removal of the Defendant as Trustee of the Trust;
2.3     The Application for production of documents.
3.The Defendant pay the costs of the Inspector in conducting its investigation into the Trust.
4.Until otherwise ordered, the Defendant is restrained from indemnifying itself out of the assets of the Trust for the costs associated with Orders 2 and 3 hereof.
At the same hearing counsel for Mr Oxer advised the master that Mr Oxer intended to apply for non-party costs against Mr Waters, his wife Theodora Waters, and MK Waters Pty Ltd. This was not conveyed to Mr Waters until after the hearing.
On 20 February 2007 Astec Paints applied to set aside the orders made on 22 December 2006. Astec Paints was represented by Iles Selley who have acted in the matter since the filing of that application. The application was refused by the master on 1 May 2007. The following costs orders were made:
2The defendant is to pay to the plaintiff immediately his costs as agreed or taxed, and as between solicitor and client, of the application of 20 February 2007 and this order and any costs thrown away by the setting aside of paras 2 and 3 of the order of 22 December 2006.
3Application of 20 February 2007 certified fit for counsel.
4Conditionally upon payment of the costs ordered in para 2 above paras 2 and 3 of the order of 22 December 2006 are thereupon set aside.
In an affidavit sworn on 20 February 2007 in support of the application to set aside the orders made on 22 December 2006, Mr Waters said that he would have attended the hearing on 22 December 2006 to oppose the orders made on that date if he had been aware that a costs order could be made against him and his wife personally. He said that the only way Astec Paints was able to continue trading was through financial support provided by himself, his wife and the MK Waters Family Trust. He referred in the affidavit to the letter he wrote to Mellor Olsson on 22 June 2006 and repeated the main points made in the letter, namely, that he advised Mellor Olsson that he and his wife were no longer able to fund the legal proceedings nor the company generally, and that the company could no longer afford to take part in the litigation. He also stated in the affidavit:
Both myself and my wife, Theodora Waters, could no longer justify funding the Defendant company and the business to the detriment of ourselves and the future of our family.
The application for non-party costs was made on 10 October 2007. Mr Oxer sought the following orders:
2That Mark Kenneth Waters, Theodora Waters and MK Waters Pty Ltd are jointly and severally liable with the Defendant [Astec Paints] for the costs of the Plaintiff [Mr Oxer] as ordered by this Honourable Court on 22 December 2006.
3That Pinn Street Investments Pty Ltd and Theodora Waters are jointly and severally liable with the Defendant for the costs of the Plaintiff as ordered by this Honourable Court on 1 May 2007.
Mrs Waters is the only shareholder of Pinn Street Investments Pty Ltd (“Pinn”) and is its sole director. Pinn is not a party to the litigation. It owns part of the land that was used by Astec Paints, and later the purchaser companies, to conduct the business.
On 26 October 2007 the master dismissed the application for the costs orders sought in paras 2 and 3 (set out above) and ordered Mr Oxer to pay the costs of the non-parties on the application. The present appeal is against the dismissal of the application and the costs order made in relation to it.
Following discussion at the hearing of the appeal, counsel for Mr Oxer applied to amend the orders sought in the Notice for Specific Directions filed on 10 October 2007 (FDN 55) by extending para 2 thereof to costs in the action generally, including the costs ordered by the master on 22 December 2006. An amendment was also sought in relation to para 3 of the same notice, the effect of which would be to seek to obtain orders against not only Astec Paints, Pinn and Mrs Waters, but also Mr Waters and MK Waters Pty Ltd, for the costs ordered by the master on 1 May 2007.
Paragraphs 2 and 3 of the orders sought, if amended, would read as follows:
2.That Mark Kenneth Waters, Theodora Waters and MK Waters Pty Ltd are jointly and severally liable with the Defendant for the costs of the Plaintiff in the action including as ordered by this Honourable Court on 22 December 2006.
3.That Pinn Street Investments Pty Ltd is jointly and severally liable with the Defendant and the other persons described in paragraph 2 for the costs of the Plaintiff as ordered by this Honourable Court on 1 May 2007.
The solicitors for Astec Paints have advised the court that the proposed amendments are not opposed. I would allow the amendments.
The reasons of the master for refusing to order costs against the non-parties
In his reasons for decision the master dealt first with para 2 of the application. He said:
In my Reasons [Oxer v Astec Paints Australia Pty Ltd (No 3) [2007] SASC 146] I held that there was a proper basis for the defendant to argue against the costs order made on 22 December 2006. The only reason that that costs order stands as against the defendant is that it did not satisfy the pre-condition of the payment of other costs to have it set aside. Clearly no costs order should be made against the non-parties for the costs of the action up to 22 December 2006 unless the same order would be made on the merits against the defendant. Insofar as my order of 22 December for costs was based on admissions by the defendant in the letter of 18 December 2006 it is not established that those admissions bind Mr and Mrs Waters and M K Waters Pty Ltd. (As Mr Waters said in his affidavit of 20 February 2007 and his cross-examination he would have acted somewhat differently if he had realised that that letter could have had consequences for him personally.)
Up until the defendant commenced to sell the assets of the Trust in about June 2006 there was little evidence that it had conducted itself in a way which would have led to the Court removing it as the trustee of the Trust as was sought by the plaintiff. The Inspector’s report largely favoured the defendant. If the plaintiff’s application to remove the defendant had been determined on the affidavit evidence put forward by the plaintiff prior to mid-2006 it is highly likely that the plaintiff would have lost and no order for costs would have been made against the defendant. Thus up to that point there is no basis for any order for costs against the non-parties.
The order for the removal of the defendant as the trustee by the order of 22 December 2006 resulted from the actions of the defendant and Mr Waters after June 2006 which did not become known to the plaintiff until December 2006. Thus it is necessary to consider whether there is any basis to order the non-party respondents to paragraph 2 to pay the defendant’s costs of the action incurred between June and December 2006. The only substantial issue which was dealt with in the action in that period was an application by the plaintiff for discovery of the Trust records which I dismissed on 7 September 2006 on the grounds that it was unreasonable and oppressive and ordered the costs of the application to be paid by the plaintiff to the defendant. (See my Reasons No 2, 7 September 2006, [2006] SASC 271). The plaintiff appealed against that decision, but the appeal never came on for hearing. That decision would have been no different even if it had been known that the defendant had clandestinely sold off the business of the Trust. Accordingly, there is no proper basis on which to order the costs incurred by the plaintiff in this period to be paid by the non-parties.
When dealing with para 3 of the application the master said:
The evidence of the involvement of Mrs Waters and Pinn is quite shadowy. Mrs Waters is the wife of Mr Waters. She was not a director of the defendant but was an employee of it when it conducted the Trust business. It was not submitted that she had any particular involvement with M K Waters Pty Ltd. On the sale of the Trust business she entered into an employment agreement with the purchasers for 3 years at an annual salary of $40,000 plus an expense allowance of $24,000. There is no evidence of her earnings from her employment with the defendant. She is the sole director and shareholder of Pinn. Pinn is the owner of part of the land on which the defendant’s business was carried on. I was not referred to any evidence of the terms of any tenancy between Pinn and the defendant. As part of the terms of the sale of the Trust business Pinn leased its property to the purchasers for 5 years at an annual rental of $96,000 plus GST with annual rent reviews based on CPI. There is no evidence that this was to the financial benefit of Pinn over and above any arrangement which it previously had with the defendant. As stated in my Reasons (No 3) Pinn paid out the indebtedness of the defendant to the ANZ Bank. Subsequent evidence discloses that on 28 September 2006 the defendant had granted a charge to Pinn over the debts owed to the defendant and on 22 December 2006 (the date of my Order) Pinn had appointed itself the controller over this property of the defendant. There is no evidence that Mrs Waters or Pinn in any way instigated, directed or financed the application of the defendant of 20 February 2007 on which the costs order of 1 May 2007 was based. Neither Mrs Waters nor Pinn on their own behalf put any evidence before the Court on the matters relevant to paragraph 3. They were not obliged to do so. I have to assess the evidence which I do have about their involvement in the light of the power of the plaintiff to adduce such evidence and their ability to refute it: Blatch v Archer (1774) 98 ER 696 at 969-70.
It has not been shown that the application of 20 February 2007, even if it was successful, would have been of any commercial advantage to either Mrs Waters or Pinn. The defendant was not in a position to finance the application of 20 February 2007. It should have been clear to whoever it was financing it on behalf of the defendant that it was inevitable that the application would not succeed unless the plaintiff’s costs thrown away by the setting aside of the orders of 22 December 2006 were paid. It is not necessary for me now to go into who might have provided the necessary finance to the defendant for this application. On the evidence there is no basis to find on the balance of probabilities that either Mrs Waters and/or Pinn, either themselves or jointly with others, financed or caused the defendant to bring that application. Without that finding, or a finding that there was some commercial benefit for Mrs Waters and/or Pinn, paragraph 3 cannot succeed.
On appeal to this court counsel for the appellant argued that, when considering the application for non-party costs orders, the master had regard to irrelevant considerations and failed to apply the principles for the award of non-party costs referred to in the authorities. It is convenient at this point to consider those principles which are relevant to the present case.
The relevant legal principles
Section 40(1) of the Supreme Court Act 1935 provides as follows:
Subject to the express provisions of this Act, and to the rules of court, and to the express provisions of any other Act whenever passed, the costs of and incidental to all proceedings in the 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 wide language of this provision empowers the court to make orders for costs against persons who are not parties to an action.[1]
[1] Vestris v Cashman (1998) 72 SASR 449
The exercise of the power to award costs against a non-party is an exception to the general principle that costs orders are confined to a party to the litigation[2] and the making of such an order will be rare.[3]
[2] Knight v F.P. Special Assets Limited (1992) 174 CLR 178 at 192
[3] Vestris v Cashman at 467; Symphony Group PLC v Hodgson [1994] QB 179 at 192

In a well-known passage in the judgment of Mason CJ and Deane J in Knight v F.P. Special Assets Limited their Honours provided an example of a case in which it may be appropriate to order costs against a non-party. The category of case to which they referred is relevant to the present case. Their Honours said:[4]
For our part, we consider it appropriate to recognize a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation. That category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made.
[4] Knight v F.P. Special Assets Limited at 192
The interests of justice may require consideration of a variety of factors relevant to the exercise of the discretion to make such an order. A number of these considerations were referred to by Lander J in Vestris v Cashman:[5]
In exercising the discretion regard would be had to whether the non-party could have been joined as a party earlier in the proceedings and thereby obtained the protection of the rules of court; whether the non-party has had any warning that an application for costs against that party would be made; whether, in those circumstances, the non-party could have applied to be joined in the proceedings and thereby had the capacity to influence the proceedings or the non-party could have protected itself by making an offer in accordance with the rules; whether if a warning had been given the non-party could have terminated the proceedings by discontinuance, negotiation, payment or otherwise; whether the party who would otherwise be usually liable for costs can meet an order for costs and if relevant the reason why that party cannot meet an order for costs; whether it was apparent at any earlier stage in the proceedings, and if so when, that the party could not meet costs; whether the moving party should have sought an order for security for costs; the relationship, if any, between the non-party and the party who would usually be liable for costs; whether the non-party has caused the proceedings; whether the non-party has funded the proceedings; whether the non-party stood to benefit by the litigation and if so how; whether the non-party had a direct or indirect financial interest in the litigation; and whether there has been any improper conduct on the part of the non-party.
None of the matters will necessarily be decisive. Indeed the presence of one or more of those matters does not inexorably lead to the conclusion that an order for costs should be made against a non-party. In Bischof v Adams the mere fact that a person may benefit from the litigation was not enough.
An order will be made against a non-party only if the justice of the case requires that an order be made.
[5] Vestris v Cashman at 468
The significance of the absence of a warning that an application for non-party costs will be made is stressed in a number of authorities.[6]
[6] See eg Vestris v Cashman at 458; Yates v Boland [2000] FCA 1895 at [17]
As an order for costs involves an exercise of the court’s discretion, an appeal on costs is determined by reference to the principles enunciated in House v The King.[7]
[7] (1936) 55 CLR 499 at 504 – 5
The funding of Astec Paints in the litigation
In my view it is clear that, at least by the time the letter of 22 June 2006 was written, Astec Paints was unable to fund the litigation. In that letter Mr Waters asserted that he and his wife would no longer fund the litigation. The implication was that he and his wife had been funding the litigation up to that time. Similar statements were made by Mr Waters in his affidavit of 20 February 2007 and when he was cross-examined on his affidavit at the hearing of the application on 7 March 2007 to set aside the orders made on 22 December 2006.
Counsel for Astec Paints conceded at the hearing of this appeal that Mr and Mrs Waters were providing the funding for the litigation. Furthermore, it is apparent that Mr Waters was responsible for instructing solicitors throughout the litigation and it can be inferred that these instructions were given on behalf of himself and his wife. It is clear that Mr and Mrs Waters had an interest in the subject of the litigation.
Standing behind an impecunious party, controlling the litigation and financing it are important considerations in deciding whether a costs order should be made against a non-party. However, it is necessary to take a broader view of the circumstances in order to determine whether the interests of justice require the making of such an order.
Costs incurred up to and in respect of the hearing of 22 December 2006
Mr Waters made it clear in the letter to his solicitors of 22 June 2006 that he and his wife could no longer fund the litigation. He asked that the solicitors act “on a minimal basis” while he looked at the funding problems. The only issue before the court between then and the hearing of Mr Oxer’s application for the replacement of the trustee on 22 December 2006 was Mr Oxer’s application for discovery of documents in accordance with the Trustee Act. At the hearing of that application Mr Oxer was ordered to pay the costs of Astec Paints.
The application for the replacement of the trustee was not opposed by Astec Paints.
In his evidence at the hearing on 7 March 2007 Mr Waters said that when he wrote the letter of 22 June 2006 he had no options left. He said that he and his wife “on the personal side” could not continue to fund the litigation. He made further references to the fact that he and his wife funded the litigation. He said the continuation of the litigation from now on would have to be funded by Pinn.
It is clear from the evidence including the affidavits, correspondence and oral evidence of Mr Waters, that he and his wife were funding the litigation as well as using their own money to keep Astec Paints going. Counsel for Astec Paints conceded as much on the hearing of the appeal. However, it is necessary to have further regard to the particular circumstances of the applications and proceedings prior to the 22 December 2006 hearing, whereby, as previously pointed out, the master ordered Astec Paints to pay the costs of Mr Oxer on the applications for (1) the appointment of the inspector, (2) the production of documents, and (3) the removal of the trustee.
The application for the appointment of the inspector was made on 11 March 2005 and the inspector was appointed on 30 May 2005. It is unclear what the financial position of Astec Paints was at this stage of the proceedings. Furthermore, at this point no warning had been issued to the effect that the non-parties would be pursued in relation to costs. In my view, the circumstances relating to this application would not justify an order for costs against the non-parties.
The application made by Mr Oxer for discovery of the trust records was made on 4 July 2006. This application was unsuccessful and there is no warrant for ordering non-party costs in relation to it.
I have already referred to the circumstances leading up to the hearing of the application for the removal of the trustee made on 23 February 2006 and dealt with on 22 December 2006. When considering whether non-party costs are appropriate in relation to this particular application, it is relevant to bear in mind that it was initiated by Mr Oxer. The application was ultimately not defended by any of the non-parties nor by Astec Paints. There had been no warning of an application for non-party costs prior to the date on which the order for the replacement of the trustee was made. Again, I am of the view that non-party costs should not apply in relation to this application.
As has been pointed out, Mr Oxer now seeks an order for non-party costs in relation to the proceedings from their commencement. It is my view that there is no justification for an order for costs against any non-party in respect of the proceedings generally, leading up to the application determined on 22 December 2006.
It is apparent from the master’s reasoning[8] that he reached his conclusion in relation to the costs sought in para 2 of the non-party costs application by placing particular emphasis on the basis upon which he made the earlier costs orders against Astec Paints. In my view more regard should have been paid to the principles discussed in the cases referred to by the master. However, as I have attempted to point out, the same result is achieved by the application of those principles.
[8] See above at [24]
For these reasons I am of the view that the appeal insofar as it relates to the proceedings up to and including the hearing on 22 December 2006 must fail.
Costs on the application to set aside the orders made on 22 December 2006
I respectfully disagree with the conclusions reached by the master, in relation to the costs orders, on the application dealt with on 1 May 2007.
By this time there had been significant changes in the circumstances relevant to the application for non-party costs. It has been pointed out that in his letter of 22 June 2006 Mr Waters stated that Astec Paints was not in a position to defend the action in the absence of financial support from him and his wife. This had been put forward as at least one of the reasons why the application to replace the trustee would not be defended.
However, on 20 February 2007, after a change of solicitors, Astec Paints took out an application to set aside the orders made on 22 December 2006. By this time the possibility of an application for non-party costs was known to those who were controlling Astec Paints’ involvement in the litigation. In his affidavit in support of the application and in his evidence on the hearing of the application Mr Waters again stated that the company was impecunious. When asked in cross-examination how the company would fund its involvement as a defendant in the future, he said the funding would come from Pinn.
In my view, the only reasonable inference from the circumstances, including the contents of Mr Waters’ affidavit and his evidence, is that he and his wife remained in control of the litigation as at the time of the most recent application and that the litigation was still being funded by them directly or, alternatively, through entities controlled by them. They had a clear interest in the litigation because of the potential effect it would have on them. The application dealt with on 1 May 2007 was initiated by them.
The master’s comments on the role of Mrs Waters are set out in his reasons above. I cannot, with respect, agree that there was no basis to find on the balance of probabilities that Mrs Waters financed or caused Astec Paints to bring the application to set aside the previous orders. Mr Waters made it clear in statements in his application and in oral evidence that he and his wife were involved in funding the litigation. He added that future litigation would be financed by a company controlled by his wife. He did not suggest at any time that there was some person or entity other than himself and his wife which had financed the litigation up to that point.
The inevitable inference is that Mr and Mrs Waters were involved in financing the application filed on 20 February 2007 and determined on 1 May 2007. As I have said, both had a clear interest in the subject matter of the litigation. They were aware of the impecuniosity of Astec Paints and they were alive to the fact that an order for costs could be made against them personally.
The master was not called upon to make a costs order against Mr Waters in respect of para 3 of the application. It is open to this court to do so if the amendment previously referred to is permitted. The same is true in respect of MK Waters Pty Ltd.
As for Mrs Waters, I am of the view that the master erred in the exercise of his discretion by failing to take into account the evidence which established the extent of her involvement.
The role of Pinn is less clear. It would seem that the intention was that Pinn should fund future litigation. In these circumstances I do not think an order for costs should be made against Pinn.
There is insufficient evidence to determine with any precision the role of MK Waters Pty Ltd in the litigation.
I would allow the appeal insofar as it relates to Mr and Mrs Waters’ involvement in the application determined on 1 May 2007.
Conclusion
I would order as follows:
1That the appeal against the orders made by the master on 26 October 2007 be allowed.
2That the orders be set aside.
3That permission be granted to amend paras 2 and 3 of the Notice for Specific Directions filed on 10 October 2007 (FDN 55) by substituting the following paragraphs:
(2)That Mark Kenneth Waters, Theodora Waters and MK Waters Pty Ltd are jointly and severally liable with the Defendant for the costs of the Plaintiff in the action including as ordered by this Honourable Court on 22 December 2006.
(3)That Pinn Street Investments Pty Ltd is jointly and severally liable with the Defendant and the other persons described in paragraph 2 for the costs of the Plaintiff as ordered by this Honourable Court on 1 May 2007.
4That the following orders be substituted for those made by the master:
(1)That the application made by para 2 (as amended) of the Notice for Specific Directions filed on 10 October 2007 be dismissed.
(2)That Mark Waters, Theodora Waters and the defendant Astec Paints Australia Pty Ltd pay the costs of the plaintiff, as between solicitor and client, of the application made by the defendant on 20 February 2007, which costs are fixed in the sum of $13,000
ANDERSON J. I agree with the orders proposed by Duggan J and I agree with his reasons.

[2008] SASC 210

1 August 2008

Key Legal Topics

Areas of Law

Civil Litigation & Procedure

Legal Concepts

Costs

Jurisdiction

Abuse of Process