Strazdins v ANZ Banking Group Ltd - [2017] SASC 3

SUPREME COURT OF SOUTH AUSTRALIA
(Appeal from a Master: Civil)
STRAZDINS v ANZ BANKING GROUP LTD
[2017] SASC 3
Judgment of The Honourable Justice Hinton
25 January 2017
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - APPEAL OR REVIEW
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - PLAINTIFF OR APPLICANT - LEGALLY ASSISTED PARTY OR WHERE LITIGATION OTHERWISE FUNDED
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - FACTORS RELEVANT TO EXERCISE OF DISCRETION - PLANTIFF'S OR APPLICANT'S IMPECUNIOSITY
Appeal against judgment of a Master of this Court.
The appellant, Mr Strazdins, was ordered to provide security for costs to the respondent, the ANZ Bank.
Mr Strazdins and Mr Cooper were directors of the firm BRI Ferrier. They were appointed as a joint and several voluntary administrators of a company DNPW Pty Ltd. Messrs Strazdins and Cooper seek orders facilitating the recovery of a portion of the costs, fees and expenses they incurred in their capacity as administrators from the ANZ Bank which is said to have received the proceeds of sale of particular assets falling within the administration to which it was not entitled.
The ANZ Bank became aware that Mr Cooper had left BRI Ferrier but would not be disjoined from the proceedings, and that a litigation funder stood behind Mr Strazdins. The ANZ Bank requested copies of the agreement between Mr Cooper and his former firm regarding his involvement in the proceedings, and the litigation funding agreement.
Upon Mr Strazdins’ solicitors refusing to provide the agreement, the ANZ Bank made an application for security for costs. The application was granted by a Master against Mr Strazdins and Mr Cooper. Mr Cooper was subsequently disjoined from the proceedings.
Mr Strazdins now appeals against the Master’s decision on the grounds that the mere presence of a litigation funder did not provide a sufficient basis upon which to order security for costs pursuant to Supreme Court Civil Rules 2006 (SA) r 194 and that there was not sufficient evidence to suggest that Mr Strazdins could not meet any adverse costs order if unsuccessful at trial.
Held, dismissing the appeal:
1. No error in the exercise of the Master’s discretion has been established.
Supreme Court Civil Rules 2006 (SA) r 194; Supreme Court Act 1935 (SA) s 17, s 40, s 72, referred to.
House v The King (1936) 55 CLR 499; Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance (2008) 67 ACSR 105, applied.
Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386; Proude v Visic (No 3) (2012) 118 SASR 444, discussed.
FFE Minerals Australia Pty Ltd v Mining Australia Pty Ltd (2000) 22 WAR 241; J.H. Billington Ltd v Billington [1907] 2 KB 106; O’Callaghan v Duhst [1931] SASR 369; August Investments Pty Ltd v Poseidon No Liability (1971) 2 SASR 65; Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd (2009) 239 CLR 75; Knight v F P Special Assets Ltd (1992) 174 CLR 178, considered.

STRAZDINS v ANZ BANKING GROUP LTD
[2017] SASC 3
Appeal from a Master: Civil
Hinton J.
Introduction

This appeal and related litigation arises out of and in relation to the administration of DNPW Pty Ltd (ACN 107 484 711). On 24 April 2008, by resolution of its directors, DNPW Pty Ltd entered into voluntary administration resulting in the appointment of Mr Strazdins and Mr Cooper as joint and several voluntary administrators. Mr Strazdins and Mr Cooper were both directors in the firm BRI Ferrier (SA) Pty Ltd (BRI Ferrier) and commenced this action as the first and second plaintiffs. It is presently unnecessary to say anything more about the history of the matter or the nature of the action that has been commenced in this Court save that Messrs Strazdins and Cooper seek orders facilitating the recovery of a portion of the costs, fees and expenses they incurred in their capacity as administrators from the Australia and New Zealand Banking Group Ltd (ANZ) which is said to have received the proceeds of sale of particular assets falling within the administration to which it was not entitled.
On 10 May 2016, on the application of the ANZ, a Master of this Court ordered that Mr Strazdins and Mr Cooper provide security for the costs of the litigation in this Court.[1] Since the making of that order this Court has ordered that Mr Cooper be dis-joined from the proceedings. The dis-joinder order was made in consequence of Mr Cooper assigning all his rights and interests in this action to Mr Strazdins on 28 February 2016 and indicating that he did not wish to take any further part in the matter. He did not participate in the hearing of this appeal.
[1] The quantum of the security to be provided pursuant to the order of 10 May 2016 was deferred for further consideration.
Mr Strazdins now appeals against the Master’s order that security for costs be provided.
As will be seen, the power to order that a party provide security for costs is discretionary. Consequently, the principles settled in House v The King apply.[2] In my view, applying those principles, no error in the exercise of the discretion vested in the Master has been demonstrated. For the reasons that follow, I would dismiss the appeal.
[2] (1936) 55 CLR 499.
Background and decision at first instance
The ANZ sought security for costs in the exercise of the power contained in rule 194(1)(e) of the Supreme Court Civil Rules 2006 (SA) (SCR) on three grounds – that Mr Cooper had divested himself of all rights and interests in the proceedings, that Mr Strazdins had limited means to satisfy any adverse costs order, and that funding to pursue the action had been obtained by Mr Strazdins from a litigation funder.
The affidavit material before the Master revealed that the substantive action in this Court was first commenced in June 2011.[3] Delay in prosecuting the matter occurred as a consequence of the need to await the outcome of related proceedings in the Federal Court and the Supreme Court of the Northern Territory.[4] The resolution of these matters necessitated amendment to the statement of claim first filed in this Court. Whilst the parties were in the process of preparing an amended statement of claim and objections thereto, the solicitors for the ANZ became aware of Mr Cooper having left BRI Ferrier and, in the course of doing so, having divested himself of all interest in these proceedings. Under the cover of a letter dated 15 December 2015, the ANZ’s solicitors wrote to Mr Strazdins’ solicitors seeking clarification as to the interest Mr Cooper retained in the proceedings. In that letter the solicitors for the ANZ advised:
If Mr Cooper no longer has an interest in the subject matter of the proceedings, this should be addressed as part of the application to further amend the Third Statement of Claim, and any failure to do so may render the pleading defective. Our client reserves its rights to object to the proposed form of the Third Statement of Claim on this ground, notwithstanding that it was not referred to in the Notice of Objections served on your office on 20 November 2015.
We also anticipate that if Mr Cooper’s interest in the subject matter of the proceedings has been assigned or transferred, we may be instructed to pursue an application for security for costs, subject to clarification of certain matters, namely:
1.   Your clients advised our client directly that litigation funding had been obtained. It is customary, although not inevitable, that a funder will grant indemnity for any adverse costs orders made against a plaintiff and, subject to the matters referred to below, this may alleviate the need for any security for costs application.
2.   If there is an indemnity in respect of adverse costs orders, given the absence of privity of contract, that would stand only for the benefit of your clients or client, and not ours, except to the extent it would provide a basis for a non-party costs order at the conclusion of the proceedings (see Gore v Justice Corp Pty Ltd (2002) 119 FCR 429; Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2005] 4 All ER 195 (PC)).
3.   If there is no such indemnity, that has the consequence that the funder is the real party to the litigation but it is not directly exposed to the implications of an adverse costs order.
Having regard to the above, as an interim measure, we seek access to the funding agreement and will liaise with you as to the steps that can be taken to avoid the need for an application for security for costs and to address the issue of privity of contract.
[3]    That material comprised the Fourth Affidavit of Lisa Anna Calabrese, sworn 11 February 2016, and the affidavit of John Brendan Golden, sworn 10 February 2016.
[4]    Determination and approval of Mr Strazdins’ and Mr Cooper’s remuneration had to be obtained from the Federal Court; see Strazdins v DNPW Pty Ltd [2013] FCA 1368 and Strazdins v DNPW Pty Ltd (No 2) [2014] FCA 199. In the Supreme Court of the Northern Territory proceedings seeking the winding up of DNPW Pty Ltd were commenced in September 2010: see NT Pubco Pty Ltd & Anor v DNPW Pty Ltd (Subject to a Deed of Company Arrangement) & Ors [2011] NTSC 51.
Mr Strazdins’ solicitors responded by letter dated 23 December 2015 informing the ANZ that Mr Cooper was no longer a member of BRI Ferrier, that Mr Cooper had agreed that the proceedings be conducted with him as a named plaintiff but that he would have no interest in the proceedings should the plaintiffs succeed, and that litigation funding had been obtained by the plaintiffs. As to the last issue, Mr Strazdins’ solicitors advised:
In relation to adverse costs orders that may be made against the plaintiffs, we confirm that litigation funding is obtained on behalf of both named plaintiffs. The litigation funding includes indemnity for adverse costs orders for both named plaintiffs.
No copy of the funding agreement was provided.
By letter dated 8 January 2016 the ANZ’s solicitors queried whether Mr Cooper should remain a named plaintiff in the proceedings and, for the purposes of satisfying themselves on this issue, sought a copy of any agreement between Mr Cooper and BRI Ferrier as to the future conduct of the matter. Further, the ANZ’s solicitors requested a copy of the litigation funding agreement in order that they may determine whether the indemnity provided extended to the benefit of the ANZ. The solicitors again foreshadowed an application for security for costs in the event that the funding agreement did not protect the ANZ’s position, but conveyed the hope that with the benefit of sighting the funding agreement and, possibly, amendment being made thereto to protect the ANZ, such application could be avoided.
Further correspondence passed between the solicitors. In a letter dated 14 January 2016 Mr Strazdins’ solicitors advised the ANZ’s solicitors:
The potential for costs orders against Mr Cooper in favour of your client is otherwise answered by the litigation funding obtained by our client. In that respect, our letter confirms that the litigation funding obtained by our client is obtained on behalf of both currently named plaintiffs. The funding is obtained solely for South Australian Supreme Court Action No.858 of 2011.
In relation to any costs orders that might be made relating to the period prior to our client obtaining litigation funding, they will be met by our client.
In relation to any costs orders that might be made relating to the period from the time that our client obtained litigation funding, they will be met by the indemnity for adverse costs orders obtained by our client.
Your client is the only defendant to the proceedings. The adverse costs indemnity is to pay costs orders that might be made in favour of your client.
Your client is not entitled to a security for costs order. The criteria for such an order, set out in Supreme Court Rule 194, is well settled and is not met in these proceedings. An application for security for costs is neither required nor appropriate. Notwithstanding this, we have confirmed to you that an indemnity for adverse costs has been obtained by our client.
Again no copy of the litigation funding agreement was forthcoming. This was the subject of a letter sent in reply by the solicitors for the ANZ dated 15 January 2016. It was not satisfactory, the letter complained, to expect the ANZ to act upon the assurance of Mr Strazdins’ solicitors. Without the benefit of both the agreement pursuant to which Mr Copper relinquished his interest in the proceedings and the litigation funding agreement, the ANZ could not determine for itself whether it would be prejudiced by the dis-joinder of Mr Cooper as a party, in that it could no longer recover costs from him, or whether the funding agreement adequately protected it in the event that it was successful in defending the proceedings.
The application for security for costs was filed in this Court on 11 February 2016.
At no stage has the funding agreement been disclosed. Knowledge of its terms remain confined to the disclosures made in the letters sent by Mr Strazdins’ solicitors to the ANZ’s solicitors to which reference has already been made. Further, at no stage has the agreement pursuant to which Mr Cooper divested himself of all interest in these proceedings been disclosed.
Before the Master the ANZ conceded that its application hinged on the involvement of the litigation funder. Such involvement, it was contended, both brought the matter within SCR 194(1)(e) and justified the making of an order in that there was now a third party who stood to benefit from the proceedings but was not equally invested in the risk.
Mr Strazdins opposed the application. He submitted that the power to make the order was not enlivened unless the Court was satisfied that he was not in a position to meet any adverse costs order. The Master rejected that submission, holding that the power contained in SCR 194(1)(e) was not conditioned on satisfaction of a likely inability to satisfy an adverse costs order. Rather, relying upon Proude v Visic (No 3), the Master concluded such inability was but one factor relevant to the assessment required by SCR 194(1)(e).[5]
[5] Proude v Visic(No 3) (2012) 118 SASR 444 at [155]-[157] (Blue J).
The Master summarised the circumstances as follows:
12. In summary therefore, the position seems to be that in this proceeding there is one plaintiff who has no interest in the outcome of the proceeding and a litigation funder who stands to benefit from the proceeding without necessarily being exposed to any risk. This seems somewhat unusual.
The Master then referred to the evidence of Mr Strazdins’ ability to meet an adverse costs order adduced by the ANZ. That evidence was limited to a property at Morphetts Flat valued at $530,000 that was subject of a mortgage in an amount unknown. No other evidence of Mr Strazdins’ assets and liabilities was adduced by either party.
The ANZ estimated that its costs up to and including the conclusion of the first day of trial would be in the region of $255,000. The trial, the ANZ contended, would last 10 days.
The Master concluded:
15. It is the defendant’s position, therefore, that in the event that it is successful at trial there is a real question as to the ability of Mr Strazdins to meet any adverse costs order on his own, the unavailability of Mr Cooper to meet any costs order on the basis of an agreement (the details of which are unknown) between himself and his former firm, and the presence of a litigation funder who, while currently providing an indemnity against an adverse costs order, may be in a position to terminate its agreement with the plaintiffs at any time. In any event it is noted that should the defendant be successful at trial it would not have direct recourse to the funder to satisfy any adverse costs order and would be compelled to commence a further proceeding to obtain a Knights order or similar.
16. In light of the above facts, I am of the view that this is an appropriate matter in which to make an order for security for costs, on the basis that it is in the interests of justice. In this regard I take into account the following factors:
1.   While Mr Strazdins is not a man of straw it is clear that, should he be unsuccessful in this proceeding, on the basis of the evidence currently before the Court, it is unlikely that he would be able to meet a costs order in favour of the defendant;
2.   Mr Strazdins is not funding this action; it is being supported by a commercial litigation funder who stands to benefit from the action in the event that it is successful;
3.   The role and status of Mr Cooper as a plaintiff in this action remains unclear and his liability as to costs in the event of an adverse costs order remains equally unclear (despite the statements that the litigation funding extends to Mr Cooper during the period that he was an active party to the litigation);
4.   There is no suggestion that an order for security will stultify the prosecution of this action.
The Master then referred to the judgment of Hodgson JA in Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance[6] and his comments made regarding the approach to be adopted in considering applications for security for costs where a liquidator sues in a personal capacity with the backing of a litigation funder. [7]
[6] (2008) 67 ACSR 105.
[7] (2008) 67 ACSR 105 at [45]-[46], [51]-[53].
The Master brought her judgment to a close by summarising her reasons for granting the application and making the order sought. She said:
19. Thus, given a situation where the position of one plaintiff [Mr Cooper] is equivocal, the ability of the other to meet an adverse costs order is uncertain, and the presence of a third party who will benefit from the action if successful, I am of the view that it is appropriate to make an order for security for costs.
The appeal grounds and submissions made in this Court
The Amended Notice of Appeal contains 16 grounds. Grounds one, two, three and nine were not pursued. With respect to the balance, Mr Strazdins contended, in a nutshell, that the indemnification provided by the litigation funder was not such that it could be concluded that the funder stood to benefit from the litigation without sharing in the risk involved. The evidence was that Mr Strazdins was indemnified for the costs of the ANZ, were the ANZ to succeed. Accepting this, the litigation funding agreement provided no reason to order security for costs. Once the litigation funding agreement and the risk the litigation funder was exposed to in funding Mr Strazdins to conduct the litigation evaporated as a reason supporting the order, all that remained was a paucity of evidence regarding Mr Strazdins’ means that alone could not justify the order.
Mr Harris QC put the above argument on the basis that SCR 194(1)(e) be construed as requiring satisfaction of a jurisdictional fact – that an order was necessary in the interests of justice – before a broad discretion to order security for costs if necessary in the interests of justice was enlivened. He submitted that the ANZ purported to satisfy the jurisdictional fact relying primarily upon the fact that Mr Strazdins had obtained indemnification from a litigation funder and its limited investigation of Mr Strazdins’ means to satisfy an adverse costs order. So framed the argument is, in effect, that the evidence adduced did not have the capacity to satisfy the jurisdictional fact; ground 11. He added, however, that once the jurisdictional fact was satisfied, the same evidence was to be taken into account in the exercise of the discretion to order security for costs and, in that regard, the evidence suffered the same frailty.

With the exception of grounds seven and eight, the remaining grounds, that is grounds four, five, six, 10, 12, 13, 14 and 15, focus more particularly upon the lack of capacity of the evidence to support the order made. In a sense these grounds support ground 11.
Grounds 14 and 15 concern the Master’s approach to the litigation funding agreement. Those grounds concern the treatment of the agreement in the context of the satisfaction of the jurisdictional fact in addition to the agreement being a factor in the exercise of the discretion once enlivened. It was argued that the adequacy of the protection afforded to the ANZ was sufficient, that the speculation engaged in as to the funder renouncing the agreement and walking away was exactly that, and that the evidence as to the content of the agreement was such that it could be concluded that the litigation funder had exposed itself to the risk of an adverse costs order such that it could not be concluded that it did not adequately, or at all, share the risks to which Mr Strazdins was exposed.
Further, it was contended that there was an illogicality to the Master’s reasoning in two respects. First, if the litigation funder did walk away from the agreement that would leave the ANZ in the position where any costs order would have to be met by Mr Strazdins, a position which the ANZ conceded would not support the making of the order ultimately made. In other words, if it was likely that Mr Strazdins could not meet an adverse costs order, a position that would not support the making of an order for security for costs on the application of the ANZ, how can it be that the potential withdrawal of the litigation funder which would result in the ANZ being in that very position become a factor supporting the making of such order. This contention is subject of ground 16. Second, the Master considered that the fact that the litigation funder did not share in the risk of the litigation provided a reason to order security for costs. So concluding, the Master acted on the basis that the litigation funder would remain involved in the litigation. However, a further reason for making the order was the risk that at any time the litigation funder could abandon Mr Strazdins.
Grounds four, five, six, 10 and 13 concern the inquiry conducted into Mr Strazdins’ capacity to satisfy an adverse costs order, the sufficiency of the evidence adduced on that subject, the Master’s finding that it was unlikely that Mr Strazdins would be able to meet an adverse costs order, and the propriety of the Master relying upon the evidence adduced where it was not obviously put forward by the ANZ as a basis for the order ultimately obtained. These grounds were advanced against the background of the contention that the litigation funding agreement was not enough of itself to justify the order made.
The real thrust of the argument on these grounds was the contention that it was not open to the Master to find on the evidence adduced that it was unlikely that Mr Strazdins would be able to meet a costs order in favour of the defendant. In this connection it was complained that the ANZ did not discharge the evidential onus of establishing a want of capacity on the part of Mr Strazdins to satisfy an adverse costs order and that any deficiency in such evidence should be visited upon the ANZ and not Mr Strazdins. As to the standard of proof to be met on this issue, Mr Strazdins pointed to the requirements of SCR 194(1)(a) and submitted that it was not enough that the evidence was “suggestive” of an incapacity as the Master held.
In and amongst these arguments it was contended that there was a lack of procedural fairness afforded Mr Strazdins. This complaint is subject of ground seven. At no time did the ANZ make any inquiry of Mr Strazdins as to his financial capacity to meet a costs order. Neither did it make any oral submission before the Master on this point. Written submissions filed after oral submissions had concluded were confined to issues raised orally. In such circumstances, Mr Strazdins had not been heard on the question of what conclusions could be drawn from the evidence adduced as to his financial affairs and capacity to meet an adverse costs order. Further, there was some evidence of Mr Strazdins funding the litigation in part that was not taken into account. In this regard Mr Harris referred to a letter from the solicitors of Mr Strazdins to the ANZ’s solicitors dated 14 January 2016, where it stated:
In relation to any costs orders that might be made relating to the period prior to our client obtaining litigation funding, they will be met by our client.
Mr Harris conceded that this evidence was limited, but nonetheless it indicated that at least for a period of time before the funding agreement was in place, the litigation was being funded by Mr Strazdins.
The finding that it was unlikely that Mr Strazdins would be able to meet a costs order in favour of the defendant was one of the central planks in the Master’s reasons for making the order. If it was not open, it was contended, the ultimate conclusion could not be sustained. A related argument was advanced here; even if the litigation funding agreement satisfied the jurisdictional fact, the question remained, did Mr Strazdins nonetheless have the means to satisfy an adverse costs order? If he did, it was said, whatever one said of the indemnity, the fact that Mr Strazdins had the means to pay an adverse costs order obviated the need for an order for security for costs. However, here no adequate investigation of Mr Strazdins’ means was undertaken and consequently no sufficient evidence of the same was adduced.
Ground 12 was said to inform ground 11. Here the point focussed upon a concession made by the ANZ before the Master that Mr Strazdins’ capacity to pay an adverse costs order could not of itself justify the making of an order for security for costs. Accepting this, it was argued, it was not open to the Master to take such capacity into account as she did.
Ground eight complained that the Master erred in finding that the liability of Mr Cooper in the event of an adverse costs order was unclear, particularly because the liability of Mr Cooper is the same as any plaintiff to an action and the evidence was that the adverse costs indemnity extended to Mr Cooper.
The ANZ’s starting position was that under SCR 194(1)(e) it was not necessary to establish that the plaintiff was impecunious. Impecuniosity was a factor to be considered on the application along with all other relevant factors. The ANZ embraced the Master’s identification of the relevant factors as quoted from the Master’s reasons above.[8] However, Mr Roberts SC made plain that the primary factor was the involvement of the litigation funder. More particularly, relying upon Green, he submitted that the Master was right to exercise the discretion and order security for costs. The litigation funder should not be permitted, he contended, to profit from the proceedings without exposing itself either directly or contractually to the risk of costs in the event that the defendant succeeds. Here the order was all the more warranted bearing in mind that the detail of the arrangements between Mr Strazdins and the litigation funder were not known.
[8] At [19].
The power engaged and applicable principles
No statutory power to make an order for security for costs was engaged in this matter.[9] Rather, as mentioned, the application was brought pursuant to SCR 194(1)(e).
[9] Supreme Court Civil Rules 2006 (SA) r 194(1)(d).
SCR 194(1)(e) provides:
194—Security for costs
(1) The Court may order a plaintiff to provide security for costs if—
(a)the action is brought in a representative capacity and the plaintiff is insolvent or would have insufficient resources to meet an order for costs if the action were to prove to be unsuccessful; or
(b)the plaintiff is ordinarily resident outside Australia; or
(c)there are reasonable grounds to suspect that the action may have been brought for an ulterior purpose; or
(d)the order is authorised by statute; or
(e)the order is necessary in the interests of justice.
Note 1—
Section 1335 of the Corporations Act 2001 (Cth), section 19 of the Service and Execution of Process Act 1992 (Cth) and section 15 of the Trans-Tasman Proceedings Act 2010 (Cth) empower the Court to order security for costs in defined circumstances.
Note 2—
If a defendant makes a counterclaim, the defendant is the plaintiff in the cross action—see definition of plaintiff.
In its application in this case SCR 194(1) is an exercise of the rule making power contained in s 72 of the Supreme Court Act 1935 (SA) (SCA) exercised in support of this Court’s inherent power. The inherent power or jurisdiction of this Court has been described as the power necessary to the effective exercise of jurisdiction granted.[10] In this connection SCR 194 may be seen as a rule made in support of the power necessary to the effective exercise of the jurisdiction conferred by s 40 SCA, namely, the power to award costs.[11] In addition SCR 194 may also be seen as supported by the well of powers available to the Court more generally to protect its processes and the administration of justice.
[10] NH v Director of Public Prosecutions (SA) (2016) ALJR 978 at [67]-[68] (French CJ, Kiefel and Bell JJ); Keramianakis v Regional Publishers Pty Ltd (2009) 237 CLR 268 at [36] (French CJ).
[11] Hence an order for security for costs has been described as protective; Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd (2008) 67 ACSR 105 at 108 (Hodgson JA).
Section 17 SCA is a further source of power that may support the exercise of the rule making power in s 72 SCA and the making of SCR 194. In this regard in J.H. Billington Ltd v Billington[12] the King’s Bench Division held that the Supreme Courts of Common law possessed an inherent jurisdiction to order security for costs which, upon the enactment of the Judicature Act 1873, descended upon the High Court. In O’Callaghan v Duhst this Court held that the same power had descended upon it.[13] In August Investments Pty Ltd v Poseidon No Liability, Zelling J stated:[14]
There is no doubt that the Court always had an inherent jurisdiction to order security for costs. See J. H. Billington Limited v. Billington, in the judgment of Lord Alverstone C.J. at p. 109 and in the judgment of Phillimore J. at p. 111. This was referred to and applied by the Full Supreme Court of this State in O'Callaghan v. Duhst. It is true that both these cases were cases of security for costs in appellate jurisdiction, but the references both in the English case to which I have referred and in the judgment of Angas Parsons J. in O'Callaghan's Case, indicate clearly that the jurisdiction existed at common law both at first instance and on appeal.
If there was any such general jurisdiction at common law and it is still extant then it would form part of the jurisdiction of this Court pursuant to the Imperial Act 4 & 5 Will. IV c. 95, s 2, the South Australian Ordinance 7 Will. IV No. 5 constituting this Court, and the Acts Nos. 31 of 1855-6, 116 of 1878, and 2253 of 1935 which have continued the jurisdiction of the Court. I am of opinion, however, that whatever the position may have been in the earlier common law, the position as to the cases in which security for costs may be ordered, as it exists today and as it existed on the 28th day of December, 1836 (as to which see Chitty's General Practice (1834) vol. III, pp. 633-635 and Tidd's New Practice (1837) pp. 265-270), is correctly set out in Halsbury's Laws of England 3rd ed. vol. 30, par. 706 at pp. 378-380, and that the plaintiff does not come within any of those cases. Alternatively, I think that if such a wider jurisdiction existed at common law it could only have been exercised in cases where there was reason to believe on the probabilities that the defendant or defendants if successful would be unable to recover their costs from the plaintiff.
(footnotes omitted).
[12] [1907] 2 KB 106.
[13] [1931] SASR 369; See also, Rajski v Computer Manufacture & Design Pty Ltd [1982] 2 NSWLR 443 at 447-8 (Holland J); Shannon v Australia and New Zealand Banking Group Ltd (No 2) (1994) 2 Qd R 563. See also Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd (2009) 239 CLR 75 at [38] (French CJ, Gummow, Hayne and Crennan JJ).
[14] (1971) 2 SASR 65 at 69.
Like Zelling J, it is not necessary for me to arrive at a concluded view as to the sources and ambit of the power to order security for costs. It is enough to conclude that SCR 194(1)(e) is supported by s 40 SCA and the inherent power to do all things necessary to the effective exercise of s 40 in addition to the inherent power that this Court possesses to protect its processes from abuse. That is the framework within which this matter arises for determination. The consequence is that the bounds of the power contained in SCR 194(1)(e) and the lawfulness of its exercise is to be determined by the scope and purpose of s 40 SCA and by what may be regarded as necessary to the effective exercise of the power vested by s 40 SCA or necessary to protect the processes of the Court from abuse.
Counsel for both parties addressed the Court on the basis that SCR 194(1)(e) vests a discretionary power that is enlivened upon the Court first concluding that an order is necessary in the interests of justice. In this regard they relied upon Blue J’s treatment of SCR 194(1) in Proude v Visic (No 3).[15] It is not immediately apparent to me that this was the approach that Blue J adopted in his treatment of SCR 194(1)(e). I readily concede that such approach accords with the language of SCR 194(1)(a)-(c). However, I doubt the drafter intended such consequence under SCR 194(1)(e). If the Court arrives at the conclusion that an order is necessary in the interests of justice, what discretion is there then to be exercised? All factors relevant to the question of the order being necessary in the interests of justice will have been considered. If the order is necessary, it is necessary. I cannot think of a circumstance where a court, having arrived at a conclusion that an order for security for costs is necessary in the interests of justice, would then decline to make the order. What additional factor not considered as part of determining whether the jurisdictional fact is established would subsequently be considered and, potentially, justify a conclusion that no order be made? Absent any additional factor, the answer arrived at in determining whether the jurisdictional fact was satisfied must be decisive of the exercise of the discretion. It occurs to me that such reasoning may underpin Blue J’s comment in Proude v Visic (No 3) at [160].[16]
[15] (2012) 118 SASR 444.
[16] (2012) 118 SASR 444.
An alternate view is that SCR 194(1)(e) calls for the making of an evaluative judgment. If, upon undertaking that evaluative judgment, the Court considers that an order for security for costs is necessary in the interests of justice, the order should be made. This approach may be considered discretionary insofar as SCR 194(1)(e) is a catchall[17] indicative of the fact that the circumstances that may warrant an order for security for costs cannot be exhaustively defined and that, in some cases, reasonable minds might differ as to whether an order for security for costs is necessary in the interests of justice. But it does not indicate that there is a discretion to refuse to make an order where the Court concludes that an order for security for costs is necessary in the interests of justice.[18] So applied the exercise of the power remains reviewable on House v The King[19] grounds.[20]
[17] Proude v Visic (No 3) (2012) 118 SASR 444 at 657 (Blue J).
[18] By analogy The Queen v Carroll (2002) 213 CLR 635 at [73] (Gaudron and Gummow JJ).
[19] (1936) 55 CLR 499 at 505.
[20] The Queen v Carroll (2002) 213 CLR 635 at [73] (Gaudron and Gummow JJ).
Ultimately, it is unnecessary to decide the issue. As I have mentioned, the parties were at one in their understanding of the operation of SCR 194(1)(e). I proceed in accordance with that understanding observing that there may be little practical difference between approaching SCR 194(1)(e) as a power calling for an evaluative judgment or as a discretionary power enlivened only upon satisfaction of a jurisdictional fact because, as I have said, if the conclusion is that the order is necessary, it is necessary.
As for when an order requiring a party to provide security for costs is necessary, no exhaustive answer could be given nor should be attempted. It is enough to observe that the answer will be informed by the scope and purpose of s 40 SCA and by what may be regarded as necessary to the effective exercise of the power there conferred or necessary to protect the processes of the Court from abuse.
Before turning to deal with the submissions made in this case, I make two further points regarding the power contained in SCR 194(1)(e). First, SCR 194(1) does not state in terms that security for costs may be ordered wherever the instituting party is impecunious. This reflects the general rule long acknowledged that poverty is no bar to a litigant pursuing the vindication of rights and the enforcement of duties in the State’s courts.[21] That is not to say however, that impecuniosity is not a factor that may be relevant to the assessment required by SCR 194(1)(e). Second, in Proude v Visic (No 3) Blue J referred to SCR 194(1)(e) and said:[22]
Rule 194(1)(e) is a residual category to catch circumstances in which security for costs ought to be ordered but which do not fall within any of paras (a) to (d). If other persons stand to benefit from the action, that is a factor to be taken into account in assessing whether an order for security for costs is necessary in the interests of justice.
[21] Cowell v Taylor (1885) 31 Ch D 34 at 38 (Bowen LJ); Pearson v Naydler [1997] 1 WLR 899 at 902 (Megarry VC).
[22] (2012) 118 SASR 444 at [157].
There is a considerable body of authority for the latter proposition.[23] However the mere fact that a non-party stands to benefit from the litigation has been considered by this Court, of itself, not to provide sufficient reason to order that the non-party pay costs.[24] Matters differ where the non-party pursues his or her own interests through the litigation and has a direct personal interest in the result.
[23] See, for example, Green (as liquidator of Arimco Mining Pty Ltd v CGU Insurance Ltd (2008) 67 ACSR 105 and the authorities cited at 109 (Hodgson JA quoting Einstein J who was the judge at first instance) and at 128 (Campbell JA).
[24] Vestris v Cashman (1998) 72 SASR 449 at 457 (Olsson J), 467 (Lander J).
In this case it is not disputed that the litigation funder who has indemnified Mr Strazdins stands to benefit from the action.
The question of when a liquidator suing in a personal capacity with the assistance of a litigation funder should be subject of an order for security for costs was considered by the New South Wales Court of Appeal in the matter of Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd.[25]
[25] (2008) 67 ACSR 105.
Before saying something more about that case I pause to note that in Campbells Cash & Carry Pty Ltd v Fostif Pty Ltd a majority of the High Court held that the obtaining of litigation funding in order that representative proceedings be maintained did not constitute an abuse of process.[26] In that case a litigation funder wrote to tobacco retailers seeking authorisation to act on their behalf in the recovery of licence fees paid to wholesalers pursuant to the New South Wales tobacco licensing scheme that was declared invalid in Ha v New South Wales.[27] In return for assuming responsibility for the recovery of any claim, including the conduct of any litigation, the funder sought one third of the total amount recovered. As to costs, if they were awarded against the retailer the funder would bear those costs, whilst if they were awarded in favour of the retailer the funder would retain the sum awarded. Subsequently representative proceedings were instituted against a number of wholesalers. The wholesalers submitted that the proceedings were an abuse of process and succeeded at first instance. On appeal the stay ordered was overturned. Subsequently, an application for special leave to appeal to the High Court was successful.
[26] (2006) 229 CLR 386.
[27] (1997) 189 CLR 465.

In the High Court the funder argued that the proceedings were an abuse of process constituted by the litigation funder’s trafficking in litigation. Gummow, Hayne and Crennan JJ said:[28]
Shorn of the terms of disapprobation, the appellants’ submissions can be seen to fasten upon Firmstones’ seeking out those who may have claims, and offering terms which not only gave Firmstones control of the litigation but also would yield, so Firmstones hoped and expected, a significant profit to Firmstones. But none of these elements, alone or in combination, warrant condemnation as being contrary to public policy or leading to any abuse of process.
As Mason P rightly pointed out in the Court of Appeal, many people seek profit from assisting the processes of litigation. That a person who hazards funds in litigation wishes to control the litigation is hardly surprising. That someone seeks out those who may have a claim and excites litigation where otherwise there would be none could be condemned as contrary to public policy only if a general rule against the maintenance of actions were to be adopted. But that approach has long since been abandoned and the qualification of that rule (by reference to criteria of common interest) proved unsuccessful. And if the conduct is neither criminal nor tortious, what would be the ultimate foundation for a conclusion not only that maintaining an action (or maintaining an action in return for a share of the proceeds) should be considered as contrary to public policy, but also that the claim that is maintained should not be determined by the court whose jurisdiction otherwise is regularly invoked?
(footnotes omitted).
[28] Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386 at [88]-[89].
In answering the rhetorical questions posed Gummow, Hayne and Crennan JJ identified fear of adverse consequences for the administration of justice and fear of unfairness in the bargain struck between funder and funded as providing the foundation upon which any rule of public policy could be erected. Both were subsequently rejected. With respect to the former, their Honours said:[29]
As for fears that “the funder’s intervention will be inimical to the due administration of justice”, whether because “[t]he greater the share of the spoils … the greater the temptation to stray from the path of rectitude” or for some other reason, it is necessary first to identify what exactly is feared. In particular, what exactly is the corruption of the processes of the Court that is feared? It was said, in In re Trepca Mines Ltd [No 2], that “[t]he common law fears that the champertous maintainer might be tempted, for his own personal gain, to inflame the damages, to suppress evidence, or even to suborn witnesses”. Why is that fear not sufficiently addressed by existing doctrines of abuse of process and other procedural and substantive elements of the court’s processes? And if lawyers undertake obligations that may give rise to conflicting duties there is no reason proffered for concluding that present rules regulating lawyers’ duties to the court and to clients are insufficient to meet the difficulties that are suggested might arise.
(footnotes omitted).
[29] Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386 at [93].
In bringing their judgment to a close their Honours observed:[30]
The difficulties thought to inhere in the prosecution of an action which, if successful, would produce a large award of damages but which, to defend, would take a very long time and very large resources, is a problem that the courts confront in many different circumstances, not just when the named plaintiffs represent others and not just when named plaintiffs receive financial support from third party funders. The solution to that problem (if there is one) does not lie in treating actions financially supported by third parties differently from other actions. And if there is a particular aspect of the problem that is to be observed principally in actions where a plaintiff represents others, that is a problem to be solved, in the first instance, through the procedures that are employed in that kind of action. It is not to be solved by identifying some general rule of public policy that a defendant may invoke to prevent determination of the claims that are made against that defendant.
[30] Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386 at [95].
In Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd[31] the New South Wales Court of Appeal attempted to distil the principles applicable to an application for security for costs against a liquidator who, as here, sued in a personal capacity with the assistance of a litigation funder. Hodgson JA said:[32]
However, in my opinion a court should be readier to order security for costs where the non-party who stands to benefit from the proceedings is not a person interested in having rights vindicated, as would be a shareholder or creditor of a plaintiff corporation, but rather is a person whose interest is solely to make a commercial profit from funding the litigation. Although litigation funding is not against public policy (Campbells Cash and Carry Pty Limited v Fostif Pty Limited [2006] HCA 41; 229 CLR 386 at [87]- [95]), the court system is primarily there to enable rights to be vindicated rather than commercial profits to be made; and in my opinion, courts should be particularly concerned that persons whose involvement in litigation is purely for commercial profit should not avoid responsibility for costs if the litigation fails.
In this case, the funder could perhaps be liable for costs, at the instance of the defendant; although Young CJ in Eq in Chartspike Pty Limited v Chahoud [2001] NSWSC 585 said there would be difficulty in enforcing this kind of indemnity, because the funder is not an insurer who could be sued pursuant to the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) s6. If in such a case the funder did not willingly pay a costs order against the plaintiff, there is a question whether the defendant could bring proceedings in which the plaintiff and the funder were joined as defendants in order to enforce the indemnity against the funder; and even if this were possible, the proceedings would be cumbersome and could well be highly contentious. I note also that, in this case, the funder can avoid liability for future costs by terminating the funding agreement; and this could happen in such a way that CGU would need to expend further costs in order to obtain a decision in its favour, with no possibility of enforcement of those costs against the funder. (Problems such as these could possibly be overcome if the funder undertook to the court to be subject to any order for costs the court might make or consented to be joined as a party for that purpose: cf UCPR 42.3.)
In all these circumstances, in my opinion, the existence of the funder and the funding agreement is a matter that favours an order for security which, according to the funding agreement, the funder would be obliged to comply with. This view is supported by the consideration that in this case the court is left in the dark as to the proportion to which the funder is entitled of any verdict obtained by the liquidator; although, because this is the result of a claim of legal professional privilege, the court would not be justified in drawing any conclusion that the proportion to which the funder is entitled is unreasonably high: cf Wentworth v Lloyd [1864] EngR 492; (1864) 10 HL Cas 589; 11 ER 1154. (It may be that where the court knows the extent of the funder’s interest in the outcome of the case, this could be a factor which might lead the court to order security for less than the totality of the costs.)
[31] (2008) 67 ACSR 105.
[32] (2008) 67 ACSR 105 at [51]-[53].
Campbell JA agreed with Hodgson JA but made additional comments. In particular, he said:[33]
One extremely relevant factor is the extent to which the litigation, if successful, will ultimately be for the private profit of the funder. That information is simply not known in the present case. The court is aware that the reported cases show a significant range of returns being asked by commercial litigation funders: see, for example, Jarbin at [108]. The effect of the terms of the funding agreement not being placed before the court in the present case because of a claim of legal professional privilege is that the court is not entitled to draw the inference that it would be entitled to draw if a privilege claim had been absent, that the funder was receiving a proportion of the proceeds at the top of the available range: Armory v Delamrie (1722) 1 Stra 505; 93 ER 664. But the court is still in a situation of knowing that there will be some special return to the funder. Sometimes in connection with the award of damages the court must do the best it can to make an assessment of damages on the basis of material that it knows is considerably less than compelling, because it would be doing a worse injustice to award no damages at all. Similarly in the present case, the very fact of private profit from litigation, and lack of satisfaction that there are available assets from which an unfavourable costs order against the liquidator would be met, are enough to show that some order of security for costs should be made. Even though the materials on the basis of which the quantum can be assessed are certainly not as good as they might be, an order in the quantum proposed by the trial judge is appropriate.
[33] (2008) 67 ACSR 105 at [88].
It may be concluded that the majority in Green is concerned to ensure that a defendant who is sued by a plaintiff whose action is maintained by a litigation funder for the purposes of commercial profit, is not, if successful in defending the action, impeded by the nature of the contractual relationship between the funder and the plaintiff in securing satisfaction of any award of costs. Put slightly differently, the majority were concerned to ensure that the exercise of the power to award costs in favour of a defendant who is sued by a plaintiff whose action is maintained by a litigation funder for the purposes of commercial profit, will be effective and not frustrated or impeded by the nature of the contractual relationship between the funder and the plaintiff. Such reasoning is not at odds with the attitude toward litigation funding expressed by the majority in Campbells Cash & Carry Pty Ltd v Fostif Pty Ltd.[34] Much will depend upon the circumstances in the individual case.
[34] (2006) 229 CLR 386; Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd (2009) 239 CLR 75 at [35].
Basten JA dissented. He said:[35]
Where a liquidator sues unsuccessfully in his or her own name, the successful defendant is likely to obtain an order for costs payable by the liquidator personally. It follows that where the nature of the proceedings allows, the liquidator will not sue personally where proceedings can properly be brought in the name of the company and is unlikely to sue personally unless indemnified in relation to a possible adverse costs order. With respect to individual plaintiffs generally (including liquidators), neither impecuniosity, the nature of the resources relied upon to bring the proceedings nor the possibility of indemnity in the case of failure will usually be considerations warranting an order for security for costs. (Given that impecuniosity is not relevant in such cases, the existence of an indemnity may well provide a greater degree of comfort to a defendant than would otherwise be the case.) The question is why a different approach should be adopted in relation to a liquidator funded by commercial business interests which have no separate and pre-existing interest in the outcome of the proceedings.
The mere fact that there is a litigation funder which has a commercial interest in the outcome, given that there is no longer any public policy concern with respect to maintenance of proceedings in which one has no prior interest, does not self-evidently render the circumstances relevantly distinguishable from the maintenance of such proceedings by a creditor whose interest similarly will not be in the subject-matter of the proceedings, except in the sense that success in the litigation will expand the resources of the corporation from which the creditor may receive payment at least of an enhanced dividend. Nor is it clear how the position of the litigation funder differs from that of a creditor which acquired its interest by assignment. The point of distinction relied upon by other members of the court, as I understand it, is that the litigation funder will, at least in the event of a successful outcome, profit from the litigation. Profit, in this context, means more than merely recovering a prior debt, but recovering also a profit margin.
[35] Green (as liquidator of Arimco Mining Pty Ltd v CGU Insurance Ltd (2008) 67 ACSR 105 at [75]-[76].
The observations made by Basten JA have force. However, I understand the point of distinction between Basten JA and the majority to be different. In my view, as I have said, the majority was concerned with ensuring that an award of costs in favour of the defendant was effective and would not be impeded by the nature of the contractual relationship between the funder and the plaintiff.
The High Court returned to the issue of whether the involvement of a litigation funder resulted in litigation constituting an abuse of process in Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd.[36] It is not necessary for present purposes to discuss this case at length. It is enough to observe that the Court approached the matter in the same way that it did in Campbells Cash & Carry Pty Ltd v Fostif Pty Ltd.[37] The mere fact that a litigation funder was involved did not constitute an abuse. Significantly, both in the joint reasons of French CJ, Gummow, Hayne and Crennan JJ and in the reasons of Heydon J, reference is made to the judgment of Hodgson JA in Green. The joint reasons refer to paragraph [51] of Hodgson JA’s judgment (reproduced above) without criticism and as stating a principle that was not contrary to what was held in Campbells Cash & Carry Pty Ltd v Fostif Pty Ltd.[38] Heydon J referred to what fell from Hodgson JA with approval.[39] Thus, bearing in mind that the litigation funder, who stands to profit by maintaining litigation, has no direct interest in the vindication of rights, entitlements or interests, a court should be readier to order security for costs so that a defendant, who is directly interested in the vindication of the rights, entitlements or interests in issue, is not impeded by the contractual relationship between funder and funded in securing satisfaction for any costs order made if the defendant succeeds and so that a funder may not avoid responsibility for costs of the litigation that it maintains, or did maintain, in the hope of profit.
[36] (2009) 239 CLR 75.
[37] (2006) 229 CLR 386.
[38] Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd (2009) 239 CLR 75 at [35].
[39] Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd (2009) 239 CLR 75 at [61]-[64].
Consideration
There is no doubt that the power vested in the Court by s 40 SCA extends to the making of an order for costs against a non-party.[40] In Knight v F P Special Assets Ltd, Mason CJ and Deane J said:[41]
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.
[40] Vestris v Cashman (1998) 72 SASR 449; Knight v F P Special Assets Ltd (1992) 174 CLR 178.
[41] (1992) 174 CLR 178 at 192-3.
I have reproduced paragraph [16] of the Master’s reasons above.[42] In my view the four factors identified were relevant to both the question of whether the jurisdictional fact was satisfied and to the exercise of the discretion enlivened thereupon. Each of the enumerated factors has a bearing on the effective exercise of the power contained in s 40 SCA.
[42] At [19].
Before the Master, as on appeal, the parties proceeded on the basis that the discretion to order security for costs was not enlivened unless and until the Master first concluded that such order was necessary in the interests of justice. No complaint was made of the absence of any statement in the Master’s reasons indicating an actual persuasion as to the existence of the jurisdictional fact. No doubt this reflects the practical reality to which I have referred.
Of the four factors taken into account by the Master, it is the role of the litigation funder that is most significant.
As indicated the Master found comfort in Hodgson JA’s judgment in Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd.[43] In that case the identity of the litigation funder was disclosed, as were the funder’s financial statements indicating a capability to satisfy an adverse costs order. Further, it was established that the funder was contractually bound to indemnify the plaintiff in relation to any order for security for costs and to provide a bank guarantee. However, the relevant provision of the funding agreement disclosing the extent to which the funder stood to benefit from the plaintiff’s success was not disclosed. In re-exercising the discretion to order security for costs, Hodgson JA said:[44]
I think it is right that the court should be concerned to ensure that a litigation funder, involved in the litigation purely for commercial profit, should not be able to avoid responsibility for costs if the litigation fails, or be in a position where there may be obstacles in the way of a successful defendant obtaining costs from such a funder.
[43] (2008) 67 ACSR 105.
[44] Green (as liquidator of Arimco Mining Pty Ltd v CGU Insurance Ltd (2008) 67 ACSR 105 at 122; see also Campbell JA at [61].
This case is a stronger candidate for an order that security for costs be provided than Green. At a high level of abstraction, the mere fact that the litigation funder supporting Mr Strazdins stands to benefit from the litigation does not warrant an order for security for costs. Here, however, the nature of any return and how it is to be determined is not known. The name of the litigation funder is not known. The basis upon which it has provided funding is not known. The degree of input into the conduct of the litigation is not known. Whether and in what circumstances the funder can walk away from the agreement to maintain the litigation is not known. There appears no doubt that the funder is not moved by altruism. The ANZ’s assertions of a commercial motivation have not been denied. It is then reasonable to infer that the funder expects a return for its investment and that there is in place some sort of regime that allows it to protect its investment. But what? What consequence may it have for the ANZ and the Court? The funder is maintaining the litigation. They are prepared for Mr Strazdins to reveal that the arrangements include that both he and Mr Cooper are indemnified for an adverse costs order, but subject to what terms and conditions is not known.
It may be asked, what risk is the litigation funder exposed to? Mr Strazdins’ points to the correspondence to which reference has already been made; in his solicitors’ opinion it includes an adverse costs order made against him and Mr Cooper, so the ANZ is, he contends, protected.

For its part the ANZ seeks the sort of assurance that the majority in Green considered the Courts should be ready to ensure. The funder in this case stands very much in the shadows of the plaintiff. In my view, the defendant and the Court are entitled to greater comfort than the bare opinion of the solicitors for Mr Strazdins. Respectfully I agree with the approach of the majority in Green and consider the Master was right in her reliance upon the principles identified by Hodgson JA. Those principles support and are consistent with the effective exercise of the power vested in the Court by s 40 SCA and the power possessed by the Court to protect its processes from abuse.
Much of Mr Strazdins’ argument on appeal focussed on the risk to which the litigation funder exposed itself. That risk was evident in Mr Strazdins’ solicitors’ opinion that the contractual relationship between Mr Strazdins and the funder included indemnification for both Mr Strazdins and Mr Cooper for any adverse costs order. It is true that on the evidence the litigation funder has “some skin in the game”, but the broader concerns enumerated in these reasons above and those expressed by the majority in Green go unanswered.
As to the assertions of illogicality, true it is that if a litigation funder walks away from a funding agreement leaving an impecunious plaintiff then the court and the defendant are, in a sense, in a position where, but for the involvement of the litigation funder, security for costs would not be ordered. Accordingly, the risk of the litigation funder walking away, so the argument went, can carry no weight. I disagree. The circumstances under which a litigation funder may walk away from a funding agreement, and the potential complex and costly questions as to partial liability for and enforcement of an adverse costs order that could ensue, are obviously relevant to an assessment of the assurance that the majority in Green considered the courts should be ready to ensure. I also disagree that it is illogical for a court to rely in making an order for security for costs on the litigation funder staying the course of the proceeding but not sharing in the risk, and, at the same time, on the possibility that the funder might walk away from the funding agreement. Each possibility presents different considerations relevant to the question of whether the defendant should have the benefit of the assurance that an order for security for costs entails. Each situation raises very different questions concerning the responsibility of the funder for an award of costs in whole or in part and the obstacles that a successful defendant may confront in enforcing a costs order. It must be remembered that once a litigation funder becomes involved the principle that impecuniosity generally presents no reason to award security for costs evaporates.
I am not persuaded that the Master’s treatment of and reliance upon the fact of the involvement of a litigation funder was plainly wrong or indicative in any way of her misunderstanding the task she was to undertake.
I turn to the complaints made regarding the evidence of Mr Strazdins’ means of meeting any adverse costs order.
The Master observed that Mr Strazdins was not a man of straw. Having regard to the indication as to the amount of costs the defendant was likely to incur up to the first day of trial, she noted that it was unlikely that Mr Strazdins would be able to meet a costs order in favour of the defendant from his own means.
There can be no doubt that the party who seeks an order for security for costs under SCR 194(1)(e) bears the onus of persuading the Court that such order is necessary in the interests of justice. The absence of evidential material that it might be reasonable to expect would be adduced may be a factor telling against the party seeking the order. Whether that is so will depend upon all other material adduced in support of the application.
It is true that the inquiry undertaken into Mr Strazdins’ means was not as comprehensive as might have been undertaken. The Master was alive to this as is evident from her observation that, beyond the evidence of his real property, no other evidence of his means was before the Court, and, as is implicit in the reserved nature of her conclusion – that it was unlikely that he would be unable to meet an adverse costs order. Her ultimate conclusion, however, is stated in terms of uncertainty as to Mr Strazdins’ ability to meet an adverse costs order, not unlikelihood. In my view, that conclusion was appropriate. It reflected the evidence. More than that it indicates that the Master took into account the less than comprehensive investigation undertaken by the ANZ of Mr Strazdins’ means.
As for the argument that the appellant was not heard on the question of impecuniosity nor given the opportunity to lead evidence in reply, first, there is no suggestion that the material was not served upon Mr Strazdins nor that its tender caught him by surprise. Nothing was put before me to suggest that the matter unfolded in a way that prevented Mr Strazdins from adducing evidence of his means. Second, as the evidence was received it was open to the Court to use it for any and all permissible purposes. That must have been apparent to counsel who did not object to its reception. Third, no affidavit has been tendered on the hearing of this appeal that would support a submission that counsel was in any way constrained on the hearing of the matter before the Master in making any submission as to the use that could be made of the evidence. Four, the use that the Court could make of the evidence was not controlled by the focus in submissions of counsel for the ANZ. Five, neither did the submissions of counsel for the ANZ control Mr Strazdins’ response. Six, nothing has been put before this Court to indicate that the parties had reached any common understanding as to the use or non-use that could be made of the material.
In my view this is not a case of denial as opposed to missed opportunity. In such circumstances it is incumbent upon those who missed the opportunity to explain fully why and, further, appraise the Court of what would have been said and what would have been adduced had matters been different. That course has not been taken.
As for the evidence that Mr Strazdins was to meet the costs of the litigation in part, no mention was made of it by the Master in her reasons. The evidence was that Mr Strazdins would be responsible for that portion of any adverse costs order that related to costs incurred prior to the operation of the funding agreement. It is not clear to me how this evidence could impact upon the Master’s decision. It does not detract from the centrality of the litigation funder to maintaining this litigation as it goes forward. It does not detract from the conclusion that Mr Strazdins’ ability to satisfy an adverse costs order from his own resources is uncertain. It does not indicate that an order would stultify the proceedings nor cast any light on Mr Cooper’s potential liability for costs. The only relevance the fact that Mr Strazdins will be responsible for a portion of an adverse costs order, being those costs incurred prior to the coming into effect of the funding agreement, could have, is if that portion was of such significance as to relegate the involvement of the litigation funder to comparative insignificance. Bearing in mind the stage which these proceedings have so far reached, it can be inferred that that is not the case. In my view, the Master’s non-reference to the fact that Mr Strazdins was to meet the costs of the litigation in part is of no consequence.
Mr Cooper is no longer a party to the proceedings. He was dis-joined by order of this Court on 31 August 2016. That order provides for Mr Cooper to be joined once more in the event that it is necessary to determine and enforce his liability for the costs of the proceedings up to the date of his dis-joinder.
As I have indicated at the time of the application before the Master Mr Cooper had not been dis-joined.
The Master had the benefit of evidence from Mr Strazdins’ solicitors that in their opinion Mr Cooper’s potential liability for costs in the event of an adverse costs orders was subject of the indemnification provided by the litigation funder. As to any liability relating to costs incurred prior to the commencement of the agreement, Mr Strazdins’ solicitors advised that Mr Strazdins had assumed responsibility for those costs. It cannot be said that these arrangements leave the issue of Mr Cooper’s liability free of doubt. In the absence of access to the agreement governing the relationship between Mr Cooper and Mr Strazdins, and in the absence of access to the litigation funding agreement, and having only the benefit of the opinion of Mr Strazdins’ solicitors, such opinion being little more than an assertion without support, I think it was open to the Master to conclude that the role, status and potential liability of Mr Cooper was, at that time, unclear. Here it may be added that to the extent that the litigation funding agreement indemnifies Mr Cooper, the same observations as made above apply.[45]
[45] At [63]-[67].
As I have said, Mr Cooper has now been dis-joined as a party. That may, it may not, provide reason to revisit the Master’s order upon any application made, but it is not indicative of error on the part of the Master.
The Master’s reference to there being no indication that if the order requiring security were made it would stultify the proceedings was not attacked.
No complaint was made as to the Master’s understanding or application of the threshold expressed in SCR 194(1)(e) i.e. that the order be necessary in the interests of justice. I do not consider this question for three reasons, first, the obvious one. It was not argued. Second, had it been argued it would have been open to the ANZ to point to alternate sources of power including the inherent power that arguably stands outside SCR 194(1). Further, and in any event, in my view an order for security for costs is necessary in the interests of justice. In the circumstances of this case, the litigation funder, who has no direct interest in the rights subject of these proceedings but yet seeks to maintain and profit from them, stands very much in the shadows; the nature of their investment in the proceedings, their input into the control and conduct of the proceedings, and the level of their commitment to the maintenance of the proceedings and right to withdraw support are not known. Such information, in fact all information governing the relationship between funder and funded, save that contained in the opinions expressed by Mr Strazdins’ solicitors to which reference is made in the correspondence referred to above, has been withheld. As has the detail governing the relationship between Mr Strazdins and Mr Cooper, and, conceivably, Mr Cooper and the funder. In the absence of such knowledge, for the purposes of ensuring the effective exercise of the power vested in the Court by s 40 SCA, in my view, the order was and is necessary. Such order provides assurance that the vindication of rights in the administration of justice is not impeded by those who seek to profit from litigation but deny the defendant and the Court knowledge of the risk and responsibility they take for the proceedings. In arriving at that conclusion I do not overlook the fact that Mr Strazdins’ means and related capacity to fund an adverse costs order is unknown and has not been fully investigated, that Mr Cooper’s potential liability for costs is uncertain, the anticipated costs of the defendant to the first day of trial, and that there is no indication that an order that security be provided would stultify the proceedings.
I make plain, if I am wrong and the exercise of the discretion by the Master miscarried, I nonetheless am satisfied for the reasons I have given that it is necessary that in the interests of justice that security for costs be ordered, and, in the light thereof, and for the same reasons, would make such order in the exercise of the discretion.
Conclusion and orders
None of the grounds of appeal have been made out. The appeal is dismissed. I will hear the parties as to costs and as to the amount that should be paid in security.