Sunburst Properties Pty Ltd (in liq) v Agwater Pty Ltd & Ors (No 2)

[2005] SASC 393

SUPREME COURT OF SOUTH AUSTRALIA

(Civil: Application)

SUNBURST PROPERTIES PTY LTD (IN LIQ) v AGWATER PTY LTD & ORS (No 2)

Judgment of The Honourable Justice Gray

11 October 2005

PROCEDURE - COSTS

PROCEDURE - COSTS - JURISDICTION - PERSONS NOT PARTIES TO PROCEEDINGS

Application for costs by the applicant against the second and seventh defendants and Mr Piggott the representative of the seventh defendant – costs sought on solicitor and own client basis – discussion of ordinary rule that costs be ordered on a party and party basis – consideration of relevant legal principles concerning order for costs on solicitor and client basis – discussion of relevant legal principles concerning orders for costs against non-parties.

Held: The second and seventh defendants ordered to pay costs on a solicitor and client basis.  No order made against Mr Piggott for non-party costs.

Supreme Court Act 1935 (SA) s 40(1); Supreme Court Rules 1987 (SA) r 101.07(6), referred to.
Sunburst Properties Pty Ltd (In Liq) v Agwater Pty Ltd & Ors [2005] SASC 335; Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; Health & Life Care v SA Asset Management (1995) 65 SASR 48; Groom v Earthmoving Contractor’s Association of SA Inc (No 2) [2004] SASC 241; Eastern Garden Pty Ltd v Sangster (No 2) [2004] SASC 66; Sheahan v Northern Australia Land & Agency Co Ltd [1995] SCSA S5363 ; Walton v McBride (1995) 36 NSWLR 440; Degman Pty Ltd (In Liquidation) v Wright (No 2) [1983] 2 NSWLR 354; EMI Ltd v Wallace [1983] 1 Ch 59; Rosniak v GIO (1997) 41 NSWLR 608; Casley-Smith v F S Evans & Sons (1989) 148 LSJS 483; Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397; Wentworth v Rogers (No 5) (1986) 6 NSWLR 534; Murdaca v Maisano [2004] VFCA 123; Knight v FP Special Assets Ltd (1992) 174 CLR 178; Vestris v Cashman (1998) 72 SASR 449; Oz, B & S Pty Ltd v Elders IXL Ltd (1993) 117 ALR 128; Hamilton v Al Fayed (No 2) [2002] 3 All ER 641; Gore v Justice Corp Pty Ltd (2002) 119 FCR 429; Symphony Group LC v Hodgson [1993] 4 All ER 143; Yates Property Corp Pty Ltd v Boland (No 2) (1997) 147 ALR 685, considered.

SUNBURST PROPERTIES PTY LTD (IN LIQ) v AGWATER PTY LTD & ORS (No 2)
[2005] SASC 393

Application for Costs

GRAY J:

Introduction

1. This is an application for costs following trial.

2. On 2 September 2005 judgment was delivered in Sunburst Properties Pty Ltd (In Liq) v Agwater Pty Ltd & Ors[1].  The plaintiff was successful in the action.  Declarations were made concerning the enforceability of an agreement, the appointment of directors and the legal effect of a number of transactions.  Orders were made rectifying a number of records.  Injunctive relief was granted. 

   [1] Sunburst Properties Pty Ltd (In Liq) v Agwater Pty Ltd & Ors [2005] SASC 335.

3. The second and seventh defendants, Andrew Morton Garrett and J & W Holdings Pty Ltd, were the contesting parties at the trial.  Mr Garrett appeared unrepresented.  J & W Holdings was represented by a director, Stephen Piggott.  Sunburst Properties seeks orders for costs against Mr Garrett and J & W Holdings.  It also seeks costs against Mr Piggott.  Costs are sought on a solicitor and own client basis. 

   Applicable Principles

4. The awarding of costs is governed by the Supreme Court Act 1935 (SA) and Rules. Section 40(1) of the Act provides:

   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.

5. Rule 101.07(6) provides definitions for different costs orders:

   In any rule or order unless the contrary meaning is indicated by the context or other factors:

   Bases of assessment of costs

   (a)     costs as between party and party, or a like expression, means only the costs which have been necessarily and reasonably incurred by the party in the conduct of the litigation;

   (b)     costs, or a like expression, means costs as between party and party;

   (c)     costs as between solicitor and client, or a like expression, means all costs reasonably incurred by the party in respect of the litigation and having regard to the proper interests of the persons who will ultimately bear the burden of such costs;

   (d)     costs as between solicitor and own client, or a like expression, means costs as a complete indemnity against the costs incurred by the party in respect of the litigation provided that they are not to include any amount shown by the party liable to pay them to have been incurred unreasonably in the interests of the party incurring them;

   (e)     indemnity costs, or a like expression, mean the same as costs as between solicitor and own client.

6. The Court has an unfettered discretion as to costs orders.[2]  The ordinary rule is that costs should be ordered on a party and party basis.  The ordinary rule assumes that an order for costs does not operate as a complete indemnity.[3]

   [2] Supreme Court Act 1935 section 40; rule 101.01.

   [3] Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225. See also Health & Life Care v SA Asset Management (1995) 65 SASR 48.

7. The Court has a discretion where some special or unusual feature of the case provides justification to depart from the usual rule that costs be taxed on a party and party basis.  The Court has regard to the particular facts and circumstances of the particular case.[4]  Those circumstances may include improper conduct which has had the effect of imposing an undue burden on the successful party.  Such conduct includes propounding a defence where there were no prospects of success on the merits.[5] 

   [4] Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233; Groom v Earthmoving Contractor’s Association of SA Inc (No 2) [2002] SASC 241, BC200104426; Eastern Garden Pty Ltd v Sangster (No 2) [2004] SASC 66, BC200401148.

   [5]  Sheahan v Northern Australia Land & Agency Co Ltd [1995] SCSA S5363; Walton v McBride (1995) 36 NSWLR 440 at 451; Degman Pty Ltd (In Liquidation) v Wright (No 2) [1983] 2 NSWLR 354; and EMI Ltd v Wallace [1983] 1 Ch 59.

8. Unreasonable conduct is sufficient to enliven the discretion.  Vexation need not be proved.[6]  The Court is entitled to order solicitor and client costs or solicitor and own client costs if satisfied that it ought to mark its disapproval of inappropriate conduct on the part of the party ordered to pay costs.

   [6] Rosniak v GIO (1997) 41 NSWLR 608.

9. Sheppard J in Colgate Palmolive Co[7] noted instances of cases which may justify departure from the general rule:[8] 

   The circumstances of the case must be such as to warrant the Court in departing from the usual course [ie party party costs]. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v Barnes [(1887) 39 ChD 133] at 141 said the Court had a general and discretionary power to award costs as between solicitor and client "as and when the justice of the case might so require". Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston [[1981] 3 WLR 619] at 637; namely, there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at p 8) in Tetijo, "The categories in which the discretion may be exercised are not closed". Davies J expressed (at p 6) similar views in Ragata ...

   Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp [(1993) 46 IR 301]); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Keng (unreported, Court of Appeal, NSW, Kirby P, Priestley JA, Cripps JA, No 40744/1992, 27 September 1993) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records [[1983] Ch 59]). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.

   It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.

   [7] Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225. See also Groom v Earthmoving Contractor’s Association of SA Inc (No 2) [2002] SASC 241; Casley-Smith v F S Evans & Sons (1989) 148 LSJS 483.

   [8] Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233-234.

10. The court’s discretion to award solicitor and client or indemnity costs is enlivened if a party fails in circumstances where, properly advised, he should have known he had no chance of success.[9]  That is so notwithstanding that no order will be made that costs be paid on a solicitor and client basis merely because the losing party’s case lacked merit.[10]

    [9] Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401.

    [10] Wentworth v Rogers (No 5) (1986) 6 NSWLR 534.

11. It may also be appropriate to consider solicitor and client or indemnity costs if it is found that a defence was pursued for some ulterior motive, or because of some wilful disregard of the known facts or clearly established law.[11]

    [11] Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants (1988) 81 ALR 397 at 400; Murdaca v Maisano [2004] VFCA 123.

12. The plaintiff must adduce a basis to justify departure from the ordinary rule.  The question must always be whether the particular facts and circumstances of the case in question warrant a departure from the usual rule that costs be awarded on a party and party basis.

    The Exercise of Discretion

13. In the present case the following are relevant matters to be weighed when exercising the discretion:

    -Sunburst instituted the proceedings to defend its right, through its Receivers and Managers, to perform the Joint-Sale Agreement; to protect its shareholding in Agwater; and to protect the integrity of the registers of, and of public information in respect of, Agwater which, on my findings, was its wholly-owned subsidiary at all material times.

    -In defending the proceedings, Mr Garrett and J & W Holdings were deliberately seeking to exploit a mistake - the premature discharge of the Agwater debenture.  It was the accidental discharge of that debenture which permitted Mr Garrett to register the J & W Holdings charge and which enabled him to obstruct performance of the Joint-Sale Agreement and of the Sale Agreement.  Mr Garrett admitted early in the trial that he was aware, from the outset, that registration of the discharge of the Agwater debenture was a mistake.

    -Neither Mr Garrett nor J & W Holdings had any genuine ground of defence apart from those grounds arising from the mistaken discharge of the Agwater debenture; the backdated documents; and the adjusted accounts.

    -The defence, in so far as it relied on acts of Agwater after 1 July 2003, was inherently untenable.  The second defendant, Mr Garrett, admitted that Mr Marshall was a director of Agwater at the time when Mr Marshall signed the Joint-Sale Agreement.  Mr Garrett himself had appointed, or caused the appointment of, Mr Marshall to the board of Agwater.  Mr Garrett knew that Mr Marshall remained on the board of Agwater from about 23 June 2003 to at least mid-November 2003. 

    -The only fact not conclusively proved by the documents admitted by the Court during the plaintiff’s opening was the status of Mr Crosby.  On the findings, Mr Crosby was a director of Agwater at all material times. As was found, “Mr Garrett has adopted an expedient and varied attitude towards Mr Crosby’s purported date of resignation”.[12]

    -The plaintiff’s case in chief was proved by unchallenged documents, admitted by the Court in the course of the plaintiff’s opening.  In the face of those exhibits, Mr Garrett and J & W Holdings should not have continued their opposition to the proceedings. 

    The plaintiff’s opening was largely vindicated by the findings.  The evidence of Mr Sandow went largely unchallenged.  He, as the first witness, exposed the backdating of the documents on which Mr Garrett and J & W Holdings relied.

    -Mr Garrett and J & W Holdings persisted with their case in the hope of obtaining the benefit of whatever finance or other advantage might be secured by maintaining control of the pipeline, and through it, Bulka Station.  Essential to this strategy was the objective of frustrating the contract between Mr Paech and the plaintiff’s receivers (and thereby National Australia Bank). 

    -If properly advised, Mr Garrett and J & W Holdings must have known that they had no real prospect of success.  So much was clear from the document book, which the plaintiffs produced in advance of the hearing.

    -Mr Garrett and J & W Holdings persisted in groundless accusations of misconduct against the National Australia Bank, the plaintiff (and its receivers) that were largely irrelevant to the case.

    -The matters agitated by Mr Garrett and J & W Holdings and their stubborn refusal to acknowledge the plaintiff’s case necessitated a prolonged hearing and occupied much of the trial.

    -Mr Garrett and J & W Holdings ignored repeated warnings from the Court about the costs being incurred. 

    [12] Sunburst Properties [2005] SASC 335 at [135].

14. In the course of my judgment I made a number of findings that are also relevant to the foregoing consideration and to the discretion concerning costs:

    -Findings of prolongation of trial

    The proceedings have at times proved difficult to limit to the pleaded issues.  At times, Mr Garrett sought to conduct his case as though the pleadings did not exist.[13]

    [13] Sunburst Properties Pty Ltd (In liq) v Agwater Pty Ltd & Ors [2005] SASC 335 at [14].

    As earlier observed during the course of the trial, Mr Garrett sought to delve into questions and issues not raised in the pleaded cases.[14]

    [14] Sunburst Properties [2005] SASC 335 at [43].

    -Findings of improper intent or motive

    I reject that evidence of Mr Garrett that the [adjustments to the accounts] were a legitimate recording of genuine transactions.[15]

    [15] Sunburst Properties [2005] SASC 335 at [119].

    Mr Garrett and Mr Sandow set about preparing and backdating a number of documents in November 2003.  As Garrett explained in his final submission that his purpose was to take whatever steps he could to obstruct the sale of the pipeline. [16]

    [16] Sunburst Properties [2005] SASC 335 at [139].

    Mr Garrett’s purpose was not only to obstruct the sale of the pipeline, it was also to take such steps as he could to remove the pipeline asset from those assets available to the creditors of the Garrett Group and in particular National Australia Bank Ltd. [17]

    [17] Sunburst Properties [2005] SASC 335 at [140].

    Initially, the share in Agwater was purportedly transferred to the Andrew Garrett Family Trust No 1.  However, the Andrew Garrett Family Trust No 1 had executed a negative pledge in favour of National Australia Bank.  There was a perceived need to move the assets from that Trust to the Andrew Garrett Family Trust No 2.  When it was thought that the Andrew Garrett Family Trust No 2 might be vulnerable, steps were taken to transfer the pipeline assets to another Garrett controlled entity, J & W Holdings.  A search of the public register of J & W Holdings would not reveal any Garrett interest in that entity.  By creating a registered charge in favour of J & W Holdings, it was perceived that J & W Holdings would have priority over other creditors. [18]

    [18] Sunburst Properties [2005] SASC 335 at [143].

    When analysed, none of the above purported transactions can withstand challenge.  They either record purported transactions that had not occurred, were void ab initio as being fraudulent, or alternatively, voidable as a result of being entered into in breach of directors’ duties. [19]

    [19] Sunburst Properties [2005] SASC 335 at [144].

    Mr Garrett and Mr Sandow were well aware they were not validly appointed directors of Agwater.  They were engaged in activities with an improper purpose.  They took all possible steps to defeat the legitimate rights and interests of National Australia Bank in regard to the assets of Agwater. [20]

    [20] Sunburst Properties [2005] SASC 335 at [147].

    -Findings of a lack of credibility and the acceptance of evidence of others

    Insofar the evidence of Mr Garrett and Mr Sandow conflicts with the evidence of Mr McKenzie, I reject their evidence. [21]

    [21] Sunburst Properties [2005] SASC 335 at [62].

    I reject Mr Garrett’s criticisms of Mr Marshall’s evidence.  Insofar as the evidence of Garrett and Sandow is inconsistent with the evidence of Mr Marshall, I reject their testimony. [22]

    [22] Sunburst Properties [2005] SASC 335 at [51].

    Generally, I formed an adverse view of Mr Garrett’s credibility and reliability as a witness.  I reject his evidence that Mr Crosby resigned in December 2002 or at any other time.  I reject his testimony that there was any agreement to transfer the share in Agwater from Sunburst Properties to the Andrew Garrett Family Trust.  I reject his evidence that there was any assignment of debt in December 2002 or at any other time, being a debt from Agwater to Sunburst Properties to become a debt from the Family Trust to Sunburst Properties.  I reject his testimony that he remained a director of Agwater until late 2003.  I am satisfied that the assertions of Mr Garrett in this respect were concoctions. [23]

    [23] Sunburst Properties [2005] SASC 335 at [67].

    I reject the evidence that there was such a meeting.  I am not satisfied on the balance of probabilities that [the 10 November 2003 meeting] occurred. [24]

    [24] Sunburst Properties [2005] SASC 335 at [115].

    I am not satisfied on the balance of probabilities that [the 14 November 2003] meeting occurred. [25]

    [25] Sunburst Properties [2005] SASC 335 at [115].

    [Mr Garrett’s] constantly changing version “smacks” of opportunism. [26]

    [26] Sunburst Properties [2005] SASC 335 at [120].

    Later in these reasons I reach the conclusion that [the Garrett transactions] were either illusions, or of no effect. [27]

    [27] Sunburst Properties [2005] SASC 335 at [122].

    I reject the evidence of Mr Garrett and Mr Sandow that there was any sale or agreement to transfer the sole share in Agwater from Sunburst properties to the Andrew Garrett Family Trust. [28]

    [28] Sunburst Properties [2005] SASC 335 at [131].

    In regard to contentious matters, I reject Garrett’s evidence.  In particular, I reject his evidence as to the suggested resignation of Crosby on 15 December 2002 or at any other date. [29]

    [29] Sunburst Properties [2005] SASC 335 at [134].

    The above matters demonstrate that Mr Garrett has adopted an expedient and varied attitude towards Crosby’s purported date of resignation.  No explanation has been offered as to his change of position on this topic.  His evidence lacks credit.  I reject it.  Garrett asserted that in November 2003 he believed that the ASIC record was conclusive proof of directorship.  I reject this explanation.  It was, in my view, simply a statement of convenience. [30]

    [30] Sunburst Properties [2005] SASC 335 at [135].

    [Mr Garrett] suggested that Mr Marshall had back-dated his resignation.  I reject Mr Garrett’s evidence in this respect and find that he resigned as a director of Agwater on 2 July 2003. [31]

    [31] Sunburst Properties [2005] SASC 335 at [137].

    In regard to the purported transactions that Mr Garrett claims that Agwater entered into relating to the disposal of assets, I am satisfied that no such transactions occurred. [32]

    [32] Sunburst Properties [2005] SASC 335 at [188].

    -Findings of baseless or un-particularised allegations of fraud

    [Mr Garrett’s] principal concern appeared to relate to a wide-sweeping allegation of fraud on the part of National Australia Bank, a number of its officers, Crosby, Mr Marshall and others.  Mr Garrett did not plead these allegations or in any way particularise them.  They concerned a number of non-parties.  To allow the allegations to be advanced in these circumstances would cause obvious and unfair prejudice, with the possibility of causing grave injustices. [33]

    [33] Sunburst Properties [2005] SASC 335 at [43].

    At one stage, he prepared a totally inadequate proposed amended counterclaim.  The document lacked the most rudimentary particularity of serious fraud allegations. [34]

    -Findings of conflict and breach of duty

    [Mr Garrett] acknowledged the backdating of documents in an effort to frustrate National Australia Bank’s attempts to recover its alleged debts. [35]

    However, a considerable body of documentary evidence produced by or on behalf of Mr Garrett was admitted to be back dated and was of dubious accuracy. [36]

    To the extent that [the purported share transfers] were otherwise valid, they were entered into by Garrett and Sandow in breach of their duties as directors and were voidable at the election of Sunburst Properties. [37]

    Mr Garrett and Mr Sandow failed to give independent consideration to the merits of the two purported transactions, the share transfer and the assignment of debt. Mr Sandow said that he “viewed the whole enterprise (comprising the Group of companies including Sunburst) as one entity rather than being separate entities, so that transfers between entities [were] part of the process”.  The totality of the evidence establishes that Mr Garrett regarded all entities in the Group, including both Sunburst Properties and Agwater, as mere manifestations of the Andrew Garrett Family Trust No 1.  Mr Garrett’s advertence to the interests of the beneficiaries of that Trust completely excluded or at the very least dominated, any advertence to the interests of Sunburst Properties and Agwater, as separate entities to whom separate duties were owed.  Mr Garrett seems never to have understood that, as a director considering any proposed transaction between two or more companies under his control, he was obliged to separately assess that proposed transaction from the standpoint of each company.[38]

    No reasonable director could have believed that the transactions were in the best interests of Sunburst Properties. [39]

    In the period prior to and after the receivership, Mr Garrett was in a position of conflict of interest and duty. [40]

    The duty of Mr Garrett and Mr Sandow as directors of Sunburst Properties was to keep the company’s assets intact for the benefit of the creditors.  Mr Garrett and Mr Sandow gave no consideration to this aspect of their duty.  Sunburst Properties received no benefit from the transaction at all and at the time of the transactions, Mr Garrett acted with a conflict of interest and in breach of duty. [41]

    I am satisfied that Mr Garrett and Mr Sandow acted in breach of their duties as directors if, contrary to my findings, they were in fact directors at the time. [42]

    [34] Sunburst Properties [2005] SASC 335 at [45].

    [35] Sunburst Properties [2005] SASC 335 at [69].

    [36] Sunburst Properties [2005] SASC 335 at [70].

    [37] Sunburst Properties [2005] SASC 335 at [152].

    [38] Sunburst Properties [2005] SASC 335 at [163].

    [39] Sunburst Properties [2005] SASC 335 at [165].

    [40] Sunburst Properties [2005] SASC 335 at [172].

    [41] Sunburst Properties [2005] SASC 335 at [173].

    [42] Sunburst Properties [2005] SASC 335 at [188].

1. The conduct of Mr Garrett and J & W Holdings unnecessarily and unreasonably prolonged the trial.  An obstructive approach was taken to the litigation.  The conduct involved in the backdating of documents, with the resulting confused circumstances, and the task of unravelling the truth substantially impeded the speedy resolution of the proceedings.  As pointed out in my primary judgment, at all relevant times J & W Holdings was under the control of Mr Garrett.

2. I am satisfied that this is an appropriate case for an order other than an order for party and party costs to be made against Mr Garrett and J & W Holdings.  Having regard to my findings and the factors summarised above, it is appropriate in the exercise of my discretion to order that Mr Garrett and J & W Holdings pay the plaintiff’s costs of the action on a solicitor and client basis.

   Non-Party Costs

3. The plaintiff also sought a personal order for costs against Mr Piggott, a director of J & W Holdings.

4. The relevant legal principles governing orders for costs against non-parties are settled. The Court has jurisdiction to make an order against Mr Piggott by virtue of section 40 of the Supreme Court Act:

   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.

5. As observed in Knight v FP Special Assets[43] and Vestris v Cashman,[44] the jurisdiction enables a court to award costs against the real parties to the action even if they are not named as parties.  In Knight, the High Court upheld an order made against the receivers of the litigant companies.[45]

   [43] Knight v FP Special Assets Ltd (1992) 174 CLR 178.

   [44] Vestris v Cashman (1998) 72 SASR 449.

   [45] See also Oz, B & S Pty Ltd v Elders IXL Ltd (1993) 117 ALR 128.

6. Whilst it has been said that persons who fund an impecunious litigant without personal gain for themselves should not be made liable for costs if the litigant is unsuccessful,[46] the position is otherwise where they pursue and fund litigation as a commercial investment.  In such a case they may be ordered to pay costs if the claim is unsuccessful.[47]

   [46] Hamilton v Al Fayed (No 2) [2002] 3 All ER 641.

   [47] Gore v Justice Corp Pty Ltd (2002) 119 FCR 429.

7. The plaintiff submitted this was a proper case for an indemnity costs order against Mr Piggott personally.  It was said:

   -Notice was given to Mr Piggott of the intention to seek an order for costs.[48] 

   -The proper inference to be drawn is that Mr Piggott assisted Mr Garrett for his own commercial reasons.  Mr Piggott effectively controlled J & W Holdings’ conduct of the litigation, albeit sometimes with Mr Garrett’s assistance.  He put his own questions and submissions to advance J & W Holdings’ commercial objectives.

   -It is well settled than an award against a non-party may encompass indemnity costs.[49]

   [48] Symphony Group LC v Hodgson [1993] 4 All ER 143.

   [49] Yates Property Corp Pty Ltd v Boland (No 2) (1997) 147 ALR 685.

8. Following the delivery of judgment, arguments were heard in respect of the claim for costs.  Mr Piggott contended that he acted with propriety as a director of J & W Holdings, doing the best he could in difficult circumstances.  He explained that as a director of the company he was presented with a number of transactions that appeared to confer benefits on the company.  He was reliant on others as to their efficacy and legality.

9. In an affidavit sworn 20 September 2005, Mr Piggott described his involvement with J & W Holdings and Mr Garrett as follows:

   I first met Mr Garrett via an introduction of Mr Peter Lewis in the Grenfell Street offices of Mr John Jackson sometime in late November 2003.  I was working in conjunction with a colleague Mr Christopher Fisher and received a request from Mr Garrett for debt funding to acquire a fleet of House Boats.  I was not aware at the time of the litigious circumstances of the Garrett Group.

   Mr Garrett requested some short term debt funding and I sought to arrange amounts from $50,000.00 via my personal contacts.  Over the new few months Mr Garrett had received short term debt funding that I had contracted for him on behalf of my Company Urban Assets Group Pty Ltd to the extent of almost $500,000.00 to which I am directly accountable.  I had the decision of either joining the list of litigants or seeking to assist Mr Garrett in an effort to recover debt for and on behalf of my clients.  I chose the latter and endeavoured to assist the Garrett’s as I saw that to be the most honourable and sensible choice.

   ...

   I was appointed Director of J & W Holdings P/L at the request of Mr John Jackson the previous director of Evajade P/L on or about 4^th November 2003.  I consented to act with the understanding that J & W Holdings P/L was not a major player in the Garrett Group, and that his role would be relatively simplistic.  I was assured that assistance and guidance would be with him via Mr Jackson a licensed Supreme Court Liquidator.  I do not have any previous experience with the actions within the courts concerning administrators, managers and receivers.

   I made enquiries to Mr Garrett for the whereabouts of the Company Register.  The former Director Daniel O’Leary was not in possession of the Company Register.  It was not found and a new constitution was adopted by resolution.  Mr Andrew Sandow has been appointed as the company secretary.  I was not certain of the past activities of the company and have relied on dialogue with Mr Garrett and discovery through action 1767 of 2003.  Essentially I was operating as a proxy for Mr Garrett as I was not familiar with all the business connections J & W had within the complexities of the myriad of Garrett entities.

10. When describing his involvement in the subject proceedings, Mr Piggott said:

    I approached the task with sincerity and confidence as I was of the opinion that Mr Garrett had suffered some injustice and that he would be vindicated by the process of court.  I now see that the due process of court proceedings are paramount as I witnessed matters raised but set aside due to relevance and narrowness of pleadings.

    As the case proceeded and I had lost the support of Mr Jackson and had not been able to secure legal representation due to lack of financial assistance and my own personal finances were depleted as a result of my ongoing involvement.

    …

    I did my best as a lay person with no legal education to carry out my duties as a Director of J & W Holdings knowing that I had a duty to its beneficial shareholders.  My involvement within 1767 diminished considerably as the action progressed and I began to realise that Mr Garrett’s defence was becoming less acceptable.  I also declined to argue or represent Agwater Pty Ltd after the initial opening statements.

11. As I understand his position, Mr Piggott accepted that J & W Holdings’ rights would turn on the success or otherwise of Mr Garrett’s submissions and contentions.  In that respect, from the company’s point of view its position would be determined by the resolution of those issues by the Court.

12. During the course of the hearing Mr Piggott, himself, did not act to materially prolong the trial.  His role was incidental to that of Mr Garrett.  I do not consider that Mr Piggott’s conduct prolonged the trial to any significant degree or added materially to the problems earlier referred to. 

13. No evidence has been put before me as to what benefit, if any, Mr Piggott may have personally received from his involvement in the litigation.  As earlier mentioned in his affidavit, Mr Piggott spoke of assisting Mr Garrett in an effort to recover a debt owed to clients.  However, I am not prepared to draw the conclusion that Mr Piggott stood to benefit personally in any material way.  On the evidence before me, I am left with the impression that Mr Piggott has been both naïve and gullible.

14. Mr Garrett acknowledged that he was in control of J & W Holdings as the beneficial interest in the company was held through his family trusts.  On my findings Mr Garrett used J & W Holdings as a vehicle in his attempts to frustrate the joint sale process.  In these circumstances, although it is appropriate that J & W Holdings be ordered to pay costs on a solicitor and client basis, it does not follow that Mr Piggott should be subjected to the same or any other order.  There is no evidence that Mr Piggott himself was personally involved in any of the Garrett “inspired” transactions the subject of my trial judgment.  In the circumstances, it is not appropriate to make an order for non-party costs against Mr Piggott.

15. I order that the second and seventh defendants pay the plaintiff’s costs to be taxed on a solicitor client basis.