Case: Caboolture Park Shopping Centre Pty Ltd (in liquidation) v White Industries (Qld) Pty Ltd [1993] FCA 471 ; (1993) 45 FCR 224
Outcome: followed
these submissions, I do not accept that the power of the Court to make orders as to non-party costs in these proceedings has been exhausted simply because costs orders have already been made and entered against the applicants. This exact issue was decisively determined by the Full Court in Caboolture Park Shopping Centre Pty Ltd (in liquidation) v White Industries (Qld) Pty Ltd [1993] FCA 471 ; (1993) 45 FCR 224 , wherein the Court considered s 4 and s 43 of the Federal Court of Australia Act 1976 (Cth) ("Federal Court Act"). So far as relevant, s 4 defines "proceeding" as meaning: ...in a court, whether between parties or not, and includes an incidental proceeding in the course of, or in connection with, a proceeding and also includes an appeal. Further, so far as relevant s 43(1) provides: the Court or a Judge has jurisdiction to award costs in all proceedings before the Court... In Caboolture Park [1993] FCA 471 ; (1993) 45 FCR 224 the respondent to those proceedings obtained judgment against the applicant including an order for costs, which judgment was entered. The applicant subsequently went into liquidation and the respondent sought a supplemental costs order against the applicant's solicitors which would have had the effect of making them liable for those costs. The solicitors submitted that, once the proceedings had been concluded by judgment being entered and by an order for costs being made inter partes , there was no jurisdiction thereafter for the Court to reopen the case. The solicitors also submitted that the jurisdiction contained in s 43 of the Federal Court Act to "award costs in all proceedings" was spent once there was no longer a "proceeding" before the Court. Applying Knight v FP Special Assets Ltd [1992] HCA 28 ; (1992) 174 CLR 178 , the Full Court held that s 43 conferred jurisdiction to award costs against non-parties to a proceeding (at 229). In relation to the submission of the solicitors concerning whether there was still a "proceeding" before the Court, the Full Court observed that the submission incorrectly confined the meaning of the word "proceeding" to the original action, and was inconsistent with the definition of "proceeding" in s 4 of the Federal Court Act (at 230). The Court continued: What s43 requires is that the jurisdiction to order costs be one limited to costs relating to a proceeding. In other words, there is no jurisdiction to order costs at large. There has to be or have been, within the Court's jurisdiction, instituted a proceeding. It is irrelevant, subject to the application of common law principles discussed later, that judgment has been given and entered . (emphasis added) I note that the decision in Caboolture Park [1993] FCA 471 ; (1993) 45 FCR 224 is consistent with decisions in other jurisdictions, including Dymocks Franchise Systems (NSW) v Todd [2004] UKPC 39 ; [2004] 1 WLR 2807 , NSW Insurance Ministerial Corporation v Edkins (1998) 45 NSWLR 8 and UTSA Pty Ltd (In Liquidation) v Ultratune Australia Pty Ltd [1998] VSC 13 ; [1999] 1 VR 204. In this case the applicants have submitted that the orders sought by the first and second respondents are in substitution for the costs orders already made rather than supplemental. That is clearly not the case. It is irrelevant that the first and second respondents have sought an award of costs against Mrs Tracy on an indemnity basis, and therefore on different terms from those already obtained against the applicants. As was the case in Caboolture Park [1993] FCA 471 ; (1993) 45 FCR 224 (where the costs were originally ordered on a standard basis but the Court subsequently ordered non-party costs on an indemnity basis), the orders sought pursuant to the notice of motion currently before the Court do not in any way seek to vary or alter the costs orders already made against the applicants. Were the first and second respondents to be successful in relation to this notice of motion, the new orders would properly be characterised as supplemental orders. Accordingly, I find that the submissions of the applicants on this issue are not substantiated, and that the jurisdiction of the Court to award non-party costs, (be they on an indemnity basis or otherwise) pursuant to s 43 of the Federal Court Act was not spent when previous costs orders were entered. LIABILITY OF MRS TRACY FOR NON-PARTY COSTS Submissions of the parties I turn now to the key issue in this case, namely whether Mrs Tracy is liable for non-party costs in respect of the costs of the first and second respondents in the primary proceedings. Helpful and detailed submissions as to the liability of Mrs Tracy for costs in the primary proceedings were filed by both parties in this case, and made orally by Counsel at the hearing. Submissions of the first and second respondents may be summarised as follows: In response, the applicants submitted in summary: There is no suggestion that the purpose of the advance by Mrs Tracy of $1.15 million to the first and third applicants in March 2005 to enable the first applicant to purchase land and business owned by the first respondent had any connection with these proceedings. There is no evidence that the list of assets provided to the National Australia Bank in support of the loan application including some of Mrs Tracy's assets was provided with Mrs Tracy's consent, knowledge or authority, as the list was executed by Mr Tracy alone. In any event this list is irrelevant as no security was provided by Mrs Tracy to the National Australia Bank in support of the loan application. In relation to Mrs Tracy's status as mortgagee, chargee and lender, it should be noted that both the National Australia Bank and, indeed, the first respondent, also had securities over the assets of the first applicant. Like the National Australia Bank and the first respondent Mrs Tracy's rights as mortgagee/chargee accrued to her prior to the commencement of proceedings and none of the funds advanced were used to fund the litigation but rather were used to purchase the orchards. Accordingly, the securities over the orchards gave Mrs Tracy a direct financial interest in the assets of the first applicant, not the proceedings. Under the Sunstate Orchards Unit Trust Deed, Mrs Tracy is within the class of discretionary beneficiaries contained in Sch 2 Pt 2 of the Deed. Her position as a contingent beneficiary under the Sunstate Unit Trust gave her no direct interest in any of the Trust assets or income of the Trust which might have been received had the litigation been successful. Any benefits Mrs Tracy received if the litigation brought by the applicants had been successful would accrue only by virtue of the securities, and not by virtue of any action taken by her concerning the proceedings. There is no real, direct and material connection between the granting of the securities to Mrs Tracy and the proceedings. The fact that the first and second respondents have already obtained orders for security for costs militate against the exercise of the discretion to make an order for non-party costs. Although the proceedings were initiated by Mrs Tracy as director of Janling Pty Ltd, the significance of the provision of instructions can only relate to the period during which the proceedings were maintained by Janling Pty Ltd. The first and second respondents have already had the benefit of a costs order against Janling Pty Ltd for the period prior to 16 February 2006 when the applicants were substituted for Janling Pty Ltd in the primary proceedings. The applicants conceded that Mrs Tracy attended Court with the second applicant during the trial. A discussion between senior Counsel for the applicants, the second applicant and Mrs Tracy (as the second applicant's wife) was unexceptional and understandable. Notwithstanding the Deeds of Assignment of the causes of action from the applicants to Mrs Tracy and then from Mrs Tracy to Janling Pty Ltd, from 16 February 2006 Janling Pty Ltd had no involvement in the proceedings and Mrs Tracy had no lawful capacity to provide any instructions for the conduct of the proceedings. The matter was resolved by consent orders made on 15 February 2006. Relevant principles Although as a general rule costs are not awarded against a stranger to litigation, as I have already indicated it is well-settled that the Court has a discretion pursuant to s 43 of the Federal Court Act to order costs against a non-party in appropriate circumstances ( Knight [1992] HCA 28 ; (1992) 174 CLR 178 , Caboolture Park [1993] FCA 471 ; (1993) 45 FCR 224 , Gore v Justice Corp Pty Ltd (2002) 119 FCR 429, Kebaro Pty Ltd v Saunders [2003] FCAFC 5 , Life Therapeutics Ltd v Bell IXL Investments Ltd (No 2) [2008] FCAFC 158 ; (2008) 170 FCR 595). The exercise of such discretion is approached with caution indeed it has been described as "rare and exceptional" ( Vestris v Cashman (1998) 72 SASR 449 at 467, Kebaro [2003] FCAFC 5 at [103] ) and depends on the circumstances of each case as it is a "fact-specific jurisdiction" ( Kebaro [2003] FCAFC 5 at [69] ). Principles guiding the approach of the Court to the exercise of the include the following: