FEDERAL COURT OF AUSTRALIA Tleis v Insurance Australia Limited t/as NRMA Insurance [2017] FCA 280 File number: NSD 1291 of 2014 Judge: KATZMANN J Date of judgment: 22 March 2017 Catchwords: COSTS — non-party costs order — application for costs against third party after settlement — where action settled on terms that judgment be entered in favour of respondent and applicants pay indemnity costs — where settlement effected before close of evidence and application based in part on material not in evidence — where application invited findings that third party had acted dishonestly and fraudulently — where no early warning of intention to make application given to third party Legislation: Federal Court of Australia Act 1976 (Cth) ss 37M, 43 Cases cited: Applicant NAGM of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (2002) 125 FCR 488 Bischof v Adams [1992] 2 VR 198 Burns v State of Queensland [2007] QCA 240 Caboolture Park Shopping Centre Pty Ltd (In liquidation) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224 Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] UKPC 39, [2004] 1 WLR 2807 Farrell v Direct Accident Management Services Ltd [2009] EWCA Civ 769 Kebaro Pty Ltd v Saunders [2003] FCAFC 5 Knight v FP Special Assets Ltd (1992) 174 CLR 178 One.Tel Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548 Symphony Group Plc v Hodgson [1994] QB 179 Systemcare (UK) Limited v Services Design Technology Limited [2011] EWCA Civ 546 Taylor v Pace Developments Ltd [1991] BCC 406 Vestris v Cashman (1998) 72 SASR 449 Date of hearing: Heard on the papers Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Category: Catchwords Number of paragraphs: 65 Counsel for the Applicants: Mr A E Maroya Solicitor for the Applicants: McMahons Lawyers Counsel for the Respondent: Mr M B J Lee SC with Ms L M Jackson Solicitor for the Respondent: William Roberts Lawyers ORDERS NSD 1291 of 2014 BETWEEN: RYAN TLEIS First Applicant WAFAA TLAIS Second Applicant AND: INSURANCE AUSTRALIA LIMITED T/AS NRMA INSURANCE (ACN 000 016 722) Respondent JUDGE: KATZMANN J DATE OF ORDER: 22 MARCH 2017 THE COURT ORDERS THAT: 1. The respondent's interlocutory application filed on 5 May 2016 be dismissed with costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT 1 On the evening of 28 December 2012 a 2008 Holden Astra convertible, registered in the name of Ms Ryan Tleis (the vehicle) and insured for substantially more than its purchase price, was destroyed by fire. Ryan's brother, Youssef, with Ryan's authority, made a claim on the policy — the fifth claim in less than a year since the policy was issued. Following an investigation, the claim was rejected. Ryan and her mother, Wafaa, who was also alleged to have had a financial interest in the vehicle, (together the applicants) sought an indemnity and damages from the respondent (the insurer) for loss arising from the fire. The insurer denied liability for various reasons, not least because it maintained that the fire was lit with the express or implied consent of the insured and that the claim is fraudulent. After unsuccessful attempts were made to persuade the insurer to reconsider its position, a complaint was lodged on the applicants' behalf with the Financial Ombudsman Service (FOS). After receiving material from the applicants and the insurer, the FOS was satisfied that the available evidence supported the insurer's position that the vehicle was in fact owned by Youssef and not Ryan. Having regard to the limits of its powers, however, it considered it was inappropriate to resolve the dispute. 2 The applicants then instituted proceedings in the Federal Circuit Court which were transferred to this Court on 3 December 2014. The applicants claimed damages, alleging that, by denying indemnity, the insurer had breached the insurance contract. The insurer filed a defence in which, in its amended form, it admitted that Ryan was the registered and "bare legal" owner of the vehicle, denied that Wafaa was at any time either the legal or beneficial owner, and contended that Youssef was the beneficial owner and primary driver. The insurer also alleged that the fire was intentionally caused by Youssef or a person acting with the consent of one or both of the applicants and, for this reason, the claim was fraudulent within the meaning of the Insurance Contracts Act 1994 (Cth) and it was entitled to avoid the contract. The insurer alleged in the alternative that it was entitled to avoid the contract because the applicants and Youssef "on whose behalf the policy was incepted" had knowingly made false statements in support of the claim with a dishonest intent to induce a false belief in the insurer for the purpose of obtaining payment under the policy and/or had not been truthful and frank in their dealings with the insurer. 3 The only evidence filed on the applicants' behalf consisted of affidavits from Ryan and Youssef. Each of them was required for cross-examination. 4 The dispute proceeded to trial on 18 April 2016. The affidavits of Ryan and Youssef were read and received into evidence, with some omissions following evidentiary objections. Although he was not a party to the action, Youssef was the first witness to be called. He was extensively cross-examined. Ryan was called on the third day. That afternoon, while she was still under cross-examination, counsel for the applicants sought leave to discontinue the proceedings on terms that the applicants pay the respondent's costs. That application was opposed. The insurer insisted on judgment being entered in its favour. It also demanded that costs be paid on an indemnity basis and that "a third party costs order" be made against Youssef on the ground that the litigation was being maintained by him and for his benefit. Ultimately, judgment was entered by consent in favour of the insurer, and Ryan and Wafaa were ordered to pay the insurer's costs on an indemnity basis. At the same time I granted liberty to the insurer to apply for a third-party costs order, fixed a timetable for the filing of submissions and any evidence, and indicated that any such application would be determined on the papers unless either party requested an oral hearing. The insurer availed itself of that liberty, filing an interlocutory application seeking orders as follows: 1. That Ryan Tleis (first applicant), Wafaa Tlais (second applicant) and Youssef Tleis are joint and severally liable to pay the respondent's costs of the proceedings on an indemnity basis as agreed or assessed. 2. The respondent's costs of this application be included in order 1 as costs in the cause. 3. These orders are to be entered forthwith. 4. Such further or other order as the Court deems fit. 5. Liberty to apply on 3 days' notice. 5 Submissions were filed by both parties and the insurer filed an affidavit from its solicitor, Robert Ishak. Neither party requested an oral hearing. 6 The first "order" the insurer seeks is, in effect, a declaration. There would be no point in making the declaration without a consequential order. If I were disposed to make such an order, it would require varying the previous costs order. For the following reasons I decline to do so. The facts 7 Before turning to the evidence and the argument on the present application, some further context is required. 8 At the trial the following facts were either agreed or not in dispute. 9 The vehicle was a two-door coupe convertible. It was manufactured in November 2007. 10 On 26 August 2011 Ryan, who at the time was suspended from driving, purchased the vehicle from Kumar Motors in Bankstown for $32,000, trading in a Mitsubishi Lancer for $20,500. The same day Ryan was registered as the owner. The vehicle had a three-month warranty. 11 On 8 October 2011, before the warranty expired, Ryan filed an application against Kumar Motors in the Consumer, Trader & Tenancy Tribunal (CTTT) (now NCAT), claiming that the vehicle was "defective and faulty" and seeking payment of $33,850. On 21 November 2011, however, the application was withdrawn, apparently after Kumar Motors agreed to repair the vehicle without charge. 12 The insurance policy was taken out on 26 January 2012. Ryan and Wafaa were named as the beneficiaries. Under the terms of the policy, the insurer agreed to indemnify Ryan and Wafaa for and against loss and damage to the vehicle in the sum of $46,350, that is, for a sum considerably more than Ryan had paid when she purchased it. 13 Over the next few months the vehicle was involved in four separate collisions: on 16 February, 16 March, 24 May, and 28 May 2012. Claims were made on the policy after each of these collisions. On at least three of those occasions, Youssef was the driver. 14 Save for a fortnight (between 30 October and 13 November 2012), over the period from 31 May 2012 until 21 December 2012 the vehicle was under repair. 15 On 16 December 2012 the insurer advised Ryan and Wafaa that the policy was due to be renewed on 26 January 2013 for an agreed value of $40,650 and an annual premium of $7,175.40. The registration was due for renewal on 25 February 2013. 16 On 21 December 2012 Youssef collected the vehicle from the repairer. It appears that he drove it to the house in Bankstown where Ryan and Wafaa lived because, from then until at least 25 December 2012, the vehicle was parked in the backyard of that house. At some stage between 25 and 28 December 2012, however, it was moved from the backyard to the kerb alongside the Tleis house. Ryan's evidence was that she moved the vehicle on 25 December 2012 because the family was planning to have a barbecue in the backyard that day. 17 Evidence was available that, at about 10.00 pm on 28 December 2012, a witness, Michael Hackett, heard a loud bang. He went outside and saw the vehicle in flames and a young man running north along the street. He described this man to police as being of Middle Eastern appearance and solid build, 5 ft 10 ins tall, with a shaved head, and wearing a white shirt. This evidence was contained in an affidavit sworn by Michael Hackett which was filed by the insurer, but not read. Youssef's evidence, which was uncontradicted, was that he has never shaved his head. 18 Later that night Youssef telephoned the insurer to report the damage to the vehicle. 19 The main area of combustion was to the external rear section, with the fire spreading from the exterior into, and within, the area of the boot. There was a second, smaller seat of fire at the upper aspects of the front offside tyre and wheel arch and a third, smaller seat of fire at the upper aspects of the front nearside tyre and wheel arch, which, according to the agreed facts, resulted in "minor translation of combustion into the engine bay". 20 The vehicle was damaged beyond repair. 21 The fire was lit as a result of deliberate human involvement. The most likely cause was the application of a match or similar open flame to an introduced fuel source or accelerant. The evidence in support of the costs application 22 In his affidavit Mr Ishak described the events that had taken place on and from the time the insurer refused to indemnify the applicants for the loss or damage to the vehicle. The following account is derived from that affidavit. 23 The applicants were notified of the insurer's decision by letter dated 19 April 2013. On 28 April 2013 Youssef wrote to the insurer's Customer Relations Department asking it to review its decision, contending that there had been no intentional nondisclosure and inviting the insurer to contact him. The letter was headed "Formal complaint against Insurance Australia Group ("NRMA")". The same day Youssef lodged a dispute in the applicants' names with the FOS. 24 Youssef sent a second letter on 2 May 2013 entitled "Formal request of level one (1) Review – Insurance Australia Group ("NRMA")", addressed to the insurer's Claims Enquiry Unit, contending that there had been no fraudulent misrepresentation, asking the insurer to note that both insured were willing to negotiate a settlement amount, reiterating that there had been no intentional non-disclosure, and once again inviting the insurer to contact him. 25 On 9 July 2014 the FOS published its determination. 26 The applicants commenced proceedings in the Federal Circuit Court on 22 September 2014, which were later transferred to this Court. 27 On 12 March 2015 Bryan McMahon, the solicitor on the record for the applicants, sent an email to Lana Collaris, special counsel to the insurer's lawyers, in the following terms: My client Youssef Tleis has informed me that you accessed his LinkedIn profile 3 times yesterday. Please let me know if you would like me to arrange a personal introduction. (Emphasis added.) 28 On 4 May 2015 Ms Collaris wrote to Mr McMahon: Dear Bryan, I attach the orders we will be seeking at this morning's directions hearing. Given that our client's claims notes show that Youssef Tleis was a regular driver of the insured vehicle, drove the replacement vehicles provided by our client, was the main point of contact in respect of all claims, and had some beneficial interest in the vehicle (see page 103 where Mr Tleis says that he is the owner of the vehicle), your clients may wish to serve an affidavit of Mr Tleis in response to our evidence. We put you on notice that if your clients do not call Mr Tleis as a witness in this proceeding, then we may ask the court to make an inference pursuant to Jones v Dunkel (1959) 101 CLR 298. In respect of the subpoenas, we make the following comments: 1. With respect to the subpoena to the RMS, given that Mr Tleis was a regular driver of the vehicle and had some interest in the vehicle, we would like to review his driving records to assess a defence on the grounds of non-disclosure. 2. With respect to the subpoena to Vodafone, we would like to review Mr Tleis's phone records to see if such records support our defence of fraud. Please advise if your client consents to these orders. 29 The insurer also relied on an affidavit of Joseph Vartuli, sworn 26 February 2016. Although the affidavit of Mr Vartuli was not read at the hearing, the insurer indicated in its submissions that it wished to read this affidavit in support of its application. 30 Mr Vartuli is the sales manager who sold the insured vehicle to Ryan. His evidence was to the effect that on 25 August 2011 he saw Youssef looking at the vehicle and, when he approached him, Youssef said that he was "looking to buy a new car" and that he had a Mitsubishi Lancer he would like to trade in. He said that Youssef told him he would like to buy the vehicle but he would need finance and, as he was only 17, "that will have to be done in [his] sister's name". He said he would return the following day with his sister. Mr Vartuli offered him a courtesy vehicle in the meantime, an offer Youssef accepted. A written agreement to use the courtesy vehicle was annexed to the affidavit. It recorded the customer's name as "Youssef Tleis" and carried a signature which appears, from a comparison with the signature on Youssef's affidavit, to be his signature. He also annexed a copy of the driver's licence he was given, which is in the same name and carries Youssef's photograph. Both Ryan and Youssef denied that Youssef had been to the car dealership alone on 25 August 2011, insisting that they had attended the dealership together on that day and the next. 31 Mr Vartuli said that the next day Youssef returned with a young woman who identified herself as Ryan, and that Ryan signed all the necessary paperwork for the purchase and finance of the vehicle. On or about 2 September 2011, however, Mr Vartuli said he received a telephone call from Youssef, who told him there were problems with the vehicle and later brought the vehicle to the car yard to enable repairs to be carried out. On or about 10 October 2011 Mr Vartuli received a notification of Ryan's application to the CTTT. On 21 November 2011 Mr Vartuli received another letter from the CTTT notifying him that the application had been withdrawn. On or about 9 December 2011 Mr Vartuli received another call from Youssef, saying that the vehicle had been inspected by the NRMA and that he wanted further repairs. Mr Vartuli said that he told Youssef to return the vehicle and they would carry out repairs on the "warrantable items". Youssef did as he was asked and the repairs were carried out without charge. 32 No objection was taken to the Court receiving this evidence. However, Mr Maroya, of counsel, who appeared for the applicants at trial, and for Youssef on this application, submitted that Mr Vartuli's version of events "should not be accepted unequivocally", since the proceedings were "discontinued" before he had been cross-examined at which point the applicants' case would have been put to him "in detail". The power to make a third party costs order 33 There is no dispute that the Court has the power to make the order sought and, in an appropriate case, to do so by a "supplemental" order to this effect after judgment is entered: Caboolture Park Shopping Centre Pty Ltd (In liquidation) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224 at 231 (Lee, Hill and Cooper JJ). 34 Section 43 of the Federal Court of Australia Act 1976 (Cth) (FCA Act) confers on the Court a wide discretion to determine by whom and to what extent costs are to be paid. That includes the discretion to make an order against a third party to the litigation "in a suitable case": Caboolture Park at 230–231. Yet, as the Full Court (Beaumont, Sundberg & Hely JJ) observed in Kebaro Pty Ltd v Saunders [2003] FCAFC 5 at [103], the authorities indicate that a non-party costs order is "exceptional" or "extraordinary" and to warrant the exercise of the discretion to make it there must be "a sufficiently close connection" or, put differently, a "'real and direct and … material' connection [between the third party and] the principal litigation" (Bischof v Adams [1992] 2 VR 198 at 204–205 (Gobbo J)). 35 In Knight v FP Special Assets Ltd (1992) 174 CLR 178 Mason CJ and Deane J said at 192–3 (Gaudron J agreeing at 205) that: [I]t [is] appropriate to recognize a general category of case in which an order for costs should be made against a non-party … 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. 36 Dawson J observed in the same case at 202 that there was "a long-asserted jurisdiction" of awarding costs in appropriate cases against a non-party who is "the effective litigant standing behind an actual party or where there has been a contempt or abuse of the process of the court". 37 Nevertheless, one cannot be too prescriptive. The categories of case in which such an order may be made are not closed (Kebaro at [103]). It has been said that "there is only one immutable rule in relation to costs, and that is that there are no immutable rules": Taylor v Pace Developments Ltd [1991] BCC 406 at 408. 38 Thus, the real question is not whether an order could be made in the present case, but whether, in all the circumstances, it is in the interests of justice to do so. The insurer's submissions 39 The insurer's submissions in chief run to 44 pages. In effect, it invited the Court to determine the merits of its defence. It asked the Court to make findings "of substance" against Youssef. It also invited the Court to consider "gaps" in the evidence and draw inferences that witnesses who might have been called would not have assisted the applicants' case, although the dispute was settled before the applicants' case had closed. It contended that the effect of the orders was that, not only had it succeeded in defeating the allegations made in the statement of claim, but that it had also made out its "positive defences". No evidence or agreed facts were tendered to support this contention. 40 The insurer submitted that Youssef had "a real, direct and material connection with the litigation because he 'helped initiate it, caused it, has controlled it, and has intermeddled in it'" (Burns v State of Queensland [2007] QCA 240 at [13]–[19]). As is apparent from Burns, itself, however, even if I were to come to that conclusion, it does not necessarily follow that the discretion should be exercised to make an order of the kind sought. 41 The insurer also submitted that the litigation would not have occurred without Youssef's "extensive involvement" in it. It contended that "[h]e hid behind his mother and sister in order to prosecute in (sic) these proceedings for his own benefit", "setting [them] up" as "straw (wo)men", knowing the claims to be false. As Youssef claimed to be the family spokesperson, the insurer submitted that it "must be inferred" that he was the person responsible for advancing, through the applicants, an argument "he knew had false foundations". The insurer also submitted that the evidence against Youssef is "strong enough" to satisfy the Court that he was engaged in a fraudulent scheme to obtain a financial advantage from the insurer and that he used the proceeding to further that scheme. These submissions were supported by references to the transcript, the affidavits and, troublingly, to numerous documents in the insurer's five-volume tender bundle, none of which was in evidence. The applicants' and non-party's submissions 42 Mr Maroya submitted that the order should not be made because: (1) the proceedings were discontinued on terms which included that the applicants pay the respondent's costs on an indemnity basis and "the court cannot try a hypothetical action": Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624 (McHugh J); (2) although the insurer considered that Youssef had "played a central role in the proceedings" at least by early May 2015, it did not signal to him its intention to seek a costs order against him until almost 12 months later; (3) the question of whether the matter is exceptional or extraordinary is to be assessed "in the context of the entire range of litigation that comes to the courts" (TGA Chapman Ltd v Christopher and Sun Alliance [1998] 2 All ER 873 at 881, cited with approval in Gore v Justice Corporation Pty Ltd (2002) 119 FCR 429 (Full Court) at [40]), not in the context of the particular class of case under consideration, and there is nothing extraordinary about this matter viewed in the relevant context; (4) Youssef's involvement did not cause the insurer to incur costs or add to its costs; (5) the insurer has not established that Youssef had a financial interest in the proceeding or stood to benefit personally from the litigation; (6) Youssef was a mere witness and witnesses are generally immune from suit; and (7) as a result of the proceeding Youssef has now lost his job with the insurer and that is "punishment enough". Should the orders be made? 43 The first of Mr Maroya's submissions is based on a false premise. The proceedings were not discontinued. Furthermore, while McHugh J did say in Lai Qin that the court could not try a hypothetical action, what he said should be read in context. The context was termination of proceedings by discontinuance or settlement where there had been no hearing on the merits. His Honour did not rule out the possibility of a costs order in these circumstances. The passage from which the quotation was taken reads in full (omitting footnotes): In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action … 44 Furthermore, his Honour observed (at 625) that, even where there is no question of unreasonable conduct, in some cases, a judge might feel confident that one party was almost certain to succeed if the matter had been fully tried. 45 In reply, the insurer referred to One.Tel Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548 at 552–3 where Burchett J discussed Lai Qin and then (at 55[6]) said this: In my opinion, it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs. In Ex parte Lai Qin, McHugh J was careful to state (at 624) that the principles with which he was concerned were those that "govern an application for costs when a party elects not to pursue an action because he or she has achieved the relief sought in the action either by settlement or by extra-curial means". 46 As the insurer submitted, this case falls into the former type, that is, it is a case in which one party, after litigating for some time, effectively surrendered to the other. But that means that the award of costs to which the applicants agreed was justified. It does not mean that a third party to the litigation should be jointly and severally liable for those costs. 47 Secondly, I am unimpressed by the submission that there is nothing extraordinary about this case. A case is exceptional or extraordinary for present purposes merely if it is "outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense": Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] UKPC 39, [2004] 1 WLR 2807 at §25 (1). In any event, proof that the circumstances are "exceptional" is not a precondition to the exercise of the jurisdiction: Systemcare (UK) Limited v Services Design Technology Limited [2011] EWCA Civ 546 at [47] (Lewison J, Lloyd and Ward LLJ agreeing at [67] and [68] respectively). 48 Thirdly, although it is possible, as Mr Maroya submitted, that Youssef was a client of Mr McMahon only for a limited purpose, prima facie, the evidence that Mr McMahon referred to Youssef as his client rather suggests that he was more than a mere witness. 49 Fourthly, the submission that Youssef has been punished enough by the loss of his employment with the insurer is beside the point as the jurisdiction to make a third-party costs order is not punitive: Applicant NAGM of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (2002) 125 FCR 488 (Sackville, Allsop and Jacobson JJ) at [66]. 50 The circumstances leading up to the fire are certainly suspicious and were not satisfactorily explained at the time the proceedings were abruptly terminated. As I said earlier, Youssef was cross-examined for a little over two days. My contemporaneous note is that the process of cross-examination was akin to pulling teeth. Youssef claimed not to have understood, or to have been hoodwinked by, very straightforward questions. Yet, he is no fool. He was a university student at the time of the events, studying for a combined degree in law and business. Although he abandoned his legal studies, he graduated with a degree in business and worked as a process analyst for the insurer from January 2015 until shortly before the trial started when he was dismissed. The evidence disclosed that, even at the age of 17, at the time the motor vehicle in question was purchased, he had a sophisticated understanding of insurance and finance beyond what might be expected of the vast majority of teenagers. A picture emerged of a person who was, at least, alert to, and adept at, exploiting loopholes in the insurance system. Moreover, through the cross-examination, the insurer painted a vivid picture that the vehicle had been purchased for him and that he treated it as his own. Youssef admitted to telling an insurance investigator both that he drove the car a lot and that the car was his. What is more, while admissions of wrongdoing were difficult to extract from him, he eventually admitted to having made a number of false statements, including representing to the insurer during one telephone call that he was Ryan. 51 Ryan was also an unimpressive witness. She, too, was guarded and evasive during the cross-examination. Implausibly she professed little or no memory for the circumstances in which her affidavits were prepared and a better memory for more remote events. 52 Had the trial proceeded to judgment, I might well have concluded that the evidence of neither Youssef nor Ryan should be accepted unless it was corroborated by independent evidence. Moreover, I might well have upheld one or all of the insurer's defences. 53 Nevertheless, I am not persuaded that the orders the insurer seeks should be made. 54 First, the trial did not proceed to judgment. The insurer had not gone into evidence when the action settled. Indeed, the applicants had not closed their case. Consequently, assumptions were put to the witnesses that were not proved. Documents upon which the insurer relies to support its application were not tendered, let alone admitted. The affidavits of Mr Vartuli and Mr Hackett were not read, and none of the insurer's witnesses was cross-examined. If the matter had not settled, the affidavits had been read, the deponents cross-examined, and the documents in the insurer's tender bundle tendered and admitted, the applicants might well have applied to call or tender evidence in reply. In all these circumstances, the inferences the insurer invited the Court to draw should not be drawn. 55 Secondly, although the category of cases in which it might be appropriate to make a third-party costs order is not closed, I was not taken to a single authority in which such an order was made following settlement. 56 Thirdly, any application for a third-party costs order needs to be treated with "considerable caution": NAGM at [68], citing Symphony Group Plc v Hodgson [1994] QB 179 at 193A (Balcombe LJ, Staughton and Waite LLJ agreeing at 196 and 197 respectively). 57 Fourthly, as Balcombe LJ observed in Symphony Group v Hodgson at 193E, "the procedure for the determination of costs is a summary procedure, not necessarily subject to all the rules that would apply in an action". In my opinion, it is undesirable, if not inappropriate, to make findings of fact on a costs application on substantive matters in dispute and particularly so when the evidence had not closed before the terms of settlement were agreed upon. Furthermore, to do so could well discourage settlement. Not only would this be an undesirable course, it would not promote the overarching purpose of the civil procedure rules, which includes the swift and efficient determination of all proceedings in the Court, and the Court is bound to exercise its discretion in a way that best promotes that purpose: see FCA Act, s 37M. Moreover, a court should not make findings of dishonesty, let alone fraud, unless it is strictly necessary. 58 Fifthly, I accept that there is evidence to suggest that Wafaa was a "woman of straw". If Youssef is to be believed, his mother was a pensioner. On the other hand, he also testified that she contributed to the premiums for the vehicle and Ryan's evidence was that her mother worked as a history teacher albeit while also receiving a disability pension. In these circumstances and in the absence of any independent evidence, it is difficult to come to a conclusion one way or another as to her ability to pay costs. But that matters little, as the liability of the applicants is joint and several and the unchallenged evidence was that Ryan is employed as a teacher and that she also derived an income from working in the family business. There is no reason to believe that she could not pay the insurer's costs. 59 Sixthly, although Youssef undoubtedly played a prominent role in the prosecution of the insurance claim and more probably than not also in this litigation, the evidence to the effect that he did so as the applicants' agent is not implausible or inherently unlikely. Indeed, as a university student of business and law, and later as a graduate in business and an employee of the insurer, it is entirely understandable. Furthermore, Ryan's evidence on this matter, which was unchallenged, is that Youssef was the only male child and that the family customarily relied on his assistance and support as "the family spokesman". She explained that her parents were born in Lebanon, English was not their first language, and the custom of reliance on sons: is a practice which, as a cultural matter, commonly happens in families of Middle-Eastern origin, particularly closely-knit families in which the parents were not born in Australia, and are still accustomed to the ways of their homeland. In our family household, Youssef would manage the bills and their payment. I know that Youssef would accompany our mother to her medical appointments. 60 Finally, the insurer did not give prompt notice of its intention to seek a third-party costs order. While this circumstance is not decisive, it is "a material consideration" in determining whether or not to make a third-party costs order: Farrell v Direct Accident Management Services Ltd [2009] EWCA Civ 769 at [11]. In Symphony Group v Hodgson at 193, Balcombe LJ characterised the giving of a warning to a non-party of the possibility that an application might be made as "an obvious application of the basic principles of natural justice". 61 Similarly, in Vestris v Cashman (1998) 72 SASR 449 at 458, Olsson J (with whom Doyle CJ agreed at 449) observed: [C]ommon fairness dictates that a defendant seeking to place a non-party at risk of an order for costs must, either by bringing a timely application for security, or alternatively, at least by letter advising the defendant's intention, place the non-party on notice of that risk, so that the non-party will not, in effect, be lulled into a false sense of security and ambushed, when it is too late for it to reflect as contemplated in Yates Property Corporation Pty Ltd v Bolan[d (No 2) (1997) 147 ALR 685 at 695, that is, on whether to make the financial commitment necessary to allow the litigation to proceed]. Lander J made observations to like effect at 468. 62 Here, neither course was adopted. 63 The insurer submitted that, since at least early May 2015, that is to say about a year before it announced its intention to make the application, it "considered that Youssef played a central role in the proceedings". That is clear from Ms Collaris's email. Yet, there is nothing to suggest that it warned Youssef of the possibility that it might seek an order for costs against him before the last day of the hearing after the applicants had signalled their intention to discontinue the proceedings. At this point, without prior notice, Mr Lee SC, who appeared with Ms Jackson for the insurer, announced that, not only would the insurer require judgment in their favour and indemnity costs but that it would also "be seeking a third party costs order against [Youssef] on the basis that this litigation was being maintained by him for his benefit". 64 No explanation was offered for the insurer's failure to give prompt notice. Instead, the insurer submitted that a party who brings a fraudulent claim through "a straw man" should be deemed to be on notice of the possibility that a successful defendant may seek costs against him or her such that "any question as to whether a third party may be prejudiced by a lack of relevant warning should not arise". I do not accept the submission. It is unsupported by authority and, since third-party costs orders are exceptional, I do not think that the prospect that such an order might be sought would occur to many an experienced practitioner, let alone a litigant. Conclusion 65 The insurer's interlocutory application should be dismissed with costs. I certify that the preceding sixty-five (65) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katzmann. Associate: Dated: 22 March 2017