Land and Environment Court of New South Wales CITATION : Edwards v The Hills Shire Council [2010] NSWLEC 190 This decision has been amended. Please see the end of the judgment for a list of the amendments. APPLICANT: Michael Edwards PARTIES : RESPONDENT: The Hills Shire Council THIRD PARTY: Alex Wong FILE NUMBER(S) : 10483 of 2009 CORAM: Biscoe J KEY ISSUES: COSTS :- application for a costs order against a non-party in Class 1 development appeal - power and discretion of Court to set aside costs order against a party (who could not be located after conclusion of proceedings) for the purpose of ordering a non-party to pay those costs - power and discretion of Court to join a non-party for the purpose of making a costs order against him - power and discretion of Court to make a costs order against a non-party - whether non-party the real party to the litigation hiding behind a party to obtain development for the non-party's preferred use. Civil Procedure Act 2005, ss 63, 98 Environmental Planning and Assessment Regulation 2000, cl 49(1)(b) LEGISLATION CITED: Land and Environment Court Rules 2007, r 3.7 Supreme Court Rules 1970, Pt 52A r 4(3) Uniform Civil Procedure Rules 2005, rr 6.26, 36.15, 42.3 Alphatex Australia v The Hills Shire Council (No 2) [2009] NSWLEC 1126 Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation [2001] HCA 26 Charlton v Moore [2009] NSWLEC 61 Double Bay Newspaper v The Fitness Lounge [2006] NSWSC 226 Edwards v The Hills Shire Council [2009] NSWLEC 187 CASES CITED: Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd [2009] HCA 43, 239 CLR 75 Knight v FP Special Assets Ltd [1992] HCA 28, 174 CLR 178 Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd [2008] NSWCA 38, 71 NSWLR 262 Norton v Blacktown City Council (No 2) [2009] NSWLEC 218, 171 LGERA 424 Roach v B & W Steel Pty Ltd (1991) 23 NSWLR 110 Yates v Boland [2000] FCA 1895 DATES OF HEARING: 27 September 2010 DATE OF JUDGMENT: 1 October 2010 APPLICANT: n/a RESPONDENT: Mr A Pickles, barrister LEGAL REPRESENTATIVES: SOLICITORS Maddocks THIRD PARTY: Mr C Carroll, barrister SOLICITORS Guardian Legal JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES BISCOE J 1 October 2010 10483 of 2009 MICHAEL EDWARDS v THE HILLS SHIRE COUNCIL JUDGMENT INTRODUCTION 1 HIS HONOUR: This is an application for costs against a non party in proceedings in Class 1 of the Court's jurisdiction. 2 On 19 October 2009 Michael Edwards' appeal against The Hills Shire Council's refusal of his development application for a brothel was dismissed by me on the council's motion that it was an abuse of process: Edwards v The Hills Shire Council [2009] NSWLEC 187. One of the orders made was that Mr Edwards pay the council's costs after 10 August 2009 of the council's notice of motion as agreed or assessed. The orders were entered and the costs were assessed. But the costs order cannot be enforced because the council has been unable to locate Mr Edwards. 3 Consequently, by notice of motion filed on 20 August 2010, almost a year after my judgment, the council moves for orders that (a) the 2009 costs order be set aside; (b) a non-party, Alex Wong, be joined as a party; (c) further or alternatively, Mr Wong be ordered to pay the council's costs that Mr Edwards was ordered to pay; and (d) Mr Wong pay the parties' costs of this notice of motion. 4 The object of the exercise is to obtain a costs order against a person who, at the moment, is a non-party. It has been said that the jurisdiction to order costs against non-parties should be exercised sparingly: Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation [2001] HCA 26 at [34] (Callinan J). 5 The gravamen of the council's case, the basis of the orders that it seeks, is that Mr Wong was the real party to the litigation hiding behind Mr Edwards to obtain development consent for Mr Wong's preferred use (the "real party" contention). In other words, the council says, Mr Wong was Mr Edwards' principal. The council's written submissions also alleged formal defects in the originating process sufficient to afford relief; however, this was not pressed in closing oral submissions. SUBMISSIONS 6 On the basis of its "real party" contention, the council submits that: (a) the Court has power to set aside the 2009 costs order under r 36.15 of the Uniform Civil Procedure Rules 2005 ( UCPR ) or s 63 of the Civil Procedure Act 2005 ( CPA Act ) on the ground that the order was made irregularly; (b) the Court has power to order costs against Mr Wong after joining him as a party pursuant to UCPR 6.26, or as a non-party pursuant to s 98 of the CPA; (c) the Court should exercise its discretion to award costs against Mr Wong. 7 Mr Wong submits that: (a) the council has not established its "real party" contention. Mr Edwards was at all times a real and genuine litigant (albeit assisted in the process by Mr Wong); (b) alternatively, the discretion to set aside the 2009 costs order, to join Mr Wong as a party and to order him to pay costs should not be exercised having regard to the delay by the council in bringing its motion. FACTUAL BACKGROUND 8 The facts are not in contest. 9 Mr Alex Wong is the proprietor of Alphatex Australia and was a co-owner with Ms Xincai Burnett, now known as Xincai Piao, of premises located at 26B Old Northern Road, Baulkham Hills until 26 July 2010 (the premises). They have lived together since 2005 and were married in March 2009. 10 Ms Piao was and is managing a business in Artarmon described in her evidence as a massage services centre and in Mr Wong's evidence as a brothel. 11 Alphatex Australia appealed to this Court from a decision by the respondent council to refuse a development application for the fitout and use of the premises as a brothel. The appeal was dismissed by the Senior Commissioner on 29 April 2009: Alphatex Australia v The Hills Shire Council (No 2) [2009] NSWLEC 1126. 12 Mr Wong and Ms Piao decided not to appeal further due to the legal costs. 13 In May 2009 one of Ms Piao's employees, Jenny Chen, expressed an interest in making a further development application, funded by her boyfriend Michael Edwards, to use the premises as a brothel on the condition of securing from Ms Piao and Mr Wong a "long term lease with good rent and a good rent free period". 14 Mr Ian Mathers (an employee at the Artarmon massage centre or brothel at the time) confirms the existence of both Ms Chen and her boyfriend whose name he thought was Mark but who was in fact Michael Edwards, together with the former's desire to start and run a massage service centre or brothel business of her own. 15 Mr Wong, Ms Piao, Ms Chen and Mr Edwards met at and inspected the premises on 17 and 19 May 2009 when further discussions ensued as to the terms of the proposed lease. 16 At the 19 May 2009 meeting, Mr Wong and Ms Piao (as "Owner") and Ms Chen and Mr Edwards (as "Lessee") executed an Interim Agreement for Lease in relation to the premises "subject to obtaining the approval of a further development application/appeal from the Hills Shire Council/Land Environment Court". The agreement included the following terms: "1. The term of the lease shall be 5 years + 5 years + 5 years, commencing on the date of the DA/appeal approval; 2. The rent shall be $1,000 (one thousand dollars) per week plus GST, no outgoing is payable apart from water, electricity and telephone costs; 3. There shall be a six-month rent free period; … 5. The Lessee shall be responsible to pay all costs associated with the development application/appeal including, but not limited to, all legal costs; … 7. The owner shall give consents to the Lessee as necessary for the development application/appeal to the Council and/or Land and Environment Court." 17 During the course of that meeting and in view of the previous development application by Alphatex, Ms Chen and Mr Edwards instructed Mr Wong to prepare the necessary paperwork for the new development application and coordinate everything, and agreed upon Mr Wong's fee for this service. Part payment of that fee was made to Mr Wong. It was also agreed that a solicitor, Mr Hannaford, who was instructed in the previous proceedings by Alphatex, would be used by Ms Chen and Mr Edwards. 18 On 26 May 2009 there was a conference between Mr Baird of counsel, Mr Hannaford and Mr Wong. Mr Wong said "We have a potential tenant who is keen to lodge a DA and if necessary an appeal which they will also fund. His name is Mr Edwards". A file note of Mr Hannaford is in evidence and indicates that lodging of a fresh development application and an appeal from my decision were both discussed. 19 In or around early June 2009 a new development application by Mr Edwards for the fitout and use of the premises as a brothel was prepared by Mr Wong, signed by Mr Edwards as the applicant and lodged with the council. Mr Wong and Ms Piao signed the application as consenting owners. Alphatex Australia's address and contact details were inserted as Mr Edward's contact details so that all communications from the council would be received directly at Mr Wong's office. 20 As the deemed refusal date for that development application approached, there was a meeting on 1 July 2009 between Mr Wong, Ms Piao, Ms Chen and Mr Edwards. After seeking and obtaining Mr Wong's estimate of legal fees based on a verbal indication to Mr Wong from Mr Hannaford, Mr Edwards told Mr Wong to go ahead with the appeal on Mr Edward's behalf and to deal with Mr Hannaford and the barrister. He gave Mr Wong the filing fee. 21 That appears to be the last occasion Mr Wong or Ms Piao communicated directly with Mr Edwards. Thereafter their communications with him were via Ms Chen. Mr Wong communicated with Ms Chen through Ms Piao. 22 As Mr Hannaford was on leave at the time, Mr Wong contacted Mr Baird and told him Mr Edwards had lodged a development application, that the deemed refusal date was expiring soon and that Mr Edwards wanted to appeal ASAP. He asked if Mr Baird would prepare the appeal documents. Mr Wong says that Mr Baird agreed. 23 On 17 July 2009 Mr Baird sent an email to Mr Hannaford stating that he had received a strange request from Mr Wong that he wished to commence Class 1 proceedings. Mr Baird said he wished to discuss this with Mr Hannaford. 24 Mr Baird prepared the Class 1 application which had the Alphatex Australia address and contact details for the same reason as the development application had those details: see [19] above. 25 The Class 1 application was filed on 21 July 2010. 26 There is in evidence a copy of an undated and unexecuted legal services agreement between Mr Hannaford and Mr Edwards, apparently prepared by the former, which Mr Hannaford seems to have initialled and dated 22 July 2009. Next to the item "Contact Points" appear the names "Alex Wong/Michael Edwards". 27 On 29 July 2009 Mr Baird sent a costs disclosure letter to Mr Wong addressed to "Alex Wong/Michael Edwards" which Mr Wong via Ms Piao passed on to Ms Chen. 28 On 7 August 2009 the council filed a notice of motion for the appeal to be summarily dismissed as an abuse of process as the proposed development was not significantly different from that which had been rejected by the Senior Commissioner. Mr Wong was present during the hearing, Mr Edwards was not. I found for the council and dismissed the appeal on 19 October 2009: see [2] above. Order 3 was in the following terms: "The applicant is to pay the council's costs after 10 August 2009 of the council's notice of motion filed on 7 August 2009. " 29 Shortly afterwards Mr Wong gave a copy of my judgment to Ms Piao who gave a copy to Ms Chen. 30 Mr Wong says he was the point of contact for Mr Edwards in relation to the appeal and the council's notice of motion, the hearing of which he attended. 31 Mr Baird's invoices issued to Mr Edwards in relation to the appeal and that of Mr Hannaford issued to Mr Wong and Ms Piao were passed on by Ms Piao to Ms Chen who later paid them by giving cash to Ms Piao. 32 A bill of costs in relation to the Class 1 proceedings was subsequently issued by the council and served upon Mr Hannaford as solicitor for Mr Edwards after 10 December 2009. The bill of costs was given by Mr Wong to Ms Piao to pass on to Ms Chen with a request that she ask Mr Edwards what he wanted to do. Ms Piao passed it on to Ms Chen who said she would let Mr Edwards know. 33 Ms Chen did not return to work after 17 December 2009 and Ms Piao has not seen her since. At the request of Mr Hannaford to Mr Wong, Ms Piao subsequently attempted to contact Ms Chen by various means in order for Mr Edwards to address the bill of costs from the council. Mr Mathers also assisted in attempting to locate Ms Chen. 34 Attempts made by Ms Piao, Mr Wong, Mr Mathers and representatives of the council have failed to locate Mr Edwards. 35 On 10 March 2010 Mr Hannaford wrote to Mr Edwards stating (inter alia): "We refer to the above matter in which you were the nominated Applicant to the development application lodged with the Hills Shire Council and the Applicant to the Land & Environment Court appeal proceedings. It is noted that throughout the course of this matter we have not received any instructions directly from you. We received our instructions from Mr Alex Wong as your agent. We presume therefore, that you have been advised and kept informed by your agent throughout as to the conduct and outcome of the proceedings and are aware that the proceedings were dismissed by Justice Biscoe of the Land & Environment Court on 19 October 2009 and the Applicant was ordered to pay the Council's costs as incurred in the proceedings from 10 August 2009. Since December 2009 there has been correspondence between our firm and Maddocks Lawyers, who act for the Council, in respect to the issue of costs. We have been in constant communication as to the progress of the costs with Mr Wong at all times and we sought instructions in respect to making an offer to settle the costs. However, we note that we have not been provided with any instructions in that regard and have been unable to obtain instructions to make an offer to settle. Maddocks Lawyers have now prepared an itemised Bill of Costs and are proceeding to make an Application for Assessment of Costs through the Supreme Court. This information was sent under their letter dated 25 February 2010. A copy of the letter is enclosed however we handed the enclosed documents/materials to Mr Wong at our meeting at our office on 8 March 2010. We advise your urgently to obtain the enclosed material to the Maddocks Lawyers letter dated 25 February 2010 from Mr Wong." 36 On 16 July 2010 the council's solicitors wrote to Mr Hannaford foreshadowing the filing of a notice of motion to join the owner of the premises to the proceedings if they were unable to serve Mr Edwards with the costs assessment certificate and related documents. 37 On 20 August 2010 the council filed this notice of motion seeking (inter alia) an order that Mr Wong pay the council's costs which were ordered by me to be paid by Mr Edwards. The reason, the council says, that it has been unable to recover costs against Mr Edwards who has never been seen by any representative of the council during the course of the proceedings. COURT'S POWERS 38 In order for the council to obtain the relief that it seeks, it is necessary to consider the power of the court to set aside its final orders, to join a person to proceedings for the purposes of making a costs order, and to make a costs order against a non-party. SETTING ASIDE THE 2009 COSTS ORDER 39 It is common ground that the costs order sought by the council against Mr Wong can only be made if the 2009 costs order against Mr Edwards is set aside. 40 The council submits that the 2009 costs order was made irregularly and therefore may be set aside under r 36.15(1) UCPR, which provides: " 36.15 General power to set aside judgment or order (1) A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, ..." 41 Section 63 CPA empowers the Court to set aside an order for procedural irregularities but I do not think it is applicable to the "real party" contention case or (if it is) that it relevantly adds anything to r 36.15: " 63 Directions with respect to procedural irregularities (1) This section applies to proceedings in connection with which there is, by reason of anything done or omitted to be done, a failure to comply with any requirement of this Act or of rules of court, whether in respect of time, place, manner, form or content or in any other respect. (2) Such a failure: (a) is to be treated as an irregularity, and ... (3) The court may do either or both of the following in respect of proceedings the subject of a failure referred to in subsection (1): (a) it may, by order, set aside…any…order in the proceedings, either wholly or in part, …. (4) The court may not take action of the kind referred to in subsection (3) (a) on the application of any party unless the application is made within a reasonable time and, in any case, before the party takes any fresh step in the proceedings after becoming aware of the failure." 42 "Irregularity" or "irregularly" are not defined in the CPA or the UCPR. The following cases are illustrative of what is an irregularity. In Roach v B & W Steel Pty Ltd (1991) 23 NSWLR 110 the irregularity was that proper notice of an application by the plaintiff was not given to the defendant. The irregularity resulted in the non-appearance by the defendant at the hearing. Similarly, in Double Bay Newspapers v The Fitness Lounge [2006] NSWSC 226 at [31] the defendant failed to appear because of an agreement reached with the plaintiff. White J drew a distinction between fundamental and non-fundamental irregularities: at [29] – [31]. In Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd [2008] NSWCA 38, 71 NSWLR 262 failure of the respondent to disclose material facts to the court when the court ordered reinstatement of the previously deregistered respondent company was found to be an irregularity. 43 The irregularity for which the council contends is that Mr Wong was the real party hiding behind Mr Edwards to obtain development consent for Mr Wong's preferred use. Although the parties are unable to refer to a similar case, I accept that the 2009 costs order was made irregularly if the council's "real party" contention is correct. 44 The matters on which the council relies for its "real party" contention include the following: (a) the address, telephone and email contact for Mr Edwards provided on the originating process were those of Mr Wong or his company Alphatex; (b) Mr Wong and Ms Piao were the owners of the premises, having acquired them in July 2008; (c) in the first appeal, Mr Wong, on behalf of Alphatex, was the named applicant who presumably intended to carry out the proposed use of the premises as a brothel. Mr Wong was the person who appeared to provide instructions during that appeal; (d) while Mr Edwards was the named applicant in the second appeal, Mr Wong was again present at all relevant times to facilitate a view of the premises and to instruct Mr Hannaford at the hearing; (e) Mr Edwards never saw any of the legal representatives appearing for him and they were not told why the proceedings were in his name. I interpolate that the latter proposition is inaccurate in that Mr Wong told the lawyers that Mr Edwards was a potential tenant, which I think suggested a commercial reason for him to take the proceedings: see [18] above; (f) Mr Edwards' application was found to be materially the same as the first application proposed by Mr Wong's company; (g) it is to be inferred that Mr Wong was not merely a disinterested landlord. His decision and that of Ms Piao to sell the premises after the dismissal of the second appeal adds weight to that inference; (h) Mr Wong conducted the litigation but did not obtain funds from Mr Edwards up front; (i) counsel's fee disclosure letter was addressed to both Mr Wong and Mr Edwards. 45 The council submits that the proper course of events would have been for Mr Wong to have conducted the appeal in his own name so that in the event that the Court made orders for costs, the order would have been made against the real named party to the proceedings; and that had the council been aware of the fact that Mr Edwards was no more than a name of convenience at the time, it would have sought orders against Mr Wong. As to the latter proposition, I have difficulty in seeing that the council had significantly more information in that regard when it filed this notice of motion than when the costs order was made against Mr Edwards in 2009. It was the inability in the interim to locate, and enforce the costs order against Mr Edwards that motivated the notice of motion. 46 Anyone has standing to make a development application with the written consent of the land owners: cl 49(1)(b) Environmental Planning and Assessment Regulation 2000. Mr Edwards obtained that consent. 47 The unchallenged evidence discloses that: a) Mr Edwards and Ms Chen were fully informed of the prior proceedings by Alphatex in this Court; b) Mr Edwards and Ms Chen sought to and did prosecute the application (in Mr Edward's name) in order to obtain a pecuniary benefit being the entering into of a lease of the premises on favourable terms; c) that proposed benefit was committed to writing in the form of the Interim Agreement for Lease; (d) Mr Hannaford and Mr Baird were told that Mr Edwards was a potential tenant and that it was Mr Edwards' development application and appeal; (e) Mr Edwards' name appears as the client on the unexecuted costs agreement with Mr Hannaford and invoices rendered by Mr Baird were addressed to Mr Edwards (albeit Mr Baird's costs disclaimer letter was addressed to Mr Wong/Mr Edwards); (f) Mr Edwards and Ms Chen agreed to pay and paid for Mr Hannaford's and Mr Baird's legal services; (g) Mr Edwards, who had statutory standing to make the development application and to appeal against its refusal, had a commercial interest in doing so under the interim lease agreement; (h) Mr Edwards agreed to pay and partly paid Mr Wong a fee for Mr Wong's agency services; (i) having failed in the original appeal, Mr Wong was not prepared to appeal further because of the legal costs. 48 In my opinion, on the unchallenged evidence Mr Wong was Mr Edwards' agent, not vice versa, and Mr Edwards was a real and genuine litigant albeit much assisted by Mr Wong. That conclusion is not negated by the matters to which the council points nor by the circumstances that Mr Edwards gave Mr Wong full rein as his agent and that Mr Wong had an interest in the development proposal as Mr Edwards' prospective landlord under their interim lease agreement and beyond. Accordingly, I do not accept the council's "real party" contention. 49 It follows that I am not satisfied that the 2009 costs order was made irregularly. Therefore, there is no power under r 36.15 or otherwise to set it aside. 50 That is the end of the council's case. However, for completeness I will proceed to address the further orders sought by the council notwithstanding that they assume that the costs order against Mr Edwards is set aside. JOINDER AS A PARTY FOR PURPOSE OF MAKING A COSTS ORDER 51 On the assumption that the 2009 costs order is set aside, the council seeks to join Mr Wong as a party to the proceedings for the purpose of making a costs order against him. 52 Joinder for that purpose is prohibited unless Mr Wong would otherwise be a "proper party" to these proceedings because UCPR 6.26 relevantly provides: " 6.26 Joinder to recover costs (1) Except to the extent to which these rules expressly provide, a party may not join another person as a party to any proceedings for the purpose of making an application for costs against the other person. (2) This rule does not apply: (a) if the other person would otherwise be a proper party to the proceedings..." 53 If r 6.26(2)(a) applies, the Court has power under r 6.26(1) to join a person to proceedings even after the proceedings have been discontinued: Norton v Blacktown City Council (No 2) [2009] NSWLEC 218, 171 LGERA 424 at [53] – [55] (Pepper J). In that case, in the exercise of discretion the Court did not so order given (inter alia) that Mr Norton discontinued the proceedings almost a year prior to this application being filed. 54 A traditional test for joinder, at least in conventional civil litigation, is to ask whether the person's rights against or liabilities to any party to the action in respect of the subject matter of the action will be directly affected by any order which may be made in the action: Charlton v Moore [2009] NSWLEC 61 at [2]; Norton at [35]. This test may fit more comfortably in conventional litigation than in a statutory merits development appeal, at least in a case such as the present. The council refers to this test and submits that Mr Wong's rights and liabilities were to be affected because (inter alia) as a part owner of the premises he had an interest in securing its lawful use as a brothel and he conducted the litigation without obtaining funds up front from Mr Edwards, leading to the inference that he was the true party to the appeal standing behind Mr Edwards. In other words, the council relies on its "real party" contention for the joinder. The "real party" contention is necessary, I think, because otherwise it is difficult to see that Mr Wong had any rights against or liabilities to the council since he did not make the development application and therefore had no right of appeal against its refusal. However, as I have earlier rejected the council's "real party" contention, Mr Wong may not be joined as a party for the purpose of making a costs order against him. COSTS ORDER AGAINST A NON-PARTY 55 On the assumption that the costs order against Mr Edwards is set aside, the council alternatively submits that a costs order should be made against Mr Wong as a non-party. 56 The general costs power to make a costs order during or after the conclusion of proceedings is found in s 98 of the CPA, which relevantly provides: " 98 Courts powers as to costs (1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. (2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court. (3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings." 57 The power to make a costs order against a non-party is apparent from the words "by whom" in s 98(1)(b). 58 The former UCPR 42.3, which was recently repealed in May 2010, restricted the power to order costs against a non-party by providing relevantly: " 42.3 Powers of the court generally (1) Subject to rule 42.27, the court may not, in the exercise of its powers and discretions under section 98 of the Civil Procedure Act 2005, make any order for costs against a person who is not a party. (2) This rule does not limit the power of the court: … (c) to make an order for payment, by a person who has committed contempt of court or an abuse of process of the court, of the whole or any part of the costs of a party to proceedings occasioned by the contempt or abuse of process". 59 The effect of this rule, and its precursor in Pt 52A r 4(3) Supreme Court Rules 1970, is to abolish the traditional categories of jurisdiction to order costs against non-parties discussed in Knight v FP Special Assets Ltd [1992] HCA 28, 174 CLR 178. Because UCPR 42.3 was still in force when Norton (above at [53]) was decided, it was necessary in that case to join the non-party as a party before a costs order could be made against him. Consequently, Norton did not address the traditional jurisdiction to order costs against non-parties. 60 The repeal of UCPR r 42.3 had the effect of overturning an earlier decision of the High Court that the Supreme Court had no power to order costs against a non-party litigation funder which, for a contingency fee, had funded an impecunious plaintiff without providing the plaintiff with an indemnity for adverse costs orders. That was because the litigation funder had not committed "an abuse of process of the court" and thus the application of r 42.3(2)(c) was not attracted: Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd [2009] HCA 43, 239 CLR 75. 61 In consequence of the repeal of r 42.3, there is again jurisdiction to order costs against a non-party and the principles discussed in Knight are revived. In Knight costs orders were made against receivers and managers of two insolvent companies that had been involved in litigation with the respondents even though the receivers and managers were not parties to the proceedings because they were responsible for initiating, and were the real parties to, the litigation. Mason CJ and Deane J held: "The cases awarding costs against non-parties are more readily explicable on the footing that there was no absence of jurisdiction to order costs against non-parties in the strict sense and that the jurisdiction could be exercised against persons who were considered to be the "real parties" to the litigation": at 188. "It is plain enough that the courts from time to time awarded costs against a person who, not being a party on the record, was considered to be the "real party". It may be that these cases are capable of being explained on various grounds, including the ground that the non-party ordered to pay costs was guilty of abuse of process, taking a very broad view of what constitutes an abuse of process, but to say that does not deny that there was jurisdiction to make an order for costs against a non-party even if the jurisdiction was exercised in limited circumstances only": at 190. "…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.": at 192-193. 62 It is not necessarily essential that the party against whom costs have been ordered be insolvent or a "man of straw" if it is unlikely that anything will be recovered from him because, for example, he has left Australia: Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation [2001] HCA 26 at [37] (Callinan J). In exercising the discretion, a factor which may be taken into account, depending on the circumstances, is whether the non-party was warned during the proceedings that a costs application might be made against him in the event that the party giving the warning was successful: Yates v Boland [2000] FCA 1895 at [34]. 63 In a case such as this in Class 1 of the Court's jurisdiction, these principles are subject to the presumptive no costs rule in r 3.7(2) of the Land and Environment Court Rules 2007 (LECR), which provides that no costs order is to be made unless the Court considers that it is "fair and reasonable in the circumstances". The High Court in Knight did not have to address such a rule. 64 It was under this rule that Mr Edwards was ordered to pay the council's costs since his proceedings were an abuse of process. That being so, I consider that if the council's "real party" contention were correct, then notwithstanding that Mr Wong did not receive the warning referred to at [62] above, it would be fair and reasonable to make a costs order against him given that it is unlikely that anything will be recovered from Mr Edwards since he disappeared when confronted with the council's bill of costs - which also suggests that he is a man of straw; Mr Wong actively conducted the litigation; and Mr Wong has an interest in the litigation in his capacity as a prospective landlord to Mr Edwards and beyond the term of the interim lease agreement in relation to the use of the premises. However, as discussed earlier, on the unchallenged evidence I do not accept the council's "real party" contention and consider that Mr Wong was Mr Edward's agent. Consequently, in my opinion, the interests of justice do not require that a costs order should be made against Mr Wong as a non-party. CONCLUSION 65 For these reasons, the council has been unsuccessful and its notice of motion must be dismissed. 66 Mr Wong seeks his costs of the council's notice of motion. Those costs are governed by r 3.7 LECR which mandates that no costs order is to be made unless the Court considers that it is fair and reasonable in the circumstances. 67 The council's notice of motion was reasonably instituted and, on the information available to the council at that time, had reasonably good prospects of success. The motion was eventually defeated by the evidence thereafter adduced for Mr Wong as to the precise and unusual relationship between him and Mr Edwards and by Mr Hannaford's letter of 10 March 2010 which emerged at the hearing in response to a subpoena. In the circumstances, I do not consider that it is fair and reasonable to make any order as to the costs of the notice of motion. ORDERS 68 The orders of the Court are as follows: 1. The respondent's notice of motion filed on 20 August 2010 is dismissed. 2. No order as to the costs of the notice of motion. 3. The exhibits may be returned. 06/10/2010 - Reverse legal representatives for Third Party and Respondent - Paragraph(s) cover sheet DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.