New South Wales Supreme Court CITATION : Australian Beverage Distributors v The Redrock Co [2008] NSWSC 114 HEARING DATE(S) : 19 February 2008 JUDGMENT DATE : 21 February 2008 JURISDICTION : Equity JUDGMENT OF : Austin J DECISION : Interlocutory process dismissed with costs CATCHWORDS : PRACTICE AND PROCEDURE - costs - defendant succeeded in resisting winding up order - defendant's solicitor was paid by third parties - whether defendant entitled to costs order - whether, in fact, defendant and third parties arranged for recoupment of payments if defendant succeeded and obtained order for costs Civil Procedure Act, 2005 (NSW), s 98 LEGISLATION CITED : Corporations Act 2001 (Cth), s 191 Legal Profession Act 2004 (NSW), s 319 Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 495 Australian Beverage Distributors Pty Ltd v The Redrock Co Pty Ltd [2008] NSWSC 3 Backhouse v Judd [1925] SASR 395 Cachia v Hanes (1994) 179 CLR 403 Dyktnyski v BHP Titanium Minerals Pty Ltd (2004) 60 NSWLR 203 Grundmann v Georgeson [2000] QCA 394 CASES CITED : Gundry v Sainsbury [1910] 1 KB 645 Halliday v High Performance Personnel Pty Ltd (in liq) (1993) 113 ALR 637 McCullum v Ifield (1969) 90 WN (Part 1) (NSW) 525 New Pinnacle Group Silver Mining Co v Luhrig Coal & Ore Dressing Appliances Co (1902) 2 SR (NSW) 50; 19 WN (NSW) 9 R v Archbishop of Canterbury [1903] 1 KB 289 Tarry v Pryce (No 2) (1987) 88 FLR 270 Wentworth v Rogers (2006) 66 NSWLR 474 PARTIES : Australian Beverage Distributors Pty Ltd (P) The Redrock Co Pty Ltd (D) FILE NUMBER(S) : SC 2039/07 COUNSEL : Mr D Allen (P) Ms A Seward (D) SOLICITORS : Catalyst Legal Pty Ltd (P) Kemp Strang (D) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION AUSTIN J 21 FEBRUARY 2008 2039/07 AUSTRALIAN BEVERAGE DISTRIBUTORS PTY LTD V THE REDROCK COMPANY PTY LTD JUDGMENT 1 HIS HONOUR: On 23 January 2008 I delivered my principal reasons for judgment in this matter (Australian Beverage Distributors Pty Ltd v The Redrock Co Pty Ltd [2008] NSWSC 3), and made an order dismissing the plaintiff's application for the winding up of the defendant. I heard argument as to costs on 31 January 2008, rejecting, for brief ex tempore reasons, the defendant's application for indemnity costs. I ordered the plaintiff to pay the defendant's costs as agreed or assessed, other than certain costs relating to applications for extension of time under s 459R. However, because documents produced by the defendant in answer to a notice to produce, and relevant to the question of costs, were not in court when counsel for the plaintiff sought to inspect them during the hearing on costs, I granted the plaintiff liberty to apply to re-open with respect to costs. 2 That liberty was exercised, and on 13 February 2008 the plaintiffs filed and served an interlocutory process seeking to have my costs order reviewed or rescinded, and also seeking a declaration that the plaintiff is not liable to pay to the defendant any costs which have not been paid by the defendant to date. There may be some issues about the appropriateness of the procedure employed by the plaintiff, but I have decided not to take up time exploring matters of procedure, since I have reached a conclusion on the substance of the evidence. In a case where the application raises a question relating to evidence given at the trial reflected in the court's findings in its principal judgment, and the assessment of costs by a costs assessor has not been commenced, my view is that the trial judge has the power to deal with the application, and ought to do so (Civil Procedure Act, 2005 (NSW), s 98(1)(b); Wentworth v Rogers (2006) 66 NSWLR 474, at 512-4 per Basten JA; cf 485-7 per Santow JA). In my view none of the "floodgates" problems adverted to by Basten JA in Wentworth v Rogers (at 514) has any application here. 3 The plaintiff contends that according to the evidence, the defendant's costs have been paid by third parties without any liability on the part of the defendant to pay costs or reimburse those payments. Therefore, it submits, the defendant has no liability to the defendant's solicitors for costs and no need for the indemnity afforded by a costs order. Since a party and party costs order is based on the indemnity principle, the defendant is not entitled to a costs order. In this case the central contentions are contentions of fact, requiring close scrutiny of the evidence. Law 4 Party and party costs are awarded to a successful party in litigation on the basis that the order provides a partial indemnity to the successful party for costs: "It has not been doubted since 1278, when the Statute Gloucester introduced the notion of costs to the common law, that costs are awarded by way of indemnity (or, more accurately, partial indemnity) for professional legal costs actually incurred in the conduct of litigation" (Cachia v Hanes (1994) 179 CLR 403, at 410 per Mason CJ, Brennan, Deane, Dawson and McHugh JJ). It is a corollary of this principle that "if a party to an action has agreed with the solicitor that the party does not have to pay any costs, then costs cannot be recovered against the adversary under a party and party order" (Dyktnyski v BHP Titanium Minerals Pty Ltd (2004) 60 NSWLR 203, at 205 per Mason P, citing Gundry v Sainsbury [1910] 1 KB 645; McCullum v Ifield (1969) 90 WN (Part 1) (NSW) 525 at 526; [1969] 2 NSWR 329 at 330). Similarly, if the solicitor agrees to cap the amount of costs recoverable from the client, that arrangement enures to the benefit of the client's anniversary (Dyktnyski at 205 per Mason P; Tarry v Pryce (No 2) (1987) 88 FLR 270). 5 In Dyktnyski at 205, Mason P drew a distinction between a case where a solicitor or a third party removes the litigant's liability to pay costs to the solicitor, and a case where the litigant remains liable to the solicitor for costs but a third party indemnifies the litigant in respect of that liability (citing several cases including Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 495, especially at 501 per Bankes LJ). A costs order is available to the litigant in the latter case, but not in the former. 6 In Dyktnyski it was held that the arrangement between solicitor and client was that the client was to have no liability whatsoever to pay costs to the solicitors, in circumstances where the solicitors wished to bring an appeal so that the Court of Appeal would determine a legal principle which they were interested in resolving, and the client did not stand to benefit personally from the outcome. The solicitors specified in their costs agreement and in a letter to the client that he would not be required to pay any of their legal costs no matter what the outcome of the appeal, and that they would meet any costs order made against the client. Mason P observed (at 207) that the letter went well beyond an arrangement where a solicitor accepts a retainer on a "no win, no fee" basis (the concept of "winning" being usually defined to include the obtaining of an award of costs in the proceedings). He said (at 207-8) that in a "no win, no fee" arrangement: "Depending on text and context the solicitor's right to charge the client is usually coterminous with the client's right to go against the other party under the costs order. In other words, where party/party costs are disallowed the client's liability to pay the solicitor is adjusted accordingly." 7 The indemnity principle accommodates this kind of conditional costs arrangement: the fact that the client is not obliged to pay the solicitor's costs unless the proceedings are successful does not deprive the client of a costs order against the other party: Wentworth v Rogers at 487-8 per Santow JA, 504 per Basten JA. 8 In Dyktnyski the Court of Appeal explained and applied an exception to the indemnity principle, arising out of New Pinnacle Group Silver Mining Co v Luhrig Coal & Ore Dressing Appliances Co (1902) 2 SR (NSW) 50; 19 WN (NSW) 9 and R v Archbishop of Canterbury [1903] 1 KB 289, to the effect that if the litigant is a nominal party participating in proceedings on behalf of the real party who incurs the legal expenses of the proceedings, a costs order may be made in favour of the nominal party for the benefit of the real party (Dyktnyski at 209 per Mason P, 215, 219-220 per McColl JA; see also Wentworth v Rogers at 511 per Basten JA). Although counsel for the defendant valiantly submitted that this exception should be applied in the present case, it seems to me clear on the facts (set out below) that here the defendant company was the real litigant, the proceedings being to wind the defendant up, even though the directors of the defendant had a stake in the outcome and one of the directors and his father were funding the defence costs. The present case was not one where, as in Dyktnyski, the plaintiff was nominally on the record and others were the real protagonists. To apply the exception here would amount to treating the corporate entity as a mere agent for its incorporators, or an empty shell, without any special facts of the kind that might warrant disregarding the separate corporate entity. Facts 9 There are two directors of the defendant company, Ian Kinsella and Simon Stonier. Mr Stonier is responsible for managing the financial operations of the company, and Mr Kinsella is responsible for sales and marketing. Mr Stonier is responsible for managing the present winding up proceedings against the company, and also proceedings in this court (described in my principal judgment) brought by Liquor National Wholesale Pty Ltd ("LNW"), a company related to the plaintiff, against Redrock, Mr Kinsella and Mr Stonier as defendants. 10 The LNW proceedings were commenced on 6 March 2007, when LNW filed a statement of claim and a notice of motion seeking interim orders. The motion was returnable on 9 March 2007. Mr Stonier gave evidence that he approached Kemp Strang to act on behalf of the three defendants in the LNW proceedings. 11 On 8 March 2007 Mr Stonier received a letter of that date addressed to him and Mr Kinsella headed "The Redrock Co Pty Ltd". The letter purported to satisfy the firm's obligation under the Legal Profession Act 2004 (NSW) to set out the terms of their engagement. It used the pronouns "we" and "you". On the face of the letter "we" designated the partners of the firm and "you" designated Mr Kinsella and Mr Stonier. The letter asked the persons to whom it was addressed to confirm the engagement to act by signing and returning a copy of the letter. The copy letter was endorsed with the words "We confirm your instructions to act for us in the above matter in accordance with the terms of engagement set out above", and made provision for signature by Mr Kinsella, Mr Stonier and "For and behalf of Redrock Co Pty Ltd". Mr Stonier gave oral evidence that he signed above the provision for his signature and that either he or Mr Kinsella signed above the provision for signature on behalf of the company, and that the signed letter was returned to Kemp Strang. I accept Mr Stonier's evidence. 12 The letter identified the "work" that was the subject of the terms of engagement as follows: "Advise and appear on the Notice of Motion filed by Liquor National Wholesale Pty Ltd against the Redrock Co Pty Ltd". Mr Stonier gave oral evidence that no other engagement letter was signed by him. In fact Kemp Strang conducted what appears to have been a great deal of work for the defendants in the LNW proceedings, not confined to the notice of motion. 13 The present winding up proceedings began by originating process filed on 28 March 2007. Mr Stonier said he received a copy of that document on about 3 April 2007 and provided it to Kemp Strang, without having any discussion with them as to who was going to pay the costs of the winding up proceedings. At all times Kemp Strang has acted for the defendant in these proceedings, though evidently without any costs agreement relating to this work. 14 The evidence before me includes copies of documents produced by the defendant in response to the plaintiff's notice to produce dated 23 November 2007, which required production of documents including all invoices issued by Kemp Strang for work carried out for the defendant and all documents evidencing any payment to Kemp Strang for the carrying out of that work. It appears from those documents that Mr Stonier transferred substantial sums of money from time to time to Kemp Strang's account by direct deposit "Re: The Redrock Co Pty Ltd … on account of costs and disbursements". Kemp Strang rendered accounts by written statements addressed to Mr Kinsella and Mr Stonier "Re: The Redrock Co Pty Ltd", for work in the LNW proceedings and for work in the present proceedings. 15 Mr Stonier gave affidavit evidence that when the winding up proceedings commenced and he provided a copy of the originating process to Kemp Strang, as far as he was concerned the proceedings were simply another aspect of the proceedings commenced by LNW. He said that all of the company's legal fees in relation to both matters had been paid either by him personally or by his father, Brian Stonier. Specifically, all of the payments identified in the documents produced in response to the plaintiff's notice to produce were, he said, made either by him or by his father. 16 In his affidavit, Mr Stonier gave evidence of a conversation he had with his father, at the time when his father offered to help fund litigation costs, in which he said to his father: "I hope to be able to repay you out of the costs recovered from the other side when we are successful". Mr Stonier also said that when he personally paid legal costs his attitude was as follows: "I also expect that if we are successful in the proceedings I will be repaid from the proceeds recovered under any costs orders". 17 At the hearing of the winding up application, Mr Kinsella was cross-examined by Mr D Allen for the plaintiff, about the defendant's financial position. He was taken to a profit and loss statement and agreed that it contained no record relating to legal fees of the company. The following cross-examination took place (T 123-4): "Q. You would agree that the Redrock Company Pty Ltd has incurred liability to pay legal fees? A. Yes. Q. What is the quantum of that liability? A. I couldn't tell you the total. Q. Could you give me an estimate, please? A. I would say approximately 400. Q. You would agree that Redrock Pty Ltd is responsible for those fees of $400,000? A. No. Q. You would say that Redrock Pty Ltd has no liability for the $400,000 of legal fees incurred? A. No. HIS HONOUR Q. Does the 'no' mean that you agree with the proposition? A. No, that Redrock doesn't have a direct liability for those fees. ALLEN Q. Because, is it the situation in the Liquor National Wholesale versus the Redrock proceedings, and also in these proceedings, that the legal fees are being paid by a third party? A. Yes. Q. There is no agreement between the third party and the Redrock Company Pty Ltd for that third party to be reimbursed by the Redrock company for those legal fees? A. No. Q. You would agree there is no - and when you say 'no', do you mean that there is no agreement that Redrock will reimburse the third party for its legal fees? A. That's correct. Q. And you would agree that the third party is not going to look in the future for Redrock to reimburse them for the legal fees? A. Not to my knowledge. Q. You would agree that Redrock won't voluntarily reimburse the third party for the legal fees to be paid? A. That hasn't even been discussed." 18 In my principal reasons for judgment I found that the plaintiff had not proved the insolvency of the defendant. Reviewing the defendant's indebtedness, I referred to the question of legal costs and said (at [124]): "Mr Kinsella was also cross-examined about Redrock's legal expenses in the present proceedings and in the proceedings brought against it by LNW, which according to him amount to about $400,000. He accepted that there was no provision for those fees in the financial statements, but he gave evidence that those fees were being paid by a third party without any agreement by Redrock to reimburse the fees (T 123)". Analysis 19 Were Kemp Strang engaged by Mr Stonier to act on behalf of all three defendants in the LNW proceedings? Although the letter is addressed to only two of the defendants, they were the directors of the other defendant. The confirmation endorsed on the letter was, in terms, a confirmation that the firm would act for all three defendants, and provision was made for signature on the corporate defendant's behalf. The confirmation was in fact signed by the two individual defendants and on behalf of the corporate defendant. When the letter and confirmation are considered together, it is plausible to conclude, and I do conclude, that the agreement by which Kemp Strang were retained was between the firm and all three defendants. For the purposes of the analysis set out below, it is significant that an agreement to which the company was a party arose out of a letter addressed to individuals who were the directors of the company. 20 The initial engagement was limited by its express words to advice and appearance on the notice of motion in the LNW proceedings. The plaintiffs submitted that in any case, that costs agreement is void for contravention of s 322(4) of the Legal Profession Act 2004 (NSW). It is unnecessary to me to resolve that question, and inappropriate to do so when the solicitors are not separately represented. 21 When Kemp Strang carried out work in respect of other aspects of the LNW proceedings, as they appear to have done, it cannot have been pursuant to this letter of engagement. It is not necessary or appropriate for me to reach any conclusion as to whether costs are recoverable for that further work, in view of the evident absence of a costs agreement complying with the Legal Profession Act. It may be that there is a viable claim on a quantum meruit under s 319 of the Legal Profession Act (Wentworth v Rogers at 488-9, per Santow JA, 508 per Basten JA). However, it is appropriate for present purposes to infer that any claim that Kemp Strang may have for costs in respect of the further work in the LNW proceedings is likely to be a claim against all three defendants. This is because that further work follows on from the initial work described in the letter of engagement, which was purportedly a contract between Kemp Strang and all three defendants, according to my findings. 22 In view of the express wording of the letter of engagement, it cannot be construed as extending to the winding up proceedings. Mr Stonier's belief that the winding up proceedings were simply another aspect of the LNW proceedings was plainly wrong. At the hearing of the application, Ms Seward, counsel for the defendant, informed the court that her client did not maintain that Kemp Strang's retainer in the winding up proceedings was pursuant to that letter. 23 Did the defendant engage Kemp Strang to act for it in the present proceedings? It seems to me that an affirmative answer should be given to this question. The legal services provided by Kemp Strang were provided directly for the benefit of the defendant, which knowingly took the benefit, and only indirectly for Mr Stonier and Mr Kinsella as its directors and shareholders. That creates a presumption that Kemp Strang were retained by the defendants (Halliday v High Performance Personnel Pty Ltd (in liq) (1993) 113 ALR 637, at 639 per Mason CJ; Grundmann v Georgeson [2000] QCA 394). The evidence tends to reinforce that presumption. Kemp Strang entered an appearance for the defendant in the proceedings. The defendant and Kemp Strang were already in a solicitor/client relationship with respect to the LNW proceedings, having become a party to that relationship by the actions of its directors, Mr Stonier and Mr Kinsella. Kemp Strang dealt with Mr Stonier and Mr Kinsella in respect of the present proceedings, by addressing statements of account to them, and by receiving instructions and payments from Mr Stonier. As Kemp Strang were aware, Mr Stonier and Mr Kinsella were the directors of the company that was the sole defendant, and so their dealings with those two individuals are readily construed as dealings with agents representing the defendant company. That construction is supported by the fact that the statements of account for work done in connection with the present proceedings, like the statements of account for work done in connection with the LNW proceedings, were headed "Re: The Redrock Co Pty Ltd". In its context, the heading suggests that Kemp Strang directed communications to Mr Stonier and Mr Kinsella in their capacity as agents for the company. 24 It may be that some or all of Mr Stonier, Mr Kinsella and Mr Stonier's father entered into a solicitor/client relationship with Kemp Strang under which they became liable to the firm to pay its fees (subject to the Legal Profession Act). But it is unnecessary to resolve that question for present purposes, because the evidence to which I have referred leads me to conclude that there was a direct solicitor/client relationship between the defendant and Kemp Strang, whether or not there was also a direct solicitor/client relationship between Kemp Strang and one or more of the three individuals. 25 The significance of this conclusion is that under s 319(1)(c) of the Legal Profession Act, there being no applicable fixed costs provision or costs agreement, the defendant became liable to Kemp Strang to pay the firm according to the fair and reasonable value of the legal services provided in connection with the present proceedings, whether or not Kemp Strang could have recourse to all or any of the three individuals as well. That conclusion is consistent with Mr Kinsella's affirmative answer to Mr Allen's question, "You would agree that the Redrock Company Pty Ltd has incurred liability to pay legal fees?" 26 There is some evidence that points against this conclusion. First, if the defendant incurred liability to pay legal fees, that liability ought to have been recognized in its financial statements, even if it was offset by payment of the fees. The absence of any recognition of the liability in the company's financial statements points against the view that liability was incurred. But when one has regard to the poor quality of the financial statements of the defendant, noted at various points in my principal judgment, it is more plausible to treat the absence of recognition of the liability as a failure to follow proper accounting practice rather than as an indication that no liability existed. 27 Some of Mr Kinsella's evidence in cross-examination might seem inconsistent with the view that the defendant incurred liability for legal costs. It was submitted that I should give little weight to Mr Kinsella's evidence because he worked on the sales and marketing side rather than on the financial side of the business. But he was a director, and his duty to prevent insolvent trading required him to have a thorough understanding of the company's exposure to the substantial legal fees that were being incurred. I therefore reject the suggestion that there should be any discounting of his evidence because of the internal division of work between the directors. However, if one carefully considers the whole passage of cross-examination that I have extracted, it emerges that Mr Kinsella believed that the defendant incurred liability for costs, but as a practical matter it had no direct responsibility to Kemp Strang for those costs, apparently because they were being paid by third parties. Understood as lay evidence, his evidence is consistent with the proposition that the defendant incurred liability to Kemp Strang for costs and disbursements. 28 The defendant's liability to Kemp Strang to pay the firm's costs and disbursements was discharged when Kemp Strang applied the payments received from Mr Stonier and his father in payment of the firm's costs and disbursements. Did the defendant have any liability to Mr Stonier and his father by virtue of the application of those payments? Mr Kinsella's evidence in cross-examination was that there was no agreement for the company to reimburse those payments. Mr Stonier's evidence was that he expected that if the defendant was successful he would be repaid from the proceeds of recovery under a costs order, and that he told his father that this would be the case when his father offered to help fund the litigation. 29 I accept Mr Stonier's evidence, which I regard as evidence of recollection of the substance of the arrangement rather than the precise words he used in his conversation with his father. I say that because it is unlikely that he intended to have some form of charge over the fund of recovered costs; but rather, his intention was that the defendant's success in the proceedings and the making of a costs order in its favour would trigger an immediate entitlement to recoupment against the company's general assets. I therefore infer that both of the "third parties" who paid the defendant's costs to Kemp Strang did so on the understanding that the payment would be recoverable in the event that the defendant was successful and obtained a costs order in its favour. That, it seems to me, amounts to an intention on their part to preserve for themselves a right of recoupment from the defendant in those circumstances. Mr Kinsella's evidence is open to the construction that he did not share that intention, and that he held the view, which presumably he held in his capacity as a director of the defendant, that the defendant would have no obligation to recoup the payments in any circumstances whatever. But in my view that would not be a correct construction of Mr Kinsella's evidence. His evidence was that there was no agreement for recoupment. As a lay person, he should be taken to have meant that the matter was not expressly agreed as far as he was aware. So construed, his evidence is consistent with the evidence of Mr Stonier, that he discussed the matter with his father in a conversation in which Mr Kinsella did not participate. 30 Therefore, when the payments were made both of the "third parties" who made the payments intended that they would be entitled to be recouped in the event of a costs order in favour of the defendants. The fact that Mr Kinsella was not privy to that intention is irrelevant because Mr Stonier's uncontested evidence is that he, rather than Mr Kinsella, was responsible for managing the litigation on the company's behalf. Thus Mr Stonier was in a position to bind the defendant to the arrangement he and his father intended, and by making funds available on that basis, he did so. The constitution of the defendant is not in evidence and there has been no submission that the funding arrangements did not comply with the requirements of the constitution for related party transactions; nor any submission that the arrangements involved contravention of s 191 of the Corporations Act (breach of which does not, in any event, affect the validity of the transaction: s 191(4)). The defendant is not a public company to which Chapter 2E of the Corporations Act would apply. 31 This finding implies that the defendant was under a contingent liability to reimburse Mr Stonier and his father, the contingency being the defendant's success in litigation and the making of a costs order in its favour. Strictly the liability and the corresponding asset should have been reflected in the company's financial statements, including Mr Stonier's loan account. But as I have said, the absence of proper accounting treatment is not a consideration that carries weight in view of the general condition of the financial statements of the company. 32 My conclusion is that the arrangement between the defendant and the "third parties" who paid the defendant's costs and disbursements was that the third parties would be entitled to recoupment if the defendant succeeded and obtained a costs order; in other words, the defendant's liability to pay its solicitors' costs was preserved to the extent of that right of recoupment. 33 In terms of content, the arrangement was similar to the "no win, no fee" arrangement described by Mason P in Dyktnyski (at 207-8, extracted above), though it was an arrangement between litigant and third parties rather than between litigant and solicitor (perhaps, therefore, better described as a "no win, no recoupment" arrangement). 34 The arrangement was also very similar to the arrangement in Adams v London Improved Motor Coach Builders (see also Backhouse v Judd [1925] SASR 395; Wentworth v Rogers at 499 per Basten JA). In that case the solicitors who received instructions from the plaintiff's trade union to act for the plaintiff became the plaintiff's solicitors, and so he became liable to them for their costs. I have found that in the present case the defendant became liable for Kemp Strang's costs when Mr Stonier instructed the firm to act in the present proceedings and they incurred costs accordingly. In Adams the trade union undertook to pay the solicitors' costs pursuant to the arrangements it had with its members to provide legal aid to them in connection with their employment, but there was no agreement between the plaintiff and the solicitors to the effect that the plaintiff would not be liable to the solicitors for their costs in any circumstances. Here I have found that Mr Stonier and his father had an arrangement with the defendant to pay Kemp Strang's legal costs, on the basis that they would be entitled to recoupment of their payments if the defendant were to succeed and obtain a costs order. This implies that the defendant's liability to pay Kemp Strang's costs is preserved to the extent of its entitlement to recover those costs from the plaintiff under the costs order. 35 In the Adams case the plaintiff's entitlement to a costs order would have been defeated only if it had been shown "that there was a bargain, either between the Union and the solicitors, or between the plaintiff and the solicitors, that under no circumstances was the plaintiff to be liable for costs" (at 501, per Bankes LJ). In the present case the defendant's entitlement to a costs order would have been defeated if it had been shown that there was a bargain either between Mr Stonier and his father and Kemp Strang, or between the defendant company and Kemp Strang, that under no circumstances was the defendant to be liable for costs. I have found that there was no such bargain. 36 Counsel for the plaintiff emphasised that according to the evidence, Kemp Strang's costs and disbursements have actually been paid; therefore, he said, the defendant has no remaining liability for costs even if it was once under a liability; and there being no liability, there is nothing to indemnify by the making of a costs order. Indeed, he submitted, any payment to the defendant would be a windfall and an unjust enrichment. 37 I do not accept this submission. First, the evidence is that certain invoices for costs and disbursements have been paid, but there is no evidence that all of the costs and disbursements incurred by Kemp Strang in these proceedings up to the present time have been paid, and this is unlikely to be the case. Secondly, my finding of fact is that Mr Stonier and his father provided money for payment of the defendant's costs and disbursements under an arrangement that obliged the company to reimburse them if the defendant succeeded and obtained a costs order. The payments were made subject to a term having the effect that there was a continuing contingent liability on the part of the defendant, and consequently a point to the making of a costs order in the defendant's favour. In those circumstances there could be no windfall or unjust enrichment. In this respect, the present facts stand in contrast with the facts of Gundry v Sainsbury, where the agreement between solicitor and client was that the client should pay no costs, in circumstances where a costs order "would have been giving a bonus to the party receiving them", contrary to justice and common sense (at 649, per Cozens-Hardy MR). Conclusion 38 As a matter of fact, the defendant incurred a liability to Kemp Strang to pay the firm's costs and disbursements incurred in acting for it in the winding up proceedings. The liability was discharged, in respect of accounts that have been rendered, by payments made by Mr Stonier and his father to Kemp Strang, but the payments were made subject to an arrangement that Mr Stonier and his father would be entitled to recoupment in the event that the defendant succeeded and a costs order was made in its favour. Consequently the plaintiff has failed to establish any ground for reviewing or rescinding the costs order made on 31 January 2008, or for declaratory or other relief. Therefore the plaintiff's interlocutory process filed on 13 February 2008 should be dismissed. 39 In my opinion it is plain that the costs of the application should follow the event. Consequently I shall order the plaintiff to pay the defendant's costs of the application. ********** 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.