Supreme Court New South Wales Medium Neutral Citation: McMillan Investment Holdings Pty Limited v North Coast Beach Property Pty Limited [2011] NSWSC 1432 Hearing dates: 24/11/11 Decision date: 24 November 2011 Jurisdiction: Common Law Before: James J Decision: 1. An order that Brian McMillan and Karin McMillan pay the costs of the plaintiff of the application for joinder on the ordinary basis. 2. An order that Brian McMillan and Karin McMillan pay the costs of the defendant of the application on the ordinary basis. Legislation Cited: Civil Procedure Act Cases Cited: FPM Constructions v Council of the City of Blue Mountains [2005] NSWCA 340 Knight & Anor v FP Special Assets Limited (1992) 174 CLR 178 May v Christodoulou [2011] NSWCA 75 Category: Costs Parties: McMillan Investment Holdings Pty Limited - Plaintiff North Coast Beach Property Pty Limited - Defendant Beach Coast Property Pty Ltd - Applicant Representation: BAM Connell - Plaintiff R Higgins - Defendant GA Moore - Applicant File Number(s): 2011/122285 Judgment 1In these proceedings I handed down a judgment on 17 November. In that judgment I dismissed an application by a company, Beach Coast Property Pty Limited ("Beach Coast") to be joined as a defendant in the proceedings. I made an order that Beach Coast pay the costs of the application of the plaintiff and of the defendant. 2On 17 November counsel for the plaintiff informed the court that the plaintiff would be seeking further costs orders, that Mr Brian McMillan and Mrs Karin McMillan pay the plaintiff's costs of the application on an indemnity basis. The proceedings were adjourned until today for argument. 3Today I made an order making returnable instanter an application by both the plaintiff and the defendant that Mr McMillan and Mrs McMillan pay the costs of the application on an indemnity basis. The application was opposed by counsel appearing for Beach Coast, Mr Brian McMillan and Mrs Karin McMillan. 4In support of the application counsel for the plaintiff referred to section 98(1)(b) of the Civil Procedure Act which provides that: "The court has full power to determine by whom, to whom and to what extent costs are to be paid". 5Counsel for the plaintiff also referred to the decision of the High Court in Knight & Anor v FP Special Assets Limited (1992) 174 CLR 178. 6In Knight it was held by Mason CJ, Deane J and Gaudron J that where a party to litigation is an insolvent person or man of straw, a non-party who has played an active part in the conduct of the litigation and who has an interest in the subject of the litigation is liable to have an order for costs made against him, if the interests of justice require that it be made. 7In the course of argument on the present application reference was made to the decision of the Court of Appeal in May v Christodoulou [2011] NSWCA 75, 4 April 2011. In May v Christodoulou Sackville JA referred to parts of the judgment of Basten JA in FPM Constructions v Council of the City of Blue Mountains [2005] NSWCA 340. 8In FPM Basten JA said at paragraph [210]: "The requirements of justice should not be allowed to expand an exception to the general rule so as to undermine the rule itself. What is significant from a survey of the cases in which orders have been made against non-parties is that they tend to satisfy at least some, if not the majority, of the following criteria: (a) the unsuccessful party to the proceedings was the moving party and not the defendant; (b) the source of funds for a litigation was the non-party or its principal; (c) the conduct of the litigation was unreasonable or improper; (d) the non-party or its principal had an interest, not necessarily financial, which was equal to or greater than that of the party or, if financial, was a substantial interest; and (e) the unsuccessful party was insolvent or could otherwise be described as a person of straw". 9In the present case I am satisfied that it is established that Beach Coast is a company with a paid-up capital of $2, that Mr Brian McMillan has been a director of Beach Coast, that Beach Coast was in no position to fund the litigation consisting of the application for joinder, and I infer that the litigation was funded by Mr McMillan and Mrs McMillan or one of them. 10The principal evidence on the application for joinder was an affidavit by Mr Brian McMillan, with a supplementary affidavit by him, and Mrs Karin McMillan herself made two affidavits in support of the application for joinder. Mrs Karin McMillan has at times been the occupier of the property at Stockton and she is alleged to be the principal beneficiary of the trust set up in 2007. 11Counsel for Beach Coast and Mr and Mrs McMillan referred to correspondence between solicitors, including recent correspondence, indicating that a conditional offer has been made by a third party to discharge the full amount of the indebtedness to the plaintiff. However, it appears to me that this correspondence has limited, if any, relevance to the question of what costs order I should make. 12It was submitted that in May v Christodoulou it was held that it is not sufficient to warrant the making of an order for costs against an individual, that the individual represented a company which was a party to litigation and that the company was unsuccessful in the litigation. 13However, I would point out that the other factors referred to by the High Court in Knight and by Basten JA in FPM were not present in Christodoulou . 14It was submitted by counsel for Mr and Mrs McMillan that I should distinguish between Mr McMillan and Mrs McMillan and that, if I was minded to make any order that a non-party pay the costs of the application, the order should be restricted to Mr McMillan. 15I have already referred to matters of fact of which I am satisfied. Applying the criteria in Knight, I find that Beach Coast as the applicant on the application for joinder was an entity of straw, that is, an entity without assets; that both Mr McMillan and Mrs McMillan played an active part in the conduct of the litigation; and that they or at least Mrs McMillan had an interest in the subject matter of the litigation. 16Applying the criteria stated by Basten JA in FPM , I find that Beach Coast was the moving party on the application for joinder, that Mr and Mrs McMillan or one of them was the source of funds for the conduct of the litigation by Beach Coast, that Mr and Mrs McMillan had an interest in the outcome of the application which was equal to or greater than that of Beach Coast and that Beach Coast could properly be described as a person of straw, that is, a person without assets. I find further that the conduct of the litigation was, in some respects, unreasonable. 17I consider that the interests of justice require that I make an order for costs against a non-party and I consider that orders for costs should be made against both Mr McMillan and Mrs McMillan that they pay the costs of the application for joinder of both the plaintiff and the defendant. 18It was further submitted by counsel for the plaintiff that I should make the order for costs an order for indemnity costs and not an order for costs on the ordinary basis. 19There is clearly a case for arguing that the order for costs should be for costs on an indemnity basis, but the conclusion I have ultimately come to is that I should limit the order for costs to an order for costs on the ordinary basis. 20I make an order that Brian McMillan and Karin McMillan pay the costs of the plaintiff of the application for joinder on the ordinary basis and I make an order that Brian McMillan and Karin McMillan pay the costs of the defendant of the application on the ordinary basis. ********** 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. Decision last updated: 25 November 2011