…party not indemnified against adverse costs
In Hardingham v RP Data Pty Limited (Third Party Costs) [2023] FCA 480 (16 May 2023), the respondent (RP Data) applied for costs against a third-party litigation funder (Court House).
Adverse costs orders, including in relation to indemnity costs, had been made against the applicants who were unsuccessful in the underlying claim. The applicants were impecunious and the costs order remained unsatisfied.
Court House had entered into a funding agreement with the applicants. It provided that, in the event of receiving an amount, either by way of judgment or settlement, the applicants were required to repay the entire funding provided by Court House. This was together with an “additional sum” calculated as 15% of the “final amount” (at [2]), being in essence the gross settlement or judgment amount. The agreement did not provide for Court House to indemnify the applicants against an adverse costs order.
Thawley J identified the established principle; that the power to order costs against a third party would only be exercised in circumstances where a non-party has a connection to the litigation which is sufficient to warrant exercise of the power (at [19]).
His Honour noted the case law which states that an order for costs against a non-party is only made in exceptional circumstances (at [21]), but considered it merely an observation.
His Honour considered the applicable principle to be: when there is a sufficient connection between the litigation and a third party, and the circumstances are such that the making of a costs order is fair in all the circumstances, the making of a third party costs order is normal. In particular, it is not exceptional to order costs against a litigation funder who facilitates litigation for their own commercial gain.
His Honour did not accept that the lack of indemnity provided by the funder to the applicants prevented an order for costs against the funder. He identified examples (at [22]) of cases that recognise the fairness in ordering a party who funds litigation for their own commercial benefit; to pay – if they fail – the successful party’s costs, whether or not the funder has given an indemnity for the costs ordered against an unsuccessful applicant.
In defending the application, Court House stated that it had only paid the fees of senior counsel and not those of the solicitors and junior counsel who had acted on a “no win no fee” basis (at [3]).
Court House submitted it would be disproportionate to the degree of funding they provided – and a form of punishment – to order it to pay the adverse costs order. This submission was not accepted by Thawley J, who stated the point was that Court House decided to fund the litigation for its own commercial gain (at [32]). His Honour noted the level of funding was substantial and Court House had participated in mediation.
His Honour concluded that Court House – and its activities – had a sufficient connection with the proceedings for it to be appropriate that a costs order be made against it (at [33]).
Shanta Martin is a barrister at the Victorian Bar, ph 03 9225 7222 or email shanta.martin@vicbar.com.au. The full version of these judgments can be found at www.austlii.edu.au. Numbers in square brackets refer to a paragraph number in the judgment.
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