In Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd;
Jeffery & Katauskas Pty Ltd v Rickard Constructions Pty Ltd
(subject to Deed of Company Arrangement) (2009) 239 CLR 75,
the High Court considered the issue of whether the Supreme Court of
NSW has the power to order costs against a nonparty (namely, a
litigation funder) which, for a contingency fee, has funded an
impecunious corporate plaintiff without providing the plaintiff
with an indemnity for adverse costs orders. The question of whether
the Supreme Court has the power depends upon whether the litigation
funder has "committed ... an abuse of process of the
Court", thus attracting the application of r 42.3(2)(c) of the
Uniform Civil Procedure Rules 2005 (NSW).
The High Court found that there was no such abuse of process by
the litigation funder not being in a position to meet an adverse
costs order against the funded party. The High Court held that a
funding agreement was not, of itself, an abuse of process and nor
was the absence of an indemnity for the costs awarded against the
funded party. Therefore, the litigation funder who had failed to
provide an indemnity for an adverse costs order could not be forced
to pay the successful party's costs because it was not a party
to the litigation.
This case will have ramifications for litigation against the
Commonwealth or NSW governments in NSW (and possibly other
jurisdictions with similar procedural rules) where the litigation
brought by plaintiff/s is being funded by litigation funders. If
the litigation funders have not agreed to indemnify the plaintiff/s
in relation to an adverse costs order, the defendant would not be
able to seek to recover these costs from the litigation funder
directly. That is, the defendant could only seek to recover costs
from the plaintiff/s directly and only to the extent that they have
the financial capacity to meet any adverse costs order.
Following this case, many have called for procedural rules to be
amended to address this issue.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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This was an interlocutory decision about the appointment of a tutor for the child appellant, to carry on his proceedings.
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