Key Points

• Administrator and Liquidators recovery of legal costs from interested third parties under Section 444GA of the Corporations Act litigation.
• Legal Costs risk and consequences for intervening third parties under Rule 2.13 of the Supreme Court (Corporations) (WA) Rules 2004.

The Administrators of Tiger Resources Ltd (subject to deed of company arrangement) applied in accordance with a DOCA and the Corporations Act for approval under the terms of the DOCA for the Administrator to transfer shares without payment to Yingkou Yangzhou Trade Co Ltd (YYT) (Share Transfer).

Three parties intervened in the proceedings as interested third parties, being YYT, Kipoi Holdings Mauritius Ltd (KHML) and Jinji Resources Finance Pty Ltd (Jinji).

YYT and Jinji’s positions: “mirrored that of the Plaintiff” and the Master found them to be: “two sides of one coin”.

KHML took an active role in the proceedings as the sole contradictor opposing the grant of leave for the Share Transfer.

The Plaintiffs asserted that they incurred additional legal costs in the application of more than $210,000 because of KHML’s vigorous conduct in the application.

The Master recognised that the normal position of an intervening third party in such applications is that they are not awarded costs and a costs order is not made against them.

However, the Master held that where an intervening interested third party takes on the role in litigation that is “analogous to an unsuccessful litigant” and who does not “passively” participate in the proceedings, the Court can exercise its discretion to make a costs order against that intervening interested third party for the additional costs the Plaintiffs incurred.

In determining whether to exercise its discretion and make a costs order against the intervening interested third party, the Court will, and did in this matter, consider:

1. whether the additional costs were incurred because of the intervention of the interested party; and
2. whether the interested party’s conduct justifies the Court exercising its discretion to make a costs order against it.

The Master made a costs order against KHML because:

1. KHML went well beyond what is normally limited involvement of an intervening third party;
2. KHML attacked with vigour all aspects of the Plaintiffs' case causing a "fierce contest with no quarter asked or given"; and
3. the proceedings were indistinguishable from any plaintiff/defendant suit, which resulted in additional costs.

The Master also determined pursuant to section 280 of the Legal Profession Act 2008 that the proceedings were of sufficient difficulty and complexity to warrant an increase in the allowable value of costs than otherwise would be claimable under the relevant legal costs determination.

YYT and Jinji, the other interested parties, also sought a costs order against KHML contrary to the general position that a costs order would not normally be made in their favour because a successful intervener can recover costs only if the intervention was necessary to protect an interest not common with the main parties.

KHML submitted that a costs order should not be made against it in YYT and Jinji’s favour because there was no: “very special factor outside the ordinary course of events” warranting a costs order against it.

The Master declined to make a costs order in YYT and Jinji’s favour against KHML because their position mirrored and their interests were common to the Plaintiffs, which is not sufficient to depart from the general position.

The judgment is an example of the Court’s willingness to exercise its discretion and make a costs order against a party where that party’s actions increase legal costs and cause delay in the proceedings.

It is critical that parties consider the legal costs consequences that might follow from the parties’ conduct in Court proceedings including the risk that the Court could remove the “cost protection cap” provided by legal costs determinations for party to party costs.

Litigants should consider, as in this matter, the potential to obtain special costs orders which in turn can lead to substantial reductions in out-of-pocket expenses reducing the commercial burden of civil litigation. They should also seek independent cost advice if they obtain costs orders either for or against them.

Dentons has both the insolvency, recovery and legal costs knowledge, skill and unrivalled capacity to advise about and represent Administrators and Liquidators at any stage in Court proceedings including independent post trial legal costs arguments and advice about and representation in assessments of legal costs after final costs orders are made.

We are ready and available to assist including by taking instructions from existing legal representatives in costs matters from a position of independence, knowledge and experience.