Dwyer v Nel [2021] QCA 165 [2021] 33 QLR

SUPREME COURT OF QUEENSLAND CITATION: Dwyer v Nel [2021] QCA 165 PARTIES: WAYNE GEOFFREY DWYER (appellant) v MARIA JOHANNA NEL (respondent) FILE NO/S: Appeal No 13267 of 2020 DC No 151 of 2018 DIVISION: Court of Appeal PROCEEDING: General Civil Appeal ORIGINATING COURT: District Court at Brisbane – [2020] QDC 282 (Jones DCJ) DELIVERED ON: 10 August 2021 DELIVERED AT: Brisbane HEARING DATE: 11 May 2021 JUDGES: Holmes CJ and Bond JA and Williams J ORDERS: 1. The appeal is dismissed. 2. The appellant pay the respondent’s costs of the appeal on the standard basis. CATCHWORDS: PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – PARTIES AND NON- PARTIES – NON-PARTIES GENERALLY – DIRECTOR OF COMPANY – where the respondent brought proceedings against the defendant company in the District Court for damages in relation to the negligent design and construction of the roof of a dwelling – where the appellant was the sole director of the defendant – where the appellant, a non-party to the District Court proceedings, was ordered to pay the respondent’s costs of the substantive proceedings to be assessed on the indemnity basis – where the appellant appeals against the non-party costs order – where the appellant submits that the primary judge erred in law in making an order that the appellant pay the respondent’s costs of the substantive proceeding on the indemnity basis – where the appellant relies upon several alleged errors to conclude that the primary judge erred in law and in fact in finding that the circumstances justified the making of the costs order against the appellant – where the appellant submits that the primary judge erred in law and in fact in finding that the circumstances justified making the costs order against the appellant and in so making that order – -- 1 of 23 -- 2 whether the trial judge erred – whether the interests of justice favour a non-party costs order being made against the appellant Civil Proceedings Act 2011 (Qld), s 15 Uniform Civil Procedure Rules 1999 (Qld), r 5 FPM Constructions v Council of the City of Blue Mountains [2005] NSWCA 340, cited Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34, cited House v The King (1936) 55 CLR 499; [1936] HCA 40, applied Kebaro Pty Ltd v Saunders [2003] FCAFC 5, cited Knight v FP Special Assets Ltd (1992) 174 CLR 178; [1992] HCA 28, applied KMB v Legal Practitioners Admissions Board (Queensland) (No 2) [2018] 1 Qd R 500; [2017] QCA 146, cited Nel v Octoclay Pty Ltd (formerly Dwyer Corporation Pty Ltd t/as Dwyer Quality Homes) [2020] QDC 200, cited Vanguard 2017 Pty Ltd v Modena Properties Pty Ltd (No 2) [2018] FCA 1461, cited Yates v Boland [2000] FCA 1895, cited COUNSEL: C Jennings QC for the appellant P A Travis for the respondent SOLICITORS: Sajen Legal for the appellant Axia Litigation Lawyers for the respondent [1] HOLMES CJ: I agree with the reasons of Williams J and with the orders her Honour proposes. [2] BOND JA: I agree with the reasons for judgment of Williams J and with the orders proposed by her Honour. [3] WILLIAMS J: By an order dated 12 November 2020, the appellant, a non-party to District Court proceedings, was ordered to pay the respondent’s costs of the substantive proceedings, to be assessed on the indemnity basis. This is an appeal against the non-party costs order.1 [4] The respondent had brought District Court proceedings against the defendant, Octoclay Pty Ltd (Octoclay), for damages in relation to negligent design and construction of the roof of a dwelling. The appellant was the sole director of the defendant and appeared at the two day trial on behalf of the defendant. [5] The primary ground of appeal is that the learned primary judge erred in law in making an order that the appellant pay the respondent’s costs of the substantive proceeding on the indemnity basis. [6] Several alleged errors are identified in the grounds of appeal which the appellant relies upon to conclude that the learned primary judge erred in law and in fact in finding that the circumstances justified the making of the costs order against the appellant.2 1 On 3 December 2020, the learned primary judge gave leave to bring the appeal pursuant to s 118B of the District Court of Queensland Act 1967 (Qld). 2 Paragraphs 2(a)-(i) of the grounds of appeal set out the various findings of fact and law relied upon. -- 2 of 23 -- 3 [7] A further ground of appeal is that the learned primary judge erred in law and in fact in finding that the circumstances justified making the costs order against the appellant and in so making that order. [8] The appellant’s written and oral submissions focus the grounds of appeal into three issues. Namely, that the learned primary judge erred by: (a) finding that Octoclay’s defence of the respondent’s claim was unreasonable, hopeless, and doomed to fail because it successfully resisted the respondent’s principal claim that damages should be assessed at $750,000 (and loss calculated at $1.2 million).3 (b) finding that Octoclay had divested itself of its assets and that the appellant had pursued a course of conduct to thereby deny the respondent an ability to enforce any award of damages against Octoclay.4 (c) failing to apply applicable principles and have regard, or proper regard, to material facts including that: (i) Octoclay was not the moving party below; (ii) the appellant’s involvement in the respondent’s proceedings was in consequence of his position as Octoclay’s sole director; (iii) the appellant was not found to have any material interest in the outcome of the respondent’s proceedings; and (iv) the respondent first gave notice of her intention to seek a personal costs order against the appellant two months before the trial.5 [9] Ultimately, the appellant contends that on the basis of the errors identified in grounds 2(a), (d), (e) and (f), the conduct of the appellant was not sufficiently serious to warrant a non-party costs order.6 [10] Further, the appellant also contends that on the basis of the errors identified in grounds 1, 2(b), (c), (g), (h) and (i) and 3, and on a proper consideration of all of the material factors, the non-party costs order should not have been made.7 Appeal from the exercise of a discretion [11] The award of costs is an exercise of discretion. Consistent with House v The King,8 to succeed the appellant must establish some error has been made by the trial judge in the exercise of that discretion. That is, the trial judge acted upon a wrong principle, allowed extraneous or irrelevant matters to guide or affect him, mistook the facts or failed to take into account a material consideration.9 [12] It is not enough to establish that this Court would reach a different decision to that of the trial judge.10 3 Grounds 2(a) and (f). The written submissions refer to the paragraphs in the draft notice of appeal prepared for the application for leave. The paragraph numbers were different to those in the final notice of appeal filed. The correct paragraph references were confirmed in correspondence with counsel. 4 Grounds 2(d) and (e). 5 Grounds 1, 2(b), (c), (g), (h) and (i) and 3. 6 Appellant’s written submissions at [18]-[21]. 7 Appellant’s written submissions at [22]-[24]. 8 (1936) 55 CLR 499. 9 Ibid 504–5 per Dixon, Evatt and McTiernan JJ. 10 Ibid. -- 3 of 23 -- 4 [13] A convenient starting point is to consider whether the trial judge’s findings in respect of Octoclay’s defence and the divesting of assets were in error. Finding that the defence was unreasonable, hopeless, and doomed to fail [14] In the reasons,11 the trial judge makes a number of findings in relation to the defence. In respect of the considerations relevant to Octoclay these include: (a) At [14]:12 “In my view, the offer to settle made on behalf of the applicant needs also to be considered in the light of how Mr Travis, counsel for the applicant, described the case of the first respondent as being the ‘maintenance of hopeless defences through to trial’. In my respectful view, that is a correct description. In the substantive judgement there are numerous references to the second respondent accepting that the first respondent had failed to give any proper consideration to the design and construction of the roof pitch. Indeed, when asked to clarify the case for the first respondent, the second respondent said to the effect ‘everyone makes mistakes’.13” (b) At [15]:14 “Additionally, the second respondent on behalf of the first respondent raised, without any real basis, a number of other potential causes for the damage suffered by the applicant. None of which were even remotely capable of being accepted by the court.15” (c) At [17]:16 “… However, in this case there are a number of features that lead me to conclude that any orders as to costs should not be limited to after the date of the offer. The evidence in the substantive proceedings made it clear that from no later than early 2018, the first respondent was or ought to have been aware that the water penetration problem was the work of its unworkmanlike design and construction.17 Despite that, as is discussed below, it took a callous and calculated course of action designed to compromise the applicant. And, when that failed, filed what could only be described as a spurious defence maintained through to trial.” [15] In respect of the considerations relevant to the appellant, the trial judge’s findings include: (a) At paragraph [22]:18 “… [W]hile I am not prepared to proceed on the basis that the second respondent was responsible for unreasonable delay, there can be no 11 [2020] QDC 282. 12 Ibid. 13 [2020] QDC 200 at [8]-[10] and [23]. 14 [2020] QDC 282. 15 In this regard at one stage Mr Dwyer went so far as to say that he agreed with 95 per cent of the case being presented by the plaintiff. T1-84, 1 19. 16 [2020] QDC 282. 17 At paras [20]-[21]. 18 [2020] QDC 282. -- 4 of 23 -- 5 doubt that, for the reasons expressed in the substantive judgement and herein, he put the applicant to unnecessary expense by running a defence in respect of liability that was clearly doomed to fail.” (b) At paragraph [26]:19 “As has already been identified, the first respondent readily accepts that it could now be properly described as a person of straw and that the second respondent controlled that corporate entity. By reference to the substantive reasons, it is also inescapable that the litigation was unreasonable in the sense that the case run by the second respondent on behalf of the first respondent was hopeless and doomed to fail.” [16] The appellant contends that these findings in respect of the defence are in error as the plaintiff was unsuccessful in its claim for diminution of the value of the property and thereby Octoclay avoided a judgment in the sum of $750,000 (being a reduction of the amount claimed of $1,200,000 down to the District Court limit). [17] As set out in the substantive reasons, the trial judge did not accept the methodology of the claim in respect of diminution of the value but the plaintiff was one hundred per cent successful on its alternative claim for rectification and related costs. [18] In respect of liability, the trial judge’s comments could not be said to be in error. The appellant does not seek to challenge that aspect of the finding. In any event, there would be no basis to do that. [19] In respect of quantum, the appellant contends that the ultimate award of damages was a significant reduction in the award of damages (from $750,000 to $500,246.98) and that the appellant “simply caused Octoclay to put the respondent to proof on her claim without causing unreasonable delay in those proceedings.”20 [20] The appellant acknowledges that the trial judge considered the reduction in the damages amount but only in the context of whether a reduction should be applied to the assessment of costs. However, the appellant contends that the trial judge erred by not considering that reduction in the context of Octoclay “enjoy[ing] some success in its defence”.21 [21] The appellant’s contention that Octoclay merely put the plaintiff to proof is not well founded. Octoclay denied liability as well as quantum. To fully appreciate this position it is also necessary to keep in mind how the pleadings progressed and what was put in issue in the pleadings: (a) The statement of claim filed on 16 October 2018 claimed the sum of $250,000 for rectification costs and $5,000 for alternative accommodation.22 (b) Default judgment with damages to be assessed was originally entered on 18 December 2018 and this was set aside by order of the Court on 9 August 2019.23 (c) The defence filed 16 August 2019 denied a duty of care and denied the loss claimed, as well as denying that the defendant caused the alleged loss.24 19 Ibid. 20 Appellant’s written submissions at [19]. 21 Appellant’s written submissions at [20]. 22 Appeal Book (AB) at 49. 23 Affidavit of J Raphael affirmed 1 September 2020 at [42]. AB at 111. 24 AB at 52-3. -- 5 of 23 -- 6 (d) The amended statement of claim filed 21 October 2019 amended the rectification costs claimed to $487,046.98 plus $5,000 for alternative accommodation and added a primary claim of $600,000 by way of diminution in the value of the property.25 (e) Octoclay did not file an amended defence. (f) On the first day of trial,26 the statement of claim was further amended to increase the diminution in the value of the property to $1,200,000 (although this in effect would have been limited to $750,000 being the District Court jurisdictional limit) and the rectification claim to $487,046.98 plus $13,200 for alternative accommodation and storage.27 (g) On the second day of trial,28 Octoclay by the appellant filed an amended defence which included a denial of the claim for diminution in the value of the property and maintained the denials previously made including the denial of the duty of care.29 [22] As to the appellant’s approach to quantum at the trial, in the substantive reasons the trial judge notes:30 “[43] At no stage did Mr Dwyer challenge the accuracy of Mr Helisma’s costings of his scope of works. Instead, in cross- examination he put an alternate and cheaper method of rectification which, as I understood it, would have involved taking off the existing tiles and laying down a form of ‘weather proof integrity’ and then replacing the existing roof tiles over that waterproof membrane ‘basically as a cosmetic issue’.31 Unfortunately, no further details were put to Mr Helisma who clearly had concerns about the acceptability of the type of solution advanced by Mr Dwyer. At one stage it was also suggested that his scope of works might have been ‘rather intrusive’, which I took to mean excessive, but Mr Helisma’s unchallenged evidence was that he adopted what he considered to be the ‘most cost effective way’.32 [44] During his closing address, Mr Dwyer advanced yet another alternative form of rectification namely putting a ‘Colorbond roof over the top’ at a cost of $60,000.33 Unfortunately, as was the situation concerning the other method of rectification proposed by Mr Dwyer, there is simply no evidence that might satisfy me that first, the rectification works could be achieved at a price anything like that contended for and, perhaps more importantly, whether those rectification works might in fact be effective.” 25 AB at 66. 26 29 July 2020. 27 AB at 73. 28 30 July 2020. 29 AB at 77-8. 30 [2020] QDC 200. 31 T1-78, 1 1-27. 32 T1-78, 1 45-47; T1-79, 1 1-5. 33 T2-38, 1 27-37. -- 6 of 23 -- 7 [23] Whilst Octoclay did put the plaintiff to proof it also did not call any evidence, did not properly put alternative rectification steps (including any alternative costings) to the plaintiff’s witnesses, and raised new factual matters in the course of closing addresses. This was in the wider context of: (a) no concessions about liability, including denial of the duty of care being owed; (b) filing no expert evidence in respect of liability; (c) the appellant accepting at the trial that the pitch of the roof was incorrectly designed and that it did not accord with the manufacturer’s specifications; and (d) no concessions on causation, with the appellant largely accepting at trial that the cause of the water damage was the failure in respect to the design and construction of the roof. [24] In final submissions the appellant stated “everybody makes mistakes”. Further he said that “the amount of money sought is just astronomically ridiculous. Nothing to support it”.34 [25] Whilst this is some recognition that the appellant’s main focus was the quantum of the claim, the plaintiff’s claim for rectification and related costs was not challenged in any substantive way and was ultimately fully accepted by the trial judge. In this regard, the trial judge’s finding could not be said to be in error. [26] The trial judge’s comments at [22]35 in the context of considering the non-party costs order against the appellant clearly refer to the reasons in the substantive judgment and also the appellant running a defence “in respect of liability that was clearly doomed to fail” (emphasis added). This is correct and consistent with the findings in the substantive judgment and is not in error. [27] The trial judge’s comments at [26]36 are not expressly stated to be “in respect of liability” and could be interpreted to be broader than just liability. The comment is made “[b]y reference to the substantive reasons” and is also focussed on the “case run by the [appellant] on behalf of [Octoclay]”. It is directed therefore at the conduct of the case itself being unreasonable and which was “hopeless and doomed to fail”. [28] The trial judge was fully aware that the plaintiff did not succeed in respect of the diminution in value claim as is apparent from the transcript of the hearing of the application in respect of costs. This was discussed in relation to both the issue of indemnity costs against Octoclay and also the considerations in respect of a non-party costs order in relation to the appellant.37 [29] Further, the trial judge’s evaluation of the diminution of value case turned on the evidence of the plaintiff’s witnesses, not by any conduct of the appellant on behalf of Octoclay. The acceptance of the rectification claim was the inevitable consequence of there being “simply no evidence” that might satisfy the trial judge of a lesser figure.38 [30] In these circumstances, no error has been made out in respect of the trial judge’s findings in relation to the defence. 34 [2020] QDC 200 at [23]. Quoting T2-42, 1 10-22. 35 [2020] QDC 282. 36 [2020] QDC 282. 37 T1-7.30–T1-8.19. AB at 250-1; T1-12.28–T1-13.1; AB at 255-6. 38 [2020] QDC 200 at [44]. AB at 38. -- 7 of 23 -- 8 Finding as to divesting of assets [31] In the context of considering the non-party costs order against the appellant, the trial judge refers to divesting of assets in paragraphs [40] and [41] as follows:39 “[40] It is difficult to pin point exactly what interest the second respondent had in pursuing the defence of the first respondent, as hopeless as it was. It is true that the second respondent and his wife between them held all of the A class and Ordinary class shares in the company. But once that company had divested itself of all of its assets, it could have abandoned its defence or not filed a defence at all without being any worse off financially. The risk of the first respondent being wound up was created when the assets of that company were transferred to the newly formed company, in circumstances where it was all but inevitable that it was going to incur a substantial judgment debt. … [42] That said, the only inference that can be drawn from the conduct of the second respondent was that he did not in fact have an interest, as misconceived as it might have been, in either the actual outcome of the proceedings or delaying that outcome. Once the first respondent divested itself of its assets the second respondent in all likelihood became the source of its funding …” (emphasis added) [32] The appellant contends that the finding that the appellant caused Octoclay to divest itself of assets to defeat any adverse judgment was in error as there was no evidence that: (a) Octoclay held assets of value or assets capable of satisfying the claim; and (b) Octoclay divested itself of any such asset at an undervalue or otherwise. [33] The appellant points to there being no evidence of residual value in the business operated by Octoclay and no inference capable of being drawn to that effect from the admissible evidence. [34] The appellant accepts that there is evidence that supports findings set out elsewhere in the reasons that: (a) The revenue of Octoclay had declined over a number of years and there had been a gradual winding down of the business. (b) Octoclay had ceased to trade in 2018 or 2019. (c) Another company, Dwyer Homes Pty Ltd, had commenced business in parallel and that business had been building up. (d) There was an assignment or sale of the Dwyer business name.40 [35] At the hearing of the appeal, Counsel for the appellant expressly confirmed41 that the appellant was not challenging the finding in [39]42 which states: 39 [2020] QDC 282. 40 T1-19.36-45. 41 T1-24.4-6. 42 [2020] QDC 282. -- 8 of 23 -- 9 “On balance, I am able to conformably conclude that the [appellant] has actively pursued a callous and deliberate course of conduct intended to deny the applicant the opportunity of reaping the benefits of her litigation commenced against [Octoclay].” [36] However, the appellant did seek to read the findings in respect of divesture of assets together with purpose of “deny[ing] the applicant the opportunity of reaping the benefits of her litigation” to found the error.43 [37] It appears that the appellant does not seek to challenge the finding in [39] as in that paragraph there is no reference to the divesture of assets.44 The appellant concedes that an inference open on the evidence is there was an intentional winding down of the business in order to defeat the prospective judgment against Octoclay.45 [38] The appellant contends that the trial judge’s finding went too far in finding a divesture of assets as part of the “callous and deliberate course of conduct”. The appellant points to there being no evidence that there were any assets that might have been available to meet any judgment debt and further there was no evidence that there was a transfer of any assets in order to “shield it from a prospective judgment debt”.46 [39] A number of objections were taken to the affidavit of Ms Jennifer Raphael which was relied upon in support of the application for costs. The trial judge ruled on the objections as part of the reasons and a number of the appellant’s objections were upheld. As a consequence of the rulings, some paragraphs of the affidavit cannot be relied upon as evidence. [40] In evidence is an email dated 16 July 2019 sent by the appellant to the solicitors for the applicant which stated as follows: “Octoclay Pty Lt D (formerly Dwyer Corporation Pty LT D): • Only constructed a couple of houses last financial year. • Is currently not trading, and will never trade again. • Does not have a builder’s licence anymore as this has been cancelled. • Has no property, real estate, motor vehicles, or any other tangible assets. • Has no money in the bank and is about to close its bank account. • Sold the trading name of Dwyer Quality Homes to another company for one dollar. • Has liabilities in excess of its assets and its net position is approximately $–100. In light of this you may wish to take further instructions from your client as to how you are wanting to handle this matter.”47 43 Appellant’s written submissions at [12(d)] and [21]. 44 T1-24.4-11. 45 T1- 20.15-8. 46 T1-21.9–12. 47 Affidavit of J Raphael affirmed 1 September 2020 at [18]; Exhibit “JLR-7”. AB at 171. -- 9 of 23 -- 10 [41] The trial judge quoted this email at [33]48 and added emphasis to the last sentence. His Honour then went on: “[34] The only sensible inference that can be drawn from that correspondence is that it was intended to pressure the applicant to compromise her litigation because, to do otherwise, would result in her not being able to recover any damages that might be awarded but also any associated costs of the proceedings.” [42] This finding as to the inference that can be drawn is not challenged on appeal. [43] In the next paragraph of the reasons the trial judge identifies from the email the statement that the trading name of Dwyer Quality Homes was sold to another company for $1. He goes on to state, this:49 “must also be seen in the light of the following: (a) It is uncontroversial that the Company Licence Search of Dwyer Homes Pty Ltd recorded that prior to the cancellation of its building licence, the first respondent was generally operating as a Category 3 licensed builder having a maximum revenue of between $12,000,001 and $30,000,000.50 (b) It is also uncontroversial that between the financial years 2003/2004 to 2018/2019 the first respondent had completed some 774 building projects. In this context, during the course of the substantive proceeding, the [appellant] advised the court that he was a very experienced builder and that he and/or other entities he had had association with, had built somewhere in the order of 3,500 homes.” [44] There is some evidence of a sale of an asset to the limited extent of the statement about the sale of the trading name of Dwyer Quality Homes for $1. However, there is no evidence of the value of that asset or any associated goodwill. It is also not clear exactly when the transfer occurred or to whom. It may be open to infer it went to Dwyer Homes Pty Ltd, the new business, but there is no direct evidence of that. Nor is there any evidence that the transfer occurred to shield Octoclay from a prospective judgment and the appellant contends an inference along those lines is not capable of being supported on the available evidence. [45] By way of contrast, the evidence identified in [35(a) and (b)] and then [36] to [39] is open to support the inference conceded by the appellant that there was an intentional winding down of the business in order to defeat the prospective judgment against Octoclay. The finding in respect of “divesture of its assets” went beyond the “winding down of the business” which was established on the evidence. [46] The trial judge’s finding that Octoclay had “divested itself of all of its assets” is unfounded on the evidence and is an error. This error is sufficient to set aside his Honour’s cost decision in respect of the appellant and it is necessary to re-exercise the costs discretion. 48 [2020] QDC 282. 49 [2020] QDC 282 at [35]. 50 Affidavit of J Raphael affirmed 1 September 2020 at [7]-[8]. -- 10 of 23 -- 11 Re-exercise of the costs discretion [47] The possibility of the need to re-exercise the costs discretion was raised at the hearing of the appeal and neither party submitted that if an error was made out it was appropriate to remit the issue to the trial judge for the re-exercise of the discretion. In these circumstances, this Court should reconsider the respondent’s application for a non-party costs order against the appellant. [48] Section 15 of the Civil Proceedings Act 2011 (Qld) states: “A court may award costs in all proceedings unless otherwise provided.” [49] Sofronoff P (with whom Gotterson JA and Douglas J agreed) considered this provision in KMB v Legal Practitioners Admissions Board (Queensland) (No 2)51 and concluded at [54]: “Under s 15 Civil Proceedings Act 2011, the Court may award costs in all proceedings unless otherwise provided. The decision of the High Court in Knight v FP Special Assets Ltd (Knight’s case) is authority for the proposition that s 58 Supreme Court Act 1867, the predecessor of s 15 Civil Proceedings Act 2011, was expressed in terms that were wide enough to permit an order for costs to be made against a non-party.” [50] The difficulty for the appellant on the re-exercise of the discretion is that the trial judge’s findings, apart from the finding in respect of divesting of assets, remain unchallenged. In particular the finding in [39] as to “callous and deliberate course of conduct” remains in respect of the winding down of Octoclay’s business and setting up a separate business which had ties to the appellant. [51] Further there is evidence which establishes: (a) The appellant was a director of Octoclay and conducted the proceedings on behalf of the company; (b) During this period the company had no assets; (c) This was known to the appellant; (d) The appellant had already threatened this to the plaintiff who was suing the company; and (e) The only explanation offered by the appellant for the maintenance of a defence is his fiduciary obligations as a director and/or pursuit of a fiduciary interest in the interest of creditors.52 [52] The appellant contends that the proper exercise of the Court’s discretion is that the respondent’s application for costs against the appellant be refused.53 This is on the basis that: (a) The appellant’s conduct in the proceedings was not sufficiently serious to amount to a “rare and exceptional” case warranting a non-party costs order; and 51 [2018] 1 Qd R 500. 52 T1-17.37-44; T1-18.40-42. 53 Appellant’s written submissions at [24]. -- 11 of 23 -- 12 (b) The material facts mitigating against a costs order being made against the appellant are:54 (i) Octoclay was the defendant to the proceedings and not the moving party. (ii) Octoclay was a “person of straw” but the respondent had engaged it to carry out the building work without further assurance. (iii) The trial judge found that the appellant’s conduct of the proceedings for Octoclay did not cause unreasonable delay. (iv) Octoclay had some success in its defence in respect of the quantification of damages and as a result the conduct of the litigation was not unreasonable or improper. (v) The appellant did not have a real interest in the outcome (the appellant did not have an interest that was equal to or greater than that of Octoclay and did not have a substantial financial interest in the outcome of the proceedings). (vi) The appellant played an active part in the proceedings, but that was as Octoclay’s sole director. (vii) The respondent did not give notice of her intention to seek a costs order against the appellant until two months before trial. [53] It is necessary to consider the relevant principles that are to be applied in respect of the exercise of the discretion to award costs against a non-party. [54] The starting point is the High Court authority of Knight v FP Special Assets Ltd55 and the frequently cited statement by Mason CJ and Deane J:56 “… the prima facie general principle is that an order for costs is only made against a party to the litigation. As our discussion of the earlier authorities indicates, there are, however, a variety of circumstances in which considerations of justice may, in accordance with general principles relating to awards of costs, support an order for costs against a non-party. Thus, for example, there are several long-established categories of case in which equity recognized that it may be appropriate for such an order to be made. For our part, we consider it appropriate to recognize a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation. That category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made.” 54 Appellant’s written submissions at [22]. 55 (1992) 174 CLR 178. 56 At 192-3. -- 12 of 23 -- 13 [55] The circumstances identified in Knight v FP Special Assets Ltd are not pre-conditions to the exercise of the court’s discretion to award costs against a non-party: they are a guide to the exercise of the discretion.57 [56] It is also clear on the authorities that the categories of case which may enliven the exercise of the discretion are not closed.58 [57] The New South Wales Court of Appeal in FPM Constructions v Council of the City of Blue Mountains59 examined the application of the principles outlined in Knight v FP Special Assets Ltd and commented at [210]: “It is also true that the principle established in Knight v FP Special Assets cannot be limited to the specific circumstances of the case, the joint judgment having expressed a conclusion in more general terms … It is clear that the categories of case which may attract the exercise of the power are by no means closed, nor should they be. Nevertheless, 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 a 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 the 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.” [58] After these comments, Basten JA then went on to consider the particular circumstances in that case against the three criteria in the joint judgment of Knight v FP Special Assets Ltd.60 Whilst the comments outlined above assist in the consideration of the cases where the discretion has been identified, they are not in themselves criteria or pre-requisites that must be met before the discretion can be exercised. [59] It is necessary therefore to consider the three criteria identified by the High Court in Knight v FP Special Assets Ltd, namely: (a) The party is insolvent or a person of straw. (b) The non-party played an active part in the litigation. 57 Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 10) [2009] FCA 498 at [25] per Collier J; Yates v Boland [2000] FCA 1895 (Full Court); Gore v Justice Corporation Pty Ltd (2002) 119 FCR 429 at 437, 447-8. 58 Kebaro Pty Ltd v Saunders [2003] FCAFC 5 at [103] per Beaumont, Sundberg and Hely JJ. 59 [2005] NSWCA 340 per Basten JA (Beazley and Giles JJA agreeing). 60 At [211] and following. -- 13 of 23 -- 14 (c) The non-party or its principal must have an interest in the subject of the litigation. [60] Considering each of these in turn in the current case. [61] It is uncontroversial that Octoclay was a “person of straw”. While the evidence may not go as far as establishing insolvency, there is evidence that established that it had little or no resources to be able to meet any judgment. This in effect was pointed out by the appellant to the plaintiff’s lawyers in the email dated 16 July 2019.61 [62] It is clear that the appellant played a role in the litigation. The appellant: (a) At all relevant times controlled Octoclay. He was sole director and secretary of Octoclay.62 (b) Wrote correspondence on behalf of Octoclay in relation to the proceedings. This included the email dated 16 July 2019 from which the trial judge inferred that it was intended to put pressure on the plaintiff to compromise the litigation.63 (c) Instructed lawyers in respect of an application to set aside the default judgment that had been entered against Octoclay. (d) Personally paid the costs judgment arising from the application to set aside the default judgment, following steps taken by the plaintiff to issue a creditor’s statutory demand for payment of the costs judgment in the amount of $11,108.54,64 thereby avoiding Octoclay being wound up.65 (e) Likely funded the lawyers retained to prepare the defence filed on 16 August 2019 and the retention of lawyers to consider the prospects of a successful appeal against the substantive decision.66 (f) Referred to and relied on Octoclay’s lack of finances as the basis on which he sought leave for Octoclay to be represented by him.67 (g) Appeared at the hearing and conducted the proceedings on behalf of Octoclay, including cross-examining the witnesses on behalf of the plaintiff and made submissions on behalf of Octoclay. The appellant also chose not to call any witnesses and key parts of the plaintiff’s case were readily conceded or not contradicted with any evidence.68 [63] It is also important to consider the involvement of the appellant in the litigation identified above in light of the findings that the trial judge made that remain unchallenged on appeal: (a) At [2020] QDC 282 at [22]: “while I am not prepared to proceed on the basis that [the appellant] was responsible for unreasonable delay, there can be no doubt that, for the reasons expressed in the substantive judgement and herein, 61 AB at 171. 62 Exhibit “JLR-1” to Affidavit of J Raphael affirmed 1 September 2020. AB at 121-37. 63 [2020] QDC 282 at [34]. AB at 19. 64 Affidavit of J Raphael affirmed 1 September 2020 at [52]; Exhibit “JLR-19”. AB at 216. 65 Plaintiff/applicant’s submissions on costs dated 21 September 2020 at [10(a)]. AB at 84. 66 [2020] QDC 282 at [42]. AB at 21. See also Plaintiff/applicant’s submissions on costs order dated 21 September 2020 at [16]. AB at 86. 67 Plaintiff/applicant’s submissions on costs dated 21 September 2020 at [10(d)] and [11]. AB at 84-5. 68 Plaintiff/applicant’s submissions on costs dated 21 September 2020 at [30]. AB at 89; see also [2020] QDC 282 at [14], [29], [35] and [43]. AB at 29, 33, 35 and 37. -- 14 of 23 -- 15 he put the [respondent] to unnecessary expense by running a defence in respect of liability that was clearly doomed to fail.” (b) At [2020] QDC 282 at [26]: “it is also inescapable that the litigation was unreasonable in the sense that the case run by [the appellant] on behalf of [Octoclay] was hopeless and doomed to fail.” (c) At [2020] QDC 282 at [39]: “I am able to conformably conclude that [the appellant] has actively pursued a callous and deliberate course of conduct intended to deny [the respondent] the opportunity of reaping the benefits of her litigation commenced against [Octoclay].” [64] The appellant not only controlled the proceedings on behalf of Octoclay but did so as part of a “callous and calculated course of action designed to compromise the [respondent]” as found by the trial judge.69 [65] The appellant’s position in respect of this criterion is that a director’s control of litigation for his company does not, of itself, warrant a non-party costs order against that director.70 While the appellant played an active part in the proceeding, the appellant contends that his involvement was as a sole director and not more.71 [66] Thawley J in Vanguard 2017 Pty Ltd v Modena Properties Pty Ltd (No 2)72 specifically considered the issue of the non-party’s connection with the proceedings and being a director. His Honour commented: “[46] There is often little difficulty connecting with the proceedings the actions of a director of a company which is a party to the proceedings. In the case of a sole director company, the director is the controlling mind of the company. However, it is obviously not sufficient of itself that the director, being actively involved in the proceedings, caused the company to defend proceedings. Such conduct is consistent with the director’s duties to the company and would not be described as ‘exceptional’ so as to disengage the ordinary rule that it is the parties to the proceedings who bear the costs. However, there may be situations where the director’s conduct is such that a non-party costs order is appropriate. The question might arise, for example, where the director’s management of the litigation was in breach of a duty to the company or was in some material way improper, or where the director caused the litigation to be conducted in a manner intended to increase irrecoverable costs of the opposing party. Such circumstances are potentially capable of warranting the exercise of the discretion to award costs against a non-party director. [47] In Taylor v Pace Developments Ltd [1991] BCC 406 at 409F-H, Lloyd LJ (with whom Nourse and Ralph Gibson LJJ agreed) observed: … The controlling director of a one-man company is inevitably the person who causes the costs to be incurred, 69 [2020] QDC 282 at [17]. AB at 13. 70 Appellant’s written submissions at [17]. 71 Appellant’s written submissions at [22(e)]. 72 [2018] FCA 1461. -- 15 of 23 -- 16 in one sense, by causing the company to defend the proceedings. But it could not be right that in every such case he should be made personally liable for the costs, even if he knows that the company will not be able to meet the plaintiff’s costs, should the company prove unsuccessful. That would be far too great an inroad on the principle of limited liability. I do not say that there may not be cases where a director may not properly be liable for costs. Thus he might be made liable if the company’s defence is not bona fide, as, for example, where the company has been advised that there is no defence, and the proceedings are defended out of spite, or for the sole purpose of causing the plaintiffs to incur irrecoverable costs. No doubt there will be other cases. But such cases must necessarily be rare. In the great majority of cases the directors of an insolvent company which defends proceedings brought against it should not be at personal risk of costs … [49] I respectfully agree with the observations of Lloyd LJ set out above.” (emphasis added) [67] The difficulty for the appellant is that the trial judge’s findings, and the involvement of the appellant in the proceedings, goes beyond that of merely being a sole director. [68] In FPM Constructions v Council of the City of Blue Mountains73 Basten JA observed in respect of this criterion at [212]: “… that role may be legitimate, as in the case of a receiver or manager. Nevertheless, in a proper exercise of the discretion, something more should generally be found, although it may be sufficient that the third criterion is satisfied. In Knight itself, the proceedings were in effect abandoned, and in Arundel Chiropractic Centre, Callinan J described the driving force behind the litigation as a company officer acting ‘stubbornly and totally unreasonably’ (at [30]).” [69] The appellant’s involvement went beyond that merely of a sole director such that “something more” is established on the facts of this case. [70] The third criterion is that the non-party has an interest in the subject of the litigation. The trial judge noted in his reasons that it was contended that the appellant’s interest was “to avoid having his builder’s licence cancelled as a result of [Octoclay] being wound up ... that risk had already come into existence sometime prior to 16 July 2019.”74 Further, the trial judge concluded: “That said, the only inference that can be drawn from the conduct of the [appellant] was that he did in fact have an interest, as misconceived as it might have been, in either the actual outcome of the proceedings or delaying that outcome.”75 73 [2005] NSWCA 340. 74 [2020] QDC 282 at [41]. 75 [2020] QDC 282 at [42]. -- 16 of 23 -- 17 [71] The appellant contends that to the extent that the appellant had an interest in the outcome of the proceedings, it was not a “real interest”, and was not equal to or greater than that of Octoclay.76 The appellant contends that “a couple of dominos … have to fall” before the appellant’s builder’s licence was at risk and in those circumstances the interest is not sufficient: the appellant’s personal interest is “too far removed”.77 [72] However, Counsel for the appellant at the hearing of the appeal conceded that if the Court drew the inference that the appellant was defending the proceedings to pursue his own interest because of the risk of him losing his personal building licence, then that was a factor that weighed heavily in favour of a non-party costs order.78 [73] The evidence is that following receipt of the email dated 16 July 2019 from the appellant regarding Octoclay’s financial position, the plaintiff’s solicitors emailed the appellant later on 16 July 2019 as follows: “Thank you for your correspondence. You are the sole director and secretary of Octoclay Pty Ltd (formerly Dwyer Corporation Pty Ltd). You are also the sole director and secretary and nominee of Dwyer Homes Pty Ltd. If Octoclay is wound up the QBCC will classify you as an excluded individual and cancel your building licence because you were the director/secretary/influential person for Octoclay. The QBCC will also classify Dwyer Homes Pty Ltd as an excluded company and cancel its building licence because you are the director/secretary/influential person and nominee for Dwyer Homes. Furthermore any liquidator appointed to Octoclay will investigate the financial records of Octolay [sic] and potentially claw back any uncommercial transactions. In light of this you may want to consider how you would like to handle this matter.”79 [74] The appellant responded later on the same evening as follows: “I have never had any ownership of Dwyer Corporation. Shares is in dwyer [sic] Corporation were owned by others. I do not have any ownership of Dwyer homes [sic] Pty LTD [sic]. Shares in Dwyer homes Pty LTD are owned by others Who are different from the Dwyer Corporation owners. There is not going to be any liquidator appointed to Octoclay it is simply going to be wound up in the next Few [sic] weeks...”80 [75] On the next day, the plaintiff’s solicitors further responded: “I strongly suggest that you seek independent legal advice. Your correspondence clearly indicates that you do not have an accurate 76 Appellant’s written submissions at [22(d)]. 77 T1-28.6-10; T1-30.12-13. 78 T1-28.17-21. 79 AB at 208. 80 AB at 209. -- 17 of 23 -- 18 understanding of how the appropriate QBCC legislation works. Ownership of shares is irrelevant in this situation. Once my client’s damages claim has been quantified by the court, my client will be taking steps to enforce the judgement against Octoclay. If the company does not pay my client will be taking steps to wind up the company. If a liquidator is appointed your personal building licence and that of Dwyer Homes Pty Ltd will be cancelled. If by ‘wound up in the next few weeks’ you mean you intend to deregister the company this is not possible. In order to deregister a company you as a director need to sign a statutory declaration confirming that the company is not involved in litigation and does not owe any money. Neither point is true. You are on notice of this. If you nevertheless sign the statutory declaration you will have provided a false declaration to ASIC which is an offence. No steps you take within the next few weeks will prevent my client from exercising its rights.”81 [76] It is also important to keep in mind the wider context in which this correspondence occurred. [77] On 18 December 2018 default judgment was entered with the defendant to pay to the plaintiff damages to be assessed.82 In July 2019, the plaintiff made an application for the Registrar to fix a hearing date for the assessment of damages. On 5 July 2019, the Registrar listed the matter for the assessment of damages on 19 July 2019. This was notified to Octoclay and the appellant.83 [78] On 16 July 2019, the appellant sent an email acknowledging receipt of the listing and stating that Octoclay in effect had no assets and inviting the plaintiff to “take further instructions … as to how you were wanting to handle this matter.”84 [79] Following the email exchanges extracted above, Octoclay engaged lawyers and an application was made to set aside the default judgment.85 The default judgment was set aside and Octoclay filed a defence on 16 August 2019.86 On 18 September 2019 Octoclay advised that it will no longer be represented by Emmett Grace Lawyers and is now acting in person.87 The appellant authorised his son Alexander Dwyer to sign the Notice That Party Acting in Person and to appear on “his behalf” at the directions hearings.88 [80] Further, on 10 February 2020 following the plaintiff taking steps to enforce the costs order arising out of the application to set aside the default judgment, the appellant transferred the amount of $11,108.54 to the plaintiff’s solicitor’s trust account.89 81 AB at 210. 82 AB at 166. 83 AB at 169–70. 84 AB at 171. 85 AB at 211. 86 Affidavit of J Raphael affirmed 1 September 2020 at [42]. AB at 111; AB at 50. 87 AB at 212-3. 88 AB at 215. 89 AB at 216. -- 18 of 23 -- 19 [81] This forms part of the conduct from which the trial judge drew the inference that the appellant had “an interest, as misconceived as it might have been”.90 [82] The trial judge also made several other relevant findings that are not challenged on appeal, including: (a) In respect of the email sent by the plaintiff’s solicitors on 16 July 2019 in respect of the potential consequences to the appellant’s personal building licence, the trial judge found: “Putting to one side the accuracy of potential ramifications for the [appellant], there can be no doubt it caused him to react quickly. On or about 29 July 2019, a form was lodged with ASIC notifying that the [appellant] was no longer acting as director and secretary of Dwyer Homes Pty Ltd and that one Alexander Wayne Dwyer was now acting exclusively in those capacities. Alexander Dwyer is the son of the [appellant]. Notwithstanding that prima facie shift in the control of that company, the [appellant] still holds himself out as its CEO.”91 (b) In respect of the appellant’s interest generally: “It is difficult to pin point exactly what interest the [appellant] had in pursuing the defence of the first respondent, as hopeless as it was. It is true that the [appellant] and his wife between them held all of the A class and Ordinary class shares in the company.”92 [83] Leaving aside the trial judge’s comments that follow about divesting of assets and, if his Honour’s comments are read as referring to the winding down of the business of Octoclay as conceded by Counsel at the hearing, further comments of the trial judge remain relevant. That is: “But once that company had [wound down its business], it could have abandoned its defence or not filed a defence at all without being any worse off financially. The risk of [Octoclay] being wound up was created when the [business of Octoclay was wound down and the setting up of a separate business with ties to the appellant],93 in circumstances where it was all but inevitable that it was going to incur a substantial judgment debt.”94 [84] It is also relevant to keep in mind that the steps taken by the appellant were in circumstances where default judgment with damages to be assessed had already been entered. Octoclay could have contested the assessment of damages but rather the appellant chose to actively take steps to set aside the default judgment and expose Octoclay to a costs order as a result which necessitated the appellant having to pay the costs order personally. All of this points to an interest beyond that of a director taking steps to protect the company’s interests, or even steps to protect the interests of creditors. [85] The comments by Basten JA in FPM Constructions v Council of the City of Blue Mountains in respect of “an interest … equal to or greater than that of the party or, if 90 [2020] QDC 282 at [42]. 91 [2020] QDC 282 at [38]. 92 [2020] QDC 282 at [40]. 93 T1-24.38–40. 94 [2020] QDC 282 at [40]. -- 19 of 23 -- 20 financial, was a substantial interest” does not modify the criterion identified in Knight v FP Special Assets Ltd. Rather, his Honour was summarising the results from a “survey of cases” where “at least some, if not a majority” of the criteria had been satisfied. His Honour’s reasoning did not go as far as to mandate the requirement of an equal or greater interest before the discretion could be enlivened.95 [86] Basten JA recognized that the “term ‘interest’ in this context is of uncertain extent”.96 Further, his Honour considered that careful attention should be given to the nature of the interest, particularly where the non-party is a company officer or a solicitor.97 [87] The New South Wales Court of Appeal in Heath v Greenacre Business Park Pty Ltd98 considered the criteria in the context of re-exercising the costs discretion having found an error requiring the setting aside of the trial judge’s costs decision. Gleeson JA, with whom Macfarlan and Leeming JJA agreed, identified several “interests” of the non-party. These interests included as a director and secretary of the relevant company, its largest unsecured creditor and an indirect interest as a shareholder in the lessee company. Further, the non-party also had an interest, as he stood to gain if the cross-claim was successful, as he would get a return as the largest unsecured creditor.99 [88] These interests were sufficient in the circumstances for a non-party costs order to be made on the re-exercise of the costs discretion, including that: (a) the non-party had taken control of the conduct of the company’s defence and cross-claim;100 (b) the company was facing significant financial difficulties in meeting costs of the litigation, if not impecunious;101 (c) there was an absence of evidence from the non-party explaining his decision to maintain the company’s defence and cross-claim after receipt of the reply affidavits;102 (d) there was no reasonable prospect of defending the proceedings or succeeding on the cross-claim in the face of the reply evidence, which the company had not sought to contradict;103 (e) the non-party acted irresponsibly as a director in not accepting “the inevitable” by consenting to judgment no later than 30 May 2014, instead allowing the risk of a likely costs order against the company to continue “unabated”.104 [89] These circumstances are very similar to a number of the circumstances being considered in the current case where the Court is also considering the re-exercise of the costs discretion. 95 FPM Constructions v Council of the City of Blue Mountains at [210]. 96 At [213]. 97 At [214]. 98 [2016] NSWCA 34. 99 At [84]. 100 At [82]. 101 At [85]. 102 At [86]. 103 At [87]. 104 At [87]. -- 20 of 23 -- 21 [90] In the particular circumstances of the current case, the appellant does have a sufficient interest in the litigation for the purposes of the third Knight v FP Special Assets Ltd criteria. [91] Whilst the identification of the three criteria puts the current case within the category identified by the High Court, it is still necessary to consider whether the interests of justice require that an order for costs should be made against the non-party. [92] The appellant has referred to two other issues that are relevant to consider at this stage. This is, that the respondent did not give notice of her intention to seek a costs order against the appellant until two months before trial and also that Octoclay was in the position of a defendant and not the “mover” in the litigation. [93] Dealing with each of these issues in turn. [94] The authorities recognise that in some circumstances the failure to warn may be a material consideration and decisive against the award of non-party costs. For example, it may be that had a non-party been warned they may have applied to be a party and been able to directly contest the issues. Alternatively, if a non-party was warned of the intention to claim costs, they would have had the opportunity to influence the litigation so as to minimise costs. This may be particularly so when it is known that the party to the proceeding is insolvent.105 [95] Here there was not a failure to warn that costs would be claimed against the appellant. The notice was given on 3 June 2020 at the time that a formal offer to settle was made.106 The trial started on 29 July 2020.107 There was ample time for the appellant to take appropriate steps to mitigate costs if it was considered appropriate, including agreeing to judgment being entered and only contesting quantum if Octoclay was not in a position to accept the offer. [96] The timing of the warning in this case does not mitigate against a non-party costs order being made given the other relevant considerations already discussed. [97] The trial judge considered the timing of the warning in the context of the appropriate period for a costs order against the appellant. His Honour stated: “There was a submission that any order as to costs concerning the [appellant] ought to be limited to those costs incurred after [Octoclay] was warned about an application for costs on an indemnity basis and the [appellant], about the risk of non-party cost orders. That occurred on 3 June 2020. Having regard to the conduct of the [appellant] since the proceedings commenced, I do not consider that any discount is warranted on that, or any other basis.”108 [98] This finding was not challenged on appeal. There is no reason to reach a different conclusion to that of the trial judge in respect of this issue. [99] In respect of the second issue, it is open that a non-party costs order may be appropriate where the unsuccessful party was a defendant. The authorities recognise that a non-party costs order would usually be made (in the rare cases when it is made) 105 Yates v Boland [2000] FCA 1895 at [35]-[39] per O’Loughlin, North and Weinberg JJ. 106 AB at 238-9. 107 AB at 283. 108 [2020] QDC 282 at [43]. -- 21 of 23 -- 22 where the unsuccessful party was the moving party but ultimately it is a question on the facts of each case. [100] Thawley J in Vanguard 2017 Pty Ltd v Modena Properties Pty Ltd (No 2)109 commented in respect of this issue as follows: “[80] … it was submitted that Modena was not the moving party, but was ‘dragged to Court’ by the moving creditor. That is correct. It is also correct to observe, as Basten JA did in FPM Constructions, that a non-party costs order is usually made in the situation where the unsuccessful party was the moving party. However, each case must depend on its own facts. If there is sufficient responsibility on the part of a non-party for the management of litigation in a way otherwise sufficient to attract an order for non-party costs, the fact that the unsuccessful party was the defendant will not operate to deny such an order being made. Basten JA expressly did not suggest that the criteria he identified in FPM Constructions were pre-requisites. Indeed, they were expressed as criteria, some or a majority of which the cases indicated tended to be satisfied.” (emphasis added) [101] In the current case, Octoclay was a defendant but the facts in this case pointing towards a non-party costs order being appropriate include: (a) Default judgment with damages to be assessed was entered on 18 December 2018 and the judgment was set aside on 9 August 2019 following an application by Octoclay brought in July 2019.110 (b) On 3 June 2020 the plaintiff served a formal offer to settle and also provided a letter warning that the plaintiff would be seeking indemnity costs and a non- party costs order if the offer was not accepted.111 The offer was to settle the proceeding on the payment of $290,000 with no order as to costs (in effect that the parties bear their own costs).112 At this time, the plaintiff claimed $600,000 for diminution in the value of the property or alternatively $487,046.98.113 (c) Whilst a defence had been filed on 16 August 2019 in response to the original statement of claim,114 no amended defence was filed in response to the additional pleaded case in respect of diminution in value of the property. (d) No steps were taken by the appellant to mitigate against the risk of exposure to a costs order in light of the offer to settle and the warning about seeking a non- party costs order. It was open at any stage for judgment to be consented to with damages to be assessed. This would have been consistent with the obligations of a litigant pursuant to rule 5 of the Uniform Civil Procedure Rules 1999 (Qld) and reduced the length of the trial to a significant extent. (e) On the first day of trial, the plaintiff was given leave to further amend the statement of claim which increased the diminution in value of the property 109 [2018] FCA 1461. 110 AB at 111. 111 AB at 238–9. 112 AB at 240. 113 Amended statement of claim filed 21 October 2019. AB at 66. 114 AB at 50. -- 22 of 23 -- 23 claim to $1,200,000 (but in effect limited to $750,000 being the District Court jurisdictional limit) and also increased the rectification claim to $500,246.98 (being rectification costs of $487,046.98 and storage costs of $13,200).115 (f) On 30 July 2020, the second day of trial, an amended defence was filed which maintained the denial of the duty of care and also put in issue the rectification costs, as well as denying the diminution in value of the property.116 (g) Octoclay did not serve any evidence, expert or lay, and did not call any witnesses at trial. [102] It is also appropriate to consider the trial judge’s findings in respect of the “hopeless defence” and also the “callous and calculated course of action designed to compromise the applicant”. [103] All of these factors support a conclusion that in the circumstances of this case there is sufficient responsibility on the part of the appellant for the management of the litigation to attract an order for non-party costs and the fact that Octoclay was the defendant does not in all of the circumstances counter against an order being made. [104] In re-exercising the costs discretion, the interests of justice support a non-party costs order being made against the appellant. Accordingly, the appropriate order is that the appellant pay the plaintiff’s costs of the substantive proceedings on an indemnity basis. Conclusion [105] As is evident from these reasons, whilst an error was established in respect of the trial judge’s finding as to the divesting of assets, on the re-exercise of the costs discretion, the same non-party costs order is the appropriate order. Consequently, the appeal is dismissed. [106] Further, as the respondent has been successful, the appropriate costs order on the appeal is that the appellant pay the respondent’s costs of the appeal on the standard basis. 115 AB at 73. 116 AB at 75; see at 78. -- 23 of 23 --