Background
Pheonix A Pty Ltd and Pheonix B Pty Ltd unsuccessfully sued Spring UT Pty Ltd and Rosario Pelligra in litigation arising from agreements for lease and leases. After trial, the Court dismissed both the applicants’ originating application and the respondents’ cross-claim. It ordered the applicants to pay the respondents’ costs, subject to any application for a different costs order.
The respondents then sought indemnity costs against the applicants and non-party costs orders, also on an indemnity basis, against the applicants’ director, Stephanie Doyle; their parent company, Pheonix 85 Pty Ltd; and their commercial litigation funder, Axes Financial Pty Ltd, trading as Aequitas Litigation Funding. Aequitas had advanced $545,246.38 under a funding agreement, stood to receive repayment and a funding fee from any recovery, and indemnified the applicants against certain adverse costs. It stopped providing funding before trial but the funding agreement did not appear to have been terminated.
The Court’s Holding
Justice Moshinsky refused to convert the applicants’ costs liability to indemnity costs. The respondents’ Calderbank offer required the applicants to pay 85% of the respondents’ party-and-party costs and therefore lacked a sufficient element of compromise to make its rejection unreasonable. Although the applicants ultimately failed and were found to have engaged in misleading or deceptive conduct, their case was not, when assessed before trial, hopeless or bound to fail. The other alleged litigation misconduct also did not justify indemnity costs.
The Court declined to order Ms Doyle or Pheonix 85 to pay the respondents’ costs. Ms Doyle’s direction of the litigation was consistent with her role as director, her interest through share ownership was indirect, and her partial funding of the case was insufficient. There was likewise no evidence that Pheonix 85 directed or funded the litigation or held an interest beyond its position as shareholder. The Court did, however, join Aequitas and order it to pay the respondents’ costs of the proceeding through 12 June 2026 on a party-and-party basis. Aequitas had provided substantial commercial funding, stood to benefit from success, and had the right to be involved in some aspects of the proceeding, including lawyer selection.
The interlocutory application was otherwise dismissed. Aequitas was ordered to pay one-third of the respondents’ costs of that application, while the respondents were ordered to pay the interlocutory-application costs of the applicants, Pheonix 85, and Ms Doyle.
Key Takeaways
- A Calderbank offer may not support indemnity costs if it lacks a genuine element of compromise, even where it identifies weaknesses that later prove decisive.
- A commercial litigation funder may face a direct non-party costs order where it substantially funds the case, expects a return from success, and possesses rights concerning aspects of the litigation’s conduct.
- Directing litigation as a corporate director, holding an indirect shareholder interest, or contributing some funding does not automatically make an individual or parent company liable for the unsuccessful party’s costs.
Why It Matters
The decision illustrates the distinction between contractual adverse-costs protection and the Court’s statutory discretion to impose costs directly on a commercial funder. The Court declined to leave the respondents solely to enforcement of the funding agreement because doing so could produce further disputes over whether the contractual indemnity applied.
It also confirms that losing a strongly contested case—even one involving adverse findings after trial—does not itself justify indemnity costs. The Court will assess whether the proceeding was objectively hopeless or improperly conducted and whether any settlement offer embodied a meaningful compromise.