John Pesutto owes Moira Deeming $2.3m, but he doesn’t have it. Can former premiers be forced to pick up the tab?

Victorian MP Moira Deeming attracted headlines recently when news broke she’s intending to sue three former Liberal premiers, among other party figures.

Why? Deeming is trying to recoup millions of dollars in legal costs after a successful defamation case.

Who pays for legal action in Australia, particularly in civil courts, can be confusing. But given how expensive litigation can be and the big names involved in this case, it’s worth unpacking.

How did we get here?

In March 2023, Victorian Liberal MP Moira Deeming spoke at a “Let Women Speak” rally held at Parliament House in Melbourne. The rally was interrupted by protesters, who were described as “neo-Nazis”.

After the rally, the then-Victorian Opposition Leader John Pesutto made a series of public statements implying Deeming had associations with the neo-Nazi groups and therefore needed to be expelled from parliament.

Perhaps unsurprisingly, in December 2023 Deeming sued Pesutto in the Federal Court for defamation. A year later, she won her lawsuit.

Pesutto was ordered to pay $300,000 in damages for the harm to Deeming’s reputation and the associated emotional distress she suffered.

But that wasn’t the end of what Pesutto had to pay.

Last month, the Federal Court also ordered Pesutto to pay $2.3 million to cover Deeming’s costs in winning her suit (in addition to having to pay his own costs).

This has created some serious problems for both Pesutto and Deeming.

It is a problem for Pesutto because he doesn’t have the money to pay and is now facing bankruptcy proceedings and his own possible expulsion from parliament.

Former premier Jeff Kennett has spruiked a crowdfunding campaign to help fund Pesutto’s legal liabilities.

It is a problem for Deeming because she will be out $2.3 million if Pesutto cannot come up with the money.

So, Deeming is now looking around for someone else who might be made to pay Pesutto’s tab.

What does the law say?

The reason Pesutto has to pay is that in nearly all Australian courts, the standard order at the end of a lawsuit is that the loser has to pay the costs – for example, lawyers’ fees, court costs, and expert witness fees – of the winner.

Usually the loser simply makes payment, unless they don’t have the financial means to do so, and the court proceedings are over.

However, the court can make “third-party costs orders”. These are orders making someone other than the losing party responsible for paying the loser’s costs bill.

Deeming’s solicitor has indicated, in a widely reported letter to Pesutto’s lawyers, that Deeming intends to seek payment of her costs from up to nine Liberal Party notables, including former premiers Ted Baillieu, Denis Napthine and Jeff Kennett, due to their alleged funding of Pesutto’s legal costs during the case.

Though the court rules allow for a third party to pay costs, and courts have broad discretion to make almost any kind of costs order, the High Court has established certain circumstances that should be considered first.

These circumstances include where a party to a lawsuit is insolvent or a “person of straw”, and where a third party has an interest in the subject of the litigation.

Perhaps tellingly, the letter from Deeming’s solicitor reportedly states Pesutto was a person of straw and that the Liberal Party figures did have an interest in the proceedings. However, this would need to be accepted by a court for Deeming to be successful.

How can people bankroll the court battles of others?

Providing money to support another person bringing litigation was originally frowned on by the law. It was regarded as “champerty” and “maintenance”. Both were treated as criminal offences.

The High Court of Australia has observed that law of maintenance and champerty can been traced to the Statute of Westminster the First of 1275. Some trace it back to Greek and Roman law.

Maintenance was where a person “improperly, and for the purpose of stirring up litigation and strife, encourages others either to bring actions, or to make defences which they have no right to make”.

But there were exceptions, such as where the maintainer acted from charitable motives or because the person maintained was family.

Champerty was a type of maintenance where the funder received some reward, such as part of the outcome of the successful litigation. The vice was stirring up litigation, oppressing others and creating an incentive to tamper with evidence.

Over time, however, Australian jurisdictions abolished the prohibition.

Access to justice, including the ability to raise a defence, is often costly in Australia because of legal fees and the loser pays system. Many litigants need financial help to bring or defend litigation.

Indeed, Australia now allows third-party litigation funding where a corporate entity funds the proceedings in return for a share of the recovery, as is commonly used in class actions and insolvency cases.

While bankrolling of civil litigation is now business as usual, it is not entirely unregulated. The courts have power to prevent an “abuse of process”, typically through permanently halting proceedings.

An abuse of process typically arises where the use of the court’s procedures unjustifiably negatively affects a party, or where it serves to bring the administration of justice into disrepute.

If a funder repeatedly supported unmeritorious claims or defences, or misused court procedures, then the courts can step in, but this is a high bar.

As a result, the main response to third parties financing litigation is to seek costs from them when the unsuccessful party cannot pay. Deeming will need to pursue this through the court.