The Issue
The mantra of the successful litigant – whether after interlocutory adjudication, trial judgment or appeal order — is that “costs ought follow the event.”
While this is the usual outcome, founded in logic and convenience, occasionally there is reason for pause. Such pause is apt in the instance of:
- valid criticism of the manner in which the successful party has conducted its case.
- paucity in measure of success of such successful party in ultimate outcome or upon the bulk of issues litigated.
The point of this article is to canvass the number of recent cases which usefully collect the principles and exemplify their application.
The Relevant Rules
The Uniform Civil Procedure Rules 1999 (Qld), relevantly, provide:
681 General rule about costs
(1) Costs of a proceeding, including an application in a proceeding, are in the discretion of the court but follow the event, unless the court orders otherwise.
(2) Subrule (1) applies unless these rules provide otherwise.
…
684 Costs of question or part of proceeding
(1) The court may make an order for costs in relation to a particular question in, or a particular part of, a proceeding.
(2) For subrule (1), the court may declare what percentage of the costs of the proceeding is attributable to the question or part of the proceeding to which the order relates.
The Federal Court of Australia Act 1976 (Cth), relevantly, provides:
43 Costs
(1) Subject to subsection (1A), the Court or a Judge has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs shall not be awarded.
…
(2) Except as provided by any other Act, the award of costs is in the discretion of the Court or Judge.
While the drafting of the federal provision is redolent of a broader discretion, the case law, exemplified below, reveals no, or little contrast in interpretation or treatment.
Disentitling Conduct
In Shrimp v Landmark Operation Ltd (No 2)1 the applicants were unsuccessful in an application for a separate trial. Some of the successful respondents sought their costs of the application, and others sought that there be no orders as to costs. Besanko J, under s 43 of the federal statute, ordered the successful respondents to pay the unsuccessful applicants’ costs.
His Honour usefully essayed the applicable principles:
[9] The application was unsuccessful. The usual order as to costs in those circumstances is that the costs of the successful party to an application are paid by the unsuccessful party: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 (“Oshlack“) at 96-97 [66]-[68] per McHugh J. There are exceptions to the usual order or circumstances in which it is not made. The difference between the majority and minority in Oshlack was as to the width of the exceptions to the usual order or circumstances in which it is not made. McHugh J (with whom Brennan CJ was in general agreement) was in the minority and he said (at 97-98 [69]-[70]) (footnotes omitted):
The traditional exceptions to the usual order as to costs focus on the conduct of the successful party which disentitles it to the beneficial exercise of the discretion. In Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd, Devlin J formulated the relevant principle as follows:
“No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct.”
‘Misconduct’ in this context means misconduct relating to the litigation, or the circumstances leading up to the litigation. Thus, the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation; unnecessarily protracts the proceedings; succeeds on a point not argued before a lower court; prosecutes the matter solely for the purpose of increasing the costs recoverable; or obtains relief which the unsuccessful party had already offered in settlement of the dispute.
Apart from anomalous examples in the equity jurisdiction, there are very few, if any, exceptions to the usual order as to costs outside the area of disentitling conduct.
[10] The majority (Gaudron, Gummow and Kirby JJ) took a broader view of the exceptions to the usual order or circumstances in which it is not made. Gaudron and Gummow JJ said (at 88 [40]):
There is no absolute rule with respect to the exercise of the power conferred by a provision such as s 69 of the Court Act that, in the absence of disentitling conduct, a successful party is to be compensated by the unsuccessful party. Nor is there any rule that there is no jurisdiction to order a successful party to bear the costs of the unsuccessful party.
(See also at 120-123 [134] per Kirby J and Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56 at [26] per Gleeson CJ, Gummow, Hayne and Crennan JJ.)
(emphasis added)
The costs orders in Shrimp were founded in the fact that, belatedly, several months after the hearing of the application, while the decision thereon was reserved, a number of the respondents raised pleas of proportionate liability. This put paid to any prospect of a separate trial. His Honour accepted that had these pleas been made earlier, it was highly unlikely the application would have been brought. In effect, his Honour proceeded on the footing of “costs thrown away”.
Costs of Issues
In James v Surf Road Nominees Pty Ltd (No 2)2, the effect of the orders made, after appeal, was that the parties enjoyed disparate success on claim and cross-claim harbouring a common factual matrix.
The New South Wales Court of Appeal3 collected the relevant principles:
[32] The effect of Pt 52A r.11 is that an unsuccessful party may be ordered to pay the entirety of the costs of the successful party, even though the successful party did not succeed on all issues. However, as is specified by the rule itself, the Court is entitled to make a different order. That may occur where there are multiple issues involved. This was the subject of comment in Waters v. P C Henderson (Aust) Pty. Limited (unreported CA(NSW) Kirby P, Mahoney and Priestley JJA, 6 July 1994) where Mahoney JA said:
Where the proceedings involve multiple issues the application of the rule that costs follow the event may involve hardship where a party succeeds on some issues and yet fails on others. Particularly is this so where, for example, a defendant succeeds on issues that occupied the bulk of the time taken by the proceedings. Nevertheless, unless a particular issue or group of issues is clearly dominant or separable, it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed.
[33] Similarly, Toohey J made the following observations in Hughes v Western Australian Cricket Association (1986) ATPR 40-748:
1. Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order.
2. Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed.
3. A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the party’s costs of them. In this sense, “issue” does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law. (references omitted)
[34] Where a matter involves multiple issues and the question before the court is whether it should make some other order as to costs other than the order that costs follow the event, a distinction is commonly drawn between cases which involve clearly discrete issues for determination, and those in which all issues are inseparable, or at least sufficiently linked, with respect to the overall disposition of a particular matter. In Permanent Trustee Aust Ltd v FAI General Insurance Co Ltd (unreported, NSWSC, 3 June 1998), Hodgson CJ in Eq noted that the obvious examples of a matter involving discrete issues is one where a plaintiff makes separate claims for different relief, or a claim by a plaintiff and a cross-claim by a defendant. Another example is where a respondent is successful in having an appeal against an earlier decision dismissed, but for reasons other than those raised in the respondent’s Notice of Contention. This is not to say that so-called “discrete issues”, for the purposes of apportioning costs, only exist in cases where there are separate claims made within a single matter. As Toohey J stated in the passage quoted at [33] above, it can relate to “any disputed question of fact or law” before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter.
…
[36] Where the court does exercise its discretion to apportion costs, the apportionment itself involves the exercise of discretion. As Gummow, French and Hill JJ recognised in Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261:
Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion for the trial judge. Mathematical precision is illusory and the exercise of the discretion will often depend upon matters of impression and evaluation.
This case is a classical example of that sentiment.
(emphasis added)
In James the court made orders, in respect of both trial and appeal costs, by reference to success on issues, but on a percentage basis.
In Todrell Pty Ltd v Finch and Others4, Chesterman J, after a four day trial, dismissed a claim by the plaintiff for declaratory relief in respect of entitlement under a put and call agreement with respect to certain land. The first defendants5 (“the defendants”) did not succeed on their first basis of argument, namely that there was no final agreement between the parties, but rather on a second basis, namely that there was no note or memorandum as required by s 59 of the Property Law Act 1974 (Qld).
His Honour considered the second basis so plain as to attract, prima facie, in the defendants’ favour, an award of indemnity costs. In contrast, his Honour found the defendants’ resistance on the first basis to be wholly, and knowingly, unmeritorious.
His Honour considered UCPR 684, its predecessor RSC O.91 r.3 and the seminal cases collected and addressed by the Queensland Full Court in Colburt v Beard6 and Thiess v TCN Channel 9 Pty Ltd (No 5).7 Applying these provisions the plaintiffs were ordered to pay the defendants’ costs, on an indemnity basis, up to and including the first day of trial, with the defendants pay the plaintiffs’ costs of the issues upon which the defendants were unsuccessful:
[23] (In) … Australian Conservation Foundation v Forestry Commission of Tasmania 81 ALR 166 at 169 … Burchett J said:
A party against whom an unsustainable claim is prosecuted is not to be forced, at his peril in respect of costs, to abandon every defence he is not sure of maintaining, and opposed to his adversary only the barrier of one hopeful argument: he is entitled to raise his earthworks at a reasonable point along the path of assault.
[24] Notwithstanding these stern warnings, which I accept are appropriate, this does appear to me to be an exceptional case. The Finchs failed on the only contested question of fact which took up three quarters of the time at trial. It was both dominant and separable. That by itself may not, I apprehend, justify an order depriving them of their costs or obliging them to pay their opponents. The real point is that their defence to that issue was baseless and they must have known it had no substance. They put their opponent to the costs of proving an issue, expensive as it turned out, on which the justice of the case was against them. Essentially the fact is that their opposition to the plaintiff on that point was not genuine. Moreover it remains disturbing that their defence should have utilised the invented evidence of their solicitor.
(emphasis added)
Where the arguments or issues do not bear the character of being hopeless or unarguable, a court will be disinclined to make an apportioning order, even as to issues which fall away in the course of trial.8
Exiguous Outcome
In Nicholl Holdings Pty Ltd v Maharaj9, McMeekin J dealt with costs in a case where the plaintiff claimed $530,000 for damages for breach of contract, together with the final injunction restraining the defendant from carrying on and engaging in the provision of medical services. The plaintiff failed on all the major issues tried but succeeded in recovering nominal damages ($209) on account of a proven breach of contract.
His Honour ordered the “successful” plaintiff to pay the defendant’s costs on a standard basis:
[11] There are a number of reasons why the undoubted discretion that I have should be exercised in favour of the defendant. In the context of this case the defendant effectively succeeded. The costs incurred by the plaintiff relevant to the limited issues on which the plaintiff succeeded are swamped by the costs that the defendant has had to incur in defeating the claims made against her. The damages that the plaintiff succeeded in winning were nominal. It was guilty of relevant misconduct relating to the litigation in the sense discussed in Oshlack v Richmond River Council (1998) 193 CLR 72 per McHugh J at p97 citing the judgment of Devlin J in Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 at 874; Brennan CJ at p 75 agreeing generally. Its success was extremely limited. It subjected the defendant to a three day trial instead of a construction argument — and one that could have been done (and very nearly was done) on the papers. If it is necessary that there be “special circumstances” related to the case, as I think that there does to disentitle a successful plaintiff, even a nominally successful one, then they are present here.
(emphasis added)
Conclusion
The common theme in the above authorities is that a court can be persuaded that costs not follow the event, and moreover that the unsuccessful party gain its costs, in circumstances where there is misconduct on the part of the successful party. This falls to be found where such party is bereft of timeous and apt conduct in civil litigation.
Such an instance, however, is likely to be the exceptional. The general rule remains that costs follow the event. There can be discerned, however, in the above cases, a resolve in the court to require high standards of the parties, and their lawyers, in selection of issues proffered for adjudication. No doubt, at both federal and state levels, this is spawned by the burgeoning emphasis upon proper use of scarce and expensive court resources.
R ichard Douglas SC
Footnotes
- [2008] FCA 25
- [2005] NSWCA 296
- Beazley, Tobias and McColl JJA
- [2007] QSC 386
- the second defendant being a party having a priorities contest with the plaintiff parasitic upon the first defendants’ success
- [1992] 2 QdR 67
- [1994] 1 QdR 156
- Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 at [52]
- [2008] QSC 133
