WEEK 12 â COSTS
WEEK 12 – COSTS 1.
Introduction
1.1
Jurisdiction
The jurisdiction to award costs is statutory: s 221 Supreme Court Act 1995. A party cannot recover any costs of a proceeding other than under the UCPR or order of the court: r 691. 691 Entitlement to recover costs A party to a proceeding cannot recover any costs of the proceeding from another party other than under these rules or an order of the court.
Costs may be awarded at any stage of the proceedings or after the proceedings end: r 680. Costs may be recovered for proceedings, which have abated: s 116I Supreme Court Act 1991.
1.2
Nature/Function of Costs
The general rule is that the winner is awarded their costs, in addition to the judgment for or against the claim. The idea is to indemnify the successful party for the costs incurred by them in contesting the claim. It is not to penalise the loser or reward the winner.
1.3
General Classification of Costs
In practice the award of costs does not fully indemnify the winner. A recognised rule of thumb is that the winner will recover only 2/3 of their actual costs. The reason for this is that there are two scales of costs: • Standard basis: r 690, 703. • Indemnity basis: r 690, 704. Standard Basis: r 703, 690 This is the usual scale awarded in litigation. It is determined by reference to the scale of costs prescribed in the rules: r 690, and is also limited to only those costs which are necessarily or properly incurred: r 703. Parties will generally receive about 60% of costs because there is a sliding scale which is not generous. 703 Standard basis of assessment (1) Unless these rules or an order of the court otherwise provide, the registrar must assess costs on the standard basis. (2) When assessing costs on the standard basis, the registrar must allow all costs necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being assessed. 690 Solicitors’ costs (1) For assessing costs on the standard basis under this part, a solicitor is entitled to charge and be allowed the costs under the scales of costs for work done for or in a proceeding in the court. (2) The scales of costs are in— (a) for the Supreme Court—schedule 1; or (b) for the District Court—schedule 2; or (c) for Magistrates Courts—schedule 3. (3) For an assessment for Magistrates Courts on the standard basis, the scale in schedule 3 appropriate for the amount the plaintiff recovers applies. (4) For an assessment for Magistrates Courts on the indemnity basis, the scale in schedule 3 appropriate for the amount the plaintiff claims applies. (5) If the nature and importance, or the difficulty or urgency, of a proceeding and the justice of the case justify it, the court may allow an increase of not more than 30% of the solicitor’s costs allowed on the assessment of the costs of the proceeding. (6) The registrar has the same authority as the court under subrule (5).
(7) The costs under the scales of costs for work done are inclusive of any GST payable in relation to the work.
Indemnity basis: r 704, 705 In special cases costs are awarded at a slightly more generous scale than the standard basis: Hurstville v Municipal Council v Connor. This is not determined by reference to what is actually paid to a solicitor, but by reference to what is reasonable: r 704. For Example: If a solicitor gives both oral advice and follows up with a letter of advice, only the letter will be covered by standard costs, but both would be covered by indemnity costs (phone call does not progress the matter) Special cases include where the dispute concerns a fund, and costs are to be paid from the fund rather than by a specific party. For example, trustee/beneficiary disputes. Another example is where the indemnity basis is used as a penalty for a party acting improperly. 704 Indemnity basis of assessment (1) The court may order costs to be assessed on the indemnity basis. (2) Without limiting subrule (1), the court may order that costs be assessed on the indemnity basis if the court orders the payment of costs— (a) out of a fund; or (b) to a party who sues or is sued as a trustee; or (c) of an application in a proceeding brought for noncompliance with an order of the court. (3) When assessing costs on the indemnity basis, the registrar must allow all costs reasonably incurred and of a reasonable amount, having regard to— (a) the scale of fees prescribed for the court; and (b) any costs agreement between the party to whom the costs are payable and the party’s solicitor; and (c) charges ordinarily payable by a client to a solicitor for the work. 705 Trustee If a party who sues or is sued as a trustee is entitled to be paid costs out of a fund held by the trustee, the registrar must assess the costs on an indemnity basis, unless the court orders otherwise.
2.
Costs Orders
Costs order = professional fees + outlays (registry fees etc – set out in the Uniform Civil Procedure (Fees) Regulation 1999 (Qld) [latest version, Nov 2006]
2.1
General rule: costs follow the event
Policy is that awarding costs against losing parties serves to discourage actions without merit If more than one issue raised within the claim/counterclaim costs of individual issues usually follow the event of each issue: r 682; Morosi v Mirror Newspapers Ltd; Smith v Madden. 682 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.
IF Self-Litigation The HCA has held that the costs rules only provide reimbursement for work done or expenses incurred by a practitioner or their employee. A partial indemnity is the appropriate compromise for a selfrepresented litigant who sought compensation for the loss of time spent preparing and conducting their case: Cachia v Hanes.
IF Successful party denied Costs There have been circumstances where the successful party is denied costs in the exercise of the courts discretion. These situations include: • where the plaintiff failed to make demand before bringing proceedings; • where the plaintiff has brought several proceedings where one action would suffice; • where the plaintiff has been guilty of conduct contrary to public policy; • where the successful party adopts an obstructive or unco-operative attitude in a mediation conference see: Capolingua v Phylum Pty Ltd Costs order against persons not party to the litigation – 3rd Parties Litigation is frequently funded by third parties, for example, insurers, unions, receivers, contingency fee arrangements, and governments. Costs can be awarded against third parties – see Knight v F P Special Assets Limited; Johnson v Santa Teresa Housing Association. A costs order can be made against a third party: Knight v FP Special Assets Ltd. The considerations the court must take into account when making a costs order against a third party are – • Party to litigation was insolvent and could not pay • Receiver played an active part in running the litigation • Receiver had interest in the subject of the litigation Johnson v Santa Teresa Housing Association • Employee under impression that employer would pay costs of action • Employer thought insurer would pay costs Court looked at court record and took it at face value – employee was the party, so employee was liable for the costs Knight v FP Special Assets Ltd • Costs order made against a third party – the receive for an unsuccessful party in the action HCA set out the considerations for making a costs order against a third party • Party to litigation was insolvent and could not pay • Receiver played an active part in running the litigation • Receiver had interest in the subject of the litigation
Costs order against persons not party to the litigation – Practitioners An order for costs made against a practitioner can only occur if there is delay, misconduct or negligence: r 708. There needs to be a serious reason to make a costs order against a lawyer, for example failure to properly consider the law and facts of the case and serious prejudice to applicant: De Sousa v Minister for Immigration, Local Government and Ethnic Affairs. 708 Solicitor’s delay or neglect The court or registrar may order a solicitor to repay to the solicitor’s client all or part of any costs ordered to be paid by the client to another party if the party incurred the costs because of delay, misconduct or negligence of the solicitor. De Sousa v Minister for Immigration, Local Government and Ethnic Affairs • Lawyer gave wrong advice to client and led to client being deported • Court emphasized that a proceeding failing does not mean the lawyer is at fault or that costs will issue against a lawyer • Must be a serious reason to make a costs order against a lawyer • For example a serious failure to properly consider the law and facts of the case and serious prejudice to applicant • Costs order against solicitor upheld
2.2
Where Costs orders do NOT follow the event
Where the successful party has done something wrong In Verna Trading Pty Ltd v New India Assurance Co Ltd a successful defendant was ordered to pay plaintiff’s costs on an indemnity basis. The defendant refused to tell the plaintiff why the insurance claim
was not being paid out. The actions of the defendant were uncooperative and had been the cause of proceedings starting. Even though the Victoria Court of Appeals thought the award of costs against the insurance company was harsh, it was not willing to overturn the order. Public Interest Litigation In Oshlack v Richmond River Council a challenge was made to a proposed property development with large environmental implications. The court made no costs order on the basis that the application was made for the public interest, public spirit, concern for the environment and unofficially represented a larger group. Party Wins in the wrong court Where the party wins their case, but it has been brought in the wrong court, the successful party will only be entitled to costs as per the scheduling relating to the correct court: r 698. 698 Costs of proceeding in wrong court (1) Subrule (2) and (3) apply unless the court otherwise orders. (2) If the relief obtained by a plaintiff in a proceeding in the Supreme Court or District Court is a judgment that, when the proceeding began, could have been given in a Magistrates Court, the costs the plaintiff may recover must be assessed as if the proceeding had been started in the Magistrates Court. (3) If the only relief obtained by a plaintiff in a proceeding in the Supreme Court is relief that, when the proceeding began, could have been given by the District Court, but not a Magistrates Court, the costs the plaintiff may recover must be assessed as if the proceeding had been started in the District Court. O’Doherty v McMahon [1971] VR 61 • Plaintiff recovered an amount less than one sixth of the jurisdictional limit of the court • Trial judge looking at case decided successful plaintiff should get costs order • Held not unreasonable to commence in higher court even though ultimately recovered so little
Party Wins but looses on several issues If one of the issues was subject to a notice to admit, normally the party must pay the costs of proof of that fact in question. There may also be apportionment of costs issue by issue as raised above: Byrns v Davie. Byrns v Davie • Defendant successful but lost of many issues (about 70% of the trial) • Held first defendant got all their costs from the plaintiff but second and third defendant recovered only 40% of their costs
Where the plaintiff succeeds against some defendants and not against others Where there are multiple defendants, they are each entitled to individual representation. Where the plaintiff succeeds against some but not others, each of the defendants may be the subject of a separate costs order. Where several defendants are alternatively liable, the courts have devised two forms of order to affect justice between the parties: 1. "Bullock order" - Bullock v London General Omnibus Co 2. "Sanderson Order" - Sanderson v Blyth Theatre Co. A Bullock order is where the plaintiff may be ordered to pay the costs of the successful defendant, but may then adds them to the disbursements recoverable from the unsuccessful defendant. The question is whether it was reasonable overall to join the successful defendant. Gould v Vaggelas • Bullock order made and overturned on appeal • HCA considered • Reasonable action to sue unsuccessful defendant • Whether behaviour of defendant made costs order fair • Order must be just in all the circumstances • Gibbs CJ: if nothing done by unsuccessful defendant to make plaintiff sue the successful defendant then unclear why they should bear costs burden
A Sanderson order is where the court may simply order the unsuccessful defendant to directly pay the costs of the successful defendant. The Question is whether it is reasonable to join all defendants and whether it is fair overall to make the unsuccessful defendant liable for all those costs. Barradine Pty Ltd v Westworld Holdings Pty Ltd and Rylands & Hilmer (A firm) • B’s solicitors and the second defendant negotiated settlement of a dispute regarding removal of a caveat and surrender of a lease. • This involved payment of $50 000 to the plaintiff on signing of the agreement and a further $50 000 on surrender of possession. • The defendant failed to make the second payment. • The plaintiff then added a second defendant who was the first defendant’s solicitors. • The plaintiff succeeded against the first defendant. • The plaintiff was ordered to pay the second defendant’s costs and recover them from the first defendant (a Bullock order). • It argued that a direct order that the first defendant pay the second defendant was more appropriate (Sanderson order). • Andrews CJ refused to make a Sanderson order since the first defendant was in liquidation. He said: ‘In this case I can see no reason why the defendants Rylands and Hilmer should be made to depend upon the result of the winding up of Westworld before recovering its costs or any of them. It is the plaintiff, in my view, who should pay those costs.'
NOTE: Note an order for the payment of costs by two or more persons creates a joint and several liability which may be enforced against one alone: Thiess Watkins White Construction Limited (in liq) v Witan Nominees.
3.
Interlocutory Orders for Costs
The General rule is that each party pays their own costs Costs order given at trial generally does not include costs of applications along the way But discretionary – can give costs order at any time: r 680. 680 General provision about costs (1) The costs a court may award— (a) may be awarded at any stage of a proceeding or after the proceeding ends; and (b) must be decided in accordance with this part. (2) If the court awards the costs of an application in a proceeding, the court may order that the costs not be assessed until the proceeding ends.
Note Commonly Used Terminology: ‘Costs in any event’ or ‘Costs’: whether you win or lose the proceeding at trial, the party with the benefit of this order gets their costs of that interlocutory application. You cannot tax and execute on those costs immediately, but have to wait until the ultimate taxation of the costs of the action. ‘Costs in the cause’: The party who wins gets the costs of this interlocutory application. If the costs in the cause are awarded to a specific party (eg plaintiff’s costs in the cause) instead of at large, then only if that party wins can they get the costs. The other party will not get those costs if they win, but will not have to pay them either. A trial judge has no power to deprive the party who has obtained an order for costs of an interlocutory application, except where they are reserved. ‘Costs of the action v Costs of the trial’: the first includes trial and interlocutory costs, the latter only includes trial costs. ‘Costs thrown away’: this arises where an interlocutory order renders previous steps useless. For example, where a defendant gets a default judgment set aside, they must compensate the plaintiff for the costs of obtaining that default judgment. ‘No order as to costs’: the court will state this specifically. Neither party recovers costs from the other, they each pay their own costs.
‘Order silent as to costs’: the winner on this application will get their costs if they also win at trial. ‘Reserved costs’: costs reserved follow the event: r 699. The trial judge will make the appropriate order dealing with these costs.
4.
Determining the Quantum of Costs
Once you have costs order, the amount of the costs must be determined. There is an assessment process to quantify the costs payable. Process of assessing quantum: • Costs order that costs to be assessed • Draft Costs Statement – set out every step that you should be entitled to cover costs for Form 60A • Serve Costs Statement on the other party who is obliged to pay the costs • The party receiving costs statements can object to the items in the costs statement in Form 61. the objections must be served • If there is an agreement as to costs, file consent order (rule 707) • If no agreement or the other side doesn’t put in objection but wont agree to the costs statement, an Application for Assessment (Form 60) must be filed and served • Appointment with Costs Assessor – the Costs Assessor will go through the steps in the statements and decides which ones go through and which ones don’t • Default assessment, if no objection – that is, assessed in absence of the other party • If there are objections, the Costs Assessor will consider Costs Statement and Notice of Objection • Certificate of Assessment issued by costs Assessor – After assessment a certificate of assessment is issued by the cost assessor which states how much the costs have been assessed at (rule 737) • The Registrar makes an order on the basis of the Certificate of assessment • Order takes effect as at the judgment of the court Parties can also claim the costs of assessment as part of the recoverable costs. The rationale is that a party shouldn’t be out of pocket going through this process; the other party should bear this cost. Note: An Offer to settle process is available (rules 733 and 734).
5.
Magistrates Court
Magistrate can fix amount of costs: The Magistrate can fix the amount of costs and award a specified amount: r 681(2). This will prevent the need for the parties to go through the quantum of costs process. The parties would have to be prepared at trial as to the amount they would want to be fixed in the event of successful litigation. But the court maintains the discretion to order costs to be assessed: r 681(3). Note also – Supreme Court Practice Direction No 3 of 2007 which aims to encourage the fixing or the agreement of costs in the Supreme Court. The purpose is to encourage the parties to agree on the costs to be otherwise assessed, and to ensure that the parties will be able to ensure that process.
6.
Security for Costs
An application may be made by the defendant to ensure that the plaintiff will be able to fulfil any costs order: r 670. The defendant is effectively being dragged into litigation by the plaintiff, so the plaintiff should be able to provide security that they will be able to pay up if a costs order is made against the plaintiff. Security for costs order available where: r 671 –
• • • • • • • •
Company plaintiff is unlikely to be able to pay costs if that is ordered Plaintiff suing for someone else’s benefit and there is reason to believe that the plaintiff will not be able to pay the costs Plaintiff’s address unknown/omitted or misstated Plaintiff changed address Plaintiff resides outside Australia Plaintiff departing Australia Act allows it Justice of the case requires security for costs order (catch-all)
It is in the court’s discretion to order a security for costs order against the plaintiff. The relevant considerations are: r 672 – • Means of those behind the proceeding • Prospects of success – if litigation started without any prospects of success • Genuineness of proceedings • Corporate party lacking funds – if there is a corporation that has no substance • Plaintiff lacks funds because of defendant – if there is some sort of relationship between plaintiff and defendant which resulted in litigation • Whether order for security would be oppressive / stifle • Public importance • Any admission that has been made in the litigation • Any delay to prejudice of defendant • Would order for security be enforceable • Cost of the proceeding
Introduction
1.1
Jurisdiction
The jurisdiction to award costs is statutory: s 221 Supreme Court Act 1995. A party cannot recover any costs of a proceeding other than under the UCPR or order of the court: r 691. 691 Entitlement to recover costs A party to a proceeding cannot recover any costs of the proceeding from another party other than under these rules or an order of the court.
Costs may be awarded at any stage of the proceedings or after the proceedings end: r 680. Costs may be recovered for proceedings, which have abated: s 116I Supreme Court Act 1991.
1.2
Nature/Function of Costs
The general rule is that the winner is awarded their costs, in addition to the judgment for or against the claim. The idea is to indemnify the successful party for the costs incurred by them in contesting the claim. It is not to penalise the loser or reward the winner.
1.3
General Classification of Costs
In practice the award of costs does not fully indemnify the winner. A recognised rule of thumb is that the winner will recover only 2/3 of their actual costs. The reason for this is that there are two scales of costs: • Standard basis: r 690, 703. • Indemnity basis: r 690, 704. Standard Basis: r 703, 690 This is the usual scale awarded in litigation. It is determined by reference to the scale of costs prescribed in the rules: r 690, and is also limited to only those costs which are necessarily or properly incurred: r 703. Parties will generally receive about 60% of costs because there is a sliding scale which is not generous. 703 Standard basis of assessment (1) Unless these rules or an order of the court otherwise provide, the registrar must assess costs on the standard basis. (2) When assessing costs on the standard basis, the registrar must allow all costs necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being assessed. 690 Solicitors’ costs (1) For assessing costs on the standard basis under this part, a solicitor is entitled to charge and be allowed the costs under the scales of costs for work done for or in a proceeding in the court. (2) The scales of costs are in— (a) for the Supreme Court—schedule 1; or (b) for the District Court—schedule 2; or (c) for Magistrates Courts—schedule 3. (3) For an assessment for Magistrates Courts on the standard basis, the scale in schedule 3 appropriate for the amount the plaintiff recovers applies. (4) For an assessment for Magistrates Courts on the indemnity basis, the scale in schedule 3 appropriate for the amount the plaintiff claims applies. (5) If the nature and importance, or the difficulty or urgency, of a proceeding and the justice of the case justify it, the court may allow an increase of not more than 30% of the solicitor’s costs allowed on the assessment of the costs of the proceeding. (6) The registrar has the same authority as the court under subrule (5).
(7) The costs under the scales of costs for work done are inclusive of any GST payable in relation to the work.
Indemnity basis: r 704, 705 In special cases costs are awarded at a slightly more generous scale than the standard basis: Hurstville v Municipal Council v Connor. This is not determined by reference to what is actually paid to a solicitor, but by reference to what is reasonable: r 704. For Example: If a solicitor gives both oral advice and follows up with a letter of advice, only the letter will be covered by standard costs, but both would be covered by indemnity costs (phone call does not progress the matter) Special cases include where the dispute concerns a fund, and costs are to be paid from the fund rather than by a specific party. For example, trustee/beneficiary disputes. Another example is where the indemnity basis is used as a penalty for a party acting improperly. 704 Indemnity basis of assessment (1) The court may order costs to be assessed on the indemnity basis. (2) Without limiting subrule (1), the court may order that costs be assessed on the indemnity basis if the court orders the payment of costs— (a) out of a fund; or (b) to a party who sues or is sued as a trustee; or (c) of an application in a proceeding brought for noncompliance with an order of the court. (3) When assessing costs on the indemnity basis, the registrar must allow all costs reasonably incurred and of a reasonable amount, having regard to— (a) the scale of fees prescribed for the court; and (b) any costs agreement between the party to whom the costs are payable and the party’s solicitor; and (c) charges ordinarily payable by a client to a solicitor for the work. 705 Trustee If a party who sues or is sued as a trustee is entitled to be paid costs out of a fund held by the trustee, the registrar must assess the costs on an indemnity basis, unless the court orders otherwise.
2.
Costs Orders
Costs order = professional fees + outlays (registry fees etc – set out in the Uniform Civil Procedure (Fees) Regulation 1999 (Qld) [latest version, Nov 2006]
2.1
General rule: costs follow the event
Policy is that awarding costs against losing parties serves to discourage actions without merit If more than one issue raised within the claim/counterclaim costs of individual issues usually follow the event of each issue: r 682; Morosi v Mirror Newspapers Ltd; Smith v Madden. 682 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.
IF Self-Litigation The HCA has held that the costs rules only provide reimbursement for work done or expenses incurred by a practitioner or their employee. A partial indemnity is the appropriate compromise for a selfrepresented litigant who sought compensation for the loss of time spent preparing and conducting their case: Cachia v Hanes.
IF Successful party denied Costs There have been circumstances where the successful party is denied costs in the exercise of the courts discretion. These situations include: • where the plaintiff failed to make demand before bringing proceedings; • where the plaintiff has brought several proceedings where one action would suffice; • where the plaintiff has been guilty of conduct contrary to public policy; • where the successful party adopts an obstructive or unco-operative attitude in a mediation conference see: Capolingua v Phylum Pty Ltd Costs order against persons not party to the litigation – 3rd Parties Litigation is frequently funded by third parties, for example, insurers, unions, receivers, contingency fee arrangements, and governments. Costs can be awarded against third parties – see Knight v F P Special Assets Limited; Johnson v Santa Teresa Housing Association. A costs order can be made against a third party: Knight v FP Special Assets Ltd. The considerations the court must take into account when making a costs order against a third party are – • Party to litigation was insolvent and could not pay • Receiver played an active part in running the litigation • Receiver had interest in the subject of the litigation Johnson v Santa Teresa Housing Association • Employee under impression that employer would pay costs of action • Employer thought insurer would pay costs Court looked at court record and took it at face value – employee was the party, so employee was liable for the costs Knight v FP Special Assets Ltd • Costs order made against a third party – the receive for an unsuccessful party in the action HCA set out the considerations for making a costs order against a third party • Party to litigation was insolvent and could not pay • Receiver played an active part in running the litigation • Receiver had interest in the subject of the litigation
Costs order against persons not party to the litigation – Practitioners An order for costs made against a practitioner can only occur if there is delay, misconduct or negligence: r 708. There needs to be a serious reason to make a costs order against a lawyer, for example failure to properly consider the law and facts of the case and serious prejudice to applicant: De Sousa v Minister for Immigration, Local Government and Ethnic Affairs. 708 Solicitor’s delay or neglect The court or registrar may order a solicitor to repay to the solicitor’s client all or part of any costs ordered to be paid by the client to another party if the party incurred the costs because of delay, misconduct or negligence of the solicitor. De Sousa v Minister for Immigration, Local Government and Ethnic Affairs • Lawyer gave wrong advice to client and led to client being deported • Court emphasized that a proceeding failing does not mean the lawyer is at fault or that costs will issue against a lawyer • Must be a serious reason to make a costs order against a lawyer • For example a serious failure to properly consider the law and facts of the case and serious prejudice to applicant • Costs order against solicitor upheld
2.2
Where Costs orders do NOT follow the event
Where the successful party has done something wrong In Verna Trading Pty Ltd v New India Assurance Co Ltd a successful defendant was ordered to pay plaintiff’s costs on an indemnity basis. The defendant refused to tell the plaintiff why the insurance claim
was not being paid out. The actions of the defendant were uncooperative and had been the cause of proceedings starting. Even though the Victoria Court of Appeals thought the award of costs against the insurance company was harsh, it was not willing to overturn the order. Public Interest Litigation In Oshlack v Richmond River Council a challenge was made to a proposed property development with large environmental implications. The court made no costs order on the basis that the application was made for the public interest, public spirit, concern for the environment and unofficially represented a larger group. Party Wins in the wrong court Where the party wins their case, but it has been brought in the wrong court, the successful party will only be entitled to costs as per the scheduling relating to the correct court: r 698. 698 Costs of proceeding in wrong court (1) Subrule (2) and (3) apply unless the court otherwise orders. (2) If the relief obtained by a plaintiff in a proceeding in the Supreme Court or District Court is a judgment that, when the proceeding began, could have been given in a Magistrates Court, the costs the plaintiff may recover must be assessed as if the proceeding had been started in the Magistrates Court. (3) If the only relief obtained by a plaintiff in a proceeding in the Supreme Court is relief that, when the proceeding began, could have been given by the District Court, but not a Magistrates Court, the costs the plaintiff may recover must be assessed as if the proceeding had been started in the District Court. O’Doherty v McMahon [1971] VR 61 • Plaintiff recovered an amount less than one sixth of the jurisdictional limit of the court • Trial judge looking at case decided successful plaintiff should get costs order • Held not unreasonable to commence in higher court even though ultimately recovered so little
Party Wins but looses on several issues If one of the issues was subject to a notice to admit, normally the party must pay the costs of proof of that fact in question. There may also be apportionment of costs issue by issue as raised above: Byrns v Davie. Byrns v Davie • Defendant successful but lost of many issues (about 70% of the trial) • Held first defendant got all their costs from the plaintiff but second and third defendant recovered only 40% of their costs
Where the plaintiff succeeds against some defendants and not against others Where there are multiple defendants, they are each entitled to individual representation. Where the plaintiff succeeds against some but not others, each of the defendants may be the subject of a separate costs order. Where several defendants are alternatively liable, the courts have devised two forms of order to affect justice between the parties: 1. "Bullock order" - Bullock v London General Omnibus Co 2. "Sanderson Order" - Sanderson v Blyth Theatre Co. A Bullock order is where the plaintiff may be ordered to pay the costs of the successful defendant, but may then adds them to the disbursements recoverable from the unsuccessful defendant. The question is whether it was reasonable overall to join the successful defendant. Gould v Vaggelas • Bullock order made and overturned on appeal • HCA considered • Reasonable action to sue unsuccessful defendant • Whether behaviour of defendant made costs order fair • Order must be just in all the circumstances • Gibbs CJ: if nothing done by unsuccessful defendant to make plaintiff sue the successful defendant then unclear why they should bear costs burden
A Sanderson order is where the court may simply order the unsuccessful defendant to directly pay the costs of the successful defendant. The Question is whether it is reasonable to join all defendants and whether it is fair overall to make the unsuccessful defendant liable for all those costs. Barradine Pty Ltd v Westworld Holdings Pty Ltd and Rylands & Hilmer (A firm) • B’s solicitors and the second defendant negotiated settlement of a dispute regarding removal of a caveat and surrender of a lease. • This involved payment of $50 000 to the plaintiff on signing of the agreement and a further $50 000 on surrender of possession. • The defendant failed to make the second payment. • The plaintiff then added a second defendant who was the first defendant’s solicitors. • The plaintiff succeeded against the first defendant. • The plaintiff was ordered to pay the second defendant’s costs and recover them from the first defendant (a Bullock order). • It argued that a direct order that the first defendant pay the second defendant was more appropriate (Sanderson order). • Andrews CJ refused to make a Sanderson order since the first defendant was in liquidation. He said: ‘In this case I can see no reason why the defendants Rylands and Hilmer should be made to depend upon the result of the winding up of Westworld before recovering its costs or any of them. It is the plaintiff, in my view, who should pay those costs.'
NOTE: Note an order for the payment of costs by two or more persons creates a joint and several liability which may be enforced against one alone: Thiess Watkins White Construction Limited (in liq) v Witan Nominees.
3.
Interlocutory Orders for Costs
The General rule is that each party pays their own costs Costs order given at trial generally does not include costs of applications along the way But discretionary – can give costs order at any time: r 680. 680 General provision about costs (1) The costs a court may award— (a) may be awarded at any stage of a proceeding or after the proceeding ends; and (b) must be decided in accordance with this part. (2) If the court awards the costs of an application in a proceeding, the court may order that the costs not be assessed until the proceeding ends.
Note Commonly Used Terminology: ‘Costs in any event’ or ‘Costs’: whether you win or lose the proceeding at trial, the party with the benefit of this order gets their costs of that interlocutory application. You cannot tax and execute on those costs immediately, but have to wait until the ultimate taxation of the costs of the action. ‘Costs in the cause’: The party who wins gets the costs of this interlocutory application. If the costs in the cause are awarded to a specific party (eg plaintiff’s costs in the cause) instead of at large, then only if that party wins can they get the costs. The other party will not get those costs if they win, but will not have to pay them either. A trial judge has no power to deprive the party who has obtained an order for costs of an interlocutory application, except where they are reserved. ‘Costs of the action v Costs of the trial’: the first includes trial and interlocutory costs, the latter only includes trial costs. ‘Costs thrown away’: this arises where an interlocutory order renders previous steps useless. For example, where a defendant gets a default judgment set aside, they must compensate the plaintiff for the costs of obtaining that default judgment. ‘No order as to costs’: the court will state this specifically. Neither party recovers costs from the other, they each pay their own costs.
‘Order silent as to costs’: the winner on this application will get their costs if they also win at trial. ‘Reserved costs’: costs reserved follow the event: r 699. The trial judge will make the appropriate order dealing with these costs.
4.
Determining the Quantum of Costs
Once you have costs order, the amount of the costs must be determined. There is an assessment process to quantify the costs payable. Process of assessing quantum: • Costs order that costs to be assessed • Draft Costs Statement – set out every step that you should be entitled to cover costs for Form 60A • Serve Costs Statement on the other party who is obliged to pay the costs • The party receiving costs statements can object to the items in the costs statement in Form 61. the objections must be served • If there is an agreement as to costs, file consent order (rule 707) • If no agreement or the other side doesn’t put in objection but wont agree to the costs statement, an Application for Assessment (Form 60) must be filed and served • Appointment with Costs Assessor – the Costs Assessor will go through the steps in the statements and decides which ones go through and which ones don’t • Default assessment, if no objection – that is, assessed in absence of the other party • If there are objections, the Costs Assessor will consider Costs Statement and Notice of Objection • Certificate of Assessment issued by costs Assessor – After assessment a certificate of assessment is issued by the cost assessor which states how much the costs have been assessed at (rule 737) • The Registrar makes an order on the basis of the Certificate of assessment • Order takes effect as at the judgment of the court Parties can also claim the costs of assessment as part of the recoverable costs. The rationale is that a party shouldn’t be out of pocket going through this process; the other party should bear this cost. Note: An Offer to settle process is available (rules 733 and 734).
5.
Magistrates Court
Magistrate can fix amount of costs: The Magistrate can fix the amount of costs and award a specified amount: r 681(2). This will prevent the need for the parties to go through the quantum of costs process. The parties would have to be prepared at trial as to the amount they would want to be fixed in the event of successful litigation. But the court maintains the discretion to order costs to be assessed: r 681(3). Note also – Supreme Court Practice Direction No 3 of 2007 which aims to encourage the fixing or the agreement of costs in the Supreme Court. The purpose is to encourage the parties to agree on the costs to be otherwise assessed, and to ensure that the parties will be able to ensure that process.
6.
Security for Costs
An application may be made by the defendant to ensure that the plaintiff will be able to fulfil any costs order: r 670. The defendant is effectively being dragged into litigation by the plaintiff, so the plaintiff should be able to provide security that they will be able to pay up if a costs order is made against the plaintiff. Security for costs order available where: r 671 –
• • • • • • • •
Company plaintiff is unlikely to be able to pay costs if that is ordered Plaintiff suing for someone else’s benefit and there is reason to believe that the plaintiff will not be able to pay the costs Plaintiff’s address unknown/omitted or misstated Plaintiff changed address Plaintiff resides outside Australia Plaintiff departing Australia Act allows it Justice of the case requires security for costs order (catch-all)
It is in the court’s discretion to order a security for costs order against the plaintiff. The relevant considerations are: r 672 – • Means of those behind the proceeding • Prospects of success – if litigation started without any prospects of success • Genuineness of proceedings • Corporate party lacking funds – if there is a corporation that has no substance • Plaintiff lacks funds because of defendant – if there is some sort of relationship between plaintiff and defendant which resulted in litigation • Whether order for security would be oppressive / stifle • Public importance • Any admission that has been made in the litigation • Any delay to prejudice of defendant • Would order for security be enforceable • Cost of the proceeding
