Costs are all too often underestimated due largely, I think, to the fact that they are ordinarily the last matter to be considered in any litigation. They are nevertheless vitally important to your client, whether they are pursuing or resisting such an application. What I hope this series of articles will do, is get you thinking about costs from the earliest point in time.
The series will cover:
(a) Who pays?
(b) Categorization of costs:
(i) Standard - v - Indemnity
(c) Types of costs included in an assessment
(d) Types of costs orders typically encountered
(e) Offers to settle and the impact on costs
I won’t deal with costs assessed under the Legal Profession Act in any detail other than to say that rules 743-743I are applicable. You can bring such an application pursuant to 743A should the need arise. I also won’t deal with the actual assessment of costs as this is something that a costs assessor will manage. Nevertheless, the procedure on assessment is set out in rule 720 and the cost assessors discretion is set out in rule 721 – I will briefly deal with rule 721 later when considering what types of costs can be included in an assessment.
There are a few seminal texts that you can refer to for specific circumstances, one of which is “Law of Costs” (2nd ed) by G. E. Dal Pont. You can also have regard to the UCPR loose leaf service which will provide you with up to date, rule specific, cases and commentary. Of course, there are also a variety on online search engines that you can refer to as well.
Ultimately, the best way to maximise your client’s costs recovery upon completion of litigation is to have a good understanding of what costs may be recoverable at the end of litigation, before you even start billing the client. In this way, I encourage you to draw your narrations such that they fit within the assessable parameters and to ensure completion of certain aspects of work also correspond. The relevant assessable items are found in schedule 1, 2 and 3 of the UCPR.
As a preliminary point, there is no common law jurisdiction to grant costs.
Costs are a creature of statute and the general power to award costs is found in section 15 of the Civil Proceedings Act 2011 (Qld).
Costs are dealt with in chapter 17A of the UCPR. This governs the types of costs able to be awarded, certain applications, the assessment criteria and other such matters.
The starting point is r. 680 which provides that a party to a proceeding can not recover any costs of the proceeding from another party other than under the UCPR rules or an order of the court.
This series is only concern with orders made by the Court.
The Court has an absolute and unfettered discretion to award costs or not to award them. This discretion must be exercised judicially.[1] Consequently, there is no right of appeal from an order as to costs only, except by leave of the judge making the order itself.[2]
Rule 680 raises three questions:
(a) What is a “proceeding”?
(b) Who is a party to a proceeding?
(c) What are “costs of the proceeding”?
The term “proceeding” is not defined in the UCPR. However, section 36 of the Acts Interpretation Act 1954 (Qld) informs us that a ‘proceeding’ is a legal or other action or proceeding and Schedule 2 of the Supreme Court Act 1991 (Qld) defines a proceeding as meaning:
[A] proceeding in a court (whether or not between parties), and includes:
(a) an incidental proceeding in the course of, or in connection with, a proceeding; and
(b) an appeal or stated case.
A ‘party’ is defined as including a person not a party to a proceeding by or to whom assessed costs of the proceeding are payable. In other words, a party to a proceeding also includes a non-party but someone who stands behind the party to the proceeding.[3] Arguably, this can be interpreted to mean a litigation funder.
“Costs of the proceeding” means costs of all the issues in the proceeding and includes:
(a) costs ordered to be costs of the proceeding; and
(b) costs of complying with the necessary steps before staring the proceeding; and
(c) costs incurred before or after the start of the proceeding for successful or unsuccessful negotiations for settlement of the dispute.
By rule 693 UCPR, the costs of a proceeding do not include the costs of an application in the proceeding, unless the court orders otherwise.
This rule applies even if the application is adjourned until the trial of the proceeding in which it is made. It is noted that the words “… Unless the court orders otherwise…” give to the Court discretion which must be exercised judicially in accordance with well-known principals.
In practice, this usually means that absent some unusual circumstances, the court will award costs of an application to the party in whose favour it is determined.[4] We will deal with this in more detail in subsequent articles in this series.
Costs can be awarded at any stage of a proceeding or after the proceeding ends.
Where costs are ordered for an application in a proceeding, the court has the discretion to order that costs not be assessed until after the proceeding is concluded.[5]
Generally such a costs order might be something like “costs in the cause” or “costs in any event”.
General rule about costs
At the outset, the general rule about the award of costs is that ‘costs follow the event’ such that the successful party is entitled to its costs on a standard basis[6], unless there is some special or exceptional circumstances that justify some other order or departure from the general rule.[7]
The practical and ordinary effect of this rule is that the unsuccessful party to a proceeding will be ordered to pay the costs of the successful party[8].
The rationale underpinning this rule is that
“costs are not awarded to punish an unsuccessful party but rather the primary purpose of an award of costs is to indemnify the successful party. … If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expenses which it did. As between the parties, fairness dictate that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.”. [9]
Accordingly, costs are awarded as an indemnity to the successful party.[10]
The general rule on costs was summarised by Toohey J in Hughes v Western Australian Cricket Association (Inc.) (1986) ATPR 40-748 at 48,136 as follows:
1. Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order. Ritter v Godfrey (1920) 2 KB 47.
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. Forster v Farquar (1893) 1 QB 564.
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 other 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. Cretazzo v Lombardi (1975) 13 SASR 4 at p12.
Departure from the general rule – who pays and how much?
Rule 684 of the UCPR provides the court with the power to depart from the general rule by affording it the power to make an order for costs in relation to a particular question in, or particular question of, a proceeding. By this rule, 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.
So what are the elements that need to be satisfied to justify a departure from the general rule?
As articulated in BHP Coal Pty Ltd v O & K Orenstein & Kopple A G (No 2) [2009] QSC 64, the key justification for a departure from the general rule is expressed by McMurdo J as follows:
The starting point is the general rule, expressed in rule 681 (1) of the UCPR, that cost should follow the event;
Rule 684 provides an exception to the general rule;
Necessarily, circumstances which would engage rule 684 are “exceptional” circumstances and the enquiry must be: “what is it about the present case which warrants departure from the general rule?”;
Ordinarily, the fact that a successful plaintiff fails on particular issues does not mean that the plaintiff should be deprived of some of the plaintiff’s costs, although it may be appropriate to award costs of a particular question, or part of a proceeding, where that matter “is definable and severable and has occupied a significant part of the trial”[11]
If a party is able to satisfy the court that the matter is one which warrants not only a departure from the general rule, but also and apportionment of costs based on the success of issues in the proceedings then it is arguable that the apportionment of costs is largely a matter of impression.[12]
Apportionment of costs
Such costs orders are granted rarely or in exceptional circumstances and ordinarily only where the said issue or issues have occupied significant and identifiable costs, preparation and hearing time. It is never appropriate where those issues gave rise to common factual enquiries in respect of other defences or counterclaims for which the defendant had the onus and failed.
The next big question is what type of costs?
The general rule provides for “standard costs” historically known as “party and party costs”. But, is there something that warrants a departure from this? Is there a good basis on which to argue for “indemnity costs” historically known as “solicitor and client costs”? And, what’s the difference between the two?
The next Article will consider costs orders.
This article should not be taken as legal advice. If you have a matter that deals with the subject matter of this article then you should seek independent legal advice regarding the particular circumstances of your case.
Liability limited by a Scheme approved under professional standards legislation.
[1] Donald Campbell & Co Ltd v Pollak [1927] AC 732 at 811 [2] Supreme Court of Queensland Act 1991 section 64 [3] Verhagen v Millard [2013] QCA 202 and NJH Pty Ltd v Billabong International Ltd [2010] QSC 239 [4] rules 693.1 [5] See rule 682 UCPR [6] see rule 702 [7] See rule 681(1); Hughes v Western Australian Cricket Association (1986) ATPR 40-748 at 48, 136; Waters v PC Henderson (Aust) Pty Ltd [1994] NSWCA 338; Cretazzo v Lombardi (1975) 13 SASR 4 at 6; J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers, Western Australian Branch & Anor (No. 2) (1993) 46 IR 301 at 302 per French J; Olshlack v Richmond River Council (1998) 193 CLR 72 at 96 [8] See commentary to r.681.1 [9] Oshlack v Richmond River Council (1998) 193 CLR 72 at 97 [10] See r.682.5 and R v Police Magistrate at Hughenden; Ex parte Cumming [1915] St R Qd 147 at 155 [11] At [6] to [8] [12] Sharples v O'Shea [1999] QSC 190; BHP Coal Pty Coal Pty Ltd v K Orenstein & Koppel AG (No 2) [2009] QSC 64; Emanuel Management Pty Ltd (in liquidation) v Foster's Brewing Group Ltd [2003] QSC 299
