Costs and costs orders(week 12) PDF

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Week 12 notes...

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Costs and costs orders Professional fees 

Professional fees payable to lawyers are often referred to as ‘costs’.

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Calculated according to:

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costs agreements (so long as they are properly executed – see e.g. ss 269 and 271 of the Legal Profession Act 2006 (ACT)), or

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statutory scales of costs if there is no agreement.

Different arrangement can be put in place: 

Conditional fees (no win, no fee).

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Conditional fees plus ‘uplift’.

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Litigation funding.

Costs 

Costs in civil proceedings (payable by one side to the other) is intended as form of indemnity.

‘[C]osts are awarded by way of indemnity to the successful party and, expressly or impliedly, that they are not by way of punishment of the unsuccessful party…’ Latoudis v Casey (1990) 170 CLR 534 

Costs do not automatically follow the outcome. 

Ability to order costs is discretionary (ACT r 1721; Federal Court Act 1976 (Cth) s 43; Civil Procedure Act 2005 (NSW) s 98).

Costs 

Is cost shifting fair?

Yes

No

Facilitates financing litigation.

Not applied in all court proceedings (civil vs criminal).

Indirectly finds legal aid commissions and other funders.

Discourages litigants of ‘ordinary means’.

Positive incentive to settlement.

Cost of litigation is higher generally – incentive to ‘win’.

Damages awards aren’t eroded by bearing own costs.

Recoverable costs don’t reflect the actual cost.

Costs

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Exceptions to the ‘ordinary rule’: 

Non compliance with Rules or orders (NSW r 42.10).

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Delay by a party or their practitioner (e.g. r 1753)

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Conduct by the successful party makes it ‘unjust’ to award them costs. 

‘[C]ompletely or partly, improper, vexatious or unreasonable’ (ACT r 1754).

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Offensive letters.

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Concealing material or true facts – Rowland v Portus (1906) 6 SR (NSW) 74.

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No participation in mediation - Capolingua v Phylum Pty Ltd (1991) 5 WAR 137.

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A good example is provided by Rowland v Portus that is also referred to in Cairns. Mr Portus lay dying and as he did so, he signed two cheques – one to his sister and the other to his niece. The only three witnesses to the signing of the cheques were the defendant (his nephew) a doctor and a clergyman. The sister and niece alleged that the cheques were in the nature of wills, being testamentary gifts. But – they weren’t executed so as to have been effective wills. The defendant never told them that and the matter went all the way to trial. It was only when the plaintiff’s lawyer was asking the doctor questions that the plaintiffs realised that they weren’t going to be successful and the matter fell over. There was no good explanation why the defendant hadn’t told his aunt about the execution of the cheques and was ordered to pay their costs.

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The last example that Cairns cites is also a valuable reminder of how important getting pleadings right is to the court and to the client as well. Capolingua involved a commercial lease. At its heart, the plaintiffs were attempting to enforce the terms of the lease as landlord but the defendants relied on some technical constructions of the lease and relevant statute to get out of the lease because they had found a better rental rate somewhere else. Ultimately the defendants were successful and were released. However, rather than getting their costs, costs were ordered against them. Ipp J in a decision solely about costs sets out a series of stuff ups by lawyers for the defendants in terms of failing to plead exactly what their defence was, including a whole pile of irrelevant pleading and then having to completely rewrite their pleadings on the second day of trial. To make it worse, the director of the defendant had turned up at the mediation before trial and had refused to allow the plaintiff’s lawyer to take notes at all and refused to take any further part in the mediation.

Common costs orders 

‘Costs to follow the event’ 

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‘Costs in any event’ 

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Ordinary costs order.

Regardless of the outcome, the named party should have the costs of this step.

‘Costs in the cause’ 

Regardless of the outcome, the successful party in the litigation will receive the costs of the step.

Common costs orders 

‘No order as to costs’ 

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‘Costs reserved’ 

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Each party bears their own costs.

Court may consider the costs at a later stage but otherwise it’s the same as ‘in the cause’.

[Nothing] 

The successful party will receive their costs as costs in the cause.

Calculation of costs 

‘Party – party basis’ (ACT) / ‘ordinary basis’ (NSW) 

Assessed according to the prescribed Schedule of costs (see eg Court Procedure Rules 2006 (ACT), Sch 4) and what is ‘fair and reasonable’ (ACT r 1751).

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Includes amounts for ‘drawing’, taking instructions and allowances for disbursements.

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ACT - May be reduced according to the amount recovered (r 1722).

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The party claiming costs, if not agreed, will prepare a ‘Bill of Costs’ itemising each task.

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The Bill will be assessed by a ‘Taxing Officer’ who will take into account a number of factors including (ACT, Sched 4, r 4.1): 

the complexity, novelty importance and cost of the proceeding;

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the skill, labour, specialised knowledge and responsibility involved in the proceeding on the part of the solicitor; and

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the number and importance of the documents prepared or perused, without regard to the length of the documents.

Item Instructions

Costs

For statement of claim, petition, special case or counterclaim

181.30

For defence

155.20

Drawing For an originating process or

135.30

Counterclaim For any other pleading

90.70

Calculation of costs 

‘Solicitor-client’ (possibly only ACT) 

Discretion or as a result of the application of the Rules. 

See, for example, rejection of compromise but a result no less favourable (see rr 1011, 1012).

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Something that takes the matter outside the ordinary (PCRZ Investments Pty Ltd v National Golf Holdings [2002] VSCA 24): 

Insignificant subject matter does not affect the discretion.

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All individuals are entitled to the benefit of the courts.

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It may be available where the proceedings have been brought for an ulterior motive, a party has engaged in misconduct or the proceedings were ‘patently unreasonable’.

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What we’re talking about here is a set of circumstances that would tend to demonstrate that a party has been unreasonable, but not so unreasonable as to warrant the most extreme form of sanction that would arise in the event of vexatious or unmeritorious proceedings.

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An example of a set of circumstances that would not lift a matter outside the ordinary is the decision in PCRZ. The facts are not set out in detail in the extract. In short, one of the shareholders in a golf club objected to having to pay a food and drink levy because, by dint of being a shareholder, they were exempted from paying membership fees. They were unsuccessful and, at trial, it was made very clear by the trial judge that it was obvious that the ‘food and drink levy’ had nothing to do with ‘membership fees’ and that the proceedings were unnecessary and were based entirely on a desire to prove a ‘matter of principle’. On appeal, the court Justice Chernov in particular noted that regardless of the subject matter of the dispute, this was not a matter in which a different

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Solicitor-client’ (possibly only ACT) 

Assessed by reference to the Schedule and amounts ordinarily, but not unreasonably, payable to a solicitor by their client (ACT r 1752(3)).

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Indemnity’ 

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Things that a ‘doubtful’ on a party-party basis might be included.

May be ordered in circumstances where: 

Proceedings have been pursued with little or no basis for success – Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397.

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Bases provided for in Rules (see eg r 1152).

All costs unless unreasonable or unreasonably incurred (ACT r 1752(4); NSW r 42.5; FCR Sch 1).

The decision in Foundation provides a useful warning about making sure that proceedings commenced aren’t affected by later decisions. In Fountain, Fountain had been involved in a joint venture with IPM but the parties had a falling out and the venture wound up. In doing so, Fountain commenced proceedings against IPM under the TPA for allegedly having made representation to third parties about its relationship with Foundation. They also joined a Mr Dallal on the allegation that he had aided and abetted for the purposes of the TPA. When the matter came on for trial, Foundation led no evidence. Mr Dallal successfully sought costs on a higher basis because (a) he had maintained on oath at all times he had never been involved in the business between Foundation and IPM and (b) about halfway through the proceedings, the High Court decided a matter concerning the interpretation of the aiding and abetting provisions that made the proceedings against Mr Dallal untenable....