The principles of law upon which the determination of costs issues are made are primarily regulated by statute and court rules. Unlike judgments on common law or equitable principles, judgments in other jurisdictions should be read with caution, as the legislation and applicable principles often reflect localised practices (Dal Pont, “Law of Costs” (“Dal Pont”), 3rd ed, 2013 at 1.1, 1.3; Hamilton, Lindsay, Morahan and Webster, “New South Wales Civil Procedure Handbook 2014” (“NSW Civil Procedure Handbook”) at [r Pt42.20], [r Pt42.60]). The principles discussed in this chapter relate only to costs issues in civil proceedings in NSW courts and tribunals (for costs in criminal proceedings, see Local Court Bench Book at [83-000] and Dal Pont, Ch 24).
For costs to be payable, an order of the court must be made: CPA s 98(2). Costs orders are made separately from substantive relief, and may be sought during, as well as at the end of, court proceedings. The most frequent orders are for costs to be payable by the unsuccessful party (based on the principle that costs “follow the event”: Laguillo v Haden Engineering Pty Ltd  1 NSWLR 306), both for interlocutory applications and hearings. While costs orders may be made at any time, they are not “assessed” until the conclusion of the proceedings unless the court otherwise orders: CPA s 98(2). (The process of assessment is explained in Dal Pont at Chs 15–18 and in the NSW Civil Procedure Handbook at [r Pt42.700]–[r Pt42.780]; principles relevant to costs assessments appeals are set out in the Civil Trials Bench Book at [5-0500]ff.). The object of party/party costs is to compensate the successful party for having to pursue or defend their rights in court (“the indemnity principle”): NSW Civil Procedure Handbook at [r Pt42.500].
The two principal issues which judges are called upon to determine are whether costs should follow the event and, if so, whether the costs payable are restricted to “party/party” costs, or extend (usually by reason of an indemnity costs order) to payment of “solicitor/client” costs. The reason for the gap between an order simply for “costs” (recoverable as party/party costs) and “solicitor/client” costs is that, independent of any costs orders, the parties to litigation have contracted with their respective legal representatives to pay litigation costs on a “practitioner/client” basis. See the definition of “legal costs” in s 4(1) of the Legal Profession Act 2004. The party/party component of those costs will be covered by the court’s costs order, but unless an order is made for indemnity costs, solicitor/client costs will not be recoverable on assessment, and must still be paid by the winning party. The considerable gap between solicitor/client and party/party costs is a motivation for the parties to use the offer of compromise/Calderbank offer procedure to settle litigation. Party/party costs are known as “costs on the ordinary basis”: CPA s 3(1).
Orders for costs play an important part in case management: CPA ss 56(5), 57(1)(d), 60, 61(3)(f), 62(6). These provisions give judges power to make a variety of special costs orders such as gross sum costs (s 98(4)(c)), or to cap costs (s 98(4)(d)), as well as to make orders in favour of, or against, non-parties (s 98(1)(b)); Ritchie’s Uniform Civil Procedure (NSW) (“Ritchie’s”), [s 98.25]–[s 98.30]). In particular, the court has power to make costs orders against legal practitioners: s 99. The general statutory costs discretion covers the making of such orders where appropriate.
In May 2014 the NSW Parliament enacted the Legal Profession Uniform Law Application Act 2014. Section 4 provides that the Legal Profession Uniform Law (“Uniform law”), which will harmonise regulation of the legal profession in States and Territories of Australia, applies the text of the Uniform Law to NSW. Changes to legal practice and conduct rules, particularly in areas such as the personal liability of legal practitioners as to costs, will result. Regulations are to be made under the Legal Profession Uniform Law Application Act to commence on 1 July 2015. At the time of updating this chapter, these regulations are not available. Additionally, categories of Uniform Rules are currently being finalised. The impact of this new legislation on legal costs issues will be addressed in the next update of this chapter.
The court’s primary task is to determine whether the facts of the case or specific costs provisions impact upon the court’s jurisdiction to make costs orders. Unless there are statutory provisions to the contrary (for example, Defamation Act 2005 (NSW) s 40), the court’s discretion to determine such issues is unfettered: CPA s 98(1); Dal Pont at 6.14–6.17; NSW Civil Procedure Handbook at [r Pt42.80], CPA s 98(2). This discretion may be exercised whenever the circumstances warrant, having regard to the scope and purpose of CPA s 98: Oshlack v Richmond River Council (1998) 193 CLR 72; Hamod v State of NSW  NSWCA 375 at . However, this discretion must be exercised on a principled basis (Smith v Sydney West Area Health Service (No 2)  NSWCA 62 at ), and in accordance with the principles of proportionality: CPA s 60.
Costs orders need not be determined at the time the application is before the court. Both interlocutory and final hearing costs may be reserved, generally by an order for liberty to apply, to enable submissions to be made at a later stage, as may applications under the slip rule (Dal Pont 6.21–6.27; NSW Civil Procedure Handbook at [r Pt42.100]; [r 36.17.60]–[r 36.17.80]; [r Pt42.180]). As to the interaction between varying a costs order and the slip rule, see NSW Civil Procedure Handbook at [r Pt42.100].
Particular costs issues tend to arise at the following times.
At the commencement of the litigation
Applications for security for costs should be made promptly: see [2-5900]ff.
Following final determination of an issue of law before completion of the hearing
The court may order costs to be paid for a particular period or stage of the proceedings, or a proportion only of the total costs, or that a specific amount of costs be paid: Sherborne Estate (No 2): Vanvalen v Neaves (2005) 65 NSWLR 268 at –.
Notices of Motion and applications for interlocutory relief
As a general rule, costs orders made on such applications are not assessable until the proceedings result in judgment.
When the trial is adjourned or aborted
Whether any special costs orders are necessary if a trial is adjourned part-heard will depend on the facts of the case: Canturi Corporation Pty Ltd v Gagner Pty Ltd (2008) DCLR (NSW) 17. Where a trial has been aborted and a new trial is ordered, the general rule is that the costs of the first trial await the result of the retrial, as costs in the cause: Brittain v Commonwealth of Australia (No 2)  NSWCA 427 at ; Jaycar Pty Ltd v Lombardo  NSWCA 284 at . It is not a prerequisite for departing from such a course that the party seeking a costs order demonstrate wrongdoing was responsible for the trial’s early termination: Nudrill Pty Ltd v La Rosa  WASCA 158 at ; Brittain v Commonwealth of Australia (No 2), above, at .
At or after the hearing, and pending appeal
Trial judges should not defer hearing costs applications, including indemnity costs issues, merely because an appeal is pending. Stays of costs assessments may be ordered if there is doubt as to whether costs could not be repaid if the appeal is successful, and there are reasonable grounds of appeal: Salfinger v Niugini Mining (Australia) Pty Ltd (No 4)  FCA 1594 at .
If a trial judge’s exercise of discretion in relation to costs miscarries, the costs order may be set aside and the Court of Appeal may then exercise the discretion afresh: McCusker v Rutter  NSWCA 318; State of NSW v Quirk  NSWCA 216 at – (factors justifying appellate intervention), or remit the matter to the trial judge for redetermination. As to costs on appeal generally, see Dal Pont, Ch 20.
Applications for payment from the Suitors’ Fund Act 1951
The Suitors’ Fund Act makes provision for payments to relieve litigants of the burden of costs arising out of erroneous decisions of lower courts. The legislation generally applies in the context of appeals from a court, which may include a tribunal: Australia Postal Commission v Dao (No 2) (1986) 6 NSWLR 497 at 513–4. Certificates have been granted in the District Court in the course of judgments handed down after hearing appeals from tribunals (Perla v Danieli  NSWDC 31; Patel v Malaysian Airlines Australia Ltd (No 2)  NSWDC 4) and a Local Court appeal: Jolly v Houston (2009) 10 DCLR (NSW) 110; see Dal Pont, Ch 21; NSW Civil Procedure Handbook at [r Pt42.640].
Legal costs may only be claimed by legal practitioners. A legal practitioner acting on his/her own behalf is not in the same position as a litigant in person, and thus may recover legal costs: Wang v Farkas (2014) 85 NSWLR 390; Ada Evans Chambers Pty Ltd v Santisi  NSWSC 538 at –. A litigant in person may recover reasonably incurred disbursements and witness expenses, including costs and disbursements for legal work done by others (Malkinson v Trim  2 All ER 356), but may not recover travelling expenses or loss of earnings: Cachia v Hanes (1994) 179 CLR 403; Dal Pont 7.28–7.29; Ritchie’s [42.2.25]. A lawyer acting for himself may seek legal costs (but note the reservations expressed by the NSW Court of Appeal in Khera v Jones  NSWCA 85 at , Dal Pont at 7.37–7.40; NSW Civil Procedure Handbook at [r Pt42.580]–[r Pt42.600] and Ritchie’s at [42.2.27]).
Concern about the impact of high legal costs on the efficiency of the legal process has led to the introduction of statutory costs caps on the costs recoverable in certain proceedings, such as negligence and personal injury claims: Legal Profession Act 2004, ss 337, 338 and see [8-0120].
An application may also be made to the court for costs to be capped: Nicholls v Michael Wilson Partners Ltd (No 2)  NSWCA 141. These principally occur in proceedings where the parties are effectively litigating from the same purse, such as family provision or de facto property disputes; see [8-0120]. In such cases, the court may, on the application of the parties or of its own motion, cap the costs of litigation under UCPR r 42.4(1) prospectively (Dal Pont 7.42–7.47) or retrospectively (Nudd v Mannix  NSWCA 327); see NSW Civil Procedure Handbook at [CPA 98.80], [r 42.4.100], Justice Hamilton, “Containment of Costs: Litigation and Arbitration” (1 June 2007) and Practice Note SC Eq 7.
The party seeking costs may also make an application (CPA s 101(4)) for interest on costs: Zepinic v Chateau Constructions (Aust) Pty Ltd (No 2)  NSWCA 227; Zepinic v Chateau Constructions (Aust) Ltd (No 2)  NSWCA 99 at –; see also Short v Crawley (No 45)  NSWSC 1541; NSW Civil Procedure Handbook at [r Pt42.660].
Where an application is made to cap costs, it is preferable that it be done prospectively and not retrospectively: Re Sherborne Estate (No 2); Vanvalen v Neaves (2005) 65 NSWLR 268 at – and ; Dal Pont, 7.42–7.49.
A party may also bring an application under CPA s 60 and UCPR rr 12.7 and 13.4, not merely to cap costs, but to stay or to strike out the proceedings in their entirety (Bleyer v Google Inc (2014) 311 ALR 529; Vizovitis v Ryan  ACTSC 155, referring to Jones v Sutton (No 2) 2005 NSWCA 203) on the basis that the costs are out of proportion to the object of resolving the issues between the parties: see Ritchie’s at [s 60.15], [s 67.20] and [42.4.5]. The basis for an application for stay of proceedings under CPA s 67 may include the opponent’s failure to pay previously assessed costs in the litigation, in the limited circumstances set out in Ritchie’s at [s 67.35] and [s 67.30]. Additionally, a successful party may properly be deprived of costs on one or more of the above bases: Milne v Ell  NSWCA 407; Bernstein v Poon 2015 ONSC 155.
As costs follow the event, a successful party has a “reasonable expectation” of being awarded costs against the unsuccessful party: Oshlack v Richmond River Council (1998) 193 CLR 72 at  and . The purpose of an order for costs is to compensate the person in whose favour it is made, not to punish the person against whom the order is made: Allplastics Engineering Pty Ltd v Dornoch Ltd  NSWCA 33 at ; see generally NSW Civil Procedure Handbook [r 42.1.50]–[r 42.1.150].
The “event” is not limited to issues in the technical pleading sense, but extends to all disputed questions of law and fact: Cretazzo v Lombardi (1975) 13 SASR 4 at 12. As to the meaning of “the event” in relation to specific legislation, such as cases under the Property (Relationships) Act 1984, see Baker v Towle (2008) 39 Fam LR 323 at –. Where proceedings for family provision are brought, the “event” is “the overall justice of the case” (Singer v Berghouse (1993) 114 ALR 521 at 522 per Gaudron J); these costs are generally paid from the estate by analogy with the Succession Act 2006 (NSW) s 99: Jvancich v Kennedy (No 2)  NSWCA 397.
Different discretionary considerations may arise, however, where the successful party has failed on issues of substance, especially where those issues have occupied a substantial part of the proceedings, or where excessive costs (such as Senior Counsel for simple applications) have been incurred: see [8-0050]. Similarly, the principle that costs follow the event may not be determinative if there is no final judgment, or if a contractual agreement between the parties displaces the “event”.
Where proceedings have been abandoned, discontinued or settled but the parties are unable to agree on costs, the court does not have the benefit of an “event” upon which a costs order will follow. Different principles apply in each case.
UCPR rr 42.19 and 42.20 provide that where a plaintiff discontinues without the consent of the defendant, or where the plaintiff’s claim is dismissed, the defendant is entitled to costs unless the court otherwise orders: see Scope Data Systems Pty Ltd v Agostini Jarrett Pty Ltd  NSWSC 971; Australiawide Airlines Ltd v Aspirion Pty Ltd  NSWCA 365; Norris v Hamberger  NSWSC 785; Foukkare v Angreb Pty Ltd  NSWCA 335 at . The same principle applies where the court dismisses proceedings or strikes out part or all of a pleading (r 42.20): see Australiawide Airlines Ltd v Aspirion Pty Ltd, above, at ; Oberlechner v Watson Wyatt Superannuation Pty Ltd  NSWSC 1435 at [10(2)]. These rules do not create a presumption, and are merely default provisions, but there is an onus on the discontinuing party to make an application to be relieved of the obligation to pay costs. The exercise of the discretion to order otherwise requires some sound positive ground or good reason for departing from the ordinary course: Ralph Lauren 57 Pty Ltd v Byron Shire Council  NSWCA 107 at –; Bitannia Pty Ltd v Parkline Constructions Pty Ltd  NSWCA 32 at – and –. The court in Bitannia Pty Ltd v Parkline Constructions Pty Ltd, above, also discussed the circumstances in which a court might or might not depart from the consequence provided by the rule: – and –. Generally, however, the discretion to depart from the rule will not be exercised where there has been a capitulation or abandonment of a claim: Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624; Cummins v Australian Jockey Club Ltd  NSWSC 254 at . See NSW Civil Procedure Handbook at [r 42.19.40].
Settlement or abandonment of part or the whole of the proceedings before hearing
The general principle in relation to costs where proceedings are determined without a hearing on the merits, and where it cannot be said that one party has simply capitulated, is that the courts make no order as to costs with the intent that each party bears its own costs, unless it can be seen that one party has acted unreasonably in bringing or defending the proceedings: Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624; Harkness v Harkness (No 2)  NSWSC 35 at . In rare cases, it may be appropriate to make an order for costs without a contested hearing on the merits, if the court can be almost certain that one party or the other would have won: Ferguson v Hyndman  NSWSC 538; see also Newcastle Wallsend Coal Co Pty Ltd v Industrial Relations Commission of NSW  NSWCA 129; Indyk v Wiernik  NSWSC 868; Oberlechner v Watson Wyatt Superannuation Pty Ltd  NSWSC 1435 at –; Foley v Australian Associated Motor Insurers Ltd  NSWSC 778; Muhibbah Engineering (M) BHD v Trust Company Ltd  NSWCA 205.
Unsatisfactory conduct of the discontinued proceedings, such as failure to comply with case management requirements (Palmer v Gold Coast Newspapers Pty Ltd  QSC 352), or commencing the abandoned proceedings in circumstances amounting to an abuse of process (Packer v Meagher  3 NSWLR 486 at 500), may result in orders for costs to be paid on an indemnity basis.
Leases, mortgages, guarantees, insurance policies and other contractual documents often contain provisions for costs payable by a party in the event of non-performance, including the basis upon which they are payable (for example, on an indemnity basis). If so, this will displace the general rule that costs follow the event, although the practical result may differ from the findings in the court proceedings: State of NSW v Tempo Services Pty Ltd  NSWCA 4 at ; Elphick v Westfield Shopping Centre Management Company Pty Ltd  NSWCA 356 at –; Ritchie’s at [42.1.30].
Where there is an alternative dispute resolution or arbitration clause in the agreement and a party commences proceedings in court in breach of that clause, this may not only have costs consequences but result in the stay or dismissal of the proceedings: see the cases summarised in Haniotis v The Owners Corporation Strata Plan 64915 (No 2)  NSWDC 39.
Contractual provisions may provide for payment of costs on an indemnity basis: Rail Corp NSW v Leduva Pty Ltd  NSWSC 800 at ; Re Shanahan (1941) 58 WN (NSW) 132; AGC (Advances) Ltd v West (1984) 5 NSWLR 301; Re Adelphi Hotel (Brighton) Ltd  2 All ER 498; Heaps v Longman Australia Pty Ltd  NSWSC 542. Where indemnity costs are ordered as a matter of discretion on the basis of a contractual obligation, the terms of the contract must plainly and unambiguously apply: Kyabram Property Investments Pty Ltd v Murray  NSWCA 87 at . As to the interaction between the court’s discretion and contractual entitlement to costs, see Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2)  NSWCA 171 at –.
In approaching the issue of costs, a court must strike a balance between permitting litigants to canvas all issues while not rewarding them for unreasonable conduct: Cretazzo v Lombardi (1975) 13 SASR 4 at 16. Where the litigation involves multiple parties or issues, the ultimately successful party may have failed on one or a number of the issues in the trial. In determining whether adjustments should be made to the costs which would otherwise follow the successful outcome, the court may take an impressionistic approach to apportionment, rather than seeking to identify and quantify issues. In particular, greater latitude may be shown to a defendant than to a plaintiff: Dal Pont 8.8–8.9; Ritter v Godfrey  2 KB 47. See generally NSW Civil Procedure Handbook at [r 42.1.60]–[r 42.1.120].
The most common circumstance in which the presumption may be displaced is evidence of disentitling conduct on the part of the successful party: Oshlack v Richmond River Council, above, at  and ; G R Vaughan (Holdings) Pty Ltd v Vogt  NSWCA 263. The disentitling conduct does not necessarily need to amount to misconduct; it may simply be any conduct “calculated to occasion unnecessary expense”: Lollis v Loulatzis (No 2)  VSC 35 at ; Keddie v Foxall  VLR 320 at 323–4. If considering a departure from the ordinary rule, the court should have regard to the principles of fairness underlying the making of any costs order: Commonwealth of Australia v Gretton  NSWCA 117 at ; Turkmani v Visalingam (No 2)  NSWCA 279 at .
In Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2)  NSWCA 256 at –, Campbell JA set out the following (non-exhaustive) list of factors relevant to ousting the presumption that costs follow the event, as identified by McHugh J in Oshlack v Richmond River Council at :
where the successful party effectively invited the litigation (see Ritter v Godfrey  2 KB 47)
where the successful party unnecessarily protracted the proceedings
where the successful party succeeded on a point not argued before a lower court (but cf Almond Investors Ltd v Kualitree Nursery Pty Ltd (No 2)  NSWCA 318 at )
where the successful party prosecuted the matter solely for the purpose of increasing the costs recoverable
where the successful party had obtained relief which the unsuccessful party had already offered in settlement of the dispute.
Campbell JA (at ) considered, however, that this still left a discretion as to whether, in any particular case within the scope of these examples, it was appropriate for the court to actually depart from the usual order as to costs.
Other relevant factors include the size of the damages (Alltrans Express Ltd v CVA Holdings Ltd  1 All ER 685), particularly if the amount falls below the amounts identified in UCPR rr 42.34 or 42.35: McLennan v Antonios (No 2)  NSWDC 38. In general terms, the “event” will be regarded as going against a party who has only recovered nominal damages, unless some other right is vindicated by the judgment, such as the establishment of a legal right irrespective of whether any substantial remedy is obtained: Ng v Chong  NSWSC 385; Berrico Estate Pty Ltd v Andersen  NSWCA 23 at  and ; Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2)  NSWCA 171 at , citing Rockcote Enterprises Pty Ltd v FS Architects Pty Ltd  NSWCA 39 at .
The court must not exercise its discretion to award costs against a successful party arbitrarily or capriciously: Oshlack v Richmond River Council, above, at . The discretion must be exercised judicially and “according to rules of reason and justice, not according to private opinion … or even benevolence … or sympathy”: Williams v Lewer  2 NSWLR 91 at 95.
The onus lies on the losing party to establish a basis for any departure from the usual rule: Waterman v Gerling Australia Insurance Co Pty Ltd (No 2)  NSWSC 1111 at . Only in an exceptional case would a successful party both be deprived of costs and also ordered to pay the opponent’s costs: Arian v Nguyen (2001) 33 MVR 37. The fact that the proceedings involve some public interest aspect does not, of itself, warrant departure from the general rule that costs follow the event: McHugh J in Oshlack v Richmond River Council, above, at ; Re Kerry (No 2)  NSWCA 194 at , ; cf CSR Ltd v Eddy (2005) 226 CLR 1. Where there is a divergence of authority on a particular issue, this may be a factor, but in Rinehart v Welker (No 3)  NSWCA 228 the importance of the subject matter did not provide a basis for refusing costs to the successful party in private litigation (at ). Nor do the general vicissitudes of litigation warrant a departure from the principle, even where the judge has acted in error: Jaycar Pty Ltd v Lombardo  NSWCA 284 at –. The court should, however, have careful regard to the facts of the case: EKO Investments Pty Limited v Austruc Constructions Ltd  NSWSC 371 at –; Knight v Clifton  Ch 700. The mere fact that a defendant strenuously defends a claim (and fails in some of those defences) does not entitle the plaintiff to the costs of a trial where the plaintiff does not succeed, or does not succeed to any material extent: AMC Caterers Pty Ltd v Stavropoulos  NSWCA 79 at –. In addition, as set out at [8-0040], the presumption may be displaced by contractual agreement (but note the court’s discretionary powers as discussed in Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2)  NSWCA 171).
Where the application is brought by a party seeking an indulgence, such as an extension of time, courts have referred to an “indulgence principle” which assumed displacement of the presumption in cases seeking some favour or dispensation from the court, such that the party seeking the indulgence should pay the costs of the application irrespective of the outcome, unless the other party had unreasonably opposed the indulgence: see, for example, Holt v Wynter (2000) 49 NSWLR 128 at .
While Fordham v Fordyce  NSWCA 129 at  has been cited as holding that there is no longer such a principle, judgments referring to Fordham v Fordyce have continued to apply the principle, particularly in the Equity Division of the Supreme Court: Celermajer Holdings Pty Ltd v Kopas  NSWSC 619 at , citing Young CJ in Eq in The Presbyterian Church (NSW) Property Trust v Scots Church Development Ltd (No 2)  NSWSC 797 at ; cf The Salvation Army (South Australia Property Trust) v Rundle  NSWCA 347 at – and –.
The appropriate starting point remains the presumption under r 42.1, and the enquiry then becomes whether in the exercise of the court’s discretion, the presumption should be displaced, or whether some other order is to be preferred, such as that the costs be the applicant’s costs in the proceedings: Nowlan v Marson Transport Ltd (2001) 53 NSWLR 116 at . For example, where the party seeking the indulgence has been guilty of some relevant delinquency, costs might nevertheless be awarded in favour of the unsuccessful opposing party: Pascoe v Edsome Pty Ltd (No 2)  NSWSC 544. Nowlan v Marson Transport Ltd, above, is frequently cited where a party (and in particular a defending party) has engaged in “trial by ambush” tactics.
In Jaycar Pty Ltd v Lombardo, above, the application sought to vary an order where the judge, rather than the parties, had made an error. The court held, at , that the application to vary the order was not an indulgence.
The presumption will be displaced where the successful party recovers less than an offer of compromise (see r 42.15), or less than an offer in a Calderbank letter: see Calderbank v Calderbank  3 All ER 333 and “Calderbank letters and offers of compromise” at [8-0500].
The most common basis for a variation of the presumption occurs when the losing party has been successful on a substantial issue. The general approach is to order costs in accordance with the outcome of the proceedings as a whole, without attempting to differentiate between particular issues on which the party may not have succeeded: Cretazzo v Lombardi (1975) 13 SASR 4 at 12. However, the court may make a different order if the losing party succeeds on significant issues: James v Surf Road Nominees Pty Ltd (No 2)  NSWCA 296 at –; Sydney Ferries v Morton (No 2)  NSWCA 238 at –; Roads and Traffic Authority (NSW) v McGregor (No 2)  NSWCA 453 at ; Cross v Queensland Newspapers Pty Ltd (No 2)  NSWCA 120 at ; Tarabay v Leite  NSWCA 259 at .
A court will generally only deprive the successful party of the costs relating to an issue on which it was unsuccessful when that issue was clearly dominant or separable: Monie v Commonwealth of Australia (No 2)  NSWCA 15 at –; Waters v PC Henderson (Australia) Pty Ltd  254 ALR 328. The interaction between CPA s 56, the court’s discretion, the parties’ respective degrees of success and the manner in which the litigation was conducted are analysed and explained in Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2)  NSWCA 171 at – and ff. For examples of issues that were not considered to be dominant or separable, see Correa v Whittingham (No 2)  NSWCA 471 at –; Smith’s Snackfood Co Ltd v Chief Commissioner of State Revenue (NSW)  NSWCA 470 at – (cross-appeal); Xu v Jinhong Design & Constructions Pty Ltd (No 2)  NSWCA 333 at  (contractual issues); Turkmani v Visvalingan (No 2)  NSWCA 279 at  (contributory negligence).
The event is not limited to the final outcome, but includes individual issues in the proceedings: Williams v Stanley Jones & Co Ltd  2 KB 37; Jelbarts Pty Ltd v McDonald  VLR 478. In Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) (2011) 288 ALR 385, Campbell JA (with Macfarlan JA and Young JA agreeing) held (at ) that an issue or group of issues is “clearly dominant” when it is clearly dominant in the proceedings as a whole. In that case, the approach by counsel to analysing the percentage of costs between the parties, by counting the proportion of paragraphs and pages devoted to each factual topic, was held (at ) to be “a highly artificial way of proceeding”, which gave “a false air of mathematical precision”. Issues which are not clearly separable include liability and contributory negligence: Turkmani v Visvalingan (No 2)  NSWCA 279 at . A successful party’s entitlement to the whole of the costs of the proceedings should not be discounted to allow for another party’s success in a separate issue that played a very minor part in the proceedings as a whole: Macourt v Clark (No 2)  NSWCA 411 at .
In Hawkesbury District Health Service Ltd v Chaker (No 2)  NSWCA 30 at , the Court of Appeal held that the severability of one issue on which the successful party failed is not, without more, sufficient to warrant departure from the general approach. The exercise of discretion will often depend upon matters of impression and evaluation: Elite Protective Personnel Pty Ltd v Salmon (No 2)  NSWCA 373 at ; Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272.
The rule may be varied more readily in the case of a plaintiff who has raised additional issues which have failed than to a successful defendant who has raised additional, but unsuccessful issues: Griffith v Australian Broadcasting Corporation (No 2)  NSWCA 145 at , – and –.
Independently of issues of separability, an application may be successful where the defendant or party to a cross-appeal has lost the case but succeeded on a substantial issue or cross-claim. For example:
cross-claims or cross-appeals with different parties succeeding to varying degrees on separate issues: Lewis v Nortex Pty Ltd (In Liq)  NSWSC 480 at –
where each party has had substantial success, the court may make no order as to costs: Hogan v Trustee of the Roman Catholic Church (No 2)  NSWSC 74 at 
where the defendant points to significant credit issues or unnecessary costs, such as the unnecessary retainer of senior counsel: Jones v Sutton (No 2)  NSWCA 203. Alternatively or in addition, an order may be sought that the opposing party’s costs be capped: Craigcare Group Pty Ltd v Superkite Pty Ltd  NSWSC 326. Unreasonable or improper conduct is not necessary to justify moderating a costs order to reflect a party’s failure on a particular issue: Short v Crawley (No 40)  NSWSC 1302 at 
where the plaintiff’s success was attributable only to late amendment: Beoco Ltd v Alfa Laval Co Ltd  1 QB 137 (no costs awarded).
The nature and extent of the apportionment is a discretionary one, made on general impression. Where the failings of the unsuccessful party are equalled or exceeded by the failings of the successful party, this may be taken into account. In Rural & General Insurance Broking Pty Ltd v APRA (2009) 231 FLR 199, the trial judge found the conduct of the practitioners on both sides, and their clients, was “a sorry affair” (at ), and took the poor conduct of the proceedings by both sides into account in making only limited costs orders following the discontinuance of hopeless proceedings.
Unless the costs order specifies otherwise, an order for costs against two or more parties renders each of them jointly and severally liable to pay the costs concerned: NSW Civil Procedure Handbook at [r Pt42.240]; Rushcutters Bay Smash Repairs Pty Ltd v H McKenna Netmakers Pty Ltd  NSWSC 670. The court may, in its discretion, apportion liability between multiple parties: Mulcahy v Hydro-Electric Commission (unrep, 2/7/98, FCA). This is more likely to occur when one of the multiple parties conducts a separate or distinct case.
It is within the legitimate scope of the power under CPA s 98 to award costs in favour of a plaintiff against a cross-defendant not joined by that plaintiff where the conduct of that cross-defendant was the cause of the litigation: Vameba Pty Ltd v Markson  NSWCA 266.
Where there are multiple successful defendants with separate representation, the court will not normally allow more than one set of costs where the interest of the successful defendants is identical and there is no conflict of interest between them. This principle is subject to a number of provisos discussed in Milillo v Konnecke  NSWCA 109 at –.
Where the plaintiff succeeds against one defendant but not the other, where both were jointly represented by the same solicitors and counsel, there is a “rule of thumb” that the successful defendant should recover a proportionate share of the “common” costs referable to the claim pressed against each defendant. This rule of thumb is convenient for the “ordinary case”, but is not to be automatically applied in every case: King Network Group Pty Ltd v Club of the Clubs Pty Ltd (No 2)  NSWCA 204 at –.
Where the plaintiff fails against the defendant, and the cross-claim against a third party raises substantially similar issues, the plaintiff may not be ordered to pay all the costs: Furber v Stacey  NSWCA 242 at – (cross-claimant awarded only one-quarter of costs against an unsuccessful plaintiff).
A defendant who fails against the third party, whether or not he or she has succeeded against the plaintiff, is generally ordered to pay the third party’s costs: Dal Pont at 11.33. Where a defendant has identified a concurrent tortfeasor (Civil Liability Act 2002 s 35A) and the plaintiff joins that party, costs issues are determined in accordance with s 35A, whether or not the plaintiff has succeeded against that party: Dymocks Book Arcade Pty Ltd v Capral Ltd  NSWSC 195 at ; Sydney Water Corporation v Asset Geotechnical Engineering Pty Ltd (No 2)  NSWSC 1604.
Where one or more of the defendants is successful against the plaintiff or in a cross-claim against another defendant, an offer to contribute under UCPR r 20.32 may be made (see Simmons v Rockdale City Council (No 2)  NSWSC 1275; Thornton v Wollondilly Mobile Engineering (No 2)  NSWSC 742 at –; James Hardie & Co Pty Ltd v Wyong Shire Council (2000) 48 NSWLR 679 at ). While the court will only “take into account” (see UCPR r 42.18) the fact that such an offer is made, giving it less impact than an offer of compromise or a Calderbank offer, it is a useful tool for one defendant against another in litigation, and a defendant making an offer to contribute should not be shut out from seeking costs, including indemnity costs, from the recipient of such an offer by reason of the existence of alternative provisions in the UCPR. Where no such offer has been made, the court must apportion the costs on the basis that costs “follow the event”: BlueScope Steel Ltd v Cartwright (No 2)  NSWCA 96 at .
A plaintiff may not be successful in relation to all defendants. If costs follow the event, the plaintiff would then be required to pay the costs of the successful defendant(s), despite having won the case: NSW Civil Procedure Handbook at [r Pt42.250]. In these circumstances, a court may, in its discretion, make special orders to ensure that these costs are met by the unsuccessful defendant(s): Gould v Vaggelas (1985) 157 CLR 215.
A “Bullock order” requires the unsuccessful defendant(s) to pay the plaintiff by way of reimbursement any costs the plaintiff has paid to the successful defendant(s): Bullock v London General Omnibus Company  1 KB 264.
A “Sanderson order” is more direct, and simply requires the unsuccessful defendant(s) to pay the costs of the successful defendant(s), leaving the plaintiff out of the process entirely: Sanderson v Blyth Theatre Co  2 KB 533. The advantages of such an order apply particularly in cases of an insolvent unsuccessful defendant. It also has the advantage of eliminating unnecessary administrative and procedural steps: Coombes v Roads and Traffic Authority (No 2)  NSWCA 70 at . For a comparison of the two kinds of orders, see Simmons v Rockdale City Council (No 2)  NSWSC 1275.
Bullock (and Sanderson) orders should only be made where it was reasonable and proper to join the successful defendant: Roads and Traffic Authority of NSW v Dederer (2007) 234 CLR 330 at –, –. See Raulfs v Fishy Bite Pty Ltd  NSWCA 135 where the costs involved in joining a party were held to have not been reasonably and properly incurred. In that case, it was found that the party was joined for the purpose of spreading the net of liability wide so as to obtain an additional defendant who might be able to afford to pay: at –.
A second precondition is that there must also have been something in the conduct of the other, unsuccessful, defendant that makes it appropriate to exercise the discretion: Coombes v Roads and Traffic Authority (No 2), above, at  ff; Council of the City of Liverpool v Turano (No 2)  NSWCA 176 at ; Stephens v Giovenco (No 2)  NSWCA 144 at ; Sneddon v Speaker of the Legislative Assembly  NSWSC 842 at .
There is no additional requirement that the causes of action must be substantially connected or interdependent: Nationwide News Pty Ltd v Naidu (No 2)  NSWCA 71 at –; ACQ v Cook (No 2) (2008) 72 NSWLR 318. The interdependence of claims against two defendants, or the need to join both in circumstances where only one may be liable, are typical examples. However, there must be some aspect of the conduct of the unsuccessful defendant, as opposed to a mere denial of liability, to make it fair to impose on that defendant liability for the costs of the successful defendant, such as creating circumstances of uncertainty as to who is the proper defendant: Dominello v Dominello (No 2)  NSWCA 257; Roads and Traffic Authority v Palmer (No 2)  NSWCA 140 at . The “something more” does not need to amount to misconduct, but it must be conduct sufficient to make it fair to make the order: Bostik Australia Pty Ltd v Liddiard (No 2)  NSWCA 304 at .
Issues may be finally disposed of in circumstances where a costs order may be determined prior to the hearing and independently of the merits of the case, such as applications for injunctions or determination of separate issues of law.
The court has power under CPA s 98(3) to make, or reconsider, orders for costs at any stage of proceedings. Unless a special order is made, the costs of any application or other step in proceedings are dealt with in accordance with the general costs in the proceedings, and are only payable at the end of the proceedings. This includes reserved costs or where no order for costs is made: r 42.7. As to the “usual order” for costs in applications for interlocutory injunctions, see His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand v The Macedonian Orthodox Community Church St Petka Incorp (No 2)  NSWCA 142 at ff.
Costs orders in relation to interlocutory applications are generally not to be paid until the conclusion of the proceedings “unless the court orders otherwise”: r 42.7. However, the court may order that interlocutory costs be payable forthwith: Solarus Products v Vero Insurance (No 4)  NSWSC 1012; Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 208 ALR 564 at –; Australian Securities and Investments Commission v Rich  NSWSC 297. The question is one of time of enforcement of the costs order. The court must take into account whether the costs in question should be determined prior to the conclusion of litigation, or whether one occasion of enforcement of costs orders at the end of a case, with costs orders going different ways being set off, is preferable: Richards v Kadian (No 2)  NSWCA 373 at .
Circumstances where an order has been refused include that the party is legally aided (Richards v Kadian (No 2), above, at ), or that the final outcome is sufficiently uncertain to warrant deferring costs to the trial judge, or that the costs of the interlocutory application should be costs in the cause: Megna v Marshall  NSWSC 1326 at ; Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1.
The discretion has been exercised in a variety of circumstances.
Where the decision relates to the determination of a discrete or self-contained question
See Richards v Kadian (No 2) at –. Examples include an unsuccessful application for summary judgment (Perpetual Trustee Co v McAndrew  NSWSC 790); an application for discovery, or a Mareva order (McNamara Business and Property Law v Kasermidis (No 3)  SASC 262); an unsuccessful application to administer interrogatories (Megna v Marshall, above, at ); and a successful application to restrain solicitors acting for the opponent: Chinese Australian Services Society Co-Operative Ltd v Sham-Ho  NSWSC 241. Where non-parties have appeared in relation to challenges to subpoenae, the court may make orders for costs which are assessable forthwith. However, steps reasonably taken in the management of the proceedings towards a hearing, such as a directions hearing, should be treated as costs in the proceedings generally: Metlife Insurance Ltd v Visy Board Pty Ltd (Costs)  NSWSC 111 at –.
Where delay in the conclusion of the proceedings is likely
This may be the case where liability has been separately determined under r 28.2. In Herbert v Tamworth City Council (No 4) (2004) 60 NSWLR 476 at , the court ordered costs payable forthwith where assessment of damages could be delayed for a decade.
Where the costs were incurred by unreasonable or unnecessary conduct
“Costs forthwith orders” may be made where a party has engaged in unreasonable conduct: Bevillesta Pty Ltd v D Tannous No 2 Pty Ltd  NSWCA 277 at –. The unfettered discretion conferred by CPA s 98 must be exercised in accordance with the dictates of justice: s 58(1). The court must, therefore take into account the matters set out in ss 56 and 57, and may have regard to the checklist in s 58(2)(b). See also Australian Securities and Investments Commission v Rich  NSWSC 297 at ; Seven Network Ltd v News Ltd  FCA 1630 at . The obligations of legal practitioners to conduct litigation reasonably are set out in Ken Tugrul v Tarrants Financial Consultants Pty Ltd ACN 086 674 179 (No 5)  NSWSC 437 at –.
A tutor, liquidator or submitting party may be a party to the litigation, but is not in the same position as an active party. The power to make a costs order against such a person or organisation is to be exercised with restraint, and the party specifically warned in advance that an order may be sought against them: Ng v Chong  NSWSC 385 at .
Relators and tutors
The court may make an order for costs against a relator: Wentworth v Attorney-General (NSW) (1984) 154 CLR 518 at 524. As to the liability of a tutor, see Yakmore v Handoush (No 2) (2009) 76 NSWLR 148 and Dal Pont at 22.68. An order may be made against an amicus curiae in an exceptional case: Dal Pont at 22.74.
The principles upon which a liquidator may be ordered to personally pay costs which have been ordered against a company in liquidation were considered in Mead v Watson as Liquidator for Hypec Electronics (2005) 23 ACLC 718 at ff. See also Arena Management Pty Ltd (Receiver & Manager Appointed) v Campbell Street Theatre Pty Ltd (2011) 80 NSWLR 652; Joubert v Campbell Street Theatre Pty Ltd (in liq)  NSWCA 302.
A submitting party
Ordinarily a submitting party who genuinely takes no part in the proceedings will not be ordered to pay costs: Highland v Labraga (No 3)  NSWSC 871. However, the position may change where that party does in fact take some active part in the proceedings: Hillig v Darkinjung Pty Ltd (No 2)  NSWCA 147 at ; Hornsby Shire Council v Valuer General of NSW  NSWSC 1281; see also Mahenthirarasa v State Rail Authority of New South Wales (No 2) (2008) 72 NSWLR 273 where the submitting party did not actively oppose the orders sought, neither did it consent to them. Similarly, in the case of preliminary discovery, where an order was sought against an agent to disclose the identity of the principal, it was considered appropriate not to order costs against the losing, but “innocent” party: Bio Transplant Inc v Bell Potter Securities Ltd  NSWSC 694.
Public officers and bodies
While courts are reticent to order costs against government bodies such as legal aid providers, orders may be made in an extreme case: Collins and the Victorian Legal Aid Commission (1984) FLC 91-508; Marriage of Millea and Duke (1992) 122 FLR 449.
Other orders for costs against non-parties
CPA s 98 confers a general power to make costs orders against parties and non-parties alike. Non-party orders were previously rare, but following the repeal of UCPR r 42.3 (formerly Pt 52A r 4 Supreme Court Rules 1970), there is no specific provision restricting the making of costs orders against non-parties: Arena Management Pty Ltd (Receiver & Manager Appointed) v Campbell Street Theatre Pty Ltd, above, at .
The procedure for notifying the non-party is set out in Flinn v Flinn  3 VR 712. As is the case with persons holding a specific role in relation to the litigation, such as a tutor, the power is to be exercised with restraint: Ng v Chong, above, at . Examples include:
persons having control of the litigation: Gore v Justice Corporation Pty Ltd (2002) 189 ALR 712 (litigation funder); Selig v Wealthsure Pty Ltd  HCA 18; Younan v GIO General Limited (ABN 22 002 861 583) (No 2)  NSWDC 149 (plaintiff’s de facto the true plaintiff); McVicar v S & J White Pty Ltd (No 2) (2007) 249 LSJS 110 at –
abuse of process: the power to dismiss and the meaning of “abuse of process” are discussed in Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd  NSWCA 283
persons conducting proceedings without authority: Hillig v Darkinjung (No 2), above, at  where a person conducts litigation in the name of another without authority, that person may be liable for costs
directors of corporations: in Naomi Marble & Granite Pty Ltd v FAI General Insurance Co Ltd (No 2)  1 Qd R 518, Shepherdson J made an order for costs against not only company directors but witnesses where a fraudulent insurance claim was pressed
persons who fail to attend court: see UCPR r 42.27
interpleaders: see NSW Civil Procedure Handbook at [r Pt43.20]–[r Pt43.100]; [r 43.2.20]–[r 43.2.100].
The categories of persons against whom such orders may be made are not closed: FPM Constructions v Council of the City of Blue Mountains  NSWCA 340 at  per Basten JA.
See also Yates v Boland  FCA 1895; Gore v Justice Corporation Pty Ltd, above, and Kebaro Pty Ltd v Saunders  FCAFC 5 (approved by the Privy Council in Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2)  All ER (D) 420 (Jul).
The Supreme Court’s inherent power to make costs orders against practitioners is derived from its supervisory jurisdiction: Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300 at – (“Lemoto”); Re Felicity; FM v Secretary, Department of Family and Community Services (No 4)  NSWCA 19. The relevant principles for the exercise of this power should not be conflated with the statutory sources of power for the court to award party/party costs against a legal practitioner, set out in CPA s 99 and Legal Practitioners Act 2004 s 348: Whyked Pty Ltd v Yahoo 7 Pty Ltd  NSWSC 477 at – per McDougall J. These statutory powers extend to the District Court and Local Court, which, it should be noted, do not enjoy inherent jurisdiction: Knaggs v J A Westaway & Sons Pty Ltd (1996) 40 NSWLR 476 at 485.
The Civil Procedure Act 2005 — s 99
Section 99 gives the court wide power to award costs personally against legal practitioners in accordance with ss 56–60: Lemoto at  and Ideal Waterproofing Pty Ltd v Buildcorp Australia Pty Ltd  NSWSC 155; Karwala v Skrzypczak Re Estate of Ratajczak  NSWSC 931 at –.
In considering the exercise of the discretion under s 99, the court may take into account a legal practitioner’s failure to comply with the requirements in CPA ss 56(3), (4) and (5), which require the parties and their representatives to assist the court to further the just, quick and cheap resolution of the real issues in the proceedings: Kendirjian v Ayoub  NSWCA 194. Breach of the practitioner’s duty to ensure that proceedings are conducted efficiently and expeditiously may sound in a personal costs order: Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd  NSWCA 243 at ; Araf Capital Funding Pty Ltd v Megaloudis  NSWSC 1255 at ; Ashmore v Corporation of Lloyds  2 All ER 486; Whyte v Brosch (1998) 45 NSWLR 354 (late submissions).
Conduct which has been held to justify an order that a practitioner personally pay the costs includes:
abuse of process: Cahill v Ekstein (unrep, 5/6/98, NSWSC)
raising untenable defences for the purpose of delay: Deputy Commissioner of Taxation v Levick (1999) 168 ALR 383 at 34; Helljay Investments Pty Ltd v Deputy Commissioner of Taxation (1999) 166 ALR 302
signing a certificate on a false affidavit of discovery: Myers v Elman  AC 282
repeatedly putting untenable submissions: Buckingham Gate International v ANZ Bank Ltd  NSWSC 946
attempting to re-agitate previously decided issues: Vasram v AMP Life Ltd  FCA 1286; see also Gersten v Minister for Immigration and Multicultural Affairs  FCA 922; Kendirjian v Ayoub at –
ignorance of the rules: Riv-Oland Marble Co (Vic) Pty Ltd v Settef SPA (1989) 63 ALJR 519
unpreparedness resulting in a hearing date being vacated, or in time being wasted during the hearing: Stafford v Taber (unrep, 31/10/94, NSWCA).
Liability for these costs may extend to the firm as well as to the solicitor on the record: Kelly v Jowett (2009) 76 NSWLR 405. See NSW Civil Procedure Handbook at [CPA 99.40]. That liability may extend to an order for such costs to be paid on an indemnity basis: Mitry Lawyers v Barnden  FCA 918.
The Legal Profession Act 2004 — s 348
The Legal Profession Act 2004 s 348, which applies in all courts, permits the making of costs orders against solicitors personally where legal services were provided in a claim for damages without reasonable prospects of success. The court is empowered to order that the practitioner repay costs to a party in the proceedings, or otherwise indemnify that party in respect of their costs. The exercise of the power remains discretionary (Lemoto at  and ), and the due administration of justice should not be impaired by the “too liberal exercise” of these new powers: at . The court approved the “fairly arguable” test proposed by Barrett J in Degiorgio v Dunn (No 2) (2005) 62 NSWLR 284. Thus, practitioners will only be exposed to liability when their belief that the material to support the claim “unquestionably fell outside the range of views which could reasonably be entertained” as to the objective justification for the proceedings: Lemoto at . The duty in relation to “reasonable belief” is, however, a continuing one (see Lemoto at ). Where circumstances change, continuing to prosecute or defend a claim may amount to a contravention of the section.
The Court of Appeal went on to lay down processes to ensure procedural fairness, relating to the manner in which an application is to be made and the notice to be given to the practitioner: Lemoto at ff, summarised at – and –; see also Mitry Lawyers v Barnden, above, at . In De Costi Seafoods (Franchises) Pty Ltd v Wachtenheim (No 5)  NSWDC 8 at –, Taylor DCJ sets out that this is a three-stage process of some complexity.
The “chilling effect” of s 348 was applied in Eurobodalla Shire Council v Wells  NSWCA 5, in which a barrister and solicitor were held to have been “reckless” in continuing to prosecute an appeal: at .
Where a practitioner believes he or she has available material providing a proper basis for alleging a fact, provided the belief was reasonable, the proceedings cannot be said to have been commenced “without reasonable prospects of success”: Fowler, Corbett & Jessop v Toro Constructions Pty Ltd  NSWCA 178 at , .
Party/party costs are for the most part not regulated, and will be assessed on the ordinary basis or on an indemnity basis. Concern about high legal costs has led to certain costs being regulated under the Legal Profession Act 2004, the Workplace Injury Management and Workers Compensation Act 1998, and the Motor Accidents Compensation Act 1999. There are also rules relating to costs payable to parties acting in a special capacity: see UCPR r 42.24 as to tutors and r 42.25 as to trustees and mortgagees. The liabilities of liquidators and fiduciaries where they become an adverse party, as opposed to being joined to the litigation in their official capacity, are explained in Lewis v Nortex Pty Ltd (in liq)  NSWSC 480 at  and –. There are also specific provisions in relation to executors’ costs, as discussed below.
The costs of obtaining a grant of probate or letters of administration are regulated under the Legal Profession Regulation 2005. In contentious probate proceedings the court has a wide and unfettered discretion, and in a proper case may order that the costs of both parties be paid out of the estate (Williamson v Spelleken  Qd R 152); or that a certain percentage of costs can be borne by the estate: McCusker v Rutter  NSWCA 318. Concerning the expression “borne by the estate” in settlement correspondence, see Zang v Middleton  NSWSC 881 at . The estate does not automatically bankroll the legal costs of every party who wishes to be heard. This needs to be borne in mind by parties who desire to participate in the proceedings but whose interests are already adequately protected. Parties and their legal representatives must take reasonable steps to avoid duplicated or unnecessary legal representation: Milillo v Konnecke  NSWCA 109 at –; Re Dowling; sub nom NSW Trustee and Guardian v Crossley  NSWSC 1040.
The modern position concerning costs in probate suits has been “compendiously stated” in Perpetual Trustee Co Ltd v Baker  NSWCA 244 at –. See also the discussion in Grynberg v Muller; Estate of Bilfeld  NSWSC 350 at ff and Trustee for the Salvation Army (NSW) Property Trust v Becker  NSWCA 136 at . Subject to two well-recognised exceptions, the basic rule in probate actions is that, ordinarily, costs follow the event, the exceptions being where the testator had been the cause of the litigation and where the “circumstances led reasonably to an investigation concerning the testator’s will”: Re Estate Late Hazel Ruby Grounds  NSWSC 1311. There are, however, discretionary considerations that might displace the presumption: see Simpson v Hodges  NSWSC 303 at . Additionally, orders for caps on costs, on the principle of proportionality, may be made: see the discussion of these principles, and their application to costs generally, in Grizonic v Suttor  NSWSC 914.
Executors acting honestly and with propriety are entitled to costs not recoverable from another party from the estate, on an indemnity basis: Milillo v Konnecke, above, at ; Diver v Neal  NSWCA 54 at ; Warton v Yeo  NSWCA 115.
There is a comprehensive discussion of probate costs, estates, funds and trusts in NSW Civil Procedure Handbook at [r Pt42.340], [r Pt42.200]–[r Pt42.250] and SCR 78.0.140.
Costs on default judgment and the enforcement of judgments
The costs payable for the uncontested recovery of a lump sum debt or the enforcement of a judgment by a judgment creditor are regulated under cl 112 of the Legal Profession Regulation 2005. The scales are set out in Sch 2. See also r 16.9. See NSW Civil Procedure Handbook at [r Pt42.360].
Maximum costs in claims for personal injury damages
The Legal Profession Act 2004 limits the costs for legal services in respect of certain claims for personal injury damages and the maximum amount recovered does not exceed $100,000: s 338. (These provisions do not prevent the awarding of costs on an indemnity basis if a reasonable offer of compromise is not accepted: s 340). Applications may be made to the court (under CPA s 98, UCPR rr 42.15 and 42.20) by a plaintiff for costs outside the cap. Examples include a failed allegation of fraud which complicated and delayed personal injury proceedings: Hurcum v Domino’s Pizza (No 2) (2007) 4 DCLR 194. As to defendants’ and third parties’ costs, see Boylan Nominees Pty Ltd v Williams Refrigeration Australia Pty Ltd (2006) 65 NSWLR 717.
In Certain Lloyd’s Underwriters Subscribing to Contract No IH00AAQS v Cross (2012) 248 CLR 378, the High Court held that the cap on damages in s 338 extended to intentional torts such as assault. In NSW v Williamson (2012) 248 CLR 417, heard by the High Court at the same time, a plaintiff received a lump sum for damages for assault and false imprisonment following his arrest by police. In NSW v Williamson, French CJ and Hayne J at  held that the cost capping provisions (s 338) applied if the amount recovered on a claim for personal injury damages did not exceed $100,000, whether that claim is framed in negligence or as an intentional tort (see also Kiefel J at ). However, false imprisonment was not a “personal injury” (at ). See NSW Civil Procedure Handbook at [r Pt42.380] (maximum party/party costs in claims for personal injury damages).
Costs in claims for work injury damages
The Workplace Injury Management and Workers Compensation Act 1998 (“the WIM Act”) s 346 makes specific provision for the award of costs in claims for work injury damages including costs in court proceedings for such claims. “Work injury damages” are defined in s 250. The relevant regulation for the purpose of s 346 is the Workers Compensation Regulation 2003. The WIM Act and the Regulation govern the costs to be awarded and the discretion conferred by s 98 of the CPA does not operate. Thus, a court can only award costs as prescribed by the Regulation or by the UCPR, but in the event of any inconsistency, the Regulation prevails. The scheme of the regulation allows no scope for an award of indemnity costs: Chubs Constructions Pty Ltd v Chamma  NSWCA 98 at –. Similarly, the UCPR rules relating to offers of compromise do not operate once a Certificate of Mediation Outcome has been issued under s 318B of the WIM Act. So far as costs in court proceedings are concerned, the parties are “fossilised” in their respective positions at the conclusion of the mediation. The same position applies throughout the court proceedings, including any appeal: Smith v Sydney West Area Health Service (No 2)  NSWCA 62 at –; Pacific Steel Constructions Pty Ltd v Barahona (No 2)  NSWCA 9 at –; see also Chubs Constructions Pty Ltd v Sam Chamma (No 2) (2010) 78 NSWLR 679; Sneddon v The Speaker of the Legislative Assembly  NSWSC 842. See NSW Civil Procedure Handbook at [r Pt42.400].
Costs in claims under the Motor Accidents Compensation Act 1999
Costs in respect of claims covered by the Motor Accidents Compensation Act 1999, for accidents that occur after 5 October 1999, are regulated by Ch 6 (ss 148–153) of that Act: Najjarine v Hakanson (2009) 53 MVR 127. As to the interrelationship of Ch 6 and r 42.15 of the UCPR, see San v Rumble (No 2) (2007) 48 MVR 492. The costs provisions in s 152 still permit an application for indemnity costs following a Calderbank offer: Arnott v Choy (No 2)  NSWCA 336. In McLennan v Antonios (No 2) (2014) 18 DCLR (NSW) 85, an application under r 42.15 that no costs be payable (the plaintiff had recovered a nominal sum) failed. See NSW Civil Procedure Handbook at [r Pt42.420].
Costs in de facto property settlement claims
Proceedings in the Family Court are conducted on the basis that each party “shall bear his or her own costs” (Family Law Act 1975, s 117(2)), although costs orders may be made where dishonesty, fraud or hopeless claims have been brought. While the NSW Court of Appeal previously considered that, in claims under the Property (Relationships) Act 1984, “the starting point should be that each party should bear its own costs” (Kardos v Sandbutt (No 2)  NSWCA 206), this approach has now been rejected: Dunstan v Rickwood (No 2) (2007) 38 Fam LR 491 at –; Baker v Towle (2008) 39 Fam L R 323 at , . The judge hearing the application has a wide discretion, including the discretion to make no order as to costs: Dal Pont at 8.80.
Costs in care proceedings
The Children’s Court cannot make an order for costs in care proceedings unless there are exceptional circumstances that justify it doing so: Children and Young Persons (Care and Protection) Act 1998, s 88. There is a power to award indemnity costs: Director-General of the Department of Human Services v Ellis-Simmons  NSWChC 5. The “exceptional circumstance” requirement before costs orders may be made (Children and Young Persons (Care and Protection) Act 1988, s 88) does not apply to proceedings in the Supreme Court: Re Kerry (No 2)  NSWCA 194.
Land and Environment Court
For costs in the NSW Land and Environment Court, see Dal Pont 8.81–8.88 and Ritchie’s at [42.1.95], [42.1.105].
Leave of the court may be required in order to seek costs in the following situations:
applications where separate representation of one of the plaintiffs is sought: Dehsabzi and Dehsabzi v John Fairfax Publications Pty Ltd (No 3)  NSWDC 273
where an insurer seeks to be separately represented from the insured: Elphick v Westfield Shopping Centre Management Company Pty Ltd  NSWCA 356 at –
retaining senior counsel, particularly in simple cases: Jones v Sutton (No 2)  NSWCA 203 at .
In addition, if the amount of damages falls below the threshold in UCPR rr 42.34 or 42.35, the court must be satisfied that the proceedings should have been commenced and continued in the court hearing the proceedings: Redwood Anti-Aging Pty Ltd v Knowles (No 2)  NSWSC 742 at –.
Leave to appeal is required for appeals on costs. In Be Financial Operations Trust v Das  NSWCA 164, Basten JA sets out (at –) that more than arguable error must be established; a question of principle must also be involved.
Although some courts differentiate between an order to pay solicitor/client costs and indemnity costs (Firth v Hale-Forbes (No 2)  FamCA 814 at –), others regard these terms as largely interchangeable: Rapuano (t/as RAPS Electrical) v Karydis-Frisan  SASCFC 93 at –; Secure Funding Pty Ltd v StarkSecure Funding Pty Ltd v Conway  NSWSC 1536 at ; Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2)  NSWCA 171 at . “Indemnity basis” means the basis set out in r 42.5.
The power to award indemnity costs is found at CPA s 98(1)(c) and r 42.5: see NSW Civil Procedure Handbook at [r 42.5.40]. The discretion, although absolute, must be exercised judicially (Mead v Watson (2005) 23 ACLC 718 at ) and be the subject of careful reasoning (Degmam Pty Ltd (In Liq) v Wright (No 2)  2 NSWLR 354), as the courts should exercise caution in making such an award: Leichhardt Municipal Council v Green  NSWCA 341; Ng v Chong  NSWSC 385 at . There appears to be no fixed rule or rationale as to when the discretion might be exercised (Harrison v Schipp  NSWCA 13 at ), except that it requires a “sufficient or unusual feature” (Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233–234), or some “relevant delinquency”: Oshlack v Richmond River Council (1998) 193 CLR 72. This does not mean moral delinquency, or some ethical shortcoming, but “delinquency” bearing a relevant relation to the conduct of the case: Ingot Capital Investment v Macquarie Equity Capital Markets Ltd (No 7) (2008) 65 ACSR 324 at ; Liverpool City Council v Estephan  NSWCA 161 at . An award of indemnity costs should be compensatory and not punitive: Hamod v State of NSW (2002) 188 ALR 659. A formal warning of an intention to claim indemnity costs will make the awarding of indemnity costs more likely: Huntsman Chemical Co Aust Ltd v International Pools Aust Pty Ltd (1995) 36 NSWLR 242.
Indemnity costs are an important case management tool, in that their availability promotes the making of settlement offers, and has the effect of limiting the litigation of cases where there are no reasonable prospects of success: Chaina v Alvaro Homes Pty Ltd  NSWCA 353 at . The following are the most common occasions when such costs are ordered, but it should be noted that the categories are not closed: Colgate-Palmolive Pty Ltd v Cussons at 257.
Indemnity costs may be awarded in cases that are commenced or continued where there is no chance of success (Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2)  NSWCA 12 at ), such as where the claim is “without substance”, “groundless”, “fanciful or hopeless” or so weak as to be futile: Hillebrand v Penrith Council  NSWSC 1058 (limitation period obviously at an end). However, mere weakness of a case will not be sufficient to warrant an exercise of the discretion to award indemnity costs: Wentworth v Rogers (No 5) (1986) 6 NSWLR 534.
Abuse of process
Costs may be awarded on an indemnity basis where the proceedings amount to an abuse of process (Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359 at 362) such as where they are commenced other than in good faith, or for an ulterior or collateral purpose: Palmer v Gold Coast Newspapers Pty Ltd  QSC 352; Packer v Meagher  3 NSWLR 486 at 500.
Unreasonable conduct or “relevant delinquency” in the proceedings
Evidence of actual misconduct is not required. Conduct of the kind described as “trolley load litigation” may suffice for an indemnity costs order: Michael Wilson & Partners Ltd v Nicholls  NSWSC 669 at –. Examples include unnecessarily prolonging the proceedings (Degmam Pty Ltd (in liq) v Wright (No 2), above, at 358); unfounded allegations of fraud or improper conduct (Maule v Liporoni (No 2) (2002) 122 LGERA 216 at 229); failure to provide proper discovery (Masha Nominees Pty Ltd v Mobil Oil Australia Pty Ltd (No 2)  VSC 56 at –); making multitudinous amendments (Qantas Airways Ltd v Dillingham Corporation Ltd (unrep, 14/5/87, NSWSC)); deliberate or high-handed conduct (Rouse v Shepherd (No 2) (1994) 35 NSWLR 277); behaviour which causes unnecessary anxiety, trouble or expense, such as the failure to adhere to proper procedure (FAI General Insurance Co Ltd v Burns (1996) 9 ANZ Ins Cas 61-384); disregard of court orders (O’Keefe v Hayes Knight GTO Pty Ltd  FCA 1559 at ); perverse persistence by an unrepresented litigant with a hopeless application: Rose v Richards  NSWSC 758. Refusal to withdraw an improper caveat commonly results in such an order: Martin v Carlisle  NSWSC 1276.
Fraud and misconduct
Other conduct which will ground an order for indemnity costs is misbehaviour of a more serious nature, such as fraud (Gate v Sun Alliance Ltd (1995) 8 ANZ Ins Cas ¶61-251 at 75,817–75,818); perjury or contempt (Berkeley Administration Inc v McClelland  FSR 565 at 568–569; Ivory v Telstra Corporation Ltd  QSC 102) or dishonest conduct: Vance v Vance (1981) 128 DLR (3d) 109 at 122.
Offers of compromise and Calderbank letters
This is the most common basis for seeking indemnity costs orders: Nair-Smith v Perisher Blue Pty Ltd (No 3)  NSWSC 1736. See “Offers of compromise and Calderbank letters” at [8-0500].
Applications for costs may be the subject of an order for liberty to apply. If no costs order is made at or shortly after the time of the hearing, how much later may such an application be made? In McCracken v Phoenix Constructions (Qld) Pty Ltd  FCAFC 87 no application was made at the time of the hearing, and the company went into liquidation. The court stressed (at ) the need for such applications to be made in a timely manner. The court nevertheless made orders for indemnity costs, notwithstanding the fact that no such application had been made at the time the court had heard the appeal.
Precision in costs orders is important, as the costs must then be assessed by a costs assessor, unless the parties can agree upon the costs payable without the need for assessment.
Where there is a dispute as to the appropriate costs order, the judge should rule on the issue, including any application for indemnity costs: Dunstan v Rickwood (No 2) (2007) 38 Fam LR 491 at . The costs the subject of the order, whether interlocutory or final, should be expressed in clear and certain terms to ensure that the parties and the costs assessor can easily ascertain the precise scope of the costs to be paid: Hogan, In the Marriage of (1986) 10 Fam LR 681 at 686. The costs must be proportionate to the value and importance of the subject matter in issue: Skalkos v T & S Recoveries Pty Ltd (2004) 65 NSWLR 151 at . As to the circumstances in which a costs assessor may refer a disputed issue back to the trial judge, see Griffith v Australian Broadcasting Corporation  NSWSC 750; Ryan v Hansen t/as Hansens Solicitors (2000) 49 NSWLR 184.
The court may also make an order for costs without quantification or, on the application of a party, make a gross sum costs order. This will require the judge to determine if the amount of costs sought is reasonable.
At the interlocutory stage, the most common application for a gross sum is an application for security for costs. These costs are not assessed by costs assessors, and represent an estimate of costs which should be paid into court pending the hearing of the litigation. At the conclusion of the litigation, these sums are paid to the successful party: The “Bernisse” and The “Elve”  P 1; Huon Shipping and Logging Co Ltd v South British Insurance Co Ltd  VLR 216; see also Kiri Te Kanawa v Leading Edge Events Australia Pty Ltd  NSWCA 187 as explained by Hamilton J in Lym International Pty Ltd v Chen  NSWSC 167 at –); Dal Pont at 28.65.
Section 98(4)(c) provides that at any time before costs are referred for assessment the court may make an order for a specified gross sum instead of assessed costs. Courts were initially reluctant to make such orders (see the cases discussed at NSW Civil Procedure Handbook at [r Pt42.90]) but such orders have now become more common due to their increasing use by judges at first instance in the Supreme Court: Poulos v Eberstaller (No 2)  NSWSC 235; Chaina v Presbyterian Church (NSW) Property Trust (No 26)  NSWSC 1009 at –. Gross sum costs orders were first made in “megalitigation” cases, where the assessment of costs could be protracted and expensive (Idoport Pty Ltd v National Australia Bank Ltd  NSWSC 1273), but are now made in circumstances where the making of such an order is appropriate, such as contumelious conduct by a party (Zepinic v Chateau Constructions (Aust) Pty Ltd (No 2)  NSWCA 227; Zepinic v Chateau Constructions (Aust) Ltd (No 2)  NSWCA 99), or where the financial circumstances of the party ordered to pay costs was poor: Hamod v State of NSW  NSWCA 375 at –.
Such applications are now increasingly brought where the subject matter of the litigation is a modest sum in comparison to the costs involved, or to avoid “satellite litigation” about costs (O’Rourke v P & B Corporation Pty Ltd  WASC 36; Lambert v Jackson  FamCA 275 at : lump sum costs orders made on an indemnity basis by reason of conduct of the litigation); Vumbaca v Sultana (No 2)  NSWDC 195 at  or indeed in litigation with no special features: Poulos v Eberstaller (No 2), above. In Colquhoun v District Court of NSW  NSWCA 460 at  Basten JA considered that a gross sum costs order may be appropriate in proceedings brought under the Children and Young Persons (Care and Protection) Act 1998.
The most commonly used phrases for costs orders are:
Costs of the day, or of the motion
This order encompasses the costs associated with a particular event in the proceedings. The effect of the order is not limited to the work done on the particular day in court, but extends to include work “reasonably connected” with the issues dealt with on that day, including preparation and taking out the order resulting from the hearing: Re Hudson; Ex parte Citicorp Australia Ltd (1986) 11 FCR 141 at 144.
Costs thrown away
Similarly, an order for “costs thrown away” relates to costs wasted by reason of one party’s error, failure to comply with a rule or court direction, or adjournment of a hearing.
Costs in the cause/proceedings
Courts are often called upon to make costs orders in interlocutory applications where the true merits of the application can best be seen in the context of the final result: Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 208 ALR 564. Such an order means the interlocutory costs correspond with the final order for costs: His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand v The Macedonian Orthodox Community Church St Petka Incorp (No 2)  NSWCA 142 at ; Dal Pont at 1.15.
Plaintiff’s/defendant’s costs in the cause/proceedings
Unlike an order for “costs in the cause”, a party-specific order such as “the defendant’s costs in the cause” means that the costs of the interlocutory application are awarded irrespective of the final outcome of the litigation: Dal Pont at 1.16. Where an order of this latter kind is made, if the defendant wins, it recovers the costs, and if it loses, it is not liable for the plaintiff’s interlocutory costs: Nixon v Howes (1907) 24 WN (NSW) 156 at 158.
No order as to costs
Where no order is made for costs in respect of interlocutory proceedings, the costs become costs in the cause and must be determined as a later date: Wentworth v Wentworth (unrep, 21/2/96, NSWCA). The order for costs of the trial will include not only trial costs but all prior proceedings unless there is an order to the contrary: Dal Pont at 1.19.
However, where the court specifically makes a “no order as to costs” order, it means that no party is awarded costs against another, and each or every party in effect bears its own costs: Re Hodgkinson  2 Ch 190; Trikas v Rheem (Australia) Pty Ltd  NSWR 645 at 646. These costs lie where they fall: Wentworth v Wentworth  NSWSC 638. An order that a party pay its own costs is inappropriate: Liverpool City Council v Estephan  NSWCA 161 at .
Costs reserved/ costs reserved to the trial judge
Costs of a motion or the hearing may be reserved. Where the order is made at the hearing, an additional order for liberty to apply to determine costs issues is generally also made. See NSW Civil Procedure Handbook at [r Pt42.200].
Costs reserved, or costs orders with liberty to apply
Costs orders made in interlocutory applications may be the subject of further costs applications.
See NSW Civil Procedure Handbook at [r Pt42.160] and [r 42.7.20]–[r 42.7.40]. The court may also make an order to allow a set-off of costs in the same proceedings: NSW Civil Procedure Handbook at [r Pt42.140]; Chaina v Presbyterian Church (NSW) Property Trust (No 26)  NSWSC 1009. Note that party/party costs are not a “supply” of services and that therefore GST does not apply: NSW Civil Procedure Handbook at [r Pt42.260].
Costs of mediation ordered by the court are governed by CPA s 28, and are part of the ordinary proceedings: NSW Civil Procedure Handbook at [r Pt42.290].
All that is required is an order for the losing party to pay the winning party’s costs of the motion or hearing. A fuller order might be: “I order the defendant to pay the plaintiff’s costs as agreed or as assessed on the ordinary basis.” If indemnity costs are awarded, the order should specify the date[s] from which such orders should run.
Where an application for costs to be assessed forthwith is made, the order should additionally state: “I further order that those costs are/are not payable forthwith, under r 42.7(2)”.
The extent to which reasons are given will depend on the circumstances. Reasons are invariably given for contested applications for indemnity costs, but costs of a motion may be ordered without reasons or (if reasons are sought) a brief outline of the reasons. Where there is a departure from the rule that costs follow the event, it should usually be accompanied by short reasons, unless there is agreement between the parties that reasons are not required.
CPA, ss 3, 5(1), 56–60, 98, 99, 101
Children and Young Persons (Care and Protection) Act 1998, s 88
Civil and Administrative Tribunal Act 2013 ss 53, 60
Defamation Act 2005 (NSW) s 40
Family Law Act 1975 (Cth) s 117(2)
Legal Profession Act 2004, ss 337, 338, 340, 348, 364, 366
Legal Profession Uniform Law Application Act 2014
Legal Profession Regulation 2005, cl 112, Sch 2
Limitation Act 1969
Motor Accidents Compensation Act 1999, Ch 6
Property (Relationships) Act 1984
Succession Act 2006, s 99
Workers Compensation Regulation 2003, Sch 7
Workplace Injury Management and Workers Compensation Act 1998, ss 250, 346
UCPR rr 16.9, 36.10, 42.2, (former) 42.3, 42.4, 42.5, 42.7, 42.14, 42.15, 42.24, 42.25, 42.27, 42.34 and 42.35
G Dal Pont, Law of Costs, 3rd ed, LexisNexis Butterworths, 2013
Ritchie’s Uniform Civil Procedure NSW (LexisNexis Butterworths)
The Hon John P Hamilton QC, The Hon Justice Geoff Lindsay, Michael Morahan OAM and Carol Webster SC, General Editors, NSW Civil Procedure Handbook 2014 (Lawbook Co, 2014; commentary on Pt 42 – Costs prepared by Peter Johnstone, President of the Children’s Court of New South Wales)
MJ Beazley, “Calderbank offers 2”, paper delivered at the “‘Without Prejudice’ Offers and Offers of Compromise” NSW Young Lawyers Civil Litigation Committee Seminar, 26 September 2012, at <www.supremecourt.justice.nsw.gov.au/Documents/beazley260912.pdf>
MJ Beazley, “Calderbank offers”, paper delivered at the Australian Lawyers Alliance Hunter Valley Conference, 14–15 March 2008 at <www.supremecourt.justice.nsw.gov.au/Documents/beazley140308.pdf>
Justice Hamilton, “Containment of Costs: Litigation and Arbitration” (1 June 2007)