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Lecture

WEEK 12B - Costs

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Department
Law
Course
LWB431
Professor
All Professors
Semester
Fall

Description
WEEK 12 – COSTS 1. Introduction 1.1 Jurisdiction The jurisdiction to award costs is statutory: s 221 Supreme Court Act 1995. A party cannot recover any costs of a proceeding other than under the UCPR or order of the court: r 691. 691 Entitlement to recover costs A party to a proceeding cannot recover any costs of the proceeding from another party other than under these rules or an order of the court. Costs may be awarded at any stage of the proceedings or after the proceedings end: r 680. Costs may be recovered for proceedings, which have abated: s 116I Supreme Court Act 1991. 1.2 Nature/Function of Costs The general rule is that the winner is awarded their costs, in addition to the judgment for or against the claim. The idea is to indemnify the successful party for the costs incurred by them in contesting the claim. It is not to penalise the loser or reward the winner. 1.3 General Classification of Costs In practice the award of costs does not fully indemnify the winner. A recognised rule of thumb is that the winner will recover only 2/3 of their actual costs. The reason for this is that there are two scales of costs: • Standard basis: r 690, 703. • Indemnity basis: r 690, 704. Standard Basis: r 703, 690 This is the usual scale awarded in litigation. It is determined by reference to the scale of costs prescribed in the rules: r 690, and is also limited to only those costs which are necessarily or properly incurred: r 703. Parties will generally receive about 60% of costs because there is a sliding scale which is not generous. 703 Standard basis of assessment (1) Unless these rules or an order of the court otherwise provide, the registrar must assess costs on the standard basis. (2) When assessing costs on the standard basis, the registrar must allow all costs necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being assessed. 690 Solicitors’ costs (1) For assessing costs on the standard basis under this part, a solicitor is entitled to charge and be allowed the costs under the scales of costs for work done for or in a proceeding in the court. (2) The scales of costs are in— (a) for the Supreme Court—schedule 1; or (b) for the District Court—schedule 2; or (c) for Magistrates Courts—schedule 3. (3) For an assessment for Magistrates Courts on the standard basis, the scale in schedule 3 appropriate for the amount the plaintiff recovers applies. (4) For an assessment for Magistrates Courts on the indemnity basis, the scale in schedule 3 appropriate for the amount the plaintiff claims applies. (5) If the nature and importance, or the difficulty or urgency, of a proceeding and the justice of the case justify it, the court may (6) The registrar has the same authority as the court under subrule (5).on the assessment of the costs of the proceeding. (7) The costs under the scales of costs for work done are inclusive of any GST payable in relation to the work. Indemnity basis: r 704, 705 In special cases costs are awarded at a slightly more generous scale than the standard basis: Hurstville v Municipal Council v Connor. This is not determined by reference to what is actually paid to a solicitor, but by reference to what is reasonable: r 704. For Example: If a solicitor gives both oral advice and follows up with a letter of advice, only the letter will be covered by standard costs, but both would be covered by indemnity costs (phone call does not progress the matter) Special cases include where the dispute concerns a fund, and costs are to be paid from the fund rather than by a specific party. For example, trustee/beneficiary disputes. Another example is where the indemnity basis is used as a penalty for a party acting improperly. 704 Indemnity basis of assessment (1) The court may order costs to be assessed on the indemnity basis. (2) Without limiting subrule (1), the court may order that costs be assessed on the indemnity basis if the court orders the payment of costs— (a) out of a fund; or (b) to a party who sues or is sued as a trustee; or (c) of an application in a proceeding brought for noncompliance with an order of the court. (3) When assessing costs on the indemnity basis, the registrar must allow all costs reasonably incurred and of a reasonable amount, having regard to— (a) the scale of fees prescribed for the court; and (b) any costs agreement between the party to whom the costs are payable and the party’s solicitor; and (c) charges ordinarily payable by a client to a solicitor for the work. 705 Trustee If a party who sues or is sued as a trustee is entitled to be paid costs out of a fund held by the trustee, the registrar must assess the costs on an indemnity basis, unless the court orders otherwise. 2. Costs Orders Costs order = professional fees + outlays (registry fees etc – set out in the Uniform Civil Procedure (Fees) Regulation 1999 (Qld) [latest version, Nov 2006] 2.1 General rule: costs follow the event Policy is that awarding costs against losing parties serves to discourage actions without merit If more than one issue raised within the claim/counterclaim costs of individual issues usually follow the event of each issue: r 682; Morosi v Mirror Newspapers Ltd; Smith v Madden. 682 Costs of question or part of proceeding (1) The court may make an order for costs in relation to a particular question in, or a particular part of, a proceeding. (2) For subrule (1), the court may declare what percentage of the costs of the proceeding is attributable to the question or part of the proceeding to which the order relates. IF Self-Litigation The HCA has held that the costs rules only provide reimbursement for work done or expenses incurred by a practitioner or their employee. A partial indemnity is the appropriate compromise for a self- represented litigant who sought compensation for the loss of time spent preparing and conducting their case: Cachia v Hanes. IF Successful party denied Costs There have been circumstances where the successful party is denied costs in the exercise of the courts discretion. These situations include: • where the plaintiff failed to make demand before bringing proceedings; • where the plaintiff has brought several proceedings where one action would suffice; • where the plaintiff has been guilty of conduct contrary to public policy; • where the successful party adopts an obstructive or unco-operative attitude in a mediation conference see: Capolingua v Phylum Pty Ltd Costs order against persons not party to the litigation – 3 Parties Litigation is frequently funded by third parties, for example, insurers, unions, receivers, contingency fee arrangements, and governments. Costs can be awarded against third parties – see Knight v F P Special Assets Limited; Johnson v Santa Teresa Housing Association. A costs order can be made against a third party: Knight v FP Special Assets Ltd. The considerations the court must take into account when making a costs order against a third party are – • Party to litigation was insolvent and could not pay • Receiver played an active part in running the litigation • Receiver had interest in the subject of the litigation Johnson v Santa Teresa Housing Association • Employee under impression that employer would pay costs of action • Employer thought insurer would pay costs Court looked at court record and took it at face value – employee was the party, so employee was liable for the costs Knight v FP Special Assets Ltd • Costs order made against a third party – the receive for an unsuccessful party in the action HCA set out the considerations for making a costs order against a third party • Party to litigation was insolvent and could not pay • Receiver played an active part in running the litigation • Receiver had interest in the subject of the litigation Costs order against persons not party to the litigation – Practitioners An order for costs made against a practitioner can only occur if there is delay, misconduct or negligence: r 708. There needs to be a serious reason to make a costs order against a lawyer, for example failure to properly consider the law and facts of the case and serious prejudice to applicant: De Sousa v Minister for Immigration, Local Government and Ethnic Affairs. 708 Solicitor’s delay or neglect The court or registrar may order a solicitor to repay to the solicitor’s client all or part of any costs ordered to be paid by the client to another party if the party incurred the costs because of delay, misconduct or negligence of the solicitor. De Sousa v Minister for Immigration, Local Government and Ethnic Affairs • Lawyer gave wrong advice to client and led to client being deported • Court emphasized that a proceeding failing does not mean the lawyer is at fault or that costs will issue against a lawyer • Must be a serious reason to make a costs order against a lawyer • For example a serious failure to properly consider the law and facts of the case and serious prejudice to applicant • Costs order against solicitor upheld 2.2 Where Costs orders do NOT follow the event Where the successful party has done something wrong In Verna Trading Pty Ltd v New India Assurance Co Ltd a successful defendant was ordered to pay plaintiff’s costs on an indemnity basis. The defendant refused to tell the plaintiff why the insurance claim was not being paid out. The actions of the defendant were uncooperative and had been the cause of proceedings starting. Even though the Victoria Court of Appeals thought the award of costs against the insurance company was harsh, it was not willing to overturn the order. Public Interest Litigation In Oshlack v Richmond River Council a challenge was made to a proposed property development with large environmental implications. The court made no costs order on the basis that the application was made for the public interest, public spirit, concern for the environment and unofficially represented a larger group. Party Wins in the wrong court Where the party wins their case, but it has been brought in the wrong court, the successful party will only be entitled to costs as per the scheduling relating to the correct court: r 698. 698 Costs of proceeding in wrong court (1) Subrule (2) and (3) apply unless the court otherwise orders. (2) If the relief obtained by a plaintiff in a proceeding in the Supreme Court or District Court is a judgment that, when
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