Circumstances that may influence a court to depart from the general rule that costs follow the event include disentitling conduct on the part of the successful party: Oshlack v Richmond River Council at [40], [69]. Disentitling conduct in this context may be constituted by any conduct “calculated to occasion unnecessary expense” and need not necessarily amount to “misconduct”: Keddie v Foxall [1955] VLR 320 at 323–324; Lollis v Loulatzis (No 2) [2008] VSC 35 at [29], nor even amount to “a most exceptional case, or a strong or exceptional case”: G R Vaughan (Holdings) Pty Ltd v Vogt [2006] NSWCA 263 at [20]. Instances include:

The mere fact that a defendant strenuously defends a claim (and fails in some of those defences) does not entitle the plaintiff to all or some of the costs of proceedings in which the plaintiff does not succeed, or does not succeed to any material extent: AMC Caterers Pty Ltd v Stavropoulos [2005] NSWCA 79 at [4]–[6].

A successful party may be deprived of costs if its success is attributable to a ground raised only by a late amendment: Beoco Ltd v Alfa Laval Co Ltd [1995] 1 QB 137 (no costs awarded); Faraday v Rappaport [2007] NSWSC 253 at [25]–[30]; cf Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2) [2018] NSWCA 266 at [40]–[49], [87]. Although it has been said that, as a general rule, where a plaintiff makes a late amendment which substantially alters the case the defendant has to meet and without which the action will fail, the defendant is entitled to the cost of the action down to the date of amendment: Beoco Ltd v Alfa Laval Co Ltd at 154, citing Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries [1951] 1 All ER 873 and Lipkin Gorman v Karpnale Ltd [1989] 1 WLR 1340 (CA)); see also Murrihy v Radio 2UE Sydney Pty Ltd [2000] NSWSC 318. This “general rule” has emerged in the context that though the late amendment has resulted in some slight measure of success for the plaintiff, ultimately the true victor, having regard to the case as a whole, was the defendant; where that is not so, the plaintiff may still recover some, or even all, its costs: Waterman v Gerling Australia Insurance Co Pty Ltd (No 2) [2005] NSWSC 1111 at [17], [26], [27]; cf Almond Investors Ltd v Kualitree Nursery Pty Ltd (No 2) [2011] NSWCA 318 at [8].

Generally, the “event” will be regarded as going against a party who recovers only nominal damages: Oshlack v Richmond River Council, above, at [70]; Ng v Chong [2005] NSWSC 385, unless some other right is vindicated by the judgment notwithstanding that no substantial damages are recovered. Attention must be given, however, to the specific circumstances of each case: Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 at 874; EKO Investments Pty Limited v Austruc Constructions Ltd [2009] NSWSC 371 at [18]–[23]; Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2) [2011] NSWCA 171 at [14], citing Rockcote Enterprises Pty Ltd v FS Architects Pty Ltd [2008] NSWCA 39 at [100].

Even if success is more than merely nominal, the amount of the damages recovered may affect the question of costs: Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 All ER 685, particularly if it falls below the threshold referred to in UCPR rr 42.34 or 42.35, in which case the successful plaintiff is entitled to its costs only if the court is satisfied that the proceedings should have been commenced and continued in that court: Redwood Anti-Aging Pty Ltd v Knowles (No 2) [2013] NSWSC 742 at [17]–[22]. UCPR r 42.35 provides that in proceedings in the District Court, where a plaintiff obtains a judgment in an amount of less than $40,000, an order for costs may, but will ordinarily not, be made, unless the court is satisfied the commencement and continuation of the proceedings in the District Court, rather than the Local Court, was warranted. UCPR r 42.34 makes similar provision in respect of proceedings in the Supreme Court where less than $500,000 is recovered.

Relevant considerations as to whether the commencement and continuation of the proceedings in the higher court were warranted include the complexity of the factual and/or legal issues: Singapore Airlines Cargo Pte Limited v Principle International Pty Ltd (No 2) [2017] NSWCA 340 at [18]–[19]; the amount claimed, and the reasons for this; the amount actually recovered, and the reasons for this; the difficulty or otherwise of assessing the likely damages awarded; the nature of the proceedings in question, and how this impacts, if at all, upon the need to proceed in the higher court; the conduct and attitude of the parties to litigation; and the importance of the legal principle involved in the case as a matter of precedent: Dal Pont at 12.15; and Singapore Airlines v Principle International at [7]. In McLennan v Antonios (No 2) [2014] NSWDC 38, where the plaintiff had recovered only $12,000 in a claim under Motor Accidents Compensation Act 1999, a contention that no costs order should be made failed on the basis that the District Court was a specialist personal injuries and motor accidents court while the Local Court was not.

A significant disproportion between the amount for which judgment is recovered and the costs of the proceedings may warrant depriving an otherwise successful plaintiff of a usual costs order, including of a prima facie entitlement to indemnity costs arising from bettering an offer of compromise: Jones v Sutton (No 2) [2005] NSWCA 203.

It has been held that a party may apply under CPA and UCPR rr 12.7 and 13.4 to stay or to strike out the proceedings in their entirety, on the basis that the costs are out of all proportion to the object of resolving the issues between the parties, though such cases will be very rare: Jameel v Dow Jones & Co Inc [2005] QB 946 at [67]-[76]; Bleyer v Google Inc (2014) 88 NSWLR 670; Vizovitis v Ryan [2012] ACTSC 155 at [37], referring to Jones v Sutton (No 2). This view is not without controversy and has not been resolved at appellate level in Australia: see the later comments by McCallum JA in Massarani v Kriz [2020] NSWCA 252, referring to Smith v Lucht [2014] QDC 302; Feldman v The Daily Beast Company LLC [2017] NSWSC 831 at [15]–[18]; Ghosh v NineMSN Pty Ltd (2015) 90 NSWLR 595 at [44]; [55]; [56]; Lazarus v Azize [2015] ACTSC 344 at [23]; Toben v Nationwide News Pty Ltd (2016) 93 NSWLR 639 at [130]–[143]; Watney v Kencian [2017] QCA 116 at [61]; GG Australia Pty Ltd v Sphere Projects Pty Ltd (No 2) [2017] FCA 664 at [52]; Farrow v Nationwide News Pty Ltd (2017) 95 NSWLR 612 at [5], [40]; Armstrong v McIntosh (No 2) [2019] WASC 379 at [115]; Fox v Channel Seven Adelaide Pty Ltd (No 2) [2020] SASC 180 at [11]-[21]; and Khalil v Nationwide News Pty Ltd (No 2) [2018] NSWDC 126 at [40].

That the proceedings involve some public interest aspect does not, of itself, warrant departure from the general rule that costs follow the event: Oshlack v Richmond River Council at [90]; Re Kerry (No 2) — Costs [2012] NSWCA 194 at [13], [15]; cf CSR Ltd v Eddy (2005) 226 CLR 1 at [78]–[81]. While it may be a relevant consideration that there is a divergence of authority on a particular issue, in private litigation the importance of the subject matter does not necessarily provide a basis in for refusing to award costs to the successful party: Rinehart v Welker (No 3) [2012] NSWCA 228 at [15]. Nor do the general vicissitudes of litigation warrant a departure from the principle, even where a judge’s error necessitates an application to vary an order: Jaycar Pty Ltd v Lombardo [2011] NSWCA 284 at [59]–[62].

Where a party seeks and obtains some favour or dispensation from the court (such as leave to amend or an extension of time), and although the starting point remains the general rule under UCPR r 42.1, so that the inquiry is whether in the exercise of the court’s discretion, that rule should be departed from or some other order preferred: (Nowlan v Marson Transport Ltd (2001) 53 NSWLR 116 at [37]), ordinarily (though not invariably) the party seeking the indulgence is required to pay the costs of the application irrespective of the outcome, unless the other party has unreasonably opposed it: Holt v Wynter (2000) 49 NSWLR 128 at [121]; Nardell Coal Corporation v Hunter Valley Coal Processing (2003) 178 FLR 400 at 435–6; Celermajer Holdings Pty Ltd v Kopas [2011] NSWSC 619 at [24], citing The Presbyterian Church (NSW) Property Trust v Scots Church Development Ltd (No 2) [2007] NSWSC 797 at [6]. However, whether this was a general rule was doubted in Fordham v Fordyce [2007] NSWCA 129 at [50]; see also The Salvation Army (South Australia Property Trust) v Rundle [2008] NSWCA 347 at [109]–[111] and [144]–[153]; and Mamfredas Investment Group Pty Limited (formerly known as MAM Marketing Pty Ltd) v PropertyIT and Consulting Pty Ltd [2013] NSWSC 929 at [85], where the existence of such an overarching principle was said to be “not clear”. This rule is of particular application where the party seeking the indulgence requires relief from some relevant delinquency, in which case costs are ordinarily awarded in favour of the unsuccessful opposing party (Pascoe v Edsome Pty Ltd (No 2) [2007] NSWSC 544) whereas unsuccessful opposition to a reasonable application for leave to amend is in a different category and might result in no order, or even an order that the respondent pay the applicant’s costs. An application to vary an order where the judge rather than a party has made an error is not an application for an indulgence: Jaycar Pty Ltd v Lombardo at [67].

The general rule is displaced where the result is no more favourable to a successful plaintiff than an offer of compromise made by the defendant in accordance with the rules of court. In such a case, unless the court otherwise orders, the plaintiff is entitled to an order against the defendant for the plaintiff’s costs on the ordinary basis up to the date of the offer, but the defendant is entitled to an order against the plaintiff for its costs on the indemnity basis thereafter: UCPR r 42.15.

The general rule may be displaced as a matter of discretion where the result is no more favourable to the successful party than an offer made by the unsuccessful party in a Calderbank letter: Calderbank v Calderbank [1975] 3 All ER 333; Singleton v Macquarie Broadcasting Holdings Ltd (1991) 24 NSWLR 103 at 108. However, unlike a formal offer of compromise, a Calderbank letter is merely a relevant consideration in the exercise of the discretion, and does not have an equivalent presumptive effect to an offer of compromise under the rules: Commonwealth of Australia v Gretton at [43]; Leichhardt Municipal Council v Green [2004] NSWCA 341 at [19], [46]–[47]; Nobrega v Trustees for the Roman Catholic Church for the Archdiocese of Sydney (No 2) [1999] NSWCA 133 at [20]–[22]; Skalkos v Assaf (No 2) [2002] NSWCA 236 at [117]; LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd [2003] NSWCA 74 at [107]–[119]. One reason for this is that a party seeking to take advantage of an offer for the purposes of costs should be expected to comply with the procedures and safeguards provided by the rules of court. Nonetheless, as a matter of discretion, a Calderbank offer may justify a special order for costs, including an order for costs on an indemnity basis, if the final judgment is no more favourable than the offer, and its rejection was unreasonable: Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8]; Jones v Bradley (No 2) [2003] NSWCA 258 at [13]; SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37], and the offer sufficiently foreshadowed its use to support a special costs order: Brymount Pty Ltd v Cummins (No 2) [2005] NSWCA 69 at [10]–[21]; Penrith Rugby League Club Ltd trading as Cardiff Panthers v Elliot (No 2) [2009] NSWCA 356; Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [2012] NSWSC 816 at [9]–[14], [38]–[40]. Regarding the Court’s decision to make a special costs order, the relevant question is whether the offeree’s failure to accept the Calderbank offer, in all the circumstances, warrants departure from the ordinary rule as to costs. That the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure from the ordinary rule as to costs: see Novelly v Tamqia Pty Ltd (No 2) [2024] NSWCA 209 at [16]. The factors relevant to the question whether a rejection of an offer is unreasonable include whether the offeree had an adequate opportunity in terms of time and information to enable it to consider and deal with the offer: Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [99] citing Donnelly v Edelsten (1994) 49 FCR 384 at 396; Novelly, above, at [23].

See also “Offers of compromise and Calderbank letters” under [8-0130].

Where a party has made an offer to contribute under UCPR r 20.32, the court must take into account both the fact and the amount of the offer in exercising its discretion as to costs: UCPR r 42.18; Simmons v Rockdale City Council (No 2) [2014] NSWSC 1275; Thornton v Wollondilly Mobile Engineering (No 2) [2012] NSWSC 742 at [13]–[18]; James Hardie &​ Co Pty Ltd v Wyong Shire Council (2000) 48 NSWLR 679 at [23]. While such an offer is only “taken into account”, which means that it does not have the presumptive effect of an offer of compromise, it is a useful tool for one defendant against another in litigation. The necessary consequence of acceptance of an offer of contribution is the application of r 20.27(3), being the ability to apply for judgment to be entered accordingly: Charlotte Dawson v ACP Publishing Pty Ltd [2007] NSWSC 542 at [23]. A defendant making an offer to contribute may seek costs, including indemnity costs.

Where the litigation involves multiple issues, the ultimately successful party may have failed on one or a number of the issues in the trial. Where the ultimately unsuccessful party has succeeded (and, as a corollary, the successful party has failed) on one or more substantial issues, the question often arises whether there should be a departure from the general rule given that “the event” is not necessarily limited to the final overall outcome, but can include individual issues in the proceedings: Williams v Stanley Jones & Co Ltd [1926] 2 KB 37; Jelbarts Pty Ltd v McDonald [1919] VLR 478; see [8-0020]. In this context, courts do not usually apportion costs between issues, but act on the outcome of the proceedings as a whole, without attempting to differentiate between particular issues on which the successful party may not have succeeded: Cretazzo v Lombardi (1975) 13 SASR 4 at 12. As the High Court cautioned in Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53 at [6], there are “good reasons not to encourage applications regarding costs on an issue-by-issue basis, involving apportionments based on degrees of difficulty of issues, time taken to argue them and the like”. The severability of one issue on which the successful party failed is not, without more, sufficient to warrant departure from the general rule: Hawkesbury District Health Service Ltd v Chaker (No 2) [2011] NSWCA 30 at [14]. 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 on a separate issue that played a very minor part in the proceedings as a whole: Waters v PC Henderson (Australia) Pty Ltd [1994] NSWCA 338; Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256 at [107]; Macourt v Clark (No 2) [2012] NSWCA 411 at [7].

However, the court must strike a balance between permitting litigants to canvas all issues, while not rewarding them for unreasonable conduct or encouraging the agitation of unnecessary issues: Cretazzo v Lombardi (1975) 13 SASR 4 at 16. These days apportionment to reflect the relative success of the parties is becoming more commonplace. Unreasonable or improper conduct is not a necessary condition for moderating a costs order to reflect a party’s failure on a particular issue: Short v Crawley (No 40) [2008] NSWSC 1302 at [32]. The court may depart from the general rule if the unsuccessful party succeeds on significant issues: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [31]–[36]; Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]; Sydney Ferries v Morton (No 2) [2010] NSWCA 238 at [10]–[12]; Roads and Traffic Authority (NSW) v McGregor (No 2) [2005] NSWCA 453 at [20]; Cross v Queensland Newspapers Pty Ltd (No 2) [2008] NSWCA 120 at [13]; Tarabay v Leite [2008] NSWCA 259 at [76]; DSHE Holdings Ltd (Receivers and Managers) (in liq) v Potts (No 2) [2022] NSWCA 258 at [11]–[12]. In Plaintiff M76/2013 v Minister for Immigration, Multicultural Affairs and Citizenship (2013) 251 CLR 322 at [241]–[245], Kiefel and Keane JJ concluded that each side should bear its own costs on the basis that the plaintiff’s limited success was largely “a Pyrrhic victory, given the rejection of substantial aspects of her case”.

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) [2008] NSWCA 15 at [63]–[66]; Waters v PC Henderson (Australia) Pty Ltd. An issue or group of issues is “clearly dominant” when it is clearly dominant in the proceedings as a whole: Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256 at [107]; cf Correa v Whittingham (No 2) [2013] NSWCA 471 at [26]–[30]; Smith’s Snackfood Co Ltd v Chief Commissioner of State Revenue (NSW) [2013] NSWCA 470 at [229]–[232] (cross-appeal not clearly dominant or separable); Xu v Jinhong Design & Constructions Pty Ltd (No 2) [2011] NSWCA 333 at [4] (contractual issues not clearly dominant or separable); Turkmani v Visvalingan (No 2) [2009] NSWCA 279 at [11] (contributory negligence not clearly separable from liability). Greater latitude is allowed in this respect to a defendant than to a plaintiff, so that the general rule may be departed from more readily against a successful plaintiff who has pressed additional issues which have failed, than against a successful defendant who has unsuccessfully raised additional issues: Ritter v Godfrey [1920] 2 KB 47; Australian Conservation Foundation Inc v Forestry Commission of Tasmania (1988) 81 ALR 166 at 169; Richmond River Council v Oshlack (1996) 39 NSWLR 622 at 637; Hendriks v McGeoch [2008] NSWCA 53 at [104]; Griffith v ABC (No 2) [2011] NSWCA 145 at [16], [19]–[20], [38]–[39]; Dal Pont 8.8–8.9. Thus where a plaintiff's case fails, it may sometimes be appropriate to order the plaintiff to pay the costs of issues unsuccessfully raised by the defendant, even if those issues are severable, so long as the defendant acted reasonably in raising those issues; but it is less often the case that a defendant would be ordered to pay the costs of severable issues unsuccessfully raised by an otherwise successful plaintiff. However, the requirements of CPA s 56, that parties assist the court to facilitate the just, quick and cheap resolution of the real issues on the proceedings and take reasonable steps to resolve or narrow the issues in dispute, apply to defendants as well as plaintiffs. This is relevant to the exercise of the costs discretion: Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2) [2011] NSWCA 171 at [9]–[10].

The principles governing the making of a costs order to reflect the costs incurred in dealing with a particular issue on which the successful party in the proceedings did not succeed have been summarised, in the context of appellate proceedings, by the Court of Appeal in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38] as follows:

See also Elite Protective Personnel Pty Ltd & Anor v Salmon (No 2) [2007] NSWCA 373; City of Canada Bay Council v Bonaccorso Pty Ltd (No 3) [2008] NSWCA 57 at [22]; Turkmani v Visvalingham (No 2) [2009] NSWCA 279; Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2) [2011] NSWCA 171 at [22]; Avopiling Pty Ltd v Bosevski (2018) 98 NSWLR 171 at [173]; Ulman v Live Group Pty Ltd [2018] NSWCA 338 at [232]–[233].

Orders to the effect that party A pay party B’s costs of specified issues (and that party B pay party A’s costs of other issues) create complexities for assessors. It is therefore undesirable to have multiple costs orders defined by reference to issues arising out of the one set of proceedings. It is preferable to make a single order that covers all of the issues, on what has often been referred to as a “broad axe” basis: In the matter of Commercial Indemnity Pty Ltd [2016] NSWSC 1125, that Party B pay a percentage of Party A’s costs of the proceedings: see Precedent 8.6 at [8-0200]. This avoids visiting on assessors a requirement to allocate work and costs between issues. The nature and extent of the apportionment is a discretionary one, and the court may take an impressionistic approach to apportionment, “on a relatively broad brush basis”, rather than seeking to identify and quantify issues with precision: Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [19]; Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272; Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 at [11]; Bostik Australia Pty Ltd v Liddiard (No 2) at [38]. The court should seek to make an order that is fair in all the circumstances, taking account of the extent to which issues are separable, and without aspiring to the false hope of mathematical precision: DSHE Holdings Ltd (Receivers and Managers) (in liq) v Potts (No 2), above, at [9]. It has been said that the approach of analysing the percentage of costs between the issues by counting the proportion of paragraphs and pages devoted to each factual topic is “a highly artificial way of proceeding”, giving “a false air of mathematical precision”: Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256 at [84]; Wollongong Coal Ltd v Gujarat NRE India Pty Ltd (No 2) [2019] NSWCA 173 at [32]. Nonetheless, such an analysis can sometimes provide useful assistance in apportionment, so long as its limitations are recognised.

If, for example, it is considered that issues on which (unsuccessful) Party B succeeded accounted for about 20% of the costs of the proceedings, and that Party A should not recover costs of those issues but should not have to pay Party B’s costs of them, then the order would be that Party B pay 80% of Party A’s costs of the proceedings. If it were considered that Party A should pay Party B’s costs of the issues on which Party A failed, then Party B should pay 60% of Party A’s costs of the proceedings.

Independently of issues of separability, the general rule may be departed from:

In probate proceedings, subject to two well-recognised exceptions, the general rule that costs follow the event usually applies, the exceptions being:

However, this general rule may be displaced by discretionary considerations: Simpson v Hodges [2008] NSWSC 303 at [55], and in a proper case the costs of both parties may be borne by the estate: Williamson v Spelleken [1977] Qd R 152; or a certain percentage of costs may be borne by the estate: McCusker v Rutter [2010] NSWCA 318.

Even where it is appropriate that the estate bears the costs, 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 [2009] NSWCA 109 at [125]–[128]; Re Dowling; sub nom NSW Trustee and Guardian v Crossley [2013] NSWSC 1040. Additionally, orders may be made fixing (or “capping”) the maximum costs, founded on the principle of proportionality: see [8-0160].

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 at [130]; Diver v Neal [2009] NSWCA 54 at [80]; Warton v Yeo [2015] NSWCA 115: see also [8-0100].

Section 99, Succession Act 2006 provides that the court may order that the costs of proceedings for a family provision order, including costs in connection with mediation, be paid out of the estate or notional estate, or both, in such manner as the court thinks fit. The section also authorises regulations making provision for or with respect to the costs in connection with family provision proceedings, including the fixing of the maximum costs for legal services that may be paid out of the estate or notional estate of a deceased person, and provides that the section and any regulations made under it prevail to the extent of any inconsistency with the legal costs legislation.

It has been said that such proceedings stand apart from cases in which costs follow the event; that costs in family provision cases generally depend on the overall justice of the case; that even in the case of an unsuccessful application, it may be that no order is made as to costs, particularly if it would have a detrimental effect on the applicant’s financial position; and that there may even be circumstances in which it is appropriate for an unsuccessful party to have his or her costs paid out of the estate: Singer v Berghouse [1993] HCA 35 (Gaudron J, refusing an application for security for costs). However, usually success is evaluated in such cases in the ordinary way, and where an application for a family provision order succeeds, the usual order is to the effect that plaintiff’s costs on the ordinary basis and the defendant/executor’s costs on the indemnity basis be paid out of the estate: see Precedent 8.8 at [8-0200]. Where an application fails, usually the plaintiff is ordered to pay the defendant/executor’s costs on the ordinary basis, unless there is some reason, such as failure to better an offer of compromise, for making an indemnity order.

In a successful appeal, the usual order is for costs of both parties to be paid out of the estate: Coates v NTE&A (1956) 95 CLR 494; Re Hall (1959) 59 SR NSW 219; Bowcock v Bowcock (1969) 90 WN (Pt 1) NSW 721; Hutchinson v Elders Trustee Co (1982) 8 Fam LR 267; Hunter v Hunter (1987) 8 NSWLR 573; Churton v Christian (1988) 12 Fam LR 386, sometimes on an indemnity basis: Dehnert v Perpetual Executors (1954) 91 CLR 177; Goodman v Windeyer (1980) 144 CLR 490, although on rare occasions the respondent may be ordered to pay the appellant’s costs: Hughes v NTE&A (1979) 143 CLR 134; typically where it is perceived that the respondent has not acted properly — for example, by giving untruthful evidence: Cooper v Dungan (unrep, 25/3/76, HCA) or by failing to adduce evidence which it was bound to adduce: Dijkhuijs v Barclay (1988) 13 NSWLR 639. In Barnaby v Berry [2001] NSWCA 454, where the appellant failed at first instance but received an enlarged legacy on appeal, the court ordered that all costs be paid out of the estate. In Barns v Barns (2003) 214 CLR 169, where the appellant failed at first instance and on intermediate appeal, upon her ultimate success, all costs were ordered to be paid out of the estate. However, in Blackmore v Allen [2000] NSWCA 162 and Marshall v Carruthers [2002] NSWCA 86, costs followed the event. Each party may be left to bear its own costs where the estate is small: Re Salathiel [1971] QWN 18. See generally de Groot and Nickel, Family Provision in Australia and New Zealand, 5th edn, 2016; and Jvancich v Kennedy (No 2) [2004] NSWCA 397.

In proceedings in the Family Court, the starting point is that each party “shall bear his or her own costs”, although costs orders may be made in an appropriate case: Family Law Act 1975, s 117. While the NSWCA 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 Sarbutt (No 2) [2006] NSWCA 206) this approach has now been rejected in favour of the general rule that costs should follow the event: Dunstan v Rickwood (No 2) [2007] NSWCA 266 at [35]–[40]; Baker v Towle [2008] NSWCA 73 at [12], [82]. When an application for property adjustment is refused, the event will be clear and, upon a straightforward application of r 42.1, the defendant will have the costs of the application unless the court makes some other order; but where an order for adjustment is made, the costs order made will rarely, if ever, depend simply upon which party commenced proceedings, and the “event” will depend on the facts and circumstances, pleadings and issues, in each case: Baker v Towle at [20]–[25].

The Children’s Court cannot make an order for costs in care proceedings unless there are exceptional circumstances that justify doing so: Children and Young Persons (Care and Protection) Act 1998, s 88. Where there are such circumstances, the power extends to awarding indemnity costs: Director-​General of the Department of Human Services v Ellis-​Simmons [2011] NSWChC 5. No such requirement for “exceptional circumstance” applies before costs orders can be made in review or appellate proceedings in the Supreme Court: Re Kerry (No 2) [2012] NSWCA 194, citing Wilson v Department of Human Services; re Anna (No 2) [2011] NSWSC 545 at [106].

For costs in the NSW Land and Environment Court, see Dal Pont 8.81–8.88 and Ritchie’s at [42.1.105].

Section 40 Defamation Act 2005 provides that in awarding costs in defamation proceedings, the court may have regard to the way in which the parties to the proceedings conducted their cases (including any misuse of a party’s superior financial position to hinder the early resolution of the proceedings), and any other matters that the court considers relevant. Unless the interests of justice require otherwise, a court must, if defamation proceedings are successfully brought by a plaintiff and costs in the proceedings are to be awarded to the plaintiff, order costs of and incidental to the proceedings to be assessed on an indemnity basis if the court is satisfied that the defendant unreasonably failed to make a settlement offer or agree to a settlement offer proposed by the plaintiff. If defamation proceedings are unsuccessfully brought by a plaintiff and costs in the proceedings are to be awarded to the defendant, it must order costs of and incidental to the proceedings to be assessed on an indemnity basis if the court is satisfied that the plaintiff unreasonably failed to accept a settlement offer made by the defendant.

Where a plaintiff discontinues without the consent of the defendant, or where the plaintiff’s claim is dismissed in whole or in part, the plaintiff must pay the defendant’s costs of the proceedings to the extent to which they have been discontinued or dismissed, unless the court otherwise orders: UCPR rr 42.19 and 42.20; and see Foukkare v Angreb Pty Ltd [2006] NSWCA 335 at [68]; Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365; Scope Data Systems Pty Ltd v Agostini Jarrett Pty Ltd [2007] NSWSC 971; Oberlechner v Watson Wyatt Superannuation Pty Ltd [2007] NSWSC 1435 at [10]; Norris v Hamberger [2008] NSWSC 785. If the court strikes out a defence, in whole or in part, the defendant must pay the plaintiff’s costs of the proceedings in relation to those matters in respect of which the defence has been struck out, unless the court otherwise orders: UCPR r 42.20(2).

While these rules do not create a presumption, and are merely default provisions, they reflect the general rule that an unsuccessful party should pay the costs of a successful party, and the discontinuing party must make an application to be relieved of the obligation to pay costs, and show some sound positive ground or good reason for departing from the default position: Fordyce v Fordham (2006) 67 NSWLR 497 at [84]; Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 at [53]–[54] and [69]–[74] (in which the court also discussed circumstances in which a court might or might not depart from the consequence provided by the rule: at [56]–[63] and [75]–[81]); Wallace v McMillan Investment Holdings Pty Ltd [2024] NSWCA 106 at [24]–[25] (in which the Court of Appeal found no error in the primary judge’s reliance on a “supervening event” of a partial settlement between the parties to depart from the ordinary order as to costs when parts of the plaintiff’s claims against the unrepresented party were dismissed); Ralph Lauren 57 Pty Ltd v Byron Shire Council [2014] NSWCA 107 at [21]–[29]. The discretion to “otherwise order” may be exercised where the discontinuing party has obtained practical extra-curial success; but will generally not be exercised where the plaintiff effectively abandons its claim: Re The Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624; Cummins v Australian Jockey Club Ltd [2009] NSWSC 254 at [22]. Unsatisfactory conduct of the discontinued proceedings, such as failure to comply with case management requirements (Palmer v Gold Coast Newspapers Pty Ltd [2013] QSC 352) or commencing the abandoned proceedings in circumstances amounting to an abuse of process (Packer v Meagher [1984] 3 NSWLR 486 at 500) may found an order that the costs of the defendant be paid on the indemnity basis: see [8-0130].

Where proceedings are commenced in a court contrary to a contractual provision for arbitration or alternative dispute resolution, the proceedings may be stayed or dismissed and the plaintiff ordered to pay the costs: Haniotis v The Owners Corporation Strata Plan 64915 (No 2) [2014] NSWDC 39, and the cases summarised there. As to whether this extends to indemnity costs, see [8-0130].

Where proceedings are resolved by compromise without a hearing on the merits, but the parties cannot agree on the question of costs, courts avoid embarking on a trial to determine only the question of costs, and ordinarily will make no order as to costs, with the intent that each party bears its own costs, unless it appears that one party has effectively capitulated, or that one party has acted unreasonably in bringing or defending the proceedings: Re The Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624; Harkness v Harkness (No 2) [2012] NSWSC 35 at [16]. 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 which party would have succeeded: Ferguson v Hyndman [2006] NSWSC 538; see also Newcastle Wallsend Coal Co Pty Ltd v Industrial Relations Commission of NSW [2006] NSWCA 129; Indyk v Wiernik [2006] NSWSC 868; Oberlechner v Watson Wyatt Superannuation Pty Ltd [2007] NSWSC 1435 at [9]–[10]; Foley v Australian Associated Motor Insurers Ltd [2008] NSWSC 778; Muhibbah Engineering (M) BHD v Trust Company Ltd [2009] NSWCA 205.

Where the plaintiff succeeds against one or more defendants but fails against others, application of the general rule that costs follow the event would require the plaintiff to pay the costs of the successful defendant(s), despite having won the case. While this may sometimes be appropriate, there are circumstances in which the court may make special orders so that the costs of the successful defendant(s) are ultimately borne, indirectly or directly, by the unsuccessful defendant/s: Gould v Vaggelas (1985) 157 CLR 215. A “Bullock order” requires the unsuccessful defendant(s) to reimburse the plaintiff for any costs the plaintiff has to pay to the successful defendant(s): Bullock v London General Omnibus Company [1907] 1 KB 264; (see Precedent 8.3 at [8-0200]). A “Sanderson order” requires the unsuccessful defendant/s to pay the costs of the successful defendant/s, leaving the plaintiff out of the process entirely, and has obvious advantages for a plaintiff in cases of an insolvent unsuccessful defendant, as well as eliminating administrative and procedural steps: Sanderson v Blyth Theatre Co [1903] 2 KB 533; Coombes v Roads and Traffic Authority (No 2) [2007] NSWCA 70 at [42]; see Precedent 8.4 at [8-0200].

Bullock and Sanderson orders should only be made where it was reasonable and proper for the plaintiff to join the defendant(s) against which it failed: Gould v Vaggelas at 230, 247 and 260; Stevedoring Industry Finance Committee v Gibson [2000] NSWCA 179, citing Lackersteen v Jones (No 2) (1988) 38 NTLR 101; Roads and Traffic Authority of NSW v Dederer (2007) 234 CLR 330 at [176]–[193], [296]–[299]; Nominal Defendant v Swift [2007] NSWCA 56; Council of the City of Liverpool v Turano (No 2) [2009] NSWCA 176 at [15]. That requirement will typically be satisfied where claims against two defendants are interdependent, or where it is necessary to join both in circumstances where only one may be liable. Conversely, it will not be satisfied where the successful defendant is joined only for the purpose of spreading the potential net of liability so as to obtain an additional defendant who might be able to afford to pay: Raulfs v Fishy Bite Pty Ltd [2012] NSWCA 135 at [105]–[111]. However, there is no additional requirement that the causes of action must be substantially connected or interdependent: Nationwide News Pty Ltd v Naidu (No 2) [2008] NSWCA 71 at [16]–[18]; ACQ v Cook (No 2) (2008) 72 NSWLR 318.

A second precondition is that there must also have been something in the conduct of the unsuccessful defendant that makes it appropriate to make the order: Gould v Vaggelas at 230 per Gibbs CJ; Sved v Council of the Municipality of Woollahra (1998) NSW Conv R 55-842 at 56,605; Stevedoring Industry Finance Committee v Gibson [2000] NSWCA 179, citing Lackersteen v Jones (No 2) (1988) 38 NTLR 101; Almeida v Universal Dye Works Pty Ltd (No 2) [2001] NSWCA 156; Coombes v Roads and Traffic Authority (No 2) at [9]ff; Council of the City of Liverpool v Turano (No 2) [2009] NSWCA 176 at [15]; Stephens v Giovenco (No 2) [2011] NSWCA 144 at [18]; Sneddon v Speaker of the Legislative Assembly [2011] NSWSC 842 at [36], citing Furber v Stacey [2005] NSWCA 242 at [116]–[117]; Simmons v Rockdale City Council (No 2) [2014] NSWSC 1275. This requires that the unsuccessful defendant have done something, beyond a mere denial of liability, that makes it fair to impose on it 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) [2009] NSWCA 257 at [15]–[27], citing Roads and Traffic Authority v Palmer (No 2) [2005] NSWCA 140 at [35]. This “something more” need not amount to “misconduct” but it must be conduct sufficient to make it fair to visit the liability on it: Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [29]. Examples of such conduct can include the making of a “very reasonable” offer to the unsuccessful defendant, no offer being made by the unsuccessful defendant, and the length and costs of the proceedings had the unsuccessful defendant not defended the case: Stephens v Giovenco; Dick v Diovenco (No 2) [2011] NSWCA 144 at [19]. However it can include conduct that predates joinder, so long as that conduct is relevant to the fairness, or reasonableness, of making a costs order against the unsuccessful defendant: Almeida v Universal Dye Works Pty Ltd (No 2) at [33].

Where a defendant has identified a concurrent tortfeasor (for the purposes of 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 succeeds against the alleged concurrent tortfeasor: Dymocks Book Arcade Pty Ltd v Capral Ltd [2010] NSWSC 195 at [9]; Sydney Water Corporation v Asset Geotechnical Engineering Pty Ltd (No 2) [2013] NSWSC 1604 at [27]–[29].

A defendant/cross-claimant who fails against a cross-defendant, whether or not it has succeeded against the plaintiff, is generally ordered to pay the cross-defendant’s costs: Dal Pont at [11.33].

Where the plaintiff fails against the defendant, and the defendant’s cross-claim against a third party consequently fails, the plaintiff may, but will not necessarily, be ordered to pay the cross-defendant’s costs, or indemnify the defendant in respect of the costs it is required to pay the cross-defendant. However, although a defendant and a cross-defendant are adversarial parties, and a plaintiff resisting an order for costs on the basis of identity of their interests has an evidentiary onus to negative any conflict of interests, where there is a substantial identity of interests, the cross-defendant should co-operate with the defendant to avoid duplication of effort and costs, and the plaintiff may be relieved of part or all of those costs if the cross-defendant fails to do so: Furber v Stacey [2005] NSWCA 242 at [57]–[59] (cross-defendant awarded only one-quarter of costs against an unsuccessful plaintiff).

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 real cause of the litigation: Vameba Pty Ltd v Markson [2008] NSWCA 266.

Legal costs may only be recovered by a party in relation to costs of legal practitioners. However, 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 [2003] 2 All ER 356, but not travelling expenses or loss of earnings: Cachia v Hanes (1994) 179 CLR 403; Dal Pont 7.28–7.29. Ultimately, this is a question of quantification on assessment, not one of liability (for costs), and unless it is apparent that there could be no entitlement, there is no reason why an order for costs should not be made in favour of a successful self-represented litigant, leaving it to the assessor to quantify the precise entitlement.

Previously, legal practitioners acting on their own behalf in legal proceedings were not in the same position as a litigant in person, under the “Chorley exception”: London Scottish Benefit Society v Chorley, Crawford and Chester (1884) 13 QBD 872, considered in Guss v Veenhuizen (No 2) (1976) 136 CLR 47; see also Wang v Farkas (2014) 85 NSWLR 390; Ada Evans Chambers Pty Ltd v Santisi [2014] NSWSC 538 at [24]–[34]. However, in Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29, the High Court said that the exception was not only anomalous, but exalted the position of legal practitioners in the administration of justice to such an extent that it was an affront to the fundamental value of equality of all persons before the law. As such, it was held that the Chorley exception should not be recognised as a part of the common law of Australia.

However, in Spencer v Coshott (2021) 106 NSWLR 84, it was held that the abrogation of the Chorley exception by the High Court in Bell Lawyers Pty Ltd v Pentelow did not deny recovery of costs by a solicitor litigant who is represented by an incorporated legal practice of which he or she is the principal and the sole director and shareholder, because of the separate legal personality of an incorporated legal practice. In Atanaskovic v Birketu Pty Ltd (2023) 113 NSWLR 305, the majority (Kirk JA and Simpson AJA, Ward P dissenting) held that the High Court’s rejection of the Chorley exception also did not exclude partners of an unincorporated law firm from being entitled to recover costs for work done by the employed solicitors of that firm. As a matter of statutory construction, the court is bound to apply the meaning of the word “remuneration” as used in the definition of “costs” in Civil Procedure Act 2005, s 3(1). And, approaching the matter simply as a matter of common law principle, following the joint judgment and judgment of Gageler J in Bell, the “employed lawyer rule” involves an application of the general indemnity principle and there is no proper basis to exclude unincorporated law firms, uniquely, from the benefit of that rule and that principle: at [188], [213] and [308]–[309] (Kirk JA); Simpson AJA.

Ordinarily, a tutor for a party with disability is personally liable for any costs order against that party; indeed, one of the reasons why a tutor is required is so that there is a person answerable for costs: Yakmore v Handoush (No 2) (2009) 76 NSWLR 148 at [45]; Dal Pont at 22.68. However, although one of the reasons for the appointment of a tutor for a person with disability is to have a person on the record that is personally liable for the costs of the litigation, that is not the sole function or purpose of the appointment of the tutor, which includes the protection of the person with the disability and of the processes of the court: Smith v NRMA Insurance Ltd [2016] NSWCA 250 at [29]–[36], citing NSW Ministerial Insurance Corporation v Abuafoul (1999) 94 FCR 247 at [27]–[29], and Goddard Elliott (a firm) v Fritsch [2012] VSC 87 at [552]. An order protecting a tutor from personal liability for costs may be made as an incidental term of an order appointing a tutor under UCPR r 7.18(1)(b), or pursuant to the power conferred by UCPR r 2.1, or in the inherent power in the parens patriae jurisdiction. Under UCPR r 42.24, if the court appoints a solicitor to be the tutor of a person under legal incapacity in connection with any proceedings, the court may order that the costs incurred by the solicitor in performance of the duties of tutor be paid by the parties to the proceedings or any of them, or out of any fund in court in which the person under legal incapacity is interested. The court may make orders for the repayment or allowance of the costs as the case requires.

Under UCPR r 42.25, a person who is or has been a party to proceedings in the capacity of trustee or mortgagee is entitled to be paid his or her costs of the proceedings, in so far as they are not payable by any other person, out of the fund held by the trustee or the mortgaged property. The court may, however, otherwise order if the trustee or mortgagee has acted unreasonably, or the trustee has in substance acted for its own benefit rather than for the benefit of the fund.

If a legal personal representative acts properly, their costs and/or the costs which they are ordered to pay in an unsuccessful defence of the estate may be ordered to be paid out of the estate: Re Estate of Paul Francis Hodges Deceased; Shorter v Hodges (1988) 14 NSWLR 698 at 709–710; see generally Halsbury’s Laws of England, 4th ed, vol 17, pars 917–919, vol 37, par 721. However, if, in conducting a proceeding, the executor is not acting merely in that capacity but in substance prosecuting or defending his or her own interests, that principle does not apply: Nowell v Palmer (1993) NSWLR 574 at 581–582. These principles apply not only to personal representatives but to fiduciaries generally: Miller v Cameron (1936) 54 CLR 572 at 578–579; Lewis v Nortex Pty Ltd (in liq) [2006] NSWSC 480 at [47].

An executor who commences or defends an action in the capacity of executor is ordinarily entitled to be indemnified out of the estate for the costs incurred in doing so, even if the litigation is unsuccessful, the executor’s conduct is found to have been mistaken, and the other party in the litigation is held to be entitled to an order for costs: Drummond v Drummond [1999] NSWSC 923 at [43]. As a rule, a trustee is allowed their costs out of the trust estate if their conduct has been honest, even though it may have been mistaken: Miller v Cameron at 578; In re Beddoe; Downes v Cottam [1893] 1 Ch 547 at 562; see also Re Weall; Andrews v Weall (1889) 42 Ch D 674 at 677, where Kekewich J spoke of the “tenderness which the Court is anxious to exhibit towards trustees honestly exercising discretion in discharge of their duties, often difficult and still more often thankless”, and Re Jones; Christmas v Jones [1897] 2 Ch 190 at 197, where the same judge said that “a man who fulfils the difficult duties of an administrator, executor or trustee is, in common sense and common justice, entitled to be recouped to the very last penny everything that he has expended properly — that is to say, without impropriety — in his character of administrator, executor or trustee”.

However, this does not apply where the executor has acted improperly: Drummond v Drummond at [44]–[45]; In re Beddoe; Downes v Cottam [1893] 1 Ch 547 at 562. Cases of impropriety include an executor taking or defending proceedings in breach of trust, or conducting the proceedings in such a way that the court, on a general view of the case, regards the executor’s conduct as “not honestly brought forward”, or “where the claim is of monstrous character, that is, one which no reasonable man could say ought to have been put forward”: Re Jones [1897] 2 Ch 190 at 198; or where the trustees acted without “reasonable prudence”: Re Weall at 678–679.

The rule relates only to costs incurred in the administration and distribution of the estate, as distinct from costs incurred by an executor in furtherance of a personal interest: Drummond v Drummond at [47]; Miller v Cameron at 578–579; Re Jones [1897] 2 Ch at 197–198; Plimsoll v Drake (No 2) (unrep, 8/6/95, SCT). Executors who pursue personal interests in litigation are “not fighting for the estate any more than if they were not executors at all”: Skrimshire v Melbourne Benevolent Asylum (1894) 20 VLR 13 at 18. Thus an executor who prosecutes or defends proceedings in the capacity of creditor or beneficiary of the estate rather than in the capacity as executor is not entitled to recoup the costs of the litigation from the estate simply because they are also an executor. A trustee who defends an action for their removal may be representing their own interests and not those of the trust estate: Miller v Cameron at 578–579, though this is not necessarily invariably so; likewise one who unsuccessfully demands a release before distributing the trust estate to the beneficiaries: Plimsoll v Drake (No 2).

Analogous principles apply to liquidators in relation to proceedings in which they participate in their own name: Re Buena Vista Motors Pty Ltd (In Liq) and the Companies Act [1971] 1 NSWLR 72, in which Street J ordered a liquidator who brought an unsuccessful claim to pay the opponents’ costs but to be indemnified out of the company’s assets since, although “the claim had been unsuccessful, it could not be characterized as frivolous or vexatious. Nor could the liquidator be said to have been acting unreasonably in bringing the claim forward for litigation” (at 73). See also Lewis v Nortex Pty Ltd (in liq) [2006] NSWSC 480 at [47]; the same principles apply also in respect of proceedings which they conduct in the name of the company: Mead v Watson as Liquidator for Hypec Electronics [2005] NSWCA 133 at [11] 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) [2011] NSWCA 302. A liquidator whose determination is challenged and who, rather than taking no active part in the proceedings, actively defends his or her decision, becomes an adverse party and is liable for costs: Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332 at 341; Lewis v Nortex Pty Ltd (in liq) at [34].

A liquidator who successfully contests an allegation of impropriety is entitled to costs out of the company funds, to the extent that they are not recoverable from the other party: National Trustees Executors and Agency Co of Australasia Limited v Barnes (1941) 64 CLR 268 at 279; Expo International Pty Ltd v Chant (No 2) (1980) 5 ACLR 193 at 197–198; Lewis v Nortex Pty Ltd (in liq) at [49].

Ordinarily, a submitting party who genuinely takes no part in the proceedings will not be ordered to pay costs: Highland v Labraga (No 3) [2006] NSWSC 871 at [19]–[23]. However, this may be otherwise where the submitting party does in fact take some active part in the proceedings: Hillig v Darkinjung Pty Ltd (No 2) [2008] NSWCA 147 at [66]; Hornsby Shire Council v Valuer General of NSW [2008] NSWSC 1281 at [3]–[8]; see also Mahenthirarasa v State Rail Authority of NSW (No 2) (2008) 72 NSWLR 273, where the submitting party, while not actively opposing the orders sought, did not consent to them and thus occasioned the incurring of additional costs and was ordered to pay costs; cf Lou v IAG Limited [2019] NSWCA 319 where, in similar circumstances, by majority, no costs order was made. Similarly, in an application for preliminary discovery, it may be appropriate not to order costs against an unsuccessful but “innocent” respondent who does not oppose the application: Totalise plc v Motley Fool Ltd [2002] 1 WLR 1233; Bio Transplant Inc v Bell Potter Securities Ltd [2008] NSWSC 694; cf Airways Corporation of New Zealand v Koenig [2002] NSWSC 521, where the application was opposed.

The court may make an order for costs against a relator: Wentworth v Attorney-General (NSW) (1984) 154 CLR 518 at 524.

An order may be made against an amicus curiae in an exceptional case: Dal Pont at 22.75-76.

All participants in interpleader proceedings may claim their costs from the fund, where they do no more than present evidence and reasonable arguments as to how that fund should be distributed. Where their involvement goes further and amounts to raising issues that add to the costs of the litigation, on which they are unsuccessful, they may be deprived of costs on those issues, or may be ordered to pay costs: Westpac Banking Corp v Morris (unrep, 2/12/98, NSWSC).

While courts are reticent to order costs against government bodies such as legal aid providers, such parties may be subject to costs orders in an extreme case: Collins and the Victorian Legal Aid Commission (1984) FLC ¶91-508; Marriage of Millea and Duke (1992) 122 FLR 449.

The Supreme Court has inherent power to make costs orders against legal practitioners, derived from its supervisory jurisdiction: Myers v Elman [1940] AC 282; Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300 at [85]–[86]; Re Felicity, FM v Secretary Department of Family and Community Services (No 4) [2015] NSWCA 19 at [18]–[20]. The object of the court’s inherent power is primarily compensatory, so as to indemnify or compensate, and thus protect, the party or parties who have suffered: Dal Pont at 23.2; Myers v Elman at 289; Hartnett t/a Hartnett Lawyers v Bell (2023) 112 NSWLR 463 at [141]–[142] (in which the appellant was found to have engaged in exorbitant overcharging and had a history of evasion and threats of counter-suit). Such general jurisdiction is exercisable against an Australian lawyer from interstate providing legal services in NSW: Council of the NSW Bar Association v Siggins [2021] NSWCA 40 at [137]–[138]; Hartnett at [86]. While the principles that inform the exercise of this inherent power should not be conflated with those relevant to the statutory powers of the court contained in CPA s 99 and Legal Profession Uniform Law Application Act 2014, Sch 2, to order a legal practitioner to pay a party’s costs (Whyked Pty Ltd v Yahoo 7 Pty Ltd [2008] NSWSC 477 at [12]–[20]), similar circumstances are likely to be relevant in both cases. As to the continued existence of the Supreme Court’s inherent power, see Re Felicity; FM v Secretary, Department of Family and Community Services (No 4) [2015] NSWCA 19 at [18]–[20]; King v Muriniti (2018) 97 NSWLR 991.

Section 99 empowers the court to make a “wasted costs order” against a legal practitioner personally, where costs have been incurred by serious neglect, incompetence or misconduct of the practitioner, or improperly or without reasonable cause in circumstances for which the practitioner is responsible. This statutory power is available to the District Court and Local Court, which do not enjoy inherent jurisdiction, as well as to the Supreme Court : Knaggs v J A Westaway & Sons Pty Ltd (1996) 40 NSWLR 476 at 485.

As to the construction of s 99 and the “voluminous case law” with respect to the making of costs orders against legal practitioners in different statutory contexts (which was partially cautioned against), see Re Felicity at [21]–[24] and Nadarajapillai v Naderasa (No 2) [2015] NSWCA 209 at [7]–[11]. The court has a right and a duty to supervise the conduct of its solicitors, and to visit with consequences any conduct of a solicitor which is of such a nature as to tend to defeat justice in the very cause in which the solicitor is engaged professionally. The jurisdiction is exercised where it is demonstrated that the solicitor has failed to fulfil their duty to the court and to realise their duty to aid in promoting in their own sphere the cause of justice. The order is for payment of costs thrown away or lost because of the conduct complained of and is frequently exercised in order to compensate the opposite party in the action. Such an order may be made on the indemnity basis: Mitry Lawyers v Barnden [2014] FCA 918 at [112].

Where a solicitor is employed by another, the client’s retainer is with the employer, and regardless of who is on the record, the firm may be liable: Kelly v Jowett (2009) 76 NSWLR 405; at [69]–[71]; Re Bannister & Legal Practitioners Ordinance 1970-75; Ex Parte Hartstein (1975) 5 ACTR 100; Re Fabricius & McLaren and Re Legal Practitioners Ordinance 1970 (1989) 91 ACTR 1; Knaggs v J A Westaway & Sons Pty Ltd. Thus the jurisdiction may be exercised even where there has been no personal complicity by the solicitor charged: Kelly v Jowett at [61]–[62], [65]; Re Jones (1870) 6 Ch App 497; Myers v Elman [1940] AC 282; Harley v McDonald [2001] UKPC 18; [2001] 2 AC 678.

Section 99 is engaged only by egregious conduct; mere negligence, incompetence or misconduct is insufficient to satisfy the test in s 99: Muriniti v Kalil [2022] NSWCA 109 at [45], [82]. A three-stage approach applies: first, is the practitioner’s conduct such as to satisfy the test; secondly, if so, did that conduct cause the applicant to incur unnecessary costs; and thirdly, if so, is it in all the circumstances just to order the legal practitioner to compensate the applicant for the whole or any part of the relevant costs: Kelly v Jowett, above, at [60]; Muriniti v Kalil at [45].

It should not be accepted that simply by making a claim for costs against a solicitor, a burden of proof is placed on the solicitor to deny misconduct: Gokani v Visvalingam Pty Ltd [2023] NSWCA 80 at [56].

Conduct which has been held to justify an order that a practitioner personally pay costs includes:

Breach of the practitioner’s duty to ensure proceedings are conducted efficiently and expeditiously may sound in a personal costs order: Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2) [2009] NSWCA 12 at [8]–[11]; Ashmore v Corporation of Lloyds [1992] 2 All ER 486; Whyte v Brosch (1998) 45 NSWLR 354 (late submissions). 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 obligations imposed by 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 at [208]–[210]. The obligations of legal practitioners to conduct litigation reasonably are described in Ken Tugrul v Tarrants Financial Consultants Pty Ltd ACN 086 674 179 (No 5) [2014] NSWSC 437 at [64]–[77].

Before such an order is made, the practitioner must first be given a reasonable opportunity to be heard: CPA s 99(2). The court may refer the matter to a costs assessor for inquiry and report: CPA s 99(3).

It is usually appropriate to defer the question of any personal costs order until the conclusion of the trial in order to avoid the potential for creating a conflict that may be to the disadvantage of a party in the conduct of the proceedings: Muriniti v Kalil, above, at [46]–[48], referring to Lemoto v Able Technical Pty Ltd, above; Redowood Pty Ltd v Goldstein Technology Pty Ltd [2004] NSWSC 515 at [35] and Saadat v Commonwealth of Australia (No 2) [2019] SASC 75 at [24].

Schedule 2, cl 5 LPULAA, which applies in all courts, permits the making of costs orders against solicitors personally where legal services are 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 v Able Technical Pty Ltd at [130], and the due administration of justice should not be impaired by the “too liberal exercise” of this power: Lemoto at [126]. Both Sch 2, cl 5 LPULAA and s 99 CPA rely on an objective test. A finding that a solicitor took a step in litigation without a belief as to reasonable prospects of success is an extremely serious finding. The relevant factor is the practitioner’s belief in a fact, rather than the fact itself; it is no part of a legal practitioner’s role in litigation to form concluded views as to the existence of facts or the outcome of proceedings. The precise question to be addressed is the solicitor’s state of knowledge: Gokani v Visvalingam Pty Ltd at [43], [52], [54]. 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 [2008] NSWCA 178 at [86]–[88]. Practitioners will be exposed to liability only 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 [131]–[132], approving the “fairly arguable” test proposed by Barrett J in Degiorgio v Dunn (No 2) (2005) 62 NSWLR 284.

However, the requirement that the practitioner have a “reasonable belief” is a continuing one: see Lemoto at [127], so that if circumstances change as a result of which the belief becomes no longer reasonable, then continuing to prosecute a claim may attract liability: Eurobodalla Shire Council v Wells [2006] NSWCA 5 at [31] (order made under the prior equivalent of this clause: s 348 of the Legal Profession Act 2004, where barrister and solicitor were found “reckless” in continuing to prosecute an appeal; see also Nadarajapillai v Naderasa (No 2) at [17].

The practitioner must be afforded procedural fairness before such an order is made: Lemoto at [151]ff; see also Mitry Lawyers v Barnden at [43]. The appropriate procedure for the making of an application and the giving of notice to the practitioner, is described in Lemoto at [8]–[10] and [143]–[149] and involves a three-stage process of some complexity: De Costi Seafoods (Franchises) Pty Ltd v Wachtenheim (No 5) [2015] NSWDC 8 at [42]–[45].

Absent special order, a costs order implicitly contemplates costs assessed on the “ordinary” basis. On the ordinary basis, a party is entitled to recover “a fair and reasonable amount” for the legal costs and disbursements that were reasonably incurred in the conduct of the proceedings: LPULAA, ss 74–80; see also UCPR r 42.2 and CPA s 3.

The court may order that costs be assessed on the indemnity basis. “Indemnity basis” means the basis set out in r 42.5, which, in any case other than where costs are payable out of property held or controlled by a person who is party to the proceedings, provides that all costs are to be allowed other than those that appear to have been unreasonably incurred or appear to be of an unreasonable amount.

The discretion to award indemnity costs must be exercised judicially: Mead v Watson [2005] NSWCA 133 at [8] and with caution: Leichhardt Municipal Council v Green [2004] NSWCA 341 at [47]; Ng v Chong [2005] NSWSC 385 at [13]. For those reasons the discretion should be the subject of careful reasoning: Degmam Pty Ltd (In Liq) v Wright (No 2) [1983] 2 NSWLR 354. Although it has been said that there is no fixed rule or rationale as to when an indemnity order might be made (Harrison v Schipp [2001] NSWCA 13 at [139]), except that it requires a “sufficient or unusual feature” (Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233–234), such an order is appropriate where the party entitled has been wantonly or recklessly caused to incur costs. That will often be the case where the party liable is guilty of some “relevant delinquency”: Oshlack v Richmond River Council (1998) 193 CLR 72 at [44]. 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] NSWSC 199 at [24]; Liverpool City Council v Estephan [2009] NSWCA 161 at [95]. As to the relevant principles relating to the making of indemnity costs orders, see the summary in In the Matter of Indoor Climate Technologies Pty Ltd [2019] NSWSC 356 at [8]. An award of indemnity costs remains compensatory and not punitive: Hamod v State of NSW [2002] FCAFC 97. A formal warning of an intention to claim indemnity costs may enhance the prospects of obtaining one: Huntsman Chemical Co Aust Ltd v International Pools Aust Pty Ltd (1995) 36 NSWLR 242, citing Insurers’  Guarantee Fund NEM General Insurance Association Ltd (In Liq) v Baker (unrep, 10/2/95, NSWCA). Such warnings should not be lightly made.

The power to make an indemnity costs order is an important case management tool, as it promotes the making of settlement offers and discourages the litigation of cases where there are no reasonable prospects of success (Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353 at [111]), or where a reasonable offer of settlement has been made. The following are the most common circumstances in which such orders are made, but the categories are not closed: Colgate-Palmolive Pty Ltd v Cussons at 257.

In certain circumstances, generally involving a risk that a costs order against the plaintiff, if unsuccessful, may not be enforceable, a defendant (or cross-defendant) may apply for security for costs. At the conclusion of the litigation, the security is paid out to the party entitled to costs: The “Bernisse” and The “Elve” [1920] P 1; Huon Shipping and Logging Co Ltd v South British Insurance Co Ltd [1923] VLR 216; see also Kiri Te Kanawa v Leading Edge Events Australia Pty Ltd [2007] NSWCA 187 as explained by Hamilton J in Lym International Pty Ltd v Chen [2009] NSWSC 167 at [18]–[20]); Dal Pont at 28.65. A defendant intending to apply for security for costs should generally do so promptly after the institution of proceedings. For security for costs, see [2-5900]ff.

In some classes of litigation, of which matrimonial proceedings are the paradigm, a party unable to fund proceedings may apply for a preliminary costs order, to place them in funds to enable them to conduct the proceedings. Such an order is taken into account in the final relief: see Breen v Breen (unrep, 7/12/90, HCA); Parker v Parker (unrep, 4/8/92, NSWSC).

The disposition of an interlocutory application is usually a discrete event in proceedings, and typically involves consideration of the costs of the application. For interlocutory costs orders, see [8-0150].

The adjournment or abortion of a trial may require consideration of the costs thereby occasioned. 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) [2004] NSWCA 427 at [30]; Jaycar Pty Ltd v Lombardo [2011] NSWCA 284 at [62]. However, 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 [2010] WASCA 158 at [15]; Brittain v Commonwealth of Australia (No 2) at [33]. Whether any special costs order is 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] NSWDC 151.

In a straightforward case, the trial judge may deal with the question of costs in the substantive judgment. Such a course is desirable, where the prima facie costs order is fairly clear, because it may avoid the time and costs of a further hearing on the question of costs. Such an order does not preclude a party from seeking a special or different costs order (such as an indemnity order, based on an offer of compromise of which the court will not previously be aware): costs orders may be reconsidered on application made before (under UCPR r 36.16(1)) or within 14 days after (under r 36.16(3A)) the order is entered, and reconsideration may be appropriate if the order was made without the parties having had a proper opportunity to make relevant submissions before the order was made: Harris v Schembri (unrep, 7/11/95, NSWSC). A costs order may also be varied in an appropriate case under the “slip rule”, on application under r 36.17: Roads and Traffic Authority v Palmer (No 2) [2005] NSWCA 140 at [25]. However, where there is room for argument about the costs order, or a party seeks an opportunity to be heard, it is prudent expressly to reserve liberty to apply, within a specified time, to set aside or vary the costs order.

If the proper costs order is not prima facie apparent, or apportionment may be appropriate, or if the parties have foreshadowed that they wish to be heard on the question of costs, then after giving judgment in the proceedings it will be appropriate to proceed to hear, then or at a later time, submissions on the question of costs. Trial judges should not defer hearing or determining costs applications merely because an appeal is contemplated or pending. Where there is a dispute as to the appropriate costs order, the judge should rule on the issue, including any application for indemnity costs, and it should not be deferred pending the outcome of a foreshadowed appeal: Dunstan v Rickwood (No 2) [2007] NSWCA 266 at [54]. Stays of costs assessments may be ordered if there is doubt as to whether costs, if paid, could be repaid if the appeal is successful and there are reasonably arguable grounds of appeal: Salfinger v Niugini Mining (Australia) Pty Ltd (No 4) [2007] FCA 1594 at [8].

Where the question of costs is not addressed and determined, the court is not functus officio in respect of costs, and an order for costs can be made after judgment: NSW Ministerial Insurance Corporation v Edkins (1998) 45 NSWLR 8. Costs orders against non-parties may also be made after the entry of judgment between the parties: Caboolture Park Shopping Centre Pty Ltd (in liq) v White Industries (Qld) Pty Ltd (No 1) (1993) 45 FCR 224; Akedian Co Ltd v Royal Insurance Australia Ltd [1999] 1 VR 80 at 98; Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) [2004] UKPC 39; [2005] 1 NZLR 145; [2005] 4 All ER 195 (PC).

The typical orders in a straightforward case are, (where the plaintiff succeeds) that the defendant pay the plaintiff’s costs; or (where the defendant succeeds) that the plaintiff pay the defendant’s costs (or that there be judgment for the defendant, with costs; or that the proceedings be dismissed, with costs): see Precedent 8.1 and 8.2 at [8-0200]. For orders where there are multiple defendants, see [8-0080] and Precedents 8.3, 8.4 and 8.5 at [8-0200].

It is implicit in an order that Party B pay Party A’s costs that the quantum, unless agreed, be determined by assessment, and quite unnecessary to specify that that the costs be “as agreed or assessed”. But because, absent agreement, the costs must be quantified by a costs assessor, it is important that the costs the subject of the order, whether interlocutory or final, be described in clear and certain terms, in order 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.

Unless a special order is made, the costs of any application or other step in proceedings form part of the general costs in the proceedings. A general costs order thus includes any reserved costs, and any in respect of which no previous order has been made, except where the court has specifically made “no order as to costs” UCPR r 42.7, and see Dal Pont at [6.21]–[6.27]. A general costs order does not disturb or include previous special costs orders, and if it is intended to vary a previous interlocutory costs orders, that must be expressly stated.

A general costs order for the “costs of the proceedings” includes the costs of a court-ordered mediation under CPA s 28: see NSW Civil Procedure Handbook at [r Pt42.290].

Common interlocutory costs orders include:

Unless the court otherwise orders (for example, by specifying “such costs to be payable forthwith”), the costs of an interlocutory application are not payable until the end of the proceedings: UCPR r 42.7(2). One reason for this is to reduce the likelihood of multiple costs assessments in respect of the one proceeding, though the rule does not preclude assessment (as distinct from enforcement) in the interim: His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand v The Macedonian Orthodox Community Church St Petka Inc (No 2) at [49], observing that the rule does not prevent the parties from taking “steps to quantify any such order, but that is a different matter to the question of enforceability”: Wende v Horwath (NSW) Pty Ltd (2014) 86 NSWLR 674 at [5]; Eastmark Holdings Pty Ltd v Kabraji (No 2) [2012] NSWSC 1255 at [43]; cf Zisti v Bartter Enterprises Pty Ltd [2013] NSWCA 146 at [73]; Sturesteps v Khoury [2015] NSWSC 1041 at [209]; Mundi v Hesse [2018] NSWSC 1548 at [59]–[62].

The court may “otherwise order” that an interlocutory costs order be payable forthwith: Solarus Products v Vero Insurance (No 4) [2013] NSWSC 1012; Fiduciary Ltd v Morningstar Research Pty Ltd [2004] NSWSC 664 at [171]–[173]; Australian Securities and Investments Commission v Rich [2003] NSWSC 297. The discretion may be exercised at any time prior to the conclusion of the proceedings: Showtime Touring Group Pty Ltd v Mosley Touring Inc [2013] NSWCA 53 at [29].

The discretion to order the immediate payment of interlocutory costs is wide; “[i]n the end, the demands of justice are the only determinant”: Fiduciary Ltd v Morningstar Research Pty Ltd at [7]; Gattelleri v Meagher [1999] NSWSC 1279 at [9]; Plaza West Pty Ltd v Simon’s Holdings (NSW) Pty Ltd (No 2) [2011] NSWSC 556 at [13]; Pavlovic v Universal Music Australia Pty Ltd (No 2) [2016] NSWCA 31. In considering whether to exercise its discretion to order otherwise, the Court must take into account the matters in CPA ss 56 and 57 and may also have regard to the matters set out in CPA s 58(2)(b), including the extent to which the parties have acted expeditiously and assisted the Court in facilitating the just, quick and cheap resolution of the real issues in dispute: Bevillesta Pty Ltd v D Tannous No 2 Pty Ltd [2010] NSWCA 277 at [37]–[39]; Penrose v Fernandez [2024] NSWSC 1207 at [31]–[35]. The practice that interlocutory costs orders were payable only upon completion of the proceedings is a relic of times when personal injury litigation formed the overwhelming business of the courts, and is more commonly departed from in commercial litigation. Because an order that costs be paid forthwith is an exception, it will only be made in a case that is out of the ordinary, as such an order “has the capacity to stultify proceedings particularly brought by persons with limited resources, and also has the risk of operating unfairly where, over the course of the proceedings, there may be orders which are made that one or other party should pay the costs of the other from time to time”: In the matter of Elsmore Resources Ltd [2014] NSWSC 1390 at [5]; Hargood v OHTL Public Co Ltd (No 2) [2015] NSWSC 511 at [8]. The court must consider whether the costs in question should be paid prior to the conclusion of the 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) [2005] NSWCA 373 at [7].

The discretion to “otherwise order” that interlocutory costs be payable forthwith has been exercised in a variety of circumstances, including:

Where the decision relates to the determination of a discrete or self-contained question: Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1 at [11]–[13]; Richards v Kadian [2005] NSWCA 373 at [6]–[7]. Examples include an unsuccessful application for summary judgment: Perpetual Trustee Co v McAndrew [2008] NSWSC 790; an application for discovery, or a Mareva order: McNamara Business and Property Law v Kasermidis (No 3) [2006] SASC 262; an unsuccessful application to administer interrogatories: Megna v Marshall [2005] NSWSC 1326 at [26]; an application for contempt: Ark Hire Pty Ltd v Barwick Event Hire Pty Ltd [2007] NSWSC 488 at [46]–[49]; a security for costs application: Young v Cooke (No 2) [2018] NSWSC 1787; and a successful application to restrain solicitors acting for the opponent: Chinese Australian Services Society Co-​Operative Ltd v Sham-​Ho [2012] NSWSC 241. Where non-parties have appeared in relation to challenges to subpoenas, 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) [2008] NSWSC 111 at [11]–[12].

Where the costs are significant and there is likely to be a delay in the conclusion of the proceedings: Fiduciary Ltd v Morningstar Research Pty Ltd at [11]–[13]; particularly if the receiving party is impecunious and the application diverted funds from the substantive cause: Reserve Rifle Club Inc v NSW Rifle Assn Inc [2010] NSWSC 351; Hardaker v Mana Island Resort (Fiji) Ltd (No 2) [2019] NSWSC 1100 at [24]–[25]. This may be the case where liability has been separately determined (under UCPR r 28.2): Herbert v Tamworth City Council (No 4) (2004) 60 NSWLR 476 at [30] (costs of hearing on liability payable forthwith where liability established but assessment of damages could be delayed for a decade).

Where the costs were incurred by unreasonable or unnecessary conduct: Fiduciary Ltd v Morningstar Research Pty Ltd at [11]–[13] (costs abnormally increased by service of very voluminous material at the last moment, the vast bulk of which was not referred to on the application); Vitoros v Raindera Pty Limited [2014] NSWSC 99 at [20] (multiple appearances necessitated by plaintiff's repeated defaults); Seven Network Ltd v News Ltd [2005] FCA 1630 at [8] (wrongful suppression of material documents unnecessarily incurring costs in defending a claim for legal professional privilege); Stokes v McCourt [2013] NSWSC 1014 at [164]–[165] (delays in conduct of the principal proceedings suggested that defendant was conducting a “war of attrition” through interlocutory disputes). The court will take into account the extent to which the parties have failed to facilitate the overriding purpose of the just, quick and cheap resolution of the real issues in the proceedings as required by CPA s 56, must take into account the matters set out in ss 56 and 57, and may have regard to the checklist in s 58(2)(b): Bevillesta Pty Ltd v D Tannous 2 Pty Ltd [2010] NSWCA 277 at [37]–[39]; Australian Securities and Investments Commission v Rich [2003] NSWSC 297 at [85]; Seven Network Ltd v News Ltd [2005] FCA 1630 at [8].

Where the costs order involves third parties, such as legal practitioners: See Bagley v Pinebelt Pty Ltd [2000] NSWSC 830 at [7] (wrongful lodgement of caveat by barrister); North South Construction Services Pty Ltd v Construction Pacific Management Pty Ltd [2002] NSWSC 286 at [35]–[36] (abuse of process by non-party).

Considerations that may tend against an “otherwise order” for costs to be payable forthwith include that the party is legally aided: Richards v Kadian (No 2) at [5], or that the final outcome is sufficiently uncertain that it is preferable to defer the question of costs to the trial judge, or to make costs of the interlocutory application costs in the cause: Megna v Marshall at [27]; Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1. Cases in which the court has declined to make a “forthwith” order include Cameron v Ofria [2007] NSWCA 37 at [12] (successful application to strike out cross claim, characterised as ordinary interlocutory application in the general course of proceedings); Hargood v OHTL Public Co Ltd (No 2) [2015] NSWSC 511 (failed application for stay and likely two years before conclusion of proceedings insufficient to depart from usual rule); Hall v Swan [2013] NSWSC 1758 at [11]–[15] (delay in service of expert reports); Eastmark Holdings Pty Ltd v Kabraji (No 2) [2012] NSWSC 1255 at [42]–[46] (several motions heard together, discretionary factors tending in both directions).

Where a party fails to pay a series of interlocutory costs orders that are payable forthwith, orders for a stay of proceedings under CPA s 67, security for costs and/or dismissal in the event of non-compliance with such orders may be made, but generally only in a special case, such as where the costs are substantial, or the failure to pay is unreasonable, or the party is acting vexatiously: Morton v Palmer (1882) 9 QBD 89; Re Wickham (1887) 35 Ch D 272; Graham v Sutton, Carden & Co [1897] 2 Ch 367; Trkulja v Dobrijevic (No 2) [2016] VSC 596 (13 costs orders totalling over $150,000); Kostov v Zhang; Kostov v Fairfax Media Publications Pty Ltd [2017] NSWDC 7 (Court of Appeal order for gross sum costs order of $15,000).

CPA s 98(1)(b), and UCPR r 42.4(1), provides that the court may “cap” costs, and this may be on the application of a party or of its own motion, and prospectively or retrospectively: Dal Pont 7.42–7.47; Nudd v Mannix [2009] NSWCA 327; Nicholls v Michael Wilson Partners Ltd (No 2) [2013] NSWCA 141. However, it is preferable that any such order be made prospectively and not retrospectively: Re Sherborne Estate (No 2); Vanvalen v Neaves (2005) 65 NSWLR 268 at [22]–[26], [31]; Dal Pont, 7.42–7.49; JP Hamilton, “Containment of costs: litigation and arbitration” (presentation, 1 June 2007); Practice Note SC Eq 7. This power has most often been exercised in proceedings where the parties are effectively litigating from the same purse, such as family provision or de facto property litigation.

Although the quantification of a costs order is usually left to the process of assessment, CPA 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.

The guiding principle as to the making of a lump sum costs order was outlined in Harrison v Schipp (2002) 54 NSWLR 738 at [22], namely, that the power “should only be exercised when the Court considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available”. Further principles were elaborated in Hamod v State of NSW [2011] NSWCA 375 at [813]–[820]. Together, these decisions are frequently cited as the leading statements of principle: see, eg, Colquhoun v District Court of NSW (No 2) [2015] NSWCA 54 at [6]–[7] (a decision of particular relevance in circumstances where there is inadequate evidence as to the appropriate sum to be ordered); South Western Sydney Local Health District v Gould (No 2) [2018] NSWCA 160 at [11]; Riva NSW Pty Ltd v Mark A Fraser and Christopher P Clancy trading as Fraser Clancy Lawyers (No 4) [2018] NSWCA 327 at [73].

Although courts were initially reluctant to make such orders, they have become increasingly common: Poulos v Eberstaller (No 2) [2014] NSWSC 235; Chaina v Presbyterian Church (NSW) Property Trust (No 26) [2014] NSWSC 1009 at [43]–[57]. At first they were utilised in “megalitigation” cases, where the assessment of costs would likely be protracted and expensive: Idoport Pty Ltd v NAB Ltd [2005] NSWSC 1273; see also Hancock v Rinehart (Lump sum costs) [2015] NSWSC 1640, but they are now made in a wide variety of circumstances, including where there has been contumelious conduct by a party (Zepinic v Chateau Constructions (Aust) Pty Ltd (No 2) [2013] NSWCA 227; Zepinic v Chateau Constructions (Aust) Ltd (No 2) [2014] NSWCA 99), or where the financial circumstances of the party ordered to pay costs are poor: Hamod v State of NSW at [813]–[820]; Constantinidis v Prentice (No 2) [2023] NSWSC 160 at [20]. Such orders are now increasingly made 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 [2008] WASC 36 at [5]; Lambert v Jackson [2011] FamCA 275 at [59] (lump sum costs orders made on an indemnity basis by reason of conduct of the litigation); Vumbaca v Sultana (No 2) [2013] NSWDC 195 at [7]; Colquhoun v District Court of NSW [2014] NSWCA 460 at [62] (appeal from Children’s Court, in which unsuccessful party had contested every point, and the costs order to which the other parties were entitled should not be rendered nugatory by the prospect of disproportionate disputation by him); Constantinidis v Prentice (No 2) at [19]–[20] (any costs assessment was likely to be lengthy, expensive and out of proportion to the modest amount of costs being assessed due to plaintiff’s repeated attempts to litigate the same matters over and over again); or even in litigation with no special features: Poulos v Eberstaller (No 2). However in O’Connor v O’Connor [2022] NSWSC 940 at [8]–[10] (cited in I C Pipes Pty Ltd v DGS Trading Pty Ltd (No 3) [2023] NSWSC 1146) Hammerschlag CJ in Eq noted that a gross sum costs order is not warranted simply because a party has a costs order and it will convenience that party not to have their costs subject to the formal process of assessment; there must be some good reason to make such an order.

When making a gross sum order, the court must determine a reasonable amount. The assessment of any lump sum to be awarded must represent a review of the successful party’s costs by reference to the pleadings and complexity of the issues raised on the pleadings; the interlocutory processes; the preparation for final hearing and the final hearing, but the court is not required to undertake a detailed examination of the kind that would be appropriate to taxation or formal costs assessment: Hamod v State of NSW at [819], citing Smoothpool v Pickering [2001] SASC 131; Harrison v Schipp (2002) 54 NSWLR 738 at 743; Hadid v Lenfest Communications Inc [2000] FCA 628 at [35]; Auspine Ltd v Australian Newsprint Mills Ltd [1999] FCA 673; see also Zepinic v Chateau Constructions (Aust) Ltd (No 2) [2014] NSWCA 99 at [28], [38]. This typically involves an assessment of the different components of the costs, including the rates and hours billed per lawyer, in the context of the litigation as a whole. An example of this can be seen in Zepinic v Chateau Constructions (Aust) Ltd (No 2), where junior counsel’s fees were deemed reasonable because the rates were not excessive, it was appropriate for counsel to be briefed to appear, and it was sensible and efficient for counsel to draft and settle written submissions; however, another lawyer’s fees were deemed to be disproportionately high, because the matter was neither large nor complex and it could and should have been resolved promptly by summary dismissal. See also Zarfati v McMillan [2023] NSWSC 839, in which the retention of a “very eminent senior counsel” was acknowledged to be a “luxury rather than a necessity” which was considered in the assessment of costs: at [24]–[25]. However, the way in which the plaintiff conducted the proceedings was accepted to have legitimately caused the defendants to undertake more lengthy and detailed preparation, and consequently incur greater costs, than might ordinarily be expected, and therefore the defendants should be compensated for the additional preparation and work undertaken on their behalf as a result of, or in response to, that conduct: at [27].

A discount (typically in the order of 10–20% in the case of an indemnity order, and 30–35% in the case of a party/party order) is usually applied when calculating a gross sum costs order, for two main reasons: first, because on assessment, even on the indemnity basis, a successful party invariably recovers something less than its actual costs, typically 15% where the assessment is on an indemnity basis; and secondly, the necessarily broad-brush approach of the court to assessment on a lump sum basis — involving some risk that the sum includes costs that would not be recovered on assessment — coupled with the savings to the costs creditor in time and costs through avoiding a detailed assessment, and the loss to the costs debtor of the opportunity to scrutinise and object to a detailed bill, has resulted in a practice of applying a discount on lump sum assessments: Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119; Idoport Pty Ltd v NAB, Idoport Pty Ltd v Donald Robert Argus [2007] NSWSC 23 at [13]; Zepinic v Chateau Constructions (Aust) Ltd (No 2) at [38]; In the matter of Aquaqueen International Pty Ltd [2015] NSWSC 500 at [18]; Hancock v Rinehart (lump sum costs) at [56]–[57].

However, that does not mean that the court must apply a percentage discount to the sum sought by the successful party, and the court “must be astute not to cause an injustice to the successful party” by applying “an arbitrary ‘fail safe’ discount on the costs estimate submitted to the court”. If the court can be confident that there is little risk that the sum includes costs that might be disallowed on assessment, the case for a discount is seriously undermined, and where a gross sum is assessed on an indemnity basis, and there is no evidence of unreasonableness, it may be inappropriate to apply any discount, although one may nevertheless be appropriate if there is evidence that the successful party errs on the side of excessive use of legal services: Beach Petroleum at 164–165; Norfeld v Jones (No 2) [2014] NSWSC 199 at [7]–[10]; Harvey v Barton (No 4) [2015] NSWSC 809 at [48] ; Hancock v Rinehart (Lump sum costs) at [57]–[59]; In the matter of Beverage Freight Services Pty Ltd [2020] NSWSC 797 at [24], [36].

An application for costs to be specified in a gross sum is not a “variation” of an order so does not attract the operation of the 14-day time limit in UCPR r 36.16(3A): Hartnett t/a Hartnett Lawyers v Bell (No 2) [2023] NSWCA 311 at [38]; see also Gabrielle v Abood (No 4) [2023] NSWCA 100 at [12], in which the Court said it was not necessary for a costs order to be “varied” to specify that it be paid in a gross sum as the specification was an additional order (not a variation).

The Costs Assessors Review Committee (CARC) has published a “Guideline for Costs Payable” between parties under court orders (whether “ordered costs” under the new legislation or “party/party costs” under the repealed legislation). This Guideline, which is available on the Supreme Court website, is intended to provide guidance for assessors as to what might reasonably be allowed in respect of certain types of work and hourly rates, but does not have the effect of a mandatory scale. By analogy it may assist courts in quantifying costs.

The costs recoverable for the undefended recovery of a liquidated debt, and for the enforcement of a judgment by a judgment creditor, are fixed under s 59(1)(d) and (e) of LPULAA and Pt 5, reg 24 of the Legal Profession Uniform Law Application Regulation 2015. The scales as to the costs recoverable in such matters are set out in Sch 1 for each court.

LPULAA Sch 1 limits the recoverable costs for legal services in respect of certain claims for personal injury damages where the damages recovered do not exceed $100,000: LPULAA Sch 1, cl 2. These provisions do not preclude the awarding of costs on an indemnity basis if a reasonable offer of compromise is not accepted: Sch 1, cl  5. 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: Hurcum v Domino’s Pizza (No 2) (2007) 4 DCLR 194 (failed allegation of fraud which complicated and delayed personal injury proceedings). The costs cap applies to a defendant, including one who brings a cross-claim, but not to a cross-defendant in proceedings for contribution: Boylan Nominees Pty Ltd v Williams Refrigeration Australia Pty Ltd (2006) 65 NSWLR 717 at [50], [52].

The cap applies if the amount recovered on a claim for personal injury damages does not exceed $100,000, whether the claim is in negligence or for an intentional tort such as assault, but does not include claims for false imprisonment, which is not a “personal injury”: Certain Lloyd’s Underwriters Subscribing to Contract No IH00AAQS v Cross (2012) 248 CLR 378; NSW v Williamson (2012) 248 CLR 417 at [7], [8]; [44].

Where damages are merely indirectly related to the death of or injury to a person, such as damages for professional negligence connected to proceedings about the death of or injury to a person, they do not fall within the definition of “personal injury damages” in s 11. The claim for damages must be a claim for the personal injury suffered: New South Wales v Williamson (2012) 248 CLR 417. In Osei v PK Simpson (2022) 106 NSWLR 458, where an injured plaintiff later sued his legal representatives, it was held that as the claim was for professional negligence and not damages for personal injury, the cap under Sch 1, cl 2 of the LPULAA does not apply.

The Workplace Injury Management and Workers Compensation Act 1998 (“the WIM Act”), s 346, applies to costs (including disbursements) payable by a party in or in relation to a claim for work injury damages, including court proceedings for work injury damages, and authorises regulations making provision for or with respect to the awarding of costs to which it applies. The regulations may provide for the awarding of costs on a party/party basis, on a practitioner and client basis, or on any other basis. A party is not entitled to an award of costs to which the section applies, and a court may not award such costs, except as prescribed by the regulations or by the rules of the court concerned. In the event of any inconsistency between the provisions of the regulations under this section and rules of court, the provisions of the regulations prevail to the extent of the inconsistency. For the purpose of s 346, the relevant regulation is Workers Compensation Regulation 2016 (“the Regulation”), Pt 17. “Work injury damages” are defined in s 250 as damages recoverable from a worker’s employer in respect of:

whether the damages are recoverable in an action for tort or breach of contract or in any other action, but does not include motor accident damages.

In such claims, the WIM Act and the Regulation govern the costs to be awarded, to the exclusion of the discretion conferred by CPA s 98. 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 [2009] NSWCA 98 at [11]–[31]. This is to be distinguished from proceedings for workers’ compensation, as s 112 of the WIM Act allows the Personal Injury Commission to make orders on an indemnity basis.

Similarly, the UCPR rules relating to offers of compromise do not operate once a Certificate of Mediation Outcome has been issued under WIM Act, s 318B. 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) [2009] NSWCA 62 at [11]–[20]; Pacific Steel Constructions Pty Ltd v Barahona (No 2) [2010] NSWCA 9 at [12]–[16]; see also Chubs Constructions Pty Ltd v Sam Chamma (No 2) (2010) 78 NSWLR 679 at [37]–[40]; Sneddon v The Speaker of the Legislative Assembly [2011] NSWSC 842 at [15]–[24].

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] NSWCA 187. Section 152(2) provides that the rules of court relating to offers of compromise apply to any such offer made in those proceedings. This extends to Calderbank offers: Arnott v Choy (No 2) [2010] NSWCA 336 at [9]–[14]. Otherwise, subject to the rules of court, the costs of such proceedings are to follow the event and are payable on a party/party basis: s 152(3). However, the provisions of Ch 6 regulate costs in court claims brought under the MAC Act in a way that does not otherwise permit for the operation of the rules of court: San v Rumble (No 2) [2007] NSWCA 259 at [15].

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, which include proceedings for judicial review: Ex Parte Parsons; Re Suitors’ Fund Act (1952) 69 WN (NSW) 380; Lou v IAG Limited t/as NRMA Insurance [2019] NSWCA 319, from a decision of a court or tribunal, which includes a claims assessor under the Motor Accidents Compensation Act: Australia Postal Commission v Dao (No 2) (1986) 6 NSWLR 497 at 513–4; Lou v IAG Limited t/as NRMA Insurance. Certificates have been granted in the District Court in the course of judgments handed down after hearing appeals from tribunals: Perla v Danieli [2012] NSWDC 31; Patel v Malaysian Airlines Australia Ltd (No 2) [2011] NSWDC 4, and a Local Court appeal: Jolly v Houston (2009) 10 DCLR (NSW) 110. See Dal Pont, Ch 21.