The Discretion As To Costs

The Queensland Courts discretion as to costs is specifically contained in each Court’s governing piece of legislation. The Court in this regard lacks power to order costs and therefore the authority is traced to statutory provision (Re Birkman (1860) 1QSCR 14). The exercise of a costs order however requires that “it is implied from the character of the donee of the power that the power will be exercised judicially and in accordance with established legal principles“ (see Re FFT (1998) 195 CLR 184). Notwithstanding the express jurisdiction to award costs having regard to statutory provision there is of course an inherent jurisdiction in each Court (and more particularly to a superior Court than an inferior Court) to award costs. In this regard the inherent jurisdiction is usually only ancillary to the prevention of an abuse of a Court’s process or necessary for the effect of exercise of its jurisdiction (see Ward v Western Australia (1999) FCA 580). Notwithstanding whether the power to award costs is by way of statute or inherently authorised the costs of a proceeding are always in the discretion of the Court.
What are the requirements for the exercise of this discretion. The discretion to order costs has been held to inherently carry the power to control the quantum and determine liability (See Re Cook (1997) 1 QDR 15) however in most instances there are further regulations and further requirements contained within the legislation (giving the discretion) which sets a standard or scale of costs.

The discretion to order costs however is not so wide that it has no boundaries and is not unfettered or unqualified. It has been held that the discretion must be exercised judicially. This is opposed to being exercised in an arbitrary or capricious manner. What this translates to is that the discretion to award costs must be exercised on the basis of fixed principles and according to rules of reason and justice (See Williams v Lewer (1974) 2 NSWLR 91). The test should be what is fair and just between the parties. What should be assessed is the conduct of the litigation and not having regard to anything outside that litigation as that would then cause the decision to be made in an arbitrary and capricious manner and not just or fair (See Peters v Peters (1907) 7 SR (NSW) 398). Of course to have the discretion exercised judicially would of necessity require that its exercise be made to ensure consistency in its application. That consistency is the exercise of fairness and justice to the parties having regard to their conduct throughout the litigation.
A principle that has been applied in respect to costs is that a wholly successful party should receive his or her costs for to deny such a party costs is to deny justice (see Redden v Chapman (1949) 50 SR (NSW) 24). The principle developed by the Courts to the proper exercise of the discretion is that the ultimate result of the litigation is viewed as the far most important factor and it has been demonstrated as being the usual rule (see Petar v Macedonian Orthodox Community Church St Petka Inc [No 2] (2007) NSWCA 142). To proceed with the discretion on costs unhindered by the principle as indicated previously would be regarded as erring at law and that a costs order outside that principle would be regarded as an exceptional costs order. Upon that basis it is then not necessary in every case for a Court to explain its reasons for applying the usual rule (that costs follow the event).

What is then difficult to understand is that the application of a rule without regard to the conduct of litigation and without regard to what has gone before the making of the application must be inconsistent with the exercise of a judicial discretion therefore. The Court’s rigid application of this rule represents a consideration of costs outside the terms of the statute and without proper exercise of the discretion of the Court. Accordingly, this usual rule cannot be the only circumstance which a Court must look to prior to the exercise of its discretion.

Whilst it has been held (in McKenna v McKenna (1984) VR 665 at 674) that the decision of each prior Court in the exercise of the discretion simply provides consideration, approaches, formulas and circumstances which are relied upon in the exercise of the discretion, they are not binding in any particular way and it is up to the Court considering the matter to exercise the discretion as the Court seems fit.

Some of the considerations which have been undertaken by Courts have been as follows:

1.A successful litigant has been deprived of costs as a result of an unreasonable delay in exercise of rights or the way in which those rights were exercised.

2.Costs were refused to a successful applicant where the extent of the increase of costs was not clear where the defendants had used the same solicitor and counsel to represent all defendants (see Morris v Hanley (2004) NSWSC 62. There is of course the issue of costs being granted to a party where proceedings are discontinued however that is covered under the Uniform Civil Procedure Rules Rule and see Garwolin Nominees Pty Ltd v Statewide Building Society (1984) VR 469 and ACI Operations Pty Ltd v Berri Limited (No 2) (2005) VSC 55). In particular, the Court has had reference to whether a party has acted reasonably in commencing the proceedings and whether the other party was acting reasonably in defending the proceedings and whether the conduct of the respondent or defendant has precipitated the litigation.

Further, where both parties act reasonably in commencing and defending proceedings then the Court may not make any orders as to costs.
The conclusion which can be drawn from the various cases and text on costs is as follows:

1.The decision to award costs must be exercised judicially in accordance with legal practice, reason and justice.

2.It must be exercised on grounds connected with the litigation having regard to established principles and in relation to the facts of each case and the conduct of the parties. This requires a consideration of the circumstances leading up to the proceedings, the conduct of the parties and their representatives during the course of the proceedings.

3.The Court however continues to maintain the principle that costs should follow the event and that the successful party should receive his costs and the loser should pay unless special circumstances exists.

4.A successful party can be deprived of their costs where the party has acted unreasonably and caused costs to be incurred by conduct before or after the commencement of the litigation and by introducing issues upon which that party failed.

What if the parties consent to an order.
 
Whilst these principles have clear application in a matter which proceeds to trial how does the Court then deal with a matter in which the parties have consented to orders and therefore it could not be said that the applicant has been successful as the application of the applicant has not been considered by a judicial body but simply has been put to the defendant and an agreement has been reached.It could not be said that the usual rule must apply in all matters in particular where the terms of the application have been agreed to but the only issue to be determined is that of costs.In that instance as there has not been a judicial determination the manner in which the application proper has been dealt with has been by agreement of the parties. The English rule of the successful party receiving costs and the loser paying them surely cannot apply as there has been no independent decision made and the parties have simply reached agreement as to the orders sought in the application.Surely the Court must then exercise its discretion judicially to determine the conduct of the parties prior to the filing of the application. Surely the matters that must be considered by a Court when exercising its discretion judicially must be having regard to the following:1.In respect of the circumstances leading up to the proceedings, did the applicant give the respondent a reasonable level of notice as to the terms of the application and the basis upon which the application would be made thereby giving the respondent an opportunity to agree to the orders that were sought prior to the filing of the application (clearly the provision of specific notice as to the terms of the application are a reasonable level of conduct which would be exercised by a prudent practitioner prior to the filing of an application and which would represent a course of conduct which is fair and just).
2.What is the conduct of the respondent in respect of the proceedings and has the conduct of the respondent caused the applicant to file the application. In this regard the conduct of the respondent clearly must be more than non action. It must be action which would be designed to defeat the basis upon which the application is made or the furtherance of litigation or the matters sought by the applicant. 
3.Whilst it is clear that the Uniform Civil Procedure Rules does not require notice, the provision of notice must be considered as a mandatory requirement to allow fairness and justice to occur between parties prior to litigation. If this element did not exist then the inevitable consequence is that proceedings would be lodged in every claim made by one party against another and the Courts would be inundated with matters which would be filed and to which a clear alternative would be available namely that of resolution by negotiation.

4.Surely the failure of one party to give notice as to an impending application or an impending litigation cannot be seen to be within the spirit of the Uniform Civil Procedure Rules or the Family Law Act or the Federal Magistrates Court Rules having regard to those pieces of legislation requiring references to ADR processes, mediations, conferencing and seeking parties to resolve disputes as efficiently and as effectively as is possible. 

CONCLUSION

 Accordingly, if you have become a respondent to litigation which has been instituted without notice or without warning (when a negotiated solution could have been achieved without litigation) to agree to or negotiate the terms of settlement without negotiating the terms as to the costs is detrimental and if the usual principle is applied by the Court (usually by a judge/magistrate who will have little regard to the material put before him) you will be subject to a costs order. Accordingly, it is more appropriate to dispute the terms of the application even if you have no objection to the orders sought in the application or at the very least not agree to the orders unless the costs issue is resolved prior.

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