Phosphate Resources Ltd v Minister for the Environment Heritage and the Arts (No 3) [2008] FCA 1899 (12 December 2008) – costs, when they don’t follow the event

December 17, 2008 |

In this decision Justice Buchanan did not award the successful party its full costs.  Costs are always discretionary however the ordinary rule, absent issues of offers of compromise and Calderbank letters, is that costs follow the event.  In this short but comprehensive decision he explains the circumstances justifying when to depart from the ordinary rule.  The decision is significant because it collects and summarises the key principles. 

At paragraph 11 Buchanan summarised the three key principles in awarding costs:

11 Within the general discretion of the courts to award costs it is accepted by decisions in both Australian and English jurisdictions that:

• Ordinarily costs follow the event and a successful litigant receives costs in the absence of special circumstances justifying some other order.

• Where a litigant has succeeded only upon a portion of the claim, the circumstances may make it reasonable that the litigant bear the expense of litigating that portion upon which he or she has failed.

• A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other parties’ costs of them.  In this sense “issue” does not mean a precise issue in the technical pleading sense but any disputed question of fact or law.

The principle in awarding costs is not to punish but compensatory.  The rationale is that the successful applicant/plaintiff had to incur costs in bringing an action because of the respondent’s/defendant’s conduct.  Similarly if the respondent/defendant wins the rationale is that he/she/it had to defend an action which should not have been brought

Buchanan highlighted but did not endorse the comments of Finkelstein and Gordon JJ in Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) where they critisised the ordinary rule and called for a broader discretion generally when a party is successful overall but not on all the issues it pleads. Their Honours called for some form of apportionment in those situations. 

This is a live issue for practitioners where the facts are complex, particularly when deciding how to formulate the clients case .  There is a strong temptation to plead as many causes of action the facts support.  During the interlocutory process, particularly after discovery,  the focus often changes.  Then at trial the evidence will push a case in unexpected directions.  That often means counsel either not pressing a cause of action already pleaded or abandoning it entirely.   Sometimes the winning issue might be a point pleaded, with leave, during the running of a trial itself.  This is an issue that increasingly worries the bench if recent judgments on pleadings and are any guide (eg see my comment on  Hydedale)  

Buchanan J found that the departure from the “ordinary rule” on costs is the exception. He also found the exception applied here because the applicant failed on the case it brought to trial.  The oral and written submissions were focused on that case concept.  The respondent’s case was based on that premise.  This matter is unusual because the case wasn’t ultimately conducted on the pleadings.  The applicant succeeded because of concessions made by the respondent on the second day of the trial which entitled the applicant to press points not previously considered or forshadowed.  It happens. 

The court awarded the applicant 50% of its costs, primarily on the basis, as Buchanan said at 13:

PRL is entitled to some compensation for its costs as a result of ultimately succeeding in its application. To put it another way, applying the test in Vadarlis at [12] there can be no doubt that “the respondent’s conduct made it necessary for the applicant to bring the proceedings”.

Pleading multiple causes of action may be warranted on the facts.  Not to do so has its dangers, such as if holds against the applicant and then helpfully suggests that another cause of action would have been appropriate. At minimum that s embarrassing (but often worse).  But with courts increasingly critical of parties pressing a multitude of claims in an action (to cover every eventuality) with the consequent longer trial and greater costs practitioners have to carefully weigh up their options before finalising their claims.

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