IT WILL COST YOU! – Deviating from the General Rule

In the first part of this series, we explored the nature of costs orders in civil litigation, the different types of costs orders that can be made and how costs are assessed. As a general rule, costs follow the event such that the unsuccessful party will usually be ordered to pay a portion of the successful party’s legal costs. However, this rule is not absolute and courts ultimately have the discretion to make the costs orders they see fit.

That being said, there are some patterns that we have seen historically that may persuade the court to deviate from the general rule. This week we will explore some key factors the courts will consider when making a costs order against the parties and how that may influence whether a party may be required to bear the costs of litigation.

Conduct Influencing the Basis for Cost Assessment

Historically, the courts have recognised various forms of conduct that may warrant a departure from the general rule that costs follow the event. This includes:

1. the making allegations of fraud knowing them to be false and the making or irrelevant allegations of fraud;
2. evidence of particular misconduct that causes loss of time to the court and to other parties which may include where a successful party;
   1. effectively invites the litigation;
   2. unnecessarily protects the proceedings;
   3. succeeds on a point not argued before a lower court;
   4. prosecutes the matter solely for the purpose of increasing the costs recoverable; or
   5. obtains relief which the unsuccessful party had already offered in settlement of the dispute.
3. bringing unmeritorious claims or defences or any abuse of the court process;
4. where proceedings were commenced or continued for some ulterior motive or in wilful disregard of known facts of clearly established law;
5. the making of allegations which ought never have to have been made or the undue prolongation of a case by groundless contentions;
6. late amendment;
7. in some certain cases where the proceedings involve some public interest (albeit the fact that the proceedings involved public interest does not in itself warrant departure from the general rule that costs follow the event).

Engaging in the above conduct does not in itself mean that the offending party will be required to pay any and all costs of the proceedings. Instead, at times the court may apportion the costs between the parties rather than making a single order in favour of one party. Apportionment is typically considered where:

1. both parties achieve some degree of success in the proceedings;
2. a party succeeds on some claims but has pursued others unreasonably or without merit;
3. multiple defendants are involved in a dispute, costs may be apportioned among them based on their level of responsibility for the proceedings; or
4. both parties have engaged in improper conduct identified above.

Settlement Offers

In addition to the above, it is well established that the rejection of any offers to settle during the course of litigation will be taken into account by the court when making their order as to costs. That is, if one party makes a settlement offer which is rejected by the opposing party and the matter proceeds to trial:

1. if the outcome awarded at trial is less favourable than the settlement offer, then the rejecting party will be ordered to pay indemnity costs from the time the settlement offer was made up until trial; or
2. if the outcome awarded at trial is more favourable than the settlement offer, then the rejecting party will generally be awarded costs in their favour.

This incentivises the parties to try and resolve the matter before proceeding to trial to avoid the time and expense of unnecessary litigation.

Best Practices to Avoid an Adverse Costs Order

Even though the court has the ultimate discretion to award costs as they see fit, there are certain practices litigating parties can employ to minimise the risk of an adverse costs order. These include:

1. Engaging in early settlement discussions – by engaging in settlement discussions, the parties demonstrate that they are acting in good faith and are trying to avoid unnecessary costs and delay which the court generally looks favourably upon;
2. Seriously considering any settlement offers made – a successful outcome at trial does not automatically grant an award for costs in your favour if the settlement offer was more favourable. Parties should carefully consider all settlement offers made and understand that the rejection of those offers may expose them to an adverse order as to costs; and
3. Maintaining proper conduct throughout the course of litigation – courts will take into account the conduct of both parties in deciding costs orders. Where the parties have prolonged the proceedings, brought unmeritorious claims or abused the court process for tactical advantages, they will likely be exposed to an adverse costs order.

By adopting a proactive, reasonable and cooperative approach to litigation, parties can position themselves to avoid or reduce the likelihood of an adverse costs order.

Lamont Project & Construction Lawyers

The Lamont Project & Construction Lawyers team has extensive knowledge regarding the civil litigation process and what circumstances may affect an order for costs. With this knowledge and expertise, Lamont Project & Construction Lawyers can provide the required support and advise on matters of civil litigation.

If you would like to discuss any matters raised in this article as it relates to your specific circumstances, please contact Lamont Project & Construction Lawyers.

The content of this article is for information purposes only and does not discuss every important topic or matter of law, and it is not to be relied upon as legal advice. Specialist advice should be sought regarding your specific circumstances.

Contact: Peter Lamont or Kathryn Easton

Email: [email protected] or [email protected]

Phone: (07) 3248 8500

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Postal Address: PO Box 1133, Milton Qld 4064