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Costs where no determination on the merits March 11, 2016

Coast Property Realty Pty Ltd v Falconer [2016] NSWSC 214

  1. The parties acknowledge that the authorities, on the operation of r 42.19, indicate that circumstances in which it may be appropriate for a court to make a contrary order include where the plaintiff has achieved practical success in the proceedings or where the defendant’s unreasonable conduct has caused unnecessary costs. The defendant also submits that a contrary order may be made if a judge could feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried (Re Minister for Immigration & Ethnic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622 at 624). In that case, McHugh J said that, although in an appropriate case, a court may make an order for costs, even where there has been no hearing on the merits, the court cannot try a hypothetical action between the parties so as to burden the parties with the costs of a litigation action, which by their settlement they have avoided. And that if it appears that both parties have acted reasonably in commencing a proceedings and continued to act reasonably until settlement or until the further prosecution of the proceedings became futile, then the appropriate exercise of the costs discretion will usually mean that the court makes no order as to costs (at 624-625).
  2. In Australiawide Airlines Limited v Aspirion Pty Limited [2006] NSWCA 365 at [64], and Bitannia Pty Ltd v Parkline Constructions [2009] NSWCA 32 at [78], the Court of Appeal has said that McHugh J’s statements in Re Minister for Immigration & Ethnic Affairs; Ex Parte Lai Qin are not readily applicable to a decision to be made in Pt 42 (under UCPR in r 42.19) or rule 22.1, because the starting point is different than the starting point considered in Re Minister for Immigration & Ethnic Affairs; Ex Parte Lai Qin. That case involved different rules of court.
  3. In those cases, the Court of Appeal held that whilst the question of whether the plaintiff has acted reasonably in commencing and continuing proceedings is a relevant consideration, it is not determinative. In Ibrahim v PERI Australia Pty Ltd [2013] NSWCA 328, Beazley P said (at [16]-[18]):

[16]    The primary judge, in determining whether a costs order ought to be made in the applicant’s favour, on the discontinuance, reviewed the case law including, relevantly, Australian Securities Commission v Aust-Home Investments Ltd [1993] FCA 585; 44 FCR 194; Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; 186 CLR 622; ONE.TEL Ltd v Deputy Commissioner of Taxation [2000] FCA 270; 101 FCR 548; Fordyce v Fordham [2006] NSWCA 274; 67 NSWLR 497; and Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32.

[17]    Although each of those cases related to different facts, the principles that are to be derived from them, in circumstances where a Court is requested to make a costs order, when proceedings have not been heard to termination include the following: whether a party acted reasonably in commencing the proceedings; whether a party had been successful in obtaining interlocutory relief; whether the party sued had acted reasonably; whether the responding party had acted reasonably in defending the proceedings; whether the proceedings terminated after interlocutory relief had been granted; and further, whether the primary judge was satisfied that the party seeking to terminate the proceedings prior to a full hearing had almost a certain chance of success.

[18]    An applicant for costs where proceedings had not been heard to fruition need not prove each or every one of these matters but they are the factors that the courts have considered relevant to a determination as to whether to order costs.

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