The case for fixed vs ordinary costs

The federal system has an array of alternatives available to litigants seeking to avoid the traditional costs assessment process.

Reflective of a broader approach to streamlined, accessible and efficient litigation in the federal system, the ability of litigants to seek lump-sum costs orders is designed to avoid the expense, delay and aggravation involved in protracted litigation.

Careful consideration is given by judicial officers to ensure any lump-sum order meets the requirements to achieve procedural fairness and natural justice in the circumstances. Various criteria must be met to ensure a fixed costs order is the appropriate mechanism to redress the successful party in the circumstances of the particular matter.

This article will take a brief look at the rules allowing for fixed costs orders in the Federal Circuit Court and the Federal Court, and when they might be applied.

Rule 21.10 of the Federal Circuit Court Rules 2001 (Cth)

Unless the Court otherwise orders, a party entitled to costs in a proceeding (other than a proceeding to which the Bankruptcy Act applies) is entitled to:

  • costs in accordance with Parts 1 and 2 of Schedule 1; and
  • disbursements properly incurred.
Note: For costs in a proceeding to which the Bankruptcy Act 1966 applies, see Part 13 of the Federal Circuit Court (Bankruptcy) Rules 2016.

Discussion

Rule 21.10 provides that costs are to be awarded in fixed sums for certain events, unless the court orders otherwise. Costs are calculated by reference to different stages of proceedings, with attendances at hearings charged at daily hearing fee rates. Distinction is made between family law matters and other federal laws, with the allowable amount for each stage set as a fixed sum (see Table 1 below).

Click to view table 1: Fixed costs schedule (Federal Circuit Court)

The Court has a general discretion to depart from the fixed event-based scale. Sometimes the court may order that a specific amount of costs be paid. In these situations, the judge may assess the costs by using departure from the event-based scale of costs:

  • the costs rules of the Federal Court, or
  • another method for determining the amount of costs.

Federal Court

The Federal Court is conferred the power to award a fixed sum for costs pursuant to s43(3)(d) of the Federal Court of Australia Act 1976 (Cth).

Section 43

The Court or a Judge has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which this or any other Act provides that costs must not be awarded. This is subject to:

  • subsection (1A); and
  • section 570 of the Fair Work Act 2009 ; and
  • section 18 of the Public Interest Disclosure Act 2013 .

In a representative proceeding commenced under Part IVA or a proceeding of a representative character commenced under any other Act that authorises the commencement of a proceeding of that character, the Court or Judge may not award costs against a person on whose behalf the proceeding has been commenced (other than a party to the proceeding who is representing such a person) except as authorised by:

  • in the case of a representative proceeding commenced under Part IVA–section 33Q or 33R; or
  • in the case of a proceeding of a representative character commenced under another Act–any provision in that Act.
  • except as provided by any other Act, the award of costs is in the discretion of the Court or Judge.
  • without limiting the discretion of the Court or a Judge in relation to costs, the Court or Judge may do any of the following:
  • make an award of costs at any stage in a proceeding, whether before, during or after any hearing or trial;
  • make different awards of costs in relation to different parts of the proceeding;
  • order the parties to bear costs in specified proportions;
  • award a party costs in a specified sum;
  • award costs in favour of or against a party whether or not the party is successful in the proceeding;
  • order a party’s lawyer to bear costs personally;
  • order that costs awarded against a party are to be assessed on an indemnity basis or otherwise;
  • do any of the following in proceedings in relation to discovery:
  • order the party requesting discovery to pay in advance for some or all of the estimated costs of discovery;
  • order the party requesting discovery to give security for the payment of the cost of discovery;
  • make an order specifying the maximum cost that may be recovered for giving discovery or taking inspection.

Note: For further provision about the award of costs, see subsections 37N(4) and (5) and paragraphs 37P(6)(d) and (e).

Further, rule 40.02 of the Federal Court Rules 2011 (Cth) provides:

A party or a person who is entitled to costs may apply to the Court for an order that costs:

  • awarded in their favour be paid other than as between party and party; or
  • be awarded in a lump sum, instead of, or in addition to, any taxed costs; or
  • be determined otherwise than by taxation.

Note 1: The Court may order that costs be paid on an indemnity basis.

Note 2: The Court may order that the costs be determined by reference to a cost assessment scheme operating under the law of a State or Territory.

Discussion

Section 43(2) provides that “except as provided by any other Act, the award of costs is in the discretion of the Court or Judge.” The discretion is absolute and unfettered subject to the requirement that it be exercised judicially: Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR151 at 152

In the leading case of Beach Petroleum NL v Johnson (No 2) [1995] FCA 350, Von Doussa J considered the Court’s discretion to award lump sum costs instead of ordering a taxation. Key principles include:

  • it is no impediment to the granting of a lump sum costs order that an earlier order has been made ordering a taxation of costs,
  • the chief purpose awarding lump sum costs is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation of costs,
  • It is a power which may be exercised whenever the particular circumstances of the case warrant it,
  • where the financial capacity of the unsuccessful party is such that the successful party is unlikely to recover the costs of a taxation, where the unsuccessful party’s assets are outside the jurisdiction, or where the unsuccessful party has a tendency not to comply with costs orders, the case for a lump sum costs order is more compelling,
  • a lump sum approach may be appropriate where one party has a tendency to litigate (generally without basis) and would likely abuse the taxation process,
  • the Court may take into account that the costs should bear some relationship to the size of the applicant’s victory and should be proportionate to the nature and importance of the case,
  • to ensure that a weaker party is not disadvantaged by a lump sum costs order the Court may adopt a careful and conservative approach to fixing the costs,
  • exercise of the discretion carries the duty to accord procedural fairness (or natural justice) to the litigants,
  • the Court must be confident that the approach taken to estimate costs is logical, fair and reasonable,
  • evidence from an independent costs consultant may prove useful for the purpose of fixing lump sum costs, although a judge is by no means bound by it. Evidence of the charges rendered to the party awarded costs is also highly relevant.

The cases also show some of the considerations found to be relevant when the court has refused to order lump sum costs. These include:

  • the evidence relating to costs must be sufficiently detailed and must clearly identify the components of the costs incurred and how they have been calculated, and
  • the court must arrive in an appropriate sum on a logical and reasonable basis and with sufficient confidence, as opposed to selecting figures at random on the basis of an arbitrary preference for one experts view over another’s.

Making the application

  • No formal application for a lump-sum costs order is required.
  • However, in cases where a lump-sum costs procedure is to take place, the costs applicant should file an affidavit in support of the lump-sum claim (Costs Summary) in accordance with the timetable set by the judge.

We’re here to help

We at Chamberlains understand the emotional and financial stress that come with litigation. Should you require further information about how costs can be recoverable in matters before the Federal Court and Federal Circuit Court, please do not hesitate to contact our office for a consultation.