March 2010

Winner doesn't always take all - a reminder that awarding costs is a matter of judicial discretion

Costs are often an important consideration in deciding whether to commence, defend, continue or settle litigation.

The general rule that costs will be awarded to the successful party was recently analysed and departed from by Justice Schmidt of the Supreme Court of NSW in Coastline Constructions (Aust) Pty Ltd & Ors v Kakavas & Ors. The judgment affirmed that despite the general rule, it is always in the court's discretion to award costs against a party which succeeds overall but loses on some issues, and that costs will not necessarily be subject to apportionment if a party wins on some issues but fails on others.

Background

Proceedings were brought by Coastline and Mr McCracken against Mr Kakavas concerning three agreements. Out of a total claim of $5,250,000, some $4,000,000 related to the first of the three agreements. Mr Kakavas counter-claimed the amount of $750,000 against Mr McCracken and, in addition, sought non-quantified damages in respect of an assault (which Mr McCracken had never denied).

While he succeeded on multiple factual matters which were relevant to the resolution of the claim under the first agreement, Mr McCracken failed on an important legal point which eventually determined the claim in respect of the first agreement. As a result, the claim for $4,000,000 was dismissed. Only the claims in relation to the second and third agreements were successful.

The cross-claim was also largely dismissed and minimal compensation of $2,000 was ordered in favour of Mr Kakavas for the admitted assault. The nominal amount resulted from a finding that the assault was trivial and not of the type alleged by Mr Kakavas.

The Law

Her Honour referred to Hughes v Western Australian Cricket Association (Inc) & Ors in which Justice Toohey observed that there is a discretion to depart from the usual order, for instance where a claimant only partly succeeds, it may be reasonable that he bear the costs for that portion on which he has failed.

Justice Schmidt held that there is no question that costs do not necessarily follow the event and there may be various deviations from the standard rule depending on the circumstances of the case, the conduct of the parties and the ultimate result of the proceedings.

Judgment

Although the legal point on which Mr McCracken lost was crucial to the disposition of the claim in relation to the first agreement, the Judge considered that it was a minor part of the proceedings, in which Mr McCracken had succeeded on most issues of fact. Mr Kakavas's contention that no costs should be ordered against him in relation to Mr McCracken's unsuccessful claim in respect of the first agreement or, alternatively, that the costs should be apportioned to reflect Mr McCracken's loss on that aspect, was rejected. Justice Schmidt decided to make the usual costs order and granted the whole of the costs pertaining to the claims under the three agreements to Mr McCracken.

By contrast however, the Judge declined to award the costs of the cross-claim to Mr Kakavas, even though he had received an order for damages in his favour. This was because Mr Kakavas had only nominal success on the cross-claim. The Judge therefore ordered that each party should pay its own costs of the cross-claim.

Conclusion

The decision confirms that as a general principle, the party that is successful in litigation is entitled to its costs. The case is nonetheless a reminder that the determination to award costs is always a matter of judicial discretion and may be shaped to reflect the substantive merits of the conduct and outcome of the case, especially where the parties have had varied success on discrete issues.

 

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