Issues arising out of parties to civil proceedings failing to adhere to the overriding purpose of Civil Procedure Act 2005 (NSW), the rules of the Court & its implications for costs – Apollo Kitchens (NSW) Pty Limited v Goway Travel Pty Limited (No. 2) [2020] NSWSC 1157

Apollo Kitchens (NSW) Pty Limited (the Respondent) was required to pay two-thirds of the costs of Goway Travel Pty Limited (the Applicant) by reason of vacating a hearing date on 30 June 2020.

Some important take-aways from the decision are as follows:

Legal Principles Regarding Costs Orders

The power to order costs lies in the discretion of the Court. The Court has the power to consider who and to what extent a party is to liable for the payment of costs and whether costs will be awarded on the ordinary basis or an indemnity basis (s.98 Civil Procedure Act 2005 (NSW)).

Costs on an ordinary basis are also known as “party/party costs”, and this allows a successful party to recover from the unsuccessful party in proceedings. This allows a successful party to be compensated for solicitor/client costs which have been reasonably incurred in the course of proceedings.

Indemnity costs may be ordered when something has occurred through the course of litigation so as to consider one party liable to pay another almost all costs incurred. This includes when a successful party:

(a)  has been subject to unnecessary costs and/or expenses in the proceedings as a direct result of the conduct of their opponents; and/or

(b)  makes a formal offer of compromise in the course of proceedings and the offer was more favourable than the outcome obtained in the course of the proceedings.

The general rule in litigating matters is that costs follow the event: Rule 42.1 Uniform Civil Procedure Rules 2005 (“UCPR”).

In the present case, the costs application arose from an interlocutory application as to the appropriate outcome for costs incurred by the parties as a result of the adjournment of a hearing.

The Court noted some critical principles with respect to making costs orders on an indemnity basis. The Court stated that an indemnity costs order might be appropriate where the case demonstrates “some relevant delinquency” by a party to the proceedings: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [44]. A “relevant delinquency” is not a question of a moral or ethical failure, but rather a delinquency that is relevant to the conduct of a case: White Constructions (ACT) Pty Limited (In Liquidation) v White and Ors [2004] NSWSC 303 at [10]-[11]. For a party seeking an indemnity costs order, it is necessary to show a level of unreasonableness in the conduct of a party through the course of proceedings: Leichhardt Municipal Council v Green [2004] NSWCA 341 at [51], [57].

In this matter, the Applicant submitted that the Respondent had failed to comply with Court orders on several occasions, and this conduct contributed to the inability for the parties to prepare for hearing. Further, Counsel for the Respondent was briefed only a week prior to the scheduled hearing and amendments to the Respondent’s Statement of Claim were sought. In these circumstances, the Applicant submitted that the circumstances by which the proceedings had come to be adjourned were considered a delinquency or misconduct by the Respondent. His Honour noted that the Applicant had also submitted a further affidavit to form part of the evidence a day prior to the scheduled hearing.

His Honour Justice Johnson stated that he was not persuaded that costs should be ordered on an indemnity basis, but rather an appropriate outcome was for the Respondent to pay two-thirds of the Applicant’s costs. Although the Respondent did not fully comply with its obligations under the Civil Procedure Act 2005 (NSW) leading up to the hearing, his Honour was not satisfied the Applicant established the requisite level of delinquency or unreasonableness on behalf of the Respondent to warrant an indemnity costs order.