Costs Orders (NT)
A costs order is an order that specifies who must pay the legal costs associated with a court proceeding. In the Northern Territory, costs orders are regulated by both legislation and court rules, including the Local Court Civil Procedure Act 1989 and the Supreme Court Rules 2008. This article deals with costs orders in the Northern Territory.
Costs follow the event
The general rule in civil litigation is that costs ‘follow the event’. This means that the successful party in a hearing can usually expect their legal expenses to be covered by the unsuccessful party. However, this rule is subject to many factors and to specific legislation and regulations.
The High Court of Australia has made clear that a judge can ignore the ‘costs follow the event’ rule and deprive the successful party of their costs (see, for instance, Austen v Ansett Transport Industries (Operations) Pty Ltd [1993]).
An unsuccessful party can also apply for a reassessment of a costs order.
Applying for a costs order
In civil litigation, one or both parties can apply for a costs order to recoup their legal expenses. Most commonly, the parties file evidence and make submissions about what costs are appropriate at the conclusion of the hearing.
The stages of proceedings when costs orders are typically made are:
- at the commencement of a case;
- after a final determination on a pertinent issue of law;
- with Notices of Motion or applications for interlocutory relief;
- if the trial is adjourned or aborted;
- after the hearing and pending appeal; and
- on appeal.
The judge or magistrate is not obliged to make a costs order at the time a party applies for one. They can make a determination about costs whenever they deem it appropriate.
The magistrate or judge decides whether a costs order is appropriate given all the circumstances of the case. The court makes this decision based on the facts of the case, the applicable legislation and the conduct of the parties during the proceeding. The court has unfettered discretion in relation to costs unless there is an applicable statutory provision that limits its discretion. However, principles of proportionality apply.
Different types of costs order
The court can make several different types of costs orders.
Costs on a standard basis are designed to compensate a successful party for having to defend their rights through litigation. This is the most common type of costs order, with the successful party receiving around 75% of their total incurred costs.
In some cases, a court may decide that given the circumstances, one party should pay almost all the costs that have been incurred by the other party. This is known as an indemnity costs order.
Indemnity costs are most often awarded when a party has proceeded with litigation with no real prospect of success, or when they have abused the court process such as by unnecessarily prolonging proceedings.
The court may also order indemnity costs against a party who refuses to accept a reasonable offer to settle before judgment.
Supreme Court Costs Orders
If a defendant does not accept a reasonable settlement offer from a plaintiff in a Supreme Court matter and the verdict is less favourable than the offer that was made, the plaintiff is generally entitled to a costs order against the defendant on an indemnity basis.
If the plaintiff rejects a defendant’s compromise offer and receives a less favourable verdict, then the plaintiff is only entitled to an order for costs incurred up to the date of the offer. In such a case, the defendant is entitled to a costs order from the day after they made the offer.
Whether or not a party has the resources to pay the costs is not a factor for the court to take into account when deciding whether to make a costs order.
Northern Territory v Sangare
In Northern Territory v Sangare [2019], the High Court considered whether a costs order should have been made after the Supreme Court and Court of Appeal dismissed a defamation claim against the Northern Territory government.
The appeal was unsuccessful, but the Court of Appeal declined to order Mr Sangare to pay the respondent’s costs because it considered that his impecuniosity would have made the order futile.
The Northern Territory government successfully appealed this decision to the High Court. The High Court found that while costs orders are under judicial discretion, futility is no reason not to make them. Costs orders also provide an avenue for the successful party to recover their expenses and a deterrent to the applicant and other litigants without funds who might bring nuisance suits.
Furthermore, if impecuniosity were to be a determinative factor, the courts would be burdened with the task of establishing the relative wealth of the unsuccessful party.
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