Practice and procedure - Costs - Order by trial judge that defendants pay plaintiffs' costs thrown away by reason of adjournment of trial - Amount of costs fixed by trial judge - Principles to be applied on fixing costs - Whether sufficient information before trial judge to enable costs to be fixed - Whether trial judge took into account irrelevant considerations

Australian Coal and Shale Employees' Federation v The Commonwealth [1953] HCA 25; (1953) 94 CLR 621

Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119

Hadid v Lenfest Communications Inc [2000] FCA 628

Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738

House v The King [1936] HCA 40; (1936) 55 CLR 499

Naidoo v Williamson [2008] WASCA 179

Nine Films and Television Pty Ltd v Ninox Television Ltd [2006] FCA 1046

Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72

Sony Entertainment (Australia) Ltd v Smith [2005] FCA 228; (2005) 215 ALR 788

The Fashion Warehouse Pty Ltd v Pola [1984] 1 Qd R 251

2 NEWNES JA: This is an appeal against a decision of Keen DCJ, made on 20 April 2009, in which his Honour ordered that the trial of an action in the District Court between the appellants (defendants) and the respondents (plaintiffs) be adjourned and the appellants pay the respondents' costs thrown away by reason of the adjournment, fixed at $25,000. His Honour ordered that the costs were to be paid on or before 4.00 pm on 4 May 2009, in default of which the appellants' defence be struck out and judgment entered for the respondents for damages to be assessed and costs.

3 The appellants seek leave to appeal against the order for the payment of costs in the sum of $25,000. On 14 May 2009, it was ordered that the application for leave to appeal be heard together with the appeal.

4 The appellants are the defendants in proceedings in the District Court brought by the respondents. The proceedings concern the liability of the appellants for what the respondents say is defective timber flooring installed by the appellants in the respondents' residence. The trial was set down for five days commencing 20 April 2009.

5 At the outset of the trial, counsel for the appellants sought an adjournment on the ground that the appellants, being dissatisfied with the services of their solicitors, had terminated the solicitors' retainer. The appellants contended that the solicitors had not properly prepared the matter for trial and, among other things, had not obtained necessary expert evidence. The application for an adjournment was opposed by the respondents.

6 The primary judge granted the adjournment with obvious, and understandable, reluctance. His Honour accepted the submission on behalf of the respondents that in the course of the proceedings the appellants had shown 'a contumelious disregard of orders and the processes of the court'. His Honour did not elaborate upon the conduct referred to and it does not appear from the papers on the appeal.

7 The primary judge considered that the respondents were entitled to the costs thrown away by reason of the adjournment. His Honour expressly accepted the respondents' submission that 'given the way in

which the [appellants] have conducted themselves, those costs ought to be a very real sanction against the [appellants]'.

8 The respondents did not seek an order for indemnity costs. They sought costs on a party-party basis in the sum of $40,000, based on two items in the scale of costs, item 16 (getting up case) and item 19 (counsel's preparation and the first day of trial). The scale of costs provides for an amount of $39,650 for item 16 and $12,760 for item 19; that is, a total of $52,410.

9 In the course of argument, his Honour expressed doubt about the amount of $40,000 sought by the respondents. He said:

I accept that to allow part of the getting up would be appropriate if I were to fix it because a good deal of refreshing, as a matter of experience, would be necessary - refreshing the brief - and depending upon how matters progress with the [appellants] getting new solicitors and what lines they take, it may be that there will be a good deal of costs thrown away because the matter may go along different tracks or [tacks] and you don't know where it's gone to. So it's a matter of educated guesswork and assessment as to what the appropriate figure ought to be, and I think to award $40,000 is, as [counsel for the appellants] puts it, really more of a penalty than a sanction, save without any evidence (ts 32).

10 His Honour then indicated to counsel for the respondents that he had in mind to fix a figure of $25,000, but gave counsel the option of an order that the costs should be taxed forthwith. Counsel for the respondents asked for the costs to be fixed, '[a]nything to avoid a taxation'.

Yes, I understand that, and it seems to me that that would probably more properly reflect the first day of trial and the getting up, which may well be thrown away. Now, there's a good deal of assessment of that in the sense of using one's experience, and one might argue it's verging on a penalty, but certainly a sanction within the meaning of what (indistinct) had to say, but that's what I have in mind to --- (ts 32 - 33).

12 The primary judge gave ex tempore reasons for judgment. In the course of those reasons, his Honour, having referred to items 16 and 19 in the scale of costs, said:

Whilst those two items combined come to somewhere in the order of nearly $52,000 and Mr Hammond sought $40,000, it seemed to me that to award $40,000 at this stage is not only arbitrary, but it would perhaps work an injustice against the [appellants] inasmuch as one has to use one's best endeavours to make an assessment of costs thrown away and have regard to what may be saved out of the getting up.

Nevertheless, having said that, it is also the case that whatever happens in this case, as a matter of experience there will have to be a good deal of refreshing done by the plaintiff of the case and depending upon how the matter progresses, the getting up might well take a totally different line, or indeed tack, so that a lot of the work may be wasted and fresh work has to be done. It's difficult to know where all that would lie.

[Counsel for the appellants] argues that I should make an order for costs, but payable at the end of the proceedings when all that can be properly assessed. It seems to me and experience shows, that in cases where a party comes to court against the background that there is in this case and seeks an adjournment, that the innocent party - in this case the [respondents] - should not be penalised at all by having to wait for payment of those costs that have been thrown away and wasted by reason of the conduct of, in this case, the [appellants]. And if that requires that there be a certain element of assessment and perhaps even guesswork, then so be it, but it is unfair and wreaks an injustice upon the [respondents] to [expect] the [respondents] to wait until the end of the proceedings.

It seemed to me that an appropriate level of costs would be $25,000 in relation to that claim made by the [respondents] (ts 37 - 38).

13 His Honour then made the order which is the subject of this appeal and, in addition, made procedural orders directed at bringing the action back on for trial.

14 The appellants relied on the following grounds of appeal:

1. The learned trial judge's trial discretion as to costs miscarried and the learned trial judge erred in law in fixing the respondents (plaintiffs') costs thrown away by reason of the adjournment in the sum of $25,000.

1. In fixing the plaintiffs' costs thrown away in the sum of $25,000 on 20 April 2009, the learned trial judge did not give the first and second appellants (defendants) a reasonable opportunity to be heard, given that:

(a) the first and second appellants (defendants) had no solicitor present;

(b) counsel who initially appeared on behalf of the first and second appellants (defendants) ceased to represent [the] first and second appellants (defendants) during the hearing and became an amicus curae.

The learned trial judge should have adjourned the question of costs until such time as the first and second appellants (defendants) had had an opportunity to appoint new solicitors.

1. To fix costs thrown away by reason of the adjournment in the sum of $25,000 was arbitrary in circumstances where:

(a) there was no evidence of the actual costs incurred or to be incurred by the respondents (plaintiffs) to their own solicitors;

(b) it was not possible for the learned trial judge to fix costs thrown away in any sum until the conclusion of the action, as before that time it could not be said what proportion of preparation and getting up could be 'recycled' for the re-listed trial.

1. The imposition of a fixed costs order in the sum of $25,000, in the form of a springing order was, both in design and effect, a penalty on the first and second appellants (defendants), rather than to compensate the respondents (plaintiffs) for the legal costs thrown away by reason of the adjournment.
2. In fixing the plaintiffs' costs thrown away in the sum of $25,000 on 20 April 2009, the learned trial judge failed to take into account relevant considerations, namely:

(a) that the second-named respondent (plaintiff) was at all material times a legal practitioner in the employ of Bradley Bayly Legal;

(b) the respondents (plaintiffs) had until relatively recently been represented in the District Court action by Bradley Bayly Legal;

(c) the respondents (plaintiffs) were thereby (at least for so long as they were represented by Bradley Bayly Legal) in the position of a 'solicitor litigant';

(d) insofar as the respondents (plaintiffs) were solicitor litigants they were not able to claim a contribution from the first and second defendants (appellants) for legal costs according to the authority of Dobree v Hoffman (1996) 18 WAR 36.

15 It was submitted on behalf of the appellants that, the retainer of their solicitors having been terminated, the services of counsel were also thereby terminated. The appellants were therefore unrepresented at the time the primary judge made the costs order and in making the order his Honour denied the appellants natural justice. It was submitted that the primary judge ought to have adjourned the proceedings for a short period to allow the appellants to appoint new solicitors.

16 It was submitted that the costs order was arbitrary and punitive rather than compensatory in nature. There was no evidence of the actual costs thrown away and there was nothing before the primary judge which enabled him to make a determination of those costs. Moreover, the reasons for decision do not reveal the manner in which his Honour calculated the sum of $25,000, except that it appears to be something in the nature of a discount on the sum of $40,000 proposed by the respondents. In fact, the extent to which costs were thrown away by reason of the adjournment depended upon a number of factors which were indeterminate at the time of the adjournment.

17 Counsel argued that his Honour had treated the amount of the costs as being in the nature of a 'sanction' for the conduct of the appellants in the course of the proceedings and in seeking a late adjournment of the trial. That was not permissible; the amount of the costs must be compensatory only. The appropriate order was for the appellants to pay the respondents' costs thrown away to be taxed. There was no evidence of any special or unusual prejudice to the respondents if that course were taken. Alternatively, the primary judge could have required the payment into court of an amount by way of security for the respondents' costs thrown away.

18 It was further submitted that there was material before the primary judge to show that the second-named respondent was a legal practitioner in the employ of the former solicitors for the respondents. While the respondents were represented by those solicitors they were in the position of solicitor-litigants and as such were not entitled to recover professional fees from the appellants.

19 It was submitted on behalf of the respondents that there had been no denial of natural justice. The appellants were, in effect, represented throughout by counsel who made submissions in support of the adjournment and in respect of the costs.

20 Counsel submitted that the amount of costs ordered to be paid by the primary judge was not arbitrary. The amount would differ little whether it were taxed or fixed as his Honour had done. The court had a discretion to make a special order as to costs by reason of the unusual complexity or importance of the case or for any other good or sufficient reason. The primary judge was therefore entitled to look at the conduct of the appellants and, in particular their contumelious disregard of the court's orders, in making a costs order and in fixing the costs.

21 It was further submitted that the costs were not punitive in nature. The primary judge considered the relevant scale of costs in reducing the amount from the $40,000 sum sought by the respondents to $25,000.

22 Counsel submitted that there was no question of the respondents being 'solicitor litigants'. The second-named respondent was an employee of the former solicitors, not a partner, and the first-named respondent is not a solicitor. Moreover, the issue was not raised by counsel for the appellants before the primary judge.

23 An appeal in respect of an order as to costs lies only by leave: s 60(1)(e), Supreme Court Act 1935 (WA). As a decision as to costs involves the exercise of discretion, it must be shown that the court below acted upon a wrong principle, or took into account extraneous or irrelevant matters or failed to take into account relevant considerations, or made a mistake as to the facts; or where, while the nature of the error may not be discoverable, the result is so unreasonable or plainly unjust that the appellate court may infer there has been a failure properly to exercise the discretion: House v The King [1936] HCA 40; (1936) 55 CLR 499, 504 - 505; Australian Coal and Shale Employees' Federation v The Commonwealth [1953] HCA 25; (1953) 94 CLR 621, 627. As the primary court has a wide discretion in relation to costs, ordinarily an appellant who seeks to bring an appeal in respect of costs alone faces a heavy burden. An appellate court will not readily interfere with the exercise of the discretion.

24 I do not consider there is any substance in the complaint that the appellants were not given a reasonable opportunity to be heard on the question of the costs of the adjournment. Notwithstanding that the appellants had terminated the retainer of their solicitors, their counsel made submissions on their behalf, and on their instructions, in respect of the costs of the adjournment. I do not consider that anything turns on the fact that both counsel and the primary judge appeared to take the view that, the solicitors' retainer having been terminated, counsel was appearing in the nature of amicus curae.

25 The substantive issues on the appeal turn on the approach which the primary judge took in fixing the costs to be paid by the appellants as a consequence of the adjournment. Before turning to those issues, it is convenient to set out the relevant principles in relation to costs.

26 As I have mentioned, a court has a wide discretion in relation to costs. It is, however, a discretion that must be exercised judicially: Naidoo v Williamson [2008] WASCA 179 [39]. It is also clear that costs may be dealt with at any stage of proceedings and the court may order that costs be paid forthwith notwithstanding that the proceedings are not concluded: O 66 r 10(1), Rules of the Supreme Court 1971 (WA). It was not in issue that when a costs order is made, the court may fix the amount of the costs payable rather than order that they be taxed. The purpose of fixing costs is to avoid the expense and delay involved in taxation. Consistent with that objective, in fixing the sum the court will not subject the costs to the detailed scrutiny often applied in taxation of costs. It is appropriate instead to apply a 'much broader brush' than would be applied on a taxation: see Sony Entertainment (Australia) Ltd v Smith [2005] FCA 228; (2005) 215 ALR 788 [197] - [200]; Hadid v Lenfest Communications Inc [2000] FCA 628 [35].

27 But in fixing the amount of the costs, the approach of the court should be 'logical, fair and reasonable': see Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119, 123; Nine Films and Television Pty Ltd v Ninox Television Ltd [2006] FCA 1046 [8]. And the power to award a fixed sum should only be exercised when the court considers that it can determine the amount of the costs fairly. That means the court must have available to it sufficient material that it is confident it can arrive at an appropriate sum: see Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738 [22].

28 In this case, the order sought was for the costs thrown away by reason of the adjournment of the trial. For costs to be thrown away, they must have been reasonably incurred and relate to work which in the circumstances has been wasted: The Fashion Warehouse Pty Ltd v Pola [1984] 1 Qd R 251.

29 In proceeding to fix such costs, it was therefore necessary for the primary judge to consider the amount of the costs which the respondents had reasonably incurred which would be wasted as a result of the adjournment of the trial. The nature of those costs was identified by the respondents' counsel as being in respect of getting up and of counsel's costs of preparation and the first day of trial. The respondents claimed an amount of $40,000. The primary judge considered that that was excessive and ordered that the appellants pay an amount of $25,000.

30 It is not apparent, however, on what basis the primary judge determined that the sum of $25,000 represented the costs that would be thrown away by reason of the adjournment. There was no evidence before his Honour of the actual costs which had been incurred by the respondents in respect of either of the items in the costs scale, or otherwise, and his Honour did not explain the reasoning which led him to arrive at the sum of $25,000.

31 It appears, however, that his Honour took into account three considerations in arriving at that figure. First, that there were likely to be amendments to the appellants' case which would lead to a substantial amount of the costs which the respondents had incurred to that point being wasted. The problem with that approach is that it was not evident that that would in fact be the case. Any such conclusion at that stage was inevitably speculative. So far as there was any indication of the appellants' intentions, it was that they intended to obtain additional evidence in respect of matters already in issue in the action. The fact that additional work might have to be done to meet the appellants' defence does not mean that costs the respondents had already incurred were wasted.

32 Secondly, it appears from the comments of the primary judge which are set out above that he regarded the amount of the costs as constituting part of the sanction for the appellants' conduct in the action and for the late application for the adjournment. In so doing, in my view, his Honour erred. An order for costs is compensatory in nature. While an order for costs may be made as a sanction for the conduct of a party in the litigation, the amount of the costs must relate to the costs reasonably incurred by the party to whom they are awarded. The purpose of such an order is to compensate the other party for the costs they have incurred, not to over-compensate them in order to impose a sanction on the defaulting party. Where the conduct of the defaulting party deserves sanction by the court, that may properly be reflected in an order for indemnity costs: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 [44]. No order for indemnity costs was sought by the respondents.

33 Thirdly, having recognised the difficulty in making an assessment of the costs thrown away on the material before him, his Honour appears to have accepted that the assessment may involve an element of 'guesswork'. However, with respect, it was not open to his Honour to engage in guesswork. In circumstances where it was not known when the action would be relisted, to what extent (if at all) the matters in issue would change, and whether the respondents would be able to retain the same counsel for the trial, it is not surprising that his Honour found it difficult to make any real assessment of the costs thrown away. In that situation, however, the proper course was either to defer the assessment until proper material could be put before him or to order that the costs be taxed, so that an appropriate determination could be made.

34 I should make it clear, however, that it does not follow that it is never open to make an order for costs thrown away in a fixed amount. Whether or not such an order can be made will depend upon the particular circumstances of the case. But in any case where such an order is to be made, what will be required is sufficient information to enable the court to be confident that it can fix an amount which is 'logical, fair and reasonable'. It is not necessary that the information, or the enquiry into it, be of the detail that would be involved on a taxation of costs but it must be sufficient to enable the court (albeit with a somewhat broader brush than might be applied on a taxation) to do justice between the parties.

35 In my view, with respect, the primary judge did not have such information before him in the present case. His Honour was in error in proceeding to fix the costs in those circumstances. I also respectfully consider that the amount his Honour fixed was substantially in excess of any amount which, on the materials before him, it could reasonably be concluded would be thrown away by the respondents by reason of the adjournment.

36 I would therefore grant leave to appeal, allow the appeal, and set aside the order of the primary judge. That raises the question of what further orders should be made by this court to resolve a matter which would appear already to be over-burdened with costs.

37 It is unfortunately the case that this court is in no better position to assess the amount of the respondents' costs which will be thrown away by reason of the adjournment of the trial. I do not think the matter should be remitted to the primary judge for further consideration. In the circumstances, I think the only course available is to order that the respondents pay the appellants' costs thrown away by reason of the adjournment to be taxed.

38 As the costs have already been paid to the respondents, they should be refunded to the appellants pending the determination of the amount payable. In that connection, I should say that there is no evidence which would warrant an order that an amount should be paid into court by the appellants as security for the costs pending their determination, but it would be open to the respondents to apply to the District Court for such an order if the grounds for it are considered to exist.

(d) order that the appellants pay the respondents' costs thrown away by reason of the adjournment of the trial to be taxed; and

(e) order that within a time to be fixed the respondents repay to the appellants the sum of $25,000 paid by the appellants pursuant to the order of the primary judge. I would hear counsel on the time within it is to be repaid.