Procedure - Costs - Departing from the general rule - Order for costs on an indemnity basis - Relevant considerations - Whether a "special case" - Court's discretion - Whether there ought be immediate recovery following taxation.

Electrona Carbide Industries Pty Ltd and Attorney-General for the State of Tasmania v Baillieu Bowring (Tas) Pty Ltd B9/1987, followed.

Judgment Number: [2001] TASSC 106

1 In consequence of my dismissal of the plaintiff's application that the defendants produce certain documents claimed by them to be privileged (see Reasons for Judgment [2001] TASSC 95), counsel for the defendants now seeks an order that the plaintiff pay their costs of and incidental to the application on an indemnity basis and that the defendants be at liberty to enforce the order once the taxation process has been concluded without waiting for the final determination of the proceedings. Counsel for the plaintiff does not oppose an order that she pay the costs of the unsuccessful application, but submits that they should be taxed on a party and party basis and that she should not be required to meet the costs until the conclusion of the proceedings.

2 Costs on an indemnity basis are not ordered unless there are special circumstances (Quick on Costs, 4.730). One category of case said to constitute special circumstances justifying the order is said to be "When the prosecution or defence of proceedings ought not to have been undertaken or continued had the party been properly advised" (Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; (1988) 81 ALR 397 at 410; Blackburn v State of New South Wales (unreported, New South Wales Supreme Court, Hunt J, 9 August 1991); Smith v Perpetual Trustee Australia Ltd (No 2) (unreported, Young J, 24 June 1992). It is this category in which counsel for the defendants submits the present case fits. I held that privilege had been clearly established and that even if the plaintiff's contention that confidential information gleaned from her records and not authorised by her to be disclosed had been the source of that material, the privilege still remained and that she had no remedy therefore by way of the order sought. It was a short point and the contention had little merit, in my view, although I took time to consider it and both counsel have sought a certificate that it was a matter proper for the attendance of counsel.

3 Counsel for the defendants relied further on the fact that prior to the hearing, he had written to the plaintiff's solicitors urging the view that the application was misconceived and warning that an order for costs on an indemnity basis would be sought if it were unsuccessful. Costs on an indemnity basis are awarded when the circumstances are such that it would be unjust to require the party obtaining a costs order to be left bearing any expense reasonably incurred by reason of that party's involvement in the proceedings in question. In all the circumstances, I am not persuaded that I should exercise my discretion to make such an order. It is extremely unusual to do so in respect of a relatively short interlocutory proceeding. One pragmatic reason is that in the ordinary course of events, the shorter the proceedings are the less likely it is that there will be any significant difference between party and party costs and costs on a solicitor client or indemnity basis, and hence it is difficult to demonstrate the need in justice for a full indemnity. Nothing has been put to me to suggest that reimbursement to the defendants, who are represented by counsel employed by the Office of the Director of Public Prosecutions, of costs taxed on a party and party basis will not adequately compensate that Office for the time expended by counsel and other employees in addressing the issues raised by the application. Nettlefold J, in Electrona Carbide Industries Pty Ltd and Attorney-General for the State of Tasmania v Baillieu Bowring (Tas) Pty Ltd B9/1987, at 4, held that:

"The court should not use the power to award costs as a de facto vehicle for delivering an award of damages or imposing a penalty."

He cited Cockburn v Edwards (1881) 18 Ch D 459 and Willmott v Barber (1881) 17 Ch D 772. In my view, awarding costs on an indemnity basis here, even if there is a more than minimal difference in quantum from party and party costs is more likely to constitute a penalty on the unsuccessful applicant than a just reimbursement of costs actually incurred by the defendants. Consequently, I confine the order to payment of the defendants' costs taxed as between party and party.

4 I also decline to order the payment of such costs immediately after the finalisation of the process of taxation. Whether the plaintiff ultimately wins the case or not, she must bear these costs, but I see no reason to permit their immediate recovery. This case was commenced in 1986 and has now been allotted a hearing date in the November Sittings of the Court. It is a big claim and involves many expert witnesses. The overall cost will be great. To permit enforcement of the order at this stage of the proceedings could be unduly burdensome to the plaintiff who, so the Court file shows, is subject to disability and whose estate is administered by State Trustees Ltd pursuant to the State Trust Corporation of Victoria Act 1987 (Vic). (See [2000] TASSC 148.) I see no unfair disadvantage to the defendants in having to wait until the conclusion of the proceedings to recover or possibly set off this small part of the overall costs. I order that the plaintiff pay the defendants' taxed costs of the application and certify for counsel, but I direct that execution not issue for such costs until final judgment is entered in the proceedings or until further order.