Principles
60 A party who is entitled to costs may apply to the Court for an order that costs:
(1) be awarded in a lump sum, instead of, or in addition to, any taxed costs: Rules, r 40.02(b);
(2) awarded in their favour be paid other than as between party and party: Rules, r 40.02(a).
61 Principles applicable to lump sum costs orders were summarised by Middleton J in De Brett Seafood Pty Ltd v Qantas Airways Ltd (No 7) [2015] FCA 979 adopting the earlier statements of Sackville J in Seven Network News Ltd v News Ltd [2007] FCA 2059:
[49] His Honour stated the principles at [25] as follows:
…
(i) The purpose of the subrule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation: Beach Petroleum v Johnson (No 2), at 120, per von Doussa J, applying Leary v Leary [1987] 1 All ER 261; Harrison v Schipp (2002) 54 NSWLR 738, at 742 [21] per Giles JA.
(ii) An order that costs be assessed as a gross sum does not envisage that any process similar to that involved in taxation should take place. On the contrary, the Court applies a much broader brush than would be used on a taxation of costs pursuant to O 62: Beach Petroleum v Johnson (No 2), at 120, 124, per von Doussa J; Harrison v Schipp, at 743 [22], per Giles JA.
(iii) The Court should be confident that the approach taken to the estimate of costs is logical, fair and reasonable. The Court should be astute to avoid both overestimating the recoverable costs and underestimating the appropriate amount, for example by applying an arbitrary discount to the amounts claimed: Beach Petroleum v Johnson (No 2), at 123, per von Doussa J.
(iv) Although the power to assess a gross sum for costs involves the exercise of a discretion, it is necessary to bear in mind fundamental principles applicable to an assessment of costs on a party and party basis. These include the principles contained in O 62 r 19 (embodying the 'necessary or proper' test) and those stated in Stanley v Phillips (1966) 115 CLR 470, at 478, per Barwick CJ (on a party and party taxation the emphasis is upon obtaining adequate representation to enable justice to be done, not upon the propriety of steps taken to ensure maximum success in the cause): Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1, at 4-5 [12]-[15], per O'Loughlin J; Charlick Trading Pty Ltd v Australian National Railways Commission [2001] FCA 629, at [6]-[8], per Mansfield J.
(v) Although the methodology permitted by O 62 r 4(2)(c) initially involves a broader approach than on a normal taxation, the provisions of O 62 and Schedule 2 provide assistance in fixing an appropriate gross sum: Charlick Trading Pty Ltd v ANRC, at [10], per Mansfield J.
[50] At [26-7] his Honour continued:
[26] The last point should be developed a little further. FCR, O 62 r 4(2)(c) authorises the Court to order that, instead of taxed costs, the successful party should be entitled to a gross sum costs order. The subrule contains no express direction that the Court is to apply the detailed criteria that are laid down in O 62 and Schedule 2. On the contrary, the subrule apparently leaves the question of quantification at large.
[27] Rule 4(2)(c) is, however, located within an Order that makes detailed provision for the assessment of party and party costs. It would be extremely odd if the more expeditious procedure contemplated by r 4(2)(c) resulted in either a successful or an unsuccessful party being exposed to an assessment of costs which simply ignores or overrides the basic principles applicable to a taxation of costs. I accept Mr Sheahan's submission that it would be an error for a Court to use its power under r 4(2)(c) to assess a gross sum clearly higher than that which would be allowed on a taxation of costs.
(Emphasis in original.)
[51] The principles in Seven Network have been applied in decisions of this Court, including by Barker J in Thompson v Department of Environment and Conservation (No 2) [2011] FCA 970 at [7] and Logan J in Wide Bay Conservation Council Inc v Burnett Water Pty Ltd (No 9) (2011) 194 FCR 250 at [31-4].
[52] I note that assessments of lump sum orders (or "gross sum" costs as they were termed under the Former Rules) made in other cases are of limited relevance. They may indicate whether the amount determined is within a "usual" or appropriate range, but each case must be decided on its particular facts and circumstances. Particularly complex and lengthy cases such as the present proceeding are, by their nature, not "usual".
[53] I also note that it is inevitable, given the broad brush nature of the process, that the level of detail provided by the party claiming lump sum costs will be less than on a taxation. This is particularly the case where, as occurred here, the proceeding is on foot and a party may have been reluctant to disclose potentially privileged or confidential information. What is required is a level of detail sufficient to enable the Court to assess what is fair, logical and reasonable. The Court should be careful to apply its judgment so as to neither over-compensate nor under-compensate the party entitled to its costs.
62 The party seeking a lump sum costs order must satisfy the Court as to the amount of costs incurred and that there is a proper basis for the award of such an amount as a gross sum: Saizeriya Co Ltd v Peregrine Management Group Pty Ltd [2005] FCA 1174, [31]. It will be necessary to examine charges rendered by the relevant party's solicitors, noting that the sum fixed should be proportionate to the nature and complexity of the case: LFDB v MS SM (No 2) [2018] FCA 2062, [8].
63 The Court's "Costs Practice Note (GPN-COSTS)" provides at [4.1]-[4.2]:
4.1 The Court's preference, wherever it is practicable and appropriate to do so, is for the making of a lump-sum costs order.
4.2 Utilisation of a lump-sum costs procedure will always be at the discretion of the judge. The parties will be given a fair opportunity to present their views as to the appropriateness of utilising a lump-sum costs procedure.
(Footnotes omitted.)
64 As to indemnity costs, the following statement of Sheppard J (at [24]) in Colgate-Palmolive Company v Cussons Pty Ltd [1993] FCA 801; (1993) 46 FCR 225 is continually cited:
The ordinary rule is that, where the Court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis …
In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England …
Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud …; evidence of particular misconduct that causes loss of time to the Court and to other parties …; the fact that the proceedings were commenced or continued for some ulterior motive … or in wilful disregard of known facts or clearly established law …; the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions …; an imprudent refusal of an offer to compromise … The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.
It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.
(Citations omitted.)
65 These principles were cited with approval in Dowling v Fairfax Media Publications Pty Ltd (No 2) [2010] FCAFC 28, [42] (Graham J), [140] (Logan and Flick JJ).
66 In Tytane Pty Ltd v Lyons [2017] FCA 1602, Davies J stated at [18]:
The ordinary rule is that the costs of a successful party will be paid by an unsuccessful party on a party-party basis. The Court will not usually make an order for costs on an indemnity basis unless there is some special or unusual feature in the case which justifies a departure from the ordinary practice: Colgate-Palmolive Company v Cussons Pty Ltd [1993] FCA 801 at [16], [20]-[24]. In Hamod v New South Wales [2002] FCAFC 97 at [20], Gray J (with whom the other members of the Court agreed) said:
Indemnity costs are not designed to punish a party for persisting with a case that turns out to fail. They are not awarded as a means of deterring litigants from putting forward arguments that might be attended by uncertainty. Rather, they serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the Court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs.
67 In Macushla Pty Ltd (Trading as Sunnytop Bakery Ciabatta Della Nonna) v El Souki [2019] FCA 643, Snaden J stated at [18]:
The Court's power to award indemnity costs is not in dispute: Federal Court of Australia Act 1976 (Cth), s 43. The bases upon which it might typically do so are notorious and also not credibly in doubt: see, eg, Colgate-Palmolive Company and Another v Cussons Pty Limited (1993) 46 FCR 225, at 232-234 (Sheppard J), referred to with approval in Dowling v Fairfax Media Publications Pty Ltd (No 2) [2010] FCAFC 28, [42] (Graham J), [140] (Logan and Flick JJ) and Tytane Pty Ltd v Lyons [2017] FCA 1602, [18] (Davies J).