Hutson v G8 Education Ltd [2025] QSC 107

• [1] The applicant, Jennifer Hutson, is a former director of the respondent, G8 Education Ltd.
• [2] On 24 March 2010, the applicant and the respondent entered into a Deed of Access, Insurance and Indemnity.
• [3] Pursuant to this Deed, the applicant claimed legal costs for defending criminal proceedings and the respondent funded her legal representation. In correspondence between the parties, the respondent sought to impose conditions on the advancement of legal funds, which the applicant resisted.
• [4] The applicant filed an originating application seeking declaratory relief in relation to three issues.
• [5] The first declaration sought related to the proper construction of the Deed and is summarised as follows:

(a) the respondent was obliged to advance funds for legal costs that Ms Hutson "reasonably expects" to be incurred;

(b) the respondent's obligation was not limited to, nor dependent upon, the reasonableness of the costs incurred or expected to be incurred (as distinct from the reasonableness of the applicant's expectation to incur the costs); and

(c) any condition imposed by the respondent under cl 4.3(b) of the Deed must be consistent with its obligations under cl 4.3(a).

• [6] The applicant was wholly successful in relation to this issue, and I granted the declarations sought by the applicant.
• [7] The second declaration sought ("the costs declaration") was that the legal costs identified in the letter of the applicant's defence lawyers dated 8 December 2023 are legal costs reasonably expected to be incurred by the applicant within the meaning of clause 4.3(a) of the Deed. I did not grant this declaration.
• [8] The third declaration sought ("the conditions declarations") was that three terms proposed by the respondent as to any future payment were inconsistent with the Deed. I found that two of the three terms were inconsistent with the Deed and made declarations accordingly.
• [9] I heard this matter on 15 October 2024 and delivered reasons on 19 December 2024. As noted, the applicant had a mixed bag of success; she was wholly successful in relation to the first declaration, partially successful in relation to the conditions declaration, and I did not make the costs declaration.
• [10] The issue of costs was adjourned. I indicated that I would deal with the question of costs on the papers unless either party requested a hearing. Both parties provided written submissions as to costs and neither party requested a hearing.

• [11] The applicant submits that the general rule that costs ought to follow the event should apply such that the respondent pay her costs of the application on the standard basis.
• [12] The applicant submits that the principal controversy on the application was that which the first declaration sought to quell, namely, the proper construction of the Deed and whether the respondent was obliged to advance funds to her which she reasonably expected to incur in defending criminal proceedings ("the Deed issue"). The applicant submits that she was wholly successful in relation to this issue and obtained a declaration precisely in the form of her application.
• [13] In relation to the other declarations sought, the applicant submits that, for the purposes of the hearing, the costs declaration and the conditions declarations were treated by the parties as secondary to the primary issue of the proper construction of the Deed.
• [14] In relation to the costs declaration, whilst there was insufficient evidence to make the declaration sought, the applicant highlights the following passage of the reasons:

"an objective assessment of the reasonableness of an expectation to incur legal costs can be achieved by reference to a costs estimate produced by a reputable and experienced legal advisor".[1]

• [15] In relation to the conditions declarations sought, the applicant makes the following observations:

(a) at the time of filing the application, the respondent sought to impose four terms under cl 4.3(b) of the Deed;

(b) by the time of the hearing, the respondent only pressed three of those terms; and

(c) of the three terms pressed by the respondent, the applicant obtained a declaration in relation to two of them.

• [16] In relation to the term pressed by the respondent, which was not made the subject of a declaration, the applicant highlighted that my reasons noted:

"I cannot see why this proposed term, per se, is inconsistent with clause 4.3 (a). It may be difficult, depending on when the estimate is to be provided, to provide as much detail as the respondent seeks. However, any detail that can be provided would assist in objectively assessing the reasonableness of an expectation to incur legal costs".[2]

• [17] Further, the applicant submits that, in relation to both the costs and conditions declarations sought, they were not clearly definable or severable from the primary issue in the proceeding and did not independently occupy any significant part of the hearing.
• [18] In summary, the applicant submits that the general rule that costs ought to follow the event should apply such that the respondent pay her costs of the application on the standard basis for the following reasons:

(a) the real controversy between the parties was the proper construction of the Deed and the respondent's obligations thereunder to indemnify the Applicant for "advance costs";

(b) it was necessary for the applicant to seek relief from the Court so as to vindicate her position regarding the respondent's obligations, and she was entirely successful on that principal question of the proper construction of the Deed; and

(c) there are no special or exceptional circumstances which would justify another costs order, such as the one sought by the respondent (that it pay only 75% of the applicant's costs), even where not all declarations sought by the applicant were made, and so the applicant should have 100% of her standard costs of the application.

• [19] The respondent highlights that the applicant was not wholly successful, and the essential heads of controversy concerned:

(a) the proper interpretation of the Deed; and

(b) whether, in the events that had occurred, the applicant was entitled to be advanced the sums identified in her solicitor's correspondence, including by reference to the conditions the respondent sought to impose on further advances.

• [20] The respondent contends that its success lay in resisting a declaration to the effect that the sums sought by the applicant were:

(a) within the respondent's obligations to advance sums under the Deed,

(b) in obliging the applicant to provide detail about the tasks to be carried out, and

(c) a reconciliation against the previous estimates of costs.

• [21] The respondent submits that these matters are of substance in terms of the controversy between the parties, and that it was substantially successful on the second event or head of controversy.
• [22] The respondent accepts that the issues of construction on which the applicant succeeded were of preponderant overall significance, but also that a fair and just result on costs requires accommodation of the respondent's partial success. The respondent submits that it should pay 75% of the applicant's costs of the proceeding on the standard basis, to be assessed.

• [23] The general rule on costs is found in r 681(1) of the Uniform Civil Procedure Rules 1999 (Qld) ("UCPR"):

"Costs of a proceeding, including an application in a proceeding, are in the discretion of the court but follow the event, unless the court orders otherwise."

• [24] The general rule is that costs follow the event, and this rule should only be departed from in the event of special or exceptional circumstances. The underlying rationale of that approach is that costs are not awarded to punish an unsuccessful party, but as a means of indemnifying the successful party.
• [25] The Court of Appeal in Courtney v Chalfen[3] has endorsed the following principles in relation to costs:

(a) ordinarily costs follow the event;

(b) costs can be awarded under r 684 UCPR on discrete issues if they are definable and severable and if they occupied a substantial proportion of the trial or hearing;

(c) there must be special or exceptional circumstances to warrant depriving a successful party of its costs; and

(d) the mere fact that the successful party has been unsuccessful on some issues will ordinarily not be sufficient to do so.[4]

• [26] The word "event" in relation to r 681(1) is to be approached distributively with the consequence that it refers to the event of each separate issue, if there is more than one, in a proceeding:

"[13] The word "event" in the general rule is to be approached distributively with the consequence that it refers to the event of an issue or of each separate issue, if there is more than one, in the proceeding (citations omitted).

[14] It is important to recognise, however, that it does not follow from the foregoing that the application of the general rule should usually lead to costs orders which reflect different results on separate events or issues. The Court is given a broad discretion and is specifically empowered to determine that some other order is more appropriate.

[15] In practice, courts often take the approach of identifying heads of controversy or "units of litigation" (rather than what might technically be regarded as issues on the pleadings) regarding success or failure on the head of controversy or unit of litigation as the criterion for awarding costs (citations omitted).[5]

• [27] It may be appropriate to award costs of a particular question or part of a proceeding where that question or part is definable and severable and has occupied a significant part of the trial.[6]
• [28] The Court has the power and a continued "predilection" for making costs orders referable to individual issues or questions as events in a proceeding.[7]
• [29] In this case, the applicant was successful in relation to the Deed issue; this issue was of preponderant overall significance at the hearing with the other declarations sought by the applicant being treated by the parties as secondary to this primary issue.
• [30] I note that most of the hearing was spent considering the Deed issue, which resolved the first declaration. Whilst there was overlapping content between all three of the declarations sought by the applicant, valuable time and consideration was still spent resolving both the costs declaration and the conditions declaration of which the respondent had partial success.
• [31] The Court is entitled to take an "impressionistic and pragmatic" view on the real heads of controversy and strive to simplify the assessment process.[8] In Speets Investment Pty Ltd v Bencol Pty Ltd (No 2) [2021] QCA 39, Bond JA stated that:

"Of course, it does not follow that an issues-based costs order should always be made in circumstances analogous to those described by McMurdo J in BHP Coal Pty Ltd v O & K Orenstein & Koppel AG (No 2). Where there are multiple issues which are determined in different directions as between the parties, a court might form an overall impression having regard to the significance of the issues, the way they were determined, and the amount of time and cost spent on them, and order one party to pay a proportion of another party's costs as a way to reflect fairly the parties' comparative success or failure in the outcome which was obtained. Courts often prefer to avoid the complicated form of costs assessment that would follow if different issues are determined in different directions as between the parties and costs were to be awarded in respect of issues. In this regard, in Wollongong Coal Ltd v Gujarat NRE India Pty Ltd (No 2) [2019] NSWCA 173, the New South Wales Court of Appeal observed at [9] where taking such an approach might result in a protracted assessment process:

"... It is more efficient, and fairer, for the court simply to net-off [orders for issues in different directions as between the parties], which it is entitled to do (see Day v Humphrey [2018] QCA 321 at [13] per the court). Such an assessment will, undoubtedly be 'rough and ready' (Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [5]), and that is entirely permissible"".[9]

• [32] In my view, taking into account an overall impression of this case, having regard to the significance of the issues, the manner in which they were determined, and the amount of time spent on them, the respondent should pay 85% of the applicant's costs of the proceeding on the standard basis to be assessed.

• [33] Accordingly, in my view, the appropriate order is that the respondent pay 85% of the applicant's costs of the proceeding on the standard basis to be assessed.

[1] Hutson v G8 Education Ltd [2024] QSC 319, [197].

[3] [2021] QCA 25

[5] Speets Investments Pty Ltd v Bencol Pty Ltd (No 2) [2021] QCA 039 [13]-[15].

[6] BHP Coal Pty Ltd v O & K Orenstein & Kappel AG (No 2) [2009] QSC 64, [8]; Day v Humphrey [2018] QCA 321, [11]; Speets (n 5) [16].

[7] McDermott v Robinson Helicopter (No 2) [2014] QSC 213; [2015] 1 Qd R 295, 302 [30]; Gladstone Area Water Board v AJ Lucas Operations Pty Ltd [2015] QSC 52, [11].

[8] Vision Eye Institute Ltd v Kitchen (No 3) [2015] QSC 164, [13].