The arguments of the parties
- Solarus relies upon, what it says, is a general rule of practice that when a question is determined separately, that determination is treated as an "event" which costs follow. It is the almost invariable practice of the Equity Division that the order Solarus seeks is made. It relies principally on a judgment of Bergin CJ in Eq (sitting as a Judge of Appeal) in Floruit Holdings Pty Ltd v Sebastian - Builders and Developers Pty Ltd [2009] NSWCA 411. Her Honour said (at [7]):
The fact that the appellants may not be successful in the main case in the District Court, by reason of a failure to prove causation or for any other reason, does not in my view disentitle them to their costs of the hearing in relation to the separate question, which was a discrete issue. The appellants should have their costs of the hearing of the separate question in the District Court.
- To demonstrate the "generalness" of the rule many cases are cited where it has been applied including Ajkay v Hickey & Co. Pty Ltd [2011] NSWSC 822 where Pembroke J (at [21]) said:
The next question raises an important question of policy on which the Court of Appeal has already expressed a clear view. The question is whether there should be a costs order on the separate question at all or whether I should wait until final resolution of the proceedings. Sometimes the determination of a separate question will resolve the whole proceedings. Sometimes it will only resolve part of the litigation, leaving much for further hearing. Even if the separate question only resolves part of the litigation, the issue will have been identified because of its perceived legal or practical significance to the parties. As a matter of policy, my view is that unless there are compelling reasons to the contrary, orders for the costs of a separate question should be made at the time of the separate hearing and should not await the conclusion of the proceedings.
Solarus also drew an analogy from those cases where the court will apportion costs where an issue "is clearly dominant or separable": Waters v PC Henderson (Aust) Pty Ltd (1994) 254 ALR 328 at 330 - 331; Turkmani v Visvalingam (No 2) [2009] NSWCA 279 at [12] and [15].
- Vero argued that, especially in complex litigation, reserving costs on interlocutory questions will often better "reflect the justice of the situation" for the reasons explained by Spender J in O'Keefe Nominees Pty Ltd v BP Australia (No 2) (1995) 55 FCR 591:
The primary concern that an order for costs reflect the justice of the situation is the reason that on many interlocutory questions the costs are reserved. In most cases, when an order for costs of the principal proceedings is made, no specific reference is made to costs which are reserved and they are, by the order for costs which is made, picked up in favour of the party that has been successful in the litigation. This circumstance reinforces the not uncommon position that in respect of the payment of costs of an interlocutory application, it is not necessarily just that the costs of an interlocutory application should follow the result of that interlocutory application but rather should be determined by the result of the principal litigation of which the interlocutory application forms but a part. For the same reason, costs orders on interlocutory applications are sometimes made whereby the costs of the application are the costs of the applicant in the principal proceedings or of a respondent in the principal proceedings, so that the benefit of that costs order is dependent on the outcome of the principal litigation. In this particular case, there has not been a final determination of the issues initiated between O'Keeffe Nominees and BP. In that sense, there has been no determination of which party would ultimately succeed and there has not been ``the event'' which, absent any specific order, reserved costs would follow.
- Vero also drew an analogy from the dominant or separable issue approach justifying a departure from the general rule. It argued that Solarus had attacked the question on a very broad front, but only one of its many arguments had penetrated Vero's stout defence; even then that successful attack required regrouping in the course of oral argument (Vero submissions [16] - [23]). Viewed from this standpoint, Vero said it could credibly argue it was entitled to some consideration as to costs and for this reason, no order, in the alternative, might best reflect the justice of the case.
- Solarus joined issue on the alternative argument. It was not unusual when a question of construction was at stake that a number of contentions might be put, only one or some of which, in the end, would be successful. Moreover, most of the evidence tendered at the hearing went to establishing that Solarus was an associated company of the named insured, the point on which it succeeded.