State of Victoria v Horvath

5. On the day upon which we published our reasons and reserved for later consideration the issues relating to the appropriate form of orders, including costs, we suggested that senior counsel for the State of Victoria (Mr. Kaye, Q.C.) should liaise with counsel for the plaintiff/respondents and police/respondents to determine whether, in the light of our reasons, some consensus as to the orders to be made could be reached.

8. Subsequently, and before the Court re-assembled on 22 December 2002, Mr. Kaye forwarded draft minutes of orders, indicating substantial agreement between the parties but outlining "three outstanding issues". In the covering memorandum Mr. Kaye indicated that he was "authorized by counsel for each of the other parties to the appeals to forward the enclosed Minutes of Orders". The minutes of agreed orders made it apparent that the parties wished the Court to make orders setting aside the orders made by the trial judge, and to make the necessary orders in lieu thereof so as to conform with the reasons we had published on 7 November 2002. The draft minutes also indicated that the three "outstanding issues" were as follows:

(i) On the accepted basis that, in accordance with the Court's published reasons, judgment should be entered against the respective plaintiff/respondent in Appeals 5310, 5311, 5312 and 5313 in favour of the State of Victoria, who should bear the trial costs of the State as between the respective plaintiffs and the "police defendants".

(ii) Should the respective plaintiffs' trial costs be paid by the police defendants (a) on a solicitor/client basis and/or (b) on scale D of the County Court.

(iii) In the appeals brought by Davison and Jenkin (namely Appeals 5316, 5318 and 5319), should the appellants be ordered to pay the costs of the respective plaintiff/respondent.

Trial costs of State

14. The State's primary submission on this issue was that, since each plaintiff failed in his or her claim against it, costs should follow the event and the plaintiffs should be ordered to pay its trial costs (on scale D of the County Court scale of costs). The plaintiffs, on the other hand, argued that, in the circumstances, if anyone should be ordered to pay the State's costs of the trial it should be the unsuccessful police defendants. More particularly, they submitted that the Court should make a Sanderson order[1] whereby the police defendants would be required to pay the State's costs directly to it (thereby absolving the plaintiffs from that potential liability)[2].

17. Before dealing with the parties' respective submissions, it is desirable to set out briefly the relevant events which form the context in which the present issue is to be resolved. Most of the circumstances are taken from the non-contentious chronology which formed part of the State's written submissions to this Court. In response to a question asked by the Court, the parties agreed that the chronology recited was accurate.

(a) When the plaintiffs filed their respective proceedings[3] the State was not named as a defendant; the only defendants were the police defendants.

(b) On 8 July 1997 (in the case of Horvath and Love) and on 3 September 1997 (in the two Kniese cases) the police defendants joined the State as a third party to the proceedings, claiming that it was liable to indemnify them in respect of any liability they may be found to have to the plaintiffs. In its defences to the claims in the third party notices, filed on 17 September 1998, the State denied any liability and claimed that the alleged wrongful acts of the police defendants, if committed, were not within the scope of their employment with the State.

(c) On 11 October 1999 the plaintiffs filed, pursuant to leave, an amended writ and pleadings in which they joined the State as a defendant and effectively reproduced against the State the allegations of the police defendants as they were pleaded in their Third Party Notices to which reference has just been made**,** and sought declarations that the State was liable to indemnify the police defendants in respect of any liability they may be found to have to the plaintiffs. Perhaps it is of interest to note that, at or about this time, the Parliament was debating the introduction of s.123 of the Police Regulation Act 1958 ("the Act").

(d) On 2 April 2000 the newly worded s.123 of the Act came into effect.

(e) On 6 October 2000 the police defendants again amended their pleadings alleging that, in raiding the Horvath premises, they acted in the course of their duty and in good faith and, therefore, were entitled to immunity from suit pursuant to s.123 of the Act (and that the State was liable for any damage caused by their impugned conduct).

(f) On 23 October 2000[4], the plaintiffs alleged, specifically, for the first time, in their Reply to the Amended Defence of the State, that the impugned conduct of the police defendants fell within s.123 of the Act and that, as a consequence, the State was liable therefor.

(g) After a trial lasting some forty days and after taking time to consider his decision, the learned trial judge gave written reasons for judgment on 23 February 2001 concluding, inter alia, that the State was not vicariously liable to the plaintiffs, but was liable to them on the basis of "transferred liability" pursuant to s.123 of the Act.

(h) On 29 March 2001 his Honour made the following relevant costs orders:

(i) In proceeding No.5310 of 2001 (the Horvath proceeding) Jenkin and the State were ordered to pay the plaintiffs' costs of the proceeding on a solicitor and client basis on scale D.

(ii) In proceeding No.5311 of 2001 (the Love proceeding) Davison and the State were ordered to pay the plaintiffs' costs of the proceeding on a party and party basis on scale D.

(iii) In proceeding No.5313 of 2001 (the David Kniese proceeding) all of the defendants were ordered to pay jointly and severally the costs of the plaintiffs on a solicitor and client basis on scale D.

(iv) In proceeding No.5312 of 2001 (the Colleen Kniese proceeding) all the defendants were ordered to pay jointly and severally the plaintiffs' costs of the proceeding on a solicitor and client basis on scale C.

(i) On 9 April 2001 the State filed its appeal in each of the four proceedings and on 23 April the learned trial judge granted a stay of the operation of the order for damages (and costs) until the hearing and determination of the appeals.

(j) On 26 February 2002, on the application of the plaintiffs, his Honour lifted the stay on his costs order so that it no longer applied to the costs orders made against the State, and also ordered that interest be paid on such costs at 11.2% per annum from 12 March 2001 to 12 March 2002 and that these costs and interest be paid by the State within fourteen days upon the plaintiffs' solicitor giving a written undertaking to the Court that he would repay such costs in the event that the State's appeals were successful.

(k) Such undertaking was provided and, on 22 March 2002, the State paid to the plaintiffs' solicitor almost $300,000 being the costs of the plaintiffs' trial counsel and interest. Between 1 and 20 July 2002 the State paid to the plaintiffs' solicitor a further $100,000 on account of his costs in respect of the proceedings. After the determination of the appeals, on 11 November 2002, the State sought repayment of those costs, but to date, this has not occurred**.**

23. We are not presently concerned with determining an appeal against the costs order of the trial judge. As a consequence of the outcome of the appeal, that order has necessarily been set aside. On the contrary, we are asked to determine in the light of our reasons, and in the exercise of our own discretion, how and by whom the costs of the trial ought to be paid. The principal question at issue is whether the State's costs below should be paid by one or other of the plaintiffs or police defendants having regard to the fact that the State succeeded in its appeal to which the plaintiffs and the police defendants were respondents. Subject to it exercising the power judicially, the Court has an unfettered discretion to determine whether and by whom those costs are to be paid[5]. Ordinarily, the court will order that the costs follow the event. As Dawson, J. said in Latoudis v. Casey[6]:

"After the Judicature Acts ... [a] successful party in a non-jury case had, in the absence of special circumstances, a reasonable expectation of obtaining an order for costs in his favour, but no right until he obtained the order; nevertheless, it was said that a court should not exercise the discretion against a successful party `except for some reason connected with the case': Donald Campbell & Co. v. Pollack". (Footnotes omitted.)

As Tadgell, J.A. explained in O'Reilly[7] it was accepted in Latoudis that, as a general principle, the Court's power to award costs is exercised for the purpose of compensating (at least in part) the successful party in respect of its costs and not for the purpose of punishing the unsuccessful party.

28. Where, however, the plaintiff succeeds against only one of two or more defendants, the court may, in the exercise of its discretion, order the unsuccessful defendant to pay the costs of the successful defendant either by ordering the plaintiff to pay the costs of the successful defendant and then ordering the losing defendant to pay the plaintiff the costs it is required to pay to the successful defendant, or by ordering the unsuccessful defendant to pay, additionally to the plaintiff's costs, the costs of the successful defendant directly to that defendant. An order in the first form is known as a Bullock order[8] and the one in the second form is a Sanderson order. See, for example, Sanderson[9], Bankamerica Finance Ltd. v. Nock[10]; Reid v. Campbell Wallis Moule & Co. Pty. Ltd.[11], Thorne v. Doug Wade Consultants Pty. Ltd.[12], Johnsons Tyne Foundry Pty. Ltd. v. Maffra Corporation[13].

31. The police defendants were the losing parties below as against the plaintiffs, and on appeal, as against the plaintiffs and as against the State. The plaintiffs, on the other hand, essentially won against the police defendants below and on appeal, but lost against the State at the appellate level. It is in those circumstances that it is necessary to decide whether the State's trial costs are to be paid directly by the police defendants (pursuant to a Sanderson order) or whether the police defendants are to pay the State's trial costs indirectly by way of a Bullock order whereby the plaintiffs are ordered to pay those costs and the police defendants are ordered to recoup to the plaintiffs the costs they have to pay to the State. Thus, the first question for consideration is whether the police defendants should be ordered to pay the State's trial costs and if the answer is yes, it will be necessary to determine if such a payment is to be made directly (pursuant to a Sanderson order) or indirectly (pursuant to a Bullock order).

34. In general terms, a plaintiff who seeks to have the losing defendant pay the costs of the successful defendant pursuant to a Bullock or a Sanderson order must establish that, in the circumstances of the case, it would be reasonable and just for such an order to be made - see for example, Sanderson[14], Reid[15] and Gould v. Vaggelas[16]. Additionally, a court will ordinarily not make such an order unless a number of requirements are satisfied. For example, a costs order in the Bullock or Sanderson form will not be made if the plaintiffs' claims against the two or more defendants are not interdependent or are not, in essence, alternative claims. Thus, for example, in Norwest Refrigeration Services Pty. Ltd. v. Bain Dawes (W.A.) Pty. Ltd.[17], the majority[18] refused[19] to make a Bullock order requiring the unsuccessful defendant (the Co-operative) to indemnify the plaintiff against the costs it was required to pay to the successful defendant (the insurer). Their Honours considered that the plaintiff's unsuccessful claim on the policy was "a straightforward action which was not interdependent with or in any real sense alternative to the claim against the Co-operative." See also in this regard Bankamerica[20]. It is plain enough, we believe, that in this case this requirement is satisfied because the plaintiffs' essential claim against the State was interdependent with, and was essentially alternative to, its claim against the police defendants. Unless the plaintiffs established that the police defendants had acted tortiously as alleged, the question whether the State was liable pursuant to s.123 of the Act (or at all) in respect of that conduct would not have arisen for consideration.

37. If that requirement is satisfied, a plaintiff who seeks a Bullock or a Sanderson order must also ordinarily show that it was reasonable for him to have joined the successful defendant and that the conduct of the unsuccessful defendant was such as to make it just to require him to indemnify the successful defendant. In Gould v. Vaggelas, for example, Gibbs, J. said[21]:

"It is sometimes said that the court may make an order of that kind - a Bullock order - where it was reasonable in all the circumstances for the plaintiff to bring the action against two or more defendants: see The Supreme Court Practice (U.K.) 1982, par. 62/2/39 and _Halsbury's Laws of England,_4th ed., vol. 37, par.219. There are some statements in the authorities which appear to support that view, including the judgment of Latham C.J. in Johnsons Tyne Foundry Pty. Ltd. v. Maffra Corporation. In my respectful opinion, however, the mere fact that the joinder of two defendants was reasonable does not mean that the unsuccessful defendant should be ordered to pay, directly or indirectly, the costs of the successful defendant. Obviously a judge should make a Bullock order only if he considers it just that the costs of the successful defendant should be borne by the unsuccessful defendant, and, if nothing that the unsuccessful defendant has said or done has led the plaintiff to sue the other defendant, who ultimately was held not to be liable, it is difficult to see any reason why the unsuccessful defendant should be required to pay for the plaintiff's error or overcaution. The ground on which a Bullock order may be made is, in my opinion, more accurately stated in a passage in Sanderson v. Blyth Theatre Co which was cited with approval in Bullock v London General Omnibus Co. and Hong v. A. & R. Brown, viz., that the costs which the plaintiff has been ordered to pay to the defendant who succeeded, and which the plaintiff recovers from the defendant who has failed `are ordered to be paid by the unsuccessful defendant, on the ground that ... those costs have been reasonably and properly incurred by the plaintiff as between him and the [unsuccessful] defendant'. In Johnsons Tyne Foundry Pty. Ltd. v. Maffra Corporation, Williams J. stated the principle in a similar way and Starke and Dixon JJ., in giving their reasons for making a Bullock order, both relied on the circumstance that the attitude adopted by the successful[22] defendant had induced the plaintiff to join the other defendant. In my respectful opinion the true position was clearly stated by Blackburn C.J. in Steppke v. National Capital Development Commission, when he said that `there is a condition for the making of a Bullock order, in addition to the question whether the suing of the successful defendant was reasonable, namely that the conduct of the unsuccessful defendant has been such as to make it fair to impose some liability on it for the costs of the successful defendant.'" (Footnotes omitted)

The test was expressed in slightly differently terms by Brennan, J.[23] and by Wilson, J.[24] although their formulation of it does not detract from the utility of the above two step analysis favoured by Gibbs, C.J. in the appropriate case. Such an approach was adopted by Callaway, J.A.[25] in McCracken & McCracken v. Pippett (No.2)[26] on the basis, as his Honour said, that it was "convenient" for the purposes of the case before the Court to do so. His Honour warned[27], however, that:

"... it would not always be convenient and it could lead to error. It is easy to think of circumstances in which the reasonableness of bringing suit might be directly related to conduct on the part of the unsuccessful defendant. In truth there is a single question, namely whether it is fair, as between the plaintiff and the unsuccessful defendant, that the latter should pay the successful defendant's costs. Prima facie, the unsuccessful defendant should not have to do so. There must, as Gibbs, C.J. and Blackburn, C.J. recognized, be something about his or her conduct that makes it appropriate to shift the incidence of the successful defendant's costs. The plaintiff, after all, has been unsuccessful too."

43. In our view, it is convenient to adopt this two-step analysis for the purpose of determining whether the police defendants here should be ordered to pay the State's trial costs. That reasonableness in joining the successful defendant is a basis of the court's exercise of its discretion as to what form the costs order ought to take, has been recognised by Kaye, J. in Altamura v. Victorian Railways Commissioners[28]. His Honour said[29]: "The basis for the court's exercise of its discretion to make such an order for costs in favour of a plaintiff is that he should be indemnified for all expenditure reasonably and properly incurred by him [or her] in procuring judgment". We take his Honour as saying in that passage no more than that one of the prerequisites for a Bullock or a Sanderson order is that the plaintiff has acted reasonably in joining the successful defendant in the action. Thus, we turn first to examine whether it was reasonable for the plaintiffs to have joined the State as defendants. Not surprisingly, perhaps, it was urged for the State that the plaintiffs' conduct in that regard was not reasonable. In particular, Mr. Kaye argued that the plaintiffs' claims that the State was vicariously liable for the alleged torts of the police defendants or that it was otherwise bound to indemnify them, were hopeless. It was said that the indemnity claim was bad in law and that the vicarious liability claim could not have succeeded because the police defendants plainly exercised an independent discretion in respect of their impugned acts. Moreover, it was said for the State, that the misconduct alleged against the police defendants was inconsistent with their having acted necessarily or reasonably in the course of their duty and in good faith, so that it should have been plain that s.123 of the Act would have no application to the alleged wrongful conduct of the police defendants.

46. In our view, however, given the circumstances of the case, it was reasonable for the plaintiffs to have joined the State as defendant. As Mr. Dreyfus for the plaintiffs submitted, it was not only reasonable, but necessary, for this to have occurred given that the police defendants had first joined the State as a Third Party and levelled against it the claims referred to above. In particular, the plaintiffs pointed to the fact that it was the police defendants who first pleaded s.123 of the Act as against the State. Once that occurred, said the plaintiffs, they virtually were bound to join the State as a defendant because, had the claim of the police defendants in that regard been successful, the plaintiffs could not have obtained judgment against any of the then existing defendants notwithstanding that they might have made out their case. Such is the nature of s.123 which grants immunity to police officers and transfers their liability to the State. Thus, it was the police defendants who first raised the issue whether the State was bound to indemnify them because it was vicariously liable for their conduct or by virtue of the operation of s.123 of the Act. The plaintiffs essentially came in on their "coat tails" to join the State as defendant and to press those matters at trial. Even if one assumes that the claims against the State that were based on vicarious liability were hopeless, they were effectively overtaken very shortly after they were first raised by those based on s.123 of the Act. As we have already noted, the latter claim was first raised by the police defendants and it became a substantial issue at the trial (and later, on appeal). As things transpired, such claims were not upheld on appeal, but they did find favour with the experienced trial judge. Thus, in the circumstances, it could not be said that, viewed at the time of the relevant amendments, the plaintiffs' act of relevantly aligning themselves with the police defendants and alleging that their impugned conduct fell within s.123 of the Act was so unreasonable as to make it unfair to require the police defendants to pay the State's costs. On the contrary, this was the first time upon which the width of the immunity from liability of police officers provided by s.123 of the Act had fallen to be considered by a court. It was an issue which was not only of vital significance to the police defendants in this case, but to police officers generally; and it was an issue of equal importance to the State.

49. Moreover, in considering the question, it is necessary to bear in mind that, as Tadgell, J. has pointed out in Reid[30], it has been the court's policy to encourage plaintiffs to join in the one proceeding, defendants against whom claims are made jointly, severally or alternatively - see r.9.02 of the Rules of Court. As Asche, C.J. explained in Lackersteen v. Jones (No.2)[31]:

"... the court should, in the exercise of its discretion balance overall two considerations of policy: the first, that an unnecessary multiplicity of actions should not be forced on litigants, so that a plaintiff who acts reasonably in joining two or more defendants should not be penalised or lose the fruits of his victory in costs on the basis that he should have either elected or taken separate actions; secondly that an unsuccessful defendant should not have to bear more than one set of costs merely because he is unsuccessful."

In that case the plaintiff brought an action against two police officers for the torts of wrongful arrest, false imprisonment and assault. The plaintiff had joined the Crown as defendant on the basis that it was vicariously liable for the impugned police conduct. The police defendants denied the allegations made against them and raised a defence under s.162 of the Police Administration Act 1978 (N.T.) which would have effectively absolved them of any liability on the basis that the acts they carried out were in performance of their duties as police officers. They also served notices of contribution against the Crown. After a trial, judgment was given for the plaintiff against the police defendants and they were ordered to pay the plaintiff's costs of the action. The judge, however, dismissed the plaintiff's claim against the Crown. On the question of costs, Asche, C.J. considered[32] that, since it was the defendants who "involved" the Crown in the action, the plaintiff's costs against the Crown were reasonably and properly incurred and that, in all the circumstances, a Sanderson order should be made requiring the unsuccessful defendants to pay the Crown's trial costs.

54. Having regard to the circumstances in which the State was joined as defendant in this case, to which we have already referred, we consider that the plaintiffs acted reasonably and properly in that regard. We are also of the view that the conduct of the police defendants was such as to make it just in all of the circumstances that they should, directly or indirectly, pay the State's trial costs. It was they who introduced into the proceedings the relevant claims against the State. It was also their impugned conduct that was at the very heart of the trial. It raised factual and legal issues in respect of which they failed at trial but which were largely responsible for its length and complexity. Consequently, we consider that it would be appropriate to order that the police defendants pay the State's costs of the trial. The remaining question is, what form should such an order take.

57. Where the court concludes that the losing defendant should bear the costs of the successful defendant, it is entirely within its discretion, subject to it being exercised judicially, whether it makes the relevant costs order in the Bullock or Sanderson form. See, for example, Sanderson[33], Mayer v. Harte[34], Bankamerica[35] and Vucadinovic[36]. Ordinarily, there is no practical difference between the two forms of order, but that is usually not so where the losing defendant is insolvent or, as here, where there is at least a real risk that he is impecunious. In those circumstances, it seems that the insolvency (or the impecuniosity) of the losing defendant is taken into account, as part of the overall circumstances, for the purpose of determining which form of costs order should be made as a matter of fairness. In that context, it would ordinarily be appropriate to have regard to the comparative hardships that will be experienced by the relevant parties from one or other form of the costs order. But that is only one of the matters to be considered, along with factors such as the relevant conduct of the losing defendant in relation to the proceeding and whether the plaintiff had acted reasonably in joining the successful defendant to the proceeding as well as other matters relevant to determining what form of order would be just in the circumstances.

60. In Mayer v. Harte, for example, although the court had regard to the impecuniosity of the losing defendant when it came to consider what form of costs order should be made, the resolution of that issue turned primarily on the court's view as to the appropriateness of the plaintiff's conduct in prosecuting the proceeding. In that case the trial judge ordered that the plaintiff pay the costs of the two successful defendants and made a Bullock order in her favour against the losing (insolvent) third defendant. His Honour had declined to make a Sanderson order which meant, of course, that the plaintiff was most unlikely to recover from him the costs she was required to pay to the two successful defendants. The majority of the Court of Appeal[37] refused to interfere with the judge's discretion. Their Lordships were not satisfied that his Honour failed to take the insolvency of the third defendant into account when exercising his discretion on the question of costs and there was no other relevant error of principle that was said to have vitiated his discretion. Their Lordships went on to say that, even if the judge's discretion had miscarried and they were called on to exercise it in his place, they would have reached the same result and not made a Sanderson order because, essentially, the plaintiff insisted on pressing her case and thus incurred costs in a four party action that were wholly disproportionate to the small amount in issue. The clear inference from their Lordships' decision is that they considered that the plaintiff's conduct in prosecuting the case was such that fairness required her to bear the costs of the successful defendants (with a costs order over as against the losing defendant) notwithstanding that there was unfairness in the plaintiff not being able to recover those costs from the losing defendant.

63. Similarly, in Vucadinovic, although the impecuniosity of the losing defendant was taken into consideration on the question what form of costs order should be made, it was but one of the matters to which Pape, J. had regard in resolving this issue. The plaintiff's conduct in prosecuting her claim in the prevailing circumstances seems to have assumed the greater significance. In that case the plaintiff suffered minor physical injuries as the result of a collision between a taxi in which she was a passenger and which was driven by the first defendant and a motor truck which was driven by the second defendant. The jury returned a verdict against the first defendant only and assessed the plaintiff's damages at $7,500. His Honour accepted that the plaintiff acted reasonably in joining the successful defendant in the proceeding and recognised[38] the unfairness that would flow to her if she were required to pay the successful defendant's costs and only have a right to recover them from the seemingly impecunious losing defendant by way of a Bullock order. On the other hand, said his Honour, the plaintiff knew or ought to have known, at least from the time when the trial commenced that, save for limited insurance proceeds, the unsuccessful first defendant had no assets to speak of and that there was a risk of her failing against the second defendant and of being ordered to pay his costs without a real prospect of being able to recover them from the first defendant. Notwithstanding those circumstances, the judge pointed out, the plaintiff effectively elected to proceed with the action which occupied four sitting days. His Honour said[39] that, in all of the circumstances, he could not see why unfairness should be imposed on the successful defendant (by ordering the unsuccessful defendant to pay his costs) in order to be fair to the plaintiff. The learned judge considered that the "ordinary rule" that costs should "follow the event" ought to apply, which required the unsuccessful plaintiff to pay the successful defendant's costs. He ordered accordingly and made a Bullock order in the plaintiff's favour as against the impecunious losing defendant.[40]

66. In Bankamerica, on the other hand, the House of Lords resolved the issue of what form the costs order should take essentially by reference to the extent of the hardship that would flow to the competing parties (the plaintiff and the successful defendant) from a Bullock or a Sanderson order. The question whether the plaintiff's behaviour was inappropriate did not arise for consideration. In that case the plaintiff finance company won against the defendant dealer which was, by the time of the trial, insolvent. It failed, however, against the defendant hirer who succeeded in his counterclaim against the plaintiff and who sought a Bullock order whereby the plaintiff would pay its costs. The trial judge refused to make such a costs order and instead made a costs order in the Sanderson form which required the losing (insolvent) defendant dealer to pay the hirer's costs. This decision was upheld by the House of Lords. Lord Brandon of Oakbrook, who made the leading speech, rejected the hirer's contention that since he succeeded at the trial costs should have followed the event and that his costs should have been paid by the plaintiff. Applying Mayer v. Harte, their Lordships held that, where the judge has the power to make a Bullock or a Sanderson order, the choice between them was a matter for his discretion although it was accepted that the insolvency of the unsuccessful defendant dealer was a factor that was relevant to the exercise of that discretion. Like the trial judge, their Lordships balanced the extent of the hardship that would flow to the plaintiff if it were made to pay the successful defendant's costs (with a right to recover them from the losing defendant pursuant to a Bullock order) with that which would be experienced by the successful defendant if a Sanderson order were made requiring the unsuccessful, but insolvent, defendant to pay its costs. They concluded that, in relative terms, less hardship or injustice would result from a Sanderson order than from a Bullock order. Consequently, their Lordships came to the view that it could not be said that, in the exercise of his discretion, the trial judge could not have made a Sanderson order but was bound to have made a Bullock order.

69. In the present case there is some indication that the police defendants would be unable to meet any substantial costs order that might be made against them. Hence, their relative impecuniosity becomes a relevant factor in determining what form of costs order should be made here. It seems plain enough that, given the circumstances, the State will suffer unfairness if its trial costs were to be the subject of a Sanderson order. Such a costs order will effectively compel it to bear its own costs notwithstanding that it ultimately succeeded in the proceeding. On the other hand, there would be unfairness to the plaintiffs if they were required to pay the State's trial costs pursuant to an order in the nature of a Bullock order. In those circumstances, they would not only have to bear their own costs of the trial, but they would have to pay those of the State without being able to recoup them from the police defendants. Be that as it may, as has already been explained, these matters are only some of the factors which go to the resolution of the immediate question. The other matters include the fact that it was reasonable for the plaintiffs to have joined the State as a defendant in the proceedings, that such a course was effectively precipitated by the police defendants and that the plaintiffs have succeeded in establishing their claim after a closely contested and long trial, the bulk of which was taken up with the examination of the impugned conduct of the police defendants. In all of the circumstances, it seems to us that the requirements of justice and reason would be best met by a costs order in the Sanderson form which requires the State's trial costs to be paid directly by the police defendants.

73. We now turn to consider the basis on which the plaintiffs' costs below should be taxed. It will be recalled that the learned trial judge ordered that the plaintiffs' costs as against the various police defendants, except Love, be taxed on a solicitor and client basis and in relation to all of the plaintiffs, other than Colleen Kniese, the judge ordered that such costs be assessed by reference to scale D of the County Court scale of costs. In the case of Colleen Kniese, his Honour ordered that her costs be taxed by reference to scale C. Those orders were made, of course, in the context of the decision to transfer the liability of the police defendants for their wrongful conduct to the State under the Act. As a consequence of this Court's reasons, however, the only orders for damages that continue to operate are those made by his Honour against the individual police officers (other than the order against Davison for malicious prosecution). In light of these developments the question of the appropriate orders to be made in respect of the plaintiffs' trial costs, is to be determined afresh by this Court.

76. It was submitted for the plaintiffs that, even though the costs question had to be considered afresh, his Honour's orders in relation to them should effectively stand. The police defendants, on the other hand, claimed that, save for the costs of Horvath and David Kniese in relation to their respective claims against Jenkin (which they agreed should be taxed on a solicitor and client basis) all costs to which the plaintiffs are entitled should be taxed on a party and party basis. These contentions were, in part, based on the effect of the application of "offers of compromise" upon the re-structured orders required by this Court's decision. The police defendants also submitted that, where the damages in question are less than $50,000, they should be assessed by reference to scale C and not scale D. Thus, there is no issue in respect of the police defendants' first contention so far as Love's entitlement to costs is concerned. Similarly, there is no issue as to the scale on which the costs of Colleen Kniese are to be assessed.

79. Ordinarily, costs are awarded on a party and party basis, but the court has the discretion to order that they be assessed on a solicitor and client basis where it is satisfied that the circumstances of the case are "special" or "exceptional" such that the justice of the situation warrants a departure from the usual order[41]. In Bass, Winneke, P. stressed[42] the unlimited nature of this discretion, although his Honour recognised that it must be exercised judicially and not unreasonably. Without in any way seeking to limit the ambit of this discretion, Sheppard, J. usefully identified in Colgate Palmolive[43] some of the circumstances which have been thought to warrant the exercise of discretion to award indemnity costs. Broadly, they include the situation where the losing party has engaged in unmeritorious, deliberate, high-minded or other improper conduct such as to warrant the court showing its disapproval, although not seeking to impose punishment, and at the same time preventing the successful party being left out of pocket[44].

82. In the present case, the behaviour of the police defendants which gave rise to the proceedings against them was, at the very least, high-handed. By engaging in the unlawful behaviour as found by the learned trial judge, they effectively abused the considerable power that was vested in them in the public interest. Their conduct of the proceedings was also unmeritorious. Not only did they strongly contest the plaintiffs' allegations concerning their conduct, which they were obviously entitled to do, but they also filed counterclaims (which were rejected by the trial judge) and, as his Honour found, they gave evidence on critical matters which he disbelieved. In short, their conduct of their case added considerably to the length and complexity of the trial. It is true, as we have said, the police defendants were entitled to defend strongly the claims that were made against them, but it does not follow that their conduct in the proceeding must be overlooked for the purpose of determining the question of costs. By taking such matters into account in the course of exercising its wide discretion as to costs, the Court does not thereby impose any relevant punishment on the police defendants for their conduct in prosecuting the defence as has been contended for by Mr. Wheelahan for Christensen. Rather, in taking those matters into account the Court has regard to them as part of the overall circumstances to which it must have regard for the purpose of determining whether it would be unfair in the overall context for the successful plaintiff to be out of pocket as to its costs.

85. In this case, the trial judge was in the best position to gauge the impact of the police defendants' conduct of the proceedings on their length and complexity. He no doubt took that and other relevant matters into account in determining that the trial costs of the plaintiffs (other than Love) should be paid on a solicitor and client basis. Although we are not bound by the judge's conclusion on that issue, we consider it relevant to our consideration notwithstanding that his Honour specifically recognised in his reasons of 29 March 2001[45] that if the State were to succeed in its appeal, "the whole regime of costs liability in these proceedings will have to be re-visited."

88. We are of the view that, in all of the circumstances of the case, the judge's order that the police defendants pay the trial costs of the plaintiffs, other than Love, on a solicitor and client basis should effectively stand.

91. We now turn to the question, on what County Court scale should the plaintiffs' costs be assessed? The decision of the trial judge that the plaintiffs' costs (other than those of Colleen Kniese) be taxed on scale D was made in the context where each such plaintiff secured an award of damages which exceeded $50,000 so that it was clearly appropriate to assess those costs in accordance with that scale. The consequence of our decision, however, is that the damages awarded as between individual plaintiffs and police defendants in some cases are below $50,000, being the amount which is the upper limit of scale C. Hence, it was argued for the police defendants that in such cases the plaintiffs' costs should be taxed on the lower scale C.

94. The Court has a wide, and relevantly unfettered, discretion to determine on what scale the successful plaintiffs' costs should be assessed.[46] We have come to the view that, given the particular circumstances of this case to which we refer below, it is appropriate to order that the trial costs of the plaintiffs (other than those of Colleen Kniese) be assessed on scale D notwithstanding that in some instances, the damages in question are below the upper limit of that scale. The four proceedings arose from the same set of incidents and were heard together. Importantly, there was a substantial overlap between them in terms of work done and costs incurred. Moreover, the amounts claimed by way of damages were substantial and all of the proceedings involved complex factual and legal issues. In the circumstances, therefore, we consider it appropriate that the trial costs of the plaintiffs (other than those of Colleen Kniese) be taxed by reference to scale D. We mention for completeness that, in our view, there is a sense of impracticality in ordering, as the police defendants submitted, that the costs of Horvath, for example, in relation to the damages awarded in her favour against Jenkin be taxed on scale D whereas the costs in relation to the damages awarded in her favour against the four police defendants jointly and severally, be taxed on scale C. (A like submission was made in respect of the two sets of damages awarded in favour of David Kniese.)

98. Save for the appeal of Davison against the order made by the judge in respect of the claim for malicious prosecution, these appeals ultimately raised for consideration only questions going to the irregularities which were said to infect his Honour's orders. Those "irregularities" have now been corrected in the orders which this Court proposes to make. In those circumstances, we think that it is not appropriate, as Mr. Holdenson contended, that in respect of the appeals numbered 5316, 5318 and 5319 to order (as is suggested in the draft minutes) that the appellants should pay the respective first respondent's costs of these appeals.

102. These reasons should enable the parties to complete appropriate minutes of the necessary orders and, unless there is a need for us to hear oral argument in relation to them, they can be submitted to the Court in the usual way.

[1] The expression derives from the case Sanderson v. Blyth Theatre Company [1903] 2 K.B. 533.

[2] Although, as we have said, the State's primary case was that the plaintiffs be ordered to pay its trial costs, Mr. Kaye for the State argued in the alternative that, if we were not prepared to order only that the plaintiffs pay the State's trial costs, we should make a Bullock, but not a Sanderson, order whereby the plaintiffs paid its trial costs but had the benefit of an order over for those costs against the police defendants.

[3] On 6 June 1997 in the case of Horvath and Love and on 5 May 1998 in the case of Colleen and David Kniese_._

[4] Being the date of the commencement of the trial.

[5] See s.78(1) of the County Court Act 1958 and r.64.24(1) of the Rules of Court.

[6] [1990] HCA 59; (1990) 170 C.L.R. 534 at 557 (with whom Brennan, J. agreed at 544-5). See also Mason, C.J. at 544 and McHugh, J. at 569 to like effect**.** Although the court in Latoudis was primarily concerned with whether the magistrate erred in awarding costs to a successful defendant in a criminal prosecution, what Dawson, J. said above nevertheless reflects the practice pursuant to which costs are awarded to the successful party. As to that, see also Oshlack v. Richmond River Council [1998] HCA 11; (1998) 193 C.L.R. 72. See also the discussion by Ormiston, J.A. in Transport Accident Commission v. O'Reilly [1998] VSCA 106; [1999] 2 V.R. 436 at 456-457 concerning the nature and ambit of the court's discretion to award costs.

[7] [1998] VSCA 106; [1999] 2 V.R. 436 at 442.

[8] The expression derives from the case of Bullock v. The London General Omnibus Company [1907] 1 K.B. 264.

[9] At 539 per Romer, L.J. and at 542 per Stirling, L.J.

[10] [1988] 1 A.C. 1002 at 1010-1011 per Lord Brandon of Oakbrook with whom the other members of the House of Lords agreed.

[11] [1990] VicRp 76; [1990] V.R. 859 at 876 per Tadgell, J.

[12] [1985] VicRp 48; [1985] V.R. 433 at 500 per Kaye and Marks, JJ.

[13] [1948] HCA 46; (1948) 77 C.L.R. 544 at 572-573 per Williams, J.

[14] At 539 per Romer, L.J. and 543 per Stirling, L.J.

[16] [1984] HCA 68; (1985) 157 C.L.R. 215 at 229-230 per Gibbs, C.J.

[17] [1984] HCA 59; (1985) 157 C.L.R. 149.

[18] Gibbs, C.J., Mason, Wilson and Dawson, JJ.

[22] The reference to the "successful" defendant is plainly a typographical error. It is plain that their Honours in Johnsons Tyne Foundry relevantly spoke of the unsuccessful defendant and that Gibbs, C.J. in Gould did likewise. The latter point is put beyond doubt by the next sentence in the Chief Justice's judgment in which he quotes with approval a passage from the judgment of Blackburn, C.J. in Steppke which deals with the "conduct of the unsuccessful defendant" being "such as to make it fair to impose some liability on it for the costs of the successful defendant".

[24] At 247, with whom Murphy, J. agreed at 232.

[25] With whom Batt and Chernov, JJ.A. agreed.

[26] [2000] VSCA 20 at [9]- [11].

[28] [1974] VicRp 4; [1974] V.R. 33.

[31] [1988] NTSC 72; (1988) 93 F.L.R. 442 at 449.

[33] At 539 per Romer, L.J. and 542 per Stirling, L.J.

[34] [1960] 1 W.L.R. 770 at 778-779 per Willmer, L.J. and 782-783 per Sellers, L.J.

[36] [1967] VicRp 10; [1967] V.R. 81 at 86-87 per Pape, J.

[40] We note that, at 86 of the report of the case, his Honour is recorded as saying (after a reference to Mayer v. Harte) that it would be "a faulty exercise of the discretion to refuse to award a successful defendant costs against an unsuccessful plaintiff solely because it had been shown that the plaintiff had no assets and was unemployed." (Emphasis added) It seems to us that the reference to "plaintiff" in this passage is the result of a typographical error. His Honour could only have been referring in that passage to the unsuccessful first defendant and not to "the plaintiff". The impecuniosity of the plaintiff would obviously be of no relevance to the exercise of the discretion, whereas the same could not be said of the impecuniosity of the losing defendant. Thus, it is likely that his Honour was referring in that passage to the unsuccessful defendant and not to the plaintiff as the report shows. That this is so is effectively confirmed in the next sentence of the judgment in which his Honour speaks of the "only evidence" of the financial position as being that of the losing defendant, thus making it clear that, in the passage in question, he was speaking of that party and not about the plaintiff.

[41] See Andrews v. Barnes (1888) 39 Ch.D. 133 at 141; In re Bradshaw; Bradshaw v. Bradshaw [1902] 1 Ch. 436 at 450; Australian Transport Insurance Pty. Ltd. v. Graeme Phillips Road Transport Insurance Pty. Ltd. (1986) [1986] FCA 85; 10 F.C.R. 177 at 178; Fountain Selected Meats (Sales) Pty. Ltd. v. International Produce Merchants Pty. Ltd. [1988] FCA 202; (1988) 81 A.L.R. 397 at 400-401 per Woodwood, J.; Colgate Palmolive Co. v. Cussons Pty. Ltd. (1993) [1993] FCA 536; 46 F.C.R. 225 at 233; MGICA (1992) Ltd. v. Kenny & Good Pty. Ltd. (No.4) (1996) 140 A.L.R. 707 at 711; Spencer v. Dowling [1996] VSC 51; [1997] 2 V.R. 127 at 163 per Callaway, J.A. cited with approval by Winneke, P. in Bass Coast Shire Council v. King [1997] 2 V.R. 5 at 29.

[44] See also Australian Guarantee Corporation Ltd. v. De Jager [1984] VicRp 40; [1984] V.R. 483 at 502 per Tadgell, J.

[46] See s.78(1) of the County Court Act 1958 and r.64.22(2) of the Rules of Court. See also Prior v. Landsdowne Press Pty. Ltd. [1977] VicRp 6; [1977] V.R. 65 at 76 per Gowans, J.