Payment of costs forthwith - the principles
13 The general principle is that costs are resolved when the rights of the parties are finally determined and the proceedings are concluded. O 62 r 3 of the Federal Court Rules concerns the time when costs are to be dealt with by the Court. It provides as follows:
(1) The Court may in any proceeding exercise its powers and discretions as to costs at any stage of the proceeding or after the conclusion of the proceeding.
(2) Where the Court makes an order in any proceeding for the payment of costs the Court may require that the costs be paid forthwith notwithstanding that the proceeding is not concluded.
(3) An order for costs of an interlocutory proceeding shall not, unless the Court otherwise orders, entitle a party to have a bill of cost taxed until the principal proceeding in which the interlocutory order was made is concluded or further order. (Emphasis added)
The Court has a power to order costs at any stage and can require those costs to be paid "forthwith", after determination of an interlocutory issue. Usually an order for costs of an interlocutory proceeding is not made until the principal proceeding is finalised, as provided by r 3(3) so that multiple taxations can be avoided, the funds of an opposing party are not exhausted at an early stage and to avoid a situation where the successful party would be prevented from setting off the judgment against an earlier order to pay costs.
14 The nature of the power to order that costs be paid forthwith was recently considered by Besanko J in Rafferty v Time 2000 West Pty Ltd (ACN 127 893 270) (No 3) (2009) 257 ALR 503. His Honour ordered the respondents to pay the applicant's costs of a notice of motion but refused to order that the costs be paid forthwith. As to the applicable principles, his Honour said:
20 The general rule, which is embodied in O 62 r 3(3), is that the costs of an interlocutory proceeding are not to be taxed until the principal proceeding is concluded or until further order. The general rule serves a number of purposes. First, it avoids multiple taxations in a proceeding. Secondly, it avoids the apparent unfairness which may arise where, at an early stage of a proceeding, a party who is ultimately successful is required to pay costs to a party who is ultimately unsuccessful. Finally, it prevents interlocutory proceedings being used as a weapon to exhaust the financial resources of one of the parties.
21 At the same time, the court may order that costs be paid forthwith, and the cases suggest that that power may be exercised in circumstances in which there is an element of unreasonableness in the conduct of the unsuccessful party, and it is likely that there will be a long delay between the interlocutory proceeding and the conclusion of the principal proceeding. One example of the former which has been discussed in the cases is where an unsuccessful party makes multiple attempts to plead its case. It seems to me that another consideration which may be relevant to the question of whether an order should be made that the costs of an interlocutory proceeding be paid forthwith is the nature of the interlocutory proceeding and the likely quantum of the costs involved. It seems to me that if the interlocutory proceeding is a substantial one and the costs payable are substantial then that may be a matter which, together with other matters, may lead to an order being made that the costs of the interlocutory proceeding be paid forthwith.
22 Each party referred me to a number of cases which discuss the relevant principles. The respondents emphasised statements to the effect that the court's power to order that the costs of an interlocutory proceeding be paid forthwith is exercised only in very special circumstances (Vasyli v AOL International Pty Ltd (unreported, Lehane J, 2 September 1996)). The applicants referred to statements in the authorities to the effect that the power to order that the costs of an interlocutory proceeding be paid forthwith should be used less sparingly than it has in the past: (Airservices Australia v Jeppesen Sanderson Inc [2006] FCA 906 at [31] per Graham J).
23 In addition to the authorities which I have mentioned, I refer to Spotwire Pty Ltd v Visa International Service Association (No 2) [2004] FCA 571 at [103]-[109] per Bennett J; IO Group Inc v Prestige Club Australasia Pty Ltd [2008] FCA 1147 at [20]-[25] per Flick J; McKellar v Container Terminal Management Services Ltd [1999] FCA 1639 at [13]-[20], [24], [41] per Weinberg J; Australian Securities and Investments Commission v Mining Projects Group Ltd (No 3) [2008] FCA 952 at [24] per Gordon J; and Jianshe Southern Pty Ltd v Cooktown Pty Ltd (No 2) [2007] FCA 903 at [35].
15 Three comparatively recent examples of where parties have been ordered to pay costs forthwith are as follows.
16 In Life Airbag Company of Australia Pty Ltd v Life Airbag Company (New Zealand) Ltd [1998] FCA 545 Branson J concluded at page 12 that costs should be paid forthwith "where a party has been required to incur significant costs over and above those which it would have incurred had the opposing party acted in the handling of the proceeding with competence and diligence." In Life Airbag the applicants filed five different versions of a statement of claim within nine months and the respondents incurred the costs of instructing counsel to attend at Court on strike out applications. These costs were viewed by her Honour as "costs in reality thrown away and in respect of which, in my view, the demands of justice may require a departure from the general practice envisaged by O 62 r 3." Justice Branson also, in ordering costs to be paid forthwith, thought that the issues were complex and that a hearing date could not realistically be expected for many months in the future. There was, in that case, suggestion by the applicants that such a departure from the ordinary rule may well stifle the proceedings, however, her Honour stated at page 13:
I conclude that in the circumstances of this case, the interests of justice require that there be a departure from the ordinary rule that an order for costs of interlocutory proceedings does not entitle a party to have a bill of costs taxed, and the costs paid, until the principal proceeding is concluded. In so concluding I do not overlook the suggestion put forward on behalf of the applicants that such a departure from the ordinary rule may have the effect of stifling the proceedings. I am not satisfied that it would necessarily have such an effect. However, even if I were, my conclusion would not alter. (Emphasis added)
17 Justice Weinberg in McKellar v Container Management Services Limited [1999] FCA 1639 found that almost a year had been wasted in the proceeding, mainly because of serious defects in the applicants' pleading. The amended statement of claim was found at [9] to be "so plainly defective in both its style and manner of pleading, and so confusing and poorly drafted," that it was struck out in its entirety. In the further amended application the number of respondents was increased from eleven to thirty-four. In the further amended statement of claim the applicants entirely abandoned a number of claims and pleaded a significantly different case. His Honour did not consider that the respondents should have to wait for up to two years before they could recover costs expended in taking time consuming steps to ensure that a pleading, which ought never to have been filed, was struck out. These were costs which were thrown away. The cost awarded to the respondents previously, as well as the costs of and incidental to the motions before the Court were ordered to be taxed and paid forthwith.
18 In Airservices Australia v Jeppesen Sanderson Inc [2006] FCA 906 Graham J held at [32]:
The making of an order under Order 62 rule 3 is justified where, through no fault of a party, such as the first and second respondents in the present case, there has been substantial delay in the proceedings because an applicant has attempted a number of versions of the Application and the Statement of Claim, additional directions hearings have taken place which should not have been necessary, interlocutory steps have been taken and applications have been brought unnecessarily given the changes to the pleadings that have occurred.
His Honour at [32] referred to the decision in All Services Australia Pty Ltd v Telstra Corporation Ltd (2000) 171 ALR 330. In that matter Kiefel J at [11] considered an order under O 62 r 3 was justified where "a party in whose favour costs orders have been made to date should not be required to wait until the finalisation of the proceedings to obtain payment of them", particularly where there have been substantial delays in the proceedings, most commonly caused by unsatisfactory attempts to plead a case requiring additional and unnecessary direction hearings. Graham J in Airservices Australia at [33] held that the circumstances clearly brought the case into the category "where, if costs are to be ordered by reference to the changes that have been proposed or made to the Application and/or pleadings of the applicant, then justice requires" that the applicant who has put the respondents to unnecessary expense should pay such costs as are thrown away and these should be paid forthwith.