What Types of Legal Costs Can Be Ordered in NSW Civil Cases?

In the long running battle to save his reputation, Ben Roberts-Smith has suffered a significant financial blow with a judge ordering him this week to pay the legal costs of several media outlets after his failed defamation suit.

The Federal Court ruled earlier this year that the articles published by Nine newspapers and The Canberra Times alleging Mr Roberts-Smith’s involvement in four murders while deployed in Afghanistan were substantially true. 

Justice Besanko was also satisfied that an allegation of bullying was true. And although he said there was not enough evidence to support an allegation of domestic violence, the Judge contended that Mr Roberts-Smith’s reputation could not have been further harmed, due to the context of the overall judgement. 

It’s important to note that the case was a defamation suit, not a criminal trial. 

Ben Roberts-Smith has never been criminally charged, and he is appealing the ruling by the Federal Court, with his appeal likely to be heard early next year. 

Costs on an ‘indemnity basis’ 

In the meantime, Justice Besanko has ordered that Ben Roberts-Smith must now pay the media outlets legal costs on an indemnity basis. This ruling essentially aims to compensate the media parties for the significant expenses incurred during proceedings.

The case was one of the longest-running in Australia’s history – more than 100 days of court sittings – and potentially also one of the most expensive, with estimates in the tens of millions spend by each party defending their positions. 

It’s somewhat sad and ironic that the man who brought war crimes being conducted by Australian SAS soldiers in Afghanistan to the attention of the media has only recently pleaded guilty to three charges relating to theft of commonwealth property and sharing this information to journalists.

Types of legal costs that can be ordered in NSW civil cases

Section 98 of the Civil Procedure Act 2005 (NSW) empowers New South Wales courts to make orders with respect to costs. 

As a general rule, costs “follow the event”, that is, there is a “reasonable expectation” that the successful party in a proceeding will be awarded costs against the unsuccessful party: Northern Territory v Sangare (2019) 265 CLR 164 at [25].

The event is generally the finalisation of a case.

Types of costs orders

 The most common types of costs ordered are:

• Ordinary costs; and
• Indemnity costs

Ordinary costs

Ordinary costs, which are also known as ‘party/party’, entitle the successful party to recover “a fair and reasonable amount” for the legal costs and disbursements that were reasonably incurred in the conduct of the proceedings.

Party/party costs do not cover all the expenses incurred by the successful party in a proceeding. As a general rule of thumb, these costs only cover about 75% of expenses incurred by the successful party.

Indemnity costs

Indemnity costs cover almost costs incurred by the successful party in a proceeding. These costs are awarded on a discretionary basis (meaning a judge decides whether or not to make an indemnity costs order).

Factors which are relevant to determining the type of costs awarded

There is no single rule as to when indemnity costs will be ordered, however the following circumstances have been determined by the courts to give rise to indemnity costs:

• where the unsuccessful party commenced, continued or defended a proceeding which had no prospect of success Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2) [2009] NSWCA 12 at [4].
• where the unsuccessful party issued proceedings as an abuse of process Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359 at 362.
• where the unsuccessful party acted unreasonably or with committed fraud or misconduct at any point in a proceeding Vance v Vance (1981) 128 DLR (3d) 109 at 122.
• where an offer of compromise was made to the unsuccessful party and rejected with the proceeding resulting in a no more favourable outcome than the offer.

Indemnity costs orders will not cover any expenses that have been unreasonably incurred or appear to be unreasonable.

When will a party not be awarded costs?

The discretion to depart from the general rule to order costs to the successful party will only occur “according to rules of reason and justice, not according to private opinion … or even benevolence … or sympathy”: Williams v Lewer [1974] 2 NSWLR 91 at 95.

Circumstances that may influence a court to depart from the general rule that costs follow the event, can include:

• where the successful party effectively invited the litigation: Ritter v Godfrey [1920] 2 KB 47
• where the successful party unnecessarily protracted the proceedings: Lollis v Loulatzis (No 2) at [29], and
• where the successful party pursued the matter solely for the purpose of increasing the costs recoverable.
• where success in the proceeding is only the result of a late amendment to grounds in the proceeding: Beoco Ltd v Alfa Laval Co Ltd [1995] 1 QB 137.
• where the “event” would only result in nominal (minimal) damages Ng v Chong [2005] NSWSC 385.
• where a plaintiff obtains a judgment in an amount of less than $40,000, an order for costs may, but will ordinarily not, be made, unless the court is satisfied the commencement and continuation of the proceedings in the District Court, rather than the Local Court, was warranted.
• where an offer of compromise was made to the successful party and rejected with the proceeding resulting in a no more favourable outcome than the offer.

Costs in defamation cases

Under section 40 Defamation Act 2005 (NSW) the court is also able to have regard to the way in which the successful party in the proceedings conducted their case (including any misuse of a party’s superior financial position to hinder the early resolution of the proceedings), and any other matters that the court considers relevant, in deciding orders as to costs.