Alexander, Phillipa --- "Costs update: Costs in unlawful discrimination proceedings" [2015] PrecedentAULA 42; (2015) 128 Precedent 55

• REDUCTIONS IN COSTS

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COSTS IN UNLAWFUL DISCRIMINATION PROCEEDINGS

By Phillipa Alexander

The principle that 'costs follow the event' applies to costs in unlawful discrimination proceedings before the Federal Court or the Federal Circuit Court, such that the successful party in the litigation is entitled to payment of his or her costs by the unsuccessful party. However, under the general discretion provided to the respective courts under s43 of the Federal Court Act 1976 (Cth) and s79 of the Federal Circuit Court of Australia Act 1999 (Cth) the courts may depart from this principle in certain circumstances.

FEDERAL CIRCUIT COURT COSTS

Party:party costs in human rights proceedings in the Federal Circuit Court are ordinarily recoverable in accordance with the event-based scale in Schedule 1 to the Federal Circuit Court Rules 2001 (Cth). This scale provides only for an amount of $3,422 (incl. GST) for the costs of initiating an application, which includes interim orders up to the completion of the first court day, plus a daily hearing fee of $2,048. This could leave a successful applicant substantially out of pocket in relation to recovery of his or her party:party costs. Conversely, the scale provides some protection for an unsuccessful applicant against whom a costs order is made. In Hinchliffe v University of Sydney (No. 2),^[1] Driver FM noted that the scale was adopted by the court in order to provide simplicity and certainty in determining issues of costs; the scale reflects the court's assessment of what costs can be accepted as reasonable in ordinary proceedings; and that it establishes a level playing field, where there is commonly a disparity between an applicant and a respondent in their relative capacity to fund the litigation. His Honour considered that it is not unjust where a successful party incurs significantly more in costs than may be recoverable under the court scale, although he did observe that a party in exceptionally long or complex proceedings could request that the matter be transferred to the Federal Court where a higher scale of costs is available.^[2]

MAXIMUM COSTS ORDERS

Costs in the Federal Court are recoverable in accordance with Schedule 3 to the Federal Court Rules 2011 (Cth) (FCR), which now provides for up to $580 (incl. GST) per hour for skilled attendances by a lawyer. Understandably, applicants in unlawful discrimination proceedings brought in the Federal Court may be concerned about their potential liability for costs if they do not succeed in the proceedings. On the application of a party, rule 42.51 FCR allows the Court to order the maximum amount of costs that may be recovered from an opposing party, on a party:party basis. Rule 1.40 FCR also provides that the court may exercise a power mentioned in the FCR on its own initiative. Rule 21.03 of the Federal Circuit Court Rules 2001 (Cth) also allows the Federal Circuit Court at the first court date to specify the maximum costs that may be recovered on a party:party basis on the application of a party, or at the court's own motion.

In the joint applications of Corcoran v Virgin Blue Airlines Pty Ltd and Ferguson v Virgin Blue Airlines Pty Ltd,^[3] the applicants claimed direct and indirect discrimination in relation to independent travel criteria imposed by Virgin, which required a disabled passenger who could not comply with the criteria to travel with a carer. The applicants, who were legally aided, sought orders that the maximum costs which could be recovered by each party in their proceedings be limited to $15,000 (being the maximum amount payable for party:party costs under the grant of legal aid).

Bennett J considered the following factors in deciding whether to make the orders:

• the timing of the application;^[4]

• the complexity of the factual or legal issues raised in the proceedings;^[5]

• the amount of damages that the applicants sought to recover^[6] and the extent of any other remedies sought;^[7]

• whether the applicants' claims were arguable and not frivolous or vexatious;^[8]

• the undesirability of forcing the applicants to abandon the proceedings;^[9] and

• whether there was a public interest element to the case.^[10]

Virgin also argued that it was necessary for the applicants to prove that in the absence of a maximum costs order, the applicants would be forced to abandon the proceedings. However, this argument was rejected by the court.^[11]

Bennett J^[12] found the factors to be weighed in deciding whether to make the order to be very finely balanced, noting that a successful litigant is entitled to the usual order for costs and the existence of a public interest is not, of itself, sufficient to alter that entitlement. However, Her Honour took into account additional factors: that the applicants had brought the application reasonably early in the litigation; they did not claim any financial reward; and that the claims were arguable and not frivolous. She held that it was appropriate to make the orders. An order of $15,000 was made in respect of the proceedings brought by Mr Ferguson who was unemployed and in receipt of a disability support pension. An amount of $35,000 was ordered in relation to Mr Corcoran's proceedings, as his income and asset position was considered to be reasonably substantial.

A maximum costs order in the sum of $25,000 was also made in Haraksin v Murrays Australia Ltd,^[13] in relation to proceedings for direct and indirect discrimination and contraventions of the Disability Standards for Accessible Public Transport 2000 (Cth), based on the respondent's failure to provide wheelchair accessible coaches. The respondent had estimated its costs at $150,000 to $200,000. While the applicant had substantial assets, evidence was given that the applicant would not proceed with the case if the order was not made; the proceedings had been brought in good faith and not for compensation; and the applicant's primary motivation in commencing and maintaining the proceedings was in the public interest.

FOREIGN APPLICANTS

A maximum costs order was also made by the Federal Court in Shurat HaDin, Israel Law Center v Lynch (No. 2)^[14] on the application of the applicants, who were an Israel-based civil rights not-for-profit organisation, three Israeli citizens residing in Israel and a company incorporated under Israeli law and carrying on the business of selling Israeli products from Israel to worldwide markets, including Australia. The respondent was pleaded to be a professional academic and director of the Centre for Peace and Conflict Studies at Sydney University. The respondent had estimated his party:party costs at $390,000. The court considered that estimate to be excessive and reduced it to $340,000, making a maximum costs order applicable to both parties in a lower sum of $300,000 to ‘to limit the costs in a manner commensurate with the proper scope of the pleadings’.^[15] Excluded from the maximum costs were all costs incurred prior to the date on which the application seeking the maximum costs order was filed.

APPEAL PROCEEDINGS

In King v Jetstar Airways Pty Ltd,^[16] the Federal Court considered the principles applicable to a maximum costs order in relation to an appeal. Mrs King had appealed from the dismissal of her proceedings at first instance that Jetstar had infringed the Disability Discrimination Act 1992 (Cth) by refusing to allow her to take a flight in respect of which two other passengers requiring wheelchair assistance had already booked. While the Court found that Mrs King had suffered discrimination, Jetstar was successful on its 'unjustifiable hardship' argument in defence. A cost-capping order of $20,000 had been made in the trial proceedings.

The Court considered that there was no reason for different principles to operate in appeal proceedings, but the fact that a full trial had been held and its outcome was known was a relevant matter.^[17] Perram J held that the litigation did raise a matter of public interest and noted that Mrs King stood to gain nothing by way of private benefit from the proceedings.^[18]

The costs of the appeal were estimated by Jetstar to be in the range of $100,000 to $180,000. In making a costs-capping order of $10,000, Perram J considered that the public interest aspect of Mrs King's claim warranted protection and that the harm would be greater to her than Jetstar if the order was not made.

FIXED COSTS

The court also has power to fix the amount of costs once the proceedings have been determined. In Escobar v Rainbow Printing Pty Ltd (No. 3),^[19] the applicant was successful in her application for damages for sexual discrimination contrary to the Sex Discrimination Act 1984 (Cth). The applicant was awarded damages of $7,325.73, together with a written apology.

The applicant then applied for her costs. Driver FM held that the application of Schedule 1 to the Federal Magistrates Court Rules 2001 (Cth) (as then applicable) would have entitled the applicant to $18,000. However, His Honour held this to be an excessive amount and reduced the applicant's costs to $12,000, on the basis that this was a reasonable outcome in terms of the costs that were likely to have been incurred on behalf of the applicant involving a relatively straightforward issue. To avoid reductions of this nature, it is recommended that practitioners have evidence of an applicant's actual incurred costs available to present to the court if required.

CALDERBANK OFFERS

A fixed costs order in the sum of $31,500 was made in Rispoli v Merck Sharpe & Dohme & Ors (No. 2).^[20] During the course of the Federal Magistrates Court proceedings, the applicant had made a Calderbank offer of $65,000 plus costs, and the respondent had made a Calderbank offer of $30,000 inclusive of costs.

The applicant recovered damages of $10,000 on her claim of discrimination and the application of Schedule 1 costs produced a costs outcome of $29,103 plus disbursements, which meant that she had received a slightly better outcome than the amount offered by the respondent. The respondent argued that the applicant should receive a reduced costs order, as she had been only partially successful. This was rejected by the court, which saw no reason to depart from the usual rule and awarded a fixed amount of costs calculated in accordance with Schedule 1, rather than leave the matter for resolution between the parties with the possibility that the matter might have to be brought back before the court for final resolution.^[21]

DEPARTURE FROM THE USUAL COSTS ORDER

An unsuccessful applicant may not be subject to an order for payment of the successful respondent's costs in cases which involve a sufficient public interest. In Xiros v Fortis Life Assurance Ltd,^[22] Driver FM dismissed the application but declined to award costs to the respondent on the basis that the proceedings required the interpretation and application of s46(2) of the Disability Discrimination Act 1992 (Cth), a provision which had not been previously judicially considered. His Honour held that the decision had some precedent value and therefore implications for other insurance policies and contained a public interest element of substance.^[23]

In Ferneley v The Boxing Authority of New South Wales,^[24] it was not clear to Wilcox J that the unsuccessful applicant should be required to pay the respondent's costs, as her case was arguable and had served the public interest in clarifying important issues of discrimination law.^[25]

Similarly, in AB v State of New South Wales (No. 2),^[26] the successful respondent was not entitled to costs as a result of a combination of public interest; a relatively novel case in which counsel appeared pro bono publico; the fact that there was no claim for damages but simply the seeking of a right of access to a public school; and the fact that but for the issue of evidence, the applicant would have succeeded on his claim.

In Jacomb v Australian Municipal Administrative Clerical & Services Union,^[27] Crennan J regarded the matter as a test case with some element of public interest. However, as the applicant also stood to benefit personally, he was ordered to pay 75 per cent of the respondent’s costs.^[28]

REDUCTIONS IN COSTS

Discrimination proceedings may be subject to an order under Rule 40.03 FCR. Rule 40.03 FCR provides that:

‘A party other than in a proceeding under the Admiralty Act 1988 may apply to the court for an order that any costs and disbursements payable to another party in the proceeding be reduced by an amount to be specified by the court if:

(a) the applicant has claimed a money sum or damages and has been awarded a sum of less than $100,000; or

(b) the proceeding (including a cross-claim) could more suitably have been brought in another court or tribunal.’

Damages are often less than $100,000, and Federal Court discrimination proceedings are also open to argument that the case could have proceeded in the Federal Circuit Court.

Phillipa Alexander is a specialist in legal costs with Costs Partners. PHONE [phone] EMAIL [e-mail].

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^[1] Hinchliffe v University of Sydney (No. 2) [2004] FMCA 640.

^[2] Ibid, at [10]-[12].

^[3] Corcoran v Virgin Blue Airlines Pty Ltd [2008] FCA 864.

^[4] Sacks v Permanent Trustee Australia Ltd [1993] 45 FCA 502; Flew v Mirvac Parking Pty Ltd [2006] FMCA 1818; Minns v State of NSW (No. 2) [2002] FMCA 197.

^[5] Hanisch v Strive Pty Ltd [1997] FCA 303 at 387 per Drummond J; Dibb v Avco Financial Services Limited [2000] FCA 1785.

^[6] Hanisch v Strive Pty Ltd, as above note 5.

^[7] Flew v Mirvac Parking Pty Ltd [2006] FMCA 1818 at [48].

^[8] Ibid, at [15].

^[9] Woodlands v Permanent Trustee Company Limited [1995] FCA 1388; (1995) 58 FCR 139; Flew v Mirvac Parking Pty Ltd [2006] FMCA 1818.

^[10] Ibid.

^[11] Corcoran v Virgin Blue Airlines Pty Ltd [2008] FCA 864 at [39]- [41].

^[12] Ibid, at [57].

^[13] Haraksin v Murrays Australia Ltd [2010] FCA 1133.

^[14] Shurat HaDin, Israel Law Center v Lynch (No. 2) [2014] FCA 413.

^[15] Ibid, at [15].

^[16] King v Jetstar Airways Pty Ltd [2012] FCA 412.

^[17] Ibid, at [8].

^[18] Ibid, at [9].

^[19] Escobar v Rainbow Printing Pty Ltd (No. 3) [2002] FMCA 160.

^[20] Rispoli v Merck Sharpe & Dohme & Ors (No.2) [2003] FMCA 516.

^[21] Ibid, at [13].

^[22] Xiros v Fortis Life Assurance Ltd [2001] FMCA 15; (2001) 162 FLR 433.

^[23] Ibid, at [24].

^[24] Ferneley v The Boxing Authority of New South Wales [2001] FCA 1740; (2001) 115 FCR 306.

^[25] Ibid, at [97].

^[26] AB v State of New South Wales (No. 2) [2005] FMCA 1624.

^[27] Jacomb v Australian Municipal Administrative Clerical & Services Union [2004] FCA 1600.

^[28] Ibid, at [12].