Drew, Sharon --- "Costs column: Legal costs of appeal proceedings" [2020] PrecedentAULA 37; (2020) 158 Precedent 55

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LEGAL COSTS OF APPEAL PROCEEDINGS

By Sharon Drew

As a general rule, an appellate court may make such order as to costs as it considers appropriate.^[1] The usual exercise of the court’s discretion is that the costs of an appeal follow the event.

However, there are factors a court will consider in making a costs order in appeal proceedings that may affect the usual exercise of discretion, including:

• the conduct of the appeal proceedings, including the adequacy of the preparation of appeal books and whether the party has complied with court orders;

• issues raised on appeal, and the extent to which they were raised at first instance;

• whether the appeal has been successful in part only;

• any offers of compromise or Calderbank offers; and

• any ‘public interest’ in the outcome of the appeal.

Failure to comply with procedural orders or to properly prepare appeal books has been relied on by appellate courts as a factor in the exercise of the discretion. For example, in QBE Underwriting Ltd as managing agent for Lloyds Syndicate 386 v Southern Colliery Maintenance Pty Ltd,^[2] the partially successful appellant was nevertheless ordered to pay the respondent’s costs of the appeal. Justice Leeming referred to the appellant’s limited success on appeal; the inclusion of grounds which were ‘borderline arguable’; the appellant’s ‘failure to correct an obvious error before the primary judge’;^[3] and the poorly prepared appeal books which were not in chronological order and included unnecessary documents.^[4] In Insurance Australia Ltd t/a NRMA Insurance v Milton,^[5] the NSW Court of Appeal ordered that the appellant’s practitioner could recover on a solicitor/client basis only 50 per cent of the costs associated with preparing appeal books in circumstances where three of the four volumes were not referred to at all, prompting the Court to describe the waste as ‘extravagant’^[6] and demonstrative of ‘the lack of compliance with the obligation to identify the documents relevant and necessary for the hearing and determination of the appeal’.^[7]

Where an appellant raises and then abandons grounds of appeal, this may impact on recovery of costs even where the appellant is ultimately successful. In Johnson & Johnson,^[8] the Court ordered the appellant to pay 75 per cent of the respondent’s costs of the appeal in circumstances where the appellant raised 350 grounds of appeal, but abandoned 202 of these before or during the hearing and was ultimately only successful on four of the grounds argued.^[9] In making the order, the Court also took into account the parties’ financial circumstances.

However, courts generally are reluctant to penalise appellants for reasonably abandoning grounds of appeal. In Mango Boulevard P/L v Spencer & Ors,^[10] while considering an application for indemnity costs, Muir JA and Mackenzie J noted that appellate courts ‘are wary of penalising parties for the abandonment of grounds of appeal’,^[11] citing the benefit of parties reassessing grounds of appeal and arguments to ensure ‘the most effective and efficient presentation of the case’.^[12]

An appellate court may depart from the usual costs order where the successful party succeeds on a point that was not argued or evidence that was not presented before a lower court. In the matter of KKL Investments P/L v Daikyo (Nth Qld) P/L & Ors,^[13] the appellant’s position completely changed between trial and appeal, resulting in the Court deciding that it was appropriate to afford the respondents ‘some substantial relief in relation to costs’ and ordering that the respondent pay two-thirds of the appellant’s costs at first instance, as well as the costs of the appeal proceedings. Similarly, in Merhi v Ford Motor Company of Australia,^[14] where the appellant was not successful on the appeal grounds pleaded but the matter was remitted for rehearing following an application to admit fresh evidence, the Court ordered the respondent to pay 60 per cent of the appellant’s costs of the appeal.

All Australian jurisdictions have court rules which provide for costs consequences of formal offers of compromise, the majority of which have been interpreted as applying on appeal either explicitly or implicitly. In addition, Calderbank offers made during the course of the appeal proceedings can be considered.

In Silversea Cruises Australia Pty Ltd v Abellanoza (No 2),^[15] the appellant was successful on only one of three grounds, and relied on settlement offers made during the appeal proceedings in support of an application for indemnity costs. The Court held that it was not unreasonable for the respondent not to accept either offer, which required the respondent to abandon its rights to costs at first instance.^[16] Characterising the outcome of the appeal as ‘largely unsuccessful’^[17] and noting that there ‘was a severable claim on which the appellant was successful; the major part of the appeal, however, concerned the larger claim on which the appellant was unsuccessful’,^[18] the Court ordered the appellant to pay 75 per cent of the respondent’s costs both at first instance and on appeal.

More problematic is the court’s treatment of offers that are made before the commencement of appeal proceedings. One view is that an offer continues to have costs consequences on appeal: ‘the offer is made, not in respect of a trial, but in respect of a claim’.^[19] Where the offer is not a formal offer however, the NSW Court of Appeal has warned that referring to ‘a pre-trial offer as generally “relevant” to the exercise of discretion in respect of the costs of the appeal is apt to encourage futile applications’.^[20]

In CSR v Eddy,^[21] the High Court of Australia resolved a conflict among the intermediate appellate courts of the states and the ACT. The majority noted that CSR’s purpose in bringing the appeal proceedings did not solely relate to the individual claim but was also ‘in order to vindicate their long-term commercial interests ... to reduce the quantum of damages payable by them in asbestos-related litigation, of which, unfortunately, there appears likely to be a large quantity in future years’.^[22] In contrast, the respondent had no interest in anything other than the particular claim. The majority described the matter as ‘a test case’.^[23] Referring to custom in the High Court that ‘where the resolution of a point is desirable from the point of view of a large and recurrent litigant ... but the other party to the litigation is not a recurrent litigant and is not well-positioned to meet adverse costs orders on the point being tested, for the grant of special leave to be made conditional on appellants paying the other side's costs in any event and on appellants not seeking to disturb costs orders in the courts below which were favourable to the other side’,^[24] the majority held that it would not be unjust to require CSR to pay the respondent’s costs of the High Court proceedings. The High Court did not disturb the orders previously made in the Court of Appeal, where CSR was ordered to pay the claimant’s costs on an indemnity basis from the date of service of a formal offer of compromise after the appeal proceedings were commenced.^[25]

In contrast, McHugh J stated that he could see no basis for refusing CSR the costs of both the proceedings in the Court of Appeal and the High Court.^[26] Similarly, Callinan J took the view that CSR was entitled to the costs of both proceedings, citing the risks associated with litigation and the commercial/adversarial approach to litigation, including each party serving offers of compromise. He opined that the purpose of offers of compromise in encouraging settlement ‘is not to be subverted in a particular case simply because one of the parties has miscalculated his prospects’.^[27]

Sharon Drew is Principal of Blue Ribbon Legal – specialising in legal costs disputes. PHONE [phone] EMAIL [e-mail] WEB www.blueribbonlegal.com.au.

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^[1] For example, Uniform Civil Procedure Rules 1999 (Qld), r766(1)(d).

^[2] [2018] NSWCA 55.

^[3] Ibid, [127].

^[4] Ibid, [129].

^[5] [2016] NSWCA 156.

^[6] Ibid, [61].

^[7] Ibid, [65].

^[8] [1999] FamCA 959.

^[9] Ibid, [33] and [39].

^[10] [2008] QCA 392.

^[11] Ibid, [12].

^[12] Ibid.

^[13] [1995] QCA 146.

^[14] [2015] VSCA 13.

^[15] [2020] NSWCA 37.

^[16] Ibid, [14].

^[17] Ibid, [15].

^[18] Ibid, [17].

^[19] Ettingshausen v Australian Consolidated Press (1995) 38 NSWLR 404, [4] per Gleeson CJ and Priestley JA, in respect of a formal Offer of Compromise made in accordance with pt52A, r22(4) of the Supreme Court Rules 1970 (NSW).

^[20] Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344, [23].

^[21] [2005] HCA 64 (CSR v Eddy).

^[22] Ibid, [80] per Gleeson CJ, Gummow and Heydon JJ.

^[23] Ibid, [81].

^[24] Ibid.

^[25] CSR Limited & v Thompson; Thompson v CSR Limited & Anor (No 2) [2004] NSWCA 11.

^[26] CSR v Eddy, above note 21, [117]–[120].

^[27] Ibid, [126].