Being broke won't avoid a costs order

Key Points
  • On appeal the High Court of Australia held that regardless of a party’s financial position, it is erroneous to decline an order for costs because it is perceived that the debt may not be paid.
  • Impecuniosity is not a factor Judge’s can consider when discretionarily determining an order of costs, nor is the futility of such an order.

The High Court of Australia recently allowed an appeal from the Court of Appeal of the Supreme Court of the Northern Territory. The decision confirmed that normally costs follow the event and held that impecuniosity of the unsuccessful party is not a basis to change that.

The respondent’s application for a temporary work visa was denied because it was invalid because of a previously refused protection visa. The respondent sought expressions of support for his application from the Minister of the Northern Territory Department of Infrastructure. A briefing note was provided which, according to the respondent, contained defamatory material, making it appear as though the respondent was a dishonest person of bad character. The respondent commenced proceedings against the Northern Territory of Australia for defamation in the sum of $5 million. The respondent was unsuccessful both at first instance and on appeal.

The Northern Territory sought an order for costs but was refused by the Court of Appeal because such an award would be futile due to the respondent’s impecuniosity. The Northern Territory appealed to the High Court of Australia on the basis that the Court of Appeal erred in principle in treating the respondent’s impecuniosity, without more, as sufficient reason to deny the successful party an order of costs.

The High Court referred to the guiding principle of costs, that the successful party is generally entitled to costs by way of indemnity against the expense of litigation that should not, in justice, have been visited upon that party. Although acknowledging the respondents’ financial position, the High Court ruled that it was erroneous to decline to make an order for costs because the debt might not be paid. The High Court referred to the fact that the only reason identified by the Court of Appeal for depriving the appellant of its costs was the respondent’s impecuniosity. This consideration was determined not relevant to the proper exercise of the Court’s discretion as to costs.

This judgment confirms that regardless of the financial position of an unsuccessful party, as well as the anticipated futility of the order, an order for costs can be made on the basis that costs follow the event and should be awarded unless the conduct of the successful party in relation to the conduct of litigation would justify a different outcome. It indicates that Judges when exercising their judicial discretion as to making a costs order should not consider impecuniosity as a factor when deciding upon whether costs should be awarded.

Post by Rod Cameron and Tayah Stevenson

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