The battle without the war – recovering costs in interlocutory matters not litigated to finality

By Lana Kelly

16 Mar 2017

Considering costs issues early in the process of seeking injunctive relief can facilitate more efficient recovery.

There are many circumstances in which an applicant seeks urgent injunctive relief on an interlocutory basis but the matter does not progress to a final hearing or determination, either because the parties have been able to resolve the matter or events unfold such that to continue the action is fruitless.

This means the question of the costs of the application, which may be substantial, remain to be resolved.

There are several options for quantifying and recovering those costs, which should be considered when weighing up whether to bring to any application.

Reserved costs and costs in the cause

Often at the hearing of the injunction application, either the parties or the judge will be attracted to an order that costs be reserved (meaning who will be entitled to recover costs is not determined) because:

  • there has been little time to prepare detailed submissions on the question of costs;
  • there is relevant evidence which is not before the Court that would assist in the exercise of the costs discretion; and
  • it is more appropriate to wait until the court determines which party ultimately succeeds.

An alternative to a reserved costs order is an order for costs in the cause, which means that only if the party in whose favour the order is made is later awarded the costs of the action will that party be entitled to recover the costs of the interlocutory application.

In practical terms, where either of these costs orders have been made and the matter does not progress to finality, the parties can:

  • attempt to agree the costs as part of the broader settlement of the issues; or
  • seek that the matter be re-listed for determination of the costs.

If an order for costs is made on an interlocutory application, the party in whose favour the order is made must not enforce the costs order (by taxing the costs) until the proceeding in which the order is made is finished, except in the Federal Court where the court otherwise orders that costs be taxed immediately. Additional considerations may arise if there are multiple parties to an action, due to questions of apportionment.

Relevant matters in the exercise of the costs discretion

Whether an injunction is granted is clearly relevant and the successful applicant will generally be entitled to their costs. The granting of interlocutory relief does not go to the ultimate merits of the case but it does show that the court accepted that there was a serious question to be tried and that the balance of convenience favoured the applicant.

Another important consideration for the court will be whether it was reasonable for the applicant to commence the proceedings and whether it was reasonable for the respondent to defend them.

In Federal Court matters, the Court will also consider whether parties acted in accordance with the overarching purpose of the civil practice and procedure provisions, which includes the objective to resolve disputes at a cost that is proportionate to the importance and complexity of the matters in dispute. Where the Court determines that the costs incurred were not proportionate, the costs may still be granted to the successful party but at a discount.

Alternatives to taxation - fixed costs orders in the Federal Court

In the Federal Court, a successful party may consider seeking a lump sum costs order in relation to an interlocutory matter. Further, the Court has the power to order costs in relation to an interlocutory application immediately thereafter, meaning it is not necessary to wait until the end of the substantive hearing (which may not occur).

The relevant Practice Note CM 4 stipulates that an application for lump sum costs must be accompanied by an affidavit stating:

  • the amount of the lump sum sought to be specified in the order; and
  • how the lump sum has been arrived at and how it is justified.

Depending on the complexity of the matter, the affidavit does not need to be prepared by an independent costs consultant and may be sworn by the solicitor with carriage of the file. Estimating the costs and fixing them in this manner may be a better alternative to taxation due to the immediacy and lower cost of obtaining the order but requires the Court to be satisfied that the approach is "logical, fair and reasonable".

The power to fix costs exists in the state jurisdictions, however, Queensland courts have been historically less willing to exercise this power than the New South Wales Supreme Court or the Federal Court.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.