Costs: when do they follow the event in judicial review proceedings?

By Barbara Casado

Following on from our case note ‘Res ipsa loquitur: when the accident speaks for itself’, the recent decision of Insurance Australia Limited t/as NRMA Insurance v Richards (No 2)^[1] has clarified when a Court can depart from the usual costs order in favour of the successful party in the proceedings.

Background

Our previous article discussed the background of this case in which her Honour Acting Justice Schmidt found^[2] in favour of NRMA (Insurer). Acting Justice Schmidt referred the liability determination back to the Personal Injury Commission (PIC) for determination in accordance with law.

During the judicial review proceedings, the Insurer raised issue with statutory construction, arguing that the PIC Member incorrectly construed the Motor Accident Injuries Act 2017 (NSW) (MAI Act) to impose the burden of proof on the Insurer in the statutory benefits claim (construction issue). Acting Justice Schmidt found against the Insurer on this issue,^[3] and noted it had not been raised or addressed with the PIC prior to the judicial review proceedings.^[4]

A dispute subsequently arose as to costs. Wendy Richards (Richards) sought orders that each party bear their own costs, which would require the Court to exercise its discretion to depart from the usual order under rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) that costs follow the event (ie that costs be awarded to the successful party in the proceedings).

Richards also sought orders that the consent costs order previously made by the PIC Member be maintained, namely that her costs of the PIC dispute be paid by the Insurer in the sum of $11,610 inclusive of GST. Further, Richards sought an indemnity certificate pursuant to section 6 of the Suitors’ Fund Act 1951 (NSW) (SFA). The Insurer did not oppose these orders.

Primary issues

Richards contended that, as both parties had a measure of success on different issues, an order that each party bear its own costs would be ‘just in the circumstances’.^[5] The primary issues before the Court were therefore: whether the Court should depart from the usual order that costs follow the event; and, if so, whether the order sought by Richards (that each side bear its own costs) was appropriate in the circumstances.

Decision

Acting Justice Schmidt noted that the Court had broad discretion^[6] to make costs orders under section 98 of the Civil Procedure Act 2005 (NSW) and set out the principles relevant to whether it would be appropriate to depart from the usual order as to costs.^[7] It was noted that:

‘[t]here is an undoubted principle whereby, unless a particular issue or group of issues is clearly dominant or separable, it would ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate those particular issues on which it was successful and those on which it failed’.^[8]

The following factors are relevant to whether an issue is ‘dominant or separable’:

• whether there has been misconduct in the proceedings, including where a party succeeds on an issue which it did not argue before a lower court;^[9]
• whether it was unreasonable for the overall successful party to raise the issue,^[10] but noting that the principle is not limited to cases of unreasonableness;^[11]
• whether the issue ‘occupied a substantial part of the hearing’;^[12] and
• whether it would be punitive for the overall unsuccessful party to bear the costs of contesting the issue advanced by the successful party^[13], especially if the issue was only raised for the first time in the present proceedings.^[14]

Acting Justice Schmidt considered it relevant that the Insurer had not argued the construction issue before the PIC and had instead followed the usual PIC procedure as to burden of proof. In addition, the construction issue occupied a substantial part of the judicial review proceedings, as the questions raised had not been previously addressed at the PIC. The construction issue was therefore ‘clearly separable’ to the issues on which the Insurer had succeeded. As the precondition was satisfied, the Court exercised its discretion to depart from the usual costs order.

Acting Justice Schmidt found that, although there was to be a departure from the usual order, the order sought by Richards was not appropriate as the Insurer remained entitled to costs under the UCPR.^[15] Instead, Richards was ordered to pay 50% of the Insurer’s costs, noting that apportionment of costs was ‘very much a matter of discretion and mathematical precision is illusory’.^[16]

Further issues

Acting Justice Schmidt also considered whether Richards remained entitled to the benefit of the original PIC costs order, despite that PIC decision having been set aside. Under section 8.10 of the MAI Act, Richards' entitlement to recover legal costs did not depend on success in the PIC proceedings.^[17] Accordingly, an order was made that the original costs order entered by the PIC should not be disturbed.

The SFA, in considering whether an indemnity certificate could and should be issued to Richards, applied to ‘an appeal against the decision of a court’.^[18] Acting Justice Schmidt found that the proceedings satisfied the requirement of an ‘appeal’, as it included ‘any proceeding in the nature of an appeal’.^[19] An analogy was drawn between the PIC and the Equal Opportunity Tribunal^[20] and, on that basis, it was found that the PIC – in exercising judicial powers – is to be considered a ‘court’ for the purposes of the SFA.^[21]  The Court therefore had the power to issue^[22] (and did issue) the indemnity certificate.^[23]