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Costs – who pays when each party has some success

The Supreme Court recently issued a cost decision that grapples with an issue that occasionally arises once litigation is finalised.  That is, if there are several issues in dispute in the proceeding, and both parties have some measure of success on various issues, who should pay costs?

The usual rule is that ‘costs follow the event’.  That is, the successful litigant usually gets an order that the unsuccessful litigant should pay their costs.  Costs are not intended to be a penalty but rather to recompense the successful litigant for the cost of vindicating their rights.  Where one party is wholly successful, they would ordinarily expect a costs order in their favour.

It is less easy to apply that ‘rule’ where each party has some, but not total, success.

In some situations the courts have looked at these types of cases on an ‘issue by issue’ basis; but in other cases they have not.

In this recent decision the fundamental issue in dispute between the parties was whether the plaintiff was able to refinance a significant debt.  Although there were a range of issues in dispute, and each party had a measure of success, but not total success; the final outcome was a finding that the plaintiff could not refinance.  Consequently, the court took the view that the proper approach to ‘success’ and ‘failure’ was to consider the fundamental commercial question to be decided in the case, and not the technical legal issues by reference to which that question was argued.

In short, the court adopted a pragmatic rather than technical approach; and awarded costs based on the practical commercial outcome of the case, rather than by dissecting success on an issue by issue basis.

The case does not establish new law but demonstrates that at least in some circumstances the courts adopt a very ‘real world’ view as to what success means, in the context of awarding costs:  Reliance Rail Pty Ltd v Permanent Custodians Ltd (No. 2) [2018] NSWSC 337.

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