Boost Foods Pty Ltd v Blu Oak Pty Ltd

The case of Boost Foods Pty Ltd v Blu Oak Pty Ltd involved the plaintiff, a food products producer and supplier, which was placed into administration following financial difficulties. The third party, who was the plaintiff's director and major shareholder, proposed a Deed of Company Arrangement which involved pursuing damages against the defendants, who were food product developers. The administrator recommended the Deed to creditors, who voted in favour, leading to the administration's end but the reappointment of the administrator. The litigation was funded by the third party, who proposed to receive a percentage of any judgment after legal costs.

The central legal issue was the determination of costs in the proceeding, specifically whether the third party should bear the defendants' costs, and whether the defendants, their insurers, and solicitors should bear the third party's costs. The third party argued that the defendants' solicitors made unsupported allegations and pursued a baseless case. The defendants, in turn, argued that the third party's litigation was protracted and not commercially sensible. The court considered the conduct of the parties, the prospects of success at trial, and the lack of a determination on the merits due to the proceeding's dismissal.

The court dismissed both the defendants' and the third party's applications for costs. It found that there was no evidence of improper conduct by the defendants' solicitors or insurers. The court highlighted that the proceeding was dismissed without a determination on the merits, making it difficult to assess the likelihood of success for either party. Additionally, the court noted that the third party was unaware of the limitation of the defendants' insurance policy until late in the proceedings. Given these considerations, the court exercised its discretion and determined that no party should bear the other's costs.

Accordingly, the court dismissed both applications for costs and ordered that each party bear its own costs of the proceeding. This ruling underscored the importance of the general rule regarding costs in Australian litigation, and the court's discretion in departing from this rule based on the specific circumstances of the case.