Kheirs Financial Services Pty Ltd v Aussie Home Loans Pty Ltd

The case of Kheir’s Financial Services Pty Ltd v Aussie Home Loans Pty Ltd involves a dispute concerning the allocation of costs in third and fourth party proceedings. The matter was heard in the Supreme Court of Victoria, where Kheir’s Financial Services brought an action against Aussie Home Loans, and subsequent proceedings involved third and fourth parties. The crux of the dispute was the determination of the liability for costs, particularly focusing on whether the traditional rule of ‘costs follow the event’ should apply or if the costs should be apportioned by analogy with the apportionment legislation or allocated on an issues basis.

The court was tasked with deciding the extent of the plaintiff’s liability for costs in the third and fourth party proceedings, given that these parties succeeded due to the defendant’s victory against the plaintiff. Specifically, the court had to determine if the costs should be apportioned according to the usual rule or if they should be allocated based on the issues raised by the statement of claim. Furthermore, the court examined whether an issues-based costs order required a judicial determination of the issues before it could be made.

In its reasoning, the court applied the principles established in Johnson v Ribbins, where it was held that an issues-based costs order cannot be made unless there has been a judicial determination of the issues. The court also considered Spotless Group Ltd v Premier Building and Consulting Pty Ltd, which supported the notion that the usual rule of ‘costs follow the event’ should apply unless there are compelling reasons to deviate from it. The court concluded that the plaintiff’s liability for costs in the third and fourth party proceedings should be restricted to the issues raised by the statement of claim. The costs should not be apportioned by analogy with apportionment legislation or allocated on an issues basis without a prior judicial determination of the issues.

The final orders of the court specified that Kheir’s Financial Services’ liability for the costs of the third and fourth party proceedings was limited to the issues raised by the statement of claim. The court refrained from allocating costs on an issues basis without a judicial determination of those issues, thereby upholding the traditional rule of ‘costs follow the event’ in this context.