Muhibbah Engineering (M) BHD v Trust Co Ltd

The New South Wales Court of Appeal considered an appeal concerning the costs of proceedings that had been settled on undertakings without admissions. The dispute arose from an application for an injunction, which was ultimately resolved without a hearing on the merits. The primary judge had ordered the defendant to pay the costs of the proceedings, having concluded that the defendant had acted unreasonably.

The central legal issue before the Court of Appeal was whether the primary judge had erred in ordering the defendant to pay costs, despite the settlement of the proceedings on undertakings without admissions and without a determination of the substantive issues. Specifically, the court had to consider whether the primary judge's conclusion that the defendant acted unreasonably was a finding that could be made in the absence of a full hearing on the merits.

The Court of Appeal reasoned that a judge is entitled to conclude that a party has acted unreasonably in the conduct of litigation, even if the proceedings are settled without admissions and without a hearing on the merits. Such a conclusion can be based on the circumstances surrounding the settlement and the conduct of the parties leading up to it. The court found that the primary judge's conclusion that the defendant acted unreasonably was open to them on the material before them.

The appeal was dismissed, and the defendant was ordered to pay the costs of the appeal.