Viscariello v Macks (No 3)

[2021] SASC 69

SUPREME COURT OF SOUTH AUSTRALIA

(Civil: Application)

VISCARIELLO v MACKS (No 3)

[2021] SASC 69]

Reasons for Decision of Auxiliary Judge Norman a Master of the Supreme Court  

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - TAXATION AND OTHER FORMS OF ASSESSMENT - PRINCIPLES OF TAXATION OR ASSESSMENT - INDEMNITY COSTS

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - TAXATION AND OTHER FORMS OF ASSESSMENT - PRINCIPLES OF TAXATION OR ASSESSMENT - WASTED COSTS OR EXPENSES

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - TAXATION AND OTHER FORMS OF ASSESSMENT - PROCEDURE AND EVIDENCE - TIME FOR TAXATION OR ASSESSMENT

The applicant is taxing his costs against the respondent.

In the course of the taxation the respondent sought orders that the applicant not be entitled to claim any costs and that he be precluded from doing so by virtue of the costs indemnity rule. The respondent’s application was set down for argument on 17 December 2020, however, on that day the respondent indicated that he wished to withdraw the application. The applicant sought that he be awarded the costs of that application on an indemnity basis and that those costs be taxed forthwith.

Held, per Norman AUJ, allowing the application in part:

1.There is no specific power under the Uniform Civil Rules 2020 (SA) (UCR) to award costs in consequence of the discontinuance of an interlocutory application.

2.Under the provisions of s 40(1) of the Supreme Court Act 1935 (SA), UCR 194.6, and the Court’s inherent power, the Court has power to award costs against a party issuing but then withdrawing an interlocutory application.

3.      The costs of the respondent’s application (FDN 336) are awarded to the applicant.

4.      These are to be on the standard costs basis.

5.      The applicant’s application for indemnity costs is refused.

6.      The applicant’s request that these costs be taxed forthwith is refused.

Supreme Court Act 1935 (SA) s 40(1); Supreme Court Civil Rules 2006 (SA) rr 107(4), 264(2); Uniform Civil Rules 2020 (SA) rr 2.1, 51.2(1), 141.3 (2), 191.1, 194(1), 194.3(1)(a)-(c), 194.4(1), 194.4(2), 194.4(3), 194.4(5), 194.4(8), 194.5(1)-(2), 194.6(1)-(2), referred to.

Clone v Players (No 3) [2020] SASC 29; Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; Fountain Selected Meat (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397; ONE.TEL Ltd v Commissioner of Taxation (2000) 101 FCR 548; Oshlack v Richmond River Council (1998) 193 CLR 72; Pentroth Pty Ltd v Kirschild Pty Ltd [2006] 96 SASR 129; Preston v Nikolaidis (No 2) [2021] NSWSC 174; Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622; Sergi v Sergi (No 2) [2019] NSWSC 1221; Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd [1991] FCA 187; Yates Property Corporation Pty Ltd v Boland (No 2) (1997) 147 ALR 685, applied.
Coastal Ecology Protection Group Inc v City of Charles Sturt [2020] SASC 29; Murray v Lesicar [2014] SASC 43; Shanamere Pty Ltd v Litigation Support Services Pty Ltd [2006] SASC 120; Taylor v Santos Ltd [1999] SASC 430; Tran v Maurice Srour and Minh Tran Pty Ltd [2000] SASC 338, discussed.

Australian Securities Commission v Aust-Home Investments Ltd (1993) 116 ALR 523; Bell Lawyers v Pentelow (2019) 372 ALR 555; Boscaini Investments Ltd v Corporation of the City of Kensington and Norwood [1999] SASC 327; Catto v Hampton Australia Ltd (In Liq) [2008] 257 LSJS 245; CIFG (Australia) Pty Ltd v Perna [2020] VSC 735; Duke Group Limited (in liq) v Pilmer [1998] SASC 7172; El Ali v Royal, Royal & Another [2019] HCA Trans 227; Gribbles Pathology Pty Ltd v Health Insurance Commission (1997) 80 FCR 284; Macks v Viscariello (2017) 130 SASR 1; Melbourne City Investment Pty Ltd v Treasury Wine Estates Limited (No 2) [2017] FCAFC 116Melbourne City Investment Pty Ltd v Treasury Wine Estates Limited (No 2) [2017] FCAFC 116; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; Mourik v Von Marburg [2016] VSC 601; North Ganalanja Aboriginal Corporation v Queensland (1996) 185 CLR 595; Royal v El Ali (No 3) (No 3) [2016] FCA 1573; Ten Group Pty Ltd (No 2) v Cornes (2012) 114 SASR 106; Tobin v Tobin (1977) 75 LSJS 9; Wentworth v Rogers (2006) 66 NSWLR 474; Zreika v Royal (2019) 271 FCR 65, considered.

VISCARIELLO v MACKS (No 3)
[2021] SASC 69]

Civil

Introduction

1. The applicant has applied for orders awarding him his costs of and incidental to the respondent’s application dated 10 August 2020 (FDN 336).

2. That application had come on for argument before me on 17 December 2020 when Mr Heinrich of counsel appeared for the applicant and Mr Cogan of counsel appeared for the respondent.

3. At the commencement of the hearing, Mr Cogan indicated that the respondent wished to withdraw the application, so the argument did not proceed.  Mr Heinrich thereupon made an oral application on behalf of the applicant for the costs of and incidental to that application.  After hearing brief submissions from Mr Heinrich and Mr Cogan, I made procedural orders for the filing of written submissions by the parties and formally reserved my decision.

4. Subsequently, the applicant filed written submissions on 21 December 2020 (FDN 360), the respondent filed responding submissions on 15 March 2021 (FDN 363), and the applicant filed reply submissions on 22 March 2021 (FDN 364).

5. The respondent also filed supplementary written submissions on 31 March 2021 (FDN 365) for which I gave him leave nunc pro tunc to do so but also gave the applicant leave to file reply submissions which were subsequently filed on 9 April 2021 (FDN 367).

   Background

   The proceedings

6. The proceedings were commenced by the applicant in 2006 and had a long and complex history.  He had sued the respondent in his capacity as an administrator and liquidator of certain companies, seeking declarations and damages, and alleging, inter alia, that he had been in breach of various statutory duties in these roles.  It was alleged that the respondent had been motivated by personal motives, wishes and intentions that caused him not to act in the best interests of the creditors, members and contributories of the companies and to act unprofessionally, and that he had acted with an improper purpose.  The Judge at first instance found that in conducting the liquidation the respondent had breached provisions of the Corporations Act 2001 (Cth) and issued declarations to that effect. An appeal and cross-appeal followed and in Macks v Viscariello[1] the Full Court held that the trial Judge had the power to make declarations pursuant to s 31 of the Supreme Court Act 1935 (SA) but varied a declaration made concerning a breach of s 180 of the Corporations Act, and set aside findings that:

   ·the respondent had acted with the four substantial and actuating collateral purposes from June 2005;

   ·he had breached ss 181 and 182 of the Corporations Act from June 2005;

   ·the proceedings were, from June 2005, an abuse of process;

   ·the Judge did not err in allowing the amendments to the pleadings after the delivery of his reasons; and

   ·issues of allegations of a breach of ss 181 and 182 on the exercise of the Court’s discretion should not be remitted for trial.

   [1] (2017) 130 SASR 1 (Lovell J, and Corby and Slattery AJ).

7. The applicant’s cross‑appeal was dismissed.

   Costs orders in the proceedings

8. In a further judgment of the Full Court dated 17 October 2018,[2] standard costs orders made in the proceedings on previous occasions were confirmed.  Further, subject to those orders, the respondent was ordered to pay to the applicant:

   ·25 percent of the costs and disbursements of the trial;

   ·25 percent of the costs of applications before the Court for which the costs order of the Court would remain by virtue of the Full Court’s reasons; and

   ·costs in the cause, to be adjudicated if not agreed. 

   [2]    Macks v Viscariello (No 2) [2018] SASCFC 106.

9. At a subsequent hearing on 26 July 2019, Auxiliary Judge Roder directed, inter alia, that the applicant was to make a genuine offer for costs to the respondent pursuant to r 271(1A) of the Supreme Court Civil Rules 2006 and that thereafter the subsequent provisions of r 271 applied to the process of adjudication.

10. On 30 June 2020, the applicant filed and served a claim for costs.  This was subsequently exhibited to the sixth affidavit of Ms Umoff filed on 10 August 2020 (FDN 337).

    The respondent’s application seeking preclusion of a claim for costs by the applicant and the prosecution of that application

11. On 10 August 2020, the respondent filed the now withdrawn application (FDN 336) seeking orders that the applicant not be entitled to claim any costs, and that he be precluded from doing so on the basis of the sixth supporting affidavit of Ms Umoff affirmed on 10 August 2020 (FDN 337).  In general terms, this affidavit asserted that the applicant was precluded from claiming any costs by virtue of the costs indemnity rule, and exhibited in support of this allegation was the applicant’s claim for costs, together with various costs agreements entered into by him. The affidavit identified the applicant’s various firms of solicitors, namely McNamara Business and Property Law (MBPL), Commercial & General Law (SA) Pty Ltd (CGL), Ujvari Lawyers, and Smith & Co.

12. At a hearing on 17 August 2020, I ordered that the respondent was to file a statement of issues in relation to this application by 31 August 2020 and that the applicant was to respond by 14 September 2020.

13. I further fixed time limits for the filing of affidavits and submissions, and   listed argument of the application for 18 November 2020.

14. On 21 September 2020, the respondent filed the seventh affidavit affirmed by Ms Umoff on that date (FDN 344) further supporting the application.

15. At a hearing on 22 October 2020, I made supplementary orders relating to the timetable for the filing of certain documents and relisted the argument to 17 December 2020 for hearing.

16. On 5 November 2020, the respondent filed his points of claim (FDN 350).

17. On 20 November 2020, the applicant filed his points of defence (FDN 351).  In this document he notified the respondent of separate proceedings filed by him on or about 19 November 2020 for the taxation of costs against his former solicitors in respect of the proceedings in this action. These proceedings are Action No. CIV-20-005422 against CGL and its now manager, and Action No. CIV-20-005423 against Ujvari Lawyers.  The respondent asserts that these proceedings were brought to his attention when he was served with the points of defence.

18. On 25 November 2020, by consent and in the absence of the parties, I made further supplementary orders relating to the filing of written submissions, including reply submissions.

19. On 27 November 2020, the applicant filed an affidavit sworn on that date (FDN 353) in support of his opposition to the application.  The affidavit exhibited as JV3 and JV4 (pages 41 and 46) copies of the relevant originating applications.  The respondent was served with this affidavit.

20. On 8 December 2020, the respondent filed his written submissions on the application.  These are referred to below.

21. On 10 December 2020, the respondent filed the eighth affidavit affirmed by Ms Umoff on that date (FDN 356) further supporting the application.

22. On 16 December 2020, the applicant filed written submissions in reply to the respondent’s submissions.  These are referred to below.

    The written submissions of the parties in relation to the withdrawn application

23. Both parties filed comprehensive written submissions prior to the 17 December 2020 hearing setting out their positions.  These are summarised below.

    The respondent’s written submissions on the substantive application now withdrawn

24. The respondent’s submissions (FDN 355) filed in support of his now withdrawn application set out in detail the basis as to why that application should have been be allowed.  These relied on Ms Umoff’s sixth and seventh affidavits.  He addressed the indemnity principle which provided that the purpose of a costs award was to provide the successful party with some level of indemnity for the legal costs incurred with respect to the professional legal costs actually incurred in the litigation, and emphasised that costs were given as an indemnity to the person entitled to them and that a costs order did not entitle a party to recover more than he or she had paid or was liable to pay to his or her own solicitors.  The respondent referred to self-represented litigants and to the principles set out in in Bell Lawyers v Pentelow.[3] In this case it was held that the rule which previously allowed a self-represented litigant who was a solicitor to recover his or her professional costs of acting in the litigation, should no longer be recognised as part of the common law of Australia.  That decision had been extended so that a firm of solicitors which was a partnership could not recover costs for work done by its staff in representing the firm and also so that an incorporated legal practice representing itself could not recover costs for work done by its staff, even where the incorporated legal practice had one shareholder and director.  There was also reference both to the costs disclosure requirements of the Legal Practitioners Act 1981 (SA) that were required to be made by solicitors when agreeing to act for clients, including the retainer by a law practice of another law practice, and the consequences of a failure to make such disclosures including preclusion from recovery of such costs unless they had been adjudicated. The respondent also referred to the concept of conditional costs agreements, the provision that costs agreements contravening certain provisions were void, and the consequences of such agreements being void.

    [3] (2019) 372 ALR 555.

25. The respondent analysed the dealings between the applicant and the various legal firms that had represented or undertaken the legal work in these proceedings for him, including the retainer agreements and their provisions (or absence of provisions), the legal work undertaken (including that solicitors had acted for the applicant in unrelated proceedings), details of the invoices rendered to the applicant by the legal firms (including absence of details as to the work which these related to), and the lack of evidence of payment of invoices.

26. The respondent referred to the Deed of Settlement dated 29 January 2014 between the applicant and CGL and Mr McNamara, which provided that if the applicant did not recover any monies from the respondent then the applicant would have no liability whatsoever to CGL for any of its solicitors’ fees.  The deed of settlement had not and would never crystallise, it was contended, meaning that the applicant could have no indemnity and accordingly he was not entitled to recover any costs from the respondent.  At most, any potential entitlement would be capped.

27. It was also submitted that because the applicant was a shareholder and director of CGL during the period that he was represented by it, then allowing him to recover any amounts claimed in relation to it would be contrary to the principle in Bell Lawyers and subsequent authorities, preventing him from recovering costs for the work conducted by that firm.  Further, some of the work conducted by CGL in the case was actually undertaken by the applicant so that would be contrary to the rule in Bell Lawyers and could not be recovered.

28. In relation to the legal work undertaken for the applicant by Ujvari Lawyers, the respondent submitted that a tax invoice rendered by that firm on its face included a large number of items for which the applicant had no entitlement to make a claim for costs.  Further, in respect of certain work there were items for which a claim was made for work not undertaken by that firm or had not charged and would not be charging the applicant for.  Accordingly, he was not entitled to recover amounts for any work purportedly done by Ujvari Lawyers if that work was not recorded in the invoice, and any allowance of costs in his favour in respect of their work was to be capped at the items the subject of the Full Court’s costs order in the applicant’s favour and which had been done, subject to taxation. 

29. Further, in respect of Ujvari Lawyer’s retainer, disclosures required under the Legal Practitioners Act had not been made so that its consumer protection objectives had not been satisfied, and accordingly as the applicant had no obligation to pay their fees until they had been taxed, he could not recover these from the respondent.  In such circumstances, and where the applicant had not paid any amounts to that firm, the Court should not consider their fees in assessing his claim.

30. The fees claimed in respect of the legal work undertaken by Smith & Co were also discussed. Included was a receipt for a payment in the amount of $250.00, but it had been admitted that with that exception no invoices have been issued by that firm, and no payments had been made in respect of any legal fees incurred in these proceedings. Accordingly, if there was any entitlement to recover any amounts from the respondent in respect of that firm it should be capped at $250.00.

31. A further argument was raised that both the applicant as well as Ujvari Lawyers had been parties to the Smith Retainer, so regardless of the Court’s findings as to the relevant contracting parties, it was invalid.  This was because it had failed to make the required disclosures under the Legal Practitioners Act.  It had contained an uplift fee and it was a conditional costs agreement because the payment of some of the legal costs to Smith & Co was conditioned upon the applicant being “successfully awarded costs”.  The effects of these contraventions were the same as in respect of the Ujvari Retainer.  The retainer was void and the effect was that any liability of the applicant was limited to either the applicable scale of costs or according to the fair and reasonable value of the legal services provided.  Even if it was determined that the applicant was not a party to the Smith Retainer, the required disclosures had not been made as it failed to provide details as to the intervals at which he was to be billed.  He had no obligation to pay Smith & Co’s solicitors’ fees until they have been taxed, and accordingly, he could not recover the value of these fees from the respondent, and on taxation, those costs might be reduced to scale or made the subject of an overall reduction.

32. In such circumstances, and where the applicant had not paid any amounts to Smith & Co for its claimed fees, the Court should not consider those in assessing his claim.

33. The respondent also raised the issue of the applicant’s claim for a taxation of his solicitor/client costs, referring to the originating applications for the taxation of costs against CGL and its manager, and for the taxation of costs against Ujvari Lawyers in respect of these proceedings filed on or about 19 November 2020.  He noted that the applicant had sought that the Court postpone consideration of the issues raised in the application until the determination of the separate taxation proceedings.

34. However, the respondent put, separate taxation proceedings were no impediment to the application being determined, because as had been submitted earlier the applicant had no entitlement to any amounts claimed for solicitors’ fees, as a matter of law.  The state of the evidence remained unchanged and the applicant had not sought to rely on any of the retainer agreements adduced in these proceedings in his separate taxation proceedings.  The postponement sought was akin to a temporary stay of proceedings and the question of entitlement was properly to be determined in this action rather than it being unduly delayed until the question was determined by another judicial officer in the separate taxation proceedings.  These proceedings had been instituted first, had progressed substantially, and significant time and resources had been directed to preparing for this interlocutory application.  Further, there might be no need for the separate taxation proceedings to progress. 

    The applicant’s written submissions on the withdrawn substantive application

1. In his written submissions (FDN 359) on the now withdrawn substantive application, the applicant submitted that notwithstanding that the respondent’s application sought a total disallowance of any solicitor’s costs with respect to those costs related to work done by Ujvari Lawyers and Smith & Co, he had not submitted that he had no liability for that work as to breach the indemnity principle.  Rather, his position had been that in relation to Ujvari Lawyers the applicant was entitled to costs for the work done by those lawyers, taking into account first the costs charged in a specific invoice from those lawyers, and secondly that in the light of some issues raised about compliance by that firm with the Legal Practitioners Act he had submitted that until there was a solicitor client taxation the firm’s fees were to be reduced to scale and might be the subject of an overall reduction.  Further, in relation to Smith & Co the respondent had not submitted there was no entitlement but rather that it was capped to $250.00.

2. In relation to work undertaken by MBPL the respondent had submitted that there was no liability for this work because there was no invoice or record of payment and because its business had been transferred to CGL after the latter’s incorporation in July 2007.  Accordingly, it was submitted, the only basis of the respondent’s submission was an allegation in a pleading in another action involving the applicant, which was insufficient evidence to support the finding and conclusion that the respondent had asserted in the present action. 

3. On the self-represented litigant issue, the applicant submitted that this issue had only been raised in relation to the work by CGL and in this regard his case was that he was a party in the action in his personal capacity, none of the circumstances in the proceedings had anything to do with him in his capacity as a legal practitioner working in any of the law firms involved in the case.  None of those firms had ever been parties in the action.  It had not been contended by the respondent that the principles regarding a self-represented litigant claiming costs applied to a law firm which represented a party in proceedings and that party was a co-owner of the law firm, nor had he referred to any authority which could support such an argument, the law was clear that the principles regarding recovery of costs by self-represented litigants who were lawyers or barristers did not extend to his circumstances.  Finally, the reality was that the respondent was seeking to extend the relevant principles on the topic on the grounds of “natural evolution” of the principles when the rationale gave no reasonable grounds for such extension. 

4. The applicant’s position was that the respondent should be taken to have decided to have withdrawn the application because it had no merit and had been brought in part based on an unmeritorious hope that it might be successful, and that immediately prior to the hearing he had decided to abandon the point.

5. He contended that by this time he had already incurred substantial legal costs in having to defend it.

   The withdrawal of the respondent’s application

6. At the hearing on 17 December 2020 Mr Heinrich of counsel appeared for the applicant and Mr Cogan of counsel appeared for the respondent.

7. Mr Heinrich told the court that Mr Cogan would advise it of what he and Mr Cogan had agreed as to the steps to be taken at the hearing.

8. Mr Cogan said that the application was withdrawn “in light of various matters including the recent referral of the taxation of Mr Viscariello’s costs against former solicitors” to which the costs claim related.[4]

   [4]    See Transcript of Proceedings at 2.12-15.

9. Mr Heinrich for the applicant then made an oral application for the costs thereof, and I fixed a programme for the determination of that costs application.

10. The Court has been informed, in the respondent’s written submissions (FDN 363) that the separate taxation proceedings had been set down for a directions hearing before Judge Dart on 3 February 2021, and that at that hearing the applicant sought, and was granted, an adjournment of the matter for further directions until 3 August 2021.

    The applicant’s submissions in support of his claim for costs

11. In his written submissions (FDN 360) the applicant confirmed that he sought orders that the respondent pay his costs of and incidental to the respondent’s application (FDN 336) to be assessed on an indemnity basis.

12. This was sought in order that he be fully indemnified for his costs (except insofar as those costs might have been unreasonably incurred or were unreasonable in amount).

13. He further sought that if his costs of and incidental to that application were not agreed within 63 days or such other time as might be ordered by the Court, then further directions were to be given by the Court for steps for his costs to be assessed by the Court prior to the completion of the adjudication proceedings, so that the costs might be taken into account when the Court made any interim or final orders assessing the costs payable by either party pursuant to their respective claims for costs; or made in relation to the costs of the adjudication proceedings when the adjudication was finalised.

14. The applicant summarised the grounds upon which he sought the above orders.

15. First, the Court has a general and unfettered discretion in relation to costs with respect to the application. Secondly, he had, in reality, been wholly successful in relation to the application, as it had been withdrawn.  Thirdly, it would be correct and proper for the Court to make an order for costs in favour of the applicant, notwithstanding the presumptive costs rule, which he identified as UCR 199.4(5).[5]

    [5]    There is no such rule and I presume he is referring to Uniform Civil Rules (SA) (UCR) 194.4.

16. The applicant submitted that the costs order he sought should not simply be a standard order for party/party costs but it should award indemnity costs for a number of reasons.  The application had been wholly unmeritorious, and had no prospects of success.  Amongst other things, it had been based upon contentions that were grossly inconsistent with established legal principles.  In relation to the “self‑represented litigant” point, it had been based upon a fundamentally misconceived misunderstanding of the facts and that were not supported by legal authority, legal principle or legislation.  He put that it was open and proper to conclude that the application had been brought, maintained and persisted with by the respondent until the morning of the hearing in circumstances where properly advised he either knew or should have known that it had no prospect of success.  Further, it was open and proper to conclude that it had been brought, maintained and persisted with by the respondent until the morning of the hearing for an improper or ulterior purpose or because of some wilful disregard of the known facts or the clearly established law.  He had incurred substantial costs in relation to the application and these should have been wholly avoided.  Finally, justice would be served if the Court made an indemnity costs order and not served if it was not, because if the costs were assessed on a party/party basis then he would be left with a substantial solicitor/client cost component which would only have been incurred as a consequence of the wholly unmeritorious conduct of the respondent in bringing and maintaining the application. 

17. He requested that all of his submissions of 16 December 2020 (FDN 359) should be treated as being incorporated into these submissions.  A key issue in relation to the claim for indemnity costs was a consideration of the merits or otherwise of the withdrawn application, and this had been explained in the 16 December 2020 submissions.  He referred to various case law in relation to indemnity costs.

18. It was emphasised by the applicant that he had been wholly successful in relation to the application.  It had been withdrawn, without explanation, just prior to the commencement of the hearing, and this fact should be regarded as demonstrating that it had no prospects of success and it was bound to fail.  There had been no change in circumstances nor any ascertainment of new facts subsequent to the issue of the application to support any suggestion that it had reasonable prospects of success.  It had simply been withdrawn without explanation. 

19. Having regard to the points of claim and defence, and the parties’ written submissions, the proper conclusion to make was that the application had been abandoned because it was unmeritorious and doomed to fail on this basis the applicant should be regarded as the successful party and be awarded costs on an indemnity rather than a party/party basis. 

20. The applicant elaborated on why he said that the application had no prospects of success.  It had been brought on the basis that pursuant to the indemnity principle he was under no liability to pay for any of the solicitors’ fees identified in his claim for costs.  However, he submitted, the effect of the respondent’s points of claim and submissions was not that the applicant had no entitlement to each and every item in his claim for costs.  Rather, he submitted, different grounds and submissions had been put by the respondent relating to those legal firms which had acted for him, MBPL, CGL, and Ujvari Lawyers. 

21. One of the principal grounds relied on by the respondent was that there had been terms agreed between the applicant and CGL that if he did not recover any costs from the respondent then he would not be liable to pay that firm any solicitor’s costs. 

22. It had been submitted by the respondent that where a fee agreement provided that a party was not liable to pay solicitor’s fees until actual recovery of costs was made from an opponent, the indemnity principle would preclude any entitlement to those costs.  However, that asserted legal principle was inconsistent with the current law, the applicant submitted, at [8] to [18] of his own submissions (FDN 359) and argued that this had been established by the High Court in El Ali v Royal, Royal & Ors,[6] which had upheld the decisions of the primary judge in that case Royal v El Ali (No 3)[7] and of the Full Court of the Federal Court in Zreika v Royal.[8]

    [6] [2019] HCA Trans 227.

    [7] [2016] FCA 1573.

    [8] (2019) 271 FCR 65.

23. The applicant noted that it was common ground between the parties that the Deed of Settlement dated 29 January 2014 between himself and CGL had set out terms in relation to the liability and payment of costs between them which provided that he was liable to that firm for all legal services provided by it to him in the action, and that his liability to pay costs was subject to recovery from the respondent. However, as he had explained in his submissions, a costs agreement having the above effect came within the scope of the indemnity principle, and such a term in a costs agreement did not offend or breach it. 

24. He contended that the cases referred to in his submissions had considered terms of costs agreements having the same effect as his own deed with CGL, and had decided that such terms were sufficient to come within the scope of the indemnity principle.

25. He noted in his submissions that the respondent had not referred to nor considered the High Court decision in El Ali,[9] and the decisions below, but had instead relied upon the earlier decisions of Wentworth v Rogers,[10] and Mourik v Von Marburg,[11] that were clearly not now good law.  He submitted that had the respondent had been properly advised about the state of the law at the time he had filed his application, he should have known that the terms of the Deed of Settlement dated 29 January 2014 had not breached the indemnity principle.

    [9] [2019] HCATrans 227.

    [10] (2006) 66 NSWLR 474.

    [11] [2016] VSC 601.

26. He submitted that notwithstanding that the withdrawn application had sought a total disallowance of any solicitor’s costs with respect to the work undertaken by Ujvari Lawyers, and Smith & Co, the respondent had not submitted that he had no liability to pay for that work so as to breach the indemnity principle.  Rather, the position had been taken that in relation to Ujvari Lawyers that he was entitled to recover his costs for the work by that firm, taking into account the costs charged in a specific invoice from those lawyers.[12]  In light of certain issues that the respondent had raised concerning compliance by Ujvari Lawyers with the disclosure requirements under the Legal Practitioners Act, the respondent had submitted that until there was a solicitor client taxation between the applicant and Ujvari Lawyers, the fees of those lawyers were to be reduced to scale and they might be the subject of an overall reduction.  Accordingly, he submitted, the court should not have been called upon to make any order that he had no entitlement to recover any costs for the work undertaken by Ujvari Lawyers.

    [12] The respondent’s submissions (FDN 355) at [56].

27. In relation to work undertaken by Smith & Co he pointed out that the respondent had not submitted there was no entitlement to recover, but rather that recovery was capped at $250.00. 

28. In relation to the work undertaken by the law firm MBPL, he noted that items 1 to 311 inclusive of his claim for costs had related to work done by this firm.  The respondent had submitted that there was no liability for this work because there was no invoice or record of payment, and had said that the business of MBPL had been transferred to CGL after the latter had been incorporated in July 2007.  However, the only basis supporting the latter submission was an allegation to that effect in a pleading in another action involving the applicant and this was insufficient to support such a finding.  The respondent’s submissions regarding MBPL had no proper or invalid basis, and a reference to an assertion in a pleading in another legal proceeding was insufficient evidence to support the factual finding and conclusion that he had asserted in the present action. 

29. An alternative ground relied upon by the respondent for the orders which had been sought was that he should be regarded as a self-represented litigant.

30. However, he contended, it was apparent that the self-represented litigant issue only applied in relation to the work undertaken by CGL incorporated in his claim for costs, and the respondent had not asserted that this issue related to the work undertaken by MBPL, Ujvari Lawyers and Smith & Co.

31. He referred to his own submissions in [53] to [64] of FDN 359 and reiterated that he had been a party in the action in his personal capacity, that none of the circumstances alleged in the proceedings had anything to do with him in his capacity as a legal practitioner working in any of the firms in question,  none of those law firms had ever been parties in the action, and their only connection was as being the solicitors on the record (excluding Smith & Co which was never the solicitor on record).  He noted that there was no authority, principle, or legislation to the effect that the principles concerning a self-represented litigant claiming costs extended to a law firm representing that party, nor had this been contended.  The legal principles regarding recovery of costs by self-represented litigants who were lawyers or barristers referred to in Bell Lawyers and other cases referred to did not extend the legal principle applicable to the applicant’s circumstances.  Finally, it was submitted, the respondent had been seeking to extend the legal principles relating to self-represented litigants on the grounds of their “natural evolution”, but the rationale gave no reasonable grounds for such extension, and the respondent should be taken to have decided to have abandoned that point and had withdrawn his application because it had no merit.

32. In conclusion, he argued, the respondent had bought the application based on an unmeritorious hope that it might succeed in an argument that the relevant legal principles regarding a self-represented litigant’s costs might extend to the circumstance of a present case, but that immediately prior to the hearing he had decided to abandon the point, by which time the applicant had already incurred substantial legal costs in having to defend it.

33. The applicant pointed out that he had been represented by counsel at all hearings since 14 July 2020 and had incurred substantial costs in this regard.  The work had involved obtaining advice about the application, attending hearings, considering documents filed and served by the respondent including two affidavits compromising 520 pages.  He had himself filed a responding affidavit comprising 48 pages.  There had been a hearing on 22 October 2020 regarding the adequacy of the respondent’s statement of issues which had been resolved by consent with orders that the parties were to file points of claim and points of defence.  The respondent had filed substantial written submissions on 9 December 2020 relating solely to the application, and he had filed substantial written submissions on 16 December 2020 (FDN 359) which comprised over 11 complete pages.  The argument listed for 17 December 2020 was for the presentation of submissions relating to the abandoned application.  At that time, it had been apparent that the respondent was pursuing all aspects of his application but it was obvious from the respondent’s written submissions that he was not even purporting to put submissions to justify the absolute order he was seeking.

34. It was also submitted that it would be appropriate in the circumstances to assess the quantification of the costs entitlement of the application before the adjudication proceedings themselves were finalised.  There were competing claims for costs by the parties against each other and it was reasonable to expect that when the substantive adjudication proceedings were finalised there would be one balance amount ordered to be paid by one party to the other, reflecting the net result of the amounts that they were each entitled to.  It was accordingly neither expedient nor in the interests of justice to defer the quantification of the applicant’s costs until after a final order had been made in the proceedings.  As the applicant’s costs entitlement on the abandoned application only related to counsel fees, it should be a relatively simple process to quantify that claim and to resolve it either by agreement or determination by the court should this become necessary.  He added that he would not be seeking to enforce a costs order once the amount of costs was quantified but proposed instead that the issue of enforcement be stayed and or deferred until further order.

    Respondent’s submissions in opposition to the applicant’s claim for costs

35. The respondent opposed the orders sought by the applicant and instead sought orders that there be no order as to the costs of the application, or alternatively that he pay the costs of and incidental to the application on a standard cost basis only and not on an indemnity basis, and that those costs not to be subject to an immediate taxation. 

36. The respondent relied on the affidavit of Ms Umoff dated 10 August 2020 (FDN 337) and referred to the factual background summarised earlier, as well as the relevant costs principles.

37. Noting the adjournment of the separate taxation proceedings to 3 August 2021, he submitted that the issue of the applicant’s liability for costs to his former lawyers, and the extent of his entitlement to indemnity, therefore remained to be determined at a future date.  For that reason, it might become necessary for the respondent to seek leave to be joined as an interested party to the separate taxation proceedings to deal with the issues in the application in those proceedings.

38. He addressed the issue of the unfettered discretion of the court to award costs, submitting that there should be no order as to costs because the merits of the application had not been heard or determined and it would be against the interests of justice for the court to try the hypothetical application for the mere purpose of determining costs. 

1. It was submitted that there was nothing to suggest that he had acted unreasonably in bringing the application to strike out the claim for solicitor’s fees, particularly because at the time of the withdrawn application the applicant’s liability for solicitor’s fees remained to be determined, and that determination was necessary in order for he the respondent to meaningfully respond to the costs claim.  In fact, he pointed out, he had obtained an extension of time to respond to the costs claim until after the determination of the application for this very reason.  

2. He submitted that his application was not “patently hopeless”, on the contrary, the applicant had issued separate taxation proceedings and his adjournment of those proceedings until August 2021 for further directions had left open both the question of his entitlement and the extent of his being indemnified by the respondent.

3. Furthermore, he submitted, his failure to inform the applicant of the reconsideration of the application was not in the circumstances relevant to the question of costs in the present application.  Like the withdrawing party in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin[13] he was under no duty to inform the applicant of this reconsideration.[14]

   [13] (1997) 186 CLR 622.

   [14] Ibid at 628 (McHugh J).

4. In the alternative, he submitted, if his failure to inform the applicant of his reconsideration was a “legally relevant factor” — which was disputed — his conduct was nevertheless reasonable.  There had been no undue delay between his legal advisors issuing the application, their becoming aware of the separate taxation proceedings, their considering the consequences of those proceedings, and then withdrawing the application. 

5. He disputed that the application had not been withdrawn “without offering any explanation or justification”.  On 17 December 2020, the Court had been informed that the withdrawal was due to the institution of the separate taxation proceedings by the applicant some three months after the application had been filed.  This change in circumstances — due to the applicant’s own conduct — had presented a new consideration relevant to the continued pursuit of the application.  In these circumstances, it was submitted, it was reasonable for him to withdraw the application.  The court should be slow to create a situation where parties were discouraged from taking such a step because of the risk of suffering an adverse costs order as a result.[15]

   [15] Murray v Lesicar [2014] SASC 43 at [28] (Stanley J).

6. It was noted that the applicant’s liability for solicitor’s fees and his entitlement to indemnity, remained to be determined as a result of his own actions.  The issues raised by the abandoned application remained alive and might ultimately need to be argued if there was no determination of the separate taxation proceedings.

7. The respondent submitted that where there had been no hearing on the merits it was not the Court’s task to determine an application merely for the purposes of costs. It was inappropriate for the applicant to attempt to incorporate his written submissions of 16 December 2020 relating to the merits of the application into his current costs submissions. For these reasons, it was submitted the court should disregard [4.15], [17], [20]-[37] and [42] of the applicant’s costs submissions. Because the applicant’s position on the merits of the withdrawn application was opposed, the incorporation of these submissions into the present costs argument would require the Court to resolve the issues in order to determine the application. There was little common ground between the parties as to the issues in the application now withdrawn, so it would be impossible to determine without a hearing on the merits and the extent to which either party would have succeeded.[16] 

   [16] Lai Qin at 625 (McHugh J).

8. The respondent addressed the costs consequences of withdrawing his application.  He referred to Lai Qin and to my decision in Clone Pty Ltd v Players Pty Ltd (No 3)[17] and submitted that this line of authority should be applied when determining whether costs ought to be awarded where there had been no hearing of the application on the merits. 

   [17] [2020] SASC 29.

9. The respondent referred to three cited instances where the Supreme Court had awarded costs in respect of the applications that had been withdrawn without any hearing on the merits.[18]  He submitted, however, that these cases should not be relied upon for the reason that they had shared no further light on the relevant principles and had been determined purely on the basis of their facts.  He also referred to Coastal Ecology Protection Group Inc v City of Charles Sturt[19] but submitted that the present circumstances differed from the circumstances in that case, as there had been a full hearing and argument, judgment had been reserved, and the application had then been withdrawn.  Livesey J had then made a standard costs order against the withdrawing party. 

   [18] Shanamere Pty Ltd v Litigation Support Services Pty Ltd [2006] SASC 120 (Sulan J); Tran v Maurice Srour and Minh Tran Pty Ltd [2000] SASC 338 (Judge Burley); Taylor v Santos Ltd [1999] SASC 430 at [11] (Judge Burley).

   [19] [2020] SASC 215 (Livesey J).

10. The respondent addressed the issue of indemnity costs, submitting that if the court were to make a cost order in favour of the applicant, then this should be on the standard costs basis and not the indemnity basis.  There had been no special or unusual features, no interests of justice issue, and no delinquency justifying such an order.  The respondent disputed the applicant’s submission that the application had no prospects of success or that if properly advised he should have known this.

11. Because the application had not been heard, the court should not determine its merits merely for the purposes of costs. Further, there was nothing improper or unreasonable in his pursuing an application that faced “legal difficulty” and in relation to which there was “little authority” on the points in law in issue.  He disputed the applicant’s assertion that the facts supported a conclusion that the application was unreasonable or that it was motivated by an improper purpose.

12. Finally, he addressed the issue as to whether there should be an immediate taxation of costs, which had been sought by the applicant in the event that a cost order was made in his favour.  He submitted an order for immediate taxation was inappropriate and the general position was that costs of an interlocutory application were not to be taxed and would not become payable until the final determination of the proceeding.  The interests of justice did not support any order to the contrary.

13. His conduct had not been unreasonable, the issues in his application had not been conceded and indeed they might ultimately need to be determined by argument by reason of the adjournment of the separate taxation proceedings.  The withdrawal of the application had not resolved the determination of a separately identifiable matter, nor was it the completion of a discrete aspect of the proceedings.  The applicant’s submission that deferring quantification was not expedient, or in the interests of justice, or might give rise to further proceedings had been vaguely put.  The fact that he did not intend to seek enforcement of any costs awarded after they had been quantified added further support to the contention that there was no urgency or need for a taxation to occur before the finalisation of the substantive taxation proceedings.

    Applicant’s reply submissions

14. The applicant in reply reiterated his primary submission that the respondent had withdrawn his application at the hearing because it had been based on misconceived legal principles and was bound to be dismissed had it proceeded.  He did not concede or accept the reasons proffered by the respondent at the hearing and argued that the Court should determine for itself whether or not the grounds stated had merit and what were the real reasons for the withdrawal. 

15. It was obvious that the respondent’s application would have been dismissed had the argument proceeded.  The respondent had not provided any substantive response to one of the key reasons for the application for costs, namely that his application had been based on a fundamentally misconceived legal approach with respect to the indemnity principle that was inconsistent and contrary to established legal principles confirmed by the High Court in El Ali.  The respondent’s submissions purported to state applicable legal principles but the submission that a retainer agreement that provided there was no liability to the client unless and until actual recovery of costs was made was insufficient to enliven the indemnity principle, and had relied on outdated case law and not the applicable legal principles as confirmed by the recent decision of the High Court which had not even been mentioned in those submissions.  It was clear from the High Court that where the liability of a client to pay costs was contingent upon a successful recovery from an opposing litigant this was sufficient to come within the province of the indemnity principle.

16. Further, the respondent had been seeking orders that finally determined the issue of whether or not the applicant had any liability for the solicitor’s fees so it was incorrect for him to now submit at [34] of FDN 363 that the basis of his application was that the applicant’s liability for the solicitor’s costs remained to be determined. 

17. The second ground relied upon in the respondent’s application, namely that the self-represented litigant principle applied to the applicant, was also misconceived and was bound to fail, it was submitted.  The general principles set out in the respondent’s submissions were not all applicable to the issue of costs in the circumstances concerning the applicant.  The respondent had not acted reasonably, and he had brought and persisted with an interlocutory application based upon misconceived legal principles until just before the commencement of the hearing.

18. The respondent had not conceded any points by the withdrawal of his interlocutory application and indeed he had said that the issue of the applicant’s entitlement to indemnity remained to be determined in the future.

19. The respondent’s application was not on the basis that the applicant’s liability “remained to be determined”, he had submitted that, as a matter of law, the retainer agreement had the effect that the indemnity principle was offended and that the applicant was not entitled to recover any costs from him.

20. The only reason why the argument did not proceed was because the respondent had decided to withdraw.  This was his own action and the withdrawal did not result from any action on the applicant’s part.  The respondent could have applied to adjourn the interlocutory application until some later time, such as the conclusion of the taxation proceedings, if it was his position that those separate taxation proceedings were relevant to his interlocutory application.  The respondent’s submissions had not explained how the separate taxation proceedings could have any bearing upon the merits of the two legal arguments raised in his application: the indemnity principle and the self-represented litigant principle.   This was because those other proceedings did not affect the basis for the respondent’s interlocutory application. 

21. The Court should conclude that the respondent had withdrawn his application, rather than seeking an adjournment, because the outcome of those separate taxation proceedings would have had no bearing on the merits of the application, which was bound to fail if determined by the Court at any time, including after the separate taxation proceedings had concluded.  There was no point in keeping it alive. 

22. In relation to the quantification of costs if they were ordered in the applicant’s favour, it was submitted that deferring that taxation would only serve to further delay the finalisation of the costs between the parties.  It was conceded that there should be no enforcement of any interim order in relation to costs until the overall result of the taxation proceedings was determined. 

    Respondent’s further written submissions in response to the applicant’s reply submissions

23. As indicated above, pursuant to leave given nunc pro tunc on 30 March 2021, the respondent filed supplementary written submissions on 31 March 2021 (FDN 365).

24. In these he addressed the issue as to whether his application was bound to be dismissed.  He noted that the applicant had contended that the principles espoused by the High Court in Lai Qin should not apply, and further that the refusal of special leave in El Ali,[20] created a binding precedent in favour of the proposition that a costs agreement conditional on the payment of costs from another party being received did not offend the indemnity principle, so that the respondent’s application was doomed to fail and accordingly that an order for costs might be made without the need for a hearing on the merits.

    [20] [2019] HCA Trans 227.

25. However, the respondent submitted, there was no general proposition that refusal to grant special leave created a binding precedent. He referred to Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd[21] and North Ganalanja Aboriginal Corporation v Queensland.[22]  He further submitted that an examination of the transcript of El Ali demonstrated why this was so.  It was not possible to determine that the Court had espoused a particular view of the law.  The High Court in El Ali in refusing special leave had observed that in its view no question of general principle arose in the case, saying that the principles to be applied in cases of that kind had been settled by decisions of intermediate appellate courts.  The High Court had found that the application had insufficient prospects of success to warrant a grant of special leave and this was refused.  The respondent referred to the remarks made by Kiefel CJ at lines 288 to 292.  In point of fact, the respondent submitted, the transcript might be regarded as supporting an argument that the Court took the view that each case turned on the construction of the particular costs agreement in such case.  The Chief Justice had come to this view on the basis of a construction of the particular terms of the particular costs agreement before the Court and this was not a proposition reached as a matter of construction.  The respondent also referred to the observations where Keane J raised with the party seeking leave, whether the case turned on the construction of a particular costs agreement in the case.[23]

    [21] (2015) 256 CLR 104 at [119] (Bell and Gageler JJ).

    [22] (1996) 185 CLR 595 at 643 (McHugh J).

    [23] Transcript of Proceedings at 7.212-214 and 7.223-224.

26. It followed, the respondent submitted, that an order for costs should not be made in the applicant’s favour.

27. The respondent also further addressed the issue of the separate taxation proceedings.  It was noted that the applicant had submitted in his reply submissions that questions of his liability to his solicitors should be dealt with in separate proceedings.  To this end, he had issued separate taxation proceedings on 19 November 2020 (Action No. CIV-20-005422 and Action No. CIV-20-00543 against CGL and Ujvari Lawyers, respectively).  The respondent submitted that leaving aside the question of his standing to raise questions as to the costs agreements between the parties in the action (referring to Catto v Hampton Australia Ltd (In Liq))[24] there might be forensic advantages in dealing with contractual issues between the applicant and his solicitors in proceedings in which those solicitors were parties.  For this reason alone, he submitted, it was reasonable for him to have withdrawn his application once the separate taxation proceedings had been instituted, and in order for him to give consideration to seeking leave to be joined as an interested party in those proceedings.

    Applicant’s supplementary written submissions in response to the respondent’s further written submissions

    [24] [2008] 257 LSJS 245 at [31]-[34] (White J).

28. The applicant filed reply submissions to the respondent’s supplementary written submissions on 9 April 2021.

29. He contended that these submissions should not detract from his previous submissions as to why he should obtain the costs orders consequent upon the withdrawal of the respondent’s application. Referring to the respondent’s submissions as to the effect of the High Court’s El Ali decision, he said that he had not put his submissions on the basis that the High Court had delivered a decision which was a binding precedent, rather it had been contended that the refusal of special leave by the High Court was made on the basis that the decision of the Full Court of the Federal Court of Australia was correct.  Accordingly, for the purposes of the issues presently before this Court, the issue which it was required to determine was whether the decision of the Full Court of the Federal Court of Australia was a binding precedent.

30. The applicant’s supplementary submissions had contended that each case turned on the construction of the particular costs agreement, so it therefore followed that an order for costs should not been made in his favour.  However, they had not provided any reasoning or basis as to why the conclusion advanced followed, nor did they provide any analysis of the particular costs agreement in El Ali, nor did they compare it with the particular costs agreements between the applicant and the several law firms which have represented him and were relevant in the present taxation proceedings.  The applicant’s position was that such analysis was required to support the respondent’s bald conclusion that an order for costs should not be made in the applicant’s favour.

31. The applicant submitted that the key point he was making was that the specific term in his costs agreement with CGL Law was in all material respects identical with the relevant term in the costs agreement in El Ali.  His written submissions filed on 16 December 2020 (FDN 359) had set out the relevant term in the retainer agreement in El Ali and it was obvious that the relevant terms of the applicant’s retainer agreement with CGL and the parties in El Ali were to the same effect, namely that any liability of the client to pay costs to his/their/its solicitors was contingent upon the recovery of those costs from another party.  The High Court had refused special leave to appeal from the Full Court of the Federal Court in Zreika v Royal[25] because that decision applied the established legal principles correctly to the terms of the particular retainer agreement in that case. 

    [25] (2019) 271 FCR 65.

32. The applicant submitted that there was no scope for the respondent to argue that terms of retainer agreements such as the one considered in that case and his own agreement here offended the indemnity principle.  He also responded to [7] to [10] of the respondent’s supplementary submissions and he referred to [4] of his own written submissions filed on 16 December 2020 pointing out that the declaration the respondent was seeking would have no practical utility because the applicant’s solicitors were not parties in these taxation proceedings and therefore would not be bound by any such declaration.  He submitted that this should have been obvious to the respondent at the time he filed his application.  He again pointed out that on 17 December 2020, the respondent had not applied to adjourn argument on his application, for example, on the grounds that the separate solicitor/client proceedings that the applicant had commenced on 19 November 2020 raised any issues as to whether or not those other proceedings were a more appropriate legal process for determining retainer issues relevant to the indemnity principle in these proceedings.  Further, he had not claimed that he required time to consider whether he should apply to be joined in those proceedings, not had he asked that his application should be adjourned pending the hearing and determination of any particular issues in those other solicitor/client proceedings.  Instead, he had simply withdrawn his application which meant that he had abandoned it.

1. The applicant pointed out that nearly three weeks had elapsed between the respondent having been given notice of the commencement of the solicitor/client taxation proceedings and the hearing on 17 December 2020. During that period there was no notice to the applicant of the respondent’s intention to withdraw his application.  To the contrary, he had filed written submissions on 9 December 2020 explaining why the orders should be made on his application.  It was accordingly appropriate to conclude that the filing of submissions on that date meant that he had decided that, in all the circumstances known to him at that time, those other solicitor/client taxation proceedings did not affect the merits or basis for seeking the orders/relief sought in his application.  He had wished the argument to proceed at the hearing on 17 December 2020 and those submissions had set out why he had said that his application should be successful.  Nor had he asserted after having been given notice on 27 November 2020 of the other taxation proceedings or in his written submissions of 9 December 2020 that that there was any change of circumstances which had justified his decision to abandon application immediately prior to the hearing on 17 December 2020.

   Legal principles

2. The relevant principles were helpfully discussed by the parties in their written submissions, which I gratefully adopt.

   The unfettered discretion of the Court to award costs

3. Section 40(1) of the Supreme Court Act 1935 (SA) provides that costs are in the discretion of the court.

4. It may order costs at any stage in the proceedings[26] on a standard costs basis (essentially the same as was referred to under former r 264(2) as party and party costs), on a solicitor client basis, or indemnity basis, or on any other basis in accordance with the applicable costs scales or a combination of both different scales of costs.[27]

   [26] UCR 194(1).

   [27] UCR 194.3(1)(a)-(c).

5. Subject to the presumptive costs rules and the Court’s overriding discretion, costs follow the event.[28]  It is a presumptive costs rule that the costs of an interlocutory application are “costs in the cause”,[29] subject to an order of the Court to the contrary.[30]

   [28] UCR 194.5(2).

   [29] UCR 194.4(5).

   [30] UCR 194.4(1).

6. Ordinarily the Court exercises its discretion as to costs after the hearing of an application is heard on its merits, to the successful party.[31]

   [31] Clone v Players (No 3) [2020] SASC 29 at [150], citing Lai Qin at 624 (McHugh J).

7. However, where there has been no hearing of the application of the merits, the court will “rarely, if ever” try a hypothetical application for the purpose for determining costs unless the abandoned claim is “patently hopeless”, and “[t]his is particularly a case where a trial on the merits would involve complex factual matters where credit could be an issue”.[32]

   [32] Clone v Players (No 3) at [101]; LexisNexis, Legal Costs South Australia (at October 2013) Principles and Practice of Costs, Costs Rules for Particular Events [1774]; Murray at [26] (Stanley J) citing Gribbles Pathology Pty Ltd v Health Insurance Commission (1997) 80 FCR 284 at 287 (Finkelstein J) followed in Boscaini Investments Ltd v Corporation of the City of Kensington and Norwood [1999] SASC 327 (Debelle J) at [21]; Australian Securities Commission v Aust‑Home Investments Ltd [1993] 116 ALR 523 at 530 (Hill J); Tobin v Tobin (1977) 75 LSJS 9 at 12 (Sangster J); Taylor v Santos Ltd [1999] SASC 430 at [11] (Judge Burley).

8. In exercising its discretion as to costs the court may have regard to any factors that it considers relevant.  These include the reasonableness of each party’s actions in commencing and defending the hearing or application[33] and the degree of certainty of the outcome if the matter had been tried.[34]  If, however it appears that both parties have acted reasonably, and there is no clear outcome, it is appropriate for the court to make no orders as to costs.[35]

   [33] UCR194.6 (1)-(2).

   [34] Clone v Players (No 3) at [106]; Lai Qin at 624-626 (McHugh J); Gribbles Pathology at [287]; Boscaini Investments at [21] citing Australian Securities Commission v Aust-Home Investments Ltd at 530 (Hill J).

   [35] Clone v Players (No 3) at [106], [150], citing Lai Qin at 625 (McHugh J), Murray at [26] (Stanley J).

9. Finally, the courts should be slow to create a situation in litigation where parties are discouraged from conceding points for practical reasons because of the risk of suffering in costs as a result.[36]

   [36] Murray at [28] (Stanley J).

   Costs consequences of withdrawn applications

10. This issue was considered by the High Court in Re Minister for Immigration & Ethnic Affairs; Ex Parte Lai Qin, where McHugh J wrote:[37]

    In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation.

    (Citations omitted)

    [37] (1997) 186 CLR 622 at 624-5.

11. He added:

    If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases.

12. Lai Qin was applied in the context of withdrawn applications in Sergi v Sergi(No 2), where Darke J wrote:[38]

    [15]Both parties correctly accept that the plaintiffs’ motion did not proceed to a determination on the merits. Accordingly, the proper exercise of the Court’s discretion will ordinarily be that there be no order as to costs unless it can be shown that one party has acted so unreasonably in bringing or defending the application that the other party should have its costs (see Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (supra) at 624–5; see also Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 at [25]-[30]). The use of the word “so” as prefacing the word “unreasonably” indicates a level of unreasonableness which is established by the circumstances in which the costs were incurred (see Renton v Kelly [2018] NSWSC 1377 at [56]; Tuitupou v Davies [2019] NSWSC 160 at [48]; see also Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 at [5]).

    [38] [2019] NSWSC 1221 at [15].

13. In ONE.TEL Ltd v Commissioner of Taxation, Burchett J wrote:[39]

    It is accepted that, in a case which terminates before there has been a hearing, the Court should not resolve the issue of costs by engaging in something in the nature of a hypothetical trial: Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201; Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624. But this does not mean that the Court can never make an order for costs. Often, it will be unable to do so; but in other cases an examination of the reasonableness of the conduct of the parties, respectively, may provide the basis of an order, or ‘a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried’, as McHugh J put it in Ex parte Lai Qin at 625. His Honour added:

    If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings.

    Although his Honour thought this would ‘usually’ be so, he made it clear that he was not laying down an invariable rule. At the beginning of his discussion of the applicable principles (at 624), he referred to the discretionary nature of the power to order costs, and to the ‘general rule [that] the successful party is entitled to his or her costs’, and he said:

    In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action.

    [39] (2000) 101 FCR 548 at 552-3.

14. Lai Qin has been followed by this Court in a number of cases including Clone Pty Ltd v Players Pty Ltd (No 3) and in Coastal Ecology,[40] where Livesey J made a standard costs order against a party which had sought strike out or summary dismissal but had later abandoned this application.  However, as is clear from His Honour’s reasons at [40]-[44] this had occurred after a full hearing and judgment had been reserved.

    [40] [2020] SASC 215.

15. There are circumstances where an order for costs has been made in respect of applications that have been withdrawn before hearing on the merits in this Court.  Examples are Shanamere Pty Ltd v Litigation Support Services Pty Ltd,[41] Tran v Maurice Srour and Minh Tran Pty Ltd,[42] and Taylor v Santos Ltd.[43]

    [41] [2006] SASC 120 (Sulan J).

    [42] [2000] SASC 338 (Judge Burley).

    [43] [1999] SASC 430 (Judge Burley).

16. However, these decisions would appear to have turned on the specific circumstances of each case. In Shanamere, Sulan J at [17] relied on former r 101.02 which provided that once an application was dismissed, costs would follow the event. His Honour then proceeded to determine what basis of costs should be awarded without expressly either applying or considering the principles that applied when the application had been withdrawn. In Tran, Judge Burley at [11] considered whether costs ought to be awarded for a discontinued proceeding and a withdrawn application. Without setting out the applicable rules or principles, he held that no costs ought to be ordered for the discontinued proceedings, on the basis that the merits of the proceedings had not been heard. However, he also held that in the circumstance of that case, costs ought to be awarded for the withdrawn application without providing any more reason. In Taylor, Judge Burley did not set out the reasoning for costs to be awarded, or what rules or principles relied on.  He simply decided how costs should be awarded without expressly applying or considering the principles applicable to a withdrawal of an application before its merits had been heard. 

17. On a consideration of the authorities the correct approach is that where there has been no hearing on the merits the costs consequences of a withdrawn application are not a forgone conclusion, but will depend on the application of the principles to the specific circumstances of the case.

    Costs on an indemnity basis

18. Indemnity costs are defined in UCR 191.1 as being costs which are a complete indemnity against the costs incurred by the person entitled to payment of costs in the proceeding (or the relevant part of the proceeding) except to the extent that the costs are shown by the liable party to have been unreasonably incurred.

19. In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd Woodward J wrote:[44]

    I believe that it is appropriate to consider awarding “solicitor and client” or “indemnity” costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law.  Such cases are, fortunately, rare.  But when they occur, the court will need to consider how it should exercise its discretion.

    [44] (1988) 81 ALR 397 at 401.

20. The ordinary rule is that the court should award costs on a standard cost basis unless the circumstances of the case must be such as to warrant the court in departing from the usual course.[45]

    [45] Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 232-233 (Sheppard J). The principles outlined in Colgate Palmolive were approved in Duke Group Limited (in liq) v Pilmer [1998] SASC 7172 at [6] (Mullighan J) and Ten Group Pty Ltd (No 2) v Cornes (2012) 114 SASR 106 at [3] (Kourakis CJ, Gray and Blue JJ).

21. The court may only award indemnity costs where the justice of the case warrants such an order.[46]  Likewise, an award of such costs will only be made where there are circumstances that are special and unusual.[47]

    [46] Shanamere at [29] (Sulan J).

    [47] Colgate Palmolive at 233 (Sheppard J) citing Fountain Selected Meat (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397 at 400-401(Woodward J).

22. Instances where indemnity costs might be awarded include where there are circumstances that are special or unusual, or involve some irrelevant delinquency on the part of the successful party.[48]

    [48] Oshlack v Richmond River Council (1998) 193 CLR 72, and more recently in Preston v Nikolaidis (No 2) [2021] NSWSC 174 at [4] (Williams J).

23. The categories in which such costs can be awarded are not closed.[49]

    [49] Colgate Palmolive at 233 (Sheppard J) citing Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd [1991] FCA 187 at [8] (French J).

24. In the general trial context, a case does not necessarily have to be hopeless, that is have no chance of success, but it is sufficient if it proceeds without apparent regard to the significant deficiencies in its evidence.[50]  However, there is nothing in itself improper or unreasonable in the pursuit of claims involving legal difficulty.[51]  In Yates, Branson J was of the view that a claim against  the  second and third respondents, who were barristers, for breaches of statutory duty should be “seen as a case involving considerable legal difficulty and limited authoritative support” and that pursuing such a case was not itself improper or unreasonable.  This was in circumstances where there was little authority on whether proceedings for breach of certain statutory duties could be bought against a barrister. 

    [50] Yates Property Corporation Pty Ltd v Boland (No 2) (1997) 147 ALR 685 at 692 (Branson J).

    [51] Yates at 690.

25. The mere existence of facts and circumstances warranting the awarding of costs on an indemnity basis does not mean that judges are necessarily obliged to so exercise their discretion, as costs will always be at the Court’s discretion.[52]

    [52] Colgate Palmolive at 234 (Sheppard J).

26. A recent decision referring to the relevant legal principles concerning an application for indemnity costs was Melbourne City Investment Pty Ltd v Treasury Wine Estates Limited (No 2) where the Full Federal Court ordered indemnity costs against a party in relation to an interlocutory application in appeal proceedings.  The relevant legal principles applicable were stated as follows:[53]

    [3]The Court has a broad power to award costs in proceedings, including indemnity costs, under s 43 of the Federal Court of Australia Act 1976 (Cth) (the Act). In exercising the discretion to award costs, s 37N(4) of the Act requires the Court to take account of any failure by a party to comply with the overarching purpose of the civil procedure provisions, to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible: see s 37M(1).

    [4]Usually the Court will award costs to the successful party on a party/party basis, but where the circumstances of the case warrant a departure from the usual course the Court may order indemnity costs.  The principles relevant to an award of indemnity costs are well-established.  There can be no exhaustive list of the circumstances that may warrant the exercise of the discretion.

    [5]In broad terms an order for indemnity costs requires that some special or unusual feature arises: Cirillo v Consolidated Press Property Ltd(formerly known as Citicorp Australia Ltd) (No 2) [2007] FCA 179 at [3] (Finn J). Indemnity costs are not punitive but are designed for “compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the Court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs”: Hamod v New South Wales (2002) 188 ALR 659 at 665 (Gray J, with whom Carr and Goldberg JJ agreed). Such circumstances may include where allegations are made “which ought never to have been made”, where the case is “unduly prolonged by groundless contentions” (Ragata Developments Pty Ltd v Westpac Banking Corporation [1993] FCA 115 at [15], [17] (Davies J)), and where “the applicant, properly advised, should have known that he had no chance of success” (Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401 (Woodward J)) or “persists in what should on proper consideration be seen to be a hopeless case” (J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) (1993) 46 IR 301 at 303 (French J)).

    [53] [2017] FCAFC 116 at [3]-[5].

27. This decision emphasises that indemnity costs compensate a party fully for costs that were unreasonable for that party to have been subjected to, and secondly if a party should have known that it had no chance of success and persisted with a hopeless case in such circumstances indemnity costs would be awarded.

28. The principles were also considered recently by the Supreme Court of Victoria in CIFG (Australia) Pty Ltd v Perna,[54] where Derham AsJ made an order for indemnity costs against a party.

    [54] [2020] VSC 735.

    Immediate taxation of costs

29. Under the UCR there is a presumption that costs ordered to be paid are not to be taxed and do not become payable until the final determination of the proceeding, including the final costs ordered.[55]  This is similar to the former r 265(2) which provided that a schedule of costs was not be adjudicated upon and an order for costs not enforced until after the principal proceedings had been concluded, subject to any order of the court to the contrary.

    [55] UCR 194.4(8).

30. Nevertheless, the court may make an order immediate taxation and payment of costs for an interlocutory application where the interests of justice demand it.[56]  Murran Investments Pty Ltd v Aromatic Beauty Products Pty Ltd concerned O 62 r 3 of the repealed Federal Court Rules (Cth) that provided that in the normal course, costs orders relating to interlocutory proceedings might not be taxed and recovered until the principal proceeding was included.[57]

    [56] (2000) 191 ALR 579 at [66] (Mansfield J).

    [57] Ibid at [65].

31. Shanamere,[58] referred to above, concerned former r 101.01(7) which provided that an order for costs of an interlocutory proceeding should not entitle a party to have costs taxed until the principal proceeding was concluded or further order. 

    [58] At [39]-[44] (Sulan J).

32. There are circumstances where it might be appropriate to order a taxation forthwith such as where the interlocutory application concerns the determination of a separately identifiable matter, or might be viewed as the completion of a discrete aspect of the action.[59]  Immediate taxation might be awarded where there had been unreasonable conduct on the part of the party against whom costs have been ordered, and similarly, it  might be awarded where considerable time remains before the proceedings as a  whole are determined.[60]  Another instance is where there has been a substantial delay on the part of the party against whom costs had been ordered due to its failure to express its case clearly, for example removing numerous causes of action and thereby causing substantial expense to the other party during the process.[61]  While delay is a relevant consideration it is not necessarily sufficient.[62]

    [59] Olsten Power Ltd v Yokogawa Australia Pty Ltd (No 2) (2006) 244 LSJS 625 at [10] (Debelle J) concerning former 1987 Rule 101.01(7).

    [60] Ibid at [10].

    [61] Rosegum Corporation Pty Ltd v Young (No 2) [2017] FCA 36 at [24] (McKerracher J).

    [62] Murran Investments at [66] (Mansfield J); Shanamere at [39]-[44] (Sulan J).

1. Finally, regard should be given to the parties’ financial resources, and whether the scope of the enquiry as to costs would divert their parties’ attention from the substantial proceedings.[63]

   [63] LexisNexis, Legal Costs South Australia (at January 2019) Principles and Practice of Costs, Costs Rules for Particular Events [2315].

   Consideration

   Does the Court have power under the UCR to award costs following the withdrawal or abandonment by a party of an interlocutory application which it has issued?

2. First and foremost, I have regard to s 40(1) of the Supreme Court Act which provides that costs are in the discretion of the Court.

3. It is a presumptive costs rule that the costs of an interlocutory application are “costs in the cause”,[64] but this is subject to an order of the court to the contrary.[65]

   [64] UCR 194.4(5).

   [65] UCR 194.4(1).

4. The UCR rules as to interlocutory applications, Chapter 9, do not in themselves provide costs consequences following the withdrawal or abandonment of such applications.

5. In the context of a discontinuance of an action itself, an applicant discontinuing is liable to pay costs up to the date of notice of the discontinuance on a standard costs basis,[66] subject to the courts discretion to order otherwise.  The wording of UCR 141.3(2) is as follows:

   If an applicant withdraws a claim under this rule, the applicant is liable to pay the costs of a respondent against whom the claim is discontinued up to the date of service of the notice of discontinuance on the standard costs basis and any interested party named in the claim must bear their own costs.

   [66] UCR 141.3(2).

6. The word “claim” is defined in UCR 2.1 as

   claim means a claim as described in rule 51.2 and, unless the context otherwise indicates, includes a cross claim

7. UCR 51.2(1) in turn provides:

   Subject to subrules (3) to (5), a claim is a proceeding in which the applicant claims—

   (a)a remedy for a common law or equitable cause of action; or

   (b)a statutory remedy of a type available for a common law or equitable cause of action (such as damages, compensation, injunction, restitution, specific performance, rescission, rectification or declaration) for a statutory cause of action analogous to a common law or equitable cause of action.

   Examples—

   A claim for damages under section 236 or compensation under section 237 or an injunction under section 232 as a result of misleading conduct in breach of section 18 of the Australian Consumer Law is a statutory cause of action.

   A claim for recovery of monies under section 588FF on avoidance of an unfair preference under section 588FA of the Corporations Act 2001 (Cth) is a statutory cause of action.

8. The predecessor to UCR 141.3(2) was the former r 107(4), which was found to be applicable in the context of a withdrawn interlocutory application in Clone Pty Ltd v Players Pty Ltd (No 3).[67]

   [67] At [100], referring to Pentroth Pty Ltd v Kirschild Pty Ltd [2006] 96 SASR 129 at [24]-[25] (White J).

9. However, that former r 107(4) was in different terms to UCR 141.3 (2).  It provided:

   Unless the parties agree or the Court orders to the contrary, the party against whom the action, or a claim or defence in the action, is discontinued is entitled to costs arising from the action, or the claim or defence (as the case may require) up to the time of receiving notice of the discontinuance. 

10. The wording after the reference to “the action” in the former r 107(4) “or a claim or defence in the action” suggests that that rule applied not only to the discontinuance of the action itself but also something other than the action.

11. However, UCR 194.5(1)(d) provides that the situations referred to in that rule are subject to the overriding discretion of the Court as to costs.  I further note that UCR 194.6(1) “Discretionary factors” provides that in exercising its discretion as to costs, the Court may have regard to any factors it considers relevant.  UCR 194.6(2) sets out examples of such matters.  These include UCR 194.6(2)(a) “any misconduct or unreasonable conduct of a party in connection with a proceeding”.

12. The withdrawal of an interlocutory application issued by a party could constitute unreasonable conduct on its part. Further, the examples set out in UCR 194.6(2) do not limit the effect of sub rule (1).

13. Taking these matters into account, and noting the provisions of s 40(1) of the Supreme Court Act and the court’s inherent powers, I have determined that the Court has power to award costs against a party issuing, but then withdrawing, an interlocutory application.

    Has the applicant been wholly successful in relation to the respondent’s withdrawn interlocutory application?

14. It is clear that the application was wholly withdrawn by the respondent at the hearing of 17 December 2010 and that such withdrawal was unqualified.  At the time of withdrawal, the respondents’ counsel Mr Cogan told the Court that the application was being withdrawn “in light of various matters including the recent referral of the taxation of Mr Viscariello’s costs against former solicitors”.  This suggests that the referral of the taxation of the applicant’s costs against his former solicitors was not the only factor in the respondent’s decision to withdraw.  The respondent has argued that he might continue to agitate the matters which were the basis for his application; for example, that he might apply to be joined as an interested party to the taxation proceedings so as to be heard there on those matters.  He also told the court that the issues raised by the abandoned application remained alive and might ultimately need to be argued if there was no determination of the separate taxation proceedings. However, whether or not any such action will ultimately be taken is entirely speculative, and significantly the application was wholly withdrawn, rather than adjourned to some later time.

15. On its face, I have determined that the applicant was successful on the application in that it was wholly withdrawn without proceeding to argument.

    Should the Court try the hypothetical application for the purpose of determining costs?

16. The High Court in Lai Qin made it clear that where there has been no hearing of the application of the merits, the court will rarely, if ever, try a hypothetical application for the purpose for determining costs unless the abandoned claim is patently hopeless.

17. In some cases where costs were awarded following the withdrawal of an application, for example Coastal Ecology, there may no difficulty in determining an application for costs.  In that matter the issue had been fully argued and judgment had been reserved.  However, as the High Court noted in Lai Qin, to try a hypothetical action between the parties in order to determine the costs consequences would burden them in circumstances where, by settlement or extra‑curial action, they would have avoided this.

18. In my view, a hypothetical trial of the respondent’s application in this case would be difficult and costly.  Although it would seem unlikely that there would be the need for issues of credit to be determined by the calling of oral evidence, the issues which would need to be determined are factually and legally complex.  The application, affidavits in support and opposition, points of claim and defences, and the written submissions of the parties provided to the court for its consideration at the 17 December 2020 hearing total approximately 380 pages, including numerous lengthy exhibits and references to numerous legal authorities on many different issues.  Were the matter to have been argued the court would have had to consider multiple legal and factual issues. 

19. Without seeking to be exhaustive, the likely legal issues  raised include such matters as the indemnity principle restricting a party from  recovering  more than was paid or liable to be paid to its own solicitors, the principles concerning self‑represented litigants as have been considered by the High Court in Bell Lawyers, the extension of those principles to  law firms comprising a partnership or incorporated legal practice, the concept of conditional costs agreements, the legislative provisions providing that  non-conforming  costs agreements are void and the consequences therof, and contraventions of the indemnity principle by reason of fee agreements providing that a party is not liable to pay solicitors’ fees until costs have been recovered and whether recent  authority on this issue has altered the earlier approach.

20. The factual issues to be addressed would include a detailed analysis of the dealings between the applicant and four separate legal firms that had represented him or undertaken his legal work in these proceedings, including consideration of the retainer agreements he entered into with them and their provisions (or absence of provisions), of the legal work actually undertaken (including allegations that solicitors had acted for  him in unrelated proceedings), of details of the invoices rendered to  him  by these legal firms (including  allegations of the absence of details as to the work undertaken), and the lack of evidence of payment of invoices. 

21. In relation to the legal work undertaken by MBPL an issue arose as to whether the respondent could rely solely on an allegation in a pleading in another action involving the applicant.  Likely factual issues would also include the consideration of mortgage arrangements made between the applicant and his legal advisors and counsel, the winding up of the CGL legal firm and its consequences, and the entry into of a deed of settlement between the applicant and CGL and Mr Stephen McNamara. 

22. In relation to the legal work undertaken for the applicant by Ujvari Lawyers there is an issue as to whether a tax invoice rendered by that firm on its face included a large number of items which he was not entitled to claim, the capping of fees of that firm to the amount referred to in the only invoice that firm had issued to him, and whether or not under the retainer the disclosures required under the Legal Practitioners Act had been made.  Argument may well have been heard on the applicant’s contention that the respondent would be unable to establish that he had no liability for certain legal work so as to breach the indemnity principle, because in relation to that firm he was entitled to costs for work raised in a specific invoice from those lawyers, and liability would remain even if its fees were to be reduced to scale and the subject of an overall reduction. 

23. A further issue for consideration would relate to the applicant’s claim for a taxation of his solicitor/client costs and its postponement at his request and whether or not this taxation was an impediment to the respondent’s submission that these proceedings should proceed for determination.

24. All of these legal and factual issues have been addressed in detail in both parties’ points of claim and defence and written submissions, and in the supporting affidavits.  Further consideration of these legal and factual issues would undoubtedly further burden the parties, and the court, in their determination.

25. The concepts of proportionality and cost effectiveness, which are objects of the UCR, also come into play.[68]

    [68] UCR 1.5.

26. I have determined, therefore, that it would be inappropriate for the Court to embark on a process of a hypothetical trial of the application.

    Was the application and its withdrawal so unreasonable that the applicant should have his costs?

27. I am conscious that the Court should be slow to create a situation where parties were discouraged from taking such a step such as withdrawing an application because of the risk of suffering an adverse costs order as a result.[69]

    [69] Murray at [28] (Stanley J).

28. In Sergi v Sergi (No 2),[70] discussed above, Darke J, following Lai Qin, wrote that  the proper exercise of the Court’s discretion would ordinarily be that there be no order as to costs unless it could be shown that one party had acted so unreasonably in bringing or defending the application that the other party should have its costs, and that the use of the word “so” as prefacing the word “unreasonably” indicated a level of unreasonableness which was  established by the circumstances in which the costs were incurred.

    [70] [2019] NSWSC 1221.

29. The applicant here has vigorously argued that had the matter proceeded to full argument he would have successfully opposed it.  Equally, the respondent has argued that the application had merit and that notwithstanding that it was abandoned, it still remained open for him to argue that the issue as to the applicant’s liability might still be determined at some future date either by way of non-party intervention at the applicant’s solicitor and client taxation of costs or in the course of the taxation itself.

30. Whatever the ultimate result might have been had the application proceeded to determination, the fact remains that the respondent issued and prosecuted it until the morning of the date of argument, and then withdrew it, causing considerable delay, prejudice and expense to the applicant who has been wholly successful in the ultimate outcome.

31. As an explanation for withdrawing the application, the respondent pointed out during the 17 December 2020 hearing that this had occurred in the light of various matters including the recent referral of the taxation of the applicant’s costs against his former solicitors. In his written submissions (FDN 363) at [37], he wrote that he had become aware of these separate taxation proceedings on 19 November 2020. However, rather than then withdrawing his application, he filed written submissions in further support therof which included nine distinct paragraphs ([72] to [80]) in which he submitted that the separate proceedings were no impediment to his application being determined, and that it should be properly determined following the argument and not be delayed until after the question was determined in those proceedings (see [77]).  He submitted at [79] that the consideration of the application rather than its postponement was consistent with the object of the UCR which included the efficient, timely and cost-effective determination of issues.

32. Having initially taken this attitude to the application, he subsequently decided that there might be forensic advantages in dealing with contractual issues between the applicant and his solicitors in proceedings in which those solicitors were parties, and then elected not to proceed with the application.  This was not conveyed to the applicant prior to the hearing, although as McHugh J observed in Lai Qin[71] an applicant in such a position is under no duty to inform a respondent of a reconsideration of his position. 

    [71] At 628.

33. Nevertheless, the issue of a substantive application, its forceful prosecution up and until the date of argument, the notification to the applicant that it would be vigorously pursued notwithstanding the issue of the separate taxation proceedings, and then its withdrawal at the last moment (rather than adjourned), resulting in success to the applicant, will, in the absence of a costs order in his favour, prejudice him financially and this would not meet the justice of the circumstances.

34. I have accordingly determined that the applicant should be awarded his costs of the application.

    Should the applicant be awarded his costs on an indemnity basis?

35. To award indemnity costs it is clear that the circumstances of the case must be such as to warrant the court in departing from the usual course.[72] The court may only award such costs where the justice of the case warrants such an order,[73] and an award of such costs will only be made where there are circumstances that are special and unusual.[74]  There is nothing in itself improper or unreasonable in the pursuit of claims involving legal difficulty.[75]

    [72] Colgate Palmolive, Duke Group Limited (in liq), Ten Group Pty Ltd (No 2) v Cornes.

    [73] Shanamere.

    [74] Colgate Palmolive.

    [75] Yates.

36. These principles place a high onus on the applicant, who has urged the court to find that the application had been wholly unmeritorious, had no prospects of success, and was based upon contentions that were grossly inconsistent with established legal principles.  He has submitted that the Court should conclude that it had been brought, maintained and persisted for an improper or ulterior purpose, or because of some wilful disregard of the known facts or clearly established law, and that justice would not serve unless indemnity costs were awarded.

37. I have regard to all of the applicant’s submissions in this respect but ultimately, I have concluded that it would not be appropriate to order that the costs he is to receive should be on an indemnity basis.  There are many factual and legal issues which the parties have referred to in their submissions, and the question of the applicant’s liability for costs to his former lawyers, and thus the extent of his entitlement to indemnity, remains to be decided at some yet to be determined future date.  The merits of the application have not been heard or determined and I am not satisfied that it was “patently hopeless”.  There have been no special or unusual features, no interests of justice issues, and no delinquency justifying such an order.  There was nothing improper or unreasonable in issuing an application that faced “legal difficulty” and in relation to which there was “little authority” on the points in law in issue.  The facts do not support a conclusion that the application was unreasonable or that it was motivated by an improper purpose.

    Should there be an immediate taxation of the applicant’s costs?

38. Under the UCR there is a presumption that costs ordered to be paid are not to be taxed and do not become payable until the final determination of the proceeding, including final costs orders being made.[76]  The Court may make an order for immediate taxation and payment of costs for an interlocutory application where the interests of justice demand it, such as where the interlocutory application concerns the determination of a separately identifiable matter,  or might be viewed as the completion of a discrete aspect of the action, or where there had been unreasonable conduct on the part of the party against whom costs have been ordered,  or  where considerable time remains before the proceedings  as a  whole are determined, or  where an issue arises as to a parties’ financial resources.  A relevant factor is whether the scope of the enquiry as to costs would divert the parties’ attention from the substantial proceedings.

    [76] UCR 194.4(8).

39. The applicant has urged that it would be appropriate in the circumstances to assess the quantification of his costs entitlement before the adjudication proceedings themselves are finalised, as there are competing claims for costs by the parties against each other, and further because his costs entitlement only relates to counsel fees and it should be a relatively simple process to quantify that claim.  He conceded that there should be no enforcement of any interim order until the overall result of the taxation proceedings was determined. 

40. I have regard to these submissions but I have formed the view that such an order would be inappropriate.  It would be contrary to the presumptive rule and the interests of justice do not support any order the contrary.  The withdrawal of the application has not resolved in the determination of a separately identifiable matter, nor was it the completion of a discrete aspect of the proceedings.  There would be no expedition in now determining quantification and the fact that the applicant does not intend to seek enforcement of any costs awarded after they had been quantified adds further support to the contention that there is no urgency or need for a taxation to occur before the finalisation of the substantive taxation proceedings.  There are many issues yet to be determined in this taxation and the order sought would distract the parties particularly when complaints have already been made about the size of their workloads in this matter.

    Summary of orders

    1.I find that there is no specific power under the UCR to award costs in consequence of the discontinuance of an interlocutory application.

    2.Under the provisions of s 40(1) of the Supreme Court Act, UCR 194.6, and the Court’s inherent power, the Court has power to award costs against a party issuing but then withdrawing an interlocutory application.

    3.The costs of the respondent’s application (FDN 336) are awarded to the applicant.

    4.These are to be on the standard costs basis.

    5.The applicant’s application for indemnity costs is refused.

    6.The applicant’s request that these costs be taxed forthwith is refused.

    7.I will hear from the parties as to any further orders in relation to this application at the next directions hearing fixed for Tuesday, 8 June 2021 at 10 am.