Discretion to award costs

9.5 The Federal Court has a broad power to award costs. Section 43 of the Federal Court of Australia Act provides that the Court or a judge has jurisdiction to award costs in proceedings before the Court and that:

Except as provided by any other Act, the award of costs is in the discretion of the Court or Judge.^[1]

9.6 In Hughes v Western Australian Cricket Association (Inc), after noting that the Federal Court Rules (Cth) do not qualify this discretion and that it must be exercised judicially, Toohey J summarised the way in which the discretion is to be exercised:

1. Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order.

2. Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed.

3. A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party’s costs of them. In this sense, ‘issue’ does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law.^[2]

9.7 Toohey J added that while there was ‘no difficulty in stating the principles’, their application to the facts of a particular case was ‘not always easy’.^[3]

9.8 In its report, Costs Shifting—Who Pays for Litigation, Report 75 (1995) (Costs Shifting), the ALRC explained that the discretion to order an unsuccessful party to pay the successful party’s costs evolved in the equity jurisdiction, ‘apparently in response to the concern that a person should not suffer loss as a result of having to assert or defend his or her rights’.^[4] The other common reasons for this rule are that it:

• compensates successful litigants for at least some of the costs they incur in litigating;

• allows people without means to litigate;

• deters vexatious or frivolous or other unmeritorious claims or defences;

• encourages settlement of disputes by adding to the amount at stake in the litigation; and

• deters delay and misconduct by making the responsible party pay for the costs his or her opponent incurs as a result of that delay or misconduct.^[5]

9.9 In 2009, the Federal Court of Australia Act was amended to ‘make it clear in the legislation that the Court may make certain orders’.^[6] The following subsection and note were added to s 43:

(3) Without limiting the discretion of the Court or a Judge in relation to costs, the Court or Judge may do any of the following:

(a) make an award of costs at any stage in a proceeding, whether before, during or after any hearing or trial;

(b) make different awards of costs in relation to different parts of the proceeding;

(c) order the parties to bear costs in specified proportions;

(d) award a party costs in a specified sum;

(e) award costs in favour of or against a party whether or not the party is successful in the proceeding;

(f) order a party’s lawyer to bear costs personally;

(g) order that costs awarded against a party are to be assessed on an indemnity basis or otherwise.

Note: For further provision about the award of costs, see subsections 37N(4) and (5) and paragraphs 37P(6)(d) and (e).^[7]