Lump Sum Interlocutory Costs Orders
Pay Now Assess Later
In a recent decision, the Supreme Court of NSW adopted a unique approach to the costs of interlocutory disputes in litigation.
In Chen v Golden Land Enterprises Pty Ltd [2022] NSWSC 19, the Court considered an application for orders that the costs of an interlocutory dispute be assessable and payable forthwith.
Ordinarily, the costs of interlocutory disputes are payable at the conclusion of proceedings, unless the Court orders otherwise: r 42.7(2) of the Uniform Civil Procedure Rules (NSW) (UCPR).
However, the Court’s power to “order otherwise” and generally to deal with costs is very wide: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 (at [22]; Elite Protective Personnel Pty Ltd & Anor v Salmon [2007] NSWCA 322 at [96]. This includes the power to order a specified gross sum for costs instead of assessed costs: s 98(4)(c) of the Civil Procedure Act 2005 (NSW) (CPA).
In Chen, the Court noted the following factors relevant to the exercise of its discretion to make an “otherwise order” under UCPR r 42.7(2):
is the interlocutory issue a discrete and severable one?
has the party against whom costs have been ordered behaved unreasonably?
do the proceedings have some distance to run, so as to make it proper that the successful party should receive some immediate recompense for the costs incurred?
The Court found that the relevant factors were present in the matter, but noted the undesirability of having a separate assessment of interlocutory costs, which could create unnecessary distraction and duplication.
To avoid those perceived difficulties, the Court found it was preferable to order the payment of a specified gross sum “on account” of the interlocutory costs, rather than have the costs assessable forthwith.
The Court referred to other decisions in which such orders had been made, including Omutta Pty Ltd v Wilson (No 2) [2019] NSWSC 401 where the reasoning behind the approach was explained at [13]:
“a better approach to the problem is to consider whether to make an order for payment of a lump sum by the plaintiff on account of the costs which will be ordered by the Court. If such a payment is ordered, it will not limit the costs which can ultimately be recovered under the order, nor will it prevent the plaintiff from contending in due course that the proper amount payable is less. At the same time, if such an order is made it will give the defendant some recompense now for the costs which he has been forced to outlay unnecessarily. Because of the interim nature of the payment, there is no need for the Court to be precise in fixing the amount; it can be determined with the broadest of brushes without resolving disputes in the evidence.”
As the above extract makes clear, an order for a lump sum payment on account of interlocutory costs can effectively balance the interests of the parties. It is also more attractive to the Court when weighed against the alternatives. In particular, it avoids the potential distraction and duplication of an order for interlocutory costs assessable forthwith and avoids the need for a more careful approach to assessment for a gross sum costs order in lieu of assessed costs under s 98(4)(c) of the CPA.
In conclusion, the Court’s approach to interlocutory costs in Chen represents a fair middle ground that practitioners should adopt in an appropriate case.