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JOANNA SHULMAN[*]
The risk of an adverse costs order is a significant impediment to individual litigants, as legal costs in litigation can be substantial. It is not uncommon in a Federal Court discrimination matter for the legal costs of a respondent to exceed $15 000 per day. The risk of substantial adverse costs orders is often the reason many complainants decide not to pursue complaints beyond the Human Rights and Equal Opportunity Commission.
Order 62A, r 1 of the Federal Court Rules (Cth) provides that the Court may, by order made at a directions hearing, specify the maximum costs that may be recovered on a party and party basis. To date, this provision has not been successfully used in the unlawful discrimination arm of the Federal Court’s jurisdiction. It is a provision that, if used prudently, could facilitate litigation of public interest[1] unlawful discrimination cases.
The importance of O 62A is that it is a pre-emptive costs decision. By contrast, standard costs orders are made at the end of a trial and usually ‘follow the event’ (ie are ordered against the unsuccessful party in the proceedings). An O 62A costs order has the potential to remove the uncertainty from the applicant’s shoulders of the risk of an adverse costs order.
Order 62A was introduced by Statutory Rule 421 of 1992. In its original form, O 62A, r 1 enabled the Federal Court to specify the maximum costs that may be recovered on a party and party basis by way of order made at a directions hearing and of its own motion, or on the application of a party. On 23 March 2004, O 62A, r 1 was amended by part 90 of Schedule 1 to the Federal Court Amendment Rules 2004 (No 1) (Cth) such that there is no longer any reference in r 1 to the Federal Court having the power to make such orders of its own motion or at a directions hearing.
The rationale for the introduction of O 62A is set out in a letter dated 6 November 1991 from the (then) Chief Justice of the Federal Court to the (then) President of the Law Council of Australia. In that letter, quoted from at length by Beazley J in Sacks v Permanent Trustee Australia Limited[2] the Chief Justice stated:
At the request of a meeting of the judges of the court, I am writing to invite your comments about possible options for changes to the costs rules.
There is concern within the court, reflecting that within the wider community and the legal profession, how the cost of litigation, particularly for a person of ordinary means, places access to the civil courts beyond their reach and thus effectively denies them justice.
A deterrent to the assertion or defence of rights in civil litigation is a fear of the ultimate exposure in terms of the legal costs to which an unsuccessful party may be subjected. One suggestion that has been made proposes a change to the rules so as to empower a judge, early in the proceedings, to make an order fixing a ceiling on the amount of costs recoverable from the unsuccessful party in the litigation. This ceiling could be defined by reference to both the party and party costs and by reference to the solicitor/client costs. It should be pointed out that this proposal does not involve the court in regulating the costs recoverable by a solicitor from his or her client but rather, where costs are ordered to be paid on a solicitor/client basis, the maximum recoverable would be the fixed amount.
The fixing of such a maximum would not preclude recovery over and above that limit where a party had, by its own conduct, caused a successful party to incur additional and unnecessary costs. There would, of course, be a general provision to allow for the variation of a maximum figure so fixed, but the object of such a rule would be to define a budget so that the management of the case might be tailored according to its economic limits. It is anticipated that such a rule, if introduced, would be primarily applied to commercial litigation at the lower end of the scale in terms of complexity and the amount in dispute, although it could be applied in other cases as appropriate.[3]
In Hanisch v Strive Pty Ltd[4], Drummond J stated that the:
principal object of O 62A is to arm the Court with power to limit the exposure to costs of parties engaged in litigation in the Federal Court which involves less complex issues and is concerned with the recovery of moderate amounts of money.[5]
It is generally recognised that any limit set for recoverable costs under O 62A, r 1 should apply equally to all parties. Thus, in Sacks, Beazley J rejected a submission by one party that the court was empowered to make an order under O 62A which would fix the maximum costs recoverable by one party, should that party succeed, but leave it open to the other party to recover its full costs, should it succeed. Similarly, in Hanisch, Drummond J stated:
I do not think that O 62A, r 2, and in particular r 2(d), provides any ground for thinking that O 62A empowers the Court to limit the costs recoverable by one party only. Rule 2, in my opinion, proceeds on the assumption that the order made under r 1 will apply equally by fixing the maximum costs recoverable by the successful party in the action, but recognises that such a limit would operate unfairly where the ultimately unsuccessful party has acted in a way which has unjustifiably increased the costs incurred by the ultimately successful party and provides that, to that extent, the successful party can recover party and party costs additional to those it may ultimately be able to recover under the order made under r 1.[6]
To date, orders limiting costs pursuant to O 62A, r 1 have been considered by the Federal Court in the following cases:
• In Sacks[7], Beazley J denied the applicant’s notice of motion to limit costs to $6 000 on the basis that the extent of the evidence was not known, that potentially complex issues were involved and the applicant was seeking to limit his liability only for costs.
• In Maunchest Pty Ltd v Bickford; Noosa Hub Pty Ltd (In Liquidation) and Jefferson[8], Drummond J ordered that the costs that may be ordered in the proceedings before the court on a party and party basis be limited to a maximum of $5 000.
• In Woodlands v Permanent Trustee Co Ltd [9], a case that involved claims by a large number of people who obtained ‘Homefund’ loans, Wilcox J made orders under O 62A specifying $12 500 as the maximum recoverable party and party costs against the applicants by any one respondent with a separate interest for a representative proceedings and $10 for other proceedings.
• In Hanisch[10], a case involving a copyright infringement, Drummond J ordered that the maximum costs that may be recovered on a party and party basis by either the applicant or the respondents be those recoverable under the District Court scale.
• In Dibb v Avco Financial Services Ltd[11], Mr Dibb, an unrepresented litigant in a case involving allegations of breach of fiduciary duties, was unsuccessful before Sackville J in his application to limit costs as the case had large legal and factual issues, there was no public interest component and there was nothing to suggest that Mr Dibbs was prevented or prohibited from conducting his case by the prospect of an adverse costs order.
• In Save the Ridge Inc v Commonwealth[12], Save the Ridge Inc, a non-profit incorporated body arguing for the protection of the Canberra environment in the vicinity of a proposed freeway, failed in its application to the Full Court that costs should not be ordered against it should it fail in its appeal. In dismissing the application, the Full Court found the following: that the questions of law involved were not far reaching in their application; that the absence of financial gain was not sufficient to dispense with the usual practice in respect to the awarding of costs; and that the more lenient standing provisions of the Environment Protection and Biodiversity Conservation Act 1999 (Cth) did not mean that there also should be a more lenient approach to the question of costs.
Order 62A has not been successfully used in the unlawful discrimination jurisdiction of the Federal Court. In Muller v Human Rights and Equal Opportunity Commission[13], an application for an order pursuant to O 62A was made to the Federal Court prior to the commencement of the Human Rights Legislation Amendment Act (No 1) 1999 (Cth), in the context of judicial review of a decision by the Human Rights and Equal Opportunity Commission. The order was not granted, on the basis, inter alia, that it was sought in terms that limited costs payable by the applicant if unsuccessful, but did not limit costs payable by the respondent.
As well, there have been no decided cases in the unlawful discrimination jurisdiction in relation to the equivalent provision in the Federal Magistrates Court Rules.[14]
In general, it appears that a court will be more inclined to make an order limiting costs under O 62A in cases involving consideration of legal issues of a less complex nature (see, eg, Hanisch).[15]
In Sacks,[16] Beazley J found that it was not appropriate to make an order under O 62A as the case was not one at the lower end of the scale of legal complexity and potentially complex issues (including the identification of proper respondents) were involved.
Similarly, in Dibb,[17] Sackville J declined to make an order under O 62A on the basis, inter alia, that the proceedings, which involved alleged breaches by the respondents of fiduciary duties, the Trade Practices Act 1974 (Cth) and the Superannuation Industry (Supervision) Act 1993 (Cth), ‘cannot be described as simple commercial litigation which should be subject to a “budget costs regime’’ ’.[18]
This particular characteristic of O 62A cases is a significant impediment when applying for the order in unlawful discrimination cases. By their very nature, many public interest unlawful discrimination cases are legally complex, involving issues such as the basis for the discrimination, the effect of the discrimination, the identification of appropriate comparators and the reasonableness of the discrimination. Significant expert evidence can be required to prove each of these elements. Accordingly, thought must go into minimising the inherent complexity of unlawful discrimination cases when seeking an order under O 62A. This will be discussed further below.
The amount of financial compensation sought to be recovered in the substantive proceedings is also a relevant factor, such that orders under O 62A are more likely to be made where the amount in question is ‘moderate’[19].
In Maunchest, Drummond J alluded to concerns ‘about the costs of this litigation which the applicant has instituted and which involves a sum of considerably less than $20,000.00’.[20]
The existence of a significant public interest element in a case has been regarded as a reason for departing from the usual costs rule.[21]
In Homefund, Wilcox J emphasised the ‘public interest’ aspect of the litigation in question in deciding to make an order under O 62A, r 1. His Honour stated that ‘[a]lthough there is not settled rule to that effect, the existence of a public interest element has often been regarded as a reason for departing from the usual costs rule.’[22]
After referring to a number of authorities in support of this proposition, Wilcox J stated further that:
Although I accepted that fear of exposure to costs acts as a deterrent to litigation to many people who feel that they have a legitimate grievance (or defence), it would be particularly unfortunate if that factor caused the abandonment of litigation that made claims having the potential, if successful, to benefit many thousands of people, most of them likely to be of limited means.[23]
Further matters referred to by Wilcox J in Homefund included the poor financial position of the applicants, the importance of the preliminary issues and the fact that ‘the cases that the applicants desired to advance appeared at least seriously arguable’,[24] and the disadvantages that would ensue if fear of exposure to costs were to prevent such cases being advanced.
The term ‘public interest’ is not judicially defined.[25] However, it is clear that not all unlawful discrimination cases will satisfy the public interest test.
Driver FM observed in Xiros v Fortis Life Assurance Ltd[26] (‘Xiros’) that:
All human rights proceedings contain some element of public interest in that the legislation is remedial in character, addressing the public mischief of discrimination… There will be many human rights proceedings where no sufficient public interest can be shown.[27]
An analysis of decisions on costs in other jurisdictions and on the making of post-event costs orders in the Federal Court, indicates some relevant factors in discrimination cases being found to be in the public interest.
It has been recognised that cases that clarify an important point of law may be characterised as having a public interest element.
In Ferneley v The Boxing Authority of New South Wales[28], Wilcox J, in making an order that the usual costs
order not apply, took into account the fact that ‘the case has served the public interest in clarifying important issues of discrimination law’[29] This issue was the application of the Sex Discrimination Act 1986 (Cth) to state authorities.
In Xiros, where there were allegations of unlawful disability discrimination in the provision of insurance services, Driver FM characterised the case as being one in which there was a significant public interest. He stated:
In the present case the proceedings have called for the interpretation and application of s 46(2) of the Disability Discrimination Act, a provision on which I have found no previous judicial consideration.
The decision of this Court will have some precedent value and will have implications for other insurance policies; and possibly a large number of similar policies. The proceedings therefore contain a public interest element of substance.[30]
However, in Save the Ridge Inc, the Full Court held that although the questions of law were not unimportant, they were not far-reaching in their application, and therefore did not warrant a departure from the usual rule to costs.[31]
In Xiros, Driver FM stated:
But the legislation confers private rights of action for damages. There will be many human rights proceedings where no sufficient public interest element can be shown: Physical Disability Council of NSW v Sydney City Council [1999] FCA 815.[32]
Further, in Minns v New South Wales (No 2)[33] Raphael FM stated:
There must be a public interest in the subject of the proceedings and once some exclusively personal benefit is sought the prospects of the proceedings having the necessary quality of public interest is much diminished.[34]
However, the fact that an applicant has no pecuniary interest and that a case has precedent value does not always result in a finding that the case is in the public interest. In the case of Hurst v Education Queensland (No 2)[35], in making a costs order against an unsuccessful applicant, Lander J held that it was not relevant that an applicant had nothing to gain personally from the proceedings and that she may be become bankrupt as the result of the costs order. Justice Lander stated that ‘legal proceedings are not the appropriate medium for the purpose of examining the ambiguities in an education policy’.[36] However, it is worth noting that Lander J’s finding that there was no indirect discrimination and accordingly that the applicant’s case failed,[37] was overturned on appeal.[38]
In Save the Ridge Inc, the Full Court cited with approval Burchett J in Australian Conservation Foundation v Forestry Commission:[39]
If a body is set up to pursue causes, which its founders consider to be in the public interest, and which generally may be in the public interest, by means including court proceedings against others, it does not follow that those proceeded against should be deprived of the ordinary protection of a right to an order in respect of their costs in the event the claims made against them prove unfounded.[40]
Another relevant ‘public interest factor’ is whether numerous people sought to gain from the litigation.[41]
As this is a relatively untested area of the law, it is difficult to recommend a template for an application under O 62A.
It is clear that the earlier the application is made the better, as the parties can then make pragmatic decisions about the conduct of the case.[42]
The most appropriate point to seek to the order would be at the same time as the filing of the application commencing proceedings. The application for an order, made by way of notice of motion, should state the costs limit sought. In relation to the costs sought it is clear that the courts do not look favourably on a differential amount between applicant and respondent. However, there is little guidance on how to determine the amount sought. The amount could be one that is closely related to the estimated actual costs. Alternatively, it could bear no relation to the costs, but rather be a nominal amount as the case has considerable public interest.
If a costs order under O 62A cannot be obtained by consent, orders will be made in relation to the service of submissions and evidence to support the notice of motion.
The submissions seeking the order should suggest:
1. That there is at least an arguable case;
2. The public interest element of the case;
3. That moderate financial compensation is sought;
4. That the legal issues involved are limited in complexity, for example, by pointing to precedents that will determine the legal issues in this case. Alternatively, show that more complex issues can be addressed in a way that will limit their complexity, for example, through appointing a court-appointed expert or through forfeiting aspects of the case;
5. That denial of the order sought may effectively deny the applicant access to the court. For example, address the applicant’s limited means compared with the respondent.
The submissions should set out how the estimate of costs will cover the costs and disbursements in running the case.
An affidavit by the solicitor with carriage for the case setting out the evidentiary basis for the submissions should also be filed, along with any other evidence to indicate the complexity of the matter or the public interest elements of the case. Such evidence could include an affidavit from an expert detailing the level of complexity of the matter and providing a costs estimate for a report.
Clearly, there are similar considerations involved in a court deciding to cap costs in public interest matters under O 62A, and in determining that costs should not follow the event because it is a public interest case. It would not be fanciful to expect that in cases in which an O 62A costs cap has been approved because, inter alia, it is a public interest matter, the court should then go on to order that costs should not follow the event because it is a public interest case. However, to date this issue has not been considered, and the relationship between pre-emptive and post-event costs orders in public interest cases is not clear.
As the above discussion suggests, there is some uncertainty in the application of O 62A, including:
1. in the absence of a legislative definition of ‘public interest’, the term is open to judicial interpretation, which has not always been consistent between cases;
2. there is no standard procedure for a party to follow when seeking a cap on costs; and
3. the relationship between pre-emptive and post-event costs orders in public interest cases is not clear.
In thinking about ways to improve the provision, it is useful to look at how other jurisdictions have dealt with the issue of costs in public interest cases.
The United Kingdom High Court and Court of Appeal have the power to order unilateral protective costs orders, which mean that an applicant is not liable for costs, or for limited costs only, in the event they lose, but can recover them in the event that they are successful. The Court of Appeal has stipulated that such orders must only be made in the most exceptional circumstances, bearing in mind the following factors:
1. that the issues raised were truly ones of general public importance;
2. the court was satisfied that there is a reasonable, as opposed to fanciful, prospect of success or that the case is properly arguable, and that it is in the public interest to make the order;
3. that the court should have regard to the financial circumstances of the parties, including the likely amount of costs in issue; and
4. that the court was more likely to make an order where the respondent had a superior capacity to bear the costs, and that without a protective costs order, the applicant would withdraw and would be reasonable in doing so.[43]
The Canadian Supreme Court has dealt with the issue of costs orders as a barrier to justice by recognising a judicial discretion in all courts to award costs in advance to public interest litigants. In the case of British Columbia (Minister of Forests) v Okanagan Indian Band[44], the Supreme Court set guidelines for the exercise of this judicial discretion. In the words of LeBel J, the applicant must establish that a case is ‘special enough’ to merit the extraordinary measure of ordering that costs be paid in advance by demonstrating that:
1. it genuinely cannot afford to pay for the litigation and there is no other realistic option for bringing the issues to trial;
2. its claim is prima facie meritorious;
3. the issues raised by the case are of public importance and have not been resolved in previous cases; and
4. if the above three criteria are satisfied, that the order would not be contrary to the interests of justice, for example where the order would be unfair to private litigants caught in the cross-fire of the dispute.[45]
This case was heralded as being a landmark case creating a legal foundation for access to justice in public interest cases.[46] However, subsequent cases have quite conservatively construed ‘impecuniosity’ and ‘special circumstances’, so that only a handful of cases have ordered advance costs orders in public interest cases.[47]
It is noteworthy that the considerations leading to the issuing of pre-emptive costs orders in public interest cases are similar across Australia, the United Kingdom and Canada. However, both Canada and the United Kingdom have adopted legislative frameworks for public interest costs orders that are more liberal in their departure from the standard costs orders than that in Australia. In the United Kingdom, there is provision for the award of unilateral costs protections, while in Canada costs may be awarded to an applicant in advance.
It is worth keeping clearly in mind the benefits arising from public interest litigation. As described by the Australian Law Reform Commission (ALRC) these benefits include:
• the development of the law leading to greater certainty, greater equity and access to the legal system and increased public confidence in the administration of the law (which in turn should lead to less disputes and less expenditure on litigation).
• economies of scale.
• impetus for reform and structural change to reduce potential disputes (eg a test case can encourage the development of rules and procedures designed to ensure greater compliance with a particular law).
• contribution to market regulation and public sector accountability by allowing greater scope for private enforcement.
• reduction of other social costs by stopping or preventing costly market or government failures.[48]
In recognising these benefits, the ALRC concluded that public interest litigation should not be impeded by costs allocation rules.[49] It recommended a standard regime be introduced for the issuing of public interest costs orders in all federal courts, which is both more proscriptive than that in the Federal Court, and more liberal. The main features of the ALRC’s recommendations included:
• the incorporation of the UK regime of unilateral pre-emptive costs orders, so that a court can order, in reasonable circumstances, that regardless of the outcome of the proceedings the party applying for the public interest costs order shall not be liable for the other party’s costs, or should only be liable to pay a specified proportion of the other party’s costs.
• the proscription of the circumstances a court is to consider in deciding whether a matter warrants the deployment of a public interest costs order, including an objects clause so as to help ensure that courts make orders in appropriate cases.
• the conflating of pre-emptive public interest costs and post-event public interest cost orders, so that a court first must determine that the circumstances warrant the making of a public interest costs order. If so, a court can make a public interest costs order at any stage of the proceedings, and in particular at the start of the proceedings.
It is the author’s opinion that the ALRC recommendations should be re-visited by the legislature. In relation to the incorporation of unilateral costs orders, the recommendations reach the appropriate balance between the facilitation of public interest litigation and ensuring that an innocent party is not deprived of its right to recover costs merely because the litigation is in the public interest. If a more liberal regime was adopted, we may be faced with the same situation as that in Canada, where courts are still reluctant to issue public interest costs orders. Further, the circumstances outlined by the ALRC as those which a court should consider in making a pre-emptive costs order do not go beyond those delineated by the Federal Court to date. The proscription of these circumstances will simply provide clarity and guidance in future cases.
It is clear that O 62A is potentially of major significance to public interest unlawful discrimination cases. As such it is an important weapon in any public interest litigator’s armoury. Its potential may be increased, and its use clarified, if the recommendations of the ALRC in relation to public interest costs orders are revisited by the legislature.
[*] JOANNA SHULMAN was the ‘equality solicitor’ at Public Interest Advocacy Centre, and is currently studying for a Masters in International Human Rights Law at New York University. She wishes to acknowledge the contributions of Simon Moran and Anne Mainsbridge of Public Interest Advocacy Centre.
© Joanna Shulman
[1] The term ‘public interest’ is not defined in legislation or case law. Instead the courts have chosen to provide guidance as to what constitutes a public interest case: see Australian Law Reform Commission, Cost Shifting – Who Pays for Litigation, Report No 75 (1995) 13.2. The characteristics of those cases that the courts have held to be ‘public interest cases’ will be discussed below.
[2] [1993] FCA 502; (1993) 118 ALR 265 (‘Sacks’).
[3] Ibid 268–269.
[4] [1997] FCA 303; (1997) 74 FCR 384 (‘Hanisch’).
[5] Ibid 387.
[6] Ibid 390.
[7] [1993] FCA 502; (1993) 118 ALR 265.
[8] [1992] FCA No NG808 of 1992 (Unreported, Drummond J, 11 April 1994) (‘Maunchest’).
[9] [1995] FCA 1388; (1995) 58 FCR 139 (‘Homefund’).
[10] [1997] FCA 303; (1997) 74 FCR 384.
[11] [2000] FCA 1785 (Unreported, Sackville J, 8 December 2000) (‘Dibb’).
[12] [2006] FCAFC 51; (2006) 230 ALR 411 (‘Save the Ridge Inc’).
[13] [1997] FCA 634 (Unreported, Moore J, 17 July 1997). Federal Magistrates Court Rules 2001 (Cth) r 21.03.
[14] Federal Magistrates Court Rules 2001 (Cth) r 21.03.
[15] (1997) 74 FCR 382, 387.
[16] [1993] FCA 502; (1993) 118 ALR 265.
[17] [2000] FCA 1785 (Unreported, Sackville J, 8 December 2000)
[18] Ibid [15].
[19] Hanisch [1997] FCA 303; (1997) 74 FCR 384, 387.
[20] [1992] FCA No NG808 of 1992 (Unreported, Drummond J, 11 April 1994) [13].
[21] Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72.
[22] [1995] FCA 1388; (1995) 58 FCR 139, 146.
[23] Ibid 148.
[24] Ibid.
[25] See Ruddock v Vadarlis (2001) 115 FCR 229.
[26] [2001] FMCA 15; (2001) 162 FLR 433.
[27] Ibid 441.
[28] [2001] FCA 1740; (2001) 115 FCR 306.
[29] Ibid 326.
[30] Xiros [2001] FMCA 15; (2001) 162 FLR 433, 441. See also Jacomb v The Australian Municipal, Administrative, Clerical & Services Union [2004] FCA 1600 (Unreported, Crennan J, 8 December 2004) and AB v New South Wales (No 2) [2005] FMCA 1624 (Unreported, Driver FM, 8 September 2005).
[31] Save the Ridge Inc [2006] FCAFC 51; (2006) 230 ALR 411, 445.
[32] Xiros [2001] FMCA 15; (2001) 162 FLR 433, 441.
[33] [2002] FMCA 197 (Unreported, Raphael FM, 2 September 2002).
[34] Ibid [13].
[35] [2005] FCA 793 (Unreported, Lander J, 16 June 2005).
[36] Ibid [33].
[37] See Devlin v Education Queensland (No 1) [2005] FCA 405; [2005] EOC 93-386, in which it unsuccessfully argued that the respondent’s failure to provide the applicant with an Auslan interpreter as part of its education policy amounted to indirect discrimination
[38] Hurst v State of Queensland [2006] FCAFC 100.
[39] [1988] FCA 144; [1988] 81 ALR 166.
[40] Save the Ridge Inc [2006] FCAFC 51; (2006) 230 ALR 411, 415.
[41] See Homefund [1995] FCA 1388; (1995) 58 FCR 139.
[42] See Minns v New South Wales (No 2) [2002] FMCA 197 (Unreported, Raphael FM, 2 September 2002) [9].
[43] R (Corner House Research) v Secretary of State for Trade and Industry [2005] EWCA Crim 3093; [2005] 4 All ER 1.
[44] (2004) 233 DLR (4th) 577.
[45] Ibid 598–599.
[46] See Chris Tollefson, Darlene Gilliland & Jerry DeMarco, ‘Towards a Costs Jurisprudence in Public Interest Litigation’ (2004) 83 Canadian Bar Review 473.
[47] See Chris Tollefson, ‘Costs and the Public Interest Litigant: Okanagan Indian Band and Beyond’ (2006) 19 Canadian Journal of Administrative Law and Practice 39.
[48] ALRC, above n 1 [13.6].
[49] Ibid [13.11].
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