Cost Law Commentary

Gross Sum Costs in the Supreme Court

Pursuant to Order 63, rule 7(c) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) (“SCR 2005”), where the Court orders that costs are to be paid to a party, the Court is empowered to order that instead of taxed costs, that party should be entitled to a gross sum specified in the order.The circumstances in which an order for gross sum costs may be appropriate are:

  1. Where the assessment of costs would be protracted and expensive[1].  The purpose is “to avoid the expense, delay and aggravation involved in protracted litigation arising out of the taxation”[2]
  2. If the party ordered to pay costs is unlikely to be able to pay the costs awarded (in order to prevent the successful party from incurring additional costs when it is unlikely to recover all of its costs)[3]

In Seven Network v News Ltd[4], Sackville J set out the principles applying to an assessment of costs on a gross sum basis:

  1. An order that costs be assessed as a gross sum does not envisage that any process similar to that involved in taxation should take place.  On the contrary, the Court applies a much broader brush than would be used on a taxation of costs pursuant to O 62:  Beach Petroleum v Johnson (No 2), at 120, 124, per von Doussa J; Harrison v Schipp, at 743 [22], per Giles JA.
  1. The Court should be confident that the approach taken to the estimate of costs is logical, fair and reasonable.  The Court should be astute to avoid both overestimating the recoverable costs and underestimating the appropriate amount, for example by applying an arbitrary discount to the amounts claimed:  Beach Petroleum v Johnson (No 2), at 123, per von Doussa J.
  2. Although the power to assess a gross sum for costs involves the exercise of a discretion, it is necessary to bear in mind fundamental principles applicable to an assessment of costs on a party and party basis.  These include the principles contained in O 62 r 19 (embodying the ‘necessary or proper’ test) and those stated in Stanley v Phillips (1966) 115 CLR 470, at 478, per Barwick CJ (on a party and party taxation the emphasis is upon obtaining adequate representation to enable justice to be done, not upon the propriety of steps taken to ensure maximum success in the cause):  Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1, at 4-5 [12]-[15], per O’Loughlin J; Charlick Trading Pty Ltd v Australian National Railways Commission [2001] FCA 629, at [6]-[8], per Mansfield J.
  3. Although the methodology permitted by O 62 r 4(2)(c) initially involves a broader approach than on a normal taxation, the provisions of O 62 r 4(2)(c) initially involves a broader approach than on a normal taxation, the provisions of O 62 and Schedule 2 provide assistance in fixing an appropriate gross sum:  Charlick Trading Pty Ltd v ANRC, at [10], per Mansfield J.[5]

In Sunland Waterfront (BVI) Ltd & Anor v Prudentia Investments Pty Ltd & Ors (No 3)[6] Croft J made an order that costs be assessed on a gross sum basis.  Whilst such orders are common in the Federal Court and Supreme Court of New South Wales, this is the first such order made in the Supreme Court of Victoria.  Croft J considered that a gross sum assessment was likely to avoid delay, and result in costs savings for both the parties and the Court.   He also noted that “the process gives effect to the objects in the purpose of the Civil Procedure Act and would appear to be the type of process contemplated by Parliament in the provisions of ss 1 and 8 of this Act.” His Honour ordered that the assessment be undertaken by an Associate Justice.  This is unusual, as in most of the other gross sum cases, it is the trial judge who undertakes the assessment, although they may sit with a Judicial Officer with experience in taxing costs.  The benefit of the trial judge undertaking the assessment is that he or she has direct knowledge of the proceedings, and therefore there are cost savings achieved through not having to put on extensive evidence about the background and features of the case which could impact on costs.

In contrast, in Thomas v Powercor Australia Ltd (No 9)[7], Beach J rejected an application for costs to be assessed on a gross sum basis, principally because the terms of the settlement between the parties required the costs to be taxed.  However, His Honour also rejected a submission that the Costs Court was not equipped to manage a taxation of costs of the magnitude likely to be involved.  His Honour also expressed concern about the possible variation in assessed costs from those likely to be allowed on a taxation.

[1] Harrison v Schipp (2002) 54 NSWLR 738

[2] Beach Petroleum v Johnson (No 2), at 120, per von Doussa J, applying Leary v Leary [1987] 1 All ER 261; Harrison v Schipp (2002) 54 NSWLR 738, at 742 [21] per Giles JA.

[3] Dye v Commonwealth Securities Ltd (No 2) [2012] FCA 407

[4] [2007] FCA 2059

[5] Subsequently applied in:  Thompson v Department of Environment and Conservation (No 2) [2011] FCA 970, at [7]; Wide Bay Conservation Council Inc v Burnett Water Pty Ltd (No 9) (2011) 194 FCR 250, at [32]; University of Western Australia v Gray (No 25) (2009) 180 FCR 483, at [67]; Black and Decker Inc v Sunaone Pty Ltd [2008] FCA 1827, at [4]; Australian Competition and Consumer Commission v Global Prepaid Communications Pty Ltd (in Liq) [2008] FCA 874, at [5].

[6] [2012]VSC 399

[7] [2012]VSC 207