Interlocutory Cost Orders - Taxing before the Conclusion of the Proceedings
The Victorian Supreme Court Rules have been amended to bring the Court into line with the Federal Court and NSW Supreme Courts, whereby costs awarded in interlocutory application or hearing cannot be taxed until the conclusion of the proceeding unless the Court otherwise orders. Besanko J considered the purpose of the equivalent Federal Court Rule:
“The general rule serves a number of purposes. First, it avoids multiple taxations in a proceeding. Secondly, it avoids the apparent unfairness which may arise where, at an early stage of a proceeding, a party who is ultimately successful is required to pay costs to a party who is ultimately unsuccessful. Finally, it prevents interlocutory proceedings being used as a weapon to exhaust the financial resources of one of the parties.
At the same time, the court may order that costs be paid forthwith, and the cases suggest that that power may be exercised in circumstances in which there is an element of unreasonableness in the conduct of the unsuccessful party, and it is likely that there will be a long delay between the interlocutory proceeding and the conclusion of the principal proceeding. One example of the former which has been discussed in the cases is where an unsuccessful party makes multiple attempts to plead its case. It seems to me that another consideration which may be relevant to the question of whether an order should be made that the costs of an interlocutory proceeding be paid forthwith is the nature of the interlocutory proceeding and the likely quantum of the costs involved. It seems to me that if the interlocutory proceeding is a substantial one and the costs payable are substantial then that may be a matter which, together with other matters, may lead to an order being made that the costs of the interlocutory proceeding be paid forthwith.”
The cases on the equivalent Federal Court Rule establish the principle that
“[t]he discretion which is vested in the Court to order that a party’s costs be taxed and paid forthwith should be exercised only where the interests of justice in the particular case require that there be a departure from the general practice”.
Consideration needs to be given as to whether an order should be sought for interlocutory cost to be taxed forthwith. Circumstances in which orders have been made that interlocutory costs be taxed forthwith include:
- where the final determination of a proceeding was "far away"
- long delay in close of pleadings by the pursuit of an ill-considered and perhaps unnecessary claim
- where a party has been required to incur significant costs over and above those which it would have incurred had the opposing party acted in the handling of the proceeding with competence and diligence
- Substantial amendments to the statement of claim
- Where the proceeding involves the resolution of a discrete issue.
Sometimes it is necessary to consider the nature of the cost order, and whether it is interlocutory in nature. An example is the recent Federal Court decision of Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 4). In that matter there was a split trial. The respondent succeeded and was granted most of its costs of the trial on liability. When it sought to file its bill of costs in respect of the liability trial, the applicant took issue that the cost order was interlocutory in nature and the costs could not be taxed until the conclusion of the whole proceedings. His Honour Justice Barker expressed the view that the cost order was not interlocutory in nature, but expressed a preliminary view that it was not. However, he chose to exercise his discretion to order that the costs be taxed forthwith.
 Allstate Life Insurance Co v Australia & New Zealand Banking Group Limited (No 13) (Full Federal Court, 17 August 1995, unreported)
 Life Airbag Company of Australia Pty Ltd v Life Airbag Company (New Zealand) Ltd (unreported, 22 May 1998)
 Australian Flight Test Services Pty Ltd v Minister for Industry, Science and Technology (unreported, Federal Court of Australia, O’Loughlin J, 26 April 1996)
  FCA 567