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Can a determination of a separate question in a proceeding trigger a costs order on the ordinary basis?

Solarus Projects Pty Ltd v Vero Insurance (No 9) [2015] NSWSC 503 (7 May 2015) 

Facts
The status of Solarus Projects Pty Ltd’s (“Solarus”) as an ‘insured’ was decided by Justice Campbell following a hearing on 5 September 2014separate to the substantive proceedings,in accordance with Rule 28.2 of the UCPR, which states:
28.2 Order for decision
The court may make orders for the decision of any question separately from any other question, whether before, at or after any trial or further trial in the proceedings.
Submissions on costs followed, with Solarus submitting that that Vero Insurance should be ordered to pay Solarus’ costs of and incidental to the separate hearing and with Vero Insurance arguing that those costs should be reserved such that they be costs of the principal proceedings under Rule 42.7(1)(a) UCPR.
 
Arguments
The arguments of both parties are summarised in the following table:
Solarus Projects Pty Ltd

 

 Vero Insurance
 

Relying on the judgment of Bergin CJ in Eq (sitting as a Judge of Appeal) in Floruit Holdings Pty Ltd v Sebastian – Builders and Developers Pty Ltd [2009] NSWCA 411, 7:

The fact that the appellants may not be successful in the main case in the District Court, by reason of a failure to prove causation or for any other reason,does not in my view disentitle them to their costs of the hearing in relation to the separate question, which was a discrete issue. The appellants should have their costs of the hearing of the separate question in the District Court.

 

Reserving costs, especially in complex litigation, on interlocutory questions will often better “reflect the justice of the situation” for the reasons explained by Spender J inO’Keefe Nominees Pty Ltd v BP Australia(No 2) [1995] FCA 1079.

 

 

Relying on Ajkay v Hickey & Co. Pty Ltd [2011] NSWSC 822, Pembroke J (at [21]) said:

The question is whether there should be a costs order on the separate question at all or whether I should wait until final resolution of the proceedings. Sometimes the determination of a separate question will resolve the whole proceedings. Sometimes it will only resolve part of the litigation, leaving much for further hearing. Even if the separate question only resolves part of the litigation, the issue will have been identified because of its perceived legal or practical significance to the parties. As a matter of policy, my view is that unless there are compelling reasons to the contrary, orders for the costs of a separate question should be made at the time of the separate hearing and should not await the conclusion of the proceedings.

 

UNIFORM CIVIL PROCEDURE RULES 2005 – REG 42.7

42.7 Interlocutory applications and reserved costs

(1) Unless the court orders otherwise, the costs of any application or other step in any proceedings, including:

(a) costs that are reserved, and

(b) costs in respect of any such application or step in respect of which no order as to costs is made,

are to be paid and otherwise dealt with in the same way as the general costs of the proceedings.

 

 

There are cases where the court will apportion costs where an issue “is clearly dominant or separable”: Waters v PC Henderson (Aust) Pty Ltd (1994) 254 ALR 328 at 330 – 331;Turkmani v Visvalingam (No 2) [2009] NSWCA 279 at [12] and [15].

Decision
Justice Campbell ordered Vero Insurance to pay Solarus’ costsof and incidental to the determination of the separate questions on the ordinary basis. However, these costs were not to become payable until the conclusion of the proceedings in accordance with UCPR Rule 42.7.
His honour clarified the following:
1.The determination of a separate question is no mere interlocutory ruling relating to practice and procedure attracting the approach of Spender J in O’Keefe Nominees.
2.Bergin CJ in Eq’s approach in Floruit Holdingsis to be regarded as a general rule of practice.
3.Even if the party who was successful on the separate question loses the main proceedings, this does not detract from the “general rule” – i.e., costs order being made in favour of the party successful on the separate question, the ratio being that “the determination of a separate question almost always decides an issue the parties perceive to have legal or practical significance for the resolution of the litigation.”
This decision has since been followed by the Supreme Court in Zraika v Walsh (No 2) [2015] NSWSC 941 (17 July 2015).
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