The Elephant in the Court Room

Cost Implications on dismissal of a counterclaim or third party claim

We've recently come across an inconsistency in the Supreme, County and Magistrates Court Rules, with implications that litigators should be alert to.

Order 63A.16 of the County Court rules provides that dismissal of a counterclaim or third party claim carries costs with it, unless the court otherwise orders. No such provision exists in the Supreme Court Rules.

The reason that litigators should be aware of this rule is that there are many instances where such claims are dismissed without adjudication on the merits, or because they are settled. In such circumstances, consideration may need to be given as to whether an order should be sought, specifically providing that no costs are payable, or awarding costs to the claimant.

On the other hand, because of the absence of the provision in the Supreme Court Rules, when finalizing a matter, consideration must always be given as to the appropriate orders to be sought regarding the costs of a counterclaim or third party claim.j

Dangers of separate components in Calderbank offers

A recent Federal Court decision considered the reasonableness of rejecting offers made.  Nothing unusual about that, but the unusual aspect of the decision was the consideration of the reasonableness of rejecting the individual components of an offer.

The proceedings involved claim under the Fair Work Act, the claimant seeking damages arising from contravention of the Act.  Under the Fair Work Act, costs are generally not awarded.  The applicant sought costs, relying on the respondents rejection of a series of without prejudice offers as evidence of unreasonable behaviour.  The court looked at the individual components of the offers, and considered the outcome against each of those individual components.  It found that, although the applicants' offers were less than the compensation awarded, some of the individual components were greater than what was awarded and in those circumstances it was reasonable for the respondent to decline that component of the settlement offer.

The particular component considered in this case was costs which have been thrown away.  The case highlights the difficulty of seeking a fixed amount for costs, are a cost order has been made and a party is seeking to compromise that order as part of an offer of settlement.  It would be necessary to establish the reasonableness of the amount of the offer relating to that cost component.