A Victorian Supreme Court judge has delivered a pointed reminder
about the rules on orders for recovery of legal costs in
In the recent case of Hodgson v Amcor Ltd (no 10)
 VSC 294, Justice Vickery did not allow the successful
parties to recover a significant part of their legal costs. The
judge found that the conduct of the successful parties that was at
the centre of the dispute was sufficiently bad to preclude them
from recovering part of their legal costs. This judgment was
despite the fact that their conduct did not mean that they should
lose the case.
The general rule on legal costs recoverability
The starting point in any consideration of costs is that
'costs should follow the event'. This effectively means
that a court will generally order an unsuccessful party to pay an
amount towards the legal costs of the successful party.
This is reflected in the High Court's observation in Oshlack
v Richmond River Council (1998) 193 CLR 72, at 96 that 'by far
the most important factor which courts have viewed as guiding the
exercise of the costs discretion is the result of the
Despite the general rule, the question whether to award costs is
always in the discretion of the court. The list of matters that a
court will consider is lengthy, but generally speaking, courts will
how the parties have conducted themselves in the
whether offers of settlement have been made
whether a party was successful on every issue they raised, or
It is less common for courts to depart from the general rule on
costs on the basis of conduct engaged in long before the litigation
began, as his Honour did in this case. Justice Vickery's
judgment could represent a willingness on the part of judges to
consider an even greater range of factors in their decisions on
The circumstances of the case
The case involved former senior managers of the multinational
packaging company Amcor Ltd during the period between 2000 and
2004. Amcor was found guilty of illegal cartel conduct. Each
manager resigned or had their contracts of employment terminated in
After the departure of the former managers, it was discovered
that they had engaged in various activities not compatible with
their duties to the company. In particular, they held undisclosed
financial interests in companies that were negotiating to purchase
businesses being sold by Amcor.
The Court ultimately found that the managers had engaged in
serious breaches of their duties to Amcor, but that Amcor had not
suffered any loss as a result of the conduct because the businesses
were sold for market value. On that basis, Amcor's claim
against the managers was not successful.
Under the ordinary rule of legal costs recoverability, the
managers ought to have received an order that Amcor pay their legal
costs of successfully defending the litigation, but Justice Vickery
declined to make that order, finding instead that they should
receive only 35% of their legal costs.
Working on the basis that ordinarily costs orders may only cover
about 50% of the actual costs incurred, the order made in this case
could well have left the former managers having to cover
approximately 80% of the (no doubt substantial) legal costs of
defending Amcor's unsuccessful claim.
Justice Vickery's decision was based on his view that the
managers should only be entitled to recover legal costs in relation
to the issue of whether the businesses were sold for market value.
He held that because they had been found to have engaged in serious
misconduct, the managers should not receive any costs associated
with the investigations and trial time that concerned this conduct
(which his Honour estimated to be about 65% of the total cost of
The decision in this case is based on facts that are unique.
But, of course, this can be said for all litigation and the
principles in this case could therefore have wider application.
The Court's apparent willingness to look to a broad range of
factors in exercising its discretion on costs is something that
litigants and their lawyers should be aware of. Awards of costs in
complicated legal matters can run to hundreds of thousands of
dollars (and indeed more in some cases).
For this reason, parties to litigation need to be aware of the
range of possible cost outcomes when planning for litigation and
should obtain legal advice on how to manage costs risk at an early
stage in their litigation.
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Winner - Australasian Law Awards Gold Employer of Choice 2011
Finalist - ALB Australasian Law Awards 2008, 2010 and 2011 (Best
Winner - BRW Client Choice Awards 2009 and 2010 - Best Australian
Law Firm (revenue less than $50m)
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