The Canberra Times is reporting that the Chief Justice Higgins has made a costs order in the litigation arising from the 2003 Canberra fires (see ‘Bushfire litigants to cover some of NSW’s costs for failed court case’). The article is true enough but it is a bit misleading. First it says:

“A group of people who lost their legal battle with NSW over its failure to control the 2003 bushfires before they devastated the ACT have been ordered to partially cover the state government’s court costs.”

As I say that’s legally true, but doesn’t paint the true picture. The plaintiff was in fact QBE Insurance. When you make a claim on your insurance policy the insurer is then allowed to sue, in your name and to exercise whatever rights you may have had, to recover the money. In this case QBE will have paid out and then sued in the names of their policy holders. So as a matter of theory, legal fiction if you like, yes the action was brought by a group of plaintiffs and yes they were ordered to pay costs but in reality it is QBE Insurance that will pay as it was exercising their rights. It should be stressed that QBE was not exercising their rights for the benefit of the insured, but for the benefit of QBE. QBE had paid out under the policies and was seeking to recover the money it had paid. Had the case gone the other way, it would have been QBE that got the damages, not the named plaintiffs.

The second paragraph says:

“A series of litigants took the ACT and NSW governments to court, claiming failures to properly fight the fires that eventually swept through the city on January 18, 2003.”

That suffers from the same confusion as the first paragraph and makes the case sound like it involved many more people than it did. It’s true there were some 100+ litigants but the major ones were NRMA, QBE and Suncorp so when it says, later, that “Landowners and other individuals took the NSW Government to court over its liability for the fires” that should be understood as three very large insurers and some uninsured individuals took the government to court.

The general rule is that the winning party gets an order for their costs but it never covers all the costs. Costs are on a party/party basis which roughly speaking, is all the costs necessary to bring the action to court between the parties so the costs of running the court case; but lots of costs are not covered, investigations that don’t go anywhere, the costs of managing the file and liaising with the client etc. Costs can also be awarded on an indemnity basis which means all the costs incurred by the winning party.

This case was complicated, as the paper reports, by the fact that by the time the case ended, many parties had ‘dropped out’ or settled. It would not be fair for the plaintiffs that continued to pay all of NSW’s costs simply as they were the last people in the battle. Higgins CJ recognised that and had to make some allowance for that.

His Honour also considered that the action was brought, at least in part, in the public interest. In his judgement (Electro Optic Systems Pty Ltd v NSW; Wayne West & Anor v NSW [2013] ACTSC 155) he said that where an action is brought ‘to vindicate the public interest’ a losing party might not have to pay the winning party’s costs. He went onto say:

24. In this case, it is apparent that there was a public interest in the conduct of the fire fighting authorities in both the ACT and NSW, particularly with a view to identifying shortcomings in their responses as, with NSW, my judgment does…

But the case was not only about the public interest

25. However, it is also apparent that each of the plaintiffs was seeking to vindicate their private right to compensation. That is, perhaps, less the case with the West plaintiffs. I had the distinct impression that vindication of his grievance against the NSW authorities was the most important issue for Mr West, nevertheless, it was not “entirely without self-interest”.

In the circumstances a costs order was justified but it would be discounted because NSW was not successful on all points. In the judgement when he decided the case, Higgins CJ was of the view that NSW firefighters had been negligent and caused the damage to the plaintiffs but they were protected by statutory defences found in the Civil Liability Act 2002 (NSW) and the Rural Fires Act 1997 (NSW). Because NSW lost on some critical points, even though it won the case, he did not think it should get all of the costs.

The final order was that QBE was to pay ½ of NSW’s costs on a ‘party party’ basis so not ½ of 100%, but ½ of some smaller amount; and West was to pay 5% of the costs to QBE.
It should be noted that costs order relates to the costs as between the parties. It is not an order to pay the court’s costs. The costs of actually running the trial, providing the judge, the court staff, the court room etc are all met by the community of the ACT.

This judgement is the end of the matter in the ACT Supreme Court but not the end of the matter. It appears that West has appealed so the next step will be a hearing in the ACT Court of Appeal. From there, depending on the result and the desire of the parties to take it further, it may make its way to the High Court of Australia.

Michael Eburn
8 August 2013.