6. Costs

The costs of litigation can be a formidable barrier to commencing proceedings. This consideration looms particularly large in public interest cases, where there is generally no private benefit (such as damages) to be gained and often a substantial resource imbalance between the parties.

In addition to the costs associated with running a claim, which may be mitigated by pro bono or reduced fee legal representation, plaintiffs face adverse costs risks. Further, the non-economic costs of litigation can be considerable and difficult to anticipate.

6.1 Usual Rule as to Costs

Australian courts have broad discretion to make orders as to costs.

The usual rule is that costs follow the event, meaning the unsuccessful party will be ordered to pay some of the successful party’s legal costs at the conclusion of a case. This reflects the notion that justice to a successful party is not achieved if it comes at the price of being out of pocket, so that a party who is responsible for litigation should bear its costs. Costs are awarded to indemnify a successful party in litigation, not to punish an unsuccessful party.^[1] Underlying both the usual rule that costs follow the event and the qualifications to it is the idea that costs should be paid in a way that is fair, having regard to the responsibility of each party for the incurring of the costs.^[2] This rule applies unless specific legislation provides otherwise, for example in merits review cases before the NSWLEC where instead costs orders must not be made unless it is ‘fair and reasonable’ in the circumstances to do so.^[3] In representative proceedings, costs generally may not be awarded against group members other than the representative plaintiff(s) who is a party to the proceeding.^[4] There is no general public interest exception to the usual rule. The two primary ways in which public interest considerations may be factored into the exercise of the court’s discretion are no or limited costs orders and cost capping orders.

6.2 No Costs Orders

Courts can exercise discretion to not apply the usual rule as to costs at all, meaning irrespective of the outcome each party bears their own costs, or limit the amount of costs payable.

The court will exercise its discretion on costs ‘having regard to all the circumstances of the case’.^[5] Public interest considerations are one factor, but generally the mere fact proceedings are brought in the public interest will not be enough alone to justify departure from the usual rule, and something more is required.^[6]

The range of outcomes in cases where a no costs order has been sought has created considerable uncertainty and difficulty for plaintiffs and lawyers to accurately predict where cases will warrant the court departing from the usual rule as to costs.

A further difficulty is that no costs orders are made at the conclusion of the proceedings, meaning there is no certainty for an applicant prior to commencing or during the proceeding.

6.3 Capped Costs

Courts may also grant a capped costs order, also known as a protective costs order, either under general discretionary powers or specific legislative provisions.^[7] While a capped costs order does not have to apply equally to all parties, orders made have generally been reciprocal.

Public interest is one factor in deciding to make such an order. However, similarly to no costs orders, public interest is not necessarily decisive,^[8] and something more is needed.^[9]

If successful, capped costs orders can provide some level of certainty as such orders are typically sought relatively early in a proceeding. In practice, however, maximum costs orders are made infrequently, and none have been made to date in climate-related cases.^[10]

6.4 Litigation Funding

Litigation funding, usually in the form of an adverse cost indemnity, may also be available to public interest litigants in certain cases, however the availability and extent of such funding is limited. The Grata Fund, for example, is a specialist not-for-profit litigation funder in Australia which has supported various climate-related cases, including the applicants in the Pabai and Kabai class action (discussed above).^[11]

While commercial litigation funding is more commonly available, commercial funders generally pursue cases with a damages element.^[12] Finding willing litigation funders, as well as legal advocates, may be easier in the context of climate litigation that offers the potential for recovery of damages.

6.5 Alternative Funding Models

Canada and the United Kingdom have legislative frameworks for public interest costs orders that are more liberal in their departure from the standard costs orders than in Australia.

The Supreme Court of Canada has recognised the availability of ‘advance costs’ or ‘interim costs’ in rare public interest cases, where litigants can have their legal costs paid for by the respondent during the course of proceedings to ensure the proceeding is not discontinued for lack of resources.^[13]

In certain jurisdictions, such as New Zealand^[14] and parts of Canada,^[15] the state itself will fund some public interest cases.

6.6 Non-Economic Costs

In addition to the economic costs posed by litigation, potential plaintiffs face considerable psychological and social costs, often exacerbated where proceedings relate to already emotionally and politically charged climate issues. These costs are experienced unevenly, and the legal system does not offer mitigation for particularly vulnerable plaintiffs.

6.7 Non-Party Costs Orders

In exceptional circumstances, a costs order may be made against a third party, or non-party to the litigation. A non-party costs order may only be made where it is in the interests of justice to do so.^[16]

The only precondition to the exercise of power to make an order for costs against a non-party is that the non-party ‘has sufficient connection with the unsuccessful party and the litigation to warrant the Court exercising its jurisdiction’, being a connection that is material to the question of costs.^[17] The category of cases in which a costs order may be made against a third party is not closed.^[18] Though not a precondition, the cases where orders for costs have been sought against non-parties mainly concern an unsuccessful party who is impecunious.^[19]

In a recent case before the Federal Court of Australia, oil and gas company Santos Ltd sought a non-party costs order against the Environmental Defenders Office (‘EDO’). The costs relate to a claim against Santos Ltd by three First Nations people from Tiwi Islands, represented by the EDO, which sought an injunction to prevent Santos Ltd from commencing construction of a gas export pipeline on the basis that the cultural heritage of the site had not been properly assessed. Simon Munkara (the first applicant) successfully obtained an interim injunction preventing works until judgment was delivered.^[20] While initially successful, the application was later dismissed, which resulted in the injunction being discharged and an order being made for the applicants to pay the costs of Santos Ltd.^[21] The applicants were not in a position to satisfy the costs order. Santos Ltd subsequently sought a non-party costs order against EDO, arguing inter alia that EDO funded part of the proceedings, that EDO’s role in the conduct of the proceedings was unreasonable and ought to attract cost consequences, and that EDO had a substantial interest in the outcome of the proceedings.^[22] In November 2024, orders were made by consent of the parties for EDO to pay Santos Ltd’s indemnity costs of over AUD$9 million, representing Santos Ltd’s full legal expenses in defending the proceedings without any discount.^[23] As it is unusual for lawyers to be required to pay costs in this way, the case has prompted close scrutiny and reflection within the profession.