Costs not awarded where neither party’s conduct was more unreasonable
The New South Wales Supreme Court has refused to order costs for the proceedings where neither party conducted the proceedings in a manner enabling a proper merits determination, “capitulated” to the other, or acted more unreasonably than the other.
On 30 March 2026, the court dismissed the proceedings for lack of prosecution and preliminarily found an award of costs inappropriate. However, the court directed the parties in Macnab v Deverell & Ors [2026] NSWSC 544 to serve cost submissions.
The court explained that s 98 of the Civil Procedure Act 2005 (NSW) gave the court wide discretion over costs, which would ordinarily follow the event unless another order should address all or part of the costs under r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW).
In appropriate cases, the court could order costs even if it did not hear the merits and even if the moving party no longer sought to proceed with the action. Exceptions were if a party capitulated or acted unreasonably.
The plaintiff sought indemnity costs from the first defendant. According to the court, her cost submissions breached the formatting requirements, exceeded the permissible length, and referred to allegations she had made in proceedings previously dismissed for lack of prosecution.
The plaintiff allegedly attempted to advance the proceedings, which the first defendant supposedly obstructed. The plaintiff argued that the first defendant’s former legal representatives had pursued a litigation strategy in breach of his obligations under ss 56–58 of the Civil Procedure Act.
The plaintiff also asserted that the first defendant sought legal costs that were remarkably high, given the absence of progress in the NSW District Court and Supreme Court proceedings, which led to their dismissal.
For his part, the first defendant advanced multiple allegations also not resolved on their merits. He referred to costs he incurred in proceedings in the NSW District Court and Supreme Court, including the costs of computers and a vacuum cleaner purchased and the costs of legal representation.
The Supreme Court of New South Wales ruled that both parties failed to conduct the proceedings in a manner that would permit their proper determination on the merits. The NSW Supreme Court held that neither party “capitulated” to the other or acted more unreasonably than the other.
According to the NSW Supreme Court, it could not determine that either party would have almost certainly succeeded, could not characterise the outcome as either party’s capitulation, and could not find either party’s conduct more unreasonable to justify a favourable cost order.
