In this Insight, Rose Legal explores the recent decision in Lau v Anglican Community Services (No. 2) [2025] NSWDC 211, where the New South Wales District Court exercised its discretion to award costs despite the plaintiff receiving only nominal damages. The case raises important considerations for legal practitioners around the principles governing costs recovery, proportionality, and the relevance of settlement negotiations. It offers valuable guidance on how the courts interpret ‘success’ in litigation and when costs orders may still be justified despite minimal financial outcomes.
The District Court of New South Wales’ decision in Lau v Anglican Community Services (No. 2) [2025] NSWDC 211 offers valuable insight into the court’s approach to legal costs in circumstances where the plaintiff is awarded only nominal damages. This case also provides a useful analysis of r 42.1 of the Uniform Civil Procedure Rules 2005 (UCPR), which addresses the entitlement to costs when a party achieves only partial success.
Background
Mr Man Hay Lau commenced proceedings against Anglican Community Services (Anglicare) following the death of his wife, alleging breaches of contract and violations under the Australian Consumer Law. While substantial damages were initially pursued, Mr Lau later narrowed his claim, ultimately seeking only nominal damages. The court awarded $200 in relation to two breaches of contract.
The Costs Dispute
Following the judgment, the parties failed to reach an agreement as to liability for costs. Anglicare contended that Mr. Lau should bear its costs, arguing that his rejection of settlement offered justified an indemnity costs order. Conversely, Mr. Lau sought an order for his costs, asserting that he had achieved a measure of success, albeit limited.
Abadee DCJ conducted an analysis of r. 42.1 UCPR, which allows the court to make an order for one party to recover costs of proceedings even if they have not been wholly successful. The judge considered factors such as the nature of the claims, the conduct of the parties, and the reasonableness of settlement offers. In this instance, the court concluded that Mr. Lau’s abandonment of substantial claims and the minimal success achieved did not warrant a departure from the general principle that costs follow the event. One of the functions of the court in this case was to identify the ‘event’ in question. Importantly, the court noted that damages alone was not the ‘event’ at which the plaintiff was aiming, but rather to prove that the Defendant was liable for his wife’s mistreatment.
However, the court also weighed the fact that the Defendant:
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Successfully defended the vast preponderance of the allegations of breach.
Succeeded in its opposition to a court-ordered apology.
Succeeded in dismissing the negligence claim, and the relief under the statutory action.
Legal Implications
This decision underscores the principle that achieving nominal damages does not automatically entitle a plaintiff to costs. It highlights the court’s discretion in determining costs, emphasising that a party’s conduct throughout litigation, including the rejection of reasonable settlement offers, can influence cost orders. The case underscores the importance of carefully evaluating settlement offers and weighing the financial risks of pursuing claims that may yield only limited success.
Conclusion
This case provides valuable insight into the complexities of cost determinations in civil cases, particularly when a plaintiff’s success is limited to nominal damages. For legal practitioners and parties involved in civil disputes, this case serves as a pertinent example of how courts assess costs in the context of partial success and the conduct of the parties involved.
Tips
At Rose Legal, we’ve advised on many assessments where the damages awarded are lower than the legal costs incurred, sometimes significantly so. If you’re in this situation, how you present your case can make all the difference. Here’s what you need to know:
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A reduction in costs in the above manner enhances the reasons why a costs expert should assist with the assessment process, and particularly the manner in which the reduction should be applied.
If you are the paying party and consider there to be merit in seeking a reduction in costs due to the damages recovered, it is vital to make this arguments before the court makes an order for costs. If an order is made that a party can recover their costs of the proceedings, an assessor cannot make an arbitrary reduction to the total amount.
