Costs, particularly legal costs, should be an important commercial issue that parties should take into account at all stages of a dispute or court proceeding. This is because costs can often amount to a significant portion of a party’s claim. In some cases, particularly in matters that arise in the lower courts, costs may even exceed the value of the claim.
This article will explore the types of costs orders that courts can make, their implications and the process to claim costs.
In the course of legal proceedings, the two types of costs that parties can potentially claim are party-party costs and indemnity costs, with the former being significantly more common.
Party-party costs are those that an unsuccessful party has to pay to a successful party. They are different from solicitor-client costs which are costs that a client pays to their lawyer.
When costs orders are made, they are usually made on a party-party basis, which is always lower than what a solicitor would charge their client. Although the costs of every case are different, generally speaking, a successful party would usually be able to claim about 50-75% of their legal costs. This is because often the court’s scale of costs is lower than what the lawyer actually charges the client.
What is the scale of costs?
The Legal Costs Committee publishes information and tables for all WA State Courts which sets out the maximum amount of legal costs that a party can claim on a party-party basis. These scales of costs are amended regularly, on a yearly or bi-yearly basis, depending on legislative changes.
Occasionally courts order that a party pay indemnity costs to the other party. Indemnity costs are all costs incurred by a party including fees, charges, disbursements, expenses and lost remuneration. An order for indemnity costs, therefore, goes well beyond legal costs.
The principle underlying indemnity costs is set out in cases such as Re Bond Holdings Ltd (1990) 1 ACSR 350, which states that indemnity costs are normally only awarded in situations involving misconduct. This may be where a matter has been deliberately delayed by a party in what amounts to an abuse of process or if an offer of compromise has been unreasonably rejected. It is therefore rare for indemnity costs to be awarded.
Costs orders for specific hearings
A typical civil litigation matter involves multiple hearings and conferences and for each hearing, the sitting judicial officer makes costs orders. Some of the more common costs orders are as follows:
Costs in the cause
The unsuccessful party pays the costs of the successful party at the end of the proceedings.
The decision as to the payment of costs and who will pay those costs will be determined at a later stage.
Costs thrown away
Unnecessary costs incurred by a party due to the other party, for example where a party had failed to appear at a hearing, adjourned the matter unnecessarily or otherwise wasted a party’s time.
When a party has received a judgment in its favour, before it considers enforcing that judgment, the successful party should calculate the amount of costs they wish to claim from the unsuccessful party. As this can be a time consuming and expensive task and is often disputed, parties can try to fix the amount they wish to claim by liaising with the other party. If an agreed set of costs is produced, then the parties should give effect to this by filing Consent Orders agreeing on a set of fixed costs.
If however, costs cannot be agreed, then the party awarded costs will need to make an application to have their costs assessed or taxed (the terminology depends on which court the matter is in). This is a process where the successful party’s lawyer will go through all of their invoices and the work they have done for their client and compare this with the scale of costs for the relevant court.
The application will then need to be filed and served on the other party, who will then scrutinize it and can file objections to any of the items claimed. It will then finally go to a hearing before the court, where the judicial officer will make the final costs determination.
As it is very important to get costs right, it is highly recommended that you obtain legal advice and instruct your lawyer to go through the costs assessment/taxation process on your behalf.
If you require legal advice or representation in any legal matter please contact Go To Court Lawyers.