IT WILL COST YOU! – Part 1, Costs Orders

By its nature, civil litigation is an expensive undertaking and at the end of the day, someone will be left to bear the burden of the legal fees. Who is required to pay and to what extent, is often determined by the court and handed down by way of a costs order.

While the general principle is such that the losing party is responsible for paying a portion of the successful parties costs, how much can be recovered can be influenced by the specific circumstances of the case and can, in some circumstances, be affected by actions taken by the parties, regardless of the final outcome.

As such, it is critically important that all parties in civil disputes have an understanding of what types of costs orders can be made and are aware of the factors that may affect them. This understanding is imperative to enable the parties to make informed decisions about their matter and may ultimately affect their appetite to litigate.

In this three-part series, we will explore:

1. The different types of costs orders and on what basis they can be assessed;
2. Factors that may affect the making of a costs order; and
3. Disputing a costs assessment.

What is a costs order

Upon the delivery of a court order in a matter, the court will make a further order concerning the payment of legal costs.

The general rule is that costs follow the event,[1] such that generally the unsuccessful party will pay a portion of the successful party’s legal costs. Legal costs can include:

1. Solicitor’s fees;
2. Barrister’s fees;
3. Expert witness fees; and
4. Court filing fees.

Types of Costs Orders

A costs order can be awarded at any stage of the proceedings[2] and can be awarded for the whole proceedings, a particular question to be tried, or for a specific part of the proceedings.

A court may order:

1. Costs in the cause – an order (usually concerning interlocutory applications) made in favour of the party that is successful at trial (i.e. not necessarily the successful party for the interlocutory step);
2. Costs reserved – at interlocutory stages of the proceedings, the court may reserve an order for costs until the conclusions of the proceedings. That is, the court will hear the parties on the question of costs at a later stage;
3. Costs thrown away – the court may award a party their costs incurred or wasted because of another party’s actions. We will explore this in more detail next week;
4. No order as to costs – this means that each party is liable to pay their own legal fees;
5. Costs in any event – is an order (usually at an interlocutory proceeding) entitling a party to receiving their costs regardless of the final outcome of the case.

Ways of Assessing Costs

A costs order may specify that costs are:

1. An amount to be assessed;
2. A percentage or part of an amount to be assessed; or
3. A fixed amount of costs to be paid.

Costs assessed refers to the process where an independent costs assessor determines the amount of legal costs that a party is entitled to receive to ensure that only reasonable and necessary costs are claimed. There are two basis by which costs pay be assessed: standard or indemnity costs.

Standard Costs

Generally, costs are assessed on a standard basis which is governed under the Uniform Civil Procedure Rules 1999 (Qld) (UCPR). A party liable to pay costs on the standard basis is not obliged to pay any and all costs incurred by the successful party. Rather, standard costs are calculated by taking into account only incurred costs that were necessary or proper for the attainment of justice or for enforcement or defence of rights.[3]

That being said, a party is often not compensated for their full legal fees and will be left with out-of-pocket expenses, regardless of being successful at trial.

When costs are assessed on a standard basis, charges for work performed are to be allowed in accordance with the relevant scale of costs in:

1. Schedule 1 of the UCPR for Supreme Court matters;
2. Schedule 2 of the UCPR for District Court matters; and
3. Schedule 3 of the UCPR for matters in the Magistrates Court.

Indemnity Costs

Alternatively, the court may order costs to be assessed on an indemnity basis[4] such that costs reasonably incurred, and of a reasonable amount, will be recoverable, having regard to:

1. The scale of fees prescribed by the court;
2. Costs agreement between the successful party and their solicitor; and
3. Charges that are ordinarily payable by a client to a solicitor for their work.[5]

A successful party will generally be able to recover more costs when assessed under an indemnity basis as opposed to a standard basis. Indemnity costs ensure that the successful party is fully compensated for their legal expenses, unlike standard costs, which may leave a party out of pocket. However, because of the higher threshold for indemnity costs, courts do not grant them as a matter of course—they are reserved for cases where the conduct of a party warrants a higher costs penalty.

A court may order indemnity costs where:

1. A party has acted unreasonably, improperly, or in bad faith during the proceedings;
2. A party has made allegations of fraud that were knowingly false;

• The litigation was prolonged unnecessarily, causing additional expense to the other side; or

1. A party rejected a reasonable settlement offer and subsequently lost at trial.

Next week we will consider additional factors which may influence a court’s decision when making an order for costs.

Lamont Project & Construction Lawyers

The Lamont Project & Construction Lawyers team has extensive knowledge regarding the civil litigation process and what circumstances may affect an order for costs. With this knowledge and expertise, Lamont Project & Construction Lawyers can provide the required support and advise on matters of civil litigation.

If you would like to discuss any matters raised in this article as it relates to your specific circumstances, please contact Lamont Project & Construction Lawyers.

The content of this article is for information purposes only and does not discuss every important topic or matter of law, and it is not to be relied upon as legal advice. Specialist advice should be sought regarding your specific circumstances.

Contact: Peter Lamont or Kathryn Easton

Email: [email protected] or [email protected]

Phone: (07) 3248 8500

Address: Suite 2, Level 2, 349 Coronation Drive, Milton Qld 4064

Postal Address: PO Box 1133, Milton Qld 4064

[1] Uniform Civil Procedure Rules 1999 (Qld) (UCPR), r 681.

[2] UCPR, r 682.

[3] UCPR, r702.

[4] UCPR, r 703(1).

[5] UCPR, r 703(3).