Going to court can be stressful, time-consuming and expensive. Even if you are successful in court, you will not be able to recover all of your legal costs. A court will usually order the unsuccessful party to contribute to the other party’s costs, but both parties will still face some legal costs. If you are involved in court proceedings, you need to understand the rules around costs and the different types of orders a court can make. This article will explain:
- how courts order costs;
- the different types of costs; and
- how to ensure you receive all costs the court orders in your favour.
Basic Rules of Court Costs
Your legal costs include all the payments you make to your lawyer during court proceedings, such as:
- court filing fees; and
- barrister fees.
If you are successful, the other party will not cover all of these costs. Instead, the court will decide how costs should be shared at the end of the hearing. The court will consider a number of factors in making costs orders.
For example, the court will consider any actions either party took before the court proceedings began, such as whether either party made reasonable settlement offers.
Costs orders only cover the costs that arise after you or the other party first file the court application and begin court proceedings. Any legal costs incurred before this date are not included in a court’s cost order. This means that you may not be able to recover costs for:
- initial legal correspondence; or
- meetings with the other party in a dispute.
It is also important to remember that if you lose in a court hearing, you will most likely have to pay part of the other party’s costs, as well as your own legal costs.
Types of Court Costs
If you are successful, there are several types of costs the court may order the other party to pay. The two main types of costs orders are outlined below.
Party costs are the most common type of cost ordered by a court at the end of a court hearing. Usually, the unsuccessful party will be ordered to pay the other party’s costs ‘as agreed or assessed’. This means the parties can either:
- reach an agreement on the amount to be paid; or
- use an independent assessment process to work out what each party’s ‘reasonable’ costs should be.
Typically, this works out to be about 60-80% of a party’s actual legal costs.
A court may award costs on an ‘indemnity’ basis, which includes almost all of a party’s legal costs. The court will only award costs on an indemnity basis if there is a reason to do so.
For example, the successful party may argue that they should receive indemnity costs because the other party:
- had no chance of winning and should never have brought the case;
- displayed unreasonable behaviour; or
- refused to accept a reasonable settlement offer before the hearing started.
Limits of Court Costs
In some circumstances, there is a limit or cap on the costs that a court can order one party to pay.
- some lower courts that deal with smaller claims do not order any costs for matters involving claim amounts less than $20,000;
- some courts or tribunals, such as the Fair Work Commission, are a ‘no cost’ jurisdiction, meaning no costs will be ordered regardless of who wins; and
- in some cases, such as motor accident or personal injury claims, the maximum costs payable are set by the law.
Security for Costs
If you have been sued by a company and you believe that they will be unable to pay a costs order, you can ask the court to make a ‘security for costs order’. In this case, the other party must pay a certain amount of money to the court at the start of the court proceedings. The court holds this money in trust until the end of the hearing. This means that there will be funds available to cover any costs order if you win. If you are not successful, the court will return these funds to the other party.
Even if you are successful in a court hearing, you will still have to pay some of your legal costs. Usually, a court will order the other party to pay most of your costs. Of course, if you lose, you will have to pay part of the winning party’s costs as well as your own. Courts make different types of costs orders at the end of a hearing, depending on the behaviour of the parties and the circumstances of each matter. If you have any questions about court costs or need assistance with a dispute, contact LegalVision's disputes lawyers on 1300 544 755.