Costs Orders – What Are They? – Payment of Legal Costs in Litigation

Upon delivery of a Court order in civil litigation, the judge or magistrate will make a further order concerning the payment of legal costs. Orders concerning costs are in the complete discretion of the Court. There are, however, common outcomes which clients should be aware of.

Costs Orders Generally – Payment of the Successful Parties Costs

The general rule is that costs will follow the event. This means the unsuccessful party will bear the legal expense incurred by the successful party in bringing or defending the proceedings. Legal costs can include:

• lawyers’ professional fees;
• expert fee’s;
• barrister’s fees; and
• Court costs such as filing fees.

Common Costs Orders

The Court will most commonly order costs on the “standard basis” but can in certain situations, make orders on the “indemnity basis”.

Standard Costs

Costs paid on the standard or “party and party” basis will usually result in the successful party recovering somewhere between half to three quarters (depending on what court) of its actual expenses. Therefore, it is not uncommon for a client to be successful at trial and yet still be left with out-of-pocket expenses.

The Uniform Civil Procedure Rules (UCPR) governs costs on the standard basis in Queensland. The UCPR provides a schedule of fees for different tasks undertaken in proceedings.

Our solicitors can advise you if it is likely you will receive costs on the standard basis on the successful conclusion of an interim application or trial. We can also provide a rough estimate of the total costs that you will be entitled to receive.

Indemnity Costs

In certain circumstances, a Court will order that the unsuccessful party pay the other side’s costs on an “indemnity basis”. Costs ordered on an indemnity basis allows for all the costs reasonably incurred by the party in bringing or defending the proceeding.

Therefore, costs ordered on an indemnity basis will generally be more than the party would otherwise recover on a standard basis. The Court will consider indemnity costs’ orders appropriate in circumstances where:

• • there is evidence of misconduct that causes loss of time to the Court and the other parties;
  • the proceedings are commenced or defended with no prospects of success;
  • the proceedings are commenced with wilful disregard of known facts or established law; or
  • there is an unreasonable refusal of an offer of compromise.

You Should Know: There are steps a party can take throughout the civil litigation to maximise their chance of receiving an indemnity costs’ order in their favour.

A costs’ assessment will be undertaken to determine the actual amount you will be entitled to receive for your costs if you are awarded costs on an indemnity or standard basis. Quite often, the parties can agree on the amount of the costs without going through an assessment process.

Impact of Offer on Costs – Calderbank Offers

Throughout the litigation, it is likely the parties will make offers to settle the dispute. There are different types of offers, each of which can have varying impacts on a party’s entitlement to costs and how much.

One type of offer which may impact the Court’s decision is where a genuine offer, quote often referred to as a “Calderbank Offer”, has been made.

The same type of offer can be made as a formal offer under the Uniform Civil Procedure Rules. If such an offer is unreasonably rejected, the non-acceptance may be a strong factor taken into account by the Court on an application for indemnity costs.

Example Scenario:

An example of when a calderbank offer or formal UCPR offer could lead to an indemnity costs’ order is where:

• • • • (1) a party makes an offer to the other side to settle the matter without the need for a trial and the offer is a genuine offer of compromise;

• • • • (2) the other side rejects that offer and the matter proceeds to trial to be decided; and

• • • • (3) at trial, the party who made the offer receives a better outcome than what they offered to settle the proceedings for.

In this case, the Court should order that the unsuccessful other party pay the successful party’s costs on an indemnity basis as they should have accepted the earlier offer.

Our solicitors can more fully explain the purposes of offers and the advantages they may have in your matter. We have significant experience in the strategy of when and how much to offer to achieve results. We will accordingly advise you on the best time to make an offer to maximise the likelihood of an indemnity costs’ order being made in your favour and likewise, whether it is in your interests to accept an offer that has been made to you.

Assessment of Costs

If costs are awarded on an indemnity basis, a costs assessor will be appointed to determine the successful party’s reasonable legal expenses. Parties can avoid this by agreeing on the amount of the costs. When assessing costs on an indemnity basis the costs’ assessor will have regard to:

• • • the scale of fees prescribed for the Court the matter was heard in;
    • any costs agreement entered into by the party to whom the costs are payable (such as with their solicitor); and
    • charges ordinarily payable by a client to a solicitor for the type of work undertaken.

Alternative Costs Orders

There are different types of costs’ orders that the Court can make depending on:

• the type of application they are awarding costs for;
• the time at which the application is brought in the litigation; and
• the purpose for which the application has been made.

In addition to standard and indemnity costs, other orders the Court may make regarding the payment of costs include:

• A reserved costs order;
• That a party pay costs thrown away; or
• That costs be in the cause.

Costs Reserved

It is common in situations of interlocutory applications and directions hearings that the Court will reserve an order for costs until the conclusion of the proceedings. What this means is that the Court will hear the parties on the question of costs at a later stage.

Costs Thrown Away

The Court may award a party their costs incurred and wasted, or “thrown away”, because of another party’s actions. Such actions may include:

• • • if the party makes an error;
    • failure to comply with directions;
    • amendment of pleadings; or
    • an unnecessary application being heard.

Costs thrown away will commonly be awarded in conjunction with a party being granted leave to do something.

For example, if a Plaintiff brings an application to amend their Claim or Statement of Claim, the Court may:

• • • grant them leave to do so; but
    • order they pay the Defendant’s costs incurred due to the application and changes required to be made to their defence.

Costs in the Cause

“Costs in the cause” is an order usually made concerning interlocutory applications or directions. It will mean that costs will be made in favour of the party that is ultimately successful at trial and not at the interlocutory stage i.e., an all or nothing situation.

Here to Help

Proper experience in applications for costs and general litigation is essential to get the best outcome for your matter. Aitken Whyte Lawyers are focused on results.

Our Litigation and Dispute Resolution Team will advise you on the proper course to take to maximise the likelihood of obtaining indemnity costs. Contact us if you require expertise in applications for costs or litigation in general.

Aitken Whyte Lawyers can assist you in all applications for costs before the Court.

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Maroochydore Qld 4558
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