Understanding ‘costs’

When important court cases are reported in the media, we often hear that ‘costs’ have been awarded to one of the parties.

Costs orders are made by a judge or magistrate requiring one party to compensate the other for some of their legal costs associated with a court appearance.

In this column I will discuss how costs are usually awarded in different types of matters, the two main types of costs orders and how to increase the likelihood of receiving more of your legal costs back when involved in litigation.

Costs in family law

Costs orders in family law are uncommon due to the operation of section 117 of the Family Law Act 1975 which provides that generally each party to a case under the act bears their own costs.

However, where the court considers it appropriate, they make orders as to costs. For example, a court might consider it appropriate to make orders as to costs where a parent has previously been ordered to provide the other parent with access to their child but has deliberately not complied with this order.

Costs might be appropriate in this instance as the matter was unnecessarily required to return to court due to the actions of the non-complying parent.

Costs in criminal law

When a criminal matter is successfully defended at trial in the Magistrates’ Court, the defendant’s solicitors are usually successful in applying for legal costs including lawyers’ fees.

However, costs are very rarely available when a plea deal has been reached to plead guilty to any charges on the basis that other charges are withdrawn.

Costs are also frequently awarded against the defendant who unsuccessfully attempts to defend charges at trial. These costs often include court fees and witness fees but do not include professional costs, as police prosecutors usually conduct prosecutions in the Magistrates’ Court.

In the County Court and Supreme Court, costs orders are typically not made in criminal matters even when a matter is successfully defended. This is because while these courts have a general power to order costs in proceedings, this general power does not apply to criminal trials on indictment.

Civil litigation

Costs orders are most commonly made in civil litigation matters such as cases in relation to defamation, breach of contract and torts.

Costs orders are made in almost every matter that is finalised by judgment following trial. The general rule is that ‘costs follow the event’, which means the unsuccessful party pays some of the successful party’s costs.

Types of costs orders

The most common type of costs ordered is known as ‘party-party costs’.

The amount awarded under party-party costs is usually well below what a party has actually paid in legal fees because the costs are calculated in accordance with a court scale of costs which is lower than what the vast majority of lawyers bill.

This means that normally where a party is successful in pursuing or defending their rights in court they are still left out of pocket in terms of their legal costs.

Solicitor-client costs – otherwise known as indemnity costs – is a preferable order for a successful party as this order forces one party to pay the other party’s costs as agreed between them and their lawyer.

If you pay your lawyer $20,000 for their reasonable fees you would receive this full amount whereas under party-party costs you might only receive $10,000 in accordance with the relevant court scale.

Indemnity costs

The easiest way to increase your chances of being awarded indemnity costs is to make an offer more generous than what the court later orders in your favour.

Determining when a cost order is likely and the amount of such a costs order can be complex and possibly confusing to parties involved.

Therefore, it is important that parties do not depend on possibly receiving costs when considering their legal options and should clarify their position with their solicitor.