Blog Detail

What are cost awards in legal proceedings.

 

There are various misconceptions when one party wants to bring a claim against another party and expects to have all their legal costs paid by the other party. Firstly, legal costs are not awarded to punish the unsuccessful party to the proceedings, but rather compensate the successful party for the expense they have been put to by the proceedings. Secondly, legal costs are always at the discretion of the court, which means that sometimes even though a party may be successful with raising or defending a claim, a costs order may not be awarded in that party’s favour. Thirdly, the legal costs against another party embodies the principle is that a successful party to litigation is entitled to an award of costs to be indemnified, unless they have disentitled themselves by the way they acted with the litigation process. 

 

The court when assessing legal costs will determine normally on a party and party basis, or on an indemnity basis. Where indemnity costs are ordered it will be a higher costs in favour of the successful party. 

 

Legal cost orders are issued on the basis of fairness and the interest of justice. As example, a plaintiff that raises allegations may only be successful on some points and receive a limited cost order in their favour. While the defendant may also receive a cost order in their favour for points they were successful on in defending the claim against them. Fairness by the court for both parties on their respective wins a losses will be reflected in the cost orders issued. 

 

Under section 24 of the Supreme Court Act 1986 (Vic) it says: 

 

24 Costs to be in the discretion of the court

 

(1) Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court, including the administration of estates and trusts, is in the discretion of the Court and the Court has full power to determine by whom and to what extend the costs are to be paid. 

 

There are various ways cost orders are explained and the following is a summary on some of the terminology used by a tribunal or court on the matter of costs, with the initial place to start being the meaning of legal fees and disbursements.

 

Legal fees

 

The term legal fee refers to the remuneration for the exercise of the professional legal skill of a lawyer, or those employees who were under that lawyer’s supervision. 

 

Therefore, it is prudent sometimes to ask, who is ‘actually’ doing the work on the file, because if a non-lawyer is acting on the file then non-lawyer fees should apply and not the professional fee for the work that is done. 

 

Disbursements 

 

Disbursements are always questioned by the client but are a necessary item in carrying out the legal service by the professional. Disbursements are costs that are paid out to others for external services, such as searches, counsel, witnesses and various other applicable services that would apply to the case that is in progress. 

 

In Re Remnant (1849) the court said disbursements are …those payments only, which are made in pursuance of the professional duty undertaken by the solicitor, and which he is bound to perform, or which are sanctioned as professional payments, by the general and established custom and practice of the professional, ought to be entered or allowed as professional disbursements in the bill of costs… which is the invoice issued to the client. 

 

Party and party’ costs

 

When proceedings are brought against a party, the successful party is generally entitled to have their legal costs and some disbursements paid by the unsuccessful party. The legal costs that are paid by the unsuccessful party is the solicitor-client costs that were incurred by that party in either raising or defending the claim. The costs of this type are called party and party costs. 

 

Party and party costs may be ordered by a tribunal or court. The order that will be issued is for the unsuccessful party to pay the professional legal costs of a qualified lawyer holding a current legal practising certificate of the successful party. 

 

Therefore, if a successful party to litigation has not used the professional services of a lawyer, they will not be able to claim a costs order against the unsuccessful party. 

 

Costs on an indemnity basis

 

Where the court orders costs on an indemnity basis, these costs are higher than party and party costs, and orders are issued only under special circumstances, which depends on the facts and situation of each particular case. Some examples of when indemnity costs are ordered include: knowingly making false, or irrelevant allegations of fraud; where a party’s misconduct causes wasteful delays; where a party commences proceedings with an ulterior motive; where a party makes unfounded allegations; where a party fails to discover documents until after the hearing. The court has a wide discretion to order costs on an indemnity basis where proceedings have not been conducted properly. 

 

Costs in the cause

 

When the court orders ‘costs in the cause’ it is for the final award of ‘costs in the action’, which by definition relate to interlocutory proceedings. As example, if a party has been successful with litigation and gets an order for costs in their favour, the successful party is entitled to have the costs for the interlocutory hearing paid by the party that lost.   

 

Costs in any event 

 

When interlocutory proceedings occur the court may order ‘costs in any event’, which means the costs are payable in favour of one of the party’s to the proceedings. As example, no matter who is the successful party to the overall litigation, and where there was an interlocutor hearing and one party has been favoured with an order for ‘costs in any event’ that party is entitled to have the cost of the interlocutory proceedings paid by the other party, no matter whether they are successful or not. 

 

Costs reserved 

 

When the court orders ‘costs reserved’ it is meaning that the party that has received the order, that as example, the costs of an interlocutory hearing, need to be assessed further by the court at a later date. However, under the Victorian court rules ‘costs reserved’ are treated as costs in the cause unless the court orders otherwise. 

 

Costs of action and costs of trial

 

When a court orders ‘costs of action’ and ‘costs of trial’ this includes the entire court costs, including interlocutory proceedings and the preparation. Where ‘costs of trial’ are ordered on their own, this relates to trial costs only and does not include interlocutory proceeding costs prior to the trial commencing. 

 

Silent as to costs

 

Where a court orders ‘silent as to costs’ a party who is successful at an interlocutory hearing is entitled to their costs as costs in the cause and the losing party is not.  

 

Costs of the day and costs thrown away 

 

Where a court orders ‘costs of the day’ and ‘costs thrown away’ it refers to that the costs incurred on that day are to be assessed by a taxing officer (a person who qualifies the legal costs) to confirm if it reasonably relates to the hearing of the day. 

 

No order as to costs

 

Where a court orders ‘no order as to costs’ this means that each party must bear their own costs to the proceedings or that particular part which is so ordered. 

 

There is numerous legal terminology used by a tribunal or court in a case brought before them in relation to costs that can be ordered in favour of a party, or against a party.  

 

Public policy is aimed at people and entities such as companies resolving their disputes amicably between themselves or with the assistance of a lawyer, and not pursuing legal action in a tribunal or court, unless it is a last resort and there is a justifiable case to answer too. Under section 56 of the Civil Procedure Act 2005 (NSW) the courts overriding purpose of any proceedings brought before it is to facilitate the just, quick and cheap resolution of the real issues in dispute. However, as generally most people understand, once proceedings are commenced in a tribunal or court, the costs are far more reaching than just monetary amounts, as it also involves lost time and emotional impact on all parties involved, including family members where the matter is of a personal nature or impacts the family whether directly or indirectly.

 

The best solution with any dispute is for it to be resolved without the need of full litigation, whether in a tribunal or court. Therefore, where a dispute has arisen and communication has ceased with the other party that is progressive to resolving the issues, get that legal advice to protect your legal rights and interests. 

 

The comments in the aforementioned do not constitute legal advice and are general in nature, and if legal advice is required please contact: John Melis at Legal AU Pty Ltd (03) 9999 7799 www.legalau.com 

 

Legal AU Pty Ltd Lawyers are “Liability limited by a Scheme approved under Professional Standards Legislation.”