Legal victories rarely give rise to multi-million dollar settlements as depicted in today’s popular media. Successfully trying a case is complicated, time-consuming and, above all, expensive. There seems to be a common misconception that just because you win a case, you are entitled to recover all of your out of pocket expenses in addition to the judgment amount, which is not the case! You will typically be entitled to recover only some of your legal costs (solicitor’s fees) from the other side. As such, prospective litigants must weight up not only their chances of success but also the degree to which they can recoup their legal expenses. If the claim amount is small or commensurate to the out of pocket expenses necessary to bring the matter to court, engaging in a long a tedious legal battle may not be wise.
In the state of New South Wales the courts can make legal fees payable on either an:
- ordinary basis; or
- indemnity basis.
Costs awarded on an ordinary basis
If you are entitled to recover your legal fees from the other side on an ordinary basis, this means that you can claim for a part of the professional work costs incurred by your legal practitioner. Professional work costs include the costs associated with:
- drafting correspondence;
- making telephone calls;
- liaising with counsel;
- writing submissions;
- preparing court documents etc.
Professional work costs do not account for expenses: i.e. travel expenses and alike. Furthermore, to be recoverable the professional costs must have been properly and reasonably incurred by the legal practitioner. Whether costs have been properly and reasonably incurred will depend on the facts of the particular case.
Costs awarded on an indemnity basis
If you are entitled to recover your legal fees from the other side on an indemnity basis, you can claim for all the professional work costs incurred by your legal practitioner, These costs are in addition to expenses incurred by the solicitor on your instructions.
Indemnity costs provide for a more generous award. They are awarded at the court’s discretion and only in exceptional circumstances. There is no single definition of what amounts to an exceptional circumstance; however, the courts have been willing to award legal costs on an indemnity basis in the following circumstances:
- When there has been an abuse of court processes;
- When a case has been brought to trial in circumstance where it is obvious that there is no real chance of success;
- Where parties engage in unreasonable or delinquent conduct throughout the trial;
- Where parties partake in fraud or other reprehensible conduct;
- Where there is a persistent failure to accept a generous offer of settlement.
The rationale for this type of legal cost award is to discourage parties from pursuing futile cases and preventing misconduct.
If you would like to know more about legal costs, your prospects of success at trial or the process of bringing a matter to court, our team of experienced LegalVision lawyers would be happy to assist you with any queries that you may have. Contact us today to see how we can help.