Costs Orders | Guide to the NSW Local Court Process

In Short

• In the NSW Local Court, the unsuccessful party is typically ordered to pay a portion of the successful party’s legal costs, usually around 60-70%.
• If parties cannot agree on the amount, an independent costs assessor determines the fair and reasonable costs payable.
• For claims under $20,000, the Small Claims Division may limit or not award legal costs, even to the successful party.

Tips for Businesses

Before initiating legal proceedings in the NSW Local Court, especially for claims under $20,000, consider the potential limitations on recovering legal costs. Engage in early settlement discussions to avoid protracted litigation and uncertain cost recovery. Consult with legal professionals to understand the cost implications specific to your case.

Summarise with: ChatGPT Perplexity Microsoft Copilot

---

Table of Contents

• How Do Costs Orders Work? 
• What is Included in My Legal Costs?
• What is a Costs Assessment?
• What Will My LegalVision Team Be Doing?  
• Key Takeaways
• Frequently Asked Questions 

Costs orders are orders made by the court requiring one party to pay the legal costs of the other party to proceedings. The general rule is that the successful party will be awarded part of their legal costs, which the unsuccessful party will need to pay. However, it is important to know that even if you are successful in a court claim against another party, you may not be able to recover 100% of your legal costs. In some instances, the court will cap the amount of costs that are recoverable to a certain point. This article outlines how costs work in the NSW Local Court. 

How Do Costs Orders Work? 

The final step in the court process is for costs orders to be made. This occurs when the hearing concerning the main issues of the dispute has concluded, and the court has come to its decision.

The general rule is that costs follow the event. This means that if you are the successful party, you will likely obtain a court order requiring the unsuccessful party to pay your costs. The purpose of costs orders is not to punish the unsuccessful party but rather, to compensate the successful party for the need to commence or defend the legal proceedings and, thus, their expenses incurred for litigation.  

Can I Still Obtain a Costs Order if My Matter is Less Than $20,000?

If the value of your claim is less than $20,000, your matter will be heard in the Small Claims Division of the Local Court, which is a “no costs jurisdiction”. This means that you are unable to recover any legal costs incurred. If your dispute is similarly valued, you should consider this fact before commencing or responding to proceedings. 

It is often more commercial to instruct your solicitors to negotiate directly with the other party. Generally, parties are to bear their own costs, as the Small Claims Division is intended to be inexpensive and less formal.

If your matter is in the New South Wales Civil and Administrative Tribunal (NCAT), NCAT may award costs if it is satisfied that special circumstances warrant it. However, costs are generally awarded only if a party is legally represented. You cannot claim costs for:

• time away from work; 
• travel; or 
• other disbursements. 

The courts have discretion with regard to the awarding of costs. Some factors that the court might consider when determining whether to make a costs order include:

• the facts of the case; 
• how the court proceedings were conducted; and 
• relevant legislation. 

Guide to Resolving Business Disputes

This guide provides key information on how to manage a business dispute as quickly and cost-effectively as possible.

Download Now

What is Included in My Legal Costs?

Legal costs generally refer to the amount a person has been charged for legal services. They can include:

• professional fees charged by your solicitors;
• counsel fees charged by a barrister to represent you in court or for specific advice;
• disbursements, which are expenses paid on the client’s behalf, such as:
  • court and filing fees; 
  • expert witness reports; and
  • printing and serving fees. 

The court can award costs on different bases, as outlined below. 

Ordinary Basis 

This is also known as “party/party costs” and is the usual process for awarding costs. Here, if your case is successful, you should expect to recover around 60-70% of your legal costs.

Indemnity Basis

Awarded costs on an indemnity basis are less common. This is because you can generally expect to recover a higher percentage of your costs if an order for indemnity costs is made in your favour, compared to costs awarded on an ordinary basis. An indemnity order will be granted by the court’s discretion and will only be awarded in certain circumstances, such as if one of the parties has:

• incurred unnecessarily high legal costs or costs in general as a result of the other party’s conduct;
• lied or committed fraud during the course of the proceedings; or
• made baseless or false allegations or has wasted the court’s time and resources.

In such circumstances and many others, the party seeking the indemnity costs must show the court that there are sufficient or unusual circumstances for the court to grant them. A common reason is that the other party did not accept a reasonable offer earlier in the proceedings. 

When a court awards costs on an indemnity basis, you may expect to recover around 90-100% of your legal costs.

If an agreement can be reached between the parties on the amount of costs payable, consent orders can be filed with the court so that the judge does not have to make the determination.

What is a Costs Assessment?

If you cannot negotiate an agreement as to the amount of costs to be paid, you may need to make an application for assessment of costs. An assessment of costs involves: 

1. providing the application to the other party and allowing them 21 days to provide objections, or otherwise resolve the matter;
2. filing the application with the Supreme Court, which will appoint an independent costs assessor to determine the application;
3. both parties then providing the cost assessor with any additional information; and 
4. the costs assessor then making a determination as to the costs that must be paid.

Once the costs assessor has made this determination, the party liable for the costs must pay them. If they fail to do so, you can register the cost determination with the Court as a judgment, and, if necessary, take steps to enforce that judgment.  

What Will My LegalVision Team Be Doing?  

Your LegalVision Team will advise you on strategic decisions relevant to your dispute, including any settlement offers made by either party throughout the proceedings. It is important to consider cost orders and litigate your claim in a way that minimises your exposure to adverse cost orders or puts you in a position to claim indemnity costs. If you are at the stage of proceedings where submissions as to costs need to be made, your solicitors may seek your instructions on what costs you would like to offer or accept.

Key Takeaways

Costs orders require one party to pay the other’s legal costs in court proceedings. Generally, the winning party recovers 60-70% of costs, but full recovery is rare. Claims under $20,000 in the Small Claims Division do not allow cost recovery. Courts may award indemnity costs (up to 100%) in cases of misconduct or unreasonable refusal to settle. If costs cannot be agreed upon, a costs assessment determines the amount payable. 

If you are going to court, our experienced disputes and litigation lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page. 

Frequently Asked Questions