Going to court is expensive. Along with paying your own lawyer, if you are involved in court proceedings, you will also likely need to pay a number of other costs. If you lose at the hearing, you might be ordered to pay the other side’s legal costs as well as your own. It is important to understand what going to court will really cost so you can decide whether it is worth pursuing your matter or whether an out-of-court settlement would be a better option. This article will explain:

  • the many types of costs involved in litigation;
  • what costs orders the court can make; and
  • how you can recover all costs owed to you.

What Do Your Legal Costs Cover?

Your legal costs include a range of fees and costs involved in going to court, including fees to:

  • your solicitor;
  • expert witnesses;
  • your barrister (also called counsel);
  • the court including filing fees and hearing fees; and
  • extra costs, such as transcript fees or document management software.

Generally, you will engage your lawyer, or firm of lawyers, to act on your behalf. Your lawyer will then incur the other costs involved in your legal matter, also called disbursements, and will charge you for these costs.

For example, your lawyer will engage the barrister or an expert to act for you and will be responsible for their costs. Your lawyer will add those costs to the invoices they send to you. 

When the court hearing ends, the judge will make orders regarding costs. Usually, the unsuccessful party will be ordered to pay the other party’s costs, but this is not always the case. The judge may find both parties should share the costs in some way, depending on the result of the hearing.

You should also remember that if you lose a court hearing, you will most likely have to pay part of the other party’s costs, as well as your own legal costs. 

How Lawyers Charge

The most common way that lawyers and law firms charge, especially for work that involves court proceedings, is by time-based billing. That is, you will pay your lawyer for all of the time they spend on your matter, based on their hourly rate. Depending on the firm’s size and the work involved in your case, you may be working with just one lawyer or a team of lawyers. This includes:

  • senior lawyers; 
  • junior lawyers;
  • administrative staff; and
  • paralegals. 

Lawyers will often ask you to pay money upfront into the firm’s trust account. This will cover the cost of the legal proceedings. They will often then ask you to pay top-ups to that amount as the court proceedings continue. Most law firms will bill you each month, and they should provide you with a detailed breakdown of every cost charged in the bill.

Lawyers must follow strict rules about the information they provide clients when they start acting for them. They must disclose their rates and terms of payment and must provide clients with an estimate of what they believe the court proceeding or legal work will cost. If the lawyer becomes aware that the forecast needs to increase, they must let you know as soon as possible. They must also provide you with a revised estimate for the cost of the proceedings.

Costs Orders by the Court

It is a common mistaken belief that parties will have all of their legal costs paid by the other side if they are successful at a hearing. This is not correct, and a court will never order the other side to pay 100% of a party’s costs. In some courts, there is a limit or cap on the costs that a court can order to pay.

For example, some lower courts do not allow costs orders for small claims matters involving amounts less than $20,000. Other courts or tribunals are ‘no cost’ jurisdictions, meaning no costs will be ordered regardless of who wins.

Courts can make several types of costs orders and when determining costs will consider actions either party took before the court proceedings began, such as whether a party made reasonable settlement offers. You should also be aware that costs orders made by the court only cover the costs that arise after you or the other party first file the court application and begin court proceedings. Any legal costs incurred before this date are not included in a court’s cost order. This means that you may not be able to recover costs for: 

  • initial legal correspondence; or
  • meetings with the other party in a dispute.

There are two main types of cost orders.

1. Party Costs

Party costs are the most common type of cost ordered by a court at the end of a court hearing. Usually, the unsuccessful party will be ordered to pay the other party’s costs ‘as agreed or assessed’. This means the parties can either:

  • reach an agreement on the amount to be paid; or
  • use an independent assessment process to work out what each party’s ‘reasonable’ costs should be.

Typically, this works out to be about 60-80% of a party’s actual legal costs. 

2. Indemnity Costs

A court may award costs on an ‘indemnity’ basis, which includes almost all of a party’s legal costs. The court will only award costs on an indemnity basis if there is a reason to do so.

For example, the successful party may argue that they should receive indemnity costs because the other party:

  • had no chance of winning and should never have brought the case;
  • displayed unreasonable behaviour; or
  • refused to accept a reasonable settlement offer before the hearing started. 

What is Cost Assessment?

If a party does not agree that the other party’s legal costs are reasonable, they can apply to have those costs assessed by an independent assessor.

For example, if the court orders the other side to pay your costs, the other side may request that your costs are ‘assessed’ to confirm the total is reasonable. The cost assessor will consider a range of factors, such as whether the:

  • work was carried out in a reasonable manner; and
  • lawyer met all disclosure and other professional requirements.

Key Takeaways

The cost of litigation is complex and varied, and there are no guarantees that you will get your costs back if you are successful at a hearing. There is always the risk that you may need to pay the other side’s costs as well as your own. It is essential to understand the types of legal costs you will incur in going to court and how courts make orders about what costs a party should pay after a hearing, so you can make the right decisions at every stage of your commercial dispute. If you have any questions about court costs or need assistance with a dispute, contact LegalVision’s litigation lawyers on 1300 544 755 or fill out the form on this page.

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