If you intend to commence proceedings in Court, you should always consider the consequences of legal costs and, if you are successful, whether the proposed defendant has any funds or assets in which to meet any costs orders against them, as well as the judgment. This is a vital step before proceeding.
Local Court General Division and Small Claims Division
If you commence civil proceedings in the General Division of the Local Court you may be subject to a maximum costs order limiting the amount of legal costs awarded in your favour (where the defendant would have to pay your legal costs). The Local Court hears civil cases for matters up to $100,000, with matters less than $20,000 in the Small Claims Division.
General Division Costs Orders
Generally, if you were successful in General Division proceedings and the Local Court were to award legal costs on an ordinary basis in your favour, the most you could expect to receive would be around 60% to 70% of your legal costs upon costs assessment (for claims above $20,000). Note that a costs assessment takes place where a costs assessor carries out a review of the legal costs sought by a party to determine the amount to be paid.
However, if the amount claimed is between $10,000 and $20,000, the maximum costs that you could be awarded would be 25% of the amount awarded by the Local Court in respect of the claim plus any amount that might be allowed in relation to costs incurred up to the filing of the first defence in the proceedings. For example, if you commenced proceedings for a claim of $15,000 in the Local Court, and the court awarded you the full amount of $15,000, the most you could be awarded in legal costs would be $3,750 (25%).
If you wanted to vary the maximum costs order, you would need to provide evidence to the court explaining why the maximum costs order should be varied considering the complexity and subject matter of the proceedings.
Small Claims Costs Orders
In proceedings in the Small Claims Division of the Local Court (claims less than $20,000), the maximum legal costs awarded would depend on the amount of the claim. However, it would be significantly less than $1,000.
Payment of Defendant’s Costs
If you were unsuccessful in the proceedings, the Local Court may award costs in the defendant’s favour, i.e. you might be required to pay the defendant’s legal costs. The same considerations above would apply.
Therefore, before commencing proceedings in the Local Court, it is always necessary to consider the legal costs consequences, particularly in circumstances where legal costs can exceed the amount of the claim. Even if you are successful, you will not recover the whole amount of your legal costs.
LegalVision has dispute lawyers who can advise you in relation to cost consequences before commencing proceedings in court. We can also advise you on alternative dispute resolution to attempt to come to some commercial arrangement rather than commencing costly proceedings in court. Give us a call on 1300 44 755 to take advantage of your free legal health check.
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