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Claims for a monetary value below $100K are heard in the NSW Local Court. Any claims for a monetary value below $20K are heard in the Small Claims Division of the Local Court. 

If your case has proceeded to a hearing in the local court, at the end of the hearing, the court can hear arguments in relation to costs. The general position is that the court will award the successful party their costs. If you are entitled to claim your costs from another party,  you should be ready to provide the court with a summary of the fair and reasonable costs that you seek. The court can fix a specific amount in respect of costs or order that costs be ‘as agreed or assessed’. 

If you commenced a claim in the Local Court and it has gone undefended, you can claim some legal costs. This article will further explain how to claim your legal costs in the Local Court. 

Claiming Costs in the NSW Local Court

If you are successful in your Local Court claim, you may be entitled to a costs order in your favour. A costs order aims to compensate the successful party, not to punish the person against whom the order is made. However, it is important to note that this does not automatically entitle you to recover all of your costs. If proceedings are abandoned, discontinued or settled (and the parties are unable to agree on costs), different principles are applied by the court in determining costs.

Before commencing any proceedings you should be aware it is very rare to have your full legal costs reimbursed.

What is a Costs Order? 

A costs order is an order made following a judgment about who should pay the legal costs of the proceedings (or parts of the proceedings). Generally, the successful party will be awarded part of their legal costs to be paid by the unsuccessful party. Even if you are successful you will not recover 100% of your costs.

In some instances for certain claims, the amount of costs that are recoverable will be capped to a certain point. Having a costs order in your favour will entitle you to seek some reimbursement from another party. This often goes towards the service fees and costs you have to pay to your solicitor. 

How Does a Costs Order Work? 

The court can decide the amount of costs that are payable by the unsuccessful party. The court can award costs for different reasons including:

Ordinary Basis 

This is also known as party/party costs. This is the usual process for awarding costs. Generally, you should expect to recover around 70% of your costs on a party/party basis if you are the successful party.

Indemnity Basis

This is less common. A party seeking indemnity costs must show the court that there are sufficient or unusual circumstances for it to be granted. A common reason is the failure to accept a reasonable offer of compromise earlier in the proceedings. For example, if you had given the defendant a reasonable offer to settle early on and they did not accept it. Then they could be punished through indemnity costs for not taking the reasonable offer to avoid a trial. 

What is a Costs Assessment?

If the court has ordered that costs are to be agreed or assessed, and an agreement cannot be reached, the next step is for a costs assessment. An independnt costs assessor will review the costs you have incurred. They will then make a determination in relation to a reasonable amount that the other party should reimburse you for. 

In summary, this process includes:

  1. preparing an application for the assessment of costs;
  2. providing the application to the judgement debtor allowing them 21 days to provide objections, or otherwise resolve the matter; and
  3. filing the application for the assessment of costs with the Supreme Court who will appoint an independent costs assessor to determine the application. 

The next steps are:

  1. Both parties provide the cost assessor with any additional information required; and
  2. The costs assessor will then make a determination on this basis as to the costs to be paid. 

Once a determination has been made, the costs of the costs assessor will need to be paid. This must occur before the certificates will be released by the court.

Who will pay the costs of the costs assessor will also be a matter to determine by the costs assessor and they may have regard to the whether or not one of the parties was unreasonable in any prior negotiations on costs. 

If the costs assessors certificate is issued, and payment is not received in accordance with the certificate. Then the certificate will be registered with the court as a judgment and become enforceable.

Claiming Costs in NSW Local Court: Small Claims Division

Due to the low monetary value of claims in the Small Claims Division of the Local Court there is a cap on the amount of costs you may be entitled to claim. The maximum amount of costs can vary depending on:

  • the total amount of the claim that the lawyer assisted with; and
  • how the proceedings ended.

The proceedings may end without a judge handing down a judgment after the hearing. In that case, the maximum amount of legal costs you could recover is $729.60. Alternatively, proceedings may end with a judge handing down a judgment after a hearing. Then the maximum amount of legal costs you could recover is $1,259.20. 

If either party does not accept a genuine offer to settle a dispute and the refusal was unreasonable, then the court can increase the maximum amount of legal costs for giving a judgment after a hearing by 25%. 

What if My Claim is Undefended, Can I Still Claim Legal Costs? 

If your claim is undefended, meaning you have filed a statement of claim and no defence was filed in reply within 28 days, you can still claim your legal costs through a default judgement. There is a limit to the amount of costs you can recover for an undefended claim, prescribed by law. For example, the amount of costs you can recover for all the legal work up until filing the statement of claim is $630.

Key Takeaways

If you wish to proceed to a hearing for a Local Court claim, it is good to understand that you will not be able to recover much of your legal costs, even if you are ultimately successful. 

The best way to ensure that you get the fairest outcome is by engaging a solicitor to represent you, or at least provide you with advice about the process. For more information regarding legal costs, contact LegalVision’s litigation lawyers on 1300 544 755 or fill out the form on this page.

Frequently Asked Questions

What is a cost order?

Costs orders are orders made by a judge about who should pay the legal costs of the proceedings. Generally, the successful party will be awarded part of their legal costs and the unsuccessful party will need to pay. 

What is a cost assessment?

A cost assessment involves and independent cost assessor reviewing the costs that you have incurred. They will then decide a reasonable amount that the other party should pay you as reimbursement. 

Can I claim legal costs for an undefended claim?

Yes, if you have filed a statement of claim and no defence was filed in response (within 28 days), you can still claim your legal costs. However, the amount of costs you can recover for an undefended claim is limited. 

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