One of the biggest risks of any court proceeding is that you might need to pay the other side’s costs if you lose. On the upside, if you win, the court will likely order that the other side pay your legal costs. But if you do not win, you might:

  • lose any damages or money you originally sought; and
  • receive a costs order to pay the other side’s costs. 

This article sets out what happens after a court gives a judgment and decides which party should pay costs, including the steps to take if you’re on the winning or losing side. 

Costs: What Happens After Judgment?

The process to determine costs can be a time-consuming and complex part of any legal proceedings. Courts can make costs orders at various points during court proceedings, such as after a directions hearing. However, courts will make the most important order for legal costs after the trial, when the court: 

  • issues its judgment; and 
  • determines which party is successful. 

Types of Legal Costs Orders 

The most common order for legal costs requires the unsuccessful party to pay the other side’s costs. This is known as an order that ‘costs follow the event’.

However, courts can choose to decide what costs to order. Its decision will rely on both the: 

  • final judgment; and 
  • parties’ conduct during the court proceedings. 

For example, if you have made genuine and reasonable attempts to reach a settlement with the other side, the court may reward you by ordering the losing party to pay a higher proportion of your legal costs. This is known as ‘indemnity costs’. Similarly, where a court finds that both parties are to blame in a dispute, the court may split costs orders according to each side’s degree of fault.

Courts do not usually refer to a specific amount of costs. Rather they refer only to the ‘costs’ of a party. Sometimes this is referred to costs ‘as agreed or assessed’, which means the amount of costs is either: 

  • that agreed between the parties; or 
  • the amount determined by a formal cost assessment. 

Arguments About Legal Costs

Courts will usually make a costs order when delivering their judgment. If you do not agree with the order that they make, you will have a period of time within which to apply for a variation of that order.

In NSW, for example, parties have 14 days to apply for a variation of that order. 

In some cases, the judge or magistrate may first ask you to make your own arguments or submissions regarding costs. This may be the case where you have: 

  • made settlement offers; and 
  • believe you should be awarded the higher’ indemnity costs’. 

Or, it may be appropriate where certain events throughout the proceedings might affect the final costs decision, such as one party causing substantial delay. 

If You Win

If you are successful in a hearing and the court orders that the other side pay your costs, you still have to take several steps before you receive the money. Unfortunately, it can be a difficult process to get the other side to pay, particularly if the other party is in some financial difficulty. 

If you receive a costs order in your favour, these are the steps to follow: 

1. Negotiate the Amount of Legal Costs

The first step is to: 

  • write to the other side;
  • refer to the court’s cost order;
  • provide them with your costs, including a breakdown; and 
  • request payment by a certain date.

If the other party can not pay, you may consider agreeing to a payment plan or other arrangement. If you can not reach an agreement with the other side on the amount of your costs, then you can have your costs assessed by an independent cost assessor. 

2. Ask For the Costs to be Assessed

You must carry out the cost assessment process at your own cost. It will generally take several months, depending on the volume of costs to be assessed.

Your solicitor can assist with this process and engage a specialist cost consultant if required. The assessment will result in a determination of the fair and reasonable amount of costs that the other should pay. You can then enforce this determination as a judgment or court order that the other party must pay. 

3. Enforce the Costs Order

If the other party has not paid the costs within the deadline you provide, then you are entitled to take other legal steps to obtain payment of that amount. That may include: 

  • issuing a garnishee order of their wages or bank account; or 
  • having the sheriff seize their property.

A garnishee order is an enforcement mechanism that allows you to forcibly recover the debt owed to you from the other party’s wages or bank account.

You may also be able to issue a bankruptcy notice against an individual or take steps to wind up a company. Unfortunately, these enforcement steps will require extra time and money.

If You Lose

If you are not successful in a hearing, the court will likely order that you pay the other side’s costs. As set out above, the parties need to either agree on the costs or have the costs assessed.  

If a court orders you to pay the other party’s costs, follow these steps:  

1. Negotiate the Amount of Legal Costs

If you do not agree that the other side’s costs as notified are reasonable, you are entitled to object. Your solicitor and barrister will be able to advise on whether the costs are within a fair and reasonable range. You should also ask the other side to provide a breakdown of the costs so that you can properly assess whether they are reasonable.  

2. Ask for the Costs to be Assessed

If you still can not agree on the amount of costs, ask the other side to have their costs assessed. This is a better option for you, as independent assessment often results in a reduction in the original costs claimed by the winning party.  

3. Pay the Costs Order

Once the other party has assessed the costs, you should take steps to pay that amount as soon as possible. If you do not pay within any deadlines given:

  • the other side may enforce the cost assessment determination as a judgment; and 
  • this judgment may affect your ability to obtain credit. 

Be aware that if you fail to pay the costs, the other side may take steps to enforce the judgment. This could include:

  • a bankruptcy notice against you personally if the judgment is in your name; or 
  • steps to wind up your company if the proceedings were in your company’s name. 

Key Takeaways

The process of dealing with costs orders is complex. Whether you win or lose the hearing, there are no guarantees about: 

  • what type of costs orders the court will make; or 
  • whether a party will pay those costs within any deadline, or at all. 

It is essential to understand the options available to you after a hearing to: 

  • negotiate these costs;
  • have them assessed; or 
  • otherwise ensure any costs orders owed to you are paid.

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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