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The Game of Costs

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Costs can quickly escalate in litigation, often exceeding the amount of the claim and becoming one of the most important factors in a case.

Clients and legal practitioners can underestimate costs. Yes, lawyers are costly, but they should provide value for money – check our article on getting value from your lawyer. And your lawyers should be able to recover much of the costs incurred from the other party should the Court find the matter in your favour.

The topic of costs is broad. Let’s look at the issue of costs in the Supreme Court of Victoria.

Recent changes: costs in the Supreme Court of Victoria

Prior to 1 April 2013, costs in the Supreme Court were generally awarded on a ‘party and party basis’. Upon application and if the circumstances warranted, the Court could award costs on a ‘solicitor and client basis’ or ‘indemnity basis’.

From 1 April 2013, the Victorian Supreme Court’s Rules in relation to costs changed. The general award is for costs on a ‘solicitor and client basis’, now referred to as the ‘standard basis’. The ‘indemnity basis’ remains available upon application to the Court at the Court’s discretion. A solicitor’s time on the standard basis can now be claimed in six-minute units at a rate of $360 plus GST per hour. There has also been a substantial increase in the claimable fees for both senior and junior counsel.

How does this affect you?

You should now be able to recover more of your costs from the other party if you are successful. Assuming that your lawyer spent reasonable amounts of time handling your matter, those costs should be recoverable. Similarly, the costs you pay to your counsel should primarily be recoverable unless they are disproportionate to the complexity of the matter.

1. Amendment to pleadings – Prior to 1 April 2013, an automatic cost penalty was imposed on a party who amended a pleading. This has changed – the party who gets the final costs orders will be awarded these costs. If a party wishes to recover their costs from the amendment, they will need to seek a specific order from the Court.

2. Costs on interlocutory applications – Where an order is silent as to costs, the costs on that interlocutory proceeding will now be “costs in the proceeding” regardless of whether the application was eventually determined. If you were able to obtain specific orders as to costs, these costs generally will not be taxed, and therefore not recoverable, until the end of the proceeding. This is to prevent multiple proceedings for recovery of the costs of each party, thereby exhausting the financial resources of the parties. However, there are circumstances in which the Court will allow the costs to be taxed – the Court will need to consider the various factors and exercise its discretion.

3. Reserved costs – Reserved costs will now be costs of the proceedings unless the Court otherwise orders. If you have lost your case or have been given negative prospects, you should consider the orders that have already been made in the proceeding and seek advice from your solicitors.

4. Claims in the wrong court – Some courts have restrictions in relation to the amounts you can claim from those jurisdictions. The recent changes to the Rules mean there is a penalty if you bring an action in the Supreme Court that should have been brought in the County Court. You will only be allowed costs in accordance with the County Court scale and you will have to pay the losing party the increase in their costs incurred as a result of the proceedings being commenced in the wrong court.

This has serious repercussions – we’ll look at this in future articles.

Please contact us if you have any questions arising from an article in this newsletter. We will be happy to discuss other aspects of costs should you need advice.