Cost Assessment Process – Legal Fees

What is cost assessment?

As a general rule, civil litigation in Queensland is a “costs jurisdiction” in which “costs follow the event” – meaning that an unsuccessful party pays the legal costs of the successful party.  Each party to civil litigation risks having to pay its own legal costs, plus the legal costs of another party, if that other party is successful.  Attempting to avoid paying at least two sets of legal fees, is major factor that encourages litigants to act reasonably (because if they don’t, and the court intervenes, then the unreasonable party might be ordered to pay the legal costs of those parties who do act reasonably).

Unlike civil litigation, there are also non-costs jurisdictions. Examples of this include:

• Criminal law;
• Family law;
• Administrative appeals; and
• Fair Work Commission.

As a general rule, the courts make one of the following four orders relating to costs:

• An unsuccessful party pays the costs of the successful party, either on a standard basis or on an indemnity basis, as assessed or as agreed;

• Costs are costs in the cause.  This means that the costs of individual steps throughout the proceeding, are paid by the party who is, at the end of the proceeding, eventually found to be unsuccessful;

• Costs reserved.  This means the party who pays costs in relation to a specific event, is a question that will be determined at a later point, normally when more information is known about the surrounding circumstances that contributed to the specific event for which costs are reserved; and

• No order as to costs.

When awarding costs, the court provides a reference to how those costs are calculated, being according to one of two methods, namely costs on a standard basis, or costs on an indemnity basis.

An order for standard costs is significantly more common that an order for indemnity costs.  Standard costs are calculated by reference to the scale of costs that is prescribed for two relevant jurisdictions, being disputes in the Magistrates Court of Queensland (on the one hand) and disputes in the District Court of Queensland or the Supreme Court of Queensland (on the other).  Standard costs, are calculated by prices fixed by the Court for all steps necessary or proper for the attainment of justice or for enforcing or defending the rights of a party whose costs are being assessed.

Speaking very generally, under the standard costs in the Magistrates Court of Queensland, a solicitor’s hourly rate is $258.00 plus GST, whereas in the District or Supreme Court, it’s $322.40 plus GST.  As a general rule, legal costs calculated on the standard basis, equal between 40% to 70% of the fees that a party was charged by its lawyers.  On this basis, even if a party wins, the difference between what the winning party pays its lawyers, and the standard fees that a losing party is ordered to pay, means the successful party is out of pocket at least 30% of what its paid its lawyers.

If a party gets the benefit of an indemnity costs order, then a losing party will be ordered to pay most, if not all of the winning party’s costs.  Instances of the court ordering a party to pay indemnity costs are rare, but include:

• “The making of allegations of fraud knowing then to be false and the making of irrelevant allegations of fraud.”- Gummow J, Thors v Weekes (1989) 92 ALR 131 at 152;

• Where “evidence of particular misconduct that causes loss of time to the Court and to other parties”- French J, Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd [1991] FCA 225;

• “Where proceedings were commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law”- Woodward J, Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd & Ors [1988] FCA 364.

• “The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions” – Davies J, Ragata Developments Pty Limited v Westpac Banking Corporation [1993] FCA 115; and

• “An imprudent refusal of an offer to compromise”- Maitland Hospital v Fisher (No. 2) (1992) 27 NSWLR 721 at 724.

(These were all found in- Colgate Palmolive Co and Another v Cussons Pty Ltd (1993) 118 ALR 248.)

Further instances include,

• A party striking out the pleadings of another party.  In this instance, the court can choose whether to award indemnity costs; and

• A plaintiff who has previously offered to settle for less money than what was eventually awarded at trial.  In this instance, then the court must order any losing party to pay the indemnity costs of the winner.

The table below summarises some of the standard cost prices (Magistrates on the left) and (District and Supreme on the right) that are fixed by the Court:

Standard costs, for a two-day trial in the Magistrates Court of Queensland, with a barrister, and with at least one appearance at court before the trial:

• range between about $6,000.00 and $8,000.00, for claims between $2,501.00 and $5,000.00.  This means that, almost invariably, the legal costs associated with carrying a matter to trial, exceed the amount that is sought to be recovered at trial; and

• range between about $12,000.00 and $15,000.00, for claims between $20,001.00 and $50,000.00.  This means that the legal costs associated with the trial, are a significant portion of the amount that is sought to be recovered at trial.

Generally speaking, litigants should budget for the following amounts for legal fees for the following steps associated with litigation

$2,000.00 to $3,000.00 : Initial advice, including review of documents, development of basic chronology, and written advice on current position

$5,000.00 to $10,000.00: Comprehensive initial advice, including written opinion from a Junior barrister, detailing the nature and amounts of any claim, strengths, risks, costs, and timing

$6,000.00: Commencing court proceedings for an amount under $150,000.00

$10,000.00 to $15,000.00: Commencing court proceedings for an amount between $150,000.00 and $750,000.00

$10,000.00 to $20,000.00: Commencing court proceedings for an amount greater than $750,000.00.

$25,000.00 to $60,000.00: One day trial for an amount under $150,000.00

$70,000.00 to $150,000.00: Two day trial for an amount between $150,000.00 and $750,000.00

$120,000.00 to $250,000.00: Two day trial for an amount greater than $750,000.00

In litigation, the successful party may seek a costs order from the court. In Queensland, cost orders are governed by the Uniform Civil Procedure Rules 1999 (UCPR).

Once the costs order is ordered by the court, it will cover the following (at the discretion of the court):

• The unsuccessful party to pay the legal fees of the other party either on
  • standard

or

• indemnity basis

(see below)

•  The costs can be awarded at any stage of the litigation proceedings or after the proceeding is finalised.

• The costs can be awarded in relation to the whole or a particular part of the proceeding. 

How are costs awarded?

Under Rule 687 of the UCPR, the court may order of payment of:

• an amount of costs to be assessed;
• a specified part or percentage of assessed costs;
• assessed costs to or from a specified stage of the proceedings;
• an amount for costs fixed by the court; or
• an amount for costs to be decided in the way the court directs

Assessment of costs

There are two types of assessments when determining costs:

Standard basis of assessment

Unless otherwise directed, courts normally assess costs in regard to a standard basis. Standard costs include ‘all costs necessary or proper for the attainment of justice or for enforcing or defending the rights of a party whose costs are being assessed’ (UCPR, Rule 702).

Indemnity basis of assessment

Indemnity costs are governed by Rule 703 of the UPCR. When courts assess costs based on an indemnity basis, it allows for all the costs reasonably incurred and of a reasonable amount. Of which include,

• The scale of fees prescribed by the court;
• Any costs agreed between the party and its solicitor of which is payable;
• Charges which are ordinarily payable by the clients to solicitors for work.

When will the courts award indemnity costs?

It is up to the discretion of the courts to award costs based on an indemnity claim. Costs are commonly awarded if the court finds that the court proceeding had no legal basis. If costs are awarded to a successful party on an indemnity basis, then the unsuccessful party may be required to pay up to 90-95% of fees and costs incurred by the successful party.

Applying for a cost assessment

When applying for a cost assessment a cost assessor may be appointed to come and review the costs and decides whether;

• It was reasonable for the lawyer to conduct out the work relating to the legal proceeding;
• Whether the work was carried out in a reasonable way;
• Relevant costs agreements.

Once the cost assessor is satisfied or makes any necessary changes to the cost assessment, a certificate of assessment will be filed with the registry within 14 days.

Scale of costs