Abraham, Romaine --- "Costs column: Party and party costs: Maximising an award" [2022] PrecedentAULA 11; (2022) 168 Precedent 44

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PARTY AND PARTY COSTS

MAXIMISING AN AWARD

By Romaine Abraham

‘Party and party costs’ are legal costs which are payable by a party or parties to another, either:

(a) as ordered by a court or tribunal;

(b) by operation of the rules of a court;^[1] or

(c) by the agreement of the parties.

A costs order can be made at various stages throughout or, more commonly, at the conclusion of proceedings. Generally speaking, where a court has the power to award costs, that power is significant and the court will have a broad discretion to make a costs order at any stage, on any basis and against any person, in connection to any part of a proceeding before the court.^[2]

Where the parties agree that one party will pay another party’s legal costs and disbursements in non-litigious matters or proceedings that resolve by agreement, this may form part of the terms of settlement.

In certain jurisdictions, ordered inter partes costs must be calculated and claimed pursuant to the relevant court scale of costs. For example, in Victoria the Supreme Court Rules enshrine a scale-based approach to calculating and assessing litigious costs for proceedings conducted in the Supreme Court of Victoria. In NSW, ordered costs for matters conducted in the Supreme Court of NSW are calculated in accordance with the receiving party’s costs agreement with their solicitor.

THE GENERAL RULE

In most civil litigation conducted in Australia, the general rule is that costs ‘follow the event’: the successful party’s legal costs are indemnified by the unsuccessful party.^[3]

THE INDEMNITY PRINCIPLE

It is important to note that a successful litigant who is awarded a costs order in their favour cannot recover party and party costs that exceed what their solicitor will ultimately charge. The award of an inter partes costs order is only a partial indemnification of the recipient’s liability for their solicitor’s professional costs and expenses of the proceeding or litigation.^[4]

REDUCING THE GAP IN COSTS

However, there are steps that can be taken to reduce the gap between your client’s solicitor and client costs and the amount quantified in accordance with their inter partes costs entitlement. These steps include the following.

Accurate time recording

Most scales of costs, while structured on an individual activity basis, make allowance for timed attendances such as conferences and telephone calls. The various scales of costs applied in the Supreme Court of Victoria and the Federal Court of Australia allow for most timed attendances in units of 6 minutes. The scale of costs applied in the Supreme Court of Queensland allows timed attendances by the quarter-hour. The scale of costs utilised in the Federal Circuit and Family Court of Australia allows a set rate per hour, commonly broken down to 1-minute units, for timed attendances.

The file notes should record the differing units of time set out in the various scales of costs, the duration of attendance in time, or the start and end time of the attendance, not just the units of attendance (for example, 41 minutes rather than 7 units).

As the various scales of costs allocate different charges for the different types of fee earner, it is also important to record each person present for the attendance. The file note should also set out as much detail as possible on the purpose and substance of the attendance, for example on how the attendance progressed the matter, to justify the allowance of such a claim should the matter proceed to a taxation or assessment of costs.

Delegation of work

Where appropriate, effective delegation under proper supervision can be an effective way to ensure actual costs incurred are as close as possible to fully recovered in the event an order for costs is made, particularly where inter partes costs must be claimed pursuant to a scale of costs. Some scales of costs, including the scale of costs set out by the Federal Court of Australia,^[5] even make specific provision for the delegation and supervision of work in certain circumstances. However, other jurisdictions generally do not allow for attendances considered supervisory in nature, such as internal conferences where delegated work is discussed by multiple fee earners assigned to a matter, on the ordinary or standard basis – the most common basis for party and party costs orders.

Briefing counsel

Finally, it may be prudent to retain counsel to advise and appear at any costs hearing where orders as to costs will be determined, or to advise in the preparation of submissions requesting specific costs orders. This will ensure your client obtains the most favourable costs order in the specific circumstances of the proceeding.

Reviewing costs orders

If any adverse costs orders have been made in the course of the matter, these should be reviewed prior to the conclusive costs order being made, as final orders can be made to either confirm or supersede earlier costs orders.

Romaine Abraham is a costs lawyer based in Melbourne, Victoria.

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^[1] See for example Supreme Court (General Civil Procedure) Rules 2015 (Vic), r63.15.

^[2] See for example Federal Court of Australia Act 1976 (Cth), s43.

^[3] See Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11, [67].

^[4] Shaw v Yarranova Pty Ltd [2011] VSCA 55.

^[5] Federal Court Rules 2011 (Cth), sch 3, item 4.