On 30 November 2023, the Supreme Court’s Council of Judges endorsed (in principle) the replacement of the ‘Scale of Costs’ with a time-based costing regime for the purposes of assessing party/party costs recovery in Victoria.

The significant changes mark a new era for the costing of Supreme Court and County Court claims, and bring Victoria more in line with the position in New South Wales.

The changes are slated to take effect from 1 January 2025. We summarise the key changes as follows.

1 | Where the party entitled to costs has been charged on an hourly basis:

Different maximum hourly limits will apply based on a legal practitioner’s level of post-admission experience. Under the draft new Scale, the hourly rate is to be applied to six-minute units.

The new hourly rates that have been proposed are:

  1. Time spent by a legal practitioner requiring legal skill or knowledge of:
    • 10 or more years post admission experience (PAE) – a reasonable amount up to $900 per hour.
    • Between 5 and 9 years PAE – a reasonable amount up to $650 per hour.
    • less than 5 years PAE – a reasonable amount up to $450 per hour.
  2. Time spent by an employee (including a law graduate) who is not a legal practitioner and is:
    • exercising legal skill or knowledge – a reasonable amount up to $390 per hour.
    • doing work not requiring legal skill or knowledge and capable of performance by a clerk – a reasonable amount up to $290 per hour.
    • exercising professional skills and expertise complementing or supporting the delivery of legal services– a reasonable amount per hour (in accordance with section 2 below).

The above rates are currently exclusive of GST. However, further consultation will be undertaken as to whether an individual litigant, not entitled to an input tax credit, can recover the GST component of the costs paid for the provision of legal services from the unsuccessful party to the litigation.

2 | Determining a “reasonable amount” based on hourly rates

In determining the reasonableness of the hourly rates claimed by a successful party (including whether to allow a rate in excess of the maximum limits), a broader range of factors will need to be considered by the relevant assessor.

The additional factors will be incorporated into an amended Rule 63.48 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (Rules) and will include the following:

  1. the responsibility involved, including delegation to and supervision of legal practitioners;
  2. the time and labour expended by the legal practitioner; and
  3. extent to which the legal practitioner appears as Counsel.

3 | Where the party entitled to costs has not been charged by the hour (i.e. fixed fee)

Where the party entitled to costs has not been charged by their law firm on an hourly rate, a reasonable amount will be allowed having regard to the factors in the proposed amended Rule 63.48 of the Rules (discussed above).

Further consultation

Relevantly, it should be noted that further consultation is currently being undertaken in respect of the following matters:

  1. Whether an individual who is not entitled to an input tax credit can recover the GST components of their legal costs from the unsuccessful party (as discussed above);
  2. Whether, given the advances in technology, it is preferable that costs under the Scale be calculated based on ‘actual time spent’, rather than six minute units. A further recommendation will be made to the Council of Judges once consultation has been completed with LIV and other stakeholders as to the suitable timing of a sunset provision in respect of six minute units; and
  3. Whether the Costs Court should have the power to award costs above the maximum proposed hourly rates, including Counsel’s fees.

Key takeaway

The key takeaway is that the Supreme and County Courts of Victoria will soon have the power to award costs which better reflect the actual costs incurred by a successful party.

This is likely to increase a party’s exposure to adverse costs orders and therefore encourage greater compromises during settlement negotiations if there are any perceived weaknesses in their claims.

The changes will also impact how law firms advise their clients in relation to the risks of litigation and the conduct of settlement negotiations. Law firms may also wish to review their standard form letters (including engagement letters) in light of the new ‘reasonable’ hourly rates endorsed by the Council of Judges.