Litigation is costly and in many cases, prohibits parties enforcing their rights in court. If you do commence proceedings, you should understand the risk that if you lose, you could end up paying both your costs and the other side’s. The court can also make interim costs orders depending on what path your litigation may take.
As dispute lawyers, we need to keep our client’s informed about the costs they are incurring as well as options for an early commercial resolution of the dispute. During these discussions, you may hear your lawyer use unfamiliar terms around ‘costs’. For these reasons, we’ve put together a short glossary of the key terms and how they work in practice.
|Assessment of Costs||Either party can apply to have a third party determine the reasonable costs. This process is administrative and not through the court.|
|Costs Follow the Event||Rule 42 of the Uniform Civil Procedure Rules 2005 (NSW) contains the general rule that costs follow the event. In other words, a successful party has a ‘reasonable expectation’ that the court will award costs against the unsuccessful party.|
|Costs in the Cause||Instead of determining costs at the end of an interlocutory application a party makes during the substantive proceedings, the court can make a costs in the cause order. Consequently, the court deals with the costs of the application after the entire matter concludes and it can see the true merits of the application in context.|
|Costs Reserved||The court defers the decision around costs to deal with at a later stage.|
|Costs Thrown Away||If the court considers that a party who was not to blame has incurred ‘wasted’ costs, then it may award ‘costs thrown away’. For example, if Party B decides their pleadings are deficient and wants to amend them, then the court may order Party A’s costs thrown away because of the amendment.|
|Indemnity Costs||The court can award costs on an indemnity basis. A party must present the court with a ‘sufficient or unusual’ feature for it to grant indemnity costs, for example:
|No Order as to Costs||The court has made no order meaning each party bears their own costs.|
|Party/Party Costs||One party recovers costs from the other party in a dispute. A party can only enforce this if a court makes an order. These costs are separate from any other award of damages or any other orders regarding the payment of money. As a general rule, you should expect to recover 70-80% of your costs from the other side if the court awards party/party costs. The court usually expresses its award as ‘costs as agreed or assessed’. That is, the parties need to agree on a costs figure, and if they can’t then the matter should proceed to a costs assessment.|
|Solicitor/Client Costs||These are the costs your lawyer charges you. There will always be a difference between the solicitor/client costs and what you can recover in party/party costs.|
Parties should first determine with their lawyer whether they actually have a case. If so, they should turn their attention to the cost consequences of legal proceedings. There are many stages of litigation, each which attracts its own cost considerations and expenses.