This factsheet aims to provide an overview of the terminology, law and procedure in relation to costs orders. The rules governing costs orders in Queensland courts is the Uniform Civil Procedure Rules 1999 (UCPR), which were amended in 2007.
A costs order is where the court orders one party to pay the other party's legal costs. Costs orders
- can be awarded at any stage of the proceedings or after the proceeding ends;
- can be awarded in relation to the whole proceedings, a particular question or a particular part of the proceedings; and
- are at the discretion of the court.
However, a costs order will usually be made at the end of the proceedings and will "follow the event", unless the court orders otherwise. In other words, the unsuccessful party will generally be ordered to pay the costs of the successful party (Rule 681, UCPR).
This means if you are unsuccessful in court proceedings, you may be required to pay a portion of the successful party's legal fees.
The cost liability between parties to a court action is known as party and party costs. Party and party costs also used to refer to a type of costs assessment, to determine how much costs should be paid, now known as the standard basis of assessment. This is discussed in more detail below.
The cost liability between a client and their solicitor is known as solicitor and client costs, and is governed by the Legal Profession Act 2007 (Qld) since 1 July 2007, and before that by the Queensland Law Society Act 1952 (Qld) from 14 May 1998. This factsheet does not look at the liability of a client to pay their solicitor's costs, although detailed information is available on the Legal Services Commission website at: www.lsc.qld.gov.au/29.htm. Solicitor and client costs also used to refer to a type of costs assessment now known as the indemnity basis of assessment. This is discussed in more detail below.
Types of costs orders
The Court may order 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 (Rule 687, UCPR).
A court may order fixed costs where that will avoid undue delay and expense, but only if the court is confident that costs can be fixed on a reliable basis. Parties should at all times during the course of a hearing be in a position to inform the court of their realistic estimate of the amount of the recoverable costs, on a standard basis or indemnity basis (see below).
The court may also order that the amount of costs be agreed between the parties.
Assessment of costs
However, normally and unless otherwise specified, the quantum (amount) of costs are to be assessed. Assessment is carried out by an approved costs assessor who may be given certain powers including examining witnesses, directing or requiring a party to produce documents or giving directions about the conduct of the assessment process. The costs assessor's fees will be paid by the person who has been ordered to pay the costs of the proceedings.
There are two types of assessment - on a standard basis and on an indemnity basis. Even if costs are ordered on a fixed basis or are to be agreed, it is important to understand these methods of assessment to ensure that the costs fixed or agreed reflect the appropriate amount.
Standard basis of assessment
Unless otherwise specified, costs are assessed on a standard basis. This means the amount of costs to be paid are calculated by taking into account only those costs actually incurred by the party which were necessary or proper for the attainment of justice or for enforcement or defence of rights (Rule 702, UCPR). The costs assessor must apply the court's scales of costs for work done set out in the Uniform Civil Procedure Rules. These are task-based, not time-based (Rule 691, UCPR).
If the nature and importance, or the difficulty or urgency, of a proceeding and the justice of the case justify it, the court may allow an increase of not more than 30% of the lawyer's costs allowable on an assessment under the relevant scale of costs (Rule 691(5), UCPR).
As a result, standard costs only provide a partial indemnity (around 60-75%) against the contractual liability for solicitor's fees. If the solicitor has charged more for work done than that specified in the scale of costs, or if there is an additional amount to be paid to the solicitor under the retainer, then this will not be included in an assessment of costs on a standard basis.
Where legal work involves or may involve litigation, the retainer between the solicitor and client must provide an estimate on how much the client may recover from the other side if successful. Conversely, the retainer must include an estimate of costs the client may have to pay to the other party if unsuccessful.
Indemnity basis of assessment
If costs are awarded on an indemnity basis, then costs are calculated by taking into account all costs reasonably incurred and of a reasonable amount, having regard to:(a) The court's scale of fees(b) Any costs agreement between the party to whom the costs are payable and the party's solicitor; and(c) Charges ordinarily payable by a client to a solicitor for the work (Rule 703, UCPR).
The only ground for disallowing items of indemnity costs is if they are of an unreasonable amount or were unreasonably incurred.
Costs may be awarded on an indemnity basis where the court finds that the court proceeding had no legal basis. If the court awards costs to the successful party on an indemnity basis, the unsuccessful party may need to pay up to 90-95% of the fees and costs actually incurred by the successful party.
Under the new system in place since 2007, the basic process following an order for costs to be assessed is as follows:
1. Liability to pay costs arises, for example, a costs order. It is important to note that a liability to pay another party's costs does not only arise from an order as to costs. That liability may also arise as a result of legislation or rules or under an agreement to pay costs.
2. Claiming party serves their bill of costs, known as a costs statement (Form 60A).
3. The paying party then has 21 days within which to object to any items in the costs statement, by serving a Notice of Objection (Form 61)
4. A costs assessor is then appointed which can be by consent between the parties or, if consent cannot be reached, by the court registrar.
5. The costs assessor performs an assessment and issues a certificate of assessment, which will state how much the paying party must pay. The paying party may, within a certain timeframe, request a statement of reasons for the certificate of assessment.
6. The paying party may appeal the assessment to a court officer, which will normally be heard by a judge. If there is no appeal, then the certificate of assessment becomes final and the paying party is liable to pay that amount.
Obviously, things may happen so that the above process is not strictly followed. For example, if the paying party does not serve a Notice of Objection, then a default process is followed. Another example is where the parties come to an agreement to settle costs; different procedures apply depending on whether agreement was reached before or after a costs assessor had been appointed.
For more information about the assessment procedure, see the Queensland Courts website on www.courts.qld.gov.au/3298.htm
Seeking costs orders
It is up to you to ask the Court for an order that the other party pay your costs if you are successful. This request should be made in the court document which commences the action, also known as an "originating process".
You can only ask that the other party pay your costs if you have retained a lawyer to represent you. You cannot ask for a costs order if you are self-represented.
If you are successful in your court action, you will need to be prepared to make submissions on why you should be entitled to your costs and on what basis they should be assessed. The fact that you were successful in your case is often enough to persuade the court that you should be entitled to your costs (refer to Rule 681, UCPR). In addition, the court may increase fixed costs, order a higher percentage of standard costs or order indemnity costs if you can show that the other party has, for example, significantly delayed the matter, unreasonably rejected offers of settlement or otherwise acted unreasonably prior to or during the trial.
If the court orders costs in your favour then you will need to follow certain procedures as set out above such as serving a Form 60A costs statement. The time limit for enforcing a costs order is 6 years from the date of the order (Rule 799(1), UCPR), or up to 12 years with the leave (permission) of the Court (Rule 799(2), UCPR and section 10(4), Limitation of Actions Act 1974 (Qld)).
Resisting costs orders
If the other party succeeds and asks for their costs, you may need to make submissions on why you should not have to pay their costs or that any costs order should be minimal. Again, relevant issues will be the conduct of the other party, your own conduct and whether the action could have reasonably been settled at an earlier time.
If you are ordered to pay costs to be assessed, then you will have an opportunity to object to any cost items claimed by the other party. You can also make a written offer to pay a fixed amount in full and final settlement of the matter in order to avoid the delay and expense of having them assessed.
If you cannot pay a costs order made against you, it is worth advising the other side the reasons as to why you cannot pay and supplying evidence of this. You may be able to negotiate a suitable repayment plan or the other party may decide it is not worth pursuing recovery of their costs against you. However, if costs orders have been made against you, then the other party is entitled to commence enforcement proceedings to recover that money with interest within 6 years of the order, or otherwise with the leave of the court. This can lead to seizure and sale of your property, redirection of your earnings or the appointment of a receiver.
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This factsheet is for general information purposes only. Independent legal advice should be sought for thorough advice about your legal matter.
The Queensland Public Interest Law Clearing House Incorporated (QPILCH) is an independent, not-for-profit community based legal service that coordinates the provision of pro bono legal services for individuals and community groups. QPILCH also provides direct services for disadvantaged and marginalised Queenslanders.
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Last updated: 1 June 2009.