I am in the right; will the other side have to pay all of my legal costs?
The general rule is that the successful party will have its costs paid by the unsuccessful party. In addition, the unsuccessful party will bear their own costs.
That sounds great; but it still doesn’t mean you will get all of your costs. The usual order is for costs on a standard basis (since 1 April 2013). The rule of thumb is that you can expect to receive around 65% of the costs you have actually incurred through the process of taxation, where costs are taxed on a standard basis. ‘Taxation’ is the technical term for the court’s process of assessing how much the unsuccessful party is to pay and is measured against the relevant Court’s ‘scale’ of permitted costs.
You are about to say: “But why should I be left out of pocket? The other side was in the wrong, the court said so!” The law makers that set the relevant ‘scale’ for each court continue to set it at well below market rates for a senior lawyer. Whether this is an attempt at finding an ‘average’ of those doing the work, or by design to encourage pre-trial settlement, litigants must accept it as a reality. The rationale is that a case is more likely to settle if both parties know they will be left out of pocket should the matter proceed, even if they go on to win their case or successfully defend the case against them. In this way, parties are encouraged to settle their dispute prior to trial (e.g. see Ugly Tribe v Sikola (2001) VSC 189 at para 10).
To maximise your recovery of costs, what you need to have is an order that the other side is to pay your costs on an indemnity basis. Indemnity costs should cover you for virtually all of the costs that you have incurred since issuing the court proceeding. A court will only make an order for indemnity costs in certain circumstances; for example, where a litigant commences proceedings, or an application within a proceeding, with a wilful disregard for known facts or clearly established law.
The most certain way to obtain an order for indemnity costs is to make an offer of compromise in accordance with the court rules, or what is known as a Calderbank letter. Calderbank letters are sufficiently complex to require their own article. If your matter is a simple question of how much money is owing, then an offer of compromise pursuant to the court’s rules is simpler. If you make an offer of compromise and it is rejected by the other side, you will be entitled to a more favourable costs assessment from 11:00am, two business days after the offer is made if the determination of the court is more favourable to you than the offer you made. The rationale behind these courts rules is to reward litigants who make offers to settle, and to punish litigants that cause unnecessary costs to be incurred by rejecting reasonable offers. Accordingly, it pays to make an early offer; even if you think the other side will not accept it.
The litigation lawyers at DSA Law know how to win cases and how to maximise your recoverable costs. Allow us to advise you about what strategies can be employed in your specific matter to get you the best possible outcome.
This information is limited to Victorian and Federal Courts, not tribunals for the Family Court.
For more information, contact us today on 03 8595 9580
Written by Jonathan Hancock, Associate and Ben Franklin, Senior Associate at DSA Law.