Blog authored by Tim Cullenward (Email: firstname.lastname@example.org )
Usually if you are involved in a dispute that cannot be resolved amicably, it will end up in the Local or District Court. If you find yourself in the position
where you need to commence legal proceedings against someone (or if you are being sued yourself), then you should consider the consequences before
it goes too far.
Generally, a Magistrate or Judge will order the losing party to pay the victor's legal costs. There are many variables to this and not every Court practises such measures, but it is generally accepted practice in the NSW Local and District Courts that "costs follow the event".
One major issue to consider before embarking on any litigation is whether the proposed defendant has any funds or assets in which to meet any costs orders against them, as well as the judgment. If they don't have any assets or funds, then there will be nothing to pay your costs if you are successful. This means that whilst you may have "won", you have lost more money than what you started with, depending on what legal costs you incurred along the way.
Local Court Division and Costs
Ordinary, if you want to commence any litigation you should speak to a solicitor. Many solicitors have an initial conference fee or similar and will disclose their fees once they have a full grasp of what your matter is about. These fees can be substantial, depending on the matter and the issues at hand, and also upon the amount of evidence and complexity of the case.
If, however, you commence civil proceedings yourself without the assistance of a lawyer, then you should consider what division you should file your Statement of Claim in. This will determine what costs you can obtain from your opponent if you are successful (and also tell you what costs orders you might be exposed to if you lose the litigation).
For instance, if you commenced legal proceedings as the Plaintiff in the General Division of the Local Court, then you may be subject to a maximum costs order limiting the amount of legal costs awarded in your favour (where the defendant would have to pay your legal costs). The Local Court hears civil cases for matters up to $100,000, with matters less than $20,000 in the Small Claims Division.
General Division Costs Orders
If you have commenced legal proceedings in the General Division of the Local Court, and you were successful, then the Court would usually direct that "costs follow the event." This means that the Defendant would have to pay your legal fees. However, the Court will usually award costs on an "ordinary basis". This means that the most you could expect to receive would be around (roughly) 70% of your legal costs upon costs assessment. These are commonly referred to as "party/party" costs. A costs assessment takes place in matters for more than $20,000 where a costs assessor carries out a review of the legal costs sought by a party to determine the amount to be paid.
If you wanted to seek your full costs i.e. 100%, then you would need to make an application for indemnity costs. These are commonly referred to as "solicitor/client costs". To obtain such a costs order you would need to provide evidence to the court as to why you should obtain such an order. For claims above $20,000, this can be done if an offer of settlement was made during the proceedings and the judgment in your favour was for more than what you offered. Such offers are usually called "Offers of Compromise" or "Calderbank Offers". A further blog on these matters will be published later.
Small Claims Costs Orders
In proceedings in the Small Claims Division of the Local Court (claims less than $20,000), the maximum legal costs awarded would depend on the amount of the claim. There are limits and the amount of costs can vary depending on whether a lawyer helped you (and to what degree), and how the proceedings were finalised. For instance, if you received assistance from a lawyer and the proceedings ended with the court giving a judgment after a hearing, the maximum amount of legal costs that can be awarded are between $252.00 and $1,259.29.
If either party makes a genuine offer to resolve the matter, and the offer was rejected or ignored, and the refusal was not reasonable, the court can increase the maximum amount of legal costs for giving a judgment after a hearing by 25%.
If the Claim is for between $10,000 and $20,000, the maximum costs that you could be awarded would be 25% of the amount awarded by the Local Court in respect of the claim, plus any amount that might be allowed in relation to costs incurred up to the filing of the first defence in the proceedings. For example, if you commenced proceedings for a claim of $15,000 in the Local Court, and the court awarded you the full amount of $15,000, the most you could be awarded in legal costs would be $3,750 (25%). This is despite any additional costs you may have incurred up to this point.
If you wanted to vary the maximum costs order, you would need to provide evidence to the court explaining why the maximum costs order should be varied considering the complexity and subject matter of the proceedings.
Remember, if you are unsuccessful in the proceedings, the Local Court may award costs in the defendant’s favour, i.e. you might be required to pay the defendant’s legal costs and the same considerations above would apply.
Before commencing proceedings in the Local Court, it is always necessary to consider the legal costs consequences, particularly in circumstances where legal costs can exceed the amount of the claim. Even if you are successful, you will not recover the whole amount of your legal costs. For more information, please contact our office on 02 6882 3133 for an appointment.