The following is guide to explain legal costs and what you could expect to recover from a defendant when making a claim.
These include professional fees for work done by your solicitor together with disbursements. Disbursements are the expenses incurred by the legal firm in pursuing your claim. These may include report fees, investigations, court filing fees, photocopying, expert fees, barrister’s fees etc.
These are the legal costs that are billed to you as the client in accordance with the Cost Agreement you have with the law firm.
Do I have to pay any costs if the other party is ordered to pay my costs?
Yes. The other party pays what is called “party/party costs” and the client pays the difference between those costs and the solicitor/client costs.
These are the legal costs payable by the defendant/the other party.
If a matter is litigated in Court, it is generally the “losing” party that will have to pay these costs by way of a partial reimbursement of legal costs incurred in a case.
These costs are generally less than the actual solicitor/client costs.
The amount of costs that the other party is to pay can be agreed between the parties or subject to a cost assessment before an independent Cost Assessor appointed by the Supreme Court of NSW. A cost assessment usually incurs further costs for the preparation of an itemised bill, written submissions and filing fees.
The cost assessment process can take several months and ends with the Cost Assessor making a determination of the amount of costs payable by a party.
Regulated Costs and capped costs
In some matters, restrictions apply as to how much of the legal costs that can be recovered.
In a public Liability claim for example, where the amount recovered in your claim is $100,000 or less, the maximum amount of professional costs which the other party has to pay by way of party/party costs, is 20% of the amount recovered or $10,000, whichever is the greater. This includes the barrister’s fees and solicitor’s fees but excludes disbursements.
Your Cost Agreement with you solicitor may stipulate however that the difference between those costs paid by the other party and your actual solicitor/client costs is to be deducted from your settlement/Judgement amount.
The Motor Accidents Compensation Regulation 2015 (MACR) fixes maximum legal costs for work done in a motor accidents claim.
There are fixed fees payable by the insurer depending on the stage of the claim when a matter is finalised and depending on the amount awarded. Again, your Cost Agreement may outline that you must pay the difference between those costs payable by the insurer and your actual solicitor/client costs.
For motor vehicle accident claims made on or after 1 November 2016 and before 1 December 2017, the legislation prohibits solicitors from contracting out of the regulated costs payable if the amount awarded/settlement amount is $50,000 or less. That is, if your claim resolves for an amount less than $50,000 you will only be charged the regulated costs. For claims made after 1 December 2017, regulated costs apply for a matter that is resolved for $75,000 or less.
When a matter is in the process of having settlement discussions, your solicitor will provide you with an estimate of the total legal costs so that you can properly consider any settlement amount that is offered and what it would result as a net sum in your hand after deduction of all costs.
What is an inclusive of costs offer?
This is an offer that is made in a claim that includes all solicitor/client costs.
The benefit of settling a claim on an inclusive of costs offer is that a client can determine how much is to be deducted from the offer including all legal costs and statutory deductions.
What is a plus costs offer?
This is an offer that is made to settle a claim for a lump sum amount (“$X”) plus payment of party/party costs which are to be agreed or assessed.
The difference between the amount of the solicitor/client costs and the costs paid by the other party are deducted from the lump sum amount of $X.
When a matter is settled on a “plus costs” basis, if the party/party costs are not agreed between the parties, then the matter is subjected to a cost assessment as outlined above.