Costs of legal proceedings

There are many factors to consider when determining whether to commence legal proceedings in a Court or Tribunal.  An important consideration is whether legal costs can be recovered from the other party in the event of a successful outcome.  This is determined based on the individual circumstances of each matter and involves an assessment of the history and status of the dispute, whether the proceedings are being heard within a Court or Tribunal as well as the conduct of the parties.

Costs before court proceedings are commenced

Before court proceedings are commenced, it is likely that the parties will incur legal costs in an attempt to resolve the dispute, including obtaining legal advice and corresponding with the other party.

Generally, and in the absence of any prior contractual arrangement, legal costs incurred prior to the commencement of proceedings are generally not recoverable.  Whilst the court has the discretion to decide whether to order such costs at the conclusion of a trial, there is no guarantee that this will occur.

Costs of court proceedings

The question of who will pay costs is generally determined at the conclusion of a trial after the court gives judgment.  Alternatively, if the matter is resolved during the course of proceedings, this may be determined at an earlier stage.

If the parties reach a settlement agreement, they will need to agree on the manner in which legal costs are dealt with.  This typically involves an assessment of the strength of each party’s position and ought to be considered with a commercial perspective.

If the matter proceeds to a final hearing, the court has the discretion to determine who pays costs and in what amount.  As a general rule, the unsuccessful party will be ordered to pay the costs of the successful party, however there is no entitlement to be awarded legal costs.

The amount of legal costs which are to be paid may be calculated in several ways.  The usual method compensates the successful party for approximately 50 – 70% of their actual legal costs incurred (this is known as part-party costs).  The court also has the discretion to award costs on an indemnity basis in exceptional circumstances, which is the total amount of actual legal costs incurred from the commencement of proceedings.

The court will take into account a number of factors in determining whether to aware party-party costs or indemnity costs, including any settlement offers exchanged between the parties and the conduct of the parties.

Costs of tribunal proceedings

In the Victorian Civil and Administrative Tribunal (VCAT), typically each party will bear their own costs regardless of the outcome.  The Tribunal will only make an order for costs in limited circumstances, having regard to the conduct of the parties and the manner in which the proceedings are conducted.

Conclusion

There are many factors that affect who will be required to pay the costs of a legal dispute.  If you are considering commencing legal proceedings, it is important to obtain legal advice on your specific circumstances from an experienced litigation lawyer.

If you require advice or further information in relation to any of the matters discussed in this article, please contact our Litigation & Dispute Resolution team on 03 5273 5273.