The Law on Legal Costs in the ACT

It's no secret that litigation can be an imposingly expensive pursuit. It's all well and good to think that someone has done you wrong, but between you and justice likely stretches a long road of legal fees. Thankfully, the courts and the parliaments of England and Australia have recognised this issue and have acted for centuries to ensure that appropriate compensation for fees and disbursements is available to the successful litigant.

What is the rule for legal costs?

In the ACT, the general rule concerning costs is set out at r 1721 of the Court Procedures Rules 2006 (ACT) (CPR). This rule stipulates that costs are at the discretion of the court. In essence, this means that the court has a large scope to make costs orders as it sees fit.

Notwithstanding r 1721, it's well known that in the absence of special circumstances (e.g. unreasonably refusing offers or failing to comply with directions of the court), a successful party will have its costs of the litigation.[2] If a litigant only succeeds on a portion of its claim, the litigant may have to bear all of the cost of litigating the unsuccessful portions of their claims.[3] Alternatively, a litigant may be ordered to pay the other party's costs in respect of the unsuccessful portions of their claim.[4]

Except in special circumstances, the court will order costs on a 'party and party' basis.[5] The court may also make orders that costs be paid on an:

• Indemnity;
• Solicitor and client basis; or 
• Any other basis it considers appropriate.[6] 

If the court makes an order for costs to be paid on a solicitor and client basis, the registrar must allow all costs that are:

• Reasonably incurred and of a reasonable amount based on the scale of costs at schedule 4 of the CPR[8] (Scale); and
• The amount ordinarily payable by a client to a solicitor for the solicitor's work.[9]

Indemnity costs orders are the most expansive type of costs orders and must include all costs other than those unreasonably incurred.[10] As a rule of thumb, the successful litigant that receives an order for its costs to be paid on an indemnity basis will receive 80 to 90 per cent of its solicitor's fees and 90 to 100 per cent of its disbursements.

What if the court doesn't order costs?

In times where the court doesn't otherwise order costs, the default position is that costs will be assessed on a party and party basis.[7] In these cases, party and party costs are 'all costs that the registrar considers were fair and reasonable for the attainment of justice or for enforcing or defending the rights of the party whose costs are being assessed.' They're assessed according to the scale of costs at schedule 4 of the CPR[8] (Scale).  As a rule of thumb, a litigant that is wholly successful will typically receive between 60 and 70 per cent of its fees and 90 to 100 per cent of its disbursements.

If the court makes an order for costs to be paid on a solicitor and client basis, the registrar must allow all costs reasonably incurred and of a reasonable amount having regard to the Scale and the amount ordinarily payable by a client to a solicitor for the solicitor’s work.[9] Indemnity costs orders are the most expansive species of costs order and must include all costs other than those unreasonably incurred.[10] As a rule of thumb, the successful litigant that receives an order for its costs to be paid on an indemnity basis will receive 80 to 90 percent of its solicitor’s fees and 90 to 100 percent of its disbursements.  

[1] Miriam Keane, From Gloucester to Judicature: Tracing the Roots of the Indemnity Rule on Costs’ (2014) 51 Irish Jurist 149, 150.

[2] Ritter v Godfrey (1920) 2 kb 47 as considered in Hughes v Western Australian Cricket Assn (Inc) and Others (1986) 8 ATPR 40-748; Oshlack v Richmon River Council (1998) 193 CLR 72 at [66].

[3] Forster v Farquhar (1893) 1 QB 564.

[4] See e.g. Supabarn Supermarkets Pty Ltd v Cotrell Pty Ltd at [26]-[27].

[5] See e.g. Australian Transcport Insurance Pty Ltd v Graeme Phillips Road Transport Insurance Pty Ltd (1986) FCR 177.

[6] Court Procedures Rules 2006 (ACT) r 1752

[7] Ibid r 1751

[8] Ibid r 1722; Schedule 4

[9] Ibid r 1752 (3)

[10] Ibid r 1752 (4)