Litigation is costly, but costs orders can help mitigate the burden of legal fees if they’re in your favour. Conversely, having a costs order made against you can add an extra hurdle after proceedings have concluded.
It’s an understatement to say that law can be expensive. When you consider Court filing fees, legal fees, and disbursements, it’s not hard to see how these costs can rapidly escalate. However, if you’re successful in litigation, you can find solace in recovering some of you legal costs.
In this guide, we’ll outline the difference between party/party costs and solicitor/client costs.
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Costs orders
A costs order outlines who has to pay what when proceedings finish. Costs orders are usually made ‘following the event’. This means that the Judge will order costs after the trial has finished. More often than not, one party will have to pay the costs of the other. However, parties can also bear their own costs.
As we have discussed, costs can be ordered in different ways. Due to this, they can mean the difference between paying a little, or a lot. This is especially true if you end up having to pay fees for someone else.
Party/party costs
Party/party costs are when an unsuccessful litigant is ordered to pay the costs of the winning party. Although a significant portion of the successful party’s costs will be covered, this is normally only in the range of 70 to 75% of the legal fees that have been incurred.
When a costs order is made on a party/party basis, both parties will try to reach an agreement as to what is to be paid. If the parties cannot agree on a fair a reasonable amount, a costs assessor will be appointed. The costs assessor will review the costs incurred in a case and determine the amount which should be paid to cover the legal costs of the successful party. Also known as ‘costs on the ordinary basis’, these types of orders are the ones most commonly seen in civil litigation.
Solicitor/client costs
Solicitor/client costs are very different from party/party costs. These types of costs are fundamentally the legal fees your solicitor charges. These fees can be calculated on an hourly or fixed-fee basis. Throughout the course of a trial, the solicitor/client costs are those which will be the most expensive.
As we mentioned earlier, party/party costs often do not account for all of a party’s legal fees. Subsequently, costs orders made on a party/party basis will likely be less than your solicitor/client costs.
Indemnity costs
A way to counter this is by seeking costs on an ‘indemnity basis’. You can seek costs on an indemnity basis under particular circumstances.
A few of these include:
- Rejecting an earlier calderbank offer
- The case contains some “sufficient or unusual feature”
- There was a “relevant delinquency” in the conduct of the case
- Hopeless cases
- Cases where there has been an abuse of process
Example
‘Button Electronics’ has sued ‘Ready Data’ for breach of contract. Button electronics are seeking damages in the amount of $280,000. Ready Data made them a calderbank offer in the amount of $200,000. Button Electronics rejected the offer. The case went to trial and the Court ruled in favour of Ready Data, finding no breach had occurred. Ready Data are able to point to the calderbank offer and recover their solicitor/client costs.
Costs orders can be beneficial or become an added burden. However, understanding these types of costs is key to understanding what the outcome of your case may be.
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