In civil litigation, costs orders are where the court orders that one party pays another party’s legal costs. Costs orders can be made during or after court proceedings and may relate to the whole proceedings or a particular part of the proceedings. Costs orders are also assessed entirely at the court’s discretion depending on the facts of the case and the conduct of the parties.
Obviously, parties engaged in litigation are unlikely to want to pay each other’s legal costs. In this respect, costs orders have a deterrent effect and parties engaged in litigation must be conscious of not acting in a manner that may put them at risk of an adverse costs order. Generally, the court makes orders for an unsuccessful party to pay the successful party’s costs in discrete events and the overall proceedings. However, the court can depart from the usual course at its discretion. Types of costs orders that may be made include the following:
- Costs of the Day – an order awarding a party the costs of a particular event in the proceedings, and all work reasonably connected to that event;
- Costs in the Cause – an order that the costs of a discrete application or court event will form part of the costs in the overall action at the conclusion of the proceedings;
- Costs Reserved – an order that neither party pays costs without further order of the court (which usually occurs at the conclusion of the proceedings, pending the overall outcome);
- Costs Thrown Away – an order that costs wastefully incurred by a party as a result of another party’s actions (for example due to an error, or failure to comply with court timetables) be paid by the other party;
- No Order as to Costs – each party pays their own costs.
The nature of any costs order made depends on various factors including the conduct of the parties, the facts of the case, the circumstances of the discrete application/issue and the overall proceedings, and the result of the discrete application/issue or overall proceedings. Generally, where matters are resolved by consent (whether interlocutory applications or the overall proceedings), there is no order as to costs.
Costs orders can also be linked to offers of compromise or Calderbank offers to settle proceedings. If a successful party recovers less than what they were offered by another party in an offer of compromise or Calderbank letter (see Calderbank v Calderbank [1975] 3 All ER 333), they may be liable for the unsuccessful party’s costs from the day following the day the offer was made: Uniform Civil Procedure Rules 2005 (NSW) r 42.15. This encourages parties to seriously contemplate settling proceedings without recourse to litigation in view of the costs consequences if they obtain an unfavourable outcome, or an outcome worse than what they may have otherwise obtained by settling the proceedings.
If you are engaged in litigation, it is crucial to be aware of the costs implications of your actions and minimising your exposure to adverse costs orders. In this respect, legal representatives must provide ongoing advice to clients about the prospects of their case, the consequences of their actions, and the possibility of costs orders being made.
Our experienced litigation team at Frank Law is able to provide you with honest and tailored advice as to the circumstances of your matter so as to ensure you are not liable for another party’s costs.
If you have further questions, please contact Matthew Sibley at msibley@franklaw.com.au
This is not legal advice.
