Standard Costs and Indemnity Costs (Qld)
In civil law matters, legal costs will most often be incurred by all parties to the action. Courts have the power to make orders requiring one party to pay another’s legal costs depending on the circumstances. Usually, the party that is successful in the legal action will have at least a part of their legal costs paid for them by the unsuccessful party. However, this is not always the case and courts have powers to make various orders about the payment of costs. Costs orders are commonly made on the basis of standard costs or indemnity costs. This article outlines the difference.
When can the court make an order for costs?
In Queensland, under the Uniform Civil Procedure Rules 1999, a court can make a costs order:
- during court proceedings or at the end of court proceedings; and
- concerning a part of court proceedings or the whole of court proceedings.
Costs orders are made at the discretion of the court.
What can an order for standard costs or indemnity costs state?
A court may make a costs order that states:
- That the amount of costs is to be assessed;
- That a percentage or part of assessed costs are to be paid;
- That assessed costs for a certain part of court proceedings are to be paid;
- That a fixed amount of costs are to be paid; and
- That costs are to be assessed in a manner that the court directs.
There are two bases upon which the amount of costs payable by one party for another are calculated. These bases are on a standard costs basis or an indemnity costs basis. Standard costs are sometimes referred to as party and party costs. Indemnity costs are sometimes referred to as solicitor and client costs. In most cases, costs are awarded on a standard costs basis.
If an order is made that standard costs are to be paid by one party for another’s legal costs, the way the amount is determined is by considering what was necessary or proper to attain justice or enforce or defend rights. There is a specific scale of costs which is contained in the Uniform Civil Procedure Rules 1999.
Generally, if costs are ordered to be paid on a standard costs basis then the party being compensated for costs will only recover about 60-75% of what they paid for their legal fees.
In some limited circumstances, a court may make an order that costs be paid on an indemnity basis. If costs are awarded on this basis that the amount payable is assessed on what costs were reasonably incurred and of a reasonable amount. Factors that can be taken into account when making this assessment include:
- The court’s scale of fees set out in the Uniform Civil Procedure Rules 1999;
- The costs agreement between the party to whom the costs are owed and their solicitor (if they have one); and
- The fees that are usually paid to a solicitor for the work done.
Usually, if this type of costs order is made the party recouping legal costs will recover about 90-95% of their legal costs. The only reason why costs would not be able to be included in an assessment on an indemnity costs basis would be if they were for an unreasonable amount or unreasonably incurred.
Indemnity costs vs standard costs
Generally, a court will make an order that costs are to be paid on a standard costs basis. However, in some circumstances, where there has been some form of misconduct or unusual circumstance, a court may make an order that costs are to be paid on an indemnity costs basis. Some examples of where costs have been ordered on an indemnity costs basis include the following:
- Where fraud allegations were shown to be false – Thors v Weekes (1989) 92 ALR 131;
- Where the party ordered to pay costs had prolonged court proceedings unnecessarily – Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd  FCA 225;
- When there was a motive to instigate the proceedings which did not have anything to do with the subject matter of the legal case, i.e. an ulterior motive – Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397;
- Where the claims made in the legal matter were shown to be baseless – Ragata Developments Pty Ltd v Westpac Banking Corporation  FCA 115;
- Where a settlement was offered but was not accepted and there is no willingness to negotiate or compromise – Maitland Hospital v Fisher (No 2)(1992) 27 NSWLR 721; and
- Where facts or established law have been disregarded – J-Corp Pty Ltd v Australia Builders Labourers Federation Union of Workers (WA)(No 2)(1993) 46 IR 301.
Applying for a costs order
If you wish to recover legal costs from another party to a proceeding you will have to request such an order from the court. You can only claim for costs if you hired legal representation. If you represent yourself in a legal matter you cannot claim costs.
Once a costs order is obtained there is a time limit of six years from the date of the order for it to be enforced. In certain circumstances, this time limit may be extended to twelve years with the permission of the court.
If you require legal advice or representation in any legal matter please contact Armstrong Legal.