Here is a fact sheet on costs from the Office of the Legal Services Commissioner:
The term costs generally refer to:
- A solicitor’s professional
fees for work they have done, and
- Disbursements, or expenses, such as barristers’ fees, search fees, fees for reports by doctors or other experts and photocopying
Solicitors may sometimes talk about solicitor/client costs and party/party costs. Solicitor/client costs are the costs which a solicitor charges the client for legal services. Party/party costs are costs which the court orders another party to pay, or which another party has agreed to pay, as part of the terms of settlement of a court case.
In litigation it is usually the losing party who has to pay party/party costs … An order for party/party costs is very rare in family law matters, where each side usually pays their own costs.
How do party/party costs work?
Party/party costs are intended to reimburse one party, usually the successful party, for legal costs which they owe or have paid to their solicitor, where these costs have been determined as fair and reasonable. However, party/party costs normally provide only partial reimbursement of a client’s total legal costs. It is like the gap between a doctor’s actual charge and the amount paid by Medicare. A solicitor who charges a client more than the client receives from the other party is not necessarily overcharging.
If costs are awarded to you, you cannot claim from the other party more than you have paid (or have to pay) to your own solicitor.
In some cases, the maximum costs payable by the other party are fixed by legislation, most notably motor accidents claims under the NSW Motor Accident Scheme and personal injury claims.
How do I recover party/party costs?
Your solicitor will normally do this for you. The solicitors for each party might first try to agree on a figure for costs. The negotiations can take time, especially when an insurance company is involved. If the solicitors cannot agree on a figure, costs will normally have to be assessed by an independent costs assessor appointed by the Supreme Court of New South Wales. The costs assessor will determine what amount the paying party should pay. This process can take some months. A costs assessor’s determination can be registered as a judgment and enforced by a court.
If costs were awarded to me, can my solicitor deduct professional fees and disbursements from my verdict/settlement money?
If a client has signed an Authority to Receive, the solicitor will receive the verdict/settlement money and pay it into the client’s trust account. After sending the client a bill, the solicitor can hold in the trust account enough of the verdict/settlement money to cover their professional fees and disbursements. The solicitor then pays the balance to the client.
The money must remain in trust until the procedure laid down by the Legal Profession Regulation has been followed. This means that the solicitor must either:
a) have the client’s authority to deduct costs, or
b) give the client notice that they intend to deduct costs and may do so unless the client objects within seven (7) days after being given the bill.
If the client objects, the client has 12 months after being given the bill to put in an application for costs assessment. If the client has not done this, the solicitor can transfer the money from the trust account to pay their costs.
Any costs deducted should be at least partially reimbursed when party/party costs are paid by the other party.
Why should I have to pay anything if I have been awarded costs?
A costs order simply entitles the client to seek reimbursement (or usually only partial reimbursement) from another party for costs which the client has paid or has to pay. The client will still have to pay their own solicitor for work the solicitor has done.
A solicitor might agree to accept any party/party costs recovered from the other side as full payment for their services, but they are not obliged to do so. This will depend on the terms of the costs agreement, if any, between the solicitor and client. The client will normally have to pay the difference between the costs charged by the solicitor and the costs recovered from the other side.
Does my no win, no fee agreement with my solicitor mean that I will not have to pay any costs if I win my case?
A conditional costs agreement — also called a ‘no win, no fee’ agreement — is usually just an agreement between the solicitor and client to defer payment of costs until the successful conclusion of the legal matter. Once the matter is successfully concluded, the solicitor can seek payment of their costs and any disbursements, usually by deducting them from the verdict/settlement money. Any costs paid by the client, either up front or from money in trust, will normally be at least partially reimbursed when party/party costs are received from the other party. Remember, if you do not win you may still have to pay your solicitors disbursements and the other party’s costs. Accordingly, it is most important to carefully review the terms contained in a `no win no fee’ agreement. Make sure you clearly understand what constitutes a successful result.