Blackstone Brief Volume 6
BStone Admin - 24 Nov 2017
How are costs calculated in your state?
Our guide to applying for costs in NSW, Queensland and Victoria
In each jurisdiction that we practice in – NSW, Queensland and Victoria – party/party and solicitor/client costs are applied differently. Unless you are a costs lawyer immersed in costs law day in, day out, it can be confusing to know how costs will be calculated, or even to find the information you need.
Two lawyers in our Sydney office, Romaine Abraham and Dipal Prasad, have created this short guide that explains everything you need to know about how costs are calculated in NSW, Queensland and Victoria.
In this article, the first of three looking at the differences between these states, Dipal and Romaine focus on the subtle and not so subtle differences between each state when costs are assessed on either the party/party (“ordinary”) basis or assessed as between practitioners and clients.
In the next two editions we will take a closer look at the different processes of costs assessment and the powers of costs assessors in each of the jurisdictions, with a specific focus on the advantages and disadvantages of each of the systems.
New South Wales
In NSW, both party/party costs and solicitor/client costs are calculated based on hourly rates. This is usually done pursuant to the costs agreement between legal adviser and client. However, if the costs agreement is set aside or the hourly rate in that agreement is deemed unreasonable, fair and reasonable rates will apply.
The test for assessing costs pursuant to a costs order one the party/party (or “ordinary”) basis is set out in s76 of the Legal Profession Uniform Law Application Act 2014 (NSW).
In conducting an assessment of ordered costs, a costs assessor must determine what a fair and reasonable amount of costs is for the work concerned. To do this, they may examine the costs agreement. However, the costs agreement will not be conclusive when it comes to determining what is fair and reasonable in the circumstances.
The test for assessing whether solicitor/client costs are fair and reasonable is set out in s199 of the Legal Profession Uniform Law (NSW).
The costs assessor must always determine:
- whether or not a valid costs agreement exists;
- whether legal costs are fair and reasonable; and
- to the extent they are not fair and reasonable, the amount of legal costs that are to be payable, if any.
Section 172, in particular, specifies that costs are to be both proportionately and reasonably incurred, and proportionate and reasonable in their amount.
|The positives||The negatives|
| Time-costing allows hourly rates and lets a practitioner charge depending on their experience and skill. |
The fair and reasonable test is applied to all costs disputes in NSW, which makes it easier to convert a solicitor/client bill of costs to a party/party bill of costs than is the case in other jurisdictions.
The gap between costs recoverable on a party/party basis and a solicitor/client basis is generally not as wide as in other jurisdictions.
| No uplift is allowed (except in solicitor/client disputes where the costs agreement specifically permits an uplift). |
There always needs to be a careful balance between brevity and sufficient information in the bill of costs to allow a client to understand and appreciate the fees charged (more so than in jurisdictions where a scale applies).
It can be difficult to estimate other parties’ costs because different hourly rates often apply. This is not the case when a uniform scale of costs is used.
Being able to recover full costs means always accurately and promptly recording all time, either during or soon after attendance.
Standard costs (previously ‘party and party costs’)
In Queensland, standard costs are dealt with in Chapter 17A of the Uniform Civil Procedure Rules 1999 (Qld). The Schedules to the Act also include:
- Scale of costs for the Supreme Court;
- Scale of costs for the District Court;
- Scale of costs for the Magistrates Courts.
The test for assessing costs on a standard basis is set out in s702 of the Rules. It says:
‘When assessing costs on the standard basis, a costs assessor must allow all costs necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being assessed.’ (emphasis added)
For solicitor/client costs, the relevant provisions can be found in Part 3.4 of the Legal Profession Act 2007 (Qld) (LPA).
In Queensland, costs can be claimed pursuant to any costs agreement with the client. If there is no costs agreement, then the relevant scale of costs will apply. If there is neither, then costs apply ‘according to the fair and reasonable value of the legal services provided’ (s319 LPA) (emphasis added).
Section 341 of the LPA says that, when assessing what is fair and reasonable, the costs assessor must consider:
(a) whether or not it was reasonable to carry out the work to which the legal costs relate; and,
(b) whether or not the work was carried out in a reasonable way; and,
(c) the fairness and reasonableness of the amount of legal costs in relation to the work, except to the extent that s340 applies to any disputed costs.
|The positives||The negatives|
|Queensland allows for a care and consideration uplift (in percentage), which covers some attendances not recoverable pursuant to the prescribed scale of costs. The highest uplift that can be claimed is 30%, unless the case is extremely complex.|| Queensland’s ‘necessary and proper’ test is more stringent than the ‘reasonable’ or ‘fair and reasonable’ test that applies in other jurisdictions. That means only limited costs are recoverable on a standard basis, relative to other jurisdictions. |
Depending on the terms of the costs agreement, the gap between solicitor/client and party/party costs is usually as high as 60%, meaning only around 40% of solicitor/client costs are often recoverable on a standard basis.
The relevant scale of costs has not been updated since 2013 and is well out of date.
Scales of costs
In Victoria, you will find each of the applicable scales on the Law Institute of Victoria website.
Which scale applies for party/party costs depends on which court you are appearing in:
- For Supreme Court matters, you will find the scale of costs at Appendix A of the Supreme Court (General Civil Procedure) Rules 2015.
- For the County Court, costs are set out in the County Court (Chapter 1 Costs Amendment) Rules2014. From 6 October 2014, they are assessed at 80 per cent of the Supreme Court scale.
- For Magistrates’ Court matters, you will find the scale of costs at Appendix A of the Magistrates’ Court General Civil Procedure Rules 2010.
- For Victorian and Civil Administrative Tribunal matters, costs are generally awarded on the County Court scale.
In Victoria, solicitor/client costs are usually claimed pursuant to the costs agreement a solicitor has with their client. The most common methods of charging legal work include:
- According to time: charging the actual time spent on a particular task and ultimately the matter. Rates will vary according to the size and location of the practice, and the experience of the practitioner providing the service.
- By reference to scale: to the relevant scale of costs or Practitioner Remuneration Order.
- By fixed or flat fee: charging an agreed fee for the whole of the matter, for a stage or for a task.
- By conditional fee: where all or part of the fee is conditional on success or a specific outcome being achieved. The rate for charging on conditional agreements can be calculated in accordance with any of the three methods above.
|The positives||The negatives|
| Reliance on scale provides a uniform approach to claiming costs. |
With the exception of timed attendances, including telephone attendances or attendances to instruct at court, for example, costs are not assessed based on time spent.
Rates allowed under the scale are deemed to be reasonable, providing certainty.
Scale rates are periodically reviewed and indexed, so they keep pace with inflation.
It is arguable that time-billing protects and facilitates inefficient or incompetent practices, whereas a scale of costs allocates a set cost to each discrete item of work.
The scale provides certainty, even where a practitioner has not been as meticulous in recording time as they should have been.
Scales of costs avoid any inflation in the amount of time spent and claimed.
The various Victorian Scales of Costs reflect a focus on providing value to the client rather than the billable hour.
Efficient and ethical practitioners can be rewarded by strictly applied scale rates.
| The scales provide just one rate for all legal practitioners, and do not take into account experience or expertise. |
The rigidity of the scale does not allow a practice to use a wide range of fee-earners with various levels of experience, in the same way that a costs agreement would. For example, the Supreme Court scale has just three basic rates (the highest rate being $393 and the lowest $228).
In complex or time-consuming matters, the scale can reduce a firm’s profitability.
When a costs agreement is based on high hourly rates (as might be the case for, say, a specialist lawyer with city offices), the gap between solicitor/client costs and party/party costs can be significant.
As you can see, each jurisdiction has its advantages and disadvantages. However, the one way to make sure you always capitalise on the strengths and avoid the pitfalls of the costs regime you’re working with, is to trust your costs to professionals like Blackstone.
Lastly, check out the Australian Lawyers Alliance website for this and other interesting articles helping you to manage your practice.
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