• Civil litigation through the courts can be a lengthy and expensive process which it is not always possible to avoid.

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• Legal costs, should be an important commercial matter relative to their claim that parties should take into account at all stages of a dispute or court proceeding. This is because costs can often amount to a significant portion of a party’s claim. In some cases, particularly in matters that arise in the lower courts, such as the WA Magistrates Court costs may even exceed the value of the claim.

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• As a general rule of law in civil actions, the court normally awards costs to the 'successful party'. Such an award is intended to reimburse a party (usually the successful one) for their legal costs. It is therefore critical that you are fully aware of the costs implications which are involved in such proceedings and of the costs that the ‘successful party’ may be able to recover from the unsuccessful party.

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• At the resolution of proceedings, and even during proceedings (at various stages during litigation the court may order costs to be paid), any party to a matter may have to pay the legal costs of some kind to the other party. 

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• It is rare that one party will ever pay the 100% of the other party’s legal costs. Instead, the type and amount of the costs to be paid varies according to different principles, depending on the outcome of the proceedings, as set out below.

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  Court “Scale” Costs

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• In most situations where the court makes an order for costs, those costs will be limited by a scale of costs set by the courts, regardless of the actual costs incurred by the successful party. As costs are assessed by reference to the scale, it essentially operates as a statutory cap that limits the amount of costs which may be awarded.

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• The court has the power to make a special costs order under s 280(2) of the Legal Profession Act if a court is of the opinion that the amount of costs allowable in respect of a matter under a legal costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter, it can order payment of costs above those fixed by the scale. However, this is unlikely to occur in Magistrates Court matters.

 

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  Solicitor/Client Costs

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• Solicitor/Client Costs are costs that a party pays to their own solicitor for the work that the solicitor performs in relation to the matter. Normally, a party must pay these costs regardless of whether they win and/or lose, or whether the other party is also ordered to pay some contribution to the costs.

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  Party/Party Costs

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• Party/Party Costs are the costs which the successful party may recover from the unsuccessful party in court proceedings in the event that an “ordinary” costs order is made. These costs are to compensate the successful party for that part of their solicitor/client costs which have been “reasonably incurred” as a result of the proceedings.​​

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• It should be noted that party/party costs will not completely cover the total solicitor/client costs and will usually range between 55% and 80% of the actual costs incurred.

 

​  Indemnity Costs

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• The Court may make an indemnity costs order in favour of a successful party in proceedings where the successful party has been subjected to unnecessary costs and/or expenses in the proceedings as a direct result of the conduct of the other party, such as where a party’s conduct has been unreasonable, i.e. where one party deliberately delays the proceedings or argues matters not seriously in contention.

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• Indemnity costs may also be awarded where one party has made and served a formal offer of compromise (that is, an offer to settle the matter before a Court Hearing). If this offer is rejected or not accepted by the other party and the offer was more favourable than the final outcome for the offeree, then the offeror (the person who made the offer) may be awarded costs on an indemnity basis (Indemnity Costs).

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• If indemnity costs are awarded, a party may recover up to 90% of the solicitor/client costs incurred.

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• It should be noted that the Magistrates Court does not have the power to make an order for costs on an indemnity basis. It does have power to make a special costs order under s 280(2) of the Legal Profession Act (i.e. if a court is of the opinion that the amount of costs allowable in respect of a matter under a legal costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter, it can order payment of costs above those fixed by the determination (see Rodwell v Hutchinson [2010] WASCA 197). Again, this is unlikely to occur in the Magistrates Court.