So, you are considering issuing legal proceedings, have received a cost estimate from your lawyer, and want to know whether you can recoup some of these costs?
What is required to recover your legal costs?
First of all, it is important to note that if you wish to attempt to recover some of your legal costs, you need the matter to go to Court and you need to win your case. If you win your case, you need to convince the Court that it is just and fair that you get a costs order in your favour.
In most Courts, if you win your case you will be entitled to a costs order in your favour, but you need to make it to the end of the proceedings. It is very rare for costs orders to be made in the interim. It can happen, and they are normally very small costs orders, but to get the bulk of your costs, you need to wait until the end of the litigation. If you are successful in the proceedings, you have a good chance of receiving a costs order.
However, the issue is that most cases never reach the end of the hearing. 98% of litigation proceedings in Australia are settled before the final hearing, so it is unlikely that you will be in a position to have a judge considering a costs order.
What is much more likely is that you will settle a case in a mediation or in a negotiation. In that context, you might receive an agreement from the other side to pay your costs. That can all be part of the back and forth in negotiation. Often legal costs are given away as part of the negotiation. So, it is reasonably rare to have a settlement agreement that has a substantial portion of legal costs paid by either side.
What you can expect to receive if you are successful
If you do receive a costs order or if you enter into an agreement in relation to costs, it is important to understand that it will normally be a lot less than your actual costs. Your actual legal costs are one thing, and what orders the Court makes are another thing.
The Courts have a scale which calculates how much you are entitled to for particular activities, and that does not necessarily relate to how much you have been charged by your lawyer to run the matter. This system is similar to “Medicare”, where you have some costs that remain out-of-pocket.
Protections to put in place
If your business has the right agreements in place, you will be entitled to your costs as a contractual right. For example, if your terms and conditions state that if the terms are breached, the business/individual is required to pay your costs on an indemnity basis. If you have a term similar to this in your documents, you will be entitled to your costs as a contractual right, and will be able to sue for the claim plus the costs. This will place you in a stronger position to receive as close to your costs as possible, not the Court scale amount. There are also other mechanisms once you are in Court which you can use to increase the likelihood of obtaining an order for costs or obtaining a higher amount of costs. For example, if you put forward an offer of settlement which was unreasonably refused, and you obtain a more favourable outcome in Court.
To summarise, in most circumstances you are entitled to your legal costs if you win your case and reach the end of the matter. However, it is unlikely that you will reach the end of the proceedings and recoup all of your legal costs. In most cases, it is likely that you will need to fund your legal case yourself.
It is important to consider whether you are in a position to pay your own legal fees when issuing legal proceedings. If you recover some costs from the other side, it is a bonus.
If you need assistance regarding issuing court proceedings or any other court related matter, please contact one of our expert litigation lawyers at Taurus Legal Management on (03) 9481 2000 or info@tauruslawyers.com.au.