Understanding costs in the County and Supreme Courts of Victoria

Legal costs in a case can be significant. Costs orders can range from $10,000 to over $100,000 depending on the case.

These costs are in addition to the main outcome of the case. If you lose your case, you may have to pay the successful party damages or compensation, as well as their legal costs.

If the court doesn’t specify the amount in a costs order, the amount will be assessed by:

• The Costs Court, or

• Someone appointed by the court.

There are rules about what a party can claim as a cost.

• If your case is unsuccessful, the successful party is not entitled to claim costs more than those actually incurred. The successful party can recover costs that were reasonably incurred, and that are reasonable in amount.

• If your case is successful, you can claim disbursements (ie. expenses incurred because of the proceeding, such as court filing fees). You can’t claim the time you spent working on your case as a cost. This is different to a party that has legal representation. A party represented by a lawyer will usually claim their solicitors’ and barristers’ fees as part of their legal costs, as well as other expenses.

Often the court will make a costs order:

• As a fixed sum, or

• As agreed by the parties or assessed.

If the court makes an order for ‘costs as agreed or assessed’, you and the other party agree on the amount the unsuccessful party needs to pay the successful party.

If you can’t agree on costs with the other party, an external expert will review the successful party’s costs and determine the amount that the unsuccessful party needs to pay.

Costs on a standard basis mean the unsuccessful party must pay the reasonable costs of the other party. These include things like paying barrister and court fees.

Typically, the unsuccessful party needs to pay about 60-70% of the successful party’s legal costs. Depending on the circumstances, it can be more or less than this.

The successful party (ie. the party being paid costs), must prove their costs are reasonable if there is a dispute about them.

Costs on an indemnity basis mean the unsuccessful party must pay all costs for the other party, unless they are an unreasonable amount or were unreasonably incurred.

Indemnity costs will usually be 85-100% of the successful party’s legal costs.

Indemnity costs are awarded when the successful party’s legal fees increased because of the unsuccessful party’s conduct in the proceeding. For example, indemnity costs may be ordered in cases of fraud, abuse of process, or unnecessarily prolonged proceedings.

The unsuccessful party (ie. the party that needs to pay costs), must prove that costs are unreasonable if there is a dispute about them.

The court will often wait to make a decision about costs at the end of the proceeding. In this case a costs order will be reserved until a later stage in the proceeding.

If there are preliminary hearings, the decision about costs may be reserved until the end of the whole case.

It’s common for the court to make an order reserving costs. Often, the unsuccessful party who loses the case will have to pay these reserved costs. 

An order for costs to be taxed in default of agreement means that a specialised court (ie. the Costs Court) will decide your costs order.

This order is usually made if you can’t agree with the other party about what the reasonable costs are.

If no order as to costs is made, you and the other party pay your own legal fees.

The court will usually make this order if you make a settlement agreement with the other party and agree to pay your own costs. 

The court will sometimes order costs for one party during a preliminary hearing (ie. an application or hearing). These are commonly the costs of a particular day or event in the proceeding.

Costs of the application or hearing usually need to be paid immediately (or within a short period after the day or event).

Costs thrown away are costs that must be paid for the other party’s wasted time.

You may be wasting the other party’s time if:

• You make late changes to a pleading (ie. amending pleadings).

• You miss attending a hearing (ie. a failure to comply with the timetable).

• You aren’t prepared for a hearing (ie. a failure to comply with the timetable).

• You make some other error.

A Calderbank offer is a written offer to the other party that usually has the words ‘without prejudice except as to costs‘.

• Without prejudice means that the offer can’t be communicated to the court.

• Except as to costs is the exception – the offer can be communicated to the court when it is time to decide who pays the legal costs.

The Calderbank offer is an important factor when the court decides a costs order. If your case is unsuccessful and you rejected a reasonable Calderbank offer, the other party can use the offer to persuade the court that you must pay their legal costs.

• A reasonable Calderbank offer is compared to the amount in damages or compensation you’re ordered to pay in the end (ie. the final outcome).

• If you rejected a Calderbank offer that is the same amount (or more) than the final outcome, the court can order you to pay a higher percentage of costs.

• Higher costs mean the court can order you pay indemnity costs (ie. 85-100% of the other party’s legal costs).

The risk of higher costs starts from the date the offer was made.

An offer of compromise is also a ‘without prejudice’ settlement offer. An offer of compromise can’t be shared with the court, except at the end of the proceeding when the court makes a costs order.

An offer of compromise has formal criteria about how it must be written and the information included. If a settlement offer meets these requirements, rules define how costs are calculated.

Costs are calculated based on the type of claim (especially personal injury claims), when the offer was made, and which party made the offer.

With an offer of compromise there is an assumption that costs will be awarded in favour of the party who made the offer, unless the court orders otherwise. It is for the party who rejected the offer to argue that the offer was not reasonable.

If you believe that a costs order made against you is unfair, you can appeal to the Supreme Court (or Court of Appeal if your case was heard in the Supreme Court).

You must lodge an appeal within 28 days of the judgment, or the costs order being made.

You should get legal advice before starting an appeal, so you’re informed about your chances of success and added financial risk.

If you think that the legal fees claimed by the other party are unreasonable, you can apply for an assessment of a bill of costs (ie. taxation)

You must apply to the Costs Court.

You should get legal advice before applying because it can be expensive.

If you can’t pay a costs order made against you, you can try to arrange a payment plan with the other party.

If you can’t agree on a payment plan with the other party, you can apply to court for an instalment order. An instalment order spreads out paying the costs order across smaller amounts.

Find more information about instalment orders on our ‘How to apply for an instalment order in the County Court of Victoria‘ page.