Recovery of costs in litigation

The general rule in litigation is that the successful party obtains a costs order in its favour.  However, generally in litigation a successful party is restricted in its ability to recover its costs by the limits imposed by various costs determinations and court costs scales.  This usually results in a successful parties being left significantly out of pocket having already often paid its own legal costs.

Section 280(2) of the Legal Profession Act 2008 enables a Court, in appropriate circumstances, to allow to the successful party a higher recovery of costs.  This will arise in circumstances where the allowance by the costs determination or scale is inadequate by reason of the unusual difficulty, complexity or importance of a matter.  In that case the Court is given considerable flexibility to dispense with all or some of the upper limits for items within the scale and also as to rates permitted by the scale.  The Court has considerable flexibility as to whether there will be a general uplift or uplift in relation to specific items only.

Recently, in Electricity Generation Corporation v Woodside Energy Limited & Ors [2011] WASC 268 (S2) Le Miere J allowed such an application, allowing costs of the successful defendants to be taxed without restriction to any of the hourly rate restrictions of the costs determination, any of the quantum limitations of the costs determination and to allow at trial for the retention by them of three counsels.  In doing so, the Court gave a further guidance of circumstances where such an application will succeed.

Parties should always consider whether their matter is one where such an application ought to be made, given the practical importance to them of a successful application. 

An application may succeed simply because the amount of work properly required exceed the allowance in the Court scales.  In many modern matters, it is not uncommon, they work in excess of the scale allowance particularly in the area of discovery and inspection.

In the circumstances of the case before him, the Judge considered that, notwithstanding that it is unusual for there to be a recovery based on rates in excess of the upper rates determined by the costs determination, this was a case of unusual difficulty, complexity and importance and it was reasonable and proper for the parties to retain a large legal team and to retain very senior practitioners and counsel.  Indeed both sides had done so.

In removing the restrictions, the judge empowered the taxing officer to consider whether or not it was reasonable for the successful parties to carry out the item of works to which the claims relate, whether or not the work was carried out in a reasonable manner and what was a fair and reasonable amount of costs for each item.  That will not be done by the taxing officer without the artificial impediments imposed by the scales.  It’s likely to enable the successful parties to recover more of their actual costs from the unsuccessful party.

For more information, please contact:

Iain Freeman
Partner
(08) 9288 6759
iain.freeman@lavanlegal.com.au