Reducing the burden of out of pocket legal costs - Legal costs in civil litigation

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Key points

  • Legal costs
  • Appropriate and properly drafted legal costs orders in litigation
  • Lawyers Duties owed to clients to obtain appropriate legal costs orders

In 1999 the Western Australian Law Reform Commission referred to: “an uncomfortable tension between legal costs and justice”; WALRC 92, Vol 1, p466.

It reported that the legal costs of litigation can sometimes be a barrier to justice: WALRC 92, Vol 1, p466.

“Loser” pays

In almost all civil litigation the starting position is that the “losing” party pays the “winning” party’s legal costs incurred and paid to its lawyers in the legal proceedings.

However, that does not mean that the “winning” party recovers all of its legal costs from the “losing” party, instead there is a “gap”, sometimes substantial, between the legal costs a “winning” party incurs and pays to its lawyers and what the “winning” party can recover from the unsuccessful party in the litigation.

Costs/benefit analysis

Before commencing any civil litigation clients should conduct a costs/benefit calculation: “will the ultimate likely benefit of the civil litigation outweigh the likely legal costs payable to their lawyers to conduct the litigation to its conclusion and the out of pocket legal costs?”: WALRC 92, Vol 1, p466.

Legal costs orders – Benefits to client

That “gap” between what a “winning” party can recover from a “losing” party can be reduced by obtaining an appropriately considered and drafted legal costs order at the appropriate time in the litigation, giving potentially substantial cost benefits to clients and reducing the burden of a client’s out of pocket legal costs.

It is important to consider the timing of any legal costs orders sought in the litigation. For example, if a party is successful in a interlocutory hearing it is likely in the client’s best interests that the question of who pays whose legal costs is determined at that interlocutory stage and not reserved to some unspecified later date in the proceedings.

Often a delay in obtaining an appropriate legal costs order at the interlocutory stage increases a client’s legal costs because lawyers are subsequently required to revisit the conduct of the litigation to ascertain the eventual cost position, causing a duplication of work and more costs.

Lawyers professional obligations – Benefits to lawyers

As part of a lawyers’ fiduciary duties owed to their clients, lawyers are required to obtain an appropriate costs order for their client or argue against an inappropriate costs order.

Further, by lawyers considering the most appropriate costs order at regular stages during civil litigation, that consideration can assist them in managing their client’s expectations, costs and risk and ensuring that they comply with their ongoing costs disclosure obligations owed to their clients.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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