Legal Costs Explained

May 20, 2019

This information is intended to assist understanding of the way legal costs work and, in particular, the difference between "party/party" costs and "solicitor/client" costs.

 

Key Terms

 

"solicitor/client costs"

Total legal costs charged to a client for legal services provided by a solicitor.

 

"party/party costs"(ordinary costs)

“Standard” legal costs that the Court orders a party to pay, or which another party has agreed to pay, as part of the terms of settlement of a Court case (“as agreed or assessed”).

 

“indemnity costs”

Similar to party/party costs, though generally permits greater scope of recoverable work –generally ordered in instances either as agreed between the parties, or ordered as a “penalty” against another party.

 

“solicitor/client cost gap”

The difference between solicitor/client costs and party/party or indemnity costs–the “gap” payment.

 

"premium payment" (uplift fee)

The additional amount payable on professional fees dependent upon the outcome outlined in the Conditional Client Services Agreement.

 

In the event of successful in your Court action, a contribution may be made towards legal costs from an estate or the other party, but this contribution will not always cover 100% of the total legal costs. 

 

The “solicitor/client cost gap” is often funded from the proceeds of the Court action, provision from an estate, or from you’re a clients’ personal resources.

 

The amount of money able to be recovered for “party/party costs" is often around 60-70% of “solicitor/client costs". “Indemnity costs” are generally a higher percentage, though does not include any “premium payment” –which is a separate agreement between client and solicitor.

 

Things to Consider

 

If a party is successful, ordinarily they will be able to recover their “party/party costs” from the other party. Where the Court action involves a deceased estate, “party/party costs” are often paid from estate assets. “Indemnity costs” are awarded in special instances –generally being more than “party/party costs”.

 

If a solicitor is acting on a conditional basis, or on a "no win, no fee" basis, if a premium payment is to be charged, the amount of the premium payment is not recoverable as “party/party costs” or “indemnity costs”. The premium payment is charged based on a calculation of the solicitor/client costs.

 

Most disbursements, like Barrister's fees, Court filing fees and other expenses properly incurred in pursuing the Court action are recoverable as “party/party costs”. “Party/party costs” are intended to reimburse one party, usually the successful party, for legal costs which they have incurred being involved in the Court action.

 

Because Court action is expensive, and there are risks for all parties, early settlement of disputes can often reduce risks and legal costs.

 

The Law Society of New South Wales has regulatory responsibility to ensure solicitors comply with las relating to legal costs. For further information see: https://www.lawsociety.com.au/practising-law-in-NSW/ethics-and-compliance/costs

 

 

 

 

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