What are costs?
The amount charged by a lawyer for legal work is called ‘costs’.
Lawyers can only charge the amount agreed with the client or the amount stated by a court in its rules. The amount agreed between the lawyer and the client is set out in a document called a ‘costs agreement’.
The party who loses a case usually has to pay all their own costs and sometimes a proportion of the costs reasonably incurred by the other side.
Courts have the power to order the losing side to pay all, some, or none of the winning side’s legal costs. This is called the Courts power to ‘award costs’. This can be done in a number of ways:
- Losing side pays all of the winning sides legal costs
- Losing side pays some of the winning sides legal costs
- Losing side pays none of the winning sides legal costs
- Losing side pays a lump sum
- Losing side pays a sum up to a certain amount. This is called a ‘cost capping order’ and should be decided at the start of the case.
Note: if your case is funded by a Legal Aid Grant and the other party is ordered to pay your costs, the payment will be made to Victorian Legal Aid. This is because Legal Aid has been paying for your case, not you.
When you begin a case you need to say if you intend to claim costs if you win. This way if you do win the court will make a costs order. In many cases, particularly cases involving civil or discrimination Court proceedings in civil matters (q.v.). A litigant is one of the opposing parties (q.v.) in a civil proceeding., the case will settle. When a case settles the parties will come to an agreement about how costs will be paid.
Inability to pay costs
These debts are called judgement debts. If you lose, you may not be able to pay the costs of the other party. There are a number of options if this is the case. One option is that the winning party may attempt to obtain a “garnishee” order from a court to have instalments of money paid to them out of your wages.
If you are on a Centrelink payment, the other party may be barred from recovering costs from you under section 12 of the Judgement Debt Recovery Act 1984.
Some people with judgement debts take the option of becoming declared a bankrupt. This will mean your assets will be sold. After a period of time, the costs debt will be waived, but the declaration will limit your future options to obtain credit.
Any issues in relation to costs from a court hearing, or disputes with a lawyer over how much they are charging, should be referred to the Costs Court.
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