Successful claims in the Local Court may allow parties to be entitled to an order for costs in their favour.
Generally, at the end of a hearing, the Court will hear arguments from parties in relation to costs. As is customary, the Court will usually award successful parties their costs – although the proportion of costs to be awarded depends on many factors. However, a successful party can be awarded no costs for various reasons. For civil claims, there are certain quantitative thresholds that are recoverable within the Local Court.
The Local Court is split into 2 separate divisions which hear claims based on the value of the claims being made – the Small Claims Division and the General Division. The Local Court has jurisdiction to hear claims up to a monetary value of $100,000. It is important to note however that being successful and obtaining a costs order does not automatically entitle a party to recover all costs they seek to claim.
The Small Claims Division
The Small Claims Division of the Court handles disputes up to $20,000 in a simple and informal manner. Here, standard rules of evidence do not apply and there are strict limits on the legal costs each party may be ordered to pay. Except as provided by the rules, the Court in its Small Claims Division has no power to award costs pursuant s 37 of the Local Court Act 2007 (NSW). However, courts can make orders for the payment of costs in circumstances outlined in Rule 2.9(2) of the Local Court Rules 2009 (NSW) where:
- If proceedings are discontinued or dismissed, or the defence is struck out at a pre-trial review or hearing;
- If proceedings are adjourned as a consequence of a party’s default or neglect, including a party’s failure to comply with a direction of the court;
- If proceedings on a motion are heard by the court; or
- If the court makes judgment after a full hearing
In circumstances falling within subsections (a) – (c), costs are limited to the amount allowable (plus GST) on entry of default judgment for a liquidated claim, as seen in the table below:
Where a judgment is given after a final hearing, costs are limited to the amount of costs that would be allowable (plus GST) on entry of default judgment for an unliquidated claim in the proceedings, as seen in the table below:
The Local Court Bench Book further advises however that where judgments are given after trial proceedings, the maximum that may be awarded is increased by 25% if the court considers:
- The party made a genuine offer to compromise on the claim that was not accepted by the other party; and
- It was unreasonable for the other party to not have accepted the offer.
General Division
The General Division of the Local Court hears claims with a monetary value over $20,000 and up to $100,000.
If a party is successful in their case, they may be able to claim legal costs and disbursements related to the claim. Disbursements are inclusive of external expenses, such as payment for expert reports or search fees. Contrasting to the Small Claims Division, costs are not capped in this Division. Therefore, parties bear the onus of presenting evidence of what they believe to be fair and reasonable costs, and why they should be entitled to be paid such costs by the opponent.
How can you recover your legal costs in the Local Court?
You should contact a solicitor who can advise you on the best options available to you to increase the likelihood of receiving a costs order in your favour.
It is important to note that recovery of all costs (i.e. indemnity costs) is not guaranteed and rather is difficult to obtain. Matthews Folbigg has been successful in obtaining indemnity costs orders for its client due to certain techniques and strategies taken to increase the likelihood of receiving such costs order.
If you are currently involved in a legal proceeding or would simply like more information to see whether this avenue may be an option for you, contact a Principal of the Matthews Folbigg Insolvency, Restructuring & Debt Recovery Group:
Chairman
