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Watching a recent news broadcast a guest referred to a constitutional law expert said; "if you lose a court case, even on a technicality, the usual practice, the usual rule is that you have to pay the other sides costs".

This is something that I've just generally accepted as true without question, which has impacted my behaviour several times where I've considered contesting something, but wasn't sure I'd win, and the costs of just paying what was asked were low, a couple examples off the top of my head from personal experience are:

  • not having contested a parking ticket where there was no sign (I later found the sign in the bushes) with a time limit ($50)
  • paying late a late fee to a company where I paid the day before the new payment period ($10)

How common is it for someone bringing about legal challenge in Australia to be penalised with paying the legal costs of the defendant - is it just when the case is frivolous, or is it common when the case was genuinely ambiguous, but still went in favour of the defendant?

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  • The terminology you are using may cause confusion. For some purposes there is a distinction between costs (e.g. out of pocket filing fees) and attorney fees. The circumstances where each may be awarded may be different as may the standard for determining what amount is awarded when they are available. For example, attorney fees must be reasonable and may be subject to other limitations, while, costs are generally awardable based on the amount actually paid or incurred. I'll leave an expert to provide a fuller answer. – ohwilleke Oct 20 '20 at 11:08
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The short answer to your question is yes: the usual rule is that the losing side “pays the costs” of the winning side. In legal jargon, “costs follow the event.”

However, costs law is its own complex, specialised area of Australian law, often taught as part of a civil procedure course using Dal Pont’s textbook. There are three important caveats to the general rule.

First, costs are in the court’s discretion. The court may decline to order costs in favour of the winning party, or even order costs against the winning party, in appropriate cases. This 2017 article in Precedent summarises some cases in New South Wales where the usual rule was not applied.

Second, the general rule as to costs is part of general civil procedure – the default rules of court that apply to civil litigation in the Supreme and Federal Courts. While similar rules apply in the High Court, general civil procedure does not apply in criminal law, family law, or litigation in small claims tribunals. For example, section 117 of the Family Law Act provides that, subject to exceptions, “each party to proceedings under this Act shall bear his or her own costs.” The NSW Civil and Administrative Tribunal can order costs “only if it is satisfied that there are special circumstances warranting an award of costs.” The average person involved in a minor legal case is unlikely to have the benefit of the rule that costs follow the event.

Third, the usual order as to costs does not normally result in the successful party getting their costs fully reimbursed. As pointed out in the comments, there is a distinction between disbursements (fixed costs such as court fees, which are usually recoverable in full) and professional fees. The general rule is that professional fees are “taxed on a party-party basis,” meaning that the losing party is ordered to pay a standard amount assessed by the court, rather than the full amount actually paid by the winning party to their lawyers. In some cases the shortfall is more than 50%. In exceptional cases, the full amount may be ordered (“costs on an indemnity basis”). The details are highly court and fact specific. And ultimately, a costs judgment must be enforced like any other civil judgment – you won’t get paid if the debtor has no assets.

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Costs follow the event

Is the general rule in .

So, the loser (plaintiff or defendant) pays:

  • any damages,
  • fees of the court or tribunal,
  • their own costs,
  • the scheduled fees (party-party costs) of the winner.

Note that the scheduled fees are an assessed amount based on a legislated schedule and an assessment of a reasonable amount of effort the winner should have invested in the case. They are typically, for decent sized cases, between 50 and 66% of the actual amount you need to pay your legal team.

There are circumstances where you can get your full (reasonable) costs paid on a solicitor-client basis. The most common are:

  • where the loser engaged in the lawsuit with no realistic prospect of success
  • where you have made a genuine without prejudice save as to costs offer of settlement which was rejected and the final decision is better than your offer. You are entitled to solicitor-client costs from the time when the offer was made

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