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Abraham, Romaine --- "Costs column: Changes recommended to the calculation of litigious costs in Victoria" [2022] PrecedentAULA 68; (2022) 173 Precedent 47

CHANGES RECOMMENDED TO THE CALCULATION OF LITIGIOUS COSTS IN VICTORIA

By Romaine Abraham

The system by which litigious costs are calculated and fixed in Victoria will be subject to a complete overhaul if the recommendations contained in the Report on Litigious Costs^[1] (Report), released by the Supreme Court of Victoria and the County Court of Victoria on 23 August 2022, are implemented. The Report, authored by the Hon Justice Jack Forrest and the Hon Kathryn Kings, sets out the findings of a comprehensive review of the basis on which costs are calculated pursuant to an award of costs to a successful party in civil proceedings.

BACKGROUND

The review was undertaken on the recommendation of the Legal Costs Committee and by approval of the Supreme Court Council of Judges. Under s93 of the Legal Profession Uniform Law Application Act 2014 (Vic), the Legal Costs Committee has the power to make inquiries into and report on: any alternative system to the current scales of costs; inconsistencies between jurisdictions regarding the scales of costs; and any other matter which the Legal Costs Committee considers could render the conduct of litigation less costly. The authors of the Report were commissioned to investigate whether it was appropriate to continue to use the scale of costs as the basis on which costs are calculated, or whether another model or system should be adopted in its place.

CURRENT METHOD OF COSTS ASSESSMENT IN VICTORIA

The scale of costs is used to calculate the quantum of costs sought and ultimately fixed (either by agreement or through the taxation process) pursuant to an award of costs in litigation. Critically, in Victoria, the relevant jurisdictional scale of costs must be used to enforce a costs order (or agreement) against another party or parties. An itemised bill of costs must be prepared in accordance with the applicable scale of costs if a matter proceeds to an inter partes taxation of costs conducted in the Costs Court.

The scale of costs used in inter partes costs matters arising from orders made in the Supreme Court of Victoria (located within Appendix A of the Supreme Court (General Civil Procedure) Rules 2015 (Vic)) marks a set fee for discrete work performed, such as the reading or preparation of documents.^[2] The scale of costs also sets an amount for timed attendances – able to be claimed in six-minute units – such as an attendance to confer or appear at hearing, and at three different rates or skill levels.

STATUTORY AND POLICY OBJECTIVES UNDERSCORING AN AWARD OF COSTS

The review considered in detail how use of the scale of costs compared to the policy and legislative objectives codified in the Civil Procedure Act 2010 (Vic) (CPA 2010) and the Legal Profession Uniform Law (Vic) (Uniform Law).^[3] Policy and statutory considerations that underscore an award of litigious costs identified in the Report include the following:

• Costs assessment structures should enable access to justice. The authors of the Report considered the prohibitive expense of litigation as detrimental to equal access to justice.

• Legal costs expended must be reasonable and proportionate to the claim; that is, reasonable and proportionate to the complexity or importance of the issues in dispute and the disputed quantum, in accordance with s24 of the CPA 2010. The overarching purpose of the CPA 2010 is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute in civil proceedings: see s7.

• The costs assessment method should be transparent to legal practitioners and clients. It must be noted that an objective of pt 4.3 of the Uniform Law is to safeguard informed decision-making by clients as to their legal options and the costs of pursuing such options. Strict costs disclosure obligations mandated by pt 4.3 – violations of which render a costs agreement void – are reflective of this objective.

• The costs assessment system should facilitate certainty and predictability.

• Methods of costs assessment must be accessible, cost-effective and efficient to apply in everyday practice.

• Methods of costs assessment must provide flexibility to adapt to the continually evolving forms of charging and use of technology in practice. The Report notes that the Legal Services Commissioner commends the use of innovative pricing models, such as fixed price models, that move away from time costing models.

• Empirical evidence must inform costs assessment methods.

• An award of costs in litigation is intended to compensate the successful party.

RECOMMENDATIONS OF THE REPORT

The Report recommended that the scale of costs currently used to calculate an inter partes costs entitlement be discarded and replaced with time costing (with a further recommendation that time costing guidelines be developed by the Legal Costs Committee, similar to the guidelines promulgated in NSW by the Costs Assessment Rules Committee).^[4]

The Report also recommended introducing a prospective costs scheme, based on the English and Welsh litigious costs model, to the Supreme and County Courts, which would introduce fixed costs for certain types of matters, such as testators in family maintenance proceedings, with the remainder of matters requiring Court approval of costs budgets soon after a proceeding is commenced.^[5] Finally, the Report endorsed the continuation of the Costs Court as the costs assessor (assigned under the Uniform Law), and the definitive arbiter of inter partes and solicitor and own client costs disputes.^[6]

These recommendations were based on the conclusion that the scale of costs was inadequate in current legal practice. It was asserted that the scale of costs did not meet the statutory or policy objectives identified, nor did it reflect the charging practices used in most legal practices. The scale was further described as ‘opaque’ and difficult to understand, both for clients and practitioners. Moreover, the critical aim of proportionate costs was not facilitated by use of the scale.^[7]

The Supreme Court and County Court have both endorsed the recommendations made in the Report. There will now be further consultation regarding transition and the implementation of a new system of costs assessment and, if the new system is adopted, there will be a significant change to how litigious costs are calculated in Victoria.

Romaine Abraham is a costs lawyer based in Melbourne, Victoria.

^[1] Supreme Court of Victoria and County Court of Victoria, JJ Forrest and K Kings, Report on Litigious Costs (3 May 2022) <https://www.supremecourt.vic.gov.au/news/report-on-litigious-costs>.

^[2] In accordance with r1.13 of the County Court Civil Procedure Rules 2018 (Vic), the County Court scale of costs is 80 per cent of the Supreme Court scale of costs.

^[3] Legal Profession Uniform Law Application Act 2014 (Vic), sch 1.

^[4] Supreme Court of Victoria and County Court of Victoria, JJ Forrest and K Kings, Report on Litigious Costs (3 May 2022) 2.

^[5] Ibid.

^[6] Ibid.

^[7] Ibid, 1.