Unlike some areas of litigation such as Personal Injury, a
client involved in commercial litigation proceedings will commonly
pay legal costs during the course of the proceedings.
A client who obtains a favourable judgment in commercial
litigation proceedings may consider applying to the Court for an
order that the unsuccessful party not only pay an amount of the
successful party's costs, but also an amount for interest on
Seeking an order for interest on costs
To recover interest on costs an order must be sought from the
Court pursuant to s101(4) of the Civil Procedure Act
An order for interest on costs should be sought by the
successful party at the time submissions on costs are made. Often
in litigation involving commercial disputes, an order for interest
on costs may be awarded when it is clear that costs have been paid
by a commercial client throughout the course of proceedings.
If an order for interest on costs is not sought prior to or at
the time the costs order is made then the successful party may
consider whether it should file an application with the Court
within 14 days after the costs order is entered by the Court. Such
application is made by way of Notice of Motion and the Motion will
need to seek an order varying the original costs order pursuant to
UCPR r 36.16(3A) and seek an order for the payment of interest on
costs of the successful party to the proceedings.
Awarding interest on costs
The purpose of making an order for interest on costs is to
compensate a party who is out of pocket as a result of paying costs
to its legal representatives during the course of proceedings.
Campbell J noted at paragraph 82 of Joseph@Lahoud@ and Anor
v Victor Lahoud and Ors  NSWSC 126 (10 March 2006)
("Lahoud v Lahoud"), that before an order for interest on
costs is made, there is no requirement to satisfy the Court that
the circumstances of the proceedings are out of the ordinary.
Form of interest on costs order
The general form of the interest on costs order is set out in
the judgment in of Lahoud@ v Lahoud.@ It should be noted
that the judgment refers to Schedule 5 of the Uniform Civil
Procedure Rules 2005 ("UCPR") which has now been
repealed. From 1 July 2010, UCPR 36.7(1) has set out the rate of
post-judgment interest under s101(4) of the Civil Procedure
In accordance with the judgment of Lahoud@ v Lahoud ,
the orders sought by a successful party awarded costs, should be as
the [unsuccessful party] is to pay the [successful party]
interest on the [successful party's] costs and disbursements as
assessed or agreed:
at the rate from time to time applicable set out in UCPR r
on the Allowed Percentage of each amount of costs and
disbursements actually paid by the [successful party]; and
from the date of payment by the [successful party] of each such
amount of costs and disbursements until such time as costs due to
the [successful party] under these orders have been paid.
The Allowed Percentage equals ((y/x) x 100)%
X – equals the total amount of costs and disbursements
which the [successful party] has paid or is liable to pay in
connection with these proceedings.
Y – equals the total amount of costs and disbursements
allowed to the [successful party] in connection with these
proceedings as agreed or assessed.
2. Grant liberty to either party to restore upon 3 days'
Payment of interest on costs
If a successful party obtains an order for costs and also an
order for interest on costs, the costs of the proceedings will need
to be agreed between the parties or assessed by a court appointed
Following the agreement or assessment of the costs payable by
the unsuccessful party, the interest payable on those costs can be
calculated using the above formula.
If agreement cannot be reached on the interest payable on the
costs, the matter should be re-listed before the Court to seek
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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This was an interlocutory decision about the appointment of a tutor for the child appellant, to carry on his proceedings.
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