If you feel you have been "ripped off" or ill-done by
in a commercial matter, beware! This emotive response can sometimes
lead to poor judgement when deciding whether or not to litigate in
certain situations. Simply being "right" is not always
synonymous with being commercial. Time and time again a litigator
is required to ensure that his or her client understands the
commercial realities of pursuing their principles.
The Harsh Reality
Unfortunately, when litigating commercial matters, even if you
are guaranteed a 'win' in the Court, you may end up losing
considerable money and time in the process.
The Local Court of New South Wales has a monetary jurisdictional
limit of $100,000 or $120,000 by consent. However, there is a
further separation between the small claims division (up to
$10,000) and the general division ($10,001 to $100,000, or $120,000
by consent). This division has a major effect on the amount of
costs that can be awarded to a successful litigant.
For example, as at April 2014, the maximum amount of costs that
can be awarded to a successful plaintiff for a liquidated claim in
the sum of $9,000 is $697.60.
The reason for the relatively low limit of costs that can be
awarded is that the Court wants to encourage litigants in the small
claims division to represent themselves, as opposed to appointing
lawyers. The small claims division is a less formal division with
hearings being conducted by Assessors as opposed to
This is not to say that all matters in the small claims division
should not be litigated by a lawyer. However, parties should be
aware of all of the circumstances before rushing off in the heat of
the moment, retaining a lawyer, litigating, and then being unable
to recover the cost of the legal proceeding - which may end up
being more than the claim amount.
What About Larger Scale Debts?
This principle is also applicable to larger scale debts which
may fall in other court jurisdictions. Generally speaking legal
costs are awarded to a successful litigant on the basis of any of
Party/Party Costs – The most common basis on which costs
are awarded. As a rule of thumb the costs recoverable from an
unsuccessful litigant will be between 60% and 70% of a successful
litigant's legal costs. This still means that about 30% to 40%
of a successful litigant's legal bill will be paid out of their
Indemnity Costs – These costs are generally awarded in
circumstances surrounding rejected offers of settlement or where
carriage of a matter has been so lacking that a Court is satisfied
a pecuniary costs order is warranted. Generally, recoverable
indemnity costs are between 70% and 80% of a successful
litigant's legal costs.
Solicitor/Client Costs – These costs are often
interchangeable with indemnity costs however are generally believed
to be higher than indemnity costs.
Adopt a Rational Approach
Commencing litigation should be seen as a potential investment
as opposed to a witch hunt. Parties should ask themselves one
simple question; is it worth spending $X and Y months in the
pursuit of $Z?
In answering this question a general action plan should be drawn
up to determine the various steps involved in litigation. Once a
larger picture is painted it is easier to calm the frustration of
feeling 'ripped off' and make a pragmatic decision as to
how to pursue a legal entitlement.
Parties should ensure they have a full and frank discussion with
their legal practitioner as to what the potential cost of
litigating a matter could be. This may end up being the deciding
factor in whether the better commercial approach would be to
negotiate or litigate.
If you have an issue with a commercial legal matter and are
unsure as to the best way forward, contact our experienced team for
commercially practical, and realistic, advice.
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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