In 2007, two Practice Directions changed the system of legal costs recovery in Queensland in one of the two traditional avenues for resolution of commercial building disputes: the Supreme Court of Queensland.
The Practice Directions
The first of the relevant Practice Directions (No 3 of 2007) is intended to encourage parties to a dispute to agree the amount of costs that would otherwise have to be assessed (or 'taxed' in the language of the old system). Practice Direction No 3 also provides that, where it would avoid undue delay and expense, the court may fix the costs for the parties rather than send them away to assess or tax the costs, provided that the parties can provide enough information for the court to reliably fix the costs.
The second relevant Practice Direction (No 7 of 2007 dated 28 June 2007) made interim arrangements for both 'party and party assessments', ie assessments between the parties to a Supreme Court dispute of the costs of that dispute and the costs of solicitor and client assessments.
With effect from December 2007, this Practice Direction No 7 became a new Chapter 17A of the Supreme Court Rules known as the Uniform Civil Procedure Rules (UCPR). Consequently, Practice Direction No 7 was repealed from 17 December 2008.
To appreciate the changes made by the new system it is useful to compare what happened under an assessment in the old system and what might happen under a new system assessment.
An Assessment Prior To 2007
Assume a building case fought through pleadings, discovery and trial to judgment in the Supreme Court. Here:
- The judge would usually award costs, sometimes in a separate judgment. It would be unusual for him or her to fix the amount of costs. (This has become common in the Federal Court or Supreme Court of New South Wales.)
- The successful party would then prepare and file a bill or 'costs statement', in size and detail something like a bill of quantities. The costs statement would detail each item of work and its charge.
- A registrar of the court would then hold a directions hearing.
- Dates would then be set for the making of detailed objections to the costs statement and the hearing of the assessment before a registrar.
- At any time up to two business days before the hearing of the assessment, the party liable to pay the costs could make an offer to settle the costs which, if not accepted, would regulate the costs of the assessment (including the court fee).
- The registrar's powers included power to allow amendment or addition to the costs statement.
- The assessment would then ordinarily proceed item by item in the costs statement, by allowance or disallowance of each item, until the whole of the costs statement had been allowed or disallowed.
What Motivated The Supreme Court To Change The Old System?
The Supreme Court felt that:
- The old system worked inefficiently by putting a successful party seeking recovery of costs awarded to unnecessary delay and expense.
- The assessment of indemnity costs, ie the assessment of costs intended to allow a successful party recovery of all costs incurred except for those unreasonably incurred, was in most cases yielding the successful party 60% or less of what they had claimed.
- The assessment of standard costs ie assessments intended to allow a successful party 'necessary or proper' costs had fallen to arguably parsimonious levels. Often, the successful party was only allowed marginal recovery which prompted litigants to use the Supreme Courts of other States to seek a more generous measure of cost recovery.
Hennessey Glass and Aluminium Pty Ltd v Watpac Australia Pty Ltd  QDC 57 demonstrates the often drawn out process provided by the old system and how appeals were necessary to overturn a less than generous assessment on costs. In this case, the plaintiff, represented by DLA Phillips Fox, claimed from the defendant, a building contractor, money alleged to be owing under a subcontract between the parties. Following three years of litigation and expert determination the dispute was settled by deed on 7 March 2003. Under the deed the defendant agreed to pay the plaintiff about two thirds of its claim together with costs of the proceedings to be assessed on the standard basis.
The plaintiff then filed an application (a costs statement) for costs assessment claiming expenses of $141,054.14, including $81,587.54 for 'outlays'.
Following an assessment, the registrar allowed the plaintiff's costs including outlays at a total of about 30% of the amount claimed.
The plaintiff successfully appealed this result and ultimately recovered a large part of the costs disallowed.
The New System – Who Does What?
The judge does what he or she did under the old system and in addition they may be prepared to fix costs. Parties may find it advantageous to ask the judge to fix the costs. In most cases the registrar will no longer assess costs awarded but refer them to a costs assessor.
The costs assessor will prepare a costs statement. This will be done 'on the papers' and a certificate of the assessment is then filed. This certificate operates as a judgment.
The costs assessor is a private sector service provider and should be chosen carefully. The preparation of a costs statement, which was the work of costs assessors under the old system, is not an assessment. Care should also be taken to ensure that the order by the registrar provides for matters including the appointment of an accredited assessor, the scope of the assessment, the procedure to be followed by the assessor and his or her powers.
On a party and party assessment the costs assessor will usually assess standard costs rather than indemnity costs. The assessor must then allow 'all costs necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being assessed'. The words are the same as those in force under the old system and encapsulate the principle that the successful party should be the one to pay for any luxuries.
Maximising the recovery of costs if you were a successful party or containing the liability if you were unsuccessful usually required particular advice and assistance before 2007. While the new system allows for a more generous measure of recovery, skilled help is still essential to ensure this measure of recovery is realised.
When choosing the service provider providing the cost assessment, consider their level of experience in the work to be done. It's a new market which means that not all providers have the experience required.
The powers to be given to the assessor also needs to be carefully considered in that they are provided with the powers necessary to do their job.
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