Lump Sum cost orders and changes to the Federal Court Costs Practice

Litigation practitioners should be aware of the significant changes to the practice of cost recovery in the Federal Court resulting from the publication of the Costs Practice Note on 25 October 2016.

Taxations of costs will now be the exception with the Court’s preference being to utilise lump-sum cost orders, consolidated cost orders, the cost estimation process and alternative dispute resolution as the means of resolving cost disputes. In fact, the use of the estimation process has been the main means of resolving costs in the Federal Court for many years, taxations being unusual. However the Court has taken a significant step to limit matters requiring the preparation of the bill of costs by indicating a preference for making a lump sum cost order.

Whilst the making of a lump sum cost order remains in the discretion of the judge, the Practice Note envisages that lump-sum cost applications will dealt with speedily. In the case of straightforward matters, the application will be dealt with during closing submissions or as soon as possible thereafter. In more complex matters, the cost hearing will take place within six weeks following the cost order or as soon as possible thereafter having regard to the issues in consideration.

This therefore requires practitioners to consider not just the cost orders to be sought, but also whether the lump-sum cost procedure is suitable and whether material should be put before the Court at an early stage as to whether the party considers such a procedure should be utilised. In straightforward matters, practitioners will need to prepare material going to the quantum of costs prior to final orders being made, given that the quantum will be dealt with as part of the order awarding costs.

Annexures A to the Practice Note is a guide to preparing the costs summary which is to be filed in support of a lump sum claim. Of particular note is that the Annexure, by implication, recognises that costs are recoverable by reference to the Court scale, unless the cost order provides to the contrary. Matters relevant to the quantification of the lump-sum which had to be detailed in the cost summary include:

  • how the lump-sum has been calculated and whether any discounts of been applied
  • an estimate of the proportion of total costs by category of work
  • details of any skill care and responsibility claim
  • details of any unusual cost arrangements, with an example being conditional fee agreements and pro bono arrangements
  • an explanation as to whether the amounts claimed for within or outside any item under the scale.

Presumably, this last aspect is designed to accommodate the fact that many scale items are not time based.

The Practice Note requires the cost summary to be “clear, concise and direct and not resemble a bill of costs in taxable form, nor should it contain submissions on the law”. It is not to exceed five pages without leave of the court (10 pages in large or complex cases).

A party required to pay costs may file an affidavit in response of no more than five pages (eight pages in large or complex cases). In addition, with leave, the parties may file short written submissions (of no more than three pages).

Other matters of note in the practice note are:

  • the Court has clarified the position in relation to how GST is to be dealt with, with a party not entitled to an input tax credit being able to recover GST on disbursements and a GST inclusive hourly rate to apply in respect of any work recoverable by reference to scale item 1.1.
  • a party must disclose its entitlement to claim an input tax credit in both cost summaries and bills of costs.
  • the form of the bill of costs has changed, with the inclusion of tables of rates for both lawyers and counsel, a new part C in which any particular special comments about the bill are to be detailed, and a requirement to confirm that there has been no breach of the indemnity principle.

Those preparing bills of costs should have particular regard to Annexure B to the Practice Note –Guide for Preparing a Bill of Costs. The Practice Note sets out in detail the various approaches which should be avoided in preparing the bill. These include avoiding grouping different tasks into a single bill item and ensuring that the rate applied reflects the nature of the work, rather than the status of the person undertaking the work. It also requires that GST be applied on an item by item basis rather than claimed as a single figure at the end of the bill.

The Practice Note is aimed at reducing the time and costs involved in quantifying costs recoverable by a party with the benefit of a cost order. However it does require litigation practitioners to give careful consideration to the possible costs orders and procedure for quantification well prior to final orders being made. The Practice Note does not address the position where a matter is resolved on a plus costs basis. In circumstances where the matter has not being dealt by Judge it is less likely that a lump sum cost order would be made.

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