Who pays the legal costs in a court case?

Costs follow the event

In a civil case, the losing party is usually ordered to pay a contribution towards the winning party's legal costs. These are called party-and-party costs. They are different from solicitor-and-client costs, which are what each party owes its own lawyer.

Party-and-party costs usually fall short of what the winner has actually paid, so even a successful party should expect to bear part of its own legal costs.

How the court decides

Under the Rules of Court 2021, the court has a broad discretion over costs. It looks at all the circumstances, including the parties' efforts to resolve the dispute amicably, how they conducted the case, how complex it was, and whether the costs are proportionate.

Costs are usually assessed on the 'standard' basis. A more generous 'indemnity' basis is reserved for exceptional situations, such as where a party has behaved improperly or a contract provides for it.

Settlement offers

The earlier rules on formal offers to settle, which carried automatic costs consequences, no longer apply. A reasonable offer that the other side unreasonably refuses can still be taken into account when the court decides costs.

Small claims

Lawyers cannot appear in the Small Claims Tribunals or the Employment Claims Tribunals, and legal costs are typically not awarded there.

Ask about costs early

Before starting or defending a claim, ask your lawyer for an estimate of your own costs and of the costs you might recover or have to pay. It is an important part of deciding whether, and how, to go ahead.