Recovering Legal Costs in Queensland Courts, Federal Courts and QCAT

Key Takeaways

• Costs follow the event in Queensland and Federal courts. Standard basis recovery is 60 to 75 per cent of actual fees. Indemnity basis recovery is 90 to 95 per cent. With proper contractual costs clauses drafted before a dispute, the recovery gap can be minimised from the start.
• Scale costs on default judgments are modest across all Queensland courts. In the Magistrates Court, a debt of $20,001 to $50,000 yields a scale amount of approximately $333. In practice you claim scale costs on default judgment for a quick registrar decision and move straight to enforcement. If your contract entitles you to indemnity costs, the balance can be pursued separately.
• Indemnity costs require the party seeking them to establish some special or unusual feature: Colgate-Palmolive Co v Cussons (1993) 46 FCR 225. The recognised categories include making allegations of fraud known to be false, pursuing a hopeless case, misconduct causing loss of court time and unreasonable refusal of a settlement offer.
• A well-timed UCPR Rule 361 offer or Calderbank offer can shift the costs burden dramatically. Sophisticated practitioners use both simultaneously: the Rule 361 offer as a safety net with automatic consequences, and the Calderbank offer as a parallel strategy targeting indemnity costs.
• Interlocutory costs are not always reserved to the final hearing. Courts can and do order them payable forthwith where the application was discrete and separately identifiable from the substantive issues: Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432.
• Since Birketu v Atanaskovic [2025] HCA 2, law firms can recover costs for work performed by their employed solicitors. But partners representing themselves still cannot recover professional costs after Bell Lawyers v Pentelow [2019] HCA 29 abolished the Chorley exception.
• QCAT and the Fair Work Commission are no-costs jurisdictions by default. The exceptions exist but are applied sparingly. If costs recovery matters to you, consider carefully whether you are in the right forum.

1. 1.The General Rule: Costs Follow the Event
2. 2.Standard Basis vs Indemnity Basis: What the Numbers Mean
3. 3.Crossing the Threshold for Indemnity Costs
4. 4.Types of Costs Orders
5. 5.Scale Costs and Default Judgment
6. 6.The Costs Assessment Process
7. 7.Settlement Offers and Costs Consequences
8. 8.Interlocutory Costs: Reserved, Forthwith or Something Else
9. 9.The No-Costs Jurisdictions: QCAT and Fair Work
10. 10.Lawyers Recovering Their Own Costs
11. 11.Security for Costs
12. 12.Practical Strategies for Maximising Recovery

Costs recovery is one of the most misunderstood areas of litigation strategy. In Queensland and Federal courts, costs generally follow the event, meaning the unsuccessful party pays the successful party's costs. On a standard basis assessment, recovery sits between 60 and 75 per cent of actual legal fees. On an indemnity basis, it climbs to around 90 to 95 per cent. With the right contractual costs clause in place before a dispute arises, the gap between what you spend and what you recover can narrow significantly.

In some jurisdictions, however, the default position is that each party bears their own costs regardless of outcome. QCAT operates this way. So does the Fair Work Commission under section 570 of the Fair Work Act 2009 (Cth). Forum selection matters.

This guide explains how the costs framework operates in practice: the rules, the cases and the tactical decisions that determine how much you recover. Getting costs strategy right from the outset is one of the most impactful things a litigant can do.

Need advice on costs recovery or costs strategy? Contact Astris Law on (07) 3519 5616 for a confidential discussion.

The General Rule: Costs Follow the Event

Rule 681 of the Uniform Civil Procedure Rules 1999 (Qld) provides that costs of a proceeding, including an application in a proceeding, are in the discretion of the court but follow the event, unless the court orders otherwise.

The principle is compensatory. It partially indemnifies the successful party for the expense of having to come to court to vindicate their rights. Even with a costs order in your favour, there is typically a gap between what you paid your solicitor and what you recover from the other side on a standard basis assessment. How large that gap is depends on a range of factors: the basis of assessment, whether a contractual costs clause applies, the reasonableness of the fees charged and the quality of the costs evidence. Proper planning before and during the proceeding directly affects the recovery outcome.

In the Federal Court, the same principle applies under section 43 of the Federal Court of Australia Act 1976 (Cth), which gives the court broad discretion over costs. The court may make costs awards at any stage, make different awards for different parts of a proceeding, order parties to bear costs in specified proportions, order costs against a successful party on particular issues, order a legal practitioner to personally bear costs (a wasted costs order) and order costs on an indemnity basis. This is a wide-ranging discretion, but in practice, the starting point remains the same: the successful litigant receives costs absent special circumstances.

Standard Basis vs Indemnity Basis: What the Numbers Mean

When a court orders costs, they are assessed on one of two bases. The difference between them has a direct impact on the financial outcome of the proceeding.

Standard basis (UCPR Rule 702)

On a standard basis, the costs assessor allows all costs necessary or proper for the attainment of justice or for enforcing or defending the rights of a party. This is the default. In practice, it results in recovery of approximately 60 to 75 per cent of actual legal fees. Items that were incurred but were not strictly essential to the conduct of the proceeding are disallowed. The assessment is restrictive. The older terminology for this was "party-party costs" and you will still see that phrase in older judgments.

Indemnity basis (UCPR Rule 703)

On an indemnity basis, the scope broadens to all costs reasonably incurred and of a reasonable amount. Recovery is approximately 90 to 95 per cent. The assessor only disallows items that were unreasonably incurred or of unreasonable amount. The assessment has regard to the prescribed scale, any costs agreement between the party and their solicitor and the charges ordinarily payable by clients to solicitors in the relevant jurisdiction. The older terminology was "solicitor-client costs" and there was historically a third, even higher category called "solicitor-own client costs" which has now been effectively absorbed into the indemnity basis.

What this means in dollar terms

If your solicitor's invoices for the proceeding total $100,000, a standard basis assessment might yield $60,000 to $75,000. An indemnity assessment might yield $90,000 to $95,000. That difference of $15,000 to $35,000 is why costs strategy is not an afterthought. A well-drafted contractual costs clause, a well-timed settlement offer or conduct by the other side that justifies an indemnity order can each close that gap substantially. The costs outcome is not fixed. It responds to how the litigation is run.

It is also worth understanding the relationship between what your solicitor charges you and what you recover from the other side. A costs agreement between you and your solicitor is a contractual matter governed by the Legal Profession Act 2007 (Qld). Your solicitor's fees might be perfectly reasonable as between you and them, but the costs assessor assesses what is recoverable from the unsuccessful party by reference to the court's scale, not your retainer. Section 323 of the Legal Profession Act requires solicitors to disclose this distinction to clients in litigious matters.

Crossing the Threshold for Indemnity Costs

Indemnity costs require clearing a genuine hurdle, but the circumstances that trigger them are well-established and common in commercial litigation. The leading authority is Colgate-Palmolive Co v Cussons (1993) 46 FCR 225, where Sheppard J held that indemnity costs are awarded where there is "some special or unusual feature" of the case justifying such an order. The High Court in Oshlack v Richmond River Council [1998] HCA 11 described the requirement as "some relevant delinquency" on the part of the unsuccessful party.

The established categories from Colgate-Palmolive and subsequent cases include:

Making allegations of fraud that are known to be false, or that are irrelevant to the issues in the proceeding. In White Industries (Qld) Pty Ltd v Flower & Hart [1998] FCA 806, unjustified allegations of fraud were sufficient to ground both personal and indemnity costs orders. The important qualification is that allegations of fraud not sustained at trial do not automatically trigger indemnity costs. The party seeking the order must show the allegations were made knowing them to be false or that they were irrelevant.

Pursuing a hopeless case. The test is whether the party knew or should have known, on proper consideration, that the case was hopeless. This is a high bar. Without a full hearing, a court is generally reluctant to conclude that a case was truly hopeless, because it cannot fully assess the merits without hearing the evidence.

Misconduct causing loss of time. This covers obstruction, failure to comply with court orders, non-disclosure, deliberate prolongation of the proceeding and generally making the litigation more expensive and time-consuming than it needed to be.

Proceedings commenced or continued for an ulterior purpose, such as delay, harassment or commercial leverage. This is abuse of process territory. In the Federal Court proceedings arising from Network Ten v Lehrmann, Lee J found that litigation conducted as an abuse of process justified indemnity costs for the substantial majority of the trial.

Undue prolongation by groundless contentions, meaning advancing issues that ought never to have been raised and wasting the court's and the other party's resources on points that had no sound basis.

Wilful disregard of known facts or clearly established law. This requires an element of knowledge or recklessness, not mere error. A party who continues to press a claim despite knowing that the facts contradict their case, or who relies on arguments that are contrary to clearly established authority, crosses the line.

Imprudent refusal of a settlement offer. This is the category that intersects with Calderbank offers and is dealt with in detail below.

In Queensland, the Court of Appeal in Grice v State of Queensland [2005] QCA 298 awarded indemnity costs where the State appealed a modest District Court judgment of approximately $33,000 on a weak point of principle and had failed to beat a Calderbank offer. More recently, in Surman v Gateway Lawyers (A Firm) (No 2) [2025] QSC 346, the Supreme Court ordered standard costs up to a certain date and indemnity costs thereafter, illustrating how the court calibrates the order to the conduct.

One area worth noting: unreasonable refusal to mediate has not, on its own, been held sufficient to justify indemnity costs in any reported Australian decision. But refusal to mediate combined with other conduct, such as rejection of reasonable settlement offers or obstruction, may form part of the overall picture.

Types of Costs Orders

The court is not limited to a binary choice between standard and indemnity costs. Rule 687 of the UCPR provides six alternatives:

Assessed costs are the default. A costs assessor reviews the costs statement line by line and determines the amount payable.

Fixed costs are where the court itself sets a specific dollar amount, dispensing with the assessment process entirely. This is a discretionary power and requires the court to be satisfied it can reliably estimate costs. It is not the same as scale costs. Scale costs are the prescribed amounts in the UCPR Schedules that an assessor uses as the reference point. Fixed costs are what the court orders when it decides to bypass the assessment altogether.

Lump sum costs are similar to fixed costs and the terms are sometimes used interchangeably in practice. The court fixes a gross amount based on evidence of costs incurred without going through a line-by-line assessment.

Specified percentage orders direct payment of a nominated percentage of assessed costs. Useful where a party succeeded on some issues but not others, or where conduct on one issue was unreasonable.

Limited stage costs restrict the order to a particular phase of the proceeding, for example costs of an interlocutory application only.

Court-directed costs allow the court to determine costs in whatever manner it considers appropriate.

The practical takeaway is that you are not locked into the full assessment process. Seeking a fixed or lump sum order at the time of judgment can save months and thousands of dollars. Practice Direction 3 of 2007 (Amended), which applies in both the Supreme Court and District Court of Queensland, actively encourages parties to agree on costs and signals the court's willingness to fix costs where the approach to estimating them is logical, fair and reasonable. The Federal Court similarly favours lump sum costs under Rule 40.02 of the Federal Court Rules 2011.

Scale Costs and Default Judgment

Understanding the terminology

Scale costs are not fixed costs. This is a common source of confusion. Scale costs are the prescribed amounts in the UCPR Schedules that the costs assessor uses as the reference point when assessing a bill. Fixed costs are a specific dollar amount the court orders under Rule 687, bypassing the assessment process. When you obtain a default judgment, the costs you are entitled to claim are determined by reference to the relevant schedule.

Default judgment

When you obtain default judgment, the costs you are entitled to claim are determined by reference to the relevant schedule for the court in which the judgment is entered. In the Magistrates Court, the scale amounts under Schedule 2 are based on the claim value and are modest by design. In the Supreme Court and District Court, the scale amounts under Schedule 1 are higher but the principle is the same.

The point of scale costs on default judgment is administrative efficiency. You are not arguing costs before a judge. You are filing the request with a registrar. Claiming scale costs is a quick step that lets you move straight to enforcement. If the underlying contract contains an indemnity costs clause, the balance can be pursued separately if the quantum justifies the effort.

Care and conduct allowance

On top of the base scale in Schedule 1, Item 1 allows a general care and conduct uplift reflecting the complexity and difficulty of the matter. The brackets are: 15 to 20 per cent for straightforward claims up to $2 million, 20 to 25 per cent for straightforward claims over $2 million, 20 to 30 per cent for complex claims up to $2 million, and 25 to 35 per cent for complex claims over $2 million. Rule 691(5) also permits the court to allow an increase of up to 30 per cent where the nature, importance, difficulty or urgency of the proceeding justifies it.

Which court assesses the bill?

The jurisdictional allocation for costs assessment in Queensland is: bills of $150,000 or less are assessed in the Magistrates Court, bills over $150,000 and up to $750,000 are assessed in the District Court, and bills over $750,000 are assessed in the Supreme Court.

The Costs Assessment Process

Once you have a costs order in your favour in Queensland, the formal assessment process under UCPR Rules 706 to 711 follows a structured path.

The entitled party prepares and serves a detailed costs statement on the paying party. The paying party then has 21 days to serve a notice of objection under Rule 706, with concise reasons identifying specific issues of law or fact. This 21-day window is a natural pressure point. Many costs disputes settle during this period because both sides know what comes next if they do not.

If no objection is served, Rule 708 allows the entitled party to apply for a default costs assessment, which is essentially an assessment without the paying party's participation. The paying party can apply to set aside a default assessment under Rule 709, but the grounds are limited.

If objections are filed, Rule 710 provides for a formal assessment application. The application must be served within 7 days under Rule 711. From there, the matter proceeds to a costs assessor who reviews the bill, considers the objections and determines the amount payable.

Under Rule 707, parties can agree on the costs amount at any stage without formal assessment. In practice, this is where a significant proportion of costs disputes resolve, particularly after the costs statement has been served and the paying party can see the quantum and detail of what is being claimed.

In the Federal Court, Division 40 of the Federal Court Rules 2011 provides for a bill of costs process. Rule 40.18 prescribes the bill format. Rule 40.19 deals with service. Rule 40.20 provides for the Registrar to prepare an estimate in the absence of parties. Rule 40.21 covers objections and confidential conferences. If matters cannot be resolved, Rule 40.27 provides for formal taxation hearings. But the Federal Court strongly prefers lump sum costs orders after final hearings to avoid this entire process.

Settlement Offers and Costs Consequences

This is where costs strategy becomes genuinely consequential. A well-timed settlement offer can transform the financial outcome of litigation regardless of the substantive result.

UCPR Rule 361 offers

The 2023 amendments to Rules 360 to 361 and the insertion of Rule 361A modernised Queensland's formal offer regime. Under Rule 361, if a defendant makes a formal offer to settle and the plaintiff does not accept it, and the plaintiff ultimately obtains a judgment that is not more favourable than the offer, the costs consequences are automatic. The defendant receives an order that the plaintiff pay the defendant's costs on a standard basis from the date of service of the offer.

Consider what this means in practice. A defendant offers $165,000 on 1 August. The plaintiff rejects the offer and proceeds to trial. The court awards the plaintiff $160,000 on 1 June the following year. The plaintiff recovers their own costs only up to 1 August. From 1 August onwards, the plaintiff pays the defendant's costs. Given that most of the costs in a proceeding are incurred between the offer and trial, the net financial result can be dramatic. A plaintiff who "won" on the merits can end up in a worse financial position than if they had accepted the offer.

The Rule 361 mechanism is a guillotine. Its application is objective and predetermined. The court does not exercise discretion over whether the consequences apply. If the threshold is met, the costs shift automatically.

Calderbank offers

A Calderbank offer is a settlement offer made "without prejudice save as to costs". It operates outside the formal rules and its costs consequences are discretionary rather than automatic. The court examines whether the rejection of the offer was unreasonable in all the circumstances.

The courts apply a multi-factor test when assessing whether rejection of a Calderbank offer was unreasonable. The factors include: the stage of the proceeding when the offer was made; the time allowed to consider the offer; the extent of the genuine compromise reflected in the offer; the offeree's prospects of success as assessed at the date of the offer (the court assesses reasonableness at the time of the offer, not with hindsight); the clarity of the offer's terms; and whether the letter notified the offeree of the costs consequences of non-acceptance.

The advantage of a Calderbank offer over a Rule 361 offer is the potential for indemnity costs. If the court finds the rejection was unreasonable, it can order costs on the indemnity basis from the date of the offer, which recovers far more than the standard basis available under Rule 361. In Grice v State of Queensland [2005] QCA 298, the combination of a weak appeal and an unbeaten Calderbank offer was sufficient for indemnity costs.

The dual strategy

Experienced litigators frequently deploy both mechanisms simultaneously. A formal UCPR Rule 361 offer creates an automatic safety net. A parallel Calderbank offer, served separately and in different terms, creates the prospect of indemnity costs if the rejection was unreasonable. It is belt and braces, and it is particularly effective in cases where the quantum is clear but the other side is being unrealistic.

Interlocutory Costs: Reserved, Forthwith or Something Else

A common misconception is that costs of interlocutory applications are always "reserved" to the final hearing and cannot be pursued until the proceeding concludes. That is the default position, but courts regularly depart from it.

What the different orders mean

The terminology around interlocutory costs is precise and each formulation has distinct consequences.

Costs in the cause means the costs of the interlocutory application will be awarded to whichever party succeeds overall at trial. If you win the interlocutory application but lose at trial, you get nothing for that application.

Costs reserved means the court defers its decision on who pays until a later stage, typically the conclusion of the proceeding. If no subsequent order is made, reserved costs are dealt with as part of the general costs of the proceeding.

Costs thrown away means costs that were wasted because of a party's amendment to their case. The typical scenario is where a plaintiff amends the statement of claim and the defendant's preparation on the original pleading, including any defence already filed, is rendered useless. Under Rule 692, a party who amends a document must pay the costs thrown away by the amendment unless the court orders otherwise. This is distinct from adjournments, where the usual order is either costs reserved or no order as to costs, unless one party specifically presses for costs of the adjournment and can show the other side caused it.

Plaintiff's (or defendant's) costs in the cause means that if the named party ultimately receives a costs order in the proceeding, these interlocutory costs are included. If they do not receive a costs order, no order is made on the interlocutory costs.

Costs in any event means the costs are payable regardless of the ultimate outcome. This is the standard practice in the Queensland District Court for interlocutory applications, notably different from the Supreme Court approach.

Getting interlocutory costs paid before trial

The leading authority on when courts will order interlocutory costs payable forthwith is Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432. Barrett J identified three circumstances justifying a departure from the general rule:

First, where the costs order relates to a discrete, separately identifiable aspect of the proceedings, distinct from the substantive issues going to trial. Discovery disputes are the classic example.

Second, where there has been demonstrated unreasonable conduct by the party against whom costs are ordered.

Third, where there is significant time and distance to run before the proceedings conclude and it would be unjust to make the successful party wait.

The Federal Court applies a stricter test under Rule 40.13 of the Federal Court Rules 2011, which provides that interlocutory costs should not be taxed until the proceeding is finished. Departure requires exceptional circumstances, including repeated failure to properly plead, prolonged delays through pursuit of ill-considered claims, or listing and abandoning special appointments after significant preparation costs have been incurred.

The practical point is this: if you win an interlocutory application that was discrete, unnecessary and caused by the other side's unreasonable conduct, do not assume those costs must wait until trial. Apply for them to be payable forthwith. The jurisdiction exists and courts use it.

The No-Costs Jurisdictions: QCAT and Fair Work

QCAT

Section 100 of the Queensland Civil and Administrative Tribunal Act 2009 provides that, other than as provided under the Act or an enabling Act, each party to a proceeding must bear the party's own costs.

This is not a presumption. It is the starting position. You can succeed completely in QCAT and have no entitlement to recover your legal fees from the other side.

The exceptions exist but they are narrow. Section 102 allows the tribunal to depart from the no-costs rule if the interests of justice require it. The factors the tribunal considers include whether a party has unnecessarily disadvantaged another party, the nature and complexity of the dispute, the relative strengths of the parties' positions, and whether natural justice was afforded in any prior administrative review. The tribunal must find that the interests of justice "require" costs, which is a strong threshold.

In practice, costs awards in QCAT are uncommon. In Golden Vision Gold Coast Pty Ltd v Orchid Avenue Pty Ltd (No 2) [2022] QCATA 154, the Appeals Tribunal awarded $29,340 in costs where the respondent had prepared oversized appeal books, refused to conduct the hearing on the papers and made improper adjournment requests. In Choi v Mee Wah To (No 3) [2014] QCAT 030, the tribunal awarded $21,046.86 on the basis that the costs of the proceeding would effectively deprive the successful party of the benefit of the judgment. In Magill v Queensland Law Society Inc (No 3) [2020] QCAT 327, $20,000 was awarded in a complex matter involving senior and junior counsel.

But these are the exceptions. In CH v Queensland Police Service [2020] QCAT 309, the tribunal refused a $6,875 costs claim despite the applicant having won $17,806.75 in compensation.

The strategic point is this: QCAT's no-costs rule was designed to make the tribunal accessible. But it also means that a well-resourced party can litigate knowing it will never have to pay the other side's costs regardless of outcome. If you have a commercial dispute of significant value and costs recovery is important to you, consider carefully whether QCAT is the right forum or whether the matter can be brought in a court where costs follow the event.

Section 105 provides a limited exception for settlement offers. If a party makes an offer to settle and the tribunal's decision is less favourable to the non-offering party, the tribunal may award reasonable costs incurred after the offer date. The Appeals Tribunal in Ricchetti v Lanbuilt held that refusal of an offer more favourable than the final decision may justify costs in the interests of justice.

QCAT Rules 83 to 84 deal with costs in minor civil disputes and are even more restrictive. In minor disputes, only the application fee is recoverable. In minor debt claims, only the filing fee, bailiff fees and business search costs can be recovered.

Fair Work Commission

Section 570 of the Fair Work Act 2009 (Cth) establishes the same no-costs default for proceedings in the Fair Work Commission. Each party bears their own costs except in limited circumstances.

Section 570(2) provides four exceptions. The FWC may order costs where a party instituted proceedings vexatiously. It may order costs where a party had no reasonable prospect of success. It may order costs where a party's unreasonable act or omission caused the other party to incur costs. And it may order costs where a party unreasonably refused to participate in a matter before the FWC.

In practice, costs awards in the FWC are rare. The thresholds are deliberately high. The result is a system where employers can defend weak unfair dismissal claims knowing that even if the claim is dismissed, the likelihood of recovering costs is minimal. Conversely, applicants with genuinely hopeless claims face limited downside risk in pursuing them.

Other no-costs tribunals

The pattern repeats across Australian tribunals. In New South Wales, section 60 of the Civil and Administrative Tribunal Act 2013 provides a no-costs default for NCAT, with an exception for "special circumstances" and, in the Consumer and Commercial Division, for claims exceeding $30,000. In Victoria, section 109 of the Victorian Civil and Administrative Tribunal Act 1998 allows VCAT to award costs where it is "fair to do so", having regard to factors including unnecessary disadvantage and unreasonable delay. The Administrative Review Tribunal (which replaced the AAT in October 2024) also operates on a no-costs basis with very limited exceptions.

Lawyers Recovering Their Own Costs

Two recent High Court decisions define the boundaries of when lawyers can recover costs for their own legal work.

Bell Lawyers v Pentelow [2019] HCA 29

Bell Lawyers engaged barrister Janet Pentelow for a client but paid only partial fees. Ms Pentelow sued for the balance and performed substantial legal work on her own case: drafting submissions, preparing affidavits, conducting research and advising senior counsel. She claimed $44,880 in professional costs for that work.

The High Court held that the Chorley exception, which historically allowed self-represented solicitors to recover costs for their own professional time, is "an affront to equality before the law" and is not part of Australian common law. Self-represented lawyers are now in the same position as self-represented lay litigants when it comes to costs recovery.

Birketu v Atanaskovic [2025] HCA 2

This decision, handed down in February 2025, addressed a related but distinct question. Atanaskovic Hartnell, an unincorporated law firm, sued former clients for unpaid fees. The firm succeeded and claimed costs of $305,463 for professional fees of its employed solicitors. These were not the partners representing themselves. They were solicitors employed by the firm who performed the legal work on the firm's litigation.

The High Court majority (Gageler CJ, Gordon, Edelman, Gleeson and Beech-Jones JJ; Steward and Jagot JJ dissenting) held that an order for costs in favour of an unincorporated law firm entitles the firm to obtain recompense for legal work performed by an employed solicitor of the firm. The general common law principle of recovering costs applies to law firms the same as any other litigant.

The distinction is between a lawyer representing themselves (no recovery, per Bell v Pentelow) and an organisation recovering costs for work by its employed legal team (recovery permitted, per Birketu). For law firms that litigate in their own name, for example pursuing unpaid fees, this is a meaningful distinction. Partners doing the work themselves cannot claim professional costs. But the firm can recover costs for work done by its employed solicitors.

Security for Costs

If you are a defendant and you are concerned that the plaintiff cannot pay your costs if you succeed, security for costs is a protective mechanism to consider early.

Under UCPR Rules 670 to 677, the court may order a plaintiff to provide security for the defendant's costs as a condition of the proceeding continuing. Under section 1335 of the Corporations Act 2001 (Cth), a defendant may seek security where a corporate plaintiff appears unable to pay costs if ordered.

The defendant must present credible evidence of a genuine belief that the plaintiff is impecunious or financially unstable. Under Rule 672, the court considers discretionary factors including the means of those standing behind the proceeding (directors behind a corporate plaintiff, for example), the prospects of success on the merits and whether a costs order against the plaintiff would be enforceable within the jurisdiction.

Security may be provided by payment into court, a charge over assets, a bank bond or a bank guarantee.

The tactical value of a security for costs application extends beyond protection. An impecunious plaintiff who cannot put up security may be forced to discontinue or settle. This is not an abuse of the process. It is a legitimate protection recognised by the rules. But the application needs to be brought early. Applying for security on the eve of trial is unlikely to succeed.

Practical Strategies for Maximising Recovery

Make a settlement offer early. Whether a UCPR Rule 361 offer or a Calderbank offer, a reasonable offer made early creates compounding costs leverage. Every dollar the other side spends after rejecting your offer is potentially their problem.

Use both offer mechanisms. A formal Rule 361 offer provides automatic consequences. A parallel Calderbank offer targets indemnity costs. There is no rule against deploying both.

Draft contractual costs clauses properly. In commercial agreements, include a clause entitling the successful party to costs on an indemnity basis and full recovery of legal costs incurred in enforcement. This can override the default standard basis and close the recovery gap before a dispute even starts.

Seek lump sum or fixed costs at judgment. Do not automatically default into the full assessment process. Ask the judge to fix costs or make a lump sum order when judgment is delivered. This works particularly well in straightforward matters where costs are readily quantifiable.

Keep detailed records. Ensure your solicitor maintains time records and a clear breakdown of work at each stage. This makes the assessment process faster, strengthens your position against objections and supports applications for lump sum costs.

Factor in the forum. If your dispute could be brought in either QCAT or a court, and costs recovery is important to the commercial outcome, the court may be the better forum.

Apply for interlocutory costs forthwith where appropriate. If you win a discrete interlocutory application caused by the other side's unreasonable conduct, do not let those costs be reserved. Apply for them immediately.

Consider security for costs early. If you are a defendant with genuine concerns about the plaintiff's capacity to pay costs, raise it before the proceeding is well advanced.

This article is intended as general information only and does not constitute legal advice. You should obtain specific legal advice relevant to your circumstances before acting on any of the information in this article.

This article is for general information purposes only and does not constitute legal advice. You should seek professional advice tailored to your specific circumstances before acting on any information in this article. Liability limited by a scheme approved under Professional Standards Legislation.