Sharon Drew

If you have received a costs order after a court case or a bill from your own lawyer, you may have come across two confusing terms: party party costs and solicitor client costs. The short answer is that they describe two different relationships. Party party costs are what one party to litigation can recover from the other party under a court order. Solicitor client costs are what a client owes their own law practice under a costs agreement. The distinction is similar to the amount you pay your GP for treatment (the “solicitor/client” cost) and the amount you receive back from Medicare for that treatment (the “party/party” cost).

The two are calculated differently, they apply in different circumstances, and they almost always produce different amounts. The distinction matters, because it determines how much of your legal spend you can realistically recover, or are required to pay. This guide explains the difference between the two in New South Wales, and how each is assessed.

What Do Party Party Costs Cover?

Party party costs are the costs that a court or tribunal orders one party to pay another. They usually require the unsuccessful party to contribute to the successful party’s legal costs.

They reflect a general principle: costs follow the event. In other words, the losing side typically bears a portion of (but not all of) the winner’s costs.

A point of terminology is worth noting here. In NSW, the costs payable under a court order are now formally described as “ordered costs”. Many lawyers, clients, and even older judgments still call them party party costs or inter partes costs, so you will see the terms used interchangeably.

Whatever the label, the key feature is the same. These are costs payable by an opposing party under an order or rule of a court or tribunal. They are not costs payable to your own lawyer.

Two things to keep in mind about party party costs:

• They commonly provide only a partial reimbursement of what a successful party has spent. They do not cover every item of legal work.

• The costs allowed are what are “fair and reasonable” as between parties, rather than simply matching the invoice sent to the client by the lawyer.

As a result, recovery on this basis is usually less than the total a party has paid their own solicitor.

What Do Solicitor Client Costs Cover?

Solicitor client costs are the costs payable by a client to their own law practice for the legal services provided to them. They are governed by the costs agreement between the client and the lawyer, and they represent the professional fees and disbursements the client has agreed to pay.

This remains subject to one overriding requirement: legal costs must be fair and reasonable.

Solicitor client costs are not the same as indemnity costs

It is important not to confuse the two:

• Solicitor client costs describe the relationship between a client and their own lawyer.

• Indemnity costs are a basis on which a court may order one party to pay another party’s costs. They are more generous to the receiving party than ordinary party party costs.

A court orders indemnity costs only in particular circumstances, such as where a party has rejected a reasonable settlement offer or has conducted the litigation unreasonably.

How Does the Calculation Differ Between the Two Bases?

For solicitor client costs, a compliant costs agreement is prima facie evidence that the costs disclosed in it are fair and reasonable.

For party party costs, the assessment is not bound by the successful party’s costs agreement. Costs that a client is properly liable to pay to their own lawyer may be disallowed or reduced when claimed against the other side. This is why the two figures rarely match.

The table below sets out the key differences at a glance:

In Which Circumstances Does Each Basis Apply?

Solicitor client costs apply in every retainer. When you engage a law practice, you are responsible for solicitor client costs for the work done on your matter.

Party party costs arise in litigated matters. They apply where a court or tribunal makes a costs order, or where parties agree to pay costs as part of a settlement. The successful party then becomes entitled to recover a contribution towards their costs from the other side.

Party party costs orders are common in civil litigation, but they are rare in some areas. In family law matters and work injury damages claims, for example, each party usually bears their own costs. A costs order against the other party is the exception rather than the rule.

1. A client pays solicitor client costs to their own lawyer throughout the matter.

2. If they succeed and obtain a costs order, they may then recover party party costs from the opposing party.

3. The party party costs partially reimburse what the client has paid their own solicitor.

The shortfall between the two is sometimes called the gap.

How Does a Costs Assessor Approach Each Basis on Assessment?

On a solicitor client assessment, the assessor examines the bill rendered by the law practice to its own client. They consider whether those costs are fair and reasonable, having regard to the factors set out in section 172 of the Uniform Law.

On a party party assessment, the assessor determines what the paying party should reasonably contribute. This involves scrutinising:

• whether each item was reasonably incurred for the conduct of the litigation, and

• whether the amount is fair and reasonable for the work performed.

Items that are properly chargeable to the client on a solicitor/client basis may nonetheless be reduced or disallowed against the opposing party. The assessor also applies the indemnity principle. This means a party cannot recover more from the other side than they are actually liable to pay their own lawyer.

Does the same process apply in Victoria and the Federal Court?

No. While NSW and Victoria share the Legal Profession Uniform Law, the process for costs assessment differs by jurisdiction:

• NSW An application is filed and an independent costs assessor, appointed by the Chief Justice, determines the fair and reasonable amount.

• Victoria the Costs Court, a division of the Supreme Court of Victoria, deals with assessment of costs.

• The High Court, the Federal Court and the Federal Circuit and Family Court of Australia have their own rules and processes for party party costs.

If your matter involves more than one jurisdiction, it is worth confirming which process applies before taking any step, because the procedures and time limits are not the same.

Speak to a Costs Specialist

Whether you have received a costs order or want to understand a bill from your own lawyer, the basis of the costs makes a significant difference to what you can recover or must pay.

Blue Ribbon Legal provides expert assessment of costs orders on both party party and solicitor client bases, helping individuals and law practices across NSW and Victoria understand and quantify their costs. Contact Blue Ribbon Legal to discuss your matter with an accredited specialist in costs law.

Frequently Asked Questions (FAQs)

Why don’t party party costs cover my entire legal bill?

Party party costs are intended to be a partial reimbursement, not a full indemnity. The assessor allows only those costs reasonably incurred for the litigation and reasonable in amount when measured against the paying party. Items you have properly paid your own lawyer may be reduced or disallowed against the other side.

Are solicitor client costs the same as indemnity costs?

No. Solicitor client costs describe what you owe your own lawyer. Indemnity costs are party/party costs that are more generous than ordinary or standard party/party costs

Can I have both kinds of costs in the same matter?

Yes. You will incur solicitor client costs payable to your own lawyer throughout the matter. If you succeed and obtain a costs order, you may also recover party party costs from the opposing party. The party party recovery does not fully cover solicitor client costs.

How do I find out what I can actually recover?

The most reliable way is to have a costs specialist review your matter and prepare or assess a bill of costs.

If you believe your lawyer has charged legal costs that are not fair and reasonable, you are not without options. In New South Wales, a client who is unhappy with a legal bill can ask for a detailed breakdown or apply to have the costs assessed by an independent assessor.

This guide explains how to challenge legal costs charged by a lawyer in NSW, the steps involved. The processes described apply to legal costs in NSW under the Legal Profession Uniform Law. Other states and the federal courts have their own rules, so it is worth confirming which regime applies if your matter crosses jurisdictions.

What Counts as Excessive Under the Legal Profession Uniform Law?

Under section 172 of the Uniform Law, a law practice must charge costs that are no more than fair and reasonable in all circumstances. In particular, the costs must be:

• proportionately and reasonably incurred, and

• proportionate and reasonable in amount.

This means a bill is not excessive simply because it is large. A complex, high-value matter may justify substantial fees.

Some common signs that costs may be open to challenge include:

• charges for work that does not appear to have been necessary or was duplicated

• hourly rates higher than what was disclosed or agreed

• a final bill significantly higher than the original estimate, without explanation

• a failure to provide proper costs disclosure

A failure to disclose costs properly is significant. Where a law practice has not complied with its disclosure obligations, the client is not required to pay the costs until they have been assessed, and the conduct may have further consequences for the practitioner.

Can You Request an Itemised Bill Before Deciding Whether to Challenge?

Yes. If you have received a lump sum bill, which simply states a total without explaining how it was calculated, you are entitled to request an itemised bill that sets out the costs in detail. This is often the sensible first step, because it lets you see exactly what you are being charged for before deciding whether to take the matter further.

A few key points about itemised bills in NSW:

• A lump sum bill describes the services and states the total amount. An itemised bill specifies in detail how the legal costs are made up.

• You must request the itemised bill within 30 days after the legal costs become payable.

• Once you request it, the law practice must provide the itemised bill within 21 days

• In certain circumstances, a law practice may be able to recover the higher costs detailed in an itemised bill than a lower lump sum bill, following costs assessment or a determination by the local regulatory authority.

How Do You Apply for a Costs Assessment of Your Solicitor’s Bill in NSW?

Costs assessment is the formal process for having an independent costs assessor decide whether your legal costs are fair and reasonable. In NSW, you apply to the Supreme Court, and the assessor is an experienced solicitor or barrister appointed by the Chief Justice.

The general steps are as follows:

1. Complete the application for costs assessment in the approved form and attach the bill you are challenging.

2. Lodge the application with the Supreme Court, together with the applicable filing fee.

3. The assessment proceeds, with both you and your lawyer given the opportunity to make submissions about the costs.

4. The assessor issues a determination of the fair and reasonable amount, supported by a certificate.

There is an important time limit. A client must generally apply for a costs assessment within 12 months after the bill was given, the request for payment was made, or the costs were paid. Applications outside that period are only allowed in limited circumstances, where the Manager, Costs Assessment decides it is just and fair to permit it. Because the window can close quickly, it is wise to act promptly once you decide to challenge a bill.

If you are unsure whether assessment is the right path, Blue Ribbon Legal’s costs assessment service can review your bill and advise on the strongest way forward.

What Role Does the Office of the Legal Services Commissioner Play?

A complaint to the OLSC about costs is time-sensitive. As a general guide, a complaint must be raised within 60 days after the costs become payable, or within 30 days after a requested itemised bill is provided. If the dispute cannot be resolved, the Commissioner can, in appropriate cases, make a determination about the costs.

What Evidence Do You Need to Support Your Challenge?

Before you apply for assessment, gather the following:

• the costs agreement

• any costs disclosure the lawyer gave you

• all invoices received, including the lump sum bill and any itemised bill

• correspondence about costs, including any estimates or updates

• a clear list of the specific items you dispute and why

What Outcomes Can You Realistically Expect from a Costs Assessment?

A costs assessment can result in your legal costs being reduced or left largely unchanged. The assessor determines the fair and reasonable amount, which may be lower than the amount billed if items are found to be unreasonable or disproportionate.

Possible outcomes to keep in mind:

• Reduction. If the assessor finds some of the costs charged were not fair and reasonable, the amount you owe can be reduced accordingly.

• Confirmation. If the costs are found to be fair and reasonable, the amount will be confirmed as charged.

• Costs of the assessment. The outcome is one factor in who pays the cost of the assessment itself.

There is no guarantee of a reduction, and every matter turns on its own facts and circumstances.

Frequently Asked Questions (FAQs)

How long do I have to challenge my lawyer’s bill in NSW?

As a general rule, you have 12 months from when the bill was given, the request for payment was made, or the costs were paid to apply for a costs assessment. A separate, shorter time limit applies to making a complaint to the OLSC.

Do I have to pay the bill before I can challenge it?

Not necessarily. You can generally apply for an assessment whether the bill is paid or unpaid. If your lawyer has not complied with their costs disclosure obligations, you may not be required to pay until the costs have been assessed.

What does it cost to challenge legal fees?

An application for costs assessment involves a filing fee, and the costs assessor’s fees. The assessment outcome may impact the assessor’s decision of who ultimately bears the cost of the process.

Can I challenge my lawyer’s costs if I already paid them?

Yes. You can generally apply for a costs assessment even after paying, provided you are within the relevant time limit, which usually runs for 12 months from payment where no bill or request for payment was given. The same fair and reasonable test applies whether or not the bill has been paid.

The costs recovery process is influenced by several factors, including whether you have completed formal costs assessment.

If you have unpaid invoices or other costs you want to recover, you may not know if it is too late to act. Read on to learn more about recovering costs and how we can help.

When can you recover costs?

Recovering costs under a court order is not subject to a time limit in NSW. This means the court will not reject an application for assessment simply because too much time has passed after the orders were made.

For costs assessments that do not arise from a court order, different rules apply. These include practitioner/client, practitioner/practitioner, and third-party assessments. Under the Legal Profession Uniform Law, you must file an application within 12 months of the final invoice. In some cases, a court may allow a late application after this period.

At Blue Ribbon Legal, we manage all types of costs assessments. We draft and file applications, serve documents, prepare submissions, review determinations, and advise you on next steps.

The assessment process differs from court proceedings to recover costs. Those proceedings operate more like debt recovery action.

Once the costs assessment is finalised, the court issues a determination. You can register this determination as a judgment. This has the same effect as a court judgment in your favour. In NSW, you can enforce judgment debts for 12 years from the date of judgment.

If a solicitor issues an unpaid invoice and no costs assessment is made, different time limits apply. After 12 months, the solicitor may commence court proceedings to recover the debt. Most debts fall under a 6-year limitation period under the Limitation Act (NSW). At Blue Ribbon Legal, we also provide debt recovery services of this kind.

At Blue Ribbon Legal, we also assist with enforcement action. This includes garnishee orders and bankruptcy proceedings. Enforcement options vary depending on the circumstances. The Sheriff’s Office may also become involved. You may also seek orders over property owned by the debtor. One option is a garnishee order, explained below.

What is a garnishee order?

A garnishee order is a court order that requires a third party to pay money owed to you on behalf of the debtor. This third party may be a bank or an employer. You must apply to the court for the order. You can apply for multiple garnishee orders until the debt is fully repaid.

How can we help?

At Blue Ribbon Legal, we provide services including costs recovery proceedings, costs assessments, and enforcement action. If you need help with a costs dispute, we encourage you to get in touch. Our team can provide expert advice and guide you on the best course of action for your situation.

If you would like to arrange a consultation, please don’t hesitate to get in touch or call us on (02) 8599 3100.