Depending on the quantum of an injured person’s claim, they may be entitled to an award for legal costs. A legal costs award however, does not necessarily mean all of their legal costs will be paid. Rather, the awards are split into three categories:
- Regulation Costs (also known as Declared Costs)
- Standard Costs
- Indemnity Costs
Each category is discussed in further detail below.
A. Regulation Costs
These costs are prescribed by regulation and declare a specific costs award having regard to the amount of damages that are payable upon settlement or court award of a personal injury claim.
The declared costs award depends on the applicable Act and Regulation, the date the personal injury arose, and is restricted by an award of damages falling between lower offer limit and upper offer limit.
For example, section 27 of the Motor Accident Insurance Regulation 2014 (Qld) provides that for injuries sustained:
- Between 1 July 2022 to 30 June 2023, regulation costs are declared at $4,160, providing the personal injury claim settled for an award of damages between the lower offer limit of $49,700 and upper offer limit of $82,870;
- On 1 July 2023 or after, the regulation costs are declared at $4,380, providing the personal injury claim settled for an award of damages between the lower offer limit of $52,350 and upper offer limit of $87,300.
As you will see, the declared regulation costs award increases over time, having regard to inflation.
It is important to note that these costs are prescribed by regulation, so if a personal injury claim settles for, or a Court awards damages for, a sum that falls between the lower and upper limits, the legal costs component cannot be any less or any more than the declared amount.
If the personal injury claim settles, or a Court awards damages, for a sum less than the lower offer limit, there will be no provision for legal costs. If however, the claim settles, or a Court awards damages, above the upper offer limit, standard costs may apply.
B. Standard Costs
Standard costs are typically higher than the declared regulation costs award. If a personal injury claim settles, or a Court awards damages, for a sum above the upper offer limit prescribed by regulation, standard costs may apply.
Costs are ordinarily assessed on a standard basis or can otherwise be agreed between the parties.
Standard costs include all costs necessary or proper for the attainment of the settlement, compensation sum, or damages award applicable to a personal injury claim.
Importantly, the injured party will not recover their entire legal fees arising from the claims process (as is the case with indemnity costs) but rather, the costs will be calculated pursuant to a Court scale.
The Court scale provides a set amount for professional legal fees depending upon each task undertaken (for example, emailing correspondence, attending court, briefing counsel) however, the costs are calculated on a standard basis and have a capped limit (for example, for each 100 words of drafting a document an award of say $26,75 is provided, drafting a letter over 100 words including its email transmission costs $33.60, a court attendance attracts an award of $105.20 per quarter-hour). The court scales are different in the Magistrates, District and Supreme Courts and are updated regularly.
The other party may simply agree to a sensible estimated amount for the standard legal cost component. However, they may also require the file to be cost assessed to ensure accuracy pursuant to the court scale. It depends upon the position taken by the other party. A cost assessment is an additional expense to be borne by the parties and so, the party that is to pay may be open to negotiating the legal costs component in conjunction with the remainder heads of damage in a personal injury claim during the negotiation phase.
Suffice to say, costs on a standard basis, ordinarily amount to far less than privately charged legal fees.
Notably, a Court can award standard costs against a claimant, in favour of the insurer or respondent, as a consequence to the Mandatory Final Offer process required by compulsorily legislated settlement conferences. That is, an injured party may be required to pay the insurer or respondent their legal costs on a standard basis, if they are not careful in the formal negotiation process. These cost consequences are discussed further below, under Mandatory Final Offers.
C. Indemnity Costs
Indemnity costs are governed by Rule 703 of the Uniform Civil Procedure Rules 1999 (Qld) and generally encompass the entirety of a party’s actual legal costs, charged by their legal representatives in accordance with the solicitors’ hourly charge out rates and the relevant time spent in completing each task, plus third party disbursement expenses.
When a Court assesses costs on an indemnity basis, it allows for all costs reasonably incurred by the party, having regard to:
- the prescribed Court scale of fees;
- any costs agreement between the party and their solicitor; and
- charges ordinarily payable by clients to solicitors for work involved in the personal injury claims process.
Items will only be excluded from an indemnity costs award if a Court finds that particular cost was unreasonably incurred or for an unreasonable amount. Indemnity costs are far broader than standard costs and are generally awarded when a party is found to have conducted their case improperly by acting in an unreasonable manner that protracted the personal injury claim process.
Indemnity costs can be awarded to either party, as a consequence to the Mandatory Final Offer process required by compulsorily legislated settlement conferences. That is, an injured party may be required to pay the defending party their legal costs on an indemnity basis, if they are not careful in the formal negotiation process. Although mostly, an indemnity costs award attaches to the respondent to the personal injury claim rather than the claimant – depending on the parties’ behaviour. These cost consequences are discussed further below, under Mandatory Final Offers
