Changes to the way costs are calculated in the Costs Court have effect from 1 January 2025 following amendments to Order 63 of the Supreme Court Rules, and the Appendix that deals with costs.

The new scale of costs is based principally on time costing, whereas the previous scale was based principally on items of legal work or particular services.

If a client has been charged on the basis of hourly rates for work done, Section 1 of the scale applies and provides that the costs payable to the entitled party are to be allowed on the basis of reasonable hourly rates, up to the maximum hourly rate set out in the scale. There are three tiers of maximum rates according to a practitioner’s years of post-admission experience. There are no minimum rates.

The scale also sets out maximum hourly rates for work done by employees of a law practice who are not legal practitioners. The maximum rates for those employees depend on whether their work required legal skill or knowledge.

The maximum hourly rates are not an endorsement by the Court that those rates are reasonable in every case, or even in most cases, nor an invitation for practitioners to charge clients the maximum hourly rate and then claim that rate as between the parties.

All claims in the Costs Court must be reasonable. In setting rates to be charged to clients, and in making costs claims, practitioners must bear in mind their overarching obligation to ensure that costs are reasonable and proportionate: s 24 of the Civil Procedure Act 2010.

In assessing costs, the Costs Court will determine whether the amount claimed relative to the work performed is reasonable on an item-by-item basis. This means that the same hourly rate will not necessarily be allowed for all time spent or work done by the same individual.  The hourly rate allowed for a lawyer drafting a letter requiring legal skill may be higher than the rate for the same lawyer collating court books.

An application can be made for the Court to allow an increase to the maximum rates if there are special grounds arising out of the nature and importance, difficulty, or urgency of the case. If the matter runs to trial, then the trial judge will usually be best placed to determine such an application.

The time-based model does not mean that a law practice must charge their clients on an hourly basis. The scale provides for the assessment of costs where the entitled party has not been charged on the basis of hourly rates. In such a case, the Costs Court will allow a reasonable amount for the work.

The scale sets out what the court can consider in determining reasonableness for both time-based costing and alternative costing. These include the actual hourly rates charged to the client, the complexity of the matter, the time required, and the difficulty or novelty of the questions involved.

The By Lawyers Supreme Court – Acting for the Plaintiff (VIC) and Supreme Court – Acting for the Defendant publications have been updated accordingly.